EverBank Financial Corp. Announces Second Quarter 2013 Financial Results

EverBank Financial Corp. Announces SecondQuarter2013 Financial Results

Earnings per Share of $0.35

12.7% Return on Equity for the Quarter

Organic Asset Generation Increased 15% From Prior Quarter to $3.8 Billion

Increased Quarterly Common Stock Dividend to $0.03

JACKSONVILLE, Fla.--(BUSINESS WIRE)-- EverBank Financial Corp. (NYS: EVER) announced today its financial results for the second quarter ended June 30, 2013.

GAAP diluted earnings per share was $0.35, a 17% increase from $0.30 in the first quarter 2013 and a 289% increase from $0.09 in the second quarter 2012. Adjusted diluted earnings per share was $0.28, a 15% decrease from $0.33 in the first quarter 2013 and a 15% decrease from $0.33 in the second quarter 2012.¹

"EverBank's results for the second quarter highlight the power of our banking franchise as we achieved quarterly portfolio loan growth of 5% and a return on equity of 12.7%," said Robert M. Clements, Chairman and Chief Executive Officer. "The second quarter saw a meaningful rise in interest rates and we look forward to benefiting from this transition given the composition of our balance sheet and flexibility of our business model. We remain confident in our ability to generate earnings growth and attractive risk-adjusted returns over the long term."

Second Quarter 2013 Key Highlights

• Return on equity ("ROE") was 12.7% and adjusted ROE was 10.2%.

• Net income of $46 million, an increase of 17% compared to the prior quarter and an increase of 312% compared to the second quarter of 2012.

• Adjusted net income of $37 million, a decrease of 15% compared to the prior quarter and an increase of 2% compared to the second quarter of 2012.

• Revenue of $288 million, an increase of 4% compared to the prior quarter and an increase of 45% compared to the second quarter of 2012.

• Total organic asset generation of $3.8 billion, an increase of 15% compared to the prior quarter and an increase of 39% compared to the second quarter of 2012.

• Total loans and leases held for investment were $12.9 billion, an increase of 5% compared to the prior quarter.

• Annualized net charge-offs to average loans and leases held for investment were 0.12% for the quarter.

• Tangible common equity per common share was $11.00 at June 30, 2013, an increase of 3% compared to the prior quarter and an increase of 10% compared to the second quarter 2012.

• Our board of directors approved a 50% increase in the quarterly common stock dividend to $0.03 per share.

"EverBank is benefiting from its strategic expansion into commercial and retail lending, with second quarter commercial lending and leasing loan growth of 5% and retail lending origination growth of 45% compared to the prior quarter," said W. Blake Wilson, President and Chief Operating Officer. "As the market transitions, we are keenly focused on optimizing efficiency at the business unit level. In addition, having completed our significant infrastructure investments, we anticipate achieving meaningful operating leverage across the organization."

Balance Sheet

Diversified Loan Growth

Total portfolio loans held for investment were $12.9 billion at June 30, 2013, an increase of $0.6 billion, or 5%, from the prior quarter. Year over year, this represents a $5.1 billion, or 65%, increase. Loans held for investment for the second quarter 2013 were comprised of:

During the second quarter, residential loans HFI increased by 5% compared to the prior quarter to $6.6 billion as we experienced significant growth in our prime jumbo hybrid ARM portfolio. Based on the current rate environment, we expect to continue to originate prime jumbo loans for our balance sheet and will selectively evaluate capital market executions. This strategy is consistent with our approach of retaining high quality loans with attractive risk-adjusted returns for our portfolio.Our commercial lending and leasing platforms experienced strong growth in the quarter and represent approximately 47% of loans HFI in the second quarter compared to approximately 32% a year ago. Our focus on high quality commercial lending and leasing assets positions us to benefit from higher interest rate levels.

Loan Origination Activities

Organic asset generation totaled $3.8 billion and retained organic production totaled $1.1 billion for the second quarter of 2013, an increase of 15% and 111%, respectively, from the prior quarter. Total commercial loans and leases originated during the quarter were $0.5 billion, including commercial real estate originations of $0.2 billion. This represents an increase of 31% and 149%, respectively, compared to the prior quarter.

Residential loan originations were $3.2 billion for the second quarter, an increase of 12% compared to the prior quarter. Origination volume from our retail channel was $1.2 billion in the second quarter, an increase of 45% from the prior quarter and a 293% increase year over year. Purchase transactions represented 32% of total volumes and 49% of retail volumes, compared to 19% and 32%, respectively, in the prior quarter. We originated record prime jumbo loan volume of $1.1 billion during the second quarter, an increase of 36% over the prior quarter, including hybrid ARM volume of $0.5 billion and fixed-rate volume of $0.6 billion.

Subsequent to the end of the quarter, we executed a sale of our fixed-rate prime jumbo loans classified as held for sale at June 30, 2013. The transaction is expected to close in the third quarter, subject to customary closing conditions.

Deposit Growth

Total deposits were $13.7 billion at June 30, 2013, flat quarter over quarter, as increased transaction, savings and money market balances were offset by lower time deposit balances. Year over year, total deposits grew by $2.9 billion, or 27%, from $10.8 billion. At June 30, 2013, our deposits were comprised of the following:

Total other borrowings were $2.7 billion at June 30, 2013, a decrease of 1% quarter over quarter. We expect to continue to replace a portion of our wholesale borrowings with core deposits over time.

Capital Strength

Total shareholders' equity was $1.5 billion at June 30, 2013, an increase of 3% quarter over quarter. The bank's Tier 1 leverage ratio was 8.3% and total risk-based capital ratio was 13.7% at June 30, 2013. As a result, the bank is considered "well-capitalized" under all applicable regulatory guidelines.

