Annual Statements Open main menu

BankUnited, Inc. - Quarter Report: 2023 September (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                
For the quarterly period ended September 30, 2023
Commission File Number: 001-35039 

BankUnited, Inc.
(Exact name of registrant as specified in its charter)
Delaware27-0162450
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
14817 Oak LaneMiami LakesFL33016
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (305) 569-2000 
Securities registered pursuant to Section 12(b) of the Act:
ClassTrading SymbolName of Exchange on Which Registered
Common Stock, $0.01 Par ValueBKUNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ý  No  o 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ý  No  o 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
Accelerated filer
 ☐
Emerging growth company
Non-accelerated filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  ☒ 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
The number of outstanding shares of the registrant common stock, $0.01 par value, as of October 30, 2023 was 74,382,141.






BANKUNITED, INC.
Form 10-Q
For the Quarter Ended September 30, 2023
TABLE OF CONTENTS
  Page
PART I. 
   
ITEM 1. 
 
 
 
 
 
 
   
ITEM 2.
   
ITEM 3.
   
ITEM 4.
   
PART II. 
   
ITEM 1.
   
ITEM 1A.
ITEM 2.
ITEM 5.
   
ITEM 6.
   

i


GLOSSARY OF DEFINED TERMS

The following acronyms and terms may be used throughout this Form 10-Q, including the consolidated financial statements and related notes.
ACLAllowance for credit losses
AFSAvailable for sale
ALCOAsset/Liability Committee
ALMAsset Liability Management
AOCIAccumulated other comprehensive income
ASCAccounting Standards Codification
ASUAccounting Standards Update
BKUBankUnited, Inc.
BOLIBank Owned Life Insurance
BankUnitedBankUnited, National Association
The BankBankUnited, National Association
BridgeBridge Funding Group, Inc.
BTFPBank Term Funding Program
Buyout loansFHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations
CCARComprehensive Capital Analysis and Review
CDCertificate of Deposit
CECLCurrent expected credit losses
CET1Common Equity Tier 1 capital
C&ICommercial and Industrial loans, including owner-occupied commercial real estate
CLOCollateralized loan obligations
CMBSCommercial mortgage-backed securities
CMEChicago Mercantile Exchange
CMOsCollateralized mortgage obligations
CRECommercial real estate loans, including non-owner occupied commercial real estate and construction and land
DSCRDebt Service Coverage Ratio
EVEEconomic value of equity
FCAThe Financial Conduct Authority
FDIAFederal Deposit Insurance Act
FDICFederal Deposit Insurance Corporation
FHAFederal Housing Administration
FHLBFederal Home Loan Bank
FICOFair Isaac Corporation (credit score)
FRBFederal Reserve Bank
GAAPU.S. generally accepted accounting principles
GDPGross Domestic Product
GNMAGovernment National Mortgage Association
ISDAInternational Swaps and Derivatives Association
LGDLoss Given Default
LIBORLondon InterBank Offered Rate
LIHTCLow Income Housing Tax Credits
LTVLoan-to-value
MBSMortgage-backed securities
MSAMetropolitan Statistical Area
ii



NRSRONationally recognized statistical rating organization
OREOOther real estate owned
PCDPurchased credit-deteriorated
PDProbability of default
PinnaclePinnacle Public Finance, Inc.
REITReal Estate Investment Trust
RPA
Risk Participation Agreement
SBAU.S. Small Business Administration
SECSecurities and Exchange Commission
SOFRSecured Overnight Financing Rate
TDRTroubled-debt restructuring
Tri-StateNew York, New Jersey and Connecticut
UPBUnpaid principal balance
VA loanLoan guaranteed by the U.S. Department of Veterans Affairs

iii



PART I
Item 1.  Financial Statements and Supplementary Data
BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In thousands, except share and per share data)
September 30,
2023
December 31,
2022
ASSETS  
Cash and due from banks:  
Non-interest bearing$12,391 $16,068 
Interest bearing379,494 556,579 
Cash and cash equivalents 391,885 572,647 
Investment securities (including securities reported at fair value of $8,876,484 and $9,745,327)
8,886,484 9,755,327 
Non-marketable equity securities312,159 294,172 
Loans24,356,276 24,885,988 
Allowance for credit losses (196,063)(147,946)
Loans, net24,160,213 24,738,042 
Bank owned life insurance 319,808 308,212 
Operating lease equipment, net460,146 539,799 
Goodwill77,637 77,637 
Other assets781,332 740,876 
Total assets$35,389,664 $37,026,712 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Liabilities:  
Demand deposits:  
Non-interest bearing$7,356,523 $8,037,848 
Interest bearing3,290,391 2,142,067 
Savings and money market10,276,071 13,061,341 
Time5,189,681 4,268,078 
Total deposits26,112,666 27,509,334 
Federal funds purchased — 190,000 
FHLB advances5,165,000 5,420,000 
Notes and other borrowings715,197 720,923 
Other liabilities872,731 750,474 
Total liabilities 32,865,594 34,590,731 
Commitments and contingencies
Stockholders' equity:  
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 74,413,059 and 75,674,587 shares issued and outstanding
744 757 
Paid-in capital279,672 321,729 
Retained earnings2,650,850 2,551,400 
Accumulated other comprehensive loss(407,196)(437,905)
Total stockholders' equity 2,524,070 2,435,981 
Total liabilities and stockholders' equity $35,389,664 $37,026,712 
 
1
The accompanying notes are an integral part of these consolidated financial statements





BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands, except per share data)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Interest income:  
Loans$337,014 $244,884 $971,962 $645,669 
Investment securities122,857 77,109 362,219 174,928 
Other10,668 4,031 40,195 8,364 
Total interest income 470,539 326,024 1,374,376 828,961 
Interest expense:
Deposits176,974 53,206 467,472 85,569 
Borrowings78,723 36,982 250,310 73,498 
Total interest expense 255,697 90,188 717,782 159,067 
Net interest income before provision for credit losses 214,842 235,836 656,594 669,894 
Provision for credit losses
33,049 3,720 68,354 35,546 
Net interest income after provision for credit losses 181,793 232,116 588,240 634,348 
Non-interest income:
Deposit service charges and fees5,402 6,064 16,296 17,920 
Gain (loss) on investment securities, net
887 135 (10,669)(16,125)
Lease financing16,531 13,180 42,159 39,958 
Other non-interest income4,904 3,693 21,960 9,070 
Total non-interest income 27,724 23,072 69,746 50,823 
Non-interest expense:
Employee compensation and benefits68,825 66,097 207,290 195,646 
Occupancy and equipment 10,890 11,719 32,735 34,630 
Deposit insurance expense7,790 4,398 23,294 11,794 
Professional fees 2,696 3,184 9,132 8,702 
Technology19,193 19,813 61,356 54,715 
Depreciation of operating lease equipment11,217 12,646 33,970 37,841 
Other non-interest expense26,479 20,248 77,311 48,503 
Total non-interest expense 147,090 138,105 445,088 391,831 
Income before income taxes
62,427 117,083 212,898 293,340 
Provision for income taxes15,446 29,233 55,039 72,576 
Net income
$46,981 $87,850 $157,859 $220,764 
Earnings per common share, basic$0.63 $1.13 $2.12 $2.73 
Earnings per common share, diluted$0.63 $1.12 $2.11 $2.71 
2
The accompanying notes are an integral part of these consolidated financial statements





BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED
(In thousands)
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Net income
$46,981 $87,850 $157,859 $220,764 
Other comprehensive income (loss), net of tax: 
Unrealized gains (losses) on investment securities available for sale: 
Net unrealized holding gain (loss) arising during the period(32,854)(117,300)23,717 (470,249)
Reclassification adjustment for net securities gains realized in income(159)(258)(1,342)(2,906)
Net change in unrealized gains (losses) on securities available for sale(33,013)(117,558)22,375 (473,155)
Unrealized gains (losses) on derivative instruments:
Net unrealized holding gains arising during the period12,410 30,495 42,598 74,540 
Reclassification adjustment for net (gains) losses realized in income(14,031)(283)(34,264)6,814 
Net change in unrealized gains (losses) on derivative instruments(1,621)30,212 8,334 81,354 
Other comprehensive income (loss)(34,634)(87,346)30,709 (391,801)
Comprehensive income (loss)$12,347 $504 $188,568 $(171,037)

3
The accompanying notes are an integral part of these consolidated financial statements



BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In thousands)

 Nine Months Ended September 30,
 20232022
Cash flows from operating activities:  
Net income
$157,859 $220,764 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion, net(8,002)(5,444)
Provision for credit losses
68,354 35,546 
Loss on investment securities, net
10,669 16,125 
Equity based compensation15,647 13,378 
Depreciation and amortization 57,040 57,737 
Deferred income taxes(18,098)13,647 
Proceeds from sale of loans held for sale, net254,642 589,681 
Other:
(Increase) decrease in other assets
(17,351)259,044 
Increase in other liabilities
72,956 116,663 
Net cash provided by operating activities
593,716 1,317,141 
Cash flows from investing activities:  
Purchases of investment securities(247,620)(2,713,761)
Proceeds from repayments and calls of investment securities790,032 1,514,500 
Proceeds from sale of investment securities341,990 798,205 
Purchases of non-marketable equity securities(400,900)(336,375)
Proceeds from redemption of non-marketable equity securities382,913 210,450 
Purchases of loans(418,244)(2,000,568)
Loan originations and repayments, net 635,953 872,339 
Proceeds from sale of loans, net38,765 21,327 
Proceeds from sale of operating lease equipment49,837 23,256 
Other investing activities(23,539)(34,639)
Net cash provided by (used in) investing activities
1,149,187 (1,645,266)
4
The accompanying notes are an integral part of these consolidated financial statements



BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)



 Nine Months Ended September 30,
 20232022
Cash flows from financing activities:  
Net decrease in deposits (1,396,668)(2,089,027)
Net decrease in federal funds purchased(190,000)(199,000)
Additions to FHLB borrowings2,380,000 4,075,000 
Repayments of FHLB borrowings(2,635,000)(685,000)
Dividends paid (59,034)(60,082)
Repurchase of common stock(55,154)(336,533)
Other financing activities32,191 34,048 
Net cash provided by (used in) financing activities
(1,923,665)739,406 
Net increase (decrease) in cash and cash equivalents
(180,762)411,281 
Cash and cash equivalents, beginning of period 572,647 314,857 
Cash and cash equivalents, end of period $391,885 $726,138 
Supplemental disclosure of cash flow information:
Interest paid$676,388 $138,143 
Income taxes paid (refunded), net$22,127 $(117,145)
Supplemental schedule of non-cash investing and financing activities:
Transfers from loans to loans held for sale$308,854 $613,243 
Dividends declared, not paid$20,057 $19,361 
Obligations incurred in acquisition of affordable housing limited partnerships$— $65,000 




5
The accompanying notes are an integral part of these consolidated financial statements





BANKUNITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED
(In thousands, except share data)

 Common
Shares
Outstanding
Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
Balance at June 30, 2023
74,429,948 $744 $274,202 $2,623,926 $(372,562)$2,526,310 
Comprehensive income— — — 46,981 (34,634)12,347 
Dividends ($0.27 per common share)
— — — (20,057)— (20,057)
Equity based compensation, net of shares forfeited and surrendered
(16,889)— 5,470 — — 5,470 
Balance at September 30, 202374,413,059 $744 $279,672 $2,650,850 $(407,196)$2,524,070 
Balance at June 30, 2022
77,944,216 $779 $387,583 $2,438,050 $(320,395)$2,506,017 
Comprehensive income— — — 87,850 (87,346)504 
Dividends ($0.25 per common share)
— — — (19,361)— (19,361)
Equity based compensation, net of shares forfeited and surrendered
(30,699)— 4,617 — — 4,617 
Repurchase of common stock (314,109)(3)(10,789)— — (10,792)
Balance at September 30, 202277,599,408 $776 $381,411 $2,506,539 $(407,741)$2,480,985 
 Common
Shares
Outstanding
Common
Stock
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
Balance at December 31, 202275,674,587 $757 $321,729 $2,551,400 $(437,905)$2,435,981 
Impact of adoption of ASU 2022-02— — — 1,336 — 1,336 
Balance at January 1, 2023
75,674,587 757 321,729 2,552,736 (437,905)2,437,317 
Comprehensive income— — — 157,859 30,709 188,568 
Dividends ($0.81 per common share)
— — — (59,745)— (59,745)
Equity based compensation, net of shares forfeited and surrendered
372,717 13,081 — — 13,084 
Repurchase of common stock (1,634,245)(16)(55,138)— — (55,154)
Balance at September 30, 202374,413,059 $744 $279,672 $2,650,850 $(407,196)$2,524,070 
Balance at December 31, 202185,647,986 $856 $707,503 $2,345,342 $(15,940)$3,037,761 
Comprehensive loss— — — 220,764 (391,801)(171,037)
Dividends ($0.75 per common share)
— — — (59,567)— (59,567)
Equity based compensation, net of shares forfeited and surrendered
297,022 10,358 — — 10,361 
Repurchase of common stock (8,345,600)(83)(336,450)— — (336,533)
Balance at September 30, 202277,599,408 $776 $381,411 $2,506,539 $(407,741)$2,480,985 
6
The accompanying notes are an integral part of these consolidated financial statements

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023



Note 1    Basis of Presentation and Summary of Significant Accounting Policies
BankUnited, Inc. is a national bank holding company with one wholly-owned subsidiary, BankUnited, collectively, the Company. BankUnited, a national banking association headquartered in Miami Lakes, Florida, provides a full range of banking and related services to individual and corporate customers through banking centers in Florida, the New York metropolitan area and Dallas, Texas. The Bank also offers certain commercial lending and deposit products through national platforms and regional wholesale banking offices.
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, these do not include all of the information and footnotes required for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in BKU’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected in future periods.
The Company has a single operating segment and thus a single reportable segment. While management monitors the revenue streams of its various business units, the business units serve a similar base of primarily commercial clients, providing a similar range of products and services, managed through similar processes and platforms. The Company’s chief operating decision maker makes company-wide resource allocation decisions and assessments of performance based on a collective assessment of the Company’s operations.
Accounting Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and disclosures of contingent assets and liabilities. Actual results could differ significantly from these estimates.
The most significant estimate impacting the Company's consolidated financial statements is the ACL.
New Accounting Pronouncements Adopted During the Nine Months Ended September 30, 2023
ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326). This ASU eliminated the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors. The ASU enhanced disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, updated certain requirements related to accounting for credit losses under ASC 326 and required disclosure of current-period gross charge-offs of financing receivables by year of origination. The Company adopted this ASU in the first quarter of 2023, prospectively, except with respect to the recognition and measurement of TDRs, for which the modified retrospective transition method was applied. The Company recorded a reduction to the ACL of $1.8 million and a cumulative-effect adjustment, net of tax, to retained earnings of $1.3 million on January 1, 2023.
Accounting Pronouncements Not Yet Adopted
ASU No. 2023-02—Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures using the Proportional Amortization Method (A Consensus of the Emerging Issues Task Force). This ASU was issued to expand use of the proportional amortization method of accounting to equity investments in tax credit programs beyond those in LIHTC programs. The ASU allows entities to elect the proportional amortization method, on a tax-credit-program-by-tax-credit-program basis, for all equity investments in tax credit programs meeting the eligibility criteria established. This ASU is effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2023. Currently, all of the Company's equity investments in tax credit programs are in LIHTC programs accounted for using the proportional amortization method.
7

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Note 2    Earnings Per Common Share
The computation of basic and diluted earnings per common share is presented below for the periods indicated (in thousands, except share and per share data):
Three Months Ended September 30,Nine Months Ended September 30,
c2023202220232022
Basic earnings per common share: 
Numerator: 
Net income
$46,981 $87,850 $157,859 $220,764 
Distributed and undistributed earnings allocated to participating securities
(700)(1,343)(2,378)(3,258)
Income allocated to common stockholders for basic earnings per common share$46,281 $86,507 $155,481 $217,506 
Denominator:
Weighted average common shares outstanding74,416,698 77,912,320 74,530,871 81,039,561 
Less average unvested stock awards(1,165,105)(1,221,971)(1,180,570)(1,230,396)
Weighted average shares for basic earnings per common share73,251,593 76,690,349 73,350,301 79,809,165 
Basic earnings per common share$0.63 $1.13 $2.12 $2.73 
Diluted earnings per common share:
Numerator:
Income allocated to common stockholders for basic earnings per common share$46,281 $86,507 $155,481 $217,506 
Adjustment for earnings reallocated from participating securities
Income used in calculating diluted earnings per common share$46,284 $86,513 $155,489 $217,515 
Denominator:
Weighted average shares for basic earnings per common share73,251,593 76,690,349 73,350,301 79,809,165 
Dilutive effect of certain share-based awards537,230 433,472 388,372 308,608 
Weighted average shares for diluted earnings per common share
73,788,823 77,123,821 73,738,673 80,117,773 
Diluted earnings per common share$0.63 $1.12 $2.11 $2.71 
Potentially dilutive unvested shares totaling 1,160,047 and 1,213,029 were outstanding at September 30, 2023 and 2022, respectively, but excluded from the calculation of diluted earnings per common share because their inclusion would have been anti-dilutive.
8

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Note 3    Investment Securities
Investment securities include investment securities available for sale, marketable equity securities, and investment securities held to maturity. The investment securities portfolio consisted of the following at the dates indicated (in thousands):
September 30, 2023
 Amortized CostGross Unrealized
Carrying Value (1)
 GainsLosses
Investment securities available for sale:
U.S. Treasury securities$119,480 $— $(12,875)$106,605 
U.S. Government agency and sponsored enterprise residential MBS
1,979,751 1,228 (48,521)1,932,458 
U.S. Government agency and sponsored enterprise commercial MBS
572,284 122 (80,566)491,840 
Private label residential MBS and CMOs
2,643,718 (353,396)2,290,325 
Private label commercial MBS
2,351,312 767 (95,750)2,256,329 
Single family real estate-backed securities418,422 — (24,958)393,464 
Collateralized loan obligations1,059,953 575 (12,716)1,047,812 
Non-mortgage asset-backed securities108,360 41 (4,057)104,344 
State and municipal obligations107,873 — (10,638)97,235 
SBA securities113,884 210 (3,439)110,655 
9,475,037 $2,946 $(646,916)8,831,067 
Investment securities held to maturity10,000 10,000 
$9,485,037 8,841,067 
Marketable equity securities 45,417 
$8,886,484 
9

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023



December 31, 2022
 Amortized CostGross Unrealized
Carrying Value (1)
 GainsLosses
Investment securities available for sale:
U.S. Treasury securities$148,956 $63 $(13,178)$135,841 
U.S. Government agency and sponsored enterprise residential MBS
2,036,693 1,334 (54,859)1,983,168 
U.S. Government agency and sponsored enterprise commercial MBS
600,517 — (75,423)525,094 
Private label residential MBS and CMOs
2,864,589 54 (333,980)2,530,663 
Private label commercial MBS
2,645,168 176 (120,990)2,524,354 
Single family real estate-backed securities502,194 — (31,753)470,441 
Collateralized loan obligations1,166,838 151 (30,526)1,136,463 
Non-mortgage asset-backed securities102,194 — (6,218)95,976 
State and municipal obligations122,181 695 (6,215)116,661 
SBA securities139,320 381 (3,919)135,782 
10,328,650 $2,854 $(677,061)9,654,443 
Investment securities held to maturity10,000 10,000 
$10,338,650 9,664,443 
Marketable equity securities 90,884 
$9,755,327 
(1)At fair value except for securities held to maturity.
Investment securities held to maturity at September 30, 2023 and December 31, 2022 consisted of one State of Israel bond maturing in 2024. Accrued interest receivable on investments totaled $35 million and $34 million at September 30, 2023 and December 31, 2022, respectively, and is included in other assets in the accompanying consolidated balance sheets.
At September 30, 2023, contractual maturities of investment securities available for sale, adjusted for anticipated prepayments when applicable, were as follows (in thousands):
Amortized CostFair Value
Due in one year or less$1,155,146 $1,095,289 
Due after one year through five years5,306,505 5,095,745 
Due after five years through ten years1,709,432 1,518,508 
Due after ten years1,303,954 1,121,525 
 $9,475,037 $8,831,067 
The carrying value of securities pledged as collateral for FHLB advances, public deposits, interest rate swaps and to secure borrowing capacity at the FRB totaled $7.7 billion and $4.1 billion at September 30, 2023 and December 31, 2022, respectively.
10

