BankUnited(BKU) - 2024 Q2 - Quarterly Results

Financial Performance Overview Q2 2024 Financial Results BankUnited's Q2 2024 net income was $53.7 million, with diluted EPS of $0.72, showing sequential growth but a year-over-year decline Quarterly and Year-to-Date Financial Results | Period | Net Income (millions) | Diluted EPS ($) | | :--- | :--- | :--- | | Q2 2024 | $53.7 | $0.72 | | Q1 2024 | $48.0 | $0.64 | | Q2 2023 | $58.0 | $0.78 | | H1 2024 | $101.7 | $1.36 | | H1 2023 | $110.9 | $1.48 | - The Chairman, President, and CEO, Rajinder Singh, described the quarter as "outstanding," highlighting margin expansion, declining deposit costs, growth in non-interest bearing deposits, and growth in the core commercial loan portfolio[4] Key Quarterly Highlights & Strategic Execution Q2 2024 saw strong strategic execution, with net interest margin expanding to 2.72%, deposit costs declining, non-interest bearing deposits growing, and wholesale funding reduced - The net interest margin (tax-equivalent basis) expanded by 0.15% to 2.72% for Q2 2024, up from 2.57% in the prior quarter[15] - The average cost of total deposits decreased by 9 basis points to 3.09% in Q2 2024 from 3.18% in Q1 2024, with the spot APY on total deposits also declining to 3.09%[5] - Non-interest bearing demand deposits grew by $826 million during the quarter, reaching 29% of total deposits at June 30, 2024[37] - Wholesale funding, including FHLB advances and brokered deposits, was reduced by $1.2 billion during the quarter[16] - The loan to deposit ratio improved, declining to 88.7% at the end of Q2 2024 from 89.6% at the end of Q1 2024[38] Detailed Financial Analysis Loan Portfolio Total loans grew by $402 million in Q2 2024, primarily from core commercial portfolios, while residential loans saw a planned reduction Loan Portfolio Composition (in thousands) | Loan Category | Q2 2024 Balance (thousands) | Q1 2024 Balance (thousands) | QoQ Change (thousands) | | :--- | :--- | :--- | :--- | | Core C&I and CRE | $15,089,927 | $14,501,044 | +$588,883 | | Residential | $7,844,722 | $8,056,972 | -$212,250 | | Mortgage warehouse lending | $539,159 | $456,385 | +$82,774 | | Total Loans | $24,628,484 | $24,226,300 | +$402,184 | - The company's commercial real estate exposure is modest, representing 24% of total loans and 165% of the Bank's total risk-based capital, which is below the median for peer banks[39] Asset Quality and Allowance for Credit Losses (ACL) Asset quality normalized with ACL to total loans at 0.92% and NPLs at 0.70%, driven by office CRE, with a $19.5 million provision Key Asset Quality Ratios | Metric | Q2 2024 | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | :--- | | ACL to Total Loans | 0.92% | 0.90% | 0.82% | | ACL to Non-Performing Loans | 130.12% | 187.92% | 159.54% | | Non-performing loans to total loans | 0.70% | 0.48% | 0.52% | | Net Charge-offs to Average Loans (Annualized) | 0.12% | 0.02% | 0.09% | - The provision for credit losses was $19.5 million in Q2 2024, up from $15.3 million in Q1 2024, driven by new loan production, risk rating migration, and changes in specific reserves[44] - Non-performing loans increased by $59 million during the quarter, with $50 million of the increase related to office CRE exposure[45] - Total criticized and classified commercial loans declined by $52 million during the quarter, as a $69 million increase in CRE was more than offset by a $121 million decline in other commercial categories[23] Net Interest Income and Margin Net interest income increased to $226.0 million in Q2 2024, with NIM expanding to 2.72% due to higher non-interest bearing deposits and loan yields Net Interest Income and Margin Performance | Metric | Q2 2024 (millions) | Q1 2024 (millions) | | :--- | :--- | :--- | | Net Interest Income | $226.0 | $214.9 | | Net Interest Margin (tax-equivalent) | 2.72% | 2.57% | - A key driver for margin expansion was the $888 million increase in average non-interest