BankUnited, Inc.: Form 10-K for the period ended Dec 31, 2024

Overview

BankUnited, Inc., with total consolidated assets of $35.2 billion at December 31, 2024, is a bank holding company with one direct wholly-owned subsidiary, BankUnited, collectively, the Company. BankUnited, a national banking association headquartered in Miami Lakes, Florida, provides a full range of commercial lending and both commercial and consumer deposit services through banking centers located in Florida, the New York metropolitan area and Dallas, Texas, and a comprehensive suite of wholesale products to customers through an Atlanta office focused on the Southeast region. The Bank provides certain commercial lending and deposit products through national platforms and certain consumer deposit products through an online channel. Our core business strategy is to build a leading regional commercial and small business bank with a distinctive value proposition based on strong service-oriented relationships, robust digital enabled customer experiences and operational excellence, and with an entrepreneurial work environment that empowers employees to deliver their best. To date, we have executed our strategy primarily through organic growth and anticipate that we will most likely continue to do so, although we will evaluate and consider opportunities to engage in merger and acquisition activity when they arise.

Our Products and Services

Lending

*General—*Our primary lending focus is to serve small, middle-market and larger corporate businesses with a variety of financial products and services while maintaining a disciplined credit culture. We offer a full array of lending products that cater to our customers' needs and have attracted and invested in experienced relationship management teams in our primary lending markets.

*Commercial loans—*Our commercial loans, which are generally made to growing small business, middle-market and larger corporate entities and non-profit organizations, include secured and unsecured lines of credit, formula-based lines of credit, equipment loans, owner-occupied commercial real estate term loans and lines of credit, mortgage warehouse lines, subscription finance facilities, letters of credit, commercial credit cards, SBA and USDA product offerings, Export-Import Bank financing products, trade finance and business acquisition finance credit facilities.

The Bank has two commercial lending subsidiaries, Pinnacle, headquartered in Scottsdale, Arizona and Bridge, headquartered in Baltimore, Maryland. Pinnacle provides financing to state and local governmental entities directly and through vendor programs and alliances. Pinnacle offers a full array of financing structures including essential use equipment lease purchase and loan agreements and direct (private placement) bond refundings. The Bridge portfolio consists of (i) businesses equipment loans and leases, including finance lease and operating lease structures, and (ii) franchise equipment, acquisition and expansion financing facilities. The Bridge lines of business have been de-emphasized due to their risk/return and liquidity profiles. We expect that related loan balances will continue to decline.

*Commercial real estate loans—*We offer term financing for the acquisition or refinancing of properties, primarily rental apartments, mixed-use commercial properties, industrial properties, warehouses, retail shopping centers, free-standing single-tenant buildings, office buildings and hotels. Other products that we provide include real estate secured lines of credit, lending to REITs and institutional asset owners, subscription lines of credit to real estate funds, and, to a lesser extent, acquisition, development and construction loan facilities and construction financing. In the current environment, we have de-emphasized lending in the office sector and been more focused on warehouse/industrial, multi-family and the retail sectors. While we have a small amount of New York rent regulated multi-family loans, we are not actively engaged in lending in this sub-sector.

*Residential mortgages—*We do not originate residential mortgages, but do invest in residential loans originated through established correspondent channels and community partners. Our residential loan portfolio is primarily comprised of loans purchased on a national basis through select correspondent channels. This national purchase program allows us to diversify our loan portfolio, both by product type and geography. Residential loans purchased are primarily closed-end, first lien jumbo mortgages for the purchase or re-finance of owner-occupied property. A limited portion of the portfolio is secured by investor-owned properties. We do not originate or purchase negatively amortizing or sub-prime residential loans. We also acquire non-performing FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations. Such 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.

*Other consumer loans—*We do not originate, or currently intend to originate a significant amount of consumer loans. Home equity loans and lines of credit and other consumer loans are not significant components of our loan portfolio or of our lending strategy.

*Credit risk management—*Credit is managed through our three lines of defense framework as prescribed in our credit policies and procedures.

• First Line of Defense - Credit opportunities are sourced, analyzed, recommended and managed by our lines of business in accordance with established credit procedures.
• Second Line of Defense - Our credit administration division, reporting to the Chief Risk Officer, is responsible for the evaluation and approval of recommended credit opportunities. Approval of credit and confirmation of risk ratings is performed within a risk-based delegated credit approval framework. The credit administration division also provides governance and oversight of our credit policies and procedures.
• Third Line of Defense - Credit Review, reporting directly to the Risk Committee of the Board of Directors, provides an independent assessment of credit risk and the effectiveness of credit risk management processes across the organization. Credit Review performs risk-based testing through both examinations and ongoing monitoring.

Asset oversight committees meet at least quarterly and provide oversight of key credit governance, transactional and credit management functions. These committees include:

• Credit Risk Management Committee with responsibilities including credit governance policies and procedures and changes thereto and establishing and maintaining the delegated credit approval framework;
• Executive Credit Committee with responsibilities including transactional credit approval for large and/or complex credit exposures as well as the approval of periodic asset monitoring reports for large and/or complex credit exposures;
• Criticized Asset Committee with responsibilities including the evaluation and oversight of higher risk assets and oversight of workout and recovery functions; and
• Residential Credit Risk Management Committee with responsibilities including residential portfolio performance monitoring and certain bulk purchase transactional authorities.

Our in-house lending limits, ranging from $125 million to $150 million, are based upon loan type and are further limited by risk-based hold limits that incorporate our assessment of the borrower’s financial condition and industry exposure. These limits are significantly below our legal lending limit and are reviewed periodically by the Credit Risk Management Committee and approved annually by the Board of Directors.

Deposit and Treasury Solutions Products

We offer traditional deposit products including commercial and consumer checking accounts, money market deposit accounts, savings accounts and certificates of deposit with a variety of terms and rates, as well as a robust suite of treasury, payments and cash management services. We offer commercial and retail deposit products across our primary geographic footprint and certain commercial deposit, payments and treasury management products and services nationally. We offer the CDARS program, providing additional FDIC insurance to our customers. We also offer other insured cash sweep programs allowing customers the ability to insure deposits above standard FDIC deposit insurance limits by distributing funds among banks that participate in the network while providing competitive rates and easy access to funds. For our consumers, we offer competitive money market and time deposit products through our online channel as well as through our retail branch network. Demand deposit balances are concentrated in commercial and small business accounts and our deposit growth strategy is focused on small business and middle market companies generally, as well as select industry verticals such as the title services and HOA industry segments. Our service fee schedule and rates are competitive with other financial institutions in our markets. We do not charge consumer overdraft or NSF fees.

Our Markets

Our largest banking markets are Florida and the Tri-State market of New York, New Jersey and Connecticut, concentrated in the New York Metropolitan area. We believe both represent long-term attractive banking markets. In Florida, our focus is on urban markets including the Miami-Dade, Broward, Palm Beach, Tampa, Orlando and Jacksonville markets.

We have more recently entered the Atlanta and Dallas markets, in Atlanta with a wholesale banking office focused on the Southeastern United States, and in Dallas with a retail branch as well as full-service wholesale banking capabilities. Our future strategy may include organic expansion into other markets, but no specific additional markets have been identified at this time.

Pinnacle offers municipal financing and the Bank provides mortgage warehouse financing on a national basis. We also offer a suite of commercial deposit, treasury solutions and cash management products nationally.

Competition

Our primary markets are highly competitive, containing not only a large number of community and regional banks, but also a significant presence of the country's largest commercial banks. We compete with other state, national and foreign banks as well as savings associations, savings banks and credit unions with physical presence in our market areas or targeting our market areas digitally for deposits and loans. In addition, we compete with financial intermediaries, such as private credit funds, FinTech companies, consumer finance companies, mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies as well as major retailers, all actively engaged in providing various types of loans and other financial services.

Interest rates on both loans and deposits and prices of fee-based services are significant competitive factors among financial institutions generally. Other important competitive factors include convenience, quality of customer service, quality and variety of product offerings, availability and quality of digital offerings, community reputation, continuity of personnel and services, and, in the case of larger commercial customers, relative lending limits and ability to offer sophisticated cash management and other commercial banking services. While we continue to provide competitive interest rates on both depository and lending products, we believe that we can compete most successfully by focusing on the financial needs of growing companies and small and middle-market businesses, offering them a broad range of personalized services, digital platforms and sophisticated cash management tools tailored to their businesses.

Regulation and Supervision

The U.S. banking industry is highly regulated under federal and state law. These regulations have a material effect on the operations of BankUnited, Inc. and its direct and indirect subsidiaries.

Statutes, regulations and policies limit the activities in which we may engage and the conduct of our permitted activities and establish capital requirements with which we must comply. The regulatory framework is intended primarily for the protection of depositors, borrowers, customers and clients, the FDIC deposit insurance fund and the banking system as a whole, and not for the protection of our stockholders or creditors. In many cases, the applicable regulatory authorities have broad enforcement power over BHCs, banks and their subsidiaries, including the power to impose substantial monetary fines and other penalties for violations of laws and regulations or engaging in unsafe and unsound banking practices. Further, the regulatory system imposes reporting and information collection obligations. We incur significant costs related to compliance with these laws and regulations.

The material statutory and regulatory requirements that are applicable to us are summarized below. The description below is not intended to summarize all laws and regulations applicable to us and is qualified in its entirety by reference to the full text of the statutes, regulations, policies and other written guidance that are described.

Bank and Bank Holding Company Regulation

As a national bank, BankUnited is subject to ongoing and comprehensive supervision, regulation, examination and enforcement by the OCC.

BankUnited, Inc., which controls BankUnited, is a BHC and, as such, is subject to regulation, inspection, supervision and enforcement by the Federal Reserve Board under the BHC Act. The Federal Reserve Board's jurisdiction also extends to any company that is directly or indirectly controlled by BankUnited, Inc..

Broad Supervision, Examination and Enforcement Powers

A principal objective of the U.S. bank regulatory system is to protect depositors by ensuring the financial safety and soundness of banking organizations. To that end, the banking regulators have broad regulatory, examination and enforcement authority. The regulators regularly examine the operations of banking organizations. In addition, banking organizations are subject to periodic reporting requirements.

The regulators have various remedies available if they determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, sensitivity to market risk, compliance or other aspects of a banking organization's operations are less than satisfactory, or that the banking organization is operating in an unsafe or unsound manner. The regulators may also take action if they determine that the banking organization or its management is violating or has violated any law or regulation. The regulators have the power to, among other things:

• enjoin "unsafe or unsound" practices;
• require affirmative actions to correct any violation or practice;
• issue administrative orders that can be judicially enforced;
• refer significant compliance violations to the U.S. Justice Department;
• direct increases in capital;
• direct the sale of subsidiaries or other assets;
• limit dividends and distributions;
• restrict growth;
• assess civil monetary penalties;
• remove officers and directors;
• terminate deposit insurance; and
• appoint a conservator or receiver.

Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations and supervisory agreements could subject BankUnited, Inc., the Bank and their subsidiaries or their officers, directors and institution-affiliated parties to the remedies described above and other sanctions. In addition, the FDIC may terminate a depository institution's deposit insurance upon a finding that the institution's financial condition is unsafe or unsound or that the institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by the institution's regulatory agency.

Notice and Approval Requirements Related to Control

As a BHC, BankUnited, Inc. must obtain prior approval of the Federal Reserve in connection with any acquisition that would result in BankUnited, Inc. acquiring substantially all the assets, or owning or controlling 5% or more of any class of voting securities, of a bank or another BHC. The statutory factors that the Federal Reserve is required to consider in considering an application include the financial and managerial resources of the parties and the future prospects of the combined organization, the effects of the transaction on competition, the convenience and needs of the community, including the record of performance of the parties under the CRA, the effectiveness of the acquiring company in combating money-laundering activities and the impact of the transaction on the financial stability of the U.S. banking or financial system.

In addition, federal and state banking laws impose notice, approval, and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect "control" of an FDIC-insured depository institution or BHC. These laws include the BHC Act and the Change in Bank Control Act. Among other things, these laws require regulatory filings by individuals or companies that seek to acquire direct or indirect "control" of an FDIC-insured depository institution. The determination of whether an investor "controls" a depository institution is based on all of the facts and circumstances surrounding the investment. As a general matter, a party is deemed to control a depository institution or other company if the party owns or controls 25% or more of any class of voting stock. Subject to rebuttal, a party may be presumed to control a depository institution or other company if the investor owns or controls 10% or more of any class of voting stock.

The BHC Act prohibits any entity from acquiring 25% (as noted above, the BHC Act has a lower limit for acquirers that are existing BHCs) or more of a BHC’s or bank’s voting securities, or otherwise obtaining control or a controlling influence over a BHC or bank without the approval of the Federal Reserve. The Federal Reserve has rule-based standards for determining whether one company has control over another. These rules established four categories of tiered presumptions of non-control that are based on the percentage of voting shares held by the investor (less than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of non-control. These indicia of control include nonvoting equity ownership, director representation, management interlocks, business relationships and restrictive contractual covenants. Investors can hold up to 24.9% of the voting securities and 33% of the total equity of a company without necessarily having a controlling influence.

Permissible Activities and Investments

Banking laws generally restrict the ability of BankUnited, Inc. to engage in activities other than those determined by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The GLB Act expanded the scope of permissible activities for a BHC that qualifies as a financial holding company. Under the regulations implementing the GLB Act, a financial holding company may engage in additional activities that are financial in nature or incidental or complementary to a financial activity. BankUnited, Inc. has not elected to become a financial holding company.

In addition, as a general matter, the establishment or acquisition by BankUnited, Inc. of a non-bank entity, or the initiation of a non-banking activity, requires prior regulatory approval. In approving acquisitions or the addition of activities, the Federal Reserve Board considers, among other things, whether the acquisition or the additional activities can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition or gains in efficiency, that outweigh such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.

Regulatory Capital Requirements and Capital Adequacy

The federal bank regulators view capital levels as important indicators of an institution's financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. The final supervisory determination on an institution's capital adequacy is based on the regulator's assessment of numerous factors. Both BankUnited, Inc. and BankUnited are subject to regulatory capital requirements.

The Federal Reserve Board has established risk-based and leverage capital guidelines for BHCs, including BankUnited, Inc. The OCC has established substantially similar risk-based and leverage capital guidelines applicable to national banks, including BankUnited. BankUnited, Inc. and BankUnited are subject to capital rules implemented under the framework promulgated by the International Basel Committee on Banking Supervision (the "Basel III Capital Rules"). While some provisions of the rules are tailored to larger institutions, the Basel III Capital Rules generally apply to all U.S. banking organizations, including BankUnited, Inc. and BankUnited.

The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios to be considered adequately capitalized:

(i) 4.5% based upon CET1;

(ii) 6.0% based upon tier 1 capital; and

(iii) 8.0% based upon total regulatory capital.

The Basel III Capital Rules require institutions to retain a capital conservation buffer of 2.5% above these required minimum capital ratio levels. A minimum leverage ratio (tier 1 capital as a percentage of average total assets) of 3.0% is also required under the Basel III Capital Rules.

Banking organizations that fail to maintain the minimum required capital conservation buffer could face restrictions on capital distributions or discretionary bonus payments to executive officers, with distributions and discretionary bonus payments being completely prohibited if no capital conservation buffer exists, or in the event of the following: (i) the banking organization's capital conservation buffer was below 2.5% at the beginning of a quarter; and (ii) its cumulative net income for the most recent quarterly period plus the preceding four calendar quarters is less than its cumulative capital distributions (as well as associated tax effects not already reflected in net income) during the same measurement period. Further, the federal bank regulatory agencies may set higher capital requirements for an individual BHC or bank when circumstances warrant it.

The Federal Reserve, OCC and FDIC have issued a proposed rule to implement wide-ranging and significant changes to the current U.S. Basel III capital rules. Generally, the proposed rules would increase capital requirements and risk-weighted assets for Category I - IV banking organizations (generally banking organizations with $100 billion or more in total assets). It is uncertain if and when a final rule will be adopted, and if so, whether and to what extent it will differ from the proposed rule. As a result, the timing and content of any final rule, and the potential effects of any final rule on BankUnited, Inc. and BankUnited remain uncertain.

