Bankunited, Inc. 2026 Q3 Earnings Call

Good morning, and thank you everyone for joining us today for BankUnited Inc.'s third quarter 2026 results conference call. On the call this morning are Raj Singh, Chairman, President, and CEO; Jim Mackey, Chief Financial Officer; and Tom Cornish, Chief Operating Officer. Before we begin, please note that our remarks today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect current expectations and are subject to various risks and uncertainties that could cause actual results to differ materially. 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.

Additional information regarding these risks can be found in the company's annual report on Form 10-K for the year ended December 31, 2025, and any subsequent quarterly report on Form 10-Q or current report on Form 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. Good morning, everyone. Thanks for joining us. Usually, we always have this issue that we come out with earnings, and there are eight other banks doing their calls at the same time. My team tells me that we somehow got lucky, and we picked a day when not many banks are coming out. So we'll have your undivided attention. That's awesome. Let me start by just before we talk about our numbers, just talk about the question that I often get from investors, what do you see in the economy and how are things out there in the mainstream? My answer is going to be similar to last quarter, which is while there are geopolitical risks and energy is a little out of control, there are concerns around inflation. The economy itself is doing quite well.

GDP growth are strong, unemployment is historically low, and in our particular markets, even more so, both those things. We are benefiting from that but keeping an eye on making sure it continues that way. What has changed from the last time that we spoke is the interest rate environment is quite different. Fed is no longer in a hold or loosening monetary policy stance. It has gone the other way. We have had our first rate hike, but more important than the rate hike also has been what has happened with the rest of the yield curve. That is a big change from last time, and we are paying extra attention to it and make sure that we have all our bases covered. That is really been the big change. Overall, our numbers, I will walk through them really quick, and of course, Tom and Jim will then get into some detail.

Net income came in at $72 million or $1.01 per share. I know you guys love to exclude anything on the securities front. If you take out some securities losses we had, net income was $74 million, and EPS was $1.03 per share. If you compare that to last quarter, I think we were at $0.96 last quarter, and a year ago, we were at $0.94. So making progress. ROA on an adjusted basis was 84 basis points, and ROE is now pretty damn close to 10%, but still not at 10%. It is at 9.8%. Basically, ROA, ROE, margin, EPS, everything improved, and it all happened on the back of basically gaining market share and deepening client relationships. Quickly, the highlight of the quarter was margin. We had given you guidance that by fourth quarter we will be at 315 NIM.

We are happy to be actually at 316 already in the third quarter. A bit of a deja vu moment for me. I think this time last year, we had the same dynamic play out. We had promised you a margin for the fourth quarter, but we achieved that in the third quarter and then expanded from there. It is going to be a very similar story, and we will talk about guidance a little bit, but margin is looking very good. And the reason it is good is because we have been very laser-focused on pricing and profitability and refuse to do business just for volume sake. That is the trade-off we have made, and it is showing. If you dissect this a little bit deeper, where is the margin growth coming from? Well, it is coming from both sides of the balance sheet. Commercial loan yields are up, but average deposit costs are down.

I tend to read not every bank that comes out for the earnings before, but I do selectively pick up earnings releases from other banks. And I have yet to see a bank that has, maybe there is some bank, but I have not seen a bank that has actually reduced deposit costs last quarter as a quarter-over-quarter. We are very proud of that. And by the way, that happened not because our NIDDA grew this quarter. Actually, our average NIDDA was flat this quarter. This is really all coming off the back of interest-bearing deposits. We are very proud of that. Printing a number below 2%, I think that makes me very happy. Talking about deposits, our franchise continued to perform well. And deposits, you remember, the seasonality in our deposit.

Second quarter is always the strongest quarter, and then things tend to moderate in the third and fourth quarter, and first quarter is our weakest quarter. Average NIDDA was essentially flat this quarter. To be honest, I was expecting a little bit of growth. But in September or late August into September, with the mortgage origination business getting impacted pretty severely by rising 10-year rates, our title business took a hit for that. Now, we grew our title business in terms of customers who brought in more clients this quarter and continue to do that every quarter. But the average activity in those accounts was lower and directly attributable to what's happening in the long end of the curve. NIDDA now stands at 32% of deposits. Again, compared to a year ago, it was 30%, so there's growth. We still have 10% growth in NIDDA year-over-year.

I'm talking about averages. Remember, we've told you time and time again, don't look at period ends, always look at averages. That's what drives the P&L, and that's a better representation of how our business is doing. Quickly talking about lending. Again, we had a pretty decent quarter in terms of production, but payoffs have been high again. Loan production year-over-year, our core loans, which we define as a commercial CRE in small business and mortgage warehouse lending as well, grew at about 4%, about $700 million. But the average C&I balances from last quarter did decline by 300. Some of it is attributable to some loans that slipped over into the fourth quarter. But generally, it's all coming back to the discipline that we're trying to maintain on two fronts.

One is trying to get the full relationship and not just do transactional business, and second is spreads. That's directly attributable to that. Having said that, fourth quarter is always our biggest quarter. If you go back and look at last year or the year before, you'll see fourth quarter tends to be the blowout quarter for us, and we expect the same this year. I will say one more thing about C&I. I've been trying to look at a lot of what our competition is doing. A lot of C&I growth, especially over the last couple of years for the industry, has come for, but at least greatly benefited from NDFI expansion. We have actually taken a more selective path, and instead of increasing our NDFI exposure, we've been decreasing it. It's a call on risk for no other reason.

We think it's the right thing to do long term. We're okay with doing investment-grade capital call business, a little bit of that, but other categories of NDFI, we have been taking down. Also, we have steered clear of some of the flashier asset classes like data centers and AI. We don't think a bank our size really is geared towards participating in that. And I know some of our peers are actively participating in that growth as well. There's no way we're getting deposits out of that business if we ever did that, put it that way. Quickly, a comment or two on credit. Credit is fairly benign, and the charge-offs were pretty low, just like last quarter. Provision would have actually been zero if we had just gone with the model.

But given all the geopolitical and other risks that are out there, we used qualitative overlays and built reserve to about 93 basis points. Capital. Because the stock was weak this quarter, we took this opportunity to step up our buyback speed, and we bought back a lot more shares this quarter than previous quarters. I think we bought back 2.1 million shares for about $97 million. So year to date, if I combine dividends and share repurchase, I think we've returned $278 million in the first 9 months of capital. And having done that, CET1 still remains robust at 12.1%. And I know your question is going to be, so what happens in the fourth quarter? Well, most likely we will finish whatever is remaining in this authorization, and we'll go back to our board in the fourth quarter.

We have meetings coming up in November, December, and we'll discuss this with them. They'll probably want to see a detailed business plan for next year and revised forecasts for actually not just the next year, but the next 3 years, and they'll make a decision based on that. But I'd be shocked if we don't re-up the buyback. With that, quickly on margin, I've already said this. Expect margin to expand again modestly in the fourth quarter quite like it did last year. And I'm sure you'll all be tempted to ask us about what will happen past fourth quarter, and we're not ready for that yet. We will give you that guidance in January like we always do. With that, let me turn it over to Tom, and then Tom will turn it over to Jeff.