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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Cadence Bank | NYSE:CADE | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.27 | 0.94% | 29.00 | 29.50 | 28.86 | 29.27 | 532,741 | 22:30:00 |
Cadence Bancorporation (NYSE: CADE) (“Cadence”) today announced a net loss for the quarter ended March 31, 2020 of ($399.3) million or ($3.15) per share, compared to net income of $58.2 million or $0.44 per share for the quarter ended March 31, 2019, and $51.4 million or $0.40 per share for the quarter ended December 31, 2019. The 2020 net loss resulted from a non-cash goodwill impairment charge of $412.9 million, net of tax, or ($3.26) per share. Adjusted net income(1), excluding non-routine income and expenses(2) and the impairment charge, was $12.5 million or $0.10 per share for the first quarter of 2020, compared to adjusted net income of $75.5 million or $0.58 per share for the quarter ended March 31, 2019 and compared to $51.9 million or $0.40 per share for the quarter ended December 31, 2019.
“There are several positive points about our first quarter results that should be mentioned. Our adjusted pre-tax, pre-provision earnings of $93 million or 2.11% as a percent of average assets is relatively stable compared to the linked quarter. Our loan loss reserves more than doubled to 1.83% of loans in part due to CECL implementation as well as the impact of COVID-19. Importantly, our capital ratios and liquidity are strong and our tangible book value per share increased from $14.65 to $15.65 linked quarter, up 6.7%. Our team has seen numerous cycles and we are cautiously and prudently preparing for an extended period of stress. Our bankers, while largely working remotely and safely, are actively and effectively meeting the needs of our customers and communities. Cadence, as an existing SBA preferred lender, has been active in the Paycheck Protection Program (“PPP”), and we have secured approximately $1 billion in these PPP loans for our customers. This is a particularly difficult time for restaurants, energy companies and their banks. COVID-19, coupled with historically low oil prices, has taken a toll on these industries in which we have an active banking presence. Our exposure to these industries contributed to the significant drop in our share price, which was a primary trigger of the goodwill impairment charge that impacted our first quarter earnings. This non-cash goodwill charge does not adversely affect our strong capital ratios or liquidity, and we remain confident in our ability to deal with any additional pressures we may experience in the quarters ahead. In light of the higher level of stress, our Board declared a second quarter dividend of $0.05 cents per share, down from $0.175 in previous quarter. This prudent step is consistent with our historical conservative approach to capital management,” stated Paul B. Murphy, Jr., Chairman and Chief Executive Officer of Cadence Bancorporation.
First Quarter 2020 Highlights:
First quarter 2020 highlights (compared to the linked quarter where applicable) are as follows:
Balance Sheet:
Total assets were $17.2 billion as of March 31, 2020, a decrease of $215.0 million or 1.2% from March 31, 2019, and a decrease of $562.3 million or 3.2% from December 31, 2019.
Loans at March 31, 2020 totaled $13.4 billion as compared to $13.6 billion at March 31, 2019, a decrease of $232.8 million or 1.7%. Loans increased $408.5 million or 3.1% from $13.0 billion at December 31, 2019. The year-over-year decline included sales of equipment financing loans of $130 million in 2Q19, sales of homebuilder finance loans of $47.1 million in the first quarter of 2020, and strategic declines in the restaurant and leveraged loan sectors as part of our risk management. The declines also reflect an overall heightened risk focus on new originations in the past year. The increases in loan balances during the first quarter of 2020 reflect primarily increased customer draws on outstanding credit lines and modest new originations, partially offset by routine paydowns. During the first quarter of 2020, draws on existing lines of credit increased by $457.3 million.
Investment Securities at March 31, 2020 totaled $2.5 billion or 14.3% of total assets as compared to $1.8 billion or 10.1% of total assets at March 31, 2019, an increase of $706.8 million or 40.3%. Investment securities for the first quarter of 2020 increased $93.1 million from $2.4 billion, or 13.3% of total assets at December 31, 2019. The increase in securities as a percent of assets from the prior year is a result of growth in deposits and lower loan balances.
Goodwill at March 31, 2020 totaled $43.1 million, down from $480.4 million at March 31, 2019 and $485.3 million at December 31, 2019. The Company performed an interim goodwill impairment test as of March 31, 2020 which indicated goodwill impairment resulting in the recording of a $443.7 million ($412.9 million, after-tax), non-cash impairment charge in the first quarter of 2020. The impairment, representing all of the Bank reporting unit’s goodwill, was primarily the result of economic and industry conditions at March 31, 2020, volatility in the market capitalization of the Company’s and its peer banks, increased loan provision estimates in light of COVID-19, increased discount rates and other changes in variables driven by the uncertain macro-environment that when combined, resulted in the fair value of the reporting unit being less than the reporting unit’s carrying value. The remaining goodwill at March 31, 2020 relates to our registered investment advisory subsidiary and trust division.
