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 Cadence Bancorporation Reports Results for 2018 Driven by Record Revenue and Continued Balance Sheet Growth
   Monday, January 28, 2019 9:15:00 AM ET

HOUSTON--(BUSINESS WIRE)-- Cadence Bancorporation (NYSE:CADE) (“Cadence”) today announced net income for the year ended December 31, 2018 of $166.3 million, or $1.97 per diluted common share (“per share”), compared to $102.4 million, or $1.25 per share for the year ended December 31, 2017. Net income for the quarter ended December 31, 2018 was $32.3 million, or $0.39 per diluted common share (“per share”), compared to $14.7 million, or $0.17 per share, in the fourth quarter of 2017, and $47.1 million, or $0.56 per share, in the third quarter of 2018. Tangible book value per share(1) was $13.62 in the fourth quarter of 2018, an increase of $1.29 from $12.33 per share as of December 31, 2017 and an increase of $0.47 from $13.15 for the third quarter 2018.



“We are very pleased to report to you another quarter of strong organic growth and operating performance as we conclude what has been a transformational year for Cadence,” stated Paul B. Murphy, Jr., Chairman and Chief Executive Officer of Cadence Bancorporation. “During 2018, our client acquisition and expansion efforts, combined with our quality markets and bankers, resulted in meaningful growth in assets and earnings as the balance sheet grew 16.3% to $12.7 billion, adjusted net income increased 42% to $174.8 million, net interest margin expanded four basis points, and the adjusted efficiency ratio improved from 54.1% for 2017 to 49.6% for 2018. Importantly, we attained these results while maintaining strong credit results, with net charge-offs of only six basis points for the second year in a row and NPAs declining as a percent of total loans and OREO during the year. Our execution remains highly customer-focused while producing excellent returns for our shareholders, most notably this year’s adjusted ROAA of 1.52%(1) and adjusted ROTCE of 16.54%(1). During the year, our strong performance allowed us to successfully execute on multiple secondary offerings resulting in our stock now being 100% publicly held, a meaningful milestone for our shareholders.

“While we are very proud of 2018, we are excited as we look toward 2019 having closed the State Bank merger on January 1, 2019. The closing of our fourth and most significant merger is another meaningful step for our organization. We enthusiastically welcome the State Bank customers and associates and look forward to serving our customers, bankers, and communities with the same passion and responsiveness they are accustomed to as we bring together two great institutions.”

At December 31, 2018, State Bank had total assets of $4.9 billion, total loans of $3.4 billion, and total deposits of $4.1 billion.

:

  • 2018 net income was $166.3 million, up meaningfully from $102.4 million for 2017. Fourth quarter of 2018 net income was $32.3 million, an increase of $17.6 million compared to fourth quarter of 2017, representing strong overall business performance, and a decrease of $14.8 million compared to the third quarter of 2018 due to non-routine expenses(2) and increased loan loss provisions in the fourth quarter of 2018. Adjusted net income was $174.8 million(1) for 2018, up from $123.3 million for 2017. Fourth quarter of 2018 adjusted net income was $41.5 million(1), an increase of $5.2 million compared to the fourth quarter of 2017 and a decrease of $7.8 million compared to the third quarter of 2018 due to increased loan provisions in the fourth quarter of 2018.
    • On a per-share basis, net income was $1.97 per share for 2018 versus $1.25 for 2017; $0.39 per share for the fourth quarter of 2018 compared to $0.17 per share for the fourth quarter of 2017; and down from $0.56 per share for the third quarter of 2018.
      • Adjusted diluted earnings per share(1) (“EPS”) reflects the impact of non-routine items(2). Adjusted EPS for 2018 was $2.07 versus $1.51 for 2017. The fourth quarter adjusted EPS of $0.50 increased $0.07 compared to the prior year’s quarter adjusted EPS of $0.43 and decreased $0.08 compared to the linked quarter adjusted EPS of $0.58. The change in loan provision (recovery) between the periods reduced the fourth quarter of 2018 adjusted EPS by ($0.12), on an after-tax basis compared to the fourth quarter of 2017 and by ($0.09) compared to the third quarter 2018.
    • Full year 2018 returns on average assets, common equity and tangible common equity(1) were 1.45%, 12.07% and 15.73% compared to full year 2017 returns of 1.02%, 8.16% and 11.08%, respectively. Annualized returns on average assets, common equity and tangible common equity(1) for the fourth quarter of 2018 were 1.05%, 9.08% and 11.68%, respectively, compared to 0.55%, 4.32% and 5.71%, respectively, for the fourth quarter of 2017, and 1.61%, 13.40% and 17.32%, respectively, for the third quarter of 2018.
      • Adjusted annualized returns on average assets(1) and tangible common equity(1) reflect the impact of non-routine items(2). Adjusted annualized returns on average assets(1) and tangible common equity(1) for the full year 2018 were 1.52% and 16.54%, respectively, compared to 1.23% and 13.35%, respectively, for 2017; for fourth quarter of 2018 were 1.34% and 14.98%, respectively, compared to 1.36% and 14.09%, respectively, for the fourth quarter of 2017 and 1.69% and 18.12%, respectively, for the third quarter of 2018.
  • Cadence continued to demonstrate its strong business development with loans ending the quarter at $10.1 billion as of December 31, 2018, an increase of $1.8 billion since December 31, 2017, and an increase of $610.1 million since September 30, 2018.
  • Core deposits (total deposits excluding brokered deposits) likewise reflected strong growth at $9.7 billion as of December 31, 2018, up $1.5 billion from December 31, 2017, and up $839.3 million from September 30, 2018.
  • The continued balance sheet growth in interest earning assets and relatively stable net interest margin (“NIM”) of 3.55% resulted in $124.2 million of total operating revenue(1) in the fourth quarter of 2018, increasing for the twelfth consecutive quarter.
  • The adjusted efficiency ratio(1), which reflects the impact of non-routine items(2), was 49.6% for 2018 and 54.1% for 2017. The adjusted efficiency ratio was 49.0% for the fourth quarter of 2018, compared to 55.6% and 48.4% for the fourth quarter of 2017 and third quarter of 2018, respectively.
  • Credit remains solid, with net charge-offs of six basis points for both 2018 and 2017, and 1 basis point in the fourth quarter of 2018.

