BankUnited, Inc.

Good day. Thank you for standing by. Welcome to the Bank United third 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Susan Greenfield, Corporate Secretary. Please go ahead.

Thank you, Michelle. Good morning, and thank you for joining us today on our third 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 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 external circumstances outside the company's 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. 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 Ross.

Thank you, Susan. Welcome, everyone. Thank you for joining us for our earnings call. You know, in preparation for this call, I usually ask Leslie like a week before if she can kind of guide me as to what are the things investors are looking for? What are the hot topics? So this time I did the same thing and what Leslie forwarded me was an email from one of the sell side analysts, I think it might have been JP Morgan, with basically saying, not specifically to us, but generally bank investors are looking for like five or six things that are top of mind. So in my comments, I'm going to go straight to those few things and try and answer them. The things were in that order, name inflation, deposit stability, both pricing and flows, uh, credit trends, uh, unrealized losses, expense management. And the last bullet point was, uh, sort of regulatory and in brackets that, uh, this really applies to larger banks. So I'm going to try and get straight to that rather than, you know, regurgitate what's in our earnings. It's been out for a couple of hours. You probably have read where the numbers came out. But if those are the big topics, let's just talk about them directly. NIM, our NIM increased by nine basis points from 247 to 256. Just for context, you know, if you go back, last quarter we told you that While our NIM had gone down from first quarter to second quarter, second quarter was pretty flat. Every month was, you know, 247. This quarter, we went up. So if you go back from January and look to now, Jan to Feb, Feb to March, March to April, NIM was declining. And then for the next three months, it was flat. And now for the three months after that, it's gone up. So it's created a A nice curve that I like and I think we can safely predict that this modest improvement will keep happening in the next few months. Deposit stability is the next question. Again, this quarter we grew, outside of brokered, we grew about $500 million in deposits and even grew non-interest DDA by a little more than $50 million. Our NIDDA to total deposits is stable at about 28%. I've been asked this question many, many times over the course of the last two or three years. What do you think the long-term run rate, that ratio is? Where will you stabilize in terms of DVA percentage? I've never been able to answer that question because, to be very honest, I don't know when all is said and done where things will stabilize. Now, looking at this data, not just for this quarter, but for the last several months, I'm beginning to get confidence in saying that I think we're there or close to being there. So, you know, and if we get another quarter or two of this, which I think we will, we will be able to declare that this seems to be the bottoming out on that ratio as well. And dare we say that, you know, shoot to actually improve from there and try and get about 30% again over the course of the next few quarters. Credit trends, quickly, net charge-offs, again, very low at seven basis points. I think last quarter there were maybe eight basis points, if I remember right. NPAs are at 40 basis points. If you carve out the SBA guarantee portion, that's about 11 basis points off that 40. So still, you know, pretty low. They were slightly lower than that last quarter, but they're about, you know, kind of bouncing around in that region. Unrealized losses came in at 407. That's our AOCI is about 407, I think. And last quarter, it was a little bit better at 373, I think. Now, obviously, that's of what's happened to rates, especially in the last few weeks. Expenses, I think we guided to you that for the second half of the year, we're going to try and keep expenses flat, and I think we pretty much delivered on that. Let me add a few other things which are not, you know, on the regulatory front, like I said, you know, that email said it's really a question for larger banks, but I don't really have anything special to report on the regulatory front that you already haven't read in the American Banker. But that's the balance sheet quickly just to go over that. Securities were down $257 million. Loans, like we said to you, were taking REZI down because we've gotten overweighted in REZI. That was down to 25. CNI was up 100. CRE was up 46. Overall, loans came in down to 74. I will make a point that even within CRE, CNI growth of $100 million, we actually did push out about $300 million roughly. of non-core CNI. So if we had not done that, it would have been much higher. We feel like we're getting done with what we need to push out in terms of the transactional business, so feeling pretty good looking forward. FHLB, we paid off a little over $800 million. Broker CDs, we paid off a little over $200 million. Actually, FHLB balances now stand lower than they were at the end of last year. So from a balance sheet perspective, we feel pretty good. Loan to deposit ratios gone down to 93% from 95 last quarter. And despite taking the balance sheet down as much as we have, our PPNR was slightly up. So I'm feeling pretty good about the way the quarter turned out. We did build reserves this quarter. ACL was up quite meaningfully to 80 basis points. And that's because, you know, We don't know when a slowdown is coming, if it's in a quarter or two or three, but it does feel like something will happen. The Fed has done a lot to slow the economy down and hopefully just a soft landing, but it may be a mild recession and we have to be ready for it. So we did build reserves up. Most of that reserve build was really because of Moody's outlook got worse. And when you run it through our numbers, that contributed to more than half of our provision. Quick comment on the environment. I always make a statement or two on this. I think on the rate side, rate economy and regulatory, I'll talk about all three. On the rate side, my personal opinion is I think the Fed is done. Whatever little more they wanted to do, I think the market is doing for them. And I would be surprised if there is much movement from the Fed. Maybe another move in a couple of meetings, but it feels like that story has inflected. The economy is still coming along fine, but reading more and more about how the consumer is pretty much done depleting the buildup of cash from the pandemic. So we're being very careful and vigilant on the economy to see any signs of cracking. I think eventually we will see some. And on the regulatory front, you know, a lot that is about to happen that we're all reading about, it impacts, obviously, banks in the hundred to trillion range a lot more. There will be some trickle-down effect for us. But on the day-to-day basis, I think everything is fine on the regulatory front. I don't think anybody is being unreasonable. And, yeah, there will be a little more burden on the regulatory front that we'll all have to deal with. but I think it's sometimes a little overplayed. So with that, am I missing anything? No, I just wrote these things down on a piece of paper, so I'll jump in and interrupt Tom and Leslie as they are talking through their stuff. But once again, thank you for joining us. I'll turn this over to Tom. Great. Thank you, Raj.