OREANDA-NEWS. Fitch Ratings has today assigned the long-term Issuer Default Ratings (IDRs) of 'BBB' and short-term IDRs of 'F2' for BankUnited, Inc. (BankUnited) and BankUnited, N.A. See the full list of rating actions at the end of this rating action commentary.

KEY RATING DRIVERS

IDRS AND VRS
The ratings reflect BankUnited's developing franchise with a growing position in the New York multifamily market and solid foundation in the Florida commercial market. The rating also reflects a seasoned management team with a solid reputation in the company's core markets, good earnings performance supported by a relatively good cost structure, and good asset quality metrics to date in the non-covered loan portfolio. Fitch views the company's capital adequacy and liquidity as consistent with the rating level and overall risk appetite.

Rating constraints include BankUnited's comparatively short operating history under current management, above-peer-level loan growth, comparatively narrow geographic exposure, low proportion of non-interest income versus peers, and, in Fitch's view, key man risk.

Since beginning operations, BankUnited has rapidly grown its lending franchise in New York and Florida. Led by seasoned regional executives, BankUnited is developing a solid franchise in the New York multifamily market and has a solid foothold in the Florida commercial market. Although BankUnited's overall size is still relatively small in New York and Florida, the company effectively competes with its transactional banking-oriented competitors by focusing on relationship-driven service.

Fitch believes BankUnited has an experienced management team and considers it a key credit strength. The Chairman and CEO, John Kanas, is a well-known and respected figure in the industry, especially in the New York City metropolitan area where he led North Fork Bank for many years until its sale to Capital One in 2006. Fitch also considers the company's regional management team to be deep and stable with a number of senior managers having solid commercial banking experience on both the lending and deposit-taking sides of the business.

The company has exhibited solid earnings performance to date characterized by a relatively good cost structure and good asset quality in the non-covered loan portfolio. The company's cost structure is driven, in part, by its small, commercial banking-focused branch footprint in the New York City metropolitan area and manageable retail branch footprint in key metropolitan areas in Florida. Asset quality in the non-covered loan portfolio is good and is driven by disciplined underwriting and has been supported by relatively benign credit conditions during this phase of the cycle.

Fitch views BankUnited's capital adequacy and liquidity as consistent with the rating level and the company's overall risk appetite. Fitch considers BankUnited's capital to be good with leverage, tier 1 capital, and total capital ratios of 9.7%, 13.5%, and 14.3%, respectively, at Sept. 30, 2015. BankUnited is nearly entirely deposit funded with core deposits accounting for roughly 70% of total deposits at Sept. 30, 2015. Currently, BankUnited's loan-to-deposit ratio is approximately 96%; however, the company plans to increase loan-to-deposits to just over 100%, which is on the higher end compared to peers.

Fitch views BankUnited as essentially a de novo bank, dating to 2009 with operations beginning in earnest during the 2010-2011 period. Fitch considers the company's short operating history to be a ratings constraint. Although members of the management team had solid track records at other institutions before joining BankUnited, through-the-cycle asset quality and profitability has yet to be observed. Our concern is heightened by the company's outsized loan growth relative to peers. As core markets become more competitive, there is risk that underwriting standards could come under pressure, potentially leading to diminished asset quality and higher provisioning in future periods.

The company's strategy is focused on growing loans and gathering deposits in New York and Florida with its national platform providing some additional asset growth and potential diversification. Although Fitch recognizes the overall strengths of these markets, particularly the company's focus on relatively top-performing metropolitan areas, BankUnited's geographic concentration remains high compared to peers. Fitch also notes that Florida has experienced greater volatility in gross domestic product and unemployment through the cycle compared to the company's other preferred markets. While BankUnited's historical asset quality performance in the non-covered portfolio is supportive of the rating, Fitch believes that material price corrections in various commercial real estate asset classes in Florida could contribute to higher losses in the future.

Fitch also characterizes BankUnited's level of non-interest income as proportionately low compared to higher-rated peers.

In Fitch's view, there is also key man risk stemming from the company's co-founder, Chairman and CEO, John Kanas. Kanas played a pivotal role in securing regulatory approval for the bank's emergence from resolution in 2009 as well as growing the bank's loan and deposit portfolios, particularly in New York, a market in which he earned a solid reputation while CEO of North Fork Bank.

SUPPORT RATING AND SUPPORT RATING FLOOR

The Support Rating of '5' and Support Ratings Floor of 'NF' reflect Fitch's view that BankUnited, Inc. and BankUnited, N.A. are not considered systemically important and therefore, the probability of support is unlikely.

LONG- AND SHORT-TERM DEPOSIT RATINGS

BankUnited, N.A.'s uninsured deposit ratings are rated one notch higher than the company's IDR because U.S. uninsured deposits benefit from depositor preference. Fitch believes U.S. depositor preference gives deposit liabilities superior recovery prospects in the event of default.

HOLDING COMPANY
The IDR and VR of BankUnited, Inc. are equalized with those of its chief operating company, BankUnited, N.A., reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries.

RATING SENSITIVITIES
IDRS AND VRS
Given the emphasis Fitch places on senior management at BankUnited, the ratings are sensitive to key man risk. Material unexpected departures or changes in senior management at either the holding company or bank could also prompt a review of the ratings. However, Fitch acknowledges that key man risk is partially mitigated by a deep bench of seasoned executives at the bank level.

The ratings are also sensitive to asset quality or earnings deterioration falling below similarly rated peer averages. As BankUnited continues to grow and as core markets become more competitive, there is risk that underwriting standards could come under pressure, potentially leading to diminished asset quality and higher provisioning in the future.

Fitch notes that, although unlikely in the near term, positive rating momentum could develop longer term from increased scale, or improved diversity among geographies and loan products, non-interest revenue sources, or as top-quartile performance through the cycle is demonstrated.

Although not anticipated, Fitch could undertake a review of the ratings should there be a material reduction in balance sheet liquidity, increased leverage, or adverse BSA/AML compliance findings.

LONG- AND SHORT-TERM DEPOSIT RATINGS
The ratings of long- and short-term deposits issued by BankUnited, N.A. are primarily sensitive to any change in the company's IDR. Should the long-term IDR be downgraded, deposit ratings could be similarly impacted.

HOLDING COMPANY
If BankUnited, Inc. became undercapitalized or had regulatory prohibitions against upstreaming dividends from the bank, there is the potential that Fitch could notch the holding company IDR and VR from the ratings of BankUnited, N.A.

Fitch has assigned the following ratings with a Stable Outlook:

BankUnited, Inc.
--Long-term IDR 'BBB';
--Short-term IDR 'F2';
--Viability Rating 'bbb';
--Support Rating '5';
--Support Floor 'NF'.

BankUnited, N.A.
--Long-term IDR 'BBB';
--Short-term IDR 'F2';
--Long-term Deposits 'BBB+';
--Short-term Deposits 'F2';
--Viability Rating 'bbb';
--Support Rating '5';
--Support Floor 'NF'.