BankUnited, Inc. (BKU) FY 2024 MD&A

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

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

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

Our Vision and Strategic Priorities

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

•Grow core customer relationships on both sides of the balance sheet;

•Continue to improve the funding profile - growth in core deposit relationships is paramount:

◦Grow NIDDA as a percentage of total deposits

◦Pay down high-cost wholesale borrowings;

•Improve the asset mix, transitioning to a mix of assets with higher risk-adjusted returns:

◦As lower-yielding residential mortgages amortize and pay off, replace them with higher yielding core C&I and CRE loans within established risk parameters

◦Continue to de-emphasize the BFG and Pinnacle portfolios;

•Play where we can win, focusing on sectors where our delivery model is a differentiator;

•Innovate with solutions that solve customer pain points;

•Invest in organic growth capabilities - people, processes, products and technology - while managing expense growth;

•Prioritize nimble technology architecture and digital capabilities;

•Retain the ability to pivot nimbly when opportunities arise;

•Maintain robust liquidity and capital levels;

•Continue to closely monitor and manage credit;

•While our primary growth strategy is organic, we will continue to monitor the M&A landscape.

Macro-Environmental Considerations

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

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those events, however, the impacts of those events and a volatile interest rate environment on bank balance sheets and margins, including those of BankUnited, are still evident and have influenced our Company's strategic priorities.

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

•The funding mix improved considerably for the year ended December 31, 2024:

◦NIDDA grew by $781 million to 27% of total deposits.

◦Non-brokered deposits grew by $1.4 billion and total deposits grew by $1.3 billion.

◦Wholesale funding, including FHLB advances and brokered deposits, declined by $2.3 billion.

•The asset mix also improved in 2024:

◦The core CRE and C&I loan segments grew by $470 million and mortgage warehouse grew by $153 million. The pace of C&I growth over the course of 2024 was impacted by an increased level of payoffs and rationalization of non-relationship credits.

◦The residential, franchise, equipment and municipal finance portfolios declined by a combined $959 million.

•Primarily due to those balance sheet compositional changes, for the year ended December 31, 2024, the net interest margin, calculated on a tax-equivalent basis, improved to 2.73% from 2.56% for the year ended December 31, 2023.

•Capital and liquidity were robust:

◦Consolidated CET1 capital was 12.0% and pro-forma CET1, including accumulated other comprehensive income, was 10.9% at December 31, 2024.

◦Total same day available liquidity was $15.5 billion at December 31, 2024.

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

•Execution of our strategic objectives is highly dependent on our ability to grow core client relationships. Competition for deposits and loans in our markets is intense with respect to the variety and quality of products and services offered, delivery channels, service levels and pricing. The economic health of our primary markets, monetary and fiscal policy, our ability to attract and retain talent and our ability to deliver technology and product solutions will impact execution of these objectives.

•The future trajectories of the macro-economy, interest rates, and monetary and fiscal policy are uncertain. Additionally, with a new administration in place, there is uncertainty around the impact of a variety of potential policy and regulatory changes. The impact of these macro factors on our customers and prospective customers also impacts us. If macro conditions are less supportive than we currently anticipate, we may be less successful in executing our strategic priorities.

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

2024 Performance Highlights:

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

Highlights include:

◦Net income for the year ended December 31, 2024, was $232.5 million, or $3.08 per diluted share, compared to $178.7 million, or $2.38 per diluted share for the year ended December 31, 2023.Results for the year ended December 31, 2023 were negatively impacted by a $35.4 million FDIC special assessment, pre-tax. This item reduced net income by $26.2 million and EPS by $0.35 for the year ended December 31, 2023.

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◦ROAA improved to 0.66% for the year ended December 31, 2024 from 0.49% for the year ended December 31, 2023; ROAE improved to 8.49% from 7.01%.

