EVER-3.31.15-10Q
 
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 March 31, 2015.
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 April 24, 2015, there were 124,228,167 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)



 
March 31,
2015
 
December 31,
2014
Assets
 
 
 
Cash and due from banks
$
63,094

 
$
49,436

Interest-bearing deposits in banks
488,954

 
317,228

Total cash and cash equivalents
552,048

 
366,664

Investment securities:
 
 
 
Available for sale, at fair value
719,645

 
776,311

Held to maturity (fair value of $119,824 and $118,230 as of March 31, 2015 and December 31, 2014, respectively)
115,631

 
115,084

Other investments
236,494

 
196,609

Total investment securities
1,071,770

 
1,088,004

Loans held for sale (includes $1,074,975 and $728,378 carried at fair value as of March 31, 2015 and December 31, 2014, respectively)
1,861,306

 
973,507

Loans and leases held for investment:
 
 
 
Loans and leases held for investment, net of unearned income
18,533,637

 
17,760,253

Allowance for loan and lease losses
(62,846
)
 
(60,846
)
Total loans and leases held for investment, net
18,470,791

 
17,699,407

Mortgage servicing rights (MSR), net
383,763

 
435,619

Premises and equipment, net
54,283

 
56,457

Other assets
953,258

 
998,130

Total Assets
$
23,347,219

 
$
21,617,788

Liabilities
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
1,213,266

 
$
984,703

Interest-bearing
14,863,421

 
14,523,994

Total deposits
16,076,687

 
15,508,697

Other borrowings
5,178,000

 
4,004,000

Trust preferred securities
103,750

 
103,750

Accounts payable and accrued liabilities
230,970

 
253,747

Total Liabilities
21,589,407

 
19,870,194

Commitments and Contingencies (Note 13)


 


Shareholders’ Equity
 
 
 
 6.75% Series A 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 March 31, 2015 and December 31, 2014)
150,000

 
150,000

Common Stock, $0.01 par value (500,000,000 shares authorized; 124,133,375 and 123,679,049 issued and outstanding at March 31, 2015 and December 31, 2014, respectively)
1,241

 
1,237

Additional paid-in capital
858,925

 
851,158

Retained earnings
817,539

 
810,796

Accumulated other comprehensive income (loss) (AOCI)
(69,893
)
 
(65,597
)
Total Shareholders’ Equity
1,757,812

 
1,747,594

Total Liabilities and Shareholders’ Equity
$
23,347,219

 
$
21,617,788


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
March 31,
 
2015
 
2014
Interest Income
 
 
 
Interest and fees on loans and leases
$
194,849

 
$
158,470

Interest and dividends on investment securities
8,022

 
9,831

Other interest income
160

 
162

Total Interest Income
203,031

 
168,463

Interest Expense
 
 
 
Deposits
29,764

 
22,607

Other borrowings
17,829

 
15,012

Total Interest Expense
47,593

 
37,619

Net Interest Income
155,438

 
130,844

Provision for Loan and Lease Losses
9,000

 
3,071

Net Interest Income after Provision for Loan and Lease Losses
146,438

 
127,773

Noninterest Income
 
 
 
Loan servicing fee income
34,132

 
46,617

Amortization of mortgage servicing rights
(20,299
)
 
(20,572
)
Recovery (impairment) of mortgage servicing rights
(43,352
)
 
4,941

Net loan servicing income (loss)
(29,519
)
 
30,986

Gain on sale of loans
42,623

 
33,851

Loan production revenue
5,387

 
4,579

Deposit fee income
4,050

 
3,335

Other lease income
4,080

 
4,905

Other
5,900

 
6,928

Total Noninterest Income
32,521

 
84,584

Noninterest Expense
 
 
 
Salaries, commissions and other employee benefits expense
91,986

 
97,694

Equipment expense
16,045

 
18,648

Occupancy expense
5,856

 
8,072

General and administrative expense
42,155

 
36,798

Total Noninterest Expense
156,042

 
161,212

Income before Provision for Income Taxes
22,917

 
51,145

Provision for Income Taxes
8,687

 
19,385

Net Income
$
14,230

 
$
31,760

Less: Net Income Allocated to Preferred Stock
(2,531
)
 
