BankUnited Inc (BKU) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BankUnited, Inc. 2014 fourth-quarter earnings conference call. My name is Tahitia, and I will be your operator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Ms. Mary Harris, Senior Vice President, Marketing and Public Relations. Please proceed.

Good morning. It's my pleasure to introduce our Chairman, President and CEO, 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 materialize, 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 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, 2013, available at the SEC's website, SEC.gov.

John?

Good morning, everybody. We are happy to give you the results of the fourth quarter and the year. We are also happy that RBC had their conference at 8:30; otherwise none of you would be here listening to us. So I'm sure we will have a discussion about that as this conversation goes on.

So we did a little better than we thought we would do in the fourth quarter, about $0.45 a share, $46.8 million, which beat the consensus by about $0.01. More importantly, we had a conversation with many of you at the end of the third quarter. We reported to you at that time that a lot of the loans that we expected to close in the third quarter slipped over into the fourth and that we anticipated that fourth-quarter loan and lease growth would be somewhere between $1.2 billion and $1.4 billion.

We actually did a little better than that. The loans that slipped over into the fourth quarter did close. And the fourth quarter itself, and quite frankly, the momentum building and going into 2015, is actually a little stronger than we had expected it to be. So about $1.5 billion of growth of those assets at that time.

That's divided into New York about $770 million, Florid about $300 million, and the national platform, that is a combination of all of them, about a little over $400 million.

So if you want to look back on the year, $1.95 a share in earnings. And with regard to the balance sheet and where we expected it to be and what we told you earlier this year, in summary, we grew loans about $4 billion -- a little bit more than $4 billion. And we grew deposits about $3 billion. And we said earlier this year that that was our goal, to grow deposits about three-quarters of the amount that we grow loans, and eke up a little bit our loan-to-deposit ratio, which is now at just a little bit over 90% -- I guess about 92%.

So you should expect that same kind of trend to continue into 2015. We intend to raise the loan deposit ratio further. And you will probably continue to see the growth in the loans outstripping the growth in deposits, but fully recognizing that as the year unfolds and if we get the growth we expect in 2015, that we will turn more of our attention to deposit growth as the year goes by.

Competition remains crazy in both of these markets. Interest rate and margin compression is something that unfortunately plagues this entire industry, in this very difficult, if not hostile, banking environment. Don't expect that to change anytime soon. You know that we have always reported to you that because we have no idea where interest rates are going and have never been sure when or if they were going up, we continue to keep this balance sheet extremely neutral -- give up some earnings to do it, but play the safe side of that. And that's worked out very well for us.

Asset quality doesn't really bear much of a discussion. It continues to be very strong -- nonperformers to total loans, 29 basis points. And you'll see, and I know that some of you have already asked questions about it, we've taken a pretty good shot at increasing loan/loss reserve this quarter, consistent with the growth in this loan portfolio, to try to remain conservative as time goes by.

So deposits grew -- it was actually $678 million, almost $700 million for the quarter. And again, we expect that to continue.

So overall, very, very happy with the quarter. We are in that period that we've described to you for the last couple of years where the earnings are under pressure, and will be for the next quarter or two. But, clearly, we can see our way through to the second half of the year such that EPS is on its way up in the second half of 2015, particularly if we continue to get the kind of asset growth that we are experiencing. And all indications are that that will continue.

I'm going to turn it over to Raj now and then to Leslie, and then we'll come back for questions.

Thanks, John. I'll repeat a lot of what John has said in terms of deposit growth. The deposit growth was consistent with the last few quarters, $678 million, of which about $177 million was DDA, and the rest, most of it was MMDA and savings. We had almost no growth in time deposits this quarter.

Loan/deposit ratio is now at 92%. It's inching up as we had designed it to. And we'll keep growing this further up. We expect in 2015 also to have loan growth be a little higher than deposit growth, which will get our loan-to-deposit ratio to drift upwards.

DDA now stands at 27%, money markets at 43% -- sorry, money market and savings at 43%, and time deposits at 30%. So the mix of deposits, while it will change ever so slightly, it's not going to change by leaps and bounds from here on.

