BankUnited Inc

Previous wording

The following discussion and analysis is intended to focus on significant matters impacting and changes in the financial condition and results of operations of the Company during the six months ended June 30, 2024 and should be read in conjunction with the consolidated financial statements and notes hereto included in this Quarterly Report on Form 10-Q and BKU's 2023 Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K").

Current wording

The following discussion and analysis is intended to focus on significant matters impacting and changes in the financial condition and results of operations of the Company during the nine months ended September 30, 2024 and should be read in conjunction with the consolidated financial statements and notes hereto included in this Quarterly Report on Form 10-Q and BKU's 2023 Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report on Form 10-K").

Previous wording

Net income for the three months ended June 30, 2024, was $53.7 million, or $0.72 per diluted share, compared to $58.0 million, or $0.78 per diluted share, for the three months ended June 30, 2023. Net income for the six months ended June 30, 2024, was $101.7 million, or $1.36 per diluted share, compared to $110.9 million, or $1.48 per diluted share for the six months ended June 30, 2023. For the six months ended June 30, 2024, the annualized return on average stockholders' equity was 7.68% and the annualized return on average assets was 0.58%.

Current wording

Net income for the three months ended September 30, 2024, was $61.5 million, or $0.81 per diluted share, compared to $47.0 million, or $0.63 per diluted share, for the three months ended September 30, 2023. Net income for the nine months ended September 30, 2024, was $163.2 million, or $2.17 per diluted share, compared to $157.9 million, or $2.11 per diluted share for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the annualized return on average stockholders' equity was 8.1% and the annualized return on average assets was 0.62%.

Previous wording

◦The average cost of total deposits declined by 0.09% to 3.09% for the three months ended June 30, 2024, from 3.18% for the immediately preceding three months ended March 31, 2024. The spot APY of total deposits declined to 3.09% at June 30, 2024 from 3.17% at March 31, 2024. The spot APY of interest bearing deposits was stable at 4.29% at both June 30, 2024 and March 31, 2024.

Current wording

◦The average cost of total deposits declined by 0.03% to 3.06% for the three months ended September 30, 2024, from 3.09% for the immediately preceding three months ended June 30, 2024. The spot APY of total deposits declined to 2.93% at September 30, 2024 from 3.09% at June 30, 2024. The average cost of interest bearing deposits declined by 0.06% to 4.20%for the three months ended September 30, 2024 from 4.26% for the immediately preceding three months ended June 30, 2024 while the spot APY of interest bearing deposits declined to 4.01% at September 30, 2024 from 4.29% at June 30, 2024.

Previous wording

◦Wholesale funding, including FHLB advances and brokered deposits, declined by $1.2 billion for the three months ended June 30, 2024.

Current wording

◦The Company's funding profile has improved significantly over the course of 2024. For the nine months ended September 30, 2024, wholesale funding, including FHLB advances and brokered deposits, declined by $1.9 billion, while non-brokered deposits grew by $1.7 billion, including an increase of $800 million in NIDDA.

Previous wording

◦The loan to deposit ratio declined to 88.7% at June 30, 2024, from 89.6% at March 31, 2024.

Current wording

◦The loan to deposit ratio declined to 87.6% at September 30, 2024, from 88.7% at June 30, 2024 and 92.8% at December 31, 2023.

Previous wording

◦Credit trends remain largely favorable although we are seeing some expected normalization. The annualized net charge-off ratio for the six months ended June 30, 2024, was 0.12%. The NPA ratio at June 30, 2024 was 0.50%, including 0.11% related to the guaranteed portion of non-performing SBA loans, compared to 0.34%, including 0.11% related to the guaranteed portion of non-performing SBA loans at March 31, 2024. The NPA ratio remains below pre-pandemic levels.

Current wording

◦Net charge-offs remained low and were $6.5 million for the three months ended September 30, 2024. The annualized net charge-off ratio for the nine months ended September 30, 2024, was 0.12%. The NPA ratio at September 30, 2024 was 0.64%, including 0.10% related to the guaranteed portion of non-performing SBA loans, compared to 0.50%, including 0.11% related to the guaranteed portion of non-performing SBA loans at June 30, 2024.

