424B4 1 d421825d424b4.htm FINAL PROSPECTUS Final Prospectus
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Filed Pursuant to Rule 424(b)(4)
Registration No. 333-184381

LOGO

EverBank Financial Corp

 

 

6,000,000 Depositary Shares, Each Representing a 1/1,000th Interest

in a Share of 6.75% Series A Non-Cumulative Perpetual Preferred Stock

EverBank Financial Corp is offering 6,000,000 depositary shares, each representing a 1/1,000th ownership interest in a share of 6.75% Series A Non-Cumulative Perpetual Preferred Stock, $0.01 par value per share, with a liquidation preference of $25,000 per share (equivalent to $25 per depositary share), or the Series A Preferred Stock. As a holder of depositary shares, you will be entitled to all proportional rights and preferences of the Series A Preferred Stock (including dividend, voting, redemption and liquidation rights). You must exercise such rights through the depositary.

Dividends on the Series A Preferred Stock, when, as and if declared by our board of directors or a duly authorized committee of the board, will accrue and be payable on the liquidation preference amount, on a non-cumulative basis, quarterly in arrears on the 5th day of January, April, July and October of each year, commencing on January 5, 2013, at a rate per annum equal to 6.75%. We currently anticipate paying dividends on the Series A Preferred Stock commencing with the first scheduled payment date on January 5, 2013. If our board of directors or a duly authorized committee of the board has not declared a dividend on the Series A Preferred Stock before the dividend payment date for any dividend period, such dividend shall not be cumulative and shall not accrue or be payable for such dividend period, and we will have no obligation to pay dividends for such dividend period, whether or not dividends on the Series A Preferred Stock are declared for any future dividend period. Payment of dividends on the Series A Preferred Stock is subject to certain legal, regulatory and other restrictions as described in more detail under “Regulation and Supervision—Regulation of Federal Savings Banks—Limitation on Capital Distributions” and “Description of Series A Preferred Stock—Dividends”.

The Series A Preferred Stock may be redeemed at our option (i) in whole or in part on January 5, 2018, or any dividend payment date thereafter, or (ii) in whole, but not in part at any time within 90 days following a “regulatory capital treatment event,” as described herein, in each case at a redemption price equal to $25,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends, without accumulation of any undeclared dividends, to, but excluding, the redemption date.

The Series A Preferred Stock will not have any voting rights, except as set forth under “Description of Series A Preferred Stock—Voting Rights” on page 225.

We intend to apply to list the depositary shares on the New York Stock Exchange, or the NYSE, under the symbol “EVER-PrA.” If the application is approved, we expect trading of the depositary shares on the NYSE to begin within the 30-day period after the initial delivery of the depositary shares.

The depositary shares are equity securities and will not be savings accounts, deposits or other obligations of any bank and are not insured by the Federal Deposit Insurance Corporation or any other government agency or instrumentality.

Investing in the depositary shares involves risks. Potential purchasers of the depositary shares should consider the information set forth in the “Risk Factors” section beginning on page 29.

 

 

Neither the Securities and Exchange Commission nor any state securities commission 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 Depositary
Share

    

Total

Price to Public

     $25.00      $150,000,000

Underwriting discounts

     $0.7875      $4,725,000

Proceeds before expenses

     $24.2125      $145,275,000

The underwriters are offering the depositary shares as set forth under “Underwriting.” Delivery of the depositary shares in book-entry form through The Depository Trust Company for the accounts of its participants, including Euroclear Bank S.A./N.V., as operator of the Euroclear System, or Euroclear, and Clearstream Banking, société anonyme, or Clearstream, is expected to be made on or about November 13, 2012.

 

 

Joint Book-Running Managers

 

BofA Merrill Lynch   Morgan Stanley   UBS Investment Bank   Goldman, Sachs & Co.

Lead Manager

Raymond James

Co-Managers

 

Deutsche Bank Securities   Keefe, Bruyette & Woods   Sterne Agee

 

Prospectus dated November 5, 2012.


Table of Contents

TABLE OF CONTENTS

 

     Page  

Prospectus Summary

     1   

Summary Consolidated Financial Data

     15   

Quarterly Financial Data

     20   

Risk Factors

     29   

Cautionary Note Regarding Forward-Looking Statements

     53   

Ratio of Earnings to Fixed Charges and Preferred Stock Dividends

     55   

Use of Proceeds

     56   

Capitalization

     57   

Selected Financial Information

     58   

Summary Quarterly Financial Data

     61   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     67   

Business

     144   

Regulation and Supervision

     160   

Management

     176   

Executive Compensation

     188   

Principal Stockholders

     214   

Certain Relationships and Related Party Transactions

     218   

Description of Series A Preferred Stock

     222   

Description of Depositary Shares

     228   

Book-Entry Issuance

     230   

Description of Our Capital Stock

     233   

Certain U.S. Federal Income Tax Considerations

     240   

Certain ERISA Considerations

     244   

Underwriting

     246   

Legal Matters

     251   

Experts

     252   

Where You Can Find More Information

     253   

Index to Financial Statements

     F-1   

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 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 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 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 the depositary shares offered hereby. You should read this entire prospectus carefully, especially the “Risk Factors” section 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 the depositary shares. 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 May 8, 2012 refer to EverBank Financial Corp, a Delaware corporation, and its consolidated subsidiaries, and for all periods prior to May 8, 2012, 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 high quality assets with 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, commercial loans and various other consumer loans, as market conditions warrant. Our organic origination activities are scalable, significant relative to our balance sheet size and provide us with growth potential. Additionally, 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 deposit growth while maintaining an attractive mix of high-value transaction and savings accounts.

Our organic growth has been supplemented by selective acquisitions of portfolios and businesses, including our recent acquisitions of General Electric Capital Corporation’s, or GECC, Business Property Lending, Inc., or Business Property Lending, and MetLife Bank’s warehouse finance business. Additionally, in 2010 we acquired the banking operations of the Bank of Florida Corporation, or Bank of Florida, in a 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

 

 

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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. From 2000 to 2011, we 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 June 30, 2012, we had total assets of $15.0 billion and total shareholders’ equity of $1.2 billion.

History

The following chart shows key events in our history, and the corresponding growth in our assets and deposits over time:

 

LOGO

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.

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.

 

 

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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 high quality borrowers and provide asset-backed loan facilities to other leasing companies. Since the acquisition, we have increased our origination activity 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 in future periods through our recent acquisition of Business Property Lending which provides loans for essential use business properties to small and midsize businesses nationwide.

We also recently acquired MetLife Bank’s warehouse finance business, which has enhanced our commercial lending capabilities. Our commercial lending business connects us with 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 investment advisor subsidiaries, we provide comprehensive financial advisory, planning, brokerage, trust and other wealth management services to our affluent and financially sophisticated customers.

Deposit Franchise

Our deposit franchise fosters strong relationships with a large number of financially sophisticated customers and provides us with a stable, flexible source of low-cost funds. Our distribution channels, operating platform and marketing strategies are characterized by low operating costs and enable us to scale our business. Our unique products, distribution and marketing strategies allow us to generate organic deposit growth, providing us flexibility and efficiency in funding asset growth opportunities organically or through strategic acquisitions.

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.

 

 

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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 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®, Android™ 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.

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 objectives.

Competitive Strengths

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.

 

 

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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 June 30, 2012, our total equity capital was approximately $1.2 billion, our total risk-based capital ratio (bank level) was 15.8% and our total deposits represented approximately 81% of total debt funding.

Scalable Source of Stable 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.

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.

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 platforms that generate a variety of assets to either retain for 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 $2.7 billion of loans and leases in the second quarter of 2012 ($10.9 billion on an annualized basis) representing an increase of 24% over the first quarter of 2012 and an increase of 89% over the second quarter of 2011. We organically generated $0.7 billion of volume for our own balance sheet ($2.9 billion on an annualized basis) representing an increase of 43% over the first quarter of 2012 and an increase of 69% over the second quarter of 2011.

Scalable Business Infrastructure. Our scalable business infrastructure has enabled us to grow our business and improve profitability. Over the course of 2011 and 2012, 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.

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 record of managing profitable growth, successfully executing acquisitions and instilling a rigorous analytical culture. In 2011 and 2012, we also made selective additions to our management team and added key business line leaders.

Strategy

Continue Growth of Deposit Base. We intend to continue to grow our deposit base to fund investment opportunities by expanding our marketing activities and enhancing account features. Key components of this strategy are to build our brand recognition and extend our reach through new media outlets.

 

 

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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 appeal to our mass-affluent customer base by offering such customers additional investment and wealth management services. 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 and the summary consolidated financial data. These risks include, but are not limited to:

 

   

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, including the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;

 

   

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 loan and lease charge-offs;

 

   

legislative or regulatory actions affecting or concerning mortgage loan modification and refinancing;

 

   

our ability to comply with any supervisory actions to which we are or become subject as a result of examination by our regulators;

 

   

concentration of our commercial real estate loan portfolio, in particular, those secured by properties located in Florida;

 

 

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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; and

 

   

impact of recent and future legal and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, and Basel III.

Corporate Information

Our principal executive offices are located at 501 Riverside Ave., Jacksonville, Florida 32202 and our telephone number is (904) 281-6000. Our corporate website address is www.everbank.com. Information on, or accessible through, our website is not part of, or incorporated by reference in, this prospectus. Our primary operating subsidiary is EverBank, a federal savings bank organized under the laws of the United States, referred to as EverBank.

“EverBank” (the EverBank logo) and other trade names and service marks that appear in this prospectus belong to EverBank. Trade names and service marks belonging to unaffiliated companies referenced in this prospectus are the property of their respective holders.

In September 2010, EverBank Financial Corp, a Florida corporation, or EverBank Florida, formed EverBank Financial Corp, a Delaware corporation, or EverBank Delaware. On May 8, 2012, EverBank Florida merged 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.

Recent Developments

Third Quarter 2012 Financial Results

On October 24, 2012, we announced our third quarter 2012 financial results. We reported that total assets increased by $1.5 billion, or 10%, to $16.5 billion at September 30, 2012, from $15.0 billion at June 30, 2012, and by $4.0 billion, or 32%, from $12.6 billion at September 30, 2011 and that total deposits grew by $1.0 billion, or 9%, to $11.8 billion at September 30, 2012, from $10.8 billion at June 30, 2012, and by $1.6 billion, or 16%, from $10.2 billion at September 30, 2011.

Key highlights for the third quarter of 2012 include:

 

   

GAAP net income was $22.2 million, compared to $11.2 million for the second quarter 2012 and $7.8 million in the third quarter of 2011.

 

   

Adjusted net income was $36.2 million, compared to $36.5 million for the second quarter 2012 and $25.6 million for the third quarter of 2011. For a reconciliation of adjusted net income to net income, see “Quarterly Financial Data—Reconciliation of Non-GAAP Measures.”

 

   

GAAP diluted earnings per share was $0.19, a 138% increase from $0.08 in the third quarter 2011. Adjusted diluted earnings per share was $0.30, an 11% increase from $0.27 in the third quarter 2011. For a reconciliation of adjusted diluted earnings per share and GAAP diluted earnings per share, see “Quarterly Financial Data—Reconciliation of Non-GAAP Measures.”

 

   

Tangible book value per common share was $10.29 at September 30, 2012, and excluding accumulated other comprehensive loss was $11.18.

 

 

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Total loans and leases were $11.4 billion at September 30, 2012, up $0.5 billion, or 5% for the quarter and up $3.4 billion, or 42%, compared to September 30, 2011. Loans and leases generated were $3.3 billion, an increase of 85% compared to the third quarter of 2011. Asset quality improved as adjusted nonperforming assets were 1.29% of total assets at September 30, 2012, compared to 1.73% for the third quarter of 2011. For a reconciliation of adjusted non-performing assets to non-performing assets, see “Quarterly Financial Data—Reconciliation of Non-GAAP Measures.”

