DOCUMENT - 2015.03.31

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-Q
 
ý                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the quarterly period ended March 31, 2015
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  ý  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  ý  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 ý
 
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  ý 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
Class
 
May 6, 2015
Common Stock, $0.01 Par Value
 
103,412,144
 


Table of Contents

BANKUNITED, INC.
Form 10-Q
For the Quarter Ended March 31, 2015
TABLE OF CONTENTS
 
 
 
Page
PART I.
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
PART II.
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 6.
 
 
 



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)
 
March 31,
2015
 
December 31,
2014
ASSETS
 

 
 

Cash and due from banks:
 

 
 

Non-interest bearing
$
42,966

 
$
46,268

Interest bearing
45,899

 
33,979

Interest bearing deposits at Federal Reserve Bank
212,429

 
100,596

Federal funds sold
3,194

 
6,674

Cash and cash equivalents
304,488

 
187,517

Investment securities available for sale, at fair value
4,454,744

 
4,585,694

Investment securities held to maturity
10,000

 
10,000

Non-marketable equity securities
183,949

 
191,674

Loans held for sale
1,865

 
1,399

Loans (including covered loans of $988,097 and $1,043,864)
13,239,255

 
12,414,769

Allowance for loan and lease losses
(99,836
)
 
(95,542
)
Loans, net
13,139,419

 
12,319,227

FDIC indemnification asset
912,923

 
974,704

Bank owned life insurance
223,630

 
215,065

Equipment under operating lease, net
366,033

 
314,558

Other real estate owned (including covered OREO of $11,068 and $13,645)
11,203

 
13,780

Deferred tax asset, net
92,577

 
117,215

Goodwill and other intangible assets
68,256

 
68,414

Other assets
214,308

 
211,282

Total assets
$
19,983,395

 
$
19,210,529

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Liabilities:
 

 
 

Demand deposits:
 

 
 

Non-interest bearing
$
2,718,596

 
$
2,714,127

Interest bearing
976,438

 
899,696

Savings and money market
6,449,141

 
5,896,007

Time
4,117,064

 
4,001,925

Total deposits
14,261,239

 
13,511,755

Federal Home Loan Bank advances and other borrowings
3,293,678

 
3,318,559

Other liabilities
312,861

 
327,681

Total liabilities
17,867,778

 
17,157,995

 
 
 
 
Commitments and contingencies


 


 
 
 
 
Stockholders' equity:
 

 
 

Common stock, par value $0.01 per share, 400,000,000 shares authorized; 103,414,014 and 101,656,702 shares issued and outstanding
1,034

 
1,017

Paid-in capital
1,389,392

 
1,353,538

Retained earnings
675,763

 
651,627

Accumulated other comprehensive income
49,428

 
46,352

Total stockholders' equity
2,115,617

 
2,052,534

Total liabilities and stockholders' equity
$
19,983,395

 
$
19,210,529

 

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 March 31,
 
2015
 
2014
Interest income:
 

 
 

Loans
$
171,379

 
$
163,783

Investment securities
28,220

 
24,826

Other
2,283

 
1,953

Total interest income
201,882

 
190,562

Interest expense:
 
 
 
Deposits
20,004

 
16,095

Borrowings
9,150

 
8,003

Total interest expense
29,154

 
24,098

Net interest income before provision for loan losses
172,728

 
166,464

Provision for (recovery of) loan losses (including $(451) and $796 for covered loans)
8,147

 
8,403

Net interest income after provision for loan losses
164,581

 
158,061

Non-interest income:
 
 
 
Income from resolution of covered assets, net
15,154

 
13,061

Net loss on FDIC indemnification
(20,265
)
 
(16,904
)
FDIC reimbursement of costs of resolution of covered assets
707

 
1,128

Service charges and fees
4,451

 
4,005

Gain on sale of loans, net (including gain related to covered loans of $10,006 and $19,294)
10,166

 
19,332

Gain on investment securities available for sale, net
2,022

 
361

Lease financing
6,237

 
3,871

Other non-interest income
2,269

 
5,336

Total non-interest income
20,741

 
30,190

Non-interest expense:
 
 
 
Employee compensation and benefits
49,479

 
49,449

Occupancy and equipment
18,170

 
16,967

Amortization of FDIC indemnification asset
22,005

 
15,741

Other real estate owned expense (income), net (including loss (gain) related to covered OREO of $471 and $(2,806))
1,224

 
(1,697
)
Deposit insurance expense
2,918

 
2,252

Professional fees
3,298

 
3,430

Telecommunications and data processing
3,471

 
3,307

Other non-interest expense
13,579

 
13,012

Total non-interest expense
114,144

 
102,461

Income before income taxes
71,178

 
85,790

Provision for income taxes
24,721

 
30,519

Net income
$
46,457

 
$
55,271

Earnings per common share, basic (see Note 2)
$
0.44

 
$
0.53

Earnings per common share, diluted (see Note 2)
$
0.44

 
$
0.53

Cash dividends declared per common share
$
0.21

 
$
0.21


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 March 31,
 
2015
 
2014
 
 
 
 
Net income
$
46,457

 
$
55,271

Other comprehensive income, net of tax:
 
 
 

Unrealized gains on investment securities available for sale:
 
 
 

Net unrealized holding gain arising during the period
12,987

 
13,411

Reclassification adjustment for net securities gains realized in income
(1,223
)
 
(222
)
Net change in unrealized gains on securities available for sale
11,764

 
13,189

Unrealized losses on derivative instruments:
 
 
 

Net unrealized holding loss arising during the period
(12,707
)
 
(4,576
)
Reclassification adjustment for net losses realized in income
4,019

 
4,023

Net change in unrealized losses on derivative instruments
(8,688
)
 
(553
)
Other comprehensive income
3,076

 
12,636

Comprehensive income
$
49,533

 
$
67,907



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)
 
Three Months Ended March 31,
 
2015
 
2014
Cash flows from operating activities:
 

 
 

Net income
$
46,457

 
$
55,271

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Amortization and accretion, net
(43,497
)
 
(72,539
)
Provision for loan losses
8,147

 
8,403

Income from resolution of covered assets, net
(15,154
)
 
(13,061
)
Net loss on FDIC indemnification
20,265

 
16,904

(Gain) loss on sale of loans, net
(10,166
)
 
(19,332
)
Increase in cash surrender value of bank owned life insurance
(865
)
 
(1,083
)
Gain on investment securities available for sale, net
(2,022
)
 
(361
)
(Gain) loss on other real estate owned
471

 
(2,677
)
Equity based compensation
3,151

 
3,529

Depreciation and amortization
9,296

 
7,381

Deferred income taxes
20,731

 
(14,507
)
Proceeds from sale of loans held for sale
6,995

 
2,070

Loans originated for sale, net of repayments
(7,311
)
 
(3,258
)
Realized tax deficiency (benefits) from dividend equivalents and equity based compensation
235

 
(615
)
Other:
 
 
 
(Increase) decrease in other assets
(10,326
)
 
22,807

Increase (decrease) in other liabilities
1,723

 
(7,572
)
Net cash provided by (used in) operating activities
28,130

 
(18,640
)
 
 
 
 
Cash flows from investing activities:
 

 
 

Purchase of investment securities
(367,175
)
 
(65,652
)
Proceeds from repayments of investment securities available for sale
135,214

 
76,525

Proceeds from sale of investment securities available for sale
334,917

 
119,824

Purchase of non-marketable equity securities
(17,363
)
 
(10,350
)
Proceeds from redemption of non-marketable equity securities
25,088

 
8,767

Purchases of loans
(169,380
)
 
(179,384
)
Loan originations, repayments and resolutions, net
(616,078
)
 
(729,621
)
Proceeds from sale of loans, net
47,695

 
146,920

Decrease in FDIC indemnification asset for claims filed
21,902

 
41,048

Purchase of premises and equipment, net
(2,241
)
 
(16,352
)
Acquisition of equipment under operating lease
(54,913
)
 
(13,995
)
Proceeds from sale of other real estate owned
4,360

 
22,832

Other investing activities
(7,700
)
 
(6,952
)
Net cash used in investing activities
(665,674
)
 
(606,390
)
 
 
 
(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 (Continued)
(In thousands)
 
Three Months Ended March 31,
 
2015
 
2014
Cash flows from financing activities:
 

 
 

Net increase in deposits
749,487

 
591,354

Additions to Federal Home Loan Bank advances and other borrowings
1,045,000

 
1,125,000

Repayments of Federal Home Loan Bank advances and other borrowings
(1,070,409
)
 
(1,075,375
)
Dividends paid
(21,968
)
 
(21,833
)
Realized tax (deficiency) benefits from dividend equivalents and equity based compensation
(235
)
 
615

Exercise of stock options
32,955

 
914

Other financing activities
19,685

 
14,767

Net cash provided by financing activities
754,515

 
635,442

Net increase in cash and cash equivalents
116,971

 
10,412

Cash and cash equivalents, beginning of period
187,517

 
252,749

Cash and cash equivalents, end of period
$
304,488

 
$
263,161

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Interest paid
$
27,226

 
$
22,535

Income taxes paid (received), net
$
(350
)
 
$
21,734

 
 
 
 
Supplemental schedule of non-cash investing and financing activities:
 
 
 
