Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2016.
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 July 22, 2016, there were 125,324,413 shares of common stock outstanding.
 

Table of Contents

EverBank Financial Corp
Form 10-Q
Index
Part I - Financial Information
 
 
 
Item 1.
 
Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015
 
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2016 and 2015
 
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015
 
Condensed Consolidated Statements of Shareholders' Equity for the Six Months Ended June 30, 2016 and 2015
 
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and 2015
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
Part II - Other Information
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.

Table of Contents

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



 
June 30,
2016
 
December 31,
2015
Assets
 
 
 
Cash and due from banks
$
62,512

 
$
55,300

Interest-bearing deposits in banks
559,434

 
527,151

Total cash and cash equivalents
621,946

 
582,451

Investment securities:
 
 
 
Available for sale, at fair value
461,141

 
555,019

Held to maturity (fair value of $109,575 and $105,448 as of June 30, 2016 and December 31, 2015, respectively)
104,205

 
103,746

Other investments
271,606

 
265,431

Total investment securities
836,952

 
924,196

Loans held for sale (includes $1,325,149 and $1,307,741 carried at fair value as of June 30, 2016 and December 31, 2015, respectively)
1,485,747

 
1,509,268

Loans and leases held for investment:
 
 
 
Loans and leases held for investment, net of unearned income
23,218,614

 
22,227,492

Allowance for loan and lease losses
(84,250
)
 
(78,137
)
Total loans and leases held for investment, net
23,134,364

 
22,149,355

Mortgage servicing rights (MSR), net
274,356

 
335,280

Premises and equipment, net
48,486

 
51,599

Other assets
952,459

 
1,048,877

Total Assets
$
27,354,310

 
$
26,601,026

Liabilities
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
1,510,198

 
$
1,141,357

Interest-bearing
17,301,564

 
17,100,685

Total deposits
18,811,762

 
18,242,042

Other borrowings
6,022,000

 
5,877,000

Trust preferred securities and subordinated notes payable
360,079

 
276,170

Accounts payable and accrued liabilities
303,110

 
337,493

Total Liabilities
25,496,951

 
24,732,705

Commitments and Contingencies (Note 14)


 


Shareholders’ Equity
 
 
 
Series A 6.75% Non-Cumulative Perpetual Preferred Stock, $0.01 par value (liquidation preference of $25,000 per share; 10,000,000 shares authorized; 6,000 issued and outstanding at June 30, 2016 and December 31, 2015)
150,000

 
150,000

Common Stock, $0.01 par value (500,000,000 shares authorized; 125,324,413 and 125,020,843 issued and outstanding at June 30, 2016 and December 31, 2015, respectively)
1,253

 
1,250

Additional paid-in capital
879,169

 
874,806

Retained earnings
935,670

 
906,278

Accumulated other comprehensive income (loss) (AOCI)
(108,733
)
 
(64,013
)
Total Shareholders’ Equity
1,857,359

 
1,868,321

Total Liabilities and Shareholders’ Equity
$
27,354,310

 
$
26,601,026


See notes to unaudited condensed consolidated financial statements.

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

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Interest Income
 
 
 
 
 
 
 
Interest and fees on loans and leases
$
236,168

 
$
210,347

 
$
467,227

 
$
405,196

Interest and dividends on investment securities
6,965

 
7,447

 
14,369

 
15,469

Other interest income
385

 
159

 
781

 
319

Total Interest Income
243,518

 
217,953

 
482,377

 
420,984

Interest Expense
 
 
 
 
 
 
 
Deposits
39,078

 
30,219

 
78,168

 
59,983

Other borrowings
27,000

 
18,709

 
52,988

 
36,538

Total Interest Expense
66,078

 
48,928

 
131,156

 
96,521

Net Interest Income
177,440

 
169,025

 
351,221

 
324,463

Provision for Loan and Lease Losses
6,012

 
7,932

 
14,931

 
16,932

Net Interest Income after Provision for Loan and Lease Losses
171,428

 
161,093

 
336,290

 
307,531

Noninterest Income
 
 
 
 
 
 
 
Loan servicing fee income
22,814

 
29,569

 
46,255

 
63,701

Amortization of mortgage servicing rights
(16,550
)
 
(19,006
)
 
(31,281
)
 
(39,305
)
Recovery (impairment) of mortgage servicing rights
(36,872
)
 
15,727

 
(59,414
)
 
(27,625
)
Net loan servicing income (loss)
(30,608
)
 
26,290

 
(44,440
)
 
(3,229
)
Gain on sale of loans
31,973

 
40,588

 
60,724

 
83,211

Loan production revenue
6,729

 
6,195

 
11,989

 
11,582

Deposit fee income
1,953

 
3,052

 
5,055

 
7,102

Other lease income
3,316

 
2,082

 
7,683

 
6,162

Other
5,805

 
5,607

 
7,910

 
11,507

Total Noninterest Income
19,168

 
83,814

 
48,921

 
116,335

Noninterest Expense
 
 
 
