BankUnited, Inc. (BKU) Q4 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the BankUnited Q4 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [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 & 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 reflects the Company’s current views with respect to among other things, future events and financial performance. The Company generally identifies forward-looking statements by terminologies 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 conditions, 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, little bit over a $1 billion and all indications as we go into ‘16 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 non-performing assets as a result of that one loan that skewed the numbers last quarter and in fact our non-covered non-performing loan ratio declined from 66 basis points last quarter down to - back down to 37 and our non-covered non-performing 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 non-performers, last quarter’s debt of 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 did 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 of capital through 2016. Note that we raised that money at 4.875 coupon to yield 5%. So we think we’re good for most of the balance of ‘16 and won't have to start thinking about capital again until either late ‘16 or early in ‘17. 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 is telling me that of the Florida loan growth this quarter, 40% of our loan growth was from non-Miami day, that’s Tampa, Orlando and Jacksonville. So that new strategy that we've begun developing in earlier 2015 is working out very well for us in Florida. New York continues to grow uninterruptedly. There's 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 talk about increases in interest rates, we've actually seen a 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, and this bank is no different than any other. So in summary, great 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 are not in - 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 ‘16 with an eye of great interest towards both politics and monetary policy and we'll all figure that out together as the time goes by. Raj, why don’t you talk a little bit about deposits and the mortgage business and the taxi medallion 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 about $260 million, just round numbers. Deposits growth is harder to predict than loan growth. In loan growth situation you obviously have a pipeline that you can look out, three, four, six months with a fair amount of certainty, generally when loans are book while there are some prepayments. Once you have enough data over time you can predict what loan balances would 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 the sort of 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 had 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 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, 2.5 years and this - it was part of our larger mortgage banking strategy where we do warehouse lending, we do originations through the correspondent channel, we of course are a big mortgage servicer and this was a smallest part of our mortgage banking business. This business, while it was growing nicely, it's a very thin 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 business, we realized this was the lowest margin most volatile business we had and we decided that we should exit this channel. This business requires lot of scale. And even if we had grown this two, five or 10x the size of what we had, it would still not be a big contributor to earnings and it 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 next couple of months, but we will not be originating in the retail channel. To give you a good quick update on the taxi medallion portfolio. The portfolio still is little over $200 million, about $214 million. The delinquencies are about $7.9 million. This is, as we have told you in 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 analyses on the portfolio in fourth quarter loan-by-loan trying to update all of our assumptions both in terms of value and cash flow and that analyses - after that analyses was done, we have classified about $78 million of that portfolio substandard in our risk rating methodology. The move of these loans to substandard is a very conservative move and we’ve 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 $215 million portfolio stands at about 5%, just little under 5%. What else? I think I'll pass this onto 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 provision 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 is no material change. To bring your attention, the balance sheet remains pretty neutral with some projected increase in net interest income in a rising rate environment that obviously as John mentioned that's all going to depend on what we see happening with 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 earning 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. Non-interest expense excluding the FDIC asset amortization ended up growing by about 11% for 2015. We certainly expect a lower rate of growth for ‘16, 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, we’re about putting our forecast together so that it reflects probably a likely two rate increases in 2016 with something about flattening trend. NIM will continue to decline in 2016 as we see the covered loans continue to run-off and have a less of an impact on our NIM. Currently I would expect NIM for the year 2016 to be somewhere in the mid-threes. 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 and not to the 9%. The rate of run-off of the indem asset and 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 non-performing assets or net charge-offs. We are 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 credit quality and not expecting anything dramatic there. So with that summary, I'll turn it back over to John to wrap this up.

Yes, not much else to add other than on the people side we continue to have very interesting conversations with people who we expect to 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 are in touch with a number of teams in New York, people who will most likely joining us this year, who have distinguished careers for many, many years in that market and will be able to bring us even more both asset - even more assets and liabilities during this year. That's actually pretty exciting. Now 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 Bloomberg 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] Our first question comes from Jared Shaw with Wells Fargo Securities.

Hi, good morning.

Hi Jared.

Hi Jared.

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.

And then…

Jared, we will 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 thing roughly 80/20, 80% amortized and 20% non.

Okay. So that stays the same as well.

Yes.

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

So 2015 has been - was a good year for buying fixed income securities. There is a lot of disruption in the market from time to time and we were able to capitalize on it.

