UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended~~September 30, 2017~~March 31, 2020

o~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For the transition period from to~~

Commission File Number: 001-35039

BankUnited, Inc.

(Exact name of registrant as specified in its charter)



Delaware	27-0162450
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



14817 Oak Lane	Miami Lakes FL	FL	33016
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: ~~(305)~~ (305) 569-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company”~~company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filerý	☒	Accelerated filer	☐	~~Accelerated filer~~ o Emerging growth company	☐
Non-accelerated filero	☐	Smaller reporting companyo
☐			~~Emerging growth company~~ o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No ý☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class	~~November 6, 2017~~Trading Symbol	Name of Exchange on Which Registered
Common Stock, $0.01 Par Value	~~106,820,503~~BKU	New York Stock Exchange

The number of outstanding shares of the registrant common stock, $0.01 par value, as of May 5, 2020 was 92,389,643.

BANKUNITED, INC.

Form 10-Q

For the Quarter Ended ~~September 30, 2017~~March 31, 2020

TABLE OF CONTENTS

GLOSSARY OF DEFINED TERMS

The following acronyms and terms may be used throughout this Form 10-Q, including the consolidated financial statements and related notes.



ACI		Loans acquired with evidence of deterioration in credit quality since origination (Acquired Credit Impaired)
ACL		Allowance for credit losses
AFS		Available for sale
ALCO		Asset/Liability Committee
ALLL		Allowance for loan and lease losses
AOCI		Accumulated other comprehensive income
~~ARM~~		~~Adjustable rate mortgage~~
ASC		Accounting Standards Codification
ASU		Accounting Standards Update
BKU		BankUnited, Inc.
BankUnited		BankUnited, National Association
The Bank		BankUnited, National Association
Bridge		Bridge Funding Group, Inc.
Buyout loans		FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations
CARES Act		Coronavirus Aid, Relief, and Economic Security Act
CDO		Collateralized debt obligation
CECL		Current expected credit losses
CET1		Common Equity Tier 1 capital
~~CECL~~CFPB		~~Current expected credit losses~~Consumer Financial Protection Bureau
CLO		Collateralized loan obligations
CMBS		Commercial mortgage-backed securities
CME		Chicago Mercantile Exchange
CMOs		Collateralized mortgage obligations
~~Commercial Shared-Loss Agreement~~CPR		~~A commercial and other loans shared-loss agreement entered into with the FDIC in connection with the FSB Acquisition~~Constant prepayment rate
~~Covered assets~~CUSIP		~~Assets covered under the Loss Sharing Agreements~~Committee on Uniform Securities Identification Procedures
~~Covered loans~~DIF		~~Loans covered under the Loss Sharing Agreements~~Deposit insurance fund
DSCR		Debt Service Coverage Ratio
EPS		Earnings per common share
EVE		Economic value of equity
FASB		Financial Accounting Standards Board
FDIA		Federal Deposit Insurance Act
FDIC		Federal Deposit Insurance Corporation
~~FEMA~~FHA loan		Loan guaranteed by the Federal ~~Emergency Management Agency~~Housing Administration
FHLB		Federal Home Loan Bank
FICO		Fair Isaac Corporation (credit score)
FRB		Federal Reserve Bank
~~FSB Acquisition~~		~~Acquisition of substantially all of the assets and assumption of all of the non-brokered deposits and substantially all of the other liabilities of BankUnited, FSB from the FDIC on May 21, 2009~~
GAAP		U.S. generally accepted accounting principles
GDP		Gross Domestic Product
~~HAMP~~GNMA		~~Home Affordable Modification Program~~Government National Mortgage Association
HTM		Held to maturity
IPO		Initial public offering
IRS		Internal Revenue Service



ISDA		International Swaps and Derivatives Association
LGD		Loss Given Default
LIBOR		London InterBank Offered Rate
LIHTC		Low Income Housing Tax Credits
~~Loss Sharing Agreements~~		~~Two loss sharing agreements entered into with the FDIC in connection with the FSB Acquisition~~
LTV		Loan-to-value
MBS		Mortgage-backed securities
MSA		Metropolitan Statistical Area



~~MSRs~~NRSRO		~~Mortgage servicing rights~~Nationally recognized statistical rating organization
~~New Loans~~		~~Loans originated or purchased since the FSB Acquisition~~
~~Non-ACI~~		~~Loans acquired without evidence of deterioration in credit quality since origination~~
~~NSF~~		~~Non-sufficient funds~~
~~NYTLC~~NYSE		New York ~~City Taxi and Limousine Commission~~Stock Exchange
OCC		Office of the Comptroller of the Currency
OCI		Other comprehensive income
OREO		Other real estate owned
~~OTTI~~PCD		~~Other-than-temporary impairment~~Purchased credit-deteriorated
PD		Probability of default
Pinnacle		Pinnacle Public Finance, Inc.
PPP		Small Business Administration’s Paycheck Protection Program
Proxy Statement		Definitive proxy statement for the Company's 2019 annual meeting of stockholders
PSU		Performance Share Unit
~~Pinnacle~~QRMs		~~Pinnacle Public Finance, Inc.~~Qualified residential mortgages
REIT		Real Estate Investment Trust
ROU Asset		Right-of-use Asset
RSU		Restricted Share Unit
SBA		U.S. Small Business Administration
SBF		Small Business Finance Unit
SEC		Securities and Exchange Commission
~~Single Family Shared-Loss Agreement~~SOFR		~~A single-family loan shared-loss agreement entered into with the FDIC in connection with the FSB Acquisition~~Secured Overnight Financing Rate
TDR		Troubled-debt restructuring
Tri-State		New York, New Jersey and Connecticut
UPB		Unpaid principal balance
~~2014 Plan~~USDA		~~2014 Omnibus Equity Incentive Plan~~U.S. Department of Agriculture
VA loan		Loan guaranteed by the U.S. Department of Veterans Affairs
WARM		Weighted-average remaining maturity

iii

~~Table of Contents~~

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In thousands, except share and per share data)


	September 30, 2017			December 31, 2016			March 31, 2020			December 31, 2019
ASSETS
Cash and due from banks:
Non-interest bearing	$	34,883		$	40,260		$	8,905		$	7,704
Interest bearing	3,714			35,413			757,793			206,969
Interest bearing deposits at Federal Reserve Bank	254,004			372,640
Cash and cash equivalents	292,601			448,313			766,698			214,673
Investment securities available for sale, at fair value	6,893,472			6,073,584
Investment securities held to maturity	10,000			10,000
Investment securities (including securities recorded at fair value of $7,864,601 and $7,759,237)							7,874,601			7,769,237
Non-marketable equity securities	270,239			284,272			281,714			253,664
Loans held for sale	31,507			41,198			17,655			37,926
Loans (including covered loans of $537,976 and $614,042)	20,610,430			19,395,394
Allowance for loan and lease losses	(158,573		)	(152,953		)
Loans							23,184,278			23,154,988
Allowance for credit losses							(250,579		)	(108,671		)
Loans, net	20,451,857			19,242,441			22,933,699			23,046,317
FDIC indemnification asset	349,617			515,933
Bank owned life insurance	248,876			239,736			288,869			282,151
Equipment under operating lease, net	588,207			539,914
Deferred tax asset, net	23,910			62,940
Operating lease equipment, net							684,563			698,153
Goodwill and other intangible assets	77,857			78,047			77,663			77,674
Other assets	316,688			343,773			670,209			491,498
Total assets	$	29,554,831		$	27,880,151		$	33,595,671		$	32,871,293

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Demand deposits:
Non-interest bearing	$	3,096,492		$	2,960,591		$	4,599,337		$	4,294,824
Interest bearing	1,828,809			1,523,064			2,535,696			2,130,976
Savings and money market	9,964,242			9,251,593			10,323,899			10,621,544
Time	6,333,701			5,755,642			7,541,839			7,347,247
Total deposits	21,223,244			19,490,890			25,000,771			24,394,591
Federal funds purchased							—			100,000
Federal Home Loan Bank advances	4,871,000			5,239,348			5,144,409			4,480,501
Notes and other borrowings	402,828			402,809			428,579			429,338
Other liabilities	434,270			328,675			505,783			486,084
Total liabilities	26,931,342			25,461,722			31,079,542			29,890,514

Commitments and contingencies

Stockholders' equity:
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 106,821,902 and 104,166,945 shares issued and outstanding	1,068			1,042
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 92,406,294 and 95,128,231 shares issued and outstanding							924			951
Paid-in capital	1,492,790			1,426,459			987,757			1,083,920
Retained earnings	1,077,042			949,681			1,851,040			1,927,735
Accumulated other comprehensive income	52,589			41,247
Accumulated other comprehensive loss							(323,592		)	(31,827		)
Total stockholders' equity	2,623,489			2,418,429			2,516,129			2,980,779
Total liabilities and stockholders' equity	$	29,554,831		$	27,880,151		$	33,595,671		$	32,871,293

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

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

(In thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Interest income:
Loans	$	253,815		$	227,233		$	739,586		$	662,439		$	234,359		$	240,632
Investment securities	51,851			39,712			141,624			109,963			56,060			76,345
Other	3,777			3,036			10,606			8,850			3,720			4,852
Total interest income	309,443			269,981			891,816			781,252			294,139			321,829
Interest expense:
Deposits	45,919			30,968			120,161			86,427			82,822			97,421
Borrowings	22,260			17,278			60,209			51,939			30,741			33,507
Total interest expense	68,179			48,246			180,370			138,366			113,563			130,928
Net interest income before provision for loan losses	241,264			221,735			711,446			642,886
Provision for (recovery of) loan losses (including $261, $(445), $2,693 and $(1,119) for covered loans)	37,854			24,408			63,573			42,449
Net interest income after provision for loan losses	203,410			197,327			647,873			600,437
Net interest income before provision for credit losses													180,576			190,901
Provision for credit losses													125,428			10,281
Net interest income after provision for credit losses													55,148			180,620
Non-interest income:
Income from resolution of covered assets, net	6,400			8,883			22,066			26,426
Net gain (loss) on FDIC indemnification	(4,838		)	993			(14,174		)	(9,410		)
Service charges and fees	4,938			5,171			15,554			14,529
Gain (loss) on sale of loans, net (including $0, $(10,033), $(1,582) and $(14,895) related to covered loans)	2,447			(7,947		)	6,601			(7,360		)
Gain on investment securities available for sale, net	26,931			3,008			29,194			10,065
Deposit service charges and fees													4,186			3,830
Gain on sale of loans, net													3,466			2,936
Gain (loss) on investment securities, net													(3,453		)	5,785
Lease financing	13,287			11,188			40,067			32,762			15,481			17,186
Other non-interest income	4,161			3,779			12,055			10,118			3,618			6,518
Total non-interest income	53,326			25,075			111,363			77,130			23,298			36,255
Non-interest expense:
Employee compensation and benefits	58,327			55,162			178,386			166,374			58,887			65,233
Occupancy and equipment	18,829			18,867			56,689			57,199			12,369			13,166
Amortization of FDIC indemnification asset	45,225			38,957			135,351			116,711
Deposit insurance expense	5,764			4,943			16,827			12,866			4,403			4,041
Professional fees	2,748			3,884			12,573			10,119			3,204			7,871
Telecommunications and data processing	3,452			3,746			10,481			10,800
Depreciation of equipment under operating lease	8,905			6,855			25,655			20,004
Technology and telecommunications													12,596			11,168
Depreciation of operating lease equipment													12,603			11,812
Other non-interest expense	13,455			15,590			37,735			40,151			14,806			13,399
Total non-interest expense	156,705			148,004			473,697			434,224			118,868			126,690
Income before income taxes	100,031			74,398			285,539			243,343
Provision for income taxes	32,252			23,550			89,060			80,896
Net income	$	67,779		$	50,848		$	196,479		$	162,447
Earnings per common share, basic (see Note 2)	$	0.62		$	0.47		$	1.79		$	1.52
Earnings per common share, diluted (see Note 2)	$	0.62		$	0.47		$	1.79		$	1.50
Cash dividends declared per common share	$	0.21		$	0.21		$	0.63		$	0.63
Income (loss) before income taxes													(40,422		)	90,185
Provision (benefit) for income taxes													(9,471		)	24,213
Net income (loss)													$	(30,951	)	$	65,972
Earnings (loss) per common share, basic													$	(0.33	)	$	0.65
Earnings (loss) per common share, diluted													$	(0.33	)	$	0.65

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

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

(In thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Net income $ 67,779
$ 50,848
$ 196,479
$ 162,447
Other comprehensive income (loss), net of tax:

Unrealized gains on investment securities available for sale:

Net unrealized holding gain arising during the period 8,557
3,216
32,826
53,490
Reclassification adjustment for net securities gains realized in income (16,293 ) (1,820 ) (17,662 ) (6,090 )
Net change in unrealized gains on securities available for sale (7,736 ) 1,396
15,164
47,400
Unrealized losses on derivative instruments:

Net unrealized holding gain (loss) arising during the period (170 ) 5,055
(8,337 ) (34,948 )
Reclassification adjustment for net losses realized in income 1,210
2,264
4,515
7,896
Net change in unrealized losses on derivative instruments 1,040
7,319
(3,822 ) (27,052 )
Other comprehensive income (loss) (6,696 ) 8,715
11,342
20,348
Comprehensive income $ 61,083
$ 59,563
$ 207,821
$ 182,795



	Three Months Ended March 31,
	2020			2019

Net income (loss)	$	(30,951	)	$	65,972
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investment securities available for sale:
Net unrealized holding gain (loss) arising during the period	(213,160		)	21,617
Reclassification adjustment for net securities gains realized in income	(1,140		)	(3,173		)
Net change in unrealized gain on securities available for sale	(214,300		)	18,444
Unrealized losses on derivative instruments:
Net unrealized holding loss arising during the period	(80,814		)	(20,675		)
Reclassification adjustment for net (gains) losses realized in income	3,349			(2,001		)
Net change in unrealized losses on derivative instruments	(77,465		)	(22,676		)
Other comprehensive loss	(291,765		)	(4,232		)
Comprehensive income (loss)	$	(322,716	)	$	61,740

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

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Cash flows from operating activities:
Net income	$	196,479		$	162,447
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)							$	(30,951	)	$	65,972
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and accretion, net	(71,111		)	(90,360		)	(5,520		)	(11,418		)
Provision for loan losses	63,573			42,449
Income from resolution of covered assets, net	(22,066		)	(26,426		)
Net loss on FDIC indemnification	14,174			9,410
(Gain) loss on sale of loans, net	(6,601		)	7,360
Increase in cash surrender value of bank owned life insurance	(4,647		)	(2,973		)
Gain on investment securities available for sale, net	(29,194		)	(10,065		)
Provision for credit losses							125,428			10,281
Gain on sale of loans, net							(3,466		)	(2,936		)
(Gain) loss on investment securities, net							3,453			(5,785		)
Equity based compensation	14,337			13,418			3,637			6,473
Depreciation and amortization	45,204			38,971			10,319			18,171
Deferred income taxes	31,625			33,958			945			(1,972		)
Proceeds from sale of loans held for sale	126,778			121,968			191,783			107,216
Loans originated for sale, net of repayments	(109,588		)	(108,075		)	(13,036		)	(27,177		)
Other:
(Increase) decrease in other assets	15,743			(9,502		)	(25,028		)	293
Increase (decrease) in other liabilities	(33,546		)	44,708
Decrease in other liabilities							(194,044		)	(70,599		)
Net cash provided by operating activities	231,160			227,288			63,520			88,519

Cash flows from investing activities:
Purchase of investment securities available for sale	(2,355,872		)	(2,224,174		)
Proceeds from repayments and calls of investment securities available for sale	861,618			457,610
Proceeds from sale of investment securities available for sale	827,353			753,756
Purchase of investment securities							(945,793		)	(1,169,104		)
Proceeds from repayments and calls of investment securities							282,822			273,112
Proceeds from sale of investment securities							306,532			775,723
Purchase of non-marketable equity securities	(185,718		)	(178,813		)	(79,688		)	(88,188		)
Proceeds from redemption of non-marketable equity securities	199,751			115,388			51,638			78,413
Purchases of loans	(949,294		)	(936,882		)	(502,628		)	(305,354		)
Loan originations, repayments and resolutions, net	(192,075		)	(1,389,435		)	309,963			(147,435		)
Proceeds from sale of loans, net	98,404			120,537			9,332			8,334
Decrease in FDIC indemnification asset for claims filed	16,768			30,829
Acquisition of equipment under operating lease, net	(73,948		)	(52,399		)
Acquisition of operating lease equipment							—			(22,400		)
Other investing activities	(31,718		)	(19,577		)	(11,641		)	(12,598		)
Net cash used in investing activities	(1,784,731		)	(3,323,160		)	(579,463		)	(609,497		)
				(Continued)						(Continued)

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

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS ~~- UNAUDITED~~ (Continued)

(In thousands)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2020			2019
Cash flows from financing activities:
Net increase in deposits	1,732,354			1,897,808			606,180			205,060
Net (decrease) increase in federal funds purchased							(100,000		)	—
Additions to Federal Home Loan Bank advances	3,921,000			3,360,000			1,746,000			1,281,000
Repayments of Federal Home Loan Bank advances	(4,290,000		)	(2,150,000		)	(1,086,000		)	(1,051,000		)
Dividends paid	(68,583		)	(67,342		)	(20,775		)	(21,673		)
Exercise of stock options	61,519			222
Repurchase of common stock							(100,972		)	(39,974		)
Other financing activities	41,569			49,638			23,535			6,943
Net cash provided by financing activities	1,397,859			3,090,326			1,067,968			380,356
Net increase (decrease) in cash and cash equivalents	(155,712		)	(5,546		)
Net (decrease) increase in cash and cash equivalents							552,025			(140,622		)
Cash and cash equivalents, beginning of period	448,313			267,500			214,673			382,073
Cash and cash equivalents, end of period	$	292,601		$	261,954		$	766,698		$	241,451

Supplemental disclosure of cash flow information:
Interest paid	$	169,759		$	132,398		$	111,191		$	121,652
Income taxes paid, net	$	46,320		$	8,168		$	4,891		$	6,104

Supplemental schedule of non-cash investing and financing activities:
Transfers from loans to other real estate owned and other repossessed assets	$	6,738		$	11,679		$	4,096		$	—
Transfers from loans to loans held for sale							$	164,293		$	69,559
Dividends declared, not paid	$	23,045		$	22,482		$	21,927		$	21,264
Unsettled purchases of investment securities available for sale	$	107,500		$	—
Unsettled sales and purchases of investment securities, net							$	43,692		$	50,000

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

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

(In thousands, except share data)



	Common Shares Outstanding		Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at December 31, 2019	95,128,231		$	951		$	1,083,920		$	1,927,735		$	(31,827	)	$	2,980,779
Impact of adoption of ASU 2016-13	—		—			—			(23,817		)	—			(23,817		)
Comprehensive loss	—		—			—			(30,951		)	(291,765		)	(322,716		)
Dividends ($0.23 per common share)	—		—			—			(21,927		)	—			(21,927		)
Equity based compensation	687,008		7			7,666			—			—			7,673
Forfeiture of unvested shares and shares surrendered for tax withholding obligations	(143,368	)	(2		)	(4,418		)	—			—			(4,420		)
Exercise of stock options	60,000		1			1,528			—			—			1,529
Repurchase of common stock	(3,325,577	)	(33		)	(100,939		)	—			—			(100,972		)
Balance at March 31, 2020	92,406,294		$	924		$	987,757		$	1,851,040		$	(323,592	)	$	2,516,129

Balance at December 31, 2018	99,141,374		$	991		$	1,220,147		$	1,697,822		$	4,873		$	2,923,833
Comprehensive income	—		—			—			65,972			(4,232		)	61,740
Dividends ($0.21 per common share)	—		—			—			(21,264		)	—			(21,264		)
Equity based compensation	563,970		6			5,083			—			—			5,089
Forfeiture of unvested shares and shares surrendered for tax withholding obligations	(191,866	)	(2		)	(6,076		)	—			—			(6,078		)
Exercise of stock options	3,910		—			44			—			—			44
Repurchase of common stock	(1,113,085	)	(11		)	(39,963		)	—			—			(39,974		)
Balance at March 31, 2019	98,404,303		$	984		$	1,179,235		$	1,742,530		$	641		$	2,923,390

Common
Shares
Outstanding

Common
Stock

Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income

Total
Stockholders’
Equity
Balance at December 31, 2016 104,166,945
$ 1,042
$ 1,426,459
$ 949,681
$ 41,247
$ 2,418,429
Comprehensive income —
—
—
196,479
11,342
207,821
Dividends —
—
—
(69,118 ) —
(69,118 )
Equity based compensation 618,306
6
12,103
—
—
12,109
Forfeiture of unvested shares and shares surrendered for tax withholding obligations (267,457 ) (3 ) (7,268 ) —
—
(7,271 )
Exercise of stock options 2,304,108
23
61,496
—
—
61,519
Balance at September 30, 2017 106,821,902
$ 1,068
$ 1,492,790
$ 1,077,042
$ 52,589
$ 2,623,489

Balance at December 31, 2015 103,626,255
$ 1,036
$ 1,406,786
$ 813,894
$ 22,182
$ 2,243,898
Comprehensive income —
—
—
162,447
20,348
182,795
Dividends —
—
—
(67,444 ) —
(67,444 )
Equity based compensation 644,888
6
13,250
—
—
13,256
Forfeiture of unvested shares and shares surrendered for tax withholding obligations (139,718 ) (1 ) (483 ) —
—
(484 )
Exercise of stock options 10,000
—
222
—
—
222
Tax benefits from dividend equivalents and equity based compensation —
—
847
—
—
847
Balance at September 30, 2016 104,141,425
$ 1,041
$ 1,420,622
$ 908,897
$ 42,530
$ 2,373,090

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

6statements

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

Note 1 Basis of Presentation and Summary of Significant Accounting Policies

BankUnited, Inc. is a national bank holding company with one wholly-owned subsidiary, BankUnited, collectively, the Company. BankUnited, a national banking association headquartered in Miami Lakes, Florida, provides a full range of banking and related services to individual and corporate customers through 9074 banking centers located in 1514 Florida counties and 65 banking centers located in the New York metropolitan area at ~~September 30, 2017.~~March 31, 2020. The Bank also offers certain commercial lending and deposit products through national platforms.

In connection with the FSB Acquisition, BankUnited entered into two loss sharing agreements with the FDIC. The Loss Sharing Agreements consist of the Single Family Shared-Loss Agreement and the Commercial Shared-Loss Agreement. Assets covered by the Loss Sharing Agreements are referred to as covered assets or, in certain cases, covered loans. The Single Family Shared-Loss Agreement provides for FDIC loss sharing and the Bank’s reimbursement for recoveries to the FDIC through May 21, 2019 for single family residential loans and OREO. Loss sharing under the Commercial Shared-Loss Agreement terminated on May 21, 2014. The Commercial Shared-Loss Agreement continued to provide for the Bank’s reimbursement of recoveries to the FDIC through June 30, 2017 for all other covered assets, including commercial real estate, commercial and industrial and consumer loans, certain investment securities and commercial OREO. Pursuant to the terms of the Loss Sharing Agreements, the covered assets are subject to a stated loss threshold whereby the FDIC will reimburse BankUnited for 80% of losses related to the covered assets up to $4.0 billion and 95% of losses in excess of this amount, beginning with the first dollar of loss incurred.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, ~~they~~these do not include all of the information and footnotes required for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in BKU’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 are not necessarily indicative of the results that may be expected in future periods.

Certain amounts presented for prior periods have been reclassified to conform to the current period presentation.

Accounting Estimates

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and disclosures of contingent assets and liabilities. Actual results could differ significantly from these estimates.

Significant estimates include the ~~ALLL, the amount and timing of expected cash flows from covered assets and the FDIC indemnification asset,~~allowance for credit losses and the fair values of investment securities and other financial instruments. ~~Management has used information provided by third party valuation specialists to assist in the determination of the fair values of investment securities.~~

New Accounting Pronouncements Adopted During the Three Months Ended March 31, 2020

~~ASU No. 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~. The amendments in this ASU simplified several aspects of the accounting for share-based payment transactions. The Company adopted this ASU in the first quarter of 2017. The amendment requiring the recognition of excess tax benefits and deficiencies as income tax benefit or expense in the income statement as opposed to being recognized as additional paid-in-capital was applied prospectively and resulted in the recognition of $0.3 million and $3.2 million in excess tax benefits in the consolidated statement of income line item "Provision for income taxes" for the three and nine months ended September 30, 2017, increasing net income by the same amount in each period. The adoption had no impact on basic and diluted earnings per share for the three months ended September 30, 2017 and increased basic and diluted earnings per share by $0.02 and $0.03, respectively, for the nine months ended September 30, 2017. The Company retrospectively adopted the amendments requiring the classification of excess tax benefits and deficiencies with other income tax cash flows as operating activities and cash paid when directly withholding shares as financing activities in the accompanying consolidated statements of cash flows; the impact was not material. The Company elected to continue its practice of estimating the number of awards expected to vest in determining the amount of compensation cost to be recognized related to share based payment transactions.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

~~ASU No. 2017-08,~~ ~~Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.~~ The amendments in this ASU require certain premiums on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased as a discount will not be impacted. The Company early-adopted this ASU in the first quarter of 2017 with no material impact on the Company's consolidated financial position, results of operations or cash flows.

~~ASU No. 2016-06,~~ ~~Derivatives and Hedging (Topic 815):Contingent Put and Call Options in Debt Instruments.~~ The amendments in this ASU clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. A company performing the assessment under these amendments is required to assess the embedded call (put) options solely in accordance with a four-step decision sequence, without also considering whether the contingency is related to interest rates or credit risks. The Company adopted this ASU in the first quarter of 2017 with no impact on its consolidated financial position, results of operations or cash flows.

~~ASU No. 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,~~ an amendment to simplify the subsequent quantitative measurement of goodwill by eliminating step two from the goodwill impairment test. As amended, an entity recognizes an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. An entity still has the option to perform the qualitative test for a reporting unit to determine if the quantitative impairment test is necessary. The Company early adopted this ASU in the third quarter of 2017, concurrent with performance of its annual goodwill impairment test, ~~with no impact on its consolidated financial position, results of operations or cash flows~~.

~~ASU No. 2017-12,~~ ~~Derivatives and Hedging (Topic 815)~~: Targeted Improvements to Accounting for Hedging Activities. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness after initial qualification. For qualifying cash flow and net investment hedges, this means that the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness will be recorded in other comprehensive income (OCI), and amounts deferred in OCI will be reclassified to earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings. The Company will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. The new guidance also permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test, such as a regression analysis, if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. In addition, in order to better align an entity's risk management activities and financial reporting for hedging relationships, the ASU allows for more hedging strategies to be eligible for hedge accounting. From a disclosure standpoint, to help users of the financial statements better understand the effects of hedge accounting, the guidance requires revised tabular disclosures that focus on the effect of hedge accounting by income statement line, and eliminates today’s requirement to disclose hedge ineffectiveness because this amount is no longer separately measured. The Company early adopted this ASU during the quarter ended September 30, 2017 with no material impact on the Company's consolidated financial position, results of operations or cash flows.

~~Recent Accounting Pronouncements~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606),~~ ~~which will supersede the revenue recognition requirements in Topic 605,~~ ~~Revenue Recognition~~, and most industry-specific revenue recognition guidance throughout the Accounting Standards Codification. The amendments in this update affect any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts, including leases and insurance contracts, are within the scope of other standards. The amendments establish a core principle requiring the recognition of revenue to depict the transfer of goods or services to customers in an amount reflecting the consideration to which the entity expects to be entitled in exchange for such goods or services. The amendments also require expanded disclosures concerning the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. Financial instruments and lease contracts are generally outside the scope of the ASU as are revenues that are in the scope of ASC 860 "Transfers and Servicing", ASC 460 "Guarantees" and ASC 815 "Derivatives and Hedging". The FASB has issued subsequent ASUs to clarify certain aspects of ASU 2014-09, without changing the core principle of the guidance and to defer the effective date of ASU 2014-09 to annual periods and interim periods within fiscal years beginning after December 15, 2017. Although management has not finalized its evaluation of the impact of adoption of this ASU, substantially all of the Company's revenues have historically been, and are expected to continue to be, generated from activities that are outside the scope of the ASU. Therefore, management does not expect adoption to have a material impact on the Company's consolidated financial position, results of operations or cash flows.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

Service charges on deposit accounts, which totaled approximately $9.8 million for the nine months ended September 30, 2017, is the most significant category of revenue identified as within the scope of the ASU; management does not expect the amount and timing of recognition of such revenue to be materially impacted by adoption, which management expects to apply using the modified retrospective approach, whereby the cumulative effect of initially applying the amendments is recognized as an adjustment to opening retained earnings at the date of adoption.

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.~~ The amendments in the ASU that are expected to be most applicable to the Company (1) eliminate the available for sale classification for equity securities and require investments in equity securities (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, provided that equity investments that do not have readily determinable fair values may be re-measured at fair value upon occurrence of an observable price change or recognition of impairment, (2) eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, and (3) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. The amendments also clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity's other deferred tax assets, which is consistent with the Company's current practice. The amendments in this ASU are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2017 and will be adopted by means of a cumulative-effect adjustment to the balance sheet, except for amendments related to equity securities without readily determinable fair values, which will be applied prospectively. Although management has not finalized its evaluation of the impact of adoption of this ASU, adoption is not expected to have any impact on the Company's consolidated financial position or cash flows, other than a cumulative effect adjustment to reclassify any unrealized gains or losses related to equity securities from AOCI to retained earnings. The carrying value of equity investments for which fair value changes will be recognized in earnings after adoption totaled $71 million and had unrealized gains of $10.0 million at September 30, 2017. Adoption of the ASU will impact the Company's disclosures about the fair value of certain financial instruments.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842).~~ The amendments in this ASU require a lessee to recognize in the statement of financial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for leases with terms longer than one year. Accounting applied by lessors is largely unchanged by this ASU. The amendments in this ASU are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2018. Early adoption is permitted; however, the Company does not intend to early adopt this ASU. Lessees and lessors are required to apply the provisions of the ASU at the beginning of the earliest period presented using a modified retrospective approach. Management has not completed its evaluation of the impact of adoption of this ASU and is not currently able to reasonably estimate the impact of adoption on the consolidated financial statements; however, the most significant impact is expected to be the recognition, as lessee, of new right-of-use assets and lease liabilities on the consolidated balance sheet for real estate leases currently classified as operating leases.

~~In June 2016, the FASB issued~~ ASU No. 2016-13, ~~Financial~~Financial Instruments - Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments. The ASU, ~~introduces~~along with subsequent ASUs issued to clarify certain of its provisions, introduced new guidance which ~~makes~~made substantive changes to the accounting for credit losses. The ASU ~~introduces~~introduced the CECL model which applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includes loans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and ~~held-to-maturity~~HTM debt securities. The CECL model requires an entity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable and supportable ~~forecasts.~~forecasts, and is generally expected to result in earlier recognition of credit losses. The ASU also ~~modifies~~modified certain provisions of the ~~current~~previous OTTI model for ~~available for sale~~AFS debt ~~securities requiring an estimate of expected credit losses only when the fair value of an available for sale debt security is below its amortized cost.~~securities. Credit losses on ~~available for sale~~AFS debt securities ~~will be~~are now limited to the difference between the security's amortized cost basis and its fair ~~value.~~value, and should be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. The Company adopted this ASU in the first quarter of 2020 using the modified retrospective transition method for the CECL model and a prospective approach for the AFS debt security model. The Company recorded a cumulative-effect adjustment to retained earnings of $23.8 million, which included $4.8 million related to off -balance sheet credit exposures, on January 1, 2020. No cumulative-effect adjustment was recorded related to AFS debt securities upon adoption. The Company has elected to phase-in the initial impact of the adoption of ASC 326 for regulatory capital purposes, allowing the impact of adoption on regulatory capital to be delayed for two years, followed by a three-year transition period.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU ~~also~~ provides optional relief for a ~~simplified~~limited period of time to ease the potential accounting ~~model~~burden associated with transitioning away from reference rates that are expected to be discontinued. Under this ASU, companies are provided with optional expedients and exceptions for ~~purchased financial assets with more than insignificant credit deterioration since~~applying generally accepted accounting principles (GAAP) to contract modifications and hedging relationships that currently utilize LIBOR as their ~~origination.~~benchmark rate, subject to certain criteria being met. The amendments in the ASU also apply to contemporaneous modifications of other contract terms related to the replacement of LIBOR. The amendments in the ASU are effective for all entities as of March 12, 2020 and will only be in effect through December 31, 2022. To date, the impact of adoption of this ASU ~~are~~on the Company's consolidated financial position, results of operations, and cash flows has not been material.

Accounting Pronouncements Not Yet Adopted

ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU simplifies the accounting for income taxes by removing certain exceptions stipulated in ASC 740 and making some other targeted changes to the accounting for income taxes. This ASU is effective for the Company for interim and annual periods in fiscal years beginning after December 15, ~~2019. Management~~2020. The Company has not ~~yet completed~~finalized its evaluation of the impact of adoption on its consolidated financial position, results of ~~this ASU~~operations, and cash flows, but the impact is not currently ~~able~~expected to reasonably estimate the impact of adoption on the consolidated financial statements; however, adoption is likely to lead to significant changes in accounting policies related to, and the methods employed in estimating, the ALLL. It is possible that the impact will be ~~material~~material.

Updates to the Company's ~~consolidated~~Significant Accounting Policies

Loans

The Company's loan portfolio contains 1-4 single family residential first mortgages, government insured residential mortgages, an insignificant amount of home equity loans and lines of credit and other consumer loans; multi-family, non-owner occupied commercial real estate, construction and land, owner-occupied commercial real estate and commercial and industrial loans, mortgage warehouse lines of credit and sales-type and direct financing leases. Loans are reported at amortized cost basis, net of the ACL.

Interest income is accrued based on the principal amount outstanding. Non-refundable loan origination fees, net of direct costs of originating or acquiring loans, as well as purchase premiums and discounts, are deferred and recognized as adjustments to yield over the contractual lives of the related loans using the level yield method.

Non-accrual loans

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 and other consumer loans, other than government insured residential loans, are generally placed on non-accrual status when they are 90 days past due. When a loan is placed on non-accrual status, uncollected interest accrued is reversed and charged to interest income. Payments received on nonaccrual commercial loans are applied as a reduction of principal. Interest payments are recognized as income on a cash basis on nonaccrual residential loans. 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 and consumer loans are generally returned to accrual status when less than 90 days past due. Past due status of loans is determined based on the contractual next payment due date. Loans less than 30 days past due are reported as current.

Contractually delinquent government insured residential loans are not classified as non-accrual due to the nature of the guarantee. Contractually delinquent PCD loans are not classified as non-accrual as long as the Company has a reasonable expectation about amounts expected to be collected.

Troubled Debt Restructurings

In certain situations, due to economic or legal reasons related to a borrower's financial ~~position~~difficulties, the Company may grant a concession to the borrower for other than an insignificant period of time that it would not otherwise consider. At that time, the related loan is classified as a TDR. The concessions granted may include rate reductions, principal forgiveness, payment forbearance, extensions of maturity at rates of interest below that commensurate with the risk profile of the loans, modification of payment terms and ~~results~~other actions intended to minimize economic loss. A TDR is generally placed on non-accrual status at the time of ~~operations.~~the modification unless the borrower was performing prior to the restructuring.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

~~In August 2016,~~Under recently issued inter-agency and authoritative guidance and consistent with the ~~FASB issued ASU No. 2016-15,~~ ~~Statement~~CARES Act, short-term (generally periods of ~~Cash Flows (Topic 230): Classification~~six months or less) deferrals or modifications related to COVID-19 will typically not be categorized as TDRs.

Purchased Credit Deteriorated ("PCD") assets

PCD assets are acquired financial assets that, as of ~~Certain Cash Receipts~~the date of acquisition, have experienced a more than insignificant deterioration in credit quality since origination. An assessment is conducted at acquisition to determine whether acquired financial assets meet the criteria to be classified as PCD assets. That assessment may be conducted at the individual asset level, or for a group of assets acquired together that have similar risk characteristics. At acquisition, the ACL related to PCD assets, representing the estimated amount of the UPB of the assets not expected to be collected, is added to the purchase price to determine the amortized cost basis and ~~Cash Payments.~~any non-credit related discount or premium is allocated to the individual assets acquired. The ~~amendments in this ASU provide guidance on eight specific cash flow classification issues where~~non-credit related discount or premium is accreted or amortized to interest income over the life of the related assets using the level yield method, as long as there ~~has been diversity in practice. The guidance~~is a reasonable expectation about amounts expected to be collected. Subsequent changes in the ~~ASU~~amount of expected credit losses are recognized immediately by adjusting the ACL and reflecting the periodic changes as credit loss expense or reversal of credit loss expense.

Loans previously categorized as ACI loans were categorized as PCD loans on initial adoption of ASC 326. At adoption, an ACL was recognized and a corresponding adjustment was made to the assets' amortized cost basis. Prior to the adoption of ASC 326, ACI loans were accounted for on a pool basis. These pools were not maintained on adoption. The Company did not re-assess whether modifications to individual PCD loans previously accounted for in pools were TDRs at adoption.

Allowance for Credit Losses ("ACL")

AFS Debt Securities

The Company reviews its AFS debt securities for credit loss impairment at the individual security level on at least a quarterly basis. A security is impaired if its fair value is less than its amortized cost basis. A decline in fair value below amortized cost basis represents a credit loss impairment to the extent the Company does not expect to recover the amortized cost basis of the security. Impairment related to credit losses is recorded through the ACL to the extent fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through the ACL are recorded through other comprehensive income, net of applicable taxes.

In assessing whether an impairment is credit loss related, the Company compares the present value of cash flows expected to be collected to the security's amortized cost basis. If the present value of cash flows expected to be collected is less than the amortized cost basis of the security, a credit loss exists and an ACL is recorded. The Company discounts expected cash flows at the effective interest rate implicit in the security at the purchase date, adjusted for expected prepayments. For floating rate securities, the Company uses the floating rate as it changes over the life of the security. In developing estimates about cash flows expected to be collected and determining whether a credit loss exists, the Company considers information about past events, current conditions and reasonable and supportable forecasts. Factors and information that the Company uses in making its assessments include, but are not necessarily limited to, the following:

The extent to which fair value is less than amortized cost;

Adverse conditions specifically related to the security, an industry or geographic area;

Changes in the financial condition of the issuer or underlying loan obligors;

The payment structure and remaining payment terms of the security, including levels of subordination or over-collateralization;

Failure of the issuer to make scheduled payments;

Changes in credit ratings;

Relevant market data;

Estimated prepayments, defaults, and the value and performance of underlying collateral at the individual security level.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

The relative importance assigned to each of these factors varies depending on the facts and circumstances pertinent to the individual security being evaluated.

Timely payment of principal and interest on securities issued by the U.S. Government, U.S. government agencies and U.S. government sponsored entities is explicitly or implicitly guaranteed by the U. S. government. Therefore, the Company expects to recover the amortized cost basis of these securities.

If the Company intends to sell a security in an unrealized loss position, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, any allowance for credit losses will be written off and the amortized cost basis will be written down to the debt security’s fair value at the reporting date with any incremental impairment reported in earnings.

Historically, the Company has not experienced credit losses related to AFS securities or uncollectible interest on its AFS securities. However, AFS securities would be charged off to the extent that there was no reasonable expectation of recovery of amortized cost basis. AFS securities would be placed on non-accrual status if the Company did not reasonably expect to receive interest payments in the future and interest accrued would be reversed against interest income. Securities would be returned to accrual status only when collection of interest was reasonably assured.

Loans

The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The ACL is adjusted through the provision for credit losses to the amount of amortized cost basis not expected to be collected, or in the case of PCD loans, the amount of UPB not expected to be collected, at the balance sheet date. Amortized cost basis includes UPB, unamortized premiums or discounts and deferred fees and costs, net of amounts previously charged off.

The measurement of expected credit losses encompasses information about historical events, current conditions and reasonable and supportable forecasts. Determining the amount of the ACL is complex and requires extensive judgment by management about matters that are inherently uncertain. Re-evaluation of the ACL estimate in future periods, in light of changes in composition and characteristics of the loan portfolio, changes in the reasonable and supportable forecast and other factors then prevailing may result in material changes in the amount of the ACL and credit loss expense in those future periods.

Loans are charged off against the ACL in the period in which they are deemed uncollectible and recoveries are credited to the ACL when received. Expected recoveries on loans previously charged off, not to exceed the aggregate of amounts previously charged-off and expected to be charged-off, are included in the ACL estimate. For loans secured by residential real estate, an assessment of collateral value is made at no later than 120 days delinquency; any outstanding loan balance in excess of fair value less cost to sell is charged off at no later than 180 days delinquency. Additionally, any outstanding balance in excess of fair value of collateral less cost to sell is charged off (i) within 60 days of receipt of notification of filing from the bankruptcy court, (ii) within 60 days of determination of loss if all borrowers are deceased or (iii) within 90 days of discovery of fraudulent activity. Other consumer loans are typically charged off at 120 days delinquency. Commercial loans are charged off when, in management's judgment, they are considered to be uncollectible.

Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. Factors that may be considered in aggregating loans for this purpose 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, and historical or expected credit loss patterns. For loans that do not share similar risk characteristics with other loans such as collateral dependent loans and TDRs, 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. Expected prepayments for commercial loans are generally estimated based on the Company's historical experience. For residential loans, expected prepayments are estimated using a model that incorporates industry prepayment data, calibrated to reflect the Company's experience. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a TDR will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

The Company has elected a 5-year reasonable and supportable forecast period, with mean reversion occurring within the credit loss models based on the economic inputs. The length of the reasonable and supportable forecast is evaluated at each reporting period and adjusted if deemed necessary.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

For the substantial majority of portfolio segments and subsegments, including residential loans other than government insured loans, and most commercial and commercial real estate loans, expected losses are estimated using econometric models. The models employ a factor based methodology, leveraging data sets containing extensive historical loss and recovery information by industry, geography, product type, collateral type and obligor characteristics, to estimate PD and LGD. Measures of PD for commercial loans incorporate current conditions through market cycle or credit cycle adjustments. For residential loans, the models consider FICO and adjusted LTVs. PDs and LGDs are then conditioned on the reasonable and supportable economic forecast. Projected PDs and LGDs are applied to estimated exposure at default, considering the term and payment structure of the loan, to generate estimates of expected loss at the loan level. For criticized or classified loans, PDs may be adjusted to industry benchmark PDs appropriate to the current risk rating if the most current financial information available is deemed not to be reflective of the borrowers' current financial condition. These loan level estimates are aggregated to generate a collective estimate for groups of loans that share common risk characteristics.

For certain less material portfolios including loans and leases to state and local government entities originated by Pinnacle, small balance commercial loans and consumer loans, the WARM method is used to estimate expected credit losses. For the Pinnacle portfolio, historical loss information is based on municipal historical default and recovery data, segmented by credit rating. For small balance commercial loans, historical loss information is based on the Company's historical loss experience over a five year period. For consumer loans, historical loss information is based on peer data; this portfolio subsegment is not significant. All loss estimates are conditioned as applicable on changes in current conditions and the reasonable and supportable economic forecast. Expected credit losses for mortgage warehouse lines of credit are estimated based primarily on the Company's historical loss experience, conditioned as applicable on changes in current conditions and the reasonable and supportable economic forecast. Generally, given the nature of these loans, losses would be expected to manifest within a very short time period after origination.

The Company expects to collect the amortized cost basis of government insured residential loans due to the nature of the government guarantee, so the quantitative ACL is zero for these loans.

Qualitative factors

Qualitative adjustments are made to the ACL when, based on management’s judgment, there are factors impacting expected credit losses not taken into account by the quantitative calculations. Potential qualitative adjustments are categorized as follows:

Economic factors, including material trends and developments that, in management's judgment, may not have been considered in the reasonable and supportable economic forecast;

Credit policy and staffing, including the nature and level of policy and procedural exceptions or changes in credit policy not reflected in quantitative results, changes in the quality of underwriting and portfolio management and staff and issues identified by credit review, internal audit or regulators that may not be reflected in quantitative results;

Concentrations, considering whether the quantitative estimate adequately accounts for concentration risk in the portfolio;

Model imprecision and model validation findings; and

Other factors not adequately considered in the quantitative estimate or other qualitative categories identified by management that may materially impact the amount of expected credit losses.

Collateral dependent loans

Collateral dependent loans are those for which the borrower is experiencing financial difficulty and repayment is expected to be ~~most applicable~~provided substantially through the operation or sale of the collateral. These loans do not typically share similar risk characteristics with other loans and expected credit losses are evaluated on an individual basis. Loans evaluated individually are not included in the collective evaluation. Estimates of expected credit losses for collateral dependent loans, whether or not foreclosure is probable, are based on the fair value of the collateral adjusted for selling costs when repayment depends on sale of the collateral.

Troubled debt restructurings

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

For TDRs, or loans for which there is a reasonable expectation that a TDR will be executed, that are not collateral dependent, the credit loss estimate is determined by comparing the net present value of expected cash flows, discounted at the loan’s original effective interest rate, to the Company requires: (1) cash payments for debt prepayment or extinguishment costs to be classified as cash outflows for financing activities, (2) proceeds from settlement of insurance claims to be classified on theamortized cost basis of the ~~nature~~loan.

Off-balance sheet credit exposures

Expected credit losses related to off-balance sheet credit exposures are estimated over the contractual period for which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. Expected credit losses are estimated using essentially the same methodologies employed to estimate expected credit losses on the amortized cost basis of loans, taking into consideration the likelihood and amount of additional amounts expected to be funded over the terms of the ~~loss~~commitments. The liability for credit losses on off-balance sheet credit exposures is presented within other liabilities on the consolidated balance sheets, distinct from the ACL. Adjustments to the liability are included in the provision for credit losses.

Accrued Interest Receivable

The Company has elected to present accrued interest receivable separate from the amortized cost basis of financial assets carried at amortized cost. The Company is applying the practical expedient provided in ASC 326 to exclude accrued interest receivable balances from tabular disclosures about financial assets carried at amortized cost and ~~(3) cash proceeds from settlement of bank-owned life insurance policies~~has elected not to ~~be classified as cash flows from investing activities. Cash payments for premiums~~estimate an ACL on ~~bank-owned life insurance may be classified as cash flows for investing activities, operating activities or a combination thereof. The amendments~~accrued interest receivable since uncollectible accrued interest is timely written off in this ASU are effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2017 and will be applied retrospectively to each period presented. The provisions of this ASU are generally consistentaccordance with the Company's ~~current practice and adoption is not expected to materially impact the Company's consolidated cash flows.~~accounting policies for non-accrual loans.