Prompt Corrective Action

Under the FDIA, the federal bank regulatory agencies must take "prompt corrective action" against undercapitalized U.S. depository institutions. U.S. depository institutions are assigned one of five capital categories: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized," and are subject to differential regulation corresponding to the capital category within which the institution falls. A depository institution is deemed to be "well capitalized" if the banking institution has a total risk-based capital ratio of 10.0% or greater, a tier 1 risk-based capital ratio of 8.0% or greater, a CET1 risk-based capital ratio of 6.5% and a leverage ratio of 5.0% or greater, and the institution is not subject to an order, written agreement, capital directive or prompt corrective action directive to meet and maintain a specific level for any capital measure. Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category. A banking institution that is undercapitalized is required to submit a capital restoration plan. Failure to meet capital guidelines could subject the institution to a variety of enforcement remedies by federal bank regulatory agencies, including termination of deposit insurance by the FDIC, restrictions on certain business activities, and appointment of the FDIC as conservator or receiver. As of December 31, 2024, BankUnited, Inc. and BankUnited were well-capitalized.

Source of Strength

All companies, including BHCs, that directly or indirectly control an insured depository institution, are required to serve as a source of financial and managerial strength for the depository institution. Under this requirement, BankUnited, Inc. in the future could be required to provide financial assistance to BankUnited should it experience financial distress. Such support may be required at times when, absent this statutory and Federal Reserve requirement, a BHC may not be inclined to provide it.

Under the prompt corrective action provisions, if a controlled bank is undercapitalized, then the regulators could require its BHC to guarantee a capital restoration plan. In addition, if the Federal Reserve believes that a BHC’s activities, assets or affiliates represent a significant risk to the financial safety, soundness or stability of a controlled bank, then the Federal Reserve could require the BHC to terminate the activities, liquidate the assets or divest the affiliates. Currently, the Company has no material activities, assets or affiliates other than those attributable to its ownership of the Bank.

Regulatory Limits on Dividends and Distributions

Federal law currently imposes limitations upon certain capital distributions by national banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to stockholders of another institution in a cash-out merger and other distributions charged against capital. The Federal Reserve Board and OCC regulate all capital distributions by BankUnited directly or indirectly to BankUnited, Inc., including dividend payments.

BankUnited may not pay dividends to BankUnited, Inc. if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage capital ratio requirements, or in the event the OCC notified BankUnited that it was in need of more than normal supervision. Under the FDIA, an insured depository institution such as BankUnited is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become "undercapitalized." Payment of dividends by BankUnited also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.

BankUnited is subject to supervisory limits on its ability to declare or pay a dividend or reduce its capital unless certain conditions are satisfied.

In addition, it is the policy of the Federal Reserve Board that BHCs should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that BHCs should not maintain a level of cash dividends that undermines the BHC’s ability to serve as a source of strength to its banking subsidiaries. As a Delaware corporation, BankUnited, Inc. is also subject to certain limitations and restrictions under Delaware corporate law with respect to payment of dividends and other distributions.

Limits on Transactions with Affiliates and Insiders

Insured depository institutions are subject to restrictions on their ability to conduct transactions with affiliates and other related parties. Section 23A of the Federal Reserve Act imposes quantitative limits, qualitative requirements, and collateral requirements on certain transactions by an insured depository institution with, or for the benefit of, its affiliates. Transactions covered by Section 23A include loans, extensions of credit, investment in securities issued by an affiliate, and acquisitions of assets from an affiliate. Section 23B of the Federal Reserve Act requires that most types of transactions by an insured depository institution with, or for the benefit of, an affiliate be on terms at least as favorable to the insured depository institution as if the transaction were conducted with an unaffiliated third party. The Dodd-Frank Act generally enhances the restrictions on transactions with affiliates, including an expansion of what types of transactions are covered to include credit exposures related to derivatives, repurchase agreements and securities lending arrangements.

The Federal Reserve Board's Regulation O and OCC regulations impose restrictions and procedural requirements in connection with the extension of credit by an insured depository institution to directors, executive officers, principal stockholders and their related interests.

Examination Fees

The OCC charges fees to recover the costs of examining national banks, processing applications and other filings, and covering direct and indirect expenses in regulating national banks. Various regulatory agencies have the authority to assess additional supervision fees.

FDIC Deposit Insurance

The FDIC is an independent federal agency that insures the deposits of federally insured depository institutions up to applicable limits. The FDIC also has certain regulatory, examination and enforcement powers with respect to FDIC-insured institutions. The deposits of BankUnited are insured by the FDIC up to applicable limits. As a general matter, the maximum deposit insurance amount is $250,000 per depositor.

Additionally, FDIC-insured depository institutions are required to pay deposit insurance assessments to the FDIC deposit insurance fund. The amount of a particular institution's deposit insurance assessment is based on that institution's risk classification under the FDIC's risk-based assessment system. An institution's risk classification is assigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. The FDIC has authority to raise or lower assessment rates on insured deposits in order to achieve statutorily required reserve ratios in the DIF and to impose special additional assessments.

Depositor Preference

The FDIA provides that, in the event of the "liquidation or other resolution" of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. Insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors, including BankUnited, Inc., with respect to any extensions of credit they have made to such insured depository institution.

Federal Reserve System and Federal Home Loan Bank System

As a national bank, BankUnited is required to hold shares of capital stock in a Federal Reserve Bank. BankUnited holds capital stock in the Federal Reserve Bank of Atlanta. As a member of the Federal Reserve System, BankUnited has access to the Federal Reserve discount window lending and payment clearing systems. Pursuant to the regulations of the Federal Reserve, all banks, including BankUnited, are required to maintain average daily reserves at mandated ratios against their transaction accounts. In addition, reserves must be maintained on certain non-personal time deposits. This reserve requirement may be met by holding cash in banking offices or on deposit at a Federal Reserve Bank.

BankUnited is a member of the Federal Home Loan Bank of Atlanta. Each FHLB provides a central credit facility primarily for its member institutions, as well as other entities involved in home mortgage lending. Any advances from an FHLB must be secured by specified types of collateral. As a member of the FHLB, BankUnited is required to acquire and hold shares of capital stock in the FHLB of Atlanta. BankUnited is in compliance with this requirement.

Anti-Money Laundering and OFAC

Under federal law, financial institutions must maintain anti-money laundering programs that include established internal policies, procedures and controls; a designated compliance officer; an ongoing employee training program; a risk-based customer due diligence program; and testing of the program by an independent audit function. Financial institutions are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence, customer identification and recordkeeping, including in their dealings with non-U.S. financial institutions and non-U.S. customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and law enforcement authorities have been granted access to certain financial information maintained by financial institutions. Bank regulators routinely examine institutions for compliance with these obligations and they must consider an institution's compliance in connection with the regulatory review of applications, including applications for banking mergers and acquisitions. The regulatory authorities have imposed "cease and desist" orders and civil money penalty sanctions against institutions found to be violating these obligations.

The U.S. Department of the Treasury's OFAC is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and Acts of Congress. The OFAC publishes lists of persons, organizations, and countries suspected of money laundering or aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. If BankUnited, Inc. or BankUnited finds a name on any transaction, account or wire transfer that is an affirmative match to one on an OFAC list, BankUnited, Inc. or BankUnited must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate authorities.

Consumer Laws and Regulations

Banking organizations are subject to numerous laws and regulations intended to protect consumers. These laws include, among others:

• Truth in Lending Act;
• Truth in Savings Act;
• Electronic Funds Transfer Act;
• Expedited Funds Availability Act;
• Equal Credit Opportunity Act;
• Fair and Accurate Credit Transactions Act;
• Fair Housing Act;
• Fair Credit Reporting Act;
• Gramm-Leach-Bliley Act;
• Home Mortgage Disclosure Act;
• Right to Financial Privacy Act;
• Real Estate Settlement Procedures Act;
• laws regarding unfair and deceptive acts and practices; and
• usury laws.

Many states and local jurisdictions have consumer protection laws analogous to, and in addition to, those listed above. These federal, state and local laws regulate the manner in which financial institutions deal with customers when taking deposits, making loans, or conducting other types of transactions. Failure to comply with these laws and regulations could give rise to regulatory sanctions, customer rescission rights, action by state and local attorneys general, and civil or criminal liability.

Privacy and Information Security

Banking organizations are subject to many federal and state laws and regulations governing the collection, use and protection of customer information. For example, the Gramm-Leach-Bliley Act requires BankUnited to disclose its privacy policies and practices relating to sharing nonpublic customer information and enables retail customers to opt out of our ability to share information with unaffiliated third parties under certain circumstances. Other federal and state laws and regulations impact our ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or to contact customers with marketing offers. The Gramm-Leach-Bliley Act also requires BankUnited to implement a comprehensive information security program that includes administrative, technical and physical safeguards to ensure the security and confidentiality of customer records and information.

CFPB

The CFPB is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The CFPB has rulemaking authority over many of the statutes governing products and services offered to bank and thrift consumers. For banking organizations with assets of $10 billion or more, such as the Bank, the CFPB has exclusive rule making and examination, and primary enforcement authority under certain federal consumer protection financial laws. In addition, states are permitted to adopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB.

The Community Reinvestment Act

The CRA is intended to encourage financial institutions to help meet the credit needs of their service areas, including low and moderate-income neighborhoods, consistent with safe and sound operations. The federal bank regulators examine and assign each bank a public CRA rating.

The CRA requires federal bank regulators to take into account the bank's record in meeting the needs of its service areas when considering an application by a bank to establish or relocate a branch or to conduct certain mergers or acquisitions. The Federal Reserve Board is required to consider the CRA performance of a BHC's controlled banks when considering an application by the BHC to acquire a banking organization or to merge with another BHC. If BankUnited, Inc. or BankUnited applies for regulatory approval to make certain investments, the regulators will consider the CRA record of target institutions and BankUnited, Inc.'s depository institution subsidiaries. A less than satisfactory CRA rating could substantially delay approval or result in denial of an application. The regulatory agency's assessment of the institution's CRA performance is made available to the public. Following its most recent CRA performance evaluation in October 2024, BankUnited received an overall rating of "Satisfactory."

A new interagency CRA rule was published in February 2024 imposing additional data collection and reporting requirements on financial institutions. A preliminary injunction against the final rule was issued in March 2024; the ultimate resolution of this matter remains uncertain.

Human Capital Resources

At December 31, 2024, we had 1,662 full-time employees and 18 part-time employees. None of our employees are parties to a collective bargaining agreement. We believe that our employees are our greatest asset and vital to our success. As such, we seek to hire and retain the best candidate for each position, without regard to age, gender, ethnicity, or other specific trait, but with an appreciation for a diversity of perspectives and experience. We have designed a compensation structure including an array of benefit plans and programs that we believe is attractive to our current and prospective employees. We have a Company sponsored 401(k) Retirement Savings Program, a tuition reimbursement program, flexible spending accounts and health savings accounts with Company contributions. BankUnited offers paid time off, paid parental leave, paid holidays, flexible work schedules and hybrid and remote job opportunities for some positions.

Our goal is to create a safe and inclusive workplace where individuals are valued, feel free to express themselves, are empowered to succeed and are able to grow both personally and professionally. At December 31, 2024, 33% of the members of our Board of Directors were female and 44% were of diverse nationality or ethnicity. Approximately 56% of our workforce was female.

The following chart presents additional information about the composition of our workforce at December 31, 2024:

iCARE™

Under the umbrella of our iCARE™ initiative, we have a number of programs intended to foster a culture that promotes employee engagement and community involvement. Our iCARE™ Council, consisting of 13 employees with a variety of backgrounds and perspectives across different divisions in our organization oversees the continued evolution of iCARE™ and 22 employees serving as iCARE™ ambassadors promote engagement in iCARE™ programs across the organization. Employees are encouraged to participate in interactive events, cultural celebrations, an enterprise-wide mentorship program and community volunteer opportunities. In 2024, our employees reported a total of 4,112 volunteer hours, up 17% from 2023, serving 209 community organizations. Our employees are given paid time to participate in community volunteer opportunities.

BankUnited has partnered with nine universities in our local markets to provide scholarships, internships, and other educational programs for high school and college students. Since the inception of these initiatives in 2020, 154 college and high school students have participated and 46 of them have been hired for full time roles at the Bank. Through BankUnited's exclusive partnership with Florida International University, the ATOM Pink Tank program, a six-month leadership, mentorship, and research development program was created to empower female students pursuing STEM careers. The Pink Tank participants receive weekly guidance and mentorship by BankUnited employees throughout the ten-week research and competition stage. The students connect with BankUnited professionals of all levels and disciplines. Since the inception of this initiative, 61 students have completed the program and 20 new students have been selected for the 2024-2025 cohort. To date, BankUnited has hired seven students and garnered participation of over 55 BankUnited employees representing 20 departments across the Bank.

Through iCARE™ we engage and encourage our employees to participate in various Bank sponsored community programs and events. These community programs include BankUnited's "Adopt A Neighborhood" in Florida focused on providing support to under-served communities, the "Entrepreneurship Program" in New York where we provide workforce development in partnership with a local university, and the "Heir’s Program" where we brought together a consortium of expertise to provide legal services and education to predominantly minority families seeking to maintain property in family lineage. The iCARE™ Ventures program, working with local partners, endeavors to support, promote and strengthen local entrepreneurship and small business growth in our communities. Our employees also participate in a variety of community and collection drives throughout the year. In 2024, the Back to School and Holiday Toy drive collected over 2,000 items for children, and the Thanksgiving drive provided over 140,000 meals to individuals and families in need.

Health, Wellness and Safety

Our award-winning Wellness Program incorporates initiatives that address the mental, physical, intellectual, occupational, social, emotional, financial and spiritual components of wellness. The BankUnited Corporate Center has an on-site fitness facility, and we provide our employees with on-site health screenings, skin cancer screenings, on-site mobile physicals, eye exams, dental exams, mammograms, and vaccine clinics. Employees can choose to participate in nutrition counseling, music and art therapy, live and streaming fitness classes, meditation sessions, live and virtual learning opportunities with local hospitals providing subject matter experts with a variety of specialties. We offer safety programs including adult, child and pet first aid and CPR courses. For participation in our Wellness Program, we offer our employees a reduced premium rate for medical insurance coverage.

In recognition of our employee wellness programs, BankUnited was listed in the top ten among America's Top 100 Healthiest Employers by Springbuk HR Technology in both 2023 and 2024. In 2024, BankUnited was listed as number one among New York City’s Top 100 Healthiest Employers between 1,000 and 4,999 employees by Springbuk HR Technology Magazine. BankUnited also achieved the 2024 Best Wellness Employer gold certification developed by Wellness Workdays in collaboration with experts from Harvard Medical School.

Career Growth and Development

Our Go for More™ Academy provides an extensive menu of training and resources that enable employees to develop their skills and that promote collaboration and career development. The School of Leadership, which includes the Rising Leaders Program, EXCELerate and Situational Leadership coursework, provides our employees with career development opportunities at all levels. Through our Discover Coaching program, we offer a personalized approach where employees meet one-on-one with an internal coach to promote individual growth, skill development, leadership development, and problem solving. BankUnited's extensive list of professional development opportunities earned us the 2025 Training Apex Award through Training Magazine. A total of 382 employees completed these programs in 2024. We believe mentoring is key to career growth and development. In 2024 280 employees enrolled in our mentoring programs and a total of 1,102 mentoring hours were reported. Our employees rated their overall mentorship program satisfaction with a score of 4.8 stars out of 5 stars.

Communication & Engagement

Employee engagement is a key contributor to our success. The Company solicits employee feedback through periodic employee engagement surveys conducted by an outside firm. 87% of employees participated in our last engagement survey and 82% of participants responded favorably to questions designed to gauge the level of overall engagement. The Company schedules regular CEO update video calls, town hall meetings and other engagement programs such as the Leadership Chat Series, a live and interactive webinar with BankUnited executives and our employees. Our Kudos Employee Recognition platform encourages employees to recognize one another's contributions and accomplishments.

