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New words:
APY, currency, effort, fluctuation, foreign, half, incentive, opportunistically, population, predominantly, program, slower, syndication, transformation, vest
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April, resetting, shared, title, vertical
Financial report summary
?Risks
- We may not realize the expected benefits of our business strategy.
- 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.
- Hurricanes and other weather-related events, social or health-care crises such as pandemics, political or social unrest, geopolitical conflict, terrorist activity, or other natural or man-made disasters could cause a disruption in our operations or otherwise have an adverse impact on our customers, our business and results of operations.
- 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.
- We depend on our executive officers and other key personnel to execute our long-term business strategy and could be harmed by the loss of their services or the inability to attract new talent.
- Evolving expectations of investors, customers, regulators and employees 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.
- The high profile 2023 failures of several regional banks and attendant events impacting the banking industry along with resulting media coverage eroded customer confidence in the banking system, particularly in regional and mid-size banks. We are subject to the risk of similar future events adversely impacting the banking industry broadly, and our Company.
- A downgrade of our credit rating could increase our cost of capital or place limitations on business activities.
- As a lender, our business is highly susceptible to credit risk.
- Our ACL may not be adequate to cover actual credit losses.
- We depend on the accuracy and completeness of information about clients and counterparties in making credit decisions.
- The credit quality of our loan portfolio and 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.
- 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.
- The geographic concentration of our markets in Florida and the New York Tri-State area makes our business highly susceptible to local economic conditions in those markets.
- 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.
- Our business is inherently highly susceptible to interest rate risk.
- A failure to maintain adequate liquidity could adversely affect our ability to sustain normal operations, our financial condition and 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.
- The Federal Reserve Bank 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.
- A significant percentage of our deposits are commercial deposits, many of which are uninsured.
- Loss of deposits or a change in deposit mix could increase our funding costs.
- 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.
- 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.
- 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 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 dependent on our information technology and telecommunications systems. System failures or interruptions could have an adverse effect on our business, financial condition and results of operations.
- We are dependent on third-party service providers for significant aspects of our business infrastructure, information technology, and telecommunications systems.
- A cybersecurity incident, which is 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.
- Failure to keep pace with technological changes could have a material adverse impact on our ability to compete for loans and deposits, and therefore on our financial condition and results of operations.
- The soundness of other financial institutions, particularly our financial institution counterparties, could adversely affect us.
- 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.
- Our ability to expand through acquisition or de novo branching requires regulatory approvals, and failure to obtain them may 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.
- We are subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties.
- The FDIC's restoration plan and any future related increased assessments could adversely affect our earnings.
- 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.
- Damage to our reputation could adversely affect our operating results.
- 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 business may be adversely affected by conditions in the financial markets and economic conditions generally.
- Our reported financial results depend on management's selection and application of accounting policies and methods and related assumptions and estimates.
- Changes in taxes and other assessments may adversely affect us.
- The price of our common stock may be volatile or may decline.
- We may not be able to attract and retain skilled employees.
- 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.
Management Discussion
- 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.
- (1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $3.1 million for the three months ended June 30, 2024, $3.2 million for the three months ended March 31, 2024, and $3.3 million for the three months ended June 30, 2023. The tax-equivalent adjustment for tax-exempt investment securities was $0.9 million for the three months ended June 30, 2024, $0.8 million for the three months ended March 31, 2024 and $0.9 million for the three months ended June 30, 2023.