EVER-9.30.13-10Q
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 September 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 October 29, 2013, there were 122,562,565 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)



 
September 30,
2013
 
December 31,
2012
Assets
 
 
 
Cash and due from banks
$
109,471

 
$
175,400

Interest-bearing deposits in banks
978,464

 
268,514

Total cash and cash equivalents
1,087,935

 
443,914

Investment securities:
 
 
 
Available for sale, at fair value
1,205,340

 
1,619,878

Held to maturity (fair value of $108,269 and $146,709 as of September 30, 2013 and December 31, 2012, respectively)
109,245

 
143,234

Other investments
106,450

 
158,172

Total investment securities
1,421,035

 
1,921,284

Loans held for sale (includes $1,047,086 and $1,452,236 carried at fair value as of September 30, 2013 and December 31, 2012, respectively)
1,059,947

 
2,088,046

Loans and leases held for investment:
 
 
 
Loans and leases held for investment, net of unearned income
12,562,967

 
12,505,089

Allowance for loan and lease losses
(66,991
)
 
(82,102
)
Total loans and leases held for investment, net
12,495,976

 
12,422,987

Equipment under operating leases, net
34,918

 
50,040

Mortgage servicing rights (MSR), net
501,494

 
375,859

Deferred income taxes, net
92,253

 
170,877

Premises and equipment, net
67,282

 
66,806

Other assets
851,249

 
703,065

Total Assets
$
17,612,089

 
$
18,242,878

Liabilities
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
1,365,655

 
$
1,445,783

Interest-bearing
12,262,021

 
11,696,605

Total deposits
13,627,676

 
13,142,388

Other borrowings
1,872,700

 
3,173,021

Trust preferred securities
103,750

 
103,750

Accounts payable and accrued liabilities
405,050

 
372,543

Total Liabilities
16,009,176

 
16,791,702

Commitments and Contingencies (Note 15)


 


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 September 30, 2013 and December 31, 2012)
150,000

 
150,000

Common Stock, $0.01 par value (500,000,000 shares authorized; 122,544,510 and 120,987,955 issued and outstanding at September 30, 2013 and December 31, 2012, respectively)
1,225

 
1,210

Additional paid-in capital
830,758

 
811,085

Retained earnings
677,809

 
575,665

Accumulated other comprehensive income (loss) (AOCI)
(56,879
)
 
(86,784
)
Total Shareholders’ Equity
1,602,913

 
1,451,176

Total Liabilities and Shareholders’ Equity
$
17,612,089

 
$
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
September 30,
 
  Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
Interest Income
 
 
 
 
 
 
 
Interest and fees on loans and leases
$
170,110

 
$
140,230

 
$
516,619

 
$
400,824

Interest and dividends on investment securities
13,376

 
20,879

 
44,439

 
62,127

Other interest income
493

 
152

 
1,108

 
338

Total Interest Income
183,979

 
161,261

 
562,166

 
463,289

Interest Expense
 
 
 
 
 
 
 
Deposits
24,437

 
22,491

 
77,827

 
63,884

Other borrowings
20,686

 
12,576

 
60,450

 
32,604

Total Interest Expense
45,123

 
35,067

 
138,277

 
96,488

Net Interest Income
138,856

 
126,194

 
423,889

 
366,801

Provision for Loan and Lease Losses
3,068

 
4,359

 
5,016

 
21,471

Net Interest Income after Provision for Loan and Lease Losses
135,788

 
121,835

 
418,873

 
345,330

Noninterest Income
 
 
 
 
 
 
 
Loan servicing fee income
50,713

 
42,341

 
140,068

 
130,380

Amortization of mortgage servicing rights
(30,438
)
 
(36,292
)
 
(101,461
)
 
(99,773
)
Recovery (impairment) of mortgage servicing rights
35,132

 
(18,229
)
 
80,259

 
(63,508
)
Net loan servicing income
55,407

 
(12,180
)
 
118,866

 
(32,901
)
Gain on sale of loans
51,397

 
85,748

 
209,545

 
203,851

Loan production revenue
10,514

 
10,528

 
30,066

 
27,817

Deposit fee income
4,952

 
4,671

 
15,167

 
16,738

Other lease income
6,506

 
7,103

 
19,388

 
24,588

Other
14,793

 
1,429

 
30,650

 
4,522

Total Noninterest Income
143,569

 
97,299

 
423,682

 
244,615

Noninterest Expense
 
 
 
 
 
 
 
