UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 16, 2015 (August 3, 2015)

 CIT GROUP INC.

(Exact name of registrant as specified in its charter)

11 W. 42^nd Street
New York, New York 10036

(Address of registrant’s principal executive office)

Registrant's telephone number, including area code: (212) 461-5200

Not Applicable

_________________________________________________________________________________________

(Former Name or Former Address, if Changed Since Last Report)

_________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Section 2 – Financial Information

Item 2.01. Completion of Acquisition or Disposition of Assets.

Effective as of August 3, 2015, CIT Group Inc. (“CIT”) completed the acquisition of IMB HoldCo LLC and its wholly owned subsidiary, OneWest Bank N.A. (collectively “OneWest”), with OneWest Bank surviving as a wholly owned subsidiary of CIT with the name CIT Bank, National Association (the “Bank Merger”). This Form 8-K/A is being filed to amend the Form 8-K filed on August 3, 2015 and includes the pro forma financial information of the combined CIT and OneWest and financial statements of OneWest.

Section 7 – Regulation FD

Item 7.01. Regulation FD Disclosure.

This Form 8-K/A includes a copy of the Company’s presentation to analysts and investors of its Unaudited Pro Forma Condensed Combined Statements of Operations for the six months ended June 30, 2015 and the year ended December 31, 2014 and the Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2015, which is attached as Exhibit 99.2. The information included in Exhibit 99.2 shall not be considered filed for purposes of the Exchange Act.

Section 9 – Financial Statements and Exhibits

Item 9.01. Exhibits.

(a) Financial statements of business acquired.

The audited consolidated financial statements of OneWest at and for the years ended December 31, 2014 and 2013 are attached hereto as Exhibit 99.3. The unaudited condensed consolidated financial statements of OneWest at and for the quarters and six months ended June 30, 2015 and 2014 are attached hereto as Exhibit 99.4. Each of Exhibits 99.3 and 99.4 is incorporated herein by reference.

(b) Pro forma financial information.

The required Unaudited Pro Forma Condensed Combined Financial Information relating to the OneWest Bank acquisition is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The Unaudited Pro Forma Condensed Combined Statements of Income for the six months ended June 30, 2015 and the year ended December 31, 2014 include the results of operations for OneWest for such periods. The Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2015 includes the financial position of OneWest as of such date.

(d) Exhibits.

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 hereunto duly authorized.

CIT GROUP INC.

(Registrant)

By: _/s/ Scott T. Parker________________________

Scott T. Parker

Executive Vice President &

Chief Financial Officer

Dated: October 16, 2015

Exhibit 99.1

Unaudited Pro forma Condensed Combined Financial Statements

The following unaudited pro forma condensed combined financial information is presented to illustrate the estimated effects of the acquisition of IMB HoldCo LLC, the parent company of OneWest Bank N.A. (collectively “OneWest”) by CIT Group Inc. (“CIT”) (the “OneWest Transaction”) on August 3, 2015. The following unaudited pro forma condensed combined balance sheet as of June 30, 2015 and the unaudited pro forma condensed combined statements of operations for the six month period ended June 30, 2015 and the year ended December 31, 2014 are based upon, derived from, and should be read in conjunction with the historical audited financial statements of CIT (which are available in CIT’s Form 10-K for the year ended December 31, 2014), the historical audited financial statements of OneWest (which are included in this Form 8-K/A for the year ended December 31, 2014), the historical unaudited financial statements of CIT (which are available in CIT’s Form 10-Q for the quarter ended June 30, 2015) and the historical unaudited financial statements of OneWest (which are included in this Form 8-K/A for the three and six month period ended June 30, 2015). The OneWest Transaction will be accounted for as a business combination using the acquisition method of accounting under the supervision of Accounting Standards Codification (“ASC”) 805, Business Combinations, (“ASC 805”). The unaudited pro forma condensed combined financial information set forth below gives effect to the consummation of the OneWest Transaction. CIT paid approximately $3.4 billion as consideration, comprised of approximately $1.9 billion in cash, approximately 30.9 million shares of CIT common stock (valued at approximately $1.5 billion at the time of the closing) and approximately 168,000 restricted stock units of CIT (valued at approximately $6.3 million of nonvested shares at the time of closing). Total consideration also included $116.0 million of cash retained by CIT as a holdback for certain potential liabilities relating to OneWest and $2.0 million of cash for expenses of the holders’ representative.

The pro forma adjustments are preliminary and are based upon available information and certain assumptions that management believes are reasonable under the circumstances and that are described in the accompanying notes to the unaudited pro forma condensed combined financial information. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. Under ASC 805, generally all assets acquired and liabilities assumed are recorded at their fair value as of the acquisition date. For pro forma purposes, the fair value of OneWest’s identifiable tangible and intangible assets acquired and liabilities assumed are based on a preliminary estimate of fair value as of June 30, 2015. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed was recognized as goodwill. Management believes the fair values recognized for the assets to be acquired and liabilities to be assumed are based on reasonable estimates and assumptions. Preliminary fair value estimates may change as additional information becomes available and such changes could be material.

The unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2014, and the six month period ended June 30, 2015 assumes the OneWest Transaction occurred on January 1, 2014. The unaudited pro forma condensed combined balance sheet as of June 30, 2015 assumes the OneWest Transaction occurred on June 30, 2015. The unaudited pro forma condensed combined financial information has been prepared by management in accordance with the regulations of the SEC and is not necessarily indicative of the combined financial position or results of operations that would have been realized had the OneWest Transaction occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that CIT will experience after the OneWest Transaction. In addition, the accompanying unaudited pro forma condensed combined statements of operations does not include any expected cost savings, operating synergies as a result of restructuring activities, or revenue enhancements, which may be realized subsequent to the OneWest Transaction, or the impact of any non-recurring or one-time transaction-related or integration-related costs. No material transactions existed between CIT and OneWest during the pro forma period.

This unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes and assumptions as well as the historical consolidated financial statements and related notes of CIT, and those of OneWest included herein, respectively.

Unaudited Pro Forma Condensed Combined Balance Sheet

The following preliminary unaudited pro forma condensed combined balance sheet as of June 30, 2015 combines the June 30, 2015 historical balance sheets of CIT and OneWest and other assets acquired and liabilities assumed, assuming the companies had been combined on June 30, 2015 under the acquisition method of accounting.

CIT Group

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2015

(in millions)

Unaudited Pro Forma Condensed Combined Statement of Operations

The following preliminary unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2015 combines the historical statements of operations of CIT and OneWest, assuming the companies had been combined on January 1, 2014 under the acquisition method of accounting.

CIT Group 
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(in millions)

Unaudited Pro Forma Condensed Combined Statement of Operations

The following preliminary unaudited pro forma condensed combined statement of operations for the year ended December 31, 2014 combines the historical statements of operations of CIT and OneWest, assuming the companies had been combined on January 1, 2014 under the acquisition method of accounting. The income tax benefit recorded by CIT for the year ended December 31, 2014 related to the partial release of the valuation allowance on federal deferred tax assets ($375.0 million) is not reflected in the unaudited pro forma condensed combined Statement of Operations because it will not have a continuing impact.

CIT Group

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2014

(in millions)                  

On August 3, 2015 CIT Group, Inc. (CIT or the "Company") completed the acquisition of IMB HoldCo LLC, the parent company of OneWest Bank N.A. (collectively "OneWest"), for $3.4 billion in cash and stock (the “OneWest Transaction”). IMB Holdco LLC shareholders received $1.9 billion in cash, approximately 30.9 million shares of CIT common stock valued at approximately $1.5 billion and approximately 168,000 restricted stock units of CIT (valued at approximately $6.3 million of nonvested shares at the time of closing). Total consideration also included $116.0 million of cash retained by CIT as a holdback for certain potential liabilities relating to OneWest and $2.0 million of cash for expenses of the holders’ representative. At June 30, 2015, OneWest had approximately 70 branches in Southern California, with approximately $21.7 billion of assets and $14.7 billion of deposits.

The unaudited pro forma condensed combined balance sheet as of June 30, 2015 and the unaudited pro forma condensed combined statement of operations for the six month period ended June 30, 2015 and for the year ended December 31, 2014 presented herein are based on the historical financial statements of CIT and OneWest, after giving effect to the OneWest Transaction and the assumptions and adjustments described in the accompanying notes to these unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined balance sheet as of June 30, 2015 gives effect to the OneWest Transaction as if the OneWest Transaction had occurred on June 30, 2015. The pro forma adjustments to reflect the acquired assets and assumed liabilities are based on the estimated fair value of OneWest's assets and liabilities as of June 30, 2015. Similarly, the historical OneWest statement of operations is based upon the period from January 1, 2015 to June 30, 2015 and January 1, 2014 to December 31, 2014. The unaudited pro forma condensed combined statement of operation reflects income from continuing operations and does not reflect discontinued operations. Management is not aware of any material transactions entered into by OneWest through August 3, 2015.

The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the OneWest Transaction. The unaudited pro forma financial data does not include any future integration costs. For pro forma purposes, the valuation of consideration transferred is based on, amongst other things, the share price of CIT on the last trading day prior to the OneWest Transaction, or July 31, 2015, of $47.04 per share. The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in the future periods or the results that actually would have been realized had CIT and OneWest been a combined company during the specified period.

The pro forma adjustments are preliminary and are based upon available information and certain assumptions which management believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information.

This unaudited pro forma condensed combined financial information, including the notes thereto, should be read in conjunction with the historical consolidated financial statements of CIT as of and for the six month period ended June 30, 2015 and the year ended December 31, 2014 included in CIT’s Form 10-Q as of June 30, 2015 and Form 10-K as of December 31, 2014, and the historical consolidated financial statements of OneWest as of and for the three and six month period ended June 30, 2015 and for the year ended December 31, 2014, included herein.

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of CIT and OneWest. The acquisition method of accounting, based on ASC 805, uses the fair value concepts defined in ASC 820, Fair Value Measurement ("ASC 820"). The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are (i) directly attributable to the OneWest Transaction, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results.

Under ASC 805, generally, all assets acquired and liabilities assumed are recorded at their fair values as of the acquisition date. The Company has not completed a full, detailed valuation analysis necessary to determine the fair values of the identifiable assets acquired and liabilities assumed. However, a preliminary valuation analysis was performed as of June 30, 2015, the date on which the merger is deemed to occur for the purposes of the pro forma balance sheet, related to the assets and liabilities of OneWest being fair valued. Accordingly, the unaudited pro forma condensed combined financial statements include only preliminary estimates. The amounts of assets acquired and liabilities assumed that will be used in acquisition accounting will be based upon their respective fair values as determined at the time of the OneWest Transaction (August 3, 2015), and may differ significantly from these preliminary estimates. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed will be recognized as goodwill. Certain market based assumptions which were used, will be updated as of the OneWest Transaction on August 3, 2015. Management believes the fair values recognized for the assets to be acquired and the liabilities to be assumed are based on reasonable estimates and assumptions. Preliminary fair value estimates may change as additional information becomes available, and such changes could be material.

ASC 820 defines fair value, establishes the framework for measuring fair value for any asset acquired or liability assumed under U.S. GAAP, expands disclosures about fair value measurements and specifies a hierarchy of valuation techniques based on the nature of the inputs used to develop the fair value measures. Fair value is defined in ASC 820 as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. This is an exit price concept for the valuation of an asset or liability. Market participants are assumed to be buyers or sellers in the most advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants, and as a result, assets may be required to be recorded at prices which are not intended to be used or sold and/or to value assets at a fair value measurement that do not reflect management’s intended use for those assets. Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances.

Assets acquired and liabilities assumed in a business combination that arise from contingencies must be recognized at fair value if fair value can be reasonably estimated. If the fair value of an asset or liability that arises from a contingency cannot be determined, the asset or liability would be recognized in accordance with ASC 450, Disclosure of Certain Loss Contingencies (“ASC 450”). If the fair value is not determinable and the ASC 450 criteria are not met, no asset or liability would be recognized.

