BankUnited, Inc.

BankUnited reported earnings of $0.97 per share and net income of about $71 million. NIM was 3.06%, up 7 basis points from the first quarter and 13 basis points from a year ago. Raj Singh said NIDDA year-over-year growth was 13%, core deposits were up about 7% year over year, and quarter-over-quarter NIDDA was up 7% while core deposits were up 3%. Charge-offs were $6.4 million, down from $36 million last quarter, and non-performing loans were down 19% sequentially and 40% year to date. CET1 was 12.3%, and the company bought back a little over $50 million of stock. For guidance, management trimmed full-year core loan growth to 4%-5% from 6%, raised average NIDDA guidance slightly to 12%-13%, reduced full-year NII growth guidance to 5%-6%, reduced revenue guidance to 5%-6%, and nudged expense guidance up slightly; they also said they expect one rate hike late in the year.

Raj Singh framed the quarter around a major franchise milestone: NIDDA to total deposits reached 34.4%, a company record, and total NIDDA was described as nearly $10 billion. His tone was proud and emphatic, stressing that the deposit franchise was built client by client and remains the key value driver for the bank. At the same time, he was clear that the company will stay disciplined on loan pricing and will walk away from business that does not meet return standards. He also said the revised guidance is mostly fine-tuning rather than a major change.

Jim Mackey focused on the drivers of margin and the updated outlook. He said NII increased $6 million sequentially and $9 million year over year, while NIM improved because average deposit cost fell 7 basis points from last quarter and 42 basis points from a year ago, and wholesale funding balances were down $636 million sequentially and $1.2 billion year over year. He noted core interest-bearing deposits rose almost $250 million and the rate on them fell 3 basis points, and that the company repurchased just over $50 million of stock, leaving about $146 million of board-approved capacity. On guidance, he said the main change is lower loan growth and NII due to competitive conditions and faster-than-expected spread compression, partially offset by a slight increase in non-interest income and a small increase in expenses.

Analysts pressed on why NII guidance came down more than loan guidance, and management said the difference is mostly timing and mix, with more mortgage warehouse and CRE, less C&I, and some strategic exits pulling down yield. They also asked about loan competition and pricing, and Tom Cornish said competition remains intense, especially in CRE, and the bank is not changing its credit box or chasing low-return deals. Questions on funding and margin centered on brokered deposits, FHLB, and deposit costs; management said they will use whichever wholesale bucket is cheapest and reiterated that average NIDDA growth, not spot rates, is the key margin driver. Analysts also asked about the pipeline, office reserves, REO, and buybacks; management said pipelines remain strong, office metrics are still solid, REO is largely cleaned up, and the board wants them to use the remaining buyback authorization this year and then come back in November or December for more.