Cadence Bancorporation Reports Second Quarter 2019 Financial Results

Jul 22, 2019 06:37 am
HOUSTON -- 

Cadence Bancorporation (NYSE:CADE) (“Cadence”) today announced net income for the quarter ended June 30, 2019 of $48.3 million, or $0.37 per diluted common share (“per share”), compared to $48.0 million or $0.57 per share for the quarter ended June 30, 2018, and $58.2 million or $0.44 per share for the quarter ended March 31, 2019. The first and second quarters of 2019 included merger related expenses of $22.0 million or $0.13 per share and $4.6 million or $0.03 per share, respectively.

“The results for second quarter of 2019 reflect continued organic loan and deposit growth and solid fundamental trends, that were unfortunately negatively impacted by higher credit costs including net charge-offs of $18.6 million and loan provisions of $28.9 million. While the credit results are certainly disappointing, there have been many positive developments this year that add further strength to our platform. As a reminder, in the first quarter of 2019, we meaningfully diversified assets and deposits with the State Bank & Trust (“State Bank”) merger and protected our interest income with the addition of a well-timed interest rate collar. This quarter, we sold non-strategic acquired loans and grew originated loans 4.0% year-to-date, reflecting an intentional moderation of growth compared to prior years. Additionally, we further lowered our use of wholesale funding and enhanced our capital base while lowering ongoing debt as we refinanced senior debt with sub-debt on attractive terms. Our tangible book value per share increased over 7% from last quarter to $14.21. The State Bank merger integration continues to progress well on all fronts, and we are encouraged by our prospects to grow this core business throughout Georgia. We continue to focus on building our quality growth throughout our regional markets, while investing in scalable infrastructure to support ongoing customer service and profitable growth. Looking forward, we believe the cumulative effect of these actions position Cadence well for future success,” stated Paul B. Murphy, Jr., Chairman and Chief Executive Officer of Cadence Bancorporation.

Adjusted Performance Metrics:

  • Adjusted net income(1), excluding non-routine income and expenses(2) primarily related to the merger, was $51.5 million for the second quarter of 2019, an increase of $9.3 million or 22.2% compared to the second quarter of 2018 and a decrease of $24.0 million or 31.8% compared to the first quarter of 2019.
  • Adjusted EPS(1) for the second quarter of 2019 of $0.40 decreased by $0.10 compared to adjusted EPS for the prior year quarter of $0.50 and decreased by $0.18 for the linked quarter of $0.58.
  • Annualized returns on average assets and tangible common equity(1) for the second quarter of 2019 were 1.10% and 12.23%, respectively, compared to 1.72% and 18.79%, respectively, for the second quarter of 2018, and 1.34% and 15.54%, respectively, for the first quarter of 2019.
    • Adjusted annualized returns on average assets(1) and adjusted tangible common equity(1) for the second quarter of 2019 were 1.17% and 12.96%, respectively, compared to 1.51% and 16.54%, respectively, for the second quarter of 2018 and 1.74% and 19.83%, respectively, for the first quarter of 2019.
 

(1)

Considered a non-GAAP financial measure.

(2)

See Table 7 for a detail of non-routine income and expenses.

Balance Sheet:

We continued to generate quality loan and deposit growth throughout our footprint during the quarter, bringing total assets to $17.5 billion as of June 30, 2019, an increase of $51.1 million or 0.3%, from March 31, 2019, and an increase of $6.2 billion or 54.8%, from June 30, 2018. The year-over-year increases throughout this release are impacted by the acquisition of State Bank which added $4.8 billion in total assets on January 1, 2019, and the linked quarter increase was softened by $164 million of loan sales as well as a $70 million decline in the securities portfolio due to portfolio rebalancing during the current quarter.

Loans. Loan balances for the second quarter of 2019 reflected conservative organic growth, with period-end balances lessened by $164 million of loan sales aimed at reducing certain risk profiles.

Loans at June 30, 2019 totaled $13.6 billion as compared to $9.0 billion and $13.6 billion at June 30, 2018 and March 31, 2019, respectively. Loans increased $1.5 billion or 16.4% since June 30, 2018, excluding the impact of the loans acquired from State Bank, and were essentially unchanged from March 31, 2019. The second quarter included a sale of certain equipment finance loans acquired through the State Bank merger, reducing loans by $130 million, as well as $34 million in non-core mortgage sales. The sales resulted in a gain of $1.9 million during the quarter. Excluding the impact of these sales, total loans grew $169 million or 1.0% during the second quarter of 2019. On a year-to-date basis, originated loans grew 4.0%, as compared to 8.8% year-to-date for 2018, reflecting management’s intentional efforts to moderate loan growth in 2019. The lower loan growth also reflects intentional movement away from targeted lending sectors and profiles.

Securities. Investment securities for the second quarter of 2019 declined modestly due to routine portfolio rebalancing that realized a net gain in the current quarter of $938 million. Investment securities at June 30, 2019 were $1.7 billion as compared to $1.0 billion at June 30, 2018 and $1.9 billion at March 31, 2019.

Funding. Our funding activities reflected strong performance this quarter with meaningful core deposits growth, further decline in period-end brokered deposits and wholesale funds, and successful execution of a subordinated debt offering allowing us to lower debt and interest costs while adding to our capital base.

Deposits at June 30, 2019 totaled $14.5 billion as compared to $9.3 billion and $14.2 billion at June 30, 2018 and March 31, 2019, respectively. Excluding the impact of deposits assumed from State Bank, deposits increased by $1.1 billion or 11.4% from June 30, 2018. The year-over-year deposit increase was driven by growth in core customer deposits (total deposits excluding brokered deposits) of $1.0 billion, or 12.0%, from June 30, 2018. The linked quarter increase included an increase of $276 million, or 2.1% in core deposits, while brokered deposits were $868 million or 6.0% of total deposits at June 30, 2019. Additionally, on July 3, 2019, $228 million in brokered deposits matured that we don’t currently anticipate replacing in the latter half of 2019.

Total borrowings were $376 million at June 30, 2019 down from $471 million at June 30, 2018 and $717 million at March 31, 2019. The linked quarter decline was largely due to lower FHLB borrowings as a result of increased core deposits. Additionally, in June 2019, we paid off $145 million of senior debt yielding 4.875% with cash and proceeds from an $85 million subordinated debt offering. The subordinated debt has a ten-year maturity, is fixed rate for five years at 4.75% and qualifies for Tier 2 capital at the holding company.

Shareholders’ equity reflected a 5.4% growth during the second quarter of 2019 driven by increases in the value of our interest rate collar based on lower interest rate expectations, as well as net earnings for the quarter. Shareholder’s equity was $2.4 billion at June 30, 2019, an increase of $1.0 billion from June 30, 2018, and an increase of $123.2 million from March 31, 2019.

  • Tangible common shareholders’ equity(1) was $1.8 billion at June 30, 2019, an increase of $756.2 million from June 30, 2018, and an increase of $126.3 million from March 31, 2019. The year over year increase resulted primarily from common stock issued of $826.1 million related to the merger with state Bank Financial Corporation. The linked quarter increase resulted from net income of $48.3 million and an increase of $95.3 million in other comprehensive income which resulted from increased fair values of derivatives and securities. These items were partially offset by dividends of $22.5 million.
  • Tangible book value per share was $14.21 as of June 30, 2019, an increase of $1.36 from $12.85 as of June 30, 2018, and an increase of $0.98 from $13.23 as of March 31, 2019.
  • Total outstanding shares at June 30, 2019 were 128.8 million.
  • Total shareholders’ equity to total assets and tangible equity to tangible assets were 13.9% and 10.8%, respectively, at June 30, 2019.

Asset Quality:

Credit quality. Credit costs were elevated during the second quarter of 2019 as we experienced deterioration in certain credits resulting in charge-offs and increased loan provisions.

  • Net charge-offs were $18.6 million compared to $2.2 million and $0.6 million for the quarters ended June 30, 2018 and March 31, 2019, respectively. On a year-to-date basis, 2019 charge offs are 0.28% of average loans as compared to 0.06% for the full year 2018 and 0.18% for the trailing four quarters. This quarter’s charge-offs were predominantly related to four credits, all previously designated as impaired. Three of the credits were general C&I and one restaurant.
  • Loan loss provisions for the second quarter of 2019 were $28.9 million driven by higher charge-offs and specific reserves, as well as general credit migration primarily in the C&I portfolio. The allowance for credit losses (“ACL”) increased to $115.3 million or 0.85% of total loans as of June 30, 2019, as compared to $90.6 million or 1.01% of total loans as of June 30, 2018, and $105.0 million or 0.77% of total loans as of March 31, 2019.
  • Loans 30-90 days past due remained low at 0.15% of total loans at June 30, 2019, down slightly from 0.16% at March 31, 2019.
  • Nonperforming assets (“NPAs”) as a percent of total loans, OREO and other NPAs was 0.85% at June 30, 2019, compared 0.63% at both June 30, 2018 and March 31, 2019. NPAs totaled $116.4 million, $57.0 million and $86.0 million as of June 30, 2019, June 30, 2018 and March 31, 2019, respectively. The increase in NPAs in the second quarter of 2019 resulted from the addition of three loans totaling $30.9 million as nonaccrual loans, one energy, one restaurant and one general C&I.
  • Total criticized loans as a percent of total loans at June 30, 2019 was 3.0% as compared to 3.7% at June 30, 2018 and 2.6% at March 31, 2019.

Total Revenue:

This quarter’s total operating revenue reflected stable underlying revenue driven by flat earning assets that, as compared to the linked quarter, was negatively impacted by timing of hedge income and lower accretion on acquired loans.

Total operating revenue(1) for the second quarter of 2019 was $192.5 million, up 60.3% from the same period in 2018 and down 3.7% from the linked quarter. On a year-to-date basis, operating revenue for the first half of 2019 was $392.5 million, up 66.1% from the same period in 2018. The year over year revenue increase reflects strong loan growth during the period as well as the impact of the State Bank acquisition.

 
(1)

Considered a non-GAAP financial measure. See Table 7 “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

Net interest income for the 2019 second quarter compared to the linked quarter reflected solid growth in both average loans and deposits with an expected modest increase in core deposit costs combined with a slightly softer originated loan yield (excluding hedge impacts). The margin was also impacted by timing of income related to our hedges and accretion.

Net interest income for the second quarter of 2019 was $160.8 million, an increase of $65.4 million or 68.6%, from the same period in 2018, and a decrease of $8.5 million or 5.0% from the first quarter of 2019.

  • Our fully tax-equivalent net interest margin (“NIM”) increased in the second quarter of 2019 to 3.97% as compared to 3.66% for the second quarter of 2018 and declined from 4.21% for the first quarter of 2019.
  • On a year-to-date basis, the NIM for 2019 increased to 4.09% compared to 3.65% for 2018.

The year-over-year increase in NIM reflects the merger with State Bank and the related positive impact on our funding costs, loan yields and accretion income. The NIM decline in the second quarter of 2019 as compared to the linked quarter was driven primarily by:

  • -5 basis point (“bp”) from core deposit cost increases;
  • -9 bp impact due to timing of interest rate hedge accounting adjustments; and
  • -5 bp from lower net accretion from acquired loans.

Average earning assets for the second quarter of 2019 were $16.3 billion, an increase of $5.8 billion from the prior year’s quarter from both organic and acquired growth, and a decline of $0.1 billion from the linked quarter due to increases in average loans offset by lower short-term investments in the current quarter.

Originated Loans and Hedge Income:

  • Average originated loans increased $233 million linked quarter, with year-over-year growth of $1.6 billion, reflecting solid quarterly growth, moderated from prior year as noted previously.
  • Yield on originated loans was 5.43% for the second quarter of 2019, as compared to 5.02% and 5.61% for the second quarter of 2018 and the first quarter of 2019, respectively. Compared to the linked quarter, the yield was negatively impacted in the second quarter by timing related to our collar between the first and second quarters of 2019.
    • $4 billion notional collar: Hedge income for the collar for the second quarter of 2019 was ($1.7) million as compared to $1.7 million for the first quarter of 2019. The collar income year-to-date for 2019 was zero.
    • $650 million rate swaps: Hedge income for the swaps for the second quarter of 2019 was ($1.5) million as compared to ($1.2) million for the second quarter of 2018 and ($1.5) million for the first quarter of 2019. Swap income year-to-date for 2019 was ($3.0) million as compared to ($1.5) million for 2018.
  • Yield on the underlying originated loans (excluding hedge impact) was 5.56% for the second quarter of 2019, as compared to 5.08% and 5.60% for the second quarter of 2018 and first quarter of 2019, respectively.
  • Approximately 69% of the total loan portfolio is floating at June 30, 2019.

Acquired Loans:

  • Acquired loan average balances declined $109.5 million during the second quarter of 2019 due to routine payoff activity, with the increase year-over-year due to the State Bank acquisition.
  • Acquired loan yields during the second quarter of 2019 were impacted by various State Bank purchase accounting adjustments applied in the second quarter incorporating impact from January 1, 2019 (“Day 1”). The adjustments also included quarterly refinements of legacy acquired loan portfolio cash flows.
  • Year-to-date 2019 yields are 10.14% on the ACI portfolio, excluding recovery accretion, and 6.59% on the ANCI portfolio. We currently expect that the year-to-date yields of the acquired portfolios, excluding recovery accretion, materially represent those portfolio’s inherent yields for the remainder of 2019, absent significant changes in payoff expectations, other currently unknown purchase accounting adjustments or changes in interest rate indices.

Cost of Funds:

  • We experienced modest increases in funding costs this quarter with total cost of funds for the second quarter of 2019 of 1.50% compared to 1.18% for the second quarter of 2018 and 1.42% in the linked quarter. Total cost of deposits for the second quarter of 2019 was 1.39% compared to 0.98% for the second quarter of 2018, and 1.30% for the linked quarter.
  • The increase in costs during the linked quarter related primarily to core deposit cost increases impacting both interest-bearing demand and time deposits related to the lagging beta impact from the 2018 rate increases. The cost of deposits was also negatively impacted by higher average wholesale funding balances related to seasonal deposit balances.
  • Cost of funds for the latter half of 2019 will be positively impacted by the $60 million reduction in debt related to the June subordinated debt issuance and senior debt repayment, as well as the maturity of $228 million in brokered deposits on July 3, 2019.
  • Noninterest-bearing deposits increased to 22.8% of total deposits compared to 22.6% at March 31, 2019.

Noninterest income for the second quarter of 2019 was $31.7 million, an increase of $7.1 million or 28.6% from the same period of 2018 due to broader growth and the State Bank merger, and an increase of $1.1 million or 3.5% over the linked quarter.

  • Total service fees and revenue for the second quarter of 2019 were $27.9 million, an increase of $6.5 million or 30.3% from the same period of 2018, and an increase of $0.1 million or 0.5% from the first quarter of 2019. The year-over-year increase in fees was due to across the board business growth and the merger. The linked quarter results included business volume driven increases in investment advisory, trust, and credit-related fees, which were offset by declines in payroll processing (revenue cycle results in higher first quarter revenue), and service charges on deposit accounts.
  • Other noninterest income was $3.8 million and increased by $0.1 million from the second quarter of 2018 and by $0.9 million from the linked quarter. The year over year variance included increases of $1.9 million in gain on sales of nonmortgage loans, $1.4 million in valuation of net profits interests and $2.8 million in gains on sales of securities, offset by the $4.9 million gain on sale of insurance subsidiary assets in the 2018 quarter, and a revaluation of an earnout receivable of $2.0 million related to the insurance asset sale in the current 2019 quarter. The linked quarter increase primarily resulted from the $1.9 million gain on sale of nonmortgage loans offset by the $2.0 million earnout receivable revaluation.
  • Noninterest income as a percent of total revenues was 16.5% for the second quarter of 2019 compared to 20.6% and 15.3% for the second quarter of 2018 and first quarter of 2019, respectively.

