BankUnited, Inc. (the “Company”) (NYSE:BKU) today announced financial results for the quarter ended March 31, 2012.
For the quarter ended March 31, 2012, the Company reported net income of $50.3 million or $0.49 per share. The results for the first quarter include pre-tax expense of $1.2 million related to transaction costs for the acquisition of Herald National Bank (“Herald”), and $5.3 million of bargain purchase gain (with no related tax impact) from the acquisition of Herald. For the quarter ended March 31, 2011, the company reported a net loss of $67.7 million, or $0.72 per share. The first quarter of 2011 included a one-time charge of $110.4 million, recorded in conjunction with the Company’s initial public offering (IPO), which was not deductible for income tax purposes.
John Kanas, Chairman, President and Chief Executive Officer, said, “We are very pleased with our operating results this quarter. Loan and deposit growth continue to reflect strong gains in market share. Additionally a noticeable improvement in the south Florida economy is beginning to have a positive impact on our performance.”
BankUnited, Inc. continues to maintain a robust capital position. The Company’s capital ratios at March 31, 2012 were as follows:
|Tier 1 leverage||13.4%|
|Tier 1 risk-based capital||36.8%|
|Total risk-based capital||38.2%|
The Company and its banking subsidiaries continue to exceed all regulatory guidelines required to be considered well capitalized.
Loans, net of discount and deferred fees and costs, increased to $4.7 billion at March 31, 2012 from $4.1 billion at December 31, 2011. Excluding loans acquired from Herald, new loans increased by $368.1 million to $2.1 billion at March 31, 2012 from $1.7 billion at December 31, 2011. Covered loans declined to $2.3 billion at March 31, 2012 from $2.4 billion at December 31, 2011.
In the first quarter of 2012, new commercial loans (including commercial loans, commercial real estate loans, and leases) grew $535.0 million to $1.8 billion, reflecting the Company’s expansion of market share in Florida, and the acquisition of loans from Herald.
For the quarter ended March 31, 2012, the Company’s portfolio of new residential loans grew $126.5 million to $590.0 million, primarily reflecting the Company’s purchase of residential loans outside of Florida to help diversify credit risk within the residential portfolio.
A comparison of portfolio composition at March 31, 2012 and December 31, 2011 is as follows:
|New Loans||Total Loans|
|Single family residential and home equity||24.7%||27.0%||54.1%||
|Commercial real estate||30.3%||26.2%||22.4%||
The Company’s asset quality remained strong, with credit risk limited by its Loss Sharing Agreements with the FDIC. At March 31, 2012, covered loans represented 49% of the total loan portfolio, as compared to 59% at December 31, 2011.
The ratio of non-performing loans to total loans was 0.7% at March 31, 2012 as compared to 0.7% at December 31, 2011 and 0.9% at March 31, 2011. At March 31, 2012, non-performing assets totaled $138.9 million, including $107.0 million of other real estate owned (“OREO”) as compared to $152.6 million, including $123.7 million of OREO, at December 31, 2011, and $217.6 million, including $182.5 million of OREO, at March 31, 2011. All OREO at March 31, 2012 is covered by the Company’s Loss Sharing Agreements.
For the quarters ended March 31, 2012 and 2011, the Company recorded a provision for loan losses of $8.8 million and $11.5 million, respectively. Of these amounts $1.6 million and $10.0 million, respectively, related to covered loans and $7.2 million and $1.5 million, respectively, related to new loans. The increase in the provision for new loans reflected the growth in the Company’s new loan originations. The provisions related to covered loans were significantly mitigated by increases in non-interest income recorded in “Net gain on indemnification asset.”
The following table summarizes the activity in the allowance for loan losses for the three months ended March 31, 2012 and 2011 (in thousands):
|Three Months Ended March 31, 2012||Three Months Ended March 31, 2011|
|New Loans||Total||ACI Loans||
|Balance at beginning of period||$ 16,332||$ 7,742||$ 24,328||$ 48,402||$ 39,925||12,284||$ 6,151||$ 58,360|
|Balance at end of period||$ 14,591||$ 10,915||$ 30,968||$ 56,474||$ 36,709||$ 17,302||$ 7,546||$ 61,557|
Investment securities grew to $4.7 billion at March 31, 2012 from $4.2 billion at December 31, 2011, including $161.0 million acquired from Herald. The average yield on investment securities was 3.00% for the quarter ended March 31, 2012 as compared to 4.07% for the quarter ended March 31, 2011. The decline in yield reflects the impact of purchases of securities at lower prevailing market rates of interest. The effective duration of the Company’s investment portfolio was approximately 1.7 years at March 31, 2012.
