Cadence Bancorporation (NYSE: CADE) (“Cadence”) today announced
net income for the quarter ended December 31, 2020 of $200.6
million or $1.57 per share, compared to $51.4 million or $0.40 per
share for the quarter ended December 31, 2019, and $49.3 million or
$0.39 per share for the quarter ended September 30, 2020. For the
full year ended December 31, 2020, Cadence reported a net loss of
($205.5) million or ($1.63) per diluted common share (“per share”),
compared to net income of $202.0 million or $1.56 per share for the
year ended December 31, 2019. The fourth quarter of 2020 included
an acceleration of gain recognition from the interest rate collar
we terminated in March 2020 which resulted in $129.5 million
($169.2 million pretax) or $1.02 per share being accelerated into
fourth quarter earnings (“accelerated hedge revenue”). This
acceleration was triggered by the determination of hedge accounting
partial ineffectiveness as announced in our related Form 8-K filed
January 7, 2021.
“We are pleased to report strong performance across multiple
fronts in the fourth quarter. The provision for loan losses is down
meaningfully linked quarter, as are nonperforming and criticized
assets. With the exception of hospitality, we saw broad-based
improvement in credit migration, as many businesses recover, and
our portfolios continue to de-risk. Our deposit franchise improved
materially in 2020, and in the fourth quarter it was encouraging to
see an increase in net interest margin and yields on originated
loans. Our hedging activities protected the bank from the sharp
decline in interest rates this year, and the unwinding of the hedge
has produced a significant increase in regulatory capital, with our
Common Equity Tier 1 capital ratio ending the year at 14.0%.
Considering these results, we are pleased to announce proactive
capital actions, including an increase of our fourth quarter
dividend to $0.15 cents per share, payable in the first quarter
2021. Furthermore, we plan to retire maturing and callable debt and
reactivate our share buyback program, which had been put on hold
during the shutdown. Cadence operates in some of the most
attractive markets in America, with a highly motivated and
experienced team focused on serving our customers and driving
shareholder value. While there clearly remains uncertainty in the
broader environment, we are encouraged by our performance and the
opportunities to further leverage our excess capital and liquidity
in 2021,” stated Paul B. Murphy, Jr., Chairman and Chief Executive
Officer of Cadence Bancorporation.
Adjusted Performance Metrics
(1):
- Adjusted net income (1), excluding non-routine income and
expenses (2), was $206.7 million for the full year of 2020 compared
to $223.1 million for 2019. For the fourth quarter of 2020,
adjusted net income was $199.7 million, an increase of $147.8
million or 284% compared to the fourth quarter of 2019 and an
increase of $148.3 million or 288% compared to the third quarter of
2020.
- Adjusted pre-tax pre-provision net revenue (1) for the full
year 2020 was $542.5 million, compared to $400.3 million for the
full year 2019. Adjusted pre-tax pre-provision net earnings in the
fourth quarter of 2020 was $260.0 million, an increase of $165.2
million or 174% compared to the fourth quarter of 2019 and an
increase of $165.4 million or 175% compared to the third quarter of
2020.
- Adjusted EPS (1) for the full year 2020 was $1.64 compared to
$1.72 for 2019. Adjusted EPS for fourth quarter of 2020 of $1.57
increased from the prior year quarter of $0.40 and increased from
the linked quarter of $0.40.
- Adjusted annualized returns on average assets (1) and adjusted
tangible common equity (1) for the full year 2020 were 1.14% and
11.59%, respectively, compared to 1.26% and 13.60% for the full
year 2019, respectively, and for the fourth quarter of 2020 were
4.33% and 41.72%, respectively, compared to 1.16% and 11.93%,
respectively, for the fourth quarter of 2019 and 1.12% and 11.52%,
respectively, for the third quarter of 2020.
Fourth Quarter 2020
Highlights:
Fourth quarter 2020 highlights (compared to the linked quarter
where applicable) are as follows:
- The provision for credit losses for the fourth quarter of 2020
was $2.8 million compared to $33.0 million in the linked quarter
reflecting improvement in overall credit metrics and lower loan
balances. As ofDecember 31, 2020, our allowance for credit losses
(“ACL”) increased to 2.89% of total loans, up from 2.86% at
September 30, 2020. Excluding Paycheck Protection Program (“PPP”)
loans, our ACL ratio to loans was 3.12% at December 31, 2020, up
from 3.11% at September 30, 2020. Our ratio of ACL to total
nonperforming loans increased to 261% from 204%.
- Our tax equivalent net interest margin (“NIM”) increased to
3.54%, up 5 basis points from prior quarter. The improvement in NIM
was driven by continued management of deposit costs, declining 7
basis points to 0.25%, and fees earned on forgiven PPP loans and
other loan payoffs.
- Common Equity Tier 1 capital ratio increased to 14.0% and total
risk weighted capital increased to 16.7%, reflecting material
increases from the prior quarter due to the strong quarterly
earnings combined with lower risk weighted assets.
- Non-interest income in the fourth quarter of 2020 included the
accelerated hedge revenue of $169.2 million.
- Annualized returns on average assets and tangible common equity
(1) for the fourth quarter of 2020 were 4.35% and 41.90%,
respectively, compared to 1.08% and 11.08%, respectively, for the
third quarter of 2020, with the increases reflecting the impact of
the accelerated hedge revenue combined with lower loan
provisions.
Balance Sheet:
Total assets were $18.7 billion as of December 31, 2020, an
increase of $912.3 million or 5.1% from December 31, 2019, and an
increase of $308.4 million or 1.7% from September 30, 2020. The
linked quarter increase was driven by increases in core deposits,
cash and securities, partially offset by net declines in loans.
Cash and Cash Equivalents at December 31, 2020 totaled
$2.1 billion as compared to $1.0 billion at December 31, 2019 and
to $1.2 billion at September 30, 2020. The $806.8 million increase
in the fourth quarter of 2020 resulted from a decrease in loans
combined with an increase in deposits.
Investment Securities at December 31, 2020 totaled $3.3
billion as compared to $2.4 billion at December 31, 2019 and $3.1
billion at September 30, 2020. Securities as a percent of earning
assets was 18.6%, 14.6%, and 17.4% at December 31, 2020, December
31, 2019, and September 30, 2020, respectively. The increase in
securities from both the prior year and linked quarter is a result
of increased balance sheet liquidity resulting from growth in
deposits and the declines in net loans. Securities acquired during
the fourth quarter include primarily agency pass-through
mortgage-backed securities along with some municipal
securities.
Loans at December 31, 2020 totaled $12.7 billion as
compared to $13.0 billion at December 31, 2019, a decrease of
$264.5 million or 2.0%. Loans decreased $746.4 million or 5.5% from
$13.5 billion at September 30, 2020. The decline in the quarter
included paydowns and payoffs of $117 million in PPP loans, $113
million in criticized loans, $180 million in Shared National
Credits (SNCs), and $94 million in leveraged loans without
moderating factors (note there is some overlap between these
categories). On a portfolio basis, Restaurants declined $120
million and Energy declined $80 million, reflecting our targeted
risk reduction strategy in those portfolios. Commercial Real Estate
(“CRE”) declined $200 million, primarily reflective of credits
transitioning to the permanent debt markets. The $321 million
decline in General Commercial &Industrial (“C&I”) included
$90 million in PPP loans as well as paydowns and payoffs resulting
from excess borrower liquidity, borrower migration to non-bank and
Main Street Lending fundings, and resolutions of problem
credits.
Goodwill at December 31, 2020 totaled $43.1 million, down
from $486.0 million at December 31, 2019 and unchanged from
September 30, 2020. As previously reported, the Company recorded a
$443.7 million ($412.9 million, after-tax), non-cash goodwill
impairment charge in the first quarter of 2020. The remaining
goodwill at December 31, 2020 relates to our registered investment
advisory subsidiary and trust division.
Total Deposits at December 31, 2020 were $16.1 billion,
an increase of $1.3 billion or 8.9% from the December 31, 2019
level and up $266.0 million or 1.7% from the September 30, 2020
level. Non-interest bearing deposits were $5.0 billion or 31.4% of
total deposits at December 31, 2020, up from $3.8 billion or 26.0%
at December 31, 2019 and essentially unchanged from September 30,
2020. Total cost of deposits declined to 0.25% for the fourth
quarter 2020, significantly lower than both the fourth quarter 2019
cost of 1.14% and the third quarter 2020 cost of 0.32%.
Shareholders’ equity was $2.1 billion at December 31,
2020, a decrease of $339.7 million or 13.8% from December 31, 2019,
and an increase of $49.6 million or 2.4% from September 30, 2020.
The year over year decrease was driven by the goodwill impairment
charge in the first quarter of 2020. The linked quarter increase
included quarterly net income of $200.6 million, $9.4 million in
cash dividends, and a decrease of $144.6 million in other
comprehensive income (“OCI”) driven by the reclassification of
hedge revenue into current earnings.
Tangible common shareholders’ equity (1) was $2.0 billion at
December 31, 2020, an increase of $124.4 million or 6.7% from
December 31, 2019 and an increase of $54.8 million or 2.8% from
September 30, 2020. The full year increase was driven by tangible
earnings during the year. The linked quarter increase resulted from
the same factors noted above.
- Total shareholders’ equity to total assets and tangible equity
to tangible assets were 11.3% and 10.7%, respectively, at December
31, 2020 compared to 13.8% and 10.9% at December 31, 2019, and
11.3% and 10.6% at September 30, 2020, respectively.
- Tangible book value per share (1) was $15.83 as of December 31,
2020, an increase of $1.18 or 8.1% from $14.65 as of December 31,
2019 and an increase of $0.43 or 2.8% from $15.40 as of September
30, 2020.
- Total outstanding shares at December 31, 2020 were 125.97
million.
Quarter end regulatory capital ratios remained robust and
increased significantly during the quarter as follows:
4Q20
3Q20
4Q19
Common equity Tier 1 capital
14.0%
12.0%
11.5%
Tier 1 leverage capital
10.9%
9.9%
10.3%
Tier 1 risk-based capital
14.0%
12.0%
11.5%
Total risk-based capital
16.7%
14.7%
13.7%
Asset Quality:
Credit quality metrics during the fourth quarter of 2020
reflected a number of improvements including declines in
nonperforming and criticized loan balances but continued to reflect
ongoing COVID-driven stress and economic uncertainty, particularly
in the Hospitality sector.
- Net charge-offs for the full year 2020 were $106.1 million or
0.79% of average loans as compared to $85.8 million or 0.63% for
the full year 2019. Net charge-offs for the fourth quarter of 2020
were $21.2 million or 0.64% annualized of average loans compared to
$35.3 million or 1.04% annualized and $19.9 million or 0.58%
annualized for the quarters ended December 31, 2019 and September
30, 2020, respectively. The current quarter net charge-offs
included $4.2 million in Restaurant, $9.2 million in Commercial
Real Estate (“CRE”), and $7.3 million in General C&I.
- Provision for credit losses for the full year 2020 was $278.0
million or 2.06% of average loans as compared to $111.0 million or
0.81% of average loans for 2019. Provision for credit losses for
the fourth quarter of 2020 was $2.8 million as compared to $27.1
million for the fourth quarter of 2019 and $33.0 million for the
third quarter of 2020. The current quarter’s provision was impacted
by improvements in nonperforming and criticized loans and lower
loan balances. The fourth quarter 2020 loan provision was
concentrated in the CRE segment provision of $7.4 million
(primarily due to the Hospitality portfolio), which was partially
offset by reductions of $3.0 million in C&I and $1.4 million in
Consumer segments.
- The ACL was $367.2 million or 2.89% of total loans as of
December 31, 2020, as compared to $119.6 million or 0.92% of total
loans as of December 31, 2019, and $385.4 million or 2.86% of total
loans as of September 30, 2020. Excluding PPP loans, the ACL was
3.12% of total loans at December 31, 2020, increased from 3.11% at
September 30, 2020.
- The material increase in the ACL during 2020 incorporated loan
provisions of $278.0 million, net charge-offs of $106.1 million and
“day 1” CECL adoption impact of $75.6 million.
- Total nonperforming loans (“NPL”) as a percent of total loans
were 1.08% at December 31, 2020, compared to 0.92% at December 31,
2019 and 1.40% at September 30, 2020. NPL totaled $138.0 million,
$119.6 million and $189.1 million as of December 31, 2020, December
31, 2019 and September 30, 2020, respectively. The linked quarter
decline of $51.1 million or 27% was due primarily to payoffs and to
a lesser extent, net charge-offs.
- The ACL coverage of NPL increased meaningfully to 266.1% as of
December 31, 2020, as compared to 100.1% as of December 31, 2019,
and 203.8% as of September 30, 2020.
- Total criticized loans at December 31, 2020 were $871.7 million
or 6.85% of total loans as compared to $605.1 million or 4.66% at
December 31, 2019 and $1.1 billion or 8.05% at September 30, 2020.
The linked quarter decrease of $211.3 million or 20% was primarily
in Restaurant, Energy, General C&I, and Healthcare credits,
reflecting decreases of 28.7%, 21.0%, 30.2% and 49.0%,
respectively.
- Active COVID related loan payment deferrals totaled $135
million at January 15, 2021, down from $376 million at September
30, 2020.
- Loans 30-89 days past due were 0.36% of total loans at December
31, 2020, compared to 0.17% at December 31, 2019 and 0.15% at
September 30, 2020. While minor, the increase was primarily due to
a small number of loans that includes $9.4 million in Hospitality
loans and $4.8 million in Mortgage loans.
Total Revenue:
Total operating revenue (1) for 2020 was $926.3 million, up
$144.2 million or 18.4%, and for the fourth quarter of 2020 was
$366.5 million, up $171.7 million or 88.1% from the same period in
2019 and up $181.8 million or 98.5% from the linked quarter.
Net interest income for the full year 2020 was $619.0
million as compared to $651.2 million for 2019, a decrease of $32.2
million or 4.9%. The year-over-year decline in earning asset yields
of 117 basis points was driven by lower index rates partially
offset by our hedges, combined with an increase in lower yielding
securities. This decline was partially offset by our cost of funds
declining 81 basis points as we achieved record low-deposit costs
and record high levels of non-interest bearing deposits during
2020.
Net interest income for the fourth quarter of 2020 was $156.7
million, a decrease of $4.2 million or 2.6% from the same period in
2019 and an increase of $2.7 million or 1.8% from the third quarter
of 2020. Compared to the linked quarter, loan interest income
excluding accretion increased $0.9 million as loan fees from loan
payoffs offset the impact of lower volumes, funding costs decreased
by $2.5 million driven by continued reduction of deposit costs, and
hedge interest income increased $0.2 million. These improvements
were partially offset by a decrease of $0.5 million in loan
accretion and a decrease of $0.3 million in investment income due
to lower yielding securities.
- We continued to lower our interest rates on deposits with total
cost of deposits dropping from 0.32% to 0.25% linked quarter, down
21.9%. Noninterest-bearing deposits as a percent of total deposits
remained stable at 31.4% compared to 31.9% in the linked quarter.
Total interest-bearing liability costs declined by 8 basis points
from 0.59% to 0.51% linked quarter, down 13.6%. Average
interest-bearing liabilities declined $244.2 million or 2.2% from
the prior quarter to $10.9 billion.
- Yield on loans excluding accretion and hedge income was 3.89%
in the fourth quarter of 2020, up 14 basis points from 3.75% in the
third quarter of 2020. Excluding the impact of PPP loans, this
yield was 3.98% and 3.87%, for the fourth and third quarters of
2020, respectively. Average loans declined $414.0 million or 3.0%
from the prior quarter to $13.2 billion.
- Total hedge income in interest income (which includes the
amortized effective collar gain recognition and other hedge income)
for the fourth quarter of 2020 totaled $19.9 million as compared to
$19.7 million for the third quarter of 2020. The effective portion
of the collar gain was and will continue to be reflected in
interest income, whereas the ineffective portion of the gain was
reflected in noninterest income during the fourth quarter of 2020.
At December 31, 2020, the remaining portion of the collar gain
(included in OCI) yet to be amortized into revenue was $35.4
million, with $33.5 million expected to be amortized into interest
income in 2021 and the final $1.9 million expected in early
2022.
- Accretion on acquired loans totaled $5.9 million for the fourth
quarter of 2020 as compared to $6.4 million for the third quarter
of 2020.
- Yield on investment securities declined to 1.87% in the fourth
quarter of 2020 compared to 2.06% in the linked quarter, with the
lower yield reflecting the impact of securities purchased in the
fourth quarter and late in the third quarter. Average investment
securities increased $241.4 million or 8.2% from the prior quarter
to $3.2 billion. Fed funds sold and short-term investments also
increased by $237.0 million or 25.2% from the prior quarter due to
excess liquidity during the fourth quarter.
- Total earning asset yields declined slightly to 3.85% in the
fourth quarter of 2020 compared to 3.86% in the linked quarter,
with average balances increasing by $64.0 million or 0.4% to $17.7
billion.
- Our NIM for the full year 2020 decreased to 3.58% compared to
4.00% for 2019. Our net interest spread for 2020 decreased to 3.29%
as compared to 3.48% for 2019. Our NIM for the fourth quarter of
2020 was 3.54% as compared to 3.89% for the fourth quarter of 2019
and 3.49% for the third quarter of 2020.
PPP loans averaged $1.0 billion in the fourth quarter at a yield
of 2.82%, and along with cash in deposits associated with these
loans, negatively impacted our fourth quarter NIM by 10 basis
points as illustrated in the table below. Excluding the impact of
the PPP program, the fourth quarter 2020 NIM remained stable at
3.64%, as lower deposit costs more than offset the impact of lower
loan balances and lower securities yields. Specifically, the NIM
change during the quarter included:
Quarterly Change
$ MM
NIM
3Q 2020 Net Interest Income
$154.5
3.49%
3Q 2020 Net Interest Income before PPP
loans & associated cash
$148.4
3.64%
Loans (ex PPP & accretion)
(0.5)
(0.04%)
Deposits
2.6
0.07%
Hedge Income
0.2
0.00%
Accretion
(0.5)
(0.01%)
Securities
(0.3)
(0.01%)
Cash
0.2
0.00%
Borrowings
(0.2)
(0.01%)
NIM before PPP loans &
cash*
$149.9
3.64%
PPP Loans & associated cash
7.4
(0.10%)
4Q 2020 Net Interest Margin
$157.3
3.54%
*Calculated by removing the quarterly average balance of PPP
loans and income, as well as the quarterly average balance of cash
associated with unused PPP funds.
Noninterest income for the full year of 2020 was $307.4
million, an increase of $176.4 million or 135% from 2019.
Noninterest income for the fourth quarter of 2020 was $209.7
million, an increase of $175.8 million from the same period of 2019
and an increase of $177.2 million from the linked quarter. Adjusted
noninterest income (1) for the fourth quarter of 2020 was $208.4
million, an increase of $176.1 million from the fourth quarter of
2019, and an increase of $175.3 million from the linked
quarter.
- The fourth quarter includes the accelerated hedge revenue of
$169.2 million reclassified from OCI. The partial accounting
ineffectiveness determination resulted from a significant decrease
in forecasted LIBOR based loans to support future amortization of
the remaining transaction gain on the termination of our interest
rate collar. See additional discussion in our Form 8-K filed
January 7, 2021.
- Excluding the accelerated hedge revenue, the linked quarter
increase was $6.1 million including increases of $3.6 million in
earnings from limited partnerships, $1.3 million in securities
gains, $0.7 million in investment advisory revenue, and $0.6
million in credit related fees.
- Noninterest income as a percent of total revenue for 2020 was
33.2% as compared to 16.7% for 2019, and for the fourth quarter of
2020 was 57.2% as compared to 17.4% for the fourth quarter of 2019
and 17.5% for the linked quarter. Before the impact of the
accelerated hedge revenue of $169.2 million, noninterest income as
a percent of total revenue for 2020 and the fourth quarter of 2020
were 18.3% and 20.5%, respectively, both increased from the
comparable periods.
Noninterest expense for the full year of 2020 was $826.5
million, an increase of $417.7 million or 102.2% from 2019 due to
the goodwill impairment charge of $443.7 million recorded in the
first quarter of 2020. Noninterest expense for the fourth quarter
of 2020 was $105.3 million, an increase of $4.8 million or 4.8%
from the same period in 2019 and an increase of $10.5 million or
11.0% from the linked quarter. Adjusted noninterest expense (1),
which excludes the impact of non-routine items (2), was $377.6
million for the full year of 2020, a decrease of $1.4 million or
0.4% from 2019. For the fourth quarter of 2020, adjusted
noninterest expense was $105.1 million, up $6.7 million or 6.9%
from the fourth quarter of 2019 and up $12.6 million or 13.6% from
the third quarter of 2020. The linked quarter increase in
noninterest expenses resulted from an increase of $8.1 million in
personnel costs driven by an increase of $8.5 million in incentive
compensation due to improved corporate performance partially offset
by a reduction of $1.0 million in medical insurance expense due to
improved claims experience.
Our adjusted efficiency ratio(1) for the full year of
2020 was 41.0% as compared to 48.6% for 2019. The adjusted
efficiency ratio for the fourth quarter of 2020 was 28.8%, compared
to the linked quarter ratio of 49.4% and the prior year’s fourth
quarter ratio of 50.9%. The full year and linked quarter
improvements are both a result of the accelerated hedge revenue of
$169.2 million. Before the impact of the accelerated hedge revenue,
the full year and fourth quarter 2020 efficiency ratios both
reflected slight increases at 50.3% and 53.7%, respectively, with
the full year increase reflecting lower revenues in 2020 and the
linked quarter increase reflecting the higher fourth quarter
expenses.
Taxes:
The effective tax rate for the full year 2020 was (15.3%) as
compared to 23.0% for the full year 2019. The effective tax rate
for the fourth quarter of 2020 was 22.4% compared to 16.1% for the
linked quarter and 23.4% for the fourth quarter of 2019. The full
year 2020 effective rate was impacted by $313.3 million in
non-deductible goodwill impairment.
_____________________________
(1)
Considered a non-GAAP financial measure.
See Table10 “Reconciliation of Non-GAAP Financial Measures” for a
reconciliation of our non-GAAP measures to the most directly
comparable GAAP financial measure.
(2)
See Table 10 for a detail of non-routine
income and expenses. The fourth quarter 2020 accelerated hedge
revenue is not included as an adjustment from GAAP earnings to
arrive at the non-GAAP adjusted performance metrics presented
herein due to the historical and continuing nature of hedge revenue
in our earnings, and the revenue resulting from the partial
ineffectiveness designation merely representing an acceleration of
a portion of the fixed collar gain into earnings as compared to the
original amortization expectation. The revised amortization
expectation for the remainder of the collar gain is presented
within this release for clarification of this component of ongoing
hedge revenue.
Dividend:
On January 21, 2021, the board of directors of Cadence
Bancorporation declared a quarterly cash dividend in the amount of
$0.15 per share of outstanding common stock, representing an
annualized dividend of $0.60 per share. The dividend will be paid
on February 12, 2021 to holders of record of Cadence’s Class A
common stock on February 5, 2021.
Share Repurchase
Authorization:
On January 21, 2021, the board of directors of Cadence
Bancorporation authorized a share repurchase program providing for
the purchase of shares of the Company’s Class A common stock for an
aggregate purchase price of up to $200 million, subject to
regulatory approvals. The previously approved share repurchase
program authorizing up to $100 million is set to expire in February
2021.
Supplementary Financial Tables
(Unaudited):
Supplementary financial tables (unaudited) are included in this
release following the customary disclosure information.
Fourth Quarter 2020 Earnings Conference
Call:
Cadence Bancorporation executive management will host a
conference call to discuss fourth quarter 2020 results on Monday,
January 25, 2021, at 7:30 a.m. CT / 8:30 a.m. ET. Slides to be
presented by management on the conference call can be viewed by
visiting www.cadencebancorporation.com and selecting “Events &
Presentations” then “Presentations”.
Conference Call Access:
To access the conference call, please dial one of the following
numbers approximately 10-15 minutes prior to the start time to
allow time for registration and use the Elite Entry Number provided
below.
Dial in (toll free):
1-888-317-6003
International dial in:
1-412-317-6061
Canada (toll free):
1-866-284-3684
Participant Elite Entry Number:
3708183
For those unable to participate in the live presentation, a
replay will be available through February 8, 2021. 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:
10150788
Webcast Access:
The call and corresponding presentation slides will be webcast
live on the home page of the Company’s website:
www.cadencebancorporation.com.
About Cadence
Bancorporation:
Cadence Bancorporation (NYSE: CADE), headquartered in Houston,
Texas, is a regional financial holding company with $18.7 billion
in total assets as of December 31, 2020. Its wholly owned
subsidiary, Cadence Bank, N.A., operates 98 branch locations in
Alabama, Florida, Georgia, Mississippi, Tennessee and Texas, and
provides corporations, middle-market companies, small businesses
and consumers with a full range of innovative banking and financial
solutions. Services and products include commercial and business
banking, treasury management, specialized lending, asset-based
lending, commercial real estate, SBA lending, foreign exchange,
wealth management, investment and trust services, financial
planning, retirement plan management, payroll and insurance
services, consumer banking, consumer loans, mortgages, home equity
lines and loans, and credit cards. Clients have access to
leading-edge online and mobile solutions, interactive teller
machines, and more than 55,000 ATMs. The Cadence team of 1,900
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 extent of the impact of the COVID-19 pandemic on us
and our customers, counterparties, employees, and third-party
service providers, and the impacts to our business, financial
position, results of operations, and prospects; the impact on our
financial condition, results of operations, financial disclosures,
and future business strategies related to the implementation of
FASB Accounting Standards Update 2016-13, Financial Instruments –
Credit Losses, commonly referred to as CECL. Cadence can give no
assurance that any goal or plan or expectation set forth in
forward-looking statements can be achieved and readers are
cautioned not to place undue reliance on such statements. The
forward-looking statements are made as of the date of this
communication, and Cadence does not intend, and assumes no
obligation, to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events or
circumstances, except as required by applicable law.
About Non-GAAP Financial Measures
Certain of the financial measures and ratios we present,
including “efficiency ratio,” “adjusted efficiency ratio,”
“adjusted noninterest expenses,” “adjusted operating revenue,”
“tangible common equity ratio,” “tangible book value per share” and
“return on average tangible common equity”, “adjusted return on
average tangible common equity”, “adjusted return on average
assets”, “adjusted diluted earnings per share”, and “pre-tax,
pre-provision net revenue” are supplemental measures that are not
required by, or are not presented in accordance with, U.S.
generally accepted accounting principles (GAAP). We refer to these
financial measures and ratios as “non-GAAP financial measures.” We
consider the use of select non-GAAP financial measures and ratios
to be useful for financial and operational decision making and
useful in evaluating period-to-period comparisons. We believe that
these non-GAAP financial measures provide meaningful supplemental
information regarding our performance by excluding certain
expenditures or assets that we believe are not indicative of our
primary business operating results or by presenting certain metrics
on a fully taxable equivalent basis.
We believe that management and investors benefit from referring
to these non-GAAP financial measures in assessing our performance
and when planning, forecasting, analyzing and comparing past,
present and future periods.
These non-GAAP financial measures should not be considered a
substitute for financial information presented in accordance with
GAAP and you should not rely on non-GAAP financial measures alone
as measures of our performance. The non-GAAP financial measures we
present may differ from non-GAAP financial measures used by our
peers or other companies. We compensate for these limitations by
providing the equivalent GAAP measures whenever we present the
non-GAAP financial measures and by including a reconciliation of
the impact of the components adjusted for in the non-GAAP financial
measure so that both measures and the individual components may be
considered when analyzing our performance. A reconciliation of
non-GAAP financial measures to the comparable GAAP financial
measures is included at the end of the financial statement tables
(Table 10).
Table 1 – Selected Financial
Data
As of and for the Three Months
Ended
As of and for the Years Ended
December 31,
(In thousands, except per share
data)
4Q20
3Q20
2Q20
1Q20
4Q19
2020
2019
Statement of Operations Data
Interest income
$
170,739
$
170,497
$
177,175
$
192,754
$
207,620
$
711,166
$
860,076
Interest expense
13,998
16,455
22,461
39,286
46,709
92,200
208,903
Net interest income
156,741
154,042
154,714
153,468
160,911
618,966
651,173
Provision for credit losses
2,835
32,973
158,811
83,429
27,126
278,048
111,027
Net interest income after provision
153,906
121,069
(4,097
)
70,039
133,785
340,918
540,146
Noninterest income (1)
209,745
32,591
29,950
35,069
33,898
307,355
130,925
Noninterest expense (2)
105,331
94,859
88,620
537,653
100,519
826,464
408,770
Income (loss) before income taxes
258,320
58,801
(62,767
)
(432,545
)
67,164
(178,191
)
262,301
Income tax expense (benefit)
57,737
9,486
(6,653
)
(33,234
)
15,738
27,336
60,343
Net income (loss)
$
200,583
$
49,315
$
(56,114
)
$
(399,311
)
$
51,426
$
(205,527
)
$
201,958
Weighted average common shares
outstanding
Basic
125,974
125,957
125,925
126,630
127,954
126,121
128,914
Diluted
126,409
126,095
125,925
126,630
128,003
126,121
129,018
Earnings (loss) per share
Basic
$
1.58
$
0.39
$
(0.45
)
$
(3.15
)
$
0.40
$
(1.63
)
$
1.56
Diluted
1.57
0.39
(0.45
)
(3.15
)
0.40
(1.63
)
1.56
Period-End Balance Sheet Data
Cash and cash equivalents
$
2,053,946
$
1,247,172
$
1,899,369
$
609,351
$
988,764
$
2,053,946
$
988,764
Investment securities
3,332,168
3,088,699
2,661,433
2,461,644
2,368,592
3,332,168
2,368,592
Total loans, net of unearned income
12,719,129
13,465,556
13,699,097
13,392,191
12,983,655
12,719,129
12,983,655
Allowance for credit losses
367,160
385,412
370,901
245,246
119,643
367,160
119,643
Total assets
18,712,567
18,404,195
18,857,753
17,237,918
17,800,229
18,712,567
17,800,229
Total deposits
16,052,245
15,786,221
16,069,282
14,489,505
14,742,794
16,052,245
14,742,794
Noninterest-bearing deposits
5,033,748
5,033,338
5,220,109
3,959,721
3,833,704
5,033,748
3,833,704
Interest-bearing deposits
11,018,497
10,752,883
10,849,173
10,529,784
10,909,090
11,018,497
10,909,090
Borrowings and subordinated debentures
372,669
372,446
372,222
372,440
372,173
372,669
372,173
Total shareholders’ equity
2,121,102
2,071,472
2,045,480
2,113,543
2,460,846
2,121,102
2,460,846
Average Balance Sheet Data
Investment securities
$
3,201,722
$
2,960,357
$
2,487,467
$
2,397,275
$
2,003,339
$
2,763,450
$
1,776,689
Total loans, net of unearned income
13,238,440
13,652,395
13,884,220
13,161,371
13,423,435
13,483,895
13,714,731
Allowance for credit losses
393,306
389,243
267,464
201,785
132,975
313,377
114,256
Total assets
18,354,046
18,248,014
18,500,600
17,694,018
17,843,383
18,199,726
17,689,126
Total deposits
15,736,884
15,628,314
15,774,787
14,574,614
14,749,327
15,430,038
14,628,628
Noninterest-bearing deposits
5,245,478
4,892,079
4,587,673
3,658,612
3,648,874
4,598,544
3,431,300
Interest-bearing deposits
10,491,406
10,736,235
11,187,115
10,916,002
11,100,454
10,831,494
11,197,328
Borrowings and subordinated debentures
372,920
372,304
372,547
439,698
374,179
389,275
437,186
Total shareholders’ equity
2,072,030
2,052,079
2,118,796
2,446,810
2,471,398
2,171,826
2,373,856
(1)
The quarter ended December 31, 2020,
includes hedge revenue of $169.2 million, $129.5 million after
tax.
(2)
The quarter ended March 31, 2020, includes
the non-cash goodwill impairment charge of $443.7 million, $412.9
million after-tax.
Table 1 (Continued) – Selected
Financial Data
As of and for the Three Months
Ended
As of and for the Years Ended
December 31,
(In thousands, except per share
data)
4Q20 (4)
3Q20
2Q20
1Q20
4Q19
2020 (4)
2019
Per Share Data:
Book value
$
16.84
$
16.45
$
16.24
$
16.79
$
19.29
$
16.84
$
19.29
Tangible book value (1)
15.83
15.40
15.15
15.65
14.65
15.83
14.65
Cash dividends declared
0.075
0.050
0.050
0.175
0.175
0.350
0.700
Dividend payout ratio
4.75
%
12.82
%
(11.11
)%
(5.56
)%
43.75
%
(21.47
)%
44.87
%
Performance Ratios:
Return on average common equity (2)
38.51
%
9.56
%
(10.65
)%
(65.64
)%
8.26
%
(9.46
)%
8.51
%
Return on average tangible common equity
(1) (2)
41.90
11.08
(10.56
)
3.86
11.82
11.63
12.40
Return on average assets (2)
4.35
1.08
(1.22
)
(9.08
)
1.14
(1.13
)
1.14
Net interest margin (2)
3.54
3.49
3.51
3.80
3.89
3.58
4.00
Efficiency ratio (1)
28.74
50.83
47.99
285.17
51.60
89.22
52.27
Adjusted efficiency ratio (1)
28.79
49.45
47.93
49.88
50.91
41.04
48.64
Asset Quality Ratios:
Total NPA to total loans, OREO, and other
NPA
1.24
%
1.55
%
1.74
%
1.31
%
0.97
%
1.24
%
0.97
%
Total nonperforming loans ("NPL") to total
loans
1.08
1.40
1.64
1.19
0.92
1.08
0.92
Total ACL to total loans
2.89
2.86
2.71
1.83
0.92
2.89
0.92
ACL to total NPL
266.05
203.82
165.30
153.61
100.07
266.05
100.07
Net charge-offs to average loans (2)
0.64
0.58
0.94
0.99
1.04
0.79
0.63
Capital Ratios:
Total shareholders’ equity to assets
11.3
%
11.3
%
10.8
%
12.3
%
13.8
%
11.3
%
13.8
%
Tangible common equity to tangible assets
(1)
10.7
10.6
10.2
11.5
10.9
10.7
10.9
Common equity Tier 1 capital (3)
14.0
12.0
11.7
11.4
11.5
14.0
11.5
Tier 1 leverage capital (3)
10.9
9.9
9.5
10.1
10.3
10.9
10.3
Tier 1 risk-based capital (3)
14.0
12.0
11.7
11.4
11.5
14.0
11.5
Total risk-based capital (3)
16.7
14.7
14.3
13.8
13.7
16.7
13.7
_____________________
(1)
Considered a non-GAAP financial
measure. See Table 10 "Reconciliation of Non-GAAP Financial
Measures" for a reconciliation of our non-GAAP measures to the most
directly comparable GAAP financial measure.
(2)
Quarterly periods are
annualized.
(3)
Current quarter regulatory
capital ratios are estimates.
(4)
Asset Quality Ratios do not
include nonperforming loans held for sale of $176 thousand.
Table 2 – Average
Balances/Yield/Rates
For the Three Months Ended
December 31,
2020
2019
Average
Income/
Yield/
Average
Income/
Yield/
(In thousands)
Balance
Expense
Rate
Balance
Expense
Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income (1)
Originated loans
$
10,939,304
$
125,535
4.57
%
$
10,160,970
$
134,450
5.25
%
ANCI portfolio
2,126,553
25,943
4.85
3,017,005
46,247
6.08
PCD portfolio (3)
172,583
3,820
8.81
245,474
9,857
15.93
Total loans
13,238,440
155,298
4.67
13,423,449
190,554
5.63
Investment securities
Taxable
2,895,541
12,597
1.73
1,806,932
11,699
2.57
Tax-exempt (2)
306,181
2,427
3.15
196,407
1,829
3.69
Total investment securities
3,201,722
15,024
1.87
2,003,339
13,528
2.68
Federal funds sold and short-term
investments
1,178,973
548
0.18
930,910
3,392
1.45
Other investments
76,878
380
1.97
77,348
530
2.72
Total interest-earning assets
17,696,013
171,250
3.85
16,435,046
208,004
5.02
Noninterest-earning assets:
Cash and due from banks
216,116
107,180
Premises and equipment
125,955
128,458
Accrued interest and other assets
709,268
1,305,674
Allowance for credit losses
(393,306
)
(132,975
)
Total assets
$
18,354,046
$
17,843,383
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing liabilities:
Demand deposits
$
7,881,093
$
4,145
0.21
%
$
8,195,455
$
26,946
1.30
%
Savings deposits
336,304
127
0.15
262,638
320
0.48
Time deposits
2,274,009
5,711
1.00
2,642,361
14,983
2.25
Total interest-bearing deposits
10,491,406
9,983
0.38
11,100,454
42,249
1.51
Other borrowings
149,981
931
2.47
152,102
953
2.49
Subordinated debentures
222,939
3,085
5.51
222,077
3,507
6.27
Total interest-bearing liabilities
10,864,326
13,999
0.51
11,474,633
46,709
1.61
Noninterest-bearing
liabilities:
Demand deposits
5,245,478
3,648,874
Accrued interest and other liabilities
172,212
248,478
Total liabilities
16,282,016
15,371,985
Shareholders' equity
2,072,030
2,471,398
Total liabilities and shareholders'
equity
$
18,354,046
$
17,843,383
Net interest income/net interest
spread
157,251
3.34
%
161,295
3.40
%
Net yield on earning assets/net interest
margin
3.54
%
3.89
%
Taxable equivalent adjustment:
Investment securities
(510
)
(384
)
Net interest income
$
156,741
$
160,911
_____________________
(1)
Nonaccrual loans are included in loans,
net of unearned income. No adjustment has been made for these loans
in the calculation of yields.
(2)
Interest income and yields are presented
on a fully taxable equivalent basis using an income tax rate of
21%.
(3)
Prior to the adoption of CECL on January
1, 2020, these loans were referred to as ACI loans, but with the
adoption of CECL they are referred to as PCD loans.
Table 2 (Continued) – Average
Balances/Yield/Rates
For the Three Months Ended
December 31, 2020
For the Three Months Ended
September 30, 2020
Average
Income/
Yield/
Average
Income/
Yield/
(In thousands)
Balance
Expense
Rate
Balance
Expense
Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income (1)
Originated loans
$
10,939,304
$
125,535
4.57
%
$
11,168,913
$
123,177
4.39
%
ANCI portfolio
2,126,553
25,943
4.85
2,295,097
28,214
4.89
PCD portfolio (3)
172,583
3,820
8.81
188,385
3,460
7.31
Total loans
13,238,440
155,298
4.67
13,652,395
154,851
4.51
Investment securities
Taxable
2,895,541
12,597
1.73
2,694,012
13,164
1.94
Tax-exempt (2)
306,181
2,427
3.15
266,345
2,150
3.21
Total investment securities
3,201,722
15,024
1.87
2,960,357
15,314
2.06
Federal funds sold and short-term
investments
1,178,973
548
0.18
942,017
432
0.18
Other investments
76,878
380
1.97
77,262
350
1.80
Total interest-earning assets
17,696,013
171,250
3.85
17,632,031
170,947
3.86
Noninterest-earning assets:
Cash and due from banks
216,116
170,241
Premises and equipment
125,955
127,432
Accrued interest and other assets
709,268
707,553
Allowance for credit losses
(393,306
)
(389,243
)
Total assets
$
18,354,046
$
18,248,014
LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing liabilities:
Demand deposits
$
7,881,093
$
4,145
0.21
%
$
8,037,801
$
4,681
0.23
%
Savings deposits
336,304
127
0.15
319,004
140
0.17
Time deposits
2,274,009
5,711
1.00
2,379,430
7,741
1.29
Total interest-bearing deposits
10,491,406
9,983
0.38
10,736,235
12,562
0.47
Other borrowings
149,981
931
2.47
149,973
931
2.47
Subordinated debentures
222,939
3,085
5.51
222,331
2,961
5.30
Total interest-bearing liabilities
10,864,326
13,999
0.51
11,108,539
16,454
0.59
Noninterest-bearing
liabilities:
Demand deposits
5,245,478
4,892,079
Accrued interest and other liabilities
172,212
195,317
Total liabilities
16,282,016
16,195,935
Stockholders' equity
2,072,030
2,052,079
Total liabilities and stockholders'
equity
$
18,354,046
$
18,248,014
Net interest income/net interest
spread
157,251
3.34
%
154,493
3.27
%
Net yield on earning assets/net interest
margin
3.54
%
3.49
%
Taxable equivalent adjustment:
Investment securities
(510
)
(451
)
Net interest income
$
156,741
$
154,042
_____________________
(1)
Nonaccrual loans are included in
loans, net of unearned income. No adjustment has been made for
these loans in the calculation of yields.
(2)
Interest income and yields are
presented on a fully taxable equivalent basis using an income tax
rate of 21%.
(3)
Prior to the adoption of CECL on
January 1, 2020, these loans were referred to as ACI loans, but
with the adoption of CECL they are referred to as PCD loans.
Table 2 (Continued) – Average
Balances/Yield/Rates
For the Year Ended December
31,
2020
2019
Average
Income/
Yield/
Average
Income/
Yield/
(In thousands)
Balance
Expense
Rate
Balance
Expense
Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income (1)
Originated loans
$
10,874,853
$
504,036
4.63
%
$
10,053,507
$
542,543
5.40
%
ANCI portfolio
2,415,141
127,774
5.29
3,387,367
219,183
6.47
PCD portfolio (3)
193,902
16,328
8.42
273,857
34,559
12.62
Total loans
13,483,895
648,138
4.81
13,714,731
796,285
5.81
Investment securities
Taxable
2,515,807
51,983
2.07
1,568,599
42,450
2.71
Tax-exempt (2)
247,643
8,332
3.36
208,090
7,983
3.84
Total investment securities
2,763,450
60,315
2.18
1,776,689
50,433
2.84
Federal funds sold and short-term
investments
1,023,367
3,092
0.30
759,026
12,762
1.68
Other investments
77,908
1,371
1.76
70,127
2,274
3.24
Total interest-earning assets
17,348,620
712,916
4.11
16,320,573
861,754
5.28
Noninterest-earning assets:
Cash and due from banks
203,413
115,268
Premises and equipment
127,151
128,448
Accrued interest and other assets
833,919
1,239,093
Allowance for credit losses
(313,377
)
(114,256
)
Total assets
$
18,199,726
$
17,689,126
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing liabilities:
Demand deposits
$
8,101,392
$
38,005
0.47
%
$
7,983,237
$
117,462
1.47
%
Savings deposits
305,031
763
0.25
253,170
1,066
0.42
Time deposits
2,425,071
36,647
1.51
2,960,921
69,550
2.35
Total interest-bearing deposits
10,831,494
75,415
0.70
11,197,328
188,078
1.68
Other borrowings
166,730
3,906
2.34
256,815
8,704
3.39
Subordinated debentures
222,545
12,879
5.79
180,371
12,121
6.72
Total interest-bearing liabilities
11,220,769
92,200
0.82
11,634,514
208,903
1.80
Noninterest-bearing
liabilities:
Demand deposits
4,598,544
3,431,300
Accrued interest and other liabilities
208,587
249,456
Total liabilities
16,027,900
15,315,270
Shareholders' equity
2,171,826
2,373,856
Total liabilities and shareholders'
equity
$
18,199,726
$
17,689,126
Net interest income/net interest
spread
620,716
3.29
%
652,851
3.48
%
Net yield on earning assets/net interest
margin
3.58
%
4.00
%
Taxable equivalent adjustment:
Investment securities
(1,750
)
(1,678
)
Net interest income
$
618,966
$
651,173
_____________________
(1)
Nonaccrual loans are included in loans,
net of unearned income. No adjustment has been made for these loans
in the calculation of yields.
(2)
Interest income and yields are presented
on a fully taxable equivalent basis using an income tax rate of
21%.
(3)
Prior to the adoption of CECL on January
1, 2020, these loans were referred to as ACI loans, but with the
adoption of CECL they are referred to as PCD loans.
Table 3 – Loan Interest Income
Detail
For the Three Months
Ended,
For the Year Ended,
(In thousands)
4Q20
3Q20
2Q20
1Q20
4Q19
December 31, 2020
December 31, 2019
Interest Income Detail
Originated loans
$
125,535
$
123,177
$
125,922
$
129,402
$
134,450
$
504,036
$
542,543
ANCI loans: interest income
20,507
22,850
26,264
32,940
37,637
102,562
180,974
ANCI loans: accretion
5,436
5,364
6,703
7,710
8,610
25,212
38,209
PCD loans: interest income (1)
3,355
2,421
3,111
3,039
3,839
11,926
29,927
PCD loans: accretion (1)
465
1,039
854
2,043
6,018
4,402
4,632
Total loan interest income
$
155,298
$
154,851
$
162,854
$
175,134
$
190,554
$
648,138
$
796,285
Yields
Originated loans
4.57
%
4.39
%
4.53
%
5.10
%
5.25
%
4.63
%
5.40
%
ANCI loans without discount accretion
3.84
3.96
4.20
4.85
4.95
4.25
5.34
ANCI loans discount accretion
1.01
0.93
1.08
1.14
1.13
1.04
1.13
PCD loans without discount accretion
7.73
5.11
6.30
5.65
6.20
6.15
10.93
PCD loans discount accretion
1.08
2.20
1.73
3.80
9.73
2.27
1.69
Total loan yield
4.67
%
4.51
%
4.72
%
5.35
%
5.63
%
4.81
%
5.81
%
(1)
Prior year PCD amounts have been revised
to be comparable to the current year presentation. Interest income
for PCD loans represents contractual interest.
Table 4 – Allowance for Credit
Losses (“ACL”) (1)
For the Three Months
Ended
For the Year Ended December
31,
(In thousands)
4Q20
3Q20
2Q20
1Q20
4Q19
2020
2019
Balance at beginning of period
$
385,412
$
370,901
$
245,246
$
119,643
$
127,773
$
119,643
$
94,378
Cumulative effect of the adoption of CECL
(2)
—
—
—
75,850
—
75,850
—
Charge-offs
(23,956
)
(21,830
)
(33,452
)
(33,098
)
(35,432
)
(112,336
)
(87,001
)
Recoveries
2,770
1,936
901
613
176
6,220
1,239
Net charge-offs
(21,186
)
(19,894
)
(32,551
)
(32,485
)
(35,256
)
(106,116
)
(85,762
)
Provision for loan losses
2,934
34,405
158,206
82,238
27,126
277,783
111,027
Balance at end of period
$
367,160
$
385,412
$
370,901
$
245,246
$
119,643
$
367,160
$
119,643
(1)
This table represents the activity in the
ACL for funded loans.
(2)
The Company adopted ASU 2016-13, Financial
Instruments – Credit Losses (“CECL”), on January 1, 2020 and
recorded this cumulative effect adjustment as a result of
accounting change.
Table 5 – ACL Activity by
Segment
For the Three Months Ended
December 31, 2020
(In thousands)
Commercial and
Industrial
Commercial Real Estate
Consumer
Total Allowance for Credit
Losses
Reserve for Unfunded
Commitments (1)
Total
As of September 30, 2020
$
202,197
$
143,008
$
40,207
$
385,412
$
2,395
$
387,807
Provision for credit losses
(2,990
)
7,372
(1,448
)
2,934
(99
)
2,835
Charge-offs
(12,870
)
(10,500
)
(586
)
(23,956
)
—
(23,956
)
Recoveries
1,028
1,307
435
2,770
—
2,770
As of December 31, 2020
$
187,365
$
141,187
$
38,608
$
367,160
$
2,296
$
369,456
For the Year Ended December
31, 2020
(In thousands)
Commercial and
Industrial
Commercial Real Estate
Consumer
Total Allowance for Credit
Losses
Reserve for Unfunded
Commitments (1)
Total
As of December 31, 2019
$
89,796
$
15,319
$
14,528
$
119,643
$
1,699
$
121,342
Cumulative effect of the adoption of
CECL
32,951
20,599
22,300
75,850
332
76,182
As of January 1, 2020
122,747
35,918
36,828
195,493
2,031
197,524
Provision for credit losses
157,580
117,792
2,411
277,783
265
278,048
Charge-offs
(96,277
)
(14,283
)
(1,776
)
(112,336
)
—
(112,336
)
Recoveries
3,315
1,760
1,145
6,220
—
6,220
As of December 31, 2020
$
187,365
$
141,187
$
38,608
$
367,160
$
2,296
$
369,456
(1)
The reserve for unfunded commitments is
recorded in other liabilities in the consolidated balance
sheets.
Table 6 – Criticized Loans by
Segment
As of December 31,
2020
(Amortized cost in thousands)
Special Mention
Substandard
Doubtful
Total Criticized
Commercial and industrial
General C&I
$
61,910
$
90,896
$
12,583
$
165,389
Energy
93,708
150,810
8,115
252,633
Restaurant
55,141
133,709
6,987
195,837
Healthcare
761
29,614
—
30,375
Total commercial and industrial
211,520
405,029
27,685
644,234
Commercial real estate
Industrial, retail, and other
35,992
26,540
—
62,532
Hospitality (1)
54,449
83,460
—
137,909
Multifamily
90
198
—
288
Office
4,863
7,843
—
12,706
Total commercial real estate
95,394
118,041
—
213,435
Consumer
Residential
—
14,023
—
14,023
Other
—
4
—
4
Total consumer
—
14,027
—
14,027
Total
$
306,914
$
537,097
$
27,685
$
871,696
As of September 30,
2020
(Amortized cost in thousands)
Special Mention
Substandard
Doubtful
Total Criticized
Commercial and industrial
General C&I
$
71,384
$
156,323
$
9,270
$
236,977
Energy sector
146,772
165,277
7,816
319,865
Restaurant industry
97,315
169,899
7,624
274,838
Healthcare
722
58,802
—
59,524
Total commercial and industrial
316,193
550,301
24,710
891,204
Commercial real estate
Industrial, retail, and other
29,574
11,856
—
41,430
Hospitality (1)
64,323
46,465
—
110,788
Multifamily
91
200
—
291
Office
346
13,250
3,029
16,625
Total commercial real estate
94,334
71,771
3,029
169,134
Consumer
Residential real estate
—
22,770
—
22,770
Other
—
358
—
358
Total consumer
—
23,128
—
23,128
Total
$
410,527
$
645,200
$
27,739
$
1,083,466
(1)
Hospitality balances have historically
been included in Industrial, retail, and other.
Table 7 – Nonperforming
Assets
As of
(In thousands)
4Q20 (3)
3Q20
2Q20
1Q20
4Q19
Nonperforming loans (1)
Commercial and industrial
$
109,000
$
145,570
$
182,839
$
136,712
$
106,803
Commercial real estate
14,969
27,163
25,261
8,133
1,127
Consumer
14,033
16,364
16,284
14,808
7,289
Small business (2)
—
—
—
—
4,337
Total nonperforming loans ("NPL")
138,002
189,097
224,384
159,653
119,556
Foreclosed OREO and other NPA
19,788
20,344
13,949
15,679
5,958
Total nonperforming assets
$
157,790
$
209,441
$
238,333
$
175,332
$
125,514
NPL as a percentage of total loans
1.08
%
1.40
%
1.64
%
1.19
%
0.92
%
NPA as a percentage of loans plus
OREO/other
1.24
%
1.55
%
1.74
%
1.31
%
0.97
%
NPA as a percentage of total assets
0.84
%
1.14
%
1.26
%
0.99
%
0.71
%
Total accruing loans 90 days or more past
due
$
13,880
$
7,260
$
3,123
$
1,999
$
23,364
(1)
Amounts are not comparable due to
our adoption of CECL on January 1, 2020. Prior to this date, pools
of individual ACI loans were excluded because they continued to
earn interest income from the accretable yield at the pool level.
With the adoption of CECL, the pools were discontinued, and
performance is based on contractual terms for individual loans.
Additionally, prior to January 1, 2020, we used recorded investment
in this table. With the adoption of CECL, we now use amortized
cost.
(2)
Upon the adoption of CECL, small
business loans are included in commercial and industrial and
commercial real estate loans.
(3)
Nonperforming loans do not
include nonperforming loans held for sale of $176 thousand.
Table 8 – Noninterest
Income
For the Three Months
Ended
Years Ended December
31,
(In thousands)
4Q20
3Q20
2Q20
1Q20
4Q19
2020
2019
Noninterest Income
Hedge revenue
$
169,248
$
—
$
—
$
—
$
—
$
169,248
$
—
Investment advisory revenue
7,457
6,797
6,505
5,605
6,920
26,364
24,890
Trust services revenue
4,885
4,556
4,092
4,815
4,713
18,349
18,066
Service charges on deposit accounts
6,028
5,847
4,852
6,416
5,181
23,143
20,503
Mortgage banking income
3,062
3,535
2,020
1,111
841
9,727
3,174
Credit-related fees
4,766
4,202
4,401
5,983
5,094
19,352
21,265
Bankcard fees
1,775
1,745
1,716
1,958
1,933
7,194
8,486
Payroll processing revenue
1,309
1,255
1,143
1,367
1,373
5,074
5,149
SBA income
2,889
3,037
1,335
1,908
2,153
9,169
7,232
Other service fees
1,751
1,450
1,528
1,912
1,701
6,641
7,412
Securities gains, net
1,353
79
2,286
2,994
317
6,712
2,018
Other
5,222
88
72
1,000
3,672
6,382
12,730
Total noninterest income
$
209,745
$
32,591
$
29,950
$
35,069
$
33,898
$
307,355
$
130,925
Table 9 – Noninterest
Expenses
For the Three Months
Ended
Years Ended December
31,
(In thousands)
4Q20
3Q20
2Q20
1Q20
4Q19
2020
2019
Noninterest Expenses
Salaries and employee benefits
$
59,833
$
51,734
$
47,158
$
48,807
$
54,840
$
207,532
$
213,874
Premises and equipment
11,036
10,716
10,634
10,808
11,618
43,194
44,637
Merger related expenses
—
2,105
—
1,282
925
3,386
28,497
Intangible asset amortization
5,164
5,299
5,472
5,592
5,876
21,528
23,862
Data processing
3,047
3,024
3,084
3,352
3,343
12,507
13,013
Software amortization
4,480
4,432
4,036
3,547
3,427
16,495
13,352
Consulting and professional fees
3,450
3,320
3,009
2,707
3,552
12,485
10,301
Loan related expenses
1,709
953
735
760
654
4,157
2,383
FDIC insurance
3,007
2,528
3,939
2,436
1,245
11,910
5,394
Communications
1,175
1,119
1,002
1,156
1,236
4,453
5,116
Advertising and public relations
956
716
920
1,464
1,764
4,057
5,017
Legal expenses
726
681
579
411
306
2,398
1,608
Other
10,748
8,232
8,052
11,636
11,732
38,667
41,716
Noninterest expenses excluding goodwill
impairment charge
105,331
94,859
88,620
93,958
100,519
382,769
408,770
Goodwill impairment charge
—
—
—
443,695
—
443,695
—
Total noninterest expenses
$
105,331
$
94,859
$
88,620
$
537,653
$
100,519
$
826,464
$
408,770
Table 10 – Reconciliation of
Non-GAAP Financial Measures
As of and for the Three Months
Ended
As of and for the Year Ended
December 31,
(In thousands, except share and per
share data)
4Q20
3Q20
2Q20
1Q20
4Q19
2020
2019
Efficiency ratio
Noninterest expenses (numerator)
$
105,331
$
94,859
$
88,620
$
537,653
$
100,519
$
826,464
$
408,770
Net interest income
$
156,741
$
154,042
$
154,714
$
153,468
$
160,911
$
618,966
$
651,173
Noninterest income
209,745
32,591
29,950
35,069
33,898
307,355
130,925
Operating revenue (denominator)
$
366,486
$
186,633
$
184,664
$
188,537
$
194,809
$
926,321
$
782,098
Efficiency ratio
28.74
%
50.83
%
47.99
%
285.17
%
51.60
%
89.22
%
52.27
%
Adjusted efficiency ratio
Noninterest expenses
$
105,331
$
94,859
$
88,620
$
537,653
$
100,519
$
826,464
$
408,770
Less: non-cash goodwill impairment
charge
—
—
—
443,695
—
443,695
—
Less: merger related expenses
—
2,105
—
1,282
925
3,386
28,497
Less: pension plan termination expense
—
—
—
—
1,225
—
1,225
Less: expenses related to COVID-19
pandemic
215
235
1,205
122
—
1,777
—
Adjusted noninterest expenses
(numerator)
$
105,116
$
92,519
$
87,415
$
92,554
$
98,369
$
377,606
$
379,048
Net interest income
$
156,741
$
154,042
$
154,714
$
153,468
$
160,911
$
618,966
$
651,173
Noninterest income
209,745
32,591
29,950
35,069
33,898
307,355
130,925
Plus: impairment charge on branch
building
—
538
—
—
—
538
—
Less: gain on sale of acquired loans
—
—
—
—
1,263
—
2,777
Less: securities gains, net
1,353
79
2,286
2,994
317
6,712
2,018
Adjusted noninterest income
208,392
33,050
27,664
32,075
32,318
301,181
128,130
Adjusted operating revenue
(denominator)
$
365,133
$
187,092
$
182,378
$
185,543
$
193,229
$
920,147
$
779,303
Adjusted efficiency ratio
28.79
%
49.45
%
47.93
%
49.88
%
50.91
%
41.04
%
48.64
%
Tangible common equity ratio
Shareholders’ equity
$
2,121,102
$
2,071,472
$
2,045,480
$
2,113,543
$
2,460,846
$
2,121,102
$
2,460,846
Less: goodwill and other intangible
assets, net
(126,841
)
(132,005
)
(137,318
)
(142,782
)
(590,949
)
(126,841
)
(590,949
)
Tangible common shareholders’ equity
1,994,261
1,939,467
1,908,162
1,970,761
1,869,897
1,994,261
1,869,897
Total assets
18,712,567
18,404,195
18,857,753
17,237,918
17,800,229
18,712,567
17,800,229
Less: goodwill and other intangible
assets, net
(126,841
)
(132,005
)
(137,318
)
(142,782
)
(590,949
)
(126,841
)
(590,949
)
Tangible assets
$
18,585,726
$
18,272,190
$
18,720,435
$
17,095,136
$
17,209,280
$
18,585,726
$
17,209,280
Tangible common equity ratio
10.73
%
10.61
%
10.19
%
11.53
%
10.87
%
10.73
%
10.87
%
Tangible book value per share
Shareholders’ equity
$
2,121,102
$
2,071,472
$
2,045,480
$
2,113,543
$
2,460,846
$
2,121,102
$
2,460,846
Less: goodwill and other intangible
assets, net
(126,841
)
(132,005
)
(137,318
)
(142,782
)
(590,949
)
(126,841
)
(590,949
)
Tangible common shareholders’ equity
$
1,994,261
$
1,939,467
$
1,908,162
$
1,970,761
$
1,869,897
$
1,994,261
$
1,869,897
Common shares outstanding
125,978,561
125,946,793
125,930,741
125,897,827
127,597,569
125,978,561
127,597,569
Tangible book value per share
$
15.83
$
15.40
$
15.15
$
15.65
$
14.65
$
15.83
$
14.65
Table 10 (Continued) –
Reconciliation of Non-GAAP Measures
As of and for the Three Months
Ended
As of and for the Year Ended
December 31,
(In thousands, except share and per
share data)
4Q20
3Q20
2Q20
1Q20
4Q19
2020
2019
Return on average tangible common
equity
Average common equity
$
2,072,030
$
2,052,079
$
2,118,796
$
2,446,810
$
2,471,398
$
2,171,826
$
2,373,856
Less: average intangible assets
(130,146
)
(135,491
)
(140,847
)
(584,513
)
(595,439
)
(247,121
)
(598,546
)
Average tangible common shareholders’
equity
$
1,941,884
$
1,916,588
$
1,977,949
$
1,862,297
$
1,875,959
$
1,924,705
$
1,775,310
Net income (loss)
$
200,583
$
49,315
$
(56,114
)
$
(399,311
)
$
51,426
$
(205,527
)
$
201,958
Plus: non-cash goodwill impairment charge,
net of tax
—
—
—
412,918
—
412,918
—
Plus: intangible asset amortization, net
of tax
3,939
4,042
4,174
4,261
4,477
16,416
18,240
Tangible net income (loss)
$
204,522
$
53,357
$
(51,940
)
$
17,868
$
55,903
$
223,807
$
220,198
Return on average tangible common
equity(1)
41.90
%
11.08
%
(10.56
)%
3.86
%
11.82
%
11.63
%
12.40
%
Adjusted return on average tangible
common equity
Average tangible common shareholders’
equity
$
1,941,884
$
1,916,588
$
1,977,949
$
1,862,297
$
1,875,959
$
1,924,705
$
1,775,310
Tangible net income (loss)
$
204,522
$
53,357
$
(51,940
)
$
17,868
$
55,903
$
223,807
$
220,198
Non-routine items:
Plus: merger related expenses
—
2,105
—
1,282
925
3,386
28,497
Plus: pension plan termination expense
—
—
—
—
1,225
—
1,225
Plus: expenses related to COVID-19
pandemic
215
235
1,205
122
—
1,777
—
Plus: impairment loss on branch
building
—
538
—
—
—
538
—
Less: gain on sale of acquired loans
—
—
—
—
1,263
—
2,777
Less: securities gains, net
1,353
79
2,286
2,994
317
6,712
2,018
Tax Expense:
Less: income tax effect of tax deductible
non-routine items
(270
)
664
(256
)
(464
)
48
(326
)
5,756
Total non-routine items, after tax
(868
)
2,135
(825
)
(1,126
)
522
(684
)
21,171
Adjusted tangible net income (loss)
$
203,654
$
55,492
$
(52,765
)
$
16,742
$
56,425
$
223,122
$
241,369
Adjusted return on average tangible common
equity(1)
41.72
%
11.52
%
(10.73
)%
3.62
%
11.93
%
11.59
%
13.60
%
Adjusted return on average
assets
Average assets
$
18,354,046
$
18,248,014
$
18,500,600
$
17,694,018
$
17,843,383
$
18,199,726
$
17,689,126
Net income (loss)
$
200,583
$
49,315
$
(56,114
)
$
(399,311
)
$
51,426
$
(205,527
)
$
201,958
Return on average assets
4.35
%
1.08
%
(1.22
)%
(9.08
)%
1.14
%
(1.13
)%
1.14
%
Net income (loss)
$
200,583
$
49,315
$
(56,114
)
$
(399,311
)
$
51,426
$
(205,527
)
$
201,958
Plus: non-cash goodwill impairment charge,
net of tax
—
—
—
412,918
—
412,918
—
Total non-routine items, after tax
(868
)
2,135
(825
)
(1,126
)
522
(684
)
21,171
Adjusted net income (loss)
$
199,715
$
51,450
$
(56,939
)
$
12,481
$
51,948
$
206,707
$
223,129
Adjusted return on average assets(1)
4.33
%
1.12
%
(1.24
)%
0.28
%
1.16
%
1.14
%
1.26
%
Adjusted diluted earnings (loss) per
share
Diluted weighted average common shares
outstanding
126,408,959
126,094,868
125,924,652
126,630,446
128,003,089
126,120,534
129,017,599
Net income (loss) allocated to common
stock
$
198,765
$
48,884
$
(56,114
)
$
(399,311
)
$
51,248
$
(205,527
)
$
201,275
Plus: non-cash goodwill impairment, net of
tax
—
—
—
412,918
—
412,918
—
Total non-routine items, after tax
(868
)
2,135
(825
)
(1,126
)
522
(684
)
21,171
Adjusted net income (loss) allocated to
common stock
$
197,897
$
51,019
$
(56,939
)
$
12,481
$
51,770
$
206,707
$
222,446
Adjusted diluted earnings (loss) per
share
$
1.57
$
0.40
$
(0.45
)
$
0.10
$
0.40
$
1.64
$
1.72
Adjusted pre-tax, pre-provision net
revenue
Income (loss) before taxes
$
258,320
$
58,801
$
(62,767
)
$
(432,545
)
$
67,164
$
(178,191
)
$
262,301
Plus: provision for credit losses
2,835
32,973
158,811
83,429
27,126
278,048
111,027
Plus: non-cash goodwill impairment
—
—
—
443,695
—
443,695
—
Plus: Total non-routine items before
taxes
(1,138
)
2,799
(1,081
)
(1,590
)
570
(1,011
)
26,927
Adjusted pre-tax, pre-provision net
revenue
$
260,017
$
94,573
$
94,963
$
92,989
$
94,860
$
542,541
$
400,255
(1)
Quarterly periods are annualized.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210125005363/en/
Cadence Bancorporation
Media contact: Danielle Kernell 713-871-4051
danielle.kernell@cadencebank.com Investor relations contact:
Valerie Toalson 713-871-4103 or 800-698-7878
vtoalson@cadencebancorporation.com
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