Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
 
ý
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 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 ý    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 ý  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 ý
 
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 ý
As of October 24, 2016, there were 125,444,711 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 September 30, 2016 and December 31, 2015
 
Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2016 and 2015
 
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015
 
Condensed Consolidated Statements of Shareholders' Equity for the Nine Months Ended September 30, 2016 and 2015
 
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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)



 
September 30,
2016
 
December 31,
2015
Assets
 
 
 
Cash and due from banks
$
54,380

 
$
55,300

Interest-bearing deposits in banks
534,284

 
527,151

Total cash and cash equivalents
588,664

 
582,451

Investment securities:
 
 
 
Available for sale, at fair value
486,902

 
555,019

Held to maturity (fair value of $105,862 and $105,448 as of September 30, 2016 and December 31, 2015, respectively)
100,928

 
103,746

Other investments
294,710

 
265,431

Total investment securities
882,540

 
924,196

Loans held for sale (includes $1,815,113 and $1,307,741 carried at fair value as of September 30, 2016 and December 31, 2015, respectively)
2,112,855

 
1,509,268

Loans and leases held for investment:
 
 
 
Loans and leases held for investment, net of unearned income
23,932,724

 
22,227,492

Allowance for loan and lease losses
(90,170
)
 
(78,137
)
Total loans and leases held for investment, net
23,842,554

 
22,149,355

Mortgage servicing rights (MSR), net
249,106

 
335,280

Premises and equipment, net
46,525

 
51,599

Other assets
980,801

 
1,048,877

Total Assets
$
28,703,045

 
$
26,601,026

Liabilities
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
2,071,154

 
$
1,141,357

Interest-bearing
17,572,194

 
17,100,685

Total deposits
19,643,348

 
18,242,042

Other borrowings
6,487,000

 
5,877,000

Trust preferred securities and subordinated notes payable
360,179

 
276,170

Accounts payable and accrued liabilities
316,962

 
337,493

Total Liabilities
26,807,489

 
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 September 30, 2016 and December 31, 2015)
150,000

 
150,000

Common Stock, $0.01 par value (500,000,000 shares authorized; 125,437,973 and 125,020,843 issued and outstanding at September 30, 2016 and December 31, 2015, respectively)
1,254

 
1,250

Additional paid-in capital
882,386

 
874,806

Retained earnings
962,749

 
906,278

Accumulated other comprehensive income (loss) (AOCI)
(100,833
)
 
(64,013
)
Total Shareholders’ Equity
1,895,556

 
1,868,321

Total Liabilities and Shareholders’ Equity
$
28,703,045

 
$
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
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Interest Income
 
 
 
 
 
 
 
Interest and fees on loans and leases
$
249,601

 
$
215,881

 
$
716,828

 
$
621,077

Interest and dividends on investment securities
6,719

 
7,520

 
21,088

 
22,989

Other interest income
568

 
226

 
1,349

 
545

Total Interest Income
256,888

 
223,627

 
739,265

 
644,611

Interest Expense
 
 
 
 
 
 
 
Deposits
39,272

 
31,921

 
117,440

 
91,904

Other borrowings
27,981

 
22,866

 
80,969

 
59,404

Total Interest Expense
67,253

 
54,787

 
198,409

 
151,308

Net Interest Income
189,635

 
168,840

 
540,856

 
493,303

Provision for Loan and Lease Losses
12,070

 
11,131

 
27,001

 
28,063

Net Interest Income after Provision for Loan and Lease Losses
177,565

 
157,709

 
513,855

 
465,240

Noninterest Income
 
 
 
 
 
 
 
Loan servicing fee income
23,637

 
27,157

 
69,892

 
90,858

Amortization of mortgage servicing rights
(19,176
)
 
(16,760
)
 
(50,457
)
 
(56,065
)
Recovery (impairment) of mortgage servicing rights
(23,170
)
 
(4,450
)
 
(82,584
)
 
