EverBank Financial Corp Announces Full Year and Fourth Quarter 2012 Financial Results
JACKSONVILLE, Fla.--(BUSINESS WIRE)-- EverBank Financial Corp (NYS: EVER) ("EverBank", "we", "our" or the "Company") announced today its financial results for the fourth quarter and the year ended December 31, 2012.
Adjusted diluted earnings per share was $0.34 in the fourth quarter 2012, a 13% increase from $0.30 in the third quarter 2012 and a 3% increase from $0.33 in the fourth quarter 2011.1 GAAP diluted earnings per share was $0.22, a 16% increase from $0.19 in the third quarter 2012 and a 57% increase from $0.14 in the fourth quarter 2011. For the full year 2012, adjusted diluted earnings per share was $1.27, a 14% increase from $1.11 in 2011. GAAP diluted earnings per share was $0.60, an 11% increase from $0.54 in 2011.
"EverBank is pleased to have completed a historic year for our Company as we executed on our strategic plans, raised significant growth capital and closed two material acquisitions," said Robert M. Clements, Chairman and Chief Executive Officer. "Our fundamentals remained strong in the fourth quarter as we benefited from continued loan and deposit growth, credit quality improvement and robust noninterest income. We believe we are well positioned for growth and success in 2013."
Fourth Quarter and Full Year 2012 Key Highlights
Adjusted return on equity ("ROE") was 13.2% for the fourth quarter, an increase of 128 basis points compared to the prior quarter. For the year, adjusted ROE was 12.4%, up 177 basis points over 2011.
Adjusted net income was $43.5 million for the fourth quarter of 2012, compared to $36.2 million for the third quarter 2012 and $31.9 million for the fourth quarter of 2011. For the year, adjusted net income was $143.4 million, an increase of 33%.
GAAP net income was $28.8 million for the fourth quarter of 2012, compared to $22.2 million for the third quarter 2012 and $13.8 million in the fourth quarter of 2011. For the full year, GAAP net income was $74.0 million, an increase of 40% over 2011.
Record revenue of $272.2 million, an increase of 22% compared to the prior quarter and an increase of 55% compared to the fourth quarter 2011. For the year, revenue was $883.6 million, an increase of 29% over 2011.
Record residential origination volume of $2.9 billion, an increase of 16% compared to the prior quarter and an increase of 48% compared to the fourth quarter. For the year, residential origination volume totaled $9.6 billion, an increase of 61% over 2011.
Total loans and leases were $14.5 billion, up $3.1 billion, or 27%, for the quarter and up $5.3 billion, or 58%, for the year.
Deposits were $13.1 billion, up $1.3 billion, or 11.2%, for the quarter and up $2.9 billion, or 28%, for the year.
Asset quality improved during the quarter as adjusted non-performing assets were 1.08% of total assets at December 31, 2012. Annualized net charge-offs to average loans and leases held for investment were 0.16% for the quarter.
Completed the public offering of $150 million of our 6.75% Series A Non-Cumulative Perpetual Preferred Stock ("Series A Preferred Stock") in November 2012.
Tangible common equity per common share was $10.30 at December 31, 2012, and excluding accumulated other comprehensive loss was $11.02.
Closed acquisition of Business Property Lending, Inc. ("BPL") on October 1, 2012, adding $2.3 billion of commercial loans.
"Our mortgage banking segment generated record residential origination volumes during the fourth quarter and is increasing market share as we continue to invest in our purchase driven retail channel," said W. Blake Wilson, President and Chief Operating Officer. "In addition, we have substantially completed our integration of BPL and are well on our way to executing our growth plans for the business. We continue to expect we will achieve our previously stated intermediate targets for the business."
A reconciliation of Non-GAAP financial measures can be found in the financial tables attached hereto.
Continued Balance Sheet Growth
Total assets increased by $1.7 billion, or 10%, to $18.2 billion at December 31, 2012, from $16.5 billion at September 30, 2012, and by $5.2 billion, or 40%, from $13.0 billion at December 31, 2011. Our interest-earning assets for the fourth quarter 2012 were largely comprised of:
Residential loans held for sale ("HFS") of $2.1 billion, a 49% increase from the prior quarter due to our success in originating preferred jumbo loans eligible for sale into the capital markets;
Residential loans held for investment ("HFI") of $6.7 billion, a 1% decline from the prior quarter as we originated more loans for sale and diversified into other types of loans;
Commercial and commercial real estate loans of $4.8 billion, a 106% increase from the prior quarter due largely to the acquisition of BPL;
Commercial leases of $0.8 billion, a 13% increase from the prior quarter; and
Investment securities of $1.9 billion, a 5% decline from the prior quarter.
Loan Origination Activities
Residential loan originations were $2.9 billion for the fourth quarter, an increase of 16% from the third quarter 2012 and 48% from the fourth quarter 2011. Loan production volume from our retail channel was $837.1 million in the fourth quarter, an increase of $324.3 million, or 63%, from the third quarter 2012 and an increase of $530.3 million, or 173%, from the second quarter 2012. Our retail channel is benefiting from the increased productivity of our recently hired sales teams and greater market share. We expect this productivity improvement to continue into 2013 as we further penetrate target markets and capitalize on purchase driven origination volumes.
Organic asset generation totaled $3.5 billion and retained organic production totaled $0.7 billion for the fourth quarter of 2012. Residential preferred jumbo loan volume originated during the fourth quarter was $397.5 million, an increase of 116% over the prior quarter. We executed $178 million of preferred jumbo whole loan sales to third parties for securitization during the fourth quarter and had approximately $500 million of preferred jumbo loans classified as HFS on December 31, 2012, which we intend to sell or securitize.
Deposit and Other Funding Sources
Total deposits grew by $1.3 billion, or 11%, to $13.1 billion at December 31, 2012, from $11.8 billion at September 30, 2012, and by $2.9 billion, or 28%, from $10.3 billion at December 31, 2011. At December 31, 2012, our deposits were comprised of the following:
Non-interest bearing accounts were $1.4 billion, or 11% of total deposits;
Interest-bearing checking accounts were $2.7 billion, or 20% of total deposits;
Savings and money market accounts were $4.5 billion, or 34% of total deposits;
Global markets money market and time accounts were $1.2 billion, or 9% of total deposits; and
Time deposit accounts, excluding global markets, were $3.4 billion, or 26% of total deposits.
Total other borrowings were $3.2 billion at December 31, 2012, an increase of $349.1 million compared to $2.8 billion at September 30, 2012 and an increase of $1.9 billion compared to $1.3 billion at December 31, 2011. The increase in other borrowings was the result of overall balance sheet positioning and funding the BPL acquisition. We expect to replace a portion of our wholesale borrowings with core deposits over time.
Our adjusted non-performing assets were 1.08% of total assets at December 31, 2012, a decrease from 1.29% at September 30, 2012 and 1.86% at December 31, 2011. We recorded a provision for loan and lease losses of $10.5 million during the fourth quarter of 2012, an increase of $6.2 million, or 142%, compared to the third quarter of 2012. The increase was driven by a one-time $6.0 million provision related to our adoption of the Office of the Comptroller of the Currency's ("OCC") troubled debt restructuring guidance on performing loans in Chapter 7 bankruptcy. Excluding this non-recurring charge, our provision was $4.6 million, an increase of $0.2 million, or 4%, from the prior quarter.
Net charge-offs during the fourth quarter of 2012 declined to $4.9 million from $5.3 million in the third quarter of 2012, a decline of 7%. On an annualized basis, net charge-offs were 0.16% of total average loans and leases held for investment, compared to 0.25% for the third quarter of 2012 and 1.03% for the fourth quarter of 2011.
Originated Loan Repurchase Activity
During the fourth quarter of 2012, we experienced net realized losses on loan repurchases of $7.3 million and recorded a provision of $3.3 million on repurchase obligations for loans sold or securitized. Our reserve declined from $31.0 million in the third quarter of 2012 to $27.0 million in the fourth quarter of 2012. We continue to be well reserved with approximately 6 quarters of coverage based on the average quarterly loss rate over the trailing four quarters. Trends continue to be stable with severities declining over the last twelve months to 45% in fourth quarter 2012, compared to 48% in the fourth quarter 2011. We continue to believe that our 0.10% total loss rate is indicative of our disciplined underwriting guidelines and risk management culture.
Total shareholders' equity was $1.5 billion at December 31, 2012, compared to $1.3 billion at September 30, 2012. The bank's Tier 1 leverage ratio was 8.0% and total risk-based capital ratio was 13.5% at December 31, 2012. As a result, the bank is considered "well-capitalized" under all applicable regulatory guidelines.
During the fourth quarter, we issued 6.0 million depositary shares, each representing 1/1,000th of a share of Series A Preferred Stock, for gross proceeds of $150.0 million with a dividend rate of 6.75% per annum.
Income Statement Highlights
Strong Revenue Growth
Revenue for the fourth quarter was $272.2 million, an increase of $48.7 million, or 22%, from $223.5 million in the third quarter 2012. Compared to the fourth quarter 2011, revenue increased $96.4 million, or 55%. The linked quarter increase was driven by the positive contribution to net interest income by the acquired BPL portfolio as well as a $6.3 million increase in loan production revenue and a $19.4 million increase in net loan servicing income. Adjusted for the impact of the non-cash mortgage servicing rights ("MSR") valuation allowance in the third quarter, net loan servicing income increased $1.2 million linked quarter and total revenue increased by $30.4 million, or 13%, compared to the third quarter 2012. Compared to the fourth quarter 2011, revenue increased $78 million, or 40%, adjusted for the MSR valuation allowance incurred in the prior year quarter.
Revenue for the year was $883.6 million, an increase of $198.2 million, or 29%, from $685.4 million in 2011. The increase was primarily due to higher net interest income as well as increased loan production revenue and gain on sale of loans, offset by a decrease in loan servicing income resulting from elevated MSR amortization and a $24.1 million increase to the MSR valuation allowance.
Net Interest Income
For the quarter, net interest income increased by $20.8 million to $147.0 million, from $126.2 million for the third quarter of 2012. This increase was attributed to higher interest income generated by the strong growth in loans and leases HFI, including a $2.5 billion increase in commercial and commercial real estate loans resulting from the acquired BPL loan portfolio as well as growth in our mortgage warehouse finance business, which resulted in a $50.0 million increase in interest income on loans and leases HFI during the quarter. Offsetting this increase was a decline in loans HFS and investment securities average balances and yields. Interest expense increased by $10.2 million during the quarter as we increased longer dated time deposits and borrowings to fund the BPL acquisition.
Net interest margin decreased to 3.56% for the fourth quarter from 3.66% in the third quarter. BPL positively impacted our commercial loan yields and NIM as expected, offset by lower accretion income on our lease financing receivables, the impact of growth in our shorter duration commercial and HFS assets and an increase in interest expense on deposits and borrowings. Excluding the impact of accretion income from our 2010 acquisition of Tygris Commercial Finance Group, Inc., our core net interest margin increased 3 basis points to 3.40% from 3.37% in the third quarter.
For 2012, net interest income was $513.8 million, an increase of $61.5 million, or 14%, compared to 2011. The increase was primarily due to higher average loans, offset by lower asset yields, lower accretion income and higher deposit and other borrowings balances. Net interest margin for 2012 was 3.74% compared to 4.11% in 2011.
Noninterest income for the fourth quarter of 2012 increased by $27.9 million, or 29%, to $125.2 million compared to the third quarter of 2012. This increase was caused by a $19.4 million improvement in net loan servicing income as well as a $6.3 million increase in loan origination revenue. Gain on sale of loans was flat compared to the third quarter at $85.7 million. Adjusted for the MSR valuation allowance in the third quarter 2012, noninterest income increased by $9.6 million, or 8% during the quarter.
For 2012, noninterest income increased by $136.7 million, or 59%, to $369.8 million. The increase was driven by a $234.4 million, or 235%, increase in origination revenues and gain on sale of loans, offset by a $79.6 million decrease in loan servicing income resulting from elevated MSR amortization and a $24.1 million increase to the MSR valuation allowance.
Noninterest expense for the fourth quarter of 2012 increased by $33.0 million, or 18%, to $217.0 million from $184.0 million in the third quarter. Salaries, commissions and employee benefits increased by $18.1 million, or 21%, with approximately $5 million attributed to the employees hired as a result of the BPL transaction and more than $6 million attributed to hiring activity and investments in retail mortgage lending. Approximately 10% of our noninterest expense is variable and tied to mortgage origination levels.
We continued to invest in our retail lending expansion during the fourth quarter, adding approximately 150 FTEs. For the year, we have added approximately 440 FTEs in our retail channel and opened 58 lending offices. Noninterest expense directly related to our retail expansion was $22.4 million for the fourth quarter, compared to $14.6 million in the third quarter and was $49.5 million for the full year 2012.
General and administrative expense, excluding credit-related expenses, increased by $20.9 million, or 42%, from the third quarter primarily due to a $5.3 million and $14.4 million increase in professional fees and other expenses, respectively. The increase in professional fees was attributed to legal and consulting fees related to the consent order. The increase in other general and administrative expense was largely driven by expenses related to our independent foreclosure review. Credit-related expenses for the fourth quarter decreased $9.8 million, or 39%, to $15.3 million from $25.1 million in the third quarter 2012. Key drivers of the decrease include a decline in of our expenses related to GNMA pool buyout loans and a decrease in foreclosure and REO expense related to the Bank of Florida portfolio.
Income Tax Expense
Our effective tax rate for the fourth quarter of 2012 was 35%, compared to 37% for the third quarter of 2012 and 22% for the fourth quarter 2011.
Segment Analysis for the Fourth Quarter of 2012
Banking and Wealth Management adjusted pre-tax income was $84.6 million, including other credit-related expenses, foreclosure and OREO expenses of $8.6 million.
Mortgage Banking adjusted pre-tax income was $20.3 million, including other credit-related expenses, foreclosure and OREO expenses of $6.6 million.
Corporate Services had an adjusted pre-tax loss of $36.6 million.
Independent Foreclosure Review
Earlier this month, several mortgage servicers announced they had entered into settlement agreements with the OCC and the Federal Reserve Board that would end their independent foreclosure reviews under consent orders entered into between those servicers and their regulators in April 2011. EverBank elected not to participate in the settlement and we are in the process of completing our foreclosure review, which we expect to conclude by the end of the second quarter 2013.
On January 29, 2013, the Company's Board of Directors declared a quarterly cash dividend of $0.02 per common share, payable on February 22, 2013, to stockholders of record as of February 11, 2013.
Forward Looking Statements
This news release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. These statements may address issues that involve significant risks, uncertainties, estimates and assumptions made by management. Words 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 are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about the Company's asset growth and earnings, industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond the Company's control. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to: deterioration of general business and economic conditions, including the real estate and financial markets, in the United States and in the geographic regions and communities we serve; risks related to liquidity; changes in interest rates that affect the pricing of our financial products, the demand for our financial services and the valuation of our financial assets and liabilities, mortgage servicing rights and mortgages held for sale; risk of higher loan and lease charge-offs; legislative or regulatory actions affecting or concerning mortgage loan modification and refinancing; our ability to comply with any supervisory actions to which we are or become subject as a result of examination by our regulators; concentration of our commercial real estate loan portfolio; higher than normal delinquency and default rates; limited ability to rely on brokered deposits as a part of our funding strategy; concentration of mass-affluent clients and jumbo mortgages; hedging strategies; risks related to securities held in our securities portfolio; delinquencies on our equipment leases and reductions in the resale value of leased equipment; loss of key personnel; fraudulent and negligent acts by loan applicants, mortgage brokers, other vendors and our employees; changes in and compliance with laws and regulations that govern our operations; failure to establish and maintain effective internal controls and procedures; effects of changes in existing U.S. government or government-sponsored mortgage programs; changes in laws and regulations that may restrict our ability to originate or increase our risk of liability with respect to certain mortgage loans; risks related to the approval and consummation of anticipated acquisitions; risks related to the continuing integration of acquired businesses and any future acquisitions; environmental liabilities with respect to properties that we take title to upon foreclosure; and the inability of our banking subsidiary to pay dividends.
For additional factors that could materially affect our financial results, please refer to EverBank Financial Corp's filings with the Securities and Exchange Commission, including but not limited to, the risks described under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company undertakes no obligation to revise these statements following the date of this news release, except as required by law.
Conference Call and Webcast
The Company will host a conference call at 8:30 a.m. Eastern Time on Thursday, January 31, 2013 to discuss its full year and fourth quarter 2012 results. The dial-in number for the conference call is 1-877-941-1427 and the international dial-in number is 1-480-629-9664, passcode is 4586595. A live webcast of the conference call will also be available on the investor relations page of the Company's website at www.abouteverbank.com/ir.
For those unable to participate in the conference call, a replay will be available from January 31, 2013 until February 7, 2013. The replay dial-in number is 1-877-870-5176 and the international replay dial-in number is 1-858-384-5517, replay passcode is 4586595.
About EverBank Financial Corp
EverBank Financial Corp, through its wholly-owned subsidiary EverBank, provides a diverse range of financial products and services directly to clients nationwide through multiple business channels. Headquartered in Jacksonville, Florida, EverBank has $18.2 billion in assets and $13.1 billion in deposits as of December 31, 2012. With an emphasis on value, innovation and service, EverBank offers a broad selection of banking, lending and investing products to consumers and businesses nationwide. EverBank provides services to clients through the internet, over the phone, through the mail, at its Florida-based financial centers and at other business offices throughout the country. More information on EverBank can be found at www.abouteverbank.com/ir.
EverBank Financial Corp and Subsidiaries
Consolidated Balance Sheets (unaudited)
(Dollars in thousands, except per share data)
Cash and due from banks
Interest-bearing deposits in banks
Total cash and cash equivalents
Available for sale, at fair value
Held to maturity (fair value of $146,709 and $194,350 as of December 31, 2012 and 2011, respectively)
Total investment securities
Loans held for sale (includes $1,439,685 and $777,280 carried at fair value as of December 31, 2012 and 2011, respectively)
Loans and leases held for investment:
Covered by loss share or indemnification agreements
Not covered by loss share or indemnification agreements
Loans and leases held for investment, net of unearned income
Allowance for loan and lease losses
Total loans and leases held for investment, net
Equipment under operating leases, net
Mortgage servicing rights (MSR), net
Deferred income taxes, net
Premises and equipment, net
Trust preferred securities
Accounts payable and accrued liabilities
Commitments and Contingencies
Series A 6% Cumulative Convertible Preferred Stock, $0.01 par value (1,000,000 shares authorized and 186,744 shares issued and outstanding at December 31, 2011; no shares authorized, issued or outstanding at December 31, 2012)
Series B 4% Cumulative Convertible Preferred Stock, $0.01 par value (liquidation preference of $1,000 per share; 1,000,000 shares authorized inclusive of Series A 4% Preferred Stock and 136,544 shares issued and outstanding at December 31, 2011; no shares authorized, issued or outstanding at December 31, 2012)
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 and 6,000 issued and outstanding at December 31, 2012; no shares authorized, issued or outstanding at December 31, 2011)
Common Stock, $0.01 par value (500,000,000 and 150,000,000 shares authorized at December 31, 2012 and 2011, respectively;120,987,955 and 75,094,375 issued and outstanding at December 31, 2012 and 2011, respectively)
Additional paid-in capital
Accumulated other comprehensive income (loss) (AOCI), net of benefit for income taxes of $53,193 and $65,367 at December 31, 2012 and 2011, respectively
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
EverBank Financial Corp and Subsidiaries
Consolidated Statements of Income (unaudited)
(Dollars in thousands, except per share data)
Three Months Ended
Interest and fees on loans and leases
Interest and dividends on investment securities
Other interest income
Total Interest Income
Total Interest Expense
Net Interest Income
Provision for Loan and Lease Losses
Net Interest Income after Provision for Loan and Lease Losses
Loan servicing fee income
Amortization and impairment of mortgage servicing rights
Net loan servicing income (loss)
Gain on sale of loans
Loan production revenue
Deposit fee income
Other lease income
Total Noninterest Income
Salaries, commissions and other employee benefits expense