BankUnited earnings for the third quarter of 2026 paired a wider lending margin with improving credit indicators, although weaker noninterest income and declining commercial and industrial loan balances tempered the results. Net income totaled $72 million, or $1.01 per share.
Key Takeaways
- Net interest margin reached 3.16%, up 10 basis points from the previous quarter, while deposit costs fell to 1.99%.
- Adjusted earnings were $1.03 per share, compared with $0.96 last quarter and $0.94 a year earlier.
- Management forecasts a roughly 3.2% fourth-quarter margin, with further expansion dependent largely on asset sensitivity and an assumed December rate hike.
Table of Contents
- BankUnited earnings benefit from lower funding costs
- Loan growth remains uneven across businesses
- Credit improvement accompanies continued buybacks
- Fourth-quarter outlook faces seasonal deposit pressure
- Conclusion
BankUnited earnings benefit from lower funding costs
The bank’s 3.16% net interest margin was 16 basis points above its year-earlier level and had already surpassed the 3.15% previously guided for the fourth quarter. Net interest income increased by $5 million sequentially and $11 million year over year.
Deposit costs declined six basis points from the previous quarter to 1.99%. Noninterest-bearing demand deposits represented 32.2% of total deposits, compared with 30.1% a year earlier. Their average balance was flat sequentially but grew 10% year over year, while average total deposits excluding brokered funding increased by approximately $1 billion over the year.
Adjusted net income, excluding $2.3 million in securities losses, totaled $74 million, or $1.03 per share. Noninterest income fell to $20 million, down $9 million from the preceding quarter and $6 million from a year earlier, reflecting securities losses, leasing losses and lower bank-owned life insurance income. Noninterest expense was stable sequentially at $175 million.
Loan growth remains uneven across businesses
Quarterly loan production exceeded $1.1 billion, and average core loans increased $706 million, or 4%, year over year. Yet average commercial and industrial balances declined $300 million from the previous quarter because of payoffs and delayed closings.
Other lending categories expanded. Average commercial real estate loans increased approximately $75 million sequentially and 10% year over year. Average mortgage warehouse balances rose approximately $133 million, or 18%, from the previous quarter and 35% from a year earlier.
Chief Operating Officer Thomas Cornish expects about two-thirds of fourth-quarter core loan growth to come from C&I businesses and one-third from CRE. He cautioned that rising rates were prompting renegotiations of CRE deals, potentially shifting the mix further toward C&I. Management’s fourth-quarter forecast calls for an ending core loan balance of $17.6 billion to $17.7 billion.
Credit improvement accompanies continued buybacks
Nonperforming loans declined 30% year over year, while criticized and classified loans fell 14%. The nonperforming asset ratio improved to 77 basis points from 110 basis points, and net charge-offs remained low.
Provision expense was $9 million. The bank added qualitative reserve overlays reflecting geopolitical and other risks, lifting its coverage ratio by two basis points to 93 basis points. Management expects provision expense of approximately $15 million in the fourth quarter.
BankUnited repurchased 2.1 million shares for approximately $97 million during the quarter. Dividends and buybacks returned $278 million to shareholders over the first nine months, while the common equity tier 1 capital ratio stood at 12.1%. Chief Financial Officer James Mackey said a medium-term CET1 target in the mid-11% range remained appropriate.
Fourth-quarter outlook faces seasonal deposit pressure
Management forecasts fourth-quarter net interest income of $265 million and a net interest margin of approximately 3.2%. Mackey attributed the expected margin improvement largely to asset sensitivity, as loan yields reprice higher while deposit costs adjust more slowly. The outlook assumes another rate hike in December 2026.
That forecast comes despite an expected seasonal decline in average noninterest-bearing demand deposits and intense competition for deposits. Management projects an average noninterest-bearing demand deposit balance of $8.65 billion for the fourth quarter.
The bank also expects approximately $178 million in fourth-quarter noninterest expense and $115 million in pre-provision net revenue. It has not yet provided guidance for 2027.
Conclusion
BankUnited’s quarter showed stronger margins and improving credit measures, but loan growth remained uneven. Its fourth-quarter outlook anticipates further margin gains while allowing for seasonal deposit declines, higher expenses and a larger provision.
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