EverBank Financial Corp Announces Fourth Quarter and Full Year 2016 Financial Results

EverBank Financial Corp (NYSE: EVER) announced today its financial results for the fourth quarter and the year ended December 31, 2016.

GAAP net income available to common shareholders was $55.8 million for the fourth quarter 2016, compared to $34.6 million for the third quarter 2016 and $42.6 million for the fourth quarter 2015. GAAP diluted earnings per share were $0.43 for the fourth quarter 2016, compared to $0.27 in the third quarter 2016 and $0.34 in the fourth quarter 2015. Adjusted net income1 available to common shareholders was $44.1 million for the fourth quarter 2016, compared to $51.6 million for the third quarter 2016 and $42.9 million for the fourth quarter 2015. Adjusted diluted earnings per common share1 in the fourth quarter 2016 were $0.34 compared to $0.40 in the third quarter 2016 and $0.34 in the fourth quarter 2015.

For the year ended 2016, GAAP net income available to common shareholders was $134.8 million, compared to $120.4 million for the year ended 2015. GAAP diluted earnings per share were $1.06 in 2016, compared to $0.95 in 2015. Adjusted net income available to common shareholders1 was $176.0 million in 2016, compared to $154.6 million in 2015. Adjusted diluted earnings per common share1 were $1.38 in 2016, compared to $1.22 in 2015.

Fourth Quarter and Full Year 2016 Key Highlights

• Total assets of $27.8 billion at December 31, 2016, a decrease of 3% compared to the prior quarter and an increase of 5% year over year.
• Portfolio loans held for investment (HFI) of $23.6 billion at December 31, 2016, a decrease of 2% compared to the prior quarter and an increase of 6% year over year.
• Total originations of $2.7 billion in the quarter, a decrease of 17% compared to the prior quarter and 16% year over year. Full year 2016 total originations of $11.6 billion, a decrease of 12% year over year.
• Total deposits of $19.6 billion at December 31, 2016, flat compared to the prior quarter and up 8% year over year.
• Net interest margin of 2.80% for the quarter, a decrease of 0.01% compared to the prior quarter.
• GAAP return on average equity (ROE) was 12.3% for the quarter and 7.7% for the full year. Adjusted ROE1 was 9.8% for the quarter and 10.1% for the full year.
• Tangible common equity per common share1 of $14.31 at December 31, 2016, an increase of 7% year over year.
• Adjusted non-performing assets to total assets1 were 0.70% at December 31, 2016. Annualized net charge-offs to average total loans and leases held for investment were 0.15% for the quarter.
• Consolidated common equity Tier 1 capital ratio of 10.5% and bank Tier 1 leverage ratio of 8.0% as of December 31, 2016.
• On November 9, 2016, the Company’s stockholders voted to approve the Company's acquisition by Teachers Insurance and Annuity Association of America.

Balance Sheet

Total assets were $27.8 billion at December 31, 2016, a decrease of $0.9 billion, or 3%, compared to the prior quarter and an increase of $1.2 billion, or 5%, year over year. The quarter over quarter decrease was driven by a $0.7 billion, or 32%, decrease in loans held for sale and a $0.4 billion, or 2%, decrease in portfolio loans HFI.

Portfolio Loans and Leases HFI

The following table presents total portfolio loans and leases HFI by product type:

Total Consumer Banking loans HFI increased $92 million, or 1%, compared to the prior quarter and increased $0.8 billion, or 7%, year over year, to $13.1 billion. Total residential mortgages remained flat compared to the prior quarter at $11.8 billion. Home equity lines and other increased $71 million, or 6%, compared to the prior quarter to $1.2 billion.

Total Commercial Banking loans and leases HFI decreased $468 million, or 4%, compared to the prior quarter and increased $490 million, or 5%, year over year to $10.5 billion. Equipment financing receivables increased $48 million, or 2%, compared to prior quarter to $2.6 billion, lender finance increased $94 million, or 6%, to $1.6 billion, mortgage warehouse finance decreased $484 million, or 16%, to $2.6 billion, and commercial real estate and other commercial loans decreased $125 million, or 3%, to $3.8 billion.

Loan and Lease Origination Activities

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

Total originations were $2.7 billion for the fourth quarter of 2016, a decrease of 17% compared to the prior quarter and a decrease of 16% year over year. For the full year 2016, total originations were $11.6 billion, a decrease of 12% year over year. Consumer originations were $2.1 billion for the fourth quarter of 2016, a decrease of 19% compared to the prior quarter and 1% year over year. For the full year 2016, consumer originations were $8.8 billion, a decrease of 7% year over year. Commercial originations were $684 million for the fourth quarter of 2016, a decrease of 12% compared to the prior quarter, and 42% year over year. For the full year 2016, commercial originations were $2.8 billion, a decrease of 23% year over year.

Deposits and Other Funding

The following table presents total deposit balances by account type and segment:

Total deposits were $19.6 billion at December 31, 2016, flat compared to the prior quarter and an increase of $1.4 billion, or 8%, year over year.

Total other borrowings were $5.5 billion at December 31, 2016, a decrease of $981 million, or 15%, compared to the prior quarter and a decrease of $371 million, or 6%, year over year.

Capital Strength

Total shareholders' equity was $2.0 billion at December 31, 2016, an increase of 6% quarter over quarter and 8% year over year. As of December 31, 2016, our consolidated common equity Tier 1 capital ratio was 10.5% and the bank’s Tier 1 leverage and total risk-based capital ratios were 8.0% and 13.4%, respectively. As a result, the bank is considered "well-capitalized" under all applicable regulatory guidelines.

Credit Quality

Our adjusted non-performing assets1 were 0.70% of total assets at December 31, 2016, compared to 0.69% for the prior quarter and 0.53% at December 31, 2015. Net charge-offs during the fourth quarter of 2016 were $9 million, an increase of $3 million compared to the prior quarter and $5 million year over year. On an annualized basis, net charge-offs were 0.15% of total average loans and leases held for investment, compared to 0.10% for the prior quarter and 0.07% for the fourth quarter of 2015.

Income Statement Highlights

Revenue

Revenue was $264 million for the fourth quarter of 2016, an increase of $31 million, or 13%, from $233 million in the prior quarter. Excluding the change in valuation allowance on our mortgage servicing rights (MSR) and other one-time items, revenue would have been $243 million in the fourth quarter of 2016, a decrease of 13% compared to the prior quarter.

Net Interest Income

Net interest income was $189 million for the fourth quarter of 2016, a decrease of $0.1 million, or less than 1%, compared to the prior quarter. Average interest-earning assets increased $121 million, or less than 1%, compared to the prior quarter. Average interest-bearing liabilities decreased $417 million, or 2%, compared to the prior quarter.

Net interest margin decreased from 2.81% in the prior quarter to 2.80% for the fourth quarter of 2016, driven by a 0.05% increase in the average cost of total interest-bearing liabilities to 1.16% partially offset by a 0.01% increase in the interest-earning asset yield to 3.82%.

Noninterest Income

Noninterest income for the fourth quarter of 2016 was $75 million, an increase of $31 million, or 73%, compared to the prior quarter driven by higher levels of net loan servicing income. Net loan servicing income increased $44 million compared to the prior quarter to $26 million, driven by the change in valuation allowance on our MSR, which included a $21 million recovery in the fourth quarter compared to an impairment of $23 million in the prior quarter. Excluding the impact of the valuation allowance, net loan servicing income would have been $5 million in both the fourth quarter of 2016 and the prior quarter.

Gain on sale of loans was $28 million, a decrease of $15 million, or 35%, compared to the prior quarter, driven primarily by lower agency funding activity.

Noninterest Expense

Noninterest expense for the fourth quarter of 2016 was $152 million, a decrease of $10 million, or 6%, compared to the prior quarter. Salaries, commissions and employee benefits were $89 million, a decrease of $5 million, or 6%, compared to the prior quarter. General and administrative expense was $42 million, a decrease of $4 million, or 8%, compared to the prior quarter.

EverBank's efficiency ratio in the fourth quarter of 2016 was 57%, compared to 69% in the prior quarter. Excluding the impact of MSR valuation allowance recovery or impairment, transaction and other non-recurring expenses, EverBank's adjusted efficiency ratio1 was 62% for the fourth quarter compared to 61% in the prior quarter.

Dividends

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.

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 $27.8 billion in assets and $19.6 billion in deposits as of December 31, 2016. 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 https://about.everbank/investors.

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, including the adequacy of our cash flow from operations and borrowings to meet our short-term liquidity needs; 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, 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; concentration of our commercial real estate loan portfolio; higher than normal delinquency and default rates affecting our mortgage banking business; 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 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, 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 and dispositions; risks related to the continuing integration of acquired businesses; changes to generally accepted accounting principles; environmental liabilities with respect to properties that we take title to upon foreclosure; fluctuations in our stock price; the inability of our banking subsidiary to pay dividends; the possibility that the proposed merger (the “Merger”) with Teachers Insurance 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; and risks that the proposed Merger disrupts our current plans and operations and potential difficulties in our employee retention as a result of the Merger.

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 Efficiency Ratio, Adjusted Return on Equity, Tangible Shareholders’ Equity, Tangible Common Shareholders' Equity, Tangible Common Equity Per Common Share, Tangible Assets and Adjusted Non-Performing Asset Ratio 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:

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