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BankUnited, Inc. (BKU)·Q4 2024 Earnings Summary

Executive Summary

  • EPS beat and margin expansion: Diluted EPS was $0.91 vs management-cited consensus of $0.73, driven by lower deposit costs and steady NIM expansion to 2.84%; ROA/ROE improved to 0.78%/9.7%. Overall net interest income rose to $239.3M and non-interest expense fell YoY due to the prior-year FDIC special assessment .
  • Funding mix improved: Average cost of total deposits fell to 2.72% (interest-bearing to 3.75%); non-interest DDA was 27% of deposits; wholesale funding fell $346M QoQ and $2.3B for 2024; loan-to-deposit ratio declined to 87.2% .
  • Asset quality manageable with targeted office pressure: NPLs rose to 1.03% (one CRE office loan) while ACL/loans held at 0.92%; net charge-offs were 0.16% for 2024, and office portfolio remains well-reserved (office ACL 2.30%) .
  • 2025 guidance: Management targets NIM >3% later in 2025, mid-single-digit deposit growth, double-digit NIDDA growth, core C&I/CRE mid- to high-single-digit growth, and ETR ~27%; provision likely higher as ACL trends toward ~1% by YE25; Q1 margin headwind of 3–4 bps from hedge roll-off .
  • Potential catalysts: Sustained margin expansion, deposit cost tailwinds, and clarity on CRE office outcomes; a $0.29 dividend was declared for payment on Jan 31, 2025, reinforcing capital return cadence .

What Went Well and What Went Wrong

  • What Went Well

    • NIM and deposit cost: NIM rose to 2.84%, with average cost of total deposits down 34 bps QoQ to 2.72% and interest-bearing deposits down 45 bps to 3.75%; management emphasized proactive repricing and strong NIDDA trends .
    • EPS outperformed consensus: “I turn to Leslie and say… What is the consensus… yesterday, she told me the consensus was $0.73… I’m happy that we’re significantly above… $0.91” .
    • Funding mix and liquidity: Wholesale funding fell $346M QoQ and $2.3B for 2024; same-day liquidity of $15.5B; CET1 at 12.0%; TCE/TA 7.8% .

  • What Went Wrong

    • Office exposure drove NPL increase: NPLs increased by ~$26M QoQ due primarily to one CRE office loan; NPL ratio rose to 1.03% and NPAs to 0.73% .
    • Loan yields fell with rates; C&I payoffs weighed: Loan tax-equivalent yield declined to 5.60% from 5.87% QoQ; C&I balances weakened due to payoffs; total loans fell $101M QoQ .
    • Provision higher vs Q3, and hedges to pressure Q1 margin: Provision was $11.0M vs $9.2M in Q3; management flagged 3–4 bps margin pressure in Q1 2025 from hedge roll-off; provision likely higher in 2025 .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Total Interest Income ($USD Millions)$483.2 $483.3 $492.4 $468.0
Net Interest Income ($USD Millions)$217.2 $226.0 $234.1 $239.3
Provision for Credit Losses ($USD Millions)$19.3 $19.5 $9.2 $11.0
Total Non-interest Income ($USD Millions)$17.1 $24.2 $22.9 $25.2
Total Non-interest Expense ($USD Millions)$190.9 $157.7 $164.6 $160.5
Net Income ($USD Millions)$20.8 $53.7 $61.5 $69.3
Diluted EPS ($USD)$0.27 $0.72 $0.81 $0.91
Net Interest Margin (%)2.60% 2.72% 2.78% 2.84%
Return on Avg Assets (%)0.23% 0.61% 0.69% 0.78%
Return on Equity (%)3.2% 8.0% 8.8% 9.7%

EPS vs consensus (Q4 2024):

MetricQ4 2024
Diluted EPS ($USD)$0.91
Consensus EPS ($USD)$0.73 (management-cited)
Beat/MissBold beat

Deposits and funding KPIs:

