BankUnited Inc (BKU) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BankUnited 2015 third-quarter earnings call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session.

(Operator Instructions) As a reminder, this conference call is being recorded.

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

Please begin.

Good morning and welcome.

It is my pleasure to introduce our Chairman, President, and CEO, John Kanas.

But first I would 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, continued, 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 historical performance of the Company and its subsidiaries or in 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, 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 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, 2014, on the SEC's website, SEC.gov.

John?

Thanks, Mary.

Well, it's finally happened -- looking across at Leslie -- after two years of predicting it, we finally get to celebrate coming out of the trough in earnings that we've been describing I guess since late 2014.

You will begin to see, as we go through these numbers, that the growth in loans, as we predicted, have a significant impact on net interest income.

And I will let Leslie go into that a little further down the road.

New York and Florida continue their very positive business trends.

The signs in both of these markets continue to be very positive in all categories.

During the quarter, New York grew $483 million in loans; Florida, $418 million; and national platforms grew $270 million.

So that would be 35% coming from Florida, 33% in New York, and 32% in national as of September 30.

Rate expectations remain persistently low.

It continues to look like we are going to get little or no help from monetary policy, either for the balance of this year or out into 2016.

We all had high -- or some of us had high expectations for help on the curve later this year, but that certainly does not seem to be case.

I would imagine that will continue to provide challenges around both revenue growth and NIM for the industry.

Pricing remains competitive, both for middle-market and corporate businesses, in all of our markets.

And we expect that that will continue as well.

So, net income for the quarter was $102.3 million or $0.95 per diluted share.

That is excluding the impact of the discrete tax benefit that we announced earlier in the quarter.

Leslie will give you more details on that in a few minutes.

Net income for the quarter was $53.8 million or $0.50, a little bit better than analyst expectations, per share, generally in line with our expectations as well.

For the immediate preceding quarter, EPS was $0.43 a share.

We are now seeing quarter-over-quarter growth of net interest income, $8 million increase this quarter compared to last, and $15.7 million increase over the third quarter last year.

The quarter was impacted by kind of a sad story.

We have one large commercial credit that we put onto nonperforming status, and the impact of that is that our nonperforming assets are now at 44 basis points.

I'm going to let Raj talk about that, is -- this is a substantial company that has been in business for 28 years, been a customer of ours since 2012, and we are sympathetic with them and are working to sell off our collateral and reduce this nonperformer.

Raj, why don't you talk a little bit more about that?

Thanks, John.

Our nonperformers did go up this quarter, primarily for this reason, for this one relationship.

It is a Florida-based relationship.

It's $44 million.

We have had the client since 2012.

The company is in business for almost 30 years.

And it was a victim of -- this company was a victim of a fraud perpetrated by one of its customers.

So we feel sorry for the company, but it is a bad situation.

We have, very quickly in the course of last few weeks when this situation developed, taken control of our collateral.

A receivable has been appointed.

We have control of the collateral.

The collateral is a fast-moving collateral which will come down and amortize almost $8 million to $10 million a month.

So we expect this $44 million balance to run down fairly quickly.

We also are negotiating with a potential buyer to take part of the receivable, which will further bring it down even faster.

And we expect the NPA/NPL number to be substantially or meaningfully lower by the end of fourth quarter.

Other than that, on the credit front, I know you probably -- you guys want an update on the taxi medallion portfolio.

There is nothing new to report over there.

The portfolio still stands at about $214 million.

As I would like to remind everyone, our portfolio is predominantly New York; 94%, 95% is New York taxi medallions.

It is performing well.

We are all concerned about the value of the collateral, but the cash flows remain strong.

So, in other words, nothing new to report, steady as it goes, but it is something that we watch very carefully.

Let me switch gears and talk a little bit about deposits.

Deposits are now at almost $16 billion.

We had strong growth this quarter, $651 million.

It was less growth than last quarter, but the business does ebb and flow a little bit.

Our loan-to-deposit ratio is now at 97%.

We have said in the past and we will reiterate the fact that we are comfortable with taking the loan-to-deposit ratio to slightly over 100%.

And so we still are comfortable where we are coming out.

The cost of funds is at 61 basis points.

This compares to 60 basis points last quarter.

And our guidance is expected to be stable to very, very slightly increasing, like it did this quarter.

With that, I will ask Leslie to speak about the rest of the financials.

Great.

