“We are very pleased to report to you our first quarter of 2018
financial results,” stated Paul B. Murphy, Jr., Chairman and Chief
Executive Officer of Cadence Bancorporation. “April 2018 marks the
one-year anniversary since we took Cadence Bancorporation public.
Since that time, our loans are up $1.1 billion or 14%, our core
deposits have increased $1.5 billion or 21%, our revenues are up
$17.2 million or 17.4%, and importantly, our earnings per share has
increased $0.11 or 31%. As a result, our stock has performed well
since our IPO. Today, our business is strong, our bankers are
motivated, and we are focused on doing a great job for our clients.
That combination ultimately translates into our continued financial
performance and return for our shareholders.”
Cadence Bancorporation (NYSE:CADE) (“Cadence”) today announced
net income for the quarter ended March 31, 2018 of $38.8 million,
or $0.46 per diluted common share (“per share”), compared to $14.7
million, or $0.17 per share, in the fourth quarter of 2017, and
$26.1 million, or $0.35 per share, in the first quarter of 2017.
The fourth quarter of 2017 includes a one-time charge of $19.0
million, or $0.22 per share, recorded in income tax expense (the
“one-time tax charge”) related to the enactment of the Tax Cuts and
Jobs Act in December 2017 requiring a re-measurement of our
deferred tax assets arising from a lower corporate tax rate.
Highlights:
- First quarter of 2018 net income was
$38.8 million, representing an increase compared to the fourth
quarter of 2017 of $5.1 million, or 15.2%, excluding the one-time
tax charge(1), (an increase of $24.1 million, or 164.3%, as
reported), and an increase of $12.7 million, or 48.7%, compared to
first quarter of 2017.
- On a per-share basis, net income was
$0.46 per share for the first quarter of 2018, compared to $0.39
per share excluding the one-time tax charge(1) for the fourth
quarter of 2017, (or $0.17 per share as reported), and $0.35 per
share for the first quarter of 2017.
- Annualized returns on average assets,
common equity and tangible common equity(1) for the first quarter
of 2018 were 1.44%, 11.73% and 15.52%, respectively, compared to
1.26%, 9.92% and 13.11%, respectively, excluding the one-time tax
charge(1), for the fourth quarter of 2017, (0.55%, 4.32% and 5.71%,
respectively, as reported), and 1.10%, 9.71% and 13.96%,
respectively, for the first quarter of 2017.
- Total revenue for the first quarter of
2018 was $116.1 million, up 2.2% from the linked quarter and up
17.4% from the same period in 2017 driven by strong loan growth and
increases in net interest margin.
- Our fully tax-equivalent net interest
margin (“NIM”) for the first quarter of 2018 was 3.64%, an increase
from 3.59% for the fourth quarter of 2017 and 3.46% for the first
quarter of 2017, reflecting our asset sensitivity. Our NIM
excluding recovery accretion for acquired-impaired loans was 3.62%
for the first quarter of 2018, up 14bp from 3.48% in the fourth
quarter of 2017 and up 19bp from 3.43% in the first quarter of
2017.
- The efficiency ratio(1) for the first
quarter of 2018 was 53.35%, an improvement from both linked and
prior quarter efficiency ratios of 58.44% and 54.95%, respectively.
The first quarter of 2018 included approximately $3.1 million of
non-routine secondary offering and legal costs.
- Loans were $8.6 billion as of March 31,
2018, an increase of $393.6 million, or 4.8%, as compared to $8.3
billion at December 31, 2017, and an increase of $1.1 billion, or
14.4%, as compared to $7.6 billion at March 31, 2017.
- Core deposits (total deposits excluding
brokered) were $8.2 billion as of March 31, 2018, up $15.8 million,
or 0.2%, from December 31, 2017, and up $1.5 billion, or 21.4%,
from March 31, 2017. Both the increases in loans and deposits were
100% organically derived.
(1) Considered a non-GAAP financial measure. See Table 7
“Reconciliation of Non-GAAP Financial Measures” for a
reconciliation of our non-GAAP measures to the most directly
comparable GAAP financial measure.
Balance Sheet:
Cadence continued its solid growth during the quarter with total
assets reaching $11.0 billion as of March 31, 2018, an increase of
$50.5 million, or 0.5%, from December 31, 2017, and an increase of
$1.3 billion, or 13.2%, from March 31, 2017.
Loans at March 31, 2018 were $8.6 billion, an increase of
$393.6 million, or 4.8%, from December 31, 2017, and an increase of
$1.1 billion, or 14.4%, from March 31, 2017. Average loans for the
first quarter of 2018 were $8.4 billion, an increase of $217.7
million, or 2.6%, from fourth quarter of 2017, and an increase of
$892.8 million, or 11.8%, from first quarter of 2017. Increases in
loans reflect continued demand primarily in our specialized and
general C&I portfolios compared to linked quarter and in our
specialized, general C&I and residential portfolios compared to
prior year.
Total deposits at March 31, 2018 were $9.0 billion, an
increase of $37.5 million, or 0.4%, from December 31, 2017, and an
increase of $1.2 billion, or 15.4%, from March 31, 2017. Average
total deposits for the first quarter of 2018 were $9.0 billion, an
increase of $376.9 million, or 4.4%, from fourth quarter of 2017,
and an increase of $987.3 million, or 12.3%, from first quarter of
2017.
- Deposit increases reflect growth in
core deposits, specifically with success in expanding commercial
deposit relationships and treasury management services.
- Noninterest bearing deposits as a
percent of total deposits were 22.6%, compared to 24.9% at December
31, 2017 and 23.9% at March 31, 2017.
- The year-over-year core deposit growth
supported a $246.2 million reduction in brokered deposits since
March 31, 2017. As of March 31, 2018, brokered deposits totaled
$0.8 billion, or 9.0% of total deposits, up slightly from 8.8% of
total deposits at December 31, 2017 and down from 13.6% of total
deposits at March 31, 2017, respectively.
Shareholders’ equity was $1.4 billion at March 31, 2018,
a decrease of $2.0 million from December 31, 2017, and an increase
of $251.1 million from March 31, 2017.
- The linked quarter decline in
shareholders’ equity was impacted by a decline in Other
Comprehensive Income due to unrealized losses related to the impact
of rising interest rates on the fair market valuation of our
securities portfolio.
- In March 2018, Cadence paid a $0.125
per common share dividend totaling $10.5 million.
- The year-over-year increase in
shareholders’ equity includes $155.6 million in net proceeds from
our April 2017 initial public offering that was added to tangible
common equity during the second quarter of 2017. This offering
resulted in increasing average diluted shares to 84.7 million for
the first quarter of 2018, as compared to 75.7 million and 84.7
million in the first quarter of 2017 and fourth quarter of 2017,
respectively.
- In November 2017 and February 2018,
Cadence completed secondary offerings whereby its controlling
stockholder, Cadence Bancorp LLC, sold 10,925,000 and 9,200,000
Cadence Bancorporation shares, respectively, reducing its ownership
in Cadence to 76.6% and 65.6%, respectively. All proceeds from
these transactions were received by Cadence Bancorp LLC and did not
impact Cadence Bancorporation’s equity or outstanding shares.
Asset Quality:
Credit quality metrics reflected general credit stability
in the first quarter of 2018.
- Annualized net-charge offs as a percent
of average loans for the quarter ended March 31, 2018 were $0.4
million, or 0.02%, compared to $4.4 million, or 0.06%, for the full
year of 2017.
- NPAs totaled $72.7 million, or 0.8%, of
total loans, OREO and other NPAs as of March 31, 2018, compared to
$70.7 million, or 0.9%, as of December 31, 2017, and down from
$171.0 million, or 2.3%, as of March 31, 2017.
- Of the $37.3 million in energy
nonperforming loans included in total NPAs as of March 31, 2018,
85% were paying in accordance with contractual terms.
- The allowance for credit losses (“ACL”)
was $91.5 million, or 1.06% of total loans, as of December 31,
2017, as compared to $87.6 million, or 1.06% of total loans, as of
December 31, 2017 and $88.3 million, or 1.17% of total loans, as of
March 31, 2017. The year-over-year decline in the ACL as a
percentage of total loans resulted primarily from the reduction in
non-performing loans and related valuation reserves (largely from
the energy portfolio) and improved environmental factors in the
energy sector over the past year.
Total Revenue:
Total revenue for the first quarter of 2018 was $116.1 million,
up 2.2% from the linked quarter and up 17.4% from the same period
in 2017. The revenue increases were primarily a result of both
strong loan growth during the period and meaningful increases in
net interest margins.
Net interest income for the first quarter of 2018 was
$91.1 million, an increase of $3.2 million, or 3.6%, from the
fourth quarter of 2017 and an increase of $16.4 million, or 21.9%,
from the same period 2017, reflecting strong growth in our earning
assets combined with increases in net interest margin.
- Our fully tax-equivalent net interest
margin (“NIM”) for the first quarter of 2018 was 3.64% as compared
to 3.59% for the fourth quarter of 2017 and 3.46% for the first
quarter of 2017. The increases in NIM are primarily a result of our
asset sensitive balance sheet and earning asset yields increasing
more significantly than our funding costs in the recent rising rate
environment. Our NIM excluding recovery accretion for
acquired-impaired loans was 3.62%, 3.48% and 3.43% for the first
quarter of 2018, fourth quarter of 2017 and first quarter of 2017
respectively.
- Earning asset yields for the first
quarter of 2018 were 4.51%, up 10 basis points from 4.41% in the
fourth quarter of 2017, and up 38 basis points from 4.13% in the
first quarter of 2017, driven by increases in loan yields.
- Over 72% of our loan portfolio is
floating rate and has benefited from the short-term rate increases
during the periods.
- Yield on loans, excluding
acquired-impaired loans, increased meaningfully to 4.81% for the
first quarter of 2018, as compared to 4.47% and 4.14% for the
fourth quarter of 2017 and first quarter of 2017,
respectively.
- Total accretion for acquired-impaired
loans was $5.6 million in the first quarter of 2018, down $2.5
million from the fourth quarter of 2017 and down $1.3 million from
the first quarter of 2017. The declines in accretion were due to
recovery timing. Recovery accretion was $0.4 million, $2.8 million
and $0.6 million for the first quarter of 2018, fourth quarter of
2017 and first quarter of 2017, respectively.
- Total loan yields increased to 4.94%
for the first quarter of 2018 versus 4.72% for the fourth quarter
of 2017 and 4.34% for the first quarter of 2017.
- The impact of the lower tax rate in the
first quarter of 2018 on the tax-equivalent yield served to reduce
the first quarter of 2018 NIM by (4) basis points.
- Total cost of funds for the first
quarter of 2018 was 94 basis points versus 89 basis points in the
linked quarter and 71 basis points in the first quarter of 2017.
- Total cost of deposits for the first
quarter of 2018 was 75 basis points versus 69 basis points in the
linked quarter and 49 basis points in the first quarter of
2017.
Noninterest income for the first quarter of 2018 was
$25.0 million, a decrease of $0.7 million, or 2.6%, from the fourth
quarter of 2017, and an increase of $0.9 million, or 3.6%, from the
same period of 2017.
- Total service fees and revenue for the
first quarter of 2018 were $23.9 million, an increase of $1.5
million, or 6.7%, from the fourth quarter of 2017, and an increase
of $1.4 million, or 6.3%, from the same period of 2017. The first
quarter of 2018 increases compared to the linked quarter were
driven throughout various fee categories due to broad based
business growth, notably in trust services, service charges on
deposit accounts, credit related fees and insurance revenue.
Mortgage banking revenue declined slightly due to the rate
environment and overall seasonality. Compared to the prior year’s
quarter, increases were also broad-based, with notable increases in
credit-related fees and investment advisory revenue, and softer
mortgage banking revenue.
- Total other noninterest income for the
first quarter of 2018 was $1.1 million, a decrease of $2.2 million
from the fourth quarter of 2017, and a decrease of $0.5 million
from the same period of 2017. The decline from linked quarter was
largely a result of the $1.6 million gain on sale of a loan in the
fourth quarter of 2017.
Noninterest Expenses:
Noninterest expense for the first quarter of 2018 was $61.9
million, a decrease of $4.4 million, or 6.7%, from $66.4 million
for the fourth quarter of 2017, and an increase of $7.6 million, or
14%, from $54.3 million during the same period in 2017. The linked
quarter included an increase of $2.2 million in salaries and
benefits driven by timing of payroll taxes and 401k contributions
due to annual incentives paid in the first quarter of 2018 and the
beginning of the tax year. This increase was more than offset by
decreases in consulting and professional fees, OREO costs and other
expenses as a result of non-routine fourth quarter of 2017
expenses. The increase in expenses from the prior year’s quarter
was due to a $3.1 million growth in salaries and benefits driven by
business growth and related incentives, and a $4.1 million increase
in other expenses due to overall growth and non-routine expenses in
the first quarter of 2018 detailed below:
- Consulting and professional fees in the
first quarter of 2018 included $0.9 million in expenses specific to
the February 2018 secondary offering.
- Legal expense for the first quarter of
2018 included $2.2 million in legal costs associated with
litigation related to a pre-acquisition matter of a legacy acquired
bank. This matter was resolved in the first quarter of 2018 and is
not expected to result in any future expenses.
The efficiency ratio(1) for the first quarter of 2018 was
53.35%, as compared to the first quarter of 2017 and fourth quarter
of 2017 ratios of 54.95% and 58.44%, respectively. The improvement
in the efficiency ratio reflects ongoing focus on managing expenses
and expanding revenue. First quarter 2018 revenues increased $17.2
million over first quarter 2017, while first quarter 2018 expenses
increased $7.6 million over first quarter 2017.
(1) Considered a non-GAAP financial measure. See Table 7
“Reconciliation of Non-GAAP Financial Measures” for a
reconciliation of our non-GAAP measures to the most directly
comparable GAAP financial measure.
Taxes:
The effective tax rate for the quarter ended March 31, 2018 was
22.0% as compared to 34.8%(1) excluding the one-time tax charge in
the fourth quarter of 2017, (71.6% as reported), and 32.6% in the
first quarter of 2017.
Quarterly Dividend:
On April 25, 2018, the Board of Directors of Cadence declared a
quarterly cash dividend in the amount of $0.125 per share of common
stock, representing an annualized dividend of $0.50 per share. The
dividend will be paid on June 15, 2018 to holders of record of the
Class A common stock on June 1, 2018.
Supplementary Financial Tables
(Unaudited):
Supplementary Financial Tables (Unaudited) are included in this
release following the customary disclosure information.
First Quarter 2018 Earnings Conference
Call:
Cadence Bancorporation executive management will host a
conference call to discuss first quarter 2018 results on Thursday,
April 26, 2018, at 10:00 a.m. CT / 11:00 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 “Event Calendar”.
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: 3260143
For those unable to participate in the live presentation, a
replay will be available through May 10, 2018. 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: 10118996 End Date: May 10, 2018
Webcast Access:
A webcast of the conference call as well as the slides to be
presented by management can be viewed by visiting
www.cadencebancorporation.com and selecting “Events &
Presentations” then “Event Calendar”.
About Cadence Bancorporation
Cadence Bancorporation (NYSE:CADE) is an $11 billion in assets
regional bank holding company headquartered in Houston, Texas.
Through its affiliates, Cadence operates 65 locations in Alabama,
Florida, Texas, Mississippi and Tennessee, 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, commercial real
estate, foreign exchange, wealth management, investment and trust
services, financial planning, retirement plan management, business
and personal insurance, 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 56,000 ATMs. The Cadence team of
1,200 associates is committed to exceeding customer expectations
and helping their clients succeed financially. Cadence Bank, N.A.,
Cadence Insurance, and Linscomb & Williams are direct or
indirect subsidiaries of Cadence Bancorporation.
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-1 filed with the
Securities and Exchange Commission (SEC), 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; lack of seasoning
in our loan portfolio; 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 identify 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; and the amount of nonperforming and classified
assets we hold. 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 noninterest expenses,”
“adjusted operating revenue,” “tangible common equity ratio,”
“tangible book value per share” and “return on average tangible
common equity” 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 7).
Table 1 - Selected Financial
Data
As of and for the
Three Months Ended (In thousands, except per share data)
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Statement of Operations Data:
Interest income $ 113,093 $ 108,370 $ 99,503 $ 99,375 $ 89,619
Interest expense 21,982 20,459 18,340
16,991 14,861 Net interest income 91,111 87,911 81,163
82,384 74,758 Provision for credit losses 4,380
(4,475 ) 1,723 6,701 5,786 Net interest income
after provision 86,731 92,386 79,440 75,683 68,972 Noninterest
income - service fees and revenue 23,904 22,405 23,014 22,144
22,489 - other noninterest income 1,079 3,251 4,110 845 1,616
Noninterest expense 61,939 66,371 56,530
56,134 54,321 Income before income taxes 49,775
51,671 50,034 42,538 38,756 Income tax expense 10,950
36,980 17,457 13,570 12,639 Net income $
38,825 $ 14,691 $ 32,577 $ 28,968 $ 26,117
Period-End Balance
Sheet Data: Investment securities $ 1,251,834 $ 1,262,948 $
1,198,032 $ 1,079,935 $ 1,116,280 Total loans, net of unearned
income 8,646,987 8,253,427 8,028,938 7,716,621 7,561,472 Allowance
for credit losses 91,537 87,576 94,765 93,215 88,304 Total assets
10,999,382 10,948,926 10,502,261 9,811,557 9,720,937 Total deposits
9,048,971 9,011,515 8,501,102 7,930,383 7,841,710
Noninterest-bearing deposits 2,040,977 2,242,765 2,071,594
1,857,809 1,871,514 Interest-bearing deposits 7,007,994 6,768,750
6,429,508 6,072,574 5,970,196 Borrowings and subordinated
debentures 471,335 470,814 572,683 499,266 682,568 Total
shareholders’ equity 1,357,103 1,359,056 1,340,848 1,304,054
1,105,976
Average Balance Sheet Data: Investment securities
$ 1,234,226 $ 1,228,330 $ 1,169,182 $ 1,099,307 $ 1,125,174 Total
loans, net of unearned income 8,443,951 8,226,294 7,867,794
7,650,048 7,551,173 Allowance for credit losses 89,097 94,968
94,706 90,366 82,258 Total assets 10,922,274 10,586,245 10,024,871
9,786,355 9,670,593 Total deposits 9,012,390 8,635,473 8,139,969
7,940,421 8,025,068 Noninterest-bearing deposits 2,128,595
2,170,758 1,982,784 1,845,447 1,857,657 Interest-bearing deposits
6,883,795 6,464,715 6,157,185 6,094,974 6,167,411 Borrowings and
subordinated debentures 444,557 502,428 484,798 510,373 474,976
Total shareholders’ equity 1,342,445 1,348,867 1,320,884 1,251,217
1,090,905
Table 1 (Continued) - Selected
Financial Data
As of and for the
Three Months Ended (In thousands, except per share data)
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Per Share Data:(3) Earnings Basic $ 0.46 $ 0.18 $
0.39 $ 0.35 $ 0.35 Diluted 0.46 0.17 0.39 0.35 0.35 Book value per
common share 16.23 16.25 16.03 15.59 14.75 Tangible book value (1)
12.32 12.33 12.10 11.64 10.33 Weighted average common shares
outstanding Basic 83,625,000 83,625,000 83,625,000 81,918,956
75,000,000 Diluted 84,674,807 84,717,005 83,955,685 81,951,795
75,672,750 Cash dividends declared $ 0.125 $ — $ — $ — $ — Dividend
payout ratio 27.17 % — % — % — % — %
Performance Ratios:
Return on average common equity (2) 11.73 % 4.32 % 9.78 % 9.29 %
9.71 % Return on average tangible common equity (1) (2) 15.52 5.71
13.04 12.63 13.96 Return on average assets (2) 1.44 0.55 1.29 1.19
1.10 Net interest margin (2) 3.64 3.59 3.52 3.71 3.46 Efficiency
ratio (1) 53.35 58.44 52.20 53.27 54.95
Asset Quality
Ratios: Total nonperforming assets ("NPAs") to total loans and
OREO and other NPAs 0.84 % 0.85 % 1.51 % 1.82 % 2.25 % Total
nonperforming loans to total loans 0.60 0.58 0.96 1.36 1.77 Total
ACL to total loans 1.06 1.06 1.18 1.21 1.17 ACL to total
nonperforming loans ("NPLs") 175.30 183.62 122.66 88.81 65.80 Net
charge-offs to average loans (2) 0.02 0.13 0.01 0.09 (0.01 )
Capital Ratios: Total shareholders’ equity to assets 12.34 %
12.41 % 12.77 % 13.29 % 11.38 % Tangible common equity to tangible
assets (1) 9.65 9.71 9.95 10.27 8.25 Common equity tier 1 (CET1)
10.42 10.57 10.79 10.92 8.99 Tier 1 leverage capital 10.57 10.68
11.12 11.00 9.10 Tier 1 risk-based capital 10.79 10.94 11.17 11.31
9.36 Total risk-based capital 12.63 12.81 13.18 13.41 11.43
_____________________
(1) - Considered a non-GAAP financial
measure. See Table 7 "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) - As of the completion of a secondary
offering on February 13, 2018, 54,875,000 of our outstanding shares
are owned by our parent-holding company
Cadence Bancorp LLC.
Table 2 - Average
Balances/Yield/Rates
For the Three Months
Ended March 31, 2018
2017 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 and ANCI
loans $ 8,189,448 $ 97,168 4.81 % $ 7,234,671 $ 73,869 4.14 % ACI
portfolio 254,503 5,623 8.96 316,502
6,941 8.89
Total loans
8,443,951 102,791 4.94 7,551,173 80,810 4.34 Investment securities
Taxable 827,227 5,118 2.51 722,465 4,301 2.41 Tax-exempt(2)
406,999 4,134 4.12 402,709 5,252 5.29 Total
investment securities 1,234,226 9,252 3.04 1,125,174 9,553 3.44
Federal funds sold and short-term investments 515,017 1,529 1.20
264,355 425 0.65 Other investments 48,986 389 3.22
48,047 669 5.65 Total interest-earning assets
10,242,180 113,961 4.51 8,988,749 91,457 4.13
Noninterest-earning assets: Cash and due from banks 92,878
53,450 Premises and equipment 62,973 66,298 Accrued interest and
other assets 613,341 644,354 Allowance for credit losses
(89,097 ) (82,258 ) Total assets $ 10,922,275 $ 9,670,593
LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing
liabilities: Demand deposits $ 4,795,114 $ 9,025 0.76 % $
4,455,742 $ 5,531 0.50 % Savings deposits 179,662 114 0.26 182,247
112 0.25 Time deposits 1,909,019 7,491 1.59
1,529,422 4,122 1.09 Total interest-bearing deposits
6,883,795 16,630 0.98 6,167,411 9,765 0.64 Other borrowings 309,323
2,956 3.88 340,470 2,802 3.34 Subordinated debentures
135,233 2,396 7.19 134,506 2,294 6.92 Total
interest-bearing liabilities 7,328,351 21,982 1.22 6,642,387 14,861
0.91
Noninterest-bearing liabilities: Demand deposits
2,128,595 1,857,657 Accrued interest and other liabilities
122,884 79,644 Total liabilities 9,579,830 8,579,688
Stockholders' equity 1,342,445 1,090,905 Total
liabilities and stockholders' equity $ 10,922,275 $ 9,670,593 Net
interest income/net interest spread 91,979 3.29 % 76,596
3.22 % Net yield on earning assets/net interest margin
3.64 % 3.46 %
Taxable equivalent adjustment:
Investment securities (868 ) (1,838 ) Net interest
income $ 91,111 $ 74,758 _____________________ (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 a tax rate of
21% for the three months ended March 31, 2018,
and using a tax rate of 35% for the three
months ended March 31, 2017.
For the Three
Months Ended
March 31, 2018
For the Three Months Ended
December 31, 2017
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 and ANCI
loans $ 8,189,448 $ 97,168 4.81 % $ 7,961,692 $ 89,762 4.47 % ACI
portfolio 254,503 5,623 8.96 264,602
8,145 12.21 Total loans 8,443,951 102,791 4.94 8,226,294 97,907
4.72 Investment securities Taxable 827,227 5,118 2.51 817,971 5,000
2.43 Tax-exempt(2) 406,999 4,134 4.12 410,359
5,047 4.88 Total investment securities 1,234,226 9,252 3.04
1,228,330 10,047 3.25 Federal funds sold and short-term investments
515,017 1,529 1.20 409,317 1,151 1.12 Other investments
48,986 389 3.22 51,318 1,030 7.96 Total
interest-earning assets 10,242,180 113,961 4.51 9,915,259 110,135
4.41
Noninterest-earning assets: Cash and due from banks
92,878 66,849 Premises and equipment 62,973 64,730 Accrued interest
and other assets 613,341 634,375 Allowance for credit losses
(89,097 ) (94,968 ) Total assets $ 10,922,275 $ 10,586,245
LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing
liabilities:
Demand deposits
$ 4,795,114 $ 9,025 0.76 % $ 4,424,371 $ 7,844 0.70 % Savings
deposits 179,662 114 0.26 177,413 112 0.25 Time deposits
1,909,019 7,491 1.59 1,862,931 7,129 1.52
Total interest-bearing deposits 6,883,795 16,630 0.98 6,464,715
15,085 0.93 Other borrowings 309,323 2,956 3.88 367,373 3,021 3.26
Subordinated debentures 135,233 2,396 7.19
135,055 2,353 6.91 Total interest-bearing liabilities
7,328,351 21,982 1.22 6,967,143 20,459 1.17
Noninterest-bearing
liabilities: Demand deposits 2,128,595 2,170,758 Accrued
interest and other liabilities 122,884 99,477 Total
liabilities 9,579,830 9,237,378
Stockholders' equity
1,342,445 1,348,867 Total liabilities and stockholders'
equity $ 10,922,275 $ 10,586,245 Net interest income/net interest
spread 91,979 3.29 % 89,676 3.24 % Net yield on
earning assets/net interest margin 3.64 % 3.59 %
Taxable equivalent adjustment: Investment securities
(868 ) (1,765 ) Net interest income $ 91,111 $ 87,911
_____________________ (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 a tax rate of
21% for the three months ended March 31, 2018,
and using a tax rate of 35% for the three
months ended March 31, 2017.
Table 3 – Loan Interest Income
Detail
For the Three Months
Ended, (In thousands) March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Loan Interest Income Detail Interest income on loans,
excluding ACI loans $ 97,168 $ 89,762 $ 84,321 $ 79,904 $ 73,869
Scheduled accretion for the period 5,192 5,348 5,550 6,075 6,331
Recovery income for the period 431 2,797 290
4,450 610 Accretion on acquired credit impaired (ACI)
loans 5,623 8,145 5,840 10,525
6,941 Loan interest income $ 102,791 $ 97,907 $ 90,161 $ 90,429 $
80,810 Loan yield, excluding ACI loans 4.81 % 4.47 % 4.41 %
4.36 % 4.14 % ACI loan yield 8.96 12.21 8.27
14.02 8.89 Total loan yield 4.94 % 4.72
% 4.55 % 4.74 % 4.34 %
Table 4 - Allowance for Credit
Losses
For the Three Months
Ended (In thousands) March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Balance at beginning of period $ 87,576 $ 94,765 $ 93,215 $
88,304 $ 82,268 Charge-offs (812 ) (2,860 ) (581 ) (2,879 ) (551 )
Recoveries 393 146 408 1,089 801
Net (charge-offs) recoveries (419 ) (2,714 )
(173 ) (1,790 ) 250 Provision for (reversal
of) credit losses 4,380 (4,475 ) 1,723
6,701 5,786
Balance at end of period $ 91,537 $
87,576 $ 94,765 $ 93,215 $ 88,304
Table 5 -Noninterest Income
For the Three Months
Ended (In thousands) March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Noninterest Income Investment advisory
revenue $ 5,299 $ 5,257 $ 5,283 $ 5,061 $ 4,916 Trust services
revenue 5,015 4,836 4,613 4,584 5,231 Service charges on deposit
accounts 3,960 3,753 3,920 3,784 3,815 Credit-related fees 3,577
3,372 3,306 2,741 2,747 Insurance revenue 2,259 1,470 1,950 1,828
2,130 Bankcard fees 1,884 1,833 1,803 1,862 1,812 Mortgage banking
revenue 577 687 965 1,213 866 Other service fees earned
1,333 1,197 1,174 1,071 972
Total
service fees and revenue 23,904 22,405
23,014 22,144 22,489 Securities gains (losses), net
12 16 1 (244 ) 81 Other 1,067 3,235 4,109
1,089 1,535
Total other noninterest income
1,079 3,251 4,110 845 1,616
Total noninterest income (GAAP) 24,983 25,656 27,124 22,989
24,105
Less: Securities gains (losses) 12 16
1 (244 ) 81
Adjusted noninterest operating
revenue (Non-GAAP measure) $ 24,971 $ 25,640 $ 27,123 $ 23,233
$ 24,024
Table 6 -Noninterest Expense
For the Three Months
Ended (In thousands) March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Noninterest Expenses Salaries and
employee benefits $ 37,353 $ 35,162 $ 35,007 $ 34,682 $ 34,267
Premises and equipment 7,591 7,629 7,419 7,180 6,693 Intangible
asset amortization 792 1,085 1,136 1,190 1,241 Net cost of
operation of other real estate owned (52 ) 1,075 453 427 296 Data
processing 2,365 2,504 1,688 1,702 1,696 Special asset expenses 53
331 215 469 140 Consulting and professional fees 2,934 4,380 2,069
1,502 1,139 Loan related expenses 255 810 532 757 280 FDIC
insurance 955 939 889 954 1,493 Communications 704 857 650 675 655
Advertising and public relations 341 683 521 499 345 Legal expenses
2,627 2,626 612 508 432 Branch closure expenses 35 55 50 47 46
Other 5,986 8,235 5,289 5,542
5,598
Total noninterest expenses $ 61,939 $ 66,371 $ 56,530
$ 56,134 $ 54,321
Table 7 - Reconciliation of Non-GAAP
Financial Measures
As of and for the
Three Months Ended (In thousands) March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
Efficiency ratio Noninterest expenses (numerator) $ 61,939 $
66,371 $ 56,530 $ 56,134 $ 54,321 Net interest income $ 91,111 $
87,911 $ 81,163 $ 82,384 $ 74,758 Noninterest income 24,983
25,656 27,124 22,989 24,105 Operating
revenue (denominator) $ 116,094 $ 113,567 $ 108,287 $ 105,373 $
98,863 Efficiency ratio 53.35 % 58.44 % 52.20
% 53.27 % 54.95 %
Adjusted noninterest expenses
and operating revenue Noninterest expense $ 61,939 $ 66,371 $
56,530 $ 56,134 $ 54,321 Less: Branch closure expenses 35
55 50 47 46 Adjusted noninterest
expenses $ 61,904 $ 66,316 $ 56,480 $ 56,087 $ 54,275 Net interest
income $ 91,111 $ 87,911 $ 81,163 $ 82,384 $ 74,758 Noninterest
income 24,983 25,656 27,124 22,989 24,105 Less: Securities gains
(losses), net 12 16 1 (244 ) 81
Adjusted operating revenue $ 116,082 $ 113,551 $ 108,286 $ 105,617
$ 98,782
Tangible common equity ratio Shareholders’ equity $
1,357,103 $ 1,359,056 $ 1,340,848 $ 1,304,054 $ 1,105,976 Less:
Goodwill and other intangible assets, net (327,247 )
(328,040 ) (329,124 ) (330,261 ) (331,450 )
Tangible common shareholders’ equity 1,029,856
1,031,016 1,011,724 973,793 774,526 Total
assets 10,999,382 10,948,926 10,502,261 9,811,557 9,720,937 Less:
Goodwill and other intangible assets, net (327,247 )
(328,040 ) (329,124 ) (330,261 ) (331,450 )
Tangible assets $ 10,672,135 $ 10,620,886 $ 10,173,137 $ 9,481,296
$ 9,389,487 Tangible common equity ratio 9.65 % 9.71
% 9.95 % 10.27 % 8.25 %
Tangible book value
per share Shareholders’ equity $ 1,357,103 $ 1,359,056 $
1,340,848 $ 1,304,054 $ 1,105,976 Less: Goodwill and other
intangible assets, net (327,247 ) (328,040 )
(329,124 ) (330,261 ) (331,450 ) Tangible common
shareholders’ equity $ 1,029,856 $ 1,031,016 $ 1,011,724 $ 973,793
$ 774,526 Common shares issued 83,625,000 83,625,000
83,625,000 83,625,000 75,000,000 Tangible book
value per share $ 12.32 $ 12.33 $ 12.10 $ 11.64 $ 10.33
Return
on average tangible common equity Average common equity $
1,342,445 $ 1,348,867 $ 1,320,884 $ 1,251,217 $ 1,090,905 Less:
Average intangible assets (327,727 ) (328,697 )
(329,816 ) (330,977 ) (332,199 ) Average
tangible common shareholders’ equity $ 1,014,718 $ 1,020,170 $
991,068 $ 920,240 $ 758,706 Net income $ 38,825 $ 14,691 $ 32,577 $
28,968 $ 26,117 Return on average tangible common equity(1)
15.52 % 5.71 % 13.04 % 12.63 % 13.96 %
Pre-tax, pre-provision net earnings Income before taxes $
49,775 $ 51,671 $ 50,034 $ 42,538 $ 38,756 Plus: Provision for
credit losses 4,380 (4,475 ) 1,723
6,701 5,786 Pre-tax, pre-provision net earnings $ 54,155 $
47,196 $ 51,757 $ 49,239 $ 44,542
Table 7 (continued) - Reconciliation of
Non-GAAP Financial Measures
As of and for the Three
Months Ended
(In thousands) December 31, 2017 Reconciliation of
Non-GAAP Financial Measures Related to One-Time Tax Charge
Net income excluding one-time tax charge Net income $ 14,691
Add: One-time tax charge 19,022 Net income excluding
one-time tax charge $ 33,713
Earnings per share Earnings per
diluted common share $ 0.17 One-time tax charge per share
0.22 Earnings per diluted common share excluding one-time tax
charge $ 0.39
Return on Average Assets Net income excluding
one-time tax charge $ 33,713 Average assets 10,586,245
Return on average assets excluding one-time tax charge(1)
1.26 %
Return on Average Common Equity Net income excluding
one-time tax charge $ 33,713 Average common equity 1,348,867
Return on average common equity excluding one-time tax charge(1)
9.92 %
Return on Average Tangible Common Equity Net
income excluding one-time tax charge $ 33,713 Average tangible
common shareholders’ equity 1,020,170 Return on average
tangible common shareholder's equity excluding one-time tax
charge(1) 13.11 %
Effective Tax Rate Income before
taxes $ 51,671 Income tax expense 36,980 Less: one-time tax charge
19,022 Income tax expense excluding one-time tax charge
17,958 Effective tax rate excluding one-time tax charge
34.8 % _____________________ (1) Annualized for the three
month periods.
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Cadence BancorporationMedia:Danielle Kernell,
713-871-4051danielle.kernell@cadencebank.comorInvestor
relations:Valerie Toalson, 713-871-4103 or
800-698-7878vtoalson@cadencebancorporation.com
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