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 June 30, 2013

 

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  x  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 x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

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

 

August 5, 2013

Common Stock, $0.01 Par Value

 

100,708,999 Shares

 

 

 



Table of Contents

 

BankUnited, Inc.

 

Form 10-Q

 

For the Quarter Ended June 30, 2013

 

TABLE OF CONTENTS

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

Financial Statements (Unaudited)

 

 

 

 

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Income

4

 

Consolidated Statements of Comprehensive Income

5

 

Consolidated Statements of Cash Flows

6

 

Consolidated Statements of Stockholders’ Equity

8

 

Notes to Consolidated Financial Statements

9

 

 

 

ITEM 2.

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

40

 

 

 

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

76

 

 

 

ITEM 4.

Controls and Procedures

76

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

ITEM 1.

Legal Proceedings

77

 

 

 

ITEM 1A.

Risk Factors

77

 

 

 

ITEM 6.

Exhibits

77

 

 

 

SIGNATURES

78

 

2



Table of Contents

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In thousands, except share and per share data)

 

 

 

June 30,

 

December 31,

 

 

 

2013

 

2012

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks:

 

 

 

 

 

Non-interest bearing

 

$

47,160

 

$

61,088

 

Interest bearing

 

16,643

 

21,507

 

Interest bearing deposits at Federal Reserve Bank

 

147,237

 

408,827

 

Federal funds sold

 

2,512

 

3,931

 

Cash and cash equivalents

 

213,552

 

495,353

 

Investment securities available for sale, at fair value (including covered securities of $214,447 and $226,505)

 

4,146,283

 

4,172,412

 

Non-marketable equity securities

 

142,391

 

133,060

 

Loans held for sale

 

1,539

 

2,129

 

Loans (including covered loans of $1,646,946 and $1,864,375)

 

6,807,325

 

5,571,739

 

Allowance for loan and lease losses

 

(58,431

)

(59,121

)

Loans, net

 

6,748,894

 

5,512,618

 

FDIC indemnification asset

 

1,345,134

 

1,457,570

 

Bank owned life insurance

 

205,856

 

207,069

 

Other real estate owned (including covered OREO of $49,571 and $76,022)

 

50,041

 

76,022

 

Deferred tax asset, net

 

63,833

 

62,274

 

Goodwill and other intangible assets

 

69,413

 

69,768

 

Other assets

 

246,489

 

187,678

 

Total assets

 

$

13,233,425

 

$

12,375,953

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Demand deposits:

 

 

 

 

 

Non-interest bearing

 

$

1,594,003

 

$

1,312,779

 

Interest bearing

 

573,169

 

542,561

 

Savings and money market

 

4,176,181

 

4,042,022

 

Time

 

2,687,562

 

2,640,711

 

Total deposits

 

9,030,915

 

8,538,073

 

Short-term borrowings

 

1,644

 

8,175

 

Federal Home Loan Bank advances

 

2,196,605

 

1,916,919

 

Other liabilities

 

151,552

 

106,106

 

Total liabilities

 

11,380,716

 

10,569,273

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock, par value $0.01 per share, 400,000,000 shares authorized; 100,550,397 and 95,006,729 shares issued and outstanding

 

1,006

 

950

 

Preferred stock, par value $0.01 per share, 100,000,000 shares authorized; 5,415,794 shares of Series A issued and outstanding at December 31, 2012

 

 

54

 

Paid-in capital

 

1,317,449

 

1,308,315

 

Retained earnings

 

472,190

 

413,385

 

Accumulated other comprehensive income

 

62,064

 

83,976

 

Total stockholders’ equity

 

1,852,709

 

1,806,680

 

Total liabilities and stockholders’ equity

 

$

13,233,425

 

$

12,375,953

 

 

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

 

3



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME — UNAUDITED

(In thousands, except per share data)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans

 

$

154,760

 

$

142,621

 

$

299,851

 

$

278,918

 

Investment securities available for sale

 

30,196

 

34,059

 

60,201

 

67,098

 

Other

 

1,142

 

1,235

 

2,421

 

2,189

 

Total interest income

 

186,098

 

177,915

 

362,473

 

348,205

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

14,158

 

17,047

 

29,039

 

34,007

 

Borrowings

 

7,890

 

15,071

 

15,597

 

30,592

 

Total interest expense

 

22,048

 

32,118

 

44,636

 

64,599

 

Net interest income before provision for (recovery of) loan losses

 

164,050

 

145,797

 

317,837

 

283,606

 

Provision for (recovery of) loan losses (including $(2,951), $(1,484), $1,849 and $116 for covered loans)

 

4,881

 

2,725

 