(32,075
)
Net loan servicing income (loss)
(18,709
)
 
5,947

 
(63,149
)
 
2,718

Gain on sale of loans
43,101

 
18,037

 
103,825

 
101,248

Loan production revenue
7,231

 
5,861

 
19,220

 
17,443

Deposit fee income
2,059

 
3,844

 
7,114

 
10,946

Other lease income
3,919

 
3,714

 
11,602

 
9,876

Other
5,733

 
3,792

 
13,643

 
15,299

Total Noninterest Income
43,334

 
41,195

 
92,255

 
157,530

Noninterest Expense
 
 
 
 
 
 
 
Salaries, commissions and other employee benefits expense
94,052

 
89,369

 
280,614

 
277,124

Equipment expense
15,833

 
15,576

 
47,802

 
46,879

Occupancy expense
6,298

 
6,679

 
19,828

 
19,691

General and administrative expense
45,582

 
39,882

 
118,791

 
141,822

Total Noninterest Expense
161,765

 
151,506

 
467,035

 
485,516

Income before Provision for Income Taxes
59,134

 
47,398

 
139,075

 
137,254

Provision for Income Taxes
22,003

 
17,815

 
52,465

 
51,874

Net Income
$
37,131

 
$
29,583

 
$
86,610

 
$
85,380

Less: Net Income Allocated to Preferred Stock
(2,532
)
 
(2,532
)
 
(7,594
)
 
(7,594
)
Net Income Allocated to Common Shareholders
$
34,599

 
$
27,051

 
$
79,016

 
$
77,786

Basic Earnings Per Common Share
$
0.28

 
$
0.22

 
$
0.63

 
$
0.63

Diluted Earnings Per Common Share
$
0.27

 
$
0.21

 
$
0.62

 
$
0.61

Dividends Declared Per Common Share
$
0.06

 
$
0.06

 
$
0.18

 
$
0.14

See notes to unaudited condensed consolidated financial statements.

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

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Net Income
$
37,131

 
$
29,583

 
$
86,610

 
$
85,380

Unrealized Gains (Losses) on Debt Securities
 
 
 
 
 
 
 
Net unrealized gains (losses) due to changes in fair value
2,667

 
(995
)
 
2,500

 
(3,090
)
Reclassification of unrealized losses (gains) to noninterest income
52

 
(568
)
 
149

 
(637
)
Tax effect
(1,033
)
 
594

 
(1,007
)
 
1,417

Change in unrealized gains (losses) on debt securities
1,686

 
(969
)
 
1,642

 
(2,310
)
Interest Rate Swaps
 
 
 
 
 
 
 
Net unrealized gains (losses) due to changes in fair value
6,135

 
(41,292
)
 
(73,863
)
 
(20,449
)
Reclassification of net unrealized losses to interest expense
3,889

 
4,050

 
11,823

 
12,693

Tax effect
(3,810
)
 
14,154

 
23,578

 
2,947

Change in interest rate swaps
6,214

 
(23,088
)
 
(38,462
)
 
(4,809
)
Other Comprehensive Income (Loss)
7,900

 
(24,057
)
 
(36,820
)
 
(7,119
)
Comprehensive Income (Loss)
$
45,031

 
$
5,526

 
$
49,790

 
$
78,261


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

 

 

 
86,610

 

 
86,610

Other comprehensive income (loss)

 

 

 

 
(36,820
)
 
(36,820
)
Issuance of common stock

 
4

 
1,795

 

 

 
1,799

Share-based grants (including income tax benefits)

 

 
5,785

 

 

 
5,785

Cash dividends on common stock

 

 

 
(22,545
)
 

 
(22,545
)
Cash dividends on preferred stock

 

 

 
(7,594
)
 

 
(7,594
)
Balance, September 30, 2016
$
150,000

 
$
1,254

 
$
882,386

 
$
962,749

 
$
(100,833
)
 
$
1,895,556

 
 
 
 
 
 