Available Information

Our website address is www.bankunited.com (http://www.bankunited.com). Our electronic filings with the SEC (including all Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports) are available free of charge on the website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information posted on our website is not incorporated into this Annual Report. In addition, the SEC maintains a website that contains reports and other information filed with the SEC. The website can be accessed at http://www.sec.gov.

An investment in our common stock is subject to risks inherent in our business. The material risks and uncertainties that management believes affect us are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below, together with all of the other information included or incorporated by reference herein. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair our business operations. If any of the events described in the risk factors should actually occur, our financial condition, results of operations and the value of our securities could be materially and adversely affected.

Strategic Risk

We may not realize the expected benefits of our business strategy.

Our fundamental business strategy is centered on building a leading regional commercial and small business bank, focused on relationship-based, granular and diversified business on both sides of the balance sheet. Our near-term strategic priorities include (i) improving the funding mix, primarily by growing core deposits and paying down high cost wholesale funding; (ii) improving risk adjusted returns by re-positioning the balance sheet away from typically lower yielding transactional business such as residential mortgages and organically growing core commercial loans, which are generally higher-yielding; (iii) managing credit quality; (iv) investing in organic growth capabilities while managing the rate of increase in expenses; and (v) maintaining robust capital and liquidity. Our ability to execute on these strategic priorities depends on a number of factors, many of which are outside of our direct control. Some of the factors that impact our ability to execute on our strategic priorities are (i) our ability to attract and retain talent; (ii) competition in our markets; (iii) fiscal, monetary and regulatory policy and the macro-economic environment; (iv) the health of our primary markets; and (v) the availability and cost of capital. There is no guarantee that we will be able to successfully execute our strategic plans and fundamental business strategy.

While acquisitions have not historically been a primary component of our business strategy, we may opportunistically consider potential acquisitions of financial institutions and complementary non-bank businesses. There are risks that may inhibit our ability to successfully execute such acquisitions, such as competition with other potential acquirers, the ability to obtain the required regulatory approvals in a timely matter or at all, the availability of capital and the successful integration of a consummated acquisition and realization of the expected benefits.

We face significant competition from other financial institutions and financial services providers, which may adversely impact our ability to execute on strategic objectives, our growth or profitability.

Although our geographic footprint is expanding, our business is currently concentrated in Florida and the New York tri-state area. Commercial and consumer banking in these markets is highly competitive. Our markets contain not only a large number of community and regional banks, but also a significant presence of the country's largest commercial banks. We compete with other state and national banks as well as savings and loan associations, savings banks and credit unions located in our markets as well as those targeting our markets digitally for deposits and loans. In addition, we compete with financial intermediaries, such as private credit funds, FinTech companies, consumer finance companies, marketplace lenders, mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies as well as major retailers, all actively engaged in providing various types of financial services. The variety of entities providing financial services to businesses and consumers, as well as the technologies and delivery channels through which those services are provided are rapidly evolving.

The financial services industry is likely to become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Increased competition among financial services companies may adversely affect our ability to market our products and services. Technology has lowered barriers to entry and made it possible for financial services providers to compete in our markets without a physical footprint and enabled non-bank providers to offer products and services traditionally provided by banks. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size or particular technology capabilities, many competitors may offer a broader range of products and services or may be able to offer better pricing for certain products and services than we can.

Our ability to compete successfully depends on a number of factors, including but not limited to (i) the ability to develop, maintain and build upon long-term customer relationships; (ii) our ability to pro-actively and quickly respond to technological change and emerging or unanticipated innovations in financial services; (iii) our ability to attract and retain talent; (iv) our ability to expand our market position or successfully enter new markets; (v) the scope, relevance and pricing of our products and services and our ability to respond quickly to changing customer preferences; (vi) the rate at which we introduce new products and services relative to our competitors; (vii) customer satisfaction with our level of service; and (viii) industry and general economic trends.

Failure to perform well in any of these areas or in general to successfully respond to the competitive pressures we face could make it harder for us to attract and retain customers and significantly weaken our competitive position, which could adversely affect our ability to achieve strategic objectives, our growth and profitability, which, in turn, could harm our business, financial condition and results of operations.

Major disruptive events such as but not limited to hurricanes, fires or other weather-related events, social or health-care crises such as pandemics, political or social unrest, government shutdowns, geopolitical conflict, terrorist activity or other natural or man-made disasters could disrupt our operations or otherwise have adverse impacts on our customers, our business and results of operations.

Our geographic markets in Florida and other coastal areas are particularly susceptible to severe weather, including hurricanes, flooding and damaging winds. The occurrence of a hurricane or other natural disaster, a man-made catastrophe such as terrorist activity, pandemic outbreaks and other health emergencies, political or social unrest, government shutdowns, geopolitical conflicts such as those currently occurring in the Middle East or Ukraine or other man-made or natural disasters could disrupt our operations or those of our clients or our work-force, result in damage to our facilities, jeopardize our ability to continue to provide essential services to our customers and negatively affect our customers and the local economies in which we operate. These events may lead to a decline in loan originations, an increase in deposit outflows, strain our liquidity position, reduce or destroy the value of collateral for our loans, particularly real estate, negatively impact the business operations of our customers, and cause an increase in delinquencies, foreclosures and loan losses. Our business, financial condition and results of operations may be materially, adversely impacted by these and other negative effects of such events.

Both physical and transitional risks related to climate change or societal and governmental responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers.

Concerns over the long-term impacts of climate change have led and may continue to lead to governmental efforts to mitigate those impacts; that governmental response could directly or indirectly impact our business or that of our customers. Consumers and businesses may change their behavior as a result of their concerns about climate change or in response to governmental efforts to address it. We and our customers may need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions and operating process changes. The impact on our customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. Among the impacts to us could be a drop in demand for our products and services, particularly in certain sectors. In addition, we could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. In particular, our clients' operations may be adversely impacted by the rising cost of property and casualty insurance related to physical risks brought on by weather events or climate change. Our efforts to take these risks into account in making lending and other decisions may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior. One of our primary market areas is the state of Florida, particularly in coastal areas; as such, we may have an increased vulnerability to the ultimate impacts of climate change as compared to some of our competitors.

We depend on our executive officers and other key and skilled personnel to execute our business strategy and could be harmed by the loss of their services or the inability to attract new talent.

We believe that our continued growth and future success will depend in large part on the skills of our senior management team and other key personnel. We believe our senior management team possesses valuable knowledge about and experience in the banking industry that could be challenging to replicate. The composition of our senior management team and our other key personnel may change over time. Although our Chairman, President and Chief Executive Officer has entered into an employment agreement with us, he may not complete the term of his employment agreement or renew upon expiration. Other members of our senior management team are not subject to employment agreements, and some members of our senior management team have reached or are approaching what might be considered normal retirement age. Our Board of Directors and senior management team are actively engaged in ongoing succession planning, however, our succession planning efforts may not be adequate to ensure continuity of qualified senior management. Our success also depends on the experience and skills of other key personnel and on their relationships with the customers and communities they serve. Competition, general labor market dynamics and the evolving transition around remote and hybrid work may also present challenges in recruiting and retaining talent. The loss of service of one or more of our executive officers or key personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition or operating results.

The actual or perceived financial stability of other financial institutions and in particular other regional and mid-size banks could adversely affect our business, market valuation and results of operations.

The actual or perceived financial instability of one or more other financial institutions, particularly but not necessarily limited to other regional and mid-size banks, may lead to a crisis in confidence in the financial system or particular sectors thereof, such as the regional and mid-size sector. This could lead to material unanticipated deposit outflows, threatening the safety and soundness of impacted financial institutions and/or significant market volatility and adversely impacting the stock prices of other publicly traded financial institutions, including the Company. Events such as these could materially adversely impact the Company’s liquidity, results of operations, business strategy, market valuation and capital. Moreover, the speed with which information spreads through news, social media and other sources on the Internet and the ease with which customers transact may amplify the onset of and negative effects from such perceptions.

We may need to raise additional capital in the future, and such capital may not be available when needed or at all.

BankUnited, Inc. as a BHC and BankUnited N.A. are required by Federal banking agencies to maintain specified levels of capital. At a minimum, our capital policy requires us to maintain capital sufficient to meet the “well-capitalized” standard established by capital adequacy guidelines and the regulatory framework for prompt corrective action. While we anticipate that our current capital resources will satisfy our capital requirements for the foreseeable future, we may, at some point need to raise additional capital to support current operations or continued growth. In addition, we may elect to raise capital for strategic reasons even when we are not required to do so. As a publicly traded company, the most likely source of additional capital is the issuance of equity or debt instruments in the capital markets. Our ability to raise capital on favorable terms, or at all, will depend on a variety of factors, many of which are outside of our control, including market conditions, credit availability, our credit rating and credit capacity, and marketability of our stock. Accordingly, we cannot be assured of being able to raise capital when needed or on favorable terms. In addition, if we needed to raise capital in the future, we may have to do so when many other financial institutions are also seeking to raise capital and would then have to compete with those institutions for investors. The inability to raise additional capital on favorable terms when needed could have a materially adverse effect on our business, financial condition and results of operations.

A downgrade of our credit rating could increase our cost of capital or place limitations on business activities.

NRSROs regularly evaluate us, and their ratings are based on a number of factors, including our financial strength and conditions affecting the financial services industry generally. In general, ratings agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset quality, business mix and level and quality of earnings and management, and we may not be able to maintain our current credit ratings. The ratings assigned to the Bank and the Company remain subject to change at any time, and it is possible that any ratings agency will take action to downgrade the Bank and the Company in the future. Additionally, ratings agencies may also make substantial changes to their ratings policies and practices, which may affect our credit ratings. A downgrade of our credit rating, particularly to a level below investment grade, could adversely impact the liquidity or value of our rated securities, our ability to access the capital or certain short-term funding markets, and our cost of capital. Additionally, certain commercial customers could be prohibited from placing deposits with us, impacting our liquidity position.

Evolving expectations of stakeholders including investors, customers, regulators, employees and ratings agencies with respect to our ESG practices and those of our customers may impose additional costs on us, impact our reputation in the market or expose us to emerging risks.

Divergent ideological and social views may create competing stakeholder, legislative, and regulatory scrutiny around ESG practices that may impact our reputation or operations or result in increased costs. We believe we have taken a balanced approach to these practices in consideration of the views of various stakeholders; however, stakeholder expectations and priorities, and in some cases externally imposed requirements around ESG, continue to evolve, are uncertain, and sometimes conflicting. If our ESG practices do not meet evolving rules and regulations or stakeholder expectations, then our reputation or our ability to attract or retain employees, customers and investors could be negatively impacted.

Credit Risk

As a lender, our business is highly susceptible to credit risk.

As a lender, we are exposed to the risk that our customers will be unable to repay their loans according to their terms and that the collateral securing the payment of their loans, if any, may be insufficient to ensure repayment. Credit losses are inherent in the business of making loans. We are also subject to credit risk that is embedded in our securities portfolio. Our credit risk management framework inclusive of our underwriting standards, procedures and policies may not prevent us from incurring substantial credit losses, particularly if economic or market conditions deteriorate. It is difficult to determine or forecast the many ways in which a decline in economic or market conditions may impact the credit quality of our assets.

Our ACL may not be adequate to cover actual credit losses.

We maintain an ACL that represents management's estimate of current expected credit losses, or the amount of amortized cost basis not expected to be collected, on our loan portfolio and the amount of credit loss impairment on our available for sale securities portfolio. Determining the amount of the ACL is complex and requires extensive judgment by management about matters that are inherently subjective and uncertain. The measurement of expected credit losses encompasses information about historical events, current conditions and reasonable and supportable economic forecasts. Factors that may be considered in determining the amount of the ACL include, but are not necessarily limited to, product or collateral type, industry, geography, internal risk rating, credit characteristics such as credit scores or collateral values, delinquency rates, historical or expected credit loss patterns and other quantitative and qualitative factors considered by management to have an impact on the adequacy of the ACL and the ability of borrowers to repay their loans. The adequacy of the ACL is also dependent on the effectiveness of the underlying models used in determining the estimate.

If management's assumptions and judgments prove to be incorrect, our credit loss models prove to be inaccurate or our processes and controls governing the determination of the amount of the ACL prove ineffective, our ACL may be insufficient and we may be required to increase our ACL. In addition, regulatory authorities periodically review our ACL and may require us to increase our provision for credit losses or recognize further loan charge-offs, based on judgments different from those of our management. Adverse or volatile actual or forecasted economic conditions could make management's estimate even more complex and difficult to determine. Any increase in our ACL will result in a decrease in net income and capital and could have a material adverse effect on our financial condition and results of operations. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Analysis of the Allowance for Credit Losses" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Allowance for Credit Losses."

We depend on the accuracy and completeness of information about clients and counterparties in making credit decisions.

In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.

The credit quality of a substantial portion of our assets and our results of operations are affected by residential and commercial real estate values and the level of residential and commercial real estate sales and rental activity.

A material portion of our loans are secured by residential or commercial real estate. The ability of our borrowers to repay their obligations and our financial results may therefore be adversely affected by changes in real estate values or in real estate market dynamics. Commercial real estate valuations in particular are highly subjective, as they are based on many assumptions. Such valuations can be significantly affected over relatively short periods of time by changes in business climate, economic conditions, demographic and market trends such as the impact of the ongoing shift to online shopping on retail properties or the evolution of remote and hybrid work on office properties. The value of commercial real estate and ability of commercial real estate borrowers to service debt is also sensitive to occupancy rates, the level of rents, regulatory and tax law changes, interest rates, other operating costs and, in many cases, the results of operations of businesses and other occupants of the real property. The properties securing income-producing investor real estate loans may not be fully leased at the origination of the loans or vacancies may arise during the terms of the loans. A borrower's ability to repay these loans is dependent upon stabilization of the properties and additional leasing through the life of the loan or the borrower's successful operation of a business. Weak economic conditions or demographic and market trends may impair a borrower's business operations, lead to elevated vacancy rates or lease turnover, slow the execution of new leases or result in falling rents. In particular, the office segment continues to be impacted by evolving trends around remote or hybrid work. The ultimate outcome of this trend and, as a result, the level of future demand for office space, remains uncertain. Lease turnover may increase, and tenants may reduce the amount of space leased when existing leases expire. Lower occupancy rates may lead to lower rents and lower valuations of office buildings. These factors could lead to deterioration in fundamentals underlying some of our commercial real estate loans. A sustained higher interest rate environment as well as rising property and casualty insurance and other operating costs have negatively impacted and may continue to negatively impact operating cash flows for some borrowers and the ability of those borrowers to service or refinance outstanding debt. These factors could result in further deterioration in the fundamentals underlying the commercial real estate market and the deterioration in value of some of our loans or the underlying collateral and ultimately to higher loan losses.

Similarly, residential real estate valuations can be impacted by housing trends, demographic trends, the availability of financing and property and casualty insurance at reasonable rates, the supply of available housing, governmental policy regarding housing and housing finance and general economic conditions affecting consumers. Real estate values may also be impacted by weather-related events and other man-made or natural disasters, or ultimately, by the impact of climate change.

We make credit and reserve decisions based on current and projected real estate values, the current conditions of borrowers, properties or projects and our expectations for the future. If real estate values or fundamentals underlying commercial or residential real estate decline, we could experience higher delinquencies and charge-offs beyond that provided for in the ACL.

The underlying collateral for a significant portion of the securities in our investment portfolio also consists of commercial or residential real estate. While we typically invest in senior tranches of these securities and their structures provide significant credit enhancement, the value and performance of underlying collateral is subject to the same risks described above. A deterioration in the value or performance of underlying collateral to an extent that credit enhancement inherent in the structure of the securities is insufficient to protect us from underlying collateral losses would result in the recognition of impairment losses and adversely impact our financial condition, results of operations and capital.

Since we engage in lending secured by real estate, we may be forced to foreclose on the collateral property and thereby be subject to risks associated with the ownership of commercial or residential real property, which could have an adverse effect on our business, financial condition or results of operations.