Previous wording

◦The ratio of the ACL to total loans increased to 0.92% at June 30, 2024; the ratio of the ACL to non-performing loans was 130.12%. The ACL to loans ratio for commercial portfolio sub-segments including C&I, CRE, franchise finance and equipment finance was 1.42% at June 30, 2024 and the ACL to loans ratio for CRE office loans was 2.47%.

Current wording

◦The ratio of the ACL to total loans increased to 0.94% at September 30, 2024; the ratio of the ACL to non-performing loans was 101.68%. The ACL to loans ratio for commercial portfolio sub-segments including C&I, CRE, franchise finance and equipment finance was 1.41% at September 30, 2024 and the ACL to loans ratio for CRE office loans was 2.20%.

Previous wording

◦Commercial real estate exposure is modest totaling 24% of loans and 165% of the Bank's total risk-based capital at June 30, 2024. By comparison, based on call report data as of March 31, 2024 for banks with between $10 billion and $100 billion in assets, the median level of CRE to total loans was 35% and the median level of CRE to total risk based capital was 222%.

Current wording

◦Commercial real estate exposure is modest totaling 25% of loans and 164% of the Bank's total risk-based capital at September 30, 2024. By comparison, based on call report data as of June 30, 2024 for banks with between $10 billion and $100 billion in assets, the median level of CRE to total loans was 35% and the median level of CRE to total risk based capital was 220%.

Previous wording

◦Total same day available liquidity was $14.9 billion, the available liquidity to uninsured, uncollateralized deposits ratio was 139% and an estimated 61% of our deposits were insured or collateralized at June 30, 2024.

Current wording

◦Total same day available liquidity was $15.0 billion, the available liquidity to uninsured, uncollateralized deposits ratio was 147% and an estimated 63% of our deposits were insured or collateralized at September 30, 2024.

Previous wording

◦At June 30, 2024, CET1 was 11.6% and pro-forma CET1, including accumulated other comprehensive income, was 10.4%. The ratio of tangible common equity/tangible assets increased to 7.4%.

Current wording

◦At September 30, 2024, CET1 was 11.8% and pro-forma CET1, including accumulated other comprehensive income, was 10.9%. The ratio of tangible common equity/tangible assets increased to 7.6%.

Previous wording

◦The net unrealized pre-tax loss on the AFS securities portfolio continued to improve, declining by $36 million for the three months ended June 30, 2024, representing 5% of amortized cost. The duration of our AFS securities portfolio remained short at 1.82 at June 30, 2024. HTM securities were not significant.

Current wording

◦The net unrealized pre-tax loss on the AFS securities portfolio continued to improve, declining by $125 million for the three months ended September 30, 2024, representing 4% of amortized cost. The duration of our AFS securities portfolio remained short at 1.73 at September 30, 2024. HTM securities were not significant.

Previous wording

◦Book value and tangible book value per common share grew to $36.11 and $35.07, respectively, at June 30, 2024, from $35.31 and $34.27, respectively, at March 31, 2024.

Current wording

◦Book value and tangible book value per common share grew to $37.56 and $36.52, respectively, at September 30, 2024, from $36.11 and $35.07, respectively, at June 30, 2024.

Previous wording

(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $3.1 million for the three months ended June 30, 2024, $3.2 million for the three months ended March 31, 2024, and $3.3 million for the three months ended June 30, 2023. The tax-equivalent adjustment for tax-exempt investment securities was $0.9 million for the three months ended June 30, 2024, $0.8 million for the three months ended March 31, 2024 and $0.9 million for the three months ended June 30, 2023.

Current wording

(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $3.0 million for the three months ended September 30, 2024, $3.1 million for the three months ended June 30, 2024, and $3.3 million for the three months ended September 30, 2023. The tax-equivalent adjustment for tax-exempt investment securities was $0.9 million for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023.