 
 
 
 
 
 
Balance, January 1, 2015
$
150,000

 
$
1,237

 
$
851,158

 
$
810,796

 
$
(65,597
)
 
$
1,747,594

Net income

 

 

 
85,380

 

 
85,380

Other comprehensive income (loss)

 

 

 

 
(7,119
)
 
(7,119
)
Issuance of common stock

 
13

 
13,150

 

 

 
13,163

Share-based grants (including income tax benefits)

 

 
8,867

 

 

 
8,867

Cash dividends on common stock

 

 

 
(17,422
)
 

 
(17,422
)
Cash dividends on preferred stock

 

 

 
(7,594
)
 

 
(7,594
)
Balance, September 30, 2015
$
150,000

 
$
1,250

 
$
873,175

 
$
871,160

 
$
(72,716
)
 
$
1,822,869


See notes to unaudited condensed consolidated financial statements.

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

 
Nine Months Ended
September 30,
 
2016
 
2015
Operating Activities
 
 
 
Net income
$
86,610

 
$
85,380

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Amortization of premiums and deferred origination costs
54,646

 
41,313

Depreciation and amortization of tangible and intangible assets
19,510

 
20,411

Reclassification of net loss on settlement of interest rate swaps
11,823

 
12,693

Amortization and impairment of mortgage servicing rights, net of recoveries
133,041

 
88,140

Deferred income taxes (benefit)
(25,340
)
 
(1,859
)
Provision for loan and lease losses
27,001

 
28,063

Loss on other real estate owned (OREO)
901

 
3,171

Share-based compensation expense
5,749

 
5,916

Payments for settlement of forward interest rate swaps
(1,478
)
 

Other operating activities
145

 
(760
)
Changes in operating assets and liabilities:
 
 
 
Loans held for sale, including proceeds from sales and repayments
(465,865
)
 
(330,844
)
Other assets
95,896

 
150,169

Accounts payable and accrued liabilities
(29,937
)
 
(29,569
)
Net cash provided by (used in) operating activities
(87,298
)
 
72,224

Investing Activities
 
 
 
Investment securities available for sale:
 
 
 
Purchases
(71,106
)
 
(29,772
)
Proceeds from sales
2,358

 
48,527

Proceeds from prepayments and maturities
137,873

 
179,846

Investment securities held to maturity:
 
 
 
Purchases
(6,566
)
 
(11,947
)
Proceeds from prepayments and maturities
8,951

 
14,541

Purchases of other investments
(457,469
)
 
(429,764
)
Proceeds from sales of other investments
428,190

 
385,540

Net change in loans and leases held for investment
(2,986,089
)
 
(4,226,475
)
Purchases of premises and equipment, including equipment under operating leases
(22,255
)
 
(15,476
)
Proceeds related to sale or settlement of other real estate owned
13,775

 
10,933

Proceeds from insured foreclosure claims
964,795

 
688,772

Proceeds from sale of mortgage servicing rights
971

 
35,938

Other investing activities
21,362

 
733

Net cash provided by (used in) investing activities
(1,965,210
)
 
(3,348,604
)
Financing Activities
 
 
 
Net increase (decrease) in nonmaturity deposits
748,850

 
1,072,756

Net increase (decrease) in time deposits
642,967

 
979,752

Net change in short-term Federal Home Loan Bank (FHLB) advances
(525,000
)
 
(1,000
)
Proceeds from long-term FHLB advances
1,800,000

 
1,600,000

Repayments of long-term FHLB advances
(665,000
)
 
(306,000
)
Repurchase of trust preferred securities
(3,522
)
 

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

 
172,286

Proceeds from issuance of common stock
2,534

 
13,163

Dividends paid
(30,140
)
 
(25,016
)
Other financing activities
(699
)
 
2,951

Net cash provided by (used in) financing activities
2,058,721

 
3,508,892

Net change in cash and cash equivalents
6,213

 
232,512

Cash and cash equivalents at beginning of period
582,451

 
366,664

Cash and cash equivalents at end of period
$
588,664

 
$
599,176

See Note 1 and Note 4 for disclosures related to supplemental noncash information.
See notes to unaudited condensed consolidated financial statements.