 

   

Annualized net charge-offs to average loans and leases held for investment were 0.25% for the three months ended September 30, 2012, compared to 1.03% for the third quarter of 2011.

Completion of the Initial Public Offering of Our Common Stock

In May 2012, we closed our initial public offering of 22,103,000 shares of our common stock at $10.00 per share, which resulted in net proceeds of $198 million. Our common stock is listed on the NYSE under the symbol “EVER”.

Acquisition of GECC’s Business Property Lending

On October 1, 2012, we acquired for $2.4 billion in cash Business Property Lending, which included the commercial loan origination and servicing platform, $2.3 billion of performing commercial loans and the rights to service $2.9 billion of loans securitized by GECC from 2003 to 2007. We funded the transaction through a combination of available cash on hand, deposits and wholesale borrowings, and no debt was assumed in the transaction. The acquired portfolio consisted of 889 100% performing loans to borrowers in 46 of the 50 states. Loans based in the top five states, based on concentration, represent approximately 43% of the unpaid principal balance at closing with California, New York, Texas, Florida and North Carolina representing 14%, 9%, 9%, 7% and 4%, respectively.

Business Property Lending operates as a nationwide originator and servicer of owner-occupied and credit-tenant commercial loans to small and midsize businesses for essential use properties. Business Property Lending focuses on well-capitalized business borrowers with strong cash flow and secondary sources of repayment. The Mortgage Bankers Association, or MBA, forecasts total commercial and multifamily mortgage debt outstanding to grow to more than $2.5 trillion by 2015, an increase of 8% versus 2010 levels. Furthermore, the MBA forecasts this debt attributed to banks and thrifts to grow to $852 billion in 2015.

The majority of recent commercial real estate sales in the industrial, retail and office industries have been concentrated in loan sizes consistent with the $2 million to $3 million average balance of the acquired portfolio. In 2011, 47%, 47% and 40% of the industrial, retail and office real estate sales, respectively, have been between $1 million and $5 million.

The acquisition diversifies our current loan portfolio and enhances our robust asset generation capabilities through a complementary nationwide origination platform. As adjusted for the acquisition, our commercial and commercial real estate and total loans would have been $4.2 billion and $13.2 billion, respectively at June 30, 2012. This represents an increase of 126% and 21%, respectively. We intend to grow this business and leverage cross selling opportunities to small business customers and their mass-affluent owners.

Private Placement of Common Stock pursuant to Conversion of Escrowed Cash

In August 2012, we converted $48.7 million of cash held in escrow into 4,032,662 shares of our common stock at a price per share of $12.065. The conversion price was based on the trailing ten day volume weighted average price per share of our common stock through August 27, 2012, as quoted on the NYSE. The

 

 

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private placement was with certain of our shareholders all of whom were former shareholders of Tygris Commercial Finance Group, Inc. The cash had been held in escrow to satisfy certain indemnification and other obligations related to our acquisition of Tygris Commercial Finance Group, Inc. The newly issued shares in the transaction remain in escrow in accordance with the terms of the original escrow agreement.

Acquisition of MetLife Bank’s Warehouse Finance Business

In April 2012, we acquired MetLife Bank’s warehouse finance business, including approximately $351 million in assets for a price of approximately $351 million. We funded the transaction through available cash on hand and no debt was assumed in the transaction. 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 have retained an independent firm to conduct a review and the review is ongoing. We are working to fulfill the requirements of the consent orders which has resulted in a material increase in our legal and compliance costs compared to prior periods. Our costs related to regulatory compliance were $7.8 million in 2011 and $6.8 million for the first six months of 2012. We expect to have continued legal and compliance costs related to these regulatory actions through the end of 2013, and we expect that these costs will impact our financial results and results of operations. 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. We believe we have implemented all the requirements of the consent order, or have an action plan satisfactory to our regulators for implementation of the requirements, and are validating our compliance therewith. The regulators must also perform their own validation of our compliance prior to releasing us from the consent orders.

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. We were not party to any such consent judgment. In total, the five mortgage servicers agreed to $25 billion in borrower restitution assistance

 

 

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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. 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. 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, as amended, 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.

In addition, Section 107 of the JOBS Act 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

 

Issuer

EverBank Financial Corp

 

Securities offered

6,000,000 depositary shares, each representing a 1/1,000th ownership interest in a share of Series A Preferred Stock. Each holder of a depositary share will be entitled, through the depositary, in proportion to the applicable fraction of a share of Series A Preferred Stock represented by such depositary share, to all of the rights and preferences of the Series A Preferred Stock represented thereby (including dividend, voting, redemption and liquidation rights).

 

Ranking

Shares of the Series A Preferred Stock will rank senior to our common stock, and at least equally with each other series of our preferred stock we may issue (except for any senior series that may be issued with the requisite consent of the holders of the Series A Preferred Stock), with respect to the payment of dividends and distributions upon liquidation, dissolution or winding up. We will generally be able to pay dividends and distributions upon liquidation, dissolution or winding up only out of lawfully available assets for such payment (i.e., after taking account of all indebtedness and other non-equity claims).

 

Dividends

Dividends on the Series A Preferred Stock, when, as and if declared by our board of directors or a duly authorized committee of the board, will accrue and be payable on the liquidation preference amount, on a non-cumulative basis, quarterly in arrears on the 5th day of each January, April, July and October of each year, commencing on January 5, 2013, at a rate per annum equal to 6.75%; provided, dividends not declared with respect to any dividend period shall not be cumulative. Any dividends paid will be distributed to holders of depositary shares in the manner described under “Description of Depositary Shares - Dividends and Other Distributions” below.

 

  A dividend period is the period from and including a dividend payment date to but excluding the next dividend payment date, except that the initial dividend period will commence on and include the original issue date of the Series A Preferred Stock.

 

  If our board of directors or a duly authorized committee of the board has not declared a dividend on the Series A Preferred Stock before the dividend payment date for any dividend period, such dividend shall not be cumulative and shall not accrue or be payable for such dividend period, and we will have no obligation to pay dividends for such dividend period, whether or not dividends on the Series A Preferred Stock, parity stock, junior stock or other preferred stock are declared for any future dividend period.

 

 

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  So long as any share of Series A Preferred Stock remains outstanding, (1) no dividend shall be declared or paid or set aside for payment and no distribution shall be declared or made or set aside for payment on any junior stock (other than a dividend payable solely in junior stock), (2) no shares of junior stock shall be repurchased, redeemed or otherwise acquired for consideration by us, directly or indirectly (other than as a result of a reclassification of junior stock for or into other junior stock, or the exchange or conversion of one share of junior stock for or into another share of junior stock, and other than through the use of the proceeds of a substantially contemporaneous sale of other shares of junior stock) nor shall any monies be paid to or made available for a sinking fund for the redemption of any such securities by us and (3) no shares of parity stock shall be repurchased, redeemed or otherwise acquired for consideration by us other than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series A Preferred Stock and such parity stock except by conversion into or exchange for junior stock, during a dividend period, unless, in the case of each of clauses (1), (2) and (3) above, the full dividends for the then-current dividend period on all outstanding shares of Series A Preferred Stock have been declared and paid or declared and a sum sufficient for the payment thereof has been set aside.

 

  When dividends are not paid in full upon the shares of Series A Preferred Stock and any parity stock, all dividends declared upon shares of Series A Preferred Stock and any parity stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that accrued dividends for the then-current dividend period per share on Series A Preferred Stock, and accrued dividends, including any accumulations, on any parity stock, bear to each other.

 

  Subject to the foregoing, and not otherwise, dividends (payable in cash, stock or otherwise), as may be determined by our board of directors or a duly authorized committee of the board, may be declared and paid on our common stock and any other securities ranking equally with or junior to the Series A Preferred Stock from time to time out of any assets legally available for such payment, and the holders of the Series A Preferred Stock shall not be entitled to participate in any such dividend.

 

  Dividends on the Series A Preferred Stock shall not be declared, paid or set aside for payment to the extent such act would cause us to fail to comply with laws and regulations applicable thereto, including applicable capital adequacy guidelines.

 

Dividend payment dates

The 5th day of each January, April, July and October of each year, commencing on January 5, 2013. If any date on which dividends would otherwise be payable is not a business day, then the dividend payment date will be the next succeeding business day and no additional dividends will accrue in respect of any payment made on the next succeeding business day.

 

 

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Redemption

On January 5, 2018, or any dividend payment date thereafter, the Series A Preferred Stock may be redeemed at our option in whole, or in part, at a redemption price equal to $25,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends, without accumulation of any undeclared dividends. The Series A Preferred Stock also may be redeemed at our option in whole, but not in part, at any time within ninety (90) days following a “regulatory capital treatment event,” as described below under “Description of Series A Preferred Stock - Redemption,” at a redemption price equal to $25,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends, without accumulation of any undeclared dividends. Neither the holders of Series A Preferred Stock nor holders of depositary shares will have the right to require the redemption or repurchase of the Series A Preferred Stock.

 

  Any redemption of the Series A Preferred Stock will be subject to our receipt of required prior approval by the Federal Reserve (or any successor bank regulatory authority that may become our applicable federal banking agency), if any, and to the satisfaction of conditions set forth in the capital adequacy guidelines or regulations of the Federal Reserve (or any successor bank regulatory authority that may become our applicable federal banking agency) applicable to redemption of the Series A Preferred Stock, if any.

 

Liquidation rights

Upon any voluntary or involuntary liquidation, dissolution or winding up of EverBank Financial Corp, holders of shares of Series A Preferred Stock are entitled to receive out of the assets of EverBank Financial Corp available for distribution to stockholders, before any distribution of assets is made to holders of our common stock or of any other shares of our stock ranking junior as to such a distribution to the Series A Preferred Stock, a liquidating distribution in the amount of the liquidation preference of $25,000 per share (equivalent to $25 per depositary share) plus any declared and unpaid dividends, without accumulation of any undeclared dividends. Distributions will be made only to the extent of EverBank Financial Corp’s assets that are available after satisfaction of all liabilities to creditors and subject to the rights of holders of any securities ranking senior to the Series A Preferred Stock and pro rata as to the Series A Preferred Stock and any other shares of our stock ranking equally as to such distribution.

 

Voting rights

None, except with respect to authorizing or increasing the authorized amount of senior stock, certain changes in the terms of the Series A Preferred Stock, and upon our non-payment of the equivalent of six quarterly dividends (whether consecutive or not), the right, together with holders of any other series of our preferred stock ranking equally with the Series A Preferred Stock with similar voting rights, to elect a minimum of two directors. See “Description of Series A Preferred Stock—Voting Rights” below. Holders of depositary shares must act through the depositary to exercise any voting rights, as described under “Description of Depositary Shares—Voting the Series A Preferred Stock” below.

 

 

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Maturity

The Series A Preferred Stock does not have a maturity date, and we are not required to redeem the Series A Preferred Stock. Accordingly, the Series A Preferred Stock will remain outstanding indefinitely, unless and until we decide to redeem it.

 

Preemptive and conversion rights

None.

 

Listing

We intend to apply for listing of the depositary shares on the NYSE under the symbol “EVER-PrA.” If the application is approved, we expect trading of the depositary shares on the NYSE to commence within a 30-day period after the initial delivery of the depositary shares.

