UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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


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

For the quarterly period ended ~~June 30, 2021~~March 31, 2022

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	33016
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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

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

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

Class

Trading Symbol

Name of Exchange on Which Registered

Common Stock, $0.01 Par Value

BKU

New York Stock Exchange

The number of outstanding shares of the registrant common stock, $0.01 par value, as of ~~August~~May 2, ~~2021~~2022 was ~~92,820,882.~~81,787,178.

BANKUNITED, INC.

Form 10-Q

For the Quarter Ended ~~June 30, 2021~~March 31, 2022

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

ALM						Asset Liability Management
AOCI						Accumulated other comprehensive income
APY						Annual Percentage Yield
~~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


CECL						Current expected credit losses
CET1						Common Equity Tier 1 capital

C&I						Commercial and Industrial loans, including owner-occupied commercial real estate
CLO						Collateralized loan obligations
CMBS						Commercial mortgage-backed securities
CME						Chicago Mercantile Exchange
CMOs						Collateralized mortgage obligations



COVID-19						Coronavirus disease of 2019
CPR						Constant prepayment rate

CRE						Commercial real estate loans, including multi-family; non-owner occupied commercial real estate; and construction and land

DDA						Demand deposit account
DFAST						Dodd-Frank Act Stress Test

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

FHA						Federal Housing Administration
FHLB						Federal Home Loan Bank
FICO						Fair Isaac Corporation (credit score)

FRB						Federal Reserve Bank


GAAP						U.S. generally accepted accounting principles
GDP						Gross Domestic Product
~~GLB Act~~						~~The Gramm-Leach-Bliley Financial Modernization Act of 1999~~
GNMA						Government National Mortgage Association

HPI						Home price indices
~~HTM~~						~~Held to maturity~~
~~IPO~~						~~Initial public offering~~


ISDA						International Swaps and Derivatives Association


LGD						Loss Given Default


~~LGD~~						~~Loss Given Default~~
LIBOR						London InterBank Offered Rate


LTV						Loan-to-value
MBS						Mortgage-backed securities
MSA						Metropolitan Statistical Area
~~MSLF~~						~~Federal Reserve Main Street Lending Facility~~

MWL						Mortgage warehouse lending

~~Non-OOCRE~~						~~Non-owner occupied commercial real estate~~
NRSRO						Nationally recognized statistical rating organization




~~OCI~~NYSE						~~Other comprehensive income~~New York Stock Exchange

~~OOCRE~~OCC						~~Owner occupied commercial real estate~~Office of the Comptroller of the Currency

OFAC						U.S. Department of the Treasury's Office of Foreign Assets Control

OREO						Other real estate owned

PCD						Purchased credit-deteriorated
PD						Probability of default
Pinnacle						Pinnacle Public Finance, Inc.
~~PPNR~~						~~Pre-tax, pre-provision net revenue~~
PPP						Small Business Administration’s Paycheck Protection Program
~~PPPLF~~						~~FRB Paycheck Protection Program Liquidity Facility~~

~~PSU~~						~~Performance Share Unit~~

~~REIT~~						~~Real Estate Investment Trust~~


~~RSU~~						~~Restricted Share Unit~~





SBA						U.S. Small Business Administration

SEC						Securities and Exchange Commission

SOFR
						Secured Overnight Financing Rate
S&P 500						Standard & Poor's 500 Index

TDR						Troubled-debt restructuring
Tri-State						New York, New Jersey and Connecticut
UPB						Unpaid principal balance

~~VA loan~~						~~Loan guaranteed by the U.S. Department of Veterans Affairs~~

VIX						CBOE Volatility Index
WARM						Weighted-average remaining maturity

iii

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)


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Cash and due from banks:	Cash and due from banks:					Cash and due from banks:
Non-interest bearing	Non-interest bearing	$	17,902	$	20,233	Non-interest bearing	$	17,780	$	19,143
Interest bearing	Interest bearing	877,446		377,483		Interest bearing	679,712		295,714
Cash and cash equivalents	Cash and cash equivalents	895,348		397,716		Cash and cash equivalents	697,492		314,857
Investment securities (including securities recorded at fair value of $10,222,035 and $9,166,683)		10,232,035		9,176,683
Investment securities (including securities recorded at fair value of $10,562,098 and $10,054,198)						Investment securities (including securities recorded at fair value of $10,562,098 and $10,054,198)	10,572,098		10,064,198
Non-marketable equity securities	Non-marketable equity securities	164,959		195,865		Non-marketable equity securities	190,534		135,859
Loans held for sale		0		24,676

Loans	Loans	22,885,074		23,866,042		Loans	23,370,029		23,765,053
Allowance for credit losses	Allowance for credit losses	(175,642)		(257,323)		Allowance for credit losses	(125,443)		(126,457)
Loans, net	Loans, net	22,709,432		23,608,719		Loans, net	23,244,586		23,638,596
Bank owned life insurance	Bank owned life insurance	303,519		294,629		Bank owned life insurance	314,697		309,477
Operating lease equipment, net	Operating lease equipment, net	667,935		663,517		Operating lease equipment, net	627,146		640,726

Goodwill	Goodwill	77,637		77,637		Goodwill	77,637		77,637
Other assets	Other assets	649,422		571,051		Other assets	607,434		634,046
Total assets	Total assets	$	35,700,287	$	35,010,493	Total assets	$	36,331,624	$	35,815,396

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:	Liabilities:					Liabilities:
Demand deposits:	Demand deposits:					Demand deposits:
Non-interest bearing	Non-interest bearing	$	8,834,228	$	7,008,838	Non-interest bearing	$	9,663,307	$	8,975,621
Interest bearing	Interest bearing	3,218,441		3,020,039		Interest bearing	2,872,430		3,709,493
Savings and money market	Savings and money market	13,578,526		12,659,740		Savings and money market	13,029,823		13,368,745
Time	Time	2,978,074		4,807,199		Time	2,975,715		3,384,243
Total deposits	Total deposits	28,609,269		27,495,816		Total deposits	28,541,275		29,438,102
Federal funds purchased	Federal funds purchased	0		180,000		Federal funds purchased	199,000		199,000
FHLB advances	FHLB advances	2,681,505		3,122,999		FHLB advances	3,395,000		1,905,000
Notes and other borrowings	Notes and other borrowings	721,639		722,495		Notes and other borrowings	721,291		721,416
Other liabilities	Other liabilities	526,331		506,171		Other liabilities	613,826		514,117
Total liabilities	Total liabilities	32,538,744		32,027,481		Total liabilities	33,470,392		32,777,635

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0

Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 93,238,553 and 93,067,500 shares issued and outstanding		932		931
Common stock, par value $0.01 per share, 400,000,000 shares authorized; 84,052,021 and 85,647,986 shares issued and outstanding						Common stock, par value $0.01 per share, 400,000,000 shares authorized; 84,052,021 and 85,647,986 shares issued and outstanding	841		856
Paid-in capital	Paid-in capital	1,011,786		1,017,518		Paid-in capital	626,564		707,503
Retained earnings	Retained earnings	2,173,698		2,013,715		Retained earnings	2,391,526		2,345,342
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(24,873)		(49,152)		Accumulated other comprehensive loss	(157,699)		(15,940)
Total stockholders' equity	Total stockholders' equity	3,161,543		2,983,012		Total stockholders' equity	2,861,232		3,037,761
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	35,700,287	$	35,010,493	Total liabilities and stockholders' equity	$	36,331,624	$	35,815,396

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 June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Interest income:	Interest income:									Interest income:
Loans	Loans	$	202,520	$	213,938	$	407,855	$	448,297	Loans		$	191,562	$	205,335
Investment securities	Investment securities	37,674		50,932		76,175		106,992		Investment securities		43,048		38,501
Other	Other	1,607		2,908		3,200		6,628		Other		1,354		1,593
Total interest income	Total interest income	241,801		267,778		487,230		561,917		Total interest income		235,964		245,429
Interest expense:	Interest expense:									Interest expense:
Deposits	Deposits	17,316		50,187		39,692		133,009		Deposits		11,857		22,376
Borrowings	Borrowings	26,174		27,254		52,987		57,995		Borrowings		15,465		26,813
Total interest expense	Total interest expense	43,490		77,441		92,679		191,004		Total interest expense		27,322		49,189
Net interest income before provision for credit losses	Net interest income before provision for credit losses	198,311		190,337		394,551		370,913		Net interest income before provision for credit losses		208,642		196,240
Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	(27,534)		25,414		(55,523)		150,842		Provision for (recovery of) credit losses		7,830		(27,989)
Net interest income after provision for credit losses	Net interest income after provision for credit losses	225,845		164,923		450,074		220,071		Net interest income after provision for credit losses		200,812		224,229
Non-interest income:	Non-interest income:									Non-interest income:
Deposit service charges and fees	Deposit service charges and fees	5,417		3,701		10,317		7,887		Deposit service charges and fees		5,960		4,900
Gain on sale of loans, net		2,234		4,326		3,988		7,792
Gain on investment securities, net		4,155		6,836		6,520		3,383
Gain (loss) on sale of loans, net										Gain (loss) on sale of loans, net		(824)		1,754
Gain (loss) on investment securities, net										Gain (loss) on investment securities, net		(7,868)		2,365
Lease financing	Lease financing	13,522		16,150		26,010		31,631		Lease financing		13,415		12,488
Other non-interest income	Other non-interest income	7,429		7,338		16,218		10,956		Other non-interest income		3,618		8,789
Total non-interest income	Total non-interest income	32,757		38,351		63,053		61,649		Total non-interest income		14,301		30,296
Non-interest expense:	Non-interest expense:									Non-interest expense:
Employee compensation and benefits	Employee compensation and benefits	56,459		48,877		115,747		107,764		Employee compensation and benefits		67,088		59,288
Occupancy and equipment	Occupancy and equipment	11,492		11,901		23,367		24,270		Occupancy and equipment		11,512		11,875
Deposit insurance expense	Deposit insurance expense	4,222		4,806		11,672		9,209		Deposit insurance expense		3,403		7,450
Professional fees	Professional fees	2,139		3,131		4,051		6,335		Professional fees		2,262		1,912
Technology and telecommunications	Technology and telecommunications	16,851		14,025		32,592		26,621		Technology and telecommunications		17,004		15,741

Depreciation of operating lease equipment	Depreciation of operating lease equipment	12,834		12,219		25,051		24,822		Depreciation of operating lease equipment		12,610		12,217

Other non-interest expense	Other non-interest expense	14,455		11,411		29,193		26,217		Other non-interest expense		12,445		14,738
Total non-interest expense	Total non-interest expense	118,452		106,370		241,673		225,238		Total non-interest expense		126,324		123,221
Income before income taxes	Income before income taxes	140,150		96,904		271,454		56,482		Income before income taxes		88,789		131,304
Provision for income taxes	Provision for income taxes	36,176		20,396		68,666		10,925		Provision for income taxes		21,639		32,490
Net income	Net income	$	103,974	$	76,508	$	202,788	$	45,557	Net income		$	67,150	$	98,814
Earnings per common share, basic	Earnings per common share, basic	$	1.12	$	0.80	$	2.18	$	0.47	Earnings per common share, basic		$	0.79	$	1.06
Earnings per common share, diluted	Earnings per common share, diluted	$	1.11	$	0.80	$	2.17	$	0.47	Earnings per common share, diluted		$	0.79	$	1.06

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 June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021

Net income	Net income	$	103,974	$	76,508	$	202,788	$	45,557	Net income		$	67,150	$	98,814
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:									Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investment securities available for sale:	Unrealized gains (losses) on investment securities available for sale:									Unrealized gains (losses) on investment securities available for sale:
Net unrealized holding gain (loss) arising during the period		13,926		188,405		(8,559)		(24,755)
Net unrealized holding loss arising during the period										Net unrealized holding loss arising during the period		(174,980)		(22,485)
Reclassification adjustment for net securities gains realized in income	Reclassification adjustment for net securities gains realized in income	(2,118)		(4,264)		(5,073)		(5,404)		Reclassification adjustment for net securities gains realized in income		(1,978)		(2,955)
Net change in unrealized gains (losses) on securities available for sale	Net change in unrealized gains (losses) on securities available for sale	11,808		184,141		(13,632)		(30,159)		Net change in unrealized gains (losses) on securities available for sale		(176,958)		(25,440)
Unrealized losses on derivative instruments:
Net unrealized holding gain (loss) arising during the period		(8,944)		(11,070)		15,667		(91,884)
Unrealized gains (losses) on derivative instruments:										Unrealized gains (losses) on derivative instruments:
Net unrealized holding gains arising during the period										Net unrealized holding gains arising during the period		31,179		24,611
Reclassification adjustment for net losses realized in income	Reclassification adjustment for net losses realized in income	11,088		7,502		22,244		10,851		Reclassification adjustment for net losses realized in income		4,020		11,156
Net change in unrealized losses on derivative instruments		2,144		(3,568)		37,911		(81,033)

Net change in unrealized gains (losses) on derivative instruments										Net change in unrealized gains (losses) on derivative instruments		35,199		35,767
Other comprehensive income (loss)	Other comprehensive income (loss)	13,952		180,573		24,279		(111,192)		Other comprehensive income (loss)		(141,759)		10,327
Comprehensive income (loss)	Comprehensive income (loss)	$	117,926	$	257,081	$	227,067	$	(65,635)	Comprehensive income (loss)		$	(74,609)	$	109,141

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

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(In thousands)


		Six Months Ended June 30,				Three Months Ended March 31,
		2021		2020				2022		2021
Cash flows from operating activities:	Cash flows from operating activities:						Cash flows from operating activities:
Net income	Net income	$	202,788	$	45,557		Net income	$	67,150	$	98,814
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion, net	Amortization and accretion, net	(15,124)		(11,590)			Amortization and accretion, net	(3,382)		(8,202)
Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	(55,523)		150,842			Provision for (recovery of) credit losses	7,830		(27,989)

Gain on sale of loans, net		(3,988)		(7,792)
(Gain) loss on sale of loans, net							(Gain) loss on sale of loans, net	824		(1,754)

Gain on investment securities, net		(6,520)		(3,383)
(Gain) loss on investment securities, net							(Gain) loss on investment securities, net	7,868		(2,365)
Equity based compensation	Equity based compensation	12,414		7,351			Equity based compensation	6,614		7,669
Depreciation and amortization	Depreciation and amortization	37,089		35,691			Depreciation and amortization	18,947		18,142
Deferred income taxes	Deferred income taxes	1,218		(769)			Deferred income taxes	12,924		6,599

Proceeds from sale of loans held for sale	Proceeds from sale of loans held for sale	455,996		369,807			Proceeds from sale of loans held for sale	248,843		203,155
Loans originated for sale, net of repayments		0		(17,681)

Other:	Other:						Other:
Increase in other assets		(132,384)		(23,101)
(Decrease) increase in other liabilities		81,833		(224,093)
Decrease in other assets							Decrease in other assets	56,905		24,498
Increase in other liabilities							Increase in other liabilities	32,767		67,832
Net cash provided by operating activities	Net cash provided by operating activities	577,799		320,839			Net cash provided by operating activities	457,290		386,399

Cash flows from investing activities:	Cash flows from investing activities:						Cash flows from investing activities:

Purchase of investment securities		(3,145,279)		(2,263,847)
Purchases of investment securities							Purchases of investment securities	(1,698,615)		(920,302)
Proceeds from repayments and calls of investment securities	Proceeds from repayments and calls of investment securities	1,265,922		587,139			Proceeds from repayments and calls of investment securities	559,785		535,586
Proceeds from sale of investment securities	Proceeds from sale of investment securities	800,056		547,337			Proceeds from sale of investment securities	482,307		410,242
Purchase of non-marketable equity securities		(1,200)		(128,562)
Purchases of non-marketable equity securities							Purchases of non-marketable equity securities	(106,875)		(1,199)
Proceeds from redemption of non-marketable equity securities	Proceeds from redemption of non-marketable equity securities	32,106		149,175			Proceeds from redemption of non-marketable equity securities	52,200		19,355
Purchases of loans	Purchases of loans	(2,271,081)		(1,085,437)			Purchases of loans	(862,163)		(963,441)
Loan originations and repayments, net	Loan originations and repayments, net	2,638,153		68,012			Loan originations and repayments, net	1,000,544		1,164,935
Proceeds from sale of loans, net	Proceeds from sale of loans, net	183,263		11,604			Proceeds from sale of loans, net	5,159		114,742

Acquisition of operating lease equipment	Acquisition of operating lease equipment	(38,875)		(19,118)			Acquisition of operating lease equipment	—		(38,875)
Other investing activities	Other investing activities	(5,183)		(10,663)			Other investing activities	(11,964)		(1,771)
Net cash used in investing activities		(542,118)		(2,144,360)
Net cash provided by (used in) investing activities							Net cash provided by (used in) investing activities	(579,622)		319,272

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

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)


		Six Months Ended June 30,				Three Months Ended March 31,
		2021		2020				2022		2021
Cash flows from financing activities:	Cash flows from financing activities:						Cash flows from financing activities:
Net increase in deposits		1,113,453		1,675,833
Net increase (decrease) in deposits							Net increase (decrease) in deposits	(896,827)		236,266
Net decrease in federal funds purchased	Net decrease in federal funds purchased	(180,000)		0			Net decrease in federal funds purchased	—		(180,000)
Additions to FHLB and PPPLF borrowings		1,106,000		3,762,336
Repayments of FHLB and PPPLF borrowings		(1,545,999)		(3,596,310)
Proceeds from issuance of notes, net		0		293,858
Additions to FHLB borrowings							Additions to FHLB borrowings	1,810,000		920,000
Repayments of FHLB borrowings							Repayments of FHLB borrowings	(320,000)		(1,020,000)

Dividends paid	Dividends paid	(43,714)		(42,702)			Dividends paid	(19,876)		(22,309)

Repurchase of common stock	Repurchase of common stock	(7,263)		(100,972)			Repurchase of common stock	(82,103)		(7,263)
Other financing activities	Other financing activities	19,474		19,036			Other financing activities	13,773		19,715
Net cash provided by financing activities		461,951		2,011,079
Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	504,967		(53,591)
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	497,632		187,558			Net increase in cash and cash equivalents	382,635		652,080
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	397,716		214,673			Cash and cash equivalents, beginning of period	314,857		397,716
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	895,348	$	402,231		Cash and cash equivalents, end of period	$	697,492	$	1,049,796

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:						Supplemental disclosure of cash flow information:
Interest paid	Interest paid	$	94,782	$	209,233		Interest paid	$	17,616	$	41,379
Income taxes paid, net		$	236,491	$	4,883
Income taxes (refunded) paid, net							Income taxes (refunded) paid, net	$	(13,092)	$	39,459

Supplemental schedule of non-cash investing and financing activities:	Supplemental schedule of non-cash investing and financing activities:						Supplemental schedule of non-cash investing and financing activities:
Unsettled sale of loans		$	0	$	11,058

Transfers from loans to loans held for sale	Transfers from loans to loans held for sale	$	611,568	$	329,308		Transfers from loans to loans held for sale	$	254,826	$	305,028

Dividends declared, not paid	Dividends declared, not paid	$	21,400	$	21,909		Dividends declared, not paid	$	20,966	$	21,405
Unsettled investment securities trades, net		$	0	$	174,788

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

BANKUNITED, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED

(In thousands, except share data)

Common
Shares
Outstanding Common
Stock Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Stockholders’
Equity
Balance at March 31, 2021 93,263,632 $ 933 $ 1,008,603 $ 2,091,124 $ (38,825) $ 3,061,835
Comprehensive income — — — 103,974 13,952 117,926
Dividends ($0.23 per common share) — — — (21,400) — (21,400)
Equity based compensation 19,469 0 3,211 — — 3,211
Forfeiture of unvested shares and shares surrendered for tax withholding obligations (44,548) (1) (28) — — (29)
Balance at June 30, 2021 93,238,553 $ 932 $ 1,011,786 $ 2,173,698 $ (24,873) $ 3,161,543
Balance at March 31, 2020 92,406,294 $ 924 $ 987,757 $ 1,851,040 $ (323,592) $ 2,516,129
Comprehensive income — — — 76,508 180,573 257,081
Dividends ($0.23 per common share) — — — (21,909) — (21,909)
Equity based compensation 56,688 1 3,762 — — 3,763
Forfeiture of unvested shares and shares surrendered for tax withholding obligations (42,704) (1) (10) — — (11)
Balance at June 30, 2020 92,420,278 $ 924 $ 991,509 $ 1,905,639 $ (143,019) $ 2,755,053


		Common Shares Outstanding	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity			Common Shares Outstanding	Common Stock		Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity

Balance at December 31, 2021													Balance at December 31, 2021	85,647,986	$	856	$	707,503	$	2,345,342	$	(15,940)	$	3,037,761
Comprehensive loss													Comprehensive loss	—	—		—		67,150		(141,759)		(74,609)
Dividends ($0.25 per common share)													Dividends ($0.25 per common share)	—	—		—		(20,966)		—		(20,966)
Equity based compensation													Equity based compensation	468,050	5		6,326		—		—		6,331
Forfeiture of unvested shares and shares surrendered for tax withholding obligations													Forfeiture of unvested shares and shares surrendered for tax withholding obligations	(132,112)	(1)		(5,181)		—		—		(5,182)

Repurchase of common stock													Repurchase of common stock	(1,931,903)	(19)		(82,084)		—		—		(82,103)
Balance at March 31, 2022													Balance at March 31, 2022	84,052,021	$	841	$	626,564	$	2,391,526	$	(157,699)	$	2,861,232

Balance at December 31, 2020	Balance at December 31, 2020	93,067,500	$	931	$	1,017,518	$	2,013,715	$	(49,152)	$	2,983,012	Balance at December 31, 2020	93,067,500	$	931	$	1,017,518	$	2,013,715	$	(49,152)	$	2,983,012
Comprehensive income	Comprehensive income	—	—		—		202,788		24,279		227,067		Comprehensive income	—	—		—		98,814		10,327		109,141
Dividends ($0.46 per common share)		—	—		—		(42,805)		—		(42,805)
Dividends ($0.23 per common share)													Dividends ($0.23 per common share)	—	—		—		(21,405)		—		(21,405)
Equity based compensation	Equity based compensation	559,180	5		7,218		—		—		7,223		Equity based compensation	539,711	5		4,007		—		—		4,012
Forfeiture of unvested shares and shares surrendered for tax withholding obligations	Forfeiture of unvested shares and shares surrendered for tax withholding obligations	(184,632)	(2)		(5,714)		—		—		(5,716)		Forfeiture of unvested shares and shares surrendered for tax withholding obligations	(140,084)	(1)		(5,686)		—		—		(5,687)
Exercise of stock options	Exercise of stock options	1,569	—		25		—		—		25		Exercise of stock options	1,569	—		25		—		—		25
Repurchase of common stock	Repurchase of common stock	(205,064)	(2)		(7,261)		—		—		(7,263)		Repurchase of common stock	(205,064)	(2)		(7,261)		—		—		(7,263)
Balance at June 30, 2021		93,238,553	$	932	$	1,011,786	$	2,173,698	$	(24,873)	$	3,161,543

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)
Balance at January 1, 2020		95,128,231	951		1,083,920		1,903,918		(31,827)		2,956,962
Comprehensive loss		—	—		—		45,557		(111,192)		(65,635)
Dividends ($0.46 per common share)		—	—		—		(43,836)		—		(43,836)
Equity based compensation		743,696	8		11,428		—		—		11,436
Forfeiture of unvested shares and shares surrendered for tax withholding obligations		(186,072)	(3)		(4,428)		—		—		(4,431)
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 June 30, 2020		92,420,278	$	924	$	991,509	$	1,905,639	$	(143,019)	$	2,755,053
Balance at March 31, 2021													Balance at March 31, 2021	93,263,632	$	933	$	1,008,603	$	2,091,124	$	(38,825)	$	3,061,835

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

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

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 6562 banking centers located in 1312 Florida counties and 4 banking centers located in the New York metropolitan area at ~~June 30, 2021.~~March 31, 2022. The Bank also offers certain commercial lending and deposit products through national platforms.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, these do not include all of the information and footnotes required for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP and should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in BKU’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 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 six~~ months ended ~~June 30, 2021~~March 31, 2022 are not necessarily indicative of the results that may be expected in future periods.

The Company has a single reportable segment.

Accounting Estimates

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

The most significant estimate impacting the Company's consolidated financial statements is the ACL.

New Accounting Pronouncements Adopted During the ~~Six~~Three Months Ended ~~June 30, 2021~~

~~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. The Company adopted this ASU on January 1, 2021 with no material impact on the Company’s consolidated financial position, results of operations, and cash flows.

~~ASU No. 2021-01,~~ ~~Reference Rate Reform (Topic 848).~~ This ASU clarifies that certain optional expedients and exceptions provided for in ASU No. 2020-04 for applying GAAP to contract modifications and hedging relationships apply to derivatives that are affected by the discounting transition. The amendments in this ASU are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The Company elected to adopt this ASU on a retrospective basis. The impact of adoption of this ASU on the Company's consolidated financial position, results of operations, and cash flows was not material.

~~Accounting Pronouncements Not Yet Adopted~~March 31, 2022

ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for convertible debt and convertible preferred stock by reducing the number of accounting models for these instruments, resulting in fewer embedded conversion features being separately recognized from the host contract. Additionally, this ASU revises the criteria for determining whether contracts in an entity's own equity meet the scope exception from derivative accounting, which will change the population of contracts that are recognized as assets or liabilities. The amendments in this ASU also revise certain aspects of the guidance on calculating earnings per share with respect to convertible instruments and instruments that may be settled in the entity's own shares. The Company adopted this ASU on January 1, 2022, with no material impact on the Company's consolidated financial position, results of operations, and cash flows.

ASU No. 2022-01, Fair Value Hedging—Portfolio Layer Method(Topic 815). This ASU expands the portfolio layer method of hedge accounting prescribed in ASU No. 2017-12 to allow multiple hedged layers of a single closed portfolio and to include portfolios of both prepayable and non-prepayable financial assets. This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same accounting method to similar hedging strategies. The ASU also specifies eligible hedging instruments in a single-layer hedge, provides additional guidance on accounting and disclosure of hedge basis adjustments and specifies how hedge basis adjustments should be considered in determining credit losses for assets in the designated closed portfolio. This ASU is effective for public business entities for interim and annual periods in fiscal years beginning after December 15, 2022. The Company adopted this ASU upon its release in March 2022 with no material impact on the Company's consolidated financial position, results of operations, and cash flows.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

Accounting Pronouncements Not Yet Adopted

ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326). This ASU eliminates the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors. The ASU enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty, updates certain requirements related to accounting for credit losses under ASC 326 and requires disclosure of current-period gross write offs of financing receivables by year of origination. The ASU is effective for the Company for interim and annual periods in fiscal years beginning after December 15, ~~2021.~~2022. The Company has not ~~finalized~~completed its evaluation of the impact of adoption of this ASU, however, the impact of adoption on ~~its~~the Company's consolidated financial position, results of operations, and cash flows ~~but the impact~~ is not ~~currently~~ expected to be material. Adoption will lead to additional and revised disclosures in the Company's financial statements.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

Note 2 Earnings Per Common Share

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
c	c	2021		2020		2021		2020		c		2022		2021
Basic earnings per common share:	Basic earnings per common share:									Basic earnings per common share:
Numerator:	Numerator:									Numerator:
Net income	Net income	$	103,974	$	76,508	$	202,788	$	45,557	Net income		$	67,150	$	98,814
Distributed and undistributed earnings allocated to participating securities	Distributed and undistributed earnings allocated to participating securities	(1,338)		(3,353)		(2,589)		(1,939)		Distributed and undistributed earnings allocated to participating securities		(929)		(1,252)
Income allocated to common stockholders for basic earnings per common share	Income allocated to common stockholders for basic earnings per common share	$	102,636	$	73,155	$	200,199	$	43,618	Income allocated to common stockholders for basic earnings per common share		$	66,221	$	97,562
Denominator:	Denominator:									Denominator:
Weighted average common shares outstanding	Weighted average common shares outstanding	93,245,282		92,409,949		93,160,962		93,177,243		Weighted average common shares outstanding		84,983,873		93,075,702
Less average unvested stock awards	Less average unvested stock awards	(1,241,381)		(1,207,798)		(1,223,555)		(1,154,589)		Less average unvested stock awards		(1,211,807)		(1,205,529)
Weighted average shares for basic earnings per common share	Weighted average shares for basic earnings per common share	92,003,901		91,202,151		91,937,407		92,022,654		Weighted average shares for basic earnings per common share		83,772,066		91,870,173
Basic earnings per common share	Basic earnings per common share	$	1.12	$	0.80	$	2.18	$	0.47	Basic earnings per common share		$	0.79	$	1.06
Diluted earnings per common share:	Diluted earnings per common share:									Diluted earnings per common share:
Numerator:	Numerator:									Numerator:
Income allocated to common stockholders for basic earnings per common share	Income allocated to common stockholders for basic earnings per common share	$	102,636	$	73,155	$	200,199	$	43,618	Income allocated to common stockholders for basic earnings per common share		$	66,221	$	97,562
Adjustment for earnings reallocated from participating securities	Adjustment for earnings reallocated from participating securities	2		0		3		0		Adjustment for earnings reallocated from participating securities		1		1
Income used in calculating diluted earnings per common share	Income used in calculating diluted earnings per common share	$	102,638	$	73,155	$	200,202	$	43,618	Income used in calculating diluted earnings per common share		$	66,222	$	97,563
Denominator:	Denominator:									Denominator:
Weighted average shares for basic earnings per common share	Weighted average shares for basic earnings per common share	92,003,901		91,202,151		91,937,407		92,022,654		Weighted average shares for basic earnings per common share		83,772,066		91,870,173
Dilutive effect of stock options and certain shared-based awards		181,061		705		137,542		126,858
Dilutive effect of certain share-based awards										Dilutive effect of certain share-based awards		137,704		93,540
Weighted average shares for diluted earnings per common share	Weighted average shares for diluted earnings per common share	92,184,962		91,202,856		92,074,949		92,149,512		Weighted average shares for diluted earnings per common share		83,909,770		91,963,713
Diluted earnings per common share	Diluted earnings per common share	$	1.11	$	0.80	$	2.17	$	0.47	Diluted earnings per common share		$	0.79	$	1.06

Potentially dilutive unvested shares totaling 1,267,676 and ~~share units totaling 1,212,062 and 1,743,403~~1,283,294 were outstanding at ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, but excluded from the calculation of diluted earnings per common share because their inclusion would have been anti-dilutive.

Participating securities for the three and six months ended June 30, 2020 include 3,023,314 dividend equivalent rights that were issued in conjunction with the IPO of the Company's common stock. These dividend equivalent rights expired in February 2021 and, while outstanding, participated in dividends on a one-for-one basis.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

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):


		June 30, 2021									March 31, 2022
		Amortized Cost		Gross Unrealized				Carrying Value (1)			Amortized Cost		Gross Unrealized				Carrying Value (1)
				Gains		Losses							Gains		Losses
Investment securities available for sale:	Investment securities available for sale:									Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	158,977	$	469	$	(2,809)	$	156,637	U.S. Treasury securities	$	109,402	$	—	$	(7,883)	$	101,519
U.S. Government agency and sponsored enterprise residential MBS	U.S. Government agency and sponsored enterprise residential MBS	2,197,562		22,257		(4,379)		2,215,440		U.S. Government agency and sponsored enterprise residential MBS	2,175,183		8,679		(18,238)		2,165,624
U.S. Government agency and sponsored enterprise commercial MBS	U.S. Government agency and sponsored enterprise commercial MBS	831,726		8,564		(4,702)		835,588		U.S. Government agency and sponsored enterprise commercial MBS	753,232		1,270		(39,908)		714,594

Private label residential MBS and CMOs	Private label residential MBS and CMOs	2,104,579		9,475		(2,327)		2,111,727		Private label residential MBS and CMOs	2,827,169		29		(119,157)		2,708,041
Private label commercial MBS	Private label commercial MBS	2,579,963		18,530		(4,469)		2,594,024		Private label commercial MBS	2,752,931		1,420		(42,365)		2,711,986
Single family rental real estate-backed securities		608,269		9,961		(785)		617,445
Single family real estate-backed securities										Single family real estate-backed securities	506,111		234		(12,476)		493,869
Collateralized loan obligations	Collateralized loan obligations	986,214		269		(4,216)		982,267		Collateralized loan obligations	1,079,220		—		(6,740)		1,072,480
Non-mortgage asset-backed securities	Non-mortgage asset-backed securities	172,791		3,715		0		176,506		Non-mortgage asset-backed securities	119,282		27		(1,911)		117,398
State and municipal obligations	State and municipal obligations	209,791		18,834		0		228,625		State and municipal obligations	204,920		3,995		(1,636)		207,279
SBA securities	SBA securities	216,682		2,244		(3,292)		215,634		SBA securities	169,724		1,872		(2,484)		169,112

		10,066,554		$	94,318	$	(26,979)	10,133,893			10,697,174		$	17,526	$	(252,798)	10,461,902
Investment securities held to maturity	Investment securities held to maturity	10,000						10,000		Investment securities held to maturity	10,000						10,000
		$	10,076,554					10,143,893			$	10,707,174					10,471,902
Marketable equity securities	Marketable equity securities							88,142		Marketable equity securities							100,196
								$	10,232,035								$	10,572,098

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022


		December 31, 2020									December 31, 2021
		Amortized Cost		Gross Unrealized				Carrying Value (1)			Amortized Cost		Gross Unrealized				Carrying Value (1)
				Gains		Losses							Gains		Losses
Investment securities available for sale:	Investment securities available for sale:									Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	79,919	$	1,307	$	(375)	$	80,851	U.S. Treasury securities	$	114,385	$	173	$	(2,898)	$	111,660
U.S. Government agency and sponsored enterprise residential MBS	U.S. Government agency and sponsored enterprise residential MBS	2,389,450		19,148		(3,028)		2,405,570		U.S. Government agency and sponsored enterprise residential MBS	2,093,283		12,934		(8,421)		2,097,796
U.S. Government agency and sponsored enterprise commercial MBS	U.S. Government agency and sponsored enterprise commercial MBS	531,724		9,297		(1,667)		539,354		U.S. Government agency and sponsored enterprise commercial MBS	861,925		5,287		(10,313)		856,899

Private label residential MBS and CMOs	Private label residential MBS and CMOs	982,890		16,274		(561)		998,603		Private label residential MBS and CMOs	2,160,136		3,575		(14,291)		2,149,420
Private label commercial MBS~~(2)~~	Private label commercial MBS~~(2)~~	2,514,271		24,931		(12,848)		2,526,354		Private label commercial MBS~~(2)~~	2,604,690		7,843		(8,523)		2,604,010
Single family rental real estate-backed securities		636,069		14,877		(58)		650,888
Single family real estate-backed securities										Single family real estate-backed securities	474,845		5,031		(2,908)		476,968
Collateralized loan obligations	Collateralized loan obligations	1,148,724		285		(8,735)		1,140,274		Collateralized loan obligations	1,079,217		598		(1,529)		1,078,286
Non-mortgage asset-backed securities	Non-mortgage asset-backed securities	246,597		6,898		(234)		253,261		Non-mortgage asset-backed securities	151,091		1,419		—		152,510
State and municipal obligations	State and municipal obligations	213,743		21,966		0		235,709		State and municipal obligations	205,718		16,559		—		222,277
SBA securities	SBA securities	233,387		2,093		(3,935)		231,545		SBA securities	184,296		2,027		(2,728)		183,595
		8,976,774		$	117,076	$	(31,441)	9,062,409			9,929,586		$	55,446	$	(51,611)	9,933,421
Investment securities held to maturity	Investment securities held to maturity	10,000						10,000		Investment securities held to maturity	10,000						10,000
		$	8,986,774					9,072,409			$	9,939,586					9,943,421
Marketable equity securities	Marketable equity securities							104,274		Marketable equity securities							120,777
								$	9,176,683								$	10,064,198

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

~~(2)Amortized cost is net of ACL totaling $0.4 million at December 31, 2020.~~

Investment securities held to maturity at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 consisted of 1 State of Israel bond maturing in 2024. Accrued interest receivable on investments totaled ~~$17~~$18 million and $16 million at ~~both June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, and is included in other assets in the accompanying consolidated balance sheets.