The cost of funds, excluding hedge accounting costs and accretion costs, is 56 basis points. It's fairly stable. It's been there, right around there for the last several quarters, and we expect it to hover in that neighborhood through 2015.

We do use FHLB as another source of funding, as you have seen this quarter. And we'll continue to use -- we have plenty of capacity over there. That will be our plug as we grow the balance sheet further.

On the M&A landscape, I'm sure there will be questions, and I'll just leave it for that. There is nothing in terms of a deal that is in the pipeline to talk about. But the M&A environment stays fairly active, and dialogues stay active, which is an encouraging sign. And most encouraging is to see deals actually getting announced, like the one that was announced this morning. But nothing is imminent from our perspective; we just keeping keep talking to a number of people.

I'll turn it over to Leslie.

Good morning, everybody. Thanks, Raj. Just to give you a quick recap of the quarterly results and a little bit more color on some of our expectations for 2015, we saw net interest income stayed pretty flat this quarter to what it was last quarter, in spite of the declining impact of sales from the zero-carrying value pool. And we should see a good increase over the comparable period of the prior year. And we should see that number probably stay flat for a quarter, and then we'll see a significant upward trajectory there.

This quarter, we kind of hit what we think of as a milestone: Total interest income from new loans for the quarter is now in excess of interest income generated by the covered loan portfolio. And that's an inflection point we've been expecting and waiting for. And we finally reached that inflection point.

Pressure on NIM continues due to the runoff of the covered assets. We ended the year with NIM of 4.26%. We had given you guidance of between 4% and 4.25%, so we were right there. For next year, I would say we are probably looking at NIM for the year somewhere between 3.80% and 4%. It will continue to decline, but at a much slower rate of decline than we've seen over recent quarters.

Provision for the quarter, as John said, just to echo on his comments, we see a higher provision. Our provisioning is related largely to the growth of the loan portfolio, keeping pace with that growth. And we see the impact of that, as John said, provisioning conservatively in the fourth quarter.

I want to emphasize we are seeing no deterioration whatsoever. You can see from our statistics and our asset quality there are no indications of that.

In line with our previous guidance to you, core noninterest expense, excluding the amortization of the indemnification asset, increased about 9% for 2014. I think we had guided you to around 10%. I would say for 2015 those increases will moderate, still being in the single digits -- probably a little bit more moderate increased than we saw this year.

ETR for the fourth quarter was low, had a positive impact on earnings for the quarter. That was really due to some changes in certain state income tax provisions that we took that gave us a favorable benefit for the fourth quarter and had a positive impacts on our earnings. And ETR going forward for 2015 for the full year, probably be between 32 and 33.

What else can I tell you? FDIC asset amortization, everybody asks about that; it will probably be pretty flat for 2015 with what it was for 2014, and then we will see it decline after that. And just to echo John's comments one more time, while EPS for the first half of 2015 will probably be lower than it was for the first half of 2014, the second half will be significantly better than what we saw in the second half of 2014. And more importantly, the trajectory will be very positive as we go into the second half of 2015.

I'll turn it back to John for concluding comments, and then we'll open it up for questions.

All in all, we are very pleased. The year has come out just about exactly where we had hoped and predicted that it would. And before we kick off the questions, no, we don't lend into the oil business.

So I'm ready for questions.

With that answer, we'll take questions. (laughter)

With that answer, we'll take questions.

(Operator Instructions) Jared Shaw, Wells Fargo Securities.

Good morning. Thanks for taking my question. When looking at the net interest income, Leslie, you said it was flat for first quarter and then upwards. So really starting in the second quarter, you think that we can start seeing that inflection in the growth in NII?

Yes. That's accurate.

Okay. And then looking at the provision this quarter, if we assume that loan growth stays consistent with where it was this quarter, should we continue to see provisioning at the same level? Was this all due to net new growth on the portfolio, or was there some type of a catch-up that you were trying to get the allowance bucket up to?