Note 2 Earnings Per Common Share

The computation of basic and diluted earnings (loss) per common share is presented below for the periods indicated (in thousands, except share and per share data):



	Three Months Ended March 31,
c	2020			2019
Basic earnings per common share:
Numerator:
Net income (loss)	$	(30,951	)	$	65,972
Distributed and undistributed earnings allocated to participating securities	—			(2,697		)
Income (loss) allocated to common stockholders for basic earnings per common share	$	(30,951	)	$	63,275
Denominator:
Weighted average common shares outstanding	93,944,529			98,856,775
Less average unvested stock awards	(1,101,370		)	(1,171,921		)
Weighted average shares for basic earnings (loss) per common share	92,843,159			97,684,854
Basic earnings (loss) per common share	$	(0.33	)	$	0.65
Diluted earnings (loss) per common share:
Numerator:
Income (loss) allocated to common stockholders for basic earnings per common share	$	(30,951	)	$	63,275
Adjustment for earnings reallocated from participating securities	—			5
Income (loss) used in calculating diluted earnings per common share	$	(30,951	)	$	63,280
Denominator:
Weighted average shares for basic earnings (loss) per common share	92,843,159			97,684,854
Dilutive effect of stock options and certain shared-based awards	—			279,779
Weighted average shares for diluted earnings (loss) per common share	92,843,159			97,964,633
Diluted earnings (loss) per common share	$	(0.33	)	$	0.65

Three Months Ended September 30, Nine Months Ended September 30,
c 2017 2016 2017
2016
Basic earnings per common share:

Numerator:

Net income $ 67,779
$ 50,848
$ 196,479
$ 162,447
Distributed and undistributed earnings allocated to participating securities (2,525 ) (2,031 ) (7,331 ) (6,522 )
Income allocated to common stockholders for basic earnings per common share $ 65,254
$ 48,817
$ 189,148
$ 155,925
Denominator:
Weighted average common shares outstanding 106,809,381
104,153,018
106,488,396
104,077,932
Less average unvested stock awards (1,101,485 ) (1,150,268 ) (1,102,381 ) (1,165,509 )
Weighted average shares for basic earnings per common share 105,707,896
103,002,750
105,386,015
102,912,423
Basic earnings per common share $ 0.62
$ 0.47
$ 1.79
$ 1.52
Diluted earnings per common share:
Numerator:
Income allocated to common stockholders for basic earnings per common share $ 65,254
$ 48,817
$ 189,148
$ 155,925
Adjustment for earnings reallocated from participating securities 6
(81 ) 21
(264 )
Income used in calculating diluted earnings per common share $ 65,260
$ 48,736
$ 189,169
$ 155,661
Denominator:

Weighted average shares for basic earnings per common share 105,707,896
103,002,750
105,386,015
102,912,423
Dilutive effect of stock options and executive share-based awards 365,286
558,304
479,459
699,977
Weighted average shares for diluted earnings per common share 106,073,182
103,561,054
105,865,474
103,612,400
Diluted earnings per common share $ 0.62
$ 0.47
$ 1.79
$ 1.50

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

~~Included in participating~~Participating securities ~~above are~~include unvested shares and 3,023,314 dividend equivalent rights ~~outstanding at September 30, 2017~~ that were issued in conjunction with the IPO of the Company's common stock. These dividend equivalent rights expire in 2021 and participate in dividends on a one-for-one basis. Participating securities have the right to participate in the earnings of the Company, but no contractual obligation to share in losses. As a result, these securities impacted the calculation of earnings per common share for the three months ended March 31, 2019 but did not impact the calculation of loss per common share for the three months ended March 31, 2020.

~~The following potentially~~Potentially dilutive ~~securities~~unvested shares and share units totaling 1,768,769 and 1,218,840 were outstanding at ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively, but excluded from the calculation of diluted earnings (loss) per common share ~~for the periods indicated~~ because their inclusion would have been ~~anti-dilutive:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Unvested shares and share units 1,111,300
1,296,848
1,111,300
1,296,848
Stock options and warrants 1,850,279
1,851,376
1,850,279
1,851,376

anti-dilutive.

Note 3 Investment Securities

Investment securities include investment securities available for sale, marketable equity securities, and investment securities held to maturity. The investment securities portfolio consisted of the following at the dates indicated (in thousands):

September 30, 2017
Amortized Cost Gross Unrealized Fair Value
Gains Losses
U.S. Treasury securities $ 24,969
$ —
$ (12 ) $ 24,957
U.S. Government agency and sponsored enterprise residential MBS 2,332,616
16,762
(691 ) 2,348,687
U.S. Government agency and sponsored enterprise commercial MBS 139,966
1,067
(1,813 ) 139,220
Private label residential MBS and CMOs 507,381
20,812
(335 ) 527,858
Private label commercial MBS 1,140,465
14,646
(1,510 ) 1,153,601
Single family rental real estate-backed securities 566,635
6,425
(112 ) 572,948
Collateralized loan obligations 695,414
4,905
—
700,319
Non-mortgage asset-backed securities 80,255
2,382
—
82,637
Preferred stocks 60,716
10,000
—
70,716
State and municipal obligations 666,013
14,370
(3,368 ) 677,015
SBA securities 572,540
14,152
(17 ) 586,675
Other debt securities 4,056
4,783
—
8,839
$ 6,791,026
$ 110,304
$ (7,858 ) $ 6,893,472

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~



	March 31, 2020
	Amortized Cost		Gross Unrealized					Carrying Value ⁽¹⁾
	Amortized Cost		Gains		Losses			Carrying Value ⁽¹⁾
Investment securities available for sale:
U.S. Treasury securities	$	75,238	$	1,092	$	(176	)	$	76,154
U.S. Government agency and sponsored enterprise residential MBS	2,209,715		5,168		(33,985		)	2,180,898
U.S. Government agency and sponsored enterprise commercial MBS	369,967		7,276		(751		)	376,492
Private label residential MBS and CMOs	1,185,539		5,081		(16,740		)	1,173,880
Private label commercial MBS	1,728,610		3,293		(127,089		)	1,604,814
Single family rental real estate-backed securities	549,981		1,331		(22,519		)	528,793
Collateralized loan obligations	1,169,469		—		(74,676		)	1,094,793
Non-mortgage asset-backed securities	265,444		392		(10,675		)	255,161
State and municipal obligations	255,602		15,431		—			271,033
SBA securities	262,661		2,320		(4,593		)	260,388
	8,072,226		$	41,384	$	(291,204	)	7,822,406
Investment securities held to maturity	10,000							10,000
	$	8,082,226						7,832,406
Marketable equity securities								42,195
								$	7,874,601


	December 31, 2016									December 31, 2019
	Amortized Cost		Gross Unrealized					Fair Value		Amortized Cost			Gross Unrealized					Carrying Value ⁽¹⁾
			Gains		Losses								Gains		Losses
Investment securities available for sale:
U.S. Treasury securities	$	4,999	$	6	$	—		$	5,005	$	70,243		$	219	$	(137	)	$	70,325
U.S. Government agency and sponsored enterprise residential MBS	1,513,028		15,922		(1,708		)	1,527,242		2,018,853			9,835		(6,513		)	2,022,175
U.S. Government agency and sponsored enterprise commercial MBS	126,754		670		(2,838		)	124,586		366,787		��	4,920		(731		)	370,976
Private label residential MBS and CMOs	334,167		42,939		(2,008		)	375,098		1,001,337			11,851		(1,011		)	1,012,177
Private label commercial MBS	1,180,386		9,623		(2,385		)	1,187,624		1,719,228			6,650		(1,194		)	1,724,684
Single family rental real estate-backed securities	858,339		4,748		(1,836		)	861,251		467,459			4,016		(1,450		)	470,025
Collateralized loan obligations	487,678		868		(1,250		)	487,296		1,204,905			322		(7,861		)	1,197,366
Non-mortgage asset-backed securities	187,660		2,002		(2,926		)	186,736		194,171			1,780		(1,047		)	194,904
Preferred stocks	76,180		12,027		(4		)	88,203
State and municipal obligations	705,884		3,711		(11,049		)	698,546		257,528			15,774		—			273,302
SBA securities	517,129		7,198		(421		)	523,906		359,808			4,587		(1,664		)	362,731
Other debt securities	3,999		4,092		—			8,091
	$	5,996,203	$	103,806	$	(26,425	)	$	6,073,584	7,660,319			$	59,954	$	(21,608	)	7,698,665
Investment securities held to maturity										10,000								10,000
										$	7,670,319							7,708,665
Marketable equity securities																		60,572
																		$	7,769,237


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

Investment securities held to maturity at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019 consisted of ~~one~~1 State of Israel bond ~~with a carrying value of $10 million. Fair value approximated carrying value at September 30, 2017~~maturing in 2024. At March 31, 2020 and December 31, ~~2016. The bond matures~~2019, accrued interest receivable on investments totaled $24 million and $28 million, respectively, and is included in ~~2024.~~other assets in the accompanying consolidated balance sheets.

At ~~September 30, 2017,~~March 31, 2020, contractual maturities of investment securities available for sale, adjusted for anticipated prepayments ~~of mortgage-backed and other pass-through securities,~~when applicable, were as follows (in thousands):

Amortized Cost Fair Value
Due in one year or less $ 684,986
$ 697,034
Due after one year through five years 3,363,698
3,406,609
Due after five years through ten years 2,252,239
2,282,220
Due after ten years 429,387
436,893
Preferred stocks with no stated maturity 60,716
70,716
$ 6,791,026
$ 6,893,472

Based on the Company’s assumptions, the estimated weighted average life of the investment portfolio as of September 30, 2017 was 4.9 years. The effective duration of the investment portfolio as of September 30, 2017 was 1.7 years. The model results are based on assumptions that may differ from actual results.



	Amortized Cost		Fair Value
Due in one year or less	$	864,668	$	857,621
Due after one year through five years	4,498,791		4,298,586
Due after five years through ten years	2,289,908		2,248,496
Due after ten years	418,859		417,703
	$	8,072,226	$	7,822,406

The carrying value of securities pledged as collateral for FHLB advances, public deposits, interest rate swaps and to secure borrowing capacity at the FRB totaled ~~$2.5~~$6.8 billion and ~~$1.8~~$2.4 billion at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

The following table provides information about gains and losses on investment securities ~~available for sale~~ for the periods indicated (in thousands):



	Three Months Ended March 31,
	2020			2019
Proceeds from sale of investment securities available for sale	$	306,532		$	775,723

Gross realized gains:
Investment securities available for sale	$	1,532		$	4,325
Gross realized losses:
Investment securities available for sale	(2		)	(8		)
Net realized gain	1,530			4,317

Net unrealized gains (losses) on marketable equity securities recognized in earnings	(4,983		)	1,468

Gain (loss) on investment securities, net	$	(3,453	)	$	5,785

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Proceeds from sale of investment securities available for sale $ 399,430

$ 259,571
$ 827,353
$ 753,756

Gross realized gains $ 28,261
$ 3,471
$ 30,553
$ 10,528
Gross realized losses (1,330 ) —
(1,359 ) —
Net realized gain 26,931
3,471
29,194
10,528
OTTI —
(463 ) —
(463 )
Gain on investment securities available for sale, net $ 26,931
$ 3,008
$ 29,194
$ 10,065

The following tables present the aggregate fair value and the aggregate amount by which amortized cost exceeded fair value for investment securities available for sale in unrealized loss positions aggregated by investment category and length of time that individual securities had been in continuous unrealized loss positions at the dates indicated (in thousands):. No ACL was recorded for any investment securities available for sale in unrealized loss positions at March 31, 2020.


	September 30, 2017															March 31, 2020
	Less than 12 Months					12 Months or Greater					Total					Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities	$	24,957	$	(12	)	$	—	$	—		$	24,957	$	(12	)	$	20,007	$	(176	)	$	—	$	—		$	20,007	$	(176	)
U.S. Government agency and sponsored enterprise residential MBS	460,806		(425		)	9,544		(266		)	470,350		(691		)	1,351,831		(19,853		)	451,047		(14,132		)	1,802,878		(33,985		)
U.S. Government agency and sponsored enterprise commercial MBS	55,152		(1,783		)	14,270		(30		)	69,422		(1,813		)	77,388		(376		)	28,515		(375		)	105,903		(751		)
Private label residential MBS and CMOs	72,557		(217		)	5,820		(118		)	78,377		(335		)	737,624		(16,740		)	—		—			737,624		(16,740		)
Private label commercial MBS	124,664		(1,510		)	—		—			124,664		(1,510		)	1,293,216		(122,960		)	44,861		(4,129		)	1,338,077		(127,089		)
Single family rental real estate-backed securities	14,708		(112		)	—		—			14,708		(112		)	460,048		(22,518		)	1,967		(1		)	462,015		(22,519		)
State and municipal obligations	184,082		(3,368		)	—		—			184,082		(3,368		)
Collateralized loan obligations																572,725		(34,562		)	522,068		(40,114		)	1,094,793		(74,676		)
Non-mortgage asset-backed securities																223,395		(9,292		)	6,143		(1,383		)	229,538		(10,675		)
SBA securities	—		—			18,229		(17		)	18,229		(17		)	48,894		(498		)	117,320		(4,095		)	166,214		(4,593		)
	$	936,926	$	(7,427	)	$	47,863	$	(431	)	$	984,789	$	(7,858	)	$	4,785,128	$	(226,975	)	$	1,171,921	$	(64,229	)	$	5,957,049	$	(291,204	)

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020


	December 31, 2016															December 31, 2019
	Less than 12 Months					12 Months or Greater					Total					Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury securities																$	20,056	$	(137	)	$	—	$	—		$	20,056	$	(137	)
U.S. Government agency and sponsored enterprise residential MBS	$	191,463	$	(628	)	$	112,391	$	(1,080	)	$	303,854	$	(1,708	)	579,076		(3,862		)	243,839		(2,651		)	822,915		(6,513		)
U.S. Government agency and sponsored enterprise commercial MBS	89,437		(2,838		)	—		—			89,437		(2,838		)	99,610		(696		)	6,477		(35		)	106,087		(731		)
Private label residential MBS and CMOs	122,142		(1,680		)	8,074		(328		)	130,216		(2,008		)	180,398		(838		)	41,636		(173		)	222,034		(1,011		)
Private label commercial MBS	169,535		(2,370		)	24,985		(15		)	194,520		(2,385		)	648,761		(1,060		)	76,302		(134		)	725,063		(1,194		)
Single family rental real estate-backed securities	139,867		(842		)	176,057		(994		)	315,924		(1,836		)	241,915		(1,445		)	5,460		(5		)	247,375		(1,450		)
Collateralized loan obligations	69,598		(402		)	173,983		(848		)	243,581		(1,250		)	63,310		(846		)	682,076		(7,015		)	745,386		(7,861		)
Non-mortgage asset-backed securities	139,477		(2,926		)	—		—			139,477		(2,926		)	78,964		(962		)	7,883		(85		)	86,847		(1,047		)
Preferred stocks	10,087		(4		)	—		—			10,087		(4		)
State and municipal obligations	448,180		(11,049		)	—		—			448,180		(11,049		)
SBA securities	4,204		(13		)	20,076		(408		)	24,280		(421		)	10,236		(2		)	142,204		(1,662		)	152,440		(1,664		)
	$	1,383,990	$	(22,752	)	$	515,566	$	(3,673	)	$	1,899,556	$	(26,425	)	$	1,922,326	$	(9,848	)	$	1,205,877	$	(11,760	)	$	3,128,203	$	(21,608	)

The Company monitors its investment securities available for sale for ~~OTTI~~credit loss impairment on an individual security basis. No securities were determined to be ~~other-than-temporarily~~credit loss impaired during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020 or other than temporarily impaired during the three months ended March 31, 2019. The Company does not intend to sell securities that are in significant unrealized loss positions at ~~September 30, 2017~~March 31, 2020 and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis, which may be at maturity. In making this determination, the Company considered its current and projected liquidity position, its investment policy as to permissible holdings and concentration limits, regulatory requirements and other relevant factors.

At ~~September 30, 2017, 54~~March 31, 2020, 314 securities available for sale were in unrealized loss positions. The amount of impairment related to 2029 of these securities was considered insignificant both individually and in the aggregate, totaling approximately ~~$237~~$285 thousand and no further analysis with respect to these securities was considered necessary.

Unrealized losses at March 31, 2020 were primarily attributable to widening spreads, resulting in large part from market response to, and dislocation in the wake of, the emerging COVID-19 pandemic. The basis for concluding that ~~impairment of the remaining~~AFS securities were not credit loss impaired and no ACL was ~~not other-than-temporary~~considered necessary at March 31, 2020 is described further ~~described below:~~below.

U.S. Government, ~~agency~~Government Agency and ~~sponsored enterprise residentialMBSand commercial MBS~~Government Sponsored Enterprise Securities

At ~~September 30, 2017, eight~~March 31, 2020, 1 U.S Treasury security, NaN U.S. Government agency and sponsored enterprise residential MBS, ~~and four~~5 U.S. Government agency and sponsored enterprise commercial MBS and 13 SBA securities were in unrealized loss positions. For five fixed rate securities, the impairment was primarily attributable to an increase in medium and long-term market interest rates subsequent to the date of acquisition. For the remaining seven variable rate securities, the amount of impairment was less than 1% of amortized cost. The timely payment of principal and interest on these securities is explicitly or implicitly guaranteed by the U.S. Government. ~~Given~~As such, there is an assumption of zero credit loss and the ~~expectation of timely payment of principal and interest,~~Company expects to recover the ~~impairments were considered to be temporary.~~

~~Private label residentialMBSandCMOs~~

At September 30, 2017, five private label residential MBS and CMOs were in unrealized loss positions, primarily as a result of an increase in medium and long-term market interest rates subsequent to acquisition. The amount of impairment of each of the individual securities was less than 3% ofentire amortized cost. These securities were assessed for OTTI using credit and prepayment behavioral models that incorporate CUSIP level constant default rates, voluntary prepayment rates and loss severity and delinquency assumptions. The resultscost basis of these assessments were not indicative of credit losses related to any of these securities as of September 30, 2017. Given the limited severity of impairment and the expectation of timely recovery of outstanding principal, the impairments were considered to be temporary.securities.

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

Private Label Securities:

None of the impaired securities had missed principal or interest payments or had been downgraded by a NRSRO at March 31, 2020. The Company performed an analysis comparing the present value of cash flows expected to be collected to the amortized cost basis of impaired securities. This analysis was based on a scenario that we believe to be generally more severe than our reasonable and supportable economic forecast at March 31, 2020, and incorporated assumptions about voluntary prepayment rates, collateral defaults, delinquencies, severity and other relevant factors as described further below. Our analysis also considered the structural characteristics of each security and the level of credit enhancement provided by that structure. Based on the results of this analysis, the Company expects to recover the entire amortized cost basis of its impaired AFS securities at March 31, 2020. No ACL was considered necessary at March 31, 2020.

Private label residential MBS and CMOs

At March 31, 2020, 40 private label residential MBS and CMOs were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality measures such as FICO, LTV, documentation, loan type, property type, agency availability criteria and performing status. We also regularly monitor sector data including home price appreciation, forbearance, delinquency and prepay trends as well as other economic data which would indicate further stress in the sector. Our March 31, 2020 analysis projected weighted average collateral losses for this category of 5% compared to weighted average credit support of 21%. 90% of impaired securities in this category were externally rated AAA, 6% were rated AA and one security representing 4% of the category was not externally rated; this security was internally rated investment grade.

Private label commercialMBS

At ~~September 30, 2017, four~~March 31, 2020, NaN private label commercial MBS were in unrealized loss ~~positions. The amount~~positions Our analysis of impairment of each of the individual securities was less than 3% of amortized cost. The unrealized losses were primarily attributable to increases in market interest rates since the purchase of the securities. These securities were assessed for OTTI using credit and prepayment behavioral models incorporating assumptions consistent with the collateral characteristics of each security. The results of this analysis were not indicative ofcash flows expected ~~credit losses. Given the limited severity of impairment and the expectation of timely recovery of outstanding principal, the impairments were considered~~ to be ~~temporary.~~collected on these securities incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality and type, loan size, loan purpose and other qualitative factors. We also regularly monitor collateral watchlisted, bankruptcy data, special servicing trends, delinquency and other economic data which would indicate further stress in the sector. Our March 31, 2020 analysis projected weighted average collateral losses for this category of 13% compared to weighted average credit support of 42%. 82% of impaired securities in this category were externally rated AAA, 12% were rated AA and 6% were rated A.

Single family rental real estate-backed securities

At ~~September 30, 2017, two~~March 31, 2020, NaN single family rental real estate-backed securities were in unrealized loss positions. The unrealized losses were primarily due to increases in market interest rates since the purchase of the securities. The amount of impairment of each of the individual securities was less than 2% of amortized cost. Management'sOur analysis of the credit characteristics, including loan-to-value and debt service coverage ratios, and levels of subordination for each of the securities is not indicative of projected credit losses. Given the limited severity of impairment and the absence of projected credit losses, the impairments were consideredcash flows expected to be ~~temporary.~~collected on these securities incorporated assumptions about collateral default rates, loss severity, delinquencies and recovery lag. We regularly monitor sector data including home price appreciation, forbearance, delinquency and prepay trends as well as other economic data which would indicate further stress in the sector. Our March 31, 2020 analysis projected weighted average collateral losses for this category of 12% compared to weighted average credit support of 51%. 91% of impaired securities in this category were externally rated AAA and 9% were rated AA.

~~State and municipal~~Collateralized loan obligations

At ~~September 30, 2017, 11 state and municipal~~March 31, 2020, NaN collateralized loan obligations were in unrealized loss positions. The amount of impairment of each of the individual securities was less than 5% of amortized cost. All of the securities are rated investment grade by nationally recognized statistical ratings organizations. Management's evaluation ofLeveraged loans underlying these securities ~~for OTTI also encompassed~~have seen pricing pressure as the ~~review~~market looks to evaluate ability of ~~credit scores~~borrowers to maintain payments. Uncertainties surrounding the broad economy and ~~analysis provided by a third party firm specializing~~how they may translate into rating downgrades and defaults as the COVID-19 crisis plays out have negatively impacted pricing in the leveraged loan market. Our analysis ~~and credit review~~ of ~~municipal securities. Given the absence of~~cash flows expected ~~credit losses and management's ability and intent to hold the securities until recovery, the impairments were considered~~ to be ~~temporary.~~collected on these securities incorporated assumptions about collateral default rates, loss severity, and delinquencies, calibrated to take into account idiosyncratic risks associated with the underlying collateral. In developing those assumptions, we took into account each sector’s performance pre, during and post the 2008 financial crisis. We regularly engage with bond managers to monitor trends in underlying collateral including potential downgrades and subsequent cash flow diversions, liquidity, ratings migration, and any other relevant developments. Our March 31, 2020 analysis projected weighted average collateral losses for this category of 21% compared to weighted average credit support of 41%. 84% of impaired securities in this category were externally rated AAA, 13% were rated AA and 3% were rated A.

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

Non-mortgage asset-backed securities

At March 31, 2020, 10 non-mortgage asset-backed securities were in unrealized loss positions. These securities are backed by student loan collateral. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, delinquencies, voluntary prepayment rates and recovery lag. In developing those assumptions, we took into account collateral type, delineated by whether collateral consisted of loans to borrowers in school, refinancing, or a mixture. Our March 31, 2020 analysis projected weighted average collateral losses for this category of 8% compared to weighted average credit support of 18%. 94% of impaired securities in this category were externally rated AAA and 6% were rated AA.

Note 4 Loans and Allowance for ~~Loan and Lease~~Credit Losses

The Company segregates its loan portfolio between covered and non-covered loans. Non-covered loans include loans originated since the FSB acquisition and commercial and consumer loans acquired in the FSB Acquisition for which loss share coverage has terminated. Covered loans are further segregated between ACI loans and non-ACI loans.

Loans consisted of the following at the dates indicated (dollars in thousands):


	September 30, 2017
				Covered Loans									Percent of Total		March 31, 2020					December 31, 2019
	Non-Covered Loans			ACI			Non-ACI			Total			Percent of Total		Total			Percent of Total		Total			Percent of Total
Residential and other consumer:
1-4 single family residential	$	3,958,205		$	470,300		$	28,589		$	4,457,094		21.7	%	$	4,843,908		20.9	%	$	4,953,936		21.4	%
Home equity loans and lines of credit	1,644			5,640			37,764			45,048			0.2	%
Government insured residential															782,060			3.4	%	698,644			3.0	%
Other consumer loans	20,166			—			—			20,166			0.1	%	8,855			0.1	%	8,539			0.1	%
	3,980,015			475,940			66,353			4,522,308			22.0	%	5,634,823			24.4	%	5,661,119			24.5	%
Commercial:
Multi-family	3,358,801			—			—			3,358,801			16.3	%	1,967,578			8.5	%	2,217,705			9.6	%
Non-owner occupied commercial real estate	4,183,275			—			—			4,183,275			20.4	%	4,987,798			21.5	%	5,030,904			21.7	%
Construction and land	271,994			—			—			271,994			1.3	%	222,223			1.0	%	243,925			1.1	%
Owner occupied commercial real estate	1,959,464			—			—			1,959,464			9.5	%	2,026,510			8.7	%	2,062,808			8.9	%
Commercial and industrial	3,900,290			—			—			3,900,290			19.0	%	5,008,573			21.6	%	4,655,349			20.1	%
Commercial lending subsidiaries	2,374,193			—			—			2,374,193			11.5	%
Pinnacle															1,187,607			5.0	%	1,202,430			5.2	%
Bridge - franchise finance															647,699			2.8	%	627,482			2.6	%
Bridge - equipment finance															649,154			2.8	%	684,794			3.0	%
Mortgage warehouse lending															852,313			3.7	%	768,472			3.3	%
	16,048,017			—			—			16,048,017			78.0	%	17,549,455			75.6	%	17,493,869			75.5	%
Total loans	20,028,032			475,940			66,353			20,570,325			100.0	%	23,184,278			100.0	%	23,154,988			100.0	%
Premiums, discounts and deferred fees and costs, net	44,422			—			(4,317		)	40,105
Loans including premiums, discounts and deferred fees and costs	20,072,454			475,940			62,036			20,610,430
Allowance for loan and lease losses	(153,725		)	(1,812		)	(3,036		)	(158,573		)
Allowance for credit losses															(250,579		)			(108,671		)
Loans, net	$	19,918,729		$	474,128		$	59,000		$	20,451,857				$	22,933,699				$	23,046,317

Premiums, discounts and deferred fees and costs, excluding the non-credit related discount on PCD loans, totaled $47 million and $50 million at March 31, 2020 and December 31, 2019, respectively. The amortized cost basis of residential PCD loans was $140 million and the related amount of non-credit discount was $143 million at March 31, 2020. The ACL related to PCD residential loans was $1.6 million and $1.7 million at March 31, 2020 and January 1, 2020, the date of initial adoption of ASU 2016-13, respectively.

Included in the table above are direct or sales type finance leases totaling $717 million and $733 million at March 31, 2020 and December 31, 2019, respectively. The amount of income recognized from direct or sales type finance leases for the three months ended March 31, 2020 and 2019 totaled $5.5 million and $5.3 million, respectively and is recorded as interest income on loans in the consolidated statements of income.

During the three months ended March 31, 2020 and 2019, the Company purchased 1-4 single family residential loans totaling $503 million and $305 million, respectively. Purchases for the three months ended March 31, 2020 and 2019 included $286 million and $133 million, respectively, of government insured residential loans.

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

December 31, 2016

Covered Loans Percent of Total
Non-Covered Loans ACI Non-ACI Total
Residential and other consumer:

1-4 single family residential $ 3,422,425
$ 532,348
$ 36,675
$ 3,991,448
20.6 %
Home equity loans and lines of credit 1,120
3,894
47,629
52,643
0.3 %
Other consumer loans 24,365
—
—
24,365
0.1 %
3,447,910
536,242
84,304
4,068,456
21.0 %
Commercial:
Multi-family 3,824,973
—
—
3,824,973
19.8 %
Non-owner occupied commercial real estate 3,739,235
—
—
3,739,235
19.3 %
Construction and land 311,436
—
—
311,436
1.6 %
Owner occupied commercial real estate 1,736,858
—
—
1,736,858
9.0 %
Commercial and industrial 3,391,614
—
—
3,391,614
17.5 %
Commercial lending subsidiaries 2,280,685
—
—
2,280,685
11.8 %
15,284,801
—
—
15,284,801
79.0 %
Total loans 18,732,711
536,242
84,304
19,353,257
100.0 %
Premiums, discounts and deferred fees and costs, net 48,641
—
(6,504 ) 42,137

Loans including premiums, discounts and deferred fees and costs 18,781,352
536,242
77,800
19,395,394

Allowance for loan and lease losses (150,853 ) —
(2,100 ) (152,953 )
Loans, net $ 18,630,499
$ 536,242
$ 75,700
$ 19,242,441

~~Included in non-covered loans above are $38 million and $47 million at September 30, 2017~~At March 31, 2020 and December 31, ~~2016, respectively, of ACI commercial loans acquired in the FSB Acquisition.~~

Through two subsidiaries, the Bank provides commercial and municipal equipment and franchise financing utilizing both loan and lease structures. At September 30, 2017 and December 31, 2016, the commercial lending subsidiaries portfolio included a net investment in direct financing leases of $680 million and $643 million, respectively.

During the three and nine months ended September 30, 2017 and 2016, the Company purchased 1-4 single family residential loans totaling $312 million, $949 million, $355 million and $937 million, respectively.

~~At September 30, 2017,~~2019, the Company had pledged ~~real estate~~ loans with ~~UPB~~a carrying value of approximately $10.5 billion and ~~recorded investment of approximately $9.9~~$10.2 billion, respectively, as security for FHLB ~~advances.~~advances and Federal Reserve discount window borrowings.

At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, accrued interest receivable on loans totaled $88 million and $83 million, respectively, and is included in other assets in the ~~UPB~~accompanying consolidated balance sheets. The amount of ~~ACI~~interest income reversed on non-accrual loans was $1.2 billion and $1.5 billion, respectively. The accretable yield on ACI loans represents the amount by which undiscounted expected future cash flows exceed recorded investment. Changes in the accretable yield on ACI loans for the nine months ended September 30, 2017 and the year ended December 31, 2016 were as follows (in thousands):

Balance at December 31, 2015 $ 902,565
Reclassifications from non-accretable difference 76,751
Accretion (303,931 )
Balance at December 31, 2016 675,385
Reclassifications from non-accretable difference 72,827
Accretion (226,251 )
Balance at September 30, 2017 $ 521,961

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

~~Covered loan sales~~

~~During the periods indicated, the Company sold covered residential loans to third parties on a non-recourse basis. The following table summarizes the impact of these transactions (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2016 2017 2016
UPB of loans sold $ 61,406
$ 123,737
$ 176,958

Cash proceeds, net of transaction costs $ 37,047
$ 98,404
$ 120,537
Recorded investment in loans sold 47,080
99,986
135,432
Loss on sale of covered loans, net $ (10,033 ) $ (1,582 ) $ (14,895 )

Gain on FDIC indemnification, net $ 8,026
$ 1,266
$ 11,958

~~There was no sale of covered loans~~not material for the three months ended ~~September 30, 2017.~~March 31, 2020.

Allowance for ~~loan and lease~~credit losses

Activity in the ~~ALLL~~allowance for credit losses is summarized ~~as follows~~below. The balance at December 31, 2019 and amounts presented for the ~~periods indicated~~three months ended March 31, 2019 represent the allowance for loan and leases losses, estimated using an incurred loss methodology. The ACL at March 31, 2020 and activity for the three months then ended were determined using the CECL methodology (in thousands):



	Three Months Ended March 31,
	2020									2019
	Residential and Other Consumer			Commercial			Total			Residential and Other Consumer		Commercial			Total
Beginning balance, December 31	$	11,154		$	97,517		$	108,671		$	10,788	$	99,143		$	109,931
Impact of adoption of ASU 2016-13	8,098			19,207			27,305			—		—			—
Provision (recovery)	(6,648		)	128,513			121,865			150		10,131			10,281
Charge-offs	(31		)	(7,775		)	(7,806		)	—		(6,133		)	(6,133		)
Recoveries	3			541			544			14		610			624
Ending balance, March 31	$	12,576		$	238,003		$	250,579		$	10,952	$	103,751		$	114,703

Three Months Ended September 30,
2017 2016
Residential and Other Consumer Commercial Unallocated Total Residential and Other Consumer Commercial Total
Beginning balance $ 13,550
$ 142,098
$ —
$ 155,648
$ 12,415
$ 123,303
$ 135,718
Provision for (recovery of) loan losses:
Covered loans 268
(7 ) —
261
(430 ) (15 ) (445 )
Non-covered loans 363
32,230
5,000
37,593
1,974
22,879
24,853
Total provision 631
32,223
5,000
37,854
1,544
22,864
24,408
Charge-offs:
Covered loans —
—
—
—
(247 ) —
(247 )
Non-covered loans —
(36,028 ) —
(36,028 ) —
(6,615 ) (6,615 )
Total charge-offs —
(36,028 ) —
(36,028 ) (247 ) (6,615 ) (6,862 )
Recoveries:
Covered loans 31
7
—
38
9
15
24
Non-covered loans 8
1,053
—
1,061
5
1,183
1,188
Total recoveries 39
1,060
—
1,099
14
1,198
1,212
Ending balance $ 14,220
$ 139,353
$ 5,000
$ 158,573
$ 13,726
$ 140,750
$ 154,476

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

Nine Months Ended September 30,
2017 2016
Residential and Other Consumer Commercial Unallocated Total Residential and Other Consumer Commercial Total
Beginning balance $ 11,503
$ 141,450
$ —
$ 152,953
$ 16,211
$ 109,617
$ 125,828
Provision for (recovery of) loan losses:
Covered loans 2,738
(45 ) —
2,693
(1,074 ) (45 ) (1,119 )
Non-covered loans (52 ) 55,932
5,000
60,880
(420 ) 43,988
43,568
Total provision 2,686
55,887
5,000
63,573
(1,494 ) 43,943
42,449
Charge-offs:
Covered loans (55 ) —
—
(55 ) (1,086 ) —
(1,086 )
Non-covered loans —
(61,034 ) —
(61,034 ) —
(15,748 ) (15,748 )
Total charge-offs (55 ) (61,034 ) —
(61,089 ) (1,086 ) (15,748 ) (16,834 )
Recoveries:
Covered loans 65
45
—
110
77
45
122
Non-covered loans 21
3,005
—
3,026
18
2,893
2,911
Total recoveries 86
3,050
—
3,136
95
2,938
3,033
Ending balance $ 14,220
$ 139,353
$ 5,000
$ 158,573
$ 13,726
$ 140,750
$ 154,476

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

~~The following table presents information about the balance of the ALLL and related loans at the dates indicated (in thousands):~~

September 30, 2017 December 31, 2016
Residential and Other Consumer Commercial Unallocated Total Residential and Other Consumer Commercial Total
Allowance for loan and lease losses:

Ending balance $ 14,220
$ 139,353
$ 5,000
$ 158,573
$ 11,503
$ 141,450
$ 152,953
Covered loans:
Ending balance $ 4,848
$ —
$ —
$ 4,848
$ 2,100
$ —
$ 2,100
Ending balance: non-ACI loans individually evaluated for impairment $ 1,024
$ —
$ —
$ 1,024
$ 529
$ —
$ 529
Ending balance: non-ACI loans collectively evaluated for impairment $ 2,012
$ —
$ —
$ 2,012
$ 1,571
$ —
$ 1,571
Ending balance: ACI loans $ 1,812
$ —
$ —
$ 1,812
$ —
$ —
$ —
Non-covered loans:
Ending balance $ 9,372
$ 139,353
$ 5,000
$ 153,725
$ 9,403
$ 141,450
$ 150,853
Ending balance: new loans individually evaluated for impairment $ 71
$ 23,902
$ —
$ 23,973
$ 12
$ 19,229
$ 19,241
Ending balance: new loans collectively evaluated for impairment $ 9,301
$ 115,451
$ 5,000
$ 129,752
$ 9,391
$ 122,221
$ 131,612
Ending balance: ACI loans $ —
$ —
$ —
$ —
$ —
$ —
$ —
Loans: 0

Covered loans:
Ending balance $ 537,976
$ —
$ —
$ 537,976
$ 614,042
$ —
$ 614,042
Ending balance: non-ACI loans individually evaluated for impairment $ 11,721
$ —
$ —
$ 11,721
$ 12,396
$ —
$ 12,396
Ending balance: non-ACI loans collectively evaluated for impairment $ 50,315
$ —
$ —
$ 50,315
$ 65,404
$ —
$ 65,404
Ending balance: ACI loans $ 475,940
$ —
$ —
$ 475,940
$ 536,242
$ —
$ 536,242
Non-covered loans:
Ending balance $ 4,033,612
$ 16,038,842
$ —
$ 20,072,454
$ 3,495,775
$ 15,285,577
$ 18,781,352
Ending balance: new loans individually evaluated for impairment $ 911
$ 210,364
$ —
$ 211,275
$ 561
$ 176,932
$ 177,493
Ending balance: new loans collectively evaluated for impairment $ 4,032,701
$ 15,790,546
$ —
$ 19,823,247
$ 3,495,207
$ 15,061,707
$ 18,556,914
Ending balance: ACI loans $ —
$ 37,932
$ —
$ 37,932
$ 7
$ 46,938
$ 46,945

~~The ALLL on residential and other consumer ACI loans at September 30, 2017 represents impairment of one pool of ACI home equity loans and lines of credit.~~

The ALLL at September 30, 2017 included $5.4 million related to the impact of Hurricanes Irma and Harvey, which made landfall during the three months ended September 30, 2017. The ALLL includes $0.4 million related to commercial loans that were downgraded during the three months ended September 30, 2017 as a result of the hurricanes and a $5.0 million unallocated qualitative allowance.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

~~Credit quality information~~

Loans other than ACI loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreements. Commercial relationships on non-accrual status with committed balances greater than or equal to $1.0 million that have internal risk ratings of substandard or doubtful, as well as loans that have been modified in TDRs, are individually evaluated for impairment. Other commercial relationships on non-accrual status with committed balances under $1.0 million may also be evaluated individually for impairment, at management's discretion. The likelihood of loss related to loans assigned internal risk ratings of substandard or doubtful is considered elevated due to their identified credit weaknesses. Factors considered by management in evaluating impairment include payment status, financial condition of the borrower, collateral value, and other factors impacting the probability of collecting scheduled principal and interest payments when due.

ACI loans or pools are considered to be impaired when it is probable that the Company will be unable to collect all of the expected cash flows at acquisition (as adjusted for any additional cash flows expected to be collected arising from changes in estimates after acquisition), other than due to changes in interest rate indices and prepayment assumptions.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

~~The table below presents information about loans or ACI pools identified as impaired at the dates indicated (in thousands):~~

September 30, 2017 December 31, 2016

Recorded
Investment
UPB
Related
Specific
Allowance

Recorded
Investment
UPB
Related
Specific
Allowance
Non-covered loans:

With no specific allowance recorded:

1-4 single family residential $ 27
$ 32
$ —
$ —
$ —
$ —
Non-owner occupied commercial real estate 9,041
9,224
—
510
512
—
Construction and land 1,238
1,238
—
1,238
1,238
—
Owner occupied commercial real estate 16,786
16,949
—
16,834
16,894
—
Commercial and industrial

Taxi medallion loans 20,320
20,321
—
18,107
18,107
—
Other commercial and industrial 1,081
1,095
—
6,172
6,172
—
Commercial lending subsidiaries 12,810
12,815
—
10,620
10,510
—
With a specific allowance recorded:
1-4 single family residential 884
863
71
561
546
12
Owner occupied commercial real estate 3,961
3,943
2,994
491
513
263
Commercial and industrial

Taxi medallion loans 100,252
100,255
13,117
73,131
73,147
5,948
Other commercial and industrial 41,297
41,292
7,313
29,452
29,463
9,168
Commercial lending subsidiaries 3,578
3,553
478
21,712
21,605
3,850
Total:
Residential and other consumer $ 911
$ 895
$ 71
$ 561
$ 546
$ 12
Commercial 210,364
210,685
23,902
178,267
178,161
19,229
$ 211,275
$ 211,580
$ 23,973
$ 178,828
$ 178,707
$ 19,241
Covered loans:
Non-ACI loans:

With no specific allowance recorded:

1-4 single family residential $ 102
$ 118
$ —
$ 1,169
$ 1,391
$ —
Home equity loans and lines of credit 1,312
1,324
—
2,255
2,286
—
With a specific allowance recorded:
1-4 single family residential 2,221
2,579
208
1,272
1,514
181
Home equity loans and lines of credit 8,086
8,163
816
7,700
7,804
348
$ 11,721
$ 12,184
$ 1,024
$ 12,396
$ 12,995
$ 529
ACI loans:

With a specific allowance recorded:

Home equity loans and lines of credit $ 5,640
$ 27,731
$ 1,812
$ —
$ —
$ —

Non-covered impaired loans include commercial real estate ACI loans modified in TDRs with a carrying value of $1.3 million as of December 31, 2016. Interest income recognized on impaired loans and pools for the three and nine months ended September 30, 2017 was approximately $2.9 million and $8.3 million, respectively. Interest income recognized on impaired loans for the three and nine months ended September 30, 2016 was not material.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

~~The following tables present the average recorded investment in impaired loans or ACI pools for the periods indicated (in thousands):~~

Three Months Ended September 30,
2017 2016
Covered Loans Covered Loans
Non-Covered Loans
Non-ACI
Loans
ACI Loans Non-Covered Loans Non-ACI
Loans ACI Loans
Residential and other consumer:

1-4 single family residential $ 962
$ 2,304
$ —
$ 344
$ 3,001
$ —
Home equity loans and lines of credit —
9,533
5,166
—
9,551
—
962
$ 11,837
$ 5,166
344
$ 12,552
$ —
Commercial:
Multi-family 1,359
—

Non-owner occupied commercial real estate 8,216
506

Construction and land 2,797
1,285

Owner occupied commercial real estate 20,579
18,231

Commercial and industrial

Taxi medallion loans 123,867
56,125

Other commercial and industrial 42,479
48,143

Commercial lending subsidiaries 21,398
13,873

220,695
138,163

$ 221,657
$ 138,507

Nine Months Ended September 30,
2017 2016
Covered Loans Covered Loans
Non-Covered Loans
Non-ACI
Loans
ACI Loans Non-Covered Loans Non-ACI
Loans ACI Loans
Residential and other consumer:

1-4 single family residential $ 800
$ 2,369
$ —
$ 251
$ 3,186
$ —
Home equity loans and lines of credit —
9,638
4,209
—
8,920
—
800
$ 12,007
$ 4,209
251
$ 12,106
$ —
Commercial:
Multi-family 1,816
—

Non-owner occupied commercial real estate 4,056
776

Construction and land 3,317
650

Owner occupied commercial real estate 18,872
13,711

Commercial and industrial

Taxi medallion loans 107,529
30,977

Other commercial and industrial 43,308
41,975

Commercial lending subsidiaries 27,202
11,293

206,100
99,382

$ 206,900
$ 99,633

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~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

The following table presents the ~~recorded investment in loans on non-accrual status as~~components of the ~~dates indicated~~provision for credit losses for the three months ended March 31, 2020 (in thousands):



Amount related to funded portion of loans	$	121,865
Amount related to off-balance sheet credit exposures	3,563
Provision for credit losses	$	125,428

September 30, 2017 December 31, 2016
Non-Covered Loans Covered
Non-ACI Loans Non-Covered Loans
Covered
Non-ACI Loans
Residential and other consumer:

1-4 single family residential $ 1,890
$ 934
$ 566
$ 918
Home equity loans and lines of credit —
2,369
—
2,283
Other consumer loans 332
—
2
—
2,222
$ 3,303
568
$ 3,201
Commercial:

Non-owner occupied commercial real estate 9,930
559

Construction and land 1,238
1,238

Owner occupied commercial real estate 21,455
19,439

Commercial and industrial

Taxi medallion loans 120,572
60,660

Other commercial and industrial 27,569
16,036

Commercial lending subsidiaries 16,625
32,645

197,389
130,577

$ 199,611
$ 131,145

Credit quality information

~~Non-covered~~The increase in the ACL from January 1, 2020, the date of initial adoption of ASU 2016-13, to March 31, 2020 included approximately $93 million related to the change in the Company's reasonable and supportable economic forecast, in large part resulting from the emerging COVID-19 pandemic. The increase also reflected an increase in specific reserves of approximately $16 million, the majority of which related to the Bridge franchise finance portfolio. The credit quality of the loan portfolio has been and is likely to continue to be impacted by the developing COVID-19 crisis, its impact on the economy broadly and more specifically on the Company's individual borrowers. Significant uncertainty currently exists about the extent of this impact, and the impact is likely not fully reflected in the credit quality indicators disclosed below as of March 31, 2020, due to the recent emergence of the pandemic.

Credit quality of loans ~~contractually delinquent~~held for investment is continuously monitored by ~~90 days or more~~dedicated residential credit risk management and ~~still accruing totaled $0.8 million~~commercial portfolio management functions. The Company also has a workout and ~~$1.6 million at September 30, 2017~~recovery department that monitors the credit quality of criticized and ~~December 31, 2016, respectively. The amount of additional interest income that would have been recognized on non-accrual~~classified loans ~~had they performed in accordance with their contractual terms was approximately $1.4 million~~ and ~~$3.7 million~~an independent internal credit review function.

Credit quality indicators for ~~the three and nine months ended September 30, 2017, respectively, and $1.1 million and $2.3 million for the three and nine months ended September 30, 2016, respectively.~~residential loans

Management considers delinquency status to be the most meaningful indicator of the credit quality of ~~1-4 single family~~ residential ~~home equity~~ and other consumer loans, other than government insured residential loans. Delinquency statistics are updated at least monthly. ~~See "Aging of loans" below for more information on the delinquency status of loans. Original~~ LTV and ~~original~~ FICO ~~score~~scores are also important indicators of credit quality for ~~the non-covered~~ 1-4 single family residential ~~portfolio.~~ loans other than government insured loans. FICO scores are generally updated at least annually, and were most recently updated in the fourth quarter of 2019. LTVs

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

are typically at origination since we do not routinely update residential appraisals. Substantially all of the government insured residential loans are government insured buyout loans, which the Company buys out of GNMA securitizations upon default. For these loans, traditional measures of credit quality are not particularly relevant considering the guaranteed nature of the loans and the underlying business model. Factors that impact risk inherent in the residential portfolio segment include national and regional economic conditions such as levels of unemployment and wages, as well as residential property values.

1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on delinquency status:



	March 31, 2020
	Amortized Cost By Origination Year
	2020		2019		2018		2017		2016		Prior		Total
Current	$	87,016	$	879,031	$	558,853	$	771,877	752,364		$	1,735,010	$	4,784,151
30 - 59 Days Past Due	—		17,524		4,282		3,974		3,357		17,003		46,140
60 - 89 Days Past Due	—		—		—		—		—		1,986		1,986
90 Days or More Past Due	—		807		1,853		177		485		8,309		11,631
	$	87,016	$	897,362	$	564,988	$	776,028	$	756,206	$	1,762,308	$	4,843,908



	December 31, 2019
	Amortized Cost By Origination Year
	2019		2018		2017		2016		2015		Prior		Total
Current	$	804,913	$	609,814	$	830,710	$	783,318	$	633,833	$	1,225,030	$	4,887,618
30 - 59 Days Past Due	13,915		3,003		3,751		8,419		4,308		12,238		45,634
60 - 89 Days Past Due	1,785		442		137		486		1,766		4,962		9,578
90 Days or More Past Due	—		1,762		914		—		5,030		3,400		11,106
	$	820,613	$	615,021	$	835,512	$	792,223	$	644,937	$	1,245,630	$	4,953,936

1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on LTV:



	March 31, 2020
	Amortized Cost By Origination Year
LTV	2020		2019		2018		2017		2016		Prior		Total
Less than 61%	$	27,741	$	192,928	$	127,117	$	176,768	220,664		$	546,673	$	1,291,891
61% - 70%	16,460		211,530		118,704		140,679		179,839		433,278		1,100,490
71% - 80%	42,815		476,643		286,050		379,188		324,805		759,286		2,268,787
More than 80%	—		16,261		33,117		79,393		30,898		23,071		182,740
	$	87,016	$	897,362	$	564,988	$	776,028	$	756,206	$	1,762,308	$	4,843,908

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020



	December 31, 2019
	Amortized Cost By Origination Year
LTV	2019		2018		2017		2016		2015		Prior		Total
Less than 61%	$	171,069	$	134,978	$	183,807	$	228,868	$	197,039	$	372,221	$	1,287,982
61% - 70 %	195,572		128,766		152,502		188,856		154,307		316,031		1,136,034
71% - 80%	442,311		313,779		404,743		338,000		283,202		531,377		2,313,412
More than 80%	11,661		37,498		94,460		36,499		10,389		26,001		216,508
	$	820,613	$	615,021	$	835,512	$	792,223	$	644,937	$	1,245,630	$	4,953,936

1-4 Single Family Residential credit exposure, excluding government insured residential loans, based on FICO score:



	March 31, 2020
	Amortized Cost By Origination Year
FICO	2020		2019		2018		2017		2016		Prior		Total
760 or greater	$	51,040	$	533,109	$	353,758	$	545,124	554,866		$	1,206,334	$	3,244,231
720 - 759	26,441		245,732		125,396		136,295		122,158		318,032		974,054
719 or less	9,535		118,521		85,834		94,609		79,182		237,942		625,623
	$	87,016	$	897,362	$	564,988	$	776,028	$	756,206	$	1,762,308	$	4,843,908



	December 31, 2019
	Amortized Cost By Origination Year
FICO	2019		2018		2017		2016		2015		Prior		Total
760 or greater	$	470,057	$	340,716	$	534,017	$	533,804	$	430,706	$	763,807	$	3,073,107
720 - 759	242,806		185,939		200,623		178,139		141,748		307,195		1,256,450
719 or less	107,750		88,366		100,872		80,280		72,483		174,628		624,379
	$	820,613	$	615,021	$	835,512	$	792,223	$	644,937	$	1,245,630	$	4,953,936

Credit quality indicators for commercial loans

Factors that impact risk inherent in commercial portfolio segments include but are not limited to levels of economic activity, health of the national and regional economy, industry trends, patterns of and trends in customer behavior that influence demand for our borrowers' products and services, and commercial real estate values. Internal risk ratings are considered the most meaningful indicator of credit quality for commercial loans. Internal risk ratings are generally indicative of the likelihood that a borrower will default, are a key factor ~~in identifying~~influencing the level and nature of ongoing monitoring of loans ~~that are individually evaluated for impairment~~ and may impact ~~management’s estimates of loss factors used in determining~~ the ~~amount~~estimation of the ~~ALLL.~~ACL. Internal risk ratings are updated on a continuous basis. Generally, relationships with balances in excess of defined thresholds, ranging from $1 million to $3 million, are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. Loans exhibiting potential credit weaknesses that deserve management’s close attention and that if left uncorrected may result in deterioration of the repayment capacity of the borrower are categorized as special mention. Loans with well-defined credit weaknesses, including payment defaults, declining collateral values, frequent overdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow, project cost overruns, unreasonable construction delays, past due real estate taxes or exhausted interest reserves, are assigned an internal risk rating of substandard. A loan with a weakness so severe that collection in full is highly questionable or improbable, but because of certain reasonably specific pending factors has not been charged off, will be assigned an internal risk rating of doubtful.

2420

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

~~The following tables summarize key indicators of credit quality for the Company's loans at the dates indicated. Amounts include premiums, discounts and deferred fees and costs (in thousands):~~

~~1-4 Single Family Residential~~Commercial credit exposure ~~for non-covered loans,~~ based on ~~original LTV and FICO score:~~ internal risk rating:

September 30, 2017
FICO
LTV 720 or less 721 - 740 741 - 760
761 or
greater
Total
60% or less $ 94,357
$ 111,279
$ 185,614
$ 819,422
$ 1,210,672
60% - 70% 93,963
102,461
140,350
586,158
922,932
70% - 80% 139,923
173,808
316,544
1,091,868
1,722,143
More than 80% 24,725
20,610
24,981
85,781
156,097
$ 352,968
$ 408,158
$ 667,489
$ 2,583,229
$ 4,011,844



	March 31, 2020
	Amortized Cost By Origination Year												Revolving Loans
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
Multi-Family
Pass	$	31,968	$	326,309	$	207,696	$	256,990	$	354,655	$	705,420	$	38,481	$	1,921,519
Special mention	—		—		—		—		4,357		—		—		4,357
Substandard	—		—		—		2,850		6,240		32,612		—		41,702
Total Multi-Family	$	31,968	$	326,309	$	207,696	$	259,840	$	365,252	$	738,032	$	38,481	$	1,967,578

Non-owner occupied commercial real estate
Pass	$	184,902	$	1,304,343	$	848,343	$	552,954	$	848,587	$	1,077,415	$	84,238	$	4,900,782
Special mention	—		—		—		4,201		114		—		—		4,315
Substandard	—		11,202		222		462		22,082		48,733		—		82,701
Total non-owner occupied commercial real estate	$	184,902	$	1,315,545	$	848,565	$	557,617	$	870,783	$	1,126,148	$	84,238	$	4,987,798

Construction and Land
Pass	$	6,283	$	94,863	$	18,643	$	63,292	$	27,579	$	2,121	$	831	$	213,612
Special mention	—		—		—		—		4,284		—		—		4,284
Substandard	—		—		888		—		3,093		346		—		4,327
Total Construction and Land	$	6,283	$	94,863	$	19,531	$	63,292	$	34,956	$	2,467	$	831	$	222,223

Owner occupied commercial real estate
Pass	$	36,757	$	340,526	$	305,021	$	324,384	$	341,658	$	571,570	$	29,758	$	1,949,674
Special mention	—		—		—		4,582		15,519		6,069		—		26,170
Substandard	—		3,203		12,608		11,915		2,779		10,610		9,551		50,666
Total owner occupied commercial real estate	$	36,757	$	343,729	$	317,629	$	340,881	$	359,956	$	588,249	$	39,309	$	2,026,510

Commercial and industrial
Pass	$	105,617	$	1,180,796	$	447,385	$	289,605	$	237,327	$	75,858	$	2,466,871	$	4,803,459
Special mention	—		2,306		1,002		1,005		426		665		61,769		67,173
Substandard	—		10,519		18,642		25,863		23,776		43,748		15,393		137,941
Total commercial and industrial	$	105,617	$	1,193,621	$	467,029	$	316,473	$	261,529	$	120,271	$	2,544,033	$	5,008,573

Pinnacle
Pass	$	14,982	$	140,375	$	99,903	$	241,039	$	234,526	$	456,782	$	—	$	1,187,607
Total Pinnacle	$	14,982	$	140,375	$	99,903	$	241,039	$	234,526	$	456,782	$	—	$	1,187,607

Bridge - Franchise Finance
Pass	$	73,535	$	137,509	$	69,366	$	47,212	$	25,975	$	21,887	$	—	$	375,484
Special mention	11,004		119,647		35,462		5,597		8,620		719		—		181,049
Substandard	183		11,419		59,257		6,310		11,658		2,339		—		91,166
Total Bridge - Franchise Finance	$	84,722	$	268,575	$	164,085	$	59,119	$	46,253	$	24,945	$	—	$	647,699

Bridge - Equipment Finance
Pass	$	24,544	$	212,004	$	123,552	$	133,612	$	60,226	$	82,855	$	—	$	636,793
Special mention	—		—		800		—		—		—		—		800
Substandard	—		—		—		—		7,693		3,868		—		11,561
Total Bridge - Equipment Finance	$	24,544	$	212,004	$	124,352	$	133,612	$	67,919	$	86,723	$	—	$	649,154

Mortgage Warehouse Lending
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	852,313	$	852,313
Total Mortgage Warehouse Lending	$	—	$	—	$	—	$	—	$	—	$	—	$	852,313	$	852,313

At March 31, 2020, the balance of revolving loans converted to term loans was immaterial.

December 31, 2016
FICO
LTV 720 or less 721 - 740 741 - 760
761 or
greater
Total
60% or less $ 87,035
$ 113,401
$ 163,668
$ 751,291
$ 1,115,395
60% - 70% 80,694
94,592
124,180
523,970
823,436
70% - 80% 110,509
148,211
276,425
907,450
1,442,595
More than 80% 22,115
9,058
15,470
42,280
88,923
$ 300,353
$ 365,262
$ 579,743
$ 2,224,991
$ 3,470,349

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

~~Commercial~~The following tables summarizes the Company's commercial credit exposure based on internal risk ~~rating:~~ rating, in aggregate, at the dates indicated (in thousands):



	March 31, 2020
	Multi-Family		Non-Owner Occupied Commercial Real Estate		Construction and Land		Owner Occupied Commercial Real Estate		Commercial and Industrial		Pinnacle		Bridge - Franchise Finance		Bridge - Equipment Finance		Mortgage Warehouse Lending		Total
Pass	$	1,921,519	$	4,900,782	$	213,612	$	1,949,674	$	4,803,459	$	1,187,607	$	375,484	$	636,793	$	852,313	$	16,841,243
Special mention	4,357		4,315		4,284		26,170		67,173		—		181,049		800		—		288,148
Substandard	41,702		82,701		4,327		50,666		137,941		—		91,166		11,561		—		420,064
	$	1,967,578	$	4,987,798	$	222,223	$	2,026,510	$	5,008,573	$	1,187,607	$	647,699	$	649,154	$	852,313	$	17,549,455



	December 31, 2019
	Multi-Family		Non-Owner Occupied Commercial Real Estate		Construction and Land		Owner Occupied Commercial Real Estate		Commercial and Industrial		Pinnacle		Bridge - Franchise Finance		Bridge - Equipment Finance		Mortgage Warehouse Lending		Total
Pass	$	2,184,771	$	4,932,279	$	240,734	$	1,991,556	$	4,508,563	$	1,202,430	$	562,042	$	663,855	$	768,472	$	17,054,702
Special mention	—		5,831		—		27,870		28,498		—		10,682		—		—		72,881
Substandard	32,934		92,794		3,191		43,382		118,288		—		54,758		20,939		—		366,286
	$	2,217,705	$	5,030,904	$	243,925	$	2,062,808	$	4,655,349	$	1,202,430	$	627,482	$	684,794	$	768,472	$	17,493,869

September 30, 2017
Commercial and Industrial
Multi-Family Non-Owner Occupied Commercial Real Estate Construction
and Land Owner Occupied Commercial Real Estate Taxi Medallion Loans Other Commercial and Industrial Commercial Lending Subsidiaries Total
Pass $ 3,299,753
$ 4,069,749
$ 265,921
$ 1,890,785
$ —
$ 3,666,227
$ 2,313,152
$ 15,505,587
Special mention 32,255
12,824
—
31,495
—
38,389
35,936
150,899
Substandard 30,253
90,996
5,535
31,460
120,572
64,087
33,637
376,540
Doubtful —
—
—
3,009
—
2,807
—
5,816
$ 3,362,261
$ 4,173,569
$ 271,456
$ 1,956,749
$ 120,572
$ 3,771,510
$ 2,382,725
$ 16,038,842
Past Due and Non-Accrual Loans:

The following table presents an aging of loans at the dates indicated (in thousands):



	March 31, 2020										December 31, 2019
	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total		Current		30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total
1-4 single family residential	$	4,784,151	$	46,140	$	1,986	$	11,631	$	4,843,908	$	4,887,618	$	45,634	$	9,578	$	11,106	$	4,953,936
Government insured residential	57,363		55,364		46,161		623,172		782,060		93,560		45,347		30,426		529,311		698,644
Home equity loans and lines of credit	1,439		89		—		—		1,528		1,320		—		—		—		1,320
Other consumer loans	5,412		1,915		—		—		7,327		7,219		—		—		—		7,219
Multi-family	1,952,228		15,350		—		—		1,967,578		2,217,705		—		—		—		2,217,705
Non-owner occupied commercial real estate	4,972,128		796		904		13,970		4,987,798		5,015,458		—		928		14,518		5,030,904
Construction and land	220,094		2,129		—		—		222,223		240,647		2,396		—		882		243,925
Owner occupied commercial real estate	1,999,110		4,135		4,619		18,646		2,026,510		2,041,352		1,336		4,420		15,700		2,062,808
Commercial and industrial	4,910,789		43,070		5,206		49,508		5,008,573		4,595,847		2,313		4,301		52,888		4,655,349
Pinnacle	1,187,607		—		—		—		1,187,607		1,202,430		—		—		—		1,202,430
Bridge - franchise finance	610,060		2,394		292		34,953		647,699		610,315		3,840		2,501		10,826		627,482
Bridge - equipment finance	636,418		12,736		—		—		649,154		677,089		7,705		—		—		684,794
Mortgage warehouse lending	852,313		—		—		—		852,313		768,472		—		—		—		768,472
	$	22,189,112	$	184,118	$	59,168	$	751,880	$	23,184,278	$	22,359,032	$	108,571	$	52,154	$	635,231	$	23,154,988

December 31, 2016
Commercial and Industrial
Multi-Family Non-Owner Occupied Commercial Real Estate
Construction
and Land
Owner Occupied Commercial Real Estate Taxi Medallion Loans Other Commercial and Industrial Commercial Lending Subsidiaries Total
Pass $ 3,811,822
$ 3,694,931
$ 309,675
$ 1,672,199
$ 40,460
$ 3,112,590
$ 2,255,444
$ 14,897,121
Special mention 12,000
7,942
—
33,274
—
19,009
—
72,225
Substandard 5,852
28,935
1,238
30,377
138,035
68,704
31,572
304,713
Doubtful —
—
—
—
178
8,162
3,178
11,518
$ 3,829,674
$ 3,731,808

$ 310,913
$ 1,735,850

$ 178,673

$ 3,208,465
$ 2,290,194

$ 15,285,577
Included in the table above is the guaranteed portion of SBA loans past due by 90 days or more totaling $36.2 million and $36.3 million at March 31, 2020 and December 31, 2019, respectively.

Loans contractually delinquent by 90 days or more and still accruing totaled $623 million, all of which were government insured residential loans at March 31, 2020 and $531 million, of which $529 million were government insured residential loans at December 31, 2019. Substantially all of these loans are government insured pool buyout loans, which the Company buys out of GNMA securitizations upon default.

2622

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

~~Aging of loans:~~

The following table presents ~~an aging of~~information about loans on non-accrual status at the dates ~~indicated. Amounts include premiums, discounts and deferred fees and costs~~indicated (in thousands):



	March 31, 2020				December 31, 2019
	Amortized Cost		Amortized Cost With No Related Allowance		Amortized Cost
Residential and other consumer	$	16,956	$	2,691	$	18,894
Commercial:
Multi-family	6,011		6,011		6,138
Non-owner occupied commercial real estate	36,355		31,607		40,097
Construction and land	3,439		346		3,191
Owner occupied commercial real estate	26,147		17,766		27,141
Commercial and industrial	60,118		16,095		74,757
Bridge - franchise finance	37,635		2,128		13,631
Bridge - equipment finance	11,561		11,318		20,939
	$	198,222	$	87,962	$	204,788

September 30, 2017 December 31, 2016
Current
30 - 59
Days Past
Due

60 - 89
Days Past
Due

90 Days or
More Past
Due
Total Current
30 - 59
Days Past
Due

60 - 89
Days Past
Due

90 Days or
More Past
Due
Total
Non-covered loans:

1-4 single family residential $ 3,994,758
$ 13,964
$ 444
$ 2,678
$ 4,011,844
$ 3,457,606
$ 10,355
$ 325
$ 2,063
$ 3,470,349
Home equity loans and lines of credit 1,623
21
—
—
1,644
1,120
—
—
—
1,120
Other consumer loans 19,623
500
—
1
20,124
24,306
—
—
—
24,306
Multi-family 3,362,261
—
—
—
3,362,261
3,829,674
—
—
—
3,829,674
Non-owner occupied commercial real estate 4,171,880
—
—
1,689
4,173,569
3,730,470
754
—
584
3,731,808
Construction and land 270,218
—
—
1,238
271,456
309,675
—
—
1,238
310,913
Owner occupied commercial real estate 1,947,728
1,261
266
7,494
1,956,749
1,726,826
1,557
797
6,670
1,735,850
Commercial and industrial
Taxi medallion loans 107,325
—
2,803
10,444
120,572
137,856
7,037
4,563
29,217
178,673
Other commercial and industrial 3,769,065
1,629
58
758
3,771,510
3,198,008
2,515
954
6,988
3,208,465
Commercial lending subsidiaries 2,382,725
—
—
—
2,382,725
2,284,435
12
3,247
2,500
2,290,194
$ 20,027,206
$ 17,375
$ 3,571
$ 24,302
$ 20,072,454
$ 18,699,976
$ 22,230
$ 9,886
$ 49,260
$ 18,781,352
Covered loans:
Non-ACI loans:

1-4 single family residential $ 23,002
$ 691
$ —
$ 934
$ 24,627
$ 29,406
$ 481
$ —
$ 918
$ 30,805
Home equity loans and lines of credit 33,263
1,114
663
2,369
37,409
43,129
1,255
534
2,077
46,995
$ 56,265
$ 1,805
$ 663
$ 3,303
$ 62,036
$ 72,535
$ 1,736
$ 534
$ 2,995
$ 77,800
ACI loans:
1-4 single family residential $ 436,051
$ 14,126
$ 2,549
$ 17,574
$ 470,300
$ 500,272
$ 13,524
$ 2,990
$ 15,562
$ 532,348
Home equity loans and lines of credit 4,876
89
40
635
5,640
3,460
148
23
263
3,894
$ 440,927
$ 14,215
$ 2,589
$ 18,209
$ 475,940
$ 503,732
$ 13,672
$ 3,013
$ 15,825
$ 536,242

~~1-4 single family residential and home equity ACI~~Included in the table above is the guaranteed portion of non-accrual SBA loans ~~that are contractually delinquent by more than 90 days and accounted for in pools that are on accrual status because discount continues to be accreted totaled $18~~totaling $49.1 million and ~~$16~~$45.7 million at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively. The amount of additional interest income that would have been recognized on non-accrual loans had they performed in accordance with their contractual terms was approximately $3.0 million and $2.0 million for the three months ended March 31, 2020 and 2019, respectively.

Collateral dependent loans:

The following table presents the amortized cost basis of collateral dependent loans at March 31, 2020 (in thousands):



	Amortized Cost		Extent to Which Secured by Collateral
Residential and other consumer	$	3,356	$	3,343
Commercial:
Multi-family	6,011		6,011
Non-owner occupied commercial real estate	20,405		20,405
Construction and land	3,439		3,411
Owner occupied commercial real estate	19,597		19,521
Commercial and industrial	47,278		33,078
Bridge - franchise finance	41,388		28,765
Bridge - equipment finance	11,570		11,559
Total commercial	149,688		122,737
	$	153,044	$	126,080

Collateral for the multi-family, non-owner occupied commercial real estate, and owner-occupied commercial real estate loan classes generally consists of commercial real estate. Collateral for construction and land loans is typically residential or commercial real estate. Collateral for commercial and industrial loans generally consists of equipment, accounts receivable, inventory and other business assets; owner-occupied commercial real estate loans may also be collateralized by these types of assets. Bridge franchise finance loans may be collateralized by franchise value or by equipment. Bridge equipment finance loans are secured by the financed equipment. Residential loans are collateralized by residential real estate.

Foreclosure of residential real estate

The carrying amount of foreclosed residential real estate properties included in "Other assets" in the accompanying consolidated balance sheets, all of which were covered, totaled $4 million and $5 million at September 30, 2017 and December 31, 2016, respectively. The recorded investment in residential ~~mortgage~~ loans in the process of foreclosure ~~totaled $13~~was $477 million, ~~and $8 million at September 30, 2017 and December 31, 2016, respectively, substantially all~~ of which ~~were covered loans.~~$467 million was government insured, at March 31, 2020 and $257 million, of which $248 million was government insured, at December 31,

2723

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

2019. The carrying amount of foreclosed residential real estate included in "Other assets" in the accompanying consolidated balance sheet was insignificant at March 31, 2020 and $6 million at December 31, 2019. In response to the COVID-19 pandemic, new foreclosure actions on residential loans have been temporarily suspended.

Troubled debt restructurings

The following table summarizes loans that were modified in TDRs during the periods indicated, as well as loans modified during the twelve months preceding ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019 that experienced payment defaults during the periods indicated (dollars in thousands):



	Three Months Ended March 31,
	2020						2019
	Loans Modified in TDRs During the Period			TDRs Experiencing Payment Defaults During the Period			Loans Modified in TDRs During the Period			TDRs Experiencing Payment Defaults During the Period
	Number of TDRs	Amortized Cost		Number of TDRs	Amortized Cost		Number of TDRs	Amortized Cost		Number of TDRs	Amortized Cost
1-4 single family residential	1	$	200	—	$	—	2	$	567	—	$	—
Government insured residential	90	14,855		25	3,628		20	2,981		16	1,942
Non-owner occupied commercial real estate	1	4,249		—	—		—	—		1	2,874
Owner occupied commercial real estate	—	—		—	—		1	904		3	1,962
Commercial and industrial	—	—		—	—		3	12,720		1	143
Bridge - franchise finance	11	13,872		10	12,321		2	1,212		—	—
Bridge - equipment finance	—	—		—	—		1	885		—	—
	103	$	33,176	35	$	15,949	29	$	19,269	21	$	6,921

Three Months Ended September 30,
2017 2016
Loans Modified in TDRs
During the Period TDRs Experiencing Payment
Defaults During the Period Loans Modified in TDRs
During the Period TDRs Experiencing Payment
Defaults During the Period
Number of
TDRs Recorded
Investment Number of
TDRs Recorded
Investment Number of
TDRs Recorded
Investment Number of
TDRs Recorded
Investment
Non-covered loans:

1-4 single family residential —
$ —
2
$ 269
—
$ —
—
$ —
Owner occupied commercial real estate —
—
—
—
1
491
—
—
Commercial and industrial
Taxi medallion loans 15
5,439
6
2,105
18
29,854
8
4,104
Other commercial and industrial 1
978
—
—
2
1,646
—

Commercial lending subsidiaries —
—
—
—
5
4,433
1
3,500
16
$ 6,417
8
$ 2,374
26
$ 36,424
9
$ 7,604
Covered loans:
Non-ACI loans:

Home equity loans and lines of credit —
$ —
1
$ 70
10
$ 1,671
—
$ —
ACI loans:
Owner occupied commercial real estate —
$ —
—
$ —
1
$ 839
—
$ —

Nine Months Ended September 30,
2017 2016
Loans Modified in TDRs
During the Period TDRs Experiencing Payment
Defaults During the Period Loans Modified in TDRs
During the Period TDRs Experiencing Payment
Defaults During the Period
Number of
TDRs Recorded
Investment Number of
TDRs Recorded
Investment Number of
TDRs Recorded
Investment Number of
TDRs Recorded
Investment
Non-covered loans:

1-4 single family residential 4
$ 351
2
$ 269
1
$ 107
—
$ —
Non-owner occupied commercial real estate 1
5,389
—
—
—
—
—
—
Owner occupied commercial real estate 2
4,522
—
—
3
5,225
—
—
Commercial and industrial

Taxi medallion loans 97
48,692
8
3,509
58
57,341
8
4,104
Other commercial and industrial 14
20,860
—
—
7
21,422
1
3,500
Commercial lending subsidiaries 1
12,810
—
—
6
7,933
—
—
119
$ 92,624
10
$ 3,778
75
$ 92,028
9
$ 7,604
Covered loans:
Non-ACI loans:

Home equity loans and lines of credit 5
$ 939
1
$ 70
16
$ 2,293
—
$ —
ACI loans:
Owner occupied commercial real estate —
$ —
—
$ —
1
$ 839
—
$ —

Modifications during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 included interest rate reductions, restructuring of the amount and timing of required periodic payments, extensions of maturity and covenant waivers. Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy. The total amount of such loans is not material. ~~Modified ACI loans accounted for in pools are~~

Under recently issued inter-agency and authoritative guidance and consistent with the CARES Act, short-term (generally periods of six months or less) deferrals or modifications related to COVID-19 will typically not ~~considered TDRs, are not separated from the pools and are not classified~~be categorized as ~~impaired loans.~~TDRs.

2824

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

~~Note 5 FDIC Indemnification Asset~~

When the Company recognizes gains or losses related to covered assets in its consolidated financial statements, changes in the estimated amount recoverable from the FDIC under the Loss Sharing Agreements with respect to those gains or losses are also reflected in the consolidated financial statements. Covered loans may be resolved through prepayment, short saleDisclosures Prescribed by Legacy GAAP (Before Adoption of the underlying collateral, foreclosure, sale of the loans or charge-off. For loans resolved through prepayment, short sale or foreclosure, the difference between consideration received in satisfaction of the loans and the carrying value of the loans is recognized in the consolidated statement of income line item “Income from resolution of covered assets, net.” Losses from the resolution of covered loans increase the amount recoverable from the FDIC under the Loss Sharing Agreements. Gains from the resolution of covered loans reduce the amount recoverable from the FDIC under the Loss Sharing Agreements. Similarly, differences in proceeds received on the sale of covered OREO and covered loans and their carrying amounts result in gains or losses and reduce or increase the amount recoverable from the FDIC under the Loss Sharing Agreements. Increases in valuation allowances or impairment charges related to covered assets also increase the amount estimated to be recoverable from the FDIC. These additions to or reductions in amounts recoverable from the FDIC related to transactions in the covered assets are recorded in the consolidated statement of income line item “Net gain (loss) on FDIC indemnification” and reflected as corresponding increases or decreases in the FDIC indemnification asset.

In addition, through June 30, 2017, recoveries of previously indemnified losses on assets that were formerly covered under the Commercial Shared-Loss Agreement resulted in reimbursements due to the FDIC. These transactions are included in the tables below. Amounts payable to the FDIC resulting from these transactions are recognized in other liabilities in the accompanying consolidated balance sheet at December 31, 2016.ASU 2016-13) for Prior Periods

The following ~~tables summarize~~table presents information about the ~~components~~balance of the ~~gains~~ALLL and ~~losses associated with covered assets, along with the~~ related ~~additions to or reductions in the amounts recoverable from the FDIC under the Loss Sharing Agreements,~~loans as ~~reflected in the consolidated statements~~ of ~~income for the periods indicated~~December 31, 2019 (in thousands):

Three Months Ended September 30,
2017 2016
Transaction
Income (Loss) Net Loss on FDIC
Indemnification Net Impact
on Pre-tax
Earnings Transaction
Income (Loss) Net Gain on FDIC
Indemnification Net Impact
on Pre-tax
Earnings
Recovery of (provision for) losses on covered loans $ (261 ) $ 215
$ (46 ) $ 445
$ (368 ) $ 77
Income from resolution of covered assets, net 6,400
(5,082 ) 1,318
8,883
(7,106 ) 1,777
Loss on sale of covered loans —
—
—
(10,033 ) 8,026
(2,007 )
Loss on covered OREO (35 ) 29
(6 ) (552 ) 441
(111 )
$ 6,104
$ (4,838 ) $ 1,266
$ (1,257 ) $ 993
$ (264 )



	Residential and Other Consumer		Commercial		Total
Allowance for loan and lease losses:
Ending balance	$	11,154	$	97,517	$	108,671
Ending balance: loans individually evaluated for impairment	$	9	$	20,481	$	20,490
Ending balance: loans collectively evaluated for impairment	$	11,145	$	77,036	$	88,181
Ending balance: ACI loans	$	—	$	—	$	—
Loans:
Ending balance	$	5,661,119	$	17,493,869	$	23,154,988
Ending balance: loans individually evaluated for impairment	$	57,117	$	187,788	$	244,905
Ending balance: loans collectively evaluated for impairment	$	5,454,422	$	17,288,901	$	22,743,323
Ending balance: ACI loans	$	149,580	$	17,180	$	166,760

The table below presents information about loans identified as impaired as of December 31, 2019 (in thousands):

Nine Months Ended September 30,
2017 2016
Transaction
Income (Loss) Net Loss on FDIC
Indemnification Net Impact
on Pre-tax
Earnings Transaction
Income (Loss) Net Loss on FDIC
Indemnification Net Impact
on Pre-tax
Earnings
Recovery of (provision for) losses on covered loans $ (2,693 ) $ 2,095
$ (598 ) $ 1,119
$ (1,007 ) $ 112
Income from resolution of covered assets, net 22,066
(17,591 ) 4,475
26,426
(21,140 ) 5,286
Loss on sale of covered loans (1,582 ) 1,266
(316 ) (14,895 ) 11,958
(2,937 )
Loss on covered OREO (65 ) 56
(9 ) (957 ) 779
(178 )
$ 17,726
$ (14,174 ) $ 3,552
$ 11,693
$ (9,410 ) $ 2,283



	Recorded Investment		UPB		Related Specific Allowance
With no specific allowance recorded:
1-4 single family residential	$	992	$	989	$	—
Government insured residential	53,428		53,350		—
Multi-family	6,138		6,169		—
Non-owner occupied commercial real estate	38,345		38,450		—
Construction and land	3,191		3,155		—
Owner occupied commercial real estate	17,419		17,488		—
Commercial and industrial	10,585		10,574		—
Bridge - franchise finance	4,115		4,117		—
Bridge - equipment finance	6,807		6,793		—
With a specific allowance recorded:
1-4 single family residential	2,697		2,652		9
Owner occupied commercial real estate	2,522		2,509		401
Commercial and industrial	63,531		63,709		13,992
Bridge - franchise finance	21,011		21,050		2,953
Bridge - equipment finance	14,124		14,024		3,135
Total:
Residential and other consumer	$	57,117	$	56,991	$	9
Commercial	187,788		188,038		20,481
	$	244,905	$	245,029	$	20,490

2925

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

~~Changes~~The following table presents the average recorded investment in ~~the FDIC indemnification asset and in the liability to the FDIC for recoveries related to assets previously covered under the Commercial Shared-Loss Agreement~~impaired loans for the ~~nine months ended September 30, 2017 and the year ended December 31, 2016, were as follows (in thousands):~~

Balance at December 31, 2015 $ 739,843
Amortization (160,091 )
Reduction for claims filed (46,083 )
Net loss on FDIC indemnification (17,759 )
Balance at December 31, 2016 515,910
Amortization (135,351 )
Reduction for claims filed (16,768 )
Net loss on FDIC indemnification (14,174 )
Balance at September 30, 2017 $ 349,617

~~The balances at September 30, 2017 and December 31, 2016 are reflected in the consolidated balance sheets as follows~~period indicated (in thousands):



	Three Months Ended March 31, 2019
Residential and other consumer:
1-4 single family residential	$	9,291
Commercial:
Multi-family	25,429
Non-owner occupied commercial real estate	18,528
Construction and land	9,857
Owner occupied commercial real estate	11,507
Commercial and industrial	28,439
Commercial lending subsidiaries	21,883
	115,643
	$	124,934

September 30, 2017 December 31, 2016
FDIC indemnification asset $ 349,617
$ 515,933
Other liabilities —
(23 )
$ 349,617
$ 515,910

Note 65 Income Taxes

The Company’s effective income tax rate was ~~32.2%~~23.4% and ~~31.7%~~26.8% for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively, and 31.2% and 33.2% for the nine months ended September 30, 2017 and 2016,~~2019, respectively. The effective income tax rate differed from the statutory federal income tax rate of ~~35% in all periods~~21% for the three months ended March 31, 2020 and 2019 due primarily to the ~~effect~~impact of state income taxes, partially offset by the benefit of income not subject to ~~tax, offset by state income taxes. In addition, the effective income tax rate for the three and nine months ended September 30, 2017 reflected~~federal tax. The Company considered the impact of ~~$0.3 million and $3.2 million, respectively,~~the COVID-19 situation in ~~excess tax benefits resulting from activity related to vesting of share-based awards and exercise of stock options.~~

The Company has investments in affordable housing limited partnerships which generate federal Low Income Housing Tax Credits and other tax benefits. The balance of these investments, included in other assets in the accompanying consolidated balance sheet, was $66 million and $71 million at September 30, 2017 and December 31, 2016, respectively. Unfunded commitments for affordable housing investments, included in other liabilities in the accompanying consolidated balance sheet, were $29 million and $53 million at September 30, 2017 and December 31, 2016, respectively. The maximum exposure to loss as a resultits evaluation of the ~~Company's involvement with these limited partnerships~~realizability of deferred tax assets at ~~September 30, 2017 was approximately $73 million. While~~March 31, 2020. Due primarily to the forecasted reversal of existing temporary differences and tax loss carryback capacity, the Company ~~believes~~concluded that the ~~likelihood of potential losses from these investments is remote, the maximum exposure~~deferred tax asset was determined by assuming a scenario where the projects completely fail and do not meet certain government compliance requirements resulting in recapture of the related tax credits. These investments did not have a material impact on income tax expense for the three and nine months ended September 30, 2017 and 2016.realizable.

Note 76 Derivatives and Hedging Activities

~~The Company uses interest rate swaps to manage interest rate risk related to liabilities that expose the Company to variability in cash flows due to changes in interest rates.~~ The Company enters into LIBOR-based interest rate swaps that are designated as cash flow hedges with the objective of limiting the variability of interest payment cash flows resulting from changes in the benchmark interest rate LIBOR. ~~Changes~~The Company also enters into LIBOR-based interest rate swaps designated as fair value hedges designed to hedge changes in the fair value of ~~interest~~outstanding fixed rate ~~swaps designated as cash flow hedging instruments are reported in AOCI and subsequently reclassified into interest expense~~borrowings caused by fluctuations in the ~~same period in which the related~~benchmark interest ~~on the floating-rate debt obligations affects earnings.~~

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

rate.

The Company ~~also~~ enters into interest rate derivative contracts with certain of its commercial borrowers to enable those borrowers to manage their exposure to interest rate fluctuations. To mitigate interest rate risk associated with these derivative contracts, the Company enters into offsetting derivative contract positions with primary dealers. These interest rate derivative contracts are not designated as hedging instruments; therefore, changes in the fair value of these derivatives are recognized immediately in earnings. ~~The~~For the three months ended March 31, 2020 and 2019, the impact on earnings, included in "other non-interest income" in the accompanying consolidated statements of income, related to changes in fair value of these derivatives ~~for the three and nine months ended September 30, 2017 and 2016~~ was not material.

The Company may be exposed to credit risk in the event of non-performance by the counterparties to its interest rate derivative agreements. The Company assesses the credit risk of its financial institution counterparties by monitoring publicly available credit rating and financial information. The Company manages dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA master agreements, central clearing mechanisms and counterparty limits. The agreements contain bilateral collateral arrangements with the amount of collateral to be posted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its commercial borrower counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company does not currently anticipate any losses from failure of interest rate derivative counterparties to honor their obligations.

The CME ~~amended its rules effective January 2017 to~~ legally ~~characterize~~characterizes variation margin payments for centrally cleared derivatives as settlements of the derivatives' exposures rather than collateral. As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting and financial reporting purposes. The Company's clearing agent for interest rate derivative contracts centrally cleared through the CME settles the variation margin daily with the CME; therefore, those

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

interest rate derivative contracts the Company clears through the CME are reported at a fair value of approximately ~~zero~~0 at ~~September 30, 2017.~~both March 31, 2020 and December 31, 2019.

The following tables set forth certain information concerning the Company’s interest rate contract derivative financial instruments and related hedged items at the dates indicated (dollars in thousands):


	September 30, 2017																		March 31, 2020
		Weighted Average Pay Rate		Weighted Average Receive Rate		Weighted Average Remaining Life in Years															Weighted Average Pay Rate		Weighted Average Receive Rate	Weighted Average Remaining Life in Years
					Notional Amount			Balance Sheet Location		Fair Value												Notional Amount			Balance Sheet Location		Fair Value
	Hedged Item						Asset				Liability		Hedged Item							Asset					Balance Sheet Location	Liability
Derivatives designated as cash flow hedges:					Notional Amount			Balance Sheet Location														Notional Amount
Pay-fixed interest rate swaps	Variability of interest cash flows on variable rate borrowings		1.77%			3-Month Libor	4.6		$	2,046,000		Other assets / Other liabilities		$	1,066			$	(259	)	Variability of interest cash flows on variable rate borrowings		2.38%	3-Month LIBOR	2.9		$	3,091,000		Other liabilities		$	—			$	(6,661	)
Derivatives designated as fair value hedges:
Receive-fixed interest rate swaps																			Variability of fair value of fixed rate borrowings		3-Month LIBOR		1.55%	1.3	250,000				Other liabilities	—				—
Derivatives not designated as hedges:
Pay-fixed interest rate swaps		3.86%		Indexed to 1-month Libor		6.4	1,000,763				Other assets / Other liabilities	7,605				(18,311		)			3.70%		Indexed to 1-month LIBOR	6.2	1,485,199				Other assets / Other liabilities	—				(42,312		)
Pay-variable interest rate swaps		Indexed to 1-month Libor		3.86%		6.4	1,000,763				Other assets / Other liabilities	19,648				(8,491		)			Indexed to 1-month LIBOR		3.70%	6.2	1,485,199				Other assets / Other liabilities	135,720				—
Interest rate caps purchased, indexed to 1-month Libor				2.80%		1.6	145,957				Other assets	15				—
Interest rate caps sold, indexed to 1-month Libor		2.80%				1.6	145,957				Other liabilities	—				(15		)
Interest rate caps purchased, indexed to 1-month LIBOR																							3.71%	1.2	26,023				Other assets	—				—
Interest rate caps sold, indexed to 1-month LIBOR																					3.71%			1.2	26,023				Other liabilities	—				—
							$	4,339,440				$	28,334			$	(27,076	)							$	6,363,444				$	135,720			$	(48,973	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020



	December 31, 2019
		Weighted Average Pay Rate	Weighted Average Receive Rate	Weighted Average Remaining Life in Years
					Notional Amount		Balance Sheet Location	Fair Value
	Hedged Item				Notional Amount		Balance Sheet Location	Asset		Liability
Derivatives designated as cash flow hedges:
Pay-fixed interest rate swaps	Variability of interest cash flows on variable rate borrowings	2.37%	3-Month LIBOR	3.2	$	3,131,000	Other liabilities	$	—	$	(1,607	)
Derivatives not designated as hedges:
Receive-fixed interest rate swaps	Variability of interest cash flows on fixed rate borrowings	3-Month LIBOR	1.55%	1.6	250,000		Other liabilities	—		—
Derivatives not designated as hedges
Pay-fixed interest rate swaps		3.72%	Indexed to 1-month LIBOR	6.4	1,460,355		Other assets / Other liabilities	876		(15,307		)
Pay-variable interest rate swaps		Indexed to 1-month LIBOR	3.72%	6.4	1,460,355		Other assets / Other liabilities	42,810		(2,115		)
Interest rate caps purchased, indexed to 1-month LIBOR			3.30%	0.6	61,004		Other assets	—		—
Interest rate caps sold, indexed to 1-month LIBOR		3.30%		0.6	61,004		Other liabilities	—		—
					$	6,423,718		$	43,686	$	(19,029	)

December 31, 2016

Weighted
Average Pay Rate

Weighted
Average Receive Rate

Weighted
Average
Remaining
Life in Years

Notional Amount Balance Sheet Location Fair Value
Hedged Item Asset Liability
Derivatives designated as cash flow hedges:

Pay-fixed interest rate swaps Variability of interest cash flows on variable rate borrowings 1.58% 3-Month Libor 3.3 $ 1,715,000
Other assets / Other liabilities $ 19,648
$ (3,112 )
Pay-fixed forward-starting interest rate swaps Variability of interest cash flows on variable rate borrowings 3.43% 3-Month Libor 10.5 300,000
Other liabilities —
(27,866 )
Derivatives not designated as hedges:

Pay-fixed interest rate swaps 3.77% Indexed to 1-month Libor 6.8 912,000
Other assets / Other liabilities 9,949
(20,383 )
Pay-variable interest rate swaps Indexed to 1-month Libor 3.77% 6.8 912,000
Other assets / Other liabilities 20,383
(9,949 )
Interest rate caps purchased, indexed to 1-month Libor
2.96% 2.3 189,057
Other assets 252
—
Interest rate caps sold, indexed to 1-month Libor 2.96% 2.3 189,057
Other liabilities —
(252 )
$ 4,217,114
$ 50,232
$ (61,562 )

The following table provides information about the amount of ~~loss~~gain (loss) related to derivatives designated as cash flow hedges reclassified from AOCI into interest expense for the periods indicated ~~(dollars in~~(in thousands):

Amount of Loss Reclassified from AOCI on Derivatives
Three Months Ended September 30, Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships 2017 2016 2017 2016 Location of Loss Reclassified from AOCI into Income
Interest rate contracts $ (2,001 ) $ (3,741 ) $ (7,463 ) $ (13,050 ) Interest expense on borrowings



	Three Months Ended March 31,
	2020			2019		Location of Gain (Loss) Reclassified from AOCI into Income
Interest rate contracts	$	(4,556	)	$	2,723	Interest expense on borrowings

During the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, no derivative positions designated as cash flow hedges were discontinued and none of the gains and losses reported in AOCI were reclassified into earnings as a result of the discontinuance of cash flow hedges or because of the early extinguishment of debt. As of ~~September 30, 2017,~~March 31, 2020, the amount of net loss expected to be reclassified from AOCI into earnings during the next twelve months was ~~$6.2~~$53.2 million.

The following table provides information about the amount of gain related to derivatives designated as fair value hedges recognized in earnings for the periods indicated (in thousands):



	Three Months Ended March 31,
	2020			2019		Location of Gain (Loss) in Consolidated Statements of Income
Fair value adjustment on derivatives	$	4,020		$	—	Interest expense on borrowings
Fair value adjustment on hedged items	(3,908		)	—		Interest expense on borrowings
Gain recognized on fair value hedges (ineffective portion)	$	112		$	—

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

The following table provides information about the hedged items related to derivatives designated as fair value hedges at the dates indicated (in thousands):



	March 31, 2020		December 31, 2019			Location in Consolidated Balance Sheets
Contractual balance outstanding of hedged item	$	250,000	$	250,000		Federal Home Loan Bank advances
Cumulative fair value hedging adjustments	$	3,409	$	(499	)	Federal Home Loan Bank advances

Some of the Company’s ISDA master agreements with financial institution counterparties contain provisions that permit either counterparty to terminate the agreements and require settlement in the event that regulatory capital ratios fall below certain designated thresholds, upon the initiation of other defined regulatory actions or upon suspension or withdrawal of the Bank’s credit rating. Currently, there are no circumstances that would trigger these provisions of the agreements.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

The Company does not offset assets and liabilities under master netting agreements for financial reporting purposes. Information on interest rate swaps subject to these agreements is as follows at the dates indicated ~~(in~~(dollars in thousands):


	September 30, 2017
				Gross Amounts Offset in Balance Sheet			Net Amounts Presented in Balance Sheet			Gross Amounts Not Offset in Balance Sheet								March 31, 2020
	Gross Amounts Recognized					Derivative Instruments				Collateral Pledged			Net Amount					Gross Amounts Offset in Balance Sheet			Net Amounts Presented in Balance Sheet		Gross Amounts Not Offset in Balance Sheet
				Gross Amounts Offset in Balance Sheet			Net Amounts Presented in Balance Sheet											Gross Amounts Offset in Balance Sheet			Net Amounts Presented in Balance Sheet				Gross Amounts Recognized			Derivative Instruments		Collateral Pledged			Net Amount
Derivative assets	$	8,686		$	—		$	8,686		$	(6,814	)	$	(1,539	)	$	333	$	—		$	—	$	—		$	—	$	—	$	—
Derivative liabilities	(18,570		)	—			(18,570		)	6,814			11,756			—		(48,973		)	—		(48,973		)	—		48,548		(425		)
	$	(9,884	)	$	—		$	(9,884	)	$	—		$	10,217		$	333	$	(48,973	)	$	—	$	(48,973	)	$	—	$	48,548	$	(425	)


	December 31, 2016
				Gross Amounts Offset in Balance Sheet			Net Amounts Presented in Balance Sheet			Gross Amounts Not Offset in Balance Sheet										December 31, 2019
	Gross Amounts Recognized					Derivative Instruments				Collateral Pledged				Net Amount						Gross Amounts Offset in Balance Sheet			Net Amounts Presented in Balance Sheet			Gross Amounts Not Offset in Balance Sheet
				Gross Amounts Offset in Balance Sheet																Gross Amounts Offset in Balance Sheet					Gross Amounts Recognized						Derivative Instruments			Collateral Pledged			Net Amount
Derivative assets	$	29,849		$	—		Net Amounts Presented in Balance Sheet	$	29,849		$	(27,485	)		$	—		$	2,364		$	876	Net Amounts Presented in Balance Sheet		$	—			$	876		$	(876	)	$	—		$	—
Derivative liabilities	(51,362		)	—			(51,362		)	27,485				23,796			(81		)	(16,914		)	—			(16,914		)		876			16,038			—
	$	(21,513	)	$	—		$	(21,513	)	$	—			$	23,796		$	2,283		$	(16,038	)	$	—		$	(16,038	)		$	—		$	16,038		$	—

The difference between the amounts reported for interest rate swaps subject to master netting agreements and the total fair value of interest rate contract derivative financial instruments reported in the consolidated balance sheets is related to interest rate derivative contracts ~~entered into with borrowers~~ not subject to master netting agreements.

At ~~September 30, 2017,~~March 31, 2020, the Company had pledged ~~investment securities available for sale with a carrying amount~~net financial collateral of ~~$40 million and cash on deposit of $2~~$53.2 million as collateral for interest rate swaps in a liability ~~position. $2 million of financial collateral was pledged by counterparties to the Company for interest rate swaps in an asset position.~~position that are not centrally cleared. The amount of collateral required to be posted varies based on the settlement value of outstanding swaps and in some cases may include initial margin requirements.

3329

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020

Note 87 Stockholders’ Equity

Accumulated Other Comprehensive Income

Changes in ~~AOCI~~other comprehensive income are summarized as follows for the periods indicated (in thousands):



	Three Months Ended March 31,
	2020									2019
	Before Tax			Tax Effect			Net of Tax			Before Tax			Tax Effect			Net of Tax
Unrealized gains (losses) on investment securities available for sale:
Net unrealized holding gain (loss) arising during the period	$	(286,636	)	$	73,476		$	(213,160	)	$	29,411		$	(7,794	)	$	21,617
Amounts reclassified to gain on investment securities available for sale, net	(1,530		)	390			(1,140		)	(4,317		)	1,144			(3,173		)
Net change in unrealized gains (losses) on investment securities available for sale	(288,166		)	73,866			(214,300		)	25,094			(6,650		)	18,444
Unrealized losses on derivative instruments:
Net unrealized holding loss arising during the period	(109,951		)	29,137			(80,814		)	(28,129		)	7,454			(20,675		)
Amounts reclassified to interest expense on borrowings	4,556			(1,207		)	3,349			(2,723		)	722			(2,001		)
Net change in unrealized losses on derivative instruments	(105,395		)	27,930			(77,465		)	(30,852		)	8,176			(22,676		)
Other comprehensive loss	$	(393,561	)	$	101,796		$	(291,765	)	$	(5,758	)	$	1,526		$	(4,232	)

Three Months Ended September 30,
2017 2016
Before Tax Tax Effect Net of Tax Before Tax Tax Effect Net of Tax
Unrealized gains on investment securities available for sale:

Net unrealized holding gain arising during the period $ 14,144
$ (5,587 ) $ 8,557
$ 5,316
$ (2,100 ) $ 3,216
Amounts reclassified to gain on investment securities available for sale, net (26,931 ) 10,638
(16,293 ) (3,008 ) 1,188
(1,820 )
Net change in unrealized gains on investment securities available for sale (12,787 ) 5,051
(7,736 ) 2,308
(912 ) 1,396
Unrealized losses on derivative instruments:
Net unrealized holding gain (loss) arising during the period (281 ) 111
(170 ) 8,356
(3,301 ) 5,055
Amounts reclassified to interest expense on borrowings 2,001
(791 ) 1,210
3,741
(1,477 ) 2,264
Net change in unrealized losses on derivative instruments 1,720
(680 ) 1,040
12,097
(4,778 ) 7,319
Other comprehensive income (loss) $ (11,067 ) $ 4,371
$ (6,696 ) $ 14,405
$ (5,690 ) $ 8,715

Nine Months Ended September 30,
2017 2016
Before Tax Tax Effect Net of Tax Before Tax Tax Effect Net of Tax
Unrealized gains on investment securities available for sale:

Net unrealized holding gain arising during the period $ 54,258
$ (21,432 ) $ 32,826
$ 88,413
$ (34,923 ) $ 53,490
Amounts reclassified to gain on investment securities available for sale, net (29,194 ) 11,532
(17,662 ) (10,065 ) 3,975
(6,090 )
Net change in unrealized gains on investment securities available for sale 25,064
(9,900 ) 15,164
78,348
(30,948 ) 47,400
Unrealized losses on derivative instruments:
Net unrealized holding loss arising during the period (13,780 ) 5,443
(8,337 ) (57,765 ) 22,817
(34,948 )
Amounts reclassified to interest expense on borrowings 7,463
(2,948 ) 4,515
13,050
(5,154 ) 7,896
Net change in unrealized losses on derivative instruments (6,317 ) 2,495
(3,822 ) (44,715 ) 17,663
(27,052 )
Other comprehensive income $ 18,747
$ (7,405 ) $ 11,342
$ 33,633
$ (13,285 ) $ 20,348

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

The categories of AOCI and changes therein are presented below for the periods indicated (in thousands):

Unrealized Gains on
Investment Securities
Available for Sale

Unrealized Losses
on Derivative
Instruments
Total
Balance at December 31, 2016 $ 47,057
$ (5,810 ) $ 41,247
Other comprehensive income 15,164
(3,822 ) 11,342
Balance at September 30, 2017 $ 62,221
$ (9,632 ) $ 52,589

Balance at December 31, 2015 $ 41,535
$ (19,353 ) $ 22,182
Other comprehensive income 47,400
(27,052 ) 20,348
Balance at September 30, 2016 $ 88,935
$ (46,405 ) $ 42,530



	Unrealized Gain (Loss) on Investment Securities Available for Sale			Unrealized Gain (Loss) on Derivative Instruments			Total
Balance at December 31, 2019	$	28,185		(60,012		)	$	(31,827	)
Other comprehensive loss	(214,300		)	(77,465		)	(291,765		)
Balance at March 31, 2020	$	(186,115	)	$	(137,477	)	$	(323,592	)

Balance at December 31, 2018	$	4,194		$	679		$	4,873
Other comprehensive loss	18,444			(22,676		)	(4,232		)
Balance at March 31, 2019	$	22,638		$	(21,997	)	$	641

Note 98 Equity Based and Other Compensation Plans

Share Awards

Unvested share awards

~~During the nine months ended September 30, 2017, the Company granted 618,306~~A summary of activity related to unvested share awards ~~under~~follows for the ~~2014 Plan. All~~periods indicated:



	Number of Share Awards		Weighted Average Grant Date Fair Value
Unvested share awards outstanding, December 31, 2019	1,050,455		$	38.24
Granted	599,766		30.90
Vested	(430,840	)	39.36
Canceled or forfeited	(3,308	)	38.58
Unvested share awards outstanding, March 31, 2020	1,216,073		$	34.22

Unvested share awards outstanding, December 31, 2018	1,186,238		38.86
Granted	563,970		36.65
Vested	(505,438	)	37.80
Canceled or forfeited	(25,930	)	39.93
Unvested share awards outstanding, March 31, 2019	1,218,840		$	38.25

Unvested share awards are generally valued at the closing price of the Company's common stock on the date of grant. All shares granted prior to 2019 vest in equal annual installments over a period of three years from the date of grant. ~~The~~All shares granted ~~were valued at~~in 2019 and 2020 to Company employees vest in equal annual installments over a period of four years from the date of grant. Shares granted to the Company's Board of Directors vest over a period of one year.

