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BankUnited(BKU) - 2024 Q3 - Quarterly Results
BankUnitedBankUnited(US:BKU)2024-10-22 10:55

Financial Performance Overview This section provides an overview of the company's strong financial results and strategic progress for the period Third Quarter 2024 Financial Results BankUnited, Inc. reported strong financial results for the third quarter of 2024, with significant year-over-year and sequential growth in net income and diluted earnings per share - The Chairman, President, and CEO, Rajinder Singh, expressed satisfaction with the Q3 results, highlighting the continued balance sheet transformation, margin expansion, and well-managed credit1 Quarterly and YTD Earnings Summary | Metric | Q3 2024 ($M) | Q2 2024 ($M) | Q3 2023 ($M) | Nine Months 2024 ($M) | Nine Months 2023 ($M) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income | $61.5M | $53.7M | $47.0M | $163.2M | $157.9M | | Diluted EPS | $0.81 | $0.72 | $0.63 | $2.17 | $2.11 | Quarterly Highlights & Strategic Progress The company demonstrated notable progress on its strategic priorities, focusing on improving core profitability, expanding net interest margin, and enhancing its funding profile Net Interest Margin (Tax-Equivalent Basis) | Period | Net Interest Margin (%) | | :--- | :--- | | Q3 2024 | 2.78% | | Q2 2024 | 2.72% | | Q3 2023 | 2.56% | - The average cost of total deposits declined by 3 basis points to 3.06% in Q3 2024 from 3.09% in Q2 2024, with the spot APY on total deposits seeing a more significant drop to 2.93% at the end of Q34 - For the first nine months of 2024, the company improved its funding mix by reducing wholesale funding (FHLB advances and brokered deposits) by $1.9 billion while increasing non-brokered deposits by $1.7 billion, including an $800 million rise in non-interest bearing demand deposits4 - The loan-to-deposit ratio improved, declining to 87.6% at September 30, 2024, from 88.7% at June 30, 2024, and 92.8% at year-end 20236 Financial Condition This section analyzes the company's balance sheet, including loan portfolio, asset quality, capital, and liquidity positions Loan Portfolio Analysis Total loans decreased by $230 million during the third quarter to $24.4 billion, driven by strategic runoff in certain portfolios offset by growth in CRE and mortgage warehouse lending Loan Portfolio Composition (in thousands) | Loan Category | Sep 30, 2024 | Jun 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Core C&I and CRE | $15,012,739 | $15,089,927 | $14,726,957 | | Franchise & Equipment | $277,704 | $307,442 | $380,347 | | Municipal Finance | $749,035 | $847,234 | $884,690 | | Mortgage Warehouse | $571,783 | $539,159 | $432,663 | | Residential | $7,787,442 | $7,844,722 | $8,209,027 | | Total Loans | $24,398,703 | $24,628,484 | $24,633,684 | - The company's balance sheet strategy involves reducing exposure to residential, franchise, equipment, and municipal finance loans, which collectively declined by $185 million in Q3 20246 Asset Quality Asset quality metrics showed some deterioration due to an increase in non-performing and criticized loans, primarily from two C&I loans, yet net charge-offs remained low and ACL strengthened to 0.94% Key Asset Quality Ratios | Metric | Sep 30, 2024 | Jun 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | ACL to Total Loans (%) | 0.94% | 0.92% | 0.82% | | ACL to Non-Performing Loans (%) | 101.68% | 130.12% | 159.54% | | Annualized Net Charge-offs (%) | 0.12% (YTD) | 0.12% (6mo) | 0.09% (Year) | - The provision for credit losses was $9.2 million for Q3 2024, a decrease from $19.5 million in Q2 2024, influenced by qualitative overlays and portfolio changes, partially offset by an improved economic forecast12 - Non-performing loans increased to $224.5 million (0.92% of total loans) at the end of Q3, up from $173.5 million (0.70% of total loans) at the end of Q216 - Total criticized and classified commercial loans rose by $90 million during the quarter, primarily due to two C&I loans moving to the substandard non-accruing category15 Capital and Liquidity Position The company maintained a robust capital position and ample liquidity, with all regulatory capital ratios significantly above 'well capitalized' requirements and continued growth in tangible common equity and book value per share - Total same-day available liquidity was strong at $15.0 billion, with the available liquidity to uninsured, uncollateralized deposits ratio at 147%9 Key Capital Ratios (BankUnited, Inc.) | Ratio | Sep 30, 2024 | Jun 30, 2024 | Well Capitalized Req. | | :--- | :--- | :--- | :--- | | CET1 Risk-based Capital (%) | 11.8% | 11.6% | 6.5% | | Total Risk-based Capital (%) | 13.9% | 13.6% | 10.0% | | Tier 1 Leverage (%) | 8.3% | 8.2% | 5.0% | | Tangible Common Equity / Tangible Assets (%) | 7.6% | 7.4% | N/A | - Book value per common share increased to $37.56 and tangible book value per common share grew to $36.52 at September 30, 202410 Detailed Financial Analysis This section offers an in-depth analysis of net interest income, non-interest expenses, and key financial performance ratios Net Interest Income and Margin Net interest income increased by 4% sequentially to $234.1 million in Q3 2024, with the net interest margin expanding by 6 basis points to 2.78% due to improved asset yields and lower deposit costs Net Interest Income and Margin Performance | Metric | Q3 2024 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income ($M) | $234.1M | $226.0M | | Net Interest Margin (Tax-equivalent) (%) | 2.78% | 2.72% | | Yield on Avg. Interest Earning Assets (%) | 5.79% | 5.77% | | Avg. Cost of Total Deposits (%) | 3.06% | 3.09% | Non-interest Expense Non-interest expense for Q3 2024 was $164.6 million, an increase of $6.9 million from the previous quarter, primarily driven by higher employee compensation and benefits due to stock price appreciation - The primary driver for the quarterly increase in non-interest expense was a $6.2 million rise in compensation and benefits18 - This increase in compensation was mainly due to the impact of a higher company stock price on certain share-based compensation awards and other variable compensation accruals18 Key Financial Ratios The company's key performance ratios, including Return on Average Assets (ROA) and Return on Average Stockholders' Equity (ROE), showed improvement in Q3 2024, reflecting enhanced profitability Selected Performance Ratios (Annualized) | Ratio | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Return on average assets (%) | 0.69% | 0.61% | 0.52% | | Return on average stockholders' equity (%) | 8.8% | 8.0% | 7.2% | | Loans to deposits (%) | 87.6% | 88.7% | 93.3% | Appendix: Financial Statements and Reconciliations This section provides comprehensive financial statements and reconciliations of non-GAAP financial measures Consolidated Financial Statements This section presents the detailed unaudited Consolidated Balance Sheets as of September 30, 2024, June 30, 2024, and December 31, 2023, and the Consolidated Statements of Income for the three and nine-month periods ended September 30, 2024 and 2023 Consolidated Balance Sheets This section presents the company's detailed unaudited consolidated balance sheets for key reporting periods - Total assets stood at $35.8 billion as of September 30, 2024, a slight increase from $35.4 billion at June 30, 202423 - Total deposits increased to $27.9 billion from $27.8 billion in the prior quarter, while FHLB advances also rose to $3.6 billion23 Consolidated Statements of Income This section details the company's consolidated statements of income, outlining revenues and expenses for the reporting periods - The Consolidated Statements of Income provide a detailed breakdown of revenues and expenses, showing a net income of $61.5 million for the quarter ended September 30, 202424 Average Balances and Yields/Rates Analysis This section provides detailed tables analyzing average balances for assets and liabilities, and their corresponding yields and rates Earnings Per Share Calculation This section details the computation of basic and diluted earnings per common share, reconciling net income to common stockholders' income Non-GAAP Financial Measures Reconciliation The report includes a reconciliation for the non-GAAP measure of tangible book value per common share, presented for comparison with other financial institutions Tangible Book Value Reconciliation | Metric | Sep 30, 2024 | Jun 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | Book value per common share (GAAP) ($) | $37.56 | $36.11 | $34.66 | | Tangible book value per common share (Non-GAAP) ($) | $36.52 | $35.07 | $33.62 |