EverBank Financial Corp Announces Full Year and Fourth Quarter 2013 Financial Results

EverBank Financial Corp (NYSE: EVER) announced today its financial results for the fourth quarter and the year ended December 31, 2013.

“2013 was a successful year for EverBank as we generated a solid return on equity, grew tangible book value per share by 12%, and executed on key strategic initiatives designed to enhance operating efficiency, simplify our earnings profile and focus on our core banking and lending activities,” said Robert M. Clements, chairman and chief executive officer. “The Company's fundamentals are strong, which we believe positions us to generate robust asset and earnings growth from our diverse nationwide lending businesses in 2014.”

Adjusted net income was $32 million for the fourth quarter of 20131, compared to $34 million for the third quarter 2013 and $44 million for the fourth quarter of 2012. For the year, adjusted net income was $148 million, an increase of 3% over 2012. GAAP net income was $18 million for the fourth quarter of 2013, compared to $33 million for the third quarter of 2013 and $29 million for the fourth quarter of 2012. For the year, GAAP net income was $137 million, an increase of 85% over 2012.

Adjusted diluted earnings per share was $0.24 in the fourth quarter 2013, an 8% decrease from $0.26 in the third quarter 2013 and a 29% decrease from $0.34 in the fourth quarter 2012. GAAP diluted earnings per share was $0.13, a 48% decrease from $0.25 in the third quarter 2013 and a 41% decrease from $0.22 in the fourth quarter 2012. For the full year 2013, adjusted diluted earnings per share was $1.11, a 13% decrease from $1.27 in 2012. GAAP diluted earnings per share was $1.02, a 70% increase from $0.60 in 2012.

Fourth Quarter and Full Year 2013 Key Highlights

• Tangible common equity per common share was $11.57 at December 31, 2013, an increase of 12% compared to year end 2012.
• Adjusted return on equity (ROE) was 10% and GAAP ROE was 9% for the full year 2013.
• Retained asset generation of $1.6 billion for the fourth quarter, including commercial origination volume of $701 million, an increase of 45% and 99%, respectively, compared to the prior quarter.
• Deployed excess liquidity to grow portfolio loans held for investment to $13.3 billion, an increase of 5% compared to the prior quarter, or 22% annualized.
• Core net interest margin was 3.30% for the quarter, an increase of 13 basis points from 3.17% in the prior quarter.
• Adjusted non-performing assets were 0.65% of total assets at December 31, 2013, a 36% decline compared to the prior quarter. Annualized net charge-offs to average loans and leases held for investment were 0.20% for the quarter.

Strategic Business Activities Update

During the fourth quarter, we continued to execute on our strategic plan of exiting non-core business activities and adjusting capacity in our mortgage banking and corporate services segments.

• We remain on track to close the sale of our default servicing platform to Green Tree Servicing LLC and expect the transfer date, in addition to the servicing sale date, to occur during the first quarter 2014. In anticipation of closing and transfer, we recognized $14 million of non-recurring costs in the quarter related to the transaction.
• Due to the normalization of industry refinance volumes and the expected first quarter 2014 default servicing platform transfer, we adjusted our residential lending, servicing and corporate administrative capacity, resulting in severance charges of $4 million and lease termination expense of $3 million.
• We closed on the sale of non-core commercial loans and REO for approximately $98 million. We recognized a $4 million loss on the sale during the quarter, however we expect to benefit from reduced noninterest expense associated with this portfolio in future periods.

"We experienced strong portfolio loan growth in the quarter as retained origination volumes gained momentum across our core strategic business channels,” said W. Blake Wilson, president and chief operating officer. “We look forward to closing our servicing transaction with Green Tree in the first quarter and remain focused on driving efficiency throughout our organization while leveraging the investments we have made in recent years."

Balance Sheet

Strong Loan Portfolio Growth

Total assets were $17.6 billion at December 31, 2013, flat compared to $17.6 billion at September 30, 2013. Consistent with our strategy to retain loans for our portfolio, total loans held for investment (HFI) increased $0.7 billion, or 5%, compared to the prior quarter, to $13.3 billion. Loans HFI for the fourth quarter were comprised of:

During the fourth quarter, residential loans HFI increased by 11% compared to the prior quarter to $5.2 billion, driven by continued growth in our high quality prime jumbo hybrid ARM portfolio. Mortgage pool buyouts declined 9% to $1.9 billion compared to the prior quarter. Total commercial finance and CRE balances increased 5% compared to the prior quarter to $5.1 billion, driven by continued strength in our EverBank Commercial Finance platform. At December 31, 2013 our commercial platforms represented approximately 46% of loans HFI.

Loan Origination Activities

Organic asset generation totaled $2.7 billion and retained organic originations totaled $1.6 billion for the fourth quarter of 2013, a decrease of 12% and an increase of 45%, respectively, from the prior quarter. Total commercial originations for the fourth quarter increased 99% to $701 million, including commercial real estate and commercial finance originations of $266 million and $435 million, respectively.

Residential loan originations were $2.0 billion for the fourth quarter, a decrease of 26% compared to the prior quarter and a decrease of 32% year over year. Excluding the impact of our exit from the wholesale broker channel in the third quarter, origination volume decreased 16% compared to the prior quarter and 11% year over year. Prime jumbo origination volume was $808 million for the fourth quarter, an increase of 5% compared to the prior quarter and 43% year over year. The mix of purchase transactions increased to 43% of total originations, compared to 40% in the prior quarter. Our gain on sale margin increased 120 basis points during the quarter to 2.88%, as we executed on our strategy to sell agency conforming originations and retain prime jumbo originations.

The following table presents total organic loan and lease origination information by product type:

Deposit and Other Funding Sources

Total deposits decreased by $0.4 billion, or 3%, to $13.3 billion at December 31, 2013, from $13.6 billion at September 30, 2013, and increased by $0.1 billion, or 1%, from $13.1 billion at December 31, 2012.

At December 31, 2013, our deposits were comprised of the following:

Capital Strength

Total shareholders' equity was $1.6 billion at December 31, 2013, compared to $1.6 billion at September 30, 2013. The bank’s Tier 1 leverage ratio was 9.0% and total risk-based capital ratio was 14.3% at December 31, 2013. As a result, the bank is considered "well-capitalized" under all applicable regulatory guidelines. Our current estimate of the fully phased-in Basel III common equity Tier 1 capital ratio at December 31, 2013 remained between 9.5% - 10.0%.

Credit Quality

Our adjusted non-performing assets were 0.65% of total assets at December 31, 2013, a decrease from 1.01% at September 30, 2013 and 1.08% at December 31, 2012. We recorded a provision for loan and lease losses of $7 million during the fourth quarter of 2013, an increase of $4 million, or 129%, compared to the third quarter of 2013. The reduction in non-performing assets and increased provision in the quarter resulted from the non-core commercial asset sale that closed late in the fourth quarter.

Net charge-offs during the fourth quarter of 2013 declined to $6 million from $10 million in the third quarter of 2013, a decline of 35%. On an annualized basis, net charge-offs for the fourth quarter were 0.20% of total average loans and leases held for investment, compared to 0.30% for the third quarter of 2013 and 0.16% for the fourth quarter of 2012.

Income Statement Highlights

Revenue

Revenue for the fourth quarter was $231 million, a decrease of $52 million, or 18%, from $282 million in the third quarter 2013. The decline was driven primarily by lower gain on sale of loans and lower MSR valuation allowance recovery, offset by lower interest expense.

Net Interest Income

For the quarter, net interest income decreased by $4 million, or 3%, to $135 million. This decrease was attributable to lower interest income resulting from lower loans held for sale and investment securities average balances. Offsetting these was lower interest expense driven primarily by a decrease in FHLB advances average balance and rate.

Core net interest margin, which is net interest margin excluding the impact of $3 million of Tygris acquisition excess accretion, increased to 3.30% for the fourth quarter from 3.17% in the third quarter. The increase was driven by a slight improvement in interest-earning asset yields resulting from higher commercial loan yields, in addition to lower average wholesale borrowing balances and rate.

Noninterest Income

Noninterest income for the fourth quarter of 2013 decreased by $48 million, or 33%, to $96 million compared to the third quarter of 2013. This decrease was driven by a $19 million decline in gain on sale of loans, a $20 million reduction in our MSR valuation allowance recovery, a $5 million decrease in loan production revenue and reduced other income.

Noninterest Expense

Noninterest expense for the fourth quarter of 2013 decreased by $29 million, or 13%, to $197 million from $226 million in the third quarter. Adjusted for the non-recurring expenses in the current and prior quarter outlined in the table below, noninterest expense decreased by $15 million, or 8%, to $173 million in the fourth quarter. General and administrative expense, excluding credit-related and consent order expense, decreased $6 million, or 16%, from the third quarter due to a $5 million decrease in other expense. Salaries, commissions and employee benefits decreased by $9 million, or 9%, due to lower staffing levels and lower variable costs related to origination activity levels. Occupancy and equipment expense increased $7 million, or 24%, driven by one-time expenses related to our default servicing platform sale and mortgage lending capacity adjustments.

Income Tax Expense

Our effective tax rate for the fourth quarter of 2013 was 30%, compared to 38% for the third quarter of 2013 and 35% for the fourth quarter 2012.

Segment Analysis for the Fourth Quarter of 2013

• Banking and Wealth Management adjusted pre-tax income was $93 million, a 2% increase compared to the prior quarter driven by higher net interest income resulting from HFI loan growth, and lower noninterest expense, offset by lower noninterest income.
• Mortgage Banking had an adjusted pre-tax loss of $19 million, compared to an adjusted pre-tax loss of $14 million in the prior quarter driven by lower noninterest income partially offset by lower noninterest expense.
• Corporate Services had an adjusted pre-tax loss of $26 million, a 19% increase compared to the prior quarter driven by higher noninterest expense.

Dividend

On January 24, 2014, the Company's Board of Directors declared a quarterly cash dividend of $0.03 per common share, payable on February 22, 2014, to stockholders of record as of February 11, 2014. Also on January 24, 2014, the Company's Board of Directors declared a quarterly cash dividend of $421.875, payable on April 7, 2014, for each share of 6.75% Series A Non-Cumulative Perpetual Preferred Stock held as of March 21, 2014.

Conference Call and Webcast

The Company will host a conference call at 8:30 a.m. Eastern Time on Wednesday, January 29, 2014 to discuss its full year and fourth 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 10039558. 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 29, 2014 until February 5, 2014. The replay dial-in number is 1-877-344-7529 and the international replay dial-in number is 1-412-317-0088, replay passcode is 10039558.

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 $17.6 billion in assets and $13.3 billion in deposits as of December 31, 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 amended consent order and the terms and conditions of our settlement of the Independent Foreclosure Review; 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.

Non-GAAP Financial Measures

This press release contains financial information and performance measures determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Adjusted Net Income, Adjusted Earnings Per Share, Adjusted Return on Equity, Adjusted Non-Performing Asset Ratio, Tangible Shareholders’ Equity, Tangible Common Shareholders' Equity, and Tangible Assets are non-GAAP financial measures. The Company’s management uses these measures to evaluate the underlying performance and efficiency of its operations. The Company’s management believes these non-GAAP measures provide meaningful additional information about the operating performance of the Company’s business and facilitate a meaningful comparison of our results in the current period to those in prior periods and future periods because these non-GAAP measures exclude certain items that may not be indicative of our core operating results and business outlook. In addition the Company’s management believes that certain of these non-GAAP measures represent a consistent benchmark against which to evaluate the Company’s growth, profitability and capital position. These non-GAAP measures are provided to enhance investors’ overall understanding of our current financial performance, and not as a substitute for, the Company’s reported results. Moreover, the manner in which we calculate these measures may differ from that of other companies reporting non-GAAP measures with similar names.

In the tables below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the non-GAAP financial measures and ratios used in this press release, or a reconciliation of the non-GAAP calculation of the financial measure for the periods indicated: