BankUnited, Inc.

Good day and thank you for standing by. Welcome to the Bank United second quarter 2023 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 the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded And I would now like to hand the conference over to our speaker today, Susan Greenfield. Please go ahead.

Thank you, Latonya. Good morning, and thank you for joining us today on our second quarter 2023 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 around 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, such as adverse events impacting the financial services industry. The company does not undertake any obligation to publicly update or review any forward-looking statements, 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. These factors should not be construed as exhaustive. Information on these factors can be found in the company's annual report on Form 10-K for the year ended December 31, 2022, 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. Thank you for joining us. Ninety days ago when we last spoke to you, I was just thinking of it this morning. The day before our last earnings release, Leslie and Tom and myself, we were huddled in a room. and doing dry runs of what the earnings release would be like. I think we did two dry runs, which we've never done before, but we did those on that day. Every question that people possibly asked, we wanted to be sure. We were prepared with the answers. We have all kinds of data available to us at our fingertips so that we could answer all your questions at that time. Compare that to yesterday. Tom and I were at a golf outing for our top clients where we had a great day. We did leave Leslie back in the office, but that's more because she doesn't like golf. But 90 days can make a big difference. So we're happy. We were able to entertain all our clients, and life has sort of gone back to normal. The day of earnings last quarter, actually that day or maybe the next day, I called a senior leadership team meeting and the top 10, 12 people in the company, we huddled together in a conference room for half a day and we did something which we rarely do with the company, which is we actually had a short-term strategy session. We always talk about long-term strategy, but that day we said, listen, the environment that we're in, now again, reminding you, this is late April, we said, okay, we're still in a tense environment. The worst may have passed, but maybe it hasn't. what are the things that we could do in the short term, sort of very tactically, and short-term defined as in the next quarter or two that will improve the standing of the company. And it was a whiteboarding session, and we started writing things on a whiteboard, anything that came to anyone's mind, you know, things like let's – and it was a metrics-driven conversation. you know, let's improve our loan-to-deposit ratio. Let's improve our total deposits. Let's pay down FHLB borrowings. Let's start an expense management program. Let's improve liquidity coverage. Let's improve our uninsured deposit levels, and so on and so forth. And we wrote down a whole bunch of things. Of course, somebody said, okay, let's make sure credit remains pristine. And we put all of that on a whiteboard, and we stared at it collectively for a period of time and said, okay, Some of these things are things that we should be doing all the time anyway, but what are the most actionable things that we can achieve in a matter of a couple of months or a couple of quarters? And we made a laundry list, and that became sort of our short-term, I don't even think it's really strategic. It really was tactical. And we started executing on all of that. Standing here exactly three months from that and reporting our second quarter numbers, I'm very happy that we've actually hit pretty much all of those metrics have been laid out for ourselves. We improved liquidity. We improved capital. We grew deposits. We improved our loan deposit ratio. We ran down our mortgage book, our securities book. We paid down FHLB. And I'll talk about margin. While margin came down this quarter, we stabilized that as well. We'll talk about that in a little more detail in a few minutes. So I'm pretty happy where we are in a very short period of time. Last quarter, I had made a comment that, you know, the first quarter could be viewed really as two different sort of timelines. It was everything from January 1st to March 10th, and then everything from March 11th to the end of March. This quarter, if I was to try and do the same, there wasn't that much of a clear demarcation, but I do feel the first half of the quarter felt very different from the second half of the quarter. And and going into July, you know that has continued And and things feel fairly back to normal. So I'm happy about that a quick quick comments about The environment, you know things that we don't control but we react to so first and foremost the economy The economy is very resilient so I'm kind of like tired of saying this over and over on every call and But that's how we see it. We don't see the stresses that we're all afraid of showing up anywhere in any of our geographies. So the economy is strong and resilient. Florida is twice as strong as the national average. If you look at Florida's GDP, unemployment rate, and so on, unfortunately that also means inflation is much higher in Florida than the rest of the country. But the economy is very resilient. On the rate environment, it does feel like the Fed is very much at, you know, I think they will raise rates. That's what the street is pricing in. But given where CPI and PPI data is, it does feel like we are very close to the inflection point on Fed policy. So that's good. And the banking environment, generally speaking, while it has improved tremendously from the chaos of three months ago, it is still a challenging environment and challenging for the reasons of the curve being inverted and the competition for deposits still being very intense and still some concerns about the economy eventually slowing down or faltering. It's still that is an expectation out in the future. It's not here and now. With that, let me quickly go over some of the numbers. Leslie and Tom will both do a deeper dive. I'll run through these quickly. Net income came in at $58 million, 78 cents a share. I think that's right on top of consensus from what I checked a couple of days ago. Deposits grew by $116 million. NIDDA went down, but only by $62 million, which is a big improvement over the big declines that we've seen in non-interest DDA over the course of the last many quarters. So our ratio of non-interest DDA to total deposits came in at 28.3, relatively stable to what it was in March. I think it was 28.6% at that time. Loans declined by $263 million, but the largest portion of that was residential, which we had gotten residential heavy, as you know, in the last couple of quarters, mostly after the pandemic. So taking that down was a very deliberate decision by us. So total loans declined by $263 million, but resi was $184 million off that $263 million. Securities portfolio, also, we let that run down. That's also larger than what we needed to be. It came down by $390 million. On the other side of the balance sheet, we did pay off FHLB advances to the tune of $1.6 billion. Margin was 247 for the quarter. Now, that's a decline from 262 last quarter, but I want to make a finer point here. Last quarter, when we looked at our margin, Our margin was declining from January to February, from February to March. It was coming down, and we ended up overall for the quarter at 262. This quarter, we entered this quarter at 247, and we ended this quarter at 247. So relative to last quarter, where this was coming down hard and fast, this quarter, while it was lower, it felt a lot better because it was stable. So I'm happy about that. Cost of deposits increased to 246. That was compared to 205 last quarter. I think the increase this quarter was 41 basis points. Last quarter was more. It was 63 basis points. So slight improvement on at least the velocity with which deposits are repricing. And on the credit front, quickly, there isn't really much to talk about because everything is fairly stable. NPAs were 34 basis points. If you exclude the SBA guaranteed loans, then there were 24 basis points. I think that's two basis points higher than last quarter. Charge-offs were nine basis points, very much in line with last quarter. In fact, compared to last year, I think last year we were averaging 22 basis points, so much better than last year. So on the credit side, there isn't much of a story. Obviously, everyone is focused on office CRE. Our total CRE levels are fairly low compared to our peers. And I'm defining peers as sort of banks between 10 and 100 billion. What we did last quarter also, we gave you a lot of information on our office portfolio. This quarter, we've given you even more information. We are spending a lot of time looking every which way possible in this book to see if there's any trouble. This is not something that is causing us any kind of heartburn. So this is a very good portfolio. A large part of the exposure is Florida, and whatever exposure we have in New York City pristine. I mean, it is really hard to poke holes in this portfolio. So as of right now, this is not what we're losing sleep on. So lastly, just a comment about capital. I said at the beginning of the call, we also improved our capital position, not because we needed to, but in a time like this, in volatile time like this, more capital is always better. Our set one improved, our tangible common equity ratio improved by 30 basis points. So overall you know tangible book value increase and and and so on so overall I you know our collective blood pressures is down a lot in the last three months and that's a good thing and and I would say that we're basically back to doing you know and executing on the long-term plan that we'd already set out for ourselves So, and I hope it stays like this, and we can come back to you in 90 days and talk more about the progress you've made on that front. But I will turn it over quickly to Tom, who will go a little more detailed into the numbers.