EVER-6.30.13-10Q
Table of Contents


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2013.
or
 
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                to             
EverBank Financial Corp
(Exact name of registrant as specified in its charter)
Delaware
 
001-35533
 
52-2024090
(State of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
 
 
501 Riverside Ave., Jacksonville, FL
 
 
 
32202
(Address of principal executive offices)
 
 
 
(Zip Code)
904-281-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes Q    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes Q  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
  
Accelerated filer o
 
Non-accelerated filer Q (Do not check if a smaller reporting company)
  
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o  No Q
As of July 29, 2013, there were 122,525,760 shares of common stock outstanding.
 

Table of Contents


EverBank Financial Corp
Form 10-Q
Index
Part I - Financial Information
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
Part II - Other Information
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.

Table of Contents

Part I. Financial Information
Item 1. Financial Statements (unaudited)
EverBank Financial Corp and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(Dollars in thousands, except per share data)



 
June 30,
2013
 
December 31,
2012
Assets
 
 
 
Cash and due from banks
$
40,841

 
$
175,400

Interest-bearing deposits in banks
448,746

 
268,514

Total cash and cash equivalents
489,587

 
443,914

Investment securities:
 
 
 
Available for sale, at fair value
1,357,752

 
1,619,878

Held to maturity (fair value of $114,853 and $146,709 as of June 30, 2013 and December 31, 2012, respectively)
115,319

 
143,234

Other investments
142,225

 
158,172

Total investment securities
1,615,296

 
1,921,284

Loans held for sale (includes $1,327,883 and $1,452,236 carried at fair value as of June 30, 2013 and December 31, 2012, respectively)
2,000,390

 
2,088,046

Loans and leases held for investment:
 
 
 
Loans and leases held for investment, net of unearned income
12,867,388

 
12,505,089

Allowance for loan and lease losses
(73,469
)
 
(82,102
)
Total loans and leases held for investment, net
12,793,919

 
12,422,987

Equipment under operating leases, net
39,850

 
50,040

Mortgage servicing rights (MSR), net
462,718

 
375,859

Deferred income taxes, net
139,814

 
170,877

Premises and equipment, net
65,930

 
66,806

Other assets
755,368

 
703,065

Total Assets
$
18,362,872

 
$
18,242,878

Liabilities
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
1,205,326

 
$
1,445,783

Interest-bearing
12,464,540

 
11,696,605

Total deposits
13,669,866

 
13,142,388

Other borrowings
2,667,700

 
3,173,021

Trust preferred securities
103,750

 
103,750

Accounts payable and accrued liabilities
372,173

 
372,543

Total Liabilities
16,813,489

 
16,791,702

Commitments and Contingencies (Note 14)
 
 


Shareholders’ Equity
 
 
 
Series A 6.75% Non-Cumulative Perpetual Preferred Stock, $0.01 par value (liquidation preference of $25,000 per share;10,000,000 shares authorized; 6,000 issued and outstanding at June 30, 2013 and December 31, 2012)
150,000

 
150,000

Common Stock, $0.01 par value (500,000,000 shares authorized; 122,383,260 and 120,987,955 issued and outstanding at June 30, 2013 and December 31, 2012, respectively)
1,224

 
1,210

Additional paid-in capital
827,682

 
811,085

Retained earnings
650,866

 
575,665

Accumulated other comprehensive income (loss) (AOCI)
(80,389
)
 
(86,784
)
Total Shareholders’ Equity
1,549,383

 
1,451,176

Total Liabilities and Shareholders’ Equity
$
18,362,872

 
$
18,242,878


See notes to unaudited condensed consolidated financial statements.

3
Table of Contents
EverBank Financial Corp and Subsidiaries
Condensed Consolidated Statements of Income (unaudited)
(Dollars in thousands, except per share data)

 
Three Months Ended
June 30,
 
   Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
Interest Income
 
 
 
 
 
 
 
Interest and fees on loans and leases
$
172,723

 
$
135,816

 
$
346,509

 
$
260,594

Interest and dividends on investment securities
14,813

 
20,699

 
31,063

 
41,248

Other interest income
317

 
82

 
615

 
186

Total Interest Income
187,853

 
156,597

 
378,187

 
302,028

Interest Expense
 
 
 
 
 
 
 
Deposits
26,567

 
20,419

 
53,390

 
41,393

Other borrowings
20,069

 
11,194

 
39,764

 
20,028

Total Interest Expense
46,636

 
31,613

 
93,154

 
61,421

Net Interest Income
141,217

 
124,984

 
285,033

 
240,607

Provision for Loan and Lease Losses
29

 
5,757

 
1,948

 
17,112

Net Interest Income after Provision for Loan and Lease Losses
141,188

 
119,227

 
283,085

 
223,495

Noninterest Income
 
 
 
 
 
 
 
Loan servicing fee income
47,192

 
42,483

 
89,355

 
88,039

Amortization and impairment of mortgage servicing rights
(3,373
)
 
(64,277
)
 
(25,896
)
 
(108,760
)
Net loan servicing income
43,819

 
(21,794
)
 
63,459

 
(20,721
)
Gain on sale of loans
75,837

 
69,926

 
158,148

 
118,103

Loan production revenue
10,063

 
9,852

 
19,552

 
17,289

Deposit fee income
4,290

 
5,828

 
10,215

 
12,067

Other lease income
6,471

 
8,822

 
12,882

 
17,485

Other
6,324

 
1,489

 
15,857

 
3,093

Total Noninterest Income
146,804

 
74,123

 
280,113

 
147,316

Noninterest Expense
 
 
 
 
 
 
 
Salaries, commissions and other employee benefits expense
118,457

 
76,277

 
228,936

 
142,867

Equipment expense
20,707

 
16,889

 
40,559

 
32,837

Occupancy expense
7,547

 
6,017

 
14,931

 
11,366

General and administrative expense
66,829

 
76,600

 
140,930

 
147,534

Total Noninterest Expense
213,540

 
175,783

 
425,356

 
334,604

Income before Provision for Income Taxes
74,452

 
17,567

 
137,842

 
36,207

Provision for Income Taxes
28,459

 
6,395

 
52,703

 
13,189

Net Income
$
45,993

 
$
11,172

 
$
85,139

 
$
23,018

Less: Net Income Allocated to Preferred Stock
(2,531
)
 
(1,685
)
 
(5,062
)
 
(7,664
)
Net Income Allocated to Common Shareholders
$
43,462

 
$
9,487

 
$
80,077

 
$
15,354

Basic Earnings Per Common Share
$
0.36

 
$
0.09

 
$
0.66

 
$
0.17

Diluted Earnings Per Common Share
$
0.35

 
$
0.09

 
$
0.65

 
$
0.17

Dividends Declared Per Common Share
$
0.02

 
$
—

 
$
0.04

 
$
—

See notes to unaudited condensed consolidated financial statements.

