EVER-9.30.14-10Q
 
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, 2014.
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 Q
 
Accelerated filer o
 
Non-accelerated filer o (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 24, 2014, there were 123,057,547 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,
2014
 
December 31,
2013
Assets
 
 
 
Cash and due from banks
$
57,835

 
$
46,175

Interest-bearing deposits in banks
306,265

 
801,603

Total cash and cash equivalents
364,100

 
847,778

Investment securities:
 
 
 
Available for sale, at fair value
987,345

 
1,115,627

Held to maturity (fair value of $115,529 and $107,921 as of September 30, 2014 and December 31, 2013, respectively)
113,751

 
107,312

Other investments
194,314

 
128,063

Total investment securities
1,295,410

 
1,351,002

Loans held for sale (includes $768,909 and $672,371 carried at fair value as of September 30, 2014 and December 31, 2013, respectively)
871,736

 
791,382

Loans and leases held for investment:
 
 
 
Loans and leases held for investment, net of unearned income
16,579,951

 
13,252,724

Allowance for loan and lease losses
(57,245
)
 
(63,690
)
Total loans and leases held for investment, net
16,522,706

 
13,189,034

Equipment under operating leases, net
15,542

 
28,126

Mortgage servicing rights (MSR), net
441,243

 
506,680

Deferred income taxes, net
3,162

 
51,375

Premises and equipment, net
55,500

 
60,733

Other assets
940,943

 
814,874

Total Assets
$
20,510,342

 
$
17,640,984

Liabilities
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
1,084,400

 
$
1,076,631

Interest-bearing
13,389,105

 
12,184,709

Total deposits
14,473,505

 
13,261,340

Other borrowings
3,977,000

 
2,377,000

Trust preferred securities
103,750

 
103,750

Accounts payable and accrued liabilities
235,064

 
277,881

Total Liabilities
18,789,319

 
16,019,971

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 September 30, 2014 and December 31, 2013)
150,000

 
150,000

Common Stock, $0.01 par value (500,000,000 shares authorized; 122,994,480 and 122,626,315 issued and outstanding at September 30, 2014 and December 31, 2013, respectively)
1,230

 
1,226

Additional paid-in capital
840,667

 
832,351

Retained earnings
780,234

 
690,051

Accumulated other comprehensive income (loss) (AOCI)
(51,108
)
 
(52,615
)
Total Shareholders’ Equity
1,721,023

 
1,621,013

Total Liabilities and Shareholders’ Equity
$
20,510,342

 
$
17,640,984


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,
 
2014
 
2013
 
2014
 
2013
Interest Income
 
 
 
 
 
 
 
Interest and fees on loans and leases
$
180,913

 
$
170,110

 
$
509,708

 
$
516,619

Interest and dividends on investment securities
9,627

 
13,376

 
29,276

 
44,439

Other interest income
116

 
493

 
388

 
1,108

Total Interest Income
190,656

 
183,979

 
539,372

 
562,166

Interest Expense
 
 
 
 
 
 
 
Deposits
26,755

 
24,437

 
72,804

 
77,827

Other borrowings
17,565

 
20,686

 
49,197

 
60,450

Total Interest Expense
44,320

 
45,123

 
122,001

 
138,277

Net Interest Income
146,336

 
138,856

 
417,371

 
423,889

Provision for Loan and Lease Losses
6,735

 
3,068

 
15,929

 
5,016

Net Interest Income after Provision for Loan and Lease Losses
139,601

 
135,788

 
401,442

 
418,873

Noninterest Income
 
 
 
 
 
 
 
Loan servicing fee income
35,900

 
50,713

 
122,934

 
140,068

Amortization of mortgage servicing rights
(19,572
)
 
(30,438
)
 
(59,170
)
 
(101,461
)
Recovery (impairment) of mortgage servicing rights
3,071

 
35,132

 
8,012

 
80,259

Net loan servicing income
19,399

 
55,407

 
71,776

 
118,866

Gain on sale of loans
47,920

 
51,397

 
129,474

 
209,545

Loan production revenue
5,783

 
10,514

 
15,709

 
30,066

Deposit fee income
3,828

 
4,952

 
11,696

 
15,167

Other lease income
3,910

 
6,506

 
12,621

 
19,388

Other
7,374

 
14,793

 
20,790

 
30,650

Total Noninterest Income
88,214

 
143,569

 
262,066

 
423,682

Noninterest Expense
 
 
 
 
 
 
 
Salaries, commissions and other employee benefits expense
90,781

 
111,144

 
283,734

 
340,080

Equipment expense
16,623

 
20,609

 
52,616

 
61,168

Occupancy expense
7,209

 
8,675

 
23,166

 
23,606

General and administrative expense
43,140

 
85,268

 
126,769

 
226,198

Total Noninterest Expense
157,753

 
225,696

 
486,285

 
651,052

Income before Provision for Income Taxes
70,062

 
53,661

 
177,223

 
191,503

Provision for Income Taxes
26,543

 
20,511

 
67,162

 
73,214

Net Income
$
43,519

 
$
33,150

 
$
110,061

 
$
118,289

Less: Net Income Allocated to Preferred Stock
(2,532
)
 