(2,531
)
Net Income Allocated to Common Shareholders
$
11,699

 
$
29,229

Basic Earnings Per Common Share
$
0.09

 
$
0.24

Diluted Earnings Per Common Share
$
0.09

 
$
0.23

Dividends Declared Per Common Share
$
0.04

 
$
0.03

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
March 31,
 
2015
 
2014
Net Income
$
14,230

 
$
31,760

Unrealized Gains (Losses) on Debt Securities
 
 
 
Unrealized gains (losses) due to changes in fair value
595

 
(90
)
Tax effect
(226
)
 
34

Change in unrealized gains (losses) on debt securities
369

 
(56
)
Interest Rate Swaps
 
 
 
Net unrealized gains (losses) due to changes in fair value
(12,144
)
 
(5,624
)
Reclassification of net unrealized losses to interest expense
4,620

 
4,050

Tax effect
2,859

 
598

Change in interest rate swaps
(4,665
)
 
(976
)
Other Comprehensive Income (Loss)
(4,296
)
 
(1,032
)
Comprehensive Income (Loss)
$
9,934

 
$
30,728


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, 2015
$
150,000

 
$
1,237

 
$
851,158

 
$
810,796

 
$
(65,597
)
 
$
1,747,594

Net income
—

 
—

 
—

 
14,230

 
—

 
14,230

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
(4,296
)
 
(4,296
)
Issuance of common stock
—

 
4

 
5,462

 
—

 
—

 
5,466

Share-based grants (including income tax benefits)
—

 
—

 
2,305

 
—

 
—

 
2,305

Cash dividends on common stock
—

 
—

 
—

 
(4,956
)
 
—

 
(4,956
)
Cash dividends on preferred stock
—

 
—

 
—

 
(2,531
)
 
—

 
(2,531
)
Balance, March 31, 2015
$
150,000

 
$
1,241

 
$
858,925

 
$
817,539

 
$
(69,893
)
 
$
1,757,812

 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2014
$
150,000

 
$
1,226

 
$
832,351

 
$
690,051

 
$
(52,615
)
 
$
1,621,013

Net income
—

 
—

 
—

 
31,760

 
—

 
31,760

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
(1,032
)
 
(1,032
)
Issuance of common stock
—

 
1

 
209

 
—

 
—

 
210

Share-based grants (including income tax benefits)
—

 
—

 
1,900

 
—

 
—

 
1,900

Cash dividends on common stock
—

 
—

 
—

 
(3,681
)
 
—

 
(3,681
)
Cash dividends on preferred stock
—

 
—

 
—

 
(2,531
)
 
—

 
(2,531
)
Balance, March 31, 2014
$
150,000

 
$
1,227

 
$
834,460

 
$
715,599

 
$
(53,647
)
 
$
1,647,639


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)

 
Three Months Ended
March 31,
 
2015
 
2014
Operating Activities:
 
 
 
Net income
$
14,230

 
$
31,760

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Amortization of premiums and deferred origination costs
13,004

 
8,423

Depreciation and amortization of tangible and intangible assets
6,737

 
8,753

Reclassification of net loss on settlement of interest rate swaps
4,620

 
4,050

Amortization and impairment of mortgage servicing rights, net of recoveries
63,651

 
15,631

Deferred income taxes (benefit)
2,181

 
9,853

Provision for loan and lease losses
9,000

 
3,071

Loss on other real estate owned (OREO)
1,097

 
892

Share-based compensation expense
1,886

 
1,719

Payments for settlement of forward interest rate swaps
—

 
(11,161
)
Other operating activities
501

 
(896
)
Changes in operating assets and liabilities:
 
 
 
Loans held for sale, including proceeds from sales and repayments
(317,755
)
 
199,591

Other assets
52,685

 
71,148

Accounts payable and accrued liabilities
(33,545
)
 
(40,241
)
Net cash provided by (used in) operating activities
(181,708
)
 
302,593

Investing Activities:
 
 
 
Investment securities available for sale:
 
 
 
Purchases
—

 
(77,994
)
Proceeds from prepayments and maturities
56,952

 
76,687

Investment securities held to maturity:
 
 
 
Purchases
(5,099
)
 
(14,162
)
Proceeds from prepayments and maturities
4,298

 
4,332

Purchases of other investments
(143,080
)
 
(72,902
)
Proceeds from sales of other investments
103,195

 
78,048

Net change in loans and leases held for investment
(1,552,524
)
 
(753,139
)
Purchases of premises and equipment, including equipment under operating leases
(2,835
)
 
(5,092
)
Purchases of mortgage servicing assets
(1,024
)
 
