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BankUnited, Inc. Reports Third Quarter 2021 Results

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MIAMI LAKES, Fla., October 21, 2021--(BUSINESS WIRE)--BankUnited, Inc. (the "Company") (NYSE: BKU) today announced financial results for the quarter ended September 30, 2021.

"The Company delivered a solid quarter. We're pleased by our continued progress in improving the deposit book and in the positive direction of credit trends" said Rajinder Singh, Chairman, President and Chief Executive Officer.

For the quarter ended September 30, 2021, the Company reported net income of $86.9 million, or $0.94 per diluted share, compared to $104.0 million or $1.11 per diluted share for the immediately preceding quarter ended June 30, 2021 and $66.6 million, or $0.70 per diluted share, for the quarter ended September 30, 2020.

For the nine months ended September 30, 2021, the Company reported net income of $289.7 million, or $3.12 per diluted share, compared to $112.1 million, or $1.17 per diluted share, for the nine months ended September 30, 2020. On an annualized basis, earnings for the nine months ended September 30, 2021 generated a return on average stockholders' equity of 12.4% and a return on average assets of 1.09%.

Financial Highlights

  • Net interest income decreased by $3.2 million compared to the immediately preceding quarter ended June 30, 2021 and increased by $7.6 million compared to the quarter ended September 30, 2020. The net interest margin, calculated on a tax-equivalent basis, was 2.33% for the quarter ended September 30, 2021 compared to 2.37% for the immediately preceding quarter and 2.32% for the quarter ended September 30, 2020. The net interest margin was impacted by pressure on earning asset yields, in part resulting from lower than expected commercial loan growth for the quarter, leading to continued deployment of liquidity into securities. Lower recognition of PPP fees also had an impact.

  • As expected, the average cost of total deposits continued to decline, dropping by 0.05% to 0.20% for the quarter ended September 30, 2021 from 0.25% for the immediately preceding quarter ended June 30, 2021, and 0.57% for the quarter ended September 30, 2020. On a spot basis, the average annual percentage yield ("APY") on total deposits declined to 0.19% at September 30, 2021 from 0.22% at June 30, 2021 and 0.36% at December 31, 2020.

  • Non-interest bearing demand deposits grew by $324 million during the quarter ended September 30, 2021 while average non-interest bearing demand deposits grew by $749 million compared to the immediately preceding quarter. Average non-interest bearing demand deposits grew by $2.7 billion compared to the third quarter of the prior year. At September 30, 2021, non-interest bearing demand deposits represented 33% of total deposits, compared to 25% of total deposits at December 31, 2020.

  • Total deposits declined by $493 million during the quarter ended September 30, 2021, as the Company continues to execute on a strategy focused on improving the quality of the deposit base rather than on growth in total deposits. Money market and savings deposits declined by $1.1 billion in the third quarter. The majority of this decline was attributable to reductions in accounts that management believes will be more price sensitive in a rising rate environment.

  • For the quarter ended September 30, 2021, the Company recorded a recovery of credit losses of $(11.8) million compared to a recovery of $(27.5) million for the immediately preceding quarter ended June 30, 2021 and a provision for credit losses of $29.2 million for the quarter ended September 30, 2020. For the nine months ended September 30, 2021 and 2020, the provision for (recovery of) credit losses was $(67.4) million and $180.1 million, respectively. Year over year volatility in the provision related to the expected economic impact of the onset of the COVID-19 pandemic in 2020 and subsequent recovery in 2021.

  • As expected, as the economy emerges from the COVID-19 crisis and our borrowers' operating results improve, criticized and classified loans continued to decline. During the quarter ended September 30, 2021, total criticized and classified loans declined by $240 million. The ratio of non-performing loans to total loans declined to 1.21% at September 30, 2021 from 1.28% at June 30, 2021.

  • Loans currently under short-term deferral totaled $17 million and loans modified under the CARES Act totaled $267 million for a total of $285 million at September 30, 2021, down from a total of $497 million at June 30, 2021.

  • Total loans and operating lease equipment, excluding the runoff of PPP loans, grew by $74 million for the quarter ended September 30, 2021.