16,848

 

11,492

 

Net interest income after provision for (recovery of) loan losses

 

159,169

 

143,072

 

300,989

 

272,114

 

Non-interest income:

 

 

 

 

 

 

 

 

 

(Amortization) accretion of FDIC indemnification asset

 

(7,150

)

4,294

 

(9,430

)

11,081

 

Income from resolution of covered assets, net

 

20,580

 

14,803

 

39,770

 

22,085

 

Net loss on indemnification asset

 

(17,683

)

(12,537

)

(29,370

)

(12,403

)

FDIC reimbursement of costs of resolution of covered assets

 

2,261

 

3,333

 

5,125

 

9,849

 

Service charges and fees

 

3,379

 

3,229

 

6,721

 

6,345

 

Gain (loss) on sale of loans, net (including loss related to covered loans of $(4,311) and $(5,082) for the three and six months ended June 30, 2013)

 

(4,115

)

253

 

(4,701

)

509

 

Gain on investment securities available for sale, net (including loss related to covered securities of $(963) for the three and six months ended June 30, 2013)

 

3,536

 

880

 

5,222

 

896

 

Mortgage insurance income

 

631

 

2,649

 

902

 

6,339

 

Other non-interest income

 

4,641

 

4,762

 

9,684

 

13,363

 

Total non-interest income

 

6,080

 

21,666

 

23,923

 

58,064

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Employee compensation and benefits

 

43,027

 

43,951

 

86,102

 

90,576

 

Occupancy and equipment

 

15,381

 

13,229

 

30,423

 

25,051

 

Impairment of other real estate owned

 

419

 

3,048

 

1,699

 

6,595

 

Gain on sale of other real estate owned

 

(6,091

)

(1,490

)

(7,122

)

(89

)

Other real estate owned expense

 

1,262

 

1,161

 

2,130

 

3,437

 

Foreclosure expense

 

1,994

 

3,892

 

2,499

 

6,611

 

Deposit insurance expense

 

1,724

 

1,946

 

3,661

 

3,096

 

Professional fees

 

6,959

 

3,953

 

12,381

 

7,602

 

Telecommunications and data processing

 

3,484

 

3,121

 

6,852

 

6,351

 

Other non-interest expense

 

10,188

 

10,220

 

20,231

 

17,919

 

Total non-interest expense

 

78,347

 

83,031

 

158,856

 

167,149

 

Income before income taxes

 

86,902

 

81,707

 

166,056

 

163,029

 

Provision for income taxes

 

32,894

 

32,778

 

63,822

 

63,828

 

Net income

 

54,008

 

48,929

 

102,234

 

99,201

 

Preferred stock dividends

 

 

921

 

 

1,841

 

Net income available to common stockholders

 

$

54,008

 

$

48,008

 

$

102,234

 

$

97,360

 

Earnings per common share, basic (see Note 2)

 

$

0.52

 

$

0.48

 

$

1.00

 

$

0.96

 

Earnings per common share, diluted (see Note 2)

 

$

0.52

 

$

0.48

 

$

0.99

 

$

0.96

 

Cash dividends declared per common share

 

$

0.21

 

$

0.17

 

$

0.42

 

$

0.34

 

 

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

 

4



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(In thousands)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

54,008

 

$

48,929

 

$

102,234

 

$

99,201

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

Unrealized gains on investment securities available for sale:

 

 

 

 

 

 

 

 

 

Net unrealized holding gain (loss) arising during the period

 

(40,858

)

10,243

 

(34,393

)

34,858

 

Reclassification adjustment for net securities gains realized in income

 

(2,172

)

(540

)

(3,208

)

(550

)

Net change in unrealized gains on securities available for sale

 

(43,030

)

9,703

 

(37,601

)

34,308

 

Unrealized losses on derivative instruments:

 

 

 

 

 

 

 

 

 

Net unrealized holding gain (loss) arising during the period

 

11,567

 

(4,567

)

9,949

 

(5,198

)

Reclassification adjustment for net losses realized in income

 

3,163

 

2,736

 

5,740

 

5,457

 

Net change in unrealized losses on derivative instruments

 

14,730

 

(1,831

)

15,689

 

259

 

Other comprehensive income (loss)

 

(28,300

)

7,872

 

(21,912

)

34,567

 

Comprehensive income

 

$

25,708

 

$

56,801

 

$

80,322

 

$

133,768

 

 

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

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

102,234

 

$

99,201

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

Amortization and accretion, net

 

(203,328

)

(238,656

)

Provision for loan losses

 

16,848

 

11,492

 

Income from resolution of covered assets, net

 

(39,770

)

(22,085

)

Net loss on indemnification asset

 

29,370

 

12,403

 

(Gain) loss on sale of loans, net

 

4,701

 

(509

)

Increase in cash surrender value of bank owned life insurance

 

(1,569

)

(1,765

)

Gain on investment securities available for sale, net

 

(5,222

)

(896

)

Gain on sale of other real estate owned

 

(7,122

)

(89

)

Equity based compensation

 

6,663

 

17,015

 

Depreciation and amortization

 

10,193

 

6,893

 

Impairment of other real estate owned

 

1,699

 

6,595

 

Deferred income taxes

 

12,158

 

(78,384

)

Proceeds from sale of loans held for sale

 

17,927

 

22,652

 

Loans originated for sale, net of repayments

 

(16,956

)

(21,224

)

Realized tax benefits from dividend equivalents and equity based compensation

 

(334

)

(511

)

Gain on acquisition

 

 

(5,288

)

Other:

 

 

 

 

 

(Increase) decrease in other assets

 

6,129

 

(15,313

)

Increase in other liabilities

 

20,443

 

38,103

 

Net cash used in operating activities

 

(45,936

)

(170,366

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Net cash paid in business combination

 

 

(1,626

)

Purchase of investment securities available for sale

 

(634,827

)

(815,844

)

Proceeds from repayments of investment securities available for sale

 

360,834

 

296,321

 

Proceeds from sale of investment securities available for sale

 

241,830

 

139,254

 

Maturities and calls of investment securities available for sale

 

 

16,305

 

Purchase of non-marketable equity securities

 

(19,212

)

(33,208

)

Proceeds from redemption of non-marketable equity securities

 

9,881

 

28,173

 

Purchases of loans

 

(575,162

)

(341,664

)

Loan originations, repayments and resolutions, net

 

(523,352

)

(140,272

)

Proceeds from sale of loans, net

 

53,182

 

 

Decrease in FDIC indemnification asset for claims filed

 

73,636

 

336,303

 

Bank owned life insurance proceeds

 

2,782

 

 

Purchase of premises and equipment, net

 

(12,084

)

(15,395

)

Acquisition of equipment under operating lease

 

(47,866

)

 

Proceeds from sale of other real estate owned

 

73,045

 

110,860

 

Net cash used in investing activities

 

(997,313

)

(420,793

)

 

(Continued)

 

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

 

6



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

Cash flows from financing activities:

 

 

 

 

 

Net increase in deposits

 

492,879

 

426,741

 

Additions to Federal Home Loan Bank advances

 

1,890,000

 

1,015,000

 

Repayments of Federal Home Loan Bank advances

 

(1,610,000

)

(1,015,000

)

Increase (decrease) in short-term borrowings

 

(6,531

)

42,375

 

Increase in advances from borrowers for taxes and insurance

 

14,330

 

13,572

 

Dividends paid

 

(21,703

)

(32,401

)

Realized tax benefits from dividend equivalents and equity based compensation

 

334

 

511

 

Exercise of stock options

 

2,139

 

763

 

Net cash provided by financing activities

 

761,448

 

451,561

 

Net decrease in cash and cash equivalents

 

(281,801

)

(139,598

)

Cash and cash equivalents, beginning of period

 

495,353

 

303,742

 

Cash and cash equivalents, end of period

 

$

213,552

 

$

164,144

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Interest paid

 

$

43,579

 

$

74,897

 

Income taxes paid

 

$

56,680

 

$

112,839

 

 

 

 

 

 

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

Transfers from loans to other real estate owned

 

$

41,641

 

$

87,353

 

Dividends declared, not paid

 

$

21,726

 

$

17,412

 

Conversion of Series A preferred stock to common stock

 

$

54

 

$

 

Exchange of common stock for Series A preferred stock

 

$

 

$

54

 

Equity consideration issued in business combination

 

$

 

$

39,861

 

 

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

 

7



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

(In thousands, except share data)

 

 

 

Common
Shares
Outstanding

 

Common
Stock

 

Preferred
Shares
Outstanding

 

Preferred
Stock

 

Paid-in
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Income

 

Total
Stockholders’
Equity

 

Balance at December 31, 2012

 

95,006,729

 

$

950

 

5,415,794

 

$

54

 

$

1,308,315

 

$

413,385

 

$

83,976

 

$

1,806,680

 

Comprehensive income

 

 

 

 

 

 

102,234

 

(21,912

)

80,322

 

Conversion of preferred shares to common shares

 

5,415,794

 

54

 

(5,415,794

)

(54

)

 

 

 

 

Dividends

 

 

 

 

 

 

(43,429

)

 

(43,429

)

Equity based compensation

 

28,763

 

 

 

 

6,663

 

 

 

6,663

 

Forfeiture of unvested shares

 

(24,610

)

 

 

 

 

 

 

 

Exercise of stock options

 

123,721

 

2

 

 

 

2,137

 

 

 

2,139

 

Tax benefits from dividend equivalents and equity based compensation

 

 

 

 

 

334

 

 

 

334

 

Balance at June 30, 2013

 

100,550,397

 

$

1,006

 

 

$

 

$

1,317,449

 

$

472,190

 

$

62,064

 

$

1,852,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2011

 

97,700,829

 

$

977

 

 

$

 

$

1,240,068

 

$

276,216

 

$

18,019

 

$

1,535,280

 

Comprehensive income

 

 

 

 

 

 

99,201

 

34,567

 

133,768

 

Exchange of common shares for preferred shares

 

(5,415,794

)

(54

)

5,415,794

 

54

 

 

 

 

 

Equity consideration issued in acquisition

 

1,676,060

 

17

 

 

 

39,844

 

 

 

39,861

 

Dividends

 

 

 

 

 

 

(34,947

)

 

(34,947

)

Equity based compensation

 

41,760

 

 

 

 

17,015

 

 

 

17,015

 

Forfeiture of unvested shares

 

(34,015

)

 

 

 

 

 

 

 

Exercise of stock options

 

55,681

 

 

 

 

763

 

 

 

763

 

Tax benefits from dividend equivalents and equity based compensation

 

 

 

 

 

511

 

 

 

511

 

Balance at June 30, 2012

 

94,024,521

 

$

940

 

5,415,794

 

$

54

 

$

1,298,201

 

$

340,470

 

$

52,586

 

$

1,692,251

 

 

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

 

8



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

June 30, 2013

 

Note 1   Basis of Presentation and Summary of Significant Accounting Policies

 

The consolidated financial statements include the accounts of BankUnited, Inc. (“BankUnited, Inc.” or “BKU”), a national bank holding company and its wholly-owned subsidiaries, BankUnited, National Association (“BankUnited” or the “Bank”), and BankUnited Investment Services, Inc. (“BUIS”), collectively, the Company. BankUnited, a national banking association headquartered in Miami Lakes, Florida, provides a full range of banking and related services to individual and corporate customers through 98 branches located in 15 Florida counties and 4 branches located in the New York metropolitan area as of June 30, 2013. BUIS was a Florida insurance agency providing wealth management and financial planning services. The operations of BUIS were discontinued in May 2013 and were not significant to the consolidated results of operations or financial position of the Company for any period presented.

 

On February 29, 2012, BKU completed the acquisition of Herald National Bank (“Herald”), a national banking association located in the New York metropolitan area.  In March 2013, Herald was merged into BankUnited.

 

On May 21, 2009, BankUnited 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”) in a transaction referred to as the “FSB Acquisition.” Neither the Company nor the Bank had any substantive operations prior to May 21, 2009. In connection with the FSB Acquisition, BankUnited entered into Loss Sharing Agreements with the FDIC (“Loss Sharing Agreements”) 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 BankUnited for 80% of losses related to the covered assets up to $4.0 billion and 95% of losses in excess of this amount, beginning with the first dollar of loss incurred.

 

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 BKU’s Annual Report on Form 10-K for the year ended December 31, 2012 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 six months ended June 30, 2013 are not necessarily indicative of the results that may be expected in future periods.

 

Certain amounts presented for prior periods have been reclassified to conform to the current period presentation.

 

Accounting Estimates

 

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. Actual results could differ significantly from these estimates.

 

Significant estimates include the allowance for loan and lease losses, the amount and timing of expected cash flows from covered assets and the FDIC indemnification asset, the fair values of investment securities and other financial instruments and the valuation of OREO. Management has used information provided by third party valuation specialists to assist in the determination of the fair values of investment securities and OREO.

 

9



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

June 30, 2013

 

Note 2   Earnings Per Common Share

 

The computation of basic and diluted earnings per common share is presented below for the periods indicated (in thousands except share and per share data):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Basic earnings per common share:

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income

 

$

54,008

 

$

48,929

 

$

102,234

 

$

99,201

 

Preferred stock dividends

 

 

(921

)

 

(1,841

)

Net income available to common stockholders

 

54,008

 

48,008

 

102,234

 

97,360

 

Distributed and undistributed earnings allocated to participating securities

 

(2,124

)

(3,687

)

(5,258

)

(6,968

)

Income allocated to common stockholders for basic earnings per common share

 

$

51,884

 

$

44,321

 

$

96,976

 

$

90,392

 

Denominator:

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

100,484,614

 

93,994,226

 

98,315,096

 

95,190,558

 

Less average unvested stock awards

 

(1,104,635

)

(1,168,872

)

(1,135,499

)

(1,405,036

)

Weighted average shares for basic earnings per common share

 

99,379,979

 

92,825,354

 

97,179,597

 

93,785,522

 

Basic earnings per common share

 

$

0.52

 

$

0.48

 

$

1.00

 

$

0.96

 

Diluted earnings per common share:

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

Income allocated to common stockholders for basic earnings per common share

 

$

51,884

 

$

44,321

 

$

96,976

 

$

90,392

 

Adjustment for earnings reallocated from participating securities

 

2

 

2,583

 

1,225

 

10

 

Income used in calculating diluted earnings per common share

 

$

51,886

 

$

46,904

 

$

98,201

 

$

90,402

 

Denominator:

 

 

 

 

 

 

 

 

 

Average shares for basic earnings per common share

 

99,379,979

 

92,825,354

 

97,179,597

 

93,785,522

 

Dilutive effect of stock options and preferred shares

 

189,403

 

5,626,620

 

2,342,584

 

189,209

 

Weighted average shares for diluted earnings per common share

 

99,569,382

 

98,451,974

 

99,522,181

 

93,974,731

 

Diluted earnings per common share

 

$

0.52

 

$

0.48

 

$

0.99

 

$

0.96

 

 

The following potentially dilutive securities were outstanding at June 30, 2013 and 2012 but excluded from the calculation of diluted earnings per common share for the periods indicated because their inclusion would have been anti-dilutive:

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Unvested shares

 

1,152,651

 

654,165

 

1,152,651

 

654,165

 

Stock options and warrants

 

6,733,410

 

6,979,788

 

6,733,410

 

6,979,788

 

Convertible preferred shares

 

 

 

 

5,415,794

 

 

Note 3   Investment Securities Available for Sale

 

Investment securities available for sale consisted of the following at the dates indicated (in thousands):

 

10



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

June 30, 2013

 

 

 

June 30, 2013

 

 

 

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

 

$

 

$

 

$

 

$

 

$

1,622,608

 

$

42,163

 

$

(7,128

)

$

1,657,643

 

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

 

 

 

 

 

27,448

 

131

 

(206

)

27,373

 

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

 

 

 

 

 

482,344

 

6,092

 

(719

)

487,717

 

Private label residential mortgage-backed securities and CMOs

 

131,644

 

55,885

 

(62

)

187,467

 

171,011

 

1,310

 

(2,325

)

169,996

 

Private label commercial mortgage-backed securities

 

 

 

 

 

568,326

 

7,842

 

(12,757

)

563,411

 

Collateralized loan obligations

 

 

 

 

 

373,743

 

1,080

 

(175

)

374,648

 

Non-mortgage asset-backed securities

 

 

 

 

 

159,525

 

5,969

 

(1

)

165,493

 

Mutual funds and preferred stocks

 

15,419

 

4,131

 

(111

)

19,439

 

125,157

 

5,279

 

(762

)

129,674

 

State and municipal obligations

 

 

 

 

 

23,836

 

163

 

(48

)

23,951

 

Small Business Administration securities

 

 

 

 

 

317,995

 

13,935

 

 

331,930

 

Other debt securities

 

3,511

 

4,030

 

 

7,541

 

 

 

 

 

 

 

$

150,574

 

$

64,046

 

$

(173

)

$

214,447

 

$

3,871,993

 

$

83,964

 

$

(24,121

)

$

3,931,836

 

 

 

 

December 31, 2012

 

 

 

Covered Securities

 

Non-Covered Securities

 

 

 

Amortized

 

Gross Unrealized

 

Fair

 

Amortized

 

Gross Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and Government agency securities

 

$

 

$

 

$

 

$

 

$

34,998

 

$

157

 

$

(1

)

$

35,154

 

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

 

 

 

 

 

1,520,047

 

64,476

 

 

1,584,523

 

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

 

 

 

 

 

58,518

 

1,898

 

 

60,416

 

Re-Remics

 

 

 

 

 

575,069

 

10,063

 

(90

)

585,042

 

Private label residential mortgage-backed securities and CMOs

 

143,739

 

58,266

 

(185

)

201,820

 

243,029

 

3,437

 

(201

)

246,265

 

Private label commercial mortgage-backed securities

 

 

 

 

 

413,110

 

19,982

 

 

433,092

 

Collateralized loan obligations

 

 

 

 

 

252,280

 

908

 

 

253,188

 

Non-mortgage asset-backed securities

 

 

 

 

 

233,791

 

7,672

 

(117

)

241,346

 

Mutual funds and preferred stocks

 

16,382

 

1,439

 

(361

)

17,460

 

125,127

 

7,066

 

 

132,193

 

State and municipal obligations

 

 

 

 

 

25,127

 

249

 

(23

)

25,353

 

Small Business Administration securities

 

 

 

 

 

333,423

 

6,187

 

 

339,610

 

Other debt securities

 

3,723

 

3,502

 

 

7,225

 

9,164

 

561

 

 

9,725

 

 

 

$

163,844

 

$

63,207

 

$

(546

)

$

226,505

 

$

3,823,683

 

$

122,656

 

$

(432

)

$

3,945,907

 

 

At June 30, 2013, contractual maturities of investment securities available for sale, adjusted for anticipated prepayments of mortgage-backed and other pass-through securities, were as follows (in thousands):

 

 

 

Amortized

 

Fair

 

 

 

Cost

 

Value

 

 

 

 

 

 

 

Due in one year or less

 

$

520,481

 

$

541,516

 

Due after one year through five years

 

1,972,658

 

2,029,229

 

Due after five years through ten years

 

1,140,425

 

1,162,982

 

Due after ten years

 

248,427

 

263,443

 

Mutual funds and preferred stocks with no stated maturity

 

140,576

 

149,113

 

 

 

$

4,022,567

 

$

4,146,283

 

 

11



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

June 30, 2013

 

Based on the Company’s proprietary assumptions, the estimated weighted average life of the investment portfolio as of June 30, 2013 was 4.3 years. The effective duration of the investment portfolio as of June 30, 2013 was 1.8 years. The model results are based on assumptions that may differ from actual results.

 

The carrying value of securities pledged as collateral for Federal Home Loan Bank (“FHLB”) advances, public deposits, interest rate swaps, securities sold under agreements to repurchase and to secure borrowing capacity at the Federal Reserve Bank totaled $0.8 billion and $0.9 billion at June 30, 2013 and December 31, 2012, respectively.

 

The following table provides information about gains and losses on investment securities available for sale for the periods indicated (in thousands):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of investment securities available for sale

 

$

122,515

 

$

133,406

 

$

241,830

 

$

139,254

 

 

 

 

 

 

 

 

 

 

 

Gross realized gains

 

$

4,501

 

$

1,176

 

$

6,190

 

$

1,194

 

Gross realized losses

 

(2

)

(296

)

(5

)

(298

)

Net realized gain

 

4,499

 

880

 

6,185

 

896

 

Other-than-temporary impairment (“OTTI”)

 

(963

)

 

(963

)

 

Gain on investment securities available for sale, net

 

$

3,536

 

$

880

 

$

5,222

 

$

896

 

 

During the three months ended June 30, 2013, OTTI was recognized on an intermediate term mortgage mutual fund investment which had been in a continuous unrealized loss position for 34 months.  Due primarily to the length of time the investment had been in a continuous unrealized loss position and an increasing measure of impairment, the Company determined the impairment to be other than temporary.  This security is covered under the Loss Sharing Agreements, therefore, the impact of the impairment was significantly mitigated by an increase of $770 thousand in the FDIC indemnification asset, reflected in the consolidated statement of income line item “Net loss on indemnification asset”.

 

The following tables present the aggregate fair value and the aggregate amount by which amortized cost exceeded fair value for investment securities in unrealized loss positions, aggregated by investment category and length of time that individual securities had been in continuous unrealized loss positions, at the dates indicated (in thousands):

 

 

 

June 30, 2013

 

 

 

Less than 12 Months

 

12 Months or Greater

 

Total

 

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

 

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

364,614

 

$

(7,128

)

$

 

$

 

$

364,614

 

$

(7,128

)

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

 

17,694

 

(206

)

 

 

17,694

 

(206

)

Re-Remics

 

146,501

 

(719

)

 

 

146,501

 

(719

)

Private label residential mortgage-backed securities and CMOs

 

81,510

 

(2,325

)

1,395

 

(62

)

82,905

 

(2,387

)

Private label commercial mortgage-backed securities

 

277,429

 

(12,757

)

 

 

277,429

 

(12,757

)

Collateralized loan obligations

 

103,850

 

(175

)

 

 

103,850

 

(175

)

Non-mortgage asset-backed securities

 

2,001

 

(1

)

 

 

2,001

 

(1

)

Mutual funds and preferred stocks

 

48,874

 

(873

)

 

 

48,874

 

(873

)

State and municipal obligations

 

5,858

 

(48

)

 

 

5,858

 

(48

)

 

 

$

1,048,331

 

$

(24,232

)

$

1,395

 

$

(62

)

$

1,049,726

 

$

(24,294

)

 

12



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

June 30, 2013

 

 

 

December 31, 2012

 

 

 

Less than 12 Months

 

12 Months or Greater

 

Total

 

 

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

Fair

 

Unrealized

 

 

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and Government agency securities

 

$

5,000

 

$

(1

)

$

 

$

 

$

5,000

 

$

(1

)

Re-Remics

 

42,018

 

(16

)

8,833

 

(74

)

50,851

 

(90

)

Private label residential mortgage-backed securities and CMOs

 

53,537

 

(185

)

6,080

 

(201

)

59,617

 

(386

)

Non-mortgage asset-backed securities

 

 

 

10,566

 

(117

)

10,566

 

(117

)

Mutual funds and preferred stocks

 

 

 

15,082

 

(361

)

15,082

 

(361

)

State and municipal obligations

 

2,902

 

(23

)

 

 

2,902

 

(23

)

 

 

$

103,457

 

$

(225

)

$

40,561

 

$

(753

)

$

144,018

 

$

(978

)

 

The Company monitors its investment securities available for sale for OTTI on an individual security basis.  As discussed above, one security was determined to be other than temporarily impaired during the three months ended June 30, 2013.  No securities were determined to be other than temporarily impaired during the six months ended June 30, 2012. The Company does not intend to sell securities that are in significant 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 at maturity. At June 30, 2013, 75 securities were in unrealized loss positions. Generally, increases in unrealized losses on investment securities available for sale arising during the three months ended June 30, 2013 were attributable to an increase in medium and long-term market interest rates during the period and in certain cases, corresponding increases in liquidity premiums in response to rate volatility.  The amount of impairment related to 18 of these securities was considered insignificant, totaling approximately $41 thousand 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 residential and commercial mortgage-backed securities:

 

At June 30, 2013, 12 U.S. Government agency and sponsored enterprise residential and commercial mortgage-backed securities were in unrealized loss positions. All of these securities had been in unrealized loss positions for three months or less.  The amount of impairment of each of the individual securities was 3% or less 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 were considered to be temporary.

 

Private label residential mortgage-backed securities and CMOs and Re-Remics:

 

At June 30, 2013, 22 private label residential 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 these assessments were not indicative of credit losses related to any of these securities as of June 30, 2013.  Eighteen of the securities had been in unrealized loss positions for two months or less and three for eight months or less.  These securities evidenced unrealized losses ranging from less than 1% to 5% of amortized cost.  The remaining security had been in an unrealized loss position for 24 months and evidenced an unrealized loss of 6% of amortized cost.  The market for this security is thin and the market price is adversely affected by lack of liquidity.  This bond is considered an odd lot which can be detrimental to potential bids for the security. Given the generally limited duration and severity of impairment and the expectation of timely recovery of outstanding principal, the impairments were considered to be temporary.

 

Private label commercial mortgage-backed securities:

 

At June 30, 2013, nine private label commercial mortgage-backed securities were in unrealized loss positions.  Eight of these securities had been in unrealized loss positions for two months and one for six months; the amount of impairment ranged from 1% to 7% of amortized cost.  These securities were assessed for OTTI using

 

13



Table of Contents

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

June 30, 2013

 

third-party developed models, incorporating assumptions consistent with the collateral characteristics of each security.  The results of this analysis were not indicative of expected credit losses.  Securities in this class generally have longer durations than the portfolio as a whole, so were more significantly impacted by the increase in rates.  Given the limited severity and duration of impairment and the expectation of timely recovery of outstanding principal, the impairments were considered to be temporary.

 

Collateralized loan obligations:

 

At June 30, 2013, two collateralized loan obligations were in unrealized loss positions.  These securities had been in unrealized loss positions for two months or less and the amount of impairment was less than 1% of amortized cost.  These securities were assessed for OTTI using third-party developed models, incorporating assumptions consistent with the collateral characteristics of each security.  The results of this analysis were not indicative of expected credit losses.  Given the limited severity and duration of impairment and the expectation of timely recovery of outstanding principal, the impairments were considered to be temporary.

 

Mutual funds:

 

At June 30, 2013, three investments in one mutual fund were in unrealized loss positions.  These investments had been in unrealized loss positions for two months or less and the amount of impairment was less than 4% of amortized cost. The majority of the underlying holdings of the mutual fund are either explicitly or implicitly guaranteed by the U.S. Government.  Given the limited severity and duration of impairment, the impairments were considered to be temporary.

 

Preferred stocks:

 

At June 30, 2013, one investment in U.S. Government sponsored enterprise preferred stock and six investments in financial institution preferred stock were in unrealized loss positions.  These securities had been in unrealized loss positions for three months or less.  Given the limited duration and results of the Company’s analysis of the financial condition of the issuer of the financial institution preferred stocks, the impairments were considered to be temporary.

 

State and municipal obligations:

 

At June 30, 2013, two municipal securities were in unrealized loss positions. These securities had been in unrealized loss positions for 11 months or less and the amount of impairment was less than 4% of amortized cost. Given the limited duration and severity of impairments, the results of the Company’s analysis of the issuers and the ratings of the securities, the impairments were considered to be temporary.

 

Note 4   Loans and Allowance for Loan and Lease Losses

 

A significant portion of the Company’s loan portfolio consists of loans acquired in the FSB Acquisition. Substantially all of these loans are covered under BankUnited’s Loss Sharing Agreements (the “covered loans”). Loans originated or purchased since the FSB Acquisition (“new loans”) are not covered by the Loss Sharing Agreements. Covered loans may be 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).

 

Loans consisted of the following at the dates indicated (dollars in thousands):

 

14



Table of Contents

 

 

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

June 30, 2013

 

 

 

June 30, 2013

 

 

 

Covered Loans

 

Non-Covered Loans

 

 

 

Percent of

 

 

 

ACI

 

Non-ACI

 

ACI

 

New Loans

 

Total

 

Total

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 single family residential

 

$

1,168,221

 

$

82,632

 

$

 

$

1,335,001

 

$

2,585,854

 

38.0

%

Home equity loans and lines of credit

 

46,121

 

143,185

 

 

1,474

 

190,780

 

2.8

%

 

 

1,214,342

 

225,817

 

 

1,336,475

 

2,776,634

 

40.8

%

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

37,324

 

673

 

8,029

 

425,151

 

471,177

 

6.9

%

Commercial real estate

 

152,311

 

383

 

5,223

 

1,219,487

 

1,377,404

 

20.3

%

Construction and land

 

11,155

 

808

 

 

66,875

 

78,838

 

1.2

%

Commercial and industrial

 

11,301

 

7,697

 

 

1,713,783

 

1,732,781

 

25.5

%

Lease financing

 

 

 

 

265,185

 

265,185

 

3.9

%

 

 

212,091

 

9,561

 

13,252

 

3,690,481

 

3,925,385

 

57.8

%

Consumer

 

1,848

 

 

 

94,094

 

95,942

 

1.4

%

Total loans

 

1,428,281

 

235,378

 

13,252

 

5,121,050

 

6,797,961

 

100.0

%

Premiums, discounts and deferred fees and costs, net

 

 

(16,713

)

 

26,077

 

9,364

 

 

 

Loans net of premiums, discounts, deferred fees and costs

 

1,428,281

 

218,665

 

13,252

 

5,147,127

 

6,807,325

 

 

 

Allowance for loan and lease losses

 

(4,304

)

(13,908

)

 

(40,219

)

(58,431

)

 

 

Loans, net

 

$

1,423,977

 

$

204,757

 

$

13,252

 

$

5,106,908

 

$

6,748,894

 

 

 

 

 

 

December 31, 2012

 

 

 

Covered Loans

 

Non-Covered Loans

 

 

 

Percent of

 

 

 

ACI

 

Non-ACI

 

ACI

 

New Loans

 

Total

 

Total

 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 single family residential

 

$

1,300,109

 

$

93,438

 

$

 

$

920,713

 

$

2,314,260

 

41.5

%

Home equity loans and lines of credit

 

52,499

 

157,691

 

 

1,954

 

212,144

 

3.8

%

 

 

1,352,608

 

251,129

 

 

922,667

 

2,526,404

 

45.3

%

Commercial:

 

 

 

 

 

 

 

 

 

 

 

 

 

Multi-family

 

56,148

 

716

 

 

307,183

 

364,047

 

6.5

%

Commercial real estate

 

173,732

 

910

 

4,087

 

794,706

 

973,435

 

17.5

%

Construction and land

 

18,064

 

829

 

 

72,361

 

91,254

 

1.6

%

Commercial and industrial

 

14,608

 

11,627

 

 

1,334,991

 

1,361,226

 

24.4

%

Lease financing

 

 

 

 

225,980

 

225,980

 

4.1

%

 

 

262,552

 

14,082

 

4,087

 

2,735,221

 

3,015,942

 

54.1

%

Consumer

 

2,239

 

 

 

33,526

 

35,765

 

0.6

%

Total loans

 

1,617,399

 

265,211

 

4,087

 

3,691,414

 

5,578,111

 

100.0

%

Premiums, discounts and deferred fees and costs, net

 

 

(18,235

)

 

11,863