sv1za
As filed with
the Securities and Exchange Commission on April 30,
2012.
Registration
No. 333-169824
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 10
to
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF
1933
EVERBANK FINANCIAL
CORP
(Exact name of registrant as
specified in its charter)
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Delaware
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6035
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90-0615674
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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501 Riverside
Ave.
Jacksonville, Florida 32202
(904) 281-6000
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Thomas A. Hajda
Executive Vice President and General Counsel
501 Riverside Ave.
Jacksonville, Florida 32202
(904) 281-6000
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies of Communications
to:
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Richard B. Aftanas
Patricia Moran
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
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Lee A. Meyerson
Lesley Peng
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effective date of this registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933 check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. 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. (Check one):
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Large
accelerated
filer o
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Accelerated
filer o
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Non-accelerated
filer þ
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until this
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to
Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell nor does it seek an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
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Subject to Completion, Dated
April 30, 2012
25,150,000 Shares
EverBank
Financial Corp
Common Stock
This is an initial public offering of shares of common stock of
EverBank Financial Corp.
EverBank Financial Corp is offering 19,220,001 shares of
common stock to be sold in the offering. The selling
stockholders identified in this prospectus are offering an
additional 5,929,999 shares. EverBank Financial Corp will
not receive any of the proceeds from the sale of the shares
being sold by the selling stockholders.
Prior to this offering there has been no public market for our
common stock. It is currently estimated that the initial public
offering price per share will be between $12.00 and $14.00. Our
common stock has been approved for listing on the New York Stock
Exchange under the symbol EVER.
See Risk Factors beginning on page 17 to
read about factors you should consider before buying shares of
the common stock.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities
or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
EverBank Financial Corp is an emerging growth company, as
defined in Section 2(a) of the Securities Act of 1933.
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Per Share
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Total
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Initial public offering price
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$
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$
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Underwriting discounts
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$
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$
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Proceeds, before expenses, to EverBank Financial Corp.
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$
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$
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Proceeds, before expenses, to the selling stockholders
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$
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$
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To the extent that the underwriters sell more than
25,150,000 shares of common stock, the underwriters have
the option to purchase up to an additional 3,772,500 shares
from EverBank Financial Corp at the initial public offering
price less the underwriting discount.
The underwriters expect to deliver the shares against payment in
New York, New York
on ,
2012.
Joint Book-Running Managers
Goldman, Sachs &
Co.
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BofA
Merrill Lynch |
Credit Suisse |
Co-Managers
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Keefe,
Bruyette & Woods |
Sandler
ONeill + Partners, L.P. |
Evercore Partners |
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Raymond
James |
Macquarie
Capital |
Sterne
Agee |
Prospectus
dated ,
2012.
TABLE OF
CONTENTS
You should rely only on the information contained in this
prospectus or in any free writing prospectus we may authorize to
be delivered to you. We have not, and the selling stockholders
and underwriters have not, authorized anyone to provide you with
different information. If anyone provides you with different
information, you should not rely on it. We are not, and the
selling stockholders and underwriters are not, making an offer
of these securities in any jurisdiction where the offer is not
permitted. You should not assume that the information contained
in this prospectus is accurate as of any date other than the
date on the front of this prospectus.
These securities are not deposits, bank accounts or
obligations of any bank and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency
and are subject to investment risks, including possible loss of
the entire amount invested.
For investors outside the United States: Neither we, the selling
stockholders nor any of the underwriters have done anything that
would permit this offering or possession or distribution of this
prospectus in any jurisdiction where action for that purpose is
required, other than in the United States. You are required to
inform yourselves about and to observe any restrictions relating
to this offering and the distribution of this prospectus.
i
PROSPECTUS
SUMMARY
The following is a summary of selected information contained
elsewhere in this prospectus. It does not contain all of the
information that you should consider before deciding to purchase
shares of our common stock. You should read this entire
prospectus carefully, especially the Risk Factors
section immediately following this Prospectus Summary and the
historical and pro forma financial statements and the related
notes thereto and managements discussion and analysis
thereof included elsewhere in this prospectus before making an
investment decision to purchase our common stock. Unless we
state otherwise or the context otherwise requires, references in
this prospectus to EverBank Financial Corp,
we, our, us, and the
Company for all periods subsequent to the
reorganization transactions described in the section entitled
Reorganization (which will be completed in
connection with this offering) refer to EverBank Financial Corp,
a newly formed Delaware corporation, and its consolidated
subsidiaries after giving effect to such reorganization
transactions. For all periods prior to the completion of such
reorganization transactions, these terms refer to EverBank
Financial Corp, a Florida corporation, and its predecessors and
their respective consolidated subsidiaries.
EverBank
Financial Corp
Overview
We are a diversified financial services company that provides
innovative banking, lending and investing products and services
to approximately 575,000 customers nationwide through scalable,
low-cost distribution channels. Our business model attracts
financially sophisticated, self-directed, mass-affluent
customers and a diverse base of small and medium-sized business
customers. We market and distribute our products and services
primarily through our integrated online financial portal, which
is augmented by our nationwide network of independent financial
advisors, 14 high-volume financial centers in targeted Florida
markets and other financial intermediaries. These channels are
connected by technology-driven centralized platforms, which
provide operating leverage throughout our business.
We have a suite of asset origination and fee income businesses
that individually generate attractive financial returns and
collectively leverage our core deposit franchise and customer
base. We originate, invest in, sell and service residential
mortgage loans, equipment leases and various other consumer and
commercial loans, as market conditions warrant. Our organic
origination activities are scalable, significant relative to our
balance sheet size and provide us with substantial growth
potential. We originated $2.2 billion of loans and leases
in the fourth quarter of 2011 ($8.8 billion on an
annualized basis) and organically generated $0.6 billion of
volume for our own balance sheet ($2.5 billion on an
annualized basis). This retained volume increased 115% from the
first quarter of 2011, which demonstrated our ability to quickly
calibrate our organic balance sheet origination levels based
upon market conditions. Our origination, lending and servicing
expertise positions us to acquire assets in the capital markets
when risk-adjusted returns available through acquisition exceed
those available through origination. Our rigorous analytical
approach provides capital markets discipline to calibrate our
levels of asset origination, retention and acquisition. These
activities diversify our earnings, strengthen our balance sheet
and provide us with flexibility to capitalize on market
opportunities.
Our deposit franchise fosters strong relationships with a large
number of financially sophisticated customers and provides us
with a stable and flexible source of low, all-in cost funding.
We have a demonstrated ability to grow our customer deposit base
significantly with short lead time by adapting our product
offerings and marketing activities rather than incurring the
higher fixed operating costs inherent in more branch-intensive
banking models. Our extensive offering of deposit products and
services includes proprietary features that distinguish us from
our competitors and enhance our value proposition to customers.
Our products, distribution and marketing strategies allow us to
generate
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substantial deposit growth while maintaining an attractive mix
of high-value transaction and savings accounts.
Our significant organic growth has been supplemented by
selective acquisitions of portfolios and businesses, including
our recent acquisition of MetLife Banks warehouse finance
business and 2010 acquisitions of the banking operations of the
Bank of Florida Corporation, or Bank of Florida, in an Federal
Deposit Insurance Corporation, or FDIC, assisted transaction and
Tygris Commercial Finance Group, Inc., or Tygris, a commercial
finance company. We evaluate and pursue financially attractive
opportunities to enhance our franchise on an ongoing basis. We
have also recently made significant investments in our business
infrastructure, management team and operating platforms that we
believe will enable us to grow our business efficiently and
further capitalize on organic growth and strategic acquisition
opportunities.
We have recorded positive earnings in every full year since
1995. Since 2000, we have recorded an average return on average
equity, or ROAE, of 14.9% and a net income compound annual
growth rate, or CAGR, of 22%. As of December 31, 2011, we
had total assets of $13.0 billion and total
shareholders equity of $1.0 billion.
History and
Growth
The following chart shows key events in our history, and the
corresponding growth in our assets and deposits over time:
Asset Origination
and Fee Income Businesses
We have a suite of asset origination and fee income businesses
that individually generate attractive financial returns and
collectively leverage our low-cost deposit franchise and
mass-affluent customer base. These businesses diversify our
earnings, strengthen our balance sheet and provide us with
increased flexibility to manage through changing market and
operating environments.
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Our asset origination and fee income businesses include the
following:
Mortgage Banking. We originate prime
residential mortgage loans using a centrally controlled
underwriting, processing and fulfillment infrastructure through
financial intermediaries (including community banks, credit
unions, mortgage bankers and brokers), consumer direct channels
and financial centers. These low-cost, scalable distribution
channels are consistent with our deposit distribution model. We
have recently expanded our retail and correspondent distribution
channels and emphasized jumbo prime mortgages, which we retain
on our balance sheet, to our mass-affluent customer base.
Our mortgage servicing business includes collecting loan
payments, remitting principal and interest payments to
investors, managing escrow funds and other activities. In
addition to generating significant fee income, our mortgage
banking activities provide us with direct asset acquisition
opportunities. We believe that our mortgage banking expertise,
insight and resources position us to make strategic investment
decisions, effectively manage our loan and investment portfolio
and capitalize on significant changes currently taking place in
the industry.
Commercial Finance. We entered the
commercial finance business as a result of our acquisition of
Tygris. We originate equipment leases nationwide through
relationships with approximately 280 equipment vendors with
large networks of creditworthy borrowers and provide
asset-backed loan facilities to other leasing companies. Since
the acquisition, we have increased our origination activity from
$63 million in the fourth quarter of 2010
($252 million on an annualized basis) to $192 million
in the fourth quarter of 2011 ($768 million on an
annualized basis) by growing volumes in existing products as
well as adding new products, customers and industries. Our
commercial finance activities provide us with access to a
variety of small business customers which creates opportunities
to cross-sell our deposit, lending and wealth management
products.
Commercial Lending. We have
historically originated a variety of commercial loans, including
owner-occupied commercial real estate, commercial investment
property and small business commercial loans principally through
our financial centers. We have not been originating a
significant volume of new commercial loans in recent periods,
but plan to expand origination of these assets and pursue
acquisitions as market conditions become more favorable. Our
Bank of Florida acquisition significantly increased our
commercial loan portfolio and expanded our ability to originate
and acquire these assets. We also recently acquired MetLife
Banks warehouse finance business, which we expect to
enhance our commercial lending capabilities. Our commercial
lending business connects us with approximately 2,000 small
business customers and provides cross-selling opportunities for
our deposit, commercial finance, wealth management and other
lending products.
Portfolio Management. Our investment
analysis capabilities are a core competency of our organization.
We supplement our organically originated assets by purchasing
loans and securities when those investments have more attractive
risk-adjusted returns than those we can originate. Our
flexibility to increase risk-adjusted returns by retaining
originated assets or acquiring assets, differentiates us from
our competitors with regional lending constraints.
Wealth Management. Through our
registered broker dealer and recently-formed investment advisor
subsidiaries, we provide comprehensive financial advisory,
planning, brokerage, trust and other wealth management services
to our affluent and financially sophisticated customers.
Deposit
Generation
Our deposit franchise fosters strong relationships with a large
number of financially sophisticated customers and provides us
with a flexible source of low-cost funds. Our distribution
channels, operating platform and marketing strategies are
characterized by low operating costs and enable us to rapidly
scale our business. As of December 31, 2011, we had
$10.3 billion in deposits, which have grown organically
(i.e., excluding deposits acquired through our acquisition of
Bank of Florida) at a CAGR of 26% from December 31, 2003 to
December 31, 2011. Our unique products, distribution and
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marketing strategies allow us to generate organic deposit growth
quickly and in large increments. These capabilities provide us
flexibility and efficiency in funding asset growth opportunities
organically or through strategic acquisitions. For example, we
grew deposits by $2.0 billion, or 50%, during the five
quarter period ended September 30, 2009 following our 2008
capital raise and by $1.3 billion, or 22%, during the two
quarter period ended March 31, 2010 following the
announcement of our Tygris acquisition.
We have received industry recognition for our innovative suite
of deposit products with proprietary transaction and investment
features that drive customer acquisition and increase customer
retention rates. Our market-based deposit products, consisting
of our
WorldCurrency®,
MarketSafe®
and EverBank Metals
Selectsm
products, provide investment capabilities for customers seeking
portfolio diversification with respect to foreign currencies,
commodities and other indices, which are typically unavailable
from our banking competitors. These market-based deposit
products generate significant fee income. Our
YieldPledge®
deposit products offer our customers certainty that they will
earn yields on these deposit accounts in the top 5% of
competitive accounts, as tracked by national bank rate tracking
services. Consequently, the
YieldPledge®
products reduce customers incentive to seek more favorable
deposit rates from our competitors.
YieldPledge®
Checking and
YieldPledge®
Savings accounts have received numerous awards including
Kiplinger Magazines Best Checking Account and Money
Magazines Best of the Breed.
Our financial portal, recognized by Forbes.com as Best of the
Web, includes online bill-pay, account aggregation, direct
deposit, single sign-on for all customer accounts and other
features, which further deepen our customer relationships. Our
website and mobile device applications provide information on
our product offerings, financial tools and calculators,
newsletters, financial reporting services and other applications
for customers to interact with us and manage all of their
EverBank accounts on a single integrated platform. Our new
mobile applications allow customers using
iPhone®,
iPad®,
AndroidTM
and
BlackBerry®
devices to view account balances, conduct real time balance
transfers between EverBank accounts, administer billpay, review
account activity detail and remotely deposit checks. Our
innovative deposit products and the interoperability and
functionality of our financial portal and mobile device
applications have led to strong customer retention rates.
Our deposit customers are typically financially sophisticated,
self-directed, mass-affluent individuals, as well as small and
medium-sized businesses. These customers generally maintain high
balances with us, and our average deposit balance per household
(excluding escrow deposits) was $78,283 as of December 31,
2011, which we believe is more than three times the industry
average.
We build and manage our deposit customer relationships through
an integrated, multi-faceted distribution network, including the
following channels:
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Consumer Direct. Our consumer direct
channel includes Internet, email, telephone and mobile device
access to products and services.
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Financial Centers. We have a network of
14 high-volume financial centers in key Florida metropolitan
areas, including the Jacksonville, Naples, Ft. Myers,
Miami, Ft. Lauderdale, Tampa Bay and Clearwater markets
with average deposits per financial center of
$130.5 million as of December 31, 2011.
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Financial Intermediaries. We offer
deposit products nationwide through relationships with financial
advisory firms representing over 2,800 independent financial
professionals.
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We believe our deposit franchise provides lower all-in funding
costs with greater scalability than branch-intensive banking
models, which must replicate operational and administrative
activities at each branch. Because our centralized operating
platform and distribution strategy largely avoid such
redundancy, we realize significant marginal operating cost
benefits as our deposit base grows. Our flexible account
features and marketing strategies enable us to manage our
deposit growth to meet strategic goals and asset deployment
objectives.
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Competitive
Strengths
Diversified Business Model. We have a
diverse set of businesses that provide complementary earnings
streams, investment opportunities and customer cross-selling
benefits. We believe our multiple revenue sources and the
geographic diversity of our customer base mitigate business risk
and provide opportunities for growth in varied economic
conditions.
Robust Asset Origination and Acquisition
Capabilities. We have robust, nationwide
asset origination that generates a variety of assets to either
hold on our balance sheet or sell in the capital markets. Our
organic origination activities are scalable, significant
relative to our balance sheet size and provide us with
substantial growth potential. We originated $2.2 billion of
loans and leases in the fourth quarter of 2011
($8.8 billion on an annualized basis) and organically
generated $0.6 billion of volume for our own balance sheet
($2.5 billion on an annualized basis). We are able to
calibrate our levels of asset origination, asset acquisition and
retention of originated assets to capitalize on various market
conditions.
Scalable Source of Low-Cost Funds. We
believe that the operating noninterest expense needed to gather
deposits is an important component of measuring funding costs.
Our scalable platform and low-cost distribution channels enable
us to achieve a lower all-in cost of deposit funding compared to
traditional branch-intensive models. Our integrated online
financial portal, online account opening and other self-service
capabilities lower our customer support costs. Our low-cost
distribution channels do not require the fixed cost investment
or lead times associated with more expensive, slower-growth
branch systems. In addition, we have demonstrated an ability to
scale core deposits rapidly and in large increments by adjusting
our marketing activities and account features.
Disciplined Risk Management. Through a
combination of leveraging our asset origination capabilities,
applying our conservative underwriting standards and executing
opportunistic acquisitions, we have built a diversified,
low-risk asset portfolio with significant credit protection,
geographic diversity and attractive yields. We adhere to
rigorous underwriting criteria and were able to avoid the higher
risk lending products and practices that plagued our industry in
recent years. Our focus on the long-term success of the business
through increasing risk-adjusted returns, as opposed to
short-term profit goals, has enabled us to remain profitable in
various market conditions across business cycles.
Scalable Business Infrastructure. Our
scalable business infrastructure has enabled us to rapidly grow
our business and achieve step function growth via acquisitions.
Over the course of 2011, we made significant additional
investments in our operating platforms, management talent and
business processes. We believe our business infrastructure will
enable us to continue growing our business well into the future.
Attractive Customer Base. Our products
and services typically appeal to well-educated, middle-aged,
high-income individuals and households as well as small and
medium-sized businesses. We believe these customers, typically
located in major metropolitan areas, tend to be financially
sophisticated with complex financial needs, providing us with
cross-selling opportunities. These customer characteristics
result in higher average deposit balances and more self-directed
transactions, which lead to operational efficiencies and lower
account servicing costs.
Financial Stability and Strong Capital
Position. Our strong capital and liquidity
position coupled with our conservative management principles
have allowed us to grow our business profitably, across business
cycles, even at times when the broader banking sector has
experienced significant losses and balance sheet contraction. As
of December 31, 2011, our total equity capital was
approximately $1.0 billion, our total risk-based capital
ratio (bank level) was 15.7% and our total deposits represented
approximately 88% of total debt funding.
Experienced Management Team with Long Tenures at the
Company. Our management team has extensive
and varied experience in managing national banking and financial
services firms and has worked together at EverBank for many
years. Senior management has demonstrated a track
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record of managing profitable growth, successfully executing
acquisitions and instilling a rigorous analytical culture. In
2011, we also made selective additions to our management team
and added key business line leaders.
Business and
Growth Strategies
Continue Strong Growth of Deposit
Base. We intend to continue to grow our
deposit base to fund investment opportunities by expanding our
marketing activities and adjusting account features. Key
components of this strategy are to build our brand recognition
and extend our reach through new media outlets.
Capitalize on Changing Industry
Dynamics. We believe that the wide-scale
disruptions in the credit markets and changes in the competitive
landscape during the financial crisis will continue to provide
us with attractive returns on our lending and investing
activities. We see significant opportunities for us in the
mortgage markets as uncertainty on the outcome of future
regulation and government participation is causing many of our
competitors to retrench or exit the market. We plan to
capitalize on fundamental changes to the pricing of risk and
build on our proven success in evaluating high risk-adjusted
return assets as part of our growth strategy going forward.
Opportunistically Evaluate
Acquisitions. On an ongoing basis, we
evaluate and pursue financially attractive opportunities to
enhance our franchise. We may consider acquisitions of lines of
business or lenders in commercial and small business lending or
leasing, loans or securities portfolios, residential lenders,
direct banks, banks or bank branches (whether in FDIC-assisted
or unassisted transactions), wealth and investment management
firms, securities brokerage firms, specialty finance or other
financial services-related companies. Our strong capital and
liquidity position enable us to strategically pursue acquisition
opportunities as they arise.
Pursue Cross-Selling Opportunities. We
intend to leverage our strong customer relationships by
cross-selling our banking, lending and investing products and
services, particularly as we expand our branding and marketing
efforts. We believe our customer concentrations in major
metropolitan markets will facilitate our abilities to cross-sell
our products. We expect to increase distribution of our deposit
and lending products, achieve additional efficiencies across our
businesses and enhance our value proposition to our customers.
Execute on Wealth Management
Business. We intend to provide additional
investment and wealth management services that will appeal to
our mass-affluent customer base. We believe our wealth
management initiative will create new asset generation
opportunities, drive additional fee income and build broader and
deeper customer relationships.
Risk
Factors
There are a number of risks that you should consider before
making an investment decision regarding this offering. These
risks are discussed more fully in the section entitled
Risk Factors following this prospectus summary.
These risks include, but are not limited to:
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general business or economic conditions;
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liquidity risk, which could impair our ability to fund
operations and jeopardize our financial condition;
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changes in interest rates, which may make our results volatile
and difficult to predict from quarter to quarter;
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legislative or regulatory actions affecting or concerning
mortgage loan modification and refinancing programs;
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our potential need to make further increases in our provisions
for loan and lease losses and to charge off additional loans and
leases in the future;
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our exposure to risk related to our commercial real estate loan
portfolio;
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limited ability to rely on brokered deposits as a part of our
funding strategy;
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conditions in the real estate market and higher than normal
delinquency and default rates;
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our concentration of jumbo mortgage loans and mortgage servicing
rights;
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uncertainty resulting from the implementation of new and pending
legislation and regulations;
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our potential failure to comply with the complex laws and
regulations that govern our operations; and
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our dependence on programs administered by government agencies
and government- sponsored enterprises.
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Corporate
Information
Our principal executive offices are located at 501 Riverside
Ave., Jacksonville, Florida 32202 and our telephone number is
(904) 281-6000.
Our corporate website address is www.everbank.com. Information
on, or accessible through, our website is not part of, or
incorporated by reference in, this prospectus. Our primary
operating subsidiary is EverBank, a federal savings bank
organized under the laws of the United States, referred to as
EverBank.
EverBank,
(the EverBank
logo) and other trade names and service marks that appear in
this prospectus belong to EverBank. Trade names and service
marks belonging to unaffiliated companies referenced in this
prospectus are the property of their respective holders.
In September 2010, EverBank Financial Corp, a Florida
corporation, or EverBank Florida, formed EverBank Financial
Corp, a Delaware corporation, or EverBank Delaware. EverBank
Delaware holds no assets and has no subsidiaries and has not
engaged in any business or other activities except in connection
with its formation and as the registrant in this offering. Prior
to the consummation of this offering, EverBank Florida will
merge with and into EverBank Delaware, with EverBank Delaware
continuing as the surviving corporation and succeeding to all of
the assets, liabilities and business of EverBank Florida. In the
merger, (1) all of the outstanding shares of common stock
of EverBank Florida will be converted into approximately
77,994,699 shares of EverBank Delaware common stock,
(2) all of the holders of outstanding shares of 4%
Series B Cumulative Participating Perpetual
Pay-In-Kind
Preferred Stock of EverBank Florida, or Series B Preferred
Stock, will receive a pro rata special one-time cash dividend of
an aggregate of approximately $1.1 million and (3) all
of the outstanding shares of Series B Preferred Stock will
be converted into 15,964,644 shares of EverBank Delaware
common stock. We refer to these transactions in this prospectus
as the Reorganization.
Recent
Developments
First Quarter
Results
Our consolidated financial statements for the quarter ended
March 31, 2012 are not yet available. The following
expectations regarding our results for this period are solely
management estimates based on currently available information.
Our independent registered public accounting firm has not
audited, reviewed or performed any procedures with respect to
preliminary financial data and, accordingly, does not express an
opinion or any other form of assurance with respect to this
data. Our actual results may differ from these expectations. Any
such differences could be material.
We expect that, for the quarter ended March 31, 2012:
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Our net interest income will be between $114 million and
$117 million;
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Our provision for loan and lease losses will be between
$10 million and $13 million;
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|
Our net income will be between $10 million and
$13 million; and
|
|
|
|
Our adjusted net income will be between $25 million and
$28 million. Adjusted net income for the quarter ended
March 31, 2012 excludes a $3.9 million after-tax
charge for transaction and
|
7
|
|
|
|
|
non-recurring regulatory related cost, a $2.1 million
after-tax charge for an increase in Bank of Florida
nonaccretable discount, and a $9.4 million after-tax charge
for MSR impairment.
|
We expect that, as of March 31, 2012:
|
|
|
|
|
Our net loans held for investment will be approximately
$7.2 billion;
|
|
|
|
Our total assets will be approximately
$13.8 billion; and
|
|
|
|
Our deposits will be approximately $10.6 billion.
|
We expect that, for the quarter ended March 31, 2012:
|
|
|
|
|
Our net interest margin will be between 3.9% and 4.0%;
|
|
|
|
Our adjusted non-performing assets as a percentage of total
assets will be between 1.6% and 1.7%. Total regulatory
non-performing assets will be approximately $1.9 billion,
which includes $1.5 billion of government insured loans
that were 90 days past due and still accruing on
approximately $0.2 billion of loans and other real estate
owned acquired from the Bank of Florida and accounted for under
ASC 310-30.
We define non-performing assets, or NPA, as non-accrual loans,
accruing loans past due 90 days or more and foreclosed
property. Our adjusted NPA will be between $220 million and
$234 million. Our adjusted NPA calculation excludes
government insured pool buyout loans for which payment is
insured by the government. We also exclude loans, leases and
foreclosed property acquired in the Tygris and Bank of Florida
acquisitions accounted for under
ASC 310-30
because, as of March 31, 2012, we expected to fully collect
the carrying value of such loans, leases and foreclosed property;
|
|
|
|
Our bank level Tier 1 (core) capital ratio will be 7.7% at
March 31, 2012 as compared to 8.0% at December 31,
2011. The ratio is calculated as Tier 1 (core) capital
divided by adjusted total assets. Total assets are adjusted for
goodwill, deferred tax assets disallowed from Tier 1 (core)
capital and other regulatory adjustments;
|
|
|
|
Our bank level total risk-based capital ratio will be 15.2% at
March 31, 2012 as compared to 15.7% at December 31,
2011. The ratio is calculated as total risk-based capital
divided by total risk-weighted assets. Risk-based capital
includes Tier 1 (core) capital, allowance for loan and
lease losses, subject to limitations, and other regulatory
adjustments;
|
|
|
|
Our tangible equity to tangible assets will be approximately
7.1%. Tangible equity and assets as of March 31, 2012
exclude goodwill of $10.2 million and intangible assets of $7.1
million;
|
|
|
|
Our net charge-offs to average loans held for investment will be
approximately 0.65% (annualized) based on the three months ended
March 31, 2012 compared to 1.45% for the three months ended
March 31, 2011; and
|
|
|
|
We organically generated approximately $2.2 billion of
loans and leases of which approximately $0.5 billion are
retained on our balance sheet.
|
We expect that our net income for the quarter ended
March 31, 2012 will be between $10.0 million and
$13.0 million, compared with net income of
$9.4 million for the quarter ended March 31, 2011.
This increase is expected to be primarily due to (1) an increase
in net interest income as a result of an increase in interest
earning assets driven by organic production and strategic
portfolio acquisitions, (2) a decrease in the provision for loan
and lease loss due to continued stabilization of our residential
and commercial legacy portfolios, and (3) an increase in
noninterest income as a result of strong production for the
quarter offset by additional impairment related to our MSR as a
result of increased prepayment assumptions. The increases are
expected to be offset by an increase in noninterest expense
related to an increase in transaction and regulatory expenses.
We expect that our net loans held for investment as of
March 31, 2012 will be approximately $7.2 billion, an
increase of 12% from net loans held for investment of
$6.4 billion as of December 31, 2011. The increase is
expected to be driven primarily by organic loan production and a
strategic loan
8
acquisition during the first quarter. Asset growth is expected
to be offset by principal paydowns in our loan portfolio.
We expect that our deposits as of March 31, 2012 will be
approximately $10.6 billion, an increase of 3% from
deposits of $10.3 billion as of December 31, 2011.
Deposit growth is expected to be driven by increases in
noninterest-bearing, time and savings and money market deposits.
The increases are expected to be driven by increased efforts to
expand our deposit base as a result of continued asset growth
over the past two quarters.
During the first quarter of 2012, our board of directors
approved and paid a special cash dividend of $4.5 million
to the holders of the Series A 6% Cumulative Convertible
Preferred Stock of EverBank Florida, or Series A Preferred
Stock. As a result of the special cash dividend, all shares of
Series A Preferred Stock were converted into shares of common
stock.
Acquisition of
MetLife Banks Warehouse Finance Business
In April 2012, we acquired MetLife Banks warehouse finance
business, including approximately $350 million in assets
for a price of approximately $350 million. In connection
with the acquisition, we hired 16 sales and operational staff
from MetLife who were a part of the existing warehouse business.
The warehouse business will continue to be operated out of
locations in New York, New York, Boston, Massachusetts and
Plano, Texas. We intend to grow this line of business, which
will provide residential loan financing to mid-sized,
high-quality mortgage banking companies across the country.
Regulatory
Developments
A horizontal review of the residential mortgage
foreclosure operations of fourteen mortgage servicers, including
EverBank, by the federal banking agencies resulted in formal
enforcement actions against all of the banks subject to the
horizontal review. On April 13, 2011, we and EverBank each
entered into a consent order with the Office of Thrift
Supervision, or OTS, with respect to EverBanks mortgage
foreclosure practices and our oversight of those practices. The
consent orders require, among other things, that we establish a
new compliance program for our mortgage servicing and
foreclosure operations and that we ensure that we have dedicated
resources for communicating with borrowers, policies and
procedures for outsourcing foreclosure or related functions and
management information systems that ensure timely delivery of
complete and accurate information. We are also required to
retain an independent firm to conduct a review of residential
foreclosure actions that were pending from January 1, 2009
through December 31, 2010 in order to determine whether any
borrowers sustained financial injury as a result of any errors,
misrepresentations or deficiencies and to provide remediation as
appropriate. We are working to fulfill the requirements of the
consent orders. In response to the consent orders, we have
established an oversight committee to monitor the implementation
of the actions required by the consent orders. Furthermore, we
have enhanced and updated several policies, procedures,
processes and controls to help ensure the mitigation of the
findings of the consent orders, and submitted them to the Board
of Governors of the Federal Reserve System, or FRB, and the
Office of the Comptroller of the Currency, or OCC (the
applicable successors to the OTS), for review. In addition, we
have enhanced our third-party vendor management system and our
compliance program, hired additional personnel and retained an
independent firm to conduct foreclosure reviews.
In addition to the horizontal review, other government agencies,
including state attorneys general and the U.S. Department
of Justice, investigated various mortgage related practices of
certain servicers, some of which practices were also the subject
of the horizontal review. We understand certain other
institutions subject to the consent decrees with the banking
regulators announced in April 2011 recently have been contacted
by the U.S. Department of Justice and state attorneys general
regarding a settlement. In addition, the federal banking
agencies may impose civil monetary penalties on the remaining
banks that were subject to the horizontal review as part of such
an investigation or independently but have not indicated what
the amount of any such penalties would be.
9
At this time, we do not know whether any other requirements or
remedies or penalties may be imposed on us as a result of the
horizontal review.
