Cadence Bancorporation Reports Fourth Quarter and Full Year 2020 Financial Results

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.

Contacts:

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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