Cadence Bancorporation (NYSE:CADE) (“Cadence”) today announced
net income for the quarter ended March 31, 2019 of $58.2 million,
or $0.44 per diluted common share (“per share”), compared to $32.3
million, or $0.39 per share for the quarter ended December 31,
2018, and $38.8 million or $0.46 per share for the quarter ended
March 31, 2018. The first quarter of 2019 included merger related
expenses of $22.0 million or $0.13 per diluted common share.
“This has been an active and exciting quarter for Cadence. We
finalized our merger with State Bank on January 1 and completed the
systems and branding conversions during the quarter. I am pleased
with our expanded footprint and the diversity it brings to our
business model. We have seen numerous examples of great leadership
from our bankers in Georgia, which we believe will lead to growing
business opportunities throughout that market. It is nice to report
a strong start to the year with better earnings than expected. On
an adjusted basis, we earned $0.57 cents per share(1) which is a
19.7% adjusted return on tangible common equity(1); 1.72% adjusted
return on assets(1); and a 45.7% adjusted efficiency ratio(1). Our
credit metrics are positive also. We charged-off $550,000 or 2
basis points (annualized) for the quarter. Nonperforming assets
declined to 0.63% at March 31 from 0.81% at fiscal year-end.
Overall, it is a good start to the year,” stated Paul B. Murphy,
Jr., Chairman and Chief Executive Officer of Cadence
Bancorporation.
Highlights:
- Adjusted net income(1), excluding
non-routine income and expenses(2) primarily related to the merger,
was $75.0 million for the first quarter of 2019, an increase of
$33.0 million or 79% compared to the first quarter of 2018 and an
increase of $33.5 million or 81% compared to the fourth quarter of
2018.
- Adjusted EPS(1) for the first quarter
of 2019 of $0.57 increased $0.07 compared to adjusted EPS for both
the prior year and linked quarters of $0.50.
- Annualized returns on average assets,
and tangible common equity(1) for the first quarter of 2019 were
1.34% and 15.54%, respectively, compared to 1.44% and 15.76%,
respectively, for the first quarter of 2018, and 1.05% and 11.85%,
respectively, for the fourth quarter of 2018.
- Adjusted annualized returns on average
assets(1) and adjusted tangible common equity(1) for the first
quarter of 2019 were 1.72% and 19.69%, respectively, compared to
1.56% and 17.00%, respectively, for the first quarter of 2018 and
1.34% and 15.15%, respectively, for the fourth quarter of
2018.
- First quarter of 2019 efficiency ratio
was 56.7% and the adjusted efficiency ratio(1) was 45.7%, resulting
from strong revenue growth coupled with expense management.
- Nonperforming assets (“NPAs”) as a
percent of total loans, OREO and other NPAs declined to 0.63% at
March 31, 2019 compared to 0.84% and 0.81% at March 31, 2018 and
December 31, 2018, respectively. Net charge-offs for the first
quarter of 2019 were $550 thousand or 2 basis points on an
annualized basis.
(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:
Total assets were $17.5 billion as of March 31, 2019, an
increase of $4.7 billion, or 37.1%, from December 31, 2018, and an
increase of $6.5 billion, or 58.7%, from March 31, 2018.
Merger with State Bank Financial Corporation (“State
Bank”). Effective January 1, 2019, State Bank merged into
Cadence, with Cadence issuing 49.2 million shares to State Bank
shareholders resulting in a total purchase price of $826 million.
This merger added the additional assets and liabilities as shown in
the table below, which included goodwill of $173.3 million, core
deposit intangibles of $111.9 million or 3.28% of core deposits, an
unfunded loan commitment mark of $26.8 million. The loan fair value
adjustments totaled $99.0 million, made up of a credit risk
adjustment of $71.2 million or 2.1% of total loans, and a market
risk adjustment of $27.8 million. Note that the loan and unfunded
commitment marks accrete into revenue and the core deposit
intangible amortizes into expense over time as described in the
footnotes below. The estimated fair values will be subject to
refinement as additional information relative to the closing date
fair values becomes available through the measurement period for a
maximum of one year from consummation.
(Dollars in thousands)
As RecordedbyState
Bank
Reversal ofLegacy
StateBankAmounts
Fair ValueAdjustments
As Recordedby Cadence
Assets Cash and cash equivalents $ 414,342 $ - $ -
$
414,342 Investment securities available-for-sale 668,517 - (652 )
667,865 Loans, net 3,487,618 83,908 (99,001 ) A 3,472,525 Premises
and equipment, net 55,151 - 10,495 65,646 Cash surrender value of
life insurance 69,252 - - 69,252 Intangible assets 92,918 (92,918 )
117,038
B
117,038 Other assets 63,612 (2,342 ) (18,024
)
43,246
Total assets acquired $ 4,851,410 $ (11,352 )
$ 9,856 $ 4,849,914
Liabilities Deposits $ 4,100,340 $ - $
(3,675 ) $ 4,096,665 Short term borrowings 23,899 - - 23,899 Other
liabilities 49,105 - 27,173 C 76,278
Total liabilities assumed 4,173,344 -
23,498 4,196,842 Net identifiable assets acquired over
liabilities assumed 678,066 (11,352
)
$ (13,642 ) $ 653,072 Goodwill
173,308 D 173,308
Net assets acquired over liabilities
assumed
$ 678,066 $ (11,352 ) $ 159,666 $ 826,380
Fair Value Adjustments:
A. Represents the mark on the total balance
of loans, which is comprised of a $20.3 million mark to the book
balance on acquired credit impaired (“ACI”) loans and a $78.6
million mark on acquired non-credit impaired (“ANCI”) loans. Based
on the expected cash flows, the ACI loans have an accretable
difference of $43 million and will accrete into interest income
over the expected life of the loan or pool of loans over
approximately seven years. The $78.6 million mark on ANCI loans
will accrete into interest income using either the effective yield
or the straight-line method over the contractual lives of the
loans, or approximately seven years.
B. Represents a core deposit intangible
(“CDI”) of $111.9 million and a customer list intangible of $5.1
million. The CDI and customer list intangible amortize into
interest expense and noninterest expense, respectively, using an
accelerated method over a ten-year period.
C. Primarily represents $26.8 million as the
fair value of unfunded loan commitments. The fair value for
revolving lines and undrawn lines amortize using the straight-line
method over the life of the loan, or approximately 48 months. The
fair value of multi-advance loans amortizes using the effective
yield method over the life of the loan, or approximately 29 months.
Amortization of both of these adjustments do not begin until some
or all the unfunded amount becomes funded.
D. Represents excess of purchase price over
the combined fair value adjustments.
Loans. Loans at March 31, 2019 totaled $13.6 billion as
compared to $8.6 billion and $10.1 billion at March 31, 2018 and
December 31, 2018, respectively. Excluding the impact of the loans
acquired from State Bank, loans increased $1.6 billion or 18.6%
since March 31, 2018, and $245.9 million, or 2.4% from January 1,
2019 to March 31, 2019. These increases reflect continued organic
demand.
Total deposits. Deposits at March 31, 2019 totaled $14.2
billion as compared to $9.0 billion and $10.7 billion at March 31,
2018 and December 31, 2018, respectively. Excluding the impact of
deposits assumed from State Bank, deposits increased by $1.1
billion or 9.8% from March 31, 2018 and decreased by $606.1 million
or 5.7% from December 31, 2018. The year-over- year deposit
increase was driven by growth in core customer deposits (total
deposits excluding brokered deposits) of $1.0 billion, or 12.4%,
from March 31, 2018. The linked quarter decrease included a decline
of core deposits of $424.4 million, or 3.2%, from December 31,
2018, which included $311.8 million that State Bank had on deposit
at Cadence as noninterest-bearing deposits at December 31, 2018
that were eliminated out of deposits, as well as cyclical deposit
declines typical in the first quarter of the year.
Shareholders’ equity was $2.3 billion at March 31, 2019,
an increase of $945.6 million from March 31, 2018, and an increase
of $864.5 million from December 31, 2018.
- Tangible common shareholders’ equity(1)
was $1.7 billion at March 31, 2019, an increase of $670.5 million
from March 31, 2018, and an increase of $576.5 million from
December 31, 2018. The first quarter 2019 increase resulted from
common stock issued of $826.1 million in the State Bank merger (net
of issuance costs), net income of $58.2 million and an increase of
$60.8 million in other comprehensive income which resulted from
increased fair values of derivatives and of securities. These items
were partially offset by an increase of $284.3 million in
intangible assets, dividends of $22.7 million and the repurchase of
3.0 million common shares at an average price of $19.60 per share,
or $58.8 million during the quarter as part of the share repurchase
program announced in October 2018.
- Tangible book value per share(1) was
$13.23 as of March 31, 2019, an increase of $0.91 from $12.32 as of
March 31, 2018, and a decrease of $0.39 or from $13.62 as of
December 31, 2018.
- Total outstanding shares in the quarter
increased to 128.8 million shares due to the issuance of 49.2
million shares in connection with the State Bank merger, partially
offset by the repurchase of 3.0 million shares during the
quarter.
(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 overall credit
stability in the loan portfolio. For the quarter ended March 31,
2019, net charge-offs were $0.6 million or 2 basis points on an
annualized basis, compared to $0.4 million or 2 basis points and
$0.2 million or 1 basis point for the quarters ended March 31, 2018
and December 31, 2018, respectively.
- NPAs totaled $86.0 million, $72.7
million and $82.4 million as of March 31, 2019, March 31, 2018 and
December 31, 2018, respectively. NPAs as a percent of total loans,
OREO and other NPAs declined to 0.63% at March 31, 2019 compared to
0.84% and 0.81% at March 31, 2018 and December 31, 2018,
respectively.
- The allowance for credit losses (“ACL”)
was $105.0 million, or 0.77% of total loans, as of March 31, 2019,
as compared to $91.5 million, or 1.06% of total loans, as of March
31, 2018, $94.4 million, or 0.94% of total loans, as of December
31, 2018. The decline in the percentage of the ACL to total loans
is due to recording the State Bank $3.5 billion loan portfolio at
fair value, which results in no ACL recorded for those loans upon
merger.
- Loan loss provision was $11.2 million
for the first quarter of 2019 compared to $4.4 million in the prior
year’s quarter and $8.4 million in the linked quarter. The first
quarter 2019 provision was driven by the quarter’s net loan growth
and an increase in specific reserves for certain credits.
Total Revenue:
Total operating revenue(1) for the first quarter of 2019 was
$200.0 million, up 72.2% from the same period in 2018 and up 61.1%
from the linked quarter. The revenue increases reflect strong loan
growth during the period as well as the impact of the State Bank
acquisition.
Net interest income for the first quarter of 2019 was
$169.3 million, an increase of $78.2 million or 85.8%, from the
same period in 2018, and an increase of $66.1 million or 64.1%,
from the fourth quarter of 2018. Our fully tax-equivalent NIM was
up significantly in the first quarter of 2019 to 4.21% as compared
to 3.64% for the first quarter of 2018 and 3.55% for the fourth
quarter of 2018.
Earning asset yields for the first quarter of 2019 were 5.52%,
up 101 basis points from 4.51% in the first quarter of 2018, and up
57 basis points from 4.95% in the fourth quarter of 2018. The
current quarter’s increase in earning asset yields reflects the
impact of the State Bank assets including purchase accounting
accretion, combined with an increase in originated earning asset
yields during the first quarter of 2019.
- Yield on originated loans increased to
5.46% for the first quarter of 2019, as compared to 4.79% and 5.20%
for the first quarter of 2018 and fourth quarter of 2018,
respectively.
- Approximately 69% of the total loan
portfolio is floating at March 31, 2019. On February 28, 2019,
Cadence entered into a $4.0 billion notional interest rate collar
with a five-year term designed to reduce the impact of interest
rate sensitivity of this portfolio. The yield on originated loans
was impacted 1 basis point, (2) basis points and (9) basis points
for the first quarter of 2019, first quarter of 2018 and fourth
quarter of 2018, respectively, by the effect of our interest rate
derivatives.
- Total accretion for ANCI loans was
$12.5 million in the first quarter of 2019 compared to $0.2 million
for the first quarter of 2018 and ($0.3) million for the fourth
quarter of 2018. The first quarter 2019 accretion is predominantly
related to loans acquired from State Bank.
- Total accretion for ACI loans was $6.3
million in the first quarter of 2019 compared to $5.6 million from
the first quarter of 2018 and $5.6 million in the fourth quarter of
2018. The first quarter 2019 accretion includes $1.3 million
related to loans acquired from State Bank.
- Total cost of funds for the first
quarter of 2019 was 1.42% compared to 0.94% for the first quarter
of 2018 and 1.51% in the linked quarter.
- Total cost of deposits for the first
quarter of 2019 was 1.30% compared to 0.75% for the first quarter
of 2018, and 1.34% for the linked quarter.
- The current quarter’s decrease in
deposit costs reflected the impact of the State Bank deposits,
partially offset by an approximate 12 bp increase in legacy deposit
costs during the first quarter of 2019.
Noninterest income for the first quarter of 2019 was
$30.7 million, an increase of $5.7 million or 22.7%, from the same
period of 2018, and an increase of $9.7 million, or 46.0%, from the
fourth quarter of 2018. Total service fees and revenue for the
first quarter of 2019 were $27.9 million, an increase of $4.0
million or 16.9% from the same period of 2018, and an increase of
$6.7 million or 31.7% from the fourth quarter of 2018. The year
over year increase in fees was driven by:
- Increase of $1.1 million in service
charges on deposits due primarily to the increase in number of
deposit accounts.
- Increase of $1.3 million in credit
related fees related to loan growth and leading loan
transactions.
- New revenue sources of payroll
processing and insurance ($1.9 million) and SBA income ($1.4
million) which resulted from the State Bank merger.
- Decrease of other service fees of $1.7
million due primarily to reduction in insurance revenue due to the
sale of insurance company assets in the second quarter of
2018.
The linked quarter increase resulted primarily from:
- Increase of $1.3 million in service
charges on deposits due to the increase in the number of deposit
accounts, primarily from the State Bank merger.
- Increase of $1.1 million in bankcard
fees which resulted from additional customers from the State Bank
merger.
- Previously mentioned new revenue
sources of payroll processing and insurance of $1.9 million and SBA
income of $1.4 million.
Other noninterest income increased by $1.6 million from the
first quarter of 2018 and by $2.9 million from the linked quarter.
These increases resulted primarily from increases in BOLI income
and earnings from limited partnerships, combined with stable net
profits interest valuation in the first quarter of 2019, as
compared to writedowns in the comparative quarters.
Noninterest expense for the first quarter of 2019 was
$113.4 million, an increase of $51.5 million or 83.1% from $61.9
million for the same period in 2018, and an increase of $40.7
million or 56.0% from $72.7 million for the fourth quarter of 2018.
The increase resulted primarily from:
- Merger related expenses of $22.0
million related to the State Bank merger
- Increase of $16.1 million and $10.0
million for the prior year period and linked quarter, respectively,
in salaries and benefits due primarily to increased numbers of
employees.
- Increase of $5.3 million and $5.5
million for the prior year period and linked quarter, respectively,
in intangible asset amortization due to the amortization of the
State Bank core deposit intangible asset.
- Increase of $5.5 million and $3.6
million for the prior year period and linked quarter, respectively,
in other noninterest expenses due to business growth and the State
Bank merger.
Adjusted noninterest expenses(1), which exclude the impact of
non-routine items(2), were $91.4 million for the first quarter of
2019, up $33.1 million or 56.9% from $58.3 million for the first
quarter of 2018 and up $30.6 million or 50.3% from $60.9 million
for the fourth quarter of 2018. Non-routine expenses in the first
quarter of 2019 comprised $22.0 million in State Bank merger
related expenses. For the fourth quarter of 2018, non-routine
expenses included $9.8 million in compensation expense and $2.0
million in merger related expenses. For the first quarter of 2018,
non-routine expenses included $1.4 million in secondary offering
expenses and $2.3 million in legacy acquired bank litigation
costs.
Our efficiency ratio(1) for the first quarter of 2019 was
56.7% compared to 53.4% for the first quarter of 2018 and 58.6% for
the fourth quarter of 2018. The efficiency ratio in all quarters
was impacted by the noted non-routine expenses. Excluding
non-routine revenues and expenses, the adjusted efficiency ratio(1)
was 45.7%, 50.2%, and 49.0% for the first quarter of 2019, first
quarter of 2018, and fourth quarter of 2018, respectively. The
first quarter of 2019 adjusted efficiency ratio is reflective of
efficiencies already gained through the State Bank merger, combined
with strong revenue 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.
Taxes:
The effective tax rate for the quarter ended March 31, 2019, was
22.7% compared to 24.9% for the quarter ended December 31, 2018,
and 22.0% for the quarter ended March 31, 2018.
Supplementary Financial Tables
(Unaudited):
Supplementary Financial Tables (Unaudited) are included in this
release following the customary disclosure information.
First Quarter 2019 Earnings Conference
Call:
Cadence Bancorporation executive management will host a
conference call to discuss first quarter 2019 results on Monday,
April 29, 2019, 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: 2919550
For those unable to participate in the live
presentation, a replay will be available through May 13, 2019. To
access the replay, please use the following numbers:
US Toll Free: 1-877-344-7529 International Toll:
1-412-317-0088 Canada Toll Free: 1-855-669-9658 Replay Access Code:
10130277 End Date: May 13, 2019
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 financial holding company with $17.4 billion
in assets as of March 31, 2019. Cadence operates 98 branch
locations in Alabama, Florida, Georgia, Mississippi, Tennessee and
Texas, and provides corporations, middle-market companies, small
businesses and consumers with a full range of innovative banking
and financial solutions. Services and products include
commercial and business banking, treasury management, specialized
lending, asset-based lending, commercial real estate, SBA lending,
foreign exchange, wealth management, investment and trust services,
financial planning, retirement plan management, business 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 more
than 55,000 ATMs. The Cadence team of 1,800 associates is
committed to exceeding customer expectations and helping their
clients succeed financially.
Cautionary Statement Regarding Forward-Looking
Information
This communication contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements reflect our current views
with respect to, among other things, future events and our results
of operations, financial condition and financial performance. These
statements are often, but not always, made through the use of words
or phrases such as “may,” “should,” “could,” “predict,”
“potential,” “believe,” “will likely result,” “expect,” “continue,”
“will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,”
“projection,” “would” and “outlook,” or the negative version of
those words or other comparable words of a future or
forward-looking nature. These forward-looking statements are not
historical facts, and are based on current expectations, estimates
and projections about our industry, management’s beliefs and
certain assumptions made by management, many of which, by their
nature, are inherently uncertain and beyond our control.
Accordingly, we caution you that any such forward-looking
statements are not guarantees of future performance and are subject
to risks, assumptions and uncertainties that are difficult to
predict. Although we believe that the expectations reflected in
these forward-looking statements are reasonable as of the date
made, actual results may prove to be materially different from the
results expressed or implied by the forward-looking statements.
Such factors include, without limitation, the “Risk Factors”
referenced in our Registration Statement on Form S-3 filed with the
Securities and Exchange Commission (the “SEC”) on May 21, 2018, and
our Registration Statement on Form S-4 filed with the SEC on July
20, 2018, other risks and uncertainties listed from time to time in
our reports and documents filed with the SEC, including our Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q, and the
following factors: business and economic conditions generally and
in the financial services industry, nationally and within our
current and future geographic market areas; economic, market,
operational, liquidity, credit and interest rate risks associated
with our business; deteriorating asset quality and higher loan
charge-offs; the laws and regulations applicable to our business;
our ability to achieve organic loan and deposit growth and the
composition of such growth; increased competition in the financial
services industry, nationally, regionally or locally; our ability
to maintain our historical earnings trends; our ability to raise
additional capital to implement our business plan; material
weaknesses in our internal control over financial reporting;
systems failures or interruptions involving our information
technology and telecommunications systems or third-party servicers;
the composition of our management team and our ability to attract
and retain key personnel; the fiscal position of the U.S. federal
government and the soundness of other financial institutions; the
composition of our loan portfolio, including the identity of our
borrowers and the concentration of loans in energy-related
industries and in our specialized industries; the portion of our
loan portfolio that is comprised of participations and shared
national credits; the amount of nonperforming and classified assets
we hold; the possibility that the anticipated benefits of the
merger with State Bank are not realized when expected or at all,
including as a result of the impact of, or problems arising from,
the integration of the two companies or as a result of the strength
of the economy and competitive factors in the areas where Cadence
and State Bank do business. 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,”
“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)
March 31,2019
December 31,2018
September 30,2018
June 30,2018
March 31,2018
Statement of Income Data:
Interest income
$
222,185 $ 143,857 $ 131,753 $ 123,963 $ 113,093 Interest expense
52,896 40,711 33,653 28,579
21,982 Net interest income 169,289 103,146 98,100 95,384 91,111
Provision for credit losses 11,210 8,422
(1,365
)
1,263 4,380 Net interest income after provision
158,079 94,724 99,465 94,121 86,731 Noninterest income - service
fees and revenue 27,939 21,217 20,490 21,395 23,904 Noninterest
income - other noninterest income 2,725 (210 ) 3,486 3,277 1,079
Noninterest expense 113,440 72,697 61,231
62,435 61,939 Income before income taxes 75,303
43,034 62,210 56,358 49,775 Income tax expense 17,102
10,709 15,074 8,384 10,950 Net income $ 58,201
$ 32,325 $ 47,136 $ 47,974 $ 38,825 Weighted average common shares
outstanding Basic 130,485,521 83,375,485 83,625,000 83,625,000
83,625,000 Diluted 130,549,319 83,375,485 84,660,256 84,792,657
84,674,807 Earnings Basic $ 0.44 $ 0.39 $ 0.56 $ 0.57 $ 0.46
Diluted 0.44 0.39 0.56 0.57 0.46
Period-End Balance Sheet
Data: Investment securities $ 1,754,839 $ 1,187,252 $ 1,206,387
$ 1,049,710 $ 1,251,834 Total loans, net of unearned income
13,624,954 10,053,923 9,443,819 8,975,755 8,646,987 Allowance for
credit losses 105,038 94,378 86,151 90,620 91,537 Total assets
17,452,911 12,730,285 11,759,837 11,305,528 10,999,382 Total
deposits 14,199,223 10,708,689 9,558,276 9,331,055 9,048,971
Noninterest-bearing deposits 3,210,321 2,454,016 2,094,856
2,137,407 2,040,977 Interest-bearing deposits 10,988,902 8,254,673
7,463,420 7,193,648 7,007,994 Borrowings and subordinated
debentures 717,278 471,770 662,658 471,453 471,335 Total
shareholders’ equity 2,302,823 1,438,274 1,414,826 1,389,956
1,357,103
Average Balance Sheet Data: Investment securities
$ 1,748,714 $ 1,187,947 $ 1,141,704 $ 1,183,055 $ 1,234,226 Total
loans, net of unearned income 13,798,386 9,890,419 9,265,754
8,848,820 8,443,951 Allowance for credit losses 97,065 87,996
92,783 93,365 89,097 Total assets 17,634,267 12,249,819 11,585,969
11,218,432 10,922,275 Total deposits 14,579,771 10,038,180
9,489,268 9,135,359 9,012,390 Noninterest-bearing deposits
3,334,399 2,210,793 2,153,097 2,058,255 2,128,595 Interest-bearing
deposits 11,245,372 7,827,387 7,336,171 7,077,104 6,883,795
Borrowings and subordinated debentures 554,281 652,813 567,864
595,087 444,556 Total shareholders’ equity 2,241,652 1,412,643
1,395,061 1,358,770 1,342,445
Table 1 (Continued) - Selected
Financial Data
As of and for the Three Months Ended (In
thousands, except share and per share data)
March 31,2019
December 31,2018
September 30,2018
June 30,2018
March 31,2018
Per Share Data: Book value per common share $ 17.88 $ 17.43
$ 16.92 $ 16.62 $ 16.23 Tangible book value (1) 13.23 13.62 13.15
12.85 12.32 Cash dividends declared 0.175 0.150 0.150 0.125 0.125
Dividend payout ratio 39.77 % 38.46 %
26.79 % 21.93 % 27.17 %
Performance Ratios: Return on
average common equity (2) 10.53 % 9.08 % 13.40 % 14.16 % 11.73 %
Return on average tangible common equity (1) (2) 15.54 11.85 17.50
18.79 15.76 Return on average assets (2) 1.34 1.05 1.61 1.72 1.44
Net interest margin (2) 4.21 3.55 3.58 3.66 3.64 Efficiency ratio
(1) 56.73 58.55 50.16 52.00 53.35 Adjusted efficiency ratio (1)
45.73 48.99 48.36 50.74 50.22
Asset Quality Ratios: Total
nonperforming assets ("NPAs") to total loans and OREO and other
NPAs 0.63 % 0.81 % 0.66 % 0.63 % 0.84 % Total nonperforming loans
to total loans 0.57 0.74 0.50 0.44 0.60 Total ACL to total loans
0.77 0.94 0.91 1.01 1.06 ACL to total nonperforming loans ("NPLs")
135.01 127.12 182.52 230.60 175.30 Net charge-offs to average loans
(2) 0.02 0.01 0.13 0.10 0.02
Capital Ratios: Total
shareholders’ equity to assets 13.2 % 11.3 % 12.0 % 12.3 % 12.3 %
Tangible common equity to tangible assets (1) 10.1 9.1 9.6 9.8 9.7
Common equity tier 1 (3) 10.4 9.8 10.4 10.5 10.4 Tier 1 leverage
capital (3) 10.0 10.1 10.7 10.7 10.6 Tier 1 risk-based capital (3)
10.4 10.1 10.7 10.9 10.8 Total risk-based capital (3) 11.9 11.8
12.4 12.7 12.6 (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) Current
quarter regulatory capital ratios are estimates.
Table 2 - Average
Balances/Yield/Rates
For the Three Months Ended March 31, 2019
2018 Average Income/
Yield/ Average Income/
Yield/ (In thousands) Balance Expense
Rate Balance Expense Rate ASSETS
Interest-earning assets:
Loans, net of unearned income (1)
Originated loans $ 9,811,821 $ 132,065 5.46 % $ 7,993,461 $ 94,378
4.79 % ANCI portfolio 3,684,905 67,337 7.41 196,017 2,790 5.77 ACI
portfolio 301,660 6,349 8.54 254,503
5,623 8.96 Total loans 13,798,386 205,751 6.05 8,443,981 102,791
4.94 Investment securities Taxable 1,531,514 10,796 2.86 827,227
5,118 2.51 Tax-exempt (2) 217,200 2,202 4.11
406,999 4,134 4.12 Total investment securities 1,748,714
12,998 3.01 1,234,226 9,252 3.04 Federal funds sold and short-term
investments 763,601 3,281 1.74 515,017 1,529 1.20 Other investments
58,139 618 4.31 48,986 389 3.22 Total
interest-earning assets 16,368,840 222,648 5.52 10,242,210 113,961
4.51
Noninterest-earning assets: Cash and due from banks
118,833 92,878 Premises and equipment 128,990 62,973 Accrued
interest and other assets 1,114,669 613,311 Allowance for credit
losses (97,065 ) (89,097 ) Total assets $ 17,634,267
$ 10,922,275
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities: Demand deposits $ 8,011,001 $
29,259 1.48 % $ 4,795,114 $ 9,025 0.76 % Savings deposits 248,651
226 0.37 179,662 114 0.26 Time deposits 2,985,720
17,186 2.33 1,909,019 7,491 1.59 Total
interest-bearing deposits 11,245,372 46,671 1.68 6,883,795 16,630
0.98 Other borrowings 418,347 3,695 3.58 309,323 2,956 3.88
Subordinated debentures 135,934 2,530 7.55
135,233 2,396 7.19 Total interest-bearing liabilities
11,799,653 52,896 1.82 7,328,351 21,982 1.22
Noninterest-bearing
liabilities: Demand deposits 3,334,399 2,128,595 Accrued
interest and other liabilities 258,563 122,884 Total
liabilities 15,392,615 9,579,830
Shareholders' equity
2,241,652 1,342,445 Total liabilities and shareholders'
equity $ 17,634,267 $ 10,922,275 Net interest income/net interest
spread 169,752 3.70 % 91,979 3.29 % Net yield on
earning assets/net interest margin 4.21 % 3.64 %
Taxable equivalent adjustment: Investment securities
(463 ) (868 ) Net interest income $ 169,289 $ 91,111
(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 EndedMarch
31, 2019
For the Three Months
EndedDecember 31, 2018
Average Income/ Yield/
Average Income/ Yield/ (In
thousands) Balance Expense Rate
Balance Expense Rate ASSETS
Interest-earning assets:
Loans, net of unearned income (1)
Originated loans $ 9,811,821 $ 132,065 5.46 % $ 9,356,318 $ 122,678
5.20 % ANCI portfolio 3,684,905 67,337 7.41 326,463 4,298 5.22 ACI
portfolio 301,660 6,349 8.54 207,638
5,580 10.66 Total loans 13,798,386 205,751 6.05 9,890,419 132,556
5.32 Investment securities Taxable 1,531,514 10,796 2.86 980,403
6,909 2.80 Tax-exempt (2) 217,200 2,202 4.11
207,544 2,202 4.21 Total investment securities
1,748,714 12,998 3.01 1,187,947 9,111 3.04 Federal funds sold and
short-term investments 763,601 3,281 1.74 437,565 2,092 1.90 Other
investments 58,139 618 4.31 58,388
559 3.80 Total interest-earning assets 16,368,840 222,648
5.52 11,574,319 144,318 4.95
Noninterest-earning assets:
Cash and due from banks 118,833 73,878 Premises and equipment
128,990 63,258 Accrued interest and other assets 1,114,669 626,360
Allowance for credit losses (97,065 ) (87,996 ) Total
assets $ 17,634,267 $ 12,249,819
LIABILITIES AND STOCKHOLDERS'
EQUITY Interest-bearing liabilities: Demand deposits $
8,011,001 $ 29,259 1.48 % $ 5,242,091 $ 20,024 1.52 % Savings
deposits 248,651 226 0.37 174,156 163 0.37 Time deposits
2,985,720 17,186 2.33 2,411,140 13,792 2.27
Total interest-bearing deposits 11,245,372 46,671 1.68 7,827,387
33,979 1.72 Other borrowings 418,347 3,695 3.58 517,051 4,266 3.27
Subordinated debentures 135,934 2,530 7.55
135,762 2,466 7.21 Total interest-bearing liabilities
11,799,653 52,896 1.82 8,480,200 40,711 1.90
Noninterest-bearing
liabilities: Demand deposits 3,334,399 2,210,793 Accrued
interest and other liabilities 258,563 146,183 Total
liabilities 15,392,615 10,837,176
Stockholders' equity
2,241,652 1,412,643 Total liabilities and
stockholders' equity $ 17,634,267 $ 12,249,819 Net interest
income/net interest spread 169,752 3.70 % 103,607
3.05 % Net yield on earning assets/net interest margin 4.21
% 3.55 %
Taxable equivalent adjustment: Investment
securities (463 ) (461 ) Net interest income $
169,289 $ 103,146 (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)
March 31,2019
December 31,2018
September 30,2018
June 30,2018
March 31,2018
Loan Interest Income Detail Interest income on originated
loans $ 132,065 $ 122,674 $ 112,419 $ 105,536 $ 94,378 ANCI loans:
interest income 54,859 4,571 3,219 2,405 2,617 ANCI loans:
accretion 12,478 (273 ) 176 189 172 ACI loans: scheduled accretion
for the period 5,844 4,724 4,881 5,016 5,192 ACI loans: recovery
income for the period 505 860 362 594
431 Loan interest income $ 205,751 $ 132,556 $ 121,057 $
113,740
$
102,790 Originated loan yield 5.46 % 5.20 % 5.11 % 5.02
%
4.79 % ANCI loan yield 7.41 5.22 4.46 5.93 5.77 ACI loan yield
8.54 10.67 9.08 9.28 8.96 Total
loan yield 6.05 % 5.32 % 5.18 % 5.16 %
4.94 %
Table 4 - Allowance for Credit
Losses
For the Three Months Ended (In thousands)
March 31,2019
December 31,2018
September 30,2018
June 30,2018
March 31,2018
Balance at beginning of period $ 94,378 $ 86,151 $ 90,620 $ 91,537
$ 87,576 Charge-offs (938 ) (318 ) (3,265 )
(3,650 ) (812 ) Recoveries 388 123 161
1,470 393 Net charge-offs (550 ) (195 )
(3,104 ) (2,180 ) (419 ) Provision for (reversal of)
credit losses 11,210 8,422 (1,365 )
1,263 4,380 Balance at end of period $ 105,037 $ 94,378 $
86,151 $ 90,620 $ 91,537
Table 5 - Noninterest Income
For the Three Months Ended (In thousands)
March 31,2019
December 31,2018
September 30,2018
June 30,2018
March 31,2018
Noninterest Income Investment advisory
revenue $ 5,642 $ 5,170 $ 5,535 $ 5,343 $ 5,299 Trust services
revenue 4,335 4,182 4,449 4,114 5,015 Service charges on deposit
accounts 5,130 3,856 3,813 3,803 3,960 Credit-related fees 4,870
5,191 3,549 3,807 3,577 Payroll processing and insurance revenue
1,859 - - - - Bankcard fees 2,213 1,073 1,078 1,915 1,884 SBA
income 1,449 - - - - Mortgage banking revenue 579 398 747 650 577
Other service fees 1,862 1,347 1,319
1,763 3,592
Total service fees and revenue
27,939 21,217 20,490 21,395 23,904
Securities (losses) gains, net (12 ) (54 ) 2 (1,813 ) 12 Other
2,737 (156 ) 3,484 5,090 1,067
Total other noninterest income 2,725 (210 )
3,486 3,277 1,079
Total noninterest
income $ 30,664 $ 21,007 $ 23,976 $ 24,672 $ 24,983
Table 6 - Noninterest Expense
For the Three Months Ended (In thousands)
March 31,2019
December 31,2018
September 30,2018
June 30,2018
March 31,2018
Noninterest Expenses Salaries and
employee benefits $ 53,471 $ 43,495 $ 35,790 $ 38,268 $ 37,353
Premises and equipment 10,959 8,212 7,544 7,131 7,591 Merger
related expenses 22,000 2,049 178 756 - Intangible asset
amortization 6,073 598 650 715 792 Data processing 2,593 2,117
1,989 2,304 2,365 Consulting and professional fees 2,229 3,675
4,266 2,409 2,934 Loan related expenses 910 1,424 821 645 255 FDIC
insurance 1,752 1,230 1,237 1,223 955 Communications 998 684 682
703 704 Advertising and public relations 781 928 679 575 341 Legal
expenses 158 395 242 468 2,627 Other 11,516 7,889
7,153 7,238 6,022
Total noninterest
expenses $ 113,440 $ 72,697 $ 61,231 $ 62,435 $ 61,939
Table 7 - Reconciliation of Non-GAAP
Financial Measures
As of and for the Three Months Ended (In
thousands, except share and per share data)
March 31,2019
December 31,2018
September 30,2018
June 30,2018
March 31,2018
Efficiency ratio Noninterest expenses (numerator) $ 113,440
$ 72,697 $ 61,231 $ 62,435 $ 61,939 Net interest income $ 169,289 $
103,146 $ 98,100 $ 95,384 $ 91,111 Noninterest income 30,664
21,007 23,976 24,672 24,983 Operating
revenue (denominator) $ 199,953 $ 124,153 $ 122,076 $ 120,056 $
116,094 Efficiency ratio 56.73 % 58.55 % 50.16
% 52.00 %
53.35 %
Adjusted efficiency ratio Noninterest
expenses $ 113,440 $ 72,697 $ 61,231 $ 62,435 $ 61,939 Less: Merger
related expenses 22,000 2,049 178 756 — Less: Secondary offerings
expenses — — 2,022 1,165 1,365 Plus: Specially designated bonuses —
9,795 — — — Less: Other non-routine expenses (2) — —
— 1,145 2,278 Adjusted noninterest expenses
(numerator) $ 91,440 $ 60,853 $ 59,031 $ 59,369 $ 58,296 Net
interest income $ 169,289 $ 103,146 $ 98,100 $ 95,384 $ 91,111
Noninterest income 30,664 21,007 23,976 24,672 24,983 Less: Gain on
sale of insurance assets — — — 4,871 — Less: Securities (losses)
gains, net (12 ) (54 ) 2 (1,813 )
12 Adjusted noninterest income 30,676 21,061
23,974 21,614 24,971 Adjusted operating
revenue (denominator) $ 199,965 $ 124,207 $ 122,074 $ 116,998 $
116,082 Adjusted efficiency ratio 45.73 % 48.99 %
48.36 % 50.74 % 50.22 %
Tangible common
equity ratio Shareholders’ equity $ 2,302,823 $ 1,438,274 $
1,414,826 $ 1,389,956 $ 1,357,103 Less: Goodwill and other
intangible assets, net (598,674 ) (314,400 )
(314,998 ) (315,648 ) (327,247 ) Tangible common
shareholders’ equity 1,704,149 1,123,874
1,099,828 1,074,308 1,029,856 Total assets 17,452,911
12,730,285 11,759,837 11,305,528 10,999,382 Less: Goodwill and
other intangible assets, net (598,674 ) (314,400 )
(314,998 ) (315,648 ) (327,247 ) Tangible
assets $ 16,854,237 $ 12,415,885 $ 11,444,839 $ 10,989,880 $
10,672,135 Tangible common equity ratio 10.11 % 9.05
% 9.61 % 9.78 % 9.65 %
Tangible book value
per share Shareholders’ equity $ 2,302,823 $ 1,438,274 $
1,414,826 $ 1,389,956 $ 1,357,103 Less: Goodwill and other
intangible assets, net (598,674 ) (314,400 )
(314,998 ) (315,648 ) (327,247 ) Tangible common
shareholders’ equity $ 1,704,149 $ 1,123,874 $ 1,099,828 $
1,074,308 $ 1,029,856 Common shares outstanding 128,762,201
82,497,009 83,625,000 83,625,000
83,625,000 Tangible book value per share $ 13.23 $ 13.62 $ 13.15 $
12.85 $ 12.32 (1)
Annualized
(2) Other non-routine expenses for the second quarter of 2018
included expenses related to the sale of the assets of our
insurance company. Non-routine expenses for the first quarter of
2018 represent 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 (In
thousands, except share and per share data)
March 31,2019
December 31,2018
September 30,2018
June 30,2018
March 31,2018
Return on average tangible common equity Average common
equity $ 2,241,652 $ 1,412,643 $ 1,395,061 $ 1,358,770 $ 1,342,445
Less: Average intangible assets (602,446 ) (314,759 )
(315,382 ) (323,255 )
(327,727 ) Average tangible common shareholders’ equity $
1,639,206 $ 1,097,884 $ 1,079,679 $ 1,035,515 $ 1,014,718 Net
income $ 58,201 $ 32,325 $ 47,136 $ 47,974 $ 38,825 Plus:
Intangible asset amortization 4,628 459 498
548 607 Tangible net income $ 62,829 $ 32,784 $
47,634 $ 48,522 $ 39,432 Return on average tangible common
equity(2) 15.54 % 11.85 % 17.50 % 18.79
% 15.76 %
Adjusted return on average tangible common
equity Average tangible common shareholders’ equity $ 1,639,206
$ 1,097,884 $ 1,079,679 $ 1,035,515 $ 1,014,718 Tangible net income
$ 62,829 $ 32,784 $ 47,634 $ 48,522 $ 39,432 Non-routine items:
Plus: Merger related expenses 22,000 2,049 178 756 — Plus:
Secondary offerings expenses —
—
2,022 1,165 1,365 Plus: Specially designated bonuses — 9,795
—
— — Plus: Other non-routine expenses(2) —
—
—
1,145 2,278 Less: Gain on sale of insurance assets — —
—
4,871
—
Less: Securities gains (losses), net (12 ) (54 ) 2 (1,813 ) 12 Tax
expense: Less: Benefit of legacy loan bad debt deduction for tax —
— — 5,991 — Less: Income tax effect of tax deductible non-routine
items 5,239 2,759 34 (166 ) 529
Total non-routine items, after tax 16,773 9,139
2,164 (5,817 )
3,102 Adjusted tangible net income available to common
shareholders $ 79,602 $ 41,923 $ 49,798 $ 42,705 $ 42,534 Adjusted
return on average tangible common equity(1) 19.69 %
15.15 % 18.30 % 16.54 % 17.00 %
Adjusted
return on average assets Average assets $ 17,634,267 $
12,249,819 $ 11,585,969 $ 11,218,432 $ 10,922,274 Net income $
58,201 $ 32,325 $ 47,136 $ 47,974 $ 38,825 Return on average assets
1.34 % 1.05 % 1.61 % 1.72 % 1.44
% Net income $ 58,201 $ 32,325 $ 47,136 $ 47,974 $ 38,825 Total
non-routine items, after tax 16,773 9,139
2,164 (5,817 ) 3,102 Adjusted net income $ 74,974 $
41,464 $ 49,300 $ 42,157 $ 41,927 Adjusted return on average assets
1.72 % 1.34 % 1.69 % 1.51 % 1.56
%
Adjusted diluted earnings per share Diluted weighted
average common shares outstanding 130,549,319
83,375,485 84,660,256 84,792,657 84,674,807
Net income allocated to common stock $ 58,028 $ 32,293 $ 47,080 $
47,914 $ 38,825 Total non-routine items, after tax 16,773
9,139 2,164 (5,817 ) 3,102 Adjusted net
income allocated to common stock $ 74,801 $ 41,432 $ 49,244 $
42,097 $ 41,927 Adjusted diluted earnings per share $ 0.57 $ 0.50 $
0.58 $ 0.50 $ 0.50
Adjusted pre-tax, pre-provision net
earnings Income before taxes $ 75,303 $ 43,034 $ 62,210 $
56,358 $ 49,775 Plus: Provision for credit losses 11,210 8,422
(1,365 ) 1,263 4,380 Plus: Total non-routine items before taxes
22,012 11,898 2,198 8 3,631
Adjusted pre-tax, pre-provision net earnings $ 108,525 $ 63,354 $
63,043 $ 57,629 $ 57,786 (1) Annualized (2)
Other non-routine expenses for the second
quarter of 2018 included expenses related to the sale of the assets
of our insurance company. Non-routine expenses for the first
quarter of 2018 represent 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/20190429005340/en/
Media contact:Danielle
Kernell713-871-4051danielle.kernell@cadencebank.com
Investor relations contact:Valerie Toalson713-871-4103 or
800-698-7878vtoalson@cadencebancorporation.com
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