4
Table of Contents
EverBank Financial Corp and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(Dollars in thousands)

 
Three Months Ended
June 30,
 
   Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
Net Income
$
45,993

 
$
11,172

 
$
85,139

 
$
23,018

Unrealized Gains (Losses) on Debt Securities
 
 
 
 
 
 
 
Unrealized gains (losses) due to changes in fair value
(23,500
)
 
(7,581
)
 
(22,796
)
 
13,705

Tax effect
8,932

 
2,883

 
8,668

 
(5,146
)
Change in unrealized gains (losses) on debt securities
(14,568
)
 
(4,698
)
 
(14,128
)
 
8,559

Interest Rate Swaps
 
 
 
 
 
 
 
Net unrealized gains (losses) due to changes in fair value
17,383

 
(32,932
)
 
21,766

 
(26,304
)
Reclassification of net unrealized losses to interest expense
6,011

 
1,964

 
11,368

 
3,674

Tax effect
(8,891
)
 
11,769

 
(12,611
)
 
8,726

Change in interest rate swaps
14,503

 
(19,199
)
 
20,523

 
(13,904
)
Other Comprehensive Income (Loss)
(65
)
 
(23,897
)
 
6,395

 
(5,345
)
Comprehensive Income (Loss)
$
45,928

 
$
(12,725
)
 
$
91,534

 
$
17,673


See notes to unaudited condensed consolidated financial statements.

5
Table of Contents
EverBank Financial Corp and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity (unaudited)
(Dollars in thousands)


 
Shareholders’ Equity
 
 
 
Preferred Stock
 
Common Stock
 
Additional Paid-In Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss), Net of Tax
 
Total Equity
Balance, January 1, 2013
$
150,000

 
$
1,210

 
$
811,085

 
$
575,665

 
$
(86,784
)
 
$
1,451,176

Net income
—

 
—

 
—

 
85,139

 
—

 
85,139

Other comprehensive income
—

 
—

 
—

 
—

 
6,395

 
6,395

Issuance of common stock
—

 
14

 
10,456

 
—

 
—

 
10,470

Share-based grants (including income tax benefits)
—

 
—

 
6,141

 
—

 
—

 
6,141

Cash dividends on common stock
—

 
—

 
—

 
(4,875
)
 
—

 
(4,875
)
Cash dividends on preferred stock
—

 
—

 
—

 
(5,063
)
 
—

 
(5,063
)
Balance, June 30, 2013
$
150,000

 
$
1,224

 
$
827,682

 
$
650,866

 
$
(80,389
)
 
$
1,549,383

 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2012
$
3

 
$
751

 
$
561,247

 
$
513,413

 
$
(107,749
)
 
$
967,665

Net income
—

 
—

 
—

 
23,018

 
—

 
23,018

Other comprehensive loss
—

 
—

 
—

 
—

 
(5,345
)
 
(5,345
)
Conversion of preferred stock
(3
)
 
188

 
(185
)
 
—

 
—

 
—

Issuance of common stock, net of issue costs
—

 
226

 
198,536

 
—

 
—

 
198,762

Repurchase of common stock
—

 
—

 
(360
)
 
—

 
—

 
(360
)
Share-based grants (including income tax benefits)
—

 
—

 
3,184

 
—

 
—

 
3,184

Cash dividends on preferred stock
—

 
—

 
—

 
(5,555
)
 
—

 
(5,555
)
Balance, June 30, 2012
$
—

 
$
1,165

 
$
762,422

 
$
530,876

 
$
(113,094
)
 
$
1,181,369


See notes to unaudited condensed consolidated financial statements.

6
Table of Contents
EverBank Financial Corp and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(Dollars in thousands)

 
   Six Months Ended
June 30,
 
2013
 
2012
Operating Activities:
 
 
 
Net income
$
85,139

 
$
23,018

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Amortization of premiums and deferred origination costs
19,303

 
4,710

Depreciation and amortization of tangible and intangible assets
20,121

 
18,091

Reclassification of net loss on settlement of interest rate swaps
11,368

 
3,674

Amortization and impairment of mortgage servicing rights
25,896

 
108,760

Deferred income taxes (benefit)
27,120

 
(8,347
)
Provision for loan and lease losses
1,948

 
17,112

Loss on other real estate owned (OREO)
2,855

 
4,605

Share-based compensation expense
3,147

 
2,229

Payments for settlement of forward interest rate swaps
(30,181
)
 
(14,002
)
Other operating activities
3

 
(2,778
)
Changes in operating assets and liabilities:
 
 
 
Loans held for sale, including proceeds from sales and repayments
(665,369
)
 
(788,325
)
Other assets
68,592

 
37,043

Accounts payable and accrued liabilities
(2,982
)
 
1,638

Net cash provided by (used in) operating activities
(433,040
)
 
(592,572
)
Investing Activities:
 
 
 
Investment securities available for sale:
 
 
 
Purchases
(27,898
)
 
(210,717
)
Proceeds from prepayments and maturities
265,572

 
274,042

Investment securities held to maturity:
 
 
 
Purchases
(19,260
)
 
(14,917
)
Proceeds from prepayments and maturities
46,691

 
13,506

Purchases of other investments
(57,050
)
 
