BankUnited, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to Bank United, Inc. First Quarter Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker for today, Susan Greenfield, Corporate Secretary. You may begin.

Thank you, Tawanda. Good morning, and thank you for joining us today on our first quarter results conference call. On the call this morning are Raj Singh, our Chairman, President, and CEO, Leslie Lunak, our Chief Financial Officer, and Tom Cornish, our Chief Operating Officer. Before we start, I'd like to remind everyone that this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflects the company's current views with respect to, among other things, future events and financial performance. Any forward-looking statements made during this call are based on the historical performance of the company and its subsidiaries or on the company's current plans, estimates, and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the company that the future plans, estimates, or expectations contemplated by the company will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions, including, without limitations, those relating to the company's operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by the COVID-19 pandemic. The company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Information on these factors can be found in the company's annual report on Form 10-K for the year ended December 31, 2020, and any subsequent quarterly report on Form 10Q or current report on Form 8K, which are available at the SEC's website, www.sec.gov. With that, I'd like to turn the call over to Raj.

Thank you, Susan. Welcome, everyone. Thank you for joining us for our quarterly earnings. Let me talk a little bit about the environment before we talk about the results for the quarter. We talked to you about 90 days ago, so I'll try and draw comparisons to what I said 90 days back. I had an optimistic tone 90 days ago. I'm more optimistic today. What we're seeing, the data that is coming to us from every angle, whether it's around the vaccination and the pandemic or it's economic data across the board, we're seeing more reasons to be optimistic for the remaining this year and into next year than we were in January. In January, we were fairly optimistic to begin with. So the economy is opening up. Florida is clearly much further along than other parts of the country. New York is a little further behind than other parts of the country. But overall, our franchise, where we do business, we're seeing a lot of positive momentum. And then those assumptions then get reflected in our financials, which we will talk to you in some detail. but generally feeling very good about economic activity and about the economy opening up and the vaccine rollout. Within the company also, I will say that we are trying to gather data on how many employees have been vaccinated. It's self-reported data, so it lags a little bit, but we're kind of matching up with where the country is. So about 30% of our employees are either vaccinated or about to be fully vaccinated, and many more are in line. Most of the senior management team is now fully vaccinated. The quarterly performance, we reported net income of about $99 million, 98.8 to be exact, $1.06 per share. This compares to 89 cents that we reported to you last quarter. And obviously, this time last year, the first quarter was a loss of 33 cents. So going to come a long way in a short few months. The highlights of the quarter is, again, we'll go through a little bit about the P&L. I'll jump to the balance sheet after that. Net interest income continued to grow despite elevated levels of liquidity as is a problem across the industry. We had an I.I. of $196 million. This compares to $193 last quarter and $181 compared to the first quarter of last year. As we told you three months ago, we were positively – bias when it came to NIM guidance. NIM did expand from 233 last quarter to 239 this quarter. And that expansion really is a result of us executing on our deposit strategy. Deposits continue to grow and cost of deposits continue to come down. We had another very, very solid quarter. Non-interest DDA grew by $957 million. which I'm very happy about. The average non-interest DDA grew by $338 million. But the number that really makes me happy is that non-interest DDA now stands at about 29% of our total deposits. Just in December, we were at 25%. At the end of 2019, I think we were at 18%. And when we started this deposit-centric strategy about Three years ago, we were in the mid-teens. I think we were 14% or 15%. So we've come a long way, and I'm very, very proud of what the company has achieved. Cost of deposits also declined by 10 basis points. So last quarter, we were at 43. We're down to 33 basis points for this quarter. And I'm very confident that second quarter, we will again show a fairly decent decline. And the reason I can say that is because on March 31st, on a spot basis, we were already down to 27 basis points. So we're starting second quarter at 27. So, you know, the number is going to be somewhere in the mid-20s. And the guidance that we gave that we will drop our cost of deposits into the teams by the end of the year stands. So overall feeling very good about what we've been able to achieve on the deposit side. And the deposit growth was fairly widespread, came from every part of the bank. On credit, let me talk a little bit about loans. Loans were down about $500 million. Most of that decline was the continued drop in utilization rates on Unline. So I think $425 million off that $505 million was directly attributable to less utilization. This has been a negative surprise for us. We had made assumptions when we did the plan at the beginning of the year that the line utilization will start to normalize slowly month by month, but instead we saw further declines in January. We saw another decline further in February. It's only in March where we've seen a slight uptick One month doesn't make a trend, but it's a positive number, and we're happy to see that, and hopefully we'll see this stabilize from here on and start to get back to normal. So Tom will talk to you more about that, but that was what was the biggest driver. In terms of credit, let me go over a few things. Temporary deferrals and modified loans under CARES Act, modification under CARES Act, that total number remains stable at about 3% of the portfolio. NPA ratio declined. It was 71 basis points last quarter. It's down to 67. But if you actually exclude the guaranteed portion of SBA loans, it was 53 basis points. Charge-offs declined compared to all of last year. I think last year we were running at about 26 basis points at charge-off rate. We're down to 17 basis points this quarter. And for the first time since this pandemic hit us, criticized and classified assets also started to decline. And as we see more good economic data come through, more importantly, as we start to see cash flow data come through, I expect this number to start declining a little more rapidly in the second and third quarter. So overall, feeling pretty good capital. By the way, needless to say, we're in a very strong capital position. SAC1 ratio is at 13.2% for Holco and 14.8% for the bank. We did buy back some stock. We bought back about $7.3 million of stock this quarter. We still have a little less than $40 million left in the buyback, and we plan to execute it against that buyback opportunistically. It's a pretty volatile time in the stock market, so we want to use that volatility to our advantage and buy back when we see dips in the stock. We did declare a 23-cent dividend, and currently we're anticipating maintaining that level. Book value per share is now at $32.83. Tangible book value is at $32 even. Both are above the pre-pandemic levels. So strategy stays the same, continuing to add, you know, one quarter relationship at a time. continuing to focus on non-interest DDA. I'll give you an example, something that just crossed my screen late last night. We've been calling on this client for a long time, and we were finally able to pry it away from one of the biggest banks in the country. It's a mid-market firm based in Broward. The relationship is coming over. I won't say from which bank, but It comes with a half a million dollar loan and $26 million in deposits with a full suite of treasury management products. And a longstanding company, very successful in the community, and very happy to be a client of Bank United. So I see a deal or two like this every other day, and that's really drip by drip is what really adds to the franchise value, and we're focused on that. We'll also keep identifying niche markets and segments where we can grow. We're now shifting focus. We haven't hired very many producers over the course of last year through the pandemic, but we're now focused on bringing on more producers and are in discussions with a number of producers in different geographies. Very importantly, we'll continue to invest in technology and innovation. This actually, I do want to say... This quarter marks the culmination of our two-year journey, the cloud journey, as we call it. We are now officially out of the data center business. We are a fully cloud-enabled bank. It took two years to put everything in the cloud, and we partnered with Amazon. They've been great partners. And in terms of our capabilities, our infrastructure, and the capabilities that cloud provides us, we're in a very different place than we were two years ago. when we started down this path. Also, I want to announce that part of this was also the first cloud-native application that we developed, also a very big deal for Bank United because we never really had any developers. We never developed anything in terms of products for delivering our products. you know, deposit solutions. But two years ago, we decided that mobile banking is such a core function that we cannot just outsource it to the same vendor which every other bank our size goes to, that we needed to control this and needed to actually have this in-house. We put a lot of effort into developing it. It was developed, like I said, in the cloud, and we launched this just last weekend and converted our entire customer base with no issues at all and I'm very excited about this big investment that we've made. Also, let me talk a little bit about 2.0, and specifically 2.0 revenue initiatives. As you know, they have been delayed given the pandemic, but I'm happy to report that we are actually making progress and getting a lot of traction, all the various things that added up to that revenue target, whether it's a commercial card program, whether it's strategy management space, and you'll start to see some of that. You already are seeing some of that in our P&L, the public service charges and fees this quarter were up 17% compared to the first quarter of last year. This is, you know, a lot of that is coming from the 2.0 initiative that we put in place and more to come. Also, you know, the small business initiative that were also part of 2.0 are now going to pick momentum. Small business, as you can imagine, were distracted very much with PPP 1.0 and then PPP 2.0. As the PPP and everything related to that gets behind us, we're going to start focusing on that and start delivering on those initiatives as well. So overall, feeling pretty good. I think this is a pretty solid quarter. Tom and Leslie are going to walk you in a little more detail with the businesses and also the financials. Tom, why don't you go next?