TIAA FSB Holdings, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.2 - EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 - TIAA FSB Holdings, Inc.	ever-33117x10qex312.htm
EX-32.2 - EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 - TIAA FSB Holdings, Inc.	ever-33117x10qex322.htm
EX-32.1 - EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 - TIAA FSB Holdings, Inc.	ever-33117x10qex321.htm
EX-31.1 - EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 - TIAA FSB Holdings, Inc.	ever-33117x10qex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



	ý	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2017.



	o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

EverBank Financial Corp

(Exact name of registrant as specified in its charter)



Delaware	001-35533	52-2024090
(State of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

501 Riverside Ave., Jacksonville, FL		32202
(Address of principal executive offices)		(Zip Code)

904-281-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



	Large accelerated filer ý		Accelerated filer o
	Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o
			Emerging growth company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No ý

As of April 24, 2017, there were 127,879,792 shares of common stock outstanding.

Table of Contents

EverBank Financial Corp

Form 10-Q

Index



Part I - Financial Information

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016	3
	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2017 and 2016	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2017 and 2016	5
	Condensed Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 2017 and 2016	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016	7
	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74

Item 4.	Controls and Procedures	74

Part II - Other Information

Item 1.	Legal Proceedings	75

Item 1A.	Risk Factors	75

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75

Item 3.	Default Upon Senior Securities	75

Item 4.	Mine Safety Disclosures	75

Item 5.	Other Information	75

Item 6.	Exhibits	75

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Part I. Financial Information

Item 1. Financial Statements (unaudited)

EverBank Financial Corp and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(Dollars in thousands, except per share data)



	March 31, 2017			December 31, 2016
Assets
Cash and due from banks	$	48,160		$	36,654
Interest-bearing deposits in banks	831,496			754,784
Total cash and cash equivalents	879,656			791,438
Investment securities:
Available for sale, at fair value	447,593			485,836
Held to maturity (fair value of $93,403 and $90,038 as of March 31, 2017 and December 31, 2016, respectively)	92,472			89,457
Other investments	263,644			253,018
Total investment securities	803,709			828,311
Loans held for sale (includes $1,389,353 and $1,271,893 carried at fair value as of March 31, 2017 and December 31, 2016, respectively)	1,440,114			1,443,263
Loans and leases held for investment:
Loans and leases held for investment, net of unearned income	23,400,992			23,556,977
Allowance for loan and lease losses	(95,158		)	(103,304		)
Total loans and leases held for investment, net	23,305,834			23,453,673
Mortgage servicing rights (MSR), net	293,726			273,941
Premises and equipment, net	40,989			43,594
Other assets	1,012,551			1,003,866
Total Assets	$	27,776,579		$	27,838,086
Liabilities
Deposits:
Noninterest-bearing	$	1,662,173		$	1,750,529
Interest-bearing	17,629,508			17,887,699
Total deposits	19,291,681			19,638,228
Other borrowings	5,756,000			5,506,000
Trust preferred securities and subordinated notes payable	360,378			360,278
Accounts payable and accrued liabilities	309,157			317,248
Total Liabilities	25,717,216			25,821,754
Commitments and Contingencies (Note 12)
Shareholders’ Equity
Series A 6.75% Non-Cumulative Perpetual Preferred Stock, $0.01 par value (liquidation preference of $25,000 per share; 10,000,000 shares authorized; 6,000 issued and outstanding at March 31, 2017 and December 31, 2016)	150,000			150,000
Common Stock, $0.01 par value (500,000,000 shares authorized; 127,819,917 and 127,036,740 issued and outstanding at March 31, 2017 and December 31, 2016, respectively)	1,279			1,270
Additional paid-in capital	914,894			905,573
Retained earnings	1,039,357			1,011,011
Accumulated other comprehensive income (loss) (AOCI)	(46,167		)	(51,522		)
Total Shareholders’ Equity	2,059,363			2,016,332
Total Liabilities and Shareholders’ Equity	$	27,776,579		$	27,838,086

See notes to unaudited condensed consolidated financial statements.

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EverBank Financial Corp and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

(Dollars in thousands, except per share data)



	Three Months Ended March 31,
	2017			2016
Interest Income
Interest and fees on loans and leases	$	245,381		$	231,059
Interest and dividends on investment securities	6,673			7,404
Other interest income	1,296			396
Total Interest Income	253,350			238,859
Interest Expense
Deposits	43,086			39,090
Other borrowings	30,919			25,988
Total Interest Expense	74,005			65,078
Net Interest Income	179,345			173,781
Provision for Loan and Lease Losses	15,680			8,919
Net Interest Income after Provision for Loan and Lease Losses	163,665			164,862
Noninterest Income
Loan servicing fee income	22,908			23,441
Amortization of mortgage servicing rights	(15,505		)	(14,731		)
Recovery (impairment) of mortgage servicing rights	22,644			(22,542		)
Net loan servicing income (loss)	30,047			(13,832		)
Gain on sale of loans	447			28,751
Loan production revenue	5,315			5,260
Deposit fee income	2,000			3,102
Other lease income	4,042			4,367
Other	8,406			2,105
Total Noninterest Income	50,257			29,753
Noninterest Expense
Salaries, commissions and other employee benefits expense	91,633			91,640
Equipment expense	16,314			15,917
Occupancy expense	6,608			6,264
General and administrative expense	38,571			35,609
Total Noninterest Expense	153,126			149,430
Income before Provision for Income Taxes	60,796			45,185
Provision for Income Taxes	22,259			17,261
Net Income	$	38,537		$	27,924
Less: Net Income Allocated to Preferred Stock	(2,531		)	(2,531		)
Net Income Allocated to Common Shareholders	$	36,006		$	25,393
Basic Earnings Per Common Share	$	0.28		$	0.20
Diluted Earnings Per Common Share	$	0.28		$	0.20
Dividends Declared Per Common Share	$	0.06		$	0.06

See notes to unaudited condensed consolidated financial statements.

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EverBank Financial Corp and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)

(Dollars in thousands)



	Three Months Ended March 31,
	2017			2016
Net Income	$	38,537		$	27,924
Unrealized Gains (Losses) on Debt Securities
Net unrealized gains (losses) due to changes in fair value	676			(3,046		)
Reclassification of unrealized losses (gains) to noninterest income	—			97
Tax effect	(257		)	1,121
Change in unrealized gains (losses) on debt securities	419			(1,828		)
Interest Rate Swaps
Net unrealized gains (losses) due to changes in fair value	484			(53,963		)
Reclassification of net unrealized losses to interest expense	6,718			4,044
Tax effect	(2,266		)	18,971
Change in interest rate swaps	4,936			(30,948		)
Other Comprehensive Income (Loss)	5,355			(32,776		)
Comprehensive Income (Loss)	$	43,892		$	(4,852	)

See notes to unaudited condensed consolidated financial statements.

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EverBank Financial Corp and Subsidiaries

Condensed Consolidated Statements of Shareholders' Equity (unaudited)

(Dollars in thousands)



	Shareholders’ Equity
	Preferred Stock		Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total Equity
Balance, January 1, 2017	$	150,000	$	1,270	$	905,573		$	1,011,011		$	(51,522	)	$	2,016,332
Net income	—		—		—			38,537			—			38,537
Other comprehensive income (loss)	—		—		—			—			5,355			5,355
Issuance of common stock	—		9		7,223			—			—			7,232
Share-based grants	—		—		2,098			—			—			2,098
Cash dividends on common stock	—		—		—			(7,660		)	—			(7,660		)
Cash dividends on preferred stock	—		—		—			(2,531		)	—			(2,531		)
Balance, March 31, 2017	$	150,000	$	1,279	$	914,894		$	1,039,357		$	(46,167	)	$	2,059,363

Balance, January 1, 2016	$	150,000	$	1,250	$	874,806		$	906,278		$	(64,013	)	$	1,868,321
Net income	—		—		—			27,924			—			27,924
Other comprehensive income (loss)	—		—		—			—			(32,776		)	(32,776		)
Issuance of common stock	—		2		(130		)	—			—			(128		)
Share-based grants (including income tax benefits)	—		—		2,599			—			—			2,599
Cash dividends on common stock	—		—		—			(7,506		)	—			(7,506		)
Cash dividends on preferred stock	—		—		—			(2,531		)	—			(2,531		)
Balance, March 31, 2016	$	150,000	$	1,252	$	877,275		$	924,165		$	(96,789	)	$	1,855,903

See notes to unaudited condensed consolidated financial statements.

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EverBank Financial Corp and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(Dollars in thousands)



	Three Months Ended March 31,
	2017			2016
Operating Activities
Net income	$	38,537		$	27,924
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of premiums and deferred origination costs	17,392			18,274
Depreciation and amortization of tangible and intangible assets	5,861			6,658
Reclassification of net loss on settlement of interest rate swaps	3,890			4,044
Amortization and impairment of mortgage servicing rights, net of recoveries	(7,139		)	37,273
Deferred income taxes (benefit)	21,319			(2,787		)
Provision for loan and lease losses	15,680			8,919
Share-based compensation expense	2,098			2,631
Gain on extinguishment of debt	(4,115		)	—
Other operating activities	1,821			(111		)
Changes in operating assets and liabilities:
Loans held for sale, including proceeds from sales and repayments	(114,750		)	279,134
Other assets	147,904			24,479
Accounts payable and accrued liabilities	(24,042		)	(83,635		)
Net cash provided by (used in) operating activities	104,456			322,803
Investing Activities
Investment securities available for sale:
Proceeds from prepayments and maturities	38,616			47,051
Investment securities held to maturity:
Purchases	(3,884		)	—
Proceeds from prepayments and maturities	622			2,351
Purchases of other investments	(84,576		)	(109,225		)
Proceeds from sales of other investments	73,950			140,250
Net change in loans and leases held for investment	(238,755		)	(799,700		)
Purchases of premises and equipment, including equipment under operating leases	(2,142		)	(9,841		)
Proceeds related to sale or settlement of other real estate owned	6,324			2,674
Proceeds from insured foreclosure claims	288,537			327,234
Other investing activities	2,800			8,474
Net cash provided by (used in) investing activities	81,492			(390,732		)
Financing Activities
Net increase (decrease) in nonmaturity deposits	(411,526		)	909,640
Net increase (decrease) in time deposits	62,640			(172,230		)
Net change in short-term Federal Home Loan Bank (FHLB) advances	(50,000		)	(800,000		)
Proceeds from long-term FHLB advances	1,375,000			100,000
Repayments of long-term FHLB advances, including early extinguishment	(1,070,885		)	(30,000		)
Proceeds from issuance of subordinated notes payable, net of issuance costs	—			88,910
Proceeds from issuance of common stock	8,201			607
Dividends paid	(10,191		)	(10,037		)
Other financing activities	(969		)	(767		)
Net cash provided by (used in) financing activities	(97,730		)	86,123
Net change in cash and cash equivalents	88,218			18,194
Cash and cash equivalents at beginning of period	791,438			582,451
Cash and cash equivalents at end of period	$	879,656		$	600,645

See Note 1 and Note 4 for disclosures related to supplemental noncash information.

See notes to unaudited condensed consolidated financial statements.

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EverBank Financial Corp and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

(Dollars in thousands, except per share data)

1. Organization and Basis of Presentation

a) Organization — EverBank Financial Corp (the Company) is a savings and loan holding company with two direct operating subsidiaries, EverBank (EB) and EverBank Funding, LLC (EBF). EB is a federally chartered thrift institution with its home office located in Jacksonville, Florida. EB's direct banking services are offered nationwide. In addition, EB operates financial centers in Florida and commercial and consumer lending centers across the United States. EB (a) accepts deposits from the general public; (b) originates, purchases, services,

sells and securitizes residential real estate mortgage loans, home equity loans, commercial real estate loans and commercial loans and

leases; and (c) offers full-service securities brokerage and investment advisory services.

EB’s subsidiaries are:

•AMC Holding, Inc., the parent of CustomerOne Financial Network, Inc.;

•Tygris Commercial Finance Group, Inc., the parent of EverBank Commercial Finance, Inc.;

•EverInsurance, Inc.;

•Elite Lender Services, Inc.;

•EverBank Wealth Management, Inc.; and

•Business Property Lending, Inc.

EBF facilitates the pooling and securitization of mortgage loans for issuance into the secondary market.

b) Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes necessary for a complete presentation of the Company's financial position, results of operations, comprehensive income, and cash flows in conformity with GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes to the financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for acquired companies are included from their respective dates of acquisition. In management’s opinion, all adjustments (which include normal recurring adjustments) necessary to present fairly the Company's financial position, results of operations, comprehensive income, and changes in cash flows have been made.

GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates relate to the Company’s allowance for loan and lease losses, loans and leases acquired with evidence of credit deterioration, contingent liabilities, and the fair values of investment securities, loans held for sale, MSR and derivative instruments. Because of the inherent uncertainties associated with any estimation process and future changes in market and economic conditions, it is possible that actual results could differ significantly from those estimates.

c) Supplemental Cash Flow Information - Noncash investing activities are presented in the following table:



	Three Months Ended March 31,
	2017		2016
Supplemental Schedules of Noncash Activities:
Loans transferred to foreclosure claims	$	441,715	$	312,790

See Note 4 for disclosures relating to noncash activities relating to loan transfers.

2. Recent Accounting Pronouncements

Debt Securities - In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period for certain callable debt securities held at a premium. Under the current guidance, premiums and discounts are typically amortized to the maturity date of the financial instrument. However, ASU 2017-08 requires the associated premium to be amortized to the earliest call date of the financial instrument. Upon adoption, ASU 2017-08 provides for transition through a modified retrospective approach, which requires restatement as of the beginning of the fiscal year of adoption through a cumulative-effect adjustment to retained earnings. ASU 2017-08 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. If adopted in an interim period, any adjustments must be reflected as of the beginning of the fiscal year of adoption. The Company is currently evaluating the adoption of ASU 2017-08 and its impact on the Company's consolidated financial statements.

Goodwill - In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies accounting for goodwill impairment by eliminating the second step from the impairment testing process. Under the current guidance, if the fair value of a reporting unit is lower than its carrying amount, the entity must take a second step and assign the fair value of a reporting unit to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination in order to calculate any impairment charge. Upon the adoption of ASU 2017-04, entities will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value without the need to assign the fair value to the assets and liabilities. Any loss recognized as a result of this test is not to exceed the total amount of goodwill allocated to

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that reporting unit and should consider income tax effects from any tax deductible goodwill, if applicable, on the carrying amount of the reporting unit when measuring the impairment loss. ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, and for interim periods within those annual periods with early adoption permitted for impairment testing dates after January 1, 2017. The Company is currently evaluating the adoption of ASU 2017-04 and its impact on the Company's consolidated financial statements.

Credit Losses - In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments, which eliminates the probable initial recognition threshold for credit losses requiring, instead, that all financial assets (or group of financial assets) measured at amortized cost be presented at the net amount expected to be collected inclusive of the entity’s current estimate of all lifetime expected credit losses. The ASU also applies to certain off-balance-sheet credit exposures such as unfunded commitments and non-derivative financial guarantees. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) in order to present the net carrying value at the amount expected to be collected on the financial asset. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The income statement under this ASU will reflect the initial recognition of current expected credit losses for newly recognized assets, as well as any increases or decreases of expected credit losses that have occurred during the period. ASU 2016-13 retains many currently-existing disclosures related to the credit quality of an entity’s assets and the related allowance for credit losses amended to reflect the change to an expected credit loss methodology, as well as enhanced disclosures to provide information to users at a more disaggregated level. Upon adoption, ASU 2016-13 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is effective, except for debt securities for which an other-than-temporary impairment (OTTI) has previously been recognized. For these debt securities, a prospective transition is provided in order to maintain the same amortized cost prior to and subsequent to the effective date of the ASU. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods with early adoption permitted for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. The Company is currently evaluating the pending adoption of ASU 2016-13 and its impact on the Company's consolidated financial statements.

Leases - In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends the existing standards for lease accounting effectively bringing most leases onto the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability, while leaving lessor accounting largely unchanged with only targeted changes incorporated into the update. ASU 2016-02 includes extensive qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. Upon adoption, ASU 2016-02 must be adopted using a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted with certain practical expedients provided. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The Company is currently evaluating the pending adoption of ASU 2016-02 and its impact on the Company's consolidated financial statements.

Recognition and Measurement - In January 2016, the FASB issued ASU 2016-01, Financial Instruments (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, which (1) requires equity investments that do not result in consolidation and are not accounted for under the equity method to be measured at fair value with changes recognized through net income; (2) simplifies the impairment assessment of equity investments without readily determinable fair values by allowing a qualitative assessment similar to those performed on long-lived assets, goodwill or intangibles to be utilized at each reporting period; (3) eliminates the use of the entry price method requiring all preparers to utilize the exit price notion consistent with Topic 820, Fair Value Measurement in disclosing the fair value of financial instruments measured at amortized cost; (4) requires separate disclosure within OCI of changes in the fair value of liabilities due to instrument-specific credit risk when the fair value option has been elected; and (5) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. Upon adoption, ASU 2016-01 provides for a cumulative-effect adjustment to retained earnings except for the impacts of amendments 2 and 3 above, which are prospective in nature. ASU 2016-01 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods with early adoption allowable only for amendment 4 above. The Company is currently evaluating the pending adoption of ASU 2016-01 and its impact on the Company's consolidated financial statements.

Revenue from Contracts with Customers - In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Subtopic 606), which supersedes the guidance in former Accounting Standards Codification (ASC) 605, Revenue Recognition. ASU 2014-09 clarifies the principles for recognizing revenue in order to improve comparability of revenue recognition practices across entities and industries with certain scope exceptions including financial instruments, leases, and guarantees. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. To satisfy this objective, ASU 2014-09 provides guidance intended to assist in the identification of contracts with customers and separate performance obligations within those contracts, the determination and allocation of the transaction price to those identified performance obligations and the recognition of revenue when a performance obligation has been satisfied. ASU 2014-09 also implements enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenues and cash flows from contracts with customers. The effective date of ASU 2014-09 has been deferred by one year from its original effective date through the August 2015 issuance of ASU 2015-14 and thus is effective for annual reporting periods beginning on or after December 15, 2017, and interim periods within those annual periods. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Upon adoption, ASU 2014-09 provides for transition through either a full retrospective approach requiring the restatement of all presented prior periods or a modified retrospective approach, which allows the new recognition standard to be applied to only those contracts that are not completed at the date of transition. If the modified retrospective approach is adopted, a cumulative-effect adjustment to retained earnings is performed with additional disclosures required including the amount by which each line item is affected by the transition as compared to the guidance in effect before adoption and an explanation of the reasons for significant changes in these amounts. The Company is currently evaluating the pending adoption of ASU 2014-09 and its impact on its consolidated financial statements and has not yet identified which transition method will be applied upon adoption.

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3. Investment Securities

The amortized cost, gross unrealized gains, gross unrealized losses, fair value and carrying amount of investment securities were as follows as of March 31, 2017 and December 31, 2016:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Carrying Amount
March 31, 2017
Available for sale:
Residential collateralized mortgage obligations (CMO) securities - nonagency	$	413,129	$	4,397	$	3,371	$	414,155	$	414,155
U.S. Treasury securities	31,925		—		17		31,908		31,908
Asset-backed securities (ABS)	1,376		—		255		1,121		1,121
Other	217		192		—		409		409
Total available for sale securities	$	446,647	$	4,589	$	3,643	$	447,593	$	447,593
Held to maturity:
Residential CMO securities - agency	$	2,789	$	86	$	—	$	2,875	$	2,789
Residential mortgage-backed securities (MBS) - agency	89,683		1,406		561		90,528		89,683
Total held to maturity securities	$	92,472	$	1,492	$	561	$	93,403	$	92,472
December 31, 2016
Available for sale:
Residential CMO securities - nonagency	$	452,035	$	4,219	$	3,836	$	452,418	$	452,418
U.S. Treasury securities	31,879		—		12		31,867		31,867
ABS	1,426		—		261		1,165		1,165
Other	225		161		—		386		386
Total available for sale securities	$	485,565	$	4,380	$	4,109	$	485,836	$	485,836
Held to maturity:
Residential CMO securities - agency	$	2,809	$	87	$	—	$	2,896	$	2,809
Residential MBS - agency	86,648		1,181		687		87,142		86,648
Total held to maturity securities	$	89,457	$	1,268	$	687	$	90,038	$	89,457

At March 31, 2017 and December 31, 2016, investment securities with a carrying value of $184,394 and $114,483, respectively, were pledged to secure other borrowings and for other purposes as required or permitted by law.

For the three months ended March 31, 2017 and 2016, no gross gains and no gross losses were realized on available for sale investments. The cost of investments sold is calculated using the specific identification method.

The gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment category and the length of time individual securities have been in a continuous unrealized loss position, at March 31, 2017 and December 31, 2016 were as follows:



	Less Than 12 Months				12 Months or Greater				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2017
Debt securities:
Residential CMO securities - nonagency	$	65,672	$	758	$	105,106	$	2,613	$	170,778	$	3,371
Residential MBS - agency	31,418		554		910		7		32,328		561
U.S. Treasury securities	31,908		17		—		—		31,908		17
ABS	—		—		1,121		255		1,121		255
Total debt securities	$	128,998	$	1,329	$	107,137	$	2,875	$	236,135	$	4,204
December 31, 2016
Debt securities:
Residential CMO securities - nonagency	$	65,236	$	900	$	122,805	$	2,936	$	188,041	$	3,836
Residential MBS - agency	33,239		680		919		7		34,158		687
U.S. Treasury securities	31,879		12		—		—		31,879		12
ABS	—		—		1,165		261		1,165		261
Total debt securities	$	130,354	$	1,592	$	124,889	$	3,204	$	255,243	$	4,796

The Company had unrealized losses at March 31, 2017 and December 31, 2016 on residential nonagency CMO securities, residential agency MBS, ABS, and U.S. Treasury securities. These unrealized losses are primarily attributable to weak market conditions. Based on the

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nature of the impairment, these unrealized losses are considered temporary. The Company does not intend to sell nor is it more likely than not that it will be required to sell these investments before their anticipated recoveries.

At March 31, 2017, the Company had 49 debt securities in an unrealized loss position. A total of 20 securities were in an unrealized loss position for less than 12 months. These 20 securities consisted of eight residential nonagency CMO securities, 11 residential agency MBS, and one U.S Treasury security. The remaining 29 debt securities were in an unrealized loss position for 12 months or longer. These 29 securities consisted of 25 residential nonagency CMO securities, three ABS, and one residential agency MBS. Of the $4,204 in unrealized losses, $2,404 relate to debt securities that are rated investment grade with the remainder representing securities for which the Company believes it has both the intent and ability to hold to recovery.

At December 31, 2016, the Company had 49 debt securities in an unrealized loss position. A total of 17 were in an unrealized loss position for less than 12 months. These 17 securities consisted of five residential nonagency CMO securities, 11 residential agency MBS and one U.S. Treasury security. The remaining 32 debt securities were in an unrealized loss position for 12 months or longer. These 32 securities consisted of three ABS, one residential agency MBS and 28 residential nonagency CMO securities. Of the $4,796 in unrealized losses, $2,503 relate to debt securities that are rated investment grade with the remainder representing securities for which the Company believes it has both the intent and ability to hold to recovery.

When certain triggers indicate the likelihood of an OTTI or the qualitative evaluation performed cannot support the expectation of recovering the entire amortized cost basis of an investment, the Company performs cash flow analyses that project prepayments, default rates and loss severities on the collateral supporting each security. If the net present value of the investment is less than the amortized cost, the difference is recognized in earnings as a credit-related impairment, while the remaining difference between the fair value and the amortized cost is recognized in AOCI.

There was no credit-related OTTI recognized for the three months ended March 31, 2017. During the three months ended March 31, 2016, the Company recognized credit-related OTTI of $97 on available for sale nonagency residential CMO securities. These credit-related OTTI losses represented additional declines in fair value on a security that was deemed OTTI at December 31, 2015. During the three months ended March 31, 2016, the Company recognized no credit-related OTTI related to held to maturity securities. There were no non-credit related OTTI losses recognized on available for sale securities or held to maturity securities during the three months ended March 31, 2017 and 2016.

During the three months ended March 31, 2017 and 2016, interest and dividend income on investment securities was comprised of the following:



	Three Months Ended March 31,
	2017		2016
Interest income on available for sale securities	$	3,081	$	3,814
Interest income on held to maturity securities	602		748
Other interest and dividend income	2,990		2,842
	$	6,673	$	7,404

All investment interest income recognized by the Company during the three months ended March 31, 2017 and 2016 was fully taxable.

4. Loans Held for Sale

Loans held for sale as of March 31, 2017 and December 31, 2016, consisted of the following:



	March 31, 2017		December 31, 2016
Mortgage warehouse (carried at fair value)	$	448,697	$	622,182
Other residential (carried at fair value)	940,656		649,711
Total loans held for sale carried at fair value	1,389,353		1,271,893
Other residential	10,320		130,674
Commercial and commercial real estate	40,441		40,696
Total loans held for sale carried at lower of cost or market	50,761		171,370
Total loans held for sale	$	1,440,114	$	1,443,263

The Company has elected the fair value option for loans it originates with the intent to market and sell in the secondary market either through third party sales or securitizations. Mortgage warehouse loans are largely comprised of agency deliverable products that the Company typically sells within three months subsequent to origination. The Company economically hedges the mortgage warehouse portfolio with forward purchase and sales commitments designed to protect against potential changes in fair value. Due to the short duration that these loans are present on the balance sheet and in part due to the burden of complying with the requirement of hedge accounting, the Company has elected fair value accounting on this portfolio of loans. The Company has also elected the fair value option for originated fixed-rate jumbo loans. Fair value accounting was elected due to the short duration that these loans are present on the balance sheet. Electing to use fair value accounting allows a better offset of the changes in the fair value of the loans and the derivative instruments used to economically hedge these loans without the burden of complying with the requirements of hedge accounting. The Company has not elected the fair value option for other residential mortgage and commercial and commercial real estate loans as the majority of these loans were transferred from the held for investment portfolio and are expected to be sold within a short period subsequent to transfer. These loans are carried at the lower of cost or market value.

Other residential loans held at the lower of cost or market value represent government insured pool buyouts that have re-performed and are now eligible to be re-securitized or sold to third parties and other residential mortgage loans for which the Company has changed its intent and has made a decision to sell the loans and as such transferred the loans to held for sale. A majority of these other residential mortgage loans consist of jumbo preferred adjustable rate mortgage (ARM) loans. Commercial and commercial real estate loans represent multi-family

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loans which the Company is actively marketing to sell. As the Company no longer has the intent to hold these loans for the foreseeable future, the loans were transferred to held for sale. Residential loans, commercial and commercial real estate loans and equipment financing receivables are transferred to the held for sale portfolio when the Company has entered into a commitment to sell a specific portion of its held for investment portfolio or when the Company has a formal marketing strategy and intends to sell a certain loan product.

In conjunction with the sale of loans and leases, the Company may be exposed to limited liability related to recourse agreements and repurchase agreements made to its insurers and purchasers, which are included in commitments and contingencies in Note 12. Commitments and contingencies include amounts related to loans sold that the Company may be required to repurchase, or otherwise indemnify or reimburse the investor or insurer for losses incurred, due to a breach with respect to Government Sponsored Enterprises (GSE) purchasers or a material breach with respect to non-GSE purchasers, of contractual representations and warranties. Refer to Note 12 for the maximum exposure to loss for a breach or a material breach of contractual representations and warranties related to GSE and non-GSE loan sales.

The following is a summary of cash flows related to transfers accounted for as sales for the three months ended March 31, 2017 and 2016:



	Three Months Ended March 31,
	2017		2016
Proceeds received from residential agency securitizations	$	986,427	$	855,964

Proceeds received from nonsecuritization sales - residential	806,787		1,431,502
Proceeds received from nonsecuritization sales - commercial and commercial real estate	—		212,068
Proceeds received from nonsecuritization sales - equipment financing receivables	11,376		75,584
Proceeds received from nonsecuritization sales	$	818,163	$	1,719,154

Repurchased loans from residential agency sales and securitizations	$	5,409	$	1,588
Repurchased loans from residential nonagency sales	4,422		700

In connection with these transfers, the Company recorded servicing assets in the amount of $12,771 and $14,759 for the three months ended March 31, 2017 and 2016. All servicing assets are initially recorded at fair value using a Level 3 measurement technique. Refer to Note 7 for information relating to servicing activities and MSR and Note 11 for a description of the valuation process. Gains and losses on the transfers which qualified as sales are recorded in the condensed consolidated statements of income in gain on sale of loans. Gain on sale of loans includes changes in fair value related to fair value option loans, changes in fair value related to offsetting hedging positions and any valuation reserves related to held for sale loans which are carried at the lower of cost or market value.

The following is a summary of transfers of loans from held for investment to held for sale and transfers of loans from held for sale to held for investment for the three months ended March 31, 2017 and 2016.