◦The net interest margin, calculated on a tax-equivalent basis, expanded by 0.17%, to 2.73% for the year ended December 31, 2024 from 2.56% for the year ended December 31, 2023. The increase in the net interest margin was primarily a result of balance sheet repositioning, particularly an improved funding mix. The following chart provides a comparison of net interest margin, the average yield on interest earning assets and the average rate paid on interest bearing liabilities for the years ended December 31, 2024 and 2023 (on tax equivalent basis):

◦Consistent with industry trends, higher prevailing interest rates and restrictive monetary policy, the average cost of total deposits increased by 0.46% to 3.01% for the year ended December 31, 2024, from 2.55% for the year ended December 31, 2023, although the average cost of deposits has declined over the latter half of the year. The spot APY of total deposits declined to 2.63% at December 31, 2024 from 3.18% at December 31, 2023, reflecting the declines in the fed funds rate in the latter half of the year and an improved deposit mix.

◦The following charts illustrate the composition of deposits at the dates indicated:

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◦NIDDA grew by 11%, or $781 million during the year ended December 31, 2024. Total deposits grew by $1.3 billion and non-brokered deposits grew by $1.4 billion. Average NIDDA increased by $148 million for the year ended December 31, 2024.

◦Loan portfolio composition shifted from residential to core commercial categories during the year ended December 31, 2024. Residential, franchise, equipment and municipal finance portfolios declined by a combined $959 million while the core C&I and CRE categories grew by $470 million for the year ended December 31, 2024, all reflective of our balance sheet repositioning strategy.

◦The loan to deposit ratio declined to 87.2% at December 31, 2024, from 92.8% at December 31, 2023.

◦The net charge-off ratio for the year ended December 31, 2024, was 0.16%, a level we consider to be relatively low. The NPA ratio at December 31, 2024 was 0.73%, including 0.10% related to the guaranteed portion of non-performing SBA loans.

◦The ratio of the ACL to total loans increased to 0.92% at December 31, 2024, from 0.82% at December 31, 2023. The ACL to loans ratio for commercial portfolio sub-segments including C&I, CRE, franchise finance and equipment finance was 1.37% at December 31, 2024 and the ACL to loans ratio for CRE office loans was 2.30%.

◦At December 31, 2024, CET1 was 12.0% and pro-forma CET1, including accumulated other comprehensive income, was 10.9%. The ratio of tangible common equity/tangible assets increased to 7.8%. The charts below present the Company's and the Bank's regulatory capital ratios at the dates indicated:

BankUnited, Inc.

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BankUnited, N.A.

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

Critical Accounting Policies and Estimates

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

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

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

ACL

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

•our evaluation of current conditions;

•our determination of a reasonable and supportable economic forecast or weighting of various forecast paths and selection of the reasonable and supportable forecast period;

•our evaluation of historical loss experience and selection of historical loss data used in formulating our ACL estimate; since we have limited company specific historical loss data, our modeling techniques also leverage broad external data sets for this purpose;

•our evaluation of changes in composition and characteristics of the loan portfolio, including internal risk ratings;

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•our estimate of expected prepayments;

•the value of underlying collateral, which may impact loss severity and certain cash flow assumptions for collateral-dependent, criticized and classified loans; in the current environment, especially with respect to certain commercial real estate sectors like office, current and projected collateral values may be particularly challenging to estimate;

•our selection and evaluation of qualitative factors; and

•our estimate of expected cash flows on AFS debt securities in unrealized loss positions.

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

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

Recent Accounting Pronouncements

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

Results of Operations

Net Interest Income

Net interest income is the difference between interest earned on interest earning assets and interest incurred on interest bearing liabilities and is the primary driver of core earnings. Net interest income is impacted by the mix of interest earning assets and interest bearing liabilities, the ratio of interest earning assets to total assets and of interest bearing liabilities to total funding sources, movements in market interest rates and monetary policy, the shape of the yield curve, levels of non-performing assets and pricing pressure from competitors.

The mix of interest earning assets is influenced by loan demand, market and competitive conditions in our primary lending markets, by management's continual assessment of the rate of return and relative risk associated with various classes of earning assets and liquidity considerations. The mix of funding sources is influenced by the Company's liquidity profile, management's assessment of the desire for lower cost funding sources weighed against relationships with customers, our ability to attract and retain core deposit relationships, competition for deposits in the Company's markets and the availability and pricing of other sources of funds.

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

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

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

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

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

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

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

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

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

•The tax-equivalent yield on loans increased to 5.78% for the year ended December 31, 2024, from 5.42% for the year ended December 31, 2023. This increase reflected the origination of new loans at higher rates, paydowns of lower-rate loans and balance sheet repositioning.

•The tax-equivalent yield on investment securities increased to 5.53% for the year ended December 31, 2024, from 5.33% for the year ended December 31, 2023. This increase resulted primarily from the reset of coupon rates on variable rate securities, purchases of higher-yielding securities and paydowns and sales of lower-yielding securities.

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•The average cost of interest bearing deposits increased to 4.10% for the year ended December 31, 2024, from 3.52% for the year ended December 31, 2023. This increase primarily reflected the ongoing impact of higher prevailing market interest rates, which did not start to reverse until the latter part of 2024.

•The average rate paid on FHLB advances decreased to 4.15% for the year ended December 31, 2024, from 4.50% for the year ended December 31, 2023, primarily due to repayment of higher rate advances, partially offset by maturities of some cash flow hedges.

Provision for Credit Losses

The provision for credit losses is a charge or credit to earnings required to maintain the ACL at a level consistent with management’s estimate of expected credit losses on financial assets carried at amortized cost at the balance sheet date. The amount of the provision is impacted by changes in current economic conditions as well as in management's reasonable and supportable economic forecast, loan originations and runoff, changes in portfolio mix, risk rating migration and portfolio seasoning, changes in specific reserves, changes in expected prepayment speeds and other assumptions. The provision for credit losses also includes amounts related to off-balance sheet credit exposures and may include amounts related to accrued interest receivable and AFS debt securities.

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

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

The provision for credit losses may be volatile and the level of the ACL may change materially from current levels. Future levels of the ACL could be significantly impacted, in either direction, by changes in factors such as, but not limited to, economic conditions or the economic outlook, the composition of the loan portfolio, the financial condition of our borrowers and collateral values.

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

Non-Interest Income

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

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

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

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

Non-Interest Expense

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

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

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

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

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

Income Taxes

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

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

Analysis of Financial Condition

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

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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 (in thousands):

Our investment strategy is focused on ensuring adequate liquidity, maintaining a suitable balance of high credit quality, diverse assets, managing interest rate risk, and generating acceptable returns given our established risk parameters. We have sought to maintain liquidity by investing a significant portion of the portfolio in high quality liquid securities including U.S. Treasury and U.S. Government Agency and sponsored enterprise securities. We have also invested in highly-rated structured products, including private-label commercial and residential MBS, collateralized loan obligations, single family real estate-backed securities and non-mortgage asset-backed securities that, while somewhat less liquid, are generally pledgeable at either the FHLB or the FRB and provide us with attractive yields. Investment grade municipal securities provide liquidity and attractive tax-equivalent yields. We remain committed to keeping the duration of our securities portfolio short; relatively short effective portfolio duration helps mitigate interest rate risk. The estimated effective duration of the investment portfolio was 1.85 years and the estimated weighted average life of the portfolio was 5.6 years as of December 31, 2024. Approximately 69% of the securities portfolio is floating rate.

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

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

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

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

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

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

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

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

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

•Failure of the issuer to make scheduled payments;

•Changes in external credit ratings;

•Relevant market data; and

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

We regularly engage with bond managers to monitor trends in underlying collateral, including potential downgrades and subsequent cash flow diversions, liquidity, ratings migration, and any other relevant developments.

