BankUnited, Inc.

Good day. Thank you for standing by. Welcome to Bank Unitas Inc. Third Quarter 2024 Earnings Conference Call. At this time, all participants are on a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your host, Jackie Bravo. Please go ahead.

Good morning, and thank you for joining us today for Bank United, Inc.' 's third quarter 2024 results conference call. On the call this morning are Raj Singh, Chairman, President, and CEO, Leslie Lunak, Chief Financial Officer, and Tom Cornish, 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 those related to the company's operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by external circumstances outside of 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 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 2031, 2023, and any subsequent quarterly report on Form 10-Q or current report on 8-K, which are available at the SEC's website. With that, I'd like to turn the call over to Mr. Raj Singh.

Thank you, Jackie. Thank you for joining us for this call. Let me start by just quickly going through the numbers. This is a good quarter. That income came in at $61.5 million or $0.81 a share. I think last quarter we were $0.72. And the quarter this time last year, we were at $0.63. I checked last week what the consensus estimates were. I think they were $0.74. So always happy when we do a little better than consensus. What contributed to this? First and foremost is margin. We had guided to the fact that margin would be up. and it was up. Margin came in at 278. I think last quarter we were at 272. So, nice growth in margin. Actually, if I look from third quarter of last year to this, it's been a 9% increase in our margin, so we're happy about that. This was officially the quarter in which the monetary policy inflection happened. happened pretty late in the quarter, but we started acting on bringing down cost of funds even slightly before that. The cost of deposits this quarter declined to 306 from 309 last quarter. Cost of interest-bearing deposits came down from 426 to 420. Now, remember the Fed move happened pretty late in the quarter. So, you know, if you want to see A better impact of all of that, you should look at our spot rates. And the portfolio APY on deposits on September 30th was 293. On June 30th, it was 309. And if you look at just spot APY for interest bearing, it came down from 429 in June to 401. Even this doesn't actually fully include the actions that we're taking on deposits. because some of our deposit products get only priced monthly. So the stuff that happened on October 1st is outside of that. So we're being, you know, long-winded way of saying we're being proactive on staying ahead of all changes in the interest rate environment. Loan-to-deposit ratio has now come down to 87.6%. which is fairly low compared to, I don't know, Leslie, if you look back on what was our low point, but feeling very good about where loan-to-deposit ratio is from a liquidity perspective. NIDDA, as we had said to you last quarter, the last couple of quarters, we have had very, very strong growth. There's some seasonal trends in that. The trends go the other way for us in the second half. Average deposits, NIDDA, were down $64 million. Total deposits are up $93 million. Here at NIDDA, it was down $430 million. It's really made up of a number of things. One is some seasonality, especially in our title book, but also in our corporate book. Some of it is actually some deposit actions we took. We're trying to push out some very high-priced, price-sensitive deposits, which we were doing in the second quarter, but it really... While we took those actions the second quarter, the money didn't leave until the third quarter. So it's a little bit of that, and I'm surprised to even be saying that still some move from DDA to money market this late in the game, but we saw some of that also happen. So all of that contributed to this, but what's important is really average NIDDA. There can be a lot of noise in our period and numbers. Average DDA was down $64 million, and despite that, that our margins still went up six basis points, so we're very happy about that. Into the fourth quarter, the seasonal headwinds will remain. We're expecting NIDD, our best guess is that it'll be flat. But we very much expect that to start growing again when the seasonal trends favor us in the first quarter and second quarter. So the pipeline of new business that is coming in is still very robust. We're very happy with the business that we've closed this quarter. and looking to close into the fourth quarter. So loans were down $230 million this quarter, mostly in the residential and in the franchise and leasing business as we've been driving those down for quite some time. Tom will get into the details of that in a little bit. In terms of credit, charge-offs were, again, very, very low, six digits. I think it was $6.5 million, Leslie, correct? $6.5 million for the quarter. We did build reserve again this quarter from 92, I guess not reserve, it's ACL, is up to 94 basis points. NPA did take up a little bit. NPAs were 54 basis points, excluding the guaranteed portion of SBA loans. There were 39 basis points in June, excluding the SBA guaranteed portion. The two notable loans that moved into NPLs this quarter were in the CNI book. This is episodic. It does happen from time to time. We are adequately reserved for both these loans. They happen to be in two very different industries. It's just very unique to the situation that these borrowers are in. One is in the media space. The other is in the logistics space. But there is no trends anywhere in the portfolio that would suggest that this is something that would repeat itself. Capital, TCE, TA went up to 7.6%. Tangible book value continued to accrete up to $36.52. So pretty much good news on that front. We did have, as you will remember, earlier in the year, we hired Ernie Diaz, who now runs our small business commercial and retail franchise. We made another significant hire This quarter, pretty late in the quarter in September, Beth Rosen joined us. She's had a storied career at J.P. Morgan for three decades plus and a little bit of time at Wells Fargo as well. So she joined the team. We're very happy to have her here. I'm sure she'll make a big impact over the coming three, four, five years. Quickly, looking through my notes. Oh, yes, the hurricane. This is the quarter we unfortunately give you hurricane updates as well. We had two hurricanes blow through, one in September, one in October. The one in September missed us for the most part. No damage to either our physical premises or the loan portfolio. Milton, which came by just last week, was closer to our footprint on the West Coast. but I'm happy to report that really did not do much damage. All our branches are back in business. All locations are reopened. We are combing through the loan portfolio to make sure that there is no impact. So far, we have not found anything, but the work is not complete. So over the course of next few days, we will comb through the entire portfolio, and if there's anything, we'll give you an update. But as of right now, nothing to report back. This weekend... You know, I was, I got an email from our regulators asking for a bunch of detailed questions as they often do. And one question kind of stuck out. And it was about fourth quarter of last year. It was about a small charge in our P&L. And they asked me, you know, could you walk us through what that was? And I just didn't remember what it was. So I called Leslie on Sunday and said, do you remember this? And she jogged her memory, and she didn't remember it either. So I took it upon myself, I started pulling my files out to just go back and remind myself of where we were fourth quarter, if I could find something to answer. Long story short, I still don't know what the answer to that million-dollar charge is, and Leslie is going to take it from here. But it gave me an opportunity to, you know, I started reading a press release from four quarters ago. And as you can imagine, preparing for earnings for this call, we're deep in the numbers with what happened last three months. But this kind of broke that rhythm a little bit and forced me to look at where we were a year ago. And then I started looking, taking a bigger picture. The more I looked at this, the better I felt. And I wrote down just a few numbers. over the last few quarters for myself, and I want to share that on this call. And Leslie, you can correct me if I'm wrong anywhere. You know, the key indicators of success really are EPS, margin, ROA, ROE, and, you know, of course, you have to keep an eye on credit and so on, right? So after March Madness, we embarked on the strategy of, you know, improving profitability through balance sheet transformation. I mean, if there's one sentence that describes what we've been trying to do over the last six quarters, it's basically this. So if I just go back and look at the last four quarters, our EPS has gone, you know, starting in fourth quarter of last year, 62 cents, then 69 cents, then 72 cents, and now 81 cents. It's not on the back of buybacks or anything like that. This is just core performance. Our NIM has gone, again, starting from fourth quarter of last year, 260 to 257 to 272 to 278. Our ROA was 52 cents fourth quarter of last year, then 59, then 61, then 69. We're still not there. This is not mission accomplished kind of thing. But it's a trajectory that made me feel good, and I just wanted to share. ROE, similarly, it was 7.3, went to 7.9, went to 8, now it's 8.8. Again, we're not there yet, but we're moving in the right direction. And Just to make a point, this is not off of the back of cost-cutting. This is not off of the back of bleeding reserves. If anything, our ACL runs from 82 to 90 to 92 to 94. We're building ACL. Charge-ups are low, almost too low for a commercial bank. And bit by bit, EPS is going up, margin is going up, ROE is going up, ROE is going up. I wanted to share that because it happened on Sunday when I was, for a very different reason, forced to go back and look at the fourth quarter of last year, which I was not paying attention to, and I thought I'd share that with you. The other thing I would say is we give you guidance every January. That's our best guess of where the year will be. Sometimes we're accurate, sometimes we're not. Last year, for example, we saw March Madness coming, so whatever guidance we gave you in January... got shredded in March thanks to Silicon Valley and a couple of other banks. But this year, the guidance we gave you, you know, is coming in just, you know, our results are coming in just in line with the guidance we gave you. We told you that, you know, we'll have double-digit NIDDA growth. Well, as of right now, we're at about 11.7%. We told you that non-brokered deposits will grow, you know, high single digits. I think we're at just over 8% right now. we said margin would grow and would get into the high twos. Well, we're 278 right now. Loans, we said, will be high single digits. I think we're a little behind over there, but we have another quarter to go. We'll probably end up in the mid single digits. So, you know, it's kind of the opposite of last year where everything was going haywire. This year, everything is falling into plan and everything is steadily increasing. And by the way, I also want to make a point. These improvements are not done artificially. This is not by some big restructure of the balance sheet and magically your numbers look better the next quarter. We didn't do any of that. We just took a sustained long-term approach to this. Improve the balance sheet left side, improve the balance sheet right side, keep your expenses in check. You know, let's you know, keep credit in check and the profitability will take care of itself, not immediately, but over time. And I'm very happy to see where everything is coming out. And, but I just wanted to share that, you know, we often get lost in just one quarter, but it's important to kind of pull back and look at two, three, four quarters. So, but with that rant, I will turn it over to Mr. Cornish.