 
 
 
 
Salaries, commissions and other employee benefits expense
94,922

 
95,769

 
186,562

 
187,755

Equipment expense
16,052

 
15,258

 
31,969

 
31,303

Occupancy expense
7,266

 
7,156

 
13,530

 
13,012

General and administrative expense
37,600

 
59,785

 
73,209

 
101,940

Total Noninterest Expense
155,840

 
177,968

 
305,270

 
334,010

Income before Provision for Income Taxes
34,756

 
66,939

 
79,941

 
89,856

Provision for Income Taxes
13,201

 
25,372

 
30,462

 
34,059

Net Income
$
21,555

 
$
41,567

 
$
49,479

 
$
55,797

Less: Net Income Allocated to Preferred Stock
(2,531
)
 
(2,531
)
 
(5,062
)
 
(5,062
)
Net Income Allocated to Common Shareholders
$
19,024

 
$
39,036

 
$
44,417

 
$
50,735

Basic Earnings Per Common Share
$
0.15

 
$
0.31

 
$
0.35

 
$
0.41

Diluted Earnings Per Common Share
$
0.15

 
$
0.31

 
$
0.35

 
$
0.40

Dividends Declared Per Common Share
$
0.06

 
$
0.04

 
$
0.12

 
$
0.08

See notes to unaudited condensed consolidated financial statements.

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

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Net Income
$
21,555

 
$
41,567

 
$
49,479

 
$
55,797

Unrealized Gains (Losses) on Debt Securities
 
 
 
 
 
 
 
Net unrealized gains (losses) due to changes in fair value
2,879

 
(2,690
)
 
(167
)
 
(2,095
)
Reclassification of unrealized losses (gains) to noninterest income
—

 
(69
)
 
97

 
(69
)
Tax effect
(1,095
)
 
1,049

 
26

 
823

Change in unrealized gains (losses) on debt securities
1,784

 
(1,710
)
 
(44
)
 
(1,341
)
Interest Rate Swaps
 
 
 
 
 
 
 
Net unrealized gains (losses) due to changes in fair value
(26,035
)
 
32,987

 
(79,998
)
 
20,843

Reclassification of net unrealized losses to interest expense
3,890

 
4,023

 
7,934

 
8,643

Tax effect
8,417

 
(14,066
)
 
27,388

 
(11,207
)
Change in interest rate swaps
(13,728
)
 
22,944

 
(44,676
)
 
18,279

Other Comprehensive Income (Loss)
(11,944
)
 
21,234

 
(44,720
)
 
16,938

Comprehensive Income (Loss)
$
9,611

 
$
62,801

 
$
4,759

 
$
72,735


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, 2016
$
150,000

 
$
1,250

 
$
874,806

 
$
906,278

 
$
(64,013
)
 
$
1,868,321

Net income
—

 
—

 
—

 
49,479

 
—

 
49,479

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
(44,720
)
 
(44,720
)
Issuance of common stock
—

 
3

 
429

 
—

 
—

 
432

Share-based grants (including income tax benefits)
—

 
—

 
3,934

 
—

 
—

 
3,934

Cash dividends on common stock
—

 
—

 
—

 
(15,025
)
 
—

 
(15,025
)
Cash dividends on preferred stock
—

 
—

 
—

 
(5,062
)
 
—

 
(5,062
)
Balance, June 30, 2016
$
150,000

 
$
1,253

 
$
879,169

 
$
935,670

 
$
(108,733
)
 
$
1,857,359

 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2015
$
150,000

 
$
1,237

 
$
851,158

 
$
810,796

 
$
(65,597
)
 
$
1,747,594

Net income
—

 
—

 
—

 
55,797

 
—

 
55,797

Other comprehensive income (loss)
—

 
—

 
—

 
—

 
16,938

 
16,938

Issuance of common stock
—

 
9

 
9,186

 
—

 
—

 
9,195

Share-based grants (including income tax benefits)
—

 
—

 
5,288

 
—

 
—

 
5,288

Cash dividends on common stock
—

 
—

 
—

 
(9,929
)
 
—

 
(9,929
)
Cash dividends on preferred stock
—

 
—

 
—

 
(5,062
)
 
—

 
(5,062
)
Balance, June 30, 2015
$
150,000

 
$
1,246

 
$
865,632

 
$
851,602

 
$
(48,659
)
 
$
1,819,821


See notes to unaudited condensed consolidated financial statements.

