BankUnited, Inc. Q2 FY2024 earnings call

• Raj highlighted an outstanding quarter with strong margin growth (NIM up to 2.72%), deposit cost decrease, and significant deposit growth. Non-brokered deposits grew by $1.3 billion, with DDA contributing $826 million. Asset mix improved with growth in corporate, commercial, small business, and CRE despite residential decline. - Tom discussed robust deposit pipelines, new account business, loan growth in core segments, and CRE details including office portfolio trends. - Leslie noted net income of $53.7 million ($0.72 per share), NIM increase, average cost of deposits decline, provision of $20 million, and mid-single-digit noninterest expense growth guidance.

Deposits: Non-brokered deposits grew by $1.3 billion this quarter, with NIDDA up $826 million. The average cost of total deposits declined to 3.09% from 3.18% last quarter. Loans: Total loans were up $402 million quarter-over-quarter. Core C&I and CRE segments grew $589 million in total, while residential declined by $212 million. The loan-to-deposit ratio improved from 89.6% to 88.7%.

• NIM is expected to expand over the back half of 2024, ending the year in the high 2%s. - Net interest income is expected to be up mid-single digits to low double digits year-over-year. - ACL is expected to gradually build as a percentage of loans. - Noninterest expense is guided to have a mid-single-digit year-over-year increase, with railcar refurbishment costs contributing to the increase.

• Office CRE loans had some migration with NPAs up, including two loans in office CRE totaling about $50 million, but fully reserved. - Seasonality impacts on deposits and loans, with title business being a big contributor and also potentially hurting in the fourth quarter.

Q: About non-interest DDA growth, what's the target?

A: Shooting for double-digit growth, aiming for mid-teens considering seasonality and market factors.

Q: On loan yields, what's the trade-off between new C&I/CRE loans and runoff?

A: New production on C&I/CRE is at 7.5%-8% yield, while resi portfolio yields mid-3%s, with loan yields expected to increase 5-10 basis points going forward.

Q: Thoughts on the office portfolio and reserves?

A: Office portfolio issues are in line with expectations, reserve at about 2.5% and felt adequate. No risk of impairment in CMBS portfolio due to high credit enhancement.

Q: Capital deployment plans?

A: Will discuss capital in August, with focus on deploying capital profitably first, then considering buybacks if sustained growth not seen.