 

Tax consequences

Distributions constituting dividend income received by a non-corporate U.S. holder in respect of the depositary shares before January 1, 2013 will generally represent “qualified dividend income,” which will be subject to taxation at a maximum rate of 15% (or a lower rate for individuals in certain tax brackets) subject to certain exceptions for short-term and hedged positions. In the absence of legislation extending the term of the preferential tax rates for qualified dividend income, all dividends received during taxable years beginning on or after January 1, 2013 will be taxed at rates applicable to ordinary income. In addition, subject to certain exceptions for short-term and hedged positions, distributions on the depositary shares constituting dividend income paid to holders that are U.S. corporations will generally qualify for the 70% dividends-received deduction. For further discussion of the tax consequences relating to the Series A Preferred Stock, see “Certain U.S. Federal Income Tax Considerations” below.

 

Use of proceeds

We estimate that the net proceeds to us from the sale in this offering will be approximately $144.4 million 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. See “Use of Proceeds.”

 

Registrar and Depositary

Wells Fargo Bank, N.A.

 

 

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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. The summary historical consolidated financial information as of and for the six months ended June 30, 2012 and 2011 (unaudited) is derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus and 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 this period. Operating results for the six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

We have consummated several significant transactions in this period and previous fiscal periods, including the acquisition of Tygris in February 2010, the acquisition of the banking operations of Bank of Florida in an FDIC-assisted transaction in May 2010, the acquisition of MetLife’s warehouse business in April 2012 and the acquisition of Business Property Lending in October 2012. 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.”

 

     Six Months Ended
June 30,
     Year Ended December 31,  
     2012      2011      2011      2010      2009  
     (In millions, except share and per share data)  

Income Statement Data:

              

Interest income

   $ 302.0       $ 298.2       $ 588.2       $ 612.5       $ 440.6   

Interest expense

     61.4         71.6         135.9         147.2         163.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     240.6         226.6         452.3         465.3         277.4   

Provision for loan and lease losses (1)

     17.1         27.0         49.7         79.3         121.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan and lease losses

     223.5         199.6         402.6         386.0         155.5   

Noninterest income (2)

     147.3         118.8         233.1         357.8         232.1   

Noninterest expense (3)

     334.6         267.0         554.2         493.9         299.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     36.2         51.4         81.5         249.9         88.4   

Provision for income taxes

     13.2         20.2         28.8         61.0         34.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income from continuing operations

     23.0         31.2         52.7         188.9         53.5   

Discontinued operations, net of income taxes

     —           —           —           —           (0.2
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 23.0       $ 31.2       $ 52.7       $ 188.9       $ 53.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income allocated to common shareholders

   $ 15.4       $ 24.4       $ 41.5       $ 144.8       $ 33.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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     Six Months Ended
June 30,
    Year Ended December 31,  
     2012     2011     2011     2010     2009  
     (In millions, except share and per share data)  

Share Data:

          

Weighted-average common shares outstanding:

          

(units in thousands)

          

Basic

     88,454        74,764        74,892        72,479        42,126   

Diluted

     90,414        77,620        77,506        74,589        43,299   

Earnings from continuing operations per common share:

          

Basic

   $ 0.17      $ 0.33      $ 0.55      $ 2.00      $ 0.80   

Diluted

     0.17        0.32        0.54        1.94        0.78   

Net tangible book value per as converted common share at period end:

          

Excluding accumulated other comprehensive income (loss) (4)

   $ 10.97      $ 11.03      $ 11.27      $ 10.70      $ 8.23   

Including accumulated other comprehensive income (loss) (5)

     10.00        10.77        10.12        10.65        8.54   
     As of June 30,     As of December 31,  
     2012     2011     2011     2010     2009  
     (In millions)  

Balance Sheet Data:

          

Cash and cash equivalents

   $ 518.2      $ 683.6      $ 295.0      $ 1,169.2      $ 23.3   

Investment securities

     2,174.4        2,930.4        2,191.8        2,203.6        1,678.9   

Loans held for sale

     3,178.6        792.4        2,725.3        1,237.7        1,283.0   

Loans and leases held for investment, net

     7,708.0        6,767.0        6,441.5        6,005.6        4,072.7   

Total assets

     15,040.8        12,520.2        13,041.7        12,007.9        8,060.2   

Deposits

     10,803.7        9,936.5        10,265.8        9,683.1        6,315.3   

Total liabilities

     13,859.4        11,492.5        12,074.0        10,994.7        7,506.3   

Total shareholders’ equity

     1,181.4        1,027.7        967.7        1,013.2        553.9   
     Six Months Ended
June 30,
    Year Ended December 31,  
       2012         2011       2011     2010     2009  

Capital Ratios (period end):

          

Tangible equity to tangible assets (6)

     7.8     8.1     7.3     8.3     6.9

Tier 1 leverage ratio (bank level) (7)

     8.3     8.3     8.0     8.7     8.0

Tier 1 risk-based capital ratio (bank level) (7)

     14.8     15.2     14.6     15.8     13.8

Total risk-based capital ratio (bank level) (7)

     15.8     16.4     15.7     17.0     15.0

Performance Metrics:

          

Adjusted net income attributable to the Company from continuing operations (in millions) (8)

   $ 63.7      $ 50.0      $ 107.6      $ 127.0      $ 53.5   

Return on average assets

     0.3     0.5     0.4     1.8     0.7

Return on average equity

     4.4     6.1     5.2     20.9     11.5

Adjusted return on average assets (9)

     0.9     0.8     0.9     1.2     0.7

Adjusted return on average equity (9)

     12.2     9.8     10.7     14.0     11.5

 

(1)

For the six months ended June 30, 2012, provision for loan and lease losses includes a $4.2 million increase in non-accretable discount related to Bank of Florida acquired credit-impaired loans. For the six months ended June 30, 2011, provision for loan and lease losses includes a $0.8 million increase in non-accretable

 

 

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  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, 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 six months ended June 30, 2012, noninterest income includes a $45.3 million impairment charge related to mortgage servicing rights, or MSR. For the six months ended June 30, 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 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 six months ended June 30, 2012, noninterest expense includes $16.2 million in transaction and non-recurring regulatory related expense. For the six months ended June 30, 2011, noninterest expense includes $12.5 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. 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. 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. The carrying value of the Tygris indemnification asset has been $0 since March 31, 2011.
(4) Calculated as adjusted tangible shareholders’ equity divided by shares of common stock. Adjusted tangible shareholders’ equity equals shareholders’ equity less goodwill, other intangible assets and accumulated other comprehensive income (loss). 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. Net tangible book value per as converted common share excluding accumulated other comprehensive income (loss) 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 shares of common stock. Tangible shareholders’ equity equals shareholders’ equity less goodwill and other intangible assets. 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. Net tangible book value per as converted common share including accumulated other comprehensive income (loss) is a non-GAAP financial measure, and its most directly comparable GAAP financial measure is book value per common share.
(6) 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.
(7) The Tier 1 leverage ratio, the Tier 1 risk-based capital ratio and the total 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.

 

 

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The Tier 1 leverage ratio is calculated as Tier 1 capital divided by adjusted total assets. The Tier 1 risk-based capital ratio is calculated as Tier 1 capital divided by total risk-weighted assets. The total risk-based capital ratio is calculated as total risk-based capital (total regulatory capital) divided by total risk-weighted assets.

Adjusted total assets is a non-GAAP financial measure and its most directly comparable GAAP financial measure is bank level total assets. In calculating adjusted total assets, total assets are adjusted for goodwill, deferred tax assets disallowed from Tier 1 capital and other regulatory adjustments.

Total risk-weighted assets is a non-GAAP financial measure and its most directly comparable GAAP financial measure is bank level total assets. 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.

Tier 1 capital is a non-GAAP financial measure and its most directly comparable GAAP financial measure is bank level shareholders’ equity. Tier 1 capital includes common equity and certain qualifying preferred stock less goodwill, disallowed deferred tax assets and other regulatory deductions.

Total risk-based capital (total regulatory capital) is a non-GAAP financial measure and its most directly comparable GAAP financial measure is bank level shareholders’ equity. Total risk-based capital (total regulatory capital) includes Tier 1 capital, ALLL, subject to limitations, and other additions.

A reconciliation of (1) Tier 1 capital to bank level shareholders’ equity which is the most comparable GAAP financial measure, and (2) total risk-based capital (total regulatory capital) to bank level shareholders’ equity which is the most comparable GAAP financial measure, is as follows:

 

    June 30,     December 31,  
    2012     2011     2011     2010     2009  
    (in thousands)  

(Bank Level)

         

Shareholders’ equity

  $ 1,263,687      $ 1,130,104      $ 1,070,887      $ 1,117,037      $ 663,291   

Less: Goodwill and other

           intangibles

    (16,938     (18,319     (17,642     (18,859     (239

           Disallowed servicing asset

    (36,650     (31,927     (38,925     —          (2,058

           Disallowed deferred tax

           asset

    (70,357     (74,522     (71,803     (69,641     —     

Add: Accumulated losses (gains) on

           securities and cash flow

           hedges

    110,101        25,051        105,682        6,440        (19,836
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tier 1 capital

    1,249,843        1,030,387        1,048,199        1,034,977        641,158   

Less: Low-level recourse and

           residual interests

    —          (19,079     (21,587     (13,241     (17,693

Add: Allowance for loan and lease

           losses

    77,393        80,419        77,765        80,938        56,658   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total regulatory capital

  $ 1,327,236      $ 1,091,727      $ 1,104,377      $ 1,102,674      $ 680,123   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted total assets

  $ 15,022,729      $ 12,438,222      $ 13,081,401      $ 11,930,638      $ 8,025,330   

Risk-weighted assets

    8,424,290        6,648,103        7,043,371        6,472,517        4,532,689   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

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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. 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:

 

     Six Months Ended
June 30,
    Year Ended December 31,  
     2012      2011     2011     2010     2009  
     (In thousands)  

Net income attributable to the Company from continuing operations

   $ 23,018       $ 31,211      $ 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     (2,910     (3,556  

Transaction and non-recurring regulatory related expense, net of tax

     10,027         7,749        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        5,382        13,654     

Increase in Bank of Florida non-accretable discount, net of tax

     2,598         501        3,007        3,837     

Impact of change in ALLL methodology, net of tax

     —           1,178        1,178        —       

Early adoption of TDR guidance and policy change, net of tax

     —           6,225        6,225        —       

MSR impairment, net of tax

     28,073         —          24,462        —       

Tax expense (benefit) related to revaluation of Tygris net unrealized built-in losses, net of tax

     —           691        691        (7,840  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income attributable to the Company from continuing operations

   $ 63,716       $ 50,027      $ 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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QUARTERLY FINANCIAL DATA

The summary historical consolidated financial information set forth below as of December 31, 2011 has been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary historical consolidated financial information as of and for the three and nine months ended September 30, 2012 and 2011 (unaudited) is derived from our unaudited interim consolidated financial statements and 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 this period. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

The information below is only a summary and should be read in conjunction with the “Summary Consolidated Financial Data,” the “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.

Certain items included in the information below are non-GAAP financial measures. Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Non-Performing Asset Ratio, Tangible Shareholders’ Equity, Adjusted Tangible Shareholders’ Equity, and Tangible Assets are non-GAAP financial measures. Our management uses these measures to evaluate the underlying performance and efficiency of its operations. Our management believes these non-GAAP measures allow for a better evaluation and transparency of the operating performance of our business and facilitate a meaningful comparison of our results in the current period to those in prior periods and future periods because these non-GAAP measures exclude certain items that may not be indicative of our core operating results and business outlook. In addition our management believes that certain of these non-GAAP measures represent a consistent benchmark against which to evaluate the Company’s growth, profitability and capital position. These non-GAAP measures are provided to enhance investors’ overall understanding of our current financial performance, and not as a substitute for, the Company’s reported results. Moreover, the manner in which we calculate these measures may differ from that of other companies reporting non-GAAP measures with similar names. In the tables below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios used in this section, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated.

