BankUnited Inc (BKU) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BankUnited for 2015 earnings conference call. (Operator Instructions.) As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference call, Ms. Mary Harris, Senior Vice President of Marketing and Public Relations. You may begin, ma'am.

Good morning and welcome. 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, and 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 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 a result of new information, future

developments or otherwise. A number of these factors could actual -- cause

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 at the SEC's website, SEC.gov.

I'll turn it over to John Kanas. John?

Good morning, everybody. Obviously, it's been a great quarter, both in terms of

earnings and growth. New loans and leases grew about $1.3 billion this quarter,

bringing that annual growth as we predicted to about $4.7 billion. Remember, we

said somewhere between $4.5 billion and $5 billion.

Deposits actually grew -- this was the biggest deposit growth quarter we've ever

had, a little bit over $1 billion, and all indications as we go into 2016 are

that these growth metrics will continue.

Net income for the quarter, almost $56.5 million, about $0.52 a share. As we reported at the end of the third quarter, we expected to see a decline in our

nonperforming assets as a result of that one loan that skewed the numbers last

quarter and, in fact, our noncovered nonperforming loan ratio declined from 66

basis points last quarter down -- back down to 37; and our noncovered

nonperforming assets ratio declined from 44 last quarter to 26 basis points,

back to what we consider for this portfolio normalized.

The largest contributor to that decline was the predicted reduction in the

balance of that one loan which represented about $44 million of nonperformance.

Last quarter it was down to just under $15 million.

The reserve on this loan was also reduced from $6.3 million down to about $2

million as a result of the success we've had in resolving that loan. Loan and

lease growth for the quarter, New York grew $623 million. Florida just under

$500 million, $485 million. And the national platforms grew $229 million. I

would remind you that the reason that that number was considerably lower is we didn't buy mortgages during this period. And Raj can talk a little bit more

about that as to why later.

As it turns out, at the end of the year by region, Florida's loans represent 35%

of the book, New York's loans represent 35% of the book, and the national loans

represent 30% of the book. About exactly where we expected them to be by the end

of this year.

During the quarter we also completed a very successful debt offering, a bond

offering in November, which will provide us with runway for -- of capital

through 2016. Note that we raised that money at 4.875% coupon to yield 5%. So we

think we are good for most of the balance of 2016 and won't have to start

thinking about capital again until either late 2016 or early in 2017.

Everybody is going to want to talk about the general economy and we don't know

any more than the rest of you know. What we do know, however, is that in neither

one of our markets are we seeing any signs of stress. The Florida markets are

continuing to show improving health. In fact, as we spread out more and more in

Florida, Tom was telling me that of the Florida loan growth this quarter, 40% of

our loan growth was from non-Miami -- non-Miami-Dade. That's Tampa, Orlando, and

Jacksonville. So that new strategy that we have begun developing earlier in 2015

is working out very well for us in Florida.

New York continues to grow uninterruptedly. There has been a lot written

recently about the very high-end condo markets in New York leveling out. We

certainly know that. We predicted that some time ago.

But as you know, most of our commercial real estate loans in that area are

financings of apartment buildings which are holding up very, very well and in

fact continuing to appreciate. We have no idea what monetary policy is going to

be next year and, like all banks, the ultimate performance of this balance sheet

and everybody else's balance sheet will be a function of what happens in the

general markets with interest rates and where the yield curve goes.

As we had feared when we talked about increases in interest rates, we've

actually seen further flattening of the curve since the monetary policy change a

few weeks ago. We certainly hope that that will rebalance itself later on in the

year but for now, certainly the yield curve does not make it easy on banks. This

bank is no different than any other.

So, in summary, greater earnings, great growth. Expect that kind of growth next

year. No issues concerning the quality of our assets. No indications of any

softness in any of the areas that we are involved in. Thank God we're not --

thank God we are in New York and Florida and not in other parts of the country

that have energy problems to worry about.

So we continue to be optimistic going into 2016 with an eye toward -- with an

eye of great interest toward both politics and monetary policy and we will

figure that out together as time goes by.

Raj, why don't you talk a little bit about deposits and mortgage business and

taxing down the portfolio and whatever else you want to talk about?