At ~~June 30, 2021,~~March 31, 2022, contractual maturities of investment securities available for sale, adjusted for anticipated prepayments when applicable, were as follows (in thousands):


		Amortized Cost		Fair Value			Amortized Cost		Fair Value
Due in one year or less	Due in one year or less	$	1,463,157	$	1,468,146	Due in one year or less	$	1,551,485	$	1,517,106
Due after one year through five years	Due after one year through five years	6,199,918		6,245,085		Due after one year through five years	6,465,385		6,369,610
Due after five years through ten years	Due after five years through ten years	1,971,729		1,984,142		Due after five years through ten years	2,092,483		2,014,536
Due after ten years	Due after ten years	431,750		436,520		Due after ten years	587,821		560,650
		$	10,066,554	$	10,133,893		$	10,697,174	$	10,461,902

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 ~~$4.1~~$4.2 billion and $4.0 billion at ~~both June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021, respectively.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Proceeds from sale of investment securities AFS	Proceeds from sale of investment securities AFS	$	389,814	$	240,805	$	800,056	$	547,337	Proceeds from sale of investment securities AFS		$	482,307	$	410,242

Gross realized gains on investment securities AFS	Gross realized gains on investment securities AFS	$	2,870	$	5,723	$	6,862	$	7,255	Gross realized gains on investment securities AFS		$	2,750	$	3,992

Gross realized losses on investment securities AFS	Gross realized losses on investment securities AFS	(29)		0		(54)		(2)		Gross realized losses on investment securities AFS		(77)		(25)

Net realized gain	Net realized gain	2,841		5,723		6,808		7,253		Net realized gain		2,673		3,967

Net unrealized gains (losses) on marketable equity securities recognized in earnings		1,314		1,113		(288)		(3,870)
Net unrealized losses on marketable equity securities recognized in earnings										Net unrealized losses on marketable equity securities recognized in earnings		(10,541)		(1,602)

Gain on investment securities, net		$	4,155	$	6,836	$	6,520	$	3,383
Gain (loss) on investment securities, net										Gain (loss) on investment securities, net		$	(7,868)	$	2,365

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):


		June 30, 2021													March 31, 2022

		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	U.S. Treasury securities	$	121,096	$	(2,809)	$	0	$	0	$	121,096	$	(2,809)	U.S. Treasury securities	$	57,646	$	(2,331)	$	43,873	$	(5,552)	$	101,519	$	(7,883)
U.S. Government agency and sponsored enterprise residential MBS	U.S. Government agency and sponsored enterprise residential MBS	287,258		(1,161)		367,303		(3,218)		654,561		(4,379)		U.S. Government agency and sponsored enterprise residential MBS	757,481		(10,072)		408,874		(8,166)		1,166,355		(18,238)
U.S. Government agency and sponsored enterprise commercial MBS	U.S. Government agency and sponsored enterprise commercial MBS	234,214		(4,369)		84,177		(333)		318,391		(4,702)		U.S. Government agency and sponsored enterprise commercial MBS	366,153		(23,942)		158,361		(15,966)		524,514		(39,908)

Private label residential MBS and CMOs	Private label residential MBS and CMOs	597,907		(2,327)		0		0		597,907		(2,327)		Private label residential MBS and CMOs	2,594,526		(113,293)		66,721		(5,864)		2,661,247		(119,157)
Private label commercial MBS	Private label commercial MBS	400,800		(3,019)		278,005		(1,450)		678,805		(4,469)		Private label commercial MBS	1,979,528		(26,074)		286,911		(16,291)		2,266,439		(42,365)
Single family rental real estate-backed securities		122,180		(785)		0		0		122,180		(785)
Single family real estate-backed securities														Single family real estate-backed securities	325,231		(8,945)		41,621		(3,531)		366,852		(12,476)
Collateralized loan obligations	Collateralized loan obligations	0		0		565,872		(4,216)		565,872		(4,216)		Collateralized loan obligations	731,894		(4,348)		317,886		(2,392)		1,049,780		(6,740)

Non-mortgage asset-backed securities														Non-mortgage asset-backed securities	104,093		(1,911)		—		—		104,093		(1,911)
State and municipal obligations														State and municipal obligations	59,176		(1,636)		—		—		59,176		(1,636)
SBA securities	SBA securities	0		0		120,630		(3,292)		120,630		(3,292)		SBA securities	45		—		91,539		(2,484)		91,584		(2,484)

		$	1,763,455	$	(14,470)	$	1,415,987	$	(12,509)	$	3,179,442	$	(26,979)		$	6,975,773	$	(192,552)	$	1,415,786	$	(60,246)	$	8,391,559	$	(252,798)

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022


		December 31, 2020														December 31, 2021
				2021
		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	U.S. Treasury securities	$	24,369		$	(375)	$	0	$	0	$	24,369	$	(375)	U.S. Treasury securities	$	49,328	$	(591)	$	47,102	$	(2,307)	$	96,430	$	(2,898)
U.S. Government agency and sponsored enterprise residential MBS	U.S. Government agency and sponsored enterprise residential MBS	220,179			(320)		370,727		(2,708)		590,906		(3,028)		U.S. Government agency and sponsored enterprise residential MBS	436,744		(4,549)		401,022		(3,872)		837,766		(8,421)
U.S. Government agency and sponsored enterprise commercial MBS	U.S. Government agency and sponsored enterprise commercial MBS	152,233			(1,412)		44,255		(255)		196,488		(1,667)		U.S. Government agency and sponsored enterprise commercial MBS	247,323		(4,084)		163,380		(6,229)		410,703		(10,313)

Private label residential MBS and CMOs	Private label residential MBS and CMOs	141,407			(561)		0		0		141,407		(561)		Private label residential MBS and CMOs	1,552,946		(13,933)		23,355		(358)		1,576,301		(14,291)
Private label commercial MBS	Private label commercial MBS	1,268,381			(12,771)		37,783		(77)		1,306,164		(12,848)		Private label commercial MBS	1,338,288		(6,085)		171,490		(2,438)		1,509,778		(8,523)
Single family rental real estate-backed securities		28,758			(58)		0		0		28,758		(58)
Single family real estate-backed securities															Single family real estate-backed securities	154,552		(2,908)		—		—		154,552		(2,908)
Collateralized loan obligations	Collateralized loan obligations	304,051			(1,171)		588,463		(7,564)		892,514		(8,735)		Collateralized loan obligations	318,555		(445)		319,192		(1,084)		637,747		(1,529)
Non-mortgage asset-backed securities		0			0		12,327		(234)		12,327		(234)

SBA securities	SBA securities	26,240			(298)		104,598		(3,637)		130,838		(3,935)		SBA securities	496		—		99,599		(2,728)		100,095		(2,728)

		$	2,165,618		$	(16,966)	$	1,158,153	$	(14,475)	$	3,323,771	$	(31,441)		$	4,098,232	$	(32,595)	$	1,225,140	$	(19,016)	$	5,323,372	$	(51,611)

The Company monitors its investment securities available for sale for credit loss impairment on an individual security basis. No securities were determined to be credit loss impaired during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. At ~~June 30, 2021,~~March 31, 2022, the Company did not have an intent to sell securities that were in ~~significant~~ unrealized loss positions and it was not more likely than not that the Company would be required to sell these securities before recovery of the amortized cost basis, which may be at maturity. In making this determination, the Company considered its current and projected liquidity position, its investment policy as to permissible holdings and concentration limits, regulatory requirements and other relevant factors.

At ~~June 30, 2021, 158~~March 31, 2022, 419 securities available for sale were in unrealized loss positions. The ~~unrealized losses are primarily attributable to changes in interest rates and, in some cases, volatility in the financial markets since their purchase. The~~ amount of impairment related to 5189 of these securities was considered insignificant both individually and in the aggregate, totaling approximately ~~$0.4~~$0.7 million and no further analysis with respect to these securities was considered necessary.

~~For~~ The basis for concluding that AFS securities were not credit loss impaired and no ACL was considered necessary at March 31, 2022 is further discussed below.

Unrealized losses were generally attributable to rising interest rates and, to a lesser extent, widening spreads related to the Federal Reserve's plans for quantitative tightening and benchmark interest rate increases. Continuing supply-chain disruptions, inflationary indicators and geopolitical events have also led to market uncertainty, producing some yield curve dislocations.

U.S. Government Agency and Government Sponsored Enterprise Securities

At March 31, 2022, 5 U.S. ~~government~~treasury, NaN U.S. Government agency and ~~U.S. government~~ sponsored enterprise residential MBS, NaN U.S. Government agency and sponsored enterprise commercial MBS, and 10 SBA securities ~~the~~were in unrealized loss positions. The timely payment of principal and interest on these securities is explicitly or implicitly guaranteed by the U.S. Government. As such, there is an assumption of zero credit loss and the Company expects to recover the entire amortized cost basis of these securities. ~~For all other AFS~~

Private Label Securities:

None of the impaired private label securities inhad missed principal or interest payments or had been downgraded by a ~~significant unrealized loss position, the~~NRSRO at March 31, 2022. The Company performed an analysis ~~by first determining~~comparing the present value of cash flows expected to be collected to the amortized cost basis of impaired securities. This analysis was based on ~~stressed economic scenarios~~a scenario that we believe to be generally more ~~severe~~conservative than our reasonable and supportable economic ~~forecast. The present value was then compared to the amortized cost basis to identify possible impairment. The economic~~ forecast ~~scenario used for evaluation of impaired securities incorporates~~at March 31, 2022, and incorporated assumptions about voluntary prepayment rates, collateral defaults, delinquencies, severity ~~recovery lag~~ and other relevant ~~factors.~~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.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

Private label residential MBS and CMOs

At March 31, 2022, NaN private label residential MBS and CMOs were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality measures such as FICO, LTV, documentation, loan type, property type, agency availability criteria and performing status. We also regularly monitor sector data including home price appreciation, forbearance, delinquency and prepay trends as well as other economic data that could be indicative of stress in the sector. Our March 31, 2022 analysis projected weighted average collateral losses for impaired securities in this category of 2% compared to weighted average credit support of 17%. As of March 31, 2022, 95% of impaired securities in this category, based on carrying value, were externally rated AAA, 1% were rated AA and 4% were rated A.

Private label commercial MBS

At March 31, 2022, NaN private label commercial MBS were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, voluntary prepayment rates, loss severity, delinquencies and recovery lag. In developing those assumptions, we took into account collateral quality and type, loan size, loan purpose and other qualitative factors. We also regularly monitor collateral watch lists, bankruptcy data, special servicing trends, delinquency and other economic data that could be indicative of stress in the sector. Our March 31, 2022 analysis projected weighted average collateral losses for impaired securities in this category of 6% compared to weighted average credit support of 42%. As of March 31, 2022, 88% of impaired securities in this category, based on carrying value, were externally rated AAA, 9% were rated AA and 3% were rated A.

Single family real estate-backed securities

At March 31, 2022, 16 single family rental real estate-backed securities were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, delinquencies and recovery lag. We regularly monitor sector data including home prices appreciation, forbearance, delinquency and prepay trends as well as other economic data that could be indicative of stress in the sector. Our March 31, 2022 analysis projected weighted average collateral losses for this category of 5% compared to weighted average credit support of 48%. As of March 31, 2022, 76% of impaired securities in this category, based on carrying value, were externally rated AAA, 16% were rated AA and 1 security was not rated.

Collateralized loan obligations

At March 31, 2022, NaN collateralized loan obligations were in unrealized loss positions. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, and delinquencies, calibrated to take into account idiosyncratic risks associated with the underlying collateral. In developing those assumptions, we took into account each sector’s performance pre, during and post the 2008 financial crisis. We regularly engage with bond managers to monitor trends in underlying collateral including potential downgrades and subsequent cash flow diversions, liquidity, ratings migration, and any other relevant developments. Our March 31, 2022 analysis projected weighted average collateral losses for impaired securities in this category of 7% compared to weighted average credit support of 43%. As of March 31, 2022, 81% of the impaired securities in this category, based on carrying value, were externally rated AAA, 15% were rated AA and 4% were rated A.

Non-mortgage asset-backed securities

At March 31, 2022, 6 non-mortgage asset-backed securities were in unrealized loss positions. These securities are backed by student loan collateral. Our analysis of cash flows expected to be collected on these securities incorporated assumptions about collateral default rates, loss severity, delinquencies, voluntary prepayment rates and recovery lag. In developing assumptions, we took into account collateral type, delineated by whether collateral consisted of loans to borrowers in school, refinancing, or a mixture. Our March 31, 2022 analysis projected weighted average collateral losses for impaired securities in this category of 3% compared to weighted average credit support of 21%. As of March 31, 2022, 51% of the impaired securities in this category, based on carrying value, were externally rated AAA, and 49% were rated AA.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

State and Municipal Obligations

At March 31, 2022, 4 state and municipal obligations were in unrealized loss positions. Our analysis of potential credit loss impairment for these securities incorporates a quantitative measure of the underlying obligor's credit worthiness provided by a third-party vendor as well as other relevant qualitative considerations. As of March 31, 2022, all of the impaired securities in this category, based on carrying value, were externally rated AAA.

Note 4 Loans and Allowance for Credit Losses

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


		June 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021

		Total		Percent of Total		Total		Percent of Total			Total		Percent of Total		Total		Percent of Total
Residential and other consumer:	Residential and other consumer:									Residential and other consumer:
1-4 single family residential	1-4 single family residential	$	5,206,766	22.8	%	$	4,922,836	20.6	%	1-4 single family residential	$	6,668,116	28.5	%	$	6,338,225	26.7	%
Government insured residential	Government insured residential	1,863,723		8.1	%	1,419,074		5.9	%	Government insured residential	1,938,479		8.3	%	2,023,221		8.5	%
Other consumer loans	Other consumer loans	5,785		0	%	6,312		0.1	%	Other consumer loans	6,244		—	%	6,934		—	%
		7,076,274		30.9	%	6,348,222		26.6	%		8,612,839		36.8	%	8,368,380		35.2	%
Commercial:	Commercial:									Commercial:
Multi-family	Multi-family	1,256,711		5.5	%	1,639,201		6.9	%	Multi-family	1,072,981		4.6	%	1,154,738		4.9	%
Non-owner occupied commercial real estate	Non-owner occupied commercial real estate	4,724,183		20.7	%	4,963,273		20.8	%	Non-owner occupied commercial real estate	4,284,675		18.3	%	4,381,610		18.4	%
Construction and land	Construction and land	218,634		1.0	%	293,307		1.2	%	Construction and land	176,825		0.8	%	165,390		0.7	%
Owner occupied commercial real estate	Owner occupied commercial real estate	1,960,900		8.6	%	2,000,770		8.4	%	Owner occupied commercial real estate	1,905,395		8.2	%	1,944,658		8.2	%
Commercial and industrial	Commercial and industrial	4,205,795		18.4	%	4,447,383		18.6	%	Commercial and industrial	4,951,999		21.2	%	4,790,275		20.2	%
PPP	PPP	491,960		2.1	%	781,811		3.3	%	PPP	80,296		0.3	%	248,505		1.0	%
Pinnacle	Pinnacle	1,046,537		4.6	%	1,107,386		4.6	%	Pinnacle	935,915		4.0	%	919,641		3.9	%
Bridge - franchise finance	Bridge - franchise finance	463,874		2.0	%	549,733		2.3	%	Bridge - franchise finance	306,563		1.3	%	342,124		1.4	%
Bridge - equipment finance	Bridge - equipment finance	421,939		1.8	%	475,548		2.0	%	Bridge - equipment finance	341,369		1.5	%	357,599		1.5	%
Mortgage warehouse lending	Mortgage warehouse lending	1,018,267		4.4	%	1,259,408		5.3	%	Mortgage warehouse lending	701,172		3.0	%	1,092,133		4.6	%
		15,808,800		69.1	%	17,517,820		73.4	%		14,757,190		63.2	%	15,396,673		64.8	%
Total loans	Total loans	22,885,074		100.0	%	23,866,042		100.0	%	Total loans	23,370,029		100.0	%	23,765,053		100.0	%
Allowance for credit losses	Allowance for credit losses	(175,642)				(257,323)				Allowance for credit losses	(125,443)				(126,457)
Loans, net	Loans, net	$	22,709,432			$	23,608,719			Loans, net	$	23,244,586			$	23,638,596

Premiums, discounts and deferred fees and costs, excluding the non-credit related discount on PCD loans, totaled ~~$46~~$73 million and ~~$39~~$67 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

The following table presents the amortized cost basis of residential PCD loans and the related amount of non-credit discount, ~~was $100 million and $95 million, respectively~~net of the related ACL, at ~~June 30, 2021 and $118 million and $115 million, respectively at December~~the dates indicated (in thousands):


	March 31, 2022		December 31, 2021
UPB	$	115,405	$	124,963
Non-credit discount	(54,709)		(59,759)
Total amortized cost of PCD loans	60,696		65,204
ACL related to PCD loans	(621)		(476)
PCD loans, net	$	60,075	$	64,728

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, ~~2020. The ACL related to PCD residential loans was $1.2 million and $2.8 million at June 30, 2021 and December 31, 2020, respectively.~~2022

Included in ~~the table above~~Loans, net are direct or sales type finance leases totaling ~~$665~~$663 million and ~~$670~~$652 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The amount of income recognized from direct or sales type finance leases for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ totaled ~~$4.5 million, $9.9 million, $5.3~~$4.6 million and ~~$10.7~~$5.4 million, respectively and is ~~recorded as~~included in interest income on loans in the consolidated statements of income.

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company purchased ~~1-4 single family~~ residential and other consumer loans totaling ~~$1.3 billion, $2.3 billion, $582~~$862 million and ~~$1.1 billion,~~$963 million, respectively. Purchases for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ included ~~$578 million, $973 million, $243~~$172 million and ~~$529~~$578 million, respectively, of government insured residential loans.

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company had pledged loans with a carrying value of approximately ~~$9.5~~$11.0 billion and ~~$9.6~~$10.6 billion, respectively, as security for FHLB advances and Federal Reserve discount window capacity.

At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, accrued interest receivable on loans ~~net of related ACL at December 31, 2020,~~ totaled ~~$97~~$102 million and ~~$99~~$98 million, respectively, and is included in other assets in the accompanying consolidated balance sheets. The amount of interest income reversed on non-accrual loans was not material for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

Allowance for credit losses

The ACL was determined utilizing a 2-year reasonable and supportable forecast period based on a single third-party provided economic scenario. Activity in the ACL is summarized below for the periods indicated (in thousands):

Three Months Ended June 30,
2021 2020
Residential and Other Consumer Commercial Total Residential and Other Consumer Commercial Total
Beginning balance $ 15,844 $ 205,090 $ 220,934 $ 12,576 $ 238,003 $ 250,579
Provision (recovery) (3,938) (23,725) (27,663) (1,924) 33,508 31,584
Charge-offs 0 (18,402) (18,402) 0 (19,178) (19,178)
Recoveries 3 770 773 43 3,095 3,138
Ending balance $ 11,909 $ 163,733 $ 175,642 $ 10,695 $ 255,428 $ 266,123


		Six Months Ended June 30,							Three Months Ended March 31,
		2021						2020				2022								2021
		Residential and Other Consumer		Commercial		Total				Residential and Other Consumer			Commercial		Total			Residential and Other Consumer		Commercial		Total		Residential and Other Consumer		Commercial		Total
Beginning balance	Beginning balance	$	18,719	$	238,604	$	257,323			$	11,154		$	97,517	$	108,671	Beginning balance	$	9,187	$	117,270	$	126,457	$	18,719	$	238,604	$	257,323
Impact of adoption of ASU 2016-13		0		0		0				8,098			19,207		27,305
Balance after adoption of ASU 2016-13		18,719		238,604		257,323				19,252			116,724		135,976

Provision (recovery)	Provision (recovery)	(6,802)		(47,167)		(53,969)				(8,572)			162,021		153,449		Provision (recovery)	(256)		7,702		7,446		(2,864)		(23,442)		(26,306)
Charge-offs	Charge-offs	(14)		(30,380)		(30,394)				(31)			(26,953)		(26,984)		Charge-offs	—		(10,671)		(10,671)		(14)		(11,978)		(11,992)
Recoveries	Recoveries	6		2,676		2,682				46			3,636		3,682		Recoveries	26		2,185		2,211		3		1,906		1,909
Ending balance	Ending balance	$	11,909	$	163,733	$	175,642			$	10,695		$	255,428	$	266,123	Ending balance	$	8,957	$	116,486	$	125,443	$	15,844	$	205,090	$	220,934

The decrease in the ACL from December 31, ~~2020~~2021 to ~~June 30, 2021 related primarily to~~March 31, 2022 reflected net charge-offs offset by the ~~recovery of~~provision for credit ~~losses recorded during the six months ended June 30, 2021.~~losses. The most significant factor ~~contributing to~~impacting the ~~recovery of~~ provision for credit losses for three months ended March 31, 2022 was an ~~improving economic forecast. The~~ increase in ~~the ACL from January 1, 2020, the date of initial adoption of ASU 2016-13,~~qualitative loss factors related to ~~June 30, 2020 was reflective of the impact of the COVID-19 pandemic on current~~ economic ~~conditions, the economic forecast and on individual borrowers and portfolio sub-segments.~~uncertainty.

The following table presents the components of the provision for (recovery of) credit losses for the periods indicated (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Amount related to funded portion of loans	Amount related to funded portion of loans	$	(27,663)	$	31,584	$	(53,969)	$	153,449	Amount related to funded portion of loans		$	7,446	$	(26,306)
Amount related to off-balance sheet credit exposures	Amount related to off-balance sheet credit exposures	129		(6,170)		(919)		(2,607)		Amount related to off-balance sheet credit exposures		384		(1,048)
Amount related to accrued interest receivable	Amount related to accrued interest receivable	0		0		(271)		0		Amount related to accrued interest receivable		—		(271)
Amount related to AFS debt securities	Amount related to AFS debt securities	0		0		(364)		0		Amount related to AFS debt securities		—		(364)
Total provision for (recovery of) credit losses	Total provision for (recovery of) credit losses	$	(27,534)	$	25,414	$	(55,523)	$	150,842	Total provision for (recovery of) credit losses		$	7,830	$	(27,989)

Credit quality information

The credit quality of the loan portfolio has been and may continue to be impacted by the COVID-19 crisis, its impact on the economy broadly and more specifically on the Company's individual borrowers. While economic conditions continue to improve, some level of uncertainty continues to exist about the full extent of this impact and the trajectory of recovery. The ultimate impact may not be fully reflected in some of the credit quality indicators disclosed below. ~~Delinquency statistics may not be fully reflective of the impact of the COVID-19 crisis due to deferral and modification programs offered to affected borrowers.~~

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

Credit quality of loans held for investment is continuously monitored by dedicated residential credit risk management and commercial portfolio management functions. The Company also has a workout and recovery department that monitors the credit quality of criticized and classified loans and an independent internal credit review function.

Credit quality indicators for residential loans

Management considers delinquency status to be the most meaningful indicator of the credit quality of residential and other consumer loans, other than government insured residential loans. Delinquency statistics are updated at least monthly. LTV and FICO scores are also important indicators of credit quality for 1-4 single family residential loans other than government insured loans. FICO scores are generally updated at least annually, and were most recently updated in the first quarter of ~~2021.~~2022. LTVs are typically at origination since we do not routinely update residential appraisals. Substantially all of the government insured residential loans are government insured buyout loans, which the Company buys out of GNMA securitizations upon default. For these loans, traditional measures of credit quality are not particularly relevant considering the guaranteed nature of the loans and the underlying business model. Factors that impact risk inherent in the residential portfolio segment include national and regional economic conditions such as levels of unemployment and wages, as well as residential property values.

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


		June 30, 2021															March 31, 2022
		Amortized Cost By Origination Year															Amortized Cost By Origination Year
		2021		2020		2019		2018		2017		Prior		Total			2022		2021		2020		2019		2018		Prior		Total
Current	Current	$	1,083,253	$	1,189,810	$	473,427	$	279,499	$	441,586	$	1,660,924	$	5,128,499	Current	$	260,140	$	3,201,688	$	998,850	$	363,094	$	202,919	$	1,571,843	$	6,598,534
30 - 59 Days Past Due	30 - 59 Days Past Due	15,148		7,150		9,631		3,635		3,848		6,086		45,498		30 - 59 Days Past Due	4,049		31,168		5,334		3,288		2,083		4,953		50,875
60 - 89 Days Past Due	60 - 89 Days Past Due	0		922		3,229		812		1,082		3,300		9,345		60 - 89 Days Past Due	—		674		79		—		414		2,433		3,600
90 Days or More Past Due	90 Days or More Past Due	0		0		1,702		5,144		851		15,727		23,424		90 Days or More Past Due	—		—		—		—		5,097		10,010		15,107
		$	1,098,401	$	1,197,882	$	487,989	$	289,090	$	447,367	$	1,686,037	$	5,206,766		$	264,189	$	3,233,530	$	1,004,263	$	366,382	$	210,513	$	1,589,239	$	6,668,116

December 31, 2020
Amortized Cost By Origination Year
2020 2019 2018 2017 2016 Prior Total
Current $ 1,092,183 $ 645,993 $ 374,838 $ 611,377 $ 740,749 $ 1,392,192 $ 4,857,332
30 - 59 Days Past Due 17,826 5,741 2,564 927 2,913 18,880 48,851
60 - 89 Days Past Due 111 145 435 0 2,825 3,973 7,489
90 Days or More Past Due 0 807 1,762 53 1,027 5,515 9,164
$ 1,110,120 $ 652,686 $ 379,599 $ 612,357 $ 747,514 $ 1,420,560 $ 4,922,836


	December 31, 2021
	Amortized Cost By Origination Year
	2021		2020		2019		2018		2017		Prior		Total
Current	$	2,884,761	$	1,062,348	$	395,453	$	224,175	$	342,414	$	1,352,844	$	6,261,995
30 - 59 Days Past Due	32,307		2,705		5,482		1,942		5,831		4,825		53,092
60 - 89 Days Past Due	605		—		1,750		1,988		—		1,307		5,650
90 Days or More Past Due	1,407		—		609		5,100		1,064		9,308		17,488
	$	2,919,080	$	1,065,053	$	403,294	$	233,205	$	349,309	$	1,368,284	$	6,338,225

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


		June 30, 2021															March 31, 2022
		Amortized Cost By Origination Year															Amortized Cost By Origination Year
LTV	LTV	2021		2020		2019		2018		2017		Prior		Total		LTV	2022		2021		2020		2019		2018		Prior		Total
Less than 61%	Less than 61%	$	419,732	$	437,986	$	108,821	$	68,019	$	138,073	$	588,791	$	1,761,422	Less than 61%	$	98,282	$	1,346,780	$	378,269	$	84,178	$	49,170	$	555,715	$	2,512,394
61% - 70%	61% - 70%	296,621		317,275		114,771		71,726		88,144		425,875		1,314,412		61% - 70%	71,188		869,013		251,806		89,525		54,280		377,744		1,713,556
71% - 80%	71% - 80%	381,806		441,154		255,015		135,047		185,034		637,249		2,035,305		71% - 80%	92,007		995,282		374,113		184,487		102,057		605,108		2,353,054
More than 80%	More than 80%	242		1,467		9,382		14,298		36,116		34,122		95,627		More than 80%	2,712		22,455		75		8,192		5,006		50,672		89,112
		$	1,098,401	$	1,197,882	$	487,989	$	289,090	$	447,367	$	1,686,037	$	5,206,766		$	264,189	$	3,233,530	$	1,004,263	$	366,382	$	210,513	$	1,589,239	$	6,668,116

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

December 31, 2020
Amortized Cost By Origination Year
LTV 2020 2019 2018 2017 2016 Prior Total
Less than 61% $ 395,977 $ 143,273 $ 82,199 $ 174,223 $ 286,092 $ 487,487 $ 1,569,251
61% - 70 % 298,941 151,633 92,928 119,381 184,119 341,159 1,188,161
71% - 80% 413,003 344,998 181,852 271,605 258,931 565,781 2,036,170
More than 80% 2,199 12,782 22,620 47,148 18,372 26,133 129,254
$ 1,110,120 $ 652,686 $ 379,599 $ 612,357 $ 747,514 $ 1,420,560 $ 4,922,836


	December 31, 2021
	Amortized Cost By Origination Year
LTV	2021		2020		2019		2018		2017		Prior		Total
Less than 61%	$	1,222,510	$	399,512	$	89,078	$	54,301	$	111,540	$	476,170	$	2,353,111
61% - 70 %	791,935		269,739		92,282		59,425		66,641		343,654		1,623,676
71% - 80%	899,400		395,726		212,649		111,276		145,413		518,817		2,283,281
More than 80%	5,235		76		9,285		8,203		25,715		29,643		78,157
	$	2,919,080	$	1,065,053	$	403,294	$	233,205	$	349,309	$	1,368,284	$	6,338,225

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


		June 30, 2021															March 31, 2022
		Amortized Cost By Origination Year															Amortized Cost By Origination Year
FICO	FICO	2021		2020		2019		2018		2017		Prior		Total		FICO	2022		2021		2020		2019		2018		Prior		Total
760 or greater	760 or greater	$	876,798	$	885,583	$	314,923	$	167,341	$	314,717	$	1,140,630	$	3,699,992	760 or greater	$	187,281	$	2,435,503	$	806,659	$	235,882	$	123,346	$	1,111,642	$	4,900,313
720 - 759	720 - 759	185,830		227,976		99,444		59,330		80,474		304,170		957,224		720 - 759	57,451		614,077		131,848		70,658		41,416		256,256		1,171,706
719 or less	719 or less	35,773		84,323		73,622		62,419		52,176		241,237		549,550		719 or less	19,457		183,950		65,756		59,842		45,751		221,341		596,097
		$	1,098,401	$	1,197,882	$	487,989	$	289,090	$	447,367	$	1,686,037	$	5,206,766		$	264,189	$	3,233,530	$	1,004,263	$	366,382	$	210,513	$	1,589,239	$	6,668,116


		December 31, 2020															December 31, 2021
		Amortized Cost By Origination Year															Amortized Cost By Origination Year
FICO	FICO	2020		2019		2018		2017		2016		Prior		Total		FICO	2021		2020		2019		2018		2017		Prior		Total
760 or greater	760 or greater	$	843,199	$	435,582	$	225,292	$	451,304	$	549,119	$	956,254	$	3,460,750	760 or greater	$	2,230,259	$	803,026	$	245,942	$	125,713	$	254,750	$	937,285	$	4,596,975
720 - 759	720 - 759	223,831		128,875		84,602		102,859		130,592		256,703		927,462		720 - 759	562,763		194,068		91,276		53,576		54,080		219,561		1,175,324
719 or less	719 or less	43,090		88,229		69,705		58,194		67,803		207,603		534,624		719 or less	126,058		67,959		66,076		53,916		40,479		211,438		565,926
		$	1,110,120	$	652,686	$	379,599	$	612,357	$	747,514	$	1,420,560	$	4,922,836		$	2,919,080	$	1,065,053	$	403,294	$	233,205	$	349,309	$	1,368,284	$	6,338,225

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 influencing the level and nature of ongoing monitoring of loans and may impact the estimation of the ACL. Internal risk ratings are updated on a continuous basis. Generally, relationships with balances in excess of defined thresholds, ranging from $1 million to $3 million, are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. Since the onset of the COVID-19 pandemic, risk ratings have been re-evaluated for a substantial portion of the commercial portfolio, with a focus on portfolio segments we identified for enhanced monitoring and loans that have been modified or for which we granted temporary payment deferrals. Loans exhibiting potential credit weaknesses that deserve management’s close attention and that could result in deterioration of repayment prospects at some future date if not checked or corrected 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 from current operations, 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.

~~Commercial credit exposure based on internal risk rating:~~
June 30, 2021
Amortized Cost By Origination Year Revolving Loans
2021 2020 2019 2018 2017 Prior Total
Multi-Family
Pass $ 31,965 $ 147,499 $ 245,838 $ 153,168 $ 145,093 $ 274,242 $ 40,238 $ 1,038,043
Special mention 0 0 0 4,258 0 1,827 0 6,085
Substandard 0 5,002 42,938 9,599 32,186 122,858 0 212,583
Total Multi-Family $ 31,965 $ 152,501 $ 288,776 $ 167,025 $ 177,279 $ 398,927 $ 40,238 $ 1,256,711
Non-owner occupied commercial real estate
Pass $ 213,043 $ 526,381 $ 1,057,193 $ 631,119 $ 424,389 $ 1,016,555 $ 79,761 $ 3,948,441
Special mention 0 0 24,604 15,662 0 7,641 0 47,907
Substandard 0 26,021 146,339 73,142 84,622 397,711 0 727,835
Total non-owner occupied commercial real estate $ 213,043 $ 552,402 $ 1,228,136 $ 719,923 $ 509,011 $ 1,421,907 $ 79,761 $ 4,724,183
Construction and Land
Pass $ 3,919 $ 34,832 $ 136,272 $ 10,611 $ 8,605 $ 268 $ 4,840 $ 199,347
Special mention 0 0 5,184 0 0 0 0 5,184
Substandard 0 1,167 2,539 1,328 0 9,069 0 14,103
Total Construction and Land $ 3,919 $ 35,999 $ 143,995 $ 11,939 $ 8,605 $ 9,337 $ 4,840 $ 218,634
Owner occupied commercial real estate
Pass $ 51,923 $ 228,037 $ 285,963 $ 236,599 $ 246,368 $ 596,121 $ 28,222 $ 1,673,233
Special mention 0 1,796 2,388 3,908 13,628 19,409 794 41,923
Substandard 0 6,902 29,021 37,616 46,835 125,370 0 245,744
Total owner occupied commercial real estate $ 51,923 $ 236,735 $ 317,372 $ 278,123 $ 306,831 $ 740,900 $ 29,016 $ 1,960,900
Commercial and industrial
Pass $ 363,731 $ 506,653 $ 647,392 $ 184,745 $ 197,346 $ 194,549 $ 1,676,514 $ 3,770,930
Special mention 0 937 11,257 16,640 1,611 2,481 438 33,364
Substandard 480 19,291 144,079 42,028 14,278 35,315 129,176 384,647
Doubtful 0 0 0 8 0 0 16,846 16,854
Total commercial and industrial $ 364,211 $ 526,881 $ 802,728 $ 243,421 $ 213,235 $ 232,345 $ 1,822,974 $ 4,205,795
PPP
Pass $ 282,746 $ 209,214 $ 0 $ 0 $ 0 $ 0 $ 0 $ 491,960
Total PPP $ 282,746 $ 209,214 $ 0 $ 0 $ 0 $ 0 $ 0 $ 491,960
Pinnacle
Pass $ 67,425 $ 141,124 $ 106,430 $ 61,798 $ 202,771 $ 466,989 $ 0 $ 1,046,537
Total Pinnacle $ 67,425 $ 141,124 $ 106,430 $ 61,798 $ 202,771 $ 466,989 $ 0 $ 1,046,537
Bridge - Franchise Finance
Pass $ 9,078 $ 51,732 $ 114,668 $ 16,475 $ 7,861 $ 10,133 $ 0 $ 209,947
Special mention 0 0 1,857 0 0 0 0 1,857
Substandard 0 29,679 95,935 78,404 27,192 20,382 0 251,592
Doubtful 0 0 0 0 0 478 0 478
Total Bridge - Franchise Finance $ 9,078 $ 81,411 $ 212,460 $ 94,879 $ 35,053 $ 30,993 $ 0 $ 463,874
Bridge - Equipment Finance
Pass $ 36,740 $ 19,892 $ 132,856 $ 55,875 $ 33,371 $ 63,653 $ 0 $ 342,387
Special mention 0 0 0 0 1,744 0 0 1,744
Substandard 0 0 14,948 22,404 40,456 0 0 77,808
Total Bridge - Equipment Finance $ 36,740 $ 19,892 $ 147,804 $ 78,279 $ 75,571 $ 63,653 $ 0 $ 421,939
Mortgage Warehouse Lending
Pass $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,018,267 $ 1,018,267
Total Mortgage Warehouse Lending $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,018,267 $ 1,018,267
December 31, 2020
Amortized Cost By Origination Year Revolving Loans
2020 2019 2018 2017 2016 Prior Total
Multi-Family
Pass $ 184,287 $ 264,254 $ 149,188 $ 206,768 $ 203,481 $ 313,758 $ 38,509 $ 1,360,245
Special mention 0 390 10,985 11,260 8,400 5,300 0 36,335
Substandard 8,393 25,239 9,645 15,125 43,920 140,299 0 242,621
Total Multi-Family $ 192,680 $ 289,883 $ 169,818 $ 233,153 $ 255,801 $ 459,357 $ 38,509 $ 1,639,201
Non-owner occupied commercial real estate
Pass $ 532,567 $ 1,070,940 $ 706,730 $ 442,599 $ 462,201 $ 607,922 $ 99,627 $ 3,922,586
Special mention 2,687 56,533 16,271 34,283 43,699 66,370 0 219,843
Substandard 30,401 132,814 69,507 56,219 288,998 242,905 0 820,844
Total non-owner occupied commercial real estate $ 565,655 $ 1,260,287 $ 792,508 $ 533,101 $ 794,898 $ 917,197 $ 99,627 $ 4,963,273
Construction and Land
Pass $ 20,860 $ 158,413 $ 9,003 $ 48,657 $ 26,845 $ 904 $ 297 $ 264,979
Special mention 0 0 8,010 8,604 4,284 0 0 20,898
Substandard 23 1,366 1,287 0 4,408 346 0 7,430
Total Construction and Land $ 20,883 $ 159,779 $ 18,300 $ 57,261 $ 35,537 $ 1,250 $ 297 $ 293,307
Owner occupied commercial real estate
Pass $ 229,670 $ 263,138 $ 251,413 $ 232,171 $ 288,403 $ 361,130 $ 17,281 $ 1,643,206
Special mention 2,593 42,485 11,789 41,799 19,839 20,347 17,985 156,837
Substandard 2,615 24,673 21,114 36,411 26,997 79,860 9,057 200,727
Total owner occupied commercial real estate $ 234,878 $ 330,296 $ 284,316 $ 310,381 $ 335,239 $ 461,337 $ 44,323 $ 2,000,770
Commercial and industrial
Pass $ 574,601 $ 759,384 $ 257,451 $ 250,787 $ 165,105 $ 47,086 $ 1,882,856 $ 3,937,270
Special mention 10,387 49,471 17,096 2,451 20,838 2,977 66,385 169,605
Substandard 21,122 120,275 34,045 14,073 29,907 31,478 89,436 340,336
Doubtful 0 0 0 0 0 172 0 172
Total commercial and industrial $ 606,110 $ 929,130 $ 308,592 $ 267,311 $ 215,850 $ 81,713 $ 2,038,677 $ 4,447,383
PPP
Pass $ 781,811 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 781,811
Total PPP $ 781,811 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 781,811
Pinnacle
Pass $ 165,218 $ 118,139 $ 70,498 $ 208,568 $ 203,990 $ 340,973 $ 0 $ 1,107,386
Total Pinnacle $ 165,218 $ 118,139 $ 70,498 $ 208,568 $ 203,990 $ 340,973 $ 0 $ 1,107,386
Bridge - Franchise Finance
Pass $ 48,741 $ 91,509 $ 23,650 $ 8,745 $ 11,817 $ 6,416 $ 0 $ 190,878
Special mention 2,693 54,271 5,175 4,699 2,088 2,667 0 71,593
Substandard 36,515 101,772 84,064 33,213 16,706 3,297 0 275,567
Doubtful 0 0 10,771 0 924 0 0 11,695
Total Bridge - Franchise Finance $ 87,949 $ 247,552 $ 123,660 $ 46,657 $ 31,535 $ 12,380 $ 0 $ 549,733
Bridge - Equipment Finance
Pass $ 23,684 $ 137,730 $ 66,004 $ 50,000 $ 36,963 $ 49,875 $ 0 $ 364,256
Special mention 0 0 19,542 16,863 0 0 0 36,405
Substandard 0 30,762 9,894 34,231 0 0 0 74,887
Total Bridge - Equipment Finance $ 23,684 $ 168,492 $ 95,440 $ 101,094 $ 36,963 $ 49,875 $ 0 $ 475,548
Mortgage Warehouse Lending
Pass $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,259,408 $ 1,259,408
Total Mortgage Warehouse Lending $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 1,259,408 $ 1,259,408

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

Commercial credit exposure based on internal risk rating:


	March 31, 2022
	Amortized Cost By Origination Year												Revolving Loans
	2022		2021		2020		2019		2018		Prior				Total
CRE
Pass	$	179,961	$	880,893	$	580,729	$	1,295,275	$	624,952	$	1,321,895	$	93,206	$	4,976,911
Special mention	—		—		—		1,902		28,579		1,504		—		31,985
Substandard	3,789		7,854		14,139		162,042		32,439		305,322		—		525,585

Total CRE	$	183,750	$	888,747	$	594,868	$	1,459,219	$	685,970	$	1,628,721	$	93,206	$	5,534,481
C&I
Pass	$	311,233	$	1,022,714	$	587,182	$	846,195	$	407,776	$	995,605	$	2,266,537	$	6,437,242
Special mention	106		5,968		222		34,682		15,340		3,299		3,648		63,265
Substandard	1,138		22,816		38,156		141,173		63,098		119,920		44,040		430,341
Doubtful	—		—		—		900		—		—		5,942		6,842
Total C&I	$	312,477	$	1,051,498	$	625,560	$	1,022,950	$	486,214	$	1,118,824	$	2,320,167	$	6,937,690
Pinnacle
Pass	$	52,418	$	142,062	$	104,862	$	80,386	$	34,071	$	522,116	$	—	$	935,915

Total Pinnacle	$	52,418	$	142,062	$	104,862	$	80,386	$	34,071	$	522,116	$	—	$	935,915
Bridge - Equipment Finance
Pass	$	9,256	$	69,827	$	18,181	$	113,736	$	40,625	$	63,030	$	—	$	314,655
Substandard	—		—		—		—		4,383		22,331		—		26,714

Total Bridge - Equipment Finance	$	9,256	$	69,827	$	18,181	$	113,736	$	45,008	$	85,361	$	—	$	341,369
Bridge - Franchise Finance
Pass	$	1,488	$	48,190	$	44,135	$	91,926	$	11,210	$	11,771	$	—	$	208,720
Substandard	—		2,077		6,078		36,660		20,137		13,055		—		78,007
Doubtful	—		—		—		7,678		12,158		—		—		19,836
Total Bridge - Franchise Finance	$	1,488	$	50,267	$	50,213	$	136,264	$	43,505	$	24,826	$	—	$	306,563
Mortgage Warehouse Lending
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	701,172	$	701,172



Total Mortgage Warehouse Lending	$	—	$	—	$	—	$	—	$	—	$	—	$	701,172	$	701,172

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022


	December 31, 2021
	Amortized Cost By Origination Year												Revolving Loans
	2021		2020		2019		2018		2017		Prior				Total
CRE
Pass	$	869,852	$	619,056	$	1,283,401	$	676,151	$	455,965	$	986,427	$	119,308	$	5,010,160
Special mention	985		—		29,573		—		—		1,704		—		32,262
Substandard	—		14,227		187,284		55,944		115,944		285,917		—		659,316

Total CRE	$	870,837	$	633,283	$	1,500,258	$	732,095	$	571,909	$	1,274,048	$	119,308	$	5,701,738
C&I
Pass	$	1,280,160	$	666,437	$	870,797	$	406,145	$	353,590	$	669,308	$	2,120,693	$	6,367,130
Special mention	6,051		19,861		39,647		17,185		1,854		11,640		20,093		116,331
Substandard	365		22,106		167,496		59,349		51,117		122,663		49,119		472,215
Doubtful	—		—		900		—		—		—		26,862		27,762
Total C&I	$	1,286,576	$	708,404	$	1,078,840	$	482,679	$	406,561	$	803,611	$	2,216,767	$	6,983,438
Pinnacle
Pass	$	143,063	$	113,785	$	88,206	$	36,761	$	177,258	$	360,568	$	—	$	919,641

Total Pinnacle	$	143,063	$	113,785	$	88,206	$	36,761	$	177,258	$	360,568	$	—	$	919,641
Bridge - Equipment Finance
Pass	$	73,190	$	18,763	$	108,990	$	43,826	$	23,684	$	48,471	$	—	$	316,924

Substandard	—		—		12,875		4,775		23,025		—		—		40,675

Total Bridge - Equipment Finance	$	73,190	$	18,763	$	121,865	$	48,601	$	46,709	$	48,471	$	—	$	357,599
Bridge - Franchise Finance
Pass	$	49,949	$	51,057	$	104,299	$	10,199	$	7,039	$	5,838	$	—	$	228,381

Substandard	—		7,351		39,588		30,134		8,660		8,018		—		93,751
Doubtful	—		—		7,718		12,274		—		—		—		19,992
Total Bridge - Franchise Finance	$	49,949	$	58,408	$	151,605	$	52,607	$	15,699	$	13,856	$	—	$	342,124
Mortgage Warehouse Lending
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	1,092,133	$	1,092,133
Total Mortgage Warehouse Lending	$	—	$	—	$	—	$	—	$	—	$	—	$	1,092,133	$	1,092,133

At ~~June 30,~~March 31, 2022 and December 31, 2021, the balance of revolving loans converted to term loans was immaterial.

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


		June 30, 2021																							March 31, 2022

		Multi-Family		Non-Owner Occupied Commercial Real Estate		Construction and Land		Owner Occupied Commercial Real Estate		Commercial and Industrial		PPP		Pinnacle		Bridge - Franchise Finance		Bridge - Equipment Finance		Mortgage Warehouse Lending		Total			Multi-Family		Non-Owner Occupied Commercial Real Estate		Construction and Land		Owner Occupied Commercial Real Estate		Commercial and Industrial		PPP		Pinnacle		Bridge - Franchise Finance		Bridge - Equipment Finance		Mortgage Warehouse Lending		Total
Pass	Pass	$	1,038,043	$	3,948,441	$	199,347	$	1,673,233	$	3,770,930	$	491,960	$	1,046,537	$	209,947	$	342,387	$	1,018,267	$	13,739,092	Pass	$	886,222	$	3,931,211	$	159,478	$	1,753,081	$	4,603,865	$	80,296	$	935,915	$	208,720	$	314,655	$	701,172	$	13,574,615
Special mention	Special mention	6,085		47,907		5,184		41,923		33,364		0		0		1,857		1,744		0		138,064		Special mention	—		30,083		1,902		5,369		57,896		—		—		—		—		—		95,250
Substandard - accruing	Substandard - accruing	205,514		676,515		9,319		219,162		277,683		0		0		218,665		77,808		0		1,684,666		Substandard - accruing	176,034		297,714		10,355		125,866		250,016		—		—		69,619		26,714		—		956,318
Substandard non-accruing	Substandard non-accruing	7,069		51,320		4,784		26,582		106,964		0		0		32,927		0		0		229,646		Substandard non-accruing	10,725		25,667		5,090		21,079		33,380		—		—		8,388		—		—		104,329
Doubtful	Doubtful	0		0		0		0		16,854		0		0		478		0		0		17,332		Doubtful	—		—		—		—		6,842		—		—		19,836		—		—		26,678
		$	1,256,711	$	4,724,183	$	218,634	$	1,960,900	$	4,205,795	$	491,960	$	1,046,537	$	463,874	$	421,939	$	1,018,267	$	15,808,800		$	1,072,981	$	4,284,675	$	176,825	$	1,905,395	$	4,951,999	$	80,296	$	935,915	$	306,563	$	341,369	$	701,172	$	14,757,190

December 31, 2020
Multi-Family Non-Owner Occupied Commercial Real Estate Construction
and Land Owner Occupied Commercial Real Estate Commercial and Industrial PPP Pinnacle Bridge - Franchise Finance Bridge - Equipment Finance Mortgage Warehouse Lending Total
Pass $ 1,360,245 $ 3,922,586 $ 264,979 $ 1,643,206 $ 3,937,270 $ 781,811 $ 1,107,386 $ 190,878 $ 364,256 $ 1,259,408 14,832,025
Special mention 36,335 219,843 20,898 156,837 169,605 0 0 71,593 36,405 0 711,516
Substandard -accruing 218,532 756,825 2,676 177,575 285,925 0 0 242,234 74,887 0 1,758,654
Substandard non-accruing 24,089 64,019 4,754 23,152 54,411 0 0 33,333 0 0 203,758
Doubtful 0 0 0 0 172 0 0 11,695 0 0 11,867
$ 1,639,201 $ 4,963,273 $ 293,307 $ 2,000,770 $ 4,447,383 $ 781,811 $ 1,107,386 $ 549,733 $ 475,548 $ 1,259,408 $ 17,517,820

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022


	December 31, 2021

	Multi-Family		Non-Owner Occupied Commercial Real Estate		Construction and Land		Owner Occupied Commercial Real Estate		Commercial and Industrial		PPP		Pinnacle		Bridge - Franchise Finance		Bridge - Equipment Finance		Mortgage Warehouse Lending		Total
Pass	$	970,337	$	3,892,353	$	147,470	$	1,750,035	$	4,368,590	$	248,505	$	919,641	$	228,381	$	316,924	$	1,092,133	$	13,934,369
Special mention	—		26,088		6,174		14,010		102,321		—		—		—		—		—		148,593
Substandard -accruing	173,536		423,918		6,582		160,159		250,644		—		—		80,864		40,675		—		1,136,378
Substandard non-accruing	10,865		39,251		5,164		20,454		40,958		—		—		12,887		—		—		129,579
Doubtful	—		—		—		—		27,762		—		—		19,992		—		—		47,754
	$	1,154,738	$	4,381,610	$	165,390	$	1,944,658	$	4,790,275	$	248,505	$	919,641	$	342,124	$	357,599	$	1,092,133	$	15,396,673

Past Due and Non-Accrual Loans:

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

June 30, 2021 December 31, 2020
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 $ 5,128,499 $ 45,498 $ 9,345 $ 23,424 $ 5,206,766 $ 4,857,332 $ 48,851 $ 7,489 $ 9,164 $ 4,922,836
Government insured residential 951,561 103,054 77,401 731,707 1,863,723 722,367 77,883 56,495 562,329 1,419,074
Other consumer loans 5,742 21 0 22 5,785 6,022 37 22 231 6,312
Multi-family 1,235,529 0 14,113 7,069 1,256,711 1,602,990 17,842 0 18,369 1,639,201
Non-owner occupied commercial real estate 4,677,789 14,113 206 32,075 4,724,183 4,876,823 34,117 20,291 32,042 4,963,273
Construction and land 217,400 888 0 346 218,634 288,032 4,530 399 346 293,307
Owner occupied commercial real estate 1,943,777 924 1,083 15,116 1,960,900 1,971,475 10,756 3,203 15,336 2,000,770
Commercial and industrial 4,173,584 78 2,066 30,067 4,205,795 4,366,009 52,117 552 28,705 4,447,383
PPP 491,960 0 0 0 491,960 781,811 0 0 0 781,811
Pinnacle 1,046,537 0 0 0 1,046,537 1,107,386 0 0 0 1,107,386
Bridge - franchise finance 441,124 0 9,948 12,802 463,874 498,831 16,423 8,664 25,815 549,733
Bridge - equipment finance 421,939 0 0 0 421,939 475,548 0 0 0 475,548
Mortgage warehouse lending 1,018,267 0 0 0 1,018,267 1,259,408 0 0 0 1,259,408
$ 21,753,708 $ 164,576 $ 114,162 $ 852,628 $ 22,885,074 $ 22,814,034 $ 262,556 $ 97,115 $ 692,337 $ 23,866,042

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~


	March 31, 2022										December 31, 2021

	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	$	6,598,534	$	50,875	$	3,600	$	15,107	$	6,668,116	$	6,261,995	$	53,092	$	5,650	$	17,488	$	6,338,225
Government insured residential	1,004,764		127,093		102,749		703,873		1,938,479		1,034,686		143,672		115,028		729,835		2,023,221

Other consumer loans	6,212		32		—		—		6,244		6,919		15		—		—		6,934
Multi-family	1,070,843		—		—		2,138		1,072,981		1,135,363		6,017		11,220		2,138		1,154,738
Non-owner occupied commercial real estate	4,246,741		19,133		1,286		17,515		4,284,675		4,359,671		2,727		29		19,183		4,381,610
Construction and land	172,178		4,301		—		346		176,825		160,183		492		4,369		346		165,390
Owner occupied commercial real estate	1,891,719		543		—		13,133		1,905,395		1,930,932		—		1,402		12,324		1,944,658
Commercial and industrial	4,891,789		21,799		25,901		12,510		4,951,999		4,763,976		2,114		11,016		13,169		4,790,275
PPP	80,119		177		—		—		80,296		247,740		765		—		—		248,505
Pinnacle	935,915		—		—		—		935,915		919,641		—		—		—		919,641
Bridge - franchise finance	275,590		27,602		—		3,371		306,563		331,397		—		6,735		3,992		342,124
Bridge - equipment finance	338,803		2,566		—		—		341,369		357,599		—		—		—		357,599
Mortgage warehouse lending	701,172		—		—		—		701,172		1,092,133		—		—		—		1,092,133
	$	22,214,379	$	254,121	$	133,536	$	767,993	$	23,370,029	$	22,602,235	$	208,894	$	155,449	$	798,475	$	23,765,053

Included in the table above is the guaranteed portion of SBA loans past due by 90 days or more totaling ~~$33.6~~$30.6 million and ~~$40.3~~$31.3 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

Loans contractually delinquent by 90 days or more and still accruing totaled ~~$732~~$704 million and ~~$562~~$730 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, ~~substantially~~ all of which were government insured residential loans. These loans are government insured pool buyout loans, which the Company buys out of GNMA securitizations upon default.

The following table presents information about loans on non-accrual status at the dates indicated (in thousands):


		June 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021

		Amortized Cost		Amortized Cost With No Related Allowance		Amortized Cost		Amortized Cost With No Related Allowance			Amortized Cost		Amortized Cost With No Related Allowance		Amortized Cost		Amortized Cost With No Related Allowance
Residential and other consumer	Residential and other consumer	$	45,553	$	1,643	$	28,828	$	1,755	Residential and other consumer	$	19,824	$	—	$	28,553	$	1,684
Commercial:	Commercial:									Commercial:
Multi-family	Multi-family	7,069		7,069		24,090		24,090		Multi-family	10,725		10,725		10,865		10,865
Non-owner occupied commercial real estate	Non-owner occupied commercial real estate	51,320		30,182		64,017		32,843		Non-owner occupied commercial real estate	25,667		11,069		39,251		20,929
Construction and land	Construction and land	4,784		4,439		4,754		4,408		Construction and land	5,090		4,301		5,164		4,369
Owner occupied commercial real estate	Owner occupied commercial real estate	26,582		7,545		23,152		2,110		Owner occupied commercial real estate	21,079		5,707		20,453		4,457
Commercial and industrial	Commercial and industrial	123,818		9,760		54,584		9,235		Commercial and industrial	40,222		16,176		68,720		10,083

Bridge - franchise finance	Bridge - franchise finance	33,405		4,010		45,028		9,754		Bridge - franchise finance	28,224		2,304		32,879		16,808

		$	292,531	$	64,648	$	244,453	$	84,195		$	150,831	$	50,282	$	205,885	$	69,195

Included in the table above is the guaranteed portion of non-accrual SBA loans totaling ~~$47.7~~$41.9 million and ~~$51.3~~$46.1 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The amount of interest income recognized on non-accrual loans was insignificant for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. 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 ~~$3.4~~$1.3 million and ~~$5.9~~$3.0 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~respectively and $3.0 million and $5.7 million for the three and six months ended June 30, 2020,~~ respectively.

Collateral dependent loans:

The following table presents the amortized cost basis of collateral dependent loans at the dates indicated (in thousands):

June 30, 2021 December 31, 2020
Amortized Cost Extent to Which Secured by Collateral Amortized Cost Extent to Which Secured by Collateral
Residential and other consumer $ 2,405 $ 2,377 $ 2,528 $ 2,513
Commercial:
Multi-family 7,069 7,069 24,090 24,090
Non-owner occupied commercial real estate 40,965 40,724 52,813 52,435
Construction and land 4,784 4,784 4,754 4,754
Owner occupied commercial real estate 20,228 20,228 14,814 14,777
Commercial and industrial 99,405 61,286 28,112 18,093
Bridge - franchise finance 7,541 5,818 28,986 12,832
Total commercial 179,992 139,909 153,569 126,981
$ 182,397 $ 142,286 $ 156,097 $ 129,494

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~


	March 31, 2022				December 31, 2021
	Amortized Cost		Extent to Which Secured by Collateral		Amortized Cost		Extent to Which Secured by Collateral
Residential and other consumer	$	746	$	746	$	2,317	$	2,295
Commercial:
Multi-family	10,725		10,725		10,865		10,865
Non-owner occupied commercial real estate	24,784		24,289		29,001		28,486
Construction and land	4,647		4,647		4,715		4,715
Owner occupied commercial real estate	16,431		16,387		15,198		15,155
Commercial and industrial	17,643		16,743		45,015		37,020

Bridge - franchise finance	24,889		17,457		26,055		18,740

Total commercial	99,119		90,248		130,849		114,981
	$	99,865	$	90,994	$	133,166	$	117,276

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. There have been no significant changes to the extent to which collateral secures collateral dependent loans during the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

Foreclosure of residential real estate

The recorded investment in residential loans in the process of foreclosure was ~~$200~~$298 million, of which ~~$192~~$291 million was government insured, at ~~June 30, 2021~~March 31, 2022 and ~~$217~~$208 million, of which ~~$209~~$202 million was government insured, at December 31, ~~2020.~~2021. The carrying amount of foreclosed residential real estate included in other assets in the accompanying consolidated balance sheet was insignificant at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

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 ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ that experienced payment defaults during those periods (dollars in thousands):


	Three Months Ended March 31,
	2022						2021
	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	4	$	1,992	—	$	—	—	$	—	—	$	—
Government insured residential	390	63,539		125	21,391		68	11,497		58	10,054





Commercial and industrial	8	15,219		—	—		—	—		—	—

Bridge - franchise finance	—	—		—	—		—	—		1	492

	402	$	80,750	125	$	21,391	68	$	11,497	59	$	10,546

Three Months Ended June 30,
2021 2020
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
Government insured residential 116 $ 21,758 54 $ 9,878 52 $ 7,291 121 $ 19,512
Non-owner occupied commercial real estate 1 2,853 0 0 0 0 1 4,249
Commercial and industrial 0 0 0 0 2 1,348 0 0
Bridge - franchise finance 0 0 0 0 1 919 5 18,718
117 $ 24,611 54 $ 9,878 55 $ 9,558 127 $ 42,479

Six Months Ended June 30,
2021 2020
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 0 $ 0 0 $ 0 1 $ 203 0 $ 0
Government insured residential 143 27,235 63 10,997 86 12,183 150 23,994
Non-owner occupied commercial real estate 1 2,853 0 0 1 4,249 1 4,249
Commercial and industrial 0 0 0 0 2 1,348 3 5,448
Bridge - franchise finance 0 0 0 0 9 14,666 8 23,358
144 $ 30,088 63 $ 10,997 99 $ 32,649 $ 162 $ 57,049

TDRs during the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ generally included interest rate reductions and extensions of maturity. Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy. The total amount of such loans is not material. The majority of loan modifications or deferrals that took place after the onset of the COVID-19 pandemic have not been categorized as TDRs, in accordance with interagency and authoritative guidance and the provisions of the CARES Act.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

Note 5 Income Taxes

The Company’s effective income tax rate was ~~25.8%~~24.4% and ~~25.3%~~24.7% for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~respectively and 21.0% and 19.3% for the three and six months ended June 30, 2020,~~ respectively. The effective income tax rates differed from the statutory federal income tax rate of 21% ~~for the three and six months ended June 30, 2021~~ due primarily to the impact of state income taxes, partially offset by the benefit of income not subject to federal tax. These factors were largely offsetting for the 2020 periods, when the effective tax rate did not differ materially from the Federal statutory rate of 21%. During the three and six months ended June 30, 2020, income not subject to tax was a larger percentage of pre-tax income when compared to the same periods in 2021.

Note 6 Derivatives and Hedging Activities

The Company has entered into ~~LIBOR-based~~ interest rate swaps and caps designated as cash flow hedges with the objective of limiting the variability of interest payment cash flows. The Company has also entered into ~~LIBOR-based~~ interest rate swaps designated as fair value hedges designed to hedge changes in the fair value of outstanding fixed rate ~~borrowings~~instruments caused by fluctuations in the benchmark interest rate.

The Company enters into interest rate derivative contracts with certain of its commercial borrowers to enable those borrowers to manage their exposure to interest rate fluctuations. To mitigate interest rate risk associated with these derivative contracts, the Company enters into offsetting derivative contract positions with primary dealers. These interest rate derivative contracts are not designated as hedging instruments; therefore, changes in the fair value of these derivatives are recognized immediately in earnings. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the impact on earnings related to changes in fair value of these derivatives was not material.

The Company may be exposed to credit risk in the event of non-performance by the counterparties to its interest rate derivative agreements. The Company assesses the credit risk of its financial institution counterparties by monitoring publicly available credit rating and financial information. The Company manages dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA master agreements, central clearing mechanisms and counterparty limits. The agreements contain bilateral collateral arrangements with the amount of collateral to be posted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its commercial borrower counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

does not currently anticipate any significant losses from failure of interest rate derivative counterparties to honor their obligations.

The CME legally 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 interest rate derivative contracts the Company clears through the CME are reported at a fair value of ~~approximately 0~~zero at both ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

2021.

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):


		June 30, 2021																	March 31, 2022

			Weighted Average Pay Rate		Weighted Average Receive Rate		Weighted Average Remaining Life in Years																Weighted Average Pay Rate / Strike Price			Weighted Average Receive Rate / Strike Price			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						Liability
Derivatives designated as cash flow hedges:	Derivatives designated as cash flow hedges:																									Derivatives designated as cash flow hedges:
Pay-fixed interest rate swaps	Pay-fixed interest rate swaps	Variability of interest cash flows on variable rate borrowings		2.53%			3-Month LIBOR		2.3		$	2,381,000		Other liabilities		$	0			$	(4,544)	Pay-fixed interest rate swaps			Variability of interest cash flows on variable rate borrowings			2.36%			3-Month LIBOR			2.6		$	820,000			Other liabilities			$	—	$	(568)
Pay-fixed interest rate swaps																		Pay-fixed interest rate swaps	Variability of interest cash flows on variable rate borrowings					1.61%			SOFR			2.3			275,000						—			—
Pay-fixed interest rate swaps																		Pay-fixed interest rate swaps	Variability of interest cash flows on variable rate liabilities				1.22%			Fed Funds Effective Rate			2.4			400,000						—			—
Interest rate caps purchased, indexed to Fed Funds effective rate	Interest rate caps purchased, indexed to Fed Funds effective rate	Variability of interest cash flows on variable rate borrowings	0%		—%		4.4		100,000		Other assets			1,259		0		Interest rate caps purchased, indexed to Fed Funds effective rate	Variability of interest cash flows on variable rate liabilities				1.00%						3.2			200,000			Other assets			9,781			—
Derivatives designated as fair value hedges:	Derivatives designated as fair value hedges:																	Derivatives designated as fair value hedges:
Receive-fixed interest rate swaps		Variability of fair value of fixed rate borrowings	3-Month LIBOR		1.54%		0.2		200,000		Other liabilities			0		0
Pay-variable interest rate swaps																		Pay-variable interest rate swaps	Variability of fair value of fixed rate loans							SOFR			2.3			100,000						—			—
Derivatives not designated as hedges:	Derivatives not designated as hedges:																	Derivatives not designated as hedges:
Pay-fixed interest rate swaps																		Pay-fixed interest rate swaps					3.56%			1-Month LIBOR			4.7			1,598,865			Other assets / Other liabilities			14,934			(3,061)
Pay-variable interest rate swaps																		Pay-variable interest rate swaps					1-Month LIBOR			3.56%			4.7			1,598,865			Other assets / Other liabilities			9,196			(40,650)
Pay-fixed interest rate swaps	Pay-fixed interest rate swaps		3.57%		Indexed to 1-month LIBOR		5.4		1,679,754		Other assets / Other liabilities			1,067		(25,087)		Pay-fixed interest rate swaps					3.48%			SOFR			6.4			70,260			Other assets / Other liabilities			2,074			(117)
Pay-variable interest rate swaps	Pay-variable interest rate swaps		Indexed to 1-month LIBOR		3.57%		5.4		1,679,754		Other assets			77,014		(2,154)		Pay-variable interest rate swaps					SOFR			3.48%			6.4			70,260			Other assets / Other liabilities			338			(2,074)
Interest rate caps purchased, indexed to 1-month LIBOR	Interest rate caps purchased, indexed to 1-month LIBOR				2.36%		2.6		43,000		Other assets			346		0		Interest rate caps purchased, indexed to 1-month LIBOR								1.00%			3.7			25,000			Other assets			951			—
Interest rate caps sold, indexed to 1-month LIBOR	Interest rate caps sold, indexed to 1-month LIBOR		2.36%				2.6		43,000		Other liabilities			0		(346)		Interest rate caps sold, indexed to 1-month LIBOR					1.00%						3.7			25,000			Other liabilities			—			(951)
									$	6,126,508				$	79,686	$	(32,131)															$	5,183,250					$	37,274		$	(47,421)

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022


		December 31, 2020																	December 31, 2021

			Weighted Average Pay Rate		Weighted Average Receive Rate		Weighted Average Remaining Life in Years																Weighted Average Pay Rate / Strike Price			Weighted Average Receive Rate / Strike Price			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						Liability
Derivatives designated as cash flow hedges:	Derivatives designated as cash flow hedges:																									Derivatives designated as cash flow hedges:
Pay-fixed interest rate swaps	Pay-fixed interest rate swaps	Variability of interest cash flows on variable rate borrowings		2.41%			3-Month LIBOR		2.5		$	2,771,000		Other liabilities		$	0			$	(5,971)	Pay-fixed interest rate swaps			Variability of interest cash flows on variable rate borrowings			2.35%			3-Month LIBOR			2.6		$	905,000			Other liabilities			$	—	$	(2,687)
Pay-fixed forward-starting interest rate swaps																		Pay-fixed forward-starting interest rate swaps	Variability of interest cash flows on variable rate liabilities					0.87%			Fed Funds Effective Rate			2.5			200,000						—			—
Interest rate caps purchased, indexed to Fed Funds effective rate	Interest rate caps purchased, indexed to Fed Funds effective rate	Variability of interest cash flows on variable rate borrowings	0%		—%		4.9		100,000		Other assets			485		0		Interest rate caps purchased, indexed to Fed Funds effective rate	Variability of interest cash flows on variable rate liabilities				1.00%						3.5			200,000			Other assets			3,260			—
Derivatives designated as fair value hedges:
Receive-fixed interest rate swaps		Variability of fair value of fixed rate borrowings	3-Month LIBOR		1.55%		0.6		250,000		Other liabilities			0		0
Derivatives not designated as hedges:	Derivatives not designated as hedges:																	Derivatives not designated as hedges:
Pay-fixed interest rate swaps	Pay-fixed interest rate swaps		3.61%		Indexed to 1-month LIBOR		5.3		1,626,152		Other assets / Other liabilities			0		(38,519)		Pay-fixed interest rate swaps					3.57%			1-Month LIBOR or SOFR			5.0			1,668,517			Other assets / Other liabilities			3,369			(15,347)
Pay-variable interest rate swaps	Pay-variable interest rate swaps		Indexed to 1-month LIBOR		3.61%		5.3		1,626,152		Other assets / Other liabilities			123,345		0		Pay-variable interest rate swaps					1-Month LIBOR or SOFR			3.57%			5.0			1,668,517			Other assets / Other liabilities			51,947			(6,837)
Interest rate caps purchased, indexed to 1-month LIBOR	Interest rate caps purchased, indexed to 1-month LIBOR				3.72%		0.4		25,921		Other assets			0		0		Interest rate caps purchased, indexed to 1-month LIBOR								1.00%			4.0			25,000			Other assets			443			—
Interest rate caps sold, indexed to 1-month LIBOR	Interest rate caps sold, indexed to 1-month LIBOR		3.72%				0.4		25,921		Other liabilities			0		0		Interest rate caps sold, indexed to 1-month LIBOR					1.00%						4.0			25,000			Other liabilities			—			(443)
									$	6,425,146				$	123,830	$	(44,490)															$	4,692,034					$	59,019		$	(25,314)

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

Three Months Ended June 30, Six Months Ended June 30, Location of Loss Reclassified from AOCI into Income
2021 2020 2021 2020
Interest rate contracts $ (14,882) $ (10,009) $ (29,857) $ (14,565) Interest expense on borrowings


	Three Months Ended March 31,
		2022		2021
Location of loss reclassified from AOCI into income:
Interest expense on borrowings		$	(4,710)	$	(14,975)
Interest expense on deposits		(722)		—
		$	(5,432)	$	(14,975)

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ 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 ~~June 30, 2021,~~March 31, 2022, the amount of net loss expected to be reclassified from AOCI into earnings during the next twelve months was ~~$38.9~~$1.1 million. See Note 7 to the consolidated financial statements for additional information about the reclassification adjustments from AOCI into earnings.