The final Basel III rules increased our estimate of the fully phased-in common equity tier 1 capital ratio from 8.5% - 9.0% to 9.0% - 9.5%.

Credit Quality

Our adjusted non-performing assets were 0.92% of total assets at June 30, 2013, a decrease from 0.99% for the prior quarter and 1.46% at June 30, 2012. Net charge-offs during the second quarter of 2013 were $4 million, a decrease of $3 million, or 48%, compared to the first quarter of 2013, driven by a $3 million increase in recoveries. On an annualized basis, net charge-offs were 0.12% of total average loans and leases held for investment, compared to 0.23% for the prior quarter and 0.34% for the second quarter of 2012.

Originated Loan Repurchase Activity

During the second quarter of 2013, we experienced net realized losses on loan repurchases of $2.7 million and recorded a net recovery of provision of $0.2 million on repurchase obligations for loans sold or securitized. Our reserve declined from $25 million in the first quarter of 2013 to $22 million in the second quarter of 2013. We continue to be well reserved with approximately 5 quarters of coverage based on the average quarterly loss rate over the trailing four quarters. We believe that our 0.10% total loss rate is indicative of our disciplined underwriting guidelines and risk management culture.

Income Statement Highlights

Continued Revenue Growth

Revenue for the second quarter of 2013 was $288 million, an increase of $11 million, or 4%, from $277 million in the first quarter 2013. The increase from the prior quarter was due to strong non-interest income driven by the positive contribution from net loan servicing income and loan production revenue, offset by lower gain on sale of loans income and other fee income.

Net Interest Income

For the second quarter of 2013, net interest income was $141 million, a $3 million, or 2%, decrease compared to the prior quarter. This decrease was attributed to lower investment securities average balances and yields, lower loans and leases HFI average balances and yields, lower lease financing receivables yields and higher yields in our wholesale borrowings. Offsetting these were a decline in deposit interest cost driven by lower deposit pricing beginning in June and an increase in loans HFS average balances and yields.Core net interest margin, which is net interest margin excluding the impact of Tygris excess accretion, decreased to 3.21% for the second quarter of 2013 from 3.27% in the first quarter of 2013.

Noninterest Income

Noninterest income for the second quarter of 2013 was $147 million, an increase of $13 million, or 10%, compared to the prior quarter. This increase was driven by a $24 million improvement in net loan servicing income, offset by a $6 million decline in gain on sale of loans income and a $3 million decrease in other income. Our gain on sale margin decreased by 87 basis points during the quarter to 2.16%, primarily driven by changes in interest rates and related mortgage spread widening that occurred at the end of the quarter.

Noninterest Expense

Noninterest expense for the second quarter of 2013 increased by $2 million, or 1%, to $214 million from $212 million in the prior quarter. Adjusted for foreclosure review costs of $18 million, noninterest expense was $196 million in the quarter, a decrease of 2% compared to $200 million in the first quarter. We expect that the initial file review of the independent foreclosure review pursuant to the consent order will be completed by early to mid August. General and administrative expense, excluding credit-related expenses, decreased $9 million, or 14%, from the first quarter due to a decline in FDIC assessment and agency fees as well as lower advertising and marketing expenses. Salaries, commissions and employee benefits increased by $8 million, or 7%, due to continued hiring activity to support our retail mortgage lending expansion as well as increased staffing in our servicing operation related to onboarding the $13 billion unpaid principal balance Fannie Mae acquisition completed in the second quarter.

Income Tax Expense

Our effective tax rate for the first and second quarter of 2013 was 38%, compared to 36% for the second quarter 2012.

Segment Analysis for the Second Quarter of 2013

• Banking and Wealth Management pre-tax income was $89 million, a 17% increase compared to the prior quarter.

• Mortgage Banking pre-tax income was $10 million, a 23% decrease compared to the prior quarter.

• Corporate Services had a pre-tax loss of $25 million, a 6% improvement compared to the pre-tax loss in the prior quarter driven by lower noninterest expense.

Dividends

On July 23, 2013, the Company's Board of Directors declared a quarterly cash dividend of $0.03 per common share, payable on August 23, 2013, to stockholders of record as of August 12, 2013. This represents an increase of 50% from the prior quarter's cash dividend. Also on July 23, 2013, the Company's Board of Directors declared a quarterly cash dividend of $421.875, payable on October 5, 2013, for each share of 6.75% Series A Non-Cumulative Perpetual Preferred Stock held as of September 20, 2013.

Subsequent Event

Subsequent to the quarter end, EverBank announced it will cease originating residential mortgages through its wholesale broker lending channel while continuing to focus on growing its retail, consumer direct and correspondent lending channels. Origination volume attributable to the wholesale broker channel was $0.5 billion in the second quarter and $1.2 billion year-to-date. These actions will eliminate approximately 150 positions nationwide and result in a one-time after-tax charge of $2.0 to $4.0 million which will be incurred in the third quarter of 2013.

Conference Call and Webcast

The Company will host a conference call at 8:00 a.m. Eastern Time on Tuesday, July 30, 2013 to discuss its second quarter 2013 results. The dial-in number for the conference call is 1-866-652-5200 and the international dial-in number is 1-412-317-6060, passcode is 10031015. 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.

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 $18.4 billion in assets and $13.7 billion in deposits as of June 30, 2013. 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.

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; our capital and liquidity requirements (including under regulatory capital standards, such as Basel III capital standards) and our ability to generate or raise capital; 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 and foreclosure; 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; our ability to comply with the consent order and complete the independent foreclosure review in a timely manner; concentration of mass-affluent clients and jumbo mortgages; hedging strategies; 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; changes in currency exchange rates or other political or economic changes in certain foreign countries; 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.