BankUnited Widens Margin as Deposit Mix Improves
Net interest margin expanded 7 bps QoQ to 3.06% as deposit costs fell and non-interest-bearing balances reached a record.
BankUnited (BKU), the Florida-based commercial bank, expanded its net interest margin to 3.06% in the second quarter, up 7 bps QoQ and 13 bps YoY, as a richer deposit mix and lower funding costs supported earnings. Net interest income rose 3% QoQ and 4% YoY to $255.3 million.
Average deposits excluding brokered funding grew $811 million QoQ and $1.5 billion YoY. Ending non-interest-bearing deposits reached a record $9.93 billion, up 11% QoQ, and accounted for 34.4% of deposits compared with 31.8% a year earlier. Average deposit cost declined 7 bps QoQ to 2.05%.
That inflow allowed BankUnited to reduce its reliance on higher-cost funding. Wholesale funding declined $1.4 billion both QoQ and YoY, while brokered deposits fell to 10.5% of total deposits. Higher securities yields provided another lift to the margin.
Core lending advanced even as the bank continued to shrink residential and other non-core balances. Average core loans rose 1% QoQ and 4% YoY, led by a 10% YoY increase in commercial real-estate loans and a 19% rise in mortgage-warehouse balances. Average residential loans declined 8% YoY, leaving average total loans essentially flat.
Credit quality improved sharply. Nonperforming loans declined 19% QoQ and 40% YoY, pushing the nonperforming-assets ratio down 13 bps sequentially to 0.66%. The annualized net charge-off rate fell to 0.11% from 0.61% in the first quarter, while provision expense declined $9.0 million QoQ to $15.6 million.
BankUnited still added to reserves, increasing its allowance by $8.7 million QoQ to $217.5 million. Allowance coverage rose 4 bps to 0.91% of loans, and coverage of nonperforming loans increased to 97.14% from 75.90%.
Capital strengthened alongside accelerated shareholder returns. The common-equity Tier 1 ratio rose 10 bps QoQ and YoY to 12.3%, while tangible common equity reached 8.4%. BankUnited repurchased about 1.1 million shares for $50.1 million during the quarter, bringing first-half buybacks to $109.7 million, more than double the $44.5 million returned through repurchases in all of 2025.
Capital-markets income more than doubled QoQ to $8.1 million, helping non-interest income rise to $29.2 million. Expenses increased to $174.6 million amid higher deposit-related costs, operational losses and compensation, leaving further earnings leverage tied to continued funding improvement and renewed core-loan growth.