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Table of Contents

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


1.  Organization and Basis of Presentation
a) Organization — EverBank Financial Corp (the Company) is a 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 GAAP. 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:
 
Nine Months Ended
September 30,
 
2016
 
2015
Supplemental Schedules of Noncash Activities:
 
 
 
Loans transferred to foreclosure claims
$
979,714

 
$
826,295

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 September 30, 2016 and December 31, 2015:
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Carrying Amount
September 30, 2016
 
 
 
 
 
 
 
 
 
Available for sale:
 
 
 
 
 
 
 
 
 
Residential collateralized mortgage obligations (CMO) securities - nonagency
$
456,210

 
$
2,667

 
$
5,423

 
$
453,454

 
$
453,454

U.S. Treasury securities
31,833

 

 

 
31,833

 
31,833

Asset-backed securities (ABS)
1,460

 

 
252

 
1,208

 
1,208

Other
230

 
177

 

 
407

 
407

Total available for sale securities
$
489,733

 
$
2,844

 
$
5,675

 
$
486,902

 
$
486,902

Held to maturity:
 
 
 
 
 
 
 
 
 
Residential CMO securities - agency
$
6,781

 
$
177

 
$

 
$
6,958

 
$
6,781

Residential mortgage-backed securities (MBS) - agency
94,147

 
4,814

 
57

 
98,904

 
94,147

Total held to maturity securities
$
100,928

 
$
4,991

 
$
57

 
$
105,862

 
$
100,928

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 September 30, 2016 and December 31, 2015, investment securities with a carrying value of $129,947 and $145,904, respectively, were pledged to secure other borrowings and for other purposes as required or permitted by law.
For the three and nine months ended September 30, 2016, no gross gains and $52 in gross losses were realized on available for sale investments. For the three and nine months ended September 30, 2015, there were $568 and $637, respectively, of gross gains realized on available for sale investments, with no gross losses having been realized. The cost of investments sold is calculated using the specific identification method.

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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 September 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
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
Residential CMO securities - nonagency
$
40,109

 
$
179

 
$
193,669

 
$
5,244

 
$
233,778

 
$
5,423

Residential MBS - agency
12,804

 
55

 
934

 
2

 
13,738

 
57

ABS

 

 
1,208

 
252

 
1,208

 
252

Total debt securities
$
52,913

 
$
234

 
$
195,811

 
$
5,498

 
$
248,724

 
$
5,732

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 September 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 September 30, 2016, the Company had 61 debt securities in an unrealized loss position. A total of 17 securities were in an unrealized loss position for less than 12 months. These 17 securities consisted of 15 residential nonagency CMO securities and two residential agency MBS. The remaining 44 debt securities were in an unrealized loss position for 12 months or longer. These 44 securities consisted of 40 residential nonagency CMO securities, three ABS, and one residential agency MBS. Of the $5,732 in unrealized losses, $3,277 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 10 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 was no credit-related OTTI recognized for the three months ended September 30, 2016. During the nine months ended September 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 nine months ended September 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 nine months ended September 30, 2016 or 2015.
During the three and nine months ended September 30, 2016 and 2015, interest and dividend income on investment securities was comprised of the following:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Interest income on available for sale securities
$
3,128

 
$
4,279

 
$
10,294

 
$
14,066

Interest income on held to maturity securities
702

 
755

 
2,165

 
2,347

Other interest and dividend income
2,889

 
2,486

 
8,629

 
6,576

 
$
6,719

 
$
7,520

 
$
21,088

 
$
22,989

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

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4.  Loans Held for Sale
Loans held for sale as of September 30, 2016 and December 31, 2015, consisted of the following:
 