	Three Months Ended March 31,
Loans Transferred from Held for Investment (LHFI) to Held for Sale (LHFS)	2017		2016
Residential mortgages	$	—	$	496,363
Government insured pool buyouts	512,755		425,204
Commercial and commercial real estate	—		170,408
Equipment financing receivables	11,586		72,172
Total transfers from LHFI to LHFS	$	524,341	$	1,164,147

Loans Transferred from LHFS to LHFI
Residential mortgages	$	36,899	$	26,155
Commercial and commercial real estate	—		28,753
Total transfers from LHFS to LHFI	$	36,899	$	54,908

When the Company has identified and has made a decision to sell a loan or set of loans which were not originated or acquired with the intent to sell, the Company will transfer the loan from HFI to HFS at the lower of cost or market value. The Company will transfer loans from HFS to HFI when it no longer has the intent to sell the loans within the foreseeable future. Loans transferred from HFS to HFI are transferred at the lower of cost or market. Loan transfers from LHFS to LHFI and transfers from LHFI to LHFS represent noncash activities within the operating and investing sections of the statement of cash flows.

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5. Loans and Leases Held for Investment, Net

Loans and leases held for investment as of March 31, 2017 and December 31, 2016 are comprised of the following:



	March 31, 2017			December 31, 2016
Residential mortgages	$	12,016,481		$	11,813,678
Commercial and commercial real estate	7,549,266			7,938,862
Equipment financing receivables	2,562,188			2,560,105
Home equity lines and other	1,273,057			1,244,332
Total loans and leases held for investment, net of unearned income	23,400,992			23,556,977
Allowance for loan and lease losses	(95,158		)	(103,304		)
Total loans and leases held for investment, net	$	23,305,834		$	23,453,673

As of March 31, 2017 and December 31, 2016, the carrying values presented above include net purchased loan and lease discounts and net deferred loan and lease origination costs as follows:



	March 31, 2017		December 31, 2016
Net purchased loan and lease discounts	$	110,650	$	104,558
Net deferred loan and lease origination costs	124,547		123,484

During the three months ended March 31, 2017 and 2016, unpaid principal balance (UPB) for significant third-party purchases of loans that impacted the Company's LHFI portfolio are as follows:



	March 31, 2017		March 31, 2016
Residential mortgages⁽¹⁾	$	1,195,783	$	1,052,548
Commercial credit facilities	23,779		101,831
Home equity lines of credit	—		256,926

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

Acquired Credit Impaired (ACI) Loans and Leases — At acquisition, the Company estimates the fair value of acquired loans and leases by segregating the portfolio into pools with similar risk characteristics. Fair value estimates for acquired loans and leases require estimates of the amounts and timing of expected future principal, interest and other cash flows. For each pool, the Company uses certain loan and lease information, including outstanding principal balance, probability of default and the estimated loss in the event of default to estimate the expected future cash flows for each loan and lease pool.

Acquisition date details of loans and leases acquired with evidence of credit deterioration during the three months ended March 31, 2017 and 2016 are as follows:



	March 31, 2017		March 31, 2016
Contractual payments receivable for acquired loans and leases at acquisition	$	1,957,754	$	1,662,326
Expected cash flows for acquired loans and leases at acquisition	1,242,351		1,041,310
Basis in acquired loans and leases at acquisition	1,155,248		976,540

Information pertaining to the ACI portfolio as of March 31, 2017 and December 31, 2016 is as follows:



	Residential		Commercial and Commercial Real Estate		Total
March 31, 2017
Carrying value, net of allowance	$	4,757,470	$	46,177	$	4,803,647
Outstanding unpaid principal balance	4,861,934		50,548		4,912,482
Allowance for loan and lease losses, beginning of period	8,769		35		8,804
Allowance for loan and lease losses, end of period	7,915		11		7,926
December 31, 2016
Carrying value, net of allowance	$	4,490,453	$	52,021	$	4,542,474
Outstanding unpaid principal balance	4,590,807		56,746		4,647,553
Allowance for loan and lease losses, beginning of year	7,031		346		7,377
Allowance for loan and lease losses, end of year	8,769		35		8,804

The Company recorded reductions of provision for loan loss of $878 and $203 for the ACI portfolio for the three months ended March 31, 2017 and 2016, respectively. The adjustments to provision are the result of changes in expected cash flows on ACI loans.

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The following is a summary of the accretable yield activity for the ACI loans during the three months ended March 31, 2017 and 2016:



	Residential			Commercial and Commercial Real Estate			Total
March 31, 2017
Balance, beginning of period	$	340,148		$	21,193		$	361,341
Additions	87,103			—			87,103
Accretion	(61,054		)	(1,230		)	(62,284		)
Reclassifications to (from) accretable yield	1,604			(441		)	1,163
Balance, end of period	$	367,801		$	19,522		$	387,323
March 31, 2016
Balance, beginning of period	$	252,841		$	43,690		$	296,531
Additions	64,770			—			64,770
Accretion	(45,000		)	(2,043		)	(47,043		)
Reclassifications to (from) accretable yield	(4,179		)	(1,581		)	(5,760		)
Transfer from loans held for investment to loans held for sale	—			(3,304		)	(3,304		)
Balance, end of period	$	268,432		$	36,762		$	305,194

6. Allowance for Loan and Lease Losses

Changes in the allowance for loan and lease losses for the three months ended March 31, 2017 and 2016 are as follows:



Three Months Ended March 31, 2017	Residential Mortgages			Commercial and Commercial Real Estate			Equipment Financing Receivables			Home Equity Lines and Other			Total
Balance, beginning of period	$	28,764		$	47,941		$	19,895		$	6,704		$	103,304
Provision for loan and lease losses	123			11,338			4,222			(3		)	15,680
Charge-offs	(1,058		)	(19,999		)	(3,525		)	(331		)	(24,913		)
Recoveries	150			314			464			159			1,087
Balance, end of period	$	27,979		$	39,594		$	21,056		$	6,529		$	95,158
Three Months Ended March 31, 2016
Balance, beginning of period	$	26,951		$	34,875		$	12,187		$	4,124		$	78,137
Provision for loan and lease losses	2,971			1,891			3,694			363			8,919
Charge-offs	(1,845		)	(69		)	(2,564		)	(219		)	(4,697		)
Recoveries	232			77			737			80			1,126
Balance, end of period	$	28,309		$	36,774		$	14,054		$	4,348		$	83,485

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The following tables provide a breakdown of the allowance for loan and lease losses and the recorded investment in loans and leases based on the method for determining the allowance as of March 31, 2017 and December 31, 2016:



March 31, 2017	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		ACI Loans		Total
Allowance for Loan and Lease Losses
Residential mortgages	$	2,239	$	17,825	$	7,915	$	27,979
Commercial and commercial real estate	13,005		26,578		11		39,594
Equipment financing receivables	3,333		17,723		—		21,056
Home equity lines and other	—		6,529		—		6,529
Total allowance for loan and lease losses	$	18,577	$	68,655	$	7,926	$	95,158
Loans and Leases Held for Investment at Recorded Investment
Residential mortgages	$	19,136	$	7,231,960	$	4,765,385	$	12,016,481
Commercial and commercial real estate	84,626		7,418,452		46,188		7,549,266
Equipment financing receivables	25,363		2,536,825		—		2,562,188
Home equity lines and other	—		1,273,057		—		1,273,057
Total loans and leases held for investment	$	129,125	$	18,460,294	$	4,811,573	$	23,400,992

December 31, 2016	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		ACI Loans		Total
Allowance for Loan and Lease Losses
Residential mortgages	$	1,921	$	18,074	$	8,769	$	28,764
Commercial and commercial real estate	21,696		26,210		35		47,941
Equipment financing receivables	1,032		18,863		—		19,895
Home equity lines and other	—		6,704		—		6,704
Total allowance for loan and lease losses	$	24,649	$	69,851	$	8,804	$	103,304
Loans and Leases Held for Investment at Recorded Investment
Residential mortgages	$	17,112	$	7,297,344	$	4,499,222	$	11,813,678
Commercial and commercial real estate	105,803		7,781,003		52,056		7,938,862
Equipment financing receivables	19,111		2,540,994		—		2,560,105
Home equity lines and other	—		1,244,332		—		1,244,332
Total loans and leases held for investment	$	142,026	$	18,863,673	$	4,551,278	$	23,556,977

The Company uses a risk grading matrix to monitor credit quality for commercial and commercial real estate loans. Risk grades are continuously monitored and updated by credit administration personnel based on current information and events. The Company monitors the credit quality of all other loan types based on performing status.

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The following tables present the recorded investment for loans and leases by credit quality indicator as of March 31, 2017 and December 31, 2016:



			Non-performing
	Performing		Accrual		Nonaccrual		Total
March 31, 2017
Residential mortgages:
Residential ⁽¹⁾	$	6,482,999	$	—	$	31,621	$	6,514,620
Government insured pool buyouts ^{(2) (3)}	5,281,708		220,153		—		5,501,861
Equipment financing receivables	2,521,219		—		40,969		2,562,188
Home equity lines and other	1,266,801		—		6,256		1,273,057
Total	$	15,552,727	$	220,153	$	78,846	$	15,851,726

	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2017
Commercial and commercial real estate:
Commercial real estate	$	3,464,894	$	14,537	$	87,814	$	—	$	3,567,245
Mortgage warehouse finance	2,121,810		—		—		—		2,121,810
Lender finance	1,640,250		—		—		—		1,640,250
Other commercial finance	205,597		8,291		6,073		—		219,961
Total commercial and commercial real estate	$	7,432,551	$	22,828	$	93,887	$	—	$	7,549,266

			Non-performing
	Performing		Accrual		Nonaccrual		Total
December 31, 2016
Residential mortgages:
Residential ⁽¹⁾	$	6,531,912	$	—	$	32,214	$	6,564,126
Government insured pool buyouts ^{(2) (3)}	5,022,454		227,098		—		5,249,552
Equipment financing receivables	2,518,964		—		41,141		2,560,105
Home equity lines and other	1,237,249		—		7,083		1,244,332
Total	$	15,310,579	$	227,098	$	80,438	$	15,618,115



	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2016
Commercial and commercial real estate:
Commercial real estate	$	3,410,406	$	18,247	$	113,275	$	—	$	3,541,928
Mortgage warehouse finance	2,592,799		—		—		—		2,592,799
Lender finance	1,589,554		—		—		—		1,589,554
Other commercial finance	208,467		6,114		—		—		214,581
Total commercial and commercial real estate	$	7,801,226	$	24,361	$	113,275	$	—	$	7,938,862


(1)	For the periods ended March 31, 2017 and December 31, 2016, performing residential mortgages included $2,705 and $3,437, respectively, of ACI loans 90 days or greater past due and still accruing.


(2)	For the periods ended March 31, 2017 and December 31, 2016, performing government insured pool buyouts included $3,708,111 and $3,498,061, respectively, of ACI loans 90 days or greater past due and still accruing.


(3)	Non-performing government insured pool buyouts represent loans that are 90 days or greater past due but remain on accrual status as the interest earned is insured and thus collectible from the insuring governmental agency.

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The following tables present an aging analysis of the recorded investment for loans and leases by class as of March 31, 2017 and December 31, 2016:



	30-59 Days Past Due		60-89 Days Past Due		90 Days and Greater Past Due		Total Past Due		Current		Total Loans Held for Investment Excluding ACI
March 31, 2017
Residential mortgages:
Residential	$	8,328	$	5,390	$	31,621	$	45,339	$	6,437,458	$	6,482,797
Government insured pool buyouts ⁽¹⁾	29,617		21,528		220,153		271,298		497,001		768,299
Commercial and commercial real estate:
Commercial real estate	3,990		—		2,803		6,793		3,514,264		3,521,057
Mortgage warehouse finance	—		—		—		—		2,121,810		2,121,810
Lender finance	—		—		—		—		1,640,250		1,640,250
Other commercial finance	—		—		—		—		219,961		219,961
Equipment financing receivables	11,456		11,012		9,351		31,819		2,530,369		2,562,188
Home equity lines and other	2,991		940		6,256		10,187		1,262,870		1,273,057
Total loans and leases held for investment	$	56,382	$	38,870	$	270,184	$	365,436	$	18,223,983	$	18,589,419

December 31, 2016
Residential mortgages:
Residential	$	8,208	$	6,379	$	32,214	$	46,801	$	6,484,372	$	6,531,173
Government insured pool buyouts ⁽¹⁾	37,064		19,346		227,098		283,508		499,775		783,283
Commercial and commercial real estate:
Commercial real estate	26,376		—		13,204		39,580		3,450,292		3,489,872
Mortgage warehouse finance	—		—		—		—		2,592,799		2,592,799
Lender finance	—		—		—		—		1,589,554		1,589,554
Other commercial finance	—		—		—		—		214,581		214,581
Equipment financing receivables	23,838		10,796		5,197		39,831		2,520,274		2,560,105
Home equity lines and other	1,754		1,984		7,083		10,821		1,233,511		1,244,332
Total loans and leases held for investment	$	97,240	$	38,505	$	284,796	$	420,541	$	18,585,158	$	19,005,699


(1)	Government insured pool buyouts remain on accrual status after 89 days as the interest earned is insured and thus collectible from the insuring governmental agency.

Residential Foreclosures and Repossessed Assets — Once all potential alternatives for loan reinstatement are exhausted, past due loans collateralized by residential real estate are referred for foreclosure proceedings in accordance with local requirements of the applicable jurisdiction. Once possession of the property collateralizing the loan is obtained, the repossessed property is recorded within other assets either as other real estate owned or, where management has both the intent and ability to recover its losses through a government guarantee, as a foreclosure claim receivable.

As the allowable time frame for initiating the loan foreclosure process varies by jurisdiction, the Company has determined, for purposes of disclosure, that loans collateralized by residential real estate are considered to be in the process of foreclosure once they are 120 days or more past due. At March 31, 2017 and December 31, 2016, the Company had loans collateralized by residential real estate with carrying values of $3,800,017 and $3,606,926, respectively, that were 120 days or more past due and therefore considered to be in the foreclosure process. Of the residential loans that were 120 days or more past due, $3,766,827 and $3,571,405 represented loans that were government insured at March 31, 2017 and December 31, 2016, respectively.

At March 31, 2017 and December 31, 2016, the Company had foreclosure claims receivable of $543,391 and $527,848, net of valuation allowances of $13,864 and $14,722, respectively. At March 31, 2017 and December 31, 2016, the Company had residential other real estate owned of $27,425 and $18,988, net of valuation allowances of $419 and $566, respectively. Of the residential other real estate owned, $23,382 and $14,125, respectively, were government insured at March 31, 2017 and December 31, 2016.

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Impaired Loans — Impaired loans include loans identified as troubled loans as a result of a borrower’s financial difficulties and other loans on which the accrual of interest income is suspended. The Company continues to collect payments on certain impaired loan balances on which accrual is suspended.

The following tables present the UPB, the recorded investment and the related allowance for impaired loans as of March 31, 2017 and December 31, 2016:



	March 31, 2017						December 31, 2016
	Unpaid Principal Balance		Recorded Investment ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Recorded Investment ⁽¹⁾		Related Allowance
With a related allowance recorded:
Residential	$	11,100	$	10,089	$	2,239	$	10,845	$	9,831	$	1,921
Commercial real estate	48,019		36,996		13,005		73,866		66,749		21,696
Equipment financing receivables	4,482		4,482		699		3,144		3,144		1,032
Total impaired loans with an allowance recorded	$	63,601	$	51,567	$	15,943	$	87,855	$	79,724	$	24,649

Without a related allowance recorded:
Residential	$	10,168	$	9,047			$	8,331	$	7,281
Commercial real estate	63,457		47,630				41,852		39,054
Equipment finance receivables	14,295		14,295				15,967		15,967
Total impaired loans without an allowance recorded	$	87,920	$	70,972			$	66,150	$	62,302


(1)	The primary difference between the UPB and recorded investment represents charge-offs previously taken.

The following table presents the average investment and interest income recognized on impaired loans for the three months ended March 31, 2017 and 2016:



	Three Months Ended March 31,
	2017				2016
	Average Investment		Interest Income Recognized		Average Investment		Interest Income Recognized
With and without a related allowance recorded:
Residential	$	18,124	$	144	$	17,617	$	124
Commercial real estate	95,215		52		77,927		126
Equipment financing receivables	18,944		—		9,205		3
Total impaired loans	$	132,283	$	196	$	104,749	$	253

The following table presents the recorded investment for loans and leases on nonaccrual status by class and loans 90 days and greater past due and still accruing as of March 31, 2017 and December 31, 2016:



	March 31, 2017				December 31, 2016
	Nonaccrual Status		90 Days and Greater Past Due and Accruing		Nonaccrual Status		90 Days and Greater Past Due and Accruing
Residential mortgages:
Residential ⁽¹⁾	$	31,621	$	—	$	32,214	$	—
Government insured pool buyouts ^{(2) (3)}	—		220,153		—		227,098
Commercial real estate	79,165		—		102,255		—
Equipment financing receivables	40,969		—		41,141		—
Home equity lines and other	6,256		—		7,083		—
Total non-performing loans and leases	$	158,011	$	220,153	$	182,693	$	227,098


(1)	For the periods ended March 31, 2017 and December 31, 2016, the Company has excluded from the preceding table $2,705 and $3,437, respectively, of performing residential ACI loans 90 days or greater past due and still accruing.


(2)	For the periods ended March 31, 2017 and December 31, 2016, the Company has excluded from the preceding table $3,708,111 and $3,498,061, respectively, of performing government insured pool buyout ACI loans 90 days or greater past due and still accruing.


(3)	Government insured pool buyouts that are 90 days or greater past due but remain on accrual status represent loans for which the interest earned is insured and thus collectible from the insuring governmental agency.

Troubled Debt Restructurings (TDR) — Modifications made to residential loans during the period included extension of original contractual maturity date, extension of the period of below market rate interest-only payments, or contingent reduction of past due interest.

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Commercial loan modifications made during the period included extension of original contractual maturity date, payment forbearance, reduction of interest rates, or extension of interest-only periods.

The following is a summary of information relating to modifications considered to be TDRs for the three months ended March 31, 2017 and 2016 that remain TDRs as of the respective balance sheet dates:



	Three Months Ended March 31, 2017
	Number of Contracts	Pre-modification Recorded Investment		Post-modification Recorded Investment
Loan Type:
Residential	3	$	1,294	$	1,293
Commercial real estate	2	33,597		26,653
Total	5	$	34,891	$	27,946

	Three Months Ended March 31, 2016
	Number of Contracts	Pre- modification Recorded Investment		Post- modification Recorded Investment
Loan Type:
Residential	3	$	457	$	457
Commercial real estate	1	2,431		2,531
Total	4	$	2,888	$	2,988

At March 31, 2017 and 2016, the Company included as TDRs 65 and 65 loans in Chapter 7 bankruptcy, respectively, with net recorded investments of $4,939 and $3,181, respectively, in accordance with guidance published by the OCC during the third quarter 2012. As no contractual change to principal or interest was made by the Company on these loans, Chapter 7 bankruptcy loans have been excluded from the modification summaries above.

A loan is considered to re-default when it is 30 days past due. The number of contracts and recorded investments of loans that were modified during the 12 months preceding March 31, 2017 that subsequently defaulted during the three months ended March 31, 2017 are as follows:



	Three Months Ended March 31, 2017
	Number of Contracts	Recorded Investment
Loan Type:
Residential	2	$	385

	Three Months Ended March 31, 2016
	Number of Contracts	Recorded Investment
Loan Type:
Residential	1	$	290

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The recorded investments of TDRs as of March 31, 2017 and December 31, 2016 are summarized as follows:



	March 31, 2017		December 31, 2016
Loan Type:
Residential mortgages	$	19,136	$	17,112
Commercial real estate	29,828		4,800
Equipment financing receivables	7,656		8,344
Total recorded investment of TDRs	$	56,620	$	30,256
Accrual Status:
Current	$	13,616	$	11,575
30-89 days past-due accruing	1,844		2,543
Nonaccrual	41,160		16,138
Total recorded investment of TDRs	$	56,620	$	30,256
TDRs classified as impaired loans	$	56,620	$	30,256
Valuation allowance on TDRs	$	9,971	$	2,416

7. Servicing Activities and Mortgage Servicing Rights

A summary of MSR activities for the three months ended March 31, 2017 and 2016 is as follows:



	Three Months Ended March 31,
	2017			2016
Balance, beginning of period	$	273,941		$	335,280
Originated servicing rights capitalized upon sale of loans	12,771			14,759
Amortization	(15,505		)	(14,731		)
Decrease (increase) in valuation allowance	22,644			(22,542		)
Other	(125		)	(95		)
Balance, end of period	$	293,726		$	312,671
Valuation allowance:
Balance, beginning of period	$	73,170		$	11,778
Increase in valuation allowance	—			22,542
Recoveries	(22,644		)	—
Balance, end of period	$	50,526		$	34,320

Components of loan servicing fee income, which includes servicing fees related to sales and securitizations, for the three months ended March 31, 2017 and 2016 are presented below:



	Three Months Ended March 31,
	2017		2016
Contractually specified servicing fees, net	$	20,573	$	20,413
Other ancillary fees	1,694		1,912
Other	641		1,116
Total	$	22,908	$	23,441

For loans securitized and sold with servicing retained during the three months ended March 31, 2017 and 2016, management used the following assumptions to determine the fair value of its residential MSR at the date of securitization:



	Three Months Ended March 31, 2017
Average discount rates	9.57	%	—	9.70%
Expected prepayment speeds	7.58	%	—	10.29%
Weighted-average life in years	6.54		—	8.23



	Three Months Ended March 31, 2016
Average discount rates	9.59	%	—	9.92%
Expected prepayment speeds	10.06	%	—	10.55%
Weighted-average life in years	6.88		—	7.11

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At March 31, 2017 and December 31, 2016, the Company estimated the fair value of its residential MSR to be approximately $293,995 and $275,602, respectively. The carrying value of its residential MSR was $293,726 and $273,941 at March 31, 2017 and December 31, 2016, respectively. The UPB below excludes $8,755,000 and $8,779,000 at March 31, 2017 and December 31, 2016, respectively, for residential loans with no related MSR basis. The MSR portfolio was valued using internally developed estimated cash flows with certain unobservable inputs, leading to a Level 3 fair value asset. For more information on the fair value of the Company’s MSR portfolio see Note 11.

The characteristics used in estimating the fair value of the residential MSR portfolio at March 31, 2017 and December 31, 2016 are as follows:



	March 31, 2017			December 31, 2016
Unpaid principal balance	$	30,382,000		$	30,359,000
Weighted-average discount rate ⁽¹⁾	9.70		%	9.69		%
Gross weighted-average coupon	4.14		%	4.17		%
Weighted-average servicing fee	0.27		%	0.27		%
Expected prepayment speed ⁽²⁾	13.02		%	13.90		%


(1)	When calculating its discount rate, the Company uses industry surveys and recent market activity as a guide with product level calibrations included where necessary. The discount rate is assessed quarterly and updates are made if the current discount rate is materially different from the current market rate.


(2)	The prepayment speed assumptions include a blend of prepayment speeds that are influenced by mortgage interest rates, the current macroeconomic environment and borrower behaviors and may vary over the expected life of the asset.

The Company performed a sensitivity analysis on the residential MSR portfolio as of March 31, 2017 and December 31, 2016. The sensitivity analysis included hypothetical adverse changes of 10% and 20% to the weighted-average of certain key assumptions. The negative impact of each change is presented below.



	March 31, 2017		December 31, 2016
Prepayment Rate
10% adverse rate change	$	12,752	$	13,472
20% adverse rate change	24,628		25,973
Discount Rate
10% adverse rate change	$	10,102	$	9,215
20% adverse rate change	19,551		17,840

In the previous table, the effect of a variation in a specific assumption on the fair value is calculated without changing any other assumptions. This analysis typically cannot be extrapolated because the relationship of a change in one key assumption to the change in the fair value of the Company’s residential mortgage servicing rights is usually not linear. The effect of changing one key assumption will likely result in changes to another key assumption which could impact the sensitivities.

8. Income Taxes

For the three months ended March 31, 2017 and 2016 the Company's effective income tax rate was 36.6% and 38.2%, respectively. The effective income tax rate differed from the statutory federal income tax rate primarily due to state income taxes for both periods.

9. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2017 and 2016:



	Three Months Ended March 31,
	2017			2016
Net income	$	38,537		$	27,924
Less dividends on preferred stock	(2,531		)	(2,531		)
Net income allocated to common shareholders	$	36,006		$	25,393
(Units in Thousands)
Average common shares outstanding	127,483			125,125
Common share equivalents:
Stock options	1,601			535
Nonvested stock	771			385
Average common shares outstanding, assuming dilution	129,855			126,045
Basic earnings per share	$	0.28		$	0.20
Diluted earnings per share	$	0.28		$	0.20

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Certain securities were antidilutive and were therefore excluded from the calculation of diluted earnings per share. Common shares attributed to these antidilutive securities had these securities been exercised or converted as of March 31, 2017 and 2016 were as follows:



	Three Months Ended March 31,
	2017	2016
Stock Options	775,309	5,890,291

10. Derivative Financial Instruments

The fair values of derivative financial instruments are reported in other assets, accounts payable, or accrued liabilities. The fair values are derived using the valuation techniques described in Note 11. The total notional or contractual amounts and fair values as of March 31, 2017 and December 31, 2016 were as follows:



			Fair Value
	Notional Amount		Asset Derivatives			Liability Derivatives
March 31, 2017
Qualifying hedge contracts accounted for under ASC 815, Derivatives and Hedging
Cash flow hedges:
Forward interest rate swaps	$	1,210,000	$	3,894		$	6,979
Derivatives not designated as hedging instruments under ASC 815, Derivatives and Hedging
Freestanding derivatives:
Interest rate lock commitments (IRLCs)	834,379		11,005			906
Forward and optional forward sale commitments	2,785,260		58			21,810
Forward and optional forward purchase commitments	1,415,200		2,549			866
Interest rate swaps and futures	77,166		641			56
Foreign exchange contracts	497,779		3,041			2,880
Foreign currency, commodity, metals and U.S. Treasury yield indexed options	119,925		5,487			—
Options embedded in client deposits	118,629		—			5,417
Indemnification asset	410,948		29,313			—
Total freestanding derivatives			52,094			31,935
Netting and cash collateral adjustments ⁽¹⁾			(15,952		)	(22,269		)
Total derivatives			$	40,036		$	16,645



			Fair Value
	Notional Amount		Asset Derivatives			Liability Derivatives
December 31, 2016
Qualifying hedge contracts accounted for under ASC 815, Derivatives and Hedging
Cash flow hedges:
Forward interest rate swaps	$	1,210,000	$	3,430		$	37,337
Derivatives not designated as hedging instruments under ASC 815, Derivatives and Hedging
Freestanding derivatives:
IRLCs	920,588		11,756			3,776
Forward and optional forward sale commitments	2,950,325		6,886			6,799
Forward and optional forward purchase commitments	1,525,000		12,206			4,640
Interest rate swaps and futures	1,173,379		517			2,282
Foreign exchange contracts	494,570		3,661			6,250
Foreign currency, commodity, metals and U.S. Treasury yield indexed options	119,925		4,339			—
Options embedded in client deposits	118,711		—			4,286
Indemnification asset	371,577		27,169			—
Total freestanding derivatives			66,534			28,033
Netting and cash collateral adjustments ⁽¹⁾			(17,359		)	(52,331		)
Total derivatives			$	52,605		$	13,039


(1)	Amounts represent the effect of legally enforceable master netting agreements that allow the Company to settle positive and negative positions as well as cash collateral and related accrued interest held or placed with the same counterparties. Amounts as of March 31, 2017 and December 31, 2016 include derivative positions netted totaling $9,842 and $15,934, respectively.

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Cash Flow Hedges

As of March 31, 2017, AOCI included $17,089 of deferred pre-tax net losses expected to be reclassified into earnings during the next 12 months for derivative instruments designated as cash flow hedges for forecasted transactions. The Company is hedging its exposure to the variability of future cash flows for forecasted transactions of fixed-rate debt for a maximum of 18 years.

Freestanding Derivatives

The following table shows the net gains and losses recognized for the three months ended March 31, 2017 and 2016 in the consolidated statements of income related to derivatives not designated as hedging instruments under ASC 815, Derivatives and Hedging. These gains and losses are recognized in noninterest income.



	Three Months Ended March 31,
	2017			2016
Freestanding derivatives
Gains (losses) on interest rate contracts ⁽¹⁾	$	(15,004	)	$	(31,712	)
Gains (losses) on foreign exchange forward contracts ⁽²⁾	13,924			23,728
Other	10			3


(1)	Interest rate contracts include interest rate lock commitments, forward and optional forward purchase and sales commitments, interest rate swaps and futures.

(2)

Foreign exchange forward contracts act as economic hedges for the foreign currency risk embedded within deposits denominated in foreign currencies. The changes in the fair value of the foreign exchange forward contracts are marked to fair value, while the deposits are translated to the current spot rate in accordance with ASC 830. Historically, the hedge has been effective in managing the foreign currency risk of foreign-denominated deposits by locking in the U.S. Dollar cash flows.

Interest rate contracts are predominantly used as economic hedges of interest rate lock commitments and loans held for sale. Other derivatives are predominantly used as economic hedges of foreign exchange, commodity, metals, and U.S. Treasury yield risk.

