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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)
 
         
Delaware   6035   90-0615674
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)
 
 
 
 
501 Riverside Ave.
Jacksonville, Florida 32202
(904) 281-6000
(Address, including zip code, and telephone number, including area code, of registrant’s 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:
 
     
Richard B. Aftanas
Patricia Moran
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
  Lee A. Meyerson
Lesley Peng
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
 
 
 
 
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):
Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o
(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.
 


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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.
 
Subject to Completion, Dated April 30, 2012
 
25,150,000 Shares
 
(EVERBANK FINANCIAL CORP LOGO)
 
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.
 
 
 
 
                 
    Per Share   Total
 
Initial public offering price
  $           $                       
Underwriting discounts
  $           $                       
Proceeds, before expenses, to EverBank Financial Corp. 
  $           $                       
Proceeds, before expenses, to the selling stockholders
  $           $                       
 
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.
BofA Merrill Lynch Credit Suisse
Co-Managers
 
Keefe, Bruyette & Woods Sandler O’Neill + Partners, L.P. Evercore Partners
Raymond James Macquarie Capital Sterne Agee
 
 
 
 
Prospectus dated          , 2012.


 

 
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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.


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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 management’s 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 Bank’s 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 Bank’s 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 Magazine’s Best Checking Account and Money Magazine’s 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:
 
  •  Consumer Direct.  Our consumer direct channel includes Internet, email, telephone and mobile device access to products and services.
 
  •  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.
 
  •  Financial Intermediaries.  We offer deposit products nationwide through relationships with financial advisory firms representing over 2,800 independent financial professionals.
 
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:
 
  •  general business or economic conditions;
 
  •  liquidity risk, which could impair our ability to fund operations and jeopardize our financial condition;
 
  •  changes in interest rates, which may make our results volatile and difficult to predict from quarter to quarter;
 
  •  legislative or regulatory actions affecting or concerning mortgage loan modification and refinancing programs;
 
  •  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;
 
  •  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;
 
  •  conditions in the real estate market and higher than normal delinquency and default rates;
 
  •  our concentration of jumbo mortgage loans and mortgage servicing rights;
 
  •  uncertainty resulting from the implementation of new and pending legislation and regulations;
 
  •  our potential failure to comply with the complex laws and regulations that govern our operations; and
 
  •  our dependence on programs administered by government agencies and government- sponsored enterprises.
 
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,” (EVER BANKLOGO) (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:
 
  •  Our net interest income will be between $114 million and $117 million;
 
  •  Our provision for loan and lease losses will be between $10 million and $13 million;
 
  •  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


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  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


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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 Bank’s Warehouse Finance Business
 
In April 2012, we acquired MetLife Bank’s 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 EverBank’s 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.


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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.


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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,” “Management’s 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


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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.


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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 “Management’s 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Primary Factors Used to Evaluate Our Business.”
 
                         
    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  
                         


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    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

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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                


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    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.

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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.


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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


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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 management’s best estimate of probable losses inherent in our loan portfolio. The level of the allowance reflects management’s 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


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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 borrower’s 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.


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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


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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 “Management’s 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


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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 manufacturer’s or vendor’s 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


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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 management’s 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 Bank’s warehouse finance business.
 
Although we believe the recent acquisition of MetLife Bank’s 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.


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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.


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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 party’s 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


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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.


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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 team’s 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.


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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 FDIC’s 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


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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 EverBank’s 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:
 
  •  changes in the thrift supervisory structure;
 
  •  changes to regulatory capital requirements;
 
  •  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
 
  •  changes to mortgage loan origination and risk retention practices.
 
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 homeowner’s 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


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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 EverBank’s 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. EverBank’s 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 EverBank’s 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,” “Management’s 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 management’s 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


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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:
 
  •  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;
 
  •  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
 
  •  an additional 84,497,958 shares will be eligible for sale upon expiration of the lock-up agreements.
 
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:
 
  •  authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to thwart a takeover attempt;
 
  •  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;
 
  •  establish a classified board of directors, with directors of each class serving a three-year term;
 
  •  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;
 
  •  limit who may call special meetings of stockholders;
 
  •  prohibit stockholder action by written consent, requiring all actions to be taken at a meeting of the stockholders; and
 
  •  require supermajority stockholder voting to effect certain amendments to our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws.
 
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 institution’s 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,” “Management’s 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, management’s 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These factors include without limitation:
 
  •  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;
 
  •  risks related to liquidity;
 
  •  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;


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  •  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.


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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.


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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.


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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 “Management’s 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.”


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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 Florida’s 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 underwriter’s 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 “Management’s 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.


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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.


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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


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$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 (000’s)     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.


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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 “Management’s 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  
 


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    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.

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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 “Management’s 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 “Management’s 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  
 


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    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

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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.


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(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.


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MANAGEMENT’S 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 management’s 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


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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


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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.


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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.


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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


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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.


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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, LLC’s 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.


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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.


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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 Bank’s 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.


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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 segment’s 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


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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 OCC’s 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 Everbank’s 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


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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


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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 %


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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 period’s average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous year’s 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  
                                                 


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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.


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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.


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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.


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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.


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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.


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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 segment’s 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 segment’s asset and liability


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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


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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.


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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.


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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.


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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


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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


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and fair value of the securities held for each of these issuers and our tot