Sure. Thanks, John. Deposits now stand at almost $17 billion -- $16.9 billion,

to be exact. Like John said, this was our biggest quarter to date in terms of

deposit growth. We grew a little over $1 billion. We are very happy about that.

For the year we grew about $3.4 billion.

This quarter, the growth was spread out between New York and Florida. Florida

actually contributed about $780 million of that growth and New York came in at

about $260 million. Just round numbers.

Deposit growth is harder to predict than loan growth because in the loan growth

situation you obviously have a pipeline that you can look out three to four, six

months with a fair amount of certainty. Generally when loans are booked, while

there are some prepayments, it is -- once you have enough data over time, you

can predict what loan balances will be. Deposit balances are harder to predict

because it's not just a matter of bringing in new customers. It's also how new

customers behave and how that money moves around which is why it's a little

harder to predict them.

Loan to deposit ratio currently stands still under 100. We are about 98. So we

are getting up there to the guidance we had given you. I think you should expect

that this year to go past 100 and probably be in sort of the 105 to 110 range

which is where we would be comfortable.

Cost of funds -- cost of deposits remained relatively stable at 62 basis points.

And the Fed rate increase in December -- we've all been waiting for this for a

long time. So far, we have not seen any impact in the marketplace over our

competitors jumping the gun on moving rates. But it's only been four weeks and

we will continue to monitor that carefully.

There was some -- a little bit of news last week. We didn't actually put this

out as a press release but we did make a decision on residential mortgage retail

originations. We've been in this business for about two or 2.5 years and this as

part of our larger mortgage banking strategy where we do warehouse lending, we

do originations to the correspondence channel. We of course are a big mortgage

servicer and this was the smallest part of our mortgage banking business.

This business, while it was growing nicely it's a very [tight] margin business,

it's a very volatile business. We saw a tremendous amount of volatility month to

month, quarter to quarter and when we took a look at this business amongst other

businesses, we realized this was the lowest margin most volatile business we had

and we decided that we should exit this channel.

This business requires a lot of scale and, even if we had grown this to five or

10 times the size of what we had, it would still not be a big contributor to

earnings and was not very strategic for us.

So about a week ago we terminated this business. We have a pipeline of loans

that we will close those loans over the course of the next couple of months but

we will not be originating in the retail channel.

To give you a quick update on the taxi medallion portfolio, the portfolio still

is a little over $200 million by 2014. The delinquencies are about $7.9 million.

This is as we've told you over the last couple of quarters, this is the portion

of our loan portfolio that we keep the closest eye on for obvious reasons.

We did a very detailed analysis of the portfolio in the fourth quarter, loan by

loan, trying to update all of our assumptions, both in terms of value and cash

flow and, that analysis, after that analysis was done, we have classified about

$78 million of that portfolio as substandard in our risk rating methodology.

The move of these loans to substandard is a very conservative move and we have

been reserving for this as well. So we did take a big provision against this

portfolio which is embedded in our loan-loss reserve and Leslie will talk more

about it; but right now the reserve against this $210 million, $215 million

portfolio stands at about 5%, just a little under 5%.

What else? I think I'll pass this on to Leslie and she can talk to you a little bit about earnings and next year, what to expect.

Okay. Thanks, Raj. So, to reiterate what John said, we had a strong quarter from

an earnings perspective. Net income of $56 million or $0.52 a share. The NIM

increased this quarter -- first time I've been able to say that in a long time

-- to 3.94 from 3.88 in the previous quarter. The main drivers of that were

improved performance of the covered loans and better yield on our investment

portfolio. Those were the two main things contributing to that.

Cost of interest-bearing liabilities was 84 basis points for the year, down from

87 for 2014, due to overall lower rates on CDs and borrowings. For the quarter,

we saw a slight uptick in the cost of interest-bearing liabilities, reflecting

the impact of the senior notes that we issued during Q4.

Not yet seen much of an impact from the Fed raising rates in December. I think

it's a little early for that. We haven't seen pressure on deposit pricing yet as

Raj said. And while we've seen some indications of better pricing on loans, pricing

does remain competitive and I think it's early to call a trend.

The provision for the quarter, Raj talked a little bit about taxi. This quarter's provisions reflects a reduction in specific reserves. John mentioned the reduction in the reserve for the one loan that we had talked about with you last quarter. There were some other specific reserves that came off as well this quarter. The effect of that was substantially offset by the provisioning that we did for the taxi portfolio. So, net of those two things really what you're seeing in the provision this quarter is just providing for the new loan production. So that's what's going on there.

From an interest rate risk perspective, there's no material change to bring to your attention. The balance sheet remains pretty neutral with some projected increase in net interest income in a rising rate environment. But obviously as John mentioned that's all going to depend on what we see happening in the yield curve.

Give you a little bit of information, looking forward to 2016, we continue to expect the trajectory of earnings for 2016 to be up. Likely with the second half of the year exceeding the first half as we continue to add interest assets to the balance sheet. We see net new loan growth in the $4.5 billion to $5 billion range again, pretty consistent with what we saw this year. Continued growth in net interest income. Noninterest expense excluding the FDIC asset amortization ended up growing by about 11% for 2015. We certainly expect a lower rate of growth for 2016. Probably the mid- to high-single digits range.

Our projections utilize a probability weighted consensus forward curve so for those of you who are going to ask me what our assumptions were about rates putting our forecast together, so that reflects probably a likely two rate increases in 2016 with something of a flattening trend. NIM will continue to decline in 2016 as we see the covered loans continue to run off and have less of an impact on our NIM.

Currently, I would expect NIM for the year 2016 to be somewhere in the mid-3s. That will obviously be materially impacted by unexpected developments in the trajectory and shape of the curve.

We've guided in the past to a combined yield on the covered loans and indemnification asset of 9% to 10%. Currently I would expect that to be closer to the 10% going forward, not to the 9%. The rate of runoff of the [NDIM] asset in covered loans we expect to remain consistent with what you've seen over the last several quarters.

We don't expect currently any material changes in the level of the ALLL nonperforming assets or net charge-offs -- we're not seeing anything that would lead us to believe anything is going to change significantly there. And as we've said previously I think you can expect the ALLL as a percentage of loans to gradually creep up over time as we move through the credit cycle but we aren't seeing signs of general deterioration in credit quality and not expecting anything dramatic there.

So, with that summary, I'll turn it back over to John to wrap us up.

Not much else to add, other than on the people side we continue to have very interesting conversations with people who we expect will join BankUnited this year. We continue to get some advantage from the very large banks that are shrinking in size, shrinking both assets and liabilities.

We're in touch with a number of teams in New York of people who will most likely join us this year who have distinguished careers for many, many years in that market and will be able to bring us even more assets and liabilities during this year. That's actually pretty exciting.

None of this is done until it's done. But we're involved in a lot of interesting conversations there.

Obviously we, like everyone else, are captive to the world economies and more specifically the economy here in the United States and things have gotten very interesting lately. Fortunately for us, we run a business every day in markets that are showing little or no stress even though we sit around and look at our Lunenburg screens, it gets pretty scary in the last couple of days. We don't find any impact in our business coming from that as yet.

Both markets very healthy, both markets continuing to further stabilize in Florida and grow and hitting here at BankUnited on all cylinders and looking forward to 2016. With that, we'll take questions.

(Operator Instructions)

Jared Shaw, Wells Fargo Securities.

Hi, good morning. Maybe first on the taxi portfolio, can you just give us an update on -- during the quarter, were there any additional restructurings versus what we saw in the past or was that fairly stable as well?

That was fairly stable, almost negligible.

Jared, we're going to start seeing those probably around the middle of this year and going through 2017 when most of those loans come due.

Okay. And what was the split between amortizing and interest-only in that portfolio for the quarter?

I think roughly 80%/20%. 80% advertising, 20% non-.

Okay. So I'd say the same as well. Okay. Great. And then, Leslie, when you talked about the higher yield on the securities portfolio, was that a result of any restructuring or reallocation of incremental purchases or what are your thoughts there?

Yes, in summary, the main driver there was we've increased our investment in municipals and we had some excellent fine opportunities in that market during the quarter in that, so we got out of some lower yielding securities and into some municipals that provided us a better yield, so --.

2015 was a good year for buying fixed income securities. A lot of disruption in the market from time to time and we were able to capitalize on it.

Would you anticipate continuing to extend that portfolio or do you think most of that is done now?

I think we'll be -- if the opportunity presents itself to do something, we will.

Okay. Great. That's it for me. Thank you.

Ebrahim Poonawala, Bank of America.

Good morning, guys. I think as a first question on the national platform, Raj, in context of sort of exiting the retail origination business how should we think about sort of growth outlook for that business? And as you look at sort of market dislocations, what are the opportunities to sort of add on teams, add on verticals to grow that platform?

The retail mortgage channel was clearly about maybe $20 million on average a month type of number. So it's very small. We don't see that having any impact on our total growth -- maybe it grew $4.7 billion this year. We'll be easily able to make that up somewhere else so I wouldn't worry about that too much. And in terms of the other businesses or other teams I don't want us to prematurely say what dialogs we're having; but as and when we're able to get these people to sign on we will disclose that. And it may be national, it may be Florida-based, it may be New York-based. We have multiple conversations going on. So it's a little too early to actually get into that because we don't have these teams signed up yet.

Understood. And just a second question -- appreciate your guidance around sort of outlook expense growth. How should we think about the efficiency improvement as sort of your size and scale, particularly in New York? Helps you get more efficient -- should we see that in the context of your margin guidance? Where do you see that [tending to] 2016?

Leslie, why don't you take that?

I think certainly, Ebrahim, you will continue to see an improved efficiency ratio and expenses going down as a percentage of average assets.

To your point, the New York operation, as well as our national platforms as they continue to grow as a percentage of the business, will contribute to operating leverage because they are very efficient operations in terms of minimal physical footprint, particularly. And the lower headcount that goes along with that.

We will continue to have noise in our numbers from FDIC assets, not just the asset itself and the amortization of the asset being (multiple speakers) but also the expense associated with it as well. So, it will only get cleaned up in three years' time in 2019 when we no longer have that asset.

But the general trajectory, as Leslie said, will be lower efficiency, lower growth of expenses. I think over the last couple of years you have seen -- it's not that we will not grow our expenses. We are a growing company, we will have expense growth. But the level of growth will be less this year than it was last year and last year it was less than it was the year before.

Understood. Thanks for taking my questions.

Stephen Scouten, Sandler O'Neill.

Hi, guys. Good morning. Thanks for taking my questions here. A question for you on the expected loan growth.

I know you said another $4.5 billion to $5 billion expected next year. Can you talk a little bit maybe about where you think the spread of that will come from? New York relative to Florida especially, and I know you said 40% of the Florida growth was non-Miami but what are you seeing specifically in Miami and any specific weakness in that market?

Well, we're not seeing any weakness in that market. Remember, we reported a couple of quarters ago that we wanted to spread out our Florida business more generally across the state because the other markets were starting to show improvements, as South Florida did. That's working here, much in our favor.

In terms of sort of predicting where the loan growth is going to come, the loan growth will come in the categories that we select along the way in 2016 to be the safest and the most profitable. We have a lot of leverage there. We have a lot of ability to manage that growth between New York, Florida, and the national companies. It's a little early to be able to say where we want to be stepping on the brakes and where we want to be stepping on the gas yet.

To give you some small examples we're looking at our little company out in Scottsdale, Arizona -- Pinnacle Public Finance. We think that's a company -- we're very, very happy with that business we think they can do.

In 2016 we think they will do more business that they did in 2015 and we've encouraged them to put up a little more capital for them to go ahead and do that. We will watch commercial real estate very carefully as the rest of the world does in all of our markets and act accordingly as we see that business ebb and flow.

So, it's too soon to say but there's no intention here of eliminating one market and emphasizing another in its entirety. I think we just continue to take these markets' temperatures as we go and act accordingly.

Okay.

I mean Miami -- it's not that Miami is weak, it's that if you can get better economics in non-Miami Florida markets, then, you want to do that.

Most of the big blanks in Florida are competing with us in Miami and it's one of the reasons why the margin pressure in Miami is a little tougher than the rest of the state. So we've ventured out where we don't have quite so much competition, but Miami is still a great resource for loans. But you're going up against the big guys in Miami and (multiple speakers) you're not necessarily in Tampa and Jacksonville.

I guess I asked more about Miami -- just some of your competitors seem to be pulling back from Miami mentioning kind of values that seem peak-ish and I know there's been some credits go -- a couple of credits go bad down there and South Florida and maybe emerging market inflows of capital could be less. So I guess just general from a macro perspective, you're not seeing any of that really flow through in terms of overall advantaged high-quality loans?

I think if you are a bank that's engaged in construction lending, you might want to get a little careful this year. Remember that's 1.5% of our loans or something. We don't do that business -- we're not financing high-rise towers anywhere either, commercially or residentially.

So in some of those markets I think everybody is in those businesses is probably well advised to be careful going forward because Miami is busy building its new supply of high-rise condos along the beach and with no end in sight. But that's not the business we're in. We've talked many times about the fact that we're involved in sort of the satellite businesses that revolve around all forms of real estate in Florida. So we're probably doing business with the plumber and the lawyer and the accountant and the electricians who are working on these things, but we're not necessarily counting on the asset values of these newly constructed buildings that are going up.

Same thing in New York -- there was an article recently about the very, very high-end properties likely to fall under some weakness, so we've been predicting that for two years. It's not our business, we don't finance that business -- never have.

But I would -- there's probably a dozen projects and a dozen big towers being built around Central Park these days. We all look at that and scratch our heads and say, how many $80 million condos are you going to be able to sell in New York?

Well, we're going to find out, I guess. But that's not our business.

Fair enough. And maybe one more for me -- just on the provision front, maybe Leslie. How do you feel --? I assume this number should go up if loan growth continues. It seemed like about 60 basis points on new loans or -- is that a level you are comfortable with? Or should it be more like 70/80 basis points on the new production in the long term?

Stephen, again, I think you will see the allowance from what I'm looking at today stay relatively consistent as a percentage of loans. The provision is the number that gets you to the allowance, so I think about it in terms of the reserves more than in terms of the P&L.

But I think you'll see the allowance stay relatively consistent as a percentage of loans, maybe gradually creep up over time as we move through the credit cycle. That's what we've been saying, and I haven't seen anything yet that would change that outlook.

Okay. Great. Thanks for taking my questions. I appreciate it.

Brady Gailey, KBW.

Good morning, guys. So, a couple of weeks ago, there was a press release issued jointly by the regulators talking about banks that have big commercial real estate composition and their loan book and banks that have gone commercial real estate by kind of an above average clip. Are you all getting any sort of pressure from regulators to slow commercial real estate-related growth?

Sure. But there's commercial real estate and there's commercial real estate. And those articles don't tend to go into detail with regard to the specifics. The regulators have one category -- commercial real estate. That is a construction loan out in the desert someplace of a hotel and also a 60% loan to value fully cash flowing apartment building on Madison Avenue in Manhattan.

So, clearly, the regulators are looking at the most speculative areas of commercial real estate and getting nervous about it. There has been a number of articles written about that. So we communicate with them frequently on that. They want to make sure that the risk management practices in all of their banks keep up with this. Of course.

But I'll tell you that commercial real estate in this Company still is a little bit under 300% of capital. There are lots of banks around that are 400%, 500%, and 600% of capital and some even higher than that and I think that probably the regulators are looking as carefully at them as they are at anybody. And they are also looking at the types of commercial real estate that the banks are going to.

But clearly that is an asset category that regulators are interested in today. They are going to continue to be adjusted in it and we dialogue with them all the time and we are continuing to build even within BankUnited an even more robust risk management practice as we sort of add assets to our balance sheet.

All right. And then, John, your comments on capital -- you raised the $400 million of debt a few months ago. You talk about maybe needing a little more capital late this year, early 2017.

Do you think that capital will have to take the form of common equity? Or do you think you can get away with raising some non-common?

We don't have any plans for common equity in 2016 or even in early 2017.

All right. And then I think, if I remember right, you all are still under your operating agreement with OCC. Any color -- (multiple speakers) I know it holds you to some higher capital ratios at the bank but any idea when that will go away?

No. Regulators keep that stuff pretty well to themselves.

I will say that BankUnited is probably if not the -- one of the fastest growing mid-cap banks in the United States and as you can see we're predicting $4.5 billion to $5 billion worth of loan growth next year. So this Company is held to a high standard by the regulators.

In a way, as operators, it makes it tougher for us to operate because we are held to these higher standards. As investors and as an investor myself it's not so bad to be held to a higher standard, particularly when we're on the brink of a new economy here apparently over the next couple of years.

So, yes, we think that our operating agreement should go away but everybody probably thinks their operating agreements should go away. But the truth is that the things that the regulators hold us to in that operating agreement probably make a lot of sense in today's world.

All right. Great. Thanks, John.

Ken Zerbe, Morgan Stanley.

Good morning. Two questions for you -- first one, just in terms of the mortgage business I just want to make sure I fully get exactly what you've sold. So this was the self-originated stuff that you were doing presumably, and the servicing portfolio, but is it also fair to assume that you still have the option to purchase mortgages? Am I thinking about that right?

We didn't sell anything. What we did was close down the retail origination channel -- those are the salespeople in the back office people that support that -- Raj, why don't you complete that?

Yes, exactly. First we did not sell anything to anyone. We only shut down the retail channel originating mortgages. So about a week ago if you walked into our branch and wanted a mortgage we would take your application. If you do that today, we tell you we won't -- we don't sell that product anymore.

The corresponding channel is still in business and you continue to see that business to travel along just fine. The servicing business which is -- we service all our loans or almost all our loans; and we also service some third-party loans. And that servicing platform is intact and doing very well, and will continue to be in that business.

We also have a mortgage warehouse business, which continues to grow nicely and we'll grow it even more this year. So all those businesses are not affected. None of them are affected. Just retail originations, which was the smallest of all these businesses, by the way.

Got it. That helps clarify it a ton. So and then it just happens to be that you didn't purchase any resi mortgages in the corresponding channel?

That's unrelated -- (multiple speakers) that's a different business.

Unrelated but to incidental. Okay. Totally makes sense.

Second question, then, just in terms of the covered portfolio -- obviously aside from the benefit we got from the securities piece the NIM is higher because of the volatility in the covered portfolio -- I guess I was just broadly under the impression that now that we have the commercial lost share gone, the resi loss share should see a bit less volatility, given how homogenous it was.

Was there anything unusual in terms of the reclassification or the review of that that would have led to a stronger greater impact on net interest income this quarter? And how should we think about that going forward?

Ken, it really isn't anything unusual -- it's not a one-time event. We just saw better performance from the portfolio -- continued improvements in roll rates, continued improvements in pricing on our loan sales. Just generally better continued, better performance of that portfolio.

Got it. And that's almost a parallel shift up in NIM but yet still on a declining basis over time?

Correct.

Okay. Great. Okay. Thank you.

Gerard Cassidy, RBC.

Good morning, guys. How are you? Raj, can you share with us -- you have that very strong deposit growth back you pointed out. What were the drivers or how were you able to achieve such good growth?

It's because we are so good-looking.

I figured you were giving out toasters or something. I wanted to go open an account.

Umbrellas, actually. But no -- deposit growth -- like we said, it's harder to predict. It's not always very even quarter over quarter. It comes in -- you work on an account for months and months and sometimes it comes -- a lot of accounts open up at the same time and sometimes you can have outflows in deposits when you are least expecting them, which we've had from time to time.

So it is difficult to predict. We did have a strong quarter. It is not that we did anything special with rates for advertising campaigns or anything unique in the fourth quarter. It's just a lot of what we've been doing over the course of the last year -- we are incenting our people more for bringing in deposits. We are pushing that harder, but we were doing that all along -- all over 2015.

It's just that a number of things happened at the same time and we got a lot more new loan -- deposit growth. It's just all kind of happened in the fourth quarter toward the end of the year.

Gerard, I mentioned earlier that we're in touch with a number of people who work in the larger banks whose businesses don't fit in those banks anymore. And a lot of those people are deposit generators. They are people who control very large sums of deposits for -- that are residing inside of these banks and have regulations that go beyond the regulations that apply to BankUnited these days.

So you should expect to see volatility in deposits -- and by volatility, I mean the potential for deposits to grow at even a faster pace in relation to loans. Because we have so many outlets for lending, we never have a problem in trying to meet loan growth targets. But we understand and you've heard us say that we don't really want to go over a 110% or so loan-to-deposit ratio.

So as Raj says, we're spending a lot of our time reincenting our people and finding other people who will bring this kind of deposit growth to us. So, it's broadly spread over the consumer deposit channel in Florida and the commercial deposit channel in New York and in Florida as well. Remember, 55% of the deposits in Florida are consumer. About 85% of the New York deposits are commercial.