Balance Sheet Highlights

Continued Balance Sheet Growth

Our total assets increased by $1.5 billion, or 10%, to $16.5 billion at September 30, 2012, from $15.0 billion at June 30, 2012, and by $4.0 billion, or 32%, from $12.6 billion at September 30, 2011. Our interest-earning assets for the third quarter 2012 were largely comprised of:

 

   

Residential loans which increased by 33% to $8.2 billion from the third quarter of 2011. During the quarter, we transferred $1.9 billion of Ginnie Mae, or GNMA, pool buyout loans from loans held for sale to loans held for investment due to our intention to hold the loans for the foreseeable future;

 

   

Commercial and commercial real estate loans which increased by 101% to $2.3 billion, from the third quarter of 2011;

 

   

Commercial leases which increased by 43% to $0.7 billion, from the third quarter of 2011; and

 

   

Investment securities which decreased by 24% to $2.0 billion, from the third quarter of 2011.

 

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Table of Contents

During the third quarter we accumulated a cash balance of $1.6 billion and slowed our retention of organic assets in preparation for funding the Business Property Lending acquisition which closed on October 1, 2012.

Loan Origination Activities

Our organic generation of residential loans, commercial loans and leases totaled $3.3 billion for the third quarter of 2012. Retained organic production totaled $1.0 billion for the quarter, an increase of 29% and 92% compared to second quarter 2012 and third quarter 2011, respectively.

Deposit and Other Funding Sources

Our total deposits grew by $1.0 billion, or 9%, to $11.8 billion at September 30, 2012, from $10.8 billion at June 30, 2012, and by $1.6 billion, or 16%, from $10.2 billion at September 30, 2011. At September 30, 2012, our deposits were comprised of the following:

 

   

Non-interest bearing accounts were $1.5 billion, or 12%, of total deposits;

 

   

Interest-bearing checking accounts were $2.4 billion, or 21%, of total deposits;

 

   

Savings and money market accounts were $4.3 billion, or 36%, of total deposits;

 

   

Global markets money market and time accounts were $1.2 billion, or 10%, of total deposits; and

 

   

Time deposit accounts, excluding global markets, were $2.4 billion, or 20%, of total deposits.

Our total other borrowings were $2.8 billion at September 30, 2012, compared to $2.5 billion at June 30, 2012. Our core deposit growth and increase in other borrowings were part of the balance sheet positioning we undertook to fund the Business Property Lending acquisition.

Credit Quality

Our adjusted nonperforming assets were 1.29% of total assets at September 30, 2012, a decrease from 1.46% at June 30, 2012. We recorded provision for loan and lease losses of $4.4 million during the third quarter of 2012, a decrease of $1.4 million, or 24%, when compared to the second quarter of 2012. Net charge-offs during the third quarter of 2012 declined to $5.3 million, from $6.6 million in the second quarter of 2012, a decline of 20%. On an annualized basis, net charge-offs were 0.25% of total average loans and leases held for investment outstanding for the third quarter of 2012, compared to 0.34% for the second quarter of 2012 and 1.03% for the third quarter of 2011.

Originated Loan Repurchase Activity

During the third quarter of 2012, we experienced charge-offs of $4.7 million and recorded a provision of $1.7 million on repurchase obligations for loans sold or securitized. Our reserve declined from $34.0 million in the second quarter to $31.0 million in the third quarter.

Capital Strength

Our total shareholders’ equity was $1.3 billion at September 30, 2012, compared to $1.2 billion at June 30, 2012. The bank’s Tier 1 leverage ratio was 8.0% and total risk-based capital ratio was 16.1% at September 30, 2012. As a result, the bank is considered “well-capitalized” under all applicable regulatory guidelines.

 

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Table of Contents

Income Statement Highlights

Net Interest Income

For the third quarter of 2012, our net interest income increased $1.2 million to $126.2 million, from $125.0 million for the second quarter of 2012. This increase was attributable to higher commercial lending volumes driven by our warehouse finance and lender finance businesses and resulted in a $4.7 million increase in interest income during the quarter. Our interest expense increased by $3.5 million during the quarter as we increased deposits and borrowings to execute on our balance sheet positioning in advance of the Business Property Lending acquisition.

Net interest margin decreased to 3.66% for the third quarter from 3.86% in the second quarter. The change in net interest margin was primarily driven by the growth in floating rate, short duration assets through increased levels of warehouse finance and lender finance originations combined with an increase in interest expense on deposits and borrowings. During the third quarter, we entered into commitments for fixed rate advances to support the acquisition of Business Property Lending.

Noninterest Income

Noninterest income for the third quarter of 2012 increased by $23.2 million, or 31%, to $97.3 million compared to the second quarter of 2012. This increase was driven by production revenues and gain on sale of loans which increased by $16.5 million, or 21%, to $96.3 million. The increase in noninterest income also reflects a $9.6 million improvement in the net loan servicing loss from $21.8 million for the second quarter to $12.2 million for the third quarter of 2012. Net loan servicing loss includes a non-cash MSR valuation allowance of $18.2 million, compared to a valuation allowance of $30.1 million in the second quarter of 2012, as well as MSR amortization expense of $36.3 million, compared to amortization of $34.1 million in the second quarter of 2012. These changes were primarily related to an extension of the historic low interest rate environment which resulted in strong residential origination volumes of $2.5 billion and elevated servicing pay-off activity.

Noninterest Expense

Our noninterest expense for the third quarter of 2012 increased by $8.2 million, or 5%, to $184.0 million from $175.8 million in the second quarter. Salaries, commissions and employee benefits increased by $9.1 million, or 12%, with $5.1 million attributed to hiring activity and investments in retail lending. Approximately 10% of our noninterest expense is variable and tied to mortgage origination levels. General and administrative expense, excluding credit-related expenses, decreased by $6.5 million, or 12%, from the second quarter as decreases in professional fees and other expenses were partially offset by increased advertising and marketing expense.

Noninterest expense directly related to our retail expansion was $14.6 million for the third quarter and $27.1 million year to date. Loan production volume from our retail channel was $513 million in the third quarter, an increase of $248 million, or 94%, from second quarter and $422 million, or 465%, from the first quarter.

Our credit-related expenses for the third quarter increased $4.3 million, or 21%, to $25.1 million from $20.8 million in the second quarter 2012. Key drivers of the increase include increased investments and related expenses to our GNMA pool buyout loans and an increase in foreclosure and REO expense related to the Bank of Florida portfolio, offset by lower repurchase reserve expenses.

 

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Table of Contents
Consolidated Statements of Income           
     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2012     2011     2012     2011  
     (dollars in thousands, except per share data)  

Interest Income

        

Interest and fees on loans and leases

   $ 140,230      $ 116,899      $ 400,824      $ 358,419   

Interest and dividends on investment securities

     20,879        27,201        62,127        82,778   

Other interest income

     152        197        338        1,312   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     161,261        144,297        463,289        442,509   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest Expense

        

Deposits

     22,491        23,959        63,884        75,559   

Other borrowings

     12,576        9,469        32,604        29,478   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     35,067        33,428        96,488        105,037   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income

     126,194        110,869        366,801        337,472   

Provision for loan and lease losses

     4,359        12,258        21,471        39,292   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income after Provision for Loan and Lease Losses

     121,835        98,611        345,330        298,180   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest Income

        

Loan servicing fee income

     42,341        48,390        130,380        144,023   

Amortization and impairment of mortgage servicing rights

     (54,521     (44,053     (163,281     (88,270
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loan servicing income (loss)

     (12,180     4,337        (32,901     55,753   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gain on sale of loans

     85,748        20,921        203,851        39,854   

Loan production revenue

     10,528        6,518        27,817        18,513   

Deposit fee income

     4,671        7,803        16,738        19,398   

Other lease income

     7,103        7,095        24,588        22,163   

Other

     1,429        6,683        4,522        16,461   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest income

     97,299        53,357        244,615        172,142   
  

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest Expense

        

Salaries, commissions and other employee benefits expense

     85,399        57,757        228,266        171,451   

Equipment expense

     17,574        13,608        50,411        36,077   

Occupancy expense

     6,619        5,237        17,985        14,808   

General and administrative expense

     74,377        62,983        221,911        184,199   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total noninterest expense

     183,969        139,585        518,573        406,535   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before Income Taxes

     35,165        12,383        71,372        63,787   

Provision for Income Taxes

     12,987        4,625        26,176        24,818   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 22,178      $ 7,758      $ 45,196      $ 38,969   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income Allocated to Participating Preferred Stock

   $ —        $ 1,598      $ 8,564      $ 8,420   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income Allocated to Common Shareholders

   $ 22,178      $ 6,160      $ 36,632      $ 30,549   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Earnings per Common Share, Basic

   $ 0.19      $ 0.08      $ 0.37      $ 0.41   

Net Earnings per Common Share, Diluted

   $ 0.19      $ 0.08      $ 0.37      $ 0.40   

Dividends Declared per Common Share

   $ 0.02      $ —        $ 0.02      $ —     
        

Weighted Average Common Shares Outstanding

        

(units in thousands)

        

Basic

     118,038        74,996        98,387        74,842   

Diluted

     119,591        77,709        100,268        77,667   

 

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Table of Contents

Consolidated Balance Sheets

                

 

 
     September 30,
2012
    December 31,
2011
    September 30,
2011
 

Assets

     (dollars in thousands)   

Cash and due from banks

   $ 53,357      $ 31,441      $ 58,231   

Interest-bearing deposits in banks

     1,566,612        263,540        401,047   
  

 

 

   

 

 

   

 

 

 

Total cash and cash equivalents

     1,619,969        294,981        459,278   
  

 

 

   

 

 

   

 

 

 

Investment securities:

      

Available for sale, at fair value

     1,722,556        1,903,922        2,387,672   

Held to maturity

     170,804        189,518        183,518   

Other investments

     126,151        98,392        79,906   
  

 

 

   

 

 

   

 

 

 

Total investment securities

     2,019,511        2,191,832        2,651,096   
  

 

 

   

 

 

   

 

 

 

Loans held for sale

     1,403,205        2,725,286        1,792,687   

Loans and leases held for investment:

      

Covered by loss share or indemnification agreements

     671,420        841,146        911,756   

Not covered by loss share or indemnification agreements

     9,385,306        5,678,135        5,369,735   
  

 

 

   

 

 

   

 

 

 

Loans and leases held for investment, net of unearned income

     10,056,726        6,519,281        6,281,491   

Allowance for loan and lease losses

     (76,469     (77,765     (83,827
  

 

 

   

 

 

   

 

 

 

Total loans and leases held for investment, net

     9,980,257        6,441,516        6,197,664   
  

 

 

   

 

 

   

 

 

 

Equipment under operating leases, net

     55,532        56,399        42,954   

Mortgage servicing rights (MSR), net

     381,773        489,496        519,828   

Deferred income taxes, net

     183,943        151,634        127,282   

Premises and equipment, net

     64,789        43,738        43,186   

Other assets

     800,461        646,796        716,789   
  

 

 

   

 

 

   

 

 

 

Total Assets

   $ 16,509,440      $ 13,041,678      $ 12,550,764   
  

 

 

   

 

 

   

 

 

 

Liabilities

      

Deposits

      

Noninterest-bearing

   $ 1,475,204      $ 1,234,615      $ 1,284,567   

Interest-bearing

     10,340,722        9,031,148        8,922,378   
  

 