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

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


		Three Months Ended June 30,				Six Months Ended June 30,				Location of Gain (Loss) in Consolidated Statements of Income		Three Months Ended March 31,			Location of Gain (Loss) in Consolidated Statements of Income
		2021		2020		2021		2020					2022				2021
Variability of fair value of fixed rate loans:											Variability of fair value of fixed rate loans:
Fair value adjustment on derivatives	Fair value adjustment on derivatives	$	(669)	$	8	$	(1,496)	$	4,028	Interest expense on borrowings	Fair value adjustment on derivatives		$	700	$	—		Interest income on loans
Fair value adjustment on hedged items	Fair value adjustment on hedged items	670		(164)		1,495		(4,072)		Interest expense on borrowings	Fair value adjustment on hedged items		(733)		—			Interest income on loans
Gain (loss) recognized on fair value hedges (ineffective portion)		$	1	$	(156)	$	(1)	$	(44)
Loss recognized on fair value hedges (ineffective portion)											Loss recognized on fair value hedges (ineffective portion)		$	(33)	$	—

Variability of fair value of fixed rate borrowings:											Variability of fair value of fixed rate borrowings:
Fair value adjustment on derivatives											Fair value adjustment on derivatives		$	—	$	(827)		Interest expense on borrowings
Fair value adjustment on hedged items											Fair value adjustment on hedged items		—		825			Interest expense on borrowings
Loss recognized on fair value hedges (ineffective portion)											Loss recognized on fair value hedges (ineffective portion)		$	—	$	(2)

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

Included in the table above are fair value hedges on fixed rate borrowings which matured during the year ended December 31, 2021.

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

June 30, 2021 December 31, 2020 Location in Consolidated Balance Sheets
Contractual balance outstanding of hedged item $ 200,000 $ 250,000 FHLB advances
Cumulative fair value hedging adjustments $ 505 $ 1,999 FHLB advances


	March 31, 2022		December 31, 2021		Location in Consolidated Balance Sheets
Contractual balance outstanding of hedged item (1)	$	100,000	$	—	Loans
Cumulative fair value hedging adjustments	$	(733)	$	—	Loans

(1)This amount is included in the amortized cost basis of a closed portfolio of loans used to designate hedging relationships in a portfolio layer method hedge in which the hedged item is anticipated to be outstanding for the designated hedge period. At March 31, 2022, the amortized cost basis of the closed portfolio used in this hedging relationship was $1.1 billion.

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.

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


		June 30, 2021																							March 31, 2022

				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 Not Offset in Balance Sheet
		Gross Amounts Recognized								Derivative Instruments				Collateral Pledged				Net Amount				Gross Amounts Recognized									Derivative Instruments			Collateral Pledged		Net Amount
Derivative assets	Derivative assets	$	1,413			$	0			$	1,413			$	(1,363)			$	0				$	50		Derivative assets	$	27,740				$	—	$	27,740	$	(2,041)	$	(25,514)	$	185
Derivative liabilities	Derivative liabilities	(29,631)		0				(29,631)				1,363				28,220				(48)			Derivative liabilities		(3,746)				—			(3,746)		2,041		1,214		(491)
		$	(28,218)	$	0			$	(28,218)			$	0			$	28,220			$	2				$	23,994			$	—		$	23,994	$	—	$	(24,300)	$	(306)


		December 31, 2020																							December 31, 2021

				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 Not Offset in Balance Sheet
		Gross Amounts Recognized								Derivative Instruments				Collateral Pledged				Net Amount				Gross Amounts Recognized									Derivative Instruments			Collateral Pledged		Net Amount
Derivative assets	Derivative assets	$	0			$	0			$	0			$	0			$	0				$	0		Derivative assets	$	7,072				$	—	$	7,072	$	(3,104)	$	(3,915)	$	53
Derivative liabilities	Derivative liabilities	(44,490)		0				(44,490)				0				44,332				(158)			Derivative liabilities		(18,034)				—			(18,034)		3,104		14,557		(373)
		$	(44,490)	$	0			$	(44,490)			$	0			$	44,332			$	(158)				$	(10,962)			$	—		$	(10,962)	$	—	$	10,642	$	(320)

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

March 31, 2022

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

At June 30, 2021, the Company had pledged net financial collateral of $31.5 million as collateral for interest rate swaps in a liability 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.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

Note 7 Stockholders’ Equity

Accumulated Other Comprehensive Income

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

Three Months Ended June 30,
2021 2020
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 arising during the period $ 18,692 $ (4,766) $ 13,926 $ 252,893 $ (64,488) $ 188,405
Amounts reclassified to gain on investment securities available for sale, net (2,842) 724 (2,118) (5,723) 1,459 (4,264)
Net change in unrealized gains (losses) on investment securities available for sale 15,850 (4,042) 11,808 247,170 (63,029) 184,141
Unrealized losses on derivative instruments:
Net unrealized holding gain (loss) arising during the period (12,005) 3,061 (8,944) (12,288) 1,218 (11,070)
Amounts reclassified to interest expense on borrowings 14,882 (3,794) 11,088 10,009 (2,507) 7,502
Net change in unrealized losses on derivative instruments 2,877 (733) 2,144 (2,279) (1,289) (3,568)
Other comprehensive income (loss) $ 18,727 $ (4,775) $ 13,952 $ 244,891 $ (64,318) $ 180,573

Six Months Ended June 30,
2021 2020
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 loss arising during the period $ (11,489) $ 2,930 $ (8,559) $ (33,743) $ 8,988 $ (24,755)
Amounts reclassified to gain on investment securities available for sale, net (6,809) 1,736 (5,073) (7,253) 1,849 (5,404)
Net change in unrealized gains (losses) on investment securities available for sale (18,298) 4,666 (13,632) (40,996) 10,837 (30,159)
Unrealized losses on derivative instruments:
Net unrealized holding gain (loss) arising during the period 21,030 (5,363) 15,667 (122,239) 30,355 (91,884)
Amounts reclassified to interest expense on borrowings 29,857 (7,613) 22,244 14,565 (3,714) 10,851
Net change in unrealized losses on derivative instruments 50,887 (12,976) 37,911 (107,674) 26,641 (81,033)
Other comprehensive income (loss) $ 32,589 $ (8,310) $ 24,279 $ (148,670) $ 37,478 $ (111,192)

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~


	Three Months Ended March 31,
	2022						2021
	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 losses arising during the period	$	(236,434)	$	61,454	$	(174,980)	$	(30,181)	$	7,696	$	(22,485)
Amounts reclassified to gain on investment securities available for sale, net	(2,673)		695		(1,978)		(3,967)		1,012		(2,955)
Net change in unrealized gains (losses) on investment securities available for sale	(239,107)		62,149		(176,958)		(34,148)		8,708		(25,440)
Unrealized gains (losses) on derivative instruments:
Net unrealized holding gains arising during the period	41,963		(10,784)		31,179		33,035		(8,424)		24,611
Amounts reclassified to interest expense on deposits	722		(188)		534		—		—		—
Amounts reclassified to interest expense on borrowings	4,710		(1,224)		3,486		14,975		(3,819)		11,156

Net change in unrealized gains (losses) on derivative instruments	47,395		(12,196)		35,199		48,010		(12,243)		35,767
Other comprehensive income (loss)	$	(191,712)	$	49,953	$	(141,759)	$	13,862	$	(3,535)	$	10,327

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

Three Months Ended June 30,
Unrealized Gain (Loss) on
Investment Securities
Available for Sale Unrealized Gain (Loss)
on Derivative
Instruments Total
Balance at March 31, 2021 $ 38,359 $ (77,184) $ (38,825)
Other comprehensive income 11,808 2,144 13,952
Balance at June 30, 2021 $ 50,167 $ (75,040) $ (24,873)
Balance at March 31, 2020 $ (186,115) $ (137,477) $ (323,592)
Other comprehensive income (loss) 184,141 (3,568) $ 180,573
Balance at June 30, 2020 $ (1,974) $ (141,045) $ (143,019)


	Three Months Ended March 31,
	Unrealized Gain (Loss) on Investment Securities Available for Sale		Unrealized Gain (Loss) on Derivative Instruments		Total





Balance at December 31, 2021	$	2,859	$	(18,799)	$	(15,940)

Other comprehensive income (loss)	(176,958)		35,199		(141,759)
Balance at March 31, 2022	$	(174,099)	$	16,400	$	(157,699)

Balance at December 31, 2020	$	63,799	$	(112,951)	$	(49,152)
Other comprehensive income (loss)	(25,440)		35,767		10,327
Balance at March 31, 2021	$	38,359	$	(77,184)	$	(38,825)

Six Months Ended June 30,
Unrealized Gain (Loss) on
Investment Securities
Available for Sale Unrealized Gain (Loss)
on Derivative
Instruments Total
Balance at December 31, 2020 $ 63,799 $ (112,951) $ (49,152)
Other comprehensive income (loss) (13,632) 37,911 24,279
Balance at June 30, 2021 $ 50,167 $ (75,040) $ (24,873)
Balance at December 31, 2019 $ 28,185 $ (60,012) $ (31,827)
Other comprehensive loss (30,159) (81,033) (111,192)
Balance at June 30, 2020 $ (1,974) $ (141,045) $ (143,019)

Capital Actions

In ~~July 2021,~~May 2022, the Company's Board of Directors authorized the repurchase of up to an additional $150 million in shares of its outstanding common stock. ~~This authorization is in addition to $37.7 million in remaining authorization under a previously announced share repurchase program.~~ Any repurchases under the program will be made in accordance with applicable securities laws from time to time in open market or private transactions. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued without prior notice at any time.

2526

Table of Contents

BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

~~Note 8 Equity Based and Other Compensation Plans~~

~~Share Awards~~

~~Unvested share awards~~

~~A summary of activity related to unvested share awards follows for the periods indicated:~~

Number of Share Awards Weighted Average Grant Date Fair Value
Unvested share awards outstanding, December 31, 2020 1,161,835 $ 33.32
Granted 559,180 42.17
Vested (460,269) 34.01
Canceled or forfeited (48,684) 35.19
Unvested share awards outstanding, June 30, 2021 1,212,062 $ 37.07
Unvested share awards outstanding, December 31, 2019 1,050,455 $ 38.24
Granted 644,300 29.73
Vested (455,260) 39.15
Canceled or forfeited (33,137) 36.21
Unvested share awards outstanding, June 30, 2020 1,206,358 $ 33.41

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. All shares granted in 2019 and later 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 stock on the date of grant for shares granted and the aggregate grant date fair value of shares vesting for the periods indicated (in thousands, except per share data):

Six Months Ended June 30,
2021 2020
Closing price on date of grant $42.01 - $47.52 $13.99 - $30.90
Aggregate grant date fair value of shares vesting $ 15,652 $ 17,824

~~The total unrecognized compensation cost of $34.5 million for all unvested share awards outstanding at June 30, 2021 will be recognized over a weighted average remaining period of 2.94 years.~~

~~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 generally vest on December 31st in equal tranches over three years for grants prior to 2019, and over four years for awards issued in 2019 and after. PSUs are initially granted based on a target value. The number of PSUs that ultimately vest at the end of the performance measurement period will be based on the achievement of performance criteria pre-established by the Compensation Committee of the Board of Directors. 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.

As a result of the majority of previous settlements being in cash, all RSUs and PSUs have been determined to be liability instruments and 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 Company's common stock at the reporting date net of a discount related to any applicable market conditions, considering the

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

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.

~~A summary of activity related to executive share-based awards for theperiods indicatedfollows:~~

RSU PSU
Unvested executive share-based awards outstanding, December 31, 2020 156,555 179,793
Granted 63,814 63,814
Unvested executive share-based awards outstanding, June 30, 2021 220,369 243,607
Unvested executive share-based awards outstanding, December 31, 2019 112,116 125,088
Granted 106,731 106,731
Unvested executive share-based awards outstanding, June 30, 2020 218,847 231,819

The total liability for the share units was $6.8 million at June 30, 2021. The total unrecognized compensation cost of $13.0 million for these share units at June 30, 2021 will be recognized over a weighted average remaining period of 2.22 years.

~~Incentive~~ ~~awards~~

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. Awards related to performance periods prior to 2019 vest over three years and awards ~~related to the 2019 and subsequent performance periods~~ vest in equal installments over a period of four years from the date of grant. No common stock was awarded pursuant to these incentive arrangements for the 2020 performance period. These awards are included in the summary of activity related to unvested share awards above. ~~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.

~~Option Awards~~

~~A summary of activity related to stock option awards for thesix months ended June 30, 2021 and 2020follows:~~

Number of
Option
Awards Weighted
Average
Exercise Price
Option awards outstanding, December 31, 2020 1,569 $ 15.94
Exercised (1,569) 15.94
Option awards outstanding and exercisable, June 30, 2021 0 $ 0
Option awards outstanding, December 31, 2019 737,753 $ 26.64
Exercised (60,000) 25.48
Option awards outstanding, June 30, 2020 677,753 $ 26.74

~~The intrinsic value of options exercised and related tax benefits was immaterial for the~~ ~~six months ended June 30, 2021~~ ~~and 2020.~~

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

Note 98 Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis

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

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

The Company uses third-party pricing services in determining fair value measurements for investment securities. To obtain an understanding of the methodologies and assumptions used, management reviews written documentation provided by the pricing services, conducts interviews with valuation desk personnel and reviews model results and detailed assumptions used to value selected securities as considered necessary. Management has established a robust price challenge process that includes a review by the treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over month fluctuations or deviations from expectations is challenged. If considered necessary to resolve any discrepancies, a price will be obtained from an additional independent valuation source. The Company does not typically adjust the prices provided, other than through this established challenge process. The results of price challenges are subject to review by executive management. ~~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. ~~These~~As all significant inputs to the valuation process are observable, these instruments are classified within level 2 of the fair value hierarchy.

Derivative financial instruments—Fair values of interest rate swaps and caps 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~~benchmark swap rates and ~~LIBOR~~benchmark forward yield curves. These fair value measurements are generally classified within level 2 of the fair value hierarchy.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

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


		June 30, 2021							March 31, 2022

		Level 1		Level 2		Total			Level 1		Level 2		Total
Investment securities available for sale:	Investment securities available for sale:							Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	156,637	$	0	$	156,637	U.S. Treasury securities	$	101,519	$	—	$	101,519
U.S. Government agency and sponsored enterprise residential MBS	U.S. Government agency and sponsored enterprise residential MBS	0		2,215,440		2,215,440		U.S. Government agency and sponsored enterprise residential MBS	—		2,165,624		2,165,624
U.S. Government agency and sponsored enterprise commercial MBS	U.S. Government agency and sponsored enterprise commercial MBS	0		835,588		835,588		U.S. Government agency and sponsored enterprise commercial MBS	—		714,594		714,594

Private label residential MBS and CMOs	Private label residential MBS and CMOs	0		2,111,727		2,111,727		Private label residential MBS and CMOs	—		2,708,041		2,708,041
Private label commercial MBS	Private label commercial MBS	0		2,594,024		2,594,024		Private label commercial MBS	—		2,711,986		2,711,986
Single family rental real estate-backed securities		0		617,445		617,445
Single family real estate-backed securities								Single family real estate-backed securities	—		493,869		493,869
Collateralized loan obligations	Collateralized loan obligations	0		982,267		982,267		Collateralized loan obligations	—		1,072,480		1,072,480
Non-mortgage asset-backed securities	Non-mortgage asset-backed securities	0		176,506		176,506		Non-mortgage asset-backed securities	—		117,398		117,398
State and municipal obligations	State and municipal obligations	0		228,625		228,625		State and municipal obligations	—		207,279		207,279
SBA securities	SBA securities	0		215,634		215,634		SBA securities	—		169,112		169,112

Marketable equity securities	Marketable equity securities	88,142		0		88,142		Marketable equity securities	100,196		—		100,196
Servicing rights	Servicing rights	0		6,950		6,950		Servicing rights	—		5,032		5,032
Derivative assets	Derivative assets	0		79,686		79,686		Derivative assets	—		37,274		37,274
Total assets at fair value	Total assets at fair value	$	244,779	$	10,063,892	$	10,308,671	Total assets at fair value	$	201,715	$	10,402,689	$	10,604,404
Derivative liabilities	Derivative liabilities	$	0	$	(32,131)	$	(32,131)	Derivative liabilities	$	—	$	(47,421)	$	(47,421)
Total liabilities at fair value	Total liabilities at fair value	$	0	$	(32,131)	$	(32,131)	Total liabilities at fair value	$	—	$	(47,421)	$	(47,421)


		December 31, 2020							December 31, 2021

		Level 1		Level 2		Total			Level 1		Level 2		Total
Investment securities available for sale:	Investment securities available for sale:							Investment securities available for sale:
U.S. Treasury securities	U.S. Treasury securities	$	80,851	$	0	$	80,851	U.S. Treasury securities	$	111,660	$	—	$	111,660
U.S. Government agency and sponsored enterprise residential MBS	U.S. Government agency and sponsored enterprise residential MBS	0		2,405,570		2,405,570		U.S. Government agency and sponsored enterprise residential MBS	—		2,097,796		2,097,796
U.S. Government agency and sponsored enterprise commercial MBS	U.S. Government agency and sponsored enterprise commercial MBS	0		539,354		539,354		U.S. Government agency and sponsored enterprise commercial MBS	—		856,899		856,899

Private label residential MBS and CMOs	Private label residential MBS and CMOs	0		998,603		998,603		Private label residential MBS and CMOs	—		2,149,420		2,149,420
Private label commercial MBS	Private label commercial MBS	0		2,526,354		2,526,354		Private label commercial MBS	—		2,604,010		2,604,010
Single family rental real estate-backed securities		0		650,888		650,888
Single family real estate-backed securities								Single family real estate-backed securities	—		476,968		476,968
Collateralized loan obligations	Collateralized loan obligations	0		1,140,274		1,140,274		Collateralized loan obligations	—		1,078,286		1,078,286
Non-mortgage asset-backed securities	Non-mortgage asset-backed securities	0		253,261		253,261		Non-mortgage asset-backed securities	—		152,510		152,510
State and municipal obligations	State and municipal obligations	0		235,709		235,709		State and municipal obligations	—		222,277		222,277
SBA securities	SBA securities	0		231,545		231,545		SBA securities	—		183,595		183,595

Marketable equity securities	Marketable equity securities	104,274		0		104,274		Marketable equity securities	120,777		—		120,777
Servicing rights	Servicing rights	0		7,073		7,073		Servicing rights	—		5,152		5,152
Derivative assets	Derivative assets	0		123,830		123,830		Derivative assets	—		59,019		59,019
Total assets at fair value	Total assets at fair value	$	185,125	$	9,112,461	$	9,297,586	Total assets at fair value	$	232,437	$	9,885,932	$	10,118,369
Derivative liabilities	Derivative liabilities	$	0	$	(44,490)	$	(44,490)	Derivative liabilities	$	—	$	(25,314)	$	(25,314)
Total liabilities at fair value	Total liabilities at fair value	$	0	$	(44,490)	$	(44,490)	Total liabilities at fair value	$	—	$	(25,314)	$	(25,314)

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

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

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

Collateral dependent loans ~~OREO~~and ~~other repossessed assets~~OREO—The carrying amount of collateral dependent loans is typically based on the fair value of the underlying collateral, which may be real estate or other business assets, less estimated costs to sell when repayment is expected to come from the sale of the collateral. The carrying value of OREO is initially measured based on the fair value of the real estate acquired in foreclosure and subsequently adjusted to the lower of cost or estimated fair value, less estimated cost to sell. Fair values of real estate collateral and OREO are typically based on third-party real estate appraisals which utilize market and income approaches to valuation incorporating both observable and unobservable inputs. The fair value of repossessed assets or collateral consisting of other business assets may be based on third-party appraisals or internal analyses that use market approaches to valuation incorporating a combination of observable and unobservable inputs.

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

~~Loans held for sale~~Operating lease equipment—~~Loans not originated or otherwise acquired with the intent to sell~~Fair values of impaired operating lease equipment are ~~transferred into the held for sale classification at the lower~~typically based upon discounted cash flow analyses, considering expected lease rates and estimated end of ~~carrying amount or fair value,~~life residual values, typically ~~determined based on the estimated selling price of the loans.~~obtained from independent appraisals. These fair value measurements are ~~typically~~ classified within level 3 of the fair value hierarchy.

The following table presents the net carrying value of assets classified within level 3 of the fair value hierarchy at the dates indicated, for which non-recurring changes in fair value ~~have been~~were recorded during the period then ended (in thousands):

June 30, 2021 December 31, 2020
Collateral dependent loans $ 92,410 $ 73,803
Loans held for sale 0 20,500
OREO and repossessed assets 2,061 2,786
$ 94,471 $ 97,089


	March 31, 2022		December 31, 2021

Collateral dependent loans	$	41,232	$	70,433

OREO	121		2,788
Operating lease equipment	—		11,429
	$	41,353	$	84,650

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):


			June 30, 2021				December 31, 2020						March 31, 2022				December 31, 2021

		Level	Carrying Value		Fair Value		Carrying Value		Fair Value			Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:	Assets:										Assets:
Cash and cash equivalents	Cash and cash equivalents	1	$	895,348	$	895,348	$	397,716	$	397,716	Cash and cash equivalents	1	$	697,492	$	697,492	$	314,857	$	314,857
Investment securities	Investment securities	1/2	$	10,232,035	$	10,232,907	$	9,176,683	$	9,177,870	Investment securities	1/2	$	10,572,098	$	10,572,495	$	10,064,198	$	10,064,887
Non-marketable equity securities	Non-marketable equity securities	2	$	164,959	$	164,959	$	195,865	$	195,865	Non-marketable equity securities	2	$	190,534	$	190,534	$	135,859	$	135,859
Loans held for sale		2	$	0	$	0	$	24,676	$	25,057

Loans, net	Loans, net	3	$	22,885,074	$	23,190,143	$	23,608,719	$	24,205,016	Loans, net	3	$	23,244,586	$	23,116,432	$	23,638,596	$	24,088,190
Derivative assets	Derivative assets	2	$	79,686	$	79,686	$	123,830	$	123,830	Derivative assets	2	$	37,274	$	37,274	$	59,019	$	59,019
Liabilities:	Liabilities:										Liabilities:
Demand, savings and money market deposits	Demand, savings and money market deposits	2	$	25,631,195	$	25,631,195	$	22,688,617	$	22,688,617	Demand, savings and money market deposits	2	$	25,565,560	$	25,565,560	$	26,053,859	$	26,053,859
Time deposits	Time deposits	2	$	2,978,074	$	2,979,040	$	4,807,199	$	4,814,862	Time deposits	2	$	2,975,715	$	2,962,239	$	3,384,243	$	3,388,435
Federal funds purchased	Federal funds purchased	2	$	0	$	0	$	180,000	$	180,000	Federal funds purchased	2	$	199,000	$	199,000	$	199,000	$	199,000
FHLB advances	FHLB advances	2	$	2,681,505	$	2,683,248	$	3,122,999	$	3,127,190	FHLB advances	2	$	3,395,000	$	3,394,089	$	1,905,000	$	1,905,629
Notes and other borrowings	Notes and other borrowings	2	$	721,639	$	838,205	$	722,495	$	849,120	Notes and other borrowings	2	$	721,291	$	758,714	$	721,416	$	813,095
Derivative liabilities	Derivative liabilities	2	$	32,131	$	32,131	$	44,490	$	44,490	Derivative liabilities	2	$	47,421	$	47,421	$	25,314	$	25,314

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BANKUNITED, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

~~June 30, 2021~~March 31, 2022

Note 109 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.

Commitments to fund loans

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

Unfunded commitments under lines of credit

Unfunded commitments under lines of credit include commercial, commercial real estate and consumer lines of credit to existing customers, for many of which additional extensions of credit are subject to borrowing base requirements. Some of these commitments may mature without being fully ~~funded.~~funded, so may not necessarily represent future liquidity requirements.

Commercial and standby letters of credit

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

Total lending related commitments outstanding at ~~June 30, 2021~~March 31, 2022 were as follows (in thousands):


Commitments to fund loans	$	~~622,579~~631,426

Unfunded commitments under lines of credit	~~3,747,497~~4,329,074
Commercial and standby letters of credit	~~95,034~~108,781
	$	~~4,465,110~~5,069,281

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.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 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 ~~2020~~2021 Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~"2020~~"2021 Annual Report on Form 10-K").

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the Company’s current views with respect to, among other things, future events and financial performance. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” "future" and similar expressions identify forward-looking statements. These forward-looking statements are based on the historical performance of the Company or on the Company’s current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by the Company that the future plans, estimates or expectations so contemplated will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to the Company’s operations, financial results, financial condition, business prospects, growth strategy and liquidity, including as impacted by external circumstances outside the ~~COVID-19 pandemic.~~Company's direct control. If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, the Company’s actual results may vary materially from those indicated in these statements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, the risk factors described in Part I, Item 1A of the ~~2020~~2021 Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q or Current Report on Form 8-K. The Company does not undertake any obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise.

~~Impact of the COVID-19 Pandemic and Our Response~~

In March 2020, the World Health Organization declared COVID-19 a global pandemic. Governmental authorities implemented a number of 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. While most of these restrictions have been lifted or moderated and we believe economic indicators currently point to a strong recovery, the pandemic and these precautionary measures negatively impacted the global and domestic economies, including in the Company's primary market areas. Certain sectors to which the Company has credit exposure, such as travel and hospitality and retail were particularly impacted. The response of the U.S. Government to the economic impact of the crisis was swift and broad-based. The government took a series of actions to support individuals, households and businesses that were negatively impacted by the economic disruption caused by the pandemic including enactment and subsequent extension of the CARES Act. The Federal Reserve also enacted a suite of facilities using its emergency lending powers designed to support liquidity and the flow of credit. Banking regulators reduced reserve requirements and enacted rules designed to support financial institutions in their efforts to work with customers during this time. Development and deployment of vaccines and improvements in treatments for the virus are positive signs and the economy is recovering, however, uncertainty remains about the future trajectory of that recovery and the virus and by extension, the ultimate impact on our financial condition and results of operations.

A summary of the effects the COVID-19 pandemic has had on our Company is discussed in the "Impact of the COVID-19 Pandemic and Our Response" section in the MD&A of the Company's 2020 Annual report on Form 10-K. A discussion of how our Company continues to be and may be impacted in the future follows. These matters are discussed in further detail throughout this Form 10-Q.

~~Our results of operations and financial condition were impacted by the COVID-19 pandemic.~~

•The COVID-19 pandemic and its effect on the economy and our borrowers has impacted the provision for credit losses and the ACL. The provision for credit losses has been more volatile since the onset of the pandemic; deterioration in economic conditions led to a higher provision for credit losses during the year ended December 31, 2020, while improvement in economic conditions and our reasonable and supportable economic forecast contributed to a recovery of provision for credit losses of $(27.5) million and $(55.5) million for the quarter and six months ended June 30, 2021. While key economic indicators and our economic forecast have improved significantly, there continues to be uncertainty as to the ultimate impact of the COVID-19 crisis on future credit loss expense and future levels of the ACL. The provision for credit losses may continue to be volatile and the level of the ACL may change materially from current levels. Future levels of the ACL could be significantly impacted, in either direction, by changes in the economic outlook and by the evolving impact of the pandemic and related events on individual borrowers in the portfolio.

~~Table of Contents~~

~~BANKUNITED, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED~~

~~June 30, 2021~~

•Levels of criticized and classified assets and non-performing assets increased in 2020, largely as a result of the COVID-19 pandemic and its impact or potential impact on our borrowers and certain portfolio sub-segments. Additionally, a significant number of borrowers requested and were granted relief in the form of temporary payment deferrals or modifications. Although levels of criticized and classified loans remain elevated compared to historical levels, as COVID-19 related restrictions on economic activity were lifted and the economic recovery gained momentum, criticized and classified loans declined by a total of $616 million and loans on short-term deferral or subject to modification under the CARES Act declined by $297 million over the first six months of 2021. See the section entitled "Asset Quality" for further discussion. If the economic recovery continues on the path of our current reasonable and supportable forecast, we would expect to see the positive impact of that recovery on the operations of borrowers, and would expect the level of criticized and classified loans to decline further over the remainder of 2021. However, since uncertainty remains about the trajectory of the virus and the economic recovery and the specific impact on our borrowers, there is a possibility that the level of criticized and classified assets may not decline. Similarly, non-performing assets, charge-offs and delinquencies could increase from current levels, particularly as loans currently subject to temporary payment deferrals and modifications reach the end of those deferral or modification periods.

•The level of commercial loan origination activity, outside of our participation in the PPP, was lower in 2020 as a result of the pandemic, and commercial loan demand remained below pre-pandemic levels through the first half of 2021. Line utilization has also remained below pre-pandemic levels.

•Levels of liquidity in the banking system and on our balance sheet have been elevated, likely as a result of fiscal stimulus. Elevated levels of liquidity and the related persistent low interest rate environment have contributed to deposit growth, but have also had a negative impact on our net interest margin. It is difficult to predict the long-term impact on liquidity of future changes in fiscal or monetary policy.

The pandemic has impacted our operations. Currently, the substantial majority of our non-branch employees continue to work remotely, although we expect most of these employees to return to the office under a hybrid arrangement in the near term. 97% of our branch locations are open and have resumed normal operations. We did not experience any significant operational difficulties, technology failures or outages, or customer service disruptions as a result of the transition to a remote work environment. We continue to focus on ensuring that our technology systems and internal controls operate effectively in a remote or hybrid 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 control environment. We have not identified any instances in which our control environment has failed to operate effectively.

Customer demand for our lending products has been and may continue to be negatively affected by the impact of the pandemic on their businesses and on the overall level of economic activity. Potential borrowers impacted by the pandemic may no longer meet our underwriting criteria. Loan production in most portfolio segments has not yet returned to pre-pandemic levels. While we currently expect loan production to increase over the second half of 2021, our ability to increase production will depend at least to some extent on the future trajectory of the pandemic and on the pace and timing of economic recovery.

~~In response to the pandemic, we prioritized risk management and implemented a number of measures to support our customers, employees and communities. Those measures included, but were not limited to:~~

•~~Activated and continue to operate under our business continuity plan under the leadership of executive management and maintained a regular cadence of Board of Directors update calls.~~

•~~Enhanced liquidity monitoring and management protocols, although we have not experienced constraints on liquidity since the onset of the pandemic; in fact, liquidity levels have been elevated.~~

•Focused on portfolio management activities, including segregating certain segments of the loan portfolio for additional monitoring, increasing the level and frequency of pro-active outreach to borrowers, enhancing workout and recovery staffing and processes and enhancing 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.

•~~Monitoring our critical third party service providers to insure 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 and protocols to keep our employees healthy and engaged.~~

•Supported our clients through participating in the Small Business Administration’s PPP, the Federal Reserve's MSLF, granting payment deferrals, loan modifications and fee waivers on a case-by-case basis.

•Disbursed over 150 grants to nonprofit organizations across our footprint and helped to meet the needs of our community partners through employee volunteer efforts, including "virtual" volunteer hours.

~~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, the cost of deposits, levels and composition of non-interest income and non-interest expense, performance ratios such as the return on average equity and return on average assets and asset quality ratios, including the ratio of non-performing loans to total loans, non-performing assets to total assets, trends in criticized and classified assets and portfolio delinquency and charge-off trends. We consider growth in and the composition of earning assets and ~~deposits, particularly non-interest bearing~~ 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 the three months ended ~~June 30, 2021~~March 31, 2022 was ~~$104.0~~$67.2 million, or ~~$1.11~~$0.79 per diluted share, compared to ~~$76.5 million, or $0.80 per diluted share, for the three months ended June 30, 2020 and net income of~~ $98.8 million, or $1.06 per diluted share, for the ~~immediately preceding quarter~~three months ended March 31, ~~2021. Net income for the six months ended June 30,~~ 2021 ~~was $202.8~~and $125.3 million or ~~$2.17~~$1.41 per diluted share compared to $45.6 million, or $0.47 per diluted share, for the six months ended June 30, 2020. On an annualized basis, earnings for the six months ended June 30, 2021 generated a return on average stockholders' equity of 13.2% and a return on average assets of 1.15%.

•~~PPNR was $112.6 million for the three months ended June 30, 2021 compared to $103.3 million~~ for the immediately preceding three months ended ~~March~~December 31, 2021. As previously reported, earnings for the quarter ended December 31, 2021 were impacted by discrete income tax benefits of $69.1 million and ~~$122.3~~a $44.8 million pre-tax loss on discontinuance of hedges. Earnings for the ~~three months ended June 30, 2020. For the six months ended June 30, 2021 and 2020, PPNR was $215.9 million and $207.3 million, respectively.~~

•~~Net interest income increased by $2.1 million compared to the immediately preceding~~ quarter ended March 31, 2021 were favorably impacted by a $28.0 million recovery of the provision for credit losses. For the three months ended March 31, 2022, the annualized return on average stockholders' equity was 9.0% and ~~by $8.0 million compared to~~ the ~~quarter ended June 30, 2020.~~ annualized return on average assets was 0.76%.

