Cadence Bancorporation (NYSE:CADE) (“Cadence”) today announced
net income for the quarter ended September 30, 2018 of $47.1
million, or $0.56 per diluted common share (“per share”), compared
to $32.6 million, or $0.39 per share, in the third quarter of 2017
and $48.0 million, or $0.57 per share, in the second quarter of
2018. Tangible book value per share(1) was $13.15 in the third
quarter of 2018, an increase of $1.05 from $12.10 for the third
quarter 2017, and an increase of $0.30 from $12.85 per share as of
June 30, 2018.
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“We are very pleased to report to you another quarter of strong
organic growth and improving operating performance for the third
quarter of 2018,” stated Paul B. Murphy, Jr., Chairman and Chief
Executive Officer of Cadence Bancorporation. “Several aspects of
our performance warrant a mention: First, loans and deposits
maintained meaningful growth in the quarter as we continue to
expand our customer base - new clients are moving to Cadence. Our
adjusted efficiency ratio(1) further improved to 48.3%, a result of
11 consecutive quarters of revenue growth and focused expense
control. Our asset quality and credit metrics remain solid with net
charge-offs of 9 basis points for the first nine months of the year
and nonperforming assets declining 48% from the prior year. During
this quarter, we also completed the last secondary offering of
Cadence stock previously owned by Cadence Bancorp, LLC (the “LLC”),
resulting in 100% of CADE stock now in public float. We received
OCC approval for the State Bank merger and are awaiting final
regulatory approval. I continue to feel great about the State Bank
team and I note their operating performance is tracking in line
with our expectations. The State Bank core deposit franchise and
low deposit betas are a great fit, especially now. I am proud of
our dedicated team of bankers and the consistent performance we
have generated since becoming a public company in April 2017, most
notably this quarter’s ROAA of 1.61% and ROTCE of 17.32%(1).”
Highlights:
- Third quarter of 2018 net income was
$47.1 million, representing strong overall business performance and
an increase of $14.5 million, or 44.5%, compared to third quarter
of 2017, and a decrease of $0.8 million, or 1.7% compared to the
second quarter of 2018 due to second quarter’s income being
impacted favorably by non-routine items(2) including the gain on
sale of the insurance subsidiary and a discrete tax deduction.
- On a per-share basis, net income was
$0.56 per share for the third quarter of 2018, a 43.8% increase
from $0.39 per share for the third quarter of 2017 and down 1.8%
from $0.57 per share for the second quarter of 2018.
- Adjusted earnings per share(1) reflects
the impact of non-routine items. The third quarter adjusted
earnings per share of $0.58 increased $0.08 compared to the linked
quarter adjusted earnings per share of $0.50 and increased $0.20
compared to the prior year’s quarter adjusted earnings per share of
$0.38.
- Annualized returns on average assets,
common equity and tangible common equity(1) for the third quarter
of 2018 were 1.61%, 13.40% and 17.32%, respectively, compared to
1.29%, 9.78% and 13.04%, respectively, for the third quarter of
2017, and 1.72%, 14.16% and 18.58%, respectively, for the second
quarter of 2018.
- Adjusted annualized returns on average
assets(1) and tangible common equity(1) reflect the impact of
non-routine items(2). Adjusted annualized returns on average
assets(1) and tangible common equity(1) for the third quarter of
2018 were 1.69% and 18.11%, respectively, compared to 1.26% and
12.77%, respectively, for the third quarter of 2017, and 1.51% and
16.40%, respectively, for the second quarter of 2018.
- Cadence continued to demonstrate its
strong business development with loan growth ending the quarter at
$9.4 billion as of September 30, 2018, an increase of $1.4 billion,
or 17.6%, since September 30, 2017, and an increase of $468.1
million, or 5.2%, since June 30, 2018.
- Core deposits (total deposits excluding
brokered) reflected solid growth at $8.8 billion as of September
30, 2018, up $1.2 billion, or 15.0%, from September 30, 2017, and
up $252.2 million, or 2.9%, from June 30, 2018. Brokered deposits
decreased $97.8 million or 11.9% from September 30, 2017 and
decreased $25.0 million from June 30, 2018.
- The strong balance sheet growth and
increasing rate environment translated into total revenue
increasing for the 11th consecutive quarter, with the third quarter
of 2018 at $122.1 million.
- The efficiency ratio(1) continued to be
an impressive demonstration of our profitable growth, with the
third quarter of 2018 at 50.2%, an improvement from both prior year
and linked efficiency ratios of 52.2% and 52.0%, respectively. The
adjusted efficiency ratio(1) , which reflects the impact of
non-routine items(2), was 48.3% for the third quarter of 2018,
compared to an adjusted efficiency ratio of 52.7% and 50.7% for the
third quarter of 2017 and second quarter of 2018,
respectively.
- Credit remained solid during the
quarter, and loan loss provisions included a reversal of ($1.4)
million for the third quarter of 2018 as compared to a provision of
$1.7 million in the prior year’s quarter and $1.3 million in the
linked quarter. Continued improvement in the energy sector and that
impact on the performance of our energy credits affected the loan
provision reversal in the third quarter of 2018, as well as,
refinement of our portfolio loss rates amid an overall stable
credit backdrop. These combined factors more than offset loan
provisions associated with the third quarter net loan growth.
(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) See Table 7 for a detail of non-routine income and
expenses.