Thanks, Raj.

Just to reiterate, net income for the quarter, $102.3 million or $0.95 per diluted share.

Exclusive of this income tax benefit, we're at $0.50 per share.

I will talk a little bit about this tax benefit, give you a little information about that.

The recognition of the benefit was predicated by some IRS guidance that came out this year clarifying certain aspects of the tax treatment afforded FDIC-assisted acquisitions of failed financial institutions.

It will result in us -- or it has resulted in us recognizing additional tax basis in certain loans that were acquired from the FDIC.

As a result, additional amounts will be deducted on current and future tax returns as these assets are finally resolved.

So that explains the $49.3 million tax benefit.

The tax provision this quarter, as expected and as we have been messaging consistently for some time now, was also impacted by a $5.9 million uncertain tax position reserve release.

Everyone should have expected that.

I assume it is built into everyone's estimates, because we've been talking about that for a couple of years now.

This has been happening, and this is the third year this has happened in the third quarter and will be the end of that.

Pressure on NIM continues due to the runoff of covered assets, in line with our expectations.

The NIM declined to 3.88% from 3.95% from the previous quarter.

On average this quarter, coupon on originations was slightly lower, but for the most part consistent with what we've been seeing the last couple of quarters, and the existing coupon on the portfolio, we didn't see a material shift in pricing this quarter.

Cost of interest-bearing liabilities was 83 basis points, down from 89 a year ago, due mainly to lower overall rates on CDs and home loan bank advances.

We continue to expect NIM for the year to be in that 3.80% to 3.90% range, as we've guided previously.

No change there.

And we continue to expect quarterly growth in net interest income.

The provision, as Raj discussed and John discussed, the provision for loan losses was impacted this quarter by this one commercial relationship.

We put up a $6.3 million reserve on that relationship, so that impacted the provision this quarter pretty materially.

The other major driver of the increase in the provision this quarter compared to the comparable quarter of the prior year was loan growth.

We had a much stronger loan growth quarter this quarter than we did in Q3 of the prior year.

So those are the two main factors that impacted the increase in the provision.

We don't see overall any kind of negative trends developing in the portfolio.

Our expectations around the level of the allowance remain largely unchanged, should remain fairly consistent as a percentage of loans and perhaps gradually creep up as we move through the credit cycle.

So, nothing has changed there.

And again, to reiterate, based on what we know today, we expect the NPA ratio to decline in the fourth quarter as this large loan begins to resolve itself.

And Leslie, we didn't talk about expectations for the full year.

We are -- we had said $4.5 billion to $5 billion.

We are still very comfortable with that level of growth.

Absolutely.

On loans.

No, no other changes to the guidance we've put out here for the year.

We will have guidance for 2016 on our fourth-quarter call.

And overall, we are comfortable with where we see consensus sitting for the year for year-to-date earnings.

With that, I will turn it over to John for wrap-up.

Both markets continue to be very healthy and are growing at impressive rates.

We just drove on 95 today, just drove by the skyline of Miami, and it seems like every month that we go by, the skyline changes.

So Florida is back and is roaring along very comfortably.

And New York, as most of you know, is continuing to support a very handy level of growth.

The New York real estate market remains healthy and is continuing to grow in value.

We have no lack of loan demand or loan growth potential in any of our markets over the next year and are very encouraged by what we see.

We are very happy to get this trough behind us and set up the fourth quarter and our expectations for 2016.

On the M&A front, it's basically the same old story.

And I know you're going to ask that question.

There does seem to be more chatter these days, more conversation.

Some of them are actually finding their way into the newspapers.

We are involved, as we always are, in multiple conversations with multiple parties trying to find something that makes sense for us and the other party.

So far, we don't see anything that is particularly interesting to us, especially since we are very comfortable with our organic growth.

But I would say, I would predict that we will see, in the mid-cap space, we will see some deals in 2016.

I will be surprised if we don't.

Conversations are heating up.

Regulators have, on multiple occasions in different ways, expressed their desire to be cooperative with mergers that makes sense.

And I know that some of you roll your eyes when you hear that, but they do feel that way.

And I think that that attitude will come out as 2016 unfolds.

So all in all, a great quarter.

Looking forward to the fourth quarter, rolling this nonperformer out of here.

I think the people that are looking to buy those receivables are in the late stages of due diligence themselves, so we expect some action on that relatively quickly.