•The net interest margin, calculated on a tax-equivalent basis, ~~decreased~~expanded to ~~2.37%~~2.50% for the three months ended ~~June 30, 2021~~March 31, 2022 from 2.44% for the immediately preceding three months and 2.39% for ~~both~~the three months ended March 31, 2021. Net interest income increased by $2.6 million compared to the immediately preceding three months ended ~~March~~December 31, 2021 and by $12.4 million compared to the three months ended ~~June 30, 2020.~~March 31, 2021.

•The average cost of total deposits ~~continued~~was 0.17% for the three months ended March 31, 2022 compared to ~~decline, dropping by 0.08% to 0.25%~~0.19% for the immediately preceding three months ended December 31, 2021 and 0.33% for the three months ended ~~June 30, 2021 from 0.33% for the immediately preceding three months ended~~ March 31, 2021 ~~and 0.80% for the three months ended June 30, 2020.~~. On a spot basis, the APY on total deposits dewas~~clined to 0.22%~~ 0.16% at both ~~June 30, 2021 from 0.27% at~~ March 31, ~~2021~~2022 and ~~0.36% at~~ December 31, ~~2020.~~

•~~For the three months ended June 30,~~ 2021, ~~the Company recorded a recovery of credit losses of $(27.5) million~~ compared to a recovery of $(28.0) million for the immediately preceding three months ended March 31, 2021 and a provision for credit losses of $25.4 million for the three months ended June 30, 2020. For the six months ended June 30, 2021 and 2020, the provision for (recovery of) credit losses was $(55.5) million and $150.8 million, respectively.

•As expected, the Company's levels of criticized and classified loans, which had increased as a result of the COVID-19 pandemic, have started to decline. During the three months ended June 30, 2021, total criticized and classified loans declined by $541 million or 21%, to $2.1 billion at June 30, 2021 from $2.6 billion at March 31, 2021.

•Loans currently under short-term deferral totaled $41 million and loans modified under the CARES Act totaled $456 million for a total of $497 million at June 30, 2021, down from a total of $762 million0.27% at March 31, 2021.

•Non-interest bearing demand deposits grew by ~~$869~~$688 million during the three months ended ~~June 30, 2021 while total deposits grew by $877 million. Average~~March 31, 2022. At March 31, 2022, non-interest bearing demand deposits ~~grew~~represented 34% of total deposits, compared to 30% of total deposits at December 31, 2021. Total deposits declined by ~~$673~~$897 million ~~for~~during the three months ended ~~June 30, 2021 compared to the immediately preceding quarter~~March 31, 2022, with declines in interest bearing demand, savings and ~~by $2.9 billion compared to the~~money market and time deposits. The majority of deposit

3431

~~second quarter of the~~outflows were accounts that, based on prior ~~year. At June 30, 2021, non-interest bearing demand deposits represented 31% of total deposits, compared~~experience, we would expect to ~~25% of total deposits at December 31, 2020.~~be price sensitive in a rising rate environment.

•~~Investment securities grew~~Total loans, excluding the runoff of PPP loans, declined by ~~$987~~$227 million for the three months ended ~~June 30, 2021,~~March 31, 2022, while average loans, ~~and operating leases,~~ excluding PPP loans, increased by $586 million.

•The ratio of non-performing loans to total loans declined to 0.65% at March 31, 2022 from 0.87% at December 31, 2021. The guaranteed portion of SBA loans on non-accrual status represented 0.18% of total loans at March 31, 2022. Criticized and classified loans continued to decline. During the three months ended March 31, 2022, total criticized and classified loans declined by ~~$69~~$280 million. ~~Excess liquidity~~

•For the three months ended March 31, 2022, the Company recorded a provision of credit losses of $7.8 million compared to a provision for credit losses of $0.2 million, for the immediately preceding three months ended December 31, 2021 and a recovery of credit losses of $(28.0) million for the three months ended March 31, 2021.

•Results for the three months ended March 31, 2022 were impacted by declines in the fair value of investment securities. Accumulated other comprehensive income declined by $142 million for the three months ended March 31, 2022, primarily due to an increase in unrealized losses on investment securities available for sale. Non-interest income was ~~deployed into~~impacted by a $10.5 million decline in the ~~investment portfolio during~~fair value of certain preferred stock investments. These declines in the ~~quarter~~fair value of securities resulted primarily from widening spreads and rising interest rates related to the Federal Reserve's plans for quantitative tightening and benchmark interest rate increases, as ~~loan growth continued~~well as inflationary concerns. None of the unrealized losses were attributable to ~~lag growth in deposits.~~credit loss impairments; the Company expects to recover the amortized cost basis of its available for sale securities.

•Book value per common share and tangible book value per common ~~share at June 30, 2021 increased to $33.91~~were $34.04 and ~~$33.08, respectively, from $32.05 and $31.22,~~$33.12, respectively, at ~~December~~March 31, ~~2020.~~2022.

•~~On July 21, 2021,~~In February 2022, the Company's Board of Directors authorized the repurchase of up to an additional $150 million in shares of its outstanding common stock. ~~This authorization is in addition to $37.7 million in remaining authorization under a previously announced share repurchase program. Any repurchases under~~During the ~~program will be made in accordance with applicable securities laws from time to time in open market or private transactions. The extent to which~~three months ended March 31, 2022, the Company ~~repurchases~~repurchased approximately 1.9 million shares ~~and the timing~~ of ~~such repurchases, will depend upon~~its common stock for an aggregate purchase price of $82 million, at a ~~variety~~weighted average price of ~~factors, including market conditions, the Company’s capital position and amount~~$42.50 per share.

•The Company announced an increase of ~~retained earnings, regulatory requirements and other considerations. No time limit was set~~$0.02 in its cash dividend for the ~~completion~~three months ended March 31, 2022 to $0.25 per common share, reflecting a 9% increase from the previous quarterly dividend of ~~the share repurchase program, and the program may be suspended or discontinued without prior notice at any time.~~$0.23 per common 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 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, by management's continual assessment of the rate of return and relative risk associated with various classes of earning assets and liquidity considerations. The mix of 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 expectations, our ability to attract and retain core deposit relationships, competition for deposits in the Company's markets and the availability and pricing of other sources of funds.

3532

The following table presents, for the periods indicated, information about (i) average balances, the total dollar amount of taxable equivalent interest income from earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Non-accrual loans are included in the average balances presented in this table; however, interest income foregone on non-accrual loans is not included. Interest income, yields, spread and margin have been calculated on a tax-equivalent basis for loans and investment securities that are exempt from federal income taxes, at a federal tax rate of 21% (dollars in thousands):


		Three Months Ended June 30,						Three Months Ended March 31,								Three Months Ended June 30,								Three Months Ended
		2021												2020						March 31, 2022								December 31, 2021						March 31, 2021
		Average Balance		Interest (1)		Yield/ Rate (1)(2)				Average Balance			Interest (1)			Yield/ Rate (1)(2)		Average Balance			Interest (1)				Yield/ Rate (1)(2)	Average Balance		Interest (1)		Yield/ Rate (1)(2)		Average Balance		Interest (1)		Yield/ Rate (1)(2)		Average Balance		Interest (1)		Yield/ Rate (1)(2)
Assets:	Assets:																						Assets:
Interest earning assets:	Interest earning assets:																						Interest earning assets:

Loans	Loans	$	22,996,564	$	205,940	3.59	%	$	23,549,309		$	208,821		3.58	%	$	23,534,684	$	217,691		3.71	%	Loans	$	23,349,143	$	194,551	3.36	%	$	22,919,535	$	201,345	3.50	%	$	23,549,309	$	208,821	3.58	%
Investment securities (3)	Investment securities (3)	9,839,422		38,338		1.56	%	9,070,185			39,188			1.73	%	8,325,217		51,684			2.48	%	Investment securities (3)	10,083,083		43,719		1.73	%	10,113,026		38,889		1.54	%	9,070,185		39,188		1.73	%
Other interest earning assets	Other interest earning assets	1,380,317		1,607		0.47	%	1,062,840			1,593			0.61	%	765,848		2,908			1.53	%	Other interest earning assets	674,640		1,354		0.81	%	1,184,056		1,397		0.47	%	1,062,840		1,593		0.61	%
Total interest earning assets	Total interest earning assets	34,216,303		245,885		2.88	%	33,682,334			249,602			2.98	%	32,625,749		272,283			3.35	%	Total interest earning assets	34,106,866		239,624		2.83	%	34,216,617		241,631		2.81	%	33,682,334		249,602		2.98	%
Allowance for credit losses	Allowance for credit losses	(215,151)						(254,438)								(254,396)							Allowance for credit losses	(129,028)						(149,319)						(254,438)
Non-interest earning assets	Non-interest earning assets	1,732,676						1,724,176								1,976,398							Non-interest earning assets	1,674,476						1,767,850						1,724,176
Total assets	Total assets	$	35,733,828					$	35,152,072							$	34,347,751						Total assets	$	35,652,314					$	35,835,148					$	35,152,072
Liabilities and Stockholders' Equity:	Liabilities and Stockholders' Equity:																						Liabilities and Stockholders' Equity:
Interest bearing liabilities:	Interest bearing liabilities:																						Interest bearing liabilities:
Interest bearing demand deposits	Interest bearing demand deposits	$	3,069,945	$	2,594	0.34	%	$	2,942,874		$	2,774		0.38	%	$	2,448,545	$	4,722		0.78	%	Interest bearing demand deposits	$	3,078,037	$	1,364	0.18	%	$	3,058,355	$	1,481	0.19	%	$	2,942,874	$	2,774	0.38	%
Savings and money market deposits	Savings and money market deposits	13,541,237		11,307		0.33	%	12,793,019			12,127			0.38	%	10,450,310		17,447			0.67	%	Savings and money market deposits	13,401,332		6,931		0.21	%	13,460,084		9,619		0.28	%	12,793,019		12,127		0.38	%
Time deposits	Time deposits	3,380,582		3,415		0.41	%	4,330,781			7,475			0.70	%	7,096,097		28,018			1.59	%	Time deposits	3,319,585		3,562		0.44	%	3,399,302		2,531		0.30	%	4,330,781		7,475		0.70	%
Total interest bearing deposits	Total interest bearing deposits	19,991,764		17,316		0.35	%	20,066,674			22,376			0.45	%	19,994,952		50,187			1.01	%	Total interest bearing deposits	19,798,954		11,857		0.24	%	19,917,741		13,631		0.27	%	20,066,674		22,376		0.45	%
Federal funds purchased	Federal funds purchased	—		—		—	%	8,000			3			0.15	%	119,835		32			0.11	%	Federal funds purchased	187,539		58		0.12	%	56,793		13		0.09	%	8,000		3		0.15	%
FHLB and PPPLF borrowings		2,873,922		16,922		2.36	%	3,072,717			17,558			2.32	%	4,961,376		21,054			1.71	%
FHLB advances																							FHLB advances	2,248,889		6,146		1.11	%	1,909,450		8,957		1.86	%	3,072,717		17,558		2.32	%
Notes and other borrowings	Notes and other borrowings	721,753		9,252		5.13	%	722,305			9,252			5.12	%	493,278		6,168			5.00	%	Notes and other borrowings	721,405		9,261		5.13	%	721,525		9,257		5.13	%	722,305		9,252		5.12	%
Total interest bearing liabilities	Total interest bearing liabilities	23,587,439		43,490		0.74	%	23,869,696			49,189			0.83	%	25,569,441		77,441			1.22	%	Total interest bearing liabilities	22,956,787		27,322		0.48	%	22,605,509		31,858		0.56	%	23,869,696		49,189		0.83	%
Non-interest bearing demand deposits	Non-interest bearing demand deposits	8,163,879						7,491,249								5,313,009							Non-interest bearing demand deposits	9,047,864						9,330,805						7,491,249
Other non-interest bearing liabilities	Other non-interest bearing liabilities	851,044						746,973								820,439							Other non-interest bearing liabilities	623,200						785,254						746,973
Total liabilities	Total liabilities	32,602,362						32,107,918								31,702,889							Total liabilities	32,627,851						32,721,568						32,107,918
Stockholders' equity	Stockholders' equity	3,131,466						3,044,154								2,644,862							Stockholders' equity	3,024,463						3,113,580						3,044,154
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	35,733,828					$	35,152,072							$	34,347,751						Total liabilities and stockholders' equity	$	35,652,314					$	35,835,148					$	35,152,072
Net interest income	Net interest income			$	202,395						$	200,413						$	194,842				Net interest income			$	212,302					$	209,773					$	200,413
Interest rate spread	Interest rate spread					2.14	%							2.15	%						2.13	%	Interest rate spread					2.35	%					2.25	%					2.15	%
Net interest margin	Net interest margin					2.37	%							2.39	%						2.39	%	Net interest margin					2.50	%					2.44	%					2.39	%

(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was ~~$3.4~~$3.0 million, ~~$3.5~~$3.1 million and ~~$3.8~~$3.5 million for the three months ended ~~June 30,~~March 31, 2022, December 31, 2021 and March 31, 2021, ~~and June 30, 2020,~~ respectively. The tax-equivalent adjustment for tax-exempt investment securities was $0.7 million for ~~both the three months ended June 30, 2021 and March 31, 2021 and $0.8 million for the three months ended June 30, 2020.~~all periods presented.

(2)~~Annualized.~~Annualized

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

Three months ended March 31, 2022 compared to the immediately preceding three months ended December 31, 2021

Net interest income, calculated on a tax-equivalent basis, was $212.3 million for the three months ended March 31, 2022, compared to $209.8 million for the three months ended December 31, 2021, an increase of $2.5 million. The increase in net interest income was comprised of decreases in tax-equivalent interest income and interest expense of $2.0 million and $4.5 million, respectively, for the three months ended March 31, 2022, compared to the three months ended December 31, 2021. The decrease in interest income reflected a lower yield on average loans and lower day count, partially offset by a higher average balance of loans and higher yield on investment securities. The decrease in interest expense reflected a lower cost of both interest bearing deposits and FHLB advances and lower day count, partially offset by a higher average balance of interest-bearing liabilities, particularly FHLB advances.

Six Months Ended June 30,
2021 2020
Average
Balance
Interest (1)
Yield/
Rate (1)(2)
Average
Balance
Interest (1)
Yield/
Rate (1)(2)
Assets:
Interest earning assets:
Loans $ 23,271,410 $ 414,761 3.58 % $ 23,192,374 $ 455,799 3.94 %
Investment securities (3)
9,456,929 77,525 1.64 % 8,216,433 108,635 2.64 %
Other interest earning assets 1,222,456 3,200 0.53 % 706,238 6,628 1.89 %
Total interest earning assets 33,950,795 495,486 2.93 % 32,115,045 571,062 3.57 %
Allowance for credit losses (234,686) (196,619)
Non-interest earning assets 1,728,449 1,863,074
Total assets $ 35,444,558 $ 33,781,500
Liabilities and Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand deposits $ 3,006,760 $ 5,368 0.36 % $ 2,311,086 $ 11,681 1.02 %
Savings and money market deposits 13,169,195 23,434 0.36 % 10,431,256 55,203 1.06 %
Time deposits 3,853,057 10,890 0.57 % 7,303,083 66,125 1.82 %
Total interest bearing deposits 20,029,012 39,692 0.40 % 20,045,425 133,009 1.33 %
Federal funds purchased 3,978 2 0.10 % 106,951 399 0.75 %
FHLB and PPPLF borrowings 2,972,770 34,480 2.34 % 4,688,102 46,138 1.98 %
Notes and other borrowings 722,028 18,505 5.13 % 461,188 11,458 4.97 %
Total interest bearing liabilities 23,727,788 92,679 0.79 % 25,301,666 191,004 1.52 %
Non-interest bearing demand deposits 7,829,422 4,840,781
Other non-interest bearing liabilities 799,297 784,770
Total liabilities 32,356,507 30,927,217
Stockholders' equity 3,088,051 2,854,283
Total liabilities and stockholders' equity $ 35,444,558 $ 33,781,500
Net interest income $ 402,807 $ 380,058
Interest rate spread 2.14 % 2.05 %
Net interest margin 2.38 % 2.37 %

~~(1)~~OnThe net interest margin, calculated on a tax-equivalent basis, ~~where applicable.~~ was 2.50% for the three months ended March 31, 2022, compared to 2.44% for the three months ended December 31, 2021. Offsetting factors impacting the net interest margin for the three months ended March 31, 2022 compared to the immediately preceding three months ended December 31, 2021 included:

•The tax-equivalent yield on investment securities increased to 1.73%, for the three months ended March 31, 2022 from 1.54%for the three months ended December 31, 2021. This increase resulted from the impact of purchases of higher-yielding securities and slower prepayment speeds on securities purchased at a premium.

•The tax-equivalent ~~adjustment for tax-exempt~~yield on loans ~~was $6.9 million and $7.5 million~~decreased to 3.36% for the ~~six~~three months ended ~~June 30,~~March 31, 2022, from 3.50% for the three months ended December 31, 2021. Factors contributing to this decrease included runoff of loans originated in a comparatively higher rate environment, slower prepayment speeds on PCD residential loans, the effect of the sale of a pool of higher yielding residential loans during the fourth quarter of 2021, lower prepayment penalties and partially offsetting higher PPP fee recognition.

•The average rate paid on FHLB advances decreased to 1.11% for the three months ended March 31, 2022 from 1.86% for the three months ended December 31, 2021. This decrease resulted from the maturity of higher rate advances, including the termination of certain cash flow hedges during the three months ended December 31, 2021, and ~~2020, respectively. The tax-equivalent adjustment for tax-exempt investment securities was $1.4 million and $1.6 million for~~ the ~~six months ended June 30, 2021 and 2020, respectively.~~addition of new advances at comparatively lower prevailing rates.

~~(2)~~•~~Annualized.~~

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

The ~~amount of tax-equivalent net interest income has exhibited an increasing trend over the three and six month periods presented above. Both~~ average ~~yields on interest earning assets and average rates~~rate paid on interest bearing ~~liabilities have been declining, reflecting~~deposits decreased to 0.24% for the ~~macro interest~~three months ended March 31, 2022, from 0.27% for the three months ended December 31, 2021. Callable and other brokered CDs and cash flow hedges entered into in anticipation of rising rates impacted the cost of deposits for the quarter; the average rate ~~environment and ongoing initiatives to reduce deposit costs and improve the mix of deposits. Notably, average interest earning assets have consistently increased, while average~~paid on interest bearing ~~liabilities have declined, contributing~~deposits excluding these instruments was 0.21% for the quarter ended March 31, 2022. The increase in the average cost of time deposits for the quarter ended March 31, 2022 compared to the ~~increasing trend in net interest income.~~quarter ended December 31, 2021 was attributable to these products. The average cost of time deposits other than these products was 0.22% for the quarter ended March 31, 2022.

Three months ended ~~June 30, 2021~~March 31, 2022 compared to the ~~immediately preceding~~ three months ended March 31, 2021

Net interest income, calculated on a tax-equivalent basis, was ~~$202.4~~$212.3 million for the three months ended ~~June 30, 2021~~March 31, 2022, compared to ~~$200.4~~$200.4 million for the three months ended March 31, 2021, an increase of ~~$2.0 million. Tax-equivalent interest income and interest expense decreased by $3.7 million and $5.7 million, respectively. The decrease in interest income resulted primarily from declines in average loans and in the yield on investment securities.~~ Declines in interest expense reflected decreases in the rate paid on interest bearing deposits and in average interest bearing liabilities, as average non-interest bearing demand deposits continued to grow.

~~The net interest margin, calculated on a tax-equivalent basis, was 2.37% f~~or the three months ended June 30, 2021, compared to 2.39% for the three months ended March 31, 2021. The net interest margin for the three months ended June 30, 2021 was negatively impacted by elevated levels of liquidity, reflected in higher levels of cash as well as deployment of liquidity into the investment portfolio as loan production lagged deposit growth.

~~Offsetting factors impacting the net interest margin for the three months ended June 30, 2021 compared to the immediately preceding quarter ended March 31, 2021 included:~~

•~~The average rate paid on interest bearing deposits decreased to~~ ~~0.35% f~~or the three months ended June 30, 2021, from 0.45% for the three months ended March 31, 2021. This decline reflected continued initiatives taken to lower rates paid on deposits including the re-pricing of term deposits.

•~~The tax-equivalent yield on investment securities decreased to~~ ~~1.56% for the three months ended June 30, 2021 from 1.73% for the three months ended March 31, 2021.~~ This decrease resulted from the impact of purchases of lower-yielding securities in the current rate environment, coupled with amortization, maturities and prepayment of securities purchased in a higher rate environment. Accounting adjustments related to faster prepayment speeds of securities purchased at a premium negatively impacted the yield on investment securities for the quarter ended June 30, 2021 by approximately 0.10%.

•~~The tax-equivalent yield on loans increased to~~ ~~3.59% f~~or the three months ended June 30, 2021, from 3.58% for the three months ended March 31, 2021. Accelerated amortization of origination fees on PPP loans that were partially or fully forgiven during the quarter impacted the yield on loans by approximately 0.11% for the three months ended June 30, 2021, compared to 0.06% for the three months ended March 31, 2021. Factoring out the impact of accelerated amortization of PPP origination fees, the yield on loans for the three months ended June 30, 2021 decreased by 0.04% compared to the immediately preceding quarter.

•Average interest bearing liabilities declined by $282 million quarter-over-quarter and average non-interest bearing demand deposits increased by $673 million, positively impacting the net interest margin.

~~Three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020~~

Net interest income, calculated on a tax-equivalent basis, was $202.4 million for the three months ended June 30, 2021, compared to $194.8 million for the three months ended June 30, 2020, an increase of $7.6 million. Net interest income, calculated on a tax-equivalent basis, was $402.8 million for the six months ended June 30, 2021, compared to $380.1 million for the six months ended June 30, 2020, an increase $22.7$11.9 million. The ~~changes~~increase in net interest income ~~were~~was comprised of decreases in tax-equivalent interest income and interest expense of ~~$26.4~~$10.0 million and ~~$75.6~~$21.9 million ~~and decreases of $34.0 million and $98.3 million~~, respectively, for the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022, compared to the three ~~and six~~ months ended ~~June 30, 2020.~~

~~Decreases~~March 31, 2021. The decrease in ~~tax-equivalent~~ interest income ~~for the three and six months ended June 30, 2021 compared~~related to ~~the three and six months ended June 30, 2020 resulted~~lower interest income on loans, resulting primarily from the ~~impact on asset~~turnover of the loan portfolio ~~yields of declines in market interest rates in early 2020, leading to runoff of assets originated in a higher rate environment and origination of assets~~ at lower prevailing ~~rates.~~ ~~These declines in yields were~~rates, partially offset by ~~increases~~an increase in interest income on investment securities related to an increase in the average balance. The decline in interest expense reflected lower interest expense on both deposits and FHLB advances. The decrease in interest expense on deposits reflected both a decline in the average balance of ~~investment securities. Average loans increased marginally for~~interest-bearing deposits and a decline in the ~~six months ended June 30, 2021 compared to the six months ended June 30, 2020, but declined for the comparative three month periods. Declines in interest expense also reflected~~cost of those deposits resulting from the impact of ~~decreases in market interest rates,~~ our strategy focused on lowering the cost of deposits and improving the deposit mix as well as term deposits repricing at lower prevailing rates. The decline in interest expense on FHLB advances reflected a lower average balance, the maturities of higher rate FHLB advances and ~~declines~~the termination of certain cash flow hedges in ~~average interest bearing liabilities.~~the fourth quarter of 2021.

The net interest margin, calculated on a ~~tax-equivalent~~tax-equivalent basis, was ~~2.37%~~2.50% for the three months ended ~~June 30, 2021,~~March 31, 2022, compared to 2.39% for the three months ended ~~June 30, 2020.~~ ~~The net interest margin, calculated on a tax-equivalent basis, was 2.38%for the six months ended June 30, 2021, compared to 2.37% for the six months ended June 30, 2020.~~March 31, 2021. The reduction in cost of interest bearing liabilities outpaced the decline in the yield on interest earning ~~assets for both the three and six months ended June 30, 2021 compared to the comparable periods in 2020.~~assets.

~~Offsetting factors impacting the net interest margin for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 included:~~

•The tax-equivalent yield on loans decreased to ~~3.59% and~~3.36% for the three months ended March 31, 2022, from 3.58% for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2021. This decrease resulted primarily from ~~3.71% and 3.94% for~~ the ~~three and six months ended June 30, 2020.~~ ~~Accelerated amortization~~runoff of ~~origination fees on PPP~~ loans ~~that were partially or fully forgiven positively impacted the yield on loans by approximately 0.11% and 0.10% for the three and six months ended June 30, 2021, respectively.~~

•T~~he tax-equivalent yield on investment securities declined to 1.56% and 1.64% from~~ ~~2.48% and 2.64%~~ ~~for the three and six months ended June 30, 2021 and the three and six months ended June 30, 2020, respectively. Accounting adjustments related to faster prepayment speeds of securities purchased at~~originated in a ~~premium negatively impacted the yield on investment securities for the quarter ended June 30, 2021 by approximately 0.07% when compared to the three months ended June 30, 2020.~~comparatively higher rate environment.

•The average rate paid on interest bearing deposits decreased to ~~0.35% and~~ ~~0.40%~~0.24% for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, from ~~1.01%~~ ~~and 1.33%~~ 0.45% for the three ~~and six~~ months ended ~~June 30, 2020.~~March 31, 2021. This decrease ~~reflected~~

resulted from declines in ~~market~~prevailing interest rates and ~~continued~~continues execution of initiatives taken to lower rates ~~paid~~ on deposits, including the re-pricing of term deposits.

•~~Average interest bearing liabilities declined by $2.0 billion and $1.6 billion, respectively~~The average rate paid on FHLB advances decreased to 1.11% for the three ~~and six~~ months ended ~~June 30, 2021, compared to~~March 31, 2022, from 2.32% for the three ~~and six~~ months ended ~~June 30, 2020. Average non-interest bearing demand deposits increased by $2.9 billion~~March 31, 2021. The decrease resulted from the maturity of higher rate advances and ~~$3.0 billion for those same comparative periods. These changes positively impacted~~ the ~~net interest margin.~~termination of certain cash flow hedges in the fourth quarter of 2021.

Provision for Credit Losses

The provision for credit losses is a charge or credit to earnings required to maintain the ACL at a level consistent with management’s estimate of expected credit losses on financial assets carried at amortized cost at the balance sheet date. The

amount of the provision is impacted by changes in current economic conditions, as well as in management's reasonable and supportable economic forecast, loan originations and runoff, changes in portfolio mix, risk rating migration and portfolio seasoning, changes in specific reserves, changes in expected prepayment speeds and other assumptions. The provision for credit losses also includes amounts related to off-balance sheet credit exposures and may include amounts related to accrued interest receivable and AFS debt securities.

The following table presents the components of the provision for (recovery of) credit losses for the periods indicated (in thousands):


							Three Months Ended March 31,
		Three Months Ended June 30, 2021		Six Months Ended June 30, 2021			2022		2021
Amount related to funded portion of loans	Amount related to funded portion of loans	$	(27,663)	$	(53,969)	Amount related to funded portion of loans	$	7,446	$	(26,306)
Amount related to off-balance sheet credit exposures	Amount related to off-balance sheet credit exposures	129		(919)		Amount related to off-balance sheet credit exposures	384		(1,048)
Amount related to accrued interest receivable	Amount related to accrued interest receivable	—		(271)		Amount related to accrued interest receivable	—		(271)
Amount related to AFS debt securities	Amount related to AFS debt securities	—		(364)		Amount related to AFS debt securities	—		(364)
Total recovery of credit losses		$	(27,534)	$	(55,523)
Total provision for (recovery of) credit losses						Total provision for (recovery of) credit losses	$	7,830	$	(27,989)

The provision for credit losses for the three months ended March 31, 2022 was impacted by an increase in qualitative loss factors related to economic uncertainty. Those qualitative considerations included but were not necessarily limited to the Federal Reserve's plans for quantitative tightening and increasing its benchmark rate and geopolitical uncertainty, some of which have emerged or evolved subsequent to publishing of the economic scenarios used in developing the quantitative estimate of the ACL. The recovery of credit losses for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 was largely driven by improvements in ~~current and~~ forecasted economic conditions. ~~For the three and six months ended June 30, 2020, the Company recorded a provision for credit losses of $25.4 million and $150.8 million, respectively.~~

The provision for credit losses ~~for~~may continue to be volatile and the ~~three~~level of the ACL may change materially from current levels. Future levels of the ACL could be significantly impacted, in either direction, by changes in the economic outlook and ~~six months ended June 30, 2020 was impacted~~ by ~~deteriorating current and forecasted economic conditions related to~~ the ~~onset~~evolving impact of the COVID-19 ~~pandemic.~~

~~The evolving COVID-19 situation~~pandemic, geopolitical events, and ~~its actual and forecasted~~their impact on ~~economic conditions have led and may continue to lead to volatility~~individual borrowers in the ~~provision for credit losses.~~portfolio.

The determination of the amount of the ACL is complex and involves a high degree of judgment and subjectivity. See “Analysis of the Allowance for Credit Losses” below for more information about how we determine the appropriate level of the ~~ACL.~~

ACL and about factors that impacted the ACL for the three months ended March 31, 2022.

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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
Deposit service charges and fees $ 5,417 $ 3,701 $ 10,317 $ 7,887
Gain on sale of loans:
Guaranteed portions of SBA loans 96 375 541 1,569
GNMA early buyout loans 2,138 3,951 3,447 6,206
Other — — — 17
Gain on sale of loans, net 2,234 4,326 3,988 7,792
Gain on investment securities:
Net realized gains on sale of securities AFS 2,841 5,723 6,808 7,253
Net unrealized gains (losses) on marketable equity securities 1,314 1,113 (288) (3,870)
Gain on investment securities, net 4,155 6,836 6,520 3,383
Lease financing 13,522 16,150 26,010 31,631
Other non-interest income 7,429 7,338 16,218 10,956
$ 32,757 $ 38,351 $ 63,053 $ 61,649


	Three Months Ended March 31,
		2022		2021
Deposit service charges and fees		$	5,960	$	4,900





Gain (loss) on sale of loans, net		(824)		1,754
Gain (loss) on investment securities:
Net realized gain on sale of securities AFS		2,673		3,967
Net unrealized loss on marketable equity securities		(10,541)		(1,602)
Gain (loss) on investment securities, net		(7,868)		2,365
Lease financing		13,415		12,488
Other non-interest income		3,618		8,789
		$	14,301	$	30,296

The increase in deposit service charges for the three ~~and six~~ months ended ~~June~~March 31, ~~2021 compared to 2020~~2022 resulted primarily from higher treasury management fee income, related to ~~our BankUnited 2.0 initiatives.~~growth in commercial non-interest bearing DDA relationships as well as enhancements to the product suite and pricing structure.

The ~~decline in gain~~unrealized loss on ~~sale of GNMA early buyout loans~~marketable equity securities for the three ~~and six~~ months ended ~~June 30, 2021 compared~~March 31, 2022 was attributable to the ~~comparable period~~decline in the fair value of the prior year related to lower levels of re-pooling activity. The decrease in gains on the sale of guaranteed portions of SBA loans for the three and six months ended June 30, 2021 compared to 2020 was a result of declining origination volume of SBA loans as resources were re-directed to the PPP.

~~The decrease in income~~certain preferred stock investments resulting from lease financing for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 was primarily attributed to the increase in operating lease equipment off-lease and re-leasing of assets at lowerrising market interest rates.

The most significant ~~factor~~factors leading to the ~~increase~~decrease in other non-interest income for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~2020 was increased~~the three months ended March 31, 2021 were declines in income related to certain investments in bank-owned life insurance and revenue ~~from~~related to our customer derivative program.

4035

Non-Interest Expense

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Employee compensation and benefits	Employee compensation and benefits	$	56,459	$	48,877	$	115,747	$	107,764	Employee compensation and benefits		$	67,088	$	59,288
Occupancy and equipment	Occupancy and equipment	11,492		11,901		23,367		24,270		Occupancy and equipment		11,512		11,875
Deposit insurance expense	Deposit insurance expense	4,222		4,806		11,672		9,209		Deposit insurance expense		3,403		7,450
Professional fees	Professional fees	2,139		3,131		4,051		6,335		Professional fees		2,262		1,912
Technology and telecommunications	Technology and telecommunications	16,851		14,025		32,592		26,621		Technology and telecommunications		17,004		15,741
Depreciation of operating lease equipment		12,834		12,219		25,051		24,822

Depreciation and impairment of operating lease equipment										Depreciation and impairment of operating lease equipment		12,610		12,217

Other non-interest expense	Other non-interest expense	14,455		11,411		29,193		26,217		Other non-interest expense		12,445		14,738
Total non-interest expense	Total non-interest expense	$	118,452	$	106,370	$	241,673	$	225,238	Total non-interest expense		$	126,324	$	123,221

Employee compensation and benefits

Employee compensation and benefits increased by ~~$7.6~~$7.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily due to increased headcount and ~~$8.0~~employee compensation increases.

Deposit insurance expense

Deposit insurance expense decreased by $4.0 million for the three ~~and six~~ months ended ~~June 30, 2021, respectively~~March 31, 2022, compared to the ~~comparable periods~~three months ended March 31, 2021, primarily as a result of 2020, primarily due to higher variable compensation accruals related to improved overall operating results for 2021 as well as the impact of a higher stock price on expense related to liability classified share awards.

~~Technology and telecommunications~~

~~The increases in technology and telecommunications are reflective of investments in digital, payments and data analytics capabilities and~~an improvement in the ~~infrastructure to support cloud migration.~~assessment rate.

Income Taxes

See Note 5 to the consolidated financial statements for information about income taxes.

