BKU

BKU is executing a credible balance-sheet repositioning that the market is only partly paying for. The 10-K shows net income of $268.4M ($3.53 diluted EPS), up 15% YoY, with PPNR up 16% to $429.7M and net interest margin expanding 22bps to 2.95% on a tax-equivalent basis. Management attributes the lift to a better funding mix: NIDDA grew 20% (+$1.5B) to 31% of total deposits, the average cost of deposits fell 61bps to 2.40%, and wholesale funding (FHLB + brokered) declined by $1.7B. Long-term debt was cut 56.6% to $297M. Loan mix continued to shift from residential/franchise/equipment/municipal (-$810M) to core commercial (+$786M), and the loan-to-deposit ratio fell to 82.7% from 87.2%. These are the right moves for a community-bank franchise post-rate-cycle.

Capital and book value back up the story. CET1 rose 30bps to 12.3%, tangible common equity to tangible assets reached 8.5%, AOCI improved by $94.9M, and tangible book value per share grew to $40.14 from $36.61. At $50.43, the stock trades around 1.26x TBV and ~14.3x trailing EPS — undemanding for a bank with ROAA improving to 0.77% and ROAE to 9.0%. Buybacks ($44.8M) plus dividends ($91.9M) returned ~$137M to holders against ~$268M of earnings, a sustainable payout that lets equity keep compounding.