That is all I have to say, and we would be happy to take questions.

(Operator Instructions) Ken Zerbe, Morgan Stanley.

First question, just starting out on the lease financing line, can you just maybe help us understand that a little bit better?

Obviously, it was a little stronger than what we were looking for this quarter.

Is that tied directly to originations of operating leases or balances?

Or how should we think about the sustainability of that line going forward?

It's a couple things, Ken.

Part of it is just increased originations and increased activity and growth of the portfolio.

We also had, this quarter, some of those assets were subject to a 1031 exchange, and we had some gains related to those 1031 exchanges this quarter, which you will see not necessarily quarterly, but periodically as we go forward.

Okay, so, volatile.

Yes, it's just part of the nature of the business.

It's part of the nature of that business.

Part of risk management, actually.

Yes.

Got it, understood.

And maybe sort of a similar question on expenses.

Pretty noticeable tick-up in expenses this quarter.

And I get your revenues are going up as well, but is there any ability to hold the line a little bit more on the expenses, or should we expect sort of continued rapid growth going forward from here?

No, Ken, I wouldn't expect continued rapid growth.

I think what you are seeing this quarter is really the first quarter that the new hires that we've talked about on the calls the past couple of quarters have been fully loaded into the comp base.

So I think that is the main driver that you're seeing this quarter of the increase in expenses.

And we continue to believe that, while certainly we are a growing company, operating expenses aren't going to decline.

They will not increase at the rate that you see revenues or the balance sheet grow.

Yes, that was a total, Ken, of 21 people that came on, and that is fully loaded now.

And those are the markets we've talked about before, some of those people in Jacksonville, some in Orlando, and some in Tampa.

Also, this was the first full quarter of the SBA business --

Correct.

-- on our -- (multiple speakers) So last quarter was only partial quarter.

This was a full quarter.

Got it, okay.

So it stays at this level, but grows slower; understood.

And then, John, maybe last question for you.

I know in the past, you have commented on your thoughts about consensus earnings or EPS.

Given that we've now sort of reached and passed that inflection point in earnings, any thoughts in terms of how aggressive or not the Street might be with their forecasting?

In 2016?

Correct.

Is that what you mean?

Yes.

We have been spending a lot of time, Ken, working on that, working on a budget for next year.

And so much of -- and we are all going through this.

Everybody that is running a mid-cap bank or a bank of any size, for that matter -- so much of this depends on level of interest rates and where monetary policy is this coming year.

So it is early for us to make any comments about 2016.

We are very encouraged by what we see, but we also see margin pressure.

And I don't understand how margin pressure can be reduced going forward, unless there is a material change in monetary policy.

I just don't see it.

Now, I don't know that we are getting any help from fiscal policy, either, so we are not ready to take a stab at that yet.

All right, sounds good.

Thank you much.

David Eads, UBS.

It was good to see the loan growth kind of pick up in Florida.

Curious if you have any color on kind of the geographies in -- whether it's Miami or in some of the expansion markets, and then what the pipeline looks like in Florida.

Actually, it is spread pretty widely.

And obviously, now that we have hired 21 more people in markets outside of Miami and Dade, we are starting to see some action from those folks.

And you see that in these numbers.

And I expect that that will continue on for the balance of the year.

Those sort of ancillary markets, if you will, of Jacksonville and Orlando are growing at impressive rates, and the folks that we put to work up there are very optimistic about the coming year.

Great.

And then, just on this lumpy credit issue this quarter, should we assume that the increase in charge-offs was also related to that?

Or was there something else going on there?

The increase in charge-offs is really just cats and dogs.

There is nothing -- it is not related to this particular credit, and there is nothing -- no one single thing that is particularly material in there.

Our annualized charge-off rate is still only 10 basis points, so we are not really alarmed about that.

Okay.

So you guys haven't taken any real losses related to this one exposure.

This just came up -- this is very late-breaking news.

But we have taken the reserve for it.

Right, right.

But not a charge-off.

But not a charge-off.

This is something that came up at the very end of the quarter.

Great.

Well, thank you so much.

Steven Alexopoulos, JPMorgan.

I wanted to start -- so regarding the $16.7 million provision in the quarter for what you deem new loans, it seems that the specific reserve came out of that bucket.

Was this problem loan originated in the third quarter?

Or by new, are you just referring to a loan that you have originated at some point?

Yes, new means loans we've originated at some point in the last six years.