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

 
Six Months Ended
June 30,
 
2016
 
2015
Operating Activities
 
 
 
Net income
$
49,479

 
$
55,797

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Amortization of premiums and deferred origination costs
37,269

 
26,268

Depreciation and amortization of tangible and intangible assets
13,249

 
13,483

Reclassification of net loss on settlement of interest rate swaps
7,934

 
8,643

Amortization and impairment of mortgage servicing rights, net of recoveries
90,695

 
66,930

Deferred income taxes (benefit)
(21,401
)
 
(346
)
Provision for loan and lease losses
14,931

 
16,932

Loss on other real estate owned (OREO)
447

 
1,342

Share-based compensation expense
3,936

 
3,881

Gain on extinguishment of debt
(1,478
)
 
—

Other operating activities
(131
)
 
1,689

Changes in operating assets and liabilities:
 
 
 
Loans held for sale, including proceeds from sales and repayments
(31,906
)
 
(535,066
)
Other assets
59,201

 
120,744

Accounts payable and accrued liabilities
(53,108
)
 
29,858

Net cash provided by (used in) operating activities
169,117

 
(189,845
)
Investing Activities
 
 
 
Investment securities available for sale:
 
 
 
Proceeds from prepayments and maturities
93,074

 
117,022

Investment securities held to maturity:
 
 
 
Purchases
(6,566
)
 
(5,099
)
Proceeds from prepayments and maturities
5,782

 
10,379

Purchases of other investments
(272,863
)
 
(288,388
)
Proceeds from sales of other investments
266,688

 
245,907

Net change in loans and leases held for investment
(1,639,117
)
 
(2,510,272
)
Purchases of premises and equipment, including equipment under operating leases
(12,598
)
 
(11,790
)
Proceeds related to sale or settlement of other real estate owned
8,615

 
8,730

Proceeds from insured foreclosure claims
644,492

 
402,945

Proceeds from sale of mortgage servicing rights
971

 
34,040

Other investing activities
12,602

 
132

Net cash provided by (used in) investing activities
(898,920
)
 
(1,996,394
)
Financing Activities
 
 
 
Net increase (decrease) in nonmaturity deposits
510,489

 
329,037

Net increase (decrease) in time deposits
48,256

 
637,386

Net change in short-term Federal Home Loan Bank (FHLB) advances
250,000

 
149,000

Proceeds from long-term FHLB advances
200,000

 
1,350,000

Repayments of long-term FHLB advances
(305,000
)
 
(256,000
)
Repurchase of trust preferred securities
(3,522
)
 
—

Proceeds from issuance of subordinated notes payable, net of issuance costs
88,731

 
172,702

Proceeds from issuance of common stock
1,167

 
9,195

Dividends paid
(20,087
)
 
(14,991
)
Other financing activities
(736
)
 
1,406

Net cash provided by (used in) financing activities
769,298

 
2,377,735

Net change in cash and cash equivalents
39,495

 
191,496

Cash and cash equivalents at beginning of period
582,451

 
366,664

Cash and cash equivalents at end of period
$
621,946

 
$
558,160

See Note 1 and Note 4 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. EB'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, home equity loans, commercial real estate loans and commercial loans and
leases; and (c) 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., the parent of EverBank Commercial Finance, Inc.;
•EverInsurance, Inc.;
•Elite Lender Services, Inc.;
•EverBank Wealth Management, Inc.; and
•Business Property Lending, Inc.
EBF facilitates 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 the Company's 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, 2015. 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, 2016. 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 Company's 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 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:
 
Six Months Ended
June 30,
 
2016
 
2015
Supplemental Schedules of Noncash Activities:
 
 
 
Loans transferred to foreclosure claims
$
601,921

 
$
477,075

See Note 4 for disclosures relating to noncash activities relating to loan transfers.
2.  Recent Accounting Pronouncements
Credit Losses - In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments, which eliminates the probable initial recognition threshold for credit losses requiring, instead, that all financial assets (or group of financial assets) measured at amortized cost be presented at the net amount expected to be collected inclusive of the entity’s current estimate of all lifetime expected credit losses. The ASU also applies to certain off-balance-sheet credit exposures such as unfunded commitments and non-derivative financial guarantees. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) in order to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The income statement under this ASU will reflect the initial recognition of current expected credit losses for newly recognized assets, as well as any increases or decreases of expected credit losses that have occurred during the period. ASU 2016-13 retains many currently-existing disclosures related to the credit quality of an entity’s assets and the related allowance for credit losses amended to reflect the change to an expected credit loss methodology, as well as enhanced disclosures to provide information to users at a more disaggregated level. Upon adoption, ASU 2016-13 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is effective, except for debt securities for which an other-than-temporary impairment has previously been recognized. For these debt securities, a prospective transition is provided in order to maintain the same amortized cost prior to and subsequent to the effective date of the ASU. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods with early adoption permitted for fiscal years beginning after