Previous wording

(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $6.3 million and $6.7 million for the six months ended June 30, 2024 and 2023, respectively. The tax-equivalent adjustment for tax-exempt investment securities was $1.7 million and $1.8 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

(1)On a tax-equivalent basis where applicable. The tax-equivalent adjustment for tax-exempt loans was $9.3 million and $10.0 million for the nine months ended September 30, 2024 and 2023, respectively. The tax-equivalent adjustment for tax-exempt investment securities was $2.6 million and $2.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Net interest income, calculated on a tax-equivalent basis, was$230.0 million for thethree months ended June 30, 2024, compared to $218.9 millionfor the three months ended March 31, 2024, an increase of $11.1 million. The increase in net interest income was comprised of an increase in tax-equivalent interest income of $1.8 million and a decrease in interest expense of $9.3 million for thethree months ended June 30, 2024, compared to thethree months ended March 31, 2024. The net interest margin, calculated on a tax-equivalent basis, was 2.72% for the three months ended June 30, 2024, compared to 2.57% for thethree months ended March 31, 2024.

Current wording

Net interest income, calculated on a tax-equivalent basis, was$238.0 million for thethree months ended September 30, 2024, compared to $230.0 millionfor the three months ended June 30, 2024, an increase of $8.0 million. The increase in net interest income was comprised of increases in tax-equivalent interest income and expense of $9.0 million and $1.0 million, respectively, for thethree months ended September 30, 2024, compared to thethree months ended June 30, 2024. The net interest margin, calculated on a tax-equivalent basis, was 2.78% for the three months ended September 30, 2024, compared to 2.72% for thethree months ended June 30, 2024.

Previous wording

Net interest income, calculated on a tax-equivalent basis, was $230.0 million for the three months ended June 30, 2024, compared to $218.1 million for the three months ended June 30, 2023, an increase of $11.9 million. The increase was comprised of increases in tax-equivalent interest income and interest expense of $19.6 million and $7.7 million, respectively.

Current wording

Net interest income, calculated on a tax-equivalent basis, was $238.0 million for the three months ended September 30, 2024, compared to $219.1 million for the three months ended September 30, 2023, an increase of $18.9 million. The increase was comprised of increases in tax-equivalent interest income and interest expense of $21.4 million and $2.5 million, respectively.

Previous wording

Increases in interest income for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, reflected rising yields on interest earning assets that more than offset the decline in average interest earning assets. Similarly, increases in interest expense for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, resulted from increases in the cost of interest bearing liabilities that more than offset the decline in average interest bearing liabilities.

Current wording

Increases in interest income for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, reflected rising yields on interest earning assets that more than offset the decline in average interest earning assets. Similarly, increases in interest expense for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, resulted from increases in the cost of interest bearing liabilities that more than offset the decline in average interest bearing liabilities.

Previous wording

The net interest margin, calculated on a tax-equivalent basis, increased to 2.72% and 2.64% for the three and six months ended June 30, 2024, respectively, from 2.47% and 2.55% for the three and six months ended June 30, 2023, respectively. The increase in the net interest margin for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 was primarily a result of balance sheet repositioning and an improved funding mix. Increased yields on average interest earning assets as well as increases in the cost of deposits reflected the ongoing impact of higher prevailing market interest rates.

Current wording

The net interest margin, calculated on a tax-equivalent basis, increased to 2.78% and 2.69% for the three and nine months ended September 30, 2024, respectively, from 2.56% and 2.55% for the three and nine months ended September 30, 2023, respectively. The increase in the net interest margin for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was primarily a result of balance sheet repositioning, particularly an improved funding mix. For the three months ended September 30, 2024 compared to the three months ended September 30, 2023, average NIDDA increased by $447 million while average FHLB advances declined by $2.3 billion. For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, average NIDDA was stable while average FHLB advances declined by $2.6 billion.