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Avg Cost of Total Deposits (%)2.96% 3.09% 3.06% 2.72%
Avg Cost of Interest-bearing Deposits (%)4.20% (spot APY) 4.26% 4.20% 3.75%
Non-interest DDA as % of Deposits25.8% 29% 27% 27%
Loan-to-Deposit Ratio (%)92.8% 88.7% 87.6% 87.2%
CET1 (Consolidated) (%)11.4% 11.6% 11.8% 12.0%
TCE/TA (%)7.0% 7.4% 7.6% 7.8%

Credit KPIs:

KPIQ4 2023Q2 2024Q3 2024Q4 2024
ACL to Total Loans (%)0.82% 0.92% 0.94% 0.92%
Non-performing Loans / Total Loans (%)0.52% 0.70% 0.92% 1.03%
Non-performing Assets / Total Assets (%)0.37% 0.50% 0.64% 0.73%
Net Charge-offs to Avg Loans (%)0.09% 0.12% 0.12% 0.16% (annual)

Segment loan composition ($USD Millions):

SegmentDec 31, 2023Sep 30, 2024Dec 31, 2024
Non-owner OCCRE$5,323.2 $5,488.9 $5,652.2
Construction & Land$496.0 $497.9 $562.0
Owner OCCRE$1,935.7 $1,999.5 $1,941.0
C&I$6,972.0 $7,026.4 $7,042.2
Franchise & Equipment$380.3 $277.7 $213.5
Municipal (Pinnacle)$884.7 $749.0 $720.7
Mortgage Warehouse$432.7 $571.8 $585.6
Residential$8,209.0 $7,787.4 $7,580.8
Total Loans$24,633.7 $24,398.7 $24,298.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIMQ4 2024NIM roughly flat in Q4; end year in high-2% range Delivered 2.84% in Q4; entering 2025 from 2.84% Achieved high-2% exit
NIMFY 2025n/a“Sometime later this year, we should get past 3%” (later half 2025); Q1 margin headwind 3–4 bps from hedge roll-off Raised target; timing indicated
Deposits (total)FY 2025n/aMid-single-digit growth New target
NIDDAFY 2025n/aDouble-digit growth; aiming ~30% mix in 2025 New target
Loans (total)FY 2025n/aLow-single-digit growth; core C&I/CRE mid- to high-single digits; resi/non-core decline New target
ExpensesFY 2025Mid-single-digit (GAAP) including railcar costs Mid-single-digit (GAAP) maintained; railcar refurbishment shifted to 2025 (~$8M) Maintained; timing shift
Provision/ACLFY 2025n/aProvision likely higher vs 2024; ACL trending toward ~1% by YE25 New target
ETRFY 2025~26.5% (prior run-rate) ~27% going forward Slightly higher
Wholesale fundingFY 2025Paydown ongoing “Not much to pay down; a little trimming” Neutral
DividendQ1 2025n/a$0.29 per share declared, payable Jan 31, 2025 Return of capital

Earnings Call Themes & Trends

TopicQ2 2024 (prior)Q3 2024 (prior)Q4 2024 (current)Trend
NIM trajectoryExpanded 15 bps to 2.72%; expected high-2% exit Up to 2.78%; guided flat Q4 Delivered 2.84%; targeting >3% in 2025 Improving
Deposit mix & costsNIDDA up $826M; avg cost total deposits 3.09% NIDDA 27%; avg cost total deposits 3.06% NIDDA 27%; avg cost total deposits 2.72% Positive tailwind
Lending growth & payoffsCore C&I/CRE up $589M; resi down $212M C&I payoffs elevated; total loans −$230M QoQ Total loans −$101M QoQ; core CRE +$227M; C&I −$43M Mixed; payoffs episodic
CRE officeOffice reserve up to 2.47% (Jun); NPLs limited Office NPLs $52M of total $61M; reserve down to 2.20% (valuation improved) NPL increase tied to one office loan; office ACL 2.30% Manageable; focused
Competition & spreadsPipeline firm; yields ~7.5–8% new production Spreads tightening; non-relationship lending returning More competition on lending than deposits; watch tighter spreads Competitive pressure
Securities valuationUnrealized losses improving in Q2/Q3 Unrealized losses down; short duration Unrealized loss driven by rates/spreads; no credit impairment Stable credit
Tax/ETR~26.5% run-rate n/a~27% going forward Slight uptick
Risk eventsHurricanes benign impacts Milton impact minimal; ongoing assessment LA wildfires exposure ~$80M, immaterial expected Monitored; limited impact

Management Commentary

  • “We’re reporting an exceptionally strong quarter… $0.91 a share… consensus was $0.73… significantly above” (Raj Singh) .
  • “We guided to NIM being flat… average NIDDA exceeded our expectations… realized beta on non-maturity interest-bearing deposits was [81]” (Leslie Lunak) .
  • “Sometime later this year, we should get past 3%… later half of the year… deposits stronger in first half; loans stronger in back half” (Raj Singh) .
  • “Substantially all the charge-offs… related to 3 C&I loans… provision likely higher in 2025… ACL likely to move toward 1%” (Leslie Lunak) .
  • “No credit related issues in securities… unrealized losses are a rate mark, driven by spreads” (Leslie Lunak) .
  • “Deposit competition is less concerning than lending… we’re seeing tighter spreads… banks doing non-relationship business” (Raj Singh) .
  • “We have not done any financial engineering… improvements are blocking and tackling” (Raj Singh) .

Q&A Highlights

  • Net interest income outlook: Mid- to high-single-digit NII growth expected for 2025; margin expansion is main driver rather than balance sheet size (Leslie) .
  • Margin cadence: Q1 2025 has 3–4 bps headwind from hedge roll-off; focus is on full-year expansion (Leslie) .
  • Deposit mix ambition: Management aiming for ~30% NIDDA in 2025; longer-term mid-30s will take time (Raj) .
  • Loan production yields: New commercial production averaged a little over ~7.5% in Q4 (Leslie) .
  • Capital actions: Buybacks possible but likely small; dividend cadence reviewed in February; preference to deploy capital into growth amid uncertainty (Raj/Leslie) .

Estimates Context

  • EPS vs consensus: Management cited S&P Global-style consensus EPS of $0.73 for Q4 2024; actual diluted EPS was $0.91, a significant beat (no direct S&P data retrieved) .
  • Revenue estimates: We were unable to retrieve S&P Global consensus revenue estimates due to an SPGI rate-limit error at the time of request. Where relevant, we benchmarked actual net interest income and NIM trends against prior periods and management commentary .
  • Note: S&P Global consensus data could not be fetched during this session due to system limit; we relied on management-cited consensus for EPS.

Key Takeaways for Investors

  • Earnings quality improving: Sequential NIM expansion and deposit cost reductions underpin EPS momentum; continued balance sheet remixing should support margin path toward >3% in 2H25 .
  • Deposit tailwinds: Downward repricing and rising NIDDA mix (target ~30%) provide accrual advantages; monitor seasonality (strong H1, softer H2) .
  • Credit risk contained but episodic: Office-specific pressure remains idiosyncratic; reserves adequate; provision likely to rise modestly with commercial mix shift and ACL trending toward ~1% by YE25 .
  • Competitive lending landscape: Tightening spreads and return of non-relationship lending may limit asset yields; focus on disciplined underwriting and relationship deposits remains key .
  • Capital and liquidity sturdy: CET1 at 12.0%, TCE/TA 7.8%, same-day liquidity $15.5B; dividend maintained at $0.29; buybacks possible but likely de minimis near term .
  • Near-term watch items: Q1 2025 hedge roll-off headwind to margin (3–4 bps), timing of railcar refurbishment expense (~$8M shifted to 2025), and episodic C&I payoffs impacting loan growth cadence .
  • Medium-term thesis: Improved funding profile, measured CRE exposure (peer-lower CRE concentration), and margin expansion trajectory support constructive view; execution on NIDDA growth and prudent credit management are the key stock drivers .