(37,422
)
Proceeds from sales of other investments
72,997

 
—

Net change in loans and leases held for investment
(32,012
)
 
(880,630
)
Cash paid for acquisition
—

 
(351,071
)
Purchases of premises and equipment, including equipment under operating leases
(9,246
)
 
(31,267
)
Purchases of mortgage servicing assets
(41,377
)
 
—

Proceeds related to sale or settlement of other real estate owned
19,620

 
18,664

Proceeds from insured foreclosure claims
198,878

 
61,869

Other investing activities
3,546

 
(190
)
Net cash provided by (used in) investing activities
420,461

 
(1,158,133
)
Financing Activities:
 
 
 
Net increase in nonmaturity deposits
826,916

 
343,692

Net increase (decrease) in time deposits
(269,741
)
 
182,987

Net change in repurchase agreements
(142,322
)
 
—

Net change in short-term Federal Home Loan Bank (FHLB) advances
(475,500
)
 
370,000

Proceeds from long-term FHLB advances
225,000

 
1,100,000

Repayments of long-term FHLB advances
(112,158
)
 
(223,500
)
Proceeds from issuance of common stock
10,470

 
207,514

Other financing activities
(4,413
)
 
(6,737
)
Net cash provided by financing activities
58,252

 
1,973,956

Net change in cash and cash equivalents
45,673

 
223,251

Cash and cash equivalents at beginning of period
443,914

 
294,981

Cash and cash equivalents at end of period
$
489,587

 
$
518,232


See Note 1 for disclosures related to supplemental noncash information.
See notes to unaudited condensed consolidated financial statements.

7
Table of Contents

EverBank Financial Corp and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
(Dollars in thousands, except per share data)


1.  Organization and Basis of Presentation
a) Organization — EverBank Financial Corp (the Company) is a thrift holding company with two direct operating subsidiaries, EverBank (EB) and EverBank Funding, LLC (EBF). EB is a federally chartered thrift institution with its home office located in Jacksonville, Florida. Its direct banking services are offered nationwide. In addition, EB operates financial centers in Florida and retail lending centers across the United States. EB (a) accepts deposits from the general public; (b) originates, purchases, services, sells and securitizes residential real estate mortgage loans, commercial real estate loans and commercial loans and leases; (c) originates consumer and home equity loans; and (d) offers full-service securities brokerage and investment advisory services.
EB’s subsidiaries are:
•AMC Holding, Inc., the parent of CustomerOne Financial Network, Inc.;
•Tygris Commercial Finance Group, Inc. (Tygris), the parent of EverBank Commercial Finance, Inc.;
•EverInsurance, Inc.;
•Elite Lender Services, Inc.;
•EverBank Wealth Management, Inc. (EWM); and
•Business Property Lending, Inc.
On January 31, 2012, as part of a tax-free reorganization, the assets, liabilities and business activities of EWM were transferred to EB.
On February 14, 2013, the Company formed EverBank Funding, LLC, a Delaware limited liability company, to facilitate the pooling and securitization of mortgage loans for issuance into the secondary market.
b) Reincorporation — In September 2010, EverBank Financial Corp, a Florida corporation (EverBank Florida), formed EverBank Financial Corp, a Delaware corporation (EverBank Delaware). Subsequent to its formation, EverBank Delaware held no assets, had no subsidiaries and did not engage in any business or other activities except in connection with its formation. In May 2012, EverBank Delaware completed an initial public offering with its common stock listed on the New York Stock Exchange (NYSE) under the symbol “EVER”. Immediately preceding the consummation of that offering, EverBank Florida merged with and into EverBank Delaware, with EverBank Delaware continuing as the surviving corporation and succeeding to all of the assets, liabilities and business of EverBank Florida. The merger resulted in the following:
•
All of the outstanding shares of common stock of EverBank Florida were converted into approximately 77,994,699 shares of EverBank Delaware common stock;
•
All of the outstanding shares of Series B Preferred Stock of EverBank Florida were converted into 15,964,644 shares of EverBank Delaware common stock;
•
As a result of the reincorporation of EverBank Florida in Delaware, the Company is now governed by the laws of the State of Delaware.
Reincorporation of EverBank Florida in Delaware did not result in any change in the business, management, fiscal year, assets, liabilities or location of the principal offices of the Company.
c) Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes necessary for a complete presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with generally accepted accounting principles. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes to the financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for acquired companies are included from their respective dates of acquisition. In management’s opinion, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations, comprehensive income, and changes in cash flows have been made.
GAAP requires management to make estimates that affect the reported amounts and disclosures of contingencies in the condensed consolidated financial statements. Estimates by their nature are based on judgment and available information. Material estimates relate to the Company’s allowance for loan and lease losses, loans and leases acquired with evidence of credit deterioration, repurchase obligations, contingent liabilities, and the fair values of investment securities, loans held for sale, MSR and derivative instruments. Because of the inherent uncertainties associated with any estimation process and future changes in market and economic conditions, it is possible that actual results could differ significantly from those estimates.    

8
Table of Contents

d) Supplemental Cash Flow Information - Noncash investing activities are presented in the following table:
 
   Six Months Ended
June 30,
 
2013
 
2012
Supplemental Schedules of Noncash Investing Activities:
 
 
 
Loans transferred to foreclosure claims from loans held for investment
$
220,783

 
$
67,487

Loans transferred to foreclosure claims from loans held for sale
98,037

 
142,519

Loans transferred from held for sale to held for investment
745,262

 
26,138

Loans transferred from held for investment to held for sale
326,636

 
1,604

 
 
 
 
Supplemental Schedules of Noncash Financing Activities:
 
 
 
Conversion of preferred stock
$
—

 
$
135,585

2.  Recent Accounting Pronouncements
Presentation of Comprehensive Income — In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2011-05, Comprehensive Income (Topic 220)—Presentation of Comprehensive Income, to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. ASU 2011-05 is effective for the first quarter of 2012 and should be applied retrospectively. Adoption of this standard resulted in the presentation of a new statement of comprehensive income separate from the statement of shareholders’ equity but did not have any impact on the Company’s results of operations. In December 2011, the FASB issued ASU 2011-12,Comprehensive Income (Topic 220)- Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05, to allow time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of AOCI on the components of net income and other comprehensive income for all periods presented. Adoption of this ASU did not have any impact on the Company’s condensed consolidated financial statements or results of operations. In February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to require an entity to disaggregate the total change of each component of other comprehensive income and separately present reclassification adjustments and current period other comprehensive income. ASU 2013-02 also requires that entities either (1) present in a single note or parenthetically on the face of the financial statements the effect of significant amounts reclassified from each component of AOCI based on its source and the income line item affected by the reclassification if items are reclassified out of AOCI in their entirety or (2) cross reference to other required, related disclosures for additional information if items are not reclassified out of AOCI in their entirety. ASU 2013-02 is effective prospectively for annual reporting periods beginning after December 15, 2012, and interim periods within those annual periods. The adoption of this standard resulted in the additional disclosure of the lines of income or expense impacted by reclassifications out of AOCI within the statement of comprehensive income but did not have any impact on the Company's condensed consolidated financial statements or results of operations.
Balance Sheet Offsetting—In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities, which will enhance disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement. The guidance will require that entities disclose the gross and net information about both instruments that are offset in the balance sheet or are subject to a master netting arrangement. In January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210)—Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which limits the scope of the new balance sheet offsetting disclosures to only (1) derivatives, including bifurcated embedded derivatives; (2) repurchase agreements and reverse repurchase agreements; and (3) securities borrowing and securities lending transactions, to the extent they are offset in the financial statements or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the statement of financial position. The requirements set forth in both ASU 2011-11 and ASU 2013-01 are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods with retrospective disclosure necessary for all comparative periods presented. The adoption of these standards resulted in additional disclosures as presented in Note 12 but did not have any impact on the Company's condensed consolidated financial statements or results of operations.
Updates to Significant Accounting Policies
Loans Held for Sale—Loans held for sale represent loans originated or acquired by the Company with the intent to sell. The Company has elected the fair value option of accounting under U.S. GAAP for certain residential mortgage loans. Electing to use the fair value option of accounting allows a better offset of the changes in the fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. These loans are initially recorded and carried at fair value, with changes in fair value recognized in gain on sale of loans. Loan origination fees are recorded when earned, and related costs are recognized when incurred.
The Company has not elected the fair value option for other residential mortgage loans primarily because the Company expects to hold these loans for a short duration. These loans are carried at the lower of cost or fair value. In determining the lower of cost or fair value adjustment on loans held for sale, the Company pools loans based on similar risk characteristics such as loan type and interest rate. Direct loan origination fees and costs are deferred at loan origination or acquisition. These amounts are recognized as income at the time the loan is sold and included in gain on sale of loans. Gains and losses on sale of these loans are recorded in gain on sale of loans.
Loans and leases are transferred from loans and leases held for investment to held for sale when the Company no longer has the intent to hold them for the foreseeable future. Loans and leases are transferred from held for sale to held for investment when the Company determines its intent to hold these loans and leases for the foreseeable future. Loans and leases are transferred to loans and leases held for investment at the lower of cost or fair value on the date of reclassification with any lower of cost or fair value adjustment recognized as a basis adjustment.

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Certain guarantees arise from agreements associated with servicing, securitization and sale of the Company's residential mortgage loans.  Under these agreements, the Company may be obligated to repurchase, or otherwise indemnify or reimburse the investor or insurer for losses incurred, due to material breach of contractual representations and warranties with respect to non-GSE purchasers, or breach of contractual representations and warranties with respect to GSEs.  These guarantees are accounted for in accordance with ASC 460, Guarantees, when the obligation is both probable and reasonably estimable. The guarantee is calculated at the fair value of the guarantee on the date of the loan sale or securitization. The corresponding provision is recognized as a reduction on net gains on loan sales and securitization, and is reduced, by a credit to earnings, as the guarantor is released from risk under the guarantee. The reserve for repurchase obligations is included in accounts payable and accrued liabilities on the consolidated balance sheets with changes to the reserve made through general and administrative expenses.  See Note 5 and Note 14 for further information related to these guarantees.
3.  Acquisition Activities
Acquisition of Business Property Lending, Inc. - On October 1, 2012, EB, a wholly owned subsidiary of the Company, acquired 100% of the outstanding common shares of Business Property Lending, Inc. (BPL), a wholly owned subsidiary of General Electric Capital Corporation (GECC) for cash consideration of $2,401,398. The acquisition provided the Company with an established and operating platform for expanding its originating capacity nationwide originating commercial real estate loans to small and mid-size business clients. The transaction was accounted for using the acquisition method with the consideration paid allocated to all identifiable assets and liabilities acquired.
Under the acquisition method of accounting, the measurement period for a transaction is to extend for a period necessary to obtain all available information to facilitate a complete and accurate recording of the transaction as of the acquisition date. This period, however, may not extend beyond a period of one year from the date of acquisition. In the event information not available at the time of acquisition is obtained during the measurement period that would affect the recording of the transaction, any applicable adjustments are to be performed retrospectively adjusting the initial recording of the acquisition.
The fair value of assets acquired included financing receivables for commercial real estate with a fair value of $2,337,123 that was comprised of both loans accounted for under ASC 310-20, Receivables, Nonrefundable Fees and Other Costs, as well as loans accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. Subsequent to the initial recording of the transaction, additional reviews into the ASC 310-20 population identified that evidence of deteriorated credit quality existed for some of these loans at the date of acquisition based on information not previously available. Upon review of the impact of this updated information to the overall fair value of the acquired loans, it was determined that no retrospective adjustment of the fair value was necessary. Therefore, a prospective adjustment was performed to include these loans in the ASC 310-30 population. The following table presents a bridge from the unpaid principal balance (UPB), or contractual net investment, to carrying value for the acquired financing receivables by method of accounting as presented initially at the acquisition date, as well as, based on the updated loan stratification:
 
As Initially Recorded
 
As Updated
 
ASC 310-20
 
ASC 310-30
 
ASC 310-20
 
ASC 310-30
Unpaid principal balance at acquisition
$
2,229,822

 
$
89,993

 
$
2,174,738

 
$
145,077

Plus: contractual interest due or unearned income
1,176,442

 
62,517

 
1,143,748

 
95,211

Contractual cash flows due
3,406,264

 
152,510

 
3,318,486

 
240,288

Less: cash flows not expected to be collected (1)
518,949

 
42,387

 
499,602

 
61,734

Expected cash flows
2,887,315

 
110,123

 
2,818,884

 
178,554

Less: accretable yield
629,788

 
30,527

 
617,297

 
43,018

Carrying value at acquisition
$
2,257,527

 
$
79,596

 
$
2,201,587

 
$
135,536

(1) Cash flows not expected to be collected includes the effects of both credit losses as well as modeled prepayment assumptions.

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4.  Investment Securities
The amortized cost and fair value of investment securities with gross unrealized gains and losses were as follows as of June 30, 2013 and December 31, 2012:
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Carrying Amount
June 30, 2013
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential collateralized mortgage obligations (CMO) securities - nonagency
$
1,340,741

 
$
17,840

 
$
7,263

 
$
1,351,318

 
$
1,351,318

Asset-backed securities (ABS)
6,672

 
—

 
843

 
5,829

 
5,829

Other
333

 
272

 
—

 
605

 
605

Total available for sale securities
$
1,347,746

 
$
18,112

 
$
8,106

 
$
1,357,752

 
$
1,357,752

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
61,526

 
$
2,187

 
$
31

 
$
63,682

 
$
61,526

Residential mortgage-backed securities (MBS) - agency
48,806

 
931

 
1,116

 
48,621

 
48,806

Corporate securities
4,987

 
—

 
2,437

 
2,550

 
4,987

Total held to maturity securities
$
115,319

 
$
3,118

 
$
3,584

 
$
114,853

 
$
115,319

December 31, 2012
 
 

 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
1,577,270

 
$
39,860

 
$
5,355

 
$
1,611,775

 
$
1,611,775

Asset-backed securities
9,461

 
—

 
1,935

 
7,526

 
7,526

Other
366

 
211

 
—

 
577

 
577

Total available for sale securities
$
1,587,097

 
$
40,071

 
$
7,290

 
$
1,619,878

 
$
1,619,878

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
106,346

 
$
3,497

 
$
—

 
$
109,843

 
$
106,346

Residential MBS - agency
31,901

 
1,986

 
—

 
33,887

 
31,901

Corporate securities
4,987

 
—

 
2,008

 
2,979

 
4,987

Total held to maturity securities
$
143,234

 
$
5,483

 
$
2,008

 
$
146,709

 
$
143,234

At June 30, 2013 and December 31, 2012, investment securities with a carrying value of $188,608 and $421,209, respectively, were pledged to secure other borrowings, public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law.
There were no gross gains or gross losses realized on available for sale investments during the three and six months ended June 30, 2013 or 2012.
The gross unrealized losses and fair value of the Company’s investments in an unrealized loss position at June 30, 2013 and December 31, 2012, aggregated by investment category and the length of time individual securities have been in a continuous unrealized loss position, are as follows:
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
349,489

 
$
5,767

 
$
45,914

 
$
1,496

 
$
395,403

 
$
7,263

Residential CMO securities - agency
11,686

 
31

 
—

 
—

 
11,686

 
31

Residential MBS - agency
35,750

 
1,116

 
—

 
—

 
35,750

 
1,116

Asset-backed securities
—

 
—

 
5,829

 
843

 
5,829

 
843

Corporate securities
—

 
—

 
2,550

 
2,437

 
2,550

 
2,437

Total debt securities
$
396,925

 
$
6,914

 
$
54,293

 
$
4,776

 
$
451,218

 
$
11,690

December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
57,715

 
$
299

 
$
183,285

 
$
5,056

 
$
241,000

 
$
5,355

Asset-backed securities
—

 
—

 
7,526

 
1,935

 
7,526

 
1,935

Corporate securities
—

 
—

 
2,979

 
2,008

 
2,979

 
2,008

Total debt securities
$
57,715

 
$
299

 
$
193,790

 
$
8,999

 
$
251,505

 
$
9,298


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Table of Contents

The Company had unrealized losses at June 30, 2013 and December 31, 2012 on residential nonagency CMO securities, residential agency CMO securities, residential agency MBS, ABS and corporate securities. These unrealized losses are primarily attributable to weak market conditions. Based on the nature of the impairment, these unrealized losses are considered temporary. The Company does not intend to sell nor is it more likely than not that it will be required to sell these investments before their anticipated recovery.
At June 30, 2013, the Company had 56 debt securities in an unrealized loss position. A total of 42 were in an unrealized loss position for less than 12 months. These 42 securities consisted of 31 residential nonagency CMO securities, two residential agency CMO securities and nine residential agency MBS. The remaining 14 debt securities were in an unrealized loss position for 12 months or longer. These 14 securities consisted of three ABS, one corporate security and 10 residential nonagency CMO securities. Of the $11,690 in unrealized losses, $7,856 relate to debt securities that are rated investment grade with the remainder representing securities for which the Company believes it has both the intent and ability to hold to recovery.
At December 31, 2012, the Company had 31 debt securities in an unrealized loss position. A total of 3 were in an unrealized loss position for less than 12 months, all of which were residential CMO securities. The remaining 28 debt securities were in an unrealized loss position for 12 months or longer. These 28 securities consisted of three ABS, one corporate security and 24 residential nonagency CMO securities. Of the $9,298 in unrealized losses, $5,355 relate to debt securities that are rated investment grade with the remainder representing securities for which the Company believes it has both the intent and ability to hold to recovery.
When certain triggers indicate the likelihood of an other-than-temporary-impairment (OTTI) or the qualitative evaluation performed cannot support the expectation of recovering the entire amortized cost basis of an investment, the Company performs cash flow analyses that project prepayments, default rates and loss severities on the collateral supporting each security. If the net present value of the investment is less than the amortized cost, the difference is recognized in earnings as a credit-related impairment, while the remaining difference between the fair value and the amortized cost is recognized in AOCI. There were no OTTI losses recognized on available for sale or held to maturity securities during the three and six months ended June 30, 2013 or 2012.
During the three and six months ended June 30, 2013 and 2012, interest and dividend income on investment securities was comprised of the following:
 
Three Months Ended
June 30,
 
   Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
Interest income on available for sale securities
$
13,420

 
$
18,728

 
$
28,285

 
$
37,599

Interest income on held to maturity securities
658

 
1,409

 
1,282

 
2,809

Other interest and dividend income
735

 
562

 
1,496

 
840

 
$
14,813

 
$
20,699

 
$
31,063

 
$
41,248

All investment interest income recognized by the Company during the three and six months ended June 30, 2013 and 2012 was fully taxable.
5.  Loans Held for Sale
Loans held for sale as of June 30, 2013 and December 31, 2012, consist of the following:
 
June 30,
2013
 
December 31,
2012
Mortgage warehouse (carried at fair value)
$
1,039,977


$
1,452,236

Government insured pool buyouts
139,982


96,635

Other
532,525


539,175

Other (carried at fair value)
287,906

 
—

Total loans held for sale
$
2,000,390


$
2,088,046

The Company typically transfers residential mortgage loans originated or acquired to various financial institutions, government agencies, and GSEs. In addition, the Company enters into loan securitization transactions related to certain conforming residential mortgage loans. In connection with these transactions, loans are converted into mortgage-backed securities issued primarily by the Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac), the Federal National Mortgage Association (FNMA or Fannie Mae) and the Government National Mortgage Association (GNMA or Ginnie Mae), and are subsequently sold to third party investors. Typically, the Company accounts for these transfers as sales and either retains or releases the right to service the loans. The servicing arrangement represents the Company's continuing involvement with these transferred loans.
In addition, the Company also may be exposed to limited liability related to recourse agreements and repurchase agreements made to our issuers and purchasers. This liability includes amounts related to loans sold that we may be required to repurchase, or otherwise indemnify or reimburse the investor or insurer for losses incurred, due to a material breach of contractual representations and warranties. Refer to Note 14 for the maximum exposure to loss for material breaches of contractual representations and warranties.
Other loans held for sale and carried at fair value of $287,906 represent preferred jumbo residential mortgage loans that the Company originated with the intent to market and sell in the secondary market either through third party sales or securitizations. The Company has elected the fair value option for these loans to provide a better offset of the changes in the fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting.

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Table of Contents

The following is a summary of cash flows related to transfers accounted for as sales for the three and six months ended June 30, 2013 and 2012:
 
Three Months Ended
June 30,
 
   Six Months Ended
June 30,
 
2013
 
2012
 
2013
 
2012
Proceeds received from agency securitizations
$
2,688,840

 
$
1,869,387

 
$
5,093,450

 
$
3,790,357

Proceeds received from nonagency sales
335,426

 
5,452

 
677,308

 
18,247

 
 
 
 
 
 
 
 
Servicing fees collected
29,349

 
23,944

 
55,562

 
47,900

 
 
 
 
 
 
 
 
Repurchased loans from agency securitizations
1,079

 
2,045

 
2,171

 
3,516

Repurchased loans from nonagency sales
4,939

 
4,346

 
10,216

 
9,514

The Company periodically transfers conforming residential mortgages to GNMA in exchange for mortgage-backed securities.  As of June 30, 2013 and December 31, 2012, the Company retained $141,438 and $99,121, respectively, of these securities backed by the transferred loans and maintained effective control over these pools of transferred assets. Accordingly, the Company did not record these transfers as sales. These transferred assets were recorded in the condensed consolidated balance sheets as loans held for sale. The remaining securities were sold to unrelated third parties and were recorded as sales.
The gains and losses on transfers which qualify as sales are recorded in the condensed consolidated statements of income in gain on sale of loans, which includes the gain or loss on sale, change in fair value related to fair value option loans, rate lock commitments, and the offsetting hedging positions.
In connection with these transfers, the Company recorded servicing assets in the amount of $27,491 and $50,992 for the three and six months ended June 30, 2013, respectively. All servicing assets are initially recorded at fair value using a Level 3 measurement technique. Refer to Note 8 for information relating to servicing activities and MSR.
During the three and six months ended June 30, 2013, the Company transferred $721,220 and $745,660 in residential mortgage loans from loans held for sale to loans held for investment at lower of cost or market. A majority of these loans were originated preferred jumbo ARM residential mortgages which were intended to be sold in the secondary market. As a result of changing economic conditions and the Company's capacity and desire to hold these loans on the balance sheet, the Company intends to hold these loans for the foreseeable future and has transferred these loans to the held for investment portfolio. During the three and six months ended June 30, 2012, the Company transferred $8,700 and $26,138 in residential mortgage and commercial real estate loans held for sale to loans held for investment at lower of cost or market as the Company has the intent to hold these loans for the foreseeable future.
During the three and six months ended June 30, 2013, the Company transferred $224,652 and $326,636 of loans held for investment to held for sale at lower of cost or market. The majority of these loans were government insured pool buyouts initially originated for the held for investment portfolio. These loans were transferred to held for sale based upon a change in intent to no longer hold these loans for the foreseeable future.

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Table of Contents

6.  Loans and Leases Held for Investment, Net
Loans and leases held for investment as of June 30, 2013 and December 31, 2012 are comprised of the following:
 
June 30,
2013
 
December 31,
2012
Residential mortgages
$
6,586,116

 
$
6,708,748

Commercial and commercial real estate
5,090,332

 
4,771,768

Lease financing receivables
1,014,996

 
836,935

Home equity lines
169,296

 
179,600

Consumer and credit card
6,648

 
8,038

Total loans and leases held for investment, net of discounts
12,867,388

 
12,505,089

Allowance for loan and lease losses
(73,469
)
 
(82,102
)
Total loans and leases held for investment, net
$
12,793,919

 
$
12,422,987

As of June 30, 2013 and December 31, 2012, the carrying values presented above include net purchased loan and lease discounts and net deferred loan and lease origination costs as follows:
 
June 30,
2013
 
December 31,
2012
Net purchased loan and lease discounts
$
130,880

 
$
164,132

Net deferred loan and lease origination costs
37,232

 
25,275

Acquired Credit Impaired (ACI) Loans and Leases — At acquisition, the Company estimates the fair value of acquired loans and leases by segregating the portfolio into pools with similar risk characteristics. Fair value estimates for acquired loans and leases require estimates of the amounts and timing of expected future principal, interest and other cash flows. For each pool, the Company uses certain loan and lease information, including outstanding principal balance, probability of default and the estimated loss in the event of default to estimate the expected future cash flows for each loan and lease pool.
Acquisition date details of loans and leases acquired with evidence of credit deterioration during the six months ended June 30, 2013 are as follows:
 
June 30,
2013
Contractual payments receivable for acquired loans and leases at acquisition
$
345,890

Expected cash flows for acquired loans and leases at acquisition
193,549

Basis in acquired loans and leases at acquisition
179,027

Information pertaining to the ACI portfolio as of June 30, 2013 and December 31, 2012 is as follows:
 
Bank of Florida  
 
Other Acquired Loans
 
Total
June 30, 2013
 
 
 
 
 
Carrying value, net of allowance
$
391,565

 
$
938,180

 
$
1,329,745

Outstanding unpaid principal balance (UPB)
431,343

 
968,467

 
1,399,810

Allowance for loan and lease losses, beginning of period
16,789

 
5,175

 
21,964

Allowance for loan and lease losses, end of period
14,867

 
5,216

 
20,083

 
Bank of Florida  
 
Other Acquired Loans
 
Total
December 31, 2012
 
 
 
 
 
Carrying value, net of allowance
$
472,374

 
$
876,351

 
$
1,348,725

Outstanding unpaid principal balance
520,873

 
913,020

 
1,433,893

Allowance for loan and lease losses, beginning of year
11,638

 
4,351

 
15,989

Allowance for loan and lease losses, end of year
16,789

 
5,175

 
21,964

The Company recorded a reduction of $867 and an additional expense of $689 in provision for loan and lease losses for the ACI portfolio for the three months ended June 30, 2013 and 2012, respectively. The Company recorded $665 and $4,329 in provision for loan and lease losses for the ACI portfolio for the six months ended June 30, 2013 and 2012, respectively. The adjustments to provision performed are the result of changes in expected cash flows on ACI loans.

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The following is a summary of the accretable yield activity for the ACI loans during the six months ended June 30, 2013 and 2012:
 
Bank of Florida  
 
Other Acquired Loans
 
Total
June 30, 2013
 
 
 
 
 
Balance, beginning of period
$
99,201

 
$
121,207

 
$
220,408

Additions
—

 
12,173

 
12,173

Accretion
(13,995
)
 
(21,692
)
 
(35,687
)
Reclassifications to accretable yield
7,256

 
23,372

 
30,628

Balance, end of period
$
92,462

 
$
135,060

 
$
227,522

June 30, 2012
 
 
 
 
 
Balance, beginning of period
$
141,750

 
$
65,973

 
$
207,723

Accretion
(18,614
)
 
(12,611
)
 
(31,225
)
Reclassifications (from) to accretable yield
(10,723
)
 
1,446

 
(9,277
)
Balance, end of period
$
112,413

 
$
54,808

 
$
167,221

Covered Loans and Leases — Covered loans and leases are acquired and recorded at fair value at acquisition, exclusive of the loss share agreements with the Federal Deposit Insurance Corporation (FDIC) and the indemnification agreement with former shareholders of Tygris. All loans acquired through the loss share agreement with the FDIC and all loans and leases acquired in the purchase of Tygris are considered covered during the applicable indemnification period. As of June 30, 2013 and December 31, 2012, the Company does not expect to receive cash payments under these indemnification agreements due to the performance of the underlying loans.
The following is a summary of the recorded investment of major categories of covered loans and leases outstanding as of June 30, 2013 and December 31, 2012:
 
Bank of Florida
 
Tygris
 
Total
June 30, 2013
 
 
 
 
 
Residential mortgages
$
47,234

 
$
—

 
$
47,234

Commercial and commercial real estate
365,680

 
—

 
365,680

Lease financing receivables
—

 
44,537

 
44,537

Home equity lines
17,569

 
—

 
17,569

Consumer and credit card
636

 
—

 
636

Total recorded investment of covered loans and leases
$
431,119

 
$
44,537

 
$
475,656

December 31, 2012
 
 
 
 
 
Residential mortgages
$
56,390

 
$
—

 
$
56,390

Commercial and commercial real estate
441,998

 
—

 
441,998

Lease financing receivables
—

 
75,201

 
75,201

Home equity lines
17,992

 
—

 
17,992

Consumer and credit card
1,378

 
—

 
1,378

Total recorded investment of covered loans and leases
$
517,758

 
$
75,201

 
$
592,959


15
Table of Contents

7.  Allowance for Loan and Lease Losses
Changes in the allowance for loan and lease losses for the three and six months ended June 30, 2013 and 2012 are as follows:
Three Months Ended June 30, 2013
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Lease Financing Receivables    
 
Home Equity Lines
 
Consumer and Credit Card
 
Total    
Balance, beginning of period
$
30,185

 
$
38,535

 
$
3,590

 
$
4,582

 
$
175

 
$
77,067

Provision for loan and lease losses
1,654

 
(2,422
)
 
1,218

 
(387
)
 
(34
)
 
29

Charge-offs
(3,271
)
 
(2,781
)
 
(988
)
 
(627
)
 
(17
)
 
(7,684
)
Recoveries
117

 
3,549

 
253

 
120

 
18

 
4,057

Balance, end of period
$
28,685

 
$
36,881

 
$
4,073

 
$
3,688

 
$
142

 
$
73,469

Three Months Ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
40,739

 
$
31,391

 
$
3,344

 
$
2,632

 
$
148

 
$
78,254

Provision for loan and lease losses
957

 
1,958

 
1,704

 
1,085

 
53

 
5,757

Charge-offs
(4,139
)
 
(1,710
)
 
(917
)
 
(484
)
 
(40
)
 
(7,290
)
Recoveries
162

 
411

 
29

 
55

 
15

 
672

Balance, end of period
$
37,719

 
$
32,050

 
$
4,160

 
$
3,288

 
$
176

 
$
77,393

Six Months Ended June 30, 2013
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Lease Financing Receivables    
 
Home Equity Lines
 
Consumer and Credit Card
 
Total    
Balance, beginning of period
$
33,631

 
$
39,863

 
$
3,181

 
$
5,265

 
$
162

 
$
82,102

   Provision for loan and lease losses
3,166

 
(2,746
)
 
2,256

 
(710
)
 
(18
)
 
1,948

   Charge-offs
(8,340
)
 
(4,228
)
 
(1,696
)
 
(1,116
)
 
(37
)
 
(15,417
)
   Recoveries
228

 
3,992

 
332

 
249

 
35

 
4,836

Balance, end of period
$
28,685

 
$
36,881

 
$
4,073

 
$
3,688

 
$
142

 
$
73,469

Six Months Ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
43,454

 
$
28,209

 
$
3,766

 
$
2,186

 
$
150

 
$
77,765

   Provision for loan and lease losses
4,793

 
7,266

 
2,427

 
2,578

 
48

 
17,112

   Charge-offs
(10,833
)
 
(4,004
)
 
(2,098
)
 
(1,592
)
 
(51
)
 
(18,578
)
   Recoveries
305

 
579

 
65

 
116

 
29

 
1,094

Balance, end of period
$
37,719

 
$
32,050

 
$
4,160

 
$
3,288

 
$
176

 
$
77,393


16
Table of Contents

The following tables provide a breakdown of the allowance for loan and lease losses and the recorded investment in loans and leases based on the method for determining the allowance as of June 30, 2013 and December 31, 2012:
June 30, 2013
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
11,762

 
$
11,707

 
$
5,216

 
$
28,685

Commercial and commercial real estate
4,024

 
17,990

 
14,867

 
36,881

Lease financing receivables
—

 
4,073

 
—

 
4,073

Home equity lines
—

 
3,688

 
—

 
3,688

Consumer and credit card
—

 
142

 
—

 
142

Total allowance for loan and lease losses
$
15,786

 
$
37,600

 
$
20,083

 
$
73,469

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
95,678

 
$
5,613,048

 
$
877,390

 
$
6,586,116

Commercial and commercial real estate
83,001

 
4,534,893

 
472,438

 
5,090,332

Lease financing receivables
—

 
1,014,996

 
—

 
1,014,996

Home equity lines
—

 
169,296

 
—

 
169,296

Consumer and credit card
—

 
6,648

 
—

 
6,648

Total loans and leases held for investment
$
178,679

 
$
11,338,881

 
$
1,349,828

 
$
12,867,388

 
 
 
 
 
 
 
 
December 31, 2012
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
12,568

 
$
15,888

 
$
5,175

 
$
33,631

Commercial and commercial real estate
5,569

 
17,505

 
16,789

 
39,863

Lease financing receivables
—

 
3,181

 
—

 
3,181

Home equity lines
—

 
5,265

 
—

 
5,265

Consumer and credit card
—

 
162

 
—

 
162

Total allowance for loan and lease losses
$
18,137

 
$
42,001

 
$
21,964

 
$
82,102

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
95,274

 
$
5,747,862

 
$
865,612

 
$
6,708,748

Commercial and commercial real estate
92,262

 
4,174,429

 
505,077

 
4,771,768

Lease financing receivables
—

 
836,935

 
—

 
836,935

Home equity lines
—

 
179,600

 
—

 
179,600

Consumer and credit card
—

 
8,038

 
—

 
8,038

Total loans and leases held for investment
$
187,536

 
$
10,946,864

 
$
1,370,689

 
$
12,505,089

The Company uses a risk grading matrix to monitor credit quality for commercial and commercial real estate loans. Risk grades are continuously monitored and updated quarterly by credit administration personnel based on current information and events. The Company monitors the quarterly credit quality of all other loan types based on performing status.

17
Table of Contents

The following tables present the recorded investment for loans and leases by credit quality indicator as of June 30, 2013 and December 31, 2012:
 
 
 
Non-performing    
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
June 30, 2013
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
4,177,574

 
$
—

 
$
59,757

 
$
4,237,331

 
 
Government insured pool buyouts (2) (3)
1,477,555

 
871,230

 
—

 
2,348,785

 
 
Lease financing receivables
1,012,395

 
—

 
2,601

 
1,014,996

 
 
Home equity lines
164,928

 
—

 
4,368

 
169,296

 
 
Consumer and credit card
6,405

 
—

 
243

 
6,648

 
 
Total
$
6,838,857

 
$
871,230

 
$
66,969

 
$
7,777,056

 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
June 30, 2013
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Commercial
$
1,772,176

 
$
302

 
$
6,811

 
$
3,434

 
$
1,782,723

Commercial real estate
2,941,773

 
72,377

 
293,459

 
—

 
3,307,609

Total commercial and commercial real estate
$
4,713,949

 
$
72,679

 
$
300,270

 
$
3,434

 
$
5,090,332

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-performing
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
December 31, 2012
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
3,880,360

 
$
—

 
$
68,924

 
$
3,949,284

 
 
Government insured pool buyouts (2) (3)
1,590,732

 
1,168,732

 
—

 
2,759,464

 
 
Lease financing receivables
834,925