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BankUnited, Inc. Reports First Quarter 2018 ResultsBankUnited, Inc. (the "Company") (NYSE: BKU) today announced financial results for the quarter ended March 31, 2018. For the quarter ended March 31, 2018, the Company reported net income of $85.2 million, or $0.77 per diluted share, compared to $62.3 million, or $0.57 per diluted share, for the quarter ended March 31, 2017. The annualized return on average stockholders' equity for the three months ended March 31, 2018 was 11.28% compared to 10.08% for the three months ended March 31, 2017 while the annualized return on average assets was 1.14% compared to 0.91% for the same periods. Rajinder Singh, President and Chief Executive Officer, said, "This was a strong quarter from an earnings perspective, with reported EPS increasing 35% over the comparable quarter of the prior year and pre-tax income increasing by 23%. We remain encouraged by positive tailwinds from tax reform, a strong job market and economic growth." Performance Highlights
Capital The Company and its banking subsidiary continue to exceed all regulatory guidelines required to be considered well capitalized. The Company's and BankUnited, N.A.'s regulatory capital ratios at March 31, 2018 were as follows:
Loans and Leases Loans, including premiums, discounts and deferred fees and costs, totaled $21.5 billion at March 31, 2018 compared to $21.4 billion at December 31, 2017. Non-covered loans grew to $21.0 billion while covered loans declined to $479 million at March 31, 2018. The Florida franchise contributed $55 million of net loan growth for the quarter ended March 31, 2018, while balances for the New York franchise declined by $139 million, due primarily to a $121 million decline in the multi-family category. The Company's national platforms, including our commercial lending subsidiaries, our mortgage warehouse lending operations, our small business finance unit and our 1-4 family residential loan portfolio, contributed $158 million of net loan growth for the quarter ended March 31, 2018, primarily driven by growth of $165 million in 1-4 family residential loans. At March 31, 2018, the non-covered loan portfolio included $7.4 billion, $6.0 billion and $7.6 billion attributable to the Florida franchise, the New York franchise and the national platforms, respectively. A comparison of loan portfolio composition at the dates indicated follows:
Asset Quality and Allowance for Loan and Lease Losses For the quarters ended March 31, 2018 and 2017, the Company recorded provisions for loan losses of $3.1 million and $12.1 million, respectively, substantially all of which related to non-covered loans. The provision related to taxi medallion loans totaled $2.8 million and $9.5 million for the quarters ended March 31, 2018 and 2017, respectively. The most significant factor impacting the decrease in the provision for loan losses related to non-covered loans for the quarter ended March 31, 2018, as compared to the quarter ended March 31, 2017, was the decline in the provision related to taxi medallion loans. Other offsetting factors contributing to the decline included (i) a net increase in the relative impact on the provision of changes in quantitative and qualitative loss factors; (ii) a decrease in the provision related to specific reserves; and (iii) lower loan growth. Non-covered, non-performing loans totaled $192.8 million or 0.92% of total non-covered loans at March 31, 2018, compared to $172.0 million or 0.82% of total non-covered loans at December 31, 2017. Non-performing taxi medallion loans comprised $98.4 million or 0.47% of total non-covered loans at March 31, 2018 and $106.1 million or 0.51% of total non-covered loans at December 31, 2017. At March 31, 2018 and December 31, 2017, the entire taxi medallion portfolio was on non-accrual status. The ratios of the allowance for non-covered loan and lease losses to total non-covered loans and to non-performing, non-covered loans were 0.65% and 71.03%, respectively, at March 31, 2018, compared to 0.69% and 84.03%, at December 31, 2017. The decrease in the ratio of the allowance for non-covered loan and lease losses to non-performing, non-covered loans was primarily a result of the increase in non-accrual multi-family loans during the three months ended March 31, 2018 and charge-offs related to taxi medallion loans. The annualized ratio of net charge-offs to average non-covered loans was 0.21% for the three months ended March 31, 2018, compared to 0.30% for the three months ended March 31, 2017. The annualized ratio of charge-offs of taxi medallion loans to average non-covered loans was 0.10% and 0.13% for the three months ended March 31, 2018 and 2017, respectively. The following table summarizes the activity in the allowance for loan and lease losses for the periods indicated (in thousands):
Charge-offs related to taxi medallion loans totaled $5.4 million and $5.9 million for the quarters ended March 31, 2018 and 2017, respectively. Deposits At March 31, 2018, deposits totaled $22.2 billion compared to $21.9 billion at December 31, 2017. The average cost of total deposits was 1.04% for the quarter ended March 31, 2018, compared to 0.94% for the immediately preceding quarter ended December 31, 2017, and 0.72% for the quarter ended March 31, 2017. Net interest income Net interest income for the quarter ended March 31, 2018 increased to $247.8 million from $230.6 million for the quarter ended March 31, 2017. Increases in interest income were partially offset by increases in interest expense. The increases in interest income were primarily attributable to increases in the average balances of loans and investment securities and related average yields. Interest expense increased due to an increase in average interest bearing deposits and an increase in the cost of funds. The Company's net interest margin, calculated on a tax-equivalent basis, was 3.56% for the quarter ended March 31, 2018, compared to 3.52% for the immediately preceding quarter ended December 31, 2017 and 3.70% for the quarter ended March 31, 2017. Significant offsetting factors impacting the decrease in net interest margin for the three months ended March 31, 2018, compared to three months ended March 31, 2017, included:
The Company's net interest margin continues to be impacted by reclassifications from non-accretable difference to accretable yield on ACI loans. Non-accretable difference at 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 represented the amount by which undiscounted expected future cash flows exceeded the recorded investment in the loans. As the Company's expected cash flows from ACI loans have increased since the FSB Acquisition, the Company has reclassified amounts from non-accretable difference to accretable yield. Changes in accretable yield on ACI loans for the three months ended March 31, 2018 and the year ended December 31, 2017 were as follows (in thousands):
Non-interest income Non-interest income totaled $28.0 million for the three months ended March 31, 2018 compared to $28.1 million for the three months ended March 31, 2017. Non-interest expense Non-interest expense totaled $161.8 million for the three months ended March 31, 2018 compared to $156.6 million for the three months ended March 31, 2017. The most significant components of the $5.3 million increase for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 were (i) an increase in employee compensation and benefits of $7.4 million mainly attributable to an increase in the number of employees, offset by (ii) a decrease in amortization of the FDIC indemnification asset of $4.1 million. Amortization of the FDIC indemnification asset was $40.3 million for the three months ended March 31, 2018, compared to $44.5 million for the three months ended March 31, 2017. The amortization rate increased to 58.42% for the three months ended March 31, 2018 from 36.38% for the three months ended March 31, 2017. As the expected cash flows from ACI loans have increased, expected cash flows from the FDIC indemnification asset have decreased, resulting in continued increases in the amortization rate. Although the amortization rate increased, total amortization expense declined due to the reduction in the average balance of the indemnification asset. Provision for income taxes The effective income tax rate was 23.1% for the three months ended March 31, 2018, compared to 30.8% for the three months ended March 31, 2017, primarily due to the reduction of the statutory corporate federal income tax rate from 35 percent to 21 percent, effective January 1, 2018. 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 base for comparison to other financial institutions. 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 March 31, 2018 (in thousands except share and per share data):
Earnings Conference Call and Presentation A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Wednesday, April 25, 2018 with President and Chief Executive Officer, Rajinder P. Singh, and Chief Financial Officer, Leslie N. Lunak. 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 (855) 798-3052 (domestic) or (234) 386-2812 (international). The name of the call is BankUnited, Inc. and the confirmation number for the call is 3597416. A replay of the call will be available from 12:00 p.m. ET on April 25th through 11:59 p.m. ET on May 2nd by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The pass code for the replay is 3597416. An archived webcast will also be available on the Investor Relations page of www.bankunited.com. About BankUnited, Inc. and the FSB Acquisition BankUnited, Inc., with total assets of $30.4 billion at March 31, 2018, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 87 banking centers in 15 Florida counties and 6 banking centers in the New York metropolitan area at March 31, 2018. 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 FSB Acquisition. Concurrently with the FSB Acquisition, BankUnited entered into two loss sharing agreements, or the Loss Sharing Agreements, which covered 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 purchased or originated loans or other assets. Effective May 22, 2014 and consistent with the terms of the Loss Sharing Agreements, loss share coverage was terminated for those commercial loans and OREO and certain investment securities that were previously covered under the Loss Sharing Agreements. 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 $3.6 billion. The Company has received $2.7 billion from the FDIC in reimbursements under the Loss Sharing Agreements for claims filed for incurred losses as of March 31, 2018. 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" 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. 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, 2017 which is available at the SEC's website (www.sec.gov).
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