Cadence Bancorporation Reports Second Quarter 2020 Financial Results
Cadence Bancorporation Reports Second Quarter 2020 Financial Results
Jul. 22, 2020
HOUSTON--(BUSINESS WIRE)--Jul. 22, 2020--Cadence Bancorporation (NYSE: CADE) ("Cadence") today announced a net loss for the quarter ended June 30, 2020 of ($56.1) million or ($0.45) per share, compared to net income of $48.3 million or $0.37 per share for the quarter ended June 30, 2019, and a net loss of ($399.3) million or ($3.15) per share for the quarter ended March 31, 2020. Adjusted net (loss) income(1), excluding non-routine income and expenses(2) (and the goodwill impairment charge for first quarter 2020), was ($56.9) million or ($0.45) per share for the second quarter of 2020, compared to $51.3 million or $0.40 per share for the quarter ended June 30, 2019 and compared to $12.5 million or $0.10 per share for the quarter ended March 31, 2020.
"The challenge and uncertainty of the second quarter in many ways brought out the best in Cadence and I am proud of how our team operated and served our customers through it all. Our pre-provision results continue to showcase a key strength of our operations, highlighted by our increased net interest income and continued expense management. That noted, clearly the credit backdrop is very challenging, as our portfolio has been meaningfully impacted by the COVID-19 pandemic and related economic shutdown. This quarter, we again spent a great deal of time critically reviewing our portfolios to ensure we are fully reflecting the realities of the environment. While the trajectory of the pandemic and its impact on the economy remain uncertain, we are very confident that our risk management and robust capital position will allow Cadence to exit this crisis in a strong position," stated Paul B. Murphy, Jr., Chairman and Chief Executive Officer of Cadence Bancorporation.
Second Quarter 2020 Highlights:
Second quarter 2020 highlights (compared to the linked quarter where applicable) are as follows:
* Adjusted pre-tax pre-provision net revenue(1) for the second quarter of 2020 remained consistent at $95.0 million, a decrease of $1.1 million or 1.2% compared to the second quarter of 2019 and an increase of $2.0 million or 2.1% compared to the first quarter of 2020. As a percent of average assets, adjusted pre-tax pre-prevision net revenue was 2.06%, 2.18%, and 2.11% for the second quarter of 2020, second quarter of 2019 and first quarter of 2020, respectively. * We originated $1.0 billion of loans under the Paycheck Protection Program ("PPP") during the second quarter of 2020. These PPP loans are 100% federally guaranteed and were fully funded by core deposits. * Total deposits increased $1.6 billion as non-interest bearing deposits increased $1.3 billion to 32% of total deposits. At the same time, we aggressively managed funding costs, with total deposit costs at 0.46%, representing a decline of 50 basis points from prior quarter. * Our tax equivalent net interest margin ("NIM") remained notable at 3.51%, in spite of the impact of lower interest rates, lower yielding PPP loans and securities, and lower accretion income on acquired loans. The gain on our collar transaction and our deposit cost management continue to provide a strong foundation to our NIM. * Adjusted expenses (see Table 10) declined by $5.1 million and we realized an adjusted efficiency ratio(1) of 47.9%, down from 49.9%. * The provision for credit losses for the second quarter 2020 was $158.8 million compared to $83.4 million in the linked quarter reflecting degradation of economic forecasts, depressed energy markets and COVID-19 driven stress. As of June 30, 2020, our Allowance for Credit Losses ("ACL") was 2.71% of total loans, up from 1.83% at March 31, 2020. Excluding PPP loans, our ACL was 2.93% at June 30, 2020. * Capital remained very strong with our Common Equity Tier 1 capital ratio increasing to 11.7% and total risk weighted capital increasing to 14.3%, providing a robust capital base well-positioned for the current environment. * Annualized returns on average assets and tangible common equity for the second quarter of 2020 were (1.22%) and (10.56%), respectively, compared to 1.10% and 12.23%, respectively, for the second quarter of 2019 and (9.08%) and 3.86%, respectively, for the first quarter of 2020. * Adjusted annualized returns on average assets(1) and adjusted tangible common equity(1) for the second quarter of 2020 were (1.24%) and (10.73%), respectively, compared to 1.17% and 12.96%, respectively, for the second quarter of 2019 and 0.28% and 3.62%, respectively, for the first quarter of 2020.
Balance Sheet:
Total assets were $18.9 billion as of June 30, 2020, an increase of $1.4 billion or 7.7% from June 30, 2019, and an increase of $1.6 billion or 9.4% from March 31, 2020 driven by the issuance of PPP loans and meaningful growth in deposits impacted by fiscal stimulus during the second quarter.
Cash and Cash Equivalents at June 30, 2020 totaled $1.9 billion as compared to $0.8 billion at June 30, 2019 and compared to $0.6 billion at March 31, 2020. The $1.3 billion increase in the second quarter of 2020 resulted from the increase of $1.6 billion in deposits during this quarter.
Loans at June 30, 2020 totaled $13.7 billion as compared to $13.6 billion at June 30, 2019, an increase of $71.2 million or 0.5%. Loans increased $306.9 million or 2.3% from $13.4 billion at March 31, 2020. The linked quarter increase included the origination of $1.0 billion in PPP loans, offset by approximately $693 million of net loan paydowns and payoffs. The declines were driven by reductions in the C&I segment, including paydowns of defensive draws taken in March, and strategic declines in the restaurant, energy and leveraged loan sectors as we work to reduce select exposures.
Investment Securities at June 30, 2020 totaled $2.7 billion or 14.1% of total assets as compared to $1.7 billion or 9.6% of total assets at June 30, 2019, an increase of $976.6 million or 58.0%. Investment securities for the second quarter of 2020 increased $199.8 million from $2.5 billion, or 14.3% of total assets at March 31, 2020. The increase in securities from both the prior year and linked quarter is a result of substantial growth in deposits and lower loan originations outside of the PPP loans. Securities acquired during the second quarter include primarily investment grade municipal bonds and agency-backed mortgages.
Goodwill at June 30, 2020 totaled $43.1 million, down from $483.2 million at June 30, 2019 and unchanged from March 31, 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 June 30, 2020 relates to our registered investment advisory subsidiary and trust division.
Total Deposits at June 30, 2020 were $16.1 billion, an increase of $1.6 billion or 10.9% from both the June 30, 2019 and March 31, 2020 levels. Second quarter 2020 core deposits increased by 11.3% as a result of customers maintaining additional liquidity in the current environment and broader impacts of fiscal stimulus. Non-interest bearing deposits increased to $5.2 billion at June 30, 2020 or 32.5% of total deposits, up from $3.3 billion or 22.8% at June 30, 2019 and up from $4.0 billion or 27.3% of total deposits at March 31, 2020.
Shareholders' equity was $2.0 billion at June 30, 2020, a decrease of $380.6 million or 15.7% from June 30, 2019, and a decrease of $68.1 million or 3.2% from March 31, 2020. The linked quarter decrease included the quarterly net loss of $56.1 million, $6.3 million in cash dividends, and a decrease of $7.2 million in other comprehensive income which was largely driven by a decrease in the realized gain on the interest rate collar as amounts were recognized in interest income. The year over year decrease was impacted by the goodwill impairment in the first quarter of 2020.
Tangible common shareholders' equity(1) was $1.9 billion at June 30, 2020, an increase of $77.7 million or 4.2% from June 30, 2019 and a decrease of $62.6 million or 3.2% from March 31, 2020. The linked quarter decrease resulted from the same factors noted above.
* Total shareholders' equity to total assets and tangible equity to tangible assets were 10.8% and 10.2%, respectively, at June 30, 2020 compared to 13.9% and 10.8% at June 30, 2019, and 12.3% and 11.5% at March 31, 2020, respectively. * Tangible book value per share(1) was $15.15 as of June 30, 2020, an increase of $0.94 or 6.6% from $14.21 as of June 30, 2019 and a decrease of $0.50 or 3.2% from $15.65 as of March 31, 2020. * Total outstanding shares at June 30, 2020 were 125.9 million.
Tangible common equity to tangible assets was 10.2% at June 30, 2020, and quarter end capital ratios remained robust and other than the leverage ratio, increased during the quarter due to lower risk weighted assets.
6/30/2020 3/31/2020 6/30/2019
Common equity Tier 1 capital 11.7% 11.4% 10.9%
Tier 1 leverage capital 9.5% 10.1% 10.3%
Tier 1 risk-based capital^ 11.7% 11.4% 10.9%
Total risk-based capital 14.3% 13.8% 12.9%
Asset Quality:
Credit quality metrics during the second quarter of 2020 reflected worsening economic factors as a result of COVID-19 and depressed energy prices, along with associated increased stress of certain borrowers, predominantly in the Restaurant and Energy categories.
* Net charge-offs for the second quarter of 2020 were $32.6 million or 0.94% annualized of average loans compared to $18.6 million or 0.54% annualized and $32.5 million or 0.99% annualized for the quarters ended June 30, 2019 and March 31, 2020, respectively. The current quarter charge-offs included $14.2 million in Energy, $13.4 million in General C&I and $4 million in Restaurant sectors. * Provision for credit losses for the second quarter of 2020 was $158.8 million as compared to $28.9 million for the second quarter of 2019 and $83.4 million for the first quarter of 2020. The current quarter's provision was significantly impacted by an economic forecast that was adversely affected by the COVID-19 pandemic and depressed oil prices, as well as associated net credit migration within certain portfolios. Our calculation for the ACL used the baseline scenario provided by a nationally recognized service, as adjusted for qualitative and environmental factors. * The ACL was $370.9 million or 2.71% of total loans as of June 30, 2020, as compared to $115.3 million or 0.85% of total loans as of June 30, 2019, and $245.2 million or 1.83% of total loans as of March 31, 2020. * Loans 30-89 days past due were 0.19% of total loans at June 30, 2020, compared to 0.16% at June 30, 2019 and 0.19% at March 31, 2020. * Accruing loans 90 days or more past due were 0.02% of total loans at June 30, 2020, compared to 0.23% at June 30, 2019 and 0.01% at March 31, 2020. * NPL as a percent of total loans were 1.64% at June 30, 2020, compared to 0.80% at June 30, 2019 and 1.19% at March 31, 2020. NPL totaled $224.4 million, $108.8 million and $159.7 million as of June 30, 2019 and March 31, 2020, respectively. * The ACL to total nonperforming loans ("NPL") was 165.3% as of June 30, 2020, as compared to 106.1% as of June 30, 2019, and 153.6% as of March 31, 2020. * Total criticized loans (see Table 6) at June 30, 2020 were $1.0 billion or 7.37% of total loans as compared to $408.5 million or 3.00% at June 30, 2019 and $665.7 million or 4.97% at March 31, 2020. The linked quarter increase included net downgrades predominantly in Restaurant and Energy and to a lesser extent CRE credits, partially mitigated by net reductions in general C&I credits.
Total Revenue:
Total operating revenue(1) for the second quarter of 2020 was $184.7 million, down $7.8 million or 4.1% from the same period in 2019 and down $3.9 million or 2.1% from the linked quarter.
Net interest income Net interest income for the second quarter of 2020 was $154.7 million, a decrease of $6.1 million or 3.8% from the same period in 2019 and an increase of $1.2 million or 0.8% from the first quarter of 2020. The linked quarter increase resulted primarily from the ability of our lower deposit costs and hedging income to more than offset the impact of declines in LIBOR on our loan portfolio. Loan interest income, excluding accretion and PPP loans, declined $23.8 million during the quarter, and was more than offset by $16.6 million in lower deposit interest expense and $9.8 million in additional hedge income.