Total Deposits at March 31, 2020 totaled $14.5 billion, an increase of $290.3 million or 2.0% from March 31, 2019 and a decrease of $253.3 million or 2% from December 31, 2019. First quarter 2020 core deposit declines of $636 million reflect an intentional reduction in certain higher priced and larger depositor relationships totaling nearly $1 billion and seasonal public fund and large corporate deposit declines of $175 million, partially offset by granular core deposit account growth of nearly $550 million. These strategic deposit activities resulted in a 16% reduction in costs of deposits to 0.96% for the quarter and an increase of noninterest-bearing deposits as a percent of total deposits to 27% from 24% in the prior quarter.
Total borrowings were $372.4 million at March 31, 2020, down from $717.3 million at March 31, 2019 and flat from $372.2 million at December 31, 2019. The year-over-year decline was largely due to a decrease of $295.0 million in FHLB borrowings as a result of increased core deposits, as well as a decline of approximately $50 million in other long-term debt.
Shareholders’ equity was $2.1 billion at March 31, 2020, a decrease of $189.3 million or 8.2% from March 31, 2019, and a decrease of $347.3 million or 14.1% from December 31, 2019. The linked quarter decrease resulted primarily from the net goodwill impairment charge of $412.9 million, $22.1 million in cash dividends, $30.0 million related to common share buybacks, and the cumulative effect of adopting CECL at January 1, 2020 of $62.8 million. These reductions to equity were partially offset by an increase of $166.0 million in other comprehensive income largely driven by the realized gain from the termination of our interest rate collar.
Tangible common shareholders’ equity(1) was $2.0 billion at March 31, 2020, an increase of $266.6 million or 15.6% from March 31, 2019 and an increase of $100.9 million or 5.4% from December 31, 2019. The linked quarter increase resulted from the same factors noted above excluding the goodwill impairment charge as it does not impact tangible common equity.
Capital ratios remained robust at March 31, 2020, with all the ratios increasing or stable in the current quarter except for the leverage ratio, which was down slightly:
Common equity Tier 1 capital
11.4%
Tier 1 leverage capital
10.1%
Tier 1 risk-based capital
11.4%
Total risk-based capital
13.8%
Asset Quality:
Credit quality metrics were elevated during the first quarter of 2020 as certain of our borrowers, predominantly in the Restaurant, Energy, and General C&I categories, experienced increased credit stress compared to our historical experience and long-term expectations.
Total Revenue:
Total operating revenue(1) for the first quarter of 2020 was $188.5 million, down $11.4 million or 5.7% from the same period in 2019 and down $6.3 million or 3.2% from the linked quarter.
Net interest income Net interest income for the first quarter of 2020 was $153.5 million, a decrease of $15.8 million or 9.3% from the same period in 2019 and a decrease of $7.4 million or 4.6% from the fourth quarter of 2019.
The year-over-year decrease in NIM reflects positive impacts from changes in our balance sheet mix, derivative activities, funding costs, loan yields offset by declines in accretion income. The first quarter 2020 NIM, as compared to the linked quarter, was down only 9 basis points due fully to lower accretion as we effectively mitigated the impact of declining rates on our loan portfolio by aggressively managing funding costs and realizing the positive impact of our terminated collar gain. Specifically, the NIM change during the quarter included:
Quarterly Change in NIMBalance
Yield
Total
4Q 2019 Net Interest Margin
3.89%
Securities & ST Investments
0.05%
-0.03%
0.02%
Originated Loans
0.01%
-0.06%
-0.05%
Acquired Loans
-0.09%
-0.03%
-0.12%
Loan Fees
-0.02%
-0.02%
Non Accrual Impact
-0.01%
-0.01%
Hedging
0.04%
0.04%
Earning Assets excl Accretion
-0.03%
-0.11%
-0.14%
Accretion
-0.11%
-0.11%
Earning Assets
-0.03%
-0.22%
-0.25%
Funding/Deposits
0.02%
0.14%
0.16%
Net Interest Margin Change
-0.01%
-0.08%
-0.09%
1Q 2020 Net Interest Margin
3.80%
The impact of the changes in yields and costs on our balance sheet included the following highlights:
Noninterest income for the first quarter of 2020 was $35.1 million, an increase of $4.4 million or 14.4% from the same period of 2019 and an increase of $1.2 million or 3.5% over the linked quarter. Adjusted noninterest income(1) for the first quarter of 2020 was $32.1 million, an increase of $1.4 million or 4.6% from the first quarter of 2019, and a decrease of $0.2 million or 0.8% from the fourth quarter of 2019.
Noninterest expense excluding goodwill impairment charge for first quarter of 2020 was $94.0 million, a decrease of $19.5 million or 17.2% from the same period in 2019 and a decrease of $6.6 million or 6.5% from the fourth quarter of 2019.