Balance Sheet:
Cadence continued its strong growth during the quarter with
total assets reaching $11.8 billion as of September 30, 2018, an
increase of $1.3 billion, or 12.0%, from September 30, 2017, and an
increase of $454.3 million, or 4.0%, from June 30, 2018.
Loans at September 30, 2018 were $9.4 billion, an
increase of $1.4 billion, or 17.6%, from September 30, 2017, and an
increase of $468.1 million, or 5.2%, from June 30, 2018. Average
loans for the third quarter of 2018 were $9.3 billion, an increase
of $1.4 billion, or 17.8%, from third quarter of 2017, and an
increase of $416.9 million, or 4.7%, from second quarter of 2018.
Increases in loans reflect continued demand primarily in our energy
mid-stream, specialized, CRE and residential portfolios compared to
linked quarter and in our specialized, general C&I and
residential portfolios compared to prior year.
Total deposits at September 30, 2018 were $9.6 billion,
an increase of $1.1 billion, or 12.4%, from September 30, 2017, and
an increase of $227.2 million, or 2.4%, from June 30, 2018. Average
total deposits for the third quarter of 2018 were $9.5 billion, an
increase of $1.3 billion, or 16.6%, from third quarter of 2017, and
an increase of $353.9 million, or 3.9%, from second quarter of
2018.
- Deposit increases reflect growth in
core deposits, specifically with success in expanding commercial
deposit relationships and treasury management services. Core
deposits (total deposits excluding brokered) were $8.8 billion as
of September 30, 2018, up $1.2 billion, or 15.0%, from September
30, 2017, and up $252.2 million, or 2.9%, from June 30, 2018.
- Noninterest bearing deposits as a
percent of total deposits were 21.9%, compared to 24.4% at
September 30, 2017 and 22.9% at June 30, 2018 as growth in interest
bearing deposits outpaced the growth in non-interest bearing
deposits during the last year.
Shareholders’ equity was $1.4 billion at September 30,
2018, an increase of $74.0 million from September 30, 2017, and an
increase of $24.9 million from June 30, 2018.
- Tangible common shareholders’ equity(1)
was $1.1 billion at September 30, 2018, an increase of $88.1
million from September 30, 2017, and an increase of $25.5 million
from June 30, 2018 which resulted primarily from net income of
$47.1 million less dividends of $12.5 million and a decrease of
$11.1 million in other comprehensive income.
- Driven by strong earnings, tangible
book value per share(1) was $13.15 in the third quarter of 2018, an
increase of $1.05 from $12.10 for the third quarter 2017, and an
increase of $0.30 from $12.85 per share as of June 30, 2018.
- In September 2018, Cadence paid a $0.15
per common share dividend totaling $12.5 million.
(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.
Asset Quality:
Credit quality reflected continued improvement in the
energy portfolio and environment, as well as overall credit
stability in the third quarter of 2018.
- Net-charge offs for the quarter ended
September 30, 2018 were $3.1 million, $0.2 million for the three
months ended September 30, 2017, and compared to $2.2 million for
the three months ended June 30, 2018. Annualized net-charge offs as
a percent of average loans for the quarter ended September 30, 2018
were 0.13%, compared to 0.06% for the full year of 2017.
Year-to-date 2018 annualized net-charge offs were 0.09%. Total
third quarter 2018 charge-offs of $3.3 million were primarily due
to one seasoned energy credit that has been in active resolution
and was previously reserved for the full amount of the
charge-off.
- NPAs totaled $62.8 million, or 0.7%, of
total loans, OREO and other NPAs as of September 30, 2018, down
48.4% from $121.8 million, or 1.5% of total loans, as of September
30, 2017, and up slightly compared to $56.8 million, or 0.6%, as of
June 30, 2018.
- The allowance for credit losses (“ACL”)
was $86.2 million, or 0.91% of total loans, as of September 30,
2018, as compared to $94.8 million, or 1.18% of total loans, as of
September 30, 2017, $90.6 million, or 1.01% of total loans, as of
June 30, 2018. The declines in the ACL as a percentage of total
loans and the related negative loan provision in the third quarter
of 2018 resulted overall stable credit, continued improvement in
the energy sector, as well as refinements of our portfolio loss
rates. These factors more than offset loan provisions associated
with the third quarter net loan growth.
Total Revenue:
Total revenue grew for the 11th consecutive quarter, with the
third quarter of 2018 at $122.1 million, up 12.7% from the same
period in 2017 and up 1.7% from the linked quarter. The revenue
increases were primarily a result of robust loan growth during the
period and improved margins as a result of our asset sensitive
balance sheet.
Net interest income reflected the strong growth in our
overall business lines. Net interest income for the third quarter
of 2018 was $98.1 million, an increase of $16.9 million, or 20.9%,
from the same period in 2017, and an increase of $2.7 million, or
2.8%, from the second quarter of 2018. Breaking it down, interest
income for the third quarter of 2018 was $131.8 million and
interest expense was $33.7 million, an increase of $32.3 million in
interest income and an increase of $15.3 million in interest
expense compared to the third quarter of 2017. Compared to the
second quarter of 2018, interest income increased $7.8 million and
interest expense increased $5.1 million.
- Our fully tax-equivalent NIM for the
third quarter of 2018 was 3.58% as compared to 3.52% for the third
quarter of 2017 and 3.66% for the second quarter of 2018. The
linked quarter decrease in NIM was impacted by the LIBOR spread to
IOER (Interest on Excess Reserves) contracting in the third quarter
of 2018, while increasing in the first two quarters of 2018. Over
71% of our loan portfolio is floating rate, of which 77% is tied to
one-month LIBOR. Further, the second quarter rebalancing of the
municipal securities portfolio served to reduce securities yields
compared to both the prior year and linked quarters. At the same
time, the deposit costs in the third quarter continued to be
impacted by federal funds rate increases in the March, June and
September periods. Our NIM excluding recovery accretion for
acquired-impaired loans was 3.57%, 3.50% and 3.64% for the third
quarter of 2018, third quarter of 2017, and second quarter of 2018,
respectively.
Earning asset yields for the third quarter of 2018 were 4.80%,
up 50 basis points from 4.30% in the third quarter of 2017, and up
5 basis points from 4.75% in the second quarter of 2018.
- Yield on loans, excluding
acquired-impaired loans, increased to 5.08% for the third quarter
of 2018, as compared to 4.41% and 5.04% for the third quarter of
2017 and second quarter of 2018, respectively.
- Total accretion for acquired-impaired
loans was $5.2 million in the third quarter compared to $5.8
million from the third quarter of 2017 compared to $5.6 million in
the second quarter of 2018. The year-over-year decline in accretion
was due to a decline in volume. Recovery accretion was $0.4
million, $0.3 million and $0.6 million for the third quarter of
2018, third quarter of 2017, second quarter of 2018,
respectively.
- Total loan yields increased to 5.18%
for the third quarter of 2018 compared to 4.55% for the third
quarter of 2017 and 5.16% for the second quarter of 2018.
- Total cost of funds for the third
quarter of 2018 was 1.33% compared to 0.84% for the third quarter
of 2017 and 1.18% in the linked quarter.
- Total cost of deposits for the third
quarter of 2018 was 1.15% compared to 0.64% for the third quarter
of 2017, and 0.98% for the linked quarter.
- The current quarter’s increase in
deposit costs reflected the six-month cumulative lag effect of the
March, June and September federal funds rate increases, consistent
with our forecasted 55% total deposit beta.
Noninterest income for the third quarter of 2018 was
$24.0 million, a decrease of $3.1 million, or 11.6%, from the same
period of 2017, and a decrease of $0.7 million, or 2.8%, from the
second quarter of 2018.
- Total service fees and revenue for the
third quarter of 2018 were $20.5 million, a decrease of $2.5
million, or 11.0%, from the same period of 2017, and a decrease of
$0.9 million, or 4.2%, from the second quarter of 2018. The third
quarter of 2018 decrease compared to the linked quarter and prior
year quarter was driven by the decrease in insurance revenue due to
the sale of the assets of our insurance company in the second
quarter of 2018 and to a $0.8 million decrease in interchange fees
limited by the Durbin Amendment. The third quarter of 2018 is the
first quarter in which the Durbin Amendment applied to the
Company’s interchange fees.
- Total other noninterest income for the
third quarter of 2018 was $3.5 million, a decrease of $0.6 million
from the same period of 2017 and an increase of $0.2 million from
the second quarter of 2018. The variances between quarters
primarily relate to the sale of the insurance company, offset by
securities losses in the second quarter of 2018(2).
Noninterest expense for the third quarter of 2018 was
$61.2 million, an increase of $4.7 million, or 8.3%, from $56.5
million during the same period in 2017, and a decrease of $1.2
million, or 1.9%, from $62.4 million for the second quarter of
2018. The linked quarter included a decrease of $2.5 million in
salaries and benefits primarily associated with the second quarter
sale of the insurance company, offset by an increase of $1.8
million in consulting and professional fees due to costs associated
with two secondary offerings in the third quarter compared to one
offering in the second quarter(2). The increase in expenses from
the prior year’s quarter was due to an increase of $1.9 million in
consulting and professional fees related to secondary offerings(2),
an increase of $0.4 million in FDIC insurance, and an increase of
$1.3 million in other noninterest expenses due to broad-based
business growth.
- Adjusted noninterest expenses(1) ,
which reflects the impact of non-routine items(2), of $59.0 million
for the third quarter of 2018 was up 4.4% from $56.5 million for
the third quarter of 2017 and down slightly from $59.4 million for
the second quarter of 2018.
Our efficiency ratio(1) has declined every quarter this
year, with the third quarter of 2018 at 50.2%, as compared to the
third quarter of 2017 and second quarter of 2018 ratios of 52.2%
and 52.0%, respectively. The improvement in the efficiency ratio
reflects continued expansion of revenue on a foundation of
well-managed expenses. The third quarter of 2018 included certain
non-routine revenues and expenses related to secondary offerings
and merger costs(2). Excluding these non-routine revenues and
expenses, the adjusted efficiency ratio(1) was 48.4% for the third
quarter of 2018. This compares to an adjusted efficiency ratio of
52.7% and 50.7% for the third quarter of 2017 and second quarter of
2018, respectively.
Taxes:
The effective tax rate for the quarter ended September 30, 2018
was 24.2% as compared to 34.9% in the third quarter of 2017 and
14.9% in the second quarter of 2018. The rate in the second quarter
of 2018 was due primarily to a one-time bad debt deduction related
to the legacy loan portfolio. The third quarter of 2018 tax rate
was primarily impacted by the nondeductible expenses associated
with two secondary offerings(2). Our annualized effective tax rate
for 2018 is currently expected to be approximately 21.4%.
(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) See Table 7 for a detail of non-routine income and
expenses.
Quarterly Dividend:
On October 19, 2018, the Board of Directors of Cadence declared
a quarterly cash dividend in the amount of $0.15 per share of
common stock, representing an annualized dividend of $0.60 per
share. The dividend will be paid on December 17, 2018 to holders of
record of Cadence’s Class A common stock on December 3, 2018. As
previously disclosed, after the completion of the State Bank
merger, the Board of Directors plans to increase the annualized
dividend to $0.70 per share.
Share Repurchase Program
Authorization:
In October 2018, the Company’s Board of Directors authorized a
share repurchase program in an amount of up to $50 million as part
of the Company’s overall capital management strategies.
Cadence Bancorp, LLC
Activity:
- In November 2017, February 2018, May
2018, and July 2018, Cadence completed secondary offerings whereby
the LLC sold 10,925,000, 9,200,000, 20,700,000, and 12,500,000 of
Cadence shares, respectively, reducing its ownership in Cadence to
76.6%, 65.6%, 40.9%, and 25.9%, respectively. All proceeds from
these transactions were received by the LLC and did not impact
Cadence Bancorporation’s equity or outstanding shares.
- On September 10, 2018, the LLC
completed an in-kind distribution (the “Distribution”) of
effectively all of the Cadence shares held by the LLC to its
unitholders (other than a de minimis amount of shares
representing the aggregate fractional shares in lieu of which
unitholders are to receive cash). As a result of the Distribution,
the LLC now owns only 58 Cadence shares and will not execute any
further secondary offerings.
- On September 14, 2018, certain
unitholders of the LLC who elected to sell the Cadence shares they
received in the Distribution completed a secondary offering of
12,099,757 Cadence shares. Cadence did not receive any proceeds
from the sale of such shares.
- The LLC anticipates dissolving during
the fourth quarter of 2018.
Supplementary Financial Tables
(Unaudited):
Supplementary Financial Tables (Unaudited) are included in this
release following the customary disclosure information.
Third Quarter 2018 Earnings Conference
Call:
Cadence Bancorporation executive management will host a
conference call to discuss third quarter 2018 results on Monday,
October 22, 2018, at 12:00 p.m. CT / 1:00 p.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: 6002871
For those unable to participate in the live
presentation, a replay will be available through November 5, 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:
10124522 End Date: November 5, 2018
Webcast
Access:
A webcast of the conference call presented by management can be
viewed by visiting www.cadencebancorporation.com and selecting
“Events & Presentations” then “Event Calendar”. Slides are
available under the “Presentations” tab.
About Cadence Bancorporation
Cadence Bancorporation (NYSE:CADE), headquartered in Houston,
Texas, is a regional bank holding company with $11.8 billion in
assets. Through its affiliates, Cadence operates 66 locations in
Alabama, Florida, 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, commercial real
estate, foreign exchange, wealth management, investment and trust
services, financial planning, retirement plan management, 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. and Linscomb &
Williams are 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-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; 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; the amount of
nonperforming and classified assets we hold; the occurrence of any
event, change or other circumstances that could give rise to the
right of Cadence or State Bank to terminate the definitive merger
agreement between Cadence and State Bank; the failure to obtain
necessary regulatory approvals and the risk that such approvals may
result in the imposition of conditions that could adversely affect
the combined company or the expected benefits of the transaction or
to satisfy any of the other conditions to the transaction on a
timely basis or at all; the possibility that the anticipated
benefits of the merger with State Bank are not realized when
expected or at all, including as a result of the impact of, or
problems arising from, the integration of the two companies or as a
result of the strength of the economy and competitive factors in
the areas where Cadence and State Bank do business; the possibility
that the transaction may be more expensive to complete than
anticipated, including as a result of unexpected factors or events;
diversion of management’s attention from ongoing business
operations and opportunities; potential adverse reactions or
changes to business or employee relationships, including those
resulting from the announcement or completion of the transaction.
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 7).
Table 1 - Selected Financial
Data
As of and for the Three Months Ended (In
thousands, except share and per share data) September
30,
2018
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
Statement of Income Data:
Interest income $ 131,753 $ 123,963 $ 113,093 $ 108,370 $ 99,503
Interest expense 33,653 28,579 21,982
20,459 18,340 Net interest income 98,100 95,384 91,111
87,911 81,163 Provision for credit losses (1,365 )
1,263 4,380 (4,475 ) 1,723 Net interest income
after provision 99,465 94,121 86,731 92,386 79,440 Noninterest
income - service fees and revenue 20,490 21,395 23,904 22,405
23,014
- other noninterest income
3,486 3,277 1,079 3,251 4,110 Noninterest expense 61,231
62,435 61,939 66,371 56,530 Income
before income taxes 62,210 56,358 49,775 51,671 50,034 Income tax
expense 15,074 8,384 10,950 36,980
17,457 Net income $ 47,136 $ 47,974 $ 38,825 $ 14,691 $
32,577
Period-End Balance Sheet Data: Investment securities
$ 1,206,387 $ 1,049,710 $ 1,251,834 $ 1,262,948 $ 1,198,032 Total
loans, net of unearned income 9,443,819 8,975,755 8,646,987
8,253,427 8,028,938 Allowance for credit losses 86,151 90,620
91,537 87,576 94,765 Total assets 11,759,837 11,305,528 10,999,382
10,948,926 10,502,261 Total deposits 9,558,276 9,331,055 9,048,971
9,011,515 8,501,102 Noninterest-bearing deposits 2,094,856
2,137,407 2,040,977 2,242,765 2,071,594 Interest-bearing deposits
7,463,420 7,193,648 7,007,994 6,768,750 6,429,508 Borrowings and
subordinated debentures 662,658 471,453 471,335 470,814 572,683
Total shareholders’ equity 1,414,826 1,389,956 1,357,103 1,359,056
1,340,848
Average Balance Sheet Data: Investment securities
$ 1,141,704 $ 1,183,055 $ 1,234,226 $ 1,228,330 $ 1,169,182 Total
loans, net of unearned income 9,265,754 8,848,820 8,443,951
8,226,294 7,867,794 Allowance for credit losses 92,783 93,365
89,097 94,968 94,706 Total assets 11,585,969 11,218,432 10,922,274
10,586,245 10,024,871 Total deposits 9,489,268 9,135,359 9,012,390
8,635,473 8,139,969 Noninterest-bearing deposits 2,153,097
2,058,255 2,128,595 2,170,758 1,982,784 Interest-bearing deposits
7,336,171 7,077,104 6,883,795 6,464,715 6,157,185 Borrowings and
subordinated debentures 567,864 595,087 444,557 502,428 484,798
Total shareholders’ equity 1,395,061 1,358,770 1,342,445 1,348,867
1,320,884
Table 1 (Continued) - Selected
Financial Data
As of and for the Three Months Ended (In
thousands, except share and per share data) September
30,
2018
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
Per Share Data:(3) Earnings Basic $ 0.56 $ 0.57 $
0.46 $ 0.18 $ 0.39 Diluted 0.56 0.57 0.46 0.17 0.39 Book value per
common share 16.92 16.62 16.23 16.25 16.03 Tangible book value (1)
13.15 12.85 12.32 12.33 12.10 Weighted average common shares
outstanding Basic 83,625,000 83,625,000 83,625,000 83,625,000
83,625,000 Diluted 84,660,256 84,792,657 84,674,807 84,717,005
83,955,685 Cash dividends declared $ 0.150 $ 0.125 $ 0.125 $ — $ —
Dividend payout ratio 26.79 % 21.93 % 27.17 % — % — %
Performance Ratios: Return on average common equity (2)
13.40 % 14.16 % 11.73 % 4.32 % 9.78 % Return on average tangible
common equity (1) (2) 17.32 18.58 15.52 5.71 13.04 Return on
average assets (2) 1.61 1.72 1.44 0.55 1.29 Net interest margin (2)
3.58 3.66 3.64 3.59 3.52 Efficiency ratio (1) 50.16 52.00 53.35
58.44 52.20 Adjusted efficiency ratio (1) 48.36 50.74 50.22 55.57
52.74
Asset Quality Ratios: Total nonperforming assets
("NPAs") to total loans and OREO and other NPAs 0.66 % 0.63 % 0.84
% 0.85 % 1.51 % Total nonperforming loans to total loans 0.50 0.44
0.60 0.58 0.96 Total ACL to total loans 0.91 1.01 1.06 1.06 1.18
ACL to total nonperforming loans ("NPLs") 182.52 230.60 175.30
183.62 122.66 Net charge-offs to average loans (2) 0.13 0.10 0.02
0.13 0.01
Capital Ratios: Total shareholders’ equity to
assets 12.0 % 12.3 % 12.3 % 12.4 % 12.8 % Tangible common equity to
tangible assets (1) 9.6 9.8 9.7 9.7 10.0 Common equity tier 1
(CET1) (4) 10.4 10.5 10.4 10.6 10.8 Tier 1 leverage capital (4)
10.7 10.7 10.6 10.7 11.1 Tier 1 risk-based capital (4) 10.7 10.9
10.8 10.9 11.2 Total risk-based capital (4) 12.4 12.7 12.6 12.8
13.2 _____________________ (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 the in-kind distribution on
September 10, 2018, 58 of our outstanding shares are owned by
Cadence Bancorp, LLC, down from 34,175,000 shares as of June 30,
2018. (4) Current quarter regulatory capital ratios are estimates.
Table 2 - Average
Balances/Yield/Rates
For the Three Months Ended September 30, 2018
2017 AverageBalance
Income/Expense Yield/Rate
AverageBalance Income/Expense
Yield/Rate (In thousands) ASSETS
Interest-earning assets: Loans, net of
unearned income (1) Originated and ANCI loans $ 9,036,566 $ 115,814
5.08 % $ 7,587,556 $ 84,321 4.41 % ACI portfolio 229,188
5,243 9.08 280,238 5,840 8.27 Total loans
9,265,754 121,057 5.18 7,867,794 90,161 4.55 Investment securities
Taxable 928,275 6,248 2.67 760,269 4,610 2.41 Tax-exempt (2)
213,429 2,195 4.08 408,913 5,046 4.90 Total
investment securities 1,141,704 8,443 2.93 1,169,182 9,656 3.28
Federal funds sold and short-term investments 458,491 2,039 1.76
267,684 1,072 1.59 Other investments 54,762 675 4.89
49,661 380 3.04 Total interest-earning assets
10,920,711 132,214 4.80 9,354,321 101,269 4.30
Noninterest-earning assets: Cash and due from banks 71,777
60,760 Premises and equipment 62,422 65,308 Accrued interest and
other assets 623,842 639,188 Allowance for credit losses
(92,783 ) (94,706 ) Total assets $ 11,585,969 $ 10,024,871
LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing
liabilities: Demand deposits $ 5,175,915 $ 17,046 1.31 % $
4,329,086 $ 7,300 0.67 % Savings deposits 181,449 149 0.33 180,099
113 0.25 Time deposits 1,978,807 10,312 2.07
1,648,000 5,665 1.36 Total interest-bearing deposits
7,336,171 27,507 1.49 6,157,185 13,078 0.84 Other borrowings
432,279 3,673 3.37 349,925 2,926 3.32 Subordinated debentures
135,585 2,473 7.24 134,873 2,336 6.87
Total interest-bearing liabilities 7,904,035 33,653 1.69 6,641,983
18,340 1.10
Noninterest-bearing liabilities: Demand deposits
2,153,097 1,982,784 Accrued interest and other liabilities
133,776 79,220 Total liabilities 10,190,908 8,703,987
Stockholders' equity 1,395,061 1,320,884 Total
liabilities and stockholders' equity $ 11,585,969 $ 10,024,871 Net
interest income/net interest spread 98,561 3.11 % 82,929
3.20 % Net yield on earning assets/net interest margin
3.58 % 3.52 %
Taxable equivalent adjustment:
Investment securities
(461
)
(1,766 ) Net interest income $ 98,100 $ 81,163
_____________________ (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 September 30, 2018, and
a tax rate of 35% for the three months ended September 30, 2017.
For the Three Months
Ended
September 30, 2018
For the Three Months Ended
June 30, 2018
AverageBalance Income/Expense
Yield/Rate AverageBalance
Income/Expense Yield/Rate (In
thousands) ASSETS Interest-earning
assets: Loans, net of unearned income (1) Originated and ANCI
loans $ 9,036,566 $ 115,814 5.08 % $ 8,606,253 $ 108,130 5.04 % ACI
portfolio 229,188 5,243 9.08 242,567
5,610 9.28 Total loans 9,265,754 121,057 5.18 8,848,820 113,740
5.16 Investment securities Taxable 928,275 6,248 2.67 838,842 5,518
2.64 Tax-exempt (2) 213,429 2,195 4.08 344,213
3,547 4.13 Total investment securities 1,141,704 8,443 2.93
1,183,055 9,065 3.07 Federal funds sold and short-term investments
458,491 2,039 1.76 452,074 1,269 1.13 Other investments
54,762 675 4.89 55,909 634 4.55 Total
interest-earning assets 10,920,711 132,214 4.80 10,539,858 124,708
4.75
Noninterest-earning assets: Cash and due from banks
71,777 80,000 Premises and equipment 62,422 62,711 Accrued interest
and other assets 623,842 629,228 Allowance for credit losses
(92,783 ) (93,365 ) Total assets $ 11,585,969 $ 11,218,432
LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing
liabilities: Demand deposits $ 5,175,915 $ 17,046 1.31 % $
4,712,302 $ 11,700 1.00 % Savings deposits 181,449 149 0.33 189,567
133 0.28 Time deposits 1,978,807 10,312 2.07
2,175,235 10,497 1.94 Total interest-bearing deposits
7,336,171 27,507 1.49 7,077,104 22,330 1.27 Other borrowings
432,279 3,673 3.37 459,678 3,785 3.30 Subordinated debentures
135,585 2,473 7.24 135,409 2,464 7.30
Total interest-bearing liabilities 7,904,035 33,653 1.69 7,672,191
28,579 1.49
Noninterest-bearing liabilities: Demand deposits
2,153,097 2,058,255 Accrued interest and other liabilities
133,776 129,216 Total liabilities 10,190,908 9,859,662
Stockholders' equity 1,395,061 1,358,770 Total
liabilities and stockholders' equity $ 11,585,969 $ 11,218,432 Net
interest income/net interest spread 98,561 3.11 % 96,129
3.26 % Net yield on earning assets/net interest margin
3.58 % 3.66 %
Taxable equivalent adjustment:
Investment securities (461 ) (745 ) Net interest
income $ 98,100 $ 95,384 _____________________ (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%.
Table 3 – Loan Interest Income
Detail
For the Three Months Ended, (In thousands)
September 30,
2018
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
Loan Interest Income Detail Interest income on loans,
excluding ACI loans $ 115,814 $ 108,130 $ 97,168 $ 89,762 $ 84,321
Scheduled accretion for the period 4,881 5,016 5,192 5,348 5,550
Recovery income for the period 362 594 431
2,797 290 Accretion on acquired credit impaired (ACI)
loans 5,243 5,610 5,623 8,145
5,840 Loan interest income $ 121,057 $ 113,740 $ 102,791 $ 97,907 $
90,161 Loan yield, excluding ACI loans 5.08 % 5.04 % 4.81 %
4.47 % 4.41 % ACI loan yield 9.08 9.28 8.96
12.21 8.27 Total loan yield 5.18 % 5.16
% 4.94 % 4.72 % 4.55 %
Table 4 - Allowance for Credit
Losses
For the Three Months Ended (In thousands)
September 30,
2018
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
Balance at beginning of period $ 90,620 $ 91,537 $ 87,576 $
94,765 $ 93,215 Charge-offs (3,265 ) (3,650 ) (812 ) (2,860 ) (581
) Recoveries 161 1,470 393 146
408
Net charge-offs (3,104 ) (2,180 )
(419 ) (2,714 ) (173 ) Provision for (reversal of)
credit losses (1,365 ) 1,263 4,380
(4,475 ) 1,723
Balance at end of period $ 86,151 $
90,620 $ 91,537 $ 87,576 $ 94,765
Table 5 - Noninterest Income
For the Three Months Ended (In thousands)
September 30,
2018
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
Noninterest Income Investment advisory
revenue $ 5,535 $ 5,343 $ 5,299 $ 5,257 $ 5,283 Trust services
revenue 4,449 4,114 5,015 4,836 4,613 Service charges on deposit
accounts 3,813 3,803 3,960 3,753 3,920 Credit-related fees 3,549
3,807 3,577 3,372 3,306 Insurance revenue — 417 2,259 1,470 1,950
Bankcard fees 1,078 1,915 1,884 1,833 1,803 Mortgage banking
revenue 747 650 577 687 965 Other service fees earned 1,319
1,346 1,333 1,197 1,174
Total
service fees and revenue 20,490 21,395
23,904 22,405 23,014 Securities gains (losses), net 2
(1,813 ) 12 16 1 Other 3,484 5,090 1,067
3,235 4,109
Total other noninterest income
3,486 3,277 1,079 3,251 4,110
Total noninterest income $ 23,976 $ 24,672 $ 24,983 $ 25,656
$ 27,124
Table 6 - Noninterest Expense
For the Three Months Ended (In thousands)
September 30,
2018
June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
Noninterest Expenses Salaries and
employee benefits $ 35,811 $ 38,268 $ 37,353 $ 35,162 $ 35,007
Premises and equipment 7,561 7,131 7,591 7,629 7,419 Intangible
asset amortization 650 715 792 1,085 1,136 Net cost of operation of
other real estate owned 398 112 (52 ) 1,075 453 Data processing
1,989 2,304 2,365 2,504 1,688 Consulting and professional fees
4,335 2,545 2,934 4,380 2,069 Loan related expenses 821 645 255 810
532 FDIC insurance 1,237 1,223 955 939 889 Communications 682 703
704 857 650 Advertising and public relations 679 575 341 683 521
Legal expenses 242 468 2,627 2,626 612 Other 6,826
7,746 6,074 8,621 5,554
Total noninterest
expenses $ 61,231 $ 62,435 $ 61,939 $ 66,371 $ 56,530
Table 7 - Reconciliation of Non-GAAP
Financial Measures
As of and for the Three Months Ended September
30, June 30, March 31,
December 31, September 30, (In
thousands) 2018 2018 2018
2017 2017 Efficiency ratio Noninterest
expenses (numerator) $ 61,231 $ 62,435 $ 61,939 $ 66,371 $ 56,530
Net interest income $ 98,100 $ 95,384 $ 91,111 $ 87,911 $ 81,163
Noninterest income 23,976 24,672 24,983
25,656 27,124 Operating revenue (denominator) $ 122,076 $
120,056 $ 116,094 $ 113,567 $ 108,287 Efficiency ratio 50.16
% 52.00 % 53.35 % 58.44 % 52.20 %
Adjusted efficiency ratio Noninterest expenses $ 61,231 $
62,435 $ 61,939 $ 66,371 $ 56,530 Less: Merger related expenses 178
756 — — — Less: Secondary offerings expenses 2,022 1,165 1,365
1,302 — Less: Other non-routine expenses(2) — 1,145
2,278 1,964 — Adjusted noninterest expenses
(numerator) $ 59,031 $ 59,369 $ 58,296 $ 63,105 $ 56,530 Net
interest income $ 98,100 $ 95,384 $ 91,111 $ 87,911 $ 81,163
Noninterest income 23,976 24,672 24,983 25,656 27,124 Less: Gain on
sale of insurance assets — 4,871 — — 1,093 Less: Securities gains
(losses), net 2 (1,813 ) 12 16 1
Adjusted noninterest income 23,974 21,614
24,971 25,640 26,030 Adjusted operating revenue
(denominator) $ 122,074 $ 116,998 $ 116,082 $ 113,551 $ 107,193
Adjusted efficiency ratio 48.36 % 50.74 %
50.22 % 55.57 % 52.74 %
Tangible common equity
ratio Shareholders’ equity $ 1,414,826 $ 1,389,956 $ 1,357,103
$ 1,359,056 $ 1,340,848 Less: Goodwill and other intangible assets,
net (314,998 ) (315,648 ) (327,247 )
(328,040 ) (329,124 ) Tangible common shareholders’ equity
1,099,828 1,074,308 1,029,856 1,031,016
1,011,724 Total assets 11,759,837 11,305,528 10,999,382
10,948,926 10,502,261 Less: Goodwill and other intangible assets,
net (314,998 ) (315,648 ) (327,247 )
(328,040 ) (329,124 ) Tangible assets $ 11,444,839 $
10,989,880 $ 10,672,135 $ 10,620,886 $ 10,173,137 Tangible common
equity ratio 9.61 % 9.78 % 9.65 % 9.71
% 9.95 %
Tangible book value per share Shareholders’
equity $ 1,414,826 $ 1,389,956 $ 1,357,103 $ 1,359,056 $ 1,340,848
Less: Goodwill and other intangible assets, net (314,998 )
(315,648 ) (327,247 ) (328,040 )
(329,124 ) Tangible common shareholders’ equity $ 1,099,828 $
1,074,308 $ 1,029,856 $ 1,031,016 $ 1,011,724 Common shares issued
83,625,000 83,625,000 83,625,000
83,625,000 83,625,000 Tangible book value per share $ 13.15
$ 12.85 $ 12.32 $ 12.33 $ 12.10 (1) Annualized. (2) Other
non-routine expenses for the second quarter of 2018 were $1.1
million and included expenses related to the sale of the assets of
our insurance company. This compares to $2.3 million and $2.0
million for the first quarter of 2018 and fourth quarter of 2017,
respectively, each representing legal costs associated with
litigation related to a pre-acquisition matter of a legacy acquired
bank that has been resolved.
Table 7 (Continued) – Reconciliation of
Non-GAAP Measures
As of and for the Three Months Ended September
30, June 30, March 31,
December 31, September 30, (In
thousands) 2018 2018 2018
2017 2017 Return on average tangible common
equity Average common equity $ 1,395,061 $ 1,358,770 $
1,342,445 $ 1,348,867 $ 1,320,884 Less: Average intangible assets
(315,382 ) (323,255 ) (327,727 )
(328,697 ) (329,816 ) Average tangible common shareholders’
equity $ 1,079,679 $ 1,035,515 $ 1,014,718 $ 1,020,170 $ 991,068
Net income $ 47,136 $ 47,974 $ 38,825 $ 14,691 $ 32,577 Return on
average tangible common equity(1) 17.32 % 18.58 %
15.52 % 5.71 % 13.04 %
Adjusted return on
average tangible common equity Average tangible common
shareholders’ equity $ 1,079,679 $ 1,035,515 $ 1,014,718 $
1,020,170 $ 991,068 Net income $ 47,136 $ 47,974 $ 38,825 $ 14,691
$ 32,577 Non-routine items: Plus: Merger related expenses 178 756 —
— — Plus: Secondary offerings expenses 2,022 1,165 1,365 1,302 —
Plus: Other non-routine expenses(2) — 1,145 2,278 1,964 — Less:
Gain on sale of insurance assets — 4,871 — — 1,093 Less: Securities
gains (losses), net 2 (1,813 ) 12 16 1 Tax expense: Plus: One-time
tax charge related to Tax Reform — — — 19,022 — Less: Benefit of
legacy loan bad debt deduction for tax — 5,991 — — — Less: Income
tax effect of tax deductible non-routine items 41
(352 ) 529 721 (405 ) Total non-routine items,
after tax 2,157 (5,631 ) 3,102 21,551
(689 ) Adjusted net income $ 49,293 $ 42,343 $ 41,927 $
36,242 $ 31,888 Adjusted return on average tangible common
equity(1) 18.11 % 16.40 % 16.76 % 14.09
% 12.77 %
Adjusted return on average assets Average
assets $ 11,585,969 $ 11,218,432 $ 10,922,274 $ 10,586,245 $
10,024,871 Adjusted net income $ 49,293 $ 42,343 $ 41,927 $ 36,242
$ 31,888 Adjusted return on average assets(1) 1.69 %
1.51 % 1.56 % 1.36 % 1.26 %
Adjusted
diluted earnings per share Diluted weighted average common
shares outstanding 84,660,256 84,792,657
84,674,807 84,717,005 83,955,685 Net income allocated
to common stock $ 47,080 $ 47,914 $ 38,825 $ 14,691 $ 32,577 Total
non-routine items 2,157 (5,631 ) 3,102
21,551 (689 ) Adjusted net income allocated to common stock
$ 49,237 $ 42,283 $ 41,927 $ 36,242 $ 31,888 Adjusted diluted
earnings per share(1) $ 0.58 $ 0.50 $ 0.50 $ 0.43 $ 0.38
Pre-tax, pre-provision net earnings Income before taxes $
62,210 $ 56,358 $ 49,775 $ 51,671 $ 50,034 Plus: Provision for
credit losses (1,365 ) 1,263 4,380
(4,475 ) 1,723 Pre-tax, pre-provision net earnings $ 60,845
$ 57,621 $ 54,155 $ 47,196 $ 51,757 (1) Annualized. (2) Other
non-routine expenses for the second quarter of 2018 were $1.1
million and included expenses related to the sale of the assets of
our insurance company. This compares to $2.3 million and $2.0
million for the first quarter of 2018 and fourth quarter of 2017,
respectively, each representing legal costs associated with
litigation related to a pre-acquisition matter of a legacy acquired
bank that has been resolved.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181022005287/en/
Cadence BancorporationMedia contact:Danielle Kernell,
713-871-4051danielle.kernell@cadencebank.comorInvestor relations
contact:Valerie Toalson, 713-871-4103 or
800-698-7878vtoalson@cadencebancorporation.com
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