At March 31, 2012, deposits totaled $8.1 billion as compared to $7.4 billion at December 31, 2011. Including Herald, demand deposits (including non-interest bearing and interest bearing) grew $308.7 million to $1.5 billion at March 31, 2012 from $1.2 billion at December 31, 2011. This was driven principally by growth in commercial and small business accounts. The average cost of deposits was 0.9% for the quarter ended March 31, 2012 as compared to 1.2% for the quarter ended March 31, 2011. The decrease in the average cost of deposits was primarily attributable to the continued growth in lower cost deposit products and a decline in market rates of interest.
Net Interest Income
Net interest income for the quarter ended March 31, 2012 totaled $137.8 million, as compared to $112.3 million for the quarter ended March 31, 2011.
The Company’s net interest margin for the quarter ended March 31, 2012 was 5.99% as compared to 5.76% for the quarter ended March 31, 2011.
The Company’s net interest margin for the quarters ended March 31, 2012 and 2011 was impacted by reclassification from non-accretable difference to accretable yield on ACI loans (defined as covered loans acquired with evidence of deterioration in credit quality). Non-accretable difference at the Acquisition represented the difference between the total contractual payments due and the cash flows expected to be received on these loans. The accretable yield on ACI loans represents the amount by which undiscounted expected future cash flows exceed the carrying value of the loans. As the Company’s expected cash flows from ACI loans have increased since the Acquisition, the Company reclassified amounts from non-accretable difference to accretable yield.
Changes in accretable yield on ACI loans for the quarter ended March 31, 2012 and the year ended December 31, 2011 were as follows (in thousands):
|Three Months Ended||Year Ended|
|March 31, 2012||December 31, 2011|
|Balance, beginning of period||$ 1,523,615||$ 1,833,974|
|Reclassifications from non-accretable difference||29,108||135,933|
|Balance, end of period||$ 1,442,611||$ 1,523,615|
Non-interest income for the quarter ended March 31, 2012 was $36.4 million, as compared to $64.3 million for the quarter ended March 31, 2011.
Non-interest income for the quarter ended March 31, 2012 was impacted by lower accretion of discount on the FDIC indemnification asset of $6.8 million as compared to $19.6 million for the quarter ended March 31, 2011. As the expected cash flows from ACI loans have increased as discussed above, the Company expects reduced cash flows from the FDIC indemnification asset, resulting in lowered accretion.
Net gain on indemnification asset was $134 thousand for the quarter ended March 31, 2012, as compared to $26.3 million for the quarter ended March 31, 2011. Factors impacting this change included the variance in OREO impairment and gains (losses) on the sale of OREO as discussed below, as well as the variance in the provision for losses on covered loans as discussed above.
Non-interest expense totaled $84.1 million for the quarter ended March 31, 2012 as compared to $204.3 million for the quarter ended March 31, 2011. Non-interest expense for the quarter ended March 31, 2011 included a one-time compensation expense of $110.4 million recorded in conjunction with the Company’s IPO.
Employee compensation and benefits (excluding the one-time charge of $110.4 million discussed above) and occupancy and equipment expense increased for the quarter ended March 31, 2012 as compared to the quarter ended March 31, 2011, reflecting the Company’s hiring of experienced commercial lending teams and the opening and refurbishment of branches. For the quarter ended March 31, 2012, the aggregate of OREO related expense, gain (loss) on sale of OREO, foreclosure expense, and impairment of other real estate owned totaled $9.9 million, as compared to $30.6 million for the quarter ended March 31, 2011. The lower level of expense for the quarter ended March 31, 2012 reflected lower levels of foreclosure activity and OREO as compared to the prior year.
Earnings Conference Call and Presentation
A conference call to discuss the first quarter results will be held at 9:00 a.m. EDT on Wednesday April 25th with Chairman, President, and Chief Executive Officer, John A. Kanas and Chief Financial Officer, Douglas J. Pauls.
The earnings release will be available on the Investor Relations page under About Us on www.bankunited.com prior to the call. The call may be accessed via a live Internet webcast at www.bankunited.com or through a dial in telephone number at (888) 680-0894 (domestic) or, (617) 213-4860 (international). The name of the call is BankUnited, and the pass code for the call is 37694054. A replay of the call will be available from 11:00 a.m. EDT on April 25 through 11:59 p.m. EDT on May 2 by calling (888) 286-8010 (domestic) or (617) 801-6888 (international). The pass code for the replay is 11033125. An archived webcast will also be available on the Investor Relations page of www.bankunited.com.
About BankUnited and the Acquisition
BankUnited, Inc. is a bank holding company with three wholly-owned subsidiaries: BankUnited, N.A., which is one of the largest independent depository institutions headquartered in Florida by assets, BankUnited Investment Services, Inc., a Florida insurance agency which provides comprehensive wealth management products and financial planning services, and Herald National Bank, a commercial bank servicing the New York City market. BankUnited, N.A., is a national bank headquartered in Miami Lakes, Florida, with $11.6 billion of assets, more than 1,404 professionals and 94 branches in 15 counties at March 31, 2012.