Adjusted noninterest expense(2), which excludes the impact of non-routine items(2), was $92.6 million, up $1.1 million or 1.2% from the first quarter of 2019 and down $5.8 million or 5.9% from $98.4 million for the fourth quarter of 2019. The linked quarter decrease in adjusted expenses resulted from:
Our adjusted efficiency ratio(1) for the first quarter of 2020 of 49.9% improved slightly from the linked quarter ratio of 50.9% with lower expenses and increased from the prior year’s first quarter ratio of 45.7% due to lower revenue.
Taxes:
The effective tax rate for the first quarter of 2020 was 7.7% compared to 23.4% for the linked quarter and 22.7% for the first quarter of 2019. The first quarter of 2020 was impacted by the non-deductible portion of the goodwill impairment.
Dividend:
On April 28, 2020, the board of directors of Cadence Bancorporation approved a quarterly cash dividend in the amount of $0.05 per share of outstanding common stock, representing an annualized dividend of $0.20 per share. The dividend will be paid on May 15, 2020 to holders of record of Cadence’s Class A common stock on May 8, 2020.
Supplementary Financial Tables (Unaudited):
Supplementary financial tables (unaudited) are included in this release following the customary disclosure information.
First Quarter 2020 Earnings Conference Call:
Cadence Bancorporation executive management will host a conference call to discuss first quarter 2020 results on Wednesday, April 29, 2020, 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:
7008277
For those unable to participate in the live presentation, a replay will be available through May 13, 2020. 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:
10141328
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 $17.2 billion in total assets as of March 31, 2020. 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.
(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.
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 impact on our financial condition, results of operations, financial disclosures, and future business strategies related to the 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).
Table 1 – Selected Financial Data
As of and for the Three Months Ended
(In thousands, except share and per share data)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Statement of Operations Data
Interest income
$
192,754
$
207,620
$
213,149
$
217,124
$
222,185
Interest expense
39,286
46,709
52,962
56,337
52,896
Net interest income
153,468
160,911
160,187
160,787
169,289
Provision for credit losses
83,429
27,126
43,764
28,927
11,210
Net interest income after provision
70,039
133,785
116,423
131,860
158,079
Noninterest income
35,069
33,898
34,642
31,722
30,664
Noninterest expense (1)
537,653
100,519
94,283
100,529
113,440
(Loss) income before income taxes
(432,545
)
67,164
56,782
63,053
75,303
Income tax (benefit) expense
(33,234
)
15,738
12,796
14,707
17,102
Net (loss) income
$
(399,311
)
$
51,426
$
43,986
$
48,346
$
58,201
Weighted average common shares outstanding
Basic
126,630,446
127,953,742
128,457,491
128,791,933
130,485,521
Diluted
126,630,446
128,003,089
128,515,274
129,035,553
130,549,319
(Loss) earnings per share
Basic
$
(3.15
)
$
0.40
$
0.34
$
0.37
$
0.44
Diluted
(3.15
)
0.40
0.34
0.37
0.44
Period-End Balance Sheet Data
Investment securities
$
2,461,644
$
2,368,592
$
1,705,325
$
1,684,847
$
1,754,839
Total loans, net of unearned income
13,392,191
12,983,655
13,637,042
13,627,934
13,624,954
Allowance for credit losses
245,246
119,643
127,773
115,345
105,038
Total assets
17,237,918
17,800,229
17,855,946
17,504,005
17,452,911
Total deposits
14,489,505
14,742,794
14,789,712
14,487,821
14,199,223
Noninterest-bearing deposits
3,959,721
3,833,704
3,602,861
3,296,652
3,210,321
Interest-bearing deposits
10,529,784
10,909,090
11,186,851
11,191,169
10,988,902
Borrowings and subordinated debentures
372,440
372,173
371,892
376,240
717,278
Total shareholders’ equity
2,113,543
2,460,846
2,475,944
2,426,072
2,302,823
Average Balance Sheet Data
Investment securities
$
2,397,275
$
2,003,339
$
1,650,902
$
1,716,550
$
1,748,714
Total loans, net of unearned income
13,161,371
13,423,435
13,719,286
13,921,873
13,798,386
Allowance for credit losses
201,785
132,975
119,873
106,656
97,065
Total assets
17,694,018
17,843,383
17,621,163
17,653,511
17,634,267
Total deposits
14,574,614
14,749,327
14,539,420
14,645,110
14,579,771
Noninterest-bearing deposits
3,658,612
3,648,874
3,456,807
3,281,383
3,334,399
Interest-bearing deposits
10,916,002
11,100,454
11,082,613
11,363,727
11,245,372
Borrowings and subordinated debentures
439,698
374,179
381,257
441,619
554,281
Total shareholders’ equity
2,446,810
2,471,398
2,447,189
2,331,855
2,241,652
(1)
For the quarter ended March 31, 2020, includes the non-cash goodwill impairment charge of $443.7 million, $412.9 million after-tax.