Salaries, commissions and other employee benefits expense
111,144

 
85,399

 
340,080

 
228,266

Equipment expense
20,609

 
17,574

 
61,168

 
50,411

Occupancy expense
8,675

 
6,619

 
23,606

 
17,985

General and administrative expense
85,268

 
74,377

 
226,198

 
221,911

Total Noninterest Expense
225,696

 
183,969

 
651,052

 
518,573

Income before Provision for Income Taxes
53,661

 
35,165

 
191,503

 
71,372

Provision for Income Taxes
20,511

 
12,987

 
73,214

 
26,176

Net Income
$
33,150

 
$
22,178

 
$
118,289

 
$
45,196

Less: Net Income Allocated to Preferred Stock
(2,532
)
 
—

 
(7,594
)
 
(8,564
)
Net Income Allocated to Common Shareholders
$
30,618

 
$
22,178

 
$
110,695

 
$
36,632

Basic Earnings Per Common Share
$
0.25

 
$
0.19

 
$
0.91

 
$
0.37

Diluted Earnings Per Common Share
$
0.25

 
$
0.19

 
$
0.89

 
$
0.37

Dividends Declared Per Common Share
$
0.03

 
$
0.02

 
$
0.07

 
$
0.02

See notes to unaudited condensed consolidated financial statements.

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

 
Three Months Ended
September 30,
 
  Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
Net Income
$
33,150

 
$
22,178

 
$
118,289

 
$
45,196

Unrealized Gains (Losses) on Debt Securities
 
 
 
 
 
 
 
Unrealized gains (losses) due to changes in fair value
2,042

 
18,662

 
(20,755
)
 
32,367

Tax effect
(776
)
 
(7,094
)
 
7,892

 
(12,240
)
Change in unrealized gains (losses) on debt securities
1,266

 
11,568

 
(12,863
)
 
20,127

Interest Rate Swaps
 
 
 
 
 
 
 
Net unrealized gains (losses) due to changes in fair value
(1,642
)
 
(11,509
)
 
20,124

 
(37,813
)
Reclassification of net unrealized losses (1)
37,523

 
3,112

 
48,891

 
6,786

Tax effect
(13,636
)
 
3,191

 
(26,247
)
 
11,918

Change in interest rate swaps
22,245

 
(5,206
)
 
42,768

 
(19,109
)
Other Comprehensive Income (Loss)
23,511

 
6,362

 
29,905

 
1,018

Comprehensive Income (Loss)
$
56,661

 
$
28,540

 
$
148,194

 
$
46,214

(1)
Reclassification of net unrealized losses includes $31,036 recorded to other noninterest income for the three and nine months ended September 30, 2013. Included in interest expense is $6,487 and $3,112 for the three months ended September 30, 2013 and 2012, respectively, and $17,855 and $6,786 for the nine months ended September 30, 2013 and 2012, respectively.

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
—

 
—

 
—

 
118,289

 
—

 
118,289

Other comprehensive income
—

 
—

 
—

 
—

 
29,905

 
29,905

Issuance of common stock
—

 
15

 
12,155

 
—

 
—

 
12,170

Share-based grants (including income tax benefits)
—

 
—

 
7,518

 
—

 
—

 
7,518

Cash dividends on common stock
—

 
—

 
—

 
(8,551
)
 
—

 
(8,551
)
Cash dividends on preferred stock
—

 
—

 
—

 
(7,594
)
 
—

 
(7,594
)
Balance, September 30, 2013
$
150,000

 
$
1,225

 
$
830,758

 
$
677,809

 
$
(56,879
)
 
$
1,602,913

 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2012
$
3

 
$
751

 
$
561,247

 
$
513,413

 
$
(107,749
)
 
$
967,665

Net income
—

 
—

 
—

 
45,196

 
—

 
45,196

Other comprehensive loss
—

 
—

 
—

 
—

 
1,018

 
1,018

Conversion of preferred stock
(3
)
 
188

 
(185
)
 
—

 
—

 
—

Issuance of common stock, net of issue costs
—

 
267

 
247,503

 
—

 
—

 
247,770

Repurchase of common stock
—

 
—

 
(442
)
 
—

 
—

 
(442
)
Share-based grants (including income tax benefits)
—

 
—

 
4,700

 
—

 
—

 
4,700

Cash dividends on common stock
—

 
—

 
—

 
(2,330
)
 
—

 
(2,330
)
Cash dividends on preferred stock
—

 
—

 
—

 
(5,555
)
 