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


The following table provides information about gains and losses on investment securities for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Gross realized gains on investment securities AFS$242 $352 $1,861 $4,058 
Gross realized losses on investment securities AFS(27)(3)(47)(131)
Net realized gain215 349 1,814 3,927 
Net gains (losses) on marketable equity securities recognized in earnings672 (214)(12,483)(20,052)
Gain (loss) on investment securities, net$887 $135 $(10,669)$(16,125)
The following tables present the aggregate fair value and the aggregate amount by which amortized cost exceeded fair value for investment securities available for sale in unrealized loss positions aggregated by investment category and length of time that individual securities had been in continuous unrealized loss positions at the dates indicated (in thousands):
 September 30, 2023
 Less than 12 Months12 Months or GreaterTotal
 Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
U.S. Treasury securities
$9,847 $(113)$96,758 $(12,762)$106,605 $(12,875)
U.S. Government agency and sponsored enterprise residential MBS
85,955 (1,008)1,707,210 (47,513)1,793,165 (48,521)
U.S. Government agency and sponsored enterprise commercial MBS
3,089 (254)475,204 (80,312)478,293 (80,566)
Private label residential MBS and CMOs
28,407 (440)2,249,139 (352,956)2,277,546 (353,396)
Private label commercial MBS
117,009 (1,400)2,044,864 (94,350)2,161,873 (95,750)
Single family real estate-backed securities29,764 (22)363,700 (24,936)393,464 (24,958)
Collateralized loan obligations89,928 (72)909,457 (12,644)999,385 (12,716)
Non-mortgage asset-backed securities
— — 81,373 (4,057)81,373 (4,057)
State and municipal obligations68,039 (2,789)29,196 (7,849)97,235 (10,638)
SBA securities8,496 (48)89,696 (3,391)98,192 (3,439)
 $440,534 $(6,146)$8,046,597 $(640,770)$8,487,131 $(646,916)
11

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


 December 31, 2022
 Less than 12 Months12 Months or GreaterTotal
 Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
U.S. Treasury securities
$29,198 $(495)$86,744 $(12,683)$115,942 $(13,178)
U.S. Government agency and sponsored enterprise residential MBS
1,243,286 (26,789)672,322 (28,070)1,915,608 (54,859)
U.S. Government agency and sponsored enterprise commercial MBS
236,102 (5,736)288,992 (69,687)525,094 (75,423)
Private label residential MBS and CMOs
1,103,578 (93,480)1,413,642 (240,500)2,517,220 (333,980)
Private label commercial MBS
1,191,969 (39,729)1,223,223 (81,261)2,415,192 (120,990)
Single family real estate-backed securities391,421 (22,293)79,020 (9,460)470,441 (31,753)
Collateralized loan obligations596,803 (14,020)494,945 (16,506)1,091,748 (30,526)
Non-mortgage asset-backed securities
95,976 (6,218)— — 95,976 (6,218)
State and municipal obligations67,444 (6,154)1,114 (61)68,558 (6,215)
SBA securities42,900 (553)74,291 (3,366)117,191 (3,919)
 $4,998,677 $(215,467)$4,334,293 $(461,594)$9,332,970 $(677,061)
The Company monitors its investment securities available for sale for credit loss impairment on an individual security basis. No securities were determined to be credit loss impaired during the three and nine months ended September 30, 2023 and 2022. At September 30, 2023, the Company did not have an intent to sell securities that were in unrealized loss positions, and it was not more likely than not that the Company would be required to sell these securities before recovery of the amortized cost basis, which may be at maturity. In making this determination, the Company considered its current and projected liquidity position including its ability to pledge securities to generate liquidity, its investment policy as to permissible holdings and concentration limits, regulatory requirements and other relevant factors. While recent events impacting the banking sector have impacted the liquidity profile of many banks, including BankUnited, the substantial majority of our investment securities are pledgeable at either the FHLB or FRB. We have not sold, and do not anticipate the need to sell, securities in unrealized loss positions to generate liquidity.
At September 30, 2023, 587 securities available for sale were in unrealized loss positions. The amount of impairment related to 105 of these securities was considered insignificant both individually and in the aggregate, totaling approximately $1.0 million and no further analysis with respect to these securities was considered necessary.
The basis for concluding that AFS securities were not credit loss impaired and no ACL was considered necessary at September 30, 2023, is further discussed below.
Unrealized losses were generally attributable to rising interest rates and widening spreads related to the Federal Reserve's quantitative tightening and benchmark interest rate increases. Continuing uncertainty with respect to the trajectory of the economy has also led to market uncertainty, producing some yield curve dislocations. The investment securities AFS portfolio was in a net unrealized loss position of $644.0 million at September 30, 2023, compared to $674.2 million at December 31, 2022, improving by $30 million during the nine months ended September 30, 2023.
U.S. Government, U.S. Government Agency and Government Sponsored Enterprise Securities
At September 30, 2023, six U.S. treasury, 156 U.S. Government agency and sponsored enterprise residential MBS, 27 U.S. Government agency and sponsored enterprise commercial MBS, and 18 SBA securities were in unrealized loss positions. The timely payment of principal and interest on these securities is explicitly or implicitly guaranteed by the U.S. Government. As such, there is an assumption of zero credit loss and the Company expects to recover the amortized cost basis of these securities.
12

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Private Label Securities:
None of the impaired private label securities had missed principal or interest payments or had been downgraded by a NRSRO at September 30, 2023. The Company performed an analysis comparing the present value of cash flows expected to be collected to the amortized cost basis of impaired securities. This analysis was based on a scenario that we believe to be generally more conservative than our reasonable and supportable economic forecast at September 30, 2023, and incorporated assumptions about voluntary prepayment rates, collateral defaults, delinquencies, severity and other relevant factors as described further below. Our analysis also considered the structural characteristics of each security and the level of credit enhancement provided by that structure.
Private label residential MBS and CMOs
At September 30, 2023, 116 private label residential MBS and CMOs were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality measures such as FICO, LTV, documentation, loan type, property type, agency availability criteria and performing status. We also regularly monitor sector data including home price appreciation, forbearance, delinquency and prepay trends as well as other economic data that could be indicative of stress in the sector. Our September 30, 2023 analysis projected weighted average collateral losses for impaired securities in this category of 2% compared to weighted average credit support of 18%. As of September 30, 2023, 94% of impaired securities in this category, based on carrying value, were externally rated AAA, 4% were rated AA and 2% were rated A.
Private label commercial MBS
At September 30, 2023, 100 private label commercial MBS were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality and type, loan size, loan purpose and other qualitative factors. We also regularly monitor collateral watch lists, bankruptcy data, defeasance data, special servicing trends, delinquency and other economic data that could be indicative of stress in the sector. Our September 30, 2023 analysis projected weighted average collateral losses for impaired securities in this category of 6% compared to weighted average credit support of 43%. As of September 30, 2023, 85% of impaired securities in this category, based on carrying value, were externally rated AAA, 10% were rated AA and 5% were rated A.
Single family real estate-backed securities
At September 30, 2023, 13 single family rental real estate-backed securities were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, delinquencies and recovery lag. We regularly monitor sector data including home price appreciation, forbearance, delinquency and prepay trends as well as other economic data that could be indicative of stress in the sector. Our September 30, 2023 analysis projected weighted average collateral losses for this category of 7% compared to weighted average credit support of 53%. As of September 30, 2023, 58% of impaired securities in this category, based on carrying value, were externally rated AAA, 16% were rated AA and one security was not externally rated.
Collateralized loan obligations
At September 30, 2023, 26 collateralized loan obligations were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, and delinquencies, calibrated to take into account idiosyncratic risks associated with the underlying collateral. In developing those assumptions, we took into account each sector’s performance pre-, during and post the 2008 financial crisis. We regularly engage with bond managers to monitor trends in underlying collateral including potential downgrades and subsequent cash flow diversions, liquidity, ratings migration, and any other relevant developments. Our September 30, 2023 analysis projected weighted average collateral losses for impaired securities in this category of 11% compared to weighted average credit support of 45%. As of September 30, 2023, 81% of the impaired securities in this category, based on carrying value, were externally rated AAA, 15% were rated AA and 4% were rated A.
13

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Non-mortgage asset-backed securities
At September 30, 2023, six non-mortgage asset-backed securities were in unrealized loss positions. These securities are backed by student loan collateral. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, delinquencies, voluntary prepayment rates and recovery lag. In developing assumptions, we took into account collateral type, delineated by whether collateral consisted of loans to borrowers in school, refinancing, or a mixture. Our September 30, 2023 analysis projected weighted average collateral losses for impaired securities in this category of 4% compared to weighted average credit support of 24%. As of September 30, 2023, 39% of the impaired securities in this category, based on carrying value, were externally rated AAA, and 61% were rated AA.
State and Municipal Obligations
At September 30, 2023, 14 state and municipal obligations were in unrealized loss positions. Our analysis of potential credit loss impairment for these securities incorporates a quantitative measure of the underlying obligor's credit worthiness provided by a third-party vendor as well as other relevant qualitative considerations. As of September 30, 2023, 54% of the impaired securities in this category, based on carrying value, were externally rated AAA, 10% were rated AA, and 36% were rated A.
Note 4    Loans and Allowance for Credit Losses
Loans consisted of the following at the dates indicated (dollars in thousands):
 September 30, 2023December 31, 2022
 TotalPercent of TotalTotalPercent of Total
Residential:    
1-4 single family residential$6,982,832 28.7 %$7,128,834 28.6 %
Government insured residential1,397,736 5.7 %1,771,880 7.1 %
8,380,568 34.4 %8,900,714 35.7 %
Commercial:
Non-owner occupied commercial real estate5,296,784 21.7 %5,405,597 21.7 %
Construction and land445,273 1.8 %294,360 1.2 %
Owner occupied commercial real estate1,851,246 7.6 %1,890,813 7.6 %
Commercial and industrial6,658,010 27.4 %6,417,721 25.9 %
Pinnacle - municipal finance900,199 3.7 %912,122 3.7 %
Franchise finance196,745 0.8 %253,774 1.0 %
Equipment finance 219,874 0.9 %286,147 1.1 %
Mortgage warehouse lending 407,577 1.7 %524,740 2.1 %
 15,975,708 65.6 %15,985,274 64.3 %
Total loans24,356,276 100.0 %24,885,988 100.0 %
Allowance for credit losses(196,063)(147,946)
Loans, net$24,160,213 $24,738,042 
Premiums, discounts and deferred fees and costs, excluding the non-credit related discount on PCD loans, totaled $50 million and $61 million at September 30, 2023 and December 31, 2022, respectively.
14

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


The following table presents the amortized cost basis of residential PCD loans and the related amount of non-credit discount, net of the related ACL, at the dates indicated (in thousands):
September 30, 2023December 31, 2022
UPB$84,904 $96,437 
Non-credit discount (37,799)(44,354)
Total amortized cost of PCD loans 47,105 52,083 
ACL related to PCD loans(169)(409)
PCD loans, net $46,936 $51,674 
Included in loans, net are direct or sales type finance leases totaling $627 million and $634 million at September 30, 2023 and December 31, 2022, respectively. The amount of income recognized from direct or sales type finance leases for the three and nine months ended September 30, 2023 and 2022 totaled $4.3 million, $13.0 million, $4.6 million and $13.6 million, respectively, and is included in interest income on loans in the consolidated statements of income.
During the three and nine months ended September 30, 2023 and 2022, the Company purchased residential loans totaling $78 million, $418 million, $425 million and $2.0 billion, respectively.
At September 30, 2023 and December 31, 2022, the Company had pledged loans with a carrying value of approximately $17.3 billion and $12.4 billion, respectively, as security for FHLB advances and Federal Reserve discount window capacity.
At September 30, 2023 and December 31, 2022, accrued interest receivable on loans totaled $134 million and $129 million, respectively, and is included in other assets in the accompanying consolidated balance sheets. The amount of interest income reversed on non-accrual loans was not material for the three and nine months ended September 30, 2023 and 2022.
Allowance for credit losses
Activity in the ACL is summarized below for the periods indicated (in thousands):
Three Months Ended September 30,
 20232022
 ResidentialCommercialTotalResidentialCommercialTotal
Beginning balance$8,887 $157,946 $166,833 $9,010 $121,229 $130,239 
Provision (recovery)(860)31,737 30,877 2,384 369 2,753 
Charge-offs— (5,155)(5,155)— (4,280)(4,280)
Recoveries3,504 3,508 1,958 1,959 
Ending balance$8,031 $188,032 $196,063 $11,395 $119,276 $130,671 
Nine Months Ended September 30,
20232022
ResidentialCommercialTotalResidentialCommercialTotal
Beginning balance$11,741 $136,205 $147,946 $9,187 $117,270 $126,457 
Impact of adoption of ASU 2022-02(117)(1,677)(1,794)N/AN/AN/A
Balance after adoption of ASU 2022-0211,624 134,528 146,152 9,187 117,270 126,457 
Provision (recovery)(3,602)66,269 62,667 2,576 30,830 33,406 
Charge-offs— (22,190)(22,190)(412)(35,518)(35,930)
Recoveries9,425 9,434 44 6,694 6,738 
Ending balance$8,031 $188,032 $196,063 $11,395 $119,276 $130,671 
15

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


The ACL was determined utilizing a 2-year reasonable and supportable forecast period. The quantitative portion of the ACL was determined using three weighted third-party provided economic scenarios.
The ACL increased by $48.1 million, from 0.59% to 0.80% of total loans, at September 30, 2023 compared to December 31, 2022. The more significant factors impacting the provision for credit losses for the nine months ended September 30, 2023 included a deteriorating economic forecast and an increase in certain specific reserves.
The following table presents gross charge-offs during the nine months ended September 30, 2023, by year of origination (in thousands):
 20232022202120202019Prior to 2019Revolving LoansTotal
CRE$— $— $— $— $— $972 $— $972 
C&I743 3,338 43 105 7,239 1,854 649 13,971 
Franchise finance— — — 1,013 2,409 3,825 — 7,247 
$743 $3,338 $43 $1,118 $9,648 $6,651 $649 $22,190 
The following table presents the components of the provision for credit losses for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Amount related to funded portion of loans$30,877 $2,753 $62,667 $33,406 
Amount related to off-balance sheet credit exposures2,172 967 5,687 2,267 
Other— — — (127)
Total provision for credit losses$33,049 $3,720 $68,354 $35,546 
Credit quality information
Credit quality of loans held for investment is continuously monitored by dedicated residential credit risk management and commercial portfolio management functions. The Company also has a workout and recovery department that monitors the credit quality of criticized and classified loans and an independent internal credit review function.
Credit quality indicators for residential loans
Management considers delinquency status to be the most meaningful indicator of the credit quality of residential loans, other than government insured residential loans. Delinquency statistics are updated at least monthly. LTV and FICO scores are also important indicators of credit quality for 1-4 single family residential loans other than government insured loans. FICO scores are generally updated semi-annually, and were most recently updated in the third quarter of 2023. LTVs are typically at origination since we do not routinely update residential appraisals. Substantially all of the government insured residential loans are government insured buyout loans, which the Company buys out of GNMA securitizations upon default. For these loans, traditional measures of credit quality are not particularly relevant considering the guaranteed nature of the loans and the underlying business model. Factors that impact risk inherent in the residential portfolio segment include national and regional economic conditions such as levels of unemployment, wages and interest rates, as well as residential property values.
16

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on delinquency status (in thousands):
September 30, 2023
Amortized Cost By Origination Year
20232022202120202019PriorTotal
Current $308,113 $1,136,640 $3,003,418 $870,174 $302,053 $1,318,308 $6,938,706 
30 - 59 Days Past Due107 4,193 11,097 1,456 — 10,195 27,048 
60 - 89 Days Past Due— 1,681 219 — — 739 2,639 
90 Days or More Past Due— 6,127 128 2,050 1,563 4,571 14,439 
$308,220 $1,148,641 $3,014,862 $873,680 $303,616 $1,333,813 $6,982,832 
December 31, 2022
Amortized Cost By Origination Year
20222021202020192018PriorTotal
Current $1,185,611 $3,149,299 $916,923 $316,023 $177,891 $1,321,011 $7,066,758 
30 - 59 Days Past Due12,752 16,432 3,266 2,953 1,854 5,759 43,016 
60 - 89 Days Past Due252 1,196 229 1,347 — 1,052 4,076 
90 Days or More Past Due2,589 2,158 2,173 360 3,069 4,635 14,984 
$1,201,204 $3,169,085 $922,591 $320,683 $182,814 $1,332,457 $7,128,834 
1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on LTV (in thousands): 
September 30, 2023
Amortized Cost By Origination Year
LTV20232022202120202019PriorTotal
Less than 61%$50,658 $265,342 $1,228,237 $331,864 $72,956 $452,361 $2,401,418 
61% - 70% 53,499 285,656 822,152 223,781 73,589 308,859 1,767,536 
71% - 80%204,063 595,548 929,735 317,963 151,667 534,823 2,733,799 
More than 80%— 2,095 34,738 72 5,404 37,770 80,079 
$308,220 $1,148,641 $3,014,862 $873,680 $303,616 $1,333,813 $6,982,832 
December 31, 2022
Amortized Cost By Origination Year
LTV20222021202020192018PriorTotal
Less than 61%$282,940 $1,301,279 $354,720 $76,404 $42,864 $472,090 $2,530,297 
61% - 70% 295,206 857,008 231,732 80,383 49,047 310,649 1,824,025 
71% - 80% 620,049 975,542 336,066 158,406 86,463 510,633 2,687,159 
More than 80%3,009 35,256 73 5,490 4,440 39,085 87,353 
$1,201,204 $3,169,085 $922,591 $320,683 $182,814 $1,332,457 $7,128,834 
17

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on FICO score (in thousands):
September 30, 2023
Amortized Cost By Origination Year
FICO20232022202120202019PriorTotal
760 or greater$211,896 $826,990 $2,412,587 $707,589 $207,477 $925,812 $5,292,351 
720 - 75967,543 195,347 396,763 101,249 52,928 216,033 1,029,863 
719 or less28,781 126,304 205,512 64,842 43,211 191,968 660,618 
$308,220 $1,148,641 $3,014,862 $873,680 $303,616 $1,333,813 $6,982,832 
December 31, 2022
Amortized Cost By Origination Year
FICO20222021202020192018PriorTotal
760 or greater$805,125 $2,513,045 $721,982 $212,574 $97,076 $944,783 $5,294,585 
720 - 759285,507 485,528 132,928 62,301 45,857 216,047 1,228,168 
719 or less110,572 170,512 67,681 45,808 39,881 171,627 606,081 
$1,201,204 $3,169,085 $922,591 $320,683 $182,814 $1,332,457 $7,128,834 

Credit quality indicators for commercial loans
Factors that impact risk inherent in commercial portfolio segments include but are not limited to levels of economic activity or potential disruptions in economic activity, health of the national, regional and to a lesser extent global economy, interest rates, industry trends, patterns of and trends in customer behavior that influence demand for our borrowers' products and services, and commercial real estate values. Internal risk ratings are considered the most meaningful indicator of credit quality for commercial loans. Internal risk ratings are generally indicative of the likelihood that a borrower will default, are a key factor influencing the level and nature of ongoing monitoring of loans and may impact the estimation of the ACL. Internal risk ratings are updated on a continuous basis. Generally, relationships with balances in excess of defined thresholds, ranging from $1 million to $3 million, are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. The special mention rating is considered a transitional rating for loans exhibiting potential credit weaknesses that could result in deterioration of repayment prospects at some future date if not checked or corrected and that deserve management’s close attention. These borrowers may exhibit declining cash flows or revenues or increasing leverage. Loans with well-defined credit weaknesses that may result in a loss if the deficiencies are not corrected are assigned a risk rating of substandard. These borrowers may exhibit payment defaults, inadequate cash flows from current operations, operating losses, increasing balance sheet leverage, project cost overruns, unreasonable construction delays, exhausted interest reserves, declining collateral values, frequent overdrafts or past due real estate taxes. Loans with weaknesses so severe that collection in full is highly questionable or improbable, but because of certain reasonably specific pending factors have not been charged off, are assigned an internal risk rating of doubtful. 
18