Analysis of Financial Condition

Average interest-earning assets increased ~~$1.8 billion~~by $425 million to ~~$34.0~~$34.1 billion for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 from ~~$32.1~~$33.7 billion for the ~~six~~three months ended ~~June 30, 2020. This increase was driven by a $1.2 billion~~March 31, 2021, primarily due to an increase in the average balance of investment ~~securities and a $516 million increase in other interest earning assets, primarily cash and cash equivalents.~~securities. Average interest bearing liabilities declined by ~~$1.6 billion~~$912.9 million for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 compared to the ~~six~~three months ended ~~June 30, 2020, while~~March 31, 2021, reflecting declines in both average interest-bearing deposits and average FHLB advances. Correspondingly, average non-interest bearing deposits increased by ~~$3.0~~$1.6 billion to ~~$7.8~~$9.0 billion for the ~~six~~three months ended ~~June 30, 2021.~~March 31, 2022. These year-over-year trends in average balances were reflective of the operating environment as the U.S. economy began to emerge from the COVID-19 pandemic. Our ongoing strategy focused on improving the quality of our deposit base coupled with increased amounts of liquidity in the system led to growth in non-interest bearing demand deposits and corresponding declines in interest bearing sources of funds. Headwinds to commercial loan growth including muted demand, our risk appetite given continued uncertainty about the ultimate impact of the pandemic, prepayments and supply chain constraints led to deployment of liquidity into the securities portfolio.

~~Cash~~In analyzing changes in the balance sheet for the quarter ended March 31, 2022, cash and ~~cash equivalents increased by $498 million to $895 million at June 30, 2021, compared to $398 million at December 31, 2020 while~~ investment securities grew by ~~$1.1 billion and~~$891 million, with securities growing by $508 million, at March 31, 2022 compared to December 31, 2021, while total loans declined by ~~$981 million.~~$395 million over the same period. Total deposits ~~increased~~decreased by ~~$1.1~~$897 million. This activity was offset by an increase of $1.5 billion ~~offset by~~in FHLB advances. Growth in the investment portfolio, which we did not initially anticipate would occur during the first quarter, reflected opportunistic purchases of securities at attractive spreads toward the end of the quarter. The most significant contributor to the decline in total loans was a decrease of ~~$622~~$391 million in ~~borrowings.~~

mortgage warehouse loans as refinancing activity has slowed in response to rising interest rates. While total deposits declined during the first quarter of 2022, non-interest bearing demand deposits grew by $688 million. The decrease in total deposits reflected declines in interest bearing demand, savings and money market, and time deposits. The majority of deposit outflows were accounts that, based on prior experience, we would expect to be price sensitive in a rising rate environment and was consistent with our overall deposit strategy.

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Investment Securities

The following table shows the amortized cost and carrying value, which, with the exception of investment securities held to maturity, is fair value, of investment securities at the dates ~~indicated:~~indicated (in thousands):

June 30, 2021 December 31, 2020
Amortized
Cost Carrying Value Amortized
Cost Carrying Value
U.S. Treasury securities $ 158,977 $ 156,637 $ 79,919 $ 80,851
U.S. Government agency and sponsored enterprise residential MBS 2,197,562 2,215,440 2,389,450 2,405,570
U.S. Government agency and sponsored enterprise commercial MBS 831,726 835,588 531,724 539,354
Private label residential MBS and CMOs 2,104,579 2,111,727 982,890 998,603
Private label commercial MBS(1)
2,579,963 2,594,024 2,514,271 2,526,354
Single family rental real estate-backed securities 608,269 617,445 636,069 650,888
Collateralized loan obligations 986,214 982,267 1,148,724 1,140,274
Non-mortgage asset-backed securities 172,791 176,506 246,597 253,261
State and municipal obligations 209,791 228,625 213,743 235,709
SBA securities 216,682 215,634 233,387 231,545
Investment securities held to maturity 10,000 10,000 10,000 10,000
$ 10,076,554 10,143,893 $ 8,986,774 9,072,409
Marketable equity securities 88,142 104,274
$ 10,232,035 $ 9,176,683



	March 31, 2022				December 31, 2021
	Amortized Cost		Carrying Value		Amortized Cost		Carrying Value
U.S. Treasury securities	$	109,402	$	101,519	$	114,385	$	111,660
U.S. Government agency and sponsored enterprise residential MBS	2,175,183		2,165,624		2,093,283		2,097,796
U.S. Government agency and sponsored enterprise commercial MBS	753,232		714,594		861,925		856,899

Private label residential MBS and CMOs	2,827,169		2,708,041		2,160,136		2,149,420
Private label commercial MBS	2,752,931		2,711,986		2,604,690		2,604,010
Single family real estate-backed securities	506,111		493,869		474,845		476,968
Collateralized loan obligations	1,079,220		1,072,480		1,079,217		1,078,286
Non-mortgage asset-backed securities	119,282		117,398		151,091		152,510
State and municipal obligations	204,920		207,279		205,718		222,277
SBA securities	169,724		169,112		184,296		183,595

Investment securities held to maturity	10,000		10,000		10,000		10,000
	$	10,707,174	10,471,902		$	9,939,586	9,943,421
Marketable equity securities			100,196				120,777
			$	10,572,098			$	10,064,198

~~(1)Amortized cost is net of ACL totaling $0.4 million at December 31, 2020.~~

Our investment strategy has focused on insuring adequate liquidity, maintaining a suitable balance of high credit quality, diverse assets, managing interest rate risk, and generating acceptable returns given our established risk parameters. We have sought to maintain liquidity by investing a significant portion of the portfolio in high quality liquid securities including U.S. Treasury and U.S. Government Agency and sponsored enterprise securities. Investment grade municipal securities provide liquidity and attractive tax-equivalent yields. We have also invested in highly rated structured products, including private-label commercial and residential MBS, collateralized loan obligations, single family ~~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. Based on the Company’s assumptions, the estimated weighted average life of the investment portfolio as of ~~June 30, 2021~~March 31, 2022 was ~~4.2~~4.4 years and the effective duration of the ~~investment~~ portfolio ~~as of June 30, 2021~~ was ~~1.6~~1.7 years.

4237

The investment securities available for sale portfolio was in a net unrealized ~~gain~~loss position of ~~$67.3~~$235.3 million at ~~June 30, 2021, with aggregate fair value equal to 101% of amortized cost.~~March 31, 2022. Net unrealized ~~gains~~losses at ~~June 30, 2021~~March 31, 2022 included ~~$94.3~~$17.5 million of gross unrealized gains and ~~$27.0~~$252.8 million of gross unrealized losses. Investment securities available for sale in unrealized loss positions at ~~June 30, 2021~~March 31, 2022 had an aggregate fair value of ~~$3.2~~$8.4 billion. The unrealized losses resulted primarily from rising interest rates and widening spreads related to the Federal Reserve's plans for quantitative tightening and benchmark interest rate increases. None of the unrealized losses were attributable to credit loss impairments. The ratings distribution of our AFS securities portfolio at ~~June 30, 2021~~March 31, 2022 is depicted in the chart below:

We evaluate the credit quality of individual securities in the portfolio quarterly to determine whether we expect to recover the amortized cost basis of the investments in unrealized loss positions. This evaluation considers, but is not necessarily limited to, the following factors, the relative significance of which varies depending on the circumstances pertinent to each individual security:

•Whether we intend to sell the security prior to recovery of its amortized cost basis;

•Whether it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis;

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

•Adverse conditions specifically related to the security, 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.

We do not intend to sell securities in significant unrealized loss positions at ~~June 30, 2021.~~March 31, 2022. Based on an assessment of our liquidity position and internal and regulatory guidelines for permissible investments and concentrations, it is not more likely than not that we will be required to sell securities in significant unrealized loss positions prior to recovery of amortized cost basis, which may be at maturity.

4338

~~U.S. Government, Government Agency~~We regularly engage with bond managers to monitor trends in underlying collateral including potential downgrades and ~~Government Sponsored Enterprise Securities~~

~~The timely payment of principal~~subsequent cash flow diversions, liquidity, ratings migration, and interest on securities issued by the U.S. government, U.S. government agencies and U.S. government sponsored enterprises is explicitly or implicitly guaranteed by the U.S. Government. As such, there is an assumption of zero credit loss and the Company expects to recover the entire amortized cost basis of these securities.

~~Private Label Securities:~~

None of the impaired private label securities had missed principal or interest payments or had been downgraded by a NRSRO at June 30, 2021. The Company performed an analysis comparing the present value of cash flows expected to be collected to the amortized cost basis of impaired private label securities. This analysis was based on a scenario that we believe to be more severe than our reasonable and supportable economic forecast at June 30, 2021, and incorporated assumptions about voluntary prepayment rates, collateral defaults, delinquencies, other collateral quality measures, loss severity, recovery lag andany other relevant factors. 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, none of the private label AFS securities in unrealized loss positions were projected to sustain credit losses at June 30, 2021.developments.

~~At June 30, 2021, the private label portfolio segments with the largest unrealized losses were the CMBS and CLO segments.~~ The following table presents ~~the distribution of third-party ratings and~~ subordination levels ~~compared to~~and average internal stress scenario losses for ~~the private label CMBS and CLOs~~select portfolio segments at ~~June 30, 2021:~~March 31, 2022:

Subordination Weighted Average Stress Scenario Loss
Rating Percent of Total Minimum Maximum Average
Private label CMBS AAA 88.3 % 29.4 % 49.8 % 38.0 % 9.1 %
AA 4.7 % 44.3 % 44.3 % 44.3 % 9.8 %
A 7.0 % 24.5 % 32.4 % 30.2 % 10.1 %
Weighted average 100.0 % 29.7 % 48.3 % 37.7 % 9.2 %
CLOs AAA 71.8 % 42.9 % 61.2 % 48.0 % 15.0 %
AA 21.1 % 33.1 % 40.7 % 36.3 % 15.2 %
A 7.1 % 24.7 % 29.5 % 26.5 % 15.2 %
Weighted average 100.0 % 39.5 % 54.6 % 44.0 % 15.1 %

Our June 30, 2021 analysis projected weighted average collateral losses for impaired securities in the private label residential MBS and CMO category of 2% compared to weighted average credit support of 15%. For impaired single family rental real estate-backed securities, our analysis projected weighted average collateral losses of 19% compared to weighted average credit support of 52%. As of June 30, 2021, all of the impaired securities in these categories were externally rated AAA.


				Subordination						Weighted Average Stress Scenario Loss
	Rating	Percent of Total		Minimum		Maximum		Average
Private label CMBS	AAA	84.2	%	30.0	%	88.5	%	44.3	%	5.7	%
	AA	11.1	%	28.5	%	92.5	%	40.1	%	6.0	%
	A	4.7	%	23.7	%	69.0	%	42.0	%	5.2	%
Weighted average		100.0	%	29.5	%	88.0	%	43.7	%	5.7	%

CLOs	AAA	79.0	%	41.2	%	64.3	%	44.9	%	7.4	%
	AA	17.2	%	30.8	%	42.5	%	35.2	%	7.0	%
	A	3.8	%	24.8	%	28.3	%	26.1	%	7.2	%
Weighted average		100.0	%	38.8	%	59.1	%	42.6	%	7.3	%

Private label residential MBS and CMO	AAA	95.0	%	2.9	%	81.5	%	17.2	%	1.8	%
	AA	1.0	%	19.9	%	30.4	%	23.0	%	4.2	%
	A	4.0	%	18.3	%	20.7	%	18.5	%	4.2	%
Weighted average		100.0	%	3.7	%	78.6	%	17.3	%	2.0	%

Single family real estate-backed securities	AAA	62.8	%	33.5	%	72.6	%	49.4	%	4.9	%
	AA	11.5	%	15.6	%	55.3	%	46.9	%	5.9	%
	NR	25.7	%	23.0	%	35.0	%	32.2	%	7.2	%
Weighted average		100.0	%	28.8	%	61.0	%	44.7	%	5.6	%

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

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

comparison to recent trading activity whenever such activity exists. Quotes obtained from the pricing services are typically non-binding.

We also 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. 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 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 marketable equity securities are classified within level 1 of the hierarchy. We continue to monitor the impact of the COVID-19 pandemic on markets. While, particularly at the onset of the pandemic, we observed increased volatility and dislocation, we believe the fiscal and 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 fair value estimates within the fair value hierarchy.

For additional discussion of the fair values of investment securities, see Note 98 to the consolidated financial statements.

4539

The following table shows the weighted average prospective yields, categorized by scheduled maturity, for AFS investment securities as of ~~June 30, 2021.~~March 31, 2022. Scheduled maturities have been adjusted for anticipated prepayments when applicable. Yields on tax-exempt securities have been calculated on a tax-equivalent basis, based on a federal income tax rate of 21%:


		Within One Year		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total			Within One Year		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total

U.S. Treasury securities	U.S. Treasury securities	0.89	%	—	%	—	%	—	%	0.89	%	U.S. Treasury securities	0.69	%	—	%	—	%	—	%	0.69	%
U.S. Government agency and sponsored enterprise residential MBS	U.S. Government agency and sponsored enterprise residential MBS	0.82	%	0.81	%	0.72	%	0.67	%	0.77	%	U.S. Government agency and sponsored enterprise residential MBS	1.23	%	1.23	%	1.20	%	1.03	%	1.22	%
U.S. Government agency and sponsored enterprise commercial MBS	U.S. Government agency and sponsored enterprise commercial MBS	1.59	%	1.79	%	1.03	%	1.15	%	1.12	%	U.S. Government agency and sponsored enterprise commercial MBS	1.60	%	1.57	%	1.16	%	1.57	%	1.30	%
Private label residential MBS and CMOs	Private label residential MBS and CMOs	1.37	%	1.22	%	1.75	%	2.33	%	1.29	%	Private label residential MBS and CMOs	2.23	%	2.14	%	1.84	%	1.52	%	2.03	%
Private label commercial MBS	Private label commercial MBS	2.20	%	1.87	%	2.05	%	2.49	%	1.94	%	Private label commercial MBS	2.53	%	2.14	%	2.16	%	3.05	%	2.19	%
Single family rental real estate-backed securities		2.85	%	2.14	%	2.32	%	—	%	2.18	%
Single family real estate-backed securities												Single family real estate-backed securities	1.36	%	3.10	%	2.70	%	—	%	3.04	%
Collateralized loan obligations	Collateralized loan obligations	1.59	%	1.83	%	1.79	%	—	%	1.81	%	Collateralized loan obligations	2.36	%	2.62	%	2.60	%	—	%	2.59	%
Non-mortgage asset-backed securities	Non-mortgage asset-backed securities	2.81	%	2.61	%	2.04	%	—	%	2.66	%	Non-mortgage asset-backed securities	3.11	%	2.83	%	1.56	%	—	%	2.30	%
State and municipal obligations	State and municipal obligations	2.91	%	3.86	%	4.61	%	4.06	%	3.99	%	State and municipal obligations	2.91	%	3.87	%	4.48	%	3.99	%	3.98	%
SBA securities	SBA securities	1.31	%	1.26	%	1.18	%	1.07	%	1.24	%	SBA securities	1.29	%	1.23	%	1.14	%	1.00	%	1.21	%

		1.41	%	1.60	%	1.30	%	1.32	%	1.51	%		1.91	%	2.11	%	1.72	%	1.56	%	1.97	%

Loans

The loan portfolio comprises the Company’s primary interest-earning asset. The following table shows the composition of the loan portfolio at the dates indicated (dollars in thousands):


		June 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021

		Total		Percent of Total		Total		Percent of Total			Total		Percent of Total		Total		Percent of Total
Residential and other consumer loans	Residential and other consumer loans	$	7,076,274	30.9	%	$	6,348,222	26.6	%	Residential and other consumer loans	$	8,612,839	36.8	%	$	8,368,380	35.2	%
Multi-family	Multi-family	1,256,711		5.5	%	1,639,201		6.9	%	Multi-family	1,072,981		4.6	%	1,154,738		4.9	%
Non-owner occupied commercial real estate	Non-owner occupied commercial real estate	4,724,183		20.7	%	4,963,273		20.8	%	Non-owner occupied commercial real estate	4,284,675		18.3	%	4,381,610		18.4	%
Construction and land	Construction and land	218,634		1.0	%	293,307		1.2	%	Construction and land	176,825		0.8	%	165,390		0.7	%
Owner occupied commercial real estate	Owner occupied commercial real estate	1,960,900		8.6	%	2,000,770		8.4	%	Owner occupied commercial real estate	1,905,395		8.2	%	1,944,658		8.2	%
Commercial and industrial	Commercial and industrial	4,205,795		18.4	%	4,447,383		18.6	%	Commercial and industrial	4,951,999		21.2	%	4,790,275		20.2	%
PPP	PPP	491,960		2.1	%	781,811		3.3	%	PPP	80,296		0.3	%	248,505		1.0	%
Pinnacle	Pinnacle	1,046,537		4.6	%	1,107,386		4.6	%	Pinnacle	935,915		4.0	%	919,641		3.9	%
Bridge - franchise finance	Bridge - franchise finance	463,874		2.0	%	549,733		2.3	%	Bridge - franchise finance	306,563		1.3	%	342,124		1.4	%
Bridge - equipment finance	Bridge - equipment finance	421,939		1.8	%	475,548		2.0	%	Bridge - equipment finance	341,369		1.5	%	357,599		1.5	%
Mortgage warehouse lending	Mortgage warehouse lending	1,018,267		4.4	%	1,259,408		5.3	%	Mortgage warehouse lending	701,172		3.0	%	1,092,133		4.6	%
Total loans	Total loans	22,885,074		100.0	%	23,866,042		100.0	%	Total loans	23,370,029		100.0	%	23,765,053		100.0	%
Allowance for credit losses	Allowance for credit losses	(175,642)				(257,323)				Allowance for credit losses	(125,443)				(126,457)
Loans, net	Loans, net	$	22,709,432			$	23,608,719			Loans, net	$	23,244,586			$	23,638,596

For the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, total loans declined by ~~$981 million. Excluding~~$395 million, while total loans, excluding PPP loans, declined by ~~$691 million for the six months.~~$227 million.

~~Growth in residential~~Residential and other consumer loans grew by $244 million during the quarter ended March 31, 2022. Commercial and industrial loans, including owner-occupied commercial real estate, grew by $122 million for the ~~six months ended June 30,~~quarter. Most of the remaining commercial portfolio segments showed declines for the quarter. MWL utilization declined to 39% at March 31, 2022 compared to 56% at December 31, 2021 ~~totaled $728 million, including $443 million in GNMA early buyout loans. In the aggregate, excluding~~as rising rates have led to lower refinancing activity and we believe this segment is evidencing a return to historically normal seasonal utilization patterns. PPP ~~commercial~~ loans declined by ~~$1.4 billion for~~$168 million during the ~~six months~~quarter ended June 30, 2021 as runoff continued to exceed new production. Line utilization remained below historical levels and accelerated prepayment activity continued. MWL line utilization declined to 52% at June 30, 2021 compared to 62% at DecemberMarch 31, ~~2020.~~2022, resulting from full or partial forgiveness from the SBA.

4640

PPP loans declined by $290 million during the six months ended June 30, 2021. Loans under the First Draw Program declined by $573 million, resulting primarily from full or partial forgiveness. PPP loans under the Second Draw Program totaling $283 million were originated during the six months ended June 30, 2021.

For the three months ended June 30, 2021 total loans excluding PPP loans declined by $56 million. Residential and other consumer loans grew by $494 million and commercial and industrial loans, including owner-occupied commercial real estate, grew by $186 million. The remaining commercial portfolio segments showed net declines for the quarter.

Residential mortgages and other consumer loans

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


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021

1-4 single family residential	1-4 single family residential	$	5,206,766	$	4,922,836	1-4 single family residential	$	6,668,116	$	6,338,225
Government insured residential	Government insured residential	1,863,723		1,419,074		Government insured residential	1,938,479		2,023,221
Other consumer loans	Other consumer loans	5,785		6,312		Other consumer loans	6,244		6,934
		$	7,076,274	$	6,348,222		$	8,612,839	$	8,368,380

The 1-4 single family residential loan portfolio, excluding government insured residential loans, is primarily comprised of loans purchased through established correspondent channels. 1-4 single family residential mortgage loans are primarily closed-end, first lien jumbo mortgages for the purchase or re-finance of owner occupied property. The loans have terms ranging from 10 to 30 years, with either fixed or adjustable interest rates. At ~~June 30, 2021, $502~~March 31, 2022, $927 million or ~~10%~~14% were secured by investor-owned properties.

The Company acquires non-performing FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations (collectively, "government insured pool buyout loans" or "buyout loans"). Buyout loans that re-perform, either through modification or self-cure, may be eligible for re-securitization. The Company and the servicer share in the economics of the sale of these loans into new securitizations. The balance of buyout loans totaled ~~$1.8~~$1.9 billion at ~~June 30, 2021.~~March 31, 2022. The Company is not the servicer of these loans.

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

The following table presents the five states with the largest geographic concentrations of 1-4 single family residential loans, excluding government insured residential loans, at the dates indicated (dollars in thousands):


		June 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021

		Total		Percent of Total		Total		Percent of Total			Total		Percent of Total		Total		Percent of Total
California	California	$	1,651,551	31.7	%	$	1,541,779	31.3	%	California	$	2,161,899	32.4	%	$	2,056,100	32.4	%
New York	New York	1,150,212		22.1	%	1,084,143		22.0	%	New York	1,361,904		20.4	%	1,293,825		20.4	%
Florida	Florida	479,256		9.2	%	518,877		10.5	%	Florida	490,414		7.4	%	494,043		7.8	%
Illinois										Illinois	333,820		5.0	%	306,388		4.8	%
Virginia	Virginia	235,750		4.5	%	196,641		4.0	%	Virginia	286,656		4.3	%	280,898		4.4	%
New Jersey		172,824		3.3	%	160,276		3.3	%
Others	Others	1,517,173		29.2	%	1,421,120		28.9	%	Others	2,033,423		30.5	%	1,906,971		30.2	%
		$	5,206,766	100.0	%	$	4,922,836	100.0	%		$	6,668,116	100.0	%	$	6,338,225	100.0	%

Commercial loans and leases

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

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

Commercial real estate loans include term loans secured by 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, hotels, real estate secured lines of credit, as well as credit facilities to institutional real estate entities such as REITs and commercial real estate investment funds.

The following table presents the distribution of commercial real estate loans by property type along with weighted average DSCRs and LTVs at ~~June 30, 2021~~March 31, 2022 (dollars in thousands):


		Amortized Cost		Percent of Total		FL		New York Tri State		Other		Weighted Average DSCR	Weighted Average LTV			Amortized Cost		Percent of Total		FL		New York Tri State		Other		Weighted Average DSCR	Weighted Average LTV
Office	Office	$	1,985,933	31	%	60	%	25	%	15	%	2.32	62.6	%	Office	$	1,826,531	33	%	60	%	25	%	15	%	2.43	65.3	%
Multifamily		1,361,226		22	%	40	%	55	%	5	%	1.72	59.0	%
Multi-family															Multi-family	1,157,169		21	%	43	%	55	%	2	%	2.18	56.4	%
Retail	Retail	1,225,933		20	%	54	%	39	%	7	%	1.53	68.7	%	Retail	1,011,670		18	%	58	%	34	%	8	%	1.84	64.1	%
Warehouse/Industrial	Warehouse/Industrial	861,098		14	%	64	%	23	%	13	%	2.27	56.4	%	Warehouse/Industrial	895,020		16	%	67	%	21	%	12	%	2.41	58.4	%
Hotel	Hotel	593,852		10	%	76	%	15	%	9	%	1.17	56.7	%	Hotel	504,801		9	%	82	%	10	%	8	%	1.69	58.3	%
Other	Other	171,486		3	%	38	%	32	%	30	%	1.90	56.2	%	Other	139,290		3	%	58	%	26	%	16	%	2.42	51.6	%
		$	6,199,528	100	%	56	%	35	%	9	%	1.90	61.4	%		$	5,534,481	100	%	59	%	32	%	9	%	2.20	61.1	%

DSCRs and LTVs in the table above are based on the most recent information ~~available, which~~available. Geographic distribution in ~~some cases may not be fully reflective~~the table above is based on location of the ~~ultimate impact of the COVID-19 pandemic on borrowers' financial condition or property values.~~underlying collateral property.

The Company’s commercial real estate underwriting standards ~~generally~~most often provide for loan terms of five to seven years, with amortization schedules of no more than thirty years. LTV ratios are typically limited to no more than 75%. Construction and land loans, included by property type in the table above, represented ~~1.0%~~0.8% of the total loan portfolio at ~~June 30, 2021.~~March 31, 2022.

Included in the table above are approximately ~~$163~~$119 million of mixed-use properties in New York, consisting of ~~$86~~$55 million categorized as multi-family, ~~$58~~$46 million categorized as retail and ~~$19~~$18 million categorized as office.

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 New York multi-family portfolio included ~~$577~~$437 million of loans collateralized by properties with some or all of the units subject to rent regulation at ~~June 30, 2021,~~March 31, 2022, substantially all of which were stabilized properties.

~~The following tables present the distribution of stabilized rent-regulated multi-family loans, by DSCR and LTV at June 30, 2021 (in thousands):~~


~~DSCR~~
~~Less than 1.00~~	$	~~167,370~~
~~1.00 - 1.24~~	~~176,703~~
~~1.25 - 1.50~~	~~116,578~~
~~1.51 or greater~~	~~76,480~~
	$	~~537,131~~


~~LTV~~
~~Less than 50%~~	$	~~127,096~~
~~50% - 65%~~	~~137,475~~
~~66% - 75%~~	~~90,531~~
~~More than 75%~~	~~182,029~~
	$	~~537,131~~

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, or of the COVID-19 pandemic. Loans with DSCR less than 1.00 may be those with temporary rent deferments, unit vacancies or increases in expenses exceeding rental receipts, such as real estate taxes. Certain type of ancillary income are excluded from the DSCR calculations.

Commercial and industrial loans are typically made to small, middle market and larger corporate businesses and not-for-profit entities and include equipment loans, secured and unsecured working capital facilities, formula-based loans, trade finance, SBA product offerings, ~~and~~ business acquisition finance credit ~~facilities.~~facilities and commercial credit cards. These loans may be structured as term loans, typically with maturities of five to seven years, or revolving lines of credit which may have multi-year maturities. The Bank also provides financing to state and local governmental entities generally within our geographic markets. Commercial loans included loans meeting the regulatory definition of shared national credits totaling ~~$2.7~~$3.3 billion at ~~June 30, 2021,~~March 31, 2022, the majority of which were relationship based loans to

borrowers in 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 presents the exposure in the ~~commercial and industrial~~C&I portfolio, ~~by industry, including $2.0 billion of owner-occupied commercial real estate~~excluding PPP loans, by industry, at ~~June 30, 2021 (in~~March 31, 2022 (dollars in thousands):


		Amortized Cost		Percent of Total			Amortized Cost		Percent of Total
Finance and Insurance	Finance and Insurance	$	939,604	15.2	%	Finance and Insurance	$	1,162,463	17.0	%
Educational Services	Educational Services	695,388		11.3	%	Educational Services	673,206		9.8	%
Wholesale Trade	Wholesale Trade	601,045		9.7	%	Wholesale Trade	669,159		9.8	%
Health Care and Social Assistance						Health Care and Social Assistance	488,299		7.1	%
Transportation and Warehousing	Transportation and Warehousing	458,358		7.4	%	Transportation and Warehousing	459,429		6.7	%
Health Care and Social Assistance		405,748		6.6	%
Manufacturing	Manufacturing	350,013		5.7	%	Manufacturing	439,488		6.4	%
Information	Information	388,849		6.3	%	Information	415,120		6.1	%
Real Estate and Rental and Leasing						Real Estate and Rental and Leasing	404,414		5.9	%
Utilities						Utilities	317,026		4.6	%
Construction						Construction	291,695		4.3	%
Retail Trade	Retail Trade	305,077		4.9	%	Retail Trade	280,840		4.1	%
Other Services (except Public Administration)						Other Services (except Public Administration)	231,215		3.4	%
Professional, Scientific, and Technical Services						Professional, Scientific, and Technical Services	228,577		3.3	%
Public Administration						Public Administration	201,512		2.9	%
Accommodation and Food Services	Accommodation and Food Services	250,342		4.1	%	Accommodation and Food Services	181,130		2.6	%
Real Estate and Rental and Leasing		312,119		5.1	%
Public Administration		231,939		3.8	%
Professional, Scientific, and Technical Services		223,364		3.6	%
Other Services (except Public Administration)		236,068		3.8	%
Construction		208,839		3.4	%
Administrative and Support and Waste Management	Administrative and Support and Waste Management	165,660		2.7	%	Administrative and Support and Waste Management	171,677		2.5	%
Arts, Entertainment, and Recreation	Arts, Entertainment, and Recreation	172,630		2.8	%	Arts, Entertainment, and Recreation	164,356		2.4	%
Utilities		163,878		2.7	%
Other	Other	57,774		0.9	%	Other	77,788		1.1	%
		$	6,166,695	100.0	%		$	6,857,394	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 ~~58%~~53% and ~~35%~~43% of the portfolio, respectively. The equipment finance division provides primarily transportation equipment financing through a variety of loan and lease structures.

5043

The following table presents the franchise portfolio by concept at ~~June 30, 2021:~~March 31, 2022 (dollars in thousands):

Amortized Cost Percent of Bridge -Franchise Finance
Restaurant concepts:
Burger King $ 58,559 12.6 %
Popeyes 19,616 4.2 %
Dunkin Donuts 19,528 4.2 %
Jimmy John's 16,834 3.6 %
Domino's 8,273 1.8 %
Other 147,017 31.7 %
$ 269,827 58.1 %
Non-restaurant concepts:
Planet Fitness $ 92,912 20.0 %
Orange Theory Fitness 70,129 15.1 %
Other 31,006 6.8 %
194,047 41.9 %
$ 463,874 100.0 %


	Amortized Cost		Percent of Bridge -Franchise Finance
Restaurant concepts:
Burger King	$	50,191	16.4	%
Dunkin Donuts	14,180		4.6	%
Ram Restaurant and Brewery	13,215		4.3	%
Jimmy John's	12,219		4.0	%
Black Bear	12,014		3.9	%
Other	60,206		19.6	%
	$	162,025	52.8	%
Non-restaurant concepts:
Planet Fitness	$	93,631	30.6	%
Orange Theory Fitness	37,731		12.3	%
Other	13,176		4.3	%
	144,538		47.2	%
	$	306,563	100.0	%

The Company has originated PPP loans under both the First and Second Draw Programs. These loans bear interest at 1% and are guaranteed as to principal and interest by the SBA. PPP loans have terms of 2 and 5 years under the First and Second Draw Programs, respectively, and are eligible for earlier forgiveness under the terms of the PPP in prescribed circumstances. ~~The following table summarizes PPP loan balances at June 30, 2021, and the amount of interest income related to accelerated amortization of~~At March 31, 2022, deferred origination fees on PPP loans ~~that were partially or fully forgiven, under each program during the three and six months ended June 30, 2021 (in thousands):~~

June 30, 2021 Fees Recognized On Forgiveness
UPB Deferred Origination Fees Amortized Cost Three Months Ended June 30, 2021 Six Months Ended June 30, 2021
First Draw Program $ 210,293 $ (1,079) $ 209,214 $ 4,512 $ 7,082
Second Draw Program 291,473 (8,727) 282,746 — —
$ 501,766 $ (9,806) $ 491,960 $ 4,512 $ 7,082
totaled $1.4 million.

Geographic Concentrations

The Company's commercial and commercial real estate portfolios are concentrated in Florida and the Tri-state area. ~~56%~~59% and ~~35%~~32% of commercial real estate loans were secured by collateral located in Florida and the Tri-state area, respectively; while ~~37%~~39% and ~~22%~~23% of all other commercial loans were to borrowers in Florida and the Tri-state area, respectively.

The following table presents the five states with the largest concentration of commercial loans and leases originated through Bridge, Pinnacle and our mortgage warehouse finance unit at the dates indicated (dollars in thousands):

June 30, 2021 December 31, 2020
Total Percent of Total Total Percent of Total
California $ 500,825 17.0 % $ 609,419 18.0 %
NY Tri State Area 278,194 9.4 % 545,458 16.1 %
Florida 285,828 9.7 % 330,587 9.7 %
Ohio 225,538 7.6 % 186,443 5.5 %
North Carolina 176,885 6.0 % 194,558 5.7 %
All Others 1,483,347 50.3 % 1,525,610 45.0 %
$ 2,950,617 100.0 % $ 3,392,075 100.0 %

Operating lease equipment, net

Operating lease equipment, net of accumulated depreciation totaled ~~$668~~$627 million at ~~June 30, 2021,~~March 31, 2022, including off-lease equipment, net of accumulated depreciation of ~~$128~~$91 million. The portfolio consists primarily of railcars, non-commercial aircraft and other transport equipment. Our operating lease customers are North American commercial end users. We have a total of ~~5,070~~4,539 railcars with a carrying value of ~~$382~~$337 million at ~~June 30, 2021,~~March 31, 2022, including hoppers, tank cars, boxcars, auto carriers, center beams and gondolas. The largest concentrations of rail cars were ~~2,402~~2,117 hopper cars and ~~1,594~~1,351 tank cars, primarily used to ship sand and petroleum products, respectively, for the energy industry.

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

At ~~June 30, 2021,~~March 31, 2022, the breakdown of carrying values of operating lease equipment, excluding equipment off-lease, by the year leases are scheduled to expire was as follows (in thousands):


Years Ending December 31:	Years Ending December 31:			Years Ending December 31:
2021		$	23,683
2022	2022	40,797		2022	$	54,478
2023	2023	75,170		2023	76,279
2024	2024	35,514		2024	47,367
2025	2025	100,020		2025	92,817
2026				2026	83,139
Thereafter through 2034	Thereafter through 2034	264,529		Thereafter through 2034	182,257
		$	539,713		$	536,337

Asset Quality

Commercial Loans

We have a robust credit risk management framework, an experienced team to lead the workout and recovery process for the commercial and commercial real estate portfolios and a dedicated internal credit review function. ~~In response to the COVID-19 pandemic, we have further enhanced our workout and recovery staffing and processes.~~ Loan performance is monitored by our credit administration, portfolio management 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. Homogenous groups of smaller balance commercial loans may be monitored collectively. The credit quality and risk rating of commercial loans as well as our underwriting and portfolio management practices are regularly reviewed by our internal independent credit review department.

We believe internal risk rating is the best indicator of the credit quality of commercial loans. The Company utilizes a 16-grade internal asset risk classification system as part of its efforts to monitor and maintain commercial asset quality. The special mention rating is considered a transitional rating for loans exhibiting potential credit weaknesses that could result in deterioration of repayment prospects at some future date if not checked or corrected and that deserve management’s close attention. These borrowers may exhibit declining cash flows or revenues or increasing leverage. Loans with well-defined credit weaknesses that may result in a loss if the deficiencies are not corrected are assigned a risk rating of substandard. These borrowers may exhibit payment defaults, inadequate cash flows from current operations, operating losses, increasing balance sheet leverage, project cost overruns, unreasonable construction delays, exhausted interest reserves, declining collateral values, frequent overdrafts or past due real estate taxes. Loans with weaknesses so severe that collection in full is highly questionable

or improbable, but because of certain reasonably specific pending factors have not been charged off, are assigned an internal risk rating of doubtful. During 2020, risk ratings were re-evaluated for a substantial portion of the commercial portfolio, with a particular focus on portfolio segments we identified for enhanced monitoring and loans for which we granted temporary payment deferrals or modifications in light of the COVID-19 pandemic. We continue to closely monitor the risk rating of commercial loans in light of the evolving COVID-19 situation.

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


		June 30, 2021				March 31, 2021				December 31, 2020			March 31, 2022								December 31, 2021	December 31, 2020

		Amortized Cost		Percent of Commercial Loans		Amortized Cost		Percent of Commercial Loans			Amortized Cost			Percent of Commercial Loans			Amortized Cost		Percent of Commercial Loans				Amortized Cost		Percent of Commercial Loans		Amortized Cost		Percent of Commercial Loans
Pass	Pass	$	13,739,092	86.8	%	$	14,167,606	84.5	%		$	14,832,025		84.6	%	Pass	$	13,574,615	92.0	%			$	13,934,369	90.5	%	$	14,832,025	84.6	%
Special mention	Special mention	138,064		0.9	%	420,331		2.5	%		711,516			4.1	%	Special mention	95,250		0.6	%			148,593		1.0	%	711,416		4.1	%
Substandard accruing	Substandard accruing	1,684,666		10.7	%	1,983,191		11.8	%		1,758,654			10.0	%	Substandard accruing	956,318		6.5	%			1,136,378		7.4	%	1,758,654		10.0	%
Substandard non-accruing	Substandard non-accruing	229,646		1.5	%	189,589		1.1	%		203,758			1.2	%	Substandard non-accruing	104,329		0.7	%			129,579		0.8	%	203,758		1.2	%
Doubtful	Doubtful	17,332		0.1	%	17,903		0.1	%		11,867			0.1	%	Doubtful	26,678		0.2	%			47,754		0.3	%	11,867		0.1	%
		$	15,808,800	100.0	%	$	16,778,620	100.0	%		$	17,517,820		100.0	%		$	14,757,190	100.0	%			$	15,396,673	100.0	%	$	17,517,720	100.0	%

Our internal risk ratings at ~~June 30, 2021~~March 31, 2022 continued to be influenced by the impact of the COVID-19 pandemic and the measures and restrictions employed to contain the spread of the virus on the economy, our borrowers and the sectors in which they ~~operate.~~operate, although that impact continues to decline. Management ~~has taken~~took what ~~we believe~~it believed to be a proactive and objective approach to risk rating the commercial loan portfolio ~~since~~at the onset of the pandemic. ~~The increase in levels~~Levels of criticized and classified loans, particularly in the special mention and substandard accruing categories, increased over the course of 2020 ~~was directly related to~~as a direct result of the impact of the COVID-19 pandemic. ~~As expected given~~Throughout 2021 and the ~~trajectory of economic recovery,~~three months ended March 31, 2022, levels of criticized and classified loans ~~have~~ declined ~~over~~in response to the ~~first six months~~trajectory of ~~2021, particularly during~~ the ~~second quarter.~~ During the six months ended June 30, 2021, total criticized and classified loans declined by $616 million. During the quarter ended June 30, 2021 criticized and classified loans declined by $541.3 million or 21%, to $2.1 billion. However, substandard non-accruing loans increased by $40.1 million during the second quarter. This increase was primarily attributable to one $69 million commercial and industrial relationship. economic recovery. If the economic recovery and its impact on individual borrowers evolve in line with our current expectations and economic forecast, we would expect to see the level of criticized and classified loans continue to decline over the ~~remainder~~course of ~~2021.~~2022. However, uncertainty remains around the future trajectory of the ~~COVID-19 virus and the economic recovery.~~economy due to a number of factors. In light of that uncertainty, it is possible that criticized and classified loan levels may not decline or that they may increase.

5346

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

June 30, 2021 March 31, 2021 December 31, 2020
Amortized Cost % of Loan Segment Amortized Cost % of Loan Segment Amortized Cost % of Loan Segment
Special mention:
CRE
Hotel $ 579 0.1 % $ 34,113 5.5 % $ 68,413 11.0 %
Retail 21,763 1.8 % 51,547 4.0 % 86,935 6.4 %
Multi-family 6,085 0.4 % 37,345 2.5 % 36,335 2.2 %
Office 27,246 1.4 % 3,973 0.2 % 37,943 1.8 %
Industrial — — % 1,047 0.1 % 9,440 1.1 %
Other 3,503 6.5 % 32,704 29.5 % 38,010 45.4 %
59,176 160,729 277,076
Owner occupied commercial real estate 41,923 2.1 % 68,145 3.5 % 156,837 7.8 %
Commercial and industrial 33,364 0.8 % 178,920 4.4 % 169,605 3.8 %
Bridge - franchise finance 1,857 0.4 % 10,745 2.0 % 71,593 13.0 %
Bridge - equipment finance 1,744 0.4 % 1,792 0.4 % 36,405 7.7 %
$ 138,064 $ 420,331 $ 711,516
Substandard accruing:
CRE
Hotel $ 290,439 48.9 % $ 453,289 73.2 % $ 400,468 64.4 %
Retail 220,424 18.0 % 275,976 21.6 % 276,149 20.4 %
Multi-family 205,514 16.4 % 292,624 19.4 % 218,532 13.3 %
Office 140,741 7.1 % 105,743 5.1 % 40,477 1.9 %
Industrial 12,855 1.5 % 17,237 2.0 % 13,902 1.7 %
Other 21,375 12.5 % 37,245 33.6 % 28,505 1.7 %
891,348 1,182,114 978,033
Owner occupied commercial real estate 219,162 11.2 % 198,896 10.3 % 177,575 8.9 %
Commercial and industrial 277,683 6.6 % 256,341 6.3 % 285,925 6.4 %
Bridge - franchise finance 218,665 47.1 % 240,810 45.9 % 242,234 44.1 %
Bridge - equipment finance 77,808 18.4 % 105,030 22.8 % 74,887 15.7 %
$ 1,684,666 $ 1,983,191 $ 1,758,654



	March 31, 2022				December 31, 2021
	Amortized Cost		% of Loan Segment			Amortized Cost		% of Loan Segment
Special mention:
CRE
Hotel	$	569	0.1	%		$	760	0.1	%


Office	31,180		1.7	%		27,001		1.5	%

Other	236		0.3	%		4,501		3.7	%
	31,985					32,262
Owner occupied commercial real estate	5,369		0.3	%		14,010		0.7	%
Commercial and industrial	57,896		1.2	%		102,321		2.1	%



	$	95,250				$	148,593

Substandard accruing:
CRE
Hotel	$	121,996	24.2	%		$	200,486	36.7	%
Retail	103,378		10.2	%		140,081		13.0	%
Multi-family	176,034		16.4	%		173,536		15.0	%
Office	72,245		4.0	%		83,121		4.6	%
Industrial	988		0.1	%		1,009		0.1	%
Other	9,462		6.8	%		5,803		2.2	%
	484,103					604,036
Owner occupied commercial real estate	125,866		6.6	%		160,159		8.2	%
Commercial and industrial	250,016		5.0	%		250,644		5.2	%

Bridge - franchise finance	69,619		22.7	%		80,864		23.6	%
Bridge - equipment finance	26,714		7.8	%		40,675		11.4	%

	$	956,318				$	1,136,378

Payment Deferrals and Modifications

~~We believe, in the current environment, information about~~At March 31, 2022, commercial loans ~~that are on temporary payment deferral or have been modified as a result~~under CARES Act modification totaled $117 million. All of the COVID-19 pandemic provides additional insight into segments or sub-segments of the portfolio that experienced some level of stress related to the pandemic and into how those loans are performing as the economy recovers. The following table summarizes deferral and modification activity in the commercial ~~portfolio, as of June 30, 2021 (dollars in thousands):~~

Under Short Term Deferral or CARES Act Modification at June 30, 2021 % of Portfolio Segment at June 30, 2021 Under Short Term Deferral or CARES Act Modification at March 31, 2021 Loans That Have Rolled Off of Short-Term Deferral or CARES Act Modification
CRE by Property Type:
Retail $ 15,871 1 % $ 36,615 $ 2,636
Hotel 225,436 42 % 343,354 118,119
Office 44,860 2 % 56,542 —
Multifamily 13,872 1 % 24,014 10,142
Total CRE 300,039 5 % 460,525 130,897
C&I by Industry
Accommodation and Food Services 31,073 12 % 24,884 —
Retail Trade 32,371 11 % 33,644 1,274
Finance and Insurance 16,854 2 % 18,244 1,390
Other 31,994 3 % 80,168 59,734
Total C&I 112,292 2 % 156,940 62,398
Bridge - franchise finance 25,647 6 % 38,182 24,813
Total Commercial $ 437,978 3 % $ 655,647 $ 218,108

~~All of the~~ loans that have rolled off of ~~deferral or~~ modification ~~as shown in the table above~~ have paid off or resumed regular payments. For commercial borrowers, short-term payment deferrals were generally deferrals of principal and/or interest payments for up to two periods of 90 days each. The deferred payments along with interest accrued during the deferral period are generally due and payable on the maturity date. CARES Act modifications ~~represent longer-term modifications and~~ most commonly have taken the form of 9 to 12 month interest only periods. The majority of loan modifications ~~and deferrals~~ that took place after the onset of the COVID-19 pandemic ~~have~~and through December 31, 2021 were not ~~been~~ categorized as TDRs, in accordance with interagency and authoritative guidance and the provisions of the CARES ~~Act.~~Act, which expired effective January 1, 2022.

Operating Lease Equipment, net

~~Seven~~Three operating leases with a carrying value of assets under lease totaling ~~$45~~$18 million, all of which were exposures to the energy industry, were internally risk rated substandard at ~~June 30, 2021.~~March 31, 2022. On a quarterly basis, management performs an impairment analysis on assets with indicators of potential impairment. Potential impairment indicators include evidence of changes in residual value, macro-economic conditions, an extended period of time off-lease, criticized or classified status, or management's intention to sell the asset at an amount potentially below its carrying value. ~~During~~There were no impairment charges during the three ~~and six~~ months ended ~~June 30, 2021 and 2020, impairment charges recognized related to operating lease equipment were insignificant.~~March 31, 2022 or March 31, 2021.

The primary risks inherent in the equipment leasing business are asset risk resulting from ownership of the equipment on lease and credit risk. Asset risk arises from fluctuations in supply and demand for the underlying leased equipment. The equipment is leased to commercial end users with original lease terms generally ranging from 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 leased assets or 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, including events such as the COVID-19 pandemic.~~disasters. We seek to mitigate these risks by leasing to a stable 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 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~~using 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 to high credit quality obligors.

Bridge had exposure to the energy industry of ~~$316~~$272 million at ~~June 30, 2021.~~March 31, 2022. The majority of the energy exposure was in the operating lease equipment portfolio where energy exposure totaled ~~$271~~$235 million. The remaining energy exposure, totaling approximately ~~$46~~$37 million was comprised of loans and direct or sales type finance leases.

Residential and Other Consumer Loans

Our residential mortgage portfolio, excluding GNMA buyout loans, consists primarily of loans purchased through established correspondent channels. Most of our purchases are of performing jumbo mortgage loans which have FICO scores above 700, primarily are owner-occupied and full documentation, and have a current LTV of 80% or less although loans with LTVs higher than 80% may be extended to selected credit-worthy borrowers. We perform due diligence on the purchased loans for credit, compliance, counterparty, payment history and property valuation.

We have a dedicated residential credit risk management function, and the residential portfolio is monitored by our internal credit review function. Residential mortgage loans 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 most recently available FICO score to be significant indicators of credit quality for the 1-4 single family residential portfolio, excluding government insured residential loans.

The following charts present information about the 1-4 single family residential portfolio, excluding government insured loans, by FICO distribution, LTV distribution and vintage at ~~June 30, 2021:~~March 31, 2022:

FICO scores are generally updated at least annually, and were most recently updated in the first quarter of ~~2021.~~2022. LTVs are typically based on valuation at origination since we do not routinely update residential appraisals.

At ~~June 30, 2021,~~March 31, 2022, the majority of the 1-4 single family residential loan portfolio, excluding government insured residential loans, was owner-occupied, with ~~83%~~81% primary residence, 7%5% second homes and ~~10%~~14% investment properties.

1-4 single family residential loans excluding government insured residential loans past due more than 30 days totaled ~~$78~~$70 million and ~~$66~~$76 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The amount of these loans 90 days or more past due was ~~$23.4~~$15 million and ~~$9.2~~$17 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Delinquency statistics as of June 30, 2021 may not be fully reflective of the impact of the COVID-19 pandemic on residential borrowers due to payment deferral programs. Loans on deferral that are in compliance with the terms of the deferral program are not reported as delinquent.

At ~~June 30, 2021, $59~~March 31, 2022, $32 million or less than 1% of 1-4 single family residential loans, excluding government insured residential loans, ~~were~~remained under short-term deferral or had been modified due to the COVID-19 pandemic. Through June 30, 2021, $532 million of residential loans, excluding government insured loans, had been granted at least one short term payment deferral. The following table presents information about residential loans granted payment deferrals as a result of the COVID-19 pandemic as of June 30, 2021, excluding government insured residential loans (dollars in thousands):

Loans That Have Rolled Off of Short-Term Deferral or CARES Act Modification
Loans Still Under Short-Term Deferral or CARES Act Modification Paid Off or Paying as Agreed Not Resumed Regular Payments
Balance
% of Loans Initially Granted Short-Term Deferral(1)
Balance % of Loans Rolled Off Short-Term Deferral Balance % of Loans Rolled Off Short-Term Deferral
$ 58,719 1% $ 438,903 93% $ 33,959 7%

~~(1) Includes $20 million of loans modified under the CARES Act that are continuing to make payments~~

For residential borrowers, relief has typically initially taken the form of 90 day payment deferrals, with deferred payments due at the end of the 90 day period. At the end of the initial 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.

Note 4 to the consolidated financial statements presents additional information about key credit quality indicators and delinquency status of the loan portfolio.

Non-Performing Assets

Non-performing assets generally consist of (i) non-accrual loans, including loans that have been modified in TDRs or CARES Act modifications and placed on non-accrual status, (ii) accruing loans that are more than 90 days contractually past due as to interest or principal, excluding PCD loans for which management has a reasonable basis for an expectation about future cash flows and government insured residential loans, and (iii) ~~OREO and repossessed assets.~~OREO.

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


		June 30, 2021			March 31, 2021			December 31, 2020				March 31, 2022			December 31, 2021

Non-accrual loans:	Non-accrual loans:										Non-accrual loans:
Residential and other consumer:	Residential and other consumer:										Residential and other consumer:
1-4 single family residential	1-4 single family residential	$	43,646		$	23,159		$	26,842		1-4 single family residential	$	19,824		$	26,988
Other consumer loans	Other consumer loans	1,907			1,904			1,986			Other consumer loans	—			1,565
Total residential and other consumer loans	Total residential and other consumer loans	45,553			25,063			28,828			Total residential and other consumer loans	19,824			28,553
Commercial:	Commercial:										Commercial:
Multi-family	Multi-family	7,069			12,701			24,090			Multi-family	10,725			10,865
Non-owner occupied commercial real estate	Non-owner occupied commercial real estate	51,320			63,785			64,017			Non-owner occupied commercial real estate	25,667			39,251
Construction and land	Construction and land	4,784			4,788			4,754			Construction and land	5,090			5,164
Owner occupied commercial real estate	Owner occupied commercial real estate	26,582			23,451			23,152			Owner occupied commercial real estate	21,079			20,453
Commercial and industrial	Commercial and industrial	123,818			66,491			54,584			Commercial and industrial	40,222			68,720

Bridge - franchise finance	Bridge - franchise finance	33,405			36,276			45,028			Bridge - franchise finance	28,224			32,879

Total commercial loans	Total commercial loans	246,978			207,492			215,625			Total commercial loans	131,007			177,332
Total non-accrual loans	Total non-accrual loans	292,531			232,555			244,453			Total non-accrual loans	150,831			205,885
Loans past due 90 days and still accruing	Loans past due 90 days and still accruing	132			1,077			—			Loans past due 90 days and still accruing	—			24
Total non-performing loans	Total non-performing loans	292,663			233,632			244,453			Total non-performing loans	150,831			205,909
OREO and repossessed assets		3,890			2,726			3,138
OREO											OREO	1,763			2,275
Total non-performing assets	Total non-performing assets	$	296,553		$	236,358		$	247,591		Total non-performing assets	$	152,594		$	208,184

Non-performing loans to total loans (1)	Non-performing loans to total loans (1)	1.28		%	1.00		%	1.02		%	Non-performing loans to total loans (1)	0.65		%	0.87		%
Non-performing assets to total assets (1)	Non-performing assets to total assets (1)	0.83		%	0.67		%	0.71		%	Non-performing assets to total assets (1)	0.42		%	0.58		%
ACL to total loans	ACL to total loans	0.77		%	0.95		%	1.08		%	ACL to total loans	0.54		%	0.53		%
ACL to non-performing loans	ACL to non-performing loans	60.02		%	94.56		%	105.26		%	ACL to non-performing loans	83.17		%	61.41		%

Net charge-offs to average loans (2)	Net charge-offs to average loans (2)	0.24		%	0.17		%	0.26		%	Net charge-offs to average loans (2)	0.15		%	0.29		%

(1) Non-performing loans and assets include the guaranteed portion of non-accrual SBA loans totaling ~~$47.7~~$41.9 million or ~~0.21%~~0.18% of total loans and 0.12% of total assets, at March 31, 2022, and $46.1 million or 0.19% of total loans and 0.13% of total assets, at ~~June 30, 2021, $48.2 million or 0.21% of total loans and 0.14% of total assets, at March 31, 2021 and $51.3 million or 0.22% of total loans and 0.15% of total assets, at~~ December 31, ~~2020.~~2021.

(2) Annualized for ~~June 30, 2021 and~~ March 31, ~~2021.~~2022.

Contractually delinquent government insured residential loans are typically GNMA early buyout loans and are excluded from non-performing loans as defined in the table above due to their government guarantee. The carrying value of such loans contractually delinquent by ~~more than~~ 90 days or more was ~~$732~~$704 million and ~~$562~~$730 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, respectivel~~y.2021, respectively.

~~The increase in non-performing loans, non-performing assets~~See "Results of Operations - Provision for Credit Losses" above and ~~related ratios was primarily attributable to one $69 million commercial and industrial relationship. Decreases~~“Analysis of the Allowance for Credit Losses” below for further discussion of trends in the ~~ratios of the ACL to total loans~~Provision for Credit Losses and the ACL to non-performing loans at June 30, 2021 compared to December 31, 2020 are attributable to the recovery of credit losses recorded during the three and six months ended June 30, 2021, which resulted primarily from an improving economic forecast, ~~and to a lesser extent, charge-offs recognized.~~ACL.

The following chart presents trends in non-performing loans and non-performing ~~assets:~~assets. Levels of non-performing loans and non-performing assets have returned to below pre-pandemic levels.

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

~~The ultimate impact of the COVID-19 pandemic on non-performing asset levels and net charge-offs may be delayed due to government assistance and loan deferral programs.~~

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 consumer loans, other than government insured pool buyout loans, are generally placed on non-accrual status when they are 90 days past due. Residential loans that have rolled off of short-term deferral and have not caught up on their deferred payments may also be placed on non-accrual; these loans are typically pending modification. When a loan is placed on non-accrual status, uncollected interest accrued is reversed and

charged to interest income. Commercial loans are returned to accrual status only after all past due principal and interest has been collected and full repayment of remaining contractual principal and interest is reasonably assured. Residential loans are generally returned to accrual status when less than 90 days past due. Past due status of loans is determined based on the contractual next payment due date. Loans less than 30 days past due are reported as current.

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 or extensions of maturity at below market terms. 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 deferrals ~~(generally periods of six months or less)~~ or modifications related to COVID-19 ~~will~~were typically not be categorized as TDRs. Additionally, section 4013 of the CARES Act, as amended by the Consolidated Appropriations Act, ~~on December 27, 2020,~~ effectively suspended the guidance related to TDRs codified in ASC 310-40 until ~~the earlier of~~ January 1, 2022, ~~or sixty days after~~ the date of the suspension of the declared state of emergency related to the COVID-19 pandemic. None of the COVID-19 related deferrals the Company has granted to date that fall under these provisions have been categorized as TDRs. See the sections entitled "Asset Quality - Commercial Loans - Payment Deferrals" and "Asset Quality - Residential and Other Consumer Loans" for further discussion.CARES Act expired.

The following table summarizes loans that had been modified in TDRs at the dates indicated (dollars in thousands):


		June 30, 2021					December 31, 2020						March 31, 2022					December 31, 2021

		Number of TDRs	Amortized Cost		Related Specific Allowance		Number of TDRs	Amortized Cost		Related Specific Allowance			Number of TDRs	Amortized Cost		Related Specific Allowance		Number of TDRs	Amortized Cost		Related Specific Allowance
Residential and other consumer (1)	Residential and other consumer (1)	399	$	69,759	$	102	342	$	57,017	$	94	Residential and other consumer (1)	749	$	128,913	$	60	449	$	79,524	$	87
Commercial	Commercial	23	43,432		3,953		25	55,515		15,630		Commercial	22	30,645		2,197		16	29,309		1,377
		422	$	113,191	$	4,055	367	$	112,532	$	15,724		771	$	159,558	$	2,257	465	$	108,833	$	1,464

(1) Includes ~~384~~731 government insured residential loans modified in TDRs totaling ~~$66.3~~$123.9 million at ~~June 30, 2021;~~March 31, 2022, and ~~326~~435 government insured residential loans modified in TDRs totaling ~~$52.8~~$76.4 million at December 31, ~~2020.~~2021.

See Note 4 to the 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 evaluates the appropriate strategy for collection to mitigate the amount of credit losses and considers the appropriate risk rating for these loans. Criticized asset reports for each relationship are presented by the assigned relationship manager and credit officer to the Criticized Asset Committee until such time as the relationships are returned to a satisfactory credit risk rating or otherwise resolved. The Criticized Asset Committee may require the transfer of a loan to our workout and recovery department, which is tasked to effectively manage the loan with the goal of minimizing losses and expenses associated with restructure, collection and/or liquidation of collateral. Commercial loans with a risk rating of substandard, loans on non-accrual status, loans modified as TDRs or CARES Act modifications and assets classified as OREO or repossessed assets are usually transferred to workout and recovery. Oversight of the workout and recovery department is provided by the Criticized Asset Committee.

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

In response to the COVID-19 pandemic and its potential economic impact to our customers, we implemented a short-term program that complies with interagency guidance and the CARES Act under which we have provided temporary relief, and in some cases longer term modifications, 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, 2019. See the sections entitled "Asset Quality - Commercial Loans - Payment Deferrals" and "Asset Quality - Residential and Other Consumer Loans" for further details about COVID-19 related payment deferrals and modifications. Under the inter-agency guidance and consistent with the CARES Act, deferrals or modifications related to COVID-19 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 agreements, will typically not be reported as past due or non-performing.

Analysis of the Allowance for Credit Losses

The ACL is management's estimate of the amount of expected credit losses over the life of the loan portfolio, or the amount of amortized cost basis not expected to be collected, at the balance sheet date. This estimate encompasses information about historical events, current conditions and reasonable and supportable economic forecasts. Determining the amount of the ACL is

complex and requires extensive judgment by management about matters that are inherently uncertain. ~~Uncertainty~~Economic uncertainty remains around the impact the continually evolving COVID-19 ~~crisis~~situation, emerging inflationary concerns and current geopolitical events will have on the economy broadly, and on our borrowers specifically. ~~In light~~Given this uncertainty, the complexity of ~~this uncertainty,~~the ACL estimate and level of management judgment required, we believe it is possible that the ACL estimate could change, potentially materially, in future periods, in either direction. Changes in the ACL may result from changes in current economic conditions, our economic forecast, loan portfolio composition and circumstances not currently known to us that may impact the financial condition and operations of our borrowers, among other factors.

Expected credit losses are estimated on a collective basis for groups of loans that share similar risk characteristics. For loans that do not share similar risk characteristics with other loans such as collateral dependent loans 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, generally excluding expected extensions, renewals, and modifications.

For the substantial majority of portfolio segments and subsegments, including residential loans other than government insured loans, and most commercial and commercial real estate loans, expected losses are estimated using econometric models. The models employ a factor based methodology, leveraging data sets containing extensive historical loss and recovery information by industry, geography, product type, collateral type and obligor characteristics, to estimate PD and LGD. Measures of PD for commercial loans incorporate current conditions through market cycle or credit cycle adjustments. For residential loans, the models consider FICO and adjusted LTVs. PDs and LGDs are then conditioned on the reasonable and supportable economic forecast. Projected PDs and LGDs, determined based on pool level characteristics, are applied to estimated exposure at default, considering the contractual term and payment structure of loans, adjusted for prepayments, to generate estimates of expected loss. For criticized or classified loans, PDs are adjusted to benchmark PDs established for each risk rating. The ACL estimate incorporates a reasonable and supportable economic forecast through the use of externally developed macroeconomic scenarios applied in the models.

A single economic scenario or a probability weighted blend of economic scenarios may be used. The models ingest numerous national, regional and MSA level variables and data points. At both March 31, 2022 and December 31, 2021, a baseline scenario provided by an external party was used in estimating the ACL.

Commercial Real Estate Model

Variables with the most significant impact on the commercial real estate model include unemployment at both national and regional levels, the CRE property forecast by property type and sub-market, 10 year treasury yield, Baa corporate yield and real GDP ~~growth. Those~~growth, at the national level. Increases in unemployment and yields within the commercial real estate model result in increases in the ACL. Increases in real GDP growth and improvements in the CRE property forecasts reduce the reserve.

Commercial Model

Variables with the most significant impact on the commercial model include a stock market volatility index, the S&P 500 index, unemployment at both national and regional levels, and a variety of interest rates and spreads. ~~Those~~Increases in the unemployment rate, the stock market volatility index, and the Baa corporate yield increase the reserve, while increases in real GDP growth and the steepening of the yield curve reduce the reserve.

Residential Model

Variables with the most significant impact on the residential model include HPI and unemployment at regional levels, real GDP growth, and a 30 year mortgage rate. Increases in the unemployment rate and the 30-year mortgage rate increase the reserve, while increases in real GDP growth and HPI reduce the reserve.

The length of the reasonable and supportable forecast period is evaluated at each reporting period and adjusted if deemed necessary. Currently, the Company uses a 2-year reasonable and supportable forecast period in estimating the ACL. After the reasonable and supportable forecast period, the models effectively revert to long-term mean losses on a straight-line basis over 12 months.

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. Loss rates are applied to the exposure at default, after factoring in amortization and expected prepayments. Expected credit losses for the funded portion of mortgage warehouse lines of credit are estimated based primarily on the Company's historical loss experience. All loss estimates are conditioned as applicable on changes in current conditions and the reasonable and supportable economic forecast.

The Company expects to collect the amortized cost basis of government insured residential loans and PPP loans due to the nature of the government guarantee, so the 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;

•Credit policy and staffing;

•Concentrations;

•Model imprecision; and

•Other factors deemed appropriate by management that may materially impact the amount of expected credit losses.

See Note 1 to the consolidated financial statements of the Company's ~~2020~~2021 Annual report on Form 10-K for more detailed information about our ACL methodology.

The following table provides an analysis of the ACL, provision for credit losses related to the funded portion of loans and net charge-offs by loan segment for the periods indicated (in thousands):


		Residential and Other Consumer Loans			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			Total				Residential and Other Consumer Loans			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			Total

Balance at December 31, 2020	Balance at December 31, 2020	$	18,719		$	39,827		$	61,507		$	3,284		$	28,797		$	62,197		$	304		$	36,331		$	6,357		$	257,323		Balance at December 31, 2020	$	18,719		$	39,827		$	61,507		$	3,284		$	28,797		$	62,197		$	304		$	36,331		$	6,357		$	257,323
Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	(6,802)			(25,813)			(25,852)			(2,185)			(3,609)			22,702			(93)			(11,157)			(1,160)			(53,969)			Provision for (recovery of) credit losses	(2,864)			5,930			(14,301)			(817)			(4,213)			(7,884)			(91)			(2,441)			375			(26,306)
Charge-offs	Charge-offs	(14)			(6,470)			(493)			—			(346)			(13,486)			—			(9,585)			—			(30,394)			Charge-offs	(14)			—			(335)			—			(187)			(1,976)			—			(9,480)			—			(11,992)
Recoveries	Recoveries	6			233			84			—			57			2,302			—			—			—			2,682			Recoveries	3			—			43			—			48			1,815			—			—			—			1,909
Balance at June 30, 2021		$	11,909		$	7,777		$	35,246		$	1,099		$	24,899		$	73,715		$	211		$	15,589		$	5,197		$	175,642
Balance at March 31, 2021																																Balance at March 31, 2021	$	15,844		$	45,757		$	46,914		$	2,467		$	24,445		$	54,152		$	213		$	24,410		$	6,732		$	220,934

Balance at December 31, 2019		$	11,154		$	5,024		$	23,240		$	764		$	8,066		$	43,485		$	720		$	9,163		$	7,055		$	108,671
Impact of adoption of ASU 2016-13		8,098			(780)			(13,442)			1,854			23,240			8,841			(309)			(133)			(64)			27,305
Balance at January 1, 2020		19,252			4,244			9,798			2,618			31,306			52,326			411			9,030			6,991			135,976
Balance at December 31, 2021																																Balance at December 31, 2021	$	9,187		$	1,512		$	26,268		$	1,031		$	21,638		$	46,312		$	170		$	16,746		$	3,593		$	126,457

Provision for (recovery of) credit losses	Provision for (recovery of) credit losses	(8,572)			16,803			75,109			766			5,205			31,735			(173)			26,527			6,049			153,449			Provision for (recovery of) credit losses	(256)			923			11,964			358			(2,145)			376			(30)			(2,801)			(943)			7,446
Charge-offs	Charge-offs	(31)			—			(552)			—			(187)			(2,933)			—			(16,561)			(6,720)			(26,984)			Charge-offs	—			—			(9,180)			—			(35)			(1,360)			—			(96)			—			(10,671)
Recoveries	Recoveries	45			2			82			—			92			3,012			—			449			—			3,682			Recoveries	26			—			620			—			319			661			—			585			—			2,211
Balance at June 30, 2020		$	10,694		$	21,049		$	84,437		$	3,384		$	36,416		$	84,140		$	238		$	19,445		$	6,320		$	266,123
Balance at March 31, 2022																																Balance at March 31, 2022	$	8,957		$	2,435		$	29,672		$	1,389		$	19,777		$	45,989		$	140		$	14,434		$	2,650		$	125,443

Net Charge-offs to Average Loans (1)	Net Charge-offs to Average Loans (1)																															Net Charge-offs to Average Loans (1)

Six Months Ended June 30, 2021		—		%	0.84		%	0.02		%	—		%	0.03		%	0.38		%	—		%	3.77		%	—		%	0.24		%
Six Months Ended June 30, 2020		—		%	—		%	0.02		%	—		%	0.01		%	—		%	—		%	5.07		%	2.09		%	0.20		%
Year Ended March 31, 2021																																Year Ended March 31, 2021	—		%	—		%	0.02		%	—		%	0.03		%	0.01		%	—		%	7.19		%	—		%	0.17		%
Year Ended March 31, 2022																																Year Ended March 31, 2022	—		%	—		%	0.80		%	—		%	(0.06)		%	0.05		%	—		%	(0.61)		%	—		%	0.15		%

(1) Annualized.

5851

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


		June 30, 2021				March 31, 2021				December 31, 2020			March 31, 2022								December 31, 2021
		Total		%(1)		Total		%(1)			Total			%(1)			Total		%(1)			Total		%(1)
Residential and other consumer	Residential and other consumer	$	11,909	30.9	%	$	15,843	28.1	%		$	18,719		26.6	%	Residential and other consumer	$	8,957	36.8	%		$	9,187	35.2	%

Multi-family	Multi-family	7,777		5.5	%	45,757		6.5	%		39,827			6.9	%	Multi-family	2,435		4.6	%		1,512		4.9	%
Non-owner occupied commercial real estate	Non-owner occupied commercial real estate	35,246		20.7	%	46,915		20.9	%		61,507			20.8	%	Non-owner occupied commercial real estate	29,672		18.3	%		26,268		18.4	%
Construction and land	Construction and land	1,099		1.0	%	2,467		1.2	%		3,284			1.2	%	Construction and land	1,389		0.8	%		1,031		0.7	%
CRE	CRE	44,122				95,139					104,618					CRE	33,496					28,811

Owner occupied commercial real estate	Owner occupied commercial real estate	24,899		8.6	%	24,445		8.3	%		28,797			8.4	%	Owner occupied commercial real estate	19,777		8.2	%		21,638		8.2	%
Commercial and industrial	Commercial and industrial	73,715		24.9	%	54,151		26.1	%		62,197			27.2	%	Commercial and industrial	45,989		24.5	%		46,312		25.8	%
Pinnacle	Pinnacle	211		4.6	%	213		4.7	%		304			4.6	%	Pinnacle	140		4.0	%		170		3.9	%
Bridge - franchise finance	Bridge - franchise finance	15,589		2.0	%	24,411		2.2	%		36,331			2.3	%	Bridge - franchise finance	14,434		1.3	%		16,746		1.4	%
Bridge - equipment finance	Bridge - equipment finance	5,197		1.8	%	6,732		2.0	%		6,357			2.0	%	Bridge - equipment finance	2,650		1.5	%		3,593		1.5	%
Commercial	Commercial	119,611				109,952					133,986					Commercial	82,990					88,459
		$	175,642	100.0	%	$	220,934	100.0	%		$	257,323		100.0	%		$	125,443	100.0	%		$	126,457	100.0	%

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

The following table presents the ACL as a percentage of loans at the dates indicated:


		June 30, 2021		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021

Residential and other consumer	Residential and other consumer	0.17	%	0.24	%	0.29	%	Residential and other consumer	0.10	%	0.11	%
Commercial:	Commercial:							Commercial:
Commercial real estate	Commercial real estate	0.71	%	1.43	%	1.52	%	Commercial real estate	0.61	%	0.51	%
Commercial and industrial	Commercial and industrial	1.28	%	0.98	%	1.07	%	Commercial and industrial	0.86	%	0.84	%
Pinnacle	Pinnacle	0.02	%	0.02	%	0.03	%	Pinnacle	0.01	%	0.02	%
Bridge - franchise finance	Bridge - franchise finance	3.37	%	4.65	%	6.61	%	Bridge - franchise finance	4.71	%	4.90	%
Bridge - equipment finance	Bridge - equipment finance	1.23	%	1.46	%	1.34	%	Bridge - equipment finance	0.78	%	1.00	%
Total commercial	Total commercial	1.04	%	1.22	%	1.36	%	Total commercial	0.79	%	0.76	%
		0.77	%	0.95	%	1.08	%		0.54	%	0.53	%

Significant offsetting factors contributing to the change in the ACL during the three months ended ~~June 30, 2021~~March 31, 2022 are depicted in the chart below (in millions):

Changes in the ACL during the three months ended ~~June 30, 2021~~

~~The decrease in the ACL from~~ March 31, 2021 to June 30, 2021 for the majority of portfolio sub-segments resulted largely from an improving economic forecast, improvement in borrower financial results as reflected in the reduction in criticized and classified loans, changes in portfolio composition including the decline in commercial loan balances, a reduction in certain qualitative loss factors and charge-offs.2022

The ACL for residential and other consumer loans decreased by $3.9 million during the quarter ended June 30, 2021, from 0.24% to 0.17% of loans. This decrease was primarily driven by improvements in the unemployment and HPI forecasts and the impact of loans that rolled off of deferral and resumed regular payments. In the aggregate, the ACL for the CRE portfolio sub-segment, including multi-family, non-owner occupied CRE and construction and land, ~~decreased~~increased by ~~$51.0~~$4.7 million during the quarter ended June 30, 2021, from 1.43% to 0.71% of loans. The ACL for multi-family loans decreased by $38.0 million. These decreases related primarily to improvement in the economic forecast, particularly the unemployment and commercial property forecasts and a decrease in criticized and classified loans. The ACL for commercial and industrial loans was impacted by an increase of ~~$27.2 million~~ ~~in the specific reserve related to one $69 million relationship,~~

~~The ACL for the Bridge franchise portfolio decreased by $8.8 million, primarily due to the decline in criticized and classified loans and the reduction in certain qualitative loss factors.~~

~~Changes in the ACL~~ during the three months ended March 31, ~~2021:~~

2022, from 0.51% to 0.61% of loans. The ~~decrease~~increase in the ACL for CRE was driven mainly by the increase in qualitative loss factors related to economic uncertainty, partially offset by net charge-offs.

