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Cadence Bank Announces Fourth Quarter 2023 and Annual Financial Results

PRNewswire 29-Jan-2024 4:30 PM

HOUSTON and TUPELO, Miss., Jan. 29, 2024 /PRNewswire/ -- Cadence Bank (NYSE: CADE) (the Company), today announced financial results for the quarter and year ended December 31, 2023.  Given the sale of Cadence Insurance, Inc. ("Cadence Insurance") in the fourth quarter of 2023, the financial results presented consist of both continuing operations and discontinued operations.  The discontinued operations include the financial results of Cadence Insurance prior to the sale, as well as the associated gain on sale in the fourth quarter of 2023. The discontinued operations results are presented as a single line item below income from continuing operations in the accompanying tables for all periods presented.  All adjusted financial results discussed herein are adjusted results from continuing operations.

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Annual highlights for 2023 included:

  • Achieved net income available to common shareholders of $532.8 million, or $2.92 per diluted common share, and adjusted net income from continuing operations available to common shareholders,(1) which excludes non-routine income and expenses,(2) of $401.2 million, or $2.20 per diluted common share.
  • Reported annual adjusted pre-tax pre-provision net revenue (PPNR) from continuing operations(1) of $612.3 million, or 1.26% of average assets.
  • Generated net organic loan growth of $2.1 billion, or 7.1% while deposit balances were relatively flat year-over-year.
  • Effective November 30, 2023, the Company completed the sale of Cadence Insurance to Arthur J. Gallagher & Co. ("Gallagher") (NYSE:AJG) for approximately $904 million (the "Transaction"), generating approximately $620 million in net capital creation, including a net book gain of approximately $520 million (included in discontinued operations).
  • During December 2023, executed a securities portfolio restructuring whereby securities with a par value of approximately $3.1 billion and an average yield of 1.26% were sold for an after-tax loss of $294.1 million (included in continuing operations). The Company has reinvested approximately $1.0 billion of the proceeds in securities with an average yield of 5.57%, lowered brokered deposits by $645 million at an average cost of 5.47% and expects to leverage the remaining proceeds, currently in cash balances earning 5.40%, during the first quarter of 2024. These transactions are expected to improve net interest margin and profitability going forward. This is in addition to $1.5 billion of securities that were restructured during the first quarter of 2023 at an after-tax loss of $39.5 million.

Highlights for the fourth quarter of 2023 included:

  • Achieved quarterly net income available to common shareholders of $256.7 million, or $1.41 per diluted common share, and adjusted net income from continuing operations available to common shareholders,(1) which excludes non-routine income and expenses,(2) of $72.7 million, or $0.40 per diluted common share.
  • Net interest margin improved to 3.04% from 2.98% for the third quarter of 2023, benefiting from improving trends in funding costs, reduction in brokered deposits, and the initial repositioning of securities.
  • Total loans were flat at $32.5 billion compared to the third quarter of 2023.
  • Deposit balances increased $161.3 million compared to the third quarter of 2023. Excluding a targeted reduction in brokered deposits, total deposits increased $624.3 million, or 6.5% annualized.
  • Continued to maintain strong balance sheet liquidity, with a loan-to-deposit ratio of 84.4% at December 31, 2023.
  • Capital increased notably in the quarter with the Common Equity Tier 1 ratio improving 130 basis points to 11.6%, and the Total Capital ratio improving 140 basis points to 14.3%.

"Our Company made a significant amount of progress during 2023, particularly during the fourth quarter," remarked Dan Rollins, Chairman and Chief Executive Officer of the Cadence Bank. "We are pleased to have completed the sale of Cadence Insurance to Gallagher at the end of November, which generated an after-tax gain of approximately $520 million.  This transaction allowed us to unlock a tremendous amount of value for our shareholders, strengthen our capital position, and better position our Company for future success. We were able to utilize a portion of this capital during the fourth quarter to reposition a meaningful portion of our securities portfolio.  We sold $3.1 billion in securities yielding approximately 1.26% at an after-tax loss of approximately $294 million.  We are currently in the process of redeploying those proceeds into higher yielding assets."

Rollins continued, "While loan balances were flat for the fourth quarter, we produced net loan growth of $2.1 billion, or 7.1%, for the full year, and deposit balances were relatively stable both for the fourth quarter and full year.  Improvement in earning asset yields and a slowing in pressure on funding costs, along with our reduction in brokered deposits and initial securities repositioning, allowed us to improve our net interest margin in the fourth quarter.  We are optimistic this trend will continue into 2024.  Finally, while both our net charge-offs and provision for credit losses increased in the latter part of 2023, our credit monitoring processes are assisting in the timely identification of potential issues, and our criticized and classified asset totals have remained stable since the first quarter of 2023."

Key Transactions

Effective November 30, 2023, the Company completed the sale of its insurance subsidiary, Cadence Insurance, to Gallagher for approximately $904 million, subject to customary purchase price adjustments. The Transaction resulted in net capital creation of approximately $620 million, including a net gain on sale of approximately $520 million.  The gain along with Cadence Insurance's historical financial results for periods prior to the divestiture have been reflected in the consolidated financial statements as discontinued operations.  Additionally, current and prior period adjusted earnings exclude the impact of discontinued operations.  The purchase price and related gain remain subject to additional adjustments in accordance with the purchase agreement. 

During December 2023, the Company executed a securities portfolio restructuring whereby available-for-sale securities totaling approximately $3.1 billion in par value were sold for an after-tax loss of $294.1 million, which is included in results from continuing operations.  In aggregate, these securities had a book yield of approximately 1.26% and an estimated duration of just over 4 years. Of  the sales proceeds, $1.0 billion has been reinvested in securities as of December 31, 2023.  These securities have an aggregate book yield of approximately 5.57% and an estimated duration of approximately 2 years.  Additionally, $645 million has been used to pay down brokered deposits at a rate of 5.47% and the remainder was held in cash earning 5.40% at December 31, 2023 pending reinvestment.

Earnings Summary

For the year ended December 31, 2023, the Company reported net income available to common shareholders of $532.8 million, or $2.92 per diluted common share, compared with $453.7 million, or $2.46 per diluted common share, for the year ended December 31, 2022. The Company reported adjusted net income from continuing operations available to common shareholders(1) of $401.2 million, or $2.20 per diluted common share, for the year ended December 31, 2023 compared with $526.1 million, or $2.85 per diluted common share, for the year ended December 31, 2022. Additionally, the Company reported adjusted PPNR from continuing operations(1) of $612.3 million, or 1.26% of average assets, for the year ended December 31, 2023 compared with $699.6 million, or 1.47% of average assets, for the year ended December 31, 2022.

For the fourth quarter of 2023, the Company reported net income available to common shareholders of $256.7 million, or $1.41 per diluted common share, compared with $95.6 million, or $0.52 per diluted common share, for the fourth quarter of 2022 and $90.2 million, or $0.49 per diluted common share, for the third quarter of 2023. Adjusted net income available to common shareholders from continuing operations(1) was $72.7 million, or $0.40 per diluted common share, for the fourth quarter of 2023, compared with $141.4 million, or $0.77 per diluted common share, for the fourth quarter of 2022 and $97.6 million, or $0.53 per diluted common share, for the third quarter of 2023. Additionally, the Company reported adjusted PPNR from continuing operations(1) of $137.9 million, or 1.13% of average assets on an annualized basis, for the fourth quarter of 2023 compared to $192.5 million, or 1.60% of average assets on an annualized basis, for the fourth quarter of 2022 and $145.3 million, or 1.18% of average assets on an annualized basis, for the third quarter of 2023.

Net Interest Revenue

Net interest revenue was $334.6 million for the fourth quarter of 2023, compared to $359.4 million for the fourth quarter of 2022 and $329.0 million for the third quarter of 2023. The net interest margin (fully taxable equivalent) was 3.04% for the fourth quarter of 2023, compared with 3.33% for the fourth quarter of 2022 and 2.98% for the third quarter of 2023.

Net interest revenue increased $5.6 million, or 1.7%, compared to the third quarter of 2023 as earning asset yields continue to increase, partially as a result of the securities portfolio repositioning, lower brokered deposits and the slower pace of deposit cost increases.  Purchase accounting accretion revenue was $4.1 million and $6.6 million for the fourth quarter of 2023 and the third quarter of 2023, respectively, adding approximately 4 basis points to the net interest margin for the fourth quarter of 2023 and 6 basis points for the third quarter of 2023.

Yield on net loans, loans held for sale, and leases excluding accretion, was 6.43% for the fourth quarter of 2023, up 12 basis points from 6.31% for the third quarter of 2023, while yield on total interest earning assets was 5.59% for the fourth quarter of 2023, up 21 basis points from 5.38% for the third quarter of 2023. Earning asset yields continue to benefit from fixed and variable rate credits as well as securities cash flows repricing at higher yields.  Approximately 28% of our total loans are floating (reprice within 30 days), and another 20% reprice within 12 months.  Our total loan beta, excluding accretion, is 46% cycle-to-date.

The average cost of total deposits increased to 2.32% for the fourth quarter of 2023, up 18 basis points during the quarter. The fourth quarter increase in total deposit costs continued to slow compared to the third quarter increase of 27 basis points and over 50 basis points for each of the first two quarters of 2023.  Total interest-bearing liabilities cost increased to 3.34% from 3.17% during the fourth quarter of 2023.  Our total deposit beta is 41% cycle-to-date.

Balance Sheet Activity

Loans and leases, net of unearned income, were $32.5 billion at December 31, 2023, which is flat compared to September 30, 2023.  Total investment securities of $8.1 billion at December 31, 2023 decreased $1.6 billion during the fourth quarter as a portion of the proceeds from the securities portfolio restructuring was temporarily held in cash at December 31, 2023 as the Company continues to reinvest the proceeds. 

Total deposits increased $161.3 million to $38.5 billion as of December 31, 2023. Total brokered deposits declined $463.0 million from $1.2 billion at the end of the third quarter of 2023 to $0.7 billion at December 31, 2023, or 1.9% of total deposits.  Excluding the decline in brokered deposits, total deposits increased $624.3 million, or 6.5% annualized, during the fourth quarter of 2023.  Approximately half of this growth represents seasonal public funds increases while the other half represents core customer deposit growth, primarily in our community bank.  

The December 31, 2023 loan to deposit ratio was 84.4% and securities to total assets was 16.5%, reflecting continued strong liquidity. Noninterest bearing deposits represented 24.0% of total deposits at the end of the fourth quarter of 2023, declining from 25.2% at September 30, 2023, reflective of a slower mix shift than during the early part of year. The Company's deposit base continues to be very granular, with average transaction account balances of approximately $23,000 for consumer accounts and $135,000 for commercial accounts at December 31, 2023. Additionally, approximately 98% of the Company's deposit accounts have balances less than $250,000, and approximately 71% of our deposit balances were FDIC insured or collateralized at quarter-end.

Short-term borrowings were stable at $3.5 billion at December 31, 2023 while cash, due from balances and deposits at the Federal Reserve increased $2.2 billion to $4.2 billion at December 31, 2023, primarily as a result of cash held from the securities portfolio repositioning pending reinvestment.  Additionally, the Company has refinanced the $3.5 billion bank term funding program borrowing, lowering the cost from 5.15% to 4.84% at year-end.

Credit Results, Provision for Credit Losses and Allowance for Credit Losses

Total non-performing assets as a percent of total assets increased to 0.45% at December 31, 2023 compared to 0.23% at December 31, 2022 and 0.32% at September 30, 2023. Total non-performing loans and leases as a percent of loans and leases, net were 0.67% at December 31, 2023, compared to 0.35% at December 31, 2022 and 0.46% at September 30, 2023.  The increase in nonaccrual loans was primarily due to the negative migration of previously identified criticized loans in the Commercial & Industrial non-real estate segment of the portfolio. While these credits drove the increase in nonaccrual loans, over 50% of nonaccrual loans (by balance) at December 31, 2023 are granular, secured residential mortgages and SBA guaranteed loans. Other real estate owned and other repossessed assets was $6.2 million at December 31, 2023 compared to the December 31, 2022 balance of $6.7 million and the September 30, 2023 balance of $2.9 million.  For the fourth quarter of 2023, criticized loans declined by $37.7 million to $844.7 million or 2.60% of loans, down from 2.71% at September 30, 2023, while classified loans were stable at 2.09% compared to 2.10% at September 30, 2023.

Net charge-offs for the fourth quarter of 2023 were $23.8 million, or 0.29% of average net loans and leases on an annualized basis, compared with net recoveries of $5.0 million for the fourth quarter of 2022 and net charge-offs of $34.2 million for the third quarter of 2023. Net charge-offs in the fourth quarter of 2023, while lower than the prior quarter, were driven primarily by a select few credits across different industries and geographies that were identified as criticized in prior quarters. The provision for credit losses for the fourth quarter of 2023 was $38.0 million, compared with $6.0 million for the fourth quarter of 2022 and $17.0 million for the third quarter of 2023. The allowance for credit losses of $468.0 million at December 31, 2023 represented 1.44% as a percent of total loans and leases, increased  from the September 30, 2023 coverage of 1.37%.  The increase in the quarter's provision includes incremental impairments on previously identified criticized credits.

Noninterest Revenue

Noninterest revenue was negative $311.5 million for the fourth quarter of 2023, or $73.1 million excluding the loss on securities sales from our repositioning transaction.  This revenue is compared with $80.2 million for the fourth quarter of 2022 and $74.0 million for the third quarter of 2023.  Adjusted noninterest revenue(1) for the fourth quarter of 2023 was $73.1 million, compared with $80.8 million for the fourth quarter of 2022 and $80.6 million for the third quarter of 2023. Adjusted noninterest revenue(1) for the fourth quarter of 2023 excludes the securities portfolio restructuring loss of $384.5 million while third quarter 2023 adjusted noninterest revenue(1) excludes $6.7 million of facility and signage write-downs associated with the 35 branch closures effected in the third quarter of 2023. The fourth quarter of 2023 decline in adjusted noninterest revenue was impacted by an $8 million adjustment to deposit service charges, representing $0.03 per diluted share, and a $4.9 million negative variance in the mortgage servicing rights valuation, representing $0.02 per diluted share, partially offset by increases in several other revenue items including card fees, wealth management income, bank-owned life insurance, and other miscellaneous income. 

Credit card, debit card and merchant fee revenue was $12.9 million for the fourth quarter of 2023, compared with $15.8 million for the fourth quarter of 2022 and $12.4 million for the third quarter of 2023.  Deposit service charge revenue was $11.2 million for the fourth quarter of 2023 compared with $16.9 million for the fourth quarter of 2022 and $16.9 million for the third quarter of 2023. The decline in deposit service charge revenue during the fourth quarter was the result of an adjustment of approximately $8 million, resulting from deposit service charge changes. These changes are expected to result in a reduction in revenue of approximately $3 million per year going forward.

Other noninterest revenue was $27.6 million for the fourth quarter of 2023, compared with $26.4 million for the fourth quarter of 2022 and $17.9 million for the third quarter of 2023. Other noninterest revenue for the third quarter of 2023 included $6.7 million of facility and signage write-downs associated with the 35 branch closures effected in the third quarter of 2023.

Mortgage production and servicing revenue totaled $3.9 million for the fourth quarter of 2023, compared with $5.4 million for the fourth quarter of 2022 and $5.8 million for the third quarter of 2023. The net mortgage servicing rights valuation adjustment was a negative $5.1 million for the fourth quarter of 2023, compared with a negative $2.8 million for the fourth quarter of 2022 and a negative $0.2 million for the third quarter of 2023 with the variances due to continued movement in interest rates. Mortgage origination volume for the fourth quarter of 2023 was $434.7 million, compared with $554.5 million for the fourth quarter of 2022 and $615.2 million for the third quarter of 2023.  The decline compared to the third quarter of 2023 reflects routine selling seasonality while the year-over-year decline was primarily the result of a shift from on-balance sheet production.

Noninterest Expense

Noninterest expense for the fourth quarter of 2023 was $329.4 million, compared with $308.6 million for the fourth quarter of 2022 and $274.4 million for the third quarter of 2023. Adjusted noninterest expense(1) for the fourth quarter of 2023 was $269.8 million, compared with $247.6 million for the fourth quarter of 2022 and $264.2 million for the third quarter of 2023. Adjusted noninterest expense(1) for the fourth quarter of 2023 excludes a charge of $36.2 million related to the FDIC special assessment, a charge of $11.2 million to reflect the pension settlement accounting impact of early retirements during 2023, incremental merger related expense of $7.5 million, and a $5.0 million contribution to the Company's foundation. The Company utilized a portion of the proceeds of the insurance transaction to fund this contribution, which will be utilized to positively impact the communities we serve while also reducing future expenses of the Company. The adjusted efficiency ratio(1) was 66.0% for the fourth quarter of 2023 compared to 64.4% for the third quarter of 2023.

The $5.5 million, or 2.1%, increase in adjusted noninterest expense(1) compared to the linked quarter was driven primarily by increases in public relations, legal, and data processing and software expense, which offset improvement in salaries and employee benefits expense.  Salaries and employee benefits expense declined $5.7 million on an adjusted basis.  Excluding the impact of the Cadence Insurance sale, employee count declined by 125 FTE during the fourth quarter of 2023, and over the last 12 months has declined by 537 FTE. Excluding the foundation contribution, public relations expense increased $1.9 million in the fourth quarter partially from seasonality as well as $0.9 million in tax credit investments with an equal reduction of tax expense.  Legal expense increased $2.6 million on an adjusted basis in the fourth quarter, primarily as a result of an accrual for the settlement of certain legal matters.  Finally, data processing and software expense increased $3.8 million related to certain expansion and development efforts, vendor increases, ongoing technology infrastructure support, and timing.

Capital Management

Total shareholders' equity was $5.2 billion at December 31, 2023 compared with $4.3 billion at December 31, 2022 and $4.4 billion at September 30, 2023. Estimated regulatory capital ratios at December 31, 2023 included Common Equity Tier 1 capital of 11.6%, Tier 1 capital of 12.1%, Total risk-based capital of 14.3%, and Tier 1 leverage capital of 9.3%. During the fourth quarter of 2023, the Company did not repurchase any shares of its common stock. During December 2023, the board approved a share repurchase authorization for 10 million shares of Company common stock for the 2024 year.  Outstanding common shares were 182.9 million as of December 31, 2023.

Summary

Rollins concluded, "I'm extremely proud of the accomplishments of our team during 2023. The opportunity to grow our loan portfolio combined with our bankers' success in protecting our core deposit relationships has positioned our balance sheet favorably as we enter 2024.  Additionally, we have made significant progress in our efforts to improve efficiency, notably through our branch consolidation efforts and workforce reduction initiatives. Finally, we expect the insurance transaction, along with our securities portfolio restructuring, will accelerate our path to improved operating performance.  We look forward to seeing the fruits of all these efforts in the new year and beyond."

Conference Call and Webcast

The Company will conduct a conference call to discuss its fourth quarter and annual 2023 financial results on January 30, 2024, at 10:00 a.m. (Central Time). This conference call will be an interactive session between management and analysts. Interested parties may listen to this live conference call via Internet webcast by accessing http://ir.cadencebank.com/events. The webcast will also be available in archived format at the same address.

(1)

Considered a non-GAAP financial measure. A discussion regarding these non-GAAP measures and ratios, including reconciliations of non-GAAP measures to the most directly comparable GAAP measures and definitions for non-GAAP ratios, appears in Table 14 "Reconciliation of Non-GAAP Measures and Other Non-GAAP Ratio Definitions" beginning on page 23 of this news release.

(2)

See Table 14 for detail on non-routine income and expenses.

 

About Cadence Bank

Cadence Bank (NYSE:CADE) is a leading regional banking franchise with approximately $50 billion in assets and more than 350 branch locations across the South and Texas. Cadence provides consumers, businesses and corporations with a full range of innovative banking and financial solutions. Services and products include consumer banking, consumer loans, mortgages, home equity lines and loans, credit cards, commercial and business banking, treasury management, specialized lending, asset-based lending, commercial real estate, equipment financing, correspondent banking, SBA lending, foreign exchange, wealth management, investment and trust services, financial planning, and retirement plan management. Cadence is committed to a culture of respect, diversity and inclusion in both its workplace and communities. Cadence Bank, Member FDIC. Equal Housing Lender.

Forward-Looking Statements

Certain statements made in this news release constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and are subject to the safe harbor under the Private Securities Litigation Reform Act of 1995 as well as the "bespeaks caution" doctrine. These statements are often, but not exclusively, made through the use of words or phrases like "assume," "believe," "budget," "contemplate," "continue," "could," "foresee," "indicate," "may," "might," "outlook," "prospect," "potential," "roadmap," "should," "target," "will," "would," the negative versions of such words, or comparable words of a future or forward-looking nature. These forward-looking statements may include, without limitation, discussions regarding general economic, interest rate, real estate market, competitive, employment, and credit market conditions, or any of the Company's comments related to topics in its risk disclosures or results of operations as well as the impact of the Cadence Insurance sale (the "Cadence Insurance Transaction") on the Company's financial condition and future net income and earnings per share, the amount of net after-tax proceeds expected to be received by the Company from the Cadence Insurance Transaction, and the Company's ability to deploy capital into strategic and growth initiatives. Forward-looking statements are based upon management's expectations as well as certain assumptions and estimates made by, and information available to, the Company's management at the time such statements were made. Forward-looking statements are not guarantees of future results or performance and are subject to certain known and unknown risks, uncertainties and other factors that are beyond the Company's control and that may cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements.

Risks, uncertainties and other factors the Company may face include, without limitation: general economic, unemployment, credit market and real estate market conditions, including inflation, and the effect of such conditions on customers, potential customers, assets, investments and liquidity; risks arising from market and consumer reactions to the general banking environment, or to conditions or situations at specific banks; risks arising from media coverage of the banking industry; risks arising from perceived instability in the banking sector; the risks of changes in interest rates and their effects on the level, cost, and composition of, and competition for, deposits, loan demand and timing of payments, the values of loan collateral, securities, and interest sensitive assets and liabilities; the ability to attract new or retain existing deposits, to retain or grow loans or additional interest and fee income, or to control noninterest expense; the effect of pricing pressures on the Company's net interest margin; the failure of assumptions underlying the establishment of reserves for possible credit losses, fair value for loans and other real estate owned; changes in real estate values; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, or uncertainties surrounding the debt ceiling and the federal budget; uncertainties surrounding the functionality of the federal government; potential delays or other problems in implementing and executing the Company's growth, expansion, acquisition, or divestment strategies (including the Cadence Insurance Transaction), including delays in obtaining regulatory or other necessary approvals, or the failure to realize any anticipated benefits or synergies from any acquisitions, growth, or divestment strategies; the ability to pay dividends or coupons on the Company's 5.5% Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, or the 4.125% Fixed-to-Floating Rate Subordinated Notes due November 20, 2029; possible downgrades in the Company's credit ratings or outlook which could increase the costs or availability of funding from capital markets; changes in legal, financial, accounting, and/or regulatory requirements; the costs and expenses to comply with such changes; the enforcement efforts of federal and state bank regulators; the ability to keep pace with technological changes, including changes regarding maintaining cybersecurity and the impact of generative artificial intelligence; increased competition in the financial services industry, particularly from regional and national institutions; the impact of a failure in, or breach of, the Company's operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber-attacks or an increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting the Company or the Company's customers. The Company also faces risks from natural disasters or acts of war or terrorism; international or political instability, including the impacts related to or resulting from Russia's military action in Ukraine, the escalating conflicts in the Middle East, and additional sanctions and export controls, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical environments.

The Company also faces risks from: possible adverse rulings, judgments, settlements or other outcomes of pending, ongoing and future litigation, as well as governmental, administrative and investigatory matters; the impairment of the Company's goodwill or other intangible assets; losses of key employees and personnel; the diversion of management's attention from ongoing business operations and opportunities; and the company's success in executing its business plans and strategies, and managing the risks involved in all of the foregoing.

In addition, the Company faces risks from the failure to achieve the expected impact on the Company's financial condition; and risks associated with unexpected costs, liabilities or delays relating to the Cadence Insurance Transaction.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with those factors that are set forth from time to time in the Company's periodic and current reports filed with the FDIC, including those factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, particularly those under the heading "Item 1A. Risk Factors," in the Company's Quarterly Reports on Form 10-Q under the heading "Part II-Item 1A. Risk Factors," and in the Company's Current Reports on Form 8-K.

Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date of this news release, if one or more events related to these or other risks or uncertainties materialize, or if the Company's underlying assumptions prove to be incorrect, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statements. The forward-looking statements speak only as of the date of this news release, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, except as required by applicable law. All written or oral forward-looking statements attributable to the Company are expressly qualified in their entirety by this section.

Table 1

Selected Financial Data

(Unaudited)



Quarter Ended


Year-to-date

(In thousands)

Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022


Dec 2023

Dec 2022

Earnings Summary:









Interest revenue

$       615,187

$       595,459

$       573,395

$       526,126

$       473,546


$    2,310,167

$ 1,560,581

Interest expense

280,582

266,499

239,868

171,862

114,188


958,811

209,290

Net interest revenue

334,605

328,960

333,527

354,264

359,358


1,351,356

1,351,291

Provision for credit losses

38,000

17,000

15,000

10,000

6,000


80,000

7,000

Net interest revenue, after provision for credit losses

296,605

311,960

318,527

344,264

353,358


1,271,356

1,344,291

Noninterest revenue

(311,460)

73,989

86,664

34,463

80,196


(116,343)

342,485

Noninterest expense

329,367

274,442

267,466

284,647

308,638


1,155,923

1,109,754

 (Loss) income from continuing operations before income taxes

(344,222)

111,507

137,725

94,080

124,916


(910)

577,022

Income tax (benefit) expense

(80,485)

24,355

30,463

21,073

28,196


(4,594)

129,705

(Loss) income from continuing operations

(263,737)

87,152

107,262

73,007

96,720


3,684

447,317

Income from discontinued operations, net of taxes

522,801

5,431

6,766

3,622

1,214


538,620

15,920

Net income

259,064

92,583

114,028

76,629

97,934


542,304

463,237

Less: Preferred dividends

2,372

2,372

2,372

2,372

2,372


9,488

9,488

Net income available to common shareholders

$       256,692

$         90,211

$       111,656

$         74,257

$         95,562


$       532,816

$   453,749










Balance Sheet - Period End Balances








Total assets

$  48,934,510

$  48,523,010

$  48,838,660

$  51,693,096

$  48,653,414


$  48,934,510

$  48,653,414

Total earning assets

44,192,887

43,727,058

44,010,411

46,806,214

43,720,151


44,192,887

43,720,151

Available-for-sale securities

8,075,476

9,643,231

10,254,580

10,877,879

11,944,096


8,075,476

11,944,096

Loans and leases, net of unearned income

32,497,022

32,520,593

32,556,708

31,282,594

30,349,277


32,497,022

30,349,277

Allowance for credit losses (ACL)

468,034

446,859

466,013

453,727

440,347


468,034

440,347

Net book value of acquired loans

6,353,344

6,895,487

7,357,174

7,942,980

8,754,526


6,353,344

8,754,526

Unamortized net discount on acquired loans

26,928

30,761

37,000

41,748

58,162


26,928

58,162

Total deposits

38,497,137

38,335,878

38,701,669

39,406,454

38,956,614


38,497,137

38,956,614

Total deposits and repurchase agreements

38,948,653

39,198,467

39,492,427

40,177,789

39,665,350


38,948,653

39,665,350

Other short-term borrowings

3,500,000

3,500,223

3,500,226

5,700,228

3,300,231


3,500,000

3,300,231

Subordinated and long-term debt

438,460

449,323

449,733

462,144

462,554


438,460

462,554

Total shareholders' equity

5,167,843

4,395,257

4,485,850

4,490,417

4,311,374


5,167,843

4,311,374

Total shareholders' equity, excluding AOCI (1)

5,929,672

5,705,178

5,648,925

5,572,303

5,533,912


5,929,672

5,533,912

Common shareholders' equity

5,000,850

4,228,264

4,318,857

4,323,424

4,144,381


5,000,850

4,144,381

Common shareholders' equity, excluding AOCI (1)

$    5,762,679

$    5,538,185

$    5,481,932

$    5,405,310

$    5,366,919


$    5,762,679

$ 5,366,919










Balance Sheet - Average Balances








Total assets

$  48,444,176

$  48,655,138

$  49,067,121

$  48,652,201

$  47,790,494


$  48,703,953

$  47,533,157

Total earning assets

43,754,664

44,003,639

44,229,519

43,817,318

42,973,660


43,951,257

43,060,970

Available-for-sale securities

9,300,714

10,004,441

10,655,791

11,354,457

12,156,803


10,322,335

13,596,372

Loans and leases, net of unearned income

32,529,030

32,311,572

31,901,096

30,891,640

29,812,924


31,913,925

28,418,658

Total deposits

38,215,379

38,465,975

38,934,793

38,904,048

38,372,354


38,628,453

39,477,906

Total deposits and repurchase agreements

38,968,397

39,293,030

39,708,963

39,632,023

39,033,328


39,399,230

40,146,852

Other short-term borrowings

3,503,320

3,510,942

3,541,985

3,326,196

3,251,947


3,471,207

1,580,409

Subordinated and long-term debt

443,251

449,568

455,617

462,385

462,927


452,645

465,004

Total shareholders' equity

4,507,343

4,505,162

4,539,353

4,396,461

4,215,585


4,487,433

4,574,403

Common shareholders' equity

$    4,340,350

$    4,338,169

$    4,372,360

$    4,229,468

$    4,048,592


$    4,320,440

$ 4,407,410










Nonperforming Assets:









Nonaccrual loans and leases

$       216,141

$       150,038

$       157,243

$       160,615

$         98,745


$       216,141

$     98,745

Restructured loans and leases, still accruing (2)

8,598


8,598

Non-performing loans and leases (NPL) (3)

216,141

150,038

157,243

160,615

107,343


216,141

107,343

Other real estate owned and other assets

6,246

2,927

2,857

5,327

6,725


6,246

6,725

Non-performing assets (NPA)

$       222,387

$       152,965

$       160,100

$       165,942

$       114,068


$       222,387

$   114,068



(1)

Denotes non-GAAP financial measure. Refer to related disclosure and reconciliation on pages 24 - 28.

(2)

Cadence elected to adopt the new accounting guidance effective January 1, 2023, which eliminates the TDR recognition and measurement guidance via the modified retrospective transition method (ASU 2022-02). As such, there is no TDR reporting effective January 1, 2023.

(3)

At December 31, 2023, $49.6 million of NPL is covered by government guarantees from the SBA, FHA, VA or USDA.

 

Table 2

Selected Financial Ratios



Quarter Ended


Year-to-date


Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022


Dec 2023

Dec 2022

Financial Ratios and Other Data:









Return on average assets from continuing operations (2)

(2.16) %

0.71 %

0.88 %

0.61 %

0.80 %


0.01 %

0.94 %

Return on average assets (2)

2.12 %

0.75 %

0.93 %

0.64 %

0.81 %


1.11 %

0.97 %

Adjusted return on average assets from continuing operations (1)(2)

0.62

0.82

0.92

1.03

1.19


0.84

1.13

Return on average common shareholders' equity from continuing operations (2)

(24.32)

7.75

9.62

6.77

9.25


(0.13)

9.93

Return on average common shareholders' equity (2)

23.46

8.25

10.24

7.12

9.36


12.33

10.30

Adjusted return on average common shareholders' equity from continuing operations (1)(2)

6.65

8.93

10.10

11.58

13.85


9.29

11.94

Return on average tangible common equity from continuing operations (1)(2)

(36.79)

11.75

14.55

10.44

14.64


(0.20)

15.05

Return on average tangible common equity (1)(2)

35.49

12.50

15.49

10.97

14.83


18.74

15.59

Adjusted return on average tangible common equity from continuing operations (1)(2)

10.06

13.53

15.27

17.84

21.94


14.11

18.08

Pre-tax pre-provision net revenue from continuing operation to total average assets (1)(2)

(2.51)

1.05

1.25

0.87

1.09


0.16

1.23

Adjusted pre-tax pre-provision net revenue from continuing operations to total average assets (1)(2)

1.13

1.18

1.30

1.41

1.60


1.26

1.47

Net interest margin-fully taxable equivalent

3.04

2.98

3.03

3.29

3.33


3.08

3.15

Net interest rate spread-fully taxable equivalent

2.25

2.21

2.29

2.65

2.84


2.33

2.90

Efficiency ratio fully tax equivalent (1)

NM

67.93

63.49

73.03

70.05


93.28

66.97

Adjusted efficiency ratio fully tax equivalent (1)

66.01

64.35

61.87

61.31

56.13


63.34

58.56

Loan/deposit ratio

84.41 %

84.83 %

84.12 %

79.38 %

77.91 %


84.41 %

77.91 %

Full time equivalent employees

5,333

6,160

6,479

6,567

6,572


5,333

6,572










Credit Quality Ratios:









Net charge-offs (recoveries) to average loans and leases (2)

0.29 %

0.42 %

0.16 %

0.02 %

(0.07) %


0.22 %

— %

Provision for credit losses to average loans and leases (2)

0.46

0.21

0.19

0.13

0.08


0.25

0.02

ACL to loans and leases, net

1.44

1.37

1.43

1.45

1.45


1.44

1.45

ACL to NPL

216.54

297.83

296.36

282.49

410.22


216.54

410.22

NPL to loans and leases, net

0.67

0.46

0.48

0.51

0.35


0.67

0.35

NPA to total assets

0.45

0.32

0.33

0.32

0.23


0.45

0.23










Equity Ratios:









Total shareholders' equity to total assets

10.56 %

9.06 %

9.19 %

8.69 %

8.86 %


10.56 %

8.86 %

Total common shareholders' equity to total assets

10.22

8.71

8.84

8.36

8.52


10.22

8.52

Tangible common shareholders' equity to tangible assets (1)

7.44

5.86

6.00

5.66

5.63


7.44

5.63

Tangible common shareholders' equity, excluding AOCI, to tangible assets, excluding AOCI (1)

8.90

8.41

8.25

7.65

8.02


8.90

8.02










Capital Adequacy (3):









Common Equity Tier 1 capital

11.6 %

10.3 %

10.1 %

10.1 %

10.2 %


11.6 %

10.2 %

Tier 1 capital

12.1

10.8

10.5

10.6

10.7


12.1

10.7

Total capital

14.3

12.9

12.7

12.8

12.8


14.3

12.8

Tier 1 leverage capital

9.3

8.6

8.5

8.4

8.4


9.3

8.4



(1)

Denotes non-GAAP financial measure. Refer to related disclosure and reconciliation on pages 24 - 28.

(2)

Annualized.

(3)

Current quarter regulatory capital ratios are estimated.

NM - Not meaningful

 

Table 3

Selected Financial Information



Quarter Ended


Year-to-date


Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022


Dec 2023

Dec 2022

Common Share Data:









Diluted (losses) earnings per share from continuing operations

$       (1.46)

$         0.46

$         0.57

$         0.38

$         0.51


$     (0.03)

$      2.37

Adjusted earnings per share from continuing operations (1)

0.40

0.53

0.60

0.66

0.77


2.20

2.85

Diluted earnings per share

1.41

0.49

0.61

0.40

0.52


2.92

2.46

Cash dividends per share

0.235

0.235

0.235

0.235

0.22


0.940

0.88

Book value per share

27.35

23.15

23.65

23.67

22.72


27.35

22.72

Tangible book value per share (1)

19.32

15.09

15.56

15.55

14.56


19.32

14.56

Market value per share (last)

29.59

21.22

19.88

20.76

24.66


29.59

24.66

Market value per share (high)

31.45

25.87

21.73

28.18

29.41


31.45

34.24

Market value per share (low)

19.67

19.00

16.95

19.24

22.43


16.95

22.04

Market value per share (average)

24.40

22.56

19.73

24.88

26.84


22.90

27.35

Dividend payout ratio from continuing operations

(16.13) %

51.09 %

41.23 %

61.84 %

43.14 %


NM

37.08 %

Adjusted dividend payout ratio from continuing operations (1)

58.75 %

44.34 %

39.17 %

35.61 %

28.57 %


42.73 %

30.88 %

Total shares outstanding

182,871,775

182,611,075

182,626,229

182,684,578

182,437,265


182,871,775

182,437,265

Average shares outstanding - diluted

182,688,190

184,645,004

183,631,570

183,908,798

183,762,008


182,608,713

184,498,472










Yield/Rate:









(Taxable equivalent basis)









Loans, loans held for sale, and leases

6.48 %

6.39 %

6.24 %

6.00 %

5.54 %


6.28 %

4.74 %

Loans, loans held for sale, and leases excluding net accretion on acquired loans and leases

6.43

6.31

6.18

5.87

5.41


6.20

4.57

Available-for-sale securities:









Taxable

2.45

2.07

2.09

1.80

1.54


2.09

1.40

Tax-exempt

3.78

3.23

3.21

3.21

3.28


3.32

2.95

Other investments

5.41

5.36

5.05

4.64

3.69


5.13

1.77

Total interest earning assets and revenue

5.59

5.38

5.21

4.88

4.38


5.27

3.63

Deposits

2.32

2.14

1.87

1.28

0.76


1.90

0.35

Interest bearing demand and money market

3.02

2.79

2.49

2.03

1.34


2.58

0.59

Savings

0.56

0.56

0.51

0.36

0.31


0.49

0.15

Time

4.22

3.98

3.69

2.24

1.17


3.69

0.68

Total interest bearing deposits

3.10

2.88

2.58

1.86

1.17


2.62

0.54

Fed funds purchased, securities sold under agreement to repurchase and other

4.33

4.27

3.97

3.73

3.04


4.07

1.45

Short-term FHLB borrowings

3.54

5.24

4.66

3.84


4.91

2.78

Short-term BTFP borrowings

5.04

5.15

5.15


5.10

Total interest bearing deposits and short-term borrowings

3.33

3.16

2.90

2.20

1.50


2.91

0.68

Long-term debt

4.18

4.22

4.23

4.27

4.15


4.23

4.16

Total interest bearing liabilities

3.34

3.17

2.92

2.23

1.54


2.93

0.74

Interest bearing liabilities to interest earning assets

76.08 %

75.74 %

74.57 %

71.24 %

68.42 %


74.43 %

66.09 %

Net interest income tax equivalent adjustment (in thousands)

$          987

$       1,081

$       1,063

$       1,051

$       1,071


$     4,184

$     4,212



(1)

Denotes non-GAAP financial measure. Refer to related disclosure and reconciliation on pages 24 - 28.

NM - Not meaningful

 

Table 4

Consolidated Balance Sheets

(Unaudited)



As of

(In thousands)

Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022

ASSETS






Cash and due from banks

$         798,177

$         594,787

$         722,625

$         660,431

$         756,906

Interest bearing deposits with other banks and Federal funds sold

3,434,088

1,400,858

1,005,889

4,449,631

1,238,853

Available-for-sale securities, at fair value

8,075,476

9,643,231

10,254,580

10,877,879

11,944,096

Loans and leases, net of unearned income

32,497,022

32,520,593

32,556,708

31,282,594

30,349,277

Allowance for credit losses

468,034

446,859

466,013

453,727

440,347

Net loans and leases

32,028,988

32,073,734

32,090,695

30,828,867

29,908,930

Loans held for sale, at fair value

186,301

162,376

193,234

196,110

187,925

Premises and equipment, net

802,133

789,698

804,732

801,463

792,232

Goodwill

1,367,785

1,367,785

1,367,785

1,367,785

1,367,785

Other intangible assets, net

100,191

104,596

109,033

115,113

119,579

Bank-owned life insurance

642,840

639,073

634,985

631,174

630,046

Other assets

1,498,531

1,590,769

1,486,070

1,609,232

1,540,239

Assets of discontinued operations

156,103

169,032

155,411

166,823

Total Assets

$    48,934,510

$    48,523,010

$    48,838,660

$    51,693,096

$    48,653,414

LIABILITIES






Deposits:






Demand: Noninterest bearing

$      9,232,068

$      9,648,191

$    10,223,508

$    11,517,037

$    12,731,065

Interest bearing

19,276,596

18,334,551

18,088,711

18,146,678

19,040,131

 Savings

2,720,913

2,837,348

2,983,709

3,226,685

3,473,746

 Time deposits

7,267,560

7,515,788

7,405,741

6,516,054

3,711,672

Total deposits

38,497,137

38,335,878

38,701,669

39,406,454

38,956,614

Securities sold under agreement to repurchase

451,516

862,589

790,758

771,335

708,736

Other short-term borrowings

3,500,000

3,500,223

3,500,226

5,700,228

3,300,231

Subordinated and long-term debt

438,460

449,323

449,733

462,144

462,554

Other liabilities

879,554

876,195

806,305

763,912

815,703

Liabilities of discontinued operations

103,545

104,119

98,606

98,202

Total Liabilities

43,766,667

44,127,753

44,352,810

47,202,679

44,342,040

SHAREHOLDERS' EQUITY






Preferred stock

166,993

166,993

166,993

166,993

166,993

Common stock

457,179

456,528

456,566

456,711

456,093

Capital surplus

2,743,066

2,733,003

2,724,021

2,715,981

2,709,391

Accumulated other comprehensive loss

(761,829)

(1,309,921)

(1,163,075)

(1,081,886)

(1,222,538)

Retained earnings

2,562,434

2,348,654

2,301,345

2,232,618

2,201,435

Total Shareholders' Equity

5,167,843

4,395,257

4,485,850

4,490,417

4,311,374

Total Liabilities & Shareholders' Equity

$    48,934,510

$    48,523,010

$    48,838,660

$    51,693,096

$    48,653,414

 

Table 5

Consolidated Quarterly Average Balance Sheets

(Unaudited)

 


(In thousands)

Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022

ASSETS






Cash and due from banks

$         443,504

$         362,479

$         402,744

$         500,507

$         428,575

Interest bearing deposits with other banks and Federal funds sold

1,811,686

1,571,973

1,605,594

1,524,358

941,416

Available-for-sale securities, at fair value

9,300,714

10,004,441

10,655,791

11,354,457

12,156,803

Loans and leases, net of unearned income

32,529,030

32,311,572

31,901,096

30,891,640

29,812,924

Allowance for credit losses

447,879

459,698

457,027

442,486

434,785

Net loans and leases

32,081,151

31,851,874

31,444,069

30,449,154

29,378,139

Loans held for sale, at fair value

113,234

115,653

67,038

46,863

62,517

Premises and equipment, net

795,164

811,095

804,526

799,077

777,717

Goodwill

1,367,916

1,367,785

1,367,785

1,367,784

1,370,106

Other intangible assets, net

102,765

107,032

113,094

117,518

122,093

Bank-owned life insurance

640,439

636,335

632,489

630,601

625,938

Other assets

1,787,603

1,826,471

1,973,991

1,861,882

1,927,190

Total Assets

$    48,444,176

$    48,655,138

$    49,067,121

$    48,652,201

$    47,790,494

LIABILITIES






Deposits:






Demand: Noninterest bearing

$      9,625,912

$      9,921,617

$    10,725,108

$    12,203,079

$    13,344,152

Interest bearing

18,292,826

17,970,463

17,997,618

19,009,345

17,866,198

 Savings

2,758,977

2,913,027

3,088,174

3,363,236

3,555,911

 Time deposits

7,537,664

7,660,868

7,123,893

4,328,388

3,606,093

Total deposits

38,215,379

38,465,975

38,934,793

38,904,048

38,372,354

Securities sold under agreement to repurchase

753,018

827,055

774,170

727,975

660,974

Other short-term borrowings

3,503,320

3,510,942

3,541,985

3,326,196

3,251,947

Subordinated and long-term debt

443,251

449,568

455,617

462,385

462,927

Other liabilities

1,021,865

896,436

821,203

835,136

826,707

Total Liabilities

43,936,833

44,149,976

44,527,768

44,255,740

43,574,909

SHAREHOLDERS' EQUITY






Preferred stock

166,993

166,993

166,993

166,993

166,993

Common stock

456,636

456,557

456,755

456,354

456,095

Capital surplus

2,733,985

2,726,686

2,717,866

2,710,501

2,701,121

Accumulated other comprehensive loss

(1,279,235)

(1,175,077)

(1,087,389)

(1,174,723)

(1,302,388)

Retained earnings

2,428,964

2,330,003

2,285,128

2,237,336

2,193,764

Total Shareholders' Equity

4,507,343

4,505,162

4,539,353

4,396,461

4,215,585

Total Liabilities & Shareholders' Equity

$    48,444,176

$    48,655,138

$    49,067,121

$    48,652,201

$    47,790,494

 

Table 6

Consolidated Statements of Income

(Unaudited)



Quarter Ended


Year-to-date

(Dollars in thousands, except per share data)

Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022


Dec 2023

Dec 2022

INTEREST REVENUE:









Loans and leases

$          531,340

$          520,126

$          496,262

$          457,084

$          414,623


$       2,004,812

$       1,342,662

Available-for-sale securities:









Taxable

55,801

50,277

53,531

48,512

45,807


208,122

183,915

Tax-exempt

1,927

2,375

2,427

2,477

2,547


9,206

10,079

Loans held for sale

1,418

1,468

961

603

1,788


4,450

7,554

Short-term investments

24,701

21,213

20,214

17,450

8,781


83,577

16,371

Total interest revenue

615,187

595,459

573,395

526,126

473,546


2,310,167

1,560,581

INTEREST EXPENSE:









Interest bearing demand deposits and money market accounts

139,144

126,296

111,938

95,344

60,253


472,723

109,893

Savings

3,918

4,108

3,915

3,014

2,769


14,955

5,519

Time deposits

80,143

76,867

65,517

23,950

10,651


246,476

24,253

Federal funds purchased and securities sold under agreement to repurchase

8,254

9,004

7,656

7,667

8,365


32,581

13,432

Short-term debt

44,451

45,438

46,036

37,015

27,302


172,940

36,863

Subordinated and long-term debt

4,672

4,786

4,806

4,872

4,848


19,136

19,330

Total interest expense

280,582

266,499

239,868

171,862

114,188


958,811

209,290

Net interest revenue

334,605

328,960

333,527

354,264

359,358


1,351,356

1,351,291

Provision for credit losses

38,000

17,000

15,000

10,000

6,000


80,000

7,000

Net interest revenue, after provision for credit losses

296,605

311,960

318,527

344,264

353,358


1,271,356

1,344,291










NONINTEREST REVENUE:









Mortgage banking

(1,137)

5,684

8,356

6,076

2,571


18,978

44,860

Credit card, debit card and merchant fees

12,902

12,413

12,617

11,851

15,750


49,784

58,160

Deposit service charges

11,161

16,867

17,208

16,482

16,863


61,718

73,478

Security (losses) gains, net

(384,524)

64

69

(51,261)

(595)


(435,652)

(384)

Wealth management

22,576

21,079

21,741

21,532

19,199


86,928

80,486

Other noninterest income

27,562

17,882

26,673

29,783

26,408


101,901

85,885

Total noninterest revenue

(311,460)

73,989

86,664

34,463

80,196


(116,343)

342,485










NONINTEREST EXPENSE:









Salaries and employee benefits

148,081

161,627

159,276

165,738

156,868


634,722

634,843

Occupancy and equipment

28,009

27,069

28,106

27,787

29,221


110,972

114,460

Data processing and software

32,922

29,127

27,289

31,105

28,510


120,443

111,107

Merger expense

122

5,070

19,916


5,192

50,845

Amortization of intangibles

4,405

4,436

6,081

4,466

4,695


19,388

18,432

Deposit insurance assessments

45,733

10,425

7,705

8,361

5,931


72,224

18,712

Pension settlement expense

11,226

600

6,127


11,826

9,023

Other noninterest expense

58,991

41,158

38,887

42,120

57,370


181,156

152,332

Total noninterest expense

329,367

274,442

267,466

284,647

308,638


1,155,923

1,109,754

(Loss) income from continuing operations before taxes

(344,222)

111,507

137,725

94,080

124,916


(910)

577,022

Income tax (benefit) expense

(80,485)

24,355

30,463

21,073

28,196


(4,594)

129,705

(Loss) income from continuing operations

(263,737)

87,152

107,262

73,007

96,720


3,684

447,317

Income from discontinued operations

706,129

7,242

9,238

4,982

2,646


727,591

22,353

Income tax expense from discontinued operations

183,328

1,811

2,472

1,360

1,432


188,971

6,433

Income from discontinued operations, net of taxes

522,801

5,431

6,766

3,622

1,214


538,620

15,920

Net income

259,064

92,583

114,028

76,629

97,934


542,304

463,237

Less: Preferred dividends

2,372

2,372

2,372

2,372

2,372


9,488

9,488

Net income available to common shareholders

$          256,692

$             90,211

$          111,656

$             74,257

$             95,562


$          532,816

$          453,749

Diluted (losses) earnings per common share from continuing operations

$               (1.46)

$                 0.46

$                 0.57

$                 0.38

$                 0.51


$               (0.03)

$                 2.37

Diluted earnings per common share

$                 1.41

$                 0.49

$                 0.61

$                 0.40

$                 0.52


$                 2.92

$                 2.46

 

Table 7

Selected Loan Portfolio Data

(Unaudited)



Quarter Ended

(In thousands)

Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022

LOAN AND LEASE PORTFOLIO:






Commercial and industrial






Non-real estate

$     8,935,598

$     9,199,024

$     9,636,481

$     9,159,387

$     8,985,547

Owner occupied

4,349,060

4,361,530

4,358,000

4,278,468

4,068,659

Total commercial and industrial

13,284,658

13,560,554

13,994,481

13,437,855

13,054,206

Commercial real estate






Construction, acquisition and development

3,910,962

3,819,307

3,744,114

3,703,137

3,547,986

Income producing

5,736,871

5,720,606

5,596,134

5,368,676

5,150,680

Total commercial real estate

9,647,833

9,539,913

9,340,248

9,071,813

8,698,666

Consumer






Residential mortgages

9,329,692

9,186,179

8,989,614

8,536,032

8,319,242

Other consumer

234,839

233,947

232,365

236,894

277,163

Total consumer

9,564,531

9,420,126

9,221,979

8,772,926

8,596,405

Total loans and leases, net of unearned income

$   32,497,022

$   32,520,593

$   32,556,708

$   31,282,594

$   30,349,277







NON-PERFORMING ASSETS






Non-performing Loans and Leases






Nonaccrual Loans and Leases






Commercial and industrial






Non-real estate

$        131,559

$          67,962

$          72,592

$          65,783

$          23,907

Owner occupied

7,097

6,486

7,541

9,089

7,944

Total commercial and industrial

138,656

74,448

80,133

74,872

31,851

Commercial real estate






Construction, acquisition and development

1,859

4,608

4,496

1,850

2,974

Income producing

17,485

12,251

19,205

20,616

7,331

Total commercial real estate

19,344

16,859

23,701

22,466

10,305

Consumer






Residential mortgages

57,881

58,488

53,171

62,748

55,892

Other consumer

260

243

238

529

697

Total consumer

58,141

58,731

53,409

63,277

56,589

Total nonaccrual loans and leases

$        216,141

$        150,038

$        157,243

$        160,615

$          98,745







Restructured loans and leases, still accruing (1)

8,598

Total non-performing loans and leases (2)

$        216,141

$        150,038

$        157,243

$        160,615

$        107,343







Other real estate owned and repossessed assets

6,246

2,927

2,857

5,327

6,725

Total non-performing assets

$        222,387

$        152,965

$        160,100

$        165,942

$        114,068







Government guaranteed portion of nonaccrual loans and
leases covered by the SBA, FHA, VA or USDA

$          49,551

$          42,046

$          35,322

$          30,218

$          20,830







Loans and leases 90+ days past due, still accruing

$          22,466

$            9,152

$            4,412

$            5,164

$            2,068







Additions to nonaccrual loans and leases during the quarter (excluding acquisitions)

$        131,136

$          69,154

$          57,764

$          89,779

$          38,945



(1)

Cadence elected to adopt the new accounting guidance effective January 1, 2023, which eliminates the TDR recognition and measurement guidance via the modified retrospective transition method (ASU 2022-02). As such, there is no TDR reporting effective January 1, 2023.

 

Table 8

Allowance for Credit Losses

(Unaudited)



Quarter Ended

(Dollars in thousands)

Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022

ALLOWANCE FOR CREDIT LOSSES:






Balance, beginning of period

$      446,859

$      466,013

$      453,727

$      440,347

$      433,363

Charge-offs:






Commercial and industrial

(21,385)

(34,959)

(13,598)

(2,853)

(2,295)

Commercial real estate

(2,290)

(931)

(126)

(1,988)

(426)

Consumer

(3,229)

(1,608)

(1,916)

(2,189)

(2,650)

Total loans charged-off

(26,904)

(37,498)

(15,640)

(7,030)

(5,371)

Recoveries:






Commercial and industrial

2,117

2,240

1,360

3,406

6,405

Commercial real estate

95

201

618

779

2,851

Consumer

867

903

948

970

1,099

Total recoveries

3,079

3,344

2,926

5,155

10,355

Net (charge-offs) recoveries

(23,825)

(34,154)

(12,714)

(1,875)

4,984

Adoption of new ASU related to modified loans (3)

255

Provision for credit losses related to loans and leases

45,000

15,000

25,000

15,000

2,000

Balance, end of period

$      468,034

$      446,859

$      466,013

$      453,727

$      440,347







Average loans and leases, net of unearned income, for period

$ 32,529,030

$ 32,311,572

$ 31,901,096

$ 30,891,640

$ 29,812,924

Ratio: Net charge-offs (recoveries) to average loans and leases (2)

0.29 %

0.42 %

0.16 %

0.02 %

(0.07) %







RESERVE FOR UNFUNDED COMMITMENTS (1)






Balance, beginning of period

$        15,551

$        13,551

$        23,551

$        28,551

$        24,551

 (Reversal) provision for credit losses for unfunded commitments

(7,000)

2,000

(10,000)

(5,000)

4,000

Balance, end of period

$          8,551

$        15,551

$        13,551

$        23,551

$        28,551



(1)

The Reserve for Unfunded Commitments is classified in other liabilities on the consolidated balance sheets.

(2)

Annualized.

(3)

Cadence elected to adopt the new accounting guidance effective January 1, 2023, which eliminates the TDR recognition and measurement guidance via the modified retrospective transition method (ASU 2022-02). As such, there is no TDR reporting effective January 1, 2023.

 

Table 9

Loan Portfolio by Grades

(Unaudited)



December 31, 2023

(In thousands)

Pass

Special
Mention

Substandard

Loss

Impaired

Purchased
Credit
Deteriorated
(Loss)

Total

LOAN AND LEASE PORTFOLIO:








Commercial and industrial








Non-real estate

$    8,450,809

$     101,607

$     294,895

$            13

$       84,457

$         3,817

$  8,935,598

Owner occupied

4,287,190

32,409

27,070

1,275

1,116

4,349,060

Total commercial and industrial

12,737,999

134,016

321,965

13

85,732

4,933

13,284,658

Commercial real estate








Construction, acquisition and development

3,894,551

3,364

13,047

3,910,962

Income producing

5,527,388

23,727

170,217

15,539

5,736,871

Total commercial real estate

9,421,939

27,091

183,264

15,539

9,647,833

Consumer (1)








Residential mortgages

9,258,002

4,066

66,050

1,574

9,329,692

Other consumer

234,367

472

234,839

Total consumer

9,492,369

4,066

66,522

1,574

9,564,531

Total loans and leases, net of unearned income

$  31,652,307

$     165,173

$     571,751

$            13

$     101,271

$         6,507

$  32,497,022



(1)

During the second quarter of 2023, the Company began determining the risk rating classification of its Consumer portfolio based on nonaccrual and delinquency status in accordance with the Uniform Retail Credit Classification guidance and industry norms, which contributed to a lower number of criticized and classified loans compared to periods prior to the second quarter of 2023. As a result of the modification, current period results are not directly comparable to periods prior to the second quarter of 2023.




September 30, 2023

(In thousands)

Pass

Special
Mention

Substandard

Impaired

Purchased
Credit
Deteriorated
(Loss)

Total

LOAN AND LEASE PORTFOLIO:







Commercial and industrial







Non-real estate

$    8,690,172

$       100,118

$       388,741

$         15,337

$           4,656

$    9,199,024

Owner occupied

4,281,916

30,414

46,803

1,275

1,122

4,361,530

Total commercial and industrial

12,972,088

130,532

435,544

16,612

5,778

13,560,554

Commercial real estate







Construction, acquisition and development

3,798,695

2,975

17,637

3,819,307

Income producing

5,519,028

65,473

124,731

11,374

5,720,606

Total commercial real estate

9,317,723

68,448

142,368

11,374

9,539,913

Consumer







Residential mortgages

9,114,880

1,366

68,359

1,574

9,186,179

Other consumer

233,505

442

233,947

Total consumer

9,348,385

1,366

68,801

1,574

9,420,126

Total loans and leases, net of unearned income

$  31,638,196

$       200,346

$       646,713

$         27,986

$           7,352

$  32,520,593

 

Table 10

Geographical Loan Information

(Unaudited)



December 31, 2023

(Dollars in thousands)

Alabama

Arkansas

Florida

Georgia

Louisiana

Mississippi

Missouri

Tennessee

Texas

Other

Total

LOAN AND LEASE PORTFOLIO:












Commercial and industrial












Non-real estate

$  417,687

$  158,759

$  503,957

$  528,205

$  346,840

$  532,593

$    62,507

$  373,991

$                     3,718,233

$  2,292,826

$                     8,935,598

Owner occupied

345,679

247,584

281,750

313,532

292,347

591,611

90,227

167,464

1,676,272

342,594

4,349,060

Total commercial and industrial

763,366

406,343

785,707

841,737

639,187

1,124,204

152,734

541,455

5,394,505

2,635,420

13,284,658

Commercial real estate












Construction, acquisition and development

202,977

79,365

363,597

472,953

54,985

194,535

46,014

182,393

1,799,697

514,446

3,910,962

Income producing

446,290

273,000

369,897

605,160

212,148

435,089

208,216

296,918

2,080,393

809,760

5,736,871

Total commercial real estate

649,267

352,365

733,494

1,078,113

267,133

629,624

254,230

479,311

3,880,090

1,324,206

9,647,833

Consumer












Residential mortgages

1,216,942

388,396

647,117

408,459

462,264

1,147,388

179,119

716,384

3,898,525

265,098

9,329,692

Other consumer

31,155

18,488

5,563

6,431

11,587

87,229

1,780

17,892

49,397

5,317

234,839

Total consumer

1,248,097

406,884

652,680

414,890

473,851

1,234,617

180,899

734,276

3,947,922

270,415

9,564,531

Total loans and leases, net of unearned income

$  2,660,730

$  1,165,592

$  2,171,881

$  2,334,740

$  1,380,171

$  2,988,445

$  587,863

$  1,755,042

$  13,222,517

$  4,230,041

$  32,497,022













Loan growth, excluding loans acquired during the quarter ($)

$    73,088

$    (5,835)

$    74,573

$    30,978

$    13,006

$    28,114

$      9,403

$    19,131

$                   (105,613)

$  (160,416)

$  (23,571)

Loan growth, excluding loans acquired during the quarter (%) (annualized)

11.21 %

(1.98) %

14.11 %

5.33 %

3.77 %

3.77 %

6.45 %

4.37 %

(3.14) %

(14.50) %

(0.29) %














September 30, 2023

(Dollars in thousands)

Alabama

Arkansas

Florida

Georgia

Louisiana

Mississippi

Missouri

Tennessee

Texas

Other

Total

LOAN AND LEASE PORTFOLIO:












Commercial and industrial












Non-real estate

$      360,970

$      162,650

$      491,854

$      514,031

$      330,072

$      516,449

$        65,475

$      341,777

$   3,884,907

$   2,530,839

$   9,199,024

Owner occupied

351,835

252,880

284,886

319,982

288,640

594,127

92,167

164,564

1,660,831

351,618

4,361,530

Total commercial and industrial

712,805

415,530

776,740

834,013

618,712

1,110,576

157,642

506,341

5,545,738

2,882,457

13,560,554

Commercial real estate












Construction, acquisition and development

210,809

73,567

306,869

422,605

59,957

201,138

49,584

163,621

1,885,210

445,947

3,819,307

Income producing

427,591

275,663

374,452

634,494

217,475

423,473

193,555

328,808

2,047,954

797,141

5,720,606

Total commercial real estate

638,400

349,230

681,321

1,057,099

277,432

624,611

243,139

492,429

3,933,164

1,243,088

9,539,913

Consumer












Residential mortgages

1,204,991

388,592

634,059

405,382

459,661

1,138,245

175,973

720,227

3,799,189

259,860

9,186,179

Other consumer

31,446

18,075

5,188

7,268

11,360

86,899

1,706

16,914

50,039

5,052

233,947

Total consumer

1,236,437

406,667

639,247

412,650

471,021

1,225,144

177,679

737,141

3,849,228

264,912

9,420,126

Total loans and leases, net of unearned income

$   2,587,642

$   1,171,427

$   2,097,308

$   2,303,762

$   1,367,165

$   2,960,331

$      578,460

$   1,735,911

$ 13,328,130

$   4,390,457

$ 32,520,593

 

Table 11

Noninterest Revenue and Expense

(Unaudited)



Quarter Ended


Year-to-date

(In thousands)

Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022


Dec 2023

Dec 2022

NONINTEREST REVENUE:









Mortgage banking excl. MSR and MSR hedge market value adjustment

$        3,931

$        5,842

$        6,774

$        8,379

$        5,408


$      24,926

$      24,642

MSR and MSR hedge market value adjustment

(5,068)

(158)

1,582

(2,303)

(2,837)


(5,948)

20,218

Credit card, debit card and merchant fees

12,902

12,413

12,617

11,851

15,750


49,784

58,160

Deposit service charges

11,161

16,867

17,208

16,482

16,863


61,718

73,478

Security gains (losses), net

(384,524)

64

69

(51,261)

(595)


(435,652)

(384)

Trust income

11,301

10,574

10,084

10,553

9,113


42,513

37,314

Annuity fees

1,839

1,882

1,702

2,192

951


7,614

2,908

Brokerage commissions and fees

9,436

8,623

9,955

8,787

9,135


36,801

40,264

Bank-owned life insurance

4,728

4,108

3,811

3,647

5,436


16,294

15,594

Other miscellaneous income

22,834

13,774

22,862

26,136

20,972


85,607

70,291

Total noninterest revenue

$  (311,460)

$      73,989

$      86,664

$      34,463

$      80,196


$  (116,343)

$    342,485










NONINTEREST EXPENSE:









Salaries and employee benefits

$    148,081

$    161,627

$    159,276

$    165,738

$    156,868


$    634,722

$    634,843

Occupancy and equipment

28,009

27,069

28,106

27,787

29,221


110,972

114,460

Deposit insurance assessments

45,733

10,425

7,705

8,361

5,931


72,224

18,712

Pension settlement expense

11,226

600

6,127


11,826

9,023

Advertising and public relations

12,632

5,671

5,618

4,241

28,419


28,162

41,055

Foreclosed property expense

915

270

323

980

400


2,488

832

Telecommunications

1,356

1,520

1,365

1,534

1,524


5,775

6,617

Travel and entertainment

3,146

2,442

2,850

2,565

3,980


11,004

11,407

Data processing and software

32,922

29,127

27,289

31,105

28,510


120,443

111,107

Professional, consulting and outsourcing

5,194

5,017

5,371

4,311

3,464


19,892

13,424

Amortization of intangibles

4,405

4,436

6,081

4,466

4,695


19,388

18,432

Legal

13,724

3,316

1,765

1,288

725


20,093

5,350

Merger expense

122

5,070

19,916


5,192

50,845

Postage and shipping

1,907

2,292

1,941

2,303

1,864


8,443

7,868

Other miscellaneous expense

20,117

20,630

19,654

24,898

16,994


85,299

65,779

Total noninterest expense

$    329,367

$    274,442

$    267,466

$    284,647

$    308,638


$ 1,155,923

$ 1,109,754










 

Table 12

Average Balance and Yields

(Unaudited)



Quarter Ended


December 31, 2023


September 30, 2023


December 31, 2022

(Dollars in thousands)

Average

Balance

Income/
Expense

Yield/

Rate


Average

Balance

Income/
Expense

Yield/

Rate


Average

Balance

Income/
Expense

Yield/

Rate

ASSETS












Interest-earning assets:












Loans and leases, excluding accretion

$ 32,529,030

$   527,688

6.44 %


$  32,311,572

$   513,989

6.31 %


$ 29,812,924

$   405,827

5.40 %

Accretion income on acquired loans


4,127

0.05



6,587

0.08



9,190

0.12

Loans held for sale

113,234

1,418

4.97


115,653

1,468

5.04


62,517

1,788

11.35

Investment securities












Taxable

9,044,724

55,801

2.45


9,635,084

50,277

2.07


11,767,062

45,807

1.54

Tax-exempt

255,990

2,439

3.78


369,357

3,006

3.23


389,741

3,224

3.28

Total investment securities

9,300,714

58,240

2.48


10,004,441

53,283

2.11


12,156,803

49,031

1.60

Other investments

1,811,686

24,701

5.41


1,571,973

21,213

5.35


941,416

8,781

3.70

Total interest-earning assets

43,754,664

616,174

5.59 %


44,003,639

596,540

5.38 %


42,973,660

474,617

4.38 %

Other assets

5,137,391




5,111,197




5,251,619



Allowance for credit losses

447,879




459,698




434,785



Total assets

$ 48,444,176




$  48,655,138




$ 47,790,494















LIABILITIES AND SHAREHOLDERS' EQUITY












Interest-bearing liabilities:












Interest bearing demand and money market

$ 18,292,826

$   139,144

3.02 %


$  17,970,463

$   126,296

2.79 %


$ 17,866,198

60,253

1.34 %

Savings deposits

2,758,977

3,918

0.56


2,913,027

4,108

0.56


3,555,911

2,769

0.31

Time deposits

7,537,664

80,143

4.22


7,660,868

76,867

3.98


3,606,093

10,651

1.17

Total interest-bearing deposits

28,589,467

223,205

3.10


28,544,358

207,271

2.88


25,028,202

73,673

1.17

Fed funds purchased, securities sold under agreement to repurchase and other

756,336

8,257

4.33


837,773

9,007

4.27


1,091,029

8,365

3.04

Short-term FHLB borrowings

2


224

2

3.54


2,821,892

27,302

3.84

  Short-term BTFP borrowings

3,500,000

44,448

5.04


3,500,000

45,433

5.15


Long-term borrowings

443,251

4,672

4.18


449,568

4,786

4.22


462,927

4,848

4.15

Total interest-bearing liabilities

33,289,056

280,582

3.34 %


33,331,923

266,499

3.17 %


29,404,050

114,188

1.54 %

Noninterest-bearing liabilities:












Demand deposits

9,625,912




9,921,617




13,344,152



Other liabilities

1,021,865




896,436




826,707



Total liabilities

43,936,833




44,149,976




43,574,909



Shareholders' equity

4,507,343




4,505,162




4,215,585



Total liabilities and shareholders' equity

$ 48,444,176




$  48,655,138




$ 47,790,494



Net interest income/net interest spread


335,592

2.25 %



330,041

2.21 %



360,429

2.84 %

Net yield on earning assets/net interest margin



3.04 %




2.98 %




3.33 %

Taxable equivalent adjustment:












Loans and investment securities


(987)




(1,081)




(1,071)


Net interest revenue


$   334,605




$   328,960




$   359,358


 

Table 12

Average Balance and Yields Cont.



Year-To-Date


December 31, 2023


December 31, 2022

(Dollars in thousands)

Average

Balance

Income/
Expense

Yield/

Rate


Average

Balance

Income/
Expense

Yield/

Rate

ASSETS








Interest-earning assets:








Loans and leases, excluding accretion

$   31,913,925

$   1,980,600

6.21 %


$   28,418,658

$   1,297,384

4.57 %

Accretion income on acquired loans


25,949

0.08



46,811

0.16

Loans held for sale

85,961

4,450

5.18


122,079

7,554

6.19

Investment securities








Taxable

9,971,325

208,122

2.09


13,163,403

183,915

1.40

Tax-exempt

351,010

11,653

3.32


432,969

12,758

2.95

Total investment securities

10,322,335

219,775

2.13


13,596,372

196,673

1.45

Other investments

1,629,036

83,577

5.13


923,861

16,371

1.77

Total interest-earning assets

43,951,257

2,314,351

5.27 %


43,060,970

1,564,793

3.63 %

Other assets

5,204,505




4,911,883



Allowance for credit losses

451,809




439,696



Total assets

$   48,703,953




$   47,533,157











LIABILITIES AND SHAREHOLDERS' EQUITY








Interest-bearing liabilities:








Interest bearing demand and money market

$   18,314,649

472,723

2.58 %


$   18,541,402

$      109,893

0.59 %

Savings deposits

3,028,875

14,955

0.49


3,657,718

5,519

0.15

Time deposits

6,674,231

246,476

3.69


3,545,402

24,253

0.68

Total interest-bearing deposits

28,017,755

734,154

2.62


25,744,522

139,665

0.54

Fed funds purchased, securities sold under agreement to repurchase and other

800,170

32,590

4.07


923,973

13,432

1.45

Short-term FHLB borrowings

1,389,759

68,235

4.91


1,325,381

36,863

2.78

Short-term BTFP borrowings

2,052,055

104,696

5.10


Long-term borrowings

452,645

19,136

4.23


465,004

19,330

4.16

Total interest-bearing liabilities

32,712,384

958,811

2.93 %


28,458,880

209,290

0.74 %

Noninterest-bearing liabilities:








Demand deposits

10,610,698




13,733,384



Other liabilities

893,438




766,490



Total liabilities

44,216,520




42,958,754



Shareholders' equity

4,487,433




4,574,403



Total liabilities and shareholders' equity

$   48,703,953




$   47,533,157



Net interest income/net interest spread


1,355,540

2.33 %



1,355,503

2.90 %

Net yield on earning assets/net interest margin



3.08 %




3.15 %

Taxable equivalent adjustment:








Loans and investment securities


(4,184)




(4,212)


Net interest revenue


$   1,351,356




$   1,351,291


 

Table 13

Selected Additional Data

(Unaudited)



Quarter Ended

(Dollars in thousands)

Dec 2023

Sep 2023

Jun 2023

Mar 2023

Dec 2022

MORTGAGE SERVICING RIGHTS ("MSR"):






Fair value, beginning of period

$      116,266

$      111,417

$      106,942

$      109,744

$      112,767

Originations of servicing assets

2,636

4,065

1,990

1,385

2,283

Changes in fair value:






Due to payoffs/paydowns

(3,035)

(2,104)

(2,621)

(1,078)

(2,308)

Due to update in valuation assumptions

(9,043)

2,888

5,106

(3,109)

(2,998)

Fair value, end of period

$      106,824

$      116,266

$      111,417

$      106,942

$      109,744







MORTGAGE BANKING REVENUE:






Origination

$          1,040

$          2,031

$          3,495

$          3,344

$          1,793

Servicing