* We aggressively lowered our interest rates on deposits resulting in a 52% reduction in costs of total deposits to 0.46% for the quarter compared to 0.96% for the linked quarter. Additionally, noninterest-bearing deposits as a percent of total deposits increased significantly to 32.5% from 27.3% in the prior quarter. Total interest-bearing liabilities declined by 61 basis points to 0.78% from 1.39% in the first quarter of 2020. * Hedge income and collar gain recognition for the second quarter of 2020 was $17.7 million as compared to $7.9 million for the first quarter of 2020. * Accretion on acquired loans totaled $7.6 million for the second quarter of 2020, adding 17 basis points to the NIM as compared to $9.8 million and 23 basis point for the first quarter of 2020. * Our NIM for the second quarter of 2020 was 3.51% as compared to 3.97% for the second quarter of 2019 and 3.80% for the first quarter of 2020.
PPP loans averaged $664 million in the second quarter at a yield of 2.38%, and along with cash in deposits associated with these loans, negatively impacted our second quarter NIM by 11 basis points. In addition to the impact of PPP loans, the second quarter 2020 NIM declined 8 basis points due to lower LIBOR and earning asset mix shifts, 6 basis points due to lower accretion, and 4 basis points due to excess liquidity as a result of fiscal stimulus and customer behavior. Specifically, the NIM change during the quarter included:
Quarterly Change $ MM NIM
1Q 2020 Net Interest Income $ 153.8 3.80 %
Loans (ex PPP & accretion) (23.8 ) -0.70 %
Deposits 16.6 0.43 %
Hedge Income 9.8 0.23 %
Accretion (2.2 ) -0.06 %
Securities (1.8 ) -0.05 %
Cash (1.5 ) -0.04 %
Borrowings 0.2 0.01 %
NIM before PPP loans & cash* $ 151.1 3.62 %
PPP Loans & associated cash 4.0 -0.11 %
2Q 2020 Net Interest Margin $ 155.1 3.51 %
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 second quarter of 2020 was $30.0 million, a decrease of $1.8 million or 5.6% from the same period of 2019 and a decrease of $5.1 million or 14.6% from the linked quarter. Adjusted noninterest income(1) for the second quarter of 2020 was $27.7 million, a decrease of $3.6 million or 11.5% from the second quarter of 2019, and a decrease of $4.4 million or 13.8% from the linked quarter.
* The linked quarter results reflected slowed business activity as a result of COVID-19, including decreases in credit related fees, service charges on deposits, and $1.8 million in net writedowns on alternative investments. These impacts were partially offset by increases in investment advisory revenue and mortgage banking income given the robust related markets. * Noninterest income as a percent of total revenue for the second quarter of 2020 was 16.2% as compared to 16.5% for the second quarter of 2019 and 18.6% for the linked quarter.
Noninterest expense (excluding goodwill impairmentcharge for first quarter 2020) for the second quarter of 2020 was $88.6 million, a decrease of $11.9 million or 11.8% from the same period in 2019 and a decrease of $5.3 million or 5.7% from the linked quarter. Adjusted noninterest expense(2), which excludes the impact of non-routine items(2), was $87.4 million, down $8.6 million or 8.9% from the second quarter of 2019 and down $5.1 million or 5.6% from the first quarter of 2020. Cadence has consistently demonstrated the ability to effectively manage expense levels in various economic environments, evidenced with the expense and efficiency declines this quarter. The linked quarter decrease in noninterest expenses (excluding the goodwill impairment charge) resulted from:
* Decrease of $1.6 million in personnel costs driven by reductions in regular compensation and employment taxes; * $1.3 million less in merger related expenses; * Decrease of $3.6 million in other expenses including: $0.8 million in special asset expenses; $0.7 million in travel expenses; $0.5 million in ATM and debit card expenses; and $0.5 million in operational losses; and * Partially offset by an increase of $1.5 million in FDIC insurance assessment.
Adjusted efficiency ratio(1) for the second quarter of 2020 was 47.9%, improving from the linked quarter ratio of 49.9% with lower expenses and decreased from the prior year's second quarter ratio of 50.0%.
^ Considered a non-GAAP financial measure. See Table 10 "Reconciliation of(1) Non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.
^ See Table 10 for a detail of non-routine income and expenses.(2)
Taxes:
The effective tax rate for the second quarter of 2020 was 10.6% compared to 7.7% for the linked quarter and 23.3% for the second quarter of 2019.
Dividend:
On July 21, 2020, the board of directors of Cadence Bancorporation approved a quarterly cash dividend in the amount of $0.05 per share of outstanding common stock, representing an annualized dividend of $0.20 per share. The dividend will be paid on August 7, 2020 to holders of record of Cadence's Class A common stock on July 31, 2020.
Supplementary Financial Tables (Unaudited):
Supplementary financial tables (unaudited) are included in this release following the customary disclosure information.
Second Quarter 2020 Earnings Conference Call:
Cadence Bancorporation executive management will host a conference call to discuss second quarter 2020 results on Wednesday, July 22, 2020, 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: 2169431
For those unable to participate in the live presentation, a replay will be available through August 5, 2020. 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: 10145370
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 $18.9 billion in total assets as of June 30, 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 1,800 associates is committed to exceeding customer expectations and helping their clients succeed financially.
Cautionary Statement Regarding Forward-Looking Information
This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and "outlook," or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict.
Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Such factors include, without limitation, the "Risk Factors" referenced in our Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the "SEC") on May 21, 2018, and our Registration Statement on Form S-4 filed with the SEC on July 20, 2018, other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, including our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, and the following factors: business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic market areas; economic, market, operational, liquidity, credit and interest rate risks associated with our business; deteriorating asset quality and higher loan charge-offs; the laws and regulations applicable to our business; our ability to achieve organic loan and deposit growth and the composition of such growth; increased competition in the financial services industry, nationally, regionally or locally; our ability to maintain our historical earnings trends; our ability to raise additional capital to implement our business plan; material weaknesses in our internal control over financial reporting; systems failures or interruptions involving our information technology and telecommunications systems or third-party servicers; the composition of our management team and our ability to attract and retain key personnel; the fiscal position of the U.S. federal government and the soundness of other financial institutions; the composition of our loan portfolio, including the identity of our borrowers and the concentration of loans in energy-related industries and in our specialized industries; the portion of our loan portfolio that is comprised of participations and shared national credits; the amount of nonperforming and classified assets we hold; the 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
(In thousands, June 30, March 31, December 31, September 30, June 30,except share and per share data) 2020 2020 2019 2019 2019
Statement of Operations Data
Interest income $ 177,175 $ 192,754 $ 207,620 $ 213,149 $ 217,124
Interest expense 22,461 39,286 46,709 52,962 56,337
Net interest income 154,714 153,468 160,911 160,187 160,787
Provision for 158,811 83,429 27,126 43,764 28,927 credit losses
Net interest income (4,097 ) 70,039 133,785 116,423 131,860 after provision
Noninterest income 29,950 35,069 33,898 34,642 31,722
Noninterest expense 88,620 537,653 100,519 94,283 100,529 ^(1)
(Loss) income (62,767 ) (432,545 ) 67,164 56,782 63,053 before income taxes
Income tax (6,653 ) (33,234 ) 15,738 12,796 14,707 (benefit) expense
Net (loss) income $ (56,114 ) $ (399,311 ) $ 51,426 $ 43,986 $ 48,346
Weighted averagecommon shares outstanding
Basic 125,924,652 126,630,446 127,953,742 128,457,491 128,791,933
Diluted 125,924,652 126,630,446 128,003,089 128,515,274 129,035,553
(Loss) earnings per share
Basic $ (0.45 ) $ (3.15 ) $ 0.40 $ 0.34 $ 0.37
Diluted (0.45 ) (3.15 ) 0.40 0.34 0.37
Period-End Balance Sheet Data
Cash and cash $ 1,899,369 $ 609,351 $ 988,764 $ 1,061,102 $ 766,259 equivalents
Investment 2,661,433 2,461,644 2,368,592 1,705,325 1,684,847 securities
Total loans, net of 13,699,097 13,392,191 12,983,655 13,637,042 13,627,934 unearned income
Allowance for 370,901 245,246 119,643 127,773 115,345 credit losses
Total assets 18,857,753 17,237,918 17,800,229 17,855,946 17,504,005
Total deposits 16,069,282 14,489,505 14,742,794 14,789,712 14,487,821
Noninterest-bearing 5,220,109 3,959,721 3,833,704 3,602,861 3,296,652 deposits
Interest-bearing 10,849,173 10,529,784 10,909,090 11,186,851 11,191,169 deposits
Borrowings andsubordinated 372,222 372,440 372,173 371,892 376,240 debentures
Total shareholders' 2,045,480 2,113,543 2,460,846 2,475,944 2,426,072 equity
Average Balance Sheet Data
Investment $ 2,487,467 $ 2,397,275 $ 2,003,339 $ 1,650,902 $ 1,716,550 securities
Total loans, net of 13,884,220 13,161,371 13,423,435 13,719,286 13,921,873 unearned income
Allowance for 267,464 201,785 132,975 119,873 106,656 credit losses
Total assets 18,500,600 17,694,018 17,843,383 17,621,163 17,653,511
Total deposits 15,774,787 14,574,614 14,749,327 14,539,420 14,645,110
Noninterest-bearing 4,587,673 3,658,612 3,648,874 3,456,807 3,281,383 deposits
Interest-bearing 11,187,115 10,916,002 11,100,454 11,082,613 11,363,727 deposits
Borrowings andsubordinated 372,547 439,698 374,179 381,257 441,619 debentures
Total shareholders' 2,118,796 2,446,810 2,471,398 2,447,189 2,331,855 equity
(1) For 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
(Inthousands, June 30, March December September June 30,except share 31, 31, 30, and per 2020 2019 2020 2019 2019share data)
Per Share Data:
Book value $ 16.24 $ 16.79 $ 19.29 $ 19.32 $ 18.84
Tangible book 15.15 15.65 14.65 14.66 14.21 value ^(1)
Cashdividends 0.050 0.175 0.175 0.175 0.175 declared
Dividend (11.11 ) (5.56 ) 43.75 % 51.47 % 47.30 %payout ratio % %
Performance Ratios:
Return onaverage (10.65 ) (65.64 ) 8.26 % 7.13 % 8.32 %common equity % %^ (2)
Return onaveragetangiblecommon (10.56 ) 3.86 11.82 10.43 12.23
equity^ (1)(2)
Return onaverage (1.22 ) (9.08 ) 1.14 0.99 1.10 assets ^(2)
Net interest 3.51 3.80 3.89 3.94 3.97 margin ^(2)
Efficiency 47.99 285.17 51.60 48.39 52.22 ratio^ (1)
Adjustedefficiency 47.93 49.88 50.91 48.07 49.97 ratio^ (1)
Asset Quality Ratios:
Total NPA tototal loans,OREO, 1.74 % 1.31 % 0.97 % 0.84 % 0.85 %
and other NPA
Totalnonperformingloans ("NPL") 1.64 1.19 0.92 0.79 0.80 to
total loans
Total ACL to 2.71 1.83 0.92 0.94 0.85 total loans
ACL to total 165.30 153.61 100.07 118.17 106.08 NPL
Netcharge-offs 0.94 0.99 1.04 0.91 0.54 to averageloans^ (2)
Capital Ratios:
Totalshareholders' 10.8 % 12.3 % 13.8 % 13.9 % 13.9 %equity toassets
Tangiblecommon equityto tangible 10.2 11.5 10.9 10.9 10.8
assets ^(1)
Common equityTier 1 11.7 11.4 11.5 11.0 10.9 capital
Tier 1leverage 9.5 10.1 10.3 10.3 10.3 capital ^(3)
Tier 1risk-based 11.7 11.4 11.5 11.0 10.9 capital^ (3)
Totalrisk-based 14.3 13.8 13.7 13.1 12.9 capital ^(3)
Considered a non-GAAP financial measure. See Table 10 "Reconciliation of(1) Non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.
(2) Annualized.
(3) Current quarter regulatory capital ratios are estimates.
Table 2 - Average Balances/Yield/Rates
For the Three Months Ended June 30,
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 $ 11,173,408 $ 125,922 4.53 % $ 10,044,825 $ 135,946 5.43 %
ANCI portfolio 2,512,163 32,967 5.28 3,586,344 55,266 6.18
PCD portfolio ^(3) 198,649 3,965 8.03 290,704 10,799 14.90
Total loans 13,884,220 162,854 4.72 13,921,873 202,011 5.82
Investment securities
Taxable 2,269,017 12,207 2.16 1,500,971 10,298 2.75
Tax-exempt ^(2) 218,450 1,948 3.59 215,579 2,061 3.83
Total investment 2,487,467 14,155 2.29 1,716,550 12,359 2.89 securities
Federal funds sold and 1,342,779 328 0.10 597,988 2,667 1.79 short-term investments
Other investments 77,337 247 1.28 67,124 520 3.11
Total interest-earning 17,791,803 177,584 4.01 16,303,535 217,557 5.35 assets
Noninterest-earning assets:
Cash and due from banks 176,716 111,337
Premises and equipment 127,413 128,067
Accrued interest and 672,132 1,217,228 other assets
Allowance for credit (267,464 ) (106,656 ) losses
Total assets $ 18,500,600 $ 17,653,511
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 8,368,151 $ 7,511 0.36 % $ 7,732,568 $ 30,195 1.57 %
Savings deposits 291,874 179 0.25 251,270 245 0.39
Time deposits 2,527,090 10,451 1.66 3,379,889 20,298 2.41
Total interest-bearing 11,187,115 18,141 0.65 11,363,727 50,738 1.79 deposits
Other borrowings 149,973 937 2.51 300,897 3,051 4.07
Subordinated debentures 222,574 3,383 6.11 140,722 2,548 7.26
Total interest-bearing 11,559,662 22,461 0.78 11,805,346 56,337 1.91 liabilities
Noninterest-bearing liabilities:
Demand deposits 4,587,673 3,281,383
Accrued interest and 234,469 234,927 other liabilities
Total liabilities 16,381,804 15,321,656
Shareholders' equity 2,118,796 2,331,855
Total liabilities and $ 18,500,600 $ 17,653,511 shareholders' equity
Net interest income/net 155,123 3.23 % 161,220 3.45 %interest spread
Net yield on earningassets/net interest 3.51 % 3.97 %margin
Taxable equivalent adjustment:
Investment securities (409 ) (433 )
Net interest income $ 154,714 $ 160,787
_____________________
(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%.
Prior to the adoption of CECL on January 1, 2020, these loans were(3) 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 For the Three Months Ended June 30, 2020 March 31, 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 $ 11,173,408 $ 125,922 4.53 % $ 10,213,846 $ 129,402 5.10 %
ANCI portfolio 2,512,163 32,967 5.28 2,731,240 40,650 5.99
PCD portfolio ^(3) 198,649 3,965 8.03 216,285 5,082 9.45
Total loans 13,884,219 162,854 4.72 13,161,371 175,134 5.35
Investment securities
Taxable 2,269,017 12,207 2.16 2,198,528 14,015 2.56
Tax-exempt ^(2) 218,450 1,948 3.59 198,747 1,807 3.66
Total investment 2,487,467 14,155 2.29 2,397,275 15,822 2.65 securities
Federal funds soldand short-term 1,342,779 328 0.10 628,885 1,783 1.14 investments
Other investments 77,337 247 1.28 80,173 394 1.98
Totalinterest-earning 17,791,802 177,584 4.01 16,267,704 193,133 4.77 assets
Noninterest-earning assets:
Cash and due from 176,716 250,804 banks
Premises and 127,413 127,812 equipment
Accrued interest and 672,132 1,249,483 other assets
Allowance for credit (267,464 ) (201,785 ) losses
Total assets $ 18,500,599 $ 17,694,018
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 8,368,151 $ 7,511 0.36 % $ 8,121,641 $ 21,667 1.07 %
Savings deposits 291,874 179 0.25 272,444 317 0.47
Time deposits 2,527,090 10,451 1.66 2,521,917 12,744 2.03
Totalinterest-bearing 11,187,115 18,141 0.65 10,916,002 34,728 1.28 deposits
Other borrowings 149,973 937 2.51 217,363 1,108 2.05
Subordinated 222,574 3,383 6.11 222,335 3,450 6.24 debentures
Totalinterest-bearing 11,559,662 22,461 0.78 11,355,700 39,286 1.39 liabilities
Noninterest-bearing liabilities:
Demand deposits 4,587,673 3,658,612
Accrued interest and 234,469 232,896 other liabilities
Total liabilities 16,381,804 15,247,208
Stockholders' equity 2,118,796 2,446,810
Total liabilities and $ 18,500,600 $ 17,694,018 stockholders' equity
Net interest income/ 155,123 3.23 % 153,847 3.38 %net interest spread
Net yield on earningassets/net interest 3.51 % 3.80 %margin
Taxable equivalent adjustment:
Investment securities (409 ) (379 )
Net interest income $ 154,714 $ 153,468
_____________________
(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%.
Prior to the adoption of CECL on January 1, 2020, these loans were(3) referred to as ACI loans, but with the adoption of CECL they are referred to as PCD loans.
Table 3 - Loan Interest Income Detail
Year-To-Date For the Three Months Ended
June 30, June 30, March 31, December September June 30,(In 31, 30, thousands) 2020 2020 2020 2019 2019 2019
InterestIncome Detail
Originated $ 255,324 $ 125,922 $ 129,402 $ 134,450 $ 136,333 $ 135,946 loans
ANCIloans: 59,205 26,264 32,940 37,637 43,133 49,095 interestincome
ANCIloans: 14,413 6,703 7,710 8,610 10,951 6,171 accretion
PCD loans:interest 6,150 3,111 3,039 3,839 3,406 2,781 income ^(1)
PCD loans:accretion 2,897 854 2,043 6,018 4,147 8,017 ^(1)
Total loaninterest $ 337,988 $ 162,854 $ 175,134 $ 190,554 $ 197,970 $ 202,011 income
Yields
Originated 4.80 % 4.53 % 5.10 % 5.25 % 5.31 % 5.43 loans
ANCI loanswithout 4.54 4.20 4.85 4.95 5.23 5.49 discountaccretion
ANCI loansdiscount 1.11 1.08 1.14 1.13 1.33 0.69 accretion
PCD loanswithout 5.96 6.30 5.65 6.20 5.23 3.84 discountaccretion
PCD loansdiscount 2.81 1.73 3.80 9.73 6.37 11.06 accretion
Total loan 5.03 % 4.72 % 5.35 % 5.63 % 5.72 % 5.82 yield
Prior quarter PCD amounts have been revised to be comparable to the(1) current quarter presentation. Interest income for PCD loans represents contractual interest.
Table 4 - Allowance for Credit Losses ("ACL") ^(1)
For the Three Months Ended
June 30, March 31, December September June 30,(In 31, 30, thousands) 2020 2020 2019 2019 2019
Balance atbeginning $ 245,246 $ 119,643 $ 127,773 $ 115,345 $ 105,038 of period
Cumulativeeffect ofthe - 75,850 - - - adoption ofCECL ^(2)
Charge-offs (33,452 ) (33,098 ) (35,432 ) (31,650 ) (18,981 )
Recoveries 901 613 176 314 361
Net (32,551 ) (32,485 ) (35,256 ) (31,336 ) (18,620 )charge-offs
Provisionfor loan 158,206 82,238 27,126 43,764 28,927 losses
Balance atend of $ 370,901 $ 245,246 $ 119,643 $ 127,773 $ 115,345 period
(1) This table represents the activity in the ACL for funded loans.
The Company adopted ASU 2016-13, Financial Instruments - Credit Losses(2) ("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 June 30, 2020
Total Reserve for(In Commercial Commercial Allowance Unfundedthousands) and Real Consumer for Commitments Total Industrial Estate Credit ^(1) Losses
As of March $ 154,585 $ 53,418 $ 37,243 $ 245,246 $ 3,222 $ 248,468 31, 2020
Provisionfor credit 95,325 59,359 3,522 158,206 605 158,811 losses
Charge-offs (32,816 ) (327 ) (309 ) (33,452 ) - (33,452 )
Recoveries 702 30 169 901 - 901
As of June $ 217,796 $ 112,480 $ 40,625 $ 370,901 $ 3,827 $ 374,728 30, 2020
For the Six Months Ended June 30, 2020
Total Reserve for(In Commercial Commercial Allowance Unfundedthousands) and Real Consumer for Commitments Total Industrial Estate Credit ^(1) Losses
As ofDecember $ 89,796 $ 15,319 $ 14,528 $ 119,643 $ 1,699 $ 121,342 31, 2019
Cumulativeeffect ofthe 32,951 20,599 22,300 75,850 332 76,182 adoption ofCECL
As ofJanuary 1, 122,747 35,918 36,828 195,493 2,031 197,524 2020
Provisionfor credit 159,008 77,158 4,278 240,444 1,796 242,240 losses
Charge-offs (64,803 ) (806 ) (941 ) (66,550 ) - (66,550 )
Recoveries 844 210 460 1,514 - 1,514
As of June $ 217,796 $ 112,480 $ 40,625 $ 370,901 $ 3,827 $ 374,728 30, 2020
(1) The reserve for unfunded commitments is recorded in other liabilities in the consolidated balance sheets
Table 6 - Criticized Loans by Segment
As of June 30, 2020
(Amortized cost in Special Substandard Doubtful Total thousands) Mention Criticized
Commercial and Industrial
General C&I $ 45,512 $ 146,333 $ 10,237 $ 202,082
Energy 155,735 114,080 10,747 280,562
Restaurant 171,722 158,596 7,596 337,914
Healthcare 18,250 47,398 - 65,648
Total commercial and 391,219 466,407 28,580 886,206 industrial
Commercial Real Estate
Industrial, retail, 60,819 40,351 534 101,704 and other
Multifamily 91 714 - 805
Office 346 1,005 - 1,351
Total commercial real 61,256 42,070 534 103,860 estate
Consumer
Residential - 19,172 - 19,172
Other - 39 - 39
Total consumer - 19,211 - 19,211
Total $ 452,475 $ 527,688 $ 29,114 $ 1,009,277
As of March 31, 2020
(Recorded investment Special Substandard Doubtful Total in thousands) Mention Criticized
Commercial and Industrial
General C&I $ 64,326 $ 208,452 $ 7,130 $ 279,908
Energy sector 111,261 43,326 5,915 160,502
Restaurant industry 43,916 63,608 6,396 113,920
Healthcare 35,604 3,122 - 38,726
Total commercial and 255,107 318,508 19,441 593,056 industrial
Commercial Real Estate
Industrial, retail, 30,158 14,241 - 44,399 and other
Multifamily 1,219 - - 1,219
Office 327 9,907 - 10,234
Total commercial real 31,704 24,148 - 55,852 estate
Consumer
Residential real - 16,760 - 16,760 estate
Other - 8 - 8
Total consumer - 16,768 - 16,768
Total $ 286,811 $ 359,424 $ 19,441 $ 665,676
Table 7 - Nonperforming Assets
As of
June 30, March 31, December September June 30, 31, 30, 2020 2020 2019 2019 2019
Nonperforming loans ^(1)
Commercialand $ 182,839 $ 136,712 $ 106,803 $ 92,643 $ 103,379 industrial
Commercial 25,261 8,133 1,127 6,855 - real estate
Consumer 16,284 14,808 7,289 5,294 2,942
Small - - 4,337 3,334 2,434 business ^(2)
Totalnonperforming 224,384 159,653 119,556 108,126 108,755 loans ("NPL")
ForeclosedOREO and 13,949 15,679 5,958 6,731 7,712 other NPA
Totalnonperforming $ 238,333 $ 175,332 $ 125,514 $ 114,857 $ 116,467 assets
NPL as apercentage of 1.64 % 1.19 % 0.92 % 0.79 % 0.80 %total loans
NPA as apercentage of 1.74 % 1.31 % 0.97 % 0.84 % 0.85 %loans plusOREO/other
NPA as apercentage of 1.26 % 0.99 % 0.71 % 0.64 % 0.67 %total assets
Totalaccruingloans 90 days $ 3,123 $ 1,999 $ 23,364 $ 24,487 $ 31,374 or more pastdue
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(1) 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, the 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.
