Cadence Bancorporation Reports First Quarter 2017 Results

Cadence Bancorporation Reports First Quarter 2017 Results

Cadence Bancorporation (NYSE:CADE) (“Cadence”) today reported first quarter 2017 results.

• Net income for the first quarter of 2017 was $26.1 million compared to $15.3 million in the first quarter of 2016, representing a 70.2% increase.
• On a per-share basis, net income was $0.35 per diluted common share for the first quarter of 2017, compared to $0.20 in the first quarter a year earlier.
• Annualized returns on average assets, common equity and tangible common equity⁽¹⁾ for the first quarter of 2017 were 1.10%, 9.71% and 13.96%, respectively, as compared to 0.69%, 5.77% and 8.44%, respectively, for the first quarter of 2016.
• Net interest margin increased 14 basis points during the first quarter of 2017 to 3.46% from 3.32% for the first quarter of 2016.
• Total assets were $9.7 billion at March 31, 2017, an increase of $719.5 million or 8.0% as compared to $9.0 billion as of March 31, 2016.
• Loans were $7.6 billion at March 31, 2017, an increase of $677.1 million, up 9.8% as compared to $6.9 billion at March 31, 2016.

“We are very pleased to report our first quarter earnings, our first as a public company following our initial public offering and listing on the New York Stock Exchange on April 13, 2017. We believe Cadence is entering an exciting chapter, and we are pleased to be introducing new investors to our company. We experienced solid results with revenues and margin increasing, expenses down and credit stable. While Federal Reserve data has shown recent industry declines in C&I loan growth, our loan growth continued in C&I and throughout our other key business lines. It was a good quarter,” said Paul Murphy, Cadence’s Chairman and Chief Executive Officer.

Period End Balance Sheet:

Cadence continued solid growth, completing the first quarter of 2017 with total assets of $9.7 billion, an increase of $719.5 million or 8.0% from March 31, 2016 total assets of $9.0 billion, and an increase of $190.0 million or 2.0% from December 31, 2016 total assets of $9.5 billion.

Loans excluding held-for-sale at March 31, 2017 were $7.6 billion, an increase of $677.1 million or 9.8%, compared with $6.9 billion at March 31, 2016, reflecting growth in our commercial and residential loan portfolios. Linked quarter loans increased $128.8 million or 1.7% from $7.4 billion at December 31, 2016, reflecting seasonal first quarter softness as well as growth in restaurant franchise and residential loans offset by paydowns in energy. Cadence’s energy lending portfolio totaled $903.9 million or 11.9% of total loans at March 31, 2017, as compared to $939.4 million or 12.6% of total loans at December 31, 2016. At March 31, 2017, midstream made up the largest component of energy loans at 52.0%, followed by exploration and production at 37.6% and energy services at 10.5%.

Total deposits at March 31, 2017 were $7.8 billion, an increase of $473.0 million or 6.4%, compared with $7.4 billion at March 31, 2016, primarily a result of expansion of commercial deposit relationships and treasury management services. Linked quarter deposits decreased $175.0 million or 2.2% from $8.0 billion at December 31, 2016, due primarily to seasonal flows, reflecting an increase in noninterest bearing deposits offset by declines in higher cost money market and time deposits.

Results of Operations for the Quarter:

Net income for the first quarter of 2017 was $26.1 million compared to $15.3 million in the first quarter of 2016, and $29.0 million for the fourth quarter of 2016. The year-over-year net income improvement was driven by continued asset and revenue growth, margin improvement, flat expenses and improved credit costs. The decline in net income on a linked quarter basis was due primarily to a provision for credit loss recovery in the fourth quarter of 2016 versus a provision expense in the first quarter of 2017. Pre-tax, pre-provision net earnings⁽¹⁾ were $44.5 million for the first quarter of 2017 as compared to $39.5 million in the fourth quarter of 2016. On a per-share basis, net income was $0.35 per diluted common share for the first quarter of 2017, compared to $0.20 a year earlier and $0.38 for the linked quarter. The first quarter of 2017 annualized returns on average assets, common equity and tangible common equity⁽¹⁾ were 1.10%, 9.71% and 13.96%, respectively, as compared to 0.69%, 5.77% and 8.44%, respectively, for the first quarter of 2016, and 1.20%, 10.54% and 15.16% for the fourth quarter of 2016.

Net interest margin for the first quarter of 2017 was 3.46% as compared to 3.32% for the first quarter of 2016 and 3.31% for the fourth quarter of 2016. This increase resulted from deposit costs lagging earning asset increases from rate increases during the period. Total cost of deposits for the first quarter of 2017 was 49 basis points versus 45 basis points in the prior year’s quarter, while yield on earning assets increased to 4.13% for the first quarter of 2017 versus 3.97% for the first quarter of 2016.

Net interest income for the first quarter of 2017 was $74.8 million as compared to $67.3 million during the same period in 2016, an increase of $7.5 million or 11.1%. This increase was due to increased yield and volume of our originated loan portfolio. Driven by the same dynamics, linked quarter net interest income increased $2.3 million or 3.1% from $72.5 million in the fourth quarter of 2016.

Noninterest income for the first quarter of 2017 was $24.1 million as compared to $20.1 million during the same period in 2016, an increase of $4.0 million or 19.7%. This increase was due to increases in trust services revenue, service charges on deposit accounts and changes in other asset valuations. Linked quarter noninterest income increased $1.7 million or 7.8% from $22.4 million for the fourth quarter of 2016, driven by increases in trust services, insurance revenue and changes in other asset valuations, offset by lower securities gains in the first quarter of 2017.

Noninterest expense for the first quarter of 2017 was $54.3 million as compared to $54.0 million during the same period in 2016, an increase of $0.3 million or 0.5%. Personnel expenses, the largest component of noninterest expense, increased to $34.3 million, or 4.4% in the first quarter of 2017 compared to the first quarter of 2016. Salary expense remained level, however other personnel expenses increased primarily due to short and long term incentive costs. These costs were offset by lower intangible asset amortization and other expenses as a result of targeted expense management efforts. Linked quarter noninterest expenses declined $1.1 million or 1.9% from $55.4 million for the fourth quarter of 2016, reflecting broad based expense management offset by increased personnel costs that typically are higher in the first quarter of each year due to payroll taxes and annual bonus 401(k) match expense, combined with the impact of approximately $2.5 million of incentive and long term compensation accrual reversals in the fourth quarter of 2016.

The efficiency ratio⁽¹⁾ for the first quarter of 2017 was 55.0%, an improvement from both the first and fourth quarters of 2016 of 61.8% and 58.4%, respectively, reflecting ongoing focus on efficiency and historically lower first quarter miscellaneous expenses.

Asset Quality:

Nonperforming assets totaled $171.0 million at March 31, 2017, increasing from $166.2 million at December 31, 2016, and down from $218.2 million at March 31, 2016. The decline as compared to the prior year is due primarily to resolutions and paydowns of energy credits. At March 31, 2017, $135.2 million or 79.1% of the nonperforming assets (NPAs) related to the energy portfolio. Additionally, of the $118.6 million in energy nonperforming loans included in total nonperforming assets, over 90% were paying in accordance with contractual terms as of March 31, 2017.

The allowance for credit losses (ACL) was $88.3 million or 1.2 % of total loans at March 31, 2017, as compared to $90.8 million or 1.3 % of total loans at March 31, 2016 and $82.3 million or 1.1% of total loans at December 31, 2016. At March 31, 2017, the allowance included reserves for the energy portfolio as follows: midstream of 1.2%, exploration and production of 5.7% and energy services of 6.4%. This compares to the December 31, 2016 energy portfolio reserve ratios of 1.3% for midstream, 3.5% for exploration and production and 5.9% for energy services.

The provision for credit losses was $5.8 million for the first quarter of 2017, compared with $10.5 million for the first quarter of 2016 and a net provision reversal of $5.2 million for the fourth quarter of 2016.

Net recoveries were $250 thousand for the first quarter of 2017, compared with net recoveries of $496 thousand for the first quarter of 2016 and net charge-offs of $3.7 million for the fourth quarter of 2016.

“As noted earlier, we are pleased with our first quarter performance. We are proud of our hard-working bankers and our focus on customer service. We look forward to sharing our performance with you as we move ahead,” stated Mr. Murphy.

First Quarter 2017 Earnings Conference Call:

Cadence Bancorporation executive management will host a conference call to discuss first quarter 2017 results on Monday, May 8, 2017, at 1:00 p.m. CT / 2:00 p.m. ET.

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.

For those unable to participate in the live presentation, a replay will be available through May 22, 2017. To access the replay, please use the following numbers:

Webcast Access:

A webcast of the conference call as well as the slides to be presented by management can be viewed by visiting www.cadencebank.com, clicking through the following links: “Investor Relations”, “Events & Presentations” and “Event Calendar”.

About Cadence Bancorporation

Cadence Bancorporation (NYSE:CADE) is a $9.7 billion in assets regional bank holding company headquartered in Houston, Texas. Through its affiliates, Cadence operates 65 locations in Alabama, Florida, 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, commercial real estate, foreign exchange, wealth management, investment and trust services, financial planning, retirement plan management, business and personal insurance, consumer banking, consumer loans, mortgages, home equity lines and loans, and credit cards. Clients have access to leading-edge online and mobile solutions, interactive teller machines, and 55,000 ATMs. The Cadence team of 1,200 associates is committed to exceeding customer expectations and helping their clients succeed financially. Cadence Bank, N.A., Cadence Insurance, and Linscomb & Williams are direct or indirect subsidiaries of Cadence Bancorporation.

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-1 filed with the Securities and Exchange Commission (SEC), 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; lack of seasoning in our loan portfolio; 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 identify 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; and the amount of nonperforming and classified assets we hold. 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 noninterest expenses,” “adjusted operating revenue,” “tangible common equity ratio,” “tangible book value per share” and “return on average tangible common equity” and “pre-tax, pre-provision net earnings,” are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on a fully taxable equivalent basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance.

A reconciliation of non-GAAP financial measures to the comparable GAAP financial measures is included at the end of the financial statement tables (Table 6).

⁽¹⁾ Considered a non-GAAP financial measure. See Table 6 “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

Cadence Bancorporation
Media contact:
Danielle Kernell, 713-871-4051
danielle.kernell@cadencebank.com
or
Investor relations contact:
Valerie Toalson, 713-871-4103 or 800-698-7878
vtoalson@cadencebancorporation.com

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