BankUnited, Inc. Reports Second Quarter 2022 Results

BankUnited, Inc. (the “Company”) (NYSE: BKU) today announced financial results for the quarter ended June 30, 2022.

"This quarter saw strong loan growth and margin expansion. We celebrated the opening of our Dallas branch and Atlanta wholesale banking office and are looking forward to continued growth of the franchise," said Rajinder Singh, Chairman, President and Chief Executive Officer.

For the quarter ended June 30, 2022, the Company reported net income of $65.8 million, or $0.82 per diluted share, compared to $67.2 million, or $0.79 per diluted share for the immediately preceding quarter ended March 31, 2022 and $104.0 million, or $1.11 per diluted share, for the quarter ended June 30, 2021. For the six months ended June 30, 2022, the Company reported net income of $132.9 million, or $1.60 per diluted share, compared to $202.8 million, or $2.17 per diluted share, for the six months ended June 30, 2021. Earnings for the six months ended June 30, 2021 were favorably impacted by a $55.5 million recovery of the provision for credit losses.

Quarterly Highlights

• During the second quarter, we continued to build out our wholesale banking teams in Atlanta and opened a banking center in Dallas.

• Total loans, excluding the runoff of PPP loans, grew by $780 million, of which $553 million was in commercial segments, for the quarter ended June 30, 2022.

• Average non-interest bearing demand deposits increased by $371 million for the quarter. Total deposits remained relatively consistent with the prior quarter-end, declining by $80 million, while non-interest bearing demand deposits declined by $18 million at June 30, 2022 compared to March 31, 2022. At June 30, 2022, non-interest bearing demand deposits represented 34% of total deposits, consistent with the prior quarter-end.

• The net interest margin, calculated on a tax-equivalent basis, expanded to 2.63% for the quarter ended June 30, 2022 from 2.50% for the immediately preceding quarter and 2.37% for the quarter ended June 30, 2021. Net interest income increased by $16.8 million compared to the immediately preceding quarter ended March 31, 2022 and by $27.1 million compared to the quarter ended June 30, 2021.

• In response to the rising interest rate environment, the average cost of total deposits increased to 0.30% for the quarter ended June 30, 2022, from 0.17% for the immediately preceding quarter ended March 31, 2022 and 0.25% for the quarter ended June 30, 2021. On a spot basis, the average annual percentage yield on total deposits increased to 0.45% at June 30, 2022, from 0.16% at March 31, 2022.

• For the quarter ended June 30, 2022, the Company recorded a provision for credit losses of $24.0 million compared to a provision of $7.8 million for the immediately preceding quarter ended March 31, 2022 and a recovery of the provision for credit losses of $(27.5) million for the quarter ended June 30, 2021. The ratio of the ACL to total loans was consistent with the prior quarter-end at 0.54%.

• The ratio of non-performing loans to total loans was 0.60% at June 30, 2022 compared to 0.65% at March 31, 2022. The guaranteed portion of SBA loans on non-accrual status represented 0.18% of total loans and 30% of non-performing loans at June 30, 2022. The positive trend in levels of criticized and classified loans continued during the quarter ended June 30, 2022 with a decline of $181 million and the annualized net charge-off ratio declined to 0.23% from 0.29% for the year ended December 31, 2021.

• Results for the quarter continued to be impacted by declines in the fair value of investment securities. Accumulated other comprehensive loss increased by $163 million for the quarter ended June 30, 2022, primarily due to an increase in unrealized losses on investment securities available for sale. Non-interest income was impacted by a $9.3 million decline in the fair value of certain preferred stock investments. These declines in the fair value of securities resulted primarily from widening spreads and rising interest rates related to the Fed's quantitative tightening and inflationary concerns. None of the unrealized losses were attributable to credit loss impairments; the Company expects to recover the amortized cost basis of its available for sale securities.

• At June 30, 2022, book value per common share and tangible book value per common share were $32.15 and $31.16, respectively.

• During the quarter ended June 30, 2022, the Company repurchased approximately 6.1 million shares of its common stock for an aggregate purchase price of $243.6 million, at a weighted average price of $39.94 per share.

Loans

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

In aggregate, commercial loans, excluding the runoff of PPP, grew by $553 million during the quarter ended June 30, 2022. The largest increase was in the commercial and industrial segment, including owner-occupied commercial real estate, which grew by $474 million for the quarter, followed by growth in MWL of $116 million. MWL utilization was 46% at June 30, 2022 compared to 39% at March 31, 2022 and 56% at December 31, 2021. Residential and other consumer loans grew by $228 million during the quarter ended June 30, 2022.