(2,532
)
 
(7,594
)
 
(7,594
)
Net Income Allocated to Common Shareholders
$
40,987

 
$
30,618

 
$
102,467

 
$
110,695

Basic Earnings Per Common Share
$
0.33

 
$
0.25

 
$
0.83

 
$
0.91

Diluted Earnings Per Common Share
$
0.33

 
$
0.25

 
$
0.82

 
$
0.89

Dividends Declared Per Common Share
$
0.04

 
$
0.03

 
$
0.10

 
$
0.07

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
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Net Income
$
43,519

 
$
33,150

 
$
110,061

 
$
118,289

Unrealized Gains (Losses) on Debt Securities
 
 
 
 
 
 
 
Reclassification of unrealized gains to noninterest income
—

 
—

 
(1,250
)
 
—

Unrealized gains (losses) due to changes in fair value
(2,134
)
 
2,042

 
(4,731
)
 
(20,755
)
Other-than-temporary impairment (OTTI) (noncredit portion), net of accretion
—

 
—

 
685

 
—

Tax effect
810

 
(776
)
 
2,013

 
7,892

Change in unrealized gains (losses) on debt securities
(1,324
)
 
1,266

 
(3,283
)
 
(12,863
)
Interest Rate Swaps
 
 
 
 
 
 
 
Net unrealized gains (losses) due to changes in fair value
1,932

 
(1,642
)
 
(5,543
)
 
20,124

Reclassification of net unrealized losses (1)
4,763

 
37,523

 
13,269

 
48,891

Tax effect
(2,544
)
 
(13,636
)
 
(2,936
)
 
(26,247
)
Change in interest rate swaps
4,151

 
22,245

 
4,790

 
42,768

Other Comprehensive Income (Loss)
2,827

 
23,511

 
1,507

 
29,905

Comprehensive Income (Loss)
$
46,346

 
$
56,661

 
$
111,568

 
$
148,194

(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 $4,763 and $6,487 for the three months ended September 30, 2014 and 2013, respectively, and $13,269 and $17,855 for the nine months ended September 30, 2014 and 2013, 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, 2014
$
150,000

 
$
1,226

 
$
832,351

 
$
690,051

 
$
(52,615
)
 
$
1,621,013

Net income
—

 
—

 
—

 
110,061

 
—

 
110,061

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
1,507

 
1,507

Issuance of common stock
—

 
4

 
1,727

 
—

 
—

 
1,731

Share-based grants (including income tax benefits)
—

 
—

 
6,589

 
—

 
—

 
6,589

Cash dividends on common stock
—

 
—

 
—

 
(12,284
)
 
—

 
(12,284
)
Cash dividends on preferred stock
—

 
—

 
—

 
(7,594
)
 
—

 
(7,594
)
Balance, September 30, 2014
$
150,000

 
$
1,230

 
$
840,667

 
$
780,234

 
$
(51,108
)
 
$
1,721,023

 
 
 
 
 
 
 
 
 
 
 
 
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 (loss)
—

 
—

 
—

 
—

 
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


See notes to unaudited condensed consolidated financial statements.

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

 
Nine Months Ended
September 30,
 
2014
 
2013
Operating Activities:
 
 
 
Net income
$
110,061

 
$
118,289

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Amortization of premiums and deferred origination costs
26,313

 
30,441

Depreciation and amortization of tangible and intangible assets
24,405

 
30,092

Reclassification of net loss on settlement of interest rate swaps
13,269

 
48,891

Amortization and impairment of mortgage servicing rights, net of recoveries
51,158

 
21,202

Deferred income taxes (benefit)
47,276

 
60,269

Provision for loan and lease losses
15,929

 
5,016

Share-based compensation expense
5,334

 
3,953

Gain on extinguishment of debt
—

 
(36,031
)
Payments for settlement of forward interest rate swaps
(32,445
)
 
(41,829
)
Other operating activities
98

 
721

Changes in operating assets and liabilities:
 
 
 
Loans held for sale, including proceeds from sales and repayments
(83,475
)
 
353,529

Other assets
184,188

 
123,711

Accounts payable and accrued liabilities
17

 
69,799

Net cash provided by (used in) operating activities
362,128

 
788,053

Investing Activities:
 
 
 
Investment securities available for sale:
 
 
 
Purchases
(125,387
)
 
(195,566
)
Proceeds from sales
3,875

 
159,043

Proceeds from prepayments and maturities
241,018

 
424,435

Investment securities held to maturity:
 
 
 
Purchases
(19,997
)
 
(30,532
)
Proceeds from prepayments and maturities
12,524

 
64,113

Purchases of other investments
(384,527
)
 
(61,550
)
Proceeds from sales of other investments
318,277

 
113,272

Net change in loans and leases held for investment
(3,859,849
)
 