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Table of Contents

December 15, 2018, and interim periods within those annual periods. The Company is currently evaluating the pending adoption of ASU 2016-13 and its impact on the Company's consolidated financial statements.
Share-Based Payment - In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718)-Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 eliminates equity treatment for tax benefits or deficiencies that result from differences between the compensation cost recognized for GAAP purposes and the related tax deduction at settlement or expiration with such changes recognized in income tax expense and excludes excess tax benefits and tax deficiencies from the calculation of assumed proceeds for earnings per share purposes since such amounts are recognized in the income statement, which will result in greater volatility in earnings per share. In addition, ASU 2016-09 simplifies the statements of cash flows by eliminating the bifurcation of excess tax benefits from operating activities to financing activities. Upon adoption, ASU 2016-09 provides for a tiered transition approach whereby amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements and forfeitures should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods with early adoption permitted. The Company is currently evaluating the pending adoption of ASU 2016-09 and its impact on the Company's consolidated financial statements.
Leases - In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends the existing standards for lease accounting effectively bringing most leases onto the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability, while leaving lessor accounting largely unchanged with only targeted changes incorporated into the update. ASU 2016-02 includes extensive qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. Upon adoption, ASU 2016-02 must be adopted using a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted with certain practical expedients provided. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The Company is currently evaluating the pending adoption of ASU 2016-02 and its impact on the Company's consolidated financial statements.
Recognition and Measurement - In January 2016, the FASB issued ASU 2016-01, Financial Instruments (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, which (1) requires equity investments that do not result in consolidation and are not accounted for under the equity method to be measured at fair value with changes recognized through net income; (2) simplifies the impairment assessment of equity investments without readily determinable fair values by allowing a qualitative assessment similar to those performed on long-lived assets, goodwill or intangibles to be utilized at each reporting period; (3) eliminates the use of the entry price method requiring all preparers to utilize the exit price notion consistent with Topic 820, Fair Value Measurement in disclosing the fair value of financial instruments measured at amortized cost; (4) requires separate disclosure within OCI of changes in the fair value of liabilities due to instrument-specific credit risk when the fair value option has been elected; and (5) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. Upon adoption, ASU 2016-01 provides for a cumulative-effect adjustment to retained earnings except for the impacts of amendments 2 and 3 above, which are prospective in nature. ASU 2016-01 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods with early adoption allowable only for amendment 4 above. The Company is currently evaluating the pending adoption of ASU 2016-01 and its impact on the Company's consolidated financial statements.
Consolidation - In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis, which (1) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIE) 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. ASU 2015-02 was effective for annual reporting periods beginning after December 15, 2015, and interim periods within those annual periods with early adoption permitted. The adoption of ASU 2015-02 did not have a material impact on the Company's consolidated financial statements.
Hybrid Financial Instruments - In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging (Topic 815) -
Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or Equity, which will
eliminate diversity in practice associated with the accounting for hybrid financial instruments issued in the form of a share. ASU 2014-16 clarifies
that no single term or feature, stated or implied, would necessarily determine the economic characteristics and risks of the host contract in
determining whether it is more akin to debt or equity. Although an individual term or feature may weigh more heavily in the evaluation, the final
determination must be made based on all economic characteristics and risks of the entire hybrid financial instrument. Once the nature of the host contract is determined, any embedded features considered to be derivatives would be evaluated for bifurcation from the host contract. ASU
2014-16 was effective for annual reporting periods beginning on or after December 15, 2015, and interim periods within those annual periods. The Company notes that its Series A Preferred Shares were determined upon issuance to be more akin to equity with no embedded features having been determined to be derivatives. As such, the adoption of ASU 2014-16 did not have a material impact on the Company’s
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 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 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

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flows from contracts with customers. The effective date of ASU 2014-09 has been deferred by one year from its original effective date through the August 2015 issuance of ASU 2015-14 and thus is effective for annual reporting periods beginning on or after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. 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.
3.  Investment Securities
The amortized cost, gross unrealized gains, gross unrealized losses, fair value and carrying amount of investment securities were as follows as of June 30, 2016 and December 31, 2015:
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Carrying Amount
June 30, 2016
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential collateralized mortgage obligations (CMO) securities - nonagency
$
464,939

 
$
1,680

 
$
7,093

 
$
459,526

 
$
459,526

Asset-backed securities (ABS)
1,518

 
—

 
290

 
1,228

 
1,228

Other
235

 
152

 
—

 
387

 
387

Total available for sale securities
$
466,692

 
$
1,832

 
$
7,383

 
$
461,141

 
$
461,141

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
8,937

 
$
291

 
$
—

 
$
9,228

 
$
8,937

Residential mortgage-backed securities (MBS) - agency
95,268

 
5,080

 
1

 
100,347

 
95,268

Total held to maturity securities
$
104,205

 
$
5,371

 
$
1

 
$
109,575

 
$
104,205

December 31, 2015
 
 

 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
558,621

 
$
1,728

 
$
7,091

 
$
553,258

 
$
553,258

ABS
1,632

 
—

 
280

 
1,352

 
1,352

Other
248

 
161

 
—

 
409

 
409

Total available for sale securities
$
560,501

 
$
1,889

 
$
7,371

 
$
555,019

 
$
555,019

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
13,065

 
$
269

 
$
—

 
$
13,334

 
$
13,065

Residential MBS - agency
90,681

 
1,973

 
540

 
92,114

 
90,681

Total held to maturity securities
$
103,746

 
$
2,242

 
$
540

 
$
105,448

 
$
103,746

At June 30, 2016 and December 31, 2015, investment securities with a carrying value of $133,049 and $145,904, respectively, were pledged to secure other borrowings and for other purposes as required or permitted by law.
For the three and six months ended June 30, 2016 and 2015, no gross gains or losses have been realized. The cost of investments sold is calculated using the specific identification method.