September 30,
2016
 
December 31,
2015
Mortgage warehouse (carried at fair value)
$
947,921


$
624,726

Other residential (carried at fair value)
867,192


683,015

   Total loans held for sale carried at fair value
1,815,113

 
1,307,741

Other residential
206,774

 
22,774

Commercial and commercial real estate
90,968


178,753

 Total loans held for sale carried at lower of cost or market
297,742

 
201,527

Total loans held for sale
$
2,112,855


$
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 value of the loans and the derivative instruments used to economically hedge these loans without the burden of complying with the requirements of 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.
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 nine months ended September 30, 2016 and 2015:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Proceeds received from residential agency securitizations
$
1,269,059

 
$
1,240,727

 
$
3,114,627

 
$
3,416,119

 
 
 
 
 
 
 
 
Proceeds received from nonsecuritization sales - residential
830,865

 
610,080

 
3,499,048

 
2,258,236

Proceeds received from nonsecuritization sales - commercial and commercial real estate
48,219

 
61,388

 
453,658

 
164,667

Proceeds received from nonsecuritization sales - equipment financing receivables
45,902

 
3,312

 
169,479

 
43,441

   Proceeds received from nonsecuritization sales
$
924,986

 
$
674,780

 
$
4,122,185

 
$
2,466,344

 
 
 
 
 
 
 
 
Repurchased loans from residential agency sales and securitizations
$
580

 
$
2,212

 
$
4,737

 
$
4,733

Repurchased loans from residential nonagency sales
2,991

 
2,420

 
5,626

 
7,797

Repurchased loans from commercial sales and securitizations (1)

 

 
74,987

 
105,651

(1)
Represents loans that were voluntarily repurchased out of the Business Lending Trusts through a clean-up call. Of those loans repurchased during the nine months ended September 30, 2016, all were subsequently sold to third parties by September 30, 2016. Of those loans repurchased in 2015, all were subsequently sold to third parties during the nine months ended September 30, 2015.
In connection with these transfers, the Company recorded servicing assets in the amount of $17,175 and $48,141 for the three and nine months ended September 30, 2016 and $17,287 and $46,110 for the three and nine months ended September 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

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Table of Contents

the condensed consolidated statements of income in gain on sale of loans, which includes the gain or loss on sale, change in fair value related to fair value option loans, 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 nine months ended September 30, 2016 and 2015.
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Loans Transferred from Held for Investment (LHFI) to Held for Sale (LHFS)
2016
 
2015
 
2016
 
2015
Residential mortgages
$
396,982

 
$
89,849

 
$
1,261,072

 
$
799,570

Government insured pool buyouts
479,142

 
218,413

 
1,380,678

 
704,085

Commercial and commercial real estate
47,002

 
348,875

 
317,863

 
348,875

Equipment financing receivables
44,098

 
3,130

 
161,830

 
40,320

Total transfers from LHFI to LHFS
$
967,224

 
$
660,267

 
$
3,121,443

 
$
1,892,850

 


 
 
 
 
 
 
Loans Transferred from LHFS to LHFI
 
 
 
 
 
 
 
Residential mortgages
$
61,717

 
$
1,706

 
$
87,872

 
$
195,760

Government insured pool buyouts
205

 

 
205

 

Commercial and commercial real estate

 

 
28,753

 

Total transfers from LHFS to LHFI
$
61,922

 
$
1,706

 
$
116,830

 
$
195,760

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 such loans and leases. 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 September 30, 2016 and December 31, 2015 are comprised of the following:
 
September 30,
2016
 
December 31,
2015
Residential mortgages
$
11,792,741

 
$
11,717,122

Commercial and commercial real estate
8,454,393

 
7,607,676

Equipment financing receivables
2,512,435

 
2,400,909

Home equity lines and other
1,173,155

 
501,785

Total loans and leases held for investment, net of unearned income
23,932,724

 
22,227,492

Allowance for loan and lease losses
(90,170
)
 
(78,137
)
Total loans and leases held for investment, net
$
23,842,554

 
$
22,149,355

As of September 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:
 
September 30,
2016
 
December 31,
2015
Net purchased loan and lease discounts
$
82,560

 
$
45,770

Net deferred loan and lease origination costs
125,346

 
123,255

During the nine months ended September 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:
 
September 30,
2016
 
September 30,
2015
Residential mortgages(1)
$
3,637,376

 
$
2,138,426

Commercial credit facilities
308,718

 
521,026

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 nine months ended September 30, 2016 and 2015 are as follows:
 
September 30,
2016
 
September 30,
2015
Contractual payments receivable for acquired loans and leases at acquisition
$
5,919,935

 
$
3,319,606

Expected cash flows for acquired loans and leases at acquisition
3,719,586

 
2,152,753

Basis in acquired loans and leases at acquisition
3,492,752

 
1,986,531

Information pertaining to the ACI portfolio as of September 30, 2016 and December 31, 2015 is as follows:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
September 30, 2016
 
 
 
 
 
Carrying value, net of allowance
$
4,454,094

 
$
67,908

 
$
4,522,002

Outstanding unpaid principal balance
4,533,401

 
72,670

 
4,606,071

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

 
346

 
7,377

Allowance for loan and lease losses, end of period
5,795

 

 
5,795

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 $1,585 and $253 for the ACI portfolio for the nine months ended September 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 nine months ended September 30, 2016 and 2015:
 
Residential
 
Commercial and Commercial Real Estate
 
Total      
September 30, 2016
 
 
 
 
 
Balance, beginning of period
$
252,841

 
$
43,690

 
$
296,531

Additions
226,834

 

 
226,834

Accretion
(149,326
)
 
(5,436
)
 
(154,762
)
Reclassifications to (from) accretable yield
(11,735
)
 
(3,457
)
 
(15,192
)
Transfer from loans held for investment to loans held for sale

 
(3,304
)
 
(3,304
)
Balance, end of period
$
318,614

 
$
31,493

 
$
350,107

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

 
$
61,256

 
$
301,906

Additions
166,222

 

 
166,222

Accretion
(97,781
)
 
(8,986
)
 
(106,767
)
Reclassifications to (from) accretable yield
(83,712
)
 
(6,022
)
 
(89,734
)
Balance, end of period
$
225,379

 
$
46,248

 
$
271,627


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6.  Allowance for Loan and Lease Losses
Changes in the allowance for loan and lease losses for the three and nine months ended September 30, 2016 and 2015 are as follows:
Three Months Ended September 30, 2016
Residential Mortgages
 
Commercial
and Commercial Real Estate
 
Equipment Financing Receivables    
 
Home Equity Lines and Other
 
Total    
Balance, beginning of period
$
25,787

 
$
37,444

 
$
15,191

 
$
5,828

 
$
84,250

Provision for loan and lease losses
1,816

 
2,627

 
6,355

 
1,272

 
12,070

Charge-offs
(2,290
)
 
(79
)
 
(4,006
)
 
(505
)
 
(6,880
)
Recoveries
57

 
133

 
488

 
52

 
730

Balance, end of period
$
25,370

 
$
40,125

 
$
18,028

 
$
6,647

 
$
90,170

Three Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
24,385

 
$
26,942

 
$
10,391

 
$
4,373

 
$
66,091

Provision for loan and lease losses
4,142

 
5,279

 
2,761

 
(1,051
)
 
11,131

Charge-offs
(2,630
)
 
(406
)
 
(2,703
)
 
(353
)
 
(6,092
)
Recoveries
91

 
4

 
602

 
70

 
767

Balance, end of period
$
25,988

 
$
31,819

 
$
11,051

 
$
3,039

 
$
71,897

 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 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
4,169

 
5,184

 
14,327

 
3,321

 
27,001

   Charge-offs
(6,311
)
 
(147
)
 
(10,505
)
 
(1,000
)
 
(17,963
)
   Recoveries
561

 
213

 
2,019

 
202

 
2,995

Balance, end of period
$
25,370

 
$
40,125

 
$
18,028

 
$
6,647

 
$
90,170

Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
25,098

 
$
23,095

 
$
8,649

 
$
4,004

 
$
60,846

   Provision for loan and lease losses
8,304

 
10,924

 
9,071

 
(236
)
 
28,063

   Charge-offs
(7,616
)
 
(2,424
)
 
(8,172
)
 
(979
)
 
(19,191
)
   Recoveries
202

 
224

 
1,503

 
250

 
2,179

Balance, end of period
$
25,988

 
$
31,819

 
$
11,051

 
$
3,039

 
$
71,897


15

Table of Contents

The following tables provide a breakdown of the allowance for loan and lease losses and the recorded investment in loans and leases based on the method for determining the allowance as of September 30, 2016 and December 31, 2015:
September 30, 2016
Individually Evaluated for Impairment
 
Collectively Evaluated for Impairment
 
ACI Loans
 
Total
Allowance for Loan and Lease Losses
 
 
 
 
 
 
 
Residential mortgages
$
2,202

 
$
17,373

 
$
5,795

 
$
25,370

Commercial and commercial real estate
12,970

 
27,155

 

 
40,125

Equipment financing receivables
1,450

 
16,578

 

 
18,028

Home equity lines and other

 
6,647

 

 
6,647

Total allowance for loan and lease losses
$
16,622

 
$
67,753

 
$
5,795

 
$
90,170

Loans and Leases Held for Investment at Recorded Investment
 
 
 
 
 
 
 
Residential mortgages
$
18,112

 
$
7,314,740

 
$
4,459,889

 
$
11,792,741

Commercial and commercial real estate
110,356

 
8,276,129

 
67,908

 
8,454,393

Equipment financing receivables
19,550

 
2,492,885

 

 
2,512,435

Home equity lines and other

 
1,173,155

 

 
1,173,155

Total loans and leases held for investment
$
148,018

 
$
19,256,909

 
$
4,527,797

 
$
23,932,724

 
 
 
 
 
 
 
 
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 September 30, 2016 and December 31, 2015:
 
 
 
Non-performing    
 
 
 
 
 
Performing
 
Accrual
 
Nonaccrual
 
Total
 
 
September 30, 2016
 
 
 
 
 
 
 
 
 
Residential mortgages:
 
 
 
 
 
 
 
 
 
Residential (1)
$
6,620,153

 
$

 
$
33,373

 
$
6,653,526

 
 
Government insured pool buyouts (2) (3)
4,897,262

 
241,953

 

 
5,139,215

 
 
Equipment financing receivables
2,474,758

 

 
37,677

 
2,512,435

 
 
Home equity lines and other
1,166,414

 

 
6,741

 
1,173,155

 
 
Total
$
15,158,587

 
$
241,953

 
$
77,791

 
$
15,478,331

 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
September 30, 2016
 
 
 
 
 
 
 
 
 
Commercial and commercial real estate:
 
 
 
 
 
 
 
 
 
Commercial real estate
$
3,510,002

 
$
13,824

 
$
125,268

 
$

 
$
3,649,094

Mortgage warehouse finance
3,076,511

 

 

 

 
3,076,511

Lender finance
1,495,585

 

 

 

 
1,495,585

Other commercial finance
213,908

 
19,295

 

 

 
233,203

Total commercial and commercial real estate
$
8,296,006

 
$
33,119

 
$
125,268

 
$

 
$
8,454,393

 
 
 
 
 
 
 
 
 
 
 
 
 
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 September 30, 2016 and December 31, 2015, performing residential mortgages included $3,823 and $5,148, respectively, of ACI loans 90 days or greater past due and still accruing.
(2)
For the periods ended September 30, 2016 and December 31, 2015, performing government insu