The Company was organized by a management team led by its Chairman, President and Chief Executive Officer, John A. Kanas, on April 28, 2009. On May 21, 2009, BankUnited acquired substantially all of the assets and assumed all of the non-brokered deposits and substantially all other liabilities of BankUnited, FSB from the FDIC, in a transaction referred to as the “Acquisition”. Concurrently with the Acquisition, BankUnited entered into two loss sharing agreements, or the “Loss Sharing Agreements”, which cover certain legacy assets, including the entire legacy loan portfolio and OREO, and certain purchased investment securities. Assets covered by the Loss Sharing Agreements are referred to as “covered assets” (or, in certain cases, “covered loans”). The Loss Sharing Agreements do not apply to subsequently acquired, purchased or originated assets. Pursuant to the terms of the Loss Sharing Agreements, the covered assets are subject to a stated loss threshold whereby the FDIC will reimburse BankUnited for 80% of losses, including certain interest and expenses, up to the $4.0 billion stated threshold and 95% of losses in excess of the $4.0 billion stated threshold. The Company’s current estimate of cumulative losses on the covered assets is approximately $4.7 billion. The Company has received $2.0 billion from the FDIC in reimbursements under the Loss Sharing Agreements for claims filed for incurred losses as of March 31, 2012.
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” 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 relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity. 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 Annual Report on Form 10-K for the year ended December 31, 2011 available at the SEC’s website (www.sec.gov).
|BANKUNITED, INC. AND SUBSIDIARIES|
|CONSOLIDATED BALANCE SHEETS - UNAUDITED|
|(In thousands, except share data)|
|March 31,||December 31,|
|Cash and due from banks:|
|Interest bearing deposits at Federal Reserve Bank||238,567||247,488|
|Federal funds sold||3,012||3,200|
|Cash and cash equivalents||312,061||303,742|
|Investment securities available for sale, at fair value|
|(including covered securities of $235,176 and $232,194)||4,661,945||4,181,977|
|Loans held for sale||2,173||3,952|
|Loans (including covered loans of $2,313,893 and $2,422,811)||4,709,283||4,137,058|
|Allowance for loan and lease losses||(56,474||)||(48,402||)|
|FDIC indemnification asset||1,786,512||2,049,151|
|Bank owned life insurance||205,012||204,077|
|Other real estate owned, covered by loss sharing agreements||106,950||123,737|
|Deferred tax asset, net||83,834||19,485|
|Goodwill and other intangible assets||70,329||68,667|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Savings and money market||3,932,111||3,553,018|
|Federal funds purchased and securities sold under repurchase agreements||11,199||206|
|Federal Home Loan Bank advances||2,231,412||2,236,131|
|Income taxes payable||80,215||53,171|
|Advance payments by borrowers for taxes and insurance||30,803||21,838|
|Commitments and contingencies|
|Common Stock, par value $0.01 per share|
|400,000,000 shares authorized; 93,982,328 and 97,700,829 shares issued and outstanding||940||977|
|Preferred Stock, par value $0.01 per share|
|100,000,000 shares authorized; 5,415,794 shares issued and outstanding at March 31, 2012||54||-|
|Accumulated other comprehensive income||44,714||18,019|
|Total stockholders' equity||1,644,933||1,535,280|
|Total liabilities and stockholders' equity||$||12,198,884||$||11,322,038|
|BANKUNITED, INC. AND SUBSIDIARIES|
|CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED|
|(In thousands, except per share data)|
|Three Months Ended March 31,|
|Investment securities available for sale||33,039||32,549|
|Total interest income||170,290||148,206|
|Total interest expense||32,481||35,879|
|Net interest income before provision for loan losses||137,809||112,327|
|Provision for loan losses (including provision for covered loans of $1,600 and $10,017)||8,767||11,456|
|Net interest income after provision for loan losses||129,042||100,871|
|Accretion of discount on FDIC indemnification asset||6,787||19,570|
|Income (loss) from resolution of covered assets, net||7,282||(710||)|
|Net gain on indemnification asset||134||26,322|
|FDIC reimbursement of costs of resolution of covered assets||6,516||10,500|
|Service charges and fees||3,055||2,684|
|Mortgage insurance income||3,690||1,301|
|Investment services income||1,132||2,404|
|Other non-interest income||7,802||2,191|
|Total non-interest income||36,398||64,262|
|Employee compensation and benefits||46,625||149,306|
|Occupancy and equipment||11,822||7,605|
|Impairment of other real estate owned||3,547||9,599|
|Loss on sale of other real estate owned||1,401||12,210|
|Other real estate owned expense||2,276||4,343|
|Deposit insurance expense||1,150||4,189|
|Telecommunications and data processing||3,230||3,448|
|Other non-interest expense||7,699||5,940|
|Total non-interest expense||84,118||204,339|
|Income (loss) before income taxes||81,322||(39,206||)|
|Provision for income taxes||31,050||28,454|
|Net income (loss)||$||50,272||$||(67,660||)|
|Earnings (loss) per common share, basic and diluted||$||0.49||$||(0.72||)|
|Cash dividends declared per common share||$||0.17||$||0.14|
|BankUnited Inc. and Subsidiaries|
|Average balances and yields|
|For the Three Months Ended March 31,|
|Interest earning assets:|
|Investment securities available for sale||$||4,398,697||$||33,039||3.00||%||$||3,201,208||$||32,549||4.07||%|
|Other interest earning assets||524,710||954||0.73||%||792,540||1,006||0.51||%|
|Total interest earning assets||9,198,813||170,290||7.42||%||7,796,534||148,206||7.63||%|
|Allowance for loan and lease losses||(49,857||)||(58,443||)|
|Non-interest earning assets||2,441,365||3,175,098|
|Liabilities and Stockholders' Equity:|
|Interest bearing liabilities:|
|Interest bearing demand deposits||$||474,898||$||767||0.65||%||$||349,822||$||553||0.64||%|
|Savings and money market deposits||3,660,944||6,433||0.71||%||3,252,484||7,226||0.90||%|
|Total interest bearing deposits||6,714,668||16,960||1.02||%||6,496,143||20,306||1.27||%|
|Short term borrowings||1,209||1||0.45||%||286||1||0.28||%|
|Total interest bearing liabilities||8,950,303||32,481||1.46||%||8,749,651||35,879||1.66||%|
|Non-interest bearing demand deposits||863,131||525,622|
|Other non-interest bearing liabilities||191,816||277,786|
|Total liabilities and stockholders' equity||$||11,590,321||$||10,913,189|
|Net interest income||$||137,809||$||112,327|
|Interest rate spread||5.96||%||5.97||%|
|Net interest margin||5.99||%||5.76||%|
|Earnings (loss) Per Common Share|
|(In thousands except share amounts)|
|Three Months Ended March 31,|
|Basic earnings per common share:|
|Net income (loss)||$||50,272||$||(67,660||)|
|Distributed and undistributed earnings allocated to participating securities||(4,182||)||-|
|Income (loss) attributable to common stockholders||$||46,090||$||(67,660||)|
|Weighted average common shares outstanding||96,386,890||94,304,787|
|Less average unvested stock awards||(1,641,200||)||-|
|Weighted average shares for basic earnings (loss) per share||94,745,690||94,304,787|
|Basic earnings per common share||$||0.49||$||(0.72||)|
|Diluted earnings per common share:|
|Income (loss) attributable to common stockholders||$||46,090||$||(67,660||)|
|Adjustment for earnings reallocated from participating securities||4||-|
|Income used in calculating diluted earnings per share||$||46,094||$||(67,660||)|
|Average shares for basic earnings per share||94,745,690||94,304,787|
|Dilutive effect of stock options||166,030||-|
|Weighted average shares for diluted earnings per share||94,911,720||94,304,787|
|Diluted earnings per common share||$||0.49||$||(0.72||)|
Three months ended
Three months ended
|Return on average assets||1.74%||(2.51%)|
|Return on average stockholders' equity||12.76%||(20.17%)|
|Net interest margin||5.99%||5.76%|
|Capital ratios||March 31, 2012||December 31, 2011|
|Tier 1 risk-based capital||36.84%||41.62%|
|Total risk-based capital||38.18%||42.89%|
|Tier 1 leverage||13.41%||13.06%|
|Asset quality ratios||March 31, 2012||December 31, 2011|
|Non-performing loans to total loans (1) (3)||0.68%||0.70%|
|Non-performing assets to total assets (2)||1.14%||1.35%|
|Allowance for loan losses to total loans (3)||1.20%||1.17%|
|Allowance for loan losses to non-performing loans (1)||176.66%||167.59%|
|Net charge-offs to average loans||0.07%||0.62%|
We define non-performing loans to include nonaccrual loans, loans, other than ACI loans, that are past due 90 days or more and still accruing and certain loans modified in troubled debt restructurings. Contractually delinquent ACI loans on which interest continues to be accreted are excluded from non-performing loans. The carrying value of ACI loans contractually delinquent by more than 90 days, but not identified as non-performing was $336.0 million and $361.2 million at March 31, 2012 and December 31, 2011, respectively.
|(2)||Non-performing assets include non-performing loans and other real estate owned.|
|(3)||Total loans is net of unearned discounts, premiums and deferred fees and costs.|