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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 June 30, 2016 and December 31, 2015 were as follows:
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
 
Fair Value
 
Unrealized Losses
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
105,463

 
$
1,060

 
$
214,662

 
$
6,033

 
$
320,125

 
$
7,093

Residential MBS - agency
—

 
—

 
942

 
1

 
942

 
1

ABS
—

 
—

 
1,228

 
290

 
1,228

 
290

Total debt securities
$
105,463

 
$
1,060

 
$
216,832

 
$
6,324

 
$
322,295

 
$
7,384

December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
173,705

 
$
1,003

 
$
221,180

 
$
6,088

 
$
394,885

 
$
7,091

Residential MBS - agency
28,514

 
313

 
9,171

 
227

 
37,685

 
540

ABS
—

 
—

 
1,352

 
280

 
1,352

 
280

Total debt securities
$
202,219

 
$
1,316

 
$
231,703

 
$
6,595

 
$
433,922

 
$
7,911

The Company had unrealized losses at June 30, 2016 and December 31, 2015 on residential nonagency 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 recoveries.
At June 30, 2016, the Company had 65 debt securities in an unrealized loss position. A total of 20 were in an unrealized loss position for less than 12 months. These 20 securities consisted of residential nonagency CMO securities. The remaining 45 debt securities were in an unrealized loss position for 12 months or longer. These 45 securities consisted of 41 residential nonagency CMO securities, three ABS, and one residential agency MBS. Of the $7,384 in unrealized losses, $3,275 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, 2015, the Company had 72 debt securities in an unrealized loss position. A total of 30 were in an unrealized loss position for less than 12 months. These 30 securities consisted of 20 residential nonagency CMO securities and ten residential agency MBS. The remaining 42 debt securities were in an unrealized loss position for 12 months or longer. These 42 securities consisted of three ABS, two residential agency MBS and 37 residential nonagency CMO securities. Of the $7,911 in unrealized losses, $5,298 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 credit related OTTI recognized for the three months ended June 30, 2016. During the six months ended June 30, 2016, the Company recognized credit-related OTTI of $97 on available for sale nonagency residential CMO securities. These credit-related OTTI losses represented additional declines in fair value on a security that was deemed OTTI at December 31, 2015. During the three and six months ended June 30, 2015, the Company recognized no credit-related OTTI related to available for sale or held to maturity securities. There were no non-credit related OTTI losses recognized on available for sale securities or held to maturity securities for the three and six months ended June 30, 2016 or 2015.
During the three and six months ended June 30, 2016 and 2015, interest and dividend income on investment securities was comprised of the following:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Interest income on available for sale securities
$
3,352

 
$
4,607

 
$
7,166

 
$
9,787

Interest income on held to maturity securities
715

 
778

 
1,463

 
1,592

Other interest and dividend income
2,898

 
2,062

 
5,740

 
4,090

 
$
6,965

 
$
7,447

 
$
14,369

 
$
15,469

All investment interest income recognized by the Company during the three and six months ended June 30, 2016 and 2015 was fully taxable.

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4.  Loans Held for Sale
Loans held for sale as of June 30, 2016 and December 31, 2015, consisted of the following:
 
June 30,
2016
 
December 31,
2015
Mortgage warehouse (carried at fair value)
$
734,807


$
624,726

Other residential (carried at fair value)
590,342


683,015

   Total loans held for sale carried at fair value
1,325,149

 
1,307,741

Other residential
67,665

 
22,774

Commercial and commercial real estate
92,933


178,753

 Total loans held for sale carried at lower of cost or market
160,598

 
201,527

Total loans held for sale
$
1,485,747


$
1,509,268

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 and in part due to the burden of complying with the requirement of hedge accounting, the Company has elected fair value accounting on this portfolio of loans. The Company has also elected the fair value option for originated fixed-rate jumbo 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 these loans 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 commercial and commercial real estate loans as the majority of these loans were transferred from the held for investment portfolio and are expected to be sold within a short period subsequent to transfer. These loans are carried at the lower of cost or market value.
A majority of the loans held for sale that are carried at the lower of cost or market value represent loans that were transferred from the held for investment portfolio. Other residential loans held at the lower of cost or market value represent government insured pool buyouts that have re-performed and are now eligible to be re-securitized or sold to third parties and other residential mortgage loans for which the Company has changed its intent and has made a decision to sell the loans and as such transferred the loans to held for sale. A majority of these other residential mortgage loans consist of jumbo preferred adjustable rate mortgage (ARM) loans. Commercial and commercial real estate loans represent multi-family loans which the Company is actively marketing to sell. As the Company no longer has the intent to hold these loans for the foreseeable future, the loans were transferred to held for sale. Residential loans, commercial and commercial real estate loans and equipment financing receivables are transferred to the held for sale portfolio when the Company has entered into a commitment to sell a specific portion of its held for investment portfolio or when the Company has a formal marketing strategy and intends to sell a certain loan product.
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 insurers 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 a breach with respect to Government Sponsored Enterprises (GSE) purchasers or a material breach with respect to non-GSE purchasers, 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 six months ended June 30, 2016 and 2015:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2016
 
