BankUnited, Inc. (BKU)

BKU 
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BankUnited, Inc. (BKU)

Q1 2013 Results Earnings Call

April 24, 2013 9:00 AM ET

Executives

Mary Harris - Senior Vice President, Marketing and Public Relations

John Kanas - Chairman, President and CEO

Raj Singh - Chief Operating Officer

Leslie Lunak - Chief Financial Officer

John Bohlsen - Vice Chairman and Chief Lending Officer

Analysts

Rob Placet - Deutsche Bank

Brady Gailey - KBW

Matthew Clark - Credit Suisse

Herman Chan - Wells Fargo Securities

Gerard Cassidy - RBC

Joe Fenech - Sandler O'Neill

Presentation

Operator

Welcome to the BankUnited 2013 First Quarter Earnings Call. My name is John, and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mary Harris, Senior Vice President of Marketing and Public Relations.

Mary Harris

Good morning and welcome. It’s my pleasure to introduce our Chairman, President and Chief Executive Officer, John Kanas.

But first I’d like to remind everyone that this call contains 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.

The company generally identifies forward-looking statements by terminology such as outlook, believes, expects, potential, continues, may, will, could, should, seeks, approximately, predicts, intends, plans, estimates, anticipates, or the negative version of those words or other comparable words.

Any forward-looking statements contained in 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 relating to the company’s operations, financial results, financial condition, business prospects, growth strategy, and liquidity. If one or more of these or other risks or uncertainties materializes, or if the company’s underlying assumptions prove to be incorrect, the company’s actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive.

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. Information on these factors can be found in the company’s annual report on Form 10-K for the year ended December 31, 2012, or at the SEC’s website, www.sec.gov.

I’ll hand the call over to John. John?

John Kanas

Good morning, everybody. Raj Singh is here with me; Leslie Lunak is here, our newly appointed CFO; and John Bohlsen is with us, not invited but in voice from New York.

We obviously very pleased with the quarter. $0.47 is a decent beat to the estimates which have been moving around recently, but generally $0.44, $0.45. And personally its even more gratifying because the while we opened four new banking centers in New York and have continued to add to staff in New York, so this quarter contains virtually zero in revenues from the New York operation, but pretty well loaded with upfront and ongoing expenses.

Also we had to deal with the large loan, it got a great deal publicity down here in Florida core Universal Health Services, which we had $15 or $16, I guess we have $16 million piece, we charged it’s a massive fraud, it’s been over papers down here, the FBI is involve and their expectations of people getting, people going to jail over this. It’s a multi-bank credit, where we had $16 million, we took almost $7 million in charge-off and reserve to be cautious another $5.5 give or take. And so the only thing remaining on our balance is what represented by basically cash.

I think we’ve been conservative over there. We hope to get some of that reserve charge back, but we’ve took advantage of this quarter to put this issue behind this. We are pretty well flushed out in terms of teams of people in New York. We are probably 50 or 60 people in chairs and then another 10 or 15 people who will be joining us strategically over the balance of this quarter.

Significantly the Herald Bank deal a little small, it didn’t involve a full blown data conversation and that has been successfully completed in March. So Herald Bank is no more, its part of BankUnited and it is completed converted under the BankUnited system.

Loan growth, you see if you add together loan growth plus the equipment under operating lease growth for the quarter, a little over $400 million first quarter typically relatively low growth quarter was last year and we expected on a comparison basis, it will be this year as well.

Deposit at $8.7 billion up a little bit. Remember that there is not a big push deposits in this institution, loan to deposit ratio is still hovering around 65%. So we’ve got lots of room to add there when necessary.

Margin came in almost exactly where we expected to commence like compression from the prior quarter at $593 and look the message that we bring to you is not unlike the message that you are getting from almost every other mid size bank in the country that is margin compression, margin compression.

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