Before she answers that, let me talk about the quarterly growth of loans, because we got crossways with some of you last year. We think that the loan growth of this Company in 2015 will be about what it was in 2014, somewhere between $4 billion and $5 billion. But it's impossible for us to predict accurately the quarters. So don't expect -- although it may happen, but don't expect $1.5 billion in the first quarter, although we are starting out very strong. So remember that on a quarter-to-quarter basis -- and try not to measure us on a quarter-to-quarter basis with regard to that asset growth. And you may want to finish to answer that.

We actually don't hold our people accountable on a quarter-by-quarter basis, so it's very hard to smooth it out on a quarterly basis. So please, like we said last year and we will say it again this year, we manage to annual budgets, annual targets, and we don't try and artificially smooth things out quarter by quarter.

There is seasonality in the business that can be just hiccups at the end of the quarter, and things get pushed off into a following quarter, like it happened for us between third and fourth quarter. So from a quarter-to-quarter basis, loan growth could be up or down. But we feel fairly good about the annual projection that we are giving you for 2015.

Absolutely. I would echo that. And Jared, back to further comments on the provision, there was some element of the provision in the fourth quarter that resulted from an increase in qualitative factors that we apply to the reserve. The way I would think about it going forward is I would expect the allowance as a percentage of loans to remain stable. And that's how I would think about that, Jared.

Okay. And then looking at the -- you had mentioned that you feel comfortable with the loan-to-deposit ratio increasing as the loan growth continues to be significantly better than the deposit growth. At what point does that become something that you focus more on in terms of focusing more on the deposit side? I guess how high would you be willing to take that ratio?

We are already started focusing on it, actually, this year. We've said before that we're willing to take that up a little over 100%, and that's probably the proper capacity for us. And it drives the earnings that we are expecting.

But we are already thinking about -- because on a quarter-to-quarter basis we expect to see this kind of growth in loans, we are already thinking about -- and have, in fact, tweaked some of our incentive plans toward deposit growth and away from loan growth, just to sort of balance the growth in both of these sides. But we are willing to go a little over 100%. But I don't know, I guess -- where did we start this year? We start this year, in terms of loan to deposits, probably just a little under 90%, right? And now we are at 92%.

85%, maybe.

Yes. So with all of the growth that we had this year in loans, we still only increased that ratio from probably 85%, 86% to 92%. So we've got a long way to go.

Okay. And then finally, just looking at M&A, could you just give us an update on your thoughts on that? And as you look at M&A, would you say is there a primary -- are you looking to help with the deposits as a primary factor on M&A? Or are you looking just overall expand the lending capacity and the size of the bank as you look at deals?

Look, we continue to -- this is everybody's favorite subject, right? This a subject that has been more talk about and less action than anything I can think of in the last five years.

We continue to have active dialogue with a number of banks, and we are in constant contact with people who we think make great partners for us one way or the other and complement the value and create new value. But, frankly, with a stock that's trading at $26 or barely $27 and other stocks under pressure, it's not easy to get a deal done in here.

I guess what I thought about over the last six months, and the amount of time that Raj and I and the M&A team have spent, we've probably spent more time looking at nonbank situations than bank situations. So we are actively engaged in just about anything you can think of. But as Raj said, don't look for an announcement next week on anything, although we do have a number of situations that could materialize very quickly.

Great. Thank you very much.

Brady Gailey, KBW.

About the margin, I just wanted to clarify. The 3.80% to 4%, is that for the full year 2015, or is that by the end of 2015?

Yes. That is for the full year, Brady.

That's full year? Okay. And then do you all have any sense, like when you put all this through the model and you look at the full-year 2015 EPS, do you think that will be above or below 2014 reported EPS?

It is going to be -- this is about as unscientific as you can get, but when we put it through the model and look at it, considering that it will be weaker in the first half and stronger in the second half, probably comes out pretty close to 2015.

Okay.

I'm sorry -- to 2014.

Yes. Okay. And then on the rate sensitivity, I know you are trying to keep it neutral, but it seems like in a year or so, with your growth, you are going to have to start matching loan growth with deposit growth. And at the pace you all are growing, maybe you have to start paying up for some of that deposit growth. And maybe you are really a smidge liability-sensitive. How do you think about the funding issue as you start to get to kind of a stable loan-to-deposit ratio going forward?

Brady, that probability of having to pay up a little bit for deposits when we reach that point is factored into our modeling. And even given that, in the rate environment that underlies our model, which is a modest increase in rates beginning in late 2015 and some flattening of the curve, even given that, we still see net interest income growing in that rate environment. So the existing balance sheet is almost entirely rate-neutral, and the dynamic balance sheet is slightly asset-sensitive, Brady, even with factoring that in.

Okay. That's helpful. And then finally, we've seen Susquehanna go. We just saw City National go. A lot of these banks are larger banks that are selling. It seems like with your current where it is, it's going to be hard for you all to really be a buyer. I know you all tested the waters there for a week a couple of years ago, but how do you all think about potentially selling this Company, given the increased activity in kind of this midcap larger-bank M&A space?

We said this before. We are owners and managers here. So we sit here, and we don't think about buying or selling, frankly. We think about creating more value. And we are quite agnostic toward the way that we create a transaction.

So we've looked at -- quite frankly, we've look at all kinds of things that you might refer -- you might think of them as mergers of equals. You might think of them as acquisitions. You might think of them as sales, depending upon how the structures come to be. But we are realists here, and we understand that this is a hostile banking environment, and not likely to get much better. And I think that midcap banks who basically take deposits and make loans for a living are going to be under a lot of pressure and continue to be under a lot of pressure. We hope that everybody else understands that as well and that some of these conversations that are not just dialogue will turn into value-creating transactions.

I will say this, though, about that. I think I talked briefly about it last time. It's quite apparent that the regulators are squeezing the large institutions to get smaller. And the result of that -- and we are not seeing it in what I would call a particularly meaningful way, but it is measurable. Midcap banks are starting to enjoy some of that spillover from the large banks. We are opening some accounts -- a lot of accounts, actually, particularly up in New York, that are migrating out of the large institutions as the large institutions migrate away from some businesses that -- not necessarily on the lending side, but mostly on the deposit side, that they have no need for since they are having to shrink their asset portfolio.

So I will say that the bad news is crummy margins out over this year, and I don't know how you could make an argument for anything more than that. But I think the good news is -- and we are seeing it, and I think others are seeing it as well -- we get a shot at some businesses that we've never seen before. And I think that will be helpful.

All right. Great. Thanks for the color, John.

Ken Zerbe, Morgan Stanley.

Thank you. Good morning. A question on loan growth, a more conceptual question, though. A couple years ago, I guess, when you started talking about the $4 billion to $5 billion of loan growth, it seems that you were hitting that, or pretty close to it, pretty much right out of the gate. And when I think about -- obviously building off Florida a little bit, obviously building out your New York presence much more aggressively, I would have naturally assumed there probably would have been more of a ramp-up in loan growth, right? So less back then, a little more now, just as you've really sort of hit your stride. But it still seems that the growth went from zero to 60 very fast, and you were very constant thereafter. Why don't we see more of a ramp-up in loan growth? Thanks.

Raj and I are scrambling to the microphone to answer this. Go ahead.

I wrestled it away from him. So there's a more nuanced story to the loan growth than just the highlight number. This is net loan growth; it's not production. Let me say that first. If you see our gross production year to year, which we don't get into that detail, it is actually up significantly between 2013 to 2014, and also from 2014 to 2015.

We also have more runoff. Two years ago, we never had to worry about runoff. Our portfolio was brand-new, and our runoff now is catching up because loans we booked three years ago, people are selling the properties or refinancing and moving on, which is natural. So while production is up, runoff is up as well, and that's one part of the answer.

The other is we have within our -- as we are growing into our capital base, we are becoming a little more stingy with what kind of assets we want to put on our balance sheet and how we want to allocate that capital. As you know, we will fully deploy our capital some time by the end of this year or early next year. And as that happens, we pulled back from certain asset classes. We don't buy as many residential loans as we used to through the [corresponding] channel. That's a pretty good example. We were doing probably twice as much of that six quarters ago than we are doing today.

There were businesses that we've exited completely, like the auto business, which would has been by now easily a $0.5 billion size portfolio for us.

So we are responding to sort of where we are in our evolution. We are trying to, at the end of the day, solve for risk-adjusted return on equity, and of course, growth as well. But the elements of that growth are different from a year from now than they are today. And so it's not fair to say we've went from zero to 60 and we stayed at 60. Yes, we went from zero to 60, but that 60 is actually very different than a year ago what it was or two years ago what it was.

Got it. All right. That helps. And then just a follow-up question. On the first-quarter loan growth, John, you kind of alluded a couple times the first quarter could be very strong. Do you want to -- can you put any numbers around that?

No, it's too early because of all the issues we talked about before, how these things slide over. I do know that there are some things, frankly, that slid over from the fourth quarter because of the way the holidays fell. So you had a holiday on a Thursday, and so we had some closings set for Friday that slipped into Monday, which puts them into 2015.

So you've got some of that, and there's a strong pipeline. I'm sitting here looking at Tom Cornish, who we were talking about this morning. And Tom is seeing a very strong pipeline here in Florida, stronger than we have seen in the past. So I don't want to put any numbers on it on a quarter-to-quarter basis, but we are comfortable with our prognostications of $4 billion to $5 billion for the year.

Great. All right. Thank you.

Stephen Scouten, Sandler O'Neill.

Thanks for taking my call. A couple clarifying questions -- one for you, Leslie. In regards to the indemnification asset amortization, you said it would be largely flat in 2015 versus 2014. So would this quarter kind of be the peak of where you expect that number to be on a quarterly basis?

Probably, yes, this quarter or next quarter. But again, I say that with a little bit of a reservation in my voice, because that can change based on our quarterly update -- quarterly updated cash flow forecast for the covered loans. But that's sitting here today, that's how I would be looking at that, and then lower amortization after 2015 going forward.

I think another way to think about this, and I've said that before, is if you look at the combined yield on the indemnification asset in the covered loans, it should stay between 9% and 10%, sort of as a sanity check on that overall picture.

Okay. And when does that real inflection point occur due to the level of yield amortization and kind of how that accounting works? Is it what you are saying, into 2016 you really start to see that inflect downward due to the way it's weighted, or is it more pronounced later on?

With respect to the indemnification asset? Yes.

Okay. Great. And then on the M&A, John, you mentioned that you guys are spending some more time on nonbank versus bank acquisitions. Can you give us an idea of what the breadth of those opportunities or even the types of things that you are looking at as it relates to nonbank acquisitions?

No. (laughter) No, we have a number of delicate conversations going on. It's not wealth management. I am not a big believer in wealth management -- although it seems this morning disproved my theory on that with 2.5 times book for [Russell Colchman] But they are not wealth management companies, but they are -- we are struggling like everybody is in looking at the yield on assets, competition for loans, the profitability that funding costs are going to go up at some point, at some time. And we are thinking about -- we are thinking globally and widely about what it is we can do to protect that margin and maybe even improve on it going into next year. So that's about all I can say.

Okay. Fair enough. And the new loan yield at 3.52%, is that a level we think can kind of remain in line? Or do you expect -- I guess in your 3.80% to 4% NIM modeling for 2015, do you expect further compression there?

Stephen, we don't really expect further compression. That's driven in large part by product mix. So it's a little bit difficult to predict. But my best guess today is it would remain relatively stable, although product mix could drive that up or down.

We are seeing a sort of interesting trend this quarter, and Tom and I were just talking about it this morning, with some of our larger real estate borrowers opting for variable-rate rather than fixed-rate loans, which hurts that margin, and you can see it in there. But that may turn out to be very good for us, depending upon when and how much rates do go up.

Fair enough. And then one last clarifying question on the provision. And I know, Leslie, you said maybe it will stay relatively flat on a percentage basis of loans. But as I look at it, it appeared to be at about 1.5% of new loan production, or net new loan production. Is that kind of another way to think of it, or was that elevated?

Not really, Stephen. I think you would be much better served by looking at the -- looking at it as the allowance as a percentage of loans.

Okay, so that percentage on --

There's so many moving parts running through the provision in any quarter which changes it. Our reserve is based on peer-group net chargeoff rates. As those change, as specific reserves move in and out, I think the better way for you to think about it is targeting that allowance as a percentage of loans.

Okay. Perfect. Well, thanks, guys, for the clarification, and congrats on the strong loan growth.

David Bishop, Drexel Hamilton.

A quick question in terms of the division of loan growth into 2015, obviously a little bit more weighted to New York this quarter. Looking forward, do you think it's going to be relatively more balanced throughout 2015?

It's hard to say. It is somewhat a function of the competitive landscape and can change quite dramatically from quarter to quarter.

We said this before -- if you realize how huge the markets are that we are in and how small we are, it gives us the ability to sort of cherry-pick where we want our growth to be, based on the loan types and the yields that we see. It just happens this quarter where we saw a lot more opportunities in New York that fit the box for us. But that could turn around and it could go the other way in Florida over the next quarter or the quarter after that. So, obviously, New York is a much, much larger market. So I suppose over time we expect to see New York grow in terms of dollars at a greater rate. But it's too close to call over the short term.

Got it. And, Leslie, circling back, I think you gave some guidance in terms of expense growth. And just maybe circling back to the fourth quarter, saw a little bit of a downtick in compensation expenses. Obviously we will have a first-quarter build for [FICO] and such, but is that a relatively good run rate to build the expense base off of?

Yes, I think so. As you said, the first quarter will be a little higher. But we'll have -- like, my best guidance, again, we had about a 9% increase, which was in line with the 10% that we had guided to last year. I would say it will be in the single digits again this year overall. And clearly comp and occupancy are the two main components of that. So I think we'll be in the single digits again, probably a little bit moderated from what we saw in 2014 in terms of the rate of overall growth.

Great. Thank you.

Joe Fenech, Hovde Group.

John, you were one of the first, I think, to allude to the possibility of this pickup in midsize bank M&A. It was a few quarters ago now. From when you made those comments, is your sense that regulators' attitudes have softened even further and that situations like M&T are now more company specific as opposed to being more of a harbinger for regulators' attitudes towards M&A generally? Has it gotten even better from when you first made those comments three quarters ago?

Well, the second question answered first -- I think that situations like M&T are very much bank-specific. Everybody freaked out when that first happened and thought, oh my God, oh my God -- and me too, by the way. Does this mean the regulators aren't going to approve anything anymore? And as this story of M&T has unfolded publicly, it's become quite clear that this was a very specific situation.

With regard to rather whether regulators are, quote, softening their -- I would characterize them right now as being extremely neutral. They are in favor of deals that make sense. And we've had many, many conversations with them, and other banks have as well, and gotten the green light on things that made sense.

So I think one thing is true -- regulators are far more involved in the M&A world than they ever were before. They want to be in earlier. They want to know what you are thinking. They want to see your models. And they have a lot to say. But, frankly, in terms of where they stand today, I view them as very neutral and certainly not impeding the process.

Okay. And then either Raj or Leslie, I guess -- credit looked fine. You guys have talked in the past, or Raj specifically, about the reserve being dictated by sort of the loan losses for the peer group because you all didn't have the sufficient loss history. That doesn't seem to have changed. My impression was that the reserve could have even drifted lower. So just wondering if there has been a shift in rationale there at all.

She's going to give you the technical answer, but let me just tell you that when you are growing at the rate we are growing, it's important to me that this Company maintains a conservative attitude toward this -- for regulators and investors and for me. So when you are growing at this rate, you can expect us to -- in my view, I don't mind overshooting a little bit there rather than undershooting.