2015
 
2016
 
2015
Proceeds received from residential agency securitizations
$
989,604

 
$
1,116,314

 
$
1,845,568

 
$
2,175,392

 
 
 
 
 
 
 
 
Proceeds received from nonsecuritization sales - residential
1,236,681

 
1,281,941

 
2,668,183

 
1,648,156

Proceeds received from nonsecuritization sales - commercial and commercial real estate
193,372

 
103,279

 
405,439

 
103,279

Proceeds received from nonsecuritization sales - equipment financing receivables
47,993

 
28,071

 
123,577

 
40,129

   Proceeds received from nonsecuritization sales
$
1,478,046

 
$
1,413,291

 
$
3,197,199

 
$
1,791,564

 
 
 
 
 
 
 
 
Repurchased loans from residential agency sales and securitizations
$
2,569

 
$
1,866

 
$
4,157

 
$
2,521

Repurchased loans from residential nonagency sales
1,935

 
4,073

 
2,635

 
5,377

Repurchased loans from commercial sales and securitizations (1)
74,987

 
105,652

 
74,987

 
105,652

(1)
Represents loans that were voluntarily repurchased out of the Business Lending Trusts through a clean-up call. Of those loans repurchased during the three months ended June 30, 2016, all were subsequently sold to third parties by June 30, 2016. Of those loans repurchased in 2015, $103,279 were subsequently sold to third parties during the three and six months ended June 30, 2015 and $2,524 were held for sale as of June 30, 2015.
In connection with these transfers, the Company recorded servicing assets in the amount of $16,207 and $30,966 for the three and six months ended June 30, 2016 and $16,531 and $28,823 for the three and six months ended June 30, 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 13 for a description of the valuation process. The gains and losses on the transfers which qualified as sales are recorded in the condensed

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Table of Contents

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 change in fair value related to offsetting hedging positions.
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 and six months ended June 30, 2016 and 2015.
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Loans Transferred from Held for Investment (LHFI) to Held for Sale (LHFS)
2016
 
2015
 
2016
 
2015
Residential mortgages
$
367,727

 
$
1,339

 
$
864,090

 
$
709,722

Government insured pool buyouts
476,332

 
217,253

 
901,536

 
485,672

Commercial and commercial real estate
100,453

 
—

 
270,861

 
—

Equipment financing receivables
45,560

 
26,040

 
117,732

 
37,190

Total transfers from LHFI to LHFS
$
990,072

 
$
244,632

 
$
2,154,219

 
$
1,232,584

 


 
 
 
 
 
 
Loans Transferred from LHFS to LHFI
 
 
 
 
 
 
 
Residential mortgages
$
—

 
$
80,029

 
26,155

 
194,054

Commercial and commercial real estate
—

 
—

 
28,753

 
—

Total transfers from LHFS to LHFI
$
—

 
$
80,029

 
$
54,908

 
$
194,054

Loans and leases are transferred from LHFI to LHFS when the Company no longer has the intent to hold the loans and leases for the foreseeable future. Loans and leases are transferred from LHFS to LHFI when the Company determines that it intends to hold the loans and leases for the foreseeable future and no longer has the intent to sell. Loan transfers from LHFS to LHFI and transfers from LHFI to LHFS 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 June 30, 2016 and December 31, 2015 are comprised of the following:
 
June 30,
2016
 
December 31,
2015
Residential mortgages
$
11,365,084

 
$
11,717,122

Commercial and commercial real estate
8,317,399

 
7,607,676

Equipment financing receivables
2,462,475

 
2,400,909

Home equity lines and other
1,073,656

 
501,785

Total loans and leases held for investment, net of unearned income
23,218,614

 
22,227,492

Allowance for loan and lease losses
(84,250
)
 
(78,137
)
Total loans and leases held for investment, net
$
23,134,364

 
$
22,149,355

As of June 30, 2016 and December 31, 2015, the carrying values presented above include net purchased loan and lease discounts and net deferred loan and lease origination costs as follows:
 
June 30,
2016
 
December 31,
2015
Net purchased loan and lease discounts
$
71,636

 
$
45,770

Net deferred loan and lease origination costs
125,555

 
123,255

During the six months ended June 30, 2016 and 2015, unpaid principal balance (UPB) for significant third-party purchases of loans that impacted the Company's LHFI portfolio are as follows:
 
June 30,
2016
 
June 30,
2015
Residential mortgages(1)
$
1,948,784

 
$
1,335,130

Commercial credit facilities
221,086

 
460,582

Home equity lines of credit
256,926

 
—

(1) Included in this amount are government insured pool buyouts.

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Acquired Credit Impaired (ACI) Loans and Leases — At acquisition, the Company estimates the fair value of acquired loans and leases by segregating the portfolio into pools with similar risk characteristics. Fair value estimates for acquired loans and leases require estimates of the amounts and timing of expected future principal, interest and other cash flows. For each pool, the Company uses certain loan and lease information, including outstanding principal balance, probability of default and the estimated loss in the event of default to estimate the expected future cash flows for each loan and lease pool.
Acquisition date details of loans and leases acquired with evidence of credit deterioration during the six months ended June 30, 2016 and 2015 are as follows:
 
June 30,
2016
 
June 30,
2015
Contractual payments receivable for acquired loans and leases at acquisition
$
3,084,207

 
$
2,080,441

Expected cash flows for acquired loans and leases at acquisition
1,938,394

 
1,359,961

Basis in acquired loans and leases at acquisition
1,815,277

 
1,244,608

Information pertaining to the ACI portfolio as of June 30, 2016 and December 31, 2015 is as follows:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
June 30, 2016
 
 
 
 
 
Carrying value, net of allowance
$
3,697,543

 
$
75,490

 
$
3,773,033

Outstanding unpaid principal balance
3,766,541

 
80,025

 
3,846,566

Allowance for loan and lease losses, beginning of period
7,031

 
346

 
7,377

Allowance for loan and lease losses, end of period
5,804

 
11

 
5,815

December 31, 2015
 
 
 
 
 
Carrying value, net of allowance
$
3,449,385

 
$
110,984

 
$
3,560,369

Outstanding unpaid principal balance
3,503,138

 
117,051

 
3,620,189

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

 
2,042

 
8,016

Allowance for loan and lease losses, end of year
7,031

 
346

 
7,377

The Company recorded reductions of provision for loan loss of $1,565 and $2,439 for the ACI portfolio for the six months ended June 30, 2016 and 2015, 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 six months ended June 30, 2016 and 2015:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
June 30, 2016
 
 
 
 
 
Balance, beginning of period
$
252,841

 
$
43,690

 
$
296,531

Additions
123,117

 
—

 
123,117

Accretion
(93,468
)
 
(3,870
)
 
(97,338
)
Reclassifications to (from) accretable yield
(7,705
)
 
(1,357
)
 
(9,062
)
Transfer from loans held for investment to loans held for sale
—

 
(3,304
)
 
(3,304
)
Balance, end of period
$
274,785

 
$
35,159

 
$
309,944

June 30, 2015
 
 
 
 
 
Balance, beginning of period
$
240,650

 
$
61,256

 
$
301,906

Additions
115,353

 
—

 
115,353

Accretion
(60,615
)
 
(6,238
)
 
(66,853
)
Reclassifications to (from) accretable yield
(8,456
)
 
276

 
(8,180
)
Balance, end of period
$
286,932

 
$
55,294

 
$
342,226


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6.  Allowance for Loan and Lease Losses
Changes in the allowance for loan and lease losses for the three and six months ended June 30, 2016 and 2015 are as follows:
Three Months Ended June 30, 2016
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Equipment Financing Receivables    
 
Home Equity Lines and Other
 
Total    
Balance, beginning of period
$
28,309

 
$
36,774

 
$
14,054

 
$
4,348

 
$
83,485

Provision for loan and lease losses
(618
)
 
666

 
4,278

 
1,686

 
6,012

Charge-offs
(2,176
)
 
—

 
(3,935
)
 
(275
)
 
(6,386
)
Recoveries
272

 
4

 
794

 
69

 
1,139

Balance, end of period
$
25,787

 
$
37,444

 
$
15,191

 
$
5,828

 
$
84,250

Three Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
23,478

 
$
24,999

 
$
10,071

 
$
4,298

 
$
62,846

Provision for loan and lease losses
3,301

 
1,725

 
2,623

 
283

 
7,932

Charge-offs
(2,447
)
 
—

 
(2,838
)
 
(305
)
 
(5,590
)
Recoveries
53

 
218

 
535

 
97

 
903

Balance, end of period
$
24,385

 
$
26,942

 
$
10,391

 
$
4,373

 
$
66,091

 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Equipment Financing Receivables    
 
Home Equity Lines and Other
 
Total    
Balance, beginning of period
$
26,951

 
$
34,875

 
$
12,187

 
$
4,124

 
$
78,137

   Provision for loan and lease losses
2,353

 
2,557

 
7,972

 
2,049

 
14,931

   Charge-offs
(4,021
)
 
(68
)
 
(6,499
)
 
(495
)
 
(11,083
)
   Recoveries
504

 
80

 
1,531

 
150

 
2,265

Balance, end of period
$
25,787

 
$
37,444

 
$
15,191

 
$
5,828

 
$
84,250

Six Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
25,098

 
$
23,095

 
$
8,649

 
$
4,004

 
$
60,846

   Provision for loan and lease losses
4,162

 
5,645

 
6,310

 
815

 
16,932

   Charge-offs
(4,986
)
 