Credit Risk Contingent Features

Certain of the Company’s derivative instruments contain provisions that require the Company to post collateral when derivatives are in a net liability position. The provisions generally are dependent upon the Company’s credit rating as reported by certain major credit rating agencies or dollar amounts in a liability position at any given time which exceed specified thresholds, as indicated in the relevant contracts. In these circumstances, the counterparties could demand additional collateral or require termination or replacement of derivative instruments in a net liability position. The aggregate fair value of all derivative instruments with such credit-risk-related contingent features in a net liability position prior to netting on March 31, 2017 and December 31, 2016 was $25,628 and $54,549, respectively. The Company offsets derivative instruments against the rights to reclaim cash collateral or the obligations to return cash collateral in the balance sheet. As of March 31, 2017 and December 31, 2016, $12,427 and $36,397, respectively, in collateral was netted against liability derivative positions subject to master netting agreements. As of March 31, 2017 and December 31, 2016, $33,410 and $56,758, respectively, of cash collateral was posted for derivatives with credit risk contingent features. Investment securities with a fair value of $31,908 and $31,867 were posted as collateral for derivatives with credit contingent features but were ineligible for collateral netting at March 31, 2017 and December 31, 2016.

Counterparty Credit Risk

The Company is exposed to counterparty credit risk if counterparties to the derivative contracts do not perform as expected. If the counterparty fails to perform, counterparty credit risk equals the amount reported as derivative assets in the balance sheet. The amounts reported as derivative assets are derivative contracts in a gain position, and to the extent subject to master netting arrangements, net of derivatives in a loss position with the same counterparty and cash collateral received. The Company minimizes this risk through obtaining credit approvals, monitoring credit limits, monitoring procedures, and executing master netting arrangements and obtaining collateral, where appropriate. The Company offsets derivative instruments against the rights to reclaim cash collateral or the obligations to return cash collateral in the balance sheet. As of March 31, 2017 and December 31, 2016, $6,109 and $1,425, respectively, in collateral was netted against asset derivative positions subject to master netting agreements. As of March 31, 2017 and December 31, 2016, the Company held $6,530 and $1,766, respectively, in collateral from its counterparties. Counterparty credit risk related to derivatives is considered in determining fair value.

11. Fair Value Measurements

Asset and liability fair value measurements have been categorized based upon the fair value hierarchy described below:

Level 1 – Valuation is based upon quoted market prices for identical instruments in active markets.

Level 2 – Valuation is based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect estimates or assumptions that market participants would use in pricing the assets or liabilities. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.

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Recurring Fair Value Measurements

As of March 31, 2017 and December 31, 2016, assets and liabilities measured at fair value on a recurring basis, including certain loans held for sale and certain other assets or other liabilities for which the Company has elected the fair value option, are as follows:



	Fair Value Measurements
	Level 1		Level 2		Level 3		Netting		Total
March 31, 2017
Financial assets:
Available for sale securities:
Residential CMO securities - nonagency	$	—	$	414,155	$	—			$	414,155
U.S. Treasury securities	31,908		—		—				31,908
Asset-backed securities	—		1,121		—				1,121
Other	263		146		—				409
Total available for sale securities	32,171		415,422		—				447,593
Loans held for sale	—		448,697		940,656				1,389,353
Other assets ⁽¹⁾	—		—		578				578
Derivative financial instruments:
Derivative assets (Note 12)	938		15,194		39,856		(15,952	)	40,036
Derivative liabilities (Note 12)	859		37,149		906		(22,269	)	16,645



	Fair Value Measurements
	Level 1			Level 2		Level 3		Netting		Total
December 31, 2016
Financial assets:
Available for sale securities:
Residential CMO securities - nonagency	$	—		$	452,418	$	—			$	452,418
U.S. Treasury securities	31,867			—		—				31,867
Asset-backed securities	—			1,165		—				1,165
Other	231			155		—				386
Total available for sale securities	32,098			453,738		—				485,836
Loans held for sale	—			622,182		649,711				1,271,893
Other assets ⁽¹⁾	—			—		212				212
Derivative financial instruments:
Derivative assets (Note 12)	—		⁽²⁾	31,526		38,438		(17,359	)	52,605
Derivative liabilities (Note 12)	—			61,594		3,776		(52,331	)	13,039


(1)	Other assets represent the net position of extended written loan commitments for which the Company has elected the fair value option of accounting. As of March 31, 2017 and December 31, 2016, the Company had outstanding commitments of $51,490 and $58,157, respectively, related to these extended loan commitments.


(2)	Level 1 derivative assets include interest rate swap futures. These futures are settled on a daily basis between the counterparty and the Company, resulting in the Company holding an outstanding notional balance and a zero derivative balance. See Note 10 for additional information regarding the interest rate swap futures.

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Changes in assets and liabilities measured at Level 3 fair value on a recurring basis for the three months ended March 31, 2017 and 2016 are as follows:



	Loans Held for Sale ⁽¹⁾			Other Assets / (Liabilities) ⁽¹⁾			Freestanding Derivatives, net ⁽¹⁾
Three Months Ended March 31, 2017
Balance, beginning of period	$	649,711		$	212		$	34,662
Purchases	—			—			9,457
Issuances	481,311			572			18,814
Sales	(184,584		)	—			—
Settlements	(5,864		)	(453		)	(15,869		)
Gains (losses) included in earnings for the period	82			247			(8,114		)
Balance, end of period	$	940,656		$	578		$	38,950
Change in unrealized net gains (losses) included in net income related to assets and liabilities still held as of March 31, 2017	$	1,124		$	524		$	4,667

Three Months Ended March 31, 2016
Balance, beginning of period	$	683,015		$	(336	)	$	7,394
Issuances	202,199			325			25,033
Sales	(499,400		)	—			—
Settlements	(49,000		)	(245		)	(24,453		)
Gains (losses) included in earnings for the period	14,396			383			10,166
Balance, end of period	$	351,210		$	127		$	18,140
Change in unrealized net gains (losses) included in net income related to assets and liabilities still held as of March 31, 2016	$	6,409		$	168		$	17,671


(1)	Net realized and unrealized gains (losses) on loans held for sale, extended written loan commitments and IRLCs are included in gain on sale of loans.

The Company monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the Company reports the transfer at the end of the reporting period.

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The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a recurring basis at March 31, 2017 and December 31, 2016:



Level 3 Fair Value Measurement	Fair Value		Valuation Technique	Unobservable Inputs	Significant Unobservable Input Value
March 31, 2017					Min.			Max.	Weighted Avg.
Loans held for sale	$	940,656	Discounted cash flow	Cost of funds	2.39	%	-	3.16%	2.99%
				Prepayment rate	4.80	%	-	24.51%	8.34%
				Default rate	0.00	%	-	2.39%	0.29%
				Weighted average life (in years)	3.33		-	10.60	8.22
				Cumulative loss	0.00	%	-	0.38%	0.03%
				Loss severity	1.64	%	-	23.55%	9.84%
Other assets	578		Discounted cash flow	Loan closing ratio	1.00	%	-	99.00%	76.75%	⁽¹⁾
Indemnification assets	28,851		Discounted cash flow	Discount rate	5.43	%	-	21.45%	8.53%
				Loss severity	5.01	%	-	23.80%	8.73%	⁽²⁾
IRLCs, net	10,099		Discounted cash flow	Loan closing ratio	1.00	%	-	99.00%	81.70%	⁽¹⁾
December 31, 2016
Loans held for sale	$	649,711	Discounted cash flow	Cost of funds	2.34	%	-	3.16%	3.00%
				Prepayment rate	4.61	%	-	25.06%	7.41%
				Default rate	0.00	%	-	2.57%	0.32%
				Weighted average life (in years)	3.26		-	10.65	8.72
				Cumulative loss	0.00	%	-	0.43%	0.04%
				Loss severity	1.60	%	-	22.83%	9.43%
Other assets	212		Discounted cash flow	Loan closing ratio	1.00	%	-	99.00%	71.11%	⁽¹⁾
Indemnification assets	26,682		Discounted cash flow	Discount rate	5.43	%	-	7.02%	6.41%
				Loss severity	4.40	%	-	19.66%	8.80%	⁽²⁾
IRLCs, net	7,980		Discounted cash flow	Loan closing ratio	1.00	%	-	99.00%	80.03%	⁽¹⁾


(1)	The range represents the highest and lowest loan closing rates used in the valuation process. The range includes the closing ratio for rate locks unclosed at the end of the period, as well as the closing ratio for loans which have settled during the period.


(2)	The range represents the highest and lowest values for all asset pools that are used in the valuation process.

Loans Held for Sale Accounted for under the Fair Value Option

The following table presents information on loans held for sale reported under the fair value option at March 31, 2017 and December 31, 2016:



	March 31, 2017		December 31, 2016
Fair value carrying amount	$	1,389,353	$	1,271,893
Aggregate unpaid principal balance	1,360,959		1,261,650
Fair value carrying amount less aggregate unpaid principal	$	28,394	$	10,243

There were $139 and $140 of loans recorded under the fair value option that were 90 days or more past due and on nonaccrual status at March 31, 2017 or December 31, 2016, respectively.

Differences between the fair value carrying amount and the aggregate UPB include changes in fair value recorded at and subsequent to funding, gains and losses on the related loan commitment prior to funding.

The net gains from initial measurement of loans accounted for under the fair value option and subsequent changes in fair value for loans outstanding was $19,908 and $33,319 for the three months ended March 31, 2017 and 2016, respectively, and are included in gain on sale of loans. These amounts exclude the impact from offsetting hedging arrangements which are also included in gain on sale of loans in the condensed consolidated statements of income. An immaterial portion of the change in fair value was attributable to changes in instrument-specific credit risk.

The Company has elected the fair value option for extended written loan commitments to originate residential mortgage loans in the Company’s held for investment portfolio. The Company economically hedges these extended loan commitments with MBS options designed to protect against potential changes in fair value. Due to the longer duration that these loan commitments are present on the balance sheet and due to the burden of complying with the requirements of hedge accounting, the Company has elected the fair value option of accounting for these instruments. The Company has not elected the fair value option for loan commitments to originate residential mortgage loans held for investment with lock terms less than 61 days. The net gains from initial measurement of extended written loan commitments accounted for under the fair value option and subsequent changes in fair value for those outstanding commitments was $524 and $168 for the three months ended March 31, 2017 and 2016, respectively and are included in gain on sales of loans in the condensed consolidated statements of income. An immaterial portion of the change in fair value was attributable to changes in instrument-specific credit risk.

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Non-recurring Fair Value Measurements

Certain assets are measured at fair value on a non-recurring basis and therefore are not included in the tables above. These measurements primarily result from assets carried at the lower of cost or market value or from impairment of individual assets. Gains and losses disclosed below represent changes in fair value recognized during the reporting period. The change in the MSR value represents a change due to impairment or recoveries on previous write downs. The carrying value of assets measured at fair value on a non-recurring basis and held at March 31, 2017 and December 31, 2016 and related changes in fair value are as follows:



	Level 1		Level 2		Level 3		Total		Loss (Gain) Due to Change in Fair Value
March 31, 2017
Collateral-dependent loans ⁽¹⁾	$	—	$	—	$	32,576	$	32,576	$	12,192
Other real estate owned ^{(1) (2)}	—		—		5,797		5,797		1,058
Mortgage servicing rights⁽³⁾	—		—		280,508		280,508		(22,644		)
December 31, 2016
Collateral-dependent loans ⁽¹⁾	$	—	$	—	$	101,006	$	101,006	$	22,153
Other real estate owned ^{(1) (2)}	—		—		7,847		7,847		969
Mortgage servicing rights⁽³⁾	—		—		260,054		260,054		61,392
Loans held for sale	—		—		40,696		40,696		619


(1)	The Company performs its lower of cost or market value analysis when an asset becomes impaired or when a loan is transferred to OREO. Subsequent valuations are performed periodically and usually occur throughout the reporting period. The table above discloses the fair value of the investment at the end of the period using the most recent asset valuation.


(2)	Gains and losses resulting from subsequent measurement of OREO are included in the condensed consolidated statements of income as general and administrative expense. OREO is included in other assets in the condensed consolidated balance sheets.


(3)	The fair value for MSR represents the value of the strata with impairment or recoveries on previous valuation allowances.

The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at March 31, 2017 and December 31, 2016:



Level 3 Fair Value Measurement	Fair Value		Valuation Technique	Unobservable Inputs	Significant Unobservable Input Value
March 31, 2017					Min.			Max.	Weighted Avg.
Collateral-dependent loans	$	32,576	Appraisal value	Appraised value	NM		-	NM	N/A	⁽¹⁾
Other real estate owned	5,797		Appraisal value	Appraised value	NM		-	NM	N/A	⁽¹⁾
Mortgage servicing rights	280,508		Discounted cash flow	Prepayment speed	9.77	%	-	15.05%	11.72%	⁽²⁾
				Discount rate	9.47	%	-	9.74%	9.63%	⁽³⁾
December 31, 2016
Collateral-dependent loans	$	101,006	Appraisal value	Appraisal value	NM		-	NM	N/A	⁽¹⁾
Other real estate owned	7,847		Appraisal value	Appraisal value	NM		-	NM	N/A	⁽¹⁾
Mortgage servicing rights	260,054		Discounted cash flow	Prepayment speed	10.18	%	-	16.14%	13.08%	⁽²⁾
				Discount rate	9.46	%	-	9.73%	9.62%	⁽³⁾
Loans held for sale	40,696		Discounted cash flow	Cost of funds	3.95	%	-	4.21%	4.17%
				Prepayment rate	5.73	%	-	6.01%	5.89%
				Default rate	3.48	%	-	4.80%	3.75%
				Weighted average life (in years)	3.44		-	5.35	5.06
				Cumulative loss	0.03	%	-	0.05%	0.05%
				Loss severity	0.25	%	-	0.25%	0.25%


(1)	NM - Not Meaningful or N/A - Not Applicable


(2)	The prepayment speed assumptions include a blend of prepayment speeds that are influenced by mortgage interest rates, the current macroeconomic environment and borrower behaviors and may vary over the expected life of the asset. The range represents the highest and lowest values for the strata with recoveries on previous valuation allowances.


(3)	The discount rate range represents the highest and lowest values for the MSR strata with impairment or recoveries on previous valuation allowances.

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Disclosures about Fair Value of Financial Instruments

The following table presents the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2017 and December 31, 2016. This table excludes financial instruments with short-term or no stated maturity, prevailing market rates and limited credit risk, and where carrying amounts approximate fair value. For financial assets such as cash and due from banks, interest-bearing deposits in banks, FHLB restricted stock, and other investments, the carrying amount is a reasonable estimate of fair value. For financial liabilities such as noninterest-bearing demand, interest-bearing demand, and savings and money market deposits, the carrying amount is a reasonable estimate of fair value as these liabilities have no stated maturity.



	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
March 31, 2017
Financial assets:
Investment securities:
Held to maturity	$	92,472	$	93,403	$	—	$	93,403	$	—
Loans held for sale ⁽¹⁾	50,761		50,761		—		—		50,761
Loans held for investment ⁽²⁾	21,199,711		21,004,041		—		—		21,004,041
Financial liabilities:
Time deposits	$	7,258,613	$	7,265,764	$	—	$	7,265,764	$	—
Other borrowings	5,756,000		5,763,807		—		5,763,807		—
Trust preferred securities and subordinated notes payable	360,378		359,203		—		276,386		82,817
December 31, 2016
Financial assets:
Investment securities:
Held to maturity	$	89,457	$	90,038	$	—	$	90,038	$	—
Loans held for sale ⁽¹⁾	171,370		171,428		—		—		171,428
Loans held for investment ⁽²⁾	21,389,229		21,358,990		—		—		21,358,990
Financial liabilities:
Time deposits	$	7,193,221	$	7,206,514	$	—	$	7,206,514	$	—
Other borrowings	5,506,000		5,518,081		—		5,518,081		—
Trust preferred securities and subordinated notes payable	360,278		350,064		—		267,643		82,421


(1)	The carrying value of loans held for sale excludes $1,389,353 and $1,271,893 in loans measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016, respectively.

(2)

The carrying value of loans held for investment is net of the allowance for loan loss of $74,102 and $83,409 as of March 31, 2017 and December 31, 2016, respectively. In addition, the carrying values exclude $2,106,123 and $2,064,444 of lease financing receivables, net of allowance for lease loss, within the equipment financing receivables portfolio as of March 31, 2017 and December 31, 2016, respectively.

Fair Value Measurement and Disclosure Valuation Methodology

Following are descriptions of the valuation methodologies used for assets and liabilities recorded at fair value on a recurring or non-recurring basis and for estimating fair value for financial instruments not carried at fair value:

Investment Securities — Within its available for sale securities portfolio, the Company holds both treasury securities and equity securities which are valued using quoted market prices for identical securities and are therefore classified within Level 1 of the valuation hierarchy. Equity securities are included within other available for sale securities. The remaining investment portfolio (nonagency CMO and ABS available for sale securities, and agency CMO and MBS securities) calculates its fair values using quoted market prices for similar instruments and values from third party pricing services for which management understands the methods used to determine fair value and are therefore classified within Level 2 of the fair value hierarchy. The Company also performs an assessment of the pricing of investment securities received from third party pricing services to ensure that the prices represent a reasonable estimate of fair value. These procedures include, but are not limited to, initial and ongoing review of pricing methodologies and trends. The Company has the ability to challenge values provided by the third party service providers and will discuss its analysis with the third party pricing service providers in order to ensure that investments are recorded or disclosed at the appropriate fair value.

When the level and volume of trading activity for certain securities has significantly declined and/or when the Company believes that third party pricing may be based in part on forced liquidations or distressed sales, the Company will perform additional analysis. The Company analyzes each security for the appropriate valuation methodology based on a combination of the market approach reflecting third party pricing information and a discounted cash flow or income approach. In calculating the fair value derived from the income approach, the Company makes certain significant assumptions in addition to those discussed above related to the liquidity risk premium, specific non-performance and default experience in the collateral underlying the security. The values resulting from the market and income approaches are weighted to derive the final fair value for each security trading in an inactive or distressed market. As of March 31, 2017 and December 31, 2016, management did not make any adjustments to the prices provided by the third party pricing service as a result of illiquid or inactive markets.

Loans Held for Sale — Fair values for loans held for sale valued under the fair value option are derived from quoted market prices for similar loans resulting in a classification within Level 2 of the valuation hierarchy or from models using loan characteristics including product type, pricing features and loan maturity dates and economic assumptions including prepayment estimates and discount rates based on prices currently offered in secondary markets for similar loans resulting in a classification within Level 3 of the valuation hierarchy. Significant increases (decreases) in any of those assumptions in isolation could result in a significantly lower (higher) fair value measurement.

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Fair values for conforming and non-conforming residential mortgage loans and commercial and commercial real estate loans carried at lower of cost or market are derived from models using characteristics of the loans including product type, pricing features, underlying collateral and loan maturity dates and economic assumptions including prepayment estimates, discount rates and estimated credit losses for loans for which a majority of the significant assumptions are observable in the market. The Company estimates the fair value of these loans held for sale utilizing a discounted cash flow approach which includes an evaluation of the collateral and underlying loan characteristics, as well as assumptions to determine the discount rate such as credit loss and prepayment forecasts, and servicing costs. In determining the appropriate discount rate, prepayment and credit assumptions, the Company monitors other capital markets activity for similar collateral being traded and/or interest rates currently being offered for similar products. Discussions related to the fair value of these loans held for sale are held between our internal valuation specialists and executive and business unit management to understand the key assumptions used in arriving at the final estimates. As such these loans are therefore classified within Level 3 of the valuation hierarchy. Significant increases (decreases) in any of those assumptions in isolation could result in a significantly lower (higher) fair value measurement.

Loans Held for Investment — Fair values for loans held for investment are derived using a discounted cash flow approach which includes an evaluation of the collateral and underlying loan characteristics. The valuation model uses loan characteristics which includes product type, maturity dates, credit profile of the loans, and the underlying interest rate of the portfolio. This information is input into valuation models along with various forecast valuation assumptions including credit loss assumptions, servicing cost (if any), prepayment forecasts, and risk adjusted capital to determine the discount rate. These assumptions are derived from internal and third party databases. Noting the valuation is derived from model-based techniques, the Company includes loans held for investment within Level 3 of the valuation hierarchy.

Impaired Loans — At the time a loan is considered impaired, it is valued at the lower of cost or market value (less estimated costs to sell). Market or fair value is determined primarily by using an income, cost, or market approach and is normally provided through appraisals. Impaired loans carried at fair value receive specific allocations within the allowance for loan and lease losses. For collateral-dependent loans, fair value is commonly based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. For collateral dependent loans for which a new appraisal is expected in the next quarter, the appraisal is reviewed by an officer and an adjustment is made, if appropriate, based on a review of the property, historical changes in value, and current market rates. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated at least quarterly for additional impairment and adjusted accordingly.

Other Real Estate Owned — Foreclosed assets are carried at the lower of cost or market value (less estimated costs to sell). Market or fair value is generally based upon appraisals or independent market prices that are periodically updated subsequent to classification as OREO. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments on properties are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Appraisals for OREO are performed by certified general appraisers (for commercial properties) or certified residential appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. Once received, a member of the Company's valuation services group reviews the assumptions and approaches utilized in the appraisal. To assess the reasonableness of the fair value, the Company's valuation services group compares the assumptions to independent data sources such as recent market data or industry-wide statistics. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and the client’s business, resulting in a Level 3 fair value classification.

Mortgage Servicing Rights — Mortgage servicing rights are evaluated for impairment on a quarterly basis. If the carrying amount of an individual stratum exceeds fair value, impairment is recorded on that stratum so that the servicing asset is carried at fair value. The servicing portfolio is valued using all relevant positive and negative cash flows including servicing fees; miscellaneous income and float; costs of servicing; the cost of carry of advances; foreclosure losses; and applying certain prevailing assumptions used in the marketplace. Mortgage servicing rights do not trade in an active market with readily observable prices and are valued using model-based techniques and significant assumptions not observable in the market. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the valuation hierarchy. The fair value of mortgage servicing rights is determined by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The assumptions are a combination of market and Company specific data. On a quarterly basis, the portfolio management group compares the Company’s estimated fair value of the mortgage servicing rights to a third-party valuation as part of the valuation process. Discussions are held between executive management and the independent third-party to review the key assumptions used by the respective parties in arriving at those estimates, and adjusted as necessary.

Time Deposits — The fair value of fixed-rate certificates of deposit is estimated using quantitative models, including discounted cash flow models that require the use of multiple market inputs including interest rates and spreads to generate continuous yield or pricing curves, and volatility factors. The majority of the market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third party pricing services. The Company considers the impact of its own credit spreads in the valuation of these liabilities. The credit risk is determined by reference to observable credit spreads in the secondary cash market and therefore time deposits are classified within Level 2 of the valuation hierarchy.

Other Borrowings — For advances that bear interest at a variable rate, the carrying amount is a reasonable estimate of fair value. For fixed-rate advances, fair value is estimated using quantitative discounted cash flow models that require the use of interest rate inputs that are currently offered for fixed-rate advances of similar remaining maturities. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third party pricing services. For hybrid advances, fair value is obtained from an FHLB proprietary model that provides the mathematical approximation of the market value of the underlying hedge. The terms of the hedge are similar to the advances and therefore classified as Level 2 within the valuation hierarchy.

Trust Preferred Securities — Fair value is estimated using quantitative models, including discounted cash flow models that require the use of multiple market inputs including interest rates and spreads to generate pricing curves. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third party pricing services. The Company interpolates its own credit spreads in the valuation of these liabilities. Due to the significance of the credit spread in the valuation inputs, trust preferred securities are classified within Level 3 of the valuation hierarchy.

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Subordinated Notes Payable —The Company issued and sold through a public offering $175,000 and $90,000 of subordinated notes on June 30, 2015 and March 14, 2016, respectively. These notes are valued using quoted market prices for the publicly traded debt, but are not actively traded on the secondary market and are therefore classified within Level 2 of the valuation hierarchy.

Interest Rate Swaps, Forward Interest Rate Swaps, and Interest Rate Swap Futures — The fair value of interest rate swaps and forward interest rate swaps is determined by a third party using a derivative valuation model. The inputs used in the valuation model are based on contract terms which primarily include start and end swap dates, swap coupon, interest rate curve and notional amounts, and other standard methodologies which are obtained from similar instruments in active markets and, therefore, are classified within Level 2 of the valuation hierarchy. See Note 10 for additional information on cash flow hedges.

The fair value of interest rate swap futures are determined based upon quotes provided by the Chicago Mercantile Exchange on which these instruments are traded. Noting such quotes represent valuations for identical instruments in active markets, these assets are classified within Level 1 of the valuation hierarchy. Such pricing is utilized for both active trading and daily settlement of pricing adjustments on outstanding positions. As these pricing adjustments are settled daily between the exchange and the Company, the result is that the Company holds interest rate swap futures with an outstanding notional and a Level 1 fair value of zero as of the balance sheet date.

Interest Rate Lock Commitments (IRLC) and Extended Written Loan Commitments— Fair values of interest rate lock commitments and extended written loan commitments are derived using valuation models incorporating current market information or by obtaining market or dealer quotes for instruments with similar characteristics, subject to anticipated loan funding probability or fallout. The significant unobservable input used in the valuation process is the closing ratio, which represents management's estimate of the percentage of loans currently in a lock position which will ultimately close. The loan closing ratio is largely dependent on the loan processing stage that a loan is currently in and the change in prevailing interest rates from the time of the rate lock through the time the loan closes. The closing ratio is computed by the Company's secondary marketing system using historical data and the ratio is periodically reviewed by the secondary marketing group for reasonableness and as such both IRLC and extended written loan commitments are classified within Level 3 of the valuation hierarchy. Generally, the fair value of these instruments are positive (negative) if the prevailing interest rate is lower (higher) than the locked in rate. Therefore, an increase in the loan closing probability (i.e., higher percentage of loans estimated to close) will result in the fair value of the interest rate lock commitment to increase if in a gain position, or decrease if in a loss position.

Forward and Optional Forward Purchase and Sale Commitments — The fair value of forward and optional forward purchase and sale commitments is determined based upon the difference between the settlement values of the commitments and the quoted market values of the securities, which can be quoted using similar instruments in the active market and therefore are classified within Level 2 of the valuation hierarchy.

The fair value of U.S. Treasury Note Future Options are valued using quoted market prices from active trades for identical instruments. As such, these assets are classified within Level 1 of the valuation hierarchy.

Foreign Exchange Contracts —Fair values of foreign exchange contracts are based on quoted prices for each foreign currency at the balance sheet date. The quoted prices are for similar instruments in an active market and are therefore, these contracts are classified within Level 2 of the valuation hierarchy.

Options and Options Embedded in Client Deposits—For options and options embedded in client deposits, the fair value is determined by obtaining market or dealer quotes for instruments with similar characteristics in active markets and therefore both options and options embedded in client deposits are classified within Level 2 of the valuation hierarchy.

Indemnification Asset—To determine the fair value of the indemnification asset the Company uses a cash flow model to project cash flows for GNMA pool buyouts with and without recourse that are subjected to the indemnification agreement. The significant unobservable inputs used in the fair value measurement of the indemnification asset are the discount rate and loss severity. Significant increases (decreases) to the discount rate in isolation could result in a significantly lower (higher) fair value measurement, whereas significant increases (decreases) to the loss severity could result in a significantly higher (lower) fair value measurement. The discount is calculated as the risk free rate plus a credit spread which is based on corporate debt issued by the indemnifying parties. Loss severity is determined by analyzing the value of the underlying mortgaged asset, the probability of borrower default, the value of the underlying government (VA) guarantee among other factors discounted over the estimated life of the asset. As the Company calculates the fair value of the indemnification asset using unobservable inputs the Company classifies the indemnification asset within Level 3 of the valuation hierarchy. The Company’s portfolio management group is responsible for analyzing and updating the assumptions and cash flow model of the underlying loans on a quarterly basis, which includes corroboration with historical experience. Counterparty credit risk is taken into account when determining fair value.

See Note 10 for additional information on freestanding derivatives.

12. Commitments and Contingencies

Commitments — Commitments to extend credit are agreements to lend to customers in accordance with predetermined contractual provisions. These commitments, predominantly at variable interest rates, are for specific periods or contain termination clauses and may require the payment of a fee. The total amounts of unused commitments do not necessarily represent future credit exposure or cash requirements, as commitments often expire without being drawn upon.

In order to meet the needs of its clients, the Company also issues standby letters of credit, which are conditional commitments generally to provide credit support for some creditors in case of default. The credit risk and potential cash requirements involved in issuing standby letters of credit are essentially the same as those involved in extending loan facilities to clients.

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Unfunded credit extension commitments at March 31, 2017 and December 31, 2016 are as follows:



	March 31, 2017		December 31, 2016
Commercial and commercial real estate ⁽¹⁾	$	3,022,702	$	2,652,441
Home equity lines of credit	508,290		506,375
Credit card lines of credit	25,905		25,810
Standby letters of credit	17,356		18,923
Total unfunded credit extension commitments	$	3,574,253	$	3,203,549


(1)	Of the outstanding unfunded commercial and commercial real estate commitments, $1,712,739 and $1,307,517 were cancellable by the Company at March 31, 2017 and December 31, 2016, respectively.

The Company enters into floating rate residential loan commitments to lend. There were $173,477 and $164,181 of these commitments outstanding as of March 31, 2017 and December 31, 2016, respectively.

The Company also has entered into commitments to lend related to loans in the origination pipeline. These commitments represent arrangements to lend funds or provide liquidity subject to specified contractual provisions.