Asset Quality and the Allowance for Credit Losses ("ACL")

Non-performing loans totaled $144.0 million or 0.60% of total loans at June 30, 2022, compared to $150.8 million or 0.65% of total loans at March 31, 2022. Non-performing loans included $43.4 million and $41.9 million of the guaranteed portion of SBA loans on non-accrual status, representing 0.18% of total loans at both June 30, 2022 and March 31, 2022.

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

The following table presents the ACL and related ACL coverage ratios at the dates indicated and net charge-off rates for the periods ended June 30, 2022 and March 31, 2022, and the year ended December 31, 2021 (dollars in thousands):

The ACL at June 30, 2022 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 June 2022, economic information provided by additional sources including developments subsequent to publishing of the scenarios, information about borrower financial condition and collateral values and other relevant information.

For the quarter ended June 30, 2022, the Company recorded a provision for credit losses of $24.0 million, which included a provision of $23.2 million related to funded loans. Factors impacting the provision for credit losses for the quarter ended June 30, 2022 included loan growth, an increase in qualitative factors and an increase in specific reserves.

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

Net Interest Income

Net interest income for the quarter ended June 30, 2022 was $225.4 million compared to $208.6 million for the immediately preceding quarter ended March 31, 2022 and $198.3 million for the quarter ended June 30, 2021. Interest income increased by $31.0 million for the quarter ended June 30, 2022 compared to the immediately preceding quarter. Interest expense increased by $14.2 million compared to the immediately preceding quarter.

The Company’s net interest margin, calculated on a tax-equivalent basis, increased by 0.13% to 2.63% for the quarter ended June 30, 2022, from 2.50% for the immediately preceding quarter ended March 31, 2022. Factors impacting the net interest margin for the quarter ended June 30, 2022 included:

• The tax-equivalent yield on investment securities increased to 2.12% for the quarter ended June 30, 2022, from 1.73% for the quarter ended March 31, 2022. This increase resulted from the reset of coupon rates on variable rate securities and purchases of higher-yielding securities.

• The tax-equivalent yield on loans increased to 3.59% for the quarter ended June 30, 2022, from 3.36% for the quarter ended March 31, 2022. The resetting of variable rate loans to higher coupon rates and origination of new loans at higher rates contributed to the increase.

• The average rate paid on interest bearing deposits increased to 0.45% for the quarter ended June 30, 2022, from 0.24% for the quarter ended March 31, 2022, primarily in response to the rising interest rate environment.

Non-interest income and Non-interest expense

Non-interest income totaled $13.5 million for the quarter ended June 30, 2022 compared to $14.3 million for the quarter ended March 31, 2022 and $32.8 million for the quarter ended June 30, 2021.

• Gain (loss) on investment securities was a net loss of $(8.4) million for the quarter ended June 30, 2022 compared to a net loss of $(7.9) million for the quarter ended March 31, 2022, and a net gain of $4.2 million for the quarter ended June 30, 2021. The net losses for the quarters ended June 30, 2022 and March 31, 2022 were attributable to $9.3 million and $10.5 million declines, respectively, in the fair value of certain preferred stock investments resulting from rising market interest rates.

• The decline in other non-interest income for the quarter ended June 30, 2022 compared to the quarter ended June 30, 2021 reflected declines in BOLI revenue and gain on sale of loans.

Employee compensation and benefits declined by $4.6 million for the quarter ended June 30, 2022, compared to the quarter ended March 31, 2022. Seasonal declines in payroll taxes and certain other benefits combined with lower compensation expense related to liability classified share awards resulting from a lower stock price were partially offset by the impact of salary increases and higher head count.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Thursday, July 21, 2022 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/BI46cdf2737b4a45dc8e0f6a39d5fdf9c1. For those unable to join the live event, an archived webcast will be available in 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 $36.6 billion at June 30, 2022, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 60 banking centers in 12 Florida counties, 4 banking centers in the New York metropolitan area, and 1 banking center located in Dallas, Texas.

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 external circumstances outside the Company's direct control. 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, 2021 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

ACL to total loans, excluding government insured residential loans, PPP loans and MWL is a non-GAAP financial measure. Management believes this measure is relevant to understanding the adequacy of the ACL coverage, excluding the impact of loans which carry nominal or no reserves. Disclosure of this non-GAAP financial measure also provides a meaningful basis for comparison to other financial institutions. The following table reconciles the non-GAAP financial measurement of ACL to total loans, excluding government insured residential loans, PPP loans and MWL to the comparable GAAP financial measurement of ACL to total loans at the dates indicated (dollars in thousands):

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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