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Commercial credit exposure based on internal risk rating (in thousands):
September 30, 2023
Amortized Cost By Origination YearRevolving Loans
20232022202120202019PriorTotal
CRE
Pass$434,477 $1,246,679 $687,012 $538,336 $1,039,284 $1,198,408 $233,648 $5,377,844 
Special mention— 54,913 2,119 — 17,733 184 — 74,949 
Substandard— — — 19,007 109,880 160,377 — 289,264 
Total CRE$434,477 $1,301,592 $689,131 $557,343 $1,166,897 $1,358,969 $233,648 $5,742,057 
C&I
Pass$1,031,714 $1,512,244 $678,519 $350,864 $488,934 $1,093,761 $2,801,246 $7,957,282 
Special mention64,338 81,766 15,199 50,348 20,157 32,882 264,699 
Substandard4,687 83,780 4,832 17,779 18,228 98,863 45,000 273,169 
Doubtful— — — — — 14,106 — 14,106 
Total C&I$1,036,410 $1,660,362 $765,117 $383,842 $557,510 $1,226,887 $2,879,128 $8,509,256 
Pinnacle - municipal finance
Pass$158,220 $140,362 $78,322 $34,597 $56,848 $431,850 $— $900,199 
Total Pinnacle - municipal finance$158,220 $140,362 $78,322 $34,597 $56,848 $431,850 $— $900,199 
Franchise finance
Pass$5,381 $26,660 $37,233 $31,551 $23,706 $26,612 $334 $151,477 
Special mention— — — 2,351 — — — 2,351 
Substandard— 221 1,193 893 22,538 12,834 — 37,679 
Doubtful— — — — — 5,238 — 5,238 
Total Franchise finance$5,381 $26,881 $38,426 $34,795 $46,244 $44,684 $334 $196,745 
Equipment Finance
Pass$1,132 $9,147 $43,364 $14,878 $58,346 $62,535 $— $189,402 
Substandard— 15,066 2,151 — 6,126 7,129 — 30,472 
Total Equipment finance$1,132 $24,213 $45,515 $14,878 $64,472 $69,664 $— $219,874 
Mortgage warehouse lending
Pass$— $— $— $— $— $— $407,577 $407,577 
Total Mortgage warehouse lending$— $— $— $— $— $— $407,577 $407,577 
19

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


December 31, 2022
Amortized Cost By Origination YearRevolving Loans
20222021202020192018PriorTotal
CRE
Pass$1,256,300 $758,025 $550,133 $1,138,113 $512,125 $932,030 $196,963 $5,343,689 
Special mention— — — 18,006 — 709 — 18,715 
Substandard12,332 1,355 20,103 98,438 56,974 148,351 — 337,553 
Total CRE$1,268,632 $759,380 $570,236 $1,254,557 $569,099 $1,081,090 $196,963 $5,699,957 
C&I
Pass$1,880,853 $825,410 $445,988 $689,003 $416,287 $832,952 $2,900,336 $7,990,829 
Special mention63 — 208 3,880 — 20,657 310 25,118 
Substandard25,898 13,916 3,319 103,625 19,715 104,190 21,277 291,940 
Doubtful— — — — 647 — — 647 
Total C&I$1,906,814 $839,326 $449,515 $796,508 $436,649 $957,799 $2,921,923 $8,308,534 
Pinnacle - municipal finance
Pass$179,223 $110,510 $66,592 $66,514 $29,783 $459,500 $— $912,122 
Total Pinnacle - municipal finance$179,223 $110,510 $66,592 $66,514 $29,783 $459,500 $— $912,122 
Franchise finance
Pass$81,146 $19,251 $38,293 $34,483 $8,617 $6,799 $— $188,589 
Special mention— — — 5,432 2,168 — — 7,600 
Substandard— 1,617 1,295 22,058 17,148 8,124 — 50,242 
Doubtful— — 1,013 2,447 3,883 — — 7,343 
Total franchise finance$81,146 $20,868 $40,601 $64,420 $31,816 $14,923 $— $253,774 
Equipment finance
Pass$27,386 $55,015 $16,488 $90,286 $33,264 $62,353 $— $284,792 
Substandard— — — 1,355 — — — 1,355 
Equipment finance$27,386 $55,015 $16,488 $91,641 $33,264 $62,353 $— $286,147 
Mortgage warehouse lending
Pass$— $— $— $— $— $— $524,740 $524,740 
Total Mortgage warehouse lending$— $— $— $— $— $— $524,740 $524,740 

At September 30, 2023 and December 31, 2022, the balance of revolving loans converted to term loans was immaterial.
The following table presents criticized and classified commercial loans, in aggregate by risk rating category, at the dates indicated (in thousands):
September 30, 2023December 31, 2022
Special mention$341,999 $51,433 
Substandard - accruing534,336 605,965 
Substandard - non-accruing96,248 75,125 
Doubtful19,344 7,990 
Total $991,927 $740,513 
20

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Past Due and Non-Accrual Loans:
The following table presents an aging of loans at the dates indicated (in thousands):
 September 30, 2023December 31, 2022
 Current30 - 59
Days Past
Due
60 - 89
Days Past
Due
90 Days or
More Past
Due
TotalCurrent30 - 59
Days Past
Due
60 - 89
Days Past
Due
90 Days or
More Past
Due
Total
1-4 single family residential$6,938,706 $27,048 $2,639 $14,439 $6,982,832 $7,066,758 $43,016 $4,076 $14,984 $7,128,834 
Government insured residential872,098 141,190 70,721 313,727 1,397,736 1,025,523 159,461 94,294 492,602 1,771,880 
CRE5,726,861 — 2,004 13,192 5,742,057 5,680,829 4,328 4,773 10,027 5,699,957 
C&I8,475,471 131 6,276 27,378 8,509,256 8,280,321 2,508 1,028 24,677 8,308,534 
Pinnacle - municipal finance900,199 — — — 900,199 912,122 — — — 912,122 
Franchise finance196,745 — — — 196,745 243,574 1,321 — 8,879 253,774 
Equipment finance 219,874 — — — 219,874 286,147 — — — 286,147 
Mortgage warehouse lending 407,577 — — — 407,577 524,740 — — — 524,740 
 $23,737,531 $168,369 $81,640 $368,736 $24,356,276 $24,020,014 $210,634 $104,171 $551,169 $24,885,988 

Included in the table above is the guaranteed portion of SBA loans past due by 90 days or more totaling $34.2 million and $30.8 million at September 30, 2023 and December 31, 2022, respectively.
Loans contractually delinquent by 90 days or more and still accruing totaled $315 million and $494 million at September 30, 2023 and December 31, 2022, respectively, substantially all of which were government insured residential loans. These loans are government insured pool buyout loans, which the Company buys out of GNMA securitizations upon default.
The following table presents information about loans on non-accrual status at the dates indicated (in thousands):
September 30, 2023December 31, 2022
Amortized CostAmortized Cost With No Related AllowanceAmortized CostAmortized Cost With No Related Allowance
1-4 single family residential$20,707 $— $21,311 $— 
CRE16,987 2,004 22,352 6,911 
C&I80,712 42,035 47,473 15,642 
Franchise finance17,893 10,314 13,290 1,668 
$136,299 $54,353 $104,426 $24,221 
Included in the table above is the guaranteed portion of non-accrual SBA loans totaling $37.8 million and $40.3 million at September 30, 2023 and December 31, 2022, respectively. The amount of interest income recognized on non-accrual loans was insignificant for the three and nine months ended September 30, 2023 and 2022. The amount of additional interest income that would have been recognized on non-accrual loans had they performed in accordance with their contractual terms was approximately $2.2 million and $5.6 million for the three and nine months ended September 30, 2023, respectively, and $2.1 million and $5.2 million for three and nine months ended September 30, 2022, respectively.
21

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Collateral dependent loans:
The following table presents the amortized cost basis of collateral dependent loans at the dates indicated (in thousands):
September 30, 2023December 31, 2022
Amortized CostExtent to Which Secured by CollateralAmortized CostExtent to Which Secured by Collateral
1-4 single family residential$— $— $730 $730 
Commercial:
CRE14,662 14,662 19,486 18,353 
C&I49,542 40,001 26,404 25,344 
Franchise finance 17,673 11,395 11,445 3,729 
Total commercial 81,877 66,058 57,335 47,426 
 $81,877 $66,058 $58,065 $48,156 
Collateral for the CRE loan class generally consists of commercial real estate, or for certain construction loans, residential real estate. Collateral for C&I loans generally consists of equipment, accounts receivable, inventory and other business assets and for owner-occupied commercial real estate loans, may also include commercial real estate. Franchise finance loans may be collateralized by franchise value or by equipment. Residential loans are collateralized by residential real estate. There were no significant changes to the extent to which collateral secured collateral dependent loans during the nine months ended September 30, 2023.
Foreclosure of residential real estate
The recorded investment in residential loans in the process of foreclosure was $305 million, of which $294 million was government insured, at September 30, 2023 and $413 million, of which $400 million was government insured, at December 31, 2022. The carrying amount of foreclosed residential real estate included in other assets in the accompanying consolidated balance sheet was insignificant at September 30, 2023 and December 31, 2022.
Loan Modifications
The following tables summarize loans that were modified for borrowers experiencing financial difficulty, by type of modification, during the periods indicated (dollars in thousands):
Three Months Ended September 30, 2023
Interest Rate Reduction Term ExtensionCombination - Interest Rate Reduction and Term Extension
Total
% (1)
Total
% (1)
Total
% (1)
Total
Government insured residential$— — %$27,710 %$687 — %$28,397 
C&I— — %1,475 — %— — %1,475 
Franchise finance — — %11,085 %— — %11,085 
$— $40,270 $687 $40,957 
Nine Months Ended September 30, 2023
Interest Rate Reduction Term ExtensionCombination - Interest Rate Reduction and Term Extension
Total
% (1)
Total
% (1)
Total
% (1)
Total
1-4 single family residential$759 — %$— — %$— — %$759 
Government insured residential106 — %64,520 %2,549 — %67,175 
C&I— — %5,786 — %— — %5,786 
Franchise finance — — %14,470 %— — %14,470 
$865 $84,776 $2,549 $88,190 
(1)Represents percentage of loans receivable in each category.
22

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


The following tables summarize the financial effect of the modifications made to borrowers experiencing difficulty, during the periods indicated:
Three Months Ended September 30, 2023
Financial Effect
Term Extension:
Government insured residential
Added a weighted average 9.2 years to the term of the modified loans.
C&I
Added a weighted average 0.5 years to the term of the modified loans.
Franchise finance
Added a weighted average 2.1 years to the term of the modified loans.
Combination - Interest Rate Reduction and Term Extension:
Government insured residential
Reduced weighted average contractual interest rate from 5.5% to 4.2% and added a weighted average 12.0 years to the term of the modified loans.
Nine Months Ended September 30, 2023
Financial Effect
Interest Rate Reduction:
1-4 single family residential
Reduced weighted average contractual interest rate from 3.8% to 3.1%.
Government insured residential
Reduced weighted average contractual interest rate from 4.8% to 3.8%.
Term Extension:
Government insured residential
Added a weighted average 8.4 years to the term of the modified loans.
C&I
Added a weighted average 0.6 years to the term of the modified loans.
Franchise finance
Added a weighted average 1.8 years to the term of the modified loans.
Combination - Interest Rate Reduction and Term Extension:
Government insured residential
Reduced weighted average contractual interest rate from 5.7% to 4.7% and added a weighted average 7.8 years to the term of the modified loans.
The following table presents the aging at September 30, 2023, of loans that were modified since January 1, 2023, the date of adoption of ASU 2022-02 (in thousands):
Current 30-59 Days Past Due60-89 Days Past Due 90 Days or More Past DueTotal
1-4 single family residential $— $759 $— $— $759 
Government insured residential 29,177 13,286 8,465 16,247 67,175 
C&I5,786 — — — 5,786 
Franchise finance 14,470 — — — 14,470 
$49,433 $14,045 $8,465 $16,247 $88,190 
23

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


The following tables summarizes loans that were modified since January 1, 2023, the date of adoption of ASU 2022-02, and subsequently defaulted, during the periods indicated (in thousands):
Three Months Ended September 30, 2023
Interest Rate Reduction Term ExtensionCombination - Interest Rate Reduction and Term Extension Total
Government insured residential $— $14,699 $548 $15,247 
Nine Months Ended September 30, 2023
Interest Rate Reduction Term ExtensionCombination - Interest Rate Reduction and Term Extension Total
Government insured residential $106 $28,432 $860 $29,398 

Disclosures Prescribed by Legacy GAAP (Before Adoption of ASU 2022-02) for Prior Periods
The following table summarizes loans that were modified in TDRs during the periods indicated, as well as loans modified during the twelve months preceding September 30, 2022 that experienced payment defaults during the periods indicated (dollars in thousands):
 Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
 Loans Modified in TDRs 
During the Period
TDRs Experiencing Payment
Defaults During the Period
Loans Modified in TDRs 
During the Period
TDRs Experiencing Payment
Defaults During the Period
 Number of
TDRs
Amortized CostNumber of
TDRs
Amortized CostNumber of
TDRs
Amortized CostNumber of
TDRs
Amortized Cost
1-4 single family residential$96 — $— 10 $5,385 — $— 
Government insured residential559 85,200 730 113,330 2,094 327,635 825 128,169 
C&I7,611 1,199 18 41,639 1,199 
Bridge - franchise finance6,615 6,615 6,615 6,615 
 568 $99,522 735 $121,144 2,126 $381,274 830 $135,983 
TDRs during the three and nine months ended September 30, 2022 generally included interest rate reductions and extensions of maturity. Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy. The total amount of such loans is not material.
Note 5    Income Taxes
The Company’s effective income tax rate was 24.7% and 25.9% for the three and nine months ended September 30, 2023, respectively, and 25.0% and 24.7% for the three and nine months ended September 30, 2022, respectively. The effective income tax rates differed from the statutory federal income tax rate of 21% for the three and nine months ended September 30, 2023 and 2022 due primarily to the impact of state income taxes, partially offset by the benefit of income not subject to federal tax.
Note 6    Derivative Financial Instruments
Derivatives designated as hedging instruments
The Company has entered into interest rate swaps, caps and collars designated as cash flow hedges with the objective of limiting the variability of interest payment cash flows. The Company has also entered into interest rate swaps designated as fair value hedges designed to hedge changes in the fair value of outstanding fixed rate instruments caused by fluctuations in the
24

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


benchmark interest rate. Changes in fair value of derivative instruments designated as cash flow hedges are reported in accumulated other comprehensive income. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings, as is the offsetting gain or loss on the hedged item.

The following table summarizes the Company's derivatives designated as hedging instruments as of the dates indicated (in thousands):
 September 30, 2023December 31, 2022
 Notional Amount
Fair Value(1)
Notional Amount
Fair Value(1)
 AssetLiabilityAssetLiability
Derivatives designated as cash flow hedges:   
Interest rate swaps$2,715,000 $— $(4,899)$1,970,000 $941 $(1,514)
Interest rate caps purchased200,000 13,910 — 200,000 15,673 — 
Interest rate collar(2)
125,000 — (595)125,000 — (203)
Derivatives designated as fair value hedges:
Pay-fixed interest rate swaps100,000 — — 100,000 — — 
 $3,140,000 $13,910 $(5,494)$2,395,000 $16,614 $(1,717)
(1) The fair values of derivatives are included in other assets or other liabilities in the consolidated balance sheets.
(2) The interest rate collar consists of a combination of zero-premium interest rate options. The Company sold a pay-variable cap with a strike price of 5.58%; sold a 0% floor; and purchased a receive-variable floor with a strike price of 1.50%.
Derivatives designated as cash flow hedges
The following table provides information about the amount of gain (loss) related to derivatives designated as cash flow hedges reclassified from AOCI into interest expense for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Location of gain (loss) reclassified from AOCI into income:
Interest expense on borrowings$13,442 $(590)$30,935 $(9,003)
Interest expense on deposits6,300 972 17,162 (205)
Interest income on loans(781)— (1,795)— 
$18,961 $382 $46,302 $(9,208)
During the three and nine months ended September 30, 2023 and 2022, no derivative positions designated as cash flow hedges were discontinued and none of the gains and losses reported in AOCI were reclassified into earnings as a result of the discontinuance of cash flow hedges or because of the early extinguishment of debt. As of September 30, 2023, the amount of net gain expected to be reclassified from AOCI into earnings during the next twelve months was $52.7 million. See Note 7 to the consolidated financial statements for additional information about the reclassification adjustments from AOCI into earnings.
Derivatives designated as fair value hedges
The amount of gain (loss) related to derivatives designated as fair value hedges recognized in earnings was insignificant for the three and nine months ended September 30, 2023 and 2022. The following table provides information about the hedged items related to derivatives designated as fair value hedges at the date indicated (in thousands):
September 30, 2023Location in Consolidated Balance Sheets
Contractual balance outstanding of hedged item (1)
$100,000 Loans
Cumulative fair value hedging adjustments$(2,701)Loans
(1)This amount is included in the amortized cost basis of a closed portfolio of loans used to designate hedging relationships in a portfolio layer method hedge in which the hedged item is anticipated to be outstanding for the designated hedge period. At September 30, 2023, the amortized cost basis of the closed portfolio used in this hedging relationship was $1.0 billion.
25

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Derivatives not designated as hedging instruments
The Company enters into interest rate derivative contracts with certain of its commercial borrowers to enable those borrowers to manage their exposure to interest rate fluctuations. To mitigate interest rate risk associated with these derivative contracts, the Company enters into offsetting derivative contract positions with primary dealers. These interest rate derivative contracts are not designated as hedging instruments; therefore, changes in the fair value of these derivatives are recognized immediately in earnings. For the three and nine months ended September 30, 2023 and 2022, the impact on earnings related to changes in fair value of these derivatives was not material.
The Company may be exposed to credit risk in the event of non-performance by the counterparties to its interest rate derivative agreements. The Company assesses the credit risk of its financial institution counterparties by monitoring publicly available credit rating and financial information. The Company manages dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA master agreements, central clearing mechanisms and counterparty limits. The agreements contain bilateral collateral arrangements with the amount of collateral to be posted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its commercial borrower counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company does not currently anticipate any significant losses from failure of interest rate derivative counterparties to honor their obligations.
The following table summarizes the Company's derivatives not designated as hedging instruments as of the dates indicated (in thousands):
 September 30, 2023December 31, 2022
 Notional Amount
Fair Value(1)
Notional Amount
Fair Value(1)
 AssetLiabilityAssetLiability
Derivatives not designated as hedges:
Pay-fixed interest rate swaps$2,040,182 $127,488 $(285)$1,916,719 $67,942 $(2,195)
Pay-variable interest rate swaps2,040,182 284 (128,764)1,916,719 2,195 (120,320)
Interest rate caps purchased65,610 2,832 — 42,920 1,988 — 
Interest rate caps sold65,610 — (2,832)42,920 — (1,988)
 $4,211,584 $130,604 $(131,881)$3,919,278 $72,125 $(124,503)
(1) Fair values of these derivatives are included in other assets and other liabilities in the consolidated balance sheets.
Some of the Company’s ISDA master agreements with financial institution counterparties contain provisions that permit either counterparty to terminate the agreements and require settlement in the event that regulatory capital ratios fall below certain designated thresholds, upon the initiation of other defined regulatory actions or upon suspension or withdrawal of the Bank’s credit rating. Currently, there are no circumstances that would trigger these provisions of the agreements.
Master netting agreements
The Company does not offset assets and liabilities under master netting agreements for financial reporting purposes. Information on interest rate swaps and caps subject to these agreements is as follows at the dates indicated (in thousands):
 September 30, 2023
  Gross Amounts Offset in Balance
Sheet
Net Amounts Presented in
Balance Sheet
Gross Amounts Not Offset in
Balance Sheet
 
 Gross Amounts
Recognized
Derivative
Instruments
Collateral
Pledged
Net Amount
Derivative assets$144,230 $— $144,230 $(5,779)$(138,264)$187 
Derivative liabilities(5,779)— (5,779)5,779 — — 
 $138,451 $— $138,451 $— $(138,264)$187 
26

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


 December 31, 2022
  Gross Amounts Offset in Balance
Sheet
Net Amounts Presented in
Balance Sheet
Gross Amounts Not Offset in
Balance Sheet
 
 Gross Amounts
Recognized
Derivative
Instruments
Collateral
Pledged
Net Amount
Derivative assets$86,544 $— $86,544 $(3,912)$(79,447)$3,185 
Derivative liabilities(3,912)— (3,912)3,912 — — 
$82,632 $— $82,632 $— $(79,447)$3,185 
The difference between the amounts reported for interest rate swaps subject to master netting agreements and the total fair value of interest rate contract derivative financial instruments reported in the consolidated balance sheets is related to interest rate derivative contracts not subject to master netting agreements.
Risk Participation Agreements
The Company purchases and sells credit protection under RPAs with the objective of sharing with financial institution counterparties some of the credit exposure related to interest rate derivative contracts entered into with commercial borrowers related to participations purchased or sold. The Company will make or receive payments under these agreements if a customer defaults on an obligation to perform under certain interest rate derivative contracts. At September 30, 2023 and December 31, 2022, the notional amount of the RPAs was $354 million and $202 million, respectively. The fair value of these derivatives was not material at September 30, 2023 and December 31, 2022.
Note 7    Stockholders’ Equity
Accumulated Other Comprehensive Income
Changes in other comprehensive income are summarized as follows for the periods indicated (in thousands):
Three Months Ended September 30,
 20232022
 Before TaxTax EffectNet of TaxBefore TaxTax EffectNet of Tax
Unrealized gains (losses) on investment securities available for sale:
   
Net unrealized holding losses arising during the period$(44,397)$11,543 $(32,854)$(158,514)$41,214 $(117,300)
Amounts reclassified to gain on investment securities available for sale, net(215)56 (159)(349)91 (258)
Net change in unrealized gains (losses) on investment securities available for sale
(44,612)11,599 (33,013)(158,863)41,305 (117,558)
Unrealized gains (losses) on derivative instruments:
Net unrealized holding gains arising during the period16,771 (4,361)12,410 41,209 (10,714)30,495 
Amounts reclassified to interest expense on deposits(6,300)1,638 (4,662)(972)253 (719)
Amounts reclassified to interest expense on borrowings
(13,442)3,495 (9,947)590 (154)436 
Amounts reclassified to interest income on loans781 (203)578 — — — 
Net change in unrealized gains (losses) on derivative instruments(2,190)569 (1,621)40,827 (10,615)30,212 
Other comprehensive loss
$(46,802)$12,168 $(34,634)$(118,036)$30,690 $(87,346)
27

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Nine Months Ended September 30,
 20232022
 Before TaxTax EffectNet of TaxBefore TaxTax EffectNet of Tax
Unrealized gains (losses) on investment securities available for sale:
   
Net unrealized holding gains (losses) arising during the period$32,050 $(8,333)$23,717 $(635,446)$165,197 $(470,249)
Amounts reclassified to gain on investment securities available for sale, net
(1,814)472 (1,342)(3,927)1,021 (2,906)
Net change in unrealized gains (losses) on investment securities available for sale
30,236 (7,861)22,375 (639,373)166,218 (473,155)
Unrealized gains (losses) on derivative instruments:
Net unrealized holding gains arising during the period57,565 (14,967)42,598 100,559 (26,019)74,540 
Amounts reclassified to interest expense on deposits(17,162)4,462 (12,700)205 (53)152 
Amounts reclassified to interest expense on borrowings
(30,935)8,043 (22,892)9,003 (2,341)6,662 
Amounts reclassified to interest income on loans1,795 (467)1,328 — — — 
Net change in unrealized gains (losses) on derivative instruments11,263 (2,929)8,334 109,767 (28,413)81,354 
Other comprehensive income (loss)$41,499 $(10,790)$30,709 $(529,606)$137,805 $(391,801)

The categories of AOCI and changes therein are presented below for the periods indicated (in thousands):
Three Months Ended September 30,
Unrealized Loss on
Investment Securities
Available for Sale
Unrealized Gain
on Derivative
Instruments
Total
Balance at June 30, 2023
$(443,523)$70,961 $(372,562)
Other comprehensive loss
(33,013)(1,621)(34,634)
Balance at September 30, 2023$(476,536)$69,340 $(407,196)
Balance at June 30, 2022
$(352,738)$32,343 $(320,395)
Other comprehensive income (loss)(117,558)30,212 (87,346)
Balance at September 30, 2022$(470,296)$62,555 $(407,741)
Nine Months Ended September 30,
Unrealized Gain (Loss) on
Investment Securities
Available for Sale
Unrealized Gain (Loss)
on Derivative
Instruments
Total
Balance at December 31, 2022$(498,911)$61,006 $(437,905)
Other comprehensive income
22,375 8,334 30,709 
Balance at September 30, 2023$(476,536)$69,340 $(407,196)
Balance at December 31, 2021
$2,859 $(18,799)$(15,940)
Other comprehensive income (loss)(473,155)81,354 (391,801)
Balance at September 30, 2022$(470,296)$62,555 $(407,741)
28

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Note 8    Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis
The following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which those measurements are typically classified.
Investment securities available for sale and marketable equity securities—Fair value measurements are based on quoted prices in active markets when available; these measurements are classified within level 1 of the fair value hierarchy. These securities typically include U.S. Treasury securities and certain preferred stocks. If quoted prices in active markets are not available, fair values are estimated using quoted prices of securities with similar characteristics, quoted prices of identical securities in less active markets, discounted cash flow techniques, or matrix pricing models. These securities are generally classified within level 2 of the fair value hierarchy and include U.S. Government agency securities, U.S. Government agency and sponsored enterprise MBS, preferred stock investments for which level 1 valuations are not available, non-mortgage asset-backed securities, single family real estate-backed securities, private label residential MBS and CMOs, private label commercial MBS, collateralized loan obligations and state and municipal obligations. Pricing of these securities is generally primarily spread driven. Observable inputs that may impact the valuation of these securities include benchmark yield curves, credit spreads, reported trades, dealer quotes, bids, issuer spreads, current rating, historical constant prepayment rates, historical voluntary prepayment rates, structural and waterfall features of individual securities, published collateral data, and for certain securities, historical constant default rates and default severities.
The Company uses third-party pricing services in determining fair value measurements for investment securities. To obtain an understanding of the methodologies and assumptions used, management reviews written documentation provided by the pricing services, conducts interviews with valuation desk personnel and reviews model results and detailed assumptions used to value selected securities as considered necessary. Management has established a robust price challenge process that includes a review by the treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over month fluctuations or deviations from expectations is challenged. If considered necessary to resolve any discrepancies, a price will be obtained from an additional independent valuation source. The Company does not typically adjust the prices provided, other than through this established challenge process. The results of price challenges are subject to review by executive management. Any price discrepancies are resolved based on careful consideration of the assumptions and inputs employed by each of the pricing sources.
Derivative financial instruments—Fair values of interest rate swaps, caps and collars are determined using widely accepted discounted cash flow modeling techniques. These discounted cash flow models use projections of future cash payments and receipts that are discounted at mid-market rates. Observable inputs that may impact the valuation of these instruments include benchmark swap rates and benchmark forward yield curves. These fair value measurements are generally classified within level 2 of the fair value hierarchy.
29

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


The following tables present assets and liabilities measured at fair value on a recurring basis at the dates indicated (in thousands):
 September 30, 2023
 Level 1Level 2Total
Investment securities available for sale:   
U.S. Treasury securities$106,605 $— $106,605 
U.S. Government agency and sponsored enterprise residential MBS— 1,932,458 1,932,458 
U.S. Government agency and sponsored enterprise commercial MBS— 491,840 491,840 
Private label residential MBS and CMOs— 2,290,325 2,290,325 
Private label commercial MBS— 2,256,329 2,256,329 
Single family real estate-backed securities— 393,464 393,464 
Collateralized loan obligations— 1,047,812 1,047,812 
Non-mortgage asset-backed securities— 104,344 104,344 
State and municipal obligations— 97,235 97,235 
SBA securities— 110,655 110,655 
Marketable equity securities45,417 — 45,417 
Derivative assets— 144,514 144,514 
Total assets at fair value$152,022 $8,868,976 $9,020,998 
Derivative liabilities$— $(137,375)$(137,375)
Total liabilities at fair value$— $(137,375)$(137,375)
 December 31, 2022
 Level 1Level 2Total
Investment securities available for sale:   
U.S. Treasury securities
$135,841 $— $135,841 
U.S. Government agency and sponsored enterprise residential MBS— 1,983,168 1,983,168 
U.S. Government agency and sponsored enterprise commercial MBS— 525,094 525,094 
Private label residential MBS and CMOs— 2,530,663 2,530,663 
Private label commercial MBS— 2,524,354 2,524,354 
Single family real estate-backed securities— 470,441 470,441 
Collateralized loan obligations— 1,136,463 1,136,463 
Non-mortgage asset-backed securities— 95,976 95,976 
State and municipal obligations— 116,661 116,661 
SBA securities— 135,782 135,782 
Marketable equity securities 90,884 — 90,884 
Derivative assets— 88,739 88,739 
Total assets at fair value$226,725 $9,607,341 $9,834,066 
Derivative liabilities$— $(126,220)$(126,220)
Total liabilities at fair value$— $(126,220)$(126,220)
30

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Assets and liabilities measured at fair value on a non-recurring basis
Following is a description of the methodologies used to estimate the fair values of assets and liabilities that may be measured at fair value on a non-recurring basis, and the level within the fair value hierarchy in which those measurements are typically classified. 
Collateral dependent loans and OREO—The carrying amount of collateral dependent loans is typically based on the fair value of the underlying collateral, which may be real estate, enterprise value or other business assets, less estimated costs to sell when repayment is expected to come from the sale of the collateral. The carrying value of OREO is initially measured based on the fair value of the real estate acquired in foreclosure and subsequently adjusted to the lower of cost or estimated fair value, less estimated cost to sell. Fair values of real estate collateral and OREO are typically based on third-party real estate appraisals which utilize market and income approaches to valuation incorporating both observable and unobservable inputs.
Fair value measurements related to collateral dependent loans and OREO are generally classified within level 3 of the fair value hierarchy.
The following table presents the net carrying value of assets classified within level 3 of the fair value hierarchy at the dates indicated, for which non-recurring changes in fair value were recorded during the period then ended (in thousands):
September 30, 2023December 31, 2022
Collateral dependent loans$59,576 $31,789 
OREO29 693 
$59,605 $32,482 
The following table presents the carrying value and fair value of financial instruments and the level within the fair value hierarchy in which those measurements are classified at the dates indicated (dollars in thousands):
 September 30, 2023December 31, 2022
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Assets:     
Cash and cash equivalents1$391,885 $391,885 $572,647 $572,647 
Investment securities 1/2$8,886,484 $8,886,350 $9,755,327 $9,755,190 
Non-marketable equity securities2$312,159 $312,159 $294,172 $294,172 
Loans, net3$24,160,213 $22,606,322 $24,738,042 $23,342,950 
Derivative assets2$144,514 $144,514 $88,739 $88,739 
Liabilities:
Demand, savings and money market deposits2$20,922,985 $20,922,985 $23,241,256 $23,241,256 
Time deposits2$5,189,681 $5,132,900 $4,268,078 $4,231,167 
Federal funds purchased 2$— $— $190,000 $190,000 
FHLB advances2$5,165,000 $5,164,688 $5,420,000 $5,419,588 
Notes and other borrowings2$715,197 $642,941 $720,923 $698,359 
Derivative liabilities2$137,375 $137,375 $126,220 $126,220 
Note 9    Commitments and Contingencies 
The Company issues off-balance sheet financial instruments to meet the financing needs of its customers. These financial instruments include commitments to fund loans, unfunded commitments under existing lines of credit, and commercial and standby letters of credit. These commitments expose the Company to varying degrees of credit and market risk which are essentially the same as those involved in extending loans to customers, and are subject to the same credit policies used in underwriting loans. Collateral may be obtained based on the Company’s credit evaluation of the counterparty. The Company’s maximum exposure to credit loss is represented by the contractual amount of these commitments.
31

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


Commitments to fund loans
These are agreements to lend funds to customers as long as there is no violation of any condition established in the contract. Commitments to fund loans generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of these commitments are expected to expire without being funded and, therefore, the total commitment amounts do not necessarily represent future liquidity requirements. 
Unfunded commitments under lines of credit
Unfunded commitments under lines of credit include commercial and commercial real estate lines of credit to existing customers, for many of which additional extensions of credit are subject to borrowing base requirements. Some of these commitments may mature without being fully funded, so may not necessarily represent future liquidity requirements. 
Commercial and standby letters of credit
Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support trade transactions or guarantee arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. 
Total lending related commitments outstanding at September 30, 2023 were as follows (in thousands):
Commitments to fund loans$324,957 
Unfunded commitments under lines of credit 4,996,007 
Commercial and standby letters of credit 148,310 
$5,469,274 
Legal Proceedings
The Company is involved in various legal actions arising in the normal course of business. In the opinion of management, based upon advice of legal counsel, the likelihood is remote that the impact of these proceedings, either individually or in the aggregate, would be material to the Company’s consolidated financial position, results of operations or cash flows.
Note 10    Deposits
The following table presents average balances and weighted average rates paid on deposits for the periods indicated (dollars in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
 Average
Balance
Average
Rate Paid(1)
Average
Balance
Average
Rate Paid(1)
Average
Balance
Average
Rate Paid(1)
Average
Balance
Average
Rate Paid(1)
Demand deposits:      
Non-interest bearing$6,937,537 — %$8,749,794 — %$7,152,362 — %$9,071,135 — %
Interest bearing3,038,870 3.33 %2,306,906 0.71 %2,728,287 2.68 %2,658,558 0.36 %
Savings and money market10,205,765 3.81 %13,001,566 1.22 %10,844,838 3.43 %13,150,357 0.64 %
Time5,420,522 3.92 %3,255,869 1.13 %5,150,486 3.49 %3,129,247 0.67 %
$25,602,694 2.74 %$27,314,135 0.78 %$25,875,973 2.41 %$28,009,297 0.41 %
(1)Annualized.
Time deposit accounts with balances greater than $250,000 totaled $893 million and $730 million at September 30, 2023 and December 31, 2022, respectively.
32

Table of Contents
BANKUNITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
September 30, 2023


The following table presents maturities of time deposits as of September 30, 2023 (in thousands):
Maturing in:
2023$1,827,279 
20242,890,024 
2025148,612 
2026323,052 
2027547 
Thereafter167 
$5,189,681 
Interest expense on deposits for the periods indicated was as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Interest bearing demand$25,491 $4,104 $54,781 $7,215 
Savings and money market97,956 39,838 278,243 62,704 
Time53,527 9,264 134,448 15,650 
$176,974 $53,206 $467,472 $85,569 
During the three and nine months ended September 30, 2023 and 2022, costs related to certain customer rebate and commission programs totaled $11.1 million, $29.0 million, $4.3 million and $8.1 million, respectively. These costs are included in "other non-interest expense" in the accompanying consolidated statements of income.
33





Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations 
The following discussion and analysis is intended to focus on significant matters impacting and changes in the financial condition and results of operations of the Company during the nine months ended September 30, 2023 and should be read in conjunction with the consolidated financial statements and notes hereto included in this Quarterly Report on Form 10-Q and BKU's 2022 Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report on Form 10-K").
Forward-Looking Statements
This Quarterly Report on Form 10-Q 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. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” "future" and similar expressions identify forward-looking statements. These forward-looking statements are based on the historical performance of the Company 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 so contemplated 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, including as impacted by external circumstances outside the Company's direct control, such as adverse events impacting the financial services industry. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, the risk factors described in Part I, Item 1A of the 2022 Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K. The Company does not undertake any obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise.
Overview
Overview and Quarterly Highlights
Macro-Environmental Factors of Note:
During March and April of 2023, three highly publicized regional bank closures led to industry-wide concerns and volatility related to bank valuations, liquidity, deposit flows, and confidence in the banking system. Deposit flows, liquidity and market perceptions have stabilized considerably since those events, however, pressure on bank margins and valuations, in part influenced by those events, remains, as does a level of market uncertainty. The FRB continues its restrictive monetary policy stance, and there is uncertainty about the trajectory of macro-economic trends. Despite these circumstances, loan and deposit pipelines are healthy, deposit flows are generally stable, our margin expanded during the third quarter and non-performing asset and net charge-off ratios remain at what we consider to be low levels. Our liquidity position is strong and our capital base remains robust.
Quarterly Highlights:
In evaluating our financial performance, we consider the level of and trends in net interest income, the net interest margin, the cost of deposits, levels and composition of non-interest income and non-interest expense, performance ratios such as the return on average equity and return on average assets and asset quality ratios, including the ratio of non-performing loans to total loans, non-performing assets to total assets, trends in criticized and classified assets and portfolio delinquency and charge-off trends. We consider growth in and the composition of earning assets and deposits, the composition and level of available liquidity, our interest rate risk profile, trends in funding mix and cost of funds. We analyze these ratios and trends against our own historical performance, our budgeted performance, our risk appetite and the financial condition and performance of comparable financial institutions.
Net income for the three months ended September 30, 2023 was $47.0 million, or $0.63 per diluted share, compared to $58.0 million or $0.78 per diluted share for the immediately preceding three months ended June 30, 2023 and $87.9 million, or $1.12 per diluted share, for the three months ended September 30, 2022. Earnings for the three months ended September 30, 2023 were impacted by an increase in the provision for credit losses, the most significant driver of which was the impact of a less favorable economic forecast. Net income for the nine months ended September 30, 2023 was $157.9 million, or $2.11 per diluted share, compared to $220.8 million, or $2.71 per diluted share for the nine months ended September 30, 2022.
34





We gained momentum executing on near-term strategic priorities this quarter:
The net interest margin, calculated on a tax-equivalent basis, expanded to 2.56% for the three months ended September 30, 2023, from 2.47% for the three months ended June 30, 2023. The net interest margin was 2.76% for the three months ended September 30, 2022.
Non-brokered deposits grew by $484 million and total deposits grew by $274 million during the three months ended September 30, 2023.
Non-interest bearing demand deposits grew by $52 million during the three months ended September 30, 2023, remaining consistent at 28% of total deposits at both September 30, 2023 and June 30, 2023, compared to 29% at December 31, 2022.
Residential loans declined by $225 million and securities declined by $257 million during the three months ended September 30, 2023, while our core C&I and commercial real estate portfolios grew by a net $147 million.
FHLB advances declined by $810 million during the three months ended September 30, 2023, as consistent with our strategy to re-position the balance sheet, cash flows from the residential and securities portfolios were used to pay down wholesale funding.
The loans to deposits ratio declined to 93.3% at September 30, 2023, from 95.3% at June 30, 2023.
We have maintained ample liquidity. Total same day available liquidity was $14.4 billion, the available liquidity to uninsured, uncollateralized deposits ratio was 161% and an estimated 66% of our deposits were insured or collateralized at September 30, 2023.
Our capital position remains robust. At September 30, 2023, CET1 increased to 11.4% at the holding company and 13.2% at the Bank. Pro-forma CET1 at the holding company and the Bank, including accumulated other comprehensive income, were 9.8% and 11.5%, respectively, at September 30, 2023.
For the three months ended September 30, 2023, the provision for credit losses was $33.0 million compared to a provision of $15.5 million for the three months ended June 30, 2023. The ratio of the ACL to total loans increased to 0.80% at September 30, 2023, from 0.68% at June 30, 2023. The largest driver of the provision for credit losses and increase in the ACL for the three months ended September 30, 2023 was a less favorable economic forecast.
The annualized net charge-off ratio for the nine months ended September 30, 2023 was 0.07%. NPAs remained low, totaling $140.5 million at September 30, 2023 compared to $120.8 million at June 30, 2023. Most of the increase was in the franchise finance portfolio. The NPA ratio at September 30, 2023 was 0.40%, including 0.11% related to the guaranteed portion of non-performing SBA loans. At June 30, 2023 the NPA ratio was 0.34%, including 0.10% related to the guaranteed portion of non-performing SBA loans.
Consistent with industry trends, rising interest rates and restrictive monetary policy contributed to an increase in the average cost of total deposits to 2.74% for the three months ended September 30, 2023 from 2.46% for the immediately preceding three months ended June 30, 2023. This increase of 0.28% was smaller than the 0.41% increase in the cost of deposits for the three months ended June 30, 2023, continuing the trend of a declining rate of increase in deposit costs. The yield on average interest earning assets increased to 5.52% for the three months ended September 30, 2023 from 5.30% for the immediately preceding three months ended June 30, 2023.
Total loans declined by $274 million during the three months ended September 30, 2023, primarily due to the $225 million decline in the residential segment.
Commercial real estate exposure is modest. Commercial real estate loans totaled 23.5% of loans at September 30, 2023, representing 168% of the Bank's total risk-based capital. At September 30, 2023, the weighted average LTV of the CRE portfolio was 55.8% and the weighted average DSCR was 1.80. 58% of the portfolio was secured by collateral properties located in Florida and 25% was secured by properties located in the New York tri-state area.
We remain committed to keeping the duration of our securities portfolio short; the duration of the available for sale securities portfolio was 2.02 at September 30, 2023. Held to maturity securities were not significant.
Book value and tangible book value per common share were $33.92 and $32.88, respectively, at September 30, 2023, compared to $33.94 and $32.90, respectively, at June 30, 2023.
35





Results of Operations
Net Interest Income
Net interest income is the difference between interest earned on interest earning assets and interest incurred on interest bearing liabilities and is the primary driver of core earnings. Net interest income is impacted by the mix of interest earning assets and interest bearing liabilities, the ratio of interest earning assets to total assets and of interest bearing liabilities to total funding sources, movements in market interest rates and monetary policy, the shape of the yield curve, levels of non-performing assets and pricing pressure from competitors.
The mix of interest earning assets is influenced by loan demand, market and competitive conditions in our primary lending markets, by management's continual assessment of the rate of return and relative risk associated with various classes of earning assets and liquidity considerations. The mix of funding sources is influenced by the Company's liquidity profile, management's assessment of the desire for lower cost funding sources weighed against relationships with customers and growth expectations, our ability to attract and retain core deposit relationships, competition for deposits in the Company's markets and the availability and pricing of other sources of funds. For the three and nine months ended September 30, 2023, the mix of funding sources and net interest margin were negatively impacted by the interest rate environment, the restrictive policy stance of the FRB which has led to increased competition for deposits, increased deposit costs and a decline in deposit levels across the banking industry, and deposit outflows related to events that impacted the banking sector in March 2023. These factors contributed to declines in average non-interest bearing demand deposits and to an increase in higher cost funding sources, including higher cost interest-bearing deposits and wholesale funding such as FHLB advances.
36





The following table presents, for the periods indicated, information about (i) average balances, the total dollar amount of taxable equivalent interest income from earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Non-accrual loans are included in the average balances presented in this table; however, interest income foregone on non-accrual loans is not included. Interest income, yields, spread and margin have been calculated on a tax-equivalent basis for loans and investment securities that are exempt from federal income taxes, at a federal tax rate of 21% (dollars in thousands):
Three Months Ended September 30, 2023
Three Months Ended June 30, 2023
Three Months Ended September 30, 2022
Average
Balance
Interest (1)
Yield/
Rate (1)(2)
Average
Balance
Interest (1)
Yield/
Rate (1)(2)
Average
Balance
Interest (1)
Yield/
Rate (1)(2)
Assets:
Interest earning assets:
Loans $24,417,433 $340,357 5.54 %$24,680,919 $329,494 5.35 %$24,053,742 $248,168 4.11 %
Investment securities (3)
9,034,116 123,794 5.48 %9,369,019 121,520 5.19 %9,981,486 77,840 3.12 %
Other interest earning assets785,146 10,668 5.39 %1,323,025 16,664 5.05 %596,879 4,031 2.68 %
Total interest earning assets34,236,695 474,819 5.52 %35,372,963 467,678 5.30 %34,632,107 330,039 3.80 %
Allowance for credit losses(173,407)(162,463)(133,828)
Non-interest earning assets1,747,310 1,744,693 1,703,371 
Total assets$35,810,598 $36,955,193 $36,201,650 
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits$3,038,870 25,491 3.33 %$2,772,839 18,417 2.66 %$2,306,906 4,104 0.71 %
Savings and money market deposits10,205,765 97,956 3.81 %10,285,494 88,892 3.47 %13,001,566 39,838 1.22 %
Time deposits5,420,522 53,527 3.92 %5,494,631 49,559 3.62 %3,255,869 9,264 1.13 %
Total interest bearing deposits18,665,157 176,974 3.76 %18,552,964 156,868 3.39 %18,564,341 53,206 1.14 %
Federal funds purchased— — — %— — — %153,905 833 2.12 %
FHLB advances6,040,870 69,525 4.57 %7,288,187 83,429 4.59 %4,739,457 26,890 2.25 %
Notes and other borrowings715,307 9,198 5.14 %719,368 9,246 5.14 %721,164 9,259 5.14 %
Total interest bearing liabilities25,421,334 255,697 3.99 %26,560,519 249,543 3.77 %24,178,867 90,188 1.48 %
Non-interest bearing demand deposits6,937,537 7,067,053 8,749,794 
Other non-interest bearing liabilities868,178 798,279 697,440 
Total liabilities33,227,049 34,425,851 33,626,101 
Stockholders' equity2,583,549 2,529,342 2,575,549 
Total liabilities and stockholders' equity$35,810,598 $36,955,193 $36,201,650 
Net interest income$219,122 $218,135 $239,851 
Interest rate spread1.53 %1.53 %2.32 %
Net interest margin2.56 %2.47 %2.76 %
(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $3.3 million for the three months ended September 30, 2023, June 30, 2023 and September 30, 2022. The tax-equivalent adjustment for tax-exempt investment securities was $0.9 million for the three months ended September 30, 2023 and June 30, 2023, and $0.7 million for the three months ended September 30, 2022.
(2)Annualized.
(3)At fair value except for securities held to maturity.
37





Nine Months Ended September 30,
 20232022
 Average
Balance
Interest (1)
Yield/
Rate (1)(2)
Average
Balance
Interest (1)
Yield/
Rate (1)(2)
Assets:
Interest earning assets:
Loans$24,606,425 $981,976 5.33 %$23,706,606 $655,114 3.69 %
Investment securities (3)
9,356,211 364,980 5.20 %10,180,351 177,047 2.32 %
Other interest earning assets1,048,313 40,195 5.13 %663,189 8,364 1.69 %
Total interest earning assets35,010,949 1,387,151 5.29 %34,550,146 840,525 3.25 %
Allowance for credit losses(162,395)(130,258)
Non-interest earning assets1,761,500 1,682,618 
Total assets$36,610,054 $36,102,506 
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits$2,728,287 $54,781 2.68 %$2,658,558 $7,215 0.36 %
Savings and money market deposits10,844,838 278,243 3.43 %13,150,357 62,704 0.64 %
Time deposits5,150,486 134,448 3.49 %3,129,247 15,650 0.67 %
Total interest bearing deposits18,723,611 467,472 3.34 %18,938,162 85,569 0.60 %
Federal funds purchased47,334 1,611 4.54 %152,028 1,046 0.92 %
FHLB advances6,596,465 220,993 4.48 %3,796,484 44,680 1.57 %
Notes and other borrowings718,507 27,706 5.14 %721,283 27,772 5.13 %
Total interest bearing liabilities26,085,917 717,782 3.68 %23,607,957 159,067 0.90 %
Non-interest bearing demand deposits7,152,362 9,071,135 
Other non-interest bearing liabilities829,464 650,936 
Total liabilities34,067,743 33,330,028 
Stockholders' equity2,542,311 2,772,478 
Total liabilities and stockholders' equity$36,610,054 $36,102,506 
Net interest income$669,369 $681,458 
Interest rate spread1.61 %2.35 %
Net interest margin2.55 %2.63 %
(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $10.0 million and $9.4 million for the nine months ended September 30, 2023 and 2022, respectively. The tax-equivalent adjustment for tax-exempt investment securities was $2.8 million and $2.1 million for the nine months ended September 30, 2023 and 2022, respectively.
(2)Annualized
(3)At fair value except for securities held to maturity.
    
Three months ended September 30, 2023 compared to the immediately preceding three months ended June 30, 2023
Net interest income, calculated on a tax-equivalent basis, was $219.1 million for the three months ended September 30, 2023, compared to $218.1 million for the three months ended June 30, 2023, an increase of $1.0 million. The increase in net interest income was comprised of increases in tax-equivalent interest income and interest expense of $7.1 million and $6.1 million, respectively, for the three months ended September 30, 2023, compared to the three months ended June 30, 2023. The net interest margin, calculated on a tax-equivalent basis, was 2.56% for the three months ended September 30, 2023, compared to 2.47% for the three months ended June 30, 2023.
Factors impacting the net interest margin for the three months ended September 30, 2023 compared to the three months ended June 30, 2023 included:
The tax-equivalent yield on loans increased to 5.54% for the three months ended September 30, 2023, from 5.35% for the three months ended June 30, 2023. The resetting of variable rate loans to higher coupon rates, paydown and maturities of lower rate loans and originations of new loans at higher rates contributed to the increase.
The tax-equivalent yield on investment securities increased to 5.48% for the three months ended September 30, 2023, from 5.19% for the three months ended June 30, 2023. This increase resulted primarily from the reset of coupon rates on variable rate securities.
38





The average rate paid on interest bearing deposits increased to 3.76% for the three months ended September 30, 2023, from 3.39% for the three months ended June 30, 2023, in response to the interest rate environment.
The average rate paid on FHLB advances decreased to 4.57% for the three months ended September 30, 2023, from 4.59% for the three months ended June 30, 2023, primarily due to repayment of higher rate advances.
The reduction in the proportion of total funding comprised of more expensive wholesale funding contributed to the increase in the net interest margin. Average non-interest bearing demand deposits also increased slightly as a percentage of total liabilities for the three months ended September 30, 2023 compared to the immediately preceding three months ended June 30, 2023.
Three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022
Net interest income, calculated on a tax-equivalent basis, was $219.1 million for the three months ended September 30, 2023, compared to $239.9 million for the three months ended September 30, 2022, a decrease of $20.8 million. The decline in net interest income was comprised of increases in tax-equivalent interest income and interest expense of $144.8 million and $165.6 million, respectively.
Net interest income, calculated on a tax-equivalent basis, was $669.4 million for the nine months ended September 30, 2023, compared to $681.5 million for the nine months ended September 30, 2022, a decrease of $12.1 million, comprised of increases in tax-equivalent interest income and interest expense of $546.6 million and $558.7 million, respectively.
Increases in interest income for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 reflected (i) increases in both the average balances of and yields on loans; (ii) rising yields on investment securities that more than offset declines in average balances; and (iii) to a lesser extent, higher yields on and average balances of other interest earning assets. Increased yields on average interest earning assets were mainly reflective of the increase in market interest rates, which impacted both coupon rate resets on existing floating rate assets and the rates on new assets added to the balance sheet. Increases in interest expense for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 reflected primarily (i) an increase in the cost of interest-bearing deposits and (ii) increases in both the cost and average balance of FHLB advances.
The net interest margin, calculated on a tax-equivalent basis, was 2.56% and 2.55% for the three and nine months ended September 30, 2023, respectively, compared to 2.76% and 2.63% for the three and nine months ended September 30, 2022, respectively. Offsetting factors impacting the net interest margin for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 included:
There was an unfavorable shift in the funding mix for the three and nine month periods ended September 30, 2023 as compared to the three and nine month periods ended September 30, 2022. For both comparative periods, non-interest bearing demand deposits declined as a percentage of total liabilities, while interest-bearing liabilities increased as a percentage of the total. Two significant factors impacting the decline in average non-interest bearing deposits were (i) rising residential mortgage rates and resultant lower levels of activity in the residential real estate sector led to a decline in balances in the title insurance industry vertical and (ii) depositors seeking higher yields in a high rate environment. Additionally, more expensive FHLB advances increased as a percentage of total interest bearing liabilities. In part, the increase in average FHLB advances reflected the impact on deposit flows of the events of March 2023. These trends began to reverse when comparing the quarter ended September 30, 2023 to the immediately preceding quarter, contributing to the quarter-over-quarter margin expansion discussed above.
The tax-equivalent yield on loans expanded to 5.54% and 5.33% for the three and nine months ended September 30, 2023, respectively, from 4.11% and 3.69% for the three and nine months ended September 30, 2022, respectively. Factors contributing to these increases were the resetting of variable rate loans at higher coupon rates and originations of new loans at higher prevailing rates.
The tax-equivalent yield on investment securities increased to 5.48% and 5.20% for the three and nine months ended September 30, 2023, respectively, from 3.12% and 2.32% for the three and nine months ended September 30, 2022, respectively. This increase resulted primarily from the reset of coupon rates on variable rate securities, purchases of higher-yielding securities, and paydowns and sales of lower-yielding securities.
39





The average rate paid on interest bearing deposits increased to 3.76% and 3.34% for the three and nine months ended September 30, 2023, respectively, from 1.14% and 0.60% for the three and nine months ended September 30, 2022, respectively, primarily in response to the rising interest rate environment, tighter liquidity conditions and resulting competition for deposits.
The average rate paid on FHLB advances increased to 4.57% and 4.48% for the three and nine months ended September 30, 2023, respectively, from 2.25% and 1.57% for the three and nine months ended September 30, 2022, respectively, primarily due to rising rates.
Provision for Credit Losses
The provision for credit losses is a charge or credit to earnings required to maintain the ACL at a level consistent with management’s estimate of expected credit losses on financial assets carried at amortized cost at the balance sheet date. The amount of the provision is impacted by changes in current economic conditions as well as in management's reasonable and supportable economic forecast, loan originations and runoff, changes in portfolio mix, risk rating migration and portfolio seasoning, changes in specific reserves, changes in expected prepayment speeds and other assumptions. The provision for credit losses also includes amounts related to off-balance sheet credit exposures and may include amounts related to accrued interest receivable and AFS debt securities.
The following table presents the components of the provision for credit losses for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Amount related to funded portion of loans$30,877 $2,753 $62,667 $33,406 
Amount related to off-balance sheet credit exposures2,172 967 5,687 2,267 
Other— — — (127)
Total provision for credit losses$33,049 $3,720 $68,354 $35,546 
The most significant factor impacting the provision for credit losses for both the three and nine months ended September 30, 2023 was a deteriorating economic forecast. Risk rating migration, including changes in certain specific reserves, also impacted the provision as did, for the nine months ended September 30, 2023, increases in certain qualitative factors.
The provision for credit losses may be volatile and the level of the ACL may change materially from current levels. Future levels of the ACL could be significantly impacted, in either direction, by changes in factors such as, but not limited to, economic conditions or the economic outlook, the composition of the loan portfolio, the financial condition of our borrowers and collateral values.
The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity. See “Analysis of the Allowance for Credit Losses” below for more information about how we determine the appropriate level of the ACL and about factors that impacted the ACL and provision for credit losses.
Non-Interest Income
The following table presents a comparison of the categories of non-interest income for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Deposit service charges and fees$5,402 $6,064 $16,296 $17,920 
Gain (loss) on investment securities:
Net realized gain on sale of securities AFS215 349 1,814 3,927 
Net gain (loss) on marketable equity securities recognized in earnings672 (214)(12,483)(20,052)
Gain (loss) on investment securities, net887 135 (10,669)(16,125)
Lease financing16,531 13,180 42,159 39,958 
Other non-interest income4,904 3,693 21,960 9,070 
$27,724 $23,072 $69,746 $50,823 
The losses on marketable equity securities during the nine months ended September 30, 2023 and 2022 were attributable to losses related to certain preferred equity investments.
40





The most significant factor leading to the increase in other non-interest income for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was an increase in BOLI income, particularly as related to the BOLI assets supporting our deferred compensation plan.
Non-Interest Expense
The following table presents the components of non-interest expense for the periods indicated (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Employee compensation and benefits$68,825 $66,097 $207,290 $195,646 
Occupancy and equipment 10,890 11,719 32,735 34,630 
Deposit insurance expense7,790 4,398 23,294 11,794 
Professional fees 2,696 3,184 9,132 8,702 
Technology19,193 19,813 61,356 54,715 
Depreciation of operating lease equipment11,217 12,646 33,970 37,841 
Other non-interest expense26,479 20,248 77,311 48,503 
Total non-interest expense$147,090 $138,105 $445,088 $391,831 
Year-over-year increases in employee compensation and benefits and technology reflected labor market dynamics and continuing investment in people and technology to support future growth.
Increases in deposit insurance expense were primarily attributable to an increase in the assessment rate. Deposit insurance expense may be elevated in the future as a result of a special assessment that was proposed by the FDIC in May 2023. The proposal would assess a 12.5 basis point annual special assessment on the Bank's uninsured deposits as reported in the Call Report at December 31, 2022, excluding the first $5 billion of uninsured deposits, and would be in place for two years. The Bank reported $18.2 billion of uninsured deposits on its December 31, 2022 Call Report. If the special assessment is levied as proposed, we expect the amount of the assessment to total approximately $33 million; the entire assessment is expected to be reflected in earnings in the period it is finalized and levied.
The most significant factor impacting the increase in other non-interest expense for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was costs related to certain depositor rebate and commission programs, some of which are correlated with changes in interest rates. See Note 10 to the consolidated financial statements for more information about these costs.
Income Taxes
See Note 5 to the consolidated financial statements for information about income taxes.
Analysis of Financial Condition
At September 30, 2023 compared to June 30, 2023, securities declined by $257 million and total loans declined by $274 million while deposits grew by $274 million. FHLB advances declined by a corresponding $810 million. Within the overall decline in loans, residential declined by $225 million while the core C&I and CRE segments grew by a net combined $147 million. These trends reflected a number of management's near-term strategic priorities including growth in core deposits, improving the asset mix and reducing wholesale funding levels.
For the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, average total deposits declined by $2.1 billion, with non-interest bearing demand deposits declining by $1.9 billion. Average other interest earning assets (primarily cash held at the FRB) increased by $0.4 billion. Correspondingly, average FHLB advances and Fed Funds purchased grew by a net $2.7 billion. The year-over-year decline in average total deposits, particularly average non-interest bearing demand deposits, reflected the impact on the title insurance industry vertical of lower levels of activity in the residential mortgage sector brought on by rising mortgage rates, and was also consistent with broader industry deposit trends evidencing restrictive monetary policy. Average interest bearing demand, money market and savings deposits declined by an aggregate $2.2 billion, largely reflecting deposit outflows following the events of March 2023 and average time deposits grew by $2.0 billion. The increase in average levels of cash held at the FRB was a response to the events of March 2023. Shifts in deposit mix also reflected customers seeking higher yields on their cash balances. Average loans grew by $0.9 billion and average investment securities declined by $0.8 billion for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.
41





The unfavorable trends in funding mix evidenced in the comparison of the nine months ended September 30, 2023 to the nine months ended September 30, 2022 began to reverse during the three months ended September 30, 2023 as average non-interest bearing demand deposits increased slightly as a percentage of total liabilities compared to the immediately preceding quarter, and FHLB advances declined to 23.8% from 27.4% of interest bearing liabilities.
Investment Securities
The following table shows the amortized cost and carrying value, which, with the exception of investment securities held to maturity, is fair value, of investment securities at the dates indicated (in thousands):
September 30, 2023December 31, 2022
 Amortized
Cost
Carrying ValueAmortized
Cost
Carrying Value
U.S. Treasury securities$119,480 $106,605 $148,956 $135,841 
U.S. Government agency and sponsored enterprise residential MBS1,979,751 1,932,458 2,036,693 1,983,168 
U.S. Government agency and sponsored enterprise commercial MBS572,284 491,840 600,517 525,094 
Private label residential MBS and CMOs
2,643,718 2,290,325 2,864,589 2,530,663 
Private label commercial MBS
2,351,312 2,256,329 2,645,168 2,524,354 
Single family real estate-backed securities418,422 393,464 502,194 470,441 
Collateralized loan obligations1,059,953 1,047,812 1,166,838 1,136,463 
Non-mortgage asset-backed securities108,360 104,344 102,194 95,976 
State and municipal obligations107,873 97,235 122,181 116,661 
SBA securities113,884 110,655 139,320 135,782 
Investment securities held to maturity10,000 10,000 10,000 10,000 
$9,485,037 8,841,067 $10,338,650 9,664,443 
Marketable equity securities45,417 90,884 
$8,886,484 $9,755,327 

Our investment strategy has focused on ensuring adequate liquidity, maintaining a suitable balance of high credit quality, diverse assets, managing interest rate risk, and generating acceptable returns given our established risk parameters. We have sought to maintain liquidity by investing a significant portion of the portfolio in high quality liquid securities including U.S. Treasury and U.S. Government Agency and sponsored enterprise securities. Investment grade municipal securities provide liquidity and attractive tax-equivalent yields. We have also invested in highly-rated structured products, including private-label commercial and residential MBS, collateralized loan obligations, single family real estate-backed securities and non-mortgage asset-backed securities that, while somewhat less liquid, are generally pledgeable at either the FHLB or the FRB and provide us with attractive yields. We remain committed to keeping the duration of our securities portfolio short; relatively short effective portfolio duration helps mitigate interest rate risk. Based on the Company’s assumptions, the estimated weighted average life of the investment portfolio as of September 30, 2023 was 5.5 years and the effective duration of the investment portfolio was 2.03.
The investment securities AFS portfolio was in a net unrealized loss position of $644.0 million at September 30, 2023, compared to a net unrealized loss position of $674.2 million at December 31, 2022, improving by $30.2 million during the nine months ended September 30, 2023. Net unrealized losses at September 30, 2023 included $2.9 million of gross unrealized gains and $646.9 million of gross unrealized losses. Investment securities available for sale in unrealized loss positions at September 30, 2023 had an aggregate fair value of $8.5 billion. The unrealized losses resulted primarily from rising interest rates and widening spreads related to the Federal Reserve's restrictive monetary policy and benchmark interest rate increases. Continuing uncertainty with respect to the trajectory of the economy has also led to market uncertainty, producing some yield curve dislocations. None of the unrealized losses were attributable to credit loss impairments.
42





The ratings distribution of our AFS securities portfolio at the dates indicated are depicted in the charts below:
September 30, 2023December 31, 2022
43524353
We evaluate the credit quality of individual securities in the portfolio quarterly to determine whether we expect to recover the amortized cost basis of the investments in unrealized loss positions. This evaluation considers, but is not necessarily limited to, the following factors, the relative significance of which varies depending on the circumstances pertinent to each individual security:
Whether we intend to sell the security prior to recovery of its amortized cost basis;
Whether it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis;
The extent to which fair value is less than amortized cost;
Adverse conditions specifically related to the security, an industry or geographic area;
Changes in the financial condition of the issuer or underlying loan obligors;
The payment structure and remaining payment terms of the security, including levels of subordination or over-collateralization;
Failure of the issuer to make scheduled payments;
Changes in credit ratings;
Relevant market data; and
Estimated prepayments, defaults, and the value and performance of underlying collateral at the individual security level.
We regularly engage with bond managers to monitor trends in underlying collateral, including potential downgrades and subsequent cash flow diversions, liquidity, ratings migration, and any other relevant developments.
We do not intend to sell securities in significant unrealized loss positions at September 30, 2023. Based on an assessment of our liquidity position and internal and regulatory guidelines for permissible investments and concentrations, it is not more likely than not that we will be required to sell securities in significant unrealized loss positions prior to recovery of amortized cost basis, which may be at maturity. While recent events impacting the banking sector have impacted the liquidity profile of many banks, including BankUnited, the substantial majority of our investment securities are pledgeable at either the FHLB or FRB. We have not sold, and do not anticipate the need to sell, securities in unrealized loss positions to generate liquidity.
43





The following table presents subordination levels and average internal stress scenario losses for select non-agency portfolio segments at September 30, 2023:
SubordinationWeighted Average Stress Scenario Loss
RatingPercent of TotalMinimumMaximumAverage
Private label CMBSAAA85.4 %30.097.444.06.2
AA10.3 %29.496.837.87.0
A4.3 %25.175.244.88.3
Weighted average100.0 %29.896.343.46.4
CLOsAAA80.0 %38.869.647.010.9
AA16.2 %31.244.336.49.1
A3.8 %29.532.730.710.0
Weighted average100.0 %37.264.144.710.6
Private label residential MBS and CMOAAA94.0 %3.090.517.72.3
AA4.2 %19.934.024.55.3
A1.8 %26.427.426.95.4
Weighted average100.0 %4.187.018.12.5
For further discussion of our analysis of impaired investment securities AFS for credit loss impairment, see Note 3 to the consolidated financial statements.
We use third-party pricing services to assist us in estimating the fair value of investment securities. We perform a variety of procedures to ensure that we have a thorough understanding of the methodologies and assumptions used by the pricing services including obtaining and reviewing written documentation of the methods and assumptions employed, conducting interviews with valuation desk personnel and reviewing model results and detailed assumptions used to value selected securities as considered necessary. Our classification of prices within the fair value hierarchy is based on an evaluation of the nature of the significant assumptions impacting the valuation of each type of security in the portfolio. We have established a robust price challenge process that includes a review by our treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over month fluctuations or deviations from our expectations based on recent observed trading activity and other information available in the marketplace that would impact the value of the security is challenged. Responses to the price challenges, which generally include specific information about inputs and assumptions incorporated in the valuation and their sources, are reviewed in detail. If considered necessary to resolve any discrepancies, a price will be obtained from additional independent valuation sources. We do not typically adjust the prices provided, other than through this established challenge process. Our primary pricing services utilize observable inputs when available, and employ unobservable inputs and proprietary models only when observable inputs are not available. As a matter of course, the services validate prices by comparison to recent trading activity whenever such activity exists. Quotes obtained from the pricing services are typically non-binding.
The majority of our investment securities are classified within level 2 of the fair value hierarchy. U.S. Treasury securities and marketable equity securities are classified within level 1 of the hierarchy.
For additional discussion of the fair values of investment securities, see Note 8 to the consolidated financial statements.
44





The following table shows the weighted average prospective yields, categorized by scheduled maturity, for AFS investment securities as of September 30, 2023. Scheduled maturities have been adjusted for anticipated prepayments when applicable. Yields on tax-exempt securities have been calculated on a tax-equivalent basis, based on a federal income tax rate of 21%:
 Within One YearAfter One Year
Through Five Years
After Five Years
Through Ten Years
After Ten YearsTotal
U.S. Treasury securities1.02 %— %— %— %1.02 %
U.S. Government agency and sponsored enterprise residential MBS5.61 %5.77 %5.86 %5.42 %5.74 %
U.S. Government agency and sponsored enterprise commercial MBS4.71 %5.68 %3.72 %2.38 %3.97 %
Private label residential MBS and CMOs3.94 %3.89 %3.81 %3.99 %3.91 %
Private label commercial MBS6.36 %7.00 %2.80 %3.31 %6.64 %
Single family real estate-backed securities4.99 %3.63 %1.36 %— %3.96 %
Collateralized loan obligations7.22 %7.51 %7.83 %— %7.49 %
Non-mortgage asset-backed securities3.04 %5.75 %6.03 %— %5.64 %
State and municipal obligations2.99 %4.17 %4.56 %3.99 %4.20 %
SBA securities6.10 %6.01 %5.87 %5.67 %6.00 %
5.07 %6.11 %4.40 %3.90 %5.45 %
Loans
The loan portfolio comprises the Company’s primary interest-earning asset. The following table shows the composition of the loan portfolio at the dates indicated (dollars in thousands):
September 30, 2023December 31, 2022
TotalPercent of TotalTotalPercent of Total
1-4 single family residential$6,982,832 28.7 %$7,128,834 28.6 %
Government insured residential1,397,736 5.7 %1,771,880 7.1 %
Non-owner occupied commercial real estate5,296,784 21.7 %5,405,597 21.7 %
Construction and land445,273 1.8 %294,360 1.2 %
Owner occupied commercial real estate1,851,246 7.6 %1,890,813 7.6 %
Commercial and industrial6,658,010 27.4 %6,417,721 25.9 %
Pinnacle - municipal finance900,199 3.7 %912,122 3.7 %
Franchise finance196,745 0.8 %253,774 1.0 %
Equipment finance219,874 0.9 %286,147 1.1 %
Mortgage warehouse lending407,577 1.7 %524,740 2.1 %
Total loans24,356,276 100.0 %24,885,988 100.0 %
Allowance for credit losses(196,063)(147,946)
Loans, net$24,160,213 $24,738,042 
Commercial loans and leases
Commercial loans include a diverse portfolio of commercial and industrial loans and lines of credit, loans secured by owner-occupied commercial real-estate, income-producing non-owner occupied commercial real estate, a smaller amount of construction and land loans, SBA loans, mortgage warehouse lines of credit, municipal loans and leases originated by Pinnacle and franchise and equipment finance loans and leases originated by Bridge. Management intends to increasingly emphasize the origination of relationship-based loans that are accompanied by deposit business.
45





The following charts present the distribution of the commercial loan portfolio at the dates indicated (dollars in millions):
September 30, 2023December 31, 2022
730 749
Commercial real estate loans include term loans secured by non-owner occupied income producing properties including rental apartments, industrial properties, retail shopping centers, free-standing single-tenant buildings, medical and other office buildings, warehouse facilities, hotels and real estate secured lines of credit. The Company’s commercial real estate underwriting standards most often provide for loan terms of five to seven years, with amortization schedules of no more than thirty years.
The following tables present the distribution of commercial real estate loans by property type, along with weighted average DSCRs and LTVs at September 30, 2023 (dollars in thousands):
Amortized CostPercent of Total FLNew York Tri StateOtherWeighted Average DSCRWeighted Average LTV
Office$1,830,978 32 %58 %24 %18 %1.6964.1 %
Warehouse/Industrial1,260,750 21 %58 %%33 %1.9851.6 %
Multifamily830,572 14 %48 %52 %— %1.9745.1 %
Retail846,077 15 %58 %25 %17 %1.6560.4 %
Hotel431,883 %80 %%16 %2.0849.8 %
Construction and Land445,273 %55 %43 %%N/AN/A
Other96,524 %75 %11 %14 %2.0847.3 %
$5,742,057 100 %58 %25 %17 %1.8055.8 %

FloridaNY Tri State
Weighted Average DSCRWeighted Average LTVWeighted Average DSCRWeighted Average LTV
Office1.74 64.9 %1.57 58.5 %
Warehouse/Industrial2.12 50.7 %1.81 38.0 %
Multifamily2.74 42.0 %1.26 48.1 %
Retail1.82 57.8 %1.24 65.0 %
Hotel2.17 47.6 %1.99 21.6 %
Other2.30 44.2 %1.13 72.6 %
2.00 55.2 %1.40 52.6 %
46





Geographic distribution in the tables above is based on location of the underlying collateral property. LTVs and DSCRs are based on the most recent available information; if current appraisals are not available, LTVs are adjusted by our models based on current and forecasted sub-market dynamics. DSCRs are calculated based on current contractually required payments, which in some cases may be interest only.
The following table presents the maturity profile of the CRE portfolio over the next 12 months by property type at September 30, 2023 (dollars in thousands):
Maturing in the Next 12 Months% Maturing in the Next 12 Months
Fixed Rate or Swapped Maturing Next 12 Months
Fixed Rate to Borrower as a % of Total Portfolio
Office$337,996 18 %$234,461 13 %
Warehouse/Industrial81,334 %69,141 %
Multifamily80,732 10 %34,332 %
Retail154,344 18 %81,676 10 %
Hotel39,989 %14,482 %
Construction and Land133,522 30 %235 — %
Other 25,774 27 %25,774 27 %
$853,691 15 %$460,101 %
The following table presents scheduled maturities of the CRE portfolio by property type at September 30, 2023 (dollars in thousands):
2023202420252026ThereafterTotal
Office$171,799 $235,284 $406,159 $338,804 $678,932 $1,830,978 
Warehouse/Industrial39,355 113,208 156,167 369,979 582,041 1,260,750 
Multifamily3,033 111,265 80,053 188,718 447,503 830,572 
Retail70,452 105,539 140,371 203,397 326,318 846,077 
Hotel25,902 17,518 44,744 218,602 125,117 431,883 
Construction and Land683 175,090 101,427 51,573 116,500 445,273 
Other 12,868 12,906 7,144 27,345 36,261 96,524 
$324,092 $770,810 $936,065 $1,398,418 $2,312,672 $5,742,057 

47





The office segment totaled $1.8 billion at September 30, 2023. The following charts present the sub-market geographic distribution of the office CRE portfolio within the NY Tri-State and Florida markets at September 30, 2023:
NY Tri-State by Sub-MarketFlorida by Sub-Market
2116 2124

The New York Tri-State market encompasses approximately 24% of the office segment, with 11%, or $197 million of total office exposure in Manhattan. As of September 30, 2023, the Manhattan portfolio was approximately 95% occupied with 5% rent rollover expected in the next twelve months. Substantially all of the Florida office portfolio is suburban.
Office loans not secured by properties in Florida or the New York tri-state area comprise 18% of the segment and exhibit no particular geographic concentration. Many of these loans were made to high quality sponsors in our NY tri-state or FL customer base. Estimated rent rollover of the office portfolio in the next 12 months is approximately 11% of the portfolio. Approximately 17% is secured by medical office buildings. Non-performing office loans were insignificant at September 30, 2023, totaling approximately $300 thousand. Office loans rated below pass at September 30, 2023 totaled $90 million, a slight decrease from December 31, 2022 levels.
Commercial and industrial loans are typically made to small, middle market and larger corporate businesses and not-for-profit entities and include equipment loans, secured and unsecured working capital facilities, formula-based loans, subscription finance lines of credit, trade finance, SBA product offerings, business acquisition finance credit facilities, credit facilities to institutional real estate entities such as REITs and commercial real estate investment funds, and a small amount of commercial credit cards. These loans may be structured as term loans, typically with maturities of five to seven years, or revolving lines of credit which may have multi-year maturities. In addition to financing provided by Pinnacle, the Bank provides financing to state and local governmental entities generally within our geographic markets. Commercial loans included loans meeting the regulatory definition of shared national credits totaling $4.8 billion at September 30, 2023, a substantial portion of which were relationship based loans to borrowers in our primary geographic footprint. The Bank makes loans secured by owner-occupied commercial real estate that typically have risk profiles more closely aligned with that of commercial and industrial loans than with other types of commercial real estate loans.
48





The following table presents the exposure in the C&I portfolio by industry, at September 30, 2023 (dollars in thousands):
Amortized CostPercent of Total
Finance and Insurance$1,612,235 19.0 %
Manufacturing827,910 9.8 %
Educational Services709,376 8.3 %
Utilities635,637 7.5 %
Wholesale Trade628,625 7.4 %
Information577,753 6.8 %
Health Care and Social Assistance540,175 6.3 %
Real Estate and Rental and Leasing507,752 6.0 %
Transportation and Warehousing401,888 4.7 %
Construction383,145 4.5 %
Retail Trade301,397 3.5 %
Professional, Scientific, and Technical Services287,656 3.4 %
Public Administration248,634 2.9 %
Other Services (except Public Administration)239,421 2.8 %
Administrative and Support and Waste Management197,729 2.3 %
Arts, Entertainment, and Recreation190,760 2.2 %
Accommodation and Food Services149,898 1.8 %
Other69,265 0.8 %
$8,509,256 100.0 %
Through its commercial lending subsidiaries, Pinnacle and Bridge, the Bank provides equipment and franchise financing on a national basis using both loan and lease structures. Pinnacle provides essential-use equipment financing to state and local governmental entities directly and through vendor programs and alliances. Pinnacle offers a full array of financing structures including equipment lease purchase agreements and direct (private placement) bond re-fundings and loan agreements. Bridge has two operating divisions. The franchise finance division offers franchise acquisition, expansion and equipment financing, typically to experienced operators in well-established concepts. The franchise finance portfolio is made up primarily of quick service restaurant and fitness concepts comprising 42% and 53% of the portfolio, respectively. The equipment finance division provides primarily transportation equipment financing through a variety of loan and lease structures.
Geographic Concentrations
The Company's commercial and commercial real estate portfolios are concentrated in Florida and the Tri-state area. 58% and 25% of commercial real estate loans were secured by collateral located in Florida and the Tri-state area, respectively; while 32% and 27% of all other commercial loans, including Pinnacle and Bridge, were to borrowers in Florida and the Tri-state area, respectively.
Residential mortgages
The following table shows the composition of residential loans at the dates indicated (in thousands):
September 30, 2023December 31, 2022
1-4 single family residential $6,982,832 $7,128,834 
Government insured residential1,397,736 1,771,880 
$8,380,568 $8,900,714 
The 1-4 single family residential loan portfolio, excluding government insured residential loans, is primarily comprised of prime jumbo loans purchased through established correspondent channels. 1-4 single family residential mortgage loans are primarily closed-end, first lien jumbo mortgages for the purchase or re-finance of owner occupied property. The loans have terms ranging from 10 to 30 years, with either fixed or adjustable interest rates. At September 30, 2023, $1.1 billion or 16% were secured by investor-owned properties.
49





The Company acquires non-performing FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations (collectively, "government insured pool buyout loans" or "buyout loans"). Buyout loans that re-perform, either through modification or self-cure, may be eligible for re-securitization. The Company and the servicer share in the economics of the sale of these loans into new securitizations. The balance of buyout loans totaled $1.4 billion at September 30, 2023. The Company is not the servicer of these loans.
The following charts present the distribution of the 1-4 single family residential mortgage portfolio at the dates indicated:
September 30, 2023December 31, 2022
1331 1342

The following table presents the five states with the largest geographic concentrations of 1-4 single family residential loans, excluding government insured residential loans, at the dates indicated (dollars in thousands):
September 30, 2023December 31, 2022
TotalPercent of TotalTotalPercent of Total
California$2,200,295 31.5 %$2,274,432 31.9 %
New York1,367,309 19.6 %1,417,707 19.9 %
Florida512,430 7.3 %521,479 7.3 %
Illinois361,199 5.2 %360,529 5.1 %
Virginia314,020 4.5 %314,530 4.4 %
Others2,227,579 31.9 %2,240,157 31.4 %
$6,982,832 100.0 %$7,128,834 100.0 %
50





Operating lease equipment, net
Operating lease equipment, net of accumulated depreciation, totaled $460 million at September 30, 2023, including off-lease equipment, net of accumulated depreciation of $48 million.
The chart below presents operating lease equipment by type at the dates indicated:
September 30, 2023December 31, 2022
277278
Bridge had exposure to the energy industry of $216 million at September 30, 2023. The majority of the energy exposure was in the operating lease equipment portfolio where energy exposure totaled $191 million, consisting primarily of railcars serving the petroleum industry.
Asset Quality
Commercial Loans
We have a robust credit risk management framework, an experienced team to lead the workout and recovery process for the commercial and commercial real estate portfolios and a dedicated internal credit review function. Loan performance is monitored by our credit administration, portfolio management and workout and recovery departments. Risk ratings are updated continuously; generally, commercial relationships with balances in excess of defined thresholds are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. The defined thresholds range from $1 million to $3 million. Homogenous groups of smaller balance commercial loans may be monitored collectively. The credit quality and risk rating of commercial loans as well as our underwriting and portfolio management practices are regularly reviewed by our internal independent credit review department.
We believe internal risk rating is the best indicator of the credit quality of commercial loans. The Company utilizes a 16-grade internal asset risk classification system as part of its efforts to monitor and maintain commercial asset quality. The special mention rating is considered a transitional rating for loans exhibiting potential credit weaknesses that could result in deterioration of repayment prospects at some future date if not checked or corrected and that deserve management’s close attention. These borrowers may exhibit declining cash flows or revenues or increasing leverage. Loans with well-defined credit weaknesses that may result in a loss if the deficiencies are not corrected are assigned a risk rating of substandard. These borrowers may exhibit payment defaults, inadequate cash flows from current operations, operating losses, increasing balance sheet leverage, project cost overruns, unreasonable construction delays, exhausted interest reserves, declining collateral values, frequent overdrafts or past due real estate taxes. Loans with weaknesses so severe that collection in full is highly questionable
51





or improbable, but because of certain reasonably specific pending factors have not been charged off, are assigned an internal risk rating of doubtful.
The following table summarizes the Company's commercial credit exposure, based on internal risk rating, at the dates indicated (dollars in thousands):
September 30, 2023June 30, 2023December 31, 2022
Amortized CostPercent of Commercial LoansAmortized CostPercent of Commercial LoansAmortized CostPercent of Commercial Loans
Pass$14,983,781 93.9 %$15,169,909 94.6 %$15,244,761 95.4 %
Special mention341,999 2.1 %233,004 1.5 %51,433 0.3 %
Substandard accruing534,336 3.3 %525,643 3.3 %605,965 3.8 %
Substandard non-accruing96,248 0.6 %80,642 0.5 %75,125 0.5 %
Doubtful19,344 0.1 %14,954 0.1 %7,990 — %
$15,975,708 100.0 %$16,024,152 100.0 %$15,985,274 100.0 %

The following table provides additional information about special mention and substandard accruing loans, at the dates indicated (dollars in thousands). Non-performing loans are discussed further in the section entitled "Non-performing Assets" below.
September 30, 2023June 30, 2023December 31, 2022
Amortized Cost% of Loan SegmentAmortized Cost% of Loan SegmentAmortized Cost% of Loan Segment
Special mention:
CRE
Hotel$184 — %$186 — %$709 0.2 %
Retail2,120 0.3 %2,135 0.2 %— — %
Office17,733 1.0 %21,682 1.1 %18,006 1.0 %
Construction and land
42,044 9.4 %— — %— — %
Other 12,868 13.3 %— — %— — %
74,949 24,003 18,715 
Owner occupied commercial real estate20,011 1.1 %20,264 1.1 %24,101 1.3 %
Commercial and industrial244,688 3.7 %184,183 2.8 %1,017 — %
Franchise finance2,351 1.2 %4,554 2.2 %7,600 3.0 %
$341,999 $233,004 $51,433 
Substandard accruing:
CRE
Hotel$40,062 9.3 %$40,009 10.0 %$14,538 3.6 %
Retail57,347 6.8 %67,075 7.5 %72,421 8.4 %
Multi-family100,086 12.1 %108,728 12.9 %146,235 15.5 %
Office71,682 3.9 %72,100 3.9 %73,042 3.9 %
Construction and land
317 0.1 %2,585 0.7 %8,872 3.0 %
Other2,783 2.9 %90 0.1 %93 0.1 %
272,277 290,587 315,201 
Owner occupied commercial real estate78,590 4.2 %84,453 4.6 %73,501 3.9 %
Commercial and industrial127,973 1.9 %90,143 1.4 %171,613 2.7 %
Franchise finance25,024 12.7 %44,354 21.3 %44,295 17.5 %
Equipment finance 30,472 13.9 %16,106 6.8 %1,355 0.5 %
$534,336 $525,643 $605,965 
52





Operating Lease Equipment, net
Operating leases with a carrying value of assets under lease totaling $23 million were internally risk rated substandard at September 30, 2023. On a quarterly basis, management performs an impairment analysis on assets with indicators of potential impairment. Potential impairment indicators include evidence of changes in residual value, macro-economic conditions, an extended period of time off-lease, criticized or classified status, or management's intention to sell the asset at an amount potentially below its carrying value. There were no impairment charges recognized during the three and nine months ended September 30, 2023 and 2022.
Residential Loans
Our residential mortgage portfolio, excluding GNMA buyout loans, consists primarily of prime jumbo loans purchased through established correspondent channels. Most of our purchases are of performing jumbo mortgage loans which have FICO scores above 700, primarily are owner-occupied and full documentation, and have a current LTV of 80% or less although loans with LTVs higher than 80% may be extended to selected credit-worthy borrowers. We perform due diligence on the purchased loans for credit, compliance, counterparty, payment history and property valuation.
We have a dedicated residential credit risk management function, and the residential portfolio is monitored by our internal credit review function. Residential mortgage loans are not individually risk rated. Delinquency status is the primary measure we use to monitor the credit quality of these loans. We also consider original LTV and most recently available FICO score to be significant indicators of credit quality for the 1-4 single family residential portfolio, excluding government insured residential loans.
The following charts present information about the 1-4 single family residential portfolio, excluding government insured loans, by FICO distribution, LTV distribution and vintage at September 30, 2023:
FICO DistributionLTV DistributionVintage
489448954896
FICO scores are generally updated semi-annually and were most recently updated in the third quarter of 2023. LTVs are typically based on valuation at origination since we do not routinely update residential appraisals.
At September 30, 2023, the majority of the 1-4 single family residential loan portfolio, excluding government insured residential loans, was owner-occupied, with 79% primary residence, 5% second homes and 16% investment properties.
1-4 single family residential loans excluding government insured residential loans past due more than 30 days totaled $44 million and $62 million at September 30, 2023 and December 31, 2022, respectively. The amount of these loans 90 days or more past due was $14 million and $15 million at September 30, 2023 and December 31, 2022, respectively.
Note 4 to the consolidated financial statements presents additional information about key credit quality indicators and delinquency status of the loan portfolio.
Stress Testing Results
The majority of our commercial portfolio is subject to quarterly stress test analysis. We continually re-evaluate our stress testing framework and adapt it to evolving macro-economic conditions as necessary. On an annual basis, we also run a rigorous stress test of our entire balance sheet incorporating the FRB's severely adverse CCAR scenario as well as additional idiosyncratic scenarios reflective of evolving macro-economic themes. The latest stress test incorporating the FRB's CCAR severely adverse scenario was performed during the second quarter of 2023.
53





The following charts summarize the results of this stress test. Additionally, we present stress results for the CRE portfolio based on the Moody's S4 recessionary scenario (dollars in millions):
Total Loan Portfolio Stress Test Results(1)
ST 1.jpg
CRE Portfolio Stress Test Results(2)
ST2.jpg
(1)Excludes Pinnacle municipal finance and mortgage warehouse lending.
(2)Construction loans are included in the chart based on their applicable property type.
Non-Performing Assets
Non-performing assets generally consist of (i) non-accrual loans, (ii) accruing loans that are more than 90 days contractually past due as to interest or principal, excluding PCD loans for which management has a reasonable basis for an expectation about future cash flows and government insured residential loans, and (iii) OREO and other non-performing assets.
The following table and charts summarize the Company's non-performing loans and non-performing assets at the dates indicated (dollars in thousands):
September 30, 2023June 30, 2023December 31, 2022
Non-accrual loans:
Residential$20,707 $22,534 $21,311 
Commercial:
Non-owner occupied commercial real estate16,987 16,778 16,657 
Construction and land— 655 5,695 
Owner occupied commercial real estate14,606 11,562 17,751 
Commercial and industrial66,106 62,647 29,722 
Franchise finance17,893 3,954 13,290 
Total commercial loans115,592 95,596 83,115 
Total non-accrual loans136,299 118,130 104,426 
Loans past due 90 days and still accruing
593 593 593 
Total non-performing loans136,892 118,723 105,019 
OREO and other non-performing assets3,586 2,084 1,932 
Total non-performing assets$140,478 $120,807 $106,951 
Non-performing loans to total loans (1)
0.56 %0.48 %0.42 %
Non-performing assets to total assets (1)
0.40 %0.34 %0.29 %
ACL to total loans0.80 %0.68 %0.59 %
ACL to non-performing loans143.22 %140.52 %140.88 %
Net charge-offs to average loans (2)
0.07 %0.09 %0.22 %
(1)    Non-performing loans and assets include the guaranteed portion of non-accrual SBA loans totaling $37.8 million or 0.16% of total loans and 0.11% of total assets, at September 30, 2023, $35.9 million or 0.15% of total loans and 0.10% of total assets, at June 30, 2023, and $40.3 million or 0.16% of total loans and 0.11% of total assets, at December 31, 2022.
(2)    Annualized for the six months ended June 30, 2023 and nine months ended September 30, 2023.
Contractually delinquent government insured residential loans are typically GNMA early buyout loans and are excluded from non-performing loans as defined in the table above due to their government guarantee. The carrying value of such loans contractually delinquent by 90 days or more was $314 million and $493 million at September 30, 2023 and December 31, 2022, respectively.
Commercial loans are placed on non-accrual status when (i) management has determined that full repayment of all contractual principal and interest is in doubt, or (ii) the loan is past due 90 days or more as to principal or interest unless the loan is well secured and in the process of collection. Residential loans, other than government insured pool buyout loans, are generally placed on non-accrual status when they are 60 days past due. Additionally, certain residential loans not contractually delinquent but in forbearance may be placed on non-accrual status at management's discretion. When a loan is placed on non-accrual status, uncollected interest accrued is reversed and charged to interest income. Commercial loans are returned to accrual status only after all past due principal and interest has been collected and full repayment of remaining contractual principal and interest is reasonably assured. Residential loans are generally returned to accrual status when less than 90 days past due. Past due status of loans is determined based on the contractual next payment due date. Loans less than 30 days past due are reported as current.
Loss Mitigation Strategies
Criticized or classified commercial loans in excess of certain thresholds are reviewed quarterly by the Criticized Asset Committee, which evaluates the appropriate strategy for collection to mitigate the amount of credit losses and considers the appropriate risk rating for these loans. Criticized asset reports for each relationship are presented by the assigned relationship manager and credit officer to the Criticized Asset Committee until such time as the relationships are returned to a satisfactory credit risk rating or otherwise resolved. The Criticized Asset Committee may require the transfer of a loan to our workout and recovery department, which is tasked to effectively manage the loan with the goal of minimizing losses and expenses associated with restructure, collection and/or liquidation of collateral. Commercial loans with a risk rating of substandard, loans on non-
accrual status, and assets classified as OREO or repossessed assets are usually transferred to workout and recovery. Oversight of the workout and recovery department is provided by the Criticized Asset Committee.
Our servicers evaluate each residential loan in default to determine the most effective loss mitigation strategy, which may be modification, short sale, or foreclosure, and pursue the alternative most suitable to the consumer and to mitigate losses to the bank.
Analysis of the Allowance for Credit Losses
The ACL is management's estimate of the amount of expected credit losses over the life of the loan portfolio, or the amount of amortized cost basis not expected to be collected, at the balance sheet date. This estimate encompasses information about historical events, current conditions and reasonable and supportable economic forecasts. Determining the amount of the ACL is complex and requires extensive judgment by management about matters that are inherently uncertain. Given the current level of economic uncertainty, the complexity of the ACL estimate and level of management judgment required, we believe it is possible that the ACL estimate could change, potentially materially, in future periods. Changes in the ACL may result from changes in current economic conditions, our economic forecast, loan portfolio composition, commercial and residential real estate market dynamics and circumstances not currently known to us that may impact the financial condition and operations of our borrowers, among other factors.
Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. For loans that do not share similar risk characteristics with other loans such as collateral dependent loans, expected credit losses are estimated on an individual basis. Expected credit losses are estimated over the contractual terms of the loans, adjusted for expected prepayments, generally excluding expected extensions, renewals, and modifications.
For the substantial majority of portfolio segments and subsegments, including residential loans other than government insured loans, and most commercial and commercial real estate loans, expected losses are estimated using econometric models. The models employ a factor based methodology, leveraging data sets containing extensive historical loss and recovery information by industry, geography, product type, collateral type and obligor characteristics, to estimate PD and LGD. Measures of PD for commercial loans incorporate current conditions through market cycle or credit cycle adjustments. For residential loans, the models consider FICO and adjusted LTVs. PDs and LGDs are then conditioned on the reasonable and supportable economic forecast. Projected PDs and LGDs, determined based on pool level characteristics, are applied to estimated exposure at default, considering the contractual term and payment structure of loans, adjusted for prepayments, to generate estimates of expected loss. For criticized or classified loans, PDs are adjusted to benchmark PDs established for each risk rating. The ACL estimate incorporates a reasonable and supportable economic forecast through the use of externally developed macroeconomic scenarios applied in the models.
A single economic scenario or a probability weighted blend of economic scenarios may be used. The models ingest numerous national, regional and MSA level variables and data points.
At September 30, 2023, we used a combination of weighted third-party provided economic scenarios in calculating the quantitative portion of the ACL, and we used a single externally provided baseline scenario at December 31, 2022, with a downside scenario informing a qualitative overlay. Each of these externally provided scenarios in fact, represent the result of a probability weighting of thousands of individual scenario paths.
See Note 1 to the consolidated financial statements of the Company's 2022 Annual Report on Form 10-K for more detailed information about our ACL methodology.
54





The following table provides an analysis of the ACL, provision for (recovery of) credit losses related to the funded portion of loans and net charge-offs by loan segment for the periods indicated (dollars in thousands):
 ResidentialNon-Owner Occupied Commercial Real EstateConstruction and LandOwner Occupied Commercial Real EstateCommercial and IndustrialPinnacle - municipal FinanceFranchise FinanceEquipment FinanceTotal
Balance at December 31, 2021
$9,187 $27,780 $1,031 $21,638 $46,312 $170 $16,746 $3,593 $126,457 
Provision for (recovery of) credit losses2,576 1,428 512 (2,882)29,621 (32)3,791 (1,608)33,406 
Charge-offs(412)(9,179)(233)(2,870)(10,248)— (12,988)— (35,930)
Recoveries44 3,014 — 617 2,438 — 625 — 6,738 
Balance at September 30, 2022$11,395 $23,043 $1,310 $16,503 $68,123 $138 $8,174 $1,985 $130,671 
Balance at December 31, 2022
$11,741 $22,327 $2,424 $20,543 $76,647 $173 $11,747 $2,344 $147,946 
Impact of adoption of ASU 2022-02(117)— — (1,676)— (6)— (1,794)
Balance at January 1, 202311,624 22,327 2,424 20,548 74,971 173 11,741 2,344 146,152 
Provision for (recovery of) credit losses(3,602)8,459 2,384 1,313 48,383 59 4,436 1,235 62,667 
Charge-offs— (972)— (268)(13,703)— (7,247)— (22,190)
Recoveries131 — 2,124 7,129 — 41 — 9,434 
Balance at September 30, 2023$8,031 $29,945 $4,808 $23,717 $116,780 $232 $8,971 $3,579 $196,063 
Net Charge-offs to Average Loans (1)
Nine Months Ended
September 30, 2022
0.01 %0.15 %0.16 %0.16 %0.17 %— %5.74 %— %0.16 %
Nine Months Ended
September 30, 2023
— %0.02 %— %(0.13)%0.13 %— %5.03 %— %0.07 %
(1) Annualized.

The following table shows the distribution of the ACL at the dates indicated (dollars in thousands):
September 30, 2023June 30, 2023December 31, 2022
 Total
%(1)
Total
%(1)
Total
%(1)
Residential$8,031 34.4 %$8,887 34.9 %$11,741 35.7 %
Non-owner occupied commercial real estate29,945 21.7 %27,305 21.5 %22,327 21.7 %
Construction and land4,808 1.8 %2,392 1.6 %2,424 1.2 %
CRE 34,753 29,697 24,751 
Owner occupied commercial real estate23,717 7.6 %20,662 7.4 %20,543 7.6 %
Commercial and industrial(2)
116,780 29.1 %100,328 28.9 %76,647 28.0 %
Pinnacle - municipal finance232 3.7 %197 3.9 %173 3.7 %
Franchise finance8,971 0.8 %4,303 0.8 %11,747 1.0 %
Equipment finance3,579 0.9 %2,759 1.0 %2,344 1.1 %
153,279 128,249 111,454 
$196,063 100.0 %$166,833 100.0 %$147,946 100.0 %
(1)Represents percentage of loans receivable in each category to total loans receivable.
(2)Includes mortgage warehouse lending.

55





The following table presents the ACL as a percentage of loans at the dates indicated:
September 30, 2023June 30, 2023December 31, 2022
Residential0.10 %0.10 %0.13 %
Commercial:
CRE0.61 %0.52 %0.43 %
Commercial and industrial1.58 %1.35 %1.10 %
Pinnacle - municipal finance0.03 %0.02 %0.02 %
Franchise finance4.56 %2.07 %4.63 %
Equipment finance1.63 %1.16 %0.82 %
Total commercial1.18 %0.99 %0.85 %
0.80 %0.68 %0.59 %
Factors contributing to the change in the ACL during the three months ended September 30, 2023 are depicted in the chart below (dollars in millions):
ACL Waterfall YTD 09302023.jpg
Changes in the ACL during the three months ended September 30, 2023
As depicted in the chart above, the primary driver of the increase in the ACL from June 30, 2023 to September 30, 2023 was the impact of a less favorable economic forecast. Changes in portfolio composition as well as risk rating migration and increases in certain specific reserves also had an impact. The ACL as a percentage of loans increased to 0.80% at September 30, 2023, from 0.68% at June 30, 2023. Discussion of changes in the ACL for select portfolio segments follows:
The ACL for the CRE portfolio sub-segment, including non-owner occupied CRE and construction and land, increased by $5.1 million during the three months ended September 30, 2023, from 0.52% to 0.61% of loans. The increase in the ACL for this segment was primarily driven by the economic forecast and an increase in criticized and classified loans. At September 30, 2023, the ACL for the CRE office portfolio totaled $18.1 million, or 0.99% of loans, an increase from 0.83% of loans at June 30, 2023.
The ACL for the commercial and industrial sub-segment, including owner-occupied commercial real estate, increased by $19.5 million during the three months ended September 30, 2023, from 1.35% to 1.58% of loans. The increase in the ACL for this segment was primarily driven by the economic forecast and an increase in certain specific reserves.
56





The ACL for the franchise finance portfolio segment increased by $4.7 million during the three months ended September 30, 2023, from 2.07% to 4.56% of loans primarily due to an increase in specific reserves related to one relationship.
The ACL for the equipment finance portfolio segment increased by $0.8 million during the three months ended September 30, 2023, from 1.16% to 1.63% of loans primarily due to an increase in criticized loans during the quarter.
The estimate of the ACL at September 30, 2023 was informed by forecasted economic scenarios published in September 2023, a wide variety of additional economic data, information about borrower financial condition and collateral values and other relevant information. The quantitative portion of the ACL at September 30, 2023 was modeled using a weighting of baseline, downside and upside third-party economic scenarios, with the highest weighting ascribed to the baseline scenario and the lowest weighting ascribed to the upside scenario. The economic variables that were most impactful to the increase in the ACL for the quarter ended September 30, 2023 included assumptions about interest rates and spreads, commercial property forecasts and the trajectory of regional unemployment.
Some of the high level data points informing the scenarios used in estimating the quantitative portion of the ACL at September 30, 2023 included:
Labor market assumptions, which reflected national unemployment peaking at 4.21% in the baseline scenario and 7.7% in the downside scenarios; and
Annualized growth in GDP troughing at 0.5% in the baseline and (3.6)% in the downside scenario.
The above unemployment and GDP growth assumptions are provided to give a high level overview of the nature and severity of the economic forecast scenarios used in estimating the ACL. Numerous additional variables and assumptions not explicitly stated, including but not limited to detailed commercial property forecasts, projected stock market volatility indices and a variety of assumptions about market interest rates and spreads also contributed to the overall impact economic conditions and the economic forecast had on the ACL estimate. Furthermore, while the variables presented above are at the national level, most of the variables are regionalized at the market and submarket level in the models.
For additional information about the ACL, see Note 4 to the consolidated financial statements.
Deposits
The Company has a diverse deposit book by industry sector. Our largest industry vertical at September 30, 2023 was the title insurance vertical, with approximately $2.8 billion in total deposits. Over 80% of title sector deposits were in operating accounts. Approximately 60% of our total deposits were commercial or municipal deposits at September 30, 2023, with approximately 80% of commercial deposits considered relationship-based.
The following table presents information about the Company's insured and collateralized deposits as of September 30, 2023 (dollars in thousands):
Total deposits$26,112,666 
Estimated amount of uninsured deposits
$12,033,365 
Less: collateralized deposits(2,829,962)
Less: affiliate deposits(311,637)
Adjusted uninsured deposits$8,891,766 
Estimated insured and collateralized deposits$17,220,900 
Insured and collateralized deposits to total deposits66 %
57





