It has been about a month since the last earnings report for BankUnited, Inc. (BKU - Free Report) . Shares have added about 7.5% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is BKU due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
BankUnited Beats on Q1 Earnings, Provisions Decline
BankUnited’s first-quarter 2018 earnings per share of 77 cents surpassed the Zacks Consensus Estimate of 72 cents. Moreover, the bottom line compared favorably with the prior-year quarter’s earnings of 57 cents per share.
Results were primarily driven by an increase in net interest income and lower provisions. Moreover, the company’s overall loans and deposit balances remained strong. However, higher expenses and lower non-interest income were the undermining factors.
Net income for the quarter was $85.2 million, up from $62.3 million recorded in the prior-year quarter.
Net Interest Income Improves, Costs Escalate
Net revenues for the quarter were $275.8 million, surpassing the Zacks Consensus Estimate of $265.3 million. Further, the reported figure increased 6.6% year over year.
Net interest income for the quarter was $247.8 million, increasing 7.5% year over year, led by higher interest income, partially offset by an increase in interest expenses.
Net interest margin decreased 14 basis points year over year to 3.56%.
Non-interest income was $28 million, decreasing nearly 1% from the year-ago quarter. The fall was primarily due to lower net income from resolution of covered assets.
Non-interest expenses increased 3.4% from the year-ago quarter to $161.8 million, primarily due to rise in employee compensation and benefits costs, depreciation of equipment under operating lease and other non-interest expenses.
Credit Quality: Mixed Bag
As of Mar 31, 2018, the ratio of net charge-offs to average loans was 0.20%, decreasing from 0.38% as of Dec 31, 2017. Also, provision for loan losses for the quarter was $3.1 million, down from $12.1 million in the prior-year quarter.
However, nonperforming loans to total loans was 0.91%, increasing from 0.81% as of Dec 31, 2017.
Solid Balance Sheet & Capital Ratios
As of Mar 31, 2018, net loans totaled $21.3 billion, almost in line with the prior quarter’s figure. Total deposits amounted to $22.2 billion, increasing from $21.9 billion as of Dec 31, 2017.
As of Mar 31, 2018, Tier 1 leverage ratio was 9.6% while Tier 1 risk-based capital ratio was 13.0%. Further, total risk-based capital ratio was 13.7% as of the same date.
Profitability Ratios Improve
At the end of the reported quarter, return on average assets was 1.14%, increasing from 0.91% reported in the prior-quarter end. Also, return on average stockholders’ equity was 11.28%, up from 10.08% at the end of the prior-year quarter.
For 2018, management expects both loan and deposit growth in the range of 10-15%. Loans are likely to be driven by growth in the Florida region.
Further, expenses (excluding the amortization in the indemnification asset) are projected to rise in high single-digit range in 2018.
The company expects NIM to be nearly 3.50%-3.60% in 2018.
Also, the company projects an effective tax rate in the range of 23-24% in 2018.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
BankUnited, Inc. Price and Consensus
At this time, BKU has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, BKU has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.