Obviously the commercial deposits are much larger on an account by account basis. But overall that's pretty close to a 50-50 split of deposit funding for the Company which we're very comfortable with.

Have you guys ever explored using the Internet to gather deposits? Does that ever make sense or are they just too interest-sensitive that if you don't pay the highest rate you don't attract those deposits?

We have studied that at length but we have not acted on it yet.

Is that something you would consider once you are more comfortable or whatever you need to do -- would you consider going down that channel?

Gerard, the problem with those deposits is that in a rising rate environment nobody knows really how sticky those deposits will be. And while, technologically, we could do that anytime this year if we wanted to, from a business strategy perspective I don't think we are comfortable with that strategy yet.

But we do have the capability to do it if we ever want to experiment with that. But we have not pulled that lever yet.

And different banks have had different levels of success with that product, and we're watching those different banks and watching the ones that are not so successful and seeing what it is that drives that. In the same way we're studying carefully the banks that are very successful at that and seeing what makes them successful.

So as Raj said, technologically we could pull the switch tomorrow and be in that business, but we don't need to yet.

Okay. And then coming back to lending, and many have talked about this in their calls this quarter that credit is very good year round but there seems to be a fear out there in that there's some sort of credit cycle that's going to fall upon us. John, using your experience of the last down cycle and if we turn the clock back to 2005/2006 and we all remember the excesses -- are you seeing any similarities? I know that subprime is not the issue this time but are there any similarities that you're seeing yet in the commercial side that make you remember what it was like in 2005 or 2006?

I try not to remember. No -- actually obviously you know as well, Gerard, we sit around and talk about that all the time and look at each other and say, where is it going to come from? What asset classes are really sort of on the hot plate right now? And frankly in the markets we're in, with the asset classes that we're in, we really don't -- we don't see any reason to start getting nervous.

Look, you know me and you know I started getting very, very nervous in 2004 and 2005 and ended up selling my company in 2006 because of what we saw coming. We don't see anything like that today.

What we see today is a stock market that's getting driven crazy by the inability of our monetary policy to have greater impact on what's going on in the underlying economy. Where we're seeing the impact of foreign countries whose economies are falling apart and the fear that is being driven through our veins by a national election that certainly looks very interesting at least right now.

But in terms of doing business every day -- where we do business every day in the asset categories that we (technical difficulty) we're not seeing it. Obviously we're being careful and obviously I suppose we're being more selective than ever both in Florida on the lending side and in New York on the lending side but -- and we're double checking and triple checking ourselves all the time, building our risk platforms to even more robust levels and staying close to the regulators.

The regulators have a lot of good information about this stuff and are able to help us predict what's going on. This a lot written the now -- for instance, there's a lot written coming out of the regulators right now about indirect auto as a category and the fact that risk might be building there and in fact layering [on]. Well, you know that we get out of indirect auto, what? 18 months ago, probably, because we saw that coming. You're seeing us make a move now with residential mortgage originations -- not because we see anything wrong with the assets but because you can't make money in the business. And we've looked at this and if we were to build it two or three times the size of this we still wouldn't make money in the business.

So our job is to allocate resources here and put all of our efforts into the areas that we can make money in and where we think the least amount of risk is. And right now, we're feeling pretty good about all the asset categories we're in.

Great. And then justifiably, we've had success in building up a national platform with different lines of business. Are there any others that you may be able to jump into in 2016 aside from where you already are in those national lines of business?

Gerard, as you know we are always looking but I don't have anything to report back to you as saying something is imminent. We're always talking both on an organic front and as well as inorganically. When the right opportunity comes along we will act on it but there's nothing in the pipeline to talk about yet.

Great. Thank you.

I'm not showing any further questions at this time. I'd like to turn the call back over to Mr. Kanas for closing remarks.

So in closing, great quarter, great year. Good growth, as we predicted. Asset quality holding very firmly where we expect it to be. Optimistic for our Company going into 2016 -- both on the growth line and in the earnings line. As Raj said, building probably -- profitability building in the second half stronger than in the first half as we continue to add good assets to the balance sheet.

No need for capital for three or four quarters, probably. And concentration, outworking our competitors and continuing to grow our franchise and these markets. That's it from this end. Raj or Leslie, anything else to add?

Thanks, everybody for joining. Look forward to talking to you more directly as we get out on the road.

Bye-bye.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.