  • Book value per common share and tangible book value per common share continued to accrete, increasing to $34.39 and $33.53, respectively, at September 30, 2021 from $33.91 and $33.08, respectively, at June 30, 2021 and $32.05 and $31.22, respectively at December 31, 2020.

  • During the quarter ended September 30, 2021, the Company repurchased approximately 3.2 million shares of its common stock for an aggregate purchase price of $129.4 million, at a weighted average price of $40.62 per share.

  • On October 20, 2021, the Company's Board of Directors authorized the repurchase of up to an additional $150 million in shares of its outstanding common stock.

Loans and Leases

A comparison of loan and lease portfolio composition at the dates indicated follows (dollars in thousands):

September 30, 2021

June 30, 2021

December 31, 2020

Residential and other consumer loans

$

7,827,224

34.3

%

$

7,076,274

30.9

%

$

6,348,222

26.6

%

Multi-family

1,181,935

5.2

%

1,256,711

5.5

%

1,639,201

6.9

%

Non-owner occupied commercial real estate

4,537,078

19.9

%

4,724,183

20.7

%

4,963,273

20.8

%

Construction and land

163,988

0.7

%

218,634

1.0

%

293,307

1.2

%

Owner occupied commercial real estate

2,012,376

8.8

%

1,960,900

8.6

%

2,000,770

8.4

%

Commercial and industrial

4,166,914

18.3

%

4,205,795

18.4

%

4,447,383

18.6

%

PPP

332,548

1.5

%

491,960

2.1

%

781,811

3.3

%

Pinnacle

932,865

4.1

%

1,046,537

4.6

%

1,107,386

4.6

%

Bridge - franchise finance

396,589

1.7

%

463,874

2.0

%

549,733

2.3

%

Bridge - equipment finance

379,446

1.7

%

421,939

1.8

%

475,548

2.0

%

Mortgage warehouse lending ("MWL")

877,006

3.8

%

1,018,267

4.4

%

1,259,408

5.3

%

$

22,807,969

100.0

%

$

22,885,074

100.0

%

$

23,866,042

100.0

%

Operating lease equipment, net

$

659,935

$

667,935

$

663,517

Residential continues to be an area of strength; residential and other consumer loans grew by $751 million during the quarter ended September 30, 2021. GNMA early buyout loans grew by $50 million, totaling $1.9 billion at September 30, 2021.

The majority of commercial portfolio segments showed net declines for the quarter ended September 30, 2021 as payoffs outpaced production. Commercial real estate portfolio segments in the aggregate declined by $317 million while commercial and industrial loans, including owner-occupied commercial real estate, remained relatively flat, growing by $13 million. Balances for Pinnacle, Bridge and mortgage warehouse declined by $114 million, $110 million and $141 million, respectively. The decrease in multifamily loans was largely attributable to $76 million of runoff in the New York portfolio.

PPP loans declined by $159 million during the quarter ended September 30, 2021, due to forgiveness of first draw program loans.

Asset Quality and the Allowance for Credit Losses

The following table presents information about non-performing loans, loans on deferral and CARES Act modifications at September 30, 2021 (dollars in thousands):

Non-Performing
Loans

Currently Under Short-
Term Deferral

CARES Act Modification

Residential and other consumer (1)

$

33,161

$

17,439

$

23,012

Commercial:

CRE by Property Type:

Retail

18,678

15,874

Hotel

22,043

81,632

Office

5,260

Multi-family

11,018

7,317

Other

7,193

Owner occupied commercial real estate

22,192

15,775

Commercial and industrial

125,550

95,871

Bridge - franchise finance

31,569

27,717

Total commercial

243,503

244,186

Total

$

276,664

$

17,439

$

267,198

------------

(1)

Excludes government insured residential loans.

In the table above, "currently under short-term deferral" refers to loans subject to a 90-day payment deferral at September 30, 2021 and "CARES Act modification" refers to loans subject to longer-term modifications that, were it not for the provisions of the CARES Act, would likely have been reported as TDRs. Non-performing loans may include some loans that have been modified under the CARES Act.

Non-performing loans totaled $276.7 million or 1.21% of total loans at September 30, 2021, compared to $292.7 million or 1.28% of total loans at June 30, 2021 and $244.5 million or 1.02% of total loans at December 31, 2020. Non-performing loans included $49.1 million, $47.7 million and $51.3 million of the guaranteed portion of SBA loans on non-accrual status, representing 0.22%, 0.21% and 0.22% of total loans at September 30, 2021, June 30, 2021 and December 31, 2020, respectively.

The following table presents criticized and classified commercial loans at the dates indicated (in thousands):

September 30, 2021

June 30, 2021

December 31, 2020

Special mention

$

153,373

$

138,064

$

711,516

Substandard - accruing

1,432,801

1,684,666

1,758,654

Substandard - non-accruing

227,055

229,646

203,758

Doubtful

16,447

17,332

11,867

Total

$

1,829,676

$

2,069,708

$

2,685,795

The following table presents the ACL at the dates indicated, related ACL coverage ratios and net charge-off rates for the quarters ended September 30, 2021 and June 30, 2021 and the year ended December 31, 2020 (dollars in thousands):

ACL

ACL to Total Loans
(1)

ACL to Non-
Performing Loans

Net Charge-offs to
Average Loans (2)

December 31, 2020

$

257,323

1.08

%

105.26

%

0.26

%

June 30, 2021

$

175,642

0.77

%

60.02

%

0.24

%

September 30, 2021

$

159,615

0.70

%

57.69

%

0.19

%

------------

(1)

ACL to total loans, excluding government insured residential loans, PPP loans and MWL, which carry nominal or no reserves, was 0.81%, 0.90% and 1.26% at September 30, 2021, June 30, 2021 and December 31, 2020, respectively.

(2)

Annualized for the periods ended June 30, 2021 and September 30, 2021.

The ACL at September 30, 2021 represents management's estimate of lifetime expected credit losses given our assessment of historical data, current conditions and a reasonable and supportable economic forecast as of the balance sheet date. The estimate was informed by Moody's economic scenarios published in September 2021, economic information provided by additional sources, information about borrower financial condition and collateral values, data reflecting the impact of recent events on individual borrowers and other relevant information.

For the quarter ended September 30, 2021, the Company recorded a recovery of credit losses of $(11.8) million, which included a recovery of $(11.6) million related to funded loans and an insignificant amount related to unfunded loan commitments and accrued interest receivable. The most significant factors contributing to the recovery of the provision for credit losses and corresponding reduction in the ACL for the quarter included declines in commercial loan balances and the accompanying shift in portfolio composition to residential loans which generally carry lower reserves, reductions in certain qualitative factors and an improving economic forecast. Improved borrower financial performance as reflected in the reduction in criticized and classified assets also contributed to the reduction in the ACL.

The following table summarizes the activity in the ACL for the periods indicated (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Beginning balance

$

175,642

$

266,123

$

257,323

$

108,671

Cumulative effect of adoption of CECL

27,305

Balance after adoption of CECL

175,642

266,123

257,323

135,976

Provision (recovery)

(11,554)

27,646

(65,523)

181,095

Net charge-offs

(4,473)

(19,641)

(32,185)

(42,943)

Ending balance

$

159,615

$

274,128

$

159,615

$

274,128

Net interest income

Net interest income for the quarter ended September 30, 2021 was $195.1 million compared to $198.3 million for the immediately preceding quarter ended June 30, 2021 and $187.5 million for the quarter ended September 30, 2020.

Interest income decreased by $7.5 million for the quarter ended September 30, 2021 compared to the immediately preceding quarter, and by $20.2 million compared to the quarter ended September 30, 2020. Interest expense decreased by $4.3 million compared to the immediately preceding quarter and by $27.9 million compared to the quarter ended September 30, 2020. Decreases in interest income resulted from turnover of the loan and investment portfolios at lower prevailing rates, as well as a decline in average loans. Declines in interest expense reflected the impact of our strategy focused on lowering the cost of deposits and improving the deposit mix, runoff and repricing of deposits generated in a higher rate environment, and declines in average interest bearing liabilities.

The Company’s net interest margin, calculated on a tax-equivalent basis, decreased by 0.04% to 2.33% for the quarter ended September 30, 2021, from 2.37% for the immediately preceding quarter ended June 30, 2021. Offsetting factors impacting the net interest margin for the quarter ended September 30, 2021 included:

  • The average rate paid on interest bearing deposits decreased to 0.29% for the quarter ended September 30, 2021, from 0.35% for the quarter ended June 30, 2021. This decline reflected continued initiatives taken to lower rates paid on deposits, including the re-pricing of term deposits.

  • The tax-equivalent yield on investment securities decreased to 1.49% for the quarter ended September 30, 2021 from 1.56% for the quarter ended June 30, 2021. This decrease resulted from the impact of purchases of lower-yielding securities coupled with amortization, maturities and prepayment of securities purchased in a higher rate environment. Accounting adjustments related to faster prepayment speeds of securities purchased at a premium negatively impacted the yield on investment securities for the quarter ended September 30, 2021 by approximately 0.06%.

  • The tax-equivalent yield on loans decreased to 3.45% for the quarter ended September 30, 2021, from 3.59% for the quarter ended June 30, 2021. Accelerated amortization of origination fees on PPP loans that were partially or fully forgiven during the quarter impacted the yield on loans by approximately 0.03% for the quarter ended September 30, 2021, compared to 0.11% for the quarter ended June 30, 2021. Factoring out the impact of accelerated amortization of PPP origination fees, the yield on loans for the quarter ended September 30, 2021 decreased by 0.06% compared to the immediately preceding quarter. This decrease is mainly the result of growth in the residential portfolio at average yields lower than our commercial loan segments.

  • The increase in average non-interest bearing demand deposits as a percentage of average total deposits also positively impacted the cost of total deposits and the net interest margin.

Capital Actions

On October 20, 2021, the Company's Board of Directors authorized the repurchase of up to $150 million in shares of its outstanding common stock. This authorization is in addition to $58.3 million in remaining authorization as of September 30, 2021, under a previously announced share repurchase program. Any repurchases under the program will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued without prior notice at any time.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Thursday, October 21, 2021 with Chairman, President and Chief Executive Officer, Rajinder P. Singh, Chief Financial Officer, Leslie N. Lunak and Chief Operating Officer, Thomas M. Cornish.

The earnings release and slides with supplemental information relating to the release will be available on the Investor Relations page under About Us on www.bankunited.com prior to the call. Due to recent demand for conference call services, participants are encouraged to listen to the call via a live Internet webcast at http://www.ir.bankunited.com/. The dial in telephone number for the call is (855) 798-3052 (domestic) or (234) 386-2812 (international). The name of the call is BankUnited, Inc. and the conference ID for the call is 9293887. A replay of the call will be available from 12:00 p.m. ET on October 21st through 11:59 p.m. ET on October 28th by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The conference ID for the replay is 9293887. An archived webcast will also be available on the Investor Relations page of www.bankunited.com.

About BankUnited, Inc.

BankUnited, Inc., with total assets of $35.3 billion at September 30, 2021, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 64 banking centers in 13 Florida counties and 4 banking centers in the New York metropolitan area at September 30, 2021.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to, among other things, future events and financial performance.

The Company generally identifies forward-looking statements by terminology such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "could," "should," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates," "forecasts" or the negative version of those words or other comparable words. Any forward-looking statements contained in this press release are based on the historical performance of the Company and its subsidiaries or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations contemplated by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including (without limitations) those relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by the COVID-19 pandemic. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Information on these factors can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K, which are available at the SEC’s website (www.sec.gov).

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In thousands, except share and per share data)

September 30,
2021

December 31,
2020

ASSETS

Cash and due from banks:

Non-interest bearing

$

17,973

$

20,233

Interest bearing

489,049

377,483

Cash and cash equivalents

507,022

397,716

Investment securities (including securities recorded at fair value of $10,319,691 and $9,166,683)

10,329,691

9,176,683

Non-marketable equity securities

155,584

195,865

Loans held for sale

24,676

Loans

22,807,969

23,866,042

Allowance for credit losses

(159,615)

(257,323)

Loans, net

22,648,354

23,608,719

Bank owned life insurance

308,912

294,629

Operating lease equipment, net

659,935

663,517

Goodwill

77,637

77,637

Other assets

619,136

571,051

Total assets

$

35,306,271

$

35,010,493

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:

Demand deposits:

Non-interest bearing

$

9,158,281

$

7,008,838

Interest bearing

3,268,709

3,020,039

Savings and money market

12,460,507

12,659,740

Time

3,228,776

4,807,199

Total deposits

28,116,273

27,495,816

Federal funds purchased

199,000

180,000

FHLB advances

2,431,014

3,122,999

Notes and other borrowings

721,527

722,495

Other liabilities

741,783

506,171

Total liabilities

32,209,597

32,027,481

Commitments and contingencies

Stockholders' equity:

Common stock, par value $0.01 per share, 400,000,000 shares authorized; 90,049,326 and 93,067,500 shares issued and outstanding

900

931

Paid-in capital

885,873

1,017,518

Retained earnings

2,239,963

2,013,715

Accumulated other comprehensive loss

(30,062)

(49,152)

Total stockholders' equity

3,096,674

2,983,012

Total liabilities and stockholders' equity

$

35,306,271

$

35,010,493

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2021

2021

2020

2021

2020

Interest income:

Loans

$

194,689

$

202,520

$

208,646

$

602,544

$

656,943

Investment securities

38,243

37,674

44,604

114,418

151,596

Other

1,413

1,607

1,322

4,613

7,950

Total interest income

234,345

241,801

254,572

721,575

816,489

Interest expense:

Deposits

14,273

17,316

37,681

53,965

170,690

Borrowings

24,950

26,174

29,412

77,937

87,407

Total interest expense

39,223

43,490

67,093

131,902

258,097

Net interest income before provision for credit losses

195,122

198,311

187,479

589,673

558,392

Provision for (recovery of) credit losses

(11,842)

(27,534)

29,232

(67,365)

180,074

Net interest income after provision for credit losses

206,964

225,845

158,247

657,038

378,318

Non-interest income:

Deposit service charges and fees

5,553

5,417

4,040

15,870

11,927

Gain on sale of loans, net

1,403

2,234

2,953

5,391

10,745

Gain (loss) on investment securities, net

(664)

4,155

7,181

5,856

10,564

Lease financing

13,212

13,522

13,934

39,222

45,565

Other non-interest income

5,974

7,429

8,184

22,192

19,140

Total non-interest income

25,478

32,757

36,292

88,531

97,941

Non-interest expense:

Employee compensation and benefits

57,224

56,459

48,448

172,971

156,212

Occupancy and equipment

11,760

11,492

12,170

35,127

36,440

Deposit insurance expense

3,552

4,222

5,886

15,224

15,095

Professional fees

2,312

2,139

2,436

6,363

8,771

Technology and telecommunications

16,687

16,851

15,435

49,279

42,056

Depreciation of operating lease equipment

12,944

12,834

12,315

37,995

37,137

Other non-interest expense

13,563

14,455

11,937

42,756

38,154

Total non-interest expense

118,042

118,452

108,627

359,715

333,865

Income before income taxes

114,400

140,150

85,912

385,854

142,394

Provision for income taxes

27,459

36,176

19,353

96,125

30,278

Net income

$

86,941

$

103,974

$

66,559

$

289,729

$

112,116

Earnings per common share, basic

$

0.94

$

1.12

$

0.70

$

3.12

$

1.17

Earnings per common share, diluted

$

0.94

$

1.11

$

0.70

$

3.12

$

1.17

BANKUNITED, INC. AND SUBSIDIARIES

AVERAGE BALANCES AND YIELDS

(Dollars in thousands)

Three Months Ended
September 30, 2021

Three Months Ended
June 30, 2021

Three Months Ended
September 30, 2020

Average
Balance

Interest (1)

Yield/
Rate (1)(2)

Average
Balance

Interest (1)

Yield/
Rate (1)(2)

Average
Balance

Interest (1)

Yield/
Rate (1)(2)

Assets:

Interest earning assets:

Loans

$

22,879,654

$

197,995

3.45

%

$

22,996,564

$

205,940

3.59

%

$

23,447,514

$

212,388

3.61

%

Investment securities (3)

10,452,255

38,939

1.49

%

9,839,422

38,338

1.56

%

9,065,478

45,351

2.00

%

Other interest earning assets

750,700

1,413

...

%

1,380,317

1,607

0.47

%

552,515

1,322

0.95

%

Total interest earning assets

34,082,609

238,347

...

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