BankUnited
Annual Report 2017

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017Commission file number: 001-35039 BankUnited, Inc.(Exact name of registrant as specified in its charter) Delaware(State or other jurisdiction ofincorporation or organization) 27-0162450(I.R.S. EmployerIdentification No.)14817 Oak Lane, Miami Lakes, FL(Address of principal executive offices) 33016(Zip Code)Registrant's telephone number, including area code: (305) 569-2000Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, $0.01 par value New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ýIndicate 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 preceding12 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 oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted andposted 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 andpost such files). Yes ý No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ýIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or 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 ý Accelerated filer oNon-accelerated filer o Smaller reporting company o Emerging growth company oIf 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 financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ýThe aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant on June 30, 2017 was $3,551,584,938.The number of outstanding shares of the registrant's common stock, $0.01 par value, as of February 26, 2018, was 106,017,421.DOCUMENTS INCORPORATED BY REFERENCE:Portions of the registrant's definitive proxy statement for the 2018 annual meeting of stockholders are incorporated by reference in this Annual Report on Form 10-K inresponse to Part II. Item 5 and Part III. Items 10, 11, 12, 13 and 14. Table of ContentsBANKUNITED, INC.Form 10-KFor the Year Ended December 31, 2017TABLE OF CONTENTS Page PART I Item 1.Business1Item 1A.Risk Factors12Item 1B.Unresolved Staff Comments24Item 2.Properties24Item 3.Legal Proceedings24Item 4.Mine Safety Disclosures24 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities25Item 6.Selected Consolidated Financial Data27Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations29Item 7A.Quantitative and Qualitative Disclosures About Market Risk79Item 8.Financial Statement and Supplementary Data80Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure156Item 9A.Controls and Procedures156Item 9B.Other Information156 PART III Item 10.Directors, Executive Officers and Corporate Governance156Item 11.Executive Compensation156Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters156Item 13.Certain Relationships and Related Transactions, and Director Independence156Item 14.Principal Accountant Fees and Services157 PART IV Item 15.Exhibits and Financial Statement Schedules158 Signatures162iGLOSSARY OF DEFINED TERMSThe following acronyms and terms may be used throughout this Form 10-K, including the consolidated financial statements and related notes.ACI Loans acquired with evidence of deterioration in credit quality since origination (Acquired Credit Impaired)AFS Available for saleALCO Asset/Liability CommitteeALLL Allowance for loan and lease lossesAOCI Accumulated other comprehensive incomeARM Adjustable rate mortgageASC Accounting Standards CodificationASU Accounting Standards UpdateATM Automated teller machineBasel Committee International Basel Committee on Banking SupervisionBHC Act Bank Holding Company Act of 1956BHC Bank holding companyBKU BankUnited, Inc.BankUnited BankUnited, National AssociationThe Bank BankUnited, National AssociationBridge Bridge Funding Group, Inc.CET1 Common Equity Tier 1 capitalCECL Current expected credit lossCFPB Consumer Financial Protection BureauCME Chicago Mercantile ExchangeCMOs Collateralized mortgage obligationsCommercial Shared-Loss Agreement A commercial and other loans shared-loss agreement entered into with the FDIC in connection with the FSBAcquisitionCovered assets Assets covered under the Loss Sharing AgreementsCovered loans Loans covered under the Loss Sharing AgreementsCRA Community Reinvestment ActDIF Deposit insurance fundDodd-Frank Act Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010EVE Economic value of equityFailed Bank BankUnited, FSBFAA Field Attorney's AdviceFASB Financial Accounting Standards BoardFDIA Federal Deposit Insurance ActFDIC Federal Deposit Insurance CorporationFHLB Federal Home Loan BankFICO Fair Isaac Corporation (credit score)FNMA Federal National Mortgage AssociationFRB Federal Reserve BankFSB Acquisition Acquisition of substantially all of the assets and assumption of all of the non-brokered deposits andsubstantially all of the other liabilities of BankUnited, FSB from the FDIC on May 21, 2009GAAP U.S. generally accepted accounting principlesGDP Gross Domestic ProductiiGLB Act The Gramm-Leach-Bliley Financial Modernization Act of 1999HAMP Home Affordable Modification ProgramHTM Held to maturityIPO Initial public offeringIRS Internal Revenue ServiceISDA International Swaps and Derivatives AssociationLIBOR London InterBank Offered RateLIHTC Low Income Housing Tax CreditsLoss Sharing Agreements Two loss sharing agreements entered into with the FDIC in connection with the FSB AcquisitionLTV Loan-to-valueMBS Mortgage-backed securitiesMSA Metropolitan Statistical AreaMSRs Mortgage servicing rightsNon-ACI Loans acquired without evidence of deterioration in credit quality since originationNon-Covered Loans Loans other than those covered under the Loss Sharing AgreementsNYTLC New York City Taxi and Limousine CommissionOCI Other comprehensive incomeOCC Office of the Comptroller of the CurrencyOFAC U.S. Department of the Treasury's Office of Foreign Assets ControlOREO Other real estate ownedOTTI Other-than-temporary impairmentProxy Statement Definitive proxy statement for the Company's 2017 annual meeting of stockholdersPSU Performance Share UnitPinnacle Pinnacle Public Finance, Inc.Re-Remics Resecuritized real estate mortgage investment conduitsRSU Restricted Share UnitSAR Share Appreciation RightSBA U.S. Small Business AdministrationSBF Small Business Finance UnitSEC Securities and Exchange CommissionSingle Family Shared-Loss Agreement A single-family loan shared-loss agreement entered into with the FDIC in connection with the FSB AcquisitionTDR Troubled-debt restructuringTri-State New York, New Jersey and ConnecticutUPB Unpaid principal balanceUSDA U.S. Department of AgricultureVIEs Variable interest entities2010 Plan 2010 Omnibus Equity Incentive Plan2014 Plan 2014 Omnibus Equity Incentive Plan401(k) Plan BankUnited 401(k) PlaniiiForward-Looking StatementsThis Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.Words such as "anticipate," "expect," "intend," "plan," "believe," "seek," "estimate," "project," "predict," "will" and similar expressions identify forward-looking statements.These forward-looking statements are based on management's current views with respect to future results, and are subject to risks and uncertainties.Forward-looking statements are based on beliefs and assumptions made by management using currently available information, such as market and industrymaterials, historical performance and current financial trends. These statements are only predictions and are not guarantees of future performance. Theinclusion of forward-looking statements should not be regarded as a representation by the Company that the future plans, estimates or expectationscontemplated by a forward-looking statement will be achieved. Forward-looking statements are subject to various risks and uncertainties and assumptions,including those relating to the Company's operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or moreof these or other risks or uncertainties materialize, or if the Company's underlying assumptions prove to be incorrect, the Company's actual results could differmaterially from those contemplated by a forward-looking statement. These risks and uncertainties include, without limitation:•the impact of conditions in the financial markets and economic conditions generally;•credit risk, relating to our portfolios of loans, leases and investments overall, as well as loans and leases exposed to specific industry conditions;•real estate market conditions and other risks related to holding loans secured by real estate or real estate received in satisfaction of loans;•an inability to successfully execute our fundamental growth strategy;•geographic concentration of the Company's markets in Florida and the New York metropolitan area;•natural or man-made disasters;•risks related to the regulation of our industry;•inadequate allowance for credit losses;•interest rate risk;•liquidity risk;•loss of executive officers or key personnel;•competition;•dependence on information technology and third party service providers and the risk of systems failures, interruptions or breaches of security;•failure to comply with the terms of the Company's Loss Sharing Agreements (as defined below) with the FDIC (as defined below);•inadequate or inaccurate forecasting tools and models;•ineffective risk management or internal controls;•a variety of operational, compliance and legal risks; and•the selection and application of accounting methods and related assumptions and estimates.Additional factors are set forth in the Company's filings with the Securities and Exchange Commission, or the SEC, including this Annual Report onForm 10-K.Forward-looking statements speak only as of the date on which they are made. The Company expressly disclaims any obligation to update or revise anyforward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.As used herein, the terms the "Company," "we," "us," and "our" refer to BankUnited, Inc. and its subsidiaries unless the context otherwise requires.ivPART IItem 1. BusinessOverviewBankUnited, Inc., with total consolidated assets of $30.3 billion at December 31, 2017, is a 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 ofbanking services to individual and corporate customers through 87 banking centers located in 15 Florida counties and 6 banking centers in the New Yorkmetropolitan area. The Bank also provides certain commercial lending and deposit products through national platforms. The Company has built, primarilythrough organic growth, a premier commercially focused regional bank with a long-term value oriented business model serving primarily small and mediumsized businesses. We endeavor to provide, through our experienced lending and relationship banking teams, personalized customer service and offer a fullrange of traditional banking products and services to both our commercial and retail customers.The FSB Acquisition and the Loss Sharing AgreementsOn May 21, 2009, BankUnited entered into the "Purchase and Assumption Agreement" with the FDIC, Receiver of BankUnited, FSB, and acquiredsubstantially all of the assets and assumed all of the non-brokered deposits and substantially all other liabilities of the Failed Bank from the FDIC in the FSBAcquisition.Concurrently with the FSB Acquisition, the Bank entered into two loss sharing agreements with the FDIC, covering certain legacy assets, including theentire legacy loan portfolio and OREO and certain purchased investment securities. We refer to assets covered by the Loss Sharing Agreements as coveredassets or, in certain cases, covered loans. The Loss Sharing Agreements do not apply to assets acquired, purchased or originated subsequent to the FSBAcquisition. At December 31, 2017, the covered assets, consisting of residential loans and OREO, had an aggregate carrying value of $506 million. The totalUPB of the covered assets at December 31, 2017 was $1.1 billion. The carrying value of the related FDIC indemnification asset at December 31, 2017 was$296 million.The following charts illustrate the percentage of total assets represented by covered assets and the FDIC indemnification asset at December 31, 2017 and2010, reflecting the change in balance sheet composition over time:Pursuant to the terms of the Loss Sharing Agreements, the covered assets are subject to a stated loss threshold whereby the FDIC will reimburse the Bankfor 80% of losses up to a $4.0 billion stated threshold and 95% of losses in excess of the $4.0 billion stated threshold. The Bank will reimburse the FDIC forits share of recoveries with respect to losses for which the FDIC paid the Bank a reimbursement under the Loss Sharing Agreements. The FDIC's obligation toreimburse the Company for losses with respect to the covered assets began with the first dollar of loss incurred. We have received reimbursements of $2.7billion for claims submitted to the FDIC under the Loss Sharing Agreements as of December 31, 2017.The Loss Sharing agreements consist of the Single Family Shared-Loss Agreement and the Commercial Shared-Loss Agreement. The Single FamilyShared-Loss Agreement provides for FDIC loss sharing and the Bank's reimbursement for recoveries to the FDIC for ten years from May 21, 2009, or throughMay 21, 2019, for single family residential and home equity loans and related OREO. The Commercial Shared-Loss Agreement provided for FDIC losssharing for five years from May 21, 2009, or through May 21, 2014, and for the Bank's reimbursement for recoveries to the FDIC for eight years from May 21,2009, or through the quarter ended June 30, 2017, for all other covered assets.1Table of ContentsUnder the terms of the Purchase and Assumption Agreement with the FDIC, the Bank may sell up to 2.5% of the covered loans based on the UPB at thedate of the FSB Acquisition, or approximately $280 million, on an annual basis without prior consent of the FDIC. Any losses incurred from such loan salesare covered under the Loss Sharing Agreements. Any loan sale in excess of this annual threshold requires approval from the FDIC to be eligible for loss sharecoverage. However, if the Bank seeks to sell residential loans in excess of the agreed 2.5% threshold in the nine months prior to the stated termination date ofloss share coverage (May 21, 2019) and the FDIC refuses to consent, then the Single Family Shared-Loss Agreement will be extended for two years only withrespect to the loans requested to be included in such sales. The Bank will have the right to sell all or any portion of such loans without FDIC consent at anytime within the nine months prior to the extended termination date, and any losses incurred will be covered under the Single Family Shared-Loss Agreement.If exercised, this final sale mechanism ensures no residual credit risk in our covered loan portfolio that would otherwise arise from credit losses occurring afterthe termination date of the Single Family Shared-Loss Agreement.Our Market AreasOur primary banking markets are Florida and the Tri-State market of New York, New Jersey and Connecticut. We believe both represent long-termattractive banking markets. In Florida, our largest concentration is in the Miami metropolitan statistical area; however, we are also focused on developingbusiness in other markets in which we have a presence, such as the Broward, Palm Beach, Orlando, Tampa and Jacksonville markets. We operate severalnational commercial lending platforms, purchase residential loans on a national basis through established correspondent channels and have a nationalcommercial deposit business.According to estimates from the United States Census Bureau and SNL Financial, from 2014 to 2017, Florida added over 1.2 million new residents, thesecond most of any U.S. state, and had a total population of 21.1 million and a median household annual income of $53,657 in 2017. The Floridaunemployment rate decreased to 3.7% at December 31, 2017. The Case-Shiller home price index for Florida reflected a year over year increase of 6% atSeptember 30, 2017. According to CoStar Commercial Repeat-Sale Indices, commercial real estate values in the South region reflected a year over yearincrease of 14% at December 31, 2017. According to a report published in December, 2017 by the University of Central Florida, personal income in Florida isexpected to average 4.1% growth from 2017 to 2021 while Florida's Real Gross State Product is forecast to expand at an average annual rate of 3.4% from2017 to 2021.We had six banking centers in metropolitan New York at December 31, 2017 serving the Tri-State area. Four banking centers were in Manhattan, one inLong Island and one in Brooklyn. According to SNL Financial, at December 31, 2017, the Tri-State area had approximately $2.0 trillion in deposits, with themajority of the market concentrated in the New York metropolitan area. The Tri-State area had a total population of 32.3 million and a median householdannual income of $70,847 in 2017, while the unemployment rate decreased to 4.3% at December 31, 2017. According to CoStar Commercial Repeat-SaleIndices, commercial real estate values in the Northeast region reflected a year over year increase of 11% at December 31, 2017.Through two commercial lending subsidiaries of BankUnited, we engage in equipment, franchise and municipal finance on a national basis. The Bankalso originates small business loans through programs sponsored by the SBA and to a lesser extent the USDA and provides mortgage warehouse finance on anational basis. We refer to our commercial lending subsidiaries, our small business finance unit, our mortgage warehouse lending operations and ourresidential loan purchase program as national platforms. We also offer a suite of commercial deposit and cash management products through a nationalplatform.Products and ServicesLending and LeasingGeneral—Our primary lending focus is to serve small and middle-market businesses and their executives with a variety of financial products andservices, while maintaining a disciplined credit culture.We offer a full array of lending products that cater to our customers' needs including small business loans, commercial real estate loans, equipment loansand leases, term loans, formula-based loans, municipal and non-profit loans and leases, commercial lines of credit, residential mortgage warehouse lines ofcredit, letters of credit and consumer loans. We also purchase performing residential loans through established correspondent channels on a national basis.We have attracted and invested in experienced lending teams from competing institutions in our Florida, Tri-State and national markets, resulting insignificant growth in our non-covered loan portfolio. At December 31, 2017, our loan portfolio included $20.9 billion in non-covered loans, including $16.7billion in commercial and commercial real estate loans and $4.2 billion in residential and other consumer loans. Continued loan growth in both the Floridaand Tri-State markets and across our national lending and leasing platforms is a core component of our current business strategy.2Table of ContentsCommercial loans—Our commercial loans, which are generally made to growing small business, middle-market and larger corporate entities, includeequipment loans, secured and unsecured lines of credit, formula-based loans, mortgage warehouse lines, letters of credit, SBA product offerings and businessacquisition finance credit facilities.Commercial real estate loans—We offer term financing for the acquisition or refinancing of properties, primarily rental apartments, mixed-usecommercial properties, industrial properties, warehouses, retail shopping centers, free-standing single-tenant buildings, office buildings and hotels. Otherproducts that we provide include real estate secured lines of credit, and, to a limited extent, acquisition, development and construction loan facilities andconstruction financing. We make commercial real estate loans secured by both owner-occupied and non-owner occupied properties. Construction lending isnot a primary area of focus for us; construction and land loans comprised 1.5% of the loan portfolio at December 31, 2017.National Commercial Lending Platforms—Through the Bank's two commercial lending subsidiaries, we provide municipal, equipment and franchisefinancing on a national basis. Pinnacle, headquartered in Scottsdale, Arizona, provides financing to state and local governmental entities directly andthrough vendor programs and alliances. Pinnacle offers a full array of financing structures on a national basis including equipment lease purchase agreementsand direct (private placement) bond refundings and loan agreements. Bridge offers large corporate and middle market businesses equipment leases and loansincluding direct finance lease and operating lease structures through its equipment finance division. Bridge offers franchise equipment, acquisition andexpansion financing through its franchise division. Bridge is headquartered in Baltimore, Maryland. In 2015, we acquired SBF, enabling us to expand oursmall business lending platform on a national basis. SBF offers an array of SBA, and to a lesser extent, USDA loan products. We typically sell the governmentguaranteed portion of the loans SBF originates, and retain the unguaranteed portion in portfolio. We also engage in residential mortgage warehouse lendingon a national basis.Residential mortgages—The non-covered residential loan portfolio is primarily comprised of loans purchased on a national basis through selectcorrespondent channels. This national purchase program allows us to diversify our loan portfolio, both by product type and geographically. Residential loanspurchased are primarily closed-end, first lien jumbo mortgages for the purchase or re-finance of owner occupied property. We do not originate or purchasenegatively amortizing or sub-prime residential loans.Home equity loans and lines of credit are not a significant component of the non-covered loan portfolio.Consumer loans—We offer consumer loans to our customers for personal, family and household purposes, including auto, boat and personal installmentloans. Consumer loans are not a material component of our loan portfolio.Loan servicing—At December 31, 2017, we serviced residential mortgage loans with a UPB of $2.0 billion. Our mortgage servicing portfolio includesservicing rights acquired in bulk and in flow transactions, as well as retained servicing on residential loans originated and sold into the secondary marketprior to the termination of our retail residential mortgage origination channel in 2016. We anticipate growing this business at a moderate pace, depending onmarket conditions, to take advantage of existing mortgage servicing capacity.We service SBA loans originated and sold into the secondary market by SBF. We anticipate that this servicing business will expand as SBF continues tooriginate and sell loans. At December 31, 2017, we serviced $546 million of SBA loans.The balance of servicing assets was not material to the Company's consolidated financial statements at December 31, 2017.Credit Policy and ProceduresBankUnited, Inc. and the Bank have established asset oversight committees to administer the loan portfolio and monitor and manage credit risk. Thesecommittees include: (i) the Enterprise Risk Management Committee, (ii) the Commercial Loan Committee , (iii) the Credit Risk Management Committee,(iv) the Asset Recovery Committee, (v) the Criticized Asset Committee and (vi) the Residential Credit Risk Management Committee. These committees meetat least quarterly.The credit approval process provides for prompt and thorough underwriting and approval or decline of loan requests. The approval method used is ahierarchy of individual lending authorities for new credits and renewals. The Credit Risk Management Committee approves authorities for lending and creditpersonnel, which are ultimately submitted to our Board for ratification. Lending authorities are based on position, capability and experience of theindividuals filling these positions. Authorities are periodically reviewed and updated.BankUnited has established in-house borrower lending limits which are significantly lower than its legal lending limit of approximately $488 million atDecember 31, 2017. In-house lending limits at December 31, 2017 ranged from $75 million to $100 million. These limits are reviewed periodically by theCredit Risk Management Committee and approved annually by the Board of Directors.3Table of ContentsDepositsWe offer traditional deposit products including checking accounts, money market deposit accounts, treasury management services, savings accounts andcertificates of deposit with a variety of terms and rates. We offer commercial and retail deposit products across our primary geographic footprint and certaincommercial deposit and treasury management services on a national platform. Our deposits are insured by the FDIC up to statutory limits. Demand depositbalances are concentrated in commercial and small business accounts. Our service fee schedule and rates are competitive with other financial institutions inour markets.Investment SecuritiesThe primary objectives of our investment policy are to provide liquidity, provide a suitable balance of high credit quality and diversified assets to theconsolidated balance sheet, manage interest rate risk exposure, and generate acceptable returns given the Company's established risk parameters.The investment policy is reviewed annually by our Board of Directors. Overall investment goals are established by our Board, Chief Executive Officer,Chief Financial Officer, and members of the ALCO. The Board has delegated the responsibility of monitoring our investment activities to ALCO. Day-to-dayactivities pertaining to the investment portfolio are conducted within the Company's Treasury division under the supervision of the Chief Investment Officerand Chief Financial Officer.Risk Management and OversightOur Board of Directors oversees our risk management process, including the company-wide approach to risk management, carried out by ourmanagement. Our Board approves the Company's business plan, risk appetite statement and the policies that set standards for the nature and level of risk theCompany is willing to assume. The Board and its established committees receive reports on the Company's management of critical risks and the effectivenessof risk management systems. While our full Board maintains the ultimate oversight responsibility for the risk management process, its committees, includingthe audit committee, the risk committee, the compensation committee and the nominating and corporate governance committee, oversee risk in certainspecified areas.Our Board has assigned responsibility to our Chief Risk Officer for maintaining a risk management framework to identify, manage, monitor and mitigaterisks to the achievement of our strategic goals and objectives and ensure we operate in a safe and sound manner in accordance with the Board approvedpolicies. We have invested significant resources to establish a robust enterprise-wide risk management framework to support the planned growth of ourCompany. Our framework is consistent with common industry practices and regulatory guidance and is appropriate to our size, growth trajectory and thecomplexity of our business activities. Significant elements include a Risk Appetite Statement and risk metrics approved by the Board, ongoing identificationand assessments of risk, executive management level risk committees to oversee compliance with the Board approved risk policies and adherence to risklimits, and ongoing testing and reporting by independent internal audit, credit review, and regulatory compliance groups. Executive level oversight of therisk management framework is provided by the Enterprise Risk Management Committee which is chaired by the Chief Risk Officer and attended by thesenior executives of the Company. Reporting to the Enterprise Risk Management Committee are sub-committees dedicated to guiding and overseeingmanagement of critical categories of risk, including the Credit Risk Management, Asset/Liability, Compliance Risk Management, Operational RiskManagement, Corporate Disclosure, Enterprise Data, Ethics, BSA/AML, and Loss Share Compliance committees.Marketing and DistributionWe conduct our banking business through 87 banking centers located in 15 Florida counties as well as 6 banking centers in the New York metropolitanarea as of December 31, 2017. Our distribution network also includes 89 ATMs, fully integrated on-line banking, mobile banking and a telephone bankingservice. We target growing companies and commercial and middle-market businesses, as well as individual consumers.In order to market our products, we use local television, radio, digital, print and direct mail advertising as well as a variety of promotional activities.CompetitionOur markets are highly competitive. Our markets contain not only a large number of community and regional banks, but also a significant presence of thecountry's largest commercial banks. We compete with other state, national and international financial institutions located in our market areas as well assavings associations, savings banks and credit unions for deposits and loans. In addition, we compete with financial intermediaries such as consumer financecompanies, mortgage banking4Table of Contentscompanies, insurance companies, securities firms, mutual funds and several government agencies as well as major retailers, all actively engaged in providingvarious types of loans and other financial services. Our largest banking competitors in the Florida market include Bank of America, BB&T, JPMorgan Chase,PNC, Regions Bank SunTrust Banks, TD Bank and Wells Fargo and a number of community banks. In the Tri-State market, we also compete with, in additionto the national and international financial institutions listed, Capital One, Signature Bank, New York Community Bank, Valley National Bank, M&T Bankand numerous community banks.Interest rates on both loans and deposits and prices of fee-based services are significant competitive factors among financial institutions generally. Otherimportant competitive factors include convenience, quality of customer service, availability of on-line, mobile and remote banking products, communityreputation, continuity of personnel and services, and, in the case of larger commercial customers, relative lending limits and ability to offer sophisticated cashmanagement and other commercial banking services. While we continue to provide competitive interest rates on both depository and lending products, webelieve that we can compete most successfully by focusing on the financial needs of growing companies and their executives and commercial and middle-market businesses, offering them a broad range of personalized services and sophisticated cash management tools tailored to their businesses.Regulation and SupervisionThe U.S. banking industry is highly regulated under federal and state law. These regulations affect the operations of BankUnited, Inc. and itssubsidiaries.Statutes, regulations and policies limit the activities in which we may engage and the conduct of our permitted activities and establish capitalrequirements with which we must comply. The regulatory framework is intended primarily for the protection of depositors, borrowers, customers and clients,the FDIC insurance funds and the banking system as a whole, and not for the protection of our stockholders or creditors. In many cases, the applicableregulatory authorities have broad enforcement power over bank holding companies, banks and their subsidiaries, including the power to impose substantialfines and other penalties for violations of laws and regulations. Further, the regulatory system imposes reporting and information collection obligations. Weincur significant costs relating to compliance with these laws and regulations. Banking statutes, regulations and policies are continually under review byfederal and state legislatures and regulatory agencies, and a change in them, including changes in how they are interpreted or implemented, could have amaterial adverse effect on our business. Although the current U.S. presidential administration has expressed support for regulatory reform, it is unclear whatimpact, if any, this will have on the laws, regulations and policies affecting the supervision of banking organizations.The material statutory and regulatory requirements that are applicable to us are summarized below. The description below is not intended to summarizeall laws and regulations applicable to us.Bank and Bank Holding Company RegulationBankUnited is a national bank. As a national bank organized under the National Bank Act, BankUnited is subject to ongoing and comprehensivesupervision, regulation, examination and enforcement by the OCC. BankUnited is subject to certain commitments made to the OCC, in conjunction with itsconversion to a national bank in 2012, regarding its business and capital plans.Any entity that directly or indirectly controls a bank must be approved by the Federal Reserve Board under the BHC Act to become a BHC. BHCs aresubject to regulation, inspection, examination, supervision and enforcement by the Federal Reserve Board under the BHC Act. The Federal Reserve Board'sjurisdiction also extends to any company that is directly or indirectly controlled by a BHC.BankUnited, Inc., which controls BankUnited, is a BHC and, as such, is subject to ongoing and comprehensive supervision, regulation, examination andenforcement by the Federal Reserve Board.Broad Supervision, Examination and Enforcement PowersA principal objective of the U.S. bank regulatory system is to protect depositors by ensuring the financial safety and soundness of banking organizations.To that end, the banking regulators have broad regulatory, examination and enforcement authority. The regulators regularly examine the operations ofbanking organizations. In addition, banking organizations are subject to periodic reporting requirements.The regulators have various remedies available if they determine that the financial condition, capital resources, asset quality, earnings prospects,management, liquidity or other aspects of a banking organization's operations are unsatisfactory. The regulators may also take action if they determine thatthe banking organization or its management is violating or has violated any law or regulation. The regulators have the power to, among other things:5Table of Contents•enjoin "unsafe or unsound" practices;•require affirmative actions to correct any violation or practice;•issue administrative orders that can be judicially enforced;•direct increases in capital;•direct the sale of subsidiaries or other assets;•limit dividends and distributions;•restrict growth;•assess civil monetary penalties;•remove officers and directors; and•terminate deposit insurance.The FDIC may terminate a depository institution's deposit insurance upon a finding that the institution's financial condition is unsafe or unsound or thatthe institution has engaged in unsafe or unsound practices or has violated any applicable rule, regulation, order or condition enacted or imposed by theinstitution's regulatory agency. Engaging in unsafe or unsound practices or failing to comply with applicable laws, regulations and supervisory agreementscould subject BankUnited, Inc., the Bank and their subsidiaries or their officers, directors and institution-affiliated parties to the remedies described aboveand other sanctions.Notice and Approval Requirements Related to ControlBanking laws impose notice, approval, and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect"control" of an FDIC-insured depository institution. These laws include the BHC Act, the Change in Bank Control Act, and the Home Owners' Loan Act.Among other things, these laws require regulatory filings by individuals or companies that seek to acquire direct or indirect "control" of an FDIC-insureddepository institution. The determination of whether an investor "controls" a depository institution is based on all of the facts and circumstances surroundingthe investment. As a general matter, a party is deemed to control a depository institution or other company if the party owns or controls 25% or more of anyclass of voting stock. Subject to rebuttal, a party may be presumed to control a depository institution or other company if the investor owns or controls 10%or more of any class of voting stock. Ownership by affiliated parties, or parties acting in concert, is typically aggregated for these purposes. If a party'sownership of BankUnited, Inc. were to exceed certain thresholds, the investor could be deemed to "control" the Company for regulatory purposes. This couldsubject the investor to regulatory filings or other regulatory consequences.In addition, except under limited circumstances, BHCs are prohibited from acquiring, without prior approval:•control of any other bank or BHC or all or substantially all the assets thereof; or•more than 5% of the voting shares of a bank or BHC which is not already a subsidiary.Permissible Activities and InvestmentsBanking laws generally restrict the ability of BankUnited, Inc. to engage in activities other than those determined by the Federal Reserve Board to be soclosely related to banking as to be a proper incident thereto. The GLB Act expanded the scope of permissible activities for a BHC that qualifies as a financialholding company. Under the regulations implementing the GLB Act, a financial holding company may engage in additional activities that are financial innature or incidental or complementary to a financial activity. Those activities include, among other activities, certain insurance and securities activities.BHCs and their subsidiaries must be well-capitalized and well-managed in order for the BHC and its nonbank affiliates to engage in the expanded financialactivities permissible only for a financial holding company. BankUnited, Inc. is not a financial holding company.In addition, as a general matter, the establishment or acquisition by BankUnited, Inc. of a non-bank entity, or the initiation of a non-banking activity,requires prior regulatory approval. In approving acquisitions or the addition of activities, the Federal Reserve Board considers, among other things, whetherthe acquisition or the additional activities can reasonably be expected to produce benefits to the public, such as greater convenience, increased competitionor gains in efficiency, that outweigh such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts of interest orunsound banking practices.6Table of ContentsRegulatory Capital Requirements and Capital AdequacyThe federal bank regulators view capital levels as important indicators of an institution's financial soundness. As a general matter, FDIC-insureddepository institutions and their holding companies are required to maintain minimum capital relative to the amount and types of assets they hold. The finalsupervisory determination on an institution's capital adequacy is based on the regulator's assessment of numerous factors. Both BankUnited, Inc. andBankUnited are subject to regulatory capital requirements.The Federal Reserve Board has established risk-based and leverage capital guidelines for BHCs, including BankUnited, Inc. The OCC has establishedsubstantially similar risk-based and leverage capital guidelines applicable to national banks, including BankUnited. BankUnited, Inc. and BankUnited aresubject to capital rules implemented under the framework promulgated by the International Basel Committee on Banking Supervision (the "Basel III CapitalRules"). While some provisions of the rules are tailored to larger institutions, the Basel III Capital Rules generally apply to all U.S. banking organizations,including BankUnited, Inc. and BankUnited.The Basel III Capital Rules provide for the following minimum capital to risk-weighted assets ratios:(i)4.5% based upon CET1;(ii)6.0% based upon tier 1 capital; and(iii)8.0% based upon total regulatory capital.A minimum leverage ratio (tier 1 capital as a percentage of average total assets) of 4.0% is also required under the Basel III Capital Rules. The Basel IIICapital Rules additionally require institutions to retain a capital conservation buffer of 2.5% above these required minimum capital ratio levels, to be phasedin at annual increments of 0.625% that began in 2016. Banking organizations that fail to maintain the minimum required capital conservation buffer couldface restrictions on capital distributions or discretionary bonus payments to executive officers, with distributions and discretionary bonus payments beingcompletely prohibited if no capital conservation buffer exists, or in the event of the following: (i) the banking organization's capital conservation buffer wasbelow 2.5% (or the minimum amount required) at the beginning of a quarter; and (ii) its cumulative net income for the most recent quarterly period plus thepreceding four calendar quarters is less than its cumulative capital distributions (as well as associated tax effects not already reflected in net income) duringthe same measurement period.The enactment of the Basel III Capital Rules increased the required capital levels of BankUnited, Inc. and BankUnited. The Basel III Capital Rulesbecame effective as applied to BankUnited, Inc. and BankUnited on January 1, 2015, with a phase in period from January 1, 2015 through January 1, 2019.Company-Run Stress TestingUnder Section 165(i) of the Dodd-Frank Act and the stress testing rules of the Federal Reserve Board and OCC, each BHC and national bank with morethan $10 billion and less than $50 billion in total consolidated assets must annually conduct a company-run stress test to estimate the potential impact ofthree scenarios provided by the agencies on its regulatory capital ratios and certain other financial metrics. BankUnited, Inc. and the Bank are required topublicly disclose a summary of the results of these forward looking, company-run stress tests that assesses the impact of hypothetical macroeconomicbaseline, adverse and severely adverse economic scenarios. In 2018, BankUnited, Inc. and the Bank will submit the results of their company-run stress test tothe Federal Reserve Board and OCC by July 31 and will publish a public summary of the results between October 15 and October 30.7Table of ContentsPrompt Corrective ActionUnder the FDIA, the federal bank regulatory agencies must take "prompt corrective action" against undercapitalized U.S. depository institutions. U.S.depository institutions are assigned one of five capital categories: "well capitalized," "adequately capitalized," "undercapitalized," "significantlyundercapitalized," and "critically undercapitalized," and are subjected to differential regulation corresponding to the capital category within which theinstitution falls. As of December 31, 2017, a depository institution was deemed to be "well capitalized" if the banking institution had a total risk-basedcapital ratio of 10.0% or greater, a tier 1 risk-based capital ratio of 8.0% or greater, a CET1 risk-based capital ratio of 6.5% and a leverage ratio of 5.0% orgreater, and the institution was not subject to an order, written agreement, capital directive, or prompt corrective action directive to meet and maintain aspecific level for any capital measure. Under certain circumstances, a well-capitalized, adequately-capitalized or undercapitalized institution may be treatedas if the institution were in the next lower capital category. A banking institution that is undercapitalized is required to submit a capital restoration plan.Failure to meet capital guidelines could subject the institution to a variety of enforcement remedies by federal bank regulatory agencies, including:termination of deposit insurance by the FDIC, restrictions on certain business activities, and appointment of the FDIC as conservator or receiver. As ofDecember 31, 2017, BankUnited, Inc. and BankUnited were well capitalized.Source of strengthThe Dodd-Frank Act and Federal Reserve Board policy require all companies, including BHCs, that directly or indirectly control an insured depositoryinstitution to serve as a source of strength for the institution. Under this requirement, BankUnited, Inc. in the future could be required to provide financialassistance to BankUnited should it experience financial distress. Such support may be required at times when, absent this statutory and Federal ReservePolicy requirement, a BHC may not be inclined to provide it.Regulatory Limits on Dividends and DistributionsFederal law currently imposes limitations upon certain capital distributions by national banks, such as certain cash dividends, payments to repurchase orotherwise acquire its shares, payments to stockholders of another institution in a cash-out merger and other distributions charged against capital. The FederalReserve Board and OCC regulate all capital distributions by BankUnited directly or indirectly to BankUnited, Inc., including dividend payments.BankUnited may not pay dividends to BankUnited, Inc. if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage capital ratio requirements, or in the event the OCC notified BankUnited that it was in need of more thannormal supervision. Under the FDIA, an insured depository institution such as BankUnited is prohibited from making capital distributions, including thepayment of dividends, if, after making such distribution, the institution would become "undercapitalized." Payment of dividends by BankUnited also may berestricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.BankUnited is subject to supervisory limits on its ability to declare or pay a dividend or reduce its capital unless certain conditions are satisfied.In addition, it is the policy of the Federal Reserve Board that BHCs should pay cash dividends on common stock only out of income available over thepast year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy providesthat BHCs should not maintain a level of cash dividends that undermines the BHC’s ability to serve as a source of strength to its banking subsidiaries.Reserve RequirementsPursuant to regulations of the Federal Reserve Board, all banking organizations are required to maintain average daily reserves at mandated ratiosagainst their transaction accounts. In addition, reserves must be maintained on certain non-personal time deposits. These reserves must be maintained in theform of vault cash or in an account at a Federal Reserve Bank.Limits on Transactions with Affiliates and InsidersInsured depository institutions are subject to restrictions on their ability to conduct transactions with affiliates and other related parties. Section 23A ofthe Federal Reserve Act imposes quantitative limits, qualitative requirements, and collateral requirements on certain transactions by an insured depositoryinstitution with, or for the benefit of, its affiliates. Transactions covered by Section 23A include loans, extensions of credit, investment in securities issued byan affiliate, and acquisitions of assets from an affiliate. Section 23B of the Federal Reserve Act requires that most types of transactions by an insured8Table of Contentsdepository institution with, or for the benefit of, an affiliate be on terms at least as favorable to the insured depository institution as if the transaction wereconducted with an unaffiliated third party.The Federal Reserve Board's Regulation O and OCC regulations impose restrictions and procedural requirements in connection with the extension ofcredit by an insured depository institution to directors, executive officers, principal stockholders and their related interests.The Volcker RuleThe Volcker Rule generally prohibits "banking entities" from engaging in "proprietary trading" and making investments and conducting certain otheractivities with "covered funds."Although the rule provides for some tiering of compliance and reporting obligations based on size, the fundamental prohibitions of the Volcker Ruleapply to banking entities of any size, including BankUnited, Inc. and BankUnited. Banking entities with total assets of $10 billion or more that engage inactivities subject to the Volcker Rule are required to establish a six-element compliance program to address the prohibitions of, and exemptions from, theVolcker Rule.Corporate governanceThe Dodd-Frank Act addresses many investor protection, corporate governance and executive compensation matters that affect most U.S. publicly tradedcompanies, including BankUnited, Inc. The Dodd-Frank Act (1) grants stockholders of U.S. publicly traded companies an advisory vote on executivecompensation; (2) enhances independence requirements for compensation committee members; (3) requires companies listed on national securitiesexchanges to adopt incentive-based compensation claw-back policies for executive officers; and (4) provides the SEC with authority to adopt proxy accessrules that would allow stockholders of publicly traded companies to nominate candidates for election as a director and have those nominees included in acompany's proxy materials.Interchange FeesThe Dodd-Frank Act gave the Federal Reserve Board the authority to establish rules regarding interchange fees charged for electronic debit transactionsby a payment card issuer that, together with its affiliates, has assets of $10 billion or more and to enforce a new statutory requirement that such fees bereasonable and proportional to the actual cost of a transaction to the issuer. The Federal Reserve Board has adopted rules under this provision that limit theswipe fees that a debit card issuer can charge a merchant for a transaction.Examination FeesThe OCC currently charges fees to recover the costs of examining national banks, processing applications and other filings, and covering direct andindirect expenses in regulating national banks. The Dodd-Frank Act provides various agencies with the authority to assess additional supervision fees.FDIC Deposit InsuranceThe FDIC is an independent federal agency that insures the deposits of federally insured depository institutions up to applicable limits. The FDIC alsohas certain regulatory, examination and enforcement powers with respect to FDIC-insured institutions. The deposits of BankUnited are insured by the FDICup to applicable limits. As a general matter, the maximum deposit insurance amount is $250,000 per depositor.Additionally. FDIC-insured depository institutions are required to pay deposit insurance assessments to the FDIC. The amount of a particular institution'sdeposit insurance assessment is based on that institution's risk classification under an FDIC risk-based assessment system. An institution's risk classification isassigned based on its capital levels and the level of supervisory concern the institution poses to the regulators. Deposit insurance assessments fund the DIF.The Dodd-Frank Act changed the way an insured depository institution's deposit insurance premiums are calculated and increased the minimum for the DIFreserve ratio from 1.15% to 1.35%. The Dodd-Frank Act also made banks with $10 billion or more in total assets responsible for the increase. Effective in thethird quarter of 2016, regular assessment rates for all banks were reduced; however, banks with total assets of $10 billion or more began paying an assessmentsurcharge equal to 4.5 cents per $100 of their assessment base in excess of $10 billion. The surcharge will continue until such time the DIF reserve ratioexceeds 1.35%. Future changes to our risk classification or to the method for calculating premiums generally may impact assessment rates, which couldimpact the profitability of our operations.9Table of ContentsDepositor PreferenceThe FDIA provides that, in the event of the "liquidation or other resolution" of an insured depository institution, the claims of depositors of theinstitution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver willhave priority over other general unsecured claims against the institution. Insured and uninsured depositors, along with the FDIC, will have priority inpayment ahead of unsecured, non-deposit creditors, including BankUnited, Inc., with respect to any extensions of credit they have made to such insureddepository institution.Federal Reserve System and Federal Home Loan Bank SystemAs a national bank, BankUnited is required to hold shares of capital stock in a Federal Reserve Bank. BankUnited holds capital stock in the FederalReserve Bank of Atlanta. As a member of the Federal Reserve System, BankUnited has access to the Federal Reserve discount window lending and paymentclearing systems.BankUnited is a member of the Federal Home Loan Bank of Atlanta. Each FHLB provides a central credit facility primarily for its member institutions aswell as other entities involved in home mortgage lending. Any advances from a FHLB must be secured by specified types of collateral. As a member of theFHLB, BankUnited is required to acquire and hold shares of capital stock in the FHLB of Atlanta. BankUnited is in compliance with this requirement.Anti-Money Laundering and OFACUnder federal law, financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, andcontrols; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. Financialinstitutions are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for duediligence and customer identification in their dealings with non-U.S. financial institutions and non-U.S. customers. Financial institutions must takereasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and lawenforcement authorities have been granted increased access to financial information maintained by financial institutions. Bank regulators routinely examineinstitutions for compliance with these obligations and they must consider an institution's compliance in connection with the regulatory review ofapplications, including applications for banking mergers and acquisitions. The regulatory authorities have imposed "cease and desist" orders and civil moneypenalty sanctions against institutions found to be violating these obligations.The U.S. Department of the Treasury's OFAC is responsible for helping to insure that U.S. entities do not engage in transactions with certain prohibitedparties, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of persons, organizations, and countries suspected of aiding,harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. If BankUnited, Inc. or BankUnited finds a name onany transaction, account or wire transfer that is on an OFAC list, BankUnited, Inc. or BankUnited must freeze or block such account or transaction, file asuspicious activity report and notify the appropriate authorities.Consumer Laws and RegulationsBanking organizations are subject to numerous laws and regulations intended to protect consumers. These laws include, among others:•Truth in Lending Act;•Truth in Savings Act;•Electronic Funds Transfer Act;•Expedited Funds Availability Act;•Equal Credit Opportunity Act;•Fair and Accurate Credit Transactions Act;•Fair Housing Act;•Fair Credit Reporting Act;•Fair Debt Collection Act;10Table of Contents•Gramm-Leach-Bliley Act;•Home Mortgage Disclosure Act;•Right to Financial Privacy Act;•Real Estate Settlement Procedures Act;•laws regarding unfair and deceptive acts and practices; and•usury laws.Many states and local jurisdictions have consumer protection laws analogous, and in addition to, those listed above. These federal, state and local lawsregulate the manner in which financial institutions deal with customers when taking deposits, making loans, or conducting other types of transactions.Failure to comply with these laws and regulations could give rise to regulatory sanctions, customer rescission rights, action by state and local attorneysgeneral, and civil or criminal liability. The creation of the CFPB by the Dodd-Frank Act has led to enhanced enforcement of consumer financial protectionlaws.CFPBThe CFPB is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conductof providers of certain consumer financial products and services. The CFPB has rulemaking authority over many of the statutes governing products andservices offered to bank and thrift consumers. For banking organizations with assets of $10 billion or more, such as BankUnited, Inc. and the Bank, the CFPBhas exclusive rule making and examination, and primary enforcement authority under federal consumer financial law. In addition, states are permitted toadopt consumer protection laws and regulations that are stricter than those regulations promulgated by the CFPB.The Community Reinvestment ActThe CRA is intended to encourage banks to help meet the credit needs of their service areas, including low and moderate-income neighborhoods,consistent with safe and sound operations. The bank regulators examine and assign each bank a public CRA rating.The CRA requires bank regulators to take into account the bank's record in meeting the needs of its service area when considering an application by abank to establish or relocate a branch or to conduct certain mergers or acquisitions. The Federal Reserve Board is required to consider the CRA records of aBHC's controlled banks when considering an application by the BHC to acquire a banking organization or to merge with another BHC. If BankUnited, Inc. orBankUnited applies for regulatory approval to make certain investments, the regulators will consider the CRA record of target institutions and BankUnited,Inc.'s depository institution subsidiaries. An unsatisfactory CRA record could substantially delay approval or result in denial of an application. Theregulatory agency's assessment of the institution's record is made available to the public. Following its most recent CRA examination in September 2015,BankUnited received an overall rating of "Satisfactory."EmployeesAt December 31, 2017, we employed 1,698 full-time employees and 65 part-time employees. None of our employees are parties to a collectivebargaining agreement. We believe that our relations with our employees are good.Available InformationOur website address is www.bankunited.com. Our electronic filings with the SEC (including all Annual Reports on Form 10-K, Quarterly Reports onForm 10-Q, Current Reports on Form 8-K, and if applicable, amendments to those reports) are available free of charge on the website as soon as reasonablypracticable after they are electronically filed with, or furnished to, the SEC. The information posted on our website is not incorporated into this AnnualReport. In addition, the SEC maintains a website that contains reports and other information filed with the SEC. The website can be accessed athttp://www.sec.gov.11Table of ContentsItem 1A. Risk FactorsRisks Related to Our BusinessOur business may be adversely affected by conditions in the financial markets and economic conditions generally.Deterioration in business or economic conditions generally, or more specifically in the principal markets in which we do business, could have one ormore of the following adverse effects on our business, financial condition and results of operations:•A decrease in demand for our loan and deposit products;•An increase in delinquencies and defaults by borrowers or counterparties;•A decrease in the value of our assets;•A decrease in our earnings;•A decrease in liquidity; and•A decrease in our ability to access the capital markets.Our enterprise risk management framework may not be effective in mitigating the risks to which we are subject, or in reducing the potential for lossesin connection with such risks.Our enterprise risk management framework is designed to identify and minimize or mitigate the risks to which we are subject, as well as any lossesstemming from such risks. Although we seek to identify, measure, monitor, report, and control our exposure to such risks, and employ a broad and diversifiedset of risk monitoring and mitigation techniques in the process, those techniques are inherently limited in their ability to anticipate the existence ordevelopment of risks that are currently unknown and unanticipated. The ineffectiveness of our enterprise risk management framework in mitigating theimpact of known risks or the emergence of previously unknown or unanticipated risks may result in our incurring losses in the future that could adverselyimpact our financial condition and results of operations.Our business is highly susceptible to credit risk on our non-covered assets.As a lender, we are exposed to the risk that our customers will be unable to repay their loans according to their terms and that the collateral securing thepayment of their loans, if any, may be insufficient to ensure repayment. Credit losses are inherent in the business of making loans. We are also subject tocredit risk that is embedded in our securities portfolio. Our credit standards, procedures and policies may not prevent us from incurring substantial creditlosses, particularly if economic or market conditions deteriorate. It is difficult to determine the many ways in which a decline in economic or marketconditions may impact the credit quality of our assets. The Single Family Shared-Loss Agreement only covers a small percentage of assets, and credit losseson assets not covered by the Single Family Shared-Loss Agreement could have a material adverse effect on our operating results.Our allowance for loan and lease losses may not be adequate to cover actual credit losses.We maintain an allowance for loan and lease losses ("ALLL") that represents management's estimate of probable incurred losses inherent in our creditportfolio. This estimate requires management to make significant assumptions and involves a high degree of judgment, which is inherently subjective,particularly as our non-covered loan portfolio has not yet developed an observable loss trend through a full credit cycle. Management considers numerousfactors in determining the amount of the ALLL, including, but not limited to, historical loss severities and net charge-off rates of BankUnited and othercomparable financial institutions, internal risk ratings, loss forecasts, collateral values, delinquency rates, the level of non-performing, criticized, classifiedand restructured loans in the portfolio, product mix, underwriting and credit administration policies and practices, portfolio trends, concentrations, industryconditions, economic trends and other factors considered by management to have an impact on the ability of borrowers to repay their loans.If management's assumptions and judgments prove to be incorrect, our current allowance may be insufficient and we may be required to increase ourALLL. In addition, regulatory authorities periodically review our ALLL and may require us to increase our provision for loan losses or recognize further loancharge-offs, based on judgments different than those of our management. Adverse economic conditions could make management's estimate even morecomplex and difficult to determine. Any increase in our ALLL will result in a decrease in net income and capital and could have a material adverse effect onour financial condition and results of operations. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations—Analysis of the Allowance for Loan and Lease Losses" and "Management's Discussion and Analysis of12Table of ContentsFinancial Condition and Results of Operations—Critical Accounting Policies and Estimates—Allowance for Loan and Lease Losses."The FASB has recently issued an ASU that will result in a significant change in how we and other financial institutions recognize credit losses andmay have a material impact on our financial condition and results of operations or on the industry more broadly.In June 2016, the FASB issued an ASU, "Financial Instruments- Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,"which replaces the current "incurred loss" model for recognizing credit losses with an "expected loss" model referred to as the CECL model. Under the CECLmodel, we will be required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities,at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historicalexperience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement will takeplace at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the "incurred loss" modelrequired under current GAAP, which delays recognition until it is probable a loss has been incurred. The adoption of the CECL model may materially affecthow we determine our ALLL and could require us to significantly increase our ALLL, resulting in an adverse impact to our financial condition, regulatorycapital levels and results of operations. Moreover, the CECL model may create more volatility in the level of our ALLL. We are not yet able to reasonablyestimate the impact that adoption of the CECL model will have on our financial condition, regulatory capital levels or results of operations. The ASU will beeffective for us for fiscal years beginning after December 15, 2019.Additionally, uncertainty exists around whether adoption of the CECL model by the financial services industry more broadly will have an impact onloan demand, how loan products are structured, the availability and pricing of credit in the markets or regulatory capital levels for the industry.We depend on the accuracy and completeness of information about clients and counterparties.In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished by or onbehalf of clients and counterparties, including financial statements and other financial information. We also may rely on representations of clients andcounterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.The credit quality of our loan portfolio and results of operations are affected by residential and commercial real estate values and the level ofresidential and commercial real estate sales and rental activity.A material portion of our loans are secured by residential or commercial real estate. The ability of our borrowers to repay their obligations and ourfinancial results may therefore be adversely affected by changes in real estate values. Commercial real estate valuations in particular are highly subjective, asthey are based on many assumptions. Such valuations can be significantly affected over relatively short periods of time by changes in business climate,economic conditions, occupancy rates, the level of rents, interest rates and, in many cases, the results of operations of businesses and other occupants of thereal property. The properties securing income-producing investor real estate loans may not be fully leased at the origination of the loan. A borrower's abilityto repay these loans is dependent upon stabilization of the properties and additional leasing through the life of the loan or the borrower's successful operationof a business. Weak economic conditions may impair a borrower's business operations, lead to elevated vacancy rates or lease turnover, slow the execution ofnew leases or result in falling rents. These factors could result in further deterioration in the fundamentals underlying the commercial real estate market andthe deterioration in value of some of our loans. Similarly, residential real estate valuations can be impacted by housing trends, the availability of financing atreasonable interest rates, the level of supply of available housing, governmental policy regarding housing and housing finance and general economicconditions affecting consumers.We make credit and reserve decisions based on current real estate values, the current conditions of borrowers, properties or projects and our expectationsfor the future. If real estate values or fundamentals underlying the commercial and residential real estate markets decline, we could experience higherdelinquencies and charge-offs beyond that provided for in the ALLL.Our portfolio of loans secured by taxi medallions is exposed to fluctuations in the demand for taxi services and valuation of the underlying collateral.We have a portfolio of loans secured by taxi medallions, substantially all of which are in New York City. The introduction of application-based mobileride-hailing services, such as Uber, has caused a more competitive landscape for these services, resulting in reduced ridership and utilization of taxis and areduction in the pool of drivers willing to drive taxis. Consequently, the reduced income generated from the operation of taxi medallions has causedsignificant declines in the market value of13Table of Contentsmedallions, increased defaults on loans secured by taxi medallions and an increase in TDRs, due to borrowers' inability to repay these loans at maturity.Management has provided for estimated losses incurred through December 31, 2017; however, further declines in demand for taxi services or furtherdeterioration in the value of medallions may result in higher delinquencies, additional TDRs and losses beyond that provided for in the ALLL.Since we engage in lending secured by real estate and may be forced to foreclose on the collateral property and own the underlying real estate, we maybe subject to the increased costs and risks associated with the ownership of commercial or residential real property, which could have an adverse effect onour business or results of operations.A significant portion of our loan portfolio is secured by residential or commercial real property. During the ordinary course of business, we may forecloseon and take title to properties securing certain loans, in which case, we are exposed to the risks inherent in the ownership of real estate. The amount that we,as a mortgagee, may realize after a default is dependent upon factors outside of our control, including:•general or local economic conditions;•environmental cleanup liability;•neighborhood values;•interest rates;•commercial real estate rental and vacancy rates;•real estate tax rates;•operating expenses of the mortgaged properties;•supply of and demand for properties;•ability to obtain and maintain adequate occupancy of the properties;•zoning laws;•governmental rules, regulations and fiscal policies; and•hurricanes or other natural or man-made disasters.These same factors may impact the ability of borrowers to repay their obligations that are secured by real property.Our business is susceptible to interest rate risk.Our business and financial performance are impacted by market interest rates and movements in those rates. Since a high percentage of our assets andliabilities are interest bearing or otherwise sensitive in value to changes in interest rates, changes in rates, in the shape of the yield curve or in spreadsbetween different types of rates can have a material impact on our results of operations and the values of our assets and liabilities. Changes in the value ofinvestment securities available for sale and certain derivatives directly impact equity through adjustments of accumulated other comprehensive income andchanges in the values of certain other assets and liabilities may directly or indirectly impact earnings. Interest rates are highly sensitive to many factors overwhich we have no control and which we may not be able to anticipate adequately, including general economic conditions and the monetary and tax policiesof various governmental bodies, particularly the Federal Reserve Board.Our earnings and cash flows depend to a great extent upon the level of our net interest income. Net interest income is the difference between the interestincome we earn on loans, investments and other interest earning assets, and the interest we pay on interest bearing liabilities, such as deposits andborrowings. The recent persistent low level of market interest rates, flattening of the yield curve and narrow spreads has limited our ability to add higheryielding assets to the balance sheet. If this prolonged period of low rates continues beyond current forecasts, interest rates increase more slowly thanexpected, the yield curve flattens or inverts, or a negative interest rate environment emerges in the United States, downward pressure on our net interestmargin may be exacerbated, negatively impacting our net interest income in the future. Changes in interest rates can increase or decrease our net interestincome, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest bearingliabilities mature or reprice more quickly than interest earning assets in a period of rising rates, an increase in interest rates could reduce net interest income.When interest earning assets mature or reprice more quickly than interest bearing liabilities, falling interest rates could reduce net interest income.Additionally, an increase in interest rates may, among other things, reduce the demand for loans and our deposit products, decrease loan repayment rates andnegatively affect borrowers' ability to meet their obligations. A decrease in the general level14Table of Contentsof interest rates may affect us through, among other things, increased prepayments on our loan and mortgage-backed securities portfolios. Competitiveconditions may also impact the interest rates we are able to earn on new loans or are required to pay on deposits, negatively impacting both our ability togrow deposits and interest earning assets and our net interest income.We attempt to manage interest rate risk by adjusting the rates, maturity, repricing, mix and balances of the different types of interest-earning assets andinterest bearing liabilities and through the use of hedging instruments; however, interest rate risk management techniques are not precise, and we may not beable to successfully manage our interest rate risk. Our ability to manage interest rate risk could be negatively impacted by longer fixed rate terms on loansbeing added to our portfolio or by unpredictable behavior of depositors in various interest rate environments. A rapid or unanticipated increase or decrease ininterest rates, changes in the shape of the yield curve or in spreads between rates could have an adverse effect on our net interest margin and results ofoperations.A failure to maintain adequate liquidity could adversely affect our financial condition and results of operations.Effective liquidity management is essential for the operation of our business. We require sufficient liquidity to meet customer loan requests, customerdeposit maturities and withdrawals and other cash commitments under both normal operating conditions and under extraordinary or unpredictablecircumstances causing industry or general financial market stress. Our access to funding sources in amounts adequate to finance our activities on terms thatare acceptable to us could be impaired by factors that affect us specifically or the financial services industry or economy generally. Factors that coulddetrimentally impact our access to liquidity sources include a downturn in economic conditions in the geographic markets in which our operations areconcentrated or in the financial or credit markets in general. Our access to liquidity in the form of deposits may also be affected by the liquidity needs of ourdepositors and by competition for deposits in our primary markets. A substantial portion of our liabilities consist of deposit accounts that are payable ondemand or upon several days' notice, while by comparison, the majority of our assets are loans, which cannot be called or sold in the same time frame.Although we have historically been able to replace maturing deposits and borrowings as necessary, we might not be able to replace such funds in the future.A failure to maintain adequate liquidity could materially and adversely affect our business, results of operations or financial condition.We may not be successful in executing our fundamental business strategy.Organic growth and diversification of our business are essential components of our business strategy. Commercial and consumer banking, for both loanand deposit products, in our primary markets is highly competitive. Our ability to achieve organic growth is also dependent on economic conditions in ourprimary markets. There is no guarantee that we will be able to successfully or profitably execute our organic growth strategy.While acquisitions have not historically been a primary contributor to our growth, we opportunistically consider potential acquisitions of financialinstitutions and complementary non-bank businesses. There are risks that may inhibit our ability to successfully execute such acquisitions. We compete withother financial institutions for acquisition opportunities and there are a limited number of candidates that meet our acquisition criteria. Consequently, wemay not be able to identify suitable candidates for acquisitions.If we do identify suitable candidates, there is no assurance that we will be able to obtain the required regulatory approvals in order to acquire them. If wedo succeed in consummating future acquisitions, acquisitions involve risks that the acquired businesses may not achieve anticipated revenue, earnings,synergies or cash flows or that the other strategic benefits of the acquisitions may not be realized. There may also be unforeseen liabilities relating to theacquired businesses or arising out of the acquisitions, asset quality problems of the acquired entities, difficulty operating in markets in which we have had noor only limited experience and other conditions not within our control, such as adverse personnel relations, loss of customers because of change in identity,and deterioration in local economic conditions.In addition, the process of integrating acquired entities will divert significant management time and resources. We may not be able to integratesuccessfully or operate profitably any financial institutions or complementary businesses we may acquire. We may experience disruption and incurunexpected expenses in integrating acquisitions. Any acquisitions we do make may not enhance our cash flows, business, financial condition, results ofoperations or prospects and may have an adverse effect on our results of operations, particularly during periods in which the acquisitions are being integratedinto our operations.Lastly, growth, whether organic or through acquisition is dependent on the availability of capital and funding. Our ability to raise capital through thesale of stock or debt securities may be affected by market conditions, economic conditions or regulatory changes. There is no assurance that sufficient capitalor funding will be available in the future, upon acceptable terms or at all.15Table of ContentsRisks related to our Single Family Shared-Loss Agreement with the FDIC may result in significant losses.A significant portion of BankUnited's revenue continues to be derived from the covered assets. The Single Family Shared-Loss Agreement with the FDICprovides that a significant portion of losses related to the covered assets will be borne by the FDIC. Under the Single Family Shared-Loss Agreement, we areobligated to comply with certain loan servicing standards, including requirements to participate in loan modification programs. A failure to comply withthese standards or other provisions of the Single Family Shared-Loss Agreement could result in covered assets losing some or all of their coverage.BankUnited's compliance with the terms of the Single Family Shared-Loss Agreement is subject to audit by the FDIC through its designated agent. Therequired terms of the agreement are extensive and failure to comply with any of the guidelines could result in a specific asset or group of assets losing theirloss sharing coverage. See "Item 1. Business—The FSB Acquisition."As discussed in “Item 1. Business - The FSB Acquisition”, the Single Family Shared-Loss Agreement is scheduled to terminate as soon as May 2019. Atthe time of termination, certain aspects of our exit from the Single Family Shared-Loss Agreement will be subject to agreement with the FDIC, which may bebeyond our control. Commensurate with the termination of the Single Family Shared-Loss Agreement, we may sell all or a portion of the remaining coveredassets and revenue generated from such covered assets is expected to cease. Our business, financial condition and results of operations following terminationof the Single Family Shared-Loss Agreement and the resolution of the related covered assets will be more dependent on our ability to execute on ourunderlying business strategy.The geographic concentration of our markets in Florida and the New York metropolitan area makes our business highly susceptible to local economicconditions.Unlike some larger financial institutions that are more geographically diversified, our operations are concentrated in Florida and the New Yorkmetropolitan area. Additionally, a significant portion of our loans secured by real estate are secured by commercial and residential properties in thesegeographic regions. Accordingly, the ability of our borrowers to repay their loans, and the value of the collateral securing such loans, may be significantlyaffected by economic conditions in these regions or by changes in the local real estate markets. Disruption or deterioration in economic conditions in themarkets we serve could result in one or more of the following:•an increase in loan delinquencies;•an increase in problem assets and foreclosures;•a decrease in the demand for our products and services; or•a decrease in the value of collateral for loans, especially real estate, in turn reducing customers' borrowing power, the value of assets associated withproblem loans and collateral coverage.The effects of adverse weather events such as Hurricanes Irma and Harvey or other natural or man-made disasters may negatively affect ourgeographic markets or disrupt our operations, which could have an adverse impact on our results of operations.Our geographic markets in Florida and other coastal areas are susceptible to severe weather, including hurricanes, flooding and damaging winds. Asignificant portion of our loans are to borrowers whose businesses are located in or secured by properties located in the state of Florida, which was impactedby Hurricane Irma in September 2017. In addition, the Bank has a limited number of customers and collateral properties located in areas of Texas that wereimpacted by Hurricane Harvey in August 2017.Weather events such as Hurricanes Irma and Harvey, or other natural or man-made disasters or terrorist activities, can disrupt our operations, result indamage to our facilities and negatively affect the local economies in which we operate. These events may lead to a decline in loan originations, reduce ordestroy the value of collateral for our loans, particularly real estate, negatively impact the business operations of our customers, and cause an increase indelinquencies, foreclosures and loan losses. These events may also lead to a decline in regional economic conditions and prospects in certain circumstances.Our business or results of operations may be adversely impacted by these and other negative effects of such events.Although we currently believe that Hurricanes Harvey and Irma did not materially impact the ability of the substantial majority of our borrowers to repaytheir loans, it is premature to conclude with certainty as to the ultimate impact of these hurricanes on our level of loan losses, our business or the results of ouroperations.The Bank is generally named as a loss payee on hazard and flood insurance policies covering collateral properties and carries casualty and businessinterruption insurance. These policies could partially mitigate losses that the Bank may sustain due to the effects of these hurricanes or other natural or man-made disasters that may occur in the future; however, the timing16Table of Contentsand amount of any proceeds that we may recover from insurance policies is uncertain and may not be sufficient to adequately compensate us for losses thatwe experience due to these hurricanes and other natural or man-made disasters.Our portfolio of assets under operating lease is exposed to fluctuations in the demand for and valuation of the underlying assets.Our equipment leasing business is exposed to asset risk resulting from ownership of the equipment on operating lease. Asset risk arises from fluctuationsin supply and demand for the underlying leased equipment. We are exposed to the risk that, at the end of the lease term or in the event of early termination,the value of the asset will be lower than expected, resulting in reduced future lease income over the remaining life of the asset or a lower sale value. Demandfor and the valuation of the leased equipment is sensitive to shifts in general and industry specific economic and market trends, governmental regulations andchanges in trade flows from specific events such as natural or man-made disasters. A significant portion of our equipment under operating lease consists ofrail cars used directly or indirectly in oil and gas drilling activities. Although we regularly monitor the value of the underlying assets and the potentialimpact of declines in oil and natural gas prices on the value of railcars on operating lease, there is no assurance that the value of these assets will not beadversely impacted by conditions in the energy industry.Our reported financial results depend on management's selection and application of accounting policies and methods and related assumptions andestimates.Our accounting policies and estimates are fundamental to our reported financial condition and results of operations. Management is required to makedifficult, complex or subjective judgments in selecting and applying many of these accounting policies. In some cases, management must select anaccounting policy or method from two or more alternatives, any of which may be reasonable under the circumstances, yet may result in us reportingmaterially different results than would have been reported under a different alternative.From time to time, the Financial Accounting Standards Board and SEC may change the financial accounting and reporting standards that govern thepreparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial conditionand results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, resulting in a restatement of prior periodfinancial statements. See Note 1 to the consolidated financial statements for more information about pending accounting pronouncements that may have amaterial impact on our reported financial results.Our internal controls may be ineffective.Management regularly monitors, evaluates and updates our internal controls over financial reporting, disclosure controls and procedures, and corporategovernance policies and procedures. Any system of controls, however well designed and operated, can provide only reasonable, not absolute, assurances thatthe objectives of the controls are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controlsand procedures could have a material adverse effect on our financial condition and results of operations.We depend on our executive officers and key personnel to continue the implementation of our long-term business strategy and could be harmed by theloss of their services.We believe that our continued growth and future success will depend in large part on the skills of our senior management team. We believe our seniormanagement team possesses valuable knowledge about and experience in the banking industry and that their knowledge and relationships could be difficultto replicate. The composition of our senior management team and our other key personnel may change over time. Although our President and ChiefExecutive Officer has entered into an employment agreement with us, he may not complete the term of his employment agreement or renew it uponexpiration. Other members of our senior management team are not subject to employment agreements. Our success also depends on the experience of otherkey personnel and on their relationships with the customers and communities they serve. The loss of service of one or more of our executive officers or keypersonnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition oroperating results.17Table of ContentsWe face significant competition from other financial institutions and financial services providers, which may adversely impact our growth orprofitability.The primary markets we currently serve are Florida and the New York metropolitan area. Consumer and commercial banking in these markets is highlycompetitive. Our markets contain not only a large number of community and regional banks, but also a significant presence of the country's largestcommercial banks. We compete with other state and national financial institutions located in Florida, New York and adjoining states as well as savings andloan associations, savings banks and credit unions for deposits and loans. In addition, we compete with financial intermediaries, such as consumer financecompanies, marketplace lenders, mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies as wellas major retailers, all actively engaged in providing various types of loans and other financial services.The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continuedconsolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer virtually anytype of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Increased competitionamong financial services companies may adversely affect our ability to market our products and services. Also, technology has lowered barriers to entry andmade it possible for banks to compete in our market without a retail footprint by offering competitive rates, as well as non-banks, including online providers,to offer products and services traditionally provided by banks. Many of our competitors have fewer regulatory constraints and may have lower cost structures.Additionally, due to their size, many competitors may offer a broader range of products and services as well as better pricing for certain products and servicesthan we can.Our ability to compete successfully depends on a number of factors, including:•the ability to develop, maintain and build upon long-term customer relationships based on quality service, high ethical standards and safe andsound banking practices;•the ability to attract and retain qualified employees to operate our business effectively;•the ability to expand our market position;•the scope, relevance and pricing of products and services offered to meet customer needs and demands;•the rate at which we introduce new products and services relative to our competitors;•customer satisfaction with our level of service; and•industry and general economic trends.Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability,which, in turn, could harm our business, financial condition and results of operations.The inability of BankUnited, Inc. to receive dividends from its subsidiary bank could have a material adverse effect on the ability of BankUnited, Inc.to make payments on its debt, pay cash dividends to its shareholders or execute share repurchases.BankUnited, Inc. is a separate and distinct legal entity from the Bank, and a substantial portion of its revenue consists of dividends from the Bank. Thesedividends are the primary funding source for the dividends paid by BankUnited, Inc. on its common stock and the interest and principal payments on its debt.In addition, any stock repurchases made by BankUnited, Inc., including under the share repurchase program announced in January 2018, may depend inwhole or in part upon dividends from the Bank. Various federal and state laws and regulations limit the amount of dividends that a bank may pay to its parentcompany. In addition, our right to participate in a distribution of assets upon the liquidation or reorganization of a subsidiary may be subject to the priorclaims of the subsidiary’s depositors and other creditors. If the Bank is unable to pay dividends, BankUnited, Inc. might not be able to service its debt, pay itsobligations, pay dividends on its common stock or make share repurchases.We rely on analytical and forecasting models that may prove to be inadequate or inaccurate, which could adversely impact the effectiveness of ourstrategic planning and our results of operations.The processes we use to forecast future performance and estimate expected credit losses, the effects of changing interest rates, sources and uses ofliquidity, cash flows from the covered assets, real estate values, and economic indicators such as unemployment on our financial condition and results ofoperations depend upon the use of analytical and forecasting tools and models. These tools and models reflect assumptions that may not be accurate,particularly in times of market stress or other18Table of Contentsunforeseen circumstances. Furthermore, even if our assumptions are accurate predictors of future performance, the tools and models they are based on mayprove to be inadequate or inaccurate because of other flaws in their design or implementation. If these tools prove to be inadequate or inaccurate, ourstrategic planning processes, earnings and capital may be adversely impacted.Tax refunds relating to the discrete income tax benefit recognized by the Company in the fourth quarter of 2017 have not yet been finalized byapplicable taxing authorities and the Company cannot provide assurances as to when or if they will be received.During the fourth quarter of 2017, the Company recognized a discrete income tax benefit of $327.9 million related to a matter that arose during anongoing audit of the Company's 2013 federal income tax return. The discrete income tax benefit recognized includes expected refunds of federal income taxof $295 million, as well as estimated interest on the federal refund and estimated refunds from certain state and local taxing jurisdictions. Although theCompany expects to receive the federal tax refund following completion of the audit and has concluded that the requirements for accounting recognition ofthe benefit have been met, the Company cannot provide assurances as to when or if it will ultimately receive the refund (or the related state and local refunds)because the IRS has not yet finalized its entire internal process, or provided the Company with a notice of proposed adjustment or revenue agent report andthe refund claims are subject to review by the Joint Committee on Taxation. The Company is continuing to evaluate whether it has claims in other statejurisdictions and whether it may have any claims for federal or state income taxes relating to tax years prior to 2012. The Company cannot provide assurancesas to when or to what extent it may have any claims relating to such other state and local taxing jurisdictions or in respect of prior tax years. Any delays orfailures to receive the federal income tax refund or related refunds from state and local taxing jurisdictions could have an adverse effect on our financialcondition or operating results.Changes in taxes and other assessments may adversely affect us.The legislatures and taxing authorities in the tax jurisdictions in which we operate regularly enact reforms to the tax and other assessment regimes towhich we and our customers are subject. For example, the Tax Cuts and Jobs Act was enacted in December 2017. This legislation made significant changes tothe U.S. Internal Revenue Code, many of which are highly complex and may require interpretations and implementing regulations. The effects of thesechanges and any other changes that result from such interpretations and implementing regulations or enactment of additional tax reforms cannot bequantified and there can be no assurance that any such reforms would not have an adverse effect upon our business.Tax laws are complex and subject to different interpretations by the taxpayer and relevant governmental taxing authorities, which are sometimes subjectto prolonged evaluation periods until a final resolution is reached. In establishing a provision for income tax expense, filing returns and establishing thevalue of deferred tax assets and liabilities for purposes of its financial statements, the Company must make judgments and interpretations about theapplication of these inherently complex tax laws. If the judgments, estimates and assumptions the Company uses in establishing provisions, preparing its taxreturns or establishing the value of deferred tax assets and liabilities for purposes of its financial statements are subsequently found to be incorrect, therecould be a material effect on our results of operations.Operational RisksWe are subject to a variety of operational, legal and compliance risks, including the risk of fraud or theft by employees or outsiders, which mayadversely affect our business and results of operations.We are exposed to many types of operational risks, including legal and compliance risk, the risk of fraud or theft by employees or outsiders andoperational errors, including clerical or record-keeping errors or those resulting from faulty or disabled technology. The occurrence of any of these eventscould cause us to suffer financial loss, face regulatory action and suffer damage to our reputation.19Table of ContentsBecause the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before theyare discovered and successfully rectified. Our necessary dependence upon automated systems to record and process transactions and our large transactionvolume may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult todetect. We also may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control which may give riseto disruption of service to customers and to financial loss or liability. The occurrence of any of these events could result in a diminished ability to operate ourbusiness as well as potential liability to customers and counterparties, reputational damage and regulatory intervention, which could adversely affect ourbusiness, financial condition or results of operations.We are dependent on our information technology and telecommunications systems. Systems failures or interruptions could have an adverse effect onour financial condition and results of operations.Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems. Werely on these systems to process new and renewal loans, gather deposits, provide customer service, facilitate collections and share data across ourorganization. The failure of these systems could interrupt our operations. Because our information technology and telecommunications systems interfacewith and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail orexperience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to process new and renewalloans, gather deposits and provide customer service, compromise our ability to operate effectively, damage our reputation, result in a loss of customerbusiness, and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on ourfinancial condition and results of operations.We are dependent on third-party service providers for certain aspects of our business infrastructure and information and telecommunications systems.We rely on third parties to provide key components of our business infrastructure and major systems including, but not limited to, core banking systemssuch as loan servicing and deposit transaction processing systems, our electronic funds transfer transaction processing, cash management and online bankingservices. While we select and monitor the performance of third party vendors carefully, we do not control their actions. Any problems caused by these thirdparties, including those resulting from disruptions in communication services provided by a vendor, failure of a vendor to handle current or higher volumes,failure of a vendor to provide services for any reason or poor performance of services, or the termination of a third-party software license or service agreementon which any of these systems is based, could adversely affect our ability to deliver products and services to our customers and otherwise conduct ourbusiness. In many cases, our operations rely heavily on the secure processing, storage and transmission of information and the monitoring of a large numberof transactions on a minute-by-minute basis, and even a short interruption in service could have significant consequences. Financial or operationaldifficulties of a third party vendor could also adversely affect our operations if those difficulties interfere with the vendor's ability to serve us effectively or atall. Replacing these third party vendors could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidableinherent risk to our business operations.Failure by us or third parties to detect or prevent a breach in information security or to protect customer privacy could have an adverse effect on ourbusiness.In the normal course of our business, we collect, process and retain sensitive and confidential client and customer information. Despite the securitymeasures we have in place, our facilities and systems may be vulnerable to cyber-attacks, security breaches, acts of vandalism, computer viruses, misplaced orlost data, programming and / or human errors, or other similar events, especially because, in the case of any intentional breaches, the techniques used changefrequently or are not recognized until launched, and cyber-attacks can originate from a wide variety of sources, including third parties.We provide our customers the ability to bank remotely, including online, via mobile devices and over the telephone. The secure transmission ofconfidential information over the Internet and other remote channels is a critical element of remote banking. Our network could be vulnerable tounauthorized access, computer viruses, phishing schemes and other security breaches. In addition to cyber-attacks or other security breaches involving thetheft of sensitive and confidential information, hackers recently have engaged in attacks against large financial institutions, particularly denial of serviceattacks, designed to disrupt key business services such as customer-facing web sites. We may be required to spend significant capital and other resources toprotect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. Any cyber-attack or othersecurity breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer information could severely damage ourreputation, erode confidence in the security of our systems, products and services, expose us to the risk of litigation and liability, disrupt our operations andhave a material adverse effect on our business.20Table of ContentsIn addition, we interact with and rely on financial counterparties for whom we process transactions and who process transactions for us and rely on otherthird parties, as noted above. Each of these third parties may be targets of the same types of fraudulent activity, computer break-ins and other cyber securitybreaches described above. The cyber security measures that they maintain to mitigate the risk of such activity may be different from our own, and in manycases we do not have any control over the types of security measures they may choose to implement. We may also incur costs as a result of data or securitybreaches of third parties with whom we do not have a significant direct relationship. As a result of financial entities and technology systems becoming moreinterdependent and complex, a cyber incident, information breach or loss, or technology failure that compromises the systems or data of one or more financialentities could have a material impact on counterparties or other market participants, including us.We have taken measures to implement safeguards to support our operations, but our ability to conduct business may be adversely affected by anysignificant disruptions to us or to third parties with whom we interact. We have a comprehensive set of information security policies and protocols and adedicated information security division that reports to the Chief Risk Officer, with oversight by the Risk Committee of the Board of Directors. The RiskCommittee receives regular reporting related to information security risks and the monitoring and management of those risks.Failure to keep pace with technological changes could have a material adverse impact on our ability to compete for loans and deposits, and thereforeon our financial condition and results of operations.Financial products and services have become increasingly technology-driven. To some degree, our ability to meet the needs of our customerscompetitively, and in a cost-efficient manner, is dependent on our ability to keep pace with technological advances and to invest in new technology as itbecomes available. Many of our larger competitors have greater resources to invest in technology than we do and may be better equipped to market newtechnology-driven products and services. The widespread adoption of new technologies, including internet services and payment systems, could require us toincur substantial expenditures to modify or adapt our existing products and services.The soundness of other financial institutions, particularly our financial institution counterparties, could adversely affect us.Our ability to engage in routine funding and other transactions could be adversely affected by the stability and actions of other financial servicesinstitutions. Financial services institutions are interrelated as a result of trading, clearing, servicing, counterparty and other relationships. We have exposureto an increasing number of financial institutions and counterparties. These counterparties include institutions that may be exposed to various risks overwhich we have little or no control.Adverse developments affecting the overall strength and soundness of the financial services industry as a whole and third parties with whom we haveimportant relationships could have a negative impact on our business even if we are not subject to the same adverse developments.Reputational risks could affect our results.Our ability to originate new business and maintain existing customer relationships is highly dependent upon customer and other external perceptions ofour business practices. Adverse perceptions regarding our business practices could damage our reputation in the customer, funding and capital markets,leading to difficulties in generating and maintaining accounts as well as in financing them. Negative public opinion can result from our actual or allegedconduct in any number of activities, including lending practices, employee relations, corporate governance and acquisitions and from actions taken bygovernment regulators and community organizations in response to those activities. Adverse developments with respect to external perceptions regarding thepractices of our competitors, or our industry as a whole, or the general economic climate may also adversely impact our reputation. These perceptions aboutus could cause our business to be negatively affected and exacerbate the other risks that we face. In addition, adverse reputational impacts on third partieswith whom we have important relationships may adversely impact our reputation. Adverse reputational impacts or events may also increase our litigationrisk. We carefully monitor internal and external developments for areas of potential reputational risk and have established governance structures to assist inevaluating such risks in our business practices and decisions.Risks Relating to the Regulation of Our IndustryWe operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executivecompensation and accounting principles, or changes in them, or our failure to comply with them, may adversely affect us.We are subject to extensive regulation, supervision, and legal requirements that govern almost all aspects of our operations, see Item 1"Business—Regulation and Supervision." The Dodd-Frank Act, which imposes significant regulatory and compliance21Table of Contentsrequirements on financial institutions, is an example of this type of federal regulation. Intended to protect customers, depositors, the DIF, and the overallfinancial stability of the United States, these laws and regulations, among other matters, prescribe minimum capital requirements, impose limitations on thebusiness activities in which we can engage, limit the dividend or distributions that BankUnited can pay to BankUnited, Inc., restrict the ability of institutionsto guarantee our debt, and impose specific accounting requirements on us. Banking regulators may also from time to time focus on issues that may impact thepace of growth of our business and operations, such as commercial real estate lending concentrations. Compliance with laws and regulations can be difficultand costly, and changes to laws and regulations often impose additional compliance costs. In addition, federal banking agencies, including the OCC andFederal Reserve Board, periodically conduct examinations of our business, including compliance with laws and regulations. Our failure to comply with theselaws and regulations, even if the failure follows good faith effort or reflects a difference in interpretation, could subject us to restrictions on our businessactivities, fines, remedial actions, administrative orders and other penalties, any of which could adversely affect our results of operations and capital base.Further, federal, state and local legislators and regulators regularly introduce measures or take actions that would modify the regulatory requirementsapplicable to banks, their holding companies and other financial institutions. Changes in laws, regulations or regulatory policies could adversely affect theoperating environment for the Company in substantial and unpredictable ways, increase our cost of doing business, impose new restrictions on the way inwhich we conduct our operations or add significant operational constraints that might impair our profitability. We cannot predict whether new legislationwill be enacted and, if enacted, the effect that it, or any implementing regulations, would have on our business, financial condition or results of operations.Failure to comply with the business plan filed with the OCC could have an adverse effect on our ability to execute our business strategy.In conjunction with the conversion of its charter to that of a national bank, BankUnited was required to file a business plan with the OCC, and is requiredto update the business plan annually. Failure to comply with the business plan could subject the Bank to regulatory actions that could impede our ability toexecute our business strategy. The provisions of the business plan restrict our ability to engage in business activities outside of those contemplated in thebusiness plan or to expand the level of our growth beyond that contemplated in the business plan without regulatory non-objection.Our ability to expand through acquisition or de novo branching requires regulatory approvals, and failure to obtain them may restrict our growth.We may identify opportunities to complement and expand our business by pursuing strategic acquisitions of financial institutions and othercomplementary businesses. We must generally receive federal regulatory approval before we can acquire an institution or business. In determining whether toapprove a proposed acquisition, federal banking regulators will consider, among other factors, the effect of the acquisition on competition, our financialcondition, our future prospects, and the impact of the proposal on U.S. financial stability. The regulators also review current and projected capital ratios andlevels, the competence, experience, and integrity of management and its record of compliance with laws and regulations, the convenience and needs of thecommunities to be served (including the acquiring institution's record of compliance under the CRA) and the effectiveness of the acquiring institution incombating money laundering activities. Such regulatory approvals may not be granted on terms that are acceptable to us, or at all. We may also be required tosell or close branches as a condition to receiving regulatory approval, which condition may not be acceptable to us or, if acceptable to us, may reduce thebenefit of any acquisition.In addition to the acquisition of existing financial institutions, as opportunities arise, we may continue de novo branching as a part of our internal growthstrategy and possibly enter into new markets through de novo branching. De novo branching and any acquisition carries with it numerous risks, including theinability to obtain all required regulatory approvals. The failure to obtain these regulatory approvals for potential future strategic acquisitions and de novobranches may impact our business plans and restrict our growth.22Table of ContentsFinancial institutions, such as BankUnited, face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-moneylaundering statutes and regulations.The federal Bank Secrecy Act, the USA PATRIOT Act, and other laws and regulations require financial institutions, among other duties, to institute andmaintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal FinancialCrimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civilmoney penalties for violations of those requirements, and has engaged in coordinated enforcement efforts with the individual federal banking regulators, aswell as the U.S. Department of Justice, Drug Enforcement Administration, and Internal Revenue Service. There is also increased scrutiny of compliance withthe sanctions programs and rules administered and enforced by the U.S. Treasury Department's Office of Foreign Assets Control.In order to comply with regulations, guidelines and examination procedures in this area, we dedicate significant resources to the ongoing execution ofour anti-money laundering program, continuously monitor and enhance as necessary our policies and procedures and maintain a robust automated anti-money laundering software solution. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of financialinstitutions that we may acquire in the future are deemed deficient, we could be subject to liability, including fines and regulatory actions such as restrictionson our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our expansionplans.We are subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties.The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lendingrequirements on financial institutions. The Department of Justice and other federal agencies are responsible for enforcing these laws and regulations. Asuccessful challenge to an institution's performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, includingthe required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on mergers and acquisitions activity, and restrictionson expansion activity. Private parties may also have the ability to challenge an institution's performance under fair lending laws in private class actionlitigation.The FDIC's restoration plan and any future related increased assessments could adversely affect our earnings.As a result of economic conditions and the enactment of the Dodd-Frank Act, the FDIC increased the deposit insurance assessment rates and thus raiseddeposit premiums for insured depository institutions. If the current level of deposit premiums are insufficient for the DIF to meet its funding requirements inthe future, further special assessments or increases in deposit insurance premiums may be required. We are generally unable to control the amount ofpremiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures in the future, we may be required to payFDIC premiums higher than current levels. Any future additional assessments or increases in FDIC insurance premiums may adversely affect our results ofoperations.We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws or anotherincident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect ouroperations and financial condition.Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in variousinformation systems that we maintain and in those maintained by third parties with whom we contract to provide data services. We are subject to complexand evolving laws and regulations governing the privacy and protection of personal information of individuals (including customers, employees, suppliersand other third parties). For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on ourability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii) requires that we provide certain disclosures tocustomers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us withnonaffiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information securityprogram containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customerinformation we process, as well as plans for responding to data security breaches. Various state and federal banking regulators and states have also enacteddata security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certaincircumstances in the event of a security breach. Ensuring that our collection, use, transfer and storage of personal information complies with all applicablelaws and regulations can increase our costs. Furthermore, we may not be able to ensure that all of our customers, suppliers, counterparties and other thirdparties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information istransmitted by electronic means. If personal, confidential or proprietary information of customers or others were to be23Table of Contentsmishandled or misused, we could be exposed to litigation or regulatory sanctions under personal information laws and regulations. Concerns regarding theeffectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate, could cause us to lose customers orpotential customers for our products and services and thereby reduce our revenues. Accordingly, any failure or perceived failure to comply with applicableprivacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify orcease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect ouroperations and financial condition.Unfavorable results from ongoing stress analyses may adversely affect our ability to retain customers or compete for new business opportunities.Under the Dodd-Frank Act, the Company is required to annually conduct a company-run stress test to estimate the potential impact of threemacroeconomic scenarios provided by the Federal Reserve on our regulatory capital ratios and certain other financial metrics. The Company is required topublicly disclose a summary of the results of these forward looking, company-run stress tests that assess the impact of hypothetical macroeconomic baseline,adverse and severely adverse economic scenarios provided by the Federal Reserve Board. The stress testing and capital planning processes may, among otherthings, require us to limit any dividend or other capital distributions we may make to stockholders or increase our capital levels, modify our business andgrowth strategies or decrease our exposure to various asset classes, any of which could have a material adverse effect on our financial condition or results ofoperations.Although the stress tests are not meant to assess our current condition, our customers may misinterpret and adversely react to the results of these stresstests. Any potential misinterpretations and adverse reactions could limit our ability to attract and retain customers or to effectively compete for new businessopportunities. The inability to attract and retain customers or effectively compete for new business may adversely affect our business, financial condition orresults of operations.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesAt December 31, 2017, BankUnited leased 139,572 square feet of office and operations space in Miami Lakes, Florida. This space includes our principalexecutive offices and operations center. At December 31, 2017, we provided banking services at 87 banking center locations in 15 Florida counties. Of the 87banking center properties, we leased 286,643 square feet in 83 locations and owned 20,347 square feet in four locations. Additionally, we leased 39,243square feet of office space, of which 11,227 square feet is vacant, and 5,580 square feet of warehouse space.At December 31, 2017, BankUnited leased 25,306 square feet of banking services space in New York City at five locations and 2,000 square feet ofbanking services space in Melville, New York at one location. We also leased 84,419 square feet of office space in New York in 10 locations, of which 10,048square feet have been subleased.At December 31, 2017, we leased 10,619 square feet of office and operations space in Baltimore, Maryland to house Bridge and 5,572 square feet ofoffice and operations space in Scottsdale, Arizona to house Pinnacle. We also leased 7,964 square feet of office and operations space in various states used bySBF.We believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future.Item 3. Legal ProceedingsThe Company is involved as plaintiff or defendant in various legal actions arising in the normal course of business. In the opinion of management, basedupon advice of legal counsel, the likelihood is remote that the impact of these proceedings, either individually or in the aggregate, would be material to theCompany’s consolidated financial position, results of operations or cash flows.Item 4. Mine Safety DisclosuresNone.24Table of ContentsPART II - FINANCIAL INFORMATIONItem 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket Information and Holders of RecordShares of our common stock trade on the NYSE under the symbol "BKU". The last sale price of our common stock on the NYSE on February 26, 2018was $41.21 per share.The following table shows the high and low sales prices for our common stock for the periods indicated, as reported by the NYSE: 2017 2016 High Low High Low1st Quarter$41.00 $34.35 $35.94 $29.722nd Quarter$37.80 $32.33 $36.28 $27.853rd Quarter$36.14 $30.37 $33.06 $28.644th Quarter$41.64 $32.34 $38.47 $28.13As of February 26, 2018, there were 551 stockholders of record of our common stock.Equity Compensation Plan InformationThe information set forth under the caption "Equity Compensation Plan Information" in our definitive proxy statement for the Company's 2018 annualmeeting of stockholders (the "Proxy Statement") is incorporated herein by reference.Dividend PolicyThe Company declared a quarterly dividend of $0.21 per share on its common stock for each of the four quarters of 2017 and 2016 resulting in totaldividends for 2017 and 2016 of $92.2 million and $90.0 million, respectively, or $0.84 per common share for each of the years ended December 31, 2017 and2016. Dividends from the Bank are the principal source of funds for the payment of dividends on our common stock. The Bank is subject to certainrestrictions that may limit its ability to pay dividends to us. See "Business—Regulation and Supervision—Regulatory Limits on Dividends andDistributions". The quarterly dividends on our common stock are subject to the discretion of our board of directors and dependent on, among other things,our financial condition, results of operations, capital requirements, restrictions contained in financing instruments and other factors that our board of directorsmay deem relevant.The accompanying notes are an integral part of these consolidated financial statements.25Table of ContentsStock Performance GraphThe graph set forth below compares the cumulative total stockholder return on an initial investment of $100 in our common stock between December 31,2012 and December 31, 2017, with the comparative cumulative total return of such amount on the S&P 500 Index and the S&P 500 Bank Index over thesame period. Reinvestment of all dividends is assumed to have been made in our common stock.The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is notnecessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.Index12/31/201212/31/201312/31/201412/31/201512/31/201612/31/2017BankUnited, Inc.100.00137.80125.32158.85170.46188.66S&P 500100.00132.39150.51152.59170.84208.14S&P Bank100.00135.72156.78158.10196.54240.87Recent Sales of Unregistered SecuritiesNone.Purchases of Equity Securities by the Issuer and Affiliated PurchasersNone.26Table of ContentsItem 6. Selected Consolidated Financial DataYou should read the selected consolidated financial data set forth below in conjunction with "Item 7. Management's Discussion and Analysis ofFinancial Condition and Results of Operations," and the audited consolidated financial statements and the related notes thereto included elsewhere in thisForm 10-K. The selected consolidated financial data set forth below is derived from our audited consolidated financial statements. At December 31, 2017 2016 2015 2014 2013 (dollars in thousands)Consolidated Balance Sheet Data: Cash and cash equivalents$194,582 $448,313 $267,500 $187,517 $252,749Investment securities available for sale, at fair value6,680,832 6,073,584 4,859,539 4,585,694 3,637,124Loans, net21,271,709 19,242,441 16,510,775 12,319,227 8,983,884FDIC indemnification asset295,635 515,933 739,880 974,704 1,205,117Equipment under operating lease, net599,502 539,914 483,518 314,558 196,483Total assets30,346,986 27,880,151 23,883,467 19,210,529 15,046,649Deposits21,878,479 19,490,890 16,938,501 13,511,755 10,532,428Federal Home Loan Bank advances4,771,000 5,239,348 4,008,464 3,307,932 2,412,050Notes and other borrowings402,830 402,809 402,545 10,627 2,263Total liabilities27,320,924 25,461,722 21,639,569 17,157,995 13,117,951Total stockholder's equity3,026,062 2,418,429 2,243,898 2,052,534 1,928,698Covered assets505,722 616,600 813,525 1,053,317 1,730,182 Years Ended December 31, 2017 2016 2015 2014 2013 (dollars in thousands, except per share data)Consolidated Income Statement Data: Interest income$1,204,461 $1,059,217 $880,816 $783,744 $738,821Interest expense254,189 188,832 135,164 106,651 92,611Net interest income950,272 870,385 745,652 677,093 646,210Provision for loan losses68,747 50,911 44,311 41,505 31,964Net interest income after provision for loan losses881,525 819,474 701,341 635,588 614,246Non-interest income157,904 106,417 102,224 84,165 68,049Non-interest expense634,968 590,447 506,672 426,503 364,293Income before income taxes404,461 335,444 296,893 293,250 318,002Provision (benefit) for income taxes (1)(209,812) 109,703 45,233 89,035 109,066Net income$614,273 $225,741 $251,660 $204,215 $208,936Share Data: Earnings per common share, basic$5.60 $2.11 $2.37 $1.95 $2.03Earnings per common share, diluted$5.58 $2.09 $2.35 $1.95 $2.01Cash dividends declared per common share$0.84 $0.84 $0.84 $0.84 $0.84Dividend payout ratio14.99% 39.85% 35.75% 43.06% 41.73%27Table of Contents As of or for the Years Ended December 31, 2017 2016 2015 2014 2013 (dollars in thousands, except per share data)Other Data (unaudited): Financial ratios Return on average assets2.13% 0.87% 1.18% 1.21% 1.55%Return on average common equity23.36% 9.64% 11.62% 10.13% 11.16%Yield on earning assets (2)4.58% 4.51% 4.64% 5.33% 6.54%Cost of interest bearing liabilities1.12% 0.93% 0.84% 0.87% 0.94%Tangible common equity to total assets9.72% 8.39% 9.07% 10.33% 12.36%Interest rate spread (2)3.46% 3.58% 3.80% 4.46% 5.60%Net interest margin (2)3.65% 3.73% 3.94% 4.61% 5.73%Loan to deposit ratio (3)98.04% 99.72% 98.50% 91.89% 85.96%Tangible book value per common share$27.59 $22.47 $20.90 $19.52 $18.41Asset quality ratios Non-performing loans to total loans (3) (4)0.81% 0.70% 0.44% 0.32% 0.39%Non-performing assets to total assets (5)0.61% 0.53% 0.35% 0.28% 0.51%Non-performing non-covered assets to total assets (5)(6)0.60% 0.51% 0.26% 0.17% 0.16%ALLL to total loans0.68% 0.79% 0.76% 0.77% 0.77%ALLL to non-performing loans (4)83.53% 112.55% 172.23% 239.24% 195.52%Non-covered ALLL to non-covered non-performingloans (4)84.03% 113.68% 199.82% 275.47% 246.73%Net charge-offs to average loans0.38% 0.13% 0.10% 0.15% 0.31%Non-covered net charge-offs to average non-coveredloans0.38% 0.13% 0.09% 0.08% 0.34% At December 31, 2017 2016 2015 2014 2013Capital ratios Tier 1 leverage9.72% 8.41% 9.35% 10.70% 12.42%CET1 risk-based capital13.11% 11.63% 12.58% N/A N/ATier 1 risk-based capital13.11% 11.63% 12.58% 15.45% 21.06%Total risk-based capital13.78% 12.45% 13.36% 16.27% 21.93% (1)Includes discrete income tax benefits of $327.9 million and $49.3 million recognized during the years ended December 31, 2017 and 2015, respectively.(2)On a tax-equivalent basis, at a federal income tax rate of 35%.(3)Total loans include premiums, discounts, deferred fees and costs and loans held for sale.(4)We define non-performing loans to include non-accrual loans, and loans, other than ACI loans, that are past due 90 days or more and still accruing. Contractually delinquentACI loans on which interest continues to be accreted are excluded from non-performing loans. Effective January 1, 2016, we are no longer reporting accruing TDRs as non-performing.(5)Non-performing assets include non-performing loans, OREO and other repossessed assets.(6)Ratio for non-covered assets is calculated as non-performing non-covered assets to total assets.28Table of ContentsItem 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 ofBankUnited, 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-lookingstatements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management's expectations. Factorsthat could cause such differences are discussed in the sections entitled "Forward-looking Statements" and "Risk Factors." We assume no obligation toupdate any of these forward-looking statements.OverviewPerformance HighlightsIn evaluating our financial performance, we consider the level of and trends in net interest income, the net interest margin, levels and composition ofnon-interest income and non-interest expense, performance ratios such as the return on average equity and return on average assets and asset quality ratios,particularly for the non-covered portfolio, including the ratio of non-performing loans to total loans, non-performing assets to total assets, and portfoliodelinquency and charge-off trends. We consider growth in earning assets and deposits, trends in funding mix and cost of funds. We analyze these ratios andtrends against our own historical performance, our budgeted performance and the financial condition and performance of comparable financial institutions.Performance highlights include:•Net income for the year ended December 31, 2017 was $614.3 million, or $5.58 per diluted share, compared to $225.7 million, or $2.09 per dilutedshare, for the year ended December 31, 2016. Earnings for the year ended December 31, 2017 generated a return on average stockholders' equity of23.36% and a return on average assets of 2.13%.•The Company recognized a discrete income tax benefit of $327.9 million during the year ended December 31, 2017, inclusive of an expectedfederal benefit of $295.0 million, estimated state benefits of $24.2 million and estimated interest of $8.7 million. Excluding the effect of this discreteincome tax benefit and related professional fees, net income for the year ended December 31, 2017 was $291.3 million, diluted earnings per sharewas $2.65, return on average stockholders' equity was 11.08% and return on average assets was 1.01%.•Net interest income for the year ended December 31, 2017 was $950.3 million, an increase of $79.9 million over the prior year. The net interestmargin, calculated on a tax-equivalent basis, was 3.65% for the year ended December 31, 2017 compared to 3.73% for the year ended December 31,2016. Significant factors contributing to the decline in the net interest margin included the continued run-off of high-yielding covered loans, thegrowth of non-covered loans and investment securities at yields lower than the yield on total earning assets and an increase in the cost of interestbearing liabilities.The following chart provides a comparison of net interest margin, the interest rate spread, the average yield on interest earning assets and the averagerate paid on interest bearing liabilities for the years ended December 31, 2017 and 2016 (on a tax equivalent basis):29Table of Contents•Non-covered loans and leases, including equipment under operating lease, grew by $2.2 billion to $21.5 billion for the year ended December 31,2017. During the year ended December 31, 2017, non-covered commercial loans grew by $1.4 billion; equipment under operating lease grew by $60million; and non-covered residential and other consumer loans grew by $700 million. The Florida region and our national platforms contributed$1.0 billion and $1.2 billion, respectively, to non-covered loan and lease growth for the year ended December 31, 2017, while the New York regionremained relatively flat. The following charts compare the composition of our loan and lease portfolio by portfolio segment and of our non-coveredloan and lease portfolio by region at December 31, 2017 and 2016: (1)Commercial real estate loans include multifamily, non-owner occupied commercial real estate and construction and land loans.(2)Includes equipment under operating leases.30Table of Contents•Asset quality remained strong. At December 31, 2017, 96.8% of the commercial loan portfolio was rated "pass" and substantially the entire non-covered residential portfolio was current. The ratio of non-performing, non-covered loans to total non-covered loans was 0.82% and the ratio of non-performing, non-covered assets to total assets was 0.60% at December 31, 2017. Non-performing taxi medallion loans comprised 0.51% of total non-covered loans and 0.35% of total assets at December 31, 2017. A comparison of our non-covered, nonperforming assets ratio to that of our peers atDecember 31, 2017, 2016 and 2015 is presented in the chart below:•Total deposits increased by $2.4 billion for the year ended December 31, 2017 to $21.9 billion. The average cost of total deposits increased to0.83% for the year ended December 31, 2017 from 0.66% for 2016. The following charts illustrate the composition of deposits at December 31, 2017and 2016:Book value per commonshare grew to $28.32 at December 31, 2017, a 22.0% increase from December 31, 2016. Tangible book value per common share increased by 22.8% over thesame period, to $27.59 at December 31, 2017. These increases were impacted by the discrete income tax benefit recognized in the year ended December 31,2017.31Table of Contents•The Company’s and the Bank's capital ratios exceeded all regulatory “well capitalized” guidelines. The charts below present the Company's and theBank's regulatory capital ratios compared to regulatory guidelines as of December 31, 2017 and 2016:BankUnited, Inc:BankUnited, N.A.:Strategic PrioritiesManagement has identified the following strategic priorities for our Company:•Our strategic focus emphasizes safety and soundness, long-term profitability and sustainable balance sheet growth.32Table of Contents•Growth in core deposit relationships, further optimization of our deposit mix and management of the cost of funds, while targeting a loan to depositratio of under 100%. We anticipate deposit growth exceeding loan growth for 2018.•Continued organic loan growth in Florida and the Tri-State markets, both of which we believe to be attractive banking markets, as well as across ournational lending platforms. We seek to maintain a loan portfolio diversified across geographies and product classes, predicated on a culture ofdisciplined credit underwriting.•Focus on a scalable and efficient operating model.•We will opportunistically evaluate potential strategic acquisitions of financial institutions and complementary businesses.Challenges confronting our Company include:•Competitive market conditions for both loans and deposits in our primary geographic footprint may impact our ability to execute our balance sheetgrowth and profitability strategy.•Managing the cost of funds while growing deposits in a competitive, rising interest rate environment presents a strategic challenge.•Adding interest earning assets to the balance sheet at current market rates as higher yielding covered loans run off is likely to continue to putpressure on our net interest margin.•Uncertainty about the regulatory environment may present challenges in the execution of our business strategy and the management of non-interestexpense. For additional discussion, see "Item 1. Business—Regulation and Supervision."Critical Accounting Policies and EstimatesOur consolidated financial statements are prepared in accordance with GAAP and follow general practices within the banking industry. Application ofthese principles requires management to make complex and subjective estimates and judgments that affect the amounts reported in the consolidated financialstatements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable andappropriate under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are notreadily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted insignificantly different estimates. Actual results may differ from these estimates.Accounting policies are an integral part of our financial statements. A thorough understanding of these accounting policies is essential when reviewingour reported results of operations and our financial position. We believe that the critical accounting policies and estimates discussed below involve aheightened 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.Allowance for Loan and Lease LossesThe ALLL represents management's estimate of probable loan losses inherent in the Company's loan portfolio. Determining the amount of the ALLL isconsidered a critical accounting estimate because of its complexity and because it requires significant judgment and estimation. Estimates that areparticularly susceptible to change that may have a material impact on the amount of the ALLL include:•the amount and timing of expected future cash flows from ACI loans and impaired loans;•the value of underlying collateral, which impacts loss severity and certain cash flow assumptions;•the selection of proxy data used to calculate loss factors;•our evaluation of loss emergence and historical loss experience periods;•our evaluation of the risk profile of various loan portfolio segments, including internal risk ratings; and•our selection and evaluation of qualitative factors.Note 1 to the consolidated financial statements describes the methodology used to determine the ALLL.33Table of ContentsAccounting for Acquired Loans and the FDIC Indemnification AssetA significant portion of the covered loans are residential ACI Loans. The accounting for ACI loans requires the Company to estimate the timing andamount of cash flows to be collected from these loans and to continually update estimates of the cash flows expected to be collected over the lives of theloans. Similarly, the accounting for the FDIC indemnification asset requires the Company to estimate the timing and amount of cash flows to be receivedfrom the FDIC in reimbursement for losses and expenses related to the covered loans; these estimates are directly related to estimates of cash flows to bereceived from the covered loans. Estimated cash flows impact the rate of accretion on covered loans and the rate of amortization on the FDIC indemnificationasset as well as the amount of any ALLL to be established related to the covered loans. These cash flow estimates are considered to be critical accountingestimates because they involve significant judgment and assumptions as to their amount and timing.Covered 1-4 single family residential and home equity loans were placed into homogenous pools at the time of the FSB Acquisition; the ongoing creditquality and performance of these loans is monitored on a pool basis and expected cash flows are estimated on a pool basis. At acquisition, the fair value of thepools was measured based on the expected cash flows to be derived from each pool. For ACI pools, the difference between total contractual payments due andthe cash flows expected to be received at acquisition was recognized as non-accretable difference. The excess of expected cash flows over the recorded fairvalue of each ACI pool at acquisition was recognized as accretable yield. The accretable yield is accreted into interest income over the life of each pool.We monitor the pools quarterly by updating our expected cash flows to determine whether any changes have occurred in expected cash flows that wouldbe indicative of impairment or necessitate reclassification between non-accretable difference and accretable yield. Initial and ongoing cash flow expectationsincorporate significant assumptions regarding prepayment rates, the timing of resolution of loans, the timing and amount of loan sales and related pricing,frequency of default, delinquency and loss severity, which is dependent on estimates of underlying collateral values. Changes in these assumptions couldhave a potentially material impact on the amount of the ALLL related to the covered loans as well as on the rate of accretion on these loans and thecorresponding rate of amortization of the FDIC indemnification asset. Prepayment, delinquency, default curves and loss severity used to forecast pool cashflows are derived from roll rates generated from the historical performance of the ACI residential loan portfolio observed over the immediately preceding fourquarters, or the immediately preceding twelve quarters as it relates to loss severity from loan sales.Fair Value MeasurementsThe Company measures certain of its assets and liabilities at fair value on a recurring or non-recurring basis. Assets and liabilities measured at fair valueon a recurring basis include investment securities available for sale, servicing rights, and derivative instruments. Assets that may be measured at fair value ona non-recurring basis include impaired loans, OREO and other repossessed assets, loans held for sale, goodwill, impaired long-lived assets, and assetsacquired and liabilities assumed in business combinations. The consolidated financial statements also include disclosures about the fair value of financialinstruments that are not recorded at fair value.Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous marketfor the asset or liability in an orderly transaction between market participants at the measurement date. Inputs used to determine fair value measurements areprioritized into a three level hierarchy based on observability and transparency of the inputs, summarized as follows:Level 1—observable inputs that reflect quoted prices in active markets for identical assets,Level 2—inputs other than quoted prices in active markets that are based on observable market data, andLevel 3—unobservable inputs requiring significant management judgment or estimation.When observable market quotes are not available, fair value is estimated using modeling techniques such as discounted cash flow analyses and optionpricing models. These modeling techniques utilize assumptions that we believe market participants would use in pricing the asset or the liability.Particularly for estimated fair values of assets and liabilities categorized within level 3 of the fair value hierarchy, the selection of different valuationtechniques or underlying assumptions could result in fair value estimates that are higher or lower than the amounts recorded or disclosed in our consolidatedfinancial statements. Considerable judgment may be involved in determining the amount that is most representative of fair value.Because of the degree of judgment involved in selecting valuation techniques and underlying assumptions, fair value measurements are consideredcritical accounting estimates.34Table of ContentsNotes 1, 4, 12 and 16 to our consolidated financial statements contain further information about fair value estimates.Recent Accounting PronouncementsSee Note 1 to our consolidated financial statements for a discussion of recent accounting pronouncements.Results of OperationsNet Interest IncomeNet interest income is the difference between interest earned on interest earning assets and interest incurred on interest bearing liabilities and is theprimary driver of core earnings. Net interest income is impacted by the relative mix of interest earning assets and interest bearing liabilities, the ratio ofinterest earning assets to total assets and of interest bearing liabilities to total funding sources, movements in market interest rates, levels of non-performingassets and pricing pressure from competitors.The mix of interest earning assets is influenced by loan demand, market and competitive conditions in our primary lending markets and bymanagement's continual assessment of the rate of return and relative risk associated with various classes of earning assets. The mix of interest bearingliabilities is influenced by the Company's liquidity profile, management's assessment of the desire for lower cost funding sources weighed againstrelationships with customers and growth requirements and is impacted by competition for deposits in the Company's markets and the availability and pricingof other sources of funds.Net interest income is also impacted by the accounting for ACI loans acquired in conjunction with the FSB Acquisition. ACI loans were initiallyrecorded at fair value, measured based on the present value of expected cash flows. The excess of expected cash flows over carrying value, known asaccretable yield, is recognized as interest income over the lives of the underlying loans. Accretion related to ACI loans is expected to continue to positivelyimpact net interest income, the net interest margin and interest rate spread until termination of the Single Family Shared-Loss Agreement, although themagnitude of the positive impact on the net interest margin and interest rate spread is expected to decline as ACI loans comprise a declining percentage oftotal loans. The proportion of total loans represented by ACI loans is declining as the ACI loans are resolved and new loans are added to the portfolio. ACIloans represented 2.4%, 3.0% and 4.6% of total loans, including premiums, discounts and deferred fees and costs, at December 31, 2017, 2016 and 2015,respectively.The impact of ACI loan accounting on net interest income makes it difficult to compare our net interest margin and interest rate spread to those reportedby other financial institutions.35Table of ContentsThe following table presents, for the years ended December 31, 2017, 2016 and 2015, information about (i) average balances, the total dollar amount oftaxable equivalent interest income from earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense oninterest bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Non-accrualand restructured loans are included in the average balances presented in this table; however, interest income foregone on non-accrual loans is not included.Interest income, yields, spread and margin have been calculated on a tax-equivalent basis for loans and investment securities that are exempt from federalincome taxes, at a federal tax rate of 35.0% (dollars in thousands): 2017 2016 2015 AverageBalance Interest (1) Yield/Rate (1) AverageBalance Interest (1) Yield/Rate (1) AverageBalance Interest (1) Yield/Rate (1)Assets: Interest earning assets: Non-covered loans$19,478,071 $730,701 3.75% $17,282,886 $617,863 3.58% $13,339,708 $478,072 3.58%Covered loans544,279 300,540 55.22% 721,268 301,614 41.82% 923,909 291,717 31.57%Total loans20,022,350 1,031,241 5.15% 18,004,154 919,477 5.11% 14,263,617 769,789 5.40%Investment securities (2)6,658,145 201,363 3.02% 5,691,617 161,385 2.84% 4,672,032 121,221 2.59%Other interest earning assets543,338 14,292 2.63% 541,816 12,204 2.25% 481,716 10,098 2.10%Total interest earning assets27,223,833 1,246,896 4.58% 24,237,587 1,093,066 4.51% 19,417,365 901,108 4.64%Allowance for loan and lease losses(156,471) (139,469) (108,875) Non-interest earning assets1,758,032 1,923,298 1,985,421 Total assets$28,825,394 $26,021,416 $21,293,911 Liabilities and Stockholders' Equity: Interest bearing liabilities: Interest bearing demand deposits$1,586,390 12,873 0.81% $1,382,717 8,343 0.60% $1,169,921 $5,782 0.49%Savings and money market deposits9,730,101 80,397 0.83% 8,361,652 51,774 0.62% 6,849,366 37,744 0.55%Time deposits6,094,336 77,663 1.27% 5,326,630 59,656 1.12% 4,305,857 47,625 1.11%Total interest bearing deposits17,410,827 170,933 0.98% 15,070,999 119,773 0.79% 12,325,144 91,151 0.74%FHLB advances4,869,690 61,997 1.27% 4,801,406 47,773 0.99% 3,706,288 40,328 1.09%Notes and other borrowings402,921 21,259 5.28% 403,197 21,287 5.28% 58,791 3,685 6.27%Total interest bearing liabilities22,683,438 254,189 1.12% 20,275,602 188,833 0.93% 16,090,223 135,164 0.84%Non-interest bearing demand deposits3,069,565 2,968,192 2,732,654 Other non-interest bearing liabilities443,019 435,645 305,519 Total liabilities26,196,022 23,679,439 19,128,396 Stockholders' equity2,629,372 2,341,977 2,165,515 Total liabilities and stockholders'equity$28,825,394 $26,021,416 $21,293,911 Net interest income $992,707 $904,233 $765,944 Interest rate spread 3.46% 3.58% 3.80%Net interest margin 3.65% 3.73% 3.94% (1)On a tax-equivalent basis. The tax-equivalent adjustment for tax-exempt loans was $29.4 million, $23.3 million and $15.9 million, and the tax-equivalent adjustment for tax-exempt investment securities was $13.1 million, $10.5 million and $4.4 million for the years ended December 31, 2017, 2016, and 2015, respectively.(2)At fair value except for securities held to maturity.The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017, reducing the statutory corporate federal income tax rate from 35 percentto 21 percent, effective January 1, 2018. Had this reduction in the federal income tax rate been applied in the determination of the tax-equivalent adjustmentsabove for the year ended December 31, 2017, the yield on non-covered loans and total loans would have been reduced by 0.07%, the yield on investmentsecurities would have been reduced by 0.09% and the yield on total interest earning assets, the interest rate spread and the net interest margin would eachhave been reduced by 0.08%.36Table of ContentsIncreases and decreases in interest income, calculated on a tax-equivalent basis, and interest expense result from changes in average balances (volume) ofinterest earning assets and liabilities, as well as changes in average interest rates. The following table shows the effect that these factors had on the interestearned on our interest earning assets and the interest incurred on our interest bearing liabilities for the years indicated. The effect of changes in volume isdetermined by multiplying the change in volume by the previous year's average rate. Similarly, the effect of rate changes is calculated by multiplying thechange in average rate by the previous year's volume. Changes applicable to both volume and rate have been allocated to volume (in thousands): 2017 Compared to 2016 2016 Compared to 2015 Change Dueto Volume Change Dueto Rate Increase(Decrease) Change Dueto Volume Change Dueto Rate IncreaseInterest Income Attributable to: Loans$104,562 $7,202 $111,764 $191,052 $(41,364) $149,688Investment securities29,733 10,245 39,978 28,484 11,680 40,164Other interest earning assets29 2,059 2,088 1,383 723 2,106Total interest income134,324 19,506 153,830 220,919 (28,961) 191,958Interest Expense Attributable to: Interest bearing demand deposits1,626 2,904 4,530 1,274 1,287 2,561Savings and money market deposits11,064 17,559 28,623 9,235 4,795 14,030Time deposits10,017 7,990 18,007 11,600 431 12,031Total interest bearing deposits22,707 28,453 51,160 22,109 6,513 28,622FHLB advances779 13,444 14,223 11,151 (3,706) 7,445Notes and other borrowings(28) — (28) 18,184 (582) 17,602Total interest expense23,458 41,897 65,355 51,444 2,225 53,669Increase (decrease) in net interest income$110,866 $(22,391) $88,475 $169,475 $(31,186) $138,289Year ended December 31, 2017 compared to year ended December 31, 2016Net interest income, calculated on a tax-equivalent basis, was $992.7 million for the year ended December 31, 2017 compared to $904.2 million for theyear ended December 31, 2016, an increase of $88.5 million. The increase in net interest income was comprised of an increase in tax-equivalent interestincome of $153.8 million, offset by an increase in interest expense of $65.4 million.The increase in tax-equivalent interest income was comprised primarily of a $111.8 million increase in interest income from loans and a $40.0 millionincrease in interest income from investment securities.Increased interest income from loans was attributable to a $2.0 billion increase in the average balance and a 0.04% increase in the tax-equivalent yield to5.15% for the year ended December 31, 2017 from 5.11% for the year ended December 31, 2016. Offsetting factors contributing to the increase in the yield onloans included:•The tax-equivalent yield on non-covered loans increased to 3.75% for the year ended December 31, 2017 from 3.58% for the year ended December31, 2016. The most significant factor contributing to the increased yield on non-covered loans was increases in market interest rates.•Interest income on covered loans totaled $300.5 million and $301.6 million for the year ended December 31, 2017 and 2016, respectively. The tax-equivalent yield on those loans increased to 55.22% for the year ended December 31, 2017 from 41.82% for the year ended December 31, 2016,reflecting improvements in expected cash flows for ACI loans, as well as an increase in higher-yielding pools as a percent of total covered loans. Theincrease in yield largely offset the impact of the decline in the average balance of covered loans outstanding.•The impact on the overall yield on loans of increased yields on both covered and non-covered loans considered individually was largely offset bythe continued increase in lower-yielding non-covered loans as a percentage of the portfolio. Non-covered loans represented 97.3% of the averagebalance of loans outstanding for the year ended December 31, 2017 compared to 96.0% for the year ended December 31, 2016.37Table of ContentsThe average balance of investment securities increased by $1.0 billion for the year ended December 31, 2017 from the year ended December 31, 2016while the tax-equivalent yield increased to 3.02% from 2.84%. The increase in tax-equivalent yield primarily reflects resetting of coupon rates on floating-rate securities. The tax-equivalent yield was reduced by 5 basis points in 2017 as a result of a retrospective adjustment to the amortization of premiums onSBA securities.The components of the increase in interest expense for the year ended December 31, 2017 as compared to the year ended December 31, 2016 were a$51.2 million increase in interest expense on deposits and a $14.2 million increase in interest expense on FHLB advances.The increase in interest expense on deposits was attributable to an increase of $2.3 billion in average interest bearing deposits and an increase in theaverage cost of interest bearing deposits of 0.19% to 0.98% for the year ended December 31, 2017 from 0.79% for the year ended December 31, 2016. Thesecost increases were generally driven by the growth of deposits in competitive markets and a rising short-term interest rate environment.The increase in interest expense on FHLB advances was primarily a result of an increase in the average cost of advances of 0.28% to 1.27% for the yearended December 31, 2017 from 0.99% for the year ended December 31, 2016. The increased cost was driven by increased market rates and, to a lesser extent,an extension of maturities through interest rate swaps.The net interest margin, calculated on a tax-equivalent basis, for the year ended December 31, 2017 was 3.65% as compared to 3.73% for the year endedDecember 31, 2016. The interest rate spread decreased to 3.46% for the year ended December 31, 2017 from 3.58% for the year ended December 31, 2016.The declines in net interest margin and interest rate spread resulted primarily from the cost of interest-bearing liabilities increasing by more than the yield oninterest earning assets. This difference was driven primarily by the decline in covered loans as a percentage of total loans. Future trends in the net interestmargin will be impacted by changes in market interest rates, including changes in the shape of the yield curve, by the mix of interest earning assets, includingthe decline in covered loans as a percentage of total loans, and by the Company's ability to manage the cost of funds while growing deposits in competitivemarkets.Year ended December 31, 2016 compared to year ended December 31, 2015Net interest income, calculated on a tax-equivalent basis, was $904.2 million for the year ended December 31, 2016 compared to $765.9 million for theyear ended December 31, 2015, an increase of $138.3 million. The increase in net interest income was comprised of an increase in tax-equivalent interestincome of $192.0 million, offset by an increase in interest expense of $53.7 million.The increase in tax-equivalent interest income was comprised primarily of a $149.7 million increase in interest income from loans and a $40.2 millionincrease in interest income from investment securities.Increased interest income from loans was attributable to a $3.7 billion increase in the average balance outstanding partially offset by a 0.29% decrease inthe tax-equivalent yield to 5.11% for the year ended December 31, 2016 from 5.40% for the year ended December 31, 2015. Offsetting factors contributing tothe overall decline in the yield on loans included:•Non-covered loans originated at lower market rates of interest comprised a greater percentage of the portfolio for the year ended December 31, 2016than for 2015. Non-covered loans represented 96.0% of the average balance of loans outstanding for the year ended December 31, 2016 compared to93.5% for the year ended December 31, 2015.•The tax-equivalent yield on non-covered loans remained unchanged at 3.58% for the years ended December 31, 2016 and 2015.•Interest income on covered loans totaled $301.6 million and $291.7 million for the years ended December 31, 2016 and 2015, respectively. The tax-equivalent yield on those loans increased to 41.82% for the year ended December 31, 2016 from 31.57% for the year ended December 31, 2015.The average balance of investment securities increased by $1.0 billion for the year ended December 31, 2016 from the year ended December 31, 2015while the tax-equivalent yield increased to 2.84% for the year ended December 31, 2016 from 2.59% for the year ended December 31, 2015. The increase intax-equivalent yield reflects (i) changes in portfolio composition, including growth in the municipal portfolio, (ii) resetting of rates on floating-rate securitiesand (iii) net purchases of securities at wider spreads.The components of the increase in interest expense for the year ended December 31, 2016 as compared to the year ended December 31, 2015 were a$28.6 million increase in interest expense on deposits, a $7.4 million increase in interest expense on FHLB advances and a $17.6 million increase in interestexpense on notes and other borrowings, reflecting the issuance of $400 million in senior notes in November 2015.38Table of ContentsThe most significant factor contributing to the increase in interest expense on deposits was an increase of $2.7 billion in average interest bearingdeposits. The average cost of interest bearing deposits increased by 0.05% to 0.79% for the year ended December 31, 2016 from 0.74% for the year endedDecember 31, 2015, generally driven by growth of deposits in competitive markets.The increase in interest expense on FHLB advances was driven by an increase in the average balance of $1.1 billion, partially offset by a decrease in theaverage rate paid on these borrowings. The average rate paid on FHLB advances decreased by 0.10% to 0.99% for the year ended December 31, 2016 from1.09% for the year ended December 31, 2015, primarily driven by a contraction in maturities.The net interest margin, calculated on a tax-equivalent basis, for the year ended December 31, 2016 was 3.73% as compared to 3.94% for the year endedDecember 31, 2015. The interest rate spread decreased to 3.58% for the year ended December 31, 2016 from 3.80% for the year ended December 31, 2015.The declines in net interest margin and interest rate spread resulted primarily from lower yields on loans and the cost of the senior notes, as discussed above.Provision for Loan LossesThe provision for loan losses is the amount of expense that, based on our judgment, is required to maintain the ALLL at an adequate level to absorbprobable losses inherent in the loan portfolio at the balance sheet date and that, in management’s judgment, is appropriate under GAAP. The determination ofthe amount of the ALLL is complex and involves a high degree of judgment and subjectivity. Our determination of the amount of the allowance andcorresponding provision for loan losses considers ongoing evaluations of the credit quality of and level of credit risk inherent in various segments of the loanportfolio and of individually significant credits, levels of non-performing loans and charge-offs, historical and statistical trends and economic and otherrelevant factors. See “Analysis of the Allowance for Loan and Lease Losses” below for more information about how we determine the appropriate level of theallowance.For the years ended December 31, 2017, 2016 and 2015, we recorded provisions for loan losses of $67.4 million, $52.6 million and $42.1 million,respectively, related to non-covered loans. The amount of the provision is impacted by loan growth, portfolio mix, historical loss rates, the level of charge-offs and specific reserves for impaired loans, and management's evaluation of qualitative factors in the determination of general reserves.The increase in the provision for loan losses related to non-covered loans for the year ended December 31, 2017 compared to 2016 included an increaseof $46.3 million in the provision related to taxi medallion loans. The provision related to taxi medallion loans totaled $58.2 million for the year endedDecember 31, 2017 compared to $11.9 million for the year ended December 31, 2016. The increased provision related to taxi medallion loans was partiallyoffset by (i) decreases in quantitative and qualitative loss factors, (ii) the impact of lower loan growth and (iii) a decrease in provisions for classified andspecifically reserved loans.The most significant factors contributing to the increase in the provision for loan losses related to non-covered loans for the year ended December 31,2016 compared to 2015 were (i) an increase in the provision related to taxi medallion loans, (ii) an increase in the provision related to impaired loans in otherportfolio segments and (iii) an increase in the relative impact on the provision of changes in quantitative and qualitative loss factors, partially offset by theimpact of lower loan growth in 2016.The provision for loan losses related to covered loans was not material for any period presented.39Table of ContentsNon-Interest IncomeThe following table presents a comparison of the categories of non-interest income for the years ended December 31, 2017, 2016 and 2015 (inthousands): 2017 2016 2015Non-interest income related to the covered assets $24,262 $5,026 $23,415Service charges and fees 20,864 19,463 17,876Gain on sale of non-covered loans 10,183 10,064 5,704Gain on investment securities available for sale, net 33,466 14,461 8,480Lease financing 53,837 44,738 35,641Other non-interest income 15,292 12,665 11,108 $157,904 $106,417 $102,224Refer to the section titled "Impact of the Covered Loans, the FDIC Indemnification Asset and the Loss Sharing Agreements" below for further informationabout non-interest income related to the covered assets.Year over year increases in services charges and fees correspond to the growth in deposits and loans.Gains on sale of non-covered loans for the years ended December 31, 2017, 2016 and 2015 related primarily to sales of the guaranteed portions of SBAloans by SBF, which was acquired on May 1, 2015.Gain on investment securities available for sale, net for the year ended December 31, 2017 primarily reflected gains from the sale of securities formerlycovered under the Commercial Shared-Loss Agreement, which were originally acquired at significant discounts in the FSB Acquisition. Other gains oninvestment securities available for sale related to sales of securities in the normal course of managing liquidity, portfolio duration and yield.Year over year increases in income from lease financing generally corresponded to the growth in the portfolio of equipment under operating lease.Non-Interest ExpenseThe following table presents the components of non-interest expense for the years ended December 31, 2017, 2016 and 2015 (in thousands): 2017 2016 2015Employee compensation and benefits$237,824 $223,011 $210,104Occupancy and equipment75,386 76,003 76,024Amortization of FDIC indemnification asset176,466 160,091 109,411Deposit insurance expense22,011 17,806 14,257Professional fees23,676 14,249 14,185Telecommunications and data processing13,966 14,343 13,613Depreciation of equipment under operating lease35,015 31,580 18,369Other non-interest expense50,624 53,364 50,709 $634,968 $590,447 $506,672Non-interest expense as a percentage of average assets was 2.2%, 2.3% and 2.4% for the years ended December 31, 2017, 2016 and 2015, respectively.Excluding amortization of the FDIC indemnification asset, non-interest expense as a percentage of average assets was 1.6%, 1.7% and 1.9% for the yearsended December 31, 2017, 2016 and 2015, respectively. The more significant changes in the components of non-interest expense are discussed below.Employee compensation and benefitsAs is typical for financial institutions, employee compensation and benefits represents the single largest component of recurring non-interest expense.Employee compensation and benefits for the year ended December 31, 2017 increased by $14.8 million compared to the year ended December 31, 2016. Theincrease for the year ended December 31, 2017 primarily reflected40Table of Contentsincreased headcount in support of growth and general increases in compensation levels. Employee compensation and benefits for the year ended December31, 2016 increased $12.9 million compared to the year ended December 31, 2015. This increase reflected general increases in salaries and the cost of benefitsas well as changes in the composition of the employee base.Amortization of FDIC indemnification assetSee the section titled "Impact of Covered Loans, the FDIC Indemnification Asset and the Loss Sharing Agreements" below for more information aboutamortization of the FDIC indemnification asset.Deposit insurance expenseDeposit insurance expense totaled $22.0 million, $17.8 million and $14.3 million respectively, for the years ended December 31, 2017, 2016 and 2015.These increases primarily reflected the growth of the balance sheet, the large bank surcharge imposed by the FDIC, which began in the third quarter of 2016,and increases in certain components of the Bank's assessment rate.Professional feesProfessional fees increased by $9.4 million for the year ended December 31, 2017 as compared to the year ended December 31, 2016, primarily due to$6.8 million in accounting and advisory fees related to the discrete income tax benefit recognized in 2017.Depreciation of equipment under operating leaseDepreciation of equipment under operating lease increased by $3.4 million for the year ended December 31, 2017 as compared to the year endedDecember 31, 2016 and by $13.2 million for the year ended December 31, 2016 compared with the year ended December 31, 2015. These increases generallycorresponded to the growth in the portfolio of equipment under operating lease. Depreciation of equipment under operating lease for the year endedDecember 31, 2016 also included impairment of $4.1 million related to a group of tank cars impacted by new safety regulations.Other non-interest expenseThe most significant components of other non-interest expense are advertising and promotion, costs related to lending activities and deposit generation,OREO and foreclosure related expenses, insurance, travel and general office expense.Impact of the Covered Loans, FDIC Indemnification Asset and the Loss Sharing AgreementsThe accounting for covered loans, the indemnification asset and the provisions of the Loss Sharing Agreements impact our financial condition andresults of operations. The more significant ways in which our financial statements are impacted are:•Interest income and the net interest margin reflect the impact of accretion related to the covered loans;•Non-interest expense includes the effect of amortization of the FDIC indemnification asset;•The Residential Shared-Loss Agreement affords the Company significant protection against future credit losses related to covered assets. The impactof any provision for loan losses related to the covered loans, losses related to covered OREO and expenses related to resolution of covered assets issignificantly mitigated by loss sharing with the FDIC;•Under the acquisition method of accounting, the assets acquired and liabilities assumed in the FSB Acquisition were initially recorded on theconsolidated balance sheet at their estimated fair values as of the acquisition date. The carrying amounts of covered loans and the FDICindemnification asset continue to be impacted by acquisition accounting adjustments. The carrying amount of covered loans, particularly ACIloans, is materially less than their UPB. Additionally, no ALLL was recorded with respect to acquired loans at the FSB Acquisition date;•Non-interest income includes gains and losses associated with the resolution of covered assets and the related effect of indemnification under theterms of the Single Family Shared-Loss Agreement. The impact of gains or losses related to transactions in covered assets is significantly mitigatedby FDIC indemnification; and•ACI loans that are contractually delinquent may not be reflected as non-accrual loans or non-performing assets due to the accounting treatmentaccorded such loans under ASC section 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality."41Table of ContentsThe following table summarizes the net impact on pre-tax earnings of transactions in the covered assets for the years ended December 31, 2017, 2016 and2015 (in thousands): 2017 2016 2015Interest income on covered loans $300,540 $301,614 $291,717Amortization of FDIC indemnification asset (176,466) (160,091) (109,411) 124,074 141,523 182,306Income from resolution of covered assets, net 27,450 36,155 50,658Gain (loss) on sale of covered loans, net 17,406 (14,470) 34,929Net loss on FDIC indemnification (22,220) (17,759) (65,942)Other, net 1,058 (4,215) 2,824 23,694 (289) 22,469Net impact on pre-tax earnings of transactions in the covered assets $147,768 $141,234 $204,775 Combined yield on covered loans and indemnification asset (1) 12.98% 10.42% 10.20% (1)The combined yield on the covered loans and the FDIC indemnification asset presented above is calculated as the interest income on the covered loans, net of the amortization ofthe FDIC indemnification asset, divided by the average combined balance of the covered loans and FDIC indemnification asset.Interest income on covered loans and amortization of the FDIC indemnification assetThe yield on covered loans increased to 55.22% for the year ended December 31, 2017 from 41.82% and 31.57% for the years ended December 31, 2016and 2015, respectively. See "Net Interest Income" above for further discussion of trends in interest income and yields on the covered loan portfolio.The FDIC indemnification asset was initially recorded at its estimated fair value at the date of the FSB Acquisition, representing the present value ofestimated future cash payments from the FDIC for probable losses on covered assets. As projected cash flows from the ACI loans have improved, the yield onthe loans has increased accordingly and the estimated future cash payments from the FDIC have decreased. This change in estimated cash flows from theFDIC is recognized prospectively, consistent with the recognition of the estimated increased cash flows from the ACI loans. As a result, the FDICindemnification asset is being amortized to the amount of the estimated future cash payments from the FDIC. The average rate at which the FDICindemnification asset was amortized increased to 42.90% for the year ended December 31, 2017 from 25.14% and 12.68% for the years ended December 31,2016 and 2015, respectively, corresponding to the increases in the yield on covered loans.The yield on covered loans will continue to increase if estimated cash flows from the ACI loans continue to improve; correspondingly, the rate ofamortization on the FDIC indemnification asset will continue to increase if estimated future cash payments from the FDIC decrease. The amount ofamortization is impacted by both the change in the amortization rate and the decrease in the average balance of the indemnification asset. As we continue tosubmit claims under the Residential Shared-Loss Agreement and recognize periodic amortization, the balance of the indemnification asset will continue todecline. See Note 6 to the consolidated financial statements for a rollforward of the FDIC indemnification asset for the years ended December 31, 2017, 2016and 2015.The following table presents the carrying value of the FDIC indemnification asset, expected future amortization of the asset, and the estimated futurecash flows from the FDIC at December 31, 2017 and 2016 (in thousands): 2017 2016FDIC indemnification asset$295,635 $515,933Less expected amortization(140,830) (245,350)Amount expected to be collected from the FDIC$154,805 $270,58342Table of ContentsThe amount of expected amortization will be amortized to non-interest expense using the effective interest method over the period during which cashflows from the FDIC are expected to be collected, which is limited to the lesser of the contractual term of the Single Family Shared-Loss Agreement and theexpected remaining life of the indemnified assets.The table below presents, at December 31, 2017, estimated future accretion on covered loans and estimated future amortization of the FDICindemnification asset, through the expected termination date of the Single Family Shared-Loss Agreement (in thousands):Future estimated accretion on covered loans$444,976Future estimated amortization of the indemnification asset(140,830)Net estimated cumulative impact on future pre-tax earnings$304,146These amounts are based on current estimates of expected future cash flows from the covered loans and the FDIC; actual results may differ from theseestimates. We are currently forecasting the sale of substantially all of the then remaining covered assets in 2019, consistent with the expected terminationdate of the Single Family Shared-Loss Agreement. Concurrently, we expect the balance of the FDIC indemnification asset to decline to zero.Non-interest income related to the covered assetsThe most significant components of non-interest income related to the covered assets are Income from resolution of covered assets, Gain (loss) on sale ofcovered loans and the related Loss on indemnification asset.Covered loans may be resolved through prepayment, short sale of the underlying collateral, foreclosure, sale of the loans or charge-off. For loans resolvedthrough prepayment, short sale or foreclosure, the difference between consideration received in resolution of the loans and the allocated carrying value of theloans is recorded in the consolidated statement of income line item “Income from resolution of covered assets, net.” Both gains and losses on individualresolutions are included in this line item. For loans resolved through sale of the loans, the difference between consideration received and the allocatedcarrying value of the loans is recorded in the consolidated statement of income line item "Gain (loss) on sale of loans, net. Losses from the resolution ofcovered loans increase the amount recoverable from the FDIC under the Single-Family Shared Loss Agreement. Gains from the resolution of covered loansreduce the amount recoverable from the FDIC under the Single-Family Shared Loss Agreement. These additions to or reductions in amounts recoverable fromthe FDIC related to the resolution of covered loans are recorded in non-interest income in the line item “Net loss on FDIC indemnification” and reflected ascorresponding increases or decreases in the FDIC indemnification asset. The amount of income or loss recorded in any period will be impacted by the amountof covered loans resolved, the amount of consideration received, and our ability to accurately project cash flows from ACI loans in future periods.For each of the years ended December 31, 2017, 2016 and 2015, the substantial majority of Income from resolution of covered assets, net, resulted frompayments in full. The year over year decreases in Income from resolution of covered assets, net reflected decreases in both the number of resolutions and theaverage income per resolution.As explained further in the section entitled "The FSB Acquisition" under Item 1, the Bank may sell up to approximately $280 million of covered loanson an annual basis without the prior consent of the FDIC. Any losses incurred, as defined, from such loan sales are covered under the Single Family Shared-Loss Agreement.The following table summarizes the gain (loss) recorded on the sale of covered residential loans and the impact of related FDIC indemnification for theyears ended December 31, 2017, 2016 and 2015 (in thousands): 2017 2016 2015Net gain (loss) on sale of covered loans$17,406 $(14,470) $34,929Net gain (loss) on FDIC indemnification(1,514) 11,615 (28,051)Net impact on pre-tax earnings$15,892 $(2,855) $6,878Pricing received on the sale of covered loans may vary based on (i) market conditions, including the interest rate environment, the amount of capitalseeking investment and the secondary supply of loans with a particular performance history or collateral type, (ii) the type and quality of collateral, (iii) theperformance history of loans included in the sale and (iv) whether or not the loans have been modified. We anticipate that we will continue to exercise ourright to sell covered residential loans on a quarterly basis in the future.43Table of ContentsWe sold substantially all of the remaining covered home equity loans and lines of credit, including the entire pool of ACI loans in 2017. The net loss onFDIC indemnification related to covered loan sales for the year ended December 31, 2017 did not bear the 80% relationship to the net gain on sale that mightgenerally be expected. This was primarily attributed to the amount of accretable discount included in the carrying value of the pool of ACI loans sold. Ourcash flow forecast had not previously reflected the sale of the entire pool in 2017.Other items of non-interest income and expense related to the covered assetsOther items of non-interest income and expense related to the covered assets, comprising the line item "Other, net" in the table above presenting theimpact on pre-tax earnings of transactions in the covered assets, include the provision for (recovery of) covered loan losses; foreclosure expenses related tocovered assets; gains, losses and other expenses related to covered OREO; FDIC reimbursement of certain expenses related to resolution of covered assets,and modification incentives. None of these items had a material impact on results of operations for any period presented.Income TaxesThe provision (benefit) for income taxes for the years ended December 31, 2017, 2016 and 2015 was $(209.8) million, $109.7 million and $45.2 million,respectively. The Company's effective tax rate was (51.9)%, 32.7% and 15.2% for the years ended December 31, 2017, 2016 and 2015 respectively.The effective income tax rate for the year ended December 31, 2017 reflected a discrete income tax benefit of $327.9 million related to a matter that aroseduring an ongoing audit of the Company's 2013 federal income tax return. During that audit, the Company asserted that U.S. federal income taxes paid inrespect of certain income previously reported by the Company for its 2012, 2013 and 2014 tax years related to the basis assigned to certain loans acquired inthe FSB Acquisition should be refunded to the Company, in light of guidance issued after the relevant returns had been filed (including Treasury Regulationsfinalized in October 2017 clarifying and modifying the tax treatment of such acquired loans). The IRS issued a Field Attorney's Advice ("FAA") in the fourthquarter of 2017 agreeing with the Company's position. The discrete income tax benefit recognized includes expected refunds of federal income tax of $295million, as well as estimated interest on the federal refund and estimated refunds from certain state and local taxing jurisdictions. After receipt of the FAA, theCompany determined that the requirements for accounting recognition of the benefit had been met. Although the Company expects to receive the federal taxrefund following completion of the audit, the IRS has not yet closed out the audit, provided the Company with a notice of proposed adjustment or revenueagent report and the refund claims are subject to review by the Joint Committee on Taxation. The Company is continuing to evaluate whether it has claims inother state jurisdictions and whether it may have any claims for federal or state income taxes relating to tax years prior to 2012. The Company has not yetdetermined when or to what extent it may have any claims relating to such other state and local taxing jurisdictions or in respect of prior tax years.The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017, reducing the statutory corporate federal income tax rate from 35 percentto 21 percent, effective January 1, 2018. The impact of the rate change on deferred tax assets and liabilities existing at the date of enactment was recognizedin earnings during the quarter ended December 31, 2017, resulting in a tax benefit of $3.7 million. The decrease in the corporate income tax rate is currentlyexpected to reduce the Company's effective tax rate to a range of approximately 23% to 24%.The effective income tax rate for the year ended December 31, 2015 reflected a discrete income tax benefit of $49.3 million related to additional taxbasis recognized with respect to certain assets.Excluding the impact of the discrete income tax benefits discussed above and the impact of enactment of the Tax Cuts and Jobs Act of 2017, the effectiveincome tax rate was 30.1%, 32.7% and 31.8% for the years ended December 31, 2017, 2016 and 2015, respectively. Significant components included in thereconciliation of the Company's adjusted effective income tax rate to the statutory federal tax rate of 35.0% included the impact of income not subject tofederal tax, partially offset by the effect of state income taxes, for each of the years presented. In addition, the effective income tax rate for the year endedDecember 31, 2017 reflected the impact of $3.7 million in excess tax benefits resulting from activity related to vesting of share-based awards and exercise ofstock options and the effective tax rate for the year ended December 31, 2015 reflected the release of $6.2 million of reserves for uncertain tax liabilities dueto the lapse of the statute of limitations related thereto.For more information about income taxes, see Note 11 to the consolidated financial statements.Analysis of Financial ConditionAverage interest-earning assets increased $3.0 billion to $27.2 billion for the year ended December 31, 2017 from $24.2 billion for the year endedDecember 31, 2016. This increase was driven by a $2.0 billion increase in the average balance of outstanding loans and a $1.0 billion increase in the averagebalance of investment securities. The increase in average loans reflected growth of $2.2 billion in average non-covered loans outstanding, partially offset bya $177 million decrease in the44Table of Contentsaverage balance of covered loans. The $165 million decrease in average non-interest earning assets period over period primarily reflected a decrease in theFDIC indemnification asset. Growth in interest earning assets, resolution of covered loans and declines in the amount of the FDIC indemnification asset aretrends that are expected to continue.Average interest bearing liabilities increased $2.4 billion to $22.7 billion for the year ended December 31, 2017 from $20.3 billion for the year endedDecember 31, 2016, due to increases of $2.3 billion in average interest bearing deposits and $68 million in average FHLB advances. Average non-interestbearing deposits increased by $101 million. We expect growth in average deposits to continue, corresponding to anticipated growth in interest earningassets.Average stockholders' equity increased by $287 million, due primarily to the retention of earnings, including the discrete income tax benefit recordedduring the fourth quarter of 2017, but also reflecting proceeds from the exercise of stock options.Investment Securities Available for SaleThe following table shows the amortized cost and fair value of investment securities available for sale at December 31, 2017, 2016 and 2015 (inthousands): 2017 2016 2015 AmortizedCost FairValue AmortizedCost FairValue AmortizedCost FairValueU.S. Treasury securities$24,981 $24,953 $4,999 $5,005 $4,997 $4,997U.S. Government agency and sponsored enterpriseresidential MBS2,043,373 2,058,027 1,513,028 1,527,242 1,167,197 1,178,318U.S. Government agency and sponsored enterprisecommercial MBS233,522 234,508 126,754 124,586 95,997 96,814Re-Remics— — — — 88,658 89,691Private label residential MBS and CMOs613,732 628,247 334,167 375,098 502,723 544,612Private label commercial MBS1,033,022 1,046,415 1,180,386 1,187,624 1,219,355 1,218,740Single family rental real estate-backed securities559,741 562,706 858,339 861,251 646,156 636,705Collateralized loan obligations720,429 723,681 487,678 487,296 309,615 306,877Non-mortgage asset-backed securities119,939 121,747 187,660 186,736 54,981 56,500Preferred stocks59,912 63,543 76,180 88,203 75,742 83,209State and municipal obligations640,511 657,203 705,884 698,546 351,456 361,753SBA securities534,534 550,682 517,129 523,906 270,553 273,336Other debt securities4,090 9,120 3,999 8,091 3,854 7,987 $6,587,786 $6,680,832 $5,996,203 $6,073,584 $4,791,284 $4,859,539Our investment strategy has focused on insuring adequate liquidity, adding a suitable balance of high credit quality, diversifying assets to theconsolidated balance sheet, managing interest rate risk, and generating acceptable returns given our established risk parameters. We have sought to maintainliquidity by investing a significant portion of the portfolio in high quality liquid securities including U.S. Treasury securities, SBA securities and U.S.Government agency MBS. Investment grade municipal securities provide liquidity along with higher tax-equivalent yields at longer durations than theportfolio in general. We have also invested in highly rated structured products that, while somewhat less liquid, provide us with attractive yields. Relativelyshort effective portfolio duration helps mitigate interest rate risk. The weighted average expected life of the investment portfolio as of December 31, 2017was 4.9 years and the effective duration was 1.7 years. A summary of activity in the investment securities available for sale portfolio for the year endedDecember 31, 2017 follows (in thousands):45Table of ContentsBalance, beginning of period$6,073,584 Purchases3,131,798 Repayments, maturities and calls(1,268,588) Sales(1,254,125) Amortization of discounts and premiums, net(17,502) Change in unrealized gains15,665Balance, end of period$6,680,832The following table shows the scheduled maturities, carrying values and current yields for investment securities available for sale as of December 31,2017. Scheduled maturities have been adjusted for anticipated prepayments of MBS and other pass through securities. Yields on tax-exempt securities havebeen calculated on a tax-equivalent basis, based on a federal income tax rate of 21% (dollars in thousands): Within One Year After One YearThrough Five Years After Five YearsThrough Ten Years After Ten Years Total CarryingValue WeightedAverageYield CarryingValue WeightedAverageYield CarryingValue WeightedAverageYield CarryingValue WeightedAverageYield CarryingValue WeightedAverageYieldU.S. Treasury securities$24,953 1.19% $— —% $— —% $— —% $24,953 1.19%U.S. Government agency and sponsoredenterprise residential MBS334,030 2.87% 783,512 2.24% 775,878 2.09% 164,607 2.07% 2,058,027 2.27%U.S. Government agency and sponsoredenterprise commercial MBS11,657 3.22% 16,812 3.03% 94,694 2.42% 111,345 2.78% 234,508 2.67%Private label residential MBS and CMOs119,381 3.84% 344,386 3.63% 136,061 3.63% 28,419 4.01% 628,247 3.69%Private label commercial MBS71,241 3.93% 748,263 3.63% 223,486 3.36% 3,425 3.48% 1,046,415 3.59%Single family rental real estate-backedsecurities1,969 3.13% 525,865 3.07% 34,872 3.26% — —% 562,706 3.08%Collateralized loan obligations3,250 3.34% 447,245 3.39% 273,186 3.12% — —% 723,681 3.29%Non-mortgage asset-backed securities11,850 4.04% 91,353 3.43% 17,370 2.84% 1,174 2.81% 121,747 3.40%State and municipal obligations— —% 27,232 2.47% 575,045 3.66% 54,926 4.29% 657,203 3.66%SBA securities95,960 2.51% 247,489 2.43% 131,656 2.38% 75,577 2.32% 550,682 2.42%Other debt securities— —% — —% 1,883 9.25% 7,237 9.68% 9,120 9.56% $674,291 3.07% $3,232,157 3.06% $2,264,131 2.88% $446,710 2.75% 6,617,289 2.98%Preferred stocks with no scheduledmaturity 63,543 7.55%Total investment securities availablefor sale $6,680,832 3.02%The available for sale investment securities portfolio was in a net unrealized gain position of $93.0 million at December 31, 2017 with aggregate fairvalue equal to 101.4% of amortized cost. Net unrealized gains included $98.9 million of gross unrealized gains and $5.9 million of gross unrealized losses.Investment securities available for sale in an unrealized loss position at December 31, 2017 had an aggregate fair value of $1.2 billion. At December 31,2017, 96.7% of investment securities available for sale were backed by the U.S. Government, U.S. Government agencies or sponsored enterprises or were ratedAAA , AA or A, based on the most recent third-party ratings. Investment securities available for sale totaling $21 million were rated below investment gradeor not rated at December 31, 2017, all of which were acquired in the FSB Acquisition and substantially all of which were in unrealized gain positions atDecember 31, 2017.We evaluate the credit quality of individual securities in the portfolio quarterly to determine whether any of the investments in unrealized loss positionsare other-than-temporarily impaired. This evaluation considers, but is not necessarily limited to, the following factors, the relative significance of whichvaries depending on the circumstances pertinent to each individual security:•our intent to hold the security until maturity or for a period of time sufficient for a recovery in value;•whether it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis;•the length of time and extent to which fair value has been less than amortized cost;46Table of Contents•adverse changes in expected cash flows;•collateral values and performance;•the payment structure of the security, including levels of subordination or over-collateralization;•changes in the economic or regulatory environment;•the general market condition of the geographic area or industry of the issuer;•the issuer’s financial condition, performance and business prospects; and•changes in credit ratings.During the year ended December 31, 2016, the Company recognized OTTI in the amount of $463 thousand on two positions in one private labelcommercial MBS security, which was determined to be other-than-temporarily impaired. This security was sold prior to the end of 2016. No securities weredetermined to be other-than-temporarily impaired at December 31, 2017 and 2015, or during the years then ended.We do not intend to sell securities in significant unrealized loss positions at December 31, 2017. Based on an assessment of our liquidity position andinternal and regulatory guidelines for permissible investments and concentrations, it is not more likely than not that we will be required to sell securities insignificant unrealized loss positions prior to recovery of amortized cost basis. The severity of impairment of individual securities in the portfolio is generallynot material. Unrealized losses in the portfolio at December 31, 2017 were primarily attributable to an increase in market interest rates subsequent to the datethe securities were acquired.The timely repayment of principal and interest on U.S. Treasury and U.S. Government agency and sponsored enterprise securities in unrealized losspositions is explicitly or implicitly guaranteed by the full faith and credit of the U.S. Government. Management performed projected cash flow analyses ofthe private label residential MBS and CMOs, and private label commercial MBS in unrealized loss positions, incorporating CUSIP level assumptionsconsistent with the collateral characteristics of each security including collateral default rate, voluntary prepayment rate, severity and delinquencyassumptions. Based on the results of this analysis, no credit losses were projected. Management's analysis of the credit characteristics of individual securitiesand the underlying collateral and levels of subordination for each of the single family rental real estate-backed securities in unrealized loss positions is notindicative of projected credit losses. Management's analysis of the state and municipal obligations in unrealized loss positions included reviewing the ratingsof the securities and the results of credit surveillance performed by an independent third party. Given the expectation of timely repayment of principal andinterest and the generally limited severity of impairment, the impairments were considered to be temporary.For further discussion of our analysis of investment securities for OTTI, see Note 4 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 wehave a thorough understanding of the methodologies and assumptions used by the pricing services including obtaining and reviewing writtendocumentation of the methods and assumptions employed, conducting interviews with valuation desk personnel and reviewing model results and detailedassumptions used to value selected securities as considered necessary. Our classification of prices within the fair value hierarchy is based on an evaluation ofthe nature of the significant assumptions impacting the valuation of each type of security in the portfolio. We have established a robust price challengeprocess that includes a review by our treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected month over monthfluctuations or deviations from our expectations based on recent observed trading activity and other information available in the marketplace that wouldimpact the value of the security is challenged. Responses to the price challenges, which generally include specific information about inputs and assumptionsincorporated in the valuation and their sources, are reviewed in detail. If considered necessary to resolve any discrepancies, a price will be obtained from anadditional independent valuation specialist. We do not typically adjust the prices provided, other than through this established challenge process. Ourprimary pricing services utilize observable inputs when available, and employ unobservable inputs and proprietary models only when observable inputs arenot available. As a matter of course, the services validate prices by comparison to recent trading activity whenever such activity exists. Quotes obtained fromthe pricing services are typically non-binding.We have also established a quarterly price validation process to assess the propriety of the pricing methodologies utilized by our primary pricingservices by independently verifying the prices of a sample of securities in the portfolio. Sample sizes vary based on the type of security being priced, withhigher sample sizes applied to more difficult to value security types. Verification procedures may consist of obtaining prices from an additional outsidesource or internal modeling, generally based on Intex. We have established acceptable percentage deviations from the price provided by the initial pricingsource. If47Table of Contentsdeviations fall outside the established parameters, we will obtain and evaluate more detailed information about the assumptions and inputs used by eachpricing source or, if considered necessary, employ an additional valuation specialist to price the security in question. Pricing issues identified through thisevaluation are addressed with the applicable pricing service and methodologies or inputs are revised as determined necessary. Depending on the results of thevalidation process, sample sizes may be extended for particular classes of securities. Results of the validation process are reviewed by the treasury front officeand by senior management.The majority of our investment securities are classified within level 2 of the fair value hierarchy. U.S. Treasury securities and certain preferred stocks areclassified within level 1 of the hierarchy. At December 31, 2017 and 2016, 0.9% and 2.1%, respectively, of our investment securities were classified withinlevel 3 of the fair value hierarchy. Securities classified within level 3 of the hierarchy at December 31, 2017 included certain private label residential MBSand trust preferred securities. These securities were classified within level 3 of the hierarchy because proprietary assumptions related to voluntary prepaymentrates, default probabilities, loss severities and discount rates were considered significant to the valuation. There were no transfers of investment securitiesbetween levels of the fair value hierarchy during the years ended December 31, 2017 and 2016.For additional discussion of the fair values of investment securities, see Note 16 to the consolidated financial statements.Loans Held for SaleLoans held for sale at December 31, 2017 and 2016 included $34 million and $41 million, respectively, of commercial loans originated by SBF with theintent to sell in the secondary market. Commercial loans held for sale are comprised of the portion of loans guaranteed by U.S. government agencies,primarily the SBA. Loans are generally sold with servicing retained. Servicing activity did not have a material impact on the results of operations for theyears ended December 31, 2017, 2016 and 2015.LoansThe loan portfolio comprises the Company’s primary interest-earning asset. The following tables show the composition of the loan portfolio and thebreakdown of the portfolio among non-covered loans, covered ACI loans and covered non-ACI loans at December 31 of each of the years indicated (dollarsin thousands):2017 Covered Loans Percent of TotalNon-Covered Loans ACI Non-ACI Total Residential and other consumer: 1-4 single family residential$4,116,814 $479,068 $26,837 $4,622,719 21.6%Home equity loans and lines of credit1,654 — 361 2,015 —%Other consumer loans20,512 — — 20,512 0.1%4,138,980 479,068 27,198 4,645,246 21.7%Commercial: Multi-family3,215,697 — — 3,215,697 15.0%Non-owner occupied commercial real estate4,485,276 — — 4,485,276 21.0%Construction and land310,999 — — 310,999 1.5%Owner occupied commercial real estate2,014,908 — — 2,014,908 9.4%Commercial and industrial4,145,785 — — 4,145,785 19.4%Commercial lending subsidiaries2,553,576 — — 2,553,576 12.0%16,726,241 — — 16,726,241 78.3%Total loans20,865,221 479,068 27,198 21,371,487 100.0%Premiums, discounts and deferred fees and costs, net48,165 — (3,148) 45,017 Loans including premiums, discounts and deferred fees andcosts20,913,386 479,068 24,050 21,416,504 Allowance for loan and lease losses(144,537) — (258) (144,795) Loans, net$20,768,849 $479,068 $23,792 $21,271,709 48Table of Contents2016 Covered Loans Percent of TotalNon-Covered Loans ACI Non-ACI Total Residential and other consumer: 1-4 single family residential$3,422,425 $532,348 $36,675 $3,991,448 20.6%Home equity loans and lines of credit1,120 3,894 47,629 52,643 0.3%Other consumer loans24,365 — — 24,365 0.1%3,447,910 536,242 84,304 4,068,456 21.0%Commercial: Multi-family3,824,973 — — 3,824,973 19.8%Non-owner occupied commercial real estate3,739,235 — — 3,739,235 19.3%Construction and land311,436 — — 311,436 1.6%Owner occupied commercial real estate1,736,858 — — 1,736,858 9.0%Commercial and industrial3,391,614 — — 3,391,614 17.5%Commercial lending subsidiaries2,280,685 — — 2,280,685 11.8%15,284,801 — — 15,284,801 79.0%Total loans18,732,711 536,242 84,304 19,353,257 100.0%Premiums, discounts and deferred fees and costs, net48,641 — (6,504) 42,137 Loans including premiums, discounts and deferred fees andcosts18,781,352 536,242 77,800 19,395,394 Allowance for loan and lease losses(150,853) — (2,100) (152,953) Loans, net$18,630,499 $536,242 $75,700 $19,242,441 49Table of Contents 2015 Covered Loans Non-Covered Loans ACI Non-ACI Total Percent ofTotalResidential and other consumer: 1-4 single family residential$2,883,470 $699,039 $46,110 $3,628,619 21.9%Home equity loans and lines of credit806 4,831 67,493 73,130 0.4%Other consumer loans35,183 — — 35,183 0.2% 2,919,459 703,870 113,603 3,736,932 22.5%Commercial: Multi-family3,472,162 — — 3,472,162 20.9%Non-owner occupied commercial real estate2,910,327 — — 2,910,327 17.5%Construction and land347,676 — — 347,676 2.1%Owner occupied commercial real estate1,354,751 — — 1,354,751 8.2%Commercial and industrial2,770,875 — — 2,770,875 16.7%Commercial lending subsidiaries2,003,984 — — 2,003,984 12.1% 12,859,775 — — 12,859,775 77.5%Total loans15,779,234 703,870 113,603 16,596,707 100.0%Premiums, discounts and deferred fees and costs, net47,829 — (7,933) 39,896 Loans net of premiums, discounts and deferred fees and costs15,827,063 703,870 105,670 16,636,603 Allowance for loan and lease losses(120,960) — (4,868) (125,828) Loans, net$15,706,103 $703,870 $100,802 $16,510,775 2014 Covered Loans Non-CoveredLoans ACI Non-ACI Total Percent ofTotalResidential and other consumer: 1-4 single family residential$2,486,272 $874,522 $56,138 $3,416,932 27.6%Home equity loans and lines of credit1,827 22,657 101,142 125,626 1.0%Other consumer loans26,307 — — 26,307 0.2% 2,514,406 897,179 157,280 3,568,865 28.8%Commercial: Multi-family1,952,189 — — 1,952,189 15.8%Non-owner occupied commercial real estate1,784,079 — — 1,784,079 14.4%Construction and land169,720 — — 169,720 1.4%Owner occupied commercial real estate1,043,370 — — 1,043,370 8.4%Commercial and industrial2,403,293 — — 2,403,293 19.4%Commercial lending subsidiaries1,456,751 — — 1,456,751 11.8% 8,809,402 — — 8,809,402 71.2%Total loans11,323,808 897,179 157,280 12,378,267 100.0%Premiums, discounts and deferred fees and costs, net47,097 — (10,595) 36,502 Loans net of premiums, discounts and deferred fees and costs11,370,905 897,179 146,685 12,414,769 Allowance for loan and lease losses(91,350) — (4,192) (95,542) Loans, net$11,279,555 $897,179 $142,493 $12,319,227 50Table of Contents 2013 Covered Loans Non-Covered Loans ACI Non-ACI Total Percent ofTotalResidential and other consumer: 1-4 single family residential$1,800,332 $1,057,012 $70,378 $2,927,722 32.4%Home equity loans and lines of credit1,535 39,602 127,807 168,944 1.9%Other consumer loans213,107 1,679 — 214,786 2.4% 2,014,974 1,098,293 198,185 3,311,452 36.7%Commercial: Multi-family1,105,965 33,354 — 1,139,319 12.6%Non-owner occupied commercial real estate947,992 93,089 52 1,041,133 11.5%Construction and land138,091 10,600 729 149,420 1.7%Owner occupied commercial real estate718,162 49,861 689 768,712 8.5%Commercial and industrial1,651,739 6,050 6,234 1,664,023 18.5%Commercial lending subsidiaries952,050 — — 952,050 10.5% 5,513,999 192,954 7,704 5,714,657 63.3%Total loans7,528,973 1,291,247 205,889 9,026,109 100.0%Premiums, discounts and deferred fees and costs, net40,748 — (13,248) 27,500 Loans net of premiums, discounts and deferred fees and costs7,569,721 1,291,247 192,641 9,053,609 Allowance for loan and lease losses(57,330) (2,893) (9,502) (69,725) Loans, net$7,512,391 $1,288,354 $183,139 $8,983,884 Included in non-covered loans above are $34 million, $47 million, $67 million, $93 million and $15 million at December 31, 2017, 2016, 2015, 2014and 2013, respectively, of ACI commercial loans acquired in the FSB Acquisition.Total loans, including premiums, discounts and deferred fees and costs, increased by $2.0 billion to $21.4 billion at December 31, 2017, from $19.4billion at December 31, 2016. Non-covered loans grew by $2.1 billion while covered loans declined by $111 million from December 31, 2016 toDecember 31, 2017. Non-covered residential and other consumer loans grew by $700 million and non-covered commercial loans grew by $1.4 billion duringthe year ended December 31, 2017.Growth in non-covered loans, including premiums, discounts and deferred fees and costs for the year ended December 31, 2017 reflected an increase of$1.0 billion for the Florida franchise, a decrease of $27 million for the New York franchise and an increase of $1.1 billion for the national platforms. The lackof growth for the New York franchise reflected management's decision to reduce our multi-family concentration in New York. Over the next twelve months,we expect the balance of the New York multi-family portfolio to continue to decline and other major portfolio segments to continue to grow acrossgeographies. Actual results will be dependent on our continual evaluation of relative risk and return and on market and competitive conditions.51Table of ContentsThe following tables show the composition of the non-covered loan portfolio and the breakdown among the Florida and New York franchises andnational platforms at December 31, 2017 and 2016. Amounts include premiums, discounts and deferred fees and costs (dollars in thousands): 2017 Florida New York National TotalResidential and other consumer$20,779 $1,348 $4,173,953 $4,196,080Commercial: Multi-family580,599 2,638,354 — 3,218,953Non-owner occupied commercial real estate2,805,820 1,572,884 96,097 4,474,801Construction and land149,658 145,702 15,124 310,484Owner occupied commercial real estate1,116,249 790,993 105,500 2,012,742Commercial and industrial2,684,524 963,886 489,417 4,137,827Commercial lending subsidiaries— — 2,562,499 2,562,499 $7,357,629 $6,113,167 $7,442,590 $20,913,386 35.2% 29.2% 35.6% 100.0% 2016 Florida New York National TotalResidential and other consumer:$24,022 $1,404 $3,470,349 $3,495,775Commercial: Multi-family520,263 3,309,411 — 3,829,674Non-owner occupied commercial real estate2,337,806 1,294,231 99,771 3,731,808Construction and land174,494 125,983 10,436 310,913Owner occupied commercial real estate1,042,441 602,155 91,254 1,735,850Commercial and industrial2,234,393 806,660 346,085 3,387,138Commercial lending subsidiaries— — 2,290,194 2,290,194 $6,333,419 $6,139,844 $6,308,089 $18,781,352 33.7% 32.7% 33.6% 100.0%The increase in non-owner occupied commercial real estate loans and the decrease in multi-family loans in the New York franchise for the year endedDecember 31, 2017 includes the impact of reclassifying $200 million of loans on mixed-use properties from multi-family to non-owner occupied commercialreal estate, based on an updated evaluation of the primary source of rental income on those properties.Included in multi-family and non-owner occupied commercial real estate loans above at December 31, 2017 were $194 million and $80 million,respectively, in re-positioning loans. These loans, substantially all of which are in New York, provided financing for some level of improvements by theborrower to the underlying collateral to enhance the cash flow generating capacity of the collateral. The primary purpose of these loans was not forconstruction.Residential mortgages and other consumer loansResidential mortgages and other consumer loans totaled $4.6 billion, or 21.7% of total loans, at December 31, 2017 and $4.1 billion, or 21.0% of totalloans, at December 31, 2016.The non-covered 1-4 single family residential loan portfolio is primarily comprised of loans purchased on a national basis through establishedcorrespondent channels. The portfolio also includes loans originated through retail channels in our Florida and New York geographic footprint prior to thetermination of our retail residential mortgage origination business in early 2016. All non-covered 1-4 single family residential loans are managed togetherand reported as part of the national platform in the disclosures above. Non-covered 1-4 single family residential mortgage loans are primarily closed-end, firstlien 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 oradjustable interest rates. At December 31, 2017, $104 million or 2.5% of non-covered residential mortgage loans were interest-only loans, substantially all ofwhich begin amortizing 10 years after origination.52Table of ContentsThe following tables present a breakdown of the non-covered and covered 1-4 single family residential mortgage portfolio categorized between fixedrate loans and ARMs at December 31, 2017 and 2016. Amounts are net of premiums, discounts and deferred fees and costs (dollars in thousands): 2017 Non-Covered Loans CoveredLoans Total Percent ofTotalFixed rate loans$1,302,323 $133,052 $1,435,375 30.7%ARM Loans2,871,630 369,705 3,241,335 69.3% $4,173,953 $502,757 $4,676,710 100.0% 2016 Non-Covered Loans CoveredLoans Total Percent ofTotalFixed rate loans$1,130,914 $191,676 $1,322,590 32.8%ARM Loans2,339,435 371,477 2,710,912 67.2% $3,470,349 $563,153 $4,033,502 100.0%We do not originate or acquire option ARMs, “no-doc” or “reduced-doc” mortgages and do not utilize wholesale mortgage origination channelsalthough the covered loan portfolio contains loans with these characteristics. Included in ARM loans above are payment option ARMs representing 51.2%and 50.2% of total covered ARM loans outstanding as of December 31, 2017 and 2016, respectively, based on UPB. All of the option ARMs are coveredloans and the substantial majority are ACI loans. They are all currently amortizing. The Company’s exposure to future losses on these mortgage loans ismitigated by the Single Family Shared-Loss Agreement.The following charts present the distribution of the non-covered 1-4 single family residential mortgage portfolio by interest rate terms and contractuallives at December 31, 2017 and 2016: (1)Fixed-rate loans with contractual terms of 20 years comprise less than 3% of the total at both December 31, 2017 and 2016, and are reported with 15 year fixed above.53Table of ContentsThe geographic concentration of the 1-4 single family residential portfolio is summarized as follows at December 31, 2017 and 2016 (dollars inthousands): 2017 Percent of TotalNon-Covered Loans Covered Loans Total Non-CoveredLoans Total LoansCalifornia$1,094,058 $23,780 $1,117,838 26.2% 23.9%New York873,360 16,847 890,207 20.9% 19.0%Florida552,556 281,396 833,952 13.2% 17.8%Virginia181,912 22,290 204,202 4.4% 4.4%Others (1)1,472,067 158,444 1,630,511 35.3% 34.9% $4,173,953 $502,757 $4,676,710 100.0% 100.0% 2016 Percent of Total Non-Covered Loans Covered Loans Total Non-CoveredLoans Total LoansCalifornia$904,107 $37,330 $941,437 26.1% 23.3%New York763,824 16,403 780,227 22.0% 19.3%Florida487,294 300,198 787,492 14.0% 19.5%Virginia152,113 30,818 182,931 4.4% 4.5%Others (1)1,163,011178,404 1,341,415 33.5% 33.4%$3,470,349$563,153 $4,033,502 100.0% 100.0% (1)No other state represented borrowers with more than 4.0% of 1-4 single family residential loans outstanding at December 31, 2017 or 2016.Home equity loans and lines of credit are not significant.Other consumer loans are comprised primarily of consumer installment financing, loans secured by certificates of deposit, unsecured personal lines ofcredit and demand deposit account overdrafts.Commercial loans and leasesThe commercial portfolio segment includes loans secured by multi-family properties, loans secured by both owner-occupied and non-owner occupiedcommercial real estate, a limited amount of construction and land loans, commercial and industrial loans and direct financing leases. Management’s loanorigination strategy is heavily focused on the commercial portfolio segment, which comprised 80.1% and 81.6% of non-covered loans as of December 31,2017 and 2016, respectively.Commercial real estate loans include term loans secured by owner and non-owner occupied income producing properties including rental apartments,mixed-use properties, industrial properties, retail shopping centers, free-standing single-tenant buildings, office buildings, warehouse facilities and hotels aswell as real estate secured lines of credit.The following charts present the distribution of non-owner occupied commercial real estate by product type at December 31, 2017 and 2016:54Table of ContentsThe Company’scommercial real estate underwriting standards generally provide for loan terms of five to ten years, with amortization schedules of no more than thirty years.LTV ratios are typically limited to no more than 80%. Owner-occupied commercial real estate loans typically have risk profiles more closely aligned withthat of commercial and industrial loans than with other types of commercial real estate loans. Construction and land loans represented only 1.5% of the totalloan portfolio at December 31, 2017. Construction and land loans are generally made for projects expected to stabilize within eighteen months of completionin sub-markets with strong fundamentals and, to a lesser extent, for-sale residential projects to experienced developers with a strong cushion between marketprices and loan basis.Commercial and industrial loans are typically made to small, middle market and larger corporate businesses and include equipment loans, secured andunsecured working capital facilities, formula-based loans, trade finance, mortgage warehouse lines, taxi medallion loans, SBA product offerings and businessacquisition finance credit facilities. These loans may be structured as term loans, typically with maturities of five to ten years, or revolving lines of creditwhich may have multi-year maturities. The Bank also provides financing to state and local governmental entities within its geographic footprint. Commercialloans include shared national credits totaling $1.6 billion at December 31, 2017, typically relationship based loans to borrowers in Florida and New York.Through its commercial lending subsidiaries, Pinnacle and Bridge, the Bank provides equipment and franchise financing on a national basis using bothloan and lease structures. Pinnacle provides financing to state and local governmental entities directly and through vendor programs and alliances. Pinnacleoffers a full array of financing structures including equipment lease purchase agreements and direct (private placement) bond re-fundings and loanagreements. Bridge has two operating divisions. The franchise finance division offers franchise acquisition, expansion and equipment financing, typically toexperienced operators in well-established concepts. The equipment finance division provides primarily transportation equipment financing through a varietyof loan and lease structures. The Bank's SBF unit primarily originates SBA guaranteed commercial and commercial real estate loans, generally selling theguaranteed portion in the secondary market and retaining the unguaranteed portion in portfolio. The Bank engages in mortgage warehouse lending on anational basis.The following table presents the recorded investment in loans and direct finance leases held for investment for each of our national commercial lendingplatforms at December 31, 2017 and 2016 (in thousands): 2017 2016Pinnacle$1,524,650 $1,317,820Bridge - franchise finance434,582 426,661Bridge - transportation equipment finance603,267 545,713SBF246,750 225,241Mortgage warehouse lending459,388 322,305 $3,268,637 $2,837,74055Table of ContentsThe geographic concentration of the commercial loans and direct financing leases in the national platforms is summarized as follows at December 31,2017 and 2016. Amounts include premiums, discounts and deferred fees and costs (dollars in thousands): 2017 2016Florida$639,474 19.6% $552,799 19.5%California486,733 14.9% 430,898 15.2%Arizona175,704 5.4% 142,010 5.0%Texas160,606 4.9% 122,094 4.3%Iowa151,935 4.6% 164,025 5.8%North Carolina147,987 4.5% 82,547 2.9%Virginia148,884 4.6% 138,417 4.9%All others (1)1,357,314 41.5% 1,204,950 42.4% $3,268,637 100.0% $2,837,740 100.0% (1)No other state represented borrowers with more than 4.0% of loans outstanding at December 31, 2017 or 2016.Loan MaturitiesThe following table sets forth, as of December 31, 2017, the maturity distribution of our non-covered loan portfolio by category, based on UPB.Commercial loans are presented by contractual maturity, including scheduled payments for amortizing loans. Contractual maturities of 1-4 single familyresidential loans have been adjusted for an estimated rate of voluntary prepayments on all loans, based on historical trends, current interest rates, types ofloans and refinance patterns (in thousands): One Year orLess After OneThrough FiveYears After FiveYears TotalResidential and other consumer: 1-4 single family residential$590,108 $2,075,104 $1,451,602 $4,116,814 Home equity loans and lines of credit286 656 712 1,654Other consumer loans6,482 11,621 2,409 20,512 596,876 2,087,381 1,454,723 4,138,980Commercial: Multi-family616,771 2,371,476 229,719 3,217,966 Non-owner occupied commercial real estate576,930 2,765,167 1,144,258 4,486,355 Construction and land98,846 90,632 121,521 310,999 Owner occupied commercial real estate210,738 877,559 927,875 2,016,172 Commercial and industrial1,481,279 2,520,004 144,534 4,145,817 Commercial lending subsidiaries556,634 1,267,586 729,356 2,553,576 3,541,198 9,892,424 3,297,263 16,730,885 $4,138,074 $11,979,805 $4,751,986 $20,869,86556Table of ContentsThe following table shows the distribution of UPB of those loans that mature in more than one year between fixed and adjustable interest rate loans as ofDecember 31, 2017 (in thousands): Interest Rate Type Fixed Adjustable TotalResidential and other consumer: 1-4 single family residential$1,172,876 $2,353,830 $3,526,706 Home equity loans and lines of credit— 1,368 1,368Other consumer loans11,872 2,158 14,030 1,184,748 2,357,356 3,542,104Commercial: Multi-family2,334,762 266,433 2,601,195 Non-owner occupied commercial real estate2,384,995 1,524,430 3,909,425 Construction and land114,810 97,343 212,153 Owner occupied commercial real estate1,180,681 624,753 1,805,434 Commercial and industrial614,641 2,049,897 2,664,538 Commercial lending subsidiaries1,914,516 82,426 1,996,942 8,544,405 4,645,282 13,189,687 $9,729,153 $7,002,638 $16,731,791No maturity information has been provided for covered loans, which are comprised entirely of loans secured by 1-4 single family residential loans, thesubstantial majority of which are ACI loans accounted for in pools.Equipment under Operating LeaseEquipment under operating lease increased by $60 million to $600 million at December 31, 2017, from $540 million at December 31, 2016. Theportfolio consisted primarily of railcars, non-commercial aircraft and other transport equipment. We have a total of 5,419 railcars with a carrying value of$442 million at December 31, 2017, including hoppers, tank cars, boxcars, auto carriers, center beams and gondolas leased to North American commercialend-users. The largest concentrations of rail cars were 2,263 hopper cars and 1,682 tank cars, primarily used to ship sand and petroleum products,respectively, for the energy industry. Equipment with a carrying value of $276 million at December 31, 2017 was leased to companies for use in the energyindustry.At December 31, 2017, the breakdown of carrying values of equipment under operating lease by the year current leases are scheduled to expire was asfollows (in thousands):Years Ending December 31: 2018 (1)$57,148201956,5742020105,485202171,637202263,391Thereafter through 2031245,267 $599,502 (1)Includes $3.4 million of equipment off-lease as of December 31, 2017.57Table of ContentsAsset QualityNon-covered Loans and LeasesCommercial LoansWe have a robust credit risk management framework, an experienced team to lead the workout and recovery process for the commercial and commercialreal estate portfolios and a dedicated internal credit review function. Loan performance is monitored by our credit administration and workout and recoverydepartments. Generally, commercial relationships with balances in excess of defined thresholds are re-evaluated at least annually and more frequently ifcircumstances indicate that a change in risk rating may be warranted. The defined thresholds range from $1 million to $3 million. Homogenous groups ofsmaller balance commercial loans may be monitored collectively. Additionally, commercial loans are regularly reviewed by our internal credit reviewdepartment. The Company utilizes a 13 grade internal asset risk classification system as part of its efforts to monitor and maintain commercial asset quality.Loans exhibiting potential credit weaknesses that deserve management’s close attention and that if left uncorrected may result in deterioration of therepayment capacity of the borrower are categorized as special mention. These borrowers may exhibit negative financial trends or erratic financialperformance, strained liquidity, marginal collateral coverage, declining industry trends or weak management. Loans with well-defined credit weaknesses thatmay result in a loss if the deficiencies are not corrected are assigned a risk rating of substandard. These borrowers may exhibit payment defaults, inadequatecash flows, operating losses, increasing balance sheet leverage, project cost overruns, unreasonable construction delays, exhausted interest reserves, decliningcollateral values, frequent overdrafts or past due real estate taxes. Loans with weaknesses so severe that collection in full is highly questionable orimprobable, but because of certain reasonably specific pending factors have not been charged off, are assigned an internal risk rating of doubtful.We believe internal risk rating is the best indicator of the credit quality of commercial loans. The following table summarizes the Company's commercialcredit exposure, based on internal risk rating, at December 31, 2017 and 2016 (in thousands): 2017 2016 Balance Percent of Total Balance Percent of TotalPass $16,189,392 96.8% $14,897,121 97.4%Special mention 183,234 1.1% 72,225 0.5%Substandard (1) 338,405 2.0% 304,713 2.0%Doubtful 6,275 0.1% 11,518 0.1% $16,717,306 100.0% $15,285,577 100.0% (1)The balance of substandard loans at December 31, 2017 and 2016 included $105 million and $138 million, respectively, of taxi medallion finance loans. Criticized andclassified loans represented 3.2% of the commercial loan portfolio, of which 0.6% were taxi medallion loans, at December 31, 2017. See Note 5 to the consolidated financialstatements for more detailed information about risk rating of commercial loans.Taxi Medallion FinanceThe commercial and industrial loan portfolio includes exposure to taxi medallion finance of $106 million at December 31, 2017. The estimated value ofunderlying taxi medallion collateral and liquidity in the market for sales of medallions, a potential secondary source of repayment, have declinedsignificantly in recent years due to competitive developments in the transportation-for-hire industry. Due to the ongoing trend of declining estimated cashflows from the operation of taxi medallions leading to declines in medallion valuations, the entire taxi medallion portfolio is on non-accrual status and riskrated substandard or doubtful as of December 31, 2017. In addition, partial charge-offs were recognized on all taxi medallion loans with carrying values inexcess of the value that can reasonably be supported by the cash flow generating capacity of a medallion, determined using the cash flow template discussedbelow.Using an extensive data set obtained from the NYTLC and assumptions that we believe are reasonable estimates of fleet utilization and borrowerexpenses, we perform a quarterly analysis to estimate the cash flow generating capacity of the operation of a New York City taxi medallion. We update ouranalysis on a quarterly basis, based on these cash flow capacity estimates. At December 31, 2017, the estimated valuations based on our cash flow templatewere $320,625 for corporate medallions owned by certain large scale fleet operators and $304,000 for individual and other corporate medallions. We usedthese values for purposes of determining the partial charge-offs. We established an additional 15% specific reserve from these58Table of Contentsvaluation levels at December 31, 2017 in recognition of continued declining trends in the estimated cash flow generating capacity of medallions. See Note16 to the consolidated financial statements for additional information about the valuation of New York City taxi medallions.The taxi medallion portfolio had the following characteristics at December 31, 2017:•Approximately 97.5% of the portfolio secured directly by taxi medallions was concentrated in New York City.•Loans delinquent by 30 days or more totaled $17.7 million or 16.7% of the portfolio, compared to $40.8 million or 22.8% of the portfolio atDecember 31, 2016. Loans delinquent by 90 days or more totaled $8.3 million or 7.8% of the portfolio, compared to $29.2 million or 16.4% of theportfolio at December 31, 2016. The most significant factor contributing to the decrease in delinquencies was one large relationship that wasbrought current and restructured in 2017. Partial charge-offs during the year ended December 31, 2017 also contributed to the reduction in the dollaramount of delinquencies.•The portfolio included 186 loans modified in TDRs with a recorded investment of $87.9 million.•In the aggregate, the ALLL related to taxi medallion loans was 11.5% of the outstanding balance at December 31, 2017, compared to 6.0% atDecember 31, 2016. Charge-offs of $56.6 million were recognized in the year ended December 31, 2017 related to taxi medallion loans. Cumulativecharge-offs of $67.8 million have been recognized related to taxi medallion loans through December 31, 2017.We are no longer originating new taxi medallion loans. Our portfolio management strategies include, but are not limited to, working with borrowersexperiencing cash flow challenges to provide short term relief and/or extended amortization periods, pro-actively attempting to refinance loans prior tomaturity, obtaining principal reductions or additional collateral when possible, continuing to monitor industry data and obtaining updated borrower andguarantor financial information.Equipment Under Operating LeaseFive operating lease relationships with a carrying value of assets under lease totaling $74 million, of which $68 million were exposures to the energyindustry, were internally risk rated special mention or substandard at December 31, 2017. The present value of remaining lease payments on these leasestotaled approximately $22 million at December 31, 2017, of which $17 million were exposures to the energy industry. There have been no missed paymentsrelated to the operating lease portfolio to date. One relationship has been restructured to date, with no decrease in total minimum lease payments.The primary risks inherent in the equipment leasing business are asset risk resulting from ownership of the equipment on operating lease and credit risk.Asset risk arises from fluctuations in supply and demand for the underlying leased equipment. The equipment is leased to commercial end-users with originallease terms generally ranging from 3-10 years at December 31, 2017. We are exposed to the risk that, at the end of the lease term, the value of the asset will belower 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 tochanges in depreciation as a result of changes in the residual values of the operating lease assets or through impairment of asset carrying values. Asset riskmay be higher for long-lived equipment such as railcars, which have useful lives of approximately 35-50 years.Asset risk is evaluated and managed by a dedicated internal staff of asset managers, managed by seasoned equipment finance professionals with a broaddepth and breadth of experience in the leasing business. Additionally, we have partnered with an industry leading, experienced service provider whoprovides fleet management and servicing relating to the railcar portfolio, including lease administration and reporting, a Regulation Y compliant full servicemaintenance program and railcar re-marketing. Risk is managed by setting appropriate residual values at inception and systematic reviews of residual valuesbased on independent appraisals, performed at least annually. Additionally, our internal management team and our external service provider closely followthe rail markets, monitoring traffic flows, supply and demand trends and the impact of new technologies and regulatory requirements. Demand for railcars issensitive to shifts in general and industry specific economic and market trends and shifts in trade flows from specific events such as natural or man-madedisasters. 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 areexpected to maintain stronger and more stable utilization rates despite impacts from unexpected events or cyclical trends and by staggering lease maturities.We regularly monitor the impact of lower oil prices on the estimated residual value of rail cars being used in the petroleum/natural gas extraction sector.Credit risk in the leased equipment portfolio results from the potential default of lessees, possibly driven by obligor specific or industry-wide conditions,and is economically less significant than asset risk, because in the operating lease business, there is no extension of credit to the obligor. Instead, the lessordeploys 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, orlower rental payments59Table of Contentsdue 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 creditadministration infrastructure, processes and procedures similar to those used to manage and monitor credit risk in the commercial loan portfolio. We alsomitigate credit risk in this portfolio by leasing only to high credit quality obligors.We expect our operating lease portfolio to continue to grow, and we plan to expand into additional asset classes to mitigate concentration risk.Residential and Other Consumer LoansThe majority of our non-covered residential mortgage portfolio consists of loans purchased through established correspondent channels. Most of ourpurchases are of performing jumbo mortgage loans which have FICO scores above 700, primarily are owner-occupied and full documentation, and have acurrent LTV of 80% or less although loans with LTVs higher than 80% may be extended to selected credit-worthy borrowers. We perform due diligence onthe 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 creditquality of these loans. We also consider original LTV and FICO score to be significant indicators of credit quality for the non-covered 1-4 single familyresidential portfolio.The following tables show the distribution of non-covered 1-4 single family residential loans by original FICO and LTV as of December 31, 2017 and2016: 2017 FICOLTV 720 or less 721 - 740 741 - 760 761 orgreater Total60% or less 2.2% 2.8% 4.5% 19.5% 29.0%60% - 70% 2.4% 2.5% 3.5% 14.2% 22.6%70% - 80% 3.6% 4.4% 7.8% 27.3% 43.1%More than 80% 0.8% 0.8% 0.7% 3.0% 5.3% 9.0% 10.5% 16.5% 64.0% 100.0% 2016 FICOLTV 720 or less 721 - 740 741 - 760 761 orgreater Total60% or less 2.5% 3.2% 4.7% 21.7% 32.1%60% - 70% 2.3% 2.7% 3.6% 15.1% 23.7%70% - 80% 3.2% 4.3% 8.0% 26.1% 41.6%More than 80% 0.7% 0.3% 0.4% 1.2% 2.6% 8.7% 10.5% 16.7% 64.1% 100.0%At December 31, 2017, the non-covered 1-4 single family residential loan portfolio had the following characteristics: substantially all were fulldocumentation with a weighted-average FICO score of 765 and a weighted-average LTV of 67.2%. The majority of this portfolio was owner-occupied, with87.6% primary residence, 8.1% second homes and 4.3% investment properties. In terms of vintage, 19.8% of the portfolio was originated pre-2014, 12.0% in2014, 20.5% in 2015, 24.2% in 2016 and 23.5% in 2017.Non-covered 1-4 single family residential loans past due more than 30 days totaled $28.9 million and $12.7 million at December 31, 2017 and 2016,respectively. The amount of these loans 90 days or more past due was $5.6 million and $2.1 million at December 31, 2017 and 2016, respectively.60Table of ContentsOther Consumer LoansSubstantially all consumer loans were current at December 31, 2017. At December 31, 2016, there were no delinquent consumer loans.Covered Loans At December 31, 2017, residential ACI loans totaled $479 million and residential non-ACI loans totaled $24 million, including premiums, discounts anddeferred fees and costs. Our exposure to loss related to covered loans is significantly mitigated by the Single Family Shared-Loss Agreement and by the fairvalue basis recorded in these loans in conjunction with the FSB Acquisition. We have an experienced resolution team in place for covered residentialmortgage loans, and have implemented outsourcing arrangements with industry leading firms in certain areas such as OREO resolution.Covered residential loans were placed into homogenous pools at the time of the FSB Acquisition and the ongoing credit quality and performance ofthese loans is monitored on a pool basis. We monitor the pools quarterly to determine whether any changes have occurred in expected cash flows that wouldbe indicative of impairment or necessitate reclassification between non-accretable difference and accretable yield. At December 31, 2017, accretable yield onresidential ACI loans totaled $445 million and non-accretable difference related to those loans totaled $191 million.At December 31, 2017, the recorded investment in non-ACI 1-4 single family residential loans was $23.7 million; $2.6 million or 11.0% of these loanswere 30 days or more past due and $1.0 million or 4.3% of these loans were 90 days or more past due. At December 31, 2017, the recorded investment in ACI1-4 single family residential loans totaled $479.1 million; $30.9 million or 6.5% of these loans were delinquent by 30 days or more and $17.8 million or3.7% were delinquent by 90 days or more.During 2017, the Company sold substantially all of the covered home equity loans and lines of credit.Hurricanes Irma and HarveyIn September 2017, Hurricane Irma made landfall in Florida as a Category 4 hurricane affecting some areas of the state with significant flooding, winddamage and power outages. In addition, the Bank has a limited number of customers and collateral properties located in areas of Texas that were impacted byHurricane Harvey during August 2017.We performed an extensive review of loans with borrowers and/or collateral located in areas impacted by these storms.This analysis entailed the identification of and direct communication with borrowers located in impacted areas to determine the population of borrowers thatmay have been significantly impacted as well as consideration of factors including but not limited to level and type of insurance coverage, collateral and lienposition, financial condition of the borrowers, delinquency trends and requests by borrowers for forbearance or modification of payment terms.Commercial LoansCommercial loans totaling $8.8 million had been modified or granted temporary payment deferrals at December 31, 2017, related to the recenthurricanes. Of these modifications and deferrals, none were determined to be TDRs due to the generally insignificant nature of the payment delays.Approximately $21.1 million of commercial loans have been downgraded to criticized or classified status through December 31, 2017 as a result of theimpact of the storms. All of these loans were performing at December 31, 2017.Residential loansThe following table presents information related to 1-4 single family residential mortgages with borrowers and/or collateral located in areas impacted byHurricanes Irma and Harvey, at December 31, 2017 (in thousands):Past due more than 30 days: Covered loans$13,523Non-covered loans12,814Total$26,337On temporary payment deferrals: Covered loans$4,413Non-covered loans2,564Total$6,97761Table of ContentsBased on our assessment, we have concluded that the hurricanes did not materially impact the ability of our borrowers to repay their loans.Management also considered the impact of the hurricanes in our analysis of investment securities for OTTI, as well as our evaluation of potentialimpairment of our investment in equipment under operating lease, LIHTC partnerships, servicing assets and OREO and determined there was no materialimpact.Impaired Loans and Non-Performing AssetsNon-performing assets generally consist of (i) non-accrual loans, including loans that have been modified in TDRs and placed on non-accrual status,(ii) accruing loans that are more than 90 days contractually past due as to interest or principal, excluding ACI loans, and (iii) OREO and repossessed assets.Impaired loans also typically include loans modified in TDRs that are accruing and ACI loans or pools for which expected cash flows at acquisition (asadjusted for any additional cash flows expected to be collected arising from changes in estimates after acquisition) have been revised downward sinceacquisition, other than due to changes in interest rate indices and prepayment assumptions.The following tables summarize the Company's impaired loans and non-performing assets at December 31 of the years indicated (dollars in thousands): 2017 2016 2015 CoveredAssets Non-CoveredAssets Total CoveredAssets Non-CoveredAssets Total CoveredAssets Non-CoveredAssets TotalNon-accrual loans Residential and other consumer: 1-4 single family residential$1,010 $9,705 $10,715 $918 $566 $1,484 $594 $2,007 $2,601Home equity loans and lines of credit331 — 331 2,283 — 2,283 4,724 — 4,724Other consumer loans— 821 821 — 2 2 — 7 7Total residential and otherconsumer loans1,341 10,526 11,867 3,201 568 3,769 5,318 2,014 7,332Commercial: Non-owner occupied commercial realestate— 12,716 12,716 — 559 559 — — —Construction and land— 1,175 1,175 — 1,238 1,238 — — —Owner occupied commercial realestate— 29,020 29,020 — 19,439 19,439 — 8,274 8,274Commercial and industrial Taxi medallion loans— 106,067 106,067 — 60,660 60,660 — 2,557 2,557Other commercial and industrial— 7,049 7,049 — 16,036 16,036 — 35,225 35,225Commercial lending subsidiaries— 3,512 3,512 — 32,645 32,645 — 9,920 9,920Total commercial loans— 159,539 159,539 — 130,577 130,577 — 55,976 55,976Total non-accrual loans1,341 170,065 171,406 3,201 131,145 134,346 5,318 57,990 63,308Loans past due 90 days and stillaccruing— 1,948 1,948 — 1,551 1,551 156 1,369 1,525TDRs (1)— — — — — — 7,050 1,175 8,225Total non-performing loans1,341 172,013 173,354 3,201 132,696 135,897 12,524 60,534 73,058OREO2,862 7,018 9,880 4,658 4,882 9,540 8,853 — 8,853Repossessed assets— 2,128 2,128 — 3,551 3,551 — 2,337 2,337Total non-performing assets4,203 181,159 185,362 7,859 141,129 148,988 21,377 62,871 84,248Impaired ACI loans and pools onaccrual status— — — — 1,335 1,335 — — —Performing TDRs Taxi medallion loans— — — — 36,848 36,848 — 633 633Other1,264 24,723 25,987 11,166 26,282 37,448 3,988 4,902 8,890Total impaired loans and non-performing assets$5,467 $205,882 $211,349 $19,025 $205,594 $224,619 $25,365 $68,406 $93,771 Non-performing loans to total loans (2)(4) 0.82% 0.81% 0.71% 0.70% 0.38% 0.44%Non-performing assets to total assets (3) 0.60% 0.61% 0.51% 0.53% 0.26% 0.35%ALLL to total loans (2) 0.69% 0.68% 0.80% 0.79% 0.76% 0.76%ALLL to non-performing loans 84.03% 83.53% 113.68% 112.55% 199.82% 172.23%Net charge-offs to average loans(5) 0.38% 0.38% 0.13% 0.13% 0.09% 0.10% (1)Effective January 1, 2016, we are no longer reporting accruing TDRs as non-performing.(2)Total loans for purposes of calculating these ratios include premiums, discounts and deferred fees and costs.(3)Ratio for non-covered assets is calculated as non-performing non-covered assets to total assets.(4)Non-performing taxi medallion loans comprised 0.51%, 0.32% and 0.02% of total non-covered loans at December 31, 2017, 2016 and 2015, respectively.(5)The ratio of charge-offs of taxi medallion loans to average non-covered loans was 0.29% and 0.06% for the years ended December 31, 2017 and 2016, respectively. 2014 2013 CoveredAssets Non-CoveredAssets Total CoveredAssets Non-CoveredAssets TotalNon-accrual loans Residential and other consumer: 1-4 single family residential$604 $49 $653 $293 $194 $487Home equity loans and lines of credit3,808 — 3,808 6,559 — 6,559Other consumer loans— 173 173 — 75 75Total residential and other consumer loans4,412 222 4,634 6,852 269 7,121Commercial: Non-owner occupied commercial real estate— 1,326 1,326 941 1,443 2,384Construction and land— 209 209 — 244 244Owner occupied commercial real estate— 3,362 3,362 101 2,786 2,887Commercial and industrial— 13,666 13,666 2,767 16,612 19,379Commercial lending subsidiaries— 9,226 9,226 — 1,370 1,370Total commercial loans— 27,789 27,789 3,809 22,455 26,264Total non-accrual loans4,412 28,011 32,423 10,661 22,724 33,385Loans past due 90 days and still accruing174 715 889 — 512 512TDRs2,188 4,435 6,623 1,765 — 1,765Total non-performing loans6,774 33,161 39,935 12,426 23,236 35,662OREO13,645 135 13,780 39,672 898 40,570Total non-performing assets20,419 33,296 53,715 52,098 24,134 76,232Impaired ACI loans on accrual status(1)— — — 44,286 — 44,286Performing TDRs3,866 797 4,663 3,588 1,400 4,988Total impaired loans and non-performing assets$24,285 $34,093 $58,378 $99,972 $25,534 $125,506 Non-performing loans to total loans (2) 0.29% 0.32% 0.31% 0.39%Non-performing assets to total assets (3) 0.17% 0.28% 0.16% 0.51%ALLL to total loans (2) 0.80% 0.77% 0.76% 0.77%ALLL to non-performing loans 275.47% 239.24% 246.73% 195.52%Net charge-offs to average loans 0.08% 0.15% 0.34% 0.31% (1)Includes TDRs on accrual status.(2)Total loans for purposes of calculating these ratios include premiums, discounts and deferred fees and costs.(3)Ratio for non-covered assets is calculated as non-performing non-covered assets to total assets.The increases in the ratios of non-performing loans to total loans and non-performing assets to total assets and the decrease in the ratio of the ALLL tonon-performing loans at December 31, 2017 compared to December 31, 2016 and December 31, 2015 were each primarily attributable to the increase in non-accrual taxi medallion loans. The decrease in the ratio of the ALLL to non-performing loans was also impacted by increases in partial charge-offs, themajority of which were related to taxi medallion loans.Contractually delinquent ACI loans with remaining accretable yield are not reflected as non-accrual loans and are not considered to be non-performingassets because accretion continues to be recorded in income. Accretion continues to be recorded as long as there is an expectation of future cash flows inexcess of carrying amount from these loans. The carrying value of ACI loans contractually delinquent by more than 90 days but on which income was stillbeing recognized was $18 million and $16 million at December 31, 2017 and 2016, respectively.Commercial loans, other than ACI loans, are placed on non-accrual status when (i) management has determined that full repayment of all contractualprincipal 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 ofcollection. Residential and consumer loans, other than ACI loans, are generally placed on non-accrual status when 90 days of interest is due and unpaid.When a loan is placed on non-accrual status, uncollected interest accrued is reversed and charged to interest income. Commercial loans are returned toaccrual status only after all past due principal and interest has been collected and full repayment of remaining contractual principal and interest is reasonablyassured. Residential loans are generally returned to accrual status when less than 90 days of interest is due and unpaid. Past due status of loans is determinedbased on the contractual next payment due date. Loans less than 30 days past due are reported as current.A loan modification is considered a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants aconcession to the borrower that the Company would not otherwise grant. These concessions may take the form of temporarily or permanently reduced interestrates, payment abatement periods, restructuring of payment terms, extensions of maturity at below market terms, or in some cases, partial forgiveness ofprincipal. Under GAAP, modified ACI loans accounted for in pools are not accounted for as TDRs and are not separated from their respective pools whenmodified. Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy.The following table summarizes loans modified in TDRs at December 31, 2017 (dollars in thousands): Number of TDRs RecordedInvestment Related SpecificAllowanceResidential and other consumer: Covered5 $2,221 $118Non-covered11 1,234 63Commercial: Taxi medallion loans186 87,942 10,235Other18 39,067 6,521 220 $130,464 $16,937Potential Problem LoansPotential problem loans have been identified by management as those commercial loans included in the "substandard accruing" risk rating category.These loans are typically performing, but possess specifically identified credit weaknesses that, if not remedied, may lead to a downgrade to non-accrualstatus and identification as impaired in the near-term. Substandard accruing commercial loans totaled $185 million at December 31, 2017, substantially all ofwhich were current as to principal and interest at December 31, 2017.Loss Mitigation StrategiesCriticized or classified commercial loans in excess of certain thresholds are reviewed quarterly by the Criticized Asset Committee, which evaluates theappropriate strategy for collection to mitigate the amount of credit losses. Criticized asset reports for each relationship are presented by the assignedrelationship manager and credit officer to the Criticized Asset Committee until such time as the relationships are returned to a satisfactory credit risk rating orotherwise resolved. The Criticized Asset Committee may require the transfer of a loan to our workout and recovery department, which is tasked to effectivelymanage the loan with the goal of minimizing losses and expenses associated with restructure, collection and/or liquidation of collateral. Commercial loanswith a risk rating of substandard; impaired loans on non-accrual status; loans modified as TDRs; taxi medallion loans; or assets classified as OREO orrepossessed assets are usually transferred to workout and recovery. Oversight of the workout and recovery department is provided by the Asset RecoveryCommittee.We evaluate each residential loan in default to determine the most effective loss mitigation strategy, which may be modification, short sale, orforeclosure. Through the program's expiration on December 31, 2016, we offered loan modifications under the HAMP program to eligible borrowers in theresidential portfolio. HAMP was a uniform loan modification process that provided eligible borrowers with sustainable monthly mortgage payments equal toa target 31% of their gross monthly income. We began offering a new modification program in late 2016 modeled after the FNMA standard modificationprogram.Analysis of the Allowance for Loan and Lease LossesThe ALLL relates to (i) loans originated since the FSB acquisition, (ii) estimated additional losses arising on non-ACI loans subsequent to the FSBAcquisition, and (iii) impairment recognized as a result of decreases in expected cash flows on ACI loans due to further credit deterioration. The impact ofany additional provision for losses on covered loans is significantly mitigated by an increase in the FDIC indemnification asset. The determination of theamount of the ALLL is, by nature, highly complex and subjective. Future events that are inherently uncertain could result in material changes to the level ofthe ALLL. General economic conditions including but not limited to unemployment rates, the level of business investment and growth, real estate values,vacancy rates and rental rates in our primary market areas, the level of interest rates, and a variety of other factors that affect the ability of borrowers’businesses to generate cash flows sufficient to service their debts will impact the future performance of the portfolio.62Table of ContentsCommercial loansThe allowance is comprised of specific reserves for loans that are individually evaluated and determined to be impaired as well as general reserves forloans that have not been identified as impaired.Commercial relationships graded substandard or doubtful and on non-accrual status with committed credit facilities greater than or equal to $1.0 million,as well as loans modified in TDRs, are individually evaluated for impairment. Other commercial relationships on non-accrual status with committed balancesunder $1.0 million may also be evaluated for impairment, at management's discretion. All loans secured by taxi medallions have been placed on non-accrualstatus and are individually evaluated for impairment. For loans evaluated individually for impairment and determined to be impaired, a specific allowance isestablished based on the present value of expected cash flows discounted at the loan’s effective interest rate, the estimated fair value of the loan, or theestimated fair value of collateral less costs to sell. We recognized partial charge-offs at December 31, 2017 on taxi medallion loans, all of which are risk-ratedsubstandard and on non-accrual status, as necessary to reduce the carrying value of the loans to our estimate of the value of New York City taxi medallionsbased on our cash flow template. Additionally, a specific allowance was recognized equal to the amount by which each loan exceeded 85% of the estimatedvalue, in recognition of the continued declining trend in cash flows and lower prices observed on certain recent taxi medallion transfers. The amount of thisspecific allowance was determined based on management's judgment.We believe that loans rated special mention, substandard or doubtful that are not individually evaluated for impairment exhibit characteristics indicativeof a heightened level of credit risk. We apply a quantitative loss factor for loans rated special mention based on average annual probability of default andimplied severity, derived from internal and external data. Loss factors for substandard and doubtful loans that are not individually evaluated are determinedby using default frequency and severity information applied at the loan level. Estimated default frequencies and severities are based on available industryand internal data. In addition, we apply a floor to these calculated loss factors, based on the loss factor applied to the special mention portfolio.Since the majority of the non-covered commercial loan portfolio is not yet seasoned enough to exhibit a loss trend, the quantitative loss factors for amajority of pass rated non-covered commercial loans is based on peer group average annual historical net charge-off rates by loan class and the Company’sinternal credit risk rating system. In 2017, we revised the source of quantitative loss factors for certain loans, as follows:•Quantitative loss factors for the Bridge portfolios, small business loans and mortgage warehouse loans are based on the Company’s averagehistorical net charge-off rates.•The quantitative loss factor for municipal finance receivables is based on the portfolio's external ratings and Moody's historical transition matrix, asopposed to the historical cumulative default curve for municipal obligations that was used previously.•The quantitative loss factor applied to the non-guaranteed portion of SBA loans is based on average historical charge-off rates published by theSBA.The net impact of these changes on the ALLL was not material.Where applicable, the peer group used to calculate average annual historical net charge-off rates used in estimating general reserves is made up of thebanks included in the OCC Midsize Bank Group plus two additional banks in the New York region that management believes to be comparable based on sizeand nature of lending operations. The OCC Midsize Bank Group primarily includes commercial banks with total assets ranging from $10 - $50 billion andincluded 27 banks at December 31, 2017. Peer bank data is obtained from the Statistics on Depository Institutions Report published by the FDIC for the mostrecent quarter available. These banks, as a group, are considered by management to be comparable to BankUnited in size, nature of lending operations andloan portfolio composition. We evaluate the composition of the peer group annually, or more frequently if, in our judgment, a more frequent evaluation isnecessary. Our internal risk rating system comprises 13 credit grades; grades 1 through 8 are “pass” grades. The risk ratings are driven largely by debt servicecoverage. Peer group historical loss rates are adjusted upward for loans assigned a lower “pass” rating.We generally use a 16-quarter loss experience period to calculate quantitative loss rates. We believe this look-back period to be consistent with the rangeof industry practice and appropriate to capture a sufficient range of observations reflecting the performance of our loans, which were originated in the currenteconomic cycle. With the exception of the Pinnacle municipal finance portfolio, a four quarter loss emergence period is used in the calculation of generalreserves. A twelve quarter loss emergence period is used in the calculation of general reserves for the Pinnacle portfolio.The primary assumptions underlying estimates of expected cash flows for ACI commercial loans are default probability and severity of loss givendefault. Assessments of default probability and severity are based on net realizable value analyses63Table of Contentsprepared at the individual loan level. Based on our analysis, no ALLL related to ACI commercial loans was recorded at December 31, 2017 or 2016.Residential and other consumer loansNon-covered LoansDue to the lack of similarity between the risk characteristics of non-covered loans and covered loans in the residential and home equity portfolios,management does not believe it is appropriate to use the historical performance of the covered residential mortgage portfolio as a basis for calculating theALLL applicable to non-covered loans. The non-covered loan portfolio has not yet developed an observable loss trend. Therefore, the ALLL for non-coveredresidential loans is based primarily on relevant proxy historical loss rates. The ALLL for non-covered 1-4 single family residential loans is estimated usingaverage annual loss rates on prime residential mortgage securitizations issued between 2003 and 2008 as a proxy. Based on the comparability of FICO scoresand LTV ratios between loans included in those securitizations and loans in the Bank’s portfolio and the geographic diversity in the new purchasedresidential portfolio, we determined that prime residential mortgage securitizations provide an appropriate proxy for incurred losses in this portfolio class. Apeer group 16-quarter average net charge-off rate is used to estimate the ALLL for the non-covered home equity and other consumer loan classes. See furtherdiscussion of peer group loss factors above. The non-covered home equity and other consumer loan portfolios are not significant components of the overallloan portfolio.Covered non-ACI LoansBased on an analysis of historical performance, OREO and short sale losses, recent trending data and other internal and external factors, we haveconcluded that historical performance by portfolio class is the best indicator of incurred loss for the non-ACI 1-4 single family residential and home equityportfolio classes. For each of these portfolio classes, a quarterly roll rate matrix is calculated by delinquency bucket to measure the rate at which loans movefrom one delinquency bucket to the next during a given quarter. An average 16-quarter roll rate matrix is used to estimate the amount within eachdelinquency bucket expected to roll to 120+ days delinquent. We assume no cure for those loans that are currently 120+ days delinquent. Loss severity givendefault is estimated based on internal data about OREO sales and short sales from the portfolio. The ALLL calculation incorporates a 100% loss severityassumption for home equity loans that are projected to roll to default. For non-ACI residential loans, the allowance is initially calculated based on UPB. Thetotal of UPB less the calculated allowance is then compared to the carrying amount of the loans, net of unamortized credit related fair value adjustmentsestablished at acquisition. If the calculated balance net of the allowance is less than the carrying amount, an additional allowance is established. Any increaseor decrease in the allowance for non-ACI residential loans will result in a corresponding increase or decrease in the FDIC indemnification asset. Substantiallyall of the non-ACI home equity loans were sold in 2017.Qualitative FactorsQualitative adjustments are made to the ALLL when, based on management’s judgment, there are internal or external factors impacting probable incurredlosses not taken into account by the quantitative calculations. Potential qualitative adjustments are categorized as follows: •Portfolio performance trends, including trends in and the levels of delinquencies, non-performing loans and classified loans; •Changes in the nature of the portfolio and terms of the loans, specifically including the volume and nature of policy and procedural exceptions;•Portfolio growth trends; •Changes in lending policies and procedures, including credit and underwriting guidelines; •Economic factors, including unemployment rates and GDP growth rates;•Changes in the value of underlying collateral;•Quality of risk ratings, as evaluated by our independent credit review function; •Credit concentrations; •Changes in and experience levels of credit administration management and staff; and64Table of Contents•Other factors identified by management that may impact the level of losses inherent in the portfolio, including but not limited to competition andlegal and regulatory considerations.Covered ACI LoansFor ACI loans, a valuation allowance is established when periodic evaluations of expected cash flows reflect a deterioration resulting from credit relatedfactors from the level of cash flows that were estimated to be collected at acquisition plus any additional expected cash flows arising from revisions in thoseestimates. We perform a quarterly analysis of expected cash flows for ACI loans.Expected cash flows are estimated on a pool basis for ACI 1-4 single family residential and home equity loans. The analysis of expected pool cash flowsincorporates updated pool level expected prepayment rate, default rate, delinquency level and loss severity given default assumptions. Prepayment,delinquency and default curves are derived primarily from roll rates generated from the historical performance of the portfolio over the immediatelypreceding four quarters. Loss severity given default assumptions are generated from the historical performance of the portfolio over the immediatelypreceding four quarters, while loss severity from loan sales is generated from historical performance over the immediately preceding twelve quarters.Estimates of default probability and loss severity given default also incorporate updated LTV ratios, at the loan level, based on Case-Shiller Home PriceIndices for the relevant MSA. Costs and fees represent an additional component of loss on default and are projected based on historical experience over thelast three years. The ACI home equity roll rates include the impact of delinquent, related senior liens and loans to borrowers who have not reaffirmed theirdebt discharged in Chapter 7 bankruptcy. No ALLL related to 1-4 single family residential ACI pools was recorded at December 31, 2017 or 2016. All of the loans in the home equity ACI poolwere sold in the fourth quarter of 2017. No ALLL related to home equity ACI pool was recorded at December 31, 2016. 65Table of ContentsThe following tables provide an analysis of the ALLL, provision for loan losses and net charge-offs for the periods from December 31, 2012 throughDecember 31, 2017 indicated (in thousands): Covered Loans Non-Covered Loans ACI Loans Non-ACI Loans TotalBalance at December 31, 2012$41,228 $8,019 $9,874 $59,121Provision for (recovery of) loan losses:33,702 (2,891) 1,153 31,964Charge-offs: 1-4 single family residential(10) — (1,276) (1,286) Home equity loans and lines of credit— — (2,858) (2,858) Other consumer loans(484) — — (484) Commercial real estate— (1,162) — (1,162) Construction and land— (77) — (77) Commercial and industrial(17,987) (996) (171) (19,154)Total Charge-offs(18,481) (2,235) (4,305) (25,021)Recoveries: Home equity loans and lines of credit— — 90 90 Other consumer loans123 — — 123 Multi-family— — 15 15 Commercial real estate— — 191 191 Commercial and industrial743 — 2,484 3,227 Commercial lending subsidiaries15 — — 15Total Recoveries881 — 2,780 3,661Net Charge-offs:(17,600) (2,235) (1,525) (21,360)Balance at December 31, 201357,330 2,893 9,502 69,725Provision for (recovery of) loan losses:41,748 2,311 (2,554) 41,505Charge-offs: 1-4 single family residential— — (269) (269) Home equity loans and lines of credit— — (2,737) (2,737) Other consumer loans(1,083) (324) — (1,407) Multi-family— (285) — (285) Non-owner occupied commercial real estate(52) (3,031) — (3,083) Construction and land— (635) (13) (648) Owner occupied commercial real estate— (356) — (356) Commercial and industrial(6,033) (573) (477) (7,083) Commercial lending subsidiaries(1,586) — — (1,586)Total Charge-offs(8,754) (5,204) (3,496) (17,454)Recoveries: Home equity loans and lines of credit— — 19 19 Other consumer loans498 — — 498 Multi-family— — 4 4 Non-owner occupied commercial real estate— — 3 3 Commercial and industrial506 — 714 1,220 Commercial lending subsidiaries22 — — 22Total Recoveries1,026 — 740 1,766Net Charge-offs:(7,728) (5,204) (2,756) (15,688)Balance at December 31, 2014$91,350 $— $4,192 $95,54266Table of Contents Covered Loans Non-Covered Loans ACI Loans Non-ACI Loans TotalBalance at December 31, 2014$91,350 $— $4,192 $95,542Provision for (recovery of) loan losses:42,060 — 2,251 44,311Charge-offs: 1-4 single family residential— — (16) (16) Home equity loans and lines of credit— — (1,664) (1,664) Owner occupied commercial real estate(263) — — (263) Commercial and industrial(5,731) — — (5,731) Commercial lending subsidiaries(7,725) — — (7,725)Total Charge-offs(13,719) — (1,680) (15,399)Recoveries: Home equity loans and lines of credit— — 39 39 Other consumer loans32 — — 32 Multi-family— — 4 4 Non-owner occupied commercial real estate2 — — 2 Commercial and industrial1,082 — 62 1,144 Commercial lending subsidiaries153 — — 153Total Recoveries1,269 — 105 1,374Net Charge-offs:(12,450) — (1,575) (14,025)Balance at December 31, 2015120,960 — 4,868 125,828Provision for (recovery of) loan losses:52,592 — (1,681) 50,911Charge-offs: 1-4 single family residential— — (442) (442) Home equity loans and lines of credit— — (774) (774) Other consumer loans(152) — — (152) Non-owner occupied commercial real estate(128) — — (128) Construction and land(93) — — (93) Owner occupied commercial real estate(2,827) — — (2,827) Commercial and industrial Taxi medallion loans(11,141) — — (11,141) Other commercial and industrial(9,121) — — (9,121) Commercial lending subsidiaries(2,432) — — (2,432)Total Charge-offs(25,894) — (1,216) (27,110)Recoveries: 1-4 single family residential Home equity loans and lines of credit— — 80 80 Other consumer loans26 — — 26Construction and land— — — — Owner occupied commercial real estate1,193 — — 1,193 Commercial and industrial Other commercial and industrial698 — 49 747 Commercial lending subsidiaries1,278 — — 1,278Total Recoveries3,195 — 129 3,324Net Charge-offs:(22,699) — (1,087) (23,786)Balance at December 31, 2016$150,853 $— $2,100 $152,95367Table of Contents Covered Loans Non-Covered Loans ACI Loans Non-ACI Loans TotalBalance at December 31, 2016$150,853 $— $2,100 $152,953Provision for (recovery of) loan losses: 1-4 single family residential862 — 100 962Home equity loans and lines of credit— — 1,318 1,318Other consumer loans172 — — 172Multi-family(1,015) — — (1,015)Non-owner occupied commercial real estate5,273 — — 5,273Construction and land243 — — 243Owner occupied commercial real estate4,797 — — 4,797Commercial and industrial Taxi medallion loans58,174 — — 58,174Other commercial and industrial7,262 — (60) 7,202Commercial lending subsidiaries(8,379) — — (8,379)Total Provision67,389 — 1,358 68,747Charge-offs: 1-4 single family residential(1) — (24) (25)Home equity loans and lines of credit— — (3,303) (3,303)Non-owner occupied commercial real estate(255) — — (255)Construction and land(63) — — (63)Owner occupied commercial real estate(2,612) — — (2,612)Commercial and industrial Taxi medallion loans(56,615) — — (56,615)Other commercial and industrial(18,320) — — (18,320)Commercial lending subsidiaries— — — —Total Charge-offs(77,866) — (3,327) (81,193)Recoveries: Home equity loans and lines of credit— — 67 67Other consumer loans26 — — 26Owner occupied commercial real estate2 — — 2Commercial and industrial Other commercial and industrial2,689 — 60 2,749Commercial lending subsidiaries1,444 — — 1,444Total Recoveries4,161 — 127 4,288Net Charge-offs:(73,705) — (3,200) (76,905)Balance at December 31, 2017$144,537 $— $258 $144,79568Table of ContentsThe following tables show the distribution of the ALLL, broken out between covered and non-covered loans, at December 31 of the years indicated(dollars in thousands): 2017 Covered Loans Non-CoveredLoans ACI Loans Non-ACILoans Total %(1)Residential and other consumer: 1 - 4 single family residential$10,140 $— $257 $10,397 21.6%Home equity loans and lines of credit7 — 1 8 —%Other consumer loans315 — — 315 0.1% 10,462 — 258 10,720 21.7%Commercial: Multi-family23,994 — — 23,994 15.0%Non-owner occupied commercial real estate40,622 — — 40,622 21.0%Construction and land3,004 — — 3,004 1.5%Owner occupied commercial real estate13,611 — — 13,611 9.4%Commercial and industrial Taxi medallion loans12,214 — — 12,214 0.6%Other commercial and industrial29,698 — — 29,698 18.8%Commercial lending subsidiaries10,932 — — 10,932 12.0% 134,075 — — 134,075 78.3% $144,537 $— $258 $144,795 100.0% 2016 Covered Loans Non-CoveredLoans ACI Loans Non-ACILoans Total %(1)Residential and other consumer: 1 - 4 single family residential$9,279 $— $181 $9,460 20.6%Home equity loans and lines of credit7 — 1,919 1,926 0.3%Other consumer loans117 — — 117 0.1% 9,403 — 2,100 11,503 21.0%Commercial: Multi-family25,009 — — 25,009 19.8%Non-owner occupied commercial real estate35,604 — — 35,604 19.3%Construction and land2,824 — — 2,824 1.6%Owner occupied commercial real estate11,424 — — 11,424 9.0%Commercial and industrial Taxi medallion loans10,655 — — 10,655 0.9%Other commercial and industrial38,067 — — 38,067 16.6%Commercial lending subsidiaries17,867 — — 17,867 11.8% 141,450 — — 141,450 79.0% $150,853 $— $2,100 $152,953 100.0%69Table of Contents2015 Covered Loans Non-CoveredLoans ACI Loans Non-ACILoans Total %(1)Residential and other consumer: 1-4 single family residential$11,086 $— $564 $11,650 21.9% Home equity loans and lines of credit4 — 4,304 4,308 0.4% Other consumer loans253 — — 253 0.2% 11,343 — 4,868 16,211 22.5%Commercial: Multi-family22,317 — — 22,317 20.9% Non-owner occupied commercial real estate26,179 — — 26,179 17.5% Construction and land3,587 — — 3,587 2.1% Owner occupied commercial real estate7,490 — — 7,490 8.2% Commercial and industrial33,661 — — 33,661 16.7% Commercial lending subsidiaries16,383 — — 16,383 12.1% 109,617 — — 109,617 77.5% $120,960 $— $4,868 $125,828 100.0% 2014 Covered Loans Non-CoveredLoans ACI Loans Non-ACILoans Total %(1)Residential and other consumer: 1-4 single family residential$7,116 $— $945 $8,061 27.6% Home equity loans and lines of credit17 — 3,247 3,264 1.0% Other consumer loans190 — — 190 0.2% 7,323 — 4,192 11,515 28.8%Commercial: Multi-family14,970 — — 14,970 15.8% Non-owner occupied commercial real estate17,615 — — 17,615 14.4% Construction and land2,725 — — 2,725 1.4% Owner occupied commercial real estate8,273 — — 8,273 8.4% Commercial and industrial25,867 — — 25,867 19.4% Commercial lending subsidiaries14,577 — — 14,577 11.8% 84,027 — — 84,027 71.2% $91,350 $— $4,192 $95,542 100.0%70Table of Contents 2013 Covered Loans Non-CoveredLoans ACI Loans Non-ACILoans Total %(1)Residential and other consumer: 1-4 single family residential$6,271 $— $827 $7,098 32.4% Home equity loans and lines of credit12 — 8,243 8,255 1.9% Other consumer loans2,187 — — 2,187 2.4% 8,470 — 9,070 17,540 36.7%Commercial: Multi-family3,947 323 — 4,270 12.6% Non-owner occupied commercial real estate4,401 1,444 8 5,853 11.5% Construction and land803 192 6 1,001 1.7% Owner occupied commercial real estate6,774 369 6 7,149 8.5% Commercial and industrial24,148 565 412 25,125 18.5% Commercial lending subsidiaries8,787 — — 8,787 10.5% 48,860 2,893 432 52,185 63.3% $57,330 $2,893 $9,502 $69,725 100.0% (1)Represents percentage of loans receivable in each category to total loans receivable.The balance of the ALLL for non-covered loans at December 31, 2017 decreased from the balance at December 31, 2016, in spite of the growth of theportfolio. This decrease was caused primarily by declines in quantitative loss factors applied to the majority of the non-covered loan portfolio and charge-offstaken, partially offset by the impact of the growth of the loan portfolio and an increase in reserves for criticized and classified loans not individuallyevaluated for impairment and for taxi medallion loans. Factors influencing the change in the ALLL related to specific loan types at December 31, 2017 ascompared to December 31, 2016, include:•An $861 thousand increase for non-covered 1-4 single family residential loans was attributable to the growth in the corresponding portfolio,partially offset by declines in both the applicable quantitative historical loss rate and qualitative loss factors.•A decrease of $1.0 million for multi-family loans reflected a decrease in the quantitative loss factor and a decline in the corresponding portfoliobalance, offset in part by an increase in qualitative loss factors and in criticized and classified loans.•An increase of $5.0 million for non-owner occupied commercial real estate loans was primarily driven by the growth of the corresponding portfolio.A net increase in qualitative loss factors and the impact of an increase in criticized and classified loans were offset by a decrease in the quantitativeloss factor.•An increase of $2.2 million for owner occupied commercial real estate loans was primarily attributable to increases in specific reserves for impairedloans. The impact of the growth of the corresponding portfolio was offset by a net decrease in quantitative and qualitative loss factors.•An increase of $1.6 million for taxi medallion loans reflects the specific reserves recognized at December 31, 2017, as discussed previously.Increases in reserves were limited due to the level of charge-offs recognized during the year ended December 31, 2017.•A decrease of $8.4 million for other commercial and industrial loans was driven by a decrease in reserves for impaired and other classified loans,primarily due to net charge-offs, and decreases in quantitative and qualitative loss factors, partially offset by growth in the corresponding portfolio.•A $6.9 million decrease for commercial lending subsidiaries primarily reflected decreases in the quantitative loss factor and in qualitative lossfactors related to portfolio growth trends and credit concentrations, for municipal finance receivables.For additional information about the ALLL, see Note 5 to the consolidated financial statements.71Table of ContentsGoodwillGoodwill consists of $59 million recorded in conjunction with the FSB Acquisition, $8 million recorded in conjunction with the acquisition of twocommercial lending subsidiaries in 2010 and $10 million recorded in conjunction with the SBF acquisition in May 2015. The Company has a singlereporting unit. We perform goodwill impairment testing in the third quarter of each fiscal year. As of the 2017 impairment testing date, the estimated fairvalue of the reporting unit substantially exceeded its carrying amount; therefore, no impairment was indicated.DepositsA further breakdown of deposits as of December 31, 2017 and 2016 is shown below:(1) Brokered deposits includecertain time deposits at December 31, 2017 and 2016.The following table shows scheduled maturities of certificates of deposit with denominations greater than or equal to $100,000 as of December 31, 2017(in thousands):Three months or less$1,077,250Over three through six months868,468Over six through twelve months1,322,385Over twelve months791,729 $4,059,832See Note 9 to the consolidated financial statements for more information about the Company's deposits.FHLB Advances, Notes and Other BorrowingsIn addition to deposits, we utilize FHLB advances to fund growth in interest earning assets; the advances provide us with additional flexibility inmanaging both term and cost of funding. FHLB advances are secured by FHLB stock, qualifying residential first mortgage, commercial real estate and homeequity loans, and MBS.See Note 10 to the consolidated financial statements for more information about the Company's FHLB advances and senior notes. Additionally, see Note12 to the consolidated financial statements for more information about derivative instruments the Company uses to manage interest rate risk related tovariability in cash flows due to changes in interest rates.Capital ResourcesPursuant to the FDIA, the federal banking agencies have adopted regulations setting forth a five-tier system for measuring the capital adequacy of thefinancial institutions they supervise. At December 31, 2017 and 2016, BankUnited and the Company had capital levels that exceeded both the regulatorywell-capitalized guidelines and all internal capital ratio targets. See Note 15 to the consolidated financial statements for more information aboutBankUnited's and the Company's regulatory capital ratios and requirements.Stockholders' equity increased to $3.0 billion at December 31, 2017, an increase of $608 million, or 25.1%, from December 31, 2016, due primarily tothe retention of earnings, including the discrete income tax benefit recorded during the72fourth quarter of 2017, and to a lesser extent, the exercise of stock options resulting in proceeds of $62.1 million during the year.Since our formation, stockholders' equity has been impacted primarily by the retention of earnings, and to a lesser extent, proceeds from the issuance ofcommon shares and changes in unrealized gains and losses, net of taxes, on investment securities available for sale and cash flow hedges. Our rate of earningsretention is derived by dividing undistributed earnings per common share by earnings per common share. Our retention ratio was 85.0% and 60.2% for theyears ended December 31, 2017 and 2016, respectively. We retain a high percentage of our earnings to support our planned growth.In January 2018, the Board of Directors of the Company authorized a share repurchase program under which the Company may repurchase up to $150million in shares of its outstanding common stock. Any repurchases will be made in accordance with applicable securities laws from time to time in openmarket or private transactions. The extent to which the Company repurchases shares, and the timing of such repurchases, will depend upon a variety offactors, including market conditions, the Company’s capital position and amount of retained earnings, regulatory requirements and other considerations. Notime limit was set for the completion of the share repurchase program, and the program may be suspended or discontinued at any time.We filed a shelf registration statement with the SEC in October 2015 that allows the Company to periodically offer and sell in one or more offerings,individually or in any combination, our common stock, preferred stock and other non-equity securities. The shelf registration provides us with flexibility inissuing capital instruments and enables us to more readily access the capital markets as needed to pursue future growth opportunities and to ensure continuedcompliance with regulatory capital requirements. Our ability to issue securities pursuant to the shelf registration is subject to market conditions.LiquidityLiquidity involves our ability to generate adequate funds to support planned interest earning asset growth, meet deposit withdrawal requests, maintainreserve requirements, conduct routine operations, pay dividends, service outstanding debt and meet other contractual obligations.Primary sources of liquidity include cash flows from operations, cash generated by the repayment and resolution of covered loans, cash paymentsreceived from the FDIC pursuant to the Single Family Shared-Loss Agreement, deposit growth, the available for sale securities portfolio and FHLB advances.For the years ended December 31, 2017, 2016 and 2015, net cash provided by operating activities was $318.6 million, $308.5 million and $219.5million, respectively. Accretion on ACI loans, which is reflected as a non-cash reduction in net income to arrive at operating cash flows, totaled $301.8million, $303.9 million and $295.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. Accretable yield on ACI loans representsthe excess of expected future cash flows over the carrying amount of the loans, and is recognized as interest income over the expected lives of the loans.Amounts recorded as accretion are realized in cash as individual loans are paid down or otherwise resolved; however, the timing of cash realization may differfrom the timing of income recognition. These cash flows from the repayment or resolution of covered loans, inclusive of amounts that have been accretedthrough earnings over time, are recognized as cash flows from investing activities in the consolidated statements of cash flows upon receipt. Cash paymentsfrom the FDIC in the form of reimbursements of losses related to the covered loans under the Single Family Shared-Loss Agreement are also characterized asinvesting cash flows. Cash generated by the repayment and resolution of covered loans and reimbursements from the FDIC totaled $469.3 million, $558.5million and $658.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Both cash generated by the repayment and resolution ofcovered loans and cash payments received from the FDIC have been and are expected to continue to be consistent and relatively predictable sources ofliquidity until the expected termination of the Single Family Shared-Loss Agreement in 2019.In addition to cash provided by operating activities, the repayment and resolution of covered loans and payments under the Single Family Shared-LossAgreement from the FDIC, BankUnited’s liquidity needs, particularly liquidity to fund growth of interest earning assets, have been and continue to be met bydeposit growth and FHLB advances. The investment portfolio also provides a source of liquidity.BankUnited has access to additional liquidity through FHLB advances, other collateralized borrowings, wholesale deposits or the sale of available forsale securities. At December 31, 2017, unencumbered investment securities available for sale totaled $4.0 billion. At December 31, 2017, BankUnited hadavailable borrowing capacity at the FHLB of $4.1 billion, unused borrowing capacity at the FRB of $770 million and unused Federal funds lines of credittotaling $70 million. Management also has the ability to exert substantial control over the rate and timing of growth of the non-covered loan portfolio, andresultant requirements for liquidity to fund loans.Continued growth of deposits and the non-covered loan portfolio and runoff of the covered loan portfolio and FDIC indemnification asset are the mostsignificant trends expected to impact the Bank’s liquidity in the near term.73Table of ContentsThe ALCO policy has established several measures of liquidity which are monitored monthly by the ALCO and quarterly by the Board of Directors. Oneprimary measure of liquidity monitored by management is the 30 day total liquidity ratio, defined as (a) the sum of cash and cash equivalents, pledgeablesecurities and a measure of funds expected to be generated by operations over the next 30 days; divided by (b) the sum of potential deposit runoff, liabilitiesmaturing within the 30 day time frame and a measure of funds expected to be used in operations over the next 30 days. BankUnited’s liquidity is consideredacceptable if the 30 day total liquidity ratio exceeds 100%. At December 31, 2017, BankUnited’s 30 day total liquidity ratio was 173%. Management alsomonitors a one year liquidity ratio, defined as (a) cash and cash equivalents, pledgeable securities, unused borrowing capacity at the FHLB, and loans andnon-agency securities maturing within one year; divided by (b) forecasted deposit outflows and borrowings maturing within one year. This ratio allowsmanagement to monitor liquidity over a longer time horizon. The acceptable threshold established by the ALCO for this liquidity measure is 100%. AtDecember 31, 2017, BankUnited’s one year liquidity ratio was 154%. Additional measures of liquidity regularly monitored by the ALCO include the ratio ofwholesale funding to total assets, a measure of available liquidity to volatile liabilities and the ratio of brokered deposits to total deposits. At December 31,2017, BankUnited was within acceptable limits established by the ALCO and the Board of Directors for each of these measures.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 ownavailable for sale securities portfolio. There are regulatory limitations that affect the ability of the Bank to pay dividends to BankUnited, Inc. Managementbelieves that such limitations will not impact our ability to meet our ongoing near-term cash obligations.We expect that our liquidity requirements will continue to be satisfied over the next 12 months through the sources of funds described above.Interest Rate RiskThe principal component of the Company’s risk of loss arising from adverse changes in the fair value of financial instruments, or market risk, is interestrate 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 primaryobjective of the Company’s asset/liability management activities is to maximize net interest income, while maintaining acceptable levels of interest rate risk.The ALCO is responsible for establishing policies to limit exposure to interest rate risk, and to ensure procedures are established to monitor compliance withthese policies. The guidelines established by the ALCO are approved at least annually by the Board of Directors.Management believes that the simulation of net interest income in different interest rate environments provides the most meaningful measure of interestrate 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 thatthey will do so. Income simulation also attends to the relative interest rate sensitivities of these items, and projects their behavior over an extended period oftime. Finally, income simulation permits management to assess the probable effects on the balance sheet not only of changes in interest rates, but also ofproposed 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 mostlikely rate scenario based on consensus forward interest rate curves versus net interest income in alternative rate scenarios. Simulations are generated basedon both static and dynamic balance sheet assumptions. Management continually reviews and refines its interest rate risk management process in response tochanges in the interest rate environment and economic climate. Currently, our model projects instantaneous rate shocks of down 100, plus 100, plus 200, plus300 and plus 400 basis point shifts as well as flattening and inverted yield curve scenarios. We continually evaluate the scenarios being modeled with a viewtoward adapting them to changing economic conditions, expectations and trends.74Table of ContentsThe Company’s ALCO policy provides that net interest income sensitivity will be considered acceptable if decreases in forecast net interest income,based on a dynamic forecasted balance sheet, in specified rate shock scenarios are within specified percentages of forecast net interest income in the mostlikely rate scenario over the next twelve months and in the second year. The following table illustrates the acceptable limits as defined by policy and theimpact on forecasted net interest income of down 100, plus 100, plus 200, plus 300 and plus 400 basis point rate shock scenarios at December 31, 2017 and2016: Down 100 Plus 100 Plus 200 Plus 300 Plus 400Policy Limits: In year 1(6.0)% (6.0)% (10.0)% (14.0)% (18.0)%In year 2(9.0)% (9.0)% (13.0)% (17.0)% (21.0)%Model Results at December 31, 2017 - increase (decrease): In year 1(0.3)% (0.1)% (0.5)% (1.4)% (2.7)%In year 2(3.5)% 1.8 % 3.2 % 4.3 % 4.8 %Model Results at December 31, 2016 - increase (decrease) (1): In year 1(2.0)% 1.5 % 2.8 % 3.4 % In year 2(3.7)% 2.6 % 4.6 % 6.6 % (1)Calculations not performed for a 400 basis point rate shock scenario at December 31, 2016Management also simulates changes in EVE in various interest rate environments. The ALCO policy has established parameters of acceptable risk thatare defined in terms of the percentage change in EVE from a base scenario under six rate scenarios, derived by implementing immediate parallel movementsof plus and minus 100, 200, 300 and 400 basis points from current rates. We did not simulate decreases in interest rates greater than 100 basis points atDecember 31, 2017 due to the current low rate environment. The parameters established by the ALCO stipulate that the modeled decline in EVE isconsidered acceptable if the decline is less than 9%, 18%, 27% and 36% in plus or minus 100, 200, 300 and 400 basis point scenarios, respectively. As ofDecember 31, 2017, our simulation for the Bank indicated percentage changes from base EVE of 1.9%, (3.8)%, (8.0)%, (12.4)% and (16.9)% in down 100,plus 100, plus 200, plus 300 and plus 400 basis point scenarios, respectively.These measures fall within an acceptable level of interest rate risk per the policies established by the ALCO and the Board of Directors. In the event themodels indicate an unacceptable level of risk, the Company could undertake a number of actions that would reduce this risk, including the sale or re-positioning of a portion of its available for sale investment portfolio, restructuring of borrowings, or the use of derivatives such as interest rate swaps andcaps.Many assumptions were used by the Company to calculate the impact of changes in interest rates, including the change in rates. Actual results may notbe similar to the Company’s projections due to several factors including the timing and frequency of rate changes, market conditions, changes in depositorbehavior 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 InstrumentsInterest rate swaps are one of the tools we use to manage interest rate risk. These derivative instruments are used to mitigate exposure to changes ininterest rates on variable rate borrowings such as FHLB advances and to manage duration of liabilities. These interest rate swaps are designated as cash flowhedging instruments. The fair value of these instruments is included in other assets and other liabilities in our consolidated balance sheets and changes in fairvalue are reported in accumulated other comprehensive income. At December 31, 2017, outstanding interest rate swaps designated as cash flow hedges hadan aggregate notional amount of $2.0 billion. The aggregate fair value of interest rate swaps designated as cash flow hedges included in other assets was $2.4million.Interest rate swaps and caps not designated as cash flow hedges had an aggregate notional amount of $2.3 billion at December 31, 2017. The aggregatefair value of these interest rate swaps and caps included in other assets was $25.3 million and the aggregate fair value included in other liabilities was $25.4million. These interest rate swaps and caps were entered into as accommodations to certain of our commercial borrowers.See Note 12 to the consolidated financial statements for additional information about derivative financial instruments.75Table of ContentsOff-Balance Sheet ArrangementsWe routinely enter into commitments to extend credit to our customers, including commitments to fund loans or lines ofcredit and commercial and standby letters of credit. The credit risk associated with these commitments is essentially the same asthat involved in extending loans to customers and they are subject to our normal credit policies and approval processes. Whilethese commitments represent contractual cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon.For more information on commitments, see Note 17 to the consolidated financial statements.Contractual ObligationsThe following table contains supplemental information regarding our significant outstanding contractual obligations, including interest to be paid onFHLB advances, long-term borrowings and time deposits, as of December 31, 2017 (in thousands): Total Less than1 year 1 - 3 years 3 - 5 years More than5 yearsFHLB advances$4,795,108 $4,566,103 $229,005 $— $—4.875% Senior notes due 2025556,000 19,500 39,000 39,000 458,500Operating lease obligations136,675 22,340 38,670 27,482 48,183Time deposits6,409,089 5,282,298 995,667 131,034 90Capital lease obligations14,607 1,799 3,813 4,046 4,949 $11,911,479 $9,892,040 $1,306,155 $201,562 $511,722Non-GAAP Financial MeasuresTangible book value per common share and tangible common equity to assets ratio are non-GAAP financial measures. Management believes thesemeasures are relevant to understanding the capital position and performance of the Company. Disclosure of these non-GAAP financial measures also providea meaningful base for comparability to other financial institutions. The following table reconciles the non-GAAP financial measurements of tangible bookvalue per common share and tangible common equity to assets ratio to their comparable GAAP financial measurements of book value per common share andequity to assets ratio, respectively, at December 31 of the years indicated (in thousands except share and per share data): 2017 2016 2015 2014 2013Total stockholders' equity$3,026,062 $2,418,429 $2,243,898 $2,052,534 $1,928,698Less: goodwill and other intangible assets77,796 78,047 78,330 68,414 69,067Tangible stockholders’ equity$2,948,266 $2,340,382 $2,165,568 $1,984,120 $1,859,631 Common shares issued and outstanding106,848,185 104,166,945 103,626,255 101,656,702 101,013,014 Book value per common share$28.32 $23.22 $21.65 $20.19 $19.09 Tangible book value per common share$27.59 $22.47 $20.90 $19.52 $18.41 Total assets$30,346,986 $27,880,151 $23,883,467 $19,210,529 $15,046,649 Equity to assets ratio9.97% 8.67% 9.40% 10.68% 12.82% Tangible common equity to assets ratio9.72% 8.39% 9.07% 10.33% 12.36%76Table of ContentsNet income, earnings per diluted common share, return on average stockholders' equity and return on average assets, in each case excluding the impact ofa discrete income tax benefit and related professional fees are non-GAAP financial measures. Management believes disclosure of these measures enhancesreaders' ability to compare the Company's financial performance for the current period to that of other periods presented. The following table reconciles thesenon-GAAP financial measurements to the comparable GAAP financial measurements of net income, earnings per diluted common share, return on averagestockholders' equity and return on average assets for the years ended December 31, 2017 and 2015 (in thousands except share and per share data): Year Ended December 31, 2017 Year Ended December 31, 2015Net income excluding the impact of a discrete income tax benefit and related professional fees: Net income (GAAP) $614,273 $251,660Less discrete income tax benefit (327,945) (49,323)Add back related professional fees (net of tax of $1,802 and $524) 4,995 801Net income excluding the impact of a discrete income tax benefit and related professional fees (non-GAAP) $291,323 $203,138 Diluted earnings per common share, excluding the impact of a discrete income tax benefit and related professional fees: Diluted earnings per common share (GAAP) $5.58 $2.35Less impact on diluted earnings per common share of discrete income tax benefit and related professional fees, beforeallocation to participating securities (non-GAAP) (3.05) (0.47)Less impact on diluted earnings per common share of discrete income tax benefit and related professional fees allocated toparticipating securities (non-GAAP) 0.12 0.02Diluted earnings per common share, excluding the impact of a discrete income tax benefit and related professional fees (non-GAAP) $2.65 $1.90 Impact on diluted earnings per common share of discrete income tax benefit and related professional fees, before allocation toparticipating securities: Discrete income tax benefit and related professional fees, net of tax $322,950 $48,522Weighted average shares for diluted earnings per share (GAAP) 105,857,487 102,972,150Impact on diluted earnings per common share of discrete income tax benefit and related professional fees, before allocation toparticipating securities (non-GAAP) $3.05 $0.47 Impact on diluted earnings per common share of discrete income tax benefit and related professional fees allocated toparticipating securities: Discrete income tax benefit and related professional fees, net of tax, allocated to participating securities $(12,424) $(1,881)Weighted average shares for diluted earnings per share (GAAP) 105,857,487 102,972,150Impact on diluted earnings per common share of discrete income tax benefit and related professional fees allocated toparticipating securities (non-GAAP) $(0.12) $(0.02)77Table of Contents Year Ended December 31, 2017Return on average assets, excluding the impact of a discrete income tax benefit and related professional fees: Return on average assets (GAAP) 2.13 %Less impact on return on average assets of discrete income tax benefit and related professional fees (non-GAAP) (1.12)%Return on average assets, excluding the impact of a discrete income tax benefit and related professional fees (non-GAAP) 1.01 % Impact on return on average assets of discrete income tax benefit and related professional fees: Discrete income tax benefit and related professional fees, net of tax $322,950Average assets 28,825,394Impact on return on average assets of discrete income tax benefit and related professional fees (non-GAAP) 1.12 % Return on average stockholders' equity, excluding the impact of a discrete income tax benefit and related professional fees: Return on stockholders' equity (GAAP) 23.36 %Less impact on return on stockholders' equity of discrete income tax benefit and related professional fees (non-GAAP) (12.28)%Return on stockholders' equity, excluding the impact of a discrete income tax benefit and related professional fees (non-GAAP) 11.08 % Impact on return on average stockholders' equity of discrete income tax benefit and related professional fees: Discrete income tax benefit and related professional fees, net of tax $322,950Average stockholders' equity 2,629,372Impact on return on average stockholders' equity of discrete income tax benefit and related professional fees (non-GAAP) 12.28 %The effective tax rate excluding the impact of the discrete income tax benefit and the impact of the change in the federal statutory rate on existingdeferred tax assets and liabilities is a non-GAAP financial measure. Management believes disclosure of this measure enhances readers' ability to compare theCompany's financial performance for the current period to that of other periods presented. The following table reconciles this non-GAAP financialmeasurement to the comparable GAAP financial measurement of the effective tax rate for the years ended December 31, 2017 and 2015 (dollars inthousands): Year Ended December 31, 2017 Year Ended December 31, 2015Effective income tax rate, excluding the impact of a discrete income tax benefit and impact of enactment of the Tax Cuts andJobs Act of 2017: Effective income tax rate (GAAP) (51.9)% 15.2 %Less impact on effective income tax rate of discrete income tax benefit and enactment of the Tax Cuts and Jobs Act of 2017(non-GAAP) 82.0 % 16.6 %Effective income tax rate, excluding the impact of a discrete income tax benefit and enactment of the Tax Cuts and Jobs Actof 2017 (non-GAAP) 30.1 % 31.8 % Impact on effective income tax rate of discrete income tax benefit and enactment of the Tax Cuts and Jobs Act of 2017 (non-GAAP): Discrete income tax benefit $(327,945) $(49,323)Tax benefit recognized from enactment of the Tax Cuts and Jobs Act of 2017 (3,744) — $(331,689) $(49,323)Income before income taxes (GAAP) 404,461 296,893Impact on effective income tax rate of discrete income tax benefit and enactment of the Tax Cuts and Jobs Act of 2017 (non-GAAP) (82.0)% (16.6)%78Item 7A. Quantitative and Qualitative Disclosures About Market RiskSee the section entitled “Interest Rate Risk” included in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results ofOperations.”79Table of ContentsItem 8. Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageManagement's Report on Internal Control Over Financial Reporting81BankUnited, Inc. Consolidated Financial Statements for the Years ended December 31, 2017, 2016 and 2015 Reports of Independent Registered Public Accounting Firm82Consolidated Balance Sheets as of December 31, 2017 and December 31, 201684Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 201585Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 201586Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 201587Consolidated Statements of Stockholders' Equity for the years ended December 31, 2017, 2016 and 201589Notes to Consolidated Financial Statements90 80MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the SecuritiesExchange Act of 1934 Rule 13a-15(f). The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management anddirectors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition ofthe Company's assets that could have a material effect on the financial statements.Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparationof financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations,internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods aresubject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or proceduresmay deteriorate.Under the supervision and with the participation of management, including the Company's principal executive officer and principal financial officer,the Company conducted an evaluation of the effectiveness of the Company's internal control over financial reporting based on the framework in InternalControl—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company'sevaluation under the framework in Internal Control—Integrated Framework, management concluded that the Company's internal control over financialreporting was effective as of December 31, 2017.The effectiveness of the Company's internal control over financial reporting as of December 31, 2017 has been audited by KPMG LLP, an independentregistered public accounting firm, as stated in their report which is included herein.81Report of Independent Registered Public Accounting FirmTo the stockholders and board of directorsBankUnited, Inc.:Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of BankUnited, Inc. and subsidiaries (the "Company") as of December 31, 2017 and 2016,the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for each of the years in the three‑year periodended December 31, 2017, and the related notes (collectively, the "consolidated financial statements"). In our opinion, the consolidated financial statementspresent fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cashflows for each of the years in the three-year period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company’sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2018 expressed an unqualified opinion on theeffectiveness of the Company’s internal control over financial reporting.Basis for OpinionThese consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on theseconsolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent withrespect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement whether due to error or fraud. Our audits included performingprocedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures thatrespond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating theoverall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/KPMG LLPWe have served as the Company's auditor since 2009.Miami, FloridaFebruary 28, 2018Certified Public Accountants82Report of Independent Registered Public Accounting FirmTo the stockholders and board of directorsBankUnited, Inc.:Opinion on Internal Control Over Financial ReportingWe have audited BankUnited, Inc.'s and subsidiaries’ (the "Company") internal control over financial reporting as of December 31, 2017, based on criteriaestablished in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In ouropinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteriaestablished in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidatedbalance sheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, cash flows, andstockholders’ equity for each of the years in the three‑year period ended December 31, 2017, and the related notes (collectively, the "consolidated financialstatements"), and our report dated February 28, 2018 expressed an unqualified opinion on those consolidated financial statements.Basis for OpinionThe Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/KPMG LLPMiami, FloridaFebruary 28, 2018Certified Public Accountants83Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except share and per share data) December 31, 2017 December 31, 2016ASSETS Cash and due from banks: Non-interest bearing$35,246 $40,260Interest bearing159,336 408,053Cash and cash equivalents194,582 448,313Investment securities available for sale, at fair value6,680,832 6,073,584Investment securities held to maturity10,000 10,000Non-marketable equity securities265,989 284,272Loans held for sale34,097 41,198Loans (including covered loans of $503,118 and $614,042)21,416,504 19,395,394Allowance for loan and lease losses(144,795) (152,953)Loans, net21,271,709 19,242,441FDIC indemnification asset295,635 515,933Bank owned life insurance252,462 239,736Equipment under operating lease, net599,502 539,914Goodwill and other intangible assets77,796 78,047Other assets664,382 406,713Total assets$30,346,986 $27,880,151 LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Demand deposits: Non-interest bearing$3,162,032 $2,960,591Interest bearing1,666,581 1,523,064Savings and money market10,715,024 9,251,593Time6,334,842 5,755,642Total deposits21,878,479 19,490,890Federal Home Loan Bank advances4,771,000 5,239,348Notes and other borrowings402,830 402,809Other liabilities268,615 328,675Total liabilities27,320,924 25,461,722 Commitments and contingencies Stockholders' equity: Common stock, par value $0.01 per share, 400,000,000 shares authorized; 106,848,185 and 104,166,945 shares issuedand outstanding1,068 1,042Paid-in capital1,498,227 1,426,459Retained earnings1,471,781 949,681Accumulated other comprehensive income54,986 41,247Total stockholders' equity3,026,062 2,418,429Total liabilities and stockholders' equity$30,346,986 $27,880,151 The accompanying notes are an integral part of these consolidated financial statements.84Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share data) Years Ended December 31, 2017 2016 2015Interest income: Loans$1,001,862 $896,154 $753,901Investment securities188,307 150,859 116,817Other14,292 12,204 10,098Total interest income1,204,461 1,059,217 880,816Interest expense: Deposits170,933 119,773 91,151Borrowings83,256 69,059 44,013Total interest expense254,189 188,832 135,164Net interest income before provision for loan losses950,272 870,385 745,652Provision for (recovery of) loan losses (including $1,358, $(1,681) and $2,251 for covered loans)68,747 50,911 44,311Net interest income after provision for loan losses881,525 819,474 701,341Non-interest income: Income from resolution of covered assets, net27,450 36,155 50,658Net loss on FDIC indemnification(22,220) (17,759) (65,942)Service charges and fees20,864 19,463 17,876Gain (loss) on sale of loans, net (including $17,406, $(14,470) and $34,929 related to covered loans)27,589 (4,406) 40,633Gain on investment securities available for sale, net33,466 14,461 8,480Lease financing53,837 44,738 35,641Other non-interest income16,918 13,765 14,878Total non-interest income157,904 106,417 102,224Non-interest expense: Employee compensation and benefits237,824 223,011 210,104Occupancy and equipment75,386 76,003 76,024Amortization of FDIC indemnification asset176,466 160,091 109,411Deposit insurance expense22,011 17,806 14,257Professional fees23,676 14,249 14,185Telecommunications and data processing13,966 14,343 13,613Depreciation of equipment under operating lease35,015 31,580 18,369Other non-interest expense50,624 53,364 50,709Total non-interest expense634,968 590,447 506,672Income before income taxes404,461 335,444 296,893Provision (benefit) for income taxes(209,812) 109,703 45,233Net income$614,273 $225,741 $251,660Earnings per common share, basic (see Note 2)$5.60 $2.11 $2.37Earnings per common share, diluted (see Note 2)$5.58 $2.09 $2.35Cash dividends declared per common share$0.84 $0.84 $0.84The accompanying notes are an integral part of these consolidated financial statements.85Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In thousands)Years Ended December 31,2017 2016 2015 Net income$614,273 $225,741 $251,660Other comprehensive income (loss), net of tax: Unrealized gains on investment securities available for sale: Net unrealized holding gain (loss) arising during the period29,724 14,271 (21,657)Reclassification adjustment for net securities gains realized in income(20,247) (8,749) (5,130)Net change in unrealized gains on securities available for sale9,477 5,522 (26,787)Unrealized losses on derivative instruments: Net unrealized holding gain (loss) arising during the period(1,559) 3,766 (13,403)Reclassification adjustment for net losses realized in income5,821 9,777 16,020Net change in unrealized losses on derivative instruments4,262 13,543 2,617Other comprehensive income (loss)13,739 19,065 (24,170)Comprehensive income$628,012 $244,806 $227,490The accompanying notes are an integral part of these consolidated financial statements.86Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Years Ended December 31, 2017 2016 2015Cash flows from operating activities: Net income$614,273 $225,741 $251,660Adjustments to reconcile net income to net cash provided by operating activities: Amortization and accretion, net(95,145) (113,979) (164,376)Provision for loan losses68,747 50,911 44,311Income from resolution of covered assets, net(27,450) (36,155) (50,658)Net loss on FDIC indemnification22,220 17,759 65,942(Gain) loss on sale of loans, net(27,589) 4,406 (40,633)Income from bank owned life insurance(5,508) (3,469) (3,102)Gain on investment securities available for sale, net(33,466) (14,461) (8,480)Equity based compensation22,692 18,032 16,027Depreciation and amortization61,552 56,444 43,390Deferred income taxes57,801 30,189 29,471Proceeds from sale of loans held for sale158,621 163,088 169,139Loans originated for sale, net of repayments(142,682) (148,195) (130,819)Other: (Increase) decrease in other assets(314,121) 24,840 (34,315)Increase (decrease) in other liabilities(41,319) 33,359 31,922Net cash provided by operating activities318,626 308,510 219,479 Cash flows from investing activities: Net cash paid in business combination— — (277,553)Purchase of investment securities available for sale(3,131,798) (3,058,106) (2,093,508)Proceeds from repayments and calls of investment securities available for sale1,260,444 724,666 537,992Proceeds from sale of investment securities available for sale1,287,591 1,127,983 1,114,020Purchase of non-marketable equity securities(248,405) (255,100) (141,599)Proceeds from redemption of non-marketable equity securities266,688 190,825 113,276Purchases of loans(1,300,996) (1,266,097) (787,834)Loan originations, repayments and resolutions, net(672,338) (1,394,916) (3,128,701)Proceeds from sale of loans, net196,413 171,367 207,425Decrease in FDIC indemnification asset for claims filed21,589 46,083 59,139Acquisition of equipment under operating lease, net(94,603) (87,976) (187,329)Other investing activities(37,161) (24,960) (24,020)Net cash used in investing activities(2,452,576) (3,826,231) (4,608,692) (Continued)The accompanying notes are an integral part of these consolidated financial statements.87Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(In thousands) Years Ended December 31, 2017 2016 2,015Cash flows from financing activities: Net increase in deposits2,387,589 2,552,389 3,426,755Additions to Federal Home Loan Bank advances4,916,000 4,025,000 3,180,000Repayments of Federal Home Loan Bank advances(5,385,000) (2,795,000) (2,480,350)Proceeds from issuance of notes, net— — 392,252Dividends paid(91,628) (89,824) (88,981)Exercise of stock options62,095 791 35,647Other financing activities(8,837) 5,178 3,873Net cash provided by financing activities1,880,219 3,698,534 4,469,196Net increase (decrease) in cash and cash equivalents(253,731) 180,813 79,983Cash and cash equivalents, beginning of period448,313 267,500 187,517Cash and cash equivalents, end of period$194,582 $448,313 $267,500 Supplemental disclosure of cash flow information: Interest paid$247,548 $186,525 $130,963Income taxes paid, net$69,231 $16,464 $29,346 Supplemental schedule of non-cash investing and financing activities: Transfers from loans to other real estate owned and other repossessed assets$13,313 $17,045 $17,541Dividends declared, not paid$23,055 $22,510 $22,380Obligations incurred in acquisition of affordable housing limited partnerships$— $12,750 $57,139The accompanying notes are an integral part of these consolidated financial statements.88Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(In thousands, except share data) CommonSharesOutstanding CommonStock Paid-inCapital RetainedEarnings AccumulatedOtherComprehensiveIncome TotalStockholders’EquityBalance at December 31, 2014101,656,702 $1,017 $1,353,538 $651,627 $46,352 $2,052,534Comprehensive income— — — 251,660 (24,170) 227,490Dividends— — — (89,393) — (89,393)Equity based compensation664,928 7 16,020 — — 16,027Forfeiture of unvested shares(59,270) (1) 1 — — —Exercise of stock options1,363,895 13 35,634 — — 35,647Tax benefits from dividend equivalents andequity based compensation— — 1,593 — — 1,593Balance at December 31, 2015103,626,255 1,036 1,406,786 813,894 22,182 2,243,898Comprehensive income— — — 225,741 19,065 244,806Dividends— — — (89,954) — (89,954)Equity based compensation651,760 7 18,026 — — 18,033Forfeiture of unvested shares and sharessurrendered for tax withholding obligations(159,049) (1) (484) — — (485)Exercise of stock options47,979 — 791 — — 791Tax benefits from dividend equivalents andequity based compensation— — 1,340 — — 1,340Balance at December 31, 2016104,166,945 $1,042 $1,426,459 $949,681 $41,247 $2,418,429Comprehensive income— — — 614,273 13,739 628,012Dividends— — — (92,173) — (92,173)Equity based compensation621,806 6 16,990 — — 16,996Forfeiture of unvested shares and sharessurrendered for tax withholding obligations(271,954) (3) (7,294) — — (7,297)Exercise of stock options2,331,388 23 62,072 — — 62,095Balance at December 31, 2017106,848,185 $1,068 $1,498,227 $1,471,781 $54,986 $3,026,062 The accompanying notes are an integral part of these consolidated financial statements.89Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Note 1 Basis of Presentation and Summary of Significant Accounting PoliciesBankUnited, Inc. is a national bank holding company with one wholly-owned subsidiary, BankUnited; collectively, the Company. BankUnited, anational banking association headquartered in Miami Lakes, Florida, provides a full range of banking and related services to individual and corporatecustomers through 87 banking centers located in 15 Florida counties and 6 banking centers located in the New York metropolitan area at December 31, 2017.The Bank also offers certain commercial lending and deposit products through national platforms.In connection with the FSB Acquisition, BankUnited entered into two loss sharing agreements with the FDIC. The Loss Sharing Agreements consist ofthe Single Family Shared-Loss Agreement and the Commercial Shared-Loss Agreement. Assets covered by the Loss Sharing Agreements are referred to ascovered assets or, in certain cases, covered loans. The Single Family Shared-Loss Agreement provides for FDIC loss sharing and the Bank’s reimbursementfor recoveries to the FDIC through May 21, 2019 for single family residential loans and OREO. Loss sharing under the Commercial Shared-Loss Agreementterminated on May 21, 2014. The Commercial Shared-Loss Agreement continued to provide for the Bank’s reimbursement of recoveries to the FDIC throughJune 30, 2017 for all other covered assets, including commercial real estate, commercial and industrial and consumer loans, certain investment securities andcommercial OREO. Pursuant to the terms of the Loss Sharing Agreements, the covered assets are subject to a stated loss threshold whereby the FDIC willreimburse BankUnited for 80% of losses related to the covered assets up to $4.0 billion and 95% of losses in excess of this amount, beginning with the firstdollar of loss incurred. The consolidated financial statements have been prepared in accordance with GAAP and prevailing practices in the banking industry.The Company has a single reportable segment.Accounting EstimatesIn preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets,liabilities, revenues, and expenses and disclosures of contingent assets and liabilities. Actual results could differ significantly from these estimates.Significant estimates include the ALLL, the amount and timing of expected cash flows from covered assets and the FDIC indemnification asset, and thefair values of investment securities and other financial instruments. Management has used information provided by third party valuation specialists to assistin the determination of the fair values of investment securities.Principles of ConsolidationThe consolidated financial statements include the accounts of BankUnited, Inc. and its wholly-owned subsidiary. All significant intercompany balancesand transactions have been eliminated in consolidation. VIEs are consolidated if the Company is the primary beneficiary; i.e., has (i) the power to direct theactivities of the VIE that most significantly impact the VIE's economic performance and (ii) the obligation to absorb losses or the right to receive benefits thatcould potentially be significant to the VIE. The Company has variable interests in affordable housing limited partnerships that are not required to beconsolidated because the Company is not the primary beneficiary.Fair Value MeasurementsCertain of the Company's assets and liabilities are reflected in the financial statements at fair value on either a recurring or non-recurring basis.Investment securities available for sale, servicing rights and derivative instruments are measured at fair value on a recurring basis. Assets measured at fairvalue or fair value less cost to sell on a non-recurring basis may include collateral dependent impaired loans, OREO and other repossessed assets, loans heldfor sale, goodwill, impaired long-lived assets and assets acquired and liabilities assumed in business combinations. These non-recurring fair valuemeasurements typically involve the application of acquisition accounting, lower-of-cost-or-market accounting or the measurement of impairment of certainassets.Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous marketfor the asset or liability in an orderly transaction between market participants at the measurement90Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017date. GAAP establishes a hierarchy that prioritizes inputs used to determine fair value measurements into three levels based on the observability andtransparency of the inputs:•Level 1 inputs are unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.•Level 2 inputs are observable inputs other than level 1 inputs, including quoted prices for similar assets and liabilities, quoted prices for identicalassets and liabilities in less active markets and other inputs that can be corroborated by observable market data.•Level 3 inputs are unobservable inputs supported by limited or no market activity or data and inputs requiring significant management judgment orestimation.The fair value hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs in estimating fairvalue. Unobservable inputs are utilized in determining fair value measurements only to the extent that observable inputs are unavailable. The need to useunobservable inputs generally results from a lack of market liquidity and diminished observability of actual trades or assumptions that would otherwise beavailable to value a particular asset or liability.Transfers between levels of the fair value hierarchy are recorded as of the end of the reporting period.Cash and Cash EquivalentsCash and cash equivalents include cash and due from banks, both interest bearing and non-interest bearing, including amounts on deposit at the FederalReserve Bank, and federal funds sold. Cash equivalents have original maturities of three months or less. For purposes of reporting cash flows, cash receiptsand payments pertaining to FHLB advances with original maturities of three months or less are reported net.Investment SecuritiesDebt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost.Debt securities that the Company may not have the intent to hold to maturity and marketable equity securities are classified as available for sale at the time ofacquisition and carried at fair value with unrealized gains and losses, net of tax, excluded from earnings and reported in AOCI, a separate component ofstockholders' equity. Securities classified as available for sale may be used as part of the Company's asset/liability management strategy and may be sold inresponse to liquidity needs, regulatory changes, changes in interest rates, prepayment risk or other market factors. The Company does not maintain a tradingportfolio. Purchase premiums and discounts on debt securities are amortized as adjustments to yield over the expected lives of the securities, using the levelyield method. Premiums are amortized to the call date if the call is considered to be clearly and closely related to the host contract. Realized gains and lossesfrom sales of securities are recorded on the trade date and are determined using the specific identification method.The Company reviews investment securities for OTTI at least quarterly. An investment security is impaired if its fair value is lower than its amortized costbasis. The Company considers many factors in determining whether a decline in fair value below amortized cost represents OTTI, including, but not limitedto:•the Company's intent to hold the security until maturity or for a period of time sufficient for a recovery in value;•whether it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis;•the length of time and extent to which fair value has been less than amortized cost;•adverse changes in expected cash flows;•collateral values and performance;•the payment structure of the security including levels of subordination or over-collateralization;•changes in the economic or regulatory environment;91Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017•the general market condition of the geographic area or industry of the issuer;•the issuer's financial condition, performance and business prospects; and•changes in credit ratings.The relative importance assigned to each of these factors varies depending on the facts and circumstances pertinent to the individual security beingevaluated.The Company recognizes OTTI of a debt security for which there has been a decline in fair value below amortized cost if (i) management intends to sellthe security, (ii) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, or (iii) theCompany does not expect to recover the entire amortized cost basis of the security. If the Company intends to sell the security, or if it is more likely than notit will be required to sell the security before recovery, an OTTI write-down is recognized in earnings equal to the entire difference between the amortized costbasis and fair value of the security. Otherwise, the amount by which amortized cost exceeds the fair value of a debt security that is considered to be other-than-temporarily impaired is separated into a component representing the credit loss, which is recognized in earnings, and a component related to all otherfactors, which is recognized in other comprehensive income. The measurement of the credit loss component is equal to the difference between the debtsecurity's amortized cost basis and the present value of its expected future cash flows discounted at the security's effective yield.The evaluation of OTTI of marketable equity securities focuses on whether evidence supports recovery of the unrealized loss within a timeframeconsistent with temporary impairment. The entire amount by which cost basis exceeds the fair value of an equity security that is considered to be other-than-temporarily impaired is recognized in earnings.Non-marketable Equity SecuritiesThe Bank, as a member of the FRB system and the FHLB, is required to maintain investments in the stock of the FRB and FHLB. No market exists for thisstock, and the investment can be liquidated only through redemption by the respective institutions, at the discretion of and subject to conditions imposed bythose institutions. The stock has no readily determinable fair value and is carried at cost. Historically, stock redemptions have been at par value, which equalsthe Company's carrying value. The Company monitors its investment in FHLB stock for impairment through review of recent financial results of the FHLB,including capital adequacy and liquidity position, dividend payment history, redemption history and information from credit agencies. The Company hasnot identified any indicators of impairment of FHLB stock.Loans Held for SaleThe guaranteed portion of SBA and USDA loans originated with the intent to sell are carried at the lower of cost or fair value, determined in theaggregate. A valuation allowance is established through a charge to earnings if the aggregate fair value of such loans is lower than their cost. Gains or lossesrecognized upon sale are determined on the specific identification basis.Loans not originated or otherwise acquired with the intent to sell are transferred into the held for sale classification at the lower of carrying amount or fairvalue when they are specifically identified for sale and a formal plan exists to sell them. Acquired credit impaired loans accounted for in pools are removedfrom the pools at their carrying amounts when they are sold.LoansThe Company's loan portfolio contains 1-4 single family residential first mortgages, home equity loans and lines of credit, consumer, multi-family, ownerand non-owner occupied commercial real estate, construction and land, and commercial and industrial loans, mortgage warehouse lines of credit and directfinancing leases. The Company segregates its loan portfolio between covered and non-covered loans. Covered loans are loans acquired from the FDIC in theFSB Acquisition that are covered under the Single Family Shared-Loss Agreement. Covered loans are further segregated between ACI loans and non-ACIloans.Non-covered LoansNon-covered loans, other than non-covered ACI loans, are carried at UPB, net of premiums, discounts, unearned income, deferred loan origination feesand costs, and the ALLL.92Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Interest income on these loans is accrued based on the principal amount outstanding. Non-refundable loan origination fees, net of direct costs oforiginating or acquiring loans, as well as purchase premiums and discounts, are deferred and recognized as adjustments to yield over the contractual lives ofthe related loans using the level yield method.Direct Financing LeasesDirect financing leases are carried at the aggregate of lease payments receivable and estimated residual value of the leased property, if applicable, lessunearned income. Interest income on direct financing leases is recognized over the term of the leases to achieve a constant periodic rate of return on theoutstanding investment. Initial direct costs are deferred and amortized over the lease term as a reduction to interest income using the effective interestmethod.ACI LoansACI loans, all of which were acquired in the FSB Acquisition and the substantial majority of which are covered under the Single Family Shared-LossAgreement, are those for which, at acquisition, management determined it probable that the Company would be unable to collect all contractual principaland interest payments due. These loans were recorded at estimated fair value at acquisition, measured as the present value of all cash flows expected to bereceived, discounted at an appropriately risk-adjusted discount rate. Initial cash flow expectations incorporated significant assumptions regardingprepayment rates, frequency of default and loss severity.The difference between total contractually required payments on ACI loans and the cash flows expected to be received represents non-accretabledifference. The excess of all cash flows expected to be received over the Company's recorded investment in the loans represents accretable yield and isrecognized as interest income on a level-yield basis over the expected life of the loans.The Company aggregated ACI 1-4 single family residential mortgage loans and home equity loans and lines of credit with similar risk characteristicsinto homogenous pools at acquisition. A composite interest rate and composite expectations of future cash flows are used in accounting for each pool. Theseloans were aggregated into pools based on the following characteristics:•delinquency status;•product type, in particular, amortizing as opposed to option ARMs;•loan-to-value ratio; and•borrower FICO score.Loans that do not have similar risk characteristics, primarily commercial and commercial real estate loans, are accounted for on an individual loan basisusing interest rates and expectations of cash flows for each loan.The Company is required to develop reasonable expectations about the timing and amount of cash flows to be collected related to ACI loans and tocontinue to update those estimates over the lives of the loans. Expected cash flows from ACI loans are updated quarterly. If it is probable that the Companywill be unable to collect all the cash flows expected from a loan or pool at acquisition plus additional cash flows expected to be collected arising fromchanges in estimates after acquisition, the loan or pool is considered impaired and a valuation allowance is established by a charge to the provision for loanlosses. If there is an increase in expected cash flows from a loan or pool, the Company first reduces any valuation allowance previously established by theamount of the increase in the present value of expected cash flows, and then recalculates the amount of accretable yield for that loan or pool. The adjustmentof accretable yield due to an increase in expected cash flows, as well as changes in expected cash flows due to changes in interest rate indices and changes inprepayment assumptions is accounted for prospectively as a change in yield. Additional cash flows expected to be collected are transferred from non-accretable difference to accretable yield and the amount of periodic accretion is adjusted accordingly over the remaining life of the loan or pool.The Company may resolve an ACI loan either through a sale of the loan, by working with the customer and obtaining partial or full repayment, by shortsale of the collateral, or by foreclosure. When a loan accounted for in a pool is resolved, it is removed from the pool at its allocated carrying amount. In theevent of a sale of the loan, the Company recognizes a gain or loss on sale based on the difference between the sales proceeds and the carrying amount of theloan. For loans resolved through pre-payment or short sale of the collateral, the Company recognizes the difference between the amount of the paymentreceived and the carrying amount of the loan in the income statement line item "Income from resolution of covered assets, net". For93Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017loans resolved through foreclosure, the difference between the fair value of the collateral obtained through foreclosure less estimated cost to sell and thecarrying amount of the loan is recognized in the income statement line item "Income from resolution of covered assets, net". Any remaining accretablediscount related to loans not accounted for in pools that are resolved by full or partial pre-payment, short sale or foreclosure is recognized in interest incomeat the time of resolution, to the extent collected.Payments received earlier than expected or in excess of expected cash flows from sales or other resolutions may result in the carrying value of a poolbeing reduced to zero even though outstanding contractual balances and expected cash flows remain related to loans in the pool. Once the carrying value of apool is reduced to zero, any future proceeds, which may include cash or real estate acquired in foreclosure, from the remaining loans, representing furtherrealization of accretable yield, are recognized as interest income upon receipt.Covered Non-ACI LoansLoans acquired in the FSB Acquisition without evidence of deterioration in credit quality since origination were initially recorded at estimated fair valueon the acquisition date. Non-ACI 1-4 single family residential mortgage loans and home equity loans and lines of credit with similar risk characteristics wereaggregated into pools for accounting purposes at acquisition. Non-ACI loans are carried at the principal amount outstanding, adjusted for unamortizedacquisition date fair value adjustments and the ALLL. Interest income is accrued based on the UPB and, with the exception of home equity loans and lines ofcredit, acquisition date fair value adjustments are amortized using the level-yield method over the expected lives of the related loans. For non-ACI 1-4 familyresidential mortgage loans accounted for in pools, prepayment estimates are used in determining the periodic amortization of acquisition date fair valueadjustments. Acquisition date fair value adjustments related to revolving home equity loans and lines of credit are amortized on a straight-line basis.Non-accrual LoansCommercial loans, other than ACI loans, are placed on non-accrual status when (i) management has determined that full repayment of all contractualprincipal 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 ofcollection. Given continued unstable conditions in the taxi industry, continued declines in ridership, and the relatively long amortization periods for most ofthese loans, there exists an increasing level of uncertainty with respect to the Company's ability to collect all contractual principal and interest on taximedallion loans. Therefore, all taxi medallion loans have been placed on non-accrual status. Residential and consumer loans, other than ACI loans, aregenerally placed on non-accrual status when 90 days of interest is due and unpaid. When a loan is placed on non-accrual status, uncollected interest accruedis reversed and charged to interest income. Payments received on nonaccrual commercial loans are applied as a reduction of principal. Interest payments arerecognized as income on a cash basis on nonaccrual residential loans. Commercial loans are returned to accrual status only after all past due principal andinterest has been collected and full repayment of remaining contractual principal and interest is reasonably assured. Residential and consumer loans arereturned to accrual status when there is no longer 90 days of interest due and unpaid. Past due status of loans is determined based on the contractual nextpayment due date. Loans less than 30 days past due are reported as current.Contractually delinquent ACI loans are not classified as non-accrual as long as discount continues to be accreted on the loans or pools.Impaired LoansLoans, other than ACI loans, are considered impaired when, based on current information and events, it is probable that the Company will be unable tocollect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreements. Commercial relationships withcommitted balances greater than or equal to $1.0 million that have internal risk ratings of substandard or doubtful and are on non-accrual status, as well asloans that have been modified in TDRs, are individually evaluated for impairment. Other commercial relationships on non-accrual status with committedbalances under $1.0 million may also be evaluated individually for impairment at management's discretion. All loans secured by taxi medallions areindividually evaluated for impairment. The likelihood of loss related to loans assigned internal risk ratings of substandard or doubtful is considered elevateddue to their identified credit weaknesses. Factors considered by management in evaluating impairment include payment status, financial condition of theborrower, collateral value, and other factors impacting the probability of collecting scheduled principal and interest payments when due.94Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017An ACI pool or loan is considered to be impaired when it is probable that the Company will be unable to collect all the cash flows expected atacquisition, plus additional cash flows expected to be collected arising from changes in estimates after acquisition. 1-4 single family residential and homeequity ACI loans accounted for in pools are evaluated collectively for impairment on a pool by pool basis based on expected pool cash flows. CommercialACI loans are individually evaluated for impairment based on expected cash flows from the individual loans. Discount continues to be accreted on ACI loansor pools as long as there are expected future cash flows in excess of the current carrying amount of the loans or pools.Troubled Debt RestructuringsIn certain situations due to economic or legal reasons related to a borrower's financial difficulties, the Company may grant a concession to the borrowerfor other than an insignificant period of time that it would not otherwise consider. At that time, except for ACI loans accounted for in pools, the related loan isclassified as a TDR and considered impaired. The concessions granted may include rate reductions, principal forgiveness, payment forbearance, extensions ofmaturity at rates of interest below that commensurate with the risk profile of the loans, modification of payment terms and other actions intended to minimizeeconomic loss. A TDR is generally placed on non-accrual status at the time of the modification unless the borrower was performing prior to the restructuring.Modified ACI loans accounted for in pools are not accounted for as TDRs, are not separated from the pools and are not classified as impaired loans.Allowance for Loan and Lease LossesThe ALLL represents the amount considered adequate by management to absorb probable losses inherent in the loan portfolio at the balance sheet date.The ALLL consists of both specific and general components. The ALLL is established as losses are estimated to have occurred through a provision charged toearnings. Individual loans are charged off against the ALLL when management determines them to be uncollectible.An assessment of collateral value is made at no later than 120 days delinquency for non-covered open- and closed-end loans secured by residential realestate; any outstanding loan balance in excess of fair value less cost to sell is charged off at no later than 180 days delinquency. Additionally, anyoutstanding balance in excess of fair value of collateral less cost to sell is charged off (i) within 60 days of receipt of notification of filing from thebankruptcy court, (ii) within 60 days of determination of loss if all borrowers are deceased or (iii) within 90 days of discovery of fraudulent activity. Coverednon-ACI loans secured by residential real estate are generally charged off at final resolution which is consistent with the terms of the Single Family Shared-Loss Agreement. Consumer loans are typically charged off at 120 days delinquency. Commercial loans are charged off when management deems them to beuncollectible. Subsequent recoveries are credited to the ALLL.Non-covered LoansThe non-covered residential and home equity portfolio segments have not yet developed an observable loss trend. Due to several factors, there is a lackof similarity between the risk characteristics of non-covered loans and covered loans in the residential and home equity portfolios. Therefore, managementdoes not believe it is appropriate to use the historical performance of the covered residential loans as a basis for calculating the ALLL applicable to the non-covered loans. The ALLL for non-covered 1-4 single family residential loans is based on average annual loss rates on prime residential mortgagesecuritizations issued between 2003 and 2008. Loans included in these securitizations have credit characteristics, such as LTV and FICO scores, consideredby management to be comparable to characteristics of loans in the non-covered 1-4 single family residential portfolio. The ALLL for non-covered homeequity and other consumer loans is based on peer group average historical loss rates.The credit quality of loans in the residential portfolio segment may be impacted by fluctuations in home values, unemployment, general economicconditions, borrowers' financial circumstances and fluctuations in interest rates.The credit quality of commercial loans is impacted by general and industry specific economic conditions and other factors that may influence debtservice coverage generated by the borrowers' businesses as well as fluctuations in the value of real estate and other collateral. For loans evaluatedindividually for impairment and determined to be impaired, a specific allowance is established based on the present value of expected cash flows discountedat the loan's effective interest rate, the estimated fair value of the loan, or for collateral dependent loans, the estimated fair value of collateral less costs to sell.Commercial loans, other than ACI commercial loans, not individually determined to be impaired are grouped based on common risk characteristics.Quantitative loss factors for pass rated commercial loans in portfolio segments that have not yet95Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017developed an observable loss trend are based primarily on peer group average historical loss rates and the Bank's internal credit risk rating system.Quantitative loss factors for the Bridge portfolios, small business loans and mortgage warehouse loans are based on the Company's average historical netcharge-off rates. The quantitative loss factor applied to the non-guaranteed portion of SBA loans is based on average historical charge-off rates published bythe SBA. The quantitative loss factor for municipal loans and direct finance leases is based on the portfolio's external ratings and Moody's historicaltransition matrix. Quantitative loss rates are generally based on a four-quarter loss emergence period and a 16-quarter loss experience period; for municipalloans and leases, a 12-quarter loss emergence period is used.The source of quantitative loss factors for the Bridge portfolios, municipal loans and leases, SBA loans, and mortgage warehouse loans was revised in2017, with no material impact to the ALLL. Where applicable, the peer group used to calculate average annual historical net charge-off rates used inestimating the Bank's general reserves is a group of 27 banks made up of the banks included in the OCC Midsize Bank Group and two additional banks in theNew York region that management believes to be comparable based on size and nature of lending operations.The quantitative loss factor for loans rated special mention is based on average annual probability of default and implied severity, derived from internaland external data. Loss factors for substandard and doubtful loans that are not individually evaluated for impairment are determined by using defaultfrequency and severity information applied at the loan level. Estimated default frequencies and severities are based on available industry data.Qualitative adjustments are made to the ALLL when, based on management's judgment and experience, there are internal or external factors impactingincurred losses not taken into account by the quantitative calculations. Management has categorized potential qualitative adjustments into the followingcategories:•Portfolio performance trends, including trends in and the levels of delinquencies, non-performing loans and classified loans;•Changes in the nature of the portfolio and terms of the loans, specifically including the volume and nature of policy and procedural exceptions;•Portfolio growth trends;•Changes in lending policies and procedures, including credit and underwriting guidelines;•Economic factors, including unemployment rates and GDP growth rates;•Changes in the value of underlying collateral;•Quality of risk ratings, as evaluated by our independent credit review function;•Credit concentrations;•Changes in and experience levels of credit administration management and staff; and•Other factors identified by management that may impact the level of losses inherent in the portfolio, including but not limited to competition, legaland regulatory requirements and unusual events.Covered Non-ACI LoansCalculated loss frequency and severity percentages are applied to the UPB of non-ACI 1-4 single family residential mortgages and home equity loansand lines of credit to calculate the ALLL. Based on an analysis of historical portfolio performance, OREO and short sale data, and other internal and externalfactors, management has concluded that historical performance by portfolio class is the best indicator of incurred loss for the non-ACI 1-4 single familyresidential and home equity portfolio classes. For each of these portfolio classes, a quarterly roll rate matrix is used to measure the rate at which loans movefrom one delinquency bucket to the next during a given quarter. An average 16-quarter roll rate matrix is used to estimate the amount within eachdelinquency bucket expected to roll to 120+ days delinquent within a four quarter loss emergence period. Loss severity given default is estimated based oninternal data about short sales and OREO sales. The ALLL calculation incorporates a 100% loss severity assumption for home equity loans and lines of creditprojected to roll to 120 days delinquency. Substantially all non-ACI home equity loans and lines of credit were sold in the fourth quarter of 2017.96Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017ACI LoansA specific valuation allowance related to an ACI loan or pool is established when quarterly evaluations of expected cash flows indicate it is probablethat the Company will be unable to collect all of the cash flows expected at acquisition plus any additional cash flows expected to be collected arising fromchanges in estimate after acquisition. The amount of any necessary valuation allowance is measured by comparing the carrying value of the loan or pool tothe updated net present value of expected cash flows for the loan or pool. In calculating the present value of expected cash flows for this purpose, changes incash flows related to credit related factors are isolated from those related to changes in interest rate indices or prepayment assumptions. Alternatively, animprovement in the expected cash flows related to ACI loans results in a reduction of any previously established specific allowance with a correspondingcredit to the provision for loan losses. A charge-off is taken for an individual ACI commercial loan when it is deemed probable that the loan will be resolvedfor an amount less than its carrying value.Expected cash flows are estimated on a pool basis for ACI 1-4 single family residential and home equity loans. The analysis of expected pool cash flowsincorporates updated pool level expected prepayment rate, default rate, delinquency level and loss severity given default assumptions. Prepayment,delinquency and default curves are derived primarily from roll rates generated from the historical performance of the portfolio over the immediatelypreceding four quarters. Loss severity given default for loans not projected to resolve through sale is generated from the historical performance of theportfolio over the immediately preceding four quarters, while loss severity from loan sales is generated from historical performance over the immediatelypreceding twelve quarters. Estimates of default probability and loss severity also incorporate updated LTV ratios, at the loan level, based on Case-ShillerHome Price Indices for the relevant MSA. Costs and fees represent an additional component of loss on default and are projected using the Bank's actualexperience over the preceding twelve quarters.The primary assumptions underlying estimates of expected cash flows for commercial ACI loans are default probability and severity of loss givendefault. Generally, updated cash flow assumptions are based primarily on net realizable value analyses prepared at the individual loan level. These analysesincorporate information about loan performance, collateral values, the financial condition of the borrower and other available information that may impactsources of repayment.Reserve for Unfunded CommitmentsThe reserve for unfunded commitments represents the estimated probable losses related to unfunded lending commitments. The reserve is calculated in amanner similar to the general reserve for non-covered loans, while also considering the timing and likelihood that the available credit will be utilized as wellas the exposure upon default. The reserve for unfunded commitments is presented within other liabilities on the consolidated balance sheets, distinct from theALLL, and adjustments to the reserve for unfunded commitments are included in other non-interest expense in the consolidated statements of income.FDIC Indemnification AssetThe FDIC indemnification asset was initially recorded at the time of the FSB Acquisition at fair value, measured as the present value of the estimatedcash payments expected from the FDIC for probable losses on covered assets. The FDIC indemnification asset is measured separately from the related coveredassets. It is not contractually embedded in the covered assets and it is not transferable with the covered assets should the Company choose to dispose of them.Impairment of expected cash flows from covered assets results in an increase in cash flows expected to be collected from the FDIC. These increasedexpected cash flows from the FDIC are recognized as increases in the FDIC indemnification asset and as non-interest income in the same period that theimpairment of the covered assets is recognized in the provision for loan losses. Increases in expected cash flows from covered assets result in decreases in cashflows expected to be collected from the FDIC. These decreases in expected cash flows from the FDIC are recognized immediately in earnings to the extentthat they relate to a reversal of a previously recorded valuation allowance related to the covered assets. Any remaining decreases in cash flows expected to becollected from the FDIC are recognized prospectively through an adjustment of the rate of accretion or amortization on the FDIC indemnification asset,consistent with the approach taken to recognize increases in expected cash flows on the covered assets. Amortization of the FDIC indemnification assetresults from circumstances in which, due to improvement in expected cash flows from the covered assets, expected cash flows from the FDIC are less than thecarrying value of the FDIC indemnification asset. Accretion or amortization of the FDIC indemnification asset is recognized in earnings using the effectiveinterest method over the period during which cash flows from the FDIC are expected to be collected, which is limited to the lesser of the contractual term ofthe indemnification agreement and the remaining life of the indemnified assets.97Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Gains and losses from resolution of ACI loans are included in the income statement line item "Income from resolution of covered assets, net." These gainsand losses represent the difference between the expected losses from ACI loans and consideration actually received in satisfaction of such loans that wereresolved either by payment in full, foreclosure or short sale. The Company may also realize gains or losses on the sale or impairment of covered loans orcovered OREO. When the Company recognizes gains or losses related to the resolution, sale or impairment of covered assets in earnings, correspondingchanges in the estimated amount recoverable from the FDIC under the Loss Sharing Agreements are reflected in the consolidated financial statements asincreases or decreases in the FDIC indemnification asset and in the consolidated statement of income line item "Net loss on FDIC indemnification."Bank Owned Life InsuranceBank owned life insurance is carried at the amount that could be realized under the contract at the balance sheet date, which is typically cash surrendervalue. Changes in cash surrender value are recorded in non-interest income.Equipment Under Operating LeaseEquipment under operating lease is carried at cost less accumulated depreciation and is depreciated to estimated residual value using the straight-linemethod over the lease term. Estimated residual values are re-evaluated at least annually, based primarily on current residual value appraisals. Rental revenueis recognized on a straight-line basis over the contractual term of the lease.A review for impairment of equipment under operating lease is performed at least annually or when events or changes in circumstances indicate that thecarrying amount of long-lived assets may not be recoverable. Impairment of assets is determined by comparing the carrying amount to future undiscountednet cash flows expected to be generated. If an asset is impaired, the measure of impairment is the amount by which the carrying amount exceeds the fair valueof the asset.GoodwillGoodwill of $78 million at both December 31, 2017 and 2016 represents the excess of consideration transferred in business combinations over the fairvalue of net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but is tested for impairment annually or more frequently if eventsor circumstances indicate that impairment may have occurred. The Company performs its annual goodwill impairment test in the third fiscal quarter. TheCompany has a single reporting unit. The impairment test compares the estimated fair value of the reporting unit to its carrying amount. If the fair value of thereporting unit exceeds its carrying amount, no impairment is indicated. If the fair value of the reporting unit is less than its carrying amount, impairment ofgoodwill is measured as the excess of the carrying amount over fair value. The estimated fair value of the reporting unit is based on the market capitalizationof the Company's common stock. The estimated fair value of the reporting unit at each impairment testing date substantially exceeded its carrying amount;therefore, no impairment of goodwill was indicated.Foreclosed Property and Repossessed AssetsForeclosed property and repossessed assets consists of real estate assets acquired through, or in lieu of, loan foreclosure and personal property acquiredthrough repossession. Such assets are included in other assets in the accompanying consolidated balance sheets. These assets are held for sale and are initiallyrecorded at estimated fair value less costs to sell, establishing a new cost basis. Subsequent to acquisition, periodic valuations are performed and the assets arecarried at the lower of the carrying amount at the date of acquisition or estimated fair value less cost to sell. Significant property improvements are capitalizedto the extent that the resulting carrying value does not exceed fair value less cost to sell. Legal fees, maintenance, taxes, insurance and other direct costs ofholding and maintaining these assets are expensed as incurred.98Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Premises and EquipmentPremises and equipment are carried at cost less accumulated depreciation and amortization and are included in other assets in the accompanyingconsolidated balance sheets. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The lives of improvementsto existing buildings are based on the lesser of the estimated remaining lives of the buildings or the estimated useful lives of the improvements. Leaseholdimprovements are amortized over the shorter of the expected terms of the leases at inception, considering options to extend that are reasonably assured, ortheir useful lives. Direct costs of materials and services associated with developing or obtaining and implementing internal use computer software incurredduring the application and development stage are capitalized and amortized over the estimated useful lives of the software. The estimated useful lives ofpremises and equipment are as follows:•buildings and improvements - 30 years;•leasehold improvements - 5 to 20 years;•furniture, fixtures and equipment - 5 to 7 years;•computer equipment - 3 to 5 years; and•software and software licensing rights - 3 to 5 years.Loan Servicing RightsLoan servicing rights are measured at fair value, with changes in fair value subsequent to acquisition recognized in earnings. Prior to January 1, 2016,residential MSRs were measured using the amortization method subsequent to acquisition. This change in accounting policy had no impact on openingretained earnings at January 1, 2016.Loan servicing rights are included in other assets in the accompanying consolidated balance sheets. Servicing fee income is recorded net of changes infair value in other non-interest income. Neither the loan servicing rights nor related income have had a material impact on the Company's financial statementsto date.Investments in Affordable Housing Limited PartnershipsThe Company has acquired investments in limited partnerships that manage or invest in qualified affordable housing projects and provide the Companywith low-income housing tax credits and other tax benefits. These investments are included in other assets in the accompanying consolidated balance sheets.The Company accounts for investments in qualified affordable housing projects using the proportional amortization method if certain criteria are met. Underthe proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other tax benefits received and theamortization is recognized in the income statement as a component of income tax expense. The investments are evaluated for impairment when events orchanges in circumstances indicate that it is more likely than not that the carrying amount of the investment will not be realized.Income TaxesThe Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are determined based on differencesbetween the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for periods in which the differences are expected toreverse. The effect of changes in tax rates on deferred tax assets and liabilities are recognized in income in the period that includes the enactment date. Avaluation allowance is established for deferred tax assets when management determines that it is more likely than not that some portion or all of a deferred taxasset will not be realized. In making such determinations, the Company considers all available positive and negative evidence that may impact therealization of deferred tax assets. These considerations include the amount of taxable income generated in statutory carryback periods, future reversals ofexisting taxable temporary differences, projected future taxable income and available tax planning strategies.The Company recognizes tax benefits from uncertain tax positions when it is more likely than not that the related tax positions will be sustained uponexamination, including resolutions of any related appeals or litigation processes, based on the technical merits of the tax positions. An uncertain tax positionis a position taken in a previously filed tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law.The Company measures tax benefits related to uncertain tax positions based on the largest benefit that has a greater than 50% likelihood of being realized99Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017upon settlement. If the initial assessment fails to result in recognition of a tax benefit, the Company subsequently recognizes a tax benefit if (i) there arechanges in tax law or case law that raise the likelihood of prevailing on the technical merits of the position to more-likely-than-not, (ii) the statute oflimitations expires, or (iii) there is a completion of an examination resulting in a settlement of that tax year or position with the appropriate agency. TheCompany recognizes interest and penalties related to uncertain tax positions, as well as interest income or expense related to tax settlements, in the provisionfor income taxes.Equity Based CompensationThe Company periodically grants unvested or restricted shares of common stock and other share-based awards to key employees. For equity classifiedawards, compensation cost is measured based on the estimated fair value of the awards at the grant date and is recognized in earnings on a straight-line basisover the requisite service period for each award. Liability-classified awards are remeasured each reporting period at fair value until the award is settled, andcompensation cost is recognized in earnings on a straight-line basis over the requisite service period for each award, adjusted for changes in fair value eachreporting period. Compensation cost related to awards that embody performance conditions is recognized when it is probable that the performance conditionswill be achieved. The number of awards expected to vest is estimated in determining the amount of compensation cost to be recognized related to share-basedpayment transactions.The fair value of unvested shares is based on the closing market price of the Company's common stock at the date of grant. Market conditions embeddedin awards are reflected in the grant-date fair value of the awards.Derivative Financial Instruments and Hedging ActivitiesInterest rate derivative contractsThe Company uses interest rate derivative contracts, such as swaps, caps, floors and collars, in the normal course of business to meet the financial needsof its customers and to manage exposure to changes in interest rates. Interest rate contracts are recorded as assets or liabilities in the consolidated balancesheets at fair value. Interest rate swaps that are used as a risk management tool to hedge the Company's exposure to changes in interest rates have beendesignated as cash flow hedging instruments. The gain or loss resulting from changes in the fair value of interest rate swaps designated and qualifying as cashflow hedging instruments is initially reported as a component of other comprehensive income and subsequently reclassified into earnings in the same periodin which the hedged transaction affects earnings.The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in thecash flows of the hedged item, the derivative expires or is sold, terminated, or exercised, management determines that the designation of the derivative as ahedging instrument is no longer appropriate or the occurrence of the forecasted transaction is no longer probable. When hedge accounting is discontinued,any subsequent changes in fair value of the derivative are recognized in earnings. The cumulative unrealized gain or loss related to a discontinued cash flowhedge continues to be reported in AOCI and is subsequently reclassified into earnings in the same period in which the hedged transaction affects earnings,unless it is probable that the forecasted transaction will not occur by the end of the originally specified time period, in which case the cumulative unrealizedgain or loss reported in AOCI is reclassified into earnings immediately.Cash flows resulting from derivative financial instruments that are accounted for as hedges are classified in the cash flow statement in the same categoryas the cash flows from the hedged items.Changes in the fair value of interest rate contracts not designated as, or not qualifying as, hedging instruments are recognized currently in earnings.Transfers of Financial AssetsTransfers of financial assets are accounted for as sales when control over the assets has been surrendered. A gain or loss is recognized in earnings uponcompletion of the sale based on the difference between the sales proceeds and the carrying value of the assets. Control over the transferred assets is deemed tohave been surrendered when: (i) the assets have been legally isolated from the Company, (ii) the transferee obtains the right (free of conditions that constrainit from taking advantage of that right) to pledge or exchange the transferred assets, and (iii) the Company does not maintain effective control over thetransferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.100Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Advertising CostsAdvertising costs are expensed as incurred.Earnings per Common ShareBasic earnings per common share is calculated by dividing income allocated to common stockholders for basic earnings per common share by theweighted average number of common shares outstanding for the period, reduced by average unvested stock awards. Unvested stock awards with non-forfeitable rights to dividends, whether paid or unpaid, and stand-alone dividend participation rights are considered participating securities and are includedin the computation of basic earnings per common share using the two class method whereby net income is allocated between common stock and participatingsecurities. In periods of a net loss, no allocation is made to participating securities as they are not contractually required to fund net losses. Diluted earningsper common share is computed by dividing income allocated to common stockholders for basic earnings per common share, adjusted for earnings reallocatedfrom participating securities, by the weighted average number of common shares outstanding for the period increased for the dilutive effect of unexercisedstock options, warrants and unvested stock awards using the treasury stock method. Contingently issuable shares are included in the calculation of earningsper common share as if the end of the respective period was the end of the contingency period.ReclassificationsCertain amounts presented for prior periods have been reclassified to conform to the current period presentation.New Accounting Pronouncements Adopted in 2017ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. The amendments in this ASU clarifiedthe requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closelyrelated to their debt hosts. A company performing the assessment under these amendments is required to assess the embedded call (put) options solely inaccordance with a four-step decision sequence, without also considering whether the contingency is related to interest rates or credit risks. The adoption ofthis standard had no impact on the Company's consolidated financial position, results of operations or cash flows.ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments inthis ASU simplified several aspects of the accounting for share-based payment transactions. The amendment requiring the recognition of excess tax benefitsand deficiencies as income tax benefit or expense as opposed to additional paid-in-capital was applied prospectively and resulted in the recognition of $3.7million in excess tax benefits in the consolidated statement of income line item "Provision for income taxes" for the year ended December 31, 2017,increasing net income by the same amount and increasing basic and diluted earnings per share by $0.03. The Company retrospectively adopted theamendments requiring the classification of excess tax benefits and deficiencies with other income tax cash flows as operating activities and cash paid whendirectly withholding shares as financing activities in the accompanying consolidated statements of cash flows; the impact of adoption was not material. TheCompany elected to continue its practice of estimating the number of awards expected to vest in determining the amount of compensation cost to berecognized related to share-based payment transactions.ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU removed step two of thegoodwill impairment test. The Company elected to early adopt this ASU in the third quarter of 2017. Adoption had no impact on the Company's consolidatedfinancial position, results of operations or cash flows.ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable DebtSecurities. The amendments in this ASU required certain premiums on callable debt securities to be amortized to the earliest call date. The amortizationperiod for callable debt securities purchased at a discount were not impacted. The Company early-adopted this ASU with no material impact on theCompany's consolidated financial position, results of operations or cash flows.ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This ASU eliminated therequirement to separately measure and report hedge ineffectiveness after initial qualification. For qualifying cash flow and net investment hedges, the entirechange in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in OCI, and amounts deferred in AOCI arereclassified to earnings in the same101Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings. The new guidance alsopermits a qualitative effectiveness assessment for certain hedges instead of a quantitative test, such as a regression analysis, if the company can reasonablysupport an expectation of high effectiveness throughout the term of the hedge. The ASU allows for more hedging strategies to be eligible for hedgeaccounting. From a disclosure standpoint, to help users of the financial statements better understand the effects of hedge accounting, the guidance requiresrevised tabular disclosures that focus on the effect of hedge accounting by income statement line, and eliminates the requirement to disclose hedgeineffectiveness because this amount is no longer separately measured. The adoption of this ASU had no impact on the Company's consolidated financialposition, results of operations or cash flows.Recent Accounting Pronouncements Not Yet AdoptedIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which will supersede the revenue recognitionrequirements in Topic 605, Revenue Recognition, and most industry-specific revenue recognition guidance throughout the Accounting StandardsCodification. The amendments in this update affect any entity that either enters into contracts with customers to transfer goods or services or enters intocontracts for the transfer of non-financial assets unless those contracts, including leases and insurance contracts, are within the scope of other standards. Theamendments establish a core principle requiring the recognition of revenue to depict the transfer of goods or services to customers in an amount reflecting theconsideration to which the entity expects to be entitled in exchange for such goods or services. The amendments also require expanded disclosuresconcerning the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. Financial instruments and leasecontracts are generally outside the scope of the ASU as are revenues that are in the scope of ASC 860 "Transfers and Servicing", ASC 460 "Guarantees" andASC 815 "Derivatives and Hedging". The FASB has issued subsequent ASUs to clarify certain aspects of ASU 2014-09, without changing the core principleof the guidance and to defer the effective date of ASU 2014-09 to annual periods and interim periods within fiscal years beginning after December 15, 2017.Substantially all of the Company's revenues have historically been generated from activities that are outside the scope of the ASU. Service charges on depositaccounts, which totaled approximately $13 million for the year ended December 31, 2017 is the most significant category of revenue identified as within thescope of the ASU; however, management does not expect the amount and timing of recognition of such revenue to be impacted by adoption. The Companywill apply this ASU for the first quarter of 2018 to contracts not completed on the date of adoption using the modified retrospective method. The Companydoes not expect adoption to have a significant impact on its financial condition, results of operations or cash flows and therefore does not expect to recordany cumulative effect of initial application. Adoption of the ASU will result in some expanded disclosure about revenue from contracts with customers.In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities. The amendments in the ASU that are expected to be applicable to the Company include provisions to: 1) eliminate theavailable for sale classification for equity securities and require investments in equity securities (except those accounted for under the equity method ofaccounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, providedthat equity investments that do not have readily determinable fair values may be re-measured at fair value upon occurrence of an observable price change orrecognition of impairment, 2) eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is requiredto be disclosed for financial instruments measured at amortized cost on the balance sheet, and 3) require public business entities to use the exit price notionwhen measuring the fair value of financial instruments for disclosure purposes. The amendments also clarify that an entity should evaluate the need for avaluation allowance on a deferred tax asset related to available for sale securities in combination with the entity's other deferred tax assets, which isconsistent with the Company's current practice. This ASU will be adopted by the Company for the first quarter of 2018 by means of a cumulative-effectadjustment to the balance sheet, except for amendments related to equity securities without readily determinable fair values, which will be appliedprospectively. Equity investments that will no longer be reported as available for sale and for which fair value changes will be recognized in earnings afteradoption totaled $64 million and had unrealized gains of $3.6 million at December 31, 2017. The Company expects to record a cumulative effect adjustmentto reclassify unrealized gains on these equity securities, net of related income taxes, of $2.2 million from AOCI to retained earnings upon adoption. Adoptionof the ASU will impact the Company's disclosures about the fair values of financial instruments.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this ASU require a lessee to recognize in the statement offinancial position a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for lease terms longer than oneyear. Accounting applied by lessors is largely unchanged by this ASU. The amendments in this ASU are effective for the Company for interim and annualperiods in fiscal years beginning after102Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017December 15, 2018. Early adoption is permitted; however, the Company does not intend to early adopt this ASU. Lessees and lessors are required to applythe provisions of the ASU at the beginning of the earliest period presented using a modified retrospective approach. Management is in the process ofevaluating the impact of adoption of this ASU on its consolidated financial statements, processes and controls. The Company has acquired and implementedsoftware to facilitate calculation and reporting of the lease liability and right of use asset. Certain accounting policy decisions have been made including useof the incremental borrowing rate to determine the discount rate and assumptions around inclusion of renewals in lease terms. The most significant impact ofadoption is expected to be the recognition, as lessee, of new right-of-use assets and lease liabilities on the consolidated balance sheet for real estate leasescurrently classified as operating leases. At its November 29, 2017 meeting, the FASB proposed allowing entities the option of applying the provisions of theASU at the effective date without adjusting the comparative periods presented. The Company is monitoring these and other proposed modifications to therequirements of this ASU.In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326); Measurement of Credit Losses on FinancialInstruments. The ASU introduces new guidance which makes substantive changes to the accounting for credit losses. The ASU introduces the CECL modelwhich applies to financial assets subject to credit losses and measured at amortized cost, as well as certain off-balance sheet credit exposures. This includesloans, loan commitments, standby letters of credit, net investments in leases recognized by a lessor and HTM debt securities. The CECL model requires anentity to estimate credit losses expected over the life of an exposure, considering information about historical events, current conditions and reasonable andsupportable forecasts, and is generally expected to result in earlier recognition of credit losses. The ASU also modifies certain provisions of the current OTTImodel for AFS debt securities. Credit losses on AFS debt securities will be limited to the difference between the security's amortized cost basis and its fairvalue, and be recognized through an allowance for credit losses rather than as a direct reduction in amortized cost basis. The ASU also provides for asimplified accounting model for purchased financial assets with more than insignificant credit deterioration since their origination. The ASU requiresexpanded disclosures including, but not limited to (i) information about the methods and assumptions used to estimate expected credit losses, includingchanges in the factors that influenced management's estimate and the reasons for those changes, (ii) for financing receivables and net investment in leasesmeasured at amortized cost, further disaggregation of information about the credit quality of those assets and (iii) a rollforward of the allowance for creditlosses for AFS and HTM securities. The amendments in this ASU are effective for the Company for interim and annual periods in fiscal years beginning afterDecember 15, 2019. Early adoption is permitted, however, the Company does not intend to early adopt this ASU. Management is in the process of evaluatingthe impact of adoption of this ASU on its consolidated financial statements, processes and controls and is not currently able to reasonably estimate the impactof adoption on the Company's consolidated financial position, results of operations or cash flows; however, adoption is likely to lead to significant changesin accounting policies related to, and the methods employed in estimating, the ALLL. It is possible that the impact will be material to the Company'sconsolidated financial position and results of operations. To date, the Company has completed a gap analysis, adopted a detailed implementation plan,established a formal governance structure for the project, selected and implemented credit loss models for key portfolio segments, chosen loss estimationmethodologies for key portfolio segments, and selected a software solution to serve as its CECL platform.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.The amendments in this ASU provide guidance on eight specific cash flow classification issues where there has been diversity in practice. The guidance inthe ASU that is expected to be most applicable to the Company requires: (1) cash payments for debt prepayment or extinguishment costs to be classified ascash outflows for financing activities, (2) proceeds from settlement of insurance claims to be classified on the basis of the nature of the loss and (3) cashproceeds from settlement of bank-owned life insurance policies to be classified as cash flows from investing activities. Cash payments for premiums on bank-owned life insurance may be classified as cash flows for investing activities, operating activities or a combination thereof. The amendments in this ASU willbe adopted for the first quarter of 2018 and will be applied retrospectively to each period presented. The provisions of this ASU are generally consistent withthe Company's current practice; therefore, adoption is not expected to significantly impact the Company's consolidated cash flows.In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain TaxEffects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from AOCI to retained earnings of stranded taxeffects in AOCI resulting from enactment of the Tax Cuts and Jobs Act (the “Act”). The amount of that reclassification is the difference between (1) theamount initially charged or credited directly to other comprehensive income at the previously enacted federal corporate income tax rate that remains in AOCIand (2) the amount that would have been charged or credited using the newly enacted federal corporate income tax rate, excluding the effect of any valuationallowance previously charged to income from continuing operations. The amendments in this ASU103Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017also require certain disclosures about stranded tax effects. The amendments in this ASU are effective for the Company for interim and annual periodsbeginning after December 15, 2018 with early adoption permitted. The Company intends to early adopt this ASU in the first quarter of 2018 with theamendments in this ASU being applied at the beginning of the period. Stranded tax effects resulting from the Act totaled approximately $11.7 million atDecember 31, 2017.Note 2 Earnings Per Common ShareThe computation of basic and diluted earnings per common share is presented below for the years ended December 31, 2017, 2016 and 2015 (inthousands, except share and per share data):20172016 2015Basic earnings per common share: Numerator: Net income$614,273 $225,741 $251,660Distributed and undistributed earnings allocated to participating securities(23,250) (8,760) (9,742)Income allocated to common stockholders for basic earnings per common share$591,023 $216,981 $241,918Denominator: Weighted average common shares outstanding106,574,448 104,097,182 103,187,530Less average unvested stock awards(1,104,035) (1,157,378) (1,128,416)Weighted average shares for basic earnings per common share105,470,413 102,939,804 102,059,114Basic earnings per common share$5.60 $2.11 $2.37Diluted earnings per common share: Numerator: Income allocated to common stockholders for basic earnings per common share$591,023 $216,981 $241,918Adjustment for earnings reallocated from participating securities(263) 62 54Income used in calculating diluted earnings per common share$590,760 $217,043 $241,972Denominator: Weighted average shares for basic earnings per common share105,470,413 102,939,804 102,059,114Dilutive effect of stock options387,074 716,366 913,036Weighted average shares for diluted earnings per common share105,857,487 103,656,170 102,972,150Diluted earnings per common share$5.58 $2.09 $2.35Included in participating securities above are unvested shares and 3,023,314 dividend equivalent rights outstanding at December 31, 2017 that wereissued in conjunction with the IPO of the Company's common stock. These dividend equivalent rights expire in 2021 and participate in dividends on a one-for-one basis.The following potentially dilutive securities were outstanding at December 31, 2017, 2016, and 2015 but excluded from the calculation of dilutedearnings per common share for the periods indicated because their inclusion would have been anti-dilutive: 2017 2016 2015Unvested shares and share units1,431,761 1,303,208 1,040,385Stock options and warrants1,850,279 1,850,279 1,851,376 104Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Note 3 Acquisition ActivityOn May 1, 2015, BankUnited completed the acquisition of SBF from CertusHoldings, Inc. in an asset purchase transaction for a cash purchase price of$278 million. SBF's primary business activity is to originate loans under programs administered by the SBA. The SBF acquisition has allowed BankUnited toexpand its small business lending platform on a national basis.BankUnited acquired the SBF loan portfolio, as well as substantially all of SBF's operating assets, and assumed certain of its operating liabilities. Theacquisition of SBF was determined to be a business combination and was accounted for using the acquisition method of accounting; accordingly, the assetsacquired and liabilities assumed were recorded at their estimated fair values at the acquisition date.The following table summarizes the estimated fair values of assets acquired and liabilities assumed (in thousands):Assets: Loans held for investment$173,809Loans held for sale82,143Servicing rights10,418Other assets4,397Total assets270,767Total liabilities3,620Estimated fair value of net assets acquired267,147Consideration issued277,553Excess of consideration issued over fair value of net assets acquired$10,406Note 4 Investment SecuritiesInvestment securities available for sale consisted of the following at December 31, 2017 and 2016 (in thousands): 2017Amortized Cost Gross Unrealized Fair Value Gains Losses U.S. Treasury securities$24,981 $— $(28) $24,953U.S. Government agency and sponsored enterprise residential MBS2,043,373 16,094 (1,440) 2,058,027U.S. Government agency and sponsored enterprise commercial MBS233,522 1,330 (344) 234,508Private label residential MBS and CMOs613,732 16,473 (1,958) 628,247Private label commercial MBS1,033,022 13,651 (258) 1,046,415Single family rental real estate-backed securities559,741 3,823 (858) 562,706Collateralized loan obligations720,429 3,252 — 723,681Non-mortgage asset-backed securities119,939 1,808 — 121,747Preferred stocks59,912 3,631 — 63,543State and municipal obligations640,511 17,606 (914) 657,203SBA securities534,534 16,208 (60) 550,682Other debt securities4,090 5,030 — 9,120 $6,587,786 $98,906 $(5,860) $6,680,832105Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2016Amortized Cost Gross Unrealized Fair Value Gains Losses U.S. Treasury securities$4,999 $6 $— $5,005U.S. Government agency and sponsored enterprise residential MBS1,513,028 15,922 (1,708) 1,527,242U.S. Government agency and sponsored enterprise commercial MBS126,754 670 (2,838) 124,586Private label residential MBS and CMOs334,167 42,939 (2,008) 375,098Private label commercial MBS1,180,386 9,623 (2,385) 1,187,624Single family rental real estate-backed securities858,339 4,748 (1,836) 861,251Collateralized loan obligations487,678 868 (1,250) 487,296Non-mortgage asset-backed securities187,660 2,002 (2,926) 186,736Preferred stocks76,180 12,027 (4) 88,203State and municipal obligations705,884 3,711 (11,049) 698,546SBA securities517,129 7,198 (421) 523,906Other debt securities3,999 4,092 — 8,091 $5,996,203 $103,806 $(26,425) $6,073,584Investment securities held to maturity at December 31, 2017 and 2016 consisted of one State of Israel bond with a carrying value of $10 million. Fairvalue approximated carrying value at December 31, 2017 and 2016. The bond matures in 2024.At December 31, 2017, contractual maturities of investment securities available for sale, adjusted for anticipated prepayments of mortgage-backed andother pass-through securities, were as follows (in thousands): Amortized Cost Fair ValueDue in one year or less$663,592 $674,291Due after one year through five years3,196,717 3,232,157Due after five years through ten years2,229,852 2,264,131Due after ten years437,713 446,710Preferred stocks with no stated maturity59,912 63,543$6,587,786 $6,680,832Based on the Company’s assumptions, the estimated weighted average life of the investment portfolio as of December 31, 2017 was 4.9 years. Theeffective duration of the investment portfolio as of December 31, 2017 was 1.7 years. The model results are based on assumptions that may differ from actualresults. The carrying value of securities pledged as collateral for FHLB advances, public deposits, interest rate swaps and to secure borrowing capacity at theFRB totaled $2.6 billion and $1.8 billion at December 31, 2017 and 2016, respectively.106Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following table provides information about gains and losses on investment securities available for sale for the years ended December 31, 2017, 2016and 2015 (in thousands):2017 2016 2015Proceeds from sale of investment securities available for sale$1,287,591 $1,127,983 $1,114,020 Gross realized gains$37,530 $14,924 $8,955Gross realized losses(4,064) — (475)Net realized gain33,466 14,924 8,480OTTI— (463) —Gain on investment securities available for sale, net$33,466 $14,461 $8,480During the year ended December 31, 2016, OTTI was recognized on two positions in one private label commercial MBS. These positions were sold at aloss before the end of 2016.The following tables present the aggregate fair value and the aggregate amount by which amortized cost exceeded fair value for investment securities inunrealized loss positions, aggregated by investment category and length of time that individual securities had been in continuous unrealized loss positions atDecember 31, 2017 and 2016 (in thousands): 2017Less than 12 Months 12 Months or Greater TotalFair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized LossesU.S. Treasury securities$24,953 $(28) $— $— $24,953 $(28)U.S. Government agency and sponsoredenterprise residential MBS471,120 (1,141) 13,028 (299) 484,148 (1,440)U.S. Government agency and sponsoredenterprise commercial MBS26,265 (344) — — 26,265 (344)Private label residential MBS and CMOs330,068 (1,858) 5,083 (100) 335,151 (1,958)Private label commercial MBS81,322 (258) — — 81,322 (258)Single family rental real estate-backedsecurities94,750 (858) — — 94,750 (858)State and municipal obligations30,715 (49) 60,982 (865) 91,697 (914)SBA securities21,300 (10) 15,427 (50) 36,727 (60)$1,080,493 $(4,546) $94,520 $(1,314) $1,175,013 $(5,860)107Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2016Less than 12 Months 12 Months or Greater TotalFair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized LossesU.S. Government agency and sponsoredenterprise residential MBS$191,463 $(628) $112,391 $(1,080) $303,854 $(1,708)U.S. Government agency and sponsoredenterprise commercial MBS89,437 (2,838) — — 89,437 (2,838)Private label residential MBS and CMOs122,142 (1,680) 8,074 (328) 130,216 (2,008)Private label commercial MBS169,535 (2,370) 24,985 (15) 194,520 (2,385)Single family rental real estate-backedsecurities139,867 (842) 176,057 (994) 315,924 (1,836)Collateralized loan obligations69,598 (402) 173,983 (848) 243,581 (1,250)Non-mortgage asset-backed securities139,477 (2,926) — — 139,477 (2,926)Preferred stocks10,087 (4) — — 10,087 (4)State and municipal obligations448,180 (11,049) — — 448,180 (11,049)SBA securities4,204 (13) 20,076 (408) 24,280 (421)$1,383,990 $(22,752) $515,566 $(3,673) $1,899,556 $(26,425)The Company monitors its investment securities available for sale for OTTI on an individual security basis. No securities were determined to be other-than-temporarily impaired during the years ended December 31, 2017 and 2015. As discussed above, OTTI was recognized on two positions in one privatelabel commercial MBS during the year ended December 31, 2016. The Company does not intend to sell securities that are in significant unrealized losspositions at December 31, 2017 and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortizedcost basis, which may be at maturity. At December 31, 2017, 71 securities were in unrealized loss positions. The amount of impairment related to 28 of thesesecurities was considered insignificant, totaling approximately $277 thousand and no further analysis with respect to these securities was considerednecessary. The basis for concluding that impairment of the remaining securities was not other-than-temporary is further described below:U.S. Treasury securitiesAt December 31, 2017, one U.S. Treasury security was in unrealized loss position. The amount of impairment is less than 1% of amortized cost. Thetimely payment of principal and interest on this security is explicitly guaranteed by the U.S. Government. Given the limited severity of impairment and theexpectation of timely payments of principal and interest, the impairment is considered to be temporary.U.S. Government agency and sponsored enterprise residential and commercial MBSAt December 31, 2017, eleven U.S. Government agency and sponsored enterprise residential MBS and three U.S. Government agency and sponsoredenterprise commercial MBS were in unrealized loss positions. For eight fixed rate securities, the amount of impairment for each of the securities was less than3% of amortized cost and was primarily attributable to an increase in medium and long-term market interest rates subsequent to the date of acquisition. Forthe remaining six variable rate securities, the amount of impairment was less than 1% of amortized cost. The timely payment of principal and interest on thesesecurities is explicitly or implicitly guaranteed by the U.S. Government. Given the limited severity of impairment and the expectation of timely payment ofprincipal and interest, the impairments were considered to be temporary.108Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Private label residential MBS and CMOsAt December 31, 2017, twelve private label residential MBS and CMOs were in unrealized loss positions, primarily as a result of an increase in mediumand long-term market interest rates subsequent to acquisition. The amount of impairment of each of the individual securities was 2% or less of amortized cost.These securities were assessed for OTTI using credit and prepayment behavioral models that incorporate CUSIP level constant default rates, voluntaryprepayment rates and loss severity and delinquency assumptions. The results of these assessments were not indicative of credit losses related to any of thesesecurities as of December 31, 2017. Given the limited severity of impairment and the expectation of timely recovery of outstanding principal, theimpairments were considered to be temporary.Private label commercial MBSAt December 31, 2017, three private label commercial MBS were in unrealized loss positions. The amount of impairment of each of the individualsecurities was less than 1% of amortized cost. These securities were assessed for OTTI using credit and prepayment behavioral models incorporatingassumptions consistent with the collateral characteristics of each security. The results of this analysis were not indicative of expected credit losses. Given thelimited severity of impairment and the expectation of timely recovery of outstanding principal, the impairments were considered to be temporary.Single family rental real estate-backed securitiesAt December 31, 2017, six single family rental real estate-backed securities were in unrealized loss positions. The unrealized losses were primarily due toincreases in market interest rates since the purchase of the securities. The amount of impairment of each of the individual securities was less than 2% ofamortized cost. Management's analysis of the credit characteristics, including loan-to-value and debt service coverage ratios, and levels of subordination foreach of the securities is not indicative of projected credit losses. Given the limited severity of impairment and the absence of projected credit losses, theimpairments were considered to be temporary.State and municipal obligationsAt December 31, 2017, six state and municipal obligations were in unrealized loss positions. The amount of impairment of each of the individualsecurities was less than 3% of amortized cost. All of the securities are rated investment grade by nationally recognized statistical ratings organizations.Management's evaluation of these securities for OTTI also encompassed the review of credit scores and analysis provided by a third party firm specializing inthe analysis and credit review of municipal securities. Given the absence of expected credit losses and management's ability and intent to hold the securitiesuntil recovery, the impairments were considered to be temporary.SBA SecuritiesAt December 31, 2017, one SBA security was in an unrealized loss position. The amount of impairment was less than 1% of amortized cost. This securitywas purchased at a premium and the impairment was attributable primarily to increased prepayment speeds. The timely payment of principal and interest onthis security is guaranteed by this U.S. Government agency. Given the limited severity of impairment and the expectation of timely payment of principal andinterest, the impairment was considered to be temporary.109Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Note 5 Loans and Allowance for Loan and Lease LossesAt December 31, 2017 and 2016, loans consisted of the following (dollars in thousands): 2017 Covered Loans Percent of TotalNon-Covered Loans ACI Non-ACI Total Residential and other consumer: 1-4 single family residential$4,116,814 $479,068 $26,837 $4,622,719 21.6%Home equity loans and lines of credit1,654 — 361 2,015 —%Other consumer loans20,512 — — 20,512 0.1%4,138,980 479,068 27,198 4,645,246 21.7%Commercial: Multi-family3,215,697 — — 3,215,697 15.0%Non-owner occupied commercial real estate4,485,276 — — 4,485,276 21.0%Construction and land310,999 — — 310,999 1.5%Owner occupied commercial real estate2,014,908 — — 2,014,908 9.4%Commercial and industrial4,145,785 — — 4,145,785 19.4%Commercial lending subsidiaries2,553,576 — — 2,553,576 12.0%16,726,241 — — 16,726,241 78.3%Total loans20,865,221 479,068 27,198 21,371,487 100.0%Premiums, discounts and deferred fees and costs, net48,165 — (3,148) 45,017 Loans including premiums, discounts and deferred fees andcosts20,913,386 479,068 24,050 21,416,504 Allowance for loan and lease losses(144,537) — (258) (144,795) Loans, net$20,768,849 $479,068 $23,792 $21,271,709 110Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2016 Covered Loans Percent of TotalNon-Covered Loans ACI Non-ACI Total Residential and other consumer: 1-4 single family residential$3,422,425 $532,348 $36,675 $3,991,448 20.6%Home equity loans and lines of credit1,120 3,894 47,629 52,643 0.3%Other consumer loans24,365 — — 24,365 0.1%3,447,910 536,242 84,304 4,068,456 21.0%Commercial: Multi-family3,824,973 — — 3,824,973 19.8%Non-owner occupied commercial real estate3,739,235 — — 3,739,235 19.3%Construction and land311,436 — — 311,436 1.6%Owner occupied commercial real estate1,736,858 — — 1,736,858 9.0%Commercial and industrial3,391,614 — — 3,391,614 17.5%Commercial lending subsidiaries2,280,685 — — 2,280,685 11.8%15,284,801 — — 15,284,801 79.0%Total loans18,732,711 536,242 84,304 19,353,257 100.0%Premiums, discounts and deferred fees and costs, net48,641 — (6,504) 42,137 Loans including premiums, discounts and deferred fees andcosts18,781,352 536,242 77,800 19,395,394 Allowance for loan and lease losses(150,853) — (2,100) (152,953) Loans, net$18,630,499 $536,242 $75,700 $19,242,441 Included in non-covered loans above are $34 million and $47 million at December 31, 2017 and 2016, respectively, of ACI commercial loans acquiredin the FSB Acquisition.Through two subsidiaries, the Bank provides commercial and municipal equipment and franchise financing utilizing both loan and lease structures. AtDecember 31, 2017 and 2016, the commercial lending subsidiaries portfolio included a net investment in direct financing leases of $738 million and $643million, respectively.The following table presents the components of the investment in direct financing leases as of December 31, 2017 and 2016 (in thousands): 2017 2016Total minimum lease payments to be received$792,064 $689,631Estimated unguaranteed residual value of leased assets17,872 3,704Gross investment in direct financing leases809,936 693,335Unearned income(76,900) (55,891)Initial direct costs5,184 5,287 $738,220 $642,731111Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017As of December 31, 2017, future minimum lease payments to be received under direct financing leases were as follows (in thousands):Years Ending December 31: 2018$189,0172019158,8462020121,930202174,536202249,781Thereafter197,954 $792,064During both of the years ended December 31, 2017 and 2016, the Company purchased 1-4 single family residential loans totaling $1.3 billion.At December 31, 2017, the Company had pledged real estate loans with UPB of approximately $10.5 billion and recorded investment of approximately$10.0 billion as security for FHLB advances.At December 31, 2017 and 2016, the UPB of ACI loans was $1.1 billion and $1.5 billion, respectively. The accretable yield on ACI loans represents theamount by which undiscounted expected future cash flows exceed recorded investment. Changes in the accretable yield on ACI loans for the years endedDecember 31, 2017, 2016, and 2015 were as follows (in thousands):Balance at December 31, 2014$1,005,312Reclassifications from non-accretable difference192,291Accretion(295,038)Balance at December 31, 2015902,565Reclassifications from non-accretable difference76,751Accretion(303,931)Balance at December 31, 2016675,385Reclassifications from non-accretable difference81,501Accretion(301,827)Balance at December 31, 2017$455,059Reclassifications from non-accretable difference in the table above for the year ended December 31, 2017 included $16.3 million of remaining accretableyield included in the determination of the recorded investment in the pool of ACI home equity loans and lines of credit, which was sold in its entirety in thefourth quarter of 2017.112Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Covered loan salesDuring the years ended December 31, 2017, 2016 and 2015, the Company sold covered residential loans to third parties on a non-recourse basis. Thefollowing table summarizes the impact of these transactions (in thousands): 2017 2016 2015UPB of loans sold$203,970 $241,348 $249,038 Cash proceeds, net of transaction costs$169,828 $171,367 $207,425Recorded investment in loans sold152,422 185,837 172,496Gain (loss) on sale of covered loans, net$17,406 $(14,470) $34,929 Gain (loss) on FDIC indemnification, net$(1,523) $11,615 $(28,051) Allowance for loan and lease losses Activity in the ALLL for the years ended December 31, 2017, 2016, and 2015 is summarized as follows (in thousands):2017 Residential andOther Consumer Commercial TotalBeginning balance$11,503 $141,450 $152,953Provision for (recovery of) loan losses: Covered loans1,418 (60) 1,358Non-covered loans1,034 66,355 67,389Total provision2,452 66,295 68,747Charge-offs: Covered loans(3,327) — (3,327)Non-covered loans(1) (77,865) (77,866)Total charge-offs(3,328) (77,865) (81,193)Recoveries: Covered loans67 60 127Non-covered loans26 4,135 4,161Total recoveries93 4,195 4,288Ending balance$10,720 $134,075 $144,795113Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2016 Residential andOther Consumer Commercial TotalBeginning balance$16,211 $109,617 $125,828Provision for (recovery of) loan losses: Covered loans(1,632) (49) (1,681)Non-covered loans(1,814) 54,406 52,592Total provision(3,446) 54,357 50,911Charge-offs: Covered loans(1,216) — (1,216)Non-covered loans(152) (25,742) (25,894)Total charge-offs(1,368) (25,742) (27,110)Recoveries: Covered loans80 49 129Non-covered loans26 3,169 3,195Total recoveries106 3,218 3,324Ending balance$11,503 $141,450 $152,9532015 Residential andOther Consumer Commercial TotalBeginning balance$11,515 $84,027 $95,542Provision for (recovery of) loan losses: Covered loans2,317 (66) 2,251Non-covered loans3,988 38,072 42,060Total provision6,305 38,006 44,311Charge-offs: Covered loans(1,680) — (1,680)Non-covered loans— (13,719) (13,719)Total charge-offs(1,680) (13,719) (15,399)Recoveries: Covered loans39 66 105Non-covered loans32 1,237 1,269Total recoveries71 1,303 1,374Ending balance$16,211 $109,617 $125,828114Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following table presents information about the balance of the ALLL and related loans as of December 31, 2017 and 2016 (in thousands): 2017 2016Residential andOther Consumer Commercial Total Residential andOtherConsumer Commercial TotalAllowance for loan and lease losses: Ending balance$10,720 $134,075 $144,795 $11,503 $141,450 $152,953Covered loans: Ending balance$258 $— $258 $2,100 $— $2,100Ending balance: non-ACI loans individually evaluated forimpairment$118 $— $118 $529 $— $529Ending balance: non-ACI loans collectively evaluated forimpairment$140 $— $140 $1,571 $— $1,571Ending balance: ACI loans$— $— $— $— $— $—Non-covered loans: Ending balance$10,462 $134,075 $144,537 $9,403 $141,450 $150,853Ending balance: loans individually evaluated forimpairment$63 $18,776 $18,839 $12 $19,229 $19,241Ending balance: loans collectively evaluated forimpairment$10,399 $115,299 $125,698 $9,391 $122,221 $131,612Ending balance: ACI loans$— $— $— $— $— $—Loans: 0 Covered loans: Ending balance$503,118 $— $503,118 $614,042 $— $614,042Ending balance: non-ACI loans individually evaluated forimpairment$2,221 $— $2,221 $12,396 $— $12,396Ending balance: non-ACI loans collectively evaluated forimpairment$21,829 $— $21,829 $65,404 $— $65,404Ending balance: ACI loans$479,068 $— $479,068 $536,242 $— $536,242Non-covered loans: Ending balance$4,196,080 $16,717,306 $20,913,386 $3,495,775 $15,285,577 $18,781,352Ending balance: loans, other than ACI loans, individuallyevaluated for impairment$1,234 $173,706 $174,940 $561 $176,932 $177,493Ending balance: loans, other than ACI loans, collectivelyevaluated for impairment$4,194,846 $16,509,824 $20,704,670 $3,495,207 $15,061,707 $18,556,914Ending balance: ACI loans$— $33,776 $33,776 $7 $46,938 $46,945115Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Credit quality information The table below presents information about loans or ACI pools identified as impaired as of December 31, 2017 and 2016 (in thousands): 2017 2016 RecordedInvestment UPB RelatedSpecificAllowance RecordedInvestment UPB RelatedSpecificAllowanceNon-covered loans: With no specific allowance recorded: 1-4 single family residential$120 $122 $— $— $— $—Non-owner occupied commercial real estate10,922 10,838 — 510 512 —Construction and land1,175 1,175 — 1,238 1,238 —Owner occupied commercial real estate22,002 22,025 — 16,834 16,894 —Commercial and industrial Taxi medallion loans13,560 13,559 — 18,107 18,107 —Other commercial and industrial345 374 — 6,172 6,172 —Commercial lending subsidiaries— — — 10,620 10,510 —With a specific allowance recorded: 1-4 single family residential1,114 1,090 63 561 546 12Multi-family23,173 23,175 1,732 — — —Owner occupied commercial real estate3,075 3,079 2,960 491 513 263Commercial and industrial Taxi medallion loans92,507 92,508 12,214 73,131 73,147 5,948Other commercial and industrial3,626 3,624 1,540 29,452 29,463 9,168Commercial lending subsidiaries3,321 3,296 330 21,712 21,605 3,850Total: Residential and other consumer$1,234 $1,212 $63 $561 $546 $12Commercial173,706 173,653 18,776 178,267 178,161 19,229 $174,940 $174,865 $18,839 $178,828 $178,707 $19,241Covered loans: Non-ACI loans: With no specific allowance recorded: 1-4 single family residential$1,061 $1,203 $— $1,169 $1,391 $—Home equity loans and lines of credit— — — 2,255 2,286 —With a specific allowance recorded: 1-4 single family residential1,160 1,314 118 1,272 1,514 181Home equity loans and lines of credit— — — 7,700 7,804 348 $2,221 $2,517 $118 $12,396 $12,995 $529Non-covered impaired loans include commercial real estate ACI loans modified in TDRs with a carrying value of $1.3 million as of December 31, 2016.Interest income recognized on impaired loans and pools for the year ended December 31, 2017 was approximately $9.6 million. The interest incomerecognized on impaired loans for the years ended December 31, 2016 and 2015 was not material.116Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following table presents the average recorded investment in impaired loans for the years ended December 31, 2017, 2016 and 2015 (in thousands): 2017 2016 2015Non-CoveredLoans Covered Non-ACILoans Non-CoveredLoans Covered Non-ACILoans Non-CoveredLoans Covered Non-ACILoansResidential and other consumer: 1-4 single family residential$868 $2,345 $301 $3,067 $82 $3,655Home equity loans and lines of credit— 8,403 — 9,225 4,830868 $10,748 301 $12,292 82 $8,485Commercial: Multi-family4,259 — 291 Non-owner occupied commercial real estate5,537 710 1,001 Construction and land2,789 797 — Owner occupied commercial real estate19,882 14,645 5,117 Commercial and industrial Taxi medallion loans108,977 45,012 — Other commercial and industrial38,275 40,443 35,976 Commercial lending subsidiaries22,865 15,052 14,835 202,584 116,659 57,220 $203,452 $116,960 $57,302 In addition to the above, a pool of ACI home equity loans and lines of credit was impaired during 2017. All of the loans from this pool were sold in thefourth quarter of 2017. The average balance of impaired ACI home equity loans and lines of credit for the year ended December 31, 2017 was $3.9 million.117Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following table presents the recorded investment in loans on non-accrual status as of December 31, 2017 and 2016 (in thousands): 2017 2016 Non-CoveredLoans CoveredNon-ACI Loans Non-CoveredLoans CoveredNon-ACI LoansResidential and other consumer: 1-4 single family residential$9,705 $1,010 $566 $918Home equity loans and lines of credit— 331 — 2,283Other consumer loans821 — 2 —10,526 $1,341 568 $3,201Commercial: Non-owner occupied commercial real estate12,716 559 Construction and land1,175 1,238 Owner occupied commercial real estate29,020 19,439 Commercial and industrial Taxi medallion loans106,067 60,660 Other commercial and industrial7,049 16,036 Commercial lending subsidiaries3,512 32,645 159,539 130,577 $170,065 $131,145 Non-covered loans contractually delinquent by 90 days or more and still accruing totaled $1.9 million and $1.6 million at December 31, 2017 and 2016,respectively. The amount of additional interest income that would have been recognized on non-accrual loans had they performed in accordance with theircontractual terms was approximately $4.1 million and $3.5 million for the years ended December 31, 2017 and 2016, respectively.Management considers delinquency status to be the most meaningful indicator of the credit quality of 1-4 single family residential, home equity andconsumer loans. Delinquency statistics are updated at least monthly. See "Aging of loans" below for more information on the delinquency status of loans.Original LTV and original FICO score are also important indicators of credit quality for the non-covered 1-4 single family residential portfolio. Internal risk ratings are considered the most meaningful indicator of credit quality for commercial loans. Internal risk ratings are a key factor inidentifying loans that are individually evaluated for impairment and impact management’s estimates of loss factors used in determining the amount of theALLL. Internal risk ratings are updated on a continuous basis. Generally, relationships with balances in excess of defined thresholds, ranging from $1 millionto $3 million, are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. Loans exhibitingpotential credit weaknesses that deserve management’s close attention and that if left uncorrected may result in deterioration of the repayment capacity of theborrower are categorized as special mention. Loans with well-defined credit weaknesses, including payment defaults, declining collateral values, frequentoverdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow, project cost overruns, unreasonable construction delays, past due realestate 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 highlyquestionable or improbable, but because of certain reasonably specific pending factors has not been charged off, will be assigned an internal risk rating ofdoubtful. 118Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following tables summarize key indicators of credit quality for the Company's loans as of December 31, 2017 and 2016. Amounts include premiums,discounts and deferred fees and costs (in thousands): 1-4 Single Family Residential credit exposure for non-covered loans, based on original LTV and FICO score: 2017 FICOLTV 720 or less 721 - 740 741 - 760 761 orgreater Total60% or less $92,316 $117,319 $185,193 $815,828 $1,210,65660% - 70% 101,158 103,506 147,592 590,693 942,94970% - 80% 149,958 183,376 324,887 1,139,969 1,798,190More than 80% 33,776 32,563 30,404 125,415 222,158 $377,208 $436,764 $688,076 $2,671,905 $4,173,953 2016 FICOLTV 720 or less 721 - 740 741 - 760 761 orgreater Total60% or less $87,035 $113,401 $163,668 $751,291 $1,115,39560% - 70% 80,694 94,592 124,180 523,970 823,43670% - 80% 110,509 148,211 276,425 907,450 1,442,595More than 80% 22,115 9,058 15,470 42,280 88,923 $300,353 $365,262 $579,743 $2,224,991 $3,470,349119Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Commercial credit exposure, based on internal risk rating: 2017 Commercial and Industrial Multi-Family Non-OwnerOccupiedCommercialReal Estate Constructionand Land OwnerOccupiedCommercialReal Estate TaxiMedallionLoans OtherCommercialand Industrial CommercialLendingSubsidiaries TotalPass$3,124,819 $4,360,827 $305,043 $1,954,464 $— $3,965,241 $2,478,998 $16,189,392Special mention34,837 33,094 — 22,161 — 37,591 55,551 183,234Substandard59,297 80,880 5,441 33,145 104,682 27,010 27,950 338,405Doubtful— — — 2,972 1,385 1,918 — 6,275 $3,218,953 $4,474,801 $310,484 $2,012,742 $106,067 $4,031,760 $2,562,499 $16,717,306 2016 Commercial and Industrial Multi-Family Non-OwnerOccupiedCommercialReal Estate Constructionand Land OwnerOccupiedCommercialReal Estate TaxiMedallionLoans OtherCommercialand Industrial CommercialLendingSubsidiaries TotalPass$3,811,822 $3,694,931 $309,675 $1,672,199 $40,460 $3,112,590 $2,255,444 $14,897,121Special mention12,000 7,942 — 33,274 — 19,009 — 72,225Substandard5,852 28,935 1,238 30,377 138,035 68,704 31,572 304,713Doubtful— — — — 178 8,162 3,178 11,518 $3,829,674 $3,731,808$310,913 $1,735,850$178,673$3,208,465 $2,290,194$15,285,577120Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Aging of loans: The following table presents an aging of loans as of December 31, 2017 and 2016. Amounts include premiums, discounts and deferred fees and costs (inthousands): 2017 2016 Current 30 - 59Days PastDue 60 - 89Days PastDue 90 Days orMore PastDue Total Current 30 - 59Days PastDue 60 - 89Days PastDue 90 Days orMore PastDue TotalNon-covered loans: 1-4 single familyresidential$4,145,079 $17,224 $6,094 $5,556 $4,173,953 $3,457,606 $10,355 $325 $2,063 $3,470,349Home equity loansand lines of credit1,633 21 — — 1,654 1,120 — — — 1,120Other consumerloans19,958 15 — 500 20,473 24,306 — — — 24,306Multi-family3,218,953 — — — 3,218,953 3,829,674 — — — 3,829,674Non-owneroccupiedcommercial realestate4,464,967 7,549 — 2,285 4,474,801 3,730,470 754 — 584 3,731,808Construction andland309,309 — — 1,175 310,484 309,675 — — 1,238 310,913Owner occupiedcommercial realestate2,004,397 1,292 499 6,554 2,012,742 1,726,826 1,557 797 6,670 1,735,850Commercial andindustrial Taxi medallionloans88,394 6,048 3,333 8,292 106,067 137,856 7,037 4,563 29,217 178,673Other commercialand industrial4,025,784 4,291 291 1,394 4,031,760 3,198,008 2,515 954 6,988 3,208,465Commercial lendingsubsidiaries2,561,647 852 — — 2,562,499 2,284,435 12 3,247 2,500 2,290,194 $20,840,121 $37,292 $10,217 $25,756 $20,913,386 $18,699,976 $22,230 $9,886 $49,260 $18,781,352Covered loans: Non-ACI loans: 1-4 single familyresidential$21,076 $1,603 $— $1,010 $23,689 $29,406 $481 $— $918 $30,805Home equityloans and linesof credit30 — — 331 361 43,129 1,255 534 2,077 46,995 $21,106 $1,603 $— $1,341 $24,050 $72,535 $1,736 $534 $2,995 $77,800ACI loans: 1-4 single familyresidential$448,125 $10,388 $2,719 $17,836 $479,068 $500,272 $13,524 $2,990 $15,562 $532,348Home equityloans and linesof credit— — — — — 3,460 148 23 263 3,894 $448,125 $10,388 $2,719 $17,836 $479,068 $503,732 $13,672 $3,013 $15,825 $536,2421-4 single family residential and home equity ACI loans that are contractually delinquent by more than 90 days and accounted for in pools that are onaccrual status because discount continues to be accreted totaled $18 million and $16 million at December 31, 2017 and 2016, respectively.121Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Loan Concentrations:At December 31, 2017 and 2016, 1-4 single family residential loans outstanding were collateralized by property located in the following states (dollars inthousands):2017 Percent of Total Non-CoveredLoans Covered Loans Total Non-CoveredLoans Total LoansCalifornia$1,094,058 $23,780 $1,117,838 26.2% 23.9%New York873,360 16,847 890,207 20.9% 19.0%Florida552,556 281,396 833,952 13.2% 17.8%Virginia181,912 22,290 204,202 4.4% 4.4%Others1,472,067 158,444 1,630,511 35.3% 34.9% $4,173,953 $502,757 $4,676,710 100.0% 100.0%2016 Percent of Total Non-CoveredLoans Covered Loans Total Non-CoveredLoans Total LoansCalifornia$904,107 $37,330 $941,437 26.1% 23.3%Florida487,294 300,198 787,492 14.0% 19.5%New York763,824 16,403 780,227 22.0% 19.3%Virginia152,113 30,818 182,931 4.4% 4.5%Others1,163,011 178,404 1,341,415 33.5% 33.4%$3,470,349 $563,153 $4,033,502 100.0% 100.0%No other state represented borrowers with more than 4.0% of 1-4 single family residential loans outstanding at December 31, 2017 or 2016. AtDecember 31, 2017, 43.4% and 36.4% of loans in the non-covered commercial portfolio were to borrowers in Florida and the New York tri-state area,respectively. At December 31, 2016, 43.1% and 39.2% of loans in the non-covered commercial portfolio were to borrowers in Florida and the New York tri-state area, respectively.Foreclosure of residential real estateThe carrying amount of foreclosed residential real estate properties included in "Other assets" in the accompanying consolidated balance sheets, all ofwhich were covered, totaled $3 million and $5 million at December 31, 2017 and 2016, respectively. The recorded investment in residential mortgage loansin the process of foreclosure totaled $11 million and $8 million at December 31, 2017 and 2016, respectively, substantially all of which were covered loans.122Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Troubled debt restructuringsThe following tables summarize loans that were modified in TDRs during the years ended December 31, 2017, 2016 and 2015, as well as loans modifiedduring the years ended December 31, 2017, 2016 and 2015 that experienced payment defaults during the periods (dollars in thousands): 2017 Loans Modified in TDRs During the Period TDRs Experiencing Payment Defaults During the Period Number ofTDRs RecordedInvestment Number ofTDRs RecordedInvestmentNon-covered loans: 1-4 single family residential7 $676 5 $595Multi-family2 23,173 — —Owner occupied commercial real estate3 4,685 — —Commercial and industrial Taxi medallion loans110 48,526 8 2,725Other commercial and industrial2 1,378 — — 124 $78,438 13 $3,320 2016 Loans Modified in TDRs During the Period TDRs Experiencing Payment Defaults During the Period Number ofTDRs RecordedInvestment Number ofTDRs RecordedInvestmentNon-covered loans: 1-4 single family residential2 $326 — $—Owner occupied commercial real estate3 5,117 1 491Commercial and industrial Taxi medallion loans74 64,854 15 8,657Other commercial and industrial8 23,247 2 1,482Commercial lending subsidiaries6 6,735 1 2,500 93 $100,279 19 $13,130Covered loans: Non-ACI loans: Home equity loans and lines of credit17 $2,016 1 $370ACI loans: Owner occupied commercial real estate1 $825 — $—123Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2015 Loans Modified in TDRs During the Period TDRs Experiencing Payment Defaults During the Period Number ofTDRs RecordedInvestment Number ofTDRs RecordedInvestmentNon-covered loans: Non-owner occupied commercial real estate1 $548 — $—Commercial and industrial Taxi medallion loans2 1,260 1 627 3 $1,808 1 $627Covered loans: Non-ACI loans: 1-4 single family residential2 $239 — $—Home equity loans and lines of credit28 6,208 7 1,231 30 $6,447 7 $1,231ACI loans: Owner occupied commercial real estate1 $500 — $—Modifications during the years ended December 31, 2017, 2016 and 2015 included interest rate reductions, restructuring of the amount and timing ofrequired periodic payments, extensions of maturity and covenant waivers. Included in TDRs are residential loans to borrowers who have not reaffirmed theirdebt discharged in Chapter 7 bankruptcy. The total amount of such loans is not material. Modified ACI loans accounted for in pools are not consideredTDRs, are not separated from the pools and are not classified as impaired loans.Note 6 FDIC Indemnification AssetWhen the Company recognizes gains or losses related to covered assets in its consolidated financial statements, changes in the estimated amountrecoverable from the FDIC under the Loss Sharing Agreements with respect to those gains or losses are also reflected in the consolidated financial statements.Covered loans may be resolved through prepayment, short sale of the underlying collateral, foreclosure, sale of the loans or charge-off. For loans resolvedthrough prepayment, short sale or foreclosure, the difference between consideration received in satisfaction of the loans and the carrying value of the loans isrecognized in the consolidated statement of income line item “Income from resolution of covered assets, net.” Losses from the resolution of covered loansincrease the amount recoverable from the FDIC under the Loss Sharing Agreements. Gains from the resolution of covered loans reduce the amountrecoverable from the FDIC under the Loss Sharing Agreements. Similarly, differences in proceeds received on the sale of covered OREO and covered loansand their carrying amounts result in gains or losses and reduce or increase the amount recoverable from the FDIC under the Loss Sharing Agreements.Increases in valuation allowances or impairment charges related to covered assets also increase the amount estimated to be recoverable from the FDIC. Theseadditions to or reductions in amounts recoverable from the FDIC related to transactions in the covered assets are recorded in the consolidated statement ofincome line item “Net loss on FDIC indemnification” and reflected as corresponding increases or decreases in the FDIC indemnification asset.In addition, through June 30, 2017, recoveries of previously indemnified losses on assets that were formerly covered under the Commercial Shared-LossAgreement resulted in reimbursements due to the FDIC. These transactions are included in the tables below. Amounts payable to the FDIC resulting fromthese transactions are recognized in other liabilities in the accompanying consolidated balance sheet at December 31, 2016.124Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following tables summarize the components of the gains and losses associated with covered assets, along with the related additions to or reductionsin the amounts recoverable from the FDIC under the Loss Sharing Agreements, as reflected in the consolidated statements of income for the years endedDecember 31, 2017, 2016 and 2015 (in thousands):2017TransactionIncome (Loss) Net Loss on FDICIndemnification Net Impacton Pre-taxEarningsProvision for losses on covered loans$(1,358) $1,039 $(319)Income from resolution of covered assets, net27,450 (21,912) 5,538Gain on sale of covered loans17,406 (1,514) 15,892Loss on covered OREO(203) 167 (36) $43,295 $(22,220) $21,075 2016 TransactionIncome (Loss) Net Loss on FDICIndemnification Net Impacton Pre-taxEarningsRecovery of losses on covered loans$1,681 $(1,472) $209Income from resolution of covered assets, net36,155 (28,946) 7,209Loss on sale of covered loans(14,470) 11,615 (2,855)Loss on covered OREO(1,301) 1,044 (257) $22,065 $(17,759) $4,306 2015 TransactionIncome (Loss) Net Loss on FDICIndemnification Net Impacton Pre-taxEarningsProvision for losses on covered loans$(2,251) $1,826 $(425)Income from resolution of covered assets, net50,658 (40,395) 10,263Gain on sale of covered loans34,929 (28,051) 6,878Loss on covered OREO(1,014) 678 (336) $82,322 $(65,942) $16,380125Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Changes in the FDIC indemnification asset, and in the liability to the FDIC for recoveries related to assets previously covered under the CommercialShared-Loss Agreement, for the years ended December 31, 2017, 2016 and 2015, were as follows (in thousands): Balance at December 31, 2014$974,335Amortization(109,411)Reduction for claims filed(59,139)Net loss on FDIC indemnification(65,942)Balance at December 31, 2015739,843Amortization(160,091)Reduction for claims filed(46,083)Net loss on FDIC indemnification(17,759)Balance at December 31, 2016515,910Amortization(176,466)Reduction for claims filed(21,589)Net loss on FDIC indemnification(22,220)Balance at December 31, 2017$295,635The balances at December 31, 2017 and 2016 are reflected in the consolidated balance sheets as follows (in thousands): 2017 2016FDIC indemnification asset$295,635 $515,933Other liabilities— (23) $295,635 $515,910Note 7 Equipment Under Operating LeaseEquipment under operating lease consists primarily of railcars and other transportation equipment. The components of equipment under operating leaseas of December 31, 2017 and 2016 are summarized as follows (in thousands): 2017 2016Equipment under operating lease$674,434 $589,716Less: accumulated depreciation(74,932) (49,802)Equipment under operating lease, net$599,502 $539,914The Company recognized impairment of $4.1 million during the year ended December 31, 2016, related to a group of tank cars impacted by new safetyregulations. This impairment charge is included in "Depreciation of equipment under operating lease" in the accompanying consolidated statements ofincome. No impairment was recognized during the years ended December 31, 2017 and 2015.126Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017At December 31, 2017, scheduled minimum rental payments under operating leases were as follows (in thousands)Years Ending December 31: 2018$50,173201946,547202040,956202131,425202225,185Thereafter through 203258,304 $252,590Note 8 Premises and Equipment and Lease CommitmentsPremises and equipment are included in other assets in the accompanying consolidated balance sheets and are summarized as follows as of December 31,2017 and 2016 (in thousands): 2017 2016Buildings and improvements$18,793 $22,470Leasehold improvements70,298 68,403Furniture, fixtures and equipment35,675 36,094Computer equipment21,078 18,559Software and software licensing rights42,908 38,002Aircraft and automobiles11,744 11,857 200,496 195,385Less: accumulated depreciation(121,477) (104,268)Premises and equipment, net$79,019 $91,117Buildings and improvements includes $11 million related to property under capital lease at both December 31, 2017 and 2016.Depreciation and amortization expense related to premises and equipment, including amortization of assets recorded under capital leases, was $19.4million, $21.3 million and $22.9 million for the years ended December 31, 2017, 2016 and 2015, respectively.The Company leases branch and office facilities under operating leases, most of which contain renewal options under various terms. Total rent expenseunder operating leases for the years ended December 31, 2017, 2016 and 2015 was $27.5 million, $27.6 million, and $27.1 million, respectively.127Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017As of December 31, 2017, future minimum rentals under non-cancelable operating leases with initial or remaining terms in excess of one year were asfollows (in thousands):Years ending December 31: 2018$22,340201921,129202017,541202115,770202211,712Thereafter through 203448,183 $136,675Note 9 DepositsThe following table presents average balances and weighted average rates paid on deposits for the years ended December 31, 2017, 2016 and 2015(dollars in thousands): 2017 2016 2015 AverageBalance AverageRate Paid AverageBalance AverageRate Paid AverageBalance AverageRate PaidDemand deposits: Non-interest bearing$3,069,565 —% $2,968,192 —% $2,732,654 —%Interest bearing1,586,390 0.81% 1,382,717 0.60% 1,169,921 0.49%Money market9,364,498 0.85% 7,946,447 0.64% 6,313,340 0.57%Savings365,603 0.21% 415,205 0.23% 536,026 0.32%Time6,094,336 1.27% 5,326,630 1.12% 4,305,857 1.11% $20,480,392 0.83% $18,039,191 0.66% $15,057,798 0.61%Time deposit accounts with balances of $100,000 or more totaled approximately $4.1 billion and $3.9 billion at December 31, 2017 and 2016,respectively. Time deposit accounts with balances of $250,000 or more totaled $2.3 billion and $2.1 billion at December 31, 2017 and 2016, respectively.The following table presents maturities of time deposits as of December 31, 2017 (in thousands):Maturing in: 2018$5,228,6902019630,7192020345,8612021101,715202227,809Thereafter48 $6,334,842Included in deposits at December 31, 2017 are public funds deposits of $2.6 billion and brokered deposits of $2.4 billion. Investment securities availablefor sale with a carrying value of $1.2 billion were pledged as security for public funds deposits at December 31, 2017.128Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Interest expense on deposits for the years ended December 31, 2017, 2016 and 2015 was as follows (in thousands): 2017 2016 2015Interest bearing demand$12,873 $8,343 $5,782Money market79,645 50,802 36,005Savings752 972 1,739Time77,663 59,656 47,625 $170,933 $119,773 $91,151Note 10 BorrowingsThe following table presents information about outstanding FHLB advances as of December 31, 2017 (dollars in thousands): Range of Interest Rates Amount Minimum Maximum Weighted AverageRateMaturing in: 2018—One month or less$2,425,000 1.20% 1.42% 1.35%2018—Over one month2,121,000 1.25% 1.69% 1.43%2019100,000 1.46% 1.57% 1.52%2020125,000 1.67% 1.78% 1.73%Carrying value$4,771,000 The table above reflects contractual maturities of outstanding advances and does not incorporate the impact that interest rate swaps designated as cashflow hedges have on the duration of borrowings. The terms of the Company's security agreement with the FHLB require a specific assignment of collateralconsisting of qualifying first mortgage loans, commercial real estate loans, home equity lines of credit and mortgage-backed securities with unpaid principalamounts discounted at various stipulated percentages at least equal to 100% of outstanding FHLB advances. As of December 31, 2017, the Company hadpledged investment securities and real estate loans with an aggregate carrying amount of approximately $10.7 billion as collateral for advances from theFHLB.At December 31, 2017 and 2016 outstanding senior notes payable and other borrowings consisted of the following (dollars in thousands): 2017 2016Principal amount of 4.875% senior notes$400,000 $400,000Unamortized discount and debt issuance costs(6,275) (6,908) 393,725 393,092Capital lease obligations9,105 9,717 $402,830 $402,809The senior notes mature on November 17, 2025 with interest payable semiannually. The notes have an effective interest rate of 5.12%, afterconsideration of issuance discount and costs. The notes may be redeemed by the Company, in whole or in part, at any time prior to August 17, 2025 at thegreater of a) 100% of the principal balance or b) the sum of the present values of the remaining scheduled payments of principal and interest on the securitiesdiscounted to the redemption date at i) the rate on a United States Treasury security with a maturity comparable to the remaining maturity of the senior notesthat would be used to price new issues of corporate debt securities with a maturity comparable to the remaining maturity of the senior notes plus ii) 40 basispoints. The senior notes may be redeemed at any time after August 17, 2025 at 100% of principal plus accrued and unpaid interest.129Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017At December 31, 2017, BankUnited had available borrowing capacity at the FHLB of approximately $4.1 billion, unused borrowing capacity at the FRBof approximately $770 million and unused Federal funds lines of credit with other financial institutions totaling $70 million.Note 11 Income TaxesThe components of the provision (benefit) for income taxes for the years ended December 31, 2017, 2016 and 2015 were as follows (in thousands): 2017 2016 2015Current: Federal$(251,880) $51,806 $18,230State(15,733) 27,708 (2,468) (267,613) 79,514 15,762Deferred: Federal46,377 35,045 20,509State11,424 (4,856) 8,962 57,801 30,189 29,471 $(209,812) $109,703 $45,233A reconciliation of expected income tax expense at the statutory federal income tax rate of 35% to the Company’s effective income tax rate for the yearsended December 31, 2017, 2016 and 2015 follows (dollars in thousands): 2017 2016 2015 Amount Percent Amount Percent Amount PercentTax expense calculated at the statutory federalincome tax rate$141,561 35.00 % $117,405 35.00 % $103,912 35.00 %Increases (decreases) resulting from: Income not subject to tax(29,511) (7.30)% (23,215) (6.92)% (14,279) (4.81)%State income taxes, net of federal tax benefit19,332 4.78 % 15,894 4.74 % 12,889 4.34 %Uncertain tax positions - lapse of statute oflimitations(2,696) (0.66)% — — % (6,166) (2.08)%Discrete income tax benefit(327,945) (81.08)% — — % (49,323) (16.61)%Other, net(10,553) (2.61)% (381) (0.12)% (1,800) (0.60)% $(209,812) (51.87)% $109,703 32.70 % $45,233 15.24 %The discrete income tax benefit recognized in the year ended December 31, 2017 related to a matter that arose during an ongoing audit of the Company's2013 federal income tax return. During that audit, the Company asserted that U.S. federal income taxes paid in respect of certain income previously reportedby the Company on its 2012, 2013 and 2014 federal income tax returns related to the basis assigned to certain loans acquired in the FSB Acquisition shouldbe refunded to the Company, in light of guidance issued after the relevant returns had been filed (including Treasury Regulations finalized in October 2017clarifying and modifying the treatment of such acquired loans). The IRS issued a FAA in the fourth quarter of 2017 agreeing with the Company's position. Inlight of this communication, the Company concluded that it is more likely than not to realize this income tax benefit and recorded the benefit in the fourthquarter of 2017. Prior to receipt of the FAA, the Company had not taken a position reflecting this benefit on any original or amended income tax returns. Thediscrete income tax benefit recognized includes expected refunds of federal income tax of $295.0 million, as well as $8.7 million in estimated interest on thefederal refund and estimated refunds of $24.2 million from certain state and local taxing jurisdictions.The Company is continuing to evaluate whether it has claims in other state jurisdictions and whether it may have any claims for federal or state incometaxes relating to tax years prior to 2012. The Company has not reached any conclusion as to130Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017when or to what extent it may have any claims relating to such other state and local taxing jurisdictions or in respect of prior tax years.The discrete income tax benefit recognized in the year ended December 31, 2015 related to additional tax basis recognized with respect to certain assets.The additional tax basis results in increased taxable losses or reduced taxable income upon the final disposition of those assets.The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017, reducing the statutory corporate federal income tax rate from 35 percentto 21 percent, effective January 1, 2018. A tax benefit of $3.7 million, representing the impact of the rate change on deferred tax assets and liabilities existingat the date of enactment, was recognized in earnings during the quarter ended December 31, 2017 and is included in the "Other, net" line item in thereconciliation above.The components of deferred tax assets and liabilities at December 31, 2017 and 2016 were as follows (in thousands): 2017 2016Deferred tax assets: Excess of tax basis over carrying value of acquired loans$66,395 $130,004Allowance for loan and lease losses33,309 52,670Net operating loss and tax credit carryforwards15,892 11,641Other31,859 51,911Gross deferred tax assets147,455 246,226Deferred tax liabilities: Net unrealized gains on investment securities available for sale24,657 30,566Lease financing, due to differences in depreciation113,161 145,700Other13,468 7,020Gross deferred tax liabilities151,286 183,286Net deferred tax asset (liability)$(3,831) $62,940Based on the evaluation of available evidence, management has concluded that it is more likely than not that the existing deferred tax assets will berealized. The primary factors supporting this conclusion are the amount of taxable income available for carryback and the amount of future taxable incomethat will result from the scheduled reversal of existing deferred tax liabilities.At December 31, 2017, remaining carryforwards included federal net operating loss carryforwards in the amount of $10.0 million, expiring from 2029through 2032, Florida net operating loss carryforwards in the amount of $100.4 million, expiring from 2030 through 2036, and state tax credit carryforwardsin the amount of $9.4 million, expiring through 2018.Deferred tax benefits of $2.0 million were recognized for the year ended December 31, 2015 related to enacted changes in state tax laws.The Company has investments in affordable housing limited partnerships which generate federal Low Income Housing Tax Credits and other taxbenefits. The balance of these investments, included in other assets in the accompanying consolidated balance sheet, was $64 million and $71 million atDecember 31, 2017 and 2016, respectively. Unfunded commitments for affordable housing investments, included in other liabilities in the accompanyingconsolidated balance sheet, were $26 million and $53 million at December 31, 2017 and 2016, respectively. The maximum exposure to loss as a result of theCompany's involvement with these limited partnerships at December 31, 2017 was approximately $72 million. While the Company believes the likelihoodof potential losses from these investments is remote, the maximum exposure was determined by assuming a scenario where the projects completely fail and donot meet certain government compliance requirements resulting in recapture of the related tax credits. These investments did not have a material impact onincome tax expense for the years ended December 31, 2017, 2016 and 2015.131Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The Company has a liability for unrecognized tax benefits relating to uncertain state tax positions in several jurisdictions. A reconciliation of thebeginning and ending amount of gross unrecognized tax benefits for the years ended December 31, 2017, 2016 and 2015 follows (in thousands): 2017 2016 2015Balance, beginning of period$72,736 $43,412 $36,622Additions for tax positions related to the current year1,882 2,713 2,909Additions for tax positions related to prior periods1,661 25,168 11,618Reductions due to changes in tax positions taken(15,316) — —Reductions due to settlements with taxing authorities— (200) (246)Reductions due to lapse of the statute of limitations(2,229) — (5,438) 58,734 71,093 45,465Interest and penalties486 1,643 (2,053)Balance, end of period$59,220 $72,736 $43,412As of December 31, 2017, 2016 and 2015, the Company had $43.6 million, $45.0 million and $27.0 million of unrecognized state tax benefits, net offederal tax benefits, that if recognized would have impacted the effective tax rate. Unrecognized tax benefits related to state income tax contingencies thatmay decrease during the 12 months subsequent to December 31, 2017 as a result of settlements with taxing authorities range from zero to $41.2 million.Interest and penalties related to unrecognized tax benefits are included in the provision for income taxes in the consolidated statements of income. AtDecember 31, 2017 and 2016, accrued interest and penalties included in the consolidated balance sheets, net of federal tax benefits, were $3.2 million and$2.5 million, respectively. The total amounts of interest and penalties, net of federal tax benefits, recognized through income tax expense were $0.3 million,$1.1 million and $(1.8) million in 2017, 2016 and 2015, respectively.The Company and its subsidiaries file a consolidated federal income tax return as well as combined state income tax returns where combined filings arerequired. Income tax returns for the tax years ended December 31, 2017, 2016, 2015, 2014 and 2013 remain subject to examination in the U.S. Federal andvarious state tax jurisdictions. The tax years ended December 31, 2009, 2010, 2011 and 2012 remain subject to examination by certain states.Note 12 Derivatives and Hedging ActivitiesThe Company uses interest rate swaps to manage interest rate risk related to liabilities that expose the Company to variability in cash flows due tochanges in interest rates. The Company enters into LIBOR-based interest rate swaps that are designated as cash flow hedges with the objective of limiting thevariability of interest payment cash flows resulting from changes in the benchmark interest rate LIBOR. Changes in the fair value of interest rate swapsdesignated as cash flow hedging instruments are reported in AOCI and subsequently reclassified into interest expense in the same period in which the relatedinterest on the floating-rate debt obligations affects earnings.The Company also enters into interest rate derivative contracts with certain of its commercial borrowers to enable those borrowers to manage theirexposure to interest rate fluctuations. To mitigate interest rate risk associated with these derivative contracts, the Company enters into offsetting derivativecontract positions with primary dealers. These interest rate derivative contracts are not designated as hedging instruments; therefore, changes in the fair valueof these derivatives are recognized immediately in earnings. The impact on earnings related to changes in fair value of these derivatives for the years endedDecember 31, 2017, 2016 and 2015 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. TheCompany assesses the credit risk of its financial institution counterparties by monitoring publicly available credit rating and financial information. TheCompany manages dealer credit risk by entering into interest rate derivatives only with primary and highly rated counterparties, the use of ISDA masteragreements, central clearing mechanisms and counterparty limits. The agreements contain bilateral collateral arrangements with the amount of collateral to beposted generally governed by the settlement value of outstanding swaps. The Company manages the risk of default by its borrower132Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017counterparties through its normal loan underwriting and credit monitoring policies and procedures. The Company does not currently anticipate any lossesfrom failure of interest rate derivative counterparties to honor their obligations.The CME amended its rules effective January 2017 to legally characterize variation margin payments for centrally cleared derivatives as settlements ofthe derivatives' exposures rather than collateral. As a result, the variation margin payment and the related derivative instruments are considered a single unitof account for accounting and financial reporting purposes. The Company's clearing agent for interest rate derivative contracts centrally cleared through theCME settles the variation margin daily with the CME; therefore, those interest rate derivative contracts the Company clears through the CME are reported ata fair value of approximately zero at December 31, 2017.The following tables set forth certain information concerning the Company’s interest rate contract derivative financial instruments and related hedgeditems at December 31, 2017 and 2016 (dollars in thousands): 2017 WeightedAveragePay Rate WeightedAverageReceive Rate WeightedAverageRemainingLife in Years NotionalAmount Balance SheetLocation Fair ValueHedged Item Asset LiabilityDerivatives designated ascash flow hedges: Pay-fixed interest rateswapsVariability of interest cashflows on variable rateborrowings 1.77% 3-Month Libor 4.3 $2,046,000 Other assets / Otherliabilities $2,350 $—Derivatives not designatedas hedges: Pay-fixed interest rateswaps 3.87% Indexed to 1-month Libor 6.4 1,028,041 Other assets / Otherliabilities 10,856 (13,173)Pay-variable interest rateswaps Indexed to 1-month Libor 3.87% 6.4 1,028,041 Other assets / Otherliabilities 14,410 (12,189)Interest rate capspurchased, indexed to1-month Libor 2.81% 1.3 145,354 Other assets 11 —Interest rate caps sold,indexed to 1-monthLibor 2.81% 1.3 145,354 Other liabilities — (11) $4,392,790 $27,627 $(25,373)133Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2016 WeightedAveragePay Rate WeightedAverageReceive Rate WeightedAverageRemainingLife in Years NotionalAmount Balance SheetLocation Fair ValueHedged Item Asset LiabilityDerivatives designated ascash flow hedges: Pay-fixed interest rateswapsVariability of interest cashflows on variable rateborrowings 1.58% 3-Month Libor 3.3 $1,715,000 Other assets / Otherliabilities $19,648 $(3,112)Pay-fixed forward-startinginterest rate swapsVariability of interest cashflows on variable rateborrowings 3.43% 3-Month Libor 10.5 300,000 Other liabilities — (27,866)Derivatives not designatedas hedges: Pay-fixed interest rateswaps 3.77% Indexed to 1-month Libor 6.8 912,000 Other assets / Otherliabilities 9,949 (20,383)Pay-variable interest rateswaps Indexed to 1-month Libor 3.77% 6.8 912,000 Other assets / Otherliabilities 20,383 (9,949)Interest rate capspurchased, indexed to1-month Libor 2.96% 2.3 189,057 Other assets 252 —Interest rate caps sold,indexed to 1-monthLibor 2.96% 2.3 189,057 Other liabilities — (252) $4,217,114 $50,232 $(61,562)The following table provides information about the amount of loss reclassified from AOCI into interest expense for the years ended December 31, 2017,2016 and 2015 (dollars in thousands): Amount of Loss Reclassified from AOCI on Derivatives Location of Loss Reclassified fromAOCI into Income 2017 2016 2015 Interest rate contracts$(9,621) $(16,161) $(21,610) Interest expense on borrowingsInterest rate contracts— — (4,869) Interest expense on deposits $(9,621) $(16,161) $(26,479) During the years ended December 31, 2017, 2016 and 2015, no derivative positions designated as cash flow hedges were discontinued and none of thegains and losses reported in AOCI were reclassified into earnings as a result of the discontinuance of cash flow hedges or because of the early extinguishmentof debt. As of December 31, 2017, the amount of net loss expected to be reclassified from AOCI into earnings during the next twelve months was $1.2million. Some of the Company’s ISDA master agreements with financial institution counterparties contain provisions that permit either counterparty to terminatethe agreements and require settlement in the event that regulatory capital ratios fall below certain designated thresholds, upon the initiation of other definedregulatory actions or upon suspension or withdrawal of the Bank’s credit rating. Currently, there are no circumstances that would trigger these provisions ofthe agreements.134Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The Company does not offset assets and liabilities under master netting agreements for financial reporting purposes. Information on interest rate swapssubject to these agreements is as follows at December 31, 2017 and 2016 (in thousands): 2017 Gross AmountsOffset in BalanceSheetNet AmountsPresented inBalance SheetGross Amounts Not Offset inBalance Sheet Gross AmountsRecognizedDerivativeInstrumentsCollateralPledgedNet AmountDerivative assets$13,217 $— $13,217 $(7,996) $(5,221) $—Derivative liabilities(13,173) — (13,173) 7,996 4,962 (215)$44 $— $44 $— $(259) $(215) 2016 Gross AmountsOffset in BalanceSheet Net AmountsPresented inBalance Sheet Gross Amounts Not Offset inBalance Sheet Gross AmountsRecognized DerivativeInstruments CollateralPledged Net AmountDerivative assets$29,849 $— $29,849 $(27,485) $— $2,364Derivative liabilities(51,362) — (51,362) 27,485 23,796 (81) $(21,513) $— $(21,513) $— $23,796 $2,283The difference between the amounts reported for interest rate swaps subject to master netting agreements and the total fair value of interest rate contractderivative financial instruments reported in the consolidated balance sheets is related to interest rate contracts entered into with borrowers not subject tomaster netting agreements.At December 31, 2017, the Company had pledged investment securities available for sale with a carrying amount of $31 million as collateral for interestrate swaps in a liability position. Financial collateral of $7.0 million was pledged by counterparties to the Company for interest rate swaps in an assetposition. The amount of collateral required to be posted varies based on the settlement value of outstanding swaps and in some cases may include initialmargin requirements. 135Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Note 13 Stockholders’ EquityAccumulated Other Comprehensive IncomeChanges in AOCI are summarized as follows for the years ended December 31, 2017, 2016 and 2015 (in thousands):2017Before Tax Tax Effect Net of TaxUnrealized gains on investment securities available for sale: Net unrealized holding gain arising during the period$49,131 $(19,407) $29,724Amounts reclassified to gain on investment securities available for sale, net(33,466) 13,219 (20,247)Net change in unrealized gains on investment securities available for sale15,665 (6,188) 9,477Unrealized losses on derivative instruments: Net unrealized holding loss arising during the period(2,577) 1,018 (1,559)Amounts reclassified to interest expense on borrowings9,621 (3,800) 5,821Net change in unrealized losses on derivative instruments7,044 (2,782) 4,262Other comprehensive income$22,709 $(8,970) $13,7392016Before Tax Tax Effect Net of TaxUnrealized gains on investment securities available for sale: Net unrealized holding gain arising during the period$23,588 $(9,317) $14,271Amounts reclassified to gain on investment securities available for sale, net(14,461) 5,712 (8,749)Net change in unrealized gains on investment securities available for sale9,127 (3,605) 5,522Unrealized losses on derivative instruments: Net unrealized holding gain arising during the period6,225 (2,459) 3,766Amounts reclassified to interest expense on borrowings16,161 (6,384) 9,777Net change in unrealized losses on derivative instruments22,386 (8,843) 13,543Other comprehensive income$31,513 $(12,448) $19,0652015Before Tax Tax Effect Net of TaxUnrealized gains on investment securities available for sale: Net unrealized holding loss arising during the period$(34,470) $12,813 $(21,657)Amounts reclassified to gain on investment securities available for sale, net(8,480) 3,350 (5,130)Net change in unrealized gains on investment securities available for sale(42,950) 16,163 (26,787)Unrealized losses on derivative instruments: Net unrealized holding loss arising during the period(22,635) 9,232 (13,403)Amounts reclassified to interest expense on deposits4,869 (1,923) 2,946Amounts reclassified to interest expense on borrowings21,610 (8,536) 13,074Net change in unrealized losses on derivative instruments3,844 (1,227) 2,617Other comprehensive loss$(39,106) $14,936 $(24,170)136Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The categories of AOCI and changes therein are presented below for the years ended December 31, 2017, 2016 and 2015(in thousands): Unrealized Gains onInvestment SecuritiesAvailable for Sale Unrealized Losseson DerivativeInstruments TotalBalance at December 31, 2014$68,322 $(21,970) $46,352Other comprehensive loss(26,787) 2,617 (24,170)Balance at December 31, 2015$41,535 $(19,353) $22,182Other comprehensive income5,522 13,543 19,065Balance at December 31, 2016$47,057 $(5,810) $41,247Other comprehensive income9,477 4,262 13,739Balance at December 31, 2017$56,534 $(1,548) $54,986 OtherIn conjunction with a previous acquisition, the Company issued 1,834,160 warrants to purchase its common stock. The warrants expire in November2018 and are exercisable at an exercise price of $9.47, in exchange for which the holder is entitled to receive 0.0827 shares of BKU common stock and cashof $1.73.In January 2018, our Board of Directors authorized a share repurchase program under which the Company may repurchase up to $150 million of itsoutstanding common stock. Any repurchases will be made in accordance with applicable securities laws from time to time in open market or privatetransactions. The authorization does not require the Company to acquire any specified number of common shares and may be commenced, suspended ordiscontinued without prior notice.Note 14 Equity Based and Other Compensation PlansDescription of Equity Based Compensation PlansIn connection with the IPO of the Company's common stock in 2011, the Company adopted the 2010 Plan. In 2014, the Board of Directors and theCompany's stockholders approved the 2014 Plan. The 2010 Plan and 2014 Plans are administered by the Board of Directors or a committee thereof andprovide for the grant of non-qualified stock options, SARs, restricted shares, deferred shares, performance shares, unrestricted shares and other share-basedawards to selected employees, directors or independent contractors of the Company and its affiliates. The number of shares of common stock authorized foraward under the 2010 Plan is 7,500,000, of which 246,151 shares remain available for issuance as of December 31, 2017. The number of shares of commonstock available for issuance under the 2014 Plan is 4,000,000, of which 2,892,439 shares remain available for issuance as of December 31, 2017. Shares ofcommon stock delivered under the plans may consist of authorized but unissued shares or previously issued shares reacquired by the Company. The term of ashare option or SAR issued under the plans may not exceed ten years from the date of grant and the exercise price may not be less than the fair market valueof the Company's common stock at the date of grant. Unvested awards generally become fully vested in the event of a change in control, as defined.137Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Compensation Expense Related to Equity Based AwardsThe following table summarizes compensation cost related to equity based awards for the years ended December 31, 2017, 2016 and 2015 (inthousands): 2017 2016 2015Compensation cost of equity based awards: Unvested and restricted share awards$18,087 $16,885 $15,573Executive share-based awards3,416 1,482 294Incentive awards1,289 — —Total compensation cost of equity based awards22,792 18,367 15,867Related tax benefits(8,576) (6,899) (5,965)Compensation cost of equity based awards, net of tax$14,216 $11,468 $9,902Share AwardsUnvested share awardsA summary of activity related to unvested share awards for the years ended December 31, 2017, 2016 and 2015 follows: Number of ShareAwards Weighted AverageGrant Date FairValueUnvested share awards outstanding, December 31, 2014829,225 $30.06Granted664,928 32.06Vested(394,498) 28.72Canceled or forfeited(59,270) 29.82Unvested share awards outstanding, December 31, 20151,040,385 31.86Granted651,760 31.00Vested(428,167) 31.79Canceled or forfeited(143,278) 31.31Unvested share awards outstanding, December 31, 20161,120,700 31.46Granted621,806 40.24Vested(553,007) 31.67Canceled or forfeited(81,022) 34.51Unvested share awards outstanding, December 31, 20171,108,477 $36.06Unvested share awards are generally valued at the closing price of the Company's common stock on the date of grant. The following table summarizesthe 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 during the yearsended December 31, 2017, 2016, and 2015 (in thousands, except per share data): 2017 2016 2015Range of the closing price on date of grant$33.21 - $40.84 $29.78 - $33.76 $31.35 - $38.63Aggregate grant date fair value of shares vesting$17,514 $13,613 $11,330Substantially all of the shares vest in equal annual installments over a period of three years from the date of grant. Unvested shares participate individends declared on the Company's common stock on a one-for-one basis.138Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Unrecognized compensation cost for unvested share awards outstanding at December 31, 2017 totaled $22.7 million, which will be recognized over aweighted average remaining period of 1.84 years.Executive share-based awardsCertain of the Company's executives are eligible to receive annual awards of RSUs and PSUs (collectively, the "share units"). Annual awards of RSUsrepresent a fixed number of shares and vest in equal tranches over three years. PSUs are initially granted based on a target value. The number of PSUs thatultimately vest at the end of a three-year performance measurement period will be based on the achievement of performance criteria pre-established by theCompensation Committee of the Board of Directors. The performance criteria established for the PSUs granted in 2017 and 2016 include both performanceand market conditions. Upon vesting, the share units will be converted to common stock on a one-for-one basis, or may be settled in cash at the Company'soption. The share units will accumulate dividends declared on the Company's common stock from the date of grant to be paid subsequent to vesting.A summary of activity related to executive share-based awards for the years ended December 31, 2017 and 2016 follows: RSU PSUUnvested executive share-based awards outstanding, December 31, 2015— —Granted97,852 57,873Vested(19,291) —Unvested executive share-based awards outstanding, December 31, 201678,561 57,873Granted47,848 47,848Vested(35,241) —Unvested executive share-based awards outstanding, December 31, 201791,168 105,721RSUs granted during the year ended December 31, 2016 included a grant of 39,979 RSUs that vest five years from the date of grant. The first tranche ofRSUs granted vested on December 31, 2016. The Company cash settled these share units in the amount of $0.8 million during the first quarter of 2017. As aresult of this cash settlement, all RSUs and PSUs have been determined to be liability instruments and will be remeasured at fair value each reporting perioduntil the awards are settled. The RSUs vested on December 31, 2017 will be settled during the first quarter of 2018.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 ofthe Company's common stock at the reporting date net of a discount related to any applicable market conditions, considering the probability of meeting thedefined performance conditions. Compensation cost related to PSUs is recognized during the performance period based on the probable outcome of therespective performance conditions.The total liability for these executive share-based awards was $3.9 million at December 31, 2017. The total unrecognized compensation cost of $5.3million for unvested executive share-based awards at December 31, 2017 will be recognized over a weighted average remaining period of 2.07 years.Based on the closing price of the Company's common stock on the date of grant, 25,321 and 41,645 unvested share awards were granted to certain of theCompany's executives in 2017 and 2015, respectively, based on the achievement of performance criteria pre-established by the Compensation Committee.These shares are included in the summary of activity related to unvested share awards above.Incentive awardsBeginning in 2017, the Company's annual incentive compensation arrangements provide for settlement through a combination of cash payments andunvested share awards following the end of the annual performance period. The dollar value of share awards to be granted is based on the achievement ofperformance criteria established in the incentive arrangements. The number of shares of common stock to be awarded is variable based on the closing price ofthe Company's stock on the date of grant; therefore, these awards are initially classified as liability instruments, with compensation cost recognized from thebeginning of the performance period. The awards vest in equal installments over a period of three years from the date of grant. The total liability for theincentive share awards was $1.3 million at December 31, 2017. The total unrecognized compensation139Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017cost of $3.9 million for these share awards at December 31, 2017 will be recognized over a weighted average remaining period of 3.00 years.Option AwardsA summary of activity related to stock option awards for the years ended December 31, 2017, 2016 and 2015 follows: Number ofOptionAwards WeightedAverageExercise PriceOption awards outstanding, December 31, 20145,015,047 $26.49Exercised(1,363,895) 26.14Option awards outstanding, December 31, 20153,651,152 26.62Exercised(47,979) 16.50Canceled or forfeited(1,097) 63.74Option awards outstanding, December 31, 20163,602,076 26.74Exercised(2,331,388) 26.63Option awards outstanding and exercisable, December 31, 20171,270,688 $26.93The intrinsic value of options exercised during the years ended December 31, 2017, 2016 and 2015 was $25.8 million, $0.9 million and $8.7 million,respectively.There were no option awards granted during the years ended December 31, 2017, 2016 and 2015. Additional information about options outstanding andexercisable at December 31, 2017 is presented in the following table: Outstanding and Exercisable OptionsRange of Exercise PricesNumber ofOptions WeightedAverageRemainingContractualTerm (inyears) AggregateIntrinsicValue (inthousands)$11.1413,160 1.73 $389$15.94 - $19.9729,145 2.59 672$22.18 - $22.3141,417 3.47 764$271,170,847 3.08 16,064$63.7416,119 0.93 — 1,270,688 3.04 $17,889Deferred Compensation PlanThe Company has a non-qualified deferred compensation plan for a select group of key management or highly compensated employees whereby aparticipant, upon election, may defer a portion of eligible compensation. The deferred compensation plan provides for discretionary Company contributions.Generally, the Company has elected not to make contributions. The Company credits each participant's account with income based on either an annualinterest rate determined by the Company's Compensation Committee or returns of selected investment portfolios, as elected by the participant. A participant'selective deferrals and interest thereon are at all times 100% vested. Company contributions and interest thereon will become 100% vested upon the earlier ofa change in control, as defined, or the participant's death, disability, attainment of normal retirement age or the completion of two years of service. Participantdeferrals and any associated earnings will be paid upon separation from service or based on a specified distribution schedule, as elected by the participant.Deferred compensation expense was $1.5 million, $1.5 million and $0.8 million for the years ended December 31, 2017, 2016 and 2015, respectively.Deferred compensation liabilities of $21 million and $20 million were included in other liabilities in the accompanying consolidated balance sheets atDecember 31, 2017 and 2016, respectively.140Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017BankUnited 401(k) PlanUnder the terms of the 401(k) Plan sponsored by the Company, eligible employees may contribute a portion of compensation not exceeding the limitsset by law. Employees are eligible to participate in the plan after one month of service. The 401(k) Plan allows a matching employer contribution equal to100% of elective deferrals that do not exceed 1% of compensation, plus 70% of elective deferrals that exceed 1% but are less than 6% of compensation.Matching contributions are fully vested after two years of service. For the years ended December 31, 2017, 2016 and 2015, BankUnited made matchingcontributions to the 401(k) Plan of approximately $5.5 million, $5.2 million and $4.9 million, respectively.Note 15 Regulatory Requirements and RestrictionsThe Company and the Bank are subject to various regulatory capital requirements administered by Federal banking agencies. Failure to meet minimumcapital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a directmaterial effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, theCompany and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet itemscalculated pursuant to regulation. The capital amounts and classification also are subject to qualitative judgments by the regulators about components, riskweightings and other factors. Banking regulations identify five capital categories for insured depository institutions: well-capitalized, adequatelycapitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. As of December 31, 2017 and 2016, all capital ratios of theCompany and the Bank exceeded the "well capitalized" levels under the regulatory framework for prompt corrective action. Quantitative measuresestablished by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total, common equitytier 1 and tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of tier 1 capital to average tangible assets (leverage ratio).The following tables provide information regarding regulatory capital for the Company and the Bank as of December 31, 2017 and 2016 (dollars inthousands): 2017 Actual Required to beConsidered WellCapitalized Required to beConsideredAdequatelyCapitalized Amount Ratio Amount Ratio Amount RatioBankUnited, Inc.: Tier 1 leverage$2,892,069 9.72% N/A (1) N/A (1) $1,189,944 4.00%CET1 risk-based capital$2,892,069 13.11% $1,434,193 6.50% $992,903 4.50%Tier 1 risk-based capital$2,892,069 13.11% $1,765,161 8.00% $1,323,871 6.00%Total risk based capital$3,041,004 13.78% $2,206,451 10.00% $1,765,161 8.00%BankUnited: Tier 1 leverage$3,107,920 10.47% $1,483,796 5.00% $1,187,037 4.00%CET1 risk-based capital$3,107,920 14.13% $1,429,999 6.50% $989,999 4.50%Tier 1 risk-based capital$3,107,920 14.13% $1,759,999 8.00% $1,319,999 6.00%Total risk based capital$3,255,221 14.80% $2,199,999 10.00% $1,759,999 8.00%141Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2016 Actual Required to beConsidered WellCapitalized Required to beConsideredAdequatelyCapitalized Amount Ratio Amount Ratio Amount RatioBankUnited, Inc.: Tier 1 leverage$2,298,450 8.41% N/A (1) N/A (1) $1,092,921 4.00%CET1 risk-based capital$2,298,450 11.63% $1,284,498 6.50% $889,268 4.50%Tier 1 risk-based capital$2,298,450 11.63% $1,580,921 8.00% $1,185,691 6.00%Total risk based capital$2,459,470 12.45% $1,976,151 10.00% $1,580,921 8.00%BankUnited: Tier 1 leverage$2,534,402 9.30% $1,361,959 5.00% $1,089,567 4.00%CET1 risk-based capital$2,534,402 12.89% $1,278,277 6.50% $884,961 4.50%Tier 1 risk-based capital$2,534,402 12.89% $1,573,265 8.00% $1,179,948 6.00%Total risk based capital$2,694,048 13.70% $1,966,581 10.00% $1,573,265 8.00% (1) There is no Tier 1 leverage ratio component in the definition of a well-capitalized bank holding company.For purposes of risk based capital computations, the FDIC Indemnification asset and the covered assets are risk-weighted at 20% due to the conditionalguarantee represented by the Loss Sharing Agreements.BankUnited is subject to various regulatory restrictions relating to the payment of dividends, including requirements to maintain capital at or abovecertain minimums, and to remain "well-capitalized" under the prompt corrective action regulations. The Company does not expect that any of these laws,regulations or policies will materially affect the ability of BankUnited to pay dividends in the future.Levels of capital required to be well capitalized or adequately capitalized as reflected above do not include a capital conservation buffer that is beingphased in between 2016 and 2019. When fully phased in on January 1, 2019, the Bank and the Company will have to maintain this capital conservationbuffer composed of CET1 capital equal to 2.50% of risk-weighted assets above the amounts required to be adequately capitalized, as reflected above, in orderto avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Capital ratiosrequired to be considered well-capitalized exceed the ratios required under the capital conservation buffer requirement at December 31, 2017.BankUnited is required by the Board of Governors of the Federal Reserve System to maintain reserve balances in the form of vault cash or deposits withthe FRB. At December 31, 2017, the reserve requirement for BankUnited was $91 million.Note 16 Fair Value MeasurementsAssets and liabilities measured at fair value on a recurring basis Following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a recurring basis and thelevel within the fair value hierarchy in which those measurements are typically classified.Investment securities available for sale—Fair value measurements are based on quoted prices in active markets when available; these measurements areclassified within level 1 of the fair value hierarchy. These securities typically include U.S. Treasury securities and certain preferred stocks. If quoted prices inactive markets are not available, fair values are estimated using quoted prices of securities with similar characteristics, quoted prices of identical securities inless active markets, discounted cash flow techniques, or matrix pricing models. These securities are generally classified within level 2 of the fair valuehierarchy and include U.S. Government agency securities, U.S. Government agency and sponsored enterprise MBS, preferred stock investments for whichlevel 1 valuations are not available, corporate debt securities, non-mortgage asset-backed securities, single family rental real estate-backed securities, certainprivate label residential MBS and CMOs, private label commercial MBS, collateralized loan obligations and state and municipal obligations. Pricing of thesesecurities is generally142Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017primarily 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 featuresof individual securities, published collateral data, and for certain securities, historical constant default rates and default severities. Investment securitiesavailable for sale generally classified within level 3 of the fair value hierarchy include certain private label MBS and trust preferred securities. The Companytypically values these securities using third-party proprietary pricing models, primarily discounted cash flow valuation techniques, which incorporate bothobservable and unobservable inputs. Unobservable inputs that may impact the valuation of these securities include risk adjusted discount rates, projectedprepayment rates, projected default rates and projected loss severity.The Company uses third-party pricing services in determining fair value measurements for investment securities. To obtain an understanding of themethodologies and assumptions used, management reviews written documentation provided by the pricing services, conducts interviews with valuation deskpersonnel and reviews model results and detailed assumptions used to value selected securities as considered necessary. Management has established a robustprice challenge process that includes a review by the treasury front office of all prices provided on a monthly basis. Any price evidencing unexpected monthover month fluctuations or deviations from expectations is challenged. If considered necessary to resolve any discrepancies, a price will be obtained from anadditional 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 pricesprovided by its primary pricing service for a sample of securities are validated. Any price discrepancies are resolved based on careful consideration of theassumptions 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 servicingfees and market based assumptions about prepayments, discount rates, default rates and costs of servicing. Prepayment and default assumptions are based onhistorical industry data for loans with similar characteristics. Assumptions about costs of servicing are based on market convention. Discount rates are basedon rates of return implied by observed trades of underlying loans in the secondary market. Fair value of residential MSRs is estimated using a discounted cashflow technique that incorporates market‑based assumptions including estimated prepayment speeds, contractual servicing fees, cost to service, discount rates,escrow account earnings, ancillary income, and estimated defaults. Due to the nature of the valuation inputs and the limited availability of market pricing,servicing rights are classified as level 3.Derivative financial instruments—Fair values of interest rate swaps are determined using widely accepted discounted cash flow modeling techniques.These discounted cash flow models use projections of future cash payments and receipts that are discounted at mid-market rates. Observable inputs that mayimpact the valuation of these instruments include LIBOR swap rates and LIBOR forward yield curves. These fair value measurements are generally classifiedwithin level 2 of the fair value hierarchy.143Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following tables present assets and liabilities measured at fair value on a recurring basis at December 31, 2017 and 2016 (in thousands): 2017Level 1 Level 2 Level 3 TotalInvestment securities available for sale: U.S. Treasury securities$24,953 $— $— $24,953U.S. Government agency and sponsored enterprise residential MBS— 2,058,027 — 2,058,027U.S. Government agency and sponsored enterprise commercial MBS— 234,508 — 234,508Private label residential MBS and CMOs— 576,033 52,214 628,247Private label commercial MBS— 1,046,415 — 1,046,415Single family rental real estate-backed securities— 562,706 — 562,706Collateralized loan obligations— 723,681 — 723,681Non-mortgage asset-backed securities— 121,747 — 121,747Preferred stocks63,543 — — 63,543State and municipal obligations— 657,203 — 657,203SBA securities— 550,682 — 550,682Other debt securities— 3,791 5,329 9,120Servicing rights— — 30,737 30,737Derivative assets— 27,627 — 27,627Total assets at fair value$88,496 $6,562,420 $88,280 $6,739,196Derivative liabilities$— $25,373 $— $25,373Total liabilities at fair value$— $25,373 $— $25,373144Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2016Level 1 Level 2 Level 3 TotalInvestment securities available for sale: U.S. Treasury securities$5,005 $— $— $5,005U.S. Government agency and sponsored enterprise residential MBS— 1,527,242 — 1,527,242U.S. Government agency and sponsored enterprise commercial MBS— 124,586 — 124,586Private label residential MBS and CMOs— 254,488 120,610 375,098Private label commercial MBS— 1,187,624 — 1,187,624Single family rental real estate-backed securities— 861,251 — 861,251Collateralized loan obligations— 487,296 — 487,296Non-mortgage asset-backed securities— 186,736 — 186,736Preferred stocks86,890 1,313 — 88,203State and municipal obligations— 698,546 — 698,546SBA securities— 523,906 — 523,906Other debt securities— 3,519 4,572 8,091Servicing rights— — 27,159 27,159Derivative assets— 50,232 — 50,232Total assets at fair value$91,895 $5,906,739 $152,341 $6,150,975Derivative liabilities$— $61,562 $— $61,562Total liabilities at fair value$— $61,562 $— $61,562There were no transfers of financial assets between levels of the fair value hierarchy during the years ended December 31, 2017 and 2016.The following tables reconcile changes in the fair value of assets and liabilities measured at fair value on a recurring basis and classified in level 3 of thefair value hierarchy during the years ended December 31, 2017, 2016 and 2015 (in thousands): 2017 Private LabelResidentialMBS Other DebtSecurities Servicing RightsBalance at beginning of period$120,610 $4,572 $27,159Gains (losses) for the period included in: Net income25,547 — (5,821)Other comprehensive income(27,569) 766 —Discount accretion6,181 280 —Purchases or additions— — 9,399Sales(45,524) — —Settlements(27,031) (289) —Transfers into level 3— — —Transfers out of level 3— — —Balance at end of period$52,214 $5,329 $30,737145Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2016 Private LabelResidentialMBS Other DebtSecurities Servicing RightsBalance at beginning of period$140,883 $4,532 $20,017Gains (losses) for the period included in: Net income— — (6,023)Other comprehensive income(2,229) (9) —Discount accretion5,947 116 —Purchases or additions— — 13,165Settlements(23,991) (67) —Transfers into level 3— — —Transfers out of level 3— — —Balance at end of period$120,610 $4,572 $27,159 2015 Private LabelResidentialMBS Other DebtSecurities Servicing RightsBalance at beginning of period$168,077 $4,918 $—Gains (losses) for the period included in: Net income— — (2,062)Other comprehensive income(7,469) (434) —Discount accretion6,524 148 —Purchases or additions— — 13,610Settlements(26,249) (100) —Transfers into level 3— — —Transfers out of level 3— — —Balance at end of period$140,883 $4,532 $11,548The balance of servicing rights at the beginning of 2016 includes $8.5 million of residential MSRs, which the Company elected to measure at fair valueeffective January 1, 2016.Gains on private label residential MBS recognized in net income during the year ended December 31, 2017 are included in the consolidated statement ofincome line item "Gain on investment securities available for sale, net." Changes in the fair value of servicing rights are included in the consolidatedstatement of income line item “Other non-interest income.” Changes in fair value include changes due to valuation assumptions, primarily discount rates andprepayment speeds, as well as other changes such as runoff and the passage of time. The amount of net unrealized losses included in earnings for the yearsended December 31, 2017 and 2016 that were related to servicing rights held at December 31, 2017 and 2016 totaled approximately $1.0 million and $1.8million, respectively, and were primarily due to changes in discount rates and prepayment speeds.Securities for which fair value measurements are categorized in level 3 of the fair value hierarchy at December 31, 2017 consisted of pooled trustpreferred securities with a fair value of $5 million and private label residential MBS and CMOs with a fair value of $52 million. The trust preferred securitiesare not material to the Company’s financial statements. Private label residential MBS consisted of senior and mezzanine tranches collateralized by primefixed rate and hybrid 1-4 single family residential mortgages originated before 2005, some of which contain option-arm features. Substantially all of thesesecurities have variable rate coupons. Weighted average subordination levels at December 31, 2017 were 17.3% and 9.7% for investment grade and non-investment grade securities, respectively.146Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following table provides information about the valuation techniques and unobservable inputs used in the valuation of private label residential MBSand CMOs falling within level 3 of the fair value hierarchy as of December 31, 2017 (dollars in thousands): Fair Value at Valuation Technique UnobservableInput Range (WeightedAverage) December 31, 2017 Investment grade $32,997 Discounted cash flow Voluntary prepayment rate 9.00% - 27.80% (16.94%) Probability of default 0.00% - 4.10% (1.18%) Loss severity 15.00% - 86.00% (30.56%) Discount rate 1.68% - 8.11% (3.64%) Non-investment grade $19,217 Discounted cash flow Voluntary prepayment rate 0.70% - 27.80% (15.37%) Probability of default 0.00% - 7.00% (2.00%) Loss severity 15.00% - 83.00% (31.04%) Discount rate 2.31% - 9.13% (6.03%)The significant unobservable inputs impacting the fair value measurement of private label residential MBS and CMOs include voluntary prepaymentrates, probability of default, loss severity given default and discount rates. Generally, increases in probability of default, loss severity or discount rates wouldresult in a lower fair value measurement. Alternatively, decreases in probability of default, loss severity or discount rates would result in a higher fair valuemeasurement. For securities with less favorable credit characteristics, decreases in voluntary prepayment speeds may be interpreted as a deterioration in theoverall credit quality of the underlying collateral and as such, lead to lower fair value measurements. The fair value measurements of those securities withhigher levels of subordination will be less sensitive to changes in these unobservable inputs other than discount rates, while securities with lower levels ofsubordination will show a higher degree of sensitivity to changes in these unobservable inputs other than discount rates. Generally, a change in theassumption used for probability of default is accompanied by a directionally similar change in the assumption used for loss severity given default and adirectionally opposite change in the assumption used for voluntary prepayment rate. The following table provides information about the valuation techniques and significant unobservable inputs used in the valuation of servicing rights asof December 31, 2017 (dollars in thousands): Fair Value at Valuation Technique UnobservableInput Range (WeightedAverage) December 31, 2017 Residential MSRs $19,622 Discounted cash flow Prepayment rate 7.31% - 26.98% (12.12%) Discount rate 9.50% - 9.58% (9.51%) Commercial servicing rights $11,115 Discounted cash flow Prepayment rate 0.66% - 10.99% (8.79%) Discount rate 8.41% - 15.26% (12.69%)Increases in prepayment rates or discount rates would result in lower fair value measurements and decreases in prepayment rates or discount rates wouldresult in higher fair value measurements. Although the prepayment rate and the discount rate are not directly interrelated, they generally move in oppositedirections.Assets and liabilities measured at fair value on a non-recurring basisFollowing is a description of the methodologies used to estimate the fair values of assets and liabilities that may be measured at fair value on a non-recurring basis, and the level within the fair value hierarchy in which those measurements are typically classified. Impaired loans, OREO and other repossessed assets—The carrying amount of collateral dependent impaired loans is typically based on the fair value ofthe underlying collateral, which may be real estate, taxi medallions, or other business assets, less estimated costs to sell. The carrying value of OREO isinitially 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, lessestimated cost to sell. Fair values of147Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017real estate collateral and OREO are typically based on third-party real estate appraisals which utilize market and income approaches to valuationincorporating both observable and unobservable inputs. When current appraisals are not available, the Company may use brokers’ price opinions, home priceindices or other available information about changes in real estate market conditions to adjust the latest appraised value available. These adjustments toappraised values may be subjective and involve significant management judgment. The fair value of repossessed assets, other than taxi medallions, orcollateral consisting of other business assets may be based on third-party appraisals or internal analyses that use market approaches to valuationincorporating primarily unobservable inputs.The fair value of New York City taxi medallions is based primarily on an internal analysis that utilizes an income approach to valuation. This analysisutilizes data obtained from the NYTLC about the fleet in general and in some cases, our portfolio specifically, and management's assumptions, based onexternal data when available, about revenues, costs and expenses, to estimate the value that can reasonably be supported by the cash flow generatingcapacity of a medallion. We further discount the results of this analysis in recognition of estimated selling costs and declining trends in medallion values. Wealso consider prices of recent medallion transfers as published by the NYTLC; however, the market for taxi medallions is illiquid and information about thecircumstances underlying observed transfers is unavailable, therefore, information about recent transfers is not considered sufficient to establish a reliableestimate of value. Taxi medallions in municipalities other than New York City are generally valued based on published information about recent transferprices; the valuation of these assets did not have a material impact on the Company's consolidated financial statements for any period presented as the taximedallion portfolio is heavily concentrated in New York City.Fair value measurements related to collateral dependent impaired loans, OREO and other repossessed assets are classified within level 3 of the fair valuehierarchy.Equipment under operating lease—Fair values of equipment under operating lease are typically based upon discounted cash flow analysis, consideringexpected lease rates and estimated end of life residual values. These fair value measurements are classified within level 3 of the fair value hierarchy.The following tables present the carrying value of assets for which non-recurring changes in fair value have been recorded for the years endedDecember 31, 2017, 2016 and 2015 (in thousands): 2017 Losses from Fair ValueChangesLevel 1 Level 2 Level 3 Total Years Ended December 31, 2017OREO and repossessed assets$— $— $5,790 $5,790 $(2,078)Impaired loans$— $— $93,051 $93,051 $(65,716) 2016 Losses from Fair ValueChangesLevel 1 Level 2 Level 3 Total Years Ended December 31, 2016OREO and repossessed assets$— $— $12,466 $12,466 $(1,156)Impaired loans$— $— $78,121 $78,121 $(25,573)Equipment under operating lease$——$— $8,173 $8,173 $(4,100)148Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017 2015 Losses from Fair ValueChangesLevel 1 Level 2 Level 3 Total Years Ended December 31, 2016OREO and repossessed assets$— $— $7,389 $7,389 $(1,206)Impaired loans$— $— $30,812 $30,812 $(9,865)Residential MSRs$— $— $8,469 $8,469 $(15)Included in the tables above are impaired taxi medallion loans with carrying values of $86.0 million and $50.7 million at December 31, 2017 and 2016,respectively, the majority of which were in New York City. Losses of $62.4 million and $12.7 million were recognized on impaired taxi medallion loansduring the years ended December 31, 2017 and 2016, respectively. There were no impaired taxi medallion loans at December 31, 2015. In addition, OREOand repossessed assets reported above included repossessed taxi medallions with carrying values of $2.1 million and $2.5 million at December 31, 2017 and2016, respectively. Losses of $1.3 million and $0.2 million were recognized on repossessed taxi medallions during the years ended December 31, 2017 and2016, respectively.Decreases in the value of medallions are largely driven by decreases in revenues generated from the medallions. Inputs that had the most significantimpact on the valuation of New York City taxi medallions at December 31, 2017 are presented below: Average AmountAverage fare per trip$16.04Number of trips per shift15.3Days worked per month25.9Second shift rental achievement53.9%149Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017The following table presents the carrying value and fair value of financial instruments and the level within the fair value hierarchy in which thosemeasurements are classified at December 31, 2017 and 2016 (dollars in thousands): 2017 2016Level Carrying Value Fair Value Carrying Value Fair ValueAssets: Cash and cash equivalents1 $194,582 $194,582 $448,313 $448,313Investment securities available for sale1/2/3 6,680,832 6,680,832 6,073,584 6,073,584Investment securities held to maturity3 10,000 10,000 10,000 10,000Non-marketable equity securities2 265,989 265,989 284,272 284,272Loans held for sale2 34,097 37,847 41,198 45,833Loans: Covered3 502,860 922,888 611,942 1,200,291Non-covered3 20,768,849 20,759,567 18,630,499 18,713,495FDIC Indemnification asset3 295,635 148,356 515,933 256,691Derivative assets2 27,627 27,627 50,232 50,232Liabilities: Demand, savings and money market deposits2 $15,543,637 $15,543,637 $13,735,248 $13,735,248Time deposits2 6,334,842 6,324,010 5,755,642 5,759,787FHLB advances2 4,771,000 4,774,160 5,239,348 5,244,188Notes and other borrowings2 402,830 435,361 402,809 403,733Derivative liabilities2 25,373 25,373 61,562 61,562The following methods and assumptions were used to estimate the fair value of each class of financial instruments, other than those described above:Cash and cash equivalentsThe carrying value of cash and cash equivalents approximates fair value due to their short-term nature and generally negligible credit risk.Investment securities held to maturityInvestment securities held to maturity includes one bond issued by the State of Israel, with fair value obtained from a third party pricing service.Non-marketable equity securitiesNon-marketable equity securities include FHLB and FRB stock. There is no market for these securities, which can be liquidated only by redemption bythe issuer. These securities are valued at par, which has historically represented the redemption price and is therefore considered to approximate fair value.Loans held for saleThe fair value of the portion of small business loans guaranteed by U.S. Government agencies being held for sale is estimated using pricing on recentsales of similar loans by the Company in active markets.150Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Covered loansFair values are estimated based on a discounted cash flow analysis. Estimates of future cash flows incorporate various factors that may include the type ofloan and related collateral, estimated collateral values, estimated voluntary prepayment rates, estimated default probability and loss severity given default,whether the interest rate is fixed or variable, term of loan and whether or not the loan is amortizing. The fair values of loans accounted for in pools areestimated on a pool basis. Discount rates for residential loans are based on observable fixed income market data for products with similar creditcharacteristics.Non-covered loansFair values of residential loans are estimated using a discounted cash flow analysis with discount rates based on yields at which similar loans are tradingin the secondary market, which reflect assumptions about credit risk. Fair values of commercial and consumer loans are estimated using a discounted cashflow analysis with discount rates based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The ALLLrelated to commercial and consumer loans is considered a reasonable estimate of the required adjustment to fair value to reflect the impact of credit risk. Thisestimate may not represent an exit value as defined in ASC 820.FDIC indemnification assetThe fair value of the FDIC indemnification asset has been estimated using a discounted cash flow technique incorporating assumptions about the timingand amount of future projected cash payments from the FDIC related to the resolution of covered assets. The factors that impact estimates of future cash flowsare similar to those impacting estimated cash flows from covered loans. The discount rate is determined by adjusting the risk free rate to incorporateuncertainty in the estimate of the timing and amount of future cash flows and illiquidity.DepositsThe fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The fair value oftime deposits is estimated using a discounted cash flow technique based on rates currently offered for deposits of similar remaining maturities.FHLB advancesFair value is estimated by discounting contractual future cash flows using the current rate at which borrowings with similar terms and remainingmaturities could be obtained by the Company.Senior notesFair value is estimated based on quoted prices of identical securities in less active markets.Note 17 Commitments and Contingencies The Company issues off-balance sheet financial instruments to meet the financing needs of its customers. These financial instruments includecommitments to fund loans, unfunded commitments under existing lines of credit, and commercial and standby letters of credit. These commitments exposethe 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 tothe same credit policies used in underwriting loans. Collateral may be obtained based on the Company’s credit evaluation of the counterparty. TheCompany’s maximum exposure to credit loss is represented by the contractual amount of these commitments.Commitments to fund loansThese are agreements to lend funds to customers as long as there is no violation of any condition established in the contract. Commitments to fund loansgenerally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of these commitments are expected to expirewithout being funded and, therefore, the total commitment amounts do not necessarily represent future liquidity requirements. 151Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Unfunded commitments under lines of creditUnfunded commitments under lines of credit include commercial, commercial real estate, home equity and consumer lines of credit to existingcustomers. Some of these commitments may mature without being fully funded. Commercial and standby letters of creditLetters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of creditare primarily issued to support trade transactions or guarantee arrangements. The credit risk involved in issuing letters of credit is essentially the same as thatinvolved in extending loan facilities to customers. Total lending related commitments outstanding at December 31, 2017 were as follows (in thousands): Commitments to fund loans$376,525Commitments to purchase loans401,270Unfunded commitments under lines of credit2,278,201Commercial and standby letters of credit82,854 $3,138,850Legal ProceedingsThe Company is involved as plaintiff or defendant in various legal actions arising in the normal course of business. In the opinion of management, basedupon advice of legal counsel, the likelihood is remote that the impact of these proceedings, either individually or in the aggregate, would be material to theCompany’s consolidated financial position, results of operations or cash flows.152Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Note 18 Condensed Financial Statements of BankUnited, Inc.Condensed financial statements of BankUnited, Inc. are presented below (in thousands):Condensed Balance Sheets December 31, 2017 December 31, 2016Assets: Cash and cash equivalents$131,696 $87,718Investment securities available for sale, at fair value63,543 78,293Investment in BankUnited, N.A.3,239,717 2,652,535Deferred tax asset, net9,456 16,738Other assets8,462 5,345Total assets$3,452,874 $2,840,629Liabilities and Stockholders' Equity: Notes payable$393,725 $393,092Other liabilities33,087 29,108Stockholders' equity3,026,062 2,418,429Total liabilities and stockholders' equity$3,452,874 $2,840,629Condensed Statements of Income Years Ended December 31, 2017 2016 2015Income: Interest and dividends on investment securities available for sale$3,580 $4,280 $4,866Service fees from subsidiary18,787 21,957 17,404Equity in earnings of subsidiary639,250 242,874 256,456Other— — 235Total661,617 269,111 278,961Expense: Interest on borrowings20,132 20,100 2,457Employee compensation and benefits27,032 27,143 22,099Other5,047 4,466 4,356Total52,211 51,709 28,912Income before income taxes609,406 217,402 250,049Benefit for income taxes(4,867) (8,339) (1,611)Net income$614,273 $225,741 $251,660153Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Condensed Statements of Cash Flows Years Ended December 31, 2017 2016 2015Cash flows from operating activities: Net income$614,273 $225,741 $251,660Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries(519,250) (157,374) (176,456)Equity based compensation22,692 18,032 16,027Other3,343 7,438 1,878Net cash provided by operating activities121,058 93,837 93,109Cash flows from investing activities: Capital contributions to subsidiary(55,000) — (575,000)Purchase of investment securities available for sale— (20,150) —Proceeds from repayments, sale, maturities and calls of investment securities available forsale15,000 19,401 46,031Other(250) (3) (285)Net cash used in investing activities(40,250) (752) (529,254)Cash flows from financing activities: Proceeds from issuance of notes payable— — 392,252Dividends paid(91,628) (89,824) (88,981)Proceeds from exercise of stock options62,095 791 35,647Other(7,297) 856 1,593Net cash provided by (used in) financing activities(36,830) (88,177) 340,511Net increase (decrease) in cash and cash equivalents43,978 4,908 (95,634)Cash and cash equivalents, beginning of period87,718 82,810 178,444Cash and cash equivalents, end of period$131,696 $87,718 $82,810Supplemental schedule of non-cash investing and financing activities: Dividends declared, not paid$23,055 $22,510 $22,380Dividends received by BankUnited, Inc. from the Bank totaled $120 million, $85.5 million and $80 million for the years ended December 31, 2017,2016, and 2015, respectively.154Table of ContentsBANKUNITED, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2017Note 19 Quarterly Financial Information (Unaudited)Financial information by quarter for the years ended December 31, 2017 and 2016 follows (in thousands, except per share data): 2017 Fourth Quarter Third Quarter Second Quarter First Quarter TotalInterest income$312,645 $309,443 $298,835 $283,538 $1,204,461Interest expense73,819 68,179 59,246 52,945 254,189Net interest income before provision for loan losses238,826 241,264 239,589 230,593 950,272Provision for loan losses5,174 37,854 13,619 12,100 68,747Net interest income after provision for loan losses233,652 203,410 225,970 218,493 881,525Non-interest income46,541 53,326 29,893 28,144 157,904Non-interest expense161,271 156,705 160,435 156,557 634,968Income before income taxes118,922 100,031 95,428 90,080 404,461Provision (benefit) for income taxes(298,872) 32,252 29,021 27,787 (209,812)Net income$417,794 $67,779 $66,407 $62,293 $614,273Earnings per common share, basic$3.80 $0.62 $0.60 $0.57 $5.60Earnings per common share, diluted$3.79 $0.62 $0.60 $0.57 $5.58 2016 Fourth Quarter Third Quarter Second Quarter First Quarter TotalInterest income$277,965 $269,981 $260,464 $250,807 $1,059,217Interest expense50,466 48,246 46,154 43,966 188,832Net interest income before provision for loan losses227,499 221,735 214,310 206,841 870,385Provision for loan losses8,462 24,408 14,333 3,708 50,911Net interest income after provision for loan losses219,037 197,327 199,977 203,133 819,474Non-interest income29,287 25,075 28,857 23,198 106,417Non-interest expense156,223 148,004 144,112 142,108 590,447Income before income taxes92,101 74,398 84,722 84,223 335,444Provision (benefit) for income taxes28,807 23,550 27,997 29,349 109,703Net income$63,294 $50,848 $56,725 $54,874 $225,741Earnings per common share, basic$0.59 $0.47 $0.53 $0.51 $2.11Earnings per common share, diluted$0.59 $0.47 $0.52 $0.51 $2.09Earnings for the fourth quarter 2017 benefited from a discrete income tax benefit of $327.9 million. See Note 11 to the consolidated financial statementsfor more information about the discrete income tax benefits.155Table of ContentsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNoneItem 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresAs of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation under the supervision and with the participation ofour management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosurecontrols 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 ChiefFinancial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2017.Changes in Internal Control over Financial ReportingNone.Management's Report on Internal Control Over Financial ReportingManagement's report, which is included in Part II, Item 8 of this Form 10-K, is incorporated herein by reference.Attestation Report of the Registered Public Accounting FirmThe effectiveness of the Company's internal control over financial reporting as of December 31, 2017 has been audited by KPMG LLP, an independentregistered public accounting firm, as stated in their report, which is included in Part II, Item 8 of this Form 10-K.Item 9B. Other InformationNone.PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceInformation regarding the directors and executive officers of BankUnited, Inc. and information regarding Section 16(a) compliance, the Audit and RiskCommittees, the Company's code of ethics, background of the directors and director nominations appearing under the captions "Section 16(a) BeneficialOwnership Reporting Compliance," "Committees of the Board of Directors," "Corporate Governance Guidelines, Code of Conduct and Code of Ethics,""Director Nominating Process and Diversity" and "Election of Directors" in the Company's Proxy Statement for the 2018 annual meeting of stockholders ishereby incorporated by reference.Item 11. Executive CompensationInformation appearing under the captions "Director Compensation" and "Executive Compensation" in the 2018 Proxy Statement (other than the"Compensation Committee Report," which is deemed furnished herein by reference) is hereby incorporated by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersInformation setting forth the security ownership of certain beneficial owners and management appearing under the caption "Beneficial Ownership of theCompany's Common Stock" and information in the "Equity Compensation Plans" table appearing under the caption "Equity Compensation PlanInformation" in the 2018 Proxy Statement is hereby incorporated by reference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceInformation regarding certain related transactions appearing under the captions "Certain Related Party Relationships" and information regarding directorindependence appearing under the caption "Director Independence" in the 2018 Proxy Statement is hereby incorporated by reference.156Table of ContentsItem 14. Principal Accountant Fees and ServicesInformation appearing under the captions "Auditor Fees and Services" and "Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors" in the 2018 Proxy Statement is hereby incorporated by reference.157Table of ContentsPART IVItem 15. Exhibits, Financial Statement Schedules(a)List of documents filed as part of this report:1)Financial Statements:Management's Report on Internal Control Over Financial ReportingReports of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of December 31, 2017 and December 31, 2016Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015Consolidated Statements of Stockholders' Equity for the years ended December 31, 2017, 2016 and 2015 Notes to Consolidated Financial Statements2)Financial Statement Schedules:Financial statement schedules are omitted as not required or not applicable or because the information is included in the Consolidated FinancialStatements or notes thereto.3)List of Exhibits:The exhibit list in the Exhibit Index is incorporated herein by reference as the list of exhibits required as part of this report.158Table of ContentsEXHIBIT INDEXExhibitNumber Description Location2.1a Purchase and Assumption Agreement, dated as of May 21, 2009, amongthe Federal Deposit Insurance Corporation, Receiver of BankUnited,FSB, Coral Cables, Florida, the Federal Deposit Insurance Corporationand BankUnited (Single Family Shared-Loss Agreement and Commercialand Other Shared-Loss Agreement included as Exhibits 4.15A and 4.15Bthereto, respectively)† Exhibit 2.1a to the Registration Statement on Form S-1of the Company filed January 18, 20112.1b Addendum to Purchase and Assumption Agreement, dated as of May 21,2009, by and among the Federal Deposit Insurance Corporation,Receiver of BankUnited, FSB, Coral Gables, Florida, BankUnited, andthe Federal Deposit Insurance Corporation Exhibit 2.1b to the Registration Statement on Form S-1of the Company filed January 10, 20112.1c Amendment No. 1 to the BankUnited Single Family Shared-LossAgreement with the FDIC, dated as of November 2, 2010 Exhibit 2.1c to the Registration Statement on Form S-1of the Company filed January 18, 20112.1d Amendment No. 2 the BankUnited Single Family Shared-LossAgreement with the FDIC, dated as of December 22, 2010 Exhibit 2.1d to the Registration Statement on Form S-1of the Company filed January 18, 20113.1 Amended and Restated Certificate of Incorporation Filed herewith3.2 Amended and Restated By-Laws Exhibit 3.1 to the Current Report on Form 8-K of theCompany filed August 15, 20164.1 Specimen common stock certificate Exhibit 4.1 to the Registration Statement on Form S-1of the Company filed January 18, 20114.2 Indenture dated as of November 17, 2015 between BankUnited, Inc. andU.S. Bank National Association, as trustee Exhibit 4.1 to the Current Report on Form 8-K of theCompany filed November 17, 20154.3 First Supplemental Indenture dated as of November 17, 2015 betweenBankUnited, Inc. and U.S. Bank National Association, as trustee Exhibit 4.2 to the Current Report on Form 8-K of theCompany filed November 17, 20154.4 Form of 4.875% Senior Note due 2025 (included as part of Exhibit 4.3above) Exhibit 4.3 to the Current Report on Form 8-K of theCompany filed November 17, 201510.1 BankUnited, N.A. Non-Qualified Deferred Compensation Plan Exhibit 10.1b to the Annual Report on Form 10-K ofthe Company filed February 26, 201510.1a Amendment to the BankUnited, N.A. Non-Qualified DeferredCompensation Plan Exhibit 10.1a to the Annual Report on Form 10-K ofthe Company filed February 26, 201610.2 BankUnited, Inc. (formerly known as BU Financial Corporation) 2009Stock Option Plan Exhibit 10.7 to the Registration Statement on Form S-1of the Company filed October 29, 201010.3a BankUnited, Inc. 2010 Omnibus Equity Incentive Plan Exhibit 10.8 to the Registration Statement on Form S-1of the Company filed January 18, 2011159Table of ContentsExhibitNumber Description Location10.3b BankUnited, Inc. 2014 Omnibus Equity Incentive Plan Appendix A to the Proxy Statement on Schedule 14Aof the Company filed April 11, 201410.4a Registration Rights Agreement by and among BankUnited, Inc., John A.Kanas, Rajinder P. Singh, Douglas J. Pauls and John Bohlsen, and eachof the other parties thereto Exhibit 10.9 to Annual Report on Form 10-K of theCompany filed March 31, 201110.4b Amendment No. 1, dated February 29, 2012, to Registration RightsAgreement, dated February 2, 2011, by and among BankUnited, Inc.,John A. Kanas, Rajinder P. Singh, Douglas J. Pauls and John Bohlsen,and each of the other parties thereto Exhibit 10.3 to the Current Report on Form 8-K of theCompany filed March 6, 201210.5 Form of indemnification agreement between BankUnited, Inc. and eachof its directors and executive officers Exhibit 10.1 to the Current Report on Form 8-K of theCompany filed February 16, 201110.6 BankUnited, Inc. Policy on Incentive Compensation Arrangements Exhibit 10.6 of the Company's Annual Report onForm 10-K filed February 26, 201510.7 Heritage Bank, N.A. 2008 Stock Incentive Plan Exhibit 10.1 to the Registration Statement on Form S-8of the Company filed February 29, 201210.8 Stock Warrant Agreement, dated as of November 24, 2008, by HeritageBank, N.A. in favor of the parties listed on Exhibit A thereto Exhibit 10.4 to the Current Report on Form 8-K of theCompany filed March 6, 201210.9 Supplemental Warrant Agreement, dated as of February 29, 2012, by andbetween BankUnited, Inc. and Heritage Bank, N.A. Exhibit 10.5 to the Current Report on Form 8-K of theCompany filed March 6, 201210.10a Amended and Restated Employment Agreement, dated February 2, 2016,by and between BankUnited, Inc. and John A. Kanas Exhibit 10.10 to the Annual Report on Form 10-K ofthe Company filed February 26, 201610.10b Amendment, dated May 6, 2016, to Amended and Restated EmploymentAgreement, dated February 2, 2016, by and between BankUnited, Inc.and John A. Kanas Exhibit 10.1 to the Current Report on Form 8-K of theCompany filed May 6, 201610.11a Amended and Restated Employment Agreement, dated February 2, 2016,by and between BankUnited, Inc. and Rajinder P. Singh Exhibit 10.11 to the Annual Report on Form 10-K ofthe Company filed February 26, 201610.11b Amendment, dated May 6, 2016, to Amended and Restated EmploymentAgreement, dated February 2, 2016, by and between BankUnited, Inc.and Rajinder P. Singh Exhibit 10.2 to the Current Report on Form 8-K of theCompany filed May 6, 201610.11c Second Amendment, dated January 4, 2017, to Amended and RestatedEmployment Agreement, dated February 2, 2016, as amended on May 6,2016, by and between BankUnited, Inc. and Rajinder P. Singh Exhibit 10.2 to the Current Report on Form 8-K/A ofthe Company filed January 4, 201710.12 Advisor and Restrictive Covenant Agreement, dated December 29, 2016,by and between BankUnited, Inc. and John A. Kanas Exhibit 10.1 to the Current Report on Form 8-K of theCompany filed January 3, 201710.13 Restricted Share Unit Agreement, dated December 29, 2016, by andbetween BankUnited, Inc. and Rajinder P. Singh Exhibit 10.3 to the Current Report on Form 8-K of theCompany filed January 3, 2017160Table of ContentsExhibitNumber Description Location12.1 Ratio of Earnings to Fixed Charges Filed herewith21.1 Subsidiaries of BankUnited, Inc. Filed herewith23.1 Consent of KPMG LLP Filed herewith31.1 Rule 13a-14(a) Certification of Chief Executive Officer of the Companyin accordance with Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith31.2 Rule 13a-14(a) Certification of Chief Financial Officer of the Companyin accordance with Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith32.1 Section 1350 Certification of Chief Executive Officer of the Company inaccordance with Section 906 of the Sarbanes-Oxley Act of 2002 Filed herewith32.2 Section 1350 Certification of Chief Financial Officer of the Company inaccordance with Section 906 of the Sarbanes-Oxley Act of 2002 Filed herewith101.INS XBRL Instance Document Filed herewith101.SCH XBRL Taxonomy Extension Schema Filed herewith101.CAL XBRL Taxonomy Extension Calculation Linkbase Filed herewith101.DEF XBRL Taxonomy Extension Definition Linkbase Filed herewith101.LAB XBRL Taxonomy Extension Label Linkbase Filed herewith101.PRE XBRL Taxonomy Extension Presentation Linkbase Filed herewith____________________________________†Schedules and similar attachments to the Purchase and Assumption Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Theregistrant will furnish supplementally a copy of any omitted schedules or similar attachment to the SEC upon request.161Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on itsbehalf by the undersigned, thereunto duly authorized. BANKUNITED, INC. Date:February 28, 2018By: /s/ RAJINDER P. SINGH Name: Rajinder P. Singh Title: President and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the datesindicated.Signature Title Date /s/ RAJINDER P. SINGH Chief Executive Officer (Principal Executive Officer) February 28, 2018Rajinder P. Singh /s/ LESLIE N. LUNAK Chief Financial Officer (Principal Financial andAccounting Officer) February 28, 2018Leslie N. Lunak /s/ JOHN A. KANAS Chairman of the Board of Directors February 28, 2018John A. Kanas /s/ TERE BLANCA Director February 28, 2018Tere Blanca /s/ EUGENE F. DEMARK Director February 28, 2018Eugene F. Demark /s/ MICHAEL J. DOWLING Director February 28, 2018Michael J. Dowling /s/ DOUGLAS J. PAULS Director February 28, 2018Douglas J. Pauls /s/ A. GAIL PRUDENTI Director February 28, 2018A. Gail Prudenti /s/ WILLIAM S. RUBENSTEIN Director February 28, 2018William S. Rubenstein /s/ SANJIV SOBTI Director February 28, 2018Sanjiv Sobti /s/ A. ROBERT TOWBIN Director February 28, 2018A. Robert Towbin /s/ LYNNE WINES Director February 28, 2018Lynne Wines 162Exhibit 3.1AMENDED AND RESTATED CERTIFICATE OF INCORPORATIONOFBANKUNITED, INC.BankUnited, Inc., a corporation organized and existing under the laws of the state of Delaware (the “Corporation”), herebycertifies that (1) the name of the Corporation is BankUnited, Inc., (2) the original certificate of incorporation of the Corporation wasfiled with the Secretary of State of the State of Delaware on April 28, 2009, under the name JAK InterCo, Inc., (3) this Amended andRestated Certificate of Incorporation was duly adopted on February 11, 2016 by the Board of Directors of the Corporation andapproved by the stockholders of the Corporation on May 18, 2016 in accordance with Sections 242 and 245 of the GeneralCorporation Law of the State of Delaware (the “DGCL”) and (4) this Amended and Restated Certificate of Incorporation amends andrestates the Certificate of Incorporation to read in its entirety as follows:FIRST. The name of the Corporation is BankUnited, Inc. (hereinafter, the “Corporation”).SECOND. The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The CorporationTrust Company.THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organizedunder the General Corporation Law of the State of Delaware (the “DGCL”).FOURTH.(a)Authorized Capital Stock. The total number of shares of stock which the Corporation shall have authority to issue is500,000,000 of which the Corporation shall have authority to issue 400,000,000 shares of common stock, each having a parvalue of one cent per share ($0.01) (the “Common Stock”), and 100,000,000 shares of preferred stock, each having a par valueof one cent per share ($0.01) (the “Preferred Stock”).(b)Common Stock. The powers, preferences and rights, and the qualifications, limitations and restrictions, of the Common Stockare as follows:(1) Each holder of record of shares of Common Stock shall be entitled to one vote for each share of Common Stockheld on all matters submitted to a vote of stockholders of the Corporation on which holders of Common Stock are entitled tovote.(2) The holders of shares of Common Stock shall not have cumulative voting rights as defined in Section 214 of theDGCL.(3) Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of this Amended andRestated Certificate of Incorporation, as it may be amended fromtime to time, holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash,stock or property of the Corporation if, as and when declared thereon by the Board of Directors from time to time out of assetsor funds of the Corporation legally available therefor.(4) In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary,after payment or provision for the payment of the debt and liabilities of the Corporation and subject to the prior payment in fullof the preferential amounts, if any, to which any series of Preferred Stock may be entitled, the holders of shares of CommonStock shall be entitled to receive the assets and funds of the Corporation remaining for distribution in proportion to the numberof shares held by them, respectively.(5) No holder of shares of Common Stock shall be entitled to preemptive or subscription rights.(c)Preferred Stock. The Board of Directors is expressly authorized to provide for the issuance of all or any shares of the PreferredStock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no votingpowers, and such distinctive designations, preferences and relative, participating, optional or other special rights and suchqualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by theBoard of Directors providing for the issuance of such class or series and as may be permitted by the DGCL, including, withoutlimitation, the authority to provide that any such class or series may be (i) subject to redemption at such time or times and atsuch price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on suchconditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class orclasses of stock or any other series of stock; (iii) entitled to such rights upon any liquidation, dissolution or winding-up, whethervoluntary or involuntary, of the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes ofstock, or shares of any other series of the same class of stock, of the Corporation at such price or prices or at such rates ofexchange and with such adjustments; all as may be stated in such resolution or resolutions.(d)Power to Sell and Purchase Shares. Subject to the requirements of applicable law, the Corporation shall have the power to issueand sell all or any part of any shares of any class of stock herein or hereafter authorized to such persons, and for suchconsideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not greaterconsideration could be received upon the issue or sale of the same number of shares of another class or of shares of anotherseries of such class, and as otherwise permitted by law. Subject to the requirements of applicable law, the Corporation shallhave the power to purchase any shares of any class of stock herein or hereafter authorized from such persons, and for suchconsideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not less considerationcould be paid upon the purchase of the same number of shares of another class or of shares of another series of such class, andas otherwise permitted by law.FIFTH. The following provisions are inserted for the management of the business and the conduct of the affairs of theCorporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:(a)The business and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors. In additionto the powers and authority expressly conferred upon the Board of Directors by applicable law, this Amended and RestatedCertificate of Incorporation or the Amended and Restated By-Laws of the Corporation (as amended from time to time, the “By-Laws”), the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised ordone by the Corporation, subject to the provisions of the DGCL and this Amended and Restated Certificate of Incorporation.(b)The number of directors of the Corporation shall be fixed from time to time exclusively by resolution of the Board of Directors.(c)Subject to the terms of any one or more classes or series of Preferred Stock then outstanding, any vacancy on the Board ofDirectors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then inoffice, provided that a quorum is present, and any other vacancy occurring on the Board of Directors may be filled by amajority of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. The right ofstockholders to fill vacancies on the Board of Directors is hereby specifically denied. Any director elected to fill a vacancy notresulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.(d)Subject to applicable law and the rights, if any, of the holders of shares of Preferred Stock then outstanding, any director or theentire Board of Directors may be removed from office at any time by the affirmative vote of the holders of at least a majority invoting power of the issued and outstanding capital stock of the Corporation entitled to vote in the election of directors (the“Voting Stock”).(e)Notwithstanding the foregoing, the election, term, removal and filling of vacancies with respect to directors, if any, electedseparately by the holders of one or more classes or series of Preferred Stock shall not be governed by this Article FIFTH, butrather shall be as provided for in the resolutions adopted by the Board of Directors creating and establishing such class or seriesof Preferred Stock.(f)In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the Board of Directors ishereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation,subject to the provisions of the DGCL and this Amended and Restated Certificate of Incorporation and any By-Laws adoptedby the stock-holders; provided, however, that no By-Laws hereafter adopted by the stock-holders shall invalidate any prior actof the directors which would have been valid if such By-Laws had not been adopted.SIXTH. No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach ofany fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under theDGCL. If the DGCL is amended hereafter to authorize the further elimination or limitation of the liability of directors, then the liabilityof a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. Any repealor modification of this Article SIXTH shall not adversely affect any right or protection of a director of the Corporation existing at thetime of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.SEVENTH. The Corporation shall indemnify any person that is or was a director or officer (and any person that is or wasserving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trustor other enterprise) to the fullest extent authorized or permitted by law, as now or hereafter in effect, and such right to indemnificationshall continue as to a person who has ceased to be a director or officer of the Corporation (or such other corporation, partnership, jointventure, trust or other enterprise) and shall inure to the benefit of his or her heirs, executors and personal and legalrepresentatives; provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall not beobligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) in connection with aproceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by theBoard of Directors. The right to indemnification conferred by this Article SEVENTH shall include the right to be paid by theCorporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition.The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnificationand to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article SEVENTH.The rights to indemnification and to the advance of expenses conferred in this Article SEVENTH shall not be exclusive of anyother right which any person may have or hereafter acquire under this Amended and Restated Certificate of Incorporation, the By-Laws, any statute or other law, by agreement, vote of stockholders or approval of the directors of the Corporation or otherwise.Any repeal or modification of this Article SEVENTH shall not adversely affect any rights to indemnification and to theadvancement of expenses of a director or officer of the Corporation existing at the time of such repeal or modification with respect toany acts or omissions occurring prior to such repeal or modification.EIGHTH. Any action required or permitted to be taken by the stockholders of the Corporation may be effected only at a dulycalled annual or special meeting of the stockholders of the Corporation. The ability of stockholders of the Corporation to consent inwriting to the taking of any action is hereby specifically denied.NINTH. Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. Thebooks of the Corporation may be kept, subject to any provision contained in the DGCL, outside the State of Delaware at such place orplaces as may be designated from time to time by the Board of Directors or in the By-Laws.TENTH. Except as otherwise required by law, special meetings of stockholders of the Corporation for any purpose or purposesmay be called at any time only by (i) the Chief Executive Officer or the President of the Corporation or (ii) the Board of Directorspursuant to a resolution duly adopted by a majority of the total number of authorized directors then in office which states the purpose orpurposes thereof or (iii) any stockholder or stockholders who beneficially own twenty-five percent (25%) or more of the votes entitledto be cast by the Voting Stock. Other than as set forth in clause (iii) of the preceding sentence, any power of the stockholders to call aspecial meeting of stockholders is hereby specifically denied. No business other than that stated in the notice of such meeting (or anyamendment or supplement thereto), which notice, in the case of a special meeting called by a stockholder or stockholders, shall includeall business requested by such stockholder or stockholders to be transacted at such meeting, shall be transacted at any special meeting.ELEVENTH. The Corporation expressly elects not to be governed by Section 203 of the DGCL.TWELFTH. In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, theBoard of Directors shall have the power without the assent or vote of the stockholders to adopt, amend, alter or repeal the By-Laws.The affirmative vote of at least a majority of the Board of Directors shall be required to adopt, amend, alter or repeal the By-Laws. TheBy-Laws also may be adopted, amended, altered or repealed by the affirmative vote of the holders of a majority of the votes entitled tobe cast by the shares of outstanding capital stock entitled to vote thereon; provided, however, that no such repeal or modification ofArticle VIII of the By-Laws may adversely affect any rights to indemnification and to the advancement of expenses of a director orofficer of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior tosuch repeal or modification. THIRTEENTH. If any provision or provisions of this Amended and Restated Certificate of Incorporation shall be held to beinvalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability ofsuch provisions in any other circumstance and of the remaining provisions of this Amended and Restated Certificate of Incorporation(including, without limitation, each portion of any paragraph of this Amended and Restated Certificate of Incorporation containing anysuch provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in anyway be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Amended and Restated Certificate ofIncorporation (including, without limitation, each such portion of any paragraph of this Amended and Restated Certificate ofIncorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit theCorporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or forthe benefit of the Corporation to the fullest extent permitted by law).IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be executedon its behalf this 18 day of May, 2016. BANKUNITED, INC. By: /s/ John A. Kanas Name: John A. Kanas Title: Chairman, President and Chief Executive OfficerExhibit 12.1BANKUNITED, INC. AND SUBSIDIARIESCALCULATION OF RATIO OF INCOME TO FIXED CHARGES(In thousands, except for ratios) Year Ended December 31, 2017 2016 2015 2014 2013Excluding Interest on Deposits: Fixed Charges Interest expense (other than interest on deposits) $83,256 $69,059 $44,013 $33,690 $32,045Interest factor in rent expense (1) 9,160 9,205 9,026 8,471 8,668Total fixed charges $92,416 $78,264 $53,039 $42,161 $40,713 Earnings Income before income taxes $404,461 $335,444 $296,893 $293,250 $318,002Fixed charges 92,416 78,264 53,039 42,161 40,713Total earnings $496,877 $413,708 $349,932 $335,411 $358,715 Ratio of earnings to fixed charges excluding interest on deposits 5.38 5.29 6.60 7.96 8.81 Including Interest on Deposits: Fixed Charges Total interest expense $254,189 $188,832 $135,164 $106,651 $92,611Interest factor in rent expense (1) 9,160 9,205 9,026 8,471 8,668Total fixed charges $263,349 $198,037 $144,190 $115,122 $101,279 Earnings Income before income taxes $404,461 $335,444 $296,893 $293,250 $318,002Fixed charges 263,349 198,037 144,190 115,122 101,279Total earnings $667,810 $533,481 $441,083 $408,372 $419,281 Ratio of earnings to fixed charges including interest on deposits 2.54 2.69 3.06 3.55 4.14(1) Consists of one third of total rent expense which management believes approximates the interest factor in rent expense.Exhibit 21.1 List of Subsidiaries The following is a list of the subsidiaries of BankUnited, Inc. as of December 31, 2017, including the name of each subsidiary and its jurisdiction ofincorporation:1.BankUnited, N.A.USA2.Bridge Funding Group, Inc.Delaware3.BU Delaware, Inc.Delaware4.CRE Properties, Inc.Florida5.Pinnacle Public Finance, Inc.DelawareExhibit 23.1 Consent of Independent Registered Public Accounting FirmThe Board of DirectorsBankUnited, Inc.:We consent to the incorporation by reference in the registration statements on Form S‑3ASR (No. 333-207619) and Form S‑8 (Nos. 333‑172035,333‑179800, 333‑188925, 333‑190586, 333‑192222 and 333-197808) of BankUnited, Inc. and subsidiaries (the "Company") of our reports datedFebruary 28, 2018, with respect to the consolidated balance sheets of the Company as of December 31, 2017 and 2016, and the related consolidatedstatements of income, comprehensive income, cash flows, and stockholders’ equity for each of the years in the three‑year period ended December 31, 2017,and the effectiveness of internal control over financial reporting as of December 31, 2017, which reports appear in the December 31, 2017 annual report onForm 10‑K of the Company./s/KPMG LLPFebruary 28, 2018Miami, FloridaCertified Public AccountantsExhibit 31.1 Certification of Chief Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Rajinder P. Singh, certify that: 1.I have reviewed this annual report on Form 10-K of BankUnited, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. /s/ Rajinder P. SinghRajinder P. SinghPresident and Chief Executive OfficerDate: February 28, 2018Exhibit 31.2 Certification of Chief Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Leslie N. Lunak, certify that: 1.I have reviewed this annual report on Form 10-K of BankUnited, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. /s/ Leslie N. LunakLeslie N. LunakChief Financial OfficerDate: February 28, 2018Exhibit 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of BankUnited, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2017, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Rajinder P. Singh, as Chief Executive Officer of the Company, certify, to the best ofmy knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and 2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Rajinder P. SinghRajinder P. SinghPresident and Chief Executive Officer Date: February 28, 2018Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of BankUnited, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2017, as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), I, Leslie N. Lunak, as Chief Financial Officer of the Company, certify, to the best ofmy knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and 2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Leslie N. LunakLeslie N. LunakChief Financial Officer Date: February 28, 2018

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