(23,177
)
Purchases of premises and equipment, including equipment under operating leases
(20,255
)
 
(16,292
)
Purchases of mortgage servicing assets
(1,082
)
 
(73,580
)
Proceeds related to sale or settlement of other real estate owned
21,778

 
30,442

Proceeds from insured foreclosure claims
131,373

 
235,296

Proceeds from sale of mortgage servicing rights
37,738

 
—

Other investing activities
865

 
5,835

Net cash provided by (used in) investing activities
(3,643,649
)
 
631,739

Financing Activities:
 
 
 
Net increase (decrease) in nonmaturity deposits
(30,001
)
 
942,027

Net increase (decrease) in time deposits
1,244,736

 
(455,970
)
Net change in repurchase agreements
—

 
(142,322
)
Net change in short-term Federal Home Loan Bank (FHLB) advances
1,425,000

 
(600,500
)
Proceeds from long-term FHLB advances
250,000

 
325,000

Repayments of long-term FHLB advances, including early extinguishment
(75,000
)
 
(112,158
)
Early extinguishment of long-term debt
—

 
(733,969
)
Proceeds from issuance of common stock
1,731

 
12,170

Other financing activities
(18,623
)
 
(10,049
)
Net cash provided by (used in) financing activities
2,797,843

 
(775,771
)
Net change in cash and cash equivalents
(483,678
)
 
644,021

Cash and cash equivalents at beginning of period
847,778

 
443,914

Cash and cash equivalents at end of period
$
364,100

 
$
1,087,935


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 savings and loan 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. EverBank's direct banking services are offered nationwide. In addition, EB operates financial centers in Florida and commercial and consumer 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.; and
•Business Property Lending, Inc.
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) 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 (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 reported in the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2014, which represents the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 the (Form 10-K) amended for the change in reportable business segments described further in Note 16 and the Form 10-K. 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, 2014. 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 of assets and liabilities and disclosure of contingencies in the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. 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.    
c) Supplemental Cash Flow Information - Noncash investing activities are presented in the following table:
 
Nine Months Ended
September 30,
 
2014
 
2013
Supplemental Schedules of Noncash Activities:
 
 
 
Loans transferred to foreclosure claims
$
431,488

 
$
498,638

Loans transferred from held for sale to held for investment
231,434

 
819,250

Loans transferred from held for investment to held for sale
1,644,258

 
454,310

2.  Recent Accounting Pronouncements
Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure — In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-14, Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure, which will eliminate diversity in practice relating to how creditors classify government-guaranteed mortgage loans, including Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA) guaranteed loans, upon foreclosure. Under ASU 2014-14 a mortgage must be derecognized and a separate other receivable recognized upon foreclosure when the loan possesses a non-separable government guarantee that the creditor has both the intent and ability to exercise and for which any amount of the claim determined on the basis of the fair value of the real estate is fixed. Other receivables recognized under this guidance are to be measured based on the amount of the principal and interest expected to be recovered from the guarantor. ASU 2014-14 allows for a modified retrospective or prospective adoption in conjunction with ASU 2014-04 and is effective for annual reporting periods beginning on or after December 15, 2014, and interim periods within those annual periods with early adoption permitted. The Company is currently evaluating which method will be employed and the final impact of the standard, however ASU 2014-14 is not expected to have a material impact on the Company’s consolidated financial statements or results of operations.

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Table of Contents

Repurchase-to-Maturity Transactions — In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860) - Repurchase-to-Maturity Transactions, Repurchase Financings and Disclosures, which changes the accounting for repurchase-to-maturity transactions. Repurchase-to-maturity transactions represent repurchase agreements where the maturity of the security transferred as collateral matches the maturity of the repurchase agreement. Under ASU 2014-11, repurchase-to-maturity transactions will be accounted for as secured borrowings similar to other repurchase agreements. ASU 2014-11 also modifies the accounting for repurchase financings which represent the concurrent transfer of a financial asset and the execution of a repurchase agreement with the same counterparty. Under ASU 2014-11, the transfer and repurchase agreement are accounted for separately with the repurchase agreement accounted for as a secured borrowing. ASU 2014-11 is effective for annual reporting periods beginning on or after December 15, 2014, and interim periods within those annual periods with early adoption permitted. Upon adoption, the accounting for all outstanding repurchase-to-maturity and repurchase financing transactions is to be adjusted through a cumulative-effect adjustment to retained earnings. The Company is currently evaluating the pending adoption of ASU 2014-11 and its impact on its consolidated financial statements.
Revenue from Contracts with Customers — In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Subtopic 606), which supersedes the guidance in former ASC (Accounting Standards Codification) 605, Revenue Recognition. ASU 2014-09 clarifies the principles for recognizing revenue in order to improve comparability of revenue recognition practices across entities and industries with certain scope exceptions including financial instruments, leases and guarantees. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods and services. To satisfy this objective, ASU 2014-09 provides guidance intended to assist in the identification of contracts with customers and separate performance obligations within those contracts, the determination and allocation of the transaction price to those identified performance obligations and the recognition of revenue when a performance obligation has been satisfied. ASU 2014-09 also implements enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. ASU 2014-09 is effective for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods with early adoption prohibited. Upon adoption, ASU 2014-09 provides for transition through either a full retrospective approach requiring the restatement of all presented prior periods or a modified retrospective approach which allows for the new recognition standard to be applied to only those contracts that are not completed at the date of transition. If the modified retrospective approach is adopted, a cumulative-effect adjustment to retained earnings is performed with additional disclosures required including the amount by which each line item is affected by the transition as compared to the guidance in effect before adoption and an explanation of the reasons for significant changes in these amounts. The Company is currently evaluating the pending adoption of ASU 2014-09 and its impact on its consolidated financial statements and has not yet identified which transition method will be applied upon adoption.
Presentation of Residential Mortgage Loans Upon Foreclosure — In January 2014, the FASB issued ASU 2014-04, Receivables- Troubled Debt Restructurings by Creditors (Subtopic 310-40), which will eliminate diversity in practice regarding the timing of derecognition for residential mortgage loans when a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan. Under ASU 2014-04, physical possession of residential real estate property is achieved when either the creditor obtains legal title to the residential real estate property upon completion of a foreclosure or the borrower conveys all interest in the residential real estate property through completion of a deed in lieu of foreclosure in order to satisfy that loan. Once physical possession has been achieved, the loan is derecognized and the property recorded within other assets at the lower of cost or fair value (less estimated costs to sell). In addition, the guidance requires both interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure. ASU 2014-04 is effective for annual reporting periods beginning on or after December 15, 2014, and interim periods within those annual periods. Upon adoption, ASU 2014-04 provides for transition through either a modified retrospective or prospective adoption. If the modified retrospective approach is adopted, a cumulative-effect adjustment to retained earnings is performed in adjusting mortgage loans and foreclosed real estate appropriately for any properties existing at the beginning of the annual period for which the amendments are effective. Prospective adoption represents the adoption of the proposed guidance for any properties covered under the guidance subsequent to adoption. The Company is currently evaluating which method will be employed and the final impact of the standard, however ASU 2014-04 is not expected to have a material impact on the Company’s consolidated financial statements or results of operations.

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3.  Investment Securities
The amortized cost and fair value of investment securities with gross unrealized gains and losses were as follows as of September 30, 2014 and December 31, 2013:
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Carrying Amount
September 30, 2014
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential collateralized mortgage obligations (CMO) securities - nonagency
$
979,256

 
$
9,954

 
$
4,030

 
$
985,180

 
$
985,180

Asset-backed securities (ABS)
1,847

 
—

 
284

 
1,563

 
1,563

Other
282

 
320

 
—

 
602

 
602

Total available for sale securities
$
981,385

 
$
10,274

 
$
4,314

 
$
987,345

 
$
987,345

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
31,530

 
$
878

 
$
—

 
$
32,408

 
$
31,530

Residential mortgage-backed securities (MBS) - agency
82,221

 
1,458

 
558

 
83,121

 
82,221

Total held to maturity securities
$
113,751

 
$
2,336

 
$
558

 
$
115,529

 
$
113,751

December 31, 2013
 
 

 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
1,097,293

 
$
15,253

 
$
3,275

 
$
1,109,271

 
$
1,109,271

Asset-backed securities
4,144

 
—

 
1,058

 
3,086

 
3,086

Other
2,933

 
337

 
—

 
3,270

 
3,270

Total available for sale securities
$
1,104,370

 
$
15,590

 
$
4,333

 
$
1,115,627

 
$
1,115,627

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
41,347

 
$
1,408

 
$
5

 
$
42,750

 
$
41,347

Residential MBS - agency
65,965

 
754

 
1,548

 
65,171

 
65,965

Total held to maturity securities
$
107,312

 
$
2,162

 
$
1,553

 
$
107,921

 
$
107,312

At September 30, 2014 and December 31, 2013, investment securities with a carrying value of $172,301 and $181,836, respectively, were pledged to secure other borrowings, securities sold under agreements to repurchase, and for other purposes as required or permitted by law.
For the three months ended September 30, 2014, there were no gross gains or gross losses realized on available for sale investments. For the nine months ended September 30, 2014, gross gains of $1,250 were realized on available for sale investments with no gross losses having been realized. For the three and nine months ended September 30, 2013, gross gains of $4,225 were realized on available for sale investments with no gross losses having been realized. The cost of investments sold is calculated using the specific identification method.
The gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment category and the length of time individual securities have been in a continuous unrealized loss position, at September 30, 2014 and December 31, 2013 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, 2014
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
334,163

 
$
2,629

 
$
71,318

 
$
1,401

 
$
405,481

 
$
4,030

Residential MBS - agency
20,543

 
157

 
12,111

 
401

 
32,654

 
558

Asset-backed securities
—

 
—

 
1,563

 
284

 
1,563

 
284

Total debt securities
$
354,706

 
$
2,786

 
$
84,992

 
$
2,086

 
$
439,698

 
$
4,872

December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
169,829

 
$
3,012

 
$
10,932

 
$
263

 
$
180,761

 
$
3,275

Residential CMO securities - agency
887

 
5

 
—

 
—

 
887

 
5

Residential MBS - agency
54,355

 
1,548

 
—

 
—

 
54,355

 
1,548

Asset-backed securities
—

 
—

 
3,086

 
1,058

 
3,086

 
1,058

Total debt securities
$
225,071

 
$
4,565

 
$
14,018

 
$
1,321

 
$
239,089

 
$
5,886

The Company had unrealized losses at September 30, 2014 and December 31, 2013 on residential CMO securities, residential agency MBS, and ABS. These unrealized losses are primarily attributable to weak market conditions. Based on the nature of the impairment,

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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, 2014, the Company had 54 debt securities in an unrealized loss position. A total of 39 were in an unrealized loss position for less than 12 months. These 39 securities consisted of 34 residential nonagency CMO securities and five residential agency MBS. The remaining 15 debt securities were in an unrealized loss position for 12 months or longer. These 15 securities consisted of eight residential nonagency CMO securities, four residential agency MBS and three ABS. Of the $4,872 in unrealized losses, $3,969 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, 2013, the Company had 36 debt securities in an unrealized loss position. A total of 29 were in an unrealized loss position for less than 12 months. These 29 securities consisted of 14 residential nonagency CMO securities, one residential agency CMO security and 14 residential agency MBS. The remaining seven debt securities were in an unrealized loss position for 12 months or longer. These seven securities consisted of three ABS and four residential nonagency CMO securities. Of the $5,886 in unrealized losses, $4,659 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.
For the three months ended September 30, 2014 no OTTI was recognized. For the nine months ended September 30, 2014, the Company recognized non-credit OTTI in earnings of $685 on available for sale residential nonagency CMO securities with no OTTI recognized on held to maturity securities. These OTTI losses represented additional declines in fair value on securities originally OTTI at December 31, 2013 as a result of regulatory changes created by the Volcker rule, which classifies these investments as covered funds that cannot be held by an insured depository institution resulting in the inability to hold these investments to recovery. 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.
During the three and nine months ended September 30, 2014 and 2013, interest and dividend income on investment securities was comprised of the following:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Interest income on available for sale securities
$
7,243

 
$
11,816

 
$
24,020

 
$
40,100

Interest income on held to maturity securities
837

 
635

 
2,473

 
1,917

Other interest and dividend income
1,547

 
925

 
2,783

 
2,422

 
$
9,627

 
$
13,376

 
$
29,276

 
$
44,439

All investment interest income recognized by the Company during the three and nine months ended September 30, 2014 and 2013 was fully taxable.
4.  Loans Held for Sale
Loans held for sale as of September 30, 2014 and December 31, 2013, consist of the following:
 
September 30,
2014
 
December 31,
2013
Mortgage warehouse (carried at fair value)
$
468,335


$
613,459

Other residential (carried at fair value)
300,574


58,912

   Total loans held for sale carried at fair value
768,909

 
672,371

Government insured pool buyouts
88,607


53,823

Other residential
14,220

 
8,939

Commercial and commercial real estate
—


56,249

  Total loans held for sale carried at lower of cost or market
102,827

 
119,011

Total loans held for sale
$
871,736


$
791,382

The Company typically transfers originated or acquired residential mortgage loans to various financial institutions, government agencies, or government-sponsored enterprises. In addition, the Company enters into loan securitization transactions related to certain conforming residential mortgage loans. In connection with the conforming loan transactions, loans are converted into mortgage-backed securities issued primarily by the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA) and the Government National Mortgage Association (GNMA), 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. For non-conforming transactions, the Company sells whole loans outright to qualified institutional buyers and retains the related servicing rights.
The Company has elected the fair value option of accounting under GAAP for certain residential mortgage loans originated within the mortgage warehouse. 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.

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Other residential loans held for sale carried at fair value represent fixed rate, 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.
Other residential loans held for sale that are carried at lower of cost or market value represent loans acquired or originated by the Company with the intention to hold these loans for a short duration and subsequently sell in the near term. Commercial and commercial real estate loans held for sale carried at the lower of cost or market represent the portion of certain commercial lines of credit that the Company has the intent to market and sell.
In addition, the Company also may be exposed to limited liability related to recourse agreements and repurchase agreements made to its issuers and purchasers, which are included in commitments and contingencies in Note 14. Commitments and contingencies include 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 material breach of contractual representations and warranties. Refer to Note 14 for the maximum exposure to loss for material breach of contractual representations and warranties.
The following is a summary of cash flows related to transfers accounted for as sales for the three and nine months ended September 30, 2014 and 2013:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2014
 
2013
 
2014
 
2013
Proceeds received from agency securitizations
$
1,426,139

 
$
2,251,809

 
$
3,638,161

 
$
7,345,260

 
 
 
 
 
 
 
 
Proceeds received from nonsecuritizations sales - residential
821,010

 
902,441

 
1,422,271

 
1,579,749

Proceeds received from nonsecuritizations sales - commercial and commercial real estate
15,363

 
—

 
94,617

 
—

Proceeds received from nonsecuritizations sales - equipment financing receivables
9,401

 
—

 
13,412

 
—

   Proceeds received from nonsecuritizations sales
$
845,774

 
$
902,441

 
$
1,530,300

 
$
1,579,749

 
 
 
 
 
 
 
 
Repurchased loans from agency sales or securitizations
$
1,122

 
$
1,858

 
3,666

 
4,028

Repurchased loans from nonagency sales or securitizations
—

 
6,927

 
4,078

 
17,143

In connection with these transfers, the Company recorded servicing assets in the amount of $20,848 and $42,952 for the three and nine months ended September 30, 2014. All servicing assets are initially recorded at fair value using a Level 3 measurement technique. Refer to Note 7 for information relating to servicing activities and MSR. The gains and losses on the transfers which qualified as sales are recorded on the consolidated statements of income in gain on sale of loans, which includes the gain or loss on sale, change in fair value related to our fair value option loans, and the offsetting hedging positions.
The Company periodically transfers conforming residential GNMA mortgages in exchange for mortgage-backed securities.  As of September 30, 2014 and December 31, 2013, the Company retained $86,650 and $50,534, 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.
During the three and nine months ended September 30, 2014, the Company transferred $192,649 and $231,434 of both residential mortgage loans and government insured loans from loans held for sale to loans held for investment at lower of cost or market as the Company no longer has the intention to sell these loans to a third party. During the three and nine months ended September 30, 2013, the Company transferred $73,988 and $819,250 in residential mortgage loans held for sale to loans held for investment at lower of cost or market. These transfers occurred as the Company changed its intent to hold these loans for the foreseeable future. In 2013 a majority of the loans transferred were originated residential preferred jumbo adjustable rate mortgages (ARM) which were originally intended to be sold in the secondary market at the time of origination, but as a result of changing economic conditions and the Company's capacity and desire to hold these loans on the balance sheet, the Company changed its intentions and now plans to hold these loans for the foreseeable future and thus transferred these loans to the held for investment portfolio. For those preferred jumbo ARM loans originated after June 2013, the Company has the intent and ability to hold these loans for the foreseeable future and thus preferred jumbo ARM loan originations are originated into the held for investment portfolio.
During the three and nine months ended September 30, 2014, the Company transferred $208,318 and $1,644,258 of loans from held for investment to held for sale at lower of cost or market. Of transfers in the three months ended September 30, 2014, $159,243 were government insured pool buyouts initially acquired for the held for investment portfolio. These loans were transferred to held for sale as they re-performed and were eligible to be re-securitized into GNMA securities. Of the transfers in the first nine months ended September 30, 2014 the Company transferred $401,499 of re-performing government insured loans that were eligible to be re-securitized, interest only loans of $343,542 and troubled debt restructuring and non-performing loans of $79,075 were transferred and sold. These interest only and troubled debt restructuring loans were selected for sale due to the increased Federal Deposit Insurance Corporation (FDIC) assessments associated with carrying mortgages deemed "non-traditional mortgages" and non-performing assets. During the same period the Company transferred $762,433 of longer duration preferred ARMs due to the decrease in balance sheet capacity as a result of third party loan acquisitions of $2,475,479 of shorter duration GNMA pool buyouts and other residential mortgage loan purchases. In addition, during the first nine months ended September 30, 2014 the Company transferred and sold $44,438 of commercial loans to help reduce its concentration in a certain segment of its commercial real estate portfolio. The Company also transferred and sold $13,271 of equipment financing receivables during the nine months ended September 30, 2014. 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 the lower of cost or market. The majority of these loans were government insured pool buyouts

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initially acquired for the held for investment portfolio. These loans were transferred to held for sale as they re-performed and were eligible to be re-securitized into GNMA securities.
5.  Loans and Leases Held for Investment, Net
Loans and leases held for investment as of September 30, 2014 and December 31, 2013 were comprised of the following:
 
September 30,
2014
 
December 31,
2013
Residential mortgages
$
9,402,082

 
$
7,044,743

Commercial and commercial real estate
5,192,970

 
4,812,970

Equipment financing receivables
1,839,416

 
1,237,941

Home equity lines
139,589

 
151,916

Consumer and credit card
5,894

 
5,154

Total loans and leases held for investment, net of discounts
16,579,951

 
13,252,724

Allowance for loan and lease losses
(57,245
)
 
(63,690
)
Total loans and leases held for investment, net
$
16,522,706

 
$
13,189,034

As of September 30, 2014 and December 31, 2013, the carrying values presented above include net purchased loan and lease discounts and net deferred loan and lease origination costs as follows:
 
September 30,
2014
 
December 31,
2013
Net purchased loan and lease discounts
$
54,510

 
$
102,416

Net deferred loan and lease origination costs
84,832

 
54,107

During the nine months ended September 30, 2014 the Company's significant purchases included acquisitions of credit impaired residential loans with a recorded investment of $2,533,686 and equipment financing receivables with a recorded investment of $216,506. Along with these purchases the Company also purchased into commercial credit facilities with an outstanding commitment of $105,000 and a net recorded investment of $66,092 at September 30, 2014.
Please see Note 4 for disclosure of our transfers and sales of financing receivables.
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, 2014 and 2013 are as follows:
 
September 30,
2014
 
September 30,
2013
Contractual payments receivable for acquired loans and leases at acquisition
$
4,334,951

 
$
345,890

Expected cash flows for acquired loans and leases at acquisition
2,689,008

 
193,549

Basis in acquired loans and leases at acquisition
2,533,686

 
179,027

Information pertaining to the ACI portfolio as of September 30, 2014 and December 31, 2013 is as follows:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
September 30, 2014
 
 
 
 
 
Carrying value, net of allowance
$
2,408,960

 
$
231,705

 
$
2,640,665

Outstanding unpaid principal balance (UPB)
2,446,279

 
236,075

 
2,682,354

Allowance for loan and lease losses, beginning of period
4,925

 
9,834

 
14,759

Allowance for loan and lease losses, end of period
6,202

 
2,887

 
9,089

December 31, 2013
 
 
 
 
 
Carrying value, net of allowance
$
646,470

 
$
331,771

 
$
978,241

Outstanding unpaid principal balance
696,222

 
339,179

 
1,035,401

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

 
16,789

 
21,964

Allowance for loan and lease losses, end of year
4,925

 
9,834

 
14,759


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The Company recorded a provision for loan loss of $427 and a reduction of provision for loan loss of $2 for the ACI portfolio for the nine months ended September 30, 2014 and 2013, respectively. The adjustments to provision are the result of changes in expected cash flows on ACI loans.
The following is a summary of the accretable yield activity for the ACI loans during the nine months ended September 30, 2014 and 2013:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
September 30, 2014
 
 
 
 
 
Balance, beginning of period
$
101,183

 
$
59,663

 
$
160,846

Additions
155,372

 
—

 
155,372

Accretion
(51,930
)
 
(14,878
)
 
(66,808
)
Reclassifications (from) to accretable yield
(9,440
)
 
25,879

 
16,439

Transfer from loans held for investment to loans held for sale
(2,522
)
 
(344
)
 
(2,866
)
Balance, end of period
$
192,663

 
$
70,320

 
$
262,983

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 (from) to accretable yield
27,249

 
23,552

 
50,801

Balance, end of period
$
119,385

 
$
109,982

 
$
229,367

Covered Loans and Leases — Covered loans and leases are acquired and recorded at fair value at acquisition, exclusive of the indemnification agreement with former shareholders of Tygris. All loans and leases acquired through the purchase of Tygris are considered covered during the applicable indemnification period. The recorded investment of loans covered under the Tygris indemnification agreement are $8,300 and $24,330 at September 30, 2014 and December 31, 2013, respectively. As of September 30, 2014, the Company does not expect to receive cash payments under this indemnification agreement due to the performance of the underlying loans and leases.

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6.  Allowance for Loan and Lease Losses
Changes in the allowance for loan and lease losses for the three and nine months ended September 30, 2014 and 2013 are as follows:
Three Months Ended September 30, 2014
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Equipment Financing Receivables    
 
Home Equity Lines
 
Consumer and Credit Card
 
Total    
Balance, beginning of period
$
20,421

 
$
27,943

 
$
5,565

 
$
2,667

 
$
132

 
$
56,728

Transfers to loans held for sale
—

 
(2,482
)
 
—

 
—

 
—

 
(2,482
)
Provision for loan and lease losses
5,115

 
(1,659
)
 
2,917

 
299

 
63

 
6,735

Charge-offs
(2,023
)
 
(568
)
 
(1,548
)
 
(171
)
 
(28
)
 
(4,338
)
Recoveries
127

 
6

 
180

 
289

 
—

 
602

Balance, end of period
$
23,640

 
$
23,240

 
$
7,114

 
$
3,084

 
$
167

 
$
57,245

Three Months Ended September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
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

Nine Months Ended September 30, 2014
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Equipment Financing Receivables    
 
Home Equity Lines
 
Consumer and Credit Card
 
Total    
Balance, beginning of period
$
26,497

 
$
29,987

 
$
4,273

 
$
2,812

 
$
121

 
$
63,690

Transfers to loans held for sale
(5,052
)
 
(2,482
)
 
—

 
(191
)
 
—

 
(7,722
)
   Provision for loan and lease losses
8,249

 
1,015

 
5,950

 
609

 
109

 
15,929

   Charge-offs
(6,998
)
 
(5,287
)
 
(3,675
)
 
(650
)
 
(63
)
 
(16,673
)
   Recoveries
944

 
7

 
566

 
504

 
—

 
2,021

Balance, end of period
$
23,640

 
$
23,240

 
$
7,114

 
$
3,084

 
$
167

 
$
57,245

Nine Months Ended September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
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


15
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, 2014 and December 31, 2013:
September 30, 2014
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
2,682

 
$
14,756

 
$
6,202

 
$
23,640

Commercial and commercial real estate
1,440

 
18,913

 
2,887

 
23,240

Equipment financing receivables
—

 
7,114

 
—

 
7,114

Home equity lines
—

 
3,084

 
—

 
3,084

Consumer and credit card
—

 
167

 
—

 
167

Total allowance for loan and lease losses
$
4,122

 
$
44,034

 
$
9,089

 
$
57,245

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
16,774

 
$
6,970,146

 
$
2,415,162

 
$
9,402,082

Commercial and commercial real estate
56,934

 
4,901,444

 
234,592

 
5,192,970

Equipment financing receivables
—

 
1,839,416

 
—

 
1,839,416

Home equity lines
—

 
139,589

 
—

 
139,589

Consumer and credit card
—

 
5,894

 
—

 
5,894

Total loans and leases held for investment
$
73,678

 
$
13,856,489

 
$
2,649,754

 
$
16,579,951

 
 
 
 
 
 
 
 
December 31, 2013
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
9,134

 
$
12,438

 
$
4,925

 
$
26,497

Commercial and commercial real estate
248

 
19,905

 
9,834

 
29,987

Equipment financing receivables
—

 
4,273

 
—

 
4,273

Home equity lines
—

 
2,812

 
—

 
2,812

Consumer and credit card
—

 
121

 
—

 
121

Total allowance for loan and lease losses
$
9,382

 
$
39,549

 
$
14,759

 
$
63,690

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
90,472

 
$
6,302,876

 
$
651,395

 
$
7,044,743

Commercial and commercial real estate
22,747

 
4,448,618

 
341,605

 
4,812,970

Equipment financing receivables
—

 
1,237,941

 
—

 
1,237,941

Home equity lines
—

 
151,916

 
—

 
151,916

Consumer and credit card
—

 
5,154

 
—

 
5,154

Total loans and leases held for investment
$
113,219

 
$
12,146,505

 
$
993,000

 
$
13,252,724

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 by credit administration personnel based on current information and events. The Company monitors the credit quality of all other loan types based on performing status.

16
Table of Contents

The following tables present the recorded investment for loans and leases by credit quality indicator as of September 30, 2014 and December 31, 2013:
 
 
 
Non-performing    
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
September 30, 2014
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
5,988,260

 
$
—

 
$
18,727

 
$
6,006,987

 
 
Government insured pool buyouts (2) (3)
2,876,267

 
518,828

 
—

 
3,395,095

 
 
Equipment financing receivables
1,830,676

 
—

 
8,740

 
1,839,416

 
 
Home equity lines
137,437

 
—

 
2,152

 
139,589

 
 
Consumer and credit card
5,863

 
—

 
31

 
5,894

 
 
Total
$
10,838,503

 
$
518,828

 
$
29,650

 
$
11,386,981

 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
September 30, 2014
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Mortgage warehouse finance
$
1,185,591

 
$
—

 
$
—

 
$
—

 
$
1,185,591

Lender finance
663,464

 
14,936

 
—

 
—

 
678,400

Other commercial finance
71,204

 
—

 
356

 
—

 
71,560

Commercial real estate
3,085,568

 
29,523

 
142,328

 
—

 
3,257,419

Total commercial and commercial real estate
$
5,005,827

 
$
44,459

 
$
142,684

 
$
—

 
$
5,192,970

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-performing
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
December 31, 2013
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
5,096,589

 
$
—

 
$
56,517

 
$
5,153,106

 
 
Government insured pool buyouts (2) (3)
1,219,719

 
671,918

 
—

 
1,891,637

 
 
Equipment financing receivables
1,233,414

 
—

 
4,527

 
1,237,941

 
 
Home equity lines
148,646

 
—

 
3,270

 
151,916

 
 
Consumer and credit card
5,117

 
—

 
37

 
5,154

 
 
Total
$
7,703,485

 
$
671,918

 
$
64,351

 
$
8,439,754

 
 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
December 31, 2013
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Mortgage warehouse finance
$
944,219

 
$
—

 
$
—

 
$
—

 
$
944,219

Lender finance
592,621

 
—

 
—

 
—

 
592,621

Other commercial finance
84,639

 
135

 
1,106

 
—

 
85,880

Commercial real estate
2,989,493

 
34,012

 
166,745

 
—

 
3,190,250

Total commercial and commercial real estate
$
4,610,972

 
$
34,147