 

   

 

 

   

 

 

 

Total deposits

     11,815,926        10,265,763        10,206,945   
  

 

 

   

 

 

   

 

 

 

Other borrowings

     2,823,927        1,257,879        782,287   

Trust preferred securities

     103,750        103,750        103,750   

Accounts payable and accrued liabilities

     507,815        446,621        484,074   
  

 

 

   

 

 

   

 

 

 

Total Liabilities

     15,251,418        12,074,013        11,577,056   
  

 

 

   

 

 

   

 

 

 

Shareholders’ Equity

      

Series A 6% Cumulative Convertible Preferred Stock

     —          2        2   

Series B 4% Cumulative Convertible Preferred Stock

     —          1        1   

Common Stock

     1,206        751        750   

Additional paid-in capital

     812,823        561,247        560,547   

Retained earnings

     550,724        513,413        499,711   

Accumulated other comprehensive loss

     (106,731     (107,749     (87,303
  

 

 

   

 

 

   

 

 

 

Total Shareholders’ Equity

     1,258,022        967,665        973,708   
  

 

 

   

 

 

   

 

 

 

Total Liabilities and Shareholders’ Equity

   $ 16,509,440      $ 13,041,678      $ 12,550,764   
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

EverBank Financial Corp and Subsidiaries

Average Balances and Interest Rates

                        
     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 
     Average
Balance
     Interest      Yield/
Rate
    Average
Balance
     Interest      Yield/
Rate
 
     (dollars in thousands)  

Assets:

                

Interest-earning assets:

                

Cash and cash equivalents

   $ 236,378       $ 152         0.26   $ 311,803       $ 198         0.25

Investment securities

     1,984,778         20,379         4.10     2,825,922         27,050         3.83

Other investments

     121,315         501         1.64     85,144         151         0.70

Loans held for sale

     2,750,575         32,508         4.73     1,127,316         12,693         4.50

Loans and leases held for investment:

                

Residential mortgages

     5,690,121         60,381         4.24     4,860,607         55,120         4.54

Commercial and commercial real estate

     2,045,963         23,869         4.57     1,131,431         16,667         5.76

Lease financing receivables

     692,643         21,218         12.25     482,816         29,803         24.69

Home equity lines

     186,179         2,190         4.68     208,132         2,552         4.86

Consumer and credit card

     8,375         63         2.99     8,468         63         2.95
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total loans and leases held for investment

     8,623,281         107,721         4.97     6,691,454         104,205         6.21
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-earning assets

     13,716,327       $ 161,261         4.69     11,041,639       $ 144,297         5.21
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Noninterest-earning assets

     1,459,268              1,352,254         
  

 

 

         

 

 

       

Total assets

   $ 15,175,595            $ 12,393,893         
  

 

 

         

 

 

       

Liabilities and Shareholders’ Equity:

                

Interest-bearing liabilities:

                

Deposits:

                

Interest-bearing demand

   $ 2,312,731       $ 4,456         0.77   $ 2,042,096       $ 4,479         0.87

Market-based money market accounts

     430,420         822         0.76     485,429         1,136         0.93

Savings and money market accounts, excluding market-based

     4,157,713         8,115         0.78     3,750,652         8,256         0.87

Market-based time

     815,528         2,029         0.99     1,028,829         2,303         0.89

Time, excluding market-based

     2,229,888         7,069         1.26     1,722,143         7,785         1.79
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total deposits

     9,946,280         22,491         0.90     9,029,149         23,959         1.05
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Borrowings:

                

Trust preferred securities

     103,750         1,498         5.74     103,750         1,652         6.32

FHLB advances

     1,803,605         10,852         2.39     730,879         7,729         4.20

Repurchase agreements

     53,244         220         1.64     20,524         88         1.70

Other

     3         6         N.M.        2         —           0.00
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total interest-bearing liabilities

     11,906,882         35,067         1.17     9,884,304         33,428         1.34
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Noninterest-bearing demand deposits

     1,591,087              1,126,875         

Other noninterest-bearing liabilities

     459,815              362,097         
  

 

 

         

 

 

       

Total liabilities

     13,957,784              11,373,276         

Total shareholders’ equity

     1,217,811              1,020,617         
  

 

 

         

 

 

       

Total liabilities and shareholders’ equity

   $ 15,175,595            $ 12,393,893         
  

 

 

         

 

 

       

Net interest income/spread

      $ 126,194         3.52      $ 110,869         3.87
     

 

 

         

 

 

    

Net interest margin

           3.66           3.98

Memo: Total deposits including non-interest bearing

   $ 11,537,367       $ 22,491         0.78   $ 10,156,024       $ 23,959         0.94

 

(1) The average balances are principally daily averages, and, for loans, include both performing and non-performing balances.
(2) Interest income on loans includes the effects of discount accretion and net deferred loan origination costs accounted for as yield adjustments.
(3) All interest income was fully taxable for all periods presented.
(4) N.M. indicates not meaningful.

 

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Reconciliation of Non-GAAP Measures

 

Adjusted Net Income                                
     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2012      2011      2012      2011  
     (dollars in thousands)  

Net income

   $ 22,178       $ 7,758       $ 45,196       $ 38,969   

Gain on repurchase of trust preferred securities, net of tax

     —           —           —           (2,910

Transaction expense, net of tax

     1,268         2,108         4,452         8,204   

Non-recurring regulatory related expense, net of tax

     1,326         2,643         8,169         4,296   

Decrease in fair value of Tygris indemnification asset resulting from a decrease in estimated future credit losses, net of tax

     —           —           —           5,382   

Increase in Bank of Florida non-accretable discount, net of tax

     111         298         2,709         799   

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

     11,302         12,824         39,375         12,824   

Tax expense related to revaluation of Tygris net unrealized built-in losses

     —           —           —           691   
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net income

   $ 36,185       $ 25,631       $ 99,901       $ 75,658   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Tangible Equity, Adjusted Tangible Equity and Tangible Assets                      
     September 30,
2012
    December 31,
2011
    September 30,
2011
 
     (dollars in thousands)  

Shareholders’ equity

   $ 1,258,022      $ 967,665      $ 973,708   

Less:

      

Goodwill

     10,238        10,238        10,238   

Intangible assets

     6,348        7,404        7,756   
  

 

 

   

 

 

   

 

 

 

Tangible equity

   $ 1,241,436      $ 950,023      $ 955,714   
  

 

 

   

 

 

   

 

 

 

Less:

      

Accumulated other comprehensive loss

     (106,731     (107,749     (87,303
  

 

 

   

 

 

   

 

 

 

Adjusted tangible equity

   $ 1,348,167      $ 1,057,772      $ 1,043,017   
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 16,509,440      $ 13,041,678      $ 12,550,764   

Less:

      

Goodwill

     10,238        10,238        10,238   

Intangible assets

     6,348        7,404        7,756   
  

 

 

   

 

 

   

 

 

 

Tangible assets

   $ 16,492,854      $ 13,024,036      $ 12,532,770   
  

 

 

   

 

 

   

 

 

 

 

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Reconciliation of Non-GAAP Measures (continued)

 

Regulatory Capital (bank level)                      
     September 30,
2012
    December 31,
2011
    September 30,
2011
 
     (dollars in thousands)  

Shareholders’ equity

   $ 1,339,669      $ 1,070,887      $ 1,078,080   

Less: Goodwill and other intangibles

     (16,586     (17,642     (17,994

Disallowed servicing asset

     (33,366     (38,925     (36,570

Disallowed deferred tax asset

     (69,412     (71,803     (72,147

Add: Accumulated losses on securities and cash flow hedges

     103,238        105,682        85,525   
  

 

 

   

 

 

   

 

 

 

Tier 1 capital

     1,323,543        1,048,199        1,036,894   

Less: Low-level recourse and residual interests

     —          (21,587     (20,431

Add: Allowance for loan and lease losses

     76,469        77,765        83,826   
  

 

 

   

 

 

   

 

 

 

Total regulatory capital

   $ 1,400,012      $ 1,104,377      $ 1,100,289   
  

 

 

   

 

 

   

 

 

 

Adjusted total assets

   $ 16,488,067      $ 13,081,401      $ 12,550,738   

Risk-weighted assets

     8,701,164        7,043,371        7,007,339   

 

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Non-Performing Assets (1)                      
     September 30,
2012
    December 31,
2011
    September 30,
2011
 
     (dollars in thousands)  

Non-accrual loans and leases:

      

Residential mortgages

   $ 75,355      $ 81,594      $ 74,194   

Commercial and commercial real estate

     85,306        104,829        92,966   

Lease financing receivables

     2,018        2,385        1,745   

Home equity lines

     4,492        4,251        3,803   

Consumer and credit card

     479        419        471   
  

 

 

   

 

 

   

 

 

 

Total non-accrual loans and leases

     167,650        193,478        173,179   

Accruing loans 90 days or more past due

     1,973        6,673        4,808   
  

 

 

   

 

 

   

 

 

 

Total non-performing loans (NPL)

     169,623        200,151        177,987   

Other real estate owned (OREO)

     43,612        42,664        39,431   
  

 

 

   

 

 

   

 

 

 

Total non-performing assets (NPA)

     213,235        242,815        217,418   

Troubled debt restructurings (TDR) less than 90 days past due

     82,030        92,628        89,129   
  

 

 

   

 

 

   

 

 

 

Total NPA and TDR (1)

   $ 295,265      $ 335,443      $ 306,547   
  

 

 

   

 

 

   

 

 

 

Total NPA and TDR

   $ 295,265      $ 335,443      $ 306,547   

Government-insured 90 days or more past due still accruing

     1,684,550        1,570,787        883,478   

Bank of Florida loans accounted for under ASC 310-30:

      

90 days or more past due

     117,506        149,743        159,767   

OREO

     18,557        19,456        19,616   
  

 

 

   

 

 

   

 

 

 

Total regulatory NPA and TDR

   $ 2,115,878      $ 2,075,429      $ 1,369,408   
  

 

 

   

 

 

   

 

 

 

Adjusted credit quality ratios excluding government-insured loans and loans accounted for under ASC 310-30:(1)

      

NPL to total loans

     1.49     2.18     2.23

NPA to total assets

     1.29     1.86     1.73

NPA and TDR to total assets

     1.79     2.57     2.44

Credit quality ratios including government-insured loans and loans accounted for under ASC 310-30:

      

NPL to total loans

     17.32     20.95     15.28

NPA to total assets

     12.32     15.20     10.20

NPA and TDR to total assets

     12.82     15.91     10.91

 

(1) 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 and foreclosed property acquired in the Bank of Florida acquisition accounted for under ASC 310-30 because as of September 30, 2012, we expected to fully collect the carrying value of such loans and foreclosed property.

 

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RISK FACTORS

Investing in our securities 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 securities.

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 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 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.

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.

 

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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 common 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 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 $45.3 million impairment charge related to MSR for the six month period ended June 30, 2012. 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 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.

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.

 

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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 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 makes 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

 

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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 gain on sale of loans could decrease in future periods if refinancing activity declines.

In recent periods we have seen elevated residential mortgage refinancing activity primarily due to government programs such as HAMP and HARP. In addition as a result of qualitative easing and other governmental policies, mortgage rates, as indicated by the Base Mortgage Rate, have declined in recent quarters. We believe this decline will extend refinance activity into future periods, which could result in a continuation of elevated mortgage refinancing activity. In addition, we have experienced heightened demand for mortgage loans by investors in the secondary market as a result of the favorable risk adjusted yield on mortgage assets relative to other investments. This expanded secondary market activity has resulted in attractive resale opportunities which has resulted in an increase in our gain on sale of loans during the first six months of 2012 as detailed in the following table:

 

      Year Ended     Six Months Ended  

(in thousands)

   December 31, 2009     December 31, 2010     December 31, 2011     June 30, 2012  
   UPB      Gain on
Sale
    UPB      Gain on
Sale
    UPB      Gain on
Sale
    UPB      Gain on
Sale
 

HARP(1)

   $ 953,940       $ 7,467      $ 1,557,512       $ 27,096      $ 998,611       $ 15,329      $ 1,220,128       $ 35,702   

Non-HARP(1)(2)

     6,062,269         60,286        4,491,474         38,863        3,941,286         59,170        2,766,533         82,847   

Other Activity(3)

     —           (1,328     —           (9     —           (1,205     —           (446
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Totals

   $ 7,016,569       $ 66,425      $ 6,048,986       $ 65,950      $ 4,939,897       $ 73,294      $ 3,986,661       $ 118,103   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) We hedge interest rate risk related to our mortgage warehouse and pipeline through the use of forward sales commitments. The gain on sale numbers include hedging gains and losses. We do not track the hedging gains and losses at an individual loan level and have allocated these based on UPB originated for the applicable periods.

 

(2) Non-HARP is entirely comprised of conforming and government loans that we have sold or plan to sell to the GSEs and other government agencies.

 

(3) Other activity is due to commercial real estate loans (CREL) that were carried at fair value.

We do not believe that this low interest rate environment coupled with the continued elevated activity in the secondary market will continue indefinitely. Presently the Federal Reserve has stated that it intends to maintain its current policies in the near term. However, in a rising interest rate environment, we would expect that refinancing volumes would decline, which could cause our originations of mortgage loans held for sale to decrease.

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 June 30, 2012, our commercial real estate loans, net of discounts, were $1.0 billion, or approximately 10% 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

 

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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, were 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 state 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. These factors could have a material adverse effect on our business, financial position, results of operations and cash flows.

We may become subject to additional risks as a result of our recent acquisition of Business Property Lending from GECC.

Our recent acquisition of Business Property Lending from GECC could expose us to commercial lending in new markets where we have little commercial experience, which could result in losses that would affect our financial results. Prior to our acquisition of Business Property Lending, most of the commercial loans we have originated have been in the state of Florida. In connection with the acquisition, we acquired a nationwide portfolio of commercial loans, along with a platform to generate such loans. If we do not maintain strong underwriting standards as we have in the past, we may suffer losses if these loans fail to perform.

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. 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. We may need to further increase our reserves for foreclosures if foreclosure rates increase.

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;

 

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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 beginning in 2010, 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 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, representing a 644% increase during 2010 and a 19% increase during 2011. Our loan repurchase reserve for loans that were sold or securitized was $34.0 million as of June 30, 2012.

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, we have since 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, representing a 376% increase during 2010 and a 1% increase during 2011. Our reserve for servicing repurchase losses was $27.6 million as of June 30, 2012.

If future repurchase demands remain at 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,

 

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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 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 June 30, 2012, the fair value of our securities portfolio was approximately $2.0 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.

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

 

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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.

In addition, in connection with the acquisition of Tygris, we acquired a portfolio of equipment leases with a fair value of $538.1 million, or 67% of the original book value of the leases at the date of acquisition. We acquired Tygris through a stock-for-stock merger with one of our subsidiaries in which 29,913,030 shares of our common stock were issued to the former Tygris stockholders. Of such shares, 9,470,010, along with $50 million in cash, were placed in an escrow account at closing to offset potential losses realized in connection with the original book value of the Tygris’ lease and loan portfolio over a five-year period following the closing, and to satisfy any indemnification claims that we may have under the acquisition agreement. 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.

As of June 30, 2012, total net charge-offs incurred with respect to the original book value of the portfolio since the closing of the acquisition have totaled $71.7 million. Because of the significant discounts recognized with respect to the population, including the expected credit discounts, EverBank has not incurred additional losses on this portfolio in excess of those expected at acquisition. As of June 30, 2012, the remaining carrying value of the acquired portfolio was $122.6 million. We currently do not expect to receive any funds from escrow related to the acquired loans and leases based on our current expectations of cash flows. 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. We are not protected for all losses and any charge-off or related losses that we experience will negatively impact our results of operations.

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 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

 

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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. It is possible that no active or liquid market will exist for the types of loans we would be forced to sell, which could result in losses.

Certain of our stockholders have director nomination rights through which they may influence the actions taken by us, and their interests may not align with our interests or the interests of our other stockholders.

Pursuant to an agreement between us and Arena Capital Investment Fund, L.P., or Arena, and Lovett Miller Venture Fund II, Limited Partnership and Lovett Miller Venture Fund III, Limited Partnership, or together, Lovett Miller, Arena has the right to designate a representative to be included in management’s slate of nominees recommended to our stockholders for election as a member of our Board of Directors and each of Arena and Lovett Miller have the right to appoint an observer who is permitted to attend meetings of our Board of Directors. In addition, pursuant to an agreement between us and Sageview Partners L.P., or Sageview, Sageview has the right to designate a representative to be included in management’s slate of nominees recommended to stockholders of the Company for election as a member of our Board of Directors and has the right to appoint an observer who is permitted to attend meetings of our Board of Directors.

These director nomination rights and observer rights will generally survive for each of Arena, Lovett Miller and Sageview, respectively, so long as such stockholder continues to own a specified percentage of the Company’s common stock. As of September 30, 2012, Arena holds 5,792,685 shares of our common stock, or 4.80%, Lovett Miller owns 1,940,096 shares of our common stock, or 1.61%, and Sageview owns 12,912,230 shares of our common stock, or 10.70%. As a result of their significant holdings of our common stock, and, in the case of Arena and Sageview, their rights to designate members of our Board of Directors, these stockholders are expected to be able to continue to exert significant influence over our policies and management, potentially in a manner which may not be in our stockholders’ best interests. For additional information, please see “Certain Relationships and Related Party Transactions” below.

Concern of customers over deposit insurance may cause a decrease in deposits.

With on-going 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

 

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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, capital and 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.

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

 

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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 an action could negatively impact our business, brand and profitability.

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 June 30, 2012, we had outstanding market-based deposits of $1.3 billion, representing approximately 12% 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 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.

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,

 

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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.

In recent fiscal periods, we have completed several significant transactions, including the acquisitions of MetLife Bank’s warehouse finance business and Business Property Lending from GECC in 2012, 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 certain of 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.

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.

 

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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.

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 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

 

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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 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 securities.

We and EverBank have entered into a consent order with the OTS, and failure to comply with the requirements of the consent order could have a negative impact on us and/or EverBank.

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.

 

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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.

The OTS, the OCC and 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 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 securities.

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

 

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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;

 

   

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 our historic OTS examinations and reporting requirements. 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 and servicing. 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 August 2012 the CFPB proposed new rules that would require servicers to comply with new standards and practices with regard to: error correction; information disclosure; force-placement of insurance; information management policies and procedures; requiring information about mortgage loss mitigation options be provided to delinquent borrowers; providing delinquent borrowers access to servicer personnel with continuity of contact about the borrower’s mortgage loan account; and evaluating borrowers’ applications for available loss mitigation options. These rules also address initial rate adjustment notices for adjustable-rate mortgages (ARMs), periodic statements for residential mortgage loans, and prompt crediting of mortgage payments and response to requests for payoff amounts.

The Dodd-Frank Act also imposes new standards for mortgage loan originations on all lenders, including banks and thrifts. Most significantly, the new standards prohibit us from making a residential mortgage loan without verifying a borrower’s ability to repay, limit the total points and fees that we and/or a broker may

 

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charge on conforming and jumbo loans to 3% of the total loan amount, and prohibit certain prepayment penalty practices. In addition, the Dodd-Frank Act generally requires lenders or securitizers to retain an economic interest in the credit risk relating to loans the lender sells and other asset-backed securities that the securitizer issues if the loans have not complied with the ability to repay standards. The risk retention requirement generally will be 5%, but could be increased by regulation. These standards will result in a myriad of new systems, pricing and compensating controls in order to ensure compliance and to decrease repurchase requests and foreclosure defenses. Collectively, these mortgage-related rules and proposals, if adopted, and any other standards or rules adopted by the CFPB or other regulators in the future, may have unknown impacts 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 as implemented by the pending new capital rules is uncertain.

On June 7, 2012, the U.S. banking agencies approved three joint notices of proposed rulemaking that, taken together, will both implement Basel III’s capital framework for U.S. banking institutions and substantially revise the agencies’ Basel I-based general risk-based capital guidelines to make them more risk sensitive. These proposed rules would limit our ability to include certain assets, including MSR, in our calculation of our regulatory capital ratios. MSR currently comprise a significant portion of our regulatory capital. At June 30, 2012, our net MSR totaled $416.0 million. For a more detailed description of Basel III and these proposed rules, see “Regulation and Supervision.” In the event these capital guidelines would limit our ability to include certain assets in our regulatory capital, we may be required to raise additional capital at less attractive terms. Our operating results and return on equity could be affected by such changes to our capital requirements.

Unfavorable results from ongoing stress tests conducted by us may adversely affect our ability to retain customers or compete for new business opportunities.

According to final rules from the FRB and OCC, beginning with data as of September 30, 2013, we and EverBank will be required to publish a summary of the results of annual company-run stress tests by June of the following year. This process will begin in 2013 and will repeat in each subsequent year. Published summary results will be required to include certain measures that evaluate our ability to absorb losses in severely adverse economic and financial conditions.

Although the stress tests are not meant to assess our current condition, and even if we remain strong, stable and well capitalized, we cannot predict our customers’ potential misinterpretation of, and adverse reaction to, the published summary of these stress tests. Any potential misinterpretations and adverse reactions could limit our ability to attract and retain customers or to effectively compete for new business opportunities. The inability to attract and retain customers or effectively compete for new business may have a material and adverse effect on our business, financial condition or results of operations.

Additionally, our regulators may require us to raise additional capital or take other actions, or may impose restrictions on our business, based on the results of the stress tests. We may not be able to raise additional capital if required to do so, or may not be able to do so on terms which are advantageous to us or our current shareholders. Any such capital raises, if required, may also be dilutive to our existing shareholders.

 

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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 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 in a meaningful way. 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.

 

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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 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 Series A Preferred Stock

You are making an investment decision with regard to the depositary shares as well as the Series A Preferred Stock.

As described in this prospectus, we are issuing fractional interests in shares of Series A Preferred Stock in the form of depositary shares. Accordingly, the depositary will rely on the payments it receives on the Series A Preferred Stock to fund all payments on the depositary shares. You should carefully review the information in this prospectus regarding both of these securities.

Our ability to pay dividends on the Series A Preferred Stock, and therefore your ability to receive distributions on the depositary shares, may be limited by federal regulatory considerations and the results of operations of our primary operating subsidiary, EverBank.

We are a thrift holding company that conducts substantially all of our operations through EverBank. As a result, our ability to make dividend payments on the Series A Preferred Stock will depend primarily upon the receipt of dividends and other distributions from EverBank.

There are various regulatory restrictions on the ability of EverBank to pay dividends or make other payments to us. Federal banking laws regulate the amount of dividends that may be paid by our banking subsidiary without prior approval. 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. In addition, the Dodd-Frank Act requires federal banking agencies to establish more stringent risk-based capital guidelines and leverage limits applicable to banks and thrift holding companies. In June 2012, the FRB, the FDIC and the OCC issued three notices of proposed rulemaking, or the NPRs, addressing, among other matters, Section 171 of the Dodd-Frank Act and Basel III. The NPRs set forth the proposed criteria for qualifying additional Tier 1 capital instruments, including the requirement that any dividends on such instruments only be paid out of the banking organization’s net income and retained earnings. These requirements, and any other new regulations or capital distribution constraints, could adversely affect our ability to pay dividends on the Series A Preferred Stock and therefore your ability to receive distributions on the depositary shares.

Additionally, our right to participate in any distribution of assets of EverBank upon EverBank’s liquidation or otherwise, and thus your ability as a holder of the depositary shares to benefit indirectly from such distribution, will be subject to the prior claims of creditors of EverBank, except to the extent that any of our claims as a creditor of EverBank may be recognized. As a result, the depositary shares will effectively be subordinated to all existing and future liabilities and obligations of EverBank. At June 30, 2012, EverBank’s direct borrowings and deposit

 

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liabilities that would effectively rank senior to the Series A Preferred Stock totaled approximately $13.4 billion. In addition, in connection with our recent acquisition of Business Property Lending from GECC, EverBank increased its borrowings from the FHLB, which ranks senior to the Senior A Preferred Stock.

The Series A Preferred Stock is equity and is subordinate to our existing and future indebtedness.

The shares of Series A Preferred Stock are our equity interests and do not constitute indebtedness. As such, the shares of Series A Preferred Stock, and the related depositary shares, will rank junior to all indebtedness and other non-equity claims on us with respect to assets available to satisfy claims on us, including in our liquidation. Our existing and future indebtedness may restrict payment of dividends on the Series A Preferred Stock. As of June 30, 2012, our indebtedness and obligations, on a consolidated basis, totaled approximately $13.9 billion. In addition, in connection with our recent acquisition of Business Property Lending, we increased our borrowings from the FHLB. Additionally, unlike indebtedness, where principal and interest would customarily be payable on specified due dates, in the case of preferred stock such as the Series A Preferred Stock, (1) dividends are payable only if, when and as declared by our board of directors or a duly authorized committee of the board, (2) dividends will not accumulate if they are not declared and (3) as a Delaware corporation, we are subject to restrictions on payments of dividends and redemption out of lawfully available assets. Further, the Series A Preferred Stock places no restrictions on our business or operations or on our ability to incur indebtedness or engage in any transactions, subject only to the limited voting rights referred to below under “Risk Factors—Holders of Series A Preferred Stock and the related depositary shares will have limited voting rights.” Also, as a thrift holding company, our ability to declare and pay dividends is dependent on certain federal regulatory considerations.

We are not required to declare dividends on the Series A Preferred Stock, and dividends on the Series A Preferred Stock are non-cumulative. If we do not declare dividends on the Series A Preferred Stock, holders of depositary shares will not be entitled to receive related distributions on their depositary shares.

Dividends on shares of the Series A Preferred Stock will not be mandatory. Holders of the Series A Preferred Stock, including the depositary, will only be entitled to receive dividends for any given dividend period if, when and as declared by our board of directors or a duly authorized committee of our board of directors out of legally available assets. Consequently, if our board of directors or a duly authorized committee of the board of directors does not authorize and declare a dividend for any dividend period, the depositary would not be entitled to receive any such dividend and no related distribution will be made on the depositary shares, and such unpaid dividend will not accrue or be payable for such dividend period. Dividends on the Series A Preferred Stock are non-cumulative. We will have no obligation to pay dividends accrued for a dividend period after the dividend payment date for such period, and holders of depositary shares will not be entitled to receive any distribution with respect to such dividends, if our board of directors or a duly authorized committee of the board of directors has not declared such dividend before the related dividend payment date, whether or not dividends are declared for any subsequent dividend period with respect to the Series A Preferred Stock or any other series of our preferred stock. If we do not declare and pay dividends on the Series A Preferred Stock, you will not receive corresponding distributions on your depositary shares and the market price of your depositary shares may decline.

We may be able to redeem the Series A Preferred Stock prior to January 5, 2018.

By its terms, the Series A Preferred Stock may be redeemed by us prior to January 5, 2018, at any time within 90 days following the occurrence of certain changes relating to the regulatory capital treatment of the Series A Preferred Stock. In particular, upon our determination in good faith that an event has occurred that would constitute a “regulatory capital treatment event,” we may, at our option, subject to the approval of the appropriate federal banking agency, redeem, all (but not less than all) of the shares of Series A Preferred Stock. See below under “Description of Series A Preferred Stock-Redemption.”

It is possible that the Series A Preferred Stock may not satisfy the proposed criteria for qualifying additional Tier 1 capital instruments consistent with Basel III as set forth in any final rules adopted by the Federal Reserve. As a result, in addition to other circumstances that may constitute a regulatory capital treatment

 

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event, if the Federal Reserve revises and replaces its current capital rules with the final risk-based and leverage capital requirements, there could be a regulatory capital treatment event whereby we would have the right, subject to prior approval of the Federal Reserve, to redeem the Series A Preferred Stock in accordance with its terms prior to January 5, 2018 at a redemption price equal to $25,000 per share (equivalent to $25 per depositary share) plus any declared and unpaid dividends, without accumulation of any undeclared dividends.

Investors should not expect us to redeem the Series A Preferred Stock on the date it becomes redeemable or on any particular date after it becomes redeemable.

The Series A Preferred Stock is a perpetual equity security. The Series A Preferred Stock has no maturity or mandatory redemption date and is not redeemable at the option of investors. By its terms, the Series A Preferred Stock may be redeemed by us at our option either in whole or in part from time to time on January 5, 2018, or any dividend payment date thereafter, or in whole, but not in part, upon the occurrence of certain changes relating to the regulatory capital treatment of the Series A Preferred Stock, as described below under “Description of Series A Preferred Stock—Redemption.” Any decision we may make at any time to propose a redemption of the Series A Preferred Stock will depend upon, among other things, our evaluation of our capital position, the composition of our shareholders’ equity and general market conditions at that time.

Our right to redeem the Series A Preferred Stock is subject to an important limitation. Under the FRB’s current risk-based capital guidelines applicable to thrift holding companies, any redemption of the Series A Preferred Stock is subject to prior approval of the FRB. The FRB may not approve any redemption of the Series A Preferred Stock that we propose. Moreover, the FRB may not authorize a redemption of Series A Preferred Stock without replacing the Series A Preferred Stock with Tier 1 capital that is not a restricted core capital element, if we were to propose such a redemption. We understand that the factors that the FRB will consider in evaluating a proposed redemption, or a request that we be permitted to redeem the Series A Preferred Stock without replacing it with Tier 1 capital that is not a restricted core capital element, include its evaluation of the overall level and quality of our capital components, considered in light of our risk exposures, earnings and growth strategy, and other supervisory considerations, although the FRB may change these factors at any time.

If the Series A Preferred Stock is redeemed, the redemption would be a taxable event to you. In addition, you might not be able to reinvest the money you receive upon redemption of the Series A Preferred Stock in a similar security.

If we are deferring payments on any outstanding junior subordinated debt securities or are in default under the indentures governing those securities, we may be prohibited from making distributions on or redeeming the Series A Preferred Stock.

The terms of any outstanding junior subordinated debt securities may prohibit us from declaring or paying any dividends or distributions on the Series A Preferred Stock, or redeeming, purchasing, acquiring or making a liquidation payment with respect to any of our capital stock, including the Series A Preferred Stock, if we are aware of any event that would be an event of default under the indenture governing those junior subordinated debt securities or at any time when we have deferred interest thereunder.

If we are not paying full dividends on any outstanding dividend parity stock, we will not be able to pay full dividends on the Series A Preferred Stock.

When dividends are not paid in full upon the shares of the Series A Preferred Stock and other dividend parity stock, all dividends paid or declared for payment on that dividend payment date with respect to the Series A Preferred Stock and the dividend parity stock will be shared first ratably by the holders of any dividend parity stock who have the right to receive dividends with respect to past dividend periods for which such dividends were not declared and paid, in proportion to the respective amounts of the undeclared and unpaid dividends relating to past dividend periods, and thereafter ratably by the holders of the Series A Preferred Stock and any

 

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dividend parity stock, in proportion to the respective amounts of the undeclared and unpaid dividends relating to the current dividend period. Therefore, if we are not paying full dividends on any outstanding dividend parity stock, we will not be able to pay full dividends on the Series A Preferred Stock.

General market conditions and unpredictable factors could adversely affect market prices for the depositary shares.

Market prices for the depositary shares may decrease. Several factors, many of which are beyond our control, will influence the market prices of the depositary shares. Factors that might influence the market prices of the depositary shares include:

 

   

whether we declare or fail to declare dividends on the Series A Preferred Stock from time to time;

 

   

our creditworthiness;

 

   

interest rates;

 

   

developments in the credit markets and developments with respect to financial institutions generally;

 

   

the market for similar securities; and

 

   

economic, financial, geopolitical, regulatory or judicial events that affect us or the financial markets generally.

Accordingly, the depositary shares that an investor purchases, whether in this offering or in the secondary market, may trade at a discount to their purchase price.

The depositary shares and Series A Preferred Stock will not be rated.

We do not intend to have the depositary shares or Series A Preferred Stock rated by any rating agency. Unrated securities usually trade at a discount to similar, rated securities. As a result, there is a risk that the depositary shares and Series A Preferred Stock may trade at a price that is lower than they might otherwise trade if rated by a rating agency. It is possible, however, that one or more rating agencies might independently determine to assign a rating to the depositary shares and Series A Preferred Stock. In addition, we may elect to issue other securities for which we may seek to obtain a rating. If any ratings are assigned to the depositary shares and Series A Preferred Stock in the future or if we issue other securities with a rating, such ratings, if they are lower than market expectations or are subsequently lowered or withdrawn, could adversely affect the market for or the market value of the depositary shares and Series A Preferred Stock.

The depositary shares may not have an active trading market.

The Series A Preferred Stock and the related depositary shares are new issues with no established trading market. Although we intend to apply to list the depositary shares on the NYSE, we may not be able to list the depositary shares. Even if the depositary shares are listed, there may be little or no secondary market for the depositary shares. Even if a secondary market for the depositary shares develops, it may not provide significant liquidity and transaction costs in any secondary market could be high. As a result, the difference between bid and asked prices in any secondary market could be substantial. Further, because the shares of Series A Preferred Stock do not have a stated maturity date, investors seeking liquidity in the depositary shares will be limited to selling their depositary shares in the secondary market. We do not expect that there will be any separate public trading market for the shares of the Series A Preferred Stock except as represented by the depositary shares.

 

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Holders of Series A Preferred Stock and the related depositary shares will have limited voting rights.

Holders of the Series A Preferred Stock, and therefore holders of the depositary shares, have no voting rights with respect to matters that generally require the approval of voting shareholders. However, holders of the Series A Preferred Stock will have the right to vote as a series on certain fundamental matters that may affect the preference or special rights of the Series A Preferred Stock, as described under “Description of Series A Preferred Stock—Voting Rights” below. In addition, if dividends on any shares of the Series A Preferred Stock or any other class or series of preferred stock that ranks on parity with the Series A Preferred Stock as to payment of dividends with similar voting rights have not been declared or paid for the equivalent of six or more dividend payments, whether or not for consecutive dividend periods, holders of the outstanding shares of Series A Preferred Stock, together with holders of any other series of our preferred stock ranking equal with the Series A Preferred Stock with similar voting rights, will be entitled to vote for the election of two additional directors to our board of directors, subject to the terms and to the limited extent described under “Description of Series A Preferred Stock—Voting Rights” below. Holders of depositary shares must act through the depositary to exercise any voting rights in respect of the Series A Preferred Stock.

We are an emerging growth company within the meaning of the JOBS Act, and if we decide to take advantage of certain exemptions from various reporting requirements applicable to emerging growth companies, an investment in us could be less attractive to investors.

We are an “emerging growth company” within the meaning of the JOBS Act. Accordingly, 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. If we choose not to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, it may increase the risk that material weaknesses or other deficiencies in our internal control over financial reporting may go undetected. As a result, holders of depositary shares 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, some investors may find the Series A Preferred Stock less attractive as a result.

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.

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

 

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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:

 

   

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;

 

   

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 within the meaning of Section 27A of the Securities Act, and such statements are intended to be covered by the safe harbor provided by the same. 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, including the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs;

 

   

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;

 

   

our ability to comply with any supervisory actions to which we are or become subject as a result of examination by our regulators;

 

   

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;

 

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the effectiveness of our derivatives to manage interest rate risk;

 

   

risks related to securities held in our securities portfolio;

 

   

delinquencies on our equipment leases and reductions in the resale value of leased equipment;

 

   

increases in loan repurchase requests and our reserves for loan repurchases;

 

   

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;

 

   

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;

 

   

changes to GAAP;

 

   

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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RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

The table below sets forth our consolidated ratios of earnings to fixed charges and preferred stock dividends for the periods presented.

 

     Six Months Ended
June 30,
    Year Ended December 31,  
    2012     2011     2011     2010     2009     2008     2007  
    (dollars in thousands)  

Excluding Interest on Deposits:

             

Fixed Charges (1):

             

Interest expense (excluding interest on deposits)

  $ 20,028      $ 20,009      $ 38,899      $ 45,758      $ 55,515      $ 66,520      $ 48,197   

Interest factor in rent expense

    2,634        2,180        4,378        3,991        2,153        2,156        2,042   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed charges

  $ 22,662      $ 22,189      $ 43,277      $ 49,749      $ 57,668      $ 68,676      $ 50,239   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings:

             

Income from continuing operations before taxes

  $ 36,207      $ 51,404      $ 81,514      $ 249,873      $ 88,390      $ 37,379      $ 47,224   

Fixed charges (1)

    22,662        22,189        43,277        49,749        57,668        68,676        50,239   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Earnings

  $ 58,869      $ 73,593      $ 124,791      $ 299,622      $ 146,058      $ 106,055      $ 97,463   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of earnings to fixed charges, excluding interest on deposits

    2.60        3.32        2.88        6.02        2.53        1.54        1.94   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Including Interest on Deposits:

             

Fixed Charges (1):

             

Interest expense

  $ 61,421      $ 71,609      $ 135,910      $ 147,167      $ 163,211      $ 202,620      $ 184,963   

Interest factor in rent expense

    2,634        2,180        4,378        3,991        2,153        2,156        2,042   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total fixed charges

  $ 64,055      $ 73,789      $ 140,288      $ 151,158      $ 165,364      $ 204,776      $ 187,005   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings:

             

Income from continuing operations before taxes

  $ 36,207      $ 51,404      $ 81,514      $ 249,873      $ 88,390      $ 37,379      $ 47,224   

Fixed charges (1)

    64,055        73,789        140,288        151,158        165,364        204,776        187,005   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Earnings

  $ 100,262      $ 125,193      $ 221,802      $ 401,031      $ 253,754      $ 242,155      $ 234,229   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratio of earnings to fixed charges, including interest on deposits

    1.57        1.70        1.58        2.65        1.53        1.18        1.25   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Preferred share dividends paid on private shares are excluded.

The term “fixed charges” means the sum of the following: (a) interest expensed and capitalized, (b) amortized premiums, discounts and capitalized expenses related to indebtedness, (c) an estimate of the interest within rental expense, and (d) preference security dividend requirements of consolidated subsidiaries.

The term “earnings” is the amount resulting from adding and subtracting the following items. Add the following: (a) pre-tax income from continuing operations before adjustment for income or loss from equity investees; (b) fixed charges; (c) amortization of capitalized interest; (d) distributed income of equity investees; and (e) your share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed charges. From the total of the added items, subtract the following: (a) interest capitalized; (b) preference security dividend requirements of consolidated subsidiaries; and (c) the noncontrolling interest in pre-tax income of subsidiaries that have not incurred fixed charges.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $144.4 million, 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 have no current plans, arrangements, agreements or understandings to engage in any such acquisition.

 

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CAPITALIZATION

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.

The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2012, actual and as adjusted for this offering:

 

     As of June 30, 2012  
     Actual     As Adjusted  
     (In thousands)  

Cash and cash equivalents

   $ 518,232      $ 662,678   
  

 

 

   

 

 

 

Debt:

    

Other borrowings

     2,503,636        2,503,636   

Trust preferred securities

     103,750        103,750   
  

 

 

   

 

 

 

Total debt

     2,607,386        2,607,386   

Shareholders’ Equity:

    

Preferred stock, 10,000,000 shares authorized actual and as adjusted:

    

Series A Preferred Stock, $0.01 par value; no shares issued and outstanding, actual; 6,000 shares issued and outstanding, as adjusted

     —          150,000   

Common stock, $0.01 par value; 500,000,000 shares authorized, 116,479,658 shares issued and outstanding, actual and as adjusted

     1,165        1,165   

Additional paid-in capital

     762,422        756,868   

Retained earnings

     530,876        530,876   

Accumulated other comprehensive loss

     (113,094     (113,094
  

 

 

   

 

 

 

Total shareholders’ equity

     1,181,369        1,325,815   
  

 

 

   

 

 

 

Total capitalization

   $ 3,788,755        3,933,201   
  

 

 

   

 

 

 

Both columns exclude 4,032,662 shares of our common stock which were issued subsequent to June 30, 2012. The shares were issued on August 27, 2012, at a price per share of $12.065, to certain of our shareholders all of whom were former shareholders of Tygris. The aggregate purchase price of $48.7 million was held in an escrow account related to the Tygris acquisition, and the shares will remain in escrow pursuant to the terms of the original escrow agreement. The conversion price was based on the trailing ten day volume weighted average price per share of our common stock through August 27, 2012, as quoted on the NYSE. For additional information regarding the acquisition of Tygris, please see “Business—Asset Origination and Fee Income Businesses—Commercial Finance.”

Both columns also exclude the effect of our acquisition of Business Property Lending. Our acquisition of Business Property Lending closed on October 1, 2012. The purchase price of $2.4 billion was funded through a combination of $0.4 billion of cash, $0.5 billion of deposits, $1.5 billion of other borrowings, and no debt was assumed in the transaction. For additional information regarding the acquisition of Business Property Lending, please see “Business—Recent Acquisitions—Acquisition of Business Property Lending.”

 

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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 historical consolidated financial information as of and for the six months ended June 30, 2012 and 2011 (unaudited) is derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus and includes all adjustments consisting of normal recurring accruals that we consider necessary for the fair presentation of the financial position and the results of operations for the period. Historical results are not necessarily indicative of future results. 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, the acquisition of the banking operations of Bank of Florida in May 2010, and the acquisition of MetLife’s warehouse business in April 2012. Accordingly, our operating results for the historical periods presented below are not comparable and may not be predictive of future results.

 

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    Six Months Ended
June 30,
    Year Ended December 31,  
    2012     2011     2011     2010     2009     2008     2007  
    (In millions, except share and per share data)  

Income Statement Data:

             

Interest income

  $ 302.0      $ 298.2      $ 588.2      $ 612.5      $ 440.6      $ 322.4      $ 263.4   

Interest expense

    61.4        71.6        135.9        147.2        163.2        202.6        185.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    240.6        226.6        452.3        465.3        277.4        119.8        78.4   

Provision for loan and lease losses (1)

    17.1        27.0        49.7        79.3        121.9        37.3        5.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan and lease losses

    223.5        199.6        402.6        386.0        155.5        82.5        72.8   

Noninterest income (2)

    147.3        118.8        233.1        357.8        232.1        175.8        177.1   

Noninterest expense (3)

    334.6        267.0        554.2        493.9        299.2        221.0        202.7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    36.2        51.4        81.5        249.9        88.4        37.4        47.2   

Provision for income taxes

    13.2        20.2        28.8        61.0        34.9        14.2        17.8   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

    23.0        31.2        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

    23.0        31.2        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

  $ 23.0      $ 31.2      $ 52.7      $ 188.9      $ 53.4      $ 46.0      $ 30.2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per Share Data:

             

Weighted-average common shares outstanding: (units in thousands)

             

Basic

    88,454        74,764        74,892        72,479        42,126        41,029        40,692   

Diluted

    90,414        77,620        77,506        74,589        43,299        42,196        41,946   

Earnings from continuing operations per common share:

             

Basic

  $ 0.17      $ 0.33      $ 0.55      $ 2.00      $ 0.80      $ 0.43      $ 0.68   

Diluted

    0.17        0.32        0.54        1.94        0.78        0.41        0.66   

Net tangible book value per as converted common share at period end:

             

Excluding accumulated other comprehensive income (loss) (5)

  $ 10.97      $ 11.03      $ 11.27      $ 10.70      $ 8.23      $ 6.95      $ 5.43   

Including accumulated other comprehensive income (loss) (6)

    10.00        10.77        10.12        10.65        8.54        6.96        5.39   
    As of June 30,     As of December 31,  
    2012     2011     2011     2010     2009     2008     2007  
    (in millions)  

Balance Sheet Data:

             

Cash and cash equivalents

  $ 518.2      $ 683.6      $ 295.0      $ 1,169.2      $ 23.3      $ 62.9      $ 33.9   

Investment securities

    2,174.4        2,930.4        2,191.8        2,203.6        1,678.9        715.7        283.6   

Loans held for sale

    3,178.6        792.4        2,725.3        1,237.7        1,283.0        915.2        943.5   

Loans and leases held for investment, net

    7,708.0        6,767.0        6,441.5        6,005.6        4,072.7        4,577.0        3,722.3   

Total assets

    15,040.8        12,520.2        13,041.7        12,007.9        8,060.2        7,048.3        5,521.9   

Deposits

    10,803.7        9,936.5        10,265.8        9,683.1        6,315.3        5,003.0        3,892.4   

Total liabilities

    13,859.4        11,492.5        12,074.0        10,994.7        7,506.3        6,628.6        5,273.4   

Total shareholders’ equity

    1,181.4        1,027.7        967.7        1,013.2        553.9        419.6        248.5   

 

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(1) For the six months ended June 30, 2012, provision for loan and lease losses includes a $4.2 million increase in non-accretable discount related to Bank of Florida acquired credit-impaired loans. For the six months ended June 30, 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, 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, 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 six months ended June 30, 2012, noninterest income includes a $45.3 million impairment charge related to mortgage servicing rights, or MSR. For the six months ended June 30, 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 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 six months ended June 30, 2012, noninterest expense includes $16.2 million in transaction and non-recurring regulatory related expense. For the six months ended June 30, 2011, noninterest expense includes $12.5 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. 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. 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. The carrying value of the Tygris indemnification asset has been $0 since March 31, 2011.
(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 adjusted tangible shareholders’ equity divided by shares of common stock. Adjusted tangible shareholders’ equity equals shareholders’ equity less goodwill, other intangible assets and accumulated other comprehensive income (loss). 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. Net tangible book value per as converted common share excluding accumulated other comprehensive income (loss) is a non-GAAP financial measure, and its most directly comparable GAAP financial measure is book value per common share.
(6) Calculated as tangible shareholders’ equity divided by shares of common stock. Tangible shareholders’ equity equals shareholders’ equity less goodwill and other intangible assets. 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. Net tangible book value per as converted common share including accumulated other comprehensive income (loss) 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 po