BankUnited earnings increased modestly in the third quarter of 2026 as lower deposit costs and higher investment yields helped widen its net interest margin. The bank reported net income of $72.2 million, or $1.01 per diluted share, for the quarter ended September 30, compared with $71.9 million, or $0.95 per share, a year earlier.
Key Takeaways
- Net interest margin reached 3.16%, up 10 basis points from the second quarter and 16 basis points from a year earlier.
- Lower non-interest income offset part of the improvement in lending and investment income.
- Credit trends were mixed: charge-offs stayed low, but non-performing loans increased from the previous quarter.
Table of Contents
- BankUnited earnings benefit from lower funding costs
- Securities sales and weaker fees limit profit growth
- Deposit averages tell a different story from quarter-end balances
- Credit measures improve annually but remain mixed sequentially
- Conclusion
BankUnited earnings benefit from lower funding costs
BankUnited’s third-quarter results announcement, released October 21, showed net income rising from $70.7 million in the second quarter. Adjusted net income, a non-GAAP measure excluding the impact of securities sales, was $73.9 million, or $1.03 per diluted share.
Net interest income increased $5.3 million from the previous quarter and $10.5 million from a year earlier. The average cost of deposits fell to 1.99%, down six basis points sequentially and 39 basis points year over year.
The bank attributed the sequential improvement to lower deposit pricing, the replacement of lower-yielding securities with higher-yielding investments, and better commercial loan yields. Chairman and Chief Executive Officer Rajinder Singh said the 3.16% net interest margin was ahead of management’s guidance.
| Item | Details |
|---|---|
| Common equity Tier 1 ratio | 12.1%, down 20 basis points from the second quarter. |
| Tangible common equity ratio | 8.0%, down 45 basis points sequentially. |
| Tangible book value per share | $39.10, compared with $40.48 in the second quarter; a non-GAAP measure. |
| Allowance for credit losses | $221.5 million, equivalent to 0.93% of total loans. |
| Total assets | $34.6 billion at September 30, 2026. |
Securities sales and weaker fees limit profit growth
Non-interest income fell to $19.8 million from $29.2 million in the second quarter and $25.6 million a year earlier. BankUnited recorded a $2.3 million net loss on investment securities after selling approximately $1 billion of lower-yielding securities and reinvesting the proceeds.
Lease financing income also declined, partly reflecting a $1.1 million loss on equipment disposals. Bank-owned life insurance income weakened, while capital markets income fell from the previous quarter.
Non-interest expense held steady sequentially at $174.6 million but increased from $166.2 million a year earlier. Consequently, pre-provision net revenue, a non-GAAP measure, declined to $105.9 million from $109.9 million in the second quarter despite the stronger interest margin.
Deposit averages tell a different story from quarter-end balances
Average non-interest-bearing demand deposits were essentially unchanged from the second quarter and rose $824 million from a year earlier. However, their quarter-end balance fell $821 million sequentially, which the bank attributed primarily to seasonal normalization after elevated second-quarter inflows.
That distinction matters for interpreting funding trends: average balances describe funding available throughout the quarter, while ending balances provide a September 30 snapshot. Non-interest-bearing demand deposits accounted for 32.2% of total ending deposits, compared with 30.1% a year earlier.
Average core loans increased $706 million year over year but declined $147 million sequentially. Total average loans fell $314 million from the second quarter as BankUnited continued its planned reduction of non-core lending. Commercial real estate and mortgage warehouse lending grew sequentially, while commercial and industrial and residential loan averages declined.
Credit measures improve annually but remain mixed sequentially
Criticized and classified loans declined $10 million from the second quarter and $176 million from a year earlier. The annualized net charge-off ratio remained at 0.11%, unchanged sequentially and below 0.25% a year earlier.
Non-performing loans nevertheless increased $40 million, or 18%, from the second quarter, although they remained $116 million below the year-earlier level. The provision for credit losses was $10.3 million, down from $15.1 million in the previous quarter.
BankUnited also repurchased approximately 2.1 million shares for $97 million during the quarter. Capital ratios declined, and the bank reported higher unrealized losses on available-for-sale investment securities.
Conclusion
BankUnited’s wider interest margin supported modest profit growth, but weaker non-interest income limited the gain. Subsequent quarterly disclosures will provide the next check on deposit costs, loan balances and the sequential increase in non-performing loans.
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