BankUnited, Inc. (the “Company”) (NYSE: BKU) today announced financial results for the quarter ended September 30, 2021.

"The Company delivered a solid quarter. We're pleased by our continued progress in improving the deposit book and in the positive direction of credit trends" said Rajinder Singh, Chairman, President and Chief Executive Officer.

For the quarter ended September 30, 2021, the Company reported net income of $86.9 million, or $0.94 per diluted share, compared to $104.0 million or $1.11 per diluted share for the immediately preceding quarter ended June 30, 2021 and $66.6 million, or $0.70 per diluted share, for the quarter ended September 30, 2020.

For the nine months ended September 30, 2021, the Company reported net income of $289.7 million, or $3.12 per diluted share, compared to $112.1 million, or $1.17 per diluted share, for the nine months ended September 30, 2020. On an annualized basis, earnings for the nine months ended September 30, 2021 generated a return on average stockholders' equity of 12.4% and a return on average assets of 1.09%.

Financial Highlights

• Net interest income decreased by $3.2 million compared to the immediately preceding quarter ended June 30, 2021 and increased by $7.6 million compared to the quarter ended September 30, 2020. The net interest margin, calculated on a tax-equivalent basis, was 2.33% for the quarter ended September 30, 2021 compared to 2.37% for the immediately preceding quarter and 2.32% for the quarter ended September 30, 2020. The net interest margin was impacted by pressure on earning asset yields, in part resulting from lower than expected commercial loan growth for the quarter, leading to continued deployment of liquidity into securities. Lower recognition of PPP fees also had an impact.
• As expected, the average cost of total deposits continued to decline, dropping by 0.05% to 0.20% for the quarter ended September 30, 2021 from 0.25% for the immediately preceding quarter ended June 30, 2021, and 0.57% for the quarter ended September 30, 2020. On a spot basis, the average annual percentage yield ("APY") on total deposits declined to 0.19% at September 30, 2021 from 0.22% at June 30, 2021 and 0.36% at December 31, 2020.
• Non-interest bearing demand deposits grew by $324 million during the quarter ended September 30, 2021 while average non-interest bearing demand deposits grew by $749 million compared to the immediately preceding quarter. Average non-interest bearing demand deposits grew by $2.7 billion compared to the third quarter of the prior year. At September 30, 2021, non-interest bearing demand deposits represented 33% of total deposits, compared to 25% of total deposits at December 31, 2020.
• Total deposits declined by $493 million during the quarter ended September 30, 2021, as the Company continues to execute on a strategy focused on improving the quality of the deposit base rather than on growth in total deposits. Money market and savings deposits declined by $1.1 billion in the third quarter. The majority of this decline was attributable to reductions in accounts that management believes will be more price sensitive in a rising rate environment.
• For the quarter ended September 30, 2021, the Company recorded a recovery of credit losses of $(11.8) million compared to a recovery of $(27.5) million for the immediately preceding quarter ended June 30, 2021 and a provision for credit losses of $29.2 million for the quarter ended September 30, 2020. For the nine months ended September 30, 2021 and 2020, the provision for (recovery of) credit losses was $(67.4) million and $180.1 million, respectively. Year over year volatility in the provision related to the expected economic impact of the onset of the COVID-19 pandemic in 2020 and subsequent recovery in 2021.
• As expected, as the economy emerges from the COVID-19 crisis and our borrowers' operating results improve, criticized and classified loans continued to decline. During the quarter ended September 30, 2021, total criticized and classified loans declined by $240 million. The ratio of non-performing loans to total loans declined to 1.21% at September 30, 2021 from 1.28% at June 30, 2021.
• Loans currently under short-term deferral totaled $17 million and loans modified under the CARES Act totaled $267 million for a total of $285 million at September 30, 2021, down from a total of $497 million at June 30, 2021.
• Total loans and operating lease equipment, excluding the runoff of PPP loans, grew by $74 million for the quarter ended September 30, 2021.
• Book value per common share and tangible book value per common share continued to accrete, increasing to $34.39 and $33.53, respectively, at September 30, 2021 from $33.91 and $33.08, respectively, at June 30, 2021 and $32.05 and $31.22, respectively at December 31, 2020.
• During the quarter ended September 30, 2021, the Company repurchased approximately 3.2 million shares of its common stock for an aggregate purchase price of $129.4 million, at a weighted average price of $40.62 per share.
• On October 20, 2021, the Company's Board of Directors authorized the repurchase of up to an additional $150 million in shares of its outstanding common stock.

Loans and Leases

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

Residential continues to be an area of strength; residential and other consumer loans grew by $751 million during the quarter ended September 30, 2021. GNMA early buyout loans grew by $50 million, totaling $1.9 billion at September 30, 2021.

The majority of commercial portfolio segments showed net declines for the quarter ended September 30, 2021 as payoffs outpaced production. Commercial real estate portfolio segments in the aggregate declined by $317 million while commercial and industrial loans, including owner-occupied commercial real estate, remained relatively flat, growing by $13 million. Balances for Pinnacle, Bridge and mortgage warehouse declined by $114 million, $110 million and $141 million, respectively. The decrease in multifamily loans was largely attributable to $76 million of runoff in the New York portfolio.

PPP loans declined by $159 million during the quarter ended September 30, 2021, due to forgiveness of first draw program loans.

Asset Quality and the Allowance for Credit Losses

The following table presents information about non-performing loans, loans on deferral and CARES Act modifications at September 30, 2021 (dollars in thousands):

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In the table above, "currently under short-term deferral" refers to loans subject to a 90-day payment deferral at September 30, 2021 and "CARES Act modification" refers to loans subject to longer-term modifications that, were it not for the provisions of the CARES Act, would likely have been reported as TDRs. Non-performing loans may include some loans that have been modified under the CARES Act.

Non-performing loans totaled $276.7 million or 1.21% of total loans at September 30, 2021, compared to $292.7 million or 1.28% of total loans at June 30, 2021 and $244.5 million or 1.02% of total loans at December 31, 2020. Non-performing loans included $49.1 million, $47.7 million and $51.3 million of the guaranteed portion of SBA loans on non-accrual status, representing 0.22%, 0.21% and 0.22% of total loans at September 30, 2021, June 30, 2021 and December 31, 2020, respectively.

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

The following table presents the ACL at the dates indicated, related ACL coverage ratios and net charge-off rates for the quarters ended September 30, 2021 and June 30, 2021 and the year ended December 31, 2020 (dollars in thousands):

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The ACL at September 30, 2021 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 September 2021, economic information provided by additional sources, information about borrower financial condition and collateral values, data reflecting the impact of recent events on individual borrowers and other relevant information.

For the quarter ended September 30, 2021, the Company recorded a recovery of credit losses of $(11.8) million, which included a recovery of $(11.6) million related to funded loans and an insignificant amount related to unfunded loan commitments and accrued interest receivable. The most significant factors contributing to the recovery of the provision for credit losses and corresponding reduction in the ACL for the quarter included declines in commercial loan balances and the accompanying shift in portfolio composition to residential loans which generally carry lower reserves, reductions in certain qualitative factors and an improving economic forecast. Improved borrower financial performance as reflected in the reduction in criticized and classified assets also contributed to the reduction in the ACL.

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 September 30, 2021 was $195.1 million compared to $198.3 million for the immediately preceding quarter ended June 30, 2021 and $187.5 million for the quarter ended September 30, 2020.

Interest income decreased by $7.5 million for the quarter ended September 30, 2021 compared to the immediately preceding quarter, and by $20.2 million compared to the quarter ended September 30, 2020. Interest expense decreased by $4.3 million compared to the immediately preceding quarter and by $27.9 million compared to the quarter ended September 30, 2020. Decreases in interest income resulted from turnover of the loan and investment portfolios at lower prevailing rates, as well as a decline in average loans. Declines in interest expense reflected the impact of our strategy focused on lowering the cost of deposits and improving the deposit mix, runoff and repricing of deposits generated in a higher rate environment, and declines in average interest bearing liabilities.

The Company’s net interest margin, calculated on a tax-equivalent basis, decreased by 0.04% to 2.33% for the quarter ended September 30, 2021, from 2.37% for the immediately preceding quarter ended June 30, 2021. Offsetting factors impacting the net interest margin for the quarter ended September 30, 2021 included:

• The average rate paid on interest bearing deposits decreased to 0.29% for the quarter ended September 30, 2021, from 0.35% for the quarter ended June 30, 2021. This decline reflected continued initiatives taken to lower rates paid on deposits, including the re-pricing of term deposits.
• The tax-equivalent yield on investment securities decreased to 1.49% for the quarter ended September 30, 2021 from 1.56% for the quarter ended June 30, 2021. This decrease resulted from the impact of purchases of lower-yielding securities coupled with amortization, maturities and prepayment of securities purchased in a higher rate environment. Accounting adjustments related to faster prepayment speeds of securities purchased at a premium negatively impacted the yield on investment securities for the quarter ended September 30, 2021 by approximately 0.06%.
• The tax-equivalent yield on loans decreased to 3.45% for the quarter ended September 30, 2021, from 3.59% for the quarter ended June 30, 2021. Accelerated amortization of origination fees on PPP loans that were partially or fully forgiven during the quarter impacted the yield on loans by approximately 0.03% for the quarter ended September 30, 2021, compared to 0.11% for the quarter ended June 30, 2021. Factoring out the impact of accelerated amortization of PPP origination fees, the yield on loans for the quarter ended September 30, 2021 decreased by 0.06% compared to the immediately preceding quarter. This decrease is mainly the result of growth in the residential portfolio at average yields lower than our commercial loan segments.
• The increase in average non-interest bearing demand deposits as a percentage of average total deposits also positively impacted the cost of total deposits and the net interest margin.

Capital Actions

On October 20, 2021, the Company's Board of Directors authorized the repurchase of up to $150 million in shares of its outstanding common stock. This authorization is in addition to $58.3 million in remaining authorization as of September 30, 2021, under a previously announced share repurchase program. Any repurchases under the program will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued without prior notice at any time.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Thursday, October 21, 2021 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 http://www.ir.bankunited.com/. The dial in telephone number for the call is (855) 798-3052 (domestic) or (234) 386-2812 (international). The name of the call is BankUnited, Inc. and the conference ID for the call is 9293887. A replay of the call will be available from 12:00 p.m. ET on October 21st through 11:59 p.m. ET on October 28th by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The conference ID for the replay is 9293887. An archived webcast will also be available on the Investor Relations page of www.bankunited.com.

About BankUnited, Inc.

BankUnited, Inc., with total assets of $35.3 billion at September 30, 2021, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 64 banking centers in 13 Florida counties and 4 banking centers in the New York metropolitan area at September 30, 2021.

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 the COVID-19 pandemic. 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, 2020 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).

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On a fully-phased in basis with respect to the adoption of CECL, the Company's and the Bank's CET1 risk-based capital ratios would have been 13.3% and 14.8%, respectively, at September 30, 2021.

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):