Time deposit accounts with balances of $250,000 or more totaled $893 million and $730 million at September 30, 2023 and December 31, 2022, respectively. The following table shows scheduled maturities of uninsured time deposits as of September 30, 2023 (in thousands):
Three months or less$325,562 
Over three through six months298,241 
Over six through twelve months130,460 
Over twelve months17,969 
$772,232 
The estimated amount of uninsured deposits at September 30, 2023 and December 31, 2022 was $12.0 billion and $18.2 billion, respectively. Collateralized and affiliate deposits are included in these amounts.
For additional information about Deposits, see Note 10 to the consolidated financial statements.
Borrowings
In addition to deposits, we utilize FHLB advances as a funding source; the advances provide us with additional flexibility in managing both term and cost of funding and in managing interest rate risk. FHLB advances are secured by qualifying residential first mortgage and commercial real estate loans and MBS. The following table presents information about the contractual balance of outstanding FHLB advances, as of September 30, 2023 (dollars in thousands):
AmountWeighted Average Rate
Maturing in:
2023 - One month or less$4,220,000 5.47 %
2023 - Over one month620,000 5.56 %
2024325,000 5.52 %
Total contractual balance outstanding$5,165,000 
The table above reflects contractual maturities of outstanding advances and does not incorporate the impact that interest rate swaps designated as cash flow hedges have on the duration or cost of borrowings.
The table below presents information about outstanding interest rate swaps hedging the variability of interest cash flows on the FHLB advances included in the table above, as of September 30, 2023 (dollars in thousands):
Notional AmountWeighted Average Rate
Cash flow hedges maturing in:
2024$535,000 2.40 %
2025625,000 2.74 %
2026930,000 3.23 %
Thereafter25,000 2.50 %
$2,115,000 2.87 %
See Note 6 to the consolidated financial statements and "Interest Rate Risk" below for more information about derivative instruments.
58





Outstanding notes payable and other borrowings consisted of the following at the dates indicated (in thousands):
September 30, 2023December 31, 2022
Senior notes:
Principal amount of 4.875% senior notes maturing on November 17, 2025
$394,621 $400,000 
Unamortized discount and debt issuance costs(1,921)(2,586)
392,700 397,414 
Subordinated notes:
Principal amount of 5.125% subordinated notes maturing on June 11, 2030
300,000 300,000 
Unamortized discount and debt issuance costs(4,471)(4,880)
295,529 295,120 
Total notes688,229 692,534 
Finance leases26,968 28,389 
Notes and other borrowings$715,197 $720,923 
During the nine months ended September 30, 2023, the Bank purchased $5.4 million of outstanding senior notes in the open market at a price of $4.8 million, an implied yield of approximately 10%.
Liquidity and Capital Resources
Liquidity
Liquidity involves our ability to generate adequate funds to support planned interest earning asset growth, meet deposit withdrawal and credit line usage requests, maintain reserve requirements, conduct routine operations, pay dividends, service outstanding debt and meet other contractual obligations.
BankUnited's ongoing liquidity needs have historically been met primarily by cash flows from operations, deposit growth, the investment portfolio, its amortizing loan portfolio and FHLB advances. FRB discount window borrowings, repurchase agreement capacity and a letter of credit with the FHLB provide additional sources of contingent liquidity. For the nine months ended September 30, 2023 and 2022, net cash provided by operating activities was $594 million and $1.3 billion, respectively. The decline in cash flows from operating activities is primarily related to fluctuations in the daily cash settlement of derivative positions centrally cleared through the CME, a lower volume of re-securitization of early buyout loans and fluctuations in the timing of income tax refunds/payments.
Available liquidity sources include cash; secured funding, such as borrowing capacity at the Federal Home Loan Bank of Atlanta, the Federal Reserve Discount Window and the BTFP; and unencumbered securities. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Bank's amortizing securities and loan portfolios, and the sale of investment securities. Management also has the ability to exert substantial control over the rate and timing of loan production, and resultant requirements for liquidity to fund new loans.
Systemic events of March 2023 impacted liquidity in the banking system, particularly for mid-size and regional banks, including BankUnited. Immediately following those events, management took a number of prudent actions to maximize BankUnited's same day available liquidity levels and enhance liquidity management. We activated our contingency funding plan, enhanced daily and intra-day monitoring and reporting, pledged additional securities and loan collateral to the FHLB and FRB, increased the amount of cash held on balance sheet and enhanced communications with funding sources, customers, counterparties and other stakeholders. While deposit flows and liquidity conditions appear to have substantially stabilized, we have kept in place enhanced monitoring and reporting of liquidity levels and deposit flows and have maintained higher levels of assets pledged at the FHLB and FRB.
At September 30, 2023, the Bank had total same day available liquidity of approximately $14.4 billion, consisting of cash of $379 million, borrowing capacity at the Federal Home Loan Bank of $5.0 billion, borrowing capacity at the FRB of $7.9 billion and unencumbered securities of $1.2 billion. At September 30, 2023, the ratio of estimated insured and collateralized deposits to total deposits was 66% and the ratio of available liquidity to estimated uninsured, uncollateralized deposits was 161%.
The ALM policy establishes limits or operating thresholds and guidelines for a number of measures of liquidity which are monitored at least monthly by the ALCO and quarterly by the Board of Directors. In the current environment, many of these
59


metrics are being monitored more frequently. Following the events of March 2023, management re-evaluated and refined these measures, and continues to evaluate further refinements as new data becomes available. Some of the measures currently used to dimension liquidity risk and manage liquidity are the ratio of available liquidity to uninsured/non-collateralized deposits, the ratio of wholesale funding to total assets, the ratio of available operational liquidity (which excludes availability at the FRB) to volatile liabilities, a liquidity stress test coverage ratio, the loan to deposit ratio, a one-year liquidity ratio a measure of on-balance sheet available liquidity, large depositor concentrations and the ratio of non-interest bearing deposits to total deposits, which is reflective of the quality and cost, rather than the quantity, of available liquidity. We have also established single depositor relationship limits.
The ALM policy stipulates that BankUnited’s liquidity measures are within policy limits if the available liquidity to uninsured, non-collateralized deposits ratio exceeds 100% and the wholesale funding ratio is less than 37.5%. At September 30, 2023, the available liquidity/uninsured, non-collateralized deposits ratio was 161% and the wholesale funding ratio was 31.8%. At September 30, 2023, BankUnited’s available operational liquidity/volatile liabilities ratio was 168% and the liquidity stress test coverage ratio was 188%, compared to acceptable thresholds of 130% and 150%, respectively. Although within policy limits, wholesale funding levels currently remain elevated; a near-term strategic priority of the Company is reducing wholesale funding. During the three months ended September 30, 2023, FHLB advances were reduced by $810 million and during the three months ended June 30, 2023, FHLB advances were reduced by $1.6 billion.
As a holding company, BankUnited, Inc. is a corporation separate and apart from its banking subsidiary, and therefore, provides for its own liquidity. BankUnited, Inc.’s main sources of funds include management fees and dividends from the Bank, access to capital markets and, to a lesser extent, its own securities portfolio. There are regulatory limitations that may affect the ability of the Bank to pay dividends to BankUnited, Inc. Management believes that such limitations will not impact our ability to meet our ongoing near-term cash obligations.
Capital
Pursuant to the FDIA, the federal banking agencies have adopted regulations setting forth a five-tier system for measuring the capital adequacy of the financial institutions they supervise. At September 30, 2023 and December 31, 2022, the Company and the Bank had capital levels that exceeded both the regulatory well-capitalized guidelines and all internal capital ratio targets. Upon adoption of ASU 2016-13 on January 1, 2020, the Company elected the option to temporarily delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period.
The following table provides information regarding regulatory capital for the Company and the Bank as of September 30, 2023 (dollars in thousands):
September 30, 2023
ActualRequired to be
Considered Well
Capitalized
Required to be
Considered
Adequately
Capitalized
Required to be Considered
Adequately
Capitalized Including Capital Conservation Buffer
AmountRatioAmountRatioAmountRatioAmountRatio
BankUnited, Inc.:
Tier 1 leverage$2,861,887 7.87 %
N/A (1)
N/A (1)
$1,453,693 4.00 %
N/A (1)
N/A (1)
CET1 risk-based capital$2,861,887 11.42 %$1,628,267 6.50 %$1,127,261 4.50 %$1,753,518 7.00 %
Tier 1 risk-based capital$2,861,887 11.42 %$2,004,020 8.00 %$1,503,015 6.00 %$2,129,272 8.50 %
Total risk-based capital$3,353,095 13.39 %$2,505,025 10.00 %$2,004,020 8.00 %$2,630,277 10.50 %
BankUnited:
Tier 1 leverage$3,291,844 9.08 %$1,812,765 5.00 %$1,450,212 4.00 %N/AN/A
CET1 risk-based capital$3,291,844 13.17 %$1,624,717 6.50 %$1,124,804 4.50 %$1,749,695 7.00 %
Tier 1 risk-based capital$3,291,844 13.17 %$1,999,652 8.00 %$1,499,739 6.00 %$2,124,630 8.50 %
Total risk-based capital$3,483,053 13.93 %$2,499,564 10.00 %$1,999,652 8.00 %$2,624,543 10.50 %
(1)    There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.
We believe we are well positioned, from a capital perspective, to withstand an economic downturn. CET1 risk-based capital, including AOCI would be 9.8% at BankUnited, Inc. and 11.5% at BankUnited N.A. as of September 30, 2023. On an annual basis, we run a rigorous stress test of our entire balance sheet incorporating the FRB's CCAR scenarios as well as additional idiosyncratic scenarios reflective of evolving macro-economic themes. The latest stress test incorporating the FRB's
60


CCAR severely adverse scenario was performed during the three months ended June 30, 2023. In the CCAR severely adverse scenario, CET1 risk-based capital at the bank level troughs at 11.8%.
We have an active shelf registration statement on file with the SEC that allows the Company to periodically offer and sell in one or more offerings, individually or in any combination, our common stock, preferred stock and other non-equity securities. The shelf registration provides us with flexibility in issuing capital instruments and enables us to more readily access the capital markets as needed to pursue future growth opportunities and to ensure continued compliance with regulatory capital requirements. Our ability to issue securities pursuant to the shelf registration is subject to market conditions.
Interest Rate Risk
A principal component of the Company’s risk of loss arising from adverse changes in the fair value of financial instruments, or market risk, is interest rate risk, including the risk that assets and liabilities with similar re-pricing characteristics may not reprice at the same time or to the same degree. A primary objective of the Company’s asset/liability management activities is to maximize net interest income, while maintaining acceptable levels of interest rate risk. The ALCO is responsible for establishing policies to manage exposure to interest rate risk, and to ensure procedures are established to monitor compliance with these policies. The policies established by the ALCO are approved at least annually by the Board of Directors or its Risk Committee.
Management believes that the simulation of net interest income in different interest rate environments provides the most meaningful measure of interest rate risk. Income simulation analysis is designed to capture not only the potential of all assets and liabilities to mature or reprice, but also the probability that they will do so. Income simulation also attends to the relative interest rate sensitivities of these items, and projects their behavior over an extended period of time. Finally, income simulation permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also of proposed strategies for responding to them.
The income simulation model analyzes interest rate sensitivity by projecting net interest income over twelve and twenty-four month periods in a most likely rate scenario based on a consensus forward curve versus net interest income in alternative rate scenarios. Management continually reviews and refines its interest rate risk management process in response to changes in the interest rate environment, the economic climate and observed customer behavior. Currently, our interest rate risk policy framework is based on modeling instantaneous rate shocks to a static balance sheet, assuming that maturing instruments are replaced with like instruments at forward rates, of plus and minus 100, 200 and 300 and plus 400 basis point shifts. We also model a variety of dynamic balance sheet scenarios, various yield curve slopes, and alternative depositor behavior assumptions. We continually evaluate the scenarios being modeled with a view toward adapting them to changing economic conditions, expectations and trends.
The following table presents the impact on forecasted net interest income compared to a "most likely" scenario, based on the consensus forward curve, in static balance sheet, parallel rate shock scenarios of plus and minus 100 and 200 basis points at September 30, 2023 and December 31, 2022.
Down 200Down 100Plus 100Plus 200
Model Results at September 30, 2023 - decrease
In year 1(3)%(1)%(1)%(4)%
In year 2(7)%(3)%(2)%(3)%
Model Results at December 31, 2022 - increase (decrease)
In year 1(5)%(2)%— %(1)%
In year 2(8)%(3)%%%
Management also simulates changes in EVE in various interest rate environments. The following table illustrates the modeled change in EVE in the indicated scenarios at September 30, 2023 and December 31, 2022:
Down 200Down 100Plus 100Plus 200
Model Results at September 30, 2023 - increase (decrease):
15 %12 %(8)%(17)%
Model Results at December 31, 2022 - increase (decrease):
%%(5)%(11)%
Changes in modeled results at September 30, 2023 compared to results at December 31, 2022 reflect shifts in funding mix and updated assumptions about depositor behavior, impacting both beta and decay assumptions, following the events impacting the banking sector of March 2023. Results are also impacted by the negative convexity of the residential mortgage portfolio and
61


embedded caps in certain floating rate securities. All of the modeled results at September 30, 2023 as presented above are within acceptable thresholds set forth in the ALM policy.
Management continually evaluates a variety of hedging strategies that are available to manage interest rate risk. Many assumptions were used by the Company to calculate the impact of changes in interest rates, including the change in rates. Actual results may not be similar to the Company’s projections due to several factors including the timing and frequency of rate changes, market conditions, changes in depositor behavior and loan prepayment speeds and the shape of the yield curve. Actual results may also differ due to the Company’s actions, if any, in response to changing rates and conditions.
Derivative Financial Instruments and Hedging Activities
Interest rate derivatives designated as cash flow or fair value hedging instruments are one of the tools we use to manage interest rate risk. These derivative instruments are used to mitigate exposure to changes in interest cash flows on variable rate liabilities and to changes in the fair value of fixed rate financial instruments, in each case caused by fluctuations in benchmark interest rates, as well as to manage duration of liabilities.
The following table provides information about the Company's derivatives designated as hedging instruments as of September 30, 2023 (dollars in thousands):
Weighted
Average Pay Rate / Strike Price
Weighted
Average Receive Rate / Strike Price
Weighted
Average
Remaining
Life in Years
  Notional Amount
 Hedged Item
Derivatives designated as cash flow hedges:
Pay-fixed interest rate swapsVariability of interest cash flows on variable rate borrowings$2,115,000 2.87%Daily SOFR2.1
Pay-fixed interest rate swapsVariability of interest cash flows on variable rate liabilities400,000 1.22%Fed Funds Effective Rate0.9
Pay-variable interest rate swapsVariability of interest cash flows on variable rate loans 200,000 Term SOFR3.72%2.6
Interest rate caps purchased, indexed to Fed Funds effective rateVariability of interest cash flows on variable rate liabilities200,000 0.88%1.7
Interest rate collar, indexed to 1-month SOFR(1)
Variability of interest cash flows on variable rate loans125,000 5.58%1.50%2.9
Derivatives designated as fair value hedges:
Pay-fixed interest rate swapsVariability of fair value of fixed rate loans100,000 1.94%Daily SOFR0.8
  $3,140,000 
(1) The interest rate collar consists of a combination of zero-premium interest rate options. The Company sold a pay-variable cap with a strike price of 5.58%; sold a 0% floor; and purchased a receive-variable floor with a strike price of 1.50%.

In addition to derivative instruments, the Company has issued callable CDs to hedge interest rate risk in a falling rate environment; the amount of such instruments outstanding at September 30, 2023 was $711 million, The short duration of our investment portfolio (2.03 at September 30, 2023) also provides a natural offset from an interest rate risk perspective to the longer duration of the residential mortgage portfolio.
See Note 6 to the consolidated financial statements for additional information about derivative financial instruments.
LIBOR Transition
As discussed in the "LIBOR Transition" section in the MD&A of the Company's 2022 Annual Report on Form 10-K, the FCA, which regulates USD LIBOR, discontinued the one-week and two-month LIBOR tenors effective December 31, 2021 and remaining tenors were discontinued effective June 30, 2023. The Company executed a comprehensive roadmap to amend the terms of LIBOR-based financial instruments, generally replacing LIBOR with SOFR as the preferred alternative reference rate. As of September 30, 2023, all LIBOR-based instruments have been converted to an alternative reference rate, generally SOFR, based on their contractual provisions.
62


Non-GAAP Financial Measures
Tangible book value per common share is a non-GAAP financial measure. Management believes this measure is relevant to understanding the capital position and performance of the Company. Disclosure of this non-GAAP financial measure also provides a meaningful basis for comparison to other financial institutions as it is a metric commonly used in the banking industry. The following table reconciles the non-GAAP financial measurement of tangible book value per common share to the comparable GAAP financial measurement of book value per common share at the dates indicated (in thousands except share and per share data): 
September 30, 2023June 30, 2023
Total stockholders’ equity$2,524,070 $2,526,310 
Less: goodwill and other intangible assets77,637 77,637 
Tangible stockholders’ equity$2,446,433 $2,448,673 
 
Common shares issued and outstanding74,413,059 74,429,948 
 
Book value per common share$33.92 $33.94 
 
Tangible book value per common share$32.88 $32.90 
63


Item 3.  Quantitative and Qualitative Disclosures About Market Risk
See the section entitled “Interest Rate Risk” included in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.
During the quarter ended September 30, 2023, there were no changes in the Company's internal control over financial reporting, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II.  OTHER INFORMATION
Item 1.   Legal Proceedings
 The Company is involved as plaintiff or defendant in various legal actions arising in the normal course of business. In the opinion of management, based upon currently available information and the advice of legal counsel, the likelihood is remote that any adverse impact of these proceedings, either individually or in the aggregate, would be material to the Company’s consolidated financial position, results of operations or cash flows.
Item 1A.   Risk Factors
Except as set forth below there have been no material changes in the risk factors disclosed by the Company in its 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2023.
Recent events affecting the banking industry predicated by the failure of three regional banks and resulting media coverage may have eroded customer confidence in the banking system and have adversely impacted liquidity, particularly for regional banks like BankUnited.
Bank failures that occurred in March and April 2023 generated significant market volatility and adversely impacted stock prices among publicly traded bank holding companies and, in particular, regional banks like the Company. Many regional banks, including BankUnited, experienced higher than normal deposit outflows immediately following the first regional bank failures in March 2023. These developments negatively impacted customer confidence in the safety and soundness of regional banks. As a result of these events, customers may choose to maintain deposits with larger financial institutions or in other higher yielding alternatives, which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations. While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements regarding the safety and soundness of the banking system and taken actions to ensure that depositors of recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be ultimately successful in restoring customer confidence in regional banks and the banking system more broadly.
These events may result in potentially adverse changes to laws or regulations governing banks and bank holding companies or in the impositions of restrictions through supervisory or enforcement activities, including higher capital or liquidity requirements, which could have a material impact on our business. Changes to capital regulations have been proposed, although not finalized, for institutions with over $100 billion in assets; if enacted as proposed, the secondary impact on institutions the size of the Company are difficult to predict. The cost of resolving the recent bank failures is likely to result in an additional FDIC deposit insurance assessment, which will negatively impact the Company's earnings in at least the period the assessment is levied.
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
None.
64





Item 5.   Other Information
During the three months ended September 30, 2023, no director or officer (as defined in Exchange Act Rule 16a-1(f)) of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
65





Item 6. 
Exhibits
Exhibit
Number
 Description Location
     
Filed herewith
Filed herewith
Filed herewith
Filed herewith
101.INSThe instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL documentFiled herewith
101.SCHXBRL Taxonomy Extension SchemaFiled herewith
101.CALXBRL Taxonomy Extension Calculation LinkbaseFiled herewith
101.DEFXBRL Taxonomy Extension Definition LinkbaseFiled herewith
101.LABXBRL Taxonomy Extension Label LinkbaseFiled herewith
101.PREXBRL Taxonomy Extension Presentation LinkbaseFiled herewith
66





SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 1st day of November 2023.
/s/ Rajinder P. Singh
Rajinder P. Singh
Chairman, President and Chief Executive Officer
 
 
/s/ Leslie N. Lunak
Leslie N. Lunak
Chief Financial Officer
67