Transfers from loans to other real estate owned
$
2,254

 
$
9,154

Disbursement of loan proceeds from escrow
$
—

 
$
52,500

Dividends declared, not paid
$
22,321

 
$
21,959

Unsettled purchases of investment securities available for sale
$
75,000

 
$
—

Acquisition of assets under capital lease
$
—

 
$
9,035


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
 
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Stockholders’
Equity
Balance at December 31, 2014
101,656,702

 
$
1,017

 
$
1,353,538

 
$
651,627

 
$
46,352

 
$
2,052,534

Comprehensive income
—

 
—

 
—

 
46,457

 
3,076

 
49,533

Dividends
—

 
—

 
—

 
(22,321
)
 
—

 
(22,321
)
Equity based compensation
545,455

 
5

 
3,146

 
—

 
—

 
3,151

Forfeiture of unvested shares
(26,108
)
 
—

 
—

 
—

 
—

 
—

Exercise of stock options
1,237,965

 
12

 
32,943

 
—

 
—

 
32,955

Tax deficiency from dividend equivalents and equity based compensation
—

 
—

 
(235
)
 
—

 
—

 
(235
)
Balance at March 31, 2015
103,414,014

 
$
1,034

 
$
1,389,392

 
$
675,763

 
$
49,428

 
$
2,115,617

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
101,013,014

 
$
1,010

 
$
1,334,945

 
$
535,263

 
$
57,480

 
$
1,928,698

Comprehensive income
—

 
—

 
—

 
55,271

 
12,636

 
67,907

Dividends
—

 
—

 
—

 
(21,959
)
 
—

 
(21,959
)
Equity based compensation
620,180

 
6

 
3,523

 
—

 
—

 
3,529

Forfeiture of unvested shares
(24,140
)
 
—

 
—

 
—

 
—

 
—

Exercise of stock options
54,883

 
1

 
913

 
—

 
—

 
914

Tax benefits from dividend equivalents and equity based compensation
—

 
—

 
615

 
—

 
—

 
615

Balance at March 31, 2014
101,663,937

 
$
1,017

 
$
1,339,996

 
$
568,575

 
$
70,116

 
$
1,979,704

 

 

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
March 31, 2015


Note 1    Basis of Presentation and Summary of Significant Accounting Policies
BankUnited, Inc. ("BankUnited, Inc." or "BKU"), is a national bank holding company with one wholly-owned subsidiary, BankUnited, National Association ("BankUnited" or the "Bank"), 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 100 branches located in 15 Florida counties and 6 banking centers located in the New York metropolitan area at March 31, 2015.
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 two loss sharing agreements with the FDIC (the "Loss Sharing Agreements"). The Loss Sharing Agreements consist of a single family shared-loss agreement (the "Single Family Shared-Loss Agreement"), and a commercial and other loans shared-loss agreement, (the "Commercial Shared-Loss Agreement"). The Single Family Shared-Loss Agreement provides for FDIC loss sharing and the Bank’s reimbursement for recoveries to the FDIC through May 21, 2019 for single family residential loans and other real estate owned ("OREO"). Loss sharing under the Commercial Shared-Loss Agreement terminated on May 21, 2014. The Commercial Shared-Loss Agreement continues to provide for the Bank’s reimbursement of recoveries to the FDIC through May 21, 2017 for all other covered assets, including commercial real estate, commercial and industrial and consumer loans, certain investment securities and commercial OREO. Gains realized on the sale of formerly covered investment securities are included in recoveries subject to reimbursement. The assets covered under the Loss Sharing Agreements are 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, 2014 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, 2015 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 ("ALLL"), the amount and timing of expected cash flows from covered assets and the FDIC indemnification asset, and the fair values of investment securities and other financial instruments. Management has used information provided by third party valuation specialists to assist in the determination of the fair values of investment securities.

9
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

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 March 31,
c
2015
 
2014
Basic earnings per common share:
 

 
 
Numerator:
 

 
 
Net income
$
46,457

 
$
55,271

Distributed and undistributed earnings allocated to participating securities
(1,772
)
 
(2,145
)
Income allocated to common stockholders for basic earnings per common share
$
44,685

 
$
53,126

Denominator:
 
 
 
Weighted average common shares outstanding
102,231,870

 
101,325,157

Less average unvested stock awards
(1,013,346
)
 
(977,439
)
Weighted average shares for basic earnings per common share
101,218,524

 
100,347,718

Basic earnings per common share
$
0.44

 
$
0.53

Diluted earnings per common share:
 
 
 
Numerator:
 
 
 
Income allocated to common stockholders for basic earnings per common share
$
44,685

 
$
53,126

Adjustment for earnings reallocated from participating securities
4

 
3

Income used in calculating diluted earnings per common share
$
44,689

 
$
53,129

Denominator:
 
 
 
