Deterioration in its portfolio of taxi medallion loans combined with some one-time expenses dragged down profits at BankUnited in the third quarter.
The Miami Lakes, Fla., company said Thursday that its third-quarter profit fell nearly 6% from the same period last year to $50.8 million following a sharp increase in its provision of loan losses. The $27.3 billion-asset BankUnited earned $56.7 million in the quarter that ended June 30.
The company recorded a $24.4 million loan loss provision, up 37% from a year ago. Much of the increase was tied to a significant uptick in problem taxi medallion loans. BankUnited reported $54.4 million in nonperforming medallion loans on Sept. 30, up from $2.6 million at the end of 2015.
According to Chief Financial Officer Leslie Lunak, medallion loans total $192 million, which is "not enough to sink the ship," she said.
John Kanas, BankUnited's chairman, president and chief executive officer, characterized Thursday's results as "somewhat disappointing," but added that the company's overall performance remains solid.
"We'll continue to watch the taxi medallion situation and see what we can do, but everything else seems to be hitting on all cylinders," Kanas, who recently announced plans to step down as president and CEO, said in a conference call with analysts.
Deposits proved to be an especially bright spot, increasing more than 11% in the first nine months of 2016, to $18.8 billion. Loans grew 14% in the same period, totaling $19 billion on Sept. 30.
Chief Operating Officer Rajinder P. Singh, who is slated to replace Kanas as president and COO on Jan. 1, said BankUnited is increasing its focus on deposits and that their growth should begin to outstrip loan growth next year.
Quarterly noninterest expense jumped 12% to $148 million, driven in part by a $2.1 million addition to the litigation reserve and a $1.1 million charge related to a recently completed audit of the company's payroll tax payments.