We do not intend to sell securities in significant unrealized loss positions at December 31, 2024. Based on an assessment of our liquidity position and internal and regulatory guidelines for permissible investments and concentrations, it is not more likely than not that we will be required to sell securities in significant unrealized loss positions prior to recovery of amortized cost basis, which may be at maturity. The substantial majority of our investment securities are eligible to be pledged at either the FHLB or FRB. We have not sold, and do not anticipate the need to sell, securities in unrealized loss positions to generate liquidity.

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

While we have seen an increase in stress scenario losses for some securities over the last year, the level of subordination continues to provide more than sufficient coverage of stress scenario collateral losses, further supporting our determination that none of our securities are credit loss impaired. The scenario used to project stress scenario losses is generally calibrated to the level of stress experienced in the Great Financial Crisis. For further discussion of our analysis of impaired investment securities AFS for credit loss impairment, see Note 3 to the consolidated financial statements.

We use third-party pricing services to assist us in estimating the fair value of investment securities. We perform a variety of procedures to ensure that we have a thorough understanding of the methodologies and assumptions used by the pricing services including obtaining and reviewing written documentation of the methods and assumptions employed, conducting interviews with valuation desk personnel, and reviewing model results and detailed assumptions used to value selected securities as considered necessary. Our classification of prices within the fair value hierarchy is based on an evaluation of the nature of the significant assumptions impacting the valuation of each type of security in the portfolio. Our primary pricing services utilize observable inputs when available, and employ unobservable inputs and proprietary models only when observable inputs are not available. As a matter of course, the services validate prices by comparison to recent trading activity whenever such activity exists. Quotes obtained from the pricing services are typically non-binding.

Quarterly, prices obtained from primary third-party pricing services are validated by obtaining prices from an additional external source for most securities in the portfolio. We have established a robust price challenge process that includes a review by our treasury front office of all prices provided on a quarterly basis. Prices evidencing unexpected quarter over quarter fluctuations, deviations from our expectations based on recent observed trading activity and other information available in the marketplace that would impact the value of the security or deviations of primary prices from those provided by secondary sources beyond established parameters are challenged. Responses to the price challenges, which generally include specific information about inputs and assumptions incorporated in the valuation and their sources, are reviewed in detail. If considered necessary to resolve any discrepancies, a price will be obtained from additional independent valuation sources. We do not typically adjust the prices provided, other than through this established challenge process.

The majority of our investment securities are classified within level 2 of the fair value hierarchy. U.S. Treasury securities and marketable equity securities are classified within level 1 of the hierarchy.

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

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The following table shows the weighted average prospective yields based on current rates, categorized by scheduled maturity, for AFS investment securities as of December 31, 2024. Scheduled maturities have been adjusted for anticipated prepayments when applicable. Yields on tax-exempt securities have been calculated on a tax-equivalent basis, based on a federal income tax rate of 21%:

Loans

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

Commercial loans and leases

Commercial loans include a diverse portfolio of commercial and industrial loans and lines of credit, loans secured by owner-occupied commercial real-estate, income-producing non-owner occupied commercial real estate, a smaller amount of construction loans, SBA loans, mortgage warehouse lines of credit, municipal loans and leases originated by Pinnacle and franchise and equipment finance loans and leases originated by Bridge.

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

Commercial Real Estate:

Commercial real estate loans include term loans secured by non-owner occupied income producing properties including rental apartments, industrial properties, retail shopping centers, free-standing single-tenant buildings, medical and other office buildings, warehouse facilities, hotels, and real estate secured lines of credit. The Company’s commercial real estate underwriting standards most often provide for loan terms of five to seven years, with amortization schedules of no more than thirty years. Overall CRE exposure is modest in comparison to peer banks as presented in the charts below:

(1)BKU information as of December 31, 2024

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

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

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

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

Geographic distribution in the tables above is based on location of the underlying collateral property. LTVs and DSCRs are based on the most recent available information; if current appraisals are not available, LTVs are adjusted by our models based on current and forecasted sub-market dynamics. DSCRs are calculated based on current contractually required payments, which in some cases may be interest only and on current levels of operating cash flows. DSCR calculations do not include pro-forma rental payments on in-place leases that are currently in initial rent abatement periods.

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

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

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

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

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

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

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

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

Commercial and Industrial

Commercial and industrial loans are typically made to small, middle market and larger corporate businesses and not-for-profit entities and include equipment loans, secured and unsecured working capital facilities, formula-based loans, subscription finance lines of credit, trade finance, SBA product offerings, business acquisition finance credit facilities, credit facilities to institutional real estate entities such as REITs and commercial real estate investment funds, and a small amount of commercial credit cards. These loans may be structured as term loans, typically with maturities of five to seven years, or revolving lines of credit which may have multi-year maturities. In addition to financing provided by Pinnacle, the Bank provides financing to state and local governmental entities generally within our primary geographic markets. The Bank makes loans secured by owner-occupied commercial real estate that typically have risk profiles more closely aligned with that of commercial and industrial loans than with other types of commercial real estate loans.

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

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

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

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

Residential mortgages

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

The 1-4 single family residential loan portfolio, excluding government insured residential loans, is primarily comprised of prime jumbo loans purchased through established correspondent channels. 1-4 single family residential mortgage loans are primarily closed-end, first lien jumbo mortgages for the purchase or re-finance of owner occupied property. The loans have terms ranging from 10 to 30 years, with either fixed or adjustable interest rates. At December 31, 2024, $963 million or 15% were secured by investor-owned properties.

The Company acquires non-performing FHA and VA insured mortgages from third party servicers who have exercised their right to purchase these loans out of GNMA securitizations upon default ("Buyout Loans"). Buyout Loans that re-perform, either through modification or self-cure, may be eligible for re-securitization. The Company and the servicer share in the economics of the sale of these loans into new securitizations. The balance of Buyout Loans totaled $1.0 billion at December 31, 2024. The Company is not the servicer of these loans.

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

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

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

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Loan Maturities

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

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

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

Operating lease equipment, net

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

Bridge had exposure to the energy industry of $109 million at December 31, 2024. The majority of the energy exposure was in the operating lease equipment portfolio where energy exposure totaled $103 million, consisting primarily of railcars serving the petroleum industry.

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Asset Quality

Commercial Loans

We have a robust credit risk management framework, an experienced team to lead the workout and recovery process for the commercial and commercial real estate portfolios and a dedicated internal credit review function. Loan performance is monitored by our credit administration, portfolio management and workout and recovery departments. Risk ratings are updated continuously; generally, commercial relationships with balances in excess of defined thresholds are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. The defined thresholds range from $2 million to $3 million. Homogenous groups of smaller balance commercial loans may be monitored collectively. The credit quality and risk rating of commercial loans as well as our underwriting and portfolio management practices are regularly reviewed by our internal independent credit review department.

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

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

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

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

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

(1)Excludes SBA

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

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

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

(1)Includes Pinnacle and franchise and equipment finance

Residential Loans

Excluding government insured loans, our residential portfolio consists largely of performing jumbo mortgage loans purchased through established correspondent channels with FICO scores above 720, full documentation, current LTVs of 80% or less and are primarily owner-occupied. Loans with LTVs higher than 80% may be extended to selected credit-worthy borrowers. We perform due diligence on the purchased loans for credit, compliance, counterparty, payment history and property valuation.

We have a dedicated residential credit risk management function, and the residential portfolio is monitored by our internal credit review function. Residential mortgage loans are not individually risk rated. Delinquency status is the primary measure we use to monitor the credit quality of these loans. We also consider original LTV and most recently available FICO score to be

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significant indicators of credit quality for the 1-4 single family residential portfolio, excluding government insured residential loans.

The following charts present information about the 1-4 single family residential portfolio, excluding government insured loans, by FICO distribution, LTV distribution and vintage at December 31, 2024:

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

Residential Delinquencies

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

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

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

Stress Testing Results

The majority of our commercial portfolio is subject to quarterly stress test analysis. We continually re-evaluate our stress testing framework and adapt it to evolving macro-economic conditions, as necessary. On an annual basis, we also run a rigorous stress test of our entire balance sheet incorporating the FRB's severely adverse CCAR scenario as well as additional idiosyncratic scenarios reflective of evolving macro-economic themes. The most recent stress test incorporating the FRB's CCAR severely adverse scenario was performed during the second quarter of 2024, based on the December 31, 2023 balance sheet.

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

Total Loan Portfolio Stress Test Results(1)

CRE Portfolio Stress Test Results(2)

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

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

Operating Lease Equipment, net

There were no operating leases internally risk rated substandard or worse at December 31, 2024. On a quarterly basis, management performs an impairment analysis on assets with indicators of potential impairment. Potential impairment indicators include evidence of changes in residual value, macro-economic conditions, an extended period of time off-lease, criticized or classified status, or management's intention to sell the asset at an amount potentially below its carrying value. There were no impairment charges recognized during the years ended December 31, 2024, 2023, and 2022.

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Non-Performing Assets

Non-performing assets generally consist of (i) non-accrual loans, (ii) accruing loans that are more than 90 days contractually past due as to interest or principal, excluding PCD loans for which management has a reasonable basis for an expectation about future cash flows and government insured residential loans, and (iii) OREO and other non-performing assets.

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

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

Contractually delinquent government insured residential loans are typically GNMA early Buyout Loans and are excluded from non-performing loans as defined in the table above due to their government guarantee. The carrying value of such loans contractually delinquent by 90 days or more was $226 million and $277 million at December 31, 2024 and 2023, respectively.

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

Net Charges-Offs to Average Loans

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

Commercial loans are placed on non-accrual status when (i) management has determined that full repayment of all contractual principal and interest is in doubt, or (ii) the loan is past due 90 days or more as to principal or interest unless the loan is well secured and in the process of collection. Residential loans, other than Buyout Loans, are generally placed on non-accrual status when they are 60 days past due. When a loan is placed on non-accrual status, uncollected interest accrued is reversed and charged to interest income. Commercial loans are returned to accrual status only after all past due principal and interest has been collected and full repayment of remaining contractual principal and interest is reasonably assured. Residential loans are generally returned to accrual status when less than 60 days past due. Past due status of loans is determined based on the contractual next payment due date. Loans less than 30 days past due are reported as current.

Loss Mitigation Strategies

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

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

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Analysis of the Allowance for Credit Losses

The ACL is management's estimate of the amount of expected credit losses over the life of the loan portfolio, or the amount of amortized cost basis not expected to be collected, at the balance sheet date. This estimate encompasses information about historical events, current conditions and reasonable and supportable economic forecasts. Determining the amount of the ACL is complex and requires extensive judgment by management about matters that are inherently uncertain. Given a level of continued uncertainty about the general economy, evolving dynamics in some segments of the commercial real estate market, particularly the office sector, the complexity of the ACL estimate and level of management judgment required, we believe it is possible that the ACL estimate could change, potentially materially, in future periods. If commercial real estate market dynamics in our primary markets worsen beyond our current expectations, the ACL and the provision for credit losses will increase in the future. Changes in the ACL may result from changes in current economic conditions including but not limited to unanticipated changes in interest rates or inflationary pressures, changes in our economic forecast, loan portfolio composition, commercial and residential real estate market dynamics and other circumstances not currently known to us that may impact the financial condition and operations of our borrowers, among other factors.

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

For the substantial majority of portfolio segments and subsegments, including residential loans other than government insured loans, and most commercial and commercial real estate loans, expected losses are estimated using a factor based methodology and econometric models.

A single economic scenario or a probability weighted blend of economic scenarios may be used. The models ingest numerous national, regional and MSA level variables and data points. At December 31, 2024 and 2023, we used a combination of weighted third-party provided economic scenarios in calculating the quantitative portion of the ACL. Each of these externally provided scenarios in fact represents the result of a probability weighting of thousands of individual scenario paths.

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

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

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

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

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

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

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

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

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

•The ACL for the CRE portfolio sub-segment increased by $29.1 million during the year ended December 31, 2024, from 0.71% to 1.13% of loans, the substantial majority related to the office portfolio. The most significant reasons for the increase in the ACL for this segment were risk rating migration, increases in specific reserves and qualitative loss factors, in part offset by net charge-offs.

•The ACL for the commercial and industrial sub-segment, including owner-occupied commercial real estate, decreased by $4.5 million during the year ended December 31, 2024, from 1.60% to 1.54% of loans. The most significant reasons for the decrease in the ACL for this segment were a reduction in criticized and classified loans and net charge-offs.

•The ACL for the franchise and equipment finance sub-segment decreased by $8.5 million during the year ended December 31, 2024, from 2.85% to 1.12% of loans; primarily due to a decline in loan balances, including the payoff of one larger non-performing loan.

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•The ACL for the residential and MWL segments increased by $4.4 million for the year ended December 31, 2024, mainly attributable to updated modeling assumptions for minimum levels of loss given default.

The estimate of the ACL at December 31, 2024, was informed by forecasted economic scenarios published in December 2024, a wide variety of additional economic data, information about borrower financial condition and collateral values, and other relevant information. The quantitative portion of the ACL at December 31, 2024, was modeled using a weighting of baseline, downside and upside third-party economic scenarios, with the highest weighting ascribed to the baseline scenario and lower weightings ascribed equally to the downside and upside scenarios.

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

•Labor market assumptions, which reflected national unemployment peaking at 4.2% and

•Annualized growth in national GDP troughing at 1.5%.

The above unemployment and GDP growth assumptions are provided to give a high level overview of the nature and severity of the baseline economic forecast scenario used in estimating the ACL. Numerous additional variables and assumptions not explicitly stated, including but not limited to detailed commercial and residential property forecasts, projected stock market volatility indices and a variety of additional assumptions about market interest rates and spreads also contributed to the overall impact economic conditions and the economic forecast had on the ACL estimate. Furthermore, while the variables presented above are at the national level, many of the economic variables are regionalized at the market and submarket level in the models.

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

Deposits

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

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

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

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

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

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

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

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

For additional information about Deposits, see Note 6 to the consolidated financial statements.

Borrowings

In addition to deposits, we utilize FHLB advances as a funding source; the advances provide us with additional flexibility in managing both term and cost of funding and in managing interest rate risk. FHLB advances are secured by qualifying residential first mortgage and commercial real estate loans and MBS. The following table presents information about the contractual balance and maturities of outstanding FHLB advances, as of December 31, 2024 (dollars in thousands):

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

The table below presents information about outstanding interest rate swaps hedging the variability of interest cash flows on the FHLB advances included in the table above, as of December 31, 2024 (dollars in thousands):

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

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

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

Liquidity and Capital Resources

Liquidity

Liquidity involves our ability to generate adequate funds to support planned interest earning asset growth, meet deposit withdrawal and credit line usage requests in both normal operating and stressed environments, maintain reserve requirements, conduct routine operations, pay dividends, service outstanding debt and meet other contractual obligations.

BankUnited's ongoing liquidity needs have historically been met primarily by cash flows from operations, deposit growth, the investment portfolio, its amortizing loan portfolio and FHLB advances. FRB discount window capacity, repurchase agreement capacity and a letter of credit with the FHLB provide additional sources of contingent liquidity. For the years ended December 31, 2024, 2023 and 2022, net cash provided by operating activities was $434 million, $657 million and $1.3 billion, respectively. The most significant contributors to the period over period declines in net cash provided by operating activities was a decline in cash proceeds from the sale of loans held for sale, due to less loan sale activity and fluctuations in the daily cash settlement of derivative positions centrally cleared through the CME.

Same day available liquidity includes cash, secured funding such as borrowing capacity at the Federal Home Loan Bank of Atlanta and the Federal Reserve, and unencumbered securities. Additional sources of liquidity include cash flows from operations, wholesale deposits, cash flow from the Bank's amortizing securities and loan portfolios, repurchase agreements and the sale of investment securities. Management also has the ability to exert substantial control over the rate and timing of loan production, and resultant requirements for liquidity to fund new loans.

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

Same Day Available Liquidity

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

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

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

As a holding company, BankUnited, Inc. is a corporation separate and apart from its banking subsidiary, and therefore, provides for its own liquidity. BankUnited, Inc.’s main sources of funds include management fees and dividends from the Bank, access to capital markets and, to a lesser extent, its own securities portfolio. There are regulatory limitations that may affect the ability of the Bank to pay dividends to BankUnited, Inc. Management believes that such limitations will not impact our ability to meet our ongoing cash obligations.

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

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

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

Capital

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

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

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Interest Rate Risk

A principal component of the Company’s risk of loss arising from adverse changes in the fair value of financial instruments, or market risk, is interest rate risk, including the risk that assets and liabilities with similar re-pricing characteristics may not reprice at the same time or to the same degree. A primary objective of the Company’s asset/liability management activities is to maximize net interest income, while maintaining acceptable levels of interest rate risk. The ALCO is responsible for establishing policies to manage exposure to interest rate risk, and to ensure procedures are established to monitor compliance with these policies. The policies established by the ALCO are approved at least annually by the Board of Directors and its Risk Committee. The Board of Directors or its risk committee monitor compliance with these policies at least quarterly.

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

Net Interest Income Simulation

The income simulation model analyzes interest rate sensitivity by projecting net interest income over 12- and 24-month periods in a most likely rate scenario based on a consensus forward curve versus net interest income in alternative rate scenarios. Management continually reviews and refines its interest rate risk management process in response to changes in the interest rate environment, the economic climate and observed customer behavior. Currently, our interest rate risk management framework is based on modeling instantaneous rate shocks to a static balance sheet, assuming that maturing instruments are replaced with like instruments at forward rates, of plus and minus 100, 200, 300 and 400 basis point parallel shifts. In lower interest rate environments, we may not model more extreme declining rate scenarios and in certain macro-environments, we may model shocks of more than 400 basis points. Our ALM policy has established limits for the plus and minus 100 and 200 basis points shock scenarios. We also model a variety of dynamic balance sheet scenarios, various yield curve slopes, non-parallel shifts and alternative depositor behavior, beta and decay assumptions. We continually evaluate the scenarios being modeled with a view toward adapting them to changing economic conditions, expectations and trends.

The following table presents the impact on forecasted net interest income compared to a "most likely" scenario, based on the consensus forward curve, in static balance sheet, parallel rate shock scenarios of plus and minus 100 and 200 basis points at December 31, 2024 and 2023:

EVE Simulation

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

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

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

•Prepayment speeds for loans, with CPRs ranging from 6.6% to 11.5% depending on loan characteristics and the magnitude of the modeled rate shock;

•Prepayment speeds for investment securities, with CPRs ranging from 4.3% to 7.7% depending on individual security collateral and characteristics and the magnitude of the modeled rate shock;

•Deposit decay rates ranging between 16% and 19%;

•Overall non-maturity interest bearing deposit beta of 75%;

Derivative Financial Instruments and Hedging Activities

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

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

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

(1) The interest rate collar consists of a combination of zero-premium interest rate options. The Company sold a pay-variable cap with a strike price of 5.58%; sold a 0% floor; and purchased a receive-variable floor with a strike price of 1.50%.

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In addition to derivative instruments, the Company has issued callable CDs to hedge interest rate risk in a falling rate environment; the amount of such instruments outstanding at December 31, 2024, was $441 million. The short duration of our AFS investment portfolio (1.85 at December 31, 2024) also provides a natural offset from an interest rate risk perspective to the longer duration of the residential mortgage portfolio.

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

Non-GAAP Financial Measures

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