A significant portion of our loan portfolio is secured by residential or commercial real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans, in which case, we are exposed to the risks and costs inherent in the ownership of real estate. The amount that we, as a mortgagee, may realize after a default is dependent upon factors outside of our control, including: (i) general or local economic conditions; (ii) sub-market property values and supply/demand dynamics; (iii) interest rates; (iv) costs of ownership such as real estate taxes, insurance, maintenance; (v) governmental rules and regulations such as but not limited to zoning laws; (vi) natural or man-made disasters; (vii) political or social unrest, crime levels and other conditions in sub-markets or neighborhoods where property is located; and (viii) the ability to maintain occupancy particularly of commercial properties. Additionally, bank-owned properties obtained in foreclosure often sell at a discount to the price that might otherwise be obtained in the market.

The geographic concentration of our markets in Florida and the New York Tri-State area makes our business highly susceptible to local conditions in those markets.

While we are expanding our geographic footprint, our operations remain concentrated in Florida and the New York Tri-State area. Additionally, a significant portion of our loans secured by real estate are secured by properties in these geographic regions. The ability of our borrowers to repay their loans and the value of the collateral securing such loans may be significantly affected by economic and market conditions as well as demographic trends, the regulatory environment and tax policy in these regions, which could differ from broader national dynamics. Many of our customers in Florida have incurred or are likely to incur significantly higher property and casualty insurance premiums on their properties. This may adversely affect real estate sales and property values in Florida or negatively impact borrowers' operating cash flows or debt service capability. If, in the future, borrowers are unable to obtain property and casualty insurance, they may be unable to repay their loans in the event of catastrophic events such as hurricanes. Florida is more vulnerable to severe weather events like hurricanes than some regions of the country and may also be more susceptible in the future to the physical risks of climate change or rising sea levels. The New York region has, in the past, been a target of terrorist activity and social unrest; these events can have adverse impacts on our business operations and those of our customers. While we are not directly engaged in international business activities, businesses in both Florida and New York may be more likely than those in some other regions to be engaged in international trade and commerce, making them more susceptible to international economic disruption and unrest. Adverse regional demographic trends and tax or regulatory policy can also lead to a decline in demand for our loan or deposit products. Recently, the New York region has experienced population declines while Florida has experienced positive demographic trends.

Our portfolio of operating lease equipment is exposed to fluctuations in the demand for and valuation of the underlying assets. Many of these assets are in service to the fossil fuel industry, and subject to transition risks related to climate change.

Although we have been reducing our exposure to this business, our equipment leasing business is exposed to asset risk resulting from ownership of the equipment on operating lease. Asset risk arises from fluctuations in supply and demand for the underlying leased equipment. We are exposed to the risk that, at the end of the lease term or in the event of early termination, the value of the asset will be lower than expected, resulting in reduced future lease income over the remaining life of the asset or a lower sale value, which could lead to impairment charges or operating losses. A significant portion of our equipment under operating lease consists of railcars and other equipment used directly or indirectly by the fossil fuel industry. Demand for this equipment, rental rates and its valuation are heavily influenced by conditions in the energy industry and the impact of transition to a lower-carbon economy including related regulation and societal norms.

Interest Rate Risk

Our business is inherently highly susceptible to interest rate risk.

Our business and financial performance are materially impacted by market interest rates and movements in those rates. Since a high percentage of our assets and liabilities are interest bearing or otherwise sensitive in value to changes in interest rates, changes in rates, in the shape of the yield curve or in spreads between different types of rates can have a material impact on our financial condition and results of operations and the values of our assets and liabilities. Changes in the value of investment securities available for sale and certain derivatives directly impact equity through adjustments of accumulated other comprehensive income and changes in the values of certain other assets and liabilities may directly or indirectly impact earnings. Changes in the values of assets and liabilities brought about by changes in interest rates, even those that do not directly impact reported GAAP or regulatory capital levels, may impact investors' perceptions of the value of the Company, rating agency opinions, or customers' perceptions of the stability of the Company leading to unanticipated deposit outflows. Interest rates are highly sensitive to many factors over which we have no control and which we may not be able to anticipate, including general economic conditions and the monetary and fiscal policies of various governmental bodies, particularly the Federal Reserve Board. The impact of changes in interest rates on our business and financial performance may be exacerbated if the extent or pace of those changes are beyond historical norms.

Our earnings and cash flows depend to a great extent upon the level of our net interest income. Net interest income is the difference between the interest income we earn on loans, investments and other interest earning assets, and the interest we pay on interest bearing liabilities, such as deposits and borrowings. A flat or inverted yield curve or tightening credit spreads may limit our ability to add higher yielding assets to the balance sheet and reduce the spread between rates paid on interest bearing liabilities and those earned on interest earning assets, placing downward pressure on our net interest margin and net interest income. Our deposit costs tend to be correlated with short-term rates; increases in short-term interest rates or generally tightening liquidity conditions may exert upward pressure on our cost of deposits. Changes in interest rates can increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. If interest bearing liabilities mature or reprice more quickly than interest earning assets in a period of rising rates, net interest income will be reduced. If interest earning assets mature or reprice more quickly than interest bearing liabilities, falling interest rates could reduce net interest income. An increase in interest rates may also reduce the demand for loans and lower-priced deposit products, decrease loan repayment rates and negatively affect borrowers' ability to meet their obligations. A decrease in the general level of interest rates may affect us through, among other things, increased prepayments on higher-yielding fixed rate loans and mortgage-backed securities. Competitive conditions may also impact the interest rates we are able to earn on new loans or are required to pay on deposits, negatively impacting both our ability to grow loans and deposits and our net interest income. Our ability to manage interest rate risk could be negatively impacted by unpredictable behavior of depositors in various interest rate environments. A rapid or unanticipated increase or decrease in interest rates, changes in the shape of the yield curve or in spreads between rates could have an adverse effect on our net interest margin and results of operations.

We attempt to manage interest rate risk by monitoring and managing the rates, maturity, repricing, mix and balances of the different types of interest earning assets and interest bearing liabilities and through the use of hedging instruments; however, interest rate risk management techniques are not precise, and we may not be able to successfully manage our interest rate risk. The modeling techniques we use to manage interest rate risk are based on a wide variety of assumptions generally derived from historical data and patterns, and may fail to accurately predict the impact of future movements in interest rates on our financial performance. Assumptions about depositor behavior are integral to interest rate risk modeling and management; technological advances enabling depositors to move money more quickly and to do business with a wide variety of financial services providers not in physical proximity to those depositors as well as the evolving landscape of the financial services industry has made predictive modeling of depositor behavior increasingly difficult. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Interest Rate Risk" for a discussion on the methodology and assumptions used by the Company in managing its interest rate risk.

Liquidity Risk

A failure to maintain adequate liquidity could adversely affect our ability to sustain normal operations, our financial condition and results of operations.

Effective liquidity management is essential for the operation of our business. We require sufficient liquidity to meet customer loan requests, customer deposit maturities and withdrawals and other cash commitments under both normal operating conditions and under extraordinary or unpredictable circumstances. Our access to funding sources in amounts adequate to finance our activities on terms that are acceptable to us could be impaired by factors or events that affect us specifically, other financial institutions, or the financial services industry or economy generally. Factors that could detrimentally impact our access to liquidity at an acceptable price, or at all include, but are not limited to: (i) national, to a lesser extent global, and regional economic and market conditions; (ii) interest rates; (iii) competition for depositor funds from banks and other investment alternatives; (iv) the availability of sufficient collateral that is acceptable to the FHLB and the Federal Reserve Bank, both of which are significant sources of contingent liquidity for us; (v) fiscal and monetary policy; (vi) public and market perception of BankUnited specifically, peer banks and the banking sector more broadly; (vii) our ability to access the capital markets as a potential liquidity source; and (viii) regulatory requirements or changes. Our access to liquidity in the form of deposits may also be affected by the liquidity needs of our depositors. A substantial portion of our liabilities consist of deposit accounts that are payable on demand or upon several days' notice, while by comparison, the majority of our assets are loans, which cannot be called or sold in the same time frame. Although we have historically been able to replace maturing deposits and borrowings as necessary, we might not be able to replace such funds in the future. A failure to maintain adequate liquidity could materially and adversely affect our ability to sustain business operations, our financial condition or results of operations.

We may be subject to material unanticipated outflows of deposits, jeopardizing our ability to maintain sufficient liquidity to conduct normal business operations.

We are susceptible to internal or external circumstances, perceptions or events, some of which we may be unable to anticipate or control or may be of an unprecedented nature, that could lead to material unexpected deposit outflows. Depositors increasingly have the ability to move funds quickly and easily using digital channels. If a significant portion of our deposits were to be withdrawn within a short period of time, the Company’s liquidity, financial condition, results of operations and ability to sustain normal operations could be materially, adversely affected.

The FRB and the FHLB are important sources of both operating and contingent liquidity. If the availability of those liquidity sources were compromised, our business, financial condition or results of operations could be materially adversely affected.

The FRB and FHLB provide important sources of stable, reliable and specifically with respect to the FRB, emergency liquidity to banks including BankUnited. Should the availability, nature, design or provisions of the various liquidity facilities provided by these entities change materially, BankUnited's ability to access operating or contingent liquidity as needed could be adversely impacted. The availability of liquidity from these sources is also dependent on the nature and value, which could be negatively impacted by changes in interest rates or general economic and market conditions, of collateral BankUnited is able to provide and on their evaluation of the Bank's creditworthiness. A significant portion of collateral available to be pledged to the FHLB and FRB consists of loans and securities collateralized by residential and commercial real estate; the value of this collateral is subject to many of the same risks discussed above with respect to the value of real estate collateral for our loans. In 2023, the FHFA, the primary regulator of the FHLB system, completed a comprehensive review of the FHLB system. The review recommended a re-evaluation of many aspects of the regulatory and statutory framework governing the FHLB system and set forth some recommended revisions to that framework. Any future regulatory or legislative action resulting from the comprehensive review could impact the future amount, terms and availability of liquidity provided by the FHLBs to their members, including BankUnited. Our ability to access funds on a timely basis from the FRB and FHLB also depends on our operational readiness; while we test operational readiness regularly and believe our processes and procedures are adequate in this regard, a failure of those processes and procedures could compromise our ability to access needed liquidity.

A significant percentage of our deposits are commercial deposits, many of which are uninsured.

Our business strategy is heavily focused on commercial customers, and as such, a large percentage of our deposits are commercial deposits. Inherently, due to the design and purpose of FDIC deposit insurance, across the U.S. banking system and at BankUnited, a significant portion of commercial deposits are uninsured. While we offer programs and products to our commercial customers that allow them to increase the amount of their deposits that are insured, not all depositors choose to take advantage of these programs and products. Uninsured deposits may be more subject to unanticipated outflows than insured deposits, particularly during times of systemic or institution-specific stress.

Loss of deposits or a change in deposit mix could increase our funding costs.

Deposits are typically a relatively low cost and stable source of funding. We compete with banks and other financial service providers for customer funds; as a result, we could lose deposits in the future, clients may shift their deposits into higher cost products, or we may need to raise interest rates to avoid deposit attrition. Funding costs may also increase if deposits are replaced with wholesale funding. Higher funding costs reduce our net interest margin, net interest income, and net income. A portion of our deposit base consists of companies serving the residential real estate eco-system and is exposed to the overall health and level of activity in that eco-system. In a sustained high interest rate environment, the level of residential real estate activity would be expected to decline, which may lead to reduced deposit balances in this vertical.

The inability of BankUnited, Inc. to receive dividends from its subsidiary bank could have a material adverse effect on the ability of BankUnited, Inc. to make payments on its debt, pay cash dividends to its shareholders or execute share repurchases.

BankUnited, Inc. is a separate and distinct legal entity from the Bank, and the substantial majority of its revenue consists of dividends from the Bank. These dividends are the primary funding source for the dividends paid by BankUnited, Inc. on its common stock, the interest and principal payments on its debt and any repurchases of outstanding common stock. Various federal and state laws and regulations limit the amount of dividends that a bank may pay to its parent company. In addition, our right to participate in a distribution of assets upon the liquidation or reorganization of a subsidiary may be subject to the prior claims of the subsidiary’s depositors and other creditors. If the Bank is unable to pay dividends, BankUnited, Inc. might not be able to service its debt, pay its obligations, pay dividends on its common stock or make share repurchases.

Operational Risk

We rely on analytical and forecasting models and tools that may prove to be inadequate or inaccurate, which could adversely impact the effectiveness of our strategic planning, the quality of certain accounting estimates including the ACL, the effectiveness of our risk management framework including but not limited to credit, interest rate and liquidity risk monitoring and management and thereby our results of operations.

The processes we use to forecast future performance and estimate expected credit losses, including in hypothetical periods of stress, the effects of changing interest rates, sources and uses of liquidity, real estate values, and economic trends and indicators on our financial condition and results of operations depend upon the use of analytical and forecasting tools and models. These tools and models reflect assumptions that may prove inaccurate, particularly in times of market stress, volatility or other unforeseen or unprecedented circumstances. Furthermore, even if our assumptions are accurate predictors of future performance, the tools and models that utilize them may prove to be inadequate or inaccurate because of other flaws in their design or implementation. If these tools prove to be inadequate or inaccurate, our strategic planning processes, risk management and monitoring framework, earnings and capital may be adversely impacted.

New lines of business, new products and services or strategic project initiatives may subject us to additional operational risks, and the failure to successfully implement these initiatives could affect our reputation and results of operations.

From time to time, we may launch new verticals or lines of business, expand into new geographies or offer new or modified banking products and services, which offerings may significantly increase operational, credit or reputational risks. Significant effort and resources may be required to manage and oversee the successful development, implementation, risk assessment, launch or scaling of new initiatives, which effort and resources may be diverted from other of our products or services. While we invest significant time and resources in developing, marketing and managing new products and services, there are material uncertainties that could adversely impact estimated implementation and operational costs or projected adoption, sales, revenues or profits, and no assurance can be given that any new offerings will be successfully developed, implemented, launched or scaled. New products and services may require startup and ongoing marketing costs and operational changes. The inability to successfully roll out new products and services may result in unmet profitability targets, increased costs, loss of customers or competitive advantage or other adverse impacts on our business and results of operations.

We are subject to the risk of fraud, theft or errors by employees or outsiders and to the impact of ineffective processes and controls, which may adversely affect our business, financial condition and results of operations.

We are exposed to the risk of fraud or theft by employees or outsiders and to operational errors, including clerical or record-keeping errors, the impact of ineffective processes and controls or faulty or disabled technology. Events such as these could cause us to suffer financial loss, the loss of customers, regulatory action and damage to our reputation.

Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence on automated systems to record and process transactions and our large transaction volume may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. The occurrence of any of these events could result in a diminished ability to operate our business as well as potential liability to customers and counterparties, reputational damage and regulatory intervention, which could adversely affect our business, financial condition or results of operations.

While we regularly monitor, evaluate and update our internal control framework including controls over financial reporting and corporate governance policies and procedures, any system of controls, however well designed and operated, can provide only reasonable, not absolute, assurances that the objectives of the controls are met. Failure of our system of controls and procedures could have a material adverse effect on our financial condition and results of operations.

We are dependent on our information technology and telecommunications systems. System failures or interruptions could have an adverse effect on our business, reputation, financial condition and results of operations.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology, internet and network connectivity and telecommunications systems. We rely on these systems and connectivity to process new and renewed loans, gather deposits, process customer and other transactions, provide customer service, facilitate collections, facilitate remote work and share data across our organization. The failure of these systems and technologies could interrupt our operations. We may be subject to disruptions of our information technology and telecommunications systems arising from events that are wholly or partially beyond our control which may give rise to disruption of service to customers and of our employees' ability to perform their jobs. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process new and renewed loans, gather deposits, process customer transactions, provide customer service, compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

We are highly dependent on third-party service providers for significant aspects of our business infrastructure, information technology, and telecommunications systems.

We rely on third parties to provide key components of our business infrastructure and major systems including, but not limited to, core banking systems such as loan servicing and deposit transaction processing systems, cloud-based data storage, our electronic funds transfer transaction processing, cash management, online banking services, ERP systems and computer and networking infrastructure. We have migrated a significant portion of our core information technology systems, data storage and customer-facing applications to private and public cloud infrastructure platforms. If we fail to administer these environments in a well-managed, secure and effective manner, or if these platforms become unavailable or do not meet their service level agreements for any reason, we may experience unplanned service disruption or unforeseen costs which could result in material harm to our business, reputation, financial condition and results of operations. We must successfully develop and maintain information, financial reporting, disclosure, data-protection and other controls adapted to our reliance on outside platforms and providers. In addition, service providers could experience system breakdowns or failures, outages, downtime, cyber-attacks, adverse changes to financial condition, bankruptcy, or other adverse conditions, which could have a material adverse effect on our business and reputation. While we have an established third-party risk management framework and select and monitor the performance of third-party vendors carefully, we do not control their actions. Any problems caused by these third parties, including those resulting from disruptions in communication services provided by a third party, failure of a third party to handle current or higher volumes, failure of a third party to provide services for any reason or poor performance of services, or the termination of a third-party software license or service agreement on which any of these systems is based, could adversely affect our ability to deliver products and services to our customers and otherwise conduct our business. In many cases, our operations rely heavily on the secure processing, storage and transmission of information and the monitoring of a large number of transactions on a minute-by-minute basis, and even a short interruption in service could have significant consequences. Financial or operational difficulties of a third-party service provider could adversely affect our operations if those difficulties interfere with the service provider's ability to serve us effectively or at all. Replacing these third-party service providers could create significant delays and expense. Accordingly, use of such third party service providers creates an unavoidable material inherent risk to our business operations.

We are at risk of cybersecurity incidents, defined as any unauthorized occurrence, or series of related unauthorized occurrences, on or conducted through our information systems, including those of third-party service providers that we rely on, that jeopardizes the confidentiality, integrity or availability of those information systems or information residing therein.

In the normal course of business, we collect, process, and retain sensitive and confidential client and customer information. Despite the security measures we and our third party service providers have in place, information systems may be vulnerable to cybersecurity incidents. Cybersecurity incidents can take many forms including cyber-attacks, security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events, especially because, in the case of any intentional breaches, the techniques used change frequently or may not be recognized until launched, and cyber-attacks can originate from a wide variety of sources.

We provide our customers the ability to bank remotely, including online, via mobile devices and over the telephone. The secure transmission of confidential information over the internet and other remote channels is a critical element of remote banking. Our network could be vulnerable to unauthorized access, computer viruses, social engineering schemes and other security breaches. In addition to cybersecurity incidents involving the theft of sensitive and confidential information, hackers have engaged in attacks against financial institutions, particularly denial of service attacks, designed to disrupt key business services such as customer-facing websites. We may be required to spend significant capital and other resources to protect against the threat of cybersecurity incidents, or to alleviate problems caused by cybersecurity incidents. Any cybersecurity incident involving the misappropriation, loss or other unauthorized disclosure of confidential customer information could severely damage our reputation, erode confidence in the security of our systems, products and services, expose us to the risk of litigation and liability, disrupt our operations and have a material adverse effect on our business.

In addition, we interact with and rely on financial counterparties for whom we process transactions and who process transactions for us and rely on other third-party service providers, as discussed above. Each of these third parties may be targets of the same types of cybersecurity incidents described above. The measures that they maintain to mitigate the risk of such activity may be different from our own and, in many cases, we do not have any control over the types of security measures they may choose to implement. We may incur costs as a result of data or security breaches of third parties with whom we do not have a significant direct relationship. As a result of financial entities and technology systems becoming more interdependent and complex, a cybersecurity incident, information breach or loss, or technology failure that compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including us.

Concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers and thereby reduce our revenues. If another financial institution experiences a material cybersecurity incident, even if we are not directly impacted in any way, negative publicity about the incident could impact confidence in the banking system generally, including in BankUnited.

See "Item 1C - Cybersecurity." for further discussion of measures we have taken to implement safeguards with respect to cybersecurity incidents.

The risk inherent in the adoption and implementation of new technologies, or the failure to keep pace with technological innovation may result in reputational harm, increased regulatory scrutiny, increased liability, heightened operational risk, an adverse impact on our ability to compete for loans and deposits and serve our customers, and an adverse impact on our business, financial condition and results of operations.

The financial services industry continues to experience rapid and significant technological change; financial products and services have become increasingly technology driven. Our ability to meet the needs of our customers competitively and in a cost-efficient manner is dependent on our ability to keep pace with and pro-actively and quickly respond to technological advances and to invest in relevant new technology as it becomes available. Many of our larger competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven products and services. The widespread adoption of new technologies, including, but not limited to, digitally enabled products and delivery channels, payment systems and technologies supporting back-office and risk management capabilities could require us to incur substantial cost and effort to acquire new technology platforms, modify or adapt our existing products and services, infrastructure and control environment, to upskill our workforce and to modify related operational processes and procedures. Our operational change management framework may fail to effectively mitigate the operational risk and disruption inherent in or to remedy any challenges associated with the adoption of new technology. Our third-party service providers also regularly incorporate technological changes in the platforms and services they provide to us; while we regularly monitor and test their impact, we may have limited or no control over their implementation and are reliant on the third-party service providers for successful development and implementation of these changes.

Generative and Agentic AI are emerging technologies that present both opportunities and risks to users. While our current use of AI is not material to our operations, its evolving use is subject to risks that algorithms and datasets are flawed or may be insufficient, poorly suited to purpose or contain biased information. The models used and results generated by AI and machine learning are not always transparent, which could increase the risk of unintended deficiencies. These deficiencies could result in inaccurate or ineffective decisions, predictions or analyses, which could subject our business to competitive harm, legal liability, increased regulatory scrutiny, reputational harm or other consequences that we may not be able to predict, any of which could negatively affect our business, financial condition and results of operations. The expanded adoption of AI may exacerbate the frequency and effectiveness of cybersecurity incidents. In addition, we expect our third-party service providers to increasingly incorporate AI capabilities into their product offerings; our third party risk management framework may be inadequate to fully mitigate the associated risks.

Our failure to keep pace with technological innovation, to successfully implement enhanced and emerging technologies or to fully realize their benefits could have a material adverse impact on our business, financial condition and results of operations.

The soundness of other financial institutions, particularly our financial institution counterparties, could adversely affect us.

Our ability to engage in routine funding and other transactions could be adversely affected by the stability and actions of other financial services institutions. Financial services institutions are interrelated as a result of trading, clearing, servicing, counterparty, and other relationships. We have exposure to an increasing number of financial institutions and counterparties. These counterparties include institutions that may be exposed to various risks over which we have little or no control.

Adverse developments affecting the overall strength and soundness of the financial services industry as a whole and third parties with whom we have important relationships could have a negative impact on our business even if we are not directly subject to the same adverse developments.

Regulatory, Legal and Compliance Risk

As a BHC, we and BankUnited operate in a highly regulated environment and the laws and regulations that apply to us, changes in them, or our failure to comply with them, may adversely affect us.

We operate in a highly regulated environment, and are subject to comprehensive statutory, legal and regulatory regimes. See Item 1 "Business—Regulation and Supervision." Intended to protect customers, depositors, the DIF, and the overall financial stability of the United States, these laws and regulations, among other matters, prescribe capital and liquidity requirements, impose limitations on the business activities in which we can engage, limit the dividend or distributions that BankUnited can pay to BankUnited, Inc., restrict the ability of institutions to guarantee our debt, and impose specific accounting and reporting requirements on us. Banking regulators may also from time to time focus on issues that may impact the pace of growth of our business, our ability to execute our business strategy and our operations. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional costs. In addition, federal banking agencies including the OCC, Federal Reserve Board and CFPB periodically conduct examinations of our business, including compliance with laws and regulations. Our failure to comply with these laws and regulations, and to effectively navigate this complex regulatory landscape, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our business activities, fines, remedial actions, administrative orders and other penalties, any of which could adversely affect our reputation, results of operations and capital base.

Further, federal, state and local legislators and regulators regularly introduce measures or take actions that would modify the regulatory requirements applicable to banks, their holding companies and other financial institutions. Changes in laws, regulations or regulatory policies could adversely affect the operating environment for the Company in substantial and unpredictable ways, increase our cost of doing business, impose new restrictions on the way in which we conduct our operations or add significant operational constraints that might impair our profitability. We cannot predict whether new legislation will be enacted and, if enacted, the effect that it, or any implementing regulations, would have on our business, financial condition or results of operations.

Changes in political administrations are likely to introduce new or modified regulations and related regulatory guidance and supervisory oversight. We expect the newly elected Trump administration will seek to implement a regulatory reform agenda that is significantly different than that of the previous administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies and at least temporarily injecting a heightened level of regulatory uncertainty. Newly enacted laws, regulations, or executive orders may significantly impact the regulatory framework in which we operate and may require material changes to our business processes in short time frames. Inability to meet new statutory requirements within the prescribed periods could adversely affect our business, financial condition and results of operations, as well as impact our reputation.

A number of new or modified rules or policies related to capital requirements for banks with more than $100 billion in assets, liquidity, and bank mergers and acquisitions have been proposed; if these or similar rules are enacted, there could be a material direct or indirect impact on our business including but not limited to our financial position, results of operations and capital. Given the initial posture of the incoming administration, there is significant uncertainty about whether certain of these proposed rules will be enacted in substantially their proposed forms, in modified form, or at all.

Our ability to expand through acquisition or de novo branching requires regulatory approvals, and failure to obtain them may restrict our growth.

Although acquisitions have not historically been a material part of our growth strategy, we may identify opportunities to complement and expand our business by pursuing strategic acquisitions of financial institutions and other complementary businesses. We must generally receive federal regulatory approval before we can acquire an institution or business. In determining whether to approve a proposed acquisition, federal banking regulators will consider, among a number of other qualitative and quantitative factors, the effect of the acquisition on competition, the impact on communities served by the acquiring and target institution, the impact on compliance with the CRA and BSA/AML laws and regulations, our financial condition, our future prospects, and the impact of the proposal on U.S. financial stability. Regulatory approvals may not be granted on terms that are acceptable to us, or at all. We may also be required to sell or close branches, or precluded from doing so, as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition. We may continue de novo branching as a part of our organic growth strategy and possibly enter into new markets through de novo branching. The failure to obtain regulatory approvals for potential future strategic acquisitions and de novo branches may impact our business plans and restrict our growth.

Financial institutions, such as BankUnited, face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The Bank Secrecy Act, the USA PATRIOT Act, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. Financial institutions are also required to comply with sanctions and programs administered by OFAC. Numerous regulatory agencies and other governmental departments are involved in enforcement and administration of these provisions.

We dedicate significant resources to ongoing compliance with these laws and regulations, continuously monitor and enhance as necessary related policies and procedures and maintain a robust automated anti-money laundering software solution. If our policies, procedures and systems are deemed deficient, we could be subject to liability, including significant civil monetary fines and to various regulatory actions such as restrictions on our ability to pay dividends, the inability to obtain approval of any contemplated acquisitions and restrictions on our ability to execute certain aspects of our business and expansion plans.

We are subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties.

The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The Department of Justice and other federal agencies are responsible for enforcing these laws and regulations. A successful challenge to an institution's performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity, and restrictions on expansion activity. Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class action litigation.

The FDIC's restoration plan and any future related increased assessments could adversely affect our earnings.

Insured depository institutions such as BankUnited are required to pay deposit insurance premiums to the FDIC, which maintains a DIF. If the current level of deposit premiums is insufficient for the DIF to meet its funding requirements in the future, special assessments or increases in deposit insurance premiums may be required. A change in BankUnited's risk classification within the FDIC's risk-based assessment framework could also result in increased deposit insurance premiums.

We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. There is also a risk that BankUnited’s deposit insurance premiums will further increase if failures of insured depository institutions further deplete the DIF or if the FDIC changes its view of the risk BankUnited poses to the DIF or otherwise increases the assessment rate adjustment applicable to BankUnited’s deposits. Any future additional assessments or increases in FDIC insurance premiums may adversely affect our financial condition or results of operations.

We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation, lead to monetary settlements or penalties and otherwise adversely affect our operations and financial condition.

Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in various information systems that we maintain and in those maintained by third party service providers. We are subject to complex and evolving laws and regulations governing the privacy and protection of personal information of individuals (including customers, employees, suppliers and other third parties). For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share nonpublic personal information about our customers with non-affiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with non-affiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program. Various state and federal banking regulators and states have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Ensuring that our collection, use, transfer and storage of personal information complies with all applicable laws and regulations increases our costs. Furthermore, we may not be able to ensure that all of our customers, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential or proprietary information of customers or others were to be mishandled or misused, we could be exposed to litigation or regulatory sanctions under personal information laws and regulations. Laws and regulations in this area are evolving, and there is a reasonable possibility that additional or modified laws or regulations applicable to us will be enacted. We may incur significant costs to comply with any such new or modified laws or regulations, or our efforts to do so may not be effective. Any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our operations and financial condition.

General Risk Factors

Our business may be adversely affected by conditions in the financial markets and economic conditions generally.

Heightened levels of economic uncertainty, volatility or deterioration in business or economic conditions generally, or more specifically in the principal markets in which we do business could have material adverse effects on our business, financial condition and results of operations. These effects may include but are not necessarily limited to: (i) a decrease in demand for our products and services; (ii) an increase in delinquencies and defaults by borrowers or counterparties leading to increased credit losses; (iii) a decline in the value of our assets; (iv) a decrease in earnings; (v) a decline in liquidity and (vi) a decrease in our ability to access the capital markets. While inflation trended down in the second half of 2024, it remains a key economic concern. Inflationary trends and a higher sustained interest rate environment could lead to an increase in our operating expenses or those of our clients, in turn impacting borrowers' ability to repay their obligations to us. Loan demand could also be negatively impacted. The imposition of tariffs or immigration reform could directly or indirectly adversely impact our clients businesses, and in turn demand for our loan and deposit products or borrowers' ability to repay their loans.

Damage to our reputation could adversely affect our operating results.

Our ability to originate new business and maintain existing customer relationships is highly dependent upon customer and other external perceptions of our business practices. Adverse perceptions regarding our business practices, or those of other regional banks, could damage our reputation in the customer, funding and capital markets, leading to difficulties in generating and maintaining business as well as obtaining financing. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, employee relations, corporate governance and acquisitions and from actions taken by government regulators and community organizations in response to those activities. The proliferation of social media may increase the likelihood that negative public opinion from any real or perceived events could impact our reputation and business. Adverse developments with respect to external perceptions regarding the practices of our competitors, or our industry as a whole, or the general economic climate may also adversely impact our reputation. These perceptions about us could cause our business to be negatively affected and exacerbate the other risks that we face. In addition, adverse reputational impacts on third parties with whom we have important relationships may adversely impact our reputation. Adverse reputational impacts or events may also increase our litigation risk.

Our enterprise risk management framework may not be effective in mitigating the risks to which we are subject, or in reducing the potential for losses in connection with such risks.

Our enterprise risk management framework is designed to identify, measure, mitigate and manage the risks to which we are subject, as well as any losses stemming from such risks. Although we seek to identify, measure, monitor, report, and control our exposure to such risks, and employ a broad and diversified set of risk monitoring and mitigation techniques in the process, those techniques are inherently limited in their ability to anticipate the existence or development of risks that are currently unknown and unanticipated. The ineffectiveness of our enterprise risk management framework in mitigating the impact of known risks or the emergence of previously unknown or unanticipated risks may result in our incurring losses in the future that could adversely impact our financial condition and results of operations.

Our reported financial results depend on management's selection and application of accounting policies and methods and related assumptions and estimates.

Our accounting policies and estimates are fundamental to our reported financial condition and results of operations. Management is required to make difficult, complex or subjective judgments in selecting and applying many of these accounting policies. In some cases, management must select an accounting policy or method from two or more alternatives, any of which may be reasonable under the circumstances, yet may result in us reporting materially different results than would have been reported under a different alternative. From time to time, the FASB and SEC may change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact our reported financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, resulting in a restatement of prior period financial statements. See Note 1 to the consolidated financial statements for more information about our accounting policies and recent accounting pronouncements that may have a material impact on our reported financial results.

Changes in taxes and other assessments may adversely affect us.

The legislatures and taxing authorities in the tax jurisdictions in which we operate regularly enact reforms to the tax and other assessment regimes to which we and our customers are subject. The effects of these changes and any other changes that result from interpreting and implementing regulations or enactment of additional tax reforms cannot be quantified and there can be no assurance that any such reforms would not have an adverse effect upon our business. Tax laws are complex and subject to different interpretations by the taxpayer and relevant governmental taxing authorities, which are sometimes subject to prolonged evaluation periods until a final resolution is reached. In establishing a provision for income tax expense, filing returns and establishing the value of deferred tax assets and liabilities for purposes of its financial statements, the Company must make judgments and interpretations about the application of these inherently complex tax laws. If the judgments, estimates and assumptions the Company uses in establishing provisions, preparing its tax returns or establishing the value of deferred tax assets and liabilities for purposes of its financial statements are subsequently found to be incorrect, there could be a material effect on our financial condition and results of operations.

The price of our common stock may be volatile or may decline.

The price of our common stock may be volatile or may decline. The price of our common stock may fluctuate as a result of a number of factors, many of which are external events outside of management's control. In addition, the stock market is subject to broad or systemic fluctuations in share prices and trading volumes that affect the market prices of the shares of many companies, including BankUnited, Inc. Factors that could affect our stock price include but are not limited to: (i) actual or anticipated changes in the Company's operating results or financial condition; (ii) performance of the regional banking sector; (iii) failure to meet analysts' estimates; (iv) actual or forecasted macro-economic conditions; (v) rating agency actions; (vi) changes in the competitive or regulatory environment; (vii) actions by large institutional shareholders or other market participants; (viii) events, circumstances or perceptions impacting the financial services sector broadly and (ix) negative publicity about us or other regional banks.

Further downgrades of the U.S. credit rating or a government shutdown could negatively impact economic conditions generally and as a result, our business, results of operation and financial condition.

The U.S. Government's sovereign credit rating was downgraded by a NRSRO in 2023. The impact of future downgrades of the U.S. sovereign credit rating or deterioration in its perceived creditworthiness could adversely affect the U.S. and global financial markets and economic conditions. In addition, disagreement over the federal budget has caused and may cause the U.S. federal government to essentially shut down for periods of time. Future events of this nature could have an adverse effect on our business, results of operations and financial condition.

Cybersecurity Risk Management and Strategy

We are committed to maintaining robust governance, oversight and management of cybersecurity risk. We have established and implemented processes, supported by written policies and procedures, to detect, assess, classify, respond to, report, track, and resolve cybersecurity threats or incidents. We have implemented systems and controls to address the information technology risks to our organization, our business partners and our customers. We employ a layered security approach leveraging diverse strategies including data loss prevention, identity and access management, network security, vulnerability management, end-point security and information security education and awareness, among others. As a federally regulated institution, the Company strongly supports an environment that facilitates and abides by the Confidentiality, Integrity, and Availability security principles.

Our risk-based policies, procedures, and practices are integrated into our overall risk management program and have been implemented across the organization to manage and mitigate risks from cybersecurity threats. We continuously assess risks from cybersecurity threats and monitor our information systems for potential vulnerabilities. We conduct regular reviews and tests of our information security program including penetration and vulnerability testing, and other exercises to evaluate the effectiveness of our program and improve our cybersecurity posture. These evaluations provide the Company with an unbiased view of its environment and controls. All identified cybersecurity incidents, technology outages or failures and vulnerabilities identified during these assessments are inventoried in a centralized tracking system and reported to impacted users and to management on a regular basis. A multi-step approach is applied to identify, prioritize, report, and remediate these vulnerabilities. Response and resolution times (commonly known as SLAs) are established for remediation of any incidents or outages detected, depending on their nature and potential impact. Our cybersecurity policies, procedures and practices are integrated with our overall risk management program by inclusion of cybersecurity and information systems metrics in our enterprise-wide comprehensive risk assessment process and risk appetite statement, the involvement of our Chief Risk Officer in the MAT and oversight of cybersecurity risk by our Enterprise Risk Management Committee and the Risk Committee of the Board of Directors.

We have engaged cybersecurity service provider experts and maintain an industry-leading incident response retainer to further enhance our cybersecurity safeguards and support our processes for assessing, identifying, and managing material risks from cybersecurity threats. Our third-party experts perform assessments that aid us in effectively detecting and responding to evolving cybersecurity threats and, in the event of a cybersecurity incident, our experts will assist us with incident response support, digital forensics and incident remediation.

The Company’s third-party risk management framework and processes have been aligned with regulatory requirements and with industry best practices to oversee and identify risks from cybersecurity threats associated with use of third-party service providers. We take a risk-based approach in performing cybersecurity assessments of third-party service providers at the time of onboarding, as part of regular ongoing monitoring, at the time of contract renewal, and upon detection of any increase in risk profile. Our information security division collaborates with our third-party risk management unit to evaluate the information technology and security programs of significant third party service providers. As applicable, these reviews evaluate the design and operational effectiveness of information technology and security related controls employed by service providers. In addition, the third party’s information technology and security policies and procedures are evaluated to form an overall opinion of the third-party service provider's technology and information security posture.

The Company has developed a training program to educate employees about its cybersecurity policies and standards, best practices, and potential threats to instill a culture of cybersecurity awareness and compliance throughout the organization. The training program includes, but is not limited to, ongoing and targeted training on topics such as social engineering, mobile security, data handling and protection, password security and incident reporting. All employees are required to participate in the training.

In 2022, Clarium Managed Services, LLC conducted a Cybersecurity Assessment for the Bank. The assessment gauged the overall Cybersecurity Risk Posture of the Bank and resulted in a score of 4.8 on a scale of 0 to 5. The next independent evaluation is planned for 2025. In the last three fiscal years, the Company has not identified any material cybersecurity incidents. No specific identified cybersecurity threats or incidents, including those resulting from any previous cybersecurity incidents, have materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, results of operations or financial condition. See Item 1A "Risk Factors" for a further discussion of our cybersecurity risks.

Cybersecurity Governance

The Risk Committee of the Board of Directors is ultimately responsible for oversight of cybersecurity risk, the Company's information risk management function, and the effective implementation of its cybersecurity program. The CISO reports routinely, typically at each of its regularly scheduled meetings, to the Risk Committee on matters including the Company's cybersecurity program, cybersecurity threats and the cybersecurity threat environment. The Risk Committee formally approves the Company's cybersecurity policy and program annually, and more frequently if material changes are adopted.

At the management level, the CISO leads the ongoing technical and business functions that include cybersecurity, information assurance, network security, systems engineering, and information security management. A dedicated information security division reports to the CISO. The CISO has over 30 years of experience in information security including physical, cyber, IT, disaster recovery, business continuity planning, secure software development, and cloud services and security, among others. The CISO holds multiple designations from the International Information System Security Certification Consortium, including Certified Information Systems Security Professional and has been a member of various boards including IT, Cybersecurity and Enterprise Risk Committees. Organizationally, the CISO reports to the CRO and provides reporting directly to the Risk Committee of the Board of Directors.

The Company has designated the MAT to assess and oversee the management and reporting of identified potentially material cybersecurity threats or incidents. The MAT convenes when a qualifying cybersecurity threat is identified by the CIO, the CISO, or their designees in accordance with established processes and procedures. The MAT has the responsibility to determine whether a cybersecurity threat or incident is material and oversee appropriate reporting. The MAT is also responsible for communicating to the Risk Committee any material cybersecurity threats or incidents.

The CISO, CIO, CRO, CFO, CAO, and General Counsel comprise the MAT. Other SMEs or technical experts may advise, consult with and provide information to the MAT as needed. In addition to the specific subject matter expertise and experience of the CISO and CIO, these executives have broad financial, legal, risk management, industry, regulatory and SEC compliance, and general leadership experience, which enable the MAT to effectively carry out its responsibilities.

BankUnited's corporate headquarters is located in leased office space in Miami Lakes, Florida. We also lease office space in New York, New Jersey, certain other areas in Florida, Dallas and Atlanta. Our subsidiaries lease office space in Baltimore, Maryland and Scottsdale, Arizona. At December 31, 2024, we provided banking services at 55 banking centers located in Florida, New York and Texas. We believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future.

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 advice of legal counsel, the likelihood is remote that the 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.

The following discussion and analysis is intended to assist readers in understanding the consolidated financial condition and results of operations of BankUnited, Inc. and its subsidiary (the "Company", "we", "us" and "our") and should be read in conjunction with the consolidated financial statements, accompanying footnotes and supplemental financial data included herein. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed in the sections entitled "Forward-looking Statements" and "Risk Factors." We assume no obligation to update any of these forward-looking statements.

Management's discussion and analysis presents the more significant factors that affected our financial condition as of December 31, 2024, and results of operations for the year then ended, including in comparison to the prior year ended December 31, 2023. Refer to Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K filed with the SEC on February 20, 2024, for a discussion and analysis of the more significant factors that affected the year ended December 31, 2023, including in comparison to the year ended December 31, 2022.

Our Vision and Strategic Priorities

Our vision is to build a leading regional commercial and small business bank, with a distinctive value proposition based on strong service-oriented relationships, robust digital enabled customer experiences, and operational excellence with an entrepreneurial work environment that empowers employees to deliver their best. Our strategic priorities, focused on improving core profitability, include:

• Grow core customer relationships on both sides of the balance sheet;
• Continue to improve the funding profile - growth in core deposit relationships is paramount:
• Grow NIDDA as a percentage of total deposits
• Pay down high-cost wholesale borrowings;
• Improve the asset mix, transitioning to a mix of assets with higher risk-adjusted returns:
• As lower-yielding residential mortgages amortize and pay off, replace them with higher yielding core C&I and CRE loans within established risk parameters
• Continue to de-emphasize the BFG and Pinnacle portfolios;
• Play where we can win, focusing on sectors where our delivery model is a differentiator;
• Innovate with solutions that solve customer pain points;
• Invest in organic growth capabilities - people, processes, products and technology - while managing expense growth;
• Prioritize nimble technology architecture and digital capabilities;
• Retain the ability to pivot nimbly when opportunities arise;
• Maintain robust liquidity and capital levels;
• Continue to closely monitor and manage credit;
• While our primary growth strategy is organic, we will continue to monitor the M&A landscape.

Macro-Environmental Considerations

The macro-environment has been challenging for the banking industry over the last several years. The FRB rate hiking cycle that commenced in 2022 continued through the first half of 2023 before stabilizing. Although a series of FRB rate cuts totaling 1% in the aggregate took place beginning in September 2024, monetary policy remains generally restrictive. Three highly publicized regional bank closures in 2023 eroded confidence in the banking system, specifically with respect to regional and mid-size banks, leading to outflows of deposits from regional and mid-size banks, including BankUnited, to the largest money-center banks and to volatility in bank valuations. Deposit flows, liquidity and market perceptions have stabilized since those events, however, the impacts of those events and a volatile interest rate environment on bank balance sheets and margins, including those of BankUnited, are still evident and have influenced our Company's strategic priorities.

We made significant progress executing on our strategic priorities in 2024:

• The funding mix improved considerably for the year ended December 31, 2024:
• NIDDA grew by $781 million to 27% of total deposits.
• Non-brokered deposits grew by $1.4 billion and total deposits grew by $1.3 billion.
• Wholesale funding, including FHLB advances and brokered deposits, declined by $2.3 billion.
• The asset mix also improved in 2024:
• The core CRE and C&I loan segments grew by $470 million and mortgage warehouse grew by $153 million. The pace of C&I growth over the course of 2024 was impacted by an increased level of payoffs and rationalization of non-relationship credits.
• The residential, franchise, equipment and municipal finance portfolios declined by a combined $959 million.
• Primarily due to those balance sheet compositional changes, for the year ended December 31, 2024, the net interest margin, calculated on a tax-equivalent basis, improved to 2.73% from 2.56% for the year ended December 31, 2023.
• Capital and liquidity were robust:
• Consolidated CET1 capital was 12.0% and pro-forma CET1, including accumulated other comprehensive income, was 10.9% at December 31, 2024.
• Total same day available liquidity was $15.5 billion at December 31, 2024.

Some of the challenges we face in executing on our strategic priorities, some of which may impact the banking industry more broadly, include:

• Execution of our strategic objectives is highly dependent on our ability to grow core client relationships. Competition for deposits and loans in our markets is intense with respect to the variety and quality of products and services offered, delivery channels, service levels and pricing. The economic health of our primary markets, monetary and fiscal policy, our ability to attract and retain talent and our ability to deliver technology and product solutions will impact execution of these objectives.
• The future trajectories of the macro-economy, interest rates, and monetary and fiscal policy are uncertain. Additionally, with a new administration in place, there is uncertainty around the impact of a variety of potential policy and regulatory changes. The impact of these macro factors on our customers and prospective customers also impacts us. If macro conditions are less supportive than we currently anticipate, we may be less successful in executing our strategic priorities.

See "Item 1A - Risk Factors" for additional discussion of risks to the execution of our strategic priorities.

2024 Performance Highlights:

In evaluating our financial performance, we consider improvement in the funding mix and the composition of earning assets, the level of and trends in net interest income and the net interest margin, the cost of deposits, trends in 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 analyze these ratios and trends against our own historical performance, our expected performance, our risk appetite and the financial condition and performance of comparable financial institutions.

Highlights include:

• Net income for the year ended December 31, 2024, was $232.5 million, or $3.08 per diluted share, compared to $178.7 million, or $2.38 per diluted share for the year ended December 31, 2023.Results for the year ended December 31, 2023 were negatively impacted by a $35.4 million FDIC special assessment, pre-tax. This item reduced net income by $26.2 million and EPS by $0.35 for the year ended December 31, 2023.
• ROAA improved to 0.66% for the year ended December 31, 2024 from 0.49% for the year ended December 31, 2023; ROAE improved to 8.49% from 7.01%.
• The net interest margin, calculated on a tax-equivalent basis, expanded by 0.17%, to 2.73% for the year ended December 31, 2024 from 2.56% for the year ended December 31, 2023. The increase in the net interest margin was primarily a result of balance sheet repositioning, particularly an improved funding mix. The following chart provides a comparison of net interest margin, the average yield on interest earning assets and the average rate paid on interest bearing liabilities for the years ended December 31, 2024 and 2023 (on tax equivalent basis):
• Consistent with industry trends, higher prevailing interest rates and restrictive monetary policy, the average cost of total deposits increased by 0.46% to 3.01% for the year ended December 31, 2024, from 2.55% for the year ended December 31, 2023, although the average cost of deposits has declined over the latter half of the year. The spot APY of total deposits declined to 2.63% at December 31, 2024 from 3.18% at December 31, 2023, reflecting the declines in the fed funds rate in the latter half of the year and an improved deposit mix.
• The following charts illustrate the composition of deposits at the dates indicated:
• NIDDA grew by 11%, or $781 million during the year ended December 31, 2024. Total deposits grew by $1.3 billion and non-brokered deposits grew by $1.4 billion. Average NIDDA increased by $148 million for the year ended December 31, 2024.
• Loan portfolio composition shifted from residential to core commercial categories during the year ended December 31, 2024. Residential, franchise, equipment and municipal finance portfolios declined by a combined $959 million while the core C&I and CRE categories grew by $470 million for the year ended December 31, 2024, all reflective of our balance sheet repositioning strategy.
• The loan to deposit ratio declined to 87.2% at December 31, 2024, from 92.8% at December 31, 2023.
• The net charge-off ratio for the year ended December 31, 2024, was 0.16%, a level we consider to be relatively low. The NPA ratio at December 31, 2024 was 0.73%, including 0.10% related to the guaranteed portion of non-performing SBA loans.
• The ratio of the ACL to total loans increased to 0.92% at December 31, 2024, from 0.82% at December 31, 2023. The ACL to loans ratio for commercial portfolio sub-segments including C&I, CRE, franchise finance and equipment finance was 1.37% at December 31, 2024 and the ACL to loans ratio for CRE office loans was 2.30%.
• At December 31, 2024, CET1 was 12.0% and pro-forma CET1, including accumulated other comprehensive income, was 10.9%. The ratio of tangible common equity/tangible assets increased to 7.8%. The charts below present the Company's and the Bank's regulatory capital ratios at the dates indicated:

BankUnited, Inc.

BankUnited, N.A.

• Book value and tangible book value per common share grew to $37.65 and $36.61, respectively, at December 31, 2024, from $34.66 and $33.62, respectively, at December 31, 2023.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry. Application of these principles requires management to make complex and subjective estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable and appropriate under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates. The most significant estimate impacting the Company's financial statements is the ACL.

Accounting policies are an integral part of our financial statements. A thorough understanding of these accounting policies is essential when reviewing our reported results of operations and our financial position. We believe that the critical accounting policies and estimates discussed below involve a heightened level of management judgment due to the complexity, subjectivity and sensitivity involved in their application.

Note 1 to the consolidated financial statements contains a further discussion of our significant accounting policies.

ACL

The ACL represents management's estimate of current expected credit losses, or the amount of amortized cost basis not expected to be collected, on our loan portfolio and the amount of credit loss impairment on our AFS securities portfolio. Determining the amount of the ACL is considered a critical accounting estimate because of its complexity and because it requires extensive judgment and estimation. Estimates that are particularly susceptible to change that may have a material impact on the amount of the ACL include:

• our evaluation of current conditions;
• our determination of a reasonable and supportable economic forecast or weighting of various forecast paths and selection of the reasonable and supportable forecast period;
• our evaluation of historical loss experience and selection of historical loss data used in formulating our ACL estimate; since we have limited company specific historical loss data, our modeling techniques also leverage broad external data sets for this purpose;
• our evaluation of changes in composition and characteristics of the loan portfolio, including internal risk ratings;
• our estimate of expected prepayments;
• the value of underlying collateral, which may impact loss severity and certain cash flow assumptions for collateral-dependent, criticized and classified loans; in the current environment, especially with respect to certain commercial real estate sectors like office, current and projected collateral values may be particularly challenging to estimate;
• our selection and evaluation of qualitative factors; and
• our estimate of expected cash flows on AFS debt securities in unrealized loss positions.

Our selection of models and modeling techniques may also have a material impact on the estimate.

Note 1 to the consolidated financial statements describes the methodology used to determine the ACL.

Recent Accounting Pronouncements

See Note 1 to the consolidated financial statements for a discussion of recent accounting pronouncements.

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, 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.

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):

(1) On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $12.2 million, $13.4 million and $12.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. The tax-equivalent adjustment for tax-exempt investment securities was $3.3 million, $3.6 million and $3.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(2) At fair value except for securities held to maturity.

Increases and decreases in interest income, calculated on a tax-equivalent basis, and interest expense result from changes in average balances (volume) of interest earning assets and liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interest earned on our interest earning assets and the interest incurred on our interest bearing liabilities for the years indicated. The effect of changes in volume is determined by multiplying the change in volume by the previous year's average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the previous year's volume. Changes applicable to both volume and rate have been allocated to volume (in thousands):

Net interest income, calculated on a tax-equivalent basis, was $929.8 million for the year ended December 31, 2024, compared to $890.8 million for the year ended December 31, 2023, an increase of $39.0 million. The increase was comprised of increases in tax-equivalent interest income and interest expense of $66.1 million and $27.1 million, respectively.

Increases in interest income for the year ended December 31, 2024 compared to the year ended December 31, 2023 reflected rising yields on interest earning assets that more than offset the decline in average interest earning assets. Similarly, increases in interest expense for the year ended December 31, 2024 compared to the year ended December 31, 2023, resulted from increases in the cost of interest bearing liabilities that more than offset the decline in average interest bearing liabilities.

The net interest margin, calculated on a tax-equivalent basis, increased to 2.73% for the year ended December 31, 2024, from 2.56% for the year ended December 31, 2023. The increase in the net interest margin for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily a result of balance sheet repositioning, particularly an improved funding mix. For the year ended December 31, 2024 compared to the year ended December 31, 2023, average NIDDA grew by $148 million while average FHLB advances declined by $2.5 billion. Within interest bearing deposits, there was a shift from generally higher priced time deposits to generally lower priced forms of interest bearing deposits.

In part, increased yields on average interest earning assets as well as increases in the cost of deposits reflected the impact of a generally more sustained higher rate environment.

Further discussion of factors impacting the net interest margin for the year ended December 31, 2024 compared to the year ended December 31, 2023 follows:

• The tax-equivalent yield on loans increased to 5.78% for the year ended December 31, 2024, from 5.42% for the year ended December 31, 2023. This increase reflected the origination of new loans at higher rates, paydowns of lower-rate loans and balance sheet repositioning.
• The tax-equivalent yield on investment securities increased to 5.53% for the year ended December 31, 2024, from 5.33% for the year ended December 31, 2023. 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.
• The average cost of interest bearing deposits increased to 4.10% for the year ended December 31, 2024, from 3.52% for the year ended December 31, 2023. This increase primarily reflected the ongoing impact of higher prevailing market interest rates, which did not start to reverse until the latter part of 2024.
• The average rate paid on FHLB advances decreased to 4.15% for the year ended December 31, 2024, from 4.50% for the year ended December 31, 2023, primarily due to repayment of higher rate advances, partially offset by maturities of some cash flow hedges.

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):

The most significant factors impacting the provision for credit losses for the year ended December 31, 2024 included (i) risk rating migration and increases in certain specific reserves; and (ii) an increase in qualitative loss factors, partially offset by an improved economic forecast.

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 level of the ACL.

Non-Interest Income

The following table presents a comparison of the categories of non-interest income for the periods indicated (in thousands):

The losses on marketable equity securities during the years ended December 31, 2023 and 2022, were attributable to losses related to certain preferred equity investments.

The decrease in lease financing revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily attributable to the continued decline in the size of the operating lease equipment portfolio. Expense related to the depreciation of operating lease equipment reflected a corresponding decrease over these comparative periods. These declines are expected to continue.

The increase in other non-interest income for the year ended December 31, 2024, compared to the year ended December 31, 2023, reflected increases in BOLI income, higher loan-related and syndication fees and increased revenue from our customer derivative and commercial card businesses.

Non-Interest Expense

The following table presents components of non-interest expense for the periods indicated (in thousands):

The most significant reason for the year-over-year increase in compensation was an increase in variable compensation expense. This increase was related to the improved performance of the Company for 2024 compared to 2023 as well as to the impact of an increase in the Company's stock price on the valuation of liability classified share awards. Increased head count and routine salary increases also contributed to this trend.

The decrease in deposit insurance expense was primarily attributable to a $35.4 million FDIC special assessment incurred during the year ended December 31, 2023. An additional $5.2 million FDIC special assessment was incurred during the year ended December 31, 2024.

The decline in depreciation of operating lease equipment for the year ended December 31, 2024 was primarily attributable to the continued decline in the size of the operating lease equipment portfolio as discussed above.

The most significant factor impacting the increase in other non-interest expense for the year ended December 31, 2024, compared to the year ended December 31, 2023 was an increase in costs related to certain customer rebate and commission programs. This increase resulted primarily from an increase in balances participating in these programs. See Note 6 to the consolidated financial statements for more information about these costs.

Income Taxes

The provision for income taxes for the years ended December 31, 2024, 2023 and 2022 was $83.9 million, $58.4 million and $90.2 million, respectively. The Company's effective income tax rate was 26.52%, 24.64% and 24.03% for the years ended 2024, 2023 and 2022, respectively.

See Note 9 to the consolidated financial statements for more information about income taxes including a reconciliation of the Company's effective income tax rate to the statutory federal rate.

Analysis of Financial Condition

As we continued to execute on our balance sheet transformation strategy over the course of the year ended December 31, 2024, total deposits grew by $1.3 billion, $781 million of which was growth in NIDDA. Non-brokered deposits grew by $1.4 billion while wholesale funding, including FHLB advances and brokered deposits, declined by $2.3 billion. On the asset side of the balance sheet, although total loans declined by $336 million, the core C&I and CRE segments grew by $470 million and MWL grew by $153 million. Lower yielding residential loans declined by $628 million, and franchise, equipment, and municipal finance declined by a combined $331 million. The loan-to-deposit ratio improved to 87.2% at December 31, 2024 from 92.8% at December 31, 2023.

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):

Our investment strategy is 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. 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. Investment grade municipal securities provide liquidity and attractive tax-equivalent yields. We remain committed to keeping the duration of our securities portfolio short; relatively short effective portfolio duration helps mitigate interest rate risk. The estimated effective duration of the investment portfolio was 1.85 years and the estimated weighted average life of the portfolio was 5.6 years as of December 31, 2024. Approximately 69% of the securities portfolio is floating rate.

The investment securities AFS portfolio was in a net unrealized loss position of $405.6 million at December 31, 2024, compared to a net unrealized loss position of $534.8 million at December 31, 2023, improving by $129.2 million during the year ended December 31, 2024. Net unrealized losses at December 31, 2024 included $8.4 million of gross unrealized gains and $414.0 million of gross unrealized losses. Investment securities available for sale in unrealized loss positions at December 31, 2024 had an aggregate fair value of $6.7 billion. The unrealized losses resulted primarily from a sustained period of higher interest rates, and in some cases, wider spreads compared to the levels at which securities were purchased. None of the unrealized losses were attributable to credit loss impairments.

The external ratings distribution of our AFS securities portfolio at the dates indicated is depicted in the charts below:

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, a sector, 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 external 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 December 31, 2024. 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. The substantial majority of our investment securities are eligible to be pledged 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.

We have implemented a robust credit stress testing framework with respect to our non-agency securities. The following table presents subordination levels and average internal stress scenario losses for select non-agency portfolio segments at December 31, 2024:

While we have seen an increase in stress scenario losses for some securities over the last year, the level of subordination continues to provide more than sufficient coverage of stress scenario collateral losses, further supporting our determination that none of our securities are credit loss impaired. The scenario used to project stress scenario losses is generally calibrated to the level of stress experienced in the Great Financial Crisis. 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. 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.

Quarterly, prices obtained from primary third-party pricing services are validated by obtaining prices from an additional external source for most securities 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 quarterly basis. Prices evidencing unexpected quarter over quarter fluctuations, 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 or deviations of primary prices from those provided by secondary sources beyond established parameters are 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.

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 disclosure related to the fair values of investment securities, see Note 14 to the consolidated financial statements.

The following table shows the weighted average prospective yields based on current rates, categorized by scheduled maturity, for AFS investment securities as of December 31, 2024. 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%:

Loans

The following table shows the composition of the loan portfolio at the dates indicated (dollars in thousands):

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 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.

The following charts present the distribution of the commercial loan portfolio at the dates indicated (dollars in millions):

Commercial Real Estate:

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. Overall CRE exposure is modest in comparison to peer banks as presented in the charts below:

CRE / Total Loans(1)(2) CRE / Total Risk Based Capital(1)(2)

(1) BKU information as of December 31, 2024

(2) CRE peer median information based on September 30, 2024 Call Report data for banks with total assets between $10 billion and $100 billion

The following tables present the distribution of commercial real estate loans by property type, along with weighted average DSCRs and LTVs at the dates indicated (dollars in thousands):

The geographic mix of the portfolio has remained relatively consistent year-over-year, with the majority in Florida, although the geographic distribution has become somewhat more diverse with the percentage outside of Florida and the New York tri-state market growing.

The following table presents weighted average DSCR and weighted average LTV for the Florida and New York tri-state CRE portfolios, by property type, at December 31, 2024:

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 and on current levels of operating cash flows. DSCR calculations do not include pro-forma rental payments on in-place leases that are currently in initial rent abatement periods.

Included in New York tri-state multifamily loans in the tables above is approximately $116 million of rent regulated exposure as of December 31, 2024. The office portfolio outside of Florida and the New York tri-state area exhibits no particular geographic concentration.

The following table presents information about CRE loans maturing in the next 12 months by property type at December 31, 2024 (dollars in thousands). Only 11% of the total CRE portfolio, with a weighted average coupon rate of 4.34%, is fixed rate to the borrower and maturing in the next 12 months.

The following table presents scheduled contractual maturities of the CRE portfolio by property type at December 31, 2024 (in thousands):

The office segment totaled $1.8 billion at December 31, 2024. Medical office comprised approximately $350 million or 20% of the total office portfolio. The following charts present the sub-market geographic distribution of the Florida and NY tri-state office portfolios at December 31, 2024:

NY Tri-State by Sub-Market Florida by Sub-Market

The New York tri-state market encompasses approximately 23% of the office segment, with $169 million of exposure in Manhattan. As of December 31, 2024, the Manhattan office portfolio was approximately 95% occupied with 10% rent rollover expected in the next 12 months. The Florida office portfolio is predominantly suburban.

Office loans not secured by properties in Florida or the New York tri-state area comprised 20%, or approximately $351 million of the segment, and exhibited no particular geographic concentration. Estimated rent rollover of the total office portfolio in the next 12 months is approximately 12%; 15% for Florida and 9% for the New York tri-state area.

The construction portfolio includes an additional $88 million in office related exposure, $85 million of which is in New York.

Non-performing loans included $77 million of office exposure, including office exposure of $32 million in the construction portfolio, at December 31, 2024. Also see the section entitled "Asset Quality" below.

Commercial and Industrial

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 primary geographic markets. 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.

The following table presents the exposure in the C&I portfolio by industry, at December 31, 2024 (dollars in thousands):

(1) Includes $1.9 billion of owner occupied real estate.

Pinnacle provides essential-use equipment financing to state and local governmental entities on a national basis directly and through vendor programs and alliances, offering a full array of financing structures including equipment lease purchase agreements and direct (private placement) bond re-fundings and loan agreements.

The franchise and equipment finance portfolio is comprised of loans originated by Bridge including (i) franchise acquisition, expansion and equipment financing facilities and (ii) transportation equipment finance. We do not currently expect significant new loan originations in these segments.

Residential mortgages

The following table shows the composition of residential loans at the dates indicated (in thousands):

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 December 31, 2024, $963 million or 15% were secured by investor-owned properties.

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 upon default ("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 $1.0 billion at December 31, 2024. The Company is not the servicer of these loans.

The following charts present the distribution of the 1-4 single family residential mortgage portfolio by product type at the dates indicated:

See Note 4 to the consolidated financial statements for information about the geographic distribution of the 1-4 single family residential portfolio.

The following table presents a breakdown of the 1-4 single family residential mortgage portfolio, excluding government insured residential loans, categorized between fixed rate loans and ARMs at the dates indicated (dollars in thousands):

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Loan Maturities

The following table sets forth, as of December 31, 2024, the maturity distribution of our loan portfolio by category, excluding government insured residential loans. Commercial loans are presented by contractual maturity, including scheduled payments for amortizing loans but not incorporating estimated prepayments. Contractual maturities of residential loans have been adjusted for an estimated rate of voluntary prepayments, based on historical trends, current interest rates, types of loans and refinance patterns (in thousands):

The following table shows the distribution of those loans that mature in more than one year between fixed and adjustable interest rate loans as of December 31, 2024 (in thousands):

Excluded from the tables above are government insured residential loans. Resolution of these loans is generally accomplished through the re-securitization and sale of the loans after they re-perform, either through modification or self-cure, or through pursuit of the applicable guarantee.

Operating lease equipment, net

Operating lease equipment, net totaled $224 million and $372 million at December 31, 2024 and 2023, respectively. Operating lease equipment declined by $148 million during the year ended December 31, 2024 mainly as a result of opportunistic disposals. We expect the balance of operating lease equipment to continue to decline as this product offering is no longer considered core to our business strategy.

