BankUnited, Inc.

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

Thank you, Chris. Good morning, and thank you for joining us today on our fourth quarter and fiscal year 2021 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 reflect 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 reports on Form 10-Q or current report on Form 8-K, 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. Thanks for giving us your time to listen to our earnings. Yesterday, somebody asked me, you know, how would you summarize in 30 seconds or less? So I'm going to start with doing that. If I was to summarize last quarter's results, let's say a billion dollars of loan growth, these are round numbers, we'll get into the exact numbers, a billion dollars of loan growth Billion dollars of deposit growth, 11 basis points expansion and margin, and improving credit trends pretty much across the board, earnings per share of $1.41. So good increase in book value as well. So this was obviously a very good quarter for us, a quarter we've been waiting for for some time. We told you at the beginning of last year that we expect loan growth to come back in the second half of the year. It took a little bit longer, but it seems to be here now, and we're very happy with what we've done on the left side of the balance sheet. There are a number of notable items this quarter, so I'm not going to go through them. I would have Leslie go through them in her comments, but what I've asked is for Tom and Leslie and myself, we'll go a little bit faster than we usually do because there's a lot to cover today. So quickly jumping into it, we had $1 billion of loan growth. This is excluding PPP, of course. And think about where we were. First quarter, we had a reduction of $500 million in loans. Second quarter, we were down just a little bit. Third quarter, we were up a little bit. And now fourth quarter, we're up very nicely, $1 billion. So the momentum is right. Loan demand, you know, we're seeing that come back across industries and across geography. So it's a very broad base, and Tom will get into the details of that. Income came in at, net income came in at $125 million, or $1.41 a share, as compared to $87 million, or 94 cents last quarter. ROE for the year came in at 13.3, ROE for $1.16. Net interest income increased by 11 million compared to last quarter. So very happy about that. Margin expanded from 233 to 244. Cost of deposits keeps going down. It didn't go down as much, and let's still get into that. But we expect it to go down again more this quarter than the first quarter. Cost of deposits was 19 basis points for the quarter. Previous quarter was 20. We ended the year on December 31st when the spot was cost upon the 16 basis points. So we're January 1st, we're starting at 16 and hopefully we'll be able to take it down more. I think at some point the cost of deposits will eventually inflect. I'm not sure if it's the first quarter or the second quarter, but we're getting close to the bottom as the rate environment is about to change. Deposits grew a billion three. For the quarter, average non-interest EVA grew 418, though period end declined 183, which was a lot of movement that we saw in the last week of the quarter. Some of that has reversed itself in the first two weeks, but that's just a usual activity that we see. Credit metrics continue to improve. Like I said, criticized classifieds came down again nicely by $367 million. as did loans that are on deferral or modified into the CARES Act. They're beginning to look really small now. NPL ratio was down to 87 basis points from 121 last quarter. If you exclude the guarantee portion of SBA loans, it was at 68 basis points. NPA ratio was down to 58 from 80. The charge-offs for last year came in at 29 basis points compared to the prior year, which were at 26 basis points. On the buyback, we told you that we would be opportunistic as and when we see weakness in the stock price, which is exactly what we did last quarter. We bought back $182 million of stock. It still leaves about $27 million in our authorization, but when that is completed, we expect to go back to the board for more because we are sitting on a lot of excess capital. Book value per share is now $35.47, and tangible is at $34.56. So, I've come a long way in the last few years. The macro environment in our markets, listen, you know, I really can't ask for anything better. The one last thing that I was asking for is loan demand to come back, and that's also back. Line usage is up. Just, you know, our people are busier than they have been since before the pandemic. which is a really good sign. Also, rate environment is going to change, and that should also marginally help banks as rates normalize. Overall, the economy, whether you measure it through unemployment, whether you measure it through collateral values, it's just there's a lot of good news around. Challenges, you know, there are still some challenges, obviously. You know, we're going through another wave, Omicron. I'm not sure how many letters are left in the Greek alphabet, but it's something we still have to pay attention to. I don't think it's really had much of an economic impact, but we just need to be aware that we are still in the middle of a pandemic. It did push back our plans for getting employees back into the office yet again. So that's not fun. Supply chain issues are still real. Inflation headwinds are still there. And labor market is tight. Things that everyone knows. I'm not saying anything, you know, earth-shattering. And competition is still intense. But overall, we're feeling very optimistic where we stand at the beginning of this year. Strategy for us looking forward into 2022 and even beyond. You know, our emphasis is to build a commercial bank and keep building a commercial bank. Last couple of years... have been a bit of a curveball, and I see us basically returning to what we were doing before the pandemic, which is continuing to grow our commercial business. In the last two years, you could look at our balance sheet and say it has gotten much lazier in terms of the spreads of assets that are on. I think that's true for every bank. If you see what has happened, you know, with the securities buildup and jumbo residential buildup. And I think going forward this year and into next year, the strategy is to basically go back and invest and grow higher spread business, which is the commercial business, and deplete down the lower spread business like the securities portfolio. We have talked to you a little bit cryptically about expansion to markets. I will tell you what those markets are. One will not surprise anyone, which is Atlanta. We had attempted to do that just before the pandemic and had really bad timing. But we are convinced that is a good market for us, and we are really doubling up efforts. And instead of doing it, you know, on a piecemeal basis, we're going to do it holistically with CNI, CRE, treasury management, the whole suite of sales team in Atlanta. So that is in the works, and we should be operational hopefully in the next quarter or so. The other location will need a little bit of explanation, so bear with me. It's actually Dallas. And why Dallas? It's not contiguous. It's far away. It's a competitive market. Well, the reason is As you know, we already do a lot of business nationally, especially on the deposit side. And we've had a lot of success over the last three or four years in Texas. And we have round numbers of about half a billion dollars in deposits from clients in Texas. We are reaching that place where we cannot grow that business without presence on the ground. So we have to invest with some people in a branch. I don't expect it to be more than a branch, at least not in the medium term, short to medium term. Just one branch and a few people will do. But we can then serve not only the existing clients, but we could grow that book. We could easily double that business in a very short period of time. So we're very bullish on that because we already know the pipeline is there. And just converting that is getting harder from far away. So those are the two markets. Texas is at least initially not going to be so much about lending other than the lending we already do in Texas to our national businesses. But over time, I think that will open up other opportunities on the asset side as well, but we're going to start with the deposit side. There's another short announcement. In the coming weeks, you'll also see an announcement from us on overdraft policy. We look at our overdraft policies. They're already very, very customer-friendly. That's not how we make a living. and we're basically walking towards this, eliminating consumer overdrafts. It's a rounding error for us. We already are a very customer-friendly bank, so why not just do this, and it's not going to have any material impact to the bottom line. Quickly, guidance for next year. We expect, basically, loan growth to come in mid to high single digits. More coming out of the commercial side and less or maybe not even any from the residential side. Certainly nothing from, you know, no growth in security from shrinking that down. The idea is not to, you know, drive this by just growing total balance sheet but by improving the mixed balance sheet. and keeping capital free for continued buybacks. We've done quite a bit last year, and there's no reason why we wouldn't do at least as much this year, if not more. Deposit growth, while that's always a focus, it's not the number one priority. That's not going to drive earnings, and we'll continue to stay focused on growing demand deposits, but really our attention is on the asset side. NIM is expected to, you know, we don't make bets on interest rates. We've said that, you know, hundreds of times. We try to stay neutral on assets. We are mildly asset sensitive at this point in time. So as rates rise in the, you know, middle of the year and onwards, we expect some help from that to our margin. Expenses, you know, it is a tough expense environment. given what we're seeing in the labor market, we expect expenses to be also made to high single digits. And PPNR is expected to grow next year. So with that, Leslie, I don't know if I'm missing anything. If I did, I will come back to it. But Tom, I'll pass the microphone to you.