(1,320
)
Proceeds related to sale or settlement of other real estate owned
5,927

 
8,837

Proceeds from insured foreclosure claims
164,873

 
59,616

Proceeds from sale of mortgage servicing rights
—

 
37,738

Other investing activities
2,139

 
1,075

Net cash provided by (used in) investing activities
(1,367,178
)
 
(658,276
)
Financing Activities:
 
 
 
Net increase (decrease) in nonmaturity deposits
342,507

 
(148,422
)
Net increase (decrease) in time deposits
219,365

 
161,977

Net change in short-term Federal Home Loan Bank (FHLB) advances
1,124,000

 
(25,000
)
Proceeds from long-term FHLB advances
225,000

 
75,000

Repayments of long-term FHLB advances, including early extinguishment
(175,000
)
 
(50,000
)
Proceeds from issuance of common stock
5,466

 
210

Dividends paid
(7,488
)
 
(6,212
)
Other financing activities
420

 
181

Net cash provided by (used in) financing activities
1,734,270

 
7,734

Net change in cash and cash equivalents
185,384

 
(347,949
)
Cash and cash equivalents at beginning of period
366,664

 
847,778

Cash and cash equivalents at end of period
$
552,048

 
$
499,829


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 and commercial entities; (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.
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 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014. 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, 2015. 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.
Accounting principles generally accepted in the United States of America require management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates relate to the Company’s allowance for loan and lease losses, loans and leases acquired with evidence of credit deterioration, 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:
 
Three Months Ended
March 31,
 
2015
 
2014
Supplemental Schedules of Noncash Activities:
 
 
 
Loans transferred to foreclosure claims
$
177,685

 
$
119,353

See Note 4 for disclosures relating to noncash activities relating to loan transfers.
2.  Recent Accounting Pronouncements
Consolidation - In February 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-2, Consolidation (Topic 810) - Amendments to the Consolidation Analysis, which (1) modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities; (2) eliminates the presumption that a general partner should consolidate a limited partnership; (3) affects the consolidation analysis of reporting entities involved with VIEs that have fee arrangements and related party relationships and (4) provides a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. Upon adoption, ASU 2015-2 provides for transition through either a full retrospective approach or a modified retrospective approach, which requires restatement as of the beginning of the fiscal year of adoption through a cumulative-effect adjustment to retained earnings. ASU 2015-2 is effective for annual reporting periods beginning after December 15, 2015, and interim periods within those annual periods with early adoption permitted. The Company is currently evaluating the pending adoption of ASU 2015-2 and its impact on its consolidated financial statements and has not yet identified which transition method will be applied upon adoption.
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 Accounting Standards Codification (ASC) 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 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

8
Table of Contents

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 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. The guidance set forth in ASU 2014-04 is consistent with the Company’s current practice for derecognizing residential mortgage loans. As such, the adoption of ASU 2014-04 did not have a material impact on the Company's consolidated financial statements but resulted in additional disclosure, which can be found in Note 6.
3.  Investment Securities
The amortized cost and fair value of investment securities with gross unrealized gains and losses were as follows as of March 31, 2015 and December 31, 2014:
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Carrying Amount
March 31, 2015
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential collateralized mortgage obligations (CMO) securities - nonagency
$
717,589

 
$
6,164

 
$
6,143

 
$
717,610

 
$
717,610

Asset-backed securities (ABS)
1,761

 
—

 
398

 
1,363

 
1,363

Other
268

 
404

 
—

 
672

 
672

Total available for sale securities
$
719,618

 
$
6,568

 
$
6,541

 
$
719,645

 
$
719,645

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
23,970

 
$
754

 
$
—

 
$
24,724

 
$
23,970

Residential mortgage-backed securities (MBS) - agency
91,661

 
3,554

 
115

 
95,100

 
91,661

Total held to maturity securities
$
115,631

 
$
4,308

 
$
115

 
$
119,824

 
$
115,631

December 31, 2014
 
 

 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
774,804

 
$
5,631

 
$
6,200

 
$
774,235

 
$
774,235

Asset-backed securities
1,800

 
—

 
405

 
1,395

 
1,395

Other
275

 
406

 
—

 
681

 
681

Total available for sale securities
$
776,879

 
$
6,037

 
$
6,605

 
$
776,311

 
$
776,311

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
27,801

 
$
788

 
$
—

 
$
28,589

 
$
27,801

Residential MBS - agency
87,283

 
2,680

 
322

 
89,641

 
87,283

Total held to maturity securities
$
115,084

 
$
3,468

 
$
322

 
$
118,230

 
$
115,084

At March 31, 2015 and December 31, 2014, investment securities with a carrying value of $157,948 and $166,836, 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 March 31, 2015, there were no gross gains or gross losses realized on available for sale investments. The cost of investments sold is calculated using the specific identification method.