Weighted average shares for basic earnings per common share
101,218,524

 
100,347,718

Dilutive effect of stock options
615,846

 
144,483

Weighted average shares for diluted earnings per common share
101,834,370

 
100,492,201

Diluted earnings per common share
$
0.44

 
$
0.53

The following potentially dilutive securities were outstanding at March 31, 2015 and 2014, 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 March 31,
 
2015
 
2014
Unvested shares
1,202,933

 
1,271,715

Stock options and warrants
1,851,376

 
6,386,424

 

10
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BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

Note 3    Investment Securities
Investment securities available for sale consisted of the following at the dates indicated (in thousands):
 
March 31, 2015
 
Amortized Cost
 
Gross Unrealized
 
Fair Value
 
 
Gains
 
Losses
 
U.S. Treasury securities
$
54,932

 
$
338

 
$
—

 
$
55,270

U.S. Government agency and sponsored enterprise residential mortgage-backed securities
1,332,387

 
31,743

 
(1,551
)
 
1,362,579

U.S. Government agency and sponsored enterprise commercial mortgage-backed securities
100,924

 
1,428

 
—

 
102,352

Resecuritized real estate mortgage investment conduits (“Re-Remics”)
161,196

 
3,292

 
—

 
164,488

Private label residential mortgage-backed securities and collateralized mortgage obligations ("CMOs")
324,042

 
52,655

 
(378
)
 
376,319

Private label commercial mortgage-backed securities
950,450

 
15,329

 
(667
)
 
965,112

Single family rental real estate-backed securities
555,680

 
3,439

 
(2,863
)
 
556,256

Collateralized loan obligations
309,564

 
223

 
(110
)
 
309,677

Non-mortgage asset-backed securities
111,090

 
4,455

 
—

 
115,545

Preferred stocks
96,223

 
10,231

 
—

 
106,454

State and municipal obligations
30,519

 
539

 
—

 
31,058

Small Business Administration securities
291,657

 
9,992

 
(10
)
 
301,639

Other debt securities
3,749

 
4,246

 
—

 
7,995

 
$
4,322,413

 
$
137,910

 
$
(5,579
)
 
$
4,454,744

 
December 31, 2014
 
Amortized Cost
 
Gross Unrealized
 
Fair Value
 
 
Gains
 
Losses
 
U.S. Treasury securities
$
54,924

 
$
43

 
$
—

 
$
54,967

U.S. Government agency and sponsored enterprise residential mortgage-backed securities
1,501,504

 
29,613

 
(6,401
)
 
1,524,716

U.S. Government agency and sponsored enterprise commercial mortgage-backed securities
101,089

 
769

 
—

 
101,858

Re-Remics
179,664

 
3,613

 
(5
)
 
183,272

Private label residential mortgage-backed securities and CMOs
350,300

 
54,222

 
(543
)
 
403,979

Private label commercial mortgage-backed securities
1,134,854

 
9,470

 
(4,935
)
 
1,139,389

Single family rental real estate-backed securities
446,079

 
468

 
(3,530
)
 
443,017

Collateralized loan obligations
174,767

 
—

 
(435
)
 
174,332

Non-mortgage asset-backed securities
117,562

 
4,608

 
(6
)
 
122,164

Preferred stocks
96,294

 
9,148

 
—

 
105,442

State and municipal obligations
15,317

 
385

 
—

 
15,702

Small Business Administration securities
298,424

 
10,540

 
(236
)
 
308,728

Other debt securities
3,712

 
4,416

 
—

 
8,128

 
$
4,474,490

 
$
127,295

 
$
(16,091
)
 
$
4,585,694



11
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BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

Investment securities held to maturity at March 31, 2015 consisted of one State of Israel bond with a carrying value of $10 million. Fair value approximated carrying value at March 31, 2015. The bond matures in 2024.
At March 31, 2015, 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 Cost
 
Fair Value
Due in one year or less
$
399,885

 
$
417,039

Due after one year through five years
2,645,847

 
2,705,829

Due after five years through ten years
960,667

 
987,667

Due after ten years
219,791

 
237,755

Preferred stocks with no stated maturity
96,223

 
106,454

 
$
4,322,413

 
$
4,454,744

Based on the Company’s proprietary assumptions, the estimated weighted average life of the investment portfolio as of March 31, 2015 was 4.0 years. The effective duration of the investment portfolio as of March 31, 2015 was 1.4 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 ("FRB") totaled $1.1 billion at March 31, 2015 and $1.0 billion at December 31, 2014. 
The following table provides information about gains and losses on investment securities available for sale for the periods indicated (in thousands): 
 
Three Months Ended March 31,
 
2015
 
2014
Proceeds from sale of investment securities available for sale
$
334,917

 
$
119,824

 
 
 
 
Gross realized gains
$
2,497

 
$
1,280

Gross realized losses
(475
)
 
(919
)
Gain on investment securities available for sale, net
$
2,022

 
$
361


12
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

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): 
 
March 31, 2015
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
U.S. Government agency and sponsored enterprise residential mortgage-backed securities
$
11,641

 
$
(29
)
 
$
266,595

 
$
(1,522
)
 
$
278,236

 
$
(1,551
)
Private label residential mortgage-backed securities and CMOs
57,975

 
(133
)
 
13,720

 
(245
)
 
71,695

 
(378
)
Private label commercial mortgage-backed securities
91,891

 
(166
)
 
91,240

 
(501
)
 
183,131

 
(667
)
Single family rental real estate-backed securities
217,379

 
(2,863
)
 
—

 
—

 
217,379

 
(2,863
)
Collateralized loan obligations
109,679

 
(110
)
 
—

 
—

 
109,679

 
(110
)
Small Business Administration securities
974

 
(10
)
 
—

 
—

 
974

 
(10
)
 
$
489,539

 
$
(3,311
)
 
$
371,555

 
$
(2,268
)
 
$
861,094

 
$
(5,579
)
 
December 31, 2014
 
Less than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
U.S. Government agency and sponsored enterprise residential mortgage-backed securities
$
7,058

 
$
(34
)
 
$
300,057

 
$
(6,367
)
 
$
307,115

 
$
(6,401
)
Re-Remics
—

 
—

 
335

 
(5
)
 
335

 
(5
)
Private label residential mortgage-backed securities and CMOs
60,076

 
(189
)
 
14,653

 
(354
)
 
74,729

 
(543
)
Private label commercial mortgage-backed securities
103,900

 
(1,150
)
 
239,456

 
(3,785
)
 
343,356

 
(4,935
)
Single family rental real estate-backed securities
233,012

 
(3,530
)
 
—

 
—

 
233,012

 
(3,530
)
Collateralized loan obligations
49,565

 
(435
)
 
—

 
—

 
49,565

 
(435
)
Non-mortgage asset-backed securities
2,796

 
(6
)
 
—

 
—

 
2,796

 
(6
)
Small Business Administration securities
49,851

 
(236
)
 
—

 
—

 
49,851

 
(236
)
 
$
506,258

 
$
(5,580
)
 
$
554,501

 
$
(10,511
)
 
$
1,060,759

 
$
(16,091
)
The Company monitors its investment securities available for sale for other-than-temporary impairment ("OTTI") on an individual security basis. No securities were determined to be other-than-temporarily impaired during the three months ended March 31, 2015 or 2014.  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 March 31, 2015, 30 securities were in unrealized loss positions. The amount of impairment related to eight of these securities was considered insignificant, totaling approximately $60 thousand and no further analysis with respect to these securities was considered necessary. The basis for concluding that impairment of the remaining securities was not other-than-temporary is further described below: 

13
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

U.S. Government agency and sponsored enterprise residential mortgage-backed securities:
At March 31, 2015, six U.S. Government agency and sponsored enterprise residential mortgage-backed securities were in unrealized loss positions. The unrealized losses were primarily attributable to an increase in medium and long-term market interest rates subsequent to the date the securities were acquired. The amount of impairment of each of the individual securities was 2% 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 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:
At March 31, 2015, four private label residential mortgage-backed securities were in unrealized loss positions.  The unrealized losses were primarily due to widening credit spreads on certain variable rate securities and an increase in medium and long-term market rates subsequent to acquisition. 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 that would result in the Company recovering less than its amortized cost basis related to any of these securities as of March 31, 2015. Given the limited 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 March 31, 2015, five private label commercial mortgage-backed securities were in unrealized loss positions. The unrealized losses were primarily attributable to an increase in medium and long-term market interest rates subsequent to the date the securities were acquired and widening credit spreads on one less liquid security. The amount of impairment of each of the individual securities 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 of impairment and the expectation of timely recovery of outstanding principal, the impairments were considered to be temporary.
Single family rental real estate-backed securities:
At March 31, 2015, six single family rental real estate-backed securities were in unrealized loss positions. The unrealized losses were primarily due to widening credit spreads. The securities had been in unrealized loss positions for nine months or less and the amount of impairment of each of the individual securities was 2% or less of amortized cost.  Management's analysis of the credit characteristics and levels of subordination for each of the securities is not indicative of projected credit losses. Given the limited duration and severity of impairment and the absence of projected credit losses, the impairments were considered to be temporary.
Collateralized loan obligations:
At March 31, 2015, one collateralized loan obligation was in an unrealized loss position, due to widening credit spreads. This security had been in an unrealized loss position for seven months and the amount of impairment was less than 1% of amortized cost. Given the limited duration and severity of impairment and the results of independent analysis of the credit quality of loans underlying the security, the impairment was considered to be temporary.
Note 4   Loans and Allowance for Loan and Lease Losses 
The Company’s loan portfolio includes loans acquired in the FSB Acquisition. Residential loans acquired in the FSB Acquisition are covered under the Single Family Shared-Loss Agreement (the “covered loans”). Loans acquired in the FSB Acquisition 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).