Based upon the size of CIT's closed transactions on August 1, 2014 of Direct Capital Group, Inc. and its wholly owned subsidiary Direct Capital Corporation and on January 31, 2014 of Nacco, the business combination adjustments included herein do not reflect the impact of these transactions, however, financial information for these entities is included as of June 30, 2015 and for the periods that those entities were owned by CIT (subsequent to August 1, 2014 for Direct Capital and subsequent to January 31, 2014 for Nacco).

Acquisition accounting rules require evaluation of certain assumptions, estimates or determination of financial statement classifications which are completed during the measurement period as defined in current accounting standards. The accounting policies of CIT and the acquisition accounting rules may materially vary from accounting policies of OneWest. During the preparation of the unaudited pro forma condensed combined financial information, management performed a preliminary analysis and identified the following significant differences:

Management has not identified any other material differences in accounting policies between the two companies as of the date of this filing.

Following the acquisition and during the measurement period, management will conduct a final review of OneWest's accounting policies in an effort to determine if differences in accounting policies require adjustment or reclassification of OneWest's results of operations or reclassification of assets or liabilities to conform to CIT's accounting policies and classifications or are required by acquisition accounting rules. As a result of that review, management may identify additional differences that, when conformed, could have a material impact on these unaudited pro forma condensed combined financial statements.

The estimated purchase price and the allocation of the estimated purchase price discussed below are preliminary. The final allocation of the purchase price will be determined at a later date and is dependent on a number of factors, including the final evaluation of the fair value of OneWest's tangible and identifiable intangible assets acquired and liabilities assumed. Such final adjustments, including increases or decreases to amortization resulting from the allocation of purchase price to amortizable tangible and intangible assets, may be material.

Exhibit 99.2

Pro Forma Financials Presentation Reflecting the Acquisition of OneWest Bank October 16, 2015

2 Disclaimer This Presentation contains forward - looking statements within the meaning of applicable federal securities laws with respect to the re cent acquisition of IMB Holdco LLC and its subsidiaries (“ OneWest ”), OneWest’s future performance, the costs to be incurred in connection with the acquisition, integration with CIT, and the impact of the transaction on CIT’s future performance . Forward - looking statements are based upon our current expectations and assumptions concerning future events, which are subject t o a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. The words “expect,” “anticipate,” “estimate,” “f ore cast,” “initiative,” “objective,” “plan,” “goal,” “project,” “outlook,” “priorities,” “target,” “intend,” “evaluate,” “pursue,” “commence,” “seek,” “may,” “would,” “could,” “s hou ld,” “believe,” “potential,” “continue,” or the negative of any of those words or similar expressions is intended to identify forward - looking statements. All statements contained in thi s Presentation, other than statements of historical fact, including without limitation, statements about our plans, strategies, prospects and expectations regarding f utu re events and our financial performance, are forward - looking statements that involve certain risks and uncertainties. While these statements represent our current judgment o n what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results, and our actual result s m ay differ materially . In addition, forward - looking statements in this Presentation are subject to certain risks and uncertainties related both to the acquisition transaction itself and to the integration of the acquired business with CIT after closing, including difficulty and delays in integrating OneWest with CIT or fully realizing projected cost savings and other projected benefits of the transaction; business disruption following the transaction; the inability to sustain revenue and earnings gro wth ; changes in general economic conditions, including changes in interest rates and capital markets; changes in law or regulations; diversion of management time on trans act ion - related issues; reputational risks and the reaction of customers and counterparties to the transaction; and changes in asset quality and risk as a result of the transac tio n . This Presentation contains unaudited pro forma condensed combined financial information, which is a summary of the unaudited pro forma condensed combined financial information contained in Exhibit 99.1 to CIT’s Form 8 - K/A filed October 16, 2015 with the Securities and Exchange Commission. Th e unaudited pro forma condensed combined financial information is provided for informational purposes only and is not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the acquisition of OneWest been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma condensed combined financial information and related adjustments required management to make certain assumptions and es tim ates. The unaudited pro forma condensed combined financial information should be read together with : ▪ The accompanying notes to the unaudited pro forma condensed combined financial information; ▪ CIT’s audited consolidated financial statements at and for the years ended December 31, 2014 and 2013, included in CIT’s Annu al Report on Form 10 - K for the year ended December 31, 2014; ▪ CIT's unaudited consolidated financial statements at and for the three and six months ended June 30, 2015, included in CIT's Qua rterly Report on Form 10 - Q for the quarter ended June 30, 2015; ▪ the audited consolidated financial statements of IMB HoldCo LLC and Subsidiaries at and for the years ended December 31, 2014 and 2013, which are attached as Exhibit 99.2 to CIT’s Form 8 - K/A filed October 16, 2015; and ▪ the unaudited condensed consolidated financial statements of IMB HoldCo LLC and Subsidiaries at and for the quarters and six months ended June 30, 2015 and 2014, which are attached as Exhibit 99.3 to CIT’s Form 8 - K/A filed October 16, 2015 . The actual amounts recorded may differ materially from the information presented in this pro forma condensed combined statement of operations as a result of : ▪ the methodology required to be used to prepare the pro forma financial statements; and ▪ revenue enhancements and/or expense savings achieved by the combined company . We describe other risks that are applicable to our businesses generally that could affect our results in Item 1A, “Risk Facto rs, ” of our latest Annual Report on Form 10 - K for the year ended December 31, 2014, which was filed with the Securities and Exchange Commission. Accordingly, you should not pl ace undue reliance on the forward - looking statements contained in this Presentation. These forward - looking statements speak only as of the date on which the statements we re made. CIT undertakes no obligation to update publicly or otherwise revise any forward - looking statements, except where expressly required by law.

3 Summary ▪ The unaudited pro forma financial statements are required by the SEC to illustrate the estimated effects of the acquisition of OneWest without consideration of any strategic actions the Company may take or any change in market conditions at the time of the acquisition ▪ Adjustments are estimates and are further described in the 8 - K/A filed on October 16, 2015 ▪ The unaudited pro forma balance sheet as of June 30, 2015 assumes the acquisition of OneWest occurred on June 30, 2015 ▪ Actual combination adjustments will be as of the August 3, 2015 closing date ▪ The unaudited pro forma statement of operations for the fiscal year ended December 31, 2014 and the six month period ended June 30, 2015 assumes the transaction occurred on January 1, 2014 ▪ Purchase accounting adjustments are based on preliminary fair value marks and applied to assets and liabilities during the applicable period ▪ Actual purchase accounting impacts as of August 3, 2015 will be provided with the third quarter earnings release ▪ Per page seven of the 2Q ‘14 earnings presentation, we have updated the 2016 projected adjustment to OneWest’s earnings from the purchase accounting marks and it is estimated to be slightly positive in 2016 (1) ▪ Net accretion and other impacts to the financial statements will differ over time (1) Adjustment are based on the analysis of the purchase accounting impact, including CIT’s modeling of the expected run - off of assets and liabilities as well as other impacts expected to continue as a result of the combination

4 Pro Forma Summary of Adjustments Pro Forma Balance Sheet ▪ CIT Adjustments ▪ Cash and equity disbursed for the acquisition of OneWest . Assumes actual share price of CIT stock issued at $47.04 per share ▪ Reversed $690 million of the valuation allowance on the net DTA ▪ Accrued estimated remaining transaction costs of $60 million ▪ Recorded fair value of expected payment on holdback of $61 million ▪ OneWest Adjustments ▪ Assets and liabilities recorded at fair value based on estimated values as of closing date and applied to the June 30, 2015 pro forma balance sheet resulting in net discount of $374 million ▪ Established intangibles primarily related to core deposits, customer relationships and trade name of $184 million ▪ Goodwill of $617 million based on excess of purchase price (reflecting the actual stock price at closing of $ 47.04) over fair value of assets and liabilities Pro Forma Income Statements ▪ Purchase accounting adjustments and continuing impacts: ▪ For loans and indemnification assets accounted for by OneWest under the fair value method, removed fair value adjustments and recorded accretion based on assumed CIT purchase accounting marks and accounting policies ▪ Removed mark - to - market impact from derivatives unwound prior to closing ▪ For assets and liabilities accounted for by OneWest under the accrual method, recorded net accretion based on CIT’s purchase accounting marks (including amortization of intangibles) ▪ Increased provision for loan losses from change in accounting policy and other purchase accounting adjustments ▪ Recorded increase in FDIC insurance expense on OneWest’s deposits to reflect the go - forward assessment rate ▪ Assumed 40% effective tax rate (‘ETR’) on purchase accounting and on - going adjustments ▪ Other adjustments: ▪ Eliminated transaction costs included in OneWest’s and CIT’s results during the period ▪ Removed impact of CIT’s valuation allowance reversal in 2014 ▪ Adjusted for discrete tax items and ~40% ETR on fair value and other combination adjustments resulting in an assumed combined ETR of ~33%

5 Pro Forma Balance Sheet – As of June 30, 2015 1. The net impact of $374 million decrease due to estimated fair value on ~$14 billion of loans, less the $131 million allowance fo r losses that was eliminated 2. Reflects change in estimated amount and timing of cash flows related to losses on approximately $ 5 billion of single family residential mortgages covered by loss share agreements 3. Intangible assets include $126 million of core deposit intangibles based on an analysis of deposit relationships. Establishe d additional intangibles for customer relationships and OneWest trade name 4. Reflects valuation allowance reversal of $690 million on federal deferred tax asset 1 2 3 4 Note: Refer to Note 4 in the 8 - K/A filed October 16, 2015 for further explanations of adjustments to Pro Forma balance sheet Business Combination (in millions) CIT at 6/30/15 OneWest at 6/30/15 Consideration Paid Net Assets Acquired Estimated Purchase Accounting Other Adjustments CIT Pro-Forma Combined BS at 6/30/15 Form 8-K/A Reference Note 4(g) Note 4(g) Note 4(g) Note 4(c), (l), (o), (r) Cash, interest bearing deposits and repurchase agreements 6,215 4,515 (1,069) - - 26 9,687 Investment securities 1,693 1,162 (800) - - - 2,055 Financing & leasing assets (net of allowance) 35,495 13,877 - - (243) (13) 49,116 Indemnification assets - 689 - - (209) - 480 Goodwill 566 100 - (100) 617 - 1,183 Intangible assets 21 3 - (3) 184 - 205 All other assets (including discontinued operations) 2,667 1,361 - - 166 688 4,882 Total Assets 46,657 21,707 (1,869) (103) 515 701 67,608 Deposits and borrowings 33,709 17,666 - - 36 17 51,428 All other liabilities (including Discontinued operations) 4,140 983 61 - 42 45 5,271 Stockholders Equity 8,808 3,058 1,462 (3,058) - 639 10,909 Total Liabilities & Stockholders Equity 46,657 21,707 1,523 (3,058) 78 701 67,608