9
Table of Contents

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 March 31, 2015 and December 31, 2014 are as follows:
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
200,727

 
$
2,136

 
$
128,968

 
$
4,007

 
$
329,695

 
$
6,143

Residential MBS - agency
4,261

 
3

 
9,452

 
112

 
13,713

 
115

Asset-backed securities
—

 
—

 
1,363

 
398

 
1,363

 
398

Total debt securities
$
204,988

 
$
2,139

 
$
139,783

 
$
4,517

 
$
344,771

 
$
6,656

December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
317,042

 
$
3,900

 
$
31,010

 
$
2,300

 
$
348,052

 
$
6,200

Residential MBS - agency
6,788

 
63

 
11,670

 
259

 
18,458

 
322

Asset-backed securities
—

 
—

 
1,395

 
405

 
1,395

 
405

Total debt securities
$
323,830

 
$
3,963

 
$
44,075

 
$
2,964

 
$
367,905

 
$
6,927

The Company had unrealized losses at March 31, 2015 and December 31, 2014 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, 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 March 31, 2015, the Company had 50 debt securities in an unrealized loss position. A total of 27 were in an unrealized loss position for less than 12 months. These 27 securities consisted of 25 residential nonagency CMO securities and two residential agency MBS. The remaining 23 debt securities were in an unrealized loss position for 12 months or longer. These 23 securities consisted of 18 residential nonagency CMO securities, two residential agency MBS and three ABS. Of the $6,656 in unrealized losses, $4,731 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, 2014, the Company had 58 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 36 residential nonagency CMO securities and three residential agency MBS. The remaining 19 debt securities were in an unrealized loss position for 12 months or longer. These 19 securities consisted of three ABS, three residential agency MBS and 13 residential nonagency CMO securities. Of the $6,927 in unrealized losses, $5,061 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 months ended March 31, 2015 or 2014.
During the three months ended March 31, 2015 and 2014, interest and dividend income on investment securities was comprised of the following:
 
Three Months Ended
March 31,
 
2015
 
2014
Interest income on available for sale securities
$
5,180

 
$
8,805

Interest income on held to maturity securities
814

 
781

Other interest and dividend income
2,028

 
245

 
$
8,022

 
$
9,831

All investment interest income recognized by the Company during the three months ended March 31, 2015 and 2014 was fully taxable.

10
Table of Contents

4.  Loans Held for Sale
Loans held for sale as of March 31, 2015 and December 31, 2014, consisted of the following:
 
March 31,
2015
 
December 31,
2014
Mortgage warehouse (carried at fair value)
$
540,632


$
410,948

Other residential (carried at fair value)
534,343


317,430

   Total loans held for sale carried at fair value
1,074,975

 
728,378

Government insured pool buyouts
15,836


12,583

Other residential
770,495

 
232,546

 Total loans held for sale carried at lower of cost or market
786,331

 
245,129

Total loans held for sale
$
1,861,306


$
973,507

The Company has elected the fair value option for loans it originates with the intent to market and sell in the secondary market either through third party sales or securitizations. Mortgage warehouse loans are largely comprised of agency deliverable products that the Company typically sells within three months subsequent to origination. The Company economically hedges the mortgage warehouse portfolio with forward purchase and sales commitments designed to protect against potential changes in fair value. Due to the short duration that these loans are present on the balance sheet, the Company has elected fair value accounting on this portfolio of loans due to the burden of complying with the requirements of hedge accounting. The Company has also elected the fair value option for originated fixed rate jumbo preferred loans, due to the short duration that these loans are present on the balance sheet. Electing to use fair value 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. The Company has not elected the fair value option for other residential mortgage and government insured pool buyouts loans because the Company expects to hold these loans for a short duration. These loans are carried at the lower of cost or fair value.
A majority of the loans held for sale that are carried at the lower of cost or market represent loans that were transferred from the held for investment portfolio to the held for sale portfolio. Government insured pool buyouts held at the lower of cost or market represent government insured loans that have re-performed and are now eligible to be re-securitized. These loans are generally bought out of the Company's servicing pools while delinquent and placed into loans held for investment as they must become current before they are eligible for securitization. Once the loan re-performs and becomes eligible for securitization, the loan is transferred to the held for sale portfolio and sold or securitized. Other residential loans held at the lower of cost or market represent loans for which the Company has changed its intent and no longer intends to hold these loans for the foreseeable future.
In conjunction with the sale of loans and leases, the Company 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 13. 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 13 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 months ended March 31, 2015 and 2014:
 
