UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period endedSeptember 30, 20172021
OR
oTRANSITION 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)
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| Delaware | | 27-0162450 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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| 14817 Oak Lane | Miami Lakes FL | 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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company”company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filerý | ☒ | Accelerated filer | ☐ | Accelerated filer o
Emerging growth company | ☐ |
Non-accelerated filero | ☐ | Smaller reporting companyo |
| ☐ | Emerging growth company o
| |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act 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.
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| Class | | Trading Symbol | | Name of Exchange on Which Registered |
| Common Stock, $0.01 Par Value | | BKU | | New York Stock Exchange |
The number of outstanding shares of the registrant common stock, $0.01 par value, as of November 1, 2021 was 89,090,636.
BANKUNITED, INC.
Form 10-Q
For the Quarter Ended September 30, 2021
TABLE OF CONTENTS
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| | Page |
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Class | | November 6, 2017 |
Common Stock, $0.01 Par Value | | 106,820,503 |
BANKUNITED, INC.
Form 10-Q
For the Quarter Ended September 30, 2017
TABLE OF CONTENTS
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| PART I. | | |
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PART I. | | |
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| ITEM 1. | | |
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| ITEM 2. | | |
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| ITEM 3. | | |
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| ITEM 4. | | |
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| PART II. | | |
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| ITEM 1. | | |
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| ITEM 1A. | | |
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ITEM 6.2. | | |
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| ITEM 6. | | |
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GLOSSARY OF DEFINED TERMS
The following acronyms and terms may be used throughout this Form 10-Q, including the consolidated financial statements and related notes.
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ACIACL | | Loans acquired with evidence of deterioration inAllowance for credit quality since origination (Acquired Credit Impaired)losses |
ALCOAFS | | Available for sale |
| ALCO | | Asset/Liability Committee |
ALLL | | Allowance for loan and lease losses |
| AOCI | | Accumulated other comprehensive income |
ARMAPY | | Adjustable rate mortgageAnnual Percentage Yield |
ASC | | |
| ASC | | Accounting Standards Codification |
| ASU | | Accounting Standards Update |
BKU | | BankUnited, Inc. |
BankUnited | | BankUnited, National Association |
The Bank | | BankUnited, National Association |
Bridge | | Bridge Funding Group, Inc. |
CET1 | | Common Equity Tier 1 capital |
CECL | | Current expected credit losses |
CME | | Chicago Mercantile Exchange |
CMOs | | Collateralized mortgage obligations |
Commercial Shared-Loss Agreement | | A commercial and other loans shared-loss agreement entered into with the FDIC in connection with the FSB Acquisition |
Covered assets | | Assets covered under the Loss Sharing Agreements |
Covered loans | | Loans covered under the Loss Sharing Agreements |
EPS | | Earnings per common share |
EVE | | Economic value of equity |
FASB | | Financial Accounting Standards Board |
FDIA | | Federal Deposit Insurance Act |
FDIC | | Federal Deposit Insurance Corporation |
FEMA | | Federal Emergency Management Agency |
FHLB | | Federal Home Loan Bank |
FICO | | Fair Isaac Corporation (credit score) |
FRB | | Federal Reserve Bank |
FSB Acquisition | | Acquisition of substantially all of the assets and assumption of all of the non-brokered deposits and substantially all of the other liabilities of BankUnited, FSB from the FDIC on May 21, 2009 |
GAAP | | U.S. generally accepted accounting principles |
GDP | | Gross Domestic Product |
HAMP | | Home Affordable Modification Program |
IPO | | Initial public offering |
ISDA | | International Swaps and Derivatives Association |
LIBOR | | London InterBank Offered Rate |
LIHTC | | Low Income Housing Tax Credits |
Loss Sharing Agreements | | Two loss sharing agreements entered into with the FDIC in connection with the FSB Acquisition |
LTV | | Loan-to-value |
MBS | | Mortgage-backed securities |
MSA | | Metropolitan Statistical Area |
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MSRs | | Mortgage servicing rights |
New Loans | | Loans originated or purchased since the FSB Acquisition |
Non-ACI | | Loans acquired without evidence of deterioration in credit quality since origination |
NSFBKU | | Non-sufficient fundsBankUnited, Inc. |
NYTLCBankUnited | | New York City Taxi and Limousine CommissionBankUnited, National Association |
OCCThe Bank | | Office of the Comptroller of the CurrencyBankUnited, National Association |
OREOBridge | | Bridge Funding Group, Inc. |
| Buyout loans | | FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations |
| CARES Act | | Coronavirus Aid, Relief, and Economic Security Act |
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| CECL | | Current expected credit losses |
| CET1 | | Common Equity Tier 1 capital |
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| C&I | | Commercial and Industrial |
| CLO | | Collateralized loan obligations |
| CMBS | | Commercial mortgage-backed securities |
| CME | | Chicago Mercantile Exchange |
| CMOs | | Collateralized mortgage obligations |
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| COVID-19 | | Coronavirus disease of 2019 |
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| CRE | | Commercial real estate |
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| DFAST | | Dodd-Frank Act Stress Test |
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| DSCR | | Debt Service Coverage Ratio |
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| EVE | | Economic value of equity |
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| FDIA | | Federal Deposit Insurance Act |
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| FHA | | Federal Housing Administration |
| FHLB | | Federal Home Loan Bank |
| FICO | | Fair Isaac Corporation (credit score) |
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| FRB | | Federal Reserve Bank |
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| GAAP | | U.S. generally accepted accounting principles |
| GDP | | Gross Domestic Product |
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| GNMA | | Government National Mortgage Association |
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| HPI | | Home price indices |
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| IPO | | Initial public offering |
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| ISDA | | International Swaps and Derivatives Association |
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| LGD | | Loss Given Default |
| LIBOR | | London InterBank Offered Rate |
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| LTV | | Loan-to-value |
| MBS | | Mortgage-backed securities |
| MSA | | Metropolitan Statistical Area |
| MSLF | | Federal Reserve Main Street Lending Facility |
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| MWL | | Mortgage warehouse lending |
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| Non-OOCRE | | Non-owner occupied commercial real estate |
| NRSRO | | Nationally recognized statistical rating organization |
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| OCI | | Other comprehensive income |
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| OOCRE | | Owner occupied commercial real estate |
| OREO | | Other real estate owned |
OTTI | | Other-than-temporary impairment |
PSUPCD | | Performance Share UnitPurchased credit-deteriorated |
PinnaclePD | | Probability of default |
| Pinnacle | | Pinnacle Public Finance, Inc. |
RSU | | |
| PPP | | Small Business Administration’s Paycheck Protection Program |
| PPPLF | | FRB Paycheck Protection Program Liquidity Facility |
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| PSU | | Performance Share Unit |
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| REIT | | Real Estate Investment Trust |
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| RSU | | Restricted Share Unit |
SBA | | |
| SBA | | U.S. Small Business Administration |
SBF | | Small Business Finance Unit |
| SEC | | Securities and Exchange Commission |
Single Family Shared-Loss Agreement | | A single-family loan shared-loss agreement entered into with the FDIC in connection with the FSB Acquisition |
TDR | | Troubled-debt restructuring |
UPB | | |
| S&P 500 | | Standard & Poor's 500 Index |
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| TDR | | Troubled-debt restructuring |
| Tri-State | | New York, New Jersey and Connecticut |
| UPB | | Unpaid principal balance |
2014 Plan | | 2014 Omnibus Equity Incentive Plan |
| VA loan | | Loan guaranteed by the U.S. Department of Veterans Affairs |
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| VIX | | CBOE Volatility Index |
| WARM | | Weighted-average remaining maturity |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements and Supplementary Data
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands, except share and per share data) |
| | | | | | | |
| | September 30,
2017 | | December 31,
2016 |
| ASSETS | |
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| Cash and due from banks: | |
| | |
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| Non-interest bearing | $ | 34,883 |
| | $ | 40,260 |
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| Interest bearing | 3,714 |
| | 35,413 |
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| Interest bearing deposits at Federal Reserve Bank | 254,004 |
| | 372,640 |
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| Cash and cash equivalents | 292,601 |
| | 448,313 |
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| Investment securities available for sale, at fair value | 6,893,472 |
| | 6,073,584 |
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| Investment securities held to maturity | 10,000 |
| | 10,000 |
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| Non-marketable equity securities | 270,239 |
| | 284,272 |
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| Loans held for sale | 31,507 |
| | 41,198 |
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| Loans (including covered loans of $537,976 and $614,042) | 20,610,430 |
| | 19,395,394 |
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| Allowance for loan and lease losses | (158,573 | ) | | (152,953 | ) |
| Loans, net | 20,451,857 |
| | 19,242,441 |
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| FDIC indemnification asset | 349,617 |
| | 515,933 |
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| Bank owned life insurance | 248,876 |
| | 239,736 |
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| Equipment under operating lease, net | 588,207 |
| | 539,914 |
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| Deferred tax asset, net | 23,910 |
| | 62,940 |
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| Goodwill and other intangible assets | 77,857 |
| | 78,047 |
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| Other assets | 316,688 |
| | 343,773 |
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| Total assets | $ | 29,554,831 |
| | $ | 27,880,151 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
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| Liabilities: | |
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| Demand deposits: | |
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| Non-interest bearing | $ | 3,096,492 |
| | $ | 2,960,591 |
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| Interest bearing | 1,828,809 |
| | 1,523,064 |
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| Savings and money market | 9,964,242 |
| | 9,251,593 |
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| Time | 6,333,701 |
| | 5,755,642 |
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| Total deposits | 21,223,244 |
| | 19,490,890 |
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| Federal Home Loan Bank advances | 4,871,000 |
| | 5,239,348 |
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| Notes and other borrowings | 402,828 |
| | 402,809 |
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| Other liabilities | 434,270 |
| | 328,675 |
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| Total liabilities | 26,931,342 |
| | 25,461,722 |
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| Commitments and contingencies |
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| Stockholders' equity: | |
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| Common stock, par value $0.01 per share, 400,000,000 shares authorized; 106,821,902 and 104,166,945 shares issued and outstanding | 1,068 |
| | 1,042 |
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| Paid-in capital | 1,492,790 |
| | 1,426,459 |
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| Retained earnings | 1,077,042 |
| | 949,681 |
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| Accumulated other comprehensive income | 52,589 |
| | 41,247 |
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| Total stockholders' equity | 2,623,489 |
| | 2,418,429 |
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| Total liabilities and stockholders' equity | $ | 29,554,831 |
| | $ | 27,880,151 |
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| September 30,
2021 | | December 31,
2020 |
| ASSETS | | | |
| Cash and due from banks: | | | |
| Non-interest bearing | $ | 17,973 | | | $ | 20,233 | |
| Interest bearing | 489,049 | | | 377,483 | |
| Cash and cash equivalents | 507,022 | | | 397,716 | |
| Investment securities (including securities recorded at fair value of $10,319,691 and $9,166,683) | 10,329,691 | | | 9,176,683 | |
| Non-marketable equity securities | 155,584 | | | 195,865 | |
| Loans held for sale | — | | | 24,676 | |
| Loans | 22,807,969 | | | 23,866,042 | |
| Allowance for credit losses | (159,615) | | | (257,323) | |
| Loans, net | 22,648,354 | | | 23,608,719 | |
| Bank owned life insurance | 308,912 | | | 294,629 | |
| Operating lease equipment, net | 659,935 | | | 663,517 | |
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| Goodwill | 77,637 | | | 77,637 | |
| Other assets | 619,136 | | | 571,051 | |
| Total assets | $ | 35,306,271 | | | $ | 35,010,493 | |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Liabilities: | | | |
| Demand deposits: | | | |
| Non-interest bearing | $ | 9,158,281 | | | $ | 7,008,838 | |
| Interest bearing | 3,268,709 | | | 3,020,039 | |
| Savings and money market | 12,460,507 | | | 12,659,740 | |
| Time | 3,228,776 | | | 4,807,199 | |
| Total deposits | 28,116,273 | | | 27,495,816 | |
| Federal funds purchased | 199,000 | | | 180,000 | |
| FHLB advances | 2,431,014 | | | 3,122,999 | |
| Notes and other borrowings | 721,527 | | | 722,495 | |
| Other liabilities | 741,783 | | | 506,171 | |
| Total liabilities | 32,209,597 | | | 32,027,481 | |
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| Commitments and contingencies | 0 | | 0 |
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| Stockholders' equity: | | | |
| Common stock, par value $0.01 per share, 400,000,000 shares authorized; 90,049,326 and 93,067,500 shares issued and outstanding | 900 | | | 931 | |
| Paid-in capital | 885,873 | | | 1,017,518 | |
| Retained earnings | 2,239,963 | | | 2,013,715 | |
| Accumulated other comprehensive loss | (30,062) | | | (49,152) | |
| Total stockholders' equity | 3,096,674 | | | 2,983,012 | |
| Total liabilities and stockholders' equity | $ | 35,306,271 | | | $ | 35,010,493 | |
1
The accompanying notes are an integral part of these consolidated financial statements
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
| Interest income: | | | | | | | | | |
| Loans | $ | 194,689 | | | $ | 208,646 | | | $ | 602,544 | | | $ | 656,943 | | | |
| Investment securities | 38,243 | | | 44,604 | | | 114,418 | | | 151,596 | | | |
| Other | 1,413 | | | 1,322 | | | 4,613 | | | 7,950 | | | |
| Total interest income | 234,345 | | | 254,572 | | | 721,575 | | | 816,489 | | | |
| Interest expense: | | | | | | | | | |
| Deposits | 14,273 | | | 37,681 | | | 53,965 | | | 170,690 | | | |
| Borrowings | 24,950 | | | 29,412 | | | 77,937 | | | 87,407 | | | |
| Total interest expense | 39,223 | | | 67,093 | | | 131,902 | | | 258,097 | | | |
| Net interest income before provision for credit losses | 195,122 | | | 187,479 | | | 589,673 | | | 558,392 | | | |
| Provision for (recovery of) credit losses | (11,842) | | | 29,232 | | | (67,365) | | | 180,074 | | | |
| Net interest income after provision for credit losses | 206,964 | | | 158,247 | | | 657,038 | | | 378,318 | | | |
| Non-interest income: | | | | | | | | | |
| Deposit service charges and fees | 5,553 | | | 4,040 | | | 15,870 | | | 11,927 | | | |
| Gain on sale of loans, net | 1,403 | | | 2,953 | | | 5,391 | | | 10,745 | | | |
| Gain (loss) on investment securities, net | (664) | | | 7,181 | | | 5,856 | | | 10,564 | | | |
| Lease financing | 13,212 | | | 13,934 | | | 39,222 | | | 45,565 | | | |
| Other non-interest income | 5,974 | | | 8,184 | | | 22,192 | | | 19,140 | | | |
| Total non-interest income | 25,478 | | | 36,292 | | | 88,531 | | | 97,941 | | | |
| Non-interest expense: | | | | | | | | | |
| Employee compensation and benefits | 57,224 | | | 48,448 | | | 172,971 | | | 156,212 | | | |
| Occupancy and equipment | 11,760 | | | 12,170 | | | 35,127 | | | 36,440 | | | |
| Deposit insurance expense | 3,552 | | | 5,886 | | | 15,224 | | | 15,095 | | | |
| Professional fees | 2,312 | | | 2,436 | | | 6,363 | | | 8,771 | | | |
| Technology and telecommunications | 16,687 | | | 15,435 | | | 49,279 | | | 42,056 | | | |
| Depreciation of operating lease equipment | 12,944 | | | 12,315 | | | 37,995 | | | 37,137 | | | |
| | | | | | | | | |
| Other non-interest expense | 13,563 | | | 11,937 | | | 42,756 | | | 38,154 | | | |
| Total non-interest expense | 118,042 | | | 108,627 | | | 359,715 | | | 333,865 | | | |
| Income before income taxes | 114,400 | | | 85,912 | | | 385,854 | | | 142,394 | | | |
| Provision for income taxes | 27,459 | | | 19,353 | | | 96,125 | | | 30,278 | | | |
| Net income | $ | 86,941 | | | $ | 66,559 | | | $ | 289,729 | | | $ | 112,116 | | | |
| Earnings per common share, basic | $ | 0.94 | | | $ | 0.70 | | | $ | 3.12 | | | $ | 1.17 | | | |
| Earnings per common share, diluted | $ | 0.94 | | | $ | 0.70 | | | $ | 3.12 | | | $ | 1.17 | | | |
2
The accompanying notes are an integral part of these consolidated financial statements
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| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Interest income: | | | | | |
| | |
|
| Loans | $ | 253,815 |
| | $ | 227,233 |
| | $ | 739,586 |
| | $ | 662,439 |
|
| Investment securities | 51,851 |
| | 39,712 |
| | 141,624 |
| | 109,963 |
|
| Other | 3,777 |
| | 3,036 |
| | 10,606 |
| | 8,850 |
|
| Total interest income | 309,443 |
| | 269,981 |
| | 891,816 |
| | 781,252 |
|
| Interest expense: | | | | | | | |
| Deposits | 45,919 |
| | 30,968 |
| | 120,161 |
| | 86,427 |
|
| Borrowings | 22,260 |
| | 17,278 |
| | 60,209 |
| | 51,939 |
|
| Total interest expense | 68,179 |
| | 48,246 |
| | 180,370 |
| | 138,366 |
|
| Net interest income before provision for loan losses | 241,264 |
| | 221,735 |
| | 711,446 |
| | 642,886 |
|
| Provision for (recovery of) loan losses (including $261, $(445), $2,693 and $(1,119) for covered loans) | 37,854 |
| | 24,408 |
| | 63,573 |
| | 42,449 |
|
| Net interest income after provision for loan losses | 203,410 |
| | 197,327 |
| | 647,873 |
| | 600,437 |
|
| Non-interest income: | | | | | | | |
| Income from resolution of covered assets, net | 6,400 |
| | 8,883 |
| | 22,066 |
| | 26,426 |
|
| Net gain (loss) on FDIC indemnification | (4,838 | ) | | 993 |
| | (14,174 | ) | | (9,410 | ) |
| Service charges and fees | 4,938 |
| | 5,171 |
| | 15,554 |
| | 14,529 |
|
| Gain (loss) on sale of loans, net (including $0, $(10,033), $(1,582) and $(14,895) related to covered loans) | 2,447 |
| | (7,947 | ) | | 6,601 |
| | (7,360 | ) |
| Gain on investment securities available for sale, net | 26,931 |
| | 3,008 |
| | 29,194 |
| | 10,065 |
|
| Lease financing | 13,287 |
| | 11,188 |
| | 40,067 |
| | 32,762 |
|
| Other non-interest income | 4,161 |
| | 3,779 |
| | 12,055 |
| | 10,118 |
|
| Total non-interest income | 53,326 |
| | 25,075 |
| | 111,363 |
| | 77,130 |
|
| Non-interest expense: | | | | | | | |
| Employee compensation and benefits | 58,327 |
| | 55,162 |
| | 178,386 |
| | 166,374 |
|
| Occupancy and equipment | 18,829 |
| | 18,867 |
| | 56,689 |
| | 57,199 |
|
| Amortization of FDIC indemnification asset | 45,225 |
| | 38,957 |
| | 135,351 |
| | 116,711 |
|
| Deposit insurance expense | 5,764 |
| | 4,943 |
| | 16,827 |
| | 12,866 |
|
| Professional fees | 2,748 |
| | 3,884 |
| | 12,573 |
| | 10,119 |
|
| Telecommunications and data processing | 3,452 |
| | 3,746 |
| | 10,481 |
| | 10,800 |
|
| Depreciation of equipment under operating lease | 8,905 |
| | 6,855 |
| | 25,655 |
| | 20,004 |
|
| Other non-interest expense | 13,455 |
| | 15,590 |
| | 37,735 |
| | 40,151 |
|
| Total non-interest expense | 156,705 |
| | 148,004 |
| | 473,697 |
| | 434,224 |
|
| Income before income taxes | 100,031 |
| | 74,398 |
| | 285,539 |
| | 243,343 |
|
| Provision for income taxes | 32,252 |
| | 23,550 |
| | 89,060 |
| | 80,896 |
|
| Net income | $ | 67,779 |
| | $ | 50,848 |
| | $ | 196,479 |
| | $ | 162,447 |
|
| Earnings per common share, basic (see Note 2) | $ | 0.62 |
| | $ | 0.47 |
| | $ | 1.79 |
| | $ | 1.52 |
|
| Earnings per common share, diluted (see Note 2) | $ | 0.62 |
| | $ | 0.47 |
| | $ | 1.79 |
| | $ | 1.50 |
|
| Cash dividends declared per common share | $ | 0.21 |
| | $ | 0.21 |
| | $ | 0.63 |
| | $ | 0.63 |
|
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
| | | | | | | | | |
| Net income | $ | 86,941 | | | $ | 66,559 | | | $ | 289,729 | | | $ | 112,116 | | | |
| Other comprehensive income (loss), net of tax: | | | | | | | | | |
| Unrealized gains (losses) on investment securities available for sale: | | | | | | | | | |
| Net unrealized holding gain (loss) arising during the period | (16,205) | | | 49,829 | | | (24,764) | | | 25,074 | | | |
| Reclassification adjustment for net securities gains realized in income | (606) | | | (1,685) | | | (5,679) | | | (7,089) | | | |
| Net change in unrealized gains (losses) on securities available for sale | (16,811) | | | 48,144 | | | (30,443) | | | 17,985 | | | |
| Unrealized losses on derivative instruments: | | | | | | | | | |
| Net unrealized holding gain (loss) arising during the period | 1,263 | | | 1,251 | | | 16,930 | | | (90,633) | | | |
| Reclassification adjustment for net losses realized in income | 10,359 | | | 11,798 | | | 32,603 | | | 22,649 | | | |
| Net change in unrealized losses on derivative instruments | 11,622 | | | 13,049 | | | 49,533 | | | (67,984) | | | |
| Other comprehensive income (loss) | (5,189) | | | 61,193 | | | 19,090 | | | (49,999) | | | |
| Comprehensive income | $ | 81,752 | | | $ | 127,752 | | | $ | 308,819 | | | $ | 62,117 | | | |
3
The accompanying notes are an integral part of these consolidated financial statements
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | | | | |
| Net income | $ | 67,779 |
| | $ | 50,848 |
| | $ | 196,479 |
| | $ | 162,447 |
|
| Other comprehensive income (loss), net of tax: | | |
|
| | | | |
|
| Unrealized gains on investment securities available for sale: | | |
|
| | | | |
|
| Net unrealized holding gain arising during the period | 8,557 |
| | 3,216 |
| | 32,826 |
| | 53,490 |
|
| Reclassification adjustment for net securities gains realized in income | (16,293 | ) | | (1,820 | ) | | (17,662 | ) | | (6,090 | ) |
| Net change in unrealized gains on securities available for sale | (7,736 | ) | | 1,396 |
| | 15,164 |
| | 47,400 |
|
| Unrealized losses on derivative instruments: | | |
|
| | | | |
|
| Net unrealized holding gain (loss) arising during the period | (170 | ) | | 5,055 |
| | (8,337 | ) | | (34,948 | ) |
| Reclassification adjustment for net losses realized in income | 1,210 |
| | 2,264 |
| | 4,515 |
| | 7,896 |
|
| Net change in unrealized losses on derivative instruments | 1,040 |
| | 7,319 |
| | (3,822 | ) | | (27,052 | ) |
| Other comprehensive income (loss) | (6,696 | ) | | 8,715 |
| | 11,342 |
| | 20,348 |
|
| Comprehensive income | $ | 61,083 |
| | $ | 59,563 |
| | $ | 207,821 |
| | $ | 182,795 |
|
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)
| | | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2021 | | 2020 | |
| Cash flows from operating activities: | |
| | |
| Cash flows from operating activities: | | | | |
| Net income | $ | 196,479 |
| | $ | 162,447 |
| Net income | $ | 289,729 | | | $ | 112,116 | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Amortization and accretion, net | (71,111 | ) | | (90,360 | ) | Amortization and accretion, net | (16,294) | | | (20,102) | | |
| Provision for loan losses | 63,573 |
| | 42,449 |
| |
| Income from resolution of covered assets, net | (22,066 | ) | | (26,426 | ) | |
| Net loss on FDIC indemnification | 14,174 |
| | 9,410 |
| |
| (Gain) loss on sale of loans, net | (6,601 | ) | | 7,360 |
| |
| Increase in cash surrender value of bank owned life insurance | (4,647 | ) | | (2,973 | ) | |
| Gain on investment securities available for sale, net | (29,194 | ) | | (10,065 | ) | |
| Provision for (recovery of) credit losses | | Provision for (recovery of) credit losses | (67,365) | | | 180,074 | | |
| | Gain on sale of loans, net | | Gain on sale of loans, net | (5,391) | | | (10,745) | | |
| | Gain on investment securities, net | | Gain on investment securities, net | (5,856) | | | (10,564) | | |
| Equity based compensation | 14,337 |
| | 13,418 |
| Equity based compensation | 17,510 | | | 12,286 | | |
| Depreciation and amortization | 45,204 |
| | 38,971 |
| Depreciation and amortization | 56,122 | | | 54,377 | | |
| Deferred income taxes | 31,625 |
| | 33,958 |
| Deferred income taxes | 7,835 | | | (27,304) | | |
| | Proceeds from sale of loans held for sale | 126,778 |
| | 121,968 |
| Proceeds from sale of loans held for sale | 651,840 | | | 498,431 | | |
| Loans originated for sale, net of repayments | (109,588 | ) | | (108,075 | ) | Loans originated for sale, net of repayments | — | | | (21,780) | | |
| Other: | | | | Other: | | |
| (Increase) decrease in other assets | 15,743 |
| | (9,502 | ) | (Increase) decrease in other assets | (123,546) | | | 2,509 | | |
| Increase (decrease) in other liabilities | (33,546 | ) | | 44,708 |
| |
| (Decrease) increase in other liabilities | | (Decrease) increase in other liabilities | 148,437 | | | (134,363) | | |
| Net cash provided by operating activities | 231,160 |
| | 227,288 |
| Net cash provided by operating activities | 953,021 | | | 634,935 | | |
| | | | | | | | | |
| Cash flows from investing activities: | |
| | |
| Cash flows from investing activities: | | | | |
| Purchase of investment securities available for sale | (2,355,872 | ) | | (2,224,174 | ) | |
| Proceeds from repayments and calls of investment securities available for sale | 861,618 |
| | 457,610 |
| |
| Proceeds from sale of investment securities available for sale | 827,353 |
| | 753,756 |
| |
| | Purchase of investment securities | | Purchase of investment securities | (4,378,200) | | | (3,356,639) | | |
| Proceeds from repayments and calls of investment securities | | Proceeds from repayments and calls of investment securities | 1,980,551 | | | 912,403 | | |
| Proceeds from sale of investment securities | | Proceeds from sale of investment securities | 1,348,346 | | | 930,757 | | |
| Purchase of non-marketable equity securities | (185,718 | ) | | (178,813 | ) | Purchase of non-marketable equity securities | (16,199) | | | (134,938) | | |
| Proceeds from redemption of non-marketable equity securities | 199,751 |
| | 115,388 |
| Proceeds from redemption of non-marketable equity securities | 56,480 | | | 179,988 | | |
| Purchases of loans | (949,294 | ) | | (936,882 | ) | Purchases of loans | (3,681,706) | | | (2,082,695) | | |
| Loan originations, repayments and resolutions, net | (192,075 | ) | | (1,389,435 | ) | |
| Loan originations and repayments, net | | Loan originations and repayments, net | 3,907,957 | | | 1,000,352 | | |
| Proceeds from sale of loans, net | 98,404 |
| | 120,537 |
| Proceeds from sale of loans, net | 210,525 | | | 11,604 | | |
| Decrease in FDIC indemnification asset for claims filed | 16,768 |
| | 30,829 |
| |
| Acquisition of equipment under operating lease, net | (73,948 | ) | | (52,399 | ) | |
| | Acquisition of operating lease equipment | | Acquisition of operating lease equipment | (44,179) | | | (19,597) | | |
| Other investing activities | (31,718 | ) | | (19,577 | ) | Other investing activities | (13,270) | | | (12,328) | | |
| Net cash used in investing activities | (1,784,731 | ) | | (3,323,160 | ) | Net cash used in investing activities | (629,695) | | | (2,571,093) | | |
| | | | (Continued) |
| | | | | |
|
4
The accompanying notes are an integral part of these consolidated financial statements
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (Continued)
(In thousands)
| | | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2021 | | 2020 | |
| Cash flows from financing activities: | |
| | |
| Cash flows from financing activities: | | | | |
| Net increase in deposits | 1,732,354 |
| | 1,897,808 |
| Net increase in deposits | 620,457 | | | 2,202,619 | | |
| Additions to Federal Home Loan Bank advances | 3,921,000 |
| | 3,360,000 |
| |
| Repayments of Federal Home Loan Bank advances | (4,290,000 | ) | | (2,150,000 | ) | |
| Net increase in federal funds purchased | | Net increase in federal funds purchased | 19,000 | | | 80,000 | | |
| Additions to FHLB and PPPLF borrowings | | Additions to FHLB and PPPLF borrowings | 1,231,001 | | | 4,281,960 | | |
| Repayments of FHLB and PPPLF borrowings | | Repayments of FHLB and PPPLF borrowings | (1,921,000) | | | (4,647,310) | | |
| Proceeds from issuance of notes, net | | Proceeds from issuance of notes, net | — | | | 293,858 | | |
| Dividends paid | (68,583 | ) | | (67,342 | ) | Dividends paid | (65,114) | | | (64,611) | | |
| Exercise of stock options | 61,519 |
| | 222 |
| |
| | Repurchase of common stock | | Repurchase of common stock | (136,686) | | | (100,972) | | |
| Other financing activities | 41,569 |
| | 49,638 |
| Other financing activities | 38,322 | | | 45,717 | | |
| Net cash provided by financing activities | 1,397,859 |
| | 3,090,326 |
| |
| Net increase (decrease) in cash and cash equivalents | (155,712 | ) | | (5,546 | ) | |
| Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | (214,020) | | | 2,091,261 | | |
| Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 109,306 | | | 155,103 | | |
| Cash and cash equivalents, beginning of period | 448,313 |
| | 267,500 |
| Cash and cash equivalents, beginning of period | 397,716 | | | 214,673 | | |
| Cash and cash equivalents, end of period | $ | 292,601 |
| | $ | 261,954 |
| Cash and cash equivalents, end of period | $ | 507,022 | | | $ | 369,776 | | |
| | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | Supplemental disclosure of cash flow information: | | |
| Interest paid | $ | 169,759 |
| | $ | 132,398 |
| Interest paid | $ | 125,834 | | | $ | 268,970 | | |
| Income taxes paid, net | $ | 46,320 |
| | $ | 8,168 |
| Income taxes paid, net | $ | 247,798 | | | $ | 5,944 | | |
| | | | | | | | | |
| Supplemental schedule of non-cash investing and financing activities: | | | | Supplemental schedule of non-cash investing and financing activities: | | |
| Transfers from loans to other real estate owned and other repossessed assets | $ | 6,738 |
| | $ | 11,679 |
| |
| | Transfers from loans to loans held for sale | | Transfers from loans to loans held for sale | $ | 832,903 | | | $ | 451,864 | | |
| | Dividends declared, not paid | $ | 23,045 |
| | $ | 22,482 |
| Dividends declared, not paid | $ | 20,676 | | | $ | 21,910 | | |
| Unsettled purchases of investment securities available for sale | $ | 107,500 |
| | $ | — |
| |
| Unsettled investment securities trades, net | | Unsettled investment securities trades, net | $ | 154,285 | | | $ | 10,339 | | |
|
5
The accompanying notes are an integral part of these consolidated financial statements
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
Loss | | Total
Stockholders’
Equity |
| Balance at June 30, 2021 | | Balance at June 30, 2021 | 93,238,553 | | | $ | 932 | | | $ | 1,011,786 | | | $ | 2,173,698 | | | $ | (24,873) | | | $ | 3,161,543 | |
| Comprehensive income | | Comprehensive income | — | | | — | | | — | | | 86,941 | | | (5,189) | | | 81,752 | |
| Dividends ($0.23 per common share) | | Dividends ($0.23 per common share) | — | | | — | | | — | | | (20,676) | | | — | | | (20,676) | |
| Equity based compensation | | Equity based compensation | 9,756 | | | 1 | | | 3,554 | | | — | | | — | | | 3,555 | |
| Forfeiture of unvested shares and shares surrendered for tax withholding obligations | | Forfeiture of unvested shares and shares surrendered for tax withholding obligations | (13,007) | | | (1) | | | (76) | | | — | | | — | | | (77) | |
| | Common Shares Outstanding | | Common Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total Stockholders’ Equity | |
| Balance at December 31, 2016 | 104,166,945 |
| | $ | 1,042 |
| | $ | 1,426,459 |
| | $ | 949,681 |
| | $ | 41,247 |
| | $ | 2,418,429 |
| |
| Repurchase of common stock | | Repurchase of common stock | (3,185,976) | | | (32) | | | (129,391) | | | — | | | — | | | (129,423) | |
| Balance at September 30, 2021 | | Balance at September 30, 2021 | 90,049,326 | | | $ | 900 | | | $ | 885,873 | | | $ | 2,239,963 | | | $ | (30,062) | | | $ | 3,096,674 | |
| | Balance at June 30, 2020 | | Balance at June 30, 2020 | 92,420,278 | | | $ | 924 | | | $ | 991,509 | | | $ | 1,905,639 | | | $ | (143,019) | | | $ | 2,755,053 | |
| Comprehensive income | — |
| | — |
| | — |
| | 196,479 |
| | 11,342 |
| | 207,821 |
| Comprehensive income | — | | | — | | | — | | | 66,559 | | | 61,193 | | | 127,752 | |
| Dividends | — |
| | — |
| | — |
| | (69,118 | ) | | — |
| | (69,118 | ) | |
| Dividends ($0.23 per common share) | | Dividends ($0.23 per common share) | — | | | — | | | — | | | (21,910) | | | — | | | (21,910) | |
| Equity based compensation | 618,306 |
| | 6 |
| | 12,103 |
| | — |
| | — |
| | 12,109 |
| Equity based compensation | — | | | — | | | 3,878 | | | — | | | — | | | 3,878 | |
| Forfeiture of unvested shares and shares surrendered for tax withholding obligations | (267,457 | ) | | (3 | ) | | (7,268 | ) | | — |
| | — |
| | (7,271 | ) | Forfeiture of unvested shares and shares surrendered for tax withholding obligations | (39,405) | | | — | | | (91) | | | — | | | — | | | (91) | |
| Exercise of stock options | 2,304,108 |
| | 23 |
| | 61,496 |
| | — |
| | — |
| | 61,519 |
| Exercise of stock options | 7,768 | | | — | | | 142 | | | — | | | — | | | 142 | |
| Balance at September 30, 2017 | 106,821,902 |
| | $ | 1,068 |
| | $ | 1,492,790 |
| | $ | 1,077,042 |
| | $ | 52,589 |
| | $ | 2,623,489 |
| |
| | | | | | | | | | | | | |
| Balance at December 31, 2015 | 103,626,255 |
| | $ | 1,036 |
| | $ | 1,406,786 |
| | $ | 813,894 |
| | $ | 22,182 |
| | $ | 2,243,898 |
| |
| Comprehensive income | — |
| | — |
| | — |
| | 162,447 |
| | 20,348 |
| | 182,795 |
| |
| Dividends | — |
| | — |
| | — |
| | (67,444 | ) | | — |
| | (67,444 | ) | |
| Equity based compensation | 644,888 |
| | 6 |
| | 13,250 |
| | — |
| | — |
| | 13,256 |
| |
| Forfeiture of unvested shares and shares surrendered for tax withholding obligations | (139,718 | ) | | (1 | ) | | (483 | ) | | — |
| | — |
| | (484 | ) | |
| Exercise of stock options | 10,000 |
| | — |
| | 222 |
| | — |
| | — |
| | 222 |
| |
| Tax benefits from dividend equivalents and equity based compensation | — |
| | — |
| | 847 |
| | — |
| | — |
| | 847 |
| |
| Balance at September 30, 2016 | 104,141,425 |
| | $ | 1,041 |
| | $ | 1,420,622 |
| | $ | 908,897 |
| | $ | 42,530 |
| | $ | 2,373,090 |
| |
| Balance at September 30, 2020 | | Balance at September 30, 2020 | 92,388,641 | | | $ | 924 | | | $ | 995,438 | | | $ | 1,950,288 | | | $ | (81,826) | | | $ | 2,864,824 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common
Shares
Outstanding | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Income (Loss) | | Total
Stockholders’
Equity |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Balance at December 31, 2020 | 93,067,500 | | | $ | 931 | | | $ | 1,017,518 | | | $ | 2,013,715 | | | $ | (49,152) | | | $ | 2,983,012 | |
| Comprehensive income | — | | | — | | | — | | | 289,729 | | | 19,090 | | | 308,819 | |
| Dividends ($0.69 per common share) | — | | | — | | | — | | | (63,481) | | | — | | | (63,481) | |
| Equity based compensation | 568,936 | | | 6 | | | 10,772 | | | — | | | — | | | 10,778 | |
| Forfeiture of unvested shares and shares surrendered for tax withholding obligations | (197,639) | | | (3) | | | (5,790) | | | — | | | — | | | (5,793) | |
| Exercise of stock options | 1,569 | | | — | | | 25 | | | — | | | — | | | 25 | |
| Repurchase of common stock | (3,391,040) | | | (34) | | | (136,652) | | | — | | | — | | | (136,686) | |
| Balance at September 30, 2021 | 90,049,326 | | | $ | 900 | | | $ | 885,873 | | | $ | 2,239,963 | | | $ | (30,062) | | | $ | 3,096,674 | |
| | | | | | | | | | | |
| Balance at December 31, 2019 | 95,128,231 | | | $ | 951 | | | $ | 1,083,920 | | | $ | 1,927,735 | | | $ | (31,827) | | | $ | 2,980,779 | |
| Impact of adoption of ASU 2016-13 | — | | | — | | | — | | | (23,817) | | | — | | | (23,817) | |
| Balance at January 1, 2020 | 95,128,231 | | | 951 | | | 1,083,920 | | | 1,903,918 | | | (31,827) | | | 2,956,962 | |
| Comprehensive income | — | | | — | | | — | | | 112,116 | | | (49,999) | | | 62,117 | |
| Dividends ($0.69 per common share) | — | | | — | | | — | | | (65,746) | | | — | | | (65,746) | |
| Equity based compensation | 743,696 | | | 8 | | | 15,306 | | | — | | | — | | | 15,314 | |
| Forfeiture of unvested shares and shares surrendered for tax withholding obligations | (225,477) | | | (3) | | | (4,519) | | | — | | | — | | | (4,522) | |
| Exercise of stock options | 67,768 | | | 1 | | | 1,670 | | | — | | | — | | | 1,671 | |
| Repurchase of common stock | (3,325,577) | | | (33) | | | (100,939) | | | — | | | — | | | (100,972) | |
| Balance at September 30, 2020 | 92,388,641 | | | $ | 924 | | | $ | 995,438 | | | $ | 1,950,288 | | | $ | (81,826) | | | $ | 2,864,824 | |
6
The accompanying notes are an integral part of these consolidated financial statements.statements
6
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
Note 1 Basis of Presentation and Summary of Significant Accounting Policies
BankUnited, Inc. is a national bank holding company with one wholly-owned subsidiary, BankUnited, 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 9064 banking centers located in 1513 Florida counties and 64 banking centers located in the New York metropolitan area at September 30, 2017.2021. The Bank also offers certain commercial lending and deposit products through national platforms.
In connection with the FSB Acquisition, BankUnited entered into two loss sharing agreements with the FDIC. The Loss Sharing Agreements consist of the Single Family Shared-Loss Agreement and the Commercial Shared-Loss Agreement. Assets covered by the Loss Sharing Agreements are referred to as covered assets or, in certain cases, covered loans. 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 OREO. Loss sharing under the Commercial Shared-Loss Agreement terminated on May 21, 2014. The Commercial Shared-Loss Agreement continued to provide for the Bank’s reimbursement of recoveries to the FDIC through June 30, 2017 for all other covered assets, including commercial real estate, commercial and industrial and consumer loans, certain investment securities and commercial OREO. 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 SEC. Accordingly, theythese 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 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, 20162020 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 and nine months ended September 30, 20172021 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 includeThe most significant estimate impacting the ALLL,Company's consolidated financial statements is 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.ACL.
New Accounting Pronouncements Adopted During the Nine Months Ended September 30, 2021
ASU No. 2016-09, Compensation - Stock Compensation2019-12, Income Taxes (Topic 718)740): ImprovementsSimplifying the Accounting for Income Taxes. This ASU simplified the accounting for income taxes by removing certain exceptions stipulated in ASC 740 and making some other targeted changes to Employee Share-Based Payment Accountingthe accounting for income taxes. The Company adopted this ASU on January 1, 2021 with no material impact on the Company’s consolidated financial position, results of operations, and cash flows.
ASU No. 2021-01, Reference Rate Reform (Topic 848). This ASU clarified that certain optional expedients and exceptions provided for in ASU No. 2020-04 for applying GAAP to contract modifications and hedging relationships apply to derivatives that are affected by the discounting transition. The amendments in this ASU simplified several aspectsare elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of the accounting for share-based payment transactions. The Company adopted this ASU in the first quarter of 2017. The amendment requiring the recognition of excess tax benefits and deficiencies as income tax benefit or expense in the income statement as opposed to being recognized as additional paid-in-capital was applied prospectively and resulted in the recognition of $0.3 million and $3.2 million in excess tax benefits in the consolidated statement of income line item "Provision for income taxes" for the three and nine months ended September 30, 2017, increasing net income by the same amount in each period. The adoption had no impact on basic and diluted earnings per share for the three months ended September 30, 2017 and increased basic and diluted earnings per share by $0.02 and $0.03, respectively, for the nine months ended September 30, 2017. The Company retrospectively adopted the amendments requiring the classification of excess tax benefits and deficiencies with other income tax cash flows as operating activities and cash paid when directly withholding shares as financing activities in the accompanying consolidated statements of cash flows; the impact was not material.reference rate reform. The Company elected to continue its practice of estimating the number of awards expected to vest in determining the amount of compensation cost to be recognized related to share based payment transactions.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments inadopt this ASU require certain premiums on callable debt securities to be amortized to the earliest call date.a retrospective basis. The amortization period for callable debt securities purchased as a discount will not be impacted. The Company early-adoptedimpact of adoption of this ASU in the first quarter of 2017 with no material impact on the Company's consolidated financial position, results of operations, orand cash flows.flows was not material.
Accounting Pronouncements Not Yet Adopted
ASU No. 2016-06, 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging (Topic 815):Contingent Put- Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for convertible debt and Call Optionsconvertible preferred stock by reducing the number of accounting models for these instruments, resulting in Debt Instruments. fewer embedded conversion features being separately recognized from the host contract. Additionally, this ASU revises the criteria for determining whether contracts in an entity's own equity meet the scope exception from derivative accounting, which will change the population of contracts that are recognized as assets or liabilities. The amendments in this ASU clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. A company performing the assessment under these amendments is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence, without also considering whether the contingency is related to interest rates or credit risks. The Company adopted this ASU in the first quarter of 2017 with no impact on its consolidated financial position, results of operations or cash flows.
ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, an amendment to simplify the subsequent quantitative measurement of goodwill by eliminating step two from the goodwill impairment test. As amended, an entity recognizes an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. An entity still has the option to perform the qualitative test for a reporting unit to determine if the quantitative impairment test is necessary. The Company early adopted this ASU in the third quarter of 2017, concurrent with performance of its annual goodwill impairment test, with no impact on its consolidated financial position, results of operations or cash flows.
ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness after initial qualification. For qualifying cash flow and net investment hedges, this means that the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness will be recorded in other comprehensive income (OCI), and amounts deferred in OCI will be reclassified to earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings. The Company will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. The new guidance also permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test, such as a regression analysis, if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. In addition, in order to better align an entity's risk management activities and financial reporting for hedging relationships, the ASU allows for more hedging strategies to be eligible for hedge accounting. From a disclosure standpoint, to help users of the financial statements better understand the effects of hedge accounting, the guidance requires revised tabular disclosures that focus on the effect of hedge accounting by income statement line, and eliminates today’s requirement to disclose hedge ineffectiveness because this amount is no longer separately measured. The Company early adopted this ASU during the quarter ended September 30, 2017 with no material impact on the Company's consolidated financial position, results of operations or cash flows.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. The amendments in this update affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts, including leases and insurance contracts, are within the scope of other standards. The amendments establish a core principle requiring the recognition of revenue to depict the transfer of goods or services to customers in an amount reflecting the consideration to which the entity expects to be entitled in exchange for such goods or services. The amendments also require expanded disclosures concerning the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. Financial instruments and lease contracts are generally outside the scope of the ASU as are revenues that are in the scope of ASC 860 "Transfers and Servicing", ASC 460 "Guarantees" and ASC 815 "Derivatives and Hedging". The FASB has issued subsequent ASUs to clarifyrevise certain aspects of ASU 2014-09, without changing the core principle of the guidance on calculating earnings per share with respect to convertible instruments and to defer the effective date of ASU 2014-09 to annual periods and interim periods within fiscal years beginning after December 15, 2017. Although management has not finalized its evaluation of the impact of adoption of this ASU, substantially all of the Company's revenues have historically been, and are expected to continue toinstruments that may be generated from activities that are outside the scope of the ASU. Therefore, management does not expect adoption to have a material impact on the Company's consolidated financial position, results of operations or cash flows.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
Service charges on deposit accounts, which totaled approximately $9.8 million for the nine months ended September 30, 2017, is the most significant category of revenue identified as within the scope of the ASU; management does not expect the amount and timing of recognition of such revenue to be materially impacted by adoption, which management expects to apply using the modified retrospective approach, whereby the cumulative effect of initially applying the amendments is recognized as an adjustment to opening retained earnings at the date of adoption.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendmentssettled in the entity's own shares. This ASU that are expected to be most applicable to the Company (1) eliminate the available for sale classification for equity securities and require investments in equity securities (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, provided that equity investments that do not have readily determinable fair values may be re-measured at fair value upon occurrence of an observable price change or recognition of impairment, (2) eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, and (3) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The amendments also clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity's other deferred tax assets, which is consistent with the Company's current practice. The amendments in this ASU are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2017 and will be adopted by means of a cumulative-effect adjustment to the balance sheet, except for amendments related to equity securities without readily determinable fair values, which will be applied prospectively. Although management2021. The Company has not finalized its evaluation of the impact of adoption of this ASU, adoption is not expected to have any impact on the Company's consolidated financial position or cash flows, other than a cumulative effect adjustment to reclassify any unrealized gains or losses related to equity securities from AOCI to retained earnings. The carrying value of equity investments for which fair value changes will be recognized in earnings after adoption totaled $71 million and had unrealized gains of $10.0 million at September 30, 2017. Adoption of the ASU will impact the Company's disclosures about the fair value of certain financial instruments.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this ASU require a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for leases with terms longer than one year. Accounting applied by lessors is largely unchanged by this ASU. The amendments in this ASU are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2018. Early adoption is permitted; however, the Company does not intend to early adopt this ASU. Lessees and lessors are required to apply the provisions of the ASU at the beginning of the earliest period presented using a modified retrospective approach. Management has not completed its evaluation of the impact of adoption of this ASU and is not currently able to reasonably estimatedetermined the impact of adoption on the consolidated financial statements; however, the most significant impact is expected to be the recognition, as lessee, of new right-of-use assets and lease liabilities on the consolidated balance sheet for real estate leases currently classified as operating leases.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments. The ASU introduces new guidance which makes substantive changes to the accounting for credit losses. The ASU introduces the CECL model which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and held-to-maturity debt securities. The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable forecasts. The ASU also modifies the current OTTI model for available for sale debt securities requiring an estimate of expected credit losses only when the fair value of an available for sale debt security is below its amortized cost. Credit losses on available for sale debt securities will be limited to the difference between the security's amortized cost basis and its fair value. The ASU also provides for a simplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. The amendments in this ASU are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2019. Management has not yet completed its evaluation of the impact of adoption of this ASU and is not currently able to reasonably estimate the impact of adoption on the consolidated financial statements; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the ALLL. It is possible that the impact will be material to the Company's consolidated financial position, and results of operations.
operations, and cash flows will not be material.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU provide guidance on eight specific cash flow classification issues where there has been diversity in practice. The guidance in the ASU that is expected to be most applicable to the Company requires: (1) cash payments for debt prepayment or extinguishment costs to be classified as cash outflows for financing activities, (2) proceeds from settlement of insurance claims to be classified on the basis of the nature of the loss and (3) cash proceeds from settlement of bank-owned life insurance policies to be classified as cash flows from investing activities. Cash payments for premiums on bank-owned life insurance may be classified as cash flows for investing activities, operating activities or a combination thereof. The amendments in this ASU are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2017 and will be applied retrospectively to each period presented. The provisions of this ASU are generally consistent with the Company's current practice and adoption is not expected to materially impact the Company's consolidated cash flows.
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 September 30, | | Nine Months Ended September 30, |
| c | 2021 | | 2020 | | 2021 | | 2020 | | |
| Basic earnings per common share: | | | | | | | | | |
| Numerator: | | | | | | | | | |
| Net income | $ | 86,941 | | | $ | 66,559 | | | $ | 289,729 | | | $ | 112,116 | | | |
| Distributed and undistributed earnings allocated to participating securities | (1,112) | | | (2,896) | | | (3,701) | | | (4,816) | | | |
| Income allocated to common stockholders for basic earnings per common share | $ | 85,829 | | | $ | 63,663 | | | $ | 286,028 | | | $ | 107,300 | | | |
| Denominator: | | | | | | | | | |
| Weighted average common shares outstanding | 92,053,714 | | | 92,405,239 | | | 92,787,824 | | | 92,918,030 | | | |
| Less average unvested stock awards | (1,208,304) | | | (1,183,564) | | | (1,218,416) | | | (1,164,317) | | | |
| Weighted average shares for basic earnings per common share | 90,845,410 | | | 91,221,675 | | | 91,569,408 | | | 91,753,713 | | | |
| Basic earnings per common share | $ | 0.94 | | | $ | 0.70 | | | $ | 3.12 | | | $ | 1.17 | | | |
| Diluted earnings per common share: | | | | | | | | | |
| Numerator: | | | | | | | | | |
| Income allocated to common stockholders for basic earnings per common share | $ | 85,829 | | | $ | 63,663 | | | $ | 286,028 | | | $ | 107,300 | | | |
| Adjustment for earnings reallocated from participating securities | 2 | | | 4 | | | 5 | | | 3 | | | |
| Income used in calculating diluted earnings per common share | $ | 85,831 | | | $ | 63,667 | | | $ | 286,033 | | | $ | 107,303 | | | |
| Denominator: | | | | | | | | | |
| Weighted average shares for basic earnings per common share | 90,845,410 | | | 91,221,675 | | | 91,569,408 | | | 91,753,713 | | | |
| Dilutive effect of stock options and certain shared-based awards | 182,448 | | | 171,054 | | | 152,675 | | | 142,008 | | | |
| Weighted average shares for diluted earnings per common share | 91,027,858 | | | 91,392,729 | | | 91,722,083 | | | 91,895,721 | | | |
| Diluted earnings per common share | $ | 0.94 | | | $ | 0.70 | | | $ | 3.12 | | | $ | 1.17 | | | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| c | 2017 | | 2016 | | 2017 |
| 2016 |
| Basic earnings per common share: | | | | | |
| | |
| Numerator: | | | | | |
| | |
| Net income | $ | 67,779 |
| | $ | 50,848 |
| | $ | 196,479 |
| | $ | 162,447 |
|
| Distributed and undistributed earnings allocated to participating securities | (2,525 | ) | | (2,031 | ) | | (7,331 | ) | | (6,522 | ) |
| Income allocated to common stockholders for basic earnings per common share | $ | 65,254 |
| | $ | 48,817 |
| | $ | 189,148 |
| | $ | 155,925 |
|
| Denominator: | | | | | | | |
| Weighted average common shares outstanding | 106,809,381 |
| | 104,153,018 |
| | 106,488,396 |
| | 104,077,932 |
|
| Less average unvested stock awards | (1,101,485 | ) | | (1,150,268 | ) | | (1,102,381 | ) | | (1,165,509 | ) |
| Weighted average shares for basic earnings per common share | 105,707,896 |
| | 103,002,750 |
| | 105,386,015 |
| | 102,912,423 |
|
| Basic earnings per common share | $ | 0.62 |
| | $ | 0.47 |
| | $ | 1.79 |
| | $ | 1.52 |
|
| Diluted earnings per common share: | | | | | | | |
| Numerator: | | | | | | | |
| Income allocated to common stockholders for basic earnings per common share | $ | 65,254 |
| | $ | 48,817 |
| | $ | 189,148 |
| | $ | 155,925 |
|
| Adjustment for earnings reallocated from participating securities | 6 |
| | (81 | ) | | 21 |
| | (264 | ) |
| Income used in calculating diluted earnings per common share | $ | 65,260 |
| | $ | 48,736 |
| | $ | 189,169 |
| | $ | 155,661 |
|
| Denominator: | | |
|
| | | | |
| Weighted average shares for basic earnings per common share | 105,707,896 |
| | 103,002,750 |
| | 105,386,015 |
| | 102,912,423 |
|
| Dilutive effect of stock options and executive share-based awards | 365,286 |
| | 558,304 |
| | 479,459 |
| | 699,977 |
|
| Weighted average shares for diluted earnings per common share | 106,073,182 |
| | 103,561,054 |
| | 105,865,474 |
| | 103,612,400 |
|
| Diluted earnings per common share | $ | 0.62 |
| | $ | 0.47 |
| | $ | 1.79 |
| | $ | 1.50 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
Included in participating securities above arePotentially dilutive unvested shares and 3,023,314 dividend equivalent rightsshare units totaling 1,205,136 and 1,206,358 were outstanding at September 30, 20172021 and 2020, respectively, but excluded from the calculation of diluted earnings per common share because their inclusion would have been anti-dilutive.
Participating securities for the three and nine months ended September 30, 2020 included 3,023,314 dividend equivalent rights that were issued in conjunction with the IPO of the Company's common stock. These dividend equivalent rights expireexpired in February 2021 and, participatewhile outstanding, participated in dividends on a one-for-one basis.
The following potentially dilutive securities were outstanding at
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017 and 2016, but excluded from the calculation of diluted earnings per common share for the periods indicated because their inclusion would have been anti-dilutive: 2021
|
| | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Unvested shares and share units | 1,111,300 |
| | 1,296,848 |
| | 1,111,300 |
| | 1,296,848 |
|
| Stock options and warrants | 1,850,279 |
| | 1,851,376 |
| | 1,850,279 |
| | 1,851,376 |
|
Note 3 Investment Securities
Investment securities include investment securities available for sale, marketable equity securities, and investment securities held to maturity. The investment securities portfolio consisted of the following at the dates indicated (in thousands):
| | | | September 30, 2017 | | September 30, 2021 |
| | Amortized Cost | | Gross Unrealized | | Fair Value | | Amortized Cost | | Gross Unrealized | | Carrying Value (1) |
| | | Gains | | Losses | | | | Gains | | Losses | |
| Investment securities available for sale: | | Investment securities available for sale: | | | | | | | |
| U.S. Treasury securities | $ | 24,969 |
| | $ | — |
| | $ | (12 | ) | | $ | 24,957 |
| U.S. Treasury securities | $ | 134,367 | | | $ | 359 | | | $ | (2,536) | | | $ | 132,190 | |
| U.S. Government agency and sponsored enterprise residential MBS | 2,332,616 |
| | 16,762 |
| | (691 | ) | | 2,348,687 |
| U.S. Government agency and sponsored enterprise residential MBS | 2,096,869 | | | 17,272 | | | (5,000) | | | 2,109,141 | |
| U.S. Government agency and sponsored enterprise commercial MBS | 139,966 |
| | 1,067 |
| | (1,813 | ) | | 139,220 |
| U.S. Government agency and sponsored enterprise commercial MBS | 899,014 | | | 5,845 | | | (8,068) | | | 896,791 | |
| | Private label residential MBS and CMOs | 507,381 |
| | 20,812 |
| | (335 | ) | | 527,858 |
| Private label residential MBS and CMOs | 2,169,425 | | | 6,804 | | | (4,151) | | | 2,172,078 | |
| Private label commercial MBS | 1,140,465 |
| | 14,646 |
| | (1,510 | ) | | 1,153,601 |
| Private label commercial MBS | 2,582,704 | | | 14,174 | | | (5,558) | | | 2,591,320 | |
| Single family rental real estate-backed securities | 566,635 |
| | 6,425 |
| | (112 | ) | | 572,948 |
| |
| Single family real estate-backed securities | | Single family real estate-backed securities | 613,796 | | | 8,633 | | | (1,128) | | | 621,301 | |
| Collateralized loan obligations | 695,414 |
| | 4,905 |
| | — |
| | 700,319 |
| Collateralized loan obligations | 975,308 | | | 599 | | | (2,372) | | | 973,535 | |
| Non-mortgage asset-backed securities | 80,255 |
| | 2,382 |
| | — |
| | 82,637 |
| Non-mortgage asset-backed securities | 274,709 | | | 3,363 | | | — | | | 278,072 | |
| Preferred stocks | 60,716 |
| | 10,000 |
| | — |
| | 70,716 |
| |
| State and municipal obligations | 666,013 |
| | 14,370 |
| | (3,368 | ) | | 677,015 |
| State and municipal obligations | 207,918 | | | 17,486 | | | — | | | 225,404 | |
| SBA securities | 572,540 |
| | 14,152 |
| | (17 | ) | | 586,675 |
| SBA securities | 199,192 | | | 2,145 | | | (3,096) | | | 198,241 | |
| Other debt securities | 4,056 |
| | 4,783 |
| | — |
| | 8,839 |
| |
| | $ | 6,791,026 |
| | $ | 110,304 |
| | $ | (7,858 | ) | | $ | 6,893,472 |
| |
| | | 10,153,302 | | | $ | 76,680 | | | $ | (31,909) | | | 10,198,073 | |
| Investment securities held to maturity | | Investment securities held to maturity | 10,000 | | | | | | | 10,000 | |
| | | $ | 10,163,302 | | | 10,208,073 | |
| Marketable equity securities | | Marketable equity securities | | | 121,618 | |
| | | $ | 10,329,691 | |
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
| | | | | | | | | | | | | | | | | | | | | | | |
| |
| December 31, 2020 |
| | Amortized Cost | | Gross Unrealized | | Carrying Value (1) |
| | | Gains | | Losses | |
| Investment securities available for sale: | | | | | | | |
| U.S. Treasury securities | $ | 79,919 | | | $ | 1,307 | | | $ | (375) | | | $ | 80,851 | |
| U.S. Government agency and sponsored enterprise residential MBS | 2,389,450 | | | 19,148 | | | (3,028) | | | 2,405,570 | |
| U.S. Government agency and sponsored enterprise commercial MBS | 531,724 | | | 9,297 | | | (1,667) | | | 539,354 | |
| | | | | | | |
| Private label residential MBS and CMOs | 982,890 | | | 16,274 | | | (561) | | | 998,603 | |
Private label commercial MBS(2) | 2,514,271 | | | 24,931 | | | (12,848) | | | 2,526,354 | |
| Single family real estate-backed securities | 636,069 | | | 14,877 | | | (58) | | | 650,888 | |
| Collateralized loan obligations | 1,148,724 | | | 285 | | | (8,735) | | | 1,140,274 | |
| Non-mortgage asset-backed securities | 246,597 | | | 6,898 | | | (234) | | | 253,261 | |
| State and municipal obligations | 213,743 | | | 21,966 | | | — | | | 235,709 | |
| SBA securities | 233,387 | | | 2,093 | | | (3,935) | | | 231,545 | |
| | 8,976,774 | | | $ | 117,076 | | | $ | (31,441) | | | 9,062,409 | |
| Investment securities held to maturity | 10,000 | | | | | | | 10,000 | |
| $ | 8,986,774 | | | | | | | 9,072,409 | |
| Marketable equity securities | | | | | | | 104,274 | |
| | | | | | | $ | 9,176,683 | |
|
| | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | Amortized Cost | | Gross Unrealized | | Fair Value |
| | | Gains | | Losses | |
| U.S. Treasury securities | $ | 4,999 |
| | $ | 6 |
| | $ | — |
| | $ | 5,005 |
|
| U.S. Government agency and sponsored enterprise residential MBS | 1,513,028 |
| | 15,922 |
| | (1,708 | ) | | 1,527,242 |
|
| U.S. Government agency and sponsored enterprise commercial MBS | 126,754 |
| | 670 |
| | (2,838 | ) | | 124,586 |
|
| Private label residential MBS and CMOs | 334,167 |
| | 42,939 |
| | (2,008 | ) | | 375,098 |
|
| Private label commercial MBS | 1,180,386 |
| | 9,623 |
| | (2,385 | ) | | 1,187,624 |
|
| Single family rental real estate-backed securities | 858,339 |
| | 4,748 |
| | (1,836 | ) | | 861,251 |
|
| Collateralized loan obligations | 487,678 |
| | 868 |
| | (1,250 | ) | | 487,296 |
|
| Non-mortgage asset-backed securities | 187,660 |
| | 2,002 |
| | (2,926 | ) | | 186,736 |
|
| Preferred stocks | 76,180 |
| | 12,027 |
| | (4 | ) | | 88,203 |
|
| State and municipal obligations | 705,884 |
| | 3,711 |
| | (11,049 | ) | | 698,546 |
|
| SBA securities | 517,129 |
| | 7,198 |
| | (421 | ) | | 523,906 |
|
| Other debt securities | 3,999 |
| | 4,092 |
| | — |
| | 8,091 |
|
| | $ | 5,996,203 |
| | $ | 103,806 |
| | $ | (26,425 | ) | | $ | 6,073,584 |
|
(1)At fair value except for securities held to maturity.
(2)Amortized cost is net of ACL totaling $0.4 million at December 31, 2020.
Investment securities held to maturity at September 30, 20172021 and December 31, 20162020 consisted of one1 State of Israel bond with a carrying value of $10 million. Fair value approximated carrying valuematuring in 2024. Accrued interest receivable on investments totaled $15 million and $17 million at September 30, 20172021 and December 31, 2016. The bond matures2020, respectively, and is included in 2024.other assets in the accompanying consolidated balance sheets.
At September 30, 2017,2021, contractual maturities of investment securities available for sale, adjusted for anticipated prepayments of mortgage-backed and other pass-through securities,when applicable, were as follows (in thousands):
|
| | | | | | | |
| | Amortized Cost | | Fair Value |
| Due in one year or less | $ | 684,986 |
| | $ | 697,034 |
|
| Due after one year through five years | 3,363,698 |
| | 3,406,609 |
|
| Due after five years through ten years | 2,252,239 |
| | 2,282,220 |
|
| Due after ten years | 429,387 |
| | 436,893 |
|
| Preferred stocks with no stated maturity | 60,716 |
| | 70,716 |
|
| | $ | 6,791,026 |
| | $ | 6,893,472 |
|
Based on the Company’s assumptions, the estimated weighted average life of the investment portfolio as of September 30, 2017 was 4.9 years. The effective duration of the investment portfolio as of September 30, 2017 was 1.7 years. The model results are based on assumptions that may differ from actual results. | | | | | | | | | | | |
| Amortized Cost | | Fair Value |
| Due in one year or less | $ | 1,564,449 | | | $ | 1,567,135 | |
| Due after one year through five years | 6,235,028 | | | 6,273,032 | |
| Due after five years through ten years | 1,955,731 | | | 1,959,443 | |
| Due after ten years | 398,094 | | | 398,463 | |
| | $ | 10,153,302 | | | $ | 10,198,073 | |
The carrying value of securities pledged as collateral for FHLB advances, public deposits, interest rate swaps and to secure borrowing capacity at the FRB totaled $2.5$4.3 billion and $1.8$4.1 billion at September 30, 20172021 and December 31, 2016,2020, respectively.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
The following table provides information about gains and losses on investment securities available for sale for the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Proceeds from sale of investment securities available for sale | $ | 399,430 |
|
| $ | 259,571 |
| | $ | 827,353 |
| | $ | 753,756 |
|
| | | | | | | | |
| Gross realized gains | $ | 28,261 |
| | $ | 3,471 |
| | $ | 30,553 |
| | $ | 10,528 |
|
| Gross realized losses | (1,330 | ) | | — |
| | (1,359 | ) | | — |
|
| Net realized gain | 26,931 |
| | 3,471 |
| | 29,194 |
| | 10,528 |
|
| OTTI | — |
| | (463 | ) | | — |
| | (463 | ) |
| Gain on investment securities available for sale, net | $ | 26,931 |
| | $ | 3,008 |
| | $ | 29,194 |
| | $ | 10,065 |
|
During the three and nine months ended September 30, 2016, OTTI was recognized on two positions in one private label commercial MBS. These positions were in unrealized loss positions at September 30, 2016 and the Company intended to sell the security before recovery of the amortized cost basis. | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
| Proceeds from sale of investment securities AFS | $ | 548,290 | | | $ | 383,420 | | | $ | 1,348,346 | | | $ | 930,757 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Gross realized gains on investment securities AFS | $ | 821 | | | $ | 2,689 | | | $ | 7,683 | | | $ | 9,945 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Gross realized losses on investment securities AFS | (6) | | | (426) | | | (60) | | | (429) | | | |
| | | | | | | | | |
| | | | | | | | | |
| Net realized gain | 815 | | | 2,263 | | | 7,623 | | | 9,516 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Net unrealized gains (losses) on marketable equity securities recognized in earnings | (1,479) | | | 4,918 | | | (1,767) | | | 1,048 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Gain (loss) on investment securities, net | $ | (664) | | | $ | 7,181 | | | $ | 5,856 | | | $ | 10,564 | | | |
The following tables present the aggregate fair value and the aggregate amount by which amortized cost exceeded fair value for investment securities available for sale 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):
| | | | | | | | | | | | | | | | September 30, 2021 |
| | September 30, 2017 | |
| | Less than 12 Months | | 12 Months or Greater | | Total | | Less than 12 Months | | 12 Months or Greater | | Total |
| | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses |
| U.S. Treasury securities | $ | 24,957 |
| | $ | (12 | ) | | $ | — |
| | $ | — |
| | $ | 24,957 |
| | $ | (12 | ) | U.S. Treasury securities | $ | 73,498 | | | $ | (1,042) | | | $ | 23,270 | | | $ | (1,494) | | | $ | 96,768 | | | $ | (2,536) | |
| U.S. Government agency and sponsored enterprise residential MBS | 460,806 |
| | (425 | ) | | 9,544 |
| | (266 | ) | | 470,350 |
| | (691 | ) | U.S. Government agency and sponsored enterprise residential MBS | 284,161 | | | (1,594) | | | 346,052 | | | (3,406) | | | 630,213 | | | (5,000) | |
| U.S. Government agency and sponsored enterprise commercial MBS | 55,152 |
| | (1,783 | ) | | 14,270 |
| | (30 | ) | | 69,422 |
| | (1,813 | ) | U.S. Government agency and sponsored enterprise commercial MBS | 190,385 | | | (3,552) | | | 193,049 | | | (4,516) | | | 383,434 | | | (8,068) | |
| | Private label residential MBS and CMOs | 72,557 |
| | (217 | ) | | 5,820 |
| | (118 | ) | | 78,377 |
| | (335 | ) | Private label residential MBS and CMOs | 879,710 | | | (3,509) | | | 63,252 | | | (642) | | | 942,962 | | | (4,151) | |
| Private label commercial MBS | 124,664 |
| | (1,510 | ) | | — |
| | — |
| | 124,664 |
| | (1,510 | ) | Private label commercial MBS | 535,218 | | | (3,285) | | | 194,206 | | | (2,273) | | | 729,424 | | | (5,558) | |
| Single family rental real estate-backed securities | 14,708 |
| | (112 | ) | | — |
| | — |
| | 14,708 |
| | (112 | ) | |
| State and municipal obligations | 184,082 |
| | (3,368 | ) | | — |
| | — |
| | 184,082 |
| | (3,368 | ) | |
| Single family real estate-backed securities | | Single family real estate-backed securities | 106,371 | | | (1,128) | | | — | | | — | | | 106,371 | | | (1,128) | |
| Collateralized loan obligations | | Collateralized loan obligations | 183,365 | | | (588) | | | 415,992 | | | (1,784) | | | 599,357 | | | (2,372) | |
| | SBA securities | — |
| | — |
| | 18,229 |
| | (17 | ) | | 18,229 |
| | (17 | ) | SBA securities | — | | | — | | | 106,956 | | | (3,096) | | | 106,956 | | | (3,096) | |
| | $ | 936,926 |
| | $ | (7,427 | ) | | $ | 47,863 |
| | $ | (431 | ) | | $ | 984,789 |
| | $ | (7,858 | ) | |
| | | | $ | 2,252,708 | | | $ | (14,698) | | | $ | 1,342,777 | | | $ | (17,211) | | | $ | 3,595,485 | | | $ | (31,909) | |
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
| | | | | | | | | | | | | | | | December 31, 2020 |
| | December 31, 2016 | |
| | Less than 12 Months | | 12 Months or Greater | | Total | | Less than 12 Months | | 12 Months or Greater | | Total |
| | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses | | Fair Value | | Unrealized Losses |
| U.S. Treasury securities | | U.S. Treasury securities | $ | 24,369 | | | $ | (375) | | | $ | — | | | $ | — | | | $ | 24,369 | | | $ | (375) | |
| U.S. Government agency and sponsored enterprise residential MBS | $ | 191,463 |
| | $ | (628 | ) | | $ | 112,391 |
| | $ | (1,080 | ) | | $ | 303,854 |
| | $ | (1,708 | ) | U.S. Government agency and sponsored enterprise residential MBS | 220,179 | | | (320) | | | 370,727 | | | (2,708) | | | 590,906 | | | (3,028) | |
| U.S. Government agency and sponsored enterprise commercial MBS | 89,437 |
| | (2,838 | ) | | — |
| | — |
| | 89,437 |
| | (2,838 | ) | U.S. Government agency and sponsored enterprise commercial MBS | 152,233 | | | (1,412) | | | 44,255 | | | (255) | | | 196,488 | | | (1,667) | |
| | Private label residential MBS and CMOs | 122,142 |
| | (1,680 | ) | | 8,074 |
| | (328 | ) | | 130,216 |
| | (2,008 | ) | Private label residential MBS and CMOs | 141,407 | | | (561) | | | — | | | — | | | 141,407 | | | (561) | |
| Private label commercial MBS | 169,535 |
| | (2,370 | ) | | 24,985 |
| | (15 | ) | | 194,520 |
| | (2,385 | ) | Private label commercial MBS | 1,268,381 | | | (12,771) | | | 37,783 | | | (77) | | | 1,306,164 | | | (12,848) | |
| Single family rental real estate-backed securities | 139,867 |
| | (842 | ) | | 176,057 |
| | (994 | ) | | 315,924 |
| | (1,836 | ) | |
| Single family real estate-backed securities | | Single family real estate-backed securities | 28,758 | | | (58) | | | — | | | — | | | 28,758 | | | (58) | |
| Collateralized loan obligations | 69,598 |
| | (402 | ) | | 173,983 |
| | (848 | ) | | 243,581 |
| | (1,250 | ) | Collateralized loan obligations | 304,051 | | | (1,171) | | | 588,463 | | | (7,564) | | | 892,514 | | | (8,735) | |
| Non-mortgage asset-backed securities | 139,477 |
| | (2,926 | ) | | — |
| | — |
| | 139,477 |
| | (2,926 | ) | Non-mortgage asset-backed securities | — | | | — | | | 12,327 | | | (234) | | | 12,327 | | | (234) | |
| Preferred stocks | 10,087 |
| | (4 | ) | | — |
| | — |
| | 10,087 |
| | (4 | ) | |
| State and municipal obligations | 448,180 |
| | (11,049 | ) | | — |
| | — |
| | 448,180 |
| | (11,049 | ) | |
| | SBA securities | 4,204 |
| | (13 | ) | | 20,076 |
| | (408 | ) | | 24,280 |
| | (421 | ) | SBA securities | 26,240 | | | (298) | | | 104,598 | | | (3,637) | | | 130,838 | | | (3,935) | |
| | $ | 1,383,990 |
| | $ | (22,752 | ) | | $ | 515,566 |
| | $ | (3,673 | ) | | $ | 1,899,556 |
| | $ | (26,425 | ) | |
| | | | $ | 2,165,618 | | | $ | (16,966) | | | $ | 1,158,153 | | | $ | (14,475) | | | $ | 3,323,771 | | | $ | (31,441) | |
The Company monitors its investment securities available for sale for OTTIcredit loss impairment on an individual security basis. No securities were determined to be other-than-temporarilycredit loss impaired during the three and nine months ended September 30, 2017. The2021 and 2020. At September 30, 2021, the Company doesdid not intendhave an intent to sell securities that arewere in significant unrealized loss positions at September 30, 2017 and it iswas not more likely than not that the Company willwould be required to sell these securities before recovery of the amortized cost basis, which may be at maturity. In making this determination, the Company considered its current and projected liquidity position, its investment policy as to permissible holdings and concentration limits, regulatory requirements and other relevant factors.
At September 30, 2017, 542021, 176 securities available for sale were in unrealized loss positions. The unrealized losses are primarily attributable to changes in interest rates. The amount of impairment related to 2059 of these securities was considered insignificant both individually and in the aggregate, totaling approximately $237 thousand$0.5 million 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:
For U.S. Government, U.S. government agency and U.S. government sponsored enterprise residentialMBSand commercial MBS
At September 30, 2017, eight U.S. Government agency and sponsored enterprise residential MBS and four U.S. Government agency and sponsored enterprise commercial MBS were in unrealized loss positions. For five fixed rate securities, the impairment was primarily attributable to an increase in medium and long-term market interest rates subsequent to the date of acquisition. For the remaining seven variable rate securities, the amount of impairment was less than 1% of amortized cost. The timely payment of principal and interest on these securities is explicitly or implicitly guaranteed by the U.S. Government. GivenAs such, there is an assumption of zero credit loss and the expectationCompany expects to recover the entire amortized cost basis of timely paymentthese securities. For all other AFS securities in a significant unrealized loss position, the Company performed an analysis by first determining the present value of principal and interest, the impairments were consideredcash flows expected to be temporary.
Private label residentialMBSandCMOs
At September 30, 2017, five private label residential MBScollected, based on stressed economic scenarios more severe than our reasonable and CMOs were in unrealized loss positions, primarily as a result of an increase in medium and long-term market interest rates subsequentsupportable economic forecast. The present value was then compared to acquisition.the amortized cost basis to identify possible impairment. The amount of impairment of each of the individual securities was less than 3% of amortized cost. These securities were assessed for OTTI using credit and prepayment behavioral models that incorporate CUSIP level constant default rates,analysis incorporated assumptions about voluntary prepayment rates, collateral defaults, delinquencies, severity, recovery lag and loss severityother relevant factors. Our analysis also considered the structural characteristics of each security and delinquency assumptions. The results of these assessments were not indicativethe level of credit losses related to any of these securities as of September 30, 2017. Given the limited severity of impairment and the expectation of timely recovery of outstanding principal, the impairments were considered to be temporary.
enhancement provided by that structure.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
Note 4 Loans and Allowance for Credit Losses
Private label commercialMBSLoans consisted of the following at the dates indicated (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 | | December 31, 2020 |
| | | |
| | Total | | Percent of Total | | Total | | Percent of Total |
| Residential and other consumer: | | | | | | | |
| 1-4 single family residential | $ | 5,907,393 | | | 25.9 | % | | $ | 4,922,836 | | | 20.6 | % |
| Government insured residential | 1,913,497 | | | 8.4 | % | | 1,419,074 | | | 5.9 | % |
| Other consumer loans | 6,334 | | | — | % | | 6,312 | | | 0.1 | % |
| | 7,827,224 | | | 34.3 | % | | 6,348,222 | | | 26.6 | % |
| Commercial: | | | | | | | |
| Multi-family | 1,181,935 | | | 5.2 | % | | 1,639,201 | | | 6.9 | % |
| Non-owner occupied commercial real estate | 4,537,078 | | | 19.9 | % | | 4,963,273 | | | 20.8 | % |
| Construction and land | 163,988 | | | 0.7 | % | | 293,307 | | | 1.2 | % |
| Owner occupied commercial real estate | 2,012,376 | | | 8.8 | % | | 2,000,770 | | | 8.4 | % |
| Commercial and industrial | 4,166,914 | | | 18.3 | % | | 4,447,383 | | | 18.6 | % |
| PPP | 332,548 | | | 1.5 | % | | 781,811 | | | 3.3 | % |
| Pinnacle | 932,865 | | | 4.1 | % | | 1,107,386 | | | 4.6 | % |
| Bridge - franchise finance | 396,589 | | | 1.7 | % | | 549,733 | | | 2.3 | % |
| Bridge - equipment finance | 379,446 | | | 1.7 | % | | 475,548 | | | 2.0 | % |
| Mortgage warehouse lending | 877,006 | | | 3.8 | % | | 1,259,408 | | | 5.3 | % |
| | 14,980,745 | | | 65.7 | % | | 17,517,820 | | | 73.4 | % |
| Total loans | 22,807,969 | | | 100.0 | % | | 23,866,042 | | | 100.0 | % |
| Allowance for credit losses | (159,615) | | | | | (257,323) | | | |
| Loans, net | $ | 22,648,354 | | | | | $ | 23,608,719 | | | |
Premiums, discounts and deferred fees and costs, excluding the non-credit related discount on PCD loans, totaled $58 million and $39 million at September 30, 2021 and December 31, 2020, respectively. The amortized cost basis of residential PCD loans and the related amount of non-credit discount was $93 million and $86 million, respectively at September 30, 2021 and $118 million and $115 million, respectively at December 31, 2020. The ACL related to PCD residential loans was $0.6 million and $2.8 million at September 30, 2021 and December 31, 2020, respectively.
Included in the table above are direct or sales type finance leases totaling $653 million and $670 million at September 30, 2021 and December 31, 2020, respectively. The amount of income recognized from direct or sales type finance leases for the three and nine months ended September 30, 2021 and 2020 totaled $4.4 million, $14.2 million, $5.3 million and $16.0 million, respectively and is included in interest income on loans in the consolidated statements of income.
During the three and nine months ended September 30, 2021 and 2020, the Company purchased 1-4 single family residential loans totaling $1.4 billion, $3.7 billion, $997 million and $2.1 billion, respectively. Purchases for the three and nine months ended September 30, 2021 and 2020 included $306 million, $1.3 billion, $418 million and $947 million, respectively, of government insured residential loans.
At September 30, 2017, four private label commercial MBS were in unrealized loss positions. The amount2021 and December 31, 2020, the Company had pledged loans with a carrying value of impairment of each of the individual securities was less than 3% of amortized cost. The unrealized losses were primarily attributable to increases in market interest rates since the purchase of the securities. These securities were assessedapproximately $10.4 billion and $9.6 billion, respectively, as security for OTTI using creditFHLB advances and prepayment behavioral 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 securitiesFederal Reserve discount window capacity.
At September 30, 2017, two single family rental real estate-backed securities were2021 and December 31, 2020, accrued interest receivable on loans, net of related ACL at December 31, 2020, totaled $97 million and $99 million, respectively, and is included in unrealized loss positions. The unrealized losses were primarily due to increasesother assets in market interest rates since the purchase of the securities.accompanying consolidated balance sheets. The amount of impairment of each ofinterest income reversed on non-accrual loans was not material for the individual securities was less than 2% of amortized cost. Management's analysis of the credit characteristics, including loan-to-valuethree and debt service coverage ratios, and levels of subordination for each of the securities is not indicative of projected credit losses. Given the limited severity of impairment and the absence of projected credit losses, the impairments were considered to be temporary.
State and municipal obligations
Atnine months ended September 30, 2017, 11 state2021 and municipal obligations were in unrealized loss positions. The amount of impairment of each of the individual securities was less than 5% of amortized cost. All of the securities are rated investment grade by nationally recognized statistical ratings organizations. Management's evaluation of these securities for OTTI also encompassed the review of credit scores and analysis provided by a third party firm specializing in the analysis and credit review of municipal securities. Given the absence of expected credit losses and management's ability and intent to hold the securities until recovery, the impairments were considered to be temporary.
2020.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
Note 4 Loans and Allowance for Loan and Lease Lossescredit losses
The Company segregates itsACL was determined utilizing a 2-year reasonable and supportable forecast period based on a single economic scenario. Activity in the ACL is summarized below for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| | 2021 | | 2020 | | |
| | Residential and Other Consumer | | Commercial | | Total | | Residential and Other Consumer | | Commercial | | Total | | | | | | |
| Beginning balance | $ | 11,909 | | | $ | 163,733 | | | $ | 175,642 | | | $ | 10,695 | | | $ | 255,428 | | | $ | 266,123 | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Provision (recovery) | (2,127) | | | (9,427) | | | (11,554) | | | 5,331 | | | 22,315 | | | 27,646 | | | | | | | |
| Charge-offs | (290) | | | (4,528) | | | (4,818) | | | — | | | (23,770) | | | (23,770) | | | | | | | |
| Recoveries | 4 | | | 341 | | | 345 | | | 4 | | | 4,125 | | | 4,129 | | | | | | | |
| Ending balance | $ | 9,496 | | | $ | 150,119 | | | $ | 159,615 | | | $ | 16,030 | | | $ | 258,098 | | | $ | 274,128 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| | 2021 | | | | 2020 |
| | Residential and Other Consumer | | Commercial | | Total | | | | | | | | Residential and Other Consumer | | Commercial | | Total |
| Beginning balance | $ | 18,719 | | | $ | 238,604 | | | $ | 257,323 | | | | | | | | | $ | 11,154 | | | $ | 97,517 | | | $ | 108,671 | |
| Impact of adoption of ASU 2016-13 | — | | | — | | | — | | | | | | | | | 8,098 | | | 19,207 | | | 27,305 | |
| Balance after adoption of ASU 2016-13 | 18,719 | | | 238,604 | | | 257,323 | | | | | | | | | 19,252 | | | 116,724 | | | 135,976 | |
| Provision (recovery) | (8,929) | | | (56,594) | | | (65,523) | | | | | | | | | (3,241) | | | 184,336 | | | 181,095 | |
| Charge-offs | (304) | | | (34,908) | | | (35,212) | | | | | | | | | (31) | | | (50,723) | | | (50,754) | |
| Recoveries | 10 | | | 3,017 | | | 3,027 | | | | | | | | | 50 | | | 7,761 | | | 7,811 | |
| Ending balance | $ | 9,496 | | | $ | 150,119 | | | $ | 159,615 | | | | | | | | | $ | 16,030 | | | $ | 258,098 | | | $ | 274,128 | |
The decrease in the ACL from December 31, 2020 to September 30, 2021 related primarily to the recovery of credit losses recorded during the nine months ended September 30, 2021. The most significant factor contributing to the recovery of provision was an improving economic forecast. The increase in the ACL from January 1, 2020, the date of initial adoption of ASU 2016-13, to September 30, 2020 was reflective of the impact of the COVID-19 pandemic on current economic conditions, the economic forecast and on individual borrowers and portfolio sub-segments.
The following table presents the components of the provision for credit losses for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Amount related to funded portion of loans | $ | (11,554) | | | $ | 27,646 | | | $ | (65,523) | | | $ | 181,095 | |
| Amount related to off-balance sheet credit exposures | 280 | | | (93) | | | (640) | | | (2,700) | |
| Amount related to accrued interest receivable | (568) | | | 1,063 | | | (838) | | | 1,063 | |
| Amount related to AFS debt securities | — | | | 616 | | | (364) | | | 616 | |
| Total provision for (recovery of) credit losses | $ | (11,842) | | | $ | 29,232 | | | $ | (67,365) | | | $ | 180,074 | |
Credit quality information
The credit quality of the loan portfolio between coveredhas been and non-covered loans. Non-covered loans include loans originated sincemay continue to be impacted by the FSB acquisitionCOVID-19 crisis, its impact on the economy broadly and commercialmore specifically on the Company's individual borrowers. While economic conditions continue to improve, some level of uncertainty continues to exist about the full extent of this impact and consumer loans acquiredthe trajectory of recovery. The ultimate impact may not be fully reflected in the FSB Acquisition for which loss share coverage has terminated. Covered loans are further segregated between ACI loans and non-ACI loans.
Loans consistedsome of the following atcredit quality indicators disclosed below. Delinquency statistics may not be fully reflective of the dates indicated (dollars in thousands):impact of the COVID-19 crisis due to deferral and modification programs offered to affected borrowers.
|
| | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| |
| | Covered Loans | | | | Percent of Total |
| | Non-Covered Loans | | ACI | | Non-ACI | | Total | |
| Residential and other consumer: | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | $ | 3,958,205 |
| | $ | 470,300 |
| | $ | 28,589 |
| | $ | 4,457,094 |
| | 21.7 | % |
| Home equity loans and lines of credit | 1,644 |
| | 5,640 |
| | 37,764 |
| | 45,048 |
| | 0.2 | % |
| Other consumer loans | 20,166 |
| | — |
| | — |
| | 20,166 |
| | 0.1 | % |
| | 3,980,015 |
| | 475,940 |
| | 66,353 |
| | 4,522,308 |
| | 22.0 | % |
| Commercial: | | | | | | | | | |
| Multi-family | 3,358,801 |
| | — |
| | — |
| | 3,358,801 |
| | 16.3 | % |
| Non-owner occupied commercial real estate | 4,183,275 |
| | — |
| | — |
| | 4,183,275 |
| | 20.4 | % |
| Construction and land | 271,994 |
| | — |
| | — |
| | 271,994 |
| | 1.3 | % |
| Owner occupied commercial real estate | 1,959,464 |
| | — |
| | — |
| | 1,959,464 |
| | 9.5 | % |
| Commercial and industrial | 3,900,290 |
| | — |
| | — |
| | 3,900,290 |
| | 19.0 | % |
| Commercial lending subsidiaries | 2,374,193 |
| | — |
| | — |
| | 2,374,193 |
| | 11.5 | % |
| | 16,048,017 |
| | — |
| | — |
| | 16,048,017 |
| | 78.0 | % |
| Total loans | 20,028,032 |
| | 475,940 |
| | 66,353 |
| | 20,570,325 |
| | 100.0 | % |
| Premiums, discounts and deferred fees and costs, net | 44,422 |
| | — |
| | (4,317 | ) | | 40,105 |
| | |
| Loans including premiums, discounts and deferred fees and costs | 20,072,454 |
| | 475,940 |
| | 62,036 |
| | 20,610,430 |
| | |
| Allowance for loan and lease losses | (153,725 | ) | | (1,812 | ) | | (3,036 | ) | | (158,573 | ) | | |
| Loans, net | $ | 19,918,729 |
| | $ | 474,128 |
| | $ | 59,000 |
| | $ | 20,451,857 |
| | |
14
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
|
| | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| |
| | Covered Loans | | | | Percent of Total |
| | Non-Covered Loans | | ACI | | Non-ACI | | Total | |
| Residential and other consumer: | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | $ | 3,422,425 |
| | $ | 532,348 |
| | $ | 36,675 |
| | $ | 3,991,448 |
| | 20.6 | % |
| Home equity loans and lines of credit | 1,120 |
| | 3,894 |
| | 47,629 |
| | 52,643 |
| | 0.3 | % |
| Other consumer loans | 24,365 |
| | — |
| | — |
| | 24,365 |
| | 0.1 | % |
| | 3,447,910 |
| | 536,242 |
| | 84,304 |
| | 4,068,456 |
| | 21.0 | % |
| Commercial: | | | | | | | | | |
| Multi-family | 3,824,973 |
| | — |
| | — |
| | 3,824,973 |
| | 19.8 | % |
| Non-owner occupied commercial real estate | 3,739,235 |
| | — |
| | — |
| | 3,739,235 |
| | 19.3 | % |
| Construction and land | 311,436 |
| | — |
| | — |
| | 311,436 |
| | 1.6 | % |
| Owner occupied commercial real estate | 1,736,858 |
| | — |
| | — |
| | 1,736,858 |
| | 9.0 | % |
| Commercial and industrial | 3,391,614 |
| | — |
| | — |
| | 3,391,614 |
| | 17.5 | % |
| Commercial lending subsidiaries | 2,280,685 |
| | — |
| | — |
| | 2,280,685 |
| | 11.8 | % |
| | 15,284,801 |
| | — |
| | — |
| | 15,284,801 |
| | 79.0 | % |
| Total loans | 18,732,711 |
| | 536,242 |
| | 84,304 |
| | 19,353,257 |
| | 100.0 | % |
| Premiums, discounts and deferred fees and costs, net | 48,641 |
| | — |
| | (6,504 | ) | | 42,137 |
| | |
| Loans including premiums, discounts and deferred fees and costs | 18,781,352 |
| | 536,242 |
| | 77,800 |
| | 19,395,394 |
| | |
| Allowance for loan and lease losses | (150,853 | ) | | — |
| | (2,100 | ) | | (152,953 | ) | | |
| Loans, net | $ | 18,630,499 |
| | $ | 536,242 |
| | $ | 75,700 |
| | $ | 19,242,441 |
| | |
Included in non-coveredCredit quality of loans above are $38 millionheld for investment is continuously monitored by dedicated residential credit risk management and $47 million at September 30, 2017commercial portfolio management functions. The Company also has a workout and December 31, 2016, respectively,recovery department that monitors the credit quality of ACI commercial loans acquired in the FSB Acquisition.
Through two subsidiaries, the Bank provides commercialcriticized and municipal equipment and franchise financing utilizing both loan and lease structures. At September 30, 2017 and December 31, 2016, the commercial lending subsidiaries portfolio included a net investment in direct financing leases of $680 million and $643 million, respectively.
During the three and nine months ended September 30, 2017 and 2016, the Company purchased 1-4 single family residential loans totaling $312 million, $949 million, $355 million and $937 million, respectively.
At September 30, 2017, the Company had pledged real estate loans with UPB of approximately $10.5 billion and recorded investment of approximately $9.9 billion as security for FHLB advances.
At September 30, 2017 and December 31, 2016, the UPB of ACI loans was $1.2 billion and $1.5 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 nine months ended September 30, 2017 and the year ended December 31, 2016 were as follows (in thousands):
|
| | | |
| Balance at December 31, 2015 | $ | 902,565 |
|
| Reclassifications from non-accretable difference | 76,751 |
|
| Accretion | (303,931 | ) |
| Balance at December 31, 2016 | 675,385 |
|
| Reclassifications from non-accretable difference | 72,827 |
|
| Accretion | (226,251 | ) |
| Balance at September 30, 2017 | $ | 521,961 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
Covered 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 September 30, | | Nine Months Ended September 30, |
| | 2016 | | 2017 | | 2016 |
| UPB of loans sold | $ | 61,406 |
| | $ | 123,737 |
| | $ | 176,958 |
|
| | | | | | |
| Cash proceeds, net of transaction costs | $ | 37,047 |
| | $ | 98,404 |
| | $ | 120,537 |
|
| Recorded investment in loans sold | 47,080 |
| | 99,986 |
| | 135,432 |
|
| Loss on sale of covered loans, net | $ | (10,033 | ) | | $ | (1,582 | ) | | $ | (14,895 | ) |
| | | | | | |
| Gain on FDIC indemnification, net | $ | 8,026 |
| | $ | 1,266 |
| | $ | 11,958 |
|
There was no sale of covered loans for the three months ended September 30, 2017.
Allowance for loan and lease losses
Activity in the ALLL is summarized as follows for the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| | Residential and Other Consumer | | Commercial | | Unallocated | | Total | | Residential and Other Consumer | | Commercial | | Total |
| Beginning balance | $ | 13,550 |
| | $ | 142,098 |
| | $ | — |
| | $ | 155,648 |
| | $ | 12,415 |
| | $ | 123,303 |
| | $ | 135,718 |
|
| Provision for (recovery of) loan losses: | | | | | | | | | | | | | |
| Covered loans | 268 |
| | (7 | ) | | — |
| | 261 |
| | (430 | ) | | (15 | ) | | (445 | ) |
| Non-covered loans | 363 |
| | 32,230 |
| | 5,000 |
| | 37,593 |
| | 1,974 |
| | 22,879 |
| | 24,853 |
|
| Total provision | 631 |
| | 32,223 |
| | 5,000 |
| | 37,854 |
| | 1,544 |
| | 22,864 |
| | 24,408 |
|
| Charge-offs: | | | | | | | | | | | | | |
| Covered loans | — |
| | — |
| | — |
| | — |
| | (247 | ) | | — |
| | (247 | ) |
| Non-covered loans | — |
| | (36,028 | ) | | — |
| | (36,028 | ) | | — |
| | (6,615 | ) | | (6,615 | ) |
| Total charge-offs | — |
| | (36,028 | ) | | — |
| | (36,028 | ) | | (247 | ) | | (6,615 | ) | | (6,862 | ) |
| Recoveries: | | | | | | | | | | | | | |
| Covered loans | 31 |
| | 7 |
| | — |
| | 38 |
| | 9 |
| | 15 |
| | 24 |
|
| Non-covered loans | 8 |
| | 1,053 |
| | — |
| | 1,061 |
| | 5 |
| | 1,183 |
| | 1,188 |
|
| Total recoveries | 39 |
| | 1,060 |
| | — |
| | 1,099 |
| | 14 |
| | 1,198 |
| | 1,212 |
|
| Ending balance | $ | 14,220 |
| | $ | 139,353 |
| | $ | 5,000 |
| | $ | 158,573 |
| | $ | 13,726 |
| | $ | 140,750 |
| | $ | 154,476 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | Residential and Other Consumer | | Commercial | | Unallocated | | Total | | Residential and Other Consumer | | Commercial | | Total |
| Beginning balance | $ | 11,503 |
| | $ | 141,450 |
| | $ | — |
| | $ | 152,953 |
| | $ | 16,211 |
| | $ | 109,617 |
| | $ | 125,828 |
|
| Provision for (recovery of) loan losses: | | | | | | | | | | | | | |
| Covered loans | 2,738 |
| | (45 | ) | | — |
| | 2,693 |
| | (1,074 | ) | | (45 | ) | | (1,119 | ) |
| Non-covered loans | (52 | ) | | 55,932 |
| | 5,000 |
| | 60,880 |
| | (420 | ) | | 43,988 |
| | 43,568 |
|
| Total provision | 2,686 |
| | 55,887 |
| | 5,000 |
| | 63,573 |
| | (1,494 | ) | | 43,943 |
| | 42,449 |
|
| Charge-offs: | | | | | | | | | | | | | |
| Covered loans | (55 | ) | | — |
| | — |
| | (55 | ) | | (1,086 | ) | | — |
| | (1,086 | ) |
| Non-covered loans | — |
| | (61,034 | ) | | — |
| | (61,034 | ) | | — |
| | (15,748 | ) | | (15,748 | ) |
| Total charge-offs | (55 | ) | | (61,034 | ) | | — |
| | (61,089 | ) | | (1,086 | ) | | (15,748 | ) | | (16,834 | ) |
| Recoveries: | | | | | | | | | | | | | |
| Covered loans | 65 |
| | 45 |
| | — |
| | 110 |
| | 77 |
| | 45 |
| | 122 |
|
| Non-covered loans | 21 |
| | 3,005 |
| | — |
| | 3,026 |
| | 18 |
| | 2,893 |
| | 2,911 |
|
| Total recoveries | 86 |
| | 3,050 |
| | — |
| | 3,136 |
| | 95 |
| | 2,938 |
| | 3,033 |
|
| Ending balance | $ | 14,220 |
| | $ | 139,353 |
| | $ | 5,000 |
| | $ | 158,573 |
| | $ | 13,726 |
| | $ | 140,750 |
| | $ | 154,476 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
The following table presents information about the balance of the ALLL and related loans at the dates indicated (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Residential and Other Consumer | | Commercial | | Unallocated | | Total | | Residential and Other Consumer | | Commercial | | Total |
| Allowance for loan and lease losses: | | | | | | | | | |
| | |
| | |
|
| Ending balance | $ | 14,220 |
| | $ | 139,353 |
| | $ | 5,000 |
| | $ | 158,573 |
| | $ | 11,503 |
| | $ | 141,450 |
| | $ | 152,953 |
|
| Covered loans: | | | | | | | | | | | | | |
| Ending balance | $ | 4,848 |
| | $ | — |
| | $ | — |
| | $ | 4,848 |
| | $ | 2,100 |
| | $ | — |
| | $ | 2,100 |
|
| Ending balance: non-ACI loans individually evaluated for impairment | $ | 1,024 |
| | $ | — |
| | $ | — |
| | $ | 1,024 |
| | $ | 529 |
| | $ | — |
| | $ | 529 |
|
| Ending balance: non-ACI loans collectively evaluated for impairment | $ | 2,012 |
| | $ | — |
| | $ | — |
| | $ | 2,012 |
| | $ | 1,571 |
| | $ | — |
| | $ | 1,571 |
|
| Ending balance: ACI loans | $ | 1,812 |
| | $ | — |
| | $ | — |
| | $ | 1,812 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Non-covered loans: | | | | | | | | | | | | | |
| Ending balance | $ | 9,372 |
| | $ | 139,353 |
| | $ | 5,000 |
| | $ | 153,725 |
| | $ | 9,403 |
| | $ | 141,450 |
| | $ | 150,853 |
|
| Ending balance: new loans individually evaluated for impairment | $ | 71 |
| | $ | 23,902 |
| | $ | — |
| | $ | 23,973 |
| | $ | 12 |
| | $ | 19,229 |
| | $ | 19,241 |
|
| Ending balance: new loans collectively evaluated for impairment | $ | 9,301 |
| | $ | 115,451 |
| | $ | 5,000 |
| | $ | 129,752 |
| | $ | 9,391 |
| | $ | 122,221 |
| | $ | 131,612 |
|
| Ending balance: ACI loans | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Loans: | | | | | | | 0 |
| | | | | | |
| Covered loans: | | | | | | | | | | | | | |
| Ending balance | $ | 537,976 |
| | $ | — |
| | $ | — |
| | $ | 537,976 |
| | $ | 614,042 |
| | $ | — |
| | $ | 614,042 |
|
| Ending balance: non-ACI loans individually evaluated for impairment | $ | 11,721 |
| | $ | — |
| | $ | — |
| | $ | 11,721 |
| | $ | 12,396 |
| | $ | — |
| | $ | 12,396 |
|
| Ending balance: non-ACI loans collectively evaluated for impairment | $ | 50,315 |
| | $ | — |
| | $ | — |
| | $ | 50,315 |
| | $ | 65,404 |
| | $ | — |
| | $ | 65,404 |
|
| Ending balance: ACI loans | $ | 475,940 |
| | $ | — |
| | $ | — |
| | $ | 475,940 |
| | $ | 536,242 |
| | $ | — |
| | $ | 536,242 |
|
| Non-covered loans: | | | | | | | | | | | | | |
| Ending balance | $ | 4,033,612 |
| | $ | 16,038,842 |
| | $ | — |
| | $ | 20,072,454 |
| | $ | 3,495,775 |
| | $ | 15,285,577 |
| | $ | 18,781,352 |
|
| Ending balance: new loans individually evaluated for impairment | $ | 911 |
| | $ | 210,364 |
| | $ | — |
| | $ | 211,275 |
| | $ | 561 |
| | $ | 176,932 |
| | $ | 177,493 |
|
| Ending balance: new loans collectively evaluated for impairment | $ | 4,032,701 |
| | $ | 15,790,546 |
| | $ | — |
| | $ | 19,823,247 |
| | $ | 3,495,207 |
| | $ | 15,061,707 |
| | $ | 18,556,914 |
|
| Ending balance: ACI loans | $ | — |
| | $ | 37,932 |
| | $ | — |
| | $ | 37,932 |
| | $ | 7 |
| | $ | 46,938 |
| | $ | 46,945 |
|
The ALLL on residential and other consumer ACI loans at September 30, 2017 represents impairment of one pool of ACI home equityclassified loans and lines of credit.an independent internal credit review function.
The ALLL at September 30, 2017 included $5.4 million related to the impact of Hurricanes Irma and Harvey, which made landfall during the three months ended September 30, 2017. The ALLL includes $0.4 million related to commercial loans that were downgraded during the three months ended September 30, 2017 as a result of the hurricanes and a $5.0 million unallocated qualitative allowance.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
Credit quality information
Loans other than ACIindicators for residential loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreements. Commercial relationships on non-accrual status with committed balances greater than or equal to $1.0 million that have internal risk ratings of substandard or doubtful, as well as loans that have been modified in TDRs, are individually evaluated for impairment. Other commercial relationships on non-accrual status with committed balances under $1.0 million may also be evaluated individually for impairment, at management's discretion. The likelihood of loss related to loans assigned internal risk ratings of substandard or doubtful is considered elevated due to their identified credit weaknesses. Factors considered by management in evaluating impairment include payment status, financial condition of the borrower, collateral value, and other factors impacting the probability of collecting scheduled principal and interest payments when due.
ACI loans or pools are considered to be impaired when it is probable that the Company will be unable to collect all of the expected cash flows at acquisition (as adjusted for any additional cash flows expected to be collected arising from changes in estimates after acquisition), other than due to changes in interest rate indices and prepayment assumptions.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
The table below presents information about loans or ACI pools identified as impaired at the dates indicated (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Recorded Investment | | UPB | | Related Specific Allowance | | Recorded Investment | | UPB | | Related Specific Allowance |
| Non-covered loans: | |
| | |
| | |
| | |
| | |
| | |
|
| With no specific allowance recorded: | |
| | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | $ | 27 |
| | $ | 32 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Non-owner occupied commercial real estate | 9,041 |
| | 9,224 |
| | — |
| | 510 |
| | 512 |
| | — |
|
| Construction and land | 1,238 |
| | 1,238 |
| | — |
| | 1,238 |
| | 1,238 |
| | — |
|
| Owner occupied commercial real estate | 16,786 |
| | 16,949 |
| | — |
| | 16,834 |
| | 16,894 |
| | — |
|
Commercial and industrial |
|
| |
|
| |
|
| |
|
| |
|
| | |
| Taxi medallion loans | 20,320 |
| | 20,321 |
| | — |
| | 18,107 |
| | 18,107 |
| | — |
|
| Other commercial and industrial | 1,081 |
| | 1,095 |
| | — |
| | 6,172 |
| | 6,172 |
| | — |
|
| Commercial lending subsidiaries | 12,810 |
| | 12,815 |
| | — |
| | 10,620 |
| | 10,510 |
| | — |
|
| With a specific allowance recorded: | | | | | | | | | | | |
| 1-4 single family residential | 884 |
| | 863 |
| | 71 |
| | 561 |
| | 546 |
| | 12 |
|
| Owner occupied commercial real estate | 3,961 |
| | 3,943 |
| | 2,994 |
| | 491 |
| | 513 |
| | 263 |
|
| Commercial and industrial |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
| Taxi medallion loans | 100,252 |
| | 100,255 |
| | 13,117 |
| | 73,131 |
| | 73,147 |
| | 5,948 |
|
| Other commercial and industrial | 41,297 |
| | 41,292 |
| | 7,313 |
| | 29,452 |
| | 29,463 |
| | 9,168 |
|
| Commercial lending subsidiaries | 3,578 |
| | 3,553 |
| | 478 |
| | 21,712 |
| | 21,605 |
| | 3,850 |
|
| Total: | | | | | | | | | | | |
| Residential and other consumer | $ | 911 |
| | $ | 895 |
| | $ | 71 |
| | $ | 561 |
| | $ | 546 |
| | $ | 12 |
|
| Commercial | 210,364 |
| | 210,685 |
| | 23,902 |
| | 178,267 |
| | 178,161 |
| | 19,229 |
|
| | $ | 211,275 |
| | $ | 211,580 |
| | $ | 23,973 |
| | $ | 178,828 |
| | $ | 178,707 |
| | $ | 19,241 |
|
| Covered loans: | | | | | | | | | | | |
| Non-ACI loans: | | | | | | | |
| | |
| | |
|
| With no specific allowance recorded: | | | | | | | |
| | |
| | |
|
| 1-4 single family residential | $ | 102 |
| | $ | 118 |
| | $ | — |
| | $ | 1,169 |
| | $ | 1,391 |
| | $ | — |
|
| Home equity loans and lines of credit | 1,312 |
| | 1,324 |
| | — |
| | 2,255 |
| | 2,286 |
| | — |
|
| With a specific allowance recorded: | | | | | | | | | | | |
| 1-4 single family residential | 2,221 |
| | 2,579 |
| | 208 |
| | 1,272 |
| | 1,514 |
| | 181 |
|
| Home equity loans and lines of credit | 8,086 |
| | 8,163 |
| | 816 |
| | 7,700 |
| | 7,804 |
| | 348 |
|
| | $ | 11,721 |
| | $ | 12,184 |
| | $ | 1,024 |
| | $ | 12,396 |
| | $ | 12,995 |
| | $ | 529 |
|
| ACI loans: | | | | | | | |
| | |
| | |
|
| With a specific allowance recorded: | | | | | | | |
| | |
| | |
|
| Home equity loans and lines of credit | $ | 5,640 |
| | $ | 27,731 |
| | $ | 1,812 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Non-covered impaired loans include commercial real estate ACI loans modified in TDRs with a carrying value of $1.3 million as of December 31, 2016. Interest income recognized on impaired loans and pools for the three and nine months ended September 30, 2017 was approximately $2.9 million and $8.3 million, respectively. Interest income recognized on impaired loans for the three and nine months ended September 30, 2016 was not material.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
The following tables present the average recorded investment in impaired loans or ACI pools for the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| | | | Covered Loans | | | | Covered Loans |
| | Non-Covered Loans | | Non-ACI Loans | | ACI Loans | | Non-Covered Loans | | Non-ACI
Loans | | ACI Loans |
| Residential and other consumer: | |
| | |
| | | | | | |
| | |
| 1-4 single family residential | $ | 962 |
| | $ | 2,304 |
| | $ | — |
| | $ | 344 |
| | $ | 3,001 |
| | $ | — |
|
| Home equity loans and lines of credit | — |
| | 9,533 |
| | 5,166 |
| | — |
| | 9,551 |
| | — |
|
| | 962 |
| | $ | 11,837 |
| | $ | 5,166 |
| | 344 |
| | $ | 12,552 |
| | $ | — |
|
| Commercial: | | | | | | | | | | | |
| Multi-family | 1,359 |
| | | | | | — |
| | | | |
| Non-owner occupied commercial real estate | 8,216 |
| | | | | | 506 |
| | | | |
| Construction and land | 2,797 |
| | | | | | 1,285 |
| | | | |
| Owner occupied commercial real estate | 20,579 |
| | | | | | 18,231 |
| | | | |
| Commercial and industrial | | | | | | |
|
| | | | |
| Taxi medallion loans | 123,867 |
| | | | | | 56,125 |
| | | | |
| Other commercial and industrial | 42,479 |
| | | | | | 48,143 |
| | | | |
| Commercial lending subsidiaries | 21,398 |
| | | | | | 13,873 |
| | | | |
| | 220,695 |
| | | | | | 138,163 |
| | | |
|
|
| | $ | 221,657 |
| | | | | | $ | 138,507 |
| | | |
|
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | | | Covered Loans | | | | Covered Loans |
| | Non-Covered Loans | | Non-ACI Loans | | ACI Loans | | Non-Covered Loans | | Non-ACI
Loans | | ACI Loans |
| Residential and other consumer: | |
| | |
| | | | | | |
| | |
| 1-4 single family residential | $ | 800 |
| | $ | 2,369 |
| | $ | — |
| | $ | 251 |
| | $ | 3,186 |
| | $ | — |
|
| Home equity loans and lines of credit | — |
| | 9,638 |
| | 4,209 |
| | — |
| | 8,920 |
| | — |
|
| | 800 |
| | $ | 12,007 |
| | $ | 4,209 |
| | 251 |
| | $ | 12,106 |
| | $ | — |
|
| Commercial: | | | | | | | | | | | |
| Multi-family | 1,816 |
| | | | | | — |
| | | | |
| Non-owner occupied commercial real estate | 4,056 |
| | | | | | 776 |
| | | | |
| Construction and land | 3,317 |
| | | | | | 650 |
| | | | |
| Owner occupied commercial real estate | 18,872 |
| | | | | | 13,711 |
| | | | |
| Commercial and industrial | | | | | | |
|
| | | | |
| Taxi medallion loans | 107,529 |
| | | | | | 30,977 |
| | | | |
| Other commercial and industrial | 43,308 |
| | | | | | 41,975 |
| | | | |
| Commercial lending subsidiaries | 27,202 |
| | | | | | 11,293 |
| | | | |
| | 206,100 |
| | | | | | 99,382 |
| | | |
|
|
| | $ | 206,900 |
| | | | | | $ | 99,633 |
| | | |
|
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
The following table presents the recorded investment in loans on non-accrual status as of the dates indicated (in thousands):
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Non-Covered Loans | | Covered
Non-ACI Loans | | Non-Covered Loans | | Covered Non-ACI Loans |
| Residential and other consumer: | |
| | |
| | |
| | |
|
| 1-4 single family residential | $ | 1,890 |
| | $ | 934 |
| | $ | 566 |
| | $ | 918 |
|
| Home equity loans and lines of credit | — |
| | 2,369 |
| | — |
| | 2,283 |
|
| Other consumer loans | 332 |
| | — |
| | 2 |
| | — |
|
| | 2,222 |
| | $ | 3,303 |
| | 568 |
| | $ | 3,201 |
|
| Commercial: | | | | | |
| | |
|
| Non-owner occupied commercial real estate | 9,930 |
| | | | 559 |
| |
|
|
| Construction and land | 1,238 |
| | | | 1,238 |
| |
|
|
| Owner occupied commercial real estate | 21,455 |
| | | | 19,439 |
| |
|
|
Commercial and industrial | | | | |
|
| |
|
|
| Taxi medallion loans | 120,572 |
| | | | 60,660 |
| | |
| Other commercial and industrial | 27,569 |
| | | | 16,036 |
| | |
| Commercial lending subsidiaries | 16,625 |
| | | | 32,645 |
| |
|
|
| | 197,389 |
| | | | 130,577 |
| |
|
|
| | $ | 199,611 |
| | | | $ | 131,145 |
| |
|
|
Non-covered loans contractually delinquent by 90 days or more and still accruing totaled $0.8 million and $1.6 million at September 30, 2017 and December 31, 2016, respectively. The amount of additional interest income that would have been recognized on non-accrual loans had they performed in accordance with their contractual terms was approximately $1.4 million and $3.7 million for the three and nine months ended September 30, 2017, respectively, and $1.1 million and $2.3 million for the three and nine months ended September 30, 2016, respectively.
Management considers delinquency status to be the most meaningful indicator of the credit quality of 1-4 single family residential home equity and other consumer loans, other than government insured residential loans. Delinquency statistics are updated at least monthly. See "Aging of loans" below for more information on the delinquency status of loans. Original LTV and original FICO scorescores are also important indicators of credit quality for the non-covered 1-4 single family residential portfolio. loans other than government insured loans. FICO scores are generally updated at least annually, and were most recently updated in the third quarter of 2021. LTVs are typically at origination since we do not routinely update residential appraisals. Substantially all of the government insured residential loans are government insured buyout loans, which the Company buys out of GNMA securitizations upon default. For these loans, traditional measures of credit quality are not particularly relevant considering the guaranteed nature of the loans and the underlying business model. Factors that impact risk inherent in the residential portfolio segment include national and regional economic conditions such as levels of unemployment and wages, as well as residential property values.
1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on delinquency status:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| Amortized Cost By Origination Year | | |
| 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| Current | $ | 2,121,916 | | | $ | 1,130,648 | | | $ | 427,557 | | | $ | 249,065 | | | $ | 390,596 | | | $ | 1,496,500 | | | $ | 5,816,282 | |
| 30 - 59 Days Past Due | 41,661 | | | 3,306 | | | 8,588 | | | 1,074 | | | 4,167 | | | 8,638 | | | 67,434 | |
| 60 - 89 Days Past Due | 4,159 | | | — | | | — | | | 1,160 | | | 887 | | | 1,123 | | | 7,329 | |
| 90 Days or More Past Due | — | | | — | | | 2,013 | | | 4,908 | | | 180 | | | 9,247 | | | 16,348 | |
| $ | 2,167,736 | | | $ | 1,133,954 | | | $ | 438,158 | | | $ | 256,207 | | | $ | 395,830 | | | $ | 1,515,508 | | | $ | 5,907,393 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Amortized Cost By Origination Year | | |
| 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total |
| Current | $ | 1,092,183 | | | $ | 645,993 | | | $ | 374,838 | | | $ | 611,377 | | | $ | 740,749 | | | $ | 1,392,192 | | | $ | 4,857,332 | |
| 30 - 59 Days Past Due | 17,826 | | | 5,741 | | | 2,564 | | | 927 | | | 2,913 | | | 18,880 | | | 48,851 | |
| 60 - 89 Days Past Due | 111 | | | 145 | | | 435 | | | — | | | 2,825 | | | 3,973 | | | 7,489 | |
| 90 Days or More Past Due | — | | | 807 | | | 1,762 | | | 53 | | | 1,027 | | | 5,515 | | | 9,164 | |
| $ | 1,110,120 | | | $ | 652,686 | | | $ | 379,599 | | | $ | 612,357 | | | $ | 747,514 | | | $ | 1,420,560 | | | $ | 4,922,836 | |
1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on LTV:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| Amortized Cost By Origination Year | | |
| LTV | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| Less than 61% | $ | 858,842 | | | $ | 421,863 | | | $ | 96,779 | | | $ | 61,697 | | | $ | 128,107 | | | $ | 522,024 | | | $ | 2,089,312 | |
| 61% - 70% | 592,153 | | | 293,563 | | | 103,415 | | | 62,702 | | | 75,334 | | | 383,202 | | | 1,510,369 | |
| 71% - 80% | 716,292 | | | 417,745 | | | 228,630 | | | 120,838 | | | 160,704 | | | 577,426 | | | 2,221,635 | |
| More than 80% | 449 | | | 783 | | | 9,334 | | | 10,970 | | | 31,685 | | | 32,856 | | | 86,077 | |
| $ | 2,167,736 | | | $ | 1,133,954 | | | $ | 438,158 | | | $ | 256,207 | | | $ | 395,830 | | | $ | 1,515,508 | | | $ | 5,907,393 | |
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Amortized Cost By Origination Year | | |
| LTV | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total |
| Less than 61% | $ | 395,977 | | | $ | 143,273 | | | $ | 82,199 | | | $ | 174,223 | | | $ | 286,092 | | | $ | 487,487 | | | $ | 1,569,251 | |
| 61% - 70 % | 298,941 | | | 151,633 | | | 92,928 | | | 119,381 | | | 184,119 | | | 341,159 | | | 1,188,161 | |
| 71% - 80% | 413,003 | | | 344,998 | | | 181,852 | | | 271,605 | | | 258,931 | | | 565,781 | | | 2,036,170 | |
| More than 80% | 2,199 | | | 12,782 | | | 22,620 | | | 47,148 | | | 18,372 | | | 26,133 | | | 129,254 | |
| $ | 1,110,120 | | | $ | 652,686 | | | $ | 379,599 | | | $ | 612,357 | | | $ | 747,514 | | | $ | 1,420,560 | | | $ | 4,922,836 | |
1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on FICO score:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| Amortized Cost By Origination Year | | |
| FICO | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
| 760 or greater | $ | 1,671,392 | | | $ | 861,916 | | | $ | 265,526 | | | $ | 140,129 | | | $ | 285,009 | | | $ | 1,036,788 | | | $ | 4,260,760 | |
| 720 - 759 | 404,557 | | | 201,050 | | | 99,390 | | | 56,658 | | | 63,460 | | | 245,708 | | | 1,070,823 | |
| 719 or less | 91,787 | | | 70,988 | | | 73,242 | | | 59,420 | | | 47,361 | | | 233,012 | | | 575,810 | |
| $ | 2,167,736 | | | $ | 1,133,954 | | | $ | 438,158 | | | $ | 256,207 | | | $ | 395,830 | | | $ | 1,515,508 | | | $ | 5,907,393 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Amortized Cost By Origination Year | | |
| FICO | 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | Total |
| 760 or greater | $ | 843,199 | | | $ | 435,582 | | | $ | 225,292 | | | $ | 451,304 | | | $ | 549,119 | | | $ | 956,254 | | | $ | 3,460,750 | |
| 720 - 759 | 223,831 | | | 128,875 | | | 84,602 | | | 102,859 | | | 130,592 | | | 256,703 | | | 927,462 | |
| 719 or less | 43,090 | | | 88,229 | | | 69,705 | | | 58,194 | | | 67,803 | | | 207,603 | | | 534,624 | |
| $ | 1,110,120 | | | $ | 652,686 | | | $ | 379,599 | | | $ | 612,357 | | | $ | 747,514 | | | $ | 1,420,560 | | | $ | 4,922,836 | |
Credit quality indicators for commercial loans
Factors that impact risk inherent in commercial portfolio segments include but are not limited to levels of economic activity, health of the national and regional economy, industry trends, patterns of and trends in customer behavior that influence demand for our borrowers' products and services, and commercial real estate values. Internal risk ratings are considered the most meaningful indicator of credit quality for commercial loans. Internal risk ratings are generally indicative of the likelihood that a borrower will default, are a key factor in identifyinginfluencing the level and nature of ongoing monitoring of loans that are individually evaluated for impairment and may impact management’s estimates of loss factors used in determining the amountestimation of the ALLL.ACL. Internal risk ratings are updated on a continuous basis. Generally, relationships with balances in excess of defined thresholds, ranging from $1 million to $3 million, are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. Since the onset of the COVID-19 pandemic, risk ratings have been re-evaluated for a substantial portion of the commercial portfolio, with a focus on portfolio segments we initially identified for enhanced monitoring and loans that have been modified or for which we granted temporary payment deferrals. Loans exhibiting potential credit weaknesses that deserve management’s close attention and that if left uncorrected maycould result in deterioration of the repayment capacity of the borrowerprospects at some future date if not checked or corrected are categorized as special mention. Loans with well-defined credit weaknesses, including payment defaults, declining collateral values, frequent overdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow from current operations, project cost overruns, unreasonable construction delays, past due real estate taxes or exhausted interest reserves, are assigned an internal risk rating of substandard. A loan with a weakness so severe that collection in full is highly questionable or improbable, but because of certain reasonably specific pending factors has not been charged off, will be assigned an internal risk rating of doubtful.