bearing demand deposits, which grew to 27.5% of average total deposits[26] - The tax-equivalent yield on loans increased to 5.85% from 5.78% in the prior quarter, reflecting new loan originations at higher rates[46] - The average cost of interest-bearing deposits increased at a declining rate, rising to 4.26% from 4.21% in the previous quarter[27] Non-interest Income Non-interest income decreased to $24.2 million in Q2 2024, primarily due to lower lease financing, partially offset by other income growth Non-interest Income Components (in millions) | Component | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | Lease financing | $5.6 | $11.4 | | Other non-interest income | $13.2 | $9.3 | | Total non-interest income | $24.2 | $26.9 | Capital and Liquidity Capital Position The company maintained a robust capital position in Q2 2024, with all ratios exceeding "Well Capitalized" requirements, and CET1 at 11.6% BankUnited, Inc. Capital Ratios | Ratio | June 30, 2024 | March 31, 2024 | Required (Well Capitalized) | | :--- | :--- | :--- | :--- | | Tier 1 leverage | 8.2% | 8.1% | 5.0% | | CET1 risk-based capital | 11.6% | 11.6% | 6.5% | | Total risk-based capital | 13.6% | 13.7% | 10.0% | | Tangible Common Equity/Tangible Assets | 7.4% | 7.3% | N/A | Liquidity The company maintains ample liquidity, with $14.9 billion in same-day available liquidity and a 139% ratio to uninsured deposits - Total same-day available liquidity stood at $14.9 billion at the end of Q2 2024[40] - The ratio of available liquidity to uninsured, uncollateralized deposits was 139%[40] Book Value per Share Book value and tangible book value per common share continued to grow, with tangible book value reaching $35.07 Book Value Per Common Share Growth | Metric | June 30, 2024 ($) | March 31, 2024 ($) | June 30, 2023 ($) | | :--- | :--- | :--- | :--- | | Book value per common share | $36.11 | $35.31 | $33.94 | | Tangible book value per common share | $35.07 | $34.27 | $32.90 | - Tangible book value per common share is a non-GAAP financial measure reconciled from the GAAP book value per common share by excluding goodwill and other intangible assets[57] Financial Statements and Supplementary Data Consolidated Statements of Financial Condition (Balance Sheet) Total assets reached $35.4 billion, with loans at $24.4 billion, deposits at $27.8 billion, and equity at $2.7 billion Selected Balance Sheet Data (in billions) | Account | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Total Assets | $35.4 | $35.1 | | Loans, net | $24.4 | $24.0 | | Total Deposits | $27.8 | $27.0 | | FHLB Advances | $3.3 | $3.9 | | Total Stockholders' Equity | $2.7 | $2.6 | Consolidated Statements of Income Q2 2024 net interest income was $226.0 million, with a $19.5 million provision for credit losses, resulting in $53.7 million net income Income Statement Summary - Q2 2024 (in millions) | Item | Amount | | :--- | :--- | | Net interest income | $226.0 | | Provision for credit losses | $19.5 | | Non-interest income | $24.2 | | Non-interest expense | $157.7 | | Net income | $53.7 | Selected Financial Ratios Q2 2024 key ratios include ROA of 0.61%, ROE of 8.0%, net interest margin of 2.72%, and loans to deposits of 88.7% Key Performance Ratios - Q2 2024 vs Q1 2024 | Ratio | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | Return on average assets | 0.61% | 0.54% | | Return on average stockholders' equity | 8.0% | 7.3% | | Net interest margin | 2.72% | 2.57% | | Loans to deposits | 88.7% | 89.6% | Earnings Per Share Calculation Basic and diluted EPS for Q2 2024 were both $0.72, based on $53.0 million income allocated to common stockholders EPS Calculation - Q2 2024 | Metric | Value | | :--- | :--- | | Net Income | $53.7 million | | Income allocated to common stockholders (Basic) | $53.0 million | | Weighted average shares (Basic) | 73,652,265 shares | | Basic EPS | $0.72 | | Weighted average shares (Diluted) | 74,018,253 shares | | Diluted EPS | $0.72 |