BankUnited, Inc.’s (BKU) fourth-quarter 2014 earnings came in at 45 cents per share, beating the Zacks Consensus Estimate by a penny. However, earnings came in 10% lower than the year-ago quarter figure of 50 cents.
Results benefited from a rise in net interest income, partially offset by escalating operating expenses, higher provision for loan losses and lower non-interest income. Further, growth in loans and deposits continued to be strong, while credit quality showed mixed figures. However, capital and profitability ratios weakened further.
For 2014, earnings per share came in at $1.95, outpacing the Zacks Consensus Estimate of $1.94. However, the figure was lower than $2.01 earned in 2013.
Net income declined 10.7% year over year to $46.8 million. For 2014, net income was $204.2 million, down 2.2% from 2013.
Performance Details
Total revenue in the reported quarter grew 2.8% year over year to $190.5 million. However, it was below the Zacks Consensus Estimate of $194.0 million.
In 2014, total revenue was $761.3 million, up 6.6% from the prior year, but slightly below the Zacks Consensus Estimate of $762.0 million.
Net interest income increased 4.4% year over year to $171.5 million. However, net interest margin declined 98 basis points (bps) year over year to 4.26%.
Non-interest income fell 9.3% year over year to $19.0 million. The decline was mainly the result of a fall in net loss on FDIC indemnification, lower net gain on sale of loans and other non-interest income. These were, however, partially offset by a rise in service charges and fees, and lease financing.
Non-interest expenses climbed 9.2% year over year to $108.5 million. The rise was primarily driven by an increase in all components, except foreclosure and other real estate-owned expenditures, professional fees as well as other expenses.
As of Dec 31, 2014, net loans summed $12.3 billion, up from $9.0 billion as of Dec 31, 2013. Further, total deposits amounted to $13.5 billion, up from $10.5 billion as of Dec 31, 2013.
Asset Quality
Asset quality represented a mixed bag. The ratio of total nonperforming loans to total loans stood at 0.31% as of Dec 31, 2014, down 8 bps from Dec 31, 2013.
Net charge-offs to average loans came in at 0.15%, down 16 bps from 0.31% as of Dec 31, 2013. However, provision for loan losses escalated 64% year over year to $20.5 million.
Profitability and Capital Ratios
BankUnited’s capital ratios continued to deteriorate. As of Dec 31, 2014, Tier 1 leverage ratio stood at 10.70%, down from 12.42% as of Dec 31, 2013. Tier 1 risk-based capital ratio came in at 15.45% versus 21.06% as of Dec 31, 2013. Total risk-based capital ratio came in at 16.27% against 21.93% as of Dec 31, 2013.
Profitability ratios also performed poorly. The return on average assets fell 39 bps year over year to 1.02% as of Dec 31, 2014. Further, return on average stockholder equity stood at 9.00% against 10.84% as of Dec 31, 2013.
Our Viewpoint
Mounting expenses and intensely competitive markets continue to keep BankUnited’s profitability under strain. Moreover, weakening asset quality further aggravates near-term concerns. However, with its steady balance sheet, the company is well poised to grow both organically and inorganically in the coming quarters.
BankUnited currently holds a Zacks Rank #4 (Sell).
Performance of Other Major Banks
Among other major regional banks, U.S. Bancorp (USB), SunTrust Banks, Inc. (STI) and Comerica Inc. (CMA) surpassed the Zacks Consensus Estimate for earnings. For U.S. Bancorp and Comerica, the beat was mainly driven by a rise in non-interest income, while SunTrust’s beat was largely attributable to a marginal increase in net interest income and lower provision for credit losses.
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