Yes

Would you anticipate continuing to extend that portfolio or do you think most of that's 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.

Our next question comes from with Ebrahim Poonawala with Bank of America.

Good morning guys.

Good morning.

I think just the first question on the national platform, Raj, in context of sort of exiting the retail origination business.

Yes.

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 really about maybe $20 million on average a month type of number.

It’s very small.

It's very small. We don't see that having any impact on our total growth. I mean, we grew $4.7 billion this year. We will 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 to prematurely say what dialogs we are having, but as and when we are able to get these people to sign up, 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 for expense growth. How should we think about the efficiency improvement as sort of your size and scale, particularly in the New York helps you get more efficient, like should we see that in the context of your margin guidance, where do you see that trending to 2016?

Leslie, why don’t you take that?

Yes, 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 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.

And we will continue to have noise in our numbers from the FDIC asset, not just the asset itself and the amortization of the asset, the indem asset, but also the expense associated with it as well. So it will only get cleaned up in three years’ time 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 there are - it’s not that we will not grow our expenses, we are growing company, we will have expense growth.

Yes.

But the level of growth will be less this year than it was last year and last year was less than it was a year before.

Understood. Thanks for taking my questions.

Our next question comes from Stephen Scouten with Sandler O'Neill.

Hi guys. Good morning. Thanks for taking my questions here.

Good morning.

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 do you see specifically in Miami and any specific weakness in that market?

Well, we're not seeing any weakness in that market. Maybe 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 pretty much in our favor. In terms of sort of predicting where the loan growth is going to come, we - 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 are looking at our little company out in Scottsdale, Arizona, Pinnacle Public Finance. We think that's a company. We are very, very happy with that business we think they can do in ‘16. We think they'll do more business than they did in ‘15 and we’ve encouraged them, put up a little more capital them for 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 is 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.

Yes, I mean Miami - it's not that Miami is weak.

Right.

It’s that - if you can get better economics in non-Miami Florida markets and you want to do that.

And most of big banks 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. Miami still a great resource for loans, but you're going up against the big guys in Miami and you're not necessarily in Tampa and Jacksonville.

Yes, I guess I ask 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 has been some credits go - a couple of credits go bad down there in 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 demand in high quality loans?

So I think if your bank is 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 who is in those businesses are 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 a business we are in. We thought many times about the fact that we are rather in the sort of satellite businesses that revolve around all forms of recent real estate Florida. So we are probably doing business with the plumber and the lawyer and the accountant and the electricians. We're working on these things but not - 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 form weakness. So we've been predicting that for two years. It's not our business. We don't finance that business, we never have, but I wouldn't give this - there is probably a dozen projects and a dozen big towers being built around Central Park these days and we will 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 are going to find out I guess, but that’s not our business.

Yes. Fair enough. Okay. And maybe one more for me. Just on the provision front, maybe Leslie, how do you feel - I mean I assume this number should go up if loan growth continued. It seemed like about 60 basis points on new loans, or is that a level you're 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 reserve more than in terms of the P&L. But I think you'll see the allowance stay relatively consistent as a percentage of loans, may be 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.

Our next question comes from Brady Gailey with KBW.

Good morning guys.

Brady, how are you?

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

Sure, yes, but there is commercial real estate and there is 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 more speculative areas of commercial real estate and getting nervous about it. There have 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. So yes, 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, 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 doing. But clearly that is an asset category that regulators are interested in today, they are going to continue to be interested in it and we dialog 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 these two 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?

Yes, we don't have any plans for common equity in ‘16 or even in the early ‘17.

All right. And then I think if I remember right, you all are still under your operating agreement with RCC [ph] any...

What kind of operating agreement [indiscernible].

I know it holds you to some higher capital ratios at the bank but any idea when that will go away?

No. Well, 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 are 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 high standards as investors, and as an investment pretty south [ph] it's not so bad to be held to a higher standard particularly when we are 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 agreement 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.

Our next question comes from Ken Zerbe with Morgan Stanley.

Good morning.

Good morning, Ken.

Good morning, Ken.

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 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. But what we did is closed down the retail origination channel. Those are the sales people in the backlog speak with support that - Raj why don’t you complete that?

Yes, we did not - exactly. First, we did not sell anything to anyone. We only shut down the retail channel for originating mortgages. So till about a week ago if you walk into a branch and wanted a mortgage, we would take your application. If you do that today, we tell you that - we won't take that, we don't sell that product any more. The correspondent channel is still in business and you'll continue to see that business to chug along just fine. The servicing business, which is we service all of our loans, almost all our loans and we also service some third-party loans and that servicing platform is intact and doing very well and we'll continue to be in that business. We also have a more 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.

Okay, that helps clarify it a ton. And then just happens to be purchase any resi mortgages in the correspondent channel.

That’s unrelated. That’s a different business.

Unrelated but [indiscernible] okay, totally makes sense. Second question then, just in terms of the covered portfolio, obviously - I mean aside from the benefit you got from the securities piece, the NIM is hard because of the volatility in the covered portfolio. I guess I was just broadly under the impression that now that we had the commercial lot share gone, the resi lot share should see a bit less volatility given how homogenous it was. Was there anything unusual in terms of the reclassification or review of that, that would have led to a stronger or a 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.

And that’s almost a parallel shift up in NIM but you guys still on a declining basis over time?

Correct.

Okay, great. Okay. Thank you.

Our next question comes from Gerard Cassidy with RBC.

Good morning guys. How are you?

Hi Gerard.

Hi Gerard.

Raj, can you share with us, you had that very strong deposit growth that you pointed out. What were the drivers or how are you able to achieve such good growth?

Because we were so good looking.

I think you’ve given out posters or something. I wanted to go open an account [ph].

Umbrellas actually. But no, it’s - deposit growth like I 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're least expecting them.

Which we’ve had.

Which we’ve had from time to time. So it is difficult to predict. We did have a strong quarter. It's not that we did anything special with rates or advertising campaign or anything unique in the fourth quarter. It's just a lot of what we've been doing over the course of last year. We are incenting our people more for bringing in deposits. We are pushing them 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 just all cannot happen in the fourth quarter towards 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 that are residing inside of these banks and have regulations that go beyond the regulations that pull out of 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 heard us say that we don't really want to go over 110%-or-so loan to deposit ratio. So as Raj says, we are spending a lot of our time re-incenting 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 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.

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 you don't attract those deposits?

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

Is that something you would consider once you’re more accountable 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 things have had different levels of success with that product and we're watching - those different banks are watching the ones that are not so successful in seeing what it is that drives that and the same way we are studying carefully the banks that are very successful with that and seeing what makes them successful. So as Raj said, technologically we can 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 like your own, but there seems to be a fear out there that there is some sort of credit cycle that's going to fall upon us. John using your experience of the last down cycle if we turn the clock back to ‘05. ‘06 and we all remember the excesses, are you seeing any similarities? I know the sub-prime 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 ‘05 or ‘06?

I’ll try not to remember. No, and actually obviously you know as well, Gerard, we sit around and talk about that all the time, right, and look at each other and say, all right, 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 that we're in, with the asset classes that we're in, we really don't - we don't see any reason to start getting their book. 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. I mean, what we see today is 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 are seeing the impact of foreign countries whose economies are falling apart and the fear that’s being driven through our veins by the 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 deal with, we are not seeing it. And obviously we're being careful and obviously I suppose we are being more selective than ever both in Florida on the lending side and in New York on the lending side but - and we are double-checking and triple-checking ourselves all the time, building our risk platforms to even more robust levels and staying close to the regulators. Regulators have lot of good information about this stuff and are able to help us to predict what's going on. There is a lot written about - for instance, there is a lot written coming out of the regulatory right now about indirect auto as a category and the fact that risk might be building there, in fact layering out well, you know that we got out of indirect auto about 18 months ago probably because we saw that coming. You are seeing us make a move now with residential mortgage origination not because we see anything wrong with the assets but because we can't make money in the business and we’ve looked at this and if we would have built 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 just finally, you’ve had success in building up the national platforms with different lines of business. Are there any others that you may be able to jump into 2016 aside from where you already are in those national lines of business?

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

Great. Thank you.

Thanks.

I’m not showing any further question 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 expected to be. Optimistic for our company going into 2016, both on the growth line and the earnings line as Raj said, building probably to 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 on outworking our competitors and continue to grow our franchise in these markets. That's it from this end. Raj or Leslie, anything else to add? Thanks for joining.

Yes, thanks everybody for joining. Look forward to talking to you more directly as we get out on the road. Bye-bye.