BankUnited, Inc.

Good day, and thank you for standing by. Welcome to the Bank United 2021 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Susan Greenfield, Corporate Secretary. Please go ahead.

Thank you, Victor. Good morning, and thank you for joining us today on our second quarter results conference call. On the call this morning are Rob Sting, 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 contains forward-looking statements within the meaning of the Project 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 conditions, business prospects, growth strategy, and liquidity, including as impacted by the COVID-19 pandemic. The company does not undertake any applications 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 statement. 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 10-Q or current report on Form 8-K which are available at the FCC's website, www.fcc.gov. With that, I'd like to turn the call over to Raj.

Thank you, Susan. Good morning, everyone. Thank you for joining us and giving us your time to listen to our earnings report. So for the quarter, net income came in at $104 million, $1.11 per share, compared to $98.8 million, or $1.06 per share last quarter. For the first six months of the year, this translates to an ROE of 13.2%, ROE of 115 basis points. I'm very happy with where things came out on the earnings front. NII, managed interest income, it's coming into growth despite tons and tons of liquidity on the balance sheet, which I think is a problem with every bank these days. Our NII came in at $198 million. Last quarter, it was 196. This quarter last year, it was 190 million. NIM contracted a tiny bit from 239 down to 237, mostly because of that elevated level of equity that I just mentioned. On the deposit front, again, a very strong quarter. Deposit costs came down. The mix improved. The volumes grew. So across the board, no matter how you measure, So that's an eight basis point reduction. The spot balances, DDA grew by $869 million. And most of our growth was DDA again. And by the way, DDA now stands at 31% of deposits. It was 25% just at the end of last year. So for those of you who have followed our story for some time, even as recently as a year or a year and a half ago, That doesn't mean that we're not shooting for a higher number. I think the bar just has been reset and we think we can actually improve the funding mix even beyond this 31% that we're at today. Provision for credit losses came in at a negative $27.5 million unless we get into the specifics of how that all evolved. On the credit front, we, again, lots of progress. Loans that were either temporary, deferred, or modified under the CARES Act also declined. They were $762 million last quarter. Now they're down to $497 million. NBL ratio, however, went up a little bit from 1% of loans last quarter to $128. three years that we become a participant in a shared national credit because the company got so large that we couldn't really support them from their credit needs. So one of the large banks in the country took over the primary and we've been a participant. But it's a company that we've known for a decade. Some accounting irregularities came up over the last few weeks in the books of this business, which is why we took the stand of moving this to a non-performing loan and taking a large reserve against it. We have a $31 million reserve, a $30 million reserve against this loan. Capital. Oh, by the way, net charges, just to finish. As you know, we have tons of capital. We announced a share buyback back in February, which is still outstanding by 37.7 million. It's still outstanding in that. We are adding to that. Yesterday, the Board met and approved another $150 million on top of what was already left in the last authorization. I think over the last couple of earnings calls, I've mentioned that the stance we've taken with buybacks is that we will be more opportunistic rather than just steady buy a little bit every day. And the reason for that is we expect this to be a very volatile market. Even a little bit of bad news or good news can really move stock prices a lot, which is what we're seeing right now. So we're going to use that to our advantage here. decision what to do. CT1 Capital is 13.5% at Holdco, 15.1% at the bank. Book value, again, continues to grow. Book value is 33.91 now. Tangible is 33.08. So very happy about that. Good new progress upwards. This quarter, after I think the longest hiatus we've ever had, this quarter we are back in the hiring business. and brought in producers both on the left and right side of the balance sheet across various business lines. So this was exciting. We had not done that for a full year, which, like I said, was the longest we've ever gone without bringing in new producers. We even launched a new business line. We were always in this business, the HOA deposit business. We've always been in this business, but not organized as a separate business line. but we did that to see a big opportunity. We've made a couple of hires, again, on the production side, and those hires will be starting soon, so very excited about what that business will do for us over the course of the next three or four years. The other thing is, this quarter, last quarter, excluding PPP loans, our loan growth was negative 500 million round numbers. This quarter, We still have a negative number, but it's small compared to how much decline we had in loans last quarter. And as I look forward to where the pipeline is, I'm actually very optimistic about what third quarter and fourth quarter would bring to us, especially in the commercial side, especially in the C&I business. Less on the CRE front, where the pipelines are also getting better, but C&I pipelines are much better. And Tom is getting into the second half of the year, the best we can tell is we will most likely make up the reduction that we've had in loans, again, excluding PPP loans, that's just a different animal. So the economy is healing, both in New York and Florida. Florida's further ahead than New York, like I've said in the past, but even New York is showing very good signs. We are obviously watching how the healthcare numbers evolve We do keep an eye on that very closely. But overall, it's been a very positive picture. We have opened up and brought our employees back in a calculated way. We're not completely back into the office, but by Labor Day, the goal is to get to the new normal. where a number of people will work in a hybrid fashion, others will work remote, and a few will work permanently five days a week at the office. So all of those, what we call R2O, return to office, is being played out as we speak, and we expect that by Labor Day, we will be in the new normal. Again, the caveat, obviously, is the health care numbers that we keep watching. What else? I am going to actually turn it over to Tom, who will get into a little more detail. One more thing, which Leslie just pointed out to me. The other change on strategy that is very recent over the last three months or so is for the first time in the history of the company, we are beginning to think about geographies outside of just New York and Toronto. you know, as much of the market as you want because it's just hard just, you know, flying back and forth between these two markets. But if the pandemic has taught us anything, it's that we don't have to fly back and forth all the time to cover two markets. If that's the case, then there are other markets that will work well with our business model. There are generally business-dense urban markets where we are beginning to see if you want to expand into these markets. There's nothing to announce, this is the very early phases, but I wanted to share at least our thinking about geographic expansion, much before it actually happened. So when there is something more concrete, of course we'll come talk to you about it, but we are beginning to at least think in those terms, that it's not just Tom, who will walk you through a little more detail.