BankUnited, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2022 Bank United earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, we'll ask a question. To ask a question during the session, you need to press star 1-1 on your telephone. I would now like to turn the call over to your host, Susan Greenfield, Corporate Secretary. You may begin.

Thank you, Kevin. Good morning, and thank you for joining us today on our third quarter 2022 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 external circumstances outside the company's direct control. 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, 2021, and any subsequent quarterly report 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, to our earnings call. Thanks for joining us. And let me start by just highlights of the quarter. Net income came at $87.9 million, $1.12 a share, a nice 37% increase in EPS. ROE came in at 13.5%. We're very happy with those results. This growth in earnings really driven because of NIM expansion. I'd like to remind everyone that we're not very asset sensitive. We're a little asset sensitive. But I think we're right in business at better margins, which is helping. And of course, the slight sensitivity is also helping. So our margin expanded by 13 basis points compared to last quarter. This quarter, last quarter, we were at 263. And if I remember well, third quarter of last year, we were at 233. So nice trajectory there. Our core CNI and CRE businesses grew by $444 million this quarter. This was, of course, partially offset by declines in mortgage warehouse, which is, you know, and a slight decline in Pinnacle and Bridge as well. But mortgage warehouse declined a little less than $200 million. I think the utilization now is at a historically low level, given everything that's happened in the mortgage origination business. Consistent with system-wide trends, you know, and the Fed tightening, deposits declined by $1.1 billion. Our non-interest DDA declined by $851 million, but NIDDA now still stands at 32% of total deposits. I'd like to remind everyone that this journey of building NIDDA, which is like five years in the making now, when we started on this journey, which was, let's say, going back to 2017, our DDA balances were just 14% of our total deposits. Even before the pandemic, which was, let's say, the end of 19, we were only at about 17.5%, and today we're at 32. I don't like seeing these declines happen. We'll talk a little more. Tom will get into the details of where this is coming from. A large part, about half of it, is coming from one particular business line, and Tom will shed some more light on that. But despite that, for this year, for 2022, if you take a nine-month view, And NIDDA is down by 182 million because in the first part of the year we were growing NIDDA. This quarter we shrunk. Overall cost of deposits came in at 78 basis points. Again, you know, given how fast the Fed is hiking, you should expect this to keep climbing up. I think last quarter, let's see, we were at 30 basis points. So 30 to 78 basis points now. Really quick, the last week of this quarter we were hit by Hurricane Ian. I'm happy to report that there were no significant damage to our facilities. Our people are all safe. And we're reaching out to our customers who might have been impacted. So far, the information that we've compiled, we don't expect a material impact on credit. Having said that, we did put $5 million into our provision just in case. As the next few days and weeks roll on, we might have a credit here or there. For that purposes, we did take a $5 million provision. That's included in our numbers. We're not seeing any systemic credit issues. We're looking very hard, turning every rock, trying to find any issues that there might be out there, because as the economy is slowing, it's natural to be very, very careful. But so far, we really have nothing to report. In fact, our criticized classified loans, they continue to decline. This quarter also, it was a very healthy decline of $175 million. Excluding the guaranteed portion of our SBA loans, the NPA ratios stood at 32 basis points, which is a very small uptake from prior quarter. And annualized net charge-offs for the nine months, not this quarter, this quarter was very low, but for the nine months stood at 16 basis points. That compares to 29 basis points of net charge-offs for last year. So we're happy about that trend as well. As you already know, the board did authorize another $150 million buyback sometime mid-September. We have executed about $11 million of that already through the end of the quarter, and we'll continue to judiciously execute on that as time goes on. So if you take all the buybacks that we've done so far through the end of September, I think the number comes to about $337 million. In terms of quickly updating the guidance that we've given you, we expect loan growth for the year to come out at about mid-single digits, driven again by CNI and CRE. By the way, CRE was a positive quarter, which is, you know, we have not said that now in many, many quarters. So we finally have, you know, it's not a very big positive, but it is a positive quarter, and we're very happy about that. We're now sort of inflected onto the other side of now growing CRE. CNI still will be the largest driver of growth. CNI, small business, middle market lending, all doing well. Pipelines are very healthy. In terms of deposits, I think deposits, this will be a challenging environment. I expect deposits this coming quarter to be, again, under pressure somewhat, both NIDDA and total deposits. and costs of deposits will climb as the Fed keeps, you know, tightening. We're expecting another 75 basis points here in a few days, and then another move in December. So having said that, margin overall should still, we're still positively biased when it comes to margin. So yes, deposit costs will go up, but, you know, our yield on assets, loans, and securities will also go up. Overall, we still think there is a, there's room for margin expansion in the fourth quarter. In terms of overall, I usually actually start with this, talking about what we're seeing in the economy. My comments will be very similar to what I said last quarter, which is that we're cautiously optimistic. We're looking very hard to see if there are any cracks appearing anywhere, but we're not finding them. We're talking to our peers. We're talking to smaller banks, bigger banks, non-banks. We're trying to see where trouble will emerge, but we're not seeing it yet. Having said that, we're not sitting and assuming that everything will be fine. We are taking a view that long-term, there will be a significant slowdown, and sometime next year, we just have to be careful. So this is not a time to be very brave and aggressive, but be a little cautious. So on the scale of that, the one to 10 that I described on the call last quarter, we stay about the same where we were around the six in terms of cautiousness and optimism. and we'll keep revising it as more data comes along. But, you know, Florida's doing very well, and we're very thankful that the hurricane missed us for the most part. Let me turn it over to Tom, and he'll get into a little more into the loans and deposits.