Commercial credit exposure based on internal risk rating: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| Amortized Cost By Origination Year | | Revolving Loans | | |
| 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | | Total |
| Multi-Family | | | | | | | | | | | | | | | |
| Pass | $ | 60,124 | | | $ | 167,678 | | | $ | 243,968 | | | $ | 107,512 | | | $ | 117,869 | | | $ | 251,710 | | | $ | 38,387 | | | $ | 987,248 | |
| Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Substandard | — | | | 8,184 | | | 42,757 | | | 18,343 | | | 34,732 | | | 90,671 | | | — | | | 194,687 | |
| | | | | | | | | | | | | | | |
| Total Multi-Family | $ | 60,124 | | | $ | 175,862 | | | $ | 286,725 | | | $ | 125,855 | | | $ | 152,601 | | | $ | 342,381 | | | $ | 38,387 | | | $ | 1,181,935 | |
| | | | | | | | | | | | | | | |
| Non-owner occupied commercial real estate | | | | | | | | | | | | | | | |
| Pass | $ | 398,519 | | | $ | 526,409 | | | $ | 1,012,963 | | | $ | 633,432 | | | $ | 391,987 | | | $ | 877,262 | | | $ | 53,325 | | | $ | 3,893,897 | |
| Special mention | — | | | — | | | 24,495 | | | 13,100 | | | — | | | 7,822 | | | — | | | 45,417 | |
| Substandard | 3,030 | | | 7,946 | | | 143,729 | | | 43,000 | | | 85,275 | | | 314,784 | | | — | | | 597,764 | |
| | | | | | | | | | | | | | | |
| Total non-owner occupied commercial real estate | $ | 401,549 | | | $ | 534,355 | | | $ | 1,181,187 | | | $ | 689,532 | | | $ | 477,262 | | | $ | 1,199,868 | | | $ | 53,325 | | | $ | 4,537,078 | |
| | | | | | | | | | | | | | | |
| Construction and Land | | | | | | | | | | | | | | | |
| Pass | $ | 9,544 | | | $ | 22,921 | | | $ | 89,499 | | | $ | 9,039 | | | $ | 8,575 | | | $ | 264 | | | $ | 5,114 | | | $ | 144,956 | |
| Special mention | — | | | — | | | 1,929 | | | — | | | — | | | — | | | — | | | 1,929 | |
| Substandard | — | | | 1,445 | | | 5,323 | | | 1,336 | | | — | | | 8,999 | | | — | | | 17,103 | |
| | | | | | | | | | | | | | | |
| Total Construction and Land | $ | 9,544 | | | $ | 24,366 | | | $ | 96,751 | | | $ | 10,375 | | | $ | 8,575 | | | $ | 9,263 | | | $ | 5,114 | | | $ | 163,988 | |
| | | | | | | | | | | | | | | |
| Owner occupied commercial real estate | | | | | | | | | | | | | | | |
| Pass | $ | 138,487 | | | $ | 225,624 | | | $ | 319,652 | | | $ | 237,123 | | | $ | 244,333 | | | $ | 561,513 | | | $ | 28,973 | | | $ | 1,755,705 | |
| Special mention | — | | | — | | | — | | | 3,668 | | | 1,591 | | | 12,003 | | | — | | | 17,262 | |
| Substandard | — | | | 5,402 | | | 24,129 | | | 26,875 | | | 47,731 | | | 135,272 | | | — | | | 239,409 | |
| | | | | | | | | | | | | | | |
| Total owner occupied commercial real estate | $ | 138,487 | | | $ | 231,026 | | | $ | 343,781 | | | $ | 267,666 | | | $ | 293,655 | | | $ | 708,788 | | | $ | 28,973 | | | $ | 2,012,376 | |
| | | | | | | | | | | | | | | |
| Commercial and industrial | | | | | | | | | | | | | | | |
| Pass | $ | 493,016 | | | $ | 487,985 | | | $ | 571,746 | | | $ | 176,729 | | | $ | 167,868 | | | $ | 188,154 | | | $ | 1,603,519 | | | $ | 3,689,017 | |
| Special mention | — | | | 118 | | | 51,299 | | | 15,459 | | | 1,124 | | | 2,186 | | | 18,579 | | | 88,765 | |
| Substandard | 423 | | | 18,385 | | | 140,794 | | | 40,347 | | | 14,347 | | | 33,215 | | | 125,174 | | | 372,685 | |
| Doubtful | — | | | — | | | — | | | 8 | | | — | | | — | | | 16,439 | | | 16,447 | |
| Total commercial and industrial | $ | 493,439 | | | $ | 506,488 | | | $ | 763,839 | | | $ | 232,543 | | | $ | 183,339 | | | $ | 223,555 | | | $ | 1,763,711 | | | $ | 4,166,914 | |
| | | | | | | | | | | | | | | |
| PPP | | | | | | | | | | | | | | | |
| Pass | $ | 283,493 | | | $ | 49,055 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 332,548 | |
| Total PPP | $ | 283,493 | | | $ | 49,055 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 332,548 | |
| | | | | | | | | | | | | | | |
| Pinnacle | | | | | | | | | | | | | | | |
| Pass | $ | 109,831 | | | $ | 116,983 | | | $ | 89,980 | | | $ | 37,755 | | | $ | 186,890 | | | $ | 391,426 | | | $ | — | | | $ | 932,865 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total Pinnacle | $ | 109,831 | | | $ | 116,983 | | | $ | 89,980 | | | $ | 37,755 | | | $ | 186,890 | | | $ | 391,426 | | | $ | — | | | $ | 932,865 | |
| | | | | | | | | | | | | | | |
| Bridge - Franchise Finance | | | | | | | | | | | | | | | |
| Pass | $ | 27,368 | | | $ | 38,067 | | | $ | 109,508 | | | $ | 12,335 | | | $ | 7,453 | | | $ | 6,436 | | | $ | — | | | $ | 201,167 | |
| | | | | | | | | | | | | | | |
| Substandard | — | | | 23,269 | | | 71,433 | | | 59,967 | | | 22,552 | | | 18,201 | | | — | | | 195,422 | |
| | | | | | | | | | | | | | | |
| Total Bridge - Franchise Finance | $ | 27,368 | | | $ | 61,336 | | | $ | 180,941 | | | $ | 72,302 | | | $ | 30,005 | | | $ | 24,637 | | | $ | — | | | $ | 396,589 | |
| | | | | | | | | | | | | | | |
| Bridge - Equipment Finance | | | | | | | | | | | | | | | |
| Pass | $ | 60,174 | | | $ | 19,327 | | | $ | 120,195 | | | $ | 51,732 | | | $ | 30,553 | | | $ | 54,679 | | | $ | — | | | $ | 336,660 | |
| Special mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Substandard | — | | | — | | | 13,912 | | | 5,163 | | | 23,711 | | | — | | | — | | | 42,786 | |
| | | | | | | | | | | | | | | |
| Total Bridge - Equipment Finance | $ | 60,174 | | | $ | 19,327 | | | $ | 134,107 | | | $ | 56,895 | | | $ | 54,264 | | | $ | 54,679 | | | $ | — | | | $ | 379,446 | |
| | | | | | | | | | | | | | | |
| Mortgage Warehouse Lending | | | | | | | | | | | | | | | |
| Pass | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 877,006 | | | $ | 877,006 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total Mortgage Warehouse Lending | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 877,006 | | | $ | 877,006 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Amortized Cost By Origination Year | | Revolving Loans | | |
| 2020 | | 2019 | | 2018 | | 2017 | | 2016 | | Prior | | | Total |
| Multi-Family | | | | | | | | | | | | | | | |
| Pass | $ | 184,287 | | | $ | 264,254 | | | $ | 149,188 | | | $ | 206,768 | | | $ | 203,481 | | | $ | 313,758 | | | $ | 38,509 | | | $ | 1,360,245 | |
| Special mention | — | | | 390 | | | 10,985 | | | 11,260 | | | 8,400 | | | 5,300 | | | — | | | 36,335 | |
| Substandard | 8,393 | | | 25,239 | | | 9,645 | | | 15,125 | | | 43,920 | | | 140,299 | | | — | | | 242,621 | |
| | | | | | | | | | | | | | | |
| Total Multi-Family | $ | 192,680 | | | $ | 289,883 | | | $ | 169,818 | | | $ | 233,153 | | | $ | 255,801 | | | $ | 459,357 | | | $ | 38,509 | | | $ | 1,639,201 | |
| | | | | | | | | | | | | | | |
| Non-owner occupied commercial real estate | | | | | | | | | | | | | | | |
| Pass | $ | 532,567 | | | $ | 1,070,940 | | | $ | 706,730 | | | $ | 442,599 | | | $ | 462,201 | | | $ | 607,922 | | | $ | 99,627 | | | $ | 3,922,586 | |
| Special mention | 2,687 | | | 56,533 | | | 16,271 | | | 34,283 | | | 43,699 | | | 66,370 | | | — | | | 219,843 | |
| Substandard | 30,401 | | | 132,814 | | | 69,507 | | | 56,219 | | | 288,998 | | | 242,905 | | | — | | | 820,844 | |
| | | | | | | | | | | | | | | |
| Total non-owner occupied commercial real estate | $ | 565,655 | | | $ | 1,260,287 | | | $ | 792,508 | | | $ | 533,101 | | | $ | 794,898 | | | $ | 917,197 | | | $ | 99,627 | | | $ | 4,963,273 | |
| | | | | | | | | | | | | | | |
| Construction and Land | | | | | | | | | | | | | | | |
| Pass | $ | 20,860 | | | $ | 158,413 | | | $ | 9,003 | | | $ | 48,657 | | | $ | 26,845 | | | $ | 904 | | | $ | 297 | | | $ | 264,979 | |
| Special mention | — | | | — | | | 8,010 | | | 8,604 | | | 4,284 | | | — | | | — | | | 20,898 | |
| Substandard | 23 | | | 1,366 | | | 1,287 | | | — | | | 4,408 | | | 346 | | | — | | | 7,430 | |
| | | | | | | | | | | | | | | |
| Total Construction and Land | $ | 20,883 | | | $ | 159,779 | | | $ | 18,300 | | | $ | 57,261 | | | $ | 35,537 | | | $ | 1,250 | | | $ | 297 | | | $ | 293,307 | |
| | | | | | | | | | | | | | | |
| Owner occupied commercial real estate | | | | | | | | | | | | | | | |
| Pass | $ | 229,670 | | | $ | 263,138 | | | $ | 251,413 | | | $ | 232,171 | | | $ | 288,403 | | | $ | 361,130 | | | $ | 17,281 | | | $ | 1,643,206 | |
| Special mention | 2,593 | | | 42,485 | | | 11,789 | | | 41,799 | | | 19,839 | | | 20,347 | | | 17,985 | | | 156,837 | |
| Substandard | 2,615 | | | 24,673 | | | 21,114 | | | 36,411 | | | 26,997 | | | 79,860 | | | 9,057 | | | 200,727 | |
| | | | | | | | | | | | | | | |
| Total owner occupied commercial real estate | $ | 234,878 | | | $ | 330,296 | | | $ | 284,316 | | | $ | 310,381 | | | $ | 335,239 | | | $ | 461,337 | | | $ | 44,323 | | | $ | 2,000,770 | |
| | | | | | | | | | | | | | | |
| Commercial and industrial | | | | | | | | | | | | | | | |
| Pass | $ | 574,601 | | | $ | 759,384 | | | $ | 257,451 | | | $ | 250,787 | | | $ | 165,105 | | | $ | 47,086 | | | $ | 1,882,856 | | | $ | 3,937,270 | |
| Special mention | 10,387 | | | 49,471 | | | 17,096 | | | 2,451 | | | 20,838 | | | 2,977 | | | 66,385 | | | 169,605 | |
| Substandard | 21,122 | | | 120,275 | | | 34,045 | | | 14,073 | | | 29,907 | | | 31,478 | | | 89,436 | | | 340,336 | |
| Doubtful | — | | | — | | | — | | | — | | | — | | | 172 | | | — | | | 172 | |
| Total commercial and industrial | $ | 606,110 | | | $ | 929,130 | | | $ | 308,592 | | | $ | 267,311 | | | $ | 215,850 | | | $ | 81,713 | | | $ | 2,038,677 | | | $ | 4,447,383 | |
| | | | | | | | | | | | | | | |
| PPP | | | | | | | | | | | | | | | |
| Pass | $ | 781,811 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 781,811 | |
| Total PPP | $ | 781,811 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 781,811 | |
| | | | | | | | | | | | | | | |
| Pinnacle | | | | | | | | | | | | | | | |
| Pass | $ | 165,218 | | | $ | 118,139 | | | $ | 70,498 | | | $ | 208,568 | | | $ | 203,990 | | | $ | 340,973 | | | $ | — | | | $ | 1,107,386 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total Pinnacle | $ | 165,218 | | | $ | 118,139 | | | $ | 70,498 | | | $ | 208,568 | | | $ | 203,990 | | | $ | 340,973 | | | $ | — | | | $ | 1,107,386 | |
| | | | | | | | | | | | | | | |
| Bridge - Franchise Finance | | | | | | | | | | | | | | | |
| Pass | $ | 48,741 | | | $ | 91,509 | | | $ | 23,650 | | | $ | 8,745 | | | $ | 11,817 | | | $ | 6,416 | | | $ | — | | | $ | 190,878 | |
| Special mention | 2,693 | | | 54,271 | | | 5,175 | | | 4,699 | | | 2,088 | | | 2,667 | | | — | | | 71,593 | |
| Substandard | 36,515 | | | 101,772 | | | 84,064 | | | 33,213 | | | 16,706 | | | 3,297 | | | — | | | 275,567 | |
| Doubtful | — | | | — | | | 10,771 | | | — | | | 924 | | | — | | | — | | | 11,695 | |
| Total Bridge - Franchise Finance | $ | 87,949 | | | $ | 247,552 | | | $ | 123,660 | | | $ | 46,657 | | | $ | 31,535 | | | $ | 12,380 | | | $ | — | | | $ | 549,733 | |
| | | | | | | | | | | | | | | |
| Bridge - Equipment Finance | | | | | | | | | | | | | | | |
| Pass | $ | 23,684 | | | $ | 137,730 | | | $ | 66,004 | | | $ | 50,000 | | | $ | 36,963 | | | $ | 49,875 | | | $ | — | | | $ | 364,256 | |
| Special mention | — | | | — | | | 19,542 | | | 16,863 | | | — | | | — | | | — | | | 36,405 | |
| Substandard | — | | | 30,762 | | | 9,894 | | | 34,231 | | | — | | | — | | | — | | | 74,887 | |
| | | | | | | | | | | | | | | |
| Total Bridge - Equipment Finance | $ | 23,684 | | | $ | 168,492 | | | $ | 95,440 | | | $ | 101,094 | | | $ | 36,963 | | | $ | 49,875 | | | $ | — | | | $ | 475,548 | |
| | | | | | | | | | | | | | | |
| Mortgage Warehouse Lending | | | | | | | | | | | | | | | |
| Pass | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,259,408 | | | $ | 1,259,408 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Total Mortgage Warehouse Lending | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,259,408 | | | $ | 1,259,408 | |
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
At September 30, 2021, the balance of revolving loans converted to term loans was immaterial.
The following tables summarize key indicators of credit quality for the Company's commercial credit exposure based on internal risk rating, in aggregate, at the dates indicated (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 |
| |
| | Multi-Family | | Non-Owner Occupied Commercial Real Estate | | Construction
and Land | | Owner Occupied Commercial Real Estate | | Commercial and Industrial | | PPP | | Pinnacle | | Bridge - Franchise Finance | | Bridge - Equipment Finance | | Mortgage Warehouse Lending | | Total |
| Pass | $ | 987,248 | | | $ | 3,893,897 | | | $ | 144,956 | | | $ | 1,755,705 | | | $ | 3,689,017 | | | $ | 332,548 | | | $ | 932,865 | | | $ | 201,167 | | | $ | 336,660 | | | $ | 877,006 | | | $ | 13,151,069 | |
| Special mention | — | | | 45,417 | | | 1,929 | | | 17,262 | | | 88,765 | | | — | | | — | | | — | | | — | | | — | | | 153,373 | |
| Substandard - accruing | 183,669 | | | 549,306 | | | 12,388 | | | 217,217 | | | 263,582 | | | — | | | — | | | 163,853 | | | 42,786 | | | — | | | 1,432,801 | |
| Substandard non-accruing | 11,018 | | | 48,458 | | | 4,715 | | | 22,192 | | | 109,103 | | | — | | | — | | | 31,569 | | | — | | | — | | | 227,055 | |
| Doubtful | — | | | — | | | — | | | — | | | 16,447 | | | — | | | — | | | — | | | — | | | — | | | 16,447 | |
| | $ | 1,181,935 | | | $ | 4,537,078 | | | $ | 163,988 | | | $ | 2,012,376 | | | $ | 4,166,914 | | | $ | 332,548 | | | $ | 932,865 | | | $ | 396,589 | | | $ | 379,446 | | | $ | 877,006 | | | $ | 14,980,745 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| |
| | Multi-Family | | Non-Owner Occupied Commercial Real Estate | | Construction
and Land | | Owner Occupied Commercial Real Estate | | Commercial and Industrial | | PPP | | Pinnacle | | Bridge - Franchise Finance | | Bridge - Equipment Finance | | Mortgage Warehouse Lending | | Total |
| Pass | $ | 1,360,245 | | | $ | 3,922,586 | | | $ | 264,979 | | | $ | 1,643,206 | | | $ | 3,937,270 | | | $ | 781,811 | | | $ | 1,107,386 | | | $ | 190,878 | | | $ | 364,256 | | | $ | 1,259,408 | | | 14,832,025 | |
| Special mention | 36,335 | | | 219,843 | | | 20,898 | | | 156,837 | | | 169,605 | | | — | | | — | | | 71,593 | | | 36,405 | | | — | | | 711,516 | |
| Substandard -accruing | 218,532 | | | 756,825 | | | 2,676 | | | 177,575 | | | 285,925 | | | — | | | — | | | 242,234 | | | 74,887 | | | — | | | 1,758,654 | |
| Substandard non-accruing | 24,089 | | | 64,019 | | | 4,754 | | | 23,152 | | | 54,411 | | | — | | | — | | | 33,333 | | | — | | | — | | | 203,758 | |
| Doubtful | — | | | — | | | — | | | — | | | 172 | | | — | | | — | | | 11,695 | | | — | | | — | | | 11,867 | |
| | $ | 1,639,201 | | | $ | 4,963,273 | | | $ | 293,307 | | | $ | 2,000,770 | | | $ | 4,447,383 | | | $ | 781,811 | | | $ | 1,107,386 | | | $ | 549,733 | | | $ | 475,548 | | | $ | 1,259,408 | | | $ | 17,517,820 | |
Past Due and Non-Accrual Loans:
The following table presents an aging of loans at the dates indicated. Amounts include premiums, discounts and deferred fees and costsindicated (in thousands):
1-4 Single Family Residential credit exposure for non-covered loans, based on original LTV and FICO score: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 | | December 31, 2020 |
| | | |
| | Current | | 30 - 59
Days Past
Due | | 60 - 89
Days Past
Due | | 90 Days or
More Past
Due | | Total | | Current | | 30 - 59
Days Past
Due | | 60 - 89
Days Past
Due | | 90 Days or
More Past
Due | | Total |
| 1-4 single family residential | $ | 5,816,282 | | | $ | 67,434 | | | $ | 7,329 | | | $ | 16,348 | | | $ | 5,907,393 | | | $ | 4,857,332 | | | $ | 48,851 | | | $ | 7,489 | | | $ | 9,164 | | | $ | 4,922,836 | |
| Government insured residential | 1,015,185 | | | 127,471 | | | 93,714 | | | 677,127 | | | 1,913,497 | | | 722,367 | | | 77,883 | | | 56,495 | | | 562,329 | | | 1,419,074 | |
| | | | | | | | | | | | | | | | | | | |
| Other consumer loans | 6,278 | | | 41 | | | 15 | | | — | | | 6,334 | | | 6,022 | | | 37 | | | 22 | | | 231 | | | 6,312 | |
| Multi-family | 1,168,556 | | | 11,228 | | | — | | | 2,151 | | | 1,181,935 | | | 1,602,990 | | | 17,842 | | | — | | | 18,369 | | | 1,639,201 | |
| Non-owner occupied commercial real estate | 4,506,576 | | | 24 | | | 1,204 | | | 29,274 | | | 4,537,078 | | | 4,876,823 | | | 34,117 | | | 20,291 | | | 32,042 | | | 4,963,273 | |
| Construction and land | 162,754 | | | 888 | | | — | | | 346 | | | 163,988 | | | 288,032 | | | 4,530 | | | 399 | | | 346 | | | 293,307 | |
| Owner occupied commercial real estate | 1,995,853 | | | — | | | — | | | 16,523 | | | 2,012,376 | | | 1,971,475 | | | 10,756 | | | 3,203 | | | 15,336 | | | 2,000,770 | |
| Commercial and industrial | 4,136,750 | | | 14,422 | | | 701 | | | 15,041 | | | 4,166,914 | | | 4,366,009 | | | 52,117 | | | 552 | | | 28,705 | | | 4,447,383 | |
| PPP | 332,548 | | | — | | | — | | | — | | | 332,548 | | | 781,811 | | | — | | | — | | | — | | | 781,811 | |
| Pinnacle | 932,865 | | | — | | | — | | | — | | | 932,865 | | | 1,107,386 | | | — | | | — | | | — | | | 1,107,386 | |
| Bridge - franchise finance | 384,661 | | | — | | | 7,030 | | | 4,898 | | | 396,589 | | | 498,831 | | | 16,423 | | | 8,664 | | | 25,815 | | | 549,733 | |
| Bridge - equipment finance | 379,446 | | | — | | | — | | | — | | | 379,446 | | | 475,548 | | | — | | | — | | | — | | | 475,548 | |
| Mortgage warehouse lending | 877,006 | | | — | | | — | | | — | | | 877,006 | | | 1,259,408 | | | — | | | — | | | — | | | 1,259,408 | |
| | $ | 21,714,760 | | | $ | 221,508 | | | $ | 109,993 | | | $ | 761,708 | | | $ | 22,807,969 | | | $ | 22,814,034 | | | $ | 262,556 | | | $ | 97,115 | | | $ | 692,337 | | | $ | 23,866,042 | |
|
| | | | | | | | | | | | | | | | | | | | |
| | | September 30, 2017 |
| | | FICO |
| LTV | | 720 or less | | 721 - 740 | | 741 - 760 | | 761 or greater | | Total |
| 60% or less | | $ | 94,357 |
| | $ | 111,279 |
| | $ | 185,614 |
| | $ | 819,422 |
| | $ | 1,210,672 |
|
| 60% - 70% | | 93,963 |
| | 102,461 |
| | 140,350 |
| | 586,158 |
| | 922,932 |
|
| 70% - 80% | | 139,923 |
| | 173,808 |
| | 316,544 |
| | 1,091,868 |
| | 1,722,143 |
|
| More than 80% | | 24,725 |
| | 20,610 |
| | 24,981 |
| | 85,781 |
| | 156,097 |
|
| | | $ | 352,968 |
| | $ | 408,158 |
| | $ | 667,489 |
| | $ | 2,583,229 |
| | $ | 4,011,844 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | | December 31, 2016 |
| | | FICO |
| LTV | | 720 or less | | 721 - 740 | | 741 - 760 | | 761 or greater | | Total |
| 60% or less | | $ | 87,035 |
| | $ | 113,401 |
| | $ | 163,668 |
| | $ | 751,291 |
| | $ | 1,115,395 |
|
| 60% - 70% | | 80,694 |
| | 94,592 |
| | 124,180 |
| | 523,970 |
| | 823,436 |
|
| 70% - 80% | | 110,509 |
| | 148,211 |
| | 276,425 |
| | 907,450 |
| | 1,442,595 |
|
| More than 80% | | 22,115 |
| | 9,058 |
| | 15,470 |
| | 42,280 |
| | 88,923 |
|
| | | $ | 300,353 |
| | $ | 365,262 |
| | $ | 579,743 |
| | $ | 2,224,991 |
| | $ | 3,470,349 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
Included in the table above is the guaranteed portion of SBA loans past due by 90 days or more totaling $33.6 million and $40.3 million at September 30, 2021 and December 31, 2020, respectively.
Commercial credit exposure, basedLoans contractually delinquent by 90 days or more and still accruing totaled $677 million and $562 million at September 30, 2021 and December 31, 2020, respectively, substantially all of which were government insured residential loans. These loans are government insured pool buyout loans, which the Company buys out of GNMA securitizations upon default.
The following table presents information about loans on internal risk rating: non-accrual status at the dates indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| | | | | |
| Amortized Cost | | Amortized Cost With No Related Allowance | | Amortized Cost | | Amortized Cost With No Related Allowance |
| Residential and other consumer | $ | 33,138 | | | $ | 1,594 | | | $ | 28,828 | | | $ | 1,755 | |
| Commercial: | | | | | | | |
| Multi-family | 11,018 | | | 11,018 | | | 24,090 | | | 24,090 | |
| Non-owner occupied commercial real estate | 48,459 | | | 32,305 | | | 64,017 | | | 32,843 | |
| Construction and land | 4,715 | | | 4,369 | | | 4,754 | | | 4,408 | |
| Owner occupied commercial real estate | 22,192 | | | 4,424 | | | 23,152 | | | 2,110 | |
| Commercial and industrial | 125,550 | | | 9,471 | | | 54,584 | | | 9,235 | |
| | | | | | | |
| Bridge - franchise finance | 31,569 | | | 3,841 | | | 45,028 | | | 9,754 | |
| | | | | | | |
| $ | 276,641 | | | $ | 67,022 | | | $ | 244,453 | | | $ | 84,195 | |
Included in the table above is the guaranteed portion of non-accrual SBA loans totaling $49.1 million and $51.3 million at September 30, 2021 and December 31, 2020, respectively. The amount of interest income recognized on non-accrual loans was insignificant for the three and nine months ended September 30, 2021 and 2020. The amount of additional interest income that would have been recognized on non-accrual loans had they performed in accordance with their contractual terms was approximately $2.7 million and $8.0 million for the three and nine months ended September 30, 2021, respectively and $2.7 million and $7.6 million for the three and nine months ended September 30, 2020, respectively.
Collateral dependent loans:
The following table presents the amortized cost basis of collateral dependent loans at the dates indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| Amortized Cost | | Extent to Which Secured by Collateral | | Amortized Cost | | Extent to Which Secured by Collateral |
| Residential and other consumer | $ | 2,351 | | | $ | 2,326 | | | $ | 2,528 | | | $ | 2,513 | |
| Commercial: | | | | | | | |
| Multi-family | 11,018 | | | 11,018 | | | 24,090 | | | 24,090 | |
| Non-owner occupied commercial real estate | 38,293 | | | 37,798 | | | 52,813 | | | 52,435 | |
| Construction and land | 4,715 | | | 4,715 | | | 4,754 | | | 4,754 | |
| Owner occupied commercial real estate | 15,702 | | | 15,702 | | | 14,814 | | | 14,777 | |
| Commercial and industrial | 98,806 | | | 60,642 | | | 28,112 | | | 18,093 | |
| | | | | | | |
| Bridge - franchise finance | 7,078 | | | 5,552 | | | 28,986 | | | 12,832 | |
| | | | | | | |
| Total commercial | 175,612 | | | 135,427 | | | 153,569 | | | 126,981 | |
| | $ | 177,963 | | | $ | 137,753 | | | $ | 156,097 | | | $ | 129,494 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | | | | | | | | | Commercial and Industrial | | | | |
| | Multi-Family | | Non-Owner Occupied Commercial Real Estate | | Construction
and Land | | Owner Occupied Commercial Real Estate | | Taxi Medallion Loans | | Other Commercial and Industrial | | Commercial Lending Subsidiaries | | Total |
| Pass | $ | 3,299,753 |
| | $ | 4,069,749 |
| | $ | 265,921 |
| | $ | 1,890,785 |
| | $ | — |
| | $ | 3,666,227 |
| | $ | 2,313,152 |
| | $ | 15,505,587 |
|
| Special mention | 32,255 |
| | 12,824 |
| | — |
| | 31,495 |
| | — |
| | 38,389 |
| | 35,936 |
| | 150,899 |
|
| Substandard | 30,253 |
| | 90,996 |
| | 5,535 |
| | 31,460 |
| | 120,572 |
| | 64,087 |
| | 33,637 |
| | 376,540 |
|
| Doubtful | — |
| | — |
| | — |
| | 3,009 |
| | — |
| | 2,807 |
| | — |
| | 5,816 |
|
| | $ | 3,362,261 |
| | $ | 4,173,569 |
| | $ | 271,456 |
| | $ | 1,956,749 |
| | $ | 120,572 |
| | $ | 3,771,510 |
| | $ | 2,382,725 |
| | $ | 16,038,842 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | | | | | | | | | Commercial and Industrial | | | | |
| | Multi-Family | | Non-Owner Occupied Commercial Real Estate | | Construction and Land | | Owner Occupied Commercial Real Estate | | Taxi Medallion Loans | | Other Commercial and Industrial | | Commercial Lending Subsidiaries | | Total |
| Pass | $ | 3,811,822 |
| | $ | 3,694,931 |
| | $ | 309,675 |
| | $ | 1,672,199 |
| | $ | 40,460 |
| | $ | 3,112,590 |
| | $ | 2,255,444 |
| | $ | 14,897,121 |
|
| Special mention | 12,000 |
| | 7,942 |
| | — |
| | 33,274 |
| | — |
| | 19,009 |
| | — |
| | 72,225 |
|
| Substandard | 5,852 |
| | 28,935 |
| | 1,238 |
| | 30,377 |
| | 138,035 |
| | 68,704 |
| | 31,572 |
| | 304,713 |
|
| Doubtful | — |
| | — |
| | — |
| | — |
| | 178 |
| | 8,162 |
| | 3,178 |
| | 11,518 |
|
| | $ | 3,829,674 |
| | $ | 3,731,808 |
|
| $ | 310,913 |
| | $ | 1,735,850 |
|
| $ | 178,673 |
|
| $ | 3,208,465 |
| | $ | 2,290,194 |
|
| $ | 15,285,577 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
AgingCollateral for the multi-family, non-owner occupied commercial real estate and owner-occupied commercial real estate loan classes generally consists of loans:
The following table presents an agingcommercial real estate. Collateral for construction and land loans is typically residential or commercial real estate. Collateral for commercial and industrial loans generally consists of equipment, accounts receivable, inventory and other business assets; owner-occupied commercial real estate loans atmay also be collateralized by these types of assets. Bridge franchise finance loans may be collateralized by franchise value or by equipment. Bridge equipment finance loans are secured by the dates indicated. Amounts include premiums, discounts and deferred fees and costs (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Current | | 30 - 59 Days Past Due | | 60 - 89 Days Past Due | | 90 Days or More Past Due | | Total | | Current | | 30 - 59 Days Past Due | | 60 - 89 Days Past Due | | 90 Days or More Past Due | | Total |
| Non-covered loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | $ | 3,994,758 |
| | $ | 13,964 |
| | $ | 444 |
| | $ | 2,678 |
| | $ | 4,011,844 |
| | $ | 3,457,606 |
| | $ | 10,355 |
| | $ | 325 |
| | $ | 2,063 |
| | $ | 3,470,349 |
|
| Home equity loans and lines of credit | 1,623 |
| | 21 |
| | — |
| | — |
| | 1,644 |
| | 1,120 |
| | — |
| | — |
| | — |
| | 1,120 |
|
| Other consumer loans | 19,623 |
| | 500 |
| | — |
| | 1 |
| | 20,124 |
| | 24,306 |
| | — |
| | — |
| | — |
| | 24,306 |
|
| Multi-family | 3,362,261 |
| | — |
| | — |
| | — |
| | 3,362,261 |
| | 3,829,674 |
| | — |
| | — |
| | — |
| | 3,829,674 |
|
| Non-owner occupied commercial real estate | 4,171,880 |
| | — |
| | — |
| | 1,689 |
| | 4,173,569 |
| | 3,730,470 |
| | 754 |
| | — |
| | 584 |
| | 3,731,808 |
|
| Construction and land | 270,218 |
| | — |
| | — |
| | 1,238 |
| | 271,456 |
| | 309,675 |
| | — |
| | — |
| | 1,238 |
| | 310,913 |
|
| Owner occupied commercial real estate | 1,947,728 |
| | 1,261 |
| | 266 |
| | 7,494 |
| | 1,956,749 |
| | 1,726,826 |
| | 1,557 |
| | 797 |
| | 6,670 |
| | 1,735,850 |
|
| Commercial and industrial | | | | | | | | | | | | | | | | | | | |
| Taxi medallion loans | 107,325 |
| | — |
| | 2,803 |
| | 10,444 |
| | 120,572 |
| | 137,856 |
| | 7,037 |
| | 4,563 |
| | 29,217 |
| | 178,673 |
|
| Other commercial and industrial | 3,769,065 |
| | 1,629 |
| | 58 |
| | 758 |
| | 3,771,510 |
| | 3,198,008 |
| | 2,515 |
| | 954 |
| | 6,988 |
| | 3,208,465 |
|
| Commercial lending subsidiaries | 2,382,725 |
| | — |
| | — |
| | — |
| | 2,382,725 |
| | 2,284,435 |
| | 12 |
| | 3,247 |
| | 2,500 |
| | 2,290,194 |
|
| | $ | 20,027,206 |
| | $ | 17,375 |
| | $ | 3,571 |
| | $ | 24,302 |
| | $ | 20,072,454 |
| | $ | 18,699,976 |
| | $ | 22,230 |
| | $ | 9,886 |
| | $ | 49,260 |
| | $ | 18,781,352 |
|
| Covered loans: | | | | | | | | | | | | | | | | | | | |
| Non-ACI loans: | | | | | | | | | | | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | $ | 23,002 |
| | $ | 691 |
| | $ | — |
| | $ | 934 |
| | $ | 24,627 |
| | $ | 29,406 |
| | $ | 481 |
| | $ | — |
| | $ | 918 |
| | $ | 30,805 |
|
| Home equity loans and lines of credit | 33,263 |
| | 1,114 |
| | 663 |
| | 2,369 |
| | 37,409 |
| | 43,129 |
| | 1,255 |
| | 534 |
| | 2,077 |
| | 46,995 |
|
| | $ | 56,265 |
| | $ | 1,805 |
| | $ | 663 |
| | $ | 3,303 |
| | $ | 62,036 |
| | $ | 72,535 |
| | $ | 1,736 |
| | $ | 534 |
| | $ | 2,995 |
| | $ | 77,800 |
|
| ACI loans: | | | | | | | | | | | | | | | | | | | |
| 1-4 single family residential | $ | 436,051 |
| | $ | 14,126 |
| | $ | 2,549 |
| | $ | 17,574 |
| | $ | 470,300 |
| | $ | 500,272 |
| | $ | 13,524 |
| | $ | 2,990 |
| | $ | 15,562 |
| | $ | 532,348 |
|
| Home equity loans and lines of credit | 4,876 |
| | 89 |
| | 40 |
| | 635 |
| | 5,640 |
| | 3,460 |
| | 148 |
| | 23 |
| | 263 |
| | 3,894 |
|
| | $ | 440,927 |
| | $ | 14,215 |
| | $ | 2,589 |
| | $ | 18,209 |
| | $ | 475,940 |
| | $ | 503,732 |
| | $ | 13,672 |
| | $ | 3,013 |
| | $ | 15,825 |
| | $ | 536,242 |
|
1-4 single familyfinanced equipment. Residential loans are collateralized by residential and home equity ACIreal estate. There have been no significant changes to the extent to which collateral secures collateral dependent loans that are contractually delinquent by more than 90 days and accounted for in pools that are on accrual status because discount continues to be accreted totaled $18 million and $16 million atduring the nine months ended September 30, 2017 and December 31, 2016, respectively.2021.
Foreclosure of residential real estate
The recorded investment in residential loans in the process of foreclosure was $189 million, of which $173 million was government insured, at September 30, 2021 and $217 million, of which $209 million was government insured, at December 31, 2020. The carrying amount of foreclosed residential real estate properties included in "Other assets"other assets in the accompanying consolidated balance sheets, all of which were covered, totaled $4 million and $5 millionsheet was insignificant at September 30, 20172021 and December 31, 2016, respectively. The recorded investment in residential mortgage loans in the process of foreclosure totaled $13 million and $8 million at September 30, 2017 and December 31, 2016, respectively, substantially all of which were covered loans.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
2020.
Troubled debt restructurings
The following table summarizes loans that were modified in TDRs during the periods indicated, as well as loans modified during the twelve months preceding September 30, 20172021 and 2016,2020 that experienced payment defaults during thethose periods indicated (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2021 | | 2020 |
| | Loans Modified in TDRs
During the Period | | TDRs Experiencing Payment Defaults During the Period | | Loans Modified in TDRs
During the Period | | TDRs Experiencing Payment
Defaults During the Period |
| | Number of
TDRs | | Amortized Cost | | Number of
TDRs | | Amortized Cost | | Number of
TDRs | | Amortized Cost | | Number of
TDRs | | Amortized Cost |
| 1-4 single family residential | — | | | $ | — | | | — | | | $ | — | | | 1 | | | $ | 1,221 | | | — | | | $ | — | |
| Government insured residential | 134 | | 23,394 | | | 63 | | 12,435 | | | 148 | | | 24,031 | | | 65 | | | 10,249 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Bridge - franchise finance | — | | | — | | | — | | | — | | | — | | | — | | | 6 | | | 8,503 | |
| | | | | | | | | | | | | | | |
| | 134 | | | $ | 23,394 | | | 63 | | | $ | 12,435 | | | 149 | | | $ | 25,252 | | | 71 | | | $ | 18,752 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| | Loans Modified in TDRs
During the Period | | TDRs Experiencing Payment
Defaults During the Period | | Loans Modified in TDRs
During the Period | | TDRs Experiencing Payment
Defaults During the Period |
| | Number of
TDRs | | Recorded
Investment | | Number of
TDRs | | Recorded
Investment | | Number of
TDRs | | Recorded
Investment | | Number of
TDRs | | Recorded
Investment |
| Non-covered loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | — |
| | $ | — |
| | 2 |
| | $ | 269 |
| | — |
| | $ | — |
| | — |
| | $ | — |
|
| Owner occupied commercial real estate | — |
| | — |
| | — |
| | — |
| | 1 |
| | 491 |
| | — |
| | — |
|
| Commercial and industrial | | | | | | | | | | | | | | | |
| Taxi medallion loans | 15 |
| | 5,439 |
| | 6 |
| | 2,105 |
| | 18 |
| | 29,854 |
| | 8 |
| | 4,104 |
|
| Other commercial and industrial | 1 |
| | 978 |
| | — |
| | — |
| | 2 |
| | 1,646 |
| | — |
| |
|
|
| Commercial lending subsidiaries | — |
| | — |
| | — |
| | — |
| | 5 |
| | 4,433 |
| | 1 |
| | 3,500 |
|
| | 16 |
| | $ | 6,417 |
| | 8 |
| | $ | 2,374 |
| | 26 |
| | $ | 36,424 |
| | 9 |
| | $ | 7,604 |
|
| Covered loans: | | | | | | | | | | | | | | | |
| Non-ACI loans: | | | | | | | | | |
| | |
| | |
| | |
|
| Home equity loans and lines of credit | — |
| | $ | — |
| | 1 |
| | $ | 70 |
| | 10 |
| | $ | 1,671 |
| | — |
| | $ | — |
|
| ACI loans: | | | | | | | | | | | | | | | |
| Owner occupied commercial real estate | — |
| | $ | — |
| | — |
| | $ | — |
| | 1 |
| | $ | 839 |
| | — |
| | $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2021 | | 2020 |
| | Loans Modified in TDRs
During the Period | | TDRs Experiencing Payment
Defaults During the Period | | Loans Modified in TDRs
During the Period | | TDRs Experiencing Payment
Defaults During the Period |
| | Number of
TDRs | | Amortized Cost | | Number of
TDRs | | Amortized Cost | | Number of
TDRs | | Amortized Cost | | Number of
TDRs | | Amortized Cost |
| 1-4 single family residential | — | | | $ | — | | | — | | | $ | — | | | 2 | | | $ | 1,422 | | | — | | | $ | — | |
| Government insured residential | 218 | | | 39,900 | | | 70 | | | 13,491 | | | 213 | | | 33,593 | | | 99 | | | 16,559 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Non-owner occupied commercial real estate | 1 | | | 2,810 | | | — | | | — | | | 1 | | | 4,249 | | | 1 | | | 4,249 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Commercial and industrial | — | | | — | | | — | | | — | | | 1 | | | 305 | | | — | | | — | |
| | | | | | | | | | | | | | | |
| Bridge - franchise finance | — | | | — | | | — | | | — | | | 9 | | | 14,554 | | | 7 | | | 12,081 | |
| | | | | | | | | | | | | | | |
| | 219 | | | $ | 42,710 | | | 70 | | | $ | 13,491 | | | 226 | | $ | 54,123 | | | $ | 107 | | | $ | 32,889 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | Loans Modified in TDRs
During the Period | | TDRs Experiencing Payment
Defaults During the Period | | Loans Modified in TDRs
During the Period | | TDRs Experiencing Payment
Defaults During the Period |
| | Number of
TDRs | | Recorded
Investment | | Number of
TDRs | | Recorded
Investment | | Number of
TDRs | | Recorded
Investment | | Number of
TDRs | | Recorded
Investment |
| Non-covered loans: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | 4 |
| | $ | 351 |
| | 2 |
| | $ | 269 |
| | 1 |
| | $ | 107 |
| | — |
| | $ | — |
|
| Non-owner occupied commercial real estate | 1 |
| | 5,389 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Owner occupied commercial real estate | 2 |
| | 4,522 |
| | — |
| | — |
| | 3 |
| | 5,225 |
| | — |
| | — |
|
| Commercial and industrial | | | | | | | | | | | | |
|
| |
|
|
| Taxi medallion loans | 97 |
| | 48,692 |
| | 8 |
| | 3,509 |
| | 58 |
| | 57,341 |
| | 8 |
| | 4,104 |
|
| Other commercial and industrial | 14 |
| | 20,860 |
| | — |
| | — |
| | 7 |
| | 21,422 |
| | 1 |
| | 3,500 |
|
| Commercial lending subsidiaries | 1 |
| | 12,810 |
| | — |
| | — |
| | 6 |
| | 7,933 |
| | — |
| | — |
|
| | 119 |
| | $ | 92,624 |
| | 10 |
| | $ | 3,778 |
| | 75 |
| | $ | 92,028 |
| | 9 |
| | $ | 7,604 |
|
| Covered loans: | | | | | | | | | | | | | | | |
| Non-ACI loans: | | | | | | | | | |
| | |
| | |
| | |
|
| Home equity loans and lines of credit | 5 |
| | $ | 939 |
| | 1 |
| | $ | 70 |
| | 16 |
| | $ | 2,293 |
| | — |
| | $ | — |
|
| ACI loans: | | | | | | | | | | | | | | | |
| Owner occupied commercial real estate | — |
| | $ | — |
| | — |
| | $ | — |
| | 1 |
| | $ | 839 |
| | — |
| | $ | — |
|
ModificationsTDRs during the three and nine months ended September 30, 20172021 and 20162020 generally included interest rate reductions restructuring of the amount and timing of required periodic payments, extensions of maturity and covenant waivers.maturity. Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy. The total amount of such loans is not material. Modified ACI loans accounted forThe majority of loan modifications or deferrals that took place after the onset of the COVID-19 pandemic have not been categorized as TDRs, in pools are not considered TDRs, are not separated fromaccordance with interagency and authoritative guidance and the pools and are not classified as impaired loans.
provisions of the CARES Act.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
Note 5 FDIC Indemnification Asset
When the Company recognizes gains or losses related to covered assets in its consolidated financial statements, changes in the estimated amount recoverable from the FDIC under the Loss Sharing Agreements with respect to those gains or losses are also reflected in the consolidated financial statements. Covered loans may be resolved through prepayment, short sale of the underlying collateral, foreclosure, sale of the loans or charge-off. For loans resolved through prepayment, short sale or foreclosure, the difference between consideration received in satisfaction of the loans and the carrying value of the loans is recognized in the consolidated statement of income line item “Income from resolution of covered assets, net.” Losses from the resolution of covered loans increase the amount recoverable from the FDIC under the Loss Sharing Agreements. Gains from the resolution of covered loans reduce the amount recoverable from the FDIC under the Loss Sharing Agreements. Similarly, differences in proceeds received on the sale of covered OREO and covered loans and their carrying amounts result in gains or losses and reduce or increase the amount recoverable from the FDIC under the Loss Sharing Agreements. Increases in valuation allowances or impairment charges related to covered assets also increase the amount estimated to be recoverable from the FDIC. These additions to or reductions in amounts recoverable from the FDIC related to transactions in the covered assets are recorded in the consolidated statement of income line item “Net gain (loss) on FDIC indemnification” and reflected as corresponding increases or decreases in the FDIC indemnification asset.
In addition, through June 30, 2017, recoveries of previously indemnified losses on assets that were formerly covered under the Commercial Shared-Loss Agreement resulted in reimbursements due to the FDIC. These transactions are included in the tables below. Amounts payable to the FDIC resulting from these transactions are recognized in other liabilities in the accompanying consolidated balance sheet at December 31, 2016.
The following tables summarize the components of the gains and losses associated with covered assets, along with the related additions to or reductions in the amounts recoverable from the FDIC under the Loss Sharing Agreements, as reflected in the consolidated statements of income for the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| | Transaction
Income (Loss) | | Net Loss on FDIC
Indemnification | | Net Impact
on Pre-tax
Earnings | | Transaction
Income (Loss) | | Net Gain on FDIC
Indemnification | | Net Impact
on Pre-tax
Earnings |
| Recovery of (provision for) losses on covered loans | $ | (261 | ) | | $ | 215 |
| | $ | (46 | ) | | $ | 445 |
| | $ | (368 | ) | | $ | 77 |
|
| Income from resolution of covered assets, net | 6,400 |
| | (5,082 | ) | | 1,318 |
| | 8,883 |
| | (7,106 | ) | | 1,777 |
|
| Loss on sale of covered loans | — |
| | — |
| | — |
| | (10,033 | ) | | 8,026 |
| | (2,007 | ) |
| Loss on covered OREO | (35 | ) | | 29 |
| | (6 | ) | | (552 | ) | | 441 |
| | (111 | ) |
| | $ | 6,104 |
| | $ | (4,838 | ) | | $ | 1,266 |
| | $ | (1,257 | ) | | $ | 993 |
| | $ | (264 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | Transaction
Income (Loss) | | Net Loss on FDIC
Indemnification | | Net Impact
on Pre-tax
Earnings | | Transaction
Income (Loss) | | Net Loss on FDIC
Indemnification | | Net Impact
on Pre-tax
Earnings |
| Recovery of (provision for) losses on covered loans | $ | (2,693 | ) | | $ | 2,095 |
| | $ | (598 | ) | | $ | 1,119 |
| | $ | (1,007 | ) | | $ | 112 |
|
| Income from resolution of covered assets, net | 22,066 |
| | (17,591 | ) | | 4,475 |
| | 26,426 |
| | (21,140 | ) | | 5,286 |
|
| Loss on sale of covered loans | (1,582 | ) | | 1,266 |
| | (316 | ) | | (14,895 | ) | | 11,958 |
| | (2,937 | ) |
| Loss on covered OREO | (65 | ) | | 56 |
| | (9 | ) | | (957 | ) | | 779 |
| | (178 | ) |
| | $ | 17,726 |
| | $ | (14,174 | ) | | $ | 3,552 |
| | $ | 11,693 |
| | $ | (9,410 | ) | | $ | 2,283 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
Changes in the FDIC indemnification asset and in the liability to the FDIC for recoveries related to assets previously covered under the Commercial Shared-Loss Agreement for the nine months ended September 30, 2017 and the year ended December 31, 2016, were as follows (in thousands):
|
| | | |
| Balance at December 31, 2015 | $ | 739,843 |
|
| Amortization | (160,091 | ) |
| Reduction for claims filed | (46,083 | ) |
| Net loss on FDIC indemnification | (17,759 | ) |
| Balance at December 31, 2016 | 515,910 |
|
| Amortization | (135,351 | ) |
| Reduction for claims filed | (16,768 | ) |
| Net loss on FDIC indemnification | (14,174 | ) |
| Balance at September 30, 2017 | $ | 349,617 |
|
The balances at September 30, 2017 and December 31, 2016 are reflected in the consolidated balance sheets as follows (in thousands):
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| FDIC indemnification asset | $ | 349,617 |
| | $ | 515,933 |
|
| Other liabilities | — |
| | (23 | ) |
| | $ | 349,617 |
| | $ | 515,910 |
|
Note 6Income Taxes
The Company’s effective income tax rate was 32.2%24.0% and 31.7%24.9% for the three months ended September 30, 2017 and 2016, respectively, and 31.2% and 33.2% for the nine months ended September 30, 20172021, respectively and 2016,22.5% and 21.3% for the three and nine months ended September 30, 2020, respectively. The effective income tax raterates differed from the statutory federal income tax rate of 35% in all periods due primarily to the effect of income not subject to tax, offset by state income taxes. In addition, the effective income tax rate21% for the three and nine months ended September 30, 2017 reflected2021 due primarily to the impact of $0.3 million and $3.2 million, respectively, in excessstate income taxes, partially offset by the benefit of income not subject to federal tax. These factors were largely offsetting for the 2020 periods, when the effective tax benefits resulting from activity related to vesting of share-based awards and exercise of stock options.
The Company has investments in affordable housing limited partnerships which generate federal Low Income Housing Tax Credits and other tax benefits. The balance of these investments, included in other assets in the accompanying consolidated balance sheet, was $66 million and $71 million at September 30, 2017 and December 31, 2016, respectively. Unfunded commitments for affordable housing investments, included in other liabilities in the accompanying consolidated balance sheet, were $29 million and $53 million at September 30, 2017 and December 31, 2016, respectively. The maximum exposure to loss as a result of the Company's involvement with these limited partnerships at September 30, 2017 was approximately $73 million. While the Company believes the likelihood of potential losses from these investments is remote, the maximum exposure was determined by assuming a scenario where the projects completely fail and do not meet certain government compliance requirements resulting in recapture of the related tax credits. These investmentsrate did not have a material impact on income tax expense fordiffer materially from the Federal statutory rate of 21%. During the three and nine months ended September 30, 20172020, income not subject to tax was a larger percentage of pre-tax income compared to the same periods in 2021.
In October 2021, the Bank reached a settlement with the Florida Department of Revenue related to certain tax matters for the 2009-2019 tax years and 2016.recorded a tax benefit of $43.9 million, net of federal impact. Unrelated to the Florida settlement, the Bank expects to record an additional approximately $25 million tax benefit in the fourth quarter of 2021 related to a reduction in the liability for unrecognized tax benefits arising from expiration of statutes of limitation in the Federal and certain state jurisdictions.
Note 76 Derivatives and Hedging Activities
The Company uses interest rate swaps to manage interest rate risk related to liabilities that expose the Company to variability in cash flows due to changes in interest rates. The Company entershas entered into LIBOR-based interest rate swaps that areand caps designated as cash flow hedges with the objective of limiting the variability of interest payment cash flows resulting from changes in the benchmarkflows. The Company has also entered into LIBOR-based interest rate LIBOR. Changesswaps designated as fair value hedges designed to hedge changes in the fair value of interestoutstanding fixed rate swaps designated as cash flow hedging instruments are reported in AOCI and subsequently reclassified into interest expenseborrowings caused by fluctuations in the same period in which the relatedbenchmark interest on the floating-rate debt obligations affects earnings.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
rate.
The Company also enters into interest rate derivative contracts with certain of its commercial borrowers to enable those borrowers to manage their exposure to interest rate fluctuations. To mitigate interest rate risk associated with these derivative contracts, the Company enters into offsetting derivative contract positions with primary dealers. These interest rate derivative contracts are not designated as hedging instruments; therefore, changes in the fair value of these derivatives are recognized immediately in earnings. TheFor the three and nine months ended September 30, 2021 and 2020, the impact on earnings related to changes in fair value of these derivatives for the three and nine months ended September 30, 2017 and 2016 was not material.
The Company may be exposed to credit risk in the event of non-performance by the counterparties to its interest rate derivative agreements. The Company assesses the credit risk of its financial institution counterparties by monitoring publicly available credit rating and financial information. The Company manages dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA master agreements, central clearing mechanisms and counterparty limits. The agreements contain bilateral collateral arrangements with the amount of collateral to be posted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its commercial borrower counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company does not currently anticipate any significant losses from failure of interest rate derivative counterparties to honor their obligations.
The CME amended its rules effective January 2017 to legally characterizecharacterizes variation margin payments for centrally cleared derivatives as settlements of the derivatives' exposures rather than collateral. As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting and financial reporting purposes. The Company's clearing agent for interest rate derivative contracts centrally cleared through the CME settles the variation margin daily with the CME; therefore, those interest rate derivative contracts the Company clears through the CME are reported at a fair value of approximately zero at both September 30, 2017.2021 and December 31, 2020.
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
The following tables set forth certain information concerning the Company’s interest rate contract derivative financial instruments and related hedged items at the dates indicated (dollars in thousands):
| | | | | | | | | | | | | | | | | | | September 30, 2021 |
| | September 30, 2017 | |
| | | Weighted Average Pay Rate | | Weighted Average Receive Rate | | Weighted Average Remaining Life in Years | | | | | | | Weighted
Average Pay Rate | | Weighted
Average Receive Rate | | Weighted
Average
Remaining
Life in Years | | |
| | | | Notional Amount | | Balance Sheet Location | | Fair Value | | | | Notional Amount | | Balance Sheet Location | | Fair Value |
| | Hedged Item | | Asset | | Liability | | Hedged Item | | Asset | | Liability |
| Derivatives designated as cash flow hedges: | | | | | | | | | |
| | | | |
| | |
| Derivatives designated as cash flow hedges: | | | | | | | | | | | | | | | |
| Pay-fixed interest rate swaps | Variability of interest cash flows on variable rate borrowings | | 1.77% | | 3-Month Libor | | 4.6 | | $ | 2,046,000 |
| | Other assets / Other liabilities | | $ | 1,066 |
| | $ | (259 | ) | Pay-fixed interest rate swaps | Variability of interest cash flows on variable rate borrowings | | 2.55% | | 3-Month LIBOR | | 2.6 | | $ | 1,906,000 | | | Other liabilities | | $ | — | | | $ | (3,945) | |
| Interest rate caps purchased, indexed to Fed Funds effective rate | | Interest rate caps purchased, indexed to Fed Funds effective rate | Variability of interest cash flows on variable rate borrowings | | —% | | —% | | 4.2 | | 100,000 | | | Other assets | | 1,318 | | | — | |
| Derivatives designated as fair value hedges: | | Derivatives designated as fair value hedges: | |
| Receive-fixed interest rate swaps | | Receive-fixed interest rate swaps | Variability of fair value of fixed rate borrowings | | 3-Month LIBOR | | 1.53% | | 0.0 | | 25,000 | | | Other liabilities | | — | | | — | |
| Derivatives not designated as hedges: | | | | | | | | Derivatives not designated as hedges: | | |
| Pay-fixed interest rate swaps | | | 3.86% | | Indexed to 1-month Libor | | 6.4 | | 1,000,763 |
| | Other assets / Other liabilities | | 7,605 |
| | (18,311 | ) | Pay-fixed interest rate swaps | | | 3.55% | | Indexed to 1-month LIBOR | | 5.3 | | 1,662,752 | | | Other assets / Other liabilities | | 1,553 | | | (21,000) | |
| Pay-variable interest rate swaps | | | Indexed to 1-month Libor | | 3.86% | | 6.4 | | 1,000,763 |
| | Other assets / Other liabilities | | 19,648 |
| | (8,491 | ) | Pay-variable interest rate swaps | | | Indexed to 1-month LIBOR | | 3.55% | | 5.3 | | 1,662,752 | | | Other assets | | 66,580 | | | (2,980) | |
| Interest rate caps purchased, indexed to 1-month Libor | | 2.80% | | 1.6 | | 145,957 |
| | Other assets | | 15 |
| | — |
| |
| Interest rate caps sold, indexed to 1-month Libor | | 2.80% | | 1.6 | | 145,957 |
| | Other liabilities | | — |
| | (15 | ) | |
| Interest rate caps purchased, indexed to 1-month LIBOR | | Interest rate caps purchased, indexed to 1-month LIBOR | | 1.00% | | 4.2 | | 25,000 | | | Other assets | | 370 | | | — | |
| Interest rate caps sold, indexed to 1-month LIBOR | | Interest rate caps sold, indexed to 1-month LIBOR | | 1.00% | | 4.2 | | 25,000 | | | Other liabilities | | — | | | (370) | |
| | | | $ | 4,339,440 |
| | $ | 28,334 |
| | $ | (27,076 | ) | | | | $ | 5,406,504 | | | $ | 69,821 | | | $ | (28,295) | |
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| |
| | | Weighted
Average Pay Rate | | Weighted
Average Receive Rate | | Weighted
Average
Remaining
Life in Years | | | | | | |
| | | | | | | Notional Amount | | Balance Sheet Location | | Fair Value |
| | Hedged Item | | | | | | | Asset | | Liability |
| Derivatives designated as cash flow hedges: | | | | | | | | | | | | | | | |
| Pay-fixed interest rate swaps | Variability of interest cash flows on variable rate borrowings | | 2.41% | | 3-Month LIBOR | | 2.5 | | $ | 2,771,000 | | | Other liabilities | | $ | — | | | $ | (5,971) | |
| Interest rate caps purchased, indexed to Fed Funds effective rate | Variability of interest cash flows on variable rate borrowings | | —% | | —% | | 4.9 | | 100,000 | | | Other assets | | 485 | | | — | |
| Derivatives designated as fair value hedges: | | | | | | | | | | | | | | | |
| Receive-fixed interest rate swaps | Variability of fair value of fixed rate borrowings | | 3-Month LIBOR | | 1.55% | | 0.6 | | 250,000 | | | Other liabilities | | — | | | — | |
| Derivatives not designated as hedges: | | | | | | | | | | | | | | | |
| Pay-fixed interest rate swaps | | | 3.61% | | Indexed to 1-month LIBOR | | 5.3 | | 1,626,152 | | | Other assets / Other liabilities | | — | | | (38,519) | |
| Pay-variable interest rate swaps | | | Indexed to 1-month LIBOR | | 3.61% | | 5.3 | | 1,626,152 | | | Other assets / Other liabilities | | 123,345 | | | — | |
| Interest rate caps purchased, indexed to 1-month LIBOR | | | | | 3.72% | | 0.4 | | 25,921 | | | Other assets | | — | | | — | |
| Interest rate caps sold, indexed to 1-month LIBOR | | | 3.72% | | | | 0.4 | | 25,921 | | | Other liabilities | | — | | | — | |
| | | | | | | | | | $ | 6,425,146 | | | | | $ | 123,830 | | | $ | (44,490) | |
|
| | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | | | Weighted Average Pay Rate | | Weighted Average Receive Rate | | Weighted Average Remaining Life in Years | | | | | | |
| | | | | | | Notional Amount | | Balance Sheet Location | | Fair Value |
| | Hedged Item | | | | | | | Asset | | Liability |
| Derivatives designated as cash flow hedges: | | | | | | | | | |
| | | | |
| | |
|
| Pay-fixed interest rate swaps | Variability of interest cash flows on variable rate borrowings | | 1.58% | | 3-Month Libor | | 3.3 | | $ | 1,715,000 |
| | Other assets / Other liabilities | | $ | 19,648 |
| | $ | (3,112 | ) |
| Pay-fixed forward-starting interest rate swaps | Variability of interest cash flows on variable rate borrowings | | 3.43% | | 3-Month Libor | | 10.5 | | 300,000 |
| | Other liabilities | | — |
| | (27,866 | ) |
| Derivatives not designated as hedges: | | |
| |
| |
| |
|
| | | |
|
| | |
| Pay-fixed interest rate swaps | | | 3.77% | | Indexed to 1-month Libor | | 6.8 | | 912,000 |
| | Other assets / Other liabilities | | 9,949 |
| | (20,383 | ) |
| Pay-variable interest rate swaps | | | Indexed to 1-month Libor | | 3.77% | | 6.8 | | 912,000 |
| | Other assets / Other liabilities | | 20,383 |
| | (9,949 | ) |
| Interest rate caps purchased, indexed to 1-month Libor | | |
| | 2.96% | | 2.3 | | 189,057 |
| | Other assets | | 252 |
| | — |
|
| Interest rate caps sold, indexed to 1-month Libor | | | 2.96% | | | | 2.3 | | 189,057 |
| | Other liabilities | | — |
| | (252 | ) |
| | | | | | | | | | $ | 4,217,114 |
| | | | $ | 50,232 |
| | $ | (61,562 | ) |
The following table provides information about the amount of lossgain (loss) related to derivatives designated as cash flow hedges reclassified from AOCI into interest expense for the periods indicated (dollars in(in thousands): |
| | | | | | | | | | | | | | | | | |
| | Amount of Loss Reclassified from AOCI on Derivatives | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | |
| Derivatives in Cash Flow Hedging Relationships | 2017 | | 2016 | | 2017 | | 2016 | | Location of Loss Reclassified from AOCI into Income |
| Interest rate contracts | $ | (2,001 | ) | | $ | (3,741 | ) | | $ | (7,463 | ) | | $ | (13,050 | ) | | Interest expense on borrowings |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Location of Loss Reclassified from AOCI into Income |
| 2021 | | 2020 | | 2021 | | 2020 | | | |
| Interest rate contracts | $ | (13,905) | | | $ | (15,893) | | | $ | (43,762) | | | $ | (30,458) | | | | | Interest expense on borrowings |
During the three and nine months ended September 30, 20172021 and 2016,2020, no derivative positions designated as cash flow hedges were discontinued and none of the gains and losses reported in AOCI were reclassified into earnings as a result of the discontinuance of cash flow hedges or because of the early extinguishment of debt. As of September 30, 2017,2021, the amount of net loss expected to be reclassified from AOCI into earnings during the next twelve months was $6.2$32.7 million.
The following table provides information about the amount of gain (loss) related to derivatives designated as fair value hedges recognized in earnings for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Location of Gain (Loss) in Consolidated Statements of Income |
| 2021 | | 2020 | | 2021 | | 2020 | | | |
| Fair value adjustment on derivatives | $ | (491) | | | $ | (738) | | | $ | (1,987) | | | $ | 3,290 | | | | | Interest expense on borrowings |
| Fair value adjustment on hedged items | 491 | | | 763 | | | 1,986 | | | (3,309) | | | | | Interest expense on borrowings |
| Gain (loss) recognized on fair value hedges (ineffective portion) | $ | — | | | $ | 25 | | | $ | (1) | | | $ | (19) | | | | | |
Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
The following table provides information about the hedged items related to derivatives designated as fair value hedges at the dates indicated (in thousands):
| | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 | | Location in Consolidated Balance Sheets |
| Contractual balance outstanding of hedged item | $ | 25,000 | | | $ | 250,000 | | | FHLB advances |
| Cumulative fair value hedging adjustments | $ | 14 | | | $ | 1,999 | | | FHLB advances |
Some of the Company’s ISDA master agreements with financial institution counterparties contain provisions that permit either counterparty to terminate the agreements and require settlement in the event that regulatory capital ratios fall below certain designated thresholds, upon the initiation of other defined regulatory actions or upon suspension or withdrawal of the Bank’s credit rating. Currently, there are no circumstances that would trigger these provisions of the agreements.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
The Company does not offset assets and liabilities under master netting agreements for financial reporting purposes. Information on interest rate swaps subject to these agreements is as follows at the dates indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2021 |
| |
| | | | Gross Amounts Offset in Balance
Sheet | | Net Amounts Presented in
Balance Sheet | | Gross Amounts Not Offset in
Balance Sheet | | |
| | Gross Amounts
Recognized | | | | Derivative
Instruments | | Collateral
Pledged | | Net Amount |
| Derivative assets | $ | 1,923 | | | $ | — | | | $ | 1,923 | | | $ | (1,674) | | | $ | — | | | $ | 249 | |
| Derivative liabilities | (24,945) | | | — | | | (24,945) | | | 1,674 | | | 23,107 | | | (164) | |
| | $ | (23,022) | | | $ | — | | | $ | (23,022) | | | $ | — | | | $ | 23,107 | | | $ | 85 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | |
| Gross Amounts Offset in Balance
Sheet |
| Net Amounts Presented in
Balance Sheet |
| Gross Amounts Not Offset in Balance Sheet |
| |
| | Gross Amounts Recognized |
|
|
| Derivative Instruments |
| Collateral Pledged |
| Net Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Derivative assets | $ | 8,686 |
| | $ | — |
| | $ | 8,686 |
| | $ | (6,814 | ) | | $ | (1,539 | ) | | $ | 333 |
|
| Derivative liabilities | (18,570 | ) | | — |
| | (18,570 | ) | | 6,814 |
| | 11,756 |
| | — |
|
| | $ | (9,884 | ) | | $ | — |
| | $ | (9,884 | ) | | $ | — |
| | $ | 10,217 |
| | $ | 333 |
|
| | | | December 31, 2016 | | December 31, 2020 |
| | | | Gross Amounts Offset in Balance
Sheet | | Net Amounts Presented in
Balance Sheet | | Gross Amounts Not Offset in Balance Sheet | | | |
| | Gross Amounts Recognized | | Derivative Instruments | | Collateral Pledged | | Net Amount | | | | Gross Amounts Offset in Balance
Sheet | | Net Amounts Presented in
Balance Sheet | | Gross Amounts Not Offset in
Balance Sheet | | |
| | | | | | | | | | | | | | Gross Amounts
Recognized | | Derivative
Instruments | | Collateral
Pledged | | Net Amount |
| Derivative assets | $ | 29,849 |
| | $ | — |
| | $ | 29,849 |
| | $ | (27,485 | ) | | $ | — |
| | $ | 2,364 |
| Derivative assets | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Derivative liabilities | (51,362 | ) | | — |
| | (51,362 | ) | | 27,485 |
| | 23,796 |
| | (81 | ) | Derivative liabilities | (44,490) | | | — | | | (44,490) | | | — | | | 44,332 | | | (158) | |
| | $ | (21,513 | ) | | $ | — |
| | $ | (21,513 | ) | | $ | — |
| | $ | 23,796 |
| | $ | 2,283 |
| | $ | (44,490) | | | $ | — | | | $ | (44,490) | | | $ | — | | | $ | 44,332 | | | $ | (158) | |
The difference between the amounts reported for interest rate swaps subject to master netting agreements and the total fair value of interest rate contract derivative financial instruments reported in the consolidated balance sheets is related to interest rate derivative contracts entered into with borrowers not subject to master netting agreements.
At September 30, 2017,2021, the Company had pledged investment securities available for sale with a carrying amountnet financial collateral of $40 million and cash on deposit of $2$25.8 million as collateral for interest rate swaps in a liability position. $2 million of financial collateral was pledged by counterparties to the Company for interest rate swaps in an asset position.position that are not centrally cleared. The amount of collateral required to be posted varies based on the settlement value of outstanding swaps and in some cases may include initial margin requirements.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
Note 87 Stockholders’ Equity
Accumulated Other Comprehensive Income
Changes in AOCIother comprehensive income are summarized as follows for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| | 2021 | | 2020 |
| | Before Tax | | Tax Effect | | Net of Tax | | Before Tax | | Tax Effect | | Net of Tax |
| Unrealized gains (losses) on investment securities available for sale: | | | | | | | | | | | |
| Net unrealized holding gains (losses) arising during the period | $ | (21,751) | | | $ | 5,546 | | | $ | (16,205) | | | $ | 66,885 | | | $ | (17,056) | | | $ | 49,829 | |
| Amounts reclassified to gain on investment securities available for sale, net | (814) | | | 208 | | | (606) | | | (2,262) | | | 577 | | | (1,685) | |
| Net change in unrealized gains (losses) on investment securities available for sale | (22,565) | | | 5,754 | | | (16,811) | | | 64,623 | | | (16,479) | | | 48,144 | |
| Unrealized losses on derivative instruments: | | | | | | | | | | | |
| Net unrealized holding gains arising during the period | 1,695 | | | (432) | | | 1,263 | | | 1,680 | | | (429) | | | 1,251 | |
| Amounts reclassified to interest expense on borrowings | 13,905 | | | (3,546) | | | 10,359 | | | 15,836 | | | (4,038) | | | 11,798 | |
| Net change in unrealized losses on derivative instruments | 15,600 | | | (3,978) | | | 11,622 | | | 17,516 | | | (4,467) | | | 13,049 | |
| Other comprehensive income (loss) | $ | (6,965) | | | $ | 1,776 | | | $ | (5,189) | | | $ | 82,139 | | | $ | (20,946) | | | $ | 61,193 | |
| | | | | | | | | | | | | | | | Nine Months Ended September 30, |
| | Three Months Ended September 30, | | 2021 | | 2020 |
| | 2017 | | 2016 | | Before Tax | | Tax Effect | | Net of Tax | | Before Tax | | Tax Effect | | Net of Tax |
| | Before Tax | | Tax Effect | | Net of Tax | | Before Tax | | Tax Effect | | Net of Tax | |
| Unrealized gains on investment securities available for sale: | |
| | |
| | |
| | | | | | | |
| Net unrealized holding gain arising during the period | $ | 14,144 |
| | $ | (5,587 | ) | | $ | 8,557 |
| | $ | 5,316 |
| | $ | (2,100 | ) | | $ | 3,216 |
| |
| Unrealized gains (losses) on investment securities available for sale: | | Unrealized gains (losses) on investment securities available for sale: | | | | | | | | | | | |
| Net unrealized holding loss arising during the period | | Net unrealized holding loss arising during the period | $ | (33,240) | | | $ | 8,476 | | | $ | (24,764) | | | $ | 33,142 | | | $ | (8,068) | | | $ | 25,074 | |
| Amounts reclassified to gain on investment securities available for sale, net | (26,931 | ) | | 10,638 |
| | (16,293 | ) | | (3,008 | ) | | 1,188 |
| | (1,820 | ) | Amounts reclassified to gain on investment securities available for sale, net | (7,623) | | | 1,944 | | | (5,679) | | | (9,515) | | | 2,426 | | | (7,089) | |
| Net change in unrealized gains on investment securities available for sale | (12,787 | ) | | 5,051 |
| | (7,736 | ) | | 2,308 |
| | (912 | ) | | 1,396 |
| |
| Net change in unrealized gains (losses) on investment securities available for sale | | Net change in unrealized gains (losses) on investment securities available for sale | (40,863) | | | 10,420 | | | (30,443) | | | 23,627 | | | (5,642) | | | 17,985 | |
| Unrealized losses on derivative instruments: | | | | | | | | | | | | Unrealized losses on derivative instruments: | | | | | | | | | | | |
| Net unrealized holding gain (loss) arising during the period | (281 | ) | | 111 |
| | (170 | ) | | 8,356 |
| | (3,301 | ) | | 5,055 |
| Net unrealized holding gain (loss) arising during the period | 22,725 | | | (5,795) | | | 16,930 | | | (120,559) | | | 29,926 | | | (90,633) | |
| Amounts reclassified to interest expense on borrowings | 2,001 |
| | (791 | ) | | 1,210 |
| | 3,741 |
| | (1,477 | ) | | 2,264 |
| Amounts reclassified to interest expense on borrowings | 43,762 | | | (11,159) | | | 32,603 | | | 30,401 | | | (7,752) | | | 22,649 | |
| Net change in unrealized losses on derivative instruments | 1,720 |
| | (680 | ) | | 1,040 |
| | 12,097 |
| | (4,778 | ) | | 7,319 |
| Net change in unrealized losses on derivative instruments | 66,487 | | | (16,954) | | | 49,533 | | | (90,158) | | | 22,174 | | | (67,984) | |
| Other comprehensive income (loss) | $ | (11,067 | ) | | $ | 4,371 |
| | $ | (6,696 | ) | | $ | 14,405 |
| | $ | (5,690 | ) | | $ | 8,715 |
| Other comprehensive income (loss) | $ | 25,624 | | | $ | (6,534) | | | $ | 19,090 | | | $ | (66,531) | | | $ | 16,532 | | | $ | (49,999) | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | Before Tax | | Tax Effect | | Net of Tax | | Before Tax | | Tax Effect | | Net of Tax |
| Unrealized gains on investment securities available for sale: | |
| | |
| | |
| | | | | | |
| Net unrealized holding gain arising during the period | $ | 54,258 |
| | $ | (21,432 | ) | | $ | 32,826 |
| | $ | 88,413 |
| | $ | (34,923 | ) | | $ | 53,490 |
|
| Amounts reclassified to gain on investment securities available for sale, net | (29,194 | ) | | 11,532 |
| | (17,662 | ) | | (10,065 | ) | | 3,975 |
| | (6,090 | ) |
| Net change in unrealized gains on investment securities available for sale | 25,064 |
| | (9,900 | ) | | 15,164 |
| | 78,348 |
| | (30,948 | ) | | 47,400 |
|
| Unrealized losses on derivative instruments: | | | | | | | | | | | |
| Net unrealized holding loss arising during the period | (13,780 | ) | | 5,443 |
| | (8,337 | ) | | (57,765 | ) | | 22,817 |
| | (34,948 | ) |
| Amounts reclassified to interest expense on borrowings | 7,463 |
| | (2,948 | ) | | 4,515 |
| | 13,050 |
| | (5,154 | ) | | 7,896 |
|
| Net change in unrealized losses on derivative instruments | (6,317 | ) | | 2,495 |
| | (3,822 | ) | | (44,715 | ) | | 17,663 |
| | (27,052 | ) |
| Other comprehensive income | $ | 18,747 |
| | $ | (7,405 | ) | | $ | 11,342 |
| | $ | 33,633 |
| | $ | (13,285 | ) | | $ | 20,348 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
The categories of AOCI and changes therein are presented below for the periods indicated (in thousands):
|
| | | | | | | | | | | |
| | Unrealized Gains on Investment Securities Available for Sale | | Unrealized Losses on Derivative Instruments | | Total |
| Balance at December 31, 2016 | $ | 47,057 |
| | $ | (5,810 | ) | | $ | 41,247 |
|
| Other comprehensive income | 15,164 |
| | (3,822 | ) | | 11,342 |
|
| Balance at September 30, 2017 | $ | 62,221 |
| | $ | (9,632 | ) | | $ | 52,589 |
|
| | | | | | |
| Balance at December 31, 2015 | $ | 41,535 |
| | $ | (19,353 | ) | | $ | 22,182 |
|
| Other comprehensive income | 47,400 |
| | (27,052 | ) | | 20,348 |
|
| Balance at September 30, 2016 | $ | 88,935 |
| | $ | (46,405 | ) | | $ | 42,530 |
|
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| Unrealized Gain (Loss) on
Investment Securities
Available for Sale | | Unrealized Loss
on Derivative
Instruments | | Total |
| Balance at June 30, 2021 | $ | 50,167 | | | $ | (75,040) | | | $ | (24,873) | |
| Other comprehensive income (loss) | (16,811) | | | 11,622 | | | (5,189) | |
| Balance at September 30, 2021 | $ | 33,356 | | | $ | (63,418) | | | $ | (30,062) | |
| | | | | |
| Balance at June 30, 2020 | $ | (1,974) | | | $ | (141,045) | | | $ | (143,019) | |
| Other comprehensive income | 48,144 | | | 13,049 | | | $ | 61,193 | |
| Balance at September 30, 2020 | $ | 46,170 | | | $ | (127,996) | | | $ | (81,826) | |
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| Unrealized Gain on
Investment Securities
Available for Sale | | Unrealized Loss
on Derivative
Instruments | | Total |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Balance at December 31, 2020 | $ | 63,799 | | | $ | (112,951) | | | $ | (49,152) | |
| | | | | |
| Other comprehensive income (loss) | (30,443) | | | 49,533 | | | 19,090 | |
| Balance at September 30, 2021 | $ | 33,356 | | | $ | (63,418) | | | $ | (30,062) | |
| | | | | |
| Balance at December 31, 2019 | $ | 28,185 | | | $ | (60,012) | | | $ | (31,827) | |
| Other comprehensive income (loss) | 17,985 | | | (67,984) | | | (49,999) | |
| Balance at September 30, 2020 | $ | 46,170 | | | $ | (127,996) | | | $ | (81,826) | |
Capital Actions
In October 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 $58.3 million remaining 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. 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.
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BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
Note 98 Equity Based and Other Compensation Plans
Share Awards
Unvested share awards
During the nine months ended September 30, 2017, the Company granted 618,306A summary of activity related to unvested share awards underfollows for the 2014 Plan. Allperiods indicated:
| | | | | | | | | | | |
| Number of Share Awards | | Weighted Average Grant Date Fair Value |
| Unvested share awards outstanding, December 31, 2020 | 1,161,835 | | | $ | 33.32 | |
| Granted | 568,936 | | | 42.17 | |
| Vested | (465,776) | | | 34.04 | |
| Canceled or forfeited | (59,859) | | | 35.55 | |
| Unvested share awards outstanding, September 30, 2021 | 1,205,136 | | | $ | 37.11 | |
| | | |
| Unvested share awards outstanding, December 31, 2019 | 1,050,455 | | | $ | 38.24 | |
| Granted | 644,300 | | | 29.73 | |
| Vested | (468,283) | | | 39.03 | |
| Canceled or forfeited | (68,525) | | | 34.78 | |
| Unvested share awards outstanding, September 30, 2020 | 1,157,947 | | | $ | 33.39 | |
Unvested share awards are generally valued at the closing price of the Company's common stock on the date of grant. All shares granted prior to 2019 vest in equal annual installments over a period of three years from the date of grant. TheAll shares granted were valued atin 2019 and later to Company employees vest in equal annual installments over a period of four years from the date of grant. Shares granted to the Company's Board of Directors vest over a period of one year.
The following table summarizes the closing price of the Company’s commonCompany's stock on the date of grant ranging from $33.21 to $40.84,for shares granted and had anthe aggregate grant date fair value of $24.9 million. shares vesting for the periods indicated (in thousands, except per share data):
| | | | | | | | | | | | | |
| Nine Months Ended September 30, | | |
| 2021 | | 2020 | | |
| Closing price on date of grant | $42.01 - $47.52 | | $13.99 - $30.90 | | |
| Aggregate grant date fair value of shares vesting | $ | 15,857 | | | $ | 18,279 | | | |
The total unrecognized compensation cost of $26.7$31.7 million for all unvested share awards outstanding at September 30, 20172021 will be recognized over a weighted average remaining period of 1.982.74 years.
During the nine months ended September 30, 2016, the Company granted 644,888 unvested share awards under the 2014 Plan. All of the shares vest in equal annual installments over a period of three years from the date of grant. The shares granted were valued at the closing price of the Company’s common stock on the date of grant, ranging from $29.78 to $33.76, and had an aggregate fair value of $20.0 million.
Executive share-based awards
Certain of the Company's executives are eligible to receive annual awards of RSUs and PSUs (collectively, the "share units"). Annual awards of RSUs represent a fixed number of shares and generally vest on December 31st in equal tranches over three years.years for grants prior to 2019, and over four years for awards issued in 2019 and after. PSUs are initially granted based on a target value. The number of PSUs that ultimately vest at the end of a three-yearthe performance measurement period will be based on the achievement of performance criteria pre-established by the Compensation Committee of the Board of Directors. The performance criteria established for the PSUs granted in 2017 and 2016 include both performance and market conditions. Upon vesting, the share units will be converted to common stock on a one-for-one basis, or may be settled in cash at the Company's option. The share units will accumulate dividends declared on the Company's common stock from the date of grant to be paid subsequent to vesting.
The first tranche of RSUs granted vested on December 31, 2016. The Company cash settled these share units in the amount of $0.8 million during the first quarter of 2017. As a result of thisthe majority of previous settlements being in cash, settlement, all RSUs and PSUs have been determined to be liability instruments and will beare remeasured at fair value each reporting period until the awards are settled. The RSUs are valued based on the closing price of the Company's common stock at the reporting date. The PSUs are valued based on the closing price of the Company's common stock at the reporting date net of a discount related to any applicable market conditions, considering the
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BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
probability of meeting the defined performance conditions. Compensation cost related to PSUs is recognized during the performance period based on the probable outcome of the respective performance conditions.
DuringA summary of activity related to executive share-based awards for the nine months ended September 30, 2017, 47,848 RSUs and 47,848 PSUs were granted. During the nine months ended September 30, 2016, 57,873 RSUs and 57,873 PSUs were granted. periods indicatedfollows:
| | | | | | | | | | | |
| RSU | | PSU |
| Unvested executive share-based awards outstanding, December 31, 2020 | 156,555 | | | 179,793 | |
| Granted | 63,814 | | | 63,814 | |
| | | |
| Unvested executive share-based awards outstanding, September 30, 2021 | 220,369 | | | 243,607 | |
| | | |
| Unvested executive share-based awards outstanding, December 31, 2019 | 112,116 | | | 125,088 | |
| Granted | 106,731 | | | 106,731 | |
| | | |
| Unvested executive share-based awards outstanding, September 30, 2020 | 218,847 | | | 231,819 | |
The total liability for the share units was $2.6$8.0 million at September 30, 2017.2021. The total unrecognized compensation cost of $5.3$11.4 million for these share units at September 30, 20172021 will be recognized over a weighted average remaining period of 2.182.07 years.
Incentive awards
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
The618,306 unvested share awards granted during the nine months ended September 30, 2017, as discussed above, included 25,321 unvested share awards granted to certain of the Company's executives based on the achievement of performance criteria pre-established by the Compensation Committee for the year ended December 31, 2016.
Incentiveawards
Beginning in 2017, the Company's annual incentive compensation arrangements for employees other than those eligible for the executive share-based awards discussed above provide for settlement through a combination of cash payments and unvested share awards following the end of the annual performance period. The dollar value of share awards to be granted is based on the achievement of performance criteria established in the incentive arrangements. The number of shares of common stock to be awarded is variable based on the closing price of the Company's stock on the date of grant; therefore, these awards are initially classified as liability instruments, with compensation cost recognized from the beginning of the performance period. TheAwards related to performance periods prior to 2019 vest over three years and awards related to the 2019 and subsequent performance periods vest in equal installments over a period of threefour years from the date of grant. The total liabilityNo common stock was awarded pursuant to these incentive arrangements for the incentive2020 performance period. These awards are included in the summary of activity related to unvested share awards was $1.2 million at September 30, 2017. above. The total unrecognized compensation cost of $5.3 million for these share awards at September 30, 2017 will be recognized over a weighted average remaining period of 3.25 years. The accrued liability and unrecognized compensation cost are based on management's current estimate of the likely outcome of the performance criteria established in the incentive arrangements and may differ from actual results.
Option Awards
A summary of activity related to stock option awards for thenine months ended September 30, 2017 2021 and 2020follows:
| | | | | | | | | | | |
| Number of
Option
Awards | | Weighted
Average
Exercise Price |
| Option awards outstanding, December 31, 2020 | 1,569 | | | $ | 15.94 | |
| Exercised | (1,569) | | | 15.94 | |
| | | |
| Option awards outstanding and exercisable, September 30, 2021 | — | | | $ | — | |
| | | |
| Option awards outstanding, December 31, 2019 | 737,753 | | | $ | 26.64 | |
| Exercised | (67,768) | | | 24.66 | |
| | | |
| Option awards outstanding, September 30, 2020 | 669,985 | | | $ | 26.84 | |
|
| | | | | | |
| | Number of Option Awards | | Weighted Average Exercise Price |
| Option awards outstanding, December 31, 2016 | 3,602,076 |
| | $ | 26.74 |
|
| Exercised | (2,304,108 | ) | | 26.70 |
|
| Option awards outstanding and exercisable, September 30, 2017 | 1,297,968 |
| | $ | 26.81 |
|
Activity related to stock option awards for the nine months ended September 30, 2016 was not significant. The intrinsic value of options exercised and the related tax benefitbenefits was $25.3 million and $3.8 million, respectively, duringimmaterial for the nine months ended September 30, 2017.2021 and 2020.
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BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
Note 109 Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis
FollowingThe following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which those measurements are typically classified.
Investment securities available for sale and marketable equity securities—Fair value measurements are based on quoted prices in active markets when available; these measurements are classified within level 1 of the fair value hierarchy. These securities typically include U.S. Treasury securities and certain preferred stocks. If quoted prices in active markets are not available, fair values are estimated using quoted prices of securities with similar characteristics, quoted prices of identical securities in less active markets, discounted cash flow techniques, or matrix pricing models. These securities are generally classified within level 2 of the fair value hierarchy and include U.S. Government agency securities, U.S. Government agency and sponsored enterprise MBS, preferred stock investments for which level 1 valuations are not available, corporate debt securities, non-mortgage asset-backed securities, single family rental real estate-backed securities, certain private label residential MBS and CMOs, private label commercial MBS, collateralized loan obligations and state and municipal obligations. Pricing of these securities is generally primarily spread driven. Observable inputs that may impact the valuation of these securities include benchmark yield curves, credit spreads, reported trades, dealer quotes, bids, issuer spreads, current rating, historical constant prepayment rates, historical voluntary prepayment rates, structural and waterfall features of individual securities, published collateral data, and for certain securities, historical constant default rates and default severities. Investment securities available for sale generally classified within level 3 of the fair value hierarchy include certain private label MBS and trust preferred securities. The Company typically values these securities using third-party proprietary pricing models, primarily discounted cash flow valuation techniques, which incorporate both observable and unobservable inputs. Unobservable inputs that may impact the valuation of
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
these securities include risk adjusted discount rates, projected prepayment rates, projected default rates and projected loss severity.
The Company uses third-party pricing services in determining fair value measurements for investment securities. To obtain an understanding of the methodologies and assumptions used, management reviews written documentation provided by the pricing services, conducts interviews with valuation desk personnel and reviews model results and detailed assumptions used to value selected securities as considered necessary. Management has established a robust price challenge process that includes a review by the treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over month fluctuations or deviations from expectations is challenged. If considered necessary to resolve any discrepancies, a price will be obtained from an additional independent valuation source. The Company does not typically adjust the prices provided, other than through this established challenge process. The results of price challenges are subject to review by executive management. The Company has also established a quarterly process whereby prices provided by its primary pricing service for a sample of securities are validated. Any price discrepancies are resolved based on careful consideration of the assumptions and inputs employed by each of the pricing sources.
Servicing rights—Commercial servicing rights are valued using a discounted cash flow methodology incorporating contractually specified servicing fees and market based assumptions about prepayments, discount rates, default rates and costs of servicing. Prepayment and default assumptions are based on historical industry data for loans with similar characteristics. Assumptions about costs of servicing are based on market convention. Discount rates are based on rates of return implied by observed trades of underlying loans in the secondary market. Fair value of residential MSRs is estimated using a discounted cash flow technique that incorporates market‑based assumptions including estimated prepayment speeds, contractual servicing fees, cost to service, discount rates, escrow account earnings, ancillary income, and estimated defaults. DueAs all significant inputs to the naturevaluation process are observable, these instruments are classified within level 2 of the valuation inputs and the limited availability of market pricing, servicing rights are classified as level 3.fair value hierarchy.
Derivative financial instruments—Fair values of interest rate swaps and caps are determined using widely accepted discounted cash flow modeling techniques. These discounted cash flow models use projections of future cash payments and receipts that are discounted at mid-market rates. Observable inputs that may impact the valuation of these instruments include LIBOR swap rates and LIBOR forward yield curves. These fair value measurements are generally classified within level 2 of the fair value hierarchy.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
The following tables present assets and liabilities measured at fair value on a recurring basis at the dates indicated (in thousands):
| | | | | | | | | | | | | | | | | |
| | September 30, 2021 |
| |
| | Level 1 | | Level 2 | | Total |
| Investment securities available for sale: | | | | | |
| U.S. Treasury securities | $ | 132,190 | | | $ | — | | | $ | 132,190 | |
| U.S. Government agency and sponsored enterprise residential MBS | — | | | 2,109,141 | | | 2,109,141 | |
| U.S. Government agency and sponsored enterprise commercial MBS | — | | | 896,791 | | | 896,791 | |
| | | | | |
| Private label residential MBS and CMOs | — | | | 2,172,078 | | | 2,172,078 | |
| Private label commercial MBS | — | | | 2,591,320 | | | 2,591,320 | |
| Single family real estate-backed securities | — | | | 621,301 | | | 621,301 | |
| Collateralized loan obligations | — | | | 973,535 | | | 973,535 | |
| Non-mortgage asset-backed securities | — | | | 278,072 | | | 278,072 | |
| State and municipal obligations | — | | | 225,404 | | | 225,404 | |
| SBA securities | — | | | 198,241 | | | 198,241 | |
| | | | | |
| Marketable equity securities | 121,618 | | | — | | | 121,618 | |
| Servicing rights | — | | | 6,072 | | | 6,072 | |
| Derivative assets | — | | | 69,821 | | | 69,821 | |
| Total assets at fair value | $ | 253,808 | | | $ | 10,141,776 | | | $ | 10,395,584 | |
| Derivative liabilities | $ | — | | | $ | (28,295) | | | $ | (28,295) | |
| Total liabilities at fair value | $ | — | | | $ | (28,295) | | | $ | (28,295) | |
| | | | | | | | | | | | December 31, 2020 |
| | September 30, 2017 | |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Total |
| Investment securities available for sale: | |
| | |
| | |
| | |
| Investment securities available for sale: | | | | | |
| U.S. Treasury securities | $ | 24,957 |
| | $ | — |
| | $ | — |
| | $ | 24,957 |
| U.S. Treasury securities | $ | 80,851 | | | $ | — | | | $ | 80,851 | |
| U.S. Government agency and sponsored enterprise residential MBS | — |
| | 2,348,687 |
| | — |
| | 2,348,687 |
| U.S. Government agency and sponsored enterprise residential MBS | — | | | 2,405,570 | | | 2,405,570 | |
| U.S. Government agency and sponsored enterprise commercial MBS | — |
| | 139,220 |
| | — |
| | 139,220 |
| U.S. Government agency and sponsored enterprise commercial MBS | — | | | 539,354 | | | 539,354 | |
| | Private label residential MBS and CMOs | — |
| | 467,061 |
| | 60,797 |
| | 527,858 |
| Private label residential MBS and CMOs | — | | | 998,603 | | | 998,603 | |
| Private label commercial MBS | — |
| | 1,153,601 |
| | — |
| | 1,153,601 |
| Private label commercial MBS | — | | | 2,526,354 | | | 2,526,354 | |
| Single family rental real estate-backed securities | — |
| | 572,948 |
| | — |
| | 572,948 |
| |
| Single family real estate-backed securities | | Single family real estate-backed securities | — | | | 650,888 | | | 650,888 | |
| Collateralized loan obligations | — |
| | 700,319 |
| | — |
| | 700,319 |
| Collateralized loan obligations | — | | | 1,140,274 | | | 1,140,274 | |
| Non-mortgage asset-backed securities | — |
| | 82,637 |
| | — |
| | 82,637 |
| Non-mortgage asset-backed securities | — | | | 253,261 | | | 253,261 | |
| Preferred stocks | 70,038 |
| | 678 |
| | — |
| | 70,716 |
| |
| State and municipal obligations | — |
| | 677,015 |
| | — |
| | 677,015 |
| State and municipal obligations | — | | | 235,709 | | | 235,709 | |
| SBA securities | — |
| | 586,675 |
| | — |
| | 586,675 |
| SBA securities | — | | | 231,545 | | | 231,545 | |
| Other debt securities | — |
| | 3,815 |
| | 5,024 |
| | 8,839 |
| |
| | Marketable equity securities | | Marketable equity securities | 104,274 | | | — | | | 104,274 | |
| Servicing rights | — |
| | — |
| | 30,136 |
| | 30,136 |
| Servicing rights | — | | | 7,073 | | | 7,073 | |
| Derivative assets | — |
| | 28,334 |
| | — |
| | 28,334 |
| Derivative assets | — | | | 123,830 | | | 123,830 | |
| Total assets at fair value | $ | 94,995 |
| | $ | 6,760,990 |
| | $ | 95,957 |
| | $ | 6,951,942 |
| Total assets at fair value | $ | 185,125 | | | $ | 9,112,461 | | | $ | 9,297,586 | |
| Derivative liabilities | $ | — |
| | $ | 27,076 |
| | $ | — |
| | $ | 27,076 |
| Derivative liabilities | $ | — | | | $ | (44,490) | | | $ | (44,490) | |
| Total liabilities at fair value | $ | — |
| | $ | 27,076 |
| | $ | — |
| | $ | 27,076 |
| Total liabilities at fair value | $ | — | | | $ | (44,490) | | | $ | (44,490) | |
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
|
| | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | Level 1 | | Level 2 | | Level 3 | | Total |
| Investment securities available for sale: | |
| | |
| | |
| | |
|
| U.S. Treasury securities | $ | 5,005 |
| | $ | — |
| | $ | — |
| | $ | 5,005 |
|
| U.S. Government agency and sponsored enterprise residential MBS | — |
| | 1,527,242 |
| | — |
| | 1,527,242 |
|
| U.S. Government agency and sponsored enterprise commercial MBS | — |
| | 124,586 |
| | — |
| | 124,586 |
|
| Private label residential MBS and CMOs | — |
| | 254,488 |
| | 120,610 |
| | 375,098 |
|
| Private label commercial MBS | — |
| | 1,187,624 |
| | — |
| | 1,187,624 |
|
| Single family rental real estate-backed securities | — |
| | 861,251 |
| | — |
| | 861,251 |
|
| Collateralized loan obligations | — |
| | 487,296 |
| | — |
| | 487,296 |
|
| Non-mortgage asset-backed securities | — |
| | 186,736 |
| | — |
| | 186,736 |
|
| Preferred stocks | 86,890 |
| | 1,313 |
| | — |
| | 88,203 |
|
| State and municipal obligations | — |
| | 698,546 |
| | — |
| | 698,546 |
|
| SBA securities | — |
| | 523,906 |
| | — |
| | 523,906 |
|
| Other debt securities | — |
| | 3,519 |
| | 4,572 |
| | 8,091 |
|
| Servicing rights | — |
| | — |
| | 27,159 |
| | 27,159 |
|
| Derivative assets | — |
| | 50,232 |
| | — |
| | 50,232 |
|
| Total assets at fair value | $ | 91,895 |
| | $ | 5,906,739 |
| | $ | 152,341 |
| | $ | 6,150,975 |
|
| Derivative liabilities | $ | — |
| | $ | 61,562 |
| | $ | — |
| | $ | 61,562 |
|
| Total liabilities at fair value | $ | — |
| | $ | 61,562 |
| | $ | — |
| | $ | 61,562 |
|
There were no transfers of financial assets between levels of the fair value hierarchy during the nine months ended September 30, 2017.
The following table reconciles changes in the fair value of assets and liabilities measured at fair value on a recurring basis and classified in level 3 of the fair value hierarchy during the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| | Private Label Residential MBS | | Other Debt Securities | | Servicing Rights | | Private Label Residential MBS | | Other Debt Securities | | Servicing Rights |
| Balance at beginning of period | $ | 108,790 |
| | $ | 4,923 |
| | $ | 29,128 |
| | $ | 131,156 |
| | $ | 4,292 |
| | $ | 24,891 |
|
| Gains (losses) for the period included in: | | | | | | | | | | | |
| Net income | 24,146 |
| | — |
| | (1,330 | ) | | — |
| | — |
| | (2,369 | ) |
| Other comprehensive income | (24,668 | ) | | 101 |
| | — |
| | 337 |
| | 22 |
| | — |
|
| Discount accretion | 2,332 |
| | 59 |
| | — |
| | 1,404 |
| | 36 |
| | — |
|
| Purchases or additions | — |
| | — |
| | 2,338 |
| | — |
| | — |
| | 2,194 |
|
| Sales | (40,732 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
| Settlements | (9,071 | ) | | (59 | ) | | — |
| | (5,594 | ) | | (26 | ) | | — |
|
| Transfers into level 3 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Transfers out of level 3 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Balance at end of period | $ | 60,797 |
| | $ | 5,024 |
| | $ | 30,136 |
| | $ | 127,303 |
| | $ | 4,324 |
| | $ | 24,716 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | Private Label Residential MBS | | Other Debt Securities | | Servicing Rights | | Private Label Residential MBS | | Other Debt Securities | | Servicing Rights |
| Balance at beginning of period | $ | 120,610 |
| | $ | 4,572 |
| | $ | 27,159 |
| | $ | 140,883 |
| | $ | 4,532 |
| | $ | 20,017 |
|
| Gains (losses) for the period included in: | | | | | | | | | | | |
| Net income | 24,146 |
| | — |
| | (4,273 | ) | | — |
| | — |
| | (5,983 | ) |
| Other comprehensive income | (25,651 | ) | | 469 |
| | — |
| | (190 | ) | | (245 | ) | | — |
|
| Discount accretion | 5,208 |
| | 248 |
| | — |
| | 4,485 |
| | 88 |
| | — |
|
| Purchases or additions | — |
| | — |
| | 7,250 |
| | — |
| | — |
| | 10,682 |
|
| Sales | (40,732 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
| Settlements | (22,784 | ) | | (265 | ) | | — |
| | (17,875 | ) | | (51 | ) | | — |
|
| Transfers into level 3 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Transfers out of level 3 | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Balance at end of period | $ | 60,797 |
| | $ | 5,024 |
| | $ | 30,136 |
| | $ | 127,303 |
| | $ | 4,324 |
| | $ | 24,716 |
|
Gains on private label residential MBS recognized in net income during the three and nine months ended September 30, 2017 are included in the consolidated statement of income line item "Gain on investment securities available for sale, net." Changes in the fair value of servicing rights are included in the consolidated statement of income line item “Other non-interest income.” Changes in fair value include changes due to valuation assumptions, primarily discount rates and prepayment speeds, as well as other changes such as runoff and the passage of time. The amount of net unrealized losses included in earnings for the nine months ended September 30, 2017 and 2016 that were related to servicing rights held at September 30, 2017 and 2016 totaled approximately $0.8 million and $1.7 million, respectively, and were primarily due to changes in discount rates and prepayment speeds.
Securities for which fair value measurements are categorized in level 3 of the fair value hierarchy at September 30, 2017 consisted of pooled trust preferred securities with a fair value of $5 million and private label residential MBS and CMOs with a fair value of $61 million. The trust preferred securities are not material to the Company’s financial statements. Private label residential MBS consisted of senior and mezzanine tranches collateralized by prime fixed rate and hybrid 1-4 single family residential mortgages originated before 2005, some of which contain option-arm features. Substantially all of these securities have variable rate coupons. Weighted average subordination levels at September 30, 2017 were 16.4% and 10.4% for investment grade and non-investment grade securities, respectively.
The following table provides information about the valuation techniques and unobservable inputs used in the valuation of private label residential MBS and CMOs falling within level 3 of the fair value hierarchy as of September 30, 2017 (dollars in thousands):
|
| | | | | | | | | | |
| | | Fair Value at | | Valuation Technique | | Unobservable Input | | Range (Weighted Average) |
| | | September 30, 2017 | | | |
| Investment grade | | $ | 34,245 |
| | Discounted cash flow | | Voluntary prepayment rate | | 6.60% - 25.60% (15.92%) |
| | | | | | | Probability of default | | 0.13% - 4.04% (1.36%) |
| | | | | | | Loss severity | | 15.00% - 75.00% (33.10%) |
| | | | | | | Discount rate | | 1.88% - 7.43% (3.48%) |
| | | | | | | | | |
| Non-investment grade | | $ | 26,552 |
| | Discounted cash flow | | Voluntary prepayment rate | | 1.10% - 29.30% (15.35%) |
| | | | | | | Probability of default | | 0.13% - 4.15% (1.51%) |
| | | | | | | Loss severity | | 15.00% - 95.00% (32.96%) |
| | | | | | | Discount rate | | 1.35% - 9.43% (5.89%) |
The significant unobservable inputs impacting the fair value measurement of private label residential MBS and CMOs include voluntary prepayment rates, probability of default, loss severity given default and discount rates. Generally, increases in
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
probability of default, loss severity or discount rates would result in a lower fair value measurement. Alternatively, decreases in probability of default, loss severity or discount rates would result in a higher fair value measurement. For securities with less favorable credit characteristics, decreases in voluntary prepayment speeds may be interpreted as a deterioration in the overall credit quality of the underlying collateral and as such, lead to lower fair value measurements. The fair value measurements of those securities with higher levels of subordination will be less sensitive to changes in these unobservable inputs other than discount rates, while securities with lower levels of subordination will show a higher degree of sensitivity to changes in these unobservable inputs other than discount rates. Generally, a change in the assumption used for probability of default is accompanied by a directionally similar change in the assumption used for loss severity given default and a directionally opposite change in the assumption used for voluntary prepayment rate.
The following table provides information about the valuation techniques and significant unobservable inputs used in the valuation of servicing rights as of September 30, 2017 (dollars in thousands):
|
| | | | | | | | | | |
| | | Fair Value at | | Valuation Technique | | Unobservable Input | | Range (Weighted Average) |
| | | September 30, 2017 | | | |
| Residential MSRs | | $ | 18,006 |
| | Discounted cash flow | | Prepayment rate | | 2.76% - 29.96% (12.88%) |
| | | | | | | Discount rate | | 9.50% - 9.58% (9.51%) |
| | | | | | | | | |
| Commercial servicing rights | | $ | 12,130 |
| | Discounted cash flow | | Prepayment rate | | 0.09% - 9.99% (7.81%) |
| | | | | | | Discount rate | | 8.12% - 14.57% (12.48%) |
Increases in prepayment rates or discount rates would result in lower fair value measurements and decreases in prepayment rates or discount rates would result in higher fair value measurements. Although the prepayment rate and the discount rate are not directly interrelated, they generally move in opposite directions.
Assets and liabilities measured at fair value on a non-recurring basisbasis
Following is a description of the methodologies used to estimate the fair values of assets and liabilities that may be measured at fair value on a non-recurring basis, and the level within the fair value hierarchy in which those measurements are typically classified.
ImpairedCollateral dependent loans, OREOand other repossessed assets—The carrying amount of collateral dependent impaired loans is typically based on the fair value of the underlying collateral, which may be real estate taxi medallions, or other business assets, less estimated costs to sell.sell when repayment is expected to come from the sale of the collateral. The carrying value of OREO is initially measured based on the fair value of the real estate acquired in foreclosure and subsequently adjusted to the lower of cost or estimated fair value, less estimated cost to sell. Fair values of real estate collateral and OREO are typically based on third-party real estate appraisals which utilize market and income approaches to valuation incorporating both observable and unobservable inputs. When current appraisals are not available, the Company may use brokers’ price opinions, home price indices or other available information about changes in real estate market conditions to adjust the latest appraised value available. These adjustments to appraised values may be subjective and involve significant management judgment. The fair value of repossessed assets other than taxi medallions, or collateral consisting of other business assets may be based on third-party appraisals or internal analyses that use market approaches to valuation incorporating primarilya combination of observable and unobservable inputs.
The fair value of New York City taxi medallions is based primarily on an internal analysis that utilizes an income approach to valuation. This analysis utilizes data obtained from the NYTLC about the fleet in general and in some cases, our portfolio specifically, and management's assumptions, based on external data when available, about revenues, costs and expenses, to estimate the value that can reasonably be supported by the cash flow generating capacity of a medallion. We further discount the results of this analysis in recognition of estimated selling costs and declining trends in medallion values. We also consider prices of recent medallion transfers as published by the NYTLC; however, the market for taxi medallions is illiquid and information about the circumstances underlying observed transfers is unavailable, therefore, information about recent transfers is not considered sufficient to establish a reliable estimate of value. The Company's medallion valuations fall within the range of published transfer prices over the last six months. Taxi medallions in municipalities other than New York City are generally valued based on published information about recent transfer prices; the valuation of these assets did not have a material impact on the Company's consolidated financial statements for any period presented as the taxi medallion portfolio is heavily concentrated in New York City.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
Fair value measurements related to collateral dependent impaired loans, OREO and other repossessed assets are generally classified within level 3 of the fair value hierarchy.
Loans held for sale—Loans not originated or otherwise acquired with the intent to sell are transferred into the held for sale classification at the lower of carrying amount or fair value, typically determined based on the estimated selling price of the loans. These fair value measurements are typically classified within level 3 of the fair value hierarchy.
The following tables presenttable presents the net carrying value of assets classified within level 3 of the fair value hierarchy at the dates indicated, for which non-recurring changes in fair value have been recorded for the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | Losses from Fair Value Changes |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Three Months Ended
September 30, 2017 | | Nine Months Ended
September 30, 2017 |
| OREO and repossessed assets | $ | — |
| | $ | — |
| | $ | 5,520 |
| | $ | 5,520 |
| | $ | (515 | ) | | $ | (1,534 | ) |
| Impaired loans | $ | — |
| | $ | — |
| | $ | 107,173 |
| | $ | 107,173 |
| | $ | (35,106 | ) | | $ | (58,073 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 | | Losses from Fair Value Changes |
| | Level 1 | | Level 2 | | Level 3 | | Total | | Three Months Ended
September 30, 2016 | | Nine Months Ended
September 30, 2016 |
| OREO and repossessed assets | $ | — |
| | $ | — |
| | $ | 7,923 |
| | $ | 7,923 |
| | $ | (372 | ) | | $ | 740 |
|
| Impaired loans | $ | — |
| | $ | — |
| | $ | 59,678 |
| | $ | 59,678 |
| | $ | (10,623 | ) | | $ | (18,873 | ) |
Included in the tables above are impaired taxi medallion loans with carrying values of $90.1 million and $39.6 million at September 30, 2017 and September 30, 2016, respectively, the majority of which were in New York City. Losses of $54.3 million and $10.2 million were recognized on impaired taxi medallion loans during the nine months ended September 30, 2017 and 2016, respectively.2021 (in thousands):
Decreases in the value of medallions are largely driven by decreases in revenues generated from the medallions. Inputs that had the most significant impact on the valuation of New York City taxi medallions at September 30, 2017 are presented below: | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| | | |
| Collateral dependent loans | $ | 47,822 | | | $ | 73,803 | |
| Loans held for sale | — | | | 20,500 | |
| OREO and repossessed assets | 2,151 | | | 2,786 | |
| | | |
| $ | 49,973 | | | $ | 97,089 | |
|
| | |
| Average Amount |
Average fare per trip | $16.12 |
Number of trips per shift | 15.4 |
|
Days worked per month | 25.6 |
|
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
The following table presents the carrying value and fair value of financial instruments and the level within the fair value hierarchy in which those measurements are classified at the dates indicated (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | September 30, 2021 | | December 31, 2020 |
| | | | | |
| | Level | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
| Assets: | | | | | | | | | |
| Cash and cash equivalents | 1 | | $ | 507,022 | | | $ | 507,022 | | | $ | 397,716 | | | $ | 397,716 | |
| Investment securities | 1/2 | | $ | 10,329,691 | | | $ | 10,330,494 | | | $ | 9,176,683 | | | $ | 9,177,870 | |
| Non-marketable equity securities | 2 | | $ | 155,584 | | | $ | 155,584 | | | $ | 195,865 | | | $ | 195,865 | |
| Loans held for sale | 2 | | $ | — | | | $ | — | | | $ | 24,676 | | | $ | 25,057 | |
| Loans, net | 3 | | $ | 22,807,969 | | | $ | 23,129,231 | | | $ | 23,608,719 | | | $ | 24,205,016 | |
| Derivative assets | 2 | | $ | 69,821 | | | $ | 69,821 | | | $ | 123,830 | | | $ | 123,830 | |
| Liabilities: | | | | | | | | | |
| Demand, savings and money market deposits | 2 | | $ | 24,887,497 | | | $ | 24,887,497 | | | $ | 22,688,617 | | | $ | 22,688,617 | |
| Time deposits | 2 | | $ | 3,228,776 | | | $ | 3,229,613 | | | $ | 4,807,199 | | | $ | 4,814,862 | |
| Federal funds purchased | 2 | | $ | 199,000 | | | $ | 199,000 | | | $ | 180,000 | | | $ | 180,000 | |
| FHLB advances | 2 | | $ | 2,431,014 | | | $ | 2,431,947 | | | $ | 3,122,999 | | | $ | 3,127,190 | |
| Notes and other borrowings | 2 | | $ | 721,527 | | | $ | 833,108 | | | $ | 722,495 | | | $ | 849,120 | |
| Derivative liabilities | 2 | | $ | 28,295 | | | $ | 28,295 | | | $ | 44,490 | | | $ | 44,490 | |
|
| | | | | | | | | | | | | | | | | |
| | | | September 30, 2017 | | December 31, 2016 |
| | Level | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value |
| Assets: | | | |
| | |
| | |
| | |
|
| Cash and cash equivalents | 1 | | $ | 292,601 |
| | $ | 292,601 |
| | $ | 448,313 |
| | $ | 448,313 |
|
| Investment securities available for sale | 1/2/3 | | 6,893,472 |
| | 6,893,472 |
| | 6,073,584 |
| | 6,073,584 |
|
| Investment securities held to maturity | 3 | | 10,000 |
| | 10,000 |
| | 10,000 |
| | 10,000 |
|
| Non-marketable equity securities | 2 | | 270,239 |
| | 270,239 |
| | 284,272 |
| | 284,272 |
|
| Loans held for sale | 2 | | 31,507 |
| | 35,113 |
| | 41,198 |
| | 45,833 |
|
| Loans: | | | | | | | | | |
| Covered | 3 | | 533,128 |
| | 997,376 |
| | 611,942 |
| | 1,200,291 |
|
| Non-covered | 3 | | 19,918,729 |
| | 19,906,579 |
| | 18,630,499 |
| | 18,713,495 |
|
| FDIC Indemnification asset | 3 | | 349,617 |
| | 168,415 |
| | 515,933 |
| | 256,691 |
|
| Derivative assets | 2 | | 28,334 |
| | 28,334 |
| | 50,232 |
| | 50,232 |
|
| Liabilities: | | | | | | | | | |
| Demand, savings and money market deposits | 2 | | $ | 14,889,543 |
| | $ | 14,889,543 |
| | $ | 13,735,248 |
| | $ | 13,735,248 |
|
| Time deposits | 2 | | 6,333,701 |
| | 6,335,324 |
| | 5,755,642 |
| | 5,759,787 |
|
| FHLB advances | 2 | | 4,871,000 |
| | 4,876,017 |
| | 5,239,348 |
| | 5,244,188 |
|
| Notes and other borrowings | 2 | | 402,828 |
| | 427,748 |
| | 402,809 |
| | 403,733 |
|
| Derivative liabilities | 2 | | 27,076 |
| | 27,076 |
| | 61,562 |
| | 61,562 |
|
The following methods and assumptions were used to estimate the fair value of each class of financial instruments, other than those described above:
Cash and cash equivalents
The carrying value of cash and cash equivalents approximates fair value due to their short-term nature and generally negligible credit risk.
Investment securities held to maturity
Investment securities held to maturity includes one bond issued by the State of Israel, with fair value obtained from a third party pricing service.
Non-marketable equity securities
Non-marketable equity securities include FHLB and FRB stock. There is no market for these securities, which can be liquidated only by redemption by the issuer. These securities are valued at par, which has historically represented the redemption price and is therefore considered to approximate fair value.
Loans held for sale
The fair value of the portion of small business loans guaranteed by U.S. Government agencies being held for sale is estimated using pricing on recent sales of similar loans by the Company in active markets.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 20172021
Covered loans
Fair values are estimated based on a discounted cash flow analysis. Estimates of future cash flows incorporate various factors that may include the type of loan and related collateral, estimated collateral values, estimated voluntary prepayment rates, estimated default probability and loss severity given default, whether the interest rate is fixed or variable, term of loan and whether or not the loan is amortizing. The fair values of loans accounted for in pools are estimated on a pool basis. Discount rates for residential loans are based on observable fixed income market data for products with similar credit characteristics.
Non-covered loans
Fair values of residential loans are estimated using a discounted cash flow analysis with discount rates based on yields at which similar loans are trading in the secondary market, which reflect assumptions about credit risk. Fair values of commercial and consumer loans are estimated using a discounted cash flow analysis with discount rates based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The ALLL related to commercial and consumer loans is considered a reasonable estimate of the required adjustment to fair value to reflect the impact of credit risk. This estimate may not represent an exit value as defined in ASC 820.
FDIC indemnification asset
The fair value of the FDIC indemnification asset has been estimated using a discounted cash flow technique incorporating assumptions about the timing and amount of future projected cash payments from the FDIC related to the resolution of covered assets. The factors that impact estimates of future cash flows are similar to those impacting estimated cash flows from covered loans. The discount rate is determined by adjusting the risk free rate to incorporate uncertainty in the estimate of the timing and amount of future cash flows and illiquidity.
Deposits
The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The fair value of time deposits is estimated using a discounted cash flow technique based on rates currently offered for deposits of similar remaining maturities.
FHLB advances
Fair value is estimated by discounting contractual future cash flows using the current rate at which borrowings with similar terms and remaining maturities could be obtained by the Company.
Senior notes
Fair value is estimated based on quoted prices of identical securities in less active markets.
Note 1110 Commitments and Contingencies
The Company issues off-balance sheet financial instruments to meet the financing needs of its customers. These financial instruments include commitments to fund loans, unfunded commitments under existing lines of credit, and commercial and standby letters of credit. These commitments expose the Company to varying degrees of credit and market risk which are essentially the same as those involved in extending loans to customers, and are subject to the same credit policies used in underwriting loans. Collateral may be obtained based on the Company’s credit evaluation of the counterparty. The Company’s maximum exposure to credit loss is represented by the contractual amount of these commitments. Unfunded commitments under lines of credit include $10.0 million available under non-cancellable commitments in effect at the date of the FSB Acquisition, which are covered under the Single Family Shared-Loss Agreement if prescribed conditions are met.
Commitments to fund loans
These are agreements to lend funds to customers as long as there is no violation of any condition established in the contract. Commitments to fund loans generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of these commitments are expected to expire without being funded and, therefore, the total commitment amounts do not necessarily represent future liquidity requirements.
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2017
Unfunded commitments under lines of credit
Unfunded commitments under lines of credit include commercial, commercial real estate home equity and consumer lines of credit to existing customers.customers, for many of which additional extensions of credit are subject to borrowing base requirements. Some of these commitments may mature without being fully funded.
Commercial and standby letters of credit
Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support trade transactions or guarantee arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
Total lending related commitments outstanding at September 30, 20172021 were as follows (in thousands):
|
| | | |
| Commitments to fund loans | $ | 417,943 |
|
| Commitments to purchase loans | 287,302 |
|
| Unfunded commitments under lines of credit | 2,361,922 |
|
| Commercial and standby letters of credit | 83,141 |
|
| | $ | 3,150,308 |
|
| | | | | |
| Commitments to fund loans | $ | 401,167 | |
| |
| Unfunded commitments under lines of credit | 3,925,811 | |
| Commercial and standby letters of credit | 99,210 | |
| $ | 4,426,188 | |
Legal Proceedings
The Company is involved as plaintiff or defendant in various legal actions arising in the normal course of business. In the opinion of management, based upon advice of legal counsel, the likelihood is remote that the impact of these proceedings, either individually or in the aggregate, would be material to the Company’s consolidated financial position, results of operations or cash flows.
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BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended to focus on significant matters impacting and changes in the financial condition and results of operations of the Company during the three and nine months ended September 30, 20172021 and should be read in conjunction with the consolidated financial statements and notes hereto included in this Quarterly Report on Form 10-Q and BKU's 20162020 Annual Report on Form 10-K for the year ended December 31, 20162020 (the "2016"2020 Annual Report on Form 10-K”10-K").
Forward-Looking Statements
This Quarterly Report on Form 10-Q 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. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates”“estimates,” "future" and similar expressions identify forward-looking statements. These forward-looking statements are based on the historical performance of the Company 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 so contemplated will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity.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. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, the risk factors described in Part II, Item 1A of this Quarterly Report on Form 10- Q and in Part I, Item 1A of the 20162020 Annual Report on Form 10-K.10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K. 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.
Overview
Quarterly Highlights
In evaluating our financial performance, we consider the level of and trends in net interest income, the net interest margin, the cost of deposits, levels and composition of non-interest income and non-interest expense, performance ratios such as the return on average equity and return on average assets and asset quality ratios, particularly for the non-covered portfolio, including the ratio of non-performing loans to total loans, non-performing assets to total assets, trends in criticized and classified assets and portfolio delinquency and charge-off trends. We consider growth in earning assets and deposits, particularly non-interest bearing deposits, trends in funding mix and cost of funds. We analyze these ratios and trends against our own historical performance, our budgeted performance and the financial condition and performance of comparable financial institutions.
Quarterly highlights include:
•Net income for the quarterthree months ended September 30, 20172021 was $67.8$86.9 million, or $0.62$0.94 per diluted share, compared to $50.8$66.6 million, or $0.47$0.70 per diluted share, for the quarter ended September 30, 2016. For the ninethree months ended September 30, 2017,2020 and net income was $196.5of $104.0 million, or $1.79$1.11 per diluted share compared to $162.4 million, or $1.50 per diluted share, for the nine months ended September 30, 2016. Earnings for the nine months ended September 30, 2017 generated an annualized return on average stockholders' equity of 10.21% and an annualized return on average assets of 0.92%.
Net interest income increased by $19.5 million to $241.3 million for the quarter ended September 30, 2017 from $221.7 million for the quarter ended September 30, 2016. Interest income increased by $39.5 million, driven by increases in the average balances of loans and investment securities outstanding and an increase in the yield on interest earning assets. Interest expense increased by $19.9 million, driven by increases in average interest bearing liabilities and the cost of those liabilities. For the nine months ended September 30, 2017, net interest income increased by $68.6 million to $711.4 million from $642.9 million for the nine months ended September 30, 2016.
The net interest margin, calculated on a tax-equivalent basis, decreased to 3.62% for the quarter ended September 30, 2017 from 3.69% for the quarter ended September 30, 2016 and 3.76% for the immediately preceding quarter ended June 30, 2017. Significant factors contributing2021. Net income for the nine months ended September 30, 2021 was $289.7 million, or $3.12 per diluted share, compared to $112.1 million, or $1.17 per diluted share, for the nine months ended September 30, 2020. On an annualized basis, earnings for the nine months ended September 30, 2021 generated a return on average stockholders' equity of 12.4% and a return on average assets of 1.09%.
•Net interest income decreased by $3.2 million compared to the decline inimmediately preceding three months ended June 30, 2021 and increased by $7.6 million compared to the net interest margin included the continued run-off of high-yielding covered loans and an increase in the cost of interest bearing liabilities.three months ended September 30, 2020. The net interest margin, calculated on a tax-equivalent basis, was 3.69%2.33% for the ninethree months ended September 30, 20172021 compared to 3.75%2.37% for the nineimmediately preceding three months ended June 30, 2021 and 2.32% for the three months ended September 30, 2016.
Total2020. The net interest earning assets increased by $613 million during the third quarter of 2017. Non-covered loans and leases, including equipment under operating lease, grew by $384 million during the quarter. For the nine months ended
September 30, 2017, total interest earning assets increased by $1.9 billion and non-covered loans and leases grew by $1.3 billion.
Total deposits increased by $445 millionmargin for the quarter ended September 30, 20172021 was impacted by pressure on earning asset yields, in part resulting from lower than expected commercial loan growth, and lower recognition of PPP fees.
•The average cost of total deposits continued to $21.2 billion.decline, dropping by 0.05% to 0.20% for the three months ended September 30, 2021 from 0.25% for the immediately preceding three months ended June 30, 2021, and 0.57% for the three months ended September 30, 2020. On a spot basis, the APY on total deposits declined to 0.19% at September 30, 2021 from 0.22% at June 30, 2021 and 0.36% at December 31, 2020.
•Non-interest bearing demand deposits grew by $324 million during the three months ended September 30, 2021 while average non-interest bearing demand deposits grew by $749 million compared to the immediately preceding quarter.
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BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2021
and by $2.7 billion compared to the third quarter of the prior year. At September 30, 2021, non-interest bearing demand deposits represented 33% of total deposits, compared to 25% of total deposits at December 31, 2020.
•Total deposits declined by $493 million during the three months ended September 30, 2021, as the Company continues to execute on a strategy focused on improving the quality of the deposit base rather than on growth in total deposits. Money market and savings deposits declined by $1.1 billion in the third quarter. The majority of this decline was attributable to reductions in accounts that management believes will be more price sensitive in a rising rate environment.
•For the three months ended September 30, 2021, the Company recorded a recovery of credit losses of $(11.8) million compared to a recovery of $(27.5) million for the immediately preceding three months ended June 30, 2021 and a provision for credit losses of $29.2 million for the three months ended September 30, 2020. For the nine months ended September 30, 2017, total deposits increased by $1.7 billion.2021 and 2020, the provision for (recovery of) credit losses was $(67.4) million and $180.1 million, respectively. Year over year volatility in the provision related to the expected economic impact of the onset of the COVID-19 pandemic in 2020 and subsequent recovery in 2021.
At•As expected, as the economy emerges from the COVID-19 crisis and our borrowers' operating results improve, criticized and classified loans continued to decline. During the three months ended September 30, 2017, 96.7% of the non-covered commercial loan portfolio was rated "pass"2021, total criticized and substantially all of the non-covered residential portfolio was current.classified loans declined by $240 million. The ratio of non-performing non-covered loans to total non-covered loans was 1.00% and the ratio of non-performing, non-covered assetsdeclined to total assets was 0.69%1.21% at September 30, 2017. Non-performing taxi medallion2021 from 1.28% at June 30, 2021.
•Loans currently under short-term deferral totaled $17 million and loans comprised 0.60%modified under the CARES Act totaled $267 million for a total of total non-covered loans and 0.41% of total assets$285 million at September 30, 2017.2021, down from a total of $497 million at June 30, 2021.
•Book value per common share and tangible book value per common share continued to accrete, increasing to $34.39 and $33.53, respectively, at September 30, 2021 from $33.91 and $33.08, respectively, at June 30, 2021 and $32.05 and $31.22, respectively at December 31, 2020.
•During the three months ended September 30, 2021, the Company repurchased approximately 3.2 million shares of its common stock for an aggregate purchase price of $129.4 million, at a weighted average price of $40.62 per share.
•On October 20, 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 $58.3 million in remaining authorization as of September 30, 2021, 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.
•In October, 2021, the Bank reached a settlement with the Florida Department of Revenue related to certain tax matters for the 2009-2019 tax years and recorded a tax benefit of $43.9 million, net of federal impact. Unrelated to the Florida settlement, the Bank expects to record an additional approximately $25 million tax benefit in the fourth quarter of 2021 related to a reduction in the liability for unrecognized tax benefits arising from expiration of statutes of limitation in the Federal and certain state jurisdictions.
Impact of the COVID-19 Pandemic and Our Response
In March 2020, the World Health Organization declared COVID-19 a global pandemic. Governmental authorities implemented a number of measures attempting to contain the spread and impact of COVID-19 such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activities. While most of these restrictions have been lifted or moderated and we believe economic indicators currently point to a strong recovery, the pandemic and these precautionary measures negatively impacted the global and domestic economies, including in the Company's primary market areas. Certain sectors to which the Company has credit exposure, such as travel and hospitality and retail were particularly impacted. The response of the U.S. Government to the economic impact of the crisis was swift and broad-based. The government took a series of actions to support individuals, households and businesses that were negatively impacted by the economic disruption caused by the pandemic including enactment and subsequent extension of the CARES Act. The Federal Reserve also enacted a suite of facilities using its emergency lending powers designed to support liquidity and the flow of credit. Banking regulators reduced reserve requirements and enacted rules designed to support financial institutions in their
efforts to work with customers during this time. Development and deployment of vaccines and improvements in treatments for the virus are positive signs and the economy continues to recover, however, some uncertainty remains about the future trajectory of that recovery and the virus and by extension, the ultimate impact on our financial condition and results of operations.
A summary of the effects the COVID-19 pandemic has had on our Company is discussed in the "Impact of the COVID-19 Pandemic and Our Response" section in the MD&A of the Company's 2020 Annual report on Form 10-K. A discussion of how our Company continues to be and may be impacted in the future follows. These matters are discussed in further detail, as applicable, throughout this Form 10-Q.
Our results of operations and financial condition were impacted by the COVID-19 pandemic.
•The COVID-19 pandemic and its effect on the economy and our borrowers has impacted the provision for credit losses and the ACL. The provision for loancredit losses has been more volatile since the onset of the pandemic; deterioration in economic conditions led to a higher provision for credit losses during the year ended December 31, 2020, while improvement in economic conditions and our reasonable and supportable economic forecast contributed to a recovery of provision for credit losses of $(11.8) million and $(67.4) million for the quarter and nine months ended September 30, 2017 totaled $37.9 million2021. While key economic indicators and $63.6 million, respectively, comparedour economic forecast have improved significantly, there continues to $24.4 million and $42.4 million, respectively, for the comparable periods of the prior year. The most significant reason for these increases in the provision for loan losses was the provision related to the taxi medallion portfolio as discussed further in the sections entitled "Asset Quality" and "Analysis of the Allowance for Loan and Lease Losses."
Gain on sale of investment securities available for sale, net totaled $26.9 million for the quarter ended September 30, 2017. Substantially all of these gains related to sales of securities formerly covered under the Commercial Shared-Loss Agreement.
The Company’s capital ratios exceeded all regulatory “well capitalized” guidelines, with a Tier 1 leverage ratio of 8.6%, CET1 and Tier 1 risk-based capital ratios of 11.9% and a Total risk-based capital ratio of 12.7% at September 30, 2017.
Book value per common share grew to $24.56 at September 30, 2017, a 7.8% increase from September 30, 2016. Tangible book value per common share increased by 8.1% over the same period, to $23.83 at September 30, 2017.
Hurricanes Irma and Harvey
On September 10, 2017, Hurricane Irma made landfall in Florida as a Category 4 hurricane affecting some areas of the state with significant flooding, wind damage and power outages. In addition, the Bank has a limited number of customers and collateral properties located in areas of Texas that were impacted by Hurricane Harvey during August, 2017.
Loan and Lease Portfolio
The Company has assessed the potential impact of the hurricanes on the value of collateral underlying our loans and the ability of borrowers to repay their obligations to the Bank. We believe the storms did not materially impact the ability of the substantial majority of our borrowers to repay their loans; however,be uncertainty remains as to the ultimate impact of these eventsthe COVID-19 crisis on future credit loss expense and future levels of the ACL. The provision for credit losses may continue to be volatile and the level of our loan lossesthe ACL may change materially from current levels. Future levels of the ACL could be significantly impacted, in either direction, by changes in the economic outlook and our results of operations.
In order to assessby the evolving impact of these hurricanesthe pandemic and related events on our loan and lease portfolio, the Company performed an extensive review of loans withindividual borrowers and/or collateral located in areas impacted by these storms. This analysis entailed the identification of and direct communication with borrowers located in impacted areas to determine the population of borrowers that may have been significantly impacted as well as consideration of factors including but not limited to level and type of insurance coverage, collateral and lien position and the financial condition of the borrower.
Commercial and commercial real estate loans with an aggregate UPB of approximately $7.1 billion at September 30, 2017 were determined to be either made to borrowers that have significant business operations in or secured by collateral in areas that were potentially impacted by the hurricanes. Substantially all of those borrowers had been contacted as of October 3, 2017 and responses were considered in the determinationportfolio.
•Levels of the ALLL as of September 30, 2017. As of October 31, 2017, commercial loans with an aggregate UPB of $22.2 million had been downgraded to criticized orand classified statusassets and non-performing assets increased in 2020, largely as a result of this analysis. Residential mortgagethe COVID-19 pandemic and other consumer loans withits impact or potential impact on our borrowers and certain portfolio sub-segments. Additionally, a carrying value of approximately $977 million at September 30, 2017, of which $315 million are covered loans, were determined to be either made to borrowers living in or secured by collateral in areas potentially impacted by the hurricanes; such loans with a carrying value of approximately $902 million, of which $312 million are covered loans, were determined to be in severely impacted areas, based on FEMA’s designation as “individual assistance” areas (“FEMA designated areas”). As of October 31, 2017, 74%significant number of borrowers in FEMA designated areas had been contacted or property inspections conducted to assist in assessing the extent of potential damage to underlying collateral. During the quarter ended September 30, 2017, the Company recorded a loan loss provision of $5.4 million related to the impact of Hurricanes Irmarequested and Harvey.
Impairment of Other Assets
Management also considered the impact of the hurricanes in our analysis of investment securities for OTTI, as well as our evaluation of potential impairment of our investment in equipment under operating lease, LIHTC partnerships, servicing assets and OREO at September 30, 2017 and determined there was no potentially material impact.
Fees, Operations and Facilities
To help those affected by Hurricane Irma, the Company waived or refunded certain fees such as overdraft, NSF and uncollected fees on consumer deposit accounts and late fees on residential mortgage, consumer and small business loans for consumer and small business customers in FEMA designated disaster areas for the period September 10, 2017 through September 30, 2017. In addition, certain residential mortgage and SBA loan customers impacted by the storm may be eligible for assistancewere granted relief in the form of temporary payment deferrals. Waiveddeferrals or modifications. Although levels of criticized and refunded feesclassified loans remain elevated compared to historical levels, as COVID-19 related restrictions on economic activity were lifted and the economic recovery gained momentum, criticized and classified loans declined by a total of $856 million and loans on short-term deferral or subject to modification under the CARES Act declined by $509 million over the nine months ended September 30, 2021. See the section entitled "Asset Quality" for further discussion. If the economic recovery continues on the path of our current reasonable and supportable forecast, we would expect to see the positive impact of that recovery on the operations of borrowers, and would expect the level of criticized and classified loans to decline further over the next few quarters. However, since uncertainty remains about the trajectory of the virus and the economic recovery and the specific impact on our borrowers, there is a possibility that the level of criticized and classified assets may not significant.decline. Similarly, non-performing assets, charge-offs and delinquencies could increase from current levels, particularly as loans currently subject to temporary payment deferrals and modifications reach the end of those deferral or modification periods.
•The level of commercial loan origination activity, outside of our participation in the PPP, and line utilization have generally remained below pre-pandemic levels. While we currently expect loan production to increase in the fourth quarter of 2021, our ability to increase production will depend at least to some extent on the future trajectory of the pandemic and on the pace and timing of economic recovery.
•Levels of liquidity in the banking system and on our balance sheet have been elevated, likely as a result of fiscal stimulus. Elevated levels of liquidity and the related persistent low interest rate environment have contributed to deposit growth, but have also had a negative impact on our net interest margin. It is difficult to predict the long-term impact on liquidity of future changes in fiscal or monetary policy.
The Company’s operations and facilities were not materiallypandemic impacted by Hurricane Irma. The Company continued operating throughoutour operations. Currently, the storm although all of our Florida branch locations were closed from September 8, 2017 through September 11, 2017. Thesubstantial majority of our Florida branch locationsnon-branch employees continue to work primarily remotely, although we expect most of these employees to return to the office under a hybrid arrangement in the near term. Our branches, for the most part, have resumed normal activity. We did not experience any significant operational difficulties, technology failures or outages, or customer service disruptions as a result of the transition to a remote or hybrid work environment. We continue to focus on ensuring that our technology systems and our Miami Lakes corporate headquarters re-opened on September 12, 2017internal controls operate effectively in a remote or hybrid work environment. We have put mechanisms in place to allow us to evaluate all significant modifications to processes and allprocedures to insure continued effectiveness of our Florida branch locations re-opened priorcontrol environment. We have not identified any instances in which our control environment has failed to September 30, 2017.operate effectively.
During the quarter ended September 30, 2017, the Company recorded expenses of $0.6 million related primarily to facilities damage and employee relocation and assistance. We do not expect future expenses related to facilities damage to be material
In response to the Company.pandemic, we prioritized risk management and implemented a number of measures to support our customers, employees and communities. Those measures included, but were not limited to:
Community Assistance•Activated and continue to operate under our business continuity plan under the leadership of executive management and maintained a regular cadence of Board of Directors update calls.
To help with•Enhanced liquidity monitoring and management protocols, although we have not experienced constraints on liquidity since the recovery effortsonset of the communitiespandemic; in whichfact, liquidity levels have been elevated.
•Focused on portfolio management activities, including segregating certain segments of the loan portfolio for additional monitoring, increasing the level and frequency of pro-active outreach to borrowers, enhancing workout and recovery staffing and processes and enhancing our stress testing framework. Results of internal stress testing indicate that we operate, workhave sufficient capital to withstand an increase in credit losses materially beyond levels currently expected, and live, BankUnited has made donations totaling $100,000 to non-profit organizations focused on recovery and relief efforts in Florida. These organizations were selected based onwithstand a severe downturn.
•Monitoring our critical third party service providers to insure their ability to immediately deploy resources directlycontinue to targeted affected areas.provide support in the current environment. We have experienced no significant service disruptions.
•Expanded certain employee benefits and launched a number of programs and protocols to keep our employees healthy and engaged. •Supported our clients through participating in the Small Business Administration’s PPP, the Federal Reserve's MSLF, granting payment deferrals, loan modifications and fee waivers on a case-by-case basis.
•Disbursed over 150 grants to nonprofit organizations across our footprint and helped to meet the needs of our community partners through employee volunteer efforts, including "virtual" volunteer hours.
We remain confident in our long-term underlying strength and stability, and our ability to navigate these evolving conditions.
Results of Operations
Net Interest Income
Net interest income is the difference between interest earned on interest earning assets and interest incurred on interest bearing liabilities and is the primary driver of core earnings. Net interest income is impacted by the relative mix of interest earning assets and interest bearing liabilities, the ratio of interest earning assets to total assets and of interest bearing liabilities to total funding sources, movements in market interest rates, the shape of the yield curve, levels of non-performing assets and pricing pressure from competitors.
The mix of interest earning assets is influenced by loan demand, market and competitive conditions in our primary lending markets, and by management's continual assessment of the rate of return and relative risk associated with various classes of earning assets.assets and liquidity considerations. The mix of interest bearing liabilities is influenced by the Company's liquidity profile, management's assessment of the desire for lower cost funding sources weighed against relationships with customers and growth requirementsexpectations, our ability to attract and is impacted byretain core deposit relationships, competition for deposits in the Company's markets and the availability and pricing of other sources of funds.
Net interest income is also impacted by the accounting for ACI loans acquired in conjunction with the FSB Acquisition. ACI loans were initially recorded at fair value, measured based on the present value of expected cash flows. The excess of expected cash flows over carrying value, known as accretable yield, is recognized as interest income over the lives of the underlying loans. The positive impact of accretion related to ACI loans on the net interest margin and the interest rate spread is expected to continue to decline as ACI loans comprise a declining percentage of total loans. The proportion of total loans represented by ACI loans is declining as the ACI loans are resolved and new loans are added to the portfolio. ACI loans represented 2.5% and 3.0% of total loans, including premiums, discounts and deferred fees and costs, at September 30, 2017 and December 31, 2016, respectively. As this trend continues, assuming an otherwise stable interest rate environment, we would expect our net interest margin and interest rate spread to decrease as covered loans are resolved.
The impact of ACI loan accounting on net interest income makes it difficult to compare our net interest margin and interest rate spread to those reported by other financial institutions.
The following table presents, for the periods indicated, information about (i) average balances, the total dollar amount of taxable equivalent interest income from earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Non-accrual and restructured loans are included in the average balances presented in this table; however, interest income foregone on non-accrual loans is not included. Interest income, yields, spread and margin have been calculated on a tax-equivalent basis for loans and investment securities that are exempt from federal income taxes, at a federal tax rate of 35.0%21% (dollars in thousands):
| | | | Three Months Ended September 30, | | Three Months Ended September 30, | | Three Months Ended June 30, | | Three Months Ended September 30, |
| | 2017 | | 2016 | | 2021 | 2020 |
| | Average
Balance | | Interest (1) | | Yield/
Rate (1)(2) | | Average
Balance | | Interest (1) | | Yield/
Rate (1)(2) | | Average
Balance | | Interest (1) | | Yield/ Rate (1)(2) | | Average
Balance | | Interest (1) | | Yield/
Rate (1)(2) | | Average
Balance | | Interest (1) | | Yield/ Rate (1)(2) |
| Assets: | | | | | | | | | | | | Assets: | | | | | | | | | | | | | | | | | |
| Interest earning assets: | |
| | |
| | |
| | |
| | |
| | |
| Interest earning assets: | |
| Non-covered loans | $ | 19,710,115 |
| | $ | 187,928 |
| | 3.79 | % | | $ | 17,813,925 |
| | $ | 158,963 |
| | 3.56 | % | |
| Covered loans | 518,026 |
| | 73,452 |
| | 56.70 | % | | 700,884 |
| | 74,487 |
| | 42.50 | % | |
| Total loans | 20,228,141 |
| | 261,380 |
| | 5.15 | % | | 18,514,809 |
| | 233,450 |
| | 5.03 | % | |
| Loans | | Loans | $ | 22,879,654 | | | $ | 197,995 | | | 3.45 | % | | $ | 22,996,564 | | | $ | 205,940 | | | 3.59 | % | | $ | 23,447,514 | | | $ | 212,388 | | | 3.61 | % |
Investment securities (3) | 7,002,615 |
| | 55,046 |
| | 3.14 | % | | 5,898,382 |
| | 42,262 |
| | 2.87 | % | Investment securities (3) | 10,452,255 | | | 38,939 | | | 1.49 | % | | 9,839,422 | | | 38,338 | | | 1.56 | % | | 9,065,478 | | | 45,351 | | | 2.00 | % |
| Other interest earning assets | 545,224 |
| | 3,777 |
| | 2.75 | % | | 557,490 |
| | 3,036 |
| | 2.17 | % | Other interest earning assets | 750,700 | | | 1,413 | | | 0.75 | % | | 1,380,317 | | | 1,607 | | | 0.47 | % | | 552,515 | | | 1,322 | | | 0.95 | % |
| Total interest earning assets | 27,775,980 |
| | 320,203 |
| | 4.60 | % | | 24,970,681 |
| | 278,748 |
| | 4.45 | % | Total interest earning assets | 34,082,609 | | | 238,347 | | | 2.79 | % | | 34,216,303 | | | 245,885 | | | 2.88 | % | | 33,065,507 | | | 259,061 | | | 3.13 | % |
| Allowance for loan and lease losses | (160,231 | ) | | | | | | (139,284 | ) | | | | | |
| Allowance for credit losses | | Allowance for credit losses | (171,381) | | | (215,151) | | | (272,464) | | |
| Non-interest earning assets | 1,699,912 |
| | | | | | 1,884,894 |
| | | | | Non-interest earning assets | 1,856,608 | | | 1,732,676 | | | 1,897,723 | | |
| Total assets | $ | 29,315,661 |
| | | | | | $ | 26,716,291 |
| | | | | Total assets | $ | 35,767,836 | | | $ | 35,733,828 | | | $ | 34,690,766 | | |
| Liabilities and Stockholders' Equity: | | | | | | | | | | | | Liabilities and Stockholders' Equity: | | | | | | |
| Interest bearing liabilities: | | | | | | | | | | | | Interest bearing liabilities: | |
| Interest bearing demand deposits | $ | 1,590,206 |
| | 3,415 |
| | 0.85 | % | | $ | 1,437,677 |
| | 2,224 |
| | 0.62 | % | Interest bearing demand deposits | $ | 3,038,038 | | | $ | 1,701 | | | 0.22 | % | | $ | 3,069,945 | | | $ | 2,594 | | | 0.34 | % | | $ | 2,800,421 | | | $ | 4,127 | | | 0.59 | % |
| Savings and money market deposits | 9,968,512 |
| | 21,964 |
| | 0.87 | % | | 8,349,281 |
| | 12,974 |
| | 0.62 | % | Savings and money market deposits | 13,554,572 | | | 10,029 | | | 0.29 | % | | 13,541,237 | | | 11,307 | | | 0.33 | % | | 10,664,462 | | | 15,853 | | | 0.59 | % |
| Time deposits | 6,290,056 |
| | 20,540 |
| | 1.30 | % | | 5,567,909 |
| | 15,770 |
| | 1.13 | % | Time deposits | 2,866,746 | | | 2,543 | | | 0.35 | % | | 3,380,582 | | | 3,415 | | | 0.41 | % | | 6,519,852 | | | 17,701 | | | 1.08 | % |
| Total interest bearing deposits | 17,848,774 |
| | 45,919 |
| | 1.02 | % | | 15,354,867 |
| | 30,968 |
| | 0.80 | % | Total interest bearing deposits | 19,459,356 | | | 14,273 | | | 0.29 | % | | 19,991,764 | | | 17,316 | | | 0.35 | % | | 19,984,735 | | | 37,681 | | | 0.75 | % |
| FHLB advances | 4,924,325 |
| | 16,946 |
| | 1.37 | % | | 5,143,003 |
| | 11,956 |
| | 0.92 | % | |
| Federal funds purchased | | Federal funds purchased | 70,054 | | | 15 | | | 0.08 | % | | — | | | — | | | — | % | | 53,587 | | | 14 | | | 0.10 | % |
| FHLB and PPPLF borrowings | | FHLB and PPPLF borrowings | 2,647,314 | | | 15,678 | | | 2.35 | % | | 2,873,922 | | | 16,922 | | | 2.36 | % | | 4,117,181 | | | 20,146 | | | 1.95 | % |
| Notes and other borrowings | 402,828 |
| | 5,314 |
| | 5.28 | % | | 403,590 |
| | 5,322 |
| | 5.27 | % | Notes and other borrowings | 721,638 | | | 9,257 | | | 5.13 | % | | 721,753 | | | 9,252 | | | 5.13 | % | | 722,271 | | | 9,252 | | | 5.12 | % |
| Total interest bearing liabilities | 23,175,927 |
| | 68,179 |
| | 1.17 | % | | 20,901,460 |
| | 48,246 |
| | 0.92 | % | Total interest bearing liabilities | 22,898,362 | | | 39,223 | | | 0.68 | % | | 23,587,439 | | | 43,490 | | | 0.74 | % | | 24,877,774 | | | 67,093 | | | 1.07 | % |
| Non-interest bearing demand deposits | 3,036,046 |
| | | | | | 2,981,017 |
| | | | | Non-interest bearing demand deposits | 8,912,960 | | | | | 8,163,879 | | | | | 6,186,718 | | | | |
| Other non-interest bearing liabilities | 468,735 |
| | | | | | 460,514 |
| | | | | Other non-interest bearing liabilities | 752,774 | | | 851,044 | | | 803,498 | | |
| Total liabilities | 26,680,708 |
| | | | | | 24,342,991 |
| | | | | Total liabilities | 32,564,096 | | | 32,602,362 | | | 31,867,990 | | |
| Stockholders' equity | 2,634,953 |
| | | | | | 2,373,300 |
| | | | | Stockholders' equity | 3,203,740 | | | 3,131,466 | | | 2,822,776 | | |
| Total liabilities and stockholders' equity | $ | 29,315,661 |
| | | | | | $ | 26,716,291 |
| | | | | Total liabilities and stockholders' equity | $ | 35,767,836 | | | $ | 35,733,828 | | | $ | 34,690,766 | | |
| Net interest income | | | $ | 252,024 |
| | | | | | $ | 230,502 |
| | | Net interest income | | | $ | 199,124 | | | | | $ | 202,395 | | | | | $ | 191,968 | | |
| Interest rate spread | | | | | 3.43 | % | | | | | | 3.53 | % | Interest rate spread | | | | 2.11 | % | | | | 2.14 | % | | | | 2.06 | % |
| Net interest margin | | | | | 3.62 | % | | | | | | 3.69 | % | Net interest margin | | 2.33 | % | | 2.37 | % | | 2.32 | % |
| | |
(1) | On a tax-equivalent basis. The tax-equivalent adjustment for tax-exempt loans was $7.6 million and $6.2 million, and the tax-equivalent adjustment for tax-exempt investment securities was $3.2 million and $2.6 million, for the three months ended September 30, 2017 and 2016, respectively. |
(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $3.3 million, $3.4 million and $3.7 million for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively. The tax-equivalent adjustment for tax-exempt investment securities was $0.7 million for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020.
(2)Annualized.
(3) At fair value except for securities held to maturity.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| | 2021 | | 2020 |
| | Average
Balance | | Interest (1) | | Yield/ Rate (1)(2) | | Average
Balance | | Interest (1) | | Yield/
Rate (1)(2) |
| Assets: | | | | | | | | | | | |
| Interest earning assets: | | | | | | | | | | | |
| Loans | $ | 23,139,389 | | | $ | 612,756 | | | 3.54 | % | | $ | 23,278,042 | | | $ | 668,187 | | | 3.83 | % |
Investment securities (3) | 9,792,350 | | | 116,464 | | | 1.59 | % | | 8,501,513 | | | 153,987 | | | 2.42 | % |
| Other interest earning assets | 1,063,476 | | | 4,613 | | | 0.58 | % | | 654,623 | | | 7,950 | | | 1.62 | % |
| Total interest earning assets | 33,995,215 | | | 733,833 | | | 2.88 | % | | 32,434,178 | | | 830,124 | | | 3.42 | % |
| Allowance for credit losses | (213,352) | | | | | | | (222,085) | | | | | |
| Non-interest earning assets | 1,771,639 | | | | | | | 1,874,709 | | | | | |
| Total assets | $ | 35,553,502 | | | | | | | $ | 34,086,802 | | | | | |
| Liabilities and Stockholders' Equity: | | | | | | | | | | | |
| Interest bearing liabilities: | | | | | | | | | | | |
| Interest bearing demand deposits | $ | 3,017,301 | | | $ | 7,069 | | | 0.31 | % | | $ | 2,475,388 | | | $ | 15,808 | | | 0.85 | % |
| Savings and money market deposits | 13,299,066 | | | 33,463 | | | 0.34 | % | | 10,509,559 | | | 71,056 | | | 0.9 | % |
| Time deposits | 3,520,674 | | | 13,433 | | | 0.51 | % | | 7,040,101 | | | 83,826 | | | 1.59 | % |
| Total interest bearing deposits | 19,837,041 | | | 53,965 | | | 0.36 | % | | 20,025,048 | | | 170,690 | | | 1.14 | % |
| Federal funds purchased | 26,245 | | | 17 | | | 0.09 | % | | 89,033 | | | 412 | | | 0.62 | % |
| FHLB and PPPLF borrowings | 2,863,093 | | | 50,158 | | | 2.34 | % | | 4,496,407 | | | 66,284 | | | 1.97 | % |
| Notes and other borrowings | 721,897 | | | 27,762 | | | 5.13 | % | | 548,851 | | | 20,711 | | | 5.03 | % |
| Total interest bearing liabilities | 23,448,276 | | | 131,902 | | | 0.75 | % | | 25,159,339 | | | 258,097 | | | 1.37 | % |
| Non-interest bearing demand deposits | 8,194,570 | | | | | | | 5,292,702 | | | | | |
| Other non-interest bearing liabilities | 783,618 | | | | | | | 791,057 | | | | | |
| Total liabilities | 32,426,464 | | | | | | | 31,243,098 | | | | | |
| Stockholders' equity | 3,127,038 | | | | | | | 2,843,704 | | | | | |
| Total liabilities and stockholders' equity | $ | 35,553,502 | | | | | | | $ | 34,086,802 | | | | | |
| Net interest income | | | $ | 601,931 | | | | | | | $ | 572,027 | | | |
| Interest rate spread | | | | | 2.13 | % | | | | | | 2.05 | % |
| Net interest margin | | | | | 2.36 | % | | | | | | 2.35 | % |
| |
(3) | At fair value except for securities held to maturity. |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| | Average
Balance | | Interest (1) | | Yield/
Rate (1)(2) | | Average
Balance | | Interest (1) | | Yield/
Rate (1)(2) |
| Assets: | | | | | | | | | | | |
| Interest earning assets: | |
| | |
| | |
| | |
| | |
| | |
|
| Non-covered loans | $ | 19,169,479 |
| | $ | 535,926 |
| | 3.73 | % | | $ | 16,876,786 |
| | $ | 452,525 |
| | 3.58 | % |
| Covered loans | 560,934 |
| | 225,194 |
| | 53.54 | % | | 746,709 |
| | 226,659 |
| | 40.48 | % |
| Total loans | 19,730,413 |
| | 761,120 |
| | 5.15 | % | | 17,623,495 |
| | 679,184 |
| | 5.14 | % |
Investment securities (3) | 6,569,553 |
| | 151,337 |
| | 3.07 | % | | 5,551,249 |
| | 117,478 |
| | 2.82 | % |
| Other interest earning assets | 557,623 |
| | 10,606 |
| | 2.54 | % | | 531,245 |
| | 8,850 |
| | 2.22 | % |
| Total interest earning assets | 26,857,589 |
| | 923,063 |
| | 4.59 | % | | 23,705,989 |
| | 805,512 |
| | 4.53 | % |
| Allowance for loan and lease losses | (157,015 | ) | | | | | | (133,280 | ) | | | | |
| Non-interest earning assets | 1,754,499 |
| | | | | | 1,946,846 |
| | | | |
| Total assets | $ | 28,455,073 |
| | | | | | $ | 25,519,555 |
| | | | |
| Liabilities and Stockholders' Equity: | | | | | | | | | | | |
| Interest bearing liabilities: | | | | | | | | | | | |
| Interest bearing demand deposits | $ | 1,564,229 |
| | 8,913 |
| | 0.76 | % | | $ | 1,341,218 |
| | 6,140 |
| | 0.61 | % |
| Savings and money market deposits | 9,557,907 |
| | 55,741 |
| | 0.78 | % | | 8,203,676 |
| | 37,285 |
| | 0.61 | % |
| Time deposits | 5,988,433 |
| | 55,507 |
| | 1.24 | % | | 5,177,191 |
| | 43,002 |
| | 1.11 | % |
| Total interest bearing deposits | 17,110,569 |
| | 120,161 |
| | 0.94 | % | | 14,722,085 |
| | 86,427 |
| | 0.78 | % |
| FHLB advances | 4,889,578 |
| | 44,262 |
| | 1.21 | % | | 4,698,492 |
| | 35,972 |
| | 1.02 | % |
| Notes and other borrowings | 402,821 |
| | 15,947 |
| | 5.28 | % | | 403,213 |
| | 15,967 |
| | 5.28 | % |
| Total interest bearing liabilities | 22,402,968 |
| | 180,370 |
| | 1.08 | % | | 19,823,790 |
| | 138,366 |
| | 0.93 | % |
| Non-interest bearing demand deposits | 3,034,682 |
| | | | | | 2,944,861 |
| | | | |
| Other non-interest bearing liabilities | 443,430 |
| | | | | | 431,921 |
| | | | |
| Total liabilities | 25,881,080 |
| | | | | | 23,200,572 |
| | | | |
| Stockholders' equity | 2,573,993 |
| | | | | | 2,318,983 |
| | | | |
| Total liabilities and stockholders' equity | $ | 28,455,073 |
| | | | | | $ | 25,519,555 |
| | | | |
| Net interest income | | | $ | 742,693 |
| | | | | | $ | 667,146 |
| | |
| Interest rate spread | | | | | 3.51 | % | | | | | | 3.60 | % |
| Net interest margin | | | | | 3.69 | % | | | | | | 3.75 | % |
(3) At fair value except for securities held to maturity.
| |
(1) | On a tax-equivalent basis. The tax-equivalent adjustment for tax-exempt loans was $21.5 million and $16.7 million, and the tax-equivalent adjustment for tax-exempt investment securities was $9.7 million and $7.5 million, for the nine months ended September 30, 2017 and 2016, respectively. |
| |
(3) | At fair value except for securities held to maturity. |
The amount of tax-equivalent net interest income increased for the three and nine month periods ended September 30, 2021 compared to the three and nine month periods ended September 30, 2020. Declines in interest expense outpaced declines in interest income, at least in part reflective of efforts to enhance the quality of the deposit mix and reduce the cost of deposits. Average interest earning assets increased over these comparative periods, while average interest bearing liabilities declined.
Both average yields on interest earning assets and average rates paid on interest bearing liabilities have been declining over the periods presented, reflecting the macro interest rate environment and ongoing initiatives to reduce deposit costs and improve the mix of deposits.
Three months ended September 30, 20172021 compared to the immediately preceding three months ended SeptemberJune 30, 20162021
Net interest income, calculated on a tax-equivalent basis, was $252.0$199.1 million for the three months ended September 30, 2021 compared to $202.4 million for the three months ended SeptemberJune 30, 2017 compared to $230.5 million for the three months ended September 30, 2016, an increase2021, a decrease of $21.5$3.3 million. The increase in netTax-equivalent interest income was comprised of an increaseand interest expense decreased by $7.5 million and $4.3 million, respectively. The decrease in tax-equivalent interest income resulted from turnover of $41.5 million, offset by an increasethe loan and investment portfolios at lower prevailing rates, as well as a decline in average loans. The decline in interest expense reflected the impact of $19.9 million.
The increase in tax-equivalent interest income was comprised primarilyour strategy focused on lowering the cost of a $27.9 million increase in interest income from loans and a $12.8 million increase in interest income from investment securities.
Increased interest income from loans was attributable to a $1.7 billion increase in the average balance outstanding and a 0.12% increase in the tax-equivalent yield to 5.15% for the three months ended September 30, 2017 from 5.03% for the three months ended September 30, 2016. Factors contributing to the increase in the yield on loans included:
The tax-equivalent yield on non-covered loans was 3.79% for the three months ended September 30, 2017 compared to 3.56% for the three months ended September 30, 2016. The most significant factor contributing to the increased yield on non-covered loans was increases in market interest rates.
Interest income on covered loans totaled $73.5 million and $74.5 million for the three months ended September 30, 2017 and 2016, respectively. The tax-equivalent yield on those loans increased to 56.70% for the three months ended September 30, 2017 from 42.50% for the three months ended September 30, 2016. The increase in the yield on covered loans resulted primarily from improvements in expected cash flows for ACI loans.
The impact on the overall yield on loans of increased yields on both covered and non-covered loans considered individually was somewhat offset by the continued increase in non-covered loans, with yields lower than those on covered loans, as a percentage of total loans.
The average balance of investment securities increased by $1.1 billion for the three months ended September 30, 2017 from the three months ended September 30, 2016 while the tax-equivalent yield increased to 3.14% from 2.87%. The most significant factor contributing to the increase in the tax-equivalent yield were increases in coupon rates on floating-rate securities.
The components of the increase in interest expense for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016 were a $15.0 million increase in interest expense on deposits and improving the deposit mix, runoff and repricing of deposits generated in a $5.0 million increase in interest expense on FHLB advances.
The increase in interest expense on deposits was attributable to an increase of $2.5 billionhigher rate environment, and declines in average interest bearing deposits and an increase in the average cost of interest bearing deposits of 0.22% to 1.02% for the three months ended September 30, 2017 from 0.80% for the three months ended September 30, 2016. These cost increases were generally driven by growth of deposits in competitive markets and a rising market interest rate environment.liabilities.
The increase in interest expense on FHLB advances reflected an increase in the average cost of advances of 0.45% to 1.37% for the three months ended September 30, 2017 from 0.92% for the three months ended September 30, 2016. The increase in cost was driven by increased market rates and to a lesser extent, an extension of maturities through interest rate swaps.
The net interest margin, calculated on a tax-equivalent basis, was 2.33% for the three months ended September 30, 2021, compared to 2.37% for the three months ended June 30, 2021. The net interest margin was impacted by pressure on earning asset yields, in part resulting from lower than expected commercial loan growth for the quarter, leading to continued deployment of liquidity into securities. Lower recognition of PPP fees also had an impact.
Offsetting factors impacting the net interest margin for the three months ended September 30, 2017 was 3.62% as2021 compared to 3.69%the immediately preceding three months ended June 30, 2021 included:
•The average rate paid on interest bearing deposits decreased to 0.29% for the three months ended September 30, 2016. 2021, from 0.35% for the three months ended June 30, 2021. This decline reflected continued initiatives taken to lower rates paid on deposits, including the re-pricing of term deposits.
•The interest rate spreadtax-equivalent yield on investment securities decreased to 3.43%1.49% for the three months ended September 30, 2021 from 1.56% for the three months ended June 30, 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 three months ended September 30, 2021 by approximately 0.06%.
•The tax-equivalent yield on loans decreased to 3.45% for the three months ended September 30, 20172021, from 3.53%3.59% for the three months ended June 30, 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 0.03% for the three months ended September 30, 2016. The declines in net interest margin and interest rate spread resulted primarily from2021, compared to 0.11% for the costthree months ended June 30, 2021. Factoring out the impact of interest-bearing liabilities increasing by more thanaccelerated amortization of PPP origination fees, the yield on interest earning assets. This difference was driven primarily byloans for the decline in covered loans as a percentage of total loans. Future trends in the net interest margin will be impacted by changes in market interest rates, including changes in the shape of the yield curve, by the mix of interest earning assets, including the decline in covered loans as a percentage of total loans, and by the Company's ability to manage the cost of funds while growing deposits in competitive markets.
Ninethree months ended September 30, 20172021 decreased by 0.06% compared to the immediately preceding three months. This decrease is mainly the result of growth in the residential portfolio at average yields lower than our commercial loan segments.
•Average interest bearing liabilities declined by $689 million quarter-over-quarter and average non-interest bearing demand deposits increased by $749 million, positively impacting the net interest margin.
Three and nine months ended September 30, 20162021 compared to the three and nine months ended September 30, 2020
Net interest income, calculated on a tax-equivalent basis, was $742.7$199.1 million for the three months ended September 30, 2021, compared to $192.0 million for the three months ended September 30, 2020, an increase of $7.2 million. Net interest income, calculated on a tax-equivalent basis, was $601.9 million for the nine months ended September 30, 20172021, compared to $667.1$572.0 million for the nine months ended September 30, 2016,2020, an increase of $75.5$29.9 million. The increasechanges in net interest income waswere comprised of an increasedecreases in tax-equivalent interest income of $117.6 million, offset by an increase inand interest expense of $42.0 million.
The increase in tax-equivalent interest income was comprised primarily$20.7 million and $27.9 million, respectively, for the three months ended September 30, 2021 and of an $81.9$96.3 million increase in interest income from loans and a $33.9$126.2 million, increase in interest income from investment securities.
Increased interest income from loans was attributable to a $2.1 billion increase in the average balance and a 0.01% increase in the tax-equivalent yield to 5.15%respectively for the nine months ended September 30, 20172021, compared to the three and nine months ended September 30, 2020.
Decreases in tax-equivalent interest income for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020 resulted from 5.14% the impact on asset portfolio yields of declines in market interest rates in early 2020, leading to runoff of assets originated in a higher rate environment and origination of assets at lower prevailing rates. These declines in yields were partially offset by increases in the average balance of interest earning assets, primarily investment securities. Declines in interest expense 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 net interest margin, calculated on a tax-equivalent basis, was 2.33%for the three months ended September 30, 2021, compared to 2.32% for the three months ended September 30, 2020. The net interest margin, calculated on a tax-equivalent basis, was 2.36%for the nine months ended September 30, 2016. Offsetting factors contributing2021, compared to the relatively steady yield on loans included:
Although the yield on non-covered loans increased to 3.73%2.35% for the nine months ended September 30, 20172020. The reduction in cost of interest bearing liabilities outpaced the decline in the yield on interest earning assets for both the three and nine months ended September 30, 2021 compared to the comparable periods in 2020.
Offsetting factors impacting the net interest margin for the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020 included:
•The tax-equivalent yield on loans decreased to 3.45% and 3.54% for the three and nine months ended September 30, 2021, from 3.58%3.61% and 3.83% for the three and nine months ended September 30, 2020. Factors contributing to the declines in the tax-equivalent yield on loans for the three and nine months ended September 30, 2021 compared to the comparable periods in 2020 were largely consistent with those discussed above. In addition, accelerated amortization of origination fees on PPP loans that were partially or fully forgiven positively impacted the yield on loans by approximately 0.03% and 0.07% for the three and nine months ended September 30, 2021, respectively.
•The tax-equivalent yield on investment securities declined to 1.49% and 1.59%, for the three and nine months ended September 30, 2021 from 2.00% and 2.42% for the three and nine months ended September 30, 2020, respectively. Factors contributing to the declines in the tax-equivalent yield on investments for the three and nine months ended
September 30, 2021 compared to the comparable periods in 2020 were largely consistent with those discussed above. In addition, accounting adjustments related to faster prepayment speeds of securities purchased at a premium negatively impacted the yield on investment securities by approximately 0.08% and 0.03% for the three and nine months ended September 30, 2021.
•The average rate paid on interest bearing deposits decreased to 0.29% and 0.36% for the three and nine months ended September 30, 2021, respectively, from 0.75% and 1.14% for the three and nine months ended September 30, 2020. This decrease reflected declines in prevailing interest rates and continued execution of initiatives taken to lower rates paid on deposits, including the re-pricing of term deposits.
•Average interest bearing liabilities declined by $2.0 billion and $1.7 billion, respectively for the three and nine months ended September 30, 2021, compared to the three and nine months ended September 30, 2020. Average non-interest bearing demand deposits increased by $2.7 billion and $2.9 billion for those same comparative periods. These changes positively impacted the net interest margin.
Provision for Credit Losses
The provision for credit losses is a charge or credit to earnings required to maintain the ACL at a level consistent with management’s estimate of expected credit losses on financial assets carried at amortized cost at the balance sheet date. The amount of the provision is impacted by changes in current economic conditions as well as in management's reasonable and supportable economic forecast, loan originations and runoff, changes in portfolio mix, risk rating migration and portfolio seasoning, changes in specific reserves, changes in expected prepayment speeds and other assumptions. The provision for credit losses also includes amounts related to off-balance sheet credit exposures and may include amounts related to accrued interest receivable and AFS debt securities.
The following table presents the components of the provision for credit losses for the periods indicated (in thousands):
| | | | | | | | | | | |
| Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 |
| Amount related to funded portion of loans | $ | (11,554) | | | $ | (65,523) | |
| Amount related to off-balance sheet credit exposures | 280 | | | (640) | |
| Amount related to accrued interest receivable | (568) | | | (838) | |
| Amount related to AFS debt securities | — | | | (364) | |
| Total recovery of credit losses | $ | (11,842) | | | $ | (67,365) | |
The most impactful factor driving the recovery of credit losses for the nine months ended September 30, 2016, lower-yielding non-covered loans comprised a greater percentage2021 was improvements in current and forecasted economic conditions. The most significant factors contributing to the recovery of the portfolioprovision for credit losses for the three months ended September 30, 2021 included declines in commercial loan balances and the accompanying shift in portfolio composition to residential loans which generally carry lower reserves, reductions in certain qualitative factors and an improving economic forecast. Improved borrower financial performance as reflected in the reduction in criticized and classified assets also contributed to the reduction in the ACL.
For the three and nine months ended September 30, 2017 than2020, the Company recorded a provision for credit losses of $29.2 million and $180.1 million, respectively. The provision for credit losses for the corresponding period in 2016. Non-covered loans represented 97.2% of the average balance of loans outstanding for thethree and nine months ended September 30, 2017 compared2020 was impacted by deteriorating current and forecasted economic conditions related to 95.8% for the nine months ended September 30, 2016.
Interest income on covered loans totaled $225.2 million and $226.7 million foronset of the nine months ended September 30, 2017 and 2016, respectively. The tax-equivalent yield on those loans increased to 53.54% for the nine months ended September 30, 2017 from 40.48% for the nine months ended September 30, 2016.COVID-19 pandemic.
The average balance of investment securities increased by $1.0 billion for the nine months ended September 30, 2017 from the nine months ended September 30, 2016 while the tax-equivalent yield increasedevolving COVID-19 situation and its actual and forecasted impact on economic conditions have led and may continue to 3.07% from 2.82%.
The components of the increase in interest expense for the nine months ended September 30, 2017 as comparedlead to the nine months ended September 30, 2016 were a $33.7 million increase in interest expense on deposits and an $8.3 million increase in interest expense on FHLB advances.
The increase in interest expense on deposits was attributable to an increase of $2.4 billion in average interest bearing deposits and an increasevolatility in the average cost of interest bearing deposits of 0.16% to 0.94% for the nine months ended September 30, 2017 from 0.78% for the nine months ended September 30, 2016. The increase in interest expense on FHLB advances was primarily a result of an increase in the average cost of advances of 0.19% to 1.21% for the nine months ended September 30, 2017 from 1.02% for the nine months ended September 30, 2016.
Factors contributing to the changes in yields and costs for the nine month periods were generally consistent with those for the three month periods discussed above.
The net interest margin, calculated on a tax-equivalent basis, for the nine months ended September 30, 2017 was 3.69% as compared to 3.75% for the nine months ended September 30, 2016. The interest rate spread decreased to 3.51% for the nine months ended September 30, 2017 from 3.60% for the nine months ended September 30, 2016. The declines in net interest margin and interest rate spread resulted primarily from the factors discussed above.
Provision for Loan Losses
The provision for loan losses is the amount of expense that, based on our judgment, is required to maintain the ALLL at an adequate level to absorb probable losses inherent in the loan portfolio at the balance sheet date and that, in management’s judgment, is appropriate under GAAP. credit losses.
The determination of the amount of the ALLLACL is complex and involves a high degree of judgment and subjectivity. Our determination of the amount of the allowance and corresponding provision for loan losses considers ongoing evaluations of the credit quality of and level of credit risk inherent in various segments of the loan portfolio and of individually significant credits, levels of non-performing loans and charge-offs, historical and statistical trends and economic and other relevant factors. See “Analysis of the Allowance for Loan and LeaseCredit Losses” below for more information about how we determine the appropriate level of the allowance.ACL.
The provision for loan losses for the quarter and nine months ended September 30, 2017 included $5.4 million related to the impact of Hurricanes Irma and Harvey. The amount of this provision was determined based on our evaluation of an intensive analysis conducted by our credit teams of the individual loans potentially impacted by these storms, including but not limited to direct contact with borrowers, preliminary assessments of the extent of damage to collateral and impacts on borrowers’ business operations and consideration of the impact of insurance coverage. The amount of the provision related to the impact of these storms is subject to change as individual situations evolve.
For the three months ended September 30, 2017 and 2016, we recorded provisions for loan losses of $37.6 million and $24.9 million, respectively, related to non-covered loans. For the nine months ended September 30, 2017 and 2016, we recorded provisions for loan losses of $60.9 million and $43.6 million, respectively, related to non-covered loans. The amount of the provision is impacted by loan growth, portfolio mix, historical loss rates, the level of charge-offs and specific reserves for impaired loans, and management's evaluation of qualitative factors in the determination of general reserves.
The most significant reason for the increase in the provision for loan losses related to non-covered loans for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016 was an increase of $28.9 million in the provision related to taxi medallion loans. The provision related to taxi medallion loans totaled $32.7 million for the quarter ended September 30, 2017, compared to $3.9 million for the quarter ended September 30, 2016. A $5.4 million provision recognized in the quarter ended September 30, 2017 related to the impact of hurricanes was more than offset by (i) a net decrease in the relative impact on the provision of changes in quantitative and qualitative loss factors, (ii) the impact of lower loan growth, and (iii) a decrease in provisions for criticized and classified loans.
Factors contributing to the increase in the provision for loan losses related to non-covered loans for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 were generally consistent with those for the three month periods discussed above.
For the three months ended September 30, 2017 and 2016, we recorded provisions for (recovery of) loan losses of $0.3 million and $(0.4) million, respectively, related to covered loans. For the nine months ended September 30, 2017 and 2016, we recorded provisions for (recovery of) loan losses of $2.7 million and $(1.1) million, respectively, related to covered loans. The provision for the nine months ended September 30, 2017 related primarily to impairment recognized on an ACI HELOC pool. As discussed below in the section entitled "Non-interest income," the impact on our results of operations of any provision for (recovery of) loan losses on covered loans is significantly mitigated by the corresponding impact on the FDIC indemnification asset, recorded in non-interest income.
Non-Interest Income
The Company reported non-interest income of $53.3 million and $25.1 million for the three months ended September 30, 2017 and 2016, respectively. Non-interest income was $111.4 million and $77.1 million for the nine months ended September 30, 2017 and 2016, respectively. A significant portion of our non-interest income has historically related to transactions in the covered assets. We have broken out the significant categories of non-interest income that relate to covered assets in the table below, to assist in the comparison of the amount and composition of our non-interest income with that of other financial institutions.
The following table presents a comparison of the categories of non-interest income for the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Income from resolution of covered assets, net | $ | 6,400 |
| | $ | 8,883 |
| | $ | 22,066 |
| | $ | 26,426 |
|
| Loss on sale of covered loans, net | — |
| | (10,033 | ) | | (1,582 | ) | | (14,895 | ) |
| Net gain (loss) on FDIC indemnification | (4,838 | ) | | 993 |
| | (14,174 | ) | | (9,410 | ) |
| Other | 237 |
| | 371 |
| | 957 |
| | 623 |
|
| Non-interest income related to the covered assets | 1,799 |
| | 214 |
| | 7,267 |
| | 2,744 |
|
| Service charges and fees | 4,938 |
| | 5,171 |
| | 15,554 |
| | 14,529 |
|
| Gain on sale of non-covered loans | 2,447 |
| | 2,086 |
| | 8,183 |
| | 7,535 |
|
| Gain on investment securities available for sale, net | 26,931 |
| | 3,008 |
| | 29,194 |
| | 10,065 |
|
| Lease financing | 13,287 |
| | 11,188 |
| | 40,067 |
| | 32,762 |
|
| Other non-interest income | 3,924 |
| | 3,408 |
| | 11,098 |
| | 9,495 |
|
| | $ | 53,326 |
| | $ | 25,075 |
| | $ | 111,363 |
| | $ | 77,130 |
|
Non-interest income related to transactions in thecovered assets | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
| Deposit service charges and fees | $ | 5,553 | | | $ | 4,040 | | | $ | 15,870 | | | $ | 11,927 | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Gain on sale of loans, net | 1,403 | | | 2,953 | | | 5,391 | | | 10,745 | | | |
| Gain on investment securities: | | | | | | | | | |
| Net realized gain on sale of securities AFS | 815 | | | 2,263 | | | 7,623 | | | 9,516 | | | |
| Net unrealized gain (loss) on marketable equity securities | (1,479) | | | 4,918 | | | (1,767) | | | 1,048 | | | |
| Gain (loss) on investment securities, net | (664) | | | 7,181 | | | 5,856 | | | 10,564 | | | |
| Lease financing | 13,212 | | | 13,934 | | | 39,222 | | | 45,565 | | | |
| Other non-interest income | 5,974 | | | 8,184 | | | 22,192 | | | 19,140 | | | |
| $ | 25,478 | | | $ | 36,292 | | | $ | 88,531 | | | $ | 97,941 | | | |
The consolidated financial statements reflect the impact of gains or losses arising from transactionsincrease in the covered assets. The balance of the FDIC indemnification asset is reduced or increased as a result of decreases or increases in cash flows expected to be received from the FDIC related to these gains or losses. When these transaction gains or losses are recorded, we also record an offsetting amount in the consolidated statement of income line item “Net gain (loss) on FDIC indemnification.” This line item includes the significantly mitigating impact of FDIC indemnification related to the following types of transactions in covered assets:
gains or losses from the resolution of covered assets;
provisions for (recoveries of) losses on covered loans;
gains or losses on the sale of covered loans; and
gains or losses on covered OREO.
See Note 5 to the consolidated financial statements for further details about the components of these gains and losses associated with covered assets, along with the related additions to or reductions in the amounts recoverable from the FDIC under the Loss Sharing Agreements, as reflected in the consolidated statements of incomedeposit service charges for the three and nine months ended September 30, 2017 and 2016.
Covered loans may be resolved through prepayment, short sale of the underlying collateral, foreclosure, sale of the loans or charge-off. For loans resolved through prepayment, short sale or foreclosure, the difference between consideration received in resolution of the loans and the carrying value of the loans is recorded in the consolidated statement of income line item “Income
from resolution of covered assets, net.” Both gains and losses on individual resolutions are included in this line item. Losses from the resolution of covered loans increase the amount recoverable from the FDIC under the Loss Sharing Agreements. Gains from the resolution of covered loans reduce the amount recoverable from the FDIC under the Loss Sharing Agreements. These additions2021 compared to or reductions in amounts recoverable from the FDIC related to the resolution of covered loans are recorded in non-interest income in the line item “Net gain (loss) on FDIC indemnification” and reflected as corresponding increases or decreases in the FDIC indemnification asset. The amount of income or loss recorded in any period will be impacted by the amount of covered loans resolved, the amount of consideration received, and our ability to accurately project cash flows from ACI loans in future periods.
The following table provides further detail of the components of income from resolution of covered assets, net, for the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Payments in full | $ | 6,423 |
| | $ | 9,371 |
| | $ | 22,201 |
| | $ | 26,790 |
|
| Other | (23 | ) | | (488 | ) | | (135 | ) | | (364 | ) |
| Income from resolution of covered assets, net | $ | 6,400 |
| | $ | 8,883 |
| | $ | 22,066 |
| | $ | 26,426 |
|
Under the terms of the Purchase and Assumption Agreement with the FDIC, the Bank may sell up to 2.5% of the covered loans based on UPB at the date of the FSB Acquisition, or approximately $280 million, on an annual basis without prior consent of the FDIC. Any losses incurred from such loan sales are covered under the Single Family Shared-Loss Agreement. Any loan sale in excess of this stipulated annual threshold requires approval from the FDIC to be eligible for loss share coverage. However, if the Bank seeks to sell covered loans in excess of the 2.5% threshold in the nine months prior to the stated termination date of loss share coverage, May 21, 2019, and the FDIC does not consent, the Single Family Shared-Loss Agreement will be extended for two additional years with respect to the loans requested to be included in such sales. The Bank will then have the right to sell all or any portion of such loans without FDIC consent at any time within the nine months prior to the extended termination date, and any losses incurred will be covered under the Single Family Shared-Loss Agreement. This final sale mechanism, if exercised, ensures no residual credit risk in our covered loan portfolio that would otherwise arise from credit losses occurring after the termination date of the Single Family Shared-Loss Agreement.
The following table summarizes the gain (loss) recorded on the sale of covered residential loans and the impact of related FDIC indemnification for the periods indicated (in thousands):
|
| | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2016 | | 2017 | | 2016 |
| Loss on sale of covered loans | $ | (10,033 | ) | | $ | (1,582 | ) | | $ | (14,895 | ) |
| Net gain on FDIC indemnification | 8,026 |
| | 1,266 |
| | 11,958 |
|
| Net impact on pre-tax earnings | $ | (2,007 | ) | | $ | (316 | ) | | $ | (2,937 | ) |
The Bank did not sell covered residential loans in the three months ended September 30, 2017, due to the potential impact of Hurricane Irma on the market for these loans, the collateral for many of which is located in Florida.
Pricing received on the sale of covered loans may vary based on (i) market conditions, including the interest rate environment, the amount of capital seeking investment and the secondary supply of loans with a particular performance history or collateral type, (ii) the type and quality of collateral, (iii) the performance history of loans included in the sale and (iv) whether or not the loans have been modified. We anticipate that we will continue to exercise our right to sell covered residential loans on a quarterly basis in the future.
Other components of non-interest income
Period over period increases in income from lease financing corresponded to the growth in the portfolio of equipment under operating lease.
Gains on sale of non-covered loans for the three and nine months ended September 30, 2017 and 20162020 resulted primarily from higher treasury management fee income, related primarily to sales of loans by SBF.our BankUnited 2.0 initiatives.
GainThe decline in gain on sale of investment securities available for sale,loans, net totaled $26.9 million for the quarter ended September 30, 2017. Substantially all of these gains resulted from the sale of securities formerly covered under the Commercial Shared-Loss Agreement and originally acquired at significant discounts in the FSB Acquisition. Other gains on investment securities available for sale for the three and nine months ended September 30, 2017 and 20162021 compared to the comparable periods of the prior year related primarily to lower levels of re-pooling activity of GNMA early buyout loans.
The decrease in income from lease financing for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 related to salesan increase in equipment temporarily off-lease and re-leasing of securitiesassets at lower rates.
The most significant factor leading to the increase in other non-interest income for the normal course of managing liquidity, portfolio duration and yield.nine months ended September 30, 2021 compared to 2020 was increased revenue from our customer derivative program.
Non-Interest Expense
The following table presents the components of non-interest expense for the periods indicated (in thousands):
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| Employee compensation and benefits | $ | 58,327 |
| | $ | 55,162 |
| | $ | 178,386 |
| | $ | 166,374 |
|
| Occupancy and equipment | 18,829 |
| | 18,867 |
| | 56,689 |
| | 57,199 |
|
| Amortization of FDIC indemnification asset | 45,225 |
| | 38,957 |
| | 135,351 |
| | 116,711 |
|
| Deposit insurance expense | 5,764 |
| | 4,943 |
| | 16,827 |
| | 12,866 |
|
| Professional fees | 2,748 |
| | 3,884 |
| | 12,573 |
| | 10,119 |
|
| Telecommunications and data processing | 3,452 |
| | 3,746 |
| | 10,481 |
| | 10,800 |
|
| Depreciation of equipment under operating lease | 8,905 |
| | 6,855 |
| | 25,655 |
| | 20,004 |
|
| Other non-interest expense | 13,455 |
| | 15,590 |
| | 37,735 |
| | 40,151 |
|
| | $ | 156,705 |
| | $ | 148,004 |
| | $ | 473,697 |
| | $ | 434,224 |
|
Annualized non-interest expense as a percentage of average assets was 2.1% and 2.2% for the three and nine months ended September 30, 2017, respectively, and 2.2% and 2.3% for the three and nine months ended September 30, 2016, respectively. Excluding amortization of the FDIC indemnification asset, non-interest expense as a percentage of average assets was 1.5% and 1.6% for the three and nine months ended September 30, 2017, respectively, and 1.6% and 1.7% for the three and nine months ended September 30, 2016, respectively. The more significant changes in the components of non-interest expense are discussed below. | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | |
| Employee compensation and benefits | $ | 57,224 | | | $ | 48,448 | | | $ | 172,971 | | | $ | 156,212 | | | |
| Occupancy and equipment | 11,760 | | | 12,170 | | | 35,127 | | | 36,440 | | | |
| Deposit insurance expense | 3,552 | | | 5,886 | | | 15,224 | | | 15,095 | | | |
| Professional fees | 2,312 | | | 2,436 | | | 6,363 | | | 8,771 | | | |
| Technology and telecommunications | 16,687 | | | 15,435 | | | 49,279 | | | 42,056 | | | |
| Depreciation of operating lease equipment | 12,944 | | | 12,315 | | | 37,995 | | | 37,137 | | | |
| | | | | | | | | |
| Other non-interest expense | 13,563 | | | 11,937 | | | 42,756 | | | 38,154 | | | |
| Total non-interest expense | $ | 118,042 | | | $ | 108,627 | | | $ | 359,715 | | | $ | 333,865 | | | |
Employee compensation and benefits
As is typical for financial institutions, employee compensation and benefits represents the single largest component of recurring non-interest expense. Employee compensation and benefits increased by $8.8 million and $16.8 million for the three and nine months ended September 30, 2017 increased by $3.2 million and $12.0 million compared to the corresponding periods in 2016. The increases for the three and nine months ended September 30, 2017 primarily reflected increased headcount and general increases in compensation levels.
Amortization of FDIC indemnification asset
Amortization of FDIC indemnification asset totaled $45.2 million and $135.4 million, respectively, for the three and nine months ended September 30, 2017 compared to $39.0 million and $116.7 million, respectively, for the three and nine months ended September 30, 2016.
The FDIC indemnification asset was initially recorded at its estimated fair value, representing the present value of estimated future cash payments from the FDIC for probable losses on covered assets. As projected cash flows from the ACI loans have increased, the yield on the loans has increased accordingly and the estimated future cash payments from the FDIC have decreased. This change in estimated cash flows is recognized prospectively, consistent with the recognition of the increased cash flows from the ACI loans. As a result, the FDIC indemnification asset is being amortized to the amount of the estimated future cash flows. For the three and nine months ended September 30, 2017, the average rate at which the FDIC indemnification asset was amortized was 46.62% and 41.19%2021, respectively compared to 25.36% and 23.48%, respectively, during the comparable periods in 2016.of 2020, primarily due to higher variable compensation accruals for 2021 as well as the impact of a higher stock price on expense related to liability classified share awards.
Technology and telecommunications
The rateincreases in technology and telecommunications expense are reflective of amortization will increase if estimated future cashinvestments in digital, payments from the FDIC decrease. The amount of amortization is impacted by both the change in the amortization rate and the decrease in the average balance of the indemnification asset. As we continue to submit claims under the Loss Sharing Agreements and recognize periodic amortization, the balance of the indemnification asset will continue to decline.data analytics capabilities.
Income Taxes
See Note 5 to the consolidated financial statements for a rollforward of the FDIC indemnification asset for the nine months ended September 30, 2017 and the year ended December 31, 2016. The entire balance of the FDIC indemnification asset relatesinformation about income taxes.
to residential loans and OREO covered under the Single Family Shared-Loss Agreement. The following table presents the carrying value of the FDIC indemnification asset and the estimated future cash flows at the dates indicated (in thousands):
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| FDIC indemnification asset | $ | 349,617 |
| | $ | 515,933 |
|
| Less expected amortization | (173,685 | ) | | (245,350 | ) |
| Amount expected to be collected from the FDIC | $ | 175,932 |
| | $ | 270,583 |
|
The amount of expected amortization reflects the impact of improvements in cash flows expected to be collected from the covered loans, as well as the impact of time value resulting from the discounting of the asset when it was initially established. This amount will be amortized to non-interest expense using the effective interest method over the period during which cash flows from the FDIC are expected to be collected, which is limited to the lesser of the contractual term of the Single Family Shared-Loss Agreement and the expected remaining life of the indemnified assets.
Deposit insurance expense
Deposit insurance expense increased $0.8 million and $4.0 million, respectively, for the three and nine months ended September 30, 2017 compared to the corresponding periods in 2016. These increases primarily reflect the growth of the balance sheet, the large bank surcharge imposed by the FDIC, which began in the third quarter of 2016, and increases in certain components of the Bank's assessment rate.
Depreciation of equipment under operating lease
Depreciation of equipment under operating lease increased by $2.1 million and $5.7 million, respectively, for the three and nine months ended September 30, 2017 compared to the corresponding periods in 2016. These increases generally correspond to the growth in the portfolio of equipment under operating lease.
Other non-interest expense
The most significant components of other non-interest expense are advertising and promotion, costs related to lending activities and deposit generation, OREO related expenses, insurance, travel and general office expense. Other non-interest expense for the three months ended September 30, 2017 includes $0.6 million related primarily to facilities damage and employee relocation and assistance due to the impact of Hurricane Irma. We do not expect future expenses related to facilities damage and employee relocation to be material to the Company.
Income Taxes
The Company’s effective income tax rate was 32.2% and 31.2% for the three and nine months ended September 30, 2017, respectively, compared to 31.7% and 33.2% for the three and nine months ended September 30, 2016, respectively. Significant components included in the reconciliation of the Company's effective income tax rate to the statutory federal tax rate of 35.0% included the effect of state income taxes and the impact of income not subject to federal tax for each of the periods presented. In addition, the effective income tax rate for the three and nine months ended September 30, 2017 reflected the impact of $0.3 million and $3.2 million, respectively, in excess tax benefits resulting from activity related to vesting of share-based awards and exercise of stock options.
Analysis of Financial Condition
Average interest-earning assets increased $3.2by $1.6 billion to $26.9$34.0 billion for the nine months ended September 30, 20172021 from $23.7$32.4 billion for the nine months ended September 30, 2016. This increase was driven by a $2.1 billion increase in the2020 while average balance of outstanding loans and a $1.0 billion increase in the average balance of investment securities. The increase in average loans reflected growth of $2.3 billion in average non-covered loans outstanding, partially offset by a $186 million decrease in the average balance of covered loans. The decrease in average non-interest earning assets period over period primarily reflected a decrease in the FDIC indemnification asset. Growth in interest earning assets, resolution of covered loans and declines in the amount of the FDIC indemnification asset are trends that are expected to continue.
Average interest bearing liabilities increased $2.6 billion to $22.4declined by $1.7 billion for the nine months ended September 30, 2017 from $19.82021 compared to the nine months ended September 30, 2020. Average non-interest bearing deposits increased by $2.9 billion to $8.2 billion for the nine months ended September 30, 2016, due2021.
Investment securities grew by $1.2 billion at September 30, 2021 compared to increasesDecember 31, 2020 while total loans declined by $1.1 billion over the same period, reflective of $2.4 billion in average interest bearing deposits and $191 million in average FHLB advances. Average non-interest bearingincreased liquidity during a period of reduced loan demand. Total deposits increased by $90 million. We expect growth$620 million offset by a decrease of $674 million in averageborrowings. This increase in total deposits from December 31, 2020 to continue, corresponding to anticipated growthSeptember 30, 2021 was comprised of an increase in interest earning assets.
Average stockholders' equity increased by $255 million, due primarily to the retentionnon-interest bearing demand deposits of earnings, but also reflecting proceeds from the exercise$2.1 billion, a decline in time deposits of stock options$1.6 billion and an increase in accumulated other comprehensive income.interest bearing deposits of $49 million. This shift in deposit mix is consistent with management's key strategic objective of growing non-interest bearing deposits and improving the overall quality of the deposit base.
Investment Securities Available for Sale
The following table shows the amortized cost and carrying value, which, with the exception of investment securities held to maturity, is fair value, of investment securities available for sale as ofat the dates indicated (in thousands):indicated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | |
| September 30, 2021 | | December 31, 2020 | | |
| | Amortized
Cost | | Carrying Value | | Amortized
Cost | | Carrying Value | | | | |
| U.S. Treasury securities | $ | 134,367 | | | $ | 132,190 | | | $ | 79,919 | | | $ | 80,851 | | | | | |
| U.S. Government agency and sponsored enterprise residential MBS | 2,096,869 | | | 2,109,141 | | | 2,389,450 | | | 2,405,570 | | | | | |
| U.S. Government agency and sponsored enterprise commercial MBS | 899,014 | | | 896,791 | | | 531,724 | | | 539,354 | | | | | |
| | | | | | | | | | | |
| Private label residential MBS and CMOs | 2,169,425 | | | 2,172,078 | | | 982,890 | | | 998,603 | | | | | |
Private label commercial MBS(1) | 2,582,704 | | | 2,591,320 | | | 2,514,271 | | | 2,526,354 | | | | | |
| Single family real estate-backed securities | 613,796 | | | 621,301 | | | 636,069 | | | 650,888 | | | | | |
| Collateralized loan obligations | 975,308 | | | 973,535 | | | 1,148,724 | | | 1,140,274 | | | | | |
| Non-mortgage asset-backed securities | 274,709 | | | 278,072 | | | 246,597 | | | 253,261 | | | | | |
| State and municipal obligations | 207,918 | | | 225,404 | | | 213,743 | | | 235,709 | | | | | |
| SBA securities | 199,192 | | | 198,241 | | | 233,387 | | | 231,545 | | | | | |
| | | | | | | | | | | |
| Investment securities held to maturity | 10,000 | | | 10,000 | | | 10,000 | | | 10,000 | | | | | |
| $ | 10,163,302 | | | 10,208,073 | | | $ | 8,986,774 | | | 9,072,409 | | | | | |
| Marketable equity securities | | | 121,618 | | | | | 104,274 | | | | | |
| | | $ | 10,329,691 | | | | | $ | 9,176,683 | | | | | |
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
| U.S. Treasury securities | $ | 24,969 |
| | $ | 24,957 |
| | $ | 4,999 |
| | $ | 5,005 |
|
| U.S. Government agency and sponsored enterprise residential MBS | 2,332,616 |
| | 2,348,687 |
| | 1,513,028 |
| | 1,527,242 |
|
| U.S. Government agency and sponsored enterprise commercial MBS | 139,966 |
| | 139,220 |
| | 126,754 |
| | 124,586 |
|
| Private label residential MBS and CMOs | 507,381 |
| | 527,858 |
| | 334,167 |
| | 375,098 |
|
| Private label commercial MBS | 1,140,465 |
| | 1,153,601 |
| | 1,180,386 |
| | 1,187,624 |
|
| Single family rental real estate-backed securities | 566,635 |
| | 572,948 |
| | 858,339 |
| | 861,251 |
|
| Collateralized loan obligations | 695,414 |
| | 700,319 |
| | 487,678 |
| | 487,296 |
|
| Non-mortgage asset-backed securities | 80,255 |
| | 82,637 |
| | 187,660 |
| | 186,736 |
|
| Preferred stocks | 60,716 |
| | 70,716 |
| | 76,180 |
| | 88,203 |
|
| State and municipal obligations | 666,013 |
| | 677,015 |
| | 705,884 |
| | 698,546 |
|
| SBA securities | 572,540 |
| | 586,675 |
| | 517,129 |
| | 523,906 |
|
| Other debt securities | 4,056 |
| | 8,839 |
| | 3,999 |
| | 8,091 |
|
| | $ | 6,791,026 |
| | $ | 6,893,472 |
| | $ | 5,996,203 |
| | $ | 6,073,584 |
|
(1)Amortized cost is net of ACL totaling $0.4 million at December 31, 2020.
Our investment strategy has focused on insuring adequate liquidity, addingmaintaining a suitable balance of high credit quality, diversifyingdiverse assets, to the consolidated balance sheet, managing interest rate risk, and generating acceptable returns given our established risk parameters. We have sought to maintain liquidity by investing a significant portion of the portfolio in high quality liquid securities including U.S. Treasury securities, SBA securities and U.S. Government agency MBS.Agency and sponsored enterprise securities. Investment grade municipal securities provide liquidity along with higherand attractive tax-equivalent yields at longer durations than the portfolio in general.yields. We have also invested in highly rated structured products, including private-label commercial and residential MBS, collateralized loan obligations, single family real estate-backed securities and non-mortgage asset-backed securities that, while somewhat less liquid, provide us with attractive yields. Relatively short effective portfolio duration helps mitigate interest rate risk arising fromrisk. Based on the currently low level of market interest rates. TheCompany’s assumptions, the estimated weighted average expected life of the investment portfolio as of September 30, 20172021 was 4.94.1 years and the effective duration of the portfolio as of September 30, 2021 was 1.71.5 years.
The following table shows the scheduled maturities, carrying values and current yields for investment securities available for sale as of September 30, 2017. Scheduled maturities have been adjusted for anticipated prepayments of MBS and other pass through securities. Yields on tax-exempt securities have been calculated on a tax-equivalent basis (dollars in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Within One Year | | After One Year Through Five Years | | After Five Years Through Ten Years | | After Ten Years | | Total |
| | Carrying Value | | Weighted Average Yield | | Carrying Value | | Weighted Average Yield | | Carrying Value | | Weighted Average Yield | | Carrying Value | | Weighted Average Yield | | Carrying Value | | Weighted Average Yield |
| U.S. Treasury securities | $ | 24,957 |
| | 1.19 | % | | $ | — |
| | — | % | | $ | — |
| | — | % | | $ | — |
| | — | % | | $ | 24,957 |
| | 1.19 | % |
| U.S. Government agency and sponsored enterprise residential MBS | 355,685 |
| | 2.94 | % | | 860,103 |
| | 2.28 | % | | 893,121 |
| | 2.14 | % | | 239,778 |
| | 2.15 | % | | 2,348,687 |
| | 2.31 | % |
| U.S. Government agency and sponsored enterprise commercial MBS | 5,562 |
| | 3.80 | % | | 11,066 |
| | 3.71 | % | | 83,066 |
| | 2.50 | % | | 39,526 |
| | 3.57 | % | | 139,220 |
| | 2.95 | % |
| Private label residential MBS and CMOs | 113,951 |
| | 4.01 | % | | 284,366 |
| | 3.82 | % | | 101,127 |
| | 4.07 | % | | 28,414 |
| | 4.39 | % | | 527,858 |
| | 3.94 | % |
| Private label commercial MBS | 90,284 |
| | 3.80 | % | | 786,542 |
| | 3.57 | % | | 276,775 |
| | 3.20 | % | | — |
| | — | % | | 1,153,601 |
| | 3.50 | % |
| Single family rental real estate-backed securities | 1,516 |
| | 3.18 | % | | 546,920 |
| | 2.92 | % | | 24,512 |
| | 3.70 | % | | — |
| | — | % | | 572,948 |
| | 2.95 | % |
| Collateralized loan obligations | — |
| | — | % | | 573,474 |
| | 3.32 | % | | 126,845 |
| | 3.52 | % | | — |
| | — | % | | 700,319 |
| | 3.36 | % |
| Non-mortgage asset-backed securities | 11,999 |
| | 3.91 | % | | 70,638 |
| | 3.63 | % | | — |
| | — | % | | — |
| | — | % | | 82,637 |
| | 3.67 | % |
| State and municipal obligations | — |
| | — | % | | 27,509 |
| | 3.00 | % | | 624,758 |
| | 4.46 | % | | 24,748 |
| | 5.60 | % | | 677,015 |
| | 4.45 | % |
| SBA securities | 93,080 |
| | 2.54 | % | | 245,991 |
| | 2.50 | % | | 150,116 |
| | 2.47 | % | | 97,488 |
| | 2.43 | % | | 586,675 |
| | 2.49 | % |
| Other debt securities | — |
| | — | % | | — |
| | — | % | | 1,900 |
| | 9.17 | % | | 6,939 |
| | 9.13 | % | | 8,839 |
| | 9.14 | % |
| | $ | 697,034 |
| | 3.13 | % | | $ | 3,406,609 |
| | 3.04 | % | | $ | 2,282,220 |
| | 3.11 | % | | $ | 436,893 |
| | 2.74 | % | | 6,822,756 |
| | 3.05 | % |
| Preferred stocks with no scheduled maturity | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | 70,716 |
| | 8.66 | % |
| Total investment securities available for sale | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | $ | 6,893,472 |
| | 3.11 | % |
The available for sale investment securities portfolio was in a net unrealized gain position of $102.4$44.8 million at September 30, 2017 with aggregate fair value equal to 101.5% of amortized cost.2021. Net unrealized gains at September 30, 2021 included $110.3$76.7 million of gross unrealized gains and $7.9$31.9 million of gross unrealized losses. Investment securities available for sale in an unrealized loss positionpositions at September 30, 20172021 had an aggregate fair value of $1.0$3.6 billion. At September 30, 2017, 96.7%The ratings distribution of investmentour AFS securities available for sale were backed by the U.S. Government, U.S. Government agencies or sponsored enterprises or were rated AAA , AA or A, based on the most recent third-party ratings. Investment securities available for sale totaling $33 million were rated below investment grade or not ratedportfolio at September 30, 2017, all of which were acquired2021 is depicted in the FSB Acquisition and substantially all of which were in unrealized gain positions at September 30, 2017.chart below:
We evaluate the credit quality of individual securities in the portfolio quarterly to determine whether anywe expect to recover the amortized cost basis of the investments in unrealized loss positions are other-than-temporarily impaired.positions. This evaluation considers, but is not necessarily limited to, the following factors, the relative significance of which varies depending on the circumstances pertinent to each individual security:
our intent•Whether we intend to holdsell the security until maturity or for a periodprior to recovery of time sufficient for a recovery in value;its amortized cost basis;
whether•Whether it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis;
the length of time and•The extent to which fair value has beenis less than amortized cost;
adverse changes•Adverse conditions specifically related to the security, an industry or geographic area;
•Changes in expected cash flows;the financial condition of the issuer or underlying loan obligors;
collateral values and performance;
the•The payment structure and remaining payment terms of the security, including levels of subordination or over-collateralization;
changes in the economic or regulatory environment;
the general market condition•Failure of the geographic area or industry of the issuer;issuer to make scheduled payments;
the issuer’s financial condition, performance and business prospects; and
changes•Changes in credit ratings.ratings;
Our evaluation•Relevant market data;
•Estimated prepayments, defaults, and the value and performance of non-agency impaired securities for OTTI as of September 30, 2017 included consideration of the potential impacts of Hurricanes Irma and Harvey. Our considerations included but were not necessarily limited to (i) observations of market pricing since the hurricanes, (ii) whether a significant portion of the underlying collateral was in an
impacted area, (iii) whether credit enhancement significantly exceededat the balance of collateral in impacted areas, (iv) for residential mortgage-backed securities, the evaluation of the extent and nature of damage to residential collateral for loans in the Bank’s residential loan portfolio located in the same areas, and (v) discussions with sponsors or managers of individual securities about specific collateral impact.
During the three and nine months ended September 30, 2016, OTTI was recognized on two positions in one private label commercial MBS. These positions were in unrealized loss positions at September 30, 2016 and the Company intended to sell the security before recovery of the amortized cost basis. No securities were determined to be other-than-temporarily impaired at September 30, 2017, or during the three and nine months then ended.level.
We do not intend to sell securities in significant unrealized loss positions at September 30, 2017.2021. Based on an assessment of our liquidity position and internal and regulatory guidelines for permissible investments and concentrations, it is not more likely than not that we will be required to sell securities in significant unrealized loss positions prior to recovery of amortized cost basis. The severity of impairment of individual securities in the portfolio is generally not material. Unrealized losses in the portfoliobasis, which may be at September 30, 2017 were primarily attributable to an increase in market interest rates subsequent to the date the securities were acquired.maturity.
U.S. Government, Government Agency and Government Sponsored Enterprise Securities
The timely repaymentpayment of principal and interest on securities issued by the U.S. Treasury,government, U.S. Government agencygovernment agencies and U.S. government sponsored enterprise securities in unrealized loss positionsenterprises is explicitly or implicitly guaranteed by the full faithU.S. Government. As such, there is an assumption of zero credit loss and creditthe Company expects to recover the entire amortized cost basis of these securities.
Private Label Securities:
None of the U.S. Government. Management performed projected cash flow analyses of theimpaired private label residential MBS and CMOs,securities had missed principal or interest payments or had been downgraded by a NRSRO at September 30, 2021. The Company performed an analysis comparing the present value of cash flows expected to be collected to the amortized cost basis of impaired private label commercial MBSsecurities. This analysis was based on a scenario that we believe to be more severe than our reasonable and non-mortgage asset-backed securities in unrealizedsupportable economic forecast at September 30, 2021, and incorporated assumptions about voluntary prepayment rates, collateral defaults, delinquencies, other collateral quality measures, loss positions, incorporating CUSIP level assumptions consistent withseverity, recovery lag and other relevant factors. Our analysis also considered the collateralstructural characteristics of each security including collateral default rate, voluntary prepayment rate, severity and delinquency assumptions.the level of credit enhancement provided by that structure. Based on the results of this analysis, no credit losses were projected. Management's analysisnone of the credit characteristics of individual securities and the underlying collateral and levels of subordination for each of the single family rental real estate-backedprivate label AFS securities in unrealized loss positions is not indicativewere projected to sustain credit losses at September 30, 2021.
At September 30, 2021, the private label portfolio segments with the largest unrealized losses were the CMBS and the RMBS and CMO segments. The following table presents the distribution of third-party ratings and subordination levels compared to average internal stress scenario losses for select portfolio segments at September 30, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Subordination | | Weighted Average Stress Scenario Loss |
| Rating | | Percent of Total | | Minimum | | Maximum | | Average | |
| Private label CMBS | AAA | | 92.7 | % | | 30.0 | % | | 53.2 | % | | 37.2 | % | | 6.5 | % |
| AA | | 4.4 | % | | 37.3 | % | | 37.3 | % | | 37.3 | % | | 5.5 | % |
| A | | 2.9 | % | | 24.5 | % | | 24.5 | % | | 24.5 | % | | 7.2 | % |
| Weighted average | | | 100.0 | % | | 30.2 | % | | 51.7 | % | | 36.8 | % | | 6.5 | % |
| | | | | | | | | | | |
| CLOs | AAA | | 84.5 | % | | 43.1 | % | | 47.7 | % | | 44.9 | % | | 8.6 | % |
| AA | | 11.3 | % | | 33.2 | % | | 39.9 | % | | 35.0 | % | | 8.4 | % |
| A | | 4.2 | % | | 24.7 | % | | 24.7 | % | | 24.7 | % | | 9.7 | % |
| Weighted average | | | 100.0 | % | | 41.2 | % | | 45.9 | % | | 43.0 | % | | 8.6 | % |
Our September 30, 2021 analysis projected weighted average collateral losses for impaired securities in the private label residential MBS and CMO category of 2% compared to weighted average credit losses. Management'ssupport of 15%. For impaired single family real estate-backed securities, our analysis projected weighted average collateral losses of 10% compared to weighted average credit support of 50%. As of September 30, 2021, all of the state and municipal obligationsimpaired securities in unrealized loss positions included reviewing the ratings of the securities and the results of credit surveillance performed by an independent third party. Given the expectation of timely repayment of principal and interest and the generally limited severity of impairment, the impairmentsthese categories were considered to be temporary.externally rated AAA.
For further discussion of our analysis of impaired investment securities AFS for OTTI,credit loss impairment see Note 3 to the consolidated financial statements.
We use third-party pricing services to assist us in estimating the fair value of investment securities. We perform a variety of procedures to ensure that we have a thorough understanding of the methodologies and assumptions used by the pricing services including obtaining and reviewing written documentation of the methods and assumptions employed, conducting interviews with valuation desk personnel and reviewing model results and detailed assumptions used to value selected securities as considered necessary. Our classification of prices within the fair value hierarchy is based on an evaluation of the nature of the significant assumptions impacting the valuation of each type of security in the portfolio. We have established a robust price challenge process that includes a review by our treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over month fluctuations or deviations from our expectations based on recent observed trading activity and other information available in the marketplace that would impact the value of the security is challenged. Responses to the price challenges, which generally include specific information about inputs and assumptions incorporated in the valuation and their sources, are reviewed in detail. If considered necessary to resolve any discrepancies, a price will be obtained from an additional independent valuation specialist.sources. We do not typically adjust the prices provided, other than through this established challenge process. Our primary pricing services utilize observable inputs when available, and employ unobservable inputs and proprietary models only when observable inputs are not available. As a matter of course, the services validate prices by comparison to recent trading activity whenever such activity exists. Quotes obtained from the pricing services are typically non-binding.
We have also established a quarterly price validation process to assess the propriety of the pricing methodologies utilized by our primary pricing services by independently verifying the prices of a sample of securities in the portfolio. Sample sizes vary based on the type of security being priced, with higher sample sizes applied to more difficult to value security types. Verification procedures may consist of obtaining prices from an additional outside source or internal modeling, generally based on Intex. We have established acceptable percentage deviations from the price provided by the initial pricing source. If deviations fall outside the established parameters, we will obtain and evaluate more detailed information about the assumptions and inputs used by each pricing source or, if considered necessary, employ an additional valuation specialist to price the security in question. Pricing issues identified through this evaluation are addressed with the applicable pricing service and methodologies or inputs are revised as determined necessary. Depending on the results of the validation process, sample sizes may be extended for particular classes of securities. Results of the validation process are reviewed by the treasury front office and by senior management.
The majority of our investment securities are classified within level 2 of the fair value hierarchy. U.S. Treasury securities and certain preferred stocksmarketable equity securities are classified within level 1 of the hierarchy. At September 30, 2017While at the onset of the COVID-19 pandemic, we observed increased volatility and December 31, 2016, 1.0%dislocation in the market for certain securities, we believe the fiscal and 2.1%, respectively,monetary response to the crisis was effective in supporting liquidity and stabilizing markets. These circumstances did not lead to a change in the categorization of our investment securities were classifiedany fair value estimates within level 3 of the fair value hierarchy. Securities classified within level 3 of the hierarchy at September 30, 2017 included certain private label residential MBS and trust preferred securities. These securities were classified within level 3 of the hierarchy because proprietary assumptions related to voluntary prepayment rates, default probabilities, loss severities and discount rates were considered significant to the valuation. There were no transfers of investment securities between levels of the fair value hierarchy during the nine months ended September 30, 2017 and 2016.
For additional discussion of the fair values of investment securities, see Note 109 to the consolidated financial statements.
Loans HeldThe following table shows the weighted average prospective yields, categorized by scheduled maturity, for Sale
Loans held for sale atAFS investment securities as of September 30, 2017 included $32 million2021. Scheduled maturities have been adjusted for anticipated prepayments when applicable. Yields on tax-exempt securities have been calculated on a tax-equivalent basis, based on a federal income tax rate of commercial loans originated by SBF with the intent to sell in the secondary market. Commercial loans held for sale are comprised of the portion of loans guaranteed by U.S. government agencies. Loans are generally sold with servicing retained. Servicing activity did not have a material impact on the results of operations for the three and nine months ended September 30, 2017 and 2016.21%:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Within One Year | | | | After One Year
Through Five Years | | | | After Five Years
Through Ten Years | | | | After Ten Years | | | | Total |
| | | | | | | | | | | | | | | | | | | |
| U.S. Treasury securities | | | 0.82 | % | | | | — | % | | | | — | % | | | | — | % | | | | 0.82 | % |
| U.S. Government agency and sponsored enterprise residential MBS | | | 0.78 | % | | | | 0.78 | % | | | | 0.69 | % | | | | 0.64 | % | | | | 0.74 | % |
| U.S. Government agency and sponsored enterprise commercial MBS | | | 1.10 | % | | | | 1.73 | % | | | | 0.97 | % | | | | 1.31 | % | | | | 1.12 | % |
| Private label residential MBS and CMOs | | | 1.30 | % | | | | 1.26 | % | | | | 1.61 | % | | | | 2.19 | % | | | | 1.29 | % |
| Private label commercial MBS | | | 2.35 | % | | | | 1.75 | % | | | | 2.14 | % | | | | 2.34 | % | | | | 1.86 | % |
| Single family real estate-backed securities | | | 2.43 | % | | | | 2.05 | % | | | | 2.34 | % | | | | — | % | | | | 2.10 | % |
| Collateralized loan obligations | | | 1.43 | % | | | | 1.82 | % | | | | 1.91 | % | | | | — | % | | | | 1.80 | % |
| Non-mortgage asset-backed securities | | | 2.32 | % | | | | 1.97 | % | | | | 1.21 | % | | | | — | % | | | | 1.90 | % |
| State and municipal obligations | | | 2.91 | % | | | | 3.87 | % | | | | 4.51 | % | | | | 3.99 | % | | | | 3.99 | % |
| SBA securities | | | 1.32 | % | | | | 1.27 | % | | | | 1.18 | % | | | | 1.05 | % | | | | 1.25 | % |
| | | | | | | | | | | | | | | | | | | |
| | | 1.39 | % | | | | 1.56 | % | | | | 1.28 | % | | | | 1.24 | % | | | | 1.47 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Loans
The loan portfolio comprises the Company’s primary interest-earning asset. The following tables showtable shows the composition of the loan portfolio and the breakdown of the portfolio among non-covered loans, covered ACI loans and covered non-ACI loans at the dates indicated (dollars in thousands):
|
| | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| |
| | Covered Loans | | | | Percent of Total |
| | Non-Covered Loans | | ACI | | Non-ACI | | Total | |
| Residential and other consumer: | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | $ | 3,958,205 |
| | $ | 470,300 |
| | $ | 28,589 |
| | $ | 4,457,094 |
| | 21.7 | % |
| Home equity loans and lines of credit | 1,644 |
| | 5,640 |
| | 37,764 |
| | 45,048 |
| | 0.2 | % |
| Other consumer loans | 20,166 |
| | — |
| | — |
| | 20,166 |
| | 0.1 | % |
| | 3,980,015 |
| | 475,940 |
| | 66,353 |
| | 4,522,308 |
| | 22.0 | % |
| Commercial: | | | | | | | | | |
| Multi-family | 3,358,801 |
| | — |
| | — |
| | 3,358,801 |
| | 16.3 | % |
| Non-owner occupied commercial real estate | 4,183,275 |
| | — |
| | — |
| | 4,183,275 |
| | 20.4 | % |
| Construction and land | 271,994 |
| | — |
| | — |
| | 271,994 |
| | 1.3 | % |
| Owner occupied commercial real estate | 1,959,464 |
| | — |
| | — |
| | 1,959,464 |
| | 9.5 | % |
| Commercial and industrial | 3,900,290 |
| | — |
| | — |
| | 3,900,290 |
| | 19.0 | % |
| Commercial lending subsidiaries | 2,374,193 |
| | — |
| | — |
| | 2,374,193 |
| | 11.5 | % |
| | 16,048,017 |
| | — |
| | — |
| | 16,048,017 |
| | 78.0 | % |
| Total loans | 20,028,032 |
| | 475,940 |
| | 66,353 |
| | 20,570,325 |
| | 100.0 | % |
| Premiums, discounts and deferred fees and costs, net | 44,422 |
| | — |
| | (4,317 | ) | | 40,105 |
| | |
| Loans including premiums, discounts and deferred fees and costs | 20,072,454 |
| | 475,940 |
| | 62,036 |
| | 20,610,430 |
| | |
| Allowance for loan and lease losses | (153,725 | ) | | (1,812 | ) | | (3,036 | ) | | (158,573 | ) | | |
| Loans, net | $ | 19,918,729 |
| | $ | 474,128 |
| | $ | 59,000 |
| | $ | 20,451,857 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 | | | | |
| | | | | | | |
| Total | | Percent of Total | | Total | | Percent of Total | | | | |
| Residential and other consumer loans | $ | 7,827,224 | | | 34.3 | % | | $ | 6,348,222 | | | 26.6 | % | | | | |
| Multi-family | 1,181,935 | | | 5.2 | % | | 1,639,201 | | | 6.9 | % | | | | |
| Non-owner occupied commercial real estate | 4,537,078 | | | 19.9 | % | | 4,963,273 | | | 20.8 | % | | | | |
| Construction and land | 163,988 | | | 0.7 | % | | 293,307 | | | 1.2 | % | | | | |
| Owner occupied commercial real estate | 2,012,376 | | | 8.8 | % | | 2,000,770 | | | 8.4 | % | | | | |
| Commercial and industrial | 4,166,914 | | | 18.3 | % | | 4,447,383 | | | 18.6 | % | | | | |
| PPP | 332,548 | | | 1.5 | % | | 781,811 | | | 3.3 | % | | | | |
| Pinnacle | 932,865 | | | 4.1 | % | | 1,107,386 | | | 4.6 | % | | | | |
| Bridge - franchise finance | 396,589 | | | 1.7 | % | | 549,733 | | | 2.3 | % | | | | |
| Bridge - equipment finance | 379,446 | | | 1.7 | % | | 475,548 | | | 2.0 | % | | | | |
| Mortgage warehouse lending | 877,006 | | | 3.8 | % | | 1,259,408 | | | 5.3 | % | | | | |
| Total loans | 22,807,969 | | | 100.0 | % | | 23,866,042 | | | 100.0 | % | | | | |
| Allowance for credit losses | (159,615) | | | | | (257,323) | | | | | | | |
| Loans, net | $ | 22,648,354 | | | | | $ | 23,608,719 | | | | | | | |
|
| | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| |
| | Covered Loans | | | | Percent of Total |
| | Non-Covered Loans | | ACI | | Non-ACI | | Total | |
| Residential and other consumer: | |
| | |
| | |
| | |
| | |
|
| 1-4 single family residential | $ | 3,422,425 |
| | $ | 532,348 |
| | $ | 36,675 |
| | $ | 3,991,448 |
| | 20.6 | % |
| Home equity loans and lines of credit | 1,120 |
| | 3,894 |
| | 47,629 |
| | 52,643 |
| | 0.3 | % |
| Other consumer loans | 24,365 |
| | — |
| | — |
| | 24,365 |
| | 0.1 | % |
| | 3,447,910 |
| | 536,242 |
| | 84,304 |
| | 4,068,456 |
| | 21.0 | % |
| Commercial: | | | | | | | | | |
| Multi-family | 3,824,973 |
| | — |
| | — |
| | 3,824,973 |
| | 19.8 | % |
| Non-owner occupied commercial real estate | 3,739,235 |
| | — |
| | — |
| | 3,739,235 |
| | 19.3 | % |
| Construction and land | 311,436 |
| | — |
| | — |
| | 311,436 |
| | 1.6 | % |
| Owner occupied commercial real estate | 1,736,858 |
| | — |
| | — |
| | 1,736,858 |
| | 9.0 | % |
| Commercial and industrial | 3,391,614 |
| | — |
| | — |
| | 3,391,614 |
| | 17.5 | % |
| Commercial lending subsidiaries | 2,280,685 |
| | — |
| | — |
| | 2,280,685 |
| | 11.8 | % |
| | 15,284,801 |
| | — |
| | — |
| | 15,284,801 |
| | 79.0 | % |
| Total loans | 18,732,711 |
| | 536,242 |
| | 84,304 |
| | 19,353,257 |
| | 100.0 | % |
| Premiums, discounts and deferred fees and costs, net | 48,641 |
| | — |
| | (6,504 | ) | | 42,137 |
| | |
| Loans including premiums, discounts and deferred fees and costs | 18,781,352 |
| | 536,242 |
| | 77,800 |
| | 19,395,394 |
| | |
| Allowance for loan and lease losses | (150,853 | ) | | — |
| | (2,100 | ) | | (152,953 | ) | | |
| Loans, net | $ | 18,630,499 |
| | $ | 536,242 |
| | $ | 75,700 |
| | $ | 19,242,441 |
| | |
Total loans, including premiums, discounts and deferred fees and costs, increased by $1.2 billion to $20.6 billion atFor the nine months ended September 30, 2017, from $19.4 billion at December 31, 2016. Non-covered loans grew by $1.3 billion while covered2021, total loans declined by $76$1.1 billion. Excluding the PPP, loans declined by $609 million from December 31, 2016 to September 30, 2017. Non-coveredfor the nine months.
Growth in residential and other consumer loans grew by $538for the nine months ended September 30, 2021 totaled $1.5 billion, including $493 million and non-coveredin GNMA early buyout loans. In the aggregate, excluding PPP, commercial loans grewdeclined by $753$2.1 billion for the nine months ended September 30, 2021 as runoff continued to exceed new production. Line utilization remained below historical levels and accelerated prepayment activity continued. MWL line utilization declined to 51% at September 30, 2021 compared to 62% at December 31, 2020, we believe related to some normalization in this segment after a period of high refinance activity.
PPP loans declined by $449 million during the nine months ended September 30, 2017.
Growth in non-covered2021. Loans under the First Draw Program declined by $733 million, resulting primarily from full or partial forgiveness. PPP loans including premiums, discounts and deferred fees and costs, forunder the Second Draw Program totaling $283 million were originated during the nine months ended September 30, 2017 reflected an increase of $536 million for2021.
For the Florida franchise, a decrease of $74 million for the New York franchise and an increase of $829 million for the national platforms.
The following tables show the composition of the non-covered loan portfolio and the breakdown among the Florida and New York franchises and national platforms at the dates indicated. Amounts include premiums, discounts and deferred fees and costs (dollars in thousands):
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | Florida | | New York | | National | | Total |
| Residential and other consumer | $ | 228,300 |
| | $ | 206,308 |
| | $ | 3,599,004 |
| | $ | 4,033,612 |
|
| Commercial: | | | | | | | |
| Multi-family | 555,193 |
| | 2,807,068 |
| | — |
| | 3,362,261 |
|
| Non-owner occupied commercial real estate | 2,572,743 |
| | 1,501,597 |
| | 99,229 |
| | 4,173,569 |
|
| Construction and land | 123,655 |
| | 134,854 |
| | 12,947 |
| | 271,456 |
|
| Owner occupied commercial real estate | 1,110,581 |
| | 748,339 |
| | 97,829 |
| | 1,956,749 |
|
| Commercial and industrial | 2,509,353 |
| | 891,978 |
| | 490,751 |
| | 3,892,082 |
|
| Commercial lending subsidiaries | — |
| | — |
| | 2,382,725 |
| | 2,382,725 |
|
| | $ | 7,099,825 |
| | $ | 6,290,144 |
| | $ | 6,682,485 |
| | $ | 20,072,454 |
|
| | 35.4 | % | | 31.3 | % | | 33.3 | % | | 100.0 | % |
|
| | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | Florida | | New York | | National | | Total |
| Residential and other consumer: | $ | 254,139 |
| | $ | 226,154 |
| | $ | 3,015,482 |
| | $ | 3,495,775 |
|
| Commercial: | | | | | | | |
| Multi-family | 520,263 |
| | 3,309,411 |
| | — |
| | 3,829,674 |
|
| Non-owner occupied commercial real estate | 2,337,806 |
| | 1,294,231 |
| | 99,771 |
| | 3,731,808 |
|
| Construction and land | 174,494 |
| | 125,983 |
| | 10,436 |
| | 310,913 |
|
| Owner occupied commercial real estate | 1,042,441 |
| | 602,155 |
| | 91,254 |
| | 1,735,850 |
|
| Commercial and industrial | 2,234,393 |
| | 806,660 |
| | 346,085 |
| | 3,387,138 |
|
| Commercial lending subsidiaries | — |
| | — |
| | 2,290,194 |
| | 2,290,194 |
|
| | $ | 6,563,536 |
| | $ | 6,364,594 |
| | $ | 5,853,222 |
| | $ | 18,781,352 |
|
| | 34.9 | % | | 33.9 | % | | 31.2 | % | | 100.0 | % |
The increase in non-owner occupied commercial real estate loans and the decrease in multi-family loans in the New York franchise over the ninethree months ended September 30, 2017 includes the impact of reclassifying $2072021 total loans excluding PPP loans grew by $82 million. Residential and other consumer loans grew by $751 million ofand commercial and industrial loans, on mixed-use properties from multi-family to non-owner occupiedincluding owner-occupied commercial real estate, loans, based ongrew by $13 million. The remaining commercial portfolio segments showed net declines for the primary source of rental income on those properties.quarter.
Residential mortgages and other consumer loans
Residential mortgagesThe following table shows the composition of residential and other consumer loans totaled $4.5 billion, or 22.0% of total loans, at September 30, 2017 and $4.1 billion, or 21.0% of total loans, at December 31, 2016.the dates indicated (in thousands):
| | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| | | |
| 1-4 single family residential | $ | 5,907,393 | | | $ | 4,922,836 | |
| Government insured residential | 1,913,497 | | | 1,419,074 | |
| Other consumer loans | 6,334 | | | 6,312 | |
| $ | 7,827,224 | | | $ | 6,348,222 | |
The non-covered1-4 single family residential loan portfolio, excluding government insured residential loans, is primarily comprised of loans purchased on a national basis through established correspondent channels. The portfolio also includes loans originated through retail channels in our Florida and New York geographic footprint prior to the termination of our retail residential mortgage origination business in early 2016. Non-covered1-4 single family residential mortgage loans are primarily closed-end, first lien jumbo mortgages for the purchase or re-finance of owner occupied property. The loans have terms ranging from 10 to 30 years, with either fixed or adjustable interest rates. At September 30, 2017, $1132021, $609 million or 2.8%10% were secured by investor-owned properties.
The Company acquires non-performing FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of non-covered residential mortgageGNMA securitizations (collectively, "government insured pool buyout loans" or "buyout loans"). Buyout loans were interest-onlythat re-perform, either through modification or self-cure, may be eligible for re-securitization. The Company and the servicer share in the economics of the sale of these loans substantially allinto new securitizations. The balance of which begin amortizing 10 years after origination.buyout loans totaled $1.9 billion at September 30, 2021. The Company is not the servicer of these loans.
We do not originate or acquire option ARMs, “no-doc” or “reduced-doc” mortgages and do not utilize wholesale mortgage origination channels although the covered loan portfolio contains loans with these characteristics. The Company’s exposure to future losses on these mortgage loans is mitigated by the Single Family Shared-Loss Agreement.
The following charts present the distribution of the non-covered 1-4 single family residential mortgage portfolio by interest rate terms and contractual lives at the dates indicated:
| |
(1) | Fixed-rate loans with contractual terms of 20 years comprise less than 3% of the total at both September 30, 2017 and December 31, 2016, and are reported with 15 year fixed above. |
The following table presents the five states with the largest geographic concentrationconcentrations of the non-covered 1-4 single family residential portfolio is summarized as followsloans, excluding government insured residential loans, at the dates indicated (dollar(dollars in thousands):
|
| | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| California | $ | 1,052,154 |
| | 26.2 | % | | $ | 904,107 |
| | 26.1 | % |
| New York | 848,123 |
| | 21.1 | % | | 763,824 |
| | 22.0 | % |
| Florida | 530,056 |
| | 13.2 | % | | 487,294 |
| | 14.0 | % |
| District of Columbia | 177,978 |
| | 4.4 | % | | 123,825 |
| | 3.6 | % |
| Virginia | 175,550 |
| | 4.4 | % | | 152,113 |
| | 4.4 | % |
Others (1) | 1,227,983 |
| | 30.7 | % | | 1,039,186 |
| | 29.9 | % |
| | $ | 4,011,844 |
| | 100.0 | % | | $ | 3,470,349 |
| | 100.0 | % |
| |
(1) | No other state represented borrowers with more than 4.0% of non-covered 1-4 single family residential loans outstanding at September 30, 2017 or December 31, 2016. |
Home equity loans and lines of credit are not significant to the non-covered loan portfolio.
Other consumer loans are comprised primarily of consumer installment financing, loans secured by certificates of deposit, unsecured personal lines of credit and demand deposit account overdrafts. | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| | | |
| Total | | Percent of Total | | Total | | Percent of Total |
| California | $ | 1,950,883 | | | 33.0 | % | | $ | 1,541,779 | | | 31.3 | % |
| New York | 1,237,243 | | | 20.9 | % | | 1,084,143 | | | 22.0 | % |
| Florida | 489,961 | | | 8.3 | % | | 518,877 | | | 10.5 | % |
| Virginia | 249,842 | | | 4.2 | % | | 196,641 | | | 4.0 | % |
| New Jersey | 243,487 | | | 4.1 | % | | 160,276 | | | 3.3 | % |
| Others | 1,735,977 | | | 29.5 | % | | 1,421,120 | | | 28.9 | % |
| $ | 5,907,393 | | | 100.0 | % | | $ | 4,922,836 | | | 100.0 | % |
Commercial loans and leases
TheCommercial loans include commercial portfolio segment includesand industrial loans and leases, loans secured by owner-occupied commercial real-estate, multi-family properties loans secured by both owner-occupied and other income-producing non-owner occupied commercial real estate, a limited amount of construction and land loans, commercial and industrialSBA loans, mortgage warehouse lines of credit, PPP loans, municipal loans and direct financing leases.leases originated by Pinnacle and franchise and equipment finance loans and leases originated by Bridge.
Management’s loan origination strategy is heavily focused onThe following charts present the distribution of the commercial loan portfolio segment, which comprised 80.1% and 81.6% of non-covered loans as of September 30, 2017 and December 31, 2016, respectively.at the dates indicated (dollars in millions):
Commercial real estate loans include term loans secured by owner and non-owner occupied income producing properties including rental apartments, mixed-use properties, industrial properties, retail shopping centers, free-standing single-tenant buildings, office buildings, warehouse facilities, and hotels, as well as real estate secured lines of credit.credit, as well as credit facilities to institutional real estate entities such as REITs and commercial real estate investment funds.
The following charts presenttable presents the distribution of non-owner occupied commercial real estate loans by product typesproperty type along with weighted average DSCRs and LTVs at September 30, 2021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| Amortized Cost | | Percent of Total | | FL | | New York Tri State | | Other | | Weighted Average DSCR | | Weighted Average LTV |
| Office | $ | 1,860,389 | | | 32 | % | | 61 | % | | 25 | % | | 14 | % | | 2.55 | | 63.2 | % |
| Multifamily | 1,243,666 | | | 21 | % | | 40 | % | | 55 | % | | 5 | % | | 1.75 | | 60.8 | % |
| Retail | 1,175,255 | | | 20 | % | | 53 | % | | 38 | % | | 9 | % | | 1.52 | | 70.2 | % |
| Warehouse/Industrial | 900,627 | | | 15 | % | | 62 | % | | 21 | % | | 17 | % | | 2.49 | | 58.0 | % |
| Hotel | 571,942 | | | 10 | % | | 75 | % | | 16 | % | | 9 | % | | 1.39 | | 53.6 | % |
| Other | 131,122 | | | 2 | % | | 55 | % | | 29 | % | | 16 | % | | 2.09 | | 56.0 | % |
| $ | 5,883,001 | | | 100 | % | | 56 | % | | 34 | % | | 10 | % | | 2.04 | | 62.2 | % |
DSCRs and LTVs in the dates indicated:table above are based on the most recent information available, which in some cases may not be fully reflective of the ultimate impact of the COVID-19 pandemic on borrowers' financial condition or property values. Geographic distribution in the table above is based on location of the underlying collateral property.
Loans secured byThe Company’s commercial real estate typically have shorter repayment periods and re-price more frequently than 1-4 single family residential loans but may have longer terms and re-price less frequently than commercial and industrial loans. The Company’s underwriting standards generallymost often provide for loan terms of five to tenseven years, with amortization schedules of no more than thirty years. LTV ratios are typically limited to no more than 80%75%. Owner-occupiedConstruction and land loans, included by property type in the table above, represented 0.7% of the total loan portfolio at September 30, 2021.
Included in the table above are approximately $132 million of mixed-use properties in New York, consisting of $62 million categorized as multi-family, $51 million categorized as retail and $19 million categorized as office. The New York multi-family portfolio included $511 million of loans collateralized by properties with some or all of the units subject to rent regulation at September 30, 2021, substantially all of which were stabilized properties.
The following tables present the distribution of stabilized rent-regulated multi-family loans, by DSCR and LTV at September 30, 2021 (in thousands):
| | | | | | | | | | | |
| DSCR | | | |
| Less than 1.00 | | | $ | 123,747 | |
| 1.00 - 1.24 | | | 185,858 | |
| 1.25 - 1.50 | | | 141,320 | |
| 1.51 or greater | | | 35,371 | |
| | | $ | 486,296 | |
| | | | | | | | | | | |
| LTV | | | |
| Less than 50% | | | $ | 95,644 | |
| 50% - 65% | | | 119,489 | |
| 66% - 75% | | | 179,240 | |
| More than 75% | | | 91,923 | |
| | | $ | 486,296 | |
The LTVs in the table above are based on the most recent appraisal obtained, which may not be fully reflective of changes in valuations that may result from the impact of the rent regulation reforms, or of the COVID-19 pandemic. Loans with DSCR less than 1.00 may be those with temporary rent deferments, unit vacancies or increases in expenses exceeding rental receipts, such as real estate taxes. Certain types of ancillary income are excluded from the DSCR calculations.
Commercial and industrial loans are typically made to small, middle market and larger corporate businesses and not-for-profit entities and include equipment loans, secured and unsecured working capital facilities, formula-based loans, trade finance, SBA product offerings and business acquisition finance credit facilities. These loans may be structured as term loans, typically with maturities of five to seven years, or revolving lines of credit which may have multi-year maturities. The Bank also provides financing to state and local governmental entities generally within our geographic markets. Commercial loans included shared national credits totaling $2.7 billion at September 30, 2021, the majority of which were relationship based loans to borrowers in Florida and New York. The Bank makes loans secured by owner-occupied commercial real estate loansthat typically have risk profiles more closely aligned with that of commercial and industrial loans than with other types of commercial real estate loans. Construction
The following table presents the exposure in the commercial and landindustrial portfolio by industry, including $2.0 billion of owner-occupied commercial real estate loans, represented only 1.3% of the total loan portfolio at September 30, 2017. Construction and land loans are generally made for projects expected to stabilize within eighteen months of completion2021 (in thousands):
in sub-markets with strong fundamentals and, to a lesser extent, for-sale residential projects to experienced developers with a strong cushion between market prices and loan basis.
Commercial and industrial loans are typically made to small and middle market businesses and include equipment loans, secured and unsecured working capital facilities, formula-based loans, mortgage warehouse lines, taxi medallion loans, SBA product offerings and business acquisition finance credit facilities. These loans may be structured as term loans, typically with maturities of three to seven years, or revolving lines of credit which may have multi-year maturities. Commercial loans include shared national credits totaling $1.5 billion at September 30, 2017, typically relationship based loans to borrowers in our geographic footprint. | | | | | | | | | | | | | | | |
| | | | | |
| Amortized Cost | | Percent of Total | | | | |
| Finance and Insurance | $ | 947,830 | | | 15.2 | % | | | | |
| Educational Services | 715,194 | | | 11.6 | % | | | | |
| Wholesale Trade | 637,871 | | | 10.3 | % | | | | |
| Transportation and Warehousing | 462,226 | | | 7.5 | % | | | | |
| Health Care and Social Assistance | 429,675 | | | 7.0 | % | | | | |
| Information | 401,502 | | | 6.5 | % | | | | |
| Manufacturing | 373,879 | | | 6.1 | % | | | | |
| Retail Trade | 296,034 | | | 4.8 | % | | | | |
| Real Estate and Rental and Leasing | 287,447 | | | 4.6 | % | | | | |
| Other Services (except Public Administration) | 235,802 | | | 3.8 | % | | | | |
| Construction | 218,208 | | | 3.5 | % | | | | |
| Utilities | 204,902 | | | 3.3 | % | | | | |
| Public Administration | 204,230 | | | 3.3 | % | | | | |
| Professional, Scientific, and Technical Services | 203,348 | | | 3.3 | % | | | | |
| Accommodation and Food Services | 194,968 | | | 3.2 | % | | | | |
| Administrative and Support and Waste Management | 158,362 | | | 2.6 | % | | | | |
| Arts, Entertainment, and Recreation | 153,893 | | | 2.5 | % | | | | |
| Other | 53,919 | | | 0.9 | % | | | | |
| $ | 6,179,290 | | | 100.0 | % | | | | |
Through its commercial lending subsidiaries, Pinnacle and Bridge, the Bank provides equipment and franchise financing on a national basis using both loan and lease structures. Pinnacle provides essential-use equipment financing to state and local governmental entities directly and through vendor programs and alliances. Pinnacle offers a full array of financing structures including equipment lease purchase agreements and direct (private placement) bond re-fundings and loan agreements. Bridge has two operating divisions. The franchise finance division offers franchise acquisition, expansion and equipment financing, typically to experienced operators in well-established concepts. The franchise finance portfolio is made up primarily of quick service restaurant and fitness concepts comprising 59% and 35% of the portfolio, respectively. The equipment finance division provides primarily transportation equipment financing through a variety of loan and lease structures. The Bank's SBF unit primarily originates SBA guaranteed commercial and commercial real estate loans, generally selling the guaranteed portion in the secondary market and retaining the unguaranteed portion in portfolio. The Bank engages in mortgage warehouse lending on a national basis.
The following table presents the recorded investmentfranchise portfolio by concept at September 30, 2021:
| | | | | | | | | | | | | | | |
| Amortized Cost | | Percent of Bridge -Franchise Finance | | | | |
| Restaurant concepts: | | | | | | | |
| Burger King | $ | 54,708 | | | 13.7 | % | | | | |
| Dunkin Donuts | 18,862 | | | 4.8 | % | | | | |
| Jimmy John's | 14,095 | | | 3.6 | % | | | | |
| Ram Restaurant and Brewery | 13,374 | | | 3.4 | % | | | | |
| Auntie Anne's | 12,927 | | | 3.3 | % | | | | |
| Other | 120,329 | | | 30.2 | % | | | | |
| $ | 234,295 | | | 59.0 | % | | | | |
| Non-restaurant concepts: | | | | | | | |
| Planet Fitness | $ | 87,155 | | | 22.0 | % | | | | |
| Orange Theory Fitness | 52,314 | | | 13.2 | % | | | | |
| Other | 22,825 | | | 5.8 | % | | | | |
| 162,294 | | | 41.0 | % | | | | |
| $ | 396,589 | | | 100.0 | % | | | | |
The Company has originated PPP loans under both the First and Second Draw Programs. These loans bear interest at 1% and are guaranteed as to principal and interest by the SBA. PPP loans have terms of 2 and 5 years under the First and Second Draw Programs, respectively, and are eligible for earlier forgiveness under the terms of the PPP in prescribed circumstances. The following table summarizes PPP loan balances at September 30, 2021, and the amount of interest income related to accelerated amortization of origination fees on loans that were partially or fully forgiven, under each program during the three and nine months ended September 30, 2021 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | Fees Recognized On Forgiveness |
| UPB | | Deferred Origination Fees | | Amortized Cost | | Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 |
| First Draw Program | $ | 49,200 | | | $ | (145) | | | $ | 49,055 | | | $ | 823 | | | $ | 7,905 | |
| Second Draw Program | 291,473 | | | (7,980) | | | 283,493 | | | — | | | — | |
| $ | 340,673 | | | $ | (8,125) | | | $ | 332,548 | | | $ | 823 | | | $ | 7,905 | |
Geographic Concentrations
The Company's commercial and commercial real estate portfolios are concentrated in Florida and the Tri-state area. 56% and 34% of commercial real estate loans were secured by collateral located in Florida and the Tri-state area, respectively; while 39% and 21% of all other commercial loans were to borrowers in Florida and the Tri-state area, respectively.
The following table presents the five states with the largest concentration of commercial loans and directleases originated through Bridge, Pinnacle and our mortgage warehouse finance leases held for investment for each of our national commercial lending platformsunit at the dates indicated (in thousands):
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Pinnacle | $ | 1,393,965 |
| | $ | 1,317,820 |
|
| Bridge - franchise finance | 421,821 |
| | 426,661 |
|
| Bridge - transportation equipment finance | 566,939 |
| | 545,713 |
|
| SBF | 235,433 |
| | 225,241 |
|
| Mortgage warehouse lending | 465,323 |
| | 322,305 |
|
| | $ | 3,083,481 |
| | $ | 2,837,740 |
|
The geographic concentration of the commercial loans and direct financing leases in the national platforms is summarized as follows at the dates indicated. Amounts include premiums, discounts and deferred fees and costs (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| September 30, 2021 | | December 31, 2020 |
| Total | | Percent of Total | | Total | | Percent of Total |
| California | $ | 440,867 | | | 17.0 | % | | $ | 609,419 | | | 18.0 | % |
| Florida | 253,672 | | | 9.8 | % | | 330,587 | | | 9.7 | % |
| NY Tri State Area | 248,884 | | | 9.6 | % | | 545,458 | | | 16.1 | % |
| North Carolina | 176,049 | | | 6.8 | % | | 137,233 | | | 4.0 | % |
| Ohio | 163,565 | | | 6.3 | % | | 194,558 | | | 5.7 | % |
| All Others | 1,302,869 | | | 50.5 | % | | 1,574,820 | | | 46.5 | % |
| $ | 2,585,906 | | | 100.0 | % | | $ | 3,392,075 | | | 100.0 | % |
|
| | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Florida | $ | 593,307 |
| | 19.2 | % | | $ | 543,445 |
| | 19.2 | % |
| California | 464,853 |
| | 15.1 | % | | 421,480 |
| | 14.9 | % |
| Arizona | 171,321 |
| | 5.6 | % | | 133,549 |
| | 4.7 | % |
| Texas | 161,662 |
| | 5.2 | % | | 118,122 |
| | 4.2 | % |
| Iowa | 152,869 |
| | 5.0 | % | | 161,874 |
| | 5.7 | % |
| Virginia | 131,041 |
| | 4.2 | % | | 138,417 |
| | 4.9 | % |
| All others (1) | 1,408,428 |
| | 45.7 | % | | 1,320,853 |
| | 46.4 | % |
| | $ | 3,083,481 |
| | 100.0 | % | | $ | 2,837,740 |
| | 100.0 | % |
| |
(1) | No other state represented borrowers with more than 4.0% of loans outstanding at September 30, 2017 or December 31, 2016. |
Equipment under Operating Lease
Equipment under operating lease increased by $48 million to $588equipment, net of accumulated depreciation totaled $660 million at September 30, 2017, from $5402021, including off-lease equipment, net of accumulated depreciation of $124 million. The portfolio consists primarily of railcars, non-commercial aircraft and other transport equipment. Our operating lease customers are North American commercial end users. We have a total of 5,067 railcars with a carrying value of $376 million at December 31, 2016. The portfolio consisted primarily of 5,424 railcars,September 30, 2021, including hoppers, tank cars, boxcars, auto carriers, center beams and gondolas leased to North American commercial end-users. The portfolio also included non-commercial aircraft and other transport equipment.gondolas. The largest concentrations of rail cars were 2,2642,400 hopper cars and 1,6831,594 tank cars, primarily used to ship sand and petroleum products, respectively, for the energy industry. Equipment with a carrying value of $288 million
The chart below presents operating lease equipment by type at the dates indicated:
At September 30, 20172021, the breakdown of carrying values of operating lease equipment, excluding equipment off-lease, by the year leases are scheduled to expire was leased to companies for use in the energy industry.as follows (in thousands):
| | | | | |
| Years Ending December 31: | |
| 2021 | $ | 16,625 | |
| 2022 | 39,521 | |
| 2023 | 79,731 | |
| 2024 | 36,840 | |
| 2025 | 97,933 | |
| Thereafter through 2034 | 265,748 | |
| $ | 536,398 | |
Asset Quality
In discussing asset quality, we distinguish between covered loans and non-covered loans. Although the risk profile of covered loans is higher than that of non-covered loans, our exposure to loss related to covered loans is significantly mitigated by the fair value basis recorded in these loans resulting from the application of acquisition accounting and by the Single Family Shared-Loss Agreement. At September 30, 2017, residential loans covered under the Single Family Shared-Loss Agreement totaled $538 million.Commercial Loans
We have established a robust credit risk management framework, put in place an experienced team to lead the workout and recovery process for the commercial and commercial real estate portfolios and implemented a dedicated internal credit review function. We have an experienced resolution team in place for covered residential mortgage loans,In response to the COVID-19 pandemic, we further enhanced our workout and have implemented outsourcing arrangements with industry leading firms in certain areas such as OREO resolution.
recovery staffing and processes. Loan performance is monitored by our credit administration, portfolio management and workout and recovery departments. Generally, commercial relationships with balances in excess of defined thresholds are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. The defined thresholds range from $1 million to $3 million. Additionally,Homogenous groups of smaller balance commercial loans may be monitored collectively. The credit quality and risk rating of commercial loans as well as our underwriting and portfolio management practices are regularly reviewed by our internal credit review department.
We believe internal risk rating is the best indicator of the credit quality of commercial loans. The Company utilizes a 13 grade16-grade internal asset risk classification system as part of its efforts to monitor and maintain commercial asset quality. LoansThe special mention rating is considered a transitional rating for loans exhibiting potential credit weaknesses that deserve management’s close attention and that if left uncorrected maycould result in deterioration of the repayment capacity of the borrower are categorized as special mention.prospects at some future date if not checked or corrected and that deserve management’s close attention. These borrowers may exhibit negative financial trendsdeclining cash flows or erratic financial performance, strained liquidity, marginal collateral coverage, declining industry trendsrevenues or weak management.increasing leverage. Loans with well-defined credit weaknesses that may result in a loss if the deficiencies are not corrected are assigned a risk rating of substandard. These borrowers may exhibit payment defaults, inadequate cash flows from current operations, operating losses, increasing balance sheet leverage, project cost overruns, unreasonable construction delays, exhausted interest reserves, declining collateral values, frequent overdrafts or past due real estate taxes. Loans with weaknesses so severe that collection in full is highly questionable or improbable, but because of certain reasonably specific pending factors have not been charged off, are assigned an internal risk rating of doubtful. Since the onset of the COVID-19 pandemic, risk ratings have been re-evaluated for a substantial portion of the commercial portfolio, in some cases more than once, with a particular focus on portfolio segments we identified for
enhanced monitoring and loans and consumer loans are not individually risk rated. Delinquency status isfor which we granted temporary payment deferrals or modifications in light of the primary measure we usepandemic. We continue to closely monitor the credit qualityrisk rating of these loans. We also consider original LTV and FICO score to be significant indicators of credit quality for the non-covered 1-4 single family residential portfolio.
Although our assessment is ongoing and the results of that assessment are subject to changecommercial loans in the future, we do not currently believe the abilitylight of the substantial majority of our borrowers to repay their loans or the value of the collateral securing those loans has been materially impacted by Hurricanes Irma and Harvey.
Non-covered Loans and Leases
Commercial Loans
The ongoing asset quality of significant commercial loans is monitored on an individual basis through our regular credit review and risk rating process. We believe internal risk rating is the best indicator of the credit quality of commercial loans. Homogenous groups of smaller balance commercial loans may be monitored collectively.evolving COVID-19 situation.
The following table summarizes the Company's commercial credit exposure, based on internal risk rating, at the dates indicated (in(dollars in thousands):
| | | | September 30, 2021 | | June 30, 2021 | | | December 31, 2020 | |
| | | | September 30, 2017 | | December 31, 2016 | | Amortized Cost | | Percent of Commercial Loans | | Amortized Cost | | Percent of Commercial Loans | | | Amortized Cost | | Percent of Commercial Loans | |
| Pass | | $ | 15,505,587 |
| | $ | 14,897,121 |
| Pass | $ | 13,151,069 | | | 87.8 | % | | $ | 13,739,092 | | | 86.8 | % | | | $ | 14,832,025 | | | 84.6 | % | |
| Special mention | | 150,899 |
| | 72,225 |
| Special mention | 153,373 | | | 1.0 | % | | 138,064 | | | 0.9 | % | | | 711,516 | | | 4.1 | % | |
Substandard (1) | | 376,540 |
| | 304,713 |
| |
| Substandard accruing | | Substandard accruing | 1,432,801 | | | 9.6 | % | | 1,684,666 | | | 10.7 | % | | | 1,758,654 | | | 10.0 | % | |
| Substandard non-accruing | | Substandard non-accruing | 227,055 | | | 1.5 | % | | 229,646 | | | 1.5 | % | | | 203,758 | | | 1.2 | % | |
| Doubtful | | 5,816 |
| | 11,518 |
| Doubtful | 16,447 | | | 0.1 | % | | 17,332 | | | 0.1 | % | | | 11,867 | | | 0.1 | % | |
| | | $ | 16,038,842 |
| | $ | 15,285,577 |
| | $ | 14,980,745 | | | 100.0 | % | | $ | 15,808,800 | | | 100.0 | % | | | $ | 17,517,820 | | | 100.0 | % | |
| |
(1) | The balance of substandard loans at September 30, 2017 and December 31, 2016 included $121 million and $138 million, respectively, of taxi medallion finance loans. Criticized and classified loans represented 3.3% of the commercial loan portfolio, of which 0.8% were taxi medallion loans, at September 30, 2017. See Note 4 to the consolidated financial statements for more detailed information about risk rating of commercial loans.
|
Taxi Medallion Finance
The commercial and industrial loan portfolio includes exposure to taxi medallion finance of $121 millionOur internal risk ratings at September 30, 2017. The estimated value2021 continued to be influenced by the impact of underlying taxi medallion collateralthe COVID-19 pandemic and liquiditythe measures and restrictions employed to contain the spread of the virus on the economy, our borrowers and the sectors in which they operate. Management has taken what we believe to be a proactive and objective approach to risk rating the commercial loan portfolio since the onset of the pandemic. Levels of criticized and classified loans, particularly in the market for salesspecial mention and substandard accruing categories, increased over the course of medallions,2020 as a potential secondary source of repayment, have declined significantly in recent years due to competitive developments in the transportation-for-hire industry. Due to the ongoing trend of declining estimated cash flows from the operation of taxi medallions leading to declines in medallion valuations, the entire taxi medallion portfolio was placed on non-accrual status and risk rated substandard as of September 30, 2017. In addition, partial charge-offs were recognized on all taxi medallion loans with carrying values in excess of collateral values, determined using the cash flow template discussed below, to reduce the carrying value of those loans to this estimated collateral value.
We update our analysis of the cash flow generating capacity of the operation of New York City medallions on a regular basis using current available taxi industry data from which taxi medallion values and prospective debt service capacity are estimated. This analysis is based on an extensive data set obtained from the NYTLC and assumptions that we believe are reasonable estimates of fleet utilization and borrower expenses. We update our analysis of estimated medallion valuations on a quarterly basis, based on these cash flow capacity estimates. At September 30, 2017, our estimate of the value of New York City taxi medallions based on our cash flow template and consideration of estimated selling costs and declining trends in medallion values was $351,000 for both corporate and individual medallions. We used this value for purposes of determining the partial charge-offs and the value of repossessed medallions. See Note 10 to the consolidated financial statements for additional information about the valuation of New York City taxi medallions.
The taxi medallion portfolio had the following characteristics at September 30, 2017:
Approximately 97% of the portfolio secured directly by taxi medallions was concentrated in New York City.
Loans delinquent by 30 days or more totaled $13.2 million or 11.0% of the portfolio, compared to $40.8 million or 22.8% of the portfolio at December 31, 2016. Loans delinquent by 90 days or more totaled $10.4 million or 8.7% of the portfolio, compared to $29.2 million or 16.4% of the portfolio at December 31, 2016. The most significant factor contributing to the decrease in delinquencies was one large relationship that was brought current and restructured in the first quarter.
The portfolio included 173 loans modified in TDRs with a recorded investment of $92.4 million.
In the aggregate, the ALLL related to taxi medallion loans was 10.9% of the outstanding balance at September 30, 2017, compared to 6.0% at December 31, 2016. Charge-offs of $35.3 million and $47.1 million were recognized in the three and nine months ended September 30, 2017 related to taxi medallion loans.
We are no longer originating new taxi medallion loans. Our portfolio management strategies include, but are not limited to, working with borrowers experiencing cash flow challenges to provide short term relief and/or extended amortization periods, pro-actively attempting to refinance loans prior to maturity, continuing to monitor industry data and obtaining updated borrower and guarantor financial information. As taxi medallion loans approach maturity or are refinanced, we expect the number and amount of TDRs in this portfolio segment to continue to increase.
Hurricane Impact - Commercial Loans
Commercial loans totaling $1.9 million and $19.4 million had been modified or granted temporary payment deferrals as of September 30, 2017 and October 31, 2017, respectively, related to the recent hurricanes. Of these modifications and deferrals, none were determined to be TDRs due to the generally insignificant nature of the payment delays.
As of September 30 and October 31, 2017, respectively, commercial loans to borrowers that have significant business operations in or are secured by collateral in areas impacted by Hurricanes Irma and Harvey totaling approximately $4.7 million and $21.3 million were more than 30 days past due; $3.7 million of these loans were more than 30 days past due prior to the storms. Approximately $22.2 million of commercial loans have been downgraded to criticized or classified status through October 31, 2017 as adirect result of the impact of the storms.COVID-19 pandemic. As expected given the trajectory of the economic recovery, levels of criticized and classified loans have declined over the first nine months of 2021. During the nine months ended September 30, 2021, total criticized and classified loans declined by $856 million. During the quarter ended September 30, 2021 criticized and classified loans declined by $240 million. If the economic recovery and its impact on individual borrowers evolve in line with our current expectations and economic forecast, we would expect to see the level of criticized and classified loans continue to decline over the remainder of 2021 and into 2022. However, uncertainty remains around the future trajectory of the COVID-19 virus and the economic recovery. In light of that uncertainty, it is possible that criticized and classified loan levels may not decline or that they may increase.
The following table provides additional information about special mention and substandard accruing loans, at the dates indicated (dollars in thousands). Non-performing loans are discussed further in the section entitled "Non-performing Assets" below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| September 30, 2021 | | June 30, 2021 | | | | | | December 31, 2020 |
| Amortized Cost | | % of Loan Segment | | Amortized Cost | | % of Loan Segment | | | | | | | | | | Amortized Cost | | % of Loan Segment |
| Special mention: | | | | | | | | | | | | | | | | | | | |
| CRE | | | | | | | | | | | | | | | | | | | |
| Hotel | $ | 765 | | | 0.1 | % | | $ | 579 | | | 0.1 | % | | | | | | | | | | $ | 68,413 | | | 11.0 | % |
| Retail | 19,204 | | | 1.6 | % | | 21,763 | | | 1.8 | % | | | | | | | | | | 86,935 | | | 6.4 | % |
| Multi-family | — | | | — | % | | 6,085 | | | 0.4 | % | | | | | | | | | | 36,335 | | | 2.2 | % |
| Office | 27,129 | | | 1.5 | % | | 27,246 | | | 1.4 | % | | | | | | | | | | 37,943 | | | 1.8 | % |
| Industrial | — | | | — | % | | — | | | — | % | | | | | | | | | | 9,440 | | | 1.1 | % |
| Other | 248 | | | 0.4 | % | | 3,503 | | | 6.5 | % | | | | | | | | | | 38,010 | | | 45.4 | % |
| 47,346 | | | | | 59,176 | | | | | | | | | | | | | 277,076 | | | |
| Owner occupied commercial real estate | 17,262 | | | 0.9 | % | | 41,923 | | | 2.1 | % | | | | | | | | | | 156,837 | | | 7.8 | % |
| Commercial and industrial | 88,765 | | | 2.1 | % | | 33,364 | | | 0.8 | % | | | | | | | | | | 169,605 | | | 3.8 | % |
| | | | | | | | | | | | | | | | | | | |
| Bridge - franchise finance | — | | | — | % | | 1,857 | | | 0.4 | % | | | | | | | | | | 71,593 | | | 13.0 | % |
| Bridge - equipment finance | — | | | — | % | | 1,744 | | | 0.4 | % | | | | | | | | | | 36,405 | | | 7.7 | % |
| $ | 153,373 | | | | | $ | 138,064 | | | | | | | | | | | | | $ | 711,516 | | | |
| | | | | | | | | | | | | | | | | | | |
| Substandard accruing: | | | | | | | | | | | | | | | | | | | |
| CRE | | | | | | | | | | | | | | | | | | | |
| Hotel | $ | 250,055 | | | 43.7 | % | | $ | 290,439 | | | 48.9 | % | | | | | | | | | | $ | 400,468 | | | 64.4 | % |
| Retail | 207,926 | | | 17.7 | % | | 220,424 | | | 18.0 | % | | | | | | | | | | 276,149 | | | 20.4 | % |
| Multi-family | 183,669 | | | 15.5 | % | | 205,514 | | | 16.4 | % | | | | | | | | | | 218,532 | | | 13.3 | % |
| Office | 84,043 | | | 4.5 | % | | 140,741 | | | 7.1 | % | | | | | | | | | | 40,477 | | | 1.9 | % |
| Industrial | 12,782 | | | 1.4 | % | | 12,855 | | | 1.5 | % | | | | | | | | | | 13,902 | | | 1.7 | % |
| Other | 6,888 | | | 5.3 | % | | 21,375 | | | 12.5 | % | | | | | | | | | | 28,505 | | | 12.6 | % |
| 745,363 | | | | | 891,348 | | | | | | | | | | | | | 978,033 | | | |
| Owner occupied commercial real estate | 217,217 | | | 10.8 | % | | 219,162 | | | 11.2 | % | | | | | | | | | | 177,575 | | | 8.9 | % |
| Commercial and industrial | 263,582 | | | 6.3 | % | | 277,683 | | | 6.6 | % | | | | | | | | | | 285,925 | | | 6.4 | % |
| | | | | | | | | | | | | | | | | | | |
| Bridge - franchise finance | 163,853 | | | 41.3 | % | | 218,665 | | | 47.1 | % | | | | | | | | | | 242,234 | | | 44.1 | % |
| Bridge - equipment finance | 42,786 | | | 11.3 | % | | 77,808 | | | 18.4 | % | | | | | | | | | | 74,887 | | | 15.7 | % |
| | | | | | | | | | | | | | | | | | | |
| $ | 1,432,801 | | | | | $ | 1,684,666 | | | | | | | | | | | | | $ | 1,758,654 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Payment Deferrals and Modifications
We believe, in the current environment, information about loans that are on temporary payment deferral or have been modified as a result of the COVID-19 pandemic provides additional insight into segments or sub-segments of the portfolio that experienced some level of stress related to the pandemic and into how those loans are performing as the economy recovers. The following table summarizes deferral and modification activity in the commercial portfolio, as of September 30, 2021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Under CARES Act Modification at September 30, 2021 | | % of Portfolio Segment at September 30, 2021 | | Under Short Term Deferral or CARES Act Modification at June 30, 2021 (1) | | Loans That Have Rolled Off of CARES Act Modification |
| CRE by Property Type: | | | | | | | |
| Retail | $ | 15,874 | | | 1 | % | | $ | 15,871 | | | $ | 2,639 | |
| Hotel | 81,632 | | | 14 | % | | 225,436 | | | 261,723 | |
| Office | — | | | — | % | | 44,860 | | | 44,660 | |
| Multifamily | 7,317 | | | 1 | % | | 13,872 | | | 16,697 | |
| | | | | | | |
| Total CRE | 104,823 | | | 2 | % | | 300,039 | | | 325,719 | |
| C&I by Industry | | | | | | | |
| Accommodation and Food Services | 30,962 | | | 16 | % | | 31,073 | | | — | |
| Retail Trade | 31,977 | | | 11 | % | | 32,371 | | | 2,274 | |
| Finance and Insurance | 16,447 | | | 2 | % | | 16,854 | | | 1,797 | |
| Other | 32,260 | | | 3 | % | | 31,994 | | | 59,903 | |
| Total C&I | 111,646 | | | 2 | % | | 112,292 | | | 63,974 | |
| Bridge - franchise finance | 27,717 | | | 7 | % | | 25,647 | | | 24,817 | |
| | | | | | | |
| Total Commercial | $ | 244,186 | | | 2 | % | | $ | 437,978 | | | $ | 414,510 | |
| | | | | | | |
| | | | | | | |
(1) Includes $2 million of loans under short-term deferral at June 30, 2021.
All of the loans that have rolled off of modification as shown in the table above have paid off or resumed regular payments. CARES Act modifications represent modifications for periods greater than 90 days and most commonly have taken the form of 9 to 12 month interest only periods. The majority of loan modifications that took place after the onset of the COVID-19 pandemic have not been categorized as TDRs, in accordance with interagency and authoritative guidance and the provisions of the CARES Act.
Operating Lease Equipment, net
FourSeven operating lease relationships with assets under leaseleases with a carrying value of assets under lease totaling $81$46 million, all of which $75 million were exposures to the energy industry, were internally risk rated special mention or substandard at September 30, 2017. The present2021. On a quarterly basis, management performs an impairment analysis on assets with indicators of potential impairment. Potential impairment indicators include evidence of changes in residual value, macro-economic conditions, an extended period of remaining lease payments on these leases totaled approximately $22 milliontime off-lease, criticized or classified status, or management's intention to sell the asset at an amount potentially below its carrying value. During the nine months ended September 30, 2017, of which $17 million were exposures to the energy industry. There have been no missed payments2021 and 2020, impairment charges recognized related to the operating lease portfolio to date. One relationship has been restructured to date, with no decrease in total minimum lease payments.equipment were insignificant.
The primary risks inherent in the equipment leasing business are asset risk resulting from ownership of the equipment on operating lease and credit risk. Asset risk arises from fluctuations in supply and demand for the underlying leased equipment. Railcars are long-lived equipment with useful lives of approximately 35-50 years. The equipment is leased to commercial end-usersend users with original lease terms generally ranging from 3-9 years at September 30, 2017.three to ten years. We are exposed to the risk that, at the end of the lease term, the value of the asset will be lower than expected, potentially resulting in reduced future lease income over the remaining life of the asset or a lower sale value. Asset risk may also lead to changes in depreciation as a result of changes in the residual values of the operating leaseleased assets or through impairment of asset carrying values.
Asset risk is evaluated and managed by a dedicated internal staff of asset managers, managed by seasoned equipment finance professionals with a broad depth and breadth of experience in the leasing business. Additionally, we have partnered with an industry leading, experienced service provider who provides fleet management and servicing relating to the railcar fleet, including lease administration and reporting, a Regulation Y compliant full service maintenance program and railcar re-marketing. Risk is managed by setting appropriate residual values at inception and systematic reviews of residual values based on independent appraisals, performed at least annually. Additionally, our internal management team and our external service provider closely follow the rail markets, monitoring traffic flows, supply and demand trends and the impact of new technologies and regulatory requirements. Demand for railcars is sensitive to shifts in general and industry specific economic and market
trends and shifts in trade flows from specific events such as natural or man-made disasters.disasters, including events such as the COVID-19 pandemic. We seek to mitigate these risks by leasing to a stable end-userend user base, by maintaining a relatively young and diversified fleet of assets that are expected to maintain stronger and more stable utilization rates despite impacts from unexpected events or cyclical trends and by staggering lease maturities. We regularly monitor the impact of lower oil prices on the estimated residual value of rail cars being used in the petroleum/natural gas extraction sector.
Credit risk in the leased equipment portfolio results from the potential default of lessees, possibly driven by obligor specific or industry-wide conditions, and is economically less significant than asset risk, because in the operating lease business, there is no extension of credit to the obligor. Instead, the lessor deploys a portion of the useful life of the asset. Credit losses, if any, will manifest through reduced rental income due to missed payments, time off lease, or lower rental payments due either to a restructuring or re-leasing of the asset to another obligor. Credit risk in the operating lease portfolio is managed and monitored utilizing credit administration infrastructure, processes and procedures similar to those used to manage and monitor credit risk in the commercial loan portfolio. We also mitigate credit risk in this portfolio by leasing only to high credit quality obligors.
We expect ourBridge had exposure to the energy industry of $309 million at September 30, 2021. The majority of the energy exposure was in the operating lease equipment portfolio to continue to grow,where energy exposure totaled $266 million. The remaining energy exposure, totaling approximately $44 million was comprised of loans and we may expand into other asset classes.
Based on our initial analysis of the location and condition of equipment under operating lease, we do not currently believe there has been any significant damage to such equipmentdirect or to the ongoing operations of lessees from Hurricanes Irma and Harvey.sales type finance leases.
Residential and Other Consumer Loans
The majority of our non-coveredOur residential mortgage portfolio, excluding GNMA buyout loans, consists primarily of loans purchased through established correspondent channels. In general, we purchaseMost of our purchases are of performing jumbo mortgage loans which have FICO scores above 700, primarily are owner-occupied and full documentation, and have a current LTV of 80% or less although loans with LTVs higher than 80% may be extended to selected credit-worthy borrowers. We perform due diligence on the purchased loans for credit, compliance, counterparty, payment history and property valuation.
The following tables showWe have a dedicated residential credit risk management function, and the distributionresidential portfolio is monitored by our internal credit review function. Residential mortgage loans and consumer loans are not individually risk rated. Delinquency status is the primary measure we use to monitor the credit quality of non-coveredthese loans. We also consider original LTV and most recently available FICO score to be significant indicators of credit quality for the 1-4 single family residential portfolio, excluding government insured residential loans.
The following charts present information about the 1-4 single family residential portfolio, excluding government insured loans, by original FICO distribution, LTV distribution and LTV asvintage at September 30, 2021:
FICO scores are generally updated at least annually, and were most recently updated in the third quarter of the dates indicated:
|
| | | | | | | | | | | | | | | |
| | | September 30, 2017 |
| | | FICO |
| LTV | | 720 or less | | 721 - 740 | | 741 - 760 | | 761 or
greater | | Total |
| 60% or less | | 2.4 | % | | 2.8 | % | | 4.6 | % | | 20.4 | % | | 30.2 | % |
| 60% - 70% | | 2.3 | % | | 2.6 | % | | 3.5 | % | | 14.6 | % | | 23.0 | % |
| 70% - 80% | | 3.5 | % | | 4.4 | % | | 7.9 | % | | 27.2 | % | | 43.0 | % |
| More than 80% | | 0.6 | % | | 0.5 | % | | 0.6 | % | | 2.1 | % | | 3.8 | % |
| | | 8.8 | % | | 10.3 | % | | 16.6 | % | | 64.3 | % | | 100.0 | % |
|
| | | | | | | | | | | | | | | |
| | | December 31, 2016 |
| | | FICO |
| LTV | | 720 or less | | 721 - 740 | | 741 - 760 | | 761 or
greater | | Total |
| 60% or less | | 2.5 | % | | 3.2 | % | | 4.7 | % | | 21.7 | % | | 32.1 | % |
| 60% - 70% | | 2.3 | % | | 2.7 | % | | 3.6 | % | | 15.1 | % | | 23.7 | % |
| 70% - 80% | | 3.2 | % | | 4.3 | % | | 8.0 | % | | 26.1 | % | | 41.6 | % |
| More than 80% | | 0.7 | % | | 0.3 | % | | 0.4 | % | | 1.2 | % | | 2.6 | % |
| | | 8.7 | % | | 10.5 | % | | 16.7 | % | | 64.1 | % | | 100.0 | % |
At September 30, 2017,2021, the non-coveredmajority of the 1-4 single family residential loan portfolio, had the following characteristics: substantially all were full documentation with a weighted-average FICO score of 765 and a weighted-average LTV of 66.6%. The majority of this portfolioexcluding government insured residential loans, was owner-occupied, with 87.9%84% primary residence, 8.3%6% second homes and 3.8%10% investment properties. In terms of vintage, 22.2% of the portfolio was originated pre-2014, 13.1% in 2014, 22.2% in 2015, 26.0% in 2016 and 16.5% in 2017.
Non-covered 1-4 single family residential loans excluding government insured residential loans past due more than 30 days totaled $17.1$91 million and $12.7$66 million at September 30, 20172021 and December 31, 2016,2020, respectively. The amount of these loans 90 days or more past due was $2.7$16 million and $2.1$9 million at September 30, 20172021 and December 31, 2016,2020, respectively. Delinquency statistics as of September 30, 2021 may not be fully reflective of the impact of the COVID-19 pandemic on residential borrowers due to payment deferral programs. Loans on deferral that are in compliance with the terms of the deferral program are not reported as delinquent.
Hurricane Impact- Residential
At September 30, 2021, $40 million or 1% of 1-4 single family residential loans,
excluding government insured residential loans, were under short-term deferral or modified due to the COVID-19 pandemic. Through September 30, 2021, $533 million of residential loans, excluding government insured loans, had been granted at least one short term payment deferral. The following table presents information related to 1-4 single familyabout residential mortgages with borrowers and/or collateral locatedloans granted payment deferrals as a result of the COVID-19 pandemic as of September 30, 2021, excluding government insured residential loans (dollars in areas impacted by Hurricanes Irma and Harvey, at the dates indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Loans That Have Rolled Off of Short-Term Deferral or CARES Act Modification |
Loans Under Short-Term Deferral or CARES Act Modification (1) | | Paid Off or Paying as Agreed | | Not Resumed Regular Payments |
| Balance | | Balance | | % of Loans Rolled Off Short-Term Deferral | | Balance | | % of Loans Rolled Off Short-Term Deferral |
| $ | 40,451 | | | $ | 466,550 | | | 95% | | $ | 25,973 | | | 5% |
|
| | | | | | | |
| | September 30, 2017 | | October 31, 2017 |
| Past due more than 30 days: | | | |
| Covered loans | $ | 14,669 |
| | $ | 13,454 |
|
| Total | $ | 20,099 |
| | $ | 21,350 |
|
| Granted temporary payment deferrals: | | | |
| Covered loans | $ | 14,807 |
| | $ | 16,983 |
|
| Total | $ | 24,772 |
| | $ | 25,969 |
|
Other Consumer Loans
Substantially all consumer(1) Includes $17 million of loans were currentunder short-term deferral and $23 million of loans modified under the CARES Act that are continuing to make payments at September 30, 2017. At December 31, 2016, there were no delinquent consumer loans.2021.
Covered Loans
At September 30, 2017,For residential ACI loans totaled $476 million and residential non-ACI loans totaled $62 million, including premiums, discounts andborrowers, relief has typically initially taken the form of 90 day payment deferrals, with deferred fees and costs. All of these loans are covered under the Single Family Shared-Loss Agreement.
Covered residential loans were placed into homogenous poolspayments due at the timeend of the FSB Acquisition and90 day period. At the ongoingend of the initial 90 day deferral period, residential borrowers may either (i) make all payments due, (ii) be granted an additional deferral period or (iii) enter into a modification or repayment plan.
Note 4 to the consolidated financial statements presents additional information about key credit quality indicators and performancedelinquency status of these loans is monitored on a pool basis. We monitor the pools quarterly to determine whether any changes have occurred in expected cash flows that would be indicative of impairment or necessitate reclassification between non-accretable difference and accretable yield. At September 30, 2017, accretable yield on residential ACI loans totaled $511 million and non-accretable difference related to those loans totaled $227 million.
At September 30, 2017, the recorded investment in non-ACI 1-4 single family residential loans was $24.6 million; $1.6 million or 6.6% of these loans were 30 days or more past due and $0.9 million or 3.8% of these loans were 90 days or more past due. At September 30, 2017, the recorded investment in ACI 1-4 single family residential loans totaled $470.3 million; $34.2 million or 7.3% of these loans were delinquent by 30 days or more and $17.6 million or 3.7% were delinquent by 90 days or more.
At September 30, 2017, non-ACI home equity loans and lines of credit had an aggregate recorded investment of $37.4 million; $4.1 million or 11.1% of these loans were 30 days or more past due and $2.4 million or 6.3% were 90 days or more past due. ACI home equity loans and lines of credit had a carrying amount of $5.6 million at September 30, 2017; 13.5% of these loans were delinquent by 30 days or more.
Home equity lines of credit generally provide that payment terms be reset after an initial contractual period of interest only payments, requiring the pay down of principal through balloon payments or amortization. Additional information regarding ACI and non-ACI home equity lines of credit at September 30, 2017 is summarized as follows:
|
| | | | | |
| | ACI | | Non-ACI |
| Loans resetting from interest only: | |
| | |
|
| Previously reset | 72.3 | % | | 51.5 | % |
| Scheduled to reset within 12 months | 2.5 | % | | 5.5 | % |
| Scheduled to reset after 12 months | 25.2 | % | | 43.0 | % |
| | 100.0 | % | | 100.0 | % |
| Lien position: | |
| | |
|
| First liens | 10.3 | % | | 18.8 | % |
| Second or third liens | 89.7 | % | | 81.2 | % |
| | 100.0 | % | | 100.0 | % |
The Company's exposure to loss related to covered loans is significantly mitigated by the Single Family Shared-Loss Agreement and by the fair value basis recorded in these assets resulting from the application of acquisition accounting. Management regularly evaluates the impact of resets of interest only loans on default rates for the covered home equityloan portfolio.
Impaired Loans and Non-Performing Assets
Non-performing assets generally consist of (i) non-accrual loans, including loans that have been modified in TDRs or CARES Act modifications and placed on non-accrual status, (ii) accruing loans that are more than 90 days contractually past due as to interest or principal, excluding ACIPCD loans for which management has a reasonable basis for an expectation about future cash flows and government insured residential loans, and (iii) OREO and repossessed assets. Impaired loans also typically include loans modified in TDRs that are accruing and ACI loans or pools for which expected cash flows at acquisition (as adjusted for any additional cash flows expected to be collected arising from changes in estimates after acquisition) have been revised downward since acquisition, other than due to changes in interest rate indices and prepayment assumptions.
The following tablestable and charts summarize the Company's impairednon-performing loans and non-performing assets at the dates indicated (dollars in thousands):
| | | | | | | | | | | | | | | | | |
| September 30, 2021 | | June 30, 2021 | | December 31, 2020 |
| | | | | |
| Non-accrual loans: | | | | | |
| Residential and other consumer: | | | | | |
| 1-4 single family residential | $ | 31,331 | | | $ | 43,646 | | | $ | 26,842 | |
| Other consumer loans | 1,807 | | | 1,907 | | | 1,986 | |
| Total residential and other consumer loans | 33,138 | | | 45,553 | | | 28,828 | |
| Commercial: | | | | | |
| Multi-family | 11,018 | | | 7,069 | | | 24,090 | |
| Non-owner occupied commercial real estate | 48,459 | | | 51,320 | | | 64,017 | |
| Construction and land | 4,715 | | | 4,784 | | | 4,754 | |
| Owner occupied commercial real estate | 22,192 | | | 26,582 | | | 23,152 | |
| Commercial and industrial | 125,550 | | | 123,818 | | | 54,584 | |
| | | | | |
| Bridge - franchise finance | 31,569 | | | 33,405 | | | 45,028 | |
| | | | | |
| Total commercial loans | 243,503 | | | 246,978 | | | 215,625 | |
| Total non-accrual loans | 276,641 | | | 292,531 | | | 244,453 | |
| Loans past due 90 days and still accruing | 23 | | | 132 | | | — | |
| Total non-performing loans | 276,664 | | | 292,663 | | | 244,453 | |
| OREO and repossessed assets | 4,115 | | | 3,890 | | | 3,138 | |
| Total non-performing assets | $ | 280,779 | | | $ | 296,553 | | | $ | 247,591 | |
| | | | | |
Non-performing loans to total loans (1) | 1.21 | % | | 1.28 | % | | 1.02 | % |
Non-performing assets to total assets (1) | 0.80 | % | | 0.83 | % | | 0.71 | % |
| ACL to total loans | 0.70 | % | | 0.77 | % | | 1.08 | % |
| ACL to non-performing loans | 57.69 | % | | 60.02 | % | | 105.26 | % |
| | | | | |
Net charge-offs to average loans (2) | 0.19 | % | | 0.24 | % | | 0.26 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Covered
Assets | | Non-Covered
Assets | | Total | | Covered Assets | | Non-Covered Assets | | Total |
| Non-accrual loans | | | | | | | | | | | |
| Residential and other consumer: | | | | | | | | | | | |
| 1 - 4 single family residential | $ | 934 |
| | $ | 1,890 |
| | $ | 2,824 |
| | $ | 918 |
| | $ | 566 |
| | $ | 1,484 |
|
| Home equity loans and lines of credit | 2,369 |
| | — |
| | 2,369 |
| | 2,283 |
| | — |
| | 2,283 |
|
| Other consumer loans | — |
| | 332 |
| | 332 |
| | — |
| | 2 |
| | 2 |
|
| Total residential and other consumer loans | 3,303 |
| | 2,222 |
| | 5,525 |
| | 3,201 |
| | 568 |
| | 3,769 |
|
| Commercial: | | | | | | | | | | | |
| Non-owner occupied commercial real estate | — |
| | 9,930 |
| | 9,930 |
| | — |
| | 559 |
| | 559 |
|
| Construction and land | — |
| | 1,238 |
| | 1,238 |
| | — |
| | 1,238 |
| | 1,238 |
|
| Owner occupied commercial real estate | — |
| | 21,455 |
| | 21,455 |
| | — |
| | 19,439 |
| | 19,439 |
|
| Commercial and industrial | | | | | | | | | | |
|
|
| Taxi medallion loans | — |
| | 120,572 |
| | 120,572 |
| | — |
| | 60,660 |
| | 60,660 |
|
| Other commercial and industrial | — |
| | 27,569 |
| | 27,569 |
| | — |
| | 16,036 |
| | 16,036 |
|
| Commercial lending subsidiaries | — |
| | 16,625 |
| | 16,625 |
| | — |
| | 32,645 |
| | 32,645 |
|
| Total commercial loans | — |
| | 197,389 |
| | 197,389 |
| | — |
| | 130,577 |
| | 130,577 |
|
| Total non-accrual loans | 3,303 |
| | 199,611 |
| | 202,914 |
| | 3,201 |
| | 131,145 |
| | 134,346 |
|
| Non-ACI and new loans past due 90 days and still accruing | — |
| | 846 |
| | 846 |
| | — |
| | 1,551 |
| | 1,551 |
|
| Total non-performing loans | 3,303 |
| | 200,457 |
| | 203,760 |
| | 3,201 |
| | 132,696 |
| | 135,897 |
|
| OREO | 4,114 |
| | 1,661 |
| | 5,775 |
| | 4,658 |
| | 4,882 |
| | 9,540 |
|
| Repossessed assets | — |
| | 2,457 |
| | 2,457 |
| | — |
| | 3,551 |
| | 3,551 |
|
| Total non-performing assets | 7,417 |
| | 204,575 |
| | 211,992 |
| | 7,859 |
| | 141,129 |
| | 148,988 |
|
| Impaired ACI loans and pools on accrual status | 5,640 |
| | — |
| | 5,640 |
| | — |
| | 1,335 |
| | 1,335 |
|
| Performing TDRs | | | | | | | | | | |
|
|
| Taxi medallion loans | — |
| | — |
| | — |
| | — |
| | 36,848 |
| | 36,848 |
|
| Other | 10,786 |
| | 19,365 |
| | 30,151 |
| | 11,166 |
| | 26,282 |
| | 37,448 |
|
| Total impaired loans and non-performing assets | $ | 23,843 |
| | $ | 223,940 |
| | $ | 247,783 |
| | $ | 19,025 |
| | $ | 205,594 |
| | $ | 224,619 |
|
| | | | | | | | | | | | |
Non-performing loans to total loans (1) (3) | | | 1.00 | % | | 0.99 | % | | | | 0.71 | % | | 0.70 | % |
Non-performing assets to total assets (2) | | | 0.69 | % | | 0.72 | % | | | | 0.51 | % | | 0.53 | % |
ALLL to total loans (1) | | | 0.77 | % | | 0.77 | % | | | | 0.80 | % | | 0.79 | % |
| ALLL to non-performing loans | | | 76.69 | % | | 77.82 | % | | | | 113.68 | % | | 112.55 | % |
Net charge-offs to average loans (4) (5) | | | 0.40 | % | | 0.39 | % | | | | 0.13 | % | | 0.13 | % |
| | | | | | | | | | | | |
| | | | | |
(1) | Total loans for purposes of calculating these ratios include premiums, discounts and deferred fees and costs. |
| |
(2) | Ratio for non-covered assets is calculated as non-performing non-covered assets to total assets. |
| |
(3) | Non-performing taxi medallion loans comprised 0.60% and 0.32% of total non-covered loans at September 30, 2017 and December 31, 2016, respectively. |
| |
(4) | Annualized for September 30, 2017. |
| |
(5) | The annualized ratio of charge-offs of taxi medallion loans to average non-covered loans was 0.33% and 0.06% for the nine months ended September 30, 2017 and the year ended December 31, 2016. |
The increases in(1) Non-performing loans and assets include the non-performingguaranteed portion of non-accrual SBA loans tototaling $49.1 million or 0.22% of total loans and non-performing assets to0.14% of total assets, ratios at September 30, 2017 compared to2021, $47.7 million or 0.21% of total loans and 0.13% of total assets, at June 30, 2021 and $51.3 million or 0.22% of total loans and 0.15% of total assets, at December 31, 2016 were primarily attributable to the increase in non-accrual taxi medallion loans. The decrease in the ALLL to non-performing loans ratio at2020.
(2) Annualized for September 30, 2017 compared to December 31, 2016 was primarily attributable to increased charge-offs of taxi medallion loans during the three months ended September2021 and June 30, 2017.2021.
Contractually delinquent ACIgovernment insured residential loans with remaining accretable yield are not reflected as non-accrualtypically GNMA early buyout loans and are not consideredexcluded from non-performing loans as defined in the table above due to be non-performing assets because accretion continues to be recorded in income. Accretion continues to be recorded as long as there is an expectation of future cash flows in excess of carrying amount from these loans.their government guarantee. The carrying value of ACIsuch loans contractually delinquent by more than 90 days but on which income was still being recognized was $18$677 million and $16$562 million at September 30, 20172021 and December 31, 2016, respectively.2020, respectively.
NewThe increase in non-performing loans, non-performing assets and related ratios from December 31, 2020 to June 30, 2021 was primarily attributable to one $69 million commercial and industrial relationship. Decreases in the ratios of the ACL to total loans and the ACL to non-performing loans at September 30, 2021 compared to December 31, 2020 are attributable to the recovery of credit losses recorded during the three and nine months ended September 30, 2021 as discussed in the section of this Management's Discussion and Analysis entitled "Results of Operations - Provision for Credit Losses", and to a lesser extent, charge-offs recognized.
The following chart presents trends in non-performing loans and non-performing assets:
The following chart presents trends in non-performing loans by portfolio sub-segment (in millions):
The ultimate impact of the COVID-19 pandemic on non-performing asset levels and net charge-offs may be delayed due to government assistance and loan deferral programs.
Commercial loans are placed on non-accrual status when (i) management has determined that full repayment of all contractual principal and interest is in doubt, or (ii) the loan is past due 90 days or more as to principal or interest unless the loan is well secured and in the process of collection. NewResidential and non-ACI residential and consumer loans, other than government insured pool buyout loans, are generally placed on non-accrual status when they are 90 days past due. Residential loans that have rolled off of interest is dueshort-term deferral and unpaid.have not caught up on their deferred payments may also be placed on non-accrual; these loans are typically pending modification. When a loan is placed on non-accrual status, uncollected interest accrued is reversed and charged to interest income. Commercial loans are returned to accrual status only after all past due principal and interest has been collected and full repayment of remaining contractual principal and interest is reasonably assured. Residential loans are generally returned to accrual status when less than 90 days of interest is due and unpaid.past due. Past due status of loans is determined based on the contractual next payment due date. Loans less than 30 days past due are reported as current.
TDRs
A loan modification is considered a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise grant. These concessions may take the form of temporarily or permanently reduced interest rates, payment abatement periods, restructuring of payment terms or extensions of maturity at below market terms, or in some cases, partial forgiveness of principal. Under GAAP, modified ACI loans accounted for in pools are not accounted for as TDRs and are not separated from their respective pools when modified.terms. Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy.
Under recently issued inter-agency and authoritative guidance and consistent with the CARES Act, short-term deferrals (generally periods of six months or less) or modifications related to COVID-19 will typically not be categorized as TDRs. Additionally, section 4013 of the CARES Act, as amended by the Consolidated Appropriations Act on December 27, 2020, effectively suspended the guidance related to TDRs codified in ASC 310-40 until the earlier of January 1, 2022 or sixty days after the date of the suspension of the declared state of emergency related to the COVID-19 pandemic. None of the COVID-19 related deferrals the Company has granted to date that fall under these provisions have been categorized as TDRs. See the sections entitled "Asset Quality - Commercial Loans - Payment Deferrals" and "Asset Quality - Residential and Other Consumer Loans" for further discussion.
The following table summarizes loans that had been modified in TDRs at September 30, 2017the dates indicated (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| | | |
| Number of TDRs | | Amortized Cost | | Related Specific Allowance | | Number of TDRs | | Amortized Cost | | Related Specific Allowance |
Residential and other consumer (1) | 453 | | | $ | 78,649 | | | $ | 89 | | | 342 | | | $ | 57,017 | | | $ | 94 | |
| Commercial | 17 | | | 37,215 | | | 2,463 | | | 25 | | | 55,515 | | | 15,630 | |
| 470 | | | $ | 115,864 | | | $ | 2,552 | | | 367 | | | $ | 112,532 | | | $ | 15,724 | |
|
| | | | | | | | | | | |
| | | Number of TDRs | | Recorded Investment | | Related Specific Allowance |
| Residential and other consumer: | | | | | | |
| Covered | | 59 |
| | $ | 11,721 |
| | $ | 1,024 |
|
| Non-covered | | 9 |
| | 912 |
| | 71 |
|
| Commercial: | | | | | | |
| Taxi medallion loans | | 173 |
| | 92,370 |
| | 10,505 |
|
| Other | | 30 |
| | 72,702 |
| | 10,581 |
|
| | | 271 |
| | $ | 177,705 |
| | $ | 22,181 |
|
Potential Problem Loans
Potential problem(1) Includes 438 government insured residential loans have been identified by management as those commercial loans includedmodified in the "substandard accruing" risk rating category. These loans are typically performing, but possess specifically identified credit weaknesses that, if not remedied, may lead to a downgrade to non-accrual status and identification as impaired in the near-term. Substandard accruing commercial loans totaled $185TDRs totaling $75.2 million at September 30, 2017, substantially all of which were current as2021; and 326 government insured residential loans modified in TDRs totaling $52.8 million at December 31, 2020.
See Note 4 to principal and interest at September 30, 2017.the consolidated financial statements for additional information about TDRs.
Loss Mitigation Strategies
Criticized or classified commercial loans in excess of certain thresholds are reviewed quarterly by the Criticized Asset Committee, which determinesevaluates the appropriate strategy for collection to mitigate the amount of credit losses.losses and considers the appropriate risk rating for these loans. Criticized asset reports for each relationship are presented by the assigned relationship manager and credit officer to the Criticized Asset Committee until such time as the relationships are returned to a satisfactory credit risk rating or otherwise resolved. The Criticized Asset Committee may require the transfer of a loan to our workout and recovery department, which is tasked to effectively manage the loan with the goal of minimizing losses and expenses associated with restructure, collection and/or liquidation of collateral. Commercial loans with a risk rating of substandard; impairedsubstandard, loans on non-accrual status;status, loans modified as TDRs; taxi medallion loans;TDRs or CARES Act modifications and assets classified as OREO or repossessed assets are usually transferred to workout and recovery. Oversight of the workout and recovery department is provided by the Criticized Asset Recovery Committee.
WeOur servicers evaluate each residential loan in default to determine the most effective loss mitigation strategy, which may be modification, short sale, or foreclosure. Throughforeclosure, and pursue the program's expirationalternative most suitable to the consumer and to mitigate losses to the bank.
In response to the COVID-19 pandemic and its potential economic impact to our customers, we implemented a short-term program that complies with interagency guidance and the CARES Act under which we have provided temporary relief, and in some cases longer term modifications, on a case by case basis to borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, 2016, we offered loan2019. See the sections entitled "Asset Quality - Commercial Loans - Payment Deferrals" and "Asset Quality - Residential and Other Consumer Loans" for further details about COVID-19 related payment deferrals and modifications. Under the inter-agency guidance and consistent with the CARES Act, deferrals or modifications underrelated to COVID-19 will generally not be categorized as TDRs. Loans subject to these temporary deferrals or modifications, if in compliance with the HAMP program to eligible borrowers incontractual terms of the residential portfolio. HAMP is a uniform loandeferral or modification process that provides eligible borrowers with sustainable monthly mortgage payments equal to a target 31% of their gross monthly income. We began offering a new modification program in late 2016 modeled after the FNMA standard modification program.agreements, will typically not be reported as past due or non-performing.
In addition to the modification programs discussed above, we offer a proprietary Subordinate Lien Modification Program for home equity loans and lines of credit. This provides BankUnited the ability to offer a modification on loans covered under the Single Family Shared-Loss Agreement that are subordinate to either a BankUnited first lien or a first lien from another lender.
Analysis of the Allowance for Loan and LeaseCredit Losses
The ALLL relates to (i) new loans, (ii) estimated additional losses arising on non-ACI loans subsequent to the FSB Acquisition, and (iii) impairment recognized as a result of decreases in expected cash flows on ACI loans due to further credit deterioration. The impact of any additional provision for losses on covered loansACL is significantly mitigated by an increase in the FDIC indemnification asset. The determinationmanagement's estimate of the amount of expected credit losses over the ALLLlife of the loan portfolio, or the amount of amortized cost basis not expected to be collected, at the balance sheet date. This estimate encompasses information about historical events, current conditions and reasonable and supportable economic forecasts. Determining the amount of the ACL is by nature, highly complex and subjective. Future eventsrequires extensive judgment by management about matters that are inherently uncertainuncertain. Uncertainty remains around the impact the continually evolving COVID-19 situation will have on the economy broadly, and on our borrowers specifically. In light of this uncertainty, we believe it is possible that the ACL estimate could change, potentially materially, in future periods, in either direction. Changes in the ACL may result from changes in current economic conditions, our economic forecast, loan portfolio composition and circumstances not currently known to us that may impact the financial condition and operations of our borrowers, among other factors.
Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. For loans that do not share similar risk characteristics with other loans such as collateral dependent loans and TDRs, expected credit losses are estimated on an individual basis. Expected credit losses are estimated over the contractual terms of the loans, adjusted for expected prepayments, generally excluding expected extensions, renewals, and modifications.
For the substantial majority of portfolio segments and subsegments, including residential loans other than government insured loans, and most commercial and commercial real estate loans, expected losses are estimated using econometric models. The models employ a factor based methodology, leveraging data sets containing extensive historical loss and recovery information by industry, geography, product type, collateral type and obligor characteristics, to estimate PD and LGD. Measures of PD for commercial loans incorporate current conditions through market cycle or credit cycle adjustments. For residential loans, the models consider FICO and adjusted LTVs. PDs and LGDs are then conditioned on the reasonable and supportable economic forecast. Projected PDs and LGDs, determined based on pool level characteristics, are applied to estimated exposure at default, considering the contractual term and payment structure of loans, adjusted for prepayments, to generate estimates of expected loss. For criticized or classified loans, PDs are adjusted to benchmark PDs established for each risk rating. The ACL estimate incorporates a reasonable and supportable economic forecast through the use of externally developed macroeconomic scenarios applied in the models.
A single economic scenario or a probability weighted blend of economic scenarios may be used. The models ingest numerous national, regional and MSA level variables and data points. At both September 30, 2021 and December 31, 2020, a baseline scenario was used in estimating the ACL.
Commercial Real Estate Model
Variables with the most significant impact on the commercial real estate model include unemployment at both national and regional levels, the CRE property forecast by property type and sub-market, 10 year treasury yield, Baa corporate yield and real GDP growth, at the national level. Increases in unemployment and yields within the commercial real estate model result in material changes toincreases in the level ofACL. Increases in real GDP growth and improvements in the ALLL. General economic conditions including but not limited toCRE property forecasts reduce the reserve.
Commercial Model
Variables with the most significant impact on the commercial model include a stock market volatility index, the S&P 500 index, unemployment, rates, the level of business investmentat both national and growth, real estate values, vacancy ratesregional levels, and rental rates in our primary market areas, the levela variety of interest rates and a variety of other factors that affectspreads. Increases in the ability of borrowers’ businesses to generate cash flows sufficient to service their debts will impactunemployment rate, the future performancestock market volatility index, and the Baa corporate yield increase the reserve, while increases in real GDP growth and the steepening of the portfolio. yield curve reduce the reserve.
Residential Model
Variables with the most significant impact on the residential model include HPI and other consumerunemployment at regional levels, real GDP growth, and a 30 year mortgage rate. Increases in the unemployment rate and the 30-year mortgage rate increase the reserve, while increases in real GDP growth and HPI reduce the reserve.
DueThe length of the reasonable and supportable forecast period is evaluated at each reporting period and adjusted if deemed necessary. Currently, the Company uses a 2-year reasonable and supportable forecast period in estimating the ACL. After the reasonable and supportable forecast period, the models effectively revert to the lack of similarity between the risk characteristics of newlong-term mean losses on a straight-line basis over 12 months.
For certain less material portfolios including loans and coveredleases to state and local government entities originated by Pinnacle, small balance commercial loans inand consumer loans, the residential and home equity portfolios, management does not believe it is appropriate to use the historical performance of the covered residential mortgage portfolio as a basis for calculating the ALLL applicable to new loans. The new loan portfolio has not yet developed an observable loss trend. Therefore, the ALLL for new residential loans is based primarily on relevant proxy historical loss rates. The ALLL for new 1-4 single family residential loans is estimated using average annual loss rates on prime residential mortgage securitizations issued between 2003 and 2008 as a proxy. Based on the comparability of FICO scores and LTV ratios between loans included in those securitizations and loans in the Bank’s portfolio and the geographic diversity in the new purchased residential portfolio, we determined that prime residential mortgage securitizations provide an appropriate proxy for incurred losses in this portfolio class. A peer group 16-quarter average net charge-off rateWARM method is used to estimate the ALLL for the new home equity and other consumer loan classes. See further discussion of the use of peer group loss factors below. The new home equity and other consumer loan portfoliosexpected credit losses. Loss rates are not significant components of the overall loan portfolio.
Based on an analysis of historical performance, OREO and short sale losses, recent trending data and other internal and external factors, we have concluded that historical performance by portfolio class is the best indicator of incurred loss for the non-ACI 1-4 single family residential and home equity portfolio classes. For each of these portfolio classes, a quarterly roll rate matrix is calculated by delinquency bucket to measure the rate at which loans move from one delinquency bucket to the next during a given quarter. An average 16-quarter roll rate matrix is used to estimate the amount within each delinquency bucket expected to roll to 120+ days delinquent. We assume no cure for those loans that are currently 120+ days delinquent. Loss severity given default is estimated based on internal data about OREO sales and short sales from the portfolio. The ALLL calculation incorporates a 100% loss severity assumption for home equity loans that are projected to roll to default. For non-ACI residential loans, the allowance is initially calculated based on UPB. The total of UPB less the calculated allowance is then compared to the carrying amount of the loans, net of unamortized credit related fair value adjustments established at acquisition. If the calculated balance net of the allowance is less than the carrying amount, an additional allowance is established. Any increase or decrease in the allowance for non-ACI residential loans will result in a corresponding increase or decrease in the FDIC indemnification asset.
Commercial
The allowance is comprised of specific reserves for loans that are individually evaluated and determined to be impaired as well as general reserves for loans that have not been identified as impaired.
Commercial relationships graded substandard or doubtful and on non-accrual status with committed credit facilities greater than or equal to $1.0 million as well as loans modified in TDRs are individually evaluated for impairment. Other commercial
relationships on non-accrual status with committed balances under $1.0 million may also be evaluated for impairment, at management's discretion. For loans evaluated individually for impairment and determined to be impaired, a specific allowance is established based on the present value of expected cash flows discounted at the loan’s effective interest rate, the estimated fair value of the loan, or the estimated fair value of collateral less costs to sell. We recognized partial charge-offs at September 30, 2017 on taxi medallion loans all of which are risk-rated substandard and on non-accrual status, as necessary to reduce the carrying value of the loans to our estimate of the value of New York City taxi medallions based on our cash flow template. Additionally, a specific allowance was recognized equal to the amount by which each loan exceeded 85% of the estimated value, in recognition of the continued declining trend in cash flows and lower prices observed on certain recent taxi medallion transfers. The amount of this specific allowance was determined based on management's judgment.
We believe that loans rated special mention, substandard or doubtful that are not individually evaluated for impairment exhibit characteristics indicative of a heightened level of credit risk. We apply a quantitative loss factor for loans rated special mention based on average annual probability of default and implied severity, derived from internal and external data. Loss factors for substandard and doubtful loans that are not individually evaluated are determined by using default frequency and severity information applied at the loan level. Estimated default frequencies and severities are based on available industry data. In addition, we apply a floor to these calculated loss factors, based on the loss factor applied to the special mention portfolio.exposure at default, after factoring in amortization and expected prepayments. Expected credit losses for the funded portion of mortgage warehouse lines of credit are estimated based primarily on the Company's historical loss experience. All loss estimates are conditioned as applicable on changes in current conditions and the reasonable and supportable economic forecast.
SinceThe Company expects to collect the majorityamortized cost basis of government insured residential loans and PPP loans due to the nature of the new commercial loan portfoliogovernment guarantee, so the ACL is not yet seasoned enough to exhibit a loss trend, the quantitative loss factorszero for a majority of pass rated new commercial loans is based on peer group average annual historical net charge-off rates by loan class and the Company’s internal credit risk rating system. Beginning in the first quarter of 2017, we revised the source of quantitative loss factors for certain loans, as follows:
Given the emergence of observable loss trends, the quantitative loss factors for the taxi medallion and Bridge portfolios are based on the Company’s average historical net charge-off rates. Beginning in the third quarter of 2017, all taxi medallion loans are individually evaluated for impairment as described above.
The general quantitative loss factor for municipal finance receivables is based on the portfolio's external ratings and Moody's historical transition matrix, as opposed to the historical cumulative default curve for municipal obligations that was used previously.
For loans that are partially guaranteed by the SBA, the loss factor applied to the non-guaranteed portion of these loans is based on the 16-quarter average charge-off rate published by the SBA for each program
Mortgage warehouse loans have been segregated for the purpose of determining a quantitative loss factor, to better recognize the risk profile of this portfolio segment.
The net impact of these changes on the ALLL was not material.
The peer group used to calculate the average annual historical net charge-off rates that form the basis for our general reserve calculations for the majority of new commercial, home equity and consumer loans is made up of the banks included in the OCC Midsize Bank Group plus two additional banks in the New York region that management believes to be comparable based on size and nature of lending operations. The OCC Midsize Bank Group primarily includes commercial banks with total assets ranging from $10 - $50 billion and included 28 banks at September 30, 2017. Peer bank data is obtained from the Statistics on Depository Institutions Report published by the FDIC for the most recent quarter available. These banks, as a group, are considered by management to be comparable to BankUnited in size, nature of lending operations and loan portfolio composition. We evaluate the composition of the peer group annually, or more frequently if, in our judgment, a more frequent evaluation is necessary. Our internal risk rating system comprises 13 credit grades; grades 1 through 8 are “pass” grades. The risk ratings are driven largely by debt service coverage. Peer group historical loss rates are adjusted upward for loans assigned a lower “pass” rating.
We use a 16-quarter loss experience period to calculate peer group average annual net charge-off rates for commercial loans. We believe this look-back period to be consistent with the range of industry practice and appropriate to capture a sufficient range of observations reflecting the performance of our loans, most of which were originated in the current economic cycle. Prior to the third quarter of 2017, we used a four-quarter loss experience period for the taxi medallion portfolio to recognize the recent deterioration in that portfolio. We use a 14-quarter loss experience period for the Bridge portfolios, reflective of the period over which an observable loss trend began to emerge.
With the exception of the Pinnacle municipal finance portfolio, a four quarter loss emergence period is used in the calculation of general reserves. A twelve quarter loss emergence period is used in the calculation of general reserves for the Pinnacle portfolio.
Qualitative Factorsfactors
Qualitative adjustments are made to the ALLLACL when, based on management’s judgment, there are internal or external factors impacting probable incurredexpected credit losses not taken into account by the quantitative calculations. Potential qualitative adjustments are categorized as follows:
Portfolio performance trends, including trends in and the levels of delinquencies, non-performing loans and classified loans; •Economic factors;
Changes in the nature of the portfolio and terms of the loans, specifically including the volume and nature of•Credit policy and procedural exceptions;staffing;
Portfolio growth trends; •Concentrations;
Changes in lending policies•Model imprecision; and procedures, including credit and underwriting guidelines;
Economic factors, including unemployment rates and GDP growth rates;
Changes in the value of underlying collateral;
Quality of risk ratings, as evaluated by our independent credit review function;
Credit concentrations;
Changes in and experience levels of credit administration management and staff; and
•Other factors identifieddeemed appropriate by management that may materially impact the level of losses inherent in the portfolio, including but not limited to competition and legal and regulatory considerations.
ACILoans
For ACI loans, a valuation allowance is established when periodic evaluationsamount of expected cash flows reflect a deterioration resulting from credit related factors fromlosses.
See Note 1 to the level of cash flows that were estimated to be collected at acquisition plus any additional expected cash flows arising from revisions in those estimates. We perform a quarterly analysis of expected cash flows for ACI loans.
Expected cash flows are estimated on a pool basis for ACI 1-4 single family residential and home equity loans. The analysis of expected pool cash flows incorporates updated pool level expected prepayment rate, default rate, delinquency level and loss severity given default assumptions. Prepayment, delinquency and default curves are derived primarily from roll rates generated from the historical performanceconsolidated financial statements of the portfolio over the immediately preceding four quarters. Loss severity given default assumptions are generated from the historical performance of the portfolio over the immediately preceding four quarters, while loss severity from loan sales is generated from historical performance over the immediately preceding twelve quarters. Estimates of default probability and loss severity given default also incorporate updated LTV ratios, at the loan level, basedCompany's 2020 Annual report on Case-Shiller Home Price IndicesForm 10-K for the relevant MSA. Costs and fees represent an additional component of loss on default and are projected based on historical experience over the last three years. The ACI home equity roll rates include the impact of delinquent, related senior liens and loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy. more detailed information about our ACL methodology.
Our projected cash flow analysis reflected a decrease in expected cash flows due to credit related factors for the home equity ACI pool; therefore, a provision for loan losses of $1.8 million was recorded for the nine months ended September 30, 2017, along with a corresponding increase in the FDIC indemnification asset of $1.4 million. No ALLL related to 1-4 single family residential ACI pools was recorded at September 30, 2017. No ALLL related to 1-4 single family residential and home equity ACI pools was recorded at December 31, 2016.
The primary assumptions underlying estimates of expected cash flows for ACI commercial loans are default probability and severity of loss given default. Assessments of default probability and severity are based on net realizable value analyses prepared at the individual loan level. Based on our analysis, no ALLL related to ACI commercial loans was recorded at September 30, 2017 or December 31, 2016.
The following tables providetable provides an analysis of the ALLL,ACL, provision for loancredit losses related to the funded portion of loans and net charge-offs by loan segment for the periods indicated (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Residential and Other Consumer Loans | | Multi-family | | Non-owner Occupied Commercial Real Estate | | Construction and Land | | Owner Occupied Commercial Real Estate | | Commercial and Industrial | | Pinnacle | | Bridge - Franchise Finance | | Bridge - Equipment Finance | | Total |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2020 | $ | 18,719 | | | $ | 39,827 | | | $ | 61,507 | | | $ | 3,284 | | | $ | 28,797 | | | $ | 62,197 | | | $ | 304 | | | $ | 36,331 | | | $ | 6,357 | | | $ | 257,323 | |
| Provision for (recovery of) credit losses | (8,929) | | | (28,940) | | | (34,063) | | | (2,210) | | | (3,601) | | | 27,718 | | | (125) | | | (13,166) | | | (2,207) | | | (65,523) | |
| Charge-offs | (304) | | | (6,470) | | | (2,697) | | | — | | | (453) | | | (15,703) | | | — | | | (9,585) | | | — | | | (35,212) | |
| Recoveries | 10 | | | 233 | | | 155 | | | — | | | 91 | | | 2,538 | | | — | | | — | | | — | | | 3,027 | |
| Balance at September 30, 2021 | $ | 9,496 | | | $ | 4,650 | | | $ | 24,902 | | | $ | 1,074 | | | $ | 24,834 | | | $ | 76,750 | | | $ | 179 | | | $ | 13,580 | | | $ | 4,150 | | | $ | 159,615 | |
| | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2019 | $ | 11,154 | | | $ | 5,024 | | | $ | 23,240 | | | $ | 764 | | | $ | 8,066 | | | $ | 43,485 | | | $ | 720 | | | $ | 9,163 | | | $ | 7,055 | | | $ | 108,671 | |
| Impact of adoption of ASU 2016-13 | 8,098 | | | (780) | | | (13,442) | | | 1,854 | | | 23,240 | | | 8,841 | | | (309) | | | (133) | | | (64) | | | 27,305 | |
| Balance at January 1, 2020 | 19,252 | | | 4,244 | | | 9,798 | | | 2,618 | | | 31,306 | | | 52,326 | | | 411 | | | 9,030 | | | 6,991 | | | 135,976 | |
| Provision for (recovery of) credit losses | (3,241) | | | 32,588 | | | 64,523 | | | 280 | | | 4,676 | | | 45,618 | | | (56) | | | 31,476 | | | 5,231 | | | 181,095 | |
| Charge-offs | (31) | | | (129) | | | (685) | | | — | | | (1,028) | | | (25,564) | | | — | | | (16,561) | | | (6,756) | | | (50,754) | |
| Recoveries | 50 | | | 2 | | | 124 | | | — | | | 98 | | | 6,977 | | | — | | | 449 | | | 111 | | | 7,811 | |
| Balance at September 30, 2020 | $ | 16,030 | | | $ | 36,705 | | | $ | 73,760 | | | $ | 2,898 | | | $ | 35,052 | | | $ | 79,357 | | | $ | 355 | | | $ | 24,394 | | | $ | 5,577 | | | $ | 274,128 | |
| | | | | | | | | | | | | | | | | | | |
Net Charge-offs to Average Loans (1) | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 | 0.01 | % | | 0.60 | % | | 0.07 | % | | — | % | | 0.02 | % | | 0.30 | % | | — | % | | 2.63 | % | | — | % | | 0.19 | % |
| Nine Months Ended September 30, 2020 | — | % | | 0.01 | % | | 0.02 | % | | — | % | | 0.06 | % | | 0.41 | % | | — | % | | 3.41 | % | | 1.44 | % | | 0.25 | % |
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | | | Covered Loans | | |
| | Non-Covered Loans | | ACI Loans | | Non-ACI Loans | | Total |
| Balance at December 31, 2016 | $ | 150,853 |
| | $ | — |
| | $ | 2,100 |
| | $ | 152,953 |
|
| Provision for (recovery of) loan losses: | | | | | | | |
| 1-4 single family residential | (4 | ) | | — |
| | 212 |
| | 208 |
|
| Home equity loans and lines of credit | — |
| | 1,812 |
| | 714 |
| | 2,526 |
|
| Other consumer loans | (48 | ) | | — |
| | — |
| | (48 | ) |
| Multi-family | (3,303 | ) | | — |
| | — |
| | (3,303 | ) |
| Non-owner occupied commercial real estate | 4,032 |
| | — |
| | — |
| | 4,032 |
|
| Construction and land | (9 | ) | | — |
| | — |
| | (9 | ) |
| Owner occupied commercial real estate | 4,884 |
| | — |
| | — |
| | 4,884 |
|
| Commercial and industrial | | | | | | | |
| Taxi medallion loans | 49,604 |
| | — |
| | — |
| | 49,604 |
|
| Other commercial and industrial | 9,338 |
| | — |
| | (45 | ) | | 9,293 |
|
| Commercial lending subsidiaries | (8,614 | ) | | — |
| | — |
| | (8,614 | ) |
| Unallocated | 5,000 |
| | — |
| | — |
| | 5,000 |
|
| Total Provision | 60,880 |
| | 1,812 |
| | 881 |
| | 63,573 |
|
| Charge-offs: | | | | | | | |
| Home equity loans and lines of credit | — |
| | — |
| | (55 | ) | | (55 | ) |
| Non-owner occupied commercial real estate | (162 | ) | | — |
| | — |
| | (162 | ) |
| Owner occupied commercial real estate | (1,164 | ) | | — |
| | — |
| | (1,164 | ) |
| Commercial and industrial | | | | | | | |
| Taxi medallion loans | (47,141 | ) | | — |
| | — |
| | (47,141 | ) |
| Other commercial and industrial | (12,567 | ) | | — |
| | — |
| | (12,567 | ) |
| Commercial lending subsidiaries | — |
| | — |
| | — |
| | — |
|
| Total Charge-offs | (61,034 | ) | | — |
| | (55 | ) | | (61,089 | ) |
| Recoveries: | | | | | | | |
| Home equity loans and lines of credit | — |
| | — |
| | 65 |
| | 65 |
|
| Other consumer loans | 21 |
| | — |
| | — |
| | 21 |
|
| Owner occupied commercial real estate | 2 |
| | — |
| | — |
| | 2 |
|
| Commercial and industrial | | | | | | | |
| Other commercial and industrial | 2,400 |
| | — |
| | 45 |
| | 2,445 |
|
| Commercial lending subsidiaries | 603 |
| | — |
| | — |
| | 603 |
|
| Total Recoveries | 3,026 |
| | — |
| | 110 |
| | 3,136 |
|
| Net Charge-offs: | (58,008 | ) | | — |
| | 55 |
| | (57,953 | ) |
| Balance at September 30, 2017 | $ | 153,725 |
| | $ | 1,812 |
| | $ | 3,036 |
| | $ | 158,573 |
|
(1) Annualized.
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | | | Covered Loans | | |
| | Non-Covered Loans | | ACI Loans | | Non-ACI Loans | | Total |
| Balance at December 31, 2015 | $ | 120,960 |
| | $ | — |
| | $ | 4,868 |
| | $ | 125,828 |
|
| Provision for (recovery of) loan losses: | | | | | | | |
| 1-4 single family residential | (324 | ) | | — |
| | 23 |
| | (301 | ) |
| Home equity loans and lines of credit | 2 |
| | — |
| | (1,097 | ) | | (1,095 | ) |
| Other consumer loans | (98 | ) | | — |
| | — |
| | (98 | ) |
| Multi-family | 1,509 |
| | — |
| | — |
| | 1,509 |
|
| Non-owner occupied commercial real estate | 7,563 |
| | — |
| | — |
| | 7,563 |
|
| Construction and land | (980 | ) | | — |
| | — |
| | (980 | ) |
| Owner occupied commercial real estate | 4,854 |
| | — |
| | — |
| | 4,854 |
|
| Commercial and industrial | | | | | | | |
| Taxi medallion loans | 9,679 |
| | — |
| | — |
| | 9,679 |
|
| Other commercial and industrial | 16,686 |
| | — |
| | (45 | ) | | 16,641 |
|
| Commercial lending subsidiaries | 4,677 |
| | — |
| | — |
| | 4,677 |
|
| Total Provision | 43,568 |
| | — |
| | (1,119 | ) | | 42,449 |
|
| Charge-offs: | | | | | | | |
| 1-4 single family residential | — |
| | — |
| | (312 | ) | | (312 | ) |
| Home equity loans and lines of credit | — |
| | — |
| | (774 | ) | | (774 | ) |
| Non-owner occupied commercial real estate | (128 | ) | | — |
| | — |
| | (128 | ) |
| Construction and land | (93 | ) | | — |
| | — |
| | (93 | ) |
| Owner occupied commercial real estate | (2,615 | ) | | — |
| | — |
| | (2,615 | ) |
| Commercial and industrial | | | | | | | |
| Taxi medallion loans | (4,235 | ) | | — |
| | — |
| | (4,235 | ) |
| Other commercial and industrial | (7,245 | ) | | — |
| | — |
| | (7,245 | ) |
| Commercial lending subsidiaries | (1,432 | ) | | — |
| | — |
| | (1,432 | ) |
| Total Charge-offs | (15,748 | ) | | — |
| | (1,086 | ) | | (16,834 | ) |
| Recoveries: | | | | | | | |
| Home equity loans and lines of credit | — |
| | — |
| | 77 |
| | 77 |
|
| Other consumer loans | 18 |
| | — |
| | — |
| | 18 |
|
| Owner occupied commercial real estate | 1,175 |
| | — |
| | — |
| | 1,175 |
|
| Commercial and industrial | | | | | | | |
| Other commercial and industrial | 440 |
| | — |
| | 45 |
| | 485 |
|
| Commercial lending subsidiaries | 1,278 |
| | — |
| | — |
| | 1,278 |
|
| Total Recoveries | 2,911 |
| | — |
| | 122 |
| | 3,033 |
|
| Net Charge-offs: | (12,837 | ) | | — |
| | (964 | ) | | (13,801 | ) |
| Balance at September 30, 2016 | $ | 151,691 |
| | $ | — |
| | $ | 2,785 |
| | $ | 154,476 |
|
The following tables showtable shows the distribution of the ALLL, broken out between covered and non-covered loans,ACL at the dates indicated (dollars in thousands): |
| | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | | | Covered Loans | | | | |
| | Non-Covered Loans | | ACI Loans | | Non-ACI Loans | | Total | | %(1) |
| Residential and other consumer: | |
| | |
| | |
| | |
| | |
|
| 1 - 4 single family residential | $ | 9,275 |
| | $ | — |
| | $ | 393 |
| | $ | 9,668 |
| | 21.7 | % |
| Home equity loans and lines of credit | 7 |
| | 1,812 |
| | 2,643 |
| | 4,462 |
| | 0.2 | % |
| Other consumer loans | 90 |
| | — |
| | — |
| | 90 |
| | 0.1 | % |
| | 9,372 |
| | 1,812 |
| | 3,036 |
| | 14,220 |
| | 22.0 | % |
| Commercial: | | | | | | | | | |
| Multi-family | 21,706 |
| | — |
| | — |
| | 21,706 |
| | 16.3 | % |
| Non-owner occupied commercial real estate | 39,474 |
| | — |
| | — |
| | 39,474 |
| | 20.4 | % |
| Construction and land | 2,815 |
| | — |
| | — |
| | 2,815 |
| | 1.3 | % |
| Owner occupied commercial real estate | 15,146 |
| | — |
| | — |
| | 15,146 |
| | 9.5 | % |
| Commercial and industrial | | | | | | | | | |
| Taxi medallion loans | 13,117 |
| | — |
| | — |
| | 13,117 |
| | 0.8 | % |
| Other commercial and industrial | 37,239 |
| | — |
| | — |
| | 37,239 |
| | 18.2 | % |
| Commercial lending subsidiaries | 9,856 |
| | — |
| | — |
| | 9,856 |
| | 11.5 | % |
| | 139,353 |
| | — |
| | — |
| | 139,353 |
| | 78.0 | % |
| Unallocated | 5,000 |
| | — |
| | — |
| | 5,000 |
| |
|
|
| | $ | 153,725 |
| | $ | 1,812 |
| | $ | 3,036 |
| | $ | 158,573 |
| | 100.0 | % |
|
| | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | | | Covered Loans | | | | |
| | Non-Covered Loans | | ACI Loans | | Non-ACI Loans | | Total | | %(1) |
| Residential and other consumer: | |
| | |
| | |
| | |
| | |
|
| 1 - 4 single family residential | $ | 9,279 |
| | $ | — |
| | $ | 181 |
| | $ | 9,460 |
| | 20.6 | % |
| Home equity loans and lines of credit | 7 |
| | — |
| | 1,919 |
| | 1,926 |
| | 0.3 | % |
| Other consumer loans | 117 |
| | — |
| | — |
| | 117 |
| | 0.1 | % |
| | 9,403 |
| | — |
| | 2,100 |
| | 11,503 |
| | 21.0 | % |
| Commercial: | | | | | | | | | |
| Multi-family | 25,009 |
| | — |
| | — |
| | 25,009 |
| | 19.8 | % |
| Non-owner occupied commercial real estate | 35,604 |
| | — |
| | — |
| | 35,604 |
| | 19.3 | % |
| Construction and land | 2,824 |
| | — |
| | — |
| | 2,824 |
| | 1.6 | % |
| Owner occupied commercial real estate | 11,424 |
| | — |
| | — |
| | 11,424 |
| | 9.0 | % |
| Commercial and industrial | | | | | | | | | |
| Taxi medallion loans | 10,655 |
| | — |
| | — |
| | 10,655 |
| | 0.9 | % |
| Other commercial and industrial | 38,067 |
| | — |
| | — |
| | 38,067 |
| | 16.6 | % |
| Commercial lending subsidiaries | 17,867 |
| | — |
| | — |
| | 17,867 |
| | 11.8 | % |
| | 141,450 |
| | — |
| | — |
| | 141,450 |
| | 79.0 | % |
| | $ | 150,853 |
| | $ | — |
| | $ | 2,100 |
| | $ | 152,953 |
| | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | June 30, 2021 | | March 31, 2021 | | December 31, 2020 |
| | Total | | %(1) | | Total | | %(1) | | Total | | %(1) | | Total | | %(1) |
| Residential and other consumer | $ | 9,496 | | | 34.3 | % | | $ | 11,909 | | | 30.9 | % | | $ | 15,843 | | | 28.1 | % | | $ | 18,719 | | | 26.6 | % |
| | | | | | | | | | | | | | | |
| Multi-family | 4,650 | | | 5.2 | % | | 7,777 | | | 5.5 | % | | 45,757 | | | 6.5 | % | | 39,827 | | | 6.9 | % |
| Non-owner occupied commercial real estate | 24,902 | | | 19.9 | % | | 35,246 | | | 20.7 | % | | 46,915 | | | 20.9 | % | | 61,507 | | | 20.8 | % |
| Construction and land | 1,074 | | | 0.7 | % | | 1,099 | | | 1.0 | % | | 2,467 | | | 1.2 | % | | 3,284 | | | 1.2 | % |
| CRE | 30,626 | | | | | 44,122 | | | | | 95,139 | | | | | 104,618 | | | |
| | | | | | | | | | | | | | | |
| Owner occupied commercial real estate | 24,834 | | | 8.8 | % | | 24,899 | | | 8.6 | % | | 24,445 | | | 8.3 | % | | 28,797 | | | 8.4 | % |
| Commercial and industrial | 76,750 | | | 23.6 | % | | 73,715 | | | 24.9 | % | | 54,151 | | | 26.1 | % | | 62,197 | | | 27.2 | % |
| Pinnacle | 179 | | | 4.1 | % | | 211 | | | 4.6 | % | | 213 | | | 4.7 | % | | 304 | | | 4.6 | % |
| Bridge - franchise finance | 13,580 | | | 1.7 | % | | 15,589 | | | 2.0 | % | | 24,411 | | | 2.2 | % | | 36,331 | | | 2.3 | % |
| Bridge - equipment finance | 4,150 | | | 1.7 | % | | 5,197 | | | 1.8 | % | | 6,732 | | | 2.0 | % | | 6,357 | | | 2.0 | % |
| Commercial | 119,493 | | | | | 119,611 | | | | | 109,952 | | | | | 133,986 | | | |
| $ | 159,615 | | | 100.0 | % | | $ | 175,642 | | | 100.0 | % | | $ | 220,934 | | | 100.0 | % | | $ | 257,323 | | | 100.0 | % |
| |
(1) | Represents percentage of loans receivable in each category to total loans receivable. |
(1)Represents percentage of loans receivable in each category to total loans receivable.
The ALLLfollowing table presents the ACL as a percentage of loans at September 30, 2017 included $5.4 million relatedthe dates indicated:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | June 30, 2021 | | March 31, 2021 | | December 31, 2020 |
| | | | | | | |
| Residential and other consumer | 0.12 | % | | 0.17 | % | | 0.24 | % | | 0.29 | % |
| Commercial: | | | | | | | |
| Commercial real estate | 0.52 | % | | 0.71 | % | | 1.43 | % | | 1.52 | % |
| Commercial and industrial | 1.37 | % | | 1.28 | % | | 0.98 | % | | 1.07 | % |
| Pinnacle | 0.02 | % | | 0.02 | % | | 0.02 | % | | 0.03 | % |
| Bridge - franchise finance | 3.43 | % | | 3.37 | % | | 4.66 | % | | 6.61 | % |
| Bridge - equipment finance | 1.09 | % | | 1.23 | % | | 1.46 | % | | 1.34 | % |
| Total commercial | 1.00 | % | | 1.04 | % | | 1.22 | % | | 1.36 | % |
| 0.70 | % | | 0.77 | % | | 0.95 | % | | 1.08 | % |
Significant offsetting factors contributing to the impact of Hurricanes Irma and Harvey. The ALLL includes $0.4 million related to loans that were downgradedchange in the ACL during the three months ended September 30, 2017 as a result of2021 are depicted in the hurricanes and a $5.0 million unallocated qualitative allowance.chart below (in millions):
Excluding
Changes in the $5.0 million unallocated qualitative allowance relative toACL during the impact of the hurricanes, the balance of the ALLL for non-covered loans atthree months ended September 30, 2017 decreased slightly as compared to December 31, 2016. Decreases in quantitative loss factors applied to the majority of the commercial loan portfolio and net decreases in qualitative factors were substantially offset by the impact of the growth of the loan portfolio and an increase in reserves for criticized and classified loans, including taxi medallion loans. Factors influencing the change2021
As depicted in the ALLL relatedchart above, the decrease in the ACL from June 30, 2021 to specific loan types at September 30, 2017 as compared to December 31, 2016, include:
The ALLL related to non-covered 1-4 single family residential loans did not change significantly. Increases related to growth2021 resulted from (i) changes in the corresponding portfolio were substantially offset by declines in both the applicable quantitative historical loss rate and qualitative reserves.
A decrease of $3.3 million for multi-family loans primarily reflects decreases in quantitative loss factors,composition including the decline in commercial loan balances and shift into residential as a percentage of the corresponding portfolio, and(ii) a net decreasereduction in certain qualitative loss factors offsetrelated to borrowers impacted by COVID-19, (iii) net charge-offs and to a lesser extent, (iv) the economic forecast and (v) portfolio migration, including changes in part by an increasespecific reserves. Improved borrower financial performance as reflected in the reduction in criticized and classified loans.assets also contributed to the reduction in the ACL.
An increaseThe ACL for residential and other consumer loans decreased by $2.4 million during the three months ended September 30, 2021, from 0.17% to 0.12% of $3.9 million for non-owner occupied commercial real estate loansloans. This decrease was primarily driven by lower forecasted mortgage rates and the growthimpact of loans that rolled off of deferral and resumed regular payments. The ACL for the correspondingCRE portfolio sub-segment, including multi-
family, non-owner occupied CRE and an increaseconstruction and land, decreased by $13.5 million during the three months ended September 30, 2021, from 0.71% to 0.52% of loans. The decrease in the ACL for CRE related to (i) changes in portfolio composition resulting from payoffs and improvements in the credit quality of existing loans as reflected in the reduction in criticized and classified loans partially offset by(ii) a decrease in quantitative loss factors.
An increase of $3.7 million for owner occupied commercial real estate loans was primarily attributable to increases in specific reserves for impaired loans and to a lesser extent, the growth of the corresponding portfolio.
An increase of $2.5 million for taxi medallion loans reflects the specific reserves recognized at September 30, 2017, as discussed previously. Increases in reserves were limited due to the level of charge-offs recognized during the nine months ended September 30, 2017.
A decrease of $0.8 million for other commercial and industrial loans was primarily driven by a decrease in reserves for impaired and other classified loans, primarily due to net charge-offs, offset by growth in the corresponding portfolio.
A $8.0 million decrease for commercial lending subsidiaries primarily reflects decreases in quantitative loss factors for the municipal finance receivables and decreasesreduction in qualitative loss factors related to the commercial property forecast for hotels now in management's judgment being appropriately captured in the quantitative estimate, (iii) improvements in the commercial property forecasts, particularly vacancy rates in the multi-family and retail segments, and (iv) improvements in the economic forecast related to unemployment and long-term interest rates.
Changes in the ACL during the three months ended June 30, 2021:
The decrease in the ACL from March 31, 2021 to June 30, 2021 for the majority of portfolio sub-segments resulted largely from an improving economic forecast, improvement in borrower financial results as reflected in the reduction in criticized and classified loans, changes in portfolio composition including the decline in commercial loan balances, a reduction in certain qualitative loss factors and charge-offs.
Changes in the ACL during the three months ended March 31, 2021:
The decrease in the ACL from December 31, 2020 to March 31, 2021 for the majority of portfolio sub-segments resulted largely from an improving economic forecast. The decrease was primarily related to the pass rated portion of the portfolio.
The estimate of the ACL at September 30, 2021was informed by economic scenarios published in September 2021, economic information provided by additional sources, information about borrower financial condition and collateral values, data reflecting the impact of recent events on individual borrowers and other relevant information. Some of the assumptions and data points informing the reasonable and supportable economic forecast used in estimating the ACL at September 30, 2021 included:
•Labor market assumptions, which reflected national unemployment at 4.5% for the fourth quarter of 2021, steadily declining to normalized levels of full employment of 3.4% through the end of 2022;
•Annualized growth trendsin GDP supported by fiscal stimulus at 7.5% for the fourth quarter of 2021, normalizing to an average of 2.5% through 2022;
•VIX trending at stabilized levels through the forecast horizon;
•S&P 500 averaging near 4,000 through the reasonable and credit concentrations.supportable forecast period;
•COVID-19 assumptions reflecting that infections abate by November 2021; and
•Increases in HPI for the remainder of 2021 and through 2022 amidst housing supply and demand gaps.
Additional variables and assumptions not explicitly stated above may also contribute to the overall impact the forecast has on the ACL estimate. Furthermore, while the variables presented above are at the national level, many of the variables are regionalized at the market and submarket level in the models.
For additional information about the ALLL,ACL, see Note 4 to the consolidated financial statements.
Deposits
Average balances and rates paid on deposits were as follows for the periods indicated (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2021 | | 2020 | | 2021 | | 2020 |
| | Average
Balance | | Average
Rate Paid | | Average
Balance | | Average
Rate Paid | | Average
Balance | | Average
Rate Paid | | Average
Balance | | Average
Rate Paid |
| Demand deposits: | | | | | | | | | | | | | | | |
| Non-interest bearing | $ | 8,912,960 | | | — | % | | $ | 6,186,718 | | | — | % | | $ | 8,194,570 | | | — | % | | $ | 5,292,702 | | | — | % |
| Interest bearing | 3,038,038 | | | 0.22 | % | | 2,800,421 | | | 0.59 | % | | 3,017,301 | | | 0.31 | % | | 2,475,388 | | | 0.85 | % |
| Savings and money market | 13,554,572 | | | 0.29 | % | | 10,664,462 | | | 0.59 | % | | 13,299,066 | | | 0.34 | % | | 10,509,559 | | | 0.90 | % |
| Time | 2,866,746 | | | 0.35 | % | | 6,519,852 | | | 1.08 | % | | 3,520,674 | | | 0.51 | % | | 7,040,101 | | | 1.59 | % |
| $ | 28,372,316 | | | 0.20 | % | | $ | 26,171,453 | | | 0.57 | % | | $ | 28,031,611 | | | 0.26 | % | | $ | 25,317,750 | | | 0.90 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| �� | 2017 | | 2016 | | 2017 | | 2016 |
| | Average
Balance | | Average
Rate Paid | | Average
Balance | | Average
Rate Paid | | Average
Balance | | Average Rate Paid | | Average
Balance | | Average
Rate Paid |
| Demand deposits: | | | | | | | | | |
| | |
| | |
| | |
|
| Non-interest bearing | $ | 3,036,046 |
| | — | % | | $ | 2,981,017 |
| | — | % | | $ | 3,034,682 |
| | — | % | | $ | 2,944,861 |
| | — | % |
| Interest bearing | 1,590,206 |
| | 0.85 | % | | 1,437,677 |
| | 0.62 | % | | 1,564,229 |
| | 0.76 | % | | 1,341,218 |
| | 0.61 | % |
| Money market | 9,590,333 |
| | 0.90 | % | | 7,948,299 |
| | 0.64 | % | | 9,187,225 |
| | 0.80 | % | | 7,778,761 |
| | 0.63 | % |
| Savings | 378,179 |
| | 0.24 | % | | 400,982 |
| | 0.22 | % | | 370,682 |
| | 0.19 | % | | 424,915 |
| | 0.24 | % |
| Time | 6,290,056 |
| | 1.30 | % | | 5,567,909 |
| | 1.13 | % | | 5,988,433 |
| | 1.24 | % | | 5,177,191 |
| | 1.11 | % |
| | $ | 20,884,820 |
| | 0.87 | % | | $ | 18,335,884 |
| | 0.67 | % | | $ | 20,145,251 |
| | 0.80 | % | | $ | 17,666,946 |
| | 0.65 | % |
TotalThe estimated amount of uninsured deposits at September 30, 20172021 and December 31, 2016 included $2.32020 was $19.7 billion and $1.9$17.4 billion, respectively,respectively. Time deposit accounts with balances of brokered deposits.
$250,000 or more totaled $712 million and $1.1 billion at September 30, 2021 and December 31, 2020, respectively. The following table shows scheduled maturities of certificates of deposit with denominations greater than or equal to $100,000uninsured time deposits as of September 30, 20172021 (in thousands):
| | | | | |
| Three months or less | $ | 243,604 | |
| Over three through six months | 275,834 | |
| Over six through twelve months | 266,940 | |
| Over twelve months | 24,352 | |
| $ | 810,729 | |
|
| | | |
| Three months or less | $ | 741,235 |
|
| Over three through six months | 1,037,771 |
|
| Over six through twelve months | 1,351,330 |
|
| Over twelve months | 931,302 |
|
| | $ | 4,061,638 |
|
FHLB Advances, Notes and Other Borrowings
In addition to deposits, we utilize FHLB advances to fund growth in interest earning assets;as a funding source; the advances provide us with additional flexibility in managing both term and cost of funding.funding and in managing interest rate risk. FHLB advances are secured by FHLB stock, qualifying residential first mortgage and commercial real estate and home equity loans, and MBS. At September 30, 2017 and December 31, 2016,The following table presents information about the contractual balance of outstanding FHLB advances totaled $4.9 billion and $5.2 billion, respectively.
The contractual balanceas of FHLB advances outstanding at September 30, 2017 is scheduled to mature as follows (in2021 (dollars in thousands):
|
| | | |
| Maturing in: | |
|
| 2017—One month or less | $ | 2,395,000 |
|
| 2017—Over one month | 855,000 |
|
| 2018 | 1,396,000 |
|
| 2019 | 100,000 |
|
| 2020 | 125,000 |
|
| Carrying value | $ | 4,871,000 |
|
| | | | | | | |
| Maturing in: | | | |
| 2021 - One month or less | $ | 1,080,000 | | | |
| 2021 - Over one month | 1,251,000 | | | |
| | | |
| | | |
| 2024 | 100,000 | | | |
| | | |
| Total contractual balance outstanding | 2,431,000 | | | |
| Cumulative fair value hedging adjustments | 14 | | | |
| Carrying Value | $ | 2,431,014 | | | |
The table above reflects contractual maturities of outstanding advances and does not incorporate the impact that interest rate swaps designated as cash flow and fair value hedges have on the duration of borrowings.
The table below presents information about outstanding interest rate swaps hedging the variability of interest cash flows on or the fair value of FHLB advances included in the table above, as of September 30, 2021 (dollars in thousands):
| | | | | | | | | | | |
| Notional Amount | | Weighted Average Rate |
| Cash flow hedges maturing in: | | | |
| 2021 | $ | 600,000 | | | 2.40 | % |
| 2022 | 210,000 | | | 2.48 | % |
| 2023 | 255,000 | | | 2.35 | % |
| 2024 | 110,000 | | | 2.54 | % |
| 2025 | 175,000 | | | 2.39 | % |
| Thereafter | 556,000 | | | 2.90 | % |
| Cash flow hedges | 1,906,000 | | | 2.55 | % |
| Fair value hedges maturing in 2021 | 25,000 | | | |
| Total interest rate swaps designated as cash flow or fair value hedges | $ | 1,931,000 | | | |
See Note 76 to the consolidated financial statements for more information about derivative instruments.
Outstanding senior notes payable and other borrowings consisted of the following at the dates indicated (in thousands):
| | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 | |
| Senior notes: | | | | |
| Principal amount of 4.875% senior notes maturing on November 17, 2025 | $ | 400,000 | | | $ | 400,000 | | |
| Unamortized discount and debt issuance costs | (3,597) | | | (4,174) | | |
| 396,403 | | | 395,826 | | |
| Subordinated notes: | | | | |
| Principal amount of 5.125% subordinated notes maturing on June 11, 2030 | 300,000 | | | 300,000 | | |
| Unamortized discount and debt issuance costs | (5,526) | | | (5,894) | | |
| 294,474 | | | 294,106 | | |
| Total notes | 690,877 | | | 689,932 | | |
| Finance leases | 30,650 | | | 32,563 | | |
| Notes and other borrowings | $ | 721,527 | | | $ | 722,495 | | |
| | | | |
| | | | |
| | | | |
| | | | |
|
| | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| Senior notes | $ | 393,564 |
| | $ | 393,092 |
|
| Capital lease obligations | 9,264 |
| | 9,717 |
|
| | $ | 402,828 |
| | $ | 402,809 |
|
Senior notes have a face amount of $400 million, a fixed coupon rate of 4.875% and mature on November 17, 2025.
Capital Resources
Pursuant to the FDIA, the federal banking agencies have adopted regulations setting forth a five-tier system for measuring the capital adequacy of the financial institutions they supervise. At September 30, 20172021 and December 31, 2016, BankUnited2020, the Company and the CompanyBank had capital levels that exceeded both the regulatory well-capitalized guidelines and all internal capital ratio targets.
Stockholders' equity increased to $2.6 billion at
The following table provides information regarding regulatory capital for the Company and the Bank as of September 30, 2017, an increase2021 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Actual | | Required to be
Considered Well
Capitalized | | Required to be
Considered
Adequately
Capitalized | | Required to be Considered
Adequately
Capitalized Including Capital Conservation Buffer |
| | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
| BankUnited, Inc.: | | | | | | | | | | | | | | | |
| Tier 1 leverage | $ | 3,076,715 | | | 8.63 | % | | N/A (1) | | N/A (1) | | $ | 1,426,054 | | | 4.00 | % | | N/A (1) | | N/A (1) |
| CET1 risk-based capital | $ | 3,076,715 | | | 13.40 | % | | $ | 1,492,067 | | | 6.50 | % | | $ | 1,032,969 | | | 4.50 | % | | $ | 1,606,841 | | | 7.00 | % |
| Tier 1 risk-based capital | $ | 3,076,715 | | | 13.40 | % | | $ | 1,836,390 | | | 8.00 | % | | $ | 1,377,292 | | | 6.00 | % | | $ | 1,951,164 | | | 8.50 | % |
| Total risk-based capital | $ | 3,501,940 | | | 15.26 | % | | $ | 2,295,487 | | | 10.00 | % | | $ | 1,836,390 | | | 8.00 | % | | $ | 2,410,262 | | | 10.50 | % |
| BankUnited: | | | | | | | | | | | | | | | |
| Tier 1 leverage | $ | 3,394,817 | | | 9.56 | % | | $ | 1,775,138 | | | 5.00 | % | | $ | 1,420,111 | | | 4.00 | % | | N/A | | N/A |
| CET1 risk-based capital | $ | 3,394,817 | | | 14.87 | % | | $ | 1,483,697 | | | 6.50 | % | | $ | 1,027,175 | | | 4.50 | % | | $ | 1,597,827 | | | 7.00 | % |
| Tier 1 risk-based capital | $ | 3,394,817 | | | 14.87 | % | | $ | 1,826,088 | | | 8.00 | % | | $ | 1,369,566 | | | 6.00 | % | | $ | 1,940,219 | | | 8.50 | % |
| Total risk-based capital | $ | 3,520,042 | | | 15.42 | % | | $ | 2,282,610 | | | 10.00 | % | | $ | 1,826,088 | | | 8.00 | % | | $ | 2,396,741 | | | 10.50 | % |
(1) There is no Tier 1 leverage ratio component in the definition of $205 million, or 8.5%,a well-capitalized bank holding company.
Upon adoption of ASU 2016-13 on January 1, 2020, the Company elected the option to temporarily delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period.
We believe we are well positioned, from a capital perspective, to withstand a severe downturn in the economy. In light of the COVID-19 crisis, we have enhanced our stress testing framework. We have increased both the frequency of stress testing, which is performed at least quarterly, and the spectrum of scenarios utilized. One exercise we completed was to stress our December 31, 2016, due primarily to2020 loan portfolio using the retention2021 DFAST severely adverse scenario. The results of earnings andthis stress test projected regulatory capital ratios in excess of all well capitalized thresholds in the exercise of stock options resulting in proceeds of $61.5 million during the period.
Since our formation, stockholders' equity has been impacted primarily by the retention of earnings, and to a lesser extent, proceeds from the issuance of common shares and changes in unrealized gains and losses, net of taxes, on investment securities
available for sale and cash flow hedges. Our rate of earnings retention is derived by dividing undistributed earnings per common share by earnings per common share. Our retention ratio was 66.0% and 64.9% for the three and nine months ended September 30, 2017, respectively, compared to 55.7% and 58.4% for the three and nine months ended September 30, 2016, respectively. We retain a high percentage of our earnings to support our planned growth.stress scenario.
We filed ahave an active shelf registration statement on file with the SEC in October 2015 that allows the Company to periodically offer and sell in one or more offerings, individually or in any combination, our common stock, preferred stock and other non-equity securities. The shelf registration provides us with flexibility in issuing capital instruments and enables us to more readily access the capital markets as needed to pursue future growth opportunities and to ensure continued compliance with regulatory capital requirements. Our ability to issue securities pursuant to the shelf registration is subject to market conditions.
The following table provides information regarding regulatory capital for the Company and the Bank as of September 30, 2017 (dollars in thousands):
|
| | | | | | | | | | | | | | | | | | | | |
| | Actual | | Required to be Considered Well Capitalized | | Required to be Considered Adequately Capitalized |
| | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
| BankUnited, Inc.: | |
| | |
| | |
| | |
| | |
| | |
|
| Tier 1 leverage | $ | 2,491,853 |
| | 8.56 | % | | N/A (1) |
| | N/A (1) |
| | $ | 1,164,462 |
| | 4.00 | % |
| CET1 risk-based capital | $ | 2,491,853 |
| | 11.91 | % | | $ | 1,359,799 |
| | 6.50 | % | | $ | 941,399 |
| | 4.50 | % |
| Tier 1 risk-based capital | $ | 2,491,853 |
| | 11.91 | % | | $ | 1,673,599 |
| | 8.00 | % | | $ | 1,255,199 |
| | 6.00 | % |
| Total risk based capital | $ | 2,657,784 |
| | 12.70 | % | | $ | 2,091,998 |
| | 10.00 | % | | $ | 1,673,599 |
| | 8.00 | % |
| BankUnited: | |
| | |
| | |
| | |
| | |
| | |
|
| Tier 1 leverage | $ | 2,706,006 |
| | 9.32 | % | | $ | 1,451,814 |
| | 5.00 | % | | $ | 1,161,451 |
| | 4.00 | % |
| CET1 risk-based capital | $ | 2,706,006 |
| | 12.98 | % | | $ | 1,354,884 |
| | 6.50 | % | | $ | 937,997 |
| | 4.50 | % |
| Tier 1 risk-based capital | $ | 2,706,006 |
| | 12.98 | % | | $ | 1,667,550 |
| | 8.00 | % | | $ | 1,250,662 |
| | 6.00 | % |
| Total risk based capital | $ | 2,869,850 |
| | 13.77 | % | | $ | 2,084,437 |
| | 10.00 | % | | $ | 1,667,550 |
| | 8.00 | % |
(1) There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.Levels of capital required to be well capitalized or adequately capitalized as reflected above do not include a capital conservation buffer that is being phased in beginning in 2016. When fully phased in on January 1, 2019, the Bank and the Company will have to maintain this capital conservation buffer composed of CET1 capital equal to 2.50% of risk-weighted assets above the amounts required to be adequately capitalized, as reflected above, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Capital ratios required to be considered well-capitalized exceed the ratios required under the capital conservation buffer requirement at September 30, 2017.
Liquidity
Liquidity involves our ability to generate adequate funds to support planned interest earning asset growth, meet deposit withdrawal and credit line usage requests, maintain reserve requirements, conduct routine operations, pay dividends, service outstanding debt and meet other contractual obligations.
PrimaryBankUnited's ongoing liquidity needs have been and continue to be met primarily by cash flows from operations, deposit growth, the investment portfolio and FHLB advances. For the nine months ended September 30, 2021 and 2020 net cash provided by operating activities was $953 million and $635 million, respectively.
Available liquidity includes cash, borrowing capacity at the Federal Home Loan Bank of Atlanta and the Federal Reserve Discount Window, Federal Funds lines of credit and unpledged agency securities. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash generated by the repayment and resolution of covered loans, cash payments receivedflow from the FDIC pursuant to the Single Family Shared-Loss Agreement, deposit growth, the available for saleBank's amortizing securities portfolio and FHLB advances.
For the nine months ended September 30, 2017loan portfolios, and 2016, net cash provided by operating activities was $231.2 million and $227.3 million, respectively. Accretion on ACI loans, which is reflected as a non-cash reduction in net income to arrive at operating cash flows, totaled $226.3 million, and $228.5 million for the nine months ended September 30, 2017 and 2016, respectively. Accretable yield on ACI loans represents the excess of expected future cash flows over the carrying amount of the loans, and is recognized as interest income over the expected lives of the loans. Amounts recorded as accretion are realized in cash as individual loans are paid down or otherwise resolved; however, the timing of cash realization may differ from the timing of income recognition. These cash flows from the repayment or resolution of covered loans, inclusive of amounts that have been accreted through earnings over time, are recognized as cash flows from investing activities in the consolidated statements of cash flows upon receipt. Cash payments from the FDIC in the form of reimbursements of losses related to the
covered loans under the Single Family Shared-Loss Agreement are also characterized as investing cash flows. Cash generated by the repayment and resolution of covered loans and reimbursements from the FDIC totaled $348.5 million and $430.3 million for the nine months ended September 30, 2017 and 2016, respectively. Both cash generated by the repayment and resolution of covered loans and cash payments received from the FDIC have been and are expected to continue to be, although to a lesser extent in the future, consistent and relatively predictable sources of liquidity.
In addition to cash provided by operating activities, the repayment and resolution of covered loans and payments under the Single Family Shared-Loss Agreement from the FDIC, BankUnited’s liquidity needs, particularly liquidity to fund growth of interest earning assets, have been and continue to be met by deposit growth and FHLB advances. The investment portfolio also provides a source of liquidity.
BankUnited has access to additional liquidity through FHLB advances, other collateralized borrowings, wholesale deposits or the sale of available for saleinvestment securities. At September 30, 2017, unencumbered investment securities available for sale totaled $4.3 billion. At September 30, 2017, BankUnited had available borrowing capacity at the FHLB of $3.8 billion, unused borrowing capacity at the FRB of $544 million and unused Federal funds lines of credit totaling $70 million. Management also has the ability to exert substantial control over the rate and timing of growth of the non-covered loan portfolio,production, and resultant requirements for liquidity to fund new loans.
Continued runoff Since the onset of the covered loan portfolio and FDIC indemnification asset andCOVID-19 pandemic, we have not experienced unusual deposit outflows or volatility; we have, in fact experienced growth of deposits and the non-covered loan portfolio are the most significant trends expected to impact the Bank’s liquidity in the near term.on-balance sheet liquidity.
The ALCO policy has established severalestablishes limits or operating thresholds for a number of measures of liquidity which are typically monitored monthly by the ALCO and quarterly by the Board of Directors. One primary measure of liquidity monitored by management isThese measures include but are not limited to the 30 day total liquidity ratio defined as (a) the sum of cash and cash equivalents, pledgeable securities and a measure of funds expected to be generated by operations over the next 30 days; divided by (b) the sum of potential deposit runoff, liabilities maturing within the 30 day time frame and a measure of funds expected to be used in operations over the next 30 days. BankUnited’s liquidity is considered acceptable if the 30 day total liquidity ratio exceeds 100%. At September 30, 2017, BankUnited’s 30 day total liquidity ratio was 172%. Management also monitors a one year liquidity ratio, defined as (a) cash and cash equivalents, pledgeable securities, unused borrowing capacity at the FHLB, and loans and non-agency securities maturing within one year; divided by (b) forecasted deposit outflows and borrowings maturing within one year. Forecasted deposit outflows, excluding certificate of deposits, are based on runoff rates derived from the most recent external core deposit analysis obtained by the Company. This ratio allows management to monitor liquidity over a longer time horizon. The acceptable threshold established by the ALCO for this liquidity measure is 100%. At September 30, 2017, BankUnited’s one year liquidity ratio was 158%. Additional measures of liquidity regularly monitored by the ALCO include the ratio of wholesale funding to total assets, a measure of available liquidity to volatile liabilities, a liquidity stress test coverage ratio, a 30-day total liquidity ratio, a one-year liquidity ratio, a wholesale funding ratio, concentrations of large deposits, a measure of on-balance sheet available liquidity and
the ratio of brokerednon-interest bearing deposits to total deposits.deposits, which is reflective of the quality and cost, rather than the quantity, of available liquidity. At September 30, 2017,2021, BankUnited was operating within acceptable thresholds and limits establishedas prescribed by the ALCO policy.
The ALCO policy stipulates that BankUnited’s liquidity is considered within policy limits or thresholds if the available liquidity/volatile liabilities ratio, 30-day total liquidity ratio and one-year liquidity ratios exceed 100%. At September 30, 2021, BankUnited’s available liquidity/volatile liabilities ratio was 317%, the 30-day total liquidity ratio was 259% .and the one-year liquidity ratio was 396%. The ALCO policy also prescribes that the liquidity stress test coverage ratio exceed 100%; at September 30, 2021, that ratio was 211%. The Company has a comprehensive contingency liquidity funding plan and conducts a quarterly liquidity stress test, the results of which are reported to the risk committee of the Board of Directors for each of these measures.Directors.
As a holding company, BankUnited, Inc. is a corporation separate and apart from its banking subsidiary, and therefore, provides for its own liquidity. BankUnited, Inc.’s main sources of funds include management fees and dividends from the Bank, access to capital markets and to a lesser extent, its own available for sale securities portfolio. There are regulatory limitations that may affect the ability of the Bank to pay dividends to BankUnited, Inc. Management believes that such limitations will not impact our ability to meet our ongoing near-term cash obligations.
We expect that our liquidity requirements will continue to be satisfied over the next 12 months through the sources of funds described above.
Interest Rate Risk
TheA principal component of the Company’s risk of loss arising from adverse changes in the fair value of financial instruments, or market risk, is interest rate risk, including the risk that assets and liabilities with similar re-pricing characteristics may not reprice at the same time or to the same degree. A primary objective of the Company’s asset/liability management activities is to maximize net interest income, while maintaining acceptable levels of interest rate risk. The ALCO is responsible for establishing policies to limit exposure to interest rate risk, and to ensure procedures are established to monitor compliance with these policies. The guidelinesthresholds established by the ALCO are approved at least annually by the Board of Directors.Directors or its Risk Committee.
Management believes that the simulation of net interest income in different interest rate environments provides the most meaningful measure of interest rate risk. Income simulation analysis is designed to capture not only the potential of all assets and liabilities to mature or reprice, but also the probability that they will do so. Income simulation also attends to the relative interest rate sensitivities of these items, and projects their behavior over an extended period of time. Finally, income simulation
permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also of proposed strategies for responding to them.
The income simulation model analyzes interest rate sensitivity by projecting net interest income over twelve and twenty-four month periods in a most likely rate scenario based on consensus forward interest rate curves versus net interest income in alternative rate scenarios. Simulations are generated based on both static and dynamic balance sheet assumptions. Management continually reviews and refines its interest rate risk management process in response to changes in the interest rate environment, the economic climate and economic climate.observed customer behavior. Currently, our model projects a down 100, plus 100, plus 200 and plus 300 basis point change with rates increasing by the magnitude of theinterest rate ramp evenly over the next 12 months as well as flattening yield curve scenarios andrisk policy framework is based on modeling instantaneous rate shocks of downplus and minus 100, plus 100, plus 200, 300 and plus 300400 basis points.point shifts. We also model a variety of yield curve slope and dynamic balance sheet scenarios. We continually evaluate the scenarios being modeled with a view toward adapting them to changing economic conditions, expectations and trends.
The Company’s ALCO policy provides that net interest income sensitivity will be considered acceptable if decreases in forecast net interest income based on a dynamic forecasted balance sheet, in specified parallel rate shock scenarios, generally by policy plus and minus 100, 200, 300 and 400 basis points, are within specified percentages of forecast net interest income in the most likely rate scenario over the next twelve months and in the second year. At September 30, 2021, the most likely rate scenario assumed that all indices are floored at 0%. We did not apply the falling rate scenarios at September 30, 2021 due to the low level of current interest rates. The following table illustrates the acceptable limits as defined bythresholds set forth in the ALCO policy and the impact on forecasted net interest income of down 100, plus 100, plus 200 and plus 300 basis point rate shockin the indicated simulated scenarios at September 30, 20172021 and December 31, 2016:2020:
| | | | | | | | | | | | Down 100 | | Plus 100 | | Plus 200 | | Plus 300 | | Plus 400 |
| | Down 100 | | Plus 100 | | Plus 200 | | Plus 300 | |
| Policy Limits: | | | | | | | | |
| Policy Thresholds: | | Policy Thresholds: | | | | | | | | | | |
| In year 1 | (6.0 | )% | | (6.0 | )% | | (10.0 | )% | | (14.0 | )% | In year 1 | | (6.0) | % | | (6.0) | % | | (10.0) | % | | (14.0) | % | | (18.0) | % |
| In year 2 | (9.0 | )% | | (9.0 | )% | | (13.0 | )% | | (17.0 | )% | In year 2 | | (9.0) | % | | (9.0) | % | | (13.0) | % | | (17.0) | % | | (21.0) | % |
| Model Results at September 30, 2017 - increase (decrease): | | | | | | | | |
| Model Results at September 30, 2021 - increase: | | Model Results at September 30, 2021 - increase: | | |
| In year 1 | (0.4 | )% | | (0.2 | )% | | (0.6 | )% | | (1.2 | )% | In year 1 | | N/A | | 4.4 | % | | 6.7 | % | | 7.8 | % | | 8.3 | % |
| In year 2 | (3.2 | )% | | 1.7 | % | | 3.0 | % | | 4.2 | % | In year 2 | | N/A | | 8.9 | % | | 15.6 | % | | 21.4 | % | | 26.3 | % |
| Model Results at December 31, 2016 - increase (decrease): | | | | | | | | |
| Model Results at December 31, 2020 - increase: | | Model Results at December 31, 2020 - increase: | | |
| In year 1 | (2.0 | )% | | 1.5 | % | | 2.8 | % | | 3.4 | % | In year 1 | | N/A | | 2.9 | % | | 3.9 | % | | 3.2 | % | | 1.9 | % |
| In year 2 | (3.7 | )% | | 2.6 | % | | 4.6 | % | | 6.6 | % | In year 2 | | N/A | | 5.0 | % | | 7.8 | % | | 9.0 | % | | 9.5 | % |
Management also simulates changes in EVE in various interest rate environments. The ALCO policy has established parameters of acceptable risk that are defined in terms of the percentage change in EVE from a base scenario under sixeight rate scenarios, derived by implementing immediate parallel movements of plus and minusdown 100, 200, 300 and 300400 basis points from current rates. We did not simulate decreases in interest rates greater than 100 basis points at September 30, 20172021 due to the currentcurrently low rate environment.level of market interest rates. The parametersfollowing table illustrates the acceptable thresholds as established by the ALCO stipulate thatand the modeled declinechange in EVE is considered acceptable ifin the decline is less than 9%, 18% and 27% in plus or minus 100, plus or minus 200 and plus or minus 300 basis pointindicated scenarios respectively. As ofat September 30, 2017, our simulation for the Company indicated percentage changes from base EVE of 1.7%, (3.6)%, (7.9)%2021 and (12.7)% in down 100, plus 100, plus 200 and plus 300 basis point scenarios, respectively.December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Down 100 | | Plus 100 | | Plus 200 | | Plus 300 | | Plus 400 |
| Policy Thresholds | | | (9.0) | % | | (9.0) | % | | (18.0) | % | | (27.0) | % | | (36.0) | % |
| Model Results at September 30, 2021 - increase (decrease): | | | N/A | | 2.4 | % | | 2.2 | % | | 1.2 | % | | (0.6) | % |
| Model Results at December 31, 2020 - increase (decrease): | | | N/A | | 0.8 | % | | (2.0) | % | | (6.1) | % | | (10.0) | % |
These measures fall within an acceptable level of interest rate risk per the policiesthresholds established byin the ALCO and the Board of Directors. In the event the models indicate an unacceptable level of risk, the Company could undertake a number of actions that would reduce this risk, including the sale or re-positioning of a portion of its available for sale investment portfolio, restructuring of borrowings, or the use of derivatives such as interest rate swaps and caps.policy.
Many assumptions were used by the Company to calculate the impact of changes in interest rates, including the change in rates. Actual results may not be similar to the Company’s projections due to several factors including the timing and frequency of rate changes, market conditions, changes in depositor behavior and loan prepayment speeds and the shape of the yield curve. Actual results may also differ due to the Company’s actions, if any, in response to changing rates and conditions.
Derivative Financial Instruments
Interest rate swaps and caps designated as cash flow or fair value hedging instruments are one of the tools we use to manage interest rate risk. These derivative instruments are used to mitigate exposure to changes in interest ratescash flows on variable rate borrowings suchand to changes in the fair value of fixed rate borrowings, in each case caused by fluctuations in benchmark interest rates, as FHLB advances andwell as to manage duration of liabilities. These interest rate swaps are designated as cash flow hedging instruments. The fair value of thesederivative instruments designated as hedges is included in other assets and other liabilities in our consolidated balance sheets and changessheets. Changes in fair value of derivative instruments designated as cash flow hedges are reported in accumulated other comprehensive income. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings, as is the offsetting gain or loss on the hedged item. At September 30, 2017,2021, outstanding interest rate swaps and caps designated as cash flow hedges had an aggregate notional amount of $2.0 billion. The aggregate fair value ofbillion and outstanding interest rate swaps designated as cash flow
fair value hedges included in other assets was $1.1 million andhad an aggregate notional amount of $25 million. At September 30, 2021, the aggregate fair value of interest rate swaps and caps designated as cash flow hedges included in other assets and other liabilities was $0.3 million.$1.3 million and $3.9 million, respectively.
Interest rate swaps and caps not designated as cash flow hedges had an aggregate notional amount of $2.3$3.4 billion at September 30, 2017.2021. The aggregate fair value of these interest rate swaps and caps included in other assets was $27.3$68.5 million and the aggregate fair value included in other liabilities was $26.8$24.4 million. These interest rate swaps and caps were entered into as accommodations to certain of our commercial borrowers. To mitigate interest rate risk associated with these derivatives, the Company enters into offsetting derivative positions with primary dealers.
See Note 76 to the consolidated financial statements for additional information about derivative financial instruments.
Off-Balance Sheet Arrangements
For more information on contractual obligations and commitments, see Note 1110 to the consolidated financial statements the FHLB Advances, Notes and Otherthe Borrowings section of this MD&AManagement's Discussion and Off-Balance Sheet Arrangements in the MD&A of the Company's 2016 Annual Report on Form 10-K.Analysis.
Critical Accounting Policies and Estimates
The Company has made no significant changes in its critical accounting policies and significant estimates from those disclosed in the 2016 Annual Report on Form 10-K.
Non-GAAP Financial Measures
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 basebasis for comparabilitycomparison to other financial institutions.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 September 30, 2017the dates indicated (in thousands except share and per share data):
| | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | | | December 31, 2020 | | | | | | |
| Total stockholders’ equity | $ | 3,096,674 | | | | | $ | 2,983,012 | | | | | | |
| Less: goodwill and other intangible assets | 77,637 | | | | 77,637 | | | | | | |
| Tangible stockholders’ equity | $ | 3,019,037 | | | | | $ | 2,905,375 | | | | | | | |
| | | | | | | | | | | | |
| Common shares issued and outstanding | 90,049,326 | | | | | 93,067,500 | | | | | | |
| | | | | | | | | | | | |
| Book value per common share | $ | 34.39 | | | | | $ | 32.05 | | | | | | | |
| | | | | | | | | | | | |
| Tangible book value per common share | $ | 33.53 | | | | | $ | 31.22 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
|
| | | |
| | |
| Total stockholders’ equity | $ | 2,623,489 |
|
| Less: goodwill and other intangible assets | 77,857 |
|
| Tangible stockholders’ equity | $ | 2,545,632 |
|
| | |
| Common shares issued and outstanding | 106,821,902 |
|
| | |
| Book value per common share | $ | 24.56 |
|
| | |
| Tangible book value per common share | $ | 23.83 |
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See the section entitled “Interest Rate Risk” included in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.
During the quarter ended September 30, 2017,2021, there were no changes in the Company’sCompany's internal control over financial reporting, that materially affected, or are reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting. We have focused on insuring that our technology systems and internal controls continue to operate effectively in a remote or hybrid work environment and have not identified any instances in which our control environment has failed to operate effectively. We are continually monitoring and assessing any impact of the COVID-19 situation on our internal controls to address impacts to their design, implementation and operating effectiveness.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved as plaintiff or defendant in various legal actions arising in the normal course of business. In the opinion of management, based upon currently available information and the advice of legal counsel, the likelihood is remote that the impact of these proceedings, either individually or in the aggregate, would be material to the Company’s consolidated financial position, results of operations or cash flows.
Item 1A. Risk Factors
For a discussion ofThere have been no material changes in the risk factors relating to our business, please refer todisclosed by the factors discussed under “Part I-Item 1A - Risk Factors”Company in our 2016its 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2017, in addition to the following factor.26, 2021.
A significant portion of our loans are to borrowers whose businesses are located in or secured by properties located in the state of Florida, which was impacted by Hurricane Irma. In addition, the Bank has a limited number of customers and collateral properties located in areas of Texas that were impacted by Hurricane Harvey. The effects of Hurricanes Irma and Harvey and other adverse weather events may negatively affect our geographic markets or disrupt our operations, which could have an adverse impact on our results of operations.
Our geographic markets in Florida and other coastal areas are susceptible to severe weather, including hurricanes, flooding and damaging winds. On September 10, 2017, Hurricane Irma made landfall in Florida as a Category 4 hurricane affecting some areas with significant flooding, wind damage and power outages. In addition, the Bank has a limited number of customers and collateral properties located in areas of Texas that were impacted by Hurricane Harvey during August, 2017. Weather events such as Hurricanes Irma and Harvey can disrupt our operations, result in damage to our facilities and negatively affect the local economies in which we operate. These events may lead to a decline in loan originations, reduce or destroy the value of collateral for our loans, particularly real estate, negatively impact the business operations of our customers, and cause an increase in delinquencies, foreclosures and loan losses. These events may also lead to a decline in regional economic conditions and prospects in certain circumstances. Our business or results of operations may be adversely impacted by these and other negative effects of such weather events.
We are currently in the process of assessing the impact of Hurricanes Irma and Harvey on our borrowers’ ability to repay their obligations to the Bank and on the value of underlying collateral properties. Although we currently believe the storms did not materially impact the ability of the substantial majority of our borrowers to repay their loans, our impact assessment is ongoing, including with respect to the impact on our loan originations, the value of properties securing our loans or the performance of our loans, the economic condition of our borrowers and their ability to timely repay their obligations, and the overall impacts on regional economic conditions and our business, operations and growth prospects in the affected market areas. As a result, it is premature to conclude with certainty as to the ultimate impact of these hurricanes on our level of loan losses, our business or the results of our operations. The Bank is generally named as a loss payee on hazard and flood insurance policies covering collateral properties and carries casualty and business interruption insurance. These policies could partially mitigate losses that the Bank may sustain due to the effects of these hurricanes; however, the timing and amount of any proceeds that we may recover from insurance policies is uncertain and may not be sufficient to adequately compensate us for losses that we experience due to these hurricanes and other natural disasters.
Item 6. 2. Unregistered Sales of Equity Securities and Use of Proceeds
Exhibits
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Issuer Purchases of Equity Securities |
| Period | | Total number of shares purchased(1) | | Average price paid per share | | Total number of shares purchased as part of publicly announced plans or programs | | Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs |
| July 1 - July 31, 2021 | | 527,237 | | | $ | 39.60 | | | 527,237 | | | $ | 166,855,206 | |
| August 1 - August 31, 2021 | | 1,264,479 | | | $ | 41.05 | | | 1,264,479 | | | $ | 114,953,959 | |
| September 1 - September 30, 2021 | | 1,394,260 | | | $ | 40.62 | | | 1,394,260 | | | $ | 58,312,230 | |
| Total | | 3,185,976 | | | $ | 40.62 | | | 3,185,976 | | | |
(1) The total number of shares purchased during the periods indicated includes shares purchased as part of a publicly announced program.
(2) On October 20, 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 $58.3 million in remaining authorization as of September 30, 2021, under a share repurchase program previously announced on January 20, 2021. 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. The authorization does not require the Company to acquire any specified number of common shares.
Item 6.
Exhibits
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 8th2nd day of November 2017.
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| /s/ Rajinder P. Singh |
| Rajinder P. Singh |
| Chairman, President and Chief Executive Officer |
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| /s/ Leslie N. Lunak |
| Leslie N. Lunak |
| Chief Financial Officer |