Bridge had exposure to the energy industry of $109 million at December 31, 2024. The majority of the energy exposure was in the operating lease equipment portfolio where energy exposure totaled $103 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 $2 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 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):

Total criticized and classified commercial loans increased by $247 million for the year ended December 31, 2024. Criticized and classified CRE loans increased by $286 million; $245 million of this increase was office exposure (including office related construction loans). As expected in the current environment, there has been some further risk rating migration within the CRE office category. Rent abatement periods, delays in completing build-out of leased space and in some cases lower occupancy levels have contributed to risk rating migration in the office portfolio. When office space is leased to new tenants, landlords frequently provide initial rent abatement periods. During these rent abatement periods, we do not include pro-forma rental payments to be made in the future under the terms of new leases in operating cash flows for the purposes of determining risk ratings. We believe we have now identified the population of potential problem CRE office loans.

The following table provides additional information about special mention and substandard accruing loans at the dates indicated (dollars in thousands). All of these loans are performing. Non-performing loans are discussed further in the section entitled "Non-performing Assets" below.

The following graphs present trends in criticized and classified loans by segment over the periods indicated (in millions):

Commercial Real Estate(1) Commercial(1)(2)

(1) Excludes SBA

(2) Includes C&I, Pinnacle, franchise and equipment finance, and MWL

The following charts present criticized and classified CRE loans by property type at the dates indicated (in millions):

The following graphs present delinquency trends by segment over the periods indicated (in millions):

Commercial Real Estate Commercial(1)

(1) Includes Pinnacle and franchise and equipment finance

Residential Loans

Excluding government insured loans, our residential portfolio consists largely of performing jumbo mortgage loans purchased through established correspondent channels with FICO scores above 720, full documentation, current LTVs of 80% or less and are primarily owner-occupied. 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 December 31, 2024:

FICO Distribution LTV Distribution Vintage

The following graph presents delinquency trends for residential loans, excluding government insured residential loans, over the periods indicated (in millions):

Residential Delinquencies

FICO scores are generally updated semi-annually and were most recently updated in the third quarter of 2024. LTVs are typically based on valuation at origination since we do not routinely update residential appraisals.

At December 31, 2024, the majority of the 1-4 single family residential loan portfolio, excluding government insured residential loans, was owner-occupied, with 80% primary residence, 5% second homes and 15% investment properties.

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 most recent stress test incorporating the FRB's CCAR severely adverse scenario was performed during the second quarter of 2024, based on the December 31, 2023 balance sheet.

The following charts summarize the results of this stress test, based on the FRB's CCAR severely adverse scenario (dollars in millions):

Total Loan Portfolio Stress Test Results(1)

CRE Portfolio Stress Test Results(2)

(1) Excludes Pinnacle municipal finance and mortgage warehouse lending.

(2) Construction loans are included in the chart based on their applicable property type.

Operating Lease Equipment, net

There were no operating leases internally risk rated substandard or worse at December 31, 2024. 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 years ended December 31, 2024, 2023, and 2022.

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 presents information about the Company's non-performing loans and non-performing assets at the dates indicated (dollars in thousands):

(1) For purposes of this ratio, commercial loans includes the C&I and CRE sub-segments, as well as franchise and equipment finance. Due to their unique risk profiles, MWL and municipal finance are excluded from this ratio.

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 $226 million and $277 million at December 31, 2024 and 2023, respectively.

The following graphs present trends in non-performing loans to total loans and non-performing assets to total assets over the periods indicated, as well as trends in net charge-offs.

Non-Performing Loans to Total Loans Non-Performing Assets to Total Assets

Net Charges-Offs to Average Loans

The following graph presents the trend in non-performing loans by portfolio segment over the periods indicated (in millions):

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 Buyout Loans, are generally placed on non-accrual status when they are 60 days past due. 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 60 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 a level of continued uncertainty about the general economy, evolving dynamics in some segments of the commercial real estate market, particularly the office sector, 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. If commercial real estate market dynamics in our primary markets worsen beyond our current expectations, the ACL and the provision for credit losses will increase in the future. Changes in the ACL may result from changes in current economic conditions including but not limited to unanticipated changes in interest rates or inflationary pressures, changes in our economic forecast, loan portfolio composition, commercial and residential real estate market dynamics and other 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 a factor based methodology and econometric 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 December 31, 2024 and 2023, we used a combination of weighted third-party provided economic scenarios in calculating the quantitative portion of the ACL. Each of these externally provided scenarios in fact represents the result of a probability weighting of thousands of individual scenario paths.

See Note 1 to the consolidated financial statements for more detailed information about our ACL methodology and related accounting policies.

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):

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The following table shows the distribution of the ACL at the dates indicated (dollars in thousands):

(1) Represents percentage of loans receivable in each category to total loans receivable.

The following table presents the ACL as a percentage of loans at the dates indicated, by portfolio sub-segment:

(1) For purposes of this ratio, commercial loans includes the C&I and CRE sub-segments, as well as franchise and equipment finance. Due to their unique risk profiles, MWL and municipal finance are excluded from this ratio.

Factors contributing to the change in the ACL during the year ended December 31, 2024, are depicted in the chart below (dollars in millions):

Changes in the ACL during the year ended December 31, 2024

As depicted in the chart above, the most significant drivers of the increase in the ACL for the year ended December 31, 2024, were (i) risk rating migration and increases in certain specific reserves and (ii) an increase in qualitative overlays ; partially offset by (iii) net charge-offs and (iv) an improved economic forecast. At December 31, 2024, the ratio of the ACL to loans was 0.92% compared to 0.82% at December 31, 2023. The ACL to loans ratio for commercial portfolio sub-segments including C&I, CRE, and franchise and equipment finance was 1.37% at December 31, 2024, up from 1.29% at December 31, 2023. The ACL to loans ratio for CRE office loans was 2.30% at December 31, 2024, compared to 1.18% at December 31, 2023. The increase in the ACL to loans ratio for the CRE office category for year ended December 31, 2024 was primarily attributable to risk rating migration, an increase in qualitative overlays, and an increase in certain specific reserves. Further discussion of changes in the ACL for select portfolio sub-segments follows:

• The ACL for the CRE portfolio sub-segment increased by $29.1 million during the year ended December 31, 2024, from 0.71% to 1.13% of loans, the substantial majority related to the office portfolio. The most significant reasons for the increase in the ACL for this segment were risk rating migration, increases in specific reserves and qualitative loss factors, in part offset by net charge-offs.
• The ACL for the commercial and industrial sub-segment, including owner-occupied commercial real estate, decreased by $4.5 million during the year ended December 31, 2024, from 1.60% to 1.54% of loans. The most significant reasons for the decrease in the ACL for this segment were a reduction in criticized and classified loans and net charge-offs.
• The ACL for the franchise and equipment finance sub-segment decreased by $8.5 million during the year ended December 31, 2024, from 2.85% to 1.12% of loans; primarily due to a decline in loan balances, including the payoff of one larger non-performing loan.
• The ACL for the residential and MWL segments increased by $4.4 million for the year ended December 31, 2024, mainly attributable to updated modeling assumptions for minimum levels of loss given default.

The estimate of the ACL at December 31, 2024, was informed by forecasted economic scenarios published in December 2024, 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 December 31, 2024, was modeled using a weighting of baseline, downside and upside third-party economic scenarios, with the highest weighting ascribed to the baseline scenario and lower weightings ascribed equally to the downside and upside scenarios.

Some of the high-level data points informing the baseline scenario, which was the scenario most heavily weighted, used in estimating the quantitative portion of the ACL at December 31, 2024, included:

• Labor market assumptions, which reflected national unemployment peaking at 4.2% and
• Annualized growth in national GDP troughing at 1.5%.

The above unemployment and GDP growth assumptions are provided to give a high level overview of the nature and severity of the baseline economic forecast scenario used in estimating the ACL. Numerous additional variables and assumptions not explicitly stated, including but not limited to detailed commercial and residential property forecasts, projected stock market volatility indices and a variety of additional 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, many of the economic 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

A breakdown of deposits at the dates indicated is shown below:

The Company has a diverse deposit book by industry sector. At December 31, 2024, our largest industry vertical was title insurance, with approximately $3.6 billion in total deposits. Deposits in the HOA vertical totaled $1.8 billion at December 31, 2024. Approximately 64% of our total deposits were commercial or municipal deposits at December 31, 2024.

Brokered deposits totaled $5.2 billion and $5.3 billion at December 31, 2024 and 2023, respectively. Brokered deposits are generally insured and typically a readily available source of funds, however, they are typically higher cost and in some circumstances, credit sensitive. We are strategically focused on reducing the level of brokered deposits in the future.

The following graph presents trends in the deposit mix and cost of deposits (in millions):

Non-interest bearing demand deposits grew by 11%, or $781 million during the year ended December 31, 2024. Total deposits grew by $1.3 billion and non-brokered deposits grew by $1.4 billion during the year ended December 31, 2024.

The following graph presents trends in the spot APY of total deposits compared to the upper bound of the federal funds target range:

The following table presents information about the Company's insured and collateralized deposits as of December 31, 2024 (dollars in thousands):

The estimated amount of uninsured deposits at December 31, 2024 and 2023, was $13.7 billion and $12.4 billion, respectively. Collateralized and affiliate deposits are included in these amounts. Time deposit accounts with balances of $250,000 or more totaled $779 million and $941 million at December 31, 2024 and 2023, respectively. The following table shows scheduled maturities of estimated uninsured time deposits as of December 31, 2024 (in thousands):

For additional information about Deposits, see Note 6 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 and maturities of outstanding FHLB advances, as of December 31, 2024 (dollars in thousands):

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 December 31, 2024 (dollars in thousands):

See Note 10 to the consolidated financial statements and "Interest Rate Risk" below for more information about derivative instruments.

Outstanding notes payable and other borrowings consisted of the following at the dates indicated (in thousands):

During the year ended December 31, 2023, the Bank purchased $11.5 million of outstanding senior notes in the open market at a price of $10.6 million, an implied yield of approximately 9%.

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 in both normal operating and stressed environments, 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 capacity, repurchase agreement capacity and a letter of credit with the FHLB provide additional sources of contingent liquidity. For the years ended December 31, 2024, 2023 and 2022, net cash provided by operating activities was $434 million, $657 million and $1.3 billion, respectively. The most significant contributors to the period over period declines in net cash provided by operating activities was a decline in cash proceeds from the sale of loans held for sale, due to less loan sale activity and fluctuations in the daily cash settlement of derivative positions centrally cleared through the CME.

Same day available liquidity includes cash, secured funding such as borrowing capacity at the Federal Home Loan Bank of Atlanta and the Federal Reserve, 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, repurchase agreements 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.

The following chart presents the components of same day available liquidity at December 31, 2024 and 2023 (in millions):

Same Day Available Liquidity

The increase in same day available liquidity as compared to December 31, 2023 reflected the decline in outstanding FHLB advances, increasing FHLB capacity. At December 31, 2024, the ratio of estimated insured and collateralized deposits to total deposits was 63%, compared to 66% at December 31, 2023, and the ratio of available liquidity to estimated uninsured, uncollateralized deposits was 150% compared to 152% at December 31, 2023. As a commercially focused bank, due to the inherent nature of commercial deposits and the fact that deposit insurance is designed primarily to protect consumers, a significant portion of our deposits are uninsured. We continue to market and educate our customers about products that enable them to obtain FDIC insurance on certain deposits exceeding the standard single depositor insurance limit, have implemented single depositor concentration limits and have reduced or eliminated exposure to sectors or depositors that have evidenced higher volatility.

Our ALM policy establishes limits or operating risk thresholds for a number of measures of liquidity which are monitored at least monthly by the ALCO and quarterly by the Board of Directors. Some of the measures currently used to dimension liquidity risk and manage liquidity are the ratio of available liquidity to uninsured/non-collateralized deposits, a wholesale funding ratio, 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 available on-balance sheet liquidity, the ratio of FHLB advances to total assets and large depositor concentrations. We also have single depositor relationship limits. Our liquidity management framework incorporates a robust contingency funding plan and liquidity stress test.

The following tables present some of the Company's liquidity measures, where applicable, their related policy limits and operating risk thresholds at the dates indicated:

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 cash obligations.

The following table presents the Company's material contractual cash requirements for the following 12 months, as of December 31, 2024 (in thousands):

(1) Includes interest to be paid on the outstanding contractual obligations.

At December 31, 2024, the Company had $4.0 billion in term deposits with a contractual maturity of 12 months or less. The majority of term deposits and FHLB advances are expected to roll over into new instruments; this amount therefore does not represent future anticipated cash requirements. Additionally, as discussed in Note 15 to the consolidated financial statements, the Bank had $262 million in outstanding commitments to fund loans and $4.7 billion in unfunded commitments under existing lines of credit at December 31, 2024. Many of these commitments are expected to expire without being fully funded and, therefore, also do not necessarily represent future cash requirements.

Capital

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.

See Note 13 to the consolidated financial statements for more information about the Company's and the Bank's regulatory capital ratios.

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 and its Risk Committee. The Board of Directors or its risk committee monitor compliance with these policies at least quarterly.

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. Simulation of changes in EVE in various interest rate environments is also a meaningful measure of interest rate risk.

Net Interest Income Simulation

The income simulation model analyzes interest rate sensitivity by projecting net interest income over 12- and 24-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 management 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, 300 and 400 basis point parallel shifts. In lower interest rate environments, we may not model more extreme declining rate scenarios and in certain macro-environments, we may model shocks of more than 400 basis points. Our ALM policy has established limits for the plus and minus 100 and 200 basis points shock scenarios. We also model a variety of dynamic balance sheet scenarios, various yield curve slopes, non-parallel shifts and alternative depositor behavior, beta and decay 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 December 31, 2024 and 2023:

EVE Simulation

The following table illustrates the modeled change in EVE in the indicated scenarios at December 31, 2024 and 2023:

All of the modeled results at December 31, 2024, are within ALM policy limits.

The Company uses many assumptions in estimating the impact of changes in interest rates on forecasted net interest income and EVE. Actual results may not be similar to the Company's projections due to many factors including but not limited to the timing and frequency of market rate changes, market conditions, unanticipated changes in depositor behavior and loan prepayment speeds, the shape of the yield curve, changes in balance sheet composition and the Company's actions in response to changing external and balance sheet dynamics. Some of the more significant assumptions used by the Company in estimating the impact of changes in interest rates on forecasted net interest income and EVE at December 31, 2024 were:

• Prepayment speeds for loans, with CPRs ranging from 6.6% to 11.5% depending on loan characteristics and the magnitude of the modeled rate shock;
• Prepayment speeds for investment securities, with CPRs ranging from 4.3% to 7.7% depending on individual security collateral and characteristics and the magnitude of the modeled rate shock;
• Deposit decay rates ranging between 16% and 19%;
• Overall non-maturity interest bearing deposit beta of 75%;

Derivative Financial Instruments and Hedging Activities

Management continually evaluates a variety of hedging strategies that are available to manage interest rate risk.

Interest rate derivatives designated as cash flow or fair value hedging instruments are tools we may use to manage interest rate risk. These derivative instruments are used to mitigate exposure to changes in interest cash flows or the fair value of financial instruments caused by fluctuations in benchmark interest rates, as well as to manage duration of liabilities.

The following tables provide information about the Company's derivatives designated as cash flow hedges as of December 31, 2024 (dollars in thousands):

(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 December 31, 2024, was $441 million. The short duration of our AFS investment portfolio (1.85 at December 31, 2024) also provides a natural offset from an interest rate risk perspective to the longer duration of the residential mortgage portfolio.

See Note 10 to the consolidated financial statements for additional information about derivative financial instruments.

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):

68

See the section entitled “Interest Rate Risk” included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, 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 as of December 31, 2024.

Changes in Internal Control over Financial Reporting

None.

Management's Report on Internal Control Over Financial Reporting

Management's report, which is included in Part II, Item 8 of this Form 10-K, is incorporated herein by reference.

Attestation Report of the Registered Public Accounting Firm

The effectiveness of the Company's internal control over financial reporting as of December 31, 2024, has been audited by Deloitte and Touche LLP, an independent registered public accounting firm, as stated in their report, which is included in Part II, Item 8 of this Form 10-K.