The contractual amounts of the Company's commitments to lend in the held for investment origination pipeline at March 31, 2017 and December 31, 2016 are as follows:



	March 31, 2017		December 31, 2016
Residential mortgage	$	319,012	$	154,093
Commercial and commercial real estate	509,205		698,559
Equipment financing receivables	323,209		287,210
Home equity lines of credit	63,690		36,207
Total commitments to lend in the pipeline	$	1,215,116	$	1,176,069

Standby letters of credit issued by third party entities are used to guarantee the Company's performance under various contracts. At March 31, 2017 and December 31, 2016, the Company had $158,732 and $158,732, respectively, in letters of credit outstanding.

EverBank periodically enters into forward-dated borrowing agreements with the FHLB to borrow funds at a fixed rate of interest. Prior to the funding date, EB has the right to terminate any of the advances subject to voluntary termination fees. The outstanding forward-dated agreements as of March 31, 2017 are as follows:



Agreement Date	Funding Date	Amount		Interest Rate		Maturity Date
June 2015	September 2017	$	25,000	3.01	%	September 2022
February 2017	September 2017	100,000		1.80	%	September 2019
February 2017	September 2017	100,000		1.79	%	October 2019

In the ordinary course of business, the Company enters into commitments to originate residential mortgage loans held for sale at interest rates determined prior to funding. Interest rate lock commitments for loans that the Company intends to sell are considered freestanding derivatives and are recorded at fair value. See Note 10 and Note 11 for information on interest rate lock commitments as they are not included in the table above. The Company has also elected the fair value option on extended written loan commitments to originate residential mortgage loans held for investment. See Note 11 for more information on these extended written loan commitments as they are included in the origination pipeline table above under the residential designation.

The Company also has an agreement with the Jacksonville Jaguars of the National Football League whereby the Company obtained the naming rights to the football stadium in Jacksonville, Florida. On July 3, 2014, the Company entered into an extension to the agreement for the naming rights and under the agreement, the Company is obligated to pay $35,433, in the aggregate, from January 1, 2017 through February 28, 2025. Under the agreement, the amount due in 2017 is $3,927, and the amount increases 3% each year through 2025.

Guarantees — The Company sells and securitizes conventional conforming and federally insured single-family residential mortgage loans predominantly to GSEs, such as Fannie Mae and Freddie Mac. The Company also sells residential mortgage loans, primarily those that do not meet criteria for whole loan sales to GSEs (nonconforming mortgage loans), through whole loan sales and securitizations to private non-GSE purchasers. In doing so, representations and warranties regarding certain attributes of the loans are made to the GSE or the third-party non-GSE purchasers. Subsequent to the sale, if it is determined that the loans sold are (1) with respect to the GSEs, in breach of these representations or warranties or (2) with respect to non-GSE purchasers, in material breach of these representations and warranties, the Company generally has an obligation to either: (a) repurchase the loan for the UPB, accrued interest and related advances, (b) indemnify the purchaser or (c) make the purchaser whole for the economic benefits of the loan. From 2010 through March 31, 2017, the Company originated, sold and securitized approximately $48,374,773 of mortgage loans to GSEs and private non-GSE purchasers.

In some cases, the Company also has an obligation to repurchase loans in the event of early payment default (EPD), which is typically triggered if a borrower does not make the first several payments due after the loan has been sold to an investor. Certain of the Company's private investors have agreed to waive EPD provisions for conventional conforming and federally insured single-family residential mortgage loans and certain jumbo loan products. However, the Company is subject to EPD provisions for certain non-conforming jumbo loan products.

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The Company’s obligations vary based upon the nature of the repurchase demand and the current status of the mortgage loan. The Company establishes reserves for estimated losses inherent in the Company’s origination and sale of mortgage loans. In estimating the accrued liability for loan repurchases, indemnifications and make-whole obligations, the Company estimates probable losses inherent in the population of all loans sold based on trends in claims requests and actual loss severities experienced. The liability includes accruals for probable contingent losses, an accrual for a noncontingent obligation to stand ready to perform over the term of the representations and warranties and an accrual for probable losses identified in the pipeline of repurchase, make-whole and indemnification requests. There is additional inherent uncertainty in the estimate because the Company historically sold a majority of loans servicing released prior to 2009 and currently does not have servicing performance metrics on a majority of those loans it originated and sold during that time period. The estimation process is designed to include amounts based on actual losses experienced from actual repurchase activity. The baseline for the repurchase reserve uses historical loss factors which are applied to those loans originated and sold by the Company. Loss factors, which are tracked by year of loss, are calculated using actual losses incurred on repurchase, indemnification or make-whole arrangements. Under this Level 3 technique, the historical loss factors experienced are accumulated for each sale vintage (year loan was sold) and are applied to more recent sale vintages to estimate inherent losses not yet realized. The Company’s estimated recourse related to these loans was $3,264 and $3,537 at March 31, 2017 and December 31, 2016, respectively, and is recorded in accounts payable and accrued liabilities. The Company incurred liabilities for new loan sales and securitizations of $381 and $544 for the three months ended March 31, 2017 and 2016, respectively. The liability is amortized, through a credit to earnings, as the Company is released from risk.

In the ordinary course of its loan servicing activities, the Company routinely initiates actions to foreclose real estate securing serviced loans. For certain serviced loans in which the Company does not own the underlying mortgage, there are provisions in which the Company is either obligated to fund foreclosure-related costs or to repurchase loans in default. Additionally, as servicer, the Company could be obligated to repurchase loans from or indemnify GSEs for loans originated by defunct originators. The outstanding principal balance on residential loans serviced for others at March 31, 2017 and December 31, 2016, was $30,382,000 and $30,359,000, respectively. The amount of estimated recourse recorded in accounts payable and accrued liabilities related to servicing activities at March 31, 2017 and December 31, 2016, was $141 and $141, respectively.

Federal Reserve Requirement — The Federal Reserve Board (FRB) requires certain institutions, including EB, to maintain cash reserves in the form of vault cash and average account balances with the Federal Reserve Bank. The reserve requirement is based on average deposits outstanding and was $216,557 and $79,917 at March 31, 2017 and December 31, 2016, respectively.

Legal Actions — On January 5, 2016, the Office of the Comptroller of the Currency (OCC) terminated EverBank’s consent order, including the remaining portions of the 2011 consent order as amended in 2013 and 2015, having determined that EverBank had satisfied the requirements of such order. In conjunction with the termination, EverBank was required by the OCC to pay $1,000 in civil money penalties pertaining to certain improper fees charged to borrowers during the timeframe the consent order had been in place. At March 31, 2017, EverBank has accrued approximately $1,877 for potential future payments to be made related to the consent order with the FRB. The Company’s consent order with the FRB relating to its oversight of mortgage foreclosure practices currently remains in place.

Proposed TIAA Merger — On August 7, 2016, the Company entered into an Agreement and Plan of Merger (Merger Agreement) with Teachers Insurance and Annuity Association of America (TIAA). Pursuant to the Merger Agreement, the Company will no longer operate as a publicly traded entity and will become a wholly-owned subsidiary of TIAA. Completion of this Merger remains subject to regulatory approval, and various customary closing conditions. The Company's stockholders approved the Merger Agreement and other Merger related proposals at a special meeting of stockholders held on November 9, 2016. Given the uncertain nature of change in control events, the accounting literature restricts accruals of items contingent upon execution of change in control events. As such, the broker fees contingent upon the successful completion of the Merger have not been accrued, which total $19,500. In addition, certain key employees have previously entered into employment agreements with the Company which require pay out in the event of a change of control and as a result the Company may be obligated to pay out if the Merger is completed.

13. Variable Interest Entities

The Company, in the normal course of business, engages in certain activities that involve VIEs, which are legal entities that lack sufficient equity to finance their activities, or the equity investors of the entities as a group lack any of the characteristics of a controlling interest. The primary beneficiary of a VIE is generally the enterprise that has both the power to direct the activities most significant to the economic performance of the VIE and the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. The Company evaluates its interest in certain entities to determine if these entities meet the definition of a VIE and whether the Company is the primary beneficiary and should consolidate the entity based on the variable interests it held both at inception and when there is a change in circumstances that requires a reconsideration. If the Company is determined to be the primary beneficiary of a VIE, it must account for the VIE as a consolidated subsidiary. If the Company is determined not to be the primary beneficiary of a VIE but holds a variable interest in the entity, such variable interests are accounted for under accounting standards as deemed appropriate.

Non-consolidated VIEs

The table below summarizes select information related to variable interests held by the Company at March 31, 2017 and December 31, 2016:



	March 31, 2017				December 31, 2016
Non-consolidated VIEs	Total Assets		Maximum Exposure		Total Assets		Maximum Exposure
Loans provided to VIEs	$	12,465	$	12,465	$	12,909	$	12,909
Debt securities	507,894		507,894		543,195		543,195

Loans provided to VIEs

The Company has provided funding to certain unconsolidated VIEs sponsored by third parties. These VIEs are generally established to finance certain small business loans originated by third parties and are not considered to have significant equity at risk. The entities are primarily funded through the issuance of loans from the Company and a certified development company (CDC). The Company's loan is secured by a first lien. Although the Company retains the servicing rights to the loan, the Company is unable to unilaterally make all decisions necessary to direct the activities that most significantly impact the VIE; therefore, it is not the primary beneficiary. The principal risk to which these entities are exposed is credit risk related to the underlying assets. The loans to these VIEs are included in the Company’s overall analysis of the

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allowance for loan and lease losses. The Company does not provide any implicit or explicit liquidity guarantees or principal value guarantees to these VIEs. The Company records these commercial loans on its condensed consolidated balance sheet as loans held for investment.

Debt securities

All MBS, CMO and ABS securities owned by the Company are issued through VIEs. The related VIEs were not consolidated, as the Company was not determined to be the primary beneficiary because, as only a holder of investments issued by the VIE, the Company does not have the power to direct the activities of the VIE that most significantly impact the entity's economic performance. See Note 3 for information related to debt securities.

Mortgage securitizations

The Company provides a variety of mortgage loan products to a diverse customer base. Once originated, the Company often securitizes these loans through the use of VIEs. These VIEs are funded through the issuance of trust certificates backed solely by the transferred assets. These mortgage loan securitizations are non-recourse except in accordance with the Company's standard obligations under representations and warranties. Thereby, the transactions effectively transfer the risk of future credit losses to the purchasers of the securities issued by the trust. The Company generally retains the servicing rights to the transferred assets but does not retain any other interest in the entities. Because the Company does not have the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, the Company is not the primary beneficiary of its U.S. agency-sponsored mortgage securitizations. Therefore, the Company does not consolidate these U.S. agency-sponsored mortgage securitizations.

Additionally, the Company does not consolidate VIEs of private label securitizations. Although the Company is the servicer of the VIE, the servicing relationship is deemed to be a fiduciary relationship and, therefore, the Company is not deemed to be the primary beneficiary of the entity. Refer to Note 4 for information related to sales of residential mortgage receivables and Note 7 for information related to mortgage servicing rights.

14. Segment Information

The Company has three reportable business segments: Consumer Banking, Commercial Banking, and Corporate Services. The Company’s reportable business segments are strategic business units that offer distinctive products and services marketed through different channels. These segments are managed separately because of their marketing and distribution requirements.

The Consumer Banking segment includes consumer deposit services and activities, residential lending and servicing, wealth management, and capital markets. Commercial Banking includes commercial and commercial real estate lending, lender finance, equipment finance and leasing, mortgage warehouse finance and commercial deposits.

The Corporate Services segment provides services to the Consumer Banking and Commercial Banking segments including executive management, risk management, technology, legal, human resources, marketing, corporate development, treasury, accounting, finance and other services and transaction-related items. Direct expenses are allocated to the reporting segments. Unallocated expenses are included in Corporate Services. Certain other expenses, including interest expense on trust preferred debt and subordinated notes payable and transaction-related items, are included in the Corporate Services segment.

The chief operating decision maker’s review of each segment’s performance is based on segment income, which is defined as income from operations before income taxes and certain corporate allocations. Additionally, total net revenue is defined as net interest income before provision for loan and lease losses and total noninterest income.

Intersegment revenue among the Company’s business units reflects the results of a funds transfer pricing (FTP) process, which takes into account assets and liabilities with similar interest rate sensitivity and maturity characteristics and reflects the allocation of net interest income related to the Company’s overall asset and liability management activities. This provides for the creation of an economic benchmark, which allows the Company to determine the profitability of the Company’s products and cost centers by calculating profitability spreads between product yields and internal references. However, business segments have some latitude to retain certain interest rate exposures related to client pricing decisions within guidelines.

FTP serves to transfer interest rate risk to the Treasury function through a transfer pricing methodology and cost allocation model. The basis for the allocation of net interest income is a function of the Company’s methodologies and assumptions that management believes are appropriate to accurately reflect business segment results. These factors are subject to change based on changes in current interest rates and market conditions.

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The results of each segment are reported on a continuing basis. The following table presents financial information of reportable business segments as of and for the three months ended March 31, 2017 and 2016. The eliminations column includes intersegment eliminations required for consolidation purposes.



	As of and for the Three Months Ended March 31, 2017
	Consumer Banking			Commercial Banking			Corporate Services			Eliminations			Consolidated
Net interest income (expense)	$	108,556		$	75,756		$	(4,967	)	$	—		$	179,345
Total net revenue	150,424		⁽¹⁾	84,002			(4,824		)	—			229,602
Intersegment revenue	17,775			(17,775		)	—			—			—
Depreciation and amortization	1,804			2,022			2,035			—			5,861
Income (loss) before income taxes	63,150		⁽¹⁾	35,424			(37,778		)	—			60,796
Total assets	17,696,696			10,299,803			283,505			(503,425		)	27,776,579

	As of and for the Three Months Ended March 31, 2016
	Consumer Banking			Commercial Banking			Corporate Services			Eliminations			Consolidated
Net interest income (expense)	$	97,520		$	80,568		$	(4,307	)	$	—		$	173,781
Total net revenue	113,099		⁽²⁾	94,603			(4,168		)	—			203,534
Intersegment revenue	14,148			(14,148		)	—			—			—
Depreciation and amortization	2,158			2,602			1,898			—			6,658
Income (loss) before income taxes	21,692		⁽²⁾	56,032			(32,539		)	—			45,185
Total assets	16,294,379			10,486,284			298,701			(437,965		)	26,641,399

(1) Segment earnings in the Consumer Banking segment included a $22,644 charge for MSR recovery for the three months ended March 31, 2017.

(2) Segment earnings in the Consumer Banking segment included a $22,542 charge for MSR impairment for the three months ended March 31, 2016.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to assist readers in understanding the financial condition and results of operations of the Company during the three months ended March 31, 2017 and should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

Cautionary Statement Regarding Forward-Looking Statements

This report contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be protected by the safe harbor provided therein. 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. EverBank Financial Corp does not undertake any obligation to revise these statements following the date of this communication, except as required by law. 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 Part I, Item 1A “Risk Factors” contained in our Annual Report on Form 10-K for the period ended December 31, 2016, as filed with the Securities and Exchange Commission (SEC) on February 17, 2017 and in Part II, Item 1A “Risk Factors” contained in this report, and include risks discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and in other periodic reports we file with the SEC. 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;


•	the possibility that the proposed merger (the Merger) with Teachers Insurance and Annuity Association of America (TIAA) does not close when expected or at all because required regulatory or other approvals and conditions to closing are not received or satisfied on a timely basis or at all;


•	the effect of the announcement or pendency of the Merger on our business relationships, operating results, and business generally;


•	risks that the proposed Merger disrupts our current plans and operations and potential difficulties in our employee retention as a result of the Merger;


•	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 mortgage loans held for sale;


•	risk of higher loan and lease charge-offs;


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


•	risk of individual claims or further fines, penalties, equitable remedies, or other enforcement actions relating to our mortgage related practices;


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


•	our ability to comply with the amended consent order and the terms and conditions of our settlement of the Independent Foreclosure Review, including the associated costs;


•	concentration of our commercial real estate loan portfolio;


•	higher than normal delinquency and default rates affecting our mortgage banking business;


•	concentration of mass-affluent clients and jumbo mortgages;


•	the effectiveness of the hedging strategies we use to manage our mortgage pipeline;


•	the effectiveness of our derivatives to manage interest rate risk;


•	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;


•	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, mortgage warehouse finance customers, other vendors and our employees;


•	costs of compliance or failure to comply with laws, rules, regulations and orders that govern our operations;


•	failure to establish and maintain effective internal controls and procedures;


•	impact of current and future legal and regulatory changes, including the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and the capital and liquidity requirements promulgated by the Basel Committee on Banking Supervision (Basel Committee);


•	effects of changes in existing United States (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;

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•	legislative action regarding foreclosures or bankruptcy laws;


•	changes to generally accepted accounting principles (GAAP);


•	environmental liabilities with respect to properties that we take title to upon foreclosure;


•	fluctuations in our stock price; and


•	inability of EverBank (EB or EverBank), our banking subsidiary, to pay dividends.

Announcement

On August 7, 2016, the Company entered into an Agreement and Plan of Merger (Merger Agreement) with TIAA, TCT Holdings, Inc., a Delaware corporation and wholly owned subsidiary of TIAA (TCT Holdings), and Dolphin Sub Corporation, a Delaware corporation and wholly owned subsidiary of TCT Holdings (Merger Sub). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company, with the Company as the surviving entity (the Merger). TCT Holdings will (subject to TIAA’s right under the Merger Agreement to elect not to do so), in connection with the Merger, merge with and into such surviving entity (the Holdco Merger). Immediately following the Holdco Merger (or, if TIAA elects not to consummate the Holdco Merger, immediately following the Merger), TIAA-CREF Trust Company, FSB, a federal savings association and wholly owned bank subsidiary of TIAA, will merge with and into EverBank, a federal savings association and wholly owned subsidiary of the Company, with EverBank as the surviving bank (the Bank Merger). The Merger Agreement was unanimously approved by the Board of Directors of each of the Company, TIAA, TCT Holdings and Merger Sub.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the Effective Time), (1) holders of the Company’s common stock, par value $0.01 per share (the Company Common Stock), will have the right to receive $19.50 in cash without interest for each share of Company Common Stock, and (2) holders of the Company’s Series A 6.75% Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share (the Company Preferred Stock), will have the right to receive the liquidation preference of $25,000 plus accrued and unpaid dividends on a share of Company Preferred Stock since the last dividend payment date for the Company Preferred Stock to but excluding the date on which the Effective Time occurs less any dividends declared but unpaid, if any, through the Effective Time, in cash without interest.

On November 9, 2016, the Company held a special meeting of stockholders. The Company's stockholders approved the Merger Agreement and other Merger related proposals. The completion of the Merger is subject to various customary closing conditions as well as regulatory approvals. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached as Exhibit 2.1 to the Form 8-K filed by the Company on August 8, 2016. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the Company, TIAA, their respective affiliates or their respective businesses, the Merger Agreement and the Merger that were contained in the Company’s proxy statement, as well as other filings that the Company makes with the Securities and Exchange Commission.

Reclassifications

Certain prior period information in this MD&A has been reclassified to conform to current period classifications.

Introduction and Overview

We are a savings and loan holding company which operates primarily through our direct subsidiary, EverBank. EB is a federally chartered thrift institution with its home office located in Jacksonville, Florida. References to “we,” “our,” “us,” "EFC," or the “Company” refer to the holding company and its subsidiaries that are consolidated for financial reporting purposes. We are a diversified financial services company that provides innovative banking, lending and investment products and services to clients nationwide through scalable, low-cost distribution channels. Our business model attracts financially sophisticated, self-directed, mass-affluent clients and a diverse base of small and medium sized business clients. We market and distribute our banking products and services primarily through our integrated online and mobile financial portal, high-volume financial centers in targeted Florida markets and other national business relationships. These channels are connected by technology-driven centralized platforms, which provide operating leverage throughout our business.

We have a suite of asset origination and fee income businesses that individually generate attractive financial returns and collectively leverage our core deposit franchise and client base. We originate, invest in, sell and service residential mortgage loans, equipment loans and leases, and various other consumer and commercial loans, as market conditions warrant. Our organic origination activities are scalable, significant relative to our balance sheet size and provide us with substantial growth potential. 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 clients and provides us with a stable and flexible source of low all-in cost funding. We have a demonstrated ability to grow our client deposit base 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 clients. Our products, distribution and marketing strategies allow us to generate substantial deposit growth while maintaining an attractive mix of high value transaction and savings accounts.

Economic and Interest Rate Environment

The results of our operations are highly dependent on economic conditions and market interest rates. To stimulate economic activity and stabilize the financial markets, the Federal Reserve Board (FRB) has maintained historically low market interest rates since 2009. Market conditions have improved during this period as the unemployment rate has leveled off at 4.5% at March 31, 2017, and consumer confidence, gross domestic product and average home prices have all risen. While economic conditions have improved domestically, under-employment and wage growth remain a worry amidst the backdrop of low inflation in the United States and abroad. Recent upticks in labor force participation alongside wage growth are being closely monitored by the markets for signs of sustained or expected inflation. Moreover, inflation in most of the Euro-Zone is at or below zero and central banks around the world have maintained an accommodative stance with drops in short-term rates. Certain developed economies now have negative interest rates and the accommodative stance by these major economies has created

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resistance to domestic rate increases. Such factors, combined with geopolitical turmoil have continued to keep interest rates at near historical low levels. The FRB announced a quarter point increase to short-term rates in December 2015 followed by another quarter point increase in December 2016 and in March 2017. The base mortgage rate (BMR) dropped throughout most of 2016 and reached a low of 3.3% in September 30, 2016, which was influenced by the vote by Britain to leave the European Union in late June 2016. The BMR impacts the fair value of our mortgage servicing rights (MSR) as well as influences our mortgage production business. During the first quarter of 2017, the BMR continued to improve ending the period at 4.0% at March 31, 2017. In addition, the 10-year treasury rate fell as low as 2.3% and was 2.4% at March 31, 2017.

Net interest income is our largest source of income and is driven primarily as a function of the average balance of interest-earning assets, the average balance of interest-bearing liabilities and the spread between the contractual yield on such assets and the contractual cost of such liabilities. These factors are influenced by both the pricing and mix of interest-earning assets and interest-bearing liabilities which, in turn, are impacted by external factors such as the local economy, competition for loans and deposits, the monetary policy of the FRB and market interest rates. The cost of our deposits is largely based on short-term interest rates which are driven primarily by the FRB’s actions. However, the yields generated by our loans and securities are typically driven by longer-term interest rates which are set by the market, or, at times by the FRB’s actions. Our net interest income is therefore influenced by movements in interest rates and the pace at which these movements occur.

Performance Highlights

First Quarter 2017 Key Highlights


•	Total assets of $27.8 billion, an increase of 4% year over year.


•	Portfolio loans held for investment (HFI) of $23.4 billion, an increase of 3% year over year.


•	Total deposits of $19.3 billion, an increase of 2% year over year.


•	Net interest margin (NIM) of 2.79%.


•	GAAP return on average equity (ROE) of 7.6% and adjusted ROE¹ of 5.5% for the quarter.


•	Tangible common equity per common share was $14.56 at March 31, 2017, an increase of 10% year over year.¹


•	Adjusted non-performing assets to total assets¹ of 0.60% at March 31, 2017. Annualized net charge-offs to average total loans and leases held for investment of 0.41% for the quarter.


•	Consolidated common equity Tier 1 capital ratio of 11.0% and bank Tier 1 leverage ratio of 8.4% at March 31, 2017.

¹ Reconciliations of Non-GAAP financial measures can be found in Tables 2, 3, 4, 12A, 12B, and 25.

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Financial Highlights				Table 1
	Three Months Ended March 31,
(dollars in thousands, except per share amounts)	2017			2016
For the Period:
Operating Results:
Total revenue⁽¹⁾	$	229,602		$	203,534
Net interest income	179,345			173,781
Provision for loan and lease losses	15,680			8,919
Noninterest income	50,257			29,753
Noninterest expense	153,126			149,430
Net income allocated to common shareholders	36,006			25,393
Net earnings per common share, diluted	0.28			0.20
Performance Metrics:
Adjusted net earnings per common share, diluted (see Table 2 for non-GAAP reconciliation)	$	0.20		$	0.32
Yield on interest-earning assets	3.89		%	3.85		%
Cost of interest-bearing liabilities	1.29		%	1.14		%
Net interest margin	2.79		%	2.82		%
Return on average assets	0.56		%	0.43		%
Return on average risk-weighted assets⁽²⁾	0.88		%	0.66		%
Return on average equity⁽³⁾	7.6		%	6.0		%
Adjusted return on average equity⁽⁴⁾	5.5		%	9.3		%
Efficiency ratio⁽⁵⁾	67		%	73		%
Adjusted efficiency ratio⁽⁶⁾(see Table 3 for non-GAAP reconciliation)	72		%	66		%
Credit Quality Ratios:
Net charge-offs to average loans and leases held for investment	0.41		%	0.07		%
Consumer Banking Metrics:
Unpaid principal balance of loans originated (in millions)	$	1,618.0		$	1,797.1
Jumbo residential mortgage loans originated (in millions)	695.6			724.5
Commercial Banking Metrics:
Loan and lease originations:
Commercial and commercial real estate (in millions)	$	218.9		$	365.0
Equipment financing receivables (in millions)	256.5			299.8
Commercial Banking loan and lease sales (in millions)	11.6			277.7

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Financial Highlights	Table 1 (cont.)
(dollars in thousands, except per share amounts)	March 31, 2017			December 31, 2016
As of Period End:
Balance Sheet Data:
Loans and leases held for investment, net	$	23,305,834		$	23,453,673
Total assets	27,776,579			27,838,086
Deposits	19,291,681			19,638,228
Total liabilities	25,717,216			25,821,754
Total shareholders’ equity	2,059,363			2,016,332
Loans and leases held for investment as a percentage of deposits	121		%	120		%
Loans and leases held for investment excluding government insured pool buyouts as a percentage of deposits	93		%	93		%
Credit Quality Ratios:
Adjusted non-performing assets as a percentage of total assets (see Table 25 for non-GAAP reconciliation)	0.60		%	0.70		%
Allowance for loan and lease losses (ALLL) as a percentage of loans and leases held for investment (see Table 27)	0.41		%	0.44		%
Government insured pool buyouts as a percentage of loans and leases held for investment	24		%	22		%
Capital:
Common equity tier 1 ratio (EFC consolidated; see Table 42)	11.0		%	10.5		%
Tier 1 leverage ratio (bank level; see Table 40)	8.4		%	8.0		%
Total risk-based capital ratio (bank level; see Table 40)	13.9		%	13.4		%
Tangible common equity per common share⁽⁷⁾	$	14.56		$	14.31
Consumer Banking Metrics:
Unpaid principal balance of loans serviced for the Company and others (in millions)	$	39,918.6		$	39,945.3
Consumer Banking loans as a percentage of loans and leases held for investment	57		%	55		%
Consumer deposits (in millions)	$	14,756.1		$	15,032.1
Commercial Banking Metrics:
Commercial Banking loans as a percentage of loans and leases held for investment	43		%	45		%
Commercial deposits (in millions)	$	4,535.6		$	4,606.2


(1)	Total revenue is defined as net interest income before provision for loan and lease losses and total noninterest income.

(2)

Return on average risk-weighted assets equals net income divided by average risk-weighted 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.


(3)	Return on average equity is calculated as net income less dividends declared on the 6.75% Series A Non-Cumulative Perpetual Preferred Stock divided by average common shareholders' equity (average shareholders' equity less average 6.75% Series A Non-Cumulative Perpetual Preferred Stock).

(4)

Adjusted return on average equity is calculated as adjusted net income less dividends declared on the 6.75% Series A Non-Cumulative Perpetual Preferred Stock divided by average common shareholders' equity. Adjusted net income is a non-GAAP measure of our financial performance and its most directly comparable GAAP measure is net income. For a reconciliation of net income to adjusted net income, see Table 2.


(5)	The efficiency ratio represents noninterest expense as a percentage of total revenue. We use the efficiency ratio to measure noninterest costs expended to generate a dollar of revenue.

(6)

The adjusted efficiency ratio represents adjusted noninterest expense as a percentage of adjusted total revenue based on adjusted net income. The adjusted efficiency ratio is a non-GAAP measure of our financial performance and its most directly comparable GAAP measure is the efficiency ratio. For a reconciliation of adjusted net income to net income, see Table 2. For detailed information regarding the adjusted efficiency ratio, see Table 3. We use the adjusted efficiency ratio to measure adjusted noninterest costs expended to generate a dollar of adjusted revenue.

(7)

Calculated as tangible common shareholders' equity divided by shares of common stock outstanding. Tangible common shareholders' equity equals shareholders' equity less goodwill, other intangible assets and perpetual preferred stock (see Table 4). Tangible common equity per common share is calculated using a denominator that includes actual period end common shares outstanding. Tangible common equity per common share is a non-GAAP financial measure, and its most directly comparable GAAP financial measure is book value per common share. For a reconciliation of tangible common equity per common share, see Table 4.