The ACL for the commercial and industrial sub-segment, including owner-occupied commercial real estate, decreased by $2.2 million during the three months ended March 31, 2022. Significant factors contributing to the decrease included (i) the decline in criticized and classified loans; (ii) a decrease related to the impact of the economic forecast; and (iii) a decrease in specific reserves; partially offset by (iv) a decrease in estimated prepayment speeds; and (v) the increase in qualitative loss factors related to economic uncertainty. The ACL coverage ratio for these loans increased from ~~December 31, 2020~~0.84% to 0.86% during the three months ended March 31, 2021 ~~for~~despite the ~~majority~~decline in the ACL. This was driven by the decline in the amortized cost basis of ~~portfolio sub-segments resulted largely from an improving economic forecast. The decrease was primarily related to~~MWL and PPP loans, which carry nominal or no reserves, during the ~~pass rated portion of the portfolio.~~ quarter.

The ACL for ~~pass-rate~~the BFG franchise finance portfolio segment decreased by $2.3 million during the three months ended March 31, 2022, from 4.90% to 4.71% of loans. This decrease is primarily attributed to reduced levels of criticized and classified loans ~~including residential~~and improvements in the economic forecast.

The ACL for the BFG equipment finance portfolio segment decreased by $0.9 million during the three months ended March 31, 2022, from 1.00% to 0.78% of loans, ~~declined~~resulting primarily from risk rating upgrades, and to ~~$93 million~~a lesser extent, faster prepayment speed assumptions partially offset by an increase in qualitative factors related to economic uncertainty.

The estimate of the ACL at March 31, ~~2021 from $137 million at December 31, 2020.~~2022 was informed by economic scenarios published in March 2022, developments emerging after the scenarios were published, economic information provided by additional sources, information about borrower financial condition and collateral values and other relevant information. The economic forecast used in modeling the ACL ~~for non-pass rated loans increased to $128 million at~~as of March 31, ~~2021 from $120 million at December 31, 2020.~~

2022 was a third-party provided baseline forecast. Some of the assumptions and data points informing the reasonable and supportable economic forecast used in estimating the ACL at ~~June 30, 2021 were:~~March 31, 2022 included:

•~~National~~Labor market assumptions, which reflected national unemployment at ~~5.2%~~3.7% for the ~~third~~second quarter of ~~2021,~~2022, steadily declining to ~~4.5%~~normalized levels of full employment of 3.5% through the end of ~~2021,~~2022 and ~~declining to 3.5% by the end of 2022;~~3.4% throughout 2023;

•Annualized growth in GDP at ~~6.7%~~4.8% for the ~~third~~second quarter of ~~2021, increasing~~2022, normalizing to ~~6.8% by the end~~an average of ~~2021,~~3.4% and ~~3.1%~~3.2% for ~~2022;~~2022 and 2023;

•VIX trending at stabilized levels through the forecast horizon; and

•S&P 500 averaging near ~~4,000~~4,200 through the reasonable and supportable forecast period.

Additional variables and assumptions not explicitly stated, including but not limited to residential and commercial property forecasts, also contributed to the overall impact economic conditions and the economic forecast had on the ACL estimate. Furthermore, while the variables presented above are at the national level; many of the variables are regionalized at the market and submarket level in the models.

For additional information about the ACL, see Note 4 to the consolidated financial statements.

Deposits

Average balances and rates paid on deposits were as follows for the periods indicated (dollars in thousands):


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended March 31,
		2021				2020				2021				2020					2022				2021
		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid		Average Balance		Average Rate Paid			Average Balance		Average Rate Paid		Average Balance		Average Rate Paid
Demand deposits:	Demand deposits:																	Demand deposits:
Non-interest bearing	Non-interest bearing	$	8,163,879	—	%	$	5,313,009	—	%	$	7,829,422	—	%	$	4,840,781	—	%	Non-interest bearing	$	9,047,864	—	%	$	7,491,249	—	%
Interest bearing	Interest bearing	3,069,945		0.34	%	2,448,545		0.78	%	3,006,760		0.36	%	2,311,086		1.02	%	Interest bearing	3,078,037		0.18	%	2,942,874		0.38	%
Savings and money market	Savings and money market	13,541,237		0.36	%	10,450,310		0.67	%	13,169,195		0.36	%	10,431,256		1.06	%	Savings and money market	13,401,332		0.21	%	12,793,019		0.38	%
Time	Time	3,380,582		0.41	%	7,096,097		1.59	%	3,853,057		0.57	%	7,303,083		1.82	%	Time	3,319,585		0.44	%	4,330,781		0.70	%
		$	28,155,643	0.25	%	$	25,307,961	0.80	%	$	27,858,434	0.29	%	$	24,886,206	1.07	%		$	28,846,818	0.17	%	$	27,557,923	0.33	%

The estimated amount of uninsured deposits at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$20.4~~$19.8 billion and ~~$17.4~~$20.2 billion, respectively. Time deposit accounts with balances of $250,000 or more totaled ~~$863~~$420 million and ~~$1.1 billion~~$603 million at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The following table shows scheduled maturities of uninsured time deposits as of ~~June 30, 2021~~March 31, 2022 (in thousands):


Three months or less	$	~~226,201~~285,268
Over three through six months	~~187,105~~56,306
Over six through twelve months	~~476,914~~157,168
Over twelve months	~~19,313~~20,528
	$	~~909,533~~519,270

Borrowings

In addition to deposits, we utilize FHLB advances as a funding source; the advances provide us with additional flexibility in managing both term and cost of funding and in managing interest rate risk. FHLB advances are secured by qualifying residential first mortgage and commercial real estate loans, and MBS. The following table presents information about the contractual balance of outstanding FHLB advances as of ~~June 30, 2021~~March 31, 2022 (dollars in thousands):

Amount
Maturing in:
2021 - One month or less $ 655,000
2021 - Over one month 1,926,000
2024 100,000
Total contractual balance outstanding 2,681,000
Cumulative fair value hedging adjustments 505
Carrying Value $ 2,681,505


	Amount		Weighted Average Rate
Maturing in:
2022 - One month or less	$	2,560,000	0.32	%
2022 - Over one month	835,000		0.53	%




Total contractual balance outstanding	$	3,395,000

The table above reflects contractual maturities of outstanding advances and does not incorporate the impact that interest rate swaps designated as cash flow ~~and fair value~~ hedges have on the duration of borrowings.

6254

The table below presents information about outstanding interest rate swaps hedging the variability of interest cash flows on or the ~~fair value of~~ FHLB advances included in the table above, as of ~~June 30, 2021~~March 31, 2022 (dollars in thousands):


		Notional Amount		Weighted Average Rate			Notional Amount		Weighted Average Rate
Cash flow hedges maturing in:	Cash flow hedges maturing in:					Cash flow hedges maturing in:
2021		$	1,075,000	2.41	%
2022	2022	210,000		2.48	%	2022	$	125,000	2.61	%
2023	2023	255,000		2.35	%	2023	255,000		2.35	%
2024	2024	110,000		2.54	%	2024	285,000		2.02	%
2025	2025	175,000		2.39	%	2025	275,000		2.06	%
2026						2026	130,000		1.93	%
Thereafter	Thereafter	556,000		2.90	%	Thereafter	25,000		2.50	%
Cash flow hedges		2,381,000		2.53	%
Fair value hedges maturing in 2021		200,000
Total interest rate swaps designated as cash flow or fair value hedges		$	2,581,000
							$	1,095,000	2.17	%

See Note 6 to the consolidated financial statements for more information about derivative instruments.

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

June 30, 2021 December 31, 2020
Senior notes:
Principal amount of 4.875% senior notes maturing on November 17, 2025 $ 400,000 $ 400,000
Unamortized discount and debt issuance costs (3,792) (4,174)
396,208 395,826
Subordinated notes:
Principal amount of 5.125% subordinated notes maturing on June 11, 2030 300,000 300,000
Unamortized discount and debt issuance costs (5,650) (5,894)
294,350 294,106
Total notes 690,558 689,932
Finance leases 31,081 32,563
Notes and other borrowings $ 721,639 $ 722,495

~~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 June 30, 2021 and December 31, 2020, the Company and the Bank had capital levels that exceeded both the regulatory well-capitalized guidelines and all internal capital ratio targets.

~~The following table provides information regarding regulatory capital for the Company and the Bank as of June 30, 2021 (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 $ 3,139,889 8.81 %
N/A (1)
N/A (1)
$ 1,425,286 4.00 %
N/A (1)
N/A (1)
CET1 risk-based capital $ 3,139,889 13.52 % $ 1,509,810 6.50 % $ 1,045,253 4.50 % $ 1,625,949 7.00 %
Tier 1 risk-based capital $ 3,139,889 13.52 % $ 1,858,228 8.00 % $ 1,393,671 6.00 % $ 1,974,367 8.50 %
Total risk-based capital $ 3,576,478 15.40 % $ 2,322,785 10.00 % $ 1,858,228 8.00 % $ 2,438,924 10.50 %
BankUnited:
Tier 1 leverage $ 3,491,270 9.84 % $ 1,774,797 5.00 % $ 1,419,838 4.00 % N/A N/A
CET1 risk-based capital $ 3,491,270 15.11 % $ 1,501,907 6.50 % $ 1,039,782 4.50 % $ 1,617,438 7.00 %
Tier 1 risk-based capital $ 3,491,270 15.11 % $ 1,848,501 8.00 % $ 1,386,376 6.00 % $ 1,964,032 8.50 %
Total risk-based capital $ 3,627,858 15.70 % $ 2,310,626 10.00 % $ 1,848,501 8.00 % $ 2,426,157 10.50 %

~~(1) There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.~~

Upon adoption of ASU 2016-13 on January 1, 2020, the Company elected the option to temporarily delay the effects of CECL on regulatory capital for two years, followed by a three-year transition period.

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, we have enhanced our stress testing framework. We have increased both the frequency of stress testing, which is performed at least quarterly, and the spectrum of scenarios utilized. One exercise we completed was to stress our December 31, 2020 loan portfolio using the 2021 DFAST severely adverse scenario. The results of this stress test projected regulatory capital ratios in excess of all well capitalized thresholds in the stress scenario.

We have an active shelf registration statement on file with the SEC that allows the Company to periodically offer and sell in one or more offerings, individually or in any combination, our common stock, preferred stock and other non-equity securities. The shelf registration provides us with flexibility in issuing capital instruments and enables us to more readily access the capital markets as needed to pursue future growth opportunities and to ensure continued compliance with regulatory capital requirements. Our ability to issue securities pursuant to the shelf registration is subject to market conditions. The Company demonstrated its ability to access the capital markets in a period of stress with its June 2020 subordinated debt issuance.


	March 31, 2022		December 31, 2021
Senior notes:
Principal amount of 4.875% senior notes maturing on November 17, 2025	$	400,000	$	400,000
Unamortized discount and debt issuance costs	(3,200)		(3,400)
	396,800		396,600
Subordinated notes:
Principal amount of 5.125% subordinated notes maturing on June 11, 2030	300,000		300,000
Unamortized discount and debt issuance costs	(5,273)		(5,400)
	294,727		294,600
Total notes	691,527		691,200
Finance leases	29,764		30,216
Notes and other borrowings	$	721,291	$	721,416

Liquidity and Capital Resources

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. FRB discount window borrowings provide an additional source of contingent liquidity. For the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ net cash provided by operating activities was ~~$578~~$457 million and ~~$321~~$386 million, respectively.

Available liquidity includes cash, borrowing capacity at the Federal Home Loan Bank of Atlanta and the Federal Reserve Discount Window, Federal Funds lines of credit and unpledged agency securities. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Bank's amortizing securities and loan portfolios, and the sale of investment securities. Management also has the ability to exert substantial control over the rate and timing of loan production, and resultant requirements for liquidity to fund new loans. ~~Since the onset of the COVID-19 pandemic, we have not experienced unusual deposit outflows or volatility; we have, in fact experienced growth in deposits and in on-balance sheet liquidity.~~

The ~~ALCO~~ALM policy establishes limits or operating thresholds and guidelines for a number of measures of liquidity which are typically monitored monthly by the ALCO and quarterly by the Board of Directors. ~~These~~The primary measures ~~include but~~used to dimension liquidity risk are ~~not limited to~~ the

ratio of available liquidity to volatile liabilities and a liquidity stress test coverage ~~ratio,~~ratio. Other measures employed to monitor and manage liquidity include but are not limited to a 30-day total liquidity ratio, a one-year liquidity ratio, a wholesale funding ratio, concentrations of large deposits, a measure of on-balance sheet available liquidity, the ratio of FHLB advances to total assets and the ratio of non-interest bearing deposits to total deposits, which is reflective of the quality and cost, rather than the quantity, of available liquidity. At ~~June 30, 2021,~~March 31, 2022, BankUnited was ~~operating within acceptable thresholds and~~in compliance with the limits as prescribed by the ~~ALCO~~ALM policy.

The ~~ALCO~~ALM policy stipulates that BankUnited’s liquidity is co~~nsidered~~ within policy limits ~~or thresholds~~ if the available liquidity/volatile liabilities ratio ~~30-day total~~and liquidity ~~ratio and one-year liquidity~~stress test ratios exceed 100%. At ~~June 30, 2021,~~March 31, 2022, BankUnited’s available liquidity/volatile liabilities ratio was ~~301%, the 30-day total liquidity ratio was 270% .and the~~ ~~one-year liquidity ratio was 424%. The ALCO policy also prescribes that~~309% and the liquidity stress test ~~coverage ratio exceed 100%; at June 30, 2021, that~~ ratio was ~~219%~~188%. The Company 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.

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 its own securities portfolio. There are regulatory limitations that may affect the ability of the Bank to pay dividends to BankUnited, Inc. Management believes that such limitations will not impact our ability to meet our ongoing near-term cash obligations.

We expect that our liquidity needs and cash requirements will continue to be satisfied over the next 12twelve months through the sources of funds described above.

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 March 31, 2022 and December 31, 2021, the Company and the Bank had capital levels that exceeded both the regulatory well-capitalized guidelines and all internal capital ratio targets.

The following table provides information regarding regulatory capital for the Company and the Bank as of March 31, 2022 (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	$	2,954,166	8.29	%	N/A (1)		N/A (1)		$	1,426,167	4.00	%	N/A (1)		N/A (1)
CET1 risk-based capital	$	2,954,166	12.53	%	$	1,532,351	6.50	%	$	1,060,859	4.50	%	$	1,650,225	7.00	%
Tier 1 risk-based capital	$	2,954,166	12.53	%	$	1,885,971	8.00	%	$	1,414,478	6.00	%	$	2,003,844	8.50	%
Total risk-based capital	$	3,360,452	14.25	%	$	2,357,464	10.00	%	$	1,885,971	8.00	%	$	2,475,337	10.50	%
BankUnited:
Tier 1 leverage	$	3,404,598	9.58	%	$	1,776,518	5.00	%	$	1,421,214	4.00	%	N/A		N/A
CET1 risk-based capital	$	3,404,598	14.52��	%	$	1,523,624	6.50	%	$	1,054,816	4.50	%	$	1,640,826	7.00	%
Tier 1 risk-based capital	$	3,404,598	14.52	%	$	1,875,229	8.00	%	$	1,406,422	6.00	%	$	1,992,431	8.50	%
Total risk-based capital	$	3,510,884	14.98	%	$	2,344,037	10.00	%	$	1,875,229	8.00	%	$	2,461,238	10.50	%

(1) There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.

We believe we are well positioned, from a capital perspective, to withstand a severe downturn in the economy. We continue to evolve our stress testing framework and adapt it to evolving macro-economic conditions as necessary. The majority of our commercial portfolio is subject to quarterly stress test analysis. On an annual basis, we also run a rigorous stress test of our entire balance sheet and, where applicable, we incorporate considerations for evolving macro-economic themes.

Interest Rate Risk

A principal component of the Company’s risk of loss arising from adverse changes in the fair value of financial instruments, or market risk, is interest rate risk, including the risk that assets and liabilities with similar re-pricing characteristics may not reprice at the same time or to the same degree. A primary objective of the Company’s asset/liability management

activities is to maximize net interest income, while maintaining acceptable levels of interest rate risk. The ALCO is responsible for establishing policies to ~~limit~~manage exposure to interest rate risk, and to ensure procedures are established to monitor compliance with these policies. The ~~thresholds~~policies established by the ALCO are approved at least annually by the Board of Directors or its Risk Committee.

Management believes that the simulation of net interest income in different interest rate environments provides the most meaningful measure of interest rate risk. Income simulation analysis is designed to capture not only the potential of all assets and liabilities to mature or reprice, but also the probability that they will do so. Income simulation also attends to the relative interest rate sensitivities of these items, and projects their behavior over an extended period of time. Finally, income simulation permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also of proposed strategies for responding to them.

The income simulation model analyzes interest rate sensitivity by projecting net interest income over twelve and twenty-four month periods in a most likely rate scenario based on consensus forward interest rate curves versus net interest income in alternative rate scenarios. Management continually reviews and refines its interest rate risk management process in response to changes in the interest rate environment, the economic climate and observed customer behavior. Currently, our interest rate risk policy framework is based on modeling instantaneous rate shocks of plus and minus 100, 200, 300 and 400 basis point shifts. We also model a variety of yield curve slope and dynamic balance sheet 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~~following table presents the impact on forecasted net interest income ~~sensitivity will be considered acceptable if decreases~~compared to a "most likely" scenario in ~~forecast net interest income in specified~~ parallel rate shock scenarios ~~generally by policy~~of plus ~~and minus~~ 100, 200, 300 and 400 basis points ~~are within specified percentages of forecast net interest income in~~at March 31, 2022 and December 31, 2021, as well as a minus 100 basis points scenario at March 31, 2022. At March 31, 2022, the most likely rate scenario ~~over the next twelve months~~incorporated a bear flattening yield curve and ~~in the second year. At June 30, 2021, the most likely rate scenario assumed that~~floored all indices ~~are floored~~ at 0%. We did not apply the falling rate ~~scenarios~~scenario at ~~June 30,~~December 31, 2021 due to the low ~~level of current~~prevailing interest ~~rates. The following table illustrates the thresholds set forth in the ALCO policy and the impact on forecasted net interest income in the indicated simulated scenarios~~rate environment at ~~June 30, 2021 and December 31, 2020:~~that time.


		Down 100		Plus 100		Plus 200		Plus 300		Plus 400			Down 100		Plus 100		Plus 200		Plus 300		Plus 400
Policy Thresholds:

Model Results at March 31, 2022 - increase (decrease)												Model Results at March 31, 2022 - increase (decrease)
In year 1	In year 1	(6.0)	%	(6.0)	%	(10.0)	%	(14.0)	%	(18.0)	%	In year 1	(6.3)	%	2.6	%	5.3	%	7.0	%	9.2	%
In year 2	In year 2	(9.0)	%	(9.0)	%	(13.0)	%	(17.0)	%	(21.0)	%	In year 2	(6.3)	%	5.7	%	10.0	%	16.7	%	23.6	%
Model Results at June 30, 2021 - increase:
Model Results at December 31, 2021 - increase												Model Results at December 31, 2021 - increase
In year 1	In year 1	N/A		3.5	%	5.5	%	6.2	%	6.0	%	In year 1	N/A		2.5	%	3.9	%	4.3	%	4.2	%
In year 2	In year 2	N/A		7.8	%	13.3	%	17.8	%	21.5	%	In year 2	N/A		6.6	%	11.5	%	15.8	%	20.4	%
Model Results at December 31, 2020 - increase:
In year 1		N/A		2.9	%	3.9	%	3.2	%	1.9	%
In year 2		N/A		5.0	%	7.8	%	9.0	%	9.5	%

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 eight rate scenarios, derived by implementing immediate parallel movements of plus and down 100, 200, 300 and 400 basis points from current rates. We did not simulate decreases in interest rates at June 30, 2021 due to the currently low level of market interest rates. The following table illustrates ~~the acceptable thresholds as established by ALCO and~~ the modeled change in EVE in the indicated scenarios at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:

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 June 30, 2021 - increase (decrease): N/A 2.1 % 1.3 % 0.1 % (1.5) %
Model Results at December 31, 2020 - increase (decrease): N/A 0.8 % (2.0) % (6.1) % (10.0) %

~~These measures fall within an acceptable level of interest rate risk per the thresholds established in the ALCO policy.~~


	Down 100		Plus 100		Plus 200		Plus 300		Plus 400

Model Results at March 31, 2022 - decrease:	(1.3)	%	(0.5)	%	(2.2)	%	(4.3)	%	(6.3)	%
Model Results at December 31, 2021 - increase (decrease):	N/A		0.4	%	(1.0)	%	(3.2)	%	(5.0)	%

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 and caps designated as cash flow or fair value hedging instruments are one of the tools we use to manage interest rate risk. These derivative instruments are used to mitigate exposure to changes in interest cash flows on variable rate ~~borrowings~~liabilities and to changes in the fair value of fixed rate ~~borrowings,~~financial instruments, in each case caused by fluctuations in benchmark interest rates, as well as to manage duration of liabilities. The fair value of derivative instruments designated as hedges is included in other assets and other liabilities in our consolidated balance 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 ~~June 30, 2021,~~March 31, 2022, outstanding interest rate swaps and caps designated as cash flow hedges had an aggregate notional amount of ~~$2.5~~$1.2 billion and outstanding interest rate swaps designated as fair value hedges had an aggregate notional amount of ~~$200~~$100 million. At June 30, 2021, the aggregate fair value of interest rate swaps and caps designated as cash flow hedges included in other assets and other liabilities was $1.3 million and $4.5 million, respectively.

Interest rate swaps and caps not designated as hedges had an aggregate notional amount of $3.4 billion at ~~June 30, 2021. The aggregate fair value of these interest rate swaps and caps included in other assets was $78.4 million and the aggregate fair value included in other liabilities was $27.6 million.~~March 31, 2022. 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 6 to the consolidated financial statements for additional information about derivative financial instruments.

~~Off-Balance Sheet Arrangements~~LIBOR Transition

~~For more~~The Company has implemented and is in the process of executing a detailed plan to facilitate the transition from LIBOR to alternative reference rates, with SOFR being the preferred alternative to LIBOR. A discussion of the Company's LIBOR transition plan and activities appears in the "LIBOR Transition" section in the MD&A of the Company's 2021 Annual report on Form 10-K.

The following table presents information about the Company's exposure to instruments that reference LIBOR as of March 31, 2022 (in thousands):


	Maturing
	Prior to June 30, 2023		After June 30, 2023		Total
Investment securities	$	—	$	4,534,460	$	4,534,460

Loans	1,344,156		6,165,101		7,509,257

Interest rate derivative contracts (1)	437,000		3,779,000		4,216,000
	$	1,781,156	$	14,478,561	$	16,259,717

(1)Represents notional amount.

Impact of the COVID-19 Pandemic

A detailed discussion of the effects the COVID-19 pandemic had during 2021 on ~~contractual obligations~~our Company appears in the "Impact of the COVID-19 Pandemic and ~~commitments, see Note 10~~Our Response" section in the MD&A of the Company's 2021 Annual report on Form 10-K.

2021 and the first quarter of 2022 were characterized broadly by economic recovery as the U.S. economy emerged from the COVID-19 pandemic, evidenced by improving economic indicators such as GDP growth, unemployment and property valuations. The actual and expected impact of the pandemic on our financial condition and results of operations are expected to continue to lessen, although we are still closely monitoring emerging developments. Levels of criticized and classified assets remain elevated at March 31, 2022, when compared to pre-pandemic levels although they continue to trend downward. The ACL at March 31, 2022 still included certain qualitative loss factors related to the ~~consolidated financial statements~~COVID-19 pandemic, and we continue to monitor the potential impact on expected credit losses of developments related to the pandemic. The composition of the balance sheet at March 31, 2022 and corresponding levels of net interest income reflect the opportunity cost of the decline in commercial loans and the ~~Borrowings section~~increase in residential loans and securities that occurred over the course of ~~this Management's Discussion~~the pandemic. Historically, commercial loans have generally tended to be higher yielding assets than residential loans and ~~Analysis.~~securities. During the first quarter of 2022, we welcomed our employees back to the office, adopting a hybrid work model for most non-branch employees. This model will likely continue to evolve over the near to medium term.

Non-GAAP Financial Measures

PPNR is a non-GAAP financial measure. Management believes this measure is relevant to understanding the performance of the Company attributable to elements other than the provision for credit losses and the ability of the Company to generate earnings sufficient to cover estimated credit losses, particularly in view of the volatility of the provision for credit losses resulting from the COVID-19 pandemic. This measure also provides a meaningful basis for comparison to other financial institutions since it is commonly employed and is a measure frequently cited by investors and analysts. The following table reconciles the non-GAAP financial measurement of PPNR to the comparable GAAP financial measurement of income before income taxes for the periods indicated (in thousands):

Three Months Ended June 30, Three Months Ended March 31, Three Months Ended June 30, Six Months Ended June 30,
2021 2021 2020 2021 2020
Income before income taxes (GAAP) $ 140,150 $ 131,304 $ 96,904 $ 271,454 $ 56,482
Plus: Provision for (recovery of) credit losses (27,534) (27,989) 25,414 (55,523) 150,842
PPNR (non-GAAP) $ 112,616 $ 103,315 $ 122,318 $ 215,931 $ 207,324

Tangible book value per common share is a non-GAAP financial measure. Management believes this measure is relevant to understanding the capital position and performance of the Company. Disclosure of this non-GAAP financial measure also provides a meaningful basis for comparison to other financial institutions as it is a metric commonly used in the banking industry. The following table reconciles the non-GAAP financial measurement of tangible book value per common share to the comparable GAAP financial measurement of book value per common share at the dates indicated (in thousands except share and per share data):

June 30, 2021 December 31, 2020
Total stockholders’ equity $ 3,161,543 $ 2,983,012
Less: goodwill and other intangible assets 77,637 77,637
Tangible stockholders’ equity $ 3,083,906 $ 2,905,375

Common shares issued and outstanding 93,238,553 93,067,500

Book value per common share $ 33.91 $ 32.05

Tangible book value per common share $ 33.08 $ 31.22


	March 31, 2022
Total stockholders’ equity	$	2,861,232
Less: goodwill and other intangible assets	77,637
Tangible stockholders’ equity	$	2,783,595

Common shares issued and outstanding	84,052,021

Book value per common share	$	34.04

Tangible book value per common share	$	33.12

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See the section entitled “Interest Rate Risk” included in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective.

During the quarter ended ~~June 30, 2021,~~March 31, 2022, there were no changes in the Company's internal control over financial reporting, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. We have focused on insuring that our technology systems and internal controls continue to operate effectively in a remote or hybrid work environment and have not identified any instances in which our control environment has failed to operate effectively. We are continually monitoring and assessing any impact of 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.

Item 1A. Risk Factors

~~There~~Geopolitical factors such as the conflict between Russia and Ukraine or similar events could negatively impact our business and results of operations.

We are monitoring the impact of the conflict between Russia and Ukraine on our business. While we do not currently expect that the conflict will have ~~been no~~a direct material ~~changes in~~impact on our business, financial condition or results of operations, collateral effects of the ~~risk factors disclosed by~~geopolitical instability, such as the ~~Company in its 2020 Annual Report on Form 10-K filed with~~imposition of sanctions against Russia and Russia’s response to such sanctions, including retaliatory acts like cyber-attacks and sanctions against other countries, or escalation or further spread of the ~~Securities and Exchange Commission on February 26, 2021.~~conflict could adversely affect the global economy or domestic markets, including ours.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~


	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)(3)
January 1 - January 31, 2022	626,670	$	41.85	626,670	$	272,136
February 1 - February 28, 2022	343,760	$	43.33	343,760	$	135,378,688
March 1 - March 31, 2022	961,473	$	42.62	961,473	$	94,396,137
Total	1,931,903	$	42.50	1,931,903

(1) The total number of shares purchased during the periods indicated includes shares purchased as part of a publicly announced program.

(2) On February 2, 2022, the Company's Board of Directors authorized the repurchase of up to $150 million in shares of its outstanding common stock. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued without prior notice at any time. The authorization does not require the Company to acquire any specified number of common shares.

(3) On May 2, 2022, the Company's Board of Directors authorized the repurchase of up to an additional $150 million in shares of its outstanding common stock. No time limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued without prior notice at any time. The authorization does not require the Company to acquire any specified number of common shares. The shares yet to be purchased under this authorization are not reflected in the table above.

6860

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 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

6961

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 ~~3rd~~4th day of ~~August 2021.~~ May 2022.


			/s/ Rajinder P. Singh
			Rajinder P. Singh
			Chairman, President and Chief Executive Officer


			/s/ Leslie N. Lunak
			Leslie N. Lunak
			Chief Financial Officer

7062


		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	3431

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	6959

ITEM 4.	Controls and Procedures	6959

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings	7059

ITEM 1A.	Risk Factors	7059

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7060

ITEM 6.	Exhibits	7161

SIGNATURES		7262


	Number of Share Awards	Weighted Average Grant Date Fair Value
Unvested share awards outstanding, December 31, 2020	1,161,835	$	33.32
Granted	559,180	42.17
Vested	(460,269)	34.01
Canceled or forfeited	(48,684)	35.19
Unvested share awards outstanding, June 30, 2021	1,212,062	$	37.07

Unvested share awards outstanding, December 31, 2019	1,050,455	$	38.24
Granted	644,300	29.73
Vested	(455,260)	39.15
Canceled or forfeited	(33,137)	36.21
Unvested share awards outstanding, June 30, 2020	1,206,358	$	33.41


	RSU	PSU
Unvested executive share-based awards outstanding, December 31, 2020	156,555	179,793
Granted	63,814	63,814

Unvested executive share-based awards outstanding, June 30, 2021	220,369	243,607

Unvested executive share-based awards outstanding, December 31, 2019	112,116	125,088
Granted	106,731	106,731

Unvested executive share-based awards outstanding, June 30, 2020	218,847	231,819


	Number of Option Awards	Weighted Average Exercise Price
Option awards outstanding, December 31, 2020	1,569	$	15.94
Exercised	(1,569)	15.94

Option awards outstanding and exercisable, June 30, 2021	0	$	0

Option awards outstanding, December 31, 2019	737,753	$	26.64
Exercised	(60,000)	25.48

Option awards outstanding, June 30, 2020	677,753	$	26.74


	June 30, 2021						Fees Recognized On Forgiveness
	UPB		Deferred Origination Fees		Amortized Cost		Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
First Draw Program	$	210,293	$	(1,079)	$	209,214	$	4,512	$	7,082
Second Draw Program	291,473		(8,727)		282,746		—		—
	$	501,766	$	(9,806)	$	491,960	$	4,512	$	7,082


	Under Short Term Deferral or CARES Act Modification at June 30, 2021		% of Portfolio Segment at June 30, 2021		Under Short Term Deferral or CARES Act Modification at March 31, 2021		Loans That Have Rolled Off of Short-Term Deferral or CARES Act Modification
CRE by Property Type:
Retail	$	15,871	1	%	$	36,615	$	2,636
Hotel	225,436		42	%	343,354		118,119
Office	44,860		2	%	56,542		—
Multifamily	13,872		1	%	24,014		10,142

Total CRE	300,039		5	%	460,525		130,897
C&I by Industry
Accommodation and Food Services	31,073		12	%	24,884		—
Retail Trade	32,371		11	%	33,644		1,274
Finance and Insurance	16,854		2	%	18,244		1,390
Other	31,994		3	%	80,168		59,734
Total C&I	112,292		2	%	156,940		62,398
Bridge - franchise finance	25,647		6	%	38,182		24,813

Total Commercial	$	437,978	3	%	$	655,647	$	218,108


			Loans That Have Rolled Off of Short-Term Deferral or CARES Act Modification
Loans Still Under Short-Term Deferral or CARES Act Modification			Paid Off or Paying as Agreed			Not Resumed Regular Payments
Balance		% of Loans Initially Granted Short-Term Deferral(1)	Balance		% of Loans Rolled Off Short-Term Deferral	Balance		% of Loans Rolled Off Short-Term Deferral
$	58,719	1%	$	438,903	93%	$	33,959	7%


	Amount
Maturing in:
2021 - One month or less	$	655,000
2021 - Over one month	1,926,000


2024	100,000

Total contractual balance outstanding	2,681,000
Cumulative fair value hedging adjustments	505
Carrying Value	$	2,681,505