6 Pro Forma Statement of Operations – Six months ended 6/30/15 1. Primarily reflects the change in yield on securities and loans acquired as well as on deposits and borrowings assumed 2. Adjusts for increase in provision for loan losses from change in accounting policy and other purchase accounting adjustments 3. Adjusts for OneWest’s losses on certain loans and borrowings previously recorded under the fair value method of accounting and corresponding derivatives unwound prior to closing 4. Purchase accounting and ongoing impacts reflect a. Incremental amortization of intangibles of ~$10 million (intangibles expected to amortize over ~8 years) b. Higher FDIC insurance premiums of ~$ 13 million on OneWest’s deposits 2 3 Note: Refer to Note 5 in the 8 - K/A filed October 16, 2015 for further explanations of adjustments to Pro Forma statement of ope rations 1 1 4 (in millions) CIT OneWest Purchase Accounting & Continuing Impacts Other Adjustments CIT Pro Forma Combined Form 8-K/A Reference Note 5: (cc), (dd), (ff), (gg), (hh), (ii), (jj), (kk), (ll) Note 5: (aa), (bb), (ee) Interest Income 565 448 1 - 1,014 Rental income on operating leases 1,062 - - - 1,062 Interest Expense (536) (63) 4 - (595) Depreciation on operating lease equipment (315) - - - (315) Maintenance and other operating lease expenses (95) - - - (95) Net finance revenue 681 385 5 - 1,071 Provision for credit losses (53) (4) (24) - (81) Other income 150 (21) - 38 167 Operating expenses (477) (185) (23) 1 (684) Income before provision for income taxes 301 175 (42) 39 473 Provision for income taxes (82) (68) 17 (21) (154) Income from continuing operations, before attribution of noncontrolling interests 219 107 (25) 18 319 Net income attributable to noncontrolling interests, after tax - - - - - Income from continuing operations 219 107 (25) 18 319 Diluted Weighted Average Shares Outstanding (thousands) 175,971 31,114 207,085 Income from continuing operations per common share $1.24 $1.54

7 Pro Forma Statement of Operations – Year ended 12/31/14 1 2 3 1. Primarily reflects the change in yield on securities and loans acquired as well as on deposits and borrowings assumed 2. Adjusts for OneWest’s losses on certain loans and borrowings previously recorded under the fair value method of accounting and corresponding derivatives unwound prior to closing 3. Purchase accounting and ongoing impacts reflect a. Incremental amortization of intangibles of ~$18 million (Intangibles expected to amortize over ~8 years) b. Higher FDIC insurance premiums of ~$28 million on OneWest’s deposits 4. Includes elimination of $375 million VA reversal in CIT’s results Note: Refer to Note 6 in the 8 - K/A filed October 16, 2015 for further explanations of adjustments to Pro Forma statement of op erations 1 4 (in millions) CIT OneWest Purchase Accounting & Continuing Impacts Other Adjustments CIT Pro Forma Combined Form 8-K/A Reference Note 6: (cc), (dd), (ff), (gg), (hh), (ii), (jj), (kk), (ll) Note 6: (aa), (bb), (ee) Interest Income 1,227 892 36 - 2,155 Rental income on operating leases 2,093 - - - 2,093 Interest Expense (1,086) (140) 21 - (1,205) Depreciation on operating lease equipment (616) - - - (616) Maintenance and other operating lease expenses (197) - - - (197) Net finance revenue 1,421 752 57 - 2,230 Provision for credit losses (100) (57) - - (157) Other income 305 (13) - 70 362 Operating expenses (945) (381) (41) 17 (1,350) Income before provision for income taxes 681 301 16 87 1,085 Provision for income taxes 398 (118) (7) (635) (362) Income from continuing operations, before attribution of noncontrolling interests 1,079 183 9 (548) 723 Net income attributable to noncontrolling interests, after tax (1) - - - (1) Income from continuing operations 1,078 183 9 (548) 722 Diluted Weighted Average Shares Outstanding (thousands) 189,463 31,114 220,577 Income from continuing operations per common share $5.69 $3.27

Exhibit 99.3

IMB HoldCo LLC

and Subsidiaries

Financial Statements

For the Years Ended December 31, 2014 and 2013

IMB HoldCo LLC and Subsidiaries

Index

Independent Auditor’s Report

To the Board of Directors of

IMB HoldCo LLC

We have audited the accompanying consolidated financial statements of IMB HoldCo LLC and its subsidiaries, which comprise the consolidated statements of financial position as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, changes in members’ equity and cash flows for the years then ended.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of IMB HoldCo LLC and its subsidiaries at December 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Pricewaterhouse Coopers LLP, 601 South Figueroa Street, Los Angeles, CA 90017

T; (213) 356 6000, F: (813)637 4444, www.pwc.com/us

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for certain qualifying existing investments previously accounted for under the equity method and transitioned to the proportional amortization method. Our opinion is not modified with respect to this matter.

/s/ PricewaterhouseCoopers LLP

May 31, 2015

Pricewaterhouse Coopers LLP, 601 South Figueroa Street, Los Angeles, CA 90017

T; (213) 356 6000, F: (813)637 4444, www.pwc.com/us

IMB HoldCo LLC and Subsidiaries

Consolidated Statements of Financial Position

As of December 31, 2014 and 2013

(Dollars in thousands)  

The accompanying notes are an integral part of these consolidated financial statements.

IMB HoldCo LLC and Subsidiaries

Consolidated Statements of Operations

For the Years Ended December 31, 2014 and 2013

(Dollars in thousands)  

The accompanying notes are an integral part of these consolidated financial statements.

IMB HoldCo LLC and Subsidiaries

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2014 and 2013

(Dollars in thousands)  

The accompanying notes are an integral part of these consolidated financial statements.

IMB HoldCo LLC and Subsidiaries

Consolidated Statements of Changes in Members’ Equity

For the Years Ended December 31, 2014 and 2013

(Dollars in thousands)  

The accompanying notes are an integral part of these consolidated financial statements.

IMB HoldCo LLC and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2014 and 2013

(Dollars in thousands)  

The accompanying notes are an integral part of these consolidated financial statements. 

IMB HoldCo LLC and Subsidiaries

Consolidated Statements of Cash Flows (continued)

For the Years Ended December 31, 2014 and 2013

(Dollars in thousands)

The accompanying notes are an integral part of these consolidated financial statements. 

IMB HoldCo LLC and Subsidiaries

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2014 and 2013

1. Summary of Significant Accounting Policies

Financial Statement Presentation

IMB HoldCo LLC (the “Parent”) is a Delaware Limited Liability Company, a bank holding company (“BHC”), formed on December 29, 2008. It is the parent of its wholly-owned subsidiary OneWest Bank Group LLC (“OWBG”), which in turn is the parent of OneWest Bank N.A. (the “Bank” or “OneWest Bank”) a national bank. IMB HoldCo LLC and Subsidiaries (the “Company”) conducts all of its banking operations through the Bank. The Company is subject to supervision and regulation by the Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve Bank of San Francisco (“FRB”).

On March 19, 2009, the Company formed OWBG as a holding company to purchase certain assets and assume certain liabilities of IndyMac Federal Bank, FSB (“IndyMac”) from the Federal Deposit Insurance Corporation (“FDIC”) as Conservator and Receiver for IndyMac under a Master Purchase Agreement and related agreements (the “IndyMac Transaction”).

On December 18, 2009, the Company purchased certain assets and assumed certain liabilities of First Federal Bank of California, FSB (“First Federal”) from the FDIC as Receiver for First Federal under a Purchase and Assumption Agreement (the “First Federal Transaction”). On February 19, 2010, the Company purchased certain assets and assumed certain liabilities of La Jolla Bank, FSB (“La Jolla”) from the FDIC as Receiver for La Jolla under a Purchase and Assumption Agreement (the “La Jolla Transaction”). On November 10, 2010, the Company purchased a multifamily and commercial real estate loan portfolio from Citibank, N.A. (“Citibank”).

In June 2013, the Company announced its decision to exit third party servicing operations. In connection with its exit, the Company entered into an agreement with Ocwen Loan Servicing, LLC (“Ocwen”) on June 13, 2013 to sell the third party servicing rights of its forward residential mortgage loans and related servicing advance receivables (the “Ocwen Transaction”). On March 28, 2014, the Company entered into an agreement with Specialized Loan Servicing, LLC (“SLS”) to sell a substantial portion of the remaining third-party servicing rights of its forward residential mortgage loans and related servicing advance receivables (the “SLS Transaction”). Both the Ocwen Transaction and SLS Transaction were completed by December 31, 2014. For further discussion, see Note 2—Acquisitions and Divestitures.

The Consolidated Financial Statements of IMB HoldCo LLC for all periods presented have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) with intercompany accounts and transactions eliminated. Additionally, where applicable, the policies conform to the accounting and reporting guidelines prescribed by Company regulatory authorities.

The Company has not made any significant changes in its accounting policies or application of authoritative guidance since December 31, 2013 except for the Company’s early adoption of Accounting Standards Update (ASU) 2014-01, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects, which required retrospective application. Refer to Accounting Pronouncements section of this Note for further discussion.

Discontinued Operations Held for Sale

The Company reports a component of operations that has been sold or classified as held for sale as discontinued operations when the operations and cash flows have been or will be eliminated from ongoing operations and the Company does not expect to retain any significant continuing involvement in the operations. Assets and liabilities of the component to be sold are classified as held for sale when management commits to a plan to sell; the asset is available for immediate sale; an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; and the sale is probable and expected to qualify for sale recognition within one year. The Company accrues for exit or disposal cost obligations associated with the discontinued operations at estimated fair value in the period in which the liability is incurred, except for one-time termination benefits that are incurred over time. For costs that will be incurred under a contract for its remaining term without economic benefit, the Company accrues the estimated fair value of such liability at the cease-use date.

The Consolidated Statements of Operations for all periods presented and related Notes to the Consolidated Financial Statements reflect the disposal of the third-party servicing businesses (for forward and reverse mortgages) and exiting of the direct mortgage lending business as discontinued operations. For further discussion, see Note 2—Acquisitions and Divestitures.

Use of Estimates

Preparation of the Consolidated Financial Statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and disclosures in the accompanying notes. The most significant estimates are the estimated fair values of the Company’s assets and liabilities for which active markets generally do not exist. Actual results may differ from those estimates and assumptions. Current market conditions increase the risk and complexity of the judgments in these estimates. Estimation methods have been applied consistently across all periods presented.

Cash and Cash Equivalents

Cash and cash equivalents include cash on deposit with the FRB and other banks, vault cash, deposits in transit, and highly liquid investments with original maturities of three months or less. The Company’s loan servicing activities require the Company to hold cash in custodial accounts, which are not included in the Company’s Consolidated Statement of Financial Position, in the amount of $99.3 million and $105.2 million at December 31, 2014 and 2013, respectively.

Restricted Cash

Restricted cash includes cash on deposit with other banks that are legally restricted as to withdrawal and primarily serve as collateral for certain servicer obligations of the Company.

Securities

Securities are classified based on management’s intent on the date of purchase and recorded on the Consolidated balance sheet as of trade date.

Trading securities are carried at their estimated fair value with changes in estimated fair value and realized gains or losses reported in noninterest income. Interest income is recognized using a yield consistent with the estimated market discount rate used to discount expected future cash flows for valuation purposes.

Securities that the Company does not intend to hold until maturity are classified as available-for-sale (“AFS”) securities and carried at their estimated fair value with unrealized gains and losses resulting from changes in estimated fair value excluded from earnings and reported as a separate component of other comprehensive income (“OCI”), net of taxes, in Members’ Equity. Estimated fair value measurement is based on market quotes, when available, or on discounted cash flow techniques using assumptions for prepayment rates, market yield requirements and credit losses when market quotes are not available. For further discussion, see Note 15—Fair Value for more information on the estimated fair value measurement of the Company’s securities.

At the time of acquisition, certain securities classified as AFS had evidence of credit deterioration and it was probable that the Company would not collect all contractually required principal and interest payments. Such purchase credit-impaired (“PCI”) debt securities are recorded initially at estimated fair value. Subsequently, the accretable yield (based on the cash flows expected to be collected over the recorded investment) is accreted to interest income. Interest income shall not be recognized to the extent the recorded investment would increase to an amount greater than the contractual payoff amount. On a quarterly basis, the cash flows expected to be collected are reviewed and updated. The Company’s expected cash flow estimates take into account expectations of relevant market and economic data as of the end of the reporting period including, for example, for securities issued in a securitization, underlying loan-level data, and structural features of the securitization, such as subordination, excess spread, overcollateralization or other forms of credit enhancement. The Company compares the losses projected for the underlying collateral (“pool losses”) against the level of credit enhancement in the securitization structure to determine whether these features are sufficient to absorb the pool losses, or whether a credit loss on the AFS debt security exists. Other-than-temporary impairment (“OTTI”) with credit-related losses are recognized as permanent write-downs while other changes in expected cash flows (e.g., increases and contractual interest rate changes) are recognized through a revised accretable yield in subsequent periods.