Previous wording

Further discussion of factors impacting the net interest margin for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023 follows:

Current wording

Further discussion of factors impacting the net interest margin for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 follows:

Previous wording

•The tax-equivalent yield on loans increased to 5.85% and 5.82% for the three andsix months ended June 30, 2024, from 5.35% and 5.22% for the three andsix months ended June 30, 2023. These increases reflected the origination of new loans at higher rates, coupon resets, paydowns of lower-rate loans and balance sheet repositioning.

Current wording

•The tax-equivalent yield on loans increased to 5.87% and 5.84% for the three andnine months ended September 30, 2024, from 5.54% and 5.33% for the three andnine months ended September 30, 2023. These increases reflected the origination of new loans at higher rates, coupon resets, paydowns of lower-rate loans and balance sheet repositioning.

Previous wording

•The tax-equivalent yield on investment securities increased to 5.60% and 5.59% for the three and six months ended June 30, 2024, from 5.19% and 5.07% for the three and six months ended June 30, 2023. These increases resulted primarily from the reset of coupon rates on variable rate securities, purchases of higher-yielding securities and paydowns and sales of lower-yielding securities.

Current wording

•The tax-equivalent yield on investment securities increased to 5.62% and 5.60% for the three and nine months ended September 30, 2024, from 5.48% and 5.20% for the three and nine months ended September 30, 2023. These increases resulted primarily from the reset of coupon rates on variable rate securities, purchases of higher-yielding securities and paydowns and sales of lower-yielding securities.

Previous wording

•The average cost of interest bearing deposits increased to 4.26% and 4.23% for the three and six months ended June 30, 2024, from 3.39% and 3.12% for the three and six months ended June 30, 2023. These increases primarily reflected the ongoing impact of higher prevailing market interest rates.

Current wording

•The average cost of interest bearing deposits increased to 4.20% and 4.22% for the three and nine months ended September 30, 2024, from 3.76% and 3.34% for the three and nine months ended September 30, 2023. These increases primarily reflected the ongoing impact of higher prevailing market interest rates.

Previous wording

•The average rate paid on FHLB advances decreased to 4.28% and 4.22%for thethree and six months ended June 30, 2024, from 4.59% and 4.44%for thethree and six months ended June 30, 2023, primarily due to repayment of higher rate advances, partially offset by maturities of cash flow hedges in the second quarter of 2024.

Current wording

•The average rate paid on FHLB advances decreased to 4.27% and 4.24%for thethree and nine months ended September 30, 2024, from 4.57% and 4.48%for thethree and nine months ended September 30, 2023, primarily due to repayment of higher rate advances, partially offset by maturities of some cash flow hedges.

Previous wording

The losses on marketable equity securities during the six months ended June 30, 2023, were attributable to losses related to certain preferred equity investments.

Current wording

The losses on marketable equity securities during the nine months ended September 30, 2023, were attributable to losses related to certain preferred equity investments.

Previous wording

The decrease in lease financing revenue for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was primarily attributable to a lower level of rental income as we have opportunistically sold some operating lease equipment in a strategic effort to reduce the size of the operating lease equipment portfolio. Expense related to the depreciation of operating lease equipment reflected a corresponding decrease over these comparative periods.

Current wording

The decrease in lease financing revenue for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, was primarily attributable to a lower level of rental income as we have opportunistically sold some operating lease equipment in a strategic effort to reduce the size of the operating lease equipment portfolio. Expense related to the depreciation of operating lease equipment reflected a corresponding decrease over these comparative periods.

Previous wording

The increase in other non-interest income for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, reflected increases in revenue from our customer derivative business and higher loan related and syndication fees.

Current wording

The increase in other non-interest income for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2024, reflected increases in BOLI income, particularly as related to the BOLI assets supporting our deferred compensation plan, higher gains on sale of loans, higher loan-related and syndication fees and particularly for the comparative nine month periods, increased revenue from our customer derivative and commercial card businesses.

Previous wording

The most significant factor impacting the increases in employee compensation and benefits was the fluctuation in variable compensation expense. An increase in expense related to liability-classified share-based awards was driven by volatility in the Company's stock price and reversal of expenses in the prior year for awards that did not vest. Accruals for estimated bonus and incentive awards also increased in 2024.