—

 
(5,555
)
Balance, September 30, 2012
$
—

 
$
1,206

 
$
812,823

 
$
550,724

 
$
(106,731
)
 
$
1,258,022


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)

 
  Nine Months Ended
September 30,
 
2013
 
2012
Operating Activities:
 
 
 
Net income
$
118,289

 
$
45,196

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Amortization of premiums and deferred origination costs
30,441

 
6,390

Depreciation and amortization of tangible and intangible assets
30,092

 
27,011

Reclassification of net loss on settlement of interest rate swaps
48,891

 
6,786

Amortization and impairment of mortgage servicing rights
21,202

 
163,281

Deferred income taxes (benefit)
60,269

 
(32,631
)
Provision for loan and lease losses
5,016

 
21,471

Loss on other real estate owned (OREO)
4,596

 
7,910

Share-based compensation expense
3,953

 
3,302

Gain on extinguishment of debt
(36,031
)
 
—

Payments for settlement of forward interest rate swaps
(41,829
)
 
(41,386
)
Other operating activities
(3,875
)
 
(4,249
)
Changes in operating assets and liabilities:
 
 
 
Loans held for sale, including proceeds from sales and repayments
353,529

 
(942,081
)
Other assets
123,711

 
89,245

Accounts payable and accrued liabilities
69,799

 
60,194

Net cash provided by (used in) operating activities
788,053

 
(589,561
)
Investing Activities:
 
 
 
Investment securities available for sale:
 
 
 
Purchases
(195,566
)
 
(210,717
)
Proceeds from sales
159,043

 
—

Proceeds from prepayments and maturities
424,435

 
419,500

Investment securities held to maturity:
 
 
 
Purchases
(30,532
)
 
(14,917
)
Proceeds from prepayments and maturities
64,113

 
32,810

Purchases of other investments
(61,550
)
 
(70,782
)
Proceeds from sales of other investments
113,272

 
43,008

Net change in loans and leases held for investment
(23,177
)
 
(1,400,765
)
Cash paid for acquisition
—

 
(351,071
)
Purchases of premises and equipment, including equipment under operating leases
(16,292
)
 
(39,453
)
Purchases of mortgage servicing assets
(73,580
)
 
—

Proceeds related to sale or settlement of other real estate owned
30,442

 
30,311

Proceeds from insured foreclosure claims
235,296

 
115,040

Other investing activities
5,835

 
1,923

Net cash provided by (used in) investing activities
631,739

 
(1,445,113
)
Financing Activities:
 
 
 
Net increase in nonmaturity deposits
942,027

 
1,085,006

Net increase (decrease) in time deposits
(455,970
)
 
459,775

Net change in repurchase agreements
(142,322
)
 
484,565

Net change in short-term Federal Home Loan Bank (FHLB) advances
(600,500
)
 
(470,000
)
Proceeds from long-term FHLB advances
325,000

 
1,886,000

Repayments of long-term FHLB advances
(112,158
)
 
(333,500
)
Early extinguishment of long-term debt
(733,969
)
 
—

Proceeds from issuance of common stock
12,170

 
256,522

Other financing activities
(10,049
)
 
(8,706
)
Net cash provided by (used in) financing activities
(775,771
)
 
3,359,662

Net change in cash and cash equivalents
644,021

 
1,324,988

Cash and cash equivalents at beginning of period
443,914

 
294,981

Cash and cash equivalents at end of period
$
1,087,935

 
$
1,619,969


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

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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.    

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Table of Contents

d) Supplemental Cash Flow Information - Noncash investing activities are presented in the following table:
 
  Nine Months Ended
September 30,
 
2013
 
2012
Supplemental Schedules of Noncash Investing Activities:
 
 
 
Loans transferred to foreclosure claims
$
498,638

 
$
350,244

Loans transferred to other real estate owned from loans held for investment
30,395

 
32,100

Loans transferred from held for sale to held for investment
819,250

 
1,928,519

Loans transferred from held for investment to held for sale
454,310

 
94,650

Additions of originated mortgage servicing assets for loans sold
84,018

 
58,061

 
 
 
 
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 13 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 and/or loss 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

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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.
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 15 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 capacity to originate commercial real estate loans to small and mid-size business clients nationwide. 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 September 30, 2013 and December 31, 2012:
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Carrying Amount
September 30, 2013
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential collateralized mortgage obligations (CMO) securities - nonagency
$
1,187,816

 
$
16,941

 
$
4,072

 
$
1,200,685

 
$
1,200,685

Asset-backed securities (ABS)
5,153

 
—

 
1,098

 
4,055

 
4,055

Other
317

 
283

 
—

 
600

 
600

Total available for sale securities
$
1,193,286

 
$
17,224

 
$
5,170

 
$
1,205,340

 
$
1,205,340

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
44,707

 
$
1,636

 
$
13

 
$
46,330

 
$
44,707

Residential mortgage-backed securities (MBS) - agency
59,551

 
943

 
1,130

 
59,364

 
59,551

Corporate securities
4,987

 
—

 
2,412

 
2,575

 
4,987

Total held to maturity securities
$
109,245

 
$
2,579

 
$
3,555

 
$
108,269

 
$
109,245

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 September 30, 2013 and December 31, 2012, investment securities with a carrying value of $169,092 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.
For the three and nine months ended September 30, 2013, gross gains of $4,225 were realized on available for sale investments in other noninterest income. For the three and nine months ended September 30, 2012, there were no gross gains or gross losses realized on available for sale investments.
The gross unrealized losses and fair value of the Company’s investments in an unrealized loss position at September 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
September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
283,055

 
$
3,258

 
$
48,450

 
$
814

 
$
331,505

 
$
4,072

Residential CMO securities - agency
6,477

 
13

 
—

 
—

 
6,477

 
13

Residential MBS - agency
35,548

 
1,130

 
—

 
—

 
35,548

 
1,130

Asset-backed securities
—

 
—

 
4,055

 
1,098

 
4,055

 
1,098

Corporate securities
—

 
—

 
2,575

 
2,412

 
2,575

 
2,412

Total debt securities
$
325,080

 
$
4,401

 
$
55,080

 
$
4,324

 
$
380,160

 
$
8,725

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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The Company had unrealized losses at September 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 September 30, 2013, the Company had 44 debt securities in an unrealized loss position. A total of 32 were in an unrealized loss position for less than 12 months. These 32 securities consisted of 20 residential nonagency CMO securities, three residential agency CMO securities and nine residential agency MBS. The remaining 12 debt securities were in an unrealized loss position for 12 months or longer. These 12 securities consisted of three ABS, one corporate security and 8 residential nonagency CMO securities. Of the $8,725 in unrealized losses, $5,024 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 nine months ended September 30, 2013 or 2012.
During the three and nine months ended September 30, 2013 and 2012, interest and dividend income on investment securities was comprised of the following:
 
Three Months Ended
September 30,
 
  Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
Interest income on available for sale securities
$
11,816

 
$
17,875

 
$
40,100

 
$
55,474

Interest income on held to maturity securities
635

 
2,504

 
1,917

 
5,313

Other interest and dividend income
925

 
500

 
2,422

 
1,340

 
$
13,376

 
$
20,879

 
$
44,439

 
$
62,127

All investment interest income recognized by the Company during the three and nine months ended September 30, 2013 and 2012 was fully taxable.
5.  Loans Held for Sale
Loans held for sale as of September 30, 2013 and December 31, 2012, consist of the following:
 
September 30,
2013
 
December 31,
2012
Mortgage warehouse (carried at fair value)
$
1,020,410


$
1,452,236

Government insured pool buyouts
1,866


96,635

Other
10,995


539,175

Other (carried at fair value)
26,676

 
—

Total loans held for sale
$
1,059,947


$
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 its issuers and purchasers. This liability includes amounts related to loans sold that the Company 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 15 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 $26,676 at September 30, 2013 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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The following is a summary of cash flows related to transfers accounted for as sales for the three and nine months ended September 30, 2013 and 2012:
 
Three Months Ended
September 30,
 
  Nine Months Ended
September 30,
 
2013
 
2012
 
2013
 
2012
Proceeds received from agency securitizations
$
2,251,809

 
$
2,476,812

 
$
7,345,260

 
$
6,267,169

Proceeds received from nonsecuritization sales
902,441

 
1,885

 
1,579,749

 
20,131

 
 
 
 
 
 
 
 
Servicing fees collected
30,928

 
24,577

 
86,489

 
72,477

 
 
 
 
 
 
 
 
Repurchased loans from agency securitizations
1,858

 
2,616

 
4,028

 
6,132

Repurchased loans from nonagency sales
6,927

 
6,773

 
17,143

 
16,287

The Company periodically transfers conforming residential mortgages to GNMA in exchange for mortgage-backed securities.  As of September 30, 2013 and December 31, 2012, the Company retained $0 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 $33,025 and $84,018 for the three and nine months ended September 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 nine months ended September 30, 2013, the Company transferred $73,988 and $819,250 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 nine months ended September 30, 2012, the Company transferred $1,899,527 and $1,928,519 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 had the intent to hold these loans for the foreseeable future.
During the three and nine months ended September 30, 2013, the Company transferred $127,674 and $454,310 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.

13
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6.  Loans and Leases Held for Investment, Net
Loans and leases held for investment as of September 30, 2013 and December 31, 2012 are comprised of the following:
 
September 30,
2013
 
December 31,
2012
Residential mortgages
$
6,698,614

 
$
6,708,748

Commercial and commercial real estate
4,608,487

 
4,771,768

Lease financing receivables
1,092,866

 
836,935

Home equity lines
156,977

 
179,600

Consumer and credit card
6,023

 
8,038

Total loans and leases held for investment, net of discounts
12,562,967

 
12,505,089

Allowance for loan and lease losses
(66,991
)
 
(82,102
)
Total loans and leases held for investment, net
$
12,495,976

 
$
12,422,987

As of September 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:
 
September 30,
2013
 
December 31,
2012
Net purchased loan and lease discounts
$
120,321

 
$
164,132

Net deferred loan and lease origination costs
45,315

 
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 nine months ended September 30, 2013 and 2012 are as follows:
 
September 30,
2013
 
September 30,
2012
Contractual payments receivable for acquired loans and leases at acquisition
$
345,890

 
$
218,750

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

 
133,627

Basis in acquired loans and leases at acquisition
179,027

 
117,579

Information pertaining to the ACI portfolio as of September 30, 2013 and December 31, 2012 is as follows:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
September 30, 2013
 
 
 
 
 
Carrying value, net of allowance
$
749,690

 
$
410,286

 
$
1,159,976

Outstanding unpaid principal balance (UPB)
793,009

 
427,667

 
1,220,676

Allowance for loan and lease losses, beginning of period
5,175

 
16,789

 
21,964

Allowance for loan and lease losses, end of period
5,216

 
11,344

 
16,560

 
Residential
 
Commercial and Commercial Real Estate
 
Total      
December 31, 2012
 
 
 
 
 
Carrying value, net of allowance
$
860,437

 
$
488,288

 
$
1,348,725

Outstanding unpaid principal balance
906,421

 
527,472

 
1,433,893

Allowance for loan and lease losses, beginning of year
5,464

 
10,525

 
15,989

Allowance for loan and lease losses, end of year
5,175

 
16,789

 
21,964

The Company recorded a reduction of provision for loan loss of $667 and provision for loan loss expense of $863 for the ACI portfolio for the three months ended September 30, 2013 and 2012, respectively. The Company recorded a reduction of provision for loan loss of $2 and provision for loan loss expense of $5,192 for the ACI portfolio for the nine months ended September 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 nine months ended September 30, 2013 and 2012:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
September 30, 2013
 
 
 
 
 
Balance, beginning of period
$
111,868

 
$
108,540

 
$
220,408

Additions
12,174

 
—

 
12,174

Accretion
(31,906
)
 
(22,110
)
 
(54,016
)
Reclassifications to accretable yield
27,249

 
23,552

 
50,801

Balance, end of period
$
119,385

 
$
109,982

 
$
229,367

September 30, 2012
 
 
 
 
 
Balance, beginning of period
$
90,224

 
$
117,499

 
$
207,723

Additions
16,048

 
—

 
16,048

Accretion
(22,159
)
 
(23,175
)
 
(45,334
)
Reclassifications (from) to accretable yield
2,616

 
(12,677
)
 
(10,061
)
Balance, end of period
$
86,729

 
$
81,647

 
$
168,376

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 September 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 September 30, 2013 and December 31, 2012:
 
Bank of Florida
 
Tygris
 
Total
September 30, 2013
 
 
 
 
 
Residential mortgages
$
46,738

 
$
—

 
$
46,738

Commercial and commercial real estate
309,709

 
—

 
309,709

Lease financing receivables
—

 
33,283

 
33,283

Home equity lines
14,266

 
—

 
14,266

Total recorded investment of covered loans and leases
$
370,713

 
$
33,283

 
$
403,996

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 nine months ended September 30, 2013 and 2012 are as follows:
Three Months Ended September 30, 2013
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Lease Financing Receivables    
 
Home Equity Lines
 
Consumer and Credit Card
 
Total    
Balance, beginning of period
$
28,685

 
$
36,881

 
$
4,073

 
$
3,688

 
$
142

 
$
73,469

Provision for loan and lease losses
1,976

 
872

 
274

 
(55
)
 
1

 
3,068

Charge-offs
(3,038
)
 
(6,081
)
 
(746
)
 
(430
)
 
(28
)
 
(10,323
)
Recoveries
70

 
488

 
75

 
130

 
14

 
777

Balance, end of period
$
27,693

 
$
32,160

 
$
3,676

 
$
3,333

 
$
129

 
$
66,991

Three Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
37,719

 
$
32,050

 
$
4,160

 
$
3,288

 
$
176

 
$
77,393

Provision for loan and lease losses
(1,277
)
 
3,271

 
917

 
1,400

 
48

 
4,359

Charge-offs
(3,868
)
 
(2,636
)
 
(805
)
 
(1,215
)
 
(61
)
 
(8,585
)
Recoveries
52

 
3,023

 
159

 
52

 
16

 
3,302

Balance, end of period
$
32,626

 
$
35,708

 
$
4,431

 
$
3,525

 
$
179

 
$
76,469

Nine Months Ended September 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
5,142

 
(1,874
)
 
2,530

 
(765
)
 
(17
)
 
5,016

   Charge-offs
(11,378
)
 
(10,309
)
 
(2,442
)
 
(1,546
)
 
(65
)
 
(25,740
)
   Recoveries
298

 
4,480

 
407

 
379

 
49

 
5,613

Balance, end of period
$
27,693

 
$
32,160

 
$
3,676

 
$
3,333

 
$
129

 
$
66,991

Nine Months Ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
43,454

 
$
28,209

 
$
3,766

 
$
2,186

 
$
150

 
$
77,765

   Provision for loan and lease losses
3,516

 
10,537

 
3,344

 
3,978

 
96

 
21,471

   Charge-offs
(14,701
)
 
(6,640
)
 
(2,903
)
 
(2,807
)
 
(112
)
 
(27,163
)
   Recoveries
357

 
3,602

 
224

 
168

 
45

 
4,396

Balance, end of period
$
32,626

 
$
35,708

 
$
4,431

 
$
3,525

 
$
179

 
$
76,469


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 September 30, 2013 and December 31, 2012:
September 30, 2013
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
9,283

 
$
13,194

 
$
5,216

 
$
27,693

Commercial and commercial real estate
2,875

 
17,941

 
11,344

 
32,160

Lease financing receivables
—

 
3,676

 
—

 
3,676

Home equity lines
—

 
3,333

 
—

 
3,333

Consumer and credit card
—

 
129

 
—

 
129

Total allowance for loan and lease losses
$
12,158

 
$
38,273

 
$
16,560

 
$
66,991

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
91,391

 
$
5,852,317

 
$
754,906

 
$
6,698,614

Commercial and commercial real estate
83,770

 
4,103,087

 
421,630

 
4,608,487

Lease financing receivables
—

 
1,092,866

 
—

 
1,092,866

Home equity lines
—

 
156,977

 
—

 
156,977

Consumer and credit card
—

 
6,023

 
—

 
6,023

Total loans and leases held for investment
$
175,161

 
$
11,211,270

 
$
1,176,536

 
$
12,562,967

 
 
 
 
 
 
 
 
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 September 30, 2013 and December 31, 2012:
 
 
 
Non-performing    
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
September 30, 2013
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
4,565,949

 
$
—

 
$
57,270

 
$
4,623,219

 
 
Government insured pool buyouts (2) (3)
1,369,117

 
706,278

 
—

 
2,075,395

 
 
Lease financing receivables
1,088,695

 
—

 
4,171

 
1,092,866

 
 
Home equity lines
152,813

 
—

 
4,164

 
156,977

 
 
Consumer and credit card
6,008

 
—

 
15

 
6,023

 
 
Total
$
7,182,582

 
$
706,278

 
$
65,620

 
$
7,954,480

 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
September 30, 2013
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Commercial
$
1,357,081

 
$
277

 
$
5,973

 
$
1,806

 
$
1,365,137

Commercial real estate
2,931,125

 
44,528

 
267,697

 
—

 
3,243,350

Total commercial and commercial real estate
$
4,288,206

 
$
44,805

 
$
273,670

 
$
1,806

 
$
4,608,487