Table 8 - Noninterest Income
For the Three Months Ended
June 30, March December September June 30,(In thousands) 31, 31, 30, 2020 2019 2020 2019 2019
Noninterest Income
Investmentadvisory $ 6,505 $ 5,605 $ 6,920 $ 6,532 $ 5,797 revenue
Trust services 4,092 4,815 4,713 4,440 4,578 revenue
Servicecharges on 4,852 6,416 5,181 5,462 4,730 depositaccounts
Credit-related 4,401 5,983 5,094 5,960 5,341 fees
Bankcard fees 1,716 1,958 1,933 2,061 2,279
Payrollprocessing 1,143 1,367 1,373 1,196 1,161 revenue
SBA income 1,335 1,908 2,153 2,216 1,415
Other service 1,528 1,912 1,701 1,700 1,907 fees
Securities 2,286 2,994 317 775 938 gains, net
Other 2,092 2,111 4,513 4,300 3,576
Totalnoninterest $ 29,950 $ 35,069 $ 33,898 $ 34,642 $ 31,722 income
Table 9 - Noninterest Expenses
For the Three Months Ended
June 30, March 31, September September June 30,(In thousands) 30, 30, 2020 2020 2019 2019 2019
Noninterest Expenses
Salaries andemployee $ 47,158 $ 48,807 $ 54,840 $ 51,904 $ 53,660 benefits
Premises and 10,634 10,808 11,618 10,913 11,148 equipment
Merger related - 1,282 925 1,010 4,562 expenses
Intangibleasset 5,472 5,592 5,876 6,025 5,888 amortization
Data 3,084 3,352 3,343 3,641 3,435 processing
Software 4,036 3,547 3,427 3,406 3,184 amortization
Consulting andprofessional 3,009 2,707 3,552 2,621 1,899 fees
Loan related 735 760 654 (921 ) 1,740 expenses
FDIC insurance 3,939 2,436 1,245 527 1,870
Communications 1,002 1,156 1,236 1,425 1,457
Advertisingand public 920 1,464 1,764 1,368 1,104 relations
Legal expenses 579 411 306 500 645
Other 8,052 11,636 11,732 11,864 9,938
Noninterestexpensesexcluding 88,620 93,958 100,519 94,283 100,529 goodwillimpairmentcharge
Goodwillimpairment - 443,695 - - - charge
Totalnoninterest $ 88,620 $ 537,653 $ 100,519 $ 94,283 $ 100,529 expenses
Table 10 - Reconciliation of Non-GAAP Financial Measures
As of and for the Three Months Ended
(Inthousands, June 30, March 31, December 31, September 30, June 30,except share and per share 2020 2020 2019 2019 2019data)
Efficiency ratio
Noninterestexpenses $ 88,620 $ 537,653 $ 100,519 $ 94,283 $ 100,529 (numerator)
Net interest $ 154,714 $ 153,468 $ 160,911 $ 160,187 $ 160,787 income
Noninterest 29,950 35,069 33,898 34,642 31,722 income
Operatingrevenue $ 184,664 $ 188,537 $ 194,809 $ 194,829 $ 192,509 (denominator)
Efficiency 47.99 % 285.17 % 51.60 % 48.39 % 52.22 %ratio
Adjustedefficiency ratio
Noninterest $ 88,620 $ 537,653 $ 100,519 $ 94,283 $ 100,529 expenses
Less:non-cashgoodwill - 443,695 - - - impairmentcharge
Less: mergerrelated - 1,282 925 1,010 4,562 expenses
Less: pensionplan - - 1,225 - - terminationexpense
Less:expensesrelated to 1,205 122 - - - COVID-19pandemic
Less: othernon-routine - - - - - expenses^(1)
Adjustednoninterest $ 87,415 $ 92,554 $ 98,369 $ 93,273 $ 95,967 expenses(numerator)
Net interest $ 154,714 $ 153,468 $ 160,911 $ 160,187 $ 160,787 income
Noninterest 29,950 35,069 33,898 34,642 31,722 income
Plus:revaluationof receivable - - - - 2,000 from sale ofinsuranceassets
Less: gain onsale of - - 1,263 - 1,514 acquiredloans
Less:securities 2,286 2,994 317 775 938 gains, net
Adjustednoninterest 27,664 32,075 32,318 33,867 31,270 income
Adjustedoperating $ 182,378 $ 185,543 $ 193,229 $ 194,054 $ 192,057 revenue(denominator)
Adjustedefficiency 47.93 % 49.88 % 50.91 % 48.07 % 49.97 %ratio
Tangiblecommon equity ratio
Shareholders' $ 2,045,480 $ 2,113,543 $ 2,460,846 $ 2,475,944 $ 2,426,072 equity
Less:goodwill andother (137,318 ) (142,782 ) (590,949 ) (597,488 ) (595,605 )intangibleassets, net
Tangiblecommon 1,908,162 1,970,761 1,869,897 1,878,456 1,830,467 shareholders'equity
Total assets 18,857,753 17,237,918 17,800,229 17,855,946 17,504,005
Less:goodwill andother (137,318 ) (142,782 ) (590,949 ) (597,488 ) (595,605 )intangibleassets, net
Tangible $ 18,720,435 $ 17,095,136 $ 17,209,280 $ 17,258,458 $ 16,908,400 assets
Tangiblecommon equity 10.19 % 11.53 % 10.87 % 10.88 % 10.83 %ratio
Tangible bookvalue per share
Shareholders' $ 2,045,480 $ 2,113,543 $ 2,460,846 $ 2,475,944 $ 2,426,072 equity
Less:goodwill andother (137,318 ) (142,782 ) (590,949 ) (597,488 ) (595,605 )intangibleassets, net
Tangiblecommon $ 1,908,162 $ 1,970,761 $ 1,869,897 $ 1,878,456 $ 1,830,467 shareholders'equity
Common shares 125,930,741 125,897,827 127,597,569 128,173,765 128,798,549 outstanding
Tangible bookvalue per $ 15.15 $ 15.65 $ 14.65 $ 14.66 $ 14.21 share
Table 10 (Continued) - Reconciliation of Non-GAAP Measures
As of and for the Three Months Ended
(Inthousands, June 30, March 31, December 31, September 30, June 30,except share and per share 2020 2020 2019 2019 2019data)
Return onaverage tangiblecommon equity
Average $ 2,118,796 $ 2,446,810 $ 2,471,398 $ 2,447,189 $ 2,331,855 common equity
Less: averageintangible (140,847 ) (584,513 ) (595,439 ) (598,602 ) (597,772 )assets
Averagetangiblecommon $ 1,977,949 $ 1,862,297 $ 1,875,959 $ 1,848,587 $ 1,734,083 shareholders'equity
Net (loss) $ (56,114 ) $ (399,311 ) $ 51,426 $ 43,986 $ 48,346 income
Plus:non-cashgoodwill - 412,918 - - - impairmentcharge, netof tax
Plus:intangibleasset 4,174 4,261 4,477 4,620 4,515 amortization,net of tax
Tangible net $ (51,940 ) $ 17,868 $ 55,903 $ 48,606 $ 52,861 income
Return onaverage )tangible (10.56 % 3.86 % 11.82 % 10.43 % 12.23 %common equity^(1)
Adjustedreturn onaverage tangiblecommon equity
Averagetangiblecommon $ 1,977,949 $ 1,862,297 $ 1,875,959 $ 1,848,587 $ 1,734,083 shareholders'equity
Tangible net $ (51,940 ) $ 17,868 $ 55,903 $ 48,606 $ 52,861 income
Non-routine items:
Plus: mergerrelated - 1,282 925 1,010 4,562 expenses
Plus: pensionplan - - 1,225 - - terminationexpense
Plus:expensesrelated to 1,205 122 - - - COVID-19pandemic
Plus:revaluationof receivable - - - - 2,000 from sale ofinsuranceassets
Less: gain onsale of - - 1,263 - 1,514 acquiredloans
Less:securities 2,286 2,994 317 775 938 gains(losses), net
Less: incometax effect oftax (256 ) (464 ) 48 55 958 deductiblenon-routineitems
Totalnon-routine (825 ) (1,126 ) 522 180 3,152 items, aftertax
Adjustedtangible net $ (52,765 ) $ 16,742 $ 56,425 $ 48,786 $ 56,012 income
Adjustedreturn onaverage (10.73 ) 3.62 % 11.93 % 10.47 % 12.96 %tangible %common equity^(1)
Adjustedreturn on averageassets
Average $ 18,500,600 $ 17,694,018 $ 17,843,383 $ 17,621,163 $ 17,653,511 assets
Net (loss) $ (56,114 ) $ (399,311 ) $ 51,426 $ 43,986 $ 48,346 income
Return on ) )average (1.22 % (9.08 % 1.14 % 0.99 % 1.10 %assets
Net (loss) $ (56,114 ) $ (399,311 ) $ 51,426 $ 43,986 $ 48,346 income
Plus:non-cashgoodwill - 412,918 - - - impairmentcharge, netof tax
Totalnon-routine (825 ) (1,126 ) 522 180 3,152 items, aftertax
Adjusted net $ (56,939 ) $ 12,481 $ 51,948 $ 44,166 $ 51,497 income
Adjustedreturn on (1.24 ) 0.28 % 1.16 % 0.99 % 1.17 %average %assets^(1)
Adjusteddiluted earnings pershare
Dilutedweightedaverage 125,924,652 126,630,446 128,003,089 128,515,274 129,035,553 common sharesoutstanding
Net incomeallocated to $ (56,114 ) $ (399,311 ) $ 51,248 $ 43,849 $ 48,176 common stock
Plus:non-cashgoodwill - 412,918 - - - impairment,net of tax
Totalnon-routine (825 ) (1,126 ) 522 180 3,152 items, aftertax
Adjusted netincome $ (56,939 ) $ 12,481 $ 51,770 $ 44,029 $ 51,328 allocated tocommon stock
Adjusteddiluted $ (0.45 ) $ 0.10 $ 0.40 $ 0.34 $ 0.40 earnings pershare
Adjustedpre-tax, pre-provisionnet revenue
Income before $ (62,767 ) $ (432,545 ) $ 67,164 $ 56,782 $ 63,053 taxes
Plus:Provision for 158,811 83,429 27,126 43,764 28,927 credit losses
Plus:non-cash - 443,695 - - - goodwillimpairment
Plus: Totalnon-routine (1,081 ) (1,590 ) 570 235 4,110 items beforetaxes
Adjustedpre-tax, $ 94,963 $ 92,989 $ 94,860 $ 100,781 $ 96,090 pre-provisionnet revenue
(1) Annualized.
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CONTACT: Cadence Bancorporation
CONTACT: Media contact: Danielle Kernell 713-871-4051 danielle.kernell@cadencebank.com
CONTACT: Investor relations contact: Valerie Toalson 713-871-4103 or 800-698-7878 vtoalson@cadencebancorporation.com
Jul. 22, 2020
HOUSTON--(BUSINESS WIRE)--Jul. 22, 2020--Cadence Bancorporation (NYSE: CADE) ("Cadence") today announced a net loss for the quarter ended June 30, 2020 of ($56.1) million or ($0.45) per share, compared to net income of $48.3 million or $0.37 per share for the quarter ended June 30, 2019, and a net loss of ($399.3) million or ($3.15) per share for the quarter ended March 31, 2020. Adjusted net (loss) income(1), excluding non-routine income and expenses(2) (and the goodwill impairment charge for first quarter 2020), was ($56.9) million or ($0.45) per share for the second quarter of 2020, compared to $51.3 million or $0.40 per share for the quarter ended June 30, 2019 and compared to $12.5 million or $0.10 per share for the quarter ended March 31, 2020.
"The challenge and uncertainty of the second quarter in many ways brought out the best in Cadence and I am proud of how our team operated and served our customers through it all. Our pre-provision results continue to showcase a key strength of our operations, highlighted by our increased net interest income and continued expense management. That noted, clearly the credit backdrop is very challenging, as our portfolio has been meaningfully impacted by the COVID-19 pandemic and related economic shutdown. This quarter, we again spent a great deal of time critically reviewing our portfolios to ensure we are fully reflecting the realities of the environment. While the trajectory of the pandemic and its impact on the economy remain uncertain, we are very confident that our risk management and robust capital position will allow Cadence to exit this crisis in a strong position," stated Paul B. Murphy, Jr., Chairman and Chief Executive Officer of Cadence Bancorporation.
Second Quarter 2020 Highlights:
Second quarter 2020 highlights (compared to the linked quarter where applicable) are as follows:
* Adjusted pre-tax pre-provision net revenue(1) for the second quarter of 2020 remained consistent at $95.0 million, a decrease of $1.1 million or 1.2% compared to the second quarter of 2019 and an increase of $2.0 million or 2.1% compared to the first quarter of 2020. As a percent of average assets, adjusted pre-tax pre-prevision net revenue was 2.06%, 2.18%, and 2.11% for the second quarter of 2020, second quarter of 2019 and first quarter of 2020, respectively. * We originated $1.0 billion of loans under the Paycheck Protection Program ("PPP") during the second quarter of 2020. These PPP loans are 100% federally guaranteed and were fully funded by core deposits. * Total deposits increased $1.6 billion as non-interest bearing deposits increased $1.3 billion to 32% of total deposits. At the same time, we aggressively managed funding costs, with total deposit costs at 0.46%, representing a decline of 50 basis points from prior quarter. * Our tax equivalent net interest margin ("NIM") remained notable at 3.51%, in spite of the impact of lower interest rates, lower yielding PPP loans and securities, and lower accretion income on acquired loans. The gain on our collar transaction and our deposit cost management continue to provide a strong foundation to our NIM. * Adjusted expenses (see Table 10) declined by $5.1 million and we realized an adjusted efficiency ratio(1) of 47.9%, down from 49.9%. * The provision for credit losses for the second quarter 2020 was $158.8 million compared to $83.4 million in the linked quarter reflecting degradation of economic forecasts, depressed energy markets and COVID-19 driven stress. As of June 30, 2020, our Allowance for Credit Losses ("ACL") was 2.71% of total loans, up from 1.83% at March 31, 2020. Excluding PPP loans, our ACL was 2.93% at June 30, 2020. * Capital remained very strong with our Common Equity Tier 1 capital ratio increasing to 11.7% and total risk weighted capital increasing to 14.3%, providing a robust capital base well-positioned for the current environment. * Annualized returns on average assets and tangible common equity for the second quarter of 2020 were (1.22%) and (10.56%), respectively, compared to 1.10% and 12.23%, respectively, for the second quarter of 2019 and (9.08%) and 3.86%, respectively, for the first quarter of 2020. * Adjusted annualized returns on average assets(1) and adjusted tangible common equity(1) for the second quarter of 2020 were (1.24%) and (10.73%), respectively, compared to 1.17% and 12.96%, respectively, for the second quarter of 2019 and 0.28% and 3.62%, respectively, for the first quarter of 2020.
Balance Sheet:
Total assets were $18.9 billion as of June 30, 2020, an increase of $1.4 billion or 7.7% from June 30, 2019, and an increase of $1.6 billion or 9.4% from March 31, 2020 driven by the issuance of PPP loans and meaningful growth in deposits impacted by fiscal stimulus during the second quarter.
Cash and Cash Equivalents at June 30, 2020 totaled $1.9 billion as compared to $0.8 billion at June 30, 2019 and compared to $0.6 billion at March 31, 2020. The $1.3 billion increase in the second quarter of 2020 resulted from the increase of $1.6 billion in deposits during this quarter.
Loans at June 30, 2020 totaled $13.7 billion as compared to $13.6 billion at June 30, 2019, an increase of $71.2 million or 0.5%. Loans increased $306.9 million or 2.3% from $13.4 billion at March 31, 2020. The linked quarter increase included the origination of $1.0 billion in PPP loans, offset by approximately $693 million of net loan paydowns and payoffs. The declines were driven by reductions in the C&I segment, including paydowns of defensive draws taken in March, and strategic declines in the restaurant, energy and leveraged loan sectors as we work to reduce select exposures.
Investment Securities at June 30, 2020 totaled $2.7 billion or 14.1% of total assets as compared to $1.7 billion or 9.6% of total assets at June 30, 2019, an increase of $976.6 million or 58.0%. Investment securities for the second quarter of 2020 increased $199.8 million from $2.5 billion, or 14.3% of total assets at March 31, 2020. The increase in securities from both the prior year and linked quarter is a result of substantial growth in deposits and lower loan originations outside of the PPP loans. Securities acquired during the second quarter include primarily investment grade municipal bonds and agency-backed mortgages.
Goodwill at June 30, 2020 totaled $43.1 million, down from $483.2 million at June 30, 2019 and unchanged from March 31, 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 June 30, 2020 relates to our registered investment advisory subsidiary and trust division.
Total Deposits at June 30, 2020 were $16.1 billion, an increase of $1.6 billion or 10.9% from both the June 30, 2019 and March 31, 2020 levels. Second quarter 2020 core deposits increased by 11.3% as a result of customers maintaining additional liquidity in the current environment and broader impacts of fiscal stimulus. Non-interest bearing deposits increased to $5.2 billion at June 30, 2020 or 32.5% of total deposits, up from $3.3 billion or 22.8% at June 30, 2019 and up from $4.0 billion or 27.3% of total deposits at March 31, 2020.
Shareholders' equity was $2.0 billion at June 30, 2020, a decrease of $380.6 million or 15.7% from June 30, 2019, and a decrease of $68.1 million or 3.2% from March 31, 2020. The linked quarter decrease included the quarterly net loss of $56.1 million, $6.3 million in cash dividends, and a decrease of $7.2 million in other comprehensive income which was largely driven by a decrease in the realized gain on the interest rate collar as amounts were recognized in interest income. The year over year decrease was impacted by the goodwill impairment in the first quarter of 2020.
Tangible common shareholders' equity(1) was $1.9 billion at June 30, 2020, an increase of $77.7 million or 4.2% from June 30, 2019 and a decrease of $62.6 million or 3.2% from March 31, 2020. The linked quarter decrease resulted from the same factors noted above.
* Total shareholders' equity to total assets and tangible equity to tangible assets were 10.8% and 10.2%, respectively, at June 30, 2020 compared to 13.9% and 10.8% at June 30, 2019, and 12.3% and 11.5% at March 31, 2020, respectively. * Tangible book value per share(1) was $15.15 as of June 30, 2020, an increase of $0.94 or 6.6% from $14.21 as of June 30, 2019 and a decrease of $0.50 or 3.2% from $15.65 as of March 31, 2020. * Total outstanding shares at June 30, 2020 were 125.9 million.
Tangible common equity to tangible assets was 10.2% at June 30, 2020, and quarter end capital ratios remained robust and other than the leverage ratio, increased during the quarter due to lower risk weighted assets.
6/30/2020 3/31/2020 6/30/2019
Common equity Tier 1 capital 11.7% 11.4% 10.9%
Tier 1 leverage capital 9.5% 10.1% 10.3%
Tier 1 risk-based capital^ 11.7% 11.4% 10.9%
Total risk-based capital 14.3% 13.8% 12.9%
Asset Quality:
Credit quality metrics during the second quarter of 2020 reflected worsening economic factors as a result of COVID-19 and depressed energy prices, along with associated increased stress of certain borrowers, predominantly in the Restaurant and Energy categories.
* Net charge-offs for the second quarter of 2020 were $32.6 million or 0.94% annualized of average loans compared to $18.6 million or 0.54% annualized and $32.5 million or 0.99% annualized for the quarters ended June 30, 2019 and March 31, 2020, respectively. The current quarter charge-offs included $14.2 million in Energy, $13.4 million in General C&I and $4 million in Restaurant sectors. * Provision for credit losses for the second quarter of 2020 was $158.8 million as compared to $28.9 million for the second quarter of 2019 and $83.4 million for the first quarter of 2020. The current quarter's provision was significantly impacted by an economic forecast that was adversely affected by the COVID-19 pandemic and depressed oil prices, as well as associated net credit migration within certain portfolios. Our calculation for the ACL used the baseline scenario provided by a nationally recognized service, as adjusted for qualitative and environmental factors. * The ACL was $370.9 million or 2.71% of total loans as of June 30, 2020, as compared to $115.3 million or 0.85% of total loans as of June 30, 2019, and $245.2 million or 1.83% of total loans as of March 31, 2020. * Loans 30-89 days past due were 0.19% of total loans at June 30, 2020, compared to 0.16% at June 30, 2019 and 0.19% at March 31, 2020. * Accruing loans 90 days or more past due were 0.02% of total loans at June 30, 2020, compared to 0.23% at June 30, 2019 and 0.01% at March 31, 2020. * NPL as a percent of total loans were 1.64% at June 30, 2020, compared to 0.80% at June 30, 2019 and 1.19% at March 31, 2020. NPL totaled $224.4 million, $108.8 million and $159.7 million as of June 30, 2019 and March 31, 2020, respectively. * The ACL to total nonperforming loans ("NPL") was 165.3% as of June 30, 2020, as compared to 106.1% as of June 30, 2019, and 153.6% as of March 31, 2020. * Total criticized loans (see Table 6) at June 30, 2020 were $1.0 billion or 7.37% of total loans as compared to $408.5 million or 3.00% at June 30, 2019 and $665.7 million or 4.97% at March 31, 2020. The linked quarter increase included net downgrades predominantly in Restaurant and Energy and to a lesser extent CRE credits, partially mitigated by net reductions in general C&I credits.
Total Revenue:
Total operating revenue(1) for the second quarter of 2020 was $184.7 million, down $7.8 million or 4.1% from the same period in 2019 and down $3.9 million or 2.1% from the linked quarter.
Net interest income Net interest income for the second quarter of 2020 was $154.7 million, a decrease of $6.1 million or 3.8% from the same period in 2019 and an increase of $1.2 million or 0.8% from the first quarter of 2020. The linked quarter increase resulted primarily from the ability of our lower deposit costs and hedging income to more than offset the impact of declines in LIBOR on our loan portfolio. Loan interest income, excluding accretion and PPP loans, declined $23.8 million during the quarter, and was more than offset by $16.6 million in lower deposit interest expense and $9.8 million in additional hedge income.
* We aggressively lowered our interest rates on deposits resulting in a 52% reduction in costs of total deposits to 0.46% for the quarter compared to 0.96% for the linked quarter. Additionally, noninterest-bearing deposits as a percent of total deposits increased significantly to 32.5% from 27.3% in the prior quarter. Total interest-bearing liabilities declined by 61 basis points to 0.78% from 1.39% in the first quarter of 2020. * Hedge income and collar gain recognition for the second quarter of 2020 was $17.7 million as compared to $7.9 million for the first quarter of 2020. * Accretion on acquired loans totaled $7.6 million for the second quarter of 2020, adding 17 basis points to the NIM as compared to $9.8 million and 23 basis point for the first quarter of 2020. * Our NIM for the second quarter of 2020 was 3.51% as compared to 3.97% for the second quarter of 2019 and 3.80% for the first quarter of 2020.
PPP loans averaged $664 million in the second quarter at a yield of 2.38%, and along with cash in deposits associated with these loans, negatively impacted our second quarter NIM by 11 basis points. In addition to the impact of PPP loans, the second quarter 2020 NIM declined 8 basis points due to lower LIBOR and earning asset mix shifts, 6 basis points due to lower accretion, and 4 basis points due to excess liquidity as a result of fiscal stimulus and customer behavior. Specifically, the NIM change during the quarter included:
Quarterly Change $ MM NIM
1Q 2020 Net Interest Income $ 153.8 3.80 %
Loans (ex PPP & accretion) (23.8 ) -0.70 %
Deposits 16.6 0.43 %
Hedge Income 9.8 0.23 %
Accretion (2.2 ) -0.06 %
Securities (1.8 ) -0.05 %
Cash (1.5 ) -0.04 %
Borrowings 0.2 0.01 %
NIM before PPP loans & cash* $ 151.1 3.62 %
PPP Loans & associated cash 4.0 -0.11 %
2Q 2020 Net Interest Margin $ 155.1 3.51 %
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 second quarter of 2020 was $30.0 million, a decrease of $1.8 million or 5.6% from the same period of 2019 and a decrease of $5.1 million or 14.6% from the linked quarter. Adjusted noninterest income(1) for the second quarter of 2020 was $27.7 million, a decrease of $3.6 million or 11.5% from the second quarter of 2019, and a decrease of $4.4 million or 13.8% from the linked quarter.
* The linked quarter results reflected slowed business activity as a result of COVID-19, including decreases in credit related fees, service charges on deposits, and $1.8 million in net writedowns on alternative investments. These impacts were partially offset by increases in investment advisory revenue and mortgage banking income given the robust related markets. * Noninterest income as a percent of total revenue for the second quarter of 2020 was 16.2% as compared to 16.5% for the second quarter of 2019 and 18.6% for the linked quarter.
Noninterest expense (excluding goodwill impairmentcharge for first quarter 2020) for the second quarter of 2020 was $88.6 million, a decrease of $11.9 million or 11.8% from the same period in 2019 and a decrease of $5.3 million or 5.7% from the linked quarter. Adjusted noninterest expense(2), which excludes the impact of non-routine items(2), was $87.4 million, down $8.6 million or 8.9% from the second quarter of 2019 and down $5.1 million or 5.6% from the first quarter of 2020. Cadence has consistently demonstrated the ability to effectively manage expense levels in various economic environments, evidenced with the expense and efficiency declines this quarter. The linked quarter decrease in noninterest expenses (excluding the goodwill impairment charge) resulted from:
* Decrease of $1.6 million in personnel costs driven by reductions in regular compensation and employment taxes; * $1.3 million less in merger related expenses; * Decrease of $3.6 million in other expenses including: $0.8 million in special asset expenses; $0.7 million in travel expenses; $0.5 million in ATM and debit card expenses; and $0.5 million in operational losses; and * Partially offset by an increase of $1.5 million in FDIC insurance assessment.
Adjusted efficiency ratio(1) for the second quarter of 2020 was 47.9%, improving from the linked quarter ratio of 49.9% with lower expenses and decreased from the prior year's second quarter ratio of 50.0%.
^ Considered a non-GAAP financial measure. See Table 10 "Reconciliation of(1) Non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.
^ See Table 10 for a detail of non-routine income and expenses.(2)
Taxes:
The effective tax rate for the second quarter of 2020 was 10.6% compared to 7.7% for the linked quarter and 23.3% for the second quarter of 2019.
Dividend:
On July 21, 2020, the board of directors of Cadence Bancorporation approved a quarterly cash dividend in the amount of $0.05 per share of outstanding common stock, representing an annualized dividend of $0.20 per share. The dividend will be paid on August 7, 2020 to holders of record of Cadence's Class A common stock on July 31, 2020.
Supplementary Financial Tables (Unaudited):
Supplementary financial tables (unaudited) are included in this release following the customary disclosure information.
Second Quarter 2020 Earnings Conference Call:
Cadence Bancorporation executive management will host a conference call to discuss second quarter 2020 results on Wednesday, July 22, 2020, 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: 2169431
For those unable to participate in the live presentation, a replay will be available through August 5, 2020. 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: 10145370
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 $18.9 billion in total assets as of June 30, 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 1,800 associates is committed to exceeding customer expectations and helping their clients succeed financially.
Cautionary Statement Regarding Forward-Looking Information
This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and "outlook," or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict.
Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Such factors include, without limitation, the "Risk Factors" referenced in our Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the "SEC") on May 21, 2018, and our Registration Statement on Form S-4 filed with the SEC on July 20, 2018, other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, including our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, and the following factors: business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic market areas; economic, market, operational, liquidity, credit and interest rate risks associated with our business; deteriorating asset quality and higher loan charge-offs; the laws and regulations applicable to our business; our ability to achieve organic loan and deposit growth and the composition of such growth; increased competition in the financial services industry, nationally, regionally or locally; our ability to maintain our historical earnings trends; our ability to raise additional capital to implement our business plan; material weaknesses in our internal control over financial reporting; systems failures or interruptions involving our information technology and telecommunications systems or third-party servicers; the composition of our management team and our ability to attract and retain key personnel; the fiscal position of the U.S. federal government and the soundness of other financial institutions; the composition of our loan portfolio, including the identity of our borrowers and the concentration of loans in energy-related industries and in our specialized industries; the portion of our loan portfolio that is comprised of participations and shared national credits; the amount of nonperforming and classified assets we hold; the 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
(In thousands, June 30, March 31, December 31, September 30, June 30,except share and per share data) 2020 2020 2019 2019 2019
Statement of Operations Data
Interest income $ 177,175 $ 192,754 $ 207,620 $ 213,149 $ 217,124
Interest expense 22,461 39,286 46,709 52,962 56,337
Net interest income 154,714 153,468 160,911 160,187 160,787
Provision for 158,811 83,429 27,126 43,764 28,927 credit losses
Net interest income (4,097 ) 70,039 133,785 116,423 131,860 after provision
Noninterest income 29,950 35,069 33,898 34,642 31,722
Noninterest expense 88,620 537,653 100,519 94,283 100,529 ^(1)
(Loss) income (62,767 ) (432,545 ) 67,164 56,782 63,053 before income taxes
Income tax (6,653 ) (33,234 ) 15,738 12,796 14,707 (benefit) expense
Net (loss) income $ (56,114 ) $ (399,311 ) $ 51,426 $ 43,986 $ 48,346
Weighted averagecommon shares outstanding
Basic 125,924,652 126,630,446 127,953,742 128,457,491 128,791,933
Diluted 125,924,652 126,630,446 128,003,089 128,515,274 129,035,553
(Loss) earnings per share
Basic $ (0.45 ) $ (3.15 ) $ 0.40 $ 0.34 $ 0.37
Diluted (0.45 ) (3.15 ) 0.40 0.34 0.37
Period-End Balance Sheet Data
Cash and cash $ 1,899,369 $ 609,351 $ 988,764 $ 1,061,102 $ 766,259 equivalents
Investment 2,661,433 2,461,644 2,368,592 1,705,325 1,684,847 securities
Total loans, net of 13,699,097 13,392,191 12,983,655 13,637,042 13,627,934 unearned income
Allowance for 370,901 245,246 119,643 127,773 115,345 credit losses
Total assets 18,857,753 17,237,918 17,800,229 17,855,946 17,504,005
Total deposits 16,069,282 14,489,505 14,742,794 14,789,712 14,487,821
Noninterest-bearing 5,220,109 3,959,721 3,833,704 3,602,861 3,296,652 deposits
Interest-bearing 10,849,173 10,529,784 10,909,090 11,186,851 11,191,169 deposits
Borrowings andsubordinated 372,222 372,440 372,173 371,892 376,240 debentures
Total shareholders' 2,045,480 2,113,543 2,460,846 2,475,944 2,426,072 equity
Average Balance Sheet Data
Investment $ 2,487,467 $ 2,397,275 $ 2,003,339 $ 1,650,902 $ 1,716,550 securities
Total loans, net of 13,884,220 13,161,371 13,423,435 13,719,286 13,921,873 unearned income
Allowance for 267,464 201,785 132,975 119,873 106,656 credit losses
Total assets 18,500,600 17,694,018 17,843,383 17,621,163 17,653,511
Total deposits 15,774,787 14,574,614 14,749,327 14,539,420 14,645,110
Noninterest-bearing 4,587,673 3,658,612 3,648,874 3,456,807 3,281,383 deposits
Interest-bearing 11,187,115 10,916,002 11,100,454 11,082,613 11,363,727 deposits
Borrowings andsubordinated 372,547 439,698 374,179 381,257 441,619 debentures
Total shareholders' 2,118,796 2,446,810 2,471,398 2,447,189 2,331,855 equity
(1) For 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
(Inthousands, June 30, March December September June 30,except share 31, 31, 30, and per 2020 2019 2020 2019 2019share data)
Per Share Data:
Book value $ 16.24 $ 16.79 $ 19.29 $ 19.32 $ 18.84
Tangible book 15.15 15.65 14.65 14.66 14.21 value ^(1)
Cashdividends 0.050 0.175 0.175 0.175 0.175 declared
Dividend (11.11 ) (5.56 ) 43.75 % 51.47 % 47.30 %payout ratio % %
Performance Ratios:
Return onaverage (10.65 ) (65.64 ) 8.26 % 7.13 % 8.32 %common equity % %^ (2)
Return onaveragetangiblecommon (10.56 ) 3.86 11.82 10.43 12.23
equity^ (1)(2)
Return onaverage (1.22 ) (9.08 ) 1.14 0.99 1.10 assets ^(2)
Net interest 3.51 3.80 3.89 3.94 3.97 margin ^(2)
Efficiency 47.99 285.17 51.60 48.39 52.22 ratio^ (1)
Adjustedefficiency 47.93 49.88 50.91 48.07 49.97 ratio^ (1)
Asset Quality Ratios:
Total NPA tototal loans,OREO, 1.74 % 1.31 % 0.97 % 0.84 % 0.85 %
and other NPA
Totalnonperformingloans ("NPL") 1.64 1.19 0.92 0.79 0.80 to
total loans
Total ACL to 2.71 1.83 0.92 0.94 0.85 total loans
ACL to total 165.30 153.61 100.07 118.17 106.08 NPL
Netcharge-offs 0.94 0.99 1.04 0.91 0.54 to averageloans^ (2)
Capital Ratios:
Totalshareholders' 10.8 % 12.3 % 13.8 % 13.9 % 13.9 %equity toassets
Tangiblecommon equityto tangible 10.2 11.5 10.9 10.9 10.8
assets ^(1)
Common equityTier 1 11.7 11.4 11.5 11.0 10.9 capital
Tier 1leverage 9.5 10.1 10.3 10.3 10.3 capital ^(3)
Tier 1risk-based 11.7 11.4 11.5 11.0 10.9 capital^ (3)
Totalrisk-based 14.3 13.8 13.7 13.1 12.9 capital ^(3)
Considered a non-GAAP financial measure. See Table 10 "Reconciliation of(1) Non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.
(2) Annualized.
(3) Current quarter regulatory capital ratios are estimates.
Table 2 - Average Balances/Yield/Rates
For the Three Months Ended June 30,
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 $ 11,173,408 $ 125,922 4.53 % $ 10,044,825 $ 135,946 5.43 %
ANCI portfolio 2,512,163 32,967 5.28 3,586,344 55,266 6.18
PCD portfolio ^(3) 198,649 3,965 8.03 290,704 10,799 14.90
Total loans 13,884,220 162,854 4.72 13,921,873 202,011 5.82
Investment securities
Taxable 2,269,017 12,207 2.16 1,500,971 10,298 2.75
Tax-exempt ^(2) 218,450 1,948 3.59 215,579 2,061 3.83
Total investment 2,487,467 14,155 2.29 1,716,550 12,359 2.89 securities
Federal funds sold and 1,342,779 328 0.10 597,988 2,667 1.79 short-term investments
Other investments 77,337 247 1.28 67,124 520 3.11
Total interest-earning 17,791,803 177,584 4.01 16,303,535 217,557 5.35 assets
Noninterest-earning assets:
Cash and due from banks 176,716 111,337
Premises and equipment 127,413 128,067
Accrued interest and 672,132 1,217,228 other assets
Allowance for credit (267,464 ) (106,656 ) losses
Total assets $ 18,500,600 $ 17,653,511
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 8,368,151 $ 7,511 0.36 % $ 7,732,568 $ 30,195 1.57 %
Savings deposits 291,874 179 0.25 251,270 245 0.39
Time deposits 2,527,090 10,451 1.66 3,379,889 20,298 2.41
Total interest-bearing 11,187,115 18,141 0.65 11,363,727 50,738 1.79 deposits
Other borrowings 149,973 937 2.51 300,897 3,051 4.07
Subordinated debentures 222,574 3,383 6.11 140,722 2,548 7.26
Total interest-bearing 11,559,662 22,461 0.78 11,805,346 56,337 1.91 liabilities
Noninterest-bearing liabilities:
Demand deposits 4,587,673 3,281,383
Accrued interest and 234,469 234,927 other liabilities
Total liabilities 16,381,804 15,321,656
Shareholders' equity 2,118,796 2,331,855
Total liabilities and $ 18,500,600 $ 17,653,511 shareholders' equity
Net interest income/net 155,123 3.23 % 161,220 3.45 %interest spread
Net yield on earningassets/net interest 3.51 % 3.97 %margin
Taxable equivalent adjustment:
Investment securities (409 ) (433 )
Net interest income $ 154,714 $ 160,787
_____________________
(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%.
Prior to the adoption of CECL on January 1, 2020, these loans were(3) 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 For the Three Months Ended June 30, 2020 March 31, 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 $ 11,173,408 $ 125,922 4.53 % $ 10,213,846 $ 129,402 5.10 %
ANCI portfolio 2,512,163 32,967 5.28 2,731,240 40,650 5.99
PCD portfolio ^(3) 198,649 3,965 8.03 216,285 5,082 9.45
Total loans 13,884,219 162,854 4.72 13,161,371 175,134 5.35
Investment securities
Taxable 2,269,017 12,207 2.16 2,198,528 14,015 2.56
Tax-exempt ^(2) 218,450 1,948 3.59 198,747 1,807 3.66
Total investment 2,487,467 14,155 2.29 2,397,275 15,822 2.65 securities
Federal funds soldand short-term 1,342,779 328 0.10 628,885 1,783 1.14 investments
Other investments 77,337 247 1.28 80,173 394 1.98
Totalinterest-earning 17,791,802 177,584 4.01 16,267,704 193,133 4.77 assets
Noninterest-earning assets:
Cash and due from 176,716 250,804 banks
Premises and 127,413 127,812 equipment
Accrued interest and 672,132 1,249,483 other assets
Allowance for credit (267,464 ) (201,785 ) losses
Total assets $ 18,500,599 $ 17,694,018
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 8,368,151 $ 7,511 0.36 % $ 8,121,641 $ 21,667 1.07 %
Savings deposits 291,874 179 0.25 272,444 317 0.47
Time deposits 2,527,090 10,451 1.66 2,521,917 12,744 2.03
Totalinterest-bearing 11,187,115 18,141 0.65 10,916,002 34,728 1.28 deposits
Other borrowings 149,973 937 2.51 217,363 1,108 2.05
Subordinated 222,574 3,383 6.11 222,335 3,450 6.24 debentures
Totalinterest-bearing 11,559,662 22,461 0.78 11,355,700 39,286 1.39 liabilities
Noninterest-bearing liabilities:
Demand deposits 4,587,673 3,658,612
Accrued interest and 234,469 232,896 other liabilities
Total liabilities 16,381,804 15,247,208
Stockholders' equity 2,118,796 2,446,810
Total liabilities and $ 18,500,600 $ 17,694,018 stockholders' equity
Net interest income/ 155,123 3.23 % 153,847 3.38 %net interest spread
Net yield on earningassets/net interest 3.51 % 3.80 %margin
Taxable equivalent adjustment:
Investment securities (409 ) (379 )
Net interest income $ 154,714 $ 153,468
_____________________
(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%.
Prior to the adoption of CECL on January 1, 2020, these loans were(3) referred to as ACI loans, but with the adoption of CECL they are referred to as PCD loans.
Table 3 - Loan Interest Income Detail
Year-To-Date For the Three Months Ended
June 30, June 30, March 31, December September June 30,(In 31, 30, thousands) 2020 2020 2020 2019 2019 2019
InterestIncome Detail
Originated $ 255,324 $ 125,922 $ 129,402 $ 134,450 $ 136,333 $ 135,946 loans
ANCIloans: 59,205 26,264 32,940 37,637 43,133 49,095 interestincome
ANCIloans: 14,413 6,703 7,710 8,610 10,951 6,171 accretion
PCD loans:interest 6,150 3,111 3,039 3,839 3,406 2,781 income ^(1)
PCD loans:accretion 2,897 854 2,043 6,018 4,147 8,017 ^(1)
Total loaninterest $ 337,988 $ 162,854 $ 175,134 $ 190,554 $ 197,970 $ 202,011 income
Yields
Originated 4.80 % 4.53 % 5.10 % 5.25 % 5.31 % 5.43 loans
ANCI loanswithout 4.54 4.20 4.85 4.95 5.23 5.49 discountaccretion
ANCI loansdiscount 1.11 1.08 1.14 1.13 1.33 0.69 accretion
PCD loanswithout 5.96 6.30 5.65 6.20 5.23 3.84 discountaccretion
PCD loansdiscount 2.81 1.73 3.80 9.73 6.37 11.06 accretion
Total loan 5.03 % 4.72 % 5.35 % 5.63 % 5.72 % 5.82 yield
Prior quarter PCD amounts have been revised to be comparable to the(1) current quarter presentation. Interest income for PCD loans represents contractual interest.
Table 4 - Allowance for Credit Losses ("ACL") ^(1)
For the Three Months Ended
June 30, March 31, December September June 30,(In 31, 30, thousands) 2020 2020 2019 2019 2019
Balance atbeginning $ 245,246 $ 119,643 $ 127,773 $ 115,345 $ 105,038 of period
Cumulativeeffect ofthe - 75,850 - - - adoption ofCECL ^(2)
Charge-offs (33,452 ) (33,098 ) (35,432 ) (31,650 ) (18,981 )
Recoveries 901 613 176 314 361
Net (32,551 ) (32,485 ) (35,256 ) (31,336 ) (18,620 )charge-offs
Provisionfor loan 158,206 82,238 27,126 43,764 28,927 losses
Balance atend of $ 370,901 $ 245,246 $ 119,643 $ 127,773 $ 115,345 period
(1) This table represents the activity in the ACL for funded loans.
The Company adopted ASU 2016-13, Financial Instruments - Credit Losses(2) ("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 June 30, 2020
Total Reserve for(In Commercial Commercial Allowance Unfundedthousands) and Real Consumer for Commitments Total Industrial Estate Credit ^(1) Losses
As of March $ 154,585 $ 53,418 $ 37,243 $ 245,246 $ 3,222 $ 248,468 31, 2020
Provisionfor credit 95,325 59,359 3,522 158,206 605 158,811 losses
Charge-offs (32,816 ) (327 ) (309 ) (33,452 ) - (33,452 )
Recoveries 702 30 169 901 - 901
As of June $ 217,796 $ 112,480 $ 40,625 $ 370,901 $ 3,827 $ 374,728 30, 2020
For the Six Months Ended June 30, 2020
Total Reserve for(In Commercial Commercial Allowance Unfundedthousands) and Real Consumer for Commitments Total Industrial Estate Credit ^(1) Losses
As ofDecember $ 89,796 $ 15,319 $ 14,528 $ 119,643 $ 1,699 $ 121,342 31, 2019
Cumulativeeffect ofthe 32,951 20,599 22,300 75,850 332 76,182 adoption ofCECL
As ofJanuary 1, 122,747 35,918 36,828 195,493 2,031 197,524 2020
Provisionfor credit 159,008 77,158 4,278 240,444 1,796 242,240 losses
Charge-offs (64,803 ) (806 ) (941 ) (66,550 ) - (66,550 )
Recoveries 844 210 460 1,514 - 1,514
As of June $ 217,796 $ 112,480 $ 40,625 $ 370,901 $ 3,827 $ 374,728 30, 2020
(1) The reserve for unfunded commitments is recorded in other liabilities in the consolidated balance sheets
Table 6 - Criticized Loans by Segment
As of June 30, 2020
(Amortized cost in Special Substandard Doubtful Total thousands) Mention Criticized
Commercial and Industrial
General C&I $ 45,512 $ 146,333 $ 10,237 $ 202,082
Energy 155,735 114,080 10,747 280,562
Restaurant 171,722 158,596 7,596 337,914
Healthcare 18,250 47,398 - 65,648
Total commercial and 391,219 466,407 28,580 886,206 industrial
Commercial Real Estate
Industrial, retail, 60,819 40,351 534 101,704 and other
Multifamily 91 714 - 805
Office 346 1,005 - 1,351
Total commercial real 61,256 42,070 534 103,860 estate
Consumer
Residential - 19,172 - 19,172
Other - 39 - 39
Total consumer - 19,211 - 19,211
Total $ 452,475 $ 527,688 $ 29,114 $ 1,009,277
As of March 31, 2020
(Recorded investment Special Substandard Doubtful Total in thousands) Mention Criticized
Commercial and Industrial
General C&I $ 64,326 $ 208,452 $ 7,130 $ 279,908
Energy sector 111,261 43,326 5,915 160,502
Restaurant industry 43,916 63,608 6,396 113,920
Healthcare 35,604 3,122 - 38,726
Total commercial and 255,107 318,508 19,441 593,056 industrial
Commercial Real Estate
Industrial, retail, 30,158 14,241 - 44,399 and other
Multifamily 1,219 - - 1,219
Office 327 9,907 - 10,234
Total commercial real 31,704 24,148 - 55,852 estate
Consumer
Residential real - 16,760 - 16,760 estate
Other - 8 - 8
Total consumer - 16,768 - 16,768
Total $ 286,811 $ 359,424 $ 19,441 $ 665,676
Table 7 - Nonperforming Assets
As of
June 30, March 31, December September June 30, 31, 30, 2020 2020 2019 2019 2019
Nonperforming loans ^(1)
Commercialand $ 182,839 $ 136,712 $ 106,803 $ 92,643 $ 103,379 industrial
Commercial 25,261 8,133 1,127 6,855 - real estate
Consumer 16,284 14,808 7,289 5,294 2,942
Small - - 4,337 3,334 2,434 business ^(2)
Totalnonperforming 224,384 159,653 119,556 108,126 108,755 loans ("NPL")
ForeclosedOREO and 13,949 15,679 5,958 6,731 7,712 other NPA
Totalnonperforming $ 238,333 $ 175,332 $ 125,514 $ 114,857 $ 116,467 assets
NPL as apercentage of 1.64 % 1.19 % 0.92 % 0.79 % 0.80 %total loans
NPA as apercentage of 1.74 % 1.31 % 0.97 % 0.84 % 0.85 %loans plusOREO/other
NPA as apercentage of 1.26 % 0.99 % 0.71 % 0.64 % 0.67 %total assets
Totalaccruingloans 90 days $ 3,123 $ 1,999 $ 23,364 $ 24,487 $ 31,374 or more pastdue
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(1) 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, the 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.
Table 8 - Noninterest Income
For the Three Months Ended
June 30, March December September June 30,(In thousands) 31, 31, 30, 2020 2019 2020 2019 2019
Noninterest Income
Investmentadvisory $ 6,505 $ 5,605 $ 6,920 $ 6,532 $ 5,797 revenue
Trust services 4,092 4,815 4,713 4,440 4,578 revenue
Servicecharges on 4,852 6,416 5,181 5,462 4,730 depositaccounts
Credit-related 4,401 5,983 5,094 5,960 5,341 fees
Bankcard fees 1,716 1,958 1,933 2,061 2,279
Payrollprocessing 1,143 1,367 1,373 1,196 1,161 revenue
SBA income 1,335 1,908 2,153 2,216 1,415
Other service 1,528 1,912 1,701 1,700 1,907 fees
Securities 2,286 2,994 317 775 938 gains, net
Other 2,092 2,111 4,513 4,300 3,576
Totalnoninterest $ 29,950 $ 35,069 $ 33,898 $ 34,642 $ 31,722 income
Table 9 - Noninterest Expenses
For the Three Months Ended
June 30, March 31, September September June 30,(In thousands) 30, 30, 2020 2020 2019 2019 2019
Noninterest Expenses
Salaries andemployee $ 47,158 $ 48,807 $ 54,840 $ 51,904 $ 53,660 benefits
Premises and 10,634 10,808 11,618 10,913 11,148 equipment
Merger related - 1,282 925 1,010 4,562 expenses
Intangibleasset 5,472 5,592 5,876 6,025 5,888 amortization
Data 3,084 3,352 3,343 3,641 3,435 processing
Software 4,036 3,547 3,427 3,406 3,184 amortization
Consulting andprofessional 3,009 2,707 3,552 2,621 1,899 fees
Loan related 735 760 654 (921 ) 1,740 expenses
FDIC insurance 3,939 2,436 1,245 527 1,870
Communications 1,002 1,156 1,236 1,425 1,457
Advertisingand public 920 1,464 1,764 1,368 1,104 relations
Legal expenses 579 411 306 500 645
Other 8,052 11,636 11,732 11,864 9,938
Noninterestexpensesexcluding 88,620 93,958 100,519 94,283 100,529 goodwillimpairmentcharge
Goodwillimpairment - 443,695 - - - charge
Totalnoninterest $ 88,620 $ 537,653 $ 100,519 $ 94,283 $ 100,529 expenses
Table 10 - Reconciliation of Non-GAAP Financial Measures
As of and for the Three Months Ended
(Inthousands, June 30, March 31, December 31, September 30, June 30,except share and per share 2020 2020 2019 2019 2019data)
Efficiency ratio
Noninterestexpenses $ 88,620 $ 537,653 $ 100,519 $ 94,283 $ 100,529 (numerator)
Net interest $ 154,714 $ 153,468 $ 160,911 $ 160,187 $ 160,787 income
Noninterest 29,950 35,069 33,898 34,642 31,722 income
Operatingrevenue $ 184,664 $ 188,537 $ 194,809 $ 194,829 $ 192,509 (denominator)
Efficiency 47.99 % 285.17 % 51.60 % 48.39 % 52.22 %ratio
Adjustedefficiency ratio
Noninterest $ 88,620 $ 537,653 $ 100,519 $ 94,283 $ 100,529 expenses
Less:non-cashgoodwill - 443,695 - - - impairmentcharge
Less: mergerrelated - 1,282 925 1,010 4,562 expenses
Less: pensionplan - - 1,225 - - terminationexpense
Less:expensesrelated to 1,205 122 - - - COVID-19pandemic
Less: othernon-routine - - - - - expenses^(1)
Adjustednoninterest $ 87,415 $ 92,554 $ 98,369 $ 93,273 $ 95,967 expenses(numerator)
Net interest $ 154,714 $ 153,468 $ 160,911 $ 160,187 $ 160,787 income
Noninterest 29,950 35,069 33,898 34,642 31,722 income
Plus:revaluationof receivable - - - - 2,000 from sale ofinsuranceassets
Less: gain onsale of - - 1,263 - 1,514 acquiredloans
Less:securities 2,286 2,994 317 775 938 gains, net
Adjustednoninterest 27,664 32,075 32,318 33,867 31,270 income
Adjustedoperating $ 182,378 $ 185,543 $ 193,229 $ 194,054 $ 192,057 revenue(denominator)
Adjustedefficiency 47.93 % 49.88 % 50.91 % 48.07 % 49.97 %ratio
Tangiblecommon equity ratio
Shareholders' $ 2,045,480 $ 2,113,543 $ 2,460,846 $ 2,475,944 $ 2,426,072 equity
Less:goodwill andother (137,318 ) (142,782 ) (590,949 ) (597,488 ) (595,605 )intangibleassets, net
Tangiblecommon 1,908,162 1,970,761 1,869,897 1,878,456 1,830,467 shareholders'equity
Total assets 18,857,753 17,237,918 17,800,229 17,855,946 17,504,005
Less:goodwill andother (137,318 ) (142,782 ) (590,949 ) (597,488 ) (595,605 )intangibleassets, net
Tangible $ 18,720,435 $ 17,095,136 $ 17,209,280 $ 17,258,458 $ 16,908,400 assets
Tangiblecommon equity 10.19 % 11.53 % 10.87 % 10.88 % 10.83 %ratio
Tangible bookvalue per share
Shareholders' $ 2,045,480 $ 2,113,543 $ 2,460,846 $ 2,475,944 $ 2,426,072 equity
Less:goodwill andother (137,318 ) (142,782 ) (590,949 ) (597,488 ) (595,605 )intangibleassets, net
Tangiblecommon $ 1,908,162 $ 1,970,761 $ 1,869,897 $ 1,878,456 $ 1,830,467 shareholders'equity
Common shares 125,930,741 125,897,827 127,597,569 128,173,765 128,798,549 outstanding
Tangible bookvalue per $ 15.15 $ 15.65 $ 14.65 $ 14.66 $ 14.21 share
Table 10 (Continued) - Reconciliation of Non-GAAP Measures
As of and for the Three Months Ended
(Inthousands, June 30, March 31, December 31, September 30, June 30,except share and per share 2020 2020 2019 2019 2019data)
Return onaverage tangiblecommon equity
Average $ 2,118,796 $ 2,446,810 $ 2,471,398 $ 2,447,189 $ 2,331,855 common equity
Less: averageintangible (140,847 ) (584,513 ) (595,439 ) (598,602 ) (597,772 )assets
Averagetangiblecommon $ 1,977,949 $ 1,862,297 $ 1,875,959 $ 1,848,587 $ 1,734,083 shareholders'equity
Net (loss) $ (56,114 ) $ (399,311 ) $ 51,426 $ 43,986 $ 48,346 income
Plus:non-cashgoodwill - 412,918 - - - impairmentcharge, netof tax
Plus:intangibleasset 4,174 4,261 4,477 4,620 4,515 amortization,net of tax
Tangible net $ (51,940 ) $ 17,868 $ 55,903 $ 48,606 $ 52,861 income
Return onaverage )tangible (10.56 % 3.86 % 11.82 % 10.43 % 12.23 %common equity^(1)
Adjustedreturn onaverage tangiblecommon equity
Averagetangiblecommon $ 1,977,949 $ 1,862,297 $ 1,875,959 $ 1,848,587 $ 1,734,083 shareholders'equity
Tangible net $ (51,940 ) $ 17,868 $ 55,903 $ 48,606 $ 52,861 income
Non-routine items:
Plus: mergerrelated - 1,282 925 1,010 4,562 expenses
Plus: pensionplan - - 1,225 - - terminationexpense
Plus:expensesrelated to 1,205 122 - - - COVID-19pandemic
Plus:revaluationof receivable - - - - 2,000 from sale ofinsuranceassets
Less: gain onsale of - - 1,263 - 1,514 acquiredloans
Less:securities 2,286 2,994 317 775 938 gains(losses), net
Less: incometax effect oftax (256 ) (464 ) 48 55 958 deductiblenon-routineitems
Totalnon-routine (825 ) (1,126 ) 522 180 3,152 items, aftertax
Adjustedtangible net $ (52,765 ) $ 16,742 $ 56,425 $ 48,786 $ 56,012 income
Adjustedreturn onaverage (10.73 ) 3.62 % 11.93 % 10.47 % 12.96 %tangible %common equity^(1)
Adjustedreturn on averageassets
Average $ 18,500,600 $ 17,694,018 $ 17,843,383 $ 17,621,163 $ 17,653,511 assets
Net (loss) $ (56,114 ) $ (399,311 ) $ 51,426 $ 43,986 $ 48,346 income
Return on ) )average (1.22 % (9.08 % 1.14 % 0.99 % 1.10 %assets
Net (loss) $ (56,114 ) $ (399,311 ) $ 51,426 $ 43,986 $ 48,346 income
Plus:non-cashgoodwill - 412,918 - - - impairmentcharge, netof tax
Totalnon-routine (825 ) (1,126 ) 522 180 3,152 items, aftertax
Adjusted net $ (56,939 ) $ 12,481 $ 51,948 $ 44,166 $ 51,497 income
Adjustedreturn on (1.24 ) 0.28 % 1.16 % 0.99 % 1.17 %average %assets^(1)
Adjusteddiluted earnings pershare
Dilutedweightedaverage 125,924,652 126,630,446 128,003,089 128,515,274 129,035,553 common sharesoutstanding
Net incomeallocated to $ (56,114 ) $ (399,311 ) $ 51,248 $ 43,849 $ 48,176 common stock
Plus:non-cashgoodwill - 412,918 - - - impairment,net of tax
Totalnon-routine (825 ) (1,126 ) 522 180 3,152 items, aftertax
Adjusted netincome $ (56,939 ) $ 12,481 $ 51,770 $ 44,029 $ 51,328 allocated tocommon stock
Adjusteddiluted $ (0.45 ) $ 0.10 $ 0.40 $ 0.34 $ 0.40 earnings pershare
Adjustedpre-tax, pre-provisionnet revenue
Income before $ (62,767 ) $ (432,545 ) $ 67,164 $ 56,782 $ 63,053 taxes
Plus:Provision for 158,811 83,429 27,126 43,764 28,927 credit losses
Plus:non-cash - 443,695 - - - goodwillimpairment
Plus: Totalnon-routine (1,081 ) (1,590 ) 570 235 4,110 items beforetaxes
Adjustedpre-tax, $ 94,963 $ 92,989 $ 94,860 $ 100,781 $ 96,090 pre-provisionnet revenue
(1) Annualized.
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CONTACT: Cadence Bancorporation
CONTACT: Media contact: Danielle Kernell 713-871-4051 danielle.kernell@cadencebank.com
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