The following table summarizes the closing price of the ~~Company’s common~~Company's stock on the date of grant ~~ranging from $33.21 to $40.84,~~for shares granted and ~~had an~~the aggregate grant date fair value of ~~$24.9 million.~~ shares vesting for the periods indicated (in thousands, except per share data):



	Three Months Ended March 31,
	2020		2019
Closing price on date of grant	$	30.90	$	36.65
Aggregate grant date fair value of shares vesting	$	16,958	$	19,105

The total unrecognized compensation cost of ~~$26.7~~$33.0 million for all unvested share awards outstanding at ~~September 30, 2017~~March 31, 2020 will be recognized over a weighted average remaining period of ~~1.98~~2.92 years.

During the nine months ended September 30, 2016, the Company granted 644,888 unvested share awards under the 2014 Plan. All of the shares vest in equal annual installments over a period of three years from the date of grant. The shares granted were valued at the closing price of the Company’s common stock on the date of grant, ranging from $29.78 to $33.76, and had an aggregate fair value of $20.0 million.

Executive share-based awards

Certain of the Company's executives are eligible to receive annual awards of RSUs and PSUs (collectively, the "share units"). Annual awards of RSUs represent a fixed number of shares and vest on December 31st in equal tranches over three ~~years.~~years for grants prior to 2019, and over four years for awards issued in 2019 and 2020. PSUs are initially granted based on a target value. The number of PSUs that ultimately vest at the end of ~~a three-year~~the performance measurement period will be based on the achievement of performance criteria pre-established by the Compensation Committee of the Board of Directors. ~~The performance criteria established for the PSUs granted in 2017 and 2016 include both performance and market conditions.~~ Upon vesting, the share units will be converted to common stock on a one-for-one basis, or may be settled in cash at the Company's option. The share units will accumulate dividends declared on the Company's common stock from the date of grant to be paid subsequent to vesting.

~~The first tranche of RSUs granted vested on December 31, 2016. The Company cash settled these share units in the amount of $0.8 million during the first quarter of 2017.~~ As a result of ~~this~~the majority of previous settlements being in cash, ~~settlement,~~ all RSUs and PSUs have been determined to be liability instruments and ~~will be~~are remeasured at fair value each reporting period until the awards are settled. The RSUs are valued based on the closing price of the Company's common stock at the reporting date. The PSUs are valued based on the closing price of the

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

Company's common stock at the reporting date net of a discount related to any applicable market conditions, considering the probability of meeting the defined performance conditions. Compensation cost related to PSUs is recognized during the performance period based on the probable outcome of the respective performance conditions.

~~During~~A summary of activity related to executive share-based awards for the ~~nine months ended September 30, 2017, 47,848 RSUs and 47,848 PSUs were granted. During the nine months ended September 30, 2016, 57,873 RSUs and 57,873 PSUs were granted.~~ period indicatedfollows:



	RSU	PSU
Unvested executive share-based awards outstanding, December 31, 2019	112,116	125,088
Granted	106,731	106,731
Unvested executive share-based awards outstanding, March 31, 2020	218,847	231,819

Unvested executive share-based awards outstanding, December 31, 2018	90,612	99,874
Granted	73,062	73,062
Unvested executive share-based awards outstanding, March 31, 2019	163,674	172,936

The total liability for the share units was ~~$2.6~~$2.8 million at ~~September 30, 2017.~~March 31, 2020. The total unrecognized compensation cost of ~~$5.3~~$8.2 million for these share units at ~~September 30, 2017~~March 31, 2020 will be recognized over a weighted average remaining period of ~~2.18~~2.74 years.

Incentiveawards

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

The~~618,306~~ ~~unvested share awards granted during the nine months ended September 30, 2017, as discussed above, included~~ ~~25,321~~ unvested share awards granted to certain of the Company's executives based on the achievement of performance criteria pre-established by the Compensation Committee for the year ended December 31, 2016.

~~Incentiveawards~~

~~Beginning in 2017, the~~ Company's annual incentive compensation arrangements for employees other than those eligible for the executive share-based awards discussed above provide for settlement through a combination of cash payments and unvested share awards following the end of the annual performance period. The dollar value of share awards to be granted is based on the achievement of performance criteria established in the incentive arrangements. The number of shares of common stock to be awarded is variable based on the closing price of the Company's stock on the date of grant; therefore, these awards are initially classified as liability instruments, with compensation cost recognized from the beginning of the performance period. ~~The~~Awards related to performance periods prior to 2019 vest over three years and awards related to the 2019 and 2020 performance periods vest in equal installments over a period of ~~three~~four years from the date of grant. These awards are included in the summary of activity related to unvested share awards above. The total liability for ~~the~~ incentive share awards for the 2020 performance period was ~~$1.2~~$0.3 million at ~~September 30, 2017.~~March 31, 2020. The total unrecognized compensation cost of ~~$5.3~~$5.6 million for ~~these~~incentive share awards at ~~September 30, 2017~~March 31, 2020 will be recognized over a weighted average remaining period of ~~3.25~~4.76 years. The accrued liability and unrecognized compensation cost are based on management's current estimate of the likely outcome of the performance criteria established in the incentive arrangements and may differ from actual results.

The 599,766 unvested share awards granted during the three months ended March 31, 2020, as discussed above, included 114,936 unvested share awards granted under the Company's annual incentive compensation arrangements based on the achievement of established performance criteria for the year ended December 31, 2019.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

Option Awards

A summary of activity related to stock option awards for the ~~nine~~three months ended ~~September 30, 2017~~ March 31, 2020 and 2019follows:

Number of
Option
Awards

Weighted
Average
Exercise Price
Option awards outstanding, December 31, 2016 3,602,076
$ 26.74
Exercised (2,304,108 ) 26.70
Option awards outstanding and exercisable, September 30, 2017 1,297,968
$ 26.81



	Number of Option Awards		Weighted Average Exercise Price
Option awards outstanding, December 31, 2019	737,753		$	26.64
Exercised	(60,000	)	25.48
Option awards outstanding and exercisable, March 31, 2020	677,753		$	26.74

Option awards outstanding, December 31, 2018	964,840		26.53
Exercised	(3,910	)	11.14
Canceled or forfeited	(1,960	)	63.74
Option awards outstanding, March 31, 2019	958,970		$	26.52

~~Activity related to stock option awards for the nine months ended September 30, 2016 was not significant.~~ The intrinsic value of options exercised and ~~the~~ related tax ~~benefit~~benefits was ~~$25.3 million and $3.8 million, respectively, during~~immaterial for the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2020 and 2019.

Note 109 Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis

Following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which those measurements are typically classified.

Investment securities available for sale and marketable equity securities—Fair value measurements are based on quoted prices in active markets when available; these measurements are classified within level 1 of the fair value hierarchy. These securities typically include U.S. Treasury securities and certain preferred stocks. If quoted prices in active markets are not available, fair values are estimated using quoted prices of securities with similar characteristics, quoted prices of identical securities in less active markets, discounted cash flow techniques, or matrix pricing models. These securities are generally classified within level 2 of the fair value hierarchy and include U.S. Government agency securities, U.S. Government agency and sponsored enterprise MBS, preferred stock investments for which level 1 valuations are not available, ~~corporate debt securities,~~ non-mortgage asset-backed securities, single family rental real estate-backed securities, certain private label residential MBS and CMOs, private label commercial MBS, collateralized loan obligations and state and municipal obligations. Pricing of these securities is generally primarily spread driven. Observable inputs that may impact the valuation of these securities include benchmark yield curves, credit spreads, reported trades, dealer quotes, bids, issuer spreads, current rating, historical constant prepayment rates, historical voluntary prepayment rates, structural and waterfall features of individual securities, published collateral data, and for certain securities, historical constant default rates and default severities. Investment securities available for sale generally classified within level 3 of the fair value hierarchy include certain private label MBS and trust preferred securities. The Company typically values these securities using third-party proprietary pricing models, primarily discounted cash flow valuation techniques, which incorporate both observable and unobservable inputs. Unobservable inputs that may impact the valuation of

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

~~these securities include risk adjusted discount rates, projected prepayment rates, projected default rates and projected loss severity.~~

The Company uses third-party pricing services in determining fair value measurements for investment securities. To obtain an understanding of the methodologies and assumptions used, management reviews written documentation provided by the pricing services, conducts interviews with valuation desk personnel and reviews model results and detailed assumptions used to value selected securities as considered necessary. Management has established a robust price challenge process that includes a review by the treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over month fluctuations or deviations from expectations is challenged. If considered necessary to resolve any discrepancies, a price will be obtained from an additional independent valuation source. The Company does not typically adjust the prices provided, other than through this established challenge process. The results of price challenges are subject to review by executive management. The Company has also established a quarterly process whereby prices provided by its primary pricing service for a sample of securities are validated. Any price discrepancies are resolved based on careful consideration of the assumptions and inputs employed by each of the pricing sources.

Servicing rights—Commercial servicing rights are valued using a discounted cash flow methodology incorporating contractually specified servicing fees and market based assumptions about prepayments, discount rates, default rates and costs of servicing. Prepayment and default assumptions are based on historical industry data for loans with similar characteristics.

Assumptions about costs of servicing are based on market convention. Discount rates are based on rates of return implied by observed trades of underlying loans in the secondary market. Fair value of residential MSRs is estimated using a discounted cash flow technique that incorporates market‑based assumptions including estimated prepayment speeds, contractual servicing fees, cost to service, discount rates, escrow account earnings, ancillary income, and estimated defaults. Due to the natureThese instruments are classified within level 2 of the ~~valuation inputs and the limited availability of market pricing, servicing rights are classified as level 3.~~fair value hierarchy.

Derivative financial instruments—Fair values of interest rate swaps are determined using widely accepted discounted cash flow modeling techniques. These discounted cash flow models use projections of future cash payments and receipts that are discounted at mid-market rates. Observable inputs that may impact the valuation of these instruments include LIBOR swap rates and LIBOR forward yield curves. These fair value measurements are generally classified within level 2 of the fair value hierarchy.

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~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

The following tables present assets and liabilities measured at fair value on a recurring basis at the dates indicated (in thousands):


	September 30, 2017								March 31, 2020
	Level 1		Level 2		Level 3		Total		Level 1		Level 2			Total
Investment securities available for sale:
U.S. Treasury securities	$	24,957	$	—	$	—	$	24,957	$	76,154	$	—		$	76,154
U.S. Government agency and sponsored enterprise residential MBS	—		2,348,687		—		2,348,687		—		2,180,898			2,180,898
U.S. Government agency and sponsored enterprise commercial MBS	—		139,220		—		139,220		—		376,492			376,492
Private label residential MBS and CMOs	—		467,061		60,797		527,858		—		1,173,880			1,173,880
Private label commercial MBS	—		1,153,601		—		1,153,601		—		1,604,814			1,604,814
Single family rental real estate-backed securities	—		572,948		—		572,948		—		528,793			528,793
Collateralized loan obligations	—		700,319		—		700,319		—		1,094,793			1,094,793
Non-mortgage asset-backed securities	—		82,637		—		82,637		—		255,161			255,161
Preferred stocks	70,038		678		—		70,716
State and municipal obligations	—		677,015		—		677,015		—		271,033			271,033
SBA securities	—		586,675		—		586,675		—		260,388			260,388
Other debt securities	—		3,815		5,024		8,839
Marketable equity securities									42,195		—			42,195
Servicing rights	—		—		30,136		30,136		—		7,179			7,179
Derivative assets	—		28,334		—		28,334		—		135,720			135,720
Total assets at fair value	$	94,995	$	6,760,990	$	95,957	$	6,951,942	$	118,349	$	7,889,151		$	8,007,500
Derivative liabilities	$	—	$	27,076	$	—	$	27,076	$	—	$	(48,973	)	$	(48,973	)
Total liabilities at fair value	$	—	$	27,076	$	—	$	27,076	$	—	$	(48,973	)	$	(48,973	)

3832

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~September 30, 2017~~March 31, 2020



	December 31, 2019
	Level 1		Level 2			Total
Investment securities available for sale:
U.S. Treasury securities	$	70,325	$	—		$	70,325
U.S. Government agency and sponsored enterprise residential MBS	—		2,022,175			2,022,175
U.S. Government agency and sponsored enterprise commercial MBS	—		370,976			370,976
Private label residential MBS and CMOs	—		1,012,177			1,012,177
Private label commercial MBS	—		1,724,684			1,724,684
Single family rental real estate-backed securities	—		470,025			470,025
Collateralized loan obligations	—		1,197,366			1,197,366
Non-mortgage asset-backed securities	—		194,904			194,904
State and municipal obligations	—		273,302			273,302
SBA securities	—		362,731			362,731
Marketable equity securities	60,572		—			60,572
Servicing rights	—		7,977			7,977
Derivative assets	—		43,686			43,686
Total assets at fair value	$	130,897	$	7,680,003		$	7,810,900
Derivative liabilities	$	—	$	(19,029	)	$	(19,029	)
Total liabilities at fair value	$	—	$	(19,029	)	$	(19,029	)

December 31, 2016
Level 1 Level 2 Level 3 Total
Investment securities available for sale:

U.S. Treasury securities $ 5,005
$ —
$ —
$ 5,005
U.S. Government agency and sponsored enterprise residential MBS —
1,527,242
—
1,527,242
U.S. Government agency and sponsored enterprise commercial MBS —
124,586
—
124,586
Private label residential MBS and CMOs —
254,488
120,610
375,098
Private label commercial MBS —
1,187,624
—
1,187,624
Single family rental real estate-backed securities —
861,251
—
861,251
Collateralized loan obligations —
487,296
—
487,296
Non-mortgage asset-backed securities —
186,736
—
186,736
Preferred stocks 86,890
1,313
—
88,203
State and municipal obligations —
698,546
—
698,546
SBA securities —
523,906
—
523,906
Other debt securities —
3,519
4,572
8,091
Servicing rights —
—
27,159
27,159
Derivative assets —
50,232
—
50,232
Total assets at fair value $ 91,895
$ 5,906,739
$ 152,341
$ 6,150,975
Derivative liabilities $ —
$ 61,562
$ —
$ 61,562
Total liabilities at fair value $ —
$ 61,562
$ —
$ 61,562

~~There were no transfers of financial assets between levels of the fair value hierarchy during the nine months ended September 30, 2017.~~

The following table reconciles changes in the fair value of assets and liabilities measured at fair value on a recurring basis and classified in level 3 of the fair value hierarchy during the periods indicated (in thousands):

Three Months Ended September 30,
2017 2016

Private Label
Residential
MBS

Other Debt
Securities
Servicing Rights
Private Label
Residential
MBS

Other Debt
Securities
Servicing Rights
Balance at beginning of period $ 108,790
$ 4,923
$ 29,128
$ 131,156
$ 4,292
$ 24,891
Gains (losses) for the period included in:
Net income 24,146
—
(1,330 ) —
—
(2,369 )
Other comprehensive income (24,668 ) 101
—
337
22
—
Discount accretion 2,332
59
—
1,404
36
—
Purchases or additions —
—
2,338
—
—
2,194
Sales (40,732 ) —
—
—
—
—
Settlements (9,071 ) (59 ) —
(5,594 ) (26 ) —
Transfers into level 3 —
—
—
—
—
—
Transfers out of level 3 —
—
—
—
—
—
Balance at end of period $ 60,797
$ 5,024
$ 30,136
$ 127,303
$ 4,324
$ 24,716

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~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

Nine Months Ended September 30,
2017 2016

Private Label
Residential
MBS

Other Debt
Securities
Servicing Rights
Private Label
Residential
MBS

Other Debt
Securities
Servicing Rights
Balance at beginning of period $ 120,610
$ 4,572
$ 27,159
$ 140,883
$ 4,532
$ 20,017
Gains (losses) for the period included in:
Net income 24,146
—
(4,273 ) —
—
(5,983 )
Other comprehensive income (25,651 ) 469
—
(190 ) (245 ) —
Discount accretion 5,208
248
—
4,485
88
—
Purchases or additions —
—
7,250
—
—
10,682
Sales (40,732 ) —
—
—
—
—
Settlements (22,784 ) (265 ) —
(17,875 ) (51 ) —
Transfers into level 3 —
—
—
—
—
—
Transfers out of level 3 —
—
—
—
—
—
Balance at end of period $ 60,797
$ 5,024
$ 30,136
$ 127,303
$ 4,324
$ 24,716

Gains on private label residential MBS recognized in net income during the three and nine months ended September 30, 2017 are included in the consolidated statement of income line item "Gain on investment securities available for sale, net." Changes in the fair value of servicing rights are included in the consolidated statement of income line item “Other non-interest income.” Changes in fair value include changes due to valuation assumptions, primarily discount rates and prepayment speeds, as well as other changes such as runoff and the passage of time. The amount of net unrealized losses included in earnings for the nine months ended September 30, 2017 and 2016 that were related to servicing rights held at September 30, 2017 and 2016 totaled approximately $0.8 million and $1.7 million, respectively, and were primarily due to changes in discount rates and prepayment speeds.

Securities for which fair value measurements are categorized in level 3 of the fair value hierarchy at September 30, 2017 consisted of pooled trust preferred securities with a fair value of $5 million and private label residential MBS and CMOs with a fair value of $61 million. The trust preferred securities are not material to the Company’s financial statements. Private label residential MBS consisted of senior and mezzanine tranches collateralized by prime fixed rate and hybrid 1-4 single family residential mortgages originated before 2005, some of which contain option-arm features. Substantially all of these securities have variable rate coupons. Weighted average subordination levels at September 30, 2017 were 16.4% and 10.4% for investment grade and non-investment grade securities, respectively.

The following table provides information about the valuation techniques and unobservable inputs used in the valuation of private label residential MBS and CMOs falling within level 3 of the fair value hierarchy as of September 30, 2017 (dollars in thousands):

Fair Value at Valuation Technique
Unobservable
Input

Range (Weighted
Average)
September 30, 2017
Investment grade $ 34,245
Discounted cash flow Voluntary prepayment rate 6.60% - 25.60% (15.92%)
Probability of default 0.13% - 4.04% (1.36%)
Loss severity 15.00% - 75.00% (33.10%)
Discount rate 1.88% - 7.43% (3.48%)

Non-investment grade $ 26,552
Discounted cash flow Voluntary prepayment rate 1.10% - 29.30% (15.35%)
Probability of default 0.13% - 4.15% (1.51%)
Loss severity 15.00% - 95.00% (32.96%)
Discount rate 1.35% - 9.43% (5.89%)

The significant unobservable inputs impacting the fair value measurement of private label residential MBS and CMOs include voluntary prepayment rates, probability of default, loss severity given default and discount rates. Generally, increases in

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~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

probability of default, loss severity or discount rates would result in a lower fair value measurement. Alternatively, decreases in probability of default, loss severity or discount rates would result in a higher fair value measurement. For securities with less favorable credit characteristics, decreases in voluntary prepayment speeds may be interpreted as a deterioration in the overall credit quality of the underlying collateral and as such, lead to lower fair value measurements. The fair value measurements of those securities with higher levels of subordination will be less sensitive to changes in these unobservable inputs other than discount rates, while securities with lower levels of subordination will show a higher degree of sensitivity to changes in these unobservable inputs other than discount rates. Generally, a change in the assumption used for probability of default is accompanied by a directionally similar change in the assumption used for loss severity given default and a directionally opposite change in the assumption used for voluntary prepayment rate.

~~The following table provides information about the valuation techniques and significant unobservable inputs used in the valuation of servicing rights as of September 30, 2017 (dollars in thousands):~~

Fair Value at Valuation Technique
Unobservable
Input

Range (Weighted
Average)
September 30, 2017
Residential MSRs $ 18,006
Discounted cash flow Prepayment rate 2.76% - 29.96% (12.88%)
Discount rate 9.50% - 9.58% (9.51%)

Commercial servicing rights $ 12,130
Discounted cash flow Prepayment rate 0.09% - 9.99% (7.81%)
Discount rate 8.12% - 14.57% (12.48%)

~~Increases in prepayment rates or discount rates would result in lower fair value measurements and decreases in prepayment rates or discount rates would result in higher fair value measurements.~~ ~~Although the prepayment rate and the discount rate are not directly interrelated, they generally move in opposite directions.~~

Assets and liabilities measured at fair value on a non-recurring basis

Following is a description of the methodologies used to estimate the fair values of assets and liabilities that may be measured at fair value on a non-recurring basis, and the level within the fair value hierarchy in which those measurements are typically classified.

Impaired loans, OREOand other repossessed assets—The carrying amount of collateral dependent impaired loans is typically based on the fair value of the underlying collateral, which may be real estate ~~taxi medallions,~~ or other business assets, less estimated costs to ~~sell.~~sell when repayment is expected to come from the sale of the collateral. The carrying value of OREO is initially measured based on the fair value of the real estate acquired in foreclosure and subsequently adjusted to the lower of cost or estimated fair value, less estimated cost to sell. Fair values of real estate collateral and OREO are typically based on third-party real estate appraisals which utilize market and income approaches to valuation incorporating both observable and unobservable inputs. When current appraisals are not available, the Company may use brokers’ price opinions, home price indices or other available information about changes in real estate market conditions to adjust the latest appraised value available. These adjustments to appraised values may be subjective and involve significant management judgment. The fair value of repossessed assets ~~other than taxi medallions,~~ or collateral consisting of other business assets may be based on third-party appraisals or internal analyses that use market approaches to valuation incorporating ~~primarily~~a combination of observable and unobservable inputs.

The fair value of New York City taxi medallions is based primarily on an internal analysis that utilizes an income approach to valuation. This analysis utilizes data obtained from the NYTLC about the fleet in general and in some cases, our portfolio specifically, and management's assumptions, based on external data when available, about revenues, costs and expenses, to estimate the value that can reasonably be supported by the cash flow generating capacity of a medallion. We further discount the results of this analysis in recognition of estimated selling costs and declining trends in medallion values. We also consider prices of recent medallion transfers as published by the NYTLC; however, the market for taxi medallions is illiquid and information about the circumstances underlying observed transfers is unavailable, therefore, information about recent transfers is not considered sufficient to establish a reliable estimate of value. The Company's medallion valuations fall within the range of published transfer prices over the last six months. Taxi medallions in municipalities other than New York City are generally valued based on published information about recent transfer prices; the valuation of these assets did not have a material impact on the Company's consolidated financial statements for any period presented as the taxi medallion portfolio is heavily concentrated in New York City.

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~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

Fair value measurements related to collateral dependent impaired loans, OREO and other repossessed assets are generally classified within level 3 of the fair value hierarchy.

Operating lease equipment—Fair values of impaired operating lease equipment are typically based upon discounted

cash flow analyses, considering expected lease rates and estimated end of life residual values, typically obtained from independent appraisals. These fair value measurements are classified within level 3 of the fair value hierarchy.

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

The following tables present the carrying value of assets for which non-recurring changes in fair value have been recorded for the periods indicated (in thousands):


	September 30, 2017								Losses from Fair Value Changes						March 31, 2020								Losses from Fair Value Changes
	Level 1		Level 2		Level 3		Total		Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			Level 1		Level 2		Level 3		Total		Three Months Ended March 31, 2020
OREO and repossessed assets	$	—	$	—	$	5,520	$	5,520	$	(515	)	$	(1,534	)	$	—	$	—	$	4,693	$	4,693	$	(4,983	)
Impaired loans	$	—	$	—	$	107,173	$	107,173	$	(35,106	)	$	(58,073	)	$	—	$	—	$	146,394	$	146,394	$	(8,792	)
Operating lease equipment															$	—	$	—	$	2,110	$	2,110	$	(691	)


	September 30, 2016								Losses from Fair Value Changes						March 31, 2019								Losses from Fair Value Changes
	Level 1		Level 2		Level 3		Total		Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016			Level 1		Level 2		Level 3		Total		Three Months Ended March 31, 2019
OREO and repossessed assets	$	—	$	—	$	7,923	$	7,923	$	(372	)	$	740		$	—	$	—	$	446	$	446	$	(18	)
Impaired loans	$	—	$	—	$	59,678	$	59,678	$	(10,623	)	$	(18,873	)	$	—	$	—	$	24,671	$	24,671	$	(1,916	)

Included in the tables above are impaired taxi medallion loans with carrying values of $90.1 million and $39.6 million at September 30, 2017 and September 30, 2016, respectively, the majority of which were in New York City. Losses of $54.3 million and $10.2 million were recognized on impaired taxi medallion loans during the nine months ended September 30, 2017 and 2016, respectively.

Decreases in the value of medallions are largely driven by decreases in revenues generated from the medallions. Inputs that had the most significant impact on the valuation of New York City taxi medallions at September 30, 2017 are presented below:



	~~Average Amount~~
~~Average fare per trip~~	~~$16.12~~
~~Number of trips per shift~~	~~15.4~~
~~Days worked per month~~	~~25.6~~

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~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

The following table presents the carrying value and fair value of financial instruments and the level within the fair value hierarchy in which those measurements are classified at the dates indicated (dollars in thousands):



		March 31, 2020				December 31, 2019
	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Cash and cash equivalents	1	$	766,698	$	766,698	$	214,673	$	214,673
Investment securities	1/2	$	7,874,601	$	7,875,510	$	7,769,237	$	7,769,949
Non-marketable equity securities	2	$	281,714	$	281,714	$	253,664	$	253,664
Loans held for sale	2	$	17,655	$	18,527	$	37,926	$	39,731
Loans, net	3	$	22,933,699	$	23,109,225	$	23,046,317	$	23,350,684
Derivative assets	2	$	135,720	$	135,720	$	43,686	$	43,686
Liabilities:
Demand, savings and money market deposits	2	$	17,458,932	$	17,458,932	$	17,047,344	$	17,047,344
Time deposits	2	$	7,541,839	$	7,602,038	$	7,347,247	$	7,377,301
Federal funds purchased	2	$	—	$	—	$	100,000	$	100,000
FHLB advances	2	$	5,144,409	$	5,163,091	$	4,480,501	$	4,500,969
Notes and other borrowings	2	$	428,579	$	449,023	$	429,338	$	473,327
Derivative liabilities	2	$	48,973	$	48,973	$	19,029	$	19,029

September 30, 2017 December 31, 2016
Level Carrying Value Fair Value Carrying Value Fair Value
Assets:

Cash and cash equivalents 1 $ 292,601
$ 292,601
$ 448,313
$ 448,313
Investment securities available for sale 1/2/3 6,893,472
6,893,472
6,073,584
6,073,584
Investment securities held to maturity 3 10,000
10,000
10,000
10,000
Non-marketable equity securities 2 270,239
270,239
284,272
284,272
Loans held for sale 2 31,507
35,113
41,198
45,833
Loans:
Covered 3 533,128
997,376
611,942
1,200,291
Non-covered 3 19,918,729
19,906,579
18,630,499
18,713,495
FDIC Indemnification asset 3 349,617
168,415
515,933
256,691
Derivative assets 2 28,334
28,334
50,232
50,232
Liabilities:
Demand, savings and money market deposits 2 $ 14,889,543
$ 14,889,543
$ 13,735,248
$ 13,735,248
Time deposits 2 6,333,701
6,335,324
5,755,642
5,759,787
FHLB advances 2 4,871,000
4,876,017
5,239,348
5,244,188
Notes and other borrowings 2 402,828
427,748
402,809
403,733
Derivative liabilities 2 27,076
27,076
61,562
61,562

~~The following methods and assumptions were used to estimate the fair value of each class of financial instruments, other than those described above:~~

~~Cash and cash equivalents~~

~~The carrying value of cash and cash equivalents approximates fair value due to their short-term nature and generally negligible credit risk.~~

~~Investment securities held to maturity~~

~~Investment securities held to maturity includes one bond issued by the State of Israel, with fair value obtained from a third party pricing service.~~

~~Non-marketable equity securities~~

Non-marketable equity securities include FHLB and FRB stock. There is no market for these securities, which can be liquidated only by redemption by the issuer. These securities are valued at par, which has historically represented the redemption price and is therefore considered to approximate fair value.

~~Loans held for sale~~

The fair value of the portion of small business loans guaranteed by U.S. Government agencies being held for sale is estimated using pricing on recent sales of similar loans by the Company in active markets.

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~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

~~Covered loans~~

Fair values are estimated based on a discounted cash flow analysis. Estimates of future cash flows incorporate various factors that may include the type of loan and related collateral, estimated collateral values, estimated voluntary prepayment rates, estimated default probability and loss severity given default, whether the interest rate is fixed or variable, term of loan and whether or not the loan is amortizing. The fair values of loans accounted for in pools are estimated on a pool basis. Discount rates for residential loans are based on observable fixed income market data for products with similar credit characteristics.

~~Non-covered loans~~

Fair values of residential loans are estimated using a discounted cash flow analysis with discount rates based on yields at which similar loans are trading in the secondary market, which reflect assumptions about credit risk. Fair values of commercial and consumer loans are estimated using a discounted cash flow analysis with discount rates based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The ALLL related to commercial and consumer loans is considered a reasonable estimate of the required adjustment to fair value to reflect the impact of credit risk. This estimate may not represent an exit value as defined in ASC 820.

~~FDIC indemnification asset~~

The fair value of the FDIC indemnification asset has been estimated using a discounted cash flow technique incorporating assumptions about the timing and amount of future projected cash payments from the FDIC related to the resolution of covered assets. The factors that impact estimates of future cash flows are similar to those impacting estimated cash flows from covered loans. The discount rate is determined by adjusting the risk free rate to incorporate uncertainty in the estimate of the timing and amount of future cash flows and illiquidity.

~~Deposits~~

The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The fair value of time deposits is estimated using a discounted cash flow technique based on rates currently offered for deposits of similar remaining maturities.

~~FHLB advances~~

~~Fair value is estimated by discounting contractual future cash flows using the current rate at which borrowings with similar terms and remaining maturities could be obtained by the Company.~~

~~Senior notes~~

~~Fair value is estimated based on quoted prices of identical securities in less active markets.~~

Note 1110 Commitments and Contingencies

The Company issues off-balance sheet financial instruments to meet the financing needs of its customers. These financial instruments include commitments to fund loans, unfunded commitments under existing lines of credit, and commercial and standby letters of credit. These commitments expose the Company to varying degrees of credit and market risk which are essentially the same as those involved in extending loans to customers, and are subject to the same credit policies used in underwriting loans. Collateral may be obtained based on the Company’s credit evaluation of the counterparty. The Company’s maximum exposure to credit loss is represented by the contractual amount of these commitments. ~~Unfunded commitments under lines~~

Table of credit include $10.0 million available under non-cancellable commitments in effect at the date of the FSB Acquisition, which are covered under the Single Family Shared-Loss Agreement if prescribed conditions are met.Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2020

Commitments to fund loans

These are agreements to lend funds to customers as long as there is no violation of any condition established in the contract. Commitments to fund loans generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of these commitments are expected to expire without being funded and, therefore, the total commitment amounts do not necessarily represent future liquidity requirements.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~September 30, 2017~~

Unfunded commitments under lines of credit

Unfunded commitments under lines of credit include commercial, commercial real estate, home equity and consumer lines of credit to existing ~~customers.~~customers, for many of which additional extensions of credit are subject to borrowing base requirements. Some of these commitments may mature without being fully funded.

Commercial and standby letters of credit

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support trade transactions or guarantee arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

Total lending related commitments outstanding at ~~September 30, 2017~~March 31, 2020 were as follows (in thousands):



Commitments to fund loans	$	344,419
Commitments to purchase loans	791,759
Unfunded commitments under lines of credit	2,979,737
Commercial and standby letters of credit	85,543
	$	4,201,458

Commitments to fund loans $ 417,943
Commitments to purchase loans 287,302
Unfunded commitments under lines of credit 2,361,922
Commercial and standby letters of credit 83,141
$ 3,150,308

Legal Proceedings

The Company is involved as plaintiff or defendant in various legal actions arising in the normal course of business. In the opinion of management, based upon advice of legal counsel, the likelihood is remote that the impact of these proceedings, either individually or in the aggregate, would be material to the Company’s consolidated financial position, results of operations or cash flows.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to focus on significant matters impacting and changes in the financial condition and results of operations of the Company during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and should be read in conjunction with the consolidated financial statements and notes hereto included in this Quarterly Report on Form 10-Q and BKU's ~~2016~~2019 Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 (the ~~"2016~~"2019 Annual Report on Form 10-K”).

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to, among other things, future events and financial performance. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” ~~“estimates”~~“estimates,” "future" and similar expressions identify forward-looking statements. These forward-looking statements are based on the historical performance of the Company or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations so contemplated will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and ~~liquidity.~~liquidity, including as impacted by the COVID-19 pandemic. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, the risk factors described in Part ~~II, Item 1A of this Quarterly Report on Form 10- Q and in Part~~ I, Item 1A of the ~~2016~~2019 Annual Report on Form ~~10-K.~~10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form

8-K. The Company does not undertake any obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise.

Impact of the COVID-19 Pandemic and Our Response

In March 2020, the World Health Organization declared novel coronavirus disease 2019 (COVID-19) as a global pandemic. The pandemic has resulted in governmental authorities implementing numerous measures attempting to contain the spread and impact of COVID-19 such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activities, including in major markets in which the Company and its clients are located or do business. The COVID-19 pandemic, and governmental responses to the pandemic, have severely negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. This situation is evolving rapidly, and there is a high level of uncertainty about its future effects.

A summary of the effects the COVID-19 pandemic has had on our Company and of our expectations about how our Company may be impacted in the future follows. These matters are discussed in further detail throughout this Form 10Q.

Our results of operations and financial condition at and for the three months ended March 31, 2020 were impacted by the COVID-19 pandemic.

Deteriorating economic conditions and a worsening forward looking economic forecast led to a higher provision for credit losses and ACL; as a result, we reported a net loss for the quarter. There is significant uncertainty as to, and we are not currently able to predict, the impact of the COVID-19 crisis on future credit loss expense and future levels of the ACL, but they may be more volatile and may change materially from current levels.

Unrealized losses on our AFS securities increased substantially as a result of the market response to, and dislocation in the wake of, the emerging pandemic. The increase in unrealized losses negatively impacted total stockholders' equity and our tangible book value at March 31, 2020. Since these unrealized losses are recorded in AOCI, they did not impact our regulatory capital ratios. We currently expect to recover the amortized cost basis of our AFS securities.

Levels of criticized and classified assets increased at March 31, 2020 as a result of the COVID-19 pandemic. Additionally, a significant number of borrowers have requested relief in the form of temporary payment deferrals. Levels of criticized and classified assets are expected to increase further in the near term as a result of impacts of the pandemic on our borrowers. We re-assess the risk ratings of individual commercial credits as we review requests for and grant temporary payment relief, or as other information comes to our attention that would warrant a re-evaluation of the risk rating. At March 31, 2020, we had not experienced an increase in non-performing assets as a result of the pandemic. It is difficult to predict when, if, or to what extent levels of non-performing assets and delinquencies will increase as a result of the pandemic, although they may do so. Similarly, charge-offs may increase. These impacts may manifest in a delayed fashion due to the impact of temporary payment deferrals and various forms of government assistance that our borrowers may receive.

Our share price has been negatively impacted by the COVID-19 crisis.

Although we took significant measures to prepare for possible disruptions in liquidity, we have not experienced such disruptions to date and continue to have sufficient levels of available liquidity.

The pandemic has impacted our operations . Currently, approximately 97% of our non-branch employees are working remotely. We did not experience any significant operational difficulties, technology failures or outages, or customer service disruptions in our transition to a remote work environment. 76% of our branches remain open to serve customers via drive-through or lobby appointments, operating with reduced hours. Generally, branch locations without drive-through facilities are temporarily closed. We have focused on insuring that our technology systems and internal controls continue to operate effectively in a remote work environment. We have put mechanisms in place to allow us to evaluate all significant modifications to processes and procedures to insure continued effectiveness of our controls. We have not identified any instances in which controls have failed to operate effectively.

Customer demand for our products and services, particularly lending products, may be impacted by the impact of the pandemic on their businesses or by social distancing measures. Potential borrowers impacted by the pandemic may no longer meet our underwriting criteria. We expect loan production in many portfolio segments to be muted in the near term as a result of the pandemic.

In response to the pandemic, we have prioritized risk management and implemented a number of measures to support our customers and employees. Specifically, we have:

Activated our business continuity plan under the leadership of executive management.

Activated our contingency funding plan, enhancing daily monitoring and reporting of liquidity trends and deposit flows, and optimized same day available liquidity.

Established a weekly cadence of Board of Directors meetings.

Pro-actively reached out to all of our borrowers with total credit exposure of $5 million or more, and to all borrowers in certain high-risk segments to assess the potential impact of COVID-19.

Segregated certain segments of the loan portfolio for enhanced monitoring.

Enhanced our workout and recovery staffing and processes.

Enhanced our stress testing framework. Results of internal stress testing indicate that we have sufficient capital to withstand an increase in credit losses materially beyond levels currently expected, and to withstand a severe downturn.

Proactively reached out to our critical third party service providers and evaluated their ability to continue to provide support in the current environment. We have experienced no significant service disruptions.

Expanded certain employee benefits and launched a number of programs to keep our employees healthy and engaged.

Enhanced personal protective measures for employees working at our corporate locations.

Supported our clients through participating in the Small Business Administration’s PPP, and granting payment deferrals and fee waivers on a case-by-case basis.

Temporarily halted new residential foreclosure actions.

We remain confident in our long-term underlying strength and stability, and our ability to navigate these challenging conditions.

Overview

Quarterly Highlights

In evaluating our financial performance, we consider the level of and trends in net interest income, the net interest margin, levels and composition of non-interest income and non-interest expense, performance ratios such as the return on average equity and return on average assets and asset quality ratios, ~~particularly for the non-covered portfolio,~~ including the ratio of non-performing loans to total loans, non-performing assets to total assets, trends in criticized and classified assets and portfolio delinquency and charge-off trends. We consider growth in earning assets and deposits, trends in funding mix and cost of funds. We analyze these ratios and trends against our own historical performance, our budgeted performance and the financial condition and performance of comparable financial institutions.

Quarterly highlights include:

~~Net income for~~For the ~~quarter~~three months ended ~~September 30, 2017 was $67.8~~March 31, 2020, the Company reported a net loss of $(31.0) million, or ~~$0.62~~$(0.33) per diluted share, compared to ~~$50.8~~net income of $66.0 million,or ~~$0.47~~$0.65 per diluted share for the ~~quarter ended September 30, 2016. For the~~ ~~nine~~three months ended ~~September 30, 2017, net income was~~ ~~$196.5 million, or~~ ~~$1.79~~ ~~per diluted share, compared to~~ ~~$162.4 million, or~~ ~~$1.50~~ ~~per diluted share,~~March 31, 2019. Results for the ~~nine~~three months ended ~~September 30, 2016. Earnings~~March 31, 2020 were negatively impacted by the application of the CECL accounting methodology, including the impact of COVID-19 on the provision for credit losses.

The Company and its banking subsidiary exceeded all regulatory guidelines required to be considered well capitalized at March 31, 2020. The Company's and the ~~nine months ended September 30, 2017~~ ~~generated an annualized return on average stockholders' equity~~Bank's CET1 risk-based capital ratios were 11.8% and 12.9% at March 31, 2020, respectively. The Company's and the Bank's Tier 1 leverage ratios were 8.5% and 9.3% at March 31, 2020, respectively. We believe we have sufficient capital to withstand a severe downturn.

Our liquidity position remains strong. At March 31, 2020, the Bank had total same day available liquidity of ~~10.21%~~ ~~and an annualized return on average assets of~~ ~~0.92%~~.

approximately $8.5 billion.

~~Net interest income increased~~Non-interest bearing demand deposits grew by ~~$19.5 million to $241.3~~$305 million for the ~~quarter~~three months ended ~~September 30, 2017 from $221.7~~March 31, 2020, to 18.4% of total deposits at March 31, 2020 compared to 17.6% of total deposits at December 31, 2019 and 15.9% of total deposits at March 31, 2019. The majority of this growth was not directly related to line draws. Total deposits grew by $606 million for the three months ended March 31, 2020.

The average cost of total deposits declined to 1.36% for the three months ended March 31, 2020, from 1.48% for the immediately preceding quarter ended ~~September 30, 2016. Interest income increased by $39.5 million, driven by increases in~~December 31, 2019 and 1.67% for the three months ended March 31, 2019. On a spot basis, the average ~~balances of loans and investment securities outstanding and an increase in the~~annual percentage yield on ~~interest earning assets. Interest expense increased by $19.9 million, driven by increases in average interest bearing liabilities~~total interest-bearing deposits declined to 1.35% at March 31, 2020

from 1.71% at December 31, 2019, and declined further to 1.08% at April 17, 2020. This is a total decline of 0.63% since December 31, 2019, reflecting recent actions taken to reduce the cost of ~~those liabilities.~~deposits.

The provision for credit losses totaled $125.4 million for the three months ended March 31, 2020, reflecting the application of the CECL methodology and encompassing management's estimate of the expected economic impact of the COVID-19 pandemic. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, the Company recorded a provision for loan losses, under the incurred loss model, of $10.3 million.

The ACL represented our current estimate of expected lifetime credit losses from the loan portfolio and totaled $251 million, or 1.08% of total loans, at March 31, 2020. Upon initial adoption of CECL, at January 1, 2020, the ACL was 0.59% of total loans and at December 31, 2019, calculated under an incurred loss methodology, the ACL was 0.47% of total loans.

Pre-tax, pre-provision income totaled $85.0 million for the three months ended March 31, 2020 compared to $100.5 million for the three months ended March 31, 2019. Pre-tax, pre-provision income for the three months ended March 31, 2020 included a $5.0 million unrealized loss on marketable equity securities, resulting from the impact on markets of the COVID-19 crisis. Inclusive of this $5.0 million unrealized loss, loss on investment securities was $(3.5) million for the three months ended March 31, 2020 compared to a gain on investment securities of $5.8 million for the comparable quarter of the prior year, a negative variance of $9.2 million. Additional factors contributing to the decline in pre-tax, pre-provision income were a $10.3 million decline in net interest income, ~~increased~~discussed further below, partially offset by ~~$68.6~~a $7.8 million decrease in total non-interest expense. Pre-tax, pre-provision income is a non-GAAP financial measure. See section entitled "Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measurements to ~~$711.4 million from $642.9 million for the nine months ended September 30, 2016.~~their comparable GAAP financial measurements.

The net interest margin, calculated on a tax-equivalent basis, ~~decreased to 3.62%~~was 2.35% for the ~~quarter~~three months ended ~~September 30, 2017 from 3.69% for the quarter ended September 30, 2016 and 3.76%~~March 31, 2020, compared to 2.41% for the immediately preceding quarter ended ~~June 30, 2017. Significant factors contributing to~~December 31, 2019 and 2.54% for the ~~decline in the net~~three months ended March 31, 2019. Both yields on interest ~~margin included the continued run-off of high-yielding covered loans~~earning assets and ~~an increase in~~ the cost of interest bearing ~~liabilities. The net interest margin, calculated on a tax-equivalent basis, was 3.69%~~liabilities declined for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 as compared to ~~3.75%~~the immediately preceding quarter and to the three months ended March 31, 2019; however, the repricing of interest bearing liabilities, particularly deposits, lagged the repricing of interest earning assets.

Stockholders' equity was impacted by a decline of $291.8 million in accumulated other comprehensive income for the ~~nine~~three months ended ~~September 30, 2016.~~

~~Total interest earning assets increased by~~ ~~$613 million~~ ~~during the~~ ~~third quarter~~ of ~~2017. Non-covered loans and leases, including equipment under operating lease, grew by $384 million during the quarter. For the nine months ended~~

~~September 30, 2017, total interest earning assets increased by $1.9 billion and non-covered loans and leases grew by $1.3 billion.~~

~~Total deposits increased by $445 million for the quarter ended September 30, 2017~~March 31, 2020, attributed to ~~$21.2 billion. For the nine months ended September 30, 2017, total deposits increased by $1.7 billion.~~

At September 30, 2017, 96.7% of the non-covered commercial loan portfolio was rated "pass" and substantially all of the non-covered residential portfolio was current. The ratio of non-performing, non-covered loans to total non-covered loans was 1.00% and the ratio of non-performing, non-covered assets to total assets was 0.69% at September 30, 2017. Non-performing taxi medallion loans comprised 0.60% of total non-covered loans and 0.41% of total assets at September 30, 2017.

~~The provision for loan~~an increase in unrealized losses for the quarter and nine months ended September 30, 2017 totaled $37.9 million and $63.6 million, respectively, compared to $24.4 million and $42.4 million, respectively, for the comparable periods of the prior year. The most significant reason for these increases in the provision for loan losses was the provision related to the taxi medallion portfolio as discussed further in the sections entitled "Asset Quality" and "Analysis of the Allowance for Loan and Lease Losses."

~~Gain~~ on ~~sale of~~ investment securities available for sale ~~net totaled $26.9~~and derivative instruments. The Company currently expects to recover the amortized cost basis of its AFS securities portfolio.

Share repurchases totaling approximately $101 million ~~for~~during the ~~quarter~~three months ended ~~September 30, 2017. Substantially all of these gains related to sales of securities formerly covered under the Commercial Shared-Loss Agreement.~~March 31, 2020 also impacted stockholders' equity. The Company has temporarily suspended its share repurchase program.

The Company’s capital ratios exceeded all regulatory “well capitalized” guidelines, with a Tier 1 leverage ratio of 8.6%, CET1 and Tier 1 risk-based capital ratios of 11.9% and a Total risk-based capital ratio of 12.7% at September 30, 2017.

~~Book value~~Company increased its quarterly cash dividend by $0.02 to $0.23 per common share, ~~grew to $24.56 at September 30, 2017,~~reflecting a ~~7.8%~~10% increase from ~~September 30, 2016. Tangible book value~~the previous quarterly cash dividend of $0.21 per common ~~share increased by 8.1% over the same period, to $23.83 at September 30, 2017.~~

~~Hurricanes Irma and Harvey~~

On September 10, 2017, Hurricane Irma made landfall in Florida as a Category 4 hurricane affecting some areas of the state with significant flooding, wind damage and power outages. In addition, the Bank has a limited number of customers and collateral properties located in areas of Texas that were impacted by Hurricane Harvey during August, 2017.

~~Loan and Lease Portfolio~~

The Company has assessed the potential impact of the hurricanes on the value of collateral underlying our loans and the ability of borrowers to repay their obligations to the Bank. We believe the storms did not materially impact the ability of the substantial majority of our borrowers to repay their loans; however, uncertainty remains as to the ultimate impact of these events on the level of our loan losses and our results of operations.

In order to assess the impact of these hurricanes on our loan and lease portfolio, the Company performed an extensive review of loans with borrowers and/or collateral located in areas impacted by these storms. This analysis entailed the identification of and direct communication with borrowers located in impacted areas to determine the population of borrowers that may have been significantly impacted as well as consideration of factors including but not limited to level and type of insurance coverage, collateral and lien position and the financial condition of the borrower.

Commercial and commercial real estate loans with an aggregate UPB of approximately $7.1 billion at September 30, 2017 were determined to be either made to borrowers that have significant business operations in or secured by collateral in areas that were potentially impacted by the hurricanes. Substantially all of those borrowers had been contacted as of October 3, 2017 and responses were considered in the determination of the ALLL as of September 30, 2017. As of October 31, 2017, commercial loans with an aggregate UPB of $22.2 million had been downgraded to criticized or classified status as a result of this analysis. Residential mortgage and other consumer loans with a carrying value of approximately $977 million at September 30, 2017, of which $315 million are covered loans, were determined to be either made to borrowers living in or secured by collateral in areas potentially impacted by the hurricanes; such loans with a carrying value of approximately $902 million, of which $312 million are covered loans, were determined to be in severely impacted areas, based on FEMA’s designation as “individual assistance” areas (“FEMA designated areas”). As of October 31, 2017, 74% of borrowers in FEMA designated areas had been contacted or property inspections conducted to assist in assessing the extent of potential damage to underlying collateral. During the quarter ended September 30, 2017, the Company recorded a loan loss provision of $5.4 million related to the impact of Hurricanes Irma and Harvey.

~~Impairment of Other Assets~~

Management also considered the impact of the hurricanes in our analysis of investment securities for OTTI, as well as our evaluation of potential impairment of our investment in equipment under operating lease, LIHTC partnerships, servicing assets and OREO at September 30, 2017 and determined there was no potentially material impact.

~~Fees, Operations and Facilities~~

To help those affected by Hurricane Irma, the Company waived or refunded certain fees such as overdraft, NSF and uncollected fees on consumer deposit accounts and late fees on residential mortgage, consumer and small business loans for consumer and small business customers in FEMA designated disaster areas for the period September 10, 2017 through September 30, 2017. In addition, certain residential mortgage and SBA loan customers impacted by the storm may be eligible for assistance in the form of temporary payment deferrals. Waived and refunded fees were not significant.

The Company’s operations and facilities were not materially impacted by Hurricane Irma. The Company continued operating throughout the storm although all of our Florida branch locations were closed from September 8, 2017 through September 11, 2017. The majority of our Florida branch locations and our Miami Lakes corporate headquarters re-opened on September 12, 2017 and all of our Florida branch locations re-opened prior to September 30, 2017.

During the quarter ended September 30, 2017, the Company recorded expenses of $0.6 million related primarily to facilities damage and employee relocation and assistance. We do not expect future expenses related to facilities damage to be material to the Company.

~~Community Assistance~~

To help with the recovery efforts of the communities in which we operate, work and live, BankUnited has made donations totaling $100,000 to non-profit organizations focused on recovery and relief efforts in Florida. These organizations were selected based on their ability to immediately deploy resources directly to targeted affected areas.share.

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 ~~relative~~ 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, 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, ~~and~~ by management's continual assessment of the rate of return and relative risk associated with various classes of earning ~~assets.~~assets and liquidity considerations. The mix of interest bearing liabilities is influenced by the Company's liquidity profile, management's assessment of the desire for lower cost funding sources weighed against relationships with customers and growth ~~requirements~~expectations, our ability to attract and ~~is impacted by~~retain core deposit relationships, competition for deposits in the Company's markets and the availability and pricing of other sources of funds.

Net interest income is also impacted by the accounting for ACI loans acquired in conjunction with the FSB Acquisition. ACI loans were initially recorded at fair value, measured based on the present value of expected cash flows. The excess of expected cash flows over carrying value, known as accretable yield, is recognized as interest income over the lives of the underlying loans. The positive impact of accretion related to ACI loans on the net interest margin and the interest rate spread is expected to continue to decline as ACI loans comprise a declining percentage of total loans. The proportion of total loans represented by ACI loans is declining as the ACI loans are resolved and new loans are added to the portfolio. ACI loans represented 2.5% and 3.0% of total loans, including premiums, discounts and deferred fees and costs, at September 30, 2017 and December 31, 2016, respectively. As this trend continues, assuming an otherwise stable interest rate environment, we would expect our net interest margin and interest rate spread to decrease as covered loans are resolved.

~~The impact of ACI loan accounting on net interest income makes it difficult to compare our net interest margin and interest rate spread to those reported by other financial institutions.~~

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 and restructured 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 ~~35.0%~~21% (dollars in thousands):

Three Months Ended September 30,
2017 2016
Average
Balance
Interest ⁽¹⁾

Yield/
Rate ⁽¹⁾⁽²⁾
Average
Balance
Interest ⁽¹⁾

Yield/
Rate ⁽¹⁾⁽²⁾
Assets:
Interest earning assets:

Non-covered loans $ 19,710,115
$ 187,928
3.79 % $ 17,813,925
$ 158,963
3.56 %
Covered loans 518,026
73,452
56.70 % 700,884
74,487
42.50 %
Total loans 20,228,141
261,380
5.15 % 18,514,809
233,450
5.03 %
Investment securities ⁽³⁾
7,002,615
55,046
3.14 % 5,898,382
42,262
2.87 %
Other interest earning assets 545,224
3,777
2.75 % 557,490
3,036
2.17 %
Total interest earning assets 27,775,980
320,203
4.60 % 24,970,681
278,748
4.45 %
Allowance for loan and lease losses (160,231 ) (139,284 )
Non-interest earning assets 1,699,912
1,884,894

Total assets $ 29,315,661
$ 26,716,291

Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 1,590,206
3,415
0.85 % $ 1,437,677
2,224
0.62 %
Savings and money market deposits 9,968,512
21,964
0.87 % 8,349,281
12,974
0.62 %
Time deposits 6,290,056
20,540
1.30 % 5,567,909
15,770
1.13 %
Total interest bearing deposits 17,848,774
45,919
1.02 % 15,354,867
30,968
0.80 %
FHLB advances 4,924,325
16,946
1.37 % 5,143,003
11,956
0.92 %
Notes and other borrowings 402,828
5,314
5.28 % 403,590
5,322
5.27 %
Total interest bearing liabilities 23,175,927
68,179
1.17 % 20,901,460
48,246
0.92 %
Non-interest bearing demand deposits 3,036,046
2,981,017

Other non-interest bearing liabilities 468,735
460,514

Total liabilities 26,680,708
24,342,991

Stockholders' equity 2,634,953
2,373,300

Total liabilities and stockholders' equity $ 29,315,661
$ 26,716,291

Net interest income $ 252,024
$ 230,502

Interest rate spread 3.43 % 3.53 %
Net interest margin 3.62 % 3.69 %



	Three Months Ended March 31,
	2020							2019
	Average Balance			Interest ⁽¹⁾⁽²⁾		Yield/ Rate ⁽¹⁾⁽²⁾		Average Balance			Interest ⁽¹⁾⁽²⁾		Yield/ Rate ⁽¹⁾⁽²⁾
Assets:
Interest earning assets:
Loans	$	22,850,065		$	238,108	4.18	%	$	21,974,453		$	245,010	4.50	%
Investment securities ⁽³⁾	8,107,649			56,951		2.81	%	8,520,555			77,607		3.64	%
Other interest earning assets	646,628			3,720		2.31	%	496,141			4,852		3.96	%
Total interest earning assets	31,604,342			298,779		3.79	%	30,991,149			327,469		4.26	%
Allowance for credit losses	(138,842		)					(111,074		)
Non-interest earning assets	1,749,752							1,603,922
Total assets	$	33,215,252						$	32,483,997
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits	$	2,173,628		6,959		1.29	%	$	1,702,479		5,639		1.34	%
Savings and money market deposits	10,412,202			37,756		1.46	%	11,453,980			52,817		1.87	%
Time deposits	7,510,070			38,107		2.04	%	6,907,011			38,965		2.29	%
Total interest bearing deposits	20,095,900			82,822		1.66	%	20,063,470			97,421		1.97	%
Short term borrowings	94,066			367		1.56	%	137,378			824		2.40	%
FHLB advances	4,414,830			25,084		2.29	%	4,660,222			27,374		2.38	%
Notes and other borrowings	429,098			5,290		4.93	%	404,852			5,309		5.25	%
Total interest bearing liabilities	25,033,894			113,563		1.82	%	25,265,922			130,928		2.10	%
Non-interest bearing demand deposits	4,368,553							3,605,131
Other non-interest bearing liabilities	749,101							657,360
Total liabilities	30,151,548							29,528,413
Stockholders' equity	3,063,704							2,955,584
Total liabilities and stockholders' equity	$	33,215,252						$	32,483,997
Net interest income				$	185,216						$	196,541
Interest rate spread						1.97	%						2.16	%
Net interest margin						2.35	%						2.54	%


(1)	On a tax-equivalent ~~basis.~~basis where applicable. The tax-equivalent adjustment for tax-exempt loans was ~~$7.6~~$3.7 million and ~~$6.2~~$4.4 million, and the tax-equivalent adjustment for tax-exempt investment securities was ~~$3.2~~$0.9 million and ~~$2.6~~$1.3 million for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively.


(2)	Annualized.


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

Nine Months Ended September 30,
2017 2016
Average
Balance
Interest ⁽¹⁾

Yield/
Rate ⁽¹⁾⁽²⁾
Average
Balance
Interest ⁽¹⁾

Yield/
Rate ⁽¹⁾⁽²⁾
Assets:
Interest earning assets:

Non-covered loans $ 19,169,479
$ 535,926
3.73 % $ 16,876,786
$ 452,525
3.58 %
Covered loans 560,934
225,194
53.54 % 746,709
226,659
40.48 %
Total loans 19,730,413
761,120
5.15 % 17,623,495
679,184
5.14 %
Investment securities ⁽³⁾
6,569,553
151,337
3.07 % 5,551,249
117,478
2.82 %
Other interest earning assets 557,623
10,606
2.54 % 531,245
8,850
2.22 %
Total interest earning assets 26,857,589
923,063
4.59 % 23,705,989
805,512
4.53 %
Allowance for loan and lease losses (157,015 ) (133,280 )
Non-interest earning assets 1,754,499
1,946,846

Total assets $ 28,455,073
$ 25,519,555

Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 1,564,229
8,913
0.76 % $ 1,341,218
6,140
0.61 %
Savings and money market deposits 9,557,907
55,741
0.78 % 8,203,676
37,285
0.61 %
Time deposits 5,988,433
55,507
1.24 % 5,177,191
43,002
1.11 %
Total interest bearing deposits 17,110,569
120,161
0.94 % 14,722,085
86,427
0.78 %
FHLB advances 4,889,578
44,262
1.21 % 4,698,492
35,972
1.02 %
Notes and other borrowings 402,821
15,947
5.28 % 403,213
15,967
5.28 %
Total interest bearing liabilities 22,402,968
180,370
1.08 % 19,823,790
138,366
0.93 %
Non-interest bearing demand deposits 3,034,682
2,944,861

Other non-interest bearing liabilities 443,430
431,921

Total liabilities 25,881,080
23,200,572

Stockholders' equity 2,573,993
2,318,983

Total liabilities and stockholders' equity $ 28,455,073
$ 25,519,555

Net interest income $ 742,693
$ 667,146

Interest rate spread 3.51 % 3.60 %
Net interest margin 3.69 % 3.75 %


~~(1)~~	On a tax-equivalent basis. The tax-equivalent adjustment for tax-exempt loans was $21.5 million and $16.7 million, and the tax-equivalent adjustment for tax-exempt investment securities was $9.7 million and $7.5 million, for the nine months ended September 30, 2017 and 2016, respectively.


~~(2)~~	~~Annualized.~~


~~(3)~~	~~At fair value except for securities held to maturity.~~

~~Three months ended September 30, 2017 compared to three months ended September 30, 2016~~

Net interest income, calculated on a tax-equivalent basis, was ~~$252.0~~$185.2 million for the three months ended ~~September 30, 2017~~March 31, 2020 compared to ~~$230.5~~$196.5 million for the three months ended ~~September 30, 2016, an increase~~March 31, 2019, a decrease of ~~$21.5~~$11.3 million. The ~~increase~~decrease in net interest income was comprised of ~~an increase~~a decrease in tax-equivalent interest income of ~~$41.5~~$28.7 million ~~offset by an increase~~and a decrease in interest expense of ~~$19.9 million.~~$17.4 million for the three months ended March 31, 2020, compared to the three months ended March 31, 2019.

The ~~increase~~decrease in tax-equivalent interest income was comprised primarily of (i) a ~~$27.9 million increase~~decrease in interest income from loans ~~and a $12.8 million increase in interest income from investment securities.~~

Increased interest income from loans was attributable to a $1.7 billion increase in the average balance outstanding and a 0.12% increase in the tax-equivalent yield to 5.15% for the three months ended September 30, 2017 from 5.03% for the three months ended September 30, 2016. Factors contributing to the increase in the yield on loans included:

The tax-equivalent yield on non-covered loans was 3.79% for the three months ended September 30, 2017 compared to 3.56% for the three months ended September 30, 2016. The most significant factor contributing to the increased yield on non-covered loans was increases in market interest rates.

~~Interest income on covered loans totaled $73.5 million and $74.5~~of $6.9 million for the three months ended September 30, 2017 and 2016, respectively. The tax-equivalent yield on those loans increased to 56.70% for the three months ended September 30, 2017 from 42.50% for the three months ended September 30, 2016. The increase in the yield on covered loans resulted primarily from improvements in expected cash flows for ACI loans.

The impact on the overall yield on loans of increased yields on both covered and non-covered loans considered individually was somewhat offset by the continued increase in non-covered loans, with yields lower than those on covered loans, as a percentage of total loans.

The average balance of investment securities increased by $1.1 billion for the three months ended September 30, 2017 from the three months ended September 30, 2016 while the tax-equivalent yield increased to 3.14% from 2.87%. The most significant factor contributing to the increase in the tax-equivalent yield were increases in coupon rates on floating-rate securities.

~~The components of the increase in interest expense for the three months ended September 30, 2017 as~~March 31, 2020 compared to the three months ended ~~September 30, 2016 were~~March 31, 2019; and (ii) a ~~$15.0 million increase~~decrease in interest ~~expense on deposits and a $5.0~~income from investment securities of $20.7 million ~~increase in interest expense on FHLB advances.~~

The increase in interest expense on deposits was attributable to an increase of $2.5 billion in average interest bearing deposits and an increase in the average cost of interest bearing deposits of 0.22% to 1.02% for the three months ended ~~September 30, 2017 from 0.80% for~~March 31, 2020 compared to the three months ended ~~September 30, 2016. These cost increases were generally driven by growth of deposits in competitive markets and a rising market interest rate environment.~~March 31, 2019.

The increase in interest expense on FHLB advances reflected an increase in the average cost of advances of 0.45% to 1.37% for the three months ended September 30, 2017 from 0.92% for the three months ended September 30, 2016. The increase in cost was driven by increased market rates and to a lesser extent, an extension of maturities through interest rate swaps.

The net interest margin, calculated on a tax-equivalent basis, was 2.35% for the three months ended ~~September 30, 2017 was 3.62% as~~March 31, 2020, compared to ~~3.69%~~2.41% for the immediately preceding quarter ended December 31, 2019 and 2.54% for the three months ended ~~September 30, 2016. The~~March 31, 2019. Both yields on interest ~~rate spread decreased to 3.43%~~earning assets and the cost of interest bearing liabilities declined for the three months ended ~~September 30, 2017 from 3.53%~~March 31, 2020 as compared to the immediately preceding quarter and to the three months ended March 31, 2019; however, the repricing of interest bearing liabilities, particularly deposits, lagged the repricing of interest earning assets.

Decreased tax equivalent interest income on loans for the three months ended ~~September 30, 2016. The declines~~March 31, 2020 compared to the three months ended March 31, 2019 was attributable to a decrease in ~~net interest margin and interest rate spread resulted primarily from the cost of interest-bearing liabilities increasing by more than~~ the yield, on interest earning assets. This difference was driven primarily by the decline in covered loans as a percentage of total loans. Future trends in the net interest margin will be impacted by changes in market interest rates, including changes in the shape of the yield curve, by the mix of interest earning assets, including the decline in covered loans as a percentage of total loans, and by the Company's ability to manage the cost of funds while growing deposits in competitive markets.

~~Nine months ended September 30, 2017~~ ~~compared to nine months ended September 30, 2016~~

Net interest income, calculated on a tax-equivalent basis, was $742.7 million for the nine months ended September 30, 2017 compared to $667.1 million for the nine months ended September 30, 2016, an increase of $75.5 million. The increase in net interest income was comprised of an increase in tax-equivalent interest income of $117.6 million,partially offset by an increase ~~in interest expense~~ of ~~$42.0 million.~~

~~The increase in tax-equivalent interest income was comprised primarily of an $81.9~~$876 million ~~increase in interest income from loans and a $33.9 million increase in interest income from investment securities.~~

~~Increased interest income from loans was attributable to a $2.1 billion increase~~ in the average balance and a 0.01% increase in the tax-equivalent yield to 5.15% for the nine months ended September 30, 2017 from 5.14% for the nine months ended September 30, 2016. Offsetting factors contributing to the relatively steady yield on loans included:

Although the yield on non-covered loans increased to 3.73% for the nine months ended September 30, 2017 from 3.58% for the nine months ended September 30, 2016, lower-yielding non-covered loans comprised a greater percentage of ~~the portfolio for the nine months ended September 30, 2017 than for the corresponding period in 2016. Non-covered loans represented 97.2% of the average balance of loans~~ outstanding ~~for the nine months ended September 30, 2017 compared to 95.8% for the nine months ended September 30, 2016.~~

~~Interest income on covered loans totaled $225.2 million and $226.7 million for the nine months ended September 30, 2017 and 2016, respectively.~~loans. The tax-equivalent yield on ~~those~~ loans ~~increased~~decreased to ~~53.54%~~4.18% for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020, from ~~40.48%~~4.50% for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2019. The most significant factor contributing to this decrease in yield was the impact of decreases in benchmark interest rates.

The average balance of investment securities ~~increased~~decreased by ~~$1.0 billion~~$412.9 million for the ~~nine~~three months ended ~~September 30, 2017 from~~March 31, 2020 compared to the ~~nine~~three months ended ~~September 30, 2016 while the~~March 31, 2019. The tax-equivalent yield on investment securities decreased to 2.81% for the three months ended March 31, 2020 from 3.64% for the three months ended March 31, 2019. The most significant factors contributing to the decrease in yield were the impact of decreases in benchmark interest rates and, to a lesser extent, increased ~~to 3.07% from 2.82%.~~prepayment speeds. This decline is reflective of the short duration of the investment portfolio in a falling rate environment.

The primary components of the ~~increase~~decrease in interest expense for the ~~nine~~three months ended ~~September 30, 2017 as~~March 31, 2020 compared to the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 were a ~~$33.7~~decrease of $14.6 million ~~increase~~ in interest expense on deposits and ~~an $8.3~~a decrease of $2.3 million ~~increase~~ in interest expense on FHLB advances. The decreases were primarily the result of decreases in the cost of interest bearing liabilities.

The ~~increase~~decrease in interest expense on deposits was attributable primarily to ~~an increase of $2.4 billion in average interest bearing deposits and an increase~~a decrease in the average cost of interest bearing deposits of ~~0.16%~~0.31% to ~~0.94%~~1.66% for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 from ~~0.78%~~1.97% for the ~~nine~~three months ended ~~September 30, 2016.~~ March 31, 2019. This decrease was generally driven by decreases in market interest rates in 2019.

The ~~increase~~decrease in interest expense on FHLB advances ~~was primarily~~resulted from a ~~result of an increase~~decrease in the average cost of advances of ~~0.19%~~0.09% to ~~1.21% for the nine months ended September 30, 2017 from 1.02% for the nine months ended September 30, 2016.~~

~~Factors contributing to the changes in yields and costs for the nine month periods were generally consistent with those~~2.29% for the three ~~month periods discussed above.~~months ended March 31, 2020 from 2.38% for the three months ended March 31, 2019. The decrease in cost was driven primarily by decreases in benchmark interest rates. The impact of declines in benchmark rates on the cost of FHLB advances is muted to an extent by the impact of cash flow hedges put in place to manage overall interest sensitivity of the balance sheet. The average balance of advances decreased by $245 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

~~The~~For the three months ended March 31, 2020, the increase in average non-interest bearing demand deposits as a percentage of total deposits positively impacted the net interest margin.

While we currently expect the net interest margin ~~calculated~~to expand in the second quarter of 2020, primarily as a result of an expected decline in deposit costs, over a longer time horizon, a persistent flat yield curve and a potential increase in non-performing loans attributable to the impact of the COVID-19 pandemic could put pressure on ~~a tax-equivalent basis, for~~ the nine months ended September 30, 2017 was 3.69% as compared to 3.75% for the nine months ended September 30, 2016. The interest rate spread decreased to 3.51% for the nine months ended September 30, 2017 from 3.60% for the nine months ended September 30, 2016. The declines in net interest ~~margin and interest rate spread resulted primarily from the factors discussed above.~~margin.

Provision for ~~Loan~~Credit Losses

The provision for ~~loan~~credit losses is ~~the amount of expense that, based on our judgment, is~~a charge to earnings required to maintain the ~~ALLL~~ACL at ~~an adequate~~a level ~~to absorb probable~~consistent with management’s estimate of expected credit losses ~~inherent in the loan portfolio~~on financial assets carried at amortized cost at the balance sheet ~~date~~date. The amount of the provision is impacted by changes in management's reasonable and ~~that,~~supportable economic forecast, loan originations and runoff, changes in ~~management’s judgment, is appropriate under GAAP.~~portfolio mix, risk rating migration and portfolio seasoning, the level of charge-offs, changes in specific reserves, changes in expected prepayment speeds and other assumptions. The provision for credit losses also includes an amount related to off-balance sheet credit exposures. The determination of the amount of the ~~ALLL~~ACL is complex and involves a high degree of judgment and subjectivity. Our determination of the amount of the allowance and corresponding provision for loan losses considers ongoing evaluations of the credit quality of and level of credit risk inherent in various segments of the loan portfolio and of individually significant credits, levels of non-performing loans and charge-offs, historical and statistical trends and economic and other relevant factors. See “Analysis of the Allowance for ~~Loan and Lease~~Credit Losses” below for more information about how we determine the appropriate level of the ~~allowance.~~

~~The provision for loan losses for the quarter and~~ ~~nine months ended September 30, 2017~~ included $5.4 million related to the impact of Hurricanes Irma and Harvey. The amount of this provision was determined based on our evaluation of an intensive analysis conducted by our credit teams of the individual loans potentially impacted by these storms, including but not limited to direct contact with borrowers, preliminary assessments of the extent of damage to collateral and impacts on borrowers’ business operations and consideration of the impact of insurance coverage. The amount of the provision related to the impact of these storms is subject to change as individual situations evolve.

~~For the three months ended September 30, 2017 and 2016, we recorded provisions for loan losses of $37.6 million and $24.9 million, respectively, related to non-covered loans. For the~~ ~~nine months ended September 30, 2017~~ ~~and 2016, we recorded provisions for loan losses of~~ ~~$60.9 million~~ ~~and~~ ~~$43.6 million~~, respectively, related to non-covered loans. The amount of the provision is impacted by loan growth, portfolio mix, historical loss rates, the level of charge-offs and specific reserves for impaired loans, and management's evaluation of qualitative factors in the determination of general reserves.

The most significant reason for the increase in the provision for loan losses related to non-covered loans for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016 was an increase of $28.9 million in the provision related to taxi medallion loans. The provision related to taxi medallion loans totaled $32.7 million for the quarter ended September 30, 2017, compared to $3.9 million for the quarter ended September 30, 2016. A $5.4 million provision recognized in the quarter ended September 30, 2017 related to the impact of hurricanes was more than offset by (i) a net decrease in the relative impact on the provision of changes in quantitative and qualitative loss factors, (ii) the impact of lower loan growth, and (iii) a decrease in provisions for criticized and classified loans.

Factors contributing to the increase in the provision for loan losses related to non-covered loans for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 were generally consistent with those for the three month periods discussed above.

ACL.

For the three months ended ~~September 30, 2017 and 2016, we recorded provisions~~March 31, 2020, the provision for ~~(recovery of) loan~~credit losses ~~of $0.3~~totaled $125.4 million, ~~and $(0.4)~~which included $3.6 million ~~respectively,~~ related to ~~covered loans. For the nine months ended September 30, 2017 and 2016, we recorded provisions for (recovery of) loan losses of $2.7 million and $(1.1) million, respectively, related to covered loans.~~off-balance sheet credit exposures. The provision for the nine months ended September 30, 2017 related primarily to impairment recognized on an ACI HELOC pool. As discussed below in the section entitled "Non-interest income," the impact on our results of operations of any provision for (recovery of) loancredit losses ~~on covered loans is significantly mitigated by the corresponding impact on the FDIC indemnification asset, recorded in non-interest income.~~

~~Non-Interest Income~~

~~The Company reported non-interest income of $53.3 million and $25.1 million~~ for the three months ended ~~September 30, 2017~~March 31, 2020 reflected the implementation of the CECL methodology and ~~2016, respectively. Non-interest income~~management's estimate of the expected negative economic impact of the COVID-19 pandemic. The provision included approximately $93 million related to changes in the economic forecast since the initial adoption of CECL on January 1, 2020 and was ~~$111.4~~impacted by an increase of approximately $16 million ~~and~~ ~~$77.1 million~~ in specific reserves during the quarter, which we believe was also exacerbated by the COVID-19 pandemic. Most of the increase in specific reserves related to credits in the Bridge franchise finance portfolio segment. The provision for credit losses, excluding the portion related to off-balance sheet credit exposures, was 0.53% of average loans for the ~~nine~~three months ended ~~September 30, 2017~~ ~~and 2016, respectively. A significant portion~~March 31, 2020.

For the three months ended March 31, 2019, the Company recorded a provision for loan losses, under the incurred loss methodology, of ~~our non-interest income has historically related~~$10.3 million.

The evolving COVID-19 situation may lead to ~~transactions~~increased volatility in the ~~covered assets. We have broken out~~provision for credit losses and if economic forecasts deteriorate further as a result of COVID-19, the ~~significant categories of non-interest income that relate to covered assets in~~provision for credit losses and the ~~table below, to assist in the comparison of the amount and composition of our non-interest income with that of other financial institutions.~~ACL could increase.

Non-Interest Income

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

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Income from resolution of covered assets, net $ 6,400
$ 8,883
$ 22,066
$ 26,426
Loss on sale of covered loans, net —
(10,033 ) (1,582 ) (14,895 )
Net gain (loss) on FDIC indemnification (4,838 ) 993
(14,174 ) (9,410 )
Other 237
371
957
623
Non-interest income related to the covered assets 1,799
214
7,267
2,744
Service charges and fees 4,938
5,171
15,554
14,529
Gain on sale of non-covered loans 2,447
2,086
8,183
7,535
Gain on investment securities available for sale, net 26,931
3,008
29,194
10,065
Lease financing 13,287
11,188
40,067
32,762
Other non-interest income 3,924
3,408
11,098
9,495
$ 53,326
$ 25,075
$ 111,363
$ 77,130

~~Non-interest income related to transactions in thecovered assets~~



	Three Months Ended March 31,
	2020			2019
Deposit service charges and fees	$	4,186		$	3,830
Gain on sale of loans, net	3,466			2,936
Gain (loss) on investment securities, net	(3,453		)	5,785
Lease financing	15,481			17,186
Other non-interest income	3,618			6,518
Non-interest income	$	23,298		$	36,255

The consolidated financial statements reflect the impact of gains or losses arising from transactions in the covered assets. The balance of the FDIC indemnification asset is reduced or increased as a result of decreases or increases in cash flows expected to be received from the FDIC related to these gains or losses. When these transaction gains or losses are recorded, we also record an offsetting amount in the consolidated statement of income line item “Net gain ~~(loss)~~ on ~~FDIC indemnification.” This line item includes the significantly mitigating impact of FDIC indemnification related to the following types of transactions in covered assets:~~

~~gains or losses from the resolution of covered assets;~~

~~provisions for (recoveries of) losses on covered loans;~~

~~gains or losses on the~~ sale of ~~covered loans; and~~

~~gains or losses on covered OREO.~~

~~See Note 5 to the consolidated financial statements~~loans for further details about the components of these gains and losses associated with covered assets, along with the related additions to or reductions in the amounts recoverable from the FDIC under the Loss Sharing Agreements, as reflected in the consolidated statements of income for the three and nine months ended September 30, 2017 and 2016.

Covered loans may be resolved through prepayment, short sale of the underlying collateral, foreclosure, sale of the loans or charge-off. For loans resolved through prepayment, short sale or foreclosure, the difference between consideration received in resolution of the loans and the carrying value of the loans is recorded in the consolidated statement of income line item “Income

from resolution of covered assets, net.” Both gains and losses on individual resolutions are included in this line item. Losses from the resolution of covered loans increase the amount recoverable from the FDIC under the Loss Sharing Agreements. Gains from the resolution of covered loans reduce the amount recoverable from the FDIC under the Loss Sharing Agreements. These additions to or reductions in amounts recoverable from the FDIC related to the resolution of covered loans are recorded in non-interest income in the line item “Net gain (loss) on FDIC indemnification” and reflected as corresponding increases or decreases in the FDIC indemnification asset. The amount of income or loss recorded in any period will be impacted by the amount of covered loans resolved, the amount of consideration received, and our ability to accurately project cash flows from ACI loans in future periods.

~~The following table provides further detail of the components of income from resolution of covered assets, net, for the periods indicated (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Payments in full $ 6,423
$ 9,371
$ 22,201
$ 26,790
Other (23 ) (488 ) (135 ) (364 )
Income from resolution of covered assets, net $ 6,400
$ 8,883
$ 22,066
$ 26,426

Under the terms of the Purchase and Assumption Agreement with the FDIC, the Bank may sell up to 2.5% of the covered loans based on UPB at the date of the FSB Acquisition, or approximately $280 million, on an annual basis without prior consent of the FDIC. Any losses incurred from such loan sales are covered under the Single Family Shared-Loss Agreement. Any loan sale in excess of this stipulated annual threshold requires approval from the FDIC to be eligible for loss share coverage. However, if the Bank seeks to sell covered loans in excess of the 2.5% threshold in the nine months prior to the stated termination date of loss share coverage, May 21, 2019, and the FDIC does not consent, the Single Family Shared-Loss Agreement will be extended for two additional years with respect to the loans requested to be included in such sales. The Bank will then have the right to sell all or any portion of such loans without FDIC consent at any time within the nine months prior to the extended termination date, and any losses incurred will be covered under the Single Family Shared-Loss Agreement. This final sale mechanism, if exercised, ensures no residual credit risk in our covered loan portfolio that would otherwise arise from credit losses occurring after the termination date of the Single Family Shared-Loss Agreement.

~~The following table summarizes the gain (loss) recorded on the sale of covered residential loans and the impact of related FDIC indemnification for the periods indicated (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2016 2017 2016
Loss on sale of covered loans $ (10,033 ) $ (1,582 ) $ (14,895 )
Net gain on FDIC indemnification 8,026
1,266
11,958
Net impact on pre-tax earnings $ (2,007 ) $ (316 ) $ (2,937 )

~~The Bank did not sell covered residential loans in~~ the three months ended ~~September 30, 2017, due to~~March 31, 2020 included gains on sales of the ~~potential impact~~guaranteed portions of ~~Hurricane Irma on the market for these~~SBA loans ~~the collateral for many of which is located in Florida.~~

~~Pricing received on the sale of covered loans may vary based on (i) market conditions, including the interest rate environment, the amount of capital seeking investment~~totaling $1.2 million and the secondary supply of loans with a particular performance history or collateral type, (ii) the type and quality of collateral, (iii) the performance history of loans included in the sale and (iv) whether or not the loans have been modified. We anticipate that we will continue to exercise our right to sell covered residential loans on a quarterly basis in the future.

~~Other components of non-interest income~~

~~Period over period increases in income from lease financing corresponded to the growth in the portfolio of equipment under operating lease.~~

~~Gains~~gains on sale of ~~non-covered~~government insured residential loans totaling $2.3 million.

The loss on investment securities for the three ~~and nine~~ months ended ~~September 30, 2017 and 2016 related primarily to sales~~March 31, 2020 included $5.0 million of ~~loans~~unrealized losses on marketable equity securities, likely resulting from the impact on markets of the COVID-19 pandemic, offset by ~~SBF.~~

~~Gain~~$1.5 million in realized gains on available for sale securities. The gain on investment securities, net for the three months ended March 31, 2019 reflected net realized gains of $4.3 million from the sale of investment securities available for sale and net totaled $26.9 million for the quarter ended September 30, 2017. Substantially all of these gains resulted from the sale of securities formerly covered under the Commercial Shared-Loss Agreement and originally acquired at significant discounts in the FSB Acquisition. Otherunrealized gains on ~~investment~~marketable equity securities ~~available for sale~~of $1.5 million.

The decrease in income from lease financing for the three ~~and nine~~ months ended ~~September 30, 2017 and 2016 related~~March 31, 2020 compared to ~~sales of securities~~the three months ended March 31, 2019, is primarily attributed to the increase in ~~the normal course of managing liquidity, portfolio duration and yield.~~operating lease equipment off-lease.

Non-Interest Expense

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



	Three Months Ended March 31,
	2020			2019
Employee compensation and benefits	$	58,887		$	65,233
Occupancy and equipment	12,369			13,166
Deposit insurance expense	4,403			4,041
Professional fees	3,204			7,871
Technology and telecommunications	12,596			11,168
Depreciation of operating lease equipment	12,603			11,812
Other non-interest expense	14,806			13,399
Total non-interest expense	$	118,868		$	126,690
Less:
Depreciation of operating lease equipment	(12,603		)	(11,812		)
Costs incurred directly related to implementation of BankUnited 2.0	(79		)	(5,892		)
Recurring operating expenses ⁽¹⁾	$	106,186		$	108,986


(1)	Recurring operating expenses is a non-GAAP measure. See section entitled "Non-GAAP Financial Measures" below for reconciliation of non-GAAP financial measurements to their comparable GAAP financial measurements.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Employee compensation and benefits $ 58,327
$ 55,162
$ 178,386
$ 166,374
Occupancy and equipment 18,829
18,867
56,689
57,199
Amortization of FDIC indemnification asset 45,225
38,957
135,351
116,711
Deposit insurance expense 5,764
4,943
16,827
12,866
Professional fees 2,748
3,884
12,573
10,119
Telecommunications and data processing 3,452
3,746
10,481
10,800
Depreciation of equipment under operating lease 8,905
6,855
25,655
20,004
Other non-interest expense 13,455
15,590
37,735
40,151
$ 156,705
$ 148,004
$ 473,697
$ 434,224

~~Annualized non-interest expense as a percentage of average assets was 2.1%~~Employee compensation and ~~2.2% for the three and nine months ended September 30, 2017, respectively, and 2.2% and 2.3% for the three and~~ ~~nine months ended September 30, 2016~~, respectively. Excluding amortization of the FDIC indemnification asset, non-interest expense as a percentage of average assets was 1.5% and 1.6% for the three and nine months ended September 30, 2017, respectively, and 1.6% and 1.7% for the three and ~~nine months ended September 30, 2016, respectively. The more significant changes in the components of non-interest expense are discussed below.~~benefits

Employee compensation and benefits

~~As is typical for financial institutions, employee compensation and benefits represents the single largest component of recurring non-interest expense. Employee compensation and benefits~~ declined by $6.3 million for the three ~~and nine~~ months ended ~~September 30, 2017 increased by $3.2 million and $12.0 million~~March 31, 2020 as compared to the ~~corresponding periods~~three months ended March 31, 2019, primarily due to a reduction in ~~2016. The increases~~headcount and a decrease in equity based compensation expense related to the impact of a declining stock price on liability-classified awards.

Professional fees

Professional fees decreased by $4.7 million for the three ~~and nine~~ months ended ~~September 30, 2017 primarily reflected increased headcount and general increases in compensation levels.~~

~~Amortization of FDIC indemnification asset~~

~~Amortization of FDIC indemnification asset totaled $45.2 million and $135.4 million, respectively, for the three and nine months ended September 30, 2017 compared to~~ ~~$39.0 million~~ ~~and~~ ~~$116.7 million, respectively, for the three and~~ ~~nine months ended September 30, 2016~~.

The FDIC indemnification asset was initially recorded at its estimated fair value, representing the present value of estimated future cash payments from the FDIC for probable losses on covered assets. As projected cash flows from the ACI loans have increased, the yield on the loans has increased accordingly and the estimated future cash payments from the FDIC have decreased. This change in estimated cash flows is recognized prospectively, consistent with the recognition of the increased cash flows from the ACI loans. As a result, the FDIC indemnification asset is being amortized to the amount of the estimated future cash flows. For the three and nine months ended September 30, 2017, the average rate at which the FDIC indemnification asset was amortized was 46.62% and 41.19%, respectively, compared to ~~25.36%~~ ~~and~~ ~~23.48%, respectively, during the comparable periods in~~ ~~2016~~.

The rate of amortization will increase if estimated future cash payments from the FDIC decrease. The amount of amortization is impacted by both the change in the amortization rate and the decrease in the average balance of the indemnification asset. As we continue to submit claims under the Loss Sharing Agreements and recognize periodic amortization, the balance of the indemnification asset will continue to decline.

~~See~~ ~~Note 5~~ ~~to the consolidated financial statements for a rollforward of the FDIC indemnification asset for the nine months ended September 30, 2017 and the year ended December~~March 31, ~~2016. The entire balance of the FDIC indemnification asset relates~~

to residential loans and OREO covered under the Single Family Shared-Loss Agreement. The following table presents the carrying value of the FDIC indemnification asset and the estimated future cash flows at the dates indicated (in thousands):

September 30, 2017 December 31, 2016
FDIC indemnification asset $ 349,617
$ 515,933
Less expected amortization (173,685 ) (245,350 )
Amount expected to be collected from the FDIC $ 175,932
$ 270,583

~~The amount of expected amortization reflects the impact of improvements in cash flows expected to be collected from the covered loans,~~2020 as well as the impact of time value resulting from the discounting of the asset when it was initially established. This amount will be amortized to non-interest expense using the effective interest method over the period during which cash flows from the FDIC are expected to be collected, which is limited to the lesser of the contractual term of the Single Family Shared-Loss Agreement and the expected remaining life of the indemnified assets.

~~Deposit insurance expense~~

~~Deposit insurance expense increased $0.8 million and $4.0 million, respectively, for the three and nine months ended September 30, 2017~~ compared to the ~~corresponding periods in~~ ~~2016. These increases primarily reflect the growth of the balance sheet, the large bank surcharge imposed by the FDIC, which began in the third quarter of~~ ~~2016, and increases in certain components of the Bank's assessment rate.~~

~~Depreciation of equipment under operating lease~~

~~Depreciation of equipment under operating lease increased by $2.1 million and $5.7 million, respectively, for the~~ three ~~and nine~~ months ended ~~September 30, 2017 compared~~March 31, 2019. The decrease was primarily due to the ~~corresponding periods~~consulting services in ~~2016. These increases generally correspond~~2019 related to ~~the growth in the portfolio of equipment under operating lease.~~our BankUnited 2.0 initiative.

Other non-interest expense

The most significant components of other non-interest expense are advertising, promotion and ~~promotion,~~business development, costs related to lending activities, loan servicing and deposit generation, ~~OREO~~insurance, expenses related ~~expenses, insurance,~~to workouts and foreclosures, regulatory examination assessments, travel and general office expense. ~~Other non-interest expense for the three months ended September 30, 2017 includes $0.6~~

We currently expect to incur near-term costs of approximately $1 million related ~~primarily~~directly to ~~facilities damage and employee relocation and assistance due to~~COVID-19, the ~~impact~~most significant of ~~Hurricane Irma. We do not expect future expenses~~which include additional software licenses related to ~~facilities damage~~our participation in the PPP, laptops and ~~employee relocation~~other equipment to ~~be material~~facilitate employees working remotely and costs related to ~~the Company.~~cleaning, sanitizing and personal protective equipment.

Income Taxes

~~The Company’s effective income tax rate was 32.2% and 31.2% for the three and nine months ended September 30, 2017, respectively, compared to~~ ~~31.7%~~ ~~and~~ ~~33.2%~~ ~~for the three and~~ ~~nine months ended September 30, 2016, respectively. Significant components included in the reconciliation of the Company's effective income tax rate~~See Note 5 to the ~~statutory federal tax rate of 35.0% included the effect of state~~consolidated financial statements for information about income taxes and the impact of income not subject to federal tax for each of the periods presented. In addition, the effective income tax rate for the three and nine months ended September 30, 2017 reflected the impact of $0.3 million and $3.2 million, respectively, in excess tax benefits resulting from activity related to vesting of share-based awards and exercise of stock options.taxes.

Analysis of Financial Condition

Average interest-earning assets increased ~~$3.2 billion~~$613 million to ~~$26.9~~$31.6 billion for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 from ~~$23.7~~$31.0 billion for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2019. This increase was driven by a ~~$2.1 billion~~$876 million increase in the average balance of outstanding loans, ~~and~~offset by a ~~$1.0 billion increase~~$413 million decrease in the average balance of investment securities. The increase in average loans reflected growth of $2.3 billion in average non-covered loans outstanding, partially offset by a $186 million decrease in the average balance of covered loans. The decrease in average non-interest earning assets period over period primarily reflected a decrease in the FDIC indemnification asset. Growth in interest earning assets, resolution of covered loans and declines in the amount of the FDIC indemnification asset are trends that are expected to continue.

Average interest bearing liabilities ~~increased $2.6 billion~~decreased $232 million to ~~$22.4~~$25.0 billion for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 from ~~$19.8~~$25.3 billion for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2019, due primarily to ~~increases~~decreases in average FHLB advances and short term borrowings of ~~$2.4 billion~~$245 million and $43 million, respectively; offset by an increase of $32 million in average interest bearing ~~deposits and $191 million in average FHLB advances.~~

deposits. Average non-interest bearing deposits increased by ~~$90 million. We expect growth in average deposits~~$763 million to ~~continue, corresponding to anticipated growth in interest earning assets.~~

~~Average stockholders' equity increased by $255 million, due primarily to~~$4.4 billion for the ~~retention of earnings, but also reflecting proceeds from the exercise of stock options and an increase in accumulated other comprehensive income.~~three months ended March 31, 2020.

Investment Securities ~~Available for Sale~~

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 ~~available for sale as of~~at the dates indicated (in thousands):


	September 30, 2017				December 31, 2016				March 31, 2020				December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
U.S. Treasury securities	$	24,969	$	24,957	$	4,999	$	5,005	$	75,238	$	76,154	$	70,243	$	70,325
U.S. Government agency and sponsored enterprise residential MBS	2,332,616		2,348,687		1,513,028		1,527,242		2,209,715		2,180,898		2,018,853		2,022,175
U.S. Government agency and sponsored enterprise commercial MBS	139,966		139,220		126,754		124,586		369,967		376,492		366,787		370,976
Private label residential MBS and CMOs	507,381		527,858		334,167		375,098		1,185,539		1,173,880		1,001,337		1,012,177
Private label commercial MBS	1,140,465		1,153,601		1,180,386		1,187,624		1,728,610		1,604,814		1,719,228		1,724,684
Single family rental real estate-backed securities	566,635		572,948		858,339		861,251		549,981		528,793		467,459		470,025
Collateralized loan obligations	695,414		700,319		487,678		487,296		1,169,469		1,094,793		1,204,905		1,197,366
Non-mortgage asset-backed securities	80,255		82,637		187,660		186,736		265,444		255,161		194,171		194,904
Preferred stocks	60,716		70,716		76,180		88,203
State and municipal obligations	666,013		677,015		705,884		698,546		255,602		271,033		257,528		273,302
SBA securities	572,540		586,675		517,129		523,906		262,661		260,388		359,808		362,731
Other debt securities	4,056		8,839		3,999		8,091
Investment securities held to maturity									10,000		10,000		10,000		10,000
	$	6,791,026	$	6,893,472	$	5,996,203	$	6,073,584	$	8,082,226	7,832,406		$	7,670,319	7,708,665
Marketable equity securities											42,195				60,572
											$	7,874,601			$	7,769,237

Our investment strategy has focused on insuring adequate liquidity, ~~adding~~maintaining a suitable balance of high credit quality, ~~diversifying~~diverse assets, ~~to the consolidated balance sheet,~~ 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 securities, GNMA securities, SBA securities and U.S. Government ~~agency~~Agency MBS. Investment grade municipal securities provide liquidity ~~along with higher~~and attractive tax-equivalent ~~yields at longer durations than the portfolio in general.~~yields. We have also invested in highly rated structured products, including private-label commercial and residential MBS, collateralized loan obligations, single family rental real estate-backed securities and non-mortgage asset-backed securities that, while somewhat less liquid, provide us with attractive yields. Relatively short effective portfolio duration helps mitigate interest rate ~~risk arising from~~risk. Based on the ~~currently low level of market interest rates. The~~Company’s assumptions, the estimated weighted average ~~expected~~ life of the investment portfolio as of ~~September 30, 2017~~March 31, 2020 was ~~4.9 years and the~~4.3 years. The effective duration of the investment portfolio as of March 31, 2020 was ~~1.7 years.~~ 1.3 years . The model results are based on assumptions that may differ from actual results.

The ~~following table shows the scheduled maturities, carrying values and current yields for~~ investment securities available for sale as of September 30, 2017. Scheduled maturities have been adjusted for anticipated prepayments of MBS and other pass through securities. Yields on tax-exempt securities have been calculated on a tax-equivalent basis (dollars in thousands):

Within One Year
After One Year
Through Five Years

After Five Years
Through Ten Years
After Ten Years Total

Carrying
Value

Weighted
Average
Yield

Carrying
Value

Weighted
Average
Yield

Carrying
Value

Weighted
Average
Yield

Carrying
Value

Weighted
Average
Yield

Carrying
Value

Weighted
Average
Yield
U.S. Treasury securities $ 24,957
1.19 % $ —
— % $ —
— % $ —
— % $ 24,957
1.19 %
U.S. Government agency and sponsored enterprise residential MBS 355,685
2.94 % 860,103
2.28 % 893,121
2.14 % 239,778
2.15 % 2,348,687
2.31 %
U.S. Government agency and sponsored enterprise commercial MBS 5,562
3.80 % 11,066
3.71 % 83,066
2.50 % 39,526
3.57 % 139,220
2.95 %
Private label residential MBS and CMOs 113,951
4.01 % 284,366
3.82 % 101,127
4.07 % 28,414
4.39 % 527,858
3.94 %
Private label commercial MBS 90,284
3.80 % 786,542
3.57 % 276,775
3.20 % —
— % 1,153,601
3.50 %
Single family rental real estate-backed securities 1,516
3.18 % 546,920
2.92 % 24,512
3.70 % —
— % 572,948
2.95 %
Collateralized loan obligations —
— % 573,474
3.32 % 126,845
3.52 % —
— % 700,319
3.36 %
Non-mortgage asset-backed securities 11,999
3.91 % 70,638
3.63 % —
— % —
— % 82,637
3.67 %
State and municipal obligations —
— % 27,509
3.00 % 624,758
4.46 % 24,748
5.60 % 677,015
4.45 %
SBA securities 93,080
2.54 % 245,991
2.50 % 150,116
2.47 % 97,488
2.43 % 586,675
2.49 %
Other debt securities —
— % —
— % 1,900
9.17 % 6,939
9.13 % 8,839
9.14 %
$ 697,034
3.13 % $ 3,406,609
3.04 % $ 2,282,220
3.11 % $ 436,893
2.74 % 6,822,756
3.05 %
Preferred stocks with no scheduled maturity

70,716
8.66 %
Total investment securities available for sale

$ 6,893,472
3.11 %

~~The available for sale investment securities~~ portfolio was in a net unrealized ~~gain~~loss position of ~~$102.4~~$249.8 million at ~~September 30, 2017~~March 31, 2020 with aggregate fair value equal to ~~101.5%~~96.9% of amortized cost. Net unrealized ~~gains~~losses included ~~$110.3~~$41.4 million of gross unrealized gains and ~~$7.9~~$291.2 million of gross unrealized losses. Investment securities available for sale in an unrealized loss position at ~~September 30, 2017~~March 31, 2020 had an aggregate fair value of ~~$1.0~~$6.0 billion. ~~At September 30, 2017, 96.7%~~The majority of ~~investment securities available for sale were backed by~~ the ~~U.S. Government, U.S. Government agencies or sponsored enterprises or were rated AAA , AA or A, based on~~unrealized losses at March 31, 2020 related to the most recent third-party ratings. Investment securities available for sale totaling $33 million were rated below investment grade or not rated at September 30, 2017, all of which were acquired in the FSB Acquisitionprivate label CMBS and ~~substantially all of~~CLO portfolio segments, which were in net unrealized ~~gain~~loss positions of $123.8 million and $74.7 million, respectively. Unrealized losses at ~~September 30, 2017.~~March 31, 2020 were primarily attributable to widening spreads, resulting in large part from market response to, and dislocation in the wake of, the emerging COVID-19 pandemic. The ratings distribution of our AFS securities portfolio at March 31, 2020 is depicted in the chart below:

We evaluate the credit quality of individual securities in the portfolio quarterly to determine whether ~~any~~we expect to recover the amortized cost basis of the investments in unrealized loss ~~positions are other-than-temporarily impaired.~~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:

~~our intent~~whether we intend to ~~hold~~sell the security ~~until maturity or for a period~~prior to recovery of ~~time sufficient for a recovery in value;~~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 length of time and~~The extent to which fair value ~~has been~~is less than amortized cost;

~~adverse changes~~Adverse conditions specifically related to the security, an industry or geographic area;

Changes in ~~expected cash flows;~~the financial condition of the issuer or underlying loan obligors;

~~collateral values and performance;~~

~~the~~The payment structure and remaining payment terms of the security, including levels of subordination or over-collateralization;

~~changes in the economic or regulatory environment;~~

~~the general market condition~~Failure of the ~~geographic area or industry of the issuer;~~issuer to make scheduled payments;

~~the issuer’s financial condition, performance and business prospects; and~~

~~changes~~Changes in credit ~~ratings.~~ratings;

~~Our evaluation~~Relevant market data;

Estimated prepayments, defaults, and the value and performance of non-agency impaired securities for OTTI as of September 30, 2017 included consideration of the potential impacts of Hurricanes Irma and Harvey. Our considerations included but were not necessarily limited to (i) observations of market pricing since the hurricanes, (ii) whether a significant portion of the underlying collateral ~~was in an~~at the individual security level.

impacted area, (iii) whether credit enhancement significantly exceeded the balance of collateral in impacted areas, (iv) for residential mortgage-backed securities, the evaluation of the extent and nature of damage to residential collateral for loans in the Bank’s residential loan portfolio located in the same areas, and (v) discussions with sponsors or managers of individual securities about specific collateral impact.

During the three and nine months ended September 30, 2016, OTTI was recognized on two positions in one private label commercial MBS. These positions were in unrealized loss positions at September 30, 2016 and the Company intended to sell the security before recovery of the amortized cost basis. No securities were determined to be ~~other-than-temporarily~~credit loss impaired ~~at September 30, 2017, or~~ during the three ~~and nine~~ months ~~then ended.~~

ended March 31, 2020 or other than temporarily impaired during the three months ended March 31, 2019. We do not intend to sell securities in significant unrealized loss positions at ~~September 30, 2017.~~March 31, 2020. 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. The severity of impairment of individual securities in the portfolio is generally not material. Unrealized losses in the portfolio~~basis, which may be at ~~September 30, 2017 were primarily attributable to an increase in market interest rates subsequent to the date the securities were acquired.~~maturity.

The timely ~~repayment~~payment of principal and interest on securities issued by the U.S. ~~Treasury,~~government, U.S. ~~Government agency~~government agencies and U.S. government sponsored ~~enterprise securities in unrealized loss positions~~enterprises is explicitly or implicitly guaranteed by the ~~full faith and credit of the~~ U.S. Government. ~~Management performed projected cash flow analyses~~As such, there is an assumption of zero credit loss and the Company expects to recover the entire amortized cost basis of these securities.

None of our impaired private label ~~residential MBS~~securities had missed principal or interest payments or had been downgraded by a NRSRO at March 31, 2020. The Company performed an analysis comparing the present value of cash flows expected to be collected to the amortized cost basis of impaired securities. This analysis was based on a scenario that we believe to be generally

more severe than our reasonable and ~~CMOs, private label commercial MBS~~supportable economic forecast at March 31, 2020, and ~~non-mortgage asset-backed securities in unrealized loss positions, incorporating CUSIP level~~incorporated assumptions ~~consistent with~~about voluntary prepayment rates, collateral defaults, delinquencies, severity and other relevant factors. Our analysis also considered the ~~collateral~~structural characteristics of each security ~~including collateral default rate, voluntary prepayment rate, severity~~ and ~~delinquency assumptions.~~the level of credit enhancement provided by that structure. Based on the results of this analysis, nowe expect to recover the entire amortized cost basis of the impaired private label AFS securities. Further information about the portfolio segments evidencing the largest unrealized losses at March 31, 2020, the CMBS and CLO portfolio segments, follows.

For private label CMBS, our analysis of cash flows expected to be collected incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality and type, loan size, loan purpose and other qualitative factors. We also regularly monitor collateral watchlisted, bankruptcy data, special servicing trends, delinquency and other economic data which would indicate further stress in the sector.

For CLOs, our analysis of cash flows expected to be collected incorporated assumptions about collateral default rates, loss severity, and delinquencies, calibrated to take into account idiosyncratic risks associated with the underlying collateral. In developing those assumptions, we took into account each sector’s performance pre, during and post the 2008 financial crisis. We regularly engage with bond managers to monitor trends in underlying collateral including potential downgrades and subsequent cash flow diversions, liquidity, ratings migration, and any other relevant developments.

The following table presents the distribution of the third-party ratings and subordination levels compared to average stress scenario losses based on our credit ~~losses were projected. Management's~~loss impairment analysis of the ~~credit characteristics of individual securities~~CMBS and the underlying collateral and levels of subordination for each of the single family rental real estate-backed securities in unrealized loss positions is not indicative of projected credit losses. Management's analysis of the state and municipal obligations in unrealized loss positions included reviewing the ratings of the securities and the results of credit surveillance performed by an independent third party. Given the expectation of timely repayment of principal and interest and the generally limited severity of impairment, the impairments were considered to be temporary.CLOs at March 31, 2020:



				Subordination						Weighted Average Stress Scenario Loss
	Rating	Percent of Total		Minimum		Maximum		Average		Weighted Average Stress Scenario Loss
Private label CMBS	AAA	82.0	%	25.7	%	43.5	%	43.1	%	13.5	%
	AA	12.0	%	30.4	%	85.9	%	39.5	%	12.3	%
	A	6.0	%	21.5	%	73.6	%	34.3	%	12.3	%
Weighted average		100.0	%	26.0	%	50.4	%	42.2	%	13.2	%

CLOs	AAA	84.0	%	36.0	%	48.1	%	43.2	%	21.0	%
	AA	13.0	%	27.8	%	40.3	%	32.8	%	22.3	%
	A	3.0	%	25.6	%	29.4	%	27.0	%	23.9	%
Weighted average		100.0	%	34.6	%	46.5	%	41.3	%	21.3	%

For further discussion of our analysis of impaired investment securities AFS for ~~OTTI,~~credit loss impairment see Note 3 to the consolidated financial statements.

Valuations of our investment securities AFS have started to recover subsequent to March 31, 2020. The following table shows the net unrealized loss and carrying value of our AFS securities at the dates indicated:



	March 31, 2020					April 22, 2020 ⁽¹⁾
	Net Unrealized Gain (Loss)			Carrying Value		Net Unrealized Gain (Loss)			Carrying Value
U.S. Treasury securities	$	916		$	76,154	$	2,048		$	77,285
U.S. Government agency and sponsored enterprise residential MBS	(28,817		)	2,180,898		(3,101		)	2,163,922
U.S. Government agency and sponsored enterprise commercial MBS	6,525			376,492		6,185			376,152
Private label residential MBS and CMOs	(11,659		)	1,173,880		(3,868		)	1,181,671
Private label commercial MBS	(123,796		)	1,604,814		(118,430		)	1,610,180
Single family rental real estate-backed securities	(21,188		)	528,793		(3,697		)	546,284
Collateralized loan obligations	(74,676		)	1,094,793		(70,086		)	1,099,384
Non-mortgage asset-backed securities	(10,283		)	255,161		(4,342		)	261,103
State and municipal obligations	15,431			271,033		14,437			270,039
SBA securities	(2,273		)	260,388		(2,310		)	260,350
	$	(249,820	)	$	7,822,406	$	(183,164	)	$	7,846,370

(1) Investments AFS held at March 31, 2020 valued as of April 22, 2020.

We use third-party pricing services to assist us in estimating the fair value of investment securities. We perform a variety of procedures to ensure that we have a thorough understanding of the methodologies and assumptions used by the pricing services including obtaining and reviewing written documentation of the methods and assumptions employed, conducting interviews with valuation desk personnel and reviewing model results and detailed assumptions used to value selected securities as considered necessary. Our classification of prices within the fair value hierarchy is based on an evaluation of the nature of the significant assumptions impacting the valuation of each type of security in the portfolio. We have established a robust price challenge process that includes a review by our treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over month fluctuations or deviations from our expectations based on recent observed trading activity and other information available in the marketplace that would impact the value of the security is challenged. Responses to the price challenges, which generally include specific information about inputs and assumptions incorporated in the valuation and their sources, are reviewed in detail. If considered necessary to resolve any discrepancies, a price will be obtained from an additional independent valuation ~~specialist.~~sources. We do not typically adjust the prices provided, other than through this established challenge process. Our primary pricing services utilize observable inputs when available, and employ unobservable inputs and proprietary models only when observable inputs are not available. As a matter of course, the services validate prices by comparison to recent trading activity whenever such activity exists. Quotes obtained from the pricing services are typically non-binding.

We ~~have~~ also ~~established~~have a quarterly price validation process to assess the propriety of the pricing methodologies utilized by our primary pricing services by independently verifying the prices of a sample of securities in the portfolio. Sample sizes vary based on the type of security being priced, with higher sample sizes applied to more difficult to value security types. Verification procedures may consist of obtaining prices from an additional outside ~~source or internal modeling, generally based on Intex.~~source. We have established acceptable percentage deviations from the price provided by the initial pricing source. If deviations fall outside the established parameters, we will obtain and evaluate more detailed information about the assumptions and inputs used by each pricing source or, if considered necessary, employ an additional valuation ~~specialist~~source to price the security in question. Pricing issues identified through this evaluation are addressed with the applicable pricing service and methodologies or inputs are revised as determined necessary. Depending on the results of the validation process, sample sizes may be extended for particular classes of securities. Results of the validation process are reviewed by the treasury front office and by senior management.

The majority of our investment securities are classified within level 2 of the fair value hierarchy. U.S. Treasury securities and ~~certain preferred stocks~~marketable equity securities are classified within level 1 of the hierarchy. ~~At September 30, 2017~~We are closely monitoring the impact of the COVID-19 pandemic on markets, and ~~December 31, 2016, 1.0%~~on our ability to price securities in our portfolio. While we have observed increased volatility, we believe the fiscal and ~~2.1%, respectively,~~monetary response to the crisis has been effective in supporting liquidity and stabilizing markets. To date, circumstances have not led to a change in the categorization of our ~~investment securities were classified~~fair value estimates within ~~level 3 of~~ the fair value hierarchy. Securities classified within level 3 of the hierarchy at September 30, 2017 included certain private label residential MBS and trust preferred securities. These securities were classified within level 3 of the hierarchy because proprietary assumptions related to voluntary prepayment rates, default probabilities, loss severities and discount rates were considered significant to the valuation. There were no transfers of investment securities between levels of the fair value hierarchy during the nine months ended September 30, 2017 and 2016.

For additional discussion of the fair values of investment securities, see Note 109 to the consolidated financial statements.

The following table shows the scheduled maturities, carrying values and current yields for investment securities available for sale as of March 31, 2020, as well as the carrying value and yield of marketable equity securities. 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% (dollars in thousands):



	Within One Year				After One Year Through Five Years				After Five Years Through Ten Years				After Ten Years				Total
	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
U.S. Treasury securities	$	76,154	1.71	%	$	—	—	%	$	—	—	%	$	—	—	%	$	76,154	1.71	%
U.S. Government agency and sponsored enterprise residential MBS	245,599		1.43	%	961,575		1.64	%	795,467		1.59	%	178,257		1.60	%	2,180,898		1.62	%
U.S. Government agency and sponsored enterprise commercial MBS	2,753		2.36	%	43,245		2.55	%	211,451		1.78	%	119,043		2.43	%	376,492		2.07	%
Private label residential MBS and CMOs	339,172		3.49	%	662,488		3.30	%	137,380		3.04	%	34,840		2.77	%	1,173,880		3.31	%
Private label commercial MBS	67,845		3.67	%	1,192,461		2.53	%	326,299		2.63	%	18,209		2.78	%	1,604,814		2.60	%
Single family rental real estate-backed securities	6,132		3.11	%	221,317		2.85	%	301,344		2.58	%	—		—	%	528,793		2.69	%
Collateralized loan obligations	17,103		2.72	%	916,875		3.01	%	160,815		3.60	%	—		—	%	1,094,793		3.10	%
Non-mortgage asset-backed securities	37,330		3.05	%	151,034		2.84	%	64,917		2.59	%	1,880		2.64	%	255,161		2.80	%
State and municipal obligations	11,584		2.45	%	18,369		3.03	%	195,302		3.99	%	45,778		4.08	%	271,033		3.87	%
SBA securities	53,949		2.57	%	131,222		2.52	%	55,521		2.47	%	19,696		2.38	%	260,388		2.51	%
	$	857,621	2.65	%	$	4,298,586	2.59	%	$	2,248,496	2.38	%	$	417,703	2.29	%	7,822,406		2.52	%
Marketable equity securities with no scheduled maturity																	42,195		7.34	%
Total investment securities available for sale and marketable equity securities																	$	7,864,601	2.54	%

Loans Held for Sale

Loans held for sale at ~~September 30, 2017~~March 31, 2020 included ~~$32~~$18 million of ~~commercial~~the guaranteed portion of SBA loans ~~originated by SBF with the intent to sell~~held for sale in the secondary market. ~~Commercial~~At December 31, 2019, loans held for sale ~~are comprised~~included $28.6 million of the ~~portion~~SBA loans held for sale and $9.3 million of other commercial loans ~~guaranteed by U.S. government agencies. Loans~~transferred to held for sale. SBA loans are generally sold with servicing retained. ~~Servicing activity did not have a material impact on the results of operations for the three and nine months ended September 30, 2017 and 2016.~~

Loans

The loan portfolio comprises the Company’s primary interest-earning asset. The following tables show the composition of the loan portfolio ~~and the breakdown of the portfolio among non-covered loans, covered ACI loans and covered non-ACI loans~~ at the dates indicated (dollars in thousands):

September 30, 2017

Covered Loans Percent of Total
Non-Covered Loans ACI Non-ACI Total
Residential and other consumer:

1-4 single family residential $ 3,958,205
$ 470,300
$ 28,589
$ 4,457,094
21.7 %
Home equity loans and lines of credit 1,644
5,640
37,764
45,048
0.2 %
Other consumer loans 20,166
—
—
20,166
0.1 %
3,980,015
475,940
66,353
4,522,308
22.0 %
Commercial:
Multi-family 3,358,801
—
—
3,358,801
16.3 %
Non-owner occupied commercial real estate 4,183,275
—
—
4,183,275
20.4 %
Construction and land 271,994
—
—
271,994
1.3 %
Owner occupied commercial real estate 1,959,464
—
—
1,959,464
9.5 %
Commercial and industrial 3,900,290
—
—
3,900,290
19.0 %
Commercial lending subsidiaries 2,374,193
—
—
2,374,193
11.5 %
16,048,017
—
—
16,048,017
78.0 %
Total loans 20,028,032
475,940
66,353
20,570,325
100.0 %
Premiums, discounts and deferred fees and costs, net 44,422
—
(4,317 ) 40,105

Loans including premiums, discounts and deferred fees and costs 20,072,454
475,940
62,036
20,610,430

Allowance for loan and lease losses (153,725 ) (1,812 ) (3,036 ) (158,573 )
Loans, net $ 19,918,729
$ 474,128
$ 59,000
$ 20,451,857



	March 31, 2020					December 31, 2019
	Total			Percent of Total		Total			Percent of Total
Residential and other consumer loans	$	5,634,823		24.4	%	$	5,661,119		24.5	%
Multi-family	1,967,578			8.5	%	2,217,705			9.6	%
Non-owner occupied commercial real estate	4,987,798			21.5	%	5,030,904			21.7	%
Construction and land	222,223			1.0	%	243,925			1.1	%
Owner occupied commercial real estate	2,026,510			8.7	%	2,062,808			8.9	%
Commercial and industrial	5,008,573			21.6	%	4,655,349			20.1	%
Pinnacle	1,187,607			5.0	%	1,202,430			5.2	%
Bridge - franchise finance	647,699			2.8	%	627,482			2.6	%
Bridge - equipment finance	649,154			2.8	%	684,794			3.0	%
Mortgage warehouse lending	852,313			3.7	%	768,472			3.3	%
Total loans	23,184,278			100.0	%	23,154,988			100.0	%
Allowance for credit losses	(250,579		)			(108,671		)
Loans, net	$	22,933,699				$	23,046,317

~~Total loans, including premiums, discounts and deferred fees and costs, increased by $1.2 billion to $20.6 billion at September 30, 2017, from $19.4 billion at December~~For the three months ended March 31, ~~2016. Non-covered~~2020, total loans grew by ~~$1.3 billion while covered loans declined by $76 million from December 31, 2016 to September 30, 2017. Non-covered residential~~$29 million. Commercial and ~~other consumer~~industrial loans grew by ~~$538~~$353 million and ~~non-covered commercial loans grew~~mortgage warehouse outstandings increased by ~~$753~~$84 million ~~during the nine months ended September 30, 2017.~~

~~Growth~~due to increased utilization. The majority of this growth was not attributable to draws under existing lines of credit. The decline in ~~non-covered loans, including premiums, discounts and deferred fees and costs, for the nine months ended September 30, 2017 reflected an increase~~multi-family balances was driven primarily by continued runoff of ~~$536 million for the Florida franchise, a decrease of $74 million for~~ the New York ~~franchise and an increase of $829 million~~portfolio. Residential activity for the ~~national platforms.~~

three months ended March 31, 2020 included purchases of approximately $286 million in GNMA early buyout loans, offset by approximately $202 million in re-poolings and paydowns. The ~~following tables show the composition~~residential portfolio, excluding GNMA early buyout loans, experienced a net decline of the non-covered loan portfolio and the breakdown among the Florida and New York franchises and national platforms at the dates indicated. Amounts include premiums, discounts and deferred fees and costs (dollars in thousands):

September 30, 2017
Florida New York National Total
Residential and other consumer $ 228,300
$ 206,308
$ 3,599,004
$ 4,033,612
Commercial:
Multi-family 555,193
2,807,068
—
3,362,261
Non-owner occupied commercial real estate 2,572,743
1,501,597
99,229
4,173,569
Construction and land 123,655
134,854
12,947
271,456
Owner occupied commercial real estate 1,110,581
748,339
97,829
1,956,749
Commercial and industrial 2,509,353
891,978
490,751
3,892,082
Commercial lending subsidiaries —
—
2,382,725
2,382,725
$ 7,099,825
$ 6,290,144
$ 6,682,485
$ 20,072,454
35.4 % 31.3 % 33.3 % 100.0 %

December 31, 2016
Florida New York National Total
Residential and other consumer: $ 254,139
$ 226,154
$ 3,015,482
$ 3,495,775
Commercial:
Multi-family 520,263
3,309,411
—
3,829,674
Non-owner occupied commercial real estate 2,337,806
1,294,231
99,771
3,731,808
Construction and land 174,494
125,983
10,436
310,913
Owner occupied commercial real estate 1,042,441
602,155
91,254
1,735,850
Commercial and industrial 2,234,393
806,660
346,085
3,387,138
Commercial lending subsidiaries —
—
2,290,194
2,290,194
$ 6,563,536
$ 6,364,594
$ 5,853,222
$ 18,781,352
34.9 % 33.9 % 31.2 % 100.0 %

~~The increase in non-owner occupied commercial real estate loans and the decrease in multi-family loans~~approximately $111 million driven by higher prepayment speeds in the New York franchise over the nine months ended September 30, 2017 includes the impact of reclassifying $207 million of loans on mixed-use properties from multi-family to non-owner occupied commercial real estate loans, based on the primary source of rental income on those properties.current rate environment.

Residential mortgages and other consumer loans

~~Residential mortgages~~The following table shows the composition of residential and other consumer loans ~~totaled $4.5 billion, or 22.0% of total loans,~~ at ~~September 30, 2017 and $4.1 billion, or 21.0% of total loans, at December 31, 2016.~~the dates indicated (in thousands):



	March 31, 2020		December 31, 2019
1-4 single family residential	$	4,843,908	$	4,953,936
Government insured residential	782,060		698,644
Other consumer loans	8,855		8,539
	$	5,634,823	$	5,661,119

The ~~non-covered~~1-4 single family residential loan portfolio, excluding government insured residential loans, is primarily comprised of loans purchased ~~on a national basis~~ through established correspondent channels. The portfolio also includes loans originated through retail channels in our Florida and New York geographic footprint prior to the termination of our retail residential mortgage origination business in early 2016. Non-covered1-4 single family residential mortgage loans are primarily closed-end, first lien jumbo mortgages for the purchase or re-finance of owner occupied property. The loans have terms ranging from 10 to 30 years, with either fixed or adjustable interest rates. At ~~September 30, 2017, $113~~March 31, 2020, $79 million or ~~2.8%~~1.6% of ~~non-covered~~ residential mortgage loans were interest-only loans, substantially all of which begin amortizing 10 years after origination. At March 31, 2020, $483 million or 10% were secured by investor-owned properties.

~~We do~~The Company acquires non-performing FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations (collectively, "government insured pool buyout loans" or "buyout loans"). Buyout loans that re-perform, either through modification or self-cure, may be eligible for re-securitization. The Company and the servicer share in the economics of the sale of these loans into new securitizations. The balance of buyout loans totaled $760 million at March 31, 2020. The Company is not ~~originate or acquire option ARMs, “no-doc” or “reduced-doc” mortgages and do not utilize wholesale mortgage origination channels although~~ the ~~covered loan portfolio contains loans with~~servicer of these ~~characteristics. The Company’s exposure to future losses on these mortgage loans is mitigated by the Single Family Shared-Loss Agreement.~~loans.

The following charts present the distribution of the ~~non-covered~~ 1-4 single family residential mortgage portfolio ~~by interest rate terms and contractual lives~~ at the dates indicated:


~~(1)~~	~~Fixed-rate loans with contractual terms of 20 years comprise less than 3% of the total at both September 30, 2017 and December 31, 2016, and are reported with 15 year fixed above.~~

The following table presents the five states with the largest geographic ~~concentration~~concentrations of ~~the non-covered~~ 1-4 single family residential ~~portfolio is summarized as follows~~loans, excluding government insured residential loans, at the dates indicated ~~(dollar~~(dollars in thousands):

September 30, 2017 December 31, 2016
California $ 1,052,154
26.2 % $ 904,107
26.1 %
New York 848,123
21.1 % 763,824
22.0 %
Florida 530,056
13.2 % 487,294
14.0 %
District of Columbia 177,978
4.4 % 123,825
3.6 %
Virginia 175,550
4.4 % 152,113
4.4 %
Others ⁽¹⁾
1,227,983
30.7 % 1,039,186
29.9 %
$ 4,011,844
100.0 % $ 3,470,349
100.0 %


~~(1)~~	~~No other state represented borrowers with more than 4.0% of non-covered 1-4 single family residential loans outstanding at September 30, 2017 or December 31, 2016.~~

~~Home equity loans and lines of credit are not significant to the non-covered loan portfolio.~~

~~Other consumer loans are comprised primarily of consumer installment financing, loans secured by certificates of deposit, unsecured personal lines of credit and demand deposit account overdrafts.~~



	March 31, 2020				December 31, 2019
	Total		Percent of Total		Total		Percent of Total
California	$	1,249,564	25.8	%	$	1,280,243	25.8	%
New York	1,062,712		21.9	%	1,057,926		21.4	%
Florida	577,494		11.9	%	597,359		12.1	%
Virginia	187,006		3.9	%	189,869		3.8	%
New Jersey	183,749		3.8	%	189,018		3.8	%
Others	1,583,383		32.7	%	1,639,521		33.1	%
	$	4,843,908	100.0	%	$	4,953,936	100.0	%

Commercial loans and leases

~~The~~Commercial loans include commercial ~~portfolio segment includes~~and industrial loans and leases, loans secured by owner-occupied commercial real-estate, multi-family properties ~~loans secured by both owner-occupied~~ and other income-producing non-owner occupied commercial real estate, a limited amount of construction and land loans, ~~commercial and industrial~~SBA loans, mortgage warehouse lines of credit, municipal loans and ~~direct financing leases.~~leases originated by Pinnacle and franchise and equipment finance loans and leases originated by Bridge.

~~Management’s loan origination strategy is heavily focused on~~

The following charts present the distribution of the commercial loan portfolio ~~segment, which comprised 80.1% and 81.6% of non-covered loans as of September 30, 2017 and December 31, 2016, respectively.~~at the dates indicated (dollars in millions):

Commercial real estate loans include term loans secured by ~~owner and~~ non-owner occupied income producing properties including rental apartments, mixed-use properties, industrial properties, retail shopping centers, free-standing single-tenant buildings, office buildings, warehouse facilities, ~~and~~ hotels, ~~as well as~~ real estate secured lines of ~~credit.~~credit, as well as credit facilities to institutional real estate entities such as REITs and commercial real estate investment funds.

The following ~~charts present~~table presents the distribution of ~~non-owner occupied~~ commercial real estate loans by ~~product types~~property type along with weighted average DSCRs and LTVs at March 31, 2020 (dollars in thousands).



	Amortized Cost		Percent of Total		Weighted Average DSCR		Weighted Average LTV
Office	$	2,074,413	28.8	%	$	1.90	58.98	%
Multifamily	2,072,664		28.9	%	1.65		56.38	%
Retail	1,446,599		20.2	%	1.76		57.47	%
Warehouse/Industrial	787,842		11.0	%	1.92		58.14	%
Hotel	619,482		8.6	%	1.90		56.98	%
Other	176,599		2.5	%	1.62		48.57	%
	$	7,177,599	100.0	%	$	1.79	57.43	%

DSCRs and LTVs in the ~~dates indicated:~~table above are based on the most recent information available, which may not be fully reflective of the ultimate impact of the COVID-19 pandemic on borrowers' financial condition or property values.

~~Loans secured by~~The Company’s commercial real estate typically have shorter repayment periods and re-price more frequently than 1-4 single family residential loans but may have longer terms and re-price less frequently than commercial and industrial loans. The Company’s underwriting standards generally provide for loan terms of five to ~~ten~~seven years, with amortization schedules of no more than thirty years. LTV ratios are typically limited to no more than ~~80%~~75%. ~~Owner-occupied commercial real estate loans typically have risk profiles more closely aligned with that of commercial and industrial loans than with other types of commercial real estate loans.~~ Construction and land loans, included by property type in the table above, represented only ~~1.3%~~1% of the total loan portfolio at ~~September 30, 2017.~~March 31, 2020. Construction and land loans are generally made for projects expected to stabilize within eighteen months of completion

in sub-markets with strong fundamentals and, to a lesser extent, for-sale residential projects to experienced developers with a strong cushion between market prices and loan basis. 79% of the commercial real estate portfolio had LTVs less than 65% at March 31, 2020.

The New York legislature has enacted a number of rent regulation reform measures that generally have the impact of limiting landlords' ability to increase rents on stabilized units and to convert stabilized units to market rate units. The following table presents the amount of loans secured by New York multi-family properties in which some or all units are rent regulated at March 31, 2020 (in thousands):



Loans secured by stabilized properties subject to rent regulation	$	1,036,885
Loans secured by non-stabilized properties subject to rent regulation	34,751
	$	1,071,636

We believe loans secured by non-stabilized properties may present a heightened level of risk as these loans were underwritten to expected cash flows upon stabilization; those expected cash flows may be impacted by the recent rent regulation reform measures.

The following tables present the distribution of stabilized rent-regulated multi-family loans, by DSCR and LTV at March 31, 2020 (in thousands):



DSCR
Less than 1.11	$	100,281
1.11 - 1.24	318,519
1.25 - 1.50	296,531
1.51 or greater	321,554
	$	1,036,885



LTV
Less than 50%	$	296,187
50% - 65%	577,752
66% - 75%	150,722
More than 75%	12,224
	$	1,036,885

The LTVs in the table above are based on the most recent appraisal obtained, which may not be fully reflective of changes in valuations that may result from the impact of the rent regulation reforms. Loans with DSCR less than 1.11 may be those with temporary vacancies or those for which expenses, particularly real estate taxes, have increased more rapidly than rents. All of the loans included in the tables above are current and performing.

Commercial and industrial loans are typically made to small, ~~and~~ middle market and larger corporate businesses and not-for-profit entities and include equipment loans, secured and unsecured working capital facilities, formula-based loans, trade finance, mortgage warehouse lines, ~~taxi medallion loans,~~ SBA product offerings and business acquisition finance credit facilities. These loans may be structured as term loans, typically with maturities of ~~three~~five to seven years, or revolving lines of credit which may have multi-year maturities. The Bank also provides financing to state and local governmental entities generally within our geographic markets. Commercial loans ~~include~~included shared national credits totaling ~~$1.5~~$2.8 billion at ~~September 30, 2017, typically~~March 31, 2020, the majority of which were relationship based loans to borrowers in ~~our geographic footprint.~~Florida and New York. 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 present the exposure in the commercial and industrial portfolio, including $2.0 billion of owner-occupied commercial real estate loans, by industry at March 31, 2020 (in thousands):



	Amortized Cost		Percent of Total
Finance and Insurance	$	1,262,984	18.0	%
Wholesale Trade	805,281		11.4	%
Educational Services	632,826		9.0	%
Transportation and Warehousing	474,716		6.7	%
Health Care and Social Assistance	472,590		6.7	%
Manufacturing	376,761		5.4	%
Administrative and Support and Waste Management	350,105		5.0	%
Retail Trade	346,915		4.9	%
Real Estate and Rental and Leasing	326,027		4.6	%
Information	296,972		4.2	%
Professional, Scientific, and Technical Services	282,398		4.0	%
Construction	277,027		3.9	%
Accommodation and Food Services	240,734		3.4	%
Other Services (except Public Administration)	230,966		3.3	%
Arts, Entertainment, and Recreation	211,786		3.0	%
Public Administration	209,215		3.0	%
Utilities	161,178		2.3	%
Other	76,602		1.2	%
	$	7,035,083	100.0	%

Through its commercial lending subsidiaries, Pinnacle and Bridge, the Bank provides equipment and franchise financing on a national basis using both loan and lease structures. Pinnacle provides essential use equipment financing to state and local governmental entities directly and through vendor programs and alliances. Pinnacle offers a full array of financing structures including equipment lease purchase agreements and direct (private placement) bond re-fundings and loan agreements. Bridge has two operating divisions. The franchise finance division offers franchise acquisition, expansion and equipment financing, typically to experienced operators in well-established concepts. The franchise finance portfolio is made up primarily of quick service restaurant and fitness concepts comprising 62% and 31% of the portfolio, respectively. The equipment finance division

provides primarily transportation equipment financing through a variety of loan and lease structures. The Bank's SBF unit primarily originates SBA guaranteed commercial and commercial real estate loans, generally selling the guaranteed portion in the secondary market and retaining the unguaranteed portion in portfolio. The Bank also engages in mortgage warehouse lending on a national basis.

Geographic Concentrations

The Company's commercial and commercial real estate portfolios are concentrated in Florida and the Tri-state area. Excluding loans originated through our national platforms, 47% and 44% of commercial real estate loans were secured by collateral located in Florida and the Tri-state area, respectively; while 54% and 28% of commercial and industrial and owner-occupied real estate loans were to borrowers in Florida and the Tri-state area, respectively.

The following table presents the ~~recorded investment in~~five states with the largest concentration of commercial loans and ~~direct finance~~ leases ~~held for investment for each of~~originated through our national ~~commercial lending~~ platforms, including Bridge, Pinnacle, SBF and our mortgage warehouse finance unit at the dates indicated ~~(in thousands):~~

September 30, 2017 December 31, 2016
Pinnacle $ 1,393,965
$ 1,317,820
Bridge - franchise finance 421,821
426,661
Bridge - transportation equipment finance 566,939
545,713
SBF 235,433
225,241
Mortgage warehouse lending 465,323
322,305
$ 3,083,481
$ 2,837,740

The geographic concentration of the commercial loans and direct financing leases in the national platforms is summarized as follows at the dates indicated. Amounts include premiums, discounts and deferred fees and costs (dollars in thousands):


	September 30, 2017				December 31, 2016				March 31, 2020				December 31, 2019
									Total		Percent of Total		Total		Percent of Total
California									$	542,068	15.1	%	$	585,222	16.5	%
Florida	$	593,307	19.2	%	$	543,445	19.2	%	459,960		12.8	%	465,146		13.1	%
California	464,853		15.1	%	421,480		14.9	%
Arizona	171,321		5.6	%	133,549		4.7	%
Texas	161,662		5.2	%	118,122		4.2	%
Iowa	152,869		5.0	%	161,874		5.7	%
New Jersey									259,213		7.2	%	178,514		5.0	%
Maryland									160,738		4.5	%	152,663		4.3	%
Virginia	131,041		4.2	%	138,417		4.9	%	154,336		4.3	%	142,856		4.0	%
All others ~~(1)~~	1,408,428		45.7	%	1,320,853		46.4	%	2,015,684		56.1	%	2,021,994		57.1	%
	$	3,083,481	100.0	%	$	2,837,740	100.0	%	$	3,591,999	100.0	%	$	3,546,395	100.0	%

Operating lease equipment, net


~~(1)~~	~~No other state represented borrowers with more than 4.0% of loans outstanding at September 30, 2017 or December 31, 2016.~~

~~Equipment under~~ Operating ~~Lease~~

~~Equipment under operating~~ lease ~~increased by $48 million to $588~~equipment, net of accumulated depreciation totaled $685 million at ~~September 30, 2017, from $540~~March 31, 2020, including off-lease equipment, net of accumulated depreciation totaling $76 million. The portfolio consists primarily of railcars, non-commercial aircraft and other transport equipment. We have a total of 5,317 railcars with a carrying value of $415 million at ~~December~~March 31, ~~2016. The portfolio consisted primarily of 5,424 railcars,~~2020, including hoppers, tank cars, boxcars, auto carriers, center beams and gondolas leased to North American commercial ~~end-users. The portfolio also included non-commercial aircraft and other transport equipment.~~end users. The largest concentrations of rail cars were ~~2,264~~2,414 hopper cars and ~~1,683~~1,594 tank cars, primarily used to ship sand and petroleum products, respectively, for the energy industry. ~~Equipment with a~~

The chart below presents operating lease equipment by type at the dates indicated:

At March 31, 2020, the breakdown of carrying ~~value~~values of ~~$288 million at September 30, 2017~~operating lease equipment, excluding equipment off-lease, by the year current leases are scheduled to expire was ~~leased to companies for use in the energy industry.~~as follows (in thousands):



Years Ending December 31:
2020	$	80,348
2021	61,399
2022	72,047
2023	41,703
2024	31,333
Thereafter through 2034	322,135
	$	608,965

Asset Quality

In discussing asset quality, we distinguish between covered loans and non-covered loans. Although the risk profile of covered loans is higher than that of non-covered loans, our exposure to loss related to covered loans is significantly mitigated by the fair value basis recorded in these loans resulting from the application of acquisition accounting and by the Single Family Shared-Loss Agreement. At September 30, 2017, residential loans covered under the Single Family Shared-Loss Agreement totaled $538 million.Commercial Loans

We have ~~established~~ a robust credit risk management framework, ~~put in place~~ an experienced team to lead the workout and recovery process for the commercial and commercial real estate portfolios and ~~implemented~~ a dedicated internal credit review function. WeIn response to the COVID-19 pandemic, we have ~~an experienced resolution team in place for covered residential mortgage loans,~~further enhanced our workout and ~~have implemented outsourcing arrangements with industry leading firms in certain areas such as OREO resolution.~~

recovery staffing and processes. Loan performance is monitored by our credit administration and workout and recovery departments. Generally, commercial relationships with balances in excess of defined thresholds are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. The defined thresholds range from $1 million to $3 million. ~~Additionally,~~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 credit review department. The Company utilizes a 13 grade internal asset risk classification system as part of its efforts to monitor and maintain commercial asset quality. Loans exhibiting potential credit weaknesses that deserve management’s close attention and, that if left uncorrected, may result in deterioration of the repayment capacity of the borrower are categorized as special mention. These borrowers may exhibit negative financial trends or erratic financial performance, strained liquidity, marginal collateral coverage, declining industry trends or weak management. 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, 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.

Residential mortgage loans and consumer 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 FICO score to be significant indicators of credit quality for the non-covered 1-4 single family residential portfolio.

Although our assessment is ongoing and the results of that assessment are subject to change in the future, we do not currently believe the ability of the substantial majority of our borrowers to repay their loans or the value of the collateral securing those loans has been materially impacted by Hurricanes Irma and Harvey.

~~Non-covered Loans and Leases~~

~~Commercial Loans~~

~~The ongoing asset quality of significant commercial loans is monitored on an individual basis through our regular credit review and risk rating process.~~ We believe internal risk rating is the best indicator of the credit quality of commercial loans. ~~Homogenous groups of smaller balance commercial loans may be monitored collectively.~~

The following table summarizes the Company's commercial credit exposure, based on internal risk rating, at the periods indicated (dollars in thousands):



	March 31, 2020				December 31, 2019
	Amortized Cost		Percent of Commercial Loans		Amortized Cost		Percent of Commercial Loans
Pass	$	16,841,243	96.0	%	$	17,054,702	97.5	%
Special mention	288,148		1.6	%	72,881		0.4	%
Substandard accruing	238,786		1.4	%	180,380		1.0	%
Substandard non-accruing	181,278		1.0	%	185,906		1.1	%
	$	17,549,455	100.0	%	$	17,493,869	100.0	%

The charts below present trends in criticized and classified loans from December 31, 2019 to March 31, 2020 (in millions):

Criticized and classified loans increased by $269 million, to 3.1% of total loans at March 31, 2020 from 1.9% of total loans at December 31, 2019. The increase was in the special mention and substandard accruing categories. As reflected in the charts above, the majority of the increase was in the franchise finance portfolio. Approximately 90% of the downgrades in franchise finance during the quarter were directly related to the COVID-19 pandemic. Given the emerging nature of and uncertainty surrounding the COVID-19 crisis, we will likely see further impacts on the risk rating distribution of the loan portfolio in the future.

Potential Problem Loans

Potential problem loans have been identified by management as those commercial loans included in the "substandard accruing" risk rating category. These loans are typically performing, but possess specifically identified credit weaknesses that, if not remedied, may lead to a downgrade to non-accrual status and identification as impaired in the near-term.

The following table summarizes the Company's substandard accruing loans, substantially all of which were current as to principal and interest, at the dates indicated (in thousands):

September 30, 2017 December 31, 2016
Pass $ 15,505,587
$ 14,897,121
Special mention 150,899
72,225
Substandard ⁽¹⁾
376,540
304,713
Doubtful 5,816
11,518
$ 16,038,842
$ 15,285,577



	March 31, 2020				December 31, 2019
	Amortized Cost		Percent of Loan Segment		Amortized Cost		Percent of Loan Segment
Multi-family	$	35,691	1.8	%	$	26,797	1.2	%
Non-owner occupied commercial real estate	46,346		0.9	%	52,697		1.0	%
Construction and land	888		0.4	%	—		—	%
Owner occupied commercial real estate	24,520		1.2	%	16,241		0.8	%
Commercial and industrial	77,810		1.6	%	43,518		0.9	%
Bridge - franchise finance	53,531		8.3	%	41,127		6.6	%
	$	238,786			$	180,380

Management closely monitors each of these loans as well as indicators of potential negative trends developing within any particular portfolio segment. The following table presents loan portfolio sub-segments that, in light of evolving conditions related to the COVID-19 pandemic, have been identified for enhanced monitoring as of March 31, 2020 (dollars in thousands):

~~(1)~~

The balance of substandard loans at September 30, 2017 and December 31, 2016 included $121 million and $138 million, respectively, of taxi medallion finance loans. Criticized and classified loans represented 3.3% of the commercial loan portfolio, of which 0.8% were taxi medallion loans, at September 30, 2017. See ~~Note 4~~ ~~to the consolidated financial statements for more detailed information about risk rating of commercial loans.~~



	March 31, 2020
	Amortized Cost		Percent of Total Loans		Amount Criticized or Classified		Amount Non-Performing
Retail - CRE	$	1,446,599	6.2	%	$	35,535	$	11,202
Retail - C&I	346,915		1.5	%	6,644		4,499
BFG - franchise finance	647,699		2.8	%	272,214		37,635
Hotel	619,482		2.7	%	37,831		22,334
Airlines	84,649		0.4	%	—		—
Cruise line	71,374		0.3	%	—		—
Energy	46,348		0.2	%	—		—
	$	3,263,066	14.1	%	$	352,224	$	75,670

It is likely that the amounts of criticized or classified loans and amounts of non-performing loans presented above do not reflect the full impact of the COVID-19 pandemic.

Retail Exposure in the CRE Portfolio

The predominant collateral type supporting this segment is both anchored and un-anchored retail centers, including some mixed-use properties with a significant retail component. We estimate that approximately 60% of this sub-segment is supported by what we consider to be essential or moderately essential businesses in the context of the pandemic. We have no significant large shopping mall or "big box" exposure. The weighted average LTV for this sub-segment is 57.5% and 84% has LTVs less than 65%, based on the most recently available information.

Retail Exposure in the C&I Portfolio

This is a well-diversified sub-segment by industry. The largest exposure is to gas stations, generally with convenience stores, representing $97 million, or 28% of the sub-segment. 63% of loans in this sub-segment are collateralized by owner-occupied real estate.

~~Taxi Medallion~~

BFG - Franchise Finance

The ~~commercial~~following table presents the franchise portfolio by concept at March 31, 2020:



	Amortized Cost		Percentage of BFG Franchise Finance
Restaurant concepts:
Burger King	$	67,087	10.3	%
Dunkin Donuts	39,366		6.1	%
Sonic	27,907		4.3	%
Domino's	26,239		4.1	%
Jimmy Johns	23,436		3.6	%
Other	217,083		33.5	%
	401,118		61.9	%
Non-restaurant concepts:
Planet Fitness	107,301		16.6	%
Orange Theory Fitness	86,664		13.4	%
Other	52,616		8.1	%
	246,581		38.1	%
	$	647,699	100.0	%

The quick service restaurant sector broadly has been experiencing margin pressure due to rising labor costs and ~~industrial loan portfolio includes exposure to taxi medallion finance of $121 million at September 30, 2017. The estimated value of underlying taxi medallion collateral and liquidity~~technological disruption in the ~~market for sales~~form of ~~medallions, a potential secondary source~~app-based food delivery services. Concepts that have adopted digital ordering, delivery, take-out and drive through models may be better positioned in light of ~~repayment,~~COVID-19 related social distancing measures. Fitness concepts, which have ~~declined significantly in recent years due to competitive developments in~~been the transportation-for-hire industry. Due to the ongoing trend of declining estimated cash flows from the operation of taxi medallions leading to declines in medallion valuations, the entire taxi medallion portfolio was placed on non-accrual status and risk rated substandard as of September 30, 2017. In addition, partial charge-offs were recognized on all taxi medallion loans with carrying values in excess of collateral values, determined using the cash flow template discussed below, to reduce the carrying value of those loans to this estimated collateral value.

We update our analysis of the cash flow generating capacity of the operation of New York City medallions on a regular basis using current available taxi industry data from which taxi medallion values and prospective debt service capacity are estimated. This analysis is based on an extensive data set obtained from the NYTLC and assumptions that we believe are reasonable estimates of fleet utilization and borrower expenses. We update our analysis of estimated medallion valuations on a quarterly basis, based on these cash flow capacity estimates. At September 30, 2017, our estimate of the value of New York City taxi medallions based on our cash flow template and consideration of estimated selling costs and declining trends in medallion values was $351,000 for both corporate and individual medallions. We used this value for purposes of determining the partial charge-offs and the value of repossessed medallions. See Note 10 to the consolidated financial statements for additional information about the valuation of New York City taxi medallions.

~~The taxi medallion portfolio had the following characteristics at September 30, 2017:~~

~~Approximately 97% of the portfolio secured directly by taxi medallions was concentrated in New York City.~~

Loans delinquent by 30 days or more totaled $13.2 million or 11.0% of the portfolio, compared to $40.8 million or 22.8% of the portfolio at December 31, 2016. Loans delinquent by 90 days or more totaled $10.4 million or 8.7% of the portfolio, compared to $29.2 million or 16.4% of the portfolio at December 31, 2016. The most significant factor contributing to the decrease in delinquencies was one large relationship that was brought current and restructured in the first quarter.

~~The portfolio included~~ ~~173~~ ~~loans modified in TDRs with a recorded investment of~~ ~~$92.4 million~~.

In the aggregate, the ALLL related to taxi medallion loans was 10.9% of the outstanding balance at September 30, 2017, compared to 6.0% at December 31, 2016. Charge-offs of $35.3 million and $47.1 million were recognized in the three and nine months ended September 30, 2017 related to taxi medallion loans.

We are no longer originating new taxi medallion loans. Our portfolio management strategies include, but are not limited to, working with borrowers experiencing cash flow challenges to provide short term relief and/or extended amortization periods, pro-actively attempting to refinance loans prior to maturity, continuing to monitor industry data and obtaining updated borrower and guarantor financial information. As taxi medallion loans approach maturity or are refinanced, we expect the number and amount of TDRsbetter performing group in this portfolio ~~segment~~sub-segment may now be under increased stress due to ~~continue~~social distancing measures arising from the pandemic.

Hotel

The following chart presents hotel exposure at March 31, 2020:

This sub-segment is experiencing significant disruption in revenue due to ~~increase.~~social distancing measures arising from the pandemic. The weighted average LTV for this sub-segment is 57% and 78% has LTVs less than 65%, based on the most recent information available. The majority of our hotel exposure is in Florida at 77%, followed by 13% in New York. This sub-segment includes $61 million in SBA loans, of which $16 million is guaranteed.

~~Hurricane Impact - Commercial Loans~~

~~Commercial loans totaling $1.9 million and $19.4 million had been modified or granted temporary payment deferrals as of September 30, 2017 and October 31, 2017, respectively, related~~

Airlines

There are three lending relationships in this sub-segment. It is our understanding that these borrowers are expecting to directly benefit from government relief programs enacted in response to the ~~recent hurricanes. Of~~COVID-19 pandemic.

Energy

Recent declines in oil prices have elevated this sub-segment to a level of enhanced monitoring. The Company's energy exposure in the loan portfolio is not material; approximately 84% of these ~~modifications and deferrals, none were determined to be TDRs due to the generally insignificant nature of the payment delays.~~

~~As of September 30 and October 31, 2017, respectively, commercial~~ loans ~~to borrowers that have significant business operations in or~~ are secured by collateral in areas impacted by Hurricanes Irma and Harvey totaling approximately $4.7 million and $21.3 million were more than 30 days past due; $3.7 million of these loans were more than 30 days past due priormarine transport equipment.

Bridge also had exposure to the ~~storms. Approximately $22.2~~energy industry in the operating lease equipment portfolio totaling $291 million at March 31, 2020, consisting of ~~commercial loans have been downgraded to criticized or classified status through October 31, 2017 as a result of the impact of the storms.~~$232 million in railcars, $39 million in helicopters and $19 million in vessels.

If current conditions persist, further deterioration could occur in this sector.

~~Equipment Under~~ Operating Lease Equipment, net

~~Four~~Two operating lease relationships with a carrying value of assets under lease ~~with a carrying value~~ totaling ~~$81~~$30 million, all of which ~~$75 million~~ were exposures to the energy industry, were internally risk rated ~~special mention or~~ substandard at ~~September 30, 2017. The present~~March 31, 2020. 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 ~~remaining lease payments~~time off-lease, criticized or classified status, or management's intention to sell the asset at an amount potentially below its carrying value. At March 31, 2020, there were 13 operating leases for which a triggering event was met. Based on ~~these leases totaled approximately $22~~a recoverability analysis performed, the Company recognized an impairment charge of $0.7 million ~~at September 30, 2017, of which $17 million were exposures to the energy industry. There have been no missed payments~~during three months ended March 31, 2020 related to ~~the~~one operating lease ~~portfolio to date. One relationship has been restructured to date, with no decrease in total minimum lease payments.~~relationship; this was not an energy exposure.

The primary risks inherent in the equipment leasing business are asset risk resulting from ownership of the equipment on ~~operating~~ lease and credit risk. Asset risk arises from fluctuations in supply and demand for the underlying leased equipment. ~~Railcars are long-lived equipment with useful lives of approximately 35-50 years.~~ The equipment is leased to commercial ~~end-users~~end users with original lease terms generally ranging from ~~3-9 years at September 30, 2017.~~three to ten years. We are exposed to the risk that, at the end of the lease term, the value of the asset will be lower than expected, potentially resulting in reduced future lease income over the remaining life of the asset or a lower sale value. Asset risk may also lead to changes in depreciation as a result of changes in the residual values of the ~~operating lease~~leased assets or through impairment of asset carrying values.

Asset risk is evaluated and managed by a dedicated internal staff of asset managers, managed by seasoned equipment finance professionals with a broad depth and breadth of experience in the leasing business. Additionally, we have partnered with an industry leading, experienced service provider who provides fleet management and servicing relating to the railcar fleet, including lease administration and reporting, a Regulation Y compliant full service maintenance program and railcar re-marketing. Risk is managed by setting appropriate residual values at inception and systematic reviews of residual values based on independent appraisals, performed at least annually. Additionally, our internal management team and our external service provider closely follow the rail markets, monitoring traffic flows, supply and demand trends and the impact of new technologies and regulatory requirements. Demand for railcars is sensitive to shifts in general and industry specific economic and market trends and shifts in trade flows from specific events such as natural or man-made disasters. We seek to mitigate these risks by leasing to a stable ~~end-user~~end user base, by maintaining a relatively young and diversified fleet of assets that are expected to maintain stronger and more stable utilization rates despite impacts from unexpected events or cyclical trends and by staggering lease maturities. We regularly monitor the impact of ~~lower~~ oil prices on the estimated residual value of rail cars being used in the petroleum/natural gas extraction sector.

Credit risk in the leased equipment portfolio results from the potential default of lessees, possibly driven by obligor specific or industry-wide conditions, and is economically less significant than asset risk, because in the operating lease business, there is no extension of credit to the obligor. Instead, the lessor deploys a portion of the useful life of the asset. Credit losses, if any, will manifest through reduced rental income due to missed payments, time off lease, or lower rental payments due either to a restructuring or re-leasing of the asset to another obligor. Credit risk in the operating lease portfolio is managed and monitored utilizing credit administration infrastructure, processes and procedures similar to those used to manage and monitor credit risk in the commercial loan portfolio. We also mitigate credit risk in this portfolio by leasing ~~only~~ to high credit quality obligors.

~~We expect our operating lease portfolio to continue to grow, and we may expand into other asset classes.~~

Based on our initial analysis of the location and condition of equipment under operating lease, we do not currently believe there has been any significant damage to such equipment or to the ongoing operations of lessees from Hurricanes Irma and Harvey.

Residential and Other Consumer Loans

~~The majority of our non-covered~~Our residential mortgage portfolio, excluding GNMA buyout loans, consists primarily of loans purchased through established correspondent channels. ~~In general, we purchase~~Most of our purchases are of performing jumbo mortgage loans which have FICO scores above 700, primarily are owner-occupied and full documentation, and have a current LTV of 80% or less although loans with

LTVs higher than 80% may be extended to selected credit-worthy borrowers. We perform due diligence on the purchased loans for credit, compliance, counterparty, payment history and property valuation.

~~The following tables show~~We have a dedicated residential credit risk management function, and the ~~distribution~~residential portfolio is monitored by our internal credit review function. Residential mortgage loans and consumer loans are not individually risk rated. Delinquency status is the primary measure we use to monitor the credit quality of ~~non-covered~~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 ~~original~~ FICO distribution, LTV distribution and ~~LTV as~~vintage at March 31, 2020:

In the charts above, FICOs are generally updated at least annually and LTVs are typically based on valuation at origination.

At March 31, 2020, the majority of the ~~dates indicated:~~

September 30, 2017
FICO
LTV 720 or less 721 - 740 741 - 760 761 or
greater Total
60% or less 2.4 % 2.8 % 4.6 % 20.4 % 30.2 %
60% - 70% 2.3 % 2.6 % 3.5 % 14.6 % 23.0 %
70% - 80% 3.5 % 4.4 % 7.9 % 27.2 % 43.0 %
More than 80% 0.6 % 0.5 % 0.6 % 2.1 % 3.8 %
8.8 % 10.3 % 16.6 % 64.3 % 100.0 %

December 31, 2016
FICO
LTV 720 or less 721 - 740 741 - 760 761 or
greater Total
60% or less 2.5 % 3.2 % 4.7 % 21.7 % 32.1 %
60% - 70% 2.3 % 2.7 % 3.6 % 15.1 % 23.7 %
70% - 80% 3.2 % 4.3 % 8.0 % 26.1 % 41.6 %
More than 80% 0.7 % 0.3 % 0.4 % 1.2 % 2.6 %
8.7 % 10.5 % 16.7 % 64.1 % 100.0 %

~~At September 30, 2017, the non-covered~~ 1-4 single family residential loan portfolio, ~~had the following characteristics: substantially all were full documentation with a weighted-average FICO score of 765 and a weighted-average LTV of 66.6%. The majority of this portfolio~~excluding government insured residential loans, was owner-occupied, with ~~87.9%~~82.4% primary residence, ~~8.3%~~7.6% second homes and ~~3.8%~~10.0% investment properties. ~~In terms of vintage, 22.2% of the portfolio was originated pre-2014, 13.1% in 2014, 22.2% in 2015, 26.0% in 2016 and 16.5% in 2017.~~

~~Non-covered~~ 1-4 single family residential loans, excluding government insured residential loans, past due more than 30 days totaled ~~$17.1~~$59.8 million and ~~$12.7~~$66.3 million at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively. The amount of these loans 90 days or more past due was ~~$2.7~~$11.6 million and ~~$2.1~~$11.1 million at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively.

~~Hurricane Impact- Residential loans~~

The following table presents information related to 1-4 single family residential mortgages with borrowers and/or collateral located in areas impacted by Hurricanes Irma and Harvey, at the dates indicated (in thousands):

September 30, 2017 October 31, 2017
Past due more than 30 days:
Covered loans $ 14,669
$ 13,454
Total $ 20,099
$ 21,350
Granted temporary payment deferrals:
Covered loans $ 14,807
$ 16,983
Total $ 24,772
$ 25,969

~~Other Consumer Loans~~

~~Substantially all~~At March 31, 2020, $2 million of other consumer loans was past due more than 30 days and all were current at ~~September 30, 2017. At~~ December 31, ~~2016, there were no delinquent consumer loans.~~2019.

~~Covered Loans~~

~~At September 30, 2017, residential ACI loans totaled $476 million~~Note 4 to the consolidated financial statements presents additional information about key credit quality indicators and ~~residential non-ACI loans totaled $62 million, including premiums, discounts and deferred fees and costs. All of these loans are covered under the Single Family Shared-Loss Agreement.~~

~~Covered residential loans were placed into homogenous pools at the time~~delinquency status of the FSB Acquisition and the ongoing credit quality and performance of these loans is monitored on a pool basis. We monitor the pools quarterly to determine whether any changes have occurred in expected cash flows that would be indicative of impairment or necessitate reclassification between non-accretable difference and accretable yield. At September 30, 2017, accretable yield on residential ACI loans totaled $511 million and non-accretable difference related to those loans totaled $227 million.

At September 30, 2017, the recorded investment in non-ACI 1-4 single family residential loans was $24.6 million; $1.6 million or 6.6% of these loans were 30 days or more past due and $0.9 million or 3.8% of these loans were 90 days or more past due. At September 30, 2017, the recorded investment in ACI 1-4 single family residential loans totaled $470.3 million; $34.2 million or 7.3% of these loans were delinquent by 30 days or more and $17.6 million or 3.7% were delinquent by 90 days or more.

At September 30, 2017, non-ACI home equity loans and lines of credit had an aggregate recorded investment of $37.4 million; $4.1 million or 11.1% of these loans were 30 days or more past due and $2.4 million or 6.3% were 90 days or more past due. ACI home equity loans and lines of credit had a carrying amount of $5.6 million at September 30, 2017; 13.5% of these loans were delinquent by 30 days or more.

Home equity lines of credit generally provide that payment terms be reset after an initial contractual period of interest only payments, requiring the pay down of principal through balloon payments or amortization. Additional information regarding ACI and non-ACI home equity lines of credit at September 30, 2017 is summarized as follows:

ACI Non-ACI
Loans resetting from interest only:

Previously reset 72.3 % 51.5 %
Scheduled to reset within 12 months 2.5 % 5.5 %
Scheduled to reset after 12 months 25.2 % 43.0 %
100.0 % 100.0 %
Lien position:

First liens 10.3 % 18.8 %
Second or third liens 89.7 % 81.2 %
100.0 % 100.0 %

The Company's exposure to loss related to covered loans is significantly mitigated by the Single Family Shared-Loss Agreement and by the fair value basis recorded in these assets resulting from the application of acquisition accounting. Management regularly evaluates the impact of resets of interest only loans on default rates for the covered home equityloan portfolio.

~~Impaired Loans and~~ Non-Performing Assets

Non-performing assets generally consist of (i) non-accrual loans, including loans that have been modified in TDRs and placed on non-accrual status, (ii) accruing loans that are more than 90 days contractually past due as to interest or principal, excluding ~~ACI~~government insured residential loans, and (iii) OREO and repossessed assets. Impaired loans also typically include loans modified in TDRs that are accruing and ACI loans or pools for which expected cash flows at acquisition (as adjusted for any additional cash flows expected to be collected arising from changes in estimates after acquisition) have been revised downward since acquisition, other than due to changes in interest rate indices and prepayment assumptions.

The following ~~tables~~table and charts summarize the Company's ~~impaired~~non-performing loans and non-performing assets at the dates indicated (dollars in thousands):



	March 31, 2020			December 31, 2019
Non-accrual loans
Residential and other consumer:
1-4 single family residential	$	14,561		$	18,877
Other consumer loans	2,395			17
Total residential and other consumer loans	16,956			18,894
Commercial:
Multi-family	6,011			6,138
Non-owner occupied commercial real estate	36,355			40,097
Construction and land	3,439			3,191
Owner occupied commercial real estate	26,147			27,141
Commercial and industrial	60,118			74,757
Bridge - franchise finance	37,635			13,631
Bridge - equipment finance	11,561			20,939
Total commercial loans	181,266			185,894
Total non-performing loans	198,222			204,788
OREO and repossessed assets	7,712			3,897
Total non-performing assets	$	205,934		$	208,685

Non-performing loans to total loans ⁽¹⁾	0.85		%	0.88		%
Non-performing assets to total assets⁽¹⁾	0.61		%	0.63		%
ACL to total loans	1.08		%	0.47		%
ACL to non-performing loans	126.41		%	53.07		%
Provision for credit losses to average loans	0.53		%	0.04		%
Net charge-offs to average loans ⁽²⁾	0.13		%	0.05		%

September 30, 2017 December 31, 2016
Covered
Assets Non-Covered
Assets Total
Covered
Assets

Non-Covered
Assets
Total
Non-accrual loans
Residential and other consumer:
1 - 4 single family residential $ 934
$ 1,890
$ 2,824
$ 918
$ 566
$ 1,484
Home equity loans and lines of credit 2,369
—
2,369
2,283
—
2,283
Other consumer loans —
332
332
—
2
2
Total residential and other consumer loans 3,303
2,222
5,525
3,201
568
3,769
Commercial:
Non-owner occupied commercial real estate —
9,930
9,930
—
559
559
Construction and land —
1,238
1,238
—
1,238
1,238
Owner occupied commercial real estate —
21,455
21,455
—
19,439
19,439
Commercial and industrial

Taxi medallion loans —
120,572
120,572
—
60,660
60,660
Other commercial and industrial —
27,569
27,569
—
16,036
16,036
Commercial lending subsidiaries —
16,625
16,625
—
32,645
32,645
Total commercial loans —
197,389
197,389
—
130,577
130,577
Total non-accrual loans 3,303
199,611
202,914
3,201
131,145
134,346
Non-ACI and new loans past due 90 days and still accruing —
846
846
—
1,551
1,551
Total non-performing loans 3,303
200,457
203,760
3,201
132,696
135,897
OREO 4,114
1,661
5,775
4,658
4,882
9,540
Repossessed assets —
2,457
2,457
—
3,551
3,551
Total non-performing assets 7,417
204,575
211,992
7,859
141,129
148,988
Impaired ACI loans and pools on accrual status 5,640
—
5,640
—
1,335
1,335
Performing TDRs

Taxi medallion loans —
—
—
—
36,848
36,848
Other 10,786
19,365
30,151
11,166
26,282
37,448
Total impaired loans and non-performing assets $ 23,843
$ 223,940
$ 247,783
$ 19,025
$ 205,594
$ 224,619

Non-performing loans to total loans ^{(1) (3)}
1.00 % 0.99 % 0.71 % 0.70 %
Non-performing assets to total assets ⁽²⁾
0.69 % 0.72 % 0.51 % 0.53 %
ALLL to total loans ⁽¹⁾
0.77 % 0.77 % 0.80 % 0.79 %
ALLL to non-performing loans 76.69 % 77.82 % 113.68 % 112.55 %
Net charge-offs to average loans ^{(4) (5)}
0.40 % 0.39 % 0.13 % 0.13 %


(1)	~~Total~~Non-performing loans ~~for purposes~~and assets include the guaranteed portion of ~~calculating these ratios include premiums, discounts~~non-accrual SBA loans totaling $49.1 million or 0.21% of total loans and ~~deferred fees~~0.15% of total assets, at March 31, 2020; compared to $45.7 million or 0.20% of total loans and ~~costs.~~0.14% of total assets, at December 31, 2019.


(2)	~~Ratio for non-covered assets is calculated as non-performing non-covered assets to total assets.~~


~~(3)~~	~~Non-performing taxi medallion loans comprised 0.60% and 0.32% of total non-covered loans at September 30, 2017 and December 31, 2016, respectively.~~


~~(4)~~	Annualized for ~~September 30, 2017.~~


~~(5)~~	~~The annualized ratio of charge-offs of taxi medallion loans to average non-covered loans was 0.33% and 0.06% for the nine months ended September 30, 2017 and the year ended December~~March 31, ~~2016.~~2020.

The ~~increases~~following chart presents trends in non-performing loans by non-performing asset ratios:

The following chart presents trends in non-performing loans by portfolio sub-segment (in millions):

The ultimate impact of the recent and evolving COVID-19 pandemic may not be reflected in the ~~non-performing loans to total loans and~~level of non-performing assets ~~to total assets ratios at September 30, 2017 compared to December 31, 2016 were primarily attributable to the increase in non-accrual taxi medallion loans.~~reported above. The ~~decrease~~potential effect on non-performing asset levels may be delayed in the ~~ALLL~~near-term due to non-performing loans ratio at September 30, 2017 compared to December 31, 2016 was primarily attributable to increased charge-offs of taxi medallion loans during the three months ended September 30, 2017.government assistance and loan deferral programs recently put in place.

Contractually delinquent ~~ACI~~government insured residential loans ~~with remaining accretable yield~~ are ~~not reflected~~excluded from non-performing loans as ~~non-accrual loans and are not considered~~defined in the table above due to be non-performing assets because accretion continues to be recorded in income. Accretion continues to be recorded as long as there is an expectation of future cash flows in excess of carrying amount from these loans.their government guarantee. The carrying value of ~~ACI~~such loans contractually delinquent by more than 90 days ~~but on which income~~ was ~~still being recognized was $18~~$623 million and ~~$16~~$529 million at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively. The increase of ACL to total loans and ACL to non-performing loans ratios at March 31, 2020 from December 31, 2019 is attributable to the adoption of CECL effective January 1, 2020 and the impact on the provision for credit losses recorded during the first quarter of 2020 resulting from changes to our economic forecast as a result of COVID-19.

~~New commercial~~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. ~~New~~Residential and ~~non-ACI residential and~~ consumer loans, other than government insured pool buyout loans, are generally placed on non-accrual status when they are 90 days ~~of interest is due and unpaid.~~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 90 days ~~of interest is due and unpaid.~~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.

TDRs

A loan modification is considered a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise grant. These concessions may take the form of temporarily or permanently reduced interest rates, payment abatement periods, restructuring of payment terms, extensions of maturity at below market terms, or in some cases, partial forgiveness of principal. ~~Under GAAP, modified ACI loans accounted for in pools are not accounted for as TDRs and are not separated from their respective pools when modified.~~ Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy.

Under recently issued inter-agency and authoritative guidance and consistent with the CARES Act, short-term (generally periods of six months or less) deferrals or modifications related to COVID-19 will typically not be categorized as TDRs. See the section below entitled "Loss Mitigation Strategies - Impacts of the COVID-19 pandemic" for further discussion.

The following table summarizes loans that have been modified in TDRs at ~~September 30, 2017~~the dates indicated (dollars in thousands):

Number of TDRs Recorded Investment Related Specific Allowance
Residential and other consumer:
Covered 59
$ 11,721
$ 1,024
Non-covered 9
912
71
Commercial:
Taxi medallion loans 173
92,370
10,505
Other 30
72,702
10,581
271
$ 177,705
$ 22,181



	March 31, 2020					December 31, 2019
	Number of TDRs	Amortized Cost		Related Specific Allowance		Number of TDRs	Amortized Cost		Related Specific Allowance
Residential and other consumer ⁽¹⁾	281	$	45,780	$	37	361	$	57,117	$	12
Commercial	33	62,387		7,710		25	56,736		6,311
	314	$	108,167	$	7,747	386	$	113,853	$	6,323

~~Potential Problem Loans~~

~~Potential problem loans have been identified by management as those commercial loans included~~


(1)	Includes 265 government insured residential loans modified in TDRs totaling $41.9 million at March 31, 2020; and 346 government insured residential loans modified in TDRs totaling $53.4 million at December 31, 2019.

See Note 4 to the "substandard accruing" risk rating category. These loans are typically performing, but possess specifically identified credit weaknesses that, if not remedied, may lead to a downgrade to non-accrual status and identification as impaired in the near-term. Substandard accruing commercial loans totaled $185 million at September 30, 2017, substantially all of which were current as to principal and interest at September 30, 2017.consolidated financial statements for additional information about TDRs.

Loss Mitigation Strategies

Criticized or classified commercial loans in excess of certain thresholds are reviewed quarterly by the Criticized Asset Committee, which ~~determines~~evaluates the appropriate strategy for collection to mitigate the amount of credit losses. 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;~~substandard, impaired loans on non-accrual ~~status;~~status, loans modified as ~~TDRs; taxi medallion loans;~~TDRs or 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 Asset Recovery Committee.

WeOur servicers evaluate each residential loan in default to determine the most effective loss mitigation strategy, which may be modification, short sale, or ~~foreclosure. Through~~foreclosure, and pursue the ~~program's expiration~~alternative most suitable to the consumer and to mitigate losses to the bank.

Impacts of the COVID-19 pandemic

In response to the COVID-19 pandemic and its potential economic impact to our customers, we implemented a short-term program that complies with the CARES Act under which we are providing temporary relief on a case by case basis to borrowers directly impacted by COVID-19 who were not more than 30 days past due as of December 31, ~~2016,~~2019. For commercial borrowers, this relief typically allows for deferrals of principal and/or interest payments for 90 days, which may be extended, again on a case by case basis, for an additional 90 days, for a maximum of 180 days on a cumulative and successive basis. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. For residential borrowers, relief typically takes the form of 90 day payment deferrals, with deferred payments due at the end of the 90 day period. At the end of the 90 day deferral period, residential borrowers may either (i) make all payments due, (ii) be granted an additional deferral period or (iii) enter into a modification or repayment plan. We have also temporarily suspended new residential foreclosure actions.

Through April 20, 2020, we ~~offered loan modifications under the HAMP program~~have granted temporary deferrals to ~~eligible~~ borrowers as summarized in the ~~residential portfolio. HAMP is a uniform loan~~table below (in millions):



	Requests Received					Approved
	Count	UPB		% of Portfolio		Count	UPB		% of Portfolio
CRE - Property Type:
Hotel	30	$	505	90	%	30	$	505	90	%
Retail	83	576		43	%	57	372		28	%
Office	15	251		13	%	9	195		10	%
Industrial	8	80		11	%	7	66		9	%
Multifamily	24	209		11	%	20	171		9	%
	160	1,621		24	%	123	1,309		19	%
C&I - Industry
Accommodation and Food Services	11	85		38	%	7	36		16	%
Arts, Entertainment, and Recreation	6	44		20	%	5	40		18	%
Retail Trade	4	51		15	%	1	7		2	%
Manufacturing	3	30		9	%	2	27		7	%
Other	25	138		<7%		14	74		<4%
	49	348		5	%	29	184		3	%
BFG - Equipment	11	67		10	%	9	66		10	%
BFG - Franchise	146	513		79	%	144	482		74	%
Smaller Balance Commercial Loans	408	320				197	112
Total Commercial	774	$	2,869			502	$	2,153
Residential (excl govt. guaranteed loans)						974	$	499

The substantial majority of these deferrals were not implemented until after March 31, 2020.

Under recently issued inter-agency guidance and consistent with the CARES Act, these deferrals or modifications will generally not be categorized as TDRs. Loans subject to these temporary deferrals or modifications, if in compliance with the contractual terms of the deferral or modification ~~process that provides eligible borrowers with sustainable monthly mortgage payments equal~~agreements, will typically not be reported as past due or classified as non-accrual during the deferral period.

We have been active participants in the SBA's PPP, established by the CARES Act to ~~a target 31% of their gross monthly income.~~help small and medium-sized businesses remain viable through the COVID-19 crisis. We began ~~offering a new modification program in late 2016 modeled after the FNMA standard modification program.~~

~~In addition to the modification programs discussed above,~~accepting intake forms on April 3, 2020, launching our digital portal on April 6, 2020. Through May 6, 2020, we ~~offer a proprietary Subordinate Lien Modification Program for home equity~~had funded almost 3,500 loans totaling $841 million and lines of credit. This provides BankUnited the ability to offer a modification on loans covered under the Single Family Shared-Loss Agreement that are subordinate to either a BankUnited first lien or a first lien from another lender.helped protect nearly 100,000 jobs.

Analysis of the Allowance for ~~Loan and Lease~~Credit Losses

The ALLL relates to (i) new loans, (ii) estimated additional losses arising on non-ACI loans subsequent to the FSB Acquisition, and (iii) impairment recognized as a result of decreases in expected cash flows on ACI loans due to further credit deterioration. The impact of any additional provision for losses on covered loansACL is ~~significantly mitigated by an increase in the FDIC indemnification asset. The determination~~management's estimate of the amount of expected credit losses over the ~~ALLL~~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 forecasts. Determining the amount of the ACL is complex

and requires extensive judgment by ~~nature, highly complex and subjective. Future events~~management about matters that are inherently ~~uncertain could result in material changes to the~~uncertain. There is currently a high level of uncertainty around the ~~ALLL. General economic conditions including but not limited to unemployment rates,~~impact the ~~level~~COVID-19 crisis will have on the economy broadly, and on our borrowers specifically. In light of ~~business investment and growth, real estate values, vacancy rates and rental rates~~this uncertainty, we believe it is possible that the ACL estimate could change, potentially materially, in future periods. Changes in the ACL may result from changes in our ~~primary market areas,~~economic forecast, changes in loan portfolio composition, and circumstances not currently known to us that may impact the ~~level~~financial condition and operations of ~~interest rates,~~our borrowers, among other factors.

For the substantial majority of the loan portfolio, expected losses are estimated using econometric models that employ a factor based methodology to estimate PD and ~~a variety of other factors that affect the ability of borrowers’ businesses~~LGD. Projected PDs and LGDs are applied to estimated exposure at default to generate ~~cash flows sufficient~~estimates of expected loss at the loan level. These loan level estimates are aggregated by portfolio segment and loan class to ~~service their debts will impact the future performance~~generate a collective estimate for groups of ~~the portfolio.~~

~~New and non-ACILoans~~

~~Residential and other consumer~~

~~Due~~loans that share common risk characteristics. Qualitative adjustments may also be applied to ~~the lack of similarity between the risk characteristics of new loans and covered loans in the residential and home equity portfolios,~~incorporate factors that management does not believe it is appropriate to use the historical performance of the covered residential mortgage portfolio as a basis for calculating the ALLL applicable to new loans. The new loan portfolio has not yet developed an observable loss trend. Therefore, the ALLL for new residential loans is based primarily on relevant proxy historical loss rates. The ALLL for new 1-4 single family residential loans is estimated using average annual loss rates on prime residential mortgage securitizations issued between 2003 and 2008 as a proxy. Based on the comparability of FICO scores and LTV ratios between loans included in those securitizations and loanshave been adequately considered in the ~~Bank’s portfolio~~quantitative estimate. For loans that do not share similar risk characteristics with other loans such as collateral dependent loans and ~~the geographic diversity in the new purchased residential portfolio, we determined that prime residential mortgage securitizations provide an appropriate proxy for incurred~~TDRs, expected credit losses in this portfolio class. A peer group 16-quarter average net charge-off rate is used to estimate the ALLL for the new home equity and other consumer loan classes. See further discussion of the use of peer group loss factors below. The new home equity and other consumer loan portfolios are ~~not significant components of the overall loan portfolio.~~

~~Based~~estimated on an ~~analysis of historical performance, OREO and short sale~~individual basis. Expected credit losses ~~recent trending data and other internal and external factors, we have concluded that historical performance by portfolio class is~~are estimated over the best indicator of incurred loss for the non-ACI 1-4 single family residential and home equity portfolio classes. For each of these portfolio classes, a quarterly roll rate matrix is calculated by delinquency bucket to measure the rate at which loans move from one delinquency bucket to the next during a given quarter. An average 16-quarter roll rate matrix is used to estimate the amount within each delinquency bucket expected to roll to 120+ days delinquent. We assume no cure for those loans that are currently 120+ days delinquent. Loss severity given default is estimated based on internal data about OREO sales and short sales from the portfolio. The ALLL calculation incorporates a 100% loss severity assumption for home equity loans that are projected to roll to default. For non-ACI residential loans, the allowance is initially calculated based on UPB. The total of UPB less the calculated allowance is then compared to the carrying amountcontractual term of the loans, net of unamortized credit related fair value adjustments established at acquisition. If the calculated balance net of the allowance is less than the carrying amount, an additional allowance is established. Any increase or decrease in the allowanceadjusted for ~~non-ACI residential loans will result in a corresponding increase or decrease in the FDIC indemnification asset.~~ expected prepayments.

~~Commercial~~

~~The allowance is comprised of specific reserves for loans that are individually evaluated and determined to be impaired as well as general reserves for loans that have not been identified as impaired.~~

Commercial relationships graded substandard or doubtful and on non-accrual status with committed credit facilities greater than or equal to $1.0 million as well as loans modified in TDRs are individually evaluated for impairment. Other commercial

relationships on non-accrual status with committed balances under $1.0 million may also be evaluated for impairment, at management's discretion. For loans evaluated individually for impairment and determined to be impaired, a specific allowance is established based on the present value of expected cash flows discounted at the loan’s effective interest rate, the estimated fair value of the loan, or the estimated fair value of collateral less costs to sell. We recognized partial charge-offs at September 30, 2017 on taxi medallion loans all of which are risk-rated substandard and on non-accrual status, as necessary to reduce the carrying value of the loans to our estimate of the value of New York City taxi medallions based on our cash flow template. Additionally, a specific allowance was recognized equalSee Note 1 to the ~~amount by which each loan exceeded 85% of the estimated value, in recognition of the continued declining trend in cash flows~~consolidated financial statements for more detailed information about our ACL methodology and ~~lower prices observed on certain recent taxi medallion transfers. The amount of this specific allowance was determined based on management's judgment.~~

We believe that loans rated special mention, substandard or doubtful that are not individually evaluated for impairment exhibit characteristics indicative of a heightened level of credit risk. We apply a quantitative loss factor for loans rated special mention based on average annual probability of default and implied severity, derived from internal and external data. Loss factors for substandard and doubtful loans that are not individually evaluated are determined by using default frequency and severity information applied at the loan level. Estimated default frequencies and severities are based on available industry data. In addition, we apply a floor to these calculated loss factors, based on the loss factor applied to the special mention portfolio.

Since the majority of the new commercial loan portfolio is not yet seasoned enough to exhibit a loss trend, the quantitative loss factors for a majority of pass rated new commercial loans is based on peer group average annual historical net charge-off rates by loan class and the Company’s internal credit risk rating system. Beginning in the first quarter of 2017, we revised the source of quantitative loss factors for certain loans, as follows:

Given the emergence of observable loss trends, the quantitative loss factors for the taxi medallion and Bridge portfolios are based on the Company’s average historical net charge-off rates. Beginning in the third quarter of 2017, all taxi medallion loans are individually evaluated for impairment as described above.

The general quantitative loss factor for municipal finance receivables is based on the portfolio's external ratings and Moody's historical transition matrix, as opposed to the historical cumulative default curve for municipal obligations that was used previously.

For loans that are partially guaranteed by the SBA, the loss factor applied to the non-guaranteed portion of these loans is based on the 16-quarter average charge-off rate published by the SBA for each program

~~Mortgage warehouse loans have been segregated for the purpose of determining a quantitative loss factor, to better recognize the risk profile of this portfolio segment.~~

~~The net impact of these changes on the ALLL was not material.~~

The peer group used to calculate the average annual historical net charge-off rates that form the basis for our general reserve calculations for the majority of new commercial, home equity and consumer loans is made up of the banks included in the OCC Midsize Bank Group plus two additional banks in the New York region that management believes to be comparable based on size and nature of lending operations. The OCC Midsize Bank Group primarily includes commercial banks with total assets ranging from $10 - $50 billion and included 28 banks at September 30, 2017. Peer bank data is obtained from the Statistics on Depository Institutions Report published by the FDIC for the most recent quarter available. These banks, as a group, are considered by management to be comparable to BankUnited in size, nature of lending operations and loan portfolio composition. We evaluate the composition of the peer group annually, or more frequently if, in our judgment, a more frequent evaluation is necessary. Our internal risk rating system comprises 13 credit grades; grades 1 through 8 are “pass” grades. The risk ratings are driven largely by debt service coverage. Peer group historical loss rates are adjusted upward for loans assigned a lower “pass” rating.

We use a 16-quarter loss experience period to calculate peer group average annual net charge-off rates for commercial loans. We believe this look-back period to be consistent with the range of industry practice and appropriate to capture a sufficient range of observations reflecting the performance of our loans, most of which were originated in the current economic cycle. Prior to the third quarter of 2017, we used a four-quarter loss experience period for the taxi medallion portfolio to recognize the recent deterioration in that portfolio. We use a 14-quarter loss experience period for the Bridge portfolios, reflective of the period over which an observable loss trend began to emerge.

With the exception of the Pinnacle municipal finance portfolio, a four quarter loss emergence period is used in the calculation of general reserves. A twelve quarter loss emergence period is used in the calculation of general reserves for the Pinnacle portfolio.

~~Qualitative Factors~~

Qualitative adjustments are made to the ALLL when, based on management’s judgment, there are internal or external factors impacting probable incurred losses not taken into account by the quantitative calculations. Potential qualitative adjustments are categorized as follows:

~~Portfolio performance trends, including trends in and the levels of delinquencies, non-performing loans and classified loans;~~

~~Changes in the nature of the portfolio and terms of the loans, specifically including the volume and nature of policy and procedural exceptions;~~

~~Portfolio growth trends;~~

~~Changes in lending policies and procedures, including credit and underwriting guidelines;~~

~~Economic factors, including unemployment rates and GDP growth rates;~~

~~Changes in the value of underlying collateral;~~

~~Quality of risk ratings, as evaluated by our independent credit review function;~~

~~Credit concentrations;~~

~~Changes in and experience levels of credit administration management and staff; and~~

~~Other factors identified by management that may impact the level of losses inherent in the portfolio, including but not limited to competition and legal and regulatory considerations.~~

~~ACILoans~~

~~For ACI loans, a valuation allowance is established when periodic evaluations of expected cash flows reflect a deterioration resulting from credit~~ related factors from the level of cash flows that were estimated to be collected at acquisition plus any additional expected cash flows arising from revisions in those estimates. We perform a quarterly analysis of expected cash flows for ACI loans.

Expected cash flows are estimated on a pool basis for ACI 1-4 single family residential and home equity loans. The analysis of expected pool cash flows incorporates updated pool level expected prepayment rate, default rate, delinquency level and loss severity given default assumptions. Prepayment, delinquency and default curves are derived primarily from roll rates generated from the historical performance of the portfolio over the immediately preceding four quarters. Loss severity given default assumptions are generated from the historical performance of the portfolio over the immediately preceding four quarters, while loss severity from loan sales is generated from historical performance over the immediately preceding twelve quarters. Estimates of default probability and loss severity given default also incorporate updated LTV ratios, at the loan level, based on Case-Shiller Home Price Indices for the relevant MSA. Costs and fees represent an additional component of loss on default and are projected based on historical experience over the last three years. The ACI home equity roll rates include the impact of delinquent, related senior liens and loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy.

Our projected cash flow analysis reflected a decrease in expected cash flows due to credit related factors for the home equity ACI pool; therefore, a provision for loan losses of $1.8 million was recorded for the nine months ended September 30, 2017, along with a corresponding increase in the FDIC indemnification asset of $1.4 million. No ALLL related to 1-4 single family residential ACI pools was recorded at September 30, 2017. No ALLL related to 1-4 single family residential and home equity ACI pools was recorded at December 31, 2016.

The primary assumptions underlying estimates of expected cash flows for ACI commercial loans are default probability and severity of loss given default. Assessments of default probability and severity are based on net realizable value analyses prepared at the individual loan level. Based on our analysis, no ALLL related to ACI commercial loans was recorded at September 30, 2017 or December 31, 2016.

accounting policies.

The following ~~tables provide~~table provides an analysis of the ~~ALLL,~~ACL, provision for ~~loan~~credit losses and net charge-offs for the periods indicated (in thousands):. For the three months ended March 31, 2020, the ACL was estimated using the CECL methodology. For the three months ended March 31,2019, prior to the adoption of ASU 2016-13, an incurred loss methodology was used.


	Nine Months Ended September 30, 2017											Three Months Ended March 31,
				Covered Loans								2020			2019
Balance at beginning of period:												$	108,671		$	109,931
Impact of adoption of ASU 2016-13												27,305			—
	Non-Covered Loans			ACI Loans		Non-ACI Loans			Total			135,976			109,931
Balance at December 31, 2016	$	150,853		$	—	$	2,100		$	152,953
Provision for (recovery of) loan losses:
1-4 single family residential	(4		)	—		212			208			(6,777		)	178
Home equity loans and lines of credit	—			1,812		714			2,526			10			(5		)
Other consumer loans	(48		)	—		—			(48		)	119			(23		)
Multi-family	(3,303		)	—		—			(3,303		)	8,842			(1,077		)
Non-owner occupied commercial real estate	4,032			—		—			4,032			15,792			5,288
Construction and land	(9		)	—		—			(9		)	(8		)	414
Owner occupied commercial real estate	4,884			—		—			4,884			19,358			(1,729		)
Commercial and industrial												56,439			7,675
Taxi medallion loans	49,604			—		—			49,604
Other commercial and industrial	9,338			—		(45		)	9,293
Commercial lending subsidiaries	(8,614		)	—		—			(8,614		)
Unallocated	5,000			—		—			5,000
Pinnacle												174			(7		)
Bridge - franchise finance												24,048			327
Bridge - equipment finance												3,868			(760		)
Total Provision	60,880			1,812		881			63,573			121,865			10,281
Charge-offs:
Home equity loans and lines of credit	—			—		(55		)	(55		)
1-4 single family residential												(31		)	—
Non-owner occupied commercial real estate	(162		)	—		—			(162		)	(552		)	(1,703		)
Owner occupied commercial real estate	(1,164		)	—		—			(1,164		)	(65		)	(42		)
Commercial and industrial												(2,215		)	(4,388		)
Taxi medallion loans	(47,141		)	—		—			(47,141		)
Other commercial and industrial	(12,567		)	—		—			(12,567		)
Commercial lending subsidiaries	—			—		—			—
Bridge - franchise finance												(167		)	—
Bridge - equipment finance												(4,776		)	—
Total Charge-offs	(61,034		)	—		(55		)	(61,089		)	(7,806		)	(6,133		)
Recoveries:
Home equity loans and lines of credit	—			—		65			65			1			2
Other consumer loans	21			—		—			21			1			12
Multi-family												2			—
Non-owner occupied commercial real estate												41			—
Owner occupied commercial real estate	2			—		—			2			86			323
Commercial and industrial												413			287
Other commercial and industrial	2,400			—		45			2,445
Commercial lending subsidiaries	603			—		—			603
Total Recoveries	3,026			—		110			3,136			544			624
Net Charge-offs:	(58,008		)	—		55			(57,953		)	(7,262		)	(5,509		)
Balance at September 30, 2017	$	153,725		$	1,812	$	3,036		$	158,573
Balance at end of period												$	250,579		$	114,703

Nine Months Ended September 30, 2016
Covered Loans
Non-Covered Loans ACI Loans Non-ACI Loans Total
Balance at December 31, 2015 $ 120,960
$ —
$ 4,868
$ 125,828
Provision for (recovery of) loan losses:
1-4 single family residential (324 ) —
23
(301 )
Home equity loans and lines of credit 2
—
(1,097 ) (1,095 )
Other consumer loans (98 ) —
—
(98 )
Multi-family 1,509
—
—
1,509
Non-owner occupied commercial real estate 7,563
—
—
7,563
Construction and land (980 ) —
—
(980 )
Owner occupied commercial real estate 4,854
—
—
4,854
Commercial and industrial
Taxi medallion loans 9,679
—
—
9,679
Other commercial and industrial 16,686
—
(45 ) 16,641
Commercial lending subsidiaries 4,677
—
—
4,677
Total Provision 43,568
—
(1,119 ) 42,449
Charge-offs:
1-4 single family residential —
—
(312 ) (312 )
Home equity loans and lines of credit —
—
(774 ) (774 )
Non-owner occupied commercial real estate (128 ) —
—
(128 )
Construction and land (93 ) —
—
(93 )
Owner occupied commercial real estate (2,615 ) —
—
(2,615 )
Commercial and industrial
Taxi medallion loans (4,235 ) —
—
(4,235 )
Other commercial and industrial (7,245 ) —
—
(7,245 )
Commercial lending subsidiaries (1,432 ) —
—
(1,432 )
Total Charge-offs (15,748 ) —
(1,086 ) (16,834 )
Recoveries:
Home equity loans and lines of credit —
—
77
77
Other consumer loans 18
—
—
18
Owner occupied commercial real estate 1,175
—
—
1,175
Commercial and industrial
Other commercial and industrial 440
—
45
485
Commercial lending subsidiaries 1,278
—
—
1,278
Total Recoveries 2,911
—
122
3,033
Net Charge-offs: (12,837 ) —
(964 ) (13,801 )
Balance at September 30, 2016 $ 151,691
$ —
$ 2,785
$ 154,476

The following ~~tables show~~table shows the distribution of the ~~ALLL, broken out between covered and non-covered loans,~~ACL at the dates indicated (dollars in thousands):

September 30, 2017
Covered Loans
Non-Covered Loans ACI Loans
Non-ACI
Loans
Total
%⁽¹⁾
Residential and other consumer:

1 - 4 single family residential $ 9,275
$ —
$ 393
$ 9,668
21.7 %
Home equity loans and lines of credit 7
1,812
2,643
4,462
0.2 %
Other consumer loans 90
—
—
90
0.1 %
9,372
1,812
3,036
14,220
22.0 %
Commercial:
Multi-family 21,706
—
—
21,706
16.3 %
Non-owner occupied commercial real estate 39,474
—
—
39,474
20.4 %
Construction and land 2,815
—
—
2,815
1.3 %
Owner occupied commercial real estate 15,146
—
—
15,146
9.5 %
Commercial and industrial
Taxi medallion loans 13,117
—
—
13,117
0.8 %
Other commercial and industrial 37,239
—
—
37,239
18.2 %
Commercial lending subsidiaries 9,856
—
—
9,856
11.5 %
139,353
—
—
139,353
78.0 %
Unallocated 5,000
—
—
5,000

$ 153,725
$ 1,812
$ 3,036
$ 158,573
100.0 %

December 31, 2016
Covered Loans
Non-Covered Loans ACI Loans
Non-ACI
Loans
Total
%⁽¹⁾
Residential and other consumer:

1 - 4 single family residential $ 9,279
$ —
$ 181
$ 9,460
20.6 %
Home equity loans and lines of credit 7
—
1,919
1,926
0.3 %
Other consumer loans 117
—
—
117
0.1 %
9,403
—
2,100
11,503
21.0 %
Commercial:
Multi-family 25,009
—
—
25,009
19.8 %
Non-owner occupied commercial real estate 35,604
—
—
35,604
19.3 %
Construction and land 2,824
—
—
2,824
1.6 %
Owner occupied commercial real estate 11,424
—
—
11,424
9.0 %
Commercial and industrial
Taxi medallion loans 10,655
—
—
10,655
0.9 %
Other commercial and industrial 38,067
—
—
38,067
16.6 %
Commercial lending subsidiaries 17,867
—
—
17,867
11.8 %
141,450
—
—
141,450
79.0 %
$ 150,853
$ —
$ 2,100
$ 152,953
100.0 %



	March 31, 2020				January 1, 2020 ⁽¹⁾				December 31, 2019
	Total		%⁽²⁾		Total		%⁽²⁾		Total		%⁽²⁾
Residential and other consumer loans	12,576		24.4	%	19,252		24.5	%	11,154		24.5	%
Commercial:
Multi-family	13,087		8.5	%	4,244		9.6	%	5,024		9.6	%
Non-owner occupied commercial real estate	25,078		21.5	%	9,798		21.7	%	23,240		21.7	%
Construction and land	2,610		1.0	%	2,618		1.1	%	764		1.1	%
Owner occupied commercial real estate	50,685		8.7	%	31,306		8.9	%	8,066		8.9	%
Commercial and industrial	106,964		25.3	%	52,327		23.4	%	43,485		23.4	%
Pinnacle	585		5.0	%	411		5.2	%	720		5.2	%
Bridge - franchise finance	32,910		2.8	%	9,030		2.6	%	9,163		2.6	%
Bridge - equipment finance	6,084		2.8	%	6,991		3.0	%	7,055		3.0	%
	238,003		75.6	%	116,725		75.5	%	97,517		75.5	%
	$	250,579	100.0	%	$	135,977	100.0	%	$	108,671	100.0	%


(1)	Adoption date of ASU 2016-13.


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

The following chart depicts the changes in the ACL from December 31, 2019 to March 31, 2020 (in millions):

The ~~ALLL~~increase in the ACL from January 1, 2020, the date of initial adoption of ASC 326, to March 31, 2020 was primarily due to changes in our reasonable and supportable forecast, in large part resulting from the emerging COVID-19 pandemic. The Company based its reasonable and supportable economic forecast used in estimating the ACL at ~~September 30, 2017~~March 31, 2020 on Moody's March Mid-Cycle Baseline forecast dated March 27, 2020. This forecast featured a peak-to-trough drop of approximately 20% in real GDP and a national unemployment rate approaching 9% in the second quarter of 2020, the VIX approaching 60 and year-over-year declines in the S&P 500 index reaching a low of near 30%. The forecast contemplated a recovery beginning in the second half of 2020 with unemployment remaining elevated into 2023. The econometric models we use to estimate

expected credit losses ingest a wide array of national, regional and MSA level economic variables and data points. Some of the more impactful include unemployment rates, a market volatility index, a stock price index, real GDP, a variety of interest rates and spreads, HPI, and commercial real estate forecast data.

The ACL for residential and other consumer loans decreased from January 1, 2020 to March 31,2020. This decline was primarily attributable to the introduction of a qualitative loss factor related to model imprecision. The ACL for residential and other consumer loans included ~~$5.4~~$1.7 million related to the impact of Hurricanes Irma and Harvey. The ALLL includes $0.4 million related to loans that were downgraded during the three months ended September 30, 2017 as a result of the hurricanes and a $5.0 million unallocated qualitative allowance.

~~Excluding the $5.0 million unallocated qualitative allowance relative to the impact of the hurricanes, the balance of the ALLL for non-covered~~PCD loans at ~~September 30, 2017 decreased slightly as compared to December~~March 31, ~~2016. Decreases~~2020.

Increases in ~~quantitative loss factors applied to~~the ACL for the majority of ~~the~~our commercial loan portfolio classes was primarily attributable to changes in the Company's reasonable and ~~net decreases in qualitative factors were substantially offset by the impact of the growth of the loan portfolio and~~supportable economic forecast. The increase also reflected an increase in specific reserves ~~for criticized~~of approximately $16 million summarized as follows:

An increase of $4.3 million in commercial and ~~classified~~industrial loans, ~~including taxi medallion loans. Factors influencing the change~~primarily related to one previously identified $35 million Florida loan.

An increase of $15.2 million in the ~~ALLL~~Bridge franchise finance portfolio, related to ~~specific loan types at September 30, 2017 as compared to December 31, 2016, include:~~

The ALLL related to non-covered 1-4 single family residential loans did not change significantly. Increases related to growth in the corresponding portfolio were substantially offset by declines in both the applicable quantitative historical loss rate and qualitative reserves.quick service restaurant concepts.

A decrease of ~~$3.3~~$3.1 million ~~for multi-family loans primarily reflects decreases in quantitative loss factors, the decline~~ in the ~~corresponding portfolio and~~Bridge equipment finance portfolio.

Changes in the ACL from December 31, 2019 to January 1, 2020 represented the adoption of ASU 2016-13. In general, the change in methodology resulted in increased reserves due to the transition to a ~~net decrease~~lifetime expected loss model from an incurred loss model. However, as noted in ~~qualitative loss factors, offset in part by an increase in criticized and classified loans.~~

~~An increase of~~ ~~$3.9 million~~ ~~for non-owner occupied commercial real estate loans~~the table above, there are certain CRE portfolios where the reserve decreased. This was ~~primarily~~mainly driven by the ~~growth~~use of quantitative models to estimate the ACL at the loan level, specific to the Company's portfolio, under CECL, instead of the ~~corresponding portfolio and an increase in criticized and classified loans, partially offset by a decrease in quantitative~~peer group historical losses rates utilized under the prior incurred loss ~~factors.~~

~~An increase of $3.7 million for owner occupied commercial real estate loans~~model. Certain qualitative factors were also removed, as their impact was ~~primarily attributable to increases in specific reserves for impaired loans and to a lesser extent, the growth of the corresponding portfolio.~~

An increase of $2.5 million for taxi medallion loans reflects the specific reserves recognized at September 30, 2017, as discussed previously. Increases in reserves were limited due to the level of charge-offs recognized during the nine months ended September 30, 2017.

~~A decrease of~~ ~~$0.8 million~~ ~~for other commercial and industrial loans was primarily driven by a decrease in reserves for impaired and other classified loans, primarily due to net charge-offs, offset by growth~~captured in the ~~corresponding portfolio.~~

A ~~$8.0 million~~ ~~decrease for commercial lending subsidiaries primarily reflects decreases in~~ quantitative ~~loss factors for the municipal finance receivables and decreases in qualitative loss factors related to portfolio growth trends and credit concentrations.~~

estimate under CECL.

For additional information about the ~~ALLL,~~ACL, see Note 4 to the consolidated financial statements.

Deposits

Average balances and rates paid on deposits were as follows for the periods indicated (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
�� 2017 2016 2017 2016
Average
Balance Average
Rate Paid Average
Balance Average
Rate Paid Average
Balance
Average
Rate Paid
Average
Balance Average
Rate Paid
Demand deposits:

Non-interest bearing $ 3,036,046
— % $ 2,981,017
— % $ 3,034,682
— % $ 2,944,861
— %
Interest bearing 1,590,206
0.85 % 1,437,677
0.62 % 1,564,229
0.76 % 1,341,218
0.61 %
Money market 9,590,333
0.90 % 7,948,299
0.64 % 9,187,225
0.80 % 7,778,761
0.63 %
Savings 378,179
0.24 % 400,982
0.22 % 370,682
0.19 % 424,915
0.24 %
Time 6,290,056
1.30 % 5,567,909
1.13 % 5,988,433
1.24 % 5,177,191
1.11 %
$ 20,884,820
0.87 % $ 18,335,884
0.67 % $ 20,145,251
0.80 % $ 17,666,946
0.65 %

~~Total deposits at September 30, 2017 and December 31, 2016 included $2.3 billion and $1.9 billion, respectively, of brokered deposits.~~



	Three Months Ended March 31,
	2020				2019
	Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Demand deposits:
Non-interest bearing	$	4,368,553	—	%	$	3,605,131	—	%
Interest bearing	2,173,628		1.29	%	1,702,479		1.34	%
Money market	10,233,123		1.48	%	11,221,366		1.90	%
Savings	179,079		0.19	%	232,614		0.28	%
Time	7,510,070		2.04	%	6,907,011		2.29	%
	$	24,464,453	1.36	%	$	23,668,601	1.67	%

The following table shows scheduled maturities of certificates of deposit with denominations greater than or equal to $100,000 as of ~~September 30, 2017~~March 31, 2020 (in thousands):


Three months or less	$	741,235	$	1,080,408
Over three through six months	1,037,771		729,787
Over six through twelve months	1,351,330		1,542,955
Over twelve months	931,302		275,485
	$	4,061,638	$	3,628,635

FHLB Advances, Notes and Other Borrowings

In addition to deposits, we utilize FHLB advances ~~to fund growth in interest earning assets;~~as a funding source; the advances provide us with additional flexibility in managing both term and cost of ~~funding.~~funding and in managing interest rate risk. FHLB advances are secured by FHLB stock, qualifying residential first mortgage and commercial real estate ~~and home equity~~ loans, and MBS. ~~At September 30, 2017 and December 31, 2016, outstanding FHLB advances totaled $4.9 billion and $5.2 billion, respectively.~~

The contractual balance of FHLB advances outstanding at ~~September 30, 2017~~March 31, 2020 is scheduled to mature as follows (in thousands):

Maturing in:
2017—One month or less $ 2,395,000
2017—Over one month 855,000
2018 1,396,000
2019 100,000
2020 125,000
Carrying value $ 4,871,000



Maturing in:
2020—One month or less	$	1,665,000
2020—Over one month	3,126,000
2021	250,000
Thereafter	100,000
Total contractual balance outstanding	5,141,000
Cumulative fair value hedging adjustments	3,409
Carrying value	$	5,144,409

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 of borrowings. See Note 76 to the consolidated financial statements for more information about derivative instruments.

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


	September 30, 2017		December 31, 2016		March 31, 2020		December 31, 2019
Senior notes	$	393,564	$	393,092	$	395,270	$	395,090
Capital lease obligations	9,264		9,717
Finance leases					33,309		34,248
	$	402,828	$	402,809	$	428,579	$	429,338

Senior notes have a face amount of $400 million, a fixed coupon rate of 4.875% and mature on November 17, 2025.

Capital Resources

Pursuant to the FDIA, the federal banking agencies have adopted regulations setting forth a five-tier system for measuring the capital adequacy of the financial institutions they supervise. At ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, BankUnited and the Company had capital levels that exceeded both the regulatory well-capitalized guidelines and all internal capital ratio targets.

~~Stockholders'~~

The following table provides information regarding regulatory capital for the Company and the Bank as of March 31, 2020 (dollars in thousands):



	Actual				Required to be Considered Well Capitalized				Required to be Considered Adequately Capitalized				Required to be Considered Adequately Capitalized Including Capital Conservation Buffer
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
BankUnited, Inc.:
Tier 1 leverage	$	2,813,226	8.53	%	N/A ⁽¹⁾		N/A⁽¹⁾		$	1,319,509	4.00	%	N/A⁽¹⁾		N/A⁽¹⁾
CET1 risk-based capital	$	2,813,226	11.76	%	$	1,554,389	6.50	%	$	1,076,115	4.50	%	$	1,673,957	7.00	%
Tier 1 risk-based capital	$	2,813,226	11.76	%	$	1,913,094	8.00	%	$	1,434,820	6.00	%	$	2,032,662	8.50	%
Total risk based capital	$	3,013,254	12.60	%	$	2,391,367	10.00	%	$	1,913,094	8.00	%	$	2,510,935	10.50	%
BankUnited:
Tier 1 leverage	$	3,064,047	9.31	%	$	1,645,075	5.00	%	$	1,316,060	4.00	%	N/A		N/A
CET1 risk-based capital	$	3,064,047	12.86	%	$	1,548,966	6.50	%	$	1,072,361	4.50	%	$	1,668,117	7.00	%
Tier 1 risk-based capital	$	3,064,047	12.86	%	$	1,906,420	8.00	%	$	1,429,815	6.00	%	$	2,025,571	8.50	%
Total risk based capital	$	3,264,075	13.70	%	$	2,383,025	10.00	%	$	1,906,420	8.00	%	$	2,502,176	10.50	%

(1) There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.

As disclosed in the Company's Form 10-K for the year ended December 31, 2019, the Company had elected to phase-in the initial impact of adopting CECL for regulatory capital purposes, allowing CECL's regulatory capital effects to be phased in at 25 percent per year, beginning in the first year of adoption. As part of its response to the impact of COVID-19, our banking regulators issued an inter-agency interim final rule providing the option to temporarily delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period. The Company has elected to adopt the provisions of this interim final rule.

Total stockholders' equity ~~increased~~decreased by approximately $465 million at March 31, 2020 compared to ~~$2.6 billion at September 30, 2017,~~December 31, 2019. The most significant reason for this decrease was a decline of $292 million in accumulated other comprehensive income for the three months ended March 31, 2020, attributed to an increase in unrealized losses on AFS securities and derivative instruments. See the section of ~~$205 million, or 8.5%, from December 31, 2016, due primarily~~this Management's Discussion and Analysis entitled "Analysis of Financial Condition; Investment Securities" and Note 3 to the ~~retention~~consolidated financial statements for further discussion of ~~earnings and~~unrealized losses on AFS securities. Management expects to recover the ~~exercise~~entire amortized cost basis of ~~stock options resulting~~its AFS securities. Unrealized losses on derivative instruments designated as hedging instruments were attributable to reductions in ~~proceeds of $61.5 million during~~benchmark interest rates. Other factors contributing to the ~~period.~~

~~Since our formation, stockholders'~~decrease in total stockholders equity ~~has been impacted primarily by~~were the ~~retention of earnings, and to a lesser extent, proceeds from the issuance~~repurchase of common shares, the initial adoption of ASU 2016-13 which impacted retained earnings by $24 million, dividends in the amount of $22 million, and ~~changes in unrealized gains and losses,~~the $31 million net ~~of taxes, on investment securities~~

~~available for sale and cash flow hedges. Our rate of earnings retention is derived by dividing undistributed earnings per~~ ~~common share by earnings per common share. Our retention ratio was~~ ~~66.0%~~ ~~and 64.9%~~loss for the ~~three~~quarter.

We believe we are well positioned, from a capital perspective, to withstand a severe downturn in the economy. In light of the COVID-19 crisis, uncertainty around its ultimate impact on the economy and, ~~nine~~by extension, on our financial condition and results of operations, we have enhanced our stress testing framework. We have increased both the frequency of stress testing and the spectrum of scenarios utilized. One exercise we completed was to stress our March 31, 2020 loan portfolio using both the 2018 DFAST severely adverse scenario and the 2020 DFAST severely adverse scenario. The results of each of these stress tests projected regulatory capital ratios in excess of all well capitalized thresholds.

During the three months ended ~~September 30, 2017, respectively, compared to 55.7% and 58.4%~~ March 31, 2020, the Company repurchased approximately 3.3 million shares of its common stock for ~~the three and nine months ended September 30, 2016, respectively.~~ ~~We retain~~an aggregate purchase price of $101 million, at a ~~high percentage~~weighted average price of ~~our earnings to support our planned growth.~~$30.36 per share. The Company has temporarily suspended its share repurchase program.

We ~~filed a~~have an active shelf registration statement on file with the SEC ~~in October 2015~~ 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.

~~The following table provides information regarding regulatory capital for~~ We believe, based on recent market issuances by other regional banks and our evaluation of current markets, the Company ~~and~~would be able to successfully access the ~~Bank as of September 30, 2017 (dollars in thousands):~~

Actual
Required to be
Considered Well
Capitalized

Required to be
Considered
Adequately
Capitalized
Amount Ratio Amount Ratio Amount Ratio
BankUnited, Inc.:

Tier 1 leverage $ 2,491,853
8.56 %
N/A ⁽¹⁾

N/A⁽¹⁾

$ 1,164,462
4.00 %
CET1 risk-based capital $ 2,491,853
11.91 % $ 1,359,799
6.50 % $ 941,399
4.50 %
Tier 1 risk-based capital $ 2,491,853
11.91 % $ 1,673,599
8.00 % $ 1,255,199
6.00 %
Total risk based capital $ 2,657,784
12.70 % $ 2,091,998
10.00 % $ 1,673,599
8.00 %
BankUnited:

Tier 1 leverage $ 2,706,006
9.32 % $ 1,451,814
5.00 % $ 1,161,451
4.00 %
CET1 risk-based capital $ 2,706,006
12.98 % $ 1,354,884
6.50 % $ 937,997
4.50 %
Tier 1 risk-based capital $ 2,706,006
12.98 % $ 1,667,550
8.00 % $ 1,250,662
6.00 %
Total risk based capital $ 2,869,850
13.77 % $ 2,084,437
10.00 % $ 1,667,550
8.00 %

~~(1) There is no Tier 1 leverage ratio component~~capital markets in the ~~definition of a well-capitalized bank holding company.~~current environment.

Levels of capital required to be well capitalized or adequately capitalized as reflected above do not include a capital conservation buffer that is being phased in beginning in 2016. When fully phased in on January 1, 2019, the Bank and the Company will have to maintain this capital conservation buffer composed of CET1 capital equal to 2.50% of risk-weighted assets above the amounts required to be adequately capitalized, as reflected above, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Capital ratios required to be considered well-capitalized exceed the ratios required under the capital conservation buffer requirement at September 30, 2017.

Liquidity

Liquidity involves our ability to generate adequate funds to support planned interest earning asset growth, meet deposit withdrawal and credit line usage requests, maintain reserve requirements, conduct routine operations, pay dividends, service outstanding debt and meet other contractual obligations.

BankUnited's ongoing liquidity needs have been and continue to be met primarily by cash flows from operations, deposit growth, the investment portfolio and FHLB advances.

The onset of the COVID-19 pandemic led to dislocation and volatility in funding and capital markets and evoked widespread concerns about the ongoing functioning of those markets, the availability of liquidity and the economy generally. In response, the Federal Reserve reduced its benchmark interest rate to a target level of 0 - 0.25%, actively adjusted the size of its overnight and term repurchase agreement operations, reduced reserve requirements and the cost of discount window borrowings, encouraged banks to utilize the discount window and committed to purchasing large amounts of U.S. Treasury securities and MBS. The U.S. government has announced an unprecedented variety of additional stimulus and measures to support markets, the flow of credit, and systemic liquidity. These include the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Term Asset-Backed Securities Loan Facility, the Municipal Liquidity Facility, the Main Street New Loan Facility, the Main Street Expanded Loan Facility, Paycheck Protection Program loans, the Paycheck Protection Program Lending Facility (PPPLF), the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Money Market Mutual Fund Liquidity Facility. These actions appear to have been effective in stabilizing market liquidity.

In response to the onset of COVID-19 and potential concerns that might arise about the stability of liquidity, we took a number of precautionary measures to ensure adequacy of liquidity. We activated our liquidity contingency funding plan, which called for the implementation of a number of measures to increase the frequency and extent of monitoring and reporting of intraday liquidity, deposit flows and other liquidity trends as well as testing of all of our contingent liquidity sources. We took steps to optimize available same day liquidity. We increased the level of cash held on balance sheet, to be prepared to meet potential increased demand for deposit withdrawals and line usage, which to date have not materialized. We optimized same day available liquidity by pledging additional securities and loans to the FHLB and the discount window to support those sources of contingent liquidity.

At March 31, 2020, same day available liquidity totaled approximately $8.5 billion, including cash, borrowing capacity at the Federal Home Loan Bank of Atlanta and the Federal Reserve Discount Window and Federal Funds lines of credit, as depicted in the following chart:

Additional sources of liquidity include cash flows from operations, wholesale deposits, and cash ~~generated by the repayment and resolution of covered loans, cash payments received~~flow from the ~~FDIC pursuant to~~Bank's amortizing securities and loan portfolios. In the ~~Single Family Shared-Loss Agreement, deposit growth, the available for sale securities portfolio and FHLB advances.~~

For the nine months ended September 30, 2017 and 2016, net cash provided by operating activities was $231.2 million and $227.3 million, respectively. Accretion on ACI loans, which is reflected as a non-cash reduction in net income to arrive at operating cash flows, totaled $226.3 million, and $228.5 million for the nine months ended September 30, 2017 and 2016, respectively. Accretable yield on ACI loans represents the excess of expected future cash flows over the carrying amount of the loans, and is recognized as interest income over the expected lives of the loans. Amounts recorded as accretion are realized in cash as individual loans are paid down or otherwise resolved; however, the timing of cash realization may differ from the timing of income recognition. Thesenear-term, cash flows from the ~~repayment or resolution~~loan portfolio may be reduced as a result of covered loans, inclusive of amounts that have been accreted through earnings over time, are recognized as cash flows from investing activities in the consolidated statements of cash flows upon receipt. Cash payments from the FDIC in the form of reimbursements of losses relatedtemporary payment deferrals granted to ~~the~~

covered loans under the Single Family Shared-Loss Agreement are also characterized as investing cash flows. Cash generated by the repayment and resolution of covered loans and reimbursements from the FDIC totaled $348.5 million and $430.3 million for the nine months ended September 30, 2017 and 2016, respectively. Both cash generated by the repayment and resolution of covered loans and cash payments received from the FDIC have been and are expectedborrowers. We do not expect this to ~~continue to be, although to a lesser extent in the future, consistent and relatively predictable sources of liquidity.~~

~~In addition to cash provided by operating activities, the repayment and resolution of covered loans and payments under the Single Family Shared-Loss Agreement from the FDIC, BankUnited’s~~materially impact our liquidity needs, particularly liquidity to fund growth of interest earning assets, have been and continue to be met by deposit growth and FHLB advances. The investment portfolio also provides a source of liquidity.

BankUnited has access to additional liquidity through FHLB advances, other collateralized borrowings, wholesale deposits or the sale of available for sale securities. At September 30, 2017, unencumbered investment securities available for sale totaled $4.3 billion. At September 30, 2017, BankUnited had available borrowing capacity at the FHLB of $3.8 billion, unused borrowing capacity at the FRB of $544 million and unused Federal funds lines of credit totaling $70 million.position. Management also has the ability to exert substantial control over the rate and timing of ~~growth of the non-covered~~ loan ~~portfolio,~~production, and resultant requirements for liquidity to fund new loans.

~~Continued runoff~~ We currently expect the majority of loan production, at least for the remainder of the ~~covered loan portfolio~~second quarter, to be related to loans originated under the PPP and ~~FDIC indemnification asset~~potentially the Main Street Lending Facility. Since the onset of the COVID-19 pandemic, we have not experienced unusual deposit outflows or volatility. Credit line usage, which we have monitored daily since the onset of COVID-19, has deviated very little from our trailing three year average. PPP loans will be a near-term demand on liquidity; it is currently our intention to match fund these loans using the PPPLF, which we have successfully accessed. Our available liquidity may also be reduced as the FHLB and ~~growth of deposits and the non-covered loan portfolio are the most significant trends expected to impact the Bank’s liquidity~~Federal Reserve Bank reprice our

collateral in the ~~near term.~~normal course of business based on March 31, 2020 valuations. Based on our initial analysis, we do not expect the impact to be material to our overall liquidity position.

For the three months ended March 31, 2020 and 2019 net cash provided by operating activities was $63.5 million and $88.5 million, respectively. When compared with the three months ended March 31, 2019, operating cash flows were negatively impacted by approximately $65 million as a result of the daily settlement of derivative positions. These settlements, which are reported in cash flows from operating activities, are directly affected by changes in market interest rates.

The ALCO policy has established several measures of liquidity which are typically monitored monthly by the ALCO and quarterly by the Board of Directors. ~~One~~In light of the COVID-19 situation, most of these measures, in addition to same day available liquidity and information about deposit flows, are currently being monitored and reported to executive management daily and to the Board of Directors weekly. The ALCO policy establishes limits for the ratio of available liquidity to volatile liabilities, the ratio of wholesale funding to total assets, the ratio of brokered deposits to total deposits and a government backed securities holding ratio, measured as the ratio of U.S. Government backed securities to total securities. At March 31, 2020 BankUnited was in compliance with all of these ALCO policy limits.

An additional primary measure of liquidity monitored by management is the ~~30 day~~30-day total liquidity ratio, defined as (a) the sum of cash and cash equivalents, pledgeable securities and a measure of funds expected to be generated by operations over the next 30 days; divided by (b) the sum of potential deposit runoff, liabilities maturing within the 30 day time frame and a measure of funds expected to be used in operations over the next 30 days. ALCO policy thresholds stipulate that BankUnited’s liquidity is considered acceptable if the ~~30 day~~30-day total liquidity ratio exceeds 100%. At ~~September 30, 2017,~~March 31, 2020, BankUnited’s ~~30 day~~30-day total liquidity ratio was ~~172%~~141%. Management also monitors a ~~one year~~one-year liquidity ratio, defined as (a) cash and cash equivalents, pledgeable securities, unused borrowing capacity at the FHLB, and loans and non-agency securities maturing within one year; divided by (b) forecasted deposit outflows and borrowings maturing within one year. ~~Forecasted deposit outflows, excluding certificate of deposits, are based on runoff rates derived from the most recent external core deposit analysis obtained by the Company.~~ This ratio allows management to monitor liquidity over a longer time horizon. The acceptable threshold established by the ALCO for this liquidity measure is 100%. At ~~September 30, 2017,~~March 31, 2020, BankUnited’s ~~one year~~one-year liquidity ratio was ~~158%~~145%. Additional measures of liquidity regularly monitored by the ALCO include the ratio of ~~wholesale funding~~FHLB advances to total ~~assets,~~funding, concentrations of large deposits, a measure of on balance sheet available liquidity ~~to volatile liabilities~~ and the ratio of ~~brokered~~non-interest bearing deposits to total ~~deposits. At September 30, 2017, BankUnited was within acceptable limits established by~~deposits, which is reflective of the ~~ALCO~~quality and cost, rather than the quantity, of available liquidity. The Company also has a comprehensive contingency liquidity funding plan and conducts a quarterly liquidity stress test, the results of which are reported to the risk committee of the Board of ~~Directors for each of these measures.~~Directors.

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 ~~available for sale~~ securities portfolio. There are regulatory limitations that may affect the ability of the Bank to pay dividends to BankUnited, Inc. Management believes that such limitations will not impact our ability to meet our ongoing near-term cash obligations.

We expect that our liquidity requirements will continue to be satisfied over the next 12 months through the sources of funds described above.

Interest Rate Risk

~~The~~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 limit exposure to interest rate risk, and to ensure procedures are established to monitor compliance with these policies. The ~~guidelines~~thresholds established by the ALCO are approved at least annually by the Board of ~~Directors.~~Directors or its Risk Committee.

Management believes that the simulation of net interest income in different interest rate environments provides the most meaningful measure of interest rate risk. Income simulation analysis is designed to capture not only the potential of all assets and liabilities to mature or reprice, but also the probability that they will do so. Income simulation also attends to the relative interest rate sensitivities of these items, and projects their behavior over an extended period of time. Finally, income simulation

permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also of proposed strategies for responding to them.

The income simulation model analyzes interest rate sensitivity by projecting net interest income over twelve and twenty-four month periods in a most likely rate scenario based on consensus forward interest rate curves versus net interest income in alternative rate scenarios. Simulations are generated based on both static and dynamic balance sheet assumptions. Management continually reviews and refines its interest rate risk management process in response to changes in the interest rate environment

and economic climate. Currently, our model projects ~~a down 100, plus 100, plus 200 and plus 300 basis point change with rates increasing by the magnitude of the rate ramp evenly over the next 12 months as well as flattening yield curve scenarios and~~ instantaneous rate shocks of down 100, plus 100, plus 200, plus 300 and plus ~~300~~400 basis ~~points.~~point shifts as well as a variety of yield curve slope scenarios. We continually evaluate the scenarios being modeled with a view toward adapting them to changing economic conditions, expectations and trends.

The Company’s ALCO policy provides that net interest income sensitivity will be considered acceptable if decreases in forecast net interest income ~~based on a dynamic forecasted balance sheet,~~ in specified parallel rate shock scenarios are within specified percentages of forecast net interest income in the most likely rate scenario over the next twelve months and in the second year. At March 31, 2020, the most likely rate scenario assumes that all indices are floored at 0%. The following table illustrates the ~~acceptable limits as defined by~~thresholds set forth in the ALCO policy and the impact on forecasted net interest income ~~of down 100, plus 100, plus 200 and plus 300 basis point rate shock~~in the indicated simulated scenarios at ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016:~~2019:


	Down 100		Plus 100		Plus 200		Plus 300		Down 100		Plus 100		Plus 200		Plus 300		Plus 400
Policy Limits:
Policy Thresholds:
In year 1	(6.0	)%	(6.0	)%	(10.0	)%	(14.0	)%	(6.0	)%	(6.0	)%	(10.0	)%	(14.0	)%	(18.0	)%
In year 2	(9.0	)%	(9.0	)%	(13.0	)%	(17.0	)%	(9.0	)%	(9.0	)%	(13.0	)%	(17.0	)%	(21.0	)%
Model Results at September 30, 2017 - increase (decrease):
Model Results at March 31, 2020 - increase (decrease):
In year 1	(0.4	)%	(0.2	)%	(0.6	)%	(1.2	)%	(2.4	)%	0.2	%	(0.8	)%	(2.5	)%	(4.7	)%
In year 2	(3.2	)%	1.7	%	3.0	%	4.2	%	(3.8	)%	2.7	%	3.7	%	3.5	%	2.9	%
Model Results at December 31, 2016 - increase (decrease):
Model Results at December 31, 2019 - increase (decrease):
In year 1	(2.0	)%	1.5	%	2.8	%	3.4	%	(1.1	)%	1.0	%	0.1	%	(2.1	)%	(5.1	)%
In year 2	(3.7	)%	2.6	%	4.6	%	6.6	%	(4.8	)%	4.6	%	7.2	%	8.7	%	9.4	%

Management also simulates changes in EVE in various interest rate environments. The ALCO policy has established parameters of acceptable risk that are defined in terms of the percentage change in EVE from a base scenario under ~~six~~eight rate scenarios, derived by implementing immediate parallel movements of plus and ~~minus~~down 100, 200, 300 and ~~300~~400 basis points from current rates. We did not simulate decreases in interest rates greater than 100 basis points at ~~September 30, 2017~~March 31, 2020 due to the ~~current~~currently low ~~rate environment.~~level of market interest rates. The ~~parameters~~following table illustrates the acceptable thresholds as established by ~~the~~ ALCO ~~stipulate that~~and the modeled ~~decline~~change in EVE ~~is considered acceptable if~~in the ~~decline is less than 9%, 18%~~indicated scenarios at March 31, 2020 and 27% in plus or minus 100, plus or minus 200 and plus or minus 300 basis point scenarios, respectively. As of September 30, 2017, our simulation for the Company indicated percentage changes from base EVE of 1.7%, (3.6)%, (7.9)% and (12.7)% in down 100, plus 100, plus 200 and plus 300 basis point scenarios, respectively.December 31, 2019:



	Down 100		Plus 100		Plus 200		Plus 300		Plus 400
Policy Thresholds	(9.0	)%	(9.0	)%	(18.0	)%	(27.0	)%	(36.0	)%
Model Results at March 31, 2020 - increase (decrease):	(5.6	)%	(0.5	)%	(4.0	)%	(8.2	)%	(12.6	)%
Model Results at December 31, 2019 - increase (decrease):	(1.5	)%	(0.7	)%	(3.1	)%	(6.2	)%	(9.7	)%

These measures fall within an acceptable level of interest rate risk per the ~~policies~~thresholds established byin the ALCO and the Board of Directors. In the event the models indicate an unacceptable level of risk, the Company could undertake a number of actions that would reduce this risk, including the sale or re-positioning of a portion of its available for sale investment portfolio, restructuring of borrowings, or the use of derivatives such as interest rate swaps and caps.policy.

Many assumptions were used by the Company to calculate the impact of changes in interest rates, including the change in rates. Actual results may not be similar to the Company’s projections due to several factors including the timing and frequency of rate changes, market conditions, changes in depositor behavior and loan prepayment speeds and the shape of the yield curve. Actual results may also differ due to the Company’s actions, if any, in response to changing rates and conditions.

Derivative Financial Instruments

Interest rate swaps designated as cash flow or fair value hedging instruments are one of the tools we use to manage interest rate risk. These derivative instruments are used to mitigate exposure to changes in interest ~~rates~~cash flows on variable rate borrowings ~~such~~and to changes in the fair value of fixed rate borrowings, in each case caused by fluctuations in benchmark interest rates, as ~~FHLB advances and~~well as to manage duration of liabilities. ~~These interest rate swaps are designated as cash flow hedging instruments.~~ The fair value of ~~these~~derivative instruments designated as hedges is included in other assets and other liabilities in our consolidated balance ~~sheets and changes~~sheets. Changes in fair value of derivative instruments designated as cash flow hedges are reported in accumulated other comprehensive income. Changes in the fair value of derivative instruments designated as fair value hedges are recognized in earnings, as is the offsetting gain or loss on the hedged item. At ~~September 30, 2017,~~March 31, 2020, outstanding interest rate swaps designated as cash flow hedges had an aggregate notional amount of ~~$2.0 billion. The aggregate fair value of~~$3.1 billion and outstanding interest rate swaps designated as ~~cash flow~~

fair value hedges ~~included in other assets was $1.1 million and the~~had an aggregate notional amount of $250 million. The aggregate fair value of interest rate swaps designated as cash flow hedges included in other liabilities was ~~$0.3~~$6.7 million.

Interest rate swaps and caps not designated as ~~cash flow~~ hedges had an aggregate notional amount of ~~$2.3~~$3.0 billion at ~~September 30, 2017.~~March 31, 2020. The aggregate fair value of these interest rate swaps and caps included in other assets was ~~$27.3~~$135.7 million and the aggregate fair

value included in other liabilities was ~~$26.8~~$42.3 million. These interest rate swaps and caps were entered into as accommodations to certain of our commercial borrowers. To mitigate interest rate risk associated with these derivatives, the Company enters into offsetting derivative positions with primary dealers.

See Note 76 to the consolidated financial statements for additional information about derivative financial instruments.

Off-Balance Sheet Arrangements

For more information on contractual obligations and commitments, see Note 1110 to the consolidated financial statements, the ~~FHLB Advances, Notes and Other~~ Borrowings section of this MD&A and Off-Balance Sheet Arrangements in the MD&A of the Company's ~~2016~~2019 Annual ~~Report on Form 10-K.~~

~~Critical Accounting Policies and Estimates~~

~~The Company has made no significant changes in its critical accounting policies and significant estimates from those disclosed in the 2016 Annual Report~~report on Form 10-K.

Non-GAAP Financial Measures

~~Tangible book value per common share~~Pre-tax, pre-provision income is a non-GAAP financial measure. Management believes this measure is relevant to understanding the ~~capital position and~~ performance of the ~~Company. Disclosure~~Company attributable to elements other than the provision for credit losses, particularly in view of ~~this non-GAAP financial~~the adoption of the CECL accounting methodology in the current quarter, which may impact comparability of operating results to prior periods. This measure also provides a meaningful ~~base~~basis for ~~comparability~~comparison to other financial institutions. The following table reconciles the non-GAAP financial measurement of ~~tangible book value per common share~~pre-tax, pre-provision income to the comparable GAAP financial measurement of ~~book value per common share at September 30, 2017~~income (loss) before income taxes for the three months ended March 31, 2020 and 2019 (in ~~thousands except share and per share data)~~thousands):

Total stockholders’ equity $ 2,623,489
Less: goodwill and other intangible assets 77,857
Tangible stockholders’ equity $ 2,545,632

Common shares issued and outstanding 106,821,902

Book value per common share $ 24.56

Tangible book value per common share $ 23.83



	Three Months Ended March 31,
	2020			2019
Income (loss) before income taxes (GAAP)	$	(40,422	)	$	90,185
Plus: Provision for credit losses	125,428			10,281
Pre-tax, pre-provision income (non-GAAP)	$	85,006		$	100,466

Recurring operating expenses is a non-GAAP financial measure. Management believes disclosure of this measure provides readers with information that may be useful in comparing current period results to prior periods and in interpreting trends in operational costs, particularly in light of our BankUnited 2.0 initiative. The following table reconciles the non-GAAP financial measurement of recurring operating expenses to the comparable GAAP financial measurement of total non-interest expense for the three months ended March 31, 2020 and 2019 (in thousands):



	Three Months Ended March 31,
	2020			2019
Total non-interest expense (GAAP)	$	118,868		$	126,690
Less:
Depreciation of operating lease equipment	(12,603		)	(11,812		)
Costs incurred directly related to implementation of BankUnited 2.0	(79		)	(5,892		)
Recurring operating expenses (non-GAAP)	$	106,186		$	108,986

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See the section entitled “Interest Rate Risk” included in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Effective January 1, 2020, the Company adopted ASU 2016-13. The Company designed new controls and modified existing controls as part of its adoption. These additional internal controls over financial reporting included controls over model governance, assumptions, the determination of a reasonable and supportable economic forecast, and expanded controls over loan level data.

During the quarter ended ~~September 30, 2017,~~March 31, 2020, there were no changes in the ~~Company’s~~Company's internal control over financial reporting, other than those discussed above, that materially affected, or are reasonably likely to materially affect, the ~~Company’s~~Company's internal control over financial reporting. We have focused on insuring that our technology systems and internal controls continue to operate effectively in a remote work environment and have not identified any instances in which controls have failed to operate effectively. We are continually monitoring and assessing the COVID-19 situation on our internal controls to address impacts to their design, implementation and operating effectiveness.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved as plaintiff or defendant in various legal actions arising in the normal course of business. In the opinion of management, based upon currently available information and the advice of legal counsel, the likelihood is remote that the impact of these proceedings, either individually or in the aggregate, would be material to the Company’s consolidated financial position, results of operations or cash flows.

We received a subpoena from the United States Department of Justice in October 2019 requesting documentation related to the taxi medallion line of business formerly conducted by the Bank. We are cooperating with this investigation.

Item 1A. Risk Factors

~~For~~The COVID-19 pandemic has caused substantial disruption to the global economy which has adversely affected, and is expected to continue to adversely affect, the Company’s business and results of operations. The future impacts of the COVID-19 pandemic on the global economy and the Company’s business, results of operations and financial condition remains uncertain.

In March 2020, the World Health Organization declared novel coronavirus disease 2019 (COVID-19) as a ~~discussion~~global pandemic. The pandemic has resulted in governmental authorities implementing numerous measures attempting to contain the spread and impact of ~~risk factors relating~~COVID-19 such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activities, including in major markets in which the Company and its clients are located or do business. The COVID-19 pandemic, and governmental responses to the pandemic, have severely negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels.

This macroeconomic environment has had, and could continue to have, an adverse effect on the Company’s business and operations. Should current economic impacts persist or continue to deteriorate, this macroeconomic environment could have a continued adverse effect on our business ~~please refer~~and operations, including, but not limited to, decreased demand for the Company’s products and services, protracted periods of lower interest rates, loss of income resulting from forbearances, deferrals and fee waivers provided by the Company to its consumer and commercial borrowers, increased credit losses due to deterioration in the financial condition of our consumer and commercial borrowers, including declining asset and collateral values, which may continue to increase our provision for credit losses and net charge-offs and possible constraints on liquidity and capital, whether due to increases in risk-weighted assets related to supporting client activities or to regulatory actions. The business operations of the Company may also be disrupted if significant portions of its workforce or those of vendors or third-party service providers are unable to work effectively, including because of illness, quarantines, government actions, restrictions in connection with the pandemic, and technology limitations and/or disruptions. The Company also faces an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions taken by governmental authorities in response to those conditions.

The extent to which the COVID-19 pandemic impacts the Company’s business, results of operations, and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the ~~factors discussed under “Part I-Item 1A - Risk~~pandemic. Moreover, the effects of the COVID-19 pandemic may heighten many of the other risks described in the section entitled “Risk Factors” in our ~~2016~~most recent Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K including, but not limited to, financial market conditions, economic conditions, credit risk, interest rate risk, risk of security breaches and technology changes.

There have been no material changes in the other risk factors disclosed by the Company in its 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, ~~2017, in addition to the following factor.~~2020.

~~A significant portion~~

Item 2. Unregistered Sales of ~~our loans are to borrowers whose businesses are located in or secured by properties located in the state~~Equity Securities and Use of Florida, which was impacted by Hurricane Irma. In addition, the Bank has a limited number of customers and collateral properties located in areas of Texas that were impacted by Hurricane Harvey. The effects of Hurricanes Irma and Harvey and other adverse weather events may negatively affect our geographic markets or disrupt our operations, which could have an adverse impact on our results of operations.Proceeds

Our geographic markets in Florida and other coastal areas are susceptible to severe weather, including hurricanes, flooding and damaging winds. On September 10, 2017, Hurricane Irma made landfall in Florida as a Category 4 hurricane affecting some areas with significant flooding, wind damage and power outages. In addition, the Bank has a limited number of customers and collateral properties located in areas of Texas that were impacted by Hurricane Harvey during August, 2017. Weather events such as Hurricanes Irma and Harvey can disrupt our operations, result in damage to our facilities and negatively affect the local economies in which we operate. These events may lead to a decline in loan originations, 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. These events may also lead to a decline in regional economic conditions and prospects in certain circumstances. Our business or results of operations may be adversely impacted by these and other negative effects of such weather events.



	Issuer Purchases of Equity Securities
Period	Total number of shares purchased⁽¹⁾	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs⁽²⁾
January 1 - January 31, 2020	418,852	$	34.07	418,852	$	131,697,572
February 1 - February 29, 2020	1,312,616	32.47		1,312,616	$	89,070,779
March 1 - March 31, 2020	1,594,109	27.65		1,594,109	$	44,997,312
Total	3,325,577	$	30.36	3,325,577

We are currently in the process of assessing the impact of Hurricanes Irma and Harvey on our borrowers’ ability to repay their obligations to the Bank and on the value of underlying collateral properties. Although we currently believe the storms did not materially impact the ability of the substantial majority of our borrowers to repay their loans, our impact assessment is ongoing, including with respect to the impact on our loan originations, the value of properties securing our loans or the performance of our loans, the economic condition of our borrowers and their ability to timely repay their obligations, and the overall impacts on regional economic conditions and our business, operations and growth prospects in the affected market areas. As a result, it is premature to conclude with certainty as to the ultimate impact of these hurricanes on our level of loan losses, our business or the results of our operations. The Bank is generally named as a loss payee on hazard and flood insurance policies covering collateral properties and carries casualty and business interruption insurance. These policies could partially mitigate losses that the Bank may sustain due to the effects of these hurricanes; however, the timing and amount of any proceeds that we may recover from insurance policies is uncertain and may not be sufficient to adequately compensate us for losses that we experience due to these hurricanes and other natural disasters.


(1)	The total number of shares purchased during the periods indicated includes shares purchased as part of a publicly announced program.

(2)

On September 12, 2019, the Company's Board of Directors authorized a share repurchase program under which the Company may repurchase up to $150 million of its outstanding common stock. No time limit was set for the completion of the share repurchase program. The authorization does not require the Company to acquire any specified number of common shares and may be commenced, suspended or discontinued without prior notice. Under this authorization, $44,997,312 remained available for purchase at March 31, 2020. On March 13, 2020, we announced the temporary suspension of the share repurchase program in light of the challenges presented by COVID-19 and surrounding events.

Item 6.

Exhibits



Exhibit Number	Description	Location

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

101.INS	The instance document does not appear in the interactive data file because its XBRL ~~Instance Document~~tags are embedded within the inline XBRL document	Filed herewith

101.SCH	XBRL Taxonomy Extension Schema	Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase	Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase	Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase	Filed herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase	Filed herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized this 8th day of ~~November 2017.~~May 2020.



	/s/ Rajinder P. Singh
	Rajinder P. Singh
	Chairman, President and Chief Executive Officer


	/s/ Leslie N. Lunak
	Leslie N. Lunak
	Chief Financial Officer

8373



		Page

	Glossary of Defined Terms	ii

PART I.	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Statements of Cash Flows	4
	Consolidated Statements of Stockholders’ Equity	6
	Notes to Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4635

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	8069

ITEM 4.	Controls and Procedures	8070

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	8170

ITEM 1A.	Risk Factors	8170

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71

ITEM 6.	Exhibits	8272

SIGNATURES		8373



Balance at December 31, 2015	$	902,565
Reclassifications from non-accretable difference	76,751
Accretion	(303,931		)
Balance at December 31, 2016	675,385
Reclassifications from non-accretable difference	72,827
Accretion	(226,251		)
Balance at September 30, 2017	$	521,961



	September 30, 2017
	FICO
LTV	720 or less		721 - 740		741 - 760		761 or greater		Total
60% or less	$	94,357	$	111,279	$	185,614	$	819,422	$	1,210,672
60% - 70%	93,963		102,461		140,350		586,158		922,932
70% - 80%	139,923		173,808		316,544		1,091,868		1,722,143
More than 80%	24,725		20,610		24,981		85,781		156,097
	$	352,968	$	408,158	$	667,489	$	2,583,229	$	4,011,844



Balance at December 31, 2015	$	739,843
Amortization	(160,091		)
Reduction for claims filed	(46,083		)
Net loss on FDIC indemnification	(17,759		)
Balance at December 31, 2016	515,910
Amortization	(135,351		)
Reduction for claims filed	(16,768		)
Net loss on FDIC indemnification	(14,174		)
Balance at September 30, 2017	$	349,617



	Unrealized Gains on Investment Securities Available for Sale		Unrealized Losses on Derivative Instruments			Total
Balance at December 31, 2016	$	47,057	$	(5,810	)	$	41,247
Other comprehensive income	15,164		(3,822		)	11,342
Balance at September 30, 2017	$	62,221	$	(9,632	)	$	52,589

Balance at December 31, 2015	$	41,535	$	(19,353	)	$	22,182
Other comprehensive income	47,400		(27,052		)	20,348
Balance at September 30, 2016	$	88,935	$	(46,405	)	$	42,530



	Fair Value at		Valuation Technique	Unobservable Input	Range (Weighted Average)
	September 30, 2017		Valuation Technique	Unobservable Input	Range (Weighted Average)
Investment grade	$	34,245	Discounted cash flow	Voluntary prepayment rate	6.60% - 25.60% (15.92%)
				Probability of default	0.13% - 4.04% (1.36%)
				Loss severity	15.00% - 75.00% (33.10%)
				Discount rate	1.88% - 7.43% (3.48%)

Non-investment grade	$	26,552	Discounted cash flow	Voluntary prepayment rate	1.10% - 29.30% (15.35%)
				Probability of default	0.13% - 4.15% (1.51%)
				Loss severity	15.00% - 95.00% (32.96%)
				Discount rate	1.35% - 9.43% (5.89%)



Commitments to fund loans	$	417,943
Commitments to purchase loans	287,302
Unfunded commitments under lines of credit	2,361,922
Commercial and standby letters of credit	83,141
	$	3,150,308



	September 30, 2017		October 31, 2017
Past due more than 30 days:
Covered loans	$	14,669	$	13,454
Total	$	20,099	$	21,350
Granted temporary payment deferrals:
Covered loans	$	14,807	$	16,983
Total	$	24,772	$	25,969



	ACI		Non-ACI
Loans resetting from interest only:
Previously reset	72.3	%	51.5	%
Scheduled to reset within 12 months	2.5	%	5.5	%
Scheduled to reset after 12 months	25.2	%	43.0	%
	100.0	%	100.0	%
Lien position:
First liens	10.3	%	18.8	%
Second or third liens	89.7	%	81.2	%
	100.0	%	100.0	%



	September 30, 2017								December 31, 2016
	Covered Assets		Non-Covered Assets			Total			Covered Assets		Non-Covered Assets			Total
Non-accrual loans
Residential and other consumer:
1 - 4 single family residential	$	934	$	1,890		$	2,824		$	918	$	566		$	1,484
Home equity loans and lines of credit	2,369		—			2,369			2,283		—			2,283
Other consumer loans	—		332			332			—		2			2
Total residential and other consumer loans	3,303		2,222			5,525			3,201		568			3,769
Commercial:
Non-owner occupied commercial real estate	—		9,930			9,930			—		559			559
Construction and land	—		1,238			1,238			—		1,238			1,238
Owner occupied commercial real estate	—		21,455			21,455			—		19,439			19,439
Commercial and industrial
Taxi medallion loans	—		120,572			120,572			—		60,660			60,660
Other commercial and industrial	—		27,569			27,569			—		16,036			16,036
Commercial lending subsidiaries	—		16,625			16,625			—		32,645			32,645
Total commercial loans	—		197,389			197,389			—		130,577			130,577
Total non-accrual loans	3,303		199,611			202,914			3,201		131,145			134,346
Non-ACI and new loans past due 90 days and still accruing	—		846			846			—		1,551			1,551
Total non-performing loans	3,303		200,457			203,760			3,201		132,696			135,897
OREO	4,114		1,661			5,775			4,658		4,882			9,540
Repossessed assets	—		2,457			2,457			—		3,551			3,551
Total non-performing assets	7,417		204,575			211,992			7,859		141,129			148,988
Impaired ACI loans and pools on accrual status	5,640		—			5,640			—		1,335			1,335
Performing TDRs
Taxi medallion loans	—		—			—			—		36,848			36,848
Other	10,786		19,365			30,151			11,166		26,282			37,448
Total impaired loans and non-performing assets	$	23,843	$	223,940		$	247,783		$	19,025	$	205,594		$	224,619

Non-performing loans to total loans ^{(1) (3)}			1.00		%	0.99		%			0.71		%	0.70		%
Non-performing assets to total assets ⁽²⁾			0.69		%	0.72		%			0.51		%	0.53		%
ALLL to total loans ⁽¹⁾			0.77		%	0.77		%			0.80		%	0.79		%
ALLL to non-performing loans			76.69		%	77.82		%			113.68		%	112.55		%
Net charge-offs to average loans ^{(4) (5)}			0.40		%	0.39		%			0.13		%	0.13		%



	Number of TDRs	Recorded Investment		Related Specific Allowance
Residential and other consumer:
Covered	59	$	11,721	$	1,024
Non-covered	9	912		71
Commercial:
Taxi medallion loans	173	92,370		10,505
Other	30	72,702		10,581
	271	$	177,705	$	22,181



	Nine Months Ended September 30, 2016
				Covered Loans
	Non-Covered Loans			ACI Loans		Non-ACI Loans			Total
Balance at December 31, 2015	$	120,960		$	—	$	4,868		$	125,828
Provision for (recovery of) loan losses:
1-4 single family residential	(324		)	—		23			(301		)
Home equity loans and lines of credit	2			—		(1,097		)	(1,095		)
Other consumer loans	(98		)	—		—			(98		)
Multi-family	1,509			—		—			1,509
Non-owner occupied commercial real estate	7,563			—		—			7,563
Construction and land	(980		)	—		—			(980		)
Owner occupied commercial real estate	4,854			—		—			4,854
Commercial and industrial
Taxi medallion loans	9,679			—		—			9,679
Other commercial and industrial	16,686			—		(45		)	16,641
Commercial lending subsidiaries	4,677			—		—			4,677
Total Provision	43,568			—		(1,119		)	42,449
Charge-offs:
1-4 single family residential	—			—		(312		)	(312		)
Home equity loans and lines of credit	—			—		(774		)	(774		)
Non-owner occupied commercial real estate	(128		)	—		—			(128		)
Construction and land	(93		)	—		—			(93		)
Owner occupied commercial real estate	(2,615		)	—		—			(2,615		)
Commercial and industrial
Taxi medallion loans	(4,235		)	—		—			(4,235		)
Other commercial and industrial	(7,245		)	—		—			(7,245		)
Commercial lending subsidiaries	(1,432		)	—		—			(1,432		)
Total Charge-offs	(15,748		)	—		(1,086		)	(16,834		)
Recoveries:
Home equity loans and lines of credit	—			—		77			77
Other consumer loans	18			—		—			18
Owner occupied commercial real estate	1,175			—		—			1,175
Commercial and industrial
Other commercial and industrial	440			—		45			485
Commercial lending subsidiaries	1,278			—		—			1,278
Total Recoveries	2,911			—		122			3,033
Net Charge-offs:	(12,837		)	—		(964		)	(13,801		)
Balance at September 30, 2016	$	151,691		$	—	$	2,785		$	154,476



Maturing in:
2017—One month or less	$	2,395,000
2017—Over one month	855,000
2018	1,396,000
2019	100,000
2020	125,000
Carrying value	$	4,871,000




Total stockholders’ equity	$	2,623,489
Less: goodwill and other intangible assets	77,857
Tangible stockholders’ equity	$	2,545,632

Common shares issued and outstanding	106,821,902

Book value per common share	$	24.56

Tangible book value per common share	$	23.83