(2,018
)
 
(5,469
)
 
(626
)
 
(13,099
)
   Recoveries
111

 
220

 
901

 
180

 
1,412

Balance, end of period
$
24,385

 
$
26,942

 
$
10,391

 
$
4,373

 
$
66,091


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 June 30, 2016 and December 31, 2015:
June 30, 2016
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
2,132

 
$
17,851

 
$
5,804

 
$
25,787

Commercial and commercial real estate
8,854

 
28,579

 
11

 
37,444

Equipment financing receivables
945

 
14,246

 
—

 
15,191

Home equity lines and other
—

 
5,828

 
—

 
5,828

Total allowance for loan and lease losses
$
11,931

 
$
66,504

 
$
5,815

 
$
84,250

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
17,725

 
$
7,644,012

 
$
3,703,347

 
$
11,365,084

Commercial and commercial real estate
78,118

 
8,163,780

 
75,501

 
8,317,399

Equipment financing receivables
14,832

 
2,447,643

 
—

 
2,462,475

Home equity lines and other
—

 
1,073,656

 
—

 
1,073,656

Total loans and leases held for investment
$
110,675

 
$
19,329,091

 
$
3,778,848

 
$
23,218,614

 
 
 
 
 
 
 
 
December 31, 2015
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
2,206

 
$
17,714

 
$
7,031

 
$
26,951

Commercial and commercial real estate
7,743

 
26,786

 
346

 
34,875

Equipment financing receivables
91

 
12,096

 
—

 
12,187

Home equity lines and other
—

 
4,124

 
—

 
4,124

Total allowance for loan and lease losses
$
10,040

 
$
60,720

 
$
7,377

 
$
78,137

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
18,185

 
$
8,242,521

 
$
3,456,416

 
$
11,717,122

Commercial and commercial real estate
81,304

 
7,415,042

 
111,330

 
7,607,676

Equipment financing receivables
4,393

 
2,396,516

 
—

 
2,400,909

Home equity lines and other
—

 
501,785

 
—

 
501,785

Total loans and leases held for investment
$
103,882

 
$
18,555,864

 
$
3,567,746

 
$
22,227,492

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 June 30, 2016 and December 31, 2015:
 
 
 
Non-performing    
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
June 30, 2016
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
6,934,351

 
$
—

 
$
27,395

 
$
6,961,746

 
 
Government insured pool buyouts (2) (3)
4,128,243

 
275,095

 
—

 
4,403,338

 
 
Equipment financing receivables
2,433,642

 
—

 
28,833

 
2,462,475

 
 
Home equity lines and other
1,066,968

 
—

 
6,688

 
1,073,656

 
 
Total
$
14,563,204

 
$
275,095

 
$
62,916

 
$
14,901,215

 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
June 30, 2016
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
3,450,661

 
$
46,363

 
$
96,164

 
$
—

 
$
3,593,188

Mortgage warehouse finance
3,035,328

 
—

 
—

 
—

 
3,035,328

Lender finance
1,450,638

 
—

 
—

 
—

 
1,450,638

Other commercial finance
214,486

 
23,759

 
—

 
—

 
238,245

Total commercial and commercial real estate
$
8,151,113

 
$
70,122

 
$
96,164

 
$
—

 
$
8,317,399

 
 
 
 
 
 
 
 
 
 
 
 
 
Non-performing
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
December 31, 2015
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
7,469,855

 
$
—

 
$
31,912

 
$
7,501,767

 
 
Government insured pool buyouts (2) (3)
3,873,603

 
341,752

 
—

 
4,215,355

 
 
Equipment financing receivables
2,383,502

 
—

 
17,407

 
2,400,909

 
 
Home equity lines and other
498,446

 
—

 
3,339

 
501,785

 
 
Total
$
14,225,406

 
$
341,752

 
$
52,658

 
$
14,619,816

 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
December 31, 2015
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
3,609,808

 
$
23,070

 
$
111,134

 
$
—

 
$
3,744,012

Mortgage warehouse finance
2,372,731

 
—

 
—

 
—

 
2,372,731

Lender finance
1,280,423

 
—

 
—

 
—

 
1,280,423

Other commercial finance
208,763

 
—

 
1,747

 
—

 
210,510

Total commercial and commercial real estate
$
7,471,725

 
$
23,070

 
$
112,881

 
$
—

 
$
7,607,676

(1)
For the periods ended June 30, 2016 and December 31, 2015, performing residential mortgages included $4,130 and $5,148, respectively, of ACI loans 90 days or greater past due and still accruing.
(2)
For the periods ended June 30, 2016 and December 31, 2015, performing government insured pool buyouts included $2,936,809 and $2,855,632, respectively, of ACI loans 90 days or greater 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.

17
Table of Contents

The following tables present an aging analysis of the recorded investment for loans and leases by class as of June 30, 2016 and December 31, 2015:
 
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
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages: