Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2011

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to            

 

Commission File Number: 001-35039

 

BankUnited, Inc

(Exact name of registrant as specified in its charter)

 

Delaware

 

27-0162450

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

14817 Oak Lane, Miami Lakes, FL

 

33016

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (305) 569-2000

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Smaller reporting company o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

May  11 , 2011

Common Stock, $0.01 Par Value

 

97,238,307 Shares

 

 

 



Table of Contents

 

BankUnited Inc.

 

Form 10-Q

For the Quarter Ended March 31, 2011

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

Financial Statements (Unaudited)

 

 

 

 

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Operations

4

 

Consolidated Statements of Cash Flows

5

 

Consolidated Statements of Stockholders’ Equity and Comprehensive Income

7

 

Notes to Consolidated Financial Statements

8

 

 

 

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

64

 

 

 

ITEM 4.

Controls and Procedures

64

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

ITEM 1.

Legal Proceedings

64

 

 

 

ITEM 1A.

Risk Factors

64

 

 

 

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

 

 

 

ITEM 3.

Defaults Upon Senior Securities

64

 

 

 

ITEM 4.

(Removed and Reserved)

65

 

 

 

ITEM 5.

Other Information

65

 

 

 

ITEM 6.

Exhibits

65

 

 

 

SIGNATURES

 

65

 

2



Table of Contents

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(Dollars in thousands, except per share data)

 

 

 

March 31,

 

December 31,

 

 

 

2011

 

2010

 

ASSETS

 

 

 

 

 

Cash and due from banks:

 

 

 

 

 

Non-interest bearing

 

$

42,557

 

$

44,860

 

Interest bearing

 

12,925

 

12,523

 

Due from Federal Reserve Bank

 

395,556

 

502,828

 

Federal funds sold

 

3,011

 

4,563

 

Cash and cash equivalents

 

454,049

 

564,774

 

 

 

 

 

 

 

Investment securities available for sale, at fair value (including covered securities of $259,536 and $263,568)

 

3,426,596

 

2,926,602

 

Federal Home Loan Bank stock

 

217,408

 

217,408

 

Loans held for sale

 

2,614

 

2,659

 

Loans (including covered loans of $3,155,362 and $3,396,047)

 

3,748,386

 

3,934,217

 

Allowance for loan losses

 

(61,557

)

(58,360

)

Loans, net

 

3,686,829

 

3,875,857

 

 

 

 

 

 

 

FDIC indemnification asset

 

2,427,145

 

2,667,401

 

Bank owned life insurance

 

228,576

 

207,061

 

Other real estate owned, covered by loss sharing agreements

 

182,482

 

206,680

 

Income tax receivable

 

 

10,862

 

Goodwill and other intangible assets

 

68,919

 

69,011

 

Other assets

 

113,825

 

121,245

 

 

 

 

 

 

 

Total assets

 

$

10,808,443

 

$

10,869,560

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Demand deposits:

 

 

 

 

 

Non-interest bearing

 

$

595,025

 

$

494,499

 

Interest bearing

 

353,054

 

349,985

 

Savings and money market

 

3,264,682

 

3,134,884

 

Time

 

2,689,130

 

3,184,360

 

Total deposits

 

6,901,891

 

7,163,728

 

 

 

 

 

 

 

Securities sold under agreements to repurchase

 

105

 

492

 

Federal Home Loan Bank advances

 

2,250,498

 

2,255,200

 

Income taxes payable

 

3,990

 

 

Deferred tax liability, net

 

20,660

 

4,618

 

Advance payments by borrowers for taxes and insurance

 

31,155

 

22,563

 

Other liabilities

 

163,192

 

169,451

 

 

 

 

 

 

 

Total liabilities

 

9,371,491

 

9,616,052

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common Stock, par value $0.01 per share 400,000,000 and 110,000,000 shares authorized; 97,238,307 and 92,971,850 shares issued and outstanding

 

972

 

930

 

Paid-in capital

 

1,212,013

 

950,831

 

Retained earnings

 

187,873

 

269,781

 

Accumulated other comprehensive income

 

36,094

 

31,966

 

Total stockholders’ equity

 

1,436,952

 

1,253,508

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

10,808,443

 

$

10,869,560

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(Dollars in thousands, except per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

Interest and fees on loans

 

$

114,651

 

$

104,086

 

Interest and dividends on investment securities available for sale

 

32,549

 

29,370

 

Other

 

1,006

 

481

 

 

 

 

 

 

 

Total interest income

 

148,206

 

133,937

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

Interest on deposits

 

20,306

 

28,279

 

Interest on borrowings

 

15,573

 

13,165

 

 

 

 

 

 

 

Total interest expense

 

35,879

 

41,444

 

 

 

 

 

 

 

Net interest income before provision for loan losses

 

112,327

 

92,493

 

Provision for loan losses

 

11,456

 

8,183

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

100,871

 

84,310

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

Accretion of discount on FDIC indemnification asset

 

19,570

 

54,384

 

Income (loss) from resolution of covered assets, net

 

(710

)

36,397

 

Net gain (loss) on indemnification asset

 

26,322

 

(23,035

)

FDIC reimbursement of costs of resolution of covered assets

 

10,500

 

6,435

 

Service charges

 

2,684

 

2,631

 

Mortgage insurance income

 

1,301

 

2,802

 

Other non-interest income

 

4,595

 

2,842

 

 

 

 

 

 

 

Total non-interest income

 

64,262

 

82,456

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

Employee compensation and benefits

 

149,306

 

29,423

 

Occupancy and equipment

 

7,605

 

6,224

 

Impairment of other real estate owned

 

9,599

 

838

 

Foreclosure expense

 

4,470

 

11,443

 

Loss/gain on sales of OREO and OREO related expense

 

16,553

 

2,326

 

Deposit insurance expense

 

4,189

 

3,245

 

Professional fees

 

3,229

 

2,193

 

Telecommunications and data processing

 

3,448

 

2,990

 

Other non-interest expense

 

5,940

 

7,020

 

 

 

 

 

 

 

Total non-interest expense

 

204,339

 

65,702

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(39,206

)

101,064

 

Provision for income taxes

 

28,454

 

40,345

 

 

 

 

 

 

 

Net income (loss)

 

$

(67,660

)

$

60,719

 

 

 

 

 

 

 

Earnings (loss) per common share, basic and diluted

 

$

(0.72

)

$

0.65

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

94,304,787

 

92,936,842

 

 

 

 

 

 

 

Cash dividends declared per common share

 

$

0.14

 

$

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollars in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2011

 

2010

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

(67,660

)

$

60,719

 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

Accretion of fair values of assets acquired and liabilities assumed

 

(109,919

)

(115,085

)

Amortization of fees, discounts and premiums, net

 

(2,578

)

(10,719

)

Provision for loan losses

 

11,456

 

8,183

 

Accretion of discount on FDIC indemnification asset

 

(19,570

)

(54,384

)

(Income) loss from resolution of covered assets

 

710

 

(36,397

)

Net (gain) loss on indemnification asset

 

(26,322

)

23,035

 

Net gain on sale of loans

 

(131

)

 

Increase in cash surrender value of bank owned life insurance

 

(669

)

(1,258

)

Gain on sale of investment securities available for sale

 

(3

)

(26

)

Loss (gain) on sale of other real estate owned

 

12,210

 

(1,474

)

Stock-based compensation

 

116,778

 

215

 

Change in fair value of equity instruments classified as liabilities

 

 

4,451

 

Depreciation and amortization

 

1,203

 

606

 

Impairment of other real estate owned

 

9,599

 

838

 

Deferred income taxes

 

13,235

 

9,095

 

Proceeds from sale of loans held for sale

 

8,321

 

 

Loans originated for sale, net of repayments

 

(8,145

)

 

Other:

 

 

 

 

 

(Increase) decrease in other assets

 

7,578

 

(8,761

)

Increase (decrease) in other liabilities

 

3,129

 

(61,270

)

Net cash used in operating activities

 

(50,778

)

(182,232

)

Cash flows from investing activities:

 

 

 

 

 

Increase in due to FDIC

 

 

230

 

Purchase of investment securities available for sale

 

(573,574

)

(609,691

)

Proceeds from repayments of investment securities available for sale

 

144,033

 

151,107

 

Proceeds from sale of investment securities available for sale

 

2,946

 

6,081

 

Maturities and calls of investment securities available for sale

 

 

5,000

 

Purchases of loans

 

(33,515

)

(23,718

)

Loan repayments and resolutions, net of originations

 

209,417

 

238,597

 

Decrease in FDIC indemnification asset for claims filed

 

286,148

 

316,591

 

Purchase of office properties and equipment, net

 

(11,036

)

(4,441

)

Proceeds from sale of other real estate owned

 

107,479

 

44,404

 

Net cash provided by investing activities

 

131,898

 

124,160

 

 

(Continued)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollars in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2011

 

2010

 

Cash flows from financing activities:

 

 

 

 

 

Net increase (decrease) in deposits

 

$

(259,357

)

$

68,814

 

Additions to Federal Home Loan Bank advances

 

 

200,000

 

Decrease in securities sold under agreements to repurchase

 

(387

)

(517

)

Settlement of FDIC warrant liability

 

(25,000

)

 

Increase in advances from borrowers for taxes and insurance

 

7,417

 

9,566

 

Issuance of common stock

 

99,476

 

2,000

 

Dividends paid

 

(14,000

)

 

Exercise of stock options

 

6

 

 

Net cash provided by (used in) in financing activities

 

(191,845

)

279,863

 

Net increase (decrease) in cash and cash equivalents

 

(110,725

)

221,791

 

Cash and cash equivalents, beginning of period

 

564,774

 

356,215

 

Cash and cash equivalents, end of period

 

$

454,049

 

$

578,006

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Interest paid on deposits and borrowings

 

$

43,095

 

$

58,952

 

Income taxes paid

 

$

150

 

$

127,610

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

Transfers from loans to other real estate owned

 

$

111,682

 

$

67,569

 

Dividends declared

 

$

14,248

 

$

 

Rescission of surrender of bank owned life insurance

 

$

20,846

 

$

 

Unsettled securities trades

 

$

71,838

 

$

 

Reclassification of PIUs previously classified as liabilities (Note 9)

 

$

44,964

 

$

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’EQUITY AND COMPREHENSIVE INCOME - UNAUDITED

(Dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

other

 

Total

 

 

 

Common

 

Paid-in

 

Retained

 

comprehensive

 

stockholders’

 

 

 

stock

 

capital

 

earnings

 

income

 

equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2010

 

$

930

 

$

950,831

 

$

269,781

 

$

31,966

 

$

1,253,508

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

(67,660

)

 

(67,660

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses on investment securities available for sale arising during the period, net of taxes of $308

 

 

 

 

(490

)

(490

)

Reclassification adjustment for realized gains on investment securities available for sale, net of taxes of $1

 

 

 

 

(2

)

(2

)

Unrealized gains on cash flow hedges, net of tax benefit of $2,901

 

 

 

 

4,620

 

4,620

 

Total comprehensive loss

 

 

 

 

 

(67,660

)

4,128

 

(63,532

)

Proceeds from issuance of common stock, net of direct costs of $3,126

 

42

 

99,434

 

 

 

99,476

 

Dividends ($0.14 per share)

 

 

 

(14,248

)

 

(14,248

)

Reclassification of PIUs previously classified as liabilities

 

 

44,964

 

 

 

44,964

 

Stock based compensation

 

 

116,778

 

 

 

116,778

 

Exercise of stock options

 

 

6

 

 

 

6

 

Balance at March 31, 2011

 

$

972

 

$

1,212,013

 

$

187,873

 

$

36,094

 

$

1,436,952

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2009

 

$

928

 

$

947,032

 

$

119,046

 

$

27,254

 

$

1,094,260

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

60,719

 

 

60,719

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on investment securities available for sale arising during the period, net of taxes of $9,116

 

 

 

 

14,515

 

14,515

 

Reclassification adjustment for realized gains on investment securities available for sale, net of taxes of $10

 

 

 

 

(16

)

(16

)

Unrealized losses on cash flow hedges, net of tax benefit of $5,140

 

 

 

 

(8,211

)

(8,211

)

Total comprehensive income

 

 

 

60,719

 

6,288

 

67,007

 

Capital contribution

 

2

 

1,998

 

 

 

2,000

 

Stock based compensation

 

 

215

 

 

 

215

 

Balance at March 31, 2010

 

$

930

 

$

949,245

 

$

179,765

 

$

33,542

 

$

1,163,482

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2011

 

Note 1   Basis of Presentation

 

BankUnited, Inc. was organized on April 28, 2009 as the holding company for BankUnited (“BankUnited” or the “Bank”), a federally chartered, federally insured savings association headquartered in Miami Lakes, Florida. On May 21, 2009, BankUnited was granted a savings association charter and the newly formed bank acquired substantially all of the assets and assumed all of the non-brokered deposits and substantially all of the other liabilities of BankUnited, FSB from the Federal Deposit Insurance Corporation (“FDIC”), a transaction referred to as the “Acquisition”. In connection with the Acquisition, the Bank entered into loss sharing agreements with the FDIC that cover single family residential mortgage loans, commercial real estate, commercial and industrial and consumer loans, certain investment securities and other real estate owned (“OREO”), collectively referred to as the “covered 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 the Bank for 80% of losses of up to $4.0 billion, and 95% of losses in excess of this amount, beginning with the first dollar of loss incurred.

 

BankUnited, Inc.’s wholly owned subsidiaries include BankUnited and BankUnited Investment Services, Inc. (BankUnited, Inc. and its subsidiaries, collectively, the “Company”). BankUnited provides a full range of banking and related services to individual and corporate customers through 81 branch offices located in 13 Florida counties.

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”).  Accordingly, they do not include all of the information and footnotes required for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles (“GAAP”) and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included.  Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected in future periods.

 

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and disclosures of contingent assets and liabilities. Management has made significant estimates in certain areas, such as the allowance for loan losses, the amount and timing of expected cash flows from covered assets and the FDIC indemnification asset, the valuation of OREO, the valuation of deferred tax assets, the evaluation of investment securities for other-than-temporary impairment and the fair values of Profits Interest Units and financial instruments.  Actual results could differ from these estimates.

 

Note 2    Recent Accounting Pronouncements

 

In April 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-02, “A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring.”  This update clarifies existing guidance on a creditor’s evaluation of whether a restructuring constitutes a troubled debt restructuring, including clarification of a creditor’s evaluation of whether it has granted a concession and of whether a debtor is experiencing financial difficulties.  The update is required to be adopted by the Company for the quarter ending September 30, 2011, retrospectively to the beginning of the annual period of adoption, or January 1, 2011.  Management does not anticipate that adoption will have a material impact on the Company’s financial position, results of operations or cash flows.

 

Note 3   Investment Securities Available for Sale

 

Investment securities available for sale at March 31, 2011 and December 31, 2010 consisted of the following (in thousands):

 

8



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2011

 

 

 

March 31, 2011

 

 

 

Covered Securities

 

Non-Covered Securities

 

 

 

Amortized

 

Gross Unrealized

 

Fair

 

Amortized

 

Gross Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agency and sponsored enterprise residential mortgage-backed securities

 

$

 

$

 

$

 

$

 

$

1,760,771

 

$

13,503

 

$

(5,222

)

$

1,769,052

 

Resecuritized real estate mortgage investment conduits (“Re-Remics”)

 

 

 

 

 

554,553

 

11,297

 

(209

)

565,641

 

Private label residential mortgage backed securities and CMO’s

 

182,027

 

55,162

 

(1,522

)

235,667

 

123,465

 

2,793

 

(77

)

126,181

 

Non mortgage asset-backed securities

 

 

 

 

 

429,225

 

3,876

 

(76

)

433,025

 

Mutual funds and preferred stocks

 

16,382

 

680

 

(802

)

16,260

 

184,552

 

7,111

 

(541

)

191,122

 

State and municipal obligations

 

 

 

 

 

21,893

 

121

 

(23

)

21,991

 

Small Business Administration securities

 

 

 

 

 

59,730

 

371

 

(53

)

60,048

 

Other debt securities

 

3,805

 

3,804

 

 

7,609

 

 

 

 

 

Total

 

$

202,214

 

$

59,646

 

$

(2,324

)

$

259,536

 

$

3,134,189

 

$

39,072

 

$

(6,201

)

$

3,167,060

 

 

 

 

December 31, 2010

 

 

 

Covered Securities

 

Non-Covered Securities

 

 

 

Amortized

 

Gross Unrealized

 

Fair

 

Amortized

 

Gross Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agency and sponsored enterprise residential mortgage-backed securities

 

$

 

$

 

$

 

$

 

$

1,282,757

 

$

11,411

 

$

(3,258

)

$

1,290,910

 

Resecuritized real estate mortgage investment conduits (“Re-Remics”)

 

 

 

 

 

599,682

 

14,054

 

(1,105

)

612,631

 

Private label residential mortgage backed securities and CMO’s

 

181,337

 

61,679

 

(1,726

)

241,290

 

138,759

 

2,906

 

(35

)

141,630

 

Non mortgage asset-backed securities

 

 

 

 

 

407,158

 

1,908

 

(72

)

408,994

 

Mutual funds and preferred stocks

 

16,382

 

57

 

(922

)

15,517

 

120,107

 

3,402

 

(491

)

123,018

 

State and municipal obligations

 

 

 

 

 

22,898

 

101

 

(39

)

22,960

 

Small Business Administration securities

 

 

 

 

 

62,831

 

191

 

(131

)

62,891

 

Other debt securities

 

3,695

 

3,066

 

 

6,761

 

 

 

 

 

Total

 

$

201,414

 

$

64,802

 

$

(2,648

)

$

263,568

 

$

2,634,192

 

$

33,973

 

$

(5,131

)

$

2,663,034

 

 

At March 31, 2011, maturities of investment securities available for sale, adjusted for anticipated prepayments of mortgage-backed and other pass-through securities, are shown below (in thousands):

 

 

 

Amortized

 

 

 

 

 

Cost

 

Fair Value

 

 

 

 

 

 

 

Due in one year or less

 

$

605,553

 

$

624,975

 

Due after one year through five years

 

1,298,282

 

1,332,627

 

Due after five years through ten years

 

736,882

 

750,165

 

Due after ten years

 

494,752

 

511,447

 

Mutual funds and preferred stocks

 

200,934

 

207,382

 

Total

 

$

3,336,403

 

$

3,426,596

 

 

Proceeds from sale of investment securities available for sale during the three months ended March 31, 2011 amounted to $2.9 million, resulting in gross realized gains of $4 thousand and gross realized losses of $1 thousand.  Proceeds from sale of investment securities available for sale during the three months ended March 31, 2010 amounted to $6.1 million, resulting in gross realized gains of $31 thousand and gross realized losses of $5 thousand.

 

9



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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2011

 

The carrying value of securities pledged as collateral for Federal Home Loan Bank advances, public deposits, interest rate swaps, securities sold under agreements to repurchase and to secure borrowing capacity at the Federal Reserve Bank, totaled $723.9 million and $496.5 million at March 31, 2011 and December 31, 2010, respectively.

 

The following table presents the aggregate fair value and the aggregate amount by which amortized cost exceeds fair value for investment securities that are in unrealized loss positions at March 31, 2011 and December 31, 2010, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position.  At December 31, 2010, all of the securities in unrealized loss positions had been in continuous unrealized loss positions for less than twelve months (in thousands):

 

 

 

March 31, 2011

 

 

 

Less Than 12 Months

 

12 Months or Longer

 

Total

 

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

 

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

U.S. Government agency and sponsored enterprise residential mortgage-backed securities

 

$

680,021

 

$

(5,205

)

$

619

 

$

(17

)

$

680,640

 

$

(5,222

)

Resecuritized real estate mortgage investment conduits (“Re-Remics”)

 

35,348

 

(194

)

22,907

 

(15

)

58,255

 

(209

)

Private label residential mortgage backed securities and CMO’s

 

11,615

 

(1,288

)

375

 

(311

)

11,990

 

(1,599

)

Non mortgage asset-backed securities

 

107,837

 

(76

)

 

 

107,837

 

(76

)

Mutual funds and preferred stocks

 

39,751

 

(1,343

)

 

 

39,751

 

(1,343

)

State and municipal obligations

 

4,128

 

(23

)

 

 

4,128

 

(23

)

Small Business Administration securities

 

18,599

 

(53

)

 

 

18,599

 

(53

)

Total

 

$

897,299

 

$

(8,182

)

$

23,901

 

$

(343

)

$

921,200

 

$

(8,525

)

 

 

 

December 31, 2010

 

 

 

Less Than 12 Months

 

 

 

Fair

 

Unrealized

 

 

 

Value

 

Losses

 

U.S. Government agency and sponsored enterprise residential mortgage-backed securities

 

$

486,216

 

$

(3,258

)

Resecuritized real estate mortgage investment conduits (“Re-Remics”)

 

59,408

 

(1,105

)

Private label residential mortgage backed securities and CMO’s

 

16,626

 

(1,761

)