Three Months Ended
March 31,
 
2015
 
2014
Proceeds received from agency securitizations
$
1,059,078

 
$
1,187,074

 
 
 
 
Proceeds received from nonsecuritization sales - residential
366,215

 
76,387

Proceeds received from nonsecuritization sales - commercial and commercial real estate
—

 
38,811

Proceeds received from nonsecuritization sales - equipment financing receivables
12,058

 
—

   Proceeds received from nonsecuritization sales
$
378,273

 
$
115,198

 
 
 
 
Repurchased loans from agency sales and securitizations
$
655

 
$
301

Repurchased loans from nonagency sales
1,304

 
1,152

In connection with these transfers, the Company recorded servicing assets in the amount of $12,293 for the three months ended March 31, 2015. 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 and Note 12 for a description of the valuation process. 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 fair value option loans, and the offsetting hedging positions.
The Company periodically transfers conforming residential Ginnie Mae (GNMA) mortgages in exchange for mortgage-backed securities.  As of March 31, 2015 and December 31, 2014, the Company retained $13,177 and $9,001, 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.

11
Table of Contents

The following is a summary of transfers of loans from held for investment to held for sale and transfers of loans from held for sale to held for investment for the three months ended March 31, 2015 and 2014.
 
Three Months Ended
March 31,
Loans Transferred from Held for investment (HFI) to Held for Sale (HFS)
2015
 
2014
Residential mortgages
$
708,383

 
$
—

Government insured pool buyouts
268,419

 
108,780

Commercial and commercial real estate
—

 
1,429

Equipment finance receivables
11,150

 
—

Total transfers from HFI to HFS
$
987,952

 
$
110,209

 


 
 
Loans Transferred from HFS to HFI
 
 
 
Residential mortgages
$
114,025

 
$
26,351

Total transfers from HFS to HFI
$
114,025

 
$
26,351

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 that it intends to hold these loans and leases for the foreseeable future. Loan transfers from held for sale to held for investment and transfers from held for investment to held for sale represent noncash activities within the operating and investing sections of the statement of cash flows.
5.  Loans and Leases Held for Investment, Net
Loans and leases held for investment as of March 31, 2015 and December 31, 2014 were comprised of the following:
 
March 31,
2015
 
December 31,
2014
Residential mortgages
$
9,779,238

 
$
9,920,070

Commercial and commercial real estate
6,505,346

 
5,646,690

Equipment financing receivables
2,073,583

 
2,031,570

Home equity lines
170,998

 
156,869

Consumer and credit card
4,472

 
5,054

Total loans and leases held for investment, net of unearned income
18,533,637

 
17,760,253

Allowance for loan and lease losses
(62,846
)
 
(60,846
)
Total loans and leases held for investment, net
$
18,470,791

 
$
17,699,407

As of March 31, 2015 and December 31, 2014, the carrying values presented above include net purchased loan and lease discounts and net deferred loan and lease origination costs as follows:
 
March 31,
2015
 
December 31,
2014
Net purchased loan and lease discounts
$
50,053

 
$
47,108

Net deferred loan and lease origination costs
98,757

 
94,778

During the three months ended March 31, 2015, the Company's significant third-party purchases included government insured buyouts with a UPB of $408,755, which are categorized as residential mortgages in the table above. The Company also purchased into commercial credit facilities with an outstanding commitment of $255,000 and outstanding balances of $101,031. Please see Note 4 for disclosure of the Company's 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.

