Skip to main content

Cadence Bancorporation Reports Third Quarter 2019 Financial Results

HOUSTON (October 23, 2019) – Cadence Bancorporation (NYSE:CADE) (“Cadence”) today announced net income for the quarter ended September 30, 2019 of $44.0 million, or $0.34 per diluted common share (“per share”), compared to $47.1 million or $0.56 per share for the quarter ended September 30, 2018, and $48.3 million or $0.37 per share for the quarter ended June 30, 2019. Annualized returns on average assets and tangible common equity for the third quarter of 2019 were 0.99% and 10.43%, respectively, compared to 1.61% and 17.50%, respectively, for the third quarter of 2018 and 1.10% and 12.23%, respectively, for the second quarter of 2019.

 

“We have a great franchise in attractive markets with experienced bankers and a solid strategy. Pre-tax, pre-loan provision net earnings were up meaningfully on a linked quarter basis. However, for the second quarter in a row, we incurred elevated charge-offs and higher provisions, primarily driven by a small number of existing nonperforming credits that experienced further deterioration. More broadly, the underlying fundamentals for our borrowers and our business remain strong, and we remain confident in our strategy and ability to generate sustainable attractive long-term returns,” stated Paul B. Murphy, Jr., Chairman and Chief Executive Officer of Cadence Bancorporation.

 

Adjusted Performance Metrics (1):

 

  • Adjusted net income(1), excluding non-routine income and expenses(2), was $44.2 million for the third quarter of 2019, a decrease of $5.1 million or 10.4% compared to the third quarter of 2018 and a decrease of $7.3 million or 14.2% compared to the second quarter of 2019, primarily due to the higher provision for credit losses in the current quarter.
  • Adjusted pre-tax pre-provision net earnings(1) increased in the third quarter of 2019 to $100.8 million, an increase of $37.7 million or 59.9% compared to the third quarter of 2018 and an increase of $4.7 million, or 4.9% compared to the second quarter of 2019.
  • Adjusted EPS(1) for the third quarter of 2019 of $0.34 decreased from the prior year quarter of $0.58 and from the linked quarter of $0.40.
  • Adjusted annualized returns on average assets(1) and adjusted tangible common equity(1) for the third quarter of 2019 were 0.99% and 10.47%, respectively, compared to 1.69% and 18.30%, respectively, for the third quarter of 2018 and 1.17% and 12.96%, respectively, for the second quarter of 2019.

 

Highlights:

 

Cadence’s fundamental operating performance during the third quarter of 2019 continued to reflect the strengths of the business model, partially offset by the elevated credit costs in the current quarter. Third quarter of 2019 compared to the linked 2019 quarter:

 

  • Adjusted pre-tax pre-loan provision net earnings(1) were $100.8 million, an increase of $4.7 million or 4.9%.
  • Core deposits were $14.3 billion, reflecting a meaningful increase of $657.6 million or 4.8%, including an increase in non-interest bearing deposits of $306.2 million, or 9.3%.
  • Total loans were $13.6 billion, a slight increase of $9.1 million or 0.1%.
  • Net interest margin (“NIM”) was 3.94%, a decline of 3 basis points or 0.8%.
  • Total costs of funds of 1.41% and total cost of deposits of 1.32%, declines of 9 and 7 basis points, respectively.
  • Adjusted noninterest expenses(1) of $93.3 million declined $2.7 million or 2.8%.
  • Adjusted efficiency ratio(1) also improved 190 basis points to 48.1%.
  • Provision for credit losses of $43.8 million, an increase of $14.8 million.
  • Net charge-offs of $31.3 million, an increase of $12.7 million.

 

Balance Sheet:

 

Total assets increased to $17.9 billion as of September 30, 2019, an increase of $6.1 billion or 51.8%, from September 30, 2018, and an increase of $351.9 million or 2.0%, from June 30, 2019. The year-over-year increases throughout this release are impacted by the acquisition of State Bank which added $4.8 billion in total assets on January 1, 2019.

 

Loans. Period-end loan balances for the third quarter of 2019 reflected moderated organic growth, offset by net paydowns in the General C&I, Restaurant and Healthcare portfolios.

 

Loans at September 30, 2019 totaled $13.6 billion as compared to $9.4 billion and $13.6 billion at September 30, 2018 and June 30, 2019, respectively. Loans increased $875.3 million or 9.3% since September 30, 2018, excluding the impact of the loans acquired from State Bank, and increased $9.1 million or 0.1% from June 30, 2019. On a year-to-date basis, loans grew $265.2 million or 2.6%, excluding the State Bank loans, as compared to 14.4% year-to-date for 2018, with the 2019 growth reflecting management’s efforts to moderate loan growth combined with higher payoff activity compared to 2018.

 

Securities. Investment securities for the third quarter of 2019 increased $20.5 million to $1.7 billion, comprising 9.6% of total assets at September 30, 2019 as compared to $1.2 billion, or 10.3% of total assets at September 30, 2018 and $1.7 billion, or 9.6% of total assets at June 30, 2019.

