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

“We're very happy with results for the quarter and optimistic about a strong economic recovery" said Rajinder Singh, Chairman, President and Chief Executive Officer.

For the quarter ended June 30, 2021, the Company reported net income of $104.0 million, or $1.11 per diluted share, compared to $98.8 million or $1.06 per diluted share for the immediately preceding quarter ended March 31, 2021 and $76.5 million, or $0.80 per diluted share, for the quarter ended June 30, 2020.

For the six months ended June 30, 2021, the Company reported net income of $202.8 million, or $2.17 per diluted share, compared to $45.6 million, or $0.47 per diluted share, for the six months ended June 30, 2020. On an annualized basis, earnings for the six months ended June 30, 2021 generated a return on average stockholders' equity of 13.2% and a return on average assets of 1.15%.

Financial Highlights

• Pre-tax, pre-provision net revenue ("PPNR") was $112.6 million for the quarter ended June 30, 2021 compared to $103.3 million for the immediately preceding quarter ended March 31, 2021 and $122.3 million for the quarter ended June 30, 2020. For the six months ended June 30, 2021 and 2020, PPNR was $215.9 million and $207.3 million, respectively.
• Net interest income increased by $2.1 million compared to the immediately preceding quarter ended March 31, 2021 and by $8.0 million compared to the quarter ended June 30, 2020. The net interest margin calculated on a tax-equivalent basis, impacted by elevated levels of liquidity, decreased to 2.37% for the quarter ended June 30, 2021 from 2.39% for both the immediately preceding quarter ended March 31, 2021 and the quarter ended June 30, 2020.
• The average cost of total deposits continued to decline, dropping by 0.08% to 0.25% for the quarter ended June 30, 2021 from 0.33% for the immediately preceding quarter ended March 31, 2021, and 0.80% for the quarter ended June 30, 2020. On a spot basis, the average annual percentage yield ("APY") on total deposits declined to 0.22% at June 30, 2021 from 0.27% at March 31, 2021 and 0.36% at December 31, 2020.
• For the quarter ended June 30, 2021, the Company recorded a recovery of credit losses of $(27.5) million compared to a recovery of $(28.0) million for the immediately preceding quarter ended March 31, 2021 and a provision for credit losses of $25.4 million for the quarter ended June 30, 2020. For the six months ended June 30, 2021 and 2020, the provision for (recovery of) credit losses was $(55.5) million and $150.8 million, respectively.
• As expected, the Company's levels of criticized and classified loans, which had increased as a result of the COVID-19 pandemic, have started to decline. During the quarter ended June 30, 2021, total criticized and classified loans declined by $541 million or 21%, to $2.1 billion at June 30, 2021 from $2.6 billion at March 31, 2021.
• Loans currently under short-term deferral totaled $41 million and loans modified under the CARES Act totaled $456 million for a total of $497 million at June 30, 2021, down from a total of $762 million at March 31, 2021.
• Non-interest bearing demand deposits grew by $869 million during the quarter ended June 30, 2021 while total deposits grew by $877 million. Average non-interest bearing demand deposits grew by $673 million for the quarter ended June 30, 2021 compared to the immediately preceding quarter and by $2.9 billion compared to the second quarter of the prior year. At June 30, 2021, non-interest bearing demand deposits represented 31% of total deposits, compared to 25% of total deposits at December 31, 2020.
• Investment securities grew by $987 million for the quarter ended June 30, 2021, while loans and operating leases, excluding PPP loans, declined by $69 million. Excess liquidity was deployed into the investment portfolio during the quarter as loan growth continued to lag growth in deposits.
• Book value per common share and tangible book value per common share at June 30, 2021 increased to $33.91 and $33.08, respectively, from $32.05 and $31.22, respectively at December 31, 2020.
• On July 21, 2021, the Company's Board of Directors authorized the repurchase of up to an additional $150 million in shares of its outstanding common stock.

Loans and Leases

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

Residential and other consumer loans grew by $494 million during the quarter, including growth of $102 million in GNMA early buyout loans and $392 million of growth in the rest of the portfolio. GNMA early buyout loans totaled $1.8 billion at June 30, 2021.

Commercial and industrial loans, including owner-occupied commercial real estate, grew by $186 million for the quarter ended June 30, 2021. The remaining commercial portfolio segments showed net declines for the quarter. The New York multi-family portfolio continued to run off, declining by $225 million. MWL line utilization was 52% at June 30, 2021 compared to 55% at March 31, 2021 and 62% at December 31, 2020.

