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Text: So for the quarter, earnings -- net income came in at $104 million, $1.11 per share compared to $98.8 million or $1.06 per share last quarter.
The -- for the full -- for the first six months of the year, this translates to an ROE of 13.2%, ROA of 115 basis points.
I'm very happy with where things came out on the earnings front.
NII, net interest income continued to grow despite tons and tons of liquidity on the balance sheet, which I think is a problem with every bank these days.
Our NII came in at $198 million.
Last quarter, it was $196 million.
This quarter last year, it was $190 million.
NIM contracted a tiny bit from 2.39%, down at 2.37% mostly because of that elevated level of liquidity that I just mentioned.
On the deposit front, again, a very strong quarter.
Deposit costs came down, the mix improved, the volumes grew.
So across the board, no matter how you measure it, the story of the deposit side was again very, very strong.
So just quickly getting into the numbers.
Our cost of deposits dropped from 33 basis points to 25 basis points in the last quarter.
That's an eight basis point reduction.
DDA grew by $869 million.
And most of our growth was DDA again.
And by the way, DDA now stands at 31% of deposits for -- it was 25% just at the end of last year.
So for those of you who have followed our story for some time, even as recently as a year or 1.5 years ago, we think of 30% as the profitability scale.
I'm happy to report we're at 31%.
But that doesn't mean that we're not shooting for a higher number.
And I think the bar just has been reset, and we think we can actually get -- improve the funding mix even beyond this 31% that we're at today.
Provision for credit losses came in at a negative $27.5 million, and Leslie will get into the specifics of how that all evolved.
On the credit front, we again got some progress.
Credit -- criticized classified assets dropped by $541 million.
That's a 21% drop.
Loans that are either temporarily, deferred or modified under the CARES Act also declined.
They were $762 million last quarter, now they're down to $497 million.
Our NPL ratio, however, went up a little bit from 1% of loans last quarter to 1.28%.
If you exclude the guaranteed portion of SBA loans, that number is 1.07%.
This increase is attributable to -- largely attributable to basically one credit.
It's a large credit, $69 million.
It's a relationship in the C&I business here in Florida.
It's a relationship that we had for almost a decade.
And for the large part of that decade, the first seven years or so, it was -- we were the primary bank all in the last two or three years that we become a participant in a shared national credit because the company got so large that we couldn't really support them from their credit needs.
So one of the large banks in the country took over the primary, and we've been a participant, but it's a company that we've known for a decade.
Some accounting irregularities came up over the last few weeks in the books of this business, which is why we took the stand of moving this to a nonperforming loan and taking a large reserve against it.
A $30 million reserve against this loan.
Capital -- by the way, net charge -- let's just move to financial then on the credit side.
Net charge-off ratio was 24 basis points compared to 26 basis points for the full year of 2020.
Capital, as you know, we have tons of capital.
We've announced a share buyback back in February, which is still outstanding by $37.7 million, still outstanding at that.
We are adding to that.
And yesterday, the Board met and approved another $150 million on top of what was already left in the last authorization.
So I think over the last couple of earnings calls, I've mentioned that the stand we've taken with buybacks is that we will be more opportunistic rather than just steady buy a little bit every day.
And the reason for that is we expect this to be a very volatile market.
Even a little bit of bad news or good news can really move stock prices a lot, which is what we're seeing right now.
So we're going to use that to our advantage and be opportunistic.
It's -- with the stock trading, I guess it's a fairly easy decision for us to do.
CET1, one capital, is 13.5% holdco; 15.1% for the bank.
Our book value, again, continues to grow.
Book value was $33.91 now.
So very happy about that continued progress upwards.
This quarter, after I think the longest hiatus we've ever had, this quarter, we are back in the hiring business and brought in producers both on the left and right side of the balance sheet across business -- the various business lines.
We have not done that for a full year, which, like I said, it was the longest we've ever gone without bringing in new producers.
We even launched a new business line.
We were always in this business, the HOA deposit business.
We've always been in this business but not organized as a separate business line, but we did that.
We see a big opportunity.
We've made a couple of hires again on the production side.
And those hires will be starting soon.
So very excited about what that business will do for us over the course of the next three or four years.
The other thing is this quarter -- last quarter, excluding PPP loans, our loan growth was negative $500 million, round number.
This quarter, we still have a negative number, but it's small compared to how much decline we had in loans last quarter.
And as I look forward to where the pipeline is, I'm actually very optimistic about what third quarter and fourth quarter would bring to us, especially in the commercial side, especially in the C&I business.
Less on the CRE front where the pipelines are also getting better, but C&I pipelines are much better, and Tom will get into a little bit details of this a little more.
But as we see into the second half of the year, the best we can tell is we will most likely make up the reduction that we've had in loans, again, excluding PPP loans because that's just a different animal.
So the economy is healing both in New York and Florida.
Florida is further ahead than New York, like I've said in the past, but even New York is showing very good signs.
We are obviously watching how the healthcare numbers evolve.
That can change at any time, so we do keep an eye on that very closely.
But overall, it's been a very positive picture.
We have opened up and brought our employees back in a capsulated way.
We're not completely back into the office.
But by Labor Day, goal is to get to the new normal where a number of people will work in a hybrid fashion, others will work remote and some -- a few will work permanently five days a week at the office.
So all of those what we call RTO, or return to office, is being played out as we speak.
And we expect that by Labor Day, we will be in the new normal.
Again, the caveat, obviously, is the healthcare crisis that we're watching.
One more thing, which Leslie just pointed out to me.
The other change on strategy that is very recent over the last three months or so is for the first time in the history of the company, we are beginning to think about geographies outside of just New York and Florida.
In the past, we've said New York and Florida is about as much of the market as we want because it's just hard just flying back and forth between these two markets.
But if the pandemic has taught us anything is that you don't have to fly back and forth all the time to cover two markets.
If that's the case, then there are other markets that will work well with our business model.
Generally, business dense urban markets where we are beginning to look and have discussions with to see if we want to expand into these markets.
There's nothing to announce.
These are in very early phases, but I wanted to share at least our thinking about geographic expansion much before it actually happens.
So when there is something more comprehensive, we'll come talk to you about it, but we are beginning to at least think in those terms that it's not just Miami and Manhattan, but other markets might also get added to this franchise over time.
So let's talk a little bit about the deposit side.
First, overall average noninterest-bearing deposits grew by $673 million for the quarter or by $2.9 billion compared to the second quarter of 2020.
On a period-end basis, noninterest-bearing DDA, as Raj said, grew by $869 million for the quarter while total deposits grew by $877 million.
NIDDA has now increased 26% on a year-to-date basis.
So what's really good about that is it's another quarter where we've seen really strong growth, really, in all of our business lines.
It's a broad-based support of the continuance of NIDDA new relationships.
Most of the growth was driven by new logos coming into the organization, new treasury management relationships, which is showing up strongly in our fee income lines, which were up 31% in terms of service charges.
So we're seeing good support in all of these areas.
Time deposits declined by $806 million.
Money market and interest-bearing checking grew by a total of $815 million.
So we're seeing some movement from time deposits to our money market product.
As we've lowered rates on the CD side, retention has been good.
And actually, as I said, a lot of this money has been moving to the money market accounts.
On the loan side, I'll spend a little bit of time on this and follow up on some of Raj's comments.
While we did have a decline, excluding the PPP loan forgiveness by $56 million, in the quarter, it began to feel like a more normalized quarter.
Residential growth was $494 million for the quarter, including both the residential and the EBO side.
And I think most importantly for us, as an indicator, C&I loans were up by $186 million for the quarter, which is really, really a good sign for us.
It's one of our major business lines.
It's the first time that this line has grown in the -- since the onset of the pandemic.
So that was really good to see.
Also even better or just as good as the $186 million, what was nice is there was a good blend of new relationships into the bank as well as existing clients increasing credit facilities during the quarter.
So utilization -- line utilization has been a challenge for the industry.
It's been a challenge for us.
We're at relatively low historic rates from a utilization perspective.
So it was nice to see clients start to move back to a more normalized basis, see transactions being done in the quarter, see M&A activity being done in the quarter.
So the blend was good, and we also -- within the C&I business, if we looked at the business, it was a strong back end of the quarter.
June was particularly strong and we saw transactions in a number of different industries.
At one point, I looked at the pipeline for closing in June, and we had something like 18 deals and all 18 were in different industries.
So that was nice to see from a diversity perspective.
So given the pipeline activity that we're seeing now, we expect to see growth in the second half of the year.
We will see a better commercial real estate environment.
We had $225 million of CRE runoff in the multifamily business.
That will pretty much taper off at this point.
As you can see from some of the supplemental information, our multifamily New York portfolio has now been kind of reduced to what I would call a pretty stabilized level.
This has been kind of a 5-year process of this reduction.
And I think now we're kind of at a stabilized level.
The other thing that was good, as Raj mentioned, we've made a number of key hires.
The HOA segment on the deposit side, we brought in producers on both sides of the balance sheet.
We've been a strong player in this market, and I think this is an opportunity for us to really significantly grow this business over the next few years.
We also added capability to our healthcare practice team, which is important to us, and we hired several commercial producers in kind of our -- one of our core Florida C&I-type team.
So the cadence in the field, it feels like it's starting to return to kind of a normalized basis for us from a business, business production, calling perspective and whatnot.
So a little update on the PPP.
$438 million of First Draw PPP loans were forgiven in Q2.
At June 30, there was a total of $209 million of PPP loans outstanding under the First Draw program and $283 million outstanding.
Under the Second Draw program, forgiveness applications are in process for the majority of the First Draw loan programs, and slide eight in the deck provides more detail on this.
A quick update on deferrals and CARE modifications.
slide 17 in the supplemental deck also provide some data on this.
On the commercial side, only $3 million of commercial loans are now in short-term deferral.
As of June 30, $436 million of commercial loans remained on modified terms under the CARES Act.
The largest group of loans still under the CARES Act is in the hotel portfolio.
Although the total CARES Act modified loans in that portfolio declined from $343 million at March 31 to $225 million at June 30.
We've seen -- particularly in Florida where about 76% of our hotel portfolio is, we've seen a pretty strong rebound in tourism in Florida.
Any of us who've been trying to book hotel rooms in Florida recently have found it pretty difficult to do at high rates.
And we're seeing a strong rebound in occupancy, particularly travel-related beachfront property occupancy, within the overall Florida book.
So that led to the significant decline that we had there, and we expect to continue to see improvement in that.
$218 million in commercial loans rolled off of deferral or modification this quarter.
100% of these loans are either paid off or resumed regular payments.
On the residential side, excluding the Ginnie Mae early buyout portfolio, $59 million of the loans were on short-term deferral or had been modified under a longer-term CARES Act repayment plan at June 30.
Of $532 million in residential loans that were granted an initial payment deferral, $493 million or 93% have rolled off.
Of those that have rolled off, 93% have either paid off or making regular payments.
Just some selected data on our CRE portfolio.
Rent collections on commercial properties remained very strong.
When we looked at larger clients in selected data that we see in the office portfolio, it's -- rent collections have run 98%, actually.
Both in Florida and New York, it did do strong performance in multifamily, 96% in Florida, 91% in New York.
Retail collections were 95% in Florida, 85% in New York, and we continue to see some improvement in the New York retail market.
As I mentioned a little bit earlier, the Florida hotel market is particularly back stronger.
All Florida and all New York properties are now open.
Occupancy averaging 75% for the second quarter of 2021, excluding one New York hotel that did not open until the end of the second quarter.
So we're seeing a good overall rebound in that market.
So as Raj mentioned, NIM was down slightly this quarter to 2.37% from 2.39% in large part due to even stronger-than-anticipated headwinds from high levels of liquidity.
Cash was elevated and liquidity was deployed into the bond portfolio, which, while accretive to net interest income is not accretive to the margin.
The yield on loans this quarter increased to 3.59% from 3.58% last quarter.
Recognition of fees on PPP loans that were forgiven added 11 basis points to that loan yield this quarter compared to six basis points last quarter.
So without the impact of PPP origination fees, the yield on loans would have declined by four basis points for the quarter just due to the turnover of the portfolio into lower-yielding assets in this environment.
We have $9.8 million of deferred fees on PPP loans that remain to be recognized.
$1.1 million of this relates to the First Draw program, and I would expect most of that to come into income in the third quarter.
And $8.7 million relates to the Second Draw program, and I really wouldn't expect to see much of any of that in the third quarter.
The yield on securities declined from 1.73% to 1.56%.
That was somewhat more than we had anticipated.
Retrospective method accounting adjustments related to faster prepayments on mortgage-backed securities actually accounted for 10 basis points of that quarterly decline and the rest of the decline, obviously, just attributable to turnover of the portfolio in a lower rate environment.
As Raj said, the cost of -- total cost of deposits declined by eight basis points quarter-over-quarter with the cost of interest-bearing deposits declining by 10 basis points.
With respect to the FHLB advances, there's still $1.1 billion of cash flow hedges against FHLB advances that are scheduled to mature over the remainder of 2021 with a weighted average rate of 2.4%.
We estimate that -- we talked about the impact on the NIM with higher levels of liquidity.
We estimate that if we simply -- if we normalize elevated cash balances, that accounts for about eight basis points.
So even if cash balances have been normalized, the NIM would have been eight basis points higher.
And we estimate that if we also normalize the level of securities, we would have seen 14 basis points.
So that impact on NIM of high levels of liquidity is somewhere between eight and 14 basis points depending on how you think about it.
As Raj said, we currently expect the cost of deposits to continue to decline next quarter, and we currently expect the NIM to be stable to slightly higher.
However, liquidity may continue to be a headwind there.
Moving on to the provision in the allowance.
Overall, the provision for credit losses this quarter was a recovery of $27.5 million.
slide s 10 through 12 of our deck provides some further details on the allowance for credit losses.
The reserve declined from 95 basis points at March 31 to 77 basis points at June 30.
Biggest drivers of that change, $19.4 million of the decrease related to the economic forecast.
The largest impacts were improvement in the unemployment outlook and improving HPI in commercial property forecast.
The reserve decreased by $17.6 million due to net charge-offs and to $16.2 million due to portfolio changes, that bucket includes things like the net decrease in loans; shift into portfolio segments with lower expected loss rates, such as residential; as well as the impact of just loans moving in and out of the portfolio; and improving borrower financial statement spreads.
$12.8 million decrease in the amount of qualitative overlays that had related to some uncertainties around the COVID pandemic that we -- that seem to be resolving themselves and an increase of $20.7 million related to risk rating migration, most of that was the $27.2 million increase in the reserve related to the $169 million commercial relationship that Raj spoke about bringing that reserve up to $30 million.
The largest component of the reduction in the reserve was the CRE portfolio because that model is particularly sensitive to unemployment and property forecast.
Similarly, we saw a reduction in the residential allowance, again, related to improving unemployment and HPI.
The C&I reserve actually increased this quarter on a loss rate basis, and that was again due to the large reserve on the one loan.
Total criticized and classified loans declined by $541 million; special mention, down by $282 million; and substandard accruing, down by $299 million; substandard non-accruing loans increased by $40 million, again, back to that one commercial loan that we've been talking about.
A couple of notes on other income and expense.
With respect to operating expenses, we saw a decline in comp this quarter.
As expected, Q1 is always somewhat elevated.
Deposit insurance expense came down correlating to a reduction in criticized and classified assets.
We continue to see increases in deposit service charges and fees stemming from our treasury management solutions initiatives that we initiated in conjunction with BankUnited 2.0.
One more thing I just want to mention real quick.
With respect to the tax rate, I would expect it to remain around 26%.
Consistent with the uncertain tax positions disclosure we made in our last 10-K, we have very recently entered into discussions with the state of Florida regarding several outstanding tax matters.
There's a possibility that these discussions could result in recognition of a benefit somewhere in the next few quarters.
These discussions have just recently gotten underway.
So it's too soon for me to be much more specific than that.
While Leslie was talking, I just looked up on my deposit report, which I get every day.
And so as of last night, our deposit cost was at 20 basis points.
So I feel pretty comfortable in saying that we will be in the teens this quarter, might be in the teens as early as next week.
So I know in the past, I've said that we think we will end the year on a spot basis in the teens.
I'm happy to say that we're about five months ahead of schedule.
And by the way, deposits continue to grow.
Truth be told, while I'm very excited about deposit growth that has come in, liquidity is a problem.
So it's -- this would have been an even better report if we had said to you that we actually kept the model as flat.
So we're trying to -- and we are succeeding in pushing out anything that we think is quite sensitive and will hurt us in the future when rates rise.
So we continue to increase the quality of the book because some day rates will rise.
So it is -- if I look back six months ago when we thought the year would play itself out, overall, on the deposit side, we're much further ahead of what we thought we could do this year.
On the loan front, we're further behind than what we thought we would do.
But I think about standing here over the next six months, I still see a lot of good news on the deposit front because the pipeline has still good money still coming in and cost of funds are still declining further than we ever thought it would.
And on the loan side, pipelines are now beginning to look normal.
So also, a point that Tom made that I just want to repeat, it may have gotten lost.
Multifamily in New York has been the big headwind for us.
The runoff from that portfolio has been a big headwind for us because exactly five years ago is when we changed strategy and deemphasized multifamily.
That 5-year anniversary is literally around maybe I think this month.
So as that portfolio matures and those payoffs and sort of natural runoff gets behind us, as I look forward, we don't see the same velocity of payoffs happening because that portfolio is kind of getting to a normalized place.
So that was also, from a payoff perspective, a good story.
And I look forward over the next couple of quarters compared to the last couple over the last -- last couple of quarters over the last five years.
So I just wanted to make that point.

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bankunited q2 earnings per share $1.11.
q2 earnings per share $1.11.

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