Table 1 (Continued) – Selected Financial Data
As of and for the Three Months Ended
(In thousands, except share and per
share data)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Per Share Data:
Book value
$
16.79
$
19.29
$
19.32
$
18.84
$
17.88
Tangible book value (1)
15.65
14.65
14.66
14.21
13.23
Cash dividends declared
0.175
0.175
0.175
0.175
0.175
Dividend payout ratio
(5.56
)%
43.75
%
51.47
%
47.30
%
39.77
%
Performance Ratios:
Return on average common equity (2)
(65.64
)%
8.26
%
7.13
%
8.32
%
10.53
%
Return on average tangible common
equity (1) (2)
3.86
11.82
10.43
12.23
15.54
Return on average assets (2)
(9.08
)
1.14
0.99
1.10
1.34
Net interest margin (2)
3.80
3.89
3.94
3.97
4.21
Efficiency ratio (1)
285.17
51.60
48.39
52.22
56.73
Adjusted efficiency ratio (1)
49.88
50.91
48.07
49.97
45.73
Asset Quality Ratios:
Total NPA to total loans, OREO,
and other NPA
1.31
%
0.97
%
0.84
%
0.85
%
0.63
%
Total nonperforming loans ("NPL") to
total loans
1.19
0.92
0.79
0.80
0.57
Total ACL to total loans
1.83
0.92
0.94
0.85
0.77
ACL to total NPL
153.61
100.07
118.17
106.08
135.21
Net charge-offs to average loans (2)
0.99
1.04
0.91
0.54
0.02
Capital Ratios:
Total shareholders’ equity to assets
12.3
%
13.8
%
13.9
%
13.9
%
13.2
%
Tangible common equity to tangible
assets (1)
11.5
10.9
10.9
10.8
10.1
Common equity Tier 1 capital
11.4
11.5
11.0
10.9
10.4
Tier 1 leverage capital (3)
10.1
10.3
10.3
10.3
10.0
Tier 1 risk-based capital (3)
11.4
11.5
11.0
10.9
10.4
Total risk-based capital (3)
13.8
13.7
13.1
12.9
11.9
_____________________
(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 March 31,
2020
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
$
10,213,846
$
129,402
5.10
%
$
9,811,821
$
132,065
5.46
%
ANCI portfolio
2,731,240
40,650
5.99
3,684,905
67,337
7.41
PCD portfolio (3)
216,285
5,082
9.45
301,660
6,349
8.54
Total loans
13,161,371
175,134
5.35
13,798,386
205,751
6.05
Investment securities
Taxable
2,198,528
14,015
2.56
1,531,514
10,796
2.86
Tax-exempt (2)
198,747
1,807
3.66
217,200
2,202
4.11
Total investment securities
2,397,275
15,822
2.65
1,748,714
12,998
3.01
Federal funds sold and short-term investments
628,885
1,783
1.14
763,601
3,281
1.74
Other investments
80,173
394
1.98
58,139
618
4.31
Total interest-earning assets
16,267,704
193,133
4.77
16,368,840
222,648
5.52
Noninterest-earning assets:
Cash and due from banks
250,804
118,833
Premises and equipment
127,812
128,990
Accrued interest and other assets
1,249,483
1,114,669
Allowance for credit losses
(201,785
)
(97,065
)
Total assets
$
17,694,018
$
17,634,267
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits
$
8,121,641
$
21,667
1.07
%
$
8,011,001
$
29,259
1.48
%
Savings deposits
272,444
317
0.47
248,651
226
0.37
Time deposits
2,521,917
12,744
2.03
2,985,720
17,186
2.33
Total interest-bearing deposits
10,916,002
34,728
1.28
11,245,372
46,671
1.68
Other borrowings
217,363
1,108
2.05
418,347
3,695
3.58
Subordinated debentures
222,335
3,450
6.24
135,934
2,530
7.55
Total interest-bearing liabilities
11,355,700
39,286
1.39
11,799,653
52,896
1.82
Noninterest-bearing liabilities:
Demand deposits
3,658,612
3,334,399
Accrued interest and other liabilities
232,896
258,563
Total liabilities
15,247,208
15,392,615
Shareholders' equity
2,446,810
2,241,652
Total liabilities and shareholders' equity
$
17,694,018
$
17,634,267
Net interest income/net interest spread
153,847
3.38
%
169,752
3.70
%
Net yield on earning assets/net interest margin
3.80
%
4.21
%
Taxable equivalent adjustment:
Investment securities
(379
)
(463
)
Net interest income
$
153,468
$
169,289
_____________________
(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%.