12
Table of Contents

Acquisition date details of loans and leases acquired with evidence of credit deterioration during the three months ended March 31, 2015 and 2014 are as follows:
 
March 31,
2015
 
March 31,
2014
Contractual payments receivable for acquired loans and leases at acquisition
$
688,235

 
$
308,426

Expected cash flows for acquired loans and leases at acquisition
450,708

 
207,240

Basis in acquired loans and leases at acquisition
413,371

 
193,177

Information pertaining to the ACI portfolio as of March 31, 2015 and December 31, 2014 is as follows:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
March 31, 2015
 
 
 
 
 
Carrying value, net of allowance
$
2,632,310

 
$
168,853

 
$
2,801,163

Outstanding unpaid principal balance (UPB)
2,669,455

 
171,469

 
2,840,924

Allowance for loan and lease losses, beginning of period
5,974

 
2,042

 
8,016

Allowance for loan and lease losses, end of period
3,870

 
482

 
4,352

December 31, 2014
 
 
 
 
 
Carrying value, net of allowance
$
2,616,728

 
$
194,599

 
$
2,811,327

Outstanding unpaid principal balance
2,655,497

 
198,061

 
2,853,558

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

 
9,834

 
14,759

Allowance for loan and lease losses, end of year
5,974

 
2,042

 
8,016

The Company recorded a reduction of provision for loan loss of $3,665 and provision for loan loss of $534 for the ACI portfolio for the three months ended March 31, 2015 and 2014, 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 three months ended March 31, 2015 and 2014:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
March 31, 2015
 
 
 
 
 
Balance, beginning of period
$
240,650

 
$
61,256

 
$
301,906

Additions
37,337

 
—

 
37,337

Accretion
(27,994
)
 
(3,295
)
 
(31,289
)
Reclassifications (from) to accretable yield
(9,672
)
 
1,848

 
(7,824
)
Balance, end of period
$
240,321

 
$
59,809

 
$
300,130

March 31, 2014
 
 
 
 
 
Balance, beginning of period
$
101,183

 
$
59,663

 
$
160,846

Additions
14,063

 
—

 
14,063

Accretion
(13,034
)
 
(5,563
)
 
(18,597
)
Reclassifications (from) to accretable yield
2,056

 
17,916

 
19,972

Balance, end of period
$
104,268

 
$
72,016

 
$
176,284


13
Table of Contents

6.  Allowance for Loan and Lease Losses
Changes in the allowance for loan and lease losses for the three months ended March 31, 2015 and 2014 are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2015
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Equipment Financing Receivables    
 
Home Equity Lines
 
Consumer and Credit Card
 
Total    
Balance, beginning of period
$
25,098

 
$
23,095

 
$
8,649

 
$
3,814

 
$
190

 
$
60,846

   Provision for loan and lease losses
861

 
3,920

 
3,687

 
475

 
57

 
9,000

   Charge-offs
(2,539
)
 
(2,018
)
 
(2,631
)
 
(288
)
 
(33
)
 
(7,509
)
   Recoveries
58

 
2

 
366

 
83

 
—

 
509

Balance, end of period
$
23,478

 
$
24,999

 
$
10,071

 
$
4,084

 
$
214

 
$
62,846

Three Months Ended March 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
26,497

 
$
29,987

 
$
4,273

 
$
2,812

 
$
121

 
$
63,690

   Provision for loan and lease losses
1,503

 
284

 
1,038

 
283

 
(37
)
 
3,071

   Charge-offs
(3,165
)
 
(5
)
 
(1,189
)
 
(316
)
 
(15
)
 
(4,690
)
   Recoveries
566

 
1

 
190

 
141

 
—

 
898

Balance, end of period
$
25,401

 
$
30,267

 
$
4,312

 
$
2,920

 
$
69

 
$
62,969

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 March 31, 2015 and December 31, 2014:
March 31, 2015
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
2,805

 
$
16,803

 
$
3,870

 
$
23,478

Commercial and commercial real estate
759

 
23,758

 
482

 
24,999

Equipment financing receivables
68

 
10,003

 
—

 
10,071

Home equity lines
—

 
4,084

 
—

 
4,084

Consumer and credit card
—

 
214

 
—

 
214

Total allowance for loan and lease losses
$
3,632

 
$
54,862

 
$
4,352

 
$
62,846

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
17,207

 
$
7,125,851

 
$
2,636,180

 
$
9,779,238

Commercial and commercial real estate
36,350

 
6,299,661

 
169,335

 
6,505,346

Equipment financing receivables
304

 
2,073,279

 
—

 
2,073,583

Home equity lines
—

 
170,998

 
—

 
170,998

Consumer and credit card
—

 
4,472

 
—

 
4,472

Total loans and leases held for investment
$
53,861

 
$
15,674,261

 
$
2,805,515

 
$
18,533,637

 
 
 
 
 
 
 
 
December 31, 2014
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
2,896

 
$
16,228

 
$
5,974

 
$
25,098

Commercial and commercial real estate
720

 
20,333

 
2,042

 
23,095

Equipment financing receivables
—

 
8,649

 
—

 
8,649

Home equity lines
—

 
3,814

 
—

 
3,814

Consumer and credit card
—

 
190

 
—

 
190

Total allowance for loan and lease losses
$
3,616

 
$
49,214

 
$
8,016

 
$
60,846

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
16,642

 
$
7,280,726

 
$
2,622,702

 
$
9,920,070

Commercial and commercial real estate
42,267

 
5,407,782

 
196,641

 
5,646,690

Equipment financing receivables
—

 
2,031,570

 
—

 
2,031,570

Home equity lines
—

 
156,869

 
—

 
156,869

Consumer and credit card
—

 
5,054

 
—

 
5,054

Total loans and leases held for investment
$
58,909

 
$
14,882,001

 
$
2,819,343

 
$
17,760,253


14
Table of Contents

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.
The following tables present the recorded investment for loans and leases by credit quality indicator as of March 31, 2015 and December 31, 2014:
 
 
 
Non-performing    
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
March 31, 2015
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
6,242,276

 
$
—

 
$
23,046

 
$
6,265,322

 
 
Government insured pool buyouts (2) (3)
3,044,420

 
469,496

 
—

 
3,513,916

 
 
Equipment financing receivables
2,060,141

 
—

 
13,442

 
2,073,583

 
 
Home equity lines
168,807

 
—

 
2,191

 
170,998

 
 
Consumer and credit card
4,443

 
—

 
29

 
4,472

 
 
Total
$
11,520,087

 
$
469,496

 
$
38,708

 
$
12,028,291

 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
March 31, 2015
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Mortgage warehouse finance
$
2,103,098

 
$
—

 
$
—

 
$
—

 
$
2,103,098

Lender finance
838,671

 
13,088

 
—

 
—

 
851,759

Other commercial finance
66,085

 
—

 
337

 
—

 
66,422

Commercial real estate
3,324,910

 
68,804

 
90,353

 
—

 
3,484,067

Total commercial and commercial real estate
$
6,332,764

 
$
81,892

 
$
90,690

 
$
—

 
$
6,505,346

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-performing
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
December 31, 2014
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
6,302,172

 
$
—

 
$
22,793

 
$
6,324,965

 
 
Government insured pool buyouts (2) (3)
3,096,877

 
498,228

 
—

 
3,595,105

 
 
Equipment financing receivables
2,020,613

 
—

 
10,957

 
2,031,570

 
 
Home equity lines
154,506

 
—

 
2,363

 
156,869

 
 
Consumer and credit card
5,016

 
—

 
38

 
5,054

 
 
Total
$
11,579,184

 
$
498,228

 
$
36,151

 
$
12,113,563

 
 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
December 31, 2014
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Mortgage warehouse finance
$
1,356,651

 
$
—

 
$
—

 
$
—

 
$
1,356,651

Lender finance
749,393

 
13,060

 
—

 
—

 
762,453

Other commercial finance
63,460

 
—

 
351

 
—

 
63,811

Commercial real estate
3,325,936

 
34,010

 
103,829

 
—

 
3,463,775

Total commercial and commercial real estate
$
5,495,440

 
$
47,070

 
$
104,180

 
$
—

 
$
5,646,690

(1)
For the periods ended March 31, 2015 and December 31, 2014, performing residential mortgages included $4,948 and $6,287, respectively, of ACI loans greater than 90 days past due and still accruing.
(2)
For the periods ended March 31, 2015 and December 31, 2014, performing government insured pool buyouts included $2,192,789 and $2,143,384, respectively, of ACI loans greater than 90 days past due and still accruing.
(3)
Non-performing government insured pool buyouts represent loans that are 90 days or greater past due but remain on accrual status as the interest earned is insured and thus collectible from the insuring governmental agency.