14
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

Loans consisted of the following at the dates indicated (dollars in thousands):
 
March 31, 2015
 
Non-Covered Loans
 
Covered Loans
 
 
 
Percent of Total
 
New Loans
 
ACI
 
ACI
 
Non-ACI
 
Total
 
Residential:
 

 
 

 
 

 
 

 
 

 
 

1-4 single family residential
$
2,554,085

 
$
—

 
$
835,610

 
$
54,158

 
$
3,443,853

 
26.1
%
Home equity loans and lines of credit
1,754

 
—

 
16,275

 
91,823

 
109,852

 
0.8
%
 
2,555,839

 
—

 
851,885

 
145,981

 
3,553,705

 
26.9
%
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Multi-family
2,407,733

 
24,958

 
—

 
—

 
2,432,691

 
18.4
%
Commercial real estate
 
 
 
 
 
 
 
 
 
 
 
Owner occupied
1,044,165

 
25,643

 
—

 
—

 
1,069,808

 
8.1
%
Non-owner occupied
1,809,210

 
28,513

 
—

 
—

 
1,837,723

 
13.9
%
Construction and land
219,582

 
2,007

 
—

 
—

 
221,589

 
1.7
%
Commercial and industrial
2,555,826

 
1,128

 
—

 
—

 
2,556,954

 
19.4
%
Commercial finance subsidiaries
1,501,819

 
—

 
—

 
—

 
1,501,819

 
11.4
%
 
9,538,335

 
82,249

 
—

 
—

 
9,620,584

 
72.9
%
Consumer
26,814

 
13

 
—

 
—

 
26,827

 
0.2
%
Total loans
12,120,988

 
82,262

 
851,885

 
145,981

 
13,201,116

 
100.0
%
Premiums, discounts and deferred fees and costs, net
47,908

 
—

 
—

 
(9,769
)
 
38,139

 
 
Loans net of premiums, discounts and deferred fees and costs
12,168,896

 
82,262

 
851,885

 
136,212

 
13,239,255

 
 
Allowance for loan and lease losses
(96,712
)
 
—

 
—

 
(3,124
)
 
(99,836
)
 
 
Loans, net
$
12,072,184

 
$
82,262

 
$
851,885

 
$
133,088

 
$
13,139,419

 
 
 

15
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

 
December 31, 2014
 
Non-Covered Loans
 
Covered Loans
 
 
 
Percent of Total
 
New Loans
 
ACI
 
ACI
 
Non-ACI
 
Total
 
Residential:
 

 
 

 
 

 
 

 
 

 
 

1-4 single family residential
$
2,486,272

 
$
—

 
$
874,522

 
$
56,138

 
$
3,416,932

 
27.6
%
Home equity loans and lines of credit
1,827

 
—

 
22,657

 
101,142

 
125,626

 
1.0
%
 
2,488,099

 
—

 
897,179

 
157,280

 
3,542,558

 
28.6
%
Commercial:
 
 
 
 
 
 
 
 
 
 
 
Multi-family
1,927,225

 
24,964

 
—

 
—

 
1,952,189

 
15.8
%
Commercial real estate
 
 
 
 
 
 
 
 
 
 
 
Owner occupied
1,008,930

 
34,440

 
—

 
—

 
1,043,370

 
8.4
%
Non-owner occupied
1,753,317

 
30,762

 
—

 
—

 
1,784,079

 
14.4
%
Construction and land
167,713

 
2,007

 
—

 
—

 
169,720

 
1.4
%
Commercial and industrial
2,402,064

 
1,229

 
—

 
—

 
2,403,293

 
19.4
%
Commercial finance subsidiaries
1,456,751

 
—

 
—

 
—

 
1,456,751

 
11.8
%
 
8,716,000

 
93,402

 
—

 
—

 
8,809,402

 
71.2
%
Consumer
26,293

 
14

 
—

 
—

 
26,307

 
0.2
%
Total loans
11,230,392

 
93,416

 
897,179

 
157,280

 
12,378,267

 
100.0
%
Premiums, discounts and deferred fees and costs, net
47,097

 
—

 
—

 
(10,595
)
 
36,502

 
 
Loans net of premiums, discounts and deferred fees and costs
11,277,489

 
93,416

 
897,179

 
146,685

 
12,414,769

 
 
Allowance for loan and lease losses
(91,350
)
 
—

 
—

 
(4,192
)
 
(95,542
)
 
 
Loans, net
$
11,186,139

 
$
93,416

 
$
897,179

 
$
142,493

 
$
12,319,227

 
 
Through three subsidiaries, the Bank provides commercial and municipal equipment financing utilizing both loan and lease structures. At March 31, 2015 and December 31, 2014, the commercial finance subsidiaries portfolio included a net investment in direct financing leases of $438 million and $458 million, respectively.
During the three months ended March 31, 2015 and 2014, the Company purchased 1-4 single family residential loans totaling $169 million and $179 million, respectively.
At March 31, 2015, the Company had pledged real estate loans with UPB of approximately $7.5 billion and recorded investment of approximately $6.3 billion as security for FHLB advances.
At March 31, 2015 and December 31, 2014, the UPB of ACI loans was $2.5 billion and $2.6 billion, respectively. The accretable yield on ACI loans represents the amount by which undiscounted expected future cash flows exceed recorded investment. Changes in the accretable yield on ACI loans for the three months ended March 31, 2015 and the year ended December 31, 2014 were as follows (in thousands):
Balance, December 31, 2013
$
1,158,572

Reclassifications from non-accretable difference
185,604

Accretion
(338,864
)
Balance, December 31, 2014
1,005,312

Reclassifications from non-accretable difference
78,723

Accretion
(70,451
)
Balance, March 31, 2015
$
1,013,584


16
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

Loan sales
During the periods indicated, the Company sold covered residential loans to third parties on a non-recourse basis. The following table summarizes the impact of these transactions (in thousands): 
 
Three Months Ended March 31,
 
2015
 
2014
UPB of loans sold
$
55,413

 
$
70,188

 
 
 
 
Cash proceeds, net of transaction costs
$
47,695

 
$
45,897

Recorded investment in loans sold
37,689

 
36,087

Net pre-tax impact on earnings, excluding gain (loss) on FDIC indemnification
$
10,006

 
$
9,810

 
 
 
 
Gain on sale of covered loans
$
10,006

 
$
1,323

Proceeds recorded in interest income
—

 
8,487

 
$
10,006

 
$
9,810

 
 
 
 
Loss on FDIC indemnification
$
(8,118
)
 
$
(320
)
 
For the three months ended March 31, 2014, covered 1-4 single family residential loans with UPB of $16 million were sold from a pool of ACI loans with a zero carrying value. Proceeds of the sale of loans from this pool, representing realization of accretable yield, were recorded in interest income. The gain or loss on the sale of loans from the remaining pools, representing the difference between the recorded investment and consideration received, was recorded in “Gain (loss) on sale of loans, net” in the accompanying consolidated statements of income.
During the three months ended March 31, 2014, in accordance with the terms of the Commercial Shared-Loss Agreement, the Bank requested and received approval from the FDIC to sell certain covered commercial and consumer loans. These loans were transferred to loans held for sale at the lower of carrying value or fair value, determined at the individual loan level, upon receipt of FDIC approval and sold in March 2014. The reduction of carrying value to fair value for specific loans was recognized in the provision for loan losses. The following table summarizes the pre-tax impact of these sales, as reflected in the consolidated statements of income for the three months ended March 31, 2014 (in thousands):
Cash proceeds, net of transaction costs
$
101,023

 
 
Carrying value of loans transferred to loans held for sale
86,521

Provision for loan losses recorded upon transfer to loans held for sale
(3,469
)
Recorded investment in loans sold
83,052

Gain on sale of covered loans
$
17,971

 
 
Loss on FDIC indemnification
$
(2,085
)
 


17
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

Allowance for loan and lease losses 
Activity in the ALLL is summarized as follows for the periods indicated (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
 
Residential
 
Commercial
 
Consumer
 
Total
 
Residential
 
Commercial
 
Consumer
 
Total
Beginning balance
$
11,325

 
$
84,027

 
$
190

 
$
95,542

 
$
15,353

 
$
52,185

 
$
2,187

 
$
69,725

Provision for (recovery of) loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 


ACI loans
—

 
—

 
—

 
—

 
—

 
1,974

 
324

 
2,298

Non-ACI loans
(436
)
 
(15
)
 
—

 
(451
)
 
(1,650
)
 
148

 
—

 
(1,502
)
New loans
2,945

 
5,658

 
(5
)
 
8,598

 
450

 
6,033

 
1,124

 
7,607

Total provision
2,509

 
5,643

 
(5
)
 
8,147

 
(1,200
)
 
8,155

 
1,448

 
8,403

Charge-offs:
 
 
 
 
 
 
 
 
 
 
 
 
 
 


ACI loans
—

 
—

 
—

 
—

 
—

 
(4,867
)
 
(324
)
 
(5,191
)
Non-ACI loans
(639
)
 
—

 
—

 
(639
)
 
(233
)
 
(490
)
 
—

 
(723
)
New loans
—

 
(3,399
)
 
—

 
(3,399
)
 
—

 
(2,186
)
 
(363
)
 
(2,549
)
Total charge-offs
(639
)
 
(3,399
)
 
—

 
(4,038
)
 
(233
)
 
(7,543
)
 
(687
)
 
(8,463
)
Recoveries:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-ACI loans
7

 
15

 
—

 
22

 
9

 
26

 
—

 
35

New loans
—

 
160

 
3

 
163

 
—

 
168

 
160

 
328

Total recoveries
7

 
175

 
3

 
185

 
9

 
194

 
160

 
363

Ending balance
$
13,202

 
$
86,446

 
$
188

 
$
99,836

 
$
13,929

 
$
52,991

 
$
3,108

 
$
70,028


18
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015

The following table presents information about the balance of the ALLL and related loans at the dates indicated (in thousands): 
 
March 31, 2015
 
December 31, 2014
 
Residential
 
Commercial
 
Consumer
 
Total
 
Residential
 
Commercial
 
Consumer
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

Ending balance
$
13,202

 
$
86,446

 
$
188

 
$
99,836

 
$
11,325

 
$
84,027

 
$
190

 
$
95,542

Ending balance: non-ACI and new loans individually evaluated for impairment
$
963

 
$
7,698

 
$
—

 
$
8,661

 
$
1,083

 
$
6,878

 
$
—

 
$
7,961

Ending balance: non-ACI and new loans collectively evaluated for impairment
$
12,239

 
$
78,748

 
$
188

 
$
91,175

 
$
10,242

 
$
77,149

 
$
190

 
$
87,581

Ending balance: ACI
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Ending balance: non-ACI
$
3,124

 
$
—

 
$
—

 
$
3,124

 
$
4,192

 
$
—

 
$
—

 
$
4,192

Ending balance: new loans
$
10,078

 
$
86,446

 
$
188

 
$
96,712

 
$
7,133

 
$
84,027

 
$
190

 
$
91,350

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
$
3,581,820

 
$
9,630,657

 
$
26,778

 
$
13,239,255

 
$
3,568,529

 
$
8,819,980

 
$
26,260

 
$
12,414,769

Ending balance: non-ACI and new loans individually evaluated for impairment
$
7,740

 
$
38,672

 
$
—

 
$
46,412

 
$
6,406

 
$
28,978

 
$
—

 
$
35,384

Ending balance: non-ACI and new loans collectively evaluated for impairment
$
2,722,195

 
$
9,509,736

 
$
26,765

 
$
12,258,696

 
$
2,664,944

 
$
8,697,600

 
$
26,246

 
$
11,388,790

Ending balance: ACI loans
$
851,885

 
$
82,249

 
$
13

 
$
934,147

 
$
897,179

 
$
93,402

 
$
14

 
$
990,595

Credit quality information 
New commercial relationships on non-accrual status with internal risk ratings of substandard or doubtful and with committed balances greater than or equal to $750,000 as well as loans that have been modified in troubled debt restructurings (“TDRs”) are individually evaluated for impairment. ACI loans or loan pools are considered to be impaired when there has been further deterioration in the cash flows expected at acquisition plus any additional cash flows expected to be collected arising from changes in estimates after acquisition, other than due to decreases in interest rate indices and changes in prepayment assumptions. Discount continues to be accreted on ACI loans or pools as long as there are expected future cash flows in excess of the current carrying amount; therefore, these loans are not classified as non-accrual even though they may be contractually delinquent. ACI 1-4 single family residential and home equity loans accounted for in pools are evaluated for impairment on a pool basis and the amount of any impairment is measured based on the expected aggregate cash flows of the pools. ACI commercial and commercial real estate loans are evaluated individually for impairment.

19
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
March 31, 2015


The tables below present information about new and non-ACI loans identified as impaired as of the dates indicated (in thousands): 
 
March 31, 2015
 
December 31, 2014
 
Recorded
Investment
 
UPB
 
Related
Specific
Allowance
 
Recorded
Investment
 
UPB
 
Related
Specific
Allowance
New loans:
 

 
 

 
 

 
 

 
 

 
 

With no specific allowance recorded:
 

 
 

 
 

 
 

 
 

 
 

1-4 single family residential
$
110

 
$
105

 
$
—

 
$
—

 
$
—

 
$
—

Commercial real estate
 
 
 
 
 
 


 


 
 
Owner occupied
3,747

 
3,727

 
—

 
2,984

 
2,961

 
—

Non-owner occupied
1,297

 
1,297

 
—

 
1,326

 
1,326

 
—

Commercial and industrial
4,850

 
4,846

 
—

 
4,830

 
4,826

 
—

Commercial finance subsidiaries
7,013

 
6,731

 
—

 
1,790

 
1,790

 
—

With a specific allowance recorded: