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BankUnited staying on the M&A sidelines for now

BankUnited Inc. management said they will likely not consider a bank acquisition until regulators change the asset threshold for determining systemically important financial institutions. Separately, executives said the bank remains cautious on commercial real estate lending but expects to slowly grow its portfolio this year.

Speaking Jan. 25 during the bank's earnings call, CEO Rajinder Singh said the bank is not interested in acquiring a small financial institution and that any large deal could put the bank over the $50 billion asset threshold that regulators use to determine a systemically important financial institution, or SIFI, a designation that carries additional regulatory burden. Singh said the termination of New York Community Bancorp Inc.'s purchase of Astoria Financial Corp. was a "bad signal" for deal activity.

"Any transformative deal that we do, which is a big if, would be one that creates a SIFI or gets very close to being a SIFI, and that's problematic in this environment from what I'm seeing," Singh said. "So I'm not very optimistic at least on the bank M&A space from BankUnited's perspective until we see some major changes in [Washington] D.C. And that might happen over the course of the next six to 12 months, but we are not there yet."

Analysts spent much of the earnings call trying to square the bank's projection for loan growth with management's continued hesitancy around the commercial real estate sector. The bank finished the quarter with a commercial real estate portfolio equal to 288% of its capital, just below the 300% threshold that regulators say warrants special attention. Management said they expect to manage the CRE portfolio under the 300% for a couple more quarters. Executives said they are particularly cautious about CRE in New York and see more of the bank's loan production coming from Florida.

"It's okay to go slow with [commercial real estate], especially in New York, but overall our goal for the year is to grow [commercial real estate] just like we shoot for growing every single line of business," Singh said.