PPP loans declined by $420 million during the quarter ended June 30, 2021 as $438 million in loans originated under the First Draw Program were fully or partially forgiven. PPP loans under the Second Draw Program totaling $17 million were originated during the quarter.

Asset Quality and the Allowance for Credit Losses

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

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

Non-performing loans increased to $292.7 million or 1.28% of total loans at June 30, 2021, from $233.6 million or 1.00% of total loans at March 31, 2021 and $244.5 million or 1.02% of total loans at December 31, 2020. The increase in non-performing loans during the quarter ended June 30, 2021 was primarily attributable to one $69 million commercial and industrial relationship. Non-performing loans in the majority of portfolio sub-segments declined during the quarter ended June 30, 2021. Non-performing loans included $47.7 million, $48.2 million and $51.3 million of the guaranteed portion of SBA loans on non-accrual status, representing 0.21%, 0.21% and 0.22% of total loans at June 30, 2021, March 31, 2021 and December 31, 2020, respectively.

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

As expected, total criticized and classified loans declined during the quarter ended June 30, 2021. The increase in substandard non-accruing loans was related primarily to the commercial and industrial relationship discussed above.

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

The ACL at June 30, 2021 represents management's estimate of lifetime expected credit losses given our assessment of historical data, current conditions and a reasonable and supportable economic forecast as of the balance sheet date. The estimate was informed by Moody's economic scenarios published in June 2021, economic information provided by additional sources, data reflecting the impact of recent events on individual borrowers and other relevant information. The decline in the ACL and in ACL coverage ratios from December 31, 2020 to June 30, 2021 related primarily to the recovery of credit losses recorded during the six months ended June 30, 2021 and to a lesser extent, charge-offs.

For the quarter ended June 30, 2021, the Company recorded a recovery of credit losses of $(27.5) million, which included a recovery of $(27.7) million related to funded loans, partially offset by an immaterial provision related to unfunded loan commitments. The recovery of provision for credit losses was largely driven by improvements in forecasted economic conditions, the reduction in criticized and classified loans and a reduction in certain qualitative loss factors. These impacts were partially offset by an increase in the ACL on non-performing loans, primarily an increase of $27.2 million in the reserve related to the commercial relationship discussed above.

The following table summarizes the activity in the ACL for the periods indicated (in thousands):

Net interest income

Net interest income for the quarter ended June 30, 2021 increased to $198.3 million from $196.2 million for the immediately preceding quarter ended March 31, 2021 and $190.3 million for the quarter ended June 30, 2020.

Interest income decreased by $3.6 million for the quarter ended June 30, 2021 compared to the immediately preceding quarter, and by $26.0 million compared to the quarter ended June 30, 2020. Interest expense decreased by $5.7 million compared to the immediately preceding quarter and by $34.0 million compared to the quarter ended June 30, 2020. Decreases in interest income resulted from the impact on portfolio yields of declines in market interest rates in early 2020 including the impact of repayment of assets originated in a higher rate environment and origination of assets at lower prevailing rates, as well as a decline in average loans. Declines in interest expense also reflected the impact of decreases in market interest rates, our strategy focused on lowering the cost of deposits and improving the deposit mix and declines in average interest bearing liabilities.

The Company’s net interest margin, calculated on a tax-equivalent basis, decreased by 0.02% to 2.37% for the quarter ended June 30, 2021, from 2.39% for both the immediately preceding quarter ended March 31, 2021 and the quarter ended June 30, 2020. The net interest margin for the quarter ended June 30, 2021 was negatively impacted by excess liquidity, reflected in higher levels of cash as well as deployment of liquidity into the investment portfolio as loan production lagged deposit growth. Offsetting factors impacting the net interest margin for the quarter ended June 30, 2021 included:

• The average rate paid on interest bearing deposits decreased to 0.35% for the quarter ended June 30, 2021, from 0.45% for the quarter ended March 31, 2021. This decline reflected continued initiatives taken to lower rates paid on deposits including the re-pricing of term deposits.
• The tax-equivalent yield on investment securities decreased to 1.56% for the quarter ended June 30, 2021 from 1.73% for the quarter ended March 31, 2021. This decrease resulted from the impact of purchases of lower-yielding securities coupled with amortization, maturities and prepayment of securities purchased in a higher rate environment. Accounting adjustments related to faster prepayment speeds of securities purchased at a premium negatively impacted the yield on investment securities for the quarter ended June 30, 2021 by approximately 0.10%.
• The tax-equivalent yield on loans increased to 3.59% for the quarter ended June 30, 2021, from 3.58% for the quarter ended March 31, 2021. Accelerated amortization of origination fees on PPP loans that were partially or fully forgiven during the quarter impacted the yield on loans by approximately 0.11% for the quarter ended June 30, 2021, compared to 0.06% for the quarter ended March 31, 2021. Factoring out the impact of accelerated amortization of PPP origination fees, the yield on loans for the quarter ended June 30, 2021 decreased by 0.04% compared to the immediately preceding quarter.
• The increase in average non-interest bearing demand deposits as a percentage of average total deposits also positively impacted the cost of total deposits and the net interest margin.

Capital Actions

On July 21, 2021, the Company's Board of Directors authorized the repurchase of up to $150 million in shares of its outstanding common stock. This authorization is in addition to $37.7 million in remaining authorization under a previously announced share repurchase program. Any repurchases under the program will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will depend upon a variety of factors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued without prior notice at any time.

Earnings Conference Call and Presentation

A conference call to discuss quarterly results will be held at 9:00 a.m. ET on Thursday, July 22, 2021 with Chairman, President and Chief Executive Officer, Rajinder P. Singh, Chief Financial Officer, Leslie N. Lunak and Chief Operating Officer, Thomas M. Cornish.

The earnings release and slides with supplemental information relating to the release will be available on the Investor Relations page under About Us on www.bankunited.com prior to the call. Due to recent demand for conference call services, participants are encouraged to listen to the call via a live Internet webcast at http://www.ir.bankunited.com/. The dial in telephone number for the call is (855) 798-3052 (domestic) or (234) 386-2812 (international). The name of the call is BankUnited, Inc. and the conference ID for the call is 7297918. A replay of the call will be available from 12:00 p.m. ET on July 22nd through 11:59 p.m. ET on July 29th by calling (855) 859-2056 (domestic) or (404) 537-3406 (international). The conference ID for the replay is 7297918. An archived webcast will also be available on the Investor Relations page of www.bankunited.com.

About BankUnited, Inc.

BankUnited, Inc., with total assets of $35.7 billion at June 30, 2021, is the bank holding company of BankUnited, N.A., a national bank headquartered in Miami Lakes, Florida with 65 banking centers in 13 Florida counties and 4 banking centers in the New York metropolitan area at June 30, 2021.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to, among other things, future events and financial performance.

The Company generally identifies forward-looking statements by terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” "forecasts" or the negative version of those words or other comparable words. Any forward-looking statements contained in this press release are based on the historical performance of the Company and its subsidiaries or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations contemplated by the Company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including (without limitations) those relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by the COVID-19 pandemic. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive. The Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Information on these factors can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K, which are available at the SEC’s website (www.sec.gov).

On a fully-phased in basis with respect to the adoption of CECL, the Company's and the Bank's CET1 risk-based capital ratios would have been 13.4% and 15.0%, respectively, at June 30, 2021.

Non-GAAP Financial Measures

PPNR is a non-GAAP financial measure. Management believes this measure is relevant to understanding the performance of the Company attributable to elements other than the provision for credit losses and the ability of the Company to generate earnings sufficient to cover estimated credit losses, particularly in view of the volatility of the provision for credit losses resulting from the COVID-19 pandemic. This measure also provides a meaningful basis for comparison to other financial institutions since it is commonly employed and is a measure frequently cited by investors and analysts. The following table reconciles the non-GAAP financial measurement of PPNR to the comparable GAAP financial measurement of income before income taxes for the periods indicated (in thousands):

ACL to total loans, excluding government insured residential loans, PPP loans and MWL is a non-GAAP financial measure. Management believes this measure is relevant to understanding the adequacy of the ACL coverage, excluding the impact of loans which carry nominal or no reserves. Disclosure of this non-GAAP financial measure also provides a meaningful basis for comparison to other financial institutions. The following table reconciles the non-GAAP financial measurement of ACL to total loans, excluding government insured residential loans, PPP loans and MWL to the comparable GAAP financial measurement of ACL to total loans at June 30, 2021, March 31, 2021 and December 31, 2020 (dollars in thousands):

Tangible book value per common share is a non-GAAP financial measure. Management believes this measure is relevant to understanding the capital position and performance of the Company. Disclosure of this non-GAAP financial measure also provides a meaningful basis for comparison to other financial institutions as it is a metric commonly used in the banking industry. The following table reconciles the non-GAAP financial measurement of tangible book value per common share to the comparable GAAP financial measurement of book value per common share at the dates indicated (in thousands except share and per share data):

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