15
Table of Contents

The following tables present an aging analysis of the recorded investment for loans and leases by class as of March 31, 2015 and December 31, 2014:
 
30-59 Days Past Due
 
60-89 Days Past Due
 
90 Days and Greater Past Due
 
Total Past Due
 
Current
 
Total Loans Held for Investment Excluding ACI
March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
 
 
Residential
$
6,475

 
$
7,070

 
$
23,046

 
$
36,591

 
$
6,176,803

 
$
6,213,394

Government insured pool buyouts (1)
32,691

 
27,575

 
469,496

 
529,762

 
399,902

 
929,664

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Mortgage warehouse finance
—

 
—

 
—

 
—

 
2,103,098

 
2,103,098

Lender finance
—

 
—

 
—

 
—

 
851,759

 
851,759

Other commercial finance
—

 
—

 
—

 
—

 
62,309

 
62,309

Commercial real estate
709

 
2,747

 
2,498

 
5,954

 
3,312,891

 
3,318,845

Equipment financing receivables
12,413

 
8,769

 
4,468

 
25,650

 
2,047,933

 
2,073,583

Home equity lines
1,171

 
470

 
2,191

 
3,832

 
167,166

 
170,998

Consumer and credit card
5

 
—

 
29

 
34

 
4,438

 
4,472

Total loans and leases held for investment
$
53,464

 
$
46,631

 
$
501,728

 
$
601,823

 
$
15,126,299

 
$
15,728,122

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
 
 
Residential
$
9,941

 
$
4,817

 
$
22,793

 
$
37,551

 
$
6,230,161

 
$
6,267,712

Government insured pool buyouts (1)
50,955

 
32,869

 
498,228

 
582,052

 
447,604

 
1,029,656

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Mortgage warehouse finance
—

 
—

 
—

 
—

 
1,356,651

 
1,356,651

Lender finance
—

 
—

 
—

 
—

 
762,453

 
762,453

Other commercial finance
1

 
—

 
—

 
1

 
59,654

 
59,655

Commercial real estate
1,139

 
—

 
2,498

 
3,637

 
3,267,653

 
3,271,290

Equipment financing receivables
18,521

 
4,114

 
3,263

 
25,898

 
2,005,672

 
2,031,570

Home equity lines
1,040

 
845

 
2,363

 
4,248

 
152,621

 
156,869

Consumer and credit card
16

 
7

 
38

 
61

 
4,993

 
5,054

Total loans and leases held for investment
$
81,613


$
42,652


$
529,183


$
653,448


$
14,287,462


$
14,940,910

(1)
Government insured pool buyouts remain on accrual status after 90 days as the interest earned is collectible from the insuring governmental agency.
Residential Foreclosures and Repossessed Assets — Once all potential alternatives for reinstatement are exhausted, past due loans collateralized by residential real estate are referred for foreclosure proceedings in accordance with local requirements of the applicable jurisdiction. Once possession of the property collateralizing the loan is obtained, the repossessed property will be recorded within other assets either as other real estate owned or, where management has both the intent and ability to recover its losses through a government guarantee, as a foreclosure claim receivable.
The following table presents the carrying value of loans collateralized by residential real estate that are either in the process of foreclosure or that have been repossessed as of March 31, 2015 and December 31, 2014:
 
March 31,
2015
 
December 31,
2014
Loans in the process of foreclosure
$
1,888,872

 
$
1,831,788

Repossessed properties:
 
 
 
Foreclosure claims receivable, net of allowance of $16,782 and $17,336, respectively
441,279

 
451,125

Other real estate owned, net of allowance of $406 and $441, respectively
5,604

 
8,013



16
Table of Contents

Impaired Loans — Impaired loans include loans identified as troubled loans as a result of a borrower’s financial difficulties and other loans on which the accrual of interest income is suspended. The Company continues to collect payments on certain impaired loan balances on which accrual is suspended.
The following tables present the unpaid principal balance, the recorded investment and the related allowance for impaired loans as of March 31, 2015 and December 31, 2014:
 
March 31, 2015
 
December 31, 2014
 
Unpaid Principal Balance
 
Recorded Investment (1)
 
Related Allowance
 
Unpaid Principal Balance
 
Recorded Investment (1)
 
Related Allowance
With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
 
 
Residential
$
11,167

 
$
10,633

 
$
2,805

 
$
10,618

 
$
10,162

 
$
2,896

Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
14,602

 
12,011

 
759

 
14,566

 
11,290

 
720

Equipment financing receivables
304

 
304

 
68

 
—

 
—

 
—

Total impaired loans with an allowance recorded
$
26,073

 
$
22,948

 
$
3,632

 
$
25,184

 
$
21,452

 
$
3,616

 
 
 
 
 
 
 
 
 
 
 
 
Without a related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
 
 
Residential
$
7,255

 
$
6,574