Current wording

The most significant factor impacting the increases in employee compensation and benefits was the fluctuation in variable compensation expense, which was driven by an increase in the Company's stock price, impacting the value ofliability-classified share-based awards as well as increases in certain other variable compensation accruals. Thenine months ended September 30, 2023, also included reversal of expenses in the prior year for awards that did not vest.

Previous wording

The year-over-year increase in deposit insurance expense was primarily attributable to an additional $5.2 million related to an FDIC special assessment during the six months ended June 30, 2024.

Current wording

The year-over-year increase in deposit insurance expense was primarily attributable to an additional $5.2 million related to an FDIC special assessment recorded during the first quarter of 2024.

Previous wording

The decline in depreciation of operating lease equipment for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, is primarily attributed to a smaller operating lease equipment portfolio, corresponding to the decline in lease financing revenue.

Current wording

The decline in depreciation of operating lease equipment for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, is primarily attributed to a smaller operating lease equipment portfolio, corresponding to the decline in lease financing revenue.

Previous wording

Included in other non-interest expense are costs related to certain deposit customer rebate and commissions programs, which increased by $6.4 million and $11.9 million for the three and six months ended June 30, 2024, respectively, compared to the three and six months ended June 30, 2023. Other non-interest expense for the six months ended June 30, 2023 included $4.4 million related to certain operational losses.

Current wording

Included in other non-interest expense are costs related to certain deposit customer rebate and commissions programs, which increased by $4.9 million and $16.7 million for the three and nine months ended September 30, 2024, respectively, compared to the three and nine months ended September 30, 2023.

Previous wording

Our investment strategy is focused on ensuring adequate liquidity, maintaining a suitable balance of high credit quality, diverse assets, managing interest rate risk, and generating acceptable returns given our established risk parameters. We have sought to maintain liquidity by investing a significant portion of the portfolio in high quality liquid securities including U.S. Treasury and U.S. Government Agency and sponsored enterprise securities. We have also invested in highly-rated structured products, including private-label commercial and residential MBS, collateralized loan obligations, single family real estate-backed securities and non-mortgage asset-backed securities that, while somewhat less liquid, are generally pledgeable at either the FHLB or the FRB and provide us with attractive yields. Investment grade municipal securities provide liquidity and attractive tax-equivalent yields. We remain committed to keeping the duration of our securities portfolio short; relatively short effective portfolio duration helps mitigate interest rate risk. Based on the Company’s assumptions, the effective duration of the investment portfolio was 1.83 years andthe estimated weighted average life of the portfolio was 5.4 yearsas of June 30, 2024.

Current wording

Our investment strategy is focused on ensuring adequate liquidity, maintaining a suitable balance of high credit quality, diverse assets, managing interest rate risk, and generating acceptable returns given our established risk parameters. We have sought to maintain liquidity by investing a significant portion of the portfolio in high quality liquid securities including U.S. Treasury and U.S. Government Agency and sponsored enterprise securities. We have also invested in highly-rated structured products, including private-label commercial and residential MBS, collateralized loan obligations, single family real estate-backed securities and non-mortgage asset-backed securities that, while somewhat less liquid, are generally pledgeable at either the FHLB or the FRB and provide us with attractive yields. Investment grade municipal securities provide liquidity and attractive tax-equivalent yields. We remain committed to keeping the duration of our securities portfolio short; relatively short effective portfolio duration helps mitigate interest rate risk. The estimated effective duration of the investment portfolio was 1.74 years andthe estimated weighted average life of the portfolio was 5.4 yearsas of September 30, 2024.

Previous wording

The investment securities AFS portfolio was in a net unrealized loss position of $462.5 million at June 30, 2024, compared to a net unrealized loss position of $534.8 million at December 31, 2023, improving by $72.3 million during the six months ended June 30, 2024. Net unrealized losses at June 30, 2024 included $10.3 million of gross unrealized gains and $472.8 million of gross unrealized losses. Investment securities available for sale in unrealized loss positions at June 30, 2024 had an aggregate fair value of $6.6 billion. The unrealized losses resulted primarily from a sustained period of higher interest rates, and in some cases, wider spreads compared to the levels at which securities were purchased. None of the unrealized losses were attributable to credit loss impairments.

Current wording

The investment securities AFS portfolio was in a net unrealized loss position of $338.0 million at September 30, 2024, compared to a net unrealized loss position of $534.8 million at December 31, 2023, improving by $196.8 million during the nine months ended September 30, 2024. Net unrealized losses at September 30, 2024 included $19.2 million of gross unrealized gains and $357.2 million of gross unrealized losses. Investment securities available for sale in unrealized loss positions at September 30, 2024 had an aggregate fair value of $6.1 billion. The unrealized losses resulted primarily from a sustained period of higher interest rates, and in some cases, wider spreads compared to the levels at which securities were purchased. None of the unrealized losses were attributable to credit loss impairments.

Previous wording

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

Current wording

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

Previous wording

We do not intend to sell securities in significant unrealized loss positions at June 30, 2024. Based on an assessment of our liquidity position and internal and regulatory guidelines for permissible investments and concentrations, it is not more likely than not that we will be required to sell securities in significant unrealized loss positions prior to recovery of amortized cost basis, which may be at maturity. The substantial majority of our investment securities are able to be pledged at either the FHLB or FRB. We have not sold, and do not anticipate the need to sell, securities in unrealized loss positions to generate liquidity.

Current wording

We do not intend to sell securities in significant unrealized loss positions at September 30, 2024. Based on an assessment of our liquidity position and internal and regulatory guidelines for permissible investments and concentrations, it is not more likely than not that we will be required to sell securities in significant unrealized loss positions prior to recovery of amortized cost basis, which may be at maturity. The substantial majority of our investment securities are eligible to be pledged at either the FHLB or FRB. We have not sold, and do not anticipate the need to sell, securities in unrealized loss positions to generate liquidity.

Previous wording

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

Current wording

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

Previous wording

Included in New York tri-state multifamily loans in the tables above is approximately $119 million of rent regulated exposure as of June 30, 2024.

Current wording

Included in New York tri-state multifamily loans in the tables above is approximately $117 million of rent regulated exposure as of September 30, 2024.

Previous wording

The office segment totaled $1.8 billion at June 30, 2024. Medical office comprised $309 million or 17% of the total office portfolio. The following charts present the sub-market geographic distribution of the Florida and NY tri-state office portfolios at June 30, 2024:

Current wording

The office segment totaled $1.8 billion at September 30, 2024. Medical office comprised $352 million or 20% of the total office portfolio. The following charts present the sub-market geographic distribution of the Florida and NY tri-state office portfolios at September 30, 2024:

Previous wording

The New York tri-state market encompasses approximately 24% of the office segment, with $180 million of exposure in Manhattan. As of June 30, 2024, the Manhattan office portfolio was approximately 96% occupied with 6% rent rollover expected in the next twelve months. The Florida office portfolio is predominantly suburban.

Current wording

The New York tri-state market encompasses approximately 23% of the office segment, with $169 million of exposure in Manhattan. As of September 30, 2024, the Manhattan office portfolio was approximately 95% occupied with 10% rent rollover expected in the next twelve months. The Florida office portfolio is predominantly suburban.

Previous wording

Office loans not secured by properties in Florida or the New York tri-state area comprised 18%, or $319 million of the segment, and exhibited no particular geographic concentration. Estimated rent rollover of the total office portfolio in the next 12 months is approximately 9%.

Current wording

Office loans not secured by properties in Florida or the New York tri-state area comprised 20%, or $354 million of the segment, and exhibited no particular geographic concentration. Estimated rent rollover of the total office portfolio in the next 12 months is approximately 11%.

Previous wording

The construction portfolio includes an additional $87 million in office related exposure, $84 million of which is in Manhattan.

Current wording

The construction portfolio includes an additional $85 million in office related exposure, $83 million of which is in New York.