 

Funding. Our funding activities reflected continued strong performance this quarter, with meaningful core deposit growth, improved deposit mix, and further decline in period-end brokered deposits and wholesale funds.

 

Deposits at September 30, 2019 totaled $14.8 billion as compared to $9.6 billion and $14.5 billion at September 30, 2018 and June 30, 2019, respectively. Excluding the impact of deposits assumed from State Bank, deposits increased by $1.1 billion or 11.9% from September 30, 2018. The year-over-year deposit increase was driven by growth in core customer deposits (total deposits excluding brokered deposits) of $1.3 billion or 15.3% from September 30, 2018. The linked quarter change included an increase of $657.6 million, or 4.8% in core deposits, while brokered deposits declined by $355.7 million to $512.3 million or 3.5% of total deposits at September 30, 2019.

 

Total borrowings were $371.9 million at September 30, 2019, down from $662.7 million at September 30, 2018 and $376.2 million at June 30, 2019. The year-over-year decline was largely due to lower FHLB borrowings as a result of increased core deposits, as well as a decline of approximately $50 million in long-term debt in the second quarter of 2019.

 

Shareholders’ equity reflected a 2.1% growth during the third quarter of 2019 driven by increases in the value of our interest rate collar based on lower interest rate expectations, as well as net earnings for the quarter. Shareholders’ equity was $2.5 billion at September 30, 2019, an increase of $1.1 billion from September 30, 2018, and an increase of $49.9 million from June 30, 2019.

 

  • Tangible common shareholders’ equity(1) was $1.9 billion at September 30, 2019, an increase of $778.6 million from September 30, 2018, and an increase of $48.0 million from June 30, 2019. The year-over-year increase resulted primarily from common stock issued of $826.1 million related to the merger with State Bank Financial Corporation. The linked quarter increase resulted from net income of $44.0 million and an increase of $37.3 million in other comprehensive income due to increased fair values of derivatives and securities. These items were partially offset by dividends of $22.4 million and an increase of $10.1 million in treasury stock.
  • Tangible book value per share(1) was $14.66 as of September 30, 2019, an increase of $1.51 from $13.15 as of September 30, 2018, and an increase of $0.45 from $14.21 as of June 30, 2019.
  • Total outstanding shares at September 30, 2019 were 128.2 million. Cadence repurchased $10.3 million of treasury stock at an average price per share of $15.51 during the quarter.
  • Total shareholders’ equity to total assets and tangible equity to tangible assets were 13.9% and 10.9%, respectively, at September 30, 2019.

 

Asset Quality:

 

Credit quality. Credit costs were elevated during the third quarter of 2019 as we experienced deterioration in certain credits resulting in increased charge-offs and loan provisions.

 

  • Net charge-offs were $31.3 million or 0.91% of average loans compared to $3.1 million or 0.13% and $18.6 million or 0.54% for the quarters ended September 30, 2018 and June 30, 2019, respectively. On a year-to-date basis, 2019 charge offs are 0.49% of average loans as compared to 0.06% for the full year 2018 and 0.40% for the trailing four quarters. The current quarter charge-offs included $15.0 million related to one General C&I non-SNC credit that also incurred a $5.0 million charge-off in the second quarter of 2019, representing 48% of the third quarter 2019 net charge-offs and 40% of the YTD 2019 net charge-offs. This credit was made to a company that experienced negative results caused by an expansion strategy that failed. The company quickly ran out of liquidity and entered into a costly restructuring process that ultimately ended with a highly distressed sale. The sale of the company was completed in October with no further provision for loan losses. In addition to this one sizable charge-off, the third quarter also included charge-offs on a $3.0 million non-SNC C&I credit, a $5.3 million Energy SNC, and a $4.4 million Restaurant SNC. All of these credits were previously identified as nonperforming, and are in the late stages of resolution.
  • Provision for credit losses for the third quarter of 2019 was $43.8 million driven by higher charge-offs and specific reserves, as well as credit migration of certain credits primarily in the General C&I and Restaurant portfolios. Specifically, 51% of the quarter’s provisioning related to loans incurring a charge-off this quarter. In light of these specific loans with partial charge-offs being in the late stages of the resolution process, we do not anticipate any incremental provision for loan losses associated with these credits.
  • The allowance for credit losses (“ACL”) increased to $127.8 million or 0.94% of total loans as of September 30, 2019, as compared to $86.2 million or 0.91% of total loans as of September 30, 2018, and $115.3 million or 0.85% of total loans as of June 30, 2019.
  • The ACL to total nonperforming loans was 118.2% as of September 30, 2019, as compared to 182.5% as of September 30, 2018, and 106.1% as of June 30, 2019.
  • Loans 30-89 days past due were 0.15% of total loans at September 30, 2019, compared to 0.10% at September 30, 2018 and 0.15% at June 30, 2019.
  • Nonperforming loans (“NPLs”) as a percent of total loans were 0.79% at September 30, 2019, compared to 0.50% at September 30, 2018 and 0.80% at June 30, 2019. NPLs totaled $108.1 million, $47.2 million and $108.7 million as of September 30, 2019, September 30, 2018 and June 30, 2019, respectively.
  • Total criticized loans (see Table 6) at September 30, 2019 were $571.9 million or 4.19% as a percent of total loans as compared to $275.7 million or 2.92% at September 30, 2018 and $408.5 million or 3.00% at June 30, 2019. The linked quarter increases included migration of certain credits in General C&I and Energy.

 

Total Revenue:

 

This quarter’s total operating revenue reflected stable underlying revenue driven by flat earning assets that, as compared to the linked quarter, was positively impacted by lower funding costs and hedge income. Total operating revenue(1) for the third quarter of 2019 was $194.8 million, up 59.6% from the same period in 2018 and up 1.2% from the linked quarter. On a year-to-date basis, operating revenue for 2019 was $587.3 million, up 63.9% from the same period in 2018. The year over year revenue increase reflects loan growth during the period as well as the impact of the State Bank acquisition.

 

Net interest income for the third quarter of 2019 was $160.2 million, an increase of $62.1 million or 63.3%, from the same period in 2018, and a decrease of $0.6 million or 0.4% from the second quarter of 2019.

 

  • Our fully tax-equivalent net interest margin (“NIM”) in the third quarter of 2019 was 3.94% as compared to 3.58% for the third quarter of 2018 and 3.97% for the second quarter of 2019.
  • On a year-to-date basis, the NIM for 2019 increased to 4.04% compared to 3.63% for 2018.

 

The year-over-year increase in NIM reflects the merger with State Bank and the related positive impact on our funding costs, loan yields and accretion income. The third quarter 2019 NIM as compared to the linked quarter change was driven primarily by:

 

  • -12 bp NIM impact in total loan yields including:
    • -22 bp impact on our loan yields due to declining LIBOR and prime rates in the current quarter;
    • +12 bp impact on income from our hedge positions;
    • -6 bp impact of the sale of $130 million of acquired non-credit impaired loans late in the second quarter 2019; and
    • +4 bp impact from higher accretion income.
  • + 9bp NIM impact from lower funding costs including:
    • +6 bp impact from lower deposit costs due to improved mix, including increased non-interest bearing deposits and lower brokered deposits, and targeted reductions of deposit rate costs in step with index rate cuts; and
    • +3 bp impact from lower borrowing costs due to a reduction in average FHLB borrowings and lower long-term debt levels due to the late second quarter senior debt refinancing that reduced debt levels approximately $50 million.

 

Average earning assets for the third quarter of 2019 were $16.2 billion, an increase of $5.3 billion from the prior year’s quarter from both organic and acquired growth, and a decline of $0.1 billion from the linked quarter due to overall flat loan growth.

 

Originated Loans and Hedge Income:

 

  • Average originated loans increased $146.2 million linked quarter, with year-over-year growth of $1.5 billion, reflecting moderated growth in 2019.
  • Yield on originated loans was 5.31% for the third quarter of 2019, as compared to 5.11% and 5.43% for the third quarter of 2018 and the second quarter of 2019, respectively. The third quarter 2019 originated loan yield was negatively impacted by declines in LIBOR, however that impact on net interest income was partially offset by the positive impact of our hedges linked quarter in addition to the growth in average originated loans.
    • $4 billion notional LIBOR collar: Hedge income (loss) for the collar for the third quarter of 2019 was $2.7 million as compared to ($1.7) million for the second quarter of 2019. The collar income year-to-date for 2019 was $2.7 million. The collar contract expires February 2024.
    • $650 million rate swaps: Hedge income (loss) for the swaps for the third quarter of 2019 was ($1.2) million as compared to ($1.6) million for the third quarter of 2018 and ($1.5) million for the second quarter of 2019. Swap income year-to-date for 2019 was ($4.2) million as compared to ($3.1) million for 2018. One swap contract for $300 million expires on December 31, 2019, with the remaining $350 million contracts expiring February 27, 2026.
  • Yield on the underlying originated loans (excluding hedge impact) was 5.25% for the third quarter of 2019, as compared to 5.18% and 5.56% for the third quarter of 2018 and second quarter of 2019, respectively.
  • Approximately 68% of the total loan portfolio is floating at September 30, 2019.

 

Acquired Loans:

 

  • Acquired loan average balances declined $348.8 million during the third quarter of 2019 due to the sale of approximately $130 million in ANCI loans near the end of the second quarter and routine payoff activity, with the increase year-over-year due to the State Bank acquisition.
  • Acquired loan yields during the third quarter of 2019 were impacted by the $130 million loan sale in second quarter yielding 8.9% on average, as well as various State Bank purchase accounting adjustments applied in the third quarter incorporating impact from January 1, 2019 (“Day 1”).
  • Year-to-date 2019 yields are 10.32% on the ACI portfolio, excluding recovery accretion, and 6.59% on the ANCI portfolio. We currently believe that the year-to-date yields of the acquired portfolios, excluding recovery accretion, materially represent those portfolio’s effective yields for the remainder of 2019, under current market conditions and payoff expectations.

 

Cost of Funds:

 

  • We experienced declines in funding costs this quarter with total cost of funds for the third quarter of 2019 of 1.41% compared to 1.33% for the third quarter of 2018 and 1.50% in the linked quarter. Total cost of deposits for the third quarter of 2019 was 1.32% compared to 1.15% for the third quarter of 2018, and 1.39% for the linked quarter.
  • The decrease in costs during the linked quarter related primarily to declines in brokered deposit balances as a result of core deposit growth, a decrease in borrowing costs due to lower total borrowings resulting from the June subordinated debt issuance and senior debt repayment, and an increase in noninterest-bearing deposits to 23.8% of total deposits compared to 22.4% at June 30, 2019.

 

Noninterest income for the third quarter of 2019 was $34.6 million, an increase of $10.7 million or 44.5% from the same period of 2018, and an increase of $2.9 million or 9.2% over the linked quarter.

 

  • Total service fees and revenue for the third quarter of 2019 were $30.6 million, an increase of $10.2 million or 49.6% from the same period of 2018, and an increase of $2.8 million or 9.9% from the second quarter of 2019. The year-over-year increase in fees was due to across the board business growth and the merger. The linked quarter results included business volume driven increases in investment advisory, service charges on deposits, credit-related fees, and SBA income, which were offset by modest declines in bankcard fees, trust services revenue, and other service fees.
  • Other noninterest income was $4.0 million and increased by $0.5 million from the third quarter of 2018 and by $0.2 million from the linked quarter. The year over year variance included an increase of $0.8 million in gains on sales of securities. The linked quarter increase primarily resulted from $1.3 million in increased earnings from limited partnerships plus the second quarter 2019 was reduced by the $2.0 million earnout receivable revaluation. These items were partially offset by a $1.5 million decline in gain on sale of loans related to the second quarter 2019 sale of $130 million of ANCI loans.
  • Noninterest income as a percent of total revenues was 17.8% for the third quarter of 2019 compared to 19.6% and 16.5% for the third quarter of 2018 and second quarter of 2019, respectively.

 

Noninterest expense for the third quarter of 2019 was $94.3 million, an increase of $33.1 million or 54.0% from $61.2 million for the same period in 2018, and a decrease of $6.2 million or 6.2% from $100.5 million for the second quarter of 2019. The year over year increase was related to the State Bank acquisition. The linked quarter decrease resulted from:

 

  • Decrease of $3.6 million in merger related costs;
  • Decrease of $1.5 million in personnel costs related to lower management incentive accruals;
  • Decrease of $1.3 million in FDIC insurance assessment related to credits received for assessments paid prior to reaching $10 billion in total assets; and
  • Decrease of $2.7 million in loan related expenses primarily associated with cost deferral on certain mortgage loans.

 

Adjusted noninterest expenses(1), which exclude the impact of non-routine items(2), were $93.3 million for the third quarter of 2019, up $34.2 million or 58.0% from $59.0 million for the third quarter of 2018 and down $2.7 million or 2.8% from $96.0 million for the second quarter of 2019. Non-routine expenses included merger related expenses of $1.0 million, $0.2 million and $4.6 million, for the third quarter of 2019, third quarter of 2018 and second quarter of 2019, respectively.

 

Our efficiency ratio(1) improvement for the third quarter of 2019 reflects increases in operating revenue combined with decreases in quarterly operating expenses. The third quarter of 2019 adjusted efficiency ratio(2) was 48.1% compared to 48.4% for the third quarter of 2018 and 50.0% for the second quarter of 2019.

 

 

(1) Considered a non-GAAP financial measure. See Table 10 “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

(2) See Table 10 for a detail of non-routine income and expenses.

 

 

Taxes:

 

The effective tax rate for the quarter ended September 30, 2019 was 22.5% compared to 23.3% for the quarter ended June 30, 2019, and 24.2% for the quarter ended September 30, 2018. The full year 2019 effective tax rate is currently estimated as 22.9%.

 

Supplementary Financial Tables (Unaudited):

 

Supplementary financial tables (unaudited) are included in this release following the customary disclosure information.

 

Third Quarter 2019 Earnings Conference Call:

 

Cadence Bancorporation executive management will host a conference call to discuss third quarter 2019 results on Wednesday, October 23, 2019, at 7:30 a.m. CT / 8:30 a.m. ET. Slides to be presented by management on the conference call can be viewed by visiting www.cadencebancorporation.com and selecting “Events & Presentations” then “Presentations”.

 

Conference Call Access:

 

To access the conference call, please dial one of the following numbers approximately 10-15 minutes prior to the start time to allow time for registration and use the Elite Entry Number provided below.

 

Dial in (toll free):

1-888-317-6003

International dial in:

1-412-317-6061

Canada (toll free):

1-866-284-3684

Participant Elite Entry Number:

3972074

 

For those unable to participate in the live presentation, a replay will be available through November 6, 2019. To access the replay, please use the following numbers:

 

US Toll Free:

1-877-344-7529

International Toll:

1-412-317-0088

Canada Toll Free:

1-855-669-9658

Replay Access Code:

10135639

End Date:

November 6, 2019

 

Webcast Access:

 

The call and corresponding presentation slides will be webcast live on the home page of the Company’s website: www.cadencebancorporation.com.

 

About Cadence Bancorporation

 

Cadence Bancorporation (NYSE: CADE), headquartered in Houston, Texas, is a regional financial holding company with $17.9 billion in assets as of September 30, 2019. Cadence operates 98 branch locations in Alabama, Florida, Georgia, Mississippi, Tennessee and Texas, and provides corporations, middle-market companies, small businesses and consumers with a full range of innovative banking and financial solutions. Services and products include commercial and business banking, treasury management, specialized lending, asset-based lending, commercial real estate, SBA lending, foreign exchange, wealth management, investment and trust services, financial planning, retirement plan management, payroll and insurance services, consumer banking, consumer loans, mortgages, home equity lines and loans, and credit cards. Clients have access to leading-edge online and mobile solutions, interactive teller machines, and more than 55,000 ATMs. The Cadence team of 1,800 associates is committed to exceeding customer expectations and helping their clients succeed financially.

 

Cautionary Statement Regarding Forward-Looking Information

 

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict.

 

Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Such factors include, without limitation, the “Risk Factors” referenced in our Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”) on May 21, 2018, and our Registration Statement on Form S-4 filed with the SEC on July 20, 2018, other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, including our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, and the following factors: business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic market areas; economic, market, operational, liquidity, credit and interest rate risks associated with our business; deteriorating asset quality and higher loan charge-offs; the laws and regulations applicable to our business; our ability to achieve organic loan and deposit growth and the composition of such growth; increased competition in the financial services industry, nationally, regionally or locally; our ability to maintain our historical earnings trends; our ability to raise additional capital to implement our business plan; material weaknesses in our internal control over financial reporting; systems failures or interruptions involving our information technology and telecommunications systems or third-party servicers; the composition of our management team and our ability to attract and retain key personnel; the fiscal position of the U.S. federal government and the soundness of other financial institutions; the composition of our loan portfolio, including the identity of our borrowers and the concentration of loans in energy-related industries and in our specialized industries; the portion of our loan portfolio that is comprised of participations and shared national credits; the amount of nonperforming and classified assets we hold; the possibility that the anticipated benefits of the merger with State Bank are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Cadence and State Bank do business; the impact on our financial condition, results of operations, financial disclosures, and future business strategies related to the upcoming implementation of FASB Accounting Standards Update 2016-13, Financial Instruments – Credit Losses, commonly referred to as CECL. Cadence can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this communication, and Cadence does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

 

About Non-GAAP Financial Measures

 

Certain of the financial measures and ratios we present, including “efficiency ratio,” “adjusted efficiency ratio,” “adjusted noninterest expenses,” “adjusted operating revenue,” “tangible common equity ratio,” “tangible book value per share” and “return on average tangible common equity”, “adjusted return on average tangible common equity”. “adjusted return on average assets”, “adjusted diluted earnings per share” and “pre-tax, pre-provision net earnings,” are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

 

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance. A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables (Table 10).

 

###

 

Contact Information

 

Cadence Bancorporation

 

Media contact:

Danielle Kernell

713-871-4051

danielle.kernell@cadencebank.com

 

Investor relations contact:

Valerie Toalson

713-871-4103 or 800-698-7878

vtoalson@cadencebancorporation.com

 

 

 

 

 

Table 1 - Selected Financial Data

 

 

 

As of and for the Three Months Ended

 

(In thousands, except share and per share data)

 

September 30,

2019

 

 

June 30,

2019

 

 

March 31,

2019

 

 

December 31,

2018

 

 

September 30,

2018

 

Statement of Income Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

213,149

 

 

$

217,124

 

 

$

222,185

 

 

$

143,857

 

 

$

131,753

 

Interest expense

 

 

52,962

 

 

 

56,337

 

 

 

52,896

 

 

 

40,711

 

 

 

33,653

 

Net interest income

 

 

160,187

 

 

 

160,787

 

 

 

169,289

 

 

 

103,146

 

 

 

98,100

 

Provision for credit losses

 

 

43,764

 

 

 

28,927

 

 

 

11,210

 

 

 

8,422

 

 

 

(1,365

)

Net interest income after provision

 

 

116,423

 

 

 

131,860

 

 

 

158,079

 

 

 

94,724

 

 

 

99,465

 

Noninterest income - service fees and revenue

 

 

30,646

 

 

 

27,882

 

 

 

27,741

 

 

 

21,217

 

 

 

20,490

 

Noninterest income - other noninterest income

 

 

3,996

 

 

 

3,840

 

 

 

2,923

 

 

 

(210

)

 

 

3,486

 

Noninterest expense

 

 

94,283

 

 

 

100,529

 

 

 

113,440

 

 

 

72,697

 

 

 

61,231

 

Income before income taxes

 

 

56,782

 

 

 

63,053

 

 

 

75,303

 

 

 

43,034

 

 

 

62,210

 

Income tax expense

 

 

12,796

 

 

 

14,707

 

 

 

17,102

 

 

 

10,709

 

 

 

15,074

 

Net income

 

$

43,986

 

 

$

48,346

 

 

$

58,201

 

 

$

32,325

 

 

$

47,136

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

128,457,491

 

 

 

128,791,933

 

 

 

130,485,521

 

 

 

83,375,485

 

 

 

83,625,000

 

Diluted

 

 

128,515,274

 

 

 

129,035,553

 

 

 

130,549,319

 

 

 

83,375,485

 

 

 

84,660,256

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

 

$

0.37

 

 

$

0.44

 

 

$

0.39

 

 

$

0.56

 

Diluted

 

 

0.34

 

 

 

0.37

 

 

 

0.44

 

 

 

0.39

 

 

 

0.56

 

Period-End Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

$

1,705,325

 

 

$

1,684,847

 

 

$

1,754,839

 

 

$

1,187,252

 

 

$

1,206,387

 

Total loans, net of unearned income

 

 

13,637,042

 

 

 

13,627,934

 

 

 

13,624,954

 

 

 

10,053,923

 

 

 

9,443,819

 

Allowance for credit losses

 

 

127,773

 

 

 

115,345

 

 

 

105,038

 

 

 

94,378

 

 

 

86,151

 

Total assets

 

 

17,855,946

 

 

 

17,504,005

 

 

 

17,452,911

 

 

 

12,730,285

 

 

 

11,759,837

 

Total deposits

 

 

14,789,712

 

 

 

14,487,821

 

 

 

14,199,223

 

 

 

10,708,689

 

 

 

9,558,276

 

Noninterest-bearing deposits

 

 

3,602,861

 

 

 

3,296,652

 

 

 

3,210,321

 

 

 

2,454,016

 

 

 

2,094,856

 

Interest-bearing deposits

 

 

11,186,851

 

 

 

11,191,169

 

 

 

10,988,902

 

 

 

8,254,673

 

 

 

7,463,420

 

Borrowings and subordinated debentures

 

 

371,892

 

 

 

376,240

 

 

 

717,278

 

 

 

471,770

 

 

 

662,658

 

Total shareholders equity

 

 

2,475,944

 

 

 

2,426,072

 

 

 

2,302,823

 

 

 

1,438,274

 

 

 

1,414,826

 

Average Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

$

1,650,902

 

 

$

1,716,550

 

 

$

1,748,714

 

 

$

1,187,947

 

 

$

1,141,704

 

Total loans, net of unearned income

 

 

13,719,286

 

 

 

13,921,873

 

 

 

13,798,386

 

 

 

9,890,419

 

 

 

9,265,754

 

Allowance for credit losses

 

 

119,873

 

 

 

106,656

 

 

 

97,065

 

 

 

87,996

 

 

 

92,783

 

Total assets

 

 

17,621,163

 

 

 

17,653,511

 

 

 

17,634,267

 

 

 

12,249,819

 

 

 

11,585,969

 

Total deposits

 

 

14,539,419

 

 

 

14,645,109

 

 

 

14,579,771

 

 

 

10,038,180

 

 

 

9,489,268

 

Noninterest-bearing deposits

 

 

3,456,807

 

 

 

3,281,383

 

 

 

3,334,399

 

 

 

2,210,793

 

 

 

2,153,097

 

Interest-bearing deposits

 

 

11,082,613

 

 

 

11,363,727

 

 

 

11,245,372

 

 

 

7,827,387

 

 

 

7,336,171

 

Borrowings and subordinated debentures

 

 

381,257

 

 

 

441,619

 

 

 

554,281

 

 

 

652,813

 

 

 

567,864

 

Total shareholders equity

 

 

2,447,189

 

 

 

2,331,855

 

 

 

2,241,652

 

 

 

1,412,643

 

 

 

1,395,061

 

 


 

 

Table 1 (Continued) - Selected Financial Data

 

 

 

As of and for the Three Months Ended

 

(In thousands, except share and per share data)

 

September 30,

2019

 

 

June 30,

2019

 

 

March 31,

2019

 

 

December 31,

2018

 

 

September 30,

2018

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value

 

$

19.32

 

 

$

18.84

 

 

$

17.88

 

 

$

17.43

 

 

$

16.92

 

Tangible book value (1)

 

 

14.66

 

 

 

14.21

 

 

 

13.23

 

 

 

13.62

 

 

 

13.15

 

Cash dividends declared

 

 

0.175

 

 

 

0.175

 

 

 

0.175

 

 

 

0.150

 

 

 

0.150

 

Dividend payout ratio

 

 

51.47

%

 

 

47.30

%

 

 

39.77

%

 

 

38.46

%

 

 

26.79

%

Performance Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average common equity (2)

 

 

7.13

%

 

 

8.32

%

 

 

10.53

%

 

 

9.08

%

 

 

13.40

%

Return on average tangible common equity (1) (2)

 

 

10.43

 

 

 

12.23

 

 

 

15.54

 

 

 

11.85

 

 

 

17.50

 

Return on average assets (2)

 

 

0.99

 

 

 

1.10

 

 

 

1.34

 

 

 

1.05

 

 

 

1.61

 

Net interest margin (2)

 

 

3.94

 

 

 

3.97

 

 

 

4.21

 

 

 

3.55

 

 

 

3.58

 

Efficiency ratio (1)

 

 

48.39

 

 

 

52.22

 

 

 

56.73

 

 

 

58.55

 

 

 

50.16

 

Adjusted efficiency ratio (1)

 

 

48.07

 

 

 

49.97

 

 

 

45.73

 

 

 

48.99

 

 

 

48.36

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total nonperforming assets ("NPAs") to total loans and OREO and other NPAs

 

 

0.84

%

 

 

0.85

%

 

 

0.63

%

 

 

0.82

%

 

 

0.66

%

Total nonperforming loans to total loans

 

 

0.79

 

 

 

0.80

 

 

 

0.57

 

 

 

0.74

 

 

 

0.50

 

Total ACL to total loans

 

 

0.94

 

 

 

0.85

 

 

 

0.77

 

 

 

0.94

 

 

 

0.91

 

ACL to total nonperforming loans ("NPLs")

 

 

118.17

 

 

 

106.08

 

 

 

135.01

 

 

 

127.12

 

 

 

182.52

 

Net charge-offs to average loans (2)

 

 

0.91

 

 

 

0.54

 

 

 

0.02

 

 

 

0.01

 

 

 

0.13

 

Capital Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders equity to assets

 

 

13.9

%

 

 

13.9

%

 

 

13.2

%

 

 

11.3

%

 

 

12.0

%

Tangible common equity to tangible assets (1)

 

 

10.9

 

 

 

10.8

 

 

 

10.1

 

 

 

9.1

 

 

 

9.6

 

Common equity tier 1 (3)

 

 

11.0

 

 

 

10.9

 

 

 

10.4

 

 

 

9.8

 

 

 

10.4

 

Tier 1 leverage capital (3)

 

 

10.3

 

 

 

10.3

 

 

 

10.0

 

 

 

10.1

 

 

 

10.7

 

Tier 1 risk-based capital (3)

 

 

11.0

 

 

 

10.9

 

 

 

10.4

 

 

 

10.1

 

 

 

10.7

 

Total risk-based capital (3)

 

 

13.2

 

 

 

12.9

 

 

 

11.9

 

 

 

11.8

 

 

 

12.4

 

_____________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Considered a non-GAAP financial measure. See Table 10 "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.
  2. Annualized.
  3. Current quarter regulatory capital ratios are estimates.

 


 

 

 

Table 2 - Average Balances/Yield/Rates

 

 

 

For the Three Months Ended September 30,

 

 

 

 

2019

 

 

 

2018

 

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

(In thousands)

 

Balance

 

 

Expense

 

 

Rate

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, net of unearned income (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

 

$

10,191,066

 

 

$

136,332

 

 

 

5.31

 

%

 

$

8,734,337

 

 

$

112,419

 

 

 

5.11

 

%

ANCI portfolio

 

 

3,269,846

 

 

 

54,084

 

 

 

6.56

 

 

 

 

302,229

 

 

 

3,395

 

 

 

4.46

 

 

ACI portfolio

 

 

258,375

 

 

 

7,554

 

 

 

11.60

 

 

 

 

229,188

 

 

 

5,243

 

 

 

9.08

 

 

Total loans

 

 

13,719,286

 

 

 

197,970

 

 

 

5.72

 

 

 

 

9,265,754

 

 

 

121,057

 

 

 

5.18

 

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

1,447,448

 

 

 

9,657

 

 

 

2.65

 

 

 

 

928,275

 

 

 

6,248

 

 

 

2.67

 

 

Tax-exempt (2)

 

 

203,454

 

 

 

1,892

 

 

 

3.69

 

 

 

 

213,429

 

 

 

2,195

 

 

 

4.08

 

 

Total investment securities

 

 

1,650,902

 

 

 

11,549

 

 

 

2.78

 

 

 

 

1,141,704

 

 

 

8,443

 

 

 

2.93

 

 

Federal funds sold and short-term investments

 

 

741,955

 

 

 

3,421

 

 

 

1.83

 

 

 

 

458,491

 

 

 

2,039

 

 

 

1.76

 

 

Other investments

 

 

77,605

 

 

 

606

 

 

 

3.10

 

 

 

 

54,762

 

 

 

675

 

 

 

4.89

 

 

Total interest-earning assets

 

 

16,189,748

 

 

 

213,546

 

 

 

5.23

 

 

 

 

10,920,711

 

 

 

132,214

 

 

 

4.80

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

123,758

 

 

 

 

 

 

 

 

 

 

 

 

71,777

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

128,286

 

 

 

 

 

 

 

 

 

 

 

 

62,422

 

 

 

 

 

 

 

 

 

 

Accrued interest and other assets

 

 

1,299,244

 

 

 

 

 

 

 

 

 

 

 

 

623,842

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(119,873

)

 

 

 

 

 

 

 

 

 

 

 

(92,783

)

 

 

 

 

 

 

 

 

 

Total assets

 

$

17,621,163

 

 

 

 

 

 

 

 

 

 

 

$

11,585,969

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

$

7,991,804

 

 

$

31,063

 

 

 

1.54

 

%

 

$

5,175,915

 

 

$

17,046

 

 

 

1.31

 

%

Savings deposits

 

 

250,003

 

 

 

274

 

 

 

0.43

 

 

 

 

181,449

 

 

 

149

 

 

 

0.33

 

 

Time deposits

 

 

2,840,806

 

 

 

17,083

 

 

 

2.39

 

 

 

 

1,978,807

 

 

 

10,312

 

 

 

2.07

 

 

Total interest-bearing deposits

 

 

11,082,613

 

 

 

48,420

 

 

 

1.73

 

 

 

 

7,336,171

 

 

 

27,507

 

 

 

1.49

 

 

Other borrowings

 

 

160,066

 

 

 

1,005

 

 

 

2.49

 

 

 

 

432,279

 

 

 

3,673

 

 

 

3.37

 

 

Subordinated debentures

 

 

221,191

 

 

 

3,536

 

 

 

6.35

 

 

 

 

135,585

 

 

 

2,473

 

 

 

7.25

 

 

Total interest-bearing liabilities

 

 

11,463,870

 

 

 

52,961

 

 

 

1.83

 

 

 

 

7,904,035

 

 

 

33,653

 

 

 

1.69

 

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

3,456,807

 

 

 

 

 

 

 

 

 

 

 

 

2,153,097

 

 

 

 

 

 

 

 

 

 

Accrued interest and other liabilities

 

 

253,297

 

 

 

 

 

 

 

 

 

 

 

 

133,776

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

15,173,974

 

 

 

 

 

 

 

 

 

 

 

 

10,190,908

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

2,447,189

 

 

 

 

 

 

 

 

 

 

 

 

1,395,061

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

17,621,163

 

 

 

 

 

 

 

 

 

 

 

$

11,585,969

 

 

 

 

 

 

 

 

 

 

Net interest income/net interest spread

 

 

 

 

 

 

160,585

 

 

 

3.40

 

%

 

 

 

 

 

 

98,561

 

 

 

3.11

 

%

Net yield on earning assets/net interest margin

 

 

 

 

 

 

 

 

 

 

3.94

 

%

 

 

 

 

 

 

 

 

 

 

3.58

 

%

Taxable equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

 

 

 

 

 

(397

)

 

 

 

 

 

 

 

 

 

 

 

(461

)

 

 

 

 

 

Net interest income

 

 

 

 

 

$

160,188

 

 

 

 

 

 

 

 

 

 

 

$

98,100

 

 

 

 

 

 

_____________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Nonaccrual loans are included in loans, net of unearned income. No adjustment has been made for these loans in the calculation of yields.
  2. Interest income and yields are presented on a fully taxable equivalent basis using an income tax rate of 21%.

 

 


 

 

Table 2 (Continued) - Average Balances/Yield/Rates

 

 

 

 

For the Three Months Ended

September 30, 2019

 

 

 

For the Three Months Ended

June 30, 2019

 

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

(In thousands)

 

Balance

 

 

Expense

 

 

Rate

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, net of unearned income (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

 

$

10,191,066

 

 

$

136,332

 

 

 

5.31

 

%

 

$

10,044,825

 

 

$

135,946

 

 

 

5.43

 

%

ANCI portfolio

 

 

3,269,846

 

 

 

54,084

 

 

 

6.56

 

 

 

 

3,586,344

 

 

 

55,266

 

 

 

6.18

 

 

ACI portfolio

 

 

258,375

 

 

 

7,554

 

 

 

11.60

 

 

 

 

290,704

 

 

 

10,799

 

 

 

14.90

 

 

Total loans

 

 

13,719,286

 

 

 

197,970

 

 

 

5.72

 

 

 

 

13,921,873