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:
- Annualized returns on average assets and tangible common equity
for the first quarter of 2020 were (9.08%) and 3.86%, respectively,
compared to 1.34% and 15.54%, respectively, for the first quarter
of 2019 and 1.14% and 11.82%, respectively, for the fourth quarter
of 2019.
- Adjusted annualized returns on average assets(1) and adjusted
tangible common equity(1) for the first quarter of 2020 were 0.28%
and 3.62%, respectively, compared to 1.74% and 19.83%,
respectively, for the first quarter of 2019 and 1.16% and 11.93%,
respectively, for the fourth quarter of 2019.
- Adjusted pre-tax pre-provision net earnings(1) for the first
quarter of 2020 was $93.0 million, a decrease of $15.5 million or
14.3% compared to the first quarter of 2019 and a decrease of $1.9
million or 2.0% compared to the fourth quarter of 2019. The linked
quarter decline was driven by lower accretion income. As a percent
of average assets, adjusted pre-tax pre-prevision net earnings was
2.11%, 2.50% and 2.11% for the first quarter of 2020, first quarter
of 2019 and fourth quarter of 2019, respectively.
- On March 6, 2020, we terminated our $4.0 billion notional
interest rate collar, realizing a gain of $261.2 million
(“transaction gain”). The locked-in transaction gain, currently
reflected in other comprehensive income net of deferred income
taxes, will amortize over an expected four years into interest
income, regardless of the interest rate environment.
- On January 1, 2020, Cadence adopted the current expected credit
loss (“CECL”) accounting standard for estimating credit losses.
Upon adoption, we recognized an increase of $75.9 million in our
allowance for credit losses (“ACL”), increasing the ACL by 63.4% to
$195.5 million or 1.50% of total loans. Note that this “Day 1”
impact did not impact first quarter loan provisions, but instead
only impacted the ACL, deferred taxes, and equity.
- The provision for credit losses for the first quarter 2020 was
$83.4 million compared to $27.1 million in the linked quarter. Upon
the adoption of CECL, the provision for credit losses includes the
provision for loan losses and the provision for unfunded credit
commitments. Prior to the adoption of CECL, the provision for
unfunded credit commitments was included in other noninterest
expenses. Our calculation for the ACL used the baseline scenario
provided by a nationally recognized service released on April 4,
2020, as adjusted after considering qualitative and environmental
factors.
- We continued to actively manage funding costs, with total cost
of funds at 1.05% and total cost of deposits at 0.96%, representing
declines of 18 basis points for each.
- We more than offset the effect of declining rates on our
earning assets through the impact of our hedging and deposit cost
management. While tax equivalent net interest margin (“NIM”)
declined by 9 basis points to 3.80%, 11 basis points was due to
lower accretion income during the quarter due in part to the
implementation of CECL.
- We aggressively managed expenses, with adjusted expenses (see
Table 10) declining $7.0 million and realized an adjusted
efficiency ratio(1) of 49.9%.
- Capital remained very strong with CET1 at 11.4%, and we ended
the quarter with a well-positioned, diverse balance sheet
reflecting strong liquidity and a robust capital base.
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.
- Tangible book value per share(1) was $15.65 as of March 31,
2020, an increase of $2.42 or 18% from $13.23 as of March 31, 2019
and an increase of $1.00 or 7% from $14.65 as of December 31,
2019.
- Total outstanding shares at March 31, 2020 were 125.9
million.
- Total shareholders’ equity to total assets and tangible equity
to tangible assets were 12.3% and 11.5%, respectively, at March 31,
2020 compared to 13.2% and 10.1% at March 31, 2019,
respectively.
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%
- For regulatory capital purposes, pursuant to the Federal
Reserve Board’s final interim rule as of April 3, 2020, 100% of the
CECL $62.8 million “Day-1” impact and 25% of the $83.4 million
“Day-2” first quarter 2020 provision for credit losses will be
deferred over a two-year period ending January 1, 2022, at which
time it will be phased in on a pro rata basis over a three-year
period ending January 1, 2025.
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.
- Upon our adoption of CECL on January 1, 2020, we recorded an
increase of $76.2 million, a 63.4% increase, to our ACL and reserve
for unfunded commitments.
- Provision for credit losses for the first quarter of 2020
(includes provision for loans and unfunded commitments) was $83.4
million or 2.55% annualized of average loans as compared to $11.2
million or 0.33% annualized of average loans for the first quarter
of 2019 and $27.1 million or 0.80% annualized of average loans for
the fourth quarter of 2019. The current quarter’s provision was
driven by CECL methodology which included an economic forecast that
was significantly adversely affected by the COVID-19 pandemic and
lower oil prices.
- Net charge-offs for the first quarter of 2020 were $32.5
million or 0.99% annualized of average loans compared to $0.6
million or 0.02% annualized and $35.3 million or 1.04% annualized
for the quarters ended March 31, 2019 and December 31, 2019,
respectively. The current quarter charge-offs included $19.0
million in three general C&I credits, $9.4 million in four
restaurant credits, and $0.8 million in one energy credit.
- The ACL was $245.2 million or 1.83% of total loans as of March
31, 2020, as compared to $105.0 million or 0.77% of total loans as
of March 31, 2019, and $119.6 million or 0.92% of total loans as of
December 31, 2019.
- The ACL to total nonperforming loans (“NPL”) was 153.6% as of
March 31, 2020, as compared to 135.2% as of March 31, 2019, and
100.1% as of December 31, 2019.
- Loans 30-89 days past due were 0.19% of total loans at March
31, 2020, compared to 0.17% at March 31, 2019 and 0.17% at December
31, 2019.
- Accruing loans 90 days or more past due were 0.01% of total
loans at March 31, 2020, compared to 0.30% at March 31, 2019 and
0.18% at December 31, 2019.
- NPL as a percent of total loans were 1.19% at March 31, 2020,
compared to 0.57% at March 31, 2019 and 0.92% at December 31, 2019.
NPL totaled $159.7 million, $77.8 million and $119.6 million as of
March 31, 2020, March 31, 2019 and December 31, 2019, respectively.
Note that the adoption of CECL resulted in $35.5 million in
additional NPL or 27 basis points in the purchased credit
deteriorated (“PCD”) population at March 31, 2020 that were
previously considered performing when evaluated as a pool under
prior accounting methodology versus individually under CECL. Had
CECL been in place at December 31, 2019, the amount of these PCD
loans would have been $43.0 million.
- Total criticized loans (see Table 6) at March 31, 2020 were
$665.7 million or 4.97% of total loans as compared to $278.5
million or 2.04% at March 31, 2019 and $605.1 million or 4.66% at
December 31, 2019. The linked quarter increase included net
downgrades in energy credits and general C&I credits, partially
mitigated by net upgrades of $28.3 million in technology
credits.
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.
- Our fully tax-equivalent net interest margin (“NIM”) for the
first quarter of 2020 was 3.80% as compared to 4.21% for the first
quarter of 2019 and 3.89% for the fourth quarter of 2019.
- Net interest spread in the first quarter of 2020 decreased to
3.38% as compared to 3.70% for the first quarter of 2019 and 3.41%
for the fourth quarter of 2019.
- Accretion on acquired loans totaled $9.8 million for the first
quarter of 2020, adding 23 basis points to the NIM. As part of the
CECL implementation, interest earned on PCD loans is reflected
through interest income where it was previously considered in ACI
loan accretion. The comparable PCD loan interest for each period
amounts to $3.0 million, $3.6 million and $3.8 million for the
quarters ended March 31, 2020, March 31, 2019 and December 31,
2019, respectively. PCD accretion was $2.0 million for the first
quarter of 2020 as compared to comparable accretion of $6.0 million
for the fourth quarter of 2019. We have normalized PCD income to
CECL presentation throughout this release for comparability
purposes between quarters.
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 NIM
Balance
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:
- Yield on originated loans, excluding hedging, was 4.75% for the
first quarter of 2020, as compared to 5.00% for the fourth quarter
of 2019. Approximately 68% of the total loan portfolio was floating
at March 31, 2020, which drove the declines in originated loan
yields in the first quarter of 2020.
- The impact of declining rates on our loan yields was partially
offset by the positive impact of our hedges linked quarter:
- Collar gain recognition: Hedge income and gain recognition for
the first quarter of 2020 was $8.0 million as compared to $6.9
million for the fourth quarter of 2019.
- Rate swaps: Swap income for the first quarter of 2020 was
($0.1) million as compared to ($0.5) million for the fourth quarter
of 2019.
- Funding costs declined meaningfully this quarter as we worked
proactively to lower higher cost deposit rates and/or balances,
resulting in total cost of deposits for the first quarter of 2020
of 0.96% compared to 1.14% for the linked quarter, and total
funding costs of 1.05% for the first quarter of 2020 compared to
1.23% for the linked quarter.
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.
- The year-over-year increase was led by increases in service
charges, credit fees, trust revenue and SBA income, partially
offset by declines in earnings from limited partnerships. The
linked quarter results included an increase in credit related fees
resulting from increased arrangement fees and an increase in
service charges on deposits offset by decreases in investment
advisory revenue impacted by declines in market values.
- Noninterest income as a percent of total revenue for the first
quarter of 2020 was 15.4% as compared to 12.1% for the first
quarter of 2019 and 14.0% for 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:
- Decrease of $6.0 million in personnel costs primarily related
to a reduction in incentive compensation and other compensation
accruals;
- Increase of $1.2 million in FDIC insurance assessment due to
incremental credits received in the fourth quarter 2019 for
assessments paid prior to reaching $10 billion in total assets;
and
- Decrease of $0.8 million in consulting and professional
fees.
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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