Okay. Fair enough. And then you guys talked a little bit last quarter about a seasonal slowdown in Florida. Can you talk about what loan growth looked like specifically in Florida in the fourth quarter and looking out into this year?

I don't know. Tom Cornish is sitting here with me. He's got a lot more years of experience in Florida than I do, and he's running the whole state for us down there. What would you say to answer that question?

Yes, I think if you look at Florida for the fourth quarter, we had about $300 million. I think that was a pretty good number. As we think about what's happening around the state and in different markets, different markets are growing at different rates. But when John talks about how big the market is, we have a significant market share kind of in middle-market and commercial real estate and business banking in the South Florida market. But when we look at the Tampa, Orlando, Jacksonville, West Coast markets, all of those markets have somewhat trailed the South Florida market in terms of economic growth. But we have invested a lot and are going to invest a lot in the teams in each of those markets this year.

So I think as we look at Florida, the opportunity for the entire state recovering at the same pace that South Florida has recovered over the last couple of years and the investment that we are going to make in different markets and different teams -- some we have already made and some over the course of the rest of this year -- I think the overall picture in Florida is very good.

Yes, I've said this to you, some of you guys, before, you should get down here. We talk about this a lot, but it's really -- it bears looking at. The snap-back in economic growth down here is extraordinary. You can't get down Brickle Avenue for the construction cranes. And there's a huge difference. Look, we are not being naive. We know that Florida has always been a boom-and-bust state. There is always that issue.

But the big difference between what we are seeing in Florida now and what we saw in 2003, 2004, and 2005, ramping up toward the 2008 and 2009, when things blew up, is those were the days when every real estate broker in town had a deposit down on four different condo units in buildings that never get built, and leverage was coming out of everybody's ears, and there was no equity in these deals. Very, very different situation down here in South Florida today.

These buildings are put up mostly with equity. They are in the hands of very solid developers, some of them -- many of them coming out of the North and Northeast. And all of the other positive factors that are driving South Florida, that is the migration of money out of Latin America, still continues unabated.

So this is really something. If you haven't been down here to see this, you really should invest $500 in a Southwest ticket and get down to take a look at it.

Absolutely.

But if you do, make a reservation in the restaurant two weeks ahead of time.

Okay. And two more quick ones, guys. Any update on capital? Thoughts on, like, the timing and form of any potential action there, given the growth you are expecting this year?

We expect, like we have said in the past, we expect to deploy our current capital maybe towards the end of the year. Might even be first quarter of 2016 when we get back into the market to raise more capital. And when we do, since we have no other form of capital other than common, in all likeliness we will be raising other forms of capital, not common. It will be probably sub debt or senior debt or the cheapest form of capital. So looks like towards the end of 2015, possibly even early 2016.

Yes, I would echo that.

Okay. And then just last one. Leslie, on the margin question, will it be at about sort of a forward run rate level, you think, meaning little or no noise by year end from the purchase accounting? Or will that normalization process with the margin bleed into 2016, you think?

I think it will bleed into 2016, to some extent, but to a much lesser extent than we have seen in the past.

Okay. All right. Thank you, guys.

Gerard Cassidy, RBC.

I apologize; I jumped on late. Can you guys give us some color? I just heard you talk about the way the underwriting is being done in condos in southern Florida is more conservative. Tying to that, in the crazy days of 2004 and 2005 in Florida, there were a lot of nonlocal banks that were lending into that market. Can you give us some color on, are you running into banks from California or overseas that are in the Florida market, or is it primarily the folks that are down there?

I think I might answer, but Tom probably can give you a better one. What's your answer to that, Tom?

Yes, I would say first of all, it would be important to distinguish, while we enjoy seeing all of this growth in the condo market and the construction in the condo market, we are not actually a player in those specific markets. We think those real estate markets are more volatile than the markets that we want to be in.