(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.

Total assets were $12.7 billion as of December 31, 2018, an increase of $1.8 billion, or 16.3%, from December 31, 2017, and an increase of $970 million, or 8.3%, from September 30, 2018.

Loans at December 31, 2018 were $10.1 billion, an increase of $1.8 billion, or 21.8%, from December 31, 2017, and an increase of $610.1 million, or 6.5%, from September 30, 2018. Average loans for the fourth quarter of 2018 were $9.9 billion, an increase of $1.7 billion, or 20.2%, from fourth quarter of 2017, and an increase of $624.7 million, or 6.7%, from the third quarter of 2018.

Increases in loans reflect continued organic demand primarily in our energy, general C&I and residential portfolios compared to prior year, and our energy sector, CRE and residential portfolios compared to linked quarter. Growth during 2018 also included acquired mortgage loans totaling approximately $214 million as a complement to our CRA lending.

Total deposits at December 31, 2018 were $10.7 billion, an increase of $1.7 billion, or 18.8%, from December 31, 2017, and an increase of $1.2 billion, or 12.0%, from September 30, 2018. Average total deposits for the fourth quarter of 2018 were $10.0 billion, an increase of $1.4 billion, or 16.2%, from fourth quarter of 2017, and an increase of $548.9 million, or 5.8%, from third quarter of 2018.

Deposit increases were driven by growth in core customer deposits, with core deposits (total deposits excluding brokered deposits) at $9.7 billion as of December 31, 2018, up $1.5 billion, or 18.1%, from December 31, 2017, and up $839.3 million, or 9.5%, from September 30, 2018. The core deposit growth reflected across the board customer expansion as well as seasonal fourth quarter growth. Core noninterest-bearing (“NIB”) deposits grew $211.3 million, or 9.4% since December 31, 2017, and $359.2 million, or 17.1% from the third quarter 2018. Core interest-bearing (“IB”) deposits grew $1.3 billion, or 21.4% since December 31, 2017, and grew $505.1 million, or 7.5% from the prior quarter. State Bank funds on deposit with Cadence amounted to $311 million at December 31, 2018, and $96 million at September 30, 2018, allowing us to benefit partially from State Bank’s strong liquidity position in the fourth quarter of 2018 in advance of the merger.

Shareholders’ equity was $1.4 billion at December 31, 2018, an increase of $79.2 million from December 31, 2017, and an increase of $23.4 million from September 30, 2018.

  • Tangible common shareholders’ equity(1) was $1.1 billion at December 31, 2018, an increase of $92.9 million from December 31, 2017, and an increase of $24.0 million from September 30, 2018. The fourth quarter 2018 increase resulted from net income of $32.3 million and an increase of $24.7 million in other comprehensive income, partially offset by dividends of $12.5 million and a repurchase of 1,127,991 common shares at an average price of $19.51 per share, or $22.0 million during the quarter as part of the share repurchase program announced in October 2018.
  • Driven by strong earnings, tangible book value per share(1) was $13.62 as of December 31, 2018, an increase of $1.29 or 10.5% from $12.33 from December 31, 2017, and an increase of $0.47 or 3.6% from $13.15 as of September 30, 2018.

(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.

:

Credit quality reflected continued overall credit stability in the loan portfolio, with net charge-offs as a percent of average loans remaining very low during the year at 0.06% for both 2018 and 2017.

  • For the quarter ended December 31, 2018, net charge-offs were $0.2 million, compared to $2.7 million and $3.1 million for the quarters ended December 31, 2017 and September 30, 2018, respectively.
  • NPAs as a percent of total loans, OREO and other NPAs also remained relatively stable ending the year at 0.8% compared to 0.9% and 0.7% as of December 31, 2017 and September 30, 2018, respectively. NPAs totaled $82.4 million, $70.7 million and $62.8 million as of December 31, 2018, December 31, 2017 and September 30, 2018, respectively.
  • The allowance for credit losses (“ACL”) was $94.4 million, or 0.94% of total loans, as of December 31, 2018, as compared to $87.6 million, or 1.06% of total loans, as of December 31, 2017, $86.2 million, or 0.91% of total loans, as of September 30, 2018.
  • Loan loss provision was $12.7 million for 2018 compared to $9.7 million for 2017. The increase resulted primarily from robust loan growth in 2018. Loan loss provision was $8.4 million for the fourth quarter of 2018 as compared to reversals of ($4.5) million in the prior year’s quarter and ($1.4) million in the linked quarter. The fourth quarter 2018 provision was driven by the quarter’s loan growth, increased qualitative adjustments related to the recent volatility in oil prices and certain economic factors and an increase in specific reserves, partially offset by a net reduction from credit migration and pay-offs during the quarter.

Total operating revenue(1) grew for the twelfth consecutive quarter, with the fourth quarter of 2018 at $124.2 million, up 9.3% from the same period in 2017 and up 1.7% from the linked quarter. The revenue increases were primarily a result of strong loan and deposit growth during the period combined with relatively stable margins. For 2018, total operating revenue was $482.4 million compared to $426.1 million for 2017.

Net interest income reflected the continued growth in our overall business lines. Net interest income for 2018 was $387.7 million, up 19% from $326.2 million in 2017. Net interest income for the fourth quarter of 2018 was $103.1 million, an increase of $15.2 million, or 17.3%, from the same period in 2017, and an increase of $5.0 million, or 5.1%, from the third quarter of 2018. Our fully tax-equivalent NIM was relatively stable throughout 2018, and down slightly in the fourth quarter of 2018 to 3.55% as compared to 3.59% for the fourth quarter of 2017 and 3.58% for the third quarter of 2018.

Earning asset yields for the fourth quarter of 2018 were 4.95%, up 54 basis points from 4.41% in the fourth quarter of 2017, and up 15 basis points from 4.80% in the third quarter of 2018.

  • Yield on loans, excluding acquired-impaired loans, increased to 5.20% for the fourth quarter of 2018, as compared to 4.47% and 5.08% for the fourth quarter of 2017 and third quarter of 2018, respectively. Approximately 71% of the loan portfolio is floating at December 31, 2018.
  • Total accretion for acquired-impaired loans was $5.6 million in the fourth quarter of 2018 compared to $8.1 million from the fourth quarter of 2017, and $5.2 million in the third quarter of 2018. Recovery income was $0.9 million, $2.8 million and $0.4 million for the fourth quarter of 2018, fourth quarter of 2017, third quarter of 2018, respectively.
  • Total loan yields increased to 5.32% for the fourth quarter of 2018 compared to 4.72% for the fourth quarter of 2017 and 5.18% for the third quarter of 2018.
  • Total cost of funds for the fourth quarter of 2018 was 1.51% compared to 0.89% for the fourth quarter of 2017 and 1.33% in the linked quarter.
    • Total cost of deposits for the fourth quarter of 2018 was 1.34% compared to 0.69% for the fourth quarter of 2017, and 1.15% for the linked quarter.
    • The current quarter’s increase in deposit costs reflected the nine-month cumulative lag effect of the March, June and September federal funds rate increases, consistent with our forecasted 55% total deposit beta.

Noninterest income for 2018 was $94.6 million for 2018 resulting in a decrease of 5.2% from $99.9 million for 2017 due to the sale of the insurance company assets and decrease in interchange fees due to commencement of the Durbin Amendment impact in 2018. Noninterest income for the fourth quarter of 2018 was $21.0 million, a decrease of $4.6 million, or 18.1%, from the same period of 2017 due to the insurance sale and Durbin impact, and a decrease of $3.0 million, or 12.4%, from the third quarter of 2018 due to variables in non-fee income revenues and valuations.

  • Total service fees and revenue for the fourth quarter of 2018 were $21.2 million, a decrease of $1.2 million or 5.3% from the same period of 2017, and an increase of $0.7 million or 3.5% from the third quarter of 2018. As noted, the year over year quarterly decline in fees was driven by the decrease of $1.5 million in insurance revenue due to the sale of the insurance company assets in the second quarter of 2018 and to a $0.8 million decrease in interchange fees limited due to the Durbin Amendment, which applied to Cadence beginning in the third quarter of 2018. These declines were partially offset by increase of $1.8 million in credit related fees due to increased capital markets income and growth in loan originations. The linked quarter increase resulted from an increase of $1.6 million in credit related fees partially offset by market related declines in trust services revenue and investment advisory revenue, as well as a small decline in mortgage banking revenue.

Noninterest expense for 2018 was $258.3 million for 2018 compared to $233.4 million for 2017 resulting in an increase of 10.7%. Noninterest expense for the fourth quarter of 2018 was $72.7 million, an increase of $6.3 million, or 9.5%, from $66.4 million during the same period in 2017, and an increase of $11.5 million, or 18.7%, from $61.2 million for the third quarter of 2018. Adjusted noninterest expenses(1), which has been adjusted to reflect the impact of non-routine items(2), was $237.5 million for 2018 compared to $230.1 million for 2017, or an increase of 3.2%. Adjusted noninterest expenses were $60.9 million for the fourth quarter of 2018, down 3.6% from $63.1 million for the fourth quarter of 2017 and up slightly from $59.0 million in the third quarter of 2018. The changes in adjusted noninterest expenses during the periods are largely a result of lower intangible asset amortization and OREO costs during 2018, offset by modest increases in operating costs due to business and balance sheet growth.

Non-routine expenses in the fourth quarter of 2018 totaled $11.8 million and included $2.0 million in State Bank merger related expenses and $9.8 million in non-routine, specially designated bonuses granted by the Board of Directors as a result of the transition of Cadence’s ownership from being 100% owned by Cadence Bancorp, LLC (“LLC”), the original top-tier holding company, to being 100% owned by the public, significantly enhancing the liquidity of Cadence’s stock. This transition was effected through a succession of events beginning with Cadence’s IPO in April 2017, followed by a series of five successful secondary offerings, and concluding with a final distribution of stock and cash, dissolving the LLC in December 2018. Cadence (NYSE: CADE) is the surviving, publicly held holding company.

Non-routine expense in the fourth quarter of 2017 included $1.3 million of secondary offering expenses, and $2.0 million related to legal expenses associated with a legacy bank matter resolved in 2018. Non-routine expense in the third quarter of 2018 included $2.0 million in secondary offering expenses and $0.2 million in merger expenses.

Our efficiency ratio(1) for 2018 was 53.6% compared to 54.8% for 2017. The efficiency ratio in the current quarter was impacted by the noted non-routine expenses, with the fourth quarter of 2018 at 58.6%, as compared to the fourth quarter of 2017 and third quarter of 2018 ratios of 58.4% and 50.2%, respectively. Excluding non-routine revenues and expenses, the adjusted efficiency ratio(1) was 49.6% for 2018 and 54.1% for 2017. The adjusted efficiency ratio was 49.0% for the fourth quarter of 2018. This compares to an adjusted efficiency ratio of 55.6% and 48.4% for the fourth quarter of 2017 and third quarter of 2018, respectively.

(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.

The effective tax rate for the quarter ended December 31, 2018 was 24.9% as compared to 34.8% in the fourth quarter of 2017 (excluding the one-time tax charge related to tax reform) and 24.2% in the third quarter of 2018. Our effective tax rate for 2018 was 21.3%.

On January 22, 2019, the Board of Directors of Cadence declared a quarterly cash dividend in the amount of $0.175 per share of outstanding common stock, representing an annualized dividend of $0.70 per share. The dividend will be paid on March 15, 2019 to holders of record of Cadence’s Class A common stock on March 1, 2019.

The LLC was dissolved in December 2018. At that time, the final distribution of net assets to unit holders was completed.

Supplementary Financial Tables (Unaudited) are included in this release following the customary disclosure information.

Cadence Bancorporation executive management will host a conference call to discuss fourth quarter 2018 results on Monday, January 28, 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”.

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: 2919757
 

For those unable to participate in the live presentation, a replay will be available through February 11, 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: 10127363
End Date: February 11, 2019
 

A webcast of the conference call presented by management can be viewed by visiting www.cadencebancorporation.com and selecting “Events & Presentations” then “Event Calendar”. Slides are available under the “Presentations” tab.

About Cadence Bancorporation

Cadence Bancorporation (NYSE: CADE), headquartered in Houston, Texas, is a regional financial holding company with $12.7 billion in assets as of December 31, 2018, and the recently acquired State Bank franchise had assets as of $4.9 billion as of December 31, 2018. 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, personal and business insurance, consumer banking, consumer loans, mortgages, home equity lines and loans, and credit cards. Clients have access to leading-edge online and mobile solutions, interactive teller machines, and 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; lack of seasoning in our loan portfolio; deteriorating asset quality and higher loan charge-offs; the laws and regulations applicable to our business; our ability to achieve organic loan and deposit growth and the composition of such growth; increased competition in the financial services industry, nationally, regionally or locally; our ability to maintain our historical earnings trends; our ability to raise additional capital to implement our business plan; material weaknesses in our internal control over financial reporting; systems failures or interruptions involving our information technology and telecommunications systems or third-party servicers; the composition of our management team and our ability to attract and retain key personnel; the fiscal position of the U.S. federal government and the soundness of other financial institutions; the composition of our loan portfolio, including the identify of our borrowers and the concentration of loans in energy-related industries and in our specialized industries; the portion of our loan portfolio that is comprised of participations and shared national credits; 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; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction. 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  

For the Year Ended
December 31,

(In thousands, except share and per share data)   December 31,

2018

  September 30,

2018

 

June 30,

2018

    March 31,

2018

    December 31,

2017

2018     2017
Statement of Income Data:        
Interest income $ 143,857 $ 131,753 $ 123,963 $ 113,093 $ 108,370 $ 512,666 $ 396,867
Interest expense   40,711   33,653   28,579   21,982   20,459   124,925   70,651
Net interest income 103,146 98,100 95,384 91,111 87,911 387,741 326,216
Provision for credit losses   8,422   (1,365 )   1,263   4,380   (4,475 )   12,700   9,735
Net interest income after provision 94,724 99,465 94,121 86,731 92,386 375,041 316,481
Noninterest income - service fees and revenue 21,217 20,490 21,395 23,904 22,405 87,008 90,052
Noninterest income - other noninterest income (210 ) 3,486 3,277 1,079 3,251 7,630 9,822
Noninterest expense  

72,697

  61,231   62,435   61,939   66,371   258,301   233,356
Income before income taxes

43,034

62,210 56,358 49,775 51,671 211,378 182,999
Income tax expense   10,709   15,074   8,384   10,950   36,980   45,117   80,646
Net income $

32,325

$ 47,136 $ 47,974 $ 38,825 $ 14,691 $ 166,261 $ 102,353
Weighted average common shares outstanding
Basic 83,375,485 83,625,000 83,625,000 83,625,000 83,625,000 83,562,109 81,072,945
Diluted 83,375,485 84,660,256 84,792,657 84,674,807 84,717,005 84,375,289 81,605,015
Earnings
Basic $ 0.39 $ 0.56 $ 0.57 $ 0.46 $ 0.18 $ 1.99 $ 1.26
Diluted

 

0.39 0.56 0.57 0.46 0.17 1.97 1.25
Period-End Balance Sheet Data:
Investment securities $ 1,187,252 $ 1,206,387 $ 1,049,710 $ 1,251,834 $ 1,262,948 $ 1,187,252 $ 1,262,948
Total loans, net of unearned income 10,053,923 9,443,819 8,975,755 8,646,987 8,253,427 10,053,923 8,253,427
Allowance for credit losses 94,378 86,151 90,620 91,537 87,576 94,378 87,576
Total assets 12,730,285 11,759,837 11,305,528 10,999,382 10,948,926 12,730,285 10,948,926
Total deposits 10,708,689 9,558,276 9,331,055 9,048,971 9,011,515 10,708,689 9,011,515
Noninterest-bearing deposits 2,454,016 2,094,856 2,137,407 2,040,977 2,242,765 2,454,016 2,242,765
Interest-bearing deposits 8,254,673 7,463,420 7,193,648 7,007,994 6,768,750 8,254,673 6,768,750
Borrowings and subordinated debentures 471,770 662,658 471,453 471,335 470,814 471,770 470,814
Total shareholders’ equity 1,438,274 1,414,826 1,389,956 1,357,103 1,359,056 1,438,274 1,359,056
Average Balance Sheet Data:
Investment securities $ 1,187,947 $ 1,141,704 $ 1,183,055 $ 1,234,226 $ 1,228,330 $ 1,180,623 $ 1,155,819
Total loans, net of unearned income 9,890,419 9,265,754 8,848,820 8,443,951 8,226,294

9,116,602

7,825,763
Allowance for credit losses 87,996 92,783 93,365 89,097 94,968 90,813 90,621
Total assets

12,249,819

11,585,969 11,218,432 10,922,274 10,586,245 11,498,013 10,020,036
Total deposits 10,038,180 9,489,268 9,135,359 9,012,390 8,635,473 9,421,803 8,186,781
Noninterest-bearing deposits 2,210,793 2,153,097 2,058,255 2,128,595 2,170,758

2,137,953

1,965,070
Interest-bearing deposits 7,827,387 7,336,171 7,077,104 6,883,795 6,464,715 7,283,850 6,221,711
Borrowings and subordinated debentures

652,813

567,864 595,087 444,557 502,428 565,658 493,196
Total shareholders’ equity 1,412,643 1,395,061 1,358,770 1,342,445 1,348,867 1,377,471 1,253,861
 
 

Table 1 (Continued) - Selected Financial Data

 
  As of and for the Three Months Ended  

For the Year Ended
December 31,

(In thousands, except share and per share data) December 31,

2018

  September 30,

2018

  June 30,

2018

  March 31,

2018

  December 31,

2017

2018   2017
Per Share Data:(3)
Book value per common share 17.43 16.92 16.62 16.23 16.25 17.43 16.25
Tangible book value (1) 13.62 13.15 12.85 12.32 12.33 13.62 12.33
Cash dividends declared $ 0.150 $ 0.150 $ 0.125 $ 0.125 $ $ 0.55 $
Dividend payout ratio 38.46 % 26.79 % 21.93 % 27.17 % % 27.64 % %
Performance Ratios:
Return on average common equity (2) 9.08 % 13.40 % 14.16 % 11.73 % 4.32 % 12.07 % 8.16 %
Return on average tangible common equity (1) (2) 11.68 17.32 18.58 15.52 5.71

15.73

11.08
Return on average assets (2) 1.05 1.61 1.72 1.44 0.55 1.45 1.02
Net interest margin (2) 3.55 3.58 3.66 3.64 3.59

3.61

3.57
Efficiency ratio (1) 58.55 50.16 52.00 53.35 58.44 53.55 54.77
Adjusted efficiency ratio (1) 48.99 48.36 50.74 50.22 55.57 49.56 54.12
Asset Quality Ratios:
Total nonperforming assets ("NPAs") to total loans and OREO and other NPAs 0.81 % 0.66 % 0.63 % 0.84 % 0.85 % 0.81 % 0.85 %
Total nonperforming loans to total loans 0.74 0.50 0.44 0.60 0.58 0.74 0.58
Total ACL to total loans 0.94 0.91 1.01 1.06 1.06 0.94 1.06
ACL to total nonperforming loans ("NPLs") 127.12 182.52 230.60 175.30 183.62 127.12 183.62
Net charge-offs to average loans (2) 0.01 0.13 0.10 0.02 0.13 0.06 0.06
Capital Ratios:
Total shareholders’ equity to assets 11.3 % 12.0 % 12.3 % 12.3 % 12.4 % 11.3 % 12.4 %
Tangible common equity to tangible assets (1) 9.1 9.6 9.8 9.7 9.7 9.1 9.7
Common equity tier 1 (4) 9.8 10.4 10.5 10.4 10.6 9.8 10.6
Tier 1 leverage capital (4) 10.1 10.7 10.7 10.6 10.7 10.1 10.7
Tier 1 risk-based capital (4) 10.1 10.7 10.9 10.8 10.9 10.1 10.9
Total risk-based capital (4) 11.8 12.4 12.7 12.6 12.8 11.8 12.8
_____________________
(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 for the three month periods.
(3)

Cadence Bancorp, LLC was dissolved in the fourth quarter of 2018 and owns zero shares of Cadence's common shares at December 31, 2018.

(4) Current quarter regulatory capital ratios are estimates.
 
 

Table 2 - Average Balances/Yield/Rates

 
  For the Three Months Ended December 31,
2018     2017
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 and ANCI loans $ 9,682,781 $ 126,972 5.20 % $ 7,961,692 $ 89,762 4.47 %
ACI portfolio   207,638   5,584 10.67   264,602   8,145 12.21
Total loans 9,890,419 132,556 5.32 8,226,294 97,907 4.72
Investment securities
Taxable 980,403 6,909 2.80 817,971 5,000 2.43
Tax-exempt (2)   207,544   2,202 4.21   410,359   5,047 4.88
Total investment securities 1,187,947 9,111 3.04 1,228,330 10,047 3.25
Federal funds sold and short-term investments 437,565 2,092 1.90 409,317 1,151 1.12
Other investments   58,388   559 3.80   51,318   1,030 7.96
Total interest-earning assets 11,574,319 144,318 4.95 9,915,259 110,135 4.41
Noninterest-earning assets:
Cash and due from banks 73,878 66,849
Premises and equipment 63,258 64,730
Accrued interest and other assets 626,360 634,375
Allowance for credit losses   (87,996 )   (94,968 )
Total assets $ 12,249,819 $ 10,586,245
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 5,242,091 $ 20,024 1.52 % $ 4,424,371 $ 7,844 0.70 %
Savings deposits 174,156 163 0.37 177,413 112 0.25
Time deposits   2,411,140   13,792 2.27   1,862,931   7,129 1.52
Total interest-bearing deposits 7,827,387 33,979 1.72 6,464,715 15,085 0.93
Other borrowings 517,051

4,266

3.27 367,373 3,021 3.26
Subordinated debentures   135,762   2,466 7.21   135,055   2,353 6.91
Total interest-bearing liabilities 8,480,200

40,711

1.90 6,967,143 20,459 1.17
Noninterest-bearing liabilities:
Demand deposits 2,210,793 2,170,758
Accrued interest and other liabilities 146,183   99,477
Total liabilities 10,837,176 9,237,378
Shareholders' equity   1,412,643   1,348,867
Total liabilities and shareholders' equity $ 12,249,819 $ 10,586,245
Net interest income/net interest spread

103,607

  3.05 % 89,676   3.24 %
Net yield on earning assets/net interest margin   3.55 %   3.59 %
Taxable equivalent adjustment:
Investment securities  

(461

)   (1,765 )
Net interest income $ 103,146 $ 87,911
_____________________
(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% for the three months ended December 31, 2018, and a tax rate of 35% for the three months ended December 31, 2017.
 
       
For the Three Months Ended

December 31, 2018

For the Three Months Ended

September 30, 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 and ANCI loans $ 9,682,781 $ 126,972 5.20 % $ 9,036,566 $ 115,814 5.08 %
ACI portfolio   207,638   5,584 10.67   229,188   5,243 9.08
Total loans 9,890,419 132,556 5.32 9,265,754 121,057 5.18
Investment securities
Taxable 980,403 6,909 2.80 928,275 6,248 2.67
Tax-exempt (2)   207,544   2,202 4.21   213,429   2,195 4.08
Total investment securities 1,187,947 9,111 3.04 1,141,704 8,443 2.93
Federal funds sold and short-term investments 437,565 2,092 1.90 458,491 2,039 1.76
Other investments   58,388   559 3.80   54,762   675 4.89
Total interest-earning assets 11,574,319 144,318 4.95 10,920,711 132,214 4.80
Noninterest-earning assets:
Cash and due from banks 73,878 71,777
Premises and equipment 63,258 62,422
Accrued interest and other assets 626,360 623,842
Allowance for credit losses   (87,996 )   (92,783 )
Total assets $ 12,249,819 $ 11,585,969
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 5,242,091 $ 20,024 1.52 % $ 5,175,915 $ 17,046 1.31 %
Savings deposits 174,156 163 0.37 181,449 149 0.33
Time deposits   2,411,140   13,792 2.27   1,978,807   10,312 2.07
Total interest-bearing deposits 7,827,387 33,979 1.72 7,336,171 27,507 1.49
Other borrowings 517,051

4,266

3.27 432,279 3,673 3.37
Subordinated debentures   135,762   2,466 7.21   135,585   2,473 7.24
Total interest-bearing liabilities 8,480,200

40,711

1.90 7,904,035 33,653 1.69
Noninterest-bearing liabilities:
Demand deposits 2,210,793 2,153,097
Accrued interest and other liabilities   146,183   133,776
Total liabilities 10,837,176 10,190,908
Stockholders' equity   1,412,643   1,395,061
Total liabilities and stockholders' equity $ 12,249,819 $ 11,585,969
Net interest income/net interest spread

103,607

3.05 % 98,561   3.11 %
Net yield on earning assets/net interest margin 3.55 %   3.58 %
Taxable equivalent adjustment:
Investment securities  

(461

)   (461 )
Net interest income $ 103,146 $ 98,100
_____________________
(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%.
 
 
  Years Ended December 31,  
2018   2017

Average
Balance

 

Income /
Expense

 

Yield /
Rate

Average
Balance

 

Income /
Expense

 

Yield /
Rate

ASSETS    
Interest-earning assets:
Loans, net of unearned income(1)
Originated and ANCI loans $

8,882,806

$ 448,084

5.04

% $ 7,535,099 $ 327,857 4.35 %
ACI portfolio   233,796   22,060   9.44   290,664   31,451 10.82
Total loans

9,116,602

470,144 5.16 7,825,763 359,308 4.59
Investment securities
Taxable 888,341 23,793 2.68 747,590 18,089 2.42
Tax-exempt (2)   292,282   12,077   4.13   408,229   20,554 5.03
Total investment securities 1,180,623 35,870 3.04 1,155,819 38,643 3.34
Federal funds sold and short-term investments 465,554 6,930 1.49 313,683 3,336 1.06
Other investments   54,538   2,259   4.14   49,781   2,774 5.57
Total interest-earning assets

10,817,317

515,203 4.76 9,345,046 404,061 4.32
Noninterest-earning assets:
Cash and due from banks 79,560 60,108
Premises and equipment 62,841 65,428
Accrued interest and other assets

629,108

640,075
Allowance for credit losses   (90,813 )   (90,621 )
Total assets $ 11,498,013 $ 10,020,036
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $ 4,983,113 57,795 1.16 $ 4,360,252 27,030 0.62
Savings deposits 181,194 560 0.31 181,500 456 0.25
Time deposits   2,119,543   42,093 1.99   1,679,959   22,213 1.32
Total interest-bearing deposits 7,283,850 100,448 1.38 6,221,711 49,699 0.80
Other borrowings 430,159

14,678

3.41 358,413 11,644 3.25
Subordinated debentures   135,499   9,799 7.23   134,783   9,308 6.91
Total interest-bearing liabilities 7,849,508

124,925

1.59 6,714,907 70,651 1.05
Noninterest-bearing liabilities:
Demand deposits 2,137,953 1,965,070
Accrued interest and other liabilities   133,081   86,198
Total liabilities 10,120,542 8,766,175
Shareholders' equity   1,377,471   1,253,861
Total liabilities and shareholders' equity $ 11,498,013 $ 10,020,036
Net interest income/net interest spread

390,278

  3.17 % 333,410   3.27 %
Net yield on earning assets/net interest margin  

3.61

%   3.57 %
Taxable equivalent adjustment:
Investment securities  

(2,537

)   (7,194 )
Net interest income $ 387,741 $ 326,216
 
(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% for 2018 and a tax rate of 35% for 2017.
 
 

Table 3 – Loan Interest Income Detail

 
  For the Three Months Ended,  

For the Years Ended
December 31,

 
(In thousands) December 31,

2018

  September 30,

2018

  June 30,

2018

  March 31,

2018

  December 31,

2017

2018   2017
Loan Interest Income Detail
Interest income on loans, excluding ACI loans $ 126,972 $ 115,814 $ 108,130 $ 97,168 $ 89,762 $ 448,084 $ 327,857
Scheduled accretion for the period 4,724 4,881 5,016 5,192 5,348 19,813 23,303
Recovery income for the period   860   362   594   431   2,797   2,247   8,148
Accretion on acquired credit impaired (ACI) loans   5,584   5,243   5,610   5,623   8,145   22,060   31,451
Loan interest income $ 132,556 $ 121,057 $ 113,740 $ 102,791 $ 97,907 $ 470,144 $ 359,308
Loan yield, excluding ACI loans 5.20 % 5.08 % 5.04 % 4.81 % 4.47 %

5.04

% 4.35 %
ACI loan yield   10.67   9.08   9.28   8.96   12.21   9.44   10.82
Total loan yield   5.32 %   5.18 %   5.16 %   4.94 %   4.72 %   5.16 %   4.59 %
 
 

Table 4 - Allowance for Credit Losses

 
  For the Three Months Ended  

For the Years Ended
December 31,

(In thousands) December 31,

2018

  September 30,

2018

  June 30,

2018

  March 31,

2018

  December 31,

2017

2018   2017
Balance at beginning of period $ 86,151 $ 90,620 $ 91,537 $ 87,576 $ 94,765 $ 87,576 $ 82,268
Charge-offs (318 ) (3,265 ) (3,650 ) (812 ) (2,860 ) (8,045 ) (6,871 )
Recoveries   123   161   1,470   393   146   2,147   2,444
Net charge-offs   (195 )   (3,104 )   (2,180 )   (419 )   (2,714 )   (5,898 )   (4,427 )
Provision for (reversal of) credit losses   8,422   (1,365 )   1,263   4,380   (4,475 )   12,700   9,735
Balance at end of period $ 94,378 $ 86,151 $ 90,620 $ 91,537 $ 87,576 $ 94,378 $ 87,576
 
 

Table 5 -Noninterest Income

 
  For the Three Months Ended    

For the Years Ended
December 31,

(In thousands) December 31,

2018

  September 30,

2018

    June 30,

2018

  March 31,

2018

    December 31,

2017

2018   2017
Noninterest Income      
Investment advisory revenue $ 5,170 $ 5,535 $ 5,343 $ 5,299 $ 5,257 $ 21,347 $ 20,517
Trust services revenue 4,182 4,449 4,114 5,015 4,836 17,760 19,264
Service charges on deposit accounts 3,856 3,813 3,803 3,960 3,753 15,432 15,272
Credit-related fees 5,191 3,549 3,807 3,577 3,372 16,124 12,166
Insurance revenue 417 2,259 1,470 2,677 7,378
Bankcard fees 1,073 1,078 1,915 1,884 1,833 5,951 7,310
Mortgage banking revenue 398 747 650 577 687 2,372 3,731
Other service fees earned   1,347   1,319   1,346   1,333   1,197   5,345   4,414
Total service fees and revenue   21,217   20,490   21,395   23,904   22,405   87,008   90,052
Securities gains (losses), net (54 ) 2 (1,813 ) 12 16 (1,853 ) (146 )
Other   (156 )   3,484   5,090   1,067   3,235   9,483   9,968
Total other noninterest income   (210 )   3,486   3,277   1,079   3,251   7,630   9,822
Total noninterest income $ 21,007 $ 23,976 $ 24,672 $ 24,983 $ 25,656 $ 94,638 $ 99,874
 
 

Table 6 -Noninterest Expense

 
  For the Three Months Ended    

For the Years Ended
December 31,

(In thousands) December 31,

2018

    September 30,

2018

    June 30,

2018

    March 31,

2018

  December 31,

2017

  2018     2017
Noninterest Expenses        
Salaries and employee benefits $ 43,495 $ 35,790 $ 38,268 $ 37,353 $ 35,162 $ 154,905 $ 139,118
Premises and equipment 8,212 7,544 7,131 7,591 7,629 30,478 28,921
Merger related expenses 2,049 178 756

2,983

Intangible asset amortization 598 650 715 792 1,085 2,755 4,652
Net cost of operation of other real estate owned 195 398 112 (52 ) 1,075 653 2,251
Data processing 2,117 1,989 2,304 2,365 2,504 8,775 7,590
Consulting and professional fees 3,675 4,266 2,409 2,934 4,380 13,285 9,090
Loan related expenses 1,424 821 645 255 810 3,145 2,379
FDIC insurance 1,230 1,237 1,223 955 939 4,645 4,275
Communications 684 682 703 704 857 2,773 2,837
Advertising and public relations 928 679 575 341 683 2,523 2,048
Legal expenses 395 242 468 2,627 2,626 3,732 4,178
Other   7,694   6,755   7,126   6,074   8,621   27,649   26,017
Total noninterest expenses $ 72,697 $ 61,231 $ 62,435 $ 61,939 $ 66,371 $ 258,301 $ 233,356
 
 

Table 7 - Reconciliation of Non-GAAP Financial Measures

 
  As of and for the Three Months Ended  

As of and for the Year Ended
December 31,

(In thousands, except share and per share data)

December 31,
2018

 

September 30,
2018

 

June 30,
2018

 

March 31,
2018

 

December 31,
2017

2018   2017
Efficiency ratio  
Noninterest expenses (numerator) $ 72,697 $ 61,231 $ 62,435 $ 61,939 $ 66,371 $ 258,301 $ 233,356
Net interest income $ 103,146 $ 98,100 $ 95,384 $ 91,111 $ 87,911 $ 387,741 $ 326,216
Noninterest income   21,007   23,976   24,672   24,983   25,656   94,638   99,874
Operating revenue (denominator) $ 124,153 $ 122,076 $ 120,056 $ 116,094 $ 113,567 $ 482,379 $ 426,090
Efficiency ratio   58.55 %   50.16 %   52.00 %   53.35 %   58.44 %   53.55 %   54.77 %
Adjusted efficiency ratio
Noninterest expenses $ 72,697 $ 61,231 $ 62,435 $ 61,939 $ 66,371 $ 258,301 $ 233,356
Less: Merger related expenses 2,049 178 756 2,983
Less: Secondary offerings expenses 2,022 1,165 1,365 1,302 4,552 1,302

Less: Specially designated bonuses

9,795 9,795
Less: Other non-routine expenses(2)       1,145   2,278   1,964   3,423   1,964
Adjusted noninterest expenses (numerator) $ 60,853 $ 59,031 $ 59,369 $ 58,296 $ 63,105 $ 237,548 $ 230,090
Net interest income $ 103,146 $ 98,100 $ 95,384 $ 91,111 $ 87,911 $ 387,741 $ 326,216
Noninterest income 21,007 23,976 24,672 24,983 25,656 94,638 99,874
Less: Gain on sale of insurance assets 4,871 4,871 1,093
Less: Securities (losses) gains, net   (54 )   2   (1,813 )   12   16   (1,853 )   (146 )
Adjusted noninterest income   21,061   23,974   21,614   24,971   25,640   91,620   98,927
Adjusted operating revenue (denominator) $ 124,207 $ 122,074 $ 116,998 $ 116,082 $ 113,551 $ 479,361 $ 425,143
Adjusted efficiency ratio   48.99 %   48.36 %   50.74 %   50.22 %   55.57 %   49.56 %   54.12 %
Tangible common equity ratio
Shareholders’ equity $ 1,438,274 $ 1,414,826 $ 1,389,956 $ 1,357,103 $ 1,359,056 $ 1,438,274 $ 1,359,056
Less: Goodwill and other intangible assets, net   (314,400 )   (314,998 )   (315,648 )   (327,247 )   (328,040 )   (314,400 )   (328,040 )
Tangible common shareholders’ equity   1,123,874   1,099,828   1,074,308   1,029,856   1,031,016   1,123,874   1,031,016
Total assets 12,730,285 11,759,837 11,305,528 10,999,382 10,948,926 12,730,285 10,948,926
Less: Goodwill and other intangible assets, net   (314,400 )   (314,998 )   (315,648 )   (327,247 )   (328,040 )   (314,400 )   (328,040 )
Tangible assets $ 12,415,885 $ 11,444,839 $ 10,989,880 $ 10,672,135 $ 10,620,886 $ 12,415,885 $ 10,620,886
Tangible common equity ratio   9.05 %   9.61 %   9.78 %   9.65 %   9.71 %   9.05 %   9.71 %
Tangible book value per share
Shareholders’ equity $ 1,438,274 $ 1,414,826 $ 1,389,956 $ 1,357,103 $ 1,359,056 $ 1,438,274 $ 1,359,056
Less: Goodwill and other intangible assets, net   (314,400 )   (314,998 )   (315,648 )   (327,247 )   (328,040 )   (314,400 )   (328,040 )
Tangible common shareholders’ equity $ 1,123,874 $ 1,099,828 $ 1,074,308 $ 1,029,856 $ 1,031,016 $ 1,123,874 $ 1,031,016
Common shares outstanding   82,497,009   83,625,000   83,625,000   83,625,000   83,625,000   82,497,009   83,625,000
Tangible book value per share $ 13.62 $ 13.15 $ 12.85 $ 12.32 $ 12.33 $ 13.62 $ 12.33
 
(1)   Annualized for the three month periods.
(2)

Other non-routine expenses for the second quarter of 2018 included expenses related to the sale of the assets of our insurance company. Non-routine expenses for the first quarter of 2018 and fourth quarter of 2017, represent legal costs associated with litigation related to a pre-acquisition matter of a legacy acquired bank that has been resolved.

 
 

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

 
  As of and for the Three Months Ended  

As of and for the Year Ended
December 31,

(In thousands, except share and per share data)

December 31,
2018

 

September 30,
2018

 

June 30,
2018

 

March 31,
2018

 

December 31,
2017

2018   2017
Return on average tangible common equity  
Average common equity $ 1,412,643 $ 1,395,061 $ 1,358,770 $ 1,342,445 $ 1,348,867 $ 1,377,471 $ 1,253,861
Less: Average intangible assets   (314,759 )   (315,382 )   (323,255 )   (327,727 )   (328,697 )   (320,232 )   (330,411 )
Average tangible common shareholders’ equity $ 1,097,884 $ 1,079,679 $ 1,035,515 $ 1,014,718 $ 1,020,170 $

1,057,239

$ 923,450
Net income $ 32,325 $ 47,136 $ 47,974 $ 38,825 $ 14,691 $

166,261

$ 102,353
Return on average tangible common equity(2)   11.68 %   17.32 %   18.58 %   15.52 %   5.71 %  

15.73

%   11.08 %
Adjusted return on average tangible common equity
Average tangible common shareholders’ equity $ 1,097,884 $ 1,079,679 $ 1,035,515 $ 1,014,718 $ 1,020,170 $

1,057,239

$ 923,450
Net income $ 32,325 $ 47,136 $ 47,974 $ 38,825 $ 14,691 $ 166,261 $ 102,353
Non-routine items:
Plus: Merger related expenses 2,049 178 756 2,983
Plus: Secondary offerings expenses 2,022 1,165 1,365 1,302 4,552 1,302
Plus: Specially designated bonuses 9,795 9,795
Plus: Other non-routine expenses(2) 1,145 2,278 1,964 3,423 1,964
Less: Gain on sale of insurance assets 4,871 - 4,871 1,093
Less: Securities gains (losses), net (54 ) 2 (1,813 ) 12 16 (1,853 ) (146 )
Tax expense:
Plus: One-time tax charge related to Tax Reform 19,022 19,022
Less: Benefit of legacy loan bad debt deduction for tax 5,991 5,991
Less: Income tax effect of tax deductible non-routine items   2,759   34   (166 )   529   721   3,157   376
Total non-routine items, after tax   9,139   2,164   (5,817 )   3,102   21,551  

8,587

  20,965
Adjusted net income $ 41,464 $ 49,300 $ 42,157 $ 41,927 $ 36,242 $

174,848

$ 123,318
Adjusted return on average tangible common equity(1)   14.98 %   18.12 %   16.33 %   16.76 %   14.09 %  

16.54

%   13.35 %
Adjusted return on average assets
Average assets $ 12,249,819 $ 11,585,969 $ 11,218,432 $ 10,922,274 $ 10,586,245 $ 11,498,013 $ 10,020,036
Adjusted net income $ 41,464 $ 49,300 $ 42,157 $ 41,927 $ 36,242 $

174,848

$ 123,318
Adjusted return on average assets(1)   1.34 %   1.69 %   1.51 %   1.56 %   1.36 %  

1.52

%   1.23 %

 

(1)   Annualized.
(2) Other non-routine expenses for the second quarter of 2018 were $1.1 million and included expenses related to the sale of the assets of our insurance company. This compares to $2.3 million and $2.0 million for the first quarter of 2018 and fourth quarter of 2017, respectively, each representing legal costs associated with litigation related to a pre-acquisition matter of a legacy acquired bank that has been resolved.
 
 

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

 
  As of and for the Three Months Ended  

As of and for the Year Ended
December 31,

(In thousands, except share and per share data)

December 31,
2018

   

September 30,
2018

 

June 30,
2018

 

March 31,
2018

   

December 31,
2017

2018     2017
Diluted weighted average common shares outstanding   83,375,485   84,660,256   84,792,657   84,674,807   84,717,005   84,375,289     81,605,015
Net income allocated to common stock $ 32,293 $ 47,080 $ 47,914 $ 38,825 $ 14,691 $ 166,064 $ 102,353
Total non-routine items, after tax   9,139   2,164   (5,817 )   3,102   21,551   8,587   20,965
Adjusted net income allocated to common stock $ 41,432 $ 49,244 $ 42,097 $ 41,927 $ 36,242 $ 174,651 $ 123,318
Adjusted diluted earnings per share $ 0.50 $ 0.58 $ 0.50 $ 0.50 $ 0.43 $ 2.07 $ 1.51
Adjusted pre-tax, pre-provision net earnings
Income before taxes $ 43,034 $ 62,210 $ 56,358 $ 49,775 $ 51,671 $ 211,378 $ 182,999
Plus: Provision for credit losses 8,422 (1,365 ) 1,263 4,380 (4,475 ) 12,700 9,735
Plus: Total non-routine items before taxes   11,898   2,198   8   3,631   3,250   17,735   2,319
Adjusted pre-tax, pre-provision net earnings $ 63,354 $ 63,043 $ 57,629 $ 57,786 $ 50,446 $ 241,813 $ 195,053
 

Media contact:
Danielle Kernell
713-871-4051
danielle.kernell@cadencebank.com

Investor relations contact:
Valerie Toalson
713-871-4103 or 800-698-7878
vtoalson@cadencebancorporation.com

Source: Cadence Bancorporation



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