Yes, not legacy loans.

Non-legacy, right.

Okay.

Got you.

That's helpful.

I'm just curious, on the loans (multiple speakers)

2012, first loan was originated, yes.

Okay.

Just on the loan side, given all of the holidays in the third quarter and the timing of Labor Day, did you have many loan deals slip into the fourth quarter?

How did that end up playing out towards the end of the quarter?

Yes, we went through this last year.

And I don't know if you were on the phone, but last year's third quarter slipped over into the fourth quarter, and we got punished for it, even though we told the market we would probably make up for that in the fourth quarter.

I'm not so sure as much of that happened this year, but I am aware that there was a significant number of loans that did not get booked on the last day of this quarter that slipped over and will be reflected in the fourth quarter.

Okay, that's helpful.

John, have you been active with any of these larger loan packages that Signature keeps speaking of?

And what's your overall view on those?

(multiple speakers) What are they doing there, Steve?

I don't know what that's about.

So these would be a $200 million package, made up of each being a $4 million multifamily loan, but from an investor group.

So it's a large package all done at the same time.

No, we have not engaged in that.

Okay.

And just finally --

We have plenty of our own action up there, frankly.

Okay.

And John, I hear you that it is very early to comment on 2016 consensus, and that makes a lot of sense.

But given the commentary you also made about after two years, earnings have finally inflected, from here on, do you at least expect steady increases in core earnings as we move forward?

Yes.

Yes.

Yes, yes.

Okay, perfect.

Thanks for taking my questions.

Frank Barlow, KBW.

Good morning.

Yes, this is Frank Barlow in for Brady Gailey.

Just a couple questions.

First, did you all make any new hires specifically this quarter?

And can you talk a little bit more about the pricing competition in Florida?

We made a couple of new hires on the retail side, nothing specific.

No, it's ad hoc.

One here, one there.

Yes, and what was the second part of your question?

Just pricing competition in Florida.

Awful, like it is everywhere.

Yes.

Relatively consistent with what it's been, John.

If somebody tries to convince you that pricing competition is better in one market than another, I would question them dearly on it.

Everywhere we go, we see pricing competition, banks competing vigorously for loans in all the markets that we are in.

Now, in certain categories of loans, we tend to see more aggressive pricing, but geographically, Florida and New York, anything in between, banks are quite aggressive right now.

Okay.

And my second question is basically on your capital plan.

In the past, you all have talked a little bit about raising some sort of debt, either later this year or sometime in 2016.

Is that still the plan?

Yes, it is.

Nothing changed, nothing changing with respect to our guidance along those lines, either later -- either this quarter or next quarter, we are likely to do something.

Perfect, thank you.

David Darst, Guggenheim.

Just following up on the sub debt issuance, does the tax benefit you recorded this quarter change the timing and maybe push that into 2016?

It gives us a little more flexibility, David, but I think we are still thinking that we want to be responsive to the market.

So we will either go later this quarter or early next quarter.

But it does provide us with a little bit of additional flexibility in terms of that.

Yes, we could certainly wait longer, but we are watching the market very closely, and we will take advantage of the market when we see fit.

Okay, and then Leslie, were you describing that there is some type of amortization of this benefit?

Or does this change your tax rate going forward as you work out of the cover book?

Yes, it is a discrete benefit.

It will only impact the ETR for this quarter.

Going forward, it should normalize.

Okay, great.

And then just one more question on the equipment leases.

Are you being more selective?

I think you have got some railcars and some other assets like that.

Is that what resulted in those balances down this quarter?

So, actually, what result -- we are being very -- we are very proactively managing the railcar portfolio.

But really what resulted in the balances being down this quarter, we did a 1031 exchange transaction, and it just happened to straddle quarter end, and the sale took place before the repurchase.

That is all that happened.

You'll see (multiple speakers).

Okay, right.

And so --

We are being careful in that area since a lot of those -- a lot of that industry is related to energy, and we are taking a granular look at everything that we do in that area.

Okay, great.

And then I guess, John, just your comment on M&A is that you don't see anything that is particularly interesting to you.

So should we assume that you are going to focus on organic growth for the next year?

Yes, David.

We always have one eye open and one ear tuned to what might happen on the M&A side.

And Raj is busy and Lisa is busy all the time running models and taking a look at things and taking meetings with investment bankers who have great ideas for us.

So, look, these things are episodic.

Anything could happen.

But we don't see anything pressing at the moment.

Okay, great.

Okay, thank you.

Jared Shaw, Wells Fargo.

Can you give an update on maybe some thoughts on the pace of the amortization of the indemnification asset?

That increased this quarter.

Should we expect to see that continuing to increase?

Or does that difficult sale to --

Sure.

For at least the coming quarter, Jared, I think you will see the amortization rate of the indemn asset and the yield on the covered loans both increase again for Q4 of 2015.

Going forward beyond that, we will just have to wait and see.

Okay.

And then on the taxi medallion, could you give an update on what portion of that is amortizing versus interest only and what specific trends you saw this quarter in terms of movement into nonperformers?

There has been no movement, really.

And about 80%, or maybe a little over 80%, of the portfolio is amortizing.

And none are delinquent.

That sounds great.

Thank you very much.

Lana Chan, BMO Capital Markets.

I don't know if I missed it, but how much of the deposit growth came from New York versus Florida this quarter?

This quarter was much more heavily weighted towards Florida than New York.

As you will remember, last quarter was more a New York quarter than Florida.

That does ebb and flow, like I said, but this was a Florida-centric quarter.

Okay.

And just -- I wanted to clarify an earlier question on expenses and expense growth.

I think the prior guidance was high-single-digit growth in expenses.

Is that still the case, Leslie?

Yes, I would say high-single-digit, yes, for 2015, probably actually maybe even right up to 10%.

Okay, thanks, Leslie.

Stephen Scouten, Sandler O'Neill.

Thanks for taking my questions, guys.

Wanted to follow up on a comment, John, you made about NIM compression heading into the next year, and just kind of feeling like that is kind of a certainty at this point.

Can you talk a little bit about what you guys are thinking in terms of the pace of that compression?

Because that, for you guys, has been flowing nicely.

And I know you've got the 3.80% to 3.90% guidance for the year, but what are you thinking about the scale of that compression into the next year?

For BankUnited, our guidance into next year is as stated.

The comment I made about NIM compression is an industry statement.

I just can't imagine that the industry isn't going to continue to suffer NIM compression as time goes by, as more people put on new loans, and older loans amortize away.

You are right.

Our NIM compression has, if you will, protection built into it, and our guidance from where we sit in 2016 holds.

So I did not mean to imply that that impacts us any differently or even as much as the rest of the industry.

It's just a general comment about the industry.

Okay, that makes sense.

And then in regards to new loan yields, I guess average new production loan yields were down like 4 basis points, down to 3.48%.

So would I be right to assume that new production yields are coming on somewhere lower than that, like the 3.30% range, something like that?

Or what are you seeing in terms of average new production (multiple speakers)?

It's not much below that 3.48%, Stephen.

Not much below there?

Okay.

Yes, no, that's --

Slightly, but not much.

And that can really vary from quarter to quarter based on product mix, fixed/floating mix that happens to go on at any given quarter.

We are not really seeing any trends there.

Yes.

Okay.

And then maybe last question, just as it pertains to deposits and the loan-to-deposit ratio, I know you guys have always said you are comfortable going slightly over 100%.

But you are moving there somewhat rapidly, and I guess year to date, you've grown loans $1 billion more than you have grown deposits.

So are there any strategies that you guys are going to undertake to drive more deposit growth, or are you comfortable using FHLB borrowings at this point?

Or can you kind of talk through your strategies there and what the risks are as we look out into 2016 there?

So, on FHLB, let me say that, yes, we are comfortable growing our FHLB borrowings, and we have an enormous amount of capacity there.

Having said that, deposit growth is central to our strategy moving forward.

We are doing plans right now for next year, and we are spending a lot of time focusing on deposit growth as how it relates to incentive plans, how it relates to marketing dollars, how it relates to our pricing strategy.

So the focus on deposit growth is increasing in the Company, as it should.

And you will see -- deposit growth is a little more -- it's a little harder to predict then loan growth, because in loan growth you can see your pipeline.

You can see what's come in the door, and with certainty you can say this will close, this won't close.

Deposit growth does fluctuate quite a bit.

We had almost $1 billion of growth last quarter.

This quarter we have $650 million.

If you ask me what do you think this quarter will be, it's hard to tell, because it is not just about bringing new money in.

It is also about how existing money fluctuates up and down.

But overall, we feel good about where our deposits are growing.