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Adjusted net income, adjusted return on average equity and adjusted efficiency ratio include adjustments to our net income for certain significant items that we believe are not reflective of our ongoing business or operating performance. A reconciliation of adjusted net income to net income, which is the most directly comparable GAAP measure, is as follows:



Adjusted Net Income	Table 2
	Three Months Ended March 31,
(dollars in thousands, except per share data)	2017			2016
Net income	$	38,537		$	27,924
Transaction expense and non-recurring regulatory related expense, net of tax	3,644			(43		)
Increase (decrease) in Bank of Florida non-accretable discount, net of tax	(15		)	(14		)
Mortgage servicing rights (MSR) impairment (recovery), net of tax	(14,039		)	13,976
Restructuring cost, net of tax	141			438
Adjusted net income	$	28,268		$	42,281
Adjusted net income allocated to preferred stock	2,531			2,531
Adjusted net income allocated to common shareholders	$	25,737		$	39,750
Adjusted net earnings per common share, basic	$	0.20		$	0.32
Adjusted net earnings per common share, diluted	$	0.20		$	0.32
Weighted average common shares outstanding:
(units in thousands)
Basic	127,483			125,125
Diluted	129,855			126,045

A reconciliation of the adjusted efficiency ratio to the efficiency ratio, which is the most directly comparable GAAP measure, is as follows:



Adjusted Efficiency Ratio	Table 3
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
Net interest income	$	179,345		$	173,781
Noninterest income	50,257			29,753
Total revenue	229,602			203,534
Adjustment items (pre-tax):
MSR impairment (recovery)	(22,644		)	22,542
Adjusted total revenue	$	206,958		$	226,076

Noninterest expense	$	153,126		$	149,430
Adjustment items (pre-tax):
Transaction expense and non-recurring regulatory related expense	(4,774		)	69
Restructuring cost	(227		)	(706		)
Adjusted noninterest expense	$	148,125		$	148,793

GAAP efficiency ratio	67		%	73		%
Adjusted efficiency ratio	72		%	66		%

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A reconciliation of tangible equity and tangible common equity to shareholders’ equity, which is the most directly comparable GAAP measure, and tangible assets to total assets, which is the most directly comparable GAAP measure, is as follows:



Tangible Equity, Tangible Common Equity, Tangible Common Equity Per Common Share, and Tangible Assets	Table 4
(dollars in thousands except share and per share amounts)	March 31, 2017		December 31, 2016
Shareholders’ equity	$	2,059,363	$	2,016,332
Less:
Goodwill	46,859		46,859
Intangible assets	817		996
Tangible equity	2,011,687		1,968,477
Less:
Perpetual preferred stock	150,000		150,000
Tangible common equity	$	1,861,687	$	1,818,477

Common shares outstanding at period end	127,819,917		127,036,740
Book value per common share	$	14.94	$	14.69
Tangible common equity per common share	14.56		14.31

Total assets	$	27,776,579	$	27,838,086
Less:
Goodwill	46,859		46,859
Intangible assets	817		996
Tangible assets	$	27,728,903	$	27,790,231

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Analysis of Statements of Income

The following table sets forth, for the periods indicated, information regarding: (i) the total dollar amount of interest income of the Company from earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) net interest spread; and (v) net interest margin.



Average Balance Sheet, Interest and Yield/Rate Analysis^{(1) (2) (3)}									Table 5
	Three Months Ended
	March 31, 2017						March 31, 2016
(dollars in thousands)	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate
Assets:
Interest-earning assets:
Cash and cash equivalents	$	658,278	$	1,296	0.80	%	$	312,614	$	396	0.51	%
Investments	797,066		6,673		3.37	%	876,401		7,404		3.39	%
Loans held for sale	1,511,061		13,823		3.66	%	2,023,076		17,156		3.39	%
Loans and leases held for investment:
Consumer Banking:
Residential mortgages:
Residential	6,532,955		50,722		3.11	%	7,063,490		55,495		3.14	%
Government insured pool buyouts	5,560,690		69,355		4.99	%	4,429,707		53,479		4.83	%
Residential mortgages	12,093,645		120,077		3.97	%	11,493,197		108,974		3.79	%
Home equity lines and other	1,251,282		10,735		3.48	%	524,890		5,317		4.07	%
Commercial Banking:
Commercial and commercial real estate:
Commercial real estate and other commercial	3,795,691		42,787		4.51	%	4,033,661		48,103		4.75	%
Mortgage warehouse finance	1,809,621		13,904		3.07	%	1,846,294		12,999		2.79	%
Lender finance	1,592,743		15,208		3.82	%	1,287,134		11,214		3.45	%
Commercial and commercial real estate	7,198,055		71,899		4.00	%	7,167,089		72,316		4.01	%
Equipment financing receivables	2,546,616		28,847		4.53	%	2,377,047		27,296		4.59	%
Total loans and leases held for investment	23,089,598		231,558		4.01	%	21,562,223		213,903		3.96	%
Total interest-earning assets	26,056,003		$	253,350	3.89	%	24,774,314		$	238,859	3.85	%
Noninterest-earning assets	1,264,535						1,423,049
Total assets	$	27,320,538					$	26,197,363
Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	4,002,510	$	7,202	0.73	%	$	3,641,030	$	6,197	0.68	%
Market-based money market accounts	345,271		519		0.61	%	341,235		518		0.61	%
Savings and money market accounts, excluding market-based	6,209,669		11,307		0.74	%	6,444,921		12,506		0.78	%
Market-based time	318,884		683		0.87	%	369,649		774		0.84	%
Time, excluding market-based	6,785,014		23,375		1.40	%	6,333,503		19,095		1.20	%
Total deposits	17,661,348		43,086		0.99	%	17,130,338		39,090		0.91	%
Borrowings:
Trust preferred securities and subordinated notes payable	360,312		5,126		5.69	%	293,781		4,462		6.08	%
Long-term Federal Home Loan Bank (FHLB) advances	4,911,778		25,412		2.07	%	3,824,527		20,018		2.07	%
Short-term FHLB advances	240,833		381		0.63	%	1,429,945		1,508		0.42	%
Total borrowings	5,512,923		30,919		2.24	%	5,548,253		25,988		1.86	%
Total interest-bearing liabilities	23,174,271		$	74,005	1.29	%	22,678,591		$	65,078	1.14	%
Noninterest-bearing demand deposits	1,771,029						1,285,853
Other noninterest-bearing liabilities	341,859						376,071
Total liabilities	25,287,159						24,340,515
Total shareholders’ equity	2,033,379						1,856,848
Total liabilities and shareholders’ equity	$	27,320,538					$	26,197,363
Net interest income/spread			$	179,345	2.60	%			$	173,781	2.71	%
Net interest margin					2.79	%					2.82	%
Memo: Total deposits including noninterest-bearing	$	19,432,377	$	43,086	0.90	%	$	18,416,191	$	39,090	0.85	%


(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.

Table of Contents

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table shows, for the periods indicated, the effect that these factors had on the interest earned on our interest-earning assets and the interest incurred on our interest-bearing liabilities.



Analysis of Change in Net Interest Income⁽¹⁾							Table 6
	Three Months Ended March 31, 2017
	Compared to
	March 31, 2016
	Increase (Decrease) Due to
(dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Cash and cash equivalents	$	435		$	465		$	900
Investments	(663		)	(68		)	(731		)
Loans held for sale	(4,282		)	949			(3,333		)
Loans and leases held for investment:
Consumer Banking:
Residential mortgages:
Residential	(4,111		)	(662		)	(4,773		)
Government insured pool buyouts	13,467			2,409			15,876
Residential mortgages	9,356			1,747			11,103
Home equity lines and other	7,297			(1,879		)	5,418
Commercial Banking:
Commercial and commercial real estate:
Commercial real estate and other commercial	(2,785		)	(2,531		)	(5,316		)
Mortgage warehouse finance	(252		)	1,157			905
Lender finance	2,597			1,397			3,994
Commercial and commercial real estate	(440		)	23			(417		)
Equipment financing receivables	1,921			(370		)	1,551
Total loans and leases held for investment	18,134			(479		)	17,655
Total change in interest income	$	13,624		$	867		$	14,491
Interest-bearing liabilities:
Deposits:
Interest-bearing demand	$	610		$	395		$	1,005
Market-based money market accounts	6			(5		)	1
Savings and money market accounts, excluding market-based	(453		)	(746		)	(1,199		)
Market-based time	(105		)	14			(91		)
Time, excluding market-based	1,335			2,945			4,280
Total deposits	1,393			2,603			3,996
Borrowings:
Trust preferred securities and subordinated notes payable	997			(333		)	664
Long-term FHLB advances	5,551			(157		)	5,394
Short-term FHLB advances	(1,223		)	96			(1,127		)
Total borrowings	5,325			(394		)	4,931
Total change in interest expense	6,718			2,209			8,927
Total change in net interest income	$	6,906		$	(1,342	)	$	5,564


(1)	The effect of changes in volume is determined by multiplying the change in volume by the previous period's average yield/cost. Similarly, the effect of rate changes is calculated by multiplying the change in average yield/cost by the previous period's volume. Changes applicable to both volume and rate have been allocated to rate.

Table of Contents

Net Interest Income

Net interest income is affected by both changes in interest rates and the amount and composition of interest-earning assets and interest-bearing liabilities. Net interest margin is defined as net interest income as a percentage of average earning assets.

First Quarter of 2017 compared to First Quarter of 2016

Net interest income increased by $5.6 million, or 3%, in the first quarter of 2017 compared to the same period in 2016 due to an increase in interest income of $14.5 million, or 6%, partially offset by an increase in interest expense of $8.9 million, or 14%. Our net interest margin decreased by 3 basis points in the first quarter of 2017 compared to the same period in 2016, which was led by an increase in rates paid on our interest-bearing liabilities due to increasing short-term interest rates. The increase in interest rates paid on our interest-bearing liabilities was partially offset by an increase in yields on our interest-earning assets coupled with an increase in the amount of average noninterest-bearing demand deposits which increased from $1.3 billion in the first quarter of 2016 to $1.8 billion in the first quarter of 2017.

Yields on our interest-earning assets increased by 4 basis points in the first quarter of 2017 compared to the same period in 2016 which was due to an increase in market interest rates partially offset by a reduction in yield on our commercial real estate portfolio as we continue to see assets acquired at higher rates mature or payoff with new originations coming on the balance sheet at lower yields.

The yields on our loans held for sale increased by 27 basis points in the first quarter of 2017 compared to the same period in 2016 primarily due to increases in the current market mortgage rates of our loans held for sale.

The yields on our loans and leases held for investment portfolio increased by 5 basis points in the first quarter of 2017 compared to the same period in 2016, which was consistent across most of our portfolios. The yield on our total commercial and commercial real estate held for investment portfolio decreased 1 basis point due to decreases in yields in commercial real estate and other commercial portfolios which was mostly offset by increases in the yields on our mortgage warehouse finance and lender finance portfolios. The yield on our commercial real estate and other commercial portfolio declined by 24 basis points in the first quarter of 2017 compared to the same period in 2016. Yields on our mortgage warehouse finance and lender finance portfolios increased due to the short-term rate increases by the Federal Reserve in December 2016 and March 2017. Yields on our equipment financing receivables decreased 6 basis points in the first quarter of 2017 compared to the same period in 2016 primarily due to continued production of leases at current market interest rates. The yield on our residential mortgages held for investment increased 18 basis points in the first quarter of 2017 compared to the same period in 2016 primarily due to the performance of our government insured pool buyout portfolio which saw an increase in yield of 16 basis points.

The yields on our interest-bearing liabilities increased by 15 basis points in the first quarter of 2017 compared to the same period in 2016, primarily due to increases in the rates paid on deposits and other borrowings given the increase in short-term interest rates by the Federal Reserve. The rates paid on our other borrowings increased by 38 basis points in the first quarter of 2017 compared to the same period in 2016 as a result of a change in the overall make-up of our FHLB advances balance which saw an increase in the average balance of our long-term FHLB advances of $1.1 billion, which carry higher yields than our short-term FHLB advances, which increased 21 basis points. The rates paid on our deposits increased 8 basis points during the first quarter of 2017 compared to the same period in 2016 primarily due to the increase in our time deposits yields, which carry a higher interest rate than our interest-bearing demand and money market accounts.

Average balances of our interest-earning assets increased by $1.3 billion, or 5%, in the first quarter of 2017 compared to the same period in 2016 primarily due to a $1.5 billion increase in loans and leases held for investment.

Average balances in our interest-bearing liabilities increased by $0.5 billion, or 2%, in the first quarter of 2017 compared to the same period in 2016 due to increases in the average balance of our deposits of $0.5 billion.

Provision for Loan and Lease Losses

We assess the allowance for loan and lease losses and make provisions for loan and lease losses as deemed appropriate in order to maintain an appropriate allowance for loan and lease losses. Increases in the allowance for loan and lease losses are achieved through provisions for loan and lease losses that are charged against net interest income. Additional allowance may result from a reduction of the net present value (NPV) of our acquired credit impaired (ACI) loans in instances where we have a decrease in our cash flow expectations.

Table of Contents

The following tables provide a breakdown of the provision for loan and lease losses based on the method for determining the allowance at three months ended March 31, 2017 and 2016:



Provision for Loan and Lease Losses									Table 7
	Three Months Ended March 31, 2017
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment			ACI Loans			Total
Residential mortgages	$	318	$	659		$	(854	)	$	123
Commercial and commercial real estate	10,995		367			(24		)	11,338
Equipment financing receivables	547		3,675			—			4,222
Home equity lines and other	51		(54		)	—			(3		)
Total Provision for Loan and Lease Losses	$	11,911	$	4,647		$	(878	)	$	15,680

	Three Months Ended March 31, 2016
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment			ACI Loans			Total
Residential mortgages	$	37	$	3,115		$	(181	)	$	2,971
Commercial and commercial real estate	869		1,044			(22		)	1,891
Equipment financing receivables	1,275		2,419			—			3,694
Home equity lines and other	—		363			—			363
Total Provision for Loan and Lease Losses	$	2,181	$	6,941		$	(203	)	$	8,919

First Quarter of 2017 Compared to First Quarter of 2016

We recorded a provision for loan and lease losses of $15.7 million in the first quarter of 2017, which is an increase of $6.8 million, or 76%, from $8.9 million in the same period in 2016. This increase was comprised of increases in the provisions for our commercial and commercial real estate and equipment financing receivables provisions of $9.4 million and $0.5 million, respectively, which were partially offset by a decrease in the residential mortgage portfolio and home equity lines and other of $2.8 million and $0.4 million, respectively. Increases in the provision for equipment financing receivables collectively evaluated portfolios was the result of increased losses upon default within this portfolio with the provision growing $1.3 million, or 52%. In addition, the provision for specifically evaluated equipment finance receivables decreased in the first quarter of 2017 compared to the same period in 2016 by $0.7 million due to improved credit quality. The increase in the commercial and commercial real estate provision was primarily driven by increases in the provision for specifically evaluated loans of $10.1 million as concerns over the collectability of several large commercial real estate relationships during the year accounted for the majority of the provision recognized for these specifically evaluated loans. These increases were partially offset by decreases in the provision for commercial and commercial real estate loans collectively evaluated of $0.7 million, or 65% which was due to the aforementioned impairment of several loans combined with a shrinking commercial real estate portfolio and growth in the lender finance asset class representing assets that are highly collateralized, revolving and short-term in nature. The decrease in provision on the collectively evaluated residential mortgage portfolio of $2.5 million, or 79%, was due to improved credit quality as evidenced by a reduction in net charge-offs year over year, as well as, a reduction in the past due non-ACI residential mortgage portfolio. In addition, the provision for ACI residential mortgage loans increased by $0.7 million as expectations of future cash flows resulted in slight increases in our valuation allowances. Net charge-offs on the loans held for investment portfolio were $23.8 million in the first quarter of 2017 compared to $3.6 million in the same period in 2016. The net charge-off ratio was 0.41% in the first quarter of 2017 compared to 0.07% in the same period in 2016.

For further discussion of changes in our allowance for loan and lease losses as well as key credit metrics including delinquency profiles, please see the "Loan and Lease Quality" section for information on net charge-offs, non-performing assets, and other factors considered by management in assessing the credit quality of the loan portfolio and establishing our allowance for loan and lease losses.

Table of Contents

Noninterest Income

The following table illustrates the primary components of noninterest income for the periods indicated.



Noninterest Income				Table 8
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
Loan servicing fee income	$	22,908		$	23,441
Amortization of MSR	(15,505		)	(14,731		)
Recovery (impairment) of MSR	22,644			(22,542		)
Net loan servicing income (loss)	30,047			(13,832		)
Gain on sale of loans	447			28,751
Loan production revenue	5,315			5,260
Deposit fee income	2,000			3,102
Other lease income	4,042			4,367
Other	8,406			2,105
Total Noninterest Income	$	50,257		$	29,753

First Quarter of 2017 compared to First Quarter of 2016

Noninterest income increased by $20.5 million, or 69%, in the first quarter of 2017 compared to the same period in 2016. The increase in noninterest income was primarily driven by an increase in net loan servicing income and other income partially offset by a decrease in gain on sale of loans and deposit fee income.

Net loan servicing income increased by $43.9 million in the first quarter of 2017 compared to the same period in 2016. The increase was primarily due to changes in our valuation allowance associated with the fair market value of our MSR. Recovery of our MSR valuation allowance of $22.6 million and MSR impairment of $22.5 million was recorded in the first quarter of 2017 and 2016, respectively. The recovery and impairment of MSR results from differences in expected prepayment rates due to differences in the interest rate environment at March 31, 2017 compared to March 31, 2016. See "Analysis of Statement of Condition" for additional discussion of the changes in valuation allowance associated with our MSR. In addition, loan servicing fee income decreased $0.5 million, or 2%, in the first quarter of 2017 compared to the same period in 2016 primarily due to the $1.1 billion decline in UPB of servicing rights from the first quarter of 2016 to the first quarter of 2017. An increase in the amortization of MSR of $0.8 million in the first quarter of 2017 compared to the same period in 2016 is primarily due changes in prepayment speeds during those periods.

Gain on sale of loans decreased by $28.3 million, or 98%, in the first quarter of 2017 compared to the same period in 2016, primarily driven by a decrease in jumbo sales volumes, a decline in rate locks outstanding at the end of each of those periods as well as fewer commercial and commercial real estate sales. Please see "Segment Results" for a discussion by segment of the changes in gain on sale of loans.

Deposit fee income decreased by $1.1 million, or 36%, in the first quarter of 2017 compared to the same period in 2016 primarily due to a decline in our world markets deposits as a result of the strong dollar.

Other noninterest income increased by $6.3 million, or 299%, in the first quarter of 2017 compared to the same period in 2016 primarily due to a $4.1 million gain related to the early extinguishment of our FHLB advances, $0.9 million of income due to releases of holdbacks related to MSR purchases and a $0.6 million increase in income related to prepayment fees on certain serviced commercial loans acquired in the Business Property Lending, Inc. (BPL) acquisition.

Noninterest Expense

The following table illustrates the primary components of noninterest expense for the periods indicated.



Noninterest Expense			Table 9
	Three Months Ended March 31,
(dollars in thousands)	2017		2016
Salaries, commissions and other employee benefits expense	$	91,633	$	91,640
Equipment expense	16,314		15,917
Occupancy expense	6,608		6,264
General and administrative expense:
Legal and professional fees, excluding consent order expense	6,785		4,998
Credit-related expenses	3,086		4,907
Federal Deposit Insurance Corporation (FDIC) premium assessment and other agency fees	7,362		7,241
Advertising and marketing expense	5,407		4,911
Other	15,931		13,552
Total general and administrative expense	38,571		35,609
Total Noninterest Expense	$	153,126	$	149,430

Table of Contents

First Quarter 2017 Compared to First Quarter 2016

Noninterest expense increased by $3.7 million, or 2%, in the first quarter of 2017 compared to the same period in 2016. The increase in noninterest expense was driven by an increase in occupancy and equipment expense and general and administrative expense.

Salaries, commissions and employee benefits remained relatively flat in the first quarter of 2017 compared to the same period in 2016. However, salaries and related benefits decreased by $3.2 million due to a 5% decrease in our Consumer Banking headcount as origination volumes declined in the first quarter of 2017 compared to the same period in 2016. These decreases were offset by lower deferred origination costs of $3.1 million in the first quarter of 2017 compared to the same period in 2016.

Occupancy and equipment expense increased by $0.7 million, or 3%, in the first quarter of 2017 compared to the same period in 2016 primarily due to an increase in software and licensing costs.

General and administrative expense increased by $3.0 million, or 8%, in the first quarter of 2017 compared to the same period in 2016 primarily due to increases in legal and professional expense and other general and administrative expenses partially offset by a decrease in credit-related expenses.

Legal and professional fees increased by $1.8 million, or 36%, in the first quarter of 2017 compared to the same period in 2016 primarily due to legal and consultant costs related to the pending merger with TIAA.

Credit-related expenses decreased by $1.8 million, or 37%, in the first quarter of 2017 primarily due to a $3.7 million decrease in our reserve for nonrecoverable advances related to our government-insured loans partially offset by an increase in our provision for REO losses and an increase in our production reserves.

Other general and administrative expense increased by $2.4 million, or 18%, primarily due to a $1.8 million consent order accrual recorded in the first quarter of 2017.

Provision for Income Taxes and Effective Tax Rates



Provision for Income Taxes and Effective Tax Rates				Table 10
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
Provision for income taxes	$	22,259		$	17,261
Effective tax rates	36.6		%	38.2		%

For the three months ended March 31, 2017 and 2016, our effective income tax rate differed from the statutory federal income tax rate primarily due to state income taxes.

Segment Results

We evaluate our overall financial performance through three financial reporting segments: Consumer Banking, Commercial Banking, and Corporate Services. To generate financial information by operating segment, we use an internal profitability reporting system which is based on a series of management estimates and allocations. We continually review and refine many of these estimates and allocations, several of which are subjective in nature. Any changes we make to estimates and allocations that may affect the reported results of any business segment do not affect our consolidated financial position or consolidated results of operations.

We use funds transfer pricing in the calculation of each respective operating segment’s net interest income to measure the value of funds used in and provided by an operating segment. The difference between the interest income on earning assets and the interest expense on funding liabilities and the corresponding funds transfer pricing charge for interest income or credit for interest expense results in net interest income. We allocate risk-adjusted capital to our segments based upon the credit, liquidity, operating and interest rate risk inherent in the segment’s asset and liability composition and operations. These capital allocations are determined based upon formulas that incorporate regulatory, GAAP and economic capital frameworks including risk-weighting assets, allocating noninterest expense and incorporating economic liquidity premiums for assets deemed by management to lower liquidity profiles.

Table of Contents

The following table summarizes segment earnings (losses) and total assets for each of our segments as of and for each of the periods shown:



Segments Earnings (Losses) and Segment Assets					Table 11
		Three Months Ended March 31,
(dollars in thousands)		2017			2016
Segment Earnings (Losses)
	Consumer Banking	$	63,150		$	21,692
	Commercial Banking	35,424			56,032
	Corporate Services	(37,778		)	(32,539		)
	Segment earnings	$	60,796		$	45,185
Segment Assets
	Consumer Banking	$	17,696,696		$	16,294,379
	Commercial Banking	10,299,803			10,486,284
	Corporate Services	283,505			298,701
	Eliminations	(503,425		)	(437,965		)
	Total assets	$	27,776,579		$	26,641,399

Table of Contents

The following tables summarize segment income (loss) for each of our segments as of and for each of the periods shown:



Business Segments Selected Financial Information												Table 12A
(dollars in thousands)	Consumer Banking			Commercial Banking			Corporate Services			Eliminations		Consolidated
Three Months Ended March 31, 2017
Net interest income (loss)	$	108,556		$	75,756		$	(4,967	)	$	—	$	179,345
Provision for loan and lease losses	120			15,560			—			—		15,680
Net interest income (loss) after provision for loan and lease losses	108,436			60,196			(4,967		)	—		163,665
Total noninterest income	41,868			8,246			143			—		50,257
Total noninterest expense	87,154			33,018			32,954			—		153,126
Income (loss) before income tax	63,150			35,424			(37,778		)	—		60,796
Adjustment items (pre-tax):
Transaction expense and non-recurring regulatory related expense	2,575			—			2,199			—		4,774
Increase (decrease) in Bank of Florida non-accretable discount	—			(24		)	—			—		(24		)
MSR impairment (recovery)	(22,644		)	—			—			—		(22,644		)
Restructuring cost	—			—			227			—		227
Adjusted income (loss) before income tax ⁽¹⁾	$	43,081		$	35,400		$	(35,352	)	$	—	$	43,129



Business Segments Selected Financial Information												Table 12B
(dollars in thousands)	Consumer Banking			Commercial Banking			Corporate Services			Eliminations		Consolidated
Three Months Ended March 31, 2016
Net interest income (loss)	$	97,520		$	80,568		$	(4,307	)	$	—	$	173,781
Provision for loan and lease losses	3,334			5,585			—			—		8,919
Net interest income (loss) after provision for loan and lease losses	94,186			74,983			(4,307		)	—		164,862
Total noninterest income	15,579			14,035			139			—		29,753
Total noninterest expense	88,073			32,986			28,371			—		149,430
Income (loss) before income tax	21,692			56,032			(32,539		)	—		45,185
Adjustment items (pre-tax):
Transaction expense and non-recurring regulatory related expense	(328		)	—			259			—		(69		)
Increase (decrease) in Bank of Florida non-accretable discount	—			(22		)	—			—		(22		)
MSR impairment (recovery)	22,542			—			—			—		22,542
Restructuring cost, net of tax	118			379			209			—		706
Adjusted income (loss) before income tax ⁽¹⁾	$	44,024		$	56,389		$	(32,071	)	$	—	$	68,342


(1)	Adjusted income (loss) before income tax is a non-GAAP measure of our financial performance and its most directly comparable GAAP measure is income (loss) before income tax. A reconciliation of this non-GAAP financial measure can be found in the Performance Highlights section above and the tables set forth in such section.

Table of Contents

Consumer Banking



Consumer Banking	Table 13
	Three Months Ended March 31,
(dollars in thousands)	2017		2016
Net interest income	$	108,556	$	97,520
Provision for loan and lease losses	120		3,334
Net interest income after provision for loan and lease losses	108,436		94,186
Noninterest income:
Net loan servicing income (loss)	29,625		(14,168		)
Gain on sale of loans	651		22,281
Loan production revenue	3,646		3,787
Deposit fee income	1,915		2,947
Other	6,031		732
Total noninterest income	41,868		15,579
Noninterest expense:
Salaries, commissions and other employee benefits expense	46,035		47,337
Equipment and occupancy expense	11,704		11,591
General and administrative expense	29,415		29,145
Total noninterest expense	87,154		88,073
Segment earnings	$	63,150	$	21,692



Residential Mortgage Lending				Table 14
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
Key Metrics:
Mortgage lending volume:
Agency	$	815,957		$	872,338
Jumbo	695,621			724,536
Other	106,448			200,257
Mortgage lending volume	$	1,618,026		$	1,797,131
Mortgage loans sold: ⁽¹⁾
Agency, excluding GNMA II	$	977,584		$	828,796
Jumbo	276,954			981,304
GNMA II	—			7,308
Other	15,766			5,026
Mortgage loans sold	$	1,270,304		$	1,822,434
Applications	$	1,200,625		$	1,509,883
Rate locks	1,208,922			1,486,128
Mortgage Lending Volume by Channel:
Retail	$	919,425		$	1,253,682
Consumer Direct	347,488			244,149
Correspondent	351,113			299,301
Purchase Activity (%):
Retail	74		%	59		%
Consumer Direct	36		%	8		%
Correspondent	79		%	69		%
Total	67		%	54		%


(1)	Excludes sales of loans to third party servicers out of government insured pool buyouts accounted for under Accounting Standards Codification (ASC) 310-30 since additional cash flows expected and/or realized in the pool are not recognized into earnings immediately but come in as a prospective adjustment to yield for the remainder of the pool.

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First Quarter of 2017 compared to First Quarter of 2016

Consumer Banking segment earnings increased by $41.5 million, or 191%, in the first quarter of 2017 compared to the same period in 2016 primarily due to an increase in net interest income and noninterest income and a decrease in noninterest expense.

Net interest income increased by $11.0 million, or 11%, in the first quarter of 2017 compared to the same period in 2016 due to an increase in interest income of $22.5 million, or 13%, partially offset by an increase in interest expense of $11.4 million, or 16%, in the first quarter of 2017. Please see "Analysis of Statements of Income" for an explanation of changes in average balances and yields/rates. In addition, net interest income after provision for loan and lease losses decreased 15% as a result of changes in the provision for loan and lease losses and allowance for loan and lease losses. Please see "Loan and Lease Quality" for an explanation and rollforward of changes in the ALLL.

Noninterest income increased by $26.3 million, or 169%, in the first quarter of 2017 compared to the same period in 2016. The increase was primarily driven by an increase in net loan servicing income of $43.8 million and other income of $5.3 million partially offset by a decrease in gain on sale of loans of $21.6 million and deposit fee income of $1.0 million in the first quarter of 2017 compared to the same period in 2016. Please see "Analysis of Statements of Income" and "Analysis of Statements of Condition" for an explanation of the changes in the activity related to loan servicing income and mortgage servicing rights, respectively. Gain on sale of loans decreased $21.6 million in the first quarter of 2017 compared to the same period in 2016 primarily due to a decrease of $704.4 million in the amount of jumbo loans sold in the first quarter of 2017 compared to the same period in 2016 and a decrease of $277.2 million of open rate locks at March 31, 2017 compared to March 31, 2016.

Noninterest expense decreased by $0.9 million, or 1%, in the first quarter of 2017 compared to the same period in 2016 primarily due to decreases in salaries, commissions and employee benefits partially offset by increases in equipment and occupancy expense and general and administrative expense. Please see "Analysis of Statements of Income" for an explanation of the changes in the activity related to these items.

Commercial Banking



Commercial Banking				Table 15
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
Net interest income	$	75,756		$	80,568
Provision for loan and lease losses	15,560			5,585
Net interest income after provision for loan and lease losses	60,196			74,983
Noninterest income:
Loan production revenue	1,669			1,472
Other lease income	4,042			4,367
Gain(loss) on sale of loans	(210		)	6,465
Other	2,745			1,731
Total noninterest income	8,246			14,035
Noninterest expense:
Salaries, commissions and other employee expense	15,217			16,216
Equipment and occupancy expense	3,459			3,674
General and administrative expense	14,342			13,096
Total noninterest expense	33,018			32,986
Segment earnings	$	35,424		$	56,032

First Quarter of 2017 compared to First Quarter of 2016

Commercial Banking segment earnings decreased by $20.6 million, or 37%, in the first quarter of 2017 compared to the same period in 2016 primarily due to a decrease in net interest income and noninterest income while noninterest expense remained relatively flat.

Net interest income decreased by $4.8 million, or 6%, in the first quarter of 2017 compared to the same period in 2016 due primarily to a decrease in yields in our commercial real estate and other commercial portfolio as well as a decrease in equipment financing receivables. Please see "Analysis of Statements of Income" for an explanation of changes in average balances and yields/rates. In addition, net interest income after provision for loan losses decreased 20% as a result of changes in the provision for loan and lease losses and allowance for loan and lease losses. Please see "Loan and Lease Quality" for an explanation and rollforward of changes in the ALLL.

Noninterest income decreased by $5.8 million, or 41%, in the first quarter of 2017 compared to the same period in 2016 primarily due to a decrease in other lease income and gain on sale of loans partially offset by an increase in loan production revenue and other income. Gain on sale of loans decreased by $6.7 million due to a decrease in the amount of commercial loans and leases sold. Please see "Analysis of Statements of Income" for a further explanation of the changes in the activity related to these items.

Noninterest expense remained relatively flat in the first quarter of 2017 compared to the same period in 2016 primarily due to decreases in salaries, commissions and other employee expense and and equipment and occupancy expense offset by an increase in general and administrative expense. Please see "Analysis of Statements of Income" for a further explanation of the changes in the activity related to these items.

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Corporate Services



Corporate Services				Table 16
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
Net interest income (loss) after provision for loan and lease losses	$	(4,967	)	$	(4,307	)
Total noninterest income	143			139
Noninterest expense:
Salaries, commissions and employee benefits	30,381			28,087
Equipment and occupancy	7,759			6,916
Other general and administrative	13,861			11,472
Inter-segment allocations	(19,047		)	(18,104		)
Total noninterest expense	32,954			28,371
Segment earnings (loss)	$	(37,778	)	$	(32,539	)

First Quarter of 2017 compared to First Quarter of 2016

Corporate Services segment loss increased by $5.2 million, or 16%, in the first quarter of 2017 compared to the same period in 2016 primarily due to an increase in net interest loss and an increase in noninterest expense.

Net interest loss increased by $0.7 million, or 15%, in the first quarter of 2017 compared to the same period in 2016 primarily due to an increase in interest expense as a result of the subordinated notes issued in March of 2016.

Noninterest expense increased by $4.6 million, or 16%, in the first quarter of 2017 compared to the same period in 2016 primarily due to an increase in salaries, commissions and employee benefits, equipment and occupancy expense and other general and administrative expense.

Salaries, commissions and employee benefits increased by $2.3 million, or 8%, in the first quarter of 2017 compared to the same period in 2016 primarily due to the impact of 2017 merit salary increases, the timing of incentive accruals compared to the prior year and increase in temporary help related to the TIAA transaction. Equipment and occupancy expense increased by $0.8 million, or 12%, in the first quarter of 2017 compared to the same period in 2016 primarily due to higher software and licensing expense. General and administrative expense increased $2.4 million, or 21%, in the first quarter of 2017 compared to the same period in 2016 primarily due to an increase in legal and professional expenses related to the potential TIAA merger.

Analysis of Statements of Condition

Investment Securities

Our overall investment strategy focuses on acquiring investment-grade senior mortgage-backed securities backed by seasoned loans with high credit quality and credit enhancements to generate earnings in the form of interest and dividends while offering liquidity, credit and interest rate risk management opportunities to support our asset and liability management strategy. Within our investment strategy, we also utilize highly rated structured products including Re-securitized Real Estate Mortgage Investment Conduits (Re-REMICs) for the added protection from credit losses and ratings deteriorations that accompany alternative securities along with U.S. Treasury securities which receive favorable treatment when held as collateral for certain derivative positions. All securities investments satisfy our internal guidelines for credit profile and generally have a relatively short duration which helps mitigate interest rate risk arising from changes in market interest rates.

Available for sale securities are used as part of our asset and liability management strategy and may be sold in response to, or in anticipation of, factors such as changes in market conditions and interest rates, changes in security prepayment rates, liquidity considerations and regulatory capital requirements.

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The following tables show the amortized cost, gross unrealized gains and losses, fair value and carrying amount of investment securities as of March 31, 2017 and December 31, 2016:



Investment Securities									Table 17
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Carrying Amount
March 31, 2017
Available for sale:
Residential Collateralized Mortgage Obligation (CMO) securities - nonagency	$	413,129	$	4,397	$	3,371	$	414,155	$	414,155
U.S. Treasury securities	31,925		—		17		31,908		31,908
Asset-backed securities (ABS)	1,376		—		255		1,121		1,121
Other	217		192		—		409		409
Total available for sale securities	446,647		4,589		3,643		447,593		447,593
Held to maturity:
Residential CMO securities - agency	2,789		86		—		2,875		2,789
Residential mortgage-backed securities (MBS) - agency	89,683		1,406		561		90,528		89,683
Total held to maturity securities	92,472		1,492		561		93,403		92,472
Total investment securities	$	539,119	$	6,081	$	4,204	$	540,996	$	540,065

December 31, 2016
Available for sale:
Residential CMO securities - nonagency	$	452,035	$	4,219	$	3,836	$	452,418	$	452,418
U.S. Treasury securities	31,879		—		12		31,867		31,867
Asset-backed securities	1,426		—		261		1,165		1,165
Other	225		161		—		386		386
Total available for sale securities	485,565		4,380		4,109		485,836		485,836
Held to maturity:
Residential CMO securities - agency	2,809		87		—		2,896		2,809
Residential MBS - agency	86,648		1,181		687		87,142		86,648
Total held to maturity securities	89,457		1,268		687		90,038		89,457
Total investment securities	$	575,022	$	5,648	$	4,796	$	575,874	$	575,293

Residential — Nonagency

At March 31, 2017, our residential nonagency portfolio consisted entirely of investments in residential nonagency CMO securities. The fair value of investments in residential nonagency CMO securities totaled $414.2 million, or 77%, of our investment securities portfolio. The fair value of our residential nonagency CMO securities decreased to $414.2 million at March 31, 2017 from $452.4 million at December 31, 2016, or 8%, primarily due to reductions in amortized cost resulting from principal payments received of $38.9 million.

Our residential nonagency CMO securities are secured by seasoned first-lien fixed and adjustable rate residential mortgage loans backed by loan originators other than government sponsored entities (GSEs). Mortgage collateral is structured into a series of classes known as tranches, each of which contains a different maturity profile and pay-down priority in order to suit investor demands for duration, yield, credit risk and prepayment volatility. We have primarily invested in CMO securities rated in the highest category assigned by a nationally recognized statistical ratings organization. Many of these securities are Re-REMICs, which adds credit subordination to provide protection against future losses and rating downgrades. Re-REMICs constituted $114.4 million, or 28%, of our residential nonagency CMO investment securities at March 31, 2017.

We have internal guidelines for the credit quality and duration of our residential nonagency CMO securities portfolio and monitor these on a regular basis. At March 31, 2017, the portfolio carried a weighted average Fair Isaac Corporation (FICO), score of 739, a weighted average amortized loan-to-value ratio (LTV), of 52%, and was seasoned an average of 146 months. This portfolio includes protection against credit losses through subordination in the securities structures and borrower equity.

Residential — Agency

At March 31, 2017, our residential agency portfolio consisted of both residential agency CMO securities and residential agency MBS securities. The carrying value of investments in residential agency CMO securities totaled $2.8 million, or 1%, of our investment securities portfolio. The carrying value of our residential agency MBS portfolio totaled $89.8 million, or 17%, of our investment securities portfolio. Our residential agency portfolio is secured by seasoned first-lien fixed and adjustable rate residential mortgage loans insured by GSEs.

The carrying value of our residential agency CMO securities remained consistent at $2.8 million from December 31, 2016 to March 31, 2017. The carrying value of our residential agency MBS securities increased by $3.0 million, or 3%, to $89.8 million at March 31, 2017, from $86.8 million at December 31, 2016 primarily due to purchases of MBS securities.

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U.S. Treasury Securities

At March 31, 2017, the Company held $31.9 million in U.S. Treasury securities to serve as collateral for certain of our derivative positions. These securities were purchased during the quarter ended September 30, 2016, and have a remaining maturity of less than one year and receive favorable collateral treatment compared to cash and thereby reduce the cash collateral required.

Other investments is comprised of residential agency CMO securities, residential agency MBS, and equity securities.

Loans Held for Sale

We typically transfer originated or acquired residential mortgage loans, commercial and commercial real estate loans and equipment financing receivables to various financial institutions, government agencies, or GSEs. In addition, we enter into loan securitization transactions related to certain conforming residential mortgage loans. In connection with the conforming loan transactions, loans are converted into mortgage-backed securities issued primarily by the Federal Home Loan Mortgage Corporation (FHLMC), Fannie Mae (FNMA) or GNMA, and are subsequently sold to third party investors. Typically, we account for these transfers as sales and retain the right to service the loans. For conforming transactions and certain non-conforming transactions, we sell whole loans outright to qualified institutional buyers and typically retain the related servicing rights.

The following table presents the balance of each major category in our loans held for sale portfolio at March 31, 2017 and December 31, 2016:



Loans Held for Sale			Table 18
(dollars in thousands)	March 31, 2017		December 31, 2016
Mortgage warehouse (carried at fair value)	$	448,697	$	622,182
Other residential (carried at fair value)	940,656		649,711
Total loans held for sale carried at fair value	1,389,353		1,271,893
Other residential	10,320		130,674
Commercial and commercial real estate	40,441		40,696
Total loans held for sale carried at lower of cost or market	50,761		171,370
Total loans held for sale	$	1,440,114	$	1,443,263

Mortgage Warehouse

At March 31, 2017, our mortgage warehouse loans totaled $448.7 million, or 31%, of our total loans held for sale portfolio. Our mortgage warehouse loans are largely comprised of agency deliverable products that we typically sell within three months subsequent to origination. We economically hedge our mortgage warehouse portfolio with forward purchase and sales commitments designed to protect against potential changes in fair value. Due to the short duration that these loans are present on our balance sheet and due to the burden of complying with the requirements of hedge accounting, we have elected fair value accounting on this portfolio of loans. Mortgage warehouse loans decreased by $173.5 million, or 28%, from December 31, 2016 due to $977.6 million of mortgage warehouse loan sales during the first quarter of 2017, which was partially offset by originations of $816.0 million during the same period.

The following table represents the length of time the mortgage warehouse loans have been classified as held for sale:



Mortgage Warehouse			Table 19
(dollars in thousands)	March 31, 2017		December 31, 2016
30 days or less	$	266,453	$	390,080
31- 90 days	112,999		154,886
Greater than 90 days	69,245		77,216
Total mortgage warehouse	$	448,697	$	622,182

Subsequent to March 31, 2017, we sold $0.5 million of the mortgage warehouse loans classified as held for sale that were held for more than 90 days. The remaining $68.8 million of warehouse loans held for more than 90 days were primarily high-balance conforming agency products.

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Other Residential Loans Carried at Fair Value

At March 31, 2017, our other residential loans carried at fair value totaled $940.7 million, or 65%, of our total loans held for sale portfolio. Other residential loans are comprised of our originated fixed-rate jumbo preferred loans that we sell to institutional investors. Due to the short duration that these loans are present on our balance sheet, we have elected fair value accounting on this portfolio of loans. Electing to use fair value allows for a better offset of the changes in the fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements of hedge accounting. Other residential loans carried at fair value increased by $290.9 million, or 45%, from $649.7 million at December 31, 2016, due to originations of $481.3 million during the three months ended March 31, 2017. These originations were offset by sales of loans with a recorded investment of $184.6 million, and paydowns and payoffs of $5.9 million during the three months ended March 31, 2017. The remaining $0.1 million relates to increases in the fair value of the loans while present on our balance sheet.

The following table represents the length of time our other residential loans carried at fair value have been classified as held for sale:



Other Residential Loans Carried at Fair Value			Table 20
(dollars in thousands)	March 31, 2017		December 31, 2016
90 days or less	$	482,585	$	342,608
91- 180 days	195,516		127,304
Greater than 180 days	262,555		179,799
Total other residential loans carried at fair value	$	940,656	$	649,711

Other Residential Loans Carried at Lower of Cost or Market Value (LOCOM)

Our other residential loans carried at LOCOM decreased by $120.4 million from $130.7 million at December 31, 2016 to $10.3 million at March 31, 2017. During the three months ended March 31, 2017, we transferred $512.8 million of government insured pool buyout loans from loans held for investment to loans held for sale and repurchased $9.8 million of residential mortgage loans. This activity was offset by whole loan sales of our government insured pool buyout loans of $512.8 million and residential mortgage loan sales of $94.0 million to third parties during the three months ended March 31, 2017. We also transferred $36.9 million of residential mortgage loans from held for sale to held for investment.

Commercial and Commercial Real Estate

Our commercial and commercial real estate loans totaled $40.4 million, or 3%, of our total loans held for sale at March 31, 2017, which was a decrease of $0.3 million, or 1%, from December 31, 2016. During the three months ended March 31, 2017, we had paydowns of $0.3 million.

Loans and Leases Held for Investment

The following table presents the balance of each major category in our loans and leases held for investment portfolio at March 31, 2017 and at December 31, 2016:



Loans and Leases Held for Investment	Table 21
(dollars in thousands)	March 31, 2017			December 31, 2016
Residential mortgages:
Residential	$	6,514,620		$	6,564,126
Government insured pool buyouts	5,501,861			5,249,552
Commercial and commercial real estate:
Mortgage warehouse finance	2,121,810			2,592,799
Lender finance	1,640,250			1,589,554
Other commercial and commercial real estate	3,787,206			3,756,509
Equipment financing receivables	2,562,188			2,560,105
Home equity lines and other	1,273,057			1,244,332
Total loans and leases, net of unearned income	23,400,992			23,556,977
Allowance for loan and lease losses	(95,158		)	(103,304		)
Total loans and leases held for investment, net	$	23,305,834		$	23,453,673
The balances presented above include:
Net purchase loan and lease discounts	$	110,650		$	104,558
Net deferred loan and lease origination costs	124,547			123,484

Please see the "Analysis for the Allowance for Loan and Lease Losses" section for a more detailed description of the composition of these balances.

Residential Mortgage Loans

At March 31, 2017, our residential mortgage loans totaled $6.5 billion, or 28%, of our total held for investment loan and lease portfolio. We primarily offer our customers residential closed-end mortgage loans typically secured by first liens on one-to-four family residential properties.

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Residential mortgage loans decreased by $49.5 million, or 1%, to $6.5 billion at March 31, 2017 from $6.6 billion at December 31, 2016. The decrease was primarily due to paydowns and payoffs of existing loans, partially offset by retained originations of $255.7 million in UPB and acquisitions of $9.9 million in UPB during the three months ended March 31, 2017.

Government Insured Buyouts

At March 31, 2017, our government insured buyout loan portfolio totaled $5.5 billion, or 24%, of our total loans and leases held for investment portfolio. Government insured pool buyouts increased by $0.3 billion, or 5%, to $5.5 billion at March 31, 2017 from $5.2 billion at December 31, 2016. The increase was primarily the result of mortgage pool buyout purchases with a UPB of $1.2 billion partially offset by net loan transfers of $0.5 billion in net recorded investment from loans held for investment (LHFI) to loans held for sale (LHFS), $0.4 billion of delinquent loans reaching foreclosure, and paydowns and payoffs of existing loans.

We have a history of servicing Federal Housing Administration (FHA) loans. As a servicer, the buyout opportunity is the right to purchase above market rate, government insured loans at par (i.e. the amount that has passed through to the GNMA security holder when repurchased). For banks like EB, with cost effective sources of short-term capital, this strategy represents a very attractive return with limited additional investment risk.

We also acquire mortgage pool buyouts through third-party acquisitions. At March 31, 2017, most of the mortgage pool buyout purchases noted above represent acquisitions from third parties with those parties retaining the related servicing rights. For these acquired loans, we initially record the assets at the acquisition price which includes attribution of the purchase price to accrued interest, UPB and discount or premium. Given that these assets have experienced credit deterioration since origination and we don't expect to receive all contractual principal and interest payments, we have determined that they are ACI loans. After the loans have been individually identified as ACI loans, we pool these loans based on common characteristics. As a result of this distinction, interest income is recorded based on the accretion rate which is the implied effective interest rate based on the expected cash flows of the pool and the net recorded investment in the pool. Included in the estimated cash flows are the timing of foreclosure and the timing and proceeds from sales of these loans. Any increase in expected and/or excess of cash flows received is taken as an adjustment to the purchase discount associated with the pool, assuming there has not been a previous impairment, and is recognized through an adjustment to the prospective yield. This type of structure impacts net interest income while having an immaterial impact to gain on sale revenue, and such deferral of prospective yield through the balance sheet may result in growth in the deferred purchase discount due to changes in expected cash flows. Noninterest expense does not include the fixed and variable costs of the day to day servicing of these defaulted assets. A minority of our servicing contracts include language which requires us to bear the risk of loss associated with advances that are not eligible for reimbursement by the FHA.

Before we contract with a third party to service a portion of our government insured buyout portfolio, we perform due diligence to ensure the servicer is (1) an approved servicer of mortgage loans for the various GSEs and other government agencies, (2) properly licensed and qualified to do business and is in good standing in each jurisdiction in which such licensing and qualification is necessary, (3) an approved servicer for any nationally recognized insurer providing mortgage insurance on the loans being serviced, and (4) qualified to act as servicer, and we confirm that no event has occurred which would make the third party unable to comply with all such eligibility requirements or would require notification to the GSEs or other government agencies.

Each GNMA pool is insured or guaranteed by one of several federal government agencies, including the Federal Housing Administration, Department of Veterans’ Affairs (VA) or the Department of Agriculture’s Rural Housing Service. The loans must at all times comply with the requirements for maintaining such insurance or guarantee. Prior to our acquisition of these loans, we perform due diligence to ensure a valid guarantee is in place; therefore we believe that a negligible amount of principal is at risk.

Duration is a potential risk of holding these loans and exposes us to interest rate risk and the risk of a funding mismatch. In most cases, acquired loans or loans purchased out of our servicing assets are greater than 89 days past due upon purchase. Loans that go through foreclosure have an expected duration of one to three years, depending on the state’s servicing timelines. Bankruptcy proceedings and loss mitigation requirements could extend the duration of these loans. Extensions for these reasons do not impact the insurance or guarantee and are modeled into the acquisition price.

Loans can re-perform on their own or through loss mitigation and/or modification. Most loans are 20 to 30 year fixed rate instruments. Re-performing loans earn a higher yield as they can earn an above market note rate rather than a government guaranteed reimbursement rate. In order to mitigate the duration risk on re-performing loans, EverBank has the ability to sell those loans into the secondary market.

Under these government programs, servicing operations must comply with the government agencies' servicing requirements in order to avoid interest curtailments (principal is not at risk). As a result, operational capacity poses a risk to the potential claim payment through missed servicing milestones.

Mortgage Warehouse Finance

At March 31, 2017, our mortgage warehouse finance portfolio totaled $2.1 billion, or 9%, of our total held for investment loan and lease portfolio. Our mortgage warehouse finance business provides short-term revolving facilities, primarily collateralized by agency and government residential loans, to mid-sized, high-quality mortgage banking companies across the country.

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Mortgage warehouse finance decreased by $471.0 million, or 18%, to $2.1 billion at March 31, 2017 from $2.6 billion at December 31, 2016. This change was due to decreased utilization by existing customers of $471.0 million. Due both to the short-term, revolving nature of these lines, which generally turn over at least every 90 days, and our customer's focus on residential financing, fluctuations in utilization rates noted between periods are generally driven by a strengthening or weakening in residential mortgage demand as well as our sales and marketing efforts.

Lender Finance

At March 31, 2017, our lender finance portfolio totaled $1.6 billion, or 7%, of our total held for investment loan and lease portfolio. Our lender finance business provides revolving lines of credit and term loans secured by equipment and receivables primarily to specialty finance companies on a national basis. These specialty finance companies are distributed among multiple sectors including healthcare, air, rail, container, middle market lender, equipment leasing and specialty lending sectors.

Our lender finance portfolio increased by $50.7 million, or 3%, to $1.6 billion at March 31, 2017 from $1.6 billion at December 31, 2016. This increase was primarily due to new originations of $59.8 million and acquisitions of $23.8 million which were partially offset by decreases in utilization by existing customers of $32.2 million. Due both to the short-term, revolving nature of these lines and the diversified operations of our customers within multiple sectors, fluctuations in utilization rates noted between periods are generally driven by changes in the need for specialty financing as impacted by overall economic developments within the U.S. economy as well as our sales and marketing efforts.

Other Commercial and Commercial Real Estate

At March 31, 2017, our other commercial and commercial real estate portfolio totaled $3.8 billion, or 16%, of our total held for investment loan and lease portfolio. Other commercial and commercial real estate business consists of asset-based lending, owner-occupied and non-owner occupied commercial real estate, and other commercial and industrial loans.

Other commercial and commercial real estate increased by $30.7 million, or 1%, to $3.8 billion at March 31, 2017 from $3.8 billion at December 31, 2016. This change was primarily due to originations of $135.2 million, partially offset by paydowns and payoffs.

Equipment Financing Receivables

Equipment financing receivables increased by $2.1 million, or less than 1%, to $2.6 billion, or 11%, of our total held for investment loan and lease portfolio at March 31, 2017 from $2.6 billion at December 31, 2016. The increase was the result of originations of $256.5 million and earned income of $32.4 million, partially offset by paydowns on existing loan and lease receivables and transfers to held for sale of $11.6 million. Our equipment finance portfolio generally consists of short-term and medium-term leases and loans secured by essential use office product, healthcare, industrial, trucking and information technology equipment to small and mid-size lessees and borrowers.

Home Equity Lines and Other

At March 31, 2017, our home equity lines and other consumer loans totaled $1.3 billion, or 5%, of our total held for investment loan and lease portfolio, an increase of $28.7 million, or 2%, from $1.2 billion at December 31, 2016. This increase was primarily the result of originations of $74.3 million partially offset by paydowns on our existing lines of credit. Our other consumer loans include direct personal loans, credit card loans and lines of credit, automobile and other loans to our clients which are generally secured by personal property. Lines of credit are generally floating rate loans that are unsecured or secured by personal property.

Mortgage Servicing Rights

The following table presents the change in our MSR portfolio for the three months ended March 31, 2017 and 2016:



Change in Mortgage Servicing Rights				Table 22
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
Balance, beginning of period	$	273,941		$	335,280
Originated servicing rights capitalized upon sale of loans	12,771			14,759
Amortization	(15,505		)	(14,731		)
Decrease (increase) in valuation allowance	22,644			(22,542		)
Other	(125		)	(95		)
Balance, end of period	$	293,726		$	312,671
Valuation allowance:
Balance, beginning of period	$	73,170		$	11,778
Increase in valuation allowance	—			22,542
Recoveries	(22,644		)	—
Balance, end of period	$	50,526		$	34,320

We carry MSR at amortized cost net of any required valuation allowance. We amortize MSR in proportion to and over the period of estimated net servicing income and evaluate MSR quarterly for impairment.

Additions of originated servicing rights decreased by $2.0 million, or 13%, in the first quarter of 2017 compared to the same period in 2016 primarily due to a decrease of $227.6 million, or 16%, in residential mortgage loans sold with servicing retained.

Amortization expense increased by $0.8 million, or 5%, during the first quarter of 2017 compared to the same period in 2016, primarily due to an increase in expected prepayments in the first quarter of 2017 compared to the same period in 2016. The increase in expected prepayments lead to a shortening in the weighted average life of the MSR, which increased amortization expense.

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During the three months ended March 31, 2017 we recorded a recovery of MSR of $22.6 million primarily due to the recent stabilization experienced within the interest rate environment. BMR has increased by one basis point since November 30, 2016. This recovery decreased the valuation allowance to $50.5 million at March 31, 2017. As of March 31, 2016, we had a valuation allowance of $34.3 million.

Other Assets

The following table sets forth other assets by category as of March 31, 2017 and December 31, 2016:



Other Assets			Table 23
(dollars in thousands)	March 31, 2017		December 31, 2016
Foreclosure claims receivable, net of allowance of $13,864 and $14,722, respectively	$	543,391	$	527,848
Accrued interest receivable	161,884		156,937
Goodwill	46,859		46,859
Servicing advances, net of allowance of $5,035 and $5,554, respectively	42,582		53,428
Fair value of derivatives, net	40,036		52,605
Equipment under operating leases	36,846		38,265
Other real estate owned (OREO), net of allowance of $2,929 and $2,727, respectively	32,005		25,515
Margin receivable, net	21,011		20,361
Corporate advances, net of allowance of $389 and $385, respectively	18,273		17,963
Prepaid assets	14,172		13,839
Income tax receivable, net	4,797		2,827
Intangible assets, net	817		996
Other	49,878		46,423
Total other assets	$	1,012,551	$	1,003,866

Other assets increased by $8.7 million, or 1%, to $1.0 billion at March 31, 2017 from $1.0 billion at December 31, 2016. The increase was driven primarily by increases in other real estate owned, accrued interest receivable, foreclosure claims receivable and income tax receivable which were partially offset by decreases in the fair value of derivatives, servicing advances and equipment under operating leases.

Foreclosure claims receivable increased by $15.5 million, or 3%, from December 31, 2016 to March 31, 2017. The increase was primarily due to claims received partially offset by continued purchases of government insured residential mortgage loans where the loans are already in foreclosure.

Accrued interest receivable increased by $4.9 million, or 3%, from December 31, 2016 to March 31, 2017. The increase was primarily due to an increase in the period end balance of our government insured pool buyouts to $5.5 billion at March 31, 2017, as our government insured pool buyout purchases are accounted for under ASC 310-30 and remain on accrual irrespective of delinquency due to the related government guarantee and our ability to estimate expected cash flows.

Servicing advances decreased by $10.8 million, or 20%, from December 31, 2016 to March 31, 2017. The decrease was primarily due to paydowns of $25.2 million, which was partially offset by $15.8 million in additional advances in the first three months of 2017.

Fair value of derivatives decreased by $12.6 million from December 31, 2016 to March 31, 2017. The decrease was primarily due to derivatives associated with forward loan purchase agreements. For further information on this decrease see Note 10, for the schedule of derivative fair values.

Equipment under operating leases decreased by $1.4 million, or 4%, from December 31, 2016 to March 31, 2017. The decrease was primarily due to an overall decline in the operating leases.

Other real estate owned increased by $6.5 million, or 25%, from December 31, 2016 to March 31, 2017. The increase was primarily due to $13.9 million in additional OREO acquired, which was partially offset by the sale of OREO of $6.3 million and a $1.0 million increase in the reserve.

Income taxes receivable increased by $2.0 million, or 70%, from December 31, 2016 to March 31, 2017. The increase was primarily caused by state estimated tax payments made during the quarter. This was partially offset by our income tax expense accrual. The overall change was a net increase in the income tax balance for the quarter.

Deferred Tax Liability

Net deferred tax liability increased by $23.8 million, or 39%, from $61.3 million at December 31, 2016 to $85.2 million at March 31, 2017. The increase was primarily due to tax adjustments related to equipment leases, mortgage servicing rights, and the tax effect of other comprehensive income adjustments related to interest rate swaps and mark-to-market adjustments.

Accumulated Other Comprehensive Income

Accumulated other comprehensive loss decreased by $5.4 million, or 10%, to a loss of $46.2 million at March 31, 2017, from a loss of $51.5 million at December 31, 2016, primarily due to the reclassifications of unrealized losses during the period into income on interest rate swaps as well as changes in fair value related to our debt securities and interest rate swaps.

Loan and Lease Quality

We use a comprehensive methodology to monitor credit quality and prudently manage credit concentration within our portfolio of loans and leases. Our underwriting policies and practices govern the risk profile, credit and geographic concentration for our loan and lease portfolios.

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We also have a comprehensive methodology to monitor these credit quality standards, including a risk classification system that identifies potential problem loans based on risk characteristics by loan type as well as the early identification of deterioration at the individual loan level. In addition to our ALLL, we have additional protections against potential credit losses, including credit indemnification agreements, purchase discounts on acquired loans and leases and other credit-related reserves, such as those on unfunded commitments.

Discounts on Acquired Loans and Lease Financing Receivables

For acquired credit-impaired, or ACI, loans accounted for under accounting standards codification (ASC) 310-30, we periodically reassess cash flow expectations at a pool or loan level. In the case of improving cash flow expectations for a particular loan or pool of loans, we reclassify an amount of non-accretable difference as accretable yield, thus increasing the prospective yield of the pool. In the case of deteriorating cash flow expectations, we record a provision for loan or lease losses following the allowance for loan loss framework. For more information on ACI loans accounted for under ASC 310-30, see Note 5 in our condensed consolidated financial statements.

The following table presents a bridge from UPB, or contractual net investment, to carrying value for ACI loans accounted for under ASC 310-30 at March 31, 2017 and December 31, 2016:



Carrying Value of ACI Loans							Table 24
(dollars in thousands)	Residential			Commercial and Commercial Real Estate			Total
Under ASC 310-30
March 31, 2017
UPB or contractual net investment	$	4,861,934		$	50,548		$	4,912,482
Plus: contractual interest due or unearned income	3,387,026			15,569			3,402,595
Contractual cash flows due	8,248,960			66,117			8,315,077
Less: nonaccretable difference	3,115,774			407			3,116,181
Less: Allowance for loan losses	7,915			11			7,926
Expected cash flows	5,125,271			65,699			5,190,970
Less: accretable yield	367,801			19,522			387,323
Carrying value	$	4,757,470		$	46,177		$	4,803,647
Carrying value as a percentage of UPB or contractual net investment	98		%	91		%	98		%
December 31, 2016
UPB or contractual net investment	$	4,590,807		$	56,746		$	4,647,553
Plus: contractual interest due or unearned income	3,216,264			17,375			3,233,639
Contractual cash flows due	7,807,071			74,121			7,881,192
Less: nonaccretable difference	2,967,701			872			2,968,573
Less: Allowance for loan losses	8,769			35			8,804
Expected cash flows	4,830,601			73,214			4,903,815
Less: accretable yield	340,148			21,193			361,341
Carrying value	$	4,490,453		$	52,021		$	4,542,474
Carrying value as a percentage of UPB or contractual net investment	98		%	92		%	98		%

In our residential ACI portfolio, a reduction in the impairment reserve of $0.9 million was recorded for the three months ended March 31, 2017. Within this portfolio, we reclassified $1.6 million to accretable yield due to an increase in undiscounted expected cash flows of our government insured buyout portfolio. The revisions to the expected cash flows were a result of continued monitoring and analytics available to us given the increase in portfolio balances and historical activity related to these assets. The actual cash flows that have been experienced over the past quarter allow for an increase in the weighted average yield on the portfolio increased.

In our commercial and commercial real estate ACI portfolio, a reduction in the impairment reserve of less than $0.1 million was recorded for the three months ended March 31, 2017 due to improving expected cash flows within certain pools. Within this portfolio, we also reclassified $0.4 million from accretable yield due to a reduction in undiscounted expected cash flows. This reduction was primarily the result of unscheduled principal paydowns and payoffs, which drove a reduction in the expected cash flows.

Problem Loans and Leases

Loans and leases are placed on nonaccrual status when, in the judgment of management, the probability of collection of interest is deemed to be insufficient to warrant further accrual, which is generally when the loan becomes 90 days past due as defined by the OCC, with the exception of government insured loans and ACI loans. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is reversed from interest income, and both the accrual of interest income and the amortization of unamortized deferred fees, costs, discounts and premiums are suspended. Concurrent with the placing of a loan on nonaccrual status, an assessment must be performed, considering both the creditworthiness of the borrower and the value of any collateral underlying the loan, to determine whether doubt exists about the collectability of the recorded investment in the loan. If collectability of the recorded investment in the loan is in doubt, any payments received subsequent to placing the loan on nonaccrual status are applied using the cost recovery method reducing the recorded investment to the extent necessary to eliminate such doubt. Once it can be determined that no doubt exists regarding the collectability of the recorded investment in the loan, subsequent interest payments may be recorded as interest income on a cash basis.

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For purposes of disclosure in the table below, we exclude government insured pool buyout loans from our definition of non-performing loans and leases. We also exclude ACI loans from non-performing status because we expect to fully collect their new carrying value which reflects purchase discounts. If we are unable to reasonably estimate future cash flows, these loans may be classified as nonaccrual loans and interest income will not be recognized until the timing and amount of future cash flows can be reasonably estimated.

Real estate we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as OREO until sold, and is carried at estimated fair value less estimated costs to sell. For purposes of disclosure in the table below, we exclude OREO acquired as a result of foreclosing on loans originated under the Federal Housing Administration insured home equity conversion mortgage program as we expect to fully collect the value of the OREO.

In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a troubled debt restructuring (TDR). Loans restructured with both terms and a rate that are commensurate with a new loan of comparable risk at the time the contract is modified are not considered to be impaired loans in calendar years subsequent to the restructuring.

The following table sets forth the composition of our non-performing assets (NPA) including nonaccrual, accruing loans and leases past due 90 or more days, TDR and OREO, as of the dates indicated. The balances of NPA reflect the net investment in such assets including deductions for purchase discounts.



Non-Performing Assets⁽¹⁾				Table 25
(dollars in thousands)	March 31, 2017			December 31, 2016
Nonaccrual loans and leases:
Consumer Banking:
Residential mortgages	$	31,832		$	32,405
Home equity lines and other	6,256			7,083
Commercial Banking:
Commercial and commercial real estate	79,165			102,255
Equipment financing receivables	40,969			41,141
Total nonaccrual loans and leases	158,222			182,884
Accruing loans 90 days or more past due	—			—
Total non-performing loans (NPL)	158,222			182,884
Other real estate owned	8,622			11,390
Total non-performing assets	166,844			194,274
Troubled debt restructurings less than 90 days past due	15,460			14,118
Total NPA and TDR ⁽¹⁾	$	182,304		$	208,392
Total NPA and TDR	$	182,304		$	208,392
Government insured 90 days or more past due still accruing	3,928,264			3,725,159
Loans accounted for under ASC 310-30:
90 days or more past due	2,705			3,437
Total regulatory NPA and TDR	$	4,113,273		$	3,936,988
Adjusted credit quality ratios: ⁽¹⁾
NPL to total loans	0.64		%	0.73		%
NPA to total assets	0.60		%	0.70		%
NPA and TDR to total assets	0.66		%	0.75		%
Credit quality ratios including government insured loans and loans accounted for under ASC 310-30 :
NPL to total loans	16.52		%	15.71		%
NPA to total assets	14.75		%	14.09		%
NPA and TDR to total assets	14.81		%	14.14		%


(1)	We define NPA as nonaccrual 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 ACI loans accounted for under ASC 310-30 because we expect to fully collect the carrying value of such loans.

Total NPA and TDR decreased by $26.1 million, or 13%, to $182.3 million at March 31, 2017 from $208.4 million at December 31, 2016. This decrease was comprised of a $24.7 million decrease in nonaccrual loans and leases and a $2.8 million decrease in real estate owned, partially offset by an increase of $1.3 million in TDRs less than 90 days past due. The decrease in nonaccrual loans and leases was primarily attributable to a decrease of $23.1 million, or 23%, in nonaccrual commercial and commercial real estate loans, decrease of $0.8 million, or 12%, in nonaccrual home equity lines and other, and a decrease of $0.6 million, or 2%, in nonaccrual residential mortgages. The decrease in nonaccrual commercial and commercial real estate loans was primarily the result of charge-offs totaling $19.7 million on two commercial relationships impaired in the prior year.

Total regulatory NPA and TDR increased to $4.1 billion at March 31, 2017 from $3.9 billion at December 31, 2016, a total increase of $176.3 million for the three months ended March 31, 2017. The increase in total regulatory NPA and TDR was primarily driven by an increase of $203.1 million, or 5%, in government insured loans 90 days or more past due still accruing which is reflective of the increase in government insured pool buyouts in our loans held for investment portfolio.

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We use an asset risk classification system in compliance with guidelines established by the OCC Handbook as part of our efforts to monitor asset quality. In connection with examinations of insured institutions, examiners have the authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard,” “doubtful,” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable and there is a high probability of loss based on currently existing facts, conditions and values. An asset classified as loss is considered uncollectible and of such little value that continuance as an asset is not warranted. Commercial loans with adverse classifications are reviewed by the commercial credit committee of our executive credit committee monthly.

In addition to the problem loans described above, as of March 31, 2017, we had special mention loans and leases totaling $51.7 million, or 0.2% of the total loan portfolio, which are not included in either the non-accrual or 90 days past due loan and lease categories. Special mention loans exhibit potential credit weaknesses or downward trends that may result in future rating downgrades, but no loss of principal or interest is expected at this time. Special mention loans and leases decreased by $9.7 million, or 16%, to $51.7 million at March 31, 2017, from $61.5 million at December 31, 2016. This decrease in special mention loans and leases was primarily comprised of a $8.2 million decrease in special mention equipment financing receivables.

During the three months ended March 31, 2017, $1.6 million of interest income would have been recognized in accordance with contractual terms had nonaccrual loans and TDRs, excluding ACI loans, been current throughout the entire period. For these loans, $0.2 million was included in net interest income for the three months ended March 31, 2017.

Analysis for the Allowance for Loan and Lease Losses

The following table provides an analysis of the ALLL, provision for loan and lease losses and net charge-offs for the three months ended March 31, 2017 and 2016:



Allowance for Loan and Lease Losses Activity				Table 26
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
ALLL, beginning of period	$	103,304		$	78,137
Charge-offs:
Consumer Banking:
Residential mortgages	1,058			1,845
Home equity lines and other	331			219
Commercial Banking:
Commercial and commercial real estate	19,999			69
Equipment financing receivables	3,525			2,564
Total charge-offs	24,913			4,697
Recoveries:
Consumer Banking:
Residential mortgages	150			232
Home equity lines and other	159			80
Commercial Banking:
Commercial and commercial real estate	314			77
Equipment financing receivables	464			737
Total recoveries	1,087			1,126
Net charge-offs	23,826			3,571
Provision for loan and lease losses	15,680			8,919
ALLL, end of period	$	95,158		$	83,485
Net charge-offs to average loans held for investment	0.41		%	0.07		%

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Net charge-offs for the three months ended March 31, 2017 totaled $23.8 million, an increase of $20.3 million over the three months ended March 31, 2016. The increase in net charge-offs is primarily the result of charge-offs associated with our commercial real estate loan portfolio.

The tables below sets forth the calculation of the ALLL based on the method for determining the allowance along with the related UPB.



Analysis of Loan and Lease Losses																Table 27
	March 31, 2017									December 31, 2016
(dollars in thousands)	Excluding ACI Loans			ACI Loans			Total			Excluding ACI Loans			ACI Loans			Total
Residential mortgages	$	20,064		$	7,915		$	27,979		$	19,995		$	8,769		$	28,764
Commercial and commercial real estate	39,583			11			39,594			47,906			35			47,941
Equipment financing receivables	21,056			—			21,056			19,895			—			19,895
Home equity lines and other	6,529			—			6,529			6,704			—			6,704
Total ALLL	$	87,232		$	7,926		$	95,158		$	94,500		$	8,804		$	103,304
ALLL as a percentage of loans and leases held for investment	0.47		%	0.16		%	0.41		%	0.50		%	0.19		%	0.44		%

Residential mortgages	$	7,251,096		$	4,765,385		$	12,016,481		$	7,314,456		$	4,499,222		$	11,813,678
Commercial and commercial real estate	7,503,078			46,188			7,549,266			7,886,806			52,056			7,938,862
Equipment financing receivables	2,562,188			—			2,562,188			2,560,105			—			2,560,105
Home equity lines and other	1,273,057			—			1,273,057			1,244,332			—			1,244,332
Total loans and leases held for investment	$	18,589,419		$	4,811,573		$	23,400,992		$	19,005,699		$	4,551,278		$	23,556,977

The recorded investment in loans and leases held for investment, excluding ACI loans, decreased by $0.4 billion, or 2%, to $18.6 billion at March 31, 2017 from $19.0 billion at December 31, 2016. The decrease is primarily attributable to reductions in new origination volumes in our residential, commercial and commercial real estate and equipment financing receivables asset classes, as well as, reductions in our strategic acquisitions of commercial credit and home equity lines.

Residential

The recorded investment in residential mortgages, excluding ACI loans, decreased by $63.4 million, or 1%, to $7.3 billion at March 31, 2017, from $7.3 billion at December 31, 2016. The ALLL for residential mortgages, excluding ACI loans, increased by $0.1 million, or less than 1%, to $20.1 million at March 31, 2017, from $20.0 million at December 31, 2016. Charge-off activity for residential mortgages was $1.1 million for the three months ended March 31, 2017. Loan performance and historical loss rates are analyzed using the prior 12 months delinquency rates and actual charge-offs.

The ALLL for our residential ACI portfolio decreased by $0.9 million, or 10%, to $7.9 million at March 31, 2017, from $8.8 million at December 31, 2016. This decrease was the result of changes in our expectation of loan modifications and liquidation timing resulting in a decrease in the impairment of our residential ACI pools.

ACI loans are recorded at fair value on the date of acquisition and accrue income over the life of the loan based on an estimate of expected cash flows to be received subsequent to acquisition. Under the accounting guidance, expected losses are a component of the expected cash flow analysis performed with no allowance necessary at the time of acquisition. An allowance is recorded when the present value of future expected cash flows discounted at the effective interest rate of the pool decreases after the acquisition date such that the book value of the pool is considered impaired. Non-ACI loans are also recorded at fair value on the date of acquisition and only credit losses subsequent to acquisition are included in the allowance for loan losses. As such, these loans carry an allowance that is smaller than what the inherent credit losses are at the acquisition date. Although we structure all of our loan sales as non-recourse, the underlying sales agreements require us to make certain market standard representations and warranties at the time of sale, which may require under certain circumstances for us to repurchase a loan that does not meet these representations and warranties. Repurchased loans are acquired at fair value and when delinquent, are recorded at collateral value, less cost to sell, with no associated allowance. As such, these loans carry an allowance that is smaller than what the inherent credit losses are at the acquisition date.

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The table below presents our residential mortgage portfolio, excluding government insured loans, by origination/vintage year and by product type. The table further segregates our portfolio between loans that were originated by EB and those that were acquired. The differentiation between acquired loans and originated loans is due to the difference in the accounting guidance applicable to each of these pools of loans when it comes to the recording of our allowance for loan and lease losses as noted above.



Residential Mortgage Loans Held for Investment Analysis					Table 28
March 31, 2017	Origination Year
(dollars in thousands)	Prior - 2009		2010 - Present		Total
Originated residential loans:
Jumbo 7/1	$	25,546	$	2,480,301	$	2,505,847
Jumbo 10/1	23,117		1,345,784		1,368,901
Jumbo 5/1	86,641		1,082,094		1,168,735
Other originated	163,926		606,364		770,290
Total originated residential loans	299,230		5,514,543		5,813,773
Acquired or repurchased residential loans:
Loan repurchases	32,503		46,598		79,101
Other acquired:
ASC 310-20 (non-ACI loan acquisitions)	436,043		154,172		590,215
ASC 310-30 (ACI loan acquisitions)	31,387		144		31,531
Total acquired or repurchased residential loans	499,933		200,914		700,847
Total residential mortgage loans	$	799,163	$	5,715,457	$	6,514,620

Due to current economic conditions, our capacity for balance sheet growth and the historical credit quality of our originated jumbo loans, we have retained a portion of the preferred jumbo ARM products that we have originated since 2010. Our sales team targets borrowers with high FICO scores and our underwriting standards require low LTV ratios. The result of these underwriting practices is a portfolio with high credit quality and LTV ratios that provide greater collateral coverage for potential losses. As of March 31, 2017, the $5.5 billion in residential loans originated on or after January 1, 2010 and retained in loans held for investment had a weighted average LTV at origination of 67% and a weighted average FICO score of 762. Of those originated residential loans, $5.9 million were greater than 30 days past due and $3.8 million were on non-accrual status at March 31, 2017.

The table below presents our government insured residential mortgage pool buyout loans by delinquency status and by product type.



Government Insured Pool Buyouts Loans Held for Investment Analysis							Table 29
March 31, 2017	Delinquency Status
(dollars in thousands)	Current		30 - 89 Days Past Due		90 Days or Greater Past Due		Total
FHA insured	$	860,141	$	525,766	$	3,624,366	$	5,010,273
VA/Other government insured	137,918		49,772		303,898		491,588
Total government insured	$	998,059	$	575,538	$	3,928,264	$	5,501,861

Government insured pool buyouts consist of loans that are insured or guaranteed by one of several federal government agencies, including the Federal Housing Administration, Department of Veterans’ Affairs or the Department of Agriculture’s Rural Housing Service. Where we are the servicer of these loans, we have the opportunity to purchase above market rate, government insured loans at par. We also engage in acquisitions of government insured loans with the servicing retained by the seller that enable us to achieve similar economics. In most cases, acquired loans or loans purchased out of our servicing assets are greater than 89 days past due upon purchase and we do not expect to collect all of the contractual principal and interest on the loans. As such, these acquisitions are accounted for as ACI loan acquisitions. Loans that go through foreclosure generally have an expected duration of one to three years, depending on the state’s servicing timelines, which may vary widely based on state foreclosure laws. Allowance related to these government insured loans is low as payment of a majority of the principal, interest and servicer advances related to these loans is insured by the various government agencies.

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The table below presents the five highest concentration percentages by state for the Company’s government insured pool buyout loans by product type and the corresponding states’ percentages of the U.S. population.



Government Insured Buyouts Concentration of Credit Risk					Table 30
March 31, 2017	State Concentration
	FHA		VA/Other		% of US Population
New Jersey	9	%			3	%
New York	8	%			6	%
Texas	7	%	9	%	8	%
California	7	%			12	%
Florida	6	%	8	%	6	%
Virginia			6	%	3	%
North Carolina			6	%	3	%
Georgia			6	%	3	%

Commercial and Commercial Real Estate

The recorded investment for commercial and commercial real estate loans, excluding ACI loans, decreased by $0.4 billion, or 5%, to $7.5 billion at March 31, 2017, from $7.9 billion at December 31, 2016. The decrease was primarily due to both reduced originations and reduced strategic acquisitions in our commercial and commercial real estate portfolio during the three months ended March 31, 2017.

The ALLL for commercial and commercial real estate, excluding ACI loans, decreased by 17%, to $39.6 million at March 31, 2017, from $47.9 million at December 31, 2016. The ALLL as a percentage of loans and leases held for investment for commercial and commercial real estate, excluding ACI loans, declined slightly to 0.5% as of March 31, 2017 compared with 0.6% at December 31, 2016. The consistency in coverage ratio is reflective of continued diligence ensuring that newly originated loans continue to adhere to our high underwriting standards.

When calculating the allowance for loan losses related to commercial and commercial real estate loans, we include an assessment of historical loss factors, which include credit quality and charge-off activity. The loss factors used in our allowance calculation have remained consistent over the periods presented. Charge-off activity is analyzed using a 15 quarter time period to determine loss rates consistent with loan segments used in recording the allowance estimate. During periods of more consistent and stable performance, this 15 quarter period is considered the most relevant starting point for analyzing the reserve. During periods of significant volatility and severe loss experience, a shortened time period may be used which is more reflective of expected future losses. At March 31, 2017 and December 31, 2016, no segments included in commercial and commercial real estate loans used shortened historical loss periods. Charge-off activity for commercial and commercial real estate was $20.0 million for the three months ended March 31, 2017. Loan delinquency is one of the leading indicators of credit quality. As of March 31, 2017 and December 31, 2016, 0.1% and 0.5 % of the recorded investment in commercial and commercial real estate, excluding ACI loans, was past due.

ACI loans are recorded at fair value on the date of acquisition and accrue income over the life of the loan based on an estimate of expected cash flows to be received subsequent to acquisition. Under the accounting guidance, expected losses are a component of the expected cash flow analysis performed with no allowance necessary at the time of acquisition. An allowance is recorded when the present value of future expected cash flows discounted at the effective interest rate of the pool decreases after the acquisition date such that the book value of the pool is considered impaired. Non-ACI loans are also recorded at fair value on the date of acquisition and only credit losses subsequent to acquisition are included in the allowance for loan losses. As such, these loans carry an allowance that is smaller than what the inherent credit losses are at the acquisition date. A majority of the $1.5 billion in non-credit impaired, acquired loans were acquired in our acquisition of BPL or represent loans acquired within our lender finance portfolio at fair value with no allowance recorded at acquisition. As additional losses are incurred and modeled, we record the applicable provision and allowance for loan and lease losses.

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The table below presents our commercial and commercial real estate portfolio by origination/vintage year and by product type and further segregates our portfolio between those loans originated or acquired by the Company. The differentiation made between originated and acquired loans is due to the difference in the accounting guidance applicable to each of these pools of loans when it comes to the recording of our allowance for loan and lease losses as noted above. For acquired loans, the origination year is based on the loans origination date.



Commercial and Commercial Real Estate Loans Held for Investment Analysis					Table 31
March 31, 2017	Origination Year
(dollars in thousands)	Prior - 2009		2010 - Present		Total
Commercial real estate - originated
Non-owner occupied	$	29,993	$	1,682,394	$	1,712,387
Multifamily	6,707		959,466		966,173
Owner occupied	16,315		176,944		193,259
Other commercial real estate	526		4,532		5,058
Originated commercial real estate	53,541		2,823,336		2,876,877
Commercial - originated
Mortgage warehouse finance ⁽¹⁾	—		2,121,810		2,121,810
Lender finance ⁽²⁾	21,988		980,941		1,002,929
Other commercial originated	2,443		26,210		28,653
Originated commercial	24,431		3,128,961		3,153,392
Total originated commercial and commercial real estate	77,972		5,952,297		6,030,269
Commercial and commercial real estate - acquired
Acquired non-credit impaired (ASC 310-20)	629,869		842,940		1,472,809
Acquired credit impaired (ASC 310-30)	46,153		35		46,188
Total acquired commercial and commercial real estate	676,022		842,975		1,518,997
Total commercial and commercial real estate	$	753,994	$	6,795,272	$	7,549,266


(1)	Represents short-term revolving credit facilities, which are underwritten every 364 or 365 days. These loans are considered to be originated by the Company, as these loans were acquired in 2012 and have been subsequently underwritten by the Company.


(2)	Lender finance loans are categorized based on the origination date of the borrower's original credit facility. Due to the unique nature of these loans and the Company's extensive underwriting process, these loans are categorized as originated by the Company.

As of March 31, 2017, $2.8 billion of commercial real estate loans originated by the Company on or after January 1, 2010, had a weighted average LTV of 60%. Of the $6.0 billion of commercial and commercial real estate loans originated by the Company on or after January 1, 2010, none were greater than 30 days past due and $19.4 million were on non-accrual status at March 31, 2017.

As of March 31, 2017, $77.0 million, or 1%, of commercial and commercial real estate loans originated by the Company on or after January 1, 2010 were rated as watch, representing loans that may have exhibited potential signs of credit weakness but remain pass rated due to an expectation that the borrower will be able to stabilize its performance and the potential for future losses is minimized, while $1.6 million were rated as special mention. Special mention loans represent loans that have a pending event that will occur within the next 180 days that could jeopardize loan repayment and possibly lead to a future loss event. The special mention rating is generally viewed as being temporary in nature such that the loan is expected to either be upgraded to a pass rating or downgraded to a substandard rating. A substandard rating represents loans for which the balance is considered at risk as it is not adequately protected by the paying capacity of the borrower or by the collateral pledged, if any, leading to the possibility of future losses. As of March 31, 2017, $19.5 million of commercial and commercial real estate loans originated by the Company on or after January 1, 2010 were rated as substandard. All remaining loans originated by the Company on or after January 1, 2010 were rated as pass.

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Equipment Financing Receivables

The table below presents our equipment financing receivables portfolio by delinquency status and by collateral type.



Equipment Financing Receivables Held for Investment Analysis							Table 32
March 31, 2017	Delinquency Status
(dollars in thousands)	Current		30 - 89 Days Past Due		90 Days or Greater Past Due		Total
Healthcare	$	731,116	$	6,662	$	1,739	$	739,517
Office products	513,141		10,988		1,631		525,760
Capital equipment	354,997		—		1,110		356,107
Transportation	268,226		1,542		261		270,029
Construction	241,933		—		1,573		243,506
Information technology	208,928		512		230		209,670
Other	212,028		2,764		2,807		217,599
Total equipment financing receivables	$	2,530,369	$	22,468	$	9,351	$	2,562,188
December 31, 2016
Healthcare	$	726,896	$	9,897	$	1,143	$	737,936
Office products	476,432		15,424		1,679		493,535
Capital Equipment	338,265		1,054		231		339,550
Specialty vehicle	271,350		877		176		272,403
Construction	243,237		1,891		—		245,128
Information technology	218,602		2,087		278		220,967
Other	245,492		3,404		1,690		250,586
Total equipment financing receivables	$	2,520,274	$	34,634	$	5,197	$	2,560,105

Our equipment financing business finances essential-use health care, office products, technology, transportation, construction and other types of equipment primarily to small and medium-sized lessees and borrowers with financing terms generally ranging from 36 to 84 months. Allowance related to these loans and leases is low due to the shorter financing terms of these products and the quality of the underlying collateral securing the transaction. Of the $2.5 billion in equipment financing receivables less than 30 days past due as of March 31, 2017, $24.6 million were on nonaccrual status and of the $22.5 million in equipment financing receivables 30-89 days past due as of March 31, 2017, $7.1 million were on nonaccrual status. It is the Company's policy to keep a loan or lease on nonaccrual status until the borrower has demonstrated performance according to the terms of their agreement for a period generally of at least six months.

Loans Subject to Representations and Warranties

We originate residential mortgage loans, primarily first-lien home loans, through our retail, consumer direct and correspondent channels with the intent of selling a substantial majority of them in the secondary mortgage market. We sell and securitize conventional conforming and federally insured single-family residential mortgage loans predominantly to GSEs, such as FNMA and FHLMC. We also sell residential mortgage loans that do not meet the criteria for whole loan sales to GSEs (nonconforming mortgage or jumbo loans) to private non-GSE purchasers through whole loan sales and securitizations.

Although we structure all of our loan sales as non-recourse sales, the underlying sale agreements require us to make certain market standard representations and warranties at the time of sale, which may vary from agreement to agreement. Such representations and warranties typically include those made regarding the existence and sufficiency of file documentation, credit information, compliance with underwriting guidelines and the absence of fraud by borrowers or other third parties, such as appraisers, in connection with obtaining the loan. We have exposure to potential loss because, among other things, the representations and warranties we provide purchasers typically survive for the life of the loan.

If it is determined that the loans sold are (1) with respect to the GSEs, in breach of these representations or warranties, or (2) with respect to non-GSE purchasers, in material breach of these representations and warranties, we generally have an obligation to either: (a) repurchase the loan for the UPB, accrued interest and related advances, (b) indemnify the purchaser or (c) make the purchaser whole for the economic benefits of the loan. Our obligations vary based upon the nature of the repurchase demand and the current status of the mortgage loan.

At the time of repurchase, we determine whether to hold the loan for sale or for investment. If the loan is sellable on the secondary market, we may elect to do so. If the loan is not sellable on the secondary market or if there are other reasons why we would elect to retain the loan, we will service the asset to minimize our losses. This may include, depending on the status of the loan at the time of repurchase, modifying the loan, or foreclosing the loan and subsequent liquidation of the mortgage property.

We also have limited repurchase exposure for early payment defaults (EPD) which are typically triggered if a borrower does not make the first several payments due after the mortgage loan has been sold to an investor. Certain of our private investors have agreed to waive EPD provisions for conventional conforming and federally insured single-family residential mortgage loans and certain jumbo loan products. However, we are subject to EPD provisions and prepayment protection provisions on non-conforming jumbo loan products. Total UPB of loans sold during the three months ended March 31, 2017 subject to EPD protection was $274.1 million.

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We have summarized the activity for the three months ended March 31, 2017 and 2016 below regarding repurchase requests received, requests successfully defended, and loans that we repurchased or for which we indemnified investors or made investors whole with the corresponding origination years:



Loan Repurchase Activity	Table 33
	Three Months Ended March 31,
(dollars in thousands)	2017		2016
Agency	13		24
Agency Aggregators / Non-GSE ⁽¹⁾	7		2
Repurchase requests received	20		26
Agency	1		9
Agency Aggregators / Non-GSE ⁽¹⁾	—		—
Requests successfully defended	1		9
Agency	17		13
Agency Aggregators / Non-GSE⁽¹⁾	5		3
Loans repurchased, indemnified or made whole	22		16
Agency	$	236	$	83
Agency Aggregators / Non-GSE ⁽¹⁾	180		50
Net realized losses on loan repurchases	$	416	$	133
Years of origination of loans repurchased	2012-2016		2008-2015


(1)	Includes a majority of agency deliverable products that were sold prior to 2010 to large aggregators of agency eligible loans who securitized and sold the loans to the agencies.

We have summarized repurchase statistics by vintage below for loans originated from 2004 through March 31, 2017:



Summary Statistics by Vintage										Table 34
Losses to date	2004 - 2005			2006 - 2009			2010 - Present			Total
(dollars in thousands)
Total sold UPB	$	11,334,198		$	18,997,792		$	48,374,773		$	78,706,763
Request rate⁽¹⁾	0.50		%	2.09		%	0.34		%	0.83		%
Requests received	256			1,855			656			2,767

Pending requests	—			1			11			12
Resolved requests	256			1,854			645			2,755
Repurchase rate	39		%	47		%	31		%	43		%

Loans repurchased	100			877			198			1,175
Average loan size	$	222		$	215		$	251		$	237
Loss severity	16		%	38		%	6		%	28		%

Losses realized	$	3,641		$	70,935		$	2,900		$	77,476
Losses realized (bps)	3.2			37.3			0.6			9.8


(1)	Request rate is calculated as the number of requests received to date, compared to the total number of loans sold for the period.

The most common reasons for loan repurchases and make-whole payments relate to missing documentation, program violations, and claimed misrepresentations related to undisclosed debts, appraisal value and/or stated income. Additionally, we also receive requests to repurchase or make whole loans because they did not meet the specified investor guidelines. Repurchase demands relating to EPDs generally surface within six (6) months of selling the loan to an investor. We currently sell certain preferred residential mortgage loans, certain government insured pool buyouts and community reinvestment act loans servicing released. From 2004 through 2009, we also sold loans servicing released, therefore the lack of servicing statistics and status of the loans sold is not known. As such, there is additional uncertainty surrounding the reserves for repurchase obligations for loans sold or securitized related to those vintages.

Along with the contingent obligation associated with representations and warranties noted above, we also have a noncontingent obligation to stand ready to perform over the term of the representations and warranties. This noncontingent obligation is recognized at the inception of the guarantee, upon the sale of loans, as a reduction in net gains on loan sales and securitizations. In estimating the fair value of the noncontingent obligation, we estimate the probable losses inherent in the population of all loans sold based on trends in repurchase requests and actual loss severities experienced.

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The following is a rollforward of our reserves for repurchase losses for the three months ended March 31, 2017 and March 31, 2016:



Reserves for Repurchase Obligations for Loans Sold or Securitized				Table 35
	Three Months Ended
(dollars in thousands)	March 31, 2017			March 31, 2016
Balance, beginning of period	$	3,537		$	4,290
Provision for new sales/securitizations	381			544
Provision (release of provision) for changes in estimate of existing reserves	(238		)	(668		)
Net realized losses on repurchases	(416		)	(133		)
Balance, end of period	$	3,264		$	4,033

The liability for repurchase losses decreased by $0.8 million, or 19%, from $4.0 million as of March 31, 2016 to $3.3 million as of March 31, 2017. The decrease in liability for loans sold or securitized is primarily due to the decreased number of repurchase requests received from investors over the comparable time period, a continuation of realized losses relating to the loan repurchases and a release of provisions based on recent purchases.

Loan Servicing

When we service residential mortgage loans where either FNMA or FHLMC is the owner of the underlying mortgage loan asset, we are subject to potential repurchase risk for: (1) breaches of loan level representations and warranties even though we may not have originated the mortgage loan; and (2) failure to service such loans in accordance with the applicable GSE servicing guide. If a loan purchased or securitized by FNMA or FHLMC is in breach of an origination representation or warranty, such GSE may look to the loan servicer for repurchase. If we are obligated to repurchase a loan from either FNMA or FHLMC, we will seek indemnification from the counterparty that sold us the MSR, which presents potential counterparty risk if such party is unable or unwilling to satisfy its indemnification obligations.

Total acquired UPB for counterparties unable or unwilling to satisfy their indemnification obligations subject to repurchase risk was $6.3 billion at March 31, 2017. Since 2013, we have not identified any new counterparties who were unwilling or unable to satisfy their indemnification obligations. Currently we have two loans in our pending pipeline related to the reserve for repurchase obligations for loans serviced.

The following is a rollforward of our reserves for servicing repurchase losses related to these counterparties for the three months ended March 31, 2017 and March 31, 2016:



Reserves for Repurchase Obligations for Loans Serviced			Table 36
	Three Months Ended
(dollars in thousands)	March 31, 2017		March 31, 2016
Balance, beginning of period	$	141	$	1,806
Provision (release of provision) for changes in estimate of existing reserves	—		(89		)
Net realized losses on repurchases	—		(46		)
Balance, end of period	$	141	$	1,671

The liability for repurchase losses for loans serviced decreased by $1.5 million, or 92%, from $1.7 million as of March 31, 2016 to $0.1 million as of March 31, 2017. The decrease in liability since March 31, 2016 is primarily due to the run-off of losses for active repurchase requests that were estimated in the prior periods and a release of provision based on recent repurchase request trends. We received zero new repurchase requests for loans serviced in the three months ended March 31, 2017. Over the same period we settled zero repurchase requests through make-whole payments, loan repurchases and rescinded requests. As of March 31, 2017, we had two active repurchase requests for loans being serviced.

Loans in Foreclosure

Losses can arise from certain government agency agreements which limit the agency’s repayment guarantees on foreclosed loans, resulting in certain minimal foreclosure costs being borne by servicers. In particular, government insured loans serviced under GNMA guidelines require servicers to fund any foreclosure claims not otherwise covered by insurance claim funds of the U.S. Department of Housing and Urban Development or the U.S. Department of Veterans Affairs.

Other than foreclosure-related costs associated with servicing government insured loans, we have not entered into any servicing agreements that require us, as servicer, to cover foreclosure-related costs.

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Funding Sources

Deposits obtained from clients are our primary source of funds for use in lending, acquisitions and other business purposes. We generate deposit client relationships through our consumer direct and financial center distribution channels. The consumer direct channel includes: Internet, email, telephone and mobile device access to product and customer support offerings. Our differentiated products, integrated online financial portal and value-added account features deepen our interactions and relationships with our clients resulting in high retention rates. Other funding sources include short-term and long-term borrowings and shareholders’ equity. FHLB borrowings have become an important funding source as we have grown.

Deposits

The following table shows the distribution of our deposits by type of deposit at the dates indicated:



Deposits			Table 37
(dollars in thousands)	March 31, 2017		December 31, 2016
Noninterest-bearing demand	$	1,662,173	$	1,750,529
Interest-bearing demand	4,093,032		3,924,294
Market-based money market accounts	345,462		340,777
Savings and money market accounts, excluding market-based	5,932,401		6,429,407
Market-based time	315,707		316,321
Time, excluding market-based	6,942,906		6,876,900
Total deposits	$	19,291,681	$	19,638,228

Our major source of funds and liquidity is our deposit base, which provides funding for our investment securities and our loan and lease portfolios. We carefully manage our interest paid on deposits to control the level of interest expense we incur. The mix and type of interest-bearing and noninterest-bearing deposits in our deposit base changes due to our funding needs, marketing activities and market conditions.

Total deposits decreased by $0.3 billion, or 2%, to $19.3 billion at March 31, 2017 from $19.6 billion at December 31, 2016. During the first three months of 2017, noninterest-bearing demand deposits decreased $88.4 million, or 5%, to $1.7 billion at March 31, 2017 primarily due to a decrease in servicing demand deposits. Interest-bearing deposits decreased by $258.2 million, or 1%, to $17.6 billion at March 31, 2017 from $17.9 billion at December 31, 2016. This decrease in interest-bearing deposits was primarily due to a decrease in savings and money market deposits.

FHLB Borrowings

In addition to deposits, we use borrowings from the FHLB as a source of funds to meet the daily liquidity needs of our clients and fund growth in earning assets. Our FHLB borrowings increased $250.0 million, or 5%, to $5.8 billion at March 31, 2017 from $5.5 billion at December 31, 2016.

The table below summarizes the average outstanding balance of our FHLB advances, the weighted average interest rate, and the maximum amount of borrowings in each category outstanding at any month end during the three months ended March 31, 2017 and 2016, respectively.



FHLB Borrowings	Table 38
	Three Months Ended March 31,
(dollars in thousands)	2017			2016
Fixed-rate advances:
Average daily balance	$	3,600,328		$	5,176,954
Weighted-average interest rate	1.76		%	1.33		%
Maximum month-end amount	$	4,481,000		$	5,402,000
Floating-rate advances:
Average daily balance	$	1,544,144		$	74,425
Weighted-average interest rate	0.64		%	0.52		%
Maximum month-end amount	$	1,625,000		$	125,000

Liquidity Management

Liquidity refers to the measure of our ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs. We continuously monitor our liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements.

Funds invested in short-term marketable instruments, the continuous maturing of other interest-earning assets, cash flows from self-liquidating investments such as mortgage-backed securities and government insured pool buyouts, the possible sale of available for sale securities, and the ability to securitize certain types of loans provide sources of liquidity from an asset perspective. The liability base provides sources of liquidity through issuance of deposits and borrowed funds. In addition, debt and equity capital raises provide us with sources of liquidity. To manage fluctuations in short-term funding needs, we utilize borrowings under lines of credit with other financial institutions, such as the FHLB, securities sold under agreements to repurchase, federal fund lines of credit with correspondent banks, and, for contingent purposes,

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the Federal Reserve Bank Discount Window. We also have access to term advances with the FHLB, as well as brokered certificates of deposits, for longer term liquidity needs. We believe our sources of liquidity are sufficient to meet our cash flow needs for the foreseeable future.

We continued to maintain a strong liquidity position during the first quarter of 2017. Cash and cash equivalents were $879.7 million, available for sale investment securities were $447.6 million, and total deposits were $19.3 billion as of March 31, 2017.

As of March 31, 2017, we had a $8.9 billion line of credit with the FHLB, of which $5.9 billion was utilized. The amount utilized includes not only outstanding balances of FHLB advances, but also letters of credit issued by FHLB on our behalf and breakage fees related to forward-dated borrowing arrangements described in Note 12 . As of March 31, 2017, we pledged collateral with the Federal Reserve Bank that provided $132.0 million of borrowing capacity at the discount window but did not have any borrowings outstanding. The maximum potential borrowing at the FRB is limited only by eligible collateral.

At March 31, 2017, our availability under Promontory Interfinancial Network, LLC’s CDARS^® One-Way Buy^SMdeposits was $2.8 billion with $10.8 million in outstanding balances. Although our availability under the program was $2.8 billion at March 31, 2017, funding from this source is also limited by the overall network volume of CDARS One-Way Buy deposits available in the marketplace. Our treasury function views $500.0 million as the practical maximum capacity for this type of deposit funding. As of March 31, 2017, our availability under federal funds commitments was $85.0 million with no outstanding borrowings.

We continue to evaluate the ultimate impact of the implementation of the new capital and liquidity standards under the Basel III Capital Rules and the Dodd-Frank Act on the Company's liquidity management functions.

Capital Management

Management, including our Board of Directors, regularly reviews our capital position to help ensure it is appropriately positioned under various operating and market environments.

2017 Capital Actions

On April 27, 2017, the Company's Board of Directors declared a quarterly cash dividend of $0.06 per common share, payable on May 19, 2017, to stockholders of record as of May 11, 2017.

On January 26, 2017, the Company's Board of Directors declared a quarterly cash dividend of $0.06 per common share, payable on February 22, 2017, to stockholders of record as of February 13, 2017. Also on January 26, 2017, the Company's Board of Directors declared a quarterly cash dividend of $421.875, payable on April 5, 2017, for each share of 6.75% Series A Non-Cumulative Perpetual Preferred Stock held as of March 21, 2017.

Capital Ratios

As a result of recent regulatory requirements pursuant to the Dodd-Frank Act and Basel III, the Company and EB will be subject to increasingly stringent regulatory capital requirements.

The Basel III Capital Rules became effective for the Company and EB on January 1, 2015 and introduced a new capital measure called Common Equity Tier 1 (CET1), which requires that most deductions and/or adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and expands the scope of the deductions and adjustments from capital as compared to existing regulations. These deductions include, for example, the requirement that mortgage servicing rights and deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1. Implementation of the deductions and other adjustments to CET1 began on January 1, 2015 and will be phased-in over a three-year period (beginning at 40% on January 1, 2015 and an additional 20% per year thereafter until fully phased-in at January 1, 2018).

The initial implementation of the requirements of Basel III at March 31, 2015 resulted in decreases to both Tier 1 Capital and adjusted total assets, but provided a one-time increase to our Tier 1 capital to adjusted tangible assets ratio. Under prior rules, the threshold deduction for mortgage servicing assets (MSA) represented the excess of the book value of the MSA (net of any related deferred tax liability) over 90% of the associated MSA's fair value. The implementation of Basel III required that this deduction be adjusted to the excess of the book value of the MSA over 10% of CET1 with a phase-in percentage applied as applicable. The result of this change at March 31, 2017 was an decrease to the MSA threshold deduction of $7.8 million for the Company and a decrease of $20.5 million for EB, which resulted in an increase of Tier 1 capital and adjusted tangible assets for the Company and an increase in Tier 1 capital and adjusted tangible assets for EB. Basel III also eliminated a prior practice of allowing thrift institutions to base their average assets calculations on ending balance sheet balances in favor of using an average assets approach consistent with the approach utilized by most other financial institutions. This change resulted in a further reduction of average tangible assets at March 31, 2017 of $0.5 billion for both the Company and EB when compared to the prior methodology as averaging in prior periods with lower asset balances served to reduce the resulting average tangible assets balance. Due to the reduction in average tangible assets and reduction in Tier 1 capital, the overall impact of these changes was an increase to our Tier 1 capital to adjusted tangible assets ratio. For our common equity Tier 1 ratio and our Tier 1 risk-based capital ratio, the impact was restricted to just the change in Tier 1 capital mentioned above and maintained the use of period end risk-weighted assets. As such, it had a positive impact on these two ratios at March 31, 2017.

At March 31, 2017, EB exceeded all regulatory capital requirements and is considered to be “well-capitalized” with a Common Equity Tier 1 ratio of 13.3%, a Tier 1 leverage ratio of 8.4%, a Tier 1 risk-based capital ratio of 13.3% and a total risk-based capital ratio of 13.9%. At March 31, 2017, the Company also exceeded all regulatory capital requirements and is considered to be “well-capitalized” with a Common Equity Tier 1 ratio of 11.0%, a Tier 1 leverage ratio of 7.9%, a Tier 1 risk-based capital ratio of 12.5% and a total risk-based capital ratio of 14.5%. Management believes, at March 31, 2017, that both the Company and EB would meet all capital adequacy requirements under the Basel III capital rules on a fully phased-in basis if such requirements were currently effective.

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The table below shows regulatory capital, adjusted total assets and risk-weighted assets for EB at March 31, 2017 and December 31, 2016.



Regulatory Capital (bank level)		Table 39
(dollars in thousands)		March 31, 2017			December 31, 2016
Shareholders’ equity		$	2,298,542		$	2,261,883
Less:	Goodwill and other intangibles	(47,207		)	(47,152		)
Add:	Accumulated losses on securities and cash flow hedges	45,786			51,018
Tier 1 capital		2,297,121			2,265,749
Add:	Allowance for loan and lease losses	95,902			104,143
Total regulatory capital		$	2,393,023		$	2,369,892

Adjusted total assets		$	27,311,415		$	28,208,963
Risk-weighted assets		17,217,435			17,677,886

The regulatory capital ratios for EB, along with the capital amounts and ratios for minimum capital adequacy purposes and well capitalized requirements under the prompt corrective action framework are as follows:



Regulatory Capital Ratios (bank level)					Table 40
	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Capital		Ratio		Minimum Amount		Ratio		Minimum Amount		Ratio
March 31, 2017
Common equity Tier 1 ratio	$	2,297,121	13.3	%	$	774,785	4.5	%	$	1,119,133	6.5	%
Tier 1 leverage ratio	2,297,121		8.4		1,092,457		4.0		1,365,571		5.0
Tier 1 risk-based capital ratio	2,297,121		13.3		1,033,046		6.0		1,377,395		8.0
Total risk-based capital ratio	2,393,023		13.9		1,377,395		8.0		1,721,744		10.0
December 31, 2016
Common equity Tier 1 ratio	$	2,265,749	12.8	%	$	795,505	4.5	%	$	1,149,063	6.5	%
Tier 1 leverage ratio	2,265,749		8.0		1,128,359		4.0		1,410,448		5.0
Tier 1 risk-based capital ratio	2,265,749		12.8		1,060,673		6.0		1,414,231		8.0
Total risk-based capital ratio	2,369,892		13.4		1,414,231		8.0		1,767,789		10.0

The table below shows regulatory capital, adjusted total assets and risk-weighted assets for the Company at March 31, 2017 and December 31, 2016.



Regulatory Capital (EFC consolidated)		Table 41
(dollars in thousands)		March 31, 2017			December 31, 2016
Shareholders’ equity		$	2,059,363		$	2,016,332
Less:	Preferred stock	(150,000		)	(150,000		)
	Goodwill and other intangibles	(47,207		)	(47,152		)
	Disallowed servicing asset	(12,697		)	(6,593		)
Add:	Accumulated losses on securities and cash flow hedges	46,167			51,522
Common Tier 1 capital		1,895,626			1,864,109
Add:	Preferred stock	150,000			150,000
Add:	Additional Tier 1 capital (trust preferred securities)	98,750			98,750
Tier 1 capital		2,144,376			2,112,859
Add:	Subordinated notes payable	261,628			261,528
Add:	Allowance for loan and lease losses	95,902			104,143
Total regulatory capital		$	2,501,906		$	2,478,530

Adjusted total assets		$	27,306,386		$	28,215,972
Risk-weighted assets		17,220,728			17,686,099

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The regulatory capital ratios for the Company, along with the capital amounts and ratios for minimum capital adequacy purposes and well capitalized requirements under the prompt corrective action framework are as follows:



Regulatory Capital Ratios (EFC consolidated)					Table 42
	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
(dollars in thousands)	Capital		Ratio		Minimum Amount		Ratio		Minimum Amount		Ratio
March 31, 2017
Common equity Tier 1 ratio	$	1,895,626	11.0	%	$	774,933	4.5	%	$	1,119,347	6.5	%
Tier 1 leverage ratio	2,144,376		7.9		1,092,255		4.0		1,365,319		5.0
Tier 1 risk-based capital ratio	2,144,376		12.5		1,033,244		6.0		1,377,658		8.0
Total risk-based capital ratio	2,501,906		14.5		1,377,658		8.0		1,722,073		10.0
December 31, 2016
Common equity Tier 1 ratio	$	1,864,108	10.5	%	$	795,874	4.5	%	$	1,149,596	6.5	%
Tier 1 leverage ratio	2,112,858		7.5		1,128,639		4.0		1,410,799		5.0
Tier 1 risk-based capital ratio	2,112,858		12.0		1,061,166		6.0		1,414,888		8.0
Total risk-based capital ratio	2,478,529		14.0		1,414,888		8.0		1,768,610		10.0

Restrictions on Paying Dividends

Federal banking regulations impose limitations upon certain capital distributions by savings banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions charged against capital. The OCC regulates all capital distributions by EB directly or indirectly to us, including dividend payments. EB may not pay dividends to us if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements, or in the event the OCC notifies EB that it is subject to heightened supervision. Under the Federal Deposit Insurance Act, an insured depository institution such as EB is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized.” Payment of dividends by EB also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an “unsafe and unsound” banking practice. In addition, pursuant to the Merger Agreement, we are restricted from raising our dividend over $0.06 per share, without the prior consent of TIAA.

Asset and Liability Management and Market Risk

Interest rate risk is our primary market risk and results from our business of investing in interest-earning assets with funds obtained from interest-bearing deposits and borrowings. Interest rate risk is defined as the risk of loss of future earnings or market value due to changes in interest rates. We are subject to this risk because:

•assets and liabilities may mature or re-price at different times or by different amounts;

•short-term and long-term market interest rates may change by different amounts;

•similar term rate indices may exhibit different re-pricing characteristics; and

•the life of assets and liabilities may shorten or lengthen as interest rates change.

Interest rates may also have a direct or indirect effect on loan demand, credit losses, mortgage origination volume, the fair value of MSRs and other items affecting earnings. Our objective is to measure the impact of interest rate changes on our capital and earnings and manage the balance sheet in order to decrease interest rate risk.

Interest rate risk is monitored by the Asset and Liability Committee (ALCO), which is comprised of certain executive officers and other members of management, in accordance with policies approved by our Board of Directors. ALCO has employed policies that attempt to manage our interest-sensitive assets and liabilities, in order to control interest rate risk and avoid incurring unacceptable levels of credit or concentration risk. We manage our exposure to interest rates by structuring our balance sheet according to these policies in the ordinary course of business. In addition, the ALCO policy permits the use of various derivative instruments to manage interest rate risk or hedge specified assets and liabilities.

Consistent with industry practice, we primarily measure interest rate risk by utilizing the concept of "Economic Value of Equity" (EVE), which is defined as the present value of assets less the present value of liabilities. EVE scenario analysis estimates the fair value of the balance sheet in alternative interest rate scenarios. The EVE does not consider management intervention and assumes the new rate environment is constant and the change is instantaneous. Further, as this framework evaluates risks to the current balance sheet only, changes to the volume and pricing of new business opportunities that can be expected in the different interest rate outcomes are not incorporated in this analytical framework. For instance, analysis of our history suggests that declining interest rate levels are associated with higher loan production volumes at higher levels of profitability. However, changes in loan production volumes fall outside of the EVE framework. As a result, we further evaluate and consider the impact of other business factors in a separate net income sensitivity analysis.

If EVE rises in a different interest rate scenario, that would indicate incremental prospective earnings in that hypothetical rate scenario. A perfectly matched balance sheet would result in no change in the EVE, no matter what the rate scenario. The table below shows the estimated impact on EVE of increases in interest rates of 1% and 2% and decreases in interest rates of 0.25%, as of March 31, 2017.

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Interest Rate Sensitivity	Table 43
	March 31, 2017
(dollars in thousands)	Net Change in EVE			% Change of EVE
Up 200 basis points	$	(106,102	)	(3.9	)%
Up 100 basis points	(43,001		)	(1.6	)%
Down 25 basis points	(26,193		)	(1.0	)%

The projected change in EVE to changes in interest rates at March 31, 2017 was in compliance with established policy guidelines. Exposure amounts depend on numerous assumptions. Due to historically low interest rates, the table above may not accurately reflect the effect of decreasing interest rates upon our net interest income that would occur under a more traditional, higher interest rate environment because short-term interest rates are near zero percent and facts underlying certain of our modeling assumptions, such as the fact that deposit and loan rates cannot fall below zero percent, distort the model’s results.

Volcker Rule

The Dodd-Frank Act added a new Section 13 to the Bank Holding Company Act, which is commonly referred to as the Volcker Rule. Generally, the Volcker Rule prohibits a “banking entity” from engaging in “proprietary trading” or from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with hedge funds, private equity funds and other “covered funds.” Through a series of extensions, the FRB has generally extended the deadline for conforming activities and investments under the rule to July 21, 2017. The Volcker Rule provides a significantly broader definition of proprietary trading, and captures many activities that would not traditionally have been referred to as proprietary trading, including risk-mitigating hedging and market-making activities. This requires the Company to undertake a careful review to ensure that it has identified all potential Volcker Rule proprietary trading within the organization. Like the prohibition on proprietary trading, the restrictions on “covered funds” – the term for any fund covered by the Volcker Rule – apply to many entities and investment activities that would not traditionally have been referred to as hedge funds or private equity funds, including the acquisition of an “ownership interest” in certain trust preferred collateralized debt obligations, collateralized loan obligations and Re-REMICs that are considered to be “covered funds” under the rule. Based on our evaluation of the impact of these changes, investments with a carrying value of $3.1 million at March 31, 2017, have been identified that may be required to be divested prior to July 21, 2017. The Volcker Rule also requires the Company to develop and provide for the continued administration of a compliance program reasonably designed to ensure and monitor the Company’s compliance with the Volcker Rule. We continue to evaluate the Volcker Rule and the final rules adopted thereunder.

Use of Derivatives to Manage Risk

Interest Rate Risk

An integral component of our interest rate risk management strategy is our use of derivative instruments to minimize significant fluctuations in earnings caused by changes in interest rates. As part of our overall interest rate risk management strategy, we enter into contracts or derivatives to hedge interest rate lock commitments, loans held for sale, trust preferred debt, and forecasted payments on debt. These derivatives include forward purchase and sales commitments (FSA), optional forward purchase and sales commitments (OFSA), interest rate swaps, and interest rate swap futures.

We enter into these derivative contracts with major financial institutions or purchase them from active exchanges where applicable. Credit risk arises from the inability of these counterparties to meet the terms of the contracts. We minimize this risk through collateral arrangements, master netting arrangements, exposure limits and monitoring procedures.

Commodity Market Risk

Commodity risk represents exposures to deposit instruments linked to various commodity, metals and U.S. Treasury yield markets. We offer market-based deposit products consisting of MarketSafe^® products, which provide investment capabilities for clients seeking portfolio diversification with respect to commodities and other indices, which are typically unavailable from our banking competitors. MarketSafe^® deposits rate of return is based on the movement of a particular market index. In order to manage the risk that may occur from fluctuations in the related markets, we enter into offsetting options with exactly the same terms as the commodity linked MarketSafe^® deposits, which provide an economic hedge.

Foreign Exchange Risk

Foreign exchange risk represents exposures to changes in the values of deposits and future cash flows denominated in currencies other than the U.S. dollar. We offer WorldCurrency^® deposit products which provide investment capabilities to clients seeking portfolio diversification with respect to foreign currencies. The products include WorldCurrency^® single-currency certificates of deposit and money market accounts denominated in the world’s major currencies. In addition, we offer foreign currency linked MarketSafe^® deposits which provide returns based upon foreign currency linked indices. Exposure to loss on these products will increase or decrease over their respective lives as currency exchange rates fluctuate. In addition, we offer foreign exchange contracts to small and medium size businesses with international payment needs. Foreign exchange contract products, which include spot and simple forward contracts, represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date. Exposure to loss on these contracts will increase or decrease over their respective lives as currency exchange and interest rates fluctuate. These types of products expose us to a degree of risk. To manage the risk that may occur from fluctuations in world currency markets, we enter into offsetting short-term forward foreign exchange contracts with terms that match the amount and the maturity date of our single-currency certificates of deposit, money market deposit instruments, or foreign exchange contracts. In addition, we enter into offsetting options with exactly the same terms as the foreign currency linked MarketSafe^® deposits, which provide an economic hedge. For more information, including the notional amount and fair value, of these derivatives, see Note 10 in our condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

See the “Asset and Liability Management and Market Risk” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of March 31, 2017. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2017.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2017 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

We are subject to various claims and legal actions in the ordinary course of our business. Some of these matters include employee-related matters and inquiries and investigations by governmental agencies regarding our employment practices. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, operating results, financial condition or cash flows.

In addition to the legal proceedings previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on February 17, 2017, we are currently subject to the following legal proceedings:

Mortgage Electronic Registration Services Related Litigation

Mortgage Electronic Registration Services (MERS), EverHome Mortgage Company, EverBank and other lenders and servicers that have held mortgages through MERS are parties to the following material and class action lawsuits where the plaintiffs allege improper mortgage assignment and, in some instances, the failure to pay recording fees in violation of state recording statutes: (1) State of Ohio, ex. rel. David P. Joyce, Prosecuting Attorney General of Geauga County, Ohio v. MERSCORP, Inc., et al., filed in October 2011 in the Court of Common Pleas for Geauga County, Ohio; and (2) Delaware County, PA, Recorder of Deeds v. MERSCORP, Inc., et al., filed in November 2013 in the Court of Common Pleas of Delaware County, Pennsylvania; and (3) On November 16, 2016, the surrounding counties of Portland Oregon filed a MERS lawsuit against EverBank, MERS and other financial institutions in Mulmoth County entitled County of Clackamas, et al. v. Mortgage Electronic Registration Systems Inc, et al. In these material and class action lawsuits, the plaintiffs in each case generally seek judgment from the courts compelling the defendants to record all assignments, restitution, compensatory and punitive damages, and appropriate attorneys' fees and costs. We believe that the plaintiffs' claims are without merit and contest all such claims vigorously.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. You should carefully consider the risks and uncertainties described in our prior filings. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business, financial condition and results of operation. Except as set forth below with respect to risk factors related to the proposed merger with TIAA, there have not been any material changes from the discussion of risk factors affecting the Company previously disclosed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on February 17, 2017. The Risk Factors set forth the material factors that could affect our financial condition and operations. Readers should not consider any descriptions of such factors to be a complete set of all potential risks that could affect the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Default Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

A list of exhibits to this Form 10-Q is set forth on the Exhibit Index and is incorporated herein by reference.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		EverBank Financial Corp

Date:	April 28, 2017	/s/ Robert M. Clements
		Robert M. Clements
		Chairman of the Board and Chief Executive Officer
		(Principal Executive Officer)

Date:	April 28, 2017	/s/ Steven J. Fischer
		Steven J. Fischer
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EXHIBIT INDEX



Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation of EverBank Financial Corp (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on May 26, 2015 and incorporated herein by reference)

3.2		Amended and Restated Bylaws of EverBank Financial Corp (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the SEC on May 26, 2015 and incorporated herein by reference)


31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

32.1		Certification of Chief Executive Officer pursuant to Rule pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2		Certification of Chief Financial Officer pursuant to Rule pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101		The following materials from the Company’s 10-Q for the period ended March 31, 2017, formatted in Extensible Business Reporting Language (XBRL): (a) Condensed Consolidated Balance Sheets; (b) Condensed Consolidated Statements of Income; (c) Condensed Consolidated Statements of Comprehensive Income (Loss); (d) Condensed Consolidated Statements of Shareholders’ Equity; (e) Condensed Consolidated Statements of Cash Flows; and (f) Notes to Condensed Consolidated Financial Statements.

**		Filed herewith

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