Non mortgage asset-backed securities

 

63,802

 

(72

)

Mutual funds and preferred stocks

 

61,336

 

(1,413

)

State and municipal obligations

 

6,144

 

(39

)

Small Business Administration securities

 

24,108

 

(131

)

Total

 

$

717,640

 

$

(7,779

)

 

The Company monitors its investment securities available for sale for other than temporary impairment, or OTTI, on an individual security basis considering numerous factors including the Company’s intent to sell securities in an unrealized loss position; the likelihood that the Company will be required to sell these securities before an anticipated recovery in value; the duration and severity of impairment; the earnings performance, credit rating, asset quality, and business prospects of the issuer; changes in the rating of the security; adverse changes in the regulatory,

 

10



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2011

 

economic or technological environment; adverse changes in general market conditions in the geographic area or industry in which the issuer operates; and factors that raise concerns about the issuer’s ability to continue as a going concern such as negative cash flows from operations, working capital deficiencies or non-compliance with statutory capital requirements or debt covenants. The relative significance of each of these factors varies depending on the circumstances related to each security.

 

None of the securities in unrealized loss positions at March 31, 2011 and December 31, 2010 were determined to be other-than-temporarily impaired. The Company does not intend to sell securities that are in unrealized loss positions and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis, which may be maturity. At March 31, 2011, fifty-nine securities were in unrealized loss positions. The amount of impairment related to twelve of these securities was considered insignificant, totaling approximately $11,000 and no further analysis with respect to these securities was considered necessary. The basis for concluding that impairment of the remaining securities is not other-than-temporary is further described below:

 

U.S. Government agency and sponsored enterprise mortgage backed securities and Small Business Administration securities:

 

At March 31, 2011, twenty-eight U.S. Government agency and sponsored enterprise mortgage-backed securities and two U.S. Small Business Administration securities were in unrealized loss positions. One of these securities had been in an unrealized loss position for twelve months and the remaining securities had been in unrealized loss positions for less than twelve months.  The amount of impairment of each of the individual securities is less than 3% of amortized cost. The timely payment of principal and interest on these securities is explicitly or implicitly guaranteed by the U.S. Government. Given the limited severity and duration of impairment and the expectation of timely payment of principal and interest, the impairments are considered to be temporary.

 

Private label mortgage-backed securities and CMO’s and Re-Remics:

 

At March 31, 2011, eight private label mortgage-backed securities and Re-Remics were in unrealized loss positions. These securities were assessed for OTTI using third-party developed credit and prepayment behavioral models and CUSIP level constant default rates, voluntary prepayment rates and loss severity and delinquency assumptions. The results of this evaluation were not indicative of credit losses related to any of these securities as of March 31, 2011. One of these securities has been in an unrealized loss position for thirteen months, one for twelve months, and the remaining securities for less than twelve months.  Given the expectation of timely recovery of outstanding principal, the impairments are considered to be temporary.

 

Non mortgage asset-backed securities:

 

At March 31, 2011, four non mortgage asset-backed securities were in unrealized loss positions. These securities had been in continuous unrealized loss positions for less than twelve months at March 31, 2011 and the amount of impairment was less than 1% of amortized cost basis for each of the securities. These securities were assessed for OTTI using a third-party developed credit and prepayment behavioral model and CUSIP level constant default rates, voluntary prepayment rates and loss severity and delinquency assumptions. The results of this evaluation were not indicative of credit losses related to these securities as of March 31, 2011. Given the limited severity and duration of impairment and the expectation of timely recovery of outstanding principal, the impairments are considered to be temporary.

 

Mutual funds and preferred stock:

 

At March 31, 2011, four mutual fund and preferred stock investments were in unrealized loss positions, including three positions in mutual funds and one position in FHLMC preferred stock. The underlying holdings of the mutual funds in which the Company has positions are either explicitly or implicitly guaranteed by the U.S. Government. These investments have been in continuous unrealized loss positions for five months or less at March 31, 2011 and the severity of impairment is 4% or less of cost basis. The FHLMC preferred stock position has been in

 

11



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2011

 

a continuous unrealized loss position for nine months. Given the limited duration and severity of impairment and the nature of the assets underlying the mutual fund investments, these impairments are considered to be temporary.

 

State and municipal obligations:

 

At March 31, 2011, one state and municipal obligation was in an unrealized loss position. The security was rated Aa1 by Moody’s, AA+ by Standard & Poors and AA+ by Fitch and had been in an unrealized loss position for 6 months. Impairment totaled less than 3% of the Company’s amortized cost basis. Given the limited duration and severity of impairment and the rating of the bond, the impairment is considered temporary.

 

12



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2011

 

Note 4   Loans and Allowance for Loan Losses

 

A significant portion of the Company’s loan portfolio consists of loans acquired in the Acquisition. These loans are covered under BankUnited’s loss sharing agreements with the FDIC (the “covered loans”).  Non-covered loans are those originated or purchased since the Acquisition. Covered loans are further segregated between those acquired with evidence of deterioration in credit quality since origination (Acquired Credit Impaired or “ACI” loans) and those acquired without evidence of deterioration in credit quality since origination (“non-ACI” loans).

 

At March 31, 2011 and December 31, 2010, loans consisted of the following (dollars in thousands):

 

 

 

March 31, 2011

 

 

 

Covered Loans

 

 

 

 

 

Percent of

 

 

 

ACI

 

Non-ACI

 

Non-Covered

 

Total

 

Total

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

1-4 single family residential

 

$

2,222,661

 

$

144,233

 

$

140,109

 

$

2,507,003

 

66.1

%

Home equity loans and lines of credit

 

92,874

 

202,130

 

2,344

 

297,348

 

7.8

%

Total

 

2,315,535

 

346,363

 

142,453

 

2,804,351

 

73.9

%

Commercial:

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

71,407

 

5,140

 

51,743

 

128,290

 

3.4

%

Commercial real estate

 

292,637

 

34,152

 

112,209

 

438,998

 

11.5

%

Construction

 

6,335

 

 

10,895

 

17,230

 

0.5

%

Land

 

42,668

 

169

 

2,151

 

44,988

 

1.2

%

Commercial and industrial

 

40,458

 

30,042

 

211,733

 

282,233

 

7.4

%

Lease financing

 

 

 

71,178

 

71,178

 

1.9

%

Total

 

453,505

 

69,503

 

459,909

 

982,917

 

25.9

%

Consumer

 

4,073

 

 

3,512

 

7,585

 

0.2

%

Total loans

 

2,773,113

 

415,866

 

605,874

 

3,794,853

 

100.0

%

Unearned discount and deferred fees and costs, net

 

 

(33,617

)

(12,850

)

(46,467

)

 

 

Loans net of discount and deferred fees and costs

 

2,773,113

 

382,249

 

593,024

 

3,748,386

 

 

 

Allowance for loan losses

 

(36,709

)

(17,302

)

(7,546

)

(61,557

)

 

 

Loans, net

 

$

2,736,404

 

$

364,947

 

$

585,478

 

$

3,686,829

 

 

 

 

 

 

December 31, 2010

 

 

 

Covered Loans

 

 

 

 

 

Percent of

 

 

 

ACI

 

Non-ACI

 

Non-Covered

 

Total

 

Total

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

1-4 single family residential

 

$

2,421,016

 

$

151,945

 

$

113,439

 

$

2,686,400

 

67.5

%

Home equity loans and lines of credit

 

98,599

 

206,797

 

2,255

 

307,651

 

7.7

%

Total

 

2,519,615

 

358,742

 

115,694

 

2,994,051

 

75.2

%

Commercial:

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

73,015

 

5,548

 

34,271

 

112,834

 

2.8

%

Commercial real estate

 

299,068

 

33,938

 

118,857

 

451,863

 

11.4

%

Construction

 

8,267

 

 

8,582

 

16,849

 

0.4

%

Land

 

48,251

 

170

 

1,873

 

50,294

 

1.3

%

Commercial and industrial

 

49,731

 

30,139

 

213,626

 

293,496

 

7.4

%

Lease financing

 

 

 

52,960

 

52,960

 

1.3

%

Total

 

478,332

 

69,795

 

430,169

 

978,296

 

24.6

%

Consumer

 

4,403

 

 

3,056

 

7,459

 

0.2

%

Total loans

 

3,002,350

 

428,537

 

548,919

 

3,979,806

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Unearned discount and deferred fees and costs, net

 

 

(34,840

)

(10,749

)

(45,589

)

 

 

Loans net of discount and deferred fees and costs

 

3,002,350

 

393,697

 

538,170

 

3,934,217

 

 

 

Allowance for loan losses

 

(39,925

)

(12,284

)

(6,151

)

(58,360

)

 

 

Loans, net

 

$

2,962,425

 

$

381,413

 

$

532,019

 

$

3,875,857

 

 

 

 

13



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2011

 

At March 31, 2011 and December 31, 2010, the unpaid principal balance of ACI loans was $6.8 billion and $7.2 billion, respectively.

 

During the three months ended March 31, 2011 and 2010, the Company purchased one-to-four single family residential loans with unpaid principal balances totaling $33.5 million and $23.7 million, respectively.

 

At March 31, 2011, the Company had pledged real estate loans with unpaid principal balances of approximately $5.2 billion and carrying amounts of approximately $2.4 billion as security for Federal Home Loan Bank advances.

 

The following table presents information about the ending balance of the allowance for loan losses and related loans as of March 31, 2011 and summarizes the activity in the allowance for loan losses for the three months ended March 31, 2011 (in thousands):

 

 

 

As of and For the Three Months Ended March 31, 2011

 

 

 

1-4 single

 

Home equity

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

family

 

loans and

 

 

 

Commercial

 

 

 

 

 

and

 

Lease

 

 

 

 

 

 

 

residential

 

lines of credit

 

Multi-family

 

real estate

 

Construction

 

Land

 

industrial

 

financing

 

Consumer

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

929

 

$

27,720

 

$

7,106

 

$

7,402

 

$

1,136

 

$

4,002

 

$

9,942

 

$

68

 

$

55

 

$

58,360

 

Provision for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACI loans

 

 

(7,838

)

(1,532

)

4,492

 

1,862

 

6,178

 

682

 

 

 

3,844

 

Non-ACI loans

 

229

 

583

 

25

 

17

 

(1

)

 

5,320

 

 

 

6,173

 

Non-covered loans

 

35

 

 

214

 

42

 

32

 

7

 

895

 

140

 

74

 

1,439

 

Total Provision

 

264

 

(7,255

)

(1,293

)

4,551

 

1,893

 

6,185

 

6,897

 

140

 

74

 

11,456

 

Charge-offs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACI loans

 

 

 

 

(648

)

(353

)

(5,594

)

(465

)

 

 

(7,060

)

Non-ACI loans

 

(459

)

(696

)

 

 

 

 

 

 

 

(1,155

)

Non-covered loans

 

 

 

 

 

 

 

(48

)

(2

)

 

(50

)

Total charge-offs

 

(459

)

(696

)

 

(648

)

(353

)

(5,594

)

(513

)

(2

)

 

(8,265

)

Recoveries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-covered loans

 

 

 

 

 

 

 

6

 

 

 

6

 

Total recoveries

 

 

 

 

 

 

 

6

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance

 

$

734

 

$

19,769

 

$

5,813

 

$

11,305

 

$

2,676

 

$

4,593

 

$

16,332

 

$

206

 

$

129

 

$

61,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance: non-ACI and non-covered loans individually evaluated for impairment

 

$

 

$

 

$

 

$

 

$

 

$

 

$

5,724

 

$

 

$

 

$

5,724

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance: non-ACI and non-covered loans collectively evaluated for impairment

 

$

734

 

$

9,119

 

$

1,644

 

$

1,666

 

$

150

 

$

135

 

$

5,341

 

$

206

 

$

129

 

$

19,124

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance: ACI

 

$

 

$

10,650

 

$

4,169

 

$

9,639

 

$

2,526

 

$

4,458

 

$

5,267

 

$

 

$

 

$

36,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance: Non-ACI

 

$

531

 

$

9,116

 

$

658

 

$

435

 

$

 

$

26

 

$

6,536

 

$

 

$

 

$

17,302

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance: Non-covered

 

$

203

 

$

3

 

$

986

 

$

1,231

 

$

150

 

$

109

 

$

4,529

 

$

206

 

$

129

 

$

7,546

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

$

2,507,003

 

$

297,348

 

$

128,290

 

$

438,998

 

$

17,230

 

$

44,988

 

$

282,233

 

$

71,178

 

$

7,585

 

$

3,794,853

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance: non-ACI and non-covered loans individually evaluated for impairment (1)

 

$

 

$

 

$

 

$

 

$

 

$

332

 

$