Emerging
Growth Company Status
We are an emerging growth company, as defined in
Section 2(a) of the Securities Act of 1933, or the
Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012, or the JOBS Act. As such, we are eligible
to take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that
are not emerging growth companies including, but not
limited to, not being required to comply with the auditor
attestation requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our
periodic reports and proxy statements, and exemptions from the
requirements of holding a non-binding advisory vote on executive
compensation and shareholder approval of any golden parachute
payments not previously approved. We have not made a decision
whether to take advantage of any or all of these exemptions. If
we do take advantage of any of these exemptions, we do not know
if some investors will find our common stock less attractive as
a result. The result may be a less active trading market for our
common stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that
an emerging growth company can take advantage of the
extended transition period provided in Section 7(a)(2)(B)
of the Securities Act for complying with new or revised
accounting standards. In other words, an emerging growth
company can delay the adoption of certain accounting
standards until those standards would otherwise apply to private
companies. We intend to take advantage of the benefits of this
extended transition period.
We could remain an emerging growth company for up to
five years, or until the earliest of (a) the last day of
the first fiscal year in which our annual gross revenues exceed
$1 billion, (b) the date that we become a large
accelerated filer as defined in
Rule 12b-2
under the Exchange Act, which would occur if the market value of
our common stock that is held by non-affiliates exceeds
$700 million as of the last business day of our most
recently completed second fiscal quarter, or (c) the date
on which we have issued more than $1 billion in
non-convertible debt during the preceding three-year period.
10
The
Offering
|
|
|
|
|
|
Common stock offered by us
|
|
19,220,001 shares
|
|
|
|
Common stock offered by the selling stockholders
|
|
5,929,999 shares
|
|
|
|
Option to purchase additional shares from us
|
|
3,772,500 shares
|
|
|
|
Total shares of common stock to be outstanding immediately after
this offering
|
|
113,179,344 shares (or 116,951,844 shares if the
underwriters exercise their option to purchase additional shares
from us in full)
|
|
|
|
Use of proceeds
|
|
We estimate that the net proceeds to us from the sale of our
common stock in this offering will be $225.1 million, at an
assumed initial public offering price of $13.00 per share,
the midpoint of the price range set forth on the cover of this
prospectus, and after deducting estimated underwriting discounts
and commissions and estimated offering expenses. We intend to
use the net proceeds of this offering for general corporate
purposes, which may include organic growth or the acquisition of
businesses or assets that we believe are complementary to our
present business and provide attractive risk-adjusted returns.
We will not receive any proceeds from the sale of shares of
common stock by the selling stockholders. See Use of
Proceeds.
|
|
|
|
Dividend policy
|
|
Commencing in the third quarter of 2012, we intend to pay a
quarterly cash dividend of $0.02 per share, subject to the
discretion of our Board of Directors. Our ability to pay
dividends is limited by various regulatory requirements and
policies of bank regulatory agencies having jurisdiction over us
and our banking subsidiary, our earnings, cash resources and
capital needs, general business conditions and other factors
deemed relevant by our Board of Directors. See Dividend
Policy, Managements Discussion and Analysis of
Financial Condition and Results of Operations
Restrictions on Paying Dividends and Regulation and
Supervision Regulation of Federal Savings
Banks Limitation on Capital Distributions.
|
|
|
|
New York Stock Exchange
symbol
|
|
EVER
|
|
|
|
Risk factors
|
|
Please read the section entitled Risk Factors
beginning on page 17 for a discussion of some of the factors you
should carefully consider before deciding to invest in our
common stock.
|
References to the number of shares of our capital stock to be
outstanding after this offering are based on
77,994,699 shares of our common stock outstanding on April
15, 2012 and include an additional 15,964,644 shares of
common stock issuable upon conversion of all outstanding shares
of Series B Preferred Stock upon the consummation of the
Reorganization and 5,950,046 shares of our common stock
held in escrow as a result of our acquisition of Tygris.
Pursuant to the terms of the Tygris acquisition agreement and
related escrow agreement, we are required to review the average
carrying value of the remaining Tygris portfolio annually and
upon certain events, including this offering, and release a
number of escrowed shares to the former Tygris shareholders to
the extent
11
that the aggregate value of the remaining escrowed shares (on a
determined per share value) equals 17.5% of the average carrying
value of the remaining Tygris portfolio on the date of each
release (see Business Recent
Acquisitions Acquisition of Tygris Commercial
Finance Group, Inc.). Based on our first annual review of
the average carrying value of the remaining Tygris portfolio, we
released 2,808,175 escrowed shares of our common stock to the
former Tygris shareholders on April 25, 2011. As of April
15, 2012, 5,950,046 shares of our common stock remain in
escrow. Following the offering, based on our second annual
review of the carrying value of the remaining Tygris portfolio,
we will release 2,915,043 escrowed shares of our common stock to
the former Tygris shareholders. We expect that another partial
release of the escrowed shares to the former Tygris shareholders
will occur in connection with the consummation of this offering.
As the necessary valuation of the remaining Tygris portfolio for
the partial release of escrowed shares triggered by this
offering must be made after the consummation of this offering,
the number of shares to be released from escrow cannot be
determined at present.
References to the number of shares of our capital stock to be
outstanding after this offering exclude:
|
|
|
|
|
12,222,787 shares of our common stock issuable upon
exercise of outstanding stock options at a weighted average
exercise price of $11.21 per share;
|
|
|
|
406,999 shares of common stock issuable upon the vesting of
outstanding restricted stock units with a remaining weighted
average vesting period, as of April 15, 2012, of
217 days; and
|
|
|
|
15,000,000 additional shares reserved for issuance under our
equity incentive plans.
|
Unless otherwise indicated, the information presented in this
prospectus:
|
|
|
|
|
gives effect to the Reorganization;
|
|
|
|
assumes an initial public offering price of $13.00 per share,
the midpoint of the estimated initial public offering price
range; and
|
|
|
|
assumes no exercise of the underwriters option to purchase
additional 3,772,500 shares from us.
|
12
SUMMARY
CONSOLIDATED FINANCIAL DATA
The summary historical consolidated financial information set
forth below for each of the years ended December 31, 2011,
2010 and 2009 has been derived from our audited consolidated
financial statements included elsewhere in this prospectus.
We have consummated several significant transactions in previous
fiscal periods, including the acquisition of Tygris in February
2010 and the acquisition of the banking operations of Bank of
Florida in an FDIC-assisted transaction in May 2010.
Accordingly, our operating results for the historical periods
presented below are not comparable and may not be predictive of
future results.
The information below is only a summary and should be read in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations and the
consolidated historical and pro forma financial statements and
the related notes thereto included in this prospectus.
As indicated in the notes to the tables below, certain items
included in the tables are non-GAAP financial measures. For a
more detailed discussion of these items, including a discussion
of why we believe these items are meaningful and a
reconciliation of each of these items to the most directly
comparable generally accepted accounting principles, or GAAP,
financial measure, see Managements Discussion and
Analysis of Financial Condition and Results of
Operations Primary Factors Used to Evaluate Our
Business.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions, except share and per share data)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
588.2
|
|
|
$
|
612.5
|
|
|
$
|
440.6
|
|
Interest expense
|
|
|
135.9
|
|
|
|
147.2
|
|
|
|
163.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
452.3
|
|
|
|
465.3
|
|
|
|
277.4
|
|
Provision for loan and lease
losses(1)
|
|
|
49.7
|
|
|
|
79.3
|
|
|
|
121.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan and lease losses
|
|
|
402.6
|
|
|
|
386.0
|
|
|
|
155.5
|
|
Noninterest
income(2)
|
|
|
233.1
|
|
|
|
357.8
|
|
|
|
232.1
|
|
Noninterest
expense(3)
|
|
|
554.2
|
|
|
|
493.9
|
|
|
|
299.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
81.5
|
|
|
|
249.9
|
|
|
|
88.4
|
|
Provision for income taxes
|
|
|
28.8
|
|
|
|
61.0
|
|
|
|
34.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
52.7
|
|
|
|
188.9
|
|
|
|
53.5
|
|
Discontinued operations, net of income taxes
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
52.7
|
|
|
$
|
188.9
|
|
|
$
|
53.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated to common shareholders
|
|
$
|
41.5
|
|
|
$
|
144.8
|
|
|
$
|
33.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
(units in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
74,892
|
|
|
|
72,479
|
|
|
|
42,126
|
|
Diluted
|
|
|
77,506
|
|
|
|
74,589
|
|
|
|
43,299
|
|
Earnings from continuing operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.55
|
|
|
$
|
2.00
|
|
|
$
|
0.80
|
|
Diluted
|
|
|
0.54
|
|
|
|
1.94
|
|
|
|
0.78
|
|
Net tangible book value per as converted common share at period
end(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
10.12
|
|
|
$
|
10.65
|
|
|
$
|
8.54
|
|
Diluted
|
|
|
9.93
|
|
|
|
10.40
|
|
|
|
8.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
295.0
|
|
|
$
|
1,169.2
|
|
|
$
|
23.3
|
|
Investment securities
|
|
|
2,191.8
|
|
|
|
2,203.6
|
|
|
|
1,678.9
|
|
Loans held for sale
|
|
|
2,725.3
|
|
|
|
1,237.7
|
|
|
|
1,283.0
|
|
Loans and leases held for investment, net
|
|
|
6,441.5
|
|
|
|
6,005.6
|
|
|
|
4,072.7
|
|
Total assets
|
|
|
13,041.7
|
|
|
|
12,007.9
|
|
|
|
8,060.2
|
|
Deposits
|
|
|
10,265.8
|
|
|
|
9,683.1
|
|
|
|
6,315.3
|
|
Total liabilities
|
|
|
12,074.0
|
|
|
|
10,994.7
|
|
|
|
7,506.3
|
|
Total shareholders equity
|
|
|
967.7
|
|
|
|
1,013.2
|
|
|
|
553.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Capital Ratios (period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible equity to tangible
assets(5)
|
|
|
7.3%
|
|
|
|
8.3%
|
|
|
|
6.9%
|
|
Tier 1 (core) capital ratio (bank
level)(6)
|
|
|
8.0%
|
|
|
|
8.7%
|
|
|
|
8.0%
|
|
Total risk-based capital ratio (bank
level)(7)
|
|
|
15.7%
|
|
|
|
17.0%
|
|
|
|
15.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to the Company from continuing
operations (in
millions)(8)
|
|
$
|
107.6
|
|
|
$
|
127.0
|
|
|
$
|
53.5
|
|
Return on average assets
|
|
|
0.4
|
%
|
|
|
1.8
|
%
|
|
|
0.7
|
%
|
Return on average equity
|
|
|
5.2
|
%
|
|
|
20.9
|
%
|
|
|
11.5
|
%
|
Adjusted return on average
assets(9)
|
|
|
0.9
|
%
|
|
|
1.2
|
%
|
|
|
0.7
|
%
|
Adjusted return on average
equity(9)
|
|
|
10.7
|
%
|
|
|
14.0
|
%
|
|
|
11.5
|
%
|
|
|
|
(1) |
|
For the year ended December 31, 2011, provision for loan
and lease losses includes a $4.9 million increase in
non-accretable discount related to Bank of Florida acquired
credit-impaired loans, a $1.9 million impact of change in
ALLL methodology and a $10.0 million impact of early
adoption of troubled debt restructuring, or TDR, guidance and
policy change. For the year ended December 31, 2010,
provision for loan and lease losses includes a $6.2 million
increase in non-accretable discount related to Bank of Florida
acquired credit-impaired loans. |
|
(2) |
|
For the year ended December 31, 2011, noninterest income
includes a $4.7 million gain on repurchase of trust
preferred securities including $0.3 million resulting from
the unwind of the associated cash flow hedge and a
$39.5 million impairment charge related to mortgage
servicing rights, or MSR. For the year ended December 31,
2010, noninterest income includes a $68.1 million
non-recurring bargain purchase gain associated with the Tygris
acquisition, a $19.9 million gain on sale of investment
securities due to portfolio concentration repositioning and a
$5.7 million gain on repurchase of trust preferred
securities. |
|
(3) |
|
For the year ended December 31, 2011, noninterest expense
includes $27.1 million in transaction and non-recurring
regulatory related expense and an $8.7 million decrease in
fair value of the Tygris indemnification asset resulting from a
decrease in estimated future credit losses. The carrying value
of the indemnification asset was $0 as of December 31,
2011. For the year ended December 31, 2010, noninterest
expense includes $9.7 million in transaction related
expense, a $10.3 million loss on early extinguishment of
acquired debt and a $22.0 million decrease in fair value of
the Tygris indemnification asset. |
|
(4) |
|
Calculated as tangible shareholders equity divided by
shares of common stock. For purposes of computing net tangible
book value per as converted common share, tangible book value
equals shareholders equity less goodwill and intangible
assets. See Note 13 to the consolidated financial statements of
EverBank Financial Corp and subsidiaries as of December 31,
2011, and 2010 and |
14
|
|
|
|
|
for the years ended December 31, 2011, 2010 and 2009 for
additional information regarding our goodwill and intangible
assets. |
|
|
|
Basic and diluted net tangible book value per as converted
common share are calculated using a denominator that includes
actual period end common shares outstanding and additional
common shares assuming conversion of all outstanding preferred
stock to common stock. Diluted net tangible book value per as
converted common share also includes in the denominator common
stock equivalent shares related to stock options and common
stock equivalent shares related to nonvested restricted stock
units. |
|
|
|
Net tangible book value per as converted common share is a
non-GAAP financial measure, and its most directly comparable
GAAP financial measure is book value per common share. |
|
(5) |
|
Calculated as tangible shareholders equity divided by
tangible assets, after deducting goodwill and intangible assets
from the numerator and the denominator. Tangible equity to
tangible assets is a non-GAAP financial measure, and the most
directly comparable GAAP financial measure for tangible equity
is shareholders equity and the most directly comparable
GAAP financial measure for tangible assets is total assets. |
|
(6) |
|
Calculated as Tier 1 (core) capital divided by adjusted
total assets. Total assets are adjusted for goodwill, deferred
tax assets disallowed from Tier 1 (core) capital and other
regulatory adjustments. |
|
(7) |
|
Calculated as total risk-based capital divided by total
risk-weighted assets. Risk-based capital includes Tier 1
(core) capital, allowance for loan and lease losses, subject to
limitations, and other regulatory adjustments. |
|
(8) |
|
Adjusted net income attributable to the Company from continuing
operations includes adjustments to our net income attributable
to the Company from continuing operations for certain material
items that we believe are not reflective of our ongoing business
or operating performance, including the Tygris and Bank of
Florida acquisitions. There were no material items that gave
rise to adjustments prior to the year ended December 31,
2010. Accordingly, for periods presented before the year ended
December 31, 2010, we have not reflected adjustments to net
income attributable to the Company from continuing operations
calculated in accordance with GAAP. A reconciliation of adjusted
net income attributable to the Company from continuing
operations to net income attributable to the Company from
continuing operations, which is the most directly comparable
GAAP measure, is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
Net income attributable to the Company from continuing operations
|
|
|
|
|
|
$
|
52,729
|
|
|
$
|
188,900
|
|
|
$
|
53,537
|
|
Bargain purchase gain on Tygris transaction, net of tax
|
|
|
|
|
|
|
|
|
|
|
(68,056
|
)
|
|
|
|
|
Gain on sale of investment securities due to portfolio
concentration repositioning, net of tax
|
|
|
|
|
|
|
|
|
|
|
(12,337
|
)
|
|
|
|
|
Gain on repurchase of trust preferred securities, net of tax
|
|
|
|
|
|
|
(2,910
|
)
|
|
|
(3,556
|
)
|
|
|
|
|
Transaction and non-recurring regulatory related expense, net of
tax
|
|
|
|
|
|
|
16,831
|
|
|
|
5,984
|
|
|
|
|
|
Loss on early extinguishment of acquired debt, net of tax
|
|
|
|
|
|
|
|
|
|
|
6,411
|
|
|
|
|
|
Decrease in fair value of Tygris indemnification asset resulting
from a decrease in estimated future credit losses, net of tax
|
|
|
|
|
|
|
5,382
|
|
|
|
13,654
|
|
|
|
|
|
Increase in Bank of Florida non-accretable discount, net of tax
|
|
|
|
|
|
|
3,007
|
|
|
|
3,837
|
|
|
|
|
|
Impact of change in ALLL methodology, net of tax
|
|
|
|
|
|
|
1,178
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
Early adoption of TDR guidance and policy change, net of tax
|
|
|
|
|
|
|
6,225
|
|
|
|
|
|
|
|
|
|
MSR impairment, net of tax
|
|
|
|
|
|
|
24,462
|
|
|
|
|
|
|
|
|
|
Tax benefit (expense) related to revaluation of Tygris net
unrealized built-in losses, net of tax
|
|
|
|
|
|
|
691
|
|
|
|
(7,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to the Company from continuing
operations
|
|
|
|
|
|
$
|
107,595
|
|
|
$
|
126,997
|
|
|
$
|
53,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
|
Adjusted return on average assets equals adjusted net income
attributable to the Company from continuing operations divided
by average total assets and adjusted return on average equity
equals adjusted net income attributable to the Company from
continuing operations divided by average shareholders
equity. Adjusted net income attributable to the Company from
continuing operations is a non-GAAP measure of our financial
performance and its most directly comparable GAAP measure is net
income attributable to the Company from continuing operations.
For a reconciliation of net income attributable to the Company
from continuing operations to adjusted net income attributable
to the Company from continuing operations, see Note 8 above. |
16
RISK
FACTORS
Investing in our common stock involves a high degree of risk.
You should carefully consider the following risk factors, as
well as all of the other information contained in this
prospectus, before deciding to invest in our common stock.
Risks Related to
Our Business
General
business and economic conditions could have a material adverse
effect on our business, financial position, results of
operations and cash flows.
Our businesses and operations are sensitive to general business
and economic conditions in the United States. If the
U.S. economy is unable to steadily emerge from the
recession that began in 2007 or we experience worsening economic
conditions, such as a so-called double-dip
recession, our growth and profitability could be constrained. In
addition, economic conditions in foreign countries can affect
the stability of global financial markets, which could hinder
the U.S. economic recovery. Financial markets remain
concerned about the ability of certain European countries,
particularly Greece, Ireland, Portugal, Spain and Italy, to
finance and service their debt. The default by any one of these
countries on their debt payments could lead to weaker economic
conditions in the United States. Weak economic conditions are
characterized by deflation, fluctuations in debt and equity
capital markets, including a lack of liquidity
and/or
depressed prices in the secondary market for mortgage loans,
increased delinquencies on mortgage, consumer and commercial
loans, residential and commercial real estate price declines and
lower home sales and commercial activity. All of these factors
are detrimental to our business. Our business is significantly
affected by monetary and related policies of the
U.S. federal government, its agencies and
government-sponsored entities, or GSEs. Changes in any of these
policies are influenced by macroeconomic conditions and other
factors that are beyond our control, are difficult to predict
and could have a material adverse effect on our business,
financial position, results of operations and cash flows.
Liquidity risk
could impair our ability to fund operations and jeopardize our
financial condition.
Liquidity is essential to our business. Actions by the Federal
Home Loan Bank of Atlanta, or FHLB, or the FRB may reduce our
borrowing capacity. Additionally, we may not be able to attract
deposits at competitive rates. An inability to raise funds
through traditional deposits, brokered deposits, borrowings, the
sale of securities or loans and other sources could have a
substantial negative effect on our liquidity or result in
increased funding costs. Furthermore, we invest in several asset
classes, including significant investments in mortgage servicing
rights, or MSR, which may be less liquid in certain markets.
Liquidity may also be adversely impacted by bank supervisory and
regulatory authorities mandating changes in the composition of
our balance sheet to asset classes that are less liquid.
Our access to funding sources in amounts adequate to finance our
activities or on terms that are acceptable to us could be
impaired by factors that affect us specifically or the financial
services industry or economy in general. Factors that could
detrimentally impact our access to liquidity sources include a
downturn in the markets in which our loans are concentrated or
adverse regulatory action against us. In addition, our access to
deposits may be affected by the liquidity
and/or cash
flow needs of depositors. Although we have historically been
able to replace maturing deposits and FHLB advances as
necessary, we might not be able to replace such funds in the
future and can lose a relatively inexpensive source of funds and
increase our funding costs if, among other things, customers
move funds out of bank deposits and into alternative
investments, such as the stock market, that are perceived as
providing superior expected returns. Furthermore, an inability
to increase our deposit base at all or at attractive rates would
impede our ability to fund our continued growth, which could
have an adverse effect on our business, results of operations
and financial condition.
17
Our ability to raise funds through deposits or borrowings could
also be impaired by factors that are not specific to us, such as
a disruption in the financial markets or negative views and
expectations about the prospects for the financial services
industry in light of the recent turmoil faced by banking
organizations and the continued deterioration in credit markets.
Although we consider our sources of funds adequate for our
liquidity needs, we may be compelled to seek additional sources
of financing in the future. We may be required to seek
additional regulatory capital through capital raising at terms
that may be very dilutive to existing stockholders. Likewise, we
may need to incur additional debt in the future to achieve our
business objectives, in connection with future acquisitions or
for other reasons. Any borrowings, if sought, may not be
available to us or, if available, may not be on favorable terms.
Our financial
results are significantly affected in a number of ways by
changes in interest rates, which may make our results volatile
and difficult to predict from quarter to quarter.
Most of our assets and liabilities are monetary in nature, which
subjects us to significant risks from changes in interest rates
and can impact our net income and the valuation of our assets
and liabilities. Our operating results depend to a great extent
on our net interest margin, which is the difference between the
amount of interest income we earn and the amount of interest
expense we incur. If the rate of interest we pay on our
interest-bearing deposits, borrowings and other liabilities
increases more than the rate of interest we receive on loans,
securities and other interest-earning assets, our net interest
income, and therefore our earnings, would be adversely affected.
Our earnings also could be adversely affected if the rates on
our loans and other investments fall more quickly than those on
our deposits and other liabilities. Interest rates are highly
sensitive to many factors beyond our control, including
competition, general economic conditions and monetary and fiscal
policies of various governmental and regulatory authorities,
including the FRB. A strengthening U.S. economy would be
expected to cause the FRB to increase short-term interest rates,
which would increase our borrowing costs and may reduce our
profit margins. A sustained low interest rate environment could
cause many of our loans subject to adjustable rates to reprice
downward to lower interest rates, which would decrease our loan
yields and reduce our profit margins.
Changes in interest rates also have a significant impact on our
mortgage loan origination revenues. Historically, there has been
an inverse correlation between the demand for mortgage loans and
interest rates. Mortgage origination volume and revenues usually
decline during periods of rising or high interest rates and
increase during periods of declining or low interest rates.
Changes in interest rates also have a significant impact on the
carrying value of a significant percentage of the assets on our
balance sheet. Furthermore, our MSR are valued based on a number
of factors, including assumptions about borrower repayment
rates, which are heavily influenced by prevailing interest
rates. When interest rates fall, borrowers are usually more
likely to prepay their mortgage loans by refinancing them at a
lower rate. As the likelihood of prepayment increases, the fair
value of our MSR can decrease, which, in turn, may reduce
earnings in the period in which the decrease occurs.
We recorded a $39.5 million impairment charge related to
MSR for the year ended December 31, 2011. In addition,
mortgage loans held for sale for which an active secondary
market and readily available market prices exist and other
interests we hold related to residential loan sales and
securitizations are carried at fair value. The value of these
assets may be negatively affected by changes in interest rates.
We may not correctly or adequately hedge this risk, and even if
we do hedge the risk with derivatives and other instruments, we
may still incur significant losses from changes in the value of
these assets or from changes in the value of the hedging
instruments.
Even though originating mortgage loans, which benefit from
declining rates, and servicing mortgage loans, which benefit
from rising rates, can act as a natural hedge to
soften the overall impact of changes in rates on our
consolidated financial results, the hedge is not perfect, either
in amount or timing. For example, the negative effect on revenue
from a decrease in the fair value of
18
residential MSR is generally immediate, but any offsetting
revenue benefit from more originations and the MSR relating to
the new loans would generally accrue over time. In addition, in
recent quarters it has become apparent that even a low interest
rate environment may not result in a significant increase in
mortgage originations in light of other macroeconomic variable
factors, declining real estate values and changes in
underwriting standards resulting from the recent recession.
We enter into forward starting swaps as a hedging strategy
related to our expected future issuances of debt. This hedging
strategy allows us to fix the interest rate margin between our
interest earning assets and our interest bearing liabilities. A
continued prolonged period of lower interest rates could affect
the duration of our interest earning assets and adversely impact
our operations in future periods.
We may be
required to make further increases in our provisions for loan
and lease losses and to charge-off additional loans and leases
in the future, which could adversely affect our results of
operations.
The real estate market in the United States since late 2007 has
been characterized by high delinquency rates and price
deterioration. Despite historically low interest rates beginning
in 2008, higher credit standards, weak employment, slow economic
growth and an overall de-leveraging in the residential and
commercial sectors have perpetuated these trends. We maintain an
allowance for loan and lease losses, which is a reserve
established through a provision for loan and lease loss expense
that represents managements best estimate of probable
losses inherent in our loan portfolio. The level of the
allowance reflects managements judgment with respect to:
|
|
|
|
|
continuing evaluation of specific credit risks;
|
|
|
|
loan loss experience;
|
|
|
|
current loan and lease portfolio quality;
|
|
|
|
present economic, political and regulatory conditions;
|
|
|
|
industry concentrations; and
|
|
|
|
other unidentified losses inherent in the current loan portfolio.
|
The determination of the appropriate level of the allowance for
loan and lease losses involves a high degree of subjectivity and
judgment and requires us to make significant estimates of
current credit risks and future trends, all of which may undergo
material changes. Changes in economic conditions affecting
borrowers, new information regarding existing loans,
identification of additional problem loans and other factors
both within and outside of our control, may require an increase
in the allowance for loan and lease losses. If current trends in
the real estate markets continue, we expect that we will
continue to experience increased delinquencies and credit
losses, particularly with respect to construction, land
development and land loans.
In addition, bank regulatory agencies periodically review our
allowance for loan and lease losses and may require an increase
in the provision for loan losses or the recognition of further
loan charge-offs, based on judgments different than those of
management. If charge-offs in future periods exceed the
allowance for loan and lease losses, we will need additional
provisions to increase the allowance for loan and lease losses,
which would result in a decrease in net income and capital, and
could have a material adverse effect on our financial condition
and results of operations.
Mortgage loan
modification and refinancing programs and future legislative
action may adversely affect the value of, and our returns on,
residential mortgage-backed securities and on MSR.
The U.S. Government, through the FRB, the FHA and the FDIC,
has initiated a number of loss mitigation programs designed to
afford relief to homeowners facing foreclosure and to assist
borrowers whose home value is less than the principal on their
mortgage, including the Home
19
Affordable Modification Program, or HAMP, which provides
homeowners with assistance in avoiding residential mortgage loan
foreclosures, the Hope for Homeowners Program, or H4H Program,
which allows certain distressed borrowers to refinance their
mortgages into Federal Housing Administration, or FHA, insured
loans in order to avoid residential mortgage loan foreclosures,
and the Home Affordable Refinancing Program, or HARP, which make
it easier for borrowers to refinance at lower interest rates.
These loan modification programs, future legislative or
regulatory actions, including possible amendments to the
bankruptcy laws, which result in the modification of outstanding
residential mortgage loans, as well as changes in the
requirements necessary to qualify for refinancing mortgage loans
with Fannie Mae, Freddie Mac or Ginnie Mae, may adversely affect
the value of, and the returns on, our portfolio of
mortgage-backed securities, or MBS, and on the value of our MSR.
Our MSR is valued based on a number of factors, including
assumptions about borrower repayment rates and costs of
servicing. If the interest rate on a mortgage is adjusted, or if
a borrower is permitted to refinance at a lower rate, or the
costs of servicing or costs of foreclosures increase, the value
of our MSR with respect to that mortgage can decrease, which, in
turn, may reduce earnings in the period in which the decrease
occurs. In addition, increases in our servicing costs from
changes to our foreclosure and other servicing practices,
including resulting from the consent orders, adversely affects
the fair value of our MSR.
Our commercial
real estate loan portfolio exposes us to risks that may be
greater than the risks related to our other mortgage loans and a
high percentage of these loans are secured by properties located
in Florida.
Many analysts and economists are predicting that commercial
mortgage loans could continue to see further deterioration. At
December 31, 2011, our commercial real estate loans, net of
discounts, were $1.0 billion, or approximately 11% of our
total loan portfolio, net of allowances. Commercial real estate
loans generally carry larger loan balances and involve a greater
degree of financial and credit risk than residential mortgage
loans or home equity loans. The repayment of these loans is
typically dependent upon the successful operation of the related
real estate or commercial projects. If the cash flow from the
project is reduced, a borrowers ability to repay the loan
may be impaired. Furthermore, the repayment of commercial
mortgage loans is generally less predictable and more difficult
to evaluate and monitor and collateral may be more difficult to
dispose of in a market decline. In such cases, we may be
compelled to modify the terms of the loan or engage in other
potentially expensive work-out techniques. Any significant
failure to pay on time by our customers would adversely affect
our results of operations and cash flows.
As a result of our 2010 acquisition of the banking operations of
Bank of Florida in an FDIC-assisted transaction, we have
increased our exposure to risks related to economic conditions
in Florida. Unlike our residential mortgage loan portfolio,
which is more geographically diverse, approximately 81% of our
commercial loans as of December 31, 2011, are secured by
properties located in Florida. Florida has experienced a deeper
recession and more dramatic slowdown in economic activity than
other states and the decline in real estate values in Florida
has been significantly higher than the national average. Our
concentration of commercial loans in this region subjects us to
risk that a further downturn in the local economy could result
in increases in delinquencies and foreclosures or losses on
these loans. In addition, the occurrence of natural disasters in
Florida, such as hurricanes, or man-made disasters, such as the
BP oil spill in the Gulf of Mexico, could result in a decline in
the value or destruction of our mortgaged properties and an
increase in the risk of delinquencies or foreclosures. Losses we
may experience on loans acquired from Bank of Florida may be
covered by loss sharing agreements we entered into with the FDIC
in connection with the acquisition. See
Business Recent Acquisitions
Acquisition of Bank of Florida. Nevertheless,
these factors could have a material adverse effect on our
business, financial position, results of operations and cash
flows.
20
Conditions in
the real estate market and higher than normal delinquency and
default rates could adversely affect our business.
The origination and servicing of residential mortgages is a
significant component of our business and our earnings have been
and may continue to be adversely affected by weak real estate
markets and historically high delinquency and default rates.
Mortgage origination volume has been low in recent fiscal
periods compared to historical levels (and refinancing activity
in particular) and may remain low for the foreseeable future
even if economic trends improve, particularly if interest rates
significantly rise and more restrictive underwriting standards
persist. At December 31, 2011, our MSR assets decreased by
approximately 15%, from December 31, 2010 with MSR at the
end of such period representing 4% of total assets and 43% of
our Tier 1 capital plus the general allowance for loan and
lease losses.
If the frequency and severity of our loan delinquencies and
default rates increase, we could experience losses on loans held
for investment and on newly originated or purchased loans that
we hold for sale. During 2009, we experienced an increase in
foreclosures and reserves due to an increase in loss severity
and foreclosure frequency resulting primarily from a decline in
housing prices during 2008 and 2009. We may need to further
increase our reserves for foreclosures if foreclosure rates
return to the levels experienced in these recent periods.
Continued or worsening conditions in the real estate market and
higher than normal delinquency and default rates on loans have
other adverse consequences for our mortgage banking business,
including:
|
|
|
|
|
cash flows and capital resources are reduced, as we are required
to make cash advances to meet contractual obligations to
investors, process foreclosures, maintain, repair and market
foreclosed properties;
|
|
|
|
mortgage service fee revenues decline because we recognize these
revenues only upon collection;
|
|
|
|
net interest income may decline and interest expense may
increase due to lower average cash and capital balances and
higher capital funding requirements;
|
|
|
|
mortgage and loan servicing costs rise;
|
|
|
|
an inability to sell our MSR in the capital markets due to
reduced liquidity;
|
|
|
|
amortization and impairment charges on our MSR increase; and
|
|
|
|
realized and unrealized losses on and declines in the liquidity
of securities held in our investment portfolio that are
collateralized by mortgage obligations.
|
We may be
required to repurchase mortgage loans with identified defects,
indemnify the investor or guarantor, or reimburse the investor
for credit loss incurred on the loan in the event of a material
breach of representations or warranties.
We may be required to repurchase mortgage loans or reimburse
investors as a result of breaches in contractual representations
and warranties, from our sales of loans we originate and
servicing of loans originated by other parties. We conduct these
activities under contractual provisions that include various
representations and warranties which typically cover ownership
of the loan, compliance with loan criteria set forth in the
applicable agreement, validity of the lien securing the loan and
similar matters. We may be required to repurchase mortgage loans
with identified defects, indemnify the investor or guarantor, or
reimburse the investor for credit loss incurred on the loan in
the event of a material breach of such contractual
representations or warranties.
We experienced increased levels of repurchase demands in 2010
and further increased levels in 2011 as compared to prior
periods, which has led to material increases in our loan
repurchase reserves and we may need to increase such reserves in
the future, which would adversely affect net
21
income. As of December 31, 2009, 2010 and 2011 our loan
repurchase reserve for loans that we sold or securitized was
$3.6 million, $26.8 million and $32.0 million, respectively.
In addition, we also service residential mortgage loans where a
GSE is the owner of the underlying mortgage loan asset. Prior to
late 2009, we had not historically experienced a significant
amount of repurchases related to the servicing of mortgage loans
as we were indemnified by the seller of the servicing rights but
due to the failures of several of our counterparties, in 2010
and 2011 we have experienced losses related to the repurchase of
loans from GSEs and subsequent disposal or payment demands from
the GSEs. As of December 31, 2009, 2010 and 2011 our reserve for
servicing repurchase losses was $6.3 million, $30.0 million and
$30.4 million, respectively.
If future repurchase demands remain at these heightened levels
or increase further or the severity of the repurchase requests
increases, or our success at appealing repurchase or other
requests differs from past experience, we may need to further
increase our loan repurchase reserves, and increased repurchase
obligations could adversely affect our financial position and
results of operations. For additional information, see
Managements Discussion and Analysis of Financial
Condition and Results of Operations Loans Subject to
Representations and Warranties.
Our
concentration of mass-affluent customers and so-called
jumbo mortgages in our residential mortgage
portfolio makes us particularly vulnerable to a downturn in
high-end real estate values and economic factors
disproportionately affecting affluent consumers of financial
services.
The Federal Housing Administration, Fannie Mae and Freddie Mac
will only purchase or guarantee so-called conforming
loans, which may not exceed certain principal amount thresholds.
As of December 31, 2011, approximately 61% of our
residential mortgage loans held for investment was comprised of
so-called jumbo loans based on the current threshold
of $417,000 in most states, and 91% of the carrying value of our
securities portfolio was comprised of residential nonagency
investment securities, substantially all of which are backed by
jumbo loans. Jumbo loans have principal balances exceeding the
thresholds of the agencies described above, and tend to be less
liquid than conforming loans, which may make it more difficult
for us to rapidly rebalance our portfolio and risk profile than
is the case for financial institutions with higher
concentrations of conforming loan assets. Due to macroeconomic
conditions, jumbo mortgage loans have, in recent periods,
experienced increased rates of delinquency, foreclosure,
bankruptcy and loss, and they are likely to continue to
experience delinquency, foreclosure, bankruptcy and loss rates
that are higher, and that may be substantially higher, than
conforming mortgage loans. In such event, liquidity in the
capital markets for such assets could be diminished and we could
be faced with increased losses and an inability to dispose of
such assets.
Hedging
strategies that we use to manage our mortgage pipeline may be
ineffective to mitigate the risk of changes in interest
rates.
We typically use derivatives and other instruments to hedge a
portion of our mortgage banking interest rate risk. Hedging is a
complex process, requiring sophisticated models and constant
monitoring, and is not a perfect science. We may use hedging
instruments tied to U.S. Treasury rates, London Interbank
Offered Rate, or LIBOR, or Eurodollars that may not perfectly
correlate with the value or income being hedged. Our mortgage
pipeline consists of our commitments to purchase mortgage loans,
or interest rate locks, and funded mortgage loans that will be
sold in the secondary market. The risk associated with the
mortgage pipeline is that interest rates will fluctuate between
the time we commit to purchase a loan at a pre-determined price,
or the customer locks in the interest rate on a loan, and the
time we sell or commit to sell the mortgage loan. Generally
speaking, if interest rates increase, the value of an unhedged
mortgage pipeline decreases, and gain on sale margins are
adversely impacted. Typically, we hedge the risk of overall
changes in fair value of loans held for sale by either entering
into forward loan sale agreements, selling forward Fannie Mae or
Freddie Mac MBS or using other derivative instruments to hedge
loan commitments and to create fair
22
value hedges against the funded loan portfolios. We generally do
not hedge all of the interest rate risk on our mortgage
portfolio and have not historically hedged the risk of changes
in the fair value of our MSR resulting from changes in interest
rates. To the extent we fail to appropriately reduce our
exposure to interest rate changes, our financial results may be
adversely affected.
We could
recognize realized and unrealized losses on securities held in
our securities portfolio, particularly if economic and market
conditions deteriorate.
As of December 31, 2011, the fair value of our securities
portfolio was approximately $2.1 billion, of which
approximately 90% was comprised of residential nonagency
investment securities. Factors beyond our control can
significantly influence the fair value of securities in our
portfolio and can cause potential adverse changes to the fair
value of these securities. These factors include, but are not
limited to, rating agency downgrades of the securities, defaults
by the issuer or individual mortgagors with respect to the
underlying securities, changes in market interest rates and
continued instability in the credit markets. Any of these
factors could cause an
other-than-temporary
impairment in future periods and result in realized losses. The
process for determining whether impairment is
other-than-temporary
usually requires difficult, subjective judgments about the
future financial performance of the issuer and any collateral
underlying the security in order to assess the probability of
receiving all contractual principal and interest payments on the
security. Because of changing economic and market conditions
affecting issuers and the performance of the underlying
collateral, we may recognize realized
and/or
unrealized losses in future periods, which could have an adverse
effect on our financial condition and results of operations.
We may
experience higher delinquencies on our equipment leases and
reductions in the resale value of leased
equipment.
In connection with the acquisition of Tygris, we acquired a
significant portfolio of equipment leases. Although we purchased
these leases at a discount, they were not subjected to our
credit standards. The non-impaired leases we acquired may become
impaired and the impaired leases may suffer further
deterioration in value, resulting in additional charge-offs to
this portfolio. Fluctuations in national, regional and local
economic conditions may increase the level of charge-offs that
we make to our lease portfolio, and, consequently, reduce our
net income. Although a significant portion of these losses will
be satisfied out of escrowed portions of the purchase price paid
by us, we are not protected for all losses and any charge-off of
related losses that we experience will negatively impact our
results of operations.
The realization of equipment values (i.e., residual values)
during the life and at the end of the term of a lease is an
important element of our commercial finance business. At the
inception of each lease, we record a residual value for the
leased equipment based on our estimate of the future value of
the equipment at the expected disposition date. A decrease in
the market value of leased equipment at a rate greater than the
rate we projected, whether due to rapid technological or
economic obsolescence, unusual or excessive
wear-and-tear
on the equipment, recession or other adverse economic
conditions, or other factors, would adversely affect the current
or the residual values of such equipment. Further, certain
equipment residual values are dependent on the
manufacturers or vendors warranties, reputation and
other factors, including market liquidity. In addition, we may
not realize the full market value of equipment if we are
required to sell it to meet liquidity needs or for other reasons
outside of the ordinary course of business. Consequently, we may
not realize our estimated residual values for equipment. If we
are unable to realize the expected value of a substantial
portion of the equipment under lease, our business could be
adversely affected.
We may become
subject to a number of risks if we elect to pursue acquisitions
and may not be able to acquire and integrate acquisition targets
successfully if we choose to do so.
As we have done in the past, we may pursue acquisitions as part
of our growth strategy. We may consider acquisitions of loans or
securities portfolios, lending or leasing firms, commercial and
23
small business lenders, residential lenders, direct banks, banks
or bank branches (whether in FDIC-assisted or unassisted
transactions), wealth and investment management firms,
securities brokerage firms, specialty finance or other financial
services-related companies. We expect that competition for
suitable acquisition targets may be significant. Additionally,
we must generally receive federal regulatory approval before we
can acquire an institution or business. Such regulatory approval
may be denied or, if granted, could be subject to conditions
that materially affect the terms of the acquisition or our
ability to capture some of the opportunities presented by the
acquisition. We may not be able to successfully identify and
acquire suitable acquisition targets on terms and conditions we
consider to be acceptable.
Even if suitable candidates are identified and we succeed in
consummating these transactions, acquisitions involve risks that
may adversely affect our market value and profitability. These
risks include, among other things: credit risk associated with
acquired loans and investments; retaining, attracting and
integrating personnel; loss of customers; reputational risks;
difficulties in integrating or operating acquired businesses or
assets; and potential disruption of our ongoing business
operations and diversion of managements attention. Through
our acquisitions we may also assume unknown or undisclosed
liabilities, fail to properly assess known contingent
liabilities or assume businesses with internal control
deficiencies. While in most of our transactions we seek to
mitigate these risks through, among other things, adequate due
diligence and indemnification provisions, we cannot be certain
that the due diligence we have conducted is adequate or that the
indemnification provisions and other risk mitigants we put in
place will be sufficient.
In addition, FDIC-assisted acquisitions involve risks similar to
acquiring existing banks even though the FDIC might provide
assistance to mitigate certain risks, such as sharing in the
exposure to loan losses and providing indemnification against
certain liabilities of a failed institution. However, because
these acquisitions are typically conducted by the FDIC in a
manner that does not allow the time normally associated with
preparing for the integration of an acquired institution, we may
face additional risks in FDIC-assisted transactions. These risks
include, among other things, the loss of customers, strain on
management resources related to collection and management of
problem loans and problems related to integration of personnel
and operating systems. We may not be successful in overcoming
these risks or any other problems encountered in connection with
acquisitions. Our inability to overcome these risks could have
an adverse effect on our results of operations, particularly
during periods in which the acquisitions are being integrated
into our operations.
We may become
subject to additional risks as a result of our recent
acquisition of MetLife Banks warehouse finance
business.
Although we believe the recent acquisition of MetLife
Banks warehouse finance business represented an attractive
opportunity to expand our business, any new business operation
we acquire could expose us to additional fraud and counterparty
risk which we may fail to adequately address. For example, our
underwriting, operational controls and risk mitigants may fail
to prevent or detect fraud or collusion with multiple parties
which could result in losses that would affect our financial
results. Since warehouse loans are typically larger than
residential mortgage loans, the systemic deterioration of one or
a few of these loans could cause an increase in non-performing
loans. Our proposed structural agreements to minimize
counterparty risk could be ineffective. Additionally, warehouse
counterparties may become subject to repurchase demands by
investors which could adversely affect their financial position.
We may have to take ownership of mortgage loans not directly
underwritten by us if the mortgage broker is unable to sell them
to investors and repay its underlying note with us. There is no
guarantee that an active or liquid market for the types of loans
we would be forced to sell will exist which could result in
losses.
24
Concern of
customers over deposit insurance may cause a decrease in
deposits.
With recent concerns about bank failures, customers have become
concerned about the extent to which their deposits are insured
by the FDIC, particularly mass-affluent customers that may
maintain deposits in excess of insured limits. Customers may
withdraw deposits in an effort to ensure that the amount they
have on deposit with our bank is fully insured and may place
them in other institutions or make investments that are
perceived as being more secure, such as securities issued by the
U.S. Treasury. We may be forced by such activity to pay
higher interest rates to retain deposits, which may constrain
our liquidity as we seek to meet funding needs caused by reduced
deposit levels, which could have a material adverse effect on
our business.
Our ability to
rely on brokered deposits as a part of our funding strategy may
be limited.
Deposits raised by EverBank continue to be a key part of our
funding strategy. Our ability to maintain our current level of
deposits or grow our deposit base could be affected by
regulatory restrictions, including the possible imposition of
prior approval requirements or restrictions on deposit growth
through brokered channels, or restrictions on our rates offered.
In addition, as a supervisory matter, reliance on brokered
deposits as a significant source of funding is discouraged. As a
result, in order to grow our deposit base, we will need to
expand our non-brokered channels for deposit generation,
including through new marketing and advertising efforts, which
may require significant time or effort to implement. Further, we
are likely to face significant competition for deposits from
other banking organizations that are also seeking stable
deposits to support their funding needs. If EverBank is unable
to develop new channels of deposit origination, it could have a
material adverse effect on our business, results of operations,
and financial position.
We are exposed
to risks associated with our Internet-based systems and online
commerce security, including hacking and
identity theft.
We operate primarily as an online bank with a small number of
financial center locations and, as such, we conduct a
substantial portion of our business over the Internet. We rely
heavily upon data processing, including loan servicing and
deposit processing, software, communications and information
systems from a number of third parties to conduct our business.
Third party, or internal, systems and networks may fail to
operate properly or become disabled due to deliberate attacks or
unintentional events. Our operations are vulnerable to
disruptions from human error, natural disasters, power loss,
computer viruses, spam attacks, denial of service attacks,
unauthorized access and other unforeseen events. Undiscovered
data corruption could render our customer information
inaccurate. These events may obstruct our ability to provide
services and process transactions. While we are in compliance
with all applicable privacy and data security laws, an incident
could put our customer confidential information at risk.
Although we have not experienced a cyber incident which has been
successful in compromising our data or systems, we can never be
certain that all of our systems are entirely free from
vulnerability to breaches of security or other technological
difficulties or failures. We monitor and modify, as necessary,
our protective measures in response to the perpetual evolution
of cyber threats.
A breach in the security of any of our information systems, or
other cyber incident, could have an adverse impact on, among
other things, our revenue, ability to attract and maintain
customers and business reputation. In addition, as a result of
any breach, we could incur higher costs to conduct our business,
to increase protection, or related to remediation. Furthermore
our customers could incorrectly blame us and terminate their
account with us for a cyber incident which occurred on their own
system or with that of an unrelated third party. In addition, a
security breach could also subject us to additional regulatory
scrutiny and expose us to civil litigation and possible
financial liability.
25
Our business
may be impaired if a third party infringes on our intellectual
property rights.
Our business depends heavily upon intellectual property that we
have developed or will develop in the future. Monitoring
infringement of intellectual property rights is difficult, and
the steps we have taken may not prevent unauthorized use of our
intellectual property. In the past, we have had to engage in
enforcement actions to protect our domain names from theft,
including administrative proceedings. We may in the future be
unable to prevent third parties from acquiring domain names that
infringe or otherwise decrease the value of our trademarks and
other intellectual property rights. Intellectual property theft
on the Internet is relatively widespread, and individuals
anywhere in the world can purchase infringing domains or use our
service marks on their
pay-per-click
sites to draw customers for competitors while exploiting our
service marks. To the extent that we are unable to rapidly
locate and stop an infringement, our intellectual property
assets may become devalued and our brand may be tarnished. Third
parties may also challenge, invalidate or circumvent our
intellectual property rights and protections, registrations and
licenses. Intellectual property litigation is expensive, and the
outcome of any action is often highly uncertain.
We may become
involved in intellectual property or other disputes that could
harm our business.
Third parties may assert claims against us, asserting that our
marks, services, associated content in any medium, or software
applications infringe on their intellectual property rights. The
laws and regulations governing intellectual property rights are
continually evolving and subject to differing interpretations.
Trademark owners often engage in litigation in state or federal
courts or oppositions in the United States Patent and Trademark
Office as a strategy to broaden the scope of their trademark
rights. If any infringement claim is successful against us, we
may be required to pay substantial damages or we may need to
seek to obtain a license of the other partys intellectual
property rights. We also could lose the expected future benefit
of our marketing and advertising spending. Moreover, we may be
prohibited from providing our services or using content that
incorporates the challenged intellectual property.
The soundness
of other financial institutions could adversely affect
us.
Financial services institutions are interrelated as a result of
trading, clearing, custody, counterparty or other relationships.
At various times, we may have significant exposure to a
relatively small group of counterparties, and we routinely
execute transactions with counterparties in the financial
services industry, including brokers and dealers, commercial
banks, investment banks, mutual and hedge funds and other
institutional customers. Many of these transactions expose us to
credit risk in the event of default of a counterparty or
customer. In addition, our credit risk may be exacerbated when
the collateral held by us cannot be realized upon or is
liquidated at prices not sufficient to recover the full amount
of the loan or derivative exposure due to us. Losses suffered
through such increased credit risk exposure could have a
material adverse effect on our financial condition, results of
operations and cash flows.
We face
increased risks with respect to our
WorldCurrency®
and other market-based deposit products.
As of December 31, 2011, we had outstanding market-based
deposits of $1.4 billion, representing approximately 13% of
our total deposits, the significant majority of which are
WorldCurrency®
deposits. Many of our
WorldCurrency®
depositors have chosen that family of products in order to
diversify their portfolios with respect to foreign currencies.
Appreciation of the U.S. dollar relative to foreign
currencies, political and economic disruptions in foreign
markets or significant changes in commodity prices or securities
indices could significantly reduce the demand for our
WorldCurrency®
and other market-based products as well as a devaluation of
these deposit balances, which could have a material adverse
effect on our liquidity and results of operations. In addition,
although we routinely use derivatives to offset changes to our
deposit obligations due to
26
fluctuations in currency exchange rates, commodity prices or
securities indices to which these products are linked, these
derivatives may not be effective. To the extent that these
derivatives do not offset changes to our deposit obligations,
our financial results may be adversely affected. Furthermore,
these rates, prices and indices are subject to significant
changes due to factors beyond our control, which may subject us
to additional risks.
We operate in
a highly competitive industry and market area.
We face substantial competition in all areas of our operations
from a variety of different competitors, many of which are
larger and may have more financial resources. Such competitors
primarily include Internet banks and national, regional and
community banks within the various markets we serve. We also
face competition from many other types of financial
institutions, including, without limitation, savings and loan
institutions, credit unions, mortgage companies, other finance
companies, brokerage firms, insurance companies, factoring
companies and other financial intermediaries. The financial
services industry could become even more competitive as a result
of legislative, regulatory and technological changes and
continued consolidation. Banks, securities firms and insurance
companies can (unless laws are changed) merge under the umbrella
of a financial holding company, which can offer virtually any
type of financial service, including banking, securities
underwriting, insurance (both agency and underwriting) and
merchant banking. Many of our competitors have fewer regulatory
constraints and may have lower cost structures.
In addition, many of our competitors have significantly more
physical branch locations than we do, which may be an important
factor to potential customers. Because we offer our services
over the Internet, we compete nationally for customers against
financial institutions ranging from small community banks to the
largest international financial institutions. Many of our
competitors continue to have access to greater financial
resources than we have, which allows them to invest in
technological improvements. Failure to successfully keep pace
with technological change affecting the financial services
industry could place us at a competitive disadvantage.
Our historical
growth rate and performance may not be indicative of our future
growth or financial results.
Our historical growth must be viewed in the context of the
recent opportunities available to us as a result of the
confluence of our access to capital at a time when market
dislocations of historical proportions resulted in unprecedented
asset acquisition opportunities. When evaluating our historical
growth and prospects for future growth, it is also important to
consider that while our business philosophy has remained
relatively constant over time, our mix of business, distribution
channels and areas of focus have changed frequently and
dramatically over the last several years. Historically, we have
entered and exited lines of business to adapt to changing market
conditions and perceived opportunities, and may continue to do
so in future periods. For example, we are currently seeking to
build a wealth management line of business. Although we have a
track record of successfully offering investment-oriented
deposit products, we have limited operational experience in
wealth management. Our resources, personnel and expertise may
prove to be insufficient to execute our wealth management
strategy, which could impact our future earnings and the
retention of high net worth customers. Moreover, our dynamic
business model makes it difficult to assess our prospects for
future growth.
In recent fiscal periods, we have completed several significant
transactions, including the acquisitions of Tygris and Bank of
Florida in 2010, the acquisition of a number of residential
mortgage loan and securities portfolios in 2008 and 2009 and the
divestiture of our reverse mortgage operations in 2008. These
transactions, along with equity capital infusions, have
significantly expanded our asset and capital base, product mix
and distribution channels. We also benefited from significant
purchase price discounts from these transactions, which are
highly accretive to our earnings and which may not be available
in the future. Over the longer-term, we expect margins on loans
to revert to longer-term historical levels.
27
We have historically generated a significant amount of fee
income through the origination and servicing of residential
mortgage loans. Fundamental changes in bank regulations and the
mortgage industry, unusually weak economic conditions and the
historically low interest rate environment that has
characterized the last several fiscal quarters make it difficult
to predict our future results or draw meaningful comparisons
between our historical results and our results in future fiscal
periods. We materially increased our investments in residential
MSR from 2008 through the first quarter of 2010. During that
time, we also significantly increased our investments in
nonagency residential collateralized mortgage obligation
securities, or CMOs. Due to concentration limits we adopted
pursuant to new regulatory constraints and possible future
regulatory guidance, our concentration in such asset classes has
been reduced. We may not be able to achieve similar performance
from alternative asset classes in the future.
We may not be able to sustain our historical rate of growth or
grow our business at all. Because of the tremendous amount of
uncertainty in the general economy and with respect to the
effectiveness of recent governmental intervention in the credit
markets and mortgage lending industry, as well as increased
delinquencies, continued home price deterioration and lower home
sales volume, it will be difficult for us to replicate our
historical earnings growth as we continue to expand. We have
benefited from the recent low interest rate environment, which
has provided us with high net interest margins which we use to
grow our business. Higher rates would compress our margins and
may impact our ability to grow. Consequently, our historical
results of operations will not necessarily be indicative of our
future operations.
We are
dependent on key personnel and the loss of one or more of those
key personnel could harm our business.
Our future success significantly depends on the continued
services and performance of our key management personnel. We
believe our management teams depth and breadth of
experience in the banking industry is integral to executing our
business plan. We also will need to continue to attract,
motivate and retain other key personnel. The loss of the
services of members of our senior management team or other key
employees or the inability to attract additional qualified
personnel as needed could have a material adverse effect on our
business, financial position, results of operations and cash
flows.
We are subject
to losses due to fraudulent and negligent acts on the part of
loan applicants, mortgage brokers, other vendors and our
employees.
When we originate mortgage loans, we rely heavily upon
information supplied by loan applicants and third parties,
including the information contained in the loan application,
property appraisal, title information and employment and income
documentation provided by third parties. If any of this
information is misrepresented and such misrepresentation is not
detected prior to loan funding, we generally bear the risk of
loss associated with the misrepresentation.
We may be
exposed to unrecoverable losses on the loans acquired in the
Bank of Florida acquisition, despite the loss sharing agreements
we have with the FDIC.
Although we acquired the loan assets of Bank of Florida at a
substantial discount and we have entered into loss sharing
agreements which provide that the FDIC will bear 80% of losses
on such assets in excess of $385.6 million, we are not
protected from all such losses. The FDIC has the right to refuse
or delay payment for such loan losses if the loss sharing
agreements are not managed in accordance with their terms.
Additionally, the loss sharing agreements have limited terms;
therefore, any losses that we experience after the terms of the
loss sharing agreements have ended will not be recoverable from
the FDIC, which would negatively impact our net income. See
Business Recent Acquisitions
Acquisition of Bank of Florida for a description of our
loss sharing arrangements with the FDIC.
28
The acquisition of assets and liabilities of financial
institutions in FDIC-sponsored or assisted transactions involves
risks similar to those faced in unassisted acquisitions, even
though the FDIC might provide assistance to mitigate certain
risks (e.g., entering into loss sharing arrangements). However,
because such acquisitions are structured in a manner that does
not allow the time normally associated with evaluating and
preparing for the integration of an acquired institution, we
face the additional risk that the anticipated benefits of such
an acquisition may not be realized fully or at all, or within
the time period expected.
Any of these factors, among others, could adversely affect our
ability to achieve the anticipated benefits of the Bank of
Florida acquisition.
Certain
provisions of the loss sharing agreements entered into with the
FDIC in connection with the Bank of Florida acquisition may have
anti-takeover effects and could limit our ability to engage in
certain strategic transactions our Board of Directors believes
would be in the best interests of stockholders.
The FDICs agreement to bear 80% of qualifying losses in
excess of $385.6 million on single family residential loans
for ten years and all other loans for five years is a
significant advantage for us and a feature of the Bank of
Florida acquisition without which we would not have entered into
the transaction. Our agreement with the FDIC requires that we
receive prior FDIC consent, which may be withheld by the FDIC in
its sole discretion, prior to us or our stockholders engaging in
certain transactions. If any such transaction is completed
without prior FDIC consent, the FDIC would have the right to
discontinue the loss sharing arrangement.
Among other things, prior FDIC consent is required for
(1) a merger or consolidation of us or EverBank with or
into another company if our stockholders will own less than
66.66% of the combined company, (2) the sale of all or
substantially all of the assets of EverBank and (3) a sale
of shares by a stockholder, or a group of related stockholders,
that will effect a change in control of us, as determined by the
FDIC with reference to the standards set forth in the Change in
Bank Control Act (generally, the acquisition of between 10% and
25% of our voting securities where the presumption of control is
not rebutted, or the acquisition by any person, acting directly
or indirectly or through or in concert with one or more persons,
of more than 25% of our voting securities). Although our Amended
and Restated Certificate of Incorporation contains a provision
that, with reference to the Change in Bank Control Act,
restricts any person from acquiring control of us, or more than
9.9% of our voting securities, without the prior approval of our
Board of Directors, such an acquisition by stockholders could
occur beyond our control. If we or any stockholder desired to
enter into any such transaction, the FDIC may not grant its
consent in a timely manner, without conditions, or at all. If
one of these transactions were to occur without prior FDIC
consent and the FDIC withdrew its loss share protection, there
could be a material adverse effect on our financial condition,
results of operations and cash flows.
Regulatory and
Legal Risks
We operate in
a highly regulated environment and the laws and regulations that
govern our operations, corporate governance, executive
compensation and accounting principles, or changes in them, or
our failure to comply with them, may adversely affect
us.
We are subject to extensive regulation, supervision and
legislation that govern almost all aspects of our operations.
Intended to protect customers, depositors, the Deposit Insurance
Fund, or DIF, and the overall financial system, these laws and
regulations, among other matters, prescribe minimum capital
requirements, impose limitations on the business activities in
which we can engage, limit the dividend or distributions that
EverBank can pay to us, restrict the ability of institutions to
guarantee our debt, impose certain specific accounting
requirements on us that may be more restrictive and may result
in greater or earlier charges to earnings or reductions in our
capital than generally accepted accounting principles, among
other things. Compliance with laws and regulations can be
difficult and costly, and changes to laws and regulations often
impose additional compliance costs. We are
29
currently facing increased regulation and supervision of our
industry as a result of the financial crisis in the banking and
financial markets, and, to the extent that we participate in any
programs established or to be established by the
U.S. Treasury or by the federal bank regulatory agencies,
there will be additional and changing requirements and
conditions imposed on us. Such additional regulation and
supervision may increase our costs and limit our ability to
pursue business opportunities. Further, our failure to comply
with these laws and regulations, even if the failure is
inadvertent or reflects a difference in interpretation, could
subject us to restrictions on our business activities, fines and
other penalties, any of which could adversely affect our results
of operations, capital base and the price of our common stock.
Federal
banking agencies periodically conduct examinations of our
business, including for compliance with laws and regulations,
and our failure to comply with any supervisory actions to which
we are or become subject as a result of such examinations may
adversely affect us.
On April 13, 2011, we and EverBank each entered into a
consent order with the OTS with respect to EverBanks
mortgage foreclosure practices and our oversight of those
practices. The consent orders require, among other things, that
we establish a new compliance program for our mortgage servicing
and foreclosure operations and that we ensure that we have
dedicated resources for communicating with borrowers, policies
and procedures for outsourcing foreclosure or related functions
and management information systems that ensure timely delivery
of complete and accurate information. We are also required to
retain an independent firm to conduct a review of residential
foreclosure actions that were pending from January 1, 2009
through December 31, 2010 in order to determine whether any
borrowers sustained financial injury as a result of any errors,
misrepresentations or deficiencies and to provide remediation as
appropriate. We are working to fulfill the requirements of the
consent orders. In response to the consent orders, we have
established an oversight committee to monitor the implementation
of the actions required by the consent orders. Furthermore, we
have enhanced and updated several policies, procedures,
processes and controls to help ensure the mitigation of the
findings of the consent orders, and submitted them to the FRB
and the OCC (the applicable successors to the OTS) for review.
In addition, we have enhanced our third-party vendor management
system and our compliance program, hired additional personnel
and retained an independent firm to conduct foreclosure reviews.
In addition to the horizontal review, other government agencies,
including state attorneys general and the U.S. Department of
Justice, investigated various mortgage related practices of
certain servicers, some of which practices were also the subject
of the horizontal review. In March 2012, the U.S. Department of
Justice, the Department of Housing and Urban Development and 50
state attorneys general entered into separate consent judgments
with five major mortgage servicers with respect to these
matters. In total, the five mortgage servicers agreed to $25
billion in borrower restitution assistance and refinancing.
Monetary sanctions imposed by the federal banking agencies as a
consequence of the horizontal review are being held in abeyance,
subject to provision of borrower assistance and remediation
under the consent judgments. We understand certain other
institutions subject to the consent decrees with the banking
regulators announced in April 2011 recently have been contacted
by the U.S. Department of Justice and state attorneys general
regarding a settlement. If an investigation of EverBank were to
occur, it could result in material fines, penalties, equitable
remedies (including requiring default servicing or other process
changes), other enforcement actions or additional litigation,
and could result in significant legal costs in responding to
governmental investigations and additional litigation. In
addition, the federal banking agencies may impose civil monetary
penalties on the remaining banks that were subject to the
horizontal review as part of such an investigation or
independently but have not indicated what the amount of any such
penalties would be. Any other requirements or remedies or
penalties that may be imposed on us as a result of the
horizontal review or any other investigation or action related
to mortgage origination or servicing may have a material adverse
effect on our results of operations, capital base and the price
of our common stock.
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We expect that mortgage-related assessments and waivers, costs,
including compensatory fees assessed by the GSEs, and other
costs associated with foreclosures will remain elevated as
additional loans are delayed in the foreclosure process. This
will likely continue to increase noninterest expenses, including
increasing default servicing costs and legal expenses. In
addition, changes to our processes and policies, including those
required under the consent orders with federal bank regulators,
are likely to result in further increases in our default
servicing costs over the longer term. Delays in foreclosure
sales may result in additional costs associated with the
maintenance of properties or possible home price declines,
result in a greater number of nonperforming loans and increased
servicing advances and may adversely affect the collectability
of such advances and the value of our MSR asset and real estate
owned properties. In addition, the valuation of certain of our
agency residential MBS could be negatively affected under
certain scenarios due to changes in the timing of cash flows.
In addition, under the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, or the Dodd-Frank Act, as of
July 21, 2011, the functions and personnel of the OTS were
transferred among the OCC, FDIC and FRB. As a result, the OTS no
longer supervises or regulates savings associations or savings
and loan holding companies. The supervision of federal thrifts,
such as EverBank, was transferred to the OCC, and the
supervision of thrift holding companies, such as us, was
transferred to the FRB. A number of steps have been made and
will be taken by the FRB to align the regulation and supervision
of thrift holding companies more closely with that of bank
holding companies. As a result of this change in supervision and
related requirements, we are subject to new and uncertain
examination and reporting requirements that could be more
stringent than the OTS examinations we have had historically.
For a more detailed description of the Dodd-Frank Act, see
Regulation and Supervision.
Governmental
and other actions relating to recording mortgages in the name of
MERS may have adverse consequences on us.
Mortgage notes, assignments or other documents are often
required to be maintained and are often necessary to enforce
mortgages loans. There has been significant public commentary
regarding the industry practice of recording mortgages in the
name of Mortgage Electronic Registration Systems, Inc., or MERS,
as nominee on behalf of the note holder, and whether
securitization trusts own the loans purported to be conveyed to
them and have valid liens securing those loans. We currently use
the MERS system for a substantial portion of the residential
mortgage loans that we originate, including loans that have been
sold to investors. A component of the consent orders described
above requires significant changes in the manner in which we
service loans identifying MERS as the mortgagee. Additionally,
certain local and state governments have commenced legal actions
against MERS and certain MERS members, questioning the validity
of the MERS model. Other challenges have also been made to the
process for transferring mortgage loans to securitization
trusts, asserting that having a mortgagee of record that is
different than the holder of the mortgage note could break
the chain of title and cloud the ownership of the loan. If
certain required documents are missing or defective, or if the
use of MERS is found not to be valid, we could be obligated to
cure certain defects or in some circumstances be subject to
additional costs and expenses in servicing mortgages. Our use of
MERS as nominee for mortgages may also create reputational and
other risks for us.
The enactment
of the Dodd-Frank Act may have a material effect on our
operations.
On July 21, 2010, President Obama signed into law the
Dodd-Frank Act, which imposes significant regulatory and
compliance changes. The key effects of the Dodd-Frank Act on our
business are:
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changes in the thrift supervisory structure;
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changes to regulatory capital requirements;
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creation of new governmental agencies with authority over our
operations including the Consumer Financial Protection Bureau,
or CFPB;
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limitation on federal preemption; and
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changes to mortgage loan origination and risk retention
practices.
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As noted above, the Dodd-Frank Act has changed the regulatory
and supervisory framework governing federal thrifts and thrift
holding companies, and as a result of this change in supervision
and related requirements, we are subject to new and uncertain
examination and reporting requirements that could be more
stringent than the OTS examinations we have had historically. It
is also expected that the FRB will impose regulatory capital
requirements on thrift holding companies, such as us, which have
not been historically subject to such requirements.
The Dodd-Frank Act also includes numerous provisions that impact
mortgage origination. For example, approximately 53% of our
total mortgage loan origination volume for the year ended
December 31, 2011 was originated through mortgage brokers
not affiliated with us. Under the Dodd-Frank Act, the loss of
federal preemption for operating subsidiaries and agents of
national banks and federal thrifts, as well as changes to the
compensation and compliance obligations of independent mortgage
brokers, could change the manner in which our mortgage loans are
originated. As a result of the Dodd-Frank Act, there will likely
be fewer independent, nonbank mortgage brokers and lenders. A
reduction in the number of independent mortgage brokers may
adversely affect our mortgage volume and, thus, our revenues and
earnings. In addition, in April 2012 the CFPB announced that it
is considering adopting new standards that would require
servicers (i) to maintain reasonable information management
policies and procedures, (ii) to intervene early with troubled
and delinquent borrowers and (iii) to ensure staff who deals
with a homeowner have access to records about that homeowner,
including records of the homeowners previous
communications with the servicer. These proposals, if adopted,
or any other standards or rules adopted by the CFPB in the
future may impose greater restrictions on our operations.
In addition, the Dodd-Frank Act contains provisions designed to
limit the ability of insured depository institutions, their
holding companies and their affiliates to conduct certain swaps
and derivatives activities and to take certain principal
positions in financial instruments. While it is generally
understood that these limitations are not intended to restrict
hedging activities, the impact of the statutory limitations on
our ability to conduct our hedging strategies will not be clear
until the implementing regulations have been promulgated.
The Dodd-Frank Act currently impacts, or may impact in the
future, other aspects of our operations and activities. For a
more detailed description of the Dodd-Frank Act, see
Regulation and Supervision.
The short-term
and long-term impact of the new Basel III capital standards
and the forthcoming new capital rules for non-Basel U.S. banks
is uncertain.
On September 12, 2010, the Group of Governors and Heads of
Supervision, the oversight body of the Basel Committee on
Banking Supervision, announced an agreement to a strengthened
set of capital requirements for internationally active banking
organizations in the United States and around the world, known
as Basel III. When implemented by U.S. banking authorities,
which have expressed support for the new capital standards, we
expect Basel III will eventually preclude us from including
certain assets in our regulatory capital ratios, including MSR.
MSR currently comprise a significant portion of our regulatory
capital. At December 31, 2011, our net MSR totaled $489.5
million. For a more detailed description of Basel III, see
Regulation and Supervision.
We are highly
dependent upon programs administered by government agencies or
government-sponsored enterprises, such as Fannie Mae, Freddie
Mac and Ginnie Mae, to generate liquidity in connection with our
conforming mortgage loans. Any changes in existing U.S.
government or government-sponsored mortgage programs could
materially and adversely affect our business, financial
position, results of operations and cash flows.
Our ability to generate revenues through securities issuances
guaranteed by Ginnie Mae, or GNMA, and through mortgage loan
sales to GSEs such as Fannie Mae and Freddie Mac (as well as
32
to other institutional investors), depends to a significant
degree on programs administered by those entities. The GSEs play
a powerful role in the residential mortgage industry, and we
have significant business relationships with them. Many of the
loans that we originate are conforming loans that qualify under
existing standards for sale to the GSEs or for guarantee by
GNMA. We also derive other material financial benefits from
these relationships, including the assumption of credit risk by
these GSEs on all loans sold to them that are pooled into
securities, in exchange for our payment of guaranty fees, and
the ability to avoid certain loan inventory finance costs
through streamlined loan funding and sale procedures. Any
discontinuation of, or significant reduction in, the operation
of these GSEs or any significant adverse change in the level of
activity in the secondary mortgage market or the underwriting
criteria of these GSEs could have a material adverse effect on
our business, financial position, results of operations and cash
flows.
Because nearly all other non-governmental participants providing
liquidity in the secondary mortgage market left that market
during the mortgage financial crisis, the GSEs have been the
only significant purchasers of residential mortgage loans. It
remains unclear when private investors may begin to re-enter the
market. As described above, GSEs (which are in conservatorship,
with heavy capital support from the U.S. government, and
subject to serious speculation about their future structure, if
any) may not be able to provide the substantial liquidity upon
which our residential mortgage loan business relies.
Federal, state
and local consumer lending laws may restrict our ability to
originate or increase our risk of liability with respect to
certain mortgage loans and could increase our cost of doing
business.
Federal, state and local laws have been adopted that are
intended to eliminate certain lending practices considered
predatory. These laws prohibit practices such as
steering borrowers away from more affordable products, selling
unnecessary insurance to borrowers, repeatedly refinancing
loans, and making loans without a reasonable expectation that
the borrowers will be able to repay the loans irrespective of
the value of the underlying property. It is our policy not to
make predatory loans, but these laws create the potential for
liability with respect to our lending, servicing and loan
investment activities. They increase our cost of doing business,
and ultimately may prevent us from making certain loans and
cause us to reduce the average percentage rate or the points and
fees on loans that we do make.
Legislative
action regarding foreclosures or bankruptcy laws may negatively
impact our business.
Recent laws delay the initiation or completion of foreclosure
proceedings on specified types of residential mortgage loans
(some for a limited period of time), or otherwise limit the
ability of residential loan servicers to take actions that may
be essential to preserve the value of the mortgage loans
underlying the MSR. Any such limitations are likely to cause
delayed or reduced collections from mortgagors and generally
increased servicing costs. Any restriction on our ability to
foreclose on a loan, any requirement that we forego a portion of
the amount otherwise due on a loan or any requirement that we
modify any original loan terms will in some instances require us
to advance principal, interest, tax and insurance payments,
which is likely to negatively impact our business, financial
condition, liquidity and results of operations.
We are exposed
to environmental liabilities with respect to properties that we
take title to upon foreclosure that could increase our costs of
doing business and harm our results of operations.
In the course of our activities, we may foreclose and take title
to residential and commercial properties and become subject to
environmental liabilities with respect to those properties. The
laws and regulations related to environmental contamination
often impose liability without regard to responsibility for the
contamination. We may be held liable to a governmental entity or
to third parties for property damage, personal injury,
investigation and
clean-up
costs incurred by these parties in connection with environmental
contamination, or may be required to investigate or clean up
hazardous
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or toxic substances, or chemical releases at a property. The
costs associated with investigation or remediation activities
could be substantial. Moreover, as the owner or former owner of
a contaminated site, we may be subject to common law claims by
third parties based upon damages and costs resulting from
environmental contamination emanating from the property. If we
ever become subject to significant environmental liabilities,
our business, financial condition, liquidity and results of
operations would be significantly harmed.
Risks Related to
This Offering and Ownership of Our Common Stock
An active
trading market for our common stock may not develop, and you may
not be able to sell your common stock at or above the initial
public offering price.
Prior to this offering, there has been no public market for our
common stock. An active trading market for shares of our common
stock may never develop or be sustained following this offering.
If an active trading market does not develop, you may have
difficulty selling your shares of common stock at an attractive
price, or at all. The initial public offering price for our
common stock will be determined by negotiations between us, the
selling stockholders and the representative of the underwriters
and may not be indicative of prices that will prevail in the
open market following this offering. Consequently, you may not
be able to sell your common stock at or above the initial public
offering price or at any other price or at the time that you
would like to sell. An inactive market may also impair our
ability to raise capital by selling our common stock and may
impair our ability to acquire other companies, products or
technologies by using our common stock as consideration.
The price of
our common stock may be volatile and fluctuate
substantially.
Since our common stock has not been publicly traded prior to
this offering, it is difficult to predict the future volatility
of the trading price of our stock as compared to the broader
stock market indices. Our share price may be volatile for
several reasons. We are currently operating through a protracted
period of historically low interest rates that will not be
sustained indefinitely. Recent and pending legislative,
regulatory, monetary and political developments have led to a
high level of uncertainty, and these factors could have profound
implications for the banking industry and the outlook for our
future profitability. In addition, our business model is highly
adaptive. In the past, we have rapidly entered and exited lines
of business as circumstances have changed and this practice may
continue, which could lead to higher levels of volatility in our
share price as compared to other financial institutions that
conduct business in more predictable ways. You should consider
an investment in our common stock risky and invest only if you
can withstand a significant loss and wide fluctuations in the
market value of your investment.
If equity
research analysts do not publish research or reports about our
business or if they issue unfavorable commentary or downgrade
our common stock, the price and trading volume of our common
stock could decline.
The trading market for our common stock will rely in part on the
research and reports that equity research analysts publish about
us and our business. The price of our stock could decline if one
or more securities analysts downgrade our stock or if those
analysts issue other unfavorable commentary or cease publishing
reports about us or our business.
If any of the analysts who elect to cover us downgrades our
stock, our stock price would likely decline rapidly. If any of
these analysts ceases coverage of us, we could lose visibility
in the market, which in turn could cause our common stock price
or trading volume to decline and our common stock to be less
liquid.
Our ability to
pay dividends is subject to regulatory limitations and to the
extent we are not able to access those funds, may impair our
ability to accomplish our growth strategy and pay our operating
expenses.
Although we intend to pay an initial quarterly cash dividend to
our stockholders, we have no obligation to do so and may change
our dividend policy at any time without notice to our
stockholders.
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Further, as a holding company separate and distinct from
EverBank, our only bank subsidiary, with no significant assets
other than EverBanks capital stock, we will need to depend
upon dividends from EverBank for substantially all of our
income. Accordingly, our ability to pay dividends and cover
operating expenses depends primarily upon the receipt of
dividends or other capital distributions from EverBank.
EverBanks ability to pay dividends to us is subject to,
among other things, its earnings, financial condition and need
for funds, as well as federal and state governmental policies
and regulations applicable to us and EverBank, including the
statutory requirement that we serve as a source of financial
strength for EverBank, which limit the amount that may be paid
as dividends without prior regulatory approval. Additionally, if
EverBanks earnings are not sufficient to pay dividends to
us while maintaining adequate capital levels, we may not be able
to pay dividends to our stockholders. See Dividend
Policy, Managements Discussion and Analysis of
Financial Condition and Results of Operations
Restrictions on Paying Dividends and Regulation and
Supervision Regulation of Federal Savings
Banks Limitation on Capital Distributions.
The
obligations associated with being a public company will require
significant resources and management attention, which may divert
from our business operations.
As a result of this offering, we will become subject to the
reporting requirements of the Securities Exchange Act of 1934,
as amended, or the Exchange Act, and the Sarbanes-Oxley Act of
2002, or the Sarbanes-Oxley Act. The Exchange Act requires that
we file annual, quarterly and current reports with respect to
our business and financial condition. As a result, we will incur
significant legal, accounting and other expenses that we did not
previously incur.
The need to establish the corporate infrastructure demanded of a
public company may divert managements attention from
implementing our growth strategy, which could prevent us from
improving our business, results of operations and financial
condition. Moreover, we strive to maintain a work environment
that reinforces our culture of collaboration, motivation and
disciplined growth strategy. The effects of becoming public,
including potential changes in our historical business
practices, which focused on long-term growth instead of
short-term gains, could adversely affect this culture. In
connection with the audit for the year ended December 31,
2010, a material weakness was identified, however, this weakness
was remediated in 2011 and there were no material weaknesses
identified for the year ended December 31, 2011. We have
made, and will continue to make, changes to our internal
controls and procedures for financial reporting and accounting
systems to meet our reporting obligations as a stand-alone
public company. However, the measures we take may not be
sufficient to satisfy our obligations as a public company. If we
do not continue to develop and implement the right processes and
tools to manage our changing enterprise and maintain our
culture, our ability to compete successfully and achieve our
business objectives could be impaired, which could negatively
impact our business, financial condition and results of
operations. In addition, we cannot predict or estimate the
amount of additional costs we may incur in order to comply with
these requirements. We anticipate that these costs will
materially increase our general and administrative expenses.
Section 404 of the Sarbanes-Oxley Act requires annual management
assessments of the effectiveness of our internal control over
financial reporting, starting with the second annual report that
we would expect to file with the Securities and Exchange
Commission, or SEC, and will likely require in the same report,
a report by our independent auditors on the effectiveness of our
internal control over financial reporting. However, as an
emerging growth company as defined by the recently
enacted JOBS Act, our independent auditors will not be required
to furnish such an assessment until we no longer qualify as an
emerging growth company. In connection with the implementation
of the necessary procedures and practices related to internal
control over financial reporting, we may identify deficiencies.
We may not be able to remediate any future deficiencies in time
to meet the deadline imposed by the Sarbanes-Oxley Act for
compliance with the requirements of Section 404. In addition,
failure to achieve and maintain an effective internal control
environment could have a material adverse effect on our business
and stock price. Further, we may take advantage of other
exemptions afforded to emerging growth companies
from time to time.
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We are an
emerging growth company within the meaning of the Securities
Act, and if we decide to take advantage of certain exemptions
from various reporting requirements applicable to emerging
growth companies, our common stock could be less attractive to
investors.
We are an emerging growth company within the meaning
of the rules under the Securities Act. We are eligible to take
advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that
are not emerging growth companies, including, but not limited
to, reduced disclosure about our executive compensation and
omission of compensation discussion and analysis, and an
exemption from the requirement of holding a non-binding advisory
vote on executive compensation. In addition, we will not be
subject to certain requirements of Section 404 of the
Sarbanes-Oxley Act, including the additional level of review of
our internal control over financial reporting as may occur when
outside auditors attest as to our internal control over
financial reporting. As a result, our stockholders may not have
access to certain information they may deem important. Further,
we are eligible to delay adoption of new or revised accounting
standards applicable to public companies and we intend to take
advantage of the benefits of this extended transition period. To
the extent we choose to do so, our financial statements may not
be comparable to companies that comply with such new or revised
accounting standards. We will remain an emerging growth company
for up to five years, though we may cease to be an emerging
growth company earlier under certain circumstances. If we take
advantage of any of these exemptions, we do not know if some
investors will find our common stock less attractive as a
result. The result may be a less active trading market for our
common stock and our stock price may be more volatile.
You will incur
immediate dilution as a result of this offering.
If you purchase common stock in this offering, you will pay more
for your shares than the amounts paid by existing stockholders
for their shares. As a result, you will incur immediate dilution
of $2.67 per share, representing the difference between the
initial public offering price of $13.00 per share (the midpoint
of the range set forth on the cover page of this prospectus) and
our as adjusted net tangible book value per share after giving
effect to this offering. See Dilution.
Our management
team may allocate the proceeds of this offering in ways in which
you may not agree.
We have broad discretion in applying the net proceeds we will
receive in this offering. As part of your investment decision,
you will not be able to assess or direct how we apply these net
proceeds. If we do not apply these funds effectively, we may
lose significant business opportunities. Furthermore, our stock
price could decline if the market does not view our use of the
net proceeds from this offering favorably. A significant portion
of the offering is by selling stockholders, and we will not
receive proceeds from the sale of the shares offered by them.
Future sales,
or the perception of future sales, of our common stock may
depress the price of our common stock.
The market price of our common stock could decline significantly
as a result of sales of a large number of shares of our common
stock in the market after this offering, including shares which
might be offered for sale by our existing stockholders. The
perception that these sales might occur could depress the market
price. These sales, or the possibility that these sales may
occur, also might make it more difficult for us to sell equity
securities in the future at a time and at a price that we deem
appropriate.
Upon completion of this offering, we will have
113,179,344 shares of common stock outstanding, assuming no
exercise of the underwriters option to purchase an
additional 3,772,500 shares from us and excluding any
additional shares that may be issued in respect of outstanding
stock options or the
36
vesting of outstanding restricted stock units. Of such
outstanding shares of common stock, excluding shares being sold
in this offering and after giving effect to the lock-up
agreements described below:
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3,467,337 shares of common stock will have been held by
non-affiliates of ours for more than one year and will be freely
transferable pursuant to the exemption provided by Rule 144
under the Securities Act immediately following consummation of
this offering;
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an additional 64,054 shares of common stock will be held by
non-affiliates of ours and will be freely transferable pursuant
to the exemption provided by Rule 144 or Rule 701 under the
Securities Act 90 days following the effective date of this
registration statement; and
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an additional 84,497,958 shares will be eligible for sale
upon expiration of the lock-up agreements.
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Of this amount, 50,708,908 shares of common stock will be
held by our directors, executive officers and other affiliates
and may not be sold in the public market unless the sale is
registered under the Securities Act of 1933, or the Securities
Act, or an exemption from registration is available.
In connection with this offering, we, our directors and
executive officers, the selling stockholders and substantially
all of our other stockholders have each agreed to enter into a
lock-up
agreement and thereby be subject to a
lock-up
period, meaning that they and their permitted transferees will
not be permitted to sell any of the shares of our common stock
for 180 days after the date of this prospectus, subject to
certain extensions without the prior consent of the
underwriters. Although we have been advised that there is no
present intention to do so, the underwriters may, in their sole
discretion and without notice, release all or any portion of the
shares of our common stock from the restrictions in any of the
lock-up
agreements described above.
As of April 15, 2012, holders of approximately
53,958,382 shares of our common stock, including any
securities convertible into or exercisable or exchangeable for
shares of our common stock, have demand and piggyback
registration rights with respect to those securities. Any shares
registered pursuant to the registration rights agreement would
be freely tradable in the public market following customary
lock-up
periods. See Shares Eligible for Future Sale.
In addition, immediately following this offering, we intend to
file a registration statement registering under the Securities
Act the shares of common stock reserved for issuance in respect
of incentive awards to our officers and certain of our
employees. If any of these holders cause a large number of
securities to be sold in the public market following expiration
of any applicable
lock-up
period, the sales could reduce the trading price of our common
stock. These sales also could impede our ability to raise future
capital.
Anti-takeover
provisions could adversely affect our
stockholders.
We are a Delaware corporation and the anti-takeover provisions
of the Delaware General Corporation Law may discourage, delay or
prevent a change in control by prohibiting us from engaging in a
business combination with an interested stockholder for a period
of three years after the person becomes an interested
stockholder, even if a change in control would be beneficial to
our existing stockholders. In addition, our Amended and Restated
Certificate of Incorporation and Amended and Restated By-laws
may discourage, delay or prevent a change in our management or
control over us that stockholders may consider favorable. Our
Amended and Restated Certificate of Incorporation and Amended
and Restated By-laws, which will be in effect upon the closing
of this offering:
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authorize the issuance of blank check preferred
stock that could be issued by our Board of Directors to thwart a
takeover attempt;
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limit the ability of a person to own, control or have the power
to vote more than 9.9% of our voting securities, in order to
prevent any potential termination of protection under the loss
sharing agreements we have with the FDIC in connection with the
Bank of Florida acquisition;
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establish a classified board of directors, with directors of
each class serving a three-year term;
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require that directors only be removed from office for cause and
only upon a majority stockholder vote;
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provide that vacancies on our Board of Directors, including
newly created directorships, may be filled only by a majority
vote of directors then in office;
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limit who may call special meetings of stockholders;
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prohibit stockholder action by written consent, requiring all
actions to be taken at a meeting of the stockholders; and
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require supermajority stockholder voting to effect certain
amendments to our Amended and Restated Certificate of
Incorporation and Amended and Restated By-laws.
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For additional information regarding these and other provisions
of our organizational documents that may make it more difficult
to acquire our company on an unsolicited basis, see
Description of Our Capital Stock Certain
Provisions of Delaware Law and Certain Charter and By-law
Provisions.
In addition, there are substantial regulatory limitations on
changes of control of savings and loan holding companies and
federal savings associations. Any company that acquires control
of a savings association becomes a savings and loan
holding company subject to registration, examination and
regulation by the FRB. Control, as defined under
federal banking regulations, includes ownership or control of
shares, or holding irrevocable proxies (or a combination
thereof), representing 25% or more of any class of voting stock,
control in any manner of the election of a majority of the
institutions directors, or a determination by the FRB that
the acquirer has the power to direct, or directly or indirectly
to exercise a controlling influence over, the management or
policies of the institution. Further, an acquisition of 10% or
more of our common stock creates a rebuttable presumption of
control under federal banking regulations. These
provisions could make it more difficult for a third party to
acquire EverBank or us even if such an acquisition might be in
the best interest of our stockholders.
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under Prospectus Summary,
Risk Factors, Managements Discussion and
Analysis of Financial Condition and Results of Operations,
Business and elsewhere in this prospectus may
contain forward-looking statements that reflect our current
views with respect to, among other things, future events and
financial performance. We generally identify forward-looking
statements by terminology such as outlook,
believes, expects,
potential, continues, may,
will, could, should,
seeks, approximately,
predicts, intends, plans,
estimates, anticipates or the negative
version of those words or other comparable words. These
forward-looking statements are not historical facts, and are
based on current expectations, estimates and projections about
our industry, managements beliefs and certain assumptions
made by management, many of which, by their nature, are
inherently uncertain and beyond our control. Accordingly, you
are cautioned that any such forward-looking statements are not
guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to
predict. Although we believe that the expectations reflected in
such forward-looking statements are reasonable as of the date
made, expectations may prove to have been materially different
from the results expressed or implied by such forward-looking
statements. Unless otherwise required by law, we also disclaim
any obligation to update our view of any such risks or
uncertainties or to announce publicly the result of any
revisions to the forward-looking statements made in this
prospectus. A number of important factors could cause actual
results to differ materially from those indicated by the
forward-looking statements, including, but not limited to, those
factors described in Risk Factors and
Managements Discussion and Analysis of Financial
Condition and Results of Operations. These factors include
without limitation:
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deterioration of general business and economic conditions,
including the real estate and financial markets, in the United
States and in the geographic regions and communities we serve;
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risks related to liquidity;
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changes in interest rates that affect the pricing of our
financial products, the demand for our financial services and
the valuation of our financial assets and liabilities, mortgage
servicing rights and mortgages held for sale;
|
|
|
|
risk of higher lease and loan charge-offs;
|
|
|
|
legislative or regulatory actions affecting or concerning
mortgage loan modification and refinancing;
|
|
|
|
concentration of our commercial real estate loan portfolio, in
particular, those secured by properties located in Florida;
|
|
|
|
higher than normal delinquency and default rates affecting our
mortgage banking business;
|
|
|
|
limited ability to rely on brokered deposits as a part of our
funding strategy;
|
|
|
|
concentration of mass-affluent customers and jumbo mortgages;
|
|
|
|
hedging strategies we use to manage our mortgage pipeline;
|
|
|
|
risks related to securities held in our securities portfolio;
|
|
|
|
delinquencies on our equipment leases and reductions in the
resale value of leased equipment;
|
|
|
|
customer concerns over deposit insurance;
|
|
|
|
failure to prevent a breach to our Internet-based system and
online commerce security;
|
|
|
|
soundness of other financial institutions;
|
|
|
|
changes in currency exchange rates or other political or
economic changes in certain foreign countries;
|
39
|
|
|
|
|
the competitive industry and market areas in which we operate;
|
|
|
|
historical growth rate and performance may not be a reliable
indicator of future results;
|
|
|
|
loss of key personnel;
|
|
|
|
fraudulent and negligent acts by loan applicants, mortgage
brokers, other vendors and our employees;
|
|
|
|
compliance with laws and regulations that govern our operations;
|
|
|
|
failure to establish and maintain effective internal controls
and procedures;
|
|
|
|
impact of recent and future legal and regulatory changes,
including the Dodd-Frank Act;
|
|
|
|
effects of changes in existing U.S. government or
government-sponsored mortgage programs;
|
|
|
|
changes in laws and regulations that may restrict our ability to
originate or increase our risk of liability with respect to
certain mortgage loans;
|
|
|
|
risks related to the continuing integration of acquired
businesses and any future acquisitions;
|
|
|
|
legislative action regarding foreclosures or bankruptcy laws;
|
|
|
|
environmental liabilities with respect to properties that we
take title to upon foreclosure; and
|
|
|
|
inability of EverBank, our banking subsidiary, to pay dividends.
|
40
USE OF
PROCEEDS
We estimate that the net proceeds to us from the sale of our
common stock in this offering will be $225.1 million, at an
assumed initial public offering price of $13.00 per share, the
midpoint of the price range set forth on the cover of this
prospectus, and after deducting estimated underwriting discounts
and commissions and estimated offering expenses. Our net
proceeds will increase by approximately $45.9 million if
the underwriters option to purchase additional shares is
exercised in full. Each $1.00 increase (decrease) in the assumed
initial public offering price of $13.00 per share, the midpoint
of the price range set forth on the cover of this prospectus,
would increase (decrease) the net proceeds to us of this
offering by $18.0 million, or $21.5 million if the
underwriters option is exercised in full, assuming the
number of shares offered by us, as set forth on the cover of
this prospectus, remains the same and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses.
We will not receive any proceeds from the sale of shares of
common stock by the selling stockholders.
We intend to use the net proceeds of this offering for general
corporate purposes, which may include organic growth or the
acquisition of businesses or assets that we believe are
complementary to our present business and provide attractive
risk-adjusted returns.
41
REORGANIZATION
In September 2010, EverBank Financial Corp, a Florida
corporation, or EverBank Florida, formed EverBank Financial
Corp, a Delaware corporation, or EverBank Delaware. EverBank
Delaware holds no assets and has no subsidiaries and has not
engaged in any business or other activities except in connection
with its formation and as the registrant in this offering. Prior
to the consummation of this offering, EverBank Florida will
merge with and into EverBank Delaware, with EverBank Delaware
continuing as the surviving corporation and succeeding to all of
the assets, liabilities and business of EverBank Florida. In the
merger, (1) all of the outstanding shares of common stock
of EverBank Florida will be converted into approximately
77,994,699 shares of EverBank Delaware common stock,
(2) all of the holders of outstanding shares of
Series B Preferred Stock will receive a pro rata special
one-time cash dividend of an aggregate of approximately
$1.1 million, and (3) all of the outstanding shares of
Series B Preferred Stock will be converted into
15,964,644 shares of EverBank Delaware common stock.
The Reorganization will cause the reincorporation of
EverBank Florida in Delaware. It will not result in any change
of the business, management, jobs, fiscal year, assets,
liabilities or location of the principal facilities of EverBank
Florida.
42
DIVIDEND
POLICY
We have historically not paid cash dividends to holders of our
common stock. However, we anticipate paying a quarterly cash
dividend of $0.02 per share, commencing in the third quarter of
2012, subject to the discretion of our Board of Directors and
dependent on, among other things, our results of operations,
financial condition, level of indebtedness, cash requirements,
contractual restrictions and other factors that our Board of
Directors may deem relevant. In addition, our ability to pay
dividends may be limited by covenants of any future outstanding
indebtedness we or our subsidiaries incur. Dividends from
EverBank will be the principal source of funds for the payment
of dividends on our common stock.
EverBank is subject to certain regulatory restrictions that may
limit its ability to pay dividends to us and, therefore, our
ability to pay dividends to our stockholders. EverBank must seek
approval from the FRB prior to any declaration of the payment of
any dividends or other capital distributions to us. EverBank may
not pay dividends to us if, after paying those dividends, it
would fail to meet the required minimum levels under risk-based
capital guidelines and the minimum leverage and tangible capital
ratio requirements, or in the event the FRB notified EverBank
that it was in need of more than normal supervision. Further,
under the Federal Deposit Insurance Act, or FDIA, an insured
depository institution such as EverBank is prohibited from
making capital distributions, including the payment of
dividends, if, after making such distribution, the institution
would become undercapitalized. Payment of dividends
by EverBank also may be restricted at any time at the discretion
of the appropriate regulator if it deems the payment to
constitute an unsafe and unsound banking practice.
See Managements Discussion and Analysis of Financial
Condition and Results of Operations Restrictions on
Paying Dividends and Regulation and
Supervision Regulation of Federal Savings
Banks Limitation on Capital Distributions.
43
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
our capitalization as of December 31, 2011:
|
|
|
|
|
on an actual basis after giving effect to the
15-for-1
stock split of EverBank Floridas common stock, but before
giving effect to the Reorganization; and
|
|
|
|
on an as adjusted basis after giving effect to (1) the
Reorganization, (2) the sale of 19,220,001 shares of
our common stock offered by us at a purchase price equal to
$13.00 per share, the midpoint of the price range set forth on
the cover page of this prospectus and the receipt of estimated
net proceeds therefrom of $225.1 million, after deducting
the estimated underwriting discounts and commissions and
estimated offering expenses, payable by us, and assuming no
exercise of the underwriters option to purchase additional
shares from us, (3) conversion of Series A Preferred
Stock into 2,801,160 shares of our common stock on
March 1, 2012, and (4) payment of an aggregate of
approximately $4.5 million to the holders of Series A
Preferred Stock in connection with the conversion of
Series A Preferred Stock into common stock on March 1,
2012.
|
You should read this information together with the consolidated
historical and pro forma financial statements and the related
notes thereto included in this prospectus and the
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the Selected
Financial Information sections of this prospectus.
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2011
|
|
|
|
|
|
|
As
|
|
|
|
Actual
|
|
|
Adjusted
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
294,981
|
|
|
$
|
514,545
|
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
Other borrowings
|
|
|
1,257,879
|
|
|
|
1,257,879
|
|
Trust preferred securities
|
|
|
103,750
|
|
|
|
103,750
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
1,361,629
|
|
|
|
1,361,629
|
|
Shareholders Equity:
|
|
|
|
|
|
|
|
|
Preferred stock, 1,000,000 shares authorized actual;
10,000,000 shares authorized, as adjusted:
|
|
|
|
|
|
|
|
|
Series A Preferred Stock, $0.01 par value;
186,744 shares issued and outstanding, actual; no shares
issued and outstanding, as adjusted
|
|
|
2
|
|
|
|
|
|
Series B Preferred Stock, $0.01 par value;
136,544 shares issued and outstanding, actual; no shares
issued and outstanding, as adjusted
|
|
|
1
|
|
|
|
|
|
Common stock, $0.01 par value; 150,000,000 shares
authorized, 75,094,375 shares issued and outstanding,
actual; 500,000,000 shares authorized,
113,179,344 shares issued and outstanding, as
adjusted(1)
|
|
|
751
|
|
|
|
1,131
|
|
Additional paid-in capital
|
|
|
561,247
|
|
|
|
785,989
|
|
Retained earnings
|
|
|
513,413
|
|
|
|
507,858
|
|
Accumulated other comprehensive loss
|
|
|
(107,749
|
)
|
|
|
(107,749
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
967,665
|
|
|
|
1,187,229
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
2,329,294
|
|
|
$
|
2,548,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As adjusted column includes an aggregate 18,765,804 shares
of our common stock that were issued upon conversion of the
Series A Preferred Stock and will be issued upon conversion
of the Series B Preferred Stock. |
44
Both columns include 5,950,046 shares of common stock held
in escrow at December 31, 2011 as a result of our
acquisition of Tygris. Pursuant to the terms of the Tygris
acquisition agreement and related escrow agreement, we are
required to review the average carrying value of the remaining
Tygris portfolio annually and upon certain events, including
this offering, release a number of escrowed shares to the former
Tygris shareholders to the extent that the aggregate value of
the escrowed shares (on a determined per share value) equals
17.5% of the average carrying value of the remaining Tygris
portfolio on the date of each release (see
Business Recent Acquisitions
Acquisition of Tygris Commercial Finance Group, Inc.).
Based on our first annual review of the average carrying value
of the remaining Tygris portfolio, we released 2,808,175
escrowed shares of our common stock to the former Tygris
shareholders on April 25, 2011. As of December 31,
2011, 5,950,046 shares of our common stock remain in
escrow. Following the offering, based on our second annual
review of the carrying value of the remaining Tygris portfolio,
we will release 2,915,043 escrowed shares of our common stock to
the former Tygris shareholders. We expect that another partial
release of the escrowed shares to the former Tygris shareholders
will occur in connection with the consummation of this offering.
As the necessary valuation of the remaining Tygris portfolio for
the partial release of escrowed shares triggered by this
offering must be made after the consummation of this offering,
the number of shares to be released from escrow cannot be
determined at present.
Both columns exclude 11,507,077 shares of our common stock
issuable upon exercise of outstanding stock options at a
weighted-average exercise price of $11.04 per share,
470,605 shares of common stock issuable upon the vesting of
outstanding restricted stock units with a remaining weighted
average vesting period, as of December 31, 2011, of 1.4 years
and 18,574,468 additional shares of common stock reserved for
issuance under our equity incentive plans.
45
DILUTION
If you invest in our common stock, your ownership interest will
be diluted to the extent of the difference between the initial
public offering price per share of our common stock and the as
adjusted net tangible book value per share of our common stock
immediately after this offering. Our historical net tangible
book value as of December 31, 2011, after giving effect to
the conversion of the Series A Preferred Stock and the
Reorganization, was $944.5 million, or $10.05 per as
converted common share at period end. Net tangible book value
per share is determined by dividing our total tangible assets
less our total liabilities by the number of shares of common
stock outstanding.
After giving effect to the Reorganization and our sale of
19,220,001 shares of common stock at an assumed initial
public offering price of $13.00 per share, the midpoint of the
range on the cover of this prospectus, and after deducting
estimated underwriting discounts and commissions and estimated
offering expenses, our as adjusted net tangible book value as of
December 31, 2011 would have been $1,169.6 million, or
$10.33 per share. This amount represents an immediate increase
in net tangible book value to our existing stockholders of $0.28
per share and an immediate dilution to new investors of $2.67
per share. The following table illustrates this per share
dilution:
|
|
|
|
|
|
|
|
|
Assumed initial public offering price per share
|
|
|
|
|
|
$
|
13.00
|
|
Historical net tangible book value per as converted common share
at December 31, 2011
|
|
$
|
10.05
|
|
|
|
|
|
Increase in net tangible book value per share attributable to
investors purchasing shares in this offering
|
|
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As adjusted net tangible book value per share after giving
effect to this offering
|
|
|
|
|
|
|
10.33
|
|
|
|
|
|
|
|
|
|
|
Dilution in as adjusted net tangible book value per share to
investors in this offering
|
|
|
|
|
|
$
|
2.67
|
|
|
|
|
|
|
|
|
|
|
Each $1.00 increase (decrease) in the assumed public offering
price of $13.00 per share would increase (decrease) our as
adjusted net tangible book value by approximately
$18.0 million, or approximately $0.16 per share, and the
dilution per share to investors in this offering by
approximately $0.84 per share, assuming that the number of
shares offered by us, as set forth on the cover page of this
prospectus, remains the same and after deducting underwriting
discounts and commissions and offering expenses. The as adjusted
information discussed above is illustrative only and will adjust
based on the actual public offering price and other terms of
this offering determined at pricing.
If the underwriters exercise their option to purchase additional
shares in full in this offering at the assumed offering price of
$13.00 per share, our as adjusted net tangible book value
at December 31, 2011 would be $1,215.4 million, or
$10.39 per share, representing an immediate increase in as
adjusted net tangible book value to our existing stockholders of
$0.34 per share and an immediate dilution to investors
participating in this offering of $2.61 per share.
The following table summarizes as of December 31, 2011, on
an as adjusted basis and after giving effect to the
Reorganization, the number of shares of common stock purchased
from us, the total consideration paid to us and the average
price per share paid by our existing stockholders and by
investors participating in this offering, based upon an assumed
initial public offering price of
46
$13.00 per share, the mid-point of the range on the cover
of this prospectus, and before deducting estimated underwriting
discounts and commissions and estimated offering expenses
payable by us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Average
|
|
|
|
Shares Purchased
|
|
|
Consideration (000s)
|
|
|
Price per
|
|
|
|
Number
|
|
|
Percentage
|
|
|
Amount
|
|
|
Percentage
|
|
|
Share
|
|
|
Existing stockholders
|
|
|
93,959,343
|
|
|
|
83.02
|
%
|
|
$
|
562,002
|
|
|
|
69.22
|
%
|
|
$
|
5.98
|
|
New investors
|
|
|
19,220,001
|
|
|
|
16.98
|
%
|
|
$
|
249,860
|
|
|
|
30.78
|
%
|
|
|
13.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
113,179,344
|
|
|
|
100
|
%
|
|
$
|
811,862
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of shares of common stock by the selling stockholders in
this offering will reduce the number of shares of common stock
held by existing stockholders to 88,029,344 or approximately
77.78% of the total shares of common stock outstanding after
this offering, and will increase the number of shares held by
new investors to 25,150,000 or approximately 22.22% of the total
shares of common stock outstanding after this offering.
The above discussion and tables do not include
12,222,787 shares of common stock issuable upon the
exercise of options outstanding as of April 15, 2012 at a
weighted average exercise price of $11.21 per share and
406,999 shares of common stock issuable upon the vesting of
restricted stock units outstanding as of April 15, 2012.
Effective upon the completion of this offering, an additional
15,000,000 shares of our common stock will be reserved for
future issuance under our equity incentive plans. To the extent
that any of these options and restricted stock units are
exercised, new options or restricted stock units are issued
under our equity incentive plans or we issue additional shares
of common stock in the future, there will be further dilution to
investors participating in this offering.
47
SELECTED
FINANCIAL INFORMATION
The selected statement of income data for the years ended
December 31, 2011, 2010 and 2009 and the selected balance
sheet data as of December 31, 2011 and 2010 have been
derived from our audited financial statements included elsewhere
in this prospectus. The selected income statement data for the
years ended December 31, 2008 and 2007 and the selected
balance sheet data as of December 31, 2009, 2008 and 2007
have been derived from our audited financial statements that are
not included in this prospectus. The selected financial
information should be read in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and the historical and
pro forma financial statements and related notes thereto
included elsewhere in this prospectus. We have prepared the
unaudited consolidated financial information on the same basis
as our audited consolidated financial information.
We consummated several significant transactions in prior fiscal
periods, including the acquisition of Tygris in February 2010
and the acquisition of the banking operations of Bank of Florida
in May 2010. Accordingly, our operating results for the
historical periods presented below are not comparable and may
not be predictive of future results. For additional information,
see the consolidated historical and pro forma financial
statements and the related notes thereto included in this
prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions, except share and per share data)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
588.2
|
|
|
$
|
612.5
|
|
|
$
|
440.6
|
|
|
$
|
322.4
|
|
|
$
|
263.4
|
|
Interest expense
|
|
|
135.9
|
|
|
|
147.2
|
|
|
|
163.2
|
|
|
|
202.6
|
|
|
|
185.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
452.3
|
|
|
|
465.3
|
|
|
|
277.4
|
|
|
|
119.8
|
|
|
|
78.4
|
|
Provision for loan and lease
losses(1)
|
|
|
49.7
|
|
|
|
79.3
|
|
|
|
121.9
|
|
|
|
37.3
|
|
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan and lease losses
|
|
|
402.6
|
|
|
|
386.0
|
|
|
|
155.5
|
|
|
|
82.5
|
|
|
|
72.8
|
|
Noninterest
income(2)
|
|
|
233.1
|
|
|
|
357.8
|
|
|
|
232.1
|
|
|
|
175.8
|
|
|
|
177.1
|
|
Noninterest
expense(3)
|
|
|
554.2
|
|
|
|
493.9
|
|
|
|
299.2
|
|
|
|
221.0
|
|
|
|
202.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
81.5
|
|
|
|
249.9
|
|
|
|
88.4
|
|
|
|
37.4
|
|
|
|
47.2
|
|
Provision for income taxes
|
|
|
28.8
|
|
|
|
61.0
|
|
|
|
34.9
|
|
|
|
14.2
|
|
|
|
17.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
52.7
|
|
|
|
188.9
|
|
|
|
53.5
|
|
|
|
23.1
|
|
|
|
29.4
|
|
Discontinued operations, net of income
taxes(4)
|
|
|
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
|
20.5
|
|
|
|
(1.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
52.7
|
|
|
|
188.9
|
|
|
|
53.4
|
|
|
|
43.6
|
|
|
|
27.5
|
|
Loss (income) attributable to non-controlling interest in
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.4
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the Company
|
|
$
|
52.7
|
|
|
$
|
188.9
|
|
|
$
|
53.4
|
|
|
$
|
46.0
|
|
|
$
|
30.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(units in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
74,892
|
|
|
|
72,479
|
|
|
|
42,126
|
|
|
|
41,029
|
|
|
|
40,692
|
|
Diluted
|
|
|
77,506
|
|
|
|
74,589
|
|
|
|
43,299
|
|
|
|
42,196
|
|
|
|
41,946
|
|
Earnings from continuing operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.55
|
|
|
$
|
2.00
|
|
|
$
|
0.80
|
|
|
$
|
0.43
|
|
|
$
|
0.68
|
|
Diluted
|
|
|
0.54
|
|
|
|
1.94
|
|
|
|
0.78
|
|
|
|
0.41
|
|
|
|
0.66
|
|
Net tangible book value per as converted common share at period
end:(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
10.12
|
|
|
$
|
10.65
|
|
|
$
|
8.54
|
|
|
$
|
6.96
|
|
|
$
|
5.39
|
|
Diluted
|
|
|
9.93
|
|
|
|
10.40
|
|
|
|
8.33
|
|
|
|
6.79
|
|
|
|
5.14
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
295.0
|
|
|
$
|
1,169.2
|
|
|
$
|
23.3
|
|
|
$
|
62.9
|
|
|
$
|
33.9
|
|
Investment securities
|
|
|
2,191.8
|
|
|
|
2,203.6
|
|
|
|
1,678.9
|
|
|
|
715.7
|
|
|
|
283.6
|
|
Loans held for sale
|
|
|
2,725.3
|
|
|
|
1,237.7
|
|
|
|
1,283.0
|
|
|
|
915.2
|
|
|
|
943.5
|
|
Loans and leases held for investment, net
|
|
|
6,441.5
|
|
|
|
6,005.6
|
|
|
|
4,072.7
|
|
|
|
4,577.0
|
|
|
|
3,722.3
|
|
Total assets
|
|
|
13,041.7
|
|
|
|
12,007.9
|
|
|
|
8,060.2
|
|
|
|
7,048.3
|
|
|
|
5,521.9
|
|
Deposits
|
|
|
10,265.8
|
|
|
|
9,683.1
|
|
|
|
6,315.3
|
|
|
|
5,003.0
|
|
|
|
3,892.4
|
|
Total liabilities
|
|
|
12,074.0
|
|
|
|
10,994.7
|
|
|
|
7,506.3
|
|
|
|
6,628.6
|
|
|
|
5,273.4
|
|
Total stockholders equity
|
|
|
967.7
|
|
|
|
1,013.2
|
|
|
|
553.9
|
|
|
|
419.6
|
|
|
|
248.5
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2011, provision for loan and lease losses
includes a $4.9 million increase in non-accretable discount
related to Bank of Florida acquired credit-impaired loans, a
$1.9 million impact of change in ALLL methodology and a
$10.0 million impact of early adoption of TDR guidance and
policy change. For the year ended December 31, 2010,
provision for loan and lease losses includes a $6.2 million
increase in non-accretable discount related to Bank of Florida
acquired credit-impaired loans.
|
|
(2)
|
|
For the year ended
December 31, 2011, noninterest income includes a
$4.7 million gain on repurchase of trust preferred
securities including $0.3 million resulting from the unwind
of the associated cash flow hedge and a $39.5 million
impairment charge related to MSR. For the year ended
December 31, 2010, noninterest income includes a
$68.1 million non-recurring bargain purchase gain
associated with the Tygris acquisition, a $19.9 million
gain on sale of investment securities due to portfolio
concentration repositioning and a $5.7 million gain on
repurchase of trust preferred securities.
|
|
(3)
|
|
For the year ended
December 31, 2011, noninterest expense includes
$27.1 million in transaction and non-recurring regulatory
related expense and an $8.7 million decrease in fair value
of the Tygris indemnification asset resulting from a decrease in
estimated future credit losses. The carrying value of the
indemnification asset was $0 as of December 31, 2011. For
the year ended December 31, 2010, noninterest expense
includes $9.7 million in transaction related expense, a
$10.3 million loss on early extinguishment of acquired debt
and a $22.0 million decrease in fair value of the Tygris
indemnification asset.
|
|
(4)
|
|
Discontinued operations for the
year ended December 31, 2008 includes a $42.7 million
after tax gain on the sale of our reverse mortgage business to
an unaffiliated third party net of an $18.8 million after
tax loss from operations of the reverse mortgage business before
the sale.
|
|
(5)
|
|
Calculated as tangible
shareholders equity divided by shares of common stock. For
purposes of computing net tangible book value per as converted
common share, tangible book value equals shareholders
equity less goodwill and other intangible assets.
|
|
|
|
Basic and diluted net tangible book
value per as converted common share is calculated using a
denominator that includes actual period end common shares
outstanding and additional common shares assuming conversion of
all outstanding preferred stock to common stock. Diluted net
tangible book value per as converted common share also includes
in the denominator common stock equivalent shares related to
stock options and common stock equivalent shares related to
nonvested restricted stock units.
|
|
|
|
Net tangible book value per as
converted common share is a non-GAAP financial measure, and its
most directly comparable GAAP financial measure is book value
per common share.
|
49
SUMMARY QUARTERLY
FINANCIAL DATA
The summary quarterly financial information set forth below for
each of the last six quarters has been derived from our
unaudited interim consolidated financial statements and other
financial information. The summary historical quarterly
financial information includes all adjustments consisting of
normal recurring accruals that we consider necessary for a fair
presentation of the financial position and the results of
operations for these periods.
We consummated several significant transactions in prior fiscal
periods, including the acquisition of Tygris in February 2010
and the acquisition of the banking operations of Bank of Florida
in an FDIC-assisted transaction in May 2010. Accordingly, our
operating results for the historical periods presented below are
not comparable and may not be predictive of future results.
The information below is only a summary and should be read in
conjunction with Managements Discussion and Analysis
of Financial Condition and Results of Operations and the
consolidated historical and pro forma financial statements and
the related notes thereto included in this prospectus.
As indicated in the notes to the tables below, certain items
included in the tables are non-GAAP financial measures. For a
more detailed discussion of these items, including a discussion
of why we believe these items are meaningful and a
reconciliation of each of these items to the most directly
comparable generally accepted accounting principles, or GAAP,
financial measure, see Managements Discussion and
Analysis of Financial Condition and Results of
Operations Primary Factors Used to Evaluate Our
Business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2011
|
|
|
2011
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
|
(In millions, except share and per share data)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
145.7
|
|
|
$
|
144.3
|
|
|
$
|
148.1
|
|
|
$
|
150.1
|
|
|
$
|
150.1
|
|
|
$
|
161.3
|
|
Interest expense
|
|
|
30.9
|
|
|
|
33.4
|
|
|
|
35.2
|
|
|
|
36.4
|
|
|
|
37.6
|
|
|
|
40.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
114.8
|
|
|
|
110.9
|
|
|
|
112.9
|
|
|
|
113.7
|
|
|
|
112.5
|
|
|
|
121.1
|
|
Provision for loan and lease
losses(1)
|
|
|
10.4
|
|
|
|
12.3
|
|
|
|
9.0
|
|
|
|
18.0
|
|
|
|
20.2
|
|
|
|
17.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan and lease losses
|
|
|
104.4
|
|
|
|
98.6
|
|
|
|
103.9
|
|
|
|
95.7
|
|
|
|
92.3
|
|
|
|
103.7
|
|
Noninterest
income(2)
|
|
|
61.0
|
|
|
|
53.4
|
|
|
|
52.9
|
|
|
|
65.9
|
|
|
|
79.3
|
|
|
|
71.9
|
|
Noninterest
expense(3)
|
|
|
147.7
|
|
|
|
139.6
|
|
|
|
121.7
|
|
|
|
145.2
|
|
|
|
127.9
|
|
|
|
152.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
17.7
|
|
|
|
12.4
|
|
|
|
35.1
|
|
|
|
16.3
|
|
|
|
43.7
|
|
|
|
23.6
|
|
Provision for income taxes
|
|
|
4.0
|
|
|
|
4.6
|
|
|
|
13.3
|
|
|
|
6.9
|
|
|
|
19.3
|
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
13.8
|
|
|
$
|
7.8
|
|
|
$
|
21.8
|
|
|
$
|
9.4
|
|
|
$
|
24.4
|
|
|
$
|
25.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocated to common shareholders
|
|
$
|
11.0
|
|
|
$
|
6.2
|
|
|
$
|
17.4
|
|
|
$
|
7.0
|
|
|
$
|
17.5
|
|
|
$
|
18.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(units in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
75,040
|
|
|
|
74,996
|
|
|
|
74,792
|
|
|
|
74,735
|
|
|
|
74,643
|
|
|
|
74,635
|
|
Diluted
|
|
|
76,908
|
|
|
|
77,709
|
|
|
|
77,568
|
|
|
|
77,621
|
|
|
|
76,826
|
|
|
|
76,993
|
|
Earnings from continuing operations per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.15
|
|
|
$
|
0.08
|
|
|
$
|
0.23
|
|
|
$
|
0.09
|
|
|
$
|
0.23
|
|
|
$
|
0.25
|
|
Diluted
|
|
|
0.14
|
|
|
|
0.08
|
|
|
|
0.23
|
|
|
|
0.09
|
|
|
|
0.23
|
|
|
|
0.24
|
|
Net tangible book value per as converted common share at period
end(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
10.12
|
|
|
$
|
10.19
|
|
|
$
|
10.77
|
|
|
$
|
10.71
|
|
|
$
|
10.65
|
|
|
$
|
10.33
|
|
Diluted
|
|
|
9.93
|
|
|
|
9.91
|
|
|
|
10.46
|
|
|
|
10.40
|
|
|
|
10.40
|
|
|
|
10.07
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2011
|
|
|
2011
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
|
(In millions)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
295.0
|
|
|
$
|
459.3
|
|
|
$
|
683.6
|
|
|
$
|
650.0
|
|
|
$
|
1,169.2
|
|
|
$
|
675.2
|
|
Investment securities
|
|
|
2,191.8
|
|
|
|
2,651.1
|
|
|
|
2,930.4
|
|
|
|
2,852.8
|
|
|
|
2,203.6
|
|
|
|
2,365.3
|
|
Loans held for sale
|
|
|
2,725.3
|
|
|
|
1,792.7
|
|
|
|
792.4
|
|
|
|
615.3
|
|
|
|
1,237.7
|
|
|
|
1,436.0
|
|
Loans and leases held for investment, net
|
|
|
6,441.5
|
|
|
|
6,197.7
|
|
|
|
6,767.0
|
|
|
|
6,445.6
|
|
|
|
6,005.6
|
|
|
|
5,692.6
|
|
Total assets
|
|
|
13,041.7
|
|
|
|
12,550.8
|
|
|
|
12,520.2
|
|
|
|
11,889.4
|
|
|
|
12,007.9
|
|
|
|
11,583.4
|
|
Deposits
|
|
|
10,265.8
|
|
|
|
10,206.9
|
|
|
|
9,936.5
|
|
|
|
9,685.5
|
|
|
|
9,683.1
|
|
|
|
9,295.6
|
|
Total liabilities
|
|
|
12,074.0
|
|
|
|
11,577.1
|
|
|
|
11,492.5
|
|
|
|
10,868.8
|
|
|
|
10,994.7
|
|
|
|
10,601.6
|
|
Total shareholders equity
|
|
|
967.7
|
|
|
|
973.7
|
|
|
|
1,027.7
|
|
|
|
1,020.6
|
|
|
|
1,013.2
|
|
|
|
981.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2011
|
|
|
2011
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
Capital Ratios (period end):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible equity to tangible
assets(5)
|
|
|
7.3
|
%
|
|
|
7.6
|
%
|
|
|
8.1
|
%
|
|
|
8.4
|
%
|
|
|
8.3
|
%
|
|
|
8.3
|
%
|
Tier 1 (core) capital (bank
level)(6)
|
|
|
8.0
|
%
|
|
|
8.3
|
%
|
|
|
8.3
|
%
|
|
|
8.7
|
%
|
|
|
8.7
|
%
|
|
|
8.5
|
%
|
Total risk-based capital ratio (bank
level)(7)
|
|
|
15.7
|
%
|
|
|
15.7
|
%
|
|
|
16.4
|
%
|
|
|
16.9
|
%
|
|
|
17.0
|
%
|
|
|
16.1
|
%
|
Performance Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to the Company from continuing
operations (in
millions)(8)
|
|
$
|
31.9
|
|
|
$
|
25.6
|
|
|
$
|
25.5
|
|
|
$
|
24.5
|
|
|
$
|
34.4
|
|
|
$
|
27.2
|
|
Return on average assets
|
|
|
0.43
|
%
|
|
|
0.25
|
%
|
|
|
0.73
|
%
|
|
|
0.32
|
%
|
|
|
0.82
|
%
|
|
|
0.88
|
%
|
Return on average equity
|
|
|
5.62
|
%
|
|
|
3.08
|
%
|
|
|
8.50
|
%
|
|
|
3.68
|
%
|
|
|
9.74
|
%
|
|
|
10.34
|
%
|
Adjusted return on average
assets(9)
|
|
|
0.99
|
%
|
|
|
0.83
|
%
|
|
|
0.85
|
%
|
|
|
0.82
|
%
|
|
|
1.15
|
%
|
|
|
0.96
|
%
|
Adjusted return on average
equity(9)
|
|
|
13.04
|
%
|
|
|
10.19
|
%
|
|
|
9.94
|
%
|
|
|
9.58
|
%
|
|
|
13.72
|
%
|
|
|
11.27
|
%
|
|
|
|
(1)
|
|
For the three months ended
December 31, 2011, provision for loan and lease losses
includes a $3.6 million increase in non-accretable discount
related to Bank of Florida acquired credit-impaired loans. For
the three months ended September 30, 2011, provision for
loan and lease losses includes a $0.5 million increase in
non-accretable discount related to Bank of Florida acquired
credit-impaired loans. For the three months ended June 30,
2011, provision for loan and lease losses includes a
$2.5 million impact of early adoption of TDR guidance and
policy change. For the three months ended March 31, 2011,
provision for loan and lease losses includes a $0.8 million
increase in non-accretable discount related to Bank of Florida
acquired credit-impaired loans, $1.9 million impact of
change in ALLL methodology and a $7.5 million impact of
early adoption of TDR guidance and policy change. For the three
months ended December 31, 2010, provision for loan and
lease losses includes a $6.2 million increase in
non-accretable discount related to Bank of Florida acquired
credit-impaired loans.
|
|
(2)
|
|
For the three months ended
December 31, 2011, noninterest income includes an
$18.8 million impairment charge related to MSR. For the
three months ended September 30, 2011, noninterest income
includes a $20.7 million impairment charge related to MSR.
For the three months ended March 31, 2011, noninterest
income includes a $4.7 million gain on repurchase of trust
preferred securities including $0.3 million resulting from
the unwind of the associated cash flow hedge. For the three
months ended September 30, 2010, noninterest income
includes a $1.6 million gain on sale of investment
securities due to portfolio concentration repositioning.
|
|
(3)
|
|
For the three months ended
December 31, 2011, noninterest expense includes
$7.0 million in transaction and non-recurring regulatory
related expense. For the three months ended September 30,
2011, noninterest expense includes $7.7 million in
transaction and non-recurring regulatory related expense. For
the three months ended June 30, 2011, noninterest expense
includes $3.4 million in transaction and non-recurring
regulatory related expense. For the three months ended
March 31, 2011, noninterest expense includes
$9.1 million in transaction and non-recurring regulatory
related expense and an $8.7 million decrease in fair value
of the Tygris
|
51
|
|
|
|
|
indemnification asset resulting
from a decrease in estimated future credit losses. For the three
months ended December 31, 2010, noninterest expense
includes $3.2 million in transaction related expense and a
$2.0 million decrease in fair value of the Tygris
indemnification asset resulting from a decrease in estimated
future credit losses. For the three months ended
September 30, 2010, noninterest expense includes
$2.5 million in transaction related expense and a
$20.0 million decrease in fair value of the Tygris
indemnification asset resulting from a decrease in estimated
future credit losses.
|
|
(4)
|
|
Calculated as tangible
shareholders equity divided by shares of common stock. For
purposes of computing net tangible book value per as converted
common share, tangible book value equals shareholders
equity less goodwill and other intangible assets.
|
|
|
|
Basic and diluted net tangible book
value per as converted common share are calculated using a
denominator that includes actual period end common shares
outstanding and additional common shares assuming conversion of
all outstanding preferred stock to common stock. Diluted net
tangible book value per as converted common share also includes
in the denominator common stock equivalent shares related to
stock options and common stock equivalent shares related to
nonvested restricted stock units.
|
|
|
|
Net tangible book value per as
converted common share is a non-GAAP financial measure, and its
most directly comparable GAAP financial measure is book value
per common share.
|
|
(5)
|
|
Calculated as tangible
shareholders equity divided by tangible assets, after
deducting goodwill and intangible assets from the numerator and
the denominator. Tangible equity to tangible assets is a
non-GAAP financial measure, and the most directly comparable
GAAP financial measure for tangible equity is shareholders
equity and the most directly comparable GAAP financial measure
for tangible assets is total assets.
|
|
(6)
|
|
Calculated as Tier 1 (core)
capital divided by adjusted total assets. Total assets are
adjusted for goodwill, deferred tax assets disallowed from
Tier 1 (core) capital and other regulatory adjustments.
|
|
(7)
|
|
Calculated as total risk-based
capital divided by total risk-weighted assets. Risk-based
capital includes Tier 1 (core) capital, allowance for loan
and lease losses, subject to limitations, and other regulatory
adjustments.
|
52
|
|
|
(8)
|
|
Adjusted net income attributable to
the Company from continuing operations includes adjustments to
our net income attributable to the Company from continuing
operations for certain material items that we believe are not
reflective of our ongoing business or operating performance
including the Tygris and Bank of Florida acquisitions. A
reconciliation of adjusted net income attributable to the
Company from continuing operations to net income attributable to
the Company from continuing operations, which is the most
directly comparable GAAP measure, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2011
|
|
|
2011
|
|
|
2011
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Net income attributable to the Company from continuing operations
|
|
$
|
13,760
|
|
|
$
|
7,758
|
|
|
$
|
21,795
|
|
|
$
|
9,416
|
|
|
$
|
24,404
|
|
|
$
|
25,010
|
|
Gain on sale of investment securities due to portfolio
concentration repositioning, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(981
|
)
|
Gain on repurchase of trust preferred securities, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,910
|
)
|
|
|
|
|
|
|
|
|
Transaction and non-recurring regulatory related expense, net of
tax
|
|
|
4,331
|
|
|
|
4,751
|
|
|
|
2,136
|
|
|
|
5,613
|
|
|
|
1,986
|
|
|
|
1,556
|
|
Decrease in fair value of Tygris indemnification asset resulting
from a decrease in estimated future credit losses, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,382
|
|
|
|
1,254
|
|
|
|
12,400
|
|
Increase in Bank of Florida non-accretable discount, net of tax
|
|
|
2,208
|
|
|
|
298
|
|
|
|
|
|
|
|
501
|
|
|
|
3,837
|
|
|
|
|
|
Impact of change in ALLL methodology, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,178
|
|
|
|
|
|
|
|
|
|
Early adoption of TDR guidance and policy change, net of tax
|
|
|
|
|
|
|
|
|
|
|
1,561
|
|
|
|
4,664
|
|
|
|
|
|
|
|
|
|
MSR impairment, net of tax
|
|
|
11,638
|
|
|
|
12,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit (expense) related to revaluation of Tygris net
unrealized built-in losses, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
691
|
|
|
|
2,900
|
|
|
|
(10,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to the Company from continuing
operations
|
|
$
|
31,937
|
|
|
$
|
25,631
|
|
|
$
|
25,492
|
|
|
$
|
24,535
|
|
|
$
|
34,381
|
|
|
$
|
27,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)
|
|
Adjusted return on average assets
equals adjusted net income attributable to the Company from
continuing operations divided by average total assets and
adjusted return on average equity equals adjusted net income
attributable to the Company from continuing operations divided
by average shareholders equity. Adjusted net income
attributable to the Company from continuing operations is a
non-GAAP measure of our financial performance and its most
directly comparable GAAP measure is net income attributable to
the Company from continuing operations. For a reconciliation of
net income attributable to the Company from continuing
operations to adjusted net income attributable to the Company
from continuing operations, see Note 8 above.
|
53
MANAGEMENTS
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Selected Financial Information and the
consolidated historical and pro forma financial statements and
the related notes thereto included in this prospectus. In
addition to historical information, this discussion contains
forward-looking statements that involve risks, uncertainties and
assumptions that could cause actual results to differ materially
from managements expectations. Factors that could cause
such differences are discussed in Cautionary Note
Regarding Forward-Looking Statements and Risk
Factors. We assume no obligation to update any of these
forward-looking statements.
Overview
We are a diversified financial services company that provides
innovative banking, lending and investing products and services
to approximately 575,000 customers nationwide through scalable,
low-cost distribution channels. Our business model attracts
financially sophisticated, self-directed, mass-affluent
customers and a diverse base of small and medium-sized business
customers. We market and distribute our products and services
primarily through our integrated online financial portal, which
is augmented by our nationwide network of independent financial
advisors, 14 high-volume financial centers in targeted Florida
markets and other financial intermediaries. These channels are
connected by technology-driven centralized platforms, which
provide operating leverage throughout our business.
Business
Segments
We evaluate our overall financial performance through two
operating business segments: (1) Banking and Wealth
Management and (2) Mortgage Banking. Our Banking and Wealth
Management segment primarily includes earnings generated by and
activities related to deposit and investment products and
services and portfolio lending and leasing activities. Our
Mortgage Banking segment primarily consists of activities
related to the origination and servicing of residential mortgage
loans. A third reporting segment, Corporate Services, consists
of corporate expenses that are not allocated to either the
Banking and Wealth Management or Mortgage Banking segments. This
segment includes executive management, technology, legal, human
resources, marketing, corporate development, treasury,
accounting, finance and other services, and transaction-related
items and expenses.
Factors Affecting
Comparability
Each factor listed below materially affected the comparability
of our cash flows, results of operations and financial condition
in 2011, 2010 and 2009, and may affect the comparability of our
historical financial information to financial information we
report in future fiscal periods.
Portfolio
Acquisitions
The significant capital we raised during the period from 2008 to
2010 enabled us to execute our strategy of organic growth and
selective portfolio acquisitions. From September 30, 2008
to December 31, 2011, we increased our loans and leases
held for investment and available for sale securities portfolio
by approximately $3.9 billion by acquiring Tygris and Bank
of Florida, retaining for investment assets we originate and
acquiring portfolios of loans, leases and MBS with attractive
risk-adjusted returns. We purchased many of our portfolio
acquisitions at discounts to par value, which enhance our
effective yield through accretion into income in subsequent
periods. Because risk-adjusted returns on acquisitions during
this period exceeded returns available to us from our asset
generation channels, a greater portion of our asset growth
during 2008 to 2010 was comprised of portfolio acquisitions
rather than from asset retention. During 2011 we continued to
take advantage of the market conditions and purchased several
performing, high quality loan portfolios. We also executed a
strategy to retain more originated loans for portfolio, increase
the amount of organic
54
GNMA buyouts from our servicing portfolio and acquire portfolios
of delinquent government insured loans. For banks like EverBank
with cost effective sources of short term capital, this strategy
represents an attractive return with low additional investment
risk.
We also deployed excess capital to grow our portfolio of MSR
through various bulk acquisitions of mortgage servicing
portfolios through 2010. Furthermore, during 2011 we reduced our
originated MSR and did not continue bulk acquisitions of
mortgage servicing portfolio. During 2011 we recognized
impairment of $39.5 million due to historically low
interest rates and related high prepayment rates. We expect to
continue retaining originated MSR in the future.
Strategic
Acquisitions
Strategic acquisitions have recently been a significant
component of our growth and may be a source of future growth. We
also completed two acquisitions during 2010 that grew our asset
base, increased our capital and enhanced our asset and deposit
generation platforms.
Tygris Commercial
Finance Group, Inc.
On February 5, 2010, we completed our acquisition of Tygris
Commercial Finance Group, Inc., or Tygris, a commercial leasing
and finance company. In addition to providing significant growth
capital, the transaction added a major new business line and
provided another source to generate assets with attractive
risk-adjusted returns for our balance sheet.
We acquired total assets with a fair value of
$777.5 million, including lease financing receivables with
a fair value of approximately $538.1 million. At closing,
acquired lease financing receivables were recorded at their
acquisition date fair value. Our assessment of fair value was
based on expected cash flows and included an estimation of
expected credit losses, prepayment expectations and operating
costs associated with those assets. The assessment resulted in a
fair value reduction equal to $266.8 million, of which
$196.1 million represents a purchase discount accretable
into income on a level yield basis. At December 31, 2011,
we note that all four lease pools have transferred to cost
recovery, thereby excess income is being realized. We realized
$81.4 million and $88.9 million of discount accretion
income related to this discount, reported as a component of
lease financing receivables interest income for the years ended
December 31, 2011 and 2010, respectively. In 2010, we
reported a bargain purchase gain of $68.1 million,
reflecting the excess of the fair value of the net assets
acquired over the consideration paid. For further discussion of
the Tygris acquisition and purchase accounting, see
Loan and Lease Quality and
Critical Accounting Policies and
Estimates below.
Bank of
Florida
On May 28, 2010, we acquired substantially all of the
assets and assumed substantially all of the deposits and certain
other liabilities of Bank of Florida-Southwest, headquartered in
Naples, Florida, Bank of Florida-Southeast, headquartered in
Fort Lauderdale, Florida, and Bank of Florida-Tampa Bay,
headquartered in Tampa, Florida, three affiliated full service
Florida chartered commercial banks that we collectively refer to
as Bank of Florida, from the FDIC, as receiver. Under the terms
of our agreements with the FDIC, we assumed deposits with a fair
value of approximately $1.2 billion and acquired assets
with a fair value of approximately $1.4 billion, including
loans with a fair value of approximately $888.8 million.
The acquisition enabled us to strengthen our core deposit
franchise and enhance our wealth management capabilities by
establishing a financial center presence in the Naples,
Ft. Myers, Miami, Ft. Lauderdale, Tampa Bay and
Clearwater markets and contributed to the increase of our total
deposits to approximately $10.3 billion as of
December 31, 2011.
All loans acquired in connection with the Bank of Florida
acquisition are subject to a loss-sharing agreement with the
FDIC, including a first loss amount to be borne solely by
EverBank. Under the agreement, the FDIC will cover 80% of losses
on the disposition of loans and other real estate owned, or
OREO, over $385.6 million. The term for loss sharing on
single-family residential real estate loans is ten years, while
the term for loss sharing on all other loans is five years. At
closing, our assessment
55
of fair value resulted in a $261.4 million reduction to the
previous carrying value of acquired loans and real estate owned.
The fair value of the loans was determined using methods similar
to those outlined above in our description of the Tygris
acquisition. In addition, we recorded a clawback liability of
$37.6 million based upon an estimated future
true-up
payment to the FDIC according to the terms of the loss sharing
arrangement. For further discussion of the Bank of Florida
acquisition and purchase accounting, see Loan
and Lease Quality, Clawback
Liability and Critical Accounting
Policies and Estimates below.
Primary Factors
Used to Evaluate Our Business
Results of
Operations
The primary factors we use to evaluate and manage our results of
operations include net interest income, noninterest income,
noninterest expense and net income.
Net Interest Income. Represents
interest income less interest expense. We generate interest
income from interest, dividends and fees received on
interest-earning assets, including loans and investment
securities we own. We incur interest expense from interest paid
on interest-bearing liabilities, including interest-bearing
deposits, borrowings and other forms of indebtedness. Net
interest income is a significant contributor to our revenues and
net income. To evaluate net interest income, we measure and
monitor (1) yields on our loans and other interest-earning
assets, (2) the costs of our deposits and other funding
sources, (3) our net interest spread, (4) our net
interest margin and (5) our provisions for loan and lease
losses. Net interest spread is the difference between rates
earned on interest-earning assets and rates paid on
interest-bearing liabilities. Net interest margin is calculated
as the annualized net interest income divided by average
interest-earning assets. Because noninterest-bearing sources of
funds, such as noninterest-bearing deposits and
shareholders equity, also fund interest-earning assets,
net interest margin includes the benefit of these
noninterest-bearing sources.
Changes in the market interest rates and interest rates we earn
on interest-earning assets or pay on interest-bearing
liabilities, as well as the volume and types of interest-earning
assets, interest-bearing and noninterest-bearing liabilities and
shareholders equity, are usually the largest drivers of
periodic changes in net interest spread, net interest margin and
net interest income. We measure net interest income before and
after provision for loan and lease losses required to maintain
our allowance for loan and lease losses at acceptable levels.
Noninterest Income. Noninterest income
includes:
|
|
|
|
|
net gains on sales of loans into the capital markets and loan
production revenue;
|
|
|
|
net loan servicing income, which includes loan servicing fees
and other ancillary income less amortization and impairment of
owned MSR generated from loans we service and
sub-service;
|
|
|
|
deposit fee income;
|
|
|
|
other lease income, and
|
|
|
|
other noninterest income.
|
Changes in market interest rates and housing market conditions
have a significant impact on our noninterest income. Lower
interest rates have historically increased customer demand for
loans to purchase homes and refinance existing loans. Higher
customer demand for loans generally results in higher gains on
sale of loans and loan production revenue and higher expenses
from amortization of owned MSR, which serve to lower net loan
servicing income. Higher interest rates have converse effects.
Our deposit fee income is largely impacted by the volume, growth
and type of deposits we hold, which are driven by prevailing
market conditions for our deposit products, our marketing
efforts and other factors.
Noninterest Expense. Includes
employees salaries, commissions and other employee
benefits expense, occupancy expense, equipment expense and
general and administrative expense.
56
Employees salaries, commissions and other employee
benefits expense include compensation, employee benefit and tax
expenses for our personnel. Occupancy expense includes office
and financial center lease and other occupancy-related expenses.
Equipment expense includes furniture, fixtures and equipment
expenses. General and administrative expenses include
professional fees, other credit related expenses, foreclosure
and REO expense, FDIC premium and assessments fees, advertising
and marketing expense, loan origination and other general and
administrative expenses. Noninterest expenses generally increase
as we grow our business segments.
Financial
Condition
The primary factors we use to evaluate and manage our financial
condition include liquidity, asset quality and capital.
Liquidity. We manage liquidity based
upon factors that include the amount of core deposits as a
percentage of total deposits, the level of diversification of
our funding sources, the allocation and amount of our deposits
among deposit types, the short-term funding sources used to fund
assets, the amount of non-deposit funding used to fund assets,
the availability of unused funding sources, off-balance sheet
obligations, the availability of assets to be readily converted
into cash without undue loss, the ability to securitize and sell
certain pools of assets, the amount of cash and liquid
securities we hold, and the re-pricing characteristics and
maturities of our assets when compared to the re-pricing
characteristics and maturities of our liabilities and other
factors.
Asset Quality. We manage the
diversification and quality of our assets based upon factors
that include the level, distribution, severity and trend of
problem, classified, delinquent, non-accrual, non-performing and
restructured assets; the adequacy of our allowance for loan and
lease losses, or ALLL, discounts and reserves for unfunded loan
commitments; the diversification and quality of loan and
investment portfolios, the extent of counterparty risks and
credit risk concentrations.
Capital. We manage capital based upon
factors that include the level and quality of capital and
overall financial condition of the Company, the trend and volume
of problem assets, the adequacy of discounts and reserves, the
level and quality of earnings, the risk exposures in our balance
sheet, the levels of Tier 1 (core), risk-based and tangible
equity capital, the ratios of Tier 1 (core), risk-based and
tangible equity capital to risk-weighted assets and total assets
and other factors.
Key
Metrics
The primary metrics we use to evaluate and manage our financial
results are described below. Although we believe these metrics
are meaningful in evaluating our results and financial
condition, they may not be directly comparable to similar
metrics used by other financial services companies and may not
provide an appropriate basis to compare our results or financial
condition to the results or financial condition of our
competitors. The following table sets forth the metrics we use
to evaluate the success of our business and our resulting
financial position and operating performance.
57
The table below includes certain financial information that is
calculated and presented on the basis of methodologies other
than in accordance with generally accepted accounting
principles, or GAAP. We believe these measures provide useful
information to investors in evaluating our financial
performance. In addition, our management uses these measures to
gauge the performance of our operations and for business
planning purposes. These non-GAAP financial measures, however,
may not be comparable to similarly titled measures reported by
other companies because other companies may not calculate these
non-GAAP measures in the same manner. As a result, the
usefulness of these measures to investors may be limited, and
they should not be considered in isolation or as a substitute
for measures prepared in accordance with GAAP. In the notes
following the table we provide a reconciliation of these
measures, or, in the case of ratios, the measures used in the
calculation of such ratios, to the closest measures calculated
directly from our GAAP financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
|
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Performance Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Yield on interest-earning assets
|
|
|
5.35
|
%
|
|
|
6.51
|
%
|
|
|
6.25
|
%
|
Cost of interest-bearing liabilities
|
|
|
1.38
|
%
|
|
|
1.74
|
%
|
|
|
2.53
|
%
|
Net interest spread
|
|
|
3.97
|
%
|
|
|
4.77
|
%
|
|
|
3.72
|
%
|
Net interest margin
|
|
|
4.11
|
%
|
|
|
4.95
|
%
|
|
|
3.93
|
%
|
Return on average assets
|
|
|
0.43
|
%
|
|
|
1.77
|
%
|
|
|
0.69
|
%
|
Return on average equity
|
|
|
5.22
|
%
|
|
|
20.86
|
%
|
|
|
11.46
|
%
|
Adjusted return on average
assets(1)
|
|
|
0.87
|
%
|
|
|
1.19
|
%
|
|
|
0.69
|
%
|
Adjusted return on average
equity(1)
|
|
|
10.66
|
%
|
|
|
14.03
|
%
|
|
|
11.49
|
%
|
Credit Quality Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted non-performing assets as a percentage of total
assets(2)
|
|
|
1.86
|
%
|
|
|
2.11
|
%
|
|
|
2.73
|
%
|
Adjusted ALLL as a percentage of loans and leases held for
investment(3)
|
|
|
1.15
|
%
|
|
|
1.71
|
%
|
|
|
2.46
|
%
|
Capital Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1 (core) capital ratio (bank
level)(4)
|
|
|
8.0
|
%
|
|
|
8.7
|
%
|
|
|
8.0
|
%
|
Total risk-based capital ratio (bank
level)(4)
|
|
|
15.7
|
%
|
|
|
17.0
|
%
|
|
|
15.0
|
%
|
Tangible equity to tangible
assets(5)
|
|
|
7.3
|
%
|
|
|
8.3
|
%
|
|
|
6.9
|
%
|
Deposit Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total core deposits as a percentage of total
deposits(6)
|
|
|
95.1
|
%
|
|
|
97.8
|
%
|
|
|
97.4
|
%
|
Deposit growth (trailing 12 months)
|
|
|
6.0
|
%
|
|
|
53.3
|
%
|
|
|
26.2
|
%
|
Banking and Wealth Management Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency
ratio(7)
|
|
|
42.8
|
%
|
|
|
38.4
|
%
|
|
|
27.8
|
%
|
Mortgage Banking Metrics: (in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal balance of loans originated
|
|
$
|
5,974.2
|
|
|
$
|
6,534.8
|
|
|
$
|
7,613.2
|
|
Unpaid principal balance of loans serviced for the Company and
others
|
|
|
54,838.1
|
|
|
|
58,232.2
|
|
|
|
48,537.4
|
|
Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net tangible book value per as converted common
share(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
10.12
|
|
|
$
|
10.65
|
|
|
$
|
8.54
|
|
Diluted
|
|
|
9.93
|
|
|
|
10.40
|
|
|
|
8.33
|
|
|
|
|
(1) |
|
Adjusted return on average assets equals adjusted net income
attributable to the Company from continuing operations divided
by average total assets and adjusted return on average equity
equals adjusted net income attributable to the Company from
continuing operations divided by average shareholders
equity. Adjusted net income attributable to the Company from
continuing operations is a non-GAAP measure of our financial
performance. Adjusted net income attributable to the Company
from continuing operations includes adjustments to our net
income attributable to the Company from continuing operations
for certain material items that we believe are not reflective of
our ongoing |
58
|
|
|
|
|
business or operating performance including the Tygris and Bank
of Florida acquisitions. There were no material items that gave
rise to adjustments prior to the year ended December 31,
2010. Accordingly, for periods presented before the year ended
December 31, 2010, we have not reflected adjustments to net
income attributable to the Company from continuing operations
calculated in accordance with GAAP. |
|
|
|
|
|
A reconciliation of adjusted net income attributable to the
Company from continuing operations to net income attributable to
the Company from continuing operations, which is the most
directly comparable GAAP measure, is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Net income attributable to the Company from continuing operations
|
|
$
|
52,729
|
|
|
$
|
188,900
|
|
|
$
|
53,537
|
|
Bargain purchase gain on Tygris transaction, net of tax
|
|
|
|
|
|
|
(68,056
|
)
|
|
|
|
|
Gain on sale of investment securities due to portfolio
concentration repositioning, net of tax
|
|
|
|
|
|
|
(12,337
|
)
|
|
|
|
|
Gain on repurchase of trust preferred securities, net of tax
|
|
|
(2,910
|
)
|
|
|
(3,556
|
)
|
|
|
|
|
Transaction and non-recurring regulatory related expense, net of
tax
|
|
|
16,831
|
|
|
|
5,984
|
|
|
|
|
|
Loss on early extinguishment of acquired debt, net of tax
|
|
|
|
|
|
|
6,411
|
|
|
|
|
|
Decrease in fair value of Tygris indemnification asset resulting
from a decrease in estimated future credit losses, net of tax
|
|
|
5,382
|
|
|
|
13,654
|
|
|
|
|
|
Increase in Bank of Florida non-accretable discount, net of tax
|
|
|
3,007
|
|
|
|
3,837
|
|
|
|
|
|
Impact of change in ALLL methodology, net of tax
|
|
|
1,178
|
|
|
|
|
|
|
|
|
|
Early adoption of TDR guidance and policy change, net of tax
|
|
|
6,225
|
|
|
|
|
|
|
|
|
|
MSR impairment, net of tax
|
|
|
24,462
|
|
|
|
|
|
|
|
|
|
Tax benefit (expense) related to revaluation of Tygris net
unrealized built-in losses, net of tax
|
|
|
691
|
|
|
|
(7,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable to the Company from continuing
operations
|
|
$
|
107,595
|
|
|
$
|
126,997
|
|
|
$
|
53,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
We define non-performing assets, or NPA, as non-accrual loans,
accruing loans past due 90 days or more and foreclosed
property. Our NPA calculation excludes government-insured pool
buyout loans for which payment is insured by the government. We
also exclude loans, leases and foreclosed property acquired in
the Tygris and Bank of Florida acquisitions because, as of
December 31, 2011, we expected to fully collect the
carrying value of such loans, leases and foreclosed property.
For further discussion of NPA, see Loan and
Lease Quality below. |
|
(3) |
|
Adjusted ALLL as a percentage of loans held for investment
equals the ALLL excluding the portion related to loans and
leases accounted for under
ASC 310-30
divided by loans and leases held for investment excluding loans
and leases accounted for under
ASC 310-30.
Adjusted ALLL as a percentage of loans and leases held for
investment is a non-GAAP financial measure, and its most
directly comparable GAAP financial measure is ALLL as a
percentage of loans and leases held for investment. For further
discussion of the ALLL and loans and leases accounted for under
ASC 310-30,
see Loan and Lease Quality below. |
|
(4) |
|
The Tier 1 (core) capital ratio and risk-based capital
ratio are regulatory financial measures that are used to assess
the capital position of financial services companies and, as
such, these ratios are presented at the bank level. The
Tier 1 (core) capital ratio is calculated as Tier 1
(core) capital divided by adjusted total assets. Tier 1
(core) capital includes common equity and certain qualifying
preferred stock less goodwill, disallowed deferred tax assets
and other regulatory deductions. Total assets are adjusted for
goodwill, deferred tax assets disallowed from Tier 1 (core)
capital and other regulatory adjustments. |
59
|
|
|
|
|
The risk-based capital ratio is calculated as total risk-based
capital divided by total risk-weighted assets. Risk-based
capital includes Tier 1 (core) capital, ALLL, subject to
limitations, and other additions. Under the regulatory
guidelines for risk-based capital, on-balance sheet assets and
credit equivalent amounts of derivatives and off-balance sheet
items are assigned to one of several broad risk categories
according to the obligor or, if relevant, the guarantor or the
nature of any collateral. The aggregate dollar amount in each
risk category is then multiplied by the risk weight associated
with that category. The resulting weighted values from each of
the risk categories are aggregated for determining total
risk-weighted assets. |
|
(5) |
|
In the calculation of the ratio of tangible equity to tangible
assets, we deduct goodwill and intangible assets from the
numerator and the denominator. We believe these adjustments are
consistent with the manner in which other companies in our
industry calculate the ratio of tangible equity to tangible
assets. |
|
|
|
A reconciliation of (1) tangible equity to
shareholders equity, which is the most directly comparable
GAAP measure, and (2) tangible assets to total assets,
which is the most directly comparable GAAP measure, is as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Shareholders equity
|
|
$
|
967,665
|
|
|
$
|
1,013,198
|
|
|
$
|
553,911
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
10,238
|
|
|
|
10,238
|
|
|
|
239
|
|
Intangible assets
|
|
|
7,404
|
|
|
|
8,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible equity
|
|
$
|
950,023
|
|
|
$
|
994,339
|
|
|
$
|
553,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
13,041,678
|
|
|
$
|
12,007,886
|
|
|
$
|
8,060,179
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
10,238
|
|
|
|
10,238
|
|
|
|
239
|
|
Intangible assets
|
|
|
7,404
|
|
|
|
8,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible assets
|
|
$
|
13,024,036
|
|
|
$
|
11,989,027
|
|
|
$
|
8,059,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|
We measure core deposits as a percentage of total deposits to
monitor the amount of our deposits that we believe demonstrate
characteristics of being long-term, stable sources of funding. |
|
|
|
We define core deposits as deposits in which we interface
directly with our customers. These deposits include demand
deposits, negotiable order of withdrawal accounts, other
transaction accounts, escrow deposits, money market deposit
accounts, savings deposits, and time deposits where we maintain
a primary customer relationship. Our definition of core deposits
differs from regulatory and industry definitions, which
generally exclude time deposits with balances greater than
$100,000 and/or deposits generated from sources under which
marketing fees are paid as a percentage of the deposit. Because
the balances held by our customers and methods by which we pay
our marketing sources have not impacted the stability of our
funding sources, in our determination of what constitutes a
core deposit, we have focused on what we believe
drives funding stability, i.e., whether we maintain the primary
customer relationships. |
|
|
|
We occasionally participate in Promontory Interfinancial
Network, LLCs
CDARS®
One-Way
BuySM
products and bulk orders of master certificates through deposit
brokers, including investment banking and brokerage firms, to
manage our liquidity needs. Because these deposits do not allow
us to maintain the primary customer relationship, we do not
characterize such deposits as core deposits. |
60
|
|
|
|
|
The calculation of core deposits is as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Total deposits
|
|
$
|
10,265,763
|
|
|
$
|
9,683,054
|
|
|
$
|
6,315,287
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokered deposits
|
|
|
225,122
|
|
|
|
208,629
|
|
|
|
167,345
|
|
CDARS®
One-Way
BuySM
time deposits
|
|
|
273,266
|
|
|
|
2,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposits
|
|
$
|
9,767,375
|
|
|
$
|
9,472,197
|
|
|
$
|
6,147,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7) |
|
The efficiency ratio represents noninterest expense from our
Banking and Wealth Management segment as a percentage of total
revenues from our Banking and Wealth Management segment. We use
the efficiency ratio to measure noninterest costs expended to
generate a dollar of revenue. Because of the significant costs
we incur and fees we generate from activities related to our
mortgage production and servicing operations, we believe the
efficiency ratio is a more meaningful metric when evaluated
within our Banking and Wealth Management segment. |
|
(8) |
|
Calculated as tangible shareholders equity divided by
shares of common stock. For purposes of computing net tangible
book value per as converted common share, tangible book value
equals shareholders equity less goodwill and other
intangible assets. |
|
|
|
Basic and diluted net tangible book value per as converted
common share are calculated using a denominator that includes
actual period end common shares outstanding and additional
common shares assuming conversion of all outstanding preferred
stock to common stock. Diluted net tangible book value per as
converted common share also includes in the denominator common
stock equivalent shares related to stock options and common
stock equivalent shares related to nonvested restricted stock
units. |
|
|
|
Net tangible book value per as converted common share is a
non-GAAP financial measure, and its most directly comparable
GAAP financial measure is book value per common share. For a
reconciliation of shareholders equity to tangible equity,
see Note 5 above. |
Material Trends
and Developments
Our historical growth must be viewed in the context of the
recent opportunities available to us over the past four years as
a result of the confluence of our access to capital at a time
when market dislocations of historical proportions resulted in
unprecedented asset acquisition opportunities. Additionally,
changes to the regulatory environment and our growth have
recently increased the investments we made in our business
infrastructure. Current and future market trends cannot be
expected to produce the same opportunities that existed during
the recent financial crisis. Important trends that will impact
our growth and our results of operations are described below.
Economic and
Interest Rate Environment
The results of our operations are highly dependent on economic
conditions and market interest rates. Beginning in 2007, turmoil
in the financial sector resulted in a reduced level of
confidence in financial markets among borrowers, lenders and
depositors, as well as extreme volatility in the capital and
credit markets. In response to these conditions, the Board of
Governors of the Federal Reserve System, or FRB, began
decreasing short-term interest rates, with 11 consecutive
decreases totaling 525 basis points between September 2007
and December 2008. To stimulate economic activity and stabilize
the financial markets, the FRB maintained historically low
market interest rates from 2009 to 2011. While market conditions
improved during this period, continued economic uncertainty has
resulted in high unemployment, low consumer confidence and
depressed home prices. As part of a sustained effort to spur
economic growth, the FRB has indicated that low market interest
rates will likely continue into 2014.
61
Capital
Raising Initiatives
In 2008, we embarked on a growth plan designed to take advantage
of our relative strength in a period of market disruption. Our
plan was fueled by several capital-generating events, including
the sale of our reverse mortgage operations to an unaffiliated
third party in May 2008 and an equity private placement in the
third quarter of 2008, which enabled us to deploy
$120.6 million of equity capital into lending, investment
and deposit growth opportunities.
Additionally, we raised $424.5 million of equity capital
and added a new asset generation channel through the Tygris
acquisition. As a result of this transaction, we increased our
equity capital base in the fall of 2009 through
$65.0 million of pre-acquisition private placement
investments made by Tygris into the Company and through the
acquisition of Tygris in February 2010, which had
$359.6 million of net identifiable assets after purchase
accounting adjustments.
The capital generated by our capital raising initiatives and any
primary capital generated by this offering should allow us to
continue to grow our balance sheet, expand our marketing
initiatives and further build our core deposit base. We believe
our strong capital position, particularly relative to our
competitors in the marketplace who experienced significant
liquidity and capital constraints, will continue to enable us to
capitalize on banking, lending and investment opportunities with
attractive risk-adjusted returns.
Banking and
Wealth Management
Net interest income in our Banking and Wealth Management segment
experienced significant growth during the period of market
uncertainty that began in 2008, with contributions from both
increased margin and higher earning asset levels. While
short-term interest rates remained low during and after the
financial crisis, disruptions in the financial sector, real
estate market and capital markets widened liquidity risk
premiums and enabled us to selectively acquire high credit
quality investment securities and whole loans at a discount to
par value. These discounted acquisitions resulted in significant
accretion into interest income, particularly in 2010.
In more recent periods, as market conditions improved and
liquidity risk premiums contracted, we executed a strategy to
expand our organic asset generation while continuing to acquire
loans and securities. We have recently expanded our retail and
correspondent residential lending channels and have emphasized
jumbo prime mortgages to our mass-affluent customer base.
Through our 2010 acquisition of Tygris, we entered the
commercial finance business and have significantly increased our
origination activity within this segment. Finally, our 2010
acquisition of Bank of Florida enhanced our ability to originate
and invest in small business commercial loans. Efforts to build
our residential lending, commercial finance and commercial
lending channels enabled us to originate loans and leases for
our balance sheet. We also recently acquired MetLife Banks
warehouse finance business, which we expect to contribute a
meaningful amount of commercial lending volume in the future if
we successfully integrate the acquired business.
We funded our asset retention and acquisition initiatives
through a combination of deposit growth, other borrowings and
the capital raising initiatives discussed earlier. Our deposits
grew by approximately $5.3 billion, or 105%, from
December 31, 2008 to $10.3 billion at
December 31, 2011. The Bank of Florida acquisition
contributed $0.9 billion, or 17%, to total deposit growth
during the same time period. Sustained reductions in the federal
funds rate set by the FRB provided a declining cost of funds
used to pursue lending and acquisition activities. A low cost of
funds, coupled with significant accretion income, resulted in
historically high net interest margins while our asset portfolio
maintained a sound credit profile. Our net interest margin
declined in 2011, as accretion income from discounted
acquisitions comprised a lower percentage of interest income.
While we believe wide-scale disruptions in the real estate
markets will continue to provide us with attractive margins on
our lending and investing activities, we do not expect to
acquire additional high credit quality assets at significant
discounts to par value going forward.
62
Due to general declines in the real estate housing markets, we
experienced elevated levels of loan and lease loss provisioning
in 2009 and 2010. Loan and lease loss provisioning declined in
2011 as economic conditions improved. Continued economic
improvement could moderate or further reduce loss provisioning
in the future, which would benefit our net interest income after
loan and lease loss provisions. Lastly, we expect higher
noninterest expense in the Banking and Wealth Management segment
in future periods as we increase the scope of our marketing
efforts, invest in our banking and lending infrastructure and
seek to build our national brand recognition. We expect the
Banking and Wealth Management segments earnings will
continue to represent a significant percentage of total earnings
in the future.
Mortgage
Banking
Our Mortgage Banking segment is comprised of fees earned from
our mortgage origination and servicing businesses that
historically have counterbalanced each other. As a result of
residential real estate purchasing and refinancing activity due
to the low interest rate environment and tax credits available
to certain home buyers, our mortgage origination volume
increased by 41% to $7.6 billion in 2009 from
$5.4 billion in 2008. Mortgage origination volume decreased
to $6.5 billion, or 14%, during 2010 from $7.6 billion
in 2009 as the stimulus from lower interest rates and housing
support programs waned. In 2011, mortgage origination volume
decreased $560.6 million, or 9%, to $6.0 billion, from
$6.5 billion in 2010 due to lower volume in our wholesale
channel as a result of contraction in the third-party market.
The low interest rate environment of 2009 and 2010 drove
significant refinance activity in our mortgage origination
business. During this time, financial service firms limited
investments in MSR assets which created attractive opportunities
to retain and acquire MSR assets in the market at more
conservative valuations. We capitalized on these opportunities
by increasing our MSR assets by approximately 14% from 2009 to
2010.
However, the sustained low interest rate environment, which the
FRB has indicated will likely continue until late 2014, has led
to higher loan servicing amortization levels and MSR impairment
charges in 2011. Additionally, higher delinquency rates and new
regulatory requirements led us to increase our servicing and
default staff over the last few years, which resulted in higher
operational expenses. These increased expenses and higher loan
servicing amortization levels partially offset higher mortgage
origination income and increased loan servicing fees. The
balance of our MSR assets decreased 15% from 2010 to 2011 due
primarily to MSR amortization and a valuation allowance of
$39.5 million recorded as of December 31, 2011,
partially offset by capitalized MSR resulting from sale of loans
we originated and sold with servicing retained.
We believe uncertainty in the mortgage market regarding future
regulation and government participation could cause competitors
to retreat from the market, creating opportunities for us to
grow our mortgage business. At this time, we do not plan
significant future investments in MSR due to regulatory
constraints. As a result, we expect our fee income from mortgage
servicing will not experience material prospective growth
consistent with our recent trends. In addition, we may
experience lower mortgage origination volumes due to new
regulations, lower rates of refinancing and higher expected
mortgage rates if government and monetary policies designed to
stimulate real estate activity do not persist. This would
favorably impact our mortgage servicing business through lower
mortgage servicing amortization levels and negatively impact our
mortgage origination business.
Corporate
Services
During 2010 and 2011, we made significant investments and
incurred significant increases to our corporate services
expenses resulting from enhancements to our business processes,
management structure and operating platforms. We believe these
enhancements were necessary to comply with the changing
regulatory environment and position the Company for continued
growth. In recent periods, we incurred legal and third-party
consulting expenses and substantially increased personnel in
compliance, accounting and risk management to comply with new
regulatory and public company
63
standards. We made selective additions to our management team
and added key business line leaders, including hiring a new
Chief Financial Officer, Executive Vice President-Residential
and Consumer Lending and Chief Information Officer. We also
added support staff for channel expansions in our mortgage and
commercial lending businesses. Finally, we made investments in
technology, marketing and facilities in order to improve the
scalability of our deposit and lending platforms.
These investments resulted in increases in corporate services
noninterest expense during these periods. We believe our
business infrastructure will enable us to grow our business
efficiently and further capitalize on organic growth and
strategic acquisition opportunities.
Regulatory
Environment
As a result of regulatory changes, including the Dodd-Frank Act,
Basel III and other new legislation, we expect to be
subject to new and potentially heightened examination and
reporting requirements. In 2011, we incurred noninterest expense
for the implementation of new Dodd-Frank Act requirements,
consolidation of thrift supervision from the OTS into the OCC,
initiation of new systems and processes resulting from our
growth above $10.0 billion in assets into the OCCs
mid-tier bank review group, expenses related to compliance with
the historical audit requirements of the horizontal servicer
foreclosure review, increases in FDIC deposit assessments and
changes to our corporate governance structure.
In addition, in April 2011, we and Everbank each entered into a
consent order with the OTS, with respect to Everbanks
mortgage foreclosure practices and our oversight of those
practices. The consent orders require, among other things, that
we establish a new compliance program for our mortgage servicing
and foreclosure operations and that we ensure that we have
dedicated resources for communicating with borrowers, policies
and procedures for outsourcing foreclosure or related functions
and management information systems that ensure timely delivery
of complete and accurate information. We are also required to
retain an independent firm to conduct a review of residential
foreclosure actions that were pending from January 1, 2009
through December 31, 2010 in order to determine whether any
borrowers sustained financial injury as a result of any errors,
misrepresentations or deficiencies and to provide remediation as
appropriate. We are working to fulfill the requirements of the
consent orders. In response to the consent orders, we have
established an oversight committee to monitor the implementation
of the actions required by the consent orders. Furthermore, we
have enhanced and updated several policies, procedures,
processes and controls to help ensure the mitigation of the
findings of the consent orders. In addition, we have enhanced
our third-party vendor management system and our compliance
program, hired additional personnel and retained an independent
firm to conduct foreclosure reviews. We expect to continue to
incur higher noninterest expense to comply with the consent
orders and the new regulations.
Additionally, regulatory changes have resulted in more
restrictive capital requirements and more stringent asset
concentration and growth limitations including, but not limited
to, limits in concentrations in MSR, nonagency mortgage
securities and brokered deposits. Due to heightened costs and
regulatory restrictions, we could face a challenging environment
for customer loan demand due to the increased costs that could
be ultimately borne by borrowers. This uncertain regulatory
environment could have a detrimental impact on our ability to
manage our business consistent with historical practices and
cause difficulty in executing our growth plan. See Risk
Factors Regulatory and Legal Risks and
Regulation and Supervision.
Credit
Reserves
One of our key operating objectives has been, and continues to
be, to maintain an appropriate level of reserves against
probable losses in our loan and lease portfolio. Due to general
stabilization in the real estate and housing markets, we have
experienced decreased levels of loan and lease loss provisioning
within our portfolio. For the year ended December 31, 2011,
our provision for loan and lease losses was $49.7 million,
a 37% decrease from 2010 where the provision for loan and lease
losses was $79.3 million. For the year ended
December 31, 2010, our provision for loan and lease
64
losses decreased 35% from $121.9 million for the year ended
December 31, 2009. As a result of the limited remaining
legacy commercial real estate portfolio and our allowance and
discount position on other loans and leases, we believe
provisions associated with existing problem loans and leases
should continue to be monitored as these and other more
distressed legacy vintages work through our loan portfolio.
In addition to the ALLL, we have other credit-related reserves
or discounts, including reserves for unfunded loan and lease
commitments and purchase discounts related to certain acquired
loans and leases. See Discounts on Acquired
Loans and Lease Financing Receivables for information
related to purchase discounts.
Average Balance
Sheet, Interest and Yield/Rate Analysis
The following tables present average balance sheets, interest
income, interest expense and the corresponding average yields
earned and rates paid for the years ended December 31,
2011, 2010 and 2009. The average balances are principally daily
averages and, for loans, include both performing
65
and non-performing balances. Interest income on loans includes
the effects of discount accretion and net deferred loan
origination costs accounted for as yield adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
Average
|
|
|
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
Balance
|
|
|
Interest
|
|
|
Rate
|
|
|
|
(In thousands)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
553,281
|
|
|
$
|
1,432
|
|
|
|
0.26
|
%
|
|
$
|
494,078
|
|
|
$
|
1,210
|
|
|
|
0.24
|
%
|
|
$
|
209,669
|
|
|
$
|
525
|
|
|
|
0.25
|
%
|
Investment securities
|
|
|
2,582,080
|
|
|
|
106,054
|
|
|
|
4.11
|
%
|
|
|
2,318,193
|
|
|
|
158,953
|
|
|
|
6.86
|
%
|
|
|
956,230
|
|
|
|
130,003
|
|
|
|
13.60
|
%
|
Other investments
|
|
|
100,772
|
|
|
|
796
|
|
|
|
0.79
|
%
|
|
|
112,350
|
|
|
|
464
|
|
|
|
0.41
|
%
|
|
|
87,421
|
|
|
|
303
|
|
|
|
0.35
|
%
|
Loans held for sale
|
|
|
1,348,214
|
|
|
|
62,895
|
|
|
|
4.67
|
%
|
|
|
1,091,092
|
|
|
|
50,535
|
|
|
|
4.63
|
%
|
|
|
1,139,930
|
|
|
|
62,024
|
|
|
|
5.44
|
%
|
Loans and leases held for investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
4,554,717
|
|
|
|
211,996
|
|
|
|
4.65
|
%
|
|
|
3,642,437
|
|
|
|
191,828
|
|
|
|
5.27
|
%
|
|
|
3,645,449
|
|
|
|
205,341
|
|
|
|
5.63
|
%
|
Commercial and commercial real estate
|
|
|
1,155,707
|
|
|
|
68,845
|
|
|
|
5.96
|
%
|
|
|
1,075,546
|
|
|
|
59,172
|
|
|
|
5.50
|
%
|
|
|
768,387
|
|
|
|
33,328
|
|
|
|
4.34
|
%
|
Lease financing receivables
|
|
|
481,216
|
|
|
|
126,208
|
|
|
|
26.23
|
%
|
|
|
432,833
|
|
|
|
141,353
|
|
|
|
32.66
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines
|
|
|
211,435
|
|
|
|
9,748
|
|
|
|
4.61
|
%
|
|
|
226,961
|
|
|
|
8,612
|
|
|
|
3.79
|
%
|
|
|
239,692
|
|
|
|
8,718
|
|
|
|
3.64
|
%
|
Consumer and credit card
|
|
|
9,332
|
|
|
|
246
|
|
|
|
2.64
|
%
|
|
|
10,028
|
|
|
|
380
|
|
|
|
3.79
|
%
|
|
|
5,677
|
|
|
|
352
|
|
|
|
6.20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases held for investment
|
|
|
6,412,407
|
|
|
|
417,043
|
|
|
|
6.50
|
%
|
|
|
5,387,805
|
|
|
|
401,345
|
|
|
|
7.45
|
%
|
|
|
4,659,205
|
|
|
|
247,739
|
|
|
|
5.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
10,996,754
|
|
|
$
|
588,220
|
|
|
|
5.35
|
%
|
|
|
9,403,518
|
|
|
$
|
612,507
|
|
|
|
6.51
|
%
|
|
|
7,052,455
|
|
|
$
|
440,594
|
|
|
|
6.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets
|
|
|
1,321,352
|
|
|
|
|
|
|
|
|
|
|
|
1,290,273
|
|
|
|
|
|
|
|
|
|
|
|
713,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,318,106
|
|
|
|
|
|
|
|
|
|
|
$
|
10,693,791
|
|
|
|
|
|
|
|
|
|
|
$
|
7,765,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand
|
|
$
|
2,052,353
|
|
|
$
|
18,320
|
|
|
|
0.89
|
%
|
|
$
|
1,694,233
|
|
|
$
|
20,502
|
|
|
|
1.21
|
%
|
|
$
|
1,308,492
|
|
|
$
|
22,402
|
|
|
|
1.71
|
%
|
Market-based money market accounts
|
|
|
451,740
|
|
|
|
4,197
|
|
|
|
0.93
|
%
|
|
|
366,774
|
|
|
|
4,504
|
|
|
|
1.23
|
%
|
|
|
321,934
|
|
|
|
5,779
|
|
|
|
1.80
|
%
|
Savings and money market accounts, excluding market-based
|
|
|
3,682,067
|
|
|
|
33,600
|
|
|
|
0.91
|
%
|
|
|
2,839,705
|
|
|
|
35,389
|
|
|
|
1.25
|
%
|
|
|
1,865,472
|
|
|
|
34,271
|
|
|
|
1.84
|
%
|
Market-based time
|
|
|
947,133
|
|
|
|
8,859
|
|
|
|
0.94
|
%
|
|
|
758,693
|
|
|
|
8,242
|
|
|
|
1.09
|
%
|
|
|
611,968
|
|
|
|
11,063
|
|
|
|
1.81
|
%
|
Time, excluding market-based
|
|
|
1,770,342
|
|
|
|
32,035
|
|
|
|
1.81
|
%
|
|
|
1,781,052
|
|
|
|
32,772
|
|
|
|
1.84
|
%
|
|
|
1,093,313
|
|
|
|
34,181
|
|
|
|
3.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
8,903,635
|
|
|
|
97,011
|
|
|
|
1.09
|
%
|
|
|
7,440,457
|
|
|
|
101,409
|
|
|
|
1.36
|
%
|
|
|
5,201,179
|
|
|
|
107,696
|
|
|
|
2.07
|
%
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred securities
|
|
|
104,106
|
|
|
|
6,641
|
|
|
|
6.38
|
%
|
|
|
117,019
|
|
|
|
7,769
|
|
|
|
6.64
|
%
|
|
|
123,000
|
|
|
|
8,677
|
|
|
|
7.05
|
%
|
FHLB advances
|
|
|
794,268
|
|
|
|
31,912
|
|
|
|
4.02
|
%
|
|
|
850,184
|
|
|
|
35,959
|
|
|
|
4.23
|
%
|
|
|
1,117,612
|
|
|
|
46,793
|
|
|
|
4.19
|
%
|
Repurchase agreements
|
|
|
20,561
|
|
|
|
346
|
|
|
|
1.68
|
%
|
|
|
12,560
|
|
|
|
212
|
|
|
|
1.69
|
%
|
|
|
1,496
|
|
|
|
16
|
|
|
|
1.04
|
%
|
Other
|
|
|
5
|
|
|
|
|
|
|
|
0.00
|
%
|
|
|
33,188
|
|
|
|
1,818
|
|
|
|
5.48
|
%
|
|
|
11,510
|
|
|
|
29
|
|
|
|
0.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
9,822,575
|
|
|
$
|
135,910
|
|
|
|
1.38
|
%
|
|
|
8,453,408
|
|
|
$
|
147,167
|
|
|
|
1.74
|
%
|
|
|
6,454,797
|
|
|
$
|
163,211
|
|
|
|
2.53
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits
|
|
|
1,123,830
|
|
|
|
|
|
|
|
|
|
|
|
1,039,096
|
|
|
|
|
|
|
|
|
|
|
|
678,572
|
|
|
|
|
|
|
|
|
|
Other noninterest-bearing liabilities
|
|
|
349,981
|
|
|
|
|
|
|
|
|
|
|
|
261,096
|
|
|
|
|
|
|
|
|
|
|
|
159,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
11,296,386
|
|
|
|
|
|
|
|
|
|
|
|
9,753,600
|
|
|
|
|
|
|
|
|
|
|
|
7,292,628
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,021,720
|
|
|
|
|
|
|
|
|
|
|
|
940,191
|
|
|
|
|
|
|
|
|
|
|
|
472,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
12,318,106
|
|
|
|
|
|
|
|
|
|
|
$
|
10,693,791
|
|
|
|
|
|
|
|
|
|
|
$
|
7,765,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income/spread
|
|
|
|
|
|
$
|
452,310
|
|
|
|
3.97
|
%
|
|
|
|
|
|
$
|
465,340
|
|
|
|
4.77
|
%
|
|
|
|
|
|
$
|
277,383
|
|
|
|
3.72
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
|
|
|
|
|
|
|
|
4.11
|
%
|
|
|
|
|
|
|
|
|
|
|
4.95
|
%
|
|
|
|
|
|
|
|
|
|
|
3.93
|
%
|
66
Interest Rates
and Operating Interest Differential
Increases and decreases in interest income and interest expense
result from changes in average balances (volume) of
interest-earning assets and interest-bearing liabilities, as
well as changes in average interest rates. The following table
shows the effect that these factors had on the interest earned
on our interest-earning assets and the interest incurred on our
interest-bearing liabilities. The effect of changes in volume is
determined by multiplying the change in volume by the previous
periods average yield/cost. Similarly, the effect of rate
changes is calculated by multiplying the change in average
yield/cost by the previous years volume. Changes
applicable to both volume and rate have been allocated to rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2011 Compared to 2010
|
|
|
2010 Compared to 2009
|
|
|
|
Increase (Decrease) Due to
|
|
|
Increase (Decrease) Due to
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
142
|
|
|
$
|
80
|
|
|
$
|
222
|
|
|
$
|
711
|
|
|
$
|
(26
|
)
|
|
$
|
685
|
|
Investment securities
|
|
|
18,103
|
|
|
|
(71,002
|
)
|
|
|
(52,899
|
)
|
|
|
185,227
|
|
|
|
(156,277
|
)
|
|
|
28,950
|
|
Other investments
|
|
|
(47
|
)
|
|
|
379
|
|
|
|
332
|
|
|
|
87
|
|
|
|
74
|
|
|
|
161
|
|
Loans held for sale
|
|
|
11,905
|
|
|
|
455
|
|
|
|
12,360
|
|
|
|
(2,657
|
)
|
|
|
(8,832
|
)
|
|
|
(11,489
|
)
|
Loans and leases held for investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgages
|
|
|
48,077
|
|
|
|
(27,909
|
)
|
|
|
20,168
|
|
|
|
(170
|
)
|
|
|
(13,343
|
)
|
|
|
(13,513
|
)
|
Commercial and commercial real estate
|
|
|
4,409
|
|
|
|
5,264
|
|
|
|
9,673
|
|
|
|
13,331
|
|
|
|
12,513
|
|
|
|
25,844
|
|
Lease financing receivables
|
|
|
15,802
|
|
|
|
(30,947
|
)
|
|
|
(15,145
|
)
|
|
|
141,353
|
|
|
|
|
|
|
|
141,353
|
|
Home equity lines
|
|
|
(588
|
)
|
|
|
1,724
|
|
|
|
1,136
|
|
|
|
(463
|
)
|
|
|
357
|
|
|
|
(106
|
)
|
Consumer and credit card
|
|
|
(26
|
)
|
|
|
(108
|
)
|
|
|
(134
|
)
|
|
|
270
|
|
|
|
(242
|
)
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases held for investment
|
|
|
67,674
|
|
|
|
(51,976
|
)
|
|
|
15,698
|
|
|
|
154,321
|
|
|
|
(715
|
)
|
|
|
153,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total change in interest income
|
|
|
97,777
|
|
|
|
(122,064
|
)
|
|
|
(24,287
|
)
|
|
|
337,689
|
|
|
|
(165,776
|
)
|
|
|
171,913
|
|
Interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing demand
|
|
$
|
4,333
|
|
|
$
|
(6,515
|
)
|
|
$
|
(2,182
|
)
|
|
$
|
6,596
|
|
|
$
|
(8,496
|
)
|
|
$
|
(1,900
|
)
|
Market-based money market accounts
|
|
|
1,045
|
|
|
|
(1,352
|
)
|
|
|
(307
|
)
|
|
|
807
|
|
|
|
(2,082
|
)
|
|
|
(1,275
|
)
|
Savings and money market accounts, excluding market-based
|
|
|
10,530
|
|
|
|
(12,319
|
)
|
|
|
(1,789
|
)
|
|
|
17,926
|
|
|
|
(16,808
|
)
|
|
|
1,118
|
|
Market-based time
|
|
|
2,054
|
|
|
|
(1,437
|
)
|
|
|
617
|
|
|
|
2,656
|
|
|
|
(5,477
|
)
|
|
|
(2,821
|
)
|
Time, excluding market-based
|
|
|
(197
|
)
|
|
|
(540
|
)
|
|
|
(737
|
)
|
|
|
21,526
|
|
|
|
(22,935
|
)
|
|
|
(1,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
17,765
|
|
|
|
(22,163
|
)
|
|
|
(4,398
|
)
|
|
|
49,511
|
|
|
|
(55,798
|
)
|
|
|
(6,287
|
)
|
Other borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust preferred securities
|
|
|
(857
|
)
|
|
|
(271
|
)
|
|
|
(1,128
|
)
|
|
|
(422
|
)
|
|
|
(486
|
)
|
|
|
(908
|
)
|
FHLB advances
|
|
|
(2,365
|
)
|
|
|
(1,682
|
)
|
|
|
(4,047
|
)
|
|
|
(11,205
|
)
|
|
|
371
|
|
|
|
(10,834
|
)
|
Repurchase agreements
|
|
|
135
|
|
|
|
(1
|
)
|
|
|
134
|
|
|
|
115
|
|
|
|
81
|
|
|
|
196
|
|
Other
|
|
|
(1,818
|
)
|
|
|
|
|
|
|
(1,818
|
)
|
|
|
54
|
|
|
|
1,735
|
|
|
|
1,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total change in interest expense
|
|
|
12,860
|
|
|
|
(24,117
|
)
|
|
|
(11,257
|
)
|
|
|
38,053
|
|
|
|
(54,097
|
)
|
|
|
(16,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total change in net interest income
|
|
$
|
84,917
|
|
|
$
|
(97,947
|
)
|
|
$
|
(13,030
|
)
|
|
$
|
299,636
|
|
|
$
|
(111,679
|
)
|
|
$
|
187,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
Results of Operations Comparison of Results of
Operations for the Years Ended December 31, 2011 and
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
%
|
|
|
|
2011
|
|
|
2010
|
|
|
Change
|
|
|
|
(In thousands)
|
|
|
|
|
|
Interest income
|
|
$
|
588,220
|
|
|
$
|
612,507
|
|
|
|
(4
|
)%
|
Interest expense
|
|
|
135,910
|
|
|
|
147,167
|
|
|
|
(8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
452,310
|
|
|
|
465,340
|
|
|
|
(3
|
)%
|
Provision for loan and lease losses
|
|
|
49,704
|
|
|
|
79,341
|
|
|
|
(37
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan and lease losses
|
|
|
402,606
|
|
|
|
385,999
|
|
|
|
4
|
%
|
Noninterest income
|
|
|
233,103
|
|
|
|
357,807
|
|
|
|
(35
|
)%
|
Noninterest expense
|
|
|
554,195
|
|
|
|
493,933
|
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
81,514
|
|
|
|
249,873
|
|
|
|
(67
|
)%
|
Provision for income taxes
|
|
|
28,785
|
|
|
|
60,973
|
|
|
|
(53
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
52,729
|
|
|
$
|
188,900
|
|
|
|
(72
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
Our total interest income decreased by $24.3 million, or
4%, to $588.2 million in 2011 from $612.5 million in
2010, primarily due to a decrease in interest earned from our
investment securities portfolio offset by increases in interest
income from our loan portfolio.
Interest income earned on our loan and lease portfolio increased
by $28.1 million, or 6%, to $479.9 million in 2011
from $451.9 million in 2010. This increase consisted of a
$15.7 million increase in interest income earned on our
average balance of loans and leases held for investment, and a
$12.4 million increase in interest income earned on our
average balance of loans held for sale. The increase in interest
income earned on our loans and leases held for investment was
primarily driven by $20.2 million and $9.7 million of
interest income earned on our residential mortgages and
commercial and commercial real estate loans, respectively. The
increase in interest income on our residential mortgages is due
to increases in originations partially offset by decreases in
interest rates as a result of decreases in interest rates
associated with the new volume. The increase in interest income
on our commercial and commercial real estate loans is due to the
timing of the Bank of Florida transaction in May 2010. The
increase in interest income is offset by a $15.1 million
decrease in interest income generated from lease financing
receivables. The decrease in yield is a result of continued run
off of deeply discounted receivables acquired as part of the
Tygris acquisition.
Interest income earned on our investment securities portfolio
decreased by $52.6 million, or 33%, to $106.9 million
in 2011 from $159.4 million in 2010. This decrease was
primarily driven by a 275 basis point decrease in yield on
the average balance of our investment securities portfolio to
4.11% in 2011 from 6.86% in 2010 offset by a
$263.9 million, or 11%, increase in the average balance of
our investment securities portfolio to $2,582.1 million in
2011 from $2,318.2 million in 2010. The decrease in yield
resulted from lower discount accretion and the addition of lower
yielding agency securities during 2011.
Interest
Expense
Interest expense decreased by $11.3 million, or 8%, to
$135.9 million in 2011 from $147.2 million in 2010,
primarily due to decreases in other borrowings interest expense
and in our deposit interest expense.
68
Other borrowings interest expense decreased by
$6.9 million, or 15%, to $38.9 million in 2011 from
$45.8 million in 2010. This decrease is primarily
attributable to a decrease of $94.0 million, or 9%, in our
average other borrowings balance to $918.9 million in 2011
from $1,013.0 million in 2010. In January 2011, we
purchased $10.0 million of our own trust preferred
securities due in September 2037.
Deposit interest expense decreased by $4.4 million, or 4%,
to $97.0 million in 2011 from $101.4 million in 2010.
The decrease largely resulted from a 27 basis point
decrease in deposit yield to 1.09% for 2011 from 1.36% for 2010
as a result of lower deposit costs due to lower market interest
rates. Interest rates were reduced during 2011 to align our
deposit levels with lower market interest rates. The decrease
was partially offset by an increase of $1,463.1 million, or
20%, in our average deposit balance to $8,903.6 million in
2011 from $7,440.5 million in 2010.
Provision for
Loan and Lease Losses
Provision for loan and lease losses decreased by
$29.6 million, or 37%, to $49.7 million in 2011 from
$79.3 million in 2010. This decrease was primarily a
reflection of lower incurred losses on our legacy commercial and
commercial real estate loans held for investment.
Noninterest
Income
Noninterest income decreased by $124.7 million, or 35%, to
$233.1 million for in 2011 from $357.8 million in
2010. The decrease is primarily a result of the bargain purchase
gain of $68.1 million related to the Tygris acquisition in
February 2010 and a decrease in net servicing income.
Significant components of noninterest income are discussed below.
Loan Production Revenue. Loan
production revenue decreased $8.4 million, or 24%, to
$26.5 million during 2011 from $34.9 million during
2010, primarily as a result of a decline in volume and lower
fees associated with originating residential mortgage loans.
Net Loan Servicing Income. Net loan
servicing decreased by $63.7 million, or 54%, to
$54.0 million in 2011 from $117.7 million in 2010.
This decrease was attributable to a $42.4 million, or 45%,
increase in the amortization expense and impairment of MSR to
$135.5 million in 2011 from $93.1 million in 2010.
This increase is the result of a $39.5 million impairment
charge driven by increasing prepayments and higher net servicing
costs. Loan servicing fee income decreased to
$189.4 million in 2011 from $210.8 million in 2010.
The decrease in net loan servicing fee income is due to a
$3.4 billion, or 6%, decrease in the unpaid principal
balance, or UPB, of our servicing portfolio to
$54.8 billion as of December 31, 2011 from
$58.2 billion as of December 31, 2010. Prepayments
exceeded new servicing retained from loans originated internally.
Deposit Fee Income. Noninterest income
earned on deposit fees increased by $6.2 million, or 31%,
to $26.0 million in 2011 from $19.8 million in 2010.
This was largely attributable to a $6.0 million increase in
fee income associated with an increase in volume of our
WorldCurrency®
deposit products.
Other Noninterest Income. Other
noninterest income decreased by $58.8 million, or 32%, to
$126.7 million in 2011 from $185.5 million in 2010.
This decrease was largely attributable to a $68.1 million
non-recurring bargain purchase gain related to the Tygris
acquisition in February 2010. This decrease was partially offset
by an increase in operating lease income of $9.6 million,
or 45%, to $30.9 million in 2011 from $21.3 million in
2010. In addition, we generated $15.9 million of gains from
the sale of investment securities in our portfolio in 2011
compared to $22.0 million of net gains in 2010.
Noninterest
Expense
Noninterest expenses increased by $60.3 million, or 12%, to
$554.2 million in 2011 from $493.9 million in 2010.
Significant components of this increase are discussed below.
69
Salaries, Commissions and Other Employee
Benefits. Salaries, commissions and other
employee benefits expense increased by $31.0 million, or
15%, to $232.8 million in 2011 from $201.8 million in
2010, due to increases in salaries, benefits and incentives
resulting from higher staffing levels from our Tygris and Bank
of Florida acquisitions, our mortgage banking business, and
corporate administration growth to support general operations.
Headcount increased by 5% from 2010 to 2011 and by 31% from 2009
to 2010, which helps account for the variance in expense on a
full year basis.
Equipment and Occupancy. Equipment and
occupancy expense increased by $16.6 million, or 31%, to
$69.9 million in 2011 from $53.3 million in 2010, due
primarily to increases of $3.1 million in computer expense
and $12.8 million in depreciation expense. Company growth
due to the Tygris and Bank of Florida acquisitions were the
primary drivers of the expense increase.
General and Administrative. General and
administrative expense increased by $12.6 million, or 5%,
to $251.5 million in 2011 from $238.9 million in 2010,
due to increases in legal and transaction expenses and FDIC
insurance premiums, partially offset by a decrease in other
credit-related expenses. Legal expenses increased
$10.3 million and other professional expense increased
$25.2 million, as a result of expenses related to this
offering, preparations for becoming a public company, the Bank
of Florida and Tygris acquisitions, and legal and regulatory
compliance, including compliance with the consent orders entered
into in April 2011 and the third party review of historical
residential mortgage foreclosure actions. Foreclosure and OREO
related expenses increased $13.7 million. The FDIC premium
assessment and agency fees increased $14.1 million. The
increase in general and administrative expenses was partially
offset by a decrease in production reserves of
$16.6 million and counter party reserves of
$12.7 million as a result of decreasing loan repurchase
requests. Additionally, we experienced a decrease in the
non-recurring loss on debt extinguishments of $10.3 million
incurred in the comparative period. The indemnification asset
write down related to the Tygris acquisition was
$8.7 million in 2011. This was a decrease of
$13.3 million from a write down of $22.0 million in
2010. The write down of the indemnification asset resulted from
a decrease in estimated future credit losses. The carrying value
of the indemnification asset was $0 as of December 31, 2011.
Income
Taxes
Provision for income taxes decreased by $32.2 million, or
53%, to $28.8 million in 2011 from $61.0 million in
2010, primarily due to a decrease in pre-tax income. Our
effective tax rates were 35.3% and 24.4% in 2011 and 2010,
respectively. Our effective tax rate in 2010 was reduced due to
the nontaxable bargain purchase gain of $68.1 million and a
$7.8 million tax benefit resulting from the revaluation of
net unrealized built-in losses. Excluding the impact of the
non-recurring items from the Tygris acquisition, the effective
tax rate was 37% in 2010.
70
Results of
Operations Comparison of Results of Operations for
the Years Ended December 31, 2010 and December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
%
|
|
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
|
(In thousands)
|
|
|
|
|
|
Interest income
|
|
$
|
612,507
|
|
|
$
|
440,594
|
|
|
|
39
|
%
|
Interest expense
|
|
|
147,167
|
|
|
|
163,211
|
|
|
|
(10
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
465,340
|
|
|
|
277,383
|
|
|
|
68
|
%
|
Provision for loan and lease losses
|
|
|
79,341
|
|
|
|
121,912
|
|
|
|
(35
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan and lease losses
|
|
|
385,999
|
|
|
|
155,471
|
|
|
|
148
|
%
|
Noninterest income
|
|
|
357,807
|
|
|
|
232,098
|
|
|
|
54
|
%
|
Noninterest expense
|
|
|
493,933
|
|
|
|
299,179
|
|
|
|
65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
249,873
|
|
|
|
88,390
|
|
|
|
183
|
%
|
Provision for income taxes
|
|
|
60,973
|
|
|
|
34,853
|
|
|
|
75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
|
|
188,900
|
|
|
|
53,537
|
|
|
|
253
|
%
|
Discontinued operations, net of income taxes
|
|
|
|
|
|
|
(172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
188,900
|
|
|
$
|
53,365
|
|
|
|
254
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
Our total interest income increased by $171.9 million, or
39%, to $612.5 million in 2010 from $440.6 million in
2009, primarily due to increases in interest income from our
loans held for investment and investment securities portfolio.
Interest income earned on our loan and lease portfolio increased
by $142.1 million, or 46%, to $451.9 million in 2010
from $309.8 million in 2009. This increase consisted of a
$153.6 million increase in interest income earned on our
average balance of loans and leases held for investment,
partially offset by a $11.5 million decrease in interest
income earned on our average balance of loans held for sale. The
$153.6 million increase in interest income earned on our
loans and leases held for investment was primarily driven by
$141.4 million and $25.8 million of interest income
earned on our lease financing receivables and commercial and
commercial real estate loans, respectively, partially offset by
a $13.5 million, or 7%, decrease in interest income earned
on residential mortgage loans. The $141.4 million of
interest income earned on our lease financing receivables
resulted from our acquisition of Tygris, including accretion of
discounts of $86.4 million, and was not a component of
interest income in 2009. The decrease in interest income earned
on our loans held for sale was primarily driven by a
$48.8 million, or 4%, decrease in the average balance of
our loans held for sale to $1.1 billion in 2010. The
decrease in average balance was the result of a decrease in
mortgage origination volumes and lower yields due to lower
market interest rates to which such yields are indexed.
Interest income earned on our available for sale, or AFS, held
to maturity, or HTM, and trading securities increased by
$29.0 million, or 22%, to $159.0 million in 2010 from
$130.0 million in 2009. This increase was primarily driven
by a $1.4 billion, or 142%, increase in the average balance
of our investment securities portfolio to $2.3 billion in
2010 from $956.2 million in 2009, partially offset by a
674 basis point decrease in yield on the average balance of
our investment securities portfolio to 6.86% in 2010 from 13.6%
in 2009. The decrease in yield resulted from higher discount
accretion in 2009 due to higher prepayment volumes.
71
Interest
Expense
Interest expense decreased by $16.0 million, or 10%, to
$147.2 million in 2010 from $163.2 million in 2009,
primarily due to decreases in our deposit interest expense and
other borrowings interest expense.
Deposit interest expense decreased by $6.3 million, or 6%,
to $101.4 million in 2010 from $107.7 million in 2009.
The decrease largely resulted from lower deposit costs due to
lower market interest rates, partially offset by an increase of
$2.2 billion, or 43%, in our average deposit balance to
$7.4 billion in 2010 from $5.2 billion in 2009.
Other borrowings interest expense decreased by
$9.8 million, or 18%, to $45.8 million in 2010 from
$55.5 million in 2009. This decrease is primarily
attributable to a decrease of $240.7 million, or 19%, in
our average other borrowings balance to $1.0 billion in
2010 from $1.3 billion in 2009.
Provision for
Loan and Lease Losses
Provision for loan and lease losses decreased by
$42.6 million, or 35%, to $79.3 million in 2010 from
$121.9 million in 2009. This decrease was primarily a
reflection of lower expected losses on our legacy commercial and
commercial real estate loans held for investment.
Noninterest
Income
Noninterest income increased by $125.7 million, or 54%, to
$357.8 million in 2010 from $232.1 million in 2009.
Significant components of this increase are discussed below.
Gain on Sale of Loans and Loan Production
Revenue. Noninterest income earned on the
gain on sale of loans decreased by $0.5 million, or 1%, to
$66.0 million in 2010 from $66.4 million in 2009,
primarily as a result of lower mortgage origination volumes
generating lower gains on the sale of such loans into the
capital markets. Loan production revenue decreased
$4.5 million, or 11%, to $34.9 million in 2010 from
$39.3 million in 2009, primarily as a result of lower fees
associated with originating fewer residential mortgage loans.
Net Loan Servicing Income. Noninterest
income earned on net loan servicing increased by
$25.5 million, or 28%, to $117.7 million in 2010 from
$92.2 million in 2009. This increase was largely
attributable to the $5.1 billion, or 10%, increase in the
unpaid principal balance, or UPB, of our servicing portfolio to
$56.4 billion in 2010 from $51.3 billion in 2009,
resulting from increased retention of originated MSR and bulk
acquisitions of loan servicing portfolios. This increase was
also driven by a $53.2 million, or 34%, increase in loan
servicing fee income to $210.8 million in 2010 from
$157.7 million in 2009, partially offset by a
$27.7 million, or 42%, increase in the amortization of MSR
to $93.1 million in 2010 from $65.5 million in 2009.
The increase in net loan servicing fee income was primarily
attributable to the increase in UPB while the amortization of
MSR increase was primarily attributed to higher prepayment
activity due to the market interest rate environment.
Deposit Fee Income. Noninterest income
earned on deposit fees decreased by $2.3 million, or 10%,
to $19.8 million in 2010 from $22.0 million in 2009.
This was largely attributable to a $3.2 million decrease in
fee income associated with our
WorldCurrency®
deposit products due to lower transaction volumes.
Other Noninterest Income. Other
noninterest income increased by $107.4 million, or 886%, to
$119.5 million in 2010 from $12.1 million in 2009.
This increase was largely attributable to a $68.1 million
non-recurring bargain purchase gain related to the Tygris
acquisition and $21.3 million of operating lease income. In
addition, we generated $21.9 million of gains in 2010 from
the sale of investment securities in our portfolio compared to
$7.4 million of gains in 2009.
Noninterest
Expense
Noninterest expenses increased by $194.8 million, or 65%,
to $493.9 million in 2010 from $299.2 million in 2009.
Significant components of this increase are discussed below.
72
Salaries, Commissions and Other Employee
Benefits. Salaries, commissions and other
employee benefits expense increased by $51.2 million, or
34%, to $201.8 million in 2010 from $150.6 million in
2009, due to increases in salaries, benefits and incentives
resulting from higher staffing levels from our Tygris and Bank
of Florida acquisitions and in our mortgage banking business.
Total headcount increased by 31%.
Equipment and Occupancy. Equipment and
occupancy expense increased by $15.3 million, or 40%, to
$53.3 million in 2010 from $38.0 million in 2009, due
primarily to increases of $4.9 million in lease expense,
$4.5 million in computer expense and $1.6 million in
depreciation expense. The Tygris and Bank of Florida
acquisitions were the primary drivers of the expense increase.
General and Administrative. General and
administrative expense increased by $128.3 million, or
116%, to $238.9 million in 2010 from $110.6 million in
2009, due to increases in legal, transaction, advertising, OREO
and foreclosure and other expenses, as well as increased
mortgage repurchase reserves. Legal expense increased
$2.5 million and other professional expense increased
$10.7 million, primarily due to one-time expenses related
to the Tygris and Bank of Florida acquisitions. Advertising
expense increased $9.6 million due to expanded marketing
related to our deposit growth initiative. Mortgage repurchase
reserves increased $63.2 million due to higher than
anticipated impairment levels and foreclosure-related expenses.
The indemnification asset related to the Tygris acquisition
decreased in fair value by $22.0 million resulting from a
decrease in estimated future credit losses. Other expenses
increased $16.0 million to $40.9 million in 2010 from
$24.9 million in 2009, due primarily to $10.3 million
related to the loss realized on the early extinguishment of
Tygris debt and increased transaction expenses of
$9.8 million.
Income
Taxes
Provision for income taxes increased by $26.1 million, or
75%, to $61.0 million in 2010 from $34.9 million in
2009, due to increases in pre-tax income from continuing
operations. Our effective tax rates were 24% and 39% in 2010 and
2009, respectively. Our effective tax rate in 2010 was impacted
by non-recurring items from the Tygris acquisition, including
the nontaxable bargain purchase gain of $68.1 million and a
tax benefit of $7.8 million resulting from a revaluation of
net unrealized built-in losses. Excluding the impact of the
non-recurring items from the Tygris acquisition, the effective
tax rate was 37% in 2010.
Discontinued
Operations
Discontinued operations relate to business activities that we
have sold, discontinued or dissolved. Net loss from discontinued
operations of $0.2 million in 2009 represents trailing
expenses from the sale of our commercial and multi-family real
estate mortgage wholesale brokerage unit in February 2009.
Segment
Results
We evaluate our overall financial performance through three
financial reporting segments: Banking and Wealth Management,
Mortgage Banking and Corporate Services. To generate financial
information by operating segment, we use an internal
profitability reporting system which is based on a series of
management estimates and allocations. We continually review and
refine many of these estimates and allocations, many of which
are subjective in nature. Any changes we make to estimates and
allocations that may affect the reported results of any business
segment do not affect our consolidated financial position or
consolidated results of operations.
We use funds transfer pricing in the calculation of the
respective operating segments net interest income to
measure the value of funds used in and provided by an operating
segment. The difference between the interest income on earning
assets and the interest expense on funding liabilities and the
corresponding funds transfer pricing charge for interest income
or credit for interest expense results in net interest income.
We allocate risk-adjusted capital to our segments based upon the
credit, liquidity, operating and interest rate risk inherent in
the segments asset and liability
73
composition and operations. These capital allocations are
determined based upon formulas that incorporate regulatory,
GAAP, Basel and economic capital frameworks including
risk-weighting assets, allocating noninterest expense and
incorporating economic liquidity premiums for assets deemed by
management to lower liquidity profiles.
Our Banking and Wealth Management segment often invests in loans
originated from asset generation channels contained within our
Mortgage Banking segment. When intersegment acquisitions take
place, we assign an estimate of the market value to the asset
and record the transfer as a market purchase. In addition,
inter-segment cash balances are eliminated in segment reporting.
The effects of these inter-segment allocations and transfers are
eliminated in consolidated reporting.
The following table summarizes segment earnings and total assets
for each of our segments as of and for each of the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
Segment Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking and Wealth Management
|
|
$
|
241,146
|
|
|
$
|
233,521
|
|
|
$
|
85,300
|
|
Mortgage Banking
|
|
|
(38,765
|
)
|
|
|
32,313
|
|
|
|
77,065
|
|
Corporate Services
|
|
|
(120,867
|
)
|
|
|
(15,961
|
)
|
|
|
(73,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
81,514
|
|
|
$
|
249,873
|
|
|
$
|
88,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking and Wealth Management
|
|
$
|
11,658,702
|
|
|
$
|
10,117,289
|
|
|
$
|
6,522,869
|
|
Mortgage Banking
|
|
|
1,557,421
|
|
|
|
1,957,897
|
|
|
|
1,543,370
|
|
Corporate Services
|
|
|
99,886
|
|
|
|
49,325
|
|
|
|
24,148
|
|
Eliminations
|
|
|
(274,331
|
)
|
|
|
(116,625
|
)
|
|
|
(30,208
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
13,041,678
|
|
|
$
|
12,007,886
|
|
|
$
|
8,060,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking and
Wealth Management
The following summarizes the results of operations for our
Banking and Wealth Management segment for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
Net interest income
|
|
$
|
419,415
|
|
|
$
|
434,811
|
|
|
$
|
253,352
|
|
Provision for loan and lease losses
|
|
|
47,554
|
|
|
|
72,771
|
|
|
|
121,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan and lease losses
|
|
|
371,861
|
|
|
|
362,040
|
|
|
|
131,976
|
|
Noninterest income
|
|
|
85,345
|
|
|
|
62,386
|
|
|
|
32,819
|
|
Noninterest expense
|
|
|
216,060
|
|
|
|
190,905
|
|
|
|
79,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
241,146
|
|
|
$
|
233,521
|
|
|
$
|
85,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2011 Compared to the Year Ended
December 31, 2010
Banking and Wealth Management segment earnings increased by
$7.6 million, or 3%, in 2011 compared to 2010, primarily
due to an increase in noninterest income which was offset by an
increase in noninterest expense. Net interest income decreased
by $15.4 million, or 4%, for the comparable period. This
decrease was primarily due to a decrease of $52.6 million
or 33% in interest earned on
74
our investment securities and partially offset by an increase of
$35.5 million, or 9%, in interest and fees earned on our
loans and leases. The decrease in interest earned on investment
securities was primarily driven by a decrease in yield on the
average balance of our investment securities portfolio. The
decrease in yield resulted from lower discount accretion due to
a decrease in prepayment volumes and the addition of lower
yielding agency securities during the 2011 period. The increase
in interest and fees on loans and leases was driven by an
increase in average loans and leases held for investment of
$1.0 billion, or 19% and an increase in average loans and
leases held for sale of $355.4 million, or 154%. The
increase in average loans and leases held for investment was
primarily driven by our residential mortgages, commercial and
commercial real estate loans, and lease financing receivables.
Average loans held for sale increased as a result of
acquisitions of GNMA loans during the second half of the year.
The increase in interest income is offset by a
$15.1 million decrease in interest income generated from
lease financing receivables. The decrease is due largely to a
decrease in yield of 643 basis points to 26.2% for the
twelve months ended December 31, 2011. The decrease in
yield is a result of continued run off of deeply discounted
receivables acquired as part of the Tygris acquisition.
Additionally, intersegment revenue decreased $8.6 million,
as a result of a change in transfer pricing to align interest
rates with market rates.
Provision expense decreased by $25.2 million, or 35%, in
2011 compared to the 2010, primarily due to lower credit losses
on our legacy commercial and commercial real estate loans held
for investment, and the improvement in the performance of
commercial loans over last year. The decrease is partially
offset by higher provision expense due to growth in our
residential portfolio. Noninterest income increased by
$23.0 million, or 37%, in 2011 compared to 2010. The
increase is driven primarily by an increase in the income
generated from sales of loans, improved earnings from leasing
operations, and an increase in deposit fee income associated
with our
WorldCurrency®
deposit products due to increased foreign currency deposits.
This increase was offset by lower gains from the sale of
investment securities in our portfolio. Noninterest expense
increased by $25.2 million, or 13%, in 2011 compared to
2010. This increase primarily reflects higher operating expenses
as a result of the Tygris and Bank of Florida acquisitions and
higher FDIC insurance premiums. Additionally, noninterest
expense in 2011 includes a charge of $8.7 million from the
write-off of the remaining Tygris indemnification asset, and
noninterest expense in 2010 includes a write-off of the Tygris
indemnification asset of $22.0 million and a charge for the
extinguishment of Tygris debt of $10.3 million.
Year Ended
December 31, 2010 Compared to the Year Ended
December 31, 2009
Banking and Wealth Management segment earnings increased by
$148.2 million, or 174%, in 2010 compared to 2009,
primarily due to an increase in interest income from investment
securities and a decrease in our provision for loan and lease
losses. Net interest income increased by $181.5 million, or
72%, for the comparable periods. This increase was primarily due
to a $146.5 million, or 55%, increase in interest income
earned on our loans and leases held for investment. Average
loans and leases held for investment increased
$728.6 million, or 16%, primarily as a result of our
acquisitions of Tygris and Bank of Florida. Provision expense
decreased by $48.6 million, or 40%, in 2010 compared to
2009, primarily due to lower anticipated credit losses in our
commercial and multi-family real estate loans held for
investment. Noninterest income increased by $29.6 million,
or 90%, in 2010 compared to 2009. This increase primarily
reflects noninterest income earned on leases resulting from the
Tygris acquisition and a higher gain on the sale of investment
securities. Noninterest expense increased by
$111.4 million, or 140%, in 2010 compared to 2009. This
increase primarily reflected higher operating expenses as a
result of the Tygris and Bank of Florida acquisitions,
non-recurring transaction expenses associated with the Tygris
and Bank of Florida acquisitions, and higher expenses from
dispositions of OREO.
75
Mortgage
Banking
The following summarizes the results of operations for our
Mortgage Banking segment for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Net interest income
|
|
$
|
39,536
|
|
|
$
|
38,298
|
|
|
$
|
32,708
|
|
Provision for loan and lease losses
|
|
|
2,150
|
|
|
|
6,570
|
|
|
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan and lease losses
|
|
|
37,386
|
|
|
|
31,728
|
|
|
|
32,172
|
|
Noninterest income
|
|
|
143,035
|
|
|
|
221,442
|
|
|
|
199,152
|
|
Noninterest expense
|
|
|
219,186
|
|
|
|
220,857
|
|
|
|
154,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings
|
|
$
|
(38,765
|
)
|
|
$
|
32,313
|
|
|
$
|
77,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2011 Compared to the Year Ended
December 31, 2010
Mortgage Banking segment earnings decreased $71.1 million,
or 220%, in 2011 compared to 2010, primarily due to a decrease
in noninterest income earned from the loan servicing, loan
production and gain on sale of loans. Net loan servicing income
decreased by $64.1 million, or 54%, compared to 2010. This
decrease was driven in part by a $3.3 billion, or 6%
decrease in UPB, of our servicing portfolio as compared to the
balance in the servicing portfolio at December 31, 2010.
Additionally, net loan servicing income includes a
$39.5 million charge for MSR impairment. Loan production
revenue decreased by $7.9 million, or 24%, in 2011 compared
to 2010 primarily as a result of a decrease in volume and lower
fees associated with originating residential mortgage loans.
Noninterest income earned from the gain on sale of loans
decreased by $3.0 million, or 4% in 2011 compared to 2010.
Decreases are offset by an increase in net interest income of
$1.2 million, or 3% due primarily to increases in
intersegment revenue with the Banking and Wealth Management
segment. Intersegment revenue increased $8.6 million, as a
result of a change in transfer pricing to align interest rates
with market rates.
Year Ended
December 31, 2010 Compared to the Year Ended
December 31, 2009
Mortgage Banking segment earnings decreased by
$44.8 million, or 58%, in 2010 compared to 2009, primarily
due to an increase in noninterest expense, partially offset by
an increase in net loan servicing income. Loan production
revenue decreased by $4.4 million, or 12%, in 2010 compared
to 2009, largely driven by lower mortgage origination volumes in
the comparable periods. Net loan servicing income increased by
$25.3 million, or 27%, during the comparable periods. This
increase was largely driven by a $9.7 billion, or 20%,
increase in our servicing portfolio compared to the prior year.
Noninterest expense increased by $66.6 million, or 43%, in
2010 compared to 2009. This increase was largely driven by a
$54.7 million, or 92%, increase in general and
administrative expenses that was primarily the result of higher
mortgage repurchase reserves. In addition, salaries, commissions
and other employee benefits increased by $10.9 million, or
14%, in 2010 compared to 2009. The increase in salaries,
commissions and other employee benefits was largely driven by a
12% increase in headcount to support our mortgage banking
operations.
76
Corporate
Services
The following summarizes the results of operations for our
Corporate Services segment for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
Net interest expense
|
|
$
|
(6,641
|
)
|
|
$
|
(7,769
|
)
|
|
$
|
(8,677
|
)
|
Noninterest income
|
|
|
4,723
|
|
|
|
73,979
|
|
|
|
127
|
|
Noninterest expense
|
|
|
118,949
|
|
|
|
82,171
|
|
|
|
65,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment earnings (loss)
|
|
$
|
(120,867
|
)
|
|
$
|
(15,961
|
)
|
|
$
|
(73,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2011 Compared to the Year Ended
December 31, 2010
Corporate Services recorded noninterest income of
$4.7 million in 2011. This was composed of a
$4.7 million gain on extinguishment of trust preferred
securities. In addition, Corporate Services noninterest expense
increased $36.8 million, or 45%, in 2011 compared to 2010,
primarily due to an increase in general and administrative
expenses. We experienced a $20.2 million, or 107%, increase
in general and administrative expenses. In addition, we had
increases of $11.7 million, or 24%, in salaries and other
employee benefits, and $4.8 million, or 35%, in occupancy
and equipment expense. The increase in general and
administrative expenses is driven primarily by an increase in
legal and professional fees as a result of this offering, legal
and regulatory compliance, and additional consulting
arrangements. Additionally, salaries, commissions, and other
employee benefits increased as a result of headcount increases.
Total headcount increased 24% in 2011 compared to 2010.
Year Ended
December 31, 2010 Compared to the Year Ended
December 31, 2009
Corporate Services recorded noninterest income of
$74.0 million in 2010. This was primarily composed of a
$68.1 million non-recurring bargain purchase gain
associated with the Tygris acquisition and a $5.7 million
gain on extinguishment of trust preferred securities. In
addition, Corporate Services noninterest expense increased by
$16.7 million, or 26%, in 2010 compared to 2009, primarily
due to an increase in salaries, commissions and other employee
benefits. We experienced a $6.3 million, or 15%, increase
in salaries, commissions and other employee benefits, in
addition to a $2.4 million, or 21%, increase in occupancy
and equipment expense and a $8.0 million, or 73%, increase
in general and administrative expenses. The increase in
salaries, commissions and other employee benefits was largely
driven by an 18% increase in headcount to support our general
operations.
Financial
Condition
Assets
Total assets increased by $1.0 billion, or 9%, to
$13.0 billion at December 31, 2011 from
$12.0 billion at December 31, 2010. This increase was
primarily attributable to increases in our loans held for sale
and loans and leases held for investment portfolio partially
offset by a decrease in our interest-bearing deposits in banks.
Total assets increased by $3.9 billion, or 49%, to
$12.0 billion at December 31, 2010 from
$8.1 billion at December 31, 2009. This increase was
primarily attributable to increases in our loan and leases held
for investment and investment securities portfolio resulting
from the continued deployment of capital generated from our
capital raising activities and the acquisitions of Tygris and
Bank of Florida. Total assets increased by $1.0 billion, or
14%, to $8.1 billion at December 31, 2009 from
$7.0 billion at December 31, 2008, primarily due to
increases in our loans and leases held for investment and
investment securities portfolio resulting from the deployment of
capital. Descriptions of our major balance sheet asset
categories are set forth below.
77
Investment
Securities
The following table sets forth the fair value of investment
securities classified as available for sale and the amortized
cost of investment securities held to maturity as of
December 31, 2011, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
Available for sale (at fair value):
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential collateralized mortgage obligation (CMO)
securities agency
|
|
$
|
104
|
|
|
$
|
148
|
|
|
$
|
4,809
|
|
Residential CMO securities nonagency
|
|
|
1,895,818
|
|
|
|
2,032,663
|
|
|
|
1,532,643
|
|
Residential mortgage-backed securities (MBS) agency
|
|
|
338
|
|
|
|
540
|
|
|
|
883
|
|
Other
|
|
|
7,662
|
|
|
|
8,254
|
|
|
|
8,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities available for sale
|
|
|
1,903,922
|
|
|
|
2,041,605
|
|
|
|
1,546,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity (at amortized cost):
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential CMO securities agency
|
|
|
159,882
|
|
|
|
6,800
|
|
|
|
7,378
|
|
Residential MBS agency
|
|
|
19,132
|
|
|
|
20,959
|
|
|
|
20,215
|
|
Other
|
|
|
10,504
|
|
|
|
5,169
|
|
|
|
5,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities held to maturity
|
|
|
189,518
|
|
|
|
32,928
|
|
|
|
33,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investment securities
|
|
$
|
2,093,440
|
|
|
$
|
2,074,533
|
|
|
$
|
1,579,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amortized cost and fair value of debt securities at
December 31, 2011 by contractual maturities are shown
below. Actual maturities may differ from contractual maturities
because the issuers may have the right to call or prepay
obligations with or without call or prepayment penalties. MBS,
including CMO, securities, are disclosed separately in the table
below, as these investment securities are likely to prepay prior
to their scheduled contractual maturity dates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
|
Fair Value
|
|
|
Yield
|
|
|
|
(In thousands)
|
|
|
Asset-backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
After ten years
|
|
$
|
10,573
|
|
|
$
|
7,477
|
|
|
|
1.23
|
%
|
Residential CMO securities agency
|
|
|
96
|
|
|
|
104
|
|
|
|
6.14
|
%
|
Residential CMO securities nonagency
|
|
|
1,919,046
|
|
|
|
1,895,818
|
|
|
|
3.95
|
%
|
Residential MBS securities agency
|
|
|
317
|
|
|
|
338
|
|
|
|
4.39
|
%
|
Equity securities
|
|
|
77
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,930,109
|
|
|
|
1,903,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities
|
|
|
|
|
|
|
|
|
|
|
|
|
After ten years
|
|
|
10,504
|
|
|
|
7,921
|
|
|
|
3.79
|
%
|
Residential CMO securities agency
|
|
|
159,882
|
|
|
|
165,833
|
|
|
|
3.14
|
%
|
Residential MBS securities agency
|
|
|
19,132
|
|
|
|
20,596
|
|
|
|
4.65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
189,518
|
|
|
|
194,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,119,627
|
|
|
$
|
2,098,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have historically utilized the investment securities
portfolio for earnings generation (in the form of interest and
dividend income), liquidity, credit and interest rate risk
management and asset diversification. Securities available for
sale are used as part of our asset/liability management strategy
and may be sold in response to, or in anticipation of, factors
such as changes in market conditions
78
and interest rates, changes in security prepayment rates,
liquidity considerations and regulatory capital requirements.
The principal categories of our investment portfolio are set
forth below.
Residential
Agency
At December 31, 2011, our residential agency CMO securities
totaled $160.0 million, or 8% of our investment securities
portfolio. The increase of $153.0 million from
December 31, 2010 is due to purchases of securities
partially offset by subsequent sales of securities. At
December 31, 2011, our residential agency MBS portfolio
totaled $19.5 million, or less than 1% of our investment
securities portfolio. Our agency residential MBS and CMO
portfolio is secured by seasoned first-lien fixed and adjustable
rate residential mortgage loans insured by GSEs.
Residential
Nonagency
Our residential CMO securities portfolio is almost entirely
comprised of investments in nonagency residential CMO
securities. Investments in nonagency residential CMO securities
decreased by $136.8 million, or 7%, to $1.9 billion at
December 31, 2011 from $2.0 billion at
December 31, 2010. The decrease during 2011 is primarily
due to sales of nonagency residential CMO securities. The same
investment securities increased by $500.0 million, or 33%,
to $2.0 billion at December 31, 2010 from
$1.5 billion at December 31, 2009. Such increases
during 2010 were primarily due to purchases of nonagency
residential CMO securities at discounts to par value. We
acquired 99% of the December 31, 2011 balance of such
securities after September 30, 2008.
Our residential nonagency CMO securities are secured by seasoned
first-lien fixed and adjustable rate residential mortgage loans
backed by loan originators other than a GSE. Mortgage collateral
is structured into a series of classes known as tranches, each
of which contains a different maturity profile and pay-down
priority in order to suit investor demands for duration, yield,
credit risk and prepayment volatility. We have primarily
invested in CMO securities rated in the highest category
assigned by a nationally recognized statistical ratings
organization. Many of these securities are re-securitizations of
real estate mortgage investment conduit securities, or
Re-REMICS, which adds credit subordination to provide protection
against future losses and rating downgrades. Re-REMICS
constituted $1.3 billion, or 66%, of our nonagency
residential CMO investment securities at December 31, 2011.
We have internal guidelines for the credit quality and duration
of our residential CMO securities portfolio and monitor these on
a regular basis. At December 31, 2011, the portfolio
carried a weighted-average Fair Isaac Corporation, or FICO,
score of 731, an amortized
loan-to-value
ratio, or LTV, of 66%, and was seasoned 78 months. This
portfolio includes protection against credit losses from
purchase discounts, subordination in the securities structures
and borrower equity.
The composition of our residential nonagency available for sale
securities includes amounts invested with several single issuers
that are in excess of 10% of our shareholders equity as of
December 31, 2011. The following table provides a summary
of the total par value, amortized cost
79
and fair value of the securities held for each of these issuers
and our tot