(3)Prior to the adoption of CECL on January 1, 2020, these loans were referred to as ACI loans, but with the adoption of CECL they are referred to as PCD loans.
Table 2 (Continued) – Average Balances/Yield/Rates
For the Three Months Ended March 31, 2020
For the Three Months Ended December 31, 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
$
10,213,846
$
129,402
5.10
%
$
10,160,970
$
134,450
5.25
%
ANCI portfolio
2,731,240
40,650
5.99
3,017,005
46,247
6.08
PCD portfolio (3)
216,285
5,082
9.45
245,474
9,857
15.93
Total loans
13,161,371
175,134
5.35
13,423,449
190,554
5.63
Investment securities
Taxable
2,198,528
14,015
2.56
1,806,932
11,699
2.57
Tax-exempt (2)
198,747
1,807
3.66
196,407
1,829
3.69
Total investment securities
2,397,275
15,822
2.65
2,003,339
13,528
2.68
Federal funds sold and short-term investments
628,885
1,783
1.14
930,910
3,392
1.45
Other investments
80,173
394
1.98
77,348
530
2.72
Total interest-earning assets
16,267,704
193,133
4.77
16,435,046
208,004
5.02
Noninterest-earning assets:
Cash and due from banks
250,804
107,180
Premises and equipment
127,812
128,458
Accrued interest and other assets
1,249,483
1,305,674
Allowance for credit losses
(201,785
)
(132,975
)
Total assets
$
17,694,018
$
17,843,383
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits
$
8,121,641
$
21,667
1.07
%
$
8,195,455
$
26,946
1.30
%
Savings deposits
272,444
317
0.47
262,638
320
0.48
Time deposits
2,521,917
12,744
2.03
2,642,361
14,983
2.25
Total interest-bearing deposits
10,916,002
34,728
1.28
11,100,454
42,249
1.51
Other borrowings
217,363
1,108
2.05
152,102
953
2.49
Subordinated debentures
222,335
3,450
6.24
222,077
3,507
6.27
Total interest-bearing liabilities
11,355,700
39,286
1.39
11,474,633
46,709
1.61
Noninterest-bearing liabilities:
Demand deposits
3,658,612
3,648,874
Accrued interest and other liabilities
232,896
248,478
Total liabilities
15,247,208
15,371,985
Stockholders' equity
2,446,810
2,471,398
Total liabilities and stockholders' equity
$
17,694,018
$
17,843,383
Net interest income/net interest spread
153,847
3.38
%
161,295
3.41
%
Net yield on earning assets/net interest margin
3.80
%
3.89
%
Taxable equivalent adjustment:
Investment securities
(379
)
(384
)
Net interest income
$
153,468
$
160,911
_____________________
(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%.
(3)Prior to the adoption of CECL on January 1, 2020, these loans were referred to as ACI loans, but with the adoption of CECL they are referred to as PCD loans.
Table 3 – Loan Interest Income Detail
For the Three Months Ended
(In thousands)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Interest Income Detail
Originated loans
$
129,402
$
134,450
$
136,333
$
135,946
$
135,815
ANCI loans: interest income
32,940
37,637
43,133
49,095
51,109
ANCI loans: accretion
7,710
8,610
10,951
6,171
12,478
PCD loans: interest income (1)
3,039
3,839
3,406
2,781
3,561
PCD loans: accretion (1)
2,043
6,018
4,147
8,018
2,788
Total loan interest income
$
175,134
$
190,554
$
197,970
$
202,012
$
205,750
Yields
Originated loans
5.10
%
5.25
%
5.31
%
5.43
%
5.61
%
ANCI loans without discount accretion
4.85
4.95
5.23
5.49
5.62
ANCI loans discount accretion
1.14
1.13
1.33
0.69
1.38
PCD loans without discount accretion
5.65
6.20
5.23
3.84
4.79
PCD loans discount accretion
3.80
9.73
6.37
11.06
3.75
Total loan yield
5.35
%
5.63
%
5.72
%
5.82
%
6.05
%
(1)
Prior quarter PCD amounts have been revised to be comparable to the current quarter presentation. Interest income for PCD loans represents contractual interest.
Table 4 – Allowance for Credit Losses (“ACL”) (1)
For the Three Months Ended
(In thousands)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Balance at beginning of period
$
119,643
$
127,773
$
115,345
$
105,038
$
94,378
Cumulative effect of the adoption of CECL (2)
75,850
—
—
—
—
Charge-offs
(33,098
)
(35,432
)
(31,650
)
(18,981
)
(938
)
Recoveries
613
176
314
361
388
Net charge-offs
(32,485
)
(35,256
)
(31,336
)
(18,620
)
(550
)
Provision for credit losses
82,238
27,126
43,764
28,927
11,210
Balance at end of period
$
245,246
$
119,643
$
127,773
$
115,345
$
105,038
(1)
This table represents the activity in the ACL for funded loans.
(2)The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (“CECL”), on January 1, 2020 and recorded this cumulative effect adjustment as a result of accounting change.
Table 5 – ACL Activity by Segment
For the Three Months Ended March 31, 2020
(In thousands)
Commercial and Industrial
Commercial Real Estate
Consumer
Total Allowance for Credit Losses
Reserve for Unfunded Commitments (1)
Total
As of December 31, 2019
$
89,796
$
15,319
$
14,528
$
119,643
$
1,699
$
121,342
Cumulative effect of the adoption of CECL
32,951
20,599
22,300
75,850
332
76,182
As of January 1, 2020
122,747
35,918
36,828
195,493
2,031
197,524
Provision for loan losses
63,684
17,798
756
82,238
1,191
83,429
Charge-offs
(31,987
)
(478
)
(633
)
(33,098
)
—
(33,098
)
Recoveries
141
180
292
613
—
613
As of March 31, 2020
$
154,585
$
53,418
$
37,243
$
245,246
$
3,222
$
248,468
(1)
The reserve for unfunded commitments is recorded in other liabilities in the consolidated balance sheets
Table 6 – Criticized Loans by Segment
As of March 31, 2020
(Amortized cost in thousands)
Special Mention
Substandard
Doubtful
Total Criticized
Commercial and Industrial
General C&I
$
64,326
$
208,452
$
7,130
$
279,908
Energy
111,261
43,326
5,915
160,502
Restaurant
43,916
66,243
3,761
113,920
Healthcare
35,604
3,122
—
38,726
Total commercial and industrial
255,107
321,143
16,806
593,056
Commercial Real Estate
Industrial, retail, and other
30,158
14,241
—
44,399
Multifamily
1,219
—
—
1,219
Office
327
9,907
—
10,234
Total commercial real estate
31,704
24,148
—
55,852
Consumer
Residential
—
16,760
—
16,760
Other
—
8
—
8
Total consumer
—
16,768
—
16,768
Total
$
286,811
$
362,059
$
16,806
$
665,676
As of December 31, 2019
(Recorded investment in thousands)
Special Mention
Substandard
Doubtful
Total Criticized
Commercial and Industrial
General C&I
$
70,058
$
204,087
$
8,191
$
282,336
Energy sector
66,235
26,439
2,754
95,428
Restaurant industry
45,456
58,559
4,697
108,712
Healthcare
22,414
3,984
—
26,398
Total commercial and industrial
204,163
293,069
15,642
512,874
Commercial Real Estate
Income producing
36,205
7,125
—
43,330
Land and development
8,997
2,350
—
11,347
Total commercial real estate
45,202
9,475
—
54,677
Consumer
Residential real estate
152
11,603
—
11,755
Other
—
81
—
81
Total consumer
152
11,684
—
11,836
Small Business Lending
6,573
19,126
—
25,699
Total
$
256,090
$
333,354
$
15,642
$
605,086
Table 7 – Nonperforming Assets
As of
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Nonperforming loans (1)
Commercial and industrial
$
137,302
$
106,803
$
92,643
$
103,379
$
74,656
Commercial real estate
7,544
1,127
6,855
—
—
Consumer
14,807
7,289
5,294
2,942
2,577
Small business
—
4,337
3,334
2,434
450
Total nonperforming loans
159,653
119,556
108,126
108,755
77,683
Foreclosed OREO and other NPA
15,679
5,958
6,731
7,712
8,179
Total nonperforming assets
$
175,332
$
125,514
$
114,857
$
116,467
$
85,862
NPL as a percentage of total loans
1.19
%
0.92
%
0.79
%
0.80
%
0.57
%
NPA as a percentage of loans plus OREO/other
1.31
%
0.97
%
0.84
%
0.85
%
0.63
%
NPA as a percentage of total assets
0.99
%
0.71
%
0.64
%
0.67
%
0.49
%
Total accruing loans 90 days or more past due
$
1,999
$
23,364
$
24,487
$
31,374
$
41,173
(1)
Amounts are not comparable due to our adoption of CECL on January 1, 2020. Prior to this date, pools of individual ACI loans were excluded because they continued to earn interest income from the accretable yield at the pool level. With the adoption of CECL, the pools were discontinued, and performance is based on contractual terms for individual loans. Additionally, prior to January 1, 2020, the we used recorded investment in this table. With the adoption of CECL we now use amortized cost.
Table 8 – Noninterest Income
For the Three Months Ended
(In thousands)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Noninterest Income
Investment advisory revenue
$
5,605
$
6,920
$
6,532
$
5,797
$
5,642
Trust services revenue
4,815
4,713
4,440
4,578
4,335
Service charges on deposit accounts
6,416
5,181
5,462
4,730
5,130
Credit-related fees
5,983
5,094
5,960
5,341
4,870
Bankcard fees
1,958
1,933
2,061
2,279
2,213
Payroll processing revenue
1,367
1,373
1,196
1,161
1,419
SBA income
1,908
2,153
2,216
1,415
1,449
Other service fees
1,912
1,701
1,700
1,907
2,104
Securities gains (losses), net
2,994
317
775
938
(12
)
Other
2,111
4,513
4,300
3,576
3,514
Total noninterest income
$
35,069
$
33,898
$
34,642
$
31,722
$
30,664
Table 9 – Noninterest Expenses
For the Three Months Ended
(In thousands)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Noninterest Expenses
Salaries and employee benefits
$
48,807
$
54,840
$
51,904
$
53,660
$
53,471
Premises and equipment
10,808
11,618
10,913
11,148
10,958
Merger related expenses
1,282
925
1,010
4,562
22,000
Intangible asset amortization
5,592
5,876
6,025
5,888
6,073
Data processing
3,352
3,343
3,641
3,435
2,594
Software amortization
3,547
3,427
3,406
3,184
3,335
Consulting and professional fees
2,707
3,552
2,621
1,899
2,229
Loan related expenses
760
654
(921
)
1,740
910
FDIC insurance
2,436
1,245
527
1,870
1,752
Communications
1,156
1,236
1,425
1,457
998
Advertising and public relations
1,464
1,764
1,368
1,104
781
Legal expenses
411
306
500
645
158
Other
11,636
11,732
11,864
9,938
8,181
Noninterest expenses excluding goodwill impairment charge
93,958
100,519
94,283
100,529
113,440
Goodwill impairment charge
443,695
—
—
—
—
Total noninterest expenses
$
537,653
$
100,519
$
94,283
$
100,529
$
113,440
Table 10 – Reconciliation of Non-GAAP Financial Measures
As of and for the Three Months Ended
(In thousands, except share and per share data)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Efficiency ratio
Noninterest expenses (numerator)
$
537,653
$
100,519
$
94,283
$
100,529
$
113,440
Net interest income
$
153,468
$
160,911
$
160,187
$
160,787
$
169,289
Noninterest income
35,069
33,898
34,642
31,722
30,664
Operating revenue (denominator)
$
188,537
$
194,809
$
194,829
$
192,509
$
199,953
Efficiency ratio
285.17
%
51.60
%
48.39
%
52.22
%
56.73
%
Adjusted efficiency ratio
Noninterest expenses
$
537,653
$
100,519
$
94,283
$
100,529
$
113,440
Less: non-cash goodwill impairment charge
443,695
—
—
—
—
Less: merger related expenses
1,282
925
1,010
4,562
22,000
Less: pension plan termination expense
—
1,225
—
—
—
Less: expenses related to COVID-19 pandemic
122
—
—
—
—
Adjusted noninterest expenses (numerator)
$
92,554
$
98,369
$
93,273
$
95,967
$
91,440
Net interest income
$
153,468
$
160,911
$
160,187
$
160,787
$
169,289
Noninterest income
35,069
33,898
34,642
31,722
30,664
Plus: revaluation of receivable from sale of insurance assets
—
—
—
2,000
—
Less: gain on sale of acquired loans
—
1,263
—
1,514
—
Less: securities gains (losses), net
2,994
317
775
938
(12
)
Adjusted noninterest income
32,075
32,318
33,867
31,270
30,676
Adjusted operating revenue (denominator)
$
185,543
$
193,229
$
194,054
$
192,057
$
199,965
Adjusted efficiency ratio
49.88
%
50.91
%
48.07
%
49.97
%
45.73
%
Tangible common equity ratio
Shareholders’ equity
$
2,113,543
$
2,460,846
$
2,475,944
$
2,426,072
$
2,302,823
Less: goodwill and other intangible assets, net
(142,782
)
(590,949
)
(597,488
)
(595,605
)
(598,674
)
Tangible common shareholders’ equity
1,970,761
1,869,897
1,878,456
1,830,467
1,704,149
Total assets
17,237,918
17,800,229
17,855,946
17,504,005
17,452,911
Less: goodwill and other intangible assets, net
(142,782
)
(590,949
)
(597,488
)
(595,605
)
(598,674
)
Tangible assets
$
17,095,136
$
17,209,280
$
17,258,458
$
16,908,400
$
16,854,237
Tangible common equity ratio
11.53
%
10.87
%
10.88
%
10.83
%
10.11
%
Tangible book value per share
Shareholders’ equity
$
2,113,543
$
2,460,846
$
2,475,944
$
2,426,072
$
2,302,823
Less: goodwill and other intangible assets, net
(142,782
)
(590,949
)
(597,488
)
(595,605
)
(598,674
)
Tangible common shareholders’ equity
$
1,970,761
$
1,869,897
$
1,878,456
$
1,830,467
$
1,704,149
Common shares outstanding
125,897,827
127,597,569
128,173,765
128,798,549
128,762,201
Tangible book value per share
$
15.65
$
14.65
$
14.66
$
14.21
$
13.23
Table 10 (Continued) – Reconciliation of Non-GAAP Measures
As of and for the Three Months Ended
(In thousands, except share and per share data)
March 31, 2020
December 31, 2019
September 30, 2019
June 30, 2019
March 31, 2019
Return on average tangible common equity
Average common equity
$
2,446,810
$
2,471,398
$
2,447,189
$
2,331,855
$
2,241,652
Less: average intangible assets
(584,513
)
(595,439
)
(598,602
)
(597,772
)
(602,446
)
Average tangible common shareholders’ equity
$
1,862,297
$
1,875,959
$
1,848,587
$
1,734,083
$
1,639,206
Net (loss) income
$
(399,311
)
$
51,426
$
43,986
$
48,346
$
58,201
Plus: non-cash goodwill impairment charge, net of tax
412,918
—
—
—
—
Plus: intangible asset amortization, net of tax
4,261
4,477
4,620
4,515
4,628
Tangible net income
$
17,868
$
55,903
$
48,606
$
52,861
$
62,829
Return on average tangible common equity
3.86
%
11.82
%
10.43
%
12.23
%
15.54
%
Adjusted return on average tangible common equity
Average tangible common shareholders’ equity
$
1,862,297
$
1,875,959
$
1,848,587
$
1,734,083
$
1,639,206
Tangible net income
$
17,868
$
55,903
$
48,606
$
52,861
$
62,829
Non-routine items:
Plus: merger related expenses
1,282
925
1,010
4,562
22,000
Plus: pension plan termination expense
—
1,225
—
—
—
Plus: expenses related to COVID-19 pandemic
122
—
—
—
—
Plus: revaluation of receivable from sale of insurance assets
—
—
—
2,000
—
Less: gain on sale of acquired loans
—
1,263
—
1,514
—
Less: securities gains (losses), net
2,994
317
775
938
(12
)
Tax expense:
Less: income tax effect of tax deductible non-routine items
(464
)
48
55
958
4,694
Total non-routine items, after tax
(1,126
)
522
180
3,152
17,318
Adjusted tangible net income
$
16,742
$
56,425
$
48,786
$
56,012
$
80,146
Adjusted return on average tangible common equity
3.62
%
11.93
%
10.47
%
12.96
%
19.83
%
Adjusted return on average assets
Average assets
$
17,694,018
$
17,843,383
$
17,621,163
$
17,653,511
$
17,634,267
Net (loss) income
$
(399,311
)
$
51,426
$
43,986
$
48,346
$
58,201
Return on average assets
(9.08
)%
1.14
%
0.99
%
1.10
%
1.34
%
Net (loss) income
$
(399,311
)
$
51,426
$
43,986
$
48,346
$
58,201
Plus: non-cash goodwill impairment charge, net of tax
412,918
—
—
—
—
Total non-routine items, after tax
(1,126
)
522
180
3,152
17,318
Adjusted net income
$
12,481
$
51,948
$
44,166
$
51,497
$
75,519
Adjusted return on average assets
0.28
%
1.16
%
0.99
%
1.17
%
1.74
%
Adjusted diluted earnings per share
Diluted weighted average common shares outstanding
126,630,446
128,003,089
128,515,274
129,035,553
130,549,319
Net income allocated to common stock
$
(399,311
)
$
51,248
$
43,849
$
48,176
$
58,028
Plus: non-cash goodwill impairment, net of tax
$
412,918
—
—
—
—
Total non-routine items, after tax
(1,126
)
522
180
3,152
17,318
Adjusted net income allocated to common stock
$
12,481
$
51,770
$
44,029
$
51,328
$
75,346
Adjusted diluted earnings per share
$
0.10
$
0.40
$
0.34
$
0.40
$
0.58
Adjusted pre-tax, pre-provision net earnings
Income before taxes
$
(432,545
)
$
67,164
$
56,782
$
63,053
$
75,303
Plus: Provision for credit losses
83,429
27,126
43,764
28,927
11,210
Plus: non-cash goodwill impairment
443,695
—
—
—
—
Plus: Total non-routine items before taxes
(1,590
)
570
235
4,110
22,012
Adjusted pre-tax, pre-provision net earnings
$
92,989
$
94,860
$
100,781
$
96,090
$
108,525
(1)
Annualized.
View source version on businesswire.com: https://www.businesswire.com/news/home/20200429005337/en/
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
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