But to the point of who is financing it, you are seeing much less out-of-market banks involved in the financing of it. More longer-term players are in the market, and more local banks are in the market, and some institutional players. But we don't, to any great extent -- even though we are not in those deals, we hear about them. We see them in the marketplace. We don't see the participation of California banks or Chicago banks or other banks financing those condos to the extent that we saw during the last downturn.

And how about outside that market or the condo market? Just in the markets you are lending into, the commercial and commercial real estate mortgage markets, are you seeing players that weren't around two years ago that are now coming into the market? Or is it the regular -- the guys that have been there for a number of years?

Well, it's a combination, I think, of two things. It's number one, the number of players that are here as indigenous banks in Florida that were not here two years ago is greater. So we have more banks that are headquartered in other parts of the country that are here. So what I would call the local market competition has become more than it was two years ago.

And I'd say the second piece of that, particularly in the commercial real estate area, is we are seeing a significant resurgence from the CMBS market, from long-term government-sponsored entity markets. We have seen a lot more of this than we have seen two years ago. So when you reflect back on Raj's comments about the difference between production and growth, we are in a more natural real estate phase, where your institutional players in the market, have now returned. So that's a competitive difference from where the market would have been two or three years ago.

And some of the government-sponsored programs are important. It seems to me like the last three or four meetings I've had with some of our larger customers, they are doing deals financed by EB-5 money.

Right.

And that's prolific in Florida and in New York. So there's no lack of resources.

And one final question. I think, Tom, you touched on this, about investing in people in the upcoming year in Florida. John, you have had great success in hiring teams of people over the years to come work for BankUnited. What's the outlook for 2015? Do you need to or do you want to hire groups again, or can you do it? Is it tougher today now that the other banks have kind of come back and are on stronger footing?

It probably is a little tougher today. I would argue that it is easier for us than many banks down here because of the performance and the relative visibility of this Company. Tom is on the trail of a number of different teams down here that would help us to spread out our efforts a little more broadly in the state of Florida. And you can expect to see us adding a couple of very productive teams down here very quickly.

We are doing the same thing in New York. We have a number of conversations going on with people whom we have known for many years who will be joining us over the next two, three, four months. Now that we have -- somebody asked the question before about with this big ramp-up we had in the beginning -- remember that a lot of the people that we hired at the beginning were folks that had worked with me for many, many years, and they had -- a tremendous glut of business was sitting on the desk waiting to get underwritten and waiting to get funded. Once that was done, the growth rate settles down to a more reasonable rate. And so now it's time to add more people who can bring in their new business. And we are doing that in New York and in Florida. You will see the effects of that this year.

I'll actually add to that. The national businesses also were looking at --

Yes, that's right.

There's a team I'm talking to tomorrow that we are hopeful that we can find a way to work with them, which will be very, very good for us and for the team. So nationally also we stay active.

Great. Thank you.

Steven Alexopoulos, JPMorgan.

This is actually Preeti Dixit on for Steve. Most of our questions have been answered. Just one quick modeling one, Leslie. Was there anything unusual or seasonal in the lease financing income this quarter? And I know the portfolio of assets under lease continues to grow, so is this a good run rate to build off of?

I think generally speaking, yes, it is.

Okay. Great. That's all we had. Thank you.

In closing, I just appreciate all you guys and gals who follow our Company and are interested in it. I think that you will be very pleased with our performance in the coming year. We are excited to get started. We would love to see a much steeper yield curve. That would help things a lot, and I could be even more optimistic.

But all of the things that we have sat here and told you about today represent our best guesses as to what's going to happen. Don't anticipate any friendlier interest rate environment than what we have today. If we should get a friendlier interest rate environment, then all bets are off, and we can do better than we are predicting. But we are excited and continue to enjoy the benefit of the tremendous growth in both of the markets that we -- all three of the markets that we serve, and expect that to continue into 2015. Thank you very much, everybody.

And the weather is 78 degrees and sunny, and we welcome you to come to stay with us.

Bye-bye.

Ladies and gentlemen, that will conclude today's conference. Thank you for your participation. You may now disconnect. Have a great day.