We are comfortable going over 100% loan-to-deposit ratio.

And you will see us (technical difficulty) deposits more aggressively in 2016 than in 2015.

Okay, so near term, you don't expect any big changes in terms of funding costs, but as you might have to do some pricing specials or other things in 2016 to grow deposits more meaningfully, we could see some ramps in the cost there.

Is that kind of accurate?

You could, but it will be modest.

Okay, great.

Thanks.

We have to weigh that against our tremendous capacity we have at the FHLB, so -- and we use those borrowings to manage funding costs very directly.

Great.

Thanks much for taking the questions.

Michael Cohen, Opportunistic Research.

Thanks for taking my question.

Just one quick follow-up on the taxi medallion portfolio.

I know you mentioned the cash flow did not change meaningfully.

Where are your debt service coverage ratios now, and where have they been over time?

Because obviously the top line of the farebox for the drivers is declining.

Right, farebox has declined a little bit year over year.

Our debt service coverage ratio, so I think 3% of our portfolio is under 1.25 debt service coverage ratio, and 46% of our portfolio is over 2, to give you an idea.

Okay.

And just for my edification, it's how many medallions across the $214 million?

And what is the average loan size?

Hang on, we've got this here.

It's 265 loans tied directly to medallions.

You can do the math yourself to get the average.

Yes.

But it's 265 loans.

Now, how many actual medallions that is, it's a different number.

577 medallions.

Great, that's really helpful.

577, yes, well, that is the number you need, right?

Yes, that is the number I need.

That's great.

That's very helpful.

And then second question, in terms of not related to medallions, but in terms of how you are thinking about your both loan and deposit growth at a sort of 35,000-foot level related to some of the larger banks shedding deposits and loans, can you sort of quantify for us how much tailwind you think that has provided you and how long you expect that to continue?

We haven't -- I think it is fair to say that anything you've seen in our growth numbers this year doesn't include any real benefit that we've gotten from anything coming out of the large institutions, either on the asset or the liability side.

We've been very -- we've been actively examining a lot of those assets and liabilities, particularly on the deposit side.

We've spent a lot of time looking at some of the hedge fund deposits that are coming out of the money center banks.

Our conclusion was that they were not profitable accounts, by any stretch of the imagination, so we took a pass.

Now, we are looking at other industries and are basically getting kicked out of the money center banks on the deposit side.

And I expect that over the course of 2016, we will get some benefit from that.

I would not want to quantify it right now.

On the asset side, I don't know, Raj, not much.

Did you see anything?

No, we don't really --

Bonds, maybe.

Bonds maybe more than loans.

Yes, if there is any place where we are making -- we have some benefit we are getting from the turmoil at the big banks is actually in the bond portfolio.

It has been a good time to buy bonds over the last six months.

Great, thank you very much.

Gerard Cassidy, RBC Capital Markets.

This is actually [Steve Dong] in for Gerard.

Your Tier 1 leverage ratio is down to 9.7%.

Can you just give us an update on your capital plans, the timing and the amount again?

So, the 9.7% is at a consolidated level.

Our constraints are at the bank level.

But as we have said, we will likely do some sort of debt raise, either this quarter or the first quarter of 2016.

The specific timing of that will be in response to what we see in the markets.

But that is currently what we are planning to do.

Okay, great.

And just, if you wouldn't mind, what was your target loans-to-deposit ratio again?

We are right now at 97% and we have said publicly that we are comfortable going over 100%, maybe 105% to 110%, in that range.

But we would not be comfortable going beyond that.

Okay, great.

Thanks very much.

There are no further questions in queue at this time.

I will turn the call back over for closing remarks.

Thanks, everybody.

Just to repeat, based on everything we know and based on the fact that we finally turned this corner on the earnings side, we go into the fourth quarter feeling pretty good about ourselves and feeling optimistic.

As I've said earlier, we are all concentrating on taking a look out at 2016, and when we figure out what it looks like for us, you will be the first to know.

But I think that it's no secret here among anybody who is on the call that 2016 lines up, I think, for the whole industry to be a challenging year.

This Company will make up some of that ground by the fact that we continue to have the ability to grow in these very healthy markets.

But we are delighted with what's gone on so far this year and look forward to finishing out strong.

That's all I have.

Thank you very much.

Thank you.

Ladies and gentlemen, this concludes today's conference.

You may now disconnect.

Good day.