cade-10q_20200331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38058

Cadence Bancorporation

(Exact name of registrant as specified in its charter)

Delaware		47-1329858
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2800 Post Oak Boulevard, Suite 3800

Houston, Texas 77056

(Address of principal executive offices) (Zip Code)

(713) 871-4000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☒	Large accelerated filer	☐	Accelerated filer

☐	Non-accelerated filer	☐	Smaller reporting company

		☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Class A Common Stock		CADE		New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class A Common Stock, $0.01 Par Value		125,929,513
Class		Outstanding as of May 8, 2020

Cadence Bancorporation

FORM 10-Q

For the Quarter Ended March 31, 2020

INDEX

PART I: FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	3

	Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 (Audited)	3
	Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019	4
	Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019	5
	Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	7
	Notes to Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	42

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	75

ITEM 4.	CONTROLS AND PROCEDURES	78

PART II: OTHER INFORMATION		79

ITEM 1.	LEGAL PROCEEDINGS	79

ITEM 1A.	RISK FACTORS	79

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	80

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	80

ITEM 4.	MINE SAFETY DISCLOSURES	80

ITEM 5.	OTHER INFORMATION	80

ITEM 6.	EXHIBITS	80

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2020			December 31, 2019
(In thousands, except share data)				(Audited)
ASSETS
Cash and due from banks	$	212,658		$	252,447
Interest-bearing deposits with banks		391,362			725,343
Federal funds sold		5,331			10,974
Total cash and cash equivalents		609,351			988,764
Investment securities available-for-sale, amortized cost of $2,375,637 and allowance for credit losses of zero at March 31, 2020		2,461,644			2,368,592
FRB and FHLB stock		77,326			76,752
Loans held for sale		38,221			87,649
Loans, net of unearned income		13,392,191			12,983,655
Less: allowance for credit losses		(245,246	)		(119,643	)
Net loans		13,146,945			12,864,012
Premises and equipment, net		126,642			127,867
Cash surrender value of life insurance		184,552			183,400
Net deferred tax asset		40,303			—
Goodwill		43,061			485,336
Other intangible assets, net		99,721			105,613
Other assets		410,152			512,244
Total assets	$	17,237,918		$	17,800,229
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits	$	3,959,721		$	3,833,704
Interest-bearing deposits		10,529,784			10,909,090
Total deposits		14,489,505			14,742,794
Federal Home Loan Bank advances		100,000			100,000
Senior debt		49,955			49,938
Subordinated debt		183,032			182,712
Junior subordinated debentures		37,351			37,445
Notes payable		2,102			2,078
Net deferred tax liability		—			24,982
Other liabilities		262,430			199,434
Total liabilities		15,124,375			15,339,383
Shareholders' equity:
Common stock $0.01 par value, authorized 300,000,000 shares; 133,115,699 shares issued and 125,897,827 shares outstanding at March 31, 2020 and 132,984,756 shares issued and 127,597,569 shares outstanding at December 31, 2019		1,331			1,330
Additional paid-in capital		1,874,126			1,873,063
Treasury stock, at cost, 7,217,872 shares and 5,387,187 shares, respectively		(130,725	)		(100,752	)
Retained earnings		88,138			572,503
Accumulated other comprehensive income		280,673			114,702
Total shareholders' equity		2,113,543			2,460,846
Total liabilities and shareholders' equity	$	17,237,918		$	17,800,229

See notes to consolidated financial statements.

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended March 31,
(In thousands, except share and per share data)	2020			2019
INTEREST INCOME
Interest and fees on loans	$	175,134		$	205,751
Interest and dividends on securities:
Taxable		14,015			10,796
Tax-exempt		1,427			1,739
Other interest income		2,178			3,899
Total interest income		192,754			222,185
INTEREST EXPENSE
Interest on time deposits		12,744			17,186
Interest on other deposits		21,984			29,485
Interest on borrowed funds		4,558			6,225
Total interest expense		39,286			52,896
Net interest income		153,468			169,289
Provision for credit losses		83,429			11,210
Net interest income after provision for credit losses		70,039			158,079
NONINTEREST INCOME
Investment advisory revenue		5,605			5,642
Trust services revenue		4,815			4,335
Credit related fees		5,983			4,870
Service charges on deposit accounts		6,416			5,130
Bankcard fees		1,958			2,213
Payroll processing revenue		1,367			1,419
SBA income		1,908			1,449
Other service fees		1,912			2,104
Securities gains (losses), net		2,994			(12	)
Other income		2,111			3,514
Total noninterest income		35,069			30,664
NONINTEREST EXPENSE
Salaries and employee benefits		48,807			53,471
Premises and equipment		10,808			10,958
Merger related expenses		1,282			22,000
Goodwill impairment		443,695			—
Intangible asset amortization		5,592			6,073
Other expense		27,469			20,938
Total noninterest expense		537,653			113,440
(Loss) income before income taxes		(432,545	)		75,303
Income tax (benefit) expense		(33,234	)		17,102
Net (loss) income	$	(399,311	)	$	58,201
Weighted average common shares outstanding (Basic)		126,630,446			130,485,521
Weighted average common shares outstanding (Diluted)		126,630,446			130,549,319
(Loss) earnings per common share (Basic)	$	(3.15	)	$	0.44
(Loss) earnings per common share (Diluted)	$	(3.15	)	$	0.44

See notes to consolidated financial statements.

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

	Three Months Ended March 31,
(In thousands)	2020			2019
Net (loss) income	$	(399,311	)	$	58,201
Other comprehensive income, net of tax:
Unrealized gains on securities available-for-sale:
Net unrealized gains, net of income taxes of $15,149 and $6,783		48,126			22,593
Less reclassification adjustments for gains (losses) realized in net income, net of income taxes of $710 and $(3)		2,284			(9	)
Net change in unrealized gains on securities available-for-sale, net of tax		45,842			22,602
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Net unrealized gains (losses), net of income taxes of $40,919 and $11,112		126,314			37,011
Less reclassification adjustments for gains (losses) realized in net income, net of income taxes of $1,922 and $(348)		6,185			(1,160	)
Net change in unrealized gains (losses) on derivative instruments, net of tax		120,129			38,171
Other comprehensive income, net of tax		165,971			60,773
Comprehensive (loss) income	$	(233,340	)	$	118,974

See notes to consolidated financial statements.

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except per share data)	Class A Common Shares Outstanding			Common Stock		Additional Paid-in Capital			Treasury Stock			Retained Earnings			Accumulated OCI			Total Shareholders' Equity
Balance at December 31, 2018		82,497		$	836	$	1,041,000		$	(22,010	)	$	461,360		$	(42,912	)	$	1,438,274
Net income		—			—		—			—			58,201			—			58,201
Equity-based compensation cost		—			—		1,188			—			—			—			1,188
Cash dividends declared ($0.175 per common share)		—			—		—			—			(22,727	)		—			(22,727	)
Dividend equivalents on restricted stock units		—			—		—			—			(125	)		—			(125	)
Purchase of treasury stock, at cost		(3,002	)		—		—			(58,830	)		—			—			(58,830	)
Issuance of common shares for State Bank acquisition		49,232			492		825,621			—			—			—			826,113
Value of stock warrants assumed from State Bank		—			—		251			—			—			—			251
Common stock issuance costs		—			—		(295	)		—			—			—			(295	)
Issuance of common shares for restricted stock unit vesting		35			1		(1	)		—			—			—			—
Issuance of treasury stock shares for exercise of stock warrants		—			—		(7	)		7			—			—			—
Other comprehensive income		—			—		—			—			—			60,773			60,773
Balance at March 31, 2019		128,762		$	1,329	$	1,867,757		$	(80,833	)	$	496,709		$	17,861		$	2,302,823

(In thousands, except per share data)

Class A Common

Shares Outstanding

Common

Stock

Additional

Paid-in

Capital

Treasury

Stock

Retained

Earnings

Accumulated

OCI

Total

Shareholders'

Equity

Balance at December 31, 2019

127,598

1,330

1,873,063