BankUnited, Inc. — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022; filed February 22, 2023. BankUnited is a regional bank holding company operating primarily in Florida and the New York metropolitan area, with commercial lending and deposit businesses, national lending platforms, and an online consumer deposit channel. Consolidated assets were $37.0 billion at year-end.
Financial results and condition
| Metric | FY2022 / December 31, 2022 | Comparable period |
|---|---|---|
| Net income; diluted EPS | $285.0 million; $3.54 | FY2021: $415.0 million; $4.52 |
| Net interest income (GAAP) | $913.0 million | FY2021: $795.7 million |
| Net interest margin (tax-equivalent) | 2.68% | FY2021: 2.38% |
| Return on average assets / equity | 0.79% / 10.6% | Not stated here for FY2021 |
| Operating cash flow | $1.294 billion | FY2021: $1.220 billion |
| Total assets | $37.027 billion | December 31, 2021: $35.815 billion |
| Total deposits | $27.509 billion | December 31, 2021: $29.438 billion |
| Loans, net of allowance | $24.738 billion | December 31, 2021: $23.639 billion |
| Stockholders’ equity | $2.436 billion | December 31, 2021: $3.038 billion |
- Earnings and margins: Interest income rose with higher asset yields and balances. The average yield on interest-earning assets increased to 3.59% from 2.86%; the average cost of total deposits rose to 0.65% from 0.24%. Pre-tax, pre-provision net revenue (PPNR), a non-GAAP measure, was $450.3 million versus $382.3 million.
- Credit costs and quality: The company recorded a $75.2 million provision for credit losses, versus a $67.1 million recovery in 2021. The allowance for credit losses (ACL) was $147.9 million, or 0.59% of loans, versus $126.5 million, or 0.53%. Non-performing loans fell to $105.0 million (0.42% of loans) from $205.9 million (0.87%); net charge-offs were 0.22% of average loans versus 0.29%.
- Funding and liquidity: Deposits declined $1.9 billion; non-interest-bearing demand deposits fell $938 million, while time deposits grew $884 million. FHLB advances increased $3.5 billion to $5.42 billion. The estimated uninsured deposit balance was $19.2 billion. The bank reported available-liquidity-to-volatile-liabilities and liquidity stress-test ratios of 176% and 188%, respectively, and said it was within policy limits and had sufficient liquidity for the next 12 months.
- Debt and capital: Notes and other borrowings were $720.9 million, including $400 million of senior notes and $300 million of subordinated notes. The company and bank exceeded regulatory “well-capitalized” requirements; year-end CET1 ratios were 11.00% and 12.40%, respectively. Cash dividends totaled $78.9 million, or $1.00 per share. The company repurchased approximately 10.3 million shares for $401.3 million during 2022.
- Investment securities and equity: Available-for-sale securities had $674.2 million of net unrealized losses at year-end, primarily attributed to rising rates and wider spreads, not credit impairment. AOCI declined by $422.0 million during 2022. Book value and tangible book value per share were $32.19 and $31.16, down from $35.47 and $34.56.
Material changes versus FY2021
- Net income decreased $130.0 million, despite higher net interest income and PPNR. The comparison reflects the 2021 credit-loss reserve release and unusually low 2021 tax expense, including a $43.9 million Florida tax settlement benefit and a separate $25.2 million benefit from reduced unrecognized tax benefits.
- Non-interest income fell to $77.6 million from $134.2 million. 2022 included a $19.7 million fair-value loss on marketable equity securities and a $2.6 million net loss on loan sales; 2021 included an $18.2 million gain on a residential loan portfolio sale.
- Total non-interest expense decreased modestly to $540.3 million from $547.6 million. FY2021 included a $44.8 million loss from discontinuing cash flow hedges; FY2022 compensation and technology expenses were higher.
- Loans excluding PPP runoff grew $1.4 billion, led by core C&I and commercial real estate. Mortgage warehouse balances fell $567 million, while residential loans increased $532 million. Deposit outflows were funded in part by increased FHLB borrowing.
Outlook, risks, and unusual items
- The filing gives no quantified earnings, revenue, margin, or growth guidance. Management’s stated priorities include organic commercial and small-business growth, improving the deposit mix, disciplined risk-adjusted returns, and investment in digital capabilities and technology. It said deposit competition and funding costs, economic uncertainty, loan-growth execution, and talent retention were key challenges.
- Management’s year-end credit-loss forecast assumed, among other items, national unemployment rising to 4.2% by year-end 2023, modest GDP growth, and home-price declines. These are reserve-model assumptions, not company guidance; management cautioned that the ACL could change materially.
- Key risks include deposit attrition and higher funding costs, interest-rate and securities-value exposure, real-estate credit conditions, geographic concentration in Florida and the Tri-State area, operating-lease asset values, cybersecurity and third-party technology dependence, regulatory requirements, and execution of the LIBOR-to-SOFR transition. $10.5 billion of LIBOR-linked instruments were scheduled to mature after June 30, 2023.
- In Q4 2022, net income was $64.2 million versus $125.3 million in Q4 2021; provision for credit losses was $39.6 million versus $0.2 million. The filing attributes the 2021 quarterly result in part to the tax benefits and hedge-discontinuance loss described above.
- Management assessed the likelihood that ordinary-course legal proceedings would materially affect the company as remote. The financial statement audit opinion was unqualified, and the auditor reported effective internal control over financial reporting.
Important facts for investors to verify
- How deposit balances, uninsured deposits, deposit mix, and FHLB borrowing have changed since year-end 2022, and the resulting funding cost and liquidity position.
- Whether the large unrealized AFS securities losses remain unrealized and whether liquidity needs could require securities sales before recovery of amortized cost.
- Current commercial real-estate and C&I credit trends, criticized/classified exposures, ACL adequacy, and the performance of the franchise-finance and operating-lease portfolios.
- Actual NIM and earnings sensitivity to changing rates and depositor behavior; the filing’s year-end model showed first-year NII changes ranging from -10.0% in a 300-basis-point decline scenario to +0.1% in a 100-basis-point increase scenario.
- Progress and any customer, operational, or financial effects of the LIBOR transition, as well as capital, dividend, and share-repurchase decisions.