BankUnited, Inc. Reports Third Quarter 2024 Results

BankUnited, Inc. (the "Company") (NYSE:BKU) today announced financial results for the quarter ended September 30, 2024.

"We're happy with third quarter results as our balance sheet transformation story continues. Margin expanded again this quarter and credit remains well managed. Looking forward, we are optimistic about the environment, our markets and opportunities to grow core customer relationships. Our thoughts are with those who were impacted by the recent storms and we are here to support our employees, clients and communities," said Rajinder Singh, Chairman, President and Chief Executive Officer.

For the quarter ended September 30, 2024, the Company reported net income of $61.5 million, or $0.81 per diluted share, compared to $53.7 million, or $0.72 per diluted share, for the immediately preceding quarter ended June 30, 2024 and $47.0 million, or $0.63 per diluted share, for the quarter ended September 30, 2023. For the nine months ended September 30, 2024, the Company reported net income of $163.2 million, or $2.17 per diluted share compared to $157.9 million, or $2.11 per diluted share for the nine months ended September 30, 2023.

Quarterly Highlights

To date, we have made notable progress executing near-term strategic priorities focused on improving core profitability.

• The net interest margin, calculated on a tax-equivalent basis, expanded by 0.06%, to 2.78% for the quarter ended September 30, 2024 from 2.72% for the immediately preceding quarter. The net interest margin was 2.56% for the quarter ended September 30, 2023. For the nine months ended September 30, 2024 the net interest margin improved to 2.69% from 2.55% for the nine months ended September 30, 2023.
• The average cost of total deposits declined by 0.03% to 3.06% for the quarter ended September 30, 2024 from 3.09% for the immediately preceding quarter ended June 30, 2024. The spot APY of total deposits declined to 2.93% at September 30, 2024 from 3.09% at June 30, 2024. The average cost of interest bearing deposits declined by 0.06% to 4.20% for the quarter ended September 30, 2024 from 4.26% for the immediately preceding quarter ended June 30, 2024 while the spot APY of interest bearing deposits declined to 4.01% at September 30, 2024 from 4.29% at June 30, 2024.
• The Company's funding profile has improved significantly over the course of 2024. For the nine months ended September 30, 2024, wholesale funding, including FHLB advances and brokered deposits, declined by $1.9 billion while non-brokered deposits grew by $1.7 billion, including an increase of $800 million in non-interest bearing demand deposits ("NIDDA").
• Average NIDDA remained relatively stable, declining by $64 million for the quarter, consistent with the prior quarter at 27% of average total deposits. Total deposits grew by $93 million for the quarter ended September 30, 2024. In part due to expected seasonal trends, for the quarter ended September 30, 2024, NIDDA declined by $430 million, and represented 27% of total deposits at September 30, 2024.
• FHLB advances increased by $295 million for the quarter ended September 30, 2024; this increase was related to intraday cash management and transactional deposit flows on the last day of the quarter and is also reflected in temporarily elevated cash balances. Brokered deposits grew by $303 million for the quarter; we took advantage of favorable pricing in the brokered deposit market during a period of market dislocation.
• For the nine months ended September 30, 2024, our core CRE and C&I loan portfolios grew by $286 million while residential loans declined by $422 million and franchise, equipment and municipal finance declined by a combined $238 million.
• Total loans declined by $230 million for the quarter ended September 30, 2024. The commercial real estate segment grew by $34 million while the C&I segment declined by $112 million. Mortgage warehouse grew by $33 million. Consistent with our balance sheet strategy, the residential, franchise, equipment and municipal finance portfolios declined by a combined $185 million.
• The loan to deposit ratio declined to 87.6% at September 30, 2024, from 88.7% at June 30, 2024 and 92.8% at December 31, 2023.
• Net charge-offs remained low and were $6.5 million for the quarter. The annualized net charge-off ratio for the nine months ended September 30, 2024 was 0.12%. The NPA ratio at September 30, 2024 was 0.64%, including 0.10% related to the guaranteed portion of non-accrual SBA loans, compared to 0.50%, including 0.11% related to the guaranteed portion of non-accrual SBA loans at June 30, 2024. The quarter-over-quarter increase was primarily related to two C&I loans.
• The ratio of the ACL to total loans increased to 0.94% at September 30, 2024; the ratio of the ACL to non-performing loans was 101.68%. The ACL to loans ratio for commercial portfolio sub-segments including C&I, CRE, franchise finance and equipment finance was 1.41% at September 30, 2024 and the ACL to loans ratio for CRE office loans was 2.20%.
• Our commercial real estate exposure is modest, totaling 25% of loans and 164% of the Bank's total risk based capital at September 30, 2024. By comparison, based on call report data as of June 30, 2024 (the most recent date available) for banks with between $10 billion and $100 billion in assets, the median level of CRE to total loans was 35% and the median level of CRE to total risk based capital was 220%.
• At September 30, 2024, the weighted average LTV of the CRE portfolio was 55.3%, the weighted average DSCR was 1.77, 56% of the portfolio was collateralized by properties located in Florida and 25% was collateralized by properties located in the New York tri-state area. For the office sub-segment, the weighted average LTV was 65.4%, the weighted average DSCR was 1.56, 57% was collateralized by properties in Florida, substantially all of which was suburban, and 23% was collateralized by properties located in the New York tri-state area.
• Liquidity remains ample. Total same day available liquidity was $15.0 billion, the available liquidity to uninsured, uncollateralized deposits ratio was 147% and an estimated 63% of our deposits were insured or collateralized at September 30, 2024.
• Our capital position is robust. At September 30, 2024, CET1 was 11.8% at a consolidated level. Pro-forma CET1, including accumulated other comprehensive income, was 10.9% at September 30, 2024. The ratio of tangible common equity to tangible assets increased to 7.6% at September 30, 2024.
• The net unrealized pre-tax loss on the available for sale ("AFS") securities portfolio continued to improve, declining by $125 million, to 4% of amortized cost, for the quarter ended September 30, 2024. The duration of our AFS securities portfolio remained short, at 1.73 as of September 30, 2024. Held to maturity securities were not significant.
• Book value and tangible book value per common share continued to grow, to $37.56 and $36.52, respectively, at September 30, 2024, compared to $36.11 and $35.07, respectively, at June 30, 2024, and $34.66 and $33.62, respectively at December 31, 2023.
• Beth Hosen, an industry veteran and proven leader, joined BankUnited in September as executive vice president and head of treasury management, overseeing treasury management sales, service and product as well as the commercial card business.

Hurricane Helene made landfall along Florida's "Big Bend" coast in September, 2024, ultimately impacting parts of the Southeastern United States. The impact of Hurricane Helene on BankUnited's operations was not significant, and is not expected to be significant to our financial condition or results of operations. Hurricane Milton made landfall near Siesta Key, Florida in October, bringing heavy rain, hurricane or tropical storm force winds, storm surge and power outages to portions of the Florida peninsula. All of our branches and office locations have re-opened for business, and damage from the storm was negligible. There were no significant impacts to banking operations. We are still in the process of finalizing our assessment of the potential impact of Hurricane Milton on our customers and credit portfolio.

Loans

Loan portfolio composition at the dates indicated follows (dollars in thousands):

For the quarter ended September 30, 2024, total loans declined by $230 million. The CRE portfolio grew by $34 million and MWL grew by $33 million while the C&I portfolio declined by $112 million. Consistent with our balance sheet strategy, the franchise, equipment, and municipal finance portfolios declined by an aggregate $128 million and residential loans declined by $57 million. The decline in C&I for the quarter was impacted by the timing of some unanticipated payoffs and strategic exits.

Asset Quality and the ACL

The following table presents information about the ACL at the dates indicated as well as net charge-off rates for the periods ended September 30, 2024, June 30, 2024 and December 31, 2023 (dollars in thousands):

The ACL at September 30, 2024 represents management's estimate of lifetime expected credit losses given an assessment of historical data, current conditions, and a reasonable and supportable economic forecast as of the balance sheet date. For the quarter ended September 30, 2024, the provision for credit losses, including both funded and unfunded loan commitments, was $9.2 million, compared to $19.5 million for the immediately preceding quarter ended June 30, 2024. For the quarter ended September 30, 2024, an increase in qualitative overlays, changes in portfolio characteristics, and updates to certain assumptions had the effect of increasing the ACL, while the impact of improvements in the economic forecast partially offset that increase.

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

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

Total criticized and classified commercial loans increased by $90 million for the quarter ended September 30, 2024. The increase in the substandard non-accruing category for the quarter ended September 30, 2024 was primarily related to two C&I loans.

Non-performing loans totaled $224.5 million or 0.92% of total loans at September 30, 2024, compared to $173.5 million or 0.70% of total loans at June 30, 2024. Non-performing loans included $35.1 million and $39.0 million of the guaranteed portion of SBA loans on non-accrual status, representing 0.14% and 0.16% of total loans at September 30, 2024 and June 30, 2024, respectively.

Net Interest Income

Net interest income for the quarter ended September 30, 2024 was $234.1 million, compared to $226.0 million for the immediately preceding quarter ended June 30, 2024, an increase of 4%. Interest income increased by $9.1 million for the quarter ended September 30, 2024, compared to the immediately preceding quarter, while interest expense increased by $1.0 million.

The Company's net interest margin, calculated on a tax-equivalent basis, increased by 0.06% to 2.78% for the quarter ended September 30, 2024, from 2.72% for the immediately preceding quarter ended June 30, 2024.

The average cost of total deposits declined to 3.06% from 3.09% for the quarter ended June 30, 2024 and the average cost of interest bearing liabilities declined to 4.24% from 4.28% for the quarter ended June 30, 2024. The yield on average interest earning assets increased to 5.79% for the quarter ended September 30, 2024 from 5.77% for the prior quarter.

Non-interest expense

Non-interest expense increased by $6.9 million for the quarter ended September 30, 2024 compared to the quarter ended June 30, 2024. A $6.2 million increase in compensation and benefits for the quarter ended September 30, 2024 resulted primarily from an increase in the Company's stock price, impacting the value of liability-classified share based compensation awards and increases in certain other variable compensation accruals.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Tuesday, October 22, 2024 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 https://ir.bankunited.com. To participate by telephone, participants will receive dial-in information and a unique PIN number upon completion of registration at https://register.vevent.com/register/BIb2316bdeec79467e835d086e37e8b472. For those unable to join the live event, an archived webcast will be available on the Investor Relations page at https://ir.bankunited.com approximately two hours following the live webcast.

About BankUnited, Inc.

BankUnited, Inc., with total assets of $35.8 billion at September 30, 2024, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida that provides a full range of banking and related services to individual and corporate customers through banking centers located in the state of Florida, the New York metropolitan area and Dallas, Texas, and a comprehensive suite of wholesale products to customers through an Atlanta office focused on the Southeast region. BankUnited also offers certain commercial lending and deposit products through national platforms. For additional information, call (877) 779-2265 or visit www.BankUnited.com.

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 limitation) those relating to the Company's operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by external circumstances outside the Company's direct control, such as but not limited to adverse events or conditions impacting the financial services industry. 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, 2023, 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).

Non-GAAP Financial Measures

Tangible book value per common share is a non-GAAP financial measure. Management believes this measure is relevant to understanding the capital position and performance of the Company. Disclosure of this non-GAAP financial measure also provides a meaningful basis for comparison to other financial institutions as it is a metric commonly used in the banking industry. The following table reconciles the non-GAAP financial measurement of tangible book value per common share to the comparable GAAP financial measurement of book value per common share at the dates indicated (in thousands except share and per share data):

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