Noninterest expense for the second quarter of 2019 declined compared to the linked quarter as merger costs materially declined during the second quarter, partially offset by an expected increase in broader operating costs associated with a larger company post-State Bank integration.

Noninterest expense for the second quarter of 2019 was $100.5 million, an increase of $38.1 million or 61.0% from $62.4 million for the same period in 2018, and a decrease of $12.9 million or 11.4% from $113.4 million for the first quarter of 2019. The linked quarter decrease resulted primarily from a decrease of $17.4 million in merger related expenses, partially offset by an increase of $4.5 million in operating expense.

The linked quarter decrease resulted from:

  • Decrease of $17.4 million in merger related costs as both the merger date and systems integration took place in the first quarter of 2019;
  • Increase of $1.8 million in technology costs associated with operating and processing a larger institution on a fully integrated basis;
  • Increase of $1.4 million in business volume related expenses due to strong loan and deposit volumes;
  • Increase of $0.7 million due to operational losses; and
  • Increase of $0.4 million in loss on sale of other real estate.

Adjusted noninterest expenses(1), which exclude the impact of non-routine items(2), were $96.0 million for the second quarter of 2019, up $36.6 million or 61.6% from $59.4 million for the second quarter of 2018 and up $4.5 million or 5.0% from $91.4 million for the first quarter of 2019. Non-routine expenses for the second quarter and first quarter of 2019 consisted of $4.6 million and $22.0 million, respectively, in State Bank merger related expenses. For the second quarter of 2018, non-routine expenses included $1.2 million in secondary offering expenses, $0.8 million in merger related expenses, and $1.1 million in other expenses.

Our efficiency ratio(1) for the second quarter of 2019 reflects lower operating revenue combined with increases in quarterly operating expenses. The second quarter of 2019 efficiency ratio was 52.2% compared to 52.0% for the second quarter of 2018 and 56.7% for the first quarter of 2019. The efficiency ratio in all quarters was impacted by the noted non-routine expenses. Excluding non-routine revenues and expenses, the adjusted efficiency ratio(1) was 50.0%, 50.7%, and 45.7% for the second quarter of 2019, second quarter of 2018, and first quarter of 2019, respectively.

Taxes:

The effective tax rate for the quarter ended June 30, 2019, was 23.3% compared to 22.7% for the quarter ended March 31, 2019, and 14.9% for the quarter ended June 30, 2018. The full year 2019 effective tax rate is currently estimated as 23.1%.

 

(1)

Considered a non-GAAP financial measure.See Table 7 “Reconciliation of Non GAAP Financial Measures” for a reconciliation of our non GAAP measures to the most directly comparable GAAP financial measure.

(2)

See Table 7 for a detail of non-routine income and expenses.

Supplementary Financial Tables (Unaudited):

Supplementary financial tables (Unaudited) are included in this release following the customary disclosure information.

Second Quarter 2019 Earnings Conference Call:

Cadence Bancorporation executive management will host a conference call to discuss second quarter 2019 results on Monday, July 22, 2019, at 12:00 p.m. CT / 1:00 p.m. ET. Slides to be presented by management on the conference call can be viewed by visiting www.cadencebancorporation.com and selecting “Events & Presentations” then “Presentations”.

Conference Call Access:

To access the conference call, please dial one of the following numbers approximately 10-15 minutes prior to the start time to allow time for registration and use the Elite Entry Number provided below.

Dial in (toll free):

1-888-317-6003

International dial in:

1-412-317-6061

Canada (toll free):

1-866-284-3684

Participant Elite Entry Number:

0554913

For those unable to participate in the live presentation, a replay will be available through August 5, 2019. To access the replay, please use the following numbers:

US Toll Free:

1-877-344-7529

International Toll:

1-412-317-0088

Canada Toll Free:

1-855-669-9658

Replay Access Code:

10132912

End Date:

August 5, 2019

Webcast Access:

The call and corresponding presentation slides will be webcast live on the home page of the Company’s website: www.cadencebancorporation.com.

About Cadence Bancorporation

Cadence Bancorporation (NYSE: CADE), headquartered in Houston, Texas, is a regional financial holding company with $17.5 billion in assets as of June 30, 2019. Cadence operates 98 branch locations in Alabama, Florida, Georgia, Mississippi, Tennessee and Texas, and provides corporations, middle-market companies, small businesses and consumers with a full range of innovative banking and financial solutions. Services and products include commercial and business banking, treasury management, specialized lending, asset-based lending, commercial real estate, SBA lending, foreign exchange, wealth management, investment and trust services, financial planning, retirement plan management, payroll and insurance services, consumer banking, consumer loans, mortgages, home equity lines and loans, and credit cards. Clients have access to leading-edge online and mobile solutions, interactive teller machines, and more than 55,000 ATMs. The Cadence team of 1,800 associates is committed to exceeding customer expectations and helping their clients succeed financially.

Cautionary Statement Regarding Forward-Looking Information

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict.

Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Such factors include, without limitation, the “Risk Factors” referenced in our Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”) on May 21, 2018, and our Registration Statement on Form S-4 filed with the SEC on July 20, 2018, other risks and uncertainties listed from time to time in our reports and documents filed with the SEC, including our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, and the following factors: business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic market areas; economic, market, operational, liquidity, credit and interest rate risks associated with our business; deteriorating asset quality and higher loan charge-offs; the laws and regulations applicable to our business; our ability to achieve organic loan and deposit growth and the composition of such growth; increased competition in the financial services industry, nationally, regionally or locally; our ability to maintain our historical earnings trends; our ability to raise additional capital to implement our business plan; material weaknesses in our internal control over financial reporting; systems failures or interruptions involving our information technology and telecommunications systems or third-party servicers; the composition of our management team and our ability to attract and retain key personnel; the fiscal position of the U.S. federal government and the soundness of other financial institutions; the composition of our loan portfolio, including the identity of our borrowers and the concentration of loans in energy-related industries and in our specialized industries; the portion of our loan portfolio that is comprised of participations and shared national credits; the amount of nonperforming and classified assets we hold; the possibility that the anticipated benefits of the merger with State Bank are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where Cadence and State Bank do business. Cadence can give no assurance that any goal or plan or expectation set forth in forward-looking statements can be achieved and readers are cautioned not to place undue reliance on such statements. The forward-looking statements are made as of the date of this communication, and Cadence does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

About Non-GAAP Financial Measures

Certain of the financial measures and ratios we present, including “efficiency ratio,” “adjusted efficiency ratio,” “adjusted noninterest expenses,” “adjusted operating revenue,” “tangible common equity ratio,” “tangible book value per share” and “return on average tangible common equity”, “adjusted return on average tangible common equity”. “adjusted return on average assets”, “adjusted diluted earnings per share” and “pre-tax, pre-provision net 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 7).

 

Table 1 - Selected Financial Data

 

 

 

As of and for the Three Months Ended

 

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

(In thousands, except share and per share data)

2019

2019(1)

2018

2018

2018

Statement of Income Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

 

217,124

 

 

$

 

222,185

 

 

$

 

143,857

 

 

$

 

131,753

 

 

$

 

123,963

 

Interest expense

 

 

56,337

 

 

 

52,896

 

 

 

40,711

 

 

 

33,653

 

 

 

28,579

 

Net interest income

 

 

160,787

 

 

 

169,289

 

 

 

103,146

 

 

 

98,100

 

 

 

95,384

 

Provision for credit losses

 

 

28,927

 

 

 

11,210

 

 

 

8,422

 

 

 

(1,365

)

 

 

1,263

 

Net interest income after provision

 

 

131,860

 

 

 

158,079

 

 

 

94,724

 

 

 

99,465

 

 

 

94,121

 

Noninterest income - service fees and revenue

 

 

27,882

 

 

 

27,741

 

 

 

21,217

 

 

 

20,490

 

 

 

21,395

 

Noninterest income - other noninterest income

 

 

3,840

 

 

 

2,923

 

 

 

(210

)

 

 

3,486

 

 

 

3,277

 

Noninterest expense

 

 

100,529

 

 

 

113,440

 

 

 

72,697

 

 

 

61,231

 

 

 

62,435

 

Income before income taxes

 

 

63,053

 

 

 

75,303

 

 

 

43,034

 

 

 

62,210

 

 

 

56,358

 

Income tax expense

 

 

14,707

 

 

 

17,102

 

 

 

10,709

 

 

 

15,074

 

 

 

8,384

 

Net income

 

$

 

48,346

 

 

$

 

58,201

 

 

$

 

32,325

 

 

$

 

47,136

 

 

$

 

47,974

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

128,791,933

 

 

 

130,485,521

 

 

 

83,375,485

 

 

 

83,625,000

 

 

 

83,625,000

 

Diluted

 

 

129,035,553

 

 

 

130,549,319

 

 

 

83,375,485

 

 

 

84,660,256

 

 

 

84,792,657

 

Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

 

0.37

 

 

$

 

0.44

 

 

$

 

0.39

 

 

$

 

0.56

 

 

$

 

0.57

 

Diluted

 

 

0.37

 

 

 

0.44

 

 

 

0.39

 

 

 

0.56

 

 

 

0.57

 

Period-End Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

$

 

1,684,847

 

 

$

 

1,754,839

 

 

$

 

1,187,252

 

 

$

 

1,206,387

 

 

$

 

1,049,710

 

Total loans, net of unearned income

 

 

13,627,934

 

 

 

13,624,954

 

 

 

10,053,923

 

 

 

9,443,819

 

 

 

8,975,755

 

Allowance for credit losses

 

 

115,345

 

 

 

105,038

 

 

 

94,378

 

 

 

86,151

 

 

 

90,620

 

Total assets

 

 

17,504,005

 

 

 

17,452,911

 

 

 

12,730,285

 

 

 

11,759,837

 

 

 

11,305,528

 

Total deposits

 

 

14,487,821

 

 

 

14,199,223

 

 

 

10,708,689

 

 

 

9,558,276

 

 

 

9,331,055

 

Noninterest-bearing deposits

 

 

3,296,652

 

 

 

3,210,321

 

 

 

2,454,016

 

 

 

2,094,856

 

 

 

2,137,407

 

Interest-bearing deposits

 

 

11,191,169

 

 

 

10,988,902

 

 

 

8,254,673

 

 

 

7,463,420

 

 

 

7,193,648

 

Borrowings and subordinated debentures

 

 

376,240

 

 

 

717,278

 

 

 

471,770

 

 

 

662,658

 

 

 

471,453

 

Total shareholders’ equity

 

 

2,426,072

 

 

 

2,302,823

 

 

 

1,438,274

 

 

 

1,414,826

 

 

 

1,389,956

 

Average Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

$

 

1,716,550

 

 

$

 

1,748,714

 

 

$

 

1,187,947

 

 

$

 

1,141,704

 

 

$

 

1,183,055

 

Total loans, net of unearned income

 

 

13,921,873

 

 

 

13,798,386

 

 

 

9,890,419

 

 

 

9,265,754

 

 

 

8,848,820

 

Allowance for credit losses

 

 

106,656

 

 

 

97,065

 

 

 

87,996

 

 

 

92,783

 

 

 

93,365

 

Total assets

 

 

17,653,511

 

 

 

17,634,267

 

 

 

12,249,819

 

 

 

11,585,969

 

 

 

11,218,432

 

Total deposits

 

 

14,645,109

 

 

 

14,579,771

 

 

 

10,038,180

 

 

 

9,489,268

 

 

 

9,135,359

 

Noninterest-bearing deposits

 

 

3,281,383

 

 

 

3,334,399

 

 

 

2,210,793

 

 

 

2,153,097

 

 

 

2,058,255

 

Interest-bearing deposits

 

 

11,363,727

 

 

 

11,245,372

 

 

 

7,827,387

 

 

 

7,336,171

 

 

 

7,077,104

 

Borrowings and subordinated debentures

 

 

441,619

 

 

 

554,281

 

 

 

652,813

 

 

 

567,864

 

 

 

595,087

 

Total shareholders’ equity

 

 

2,331,855

 

 

 

2,241,652

 

 

 

1,412,643

 

 

 

1,395,061

 

 

 

1,358,770

 

(1)

Certain reclassifications have been made to the first quarter of 2019 to conform to second quarter presentation.

 

Table 1 (Continued) - Selected Financial Data

 

 

 

As of and for the Three Months Ended

 

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

(In thousands, except share and per share data)

2019

2019

2018

2018

2018

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value per common share

 

$

 

18.84

 

 

$

 

17.88

 

 

$

 

17.43

 

 

$

 

16.92

 

 

$

 

16.62

 

Tangible book value (1)

 

 

14.21

 

 

 

13.23

 

 

 

13.62

 

 

 

13.15

 

 

 

12.85

 

Cash dividends declared

 

 

0.175

 

 

 

0.175

 

 

 

0.150

 

 

 

0.150

 

 

 

0.125

 

Dividend payout ratio

 

 

47.30

%

 

 

39.77

%

 

 

38.46

%

 

 

26.79

%

 

 

21.93

%

Performance Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average common equity (2)

 

 

8.32

%

 

 

10.53

%

 

 

9.08

%

 

 

13.40

%

 

 

14.16

%

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

 

 

12.23

 

 

 

15.54

 

 

 

11.85

 

 

 

17.50

 

 

 

18.79

 

Return on average assets (2)

 

 

1.10

 

 

 

1.34

 

 

 

1.05

 

 

 

1.61

 

 

 

1.72

 

Net interest margin (2)

 

 

3.97

 

 

 

4.21

 

 

 

3.55

 

 

 

3.58

 

 

 

3.66

 

Efficiency ratio (1)

 

 

52.22

 

 

 

56.73

 

 

 

58.55

 

 

 

50.16

 

 

 

52.00

 

Adjusted efficiency ratio (1)

 

 

49.97

 

 

 

45.73

 

 

 

48.99

 

 

 

48.36

 

 

 

50.74

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total nonperforming assets ("NPAs") to total loans and OREO and other NPAs

 

 

0.85

%

 

 

0.63

%

 

 

0.81

%

 

 

0.66

%

 

 

0.63

%

Total nonperforming loans to total loans

 

 

0.80

 

 

 

0.57

 

 

 

0.74

 

 

 

0.50

 

 

 

0.44

 

Total ACL to total loans

 

 

0.85

 

 

 

0.77

 

 

 

0.94

 

 

 

0.91

 

 

 

1.01

 

ACL to total nonperforming loans ("NPLs")

 

 

106.08

 

 

 

135.01

 

 

 

127.12

 

 

 

182.52

 

 

 

230.60

 

Net charge-offs to average loans (2)

 

 

0.54

 

 

 

0.02

 

 

 

0.01

 

 

 

0.13

 

 

 

0.10

 

Capital Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders’ equity to assets

 

 

13.9

%

 

 

13.2

%

 

 

11.3

%

 

 

12.0

%

 

 

12.3

%

Tangible common equity to tangible assets (1)

 

 

10.8

 

 

 

10.1

 

 

 

9.1

 

 

 

9.6

 

 

 

9.8

 

Common equity tier 1 (3)

 

 

10.7

 

 

 

10.4

 

 

 

9.8

 

 

 

10.4

 

 

 

10.5

 

Tier 1 leverage capital (3)

 

 

10.2

 

 

 

10.0

 

 

 

10.1

 

 

 

10.7

 

 

 

10.7

 

Tier 1 risk-based capital (3)

 

 

10.7

 

 

 

10.4

 

 

 

10.1

 

 

 

10.7

 

 

 

10.9

 

Total risk-based capital (3)

 

 

12.8

 

 

 

11.9

 

 

 

11.8

 

 

 

12.4

 

 

 

12.7

 

(1)

Considered a non-GAAP financial measure. See Table 7 "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

(2)

Annualized.

(3)

Current quarter regulatory capital ratios are estimates.

 

Table 2 - Average Balances/Yield/Rates

 

 

 

For the Three Months Ended June 30,

 

 

 

 

2019

 

 

 

2018

 

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

(In thousands)

 

Balance

 

 

Expense

 

 

Rate

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, net of unearned income(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

 

$

 

10,044,825

 

 

$

 

135,946

 

 

 

5.43

 

%

 

$

 

8,430,875

 

 

$

 

105,536

 

 

 

5.02

 

%

ANCI portfolio

 

 

3,586,344

 

 

 

55,266

 

 

 

6.18

 

 

 

 

175,378

 

 

 

2,594

 

 

 

5.93

 

 

ACI portfolio

 

 

290,704

 

 

 

10,799

 

 

 

14.90

 

 

 

 

242,567

 

 

 

5,610

 

 

 

9.28

 

 

Total loans

 

 

13,921,873

 

 

 

202,011

 

 

 

5.82

 

 

 

 

8,848,820

 

 

 

113,740

 

 

 

5.16

 

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

1,500,971

 

 

 

10,298

 

 

 

2.75

 

 

 

 

838,842

 

 

 

5,518

 

 

 

2.64

 

 

Tax-exempt (2)

 

 

215,579

 

 

 

2,061

 

 

 

3.83

 

 

 

 

344,213

 

 

 

3,547

 

 

 

4.13

 

 

Total investment securities

 

 

1,716,550

 

 

 

12,359

 

 

 

2.89

 

 

 

 

1,183,055

 

 

 

9,065

 

 

 

3.07

 

 

Federal funds sold and short-term investments

 

 

597,988

 

 

 

2,667

 

 

 

1.79

 

 

 

 

452,074

 

 

 

1,269

 

 

 

1.13

 

 

Other investments

 

 

67,124

 

 

 

520

 

 

 

3.11

 

 

 

 

55,909

 

 

 

634

 

 

 

4.55

 

 

Total interest-earning assets

 

 

16,303,535

 

 

 

217,557

 

 

 

5.35

 

 

 

 

10,539,858

 

 

 

124,708

 

 

 

4.75

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

111,337

 

 

 

 

 

 

 

 

 

 

 

 

80,000

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

128,067

 

 

 

 

 

 

 

 

 

 

 

 

62,711

 

 

 

 

 

 

 

 

 

 

Accrued interest and other assets

 

 

1,217,228

 

 

 

 

 

 

 

 

 

 

 

 

629,228

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(106,656

)

 

 

 

 

 

 

 

 

 

 

 

(93,365

)

 

 

 

 

 

 

 

 

 

Total assets

 

$

 

17,653,511

 

 

 

 

 

 

 

 

 

 

 

$

 

11,218,432

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

$

 

7,732,568

 

 

$

 

30,195

 

 

 

1.57

 

%

 

$

 

4,712,302

 

 

$

 

11,700

 

 

 

1.00

 

%

Savings deposits

 

 

251,270

 

 

 

245

 

 

 

0.39

 

 

 

 

189,567

 

 

 

133

 

 

 

0.28

 

 

Time deposits

 

 

3,379,889

 

 

 

20,298

 

 

 

2.41

 

 

 

 

2,175,235

 

 

 

10,497

 

 

 

1.94

 

 

Total interest-bearing deposits

 

 

11,363,727

 

 

 

50,738

 

 

 

1.79

 

 

 

 

7,077,104

 

 

 

22,330

 

 

 

1.27

 

 

Other borrowings

 

 

300,897

 

 

 

3,051

 

 

 

4.07

 

 

 

 

459,678

 

 

 

3,785

 

 

 

3.30

 

 

Subordinated debentures

 

 

140,722

 

 

 

2,548

 

 

 

7.26

 

 

 

 

135,409

 

 

 

2,464

 

 

 

7.30

 

 

Total interest-bearing liabilities

 

 

11,805,346

 

 

 

56,337

 

 

 

1.91

 

 

 

 

7,672,191

 

 

 

28,579

 

 

 

1.49

 

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

3,281,383

 

 

 

 

 

 

 

 

 

 

 

 

2,058,255

 

 

 

 

 

 

 

 

 

 

Accrued interest and other liabilities

 

 

234,927

 

 

 

 

 

 

 

 

 

 

 

 

129,216

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

15,321,656

 

 

 

 

 

 

 

 

 

 

 

 

9,859,662

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

2,331,855

 

 

 

 

 

 

 

 

 

 

 

 

1,358,770

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

 

17,653,511

 

 

 

 

 

 

 

 

 

 

 

$

 

11,218,432

 

 

 

 

 

 

 

 

 

 

Net interest income/net interest spread

 

 

 

 

 

 

161,220

 

 

 

3.45

 

%

 

 

 

 

 

 

96,129

 

 

 

3.26

 

%

Net yield on earning assets/net interest margin

 

 

 

 

 

 

 

 

 

 

3.97

 

%

 

 

 

 

 

 

 

 

 

 

3.66

 

%

Taxable equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

 

 

 

 

 

(433

)

 

 

 

 

 

 

 

 

 

 

 

(745

)

 

 

 

 

 

Net interest income

 

 

 

 

 

$

 

160,787

 

 

 

 

 

 

 

 

 

 

 

$

 

95,384

 

 

 

 

 

 

(1)

Nonaccrual loans are included in loans, net of unearned income. No adjustment has been made for these loans in the calculation of yields.

(2)

Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%.

 

Table 2 (Continued) - Average Balances/Yield/Rates

 

 

 

For the Three Months Ended

 

 

 

For the Three Months Ended

 

 

June 30, 2019

March 31, 2019

 

 

Average

 

 

Income/

 

 

Yield/

 

 

 

Average

 

 

Income/

 

 

Yield/

 

 

(In thousands)

 

Balance

 

 

Expense

 

 

Rate

 

 

 

Balance

 

 

Expense

 

 

Rate

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, net of unearned income (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

 

$

 

10,044,825

 

 

$

 

135,946

 

 

 

5.43

 

%

 

$

 

9,811,821

 

 

$

 

135,815

 

 

 

5.61

 

%

ANCI portfolio

 

 

3,586,344

 

 

 

55,266

 

 

 

6.18

 

 

 

 

3,684,905

 

 

 

63,587

 

 

 

7.00

 

 

ACI portfolio

 

 

290,704

 

 

 

10,799

 

 

 

14.90

 

 

 

 

301,660

 

 

 

6,349

 

 

 

8.54

 

 

Total loans

 

 

13,921,873

 

 

 

202,011

 

 

 

5.82

 

 

 

 

13,798,386

 

 

 

205,751

 

 

 

6.05

 

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

1,500,971

 

 

 

10,298

 

 

 

2.75

 

 

 

 

1,531,514

 

 

 

10,796

 

 

 

2.86

 

 

Tax-exempt (2)

 

 

215,579

 

 

 

2,061

 

 

 

3.83

 

 

 

 

217,200

 

 

 

2,202

 

 

 

4.11

 

 

Total investment securities

 

 

1,716,550

 

 

 

12,359

 

 

 

2.89

 

 

 

 

1,748,714

 

 

 

12,998

 

 

 

3.01

 

 

Federal funds sold and short-term investments

 

 

597,988

 

 

 

2,667

 

 

 

1.79

 

 

 

 

763,601

 

 

 

3,281

 

 

 

1.74

 

 

Other investments

 

 

67,124

 

 

 

520

 

 

 

3.11

 

 

 

 

58,139

 

 

 

618

 

 

 

4.31

 

 

Total interest-earning assets

 

 

16,303,535

 

 

 

217,557

 

 

 

5.35

 

 

 

 

16,368,840

 

 

 

222,648

 

 

 

5.52

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

111,337

 

 

 

 

 

 

 

 

 

 

 

 

118,833

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

128,067

 

 

 

 

 

 

 

 

 

 

 

 

128,990

 

 

 

 

 

 

 

 

 

 

Accrued interest and other assets

 

 

1,217,228

 

 

 

 

 

 

 

 

 

 

 

 

1,114,669

 

 

 

 

 

 

 

 

 

 

Allowance for credit losses

 

 

(106,656

)

 

 

 

 

 

 

 

 

 

 

 

(97,065

)

 

 

 

 

 

 

 

 

 

Total assets

 

$

 

17,653,511

 

 

 

 

 

 

 

 

 

 

 

$

 

17,634,267

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

$

 

7,732,568

 

 

$

 

30,195

 

 

 

1.57

 

%

 

$

 

8,011,001

 

 

$

 

29,259

 

 

 

1.48

 

%

Savings deposits

 

 

251,270

 

 

 

245

 

 

 

0.39

 

 

 

 

248,651

 

 

 

226

 

 

 

0.37

 

 

Time deposits

 

 

3,379,889

 

 

 

20,298

 

 

 

2.41

 

 

 

 

2,985,720

 

 

 

17,186

 

 

 

2.33

 

 

Total interest-bearing deposits

 

 

11,363,727

 

 

 

50,738

 

 

 

1.79

 

 

 

 

11,245,372

 

 

 

46,671

 

 

 

1.68

 

 

Other borrowings

 

 

300,897

 

 

 

3,051

 

 

 

4.07

 

 

 

 

418,347

 

 

 

3,695

 

 

 

3.58

 

 

Subordinated debentures

 

 

140,722

 

 

 

2,548

 

 

 

7.26

 

 

 

 

135,934

 

 

 

2,530

 

 

 

7.55

 

 

Total interest-bearing liabilities

 

 

11,805,346

 

 

 

56,337

 

 

 

1.91

 

 

 

 

11,799,653

 

 

 

52,896

 

 

 

1.82

 

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

3,281,383

 

 

 

 

 

 

 

 

 

 

 

 

3,334,399

 

 

 

 

 

 

 

 

 

 

Accrued interest and other liabilities

 

 

234,927

 

 

 

 

 

 

 

 

 

 

 

 

258,563

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

15,321,656

 

 

 

 

 

 

 

 

 

 

 

 

15,392,615

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

2,331,855

 

 

 

 

 

 

 

 

 

 

 

 

2,241,652

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

 

$

 

17,653,511

 

 

 

 

 

 

 

 

 

 

 

$

 

17,634,267

 

 

 

 

 

 

 

 

 

 

Net interest income/net interest spread

 

 

 

 

 

 

161,220

 

 

 

3.45

 

%

 

 

 

 

 

 

169,752

 

 

 

3.70

 

%

Net yield on earning assets/net interest margin

 

 

 

 

 

 

 

 

 

 

3.97

 

%

 

 

 

 

 

 

 

 

 

 

4.21

 

%

Taxable equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

 

 

 

 

 

(433

)

 

 

 

 

 

 

 

 

 

 

 

(463

)

 

 

 

 

 

Net interest income

 

 

 

 

 

$

 

160,787

 

 

 

 

 

 

 

 

 

 

 

$

 

169,289

 

 

 

 

 

 

(1)

Nonaccrual loans are included in loans, net of unearned income. No adjustment has been made for these loans in the calculation of yields.

(2)

Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%.

 

Table 3 - Loan Interest Income Detail

 

 

 

Year-To-Date

 

 

For the Three Months Ended,

 

 

 

 

June 30,

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

 

(In thousands)

2019

2019

2019 (1)

2018

2018

2018

Loan Interest Income Detail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income on originated loans

 

$

 

271,761

 

 

$

 

135,946

 

 

$

 

135,815

 

 

 

$

 

122,674

 

 

$

 

112,419

 

 

$

 

105,536

 

 

ANCI loans: interest income

 

 

100,204

 

 

 

49,095

 

 

 

51,109

 

 

 

 

4,571

 

 

 

3,219

 

 

 

2,405

 

 

ANCI loans: accretion

 

 

18,649

 

 

 

6,171

 

 

 

12,478

 

 

 

 

(273

)

 

 

176

 

 

 

189

 

 

ACI loans: scheduled accretion for the period

 

 

14,885

 

 

 

8,989

 

 

 

5,896

 

 

 

 

4,724

 

 

 

4,881

 

 

 

5,016

 

 

ACI loans: recovery income for the period

 

 

2,263

 

 

 

1,810

 

 

 

453

 

 

 

 

860

 

 

 

362

 

 

 

594

 

 

Loan interest income

 

$

 

407,762

 

 

$

 

202,011

 

 

$

 

205,751

 

 

 

$

 

132,556

 

 

$

 

121,057

 

 

$

 

113,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loan yield

 

 

5.52

 

%

 

5.43

 

%

 

5.61

 

 

%

 

5.20

 

%

 

5.11

 

%

 

5.02

 

%

ANCI loan yield without discount accretion

 

 

5.56

 

 

 

5.49

 

 

 

5.63

 

 

 

 

5.55

 

 

 

4.23

 

 

 

5.50

 

 

ANCI loan yield on discount accretion

 

 

1.03

 

 

 

0.69

 

 

 

1.37

 

 

 

 

(0.33

)

 

 

0.23

 

 

 

0.43

 

 

ACI loan yield without recovery income

 

 

10.14

 

 

 

12.40

 

 

 

7.93

 

 

 

 

9.81

 

 

 

8.65

 

 

 

8.44

 

 

ACI loan yield on recovery income

 

 

1.54

 

 

 

2.50

 

 

 

0.61

 

 

 

 

0.86

 

 

 

0.42

 

 

 

0.84

 

 

Total loan yield

 

 

5.93

 

%

 

5.82

 

%

 

6.05

 

 

%

 

5.32

 

%

 

5.18

 

%

 

5.16

 

%

(1)

Certain reclassifications have been made to the first quarter of 2019 to conform to second quarter presentation.

 

Table 4 - Allowance for Credit Losses

 

 

 

For the Three Months Ended

 

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

(In thousands)

2019

2019

2018

2018

2018

Balance at beginning of period

 

$

 

105,038

 

 

$

 

94,378

 

 

$

 

86,151

 

 

$

 

90,620

 

 

$

 

91,537

 

Charge-offs

 

 

(18,981

)

 

 

(938

)

 

 

(318

)

 

 

(3,265

)

 

 

(3,650

)

Recoveries

 

 

361

 

 

 

388

 

 

 

123

 

 

 

161

 

 

 

1,470

 

Net charge-offs

 

 

(18,620

)

 

 

(550

)

 

 

(195

)

 

 

(3,104

)

 

 

(2,180

)

Provision for (reversal of) credit losses

 

 

28,927

 

 

 

11,210

 

 

 

8,422

 

 

 

(1,365

)

 

 

1,263

 

Balance at end of period

 

$

 

115,345

 

 

$

 

105,038

 

 

$

 

94,378

 

 

$

 

86,151

 

 

$

 

90,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of Ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

 

$

 

105,369

 

 

$

 

96,387

 

 

$

 

85,402

 

 

$

 

77,137

 

 

$

 

81,520

 

Acquired non-credit impaired loans

 

 

1,091

 

 

 

1,117

 

 

 

1,052

 

 

 

817

 

 

 

1,110

 

Acquired credit impaired loans

 

 

8,886

 

 

 

7,534

 

 

 

7,924

 

 

 

8,197

 

 

 

7,990

 

 

 

$

 

115,345

 

 

$

 

105,038

 

 

$

 

94,378

 

 

$

 

86,151

 

 

$

 

90,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 5 - Noninterest Income

 

 

 

For the Three Months Ended

 

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

(In thousands)

2019

2019(1)

2018

2018

2018

Noninterest Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory revenue

 

$

 

5,797

 

 

$

 

5,642

 

 

 

$

 

5,170

 

 

$

 

5,535

 

 

$

 

5,343

 

Trust services revenue

 

 

4,578

 

 

 

4,335

 

 

 

 

4,182

 

 

 

4,449

 

 

 

4,114

 

Service charges on deposit accounts

 

 

4,730

 

 

 

5,130

 

 

 

 

3,856

 

 

 

3,813

 

 

 

3,803

 

Credit-related fees

 

 

5,341

 

 

 

4,870

 

 

 

 

5,191

 

 

 

3,549

 

 

 

3,807

 

Payroll processing revenue

 

 

1,161

 

 

 

1,419

 

 

 

 

-

 

 

 

-

 

 

 

-

 

Bankcard fees

 

 

2,279

 

 

 

2,213

 

 

 

 

1,073

 

 

 

1,078

 

 

 

1,915

 

SBA income

 

 

1,415

 

 

 

1,449

 

 

 

 

-

 

 

 

-

 

 

 

-

 

Mortgage banking revenue

 

 

674

 

 

 

579

 

 

 

 

398

 

 

 

747

 

 

 

650

 

Other service fees

 

 

1,907

 

 

 

2,104

 

 

 

 

1,347

 

 

 

1,319

 

 

 

1,346

 

Total service fees and revenue

 

 

27,882

 

 

 

27,741

 

 

 

 

21,217

 

 

 

20,490

 

 

 

20,978

 

Securities (losses) gains, net

 

 

938

 

 

 

(12

)

 

 

(54

)

 

 

2

 

 

 

(1,813

)

Other

 

 

2,902

 

 

 

2,935

 

 

 

 

(156

)

 

 

3,484

 

 

 

5,507

 

Total other noninterest income

 

 

3,840

 

 

 

2,923

 

 

 

 

(210

)

 

 

3,486

 

 

 

3,694

 

Total noninterest income

 

$

 

31,722

 

 

$

 

30,664

 

 

 

$

 

21,007

 

 

$

 

23,976

 

 

$

 

24,672

 

(1)

Certain reclassifications have been made to the first quarter of 2019 to conform to second quarter presentation.

 

Table 6 - Noninterest Expense

 

 

 

For the Three Months Ended

 

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

(In thousands)

2019

2019

2018

2018

2018

Noninterest Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

$

 

53,660

 

 

$

 

53,471

 

 

$

 

43,495

 

 

$

 

35,790

 

 

$

 

38,268

 

Premises and equipment

 

 

11,148

 

 

 

10,958

 

 

 

8,212

 

 

 

7,544

 

 

 

7,131

 

Merger related expenses

 

 

4,562

 

 

 

22,000

 

 

 

2,049

 

 

 

178

 

 

 

756

 

Intangible asset amortization

 

 

5,888

 

 

 

6,073

 

 

 

598

 

 

 

650

 

 

 

715

 

Data processing

 

 

3,435

 

 

 

2,594

 

 

 

2,117

 

 

 

1,989

 

 

 

2,304

 

Consulting and professional fees

 

 

1,899

 

 

 

2,229

 

 

 

3,675

 

 

 

4,266

 

 

 

2,409

 

Loan related expenses

 

 

1,740

 

 

 

910

 

 

 

1,424

 

 

 

821

 

 

 

645

 

FDIC insurance

 

 

1,870

 

 

 

1,752

 

 

 

1,230

 

 

 

1,237

 

 

 

1,223

 

Communications

 

 

1,457

 

 

 

998

 

 

 

684

 

 

 

682

 

 

 

703

 

Advertising and public relations

 

 

1,104

 

 

 

781

 

 

 

928

 

 

 

679

 

 

 

575

 

Legal expenses

 

 

645

 

 

 

158

 

 

 

395

 

 

 

242

 

 

 

468

 

Other

 

 

13,122

 

 

 

11,516

 

 

 

7,889

 

 

 

7,153

 

 

 

7,238

 

Total noninterest expenses

 

$

 

100,529

 

 

$

 

113,440

 

 

$

 

72,697

 

 

$

 

61,231

 

 

$

 

62,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7 - Reconciliation of Non-GAAP Financial Measures

 

 

 

As of and for the Three Months Ended

 

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

(In thousands, except share and per share data)

2019

2019

2018

2018

2018

Efficiency ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expenses (numerator)

 

$

 

100,529

 

 

$

 

113,440

 

 

$

 

72,697

 

 

$

 

61,231

 

 

$

 

62,435

 

Net interest income

 

$

 

160,787

 

 

$

 

169,289

 

 

$

 

103,146

 

 

$

 

98,100

 

 

$

 

95,384

 

Noninterest income

 

 

31,722

 

 

 

30,664

 

 

 

21,007

 

 

 

23,976

 

 

 

24,672

 

Operating revenue (denominator)

 

$

 

192,509

 

 

$

 

199,953

 

 

$

 

124,153

 

 

$

 

122,076

 

 

$

 

120,056

 

Efficiency ratio

 

 

52.22

%

 

 

56.73

%

 

 

58.55

%

 

 

50.16

%

 

 

52.00

%

Adjusted efficiency ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expenses

 

$

 

100,529

 

 

$

 

113,440

 

 

$

 

72,697

 

 

$

 

61,231

 

 

$

 

62,435

 

Less: Merger related expenses

 

 

4,562

 

 

 

22,000

 

 

 

2,049

 

 

 

178

 

 

 

756

 

Less: Secondary offerings expenses

 

 

 

 

 

 

 

 

 

 

 

2,022

 

 

 

1,165

 

Plus: Specially designated bonuses

 

 

 

 

 

 

 

 

9,795

 

 

 

 

 

 

 

Less: Other non-routine expenses(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,145

 

Adjusted noninterest expenses (numerator)

 

$

 

95,967

 

 

$

 

91,440

 

 

$

 

60,853

 

 

$

 

59,031

 

 

$

 

59,369

 

Net interest income

 

$

 

160,787

 

 

$

 

169,289

 

 

$

 

103,146

 

 

$

 

98,100

 

 

$

 

95,384

 

Noninterest income

 

 

31,722

 

 

 

30,664

 

 

 

21,007

 

 

 

23,976

 

 

 

24,672

 

Plus: Revaluation of receivable from sale of insurance assets

 

 

2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Gain on sale of insurance assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,871

 

Less: gain on sale of acquired commercial loans

 

 

1,514

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Securities (losses) gains, net

 

 

938

 

 

 

(12

)

 

 

(54

)

 

 

2

 

 

 

(1,813

)

Adjusted noninterest income

 

 

31,270

 

 

 

30,676

 

 

 

21,061

 

 

 

23,974

 

 

 

21,614

 

Adjusted operating revenue (denominator)

 

$

 

192,057

 

 

$

 

199,965

 

 

$

 

124,207

 

 

$

 

122,074

 

 

$

 

116,998

 

Adjusted efficiency ratio

 

 

49.97

%

 

 

45.73

%

 

 

48.99

%

 

 

48.36

%

 

 

50.74

%

Tangible common equity ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

$

 

2,426,072

 

 

$

 

2,302,823

 

 

$

 

1,438,274

 

 

$

 

1,414,826

 

 

$

 

1,389,956

 

Less: Goodwill and other intangible assets, net

 

 

(595,605

)

 

 

(598,674

)

 

 

(314,400

)

 

 

(314,998

)

 

 

(315,648

)

Tangible common shareholders’ equity

 

 

1,830,467

 

 

 

1,704,149

 

 

 

1,123,874

 

 

 

1,099,828

 

 

 

1,074,308

 

Total assets

 

 

17,504,005

 

 

 

17,452,911

 

 

 

12,730,285

 

 

 

11,759,837

 

 

 

11,305,528

 

Less: Goodwill and other intangible assets, net

 

 

(595,605

)

 

 

(598,674

)

 

 

(314,400

)

 

 

(314,998

)

 

 

(315,648

)

Tangible assets

 

$

 

16,908,400

 

 

$

 

16,854,237

 

 

$

 

12,415,885

 

 

$

 

11,444,839

 

 

$

 

10,989,880

 

Tangible common equity ratio

 

 

10.83

%

 

 

10.11

%

 

 

9.05

%

 

 

9.61

%

 

 

9.78

%

Tangible book value per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

$

 

2,426,072

 

 

$

 

2,302,823

 

 

$

 

1,438,274

 

 

$

 

1,414,826

 

 

$

 

1,389,956

 

Less: Goodwill and other intangible assets, net

 

 

(595,605

)

 

 

(598,674

)

 

 

(314,400

)

 

 

(314,998

)

 

 

(315,648

)

Tangible common shareholders’ equity

 

$

 

1,830,467

 

 

$

 

1,704,149

 

 

$

 

1,123,874

 

 

$

 

1,099,828

 

 

$

 

1,074,308

 

Common shares outstanding

 

 

128,798,549

 

 

 

128,762,201

 

 

 

82,497,009

 

 

 

83,625,000

 

 

 

83,625,000

 

Tangible book value per share

 

$

 

14.21

 

 

$

 

13.23

 

 

$

 

13.62

 

 

$

 

13.15

 

 

$

 

12.85

 

(1)

 

Other non-routine expenses for the second quarter of 2018 included expenses related to the sale of the assets of our insurance company.

 

Table 7 (Continued) - Reconciliation of Non-GAAP Measures

 

 

 

As of and for the Three Months Ended

 

 

 

June 30,

 

 

March 31,

 

 

December 31,

 

 

September 30,

 

 

June 30,

 

(In thousands, except share and per share data)

2019

2019

2018

2018

2018

Return on average tangible common equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average common equity

 

$

 

2,331,855

 

 

$

 

2,241,652

 

 

$

 

1,412,643

 

 

$

 

1,395,061

 

 

$

 

1,358,770

 

Less: Average intangible assets

 

 

(597,772

)

 

 

(602,446

)

 

 

(314,759

)

 

 

(315,382

)

 

 

(323,255

)

Average tangible common shareholders’ equity

 

$

 

1,734,083

 

 

$

 

1,639,206

 

 

$

 

1,097,884

 

 

$

 

1,079,679

 

 

$

 

1,035,515

 

Net income

 

$

 

48,346

 

 

$

 

58,201

 

 

$

 

32,325

 

 

$

 

47,136

 

 

$

 

47,974

 

Plus: Intangible asset amortization

 

 

4,515

 

 

 

4,628

 

 

 

459

 

 

 

498

 

 

 

548

 

Tangible net income

 

$

 

52,861

 

 

$

 

62,829

 

 

$

 

32,784

 

 

$

 

47,634

 

 

$

 

48,522

 

Return on average tangible common equity(2)

 

 

12.23

%

 

 

15.54

%

 

 

11.85

%

 

 

17.50

%

 

 

18.79

%

Adjusted return on average tangible common equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average tangible common shareholders’ equity

 

$

 

1,734,083

 

 

$

 

1,639,206

 

 

$

 

1,097,884

 

 

$

 

1,079,679

 

 

$

 

1,035,515

 

Tangible net income

 

$

 

52,861

 

 

$

 

62,829

 

 

$

 

32,784

 

 

$

 

47,634

 

 

$

 

48,522

 

Non-routine items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: Merger related expenses

 

 

4,562

 

 

 

22,000

 

 

 

2,049

 

 

 

178

 

 

 

756

 

Plus: Secondary offerings expenses

 

 

 

 

 

 

 

 

 

 

 

2,022

 

 

 

1,165

 

Plus: Specially designated bonuses

 

 

 

 

 

 

 

 

9,795

 

 

 

 

 

 

 

Plus: Other non-routine expenses(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,145

 

Plus: Revaluation of receivable from sale of insurance assets

 

 

2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Gain on sale of insurance assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,871

 

Less: gain on sale of acquired commercial loans

 

 

1,514

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Securities gains (losses), net

 

 

938

 

 

 

(12

)

 

 

(54

)

 

 

2

 

 

 

(1,813

)

Tax expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Benefit of legacy loan bad debt deduction for tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,991

 

Less: Income tax effect of tax deductible non-routine items

 

 

958

 

 

 

4,694

 

 

 

2,648

 

 

 

34

 

 

 

(166

)

Total non-routine items, after tax

 

 

3,152

 

 

 

17,318

 

 

 

9,250

 

 

 

2,164

 

 

 

(5,817

)

Adjusted tangible net income available to common shareholders

 

$

 

56,012

 

 

$

 

80,146

 

 

$

 

42,034

 

 

$

 

49,798

 

 

$

 

42,705

 

Adjusted return on average tangible common equity(2)

 

 

12.96

%

 

 

19.83

%

 

 

15.19

%

 

 

18.30

%

 

 

16.54

%

Adjusted return on average assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average assets

 

$

 

17,653,511

 

 

$

 

17,634,267

 

 

$

 

12,249,819

 

 

$

 

11,585,969

 

 

$

 

11,218,432

 

Net income

 

$

 

48,346

 

 

$

 

58,201

 

 

$

 

32,325

 

 

$

 

47,136

 

 

$

 

47,974

 

Return on average assets

 

 

1.10

%

 

 

1.34

%

 

 

1.05

%

 

 

1.61

%

 

 

1.72

%

Net income

 

$

 

48,346

 

 

$

 

58,201

 

 

$

 

32,325

 

 

$

 

47,136

 

 

$

 

47,974

 

Total non-routine items, after tax

 

 

3,152

 

 

 

17,318

 

 

 

9,250

 

 

 

2,164

 

 

 

(5,817

)

Adjusted net income

 

$

 

51,497

 

 

$

 

75,519

 

 

$

 

41,575

 

 

$

 

49,300

 

 

$

 

42,157

 

Adjusted return on average assets

 

 

1.17

%

 

 

1.74

%

 

 

1.35

%

 

 

1.69

%

 

 

1.51

%

Adjusted diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

 

129,035,553

 

 

 

130,549,319

 

 

 

83,375,485

 

 

 

84,660,256

 

 

 

84,792,657

 

Net income allocated to common stock

 

$

 

48,176

 

 

$

 

58,028

 

 

$

 

32,293

 

 

$

 

47,080

 

 

$

 

47,914

 

Total non-routine items, after tax

 

 

3,152

 

 

 

17,318

 

 

 

9,250

 

 

 

2,164

 

 

 

(5,817

)

Adjusted net income allocated to common stock

 

$

 

51,328

 

 

$

 

75,346

 

 

$

 

41,543

 

 

$

 

49,244

 

 

$

 

42,097

 

Adjusted diluted earnings per share

 

$

 

0.40

 

 

$

 

0.58

 

 

$

 

0.50

 

 

$

 

0.58

 

 

$

 

0.50

 

Adjusted pre-tax, pre-provision net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

 

63,053

 

 

$

 

75,303

 

 

$

 

43,034

 

 

$

 

62,210

 

 

$

 

56,358

 

Plus: Provision for credit losses

 

 

28,927

 

 

 

11,210

 

 

 

8,422

 

 

 

(1,365

)

 

 

1,263

 

Plus: Total non-routine items before taxes

 

 

4,110

 

 

 

22,012

 

 

 

11,898

 

 

 

2,198

 

 

 

8

 

Adjusted pre-tax, pre-provision net earnings

 

$

 

96,090

 

 

$

 

108,525

 

 

$

 

63,354

 

 

$

 

63,043

 

 

$

 

57,629

 

(1)

Other non-routine expenses for the second quarter of 2018 included expenses related to the sale of the assets of our insurance company.

(2)

Annualized.

 

Cadence Bancorporation
Media contact:
Danielle Kernell
713-871-4051
[email protected]

Investor relations contact:
Valerie Toalson
713-871-4103 or 800-698-7878
[email protected]