The Company evaluates AFS securities with an unrealized loss for potential OTTI on a quarterly basis or more often if a potential loss-triggering event occurs. If the Company determines that it intends to sell AFS securities, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the Company recognizes an OTTI write-down equal to the difference between the amortized cost basis and the estimated fair value of those securities. For AFS securities that the Company does not intend to sell or it is more likely than not that the Company will not be required to sell prior to recovery of the amortized cost basis, the Company compares the present value of

expected cash flows to be received, discounted at the current effective yield, to the security’s amortized cost to determine if a credit loss exists. In the event of a credit loss, impairment for the credit loss is reported in noninterest income. Changes in values attributable to factors other than credit losses are recorded in OCI. Realized gains and losses from the sale of the AFS securities are reported in noninterest income using the specific identification method.

For non-PCI securities, unamortized premiums and discounts are recognized in interest income over the contractual life of the security. As principal repayments are received on debt securities, a proportionate amount of the related premium or discount is recognized in income so that the effective interest rate on the remaining portion of the security continues unchanged.

For further discussion, see Note 3—Securities.

Loans Held for Sale

Loans held for sale (“HFS”) consist primarily of residential mortgage loans, which are secured by one-to-four family residential real estate located throughout the United States. Loans HFS are carried at estimated fair value under the fair value option or lower of cost or estimated fair value (“LOCOM”).

For loans recorded at LOCOM, estimated fair value and LOCOM adjustments are measured on an individual loan basis. Gains and losses on loans HFS are recorded in noninterest income. Interest income is recognized based on the contractual terms of the loans. Net loan origination fees and costs, and purchase premiums or discounts are deferred but not amortized for loans HFS under LOCOM.

Loans HFS are carried at estimated fair value with subsequent changes in fair value recognized in earnings. Interest income is recognized using a yield consistent with the estimated market discount rate used for valuation purposes while the remaining change in fair value is recognized as non-interest income. Net loan origination fees or costs, and purchase premiums or discounts are recognized as earned or incurred through current earnings.

The estimated fair value of loans HFS is subject to change primarily due to changes in market interest rates and mortgage spreads. Under the Company’s risk management policy, the Company generally manages the exposure to changes in estimated fair value of the loans HFS primarily by selling forward contracts on Agency securities (“risk management instruments”). The Company records the changes in the estimated fair value of loans HFS and related risk management instruments as an adjustment to Gain/(loss) from mortgage banking activities in current earnings. For further discussion, see Note 14—Derivative Instruments. As part of its decision to exit the third party servicing business in 2013, the Company discontinued its associated direct mortgage lending business and reported the associated loans HFS in discontinued operations. For further discussion, see Note 2—Acquisitions and Divestitures.

Loan Commitments

The Company enters into commitments to originate residential mortgage loans whereby the interest rate or margin on the loans is fixed prior to funding (“rate lock commitments”). Rate lock commitments on loans the Company intends to sell are accounted for as derivative instruments at estimated fair value. The expected net future cash flows related to servicing of a loan are included in the measurement of estimated fair value. The estimated fair value of rate lock commitments is determined using current secondary market prices for underlying loans with similar coupons, maturity and credit quality, subject to the anticipated loan funding probability, or fallout factor. Upon funding, the current value of the rate lock becomes part of the carrying value of the funded loan.

Similar to loans HFS, the estimated fair value of rate lock commitments is subject to change primarily due to changes in interest rates and mortgage spreads. Under the Company’s risk management policy, the Company manages the exposure to changes in estimated fair value primarily by selling forward contracts on Agency securities. Both the rate lock commitments and the related risk management instruments are recorded at estimated fair value with changes in estimated fair value being recorded in Gain/(loss) from mortgage banking activities in current earnings. For further discussion, see Note 14—Derivative Instruments. Due to the Company’s decision to exit the direct mortgage lending business, the outstanding rate lock commitments and forward contracts on Agency securities associated with the loans HFS are reported as discontinued operations under Assets of operations held for sale.

Loans Held for Investment

Loans are classified as held for investment (“HFI”) based on management’s intent and ability to hold the loans for the foreseeable future. The Company’s HFI loans are accounted for under three accounting measurements: fair value, accretable yield method, or at amortized cost.

Fair Value Option Loans

For loans accounted for under the fair value option, fair values are generally determined by discounting principal and interest cash flows expected to be collected using an estimated market discount rate that management believes a market participant would consider in determining estimated fair value. The Company estimates the cash flows expected to be collected using internal credit risk metrics, as well as interest rate and prepayment risk models that incorporate management’s best estimate of current key assumptions such as default rates, loss severity and prepayment speeds for the life of the loan. Interest income is recognized on loans carried at fair value using a yield consistent with the estimated market discount rate used for valuation purposes while the remaining change in fair value is recognized as non-interest income. For further discussion, see Note 15—Fair Value. Loan origination fees and costs, and purchase premiums or discounts, are recognized as earned or incurred through current earnings.

Purchased Credit-Impaired Loans

Purchased credit-impaired loans (“PCI loans”) were determined as of the date of purchase to have evidence of credit quality deterioration for which it is probable that the Company will be unable to collect all contractually required principal and interest payments. Evidence of credit quality deterioration as of the purchase date may include statistics such as past due status, refreshed borrower credit scores and refreshed loan-to-value ratios.

PCI loans with similar common risk characteristics are pooled together for accounting purposes (i.e., into one unit of account). Common risk characteristics consist of similar credit risk (e.g., delinquency status, loan-to-value, debt service coverage ratio, or credit risk rating) and at least one other predominant risk characteristic (e.g., loan type, collateral type, interest rate index or type, date of origination, term, or geographic location). Generally, PCI loans are grouped together based on similar credit risk and collateral type.

PCI loans are initially recorded at estimated fair value, which is determined by discounting both principal and interest cash flows expected to be collected using an observable discount rate for similar instruments with adjustments that management believes a market participant would consider in determining estimated fair value. The Company estimates the cash flows expected to be collected at acquisition using internal credit risk, interest rate and prepayment risk models that incorporate management’s best estimate of current key assumptions, such as default rates, loss severity and prepayment speeds for the life of the loan.

An accretable yield based on the cash flows expected to be collected (estimated fair value at acquisition date) over the recorded investment is used to recognize interest income using the effective yield method over the expected remaining life. Interest income shall not be recognized to the extent the recorded investment would increase to an amount greater than the contractual payoff amount. Decreases in expected cash flows related to further credit deterioration result in a charge to the provision for credit losses and a corresponding increase to the allowance for credit losses. Increases in expected cash flows due to credit quality result in recovery of any previously recorded allowance for credit losses, to the extent applicable, and an increase in the accretable yield applied prospectively for any remaining increase. Changes in expected cash flows caused by changes in market interest rates or by prepayments are recognized as adjustments to the accretable yield on a prospective basis.

Amortized Cost Loans

For loans carried at amortized cost, except for Small Business Administration (“SBA”) loans, fees and incremental direct costs associated with the loan origination and pricing process as well as premiums and discounts, are deferred and generally amortized over the contractual life of the loan using the effective interest method. For SBA loans that are purchased at a premium, the premium is amortized as a reduction to interest income over the estimated life of the loans, giving consideration to expected prepayments. Any differences with the actual prepayments or from changes in the expected prepayments are reflected as an adjustment to interest income in the period of the change as if the revised estimates had been applied since the date of acquisition.

The Company also originates revolving lines of credit. Fees received for originating such commitments are deferred and amortized into noninterest income on a straight-line basis over the commitment period.

Past due loans are loans that are past their contractual interest or principal due date. Loans are classified as impaired when it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement.

Loans are placed on nonaccrual status when management determines that there is significant uncertainty as to the full and timely collection of principal and/or interest. Any outstanding accrued interest is reversed from current period earnings and the amortization of deferred fees or costs is suspended, unless the loan is both well secured and in the process of collection. Commercial and commercial real estate loans are placed on nonaccrual status when full collection of principal and/or interest is not expected or when principal and/or interest becomes contractually 90 days past due, unless the loan is well secured and in the process of collection. These delinquent loans are generally placed on nonaccrual status under the cost recovery method, whereby all payments received are applied against the recorded investment. Residential mortgage loans are placed on nonaccrual status when they are 90 days past due or earlier due to a triggering event such as bankruptcy or foreclosure. Subsequent to being placed on nonaccrual status, interest income is recognized as payments are received. Consumer credit card loans are not placed on nonaccrual status; rather they are charged off at 180 days delinquent. Generally, a loan may be returned to accrual status when the delinquent principal and interest are brought current in accordance with the terms of the loan agreement and full collection of the remaining contractual principal and interest is no longer in doubt or the loan becomes well secured and is in the process of collection.

A nonaccrual loan that has been formally restructured continues to be reported on nonaccrual status until the loan has a demonstrated period of performance, including full collection of at least six consecutive payments under the restructured terms and full recovery of any prior charge-offs. The loan remains classified as a nonaccrual loan if the borrower’s performance under the new terms is not reasonably assured.

Troubled Debt Restructurings

Troubled debt restructurings (“TDRs”) are loans the Company has modified in such a way so as to have granted a concession to the borrower that it would not otherwise consider. Such concessions are considered to be unavailable to the borrower through normal channels or other lending sources because of the borrower’s financial difficulties. A TDR typically involves a modification of terms such as forgiveness of principal and/or interest, a reduction of the interest rate below the current market rate for a loan with similar risk characteristics or extending the maturity date of the loan without corresponding compensation or additional support.

The Company measures impairment of a TDR using the methodology described for individually impaired loans (see “Allowance for Credit Losses” below). For the wholesale portfolio segment, including commercial and commercial real estate loans (“Wholesale loans”), the Company generally determines accrual status for TDRs by performing an individual assessment of each loan, which may include, among other factors, the consideration of demonstrated performance by the borrower under the previous terms and a minimum of six consecutive months of sustained performance. For the consumer portfolio segment, including residential mortgages and other consumer loans (“Consumer loans”), TDRs are initially placed on nonaccrual and typically a minimum of six consecutive months of sustained performance is required before returning to accrual status.

Loans accounted for as PCI loans or carried at estimated fair value under the fair value option that the Company may from time to time modify as TDRs are not within the scope of the accounting guidance for TDRs. TDR recognition is therefore limited to non-PCI loans accounted for at amortized cost. For further discussion, see Note 4—Loans Receivable, Allowance for Loan Losses and Reserve for Off-Balance Sheet Commitments.

Allowance for Credit Losses

The allowance for credit losses consists of the allowance for loan losses and a separate reserve for off-balance sheet commitments, such as unfunded loan commitments, standby letters of credit and commercial lines of credit. The Company maintains an allowance for credit losses that is sufficient to reflect the probable credit losses inherent in its HFI loan portfolio based on management’s evaluation of the size, concentration and current risk characteristics of the loan portfolio. The allowance for credit losses does not cover loans accounted for at estimated fair value, as the fair values of these loans reflect the expected lifetime credit losses.

Management develops its allowance by dividing the Company’s portfolio into Wholesale and Consumer loans, which is separated by non-PCI and PCI loans. The Company further divides the non-PCI loan portfolio into classes based on the initial measurement attributes, risk characteristics or its method of monitoring and assessing credit risk.

Non-PCI Loans

The Company’s methodology for assessing the adequacy of its allowance for non-PCI loans includes specific allowances for individual loans identified as impaired, a general (pool) allowance for inherent losses in the portfolio for loans that are not individually identified as impaired and a judgmental portion of the allowance to capture losses from qualitative and other factors that are not captured in the other components of the allowance. A specific allowance is established for loans and TDRs that are deemed impaired on an individual basis. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all contractual amounts due, including principle and/or interest. Once a loan is deemed impaired, management measures the amount of impairment. Impaired loans and TDRs are primarily measured based on the shortfall between the present value of the expected future cash flows expected to be collected, discounted at the loan’s effective interest rate, and compared to the recorded investment in the loan. Alternatively, the Company may use observable market prices, or for loans that are solely dependent on the collateral for repayment, the estimated fair value of the collateral less estimated costs to sell. The specific allowance is used to absorb credit losses only related to that impaired loan and is not used to cover losses sustained on any other loan.

The allowance covers inherent credit losses in groups of (i) smaller balance, homogeneous loans and (ii) large balance non-homogeneous loans that have not been deemed impaired on an individual basis. For purposes of evaluation, the non-impaired loans are grouped into pools with similar loan characteristics within a portfolio (Wholesale and Consumer loans) and further divided into classes based on loan type: commercial, commercial real estate, consumer residential mortgages and consumer unsecured credit cards. The Wholesale loans are evaluated on a pool basis based on the nature of the loan, which include specialty lending, commercial and business banking, private banking, and SBA lending. To estimate the loss reserve for these non-impaired Wholesale loans, the Company utilizes a third party loss valuation model to derive an estimated incurred loss for each loan based on the potential default balance exposure, the probability of default, and the loss given default (severity). The third party statistical model incorporates historical default experience and loss severity experience by other financial institutions for similar loans to estimate an expected loss as of the assessment date. For Wholesale loans, the loss emergence period which is the period between the loss event and loss confirmation could be 24 months or more. For consumer residential mortgages, the Company develops a loss reserve by observing the projected lifetime losses derived from a third party valuation model and then adjusting for losses expected to be identified within the next 12 months. The key drivers of the projected lifetime losses include the type of loan (forward or reverse), type of product (fixed, adjustable rate mortgage (“ARM”), or hybrid), delinquency status of the underlying loans, the borrower’s FICO, loan-to-value and/or debt-to-income ratio, and geographic location of the collateral. For consumer unsecured credit cards, the Company develops a loss reserve factor based on the average actual loss experience over the past twelve months to estimate the incurred losses to be identified within the next 12 months.

The judgmental portion of the allowance is based on management’s qualitative assessment of internal and external factors affecting the collectability of its outstanding loans that are intended to capture probable losses from adverse changes in the current economic and market conditions and trends and other inherent losses that are not reflected in the systematic method described above.

The allowance for credit losses is established through a provision for credit losses, which is charged against current period earnings. The allowance for credit losses is reduced by any charge-offs for confirmed losses, net of recoveries.

PCI loans

PCI loans are initially recorded at estimated fair value at the time of acquisition. As expected credit losses were included in the determination of estimated fair value, no allowance was established on the acquisition date.

Subsequent to acquisition, the PCI loans are aggregated into pools based on common risk characteristics and the excess of the cash flows initially expected to be collected over the estimated fair value of the loans at the acquisition date is accreted into interest income over the estimated remaining life using the effective interest method. Estimates of cash flows expected to be collected over the life of the loan are generally updated quarterly for probable and significant changes based on updated assumptions regarding default rates, loss severities, and other factors that are reflective of

current market conditions. Modifications or refinancing of loans accounted for within a pool do not result in the removal of those loans; instead, the revised terms are reflected in the expected cash flows within the pool of loans.

Significant and probable decreases in cash flows expected to be collected for PCI loans are generally reflected by an increase in the allowance for credit losses through a charge to the provision for credit losses.

Changes in expected interest cash flows caused by changes in market interest rates or prepayments are recognized as adjustments to the accretable yield on a prospective basis. If the loan is covered under a shared-loss agreement with the FDIC, the recorded provision is partially offset by any benefit expected to be derived from the related indemnification asset. For further discussion, see Note 5—Indemnification Assets.

Charge-off Policy

PCI and non-PCI loans are charged off in whole or in part when they are determined to be uncollectible. For Wholesale and similar PCI loans, they are determined to be uncollectible based on delinquency status, evaluation of the borrower’s financial condition and future ability to pay, any guarantees and the expected net realizable value of collateral. Generally, Wholesale and similar PCI loans are charged off when the loan is delinquent, it is determined that advances to the borrower are in excess of the calculated current estimated fair value of the collateral and the borrower is deemed to be incapable of repayment of the debt. For Consumer and similar non-PCI loans, charge-offs are based on delinquency status, an evaluation of borrower creditworthiness and the value of any collateral. Recoveries of amounts previously charged off are recorded as a recovery to the allowance for non-PCI loans and for PCI loans depending on the circumstance, either a recovery to the allowance or a decrease in the recorded investment.

Reserve for Off-Balance Sheet Commitments

In addition to the allowance for funded loans, the Company maintains a separate reserve for probable losses related to its unfunded commitments, which is recorded in other liabilities. The reserve for unfunded commitments is analyzed and segregated by classes similar to the allowance process for funded loans. The Company determines the adequacy of the reserve based on its evaluations of the unfunded amounts at least quarterly, including credit risk factors and the terms and expiration dates of the unfunded commitments.

The estimated allowance for credit losses is inherently subjective and the Company’s actual losses could be greater or less than the estimates. For further discussion, see Note 4—Loans Receivable, Allowance for Loan Losses and Reserve for Off-Balance Sheet Commitments.

Indemnification Assets

As part of the IndyMac Transaction, the Company entered into multiple shared-loss agreements with the FDIC to obtain protection from certain losses related to certain purchased assets. One agreement relates to indemnifying certain losses on the single family residential (“SFR”) loans. A second agreement relates to indemnifying certain losses on the proprietary reverse mortgage with a small population of HECM loans (collectively referred to as “reverse mortgage loans”). In addition to the above indemnifications, the FDIC also agreed to indemnify the Company, subject to certain requirements and limitations, for third party claims from the Agencies related to IndyMac selling representations and warranties as well as liabilities arising from the acts or omissions (including, without limitation, breaches of servicer obligations) of IndyMac prior to the transaction date. These agreements are accounted for as indemnification assets, which are recognized and measured on the same basis as the indemnified assets.

The indemnified IndyMac SFR mortgage loans and reverse mortgage loans and the related indemnification assets are recorded at estimated fair value. Interest income is recognized on indemnification assets carried at fair value using a yield consistent with the estimated market discount rate used for valuation purposes. Subsequent changes in the estimated fair value of the indemnification assets are recorded in Gain/(loss) on loans and indemnification assets carried at fair value. Fair value is estimated by discounting the expected cash flows to be received from the FDIC at an estimated market discount rate. The difference between the present value and the undiscounted cash flows the Company expects to collect from the FDIC is accreted into interest income on loans over the lesser of the contractual term of the indemnification agreement or the remaining life of the indemnified assets based on a yield consistent with the market discount rate.

As part of the First Federal and La Jolla Transactions, the Company entered into shared-loss agreements with the FDIC to obtain protection from certain losses related to the purchased assets, specifically the SFR, commercial and other loans HFI. These shared-loss agreements are accounted for as indemnification assets. The indemnification assets acquired in

the First Federal and La Jolla Transactions were initially recognized at estimated fair value as of the acquisition date similar to the indemnified loans. Subsequently, the indemnification asset is measured on the same basis of accounting as the indemnified loans (e.g., as PCI loans under the effective yield method). A yield is determined based on the cash flows expected to be collected over the recorded investment and used to recognize interest income on loans over the lesser of the contractual term of the indemnification agreement or the remaining life of the indemnified assets.

The expected cash flows are generally reviewed and updated on a quarterly basis. A decrease in the cash flows expected to be collected from the indemnified loans results in an increase in the allowance for credit losses. An increase is recorded in the indemnification asset for the portion of the loss that is expected to be reimbursed from the FDIC and a decrease is recorded to the Provision for credit losses. An increase in the cash flows expected to be collected from the indemnified loans results in a reversal of a previously recorded allowance for credit losses, if applicable. A decrease is recorded in the indemnification asset for the portion that previously was expected to be reimbursed from the FDIC resulting in an increase in the Provision for credit losses.

Changes in expected cash flows caused by changes in market interest rates or by prepayments are recognized as adjustments to the accretable yield on a prospective basis in interest income. In some cases, the cash flows expected to be collected from the indemnified loans may improve to the extent that the related indemnification asset is no longer expected to be fully recovered. For PCI loans with an associated indemnification asset, if the increase in expected cash flows is recognized through a higher yield, a negative yield is applied to the related indemnification asset to mirror an accounting offset for the indemnified loans. Any negative yield is determined based on the remaining term of the indemnification agreement. Both accretion (positive yield) and amortization (negative yield) of the indemnification asset are recognized in interest income on loans.

In connection with the La Jolla Transaction, the Company records a separate FDIC true-up liability for an estimated payment due to the FDIC as the actual and estimated cumulative losses of the acquired covered assets are projected to be lower than the cumulative losses originally estimated at the time of acquisition. There is no FDIC true-up liability recorded in connection with the First Federal Transaction based on the projected loss estimates at this time. The FDIC true-up liability represents contingent consideration to the FDIC that is re-measured at estimated fair value using the discounted cash flow model with the changes in fair value recognized in noninterest expense.

In presenting the Consolidated Statement of Cash Flows, the Company first allocates cash receipts to Operating activities based on earned interest income, with the remaining allocated to Investing activities. Because of substantial increases in expected cash flow from acquired covered loans and other assets, the Company will not fully recover the initial allocated investment in FDIC indemnification assets and accordingly, does not reflect any actual cash receipts as Operating activity on the Consolidated Statement of Cash Flows related to these assets.

For further discussion, see Note 5—Indemnification Assets.

Servicing Advances

The Company is required to make servicing advances in the normal course of servicing mortgage loans. These advances include customary, reasonable and necessary out-of-pocket costs incurred in the performance of its servicing obligation. They include advances related to foreclosure activities, funding of principal and interest with respect to mortgage loans held in connection with a securitized transaction and taxes and other assessments which are or may become a lien upon the mortgage property. Servicing advances are generally reimbursed from cash flows collected from the loans.

A receivable is recognized for the advances that are expected to be reimbursed. A loss is recognized for any advances that are not expected to be reimbursed.

Transfers of servicing advances to an unrelated purchaser are accounted for as sales at the date on which title passes if the Company has effectively surrendered control over the transferred assets at the unit of account level; otherwise, such transfers are accounted for as a secured borrowing and the assets are not de-recognized. In assessing whether control has been surrendered, the Company considers the existence and extent of any continuing involvement in the transferred financial assets and the impact of all arrangements or agreements made contemporaneously with, or in contemplation of, the transfer, even if they were not entered into at the time of transfer. Control is generally considered to have been surrendered when the transferred assets have been legally isolated from the Company and the purchaser (transferee) has the right to pledge or exchange the assets without any significant constraints. In determining whether the servicing advances transfer qualifies for sale accounting, the Company considers whether the Company has an obligation to repurchase or redeem the transferred financial assets before their maturity (unless required under standard

representations and warranties), and whether the Company holds any call options or put options or similar right to require the transferred financial assets to be sold back to the Company.

For further discussion, see Note 6—Servicing Advances.

Mortgage Servicing Rights

The Company recognizes mortgage servicing rights (“MSRs”) as separate assets only when servicing is contractually separated from the underlying mortgage loans; 1) by sale or securitization of the loans with servicing retained or 2) by separate purchase or assumption of the servicing. Under primary servicing agreements, the Company collects monthly principal, interest and escrow payments from individual mortgagors and performs certain accounting and reporting functions for the benefit of the related mortgage investors. For performing such services, the Company receives a servicing fee and is entitled to certain ancillary income (e.g., late charges), which is recognized as income as it is earned.

MSRs represent a contract for the right to receive future revenue associated with the servicing of financial assets and thus are considered a non-financial asset. MSRs are initially recorded at estimated fair value at their date of acquisition. The Company has elected to account for MSRs using the amortization method. Therefore, MSRs are recorded at LOCOM with impairment recognized as a reduction to Loan servicing fees, net. Estimated fair value is based on observable market data and to the extent such information is not available, the Company determines the estimated fair value of the MSRs using discounted cash flow techniques using a third-party valuation model. Estimates of fair value involve several assumptions, including market expectations of future prepayment rates, interest rates, discount rates, ancillary income, servicing costs and default rates, all of which are subject to change over time. Assumptions are evaluated for reasonableness in comparison to actual performance, available market and third party data.

MSRs are evaluated and measured for potential impairment using stratification based on one or more predominant risk characteristic of the underlying financial assets such as loan vintage. The MSRs are amortized in proportion to and over the period of estimated net servicing income and the amortization is recorded as a reduction to Loan servicing fee, net. The amortization of MSRs is analyzed at least quarterly and adjusted to reflect changes in prepayment speeds, delinquency rates, as well as other factors.

Company policy requires OTTI to be recognized when it is probable that all or part of the valuation allowance for impairment (recognized under LOCOM) will not be recovered within the foreseeable future. For this purpose, the foreseeable future shall not exceed a period of two years. The Company will assess a servicing asset for OTTI when conditions exist or events occur indicating that OTTI may exist (e.g., a severe or extended decline in estimated fair value). In such a case, a stress test will be performed each quarter to facilitate timely identification of OTTI for MSRs.

Transfer of MSRs to an unrelated third party purchaser are accounted for as sales at the date on which title passes if the Company no longer retains the substantial risks and rewards of ownership at the unit of account level; otherwise, such transfers are accounted for as a secured borrowing. Substantially all of the risks and rewards of ownership have been transferred to the purchaser when the required investor consents are obtained, the purchaser is an approved servicer, title to the transferred assets has passed, and substantially all risks and rewards of ownership have irrevocably passed to the purchaser upon the transfer date. The unit of account represents the contractual mortgage loan pool, which represents the underlying mortgage loans under the servicing contract that have been funded and pooled for sale and share similar terms and conditions of the applicable servicing agreement. In determining whether the MSR transfer qualifies for sale accounting, the Company considers whether there are any more than minor protective provisions provided to the purchaser (e.g., indemnifications and recourse obligations that protect the yield or value of the MSR) retained by the Company after the transfer date.

For further discussion, see Note 7—Mortgage Servicing Rights.

Investment in Restricted Stock

The Company is a member of, and owns capital stock in, the Federal Home Loan Bank of San Francisco (“FHLB”) and FRB. As a condition of membership, the Company is required to own capital stock in the FHLB based upon outstanding FHLB advances and FRB stock based on a specified ratio relative to the Company’s capital. FHLB and FRB stock may only be sold back to the member institutions at its carrying value and cannot be sold to other parties.

For FHLB stock, cash dividends are recorded as Other interest income when declared by the FHLB. For FRB stock, the Company is legally entitled (without declaration) to a specified dividend paid semi-annually, which the Company accrues at the statutory rate (6% per annum) as Other interest income.

Due to the restricted ownership requirements, the Company accounts for its investment in FHLB and FRB stock as a nonmarketable equity stock accounted under the cost method and reviews the investment for impairment at least annually, or when events or circumstances indicate that their carrying amounts may not be recoverable. The Company’s impairment evaluation considers the long-term nature of the investment, the liquidity position of the member institutions, its recent dividend declarations and the intent and ability to hold this investment for a period of time sufficient to ultimately recover the Company’s recorded investment.

For further discussion, see Note 8—Investment in Restricted Stock.  

Variable Interest Entities

Variable interest entities (“VIEs”) are those in which there is insufficient equity at risk to finance the operations of the entity without additional subordinated financial support; where the equity interest holders, as a group, do not have the power to direct the activities of the entity that most significantly impact the entity’s economic performance; or where the equity investors as a group do not have rights that are in proportion to their obligations to absorb losses or rights to receive residual returns of the entity.

When the Company holds a variable interest in a VIE, it must determine whether its variable interest makes it the primary beneficiary. If the Company is determined to be the primary beneficiary, it must consolidate all of the assets and liabilities and results of operations of the VIE in its financial statements. A primary beneficiary is a variable interest holder in a VIE that has both (1) the power to direct the activities of the trust that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. There can be no more than one, although there can be no, primary beneficiary for any given VIE.

In assessing whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all the facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes, first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In assessing whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests, including debt and equity investments, servicing fees, and derivative or other arrangements deemed to be variable interests in the VIE. The assessment involves significant judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. The reassessment process, performed at least annually, involves both a qualitative and quantitative analysis. The Company’s qualitative analysis considers the Company’s involvement with the VIEs and the design and purpose of the VIEs. It also assesses whether there has been a significant change in the structure of the VIE, or in the activities of the VIE based on changes in governing documents or other circumstances. The Company’s quantitative analysis assesses whether there has been a significant change in the economic performance of the VIE that would change the total potential amount of losses the Company might absorb or residual returns the Company might receive. Accordingly, the consolidation status of the VIEs with which the Company is involved may change from period-to-period as a result of such reassessments.

For further discussion, see Note 10—Variable Interest Entities.

Derivative Instruments

The Company’s approach to managing interest rate risk and foreign currency risk includes the use of derivative instruments, which may include interest rate swaps, caps and floors, futures, forward contracts and options. These instruments are used to mitigate significant, unplanned fluctuations in earnings or cash flows caused by volatility in interest rates, and the value of foreign currencies. The Company’s Asset-Liability Committee (“ALCO”), which is the management committee responsible for the Company’s overall interest rate risk management strategies, monitors all hedging and risk management strategies involving derivative instruments.

If certain conditions are met at inception, hedge accounting may be applied and the derivative instrument may be specifically designated as: (a) a hedge of the exposure to changes in the estimated fair value of a recognized asset or liability or unrecognized firm commitment, referred to as a fair value hedge, or (b) a hedge of the exposure to the

variability of cash flows of a recognized asset, liability or probable forecasted transaction, referred to as a cash flow hedge.

For a qualifying cash flow hedge, changes in the estimated fair value of the derivatives are recorded in OCI. When the cash flows associated with the hedged item are realized, the gain or loss included in OCI is recognized in the same location in the consolidated statement of income as the hedged item. Hedge ineffectiveness is recorded immediately as a component of interest expense. If a derivative designated as a cash flow hedge is terminated or ceases to be highly effective, the gain or loss in OCI is recognized proportionately in earnings over the period the forecasted hedged transactions impact earnings. If the hedged forecasted transaction is no longer deemed probable of occurring, hedge accounting is ceased and any deferred gain or loss recorded in other comprehensive income (loss) is reported in earnings immediately.

Where hedge accounting is applied, the Company formally documents all qualifying hedge relationships, as well as its risk management objective and strategy for undertaking each hedge transaction prior to execution. Hedge accounting is discontinued if any of the conditions required for hedge accounting are no longer met; the hedging derivative instrument is sold, terminated, or exercised; or the hedge relationship is de-designated by the Company. For a cash flow hedge of a probable forecasted transaction, hedge accounting is discontinued if it becomes probable that the forecasted transaction will not occur. In that case, any amounts recorded in OCI are reclassified into earnings immediately.

The Company evaluates its financial instruments for embedded derivatives based on the following conditions: (1) if the economic characteristics of the embedded derivative are not clearly and closely related to the economic characteristics of the financial instrument (host contract), (2) if the financial instrument that embodies both the embedded derivative and the host contract is not measured at fair value and (3) if a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative. If all three conditions are met, the embedded derivative is bifurcated from the financial instrument and recognized as a free-standing derivative. The remaining host contract (financial instrument) is recognized as the difference between the basis of the hybrid instrument and the fair value of the bifurcated derivative.

All free-standing derivative instruments, including economic hedges that do not qualify for hedge accounting are recognized on the Consolidated Statements of Financial Position at estimated fair value with changes in estimated fair value recorded in current period noninterest income as Gain/(loss) on derivatives, net.

For further discussion, see Note 14—Derivative Instruments and Note 15—Fair Value.

Other Real Estate Owned

Other real estate owned (“OREO”) represents collateral acquired from the foreclosure of secured loans that is actively marketed for sale. OREO is initially recorded at estimated fair value less disposition costs. Estimated fair value is generally based upon broker price opinions and independent appraisals, which are then modified based on assumptions and expectations that are determined by management. Any write-down on the date of transfer from loan classification is charged to the allowance for credit losses. If the estimated fair value of OREO at initial acquisition exceeds the carrying amount of the loan, the excess is recorded either as a recovery to the allowance for credit losses if a charge-off had previously been recorded, or as a gain on initial transfer in Gain/(loss) on other real estate owned.

Subsequently, OREO is recorded at the lower of its carrying value or estimated fair value less disposition costs. If the property has lost value subsequent to initial acquisition, a valuation allowance (contra asset) is established and charged to Gain/(loss) on other real estate owned, which is included in earnings. OREO values are reviewed on an ongoing basis and subsequent declines in an individual property’s estimated fair value are recognized in earnings in the current period. Expenses for holding costs are expensed as incurred.

Tax Credit Investments

The Company invests in limited liability entities formed to operate qualifying affordable housing projects and other tax credit investments.

The affordable housing investments provide tax benefits to investors in the form of tax deductions from operating losses and tax credits. As a limited partner, the Company has no significant influence over the operations. These investments are initially recorded at the initial capital contribution with a liability recognized for the commitment to contribute additional capital over the term of the investment. In 2014, the Company early adopted ASU 2014-01 to account for all existing and

new qualifying affordable housing investments under the proportional amortization method in lieu of the equity method, and elected to continue to apply the effective yield method for one existing investment. The qualifying criteria for the proportional amortization method shall be evaluated at least annually, or when there is a change in the nature of the limited liability entity or a change in the investor’s relationship with the limited liability entity, which may result in the Company no longer meeting the conditions required for proportional amortization method.

Under the proportional amortization method, the recorded investment is amortized into income tax expense in proportion to the allocated tax credits and other tax benefits received in the current year as compared to the total estimated tax benefits expected to be received over the life of the investment. Under the effective yield method, the guaranteed affordable housing investments are amortized based on a constant effective yield with the related tax benefits and credits, as they are allocated to the Company. Both the amortization and all of the related tax benefits and credits are recorded in the tax provision. To the extent there is residual value on the investments, cash received from the operations of the limited partnership will be recognized in earnings when realized or realizable.

The Company also invests in limited liability entities that make equity investments, provide debt financing or support community-based investments in tax-advantaged projects. The Company invests as a limited partner and its ownership amount in each limited liability entity varies. These investments generate a return primarily through the receipt of federal and/or state income tax credits or tax benefits from the allocation of tax deductible operating losses or expenses. For non-qualifying affordable housing investments and these other tax credit investments, the investments are recorded using the equity method or cost method depending on the ownership percentage and level of influence on the limited partnership.

Under the equity method, the Company’s investments are adjusted for the Company’s share of the investee’s net income or loss for the period. Any dividends or distributions received are recorded as a reduction of the recorded investment. The tax credits are recognized though the tax provision. For investments involving an ownership of 5 percent or less, the cost method is applied. Under the cost method, the investment would be recorded at its net realizable value. Income is recognized when dividends or distributions of earnings are made by the investee. Any tax credits or tax benefits received from the investment are recognized through the tax provision.

For these limited liability entities, the Company assesses whether it is the primary beneficiary of the limited liability entity, which is a VIE. The primary beneficiary of a VIE is determined to be the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Generally, the Company, as a limited partner, is not deemed to be the primary beneficiary as it does not meet the power criterion, i.e., no power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and no direct ability to unilaterally remove the general partner. For further discussion, see Note 10—Variable Interest Entities.

All tax credit investments are evaluated for potential impairment at least annually, or more frequently, when events or conditions indicate that it is deemed probable that the Company will not recover its investment. Potential indicators of impairment might arise when there is evidence that some or all tax credits previously claimed would be recaptured, or that expected remaining credits would no longer be available to the limited liability entities. If an investment is determined to be impaired, it is written down to its estimated fair value and the new cost basis of the investment is not adjusted for subsequent recoveries in value. All of these investments are included within Other assets and any impairment loss is recognized in Other losses. For further discussion, see Note 9—Other Assets.

FDIC Receivable

In connection with the IndyMac transaction, the Company has a receivable with the FDIC representing a secured interest in certain homebuilder, home construction and lot loans. The secured interest entitles the Company to 40% of the underlying cash flows. The Company elected to measure the FDIC Receivable at estimated fair value with changes in the estimated fair value recorded in Gain/(loss) on loans and indemnification assets carried at fair value. The fair value is estimated based on cash flows expected to be collected from the Company’s participation interest in the underlying collateral. The underlying cash flows include estimated amounts expected to be collected from repayment of loan principal and interest and net proceeds from property liquidations. These cash flows are offset by amounts paid for servicing expenses, management fees, and liquidation expenses. The Company recognizes interest income on the FDIC receivable by applying a yield determined by discounting the expected cash flows at a market rate consistent with the valuation approach. For further discussion, see Note 15 – Fair Value.

Goodwill and Other Intangible Assets

Goodwill is recorded in business combinations under the purchase method of accounting when there is a purchase premium after adjusting for the estimated fair value of net assets purchased, including identifiable intangible assets. Rather than being amortized (due to its indeterminate useful life), goodwill is subject to an impairment test at the reporting unit level at least annually, or more frequently, when events or circumstances indicate potential impairment.

In analyzing goodwill for impairment, the Company may elect to initially perform an optional qualitative assessment to determine whether it is necessary to perform a quantitative impairment test. This qualitative assessment includes both positive and negative factors, and is based on all available facts and circumstances known to management at the time the assessment is made. Such qualitative factors include the reporting unit specific events, overall financial performance and industry and market considerations. If, based on the qualitative review, the Company concludes that it is more likely than not a reporting unit’s estimated fair value is greater than its carrying amount (i.e., a likelihood of more than 50 percent), then no further analysis is necessary. If the qualitative assessment is inconclusive, or at the Company’s election, the Company proceeds to complete the quantitative steps to determine if there is goodwill impairment by first comparing the estimated fair value of the reporting unit to its carrying value, including the allocated goodwill. If the estimated fair value is less than the carrying value with goodwill, an additional test is required to measure the amount of impairment. The Company recognizes impairment losses as a charge to Other expenses and an adjustment to the carrying value of the goodwill asset. Subsequent reversals of goodwill impairment are prohibited.

Core deposit intangibles (“CDIs”) are recognized separately from goodwill in connection with business combinations. CDIs represent future benefits arising from non-contractual customer relationships (e.g., account relationships with the depositors) acquired from the purchase of demand deposit accounts, including non-interest bearing, money market and pass book savings accounts. CDIs have a finite life and are amortized on an accelerated basis over the estimated useful life not to exceed seven years.

The Company reviews the CDIs for impairment at least annually, or more frequently, when events or circumstances indicate that their carrying amounts may not be recoverable. Impairment is permanently recognized by writing down the asset to the extent that carrying amount exceeds the estimated fair value. The estimated fair value of the CDIs is determined using a third party pricing matrix. The impairment loss, if any, is reported in core deposit amortization on the Consolidated Statements of Income.

For further discussion, see Note 11—Goodwill and Other Intangible Assets.

Property and Equipment

Property and equipment are included in Other assets and are carried at cost less accumulated depreciation and amortization. Depreciation is expensed using the straight-line method over the estimated service lives of the assets. Estimated service lives generally range from 3 to 5 years for furniture, fixtures and equipment and 20 to 40 years for buildings. Leasehold improvements are amortized over the term of the respective lease or the estimated useful life of the improvement, whichever is shorter. Net gains or net losses on dispositions, if any, are included in Fee and other income. For further discussion, see Note 9-Other Assets

Income Taxes

The taxes in the Consolidated Financial Statements include those related to subsidiaries of the Company, which are corporations or limited liability companies, which have elected to be taxed as corporations.

The Company and its subsidiaries account for income taxes in two components: current and deferred. Deferred income tax expense results from changes in deferred tax assets and liabilities between reporting periods.

Deferred tax assets and liabilities represent decreases or increases in taxes expected to be paid in the future because of the future reversals of temporary differences in the basis of assets and liabilities as measured by enacted tax laws and their basis as reported in the Consolidated Financial Statements. Deferred tax assets are recognized if, in management’s judgment, their realizability is determined to be more likely than not. If a deferred tax asset is determined to be unrealizable, a valuation allowance is established. Interest and penalties, if applicable, are recognized as a component of Other expense. For further discussion, see Note 19—Income Taxes.

Fair Value Measurement

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (also referred to as an exit price). The accounting framework categorizes inputs used to measure estimated fair value into a three-level hierarchy based on the extent to which the measurement relies on observable market data in measuring estimated fair value.

Estimated fair value measurements of assets and liabilities are classified within this hierarchy in their entirety based on the lowest level of any input that is significant to the estimated fair value measurement. All readily available observable market data must be considered and the measurement of estimated fair value must maximize the use of observable data.

The use of estimated fair value measurements are fundamental to the Company’s Consolidated Financial Statements and is a critical component of the Company’s accounting estimates because a substantial portion of the assets and liabilities for which no active markets with quoted prices exist are recorded at estimated fair value. Consequently, significant judgment is required to measure their estimated fair values.

Assets carried at estimated fair value under “Level 1” use inputs based on unadjusted quoted prices in active markets for those identical financial instruments. Assets and liabilities recorded under “Level 2” are valued primarily utilizing inputs or prices that are observable in the marketplace, which can be derived from observable market data or corroborated by observable data based on transactions that are executed.

Estimated fair value measurements classified as “Level 3” are based on at least one significant unobservable input. The process to determine estimated fair value under “Level 3” is generally more subjective and involves significant management judgment and assumptions. These assumptions may have a significant effect on the Company’s estimates of fair value, and the use of different assumptions and changes in market conditions could have a material effect on the Company’s results of operations or financial condition. For further discussion, see Note 15—Fair Value.

Other Comprehensive Income (Loss)

The Company records unrealized gains and losses on AFS securities and deferred gains and losses from cash flow hedges in OCI, net-of-tax. Unrealized gains and losses on AFS securities are reclassified to Gain on securities, net as the gains or losses are realized upon sale or settlement of the securities. Unrealized losses on AFS securities deemed to represent credit related impairment are recognized in Gain on securities, net immediately. For AFS securities that the Company does not intend to sell or it is not “more-likely-than-not” that it will be required to sell, an unrealized loss related to all other non-credit factors is recorded as a component of OCI. Deferred gains or losses from cash flow hedges are reclassified to earnings when the hedged cash flows affect earnings. For further discussion, see Note 20—Other Comprehensive Income (Loss).

Income Recognition

The Company recognizes revenue as it is earned based on contractual terms, as transactions occur or services are provided and collectability is reasonably assured. Syndication and arrangement fees are recognized as income when the syndication or arrangement is complete and the fee is nonrefundable. Annual administrative or Agency fees are recognized ratably over the 12-month service period.

Service charges (fee income) on deposit accounts primarily represent monthly fees based on minimum balances or transaction-based fees. Loan servicing revenue includes fees collected for the servicing of loans not owned by the Company. For further discussion about interest income and service fee income recognition, see Note 3—Securities, Note 4—Loans Receivable, Allowance for Loan Losses and Reserves for Off-Balance Sheet Commitments and Note 7—Mortgage Servicing Rights, respectively.

Accounting Pronouncements

The following is a summary of Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”) that became effective during the year ended December 31, 2014:

ASU 2013-11 clarifies current guidance to require an entity with an unrecognized tax benefit that is not available (under the tax law of the applicable jurisdiction) or not intended to be used at the reporting date, to present the unrecognized tax benefit as a liability that should not be combined with deferred tax assets. Otherwise, the unrecognized tax benefit should be presented as a reduction to the related deferred tax asset. No additional recurring disclosures are required by this ASU. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted with prospective application to all unrecognized tax benefits that exist at the effective date. Retrospective application is also permitted. The Company does not have a net operating loss carryforward or similar tax loss. Accordingly, the adoption of this ASU on January 1, 2014 did not have a material effect on the Company’s results of operations or financial position.

ASU 2014-01 allows investors to use the proportional amortization method to account for investments in limited liability entities that manage or invest in affordable housing projects that qualify for affordable housing investments. Under the proportional amortization method, an investor that meets certain conditions can amortize the cost of its investment, in proportion to the tax credits and other tax benefits it receives, and present the amortization as a component of income tax expense. An investor that does not qualify for the proportional amortization method or elects not to apply it will account for its investments under the cost method or equity method in accordance with current guidance. The ASU requires new disclosure for all investors in these projects. The ASU is effective for annual periods beginning after December 15, 2014 with retrospective application to all periods presented. However, entities that use the effective yield method to account for investments in these projects before adoption may continue to do so for those pre-existing investments. Early adoption is permitted. The Company early adopted this guidance effective January 1, 2014 to present eligible affordable housing investments using a net presentation of investment performance within income tax expense. The Company elected to transition to the proportional amortization method for its qualifying existing investments previously accounted for under the equity method and continue to apply the effective yield method for one existing investment. For prior periods, pursuant to the ASU, amortization expense related to our qualifying investments was reclassified from Fee and other income to Income tax expense from continuing operations as a result of adoption to the proportional amortization method. The cumulative effect of the retrospective application to retained earnings as of January 1, 2013 was a reduction of $471 thousand net of tax. These investments are included in Other Assets (refer to Note 9).

The following accounting pronouncements have been issued by the FASB but are not yet effective:

ASU 2014-04 clarifies when an in-substance repossession or foreclosure occurs that would require a transfer of the mortgage loan to OREO. Under the ASU, repossession or foreclosure is deemed to have occurred when (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The ASU is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2014. The Company intends to adopt this ASU in the first quarter of 2015 under the modified retrospective method and does not expect the adoption of this ASU to have a material effect on the net results of operations or financial position.

ASU 2014-08 narrows the definition of a qualifying discontinued operation by requiring a discontinued operation to represent a strategic shift (e.g., separate major line of business or a separate major geographical area of operations) that will have a major effect on an entity’s operations and financial results. Further, the new guidance permits entities to have continuing cash flows and significant continuing involvement with the discontinued component but requires expanded disclosures. The Company intends to adopt this ASU for disposals that have not been previously reported on the Company’s financial statement beginning in January 01, 2015. The Company does not expect the adoption of this ASU to have a material effect on the net results of operations or financial position.

ASU 2014-09 provides a single revenue recognition model in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The ASU outlines a five-step process for applying the new revenue model and expands required disclosures on revenue recognition. The ASU is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2016 using either a full or modified retrospective transition method. Early adoption is not permitted. The ASU does not apply to financial instruments. The Company is evaluating the impact of this ASU; however, the Company does not expect this ASU to have a material effect on the net results of operations or financial position.

ASU 2014-11 changes the accounting for repurchase-to-maturity transactions to secured borrowing accounting and separate accounting for the initial transfer of a financial asset executed contemporaneously with a related repurchase agreement with the same counterparty. The initial transfer of the financial asset would be accounted for as a sale by the transferor only if all criteria for derecognition have been met. The ASU requires new and expanded disclosures for repurchase agreements and similar transactions accounted for as secured borrowings. The ASU is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2014. Early adoption is not permitted. The Company intends to adopt this ASU in the first quarter of 2015. The Company currently does not have any repurchase agreements or similar transactions accounted for as secured borrowings. Accordingly, the Company does not expect the adoption of this ASU to have a material effect on the net results of operations or financial position.

ASU 2014-13 allows entities the option to use the more observable of the fair value of the financial assets or the fair value of the financial liabilities of the collateralized financing entity (“CFE”) to measure both. Under this update, the parent company’s earnings impact resulting from the re-measurement of a consolidated CFE’s financial assets and financial liabilities would be minimized. This ASU is effective for annual periods ending after December 15, 2015, and interim periods beginning after December 15, 2015. Early adoption is permitted as of the beginning of an annual period. The Company is currently evaluating the effect of this ASU on its net results of operations and its financial position.

ASU 2014-14 requires that a mortgage loan be derecognized and a separate other receivable be recognized upon foreclosure if the following conditions are met: (i) the loan has a government guarantee that is not separable from the loan before foreclosure; (ii) at the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (iii) at the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable is measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company intends to adopt this ASU in the first quarter of 2015 under the modified retrospective method and does not expect the adoption of this ASU to have a material effect on the net results of operations and its financial position.

ASU 2014-17, and related amended guidance issued by ASU 2015-08, provide an acquired entity with the option to apply pushdown accounting in its separate financial statements. An acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be

issued, the application of this guidance would be a change in accounting principle. The Company is currently evaluating the effect of this ASU on its net results of operations and its financial position.

ASU 2015-02 amends the consolidation requirements in ASC 810 and is intended to improve certain areas of consolidation guidance for legal entities such as limited partnerships, limited liability companies, and securitization structures. The guidance eliminates the deferral issued by the FASB in February 2010 of the accounting guidance for VIEs for certain investment funds, including mutual funds, private equity funds and hedge funds. In addition, the guidance amends the evaluation of fees paid to a decision maker or a service provider, and exempts certain money market funds from consolidation. The amendments in this Update are effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. The ASU can be adopted using either a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or retrospective approach. The Company is currently evaluating the impact on the net results of operations or financial position.

ASU 2015-03 requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. The ASU is limited to the presentation on the financial position, and does not affect the recognition and measurement for debt issuance costs. This ASU is effective for annual periods ending after December 15, 2015, and interim periods beginning after December 15, 2015. Early adoption is permitted. The Company is currently evaluating the effect of this ASU on its net results of operations and its financial position.

2. Acquisitions and Divestitures

IndyMac Transaction

On March 19, 2009, the Company executed a definitive agreement with the FDIC as Conservator and Receiver for IndyMac to purchase certain assets and assume certain liabilities of IndyMac from the FDIC.

The IndyMac Transaction provided the newly formed OneWest Bank an opportunity to purchase certain assets and assume certain liabilities of IndyMac. The Company’s strategy is to operate as a regional bank, focused on deposits, residential and commercial lending for its customers in Southern California, and to use the acquired business operation as a platform for future purchase and assumption transactions and for expansion into other banking activities. The IndyMac Transaction included a retail branch network of 33 branches located primarily in the Los Angeles area, a national mortgage banking business and certain assets and certain liabilities of Financial Freedom Senior Funding Corporation, one of the nation’s largest reverse mortgage businesses.

First Federal Transaction

On December 18, 2009, the Company purchased certain assets and assumed certain liabilities of First Federal from the FDIC through an executed purchase and assumption agreement with the FDIC. The Company viewed this as a strategic transaction consistent with its strategy to expand its retail banking network through the addition of First Federal’s 39 branches in Southern California. The transaction involved the purchase of certain assets and assumption of certain liabilities, subject to the indemnifications and other terms agreed to with the FDIC.

La Jolla Transaction

On February 19, 2010, the Company purchased certain assets and assumed certain liabilities of La Jolla through an executed purchase and assumption agreement with the FDIC as Receiver subject to the indemnifications and other terms agreed to with the FDIC. The Company viewed this as a strategic transaction consistent with its strategy to expand its retail banking network in California. The Company received approximately $373.7 million in consideration from the FDIC, as a result of the transaction.

Citibank Transaction

During November 2010, the Company purchased approximately 600 multifamily and commercial loans from Citibank. The Company viewed this as a strategic addition to the Company’s commercial real estate portfolio. The transaction involved the purchase all of the legal rights of ownership of the portfolio. The Company has the ability to subsequently transfer or pledge the loans and has no recourse to Citibank for subsequent deterioration in credit performance or the value of the loans transferred. Citibank has no obligations to repurchase the loans. Citibank serviced the loans for a market based fee through early March 2011 but has had no other continuing involvement.

Discontinued Operations Held for Sale

The Company is focused on growing its core businesses and becoming a leading regional bank franchise.

Forward Mortgage Servicing

In connection with this strategy, the Company has substantially sold all of its third-party servicing rights for forward residential mortgage loans as of December 31, 2014 with the completed transfers related to the Ocwen Transaction and the SLS Transaction. The Company has also completed its exit of its related direct residential mortgage lending operations and intends to sell its third-party reverse mortgage servicing rights within the first half of 2015. The Company’s planned exit of these businesses qualify as discontinued operations and are classified as Assets of operations held for sale and associated Liabilities of discontinued operations.

The Ocwen Transaction for $2.1 billion closed in stages with the sales of the majority of GSE loans completed in 2013 and the sale of the majority of private label securities in 2013 and 2014. Each closing has been subject to receipt of investor and third-party consents and other customary closing conditions. In 2013, the Company closed the sale of $1.7 billion of servicing advances, $224.8 million of MSRs and $80.3 million of servicing fee receivables with a net gain recognized of $92.8 million. In 2014, the Company settled the remaining $30.3 million of servicing advances, $3.3 million of MSRs and $1.9 million of servicing fee receivables with a net gain recognized of $2.1 million.

The SLS Transaction for $129.9 million closed in stages with the sale of the private label securities completed in 2014 with the sale of $113.4 million of servicing advances, $5.7 million of MSRs and $5.1 million of servicing fee receivables and a net gain recognized of $5.4 million. Each closing has been subject to receipt of investor and third-party consents and other customary closing conditions.

The service fee income and servicing related reserves have been included in Loss from discontinued operations. The Company has also agreed to indemnify the purchasers Ocwen and SLS against certain claims that may arise which are deemed attributable to the period prior to servicing transfer date. For further discussion, see Note 16—Commitments and Contingencies.

As part of exiting the direct mortgage lending business related to servicing, $2.2 million and $16.7 million of non-PCI SFR mortgage loans have been included in Assets of operations held for sale carried under the fair value option at December 31, 2014 and 2013, respectively.

Reverse Mortgage Servicing

The Company acquired servicing rights associated with Home Equity Conversion Mortgage (“HECM”) loans previously securitized in the form of Ginnie Mae (“GNMA”) HECM Mortgage-Backed Securities (“HMBS”) in connection with the IndyMac Transaction (under Financial Freedom). Refer to Note 10-Variable Interest Entities for further discussion.

Subsequent to acquiring the servicing right assets, the Company funded new draws and originated new HECM loans, which were pooled and then securitized in the form of GNMA HMBS and sold into the secondary market with servicing retained. The HECM loans are insured by the Federal Housing Administration (“FHA”). Based upon the structure of the GNMA HMBS securitization program, the Company determined that it has not met all of the requirements for sale accounting; therefore, the Company accounted for these transfers as a financing transaction. Under a financing transaction, the transferred HECM loans remain on the Company’s statement of financial position and the proceeds received for the transferred HECM loans are recorded as a secured borrowing. At December 31, 2014 and 2013, the Company has a loan balance of $481.2 million and $492.9 million included in Assets of operations held for sale and secured borrowing of $467.6 million and $480.4 million included in Liabilities of discontinued operations. Refer to Note 13- Borrowings for further discussion.

Upon completion of disposition of operations, the Company will assess any continuing involvement or risks and obligations retained associated with the HECM loans and servicing. To the extent the Company no longer has any continuing involvement or maintains risks or obligations as servicer, the HECM loans and secured borrowings will be derecognized.

Concurrently, the Company has been actively identifying potential purchasers of its third-party reverse mortgage servicing operations. A write-down of $45.3 million in 2014 associated with this business has been included in discontinued operations (including $42.4 million in write-down to MSRs and $2.9 million in write-down to the servicing advance and

receivable pertaining to monthly mortgage insurance premium on REO). A write-down of $15.4 million in 2013 associated with this business has been included in discontinued operations (including $11.8 million in write-down to MSRs and $3.7 million in write-down to the servicing advance and miscellaneous GNMA unsecuritized interest receivables).

Summarized Assets of operations held for sale and Liabilities of discontinued operations is as follows:

Of the $306.4 million reported in Other liabilities at December 31, 2014, $287.9 million represents contingent liabilities related to specified servicing related exposure to loss. Of the $362.7 million reported in Other liabilities at December 31, 2013, $332.5 million represents contingent liabilities related to specified servicing related exposure to loss. For further discussion, see Note 16—Commitments and Contingencies.

The results from discontinued operations for the years ended December 31, 2014 and 2013 are as follows:

The following summarizes the net gain on sale from discontinued operations for the years ended December 31, 2014 and 2013:

As of December 31, 2014, the Company’s restructuring liability is $8.3 million with $2.7 million included in Other liabilities and the remaining $5.6 million included in Liabilities of discontinued operations on the Consolidated Statements of Financial Position. The $8.3 million restructuring liability as of December 31, 2014 covers 389 impacted positions, of which 13 positions have been eliminated (but unpaid) and the Company expects it will impact 376 positions in 2015 and 2016 for the planned sale of third party servicing operations. As of December 31, 2013, the restructuring liability totaled $12.2 million, of which $972 thousand is included in Other liabilities and the remaining $11.2 million included in Liabilities of discontinued operations on the Consolidated Statements of Financial Positions. During 2013, the restructuring impacted approximately 850 positions.

The following table summarizes the activity related to the restructuring charges:

The Company has engaged advisors in connection with its planned sale of third party reverse mortgage servicing operations within the first half of 2015. Contingent upon closing of the third party reverse mortgage servicing operations, the Company will incur approximately $2 million in transaction costs related to advisory services. 

3. Securities

Securities consist of mortgage backed securities (“MBS”) including senior securities, investment and non-investment grade MBS, interest-only and principal-only stripped securities and government sponsored enterprises (“Agencies” or “GSEs”) securities. Securities consist of residential MBS classified as trading or AFS securities. The Company does not have any securities classified as held-to-maturity.

In 2013, the Company deconsolidated the previously consolidated VIEs as the Company was no longer deemed the primary beneficiary, with the loans and secured borrowing eliminated and the securities (beneficial interests) held by the Company were re-recognized at their estimated fair value upon the date of deconsolidation. For further discussion, see Note 10—Variable Interest Entities.

The following table summarizes the estimated fair values of the components of trading securities as of December 31, 2014 and 2013:

During the year ended December 31, 2014 and 2013, the Company sold 79 and three trading securities for $57.1 million and $9.6 million, respectively, with a net realized loss of $250 thousand and a net realized gain of $1.3 million recorded as non-interest income, respectively. The Company recognized $776 thousand and $602 thousand in realized gain from cash proceeds received from charged-off trading securities for the years ended December 31, 2014 and 2013, respectively. In addition, the Company recognized an unrealized gain of $2.3 million and $24.1 million for the years ended December 31, 2014 and 2013, respectively. Realized and unrealized gains/losses of trading securities are recognized in Gain on securities, net.

The following table summarizes the amortized cost, gross unrealized gains and losses in OCI and estimated fair value of AFS securities as of December 31, 2014 and 2013:

The following table summarizes the gross unrealized losses and estimated fair value of AFS securities aggregated by investment category and length of time that the securities have been in a continuous unrealized loss position due to interest rate fluctuations as of December 31, 2014 and 2013:

Contractual maturities of the securities generally range from 10 to 30 years. Expected weighted average lives of these securities generally range from several months to more than ten years due to anticipated borrower prepayments occurring prior to the contractual maturity. The following table summarizes information regarding the remaining contractual maturities of the Company’s AFS and trading securities portfolio as of December 31, 2014 and 2013: