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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

☒

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

For the quarterly period ended June 30, 2020

or

☐

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

For the transition period from              to             

Commission File Number: 001-38058

 

Cadence Bancorporation

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

47-1329858

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

2800 Post Oak Boulevard, Suite 3800

Houston, Texas 77056

(Address of principal executive offices) (Zip Code)

(713) 871-4000

(Registrant’s telephone number, including area code)

Not Applicable

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

 

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

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

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

 

☒

Large accelerated filer

 

☐

 

Accelerated filer

 

 

 

 

 

 

☐

Non-accelerated filer

 

☐

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

☐

 

Emerging growth company

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

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

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

Title of each class

 

Trading Symbol

 

Name of each exchange on which registered

Class A Common Stock

 

CADE

 

New York Stock Exchange

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

 

Class A Common Stock, $0.01 Par Value

 

125,962,766

Class

 

Outstanding as of August 7, 2020

 

 

 

Cadence Bancorporation

FORM 10-Q

For the Quarter Ended June 30, 2020

INDEX

 

PART I: FINANCIAL INFORMATION

 

3

 

 

 

ITEM 1.

 

FINANCIAL STATEMENTS (UNAUDITED)

 

3

 

 

 

 

 

 

 

Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (Audited)

 

3

 

 

Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019

 

4

 

 

Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2020 and 2019

 

5

 

 

Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2020 and 2019

 

6

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

 

8

 

 

Notes to Consolidated Financial Statements

 

9

 

 

 

 

 

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

47

 

 

 

 

 

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

86

 

 

 

 

 

ITEM 4.

 

CONTROLS AND PROCEDURES

 

90

 

 

 

 

 

PART II: OTHER INFORMATION

 

91

 

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

91

 

 

 

 

 

ITEM 1A.

 

RISK FACTORS

 

91

 

 

 

 

 

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

92

 

 

 

 

 

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

92

 

 

 

 

 

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

92

 

 

 

 

 

ITEM 5.

 

OTHER INFORMATION

 

92

 

 

 

 

 

ITEM 6.

 

EXHIBITS

 

93

 

2

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

June 30, 2020

 

 

December 31, 2019

 

(In thousands, except share data)

 

 

 

 

(Audited)

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

$

185,919

 

 

$

252,447

 

Interest-bearing deposits with banks

 

1,696,051

 

 

 

725,343

 

Federal funds sold

 

17,399

 

 

 

10,974

 

     Total cash and cash equivalents

 

1,899,369

 

 

 

988,764

 

Investment securities available-for-sale, amortized cost of $2,574,282 and allowance for credit losses of zero at June 30, 2020

 

2,661,433

 

 

 

2,368,592

 

FRB and FHLB stock

 

77,358

 

 

 

76,752

 

Loans held for sale

 

38,631

 

 

 

87,649

 

Loans, net of unearned income

 

13,699,097

 

 

 

12,983,655

 

Less: allowance for credit losses

 

(370,901

)

 

 

(119,643

)

     Net loans

 

13,328,196

 

 

 

12,864,012

 

Premises and equipment, net

 

126,620

 

 

 

127,867

 

Cash surrender value of life insurance

 

185,218

 

 

 

183,400

 

Net deferred tax asset

 

65,915

 

 

 

—

 

Goodwill

 

43,061

 

 

 

485,336

 

Other intangible assets, net

 

94,257

 

 

 

105,613

 

Other assets

 

337,695

 

 

 

512,244

 

Total assets

$

18,857,753

 

 

$

17,800,229

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

  Noninterest-bearing deposits

$

5,220,109

 

 

$

3,833,704

 

  Interest-bearing deposits

 

10,849,173

 

 

 

10,909,090

 

     Total deposits

 

16,069,282

 

 

 

14,742,794

 

  Federal Home Loan Bank advances

 

100,000

 

 

 

100,000

 

  Senior debt

 

49,969

 

 

 

49,938

 

  Subordinated debt

 

183,142

 

 

 

182,712

 

  Junior subordinated debentures

 

37,448

 

 

 

37,445

 

  Notes payable

 

1,663

 

 

 

2,078

 

  Net deferred tax liability

 

—

 

 

 

24,982

 

  Other liabilities

 

370,769

 

 

 

199,434

 

     Total liabilities

 

16,812,273

 

 

 

15,339,383

 

Shareholders' equity:

 

 

 

 

 

 

 

Common stock $0.01 par value, authorized 300,000,000 shares; 133,148,613 shares issued and 125,930,741 shares outstanding at June 30, 2020 and 132,984,756 shares issued and 127,597,569 shares outstanding at December 31, 2019

 

1,331

 

 

 

1,330

 

Additional paid-in capital

 

1,875,651

 

 

 

1,873,063

 

Treasury stock, at cost, 7,217,872 shares and 5,387,187 shares, respectively

 

(130,725

)

 

 

(100,752

)

Retained earnings

 

25,763

 

 

 

572,503

 

Accumulated other comprehensive income

 

273,460

 

 

 

114,702

 

     Total shareholders' equity

 

2,045,480

 

 

 

2,460,846

 

Total liabilities and shareholders' equity

$

18,857,753

 

 

$

17,800,229

 

 

See notes to consolidated financial statements.

3

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands, except share and per share data)

2020

 

 

2019

 

 

2020

 

 

2019

 

INTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

$

162,854

 

 

$

202,011

 

 

$

337,988

 

 

$

407,762

 

Interest and dividends on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Taxable

 

12,207

 

 

 

10,298

 

 

 

26,222

 

 

 

21,094

 

  Tax-exempt

 

1,539

 

 

 

1,627

 

 

 

2,966

 

 

 

3,366

 

Other interest income

 

575

 

 

 

3,188

 

 

 

2,753

 

 

 

7,087

 

  Total interest income

 

177,175

 

 

 

217,124

 

 

 

369,929

 

 

 

439,309

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on time deposits

 

10,451

 

 

 

20,298

 

 

 

23,195

 

 

 

37,484

 

Interest on other deposits

 

7,690

 

 

 

30,440

 

 

 

29,674

 

 

 

59,925

 

Interest on borrowed funds

 

4,320

 

 

 

5,599

 

 

 

8,878

 

 

 

11,824

 

  Total interest expense

 

22,461

 

 

 

56,337

 

 

 

61,747

 

 

 

109,233

 

Net interest income

 

154,714

 

 

 

160,787

 

 

 

308,182

 

 

 

330,076

 

Provision for credit losses

 

158,811

 

 

 

28,927

 

 

 

242,240

 

 

 

40,137

 

  Net interest income after provision for credit losses

 

(4,097

)

 

 

131,860

 

 

 

65,942

 

 

 

289,939

 

NONINTEREST INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment advisory revenue

 

6,505

 

 

 

5,797

 

 

 

12,111

 

 

 

11,439

 

Trust services revenue

 

4,092

 

 

 

4,578

 

 

 

8,908

 

 

 

8,913

 

Credit related fees

 

4,401

 

 

 

5,341

 

 

 

10,384

 

 

 

10,211

 

Service charges on deposit accounts

 

4,852

 

 

 

4,730

 

 

 

11,268

 

 

 

9,860

 

Bankcard fees

 

1,716

 

 

 

2,279

 

 

 

3,674

 

 

 

4,492

 

Payroll processing revenue

 

1,143

 

 

 

1,161

 

 

 

2,510

 

 

 

2,580

 

SBA income

 

1,335

 

 

 

1,415

 

 

 

3,243

 

 

 

2,864

 

Other service fees

 

1,528

 

 

 

1,907

 

 

 

3,440

 

 

 

4,011

 

Securities gains, net

 

2,286

 

 

 

938

 

 

 

5,280

 

 

 

926

 

Other income

 

2,092

 

 

 

3,576

 

 

 

4,201

 

 

 

7,090

 

  Total noninterest income

 

29,950

 

 

 

31,722

 

 

 

65,019

 

 

 

62,386

 

NONINTEREST EXPENSE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

47,158

 

 

 

53,660

 

 

 

95,965

 

 

 

107,131

 

Premises and equipment

 

10,634

 

 

 

11,148

 

 

 

21,443

 

 

 

22,106

 

Merger related expenses

 

—

 

 

 

4,562

 

 

 

1,281

 

 

 

26,562

 

Goodwill impairment

 

—

 

 

 

—

 

 

 

443,695

 

 

 

—

 

Intangible asset amortization

 

5,472

 

 

 

5,888

 

 

 

11,065

 

 

 

11,961

 

Other expense

 

25,356

 

 

 

25,271

 

 

 

52,824

 

 

 

46,209

 

  Total noninterest expense

 

88,620

 

 

 

100,529

 

 

 

626,273

 

 

 

213,969

 

(Loss) income before income taxes

 

(62,767

)

 

 

63,053

 

 

 

(495,312

)

 

 

138,356

 

Income tax (benefit) expense

 

(6,653

)

 

 

14,707

 

 

 

(39,887

)

 

 

31,809

 

Net (loss) income

$

(56,114

)

 

$

48,346

 

 

$

(455,425

)

 

$

106,547

 

Weighted average common shares outstanding (Basic)

 

125,924,652

 

 

 

128,791,933

 

 

 

126,277,549

 

 

 

129,634,049

 

Weighted average common shares outstanding (Diluted)

 

125,924,652

 

 

 

129,035,553

 

 

 

126,277,549

 

 

 

129,787,758

 

(Loss) earnings per common share (Basic)

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 

(Loss) earnings per common share (Diluted)

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 

 

See notes to consolidated financial statements.

4

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income

$

(56,114

)

 

$

48,346

 

 

$

(455,425

)

 

$

106,547

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains on securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains, net of income taxes of $1,502, $5,617, $16,651, and $12,399

 

4,832

 

 

 

18,708

 

 

 

52,957

 

 

 

41,301

 

Less reclassification adjustments for gains realized in net income, net of income taxes of $542, $217, $1,252, and $214

 

1,744

 

 

 

721

 

 

 

4,028

 

 

 

712

 

Net change in unrealized gains on securities available-for-sale, net of tax

 

3,088

 

 

 

17,987

 

 

 

48,929

 

 

 

40,589

 

Unrealized gains (losses) on derivative instruments designated as cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains, net of income taxes of $959, $21,282, $41,879, and $32,393

 

3,087

 

 

 

76,153

 

 

 

129,399

 

 

 

113,165

 

Less reclassification adjustments for gains (losses) realized in net income, net of income taxes of $4,307, $(339), $6,232, and $(688)

 

13,388

 

 

 

(1,133

)

 

 

19,570

 

 

 

(2,292

)

Net change in unrealized gains (losses) on derivative instruments, net of tax

 

(10,301

)

 

 

77,286

 

 

 

109,829

 

 

 

115,457

 

Other comprehensive (loss) income, net of tax

 

(7,213

)

 

 

95,273

 

 

 

158,758

 

 

 

156,046

 

Comprehensive (loss) income

$

(63,327

)

 

$

143,619

 

 

$

(296,667

)

 

$

262,593

 

 

 

 

See notes to consolidated financial statements.

 

5

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except per share data)

Class A Common

Shares Outstanding

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Treasury

Stock

 

 

Retained

Earnings

 

 

Accumulated

OCI

 

 

Total

Shareholders'

Equity

 

Balance at December 31, 2018

 

82,497

 

 

$

836

 

 

$

1,041,000

 

 

$

(22,010

)

 

$

461,360

 

 

$

(42,912

)

 

$

1,438,274

 

Net income

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

58,201

 

 

 

—

 

 

 

58,201

 

Equity-based compensation cost

 

—

 

 

 

—

 

 

 

1,188

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,188

 

Cash dividends declared ($0.175 per common share)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(22,727

)

 

 

—

 

 

 

(22,727

)

Dividend equivalents on restricted stock units

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(125

)

 

 

—

 

 

 

(125

)

Purchase of treasury stock, at cost

 

(3,002

)

 

 

—

 

 

 

—

 

 

 

(58,830

)

 

 

—

 

 

 

—

 

 

 

(58,830

)

Issuance of common shares for State Bank acquisition

 

49,232

 

 

 

492

 

 

 

825,621

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

826,113

 

Value of stock warrants assumed from State Bank

 

—

 

 

 

—

 

 

 

251

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

251

 

Common stock issuance costs

 

—

 

 

 

—

 

 

 

(295

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(295

)

Issuance of common shares for restricted stock unit vesting

 

35

 

 

 

1

 

 

 

(1

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Issuance of treasury stock shares for exercise of stock warrants

 

—

 

 

 

—

 

 

 

(7

)

 

 

7

 

 

 

—

 

 

 

—

 

 

 

—

 

Other comprehensive income

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

60,773

 

 

 

60,773

 

Balance at March 31, 2019

 

128,762

 

 

 

1,329

 

 

 

1,867,757

 

 

 

(80,833

)

 

 

496,709

 

 

 

17,861

 

 

 

2,302,823

 

Net income

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

48,346

 

 

 

—

 

 

 

48,346

 

Equity-based compensation cost

 

—

 

 

 

—

 

 

 

2,711

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,711

 

Cash dividends declared ($0.175 per common share)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(22,539

)

 

 

—

 

 

 

(22,539

)

Dividend equivalents on restricted stock units

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(257

)

 

 

—

 

 

 

(257

)

Common stock issuance costs

 

—

 

 

 

—

 

 

 

(285

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(285

)

Issuance of common shares for restricted stock unit vesting

 

32

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Issuance of treasury stock shares for exercise of stock warrants

 

5

 

 

 

—

 

 

 

(86

)

 

 

86

 

 

 

—

 

 

 

—

 

 

 

—

 

Other comprehensive income

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

95,273

 

 

 

95,273

 

Balance at June 30, 2019

 

128,799

 

 

$

1,329

 

 

$

1,870,097

 

 

$

(80,747

)

 

$

522,259

 

 

$

113,134

 

 

$

2,426,072

 

 

(continued on next page)

6

CADENCE BANCORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(continued)

(In thousands, except per share data)

Class A Common

Shares Outstanding

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Treasury

Stock

 

 

Retained

Earnings

 

 

Accumulated

OCI

 

 

Total

Shareholders'

Equity

 

Balance at December 31, 2019

 

127,598

 

 

$

1,330

 

 

$

1,873,063

 

 

$

(100,752

)

 

$

572,503

 

 

$

114,702

 

 

$

2,460,846

 

Net loss

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(399,311

)

 

 

—

 

 

 

(399,311

)

Cumulative effect from adopting new accounting standard (Note 4)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(62,779

)

 

 

—

 

 

 

(62,779

)

Equity-based compensation cost

 

—

 

 

 

—

 

 

 

1,063

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,063

 

Cash dividends declared ($0.175 per common share)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(22,139

)

 

 

—

 

 

 

(22,139

)

Dividend equivalents on restricted stock units

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(136

)

 

 

—

 

 

 

(136

)

Purchase of treasury stock, at cost

 

(1,831

)

 

 

—

 

 

 

—

 

 

 

(29,973

)

 

 

—

 

 

 

—

 

 

 

(29,973

)

Issuance of common shares for restricted stock unit vesting

 

131

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Other comprehensive income

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

165,971

 

 

 

165,971

 

Balance at March 31, 2020

 

125,898

 

 

 

1,331

 

 

 

1,874,126

 

 

 

(130,725

)

 

 

88,138

 

 

 

280,673

 

 

 

2,113,543

 

Net loss

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(56,114

)

 

 

—

 

 

 

(56,114

)

Equity-based compensation cost

 

—

 

 

 

—

 

 

 

1,525

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,525

 

Cash dividends declared ($0.05 per common share)

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(6,296

)

 

 

—

 

 

 

(6,296

)

Dividend equivalents on restricted stock units

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

35

 

 

 

—

 

 

 

35

 

Issuance of common shares for restricted stock unit vesting

 

33

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other comprehensive loss

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(7,213

)

 

 

(7,213

)

Balance at June 30, 2020

 

125,931

 

 

$

1,331

 

 

$

1,875,651

 

 

$

(130,725

)

 

$

25,763

 

 

$

273,460

 

 

$

2,045,480

 

 

See notes to consolidated financial statements.

 

7

CADENCE BANCORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Six Months Ended June 30,

 

(In thousands)

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES

$

464,554

 

 

$

132,067

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Cash received in acquisitions, net

 

—

 

 

 

414,342

 

Purchase of securities available-for-sale

 

(505,656

)

 

 

(169,314

)

Proceeds from sales of securities available-for-sale

 

180,605

 

 

 

254,109

 

Proceeds from maturities, calls and paydowns of securities available-for-sale

 

227,948

 

 

 

138,358

 

Purchases of other securities, net

 

(606

)

 

 

(26,397

)

Proceeds from sales of loans held for sale

 

47,018

 

 

 

16,984

 

Increase in loans, net

 

(758,878

)

 

 

(228,789

)

Purchase of premises and equipment

 

(5,320

)

 

 

(4,772

)

Proceeds from disposition of foreclosed property

 

2,087

 

 

 

4,787

 

Other, net

 

(9,227

)

 

 

(1,317

)

Net cash (used in) provided by investing activities

 

(822,029

)

 

 

397,991

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Increase (decrease) in deposits, net

 

1,326,488

 

 

 

(319,177

)

Net change in securities sold under agreements to repurchase

 

—

 

 

 

(23,357

)

Advances on line of credit

 

—

 

 

 

5,000

 

Net change in short term FHLB advances

 

—

 

 

 

(150,000

)

Issuance of subordinated debentures

 

—

 

 

 

83,474

 

Proceeds from long term FHLB advances

 

—

 

 

 

100,000

 

Repayment of senior debt

 

—

 

 

 

(134,922

)

Repurchase of common stock

 

(29,973

)

 

 

(58,830

)

Cash dividends paid on common stock

 

(28,435

)

 

 

(45,266

)

Net cash provided by (used in) financing activities

 

1,268,080

 

 

 

(543,079

)

Net increase (decrease) in cash and cash equivalents

 

910,605

 

 

 

(13,022

)

Cash and cash equivalents at beginning of period

 

988,764

 

 

 

779,280

 

Cash and cash equivalents at end of period

$

1,899,369

 

 

$

766,258

 

SUPPLEMENTAL DISCLOSURES

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

Interest

$

66,069

 

 

$

101,974

 

Income taxes paid

 

984

 

 

 

30,692

 

Cash paid for amounts included in lease liabilities

 

5,562

 

 

 

5,683

 

Non-cash investing activities (at fair value):

 

 

 

 

 

 

 

Acquisition of real estate and other assets in settlement of loans

 

12,665

 

 

 

1,886

 

Transfers of loans held for sale to loans

 

10,500

 

 

 

33,464

 

Transfers of loans to loans held for sale

 

—

 

 

 

17,444

 

Securities purchased, net, with settlement after quarter end

 

132,353

 

 

 

—

 

Right-of-use assets (remeasured) obtained in exchange for operating lease liabilities

 

379

 

 

 

82,220

 

 

 

See notes to consolidated financial statements.

 

8

CADENCE BANCORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Cadence Bancorporation (the “Company”) is a Delaware corporation and a financial holding company whose primary asset is its investment in its wholly owned subsidiary bank, Cadence Bank, National Association (the “Bank”).

Note 1—Summary of Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements for the Company have been prepared in accordance with instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this report have been included. These interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019. Operating results for the period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

The Company and its subsidiaries follow accounting principles generally accepted in the United States of America, including, where applicable, general practices within the banking industry. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. The assessment of whether or not the Company has a controlling interest (i.e., the primary beneficiary) in a variable-interest entity (“VIE”) is performed on an on-going basis. All equity investments in non-consolidated VIEs are included in “other assets” in the Company’s consolidated balance sheets (see Note 15).

Certain amounts reported in prior years have been reclassified to conform to the 2020 presentation. These reclassifications did not materially impact the Company’s consolidated balance sheets or consolidated statements of operations.

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, Subsequent Events, the Company’s management has evaluated subsequent events for potential recognition or disclosure in the consolidated financial statements through the date of the issuance of the consolidated financial statements. No subsequent events were identified that would have required a change to the consolidated financial statements, however, certain matters that occurred after the balance sheet date are included in Note 19 to the consolidated financial statements.

Nature of Operations

The Company’s primary subsidiary is the Bank.

The Bank operates under a national bank charter and is subject to regulation by the Office of the Comptroller of the Currency (“OCC”). The Bank provides full banking services in six southern states: Alabama, Florida, Georgia, Mississippi, Tennessee, and Texas.

The Bank’s operating subsidiaries include:

 

•

Linscomb & Williams, Inc. — financial advisory firm;

 

•

Cadence Investment Services, Inc. — provides investment and insurance products; and

 

•

Altera Payroll and Insurance, Inc. — provides payroll processing services and the sale of certain insurance products.

The Company and the Bank also have certain other non-operating and immaterial subsidiaries.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of goodwill, intangible assets, and deferred income taxes.

9

Accounting Policies

Related Party Transactions

In the normal course of business, loans are made to directors and executive officers and to companies in which they have a significant ownership interest. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties, are consistent with sound banking practices, and are within applicable regulatory and lending limitations. The aggregate balances of related party loans and deposits are insignificant as of June 30, 2020 and December 31, 2019.

Loans and Allowances for Credit Losses (“ACL”)

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. During 2018 and 2019, the FASB issued additional guidance providing clarifications and corrections, including: ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments–Credit Losses; ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments–Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; ASU 2019-05, Financial Instruments–Credit Losses (Topic 326): Targeted Transition Relief; ASU 2019-10, Financial Instruments–Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates; ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments–Credit Losses (collectively “ASC 326”). ASC 326, better known as Current Expected Credit Losses (“CECL”), among other things:

 

•

Replaces the current incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

 

•

Eliminates existing guidance for acquired credit impaired (“ACI”) loans and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, referred to as purchase credit deteriorated (“PCD”) assets, which will be offset by an increase in the amortized cost of the related loans. For ACI loans accounted for under ASC 310-30 prior to adoption, the guidance in this amendment for PCD assets will be prospectively applied.

 

•

Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in-scope financial assets (including collateral dependent assets).

 

•

Amends existing impairment guidance for available-for-sale securities to incorporate an allowance, which will allow for reversals of credit impairments if the credit of an issuer improves.

 

•

Requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio.

The Company adopted ASC 326 and additional related guidance effective January 1, 2020, using the cumulative effect method. As a result of this adoption, the Company recognized an adjustment to retained earnings of $62.8 million, recorded a deferred tax asset of $19.5 million, and reclassed ACL of $6.1 million with respect to PCD loans, formerly ACI loans, as of January 1, 2020. Because the Company adopted ASC 326 with a cumulative effect adjustment as of January 1, 2020, the comparative results as of December 31, 2019, and for the three and six months ended June 30, 2019, have not been restated and continue to be reported under the incurred loss accounting model.

The Company has elected the transition provisions provided by the banking agencies and will phase in the regulatory capital effects of the “Day One” and subsequent provisions for loan losses resulting from adoption of CECL. See Note 12 for additional disclosure.

Other changes to the Company’s significant accounting policies pertaining to Loans and the ACL as incorporated under ASC 326 are as follows:

 

•

In accordance with ASC 326, the Company uses amortized cost as a basis for determining the ACL; whereas, prior to adopting ASC 326, under the incurred loss accounting model the Company used recorded investment. The components of amortized cost include unpaid principal balance (“UPB”), unamortized discounts and premiums, and unamortized deferred fees and costs. As permitted by ASC 326, the Company has elected to not include accrued interest receivable in the determination of amortized cost and measurement of expected credit losses and, instead, has an accounting policy to write off accrued interest deemed uncollectible in a timely manner.

 

•

ASC 326 provides special initial recognition and measurement for the Day One accounting for PCD assets.

10

 

o

ASC 326 requires entities that purchase certain financial assets (or portfolios of financial assets) with the intention of holding them for investment to determine whether the assets have experienced more-than-insignificant deterioration in credit quality since origination.

 

o

More-than-insignificant deterioration will generally be determined by the asset’s delinquency status, risk rating changes, credit rating, accruing status or other indicators of credit deterioration since origination.

 

o

An entity initially measures the amortized cost of a PCD asset by adding the acquisition date estimate of expected credit losses to the asset’s purchase price. Because the initial estimate for expected credit losses is added to the purchase price to establish the Day One amortized cost, PCD accounting is commonly referred to as a “gross-up” approach. There is no credit loss expense recognized upon acquisition of a PCD asset; rather the “gross-up” is offset by establishment of the initial allowance.

 

o

After initial recognition, the accounting for a PCD asset will generally follow the credit loss model.

 

o

Interest income for a PCD asset is recognized using the effective interest rate (“EIR”) calculated at initial measurement. This EIR is determined by comparing the amortized cost basis of the instrument to its contractual cash flows, consistent with ASC 310-20. Accordingly, since the PCD gross-up is included in the amortized cost, the purchase discount related to estimated credit losses on acquisition is not accreted into interest income. Only the noncredit-related discount or premium is accreted or amortized, using the EIR that was calculated at the time the asset was acquired.

 

•

Commercial loans are generally placed on nonaccrual status when principal or interest is past due 90 days or more unless the loan is well secured and in the process of collection. Consumer loans, including residential first and second lien loans secured by real estate, are generally placed on nonaccrual status when they are 120 or more days past due. Prior to the adoption of ASC 326, the majority of our current PCD loans were treated as accruing loans as the Company was able to reasonably predict future cash flows at the unit of account or pool level. After adoption, the accruing status of each individual loan will be subject to the nonaccrual polices described above.

 

•

The accrual of interest, as well as the amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium, is generally discontinued at the time the loan is placed on nonaccrual status. All accrued but uncollected interest for loans that are placed on nonaccrual status is reversed through interest income. Cash receipts received on nonaccrual loans are generally applied against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income (i.e., cost recovery method). However, interest may be accounted for under the cash-basis method as long as the remaining amortized costs in the loan is deemed fully collectible.

The ACL is maintained through charges to income in the form of a provision for credit losses at a level management believes is adequate to absorb an estimate of expected credit losses over the contractual life of the loan portfolio as of the reporting date. Events that are not within the Company’s control, such as changes in economic factors, could change subsequent to the reporting date and could cause the ACL to be overstated or understated. The amount of the ACL is affected by loan charge-offs, which decrease the ACL; recoveries on loans previously charged off, which increase the ACL; and the provision for credit losses charged to income, which increases the ACL.

The following is a description of the Company’s process for estimating the ACL for all loans in its portfolio, including PCD loans:

 

•

The quantitative component of the Company’s ACL model includes three segments: commercial (“C&I”), commercial real estate (“CRE”), and consumer.

 

o

The C&I loan segment includes loans to clients in specialized industries, including restaurant, healthcare, and technology. Additional commercial lending activities include energy, general corporate loans, business banking and community banking loans. The C&I segment uses loan level through-the-cycle probability-of-default (“PD”) and loss-given-default (“LGD”) ratings generated by Cadence’s scorecards. These PD ratings are conditioned by industry to reflect the effect of certain forecasted macroeconomic variables, such as market value, interest rate spreads, and unemployment rate.

 

o

The CRE loan segment includes loans which are secured by a variety of property types, including multi-family dwellings, office buildings, industrial properties, and retail facilities. The Company offers construction financing, acquisition or refinancing of properties primarily located in our markets in Texas and the southeast United States. The CRE loan segment uses a loss-rate model, where lifetime loss rates are correlated closely with characteristics such as origination LTV, vintage/origination quality, and loan age, as well as with macroeconomic factors, including GDP growth rate, unemployment rate, and CRE market price change.

11

 

o

The consumer loan segment primarily consists of one-to-four family residential real estate loans with terms ranging from 10 to 30 years; however, the portfolio is heavily weighted to the 30-year term. The Company offers both fixed and adjustable interest rates and does not originate subprime loans. These loans are typically closed-end first lien loans for purposes of purchasing property, or for refinancing existing loans with or without cash out. Our loans are primarily owner occupied, full documentation loans. This segment also offers consumer loans to our customers for personal, family and household purposes, auto, boat and personal installment loans, however, these loans are a small percentage of the portfolio. The consumer loan segment uses a loss-rate model. Life-time loss rates capture the effect of credit score, loan age, size, and other loan characteristics and include Cadence’s own assumptions for LGD and the expected life of the loan. The loss rates are also affected by macroeconomic variables such as the unemployment rate, retails sales percent change year-over-year, household employment percent change year-over-year, Federal Housing Finance Agency (“FHFA”) home price index, housing affordability index at origination, and median house price.

 

o

When foreclosure of collateral securing a loan is probable, ASC 326 requires that the expected credit loss on a loan be measured based on the fair value of the collateral. When management’s measured value of the impaired loan is less than the amortized cost in the loan, the amount of the impairment is recorded as a specific reserve. These specific reserves are determined on an individual loan basis based on management’s current evaluation of the loss exposure for each credit, given the payment status, the financial condition of the borrower and any guarantors and the value of any underlying collateral. Loans that are individually evaluated are excluded from the collective evaluations described above. Changes in specific reserves from period to period are the result of changes in the circumstances of individual loans such as charge-offs, payments received, changes in collateral values or other factors.

 

o

For any collateral dependent loan where foreclosure is not probable, but repayment is expected to be provided primarily from the sale or operation of the collateral and the borrower is experiencing financial difficulty, a practical expedient for measuring the credit loss is allowed using the fair value of the collateral. The Company expects to elect this for qualifying credits particularly when there are unique risk characteristics which prohibit them from being collectively evaluated. When repayment will be from the operation of the collateral, generally fair value is estimated on the present value of expected cash flows from the operation of the collateral (an income approach). When repayment is expected from the sale of the collateral, the present value of the costs to sell will be deducted from the fair value of the collateral measured as of the measurement date.

 

•

As described above, loans included in each segment are collectively or individually evaluated to determine an expected credit loss which is allocated to the individual loans. Due to the growth of the credit portfolio into new geographic areas and into new commercial markets and the lack of seasoning of the portfolio, the Company recognizes there is limited historical loss information to adequately estimate loss rates based primarily on the Company’s historical loss data. Therefore, external loss data was acquired from the research arm of a nationally recognized risk rating agency to act as a proxy for loss rates within the ACL models until sufficient loss history can be accumulated from the Company’s loss experience in these segments. These loss rates were developed specifically for the Company’s customer risk profile and portfolio mix.

 

•

ASC 326 acknowledges that, because historical experience may not fully reflect an institution's expectations about the future, the institution should adjust historical loss information, as necessary, to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information. The quantitative models use baseline macroeconomic scenario forecast data provided by a nationally recognized rating agency for a reasonable and supportable period in estimating the current expected credit losses. The Company has elected an input reversion approach whereby the selected economic forecast for the identified macroeconomic variables revert to their historical trends. As a rule, the forecasts revert to their long-term equilibrium within two to five years or one “business cycle” depending on the segment. The Company monitors actual loss experience for each loan segment for adjustments required to the loss rates utilized.

12

 

•

Additionally, to adjust historical credit loss information for current conditions and reasonable and supportable forecasts, all significant factors relevant to determining the expected collectability of financial assets as of each reporting date should be considered. ASC 326 provides examples of factors an institution may consider. The banking regulatory agencies believe the qualitative or environmental factors identified in the December 2006 Interagency Policy Statement on the Allowance for Loan and Lease Losses should continue to be relevant under CECL and are covered by the examples of factors that may be considered under ASC 326. These factors require judgments that cannot be subjected to exact mathematical calculation. There are no formulas for translating them into a basis-point adjustment to be applied to historical losses. The adjustment must reflect management’s overall estimate of the extent to which expected losses on a segment of loans will differ from historical loss experience. It would include management’s opinion on the effects related to current conditions and reasonable and supportable forecasts, that are not already reflected in the quantitative loss estimate. These adjustments are highly subjective estimates that will be determined each quarter. To facilitate this process, management has developed certain analyses of selected internal and external data to assist management in determining the risk of imprecision. These primary adjustment factors include, but are not limited to the following:

 

o

Lending policies, procedures, practices or philosophy, including underwriting standards and collection, charge-off and recovery practices

 

o

Changes in national and service market economic and business conditions that could affect the level of default rates or the level of losses once a default has occurred within the Bank’s existing loan portfolio

 

o

Changes in the nature or size of the portfolio

 

o

Changes in portfolio collateral values

 

o

Changes in the experience, ability, and depth of lending management, and other relevant staff

 

o

Volume and/or severity of past due and classified credits or trends in the volume of losses, non-accrual credits, impaired credits, and other credit modifications

 

o

Quality of the institution’s credit review system and processes and the degree of oversight by bank management and the board of directors

 

o

Concentrations of credit such as industry and lines of business

 

o

Competition and legal and regulatory requirements or other external factors

 

•

The reserve for unfunded commitments is determined by assessing three distinct components: unfunded commitment volatility in the portfolio (excluding commitments related to letters of credit and commitment letters), adversely rated letters of credit, and adversely rated lines of credit. Unfunded commitment volatility is calculated on a trailing nine quarter basis; the resulting expected funding amount is then reserved for based on the current combined reserve rate of the funded portfolio. Adversely rated letters and lines of credit are assessed individually based on funding and loss expectations as of the period end. The reserve for unfunded commitments is recorded in other liabilities and the provision for losses on unfunded commitments is included in the provision for credit losses. Prior to adoption, the provision for losses on unfunded commitments was recorded in other noninterest expense. As of June 30, 2020 and December 31, 2019, the reserve for unfunded commitments totaled $3.8 million and $2.0 million, respectively.

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss. ASU 2017-04 became effective for the Company on January 1, 2020. See Note 5, Goodwill and Other Intangible Assets.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 amends the disclosure requirements of ASC 820 to remove disclosure of transfers between Level 1 and Level 2 of the fair value hierarchy and the valuation process for Level 3 fair value measurements, among other amendments, and to include disclosure of the range and weighted average used in Level 3 fair value measurements, among other amendments. Amendments should be applied retrospectively to all periods presented, except for certain amendments, which should be applied prospectively. ASU 2018-13 became effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a significant impact on the Company’s fair value disclosures.

13

In August 2018, the FASB issued ASU No. 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). This standard aligns the requirements for capitalizing implementation costs in a hosting arrangement service contract with the existing guidance for capitalizing implementation costs incurred for an internal-use software license. This standard also requires capitalizing or expensing implementation costs based on the nature of the costs and the project stage during which they are incurred and establishes additional disclosure requirements. This standard became effective for Cadence on January 1, 2020. The adoption of this guidance had no material impact on the consolidated financial statements.

In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU amends ASC 810 guidance on how all reporting entities evaluate indirect interests held through related parties in common control arrangements when determining whether fees paid to decision makers and service providers are variable interests. ASU 2018-17 became effective for Cadence on January 1, 2020. The adoption of this guidance had no material impact on the consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments–Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging activities, and recognition and measurement. The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates, and prepayments, among other things. With respect to hedge accounting, the amendments address partial-term fair value hedges, fair value hedge basis adjustments, application by not-for-profit entities and private companies, and certain transition requirements, among other things. On recognizing and measuring financial instruments, they address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities must be remeasured at historical exchange rates.

The credit losses and hedging amendments have the same effective dates as the respective standards, unless an entity has already adopted the standards. The adoption of the credit loss standard, or CECL, is discussed above. Since the Company early adopted the guidance in ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, in 2018, the amended hedge accounting guidance in ASU 2019-04 became effective as of the beginning of the first annual reporting period beginning after April 25, 2019. The Company adopted this guidance on January 1, 2020, with no material impact.

In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update). The ASU adds and amends SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 119 related to the new credit losses standard and comments by the SEC staff related to the revised effective date of the new leases standard. The guidance became effective upon issuance and did not have a material impact.

In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. The ASU makes narrow-scope improvements to various financial instruments topics, including the new credit losses standard. Transition varies, with some of the amendments effective upon issuance for certain entities. The amendments related to ASU 2019-04 and ASU 2016-13 became effective for Cadence on January 1, 2020. Other amendments became effective upon issuance (March 9, 2020). The adoption of this guidance had no material impact on the consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients for hedging relationships affected by reference rate reform, if certain criteria are met. Entities can make a one-time election to sell and/or transfer to available-for-sale or trading any held-to-maturity debt securities that refer to an interest rate affected by reference rate reform and were classified as HTM before January 1, 2020. The guidance became effective upon issuance (March 12, 2020). As Cadence has no held-to-maturity debt securities, the adoption of the guidance had no impact.

14

Pending Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU eliminates certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted in interim or annual periods for which entities have not yet issued financial statements. Entities that elect to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, entities that elect early adoption must adopt all the amendments in the same period. Entities will apply the guidance prospectively, except for certain amendments. The Company is evaluating the impact this guidance may have on its consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force). The guidance clarifies that entities that apply the measurement alternative in ASC 321 should consider observable transactions that result in entities initially applying or discontinuing the use of the equity method of accounting under ASC 323. The guidance also says that certain forward contracts and purchased options on equity securities that are not deemed to be in-substance common stock under ASC 323 or accounted for as derivatives under ASC 815 are in the scope of ASC 321. The guidance is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The guidance should be applied prospectively. The Company is evaluating the impact this guidance may have on its consolidated financial statements.

 

15

Note 2 – Business Combinations

State Bank

On January 1, 2019, the Company acquired all the outstanding stock of State Bank Financial Corporation (“State Bank”) of Atlanta, Georgia in a stock transaction. The Company completed the accounting for the acquisition of State Bank and the measurement period was closed on December 31, 2019. The acquisition added $3.3 billion in loans and $4.1 billion in deposits. State Bank operated 32 branch locations across Georgia.

Under the terms of the transaction, State Bank shareholders received 1.271 shares of the Company’s Class A common stock in exchange for each share of State Bank common stock resulting in the Company issuing 49.2 million shares of its Class A common stock. In total, the purchase price for State Bank was $826.4 million, including $826.1 million in the Company’s common stock and $0.3 million representing the fair value of unexercised warrants.

The following table provides the purchase price allocation and the consideration paid for State Bank’s net assets.

(In thousands, except shares and per share data)

 

As Recorded by Cadence

 

Assets

 

 

 

 

Cash and cash equivalents

 

$

414,342

 

Investment securities available-for-sale

 

 

667,865

 

Loans held for sale

 

 

148,469

 

Loans

 

 

3,317,897

 

Premises and equipment

 

 

65,646

 

Cash surrender value of life insurance

 

 

69,252

 

Intangible assets

 

 

117,038

 

Other assets

 

 

47,146

 

Total assets acquired

 

$

4,847,655

 

Liabilities

 

 

 

 

Deposits

 

$

4,096,665

 

Short term borrowings

 

 

23,899

 

Other liabilities

 

 

76,368

 

Total liabilities assumed

 

 

4,196,932

 

Net identifiable assets acquired over liabilities assumed

 

 

650,723

 

Goodwill

 

 

175,657

 

Net assets acquired over liabilities assumed

 

$

826,380

 

Consideration:

 

 

 

 

Cadence Bancorporation common shares issued

 

 

49,232,008

 

Fair value per share of the Company's common stock

 

$

16.78

 

Company common stock issued

 

 

826,113

 

Fair value of unexercised warrants

 

 

267

 

Fair value of total consideration transferred

 

$

826,380

 

 

 

 

 

 

The Company estimated the fair value of loans by utilizing the discounted cash flow method applied to pools of loans aggregated by product categories and interest rate type. In addition, certain cash flows were estimated on an individual loan basis based on current performance and collateral value, if the loan was collateral dependent. Contractual principal and interest cash flows were projected based on the payment type (i.e., amortizing or interest only), interest rate type (i.e., fixed or adjustable), interest rate index, weighted average maturity, weighted average interest rate, weighted average spread, and weighted average interest rate floor of each loan pool. The expected cash flows for each category were determined by estimating future credit losses using probabilities of default (PD), loss given default (LGD) and the rate of prepayments. Projected monthly cash flows were then discounted to present value based on discount rates developed from various sources including an analysis of State Bank’s newly originated loans, a buildup approach and market data. There was no carryover of State Bank’s ACL associated with the loans acquired.

16

Intangible assets consisted of the core deposit intangible and the customer relationship intangible of a subsidiary. The core deposit intangible asset recognized of $111.9 million is being amortized over its estimated useful life of ten years utilizing an accelerated method. The benefit of the deposit base is equal to the difference in cash flows between maintaining the existing deposits and obtaining alternative funds over the life of the deposit base. The difference was tax effected and discounted to present value at a risk-adjusted discount rate. The valuation of the core deposit base includes estimates of the attrition rates for each deposit type based on historical attrition data and market participant information, in addition to estimates of total costs including interest cost, net maintenance cost, cost of reserves, and cost of float. The customer relationship and trademark intangible recognized of $3.7 million and $1.4 million are being amortized over estimated useful lives of ten and twenty years, respectively, using an accelerated method.

Goodwill of $175.7 million was recorded as a result of the transaction and is not amortized for financial statement purposes. All the goodwill was assigned to the Banking segment. The goodwill recorded is not deductible for income tax purposes. See also Note 5, Goodwill and Other Intangible Assets.

Certificates of deposit, including IRAs, were valued by projecting out the expected cash flows based on the contractual terms of the certificates of deposit. The fair values of savings and transaction deposit accounts were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. These cash flows were discounted using the interest rates on fixed maturity deposits offered by Cadence and State Bank as of January 1, 2019 resulting in a $3.4 million discount amortized over a twelve-month period.

Unfunded commitments are contractual obligations by a financial institution for future funding as it relates to closed end or revolving lines of credit. The Company valued these unfunded commitments at $26.8 million and recorded a liability using the “Netback” method. Because the borrower can draw upon their credit anytime until maturity, the lender must increase its capital on hand to meet funding requirements. Therefore, the undrawn portion is considered a liability (or asset if the loan is valued above par) and is netted back against the asset or the drawn portion. Generally, amortization for revolving lines occurs straight-line over the life of the loan and for closed end loans using the effective yield method over the remaining life of the loan when the loan funds.

Wealth & Pension

On July 1, 2019, the Company’s wholly owned subsidiary, Linscomb & Williams, Inc., acquired certain assets and assumed certain liabilities of Wealth and Pension Services Group, Inc. (“W&P”), a fee-based investment advisory firm with its principal office in Atlanta, Georgia. The Company completed the accounting for the acquisition and the measurement period was closed on June 30, 2020. The total purchase consideration paid of $8.0 million included an initial cash payment of $5.2 million and future cash payments totaling approximately $2.1 million to be paid in installments over a five-year period pursuant to the Asset Purchase Agreement. W&P is also eligible for future earn-out payments pursuant to the Asset Purchase Agreement based on achieving certain levels of earnings growth over a three- and five-year period. Intangible assets with an estimated fair value of $4.8 million were recorded and are comprised primarily of customer relationships and noncompete agreements. We also recognized goodwill of $2.9 million in connection with the acquisition.

Note 3—Investment Securities

 

A summary of amortized cost and estimated fair value of securities available-for-sale at June 30, 2020 and December 31, 2019 is as follows:

 

(In thousands)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

105,499

 

 

$

617

 

 

$

612

 

 

$

105,504

 

Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential pass-through:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by GNMA

 

 

112,167

 

 

 

3,145

 

 

 

—

 

 

 

115,312

 

Issued by FNMA and FHLMC

 

 

1,596,585

 

 

 

51,321

 

 

 

54

 

 

 

1,647,852

 

Other residential mortgage-backed securities

 

 

230,319

 

 

 

7,216

 

 

 

—

 

 

 

237,535

 

Commercial mortgage-backed securities

 

 

300,597

 

 

 

13,837

 

 

 

298

 

 

 

314,136

 

Total MBS

 

 

2,239,668

 

 

 

75,519

 

 

 

352

 

 

 

2,314,835

 

Obligations of states and municipal subdivisions

 

 

229,115

 

 

 

12,061

 

 

 

82

 

 

 

241,094

 

Total securities available-for-sale

 

$

2,574,282

 

 

$

88,197

 

 

$

1,046

 

 

$

2,661,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17

 

(In thousands)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

69,464

 

 

$

57

 

 

$

415

 

 

$

69,106

 

Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential pass-through:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by GNMA

 

 

98,122

 

 

 

1,205

 

 

 

245

 

 

 

99,082

 

Issued by FNMA and FHLMC

 

 

1,423,771

 

 

 

13,128

 

 

 

1,402

 

 

 

1,435,497

 

Other residential mortgage-backed securities

 

 

292,019

 

 

 

4,197

 

 

 

384

 

 

 

295,832

 

Commercial mortgage-backed securities

 

 

276,533

 

 

 

2,448

 

 

 

3,023

 

 

 

275,958

 

Total MBS

 

 

2,090,445

 

 

 

20,978

 

 

 

5,054

 

 

 

2,106,369

 

Obligations of states and municipal subdivisions

 

 

185,882

 

 

 

7,235

 

 

 

—

 

 

 

193,117

 

Total securities available-for-sale

 

$

2,345,791

 

 

$

28,270

 

 

$

5,469

 

 

$

2,368,592

 

 

The scheduled contractual maturities of securities available-for-sale at June 30, 2020 were as follows:

 

 

 

Amortized

 

 

Estimated

 

(In thousands)

 

Cost

 

 

Fair Value

 

Due in one year or less

 

$

1,222

 

 

$

1,225

 

Due after one year through five years

 

 

1,096

 

 

 

1,087

 

Due after five years through ten years

 

 

86,559

 

 

 

86,711

 

Due after ten years

 

 

245,737

 

 

 

257,575

 

Mortgage-backed securities

 

 

2,239,668

 

 

 

2,314,835

 

Total

 

$

2,574,282

 

 

$

2,661,433

 

 

Gross gains and gross losses on sales of securities available-for-sale for the three and six months ended June 30, 2020 and 2019 are presented below. There were no other-than-temporary impairment charges included in gross realized losses for the three and six months ended June 30, 2020 and 2019. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale.

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Gross realized gains

 

$

2,286

 

 

$

1,810

 

 

$

5,280

 

 

$

1,813

 

Gross realized losses

 

 

—

 

 

 

872

 

 

 

—

 

 

 

887

 

Realized gains, net

 

$

2,286

 

 

$

938

 

 

$

5,280

 

 

$

926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities with a carrying value of $775.9 million and $629.4 million at June 30, 2020 and December 31, 2019, respectively, were pledged to secure public deposits, FHLB borrowings, repurchase agreements and for other purposes as required or permitted by law.

Information pertaining to securities available-for-sale with gross unrealized losses aggregated by category and length of time the securities have been in a continuous loss position was as follows:

 

 

Unrealized Loss Analysis

 

 

 

Losses < 12 Months

 

 

Losses > 12 Months

 

(In thousands)

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

48,760

 

 

$

401

 

 

$

12,074

 

 

$

211

 

Mortgage-backed securities

 

 

84,554

 

 

 

350

 

 

 

276

 

 

 

2

 

Obligations of states and municipal subdivisions

 

 

9,844

 

 

 

82

 

 

 

—

 

 

 

—

 

Total

 

$

143,158

 

 

$

833

 

 

$

12,350

 

 

$

213

 

18

 

 

 

Unrealized Loss Analysis

 

 

 

Losses < 12 Months

 

 

Losses > 12 Months

 

(In thousands)

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

33,053

 

 

$

209

 

 

$

13,703

 

 

$

206

 

Mortgage-backed securities

 

 

708,991

 

 

 

4,466

 

 

 

61,506

 

 

 

588

 

Obligations of states and municipal subdivisions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

742,044

 

 

$

4,675

 

 

$

75,209

 

 

$

794

 

 

 

As of June 30, 2020 and December 31, 2019, approximately 6% and 35%, respectively, of the fair value of securities in the investment portfolio reflected an unrealized loss. As of June 30, 2020, there were 9 securities that had been in a loss position for more than twelve months, and 21 securities that had been in a loss position for less than 12 months. As of June 30, 2020, the unrealized losses were not deemed to be caused by credit-related issues. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. Any impairment that is not credit-related is recognized in other comprehensive income, net of applicable taxes. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. As of June 30, 2020, allowance for credit losses related to available-for-sale securities is zero as the decline in fair value did not result from credit-related issues. The Company has adequate liquidity and, therefore, does not plan to sell and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

Note 4—Loans Held for Sale, Loans and Allowance for Credit Losses

Loans Held for Sale

The following table presents a summary of the loans held for sale by portfolio segment at the lower of amortized cost or fair value as of June 30, 2020 and December 31, 2019.

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Commercial and industrial

 

$

30,865

 

 

$

34,767

 

Commercial real estate

 

 

1,098

 

 

 

49,894

 

Consumer

 

 

6,668

 

 

 

2,988

 

Total loans held for sale(1)

 

$

38,631

 

 

$

87,649

 

 

 

 

 

 

 

 

 

 

(1) $0.1 million and $0.4 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020 and December 31, 2019, respectively.

 

Loans

The following table presents total loans outstanding by portfolio segment and class of financing receivable as of June 30, 2020 and December 31, 2019. Outstanding balances include originated loans, Acquired Noncredit Impaired (“ANCI”) loans, and Purchase Credit Deteriorated (“PCD”) loans, formerly referred to as acquired credit impaired (“ACI”) loans. See Note 1 for additional information regarding the adoption of the new CECL accounting standard.

19

(In thousands)

 

June 30, 2020

 

 

December 31, 2019(2)

 

Commercial and industrial

 

 

 

 

 

 

 

 

General C&I

 

$

4,948,200

 

 

$

4,517,016

 

Energy

 

 

1,449,274

 

 

 

1,419,957

 

Restaurant

 

 

1,146,785

 

 

 

1,027,421

 

Healthcare

 

 

559,584

 

 

 

474,264

 

Total commercial and industrial

 

 

8,103,843

 

 

 

7,438,658

 

Commercial real estate

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

1,648,520

 

 

 

1,691,694

 

Multifamily

 

 

769,879

 

 

 

659,902

 

Office

 

 

558,525

 

 

 

535,676

 

Total commercial real estate

 

 

2,976,924

 

 

 

2,887,272

 

Consumer

 

 

 

 

 

 

 

 

Residential

 

 

2,537,695

 

 

 

2,568,295

 

Other

 

 

80,635

 

 

 

89,430

 

Total consumer

 

 

2,618,330

 

 

 

2,657,725

 

Total(1)

 

$

13,699,097

 

 

$

12,983,655

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million and $44.5 million of net accrued interest receivable is excluded from the total loan balances above as of June 30, 2020 and December 31, 2019, respectively.

 

(2) December 31, 2019 balances have been reclassified to conform to 2020 presentation for comparability purposes.

 

Paycheck Protection Program. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) created the Paycheck Protection Program (“PPP”) to provide certain small businesses with liquidity to support their operations during the COVID-19 pandemic. Entities must meet certain eligibility requirements to receive PPP loans, and they must maintain specified levels of payroll and employment to have the loans forgiven. The conditions are subject to audit by the U.S. government, but entities that borrow less than $2 million (together with any affiliates) will be deemed to have made the required certification concerning the necessity of the loan in good faith.

Under the PPP, eligible small businesses can apply to an SBA-approved lender for a loan that does not require collateral or personal guarantees. The loans have a 1% fixed interest rate. Loans issued prior to June 5 are due in two years unless otherwise modified and loans issued after June 5 are due in five years. However, they are eligible for forgiveness (in full or in part, including any accrued interest) under certain conditions. For loans (or parts of loans) that are forgiven, the lender will collect the forgiven amount from the U.S. government.

In response to the COVID-19 pandemic, the Company has taken several actions to offer various forms of support its customers, employees, and communities that have experienced impacts from this development. The Company is actively working with customers impacted by the economic downturn, including securing loans for our customers under the PPP.

The following table presents the Company’s PPP loans by portfolio segment and class of financing receivable as of June 30, 2020.

(In thousands)

 

Amortized Cost

 

 

% of PPP Portfolio

 

Commercial and industrial

 

 

 

 

 

 

 

 

General C&I

 

$

717,155

 

 

 

69.5

%

Energy sector

 

 

79,034

 

 

 

7.6

 

Restaurant industry

 

 

141,218

 

 

 

13.7

 

Healthcare

 

 

94,591

 

 

 

9.2

 

Total PPP loans

 

$

1,031,998

 

 

 

100.0

%

As a % of total loans

 

 

7.5

%

 

 

 

 

Allowance for Credit Losses (“ACL”)

Credit Risk Management. The Company’s credit risk management is overseen by the Company’s Board of Directors, including its Risk Management Committee, and the Company’s Senior Credit Risk Management Committee (“SCRMC”). The SCRMC is responsible for reviewing the Company’s credit portfolio management information, including asset quality trends, concentration reports, policy, financial and documentation exceptions, delinquencies, charge-offs, and nonperforming assets.

The Company’s credit policy requires that key risks be identified and measured, documented and mitigated, to the extent possible, and requires various levels of internal approvals based on the characteristics of the loans, including the size of the exposure. The Company also has customized underwriting guidelines for loans in the Company’s specialized industries that the Company believes reflects the unique characteristics of these industries.

20

Under the Company’s dual credit risk rating (“DCRR”) system, it is the Company’s policy to assign risk ratings to all commercial loan (C&I and CRE) exposures using the Company’s internal credit risk rating system. The assignment of loan risk ratings is the primary responsibility of the lending officer concurrent with approval from the credit officer reviewing and recommending approval of the credit. The assignment of commercial risk ratings is completed on a transactional basis using scorecards. The Company uses a total of nine different scorecards that accommodate various areas of lending. Each scorecard contains two main components: probability of default (“PD”) and loss given default (“LGD”). Each component is assessed using a multitude of both qualitative and quantitative scoring elements, which will generate a percentage for each component. The key elements assessed in the scorecard for PD are financial performance and trends as well as qualitative measures. The key elements for LGD are collateral quality and the structure of the loan. The PD percentage and LGD percentage are converted into PD and LGD risk ratings for each loan. The PD rating is used as the Company’s risk grade of record. Loans with PD ratings of 1 through 8 are loans that the Company rates internally as “Pass.” Loans with PD ratings of 9 through 13 are rated internally as “Criticized” and represent loans for which one or more potential or defined weaknesses exists. Loans with PD ratings of 10 through 13 are also considered “Classified” and represent loans for which one or more defined weaknesses exist. These classifications are consistent with regulatory guidelines. The following is a qualitative description of the Company’s loan classifications:

 

•

Pass—For loans within this risk rating, the condition of the borrower and the performance of the loan is satisfactory or better.

 

•

Pass/Watch—Borderline risk credits representing the weakest pass risk rating. Pass/Watch credits consist of credits where financial performance is weak, but stable. Weak performance is transitional. The borrower has a viable, defined plan for improvement. Generally, it is not expected for loans to be originated within this category.

 

•

Special Mention—A special mention loan has identified potential weaknesses that are of sufficient materiality to require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date. Special mention assets contain greater than acceptable risk to warrant increases in credit exposure and are thus considered non-pass rated credits.

 

•

Substandard—A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Loans classified as substandard possess well-defined weaknesses that are expected to jeopardize their liquidation. Loans in this category may be either on accrual status or nonaccrual status.

 

•

Doubtful—Loans classified as doubtful possess all of the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable or improbable based on currently existing facts, conditions, and values. Loans rated as doubtful are not rated as loss because certain events may occur that could salvage the debt. Loans in this category are required to be on nonaccrual.

 

•

Loss—Loans classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future. Loans may reside in this classification for administrative purposes for a period not to exceed the earlier of thirty (30) days or calendar quarter-end.

Consumer purpose loan risk classification is assigned in accordance with the Uniform Retail Credit Classification, based on delinquency and accrual status.

An important aspect of the Company’s assessment of risk is the ongoing completion of periodic risk rating reviews. As part of these reviews, the Company seeks to review the risk ratings of each facility within a customer relationship and may recommend an upgrade or downgrade to the risk ratings. The Company’s policy is to review two times per year all customer relationships with an aggregate exposure of $10 million or greater as well as all shared national credits (“SNC”). Additionally, all customer relationships with an aggregate exposure of $2.5 million to $10.0 million are reviewed annually. Further, customer relationships with an aggregate exposure of $2.5 million and greater with pass/watch or criticized risk ratings are reviewed quarterly. Certain relationships are exempt from review, such as relationships where the Company’s exposure is cash-secured. An updated risk rating scorecard is required during each risk review as well as with any credit event that requires credit approval.

The Company’s policies establish concentration limits for various industries within the commercial portfolio as well as commercial real estate, leveraged lending and other regulatory categories. Concentration limits are monitored and reassessed on a periodic basis and approved by the Board of Directors on an annual basis.

The approval of the Company’s Senior Loan Committee is generally required for relationships in an amount greater than $5.0 million. For loans in an amount greater than $5.0 million that are risk rated 10 or worse, approval of the Credit Transition Committee is generally required. There is a credit executive assigned to each line of business who holds the primary responsibility for the approval process outside of the loan approval committees.

21

ACL Rollforward and Analysis. The following tables provide a summary of the activity in the ACL and the reserve for unfunded commitments for the three and six months ended June 30, 2020 and 2019.

 

 

For the Three Months Ended June 30, 2020

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Total Allowance for Credit Losses

 

 

Reserve for Unfunded Commitments(1)

 

 

Total

 

As of March 31, 2020

 

$

154,585

 

 

$

53,418

 

 

$

37,243

 

 

$

245,246

 

 

$

3,222

 

 

$

248,468

 

Provision for credit losses

 

 

95,325

 

 

 

59,359

 

 

 

3,522

 

 

 

158,206

 

 

 

605

 

 

 

158,811

 

Charge-offs

 

 

(32,816

)

 

 

(327

)

 

 

(309

)

 

 

(33,452

)

 

 

—

 

 

 

(33,452

)

Recoveries

 

 

702

 

 

 

30

 

 

 

169

 

 

 

901

 

 

 

—

 

 

 

901

 

As of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

$

3,827

 

 

$

374,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The reserve for unfunded commitments is included in other liabilities on the consolidated balance sheets at June 30, 2020 and March 31, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2020

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Total Allowance for Credit Losses

 

 

Reserve for Unfunded Commitments(1)

 

 

Total

 

As of December 31, 2019

 

$

89,796

 

 

$

15,319

 

 

$

14,528

 

 

$

119,643

 

 

$

1,699

 

 

$

121,342

 

Cumulative effect of adoption of CECL

 

 

32,951

 

 

 

20,599

 

 

 

22,300

 

 

 

75,850

 

 

 

332

 

 

 

76,182

 

As of January 1, 2020

 

 

122,747

 

 

 

35,918

 

 

 

36,828

 

 

 

195,493

 

 

 

2,031

 

 

 

197,524

 

Provision for credit losses

 

 

159,008

 

 

 

77,158

 

 

 

4,278

 

 

 

240,444

 

 

 

1,796

 

 

 

242,240

 

Charge-offs

 

 

(64,803

)

 

 

(806

)

 

 

(941

)

 

 

(66,550

)

 

 

—

 

 

 

(66,550

)

Recoveries

 

 

844

 

 

 

210

 

 

 

460

 

 

 

1,514

 

 

 

—

 

 

 

1,514

 

As of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

$

3,827

 

 

$

374,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated

 

$

189,085

 

 

$

111,945

 

 

$

40,625

 

 

$

341,655

 

 

 

 

 

 

 

 

 

Loans individually evaluated

 

 

28,711

 

 

 

535

 

 

 

—

 

 

 

29,246

 

 

 

 

 

 

 

 

 

ACL as of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (amortized cost)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated

 

$

7,918,246

 

 

$

2,954,091

 

 

$

2,615,866

 

 

$

13,488,203

 

 

 

 

 

 

 

 

 

Loans individually evaluated

 

 

185,597

 

 

 

22,833

 

 

 

2,464

 

 

 

210,894

 

 

 

 

 

 

 

 

 

Loans as of June 30, 2020(2)

 

$

8,103,843

 

 

$

2,976,924

 

 

$

2,618,330

 

 

$

13,699,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The reserve for unfunded commitments is included in other liabilities on the consolidated balance sheets at June 30, 2020 and December 31, 2019.

 

(2) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

 

22

 

 

For the Three Months Ended June 30, 2019

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Small Business

 

 

Total Allowance for Credit Losses

 

As of March 31, 2019

 

$

75,526

 

 

$

10,469

 

 

$

14,690

 

 

$

4,353

 

 

$

105,038

 

Provision for credit losses

 

 

24,652

 

 

 

3,201

 

 

 

240

 

 

 

834

 

 

 

28,927

 

Charge-offs

 

 

(18,001

)

 

 

(253

)

 

 

(534

)

 

 

(193

)

 

 

(18,981

)

Recoveries

 

 

269

 

 

 

—

 

 

 

68

 

 

 

24

 

 

 

361

 

As of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2019

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Small Business

 

 

Total Allowance for Credit Losses

 

As of December 31, 2018

 

$

66,316

 

 

$

10,452

 

 

$

13,703

 

 

$

3,907

 

 

$

94,378

 

Provision for credit losses

 

 

33,951

 

 

 

3,303

 

 

 

1,446

 

 

 

1,437

 

 

 

40,137

 

Charge-offs

 

 

(18,462

)

 

 

(338

)

 

 

(768

)

 

 

(351

)

 

 

(19,919

)

Recoveries

 

 

641

 

 

 

—

 

 

 

83

 

 

 

25

 

 

 

749

 

As of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated for impairment

 

$

63,783

 

 

$

13,407

 

 

$

14,398

 

 

$

4,935

 

 

$

96,523

 

Loans individually evaluated for impairment

 

 

18,663

 

 

 

10

 

 

 

66

 

 

 

83

 

 

 

18,822

 

ACL as of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated for impairment

 

$

7,293,236

 

 

$

2,852,595

 

 

$

2,679,802

 

 

$

767,303

 

 

$

13,592,936

 

Loans individually evaluated for impairment

 

 

113,063

 

 

 

7,339

 

 

 

1,763

 

 

 

411

 

 

 

122,576

 

Loans as of June 30, 2019(1)

 

$

7,406,299

 

 

$

2,859,934

 

 

$

2,681,565

 

 

$

767,714

 

 

$

13,715,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Allowance for credit losses and loan balances as calculated and reported under the incurred loss accounting model and reported at June 30, 2019.

 

As described in Note 1, the Company adopted the new CECL accounting standard on January 1, 2020 which increased the ACL by $75.9 million. The ACL was increased an additional $158.2 million and $242.2 million in provision for the second quarter and year-to-date 2020, respectively which reflects the forecasted effects of COVID-19 on the various loan segments due to higher unemployment, lower GDP, market value, and real estate prices. The second quarter 2020 provision was affected by credit migration as well as a negative shift in the outlook for commercial real estate and a slower expected recovery. The Company’s estimate of the ACL used the baseline scenario provided by a nationally recognized service, as adjusted for consideration of certain qualitative and environmental factors. These adjustments consider, among other factors, risk attributes of each portfolio, relevant third-party research, energy prices, and loss data collected from previous recessions. Loan charge-offs recognized during 2020 are higher than 2019 as a result of credit migration that has occurred primarily in the Restaurant, Energy and General C&I classes with the most significant impact being COVID related.

The Company’s individually evaluated loans totaling $210.9 million at June 30, 2020 are considered collateral dependent loans and generally are considered impaired (Note 1). The majority of the these are within the C&I segment and include loans in the Energy, Restaurant, and General C&I classes. The majority of these loans are supported by an enterprise valuation or by collateral such as real estate, receivables or inventory, with the exception of loans within the Energy Exploration and Production (“E&P”) sector which are secured by oil and gas reserves. Loans within the CRE and consumer segments are secured by commercial and residential real estate.

Credit Quality

The following table provides information by each credit quality indicator and by origination year (vintage) as of June 30, 2020. The Company defines origination year (vintage) for the purposes of disclosure as the year of execution of the original loan agreement. Loans that are modified as a TDR are considered to be a continuation of the original loan, therefore the origination date of the original loan is reflected as the vintage date. This presentation is consistent with the vintage determination used in the ACL model. The criticized loans with a 2020 vintage relate to credits in resolution.

23

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

 

 

Revolving Credits

 

 

 

 

 

(In thousands)

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015 and Prior

 

 

Revolving Loans

 

 

Converted to

Term Loans

 

 

Total

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

1,298,422

 

 

$

760,994

 

 

$

1,065,899

 

 

$

639,740

 

 

$

379,240

 

 

$

661,520

 

 

$

2,395,110

 

 

$

16,712

 

 

$

7,217,637

 

Special mention

 

 

459

 

 

 

3,716

 

 

 

45,348

 

 

 

71,407

 

 

 

37,513

 

 

 

40,930

 

 

 

191,612

 

 

 

234

 

 

 

391,219

 

Substandard

 

 

3,676

 

 

 

8,616

 

 

 

112,904

 

 

 

33,882

 

 

 

41,116

 

 

 

97,183

 

 

 

169,030

 

 

 

—

 

 

 

466,407

 

Doubtful

 

 

—

 

 

 

1,784

 

 

 

6,675

 

 

 

6,957

 

 

 

4,521

 

 

 

1,577

 

 

 

7,066

 

 

 

—

 

 

 

28,580

 

Total commercial and industrial

 

 

1,302,557

 

 

 

775,110

 

 

 

1,230,826

 

 

 

751,986

 

 

 

462,390

 

 

 

801,210

 

 

 

2,762,818

 

 

 

16,946

 

 

 

8,103,843

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 

179,936

 

 

 

450,869

 

 

 

749,786

 

 

 

623,234

 

 

 

254,228

 

 

 

509,130

 

 

 

105,881

 

 

 

—

 

 

 

2,873,064

 

Special mention

 

 

275

 

 

 

45

 

 

 

16,090

 

 

 

21,825

 

 

 

11,613

 

 

 

11,215

 

 

 

193

 

 

 

—

 

 

 

61,256

 

Substandard

 

 

—

 

 

 

210

 

 

 

18,707

 

 

 

5,873

 

 

 

9,719

 

 

 

7,501

 

 

 

60

 

 

 

—

 

 

 

42,070

 

Doubtful

 

 

—

 

 

 

—

 

 

 

534

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

534

 

Total commercial real estate

 

 

180,211

 

 

 

451,124

 

 

 

785,117

 

 

 

650,932

 

 

 

275,560

 

 

 

527,846

 

 

 

106,134

 

 

 

—

 

 

 

2,976,924

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

199,779

 

 

 

466,604

 

 

 

587,756

 

 

 

330,294

 

 

 

297,718

 

 

 

464,492

 

 

 

237,681

 

 

 

968

 

 

 

2,585,292

 

30-59 days past due

 

 

—

 

 

 

1,537

 

 

 

4,193

 

 

 

549

 

 

 

1,487

 

 

 

4,099

 

 

 

350

 

 

 

—

 

 

 

12,215

 

60-89 days past due

 

 

—

 

 

 

490

 

 

 

4,232

 

 

 

392

 

 

 

1,952

 

 

 

2,743

 

 

 

88

 

 

 

—

 

 

 

9,897

 

90+ days past due

 

 

—

 

 

 

196

 

 

 

4,385

 

 

 

662

 

 

 

836

 

 

 

4,847

 

 

 

—

 

 

 

—

 

 

 

10,926

 

Total consumer

 

 

199,779

 

 

 

468,827

 

 

 

600,566

 

 

 

331,897

 

 

 

301,993

 

 

 

476,181

 

 

 

238,119

 

 

 

968

 

 

 

2,618,330

 

Total(1)

 

$

1,682,547

 

 

$

1,695,061

 

 

$

2,616,509

 

 

$

1,734,815

 

 

$

1,039,943

 

 

$

1,805,237

 

 

$

3,107,071

 

 

$

17,914

 

 

$

13,699,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

Past Due

The following tables provide an aging analysis of past due loans by portfolio segment and class of financing receivable.

 

 

Age Analysis of Past-Due Loans as of June 30, 2020

 

 

 

 

 

 

 

 

 

 

90+ Days

 

(In thousands)

 

30-59 Days Past Due

 

 

60-89 Days Past Due

 

 

90+ Days Past Due

 

 

Total

 

 

Current

 

 

Total(1)

 

 

Past Due and Accruing

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

3,257

 

 

$

1,060

 

 

$

18,155

 

 

$

22,472

 

 

$

4,925,728

 

 

$

4,948,200

 

 

$

126

 

Energy

 

 

964

 

 

 

25,947

 

 

 

3,820

 

 

 

30,731

 

 

 

1,418,543

 

 

 

1,449,274

 

 

 

—

 

Restaurant

 

 

352

 

 

 

31

 

 

 

14,898

 

 

 

15,281

 

 

 

1,131,504

 

 

 

1,146,785

 

 

 

—

 

Healthcare

 

 

412

 

 

 

1,416

 

 

 

2,504

 

 

 

4,332

 

 

 

555,252

 

 

 

559,584

 

 

 

—

 

Total commercial and industrial

 

 

4,985

 

 

 

28,454

 

 

 

39,377

 

 

 

72,816

 

 

 

8,031,027

 

 

 

8,103,843

 

 

 

126

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

1,027

 

 

 

1,631

 

 

 

1,682

 

 

 

4,340

 

 

 

1,644,180

 

 

 

1,648,520

 

 

 

71

 

Multifamily

 

 

218

 

 

 

—

 

 

 

—

 

 

 

218

 

 

 

769,661

 

 

 

769,879

 

 

 

—

 

Office

 

 

513

 

 

 

—

 

 

 

92

 

 

 

605

 

 

 

557,920

 

 

 

558,525

 

 

 

—

 

Total commercial real estate

 

 

1,758

 

 

 

1,631

 

 

 

1,774

 

 

 

5,163

 

 

 

2,971,761

 

 

 

2,976,924

 

 

 

71

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

12,080

 

 

 

9,502

 

 

 

10,888

 

 

 

32,470

 

 

 

2,505,225

 

 

 

2,537,695

 

 

 

2,894

 

Other

 

 

135

 

 

 

395

 

 

 

38

 

 

 

568

 

 

 

80,067

 

 

 

80,635

 

 

 

32

 

Total consumer

 

 

12,215

 

 

 

9,897

 

 

 

10,926

 

 

 

33,038

 

 

 

2,585,292

 

 

 

2,618,330

 

 

 

2,926

 

Total

 

$

18,958

 

 

$

39,982

 

 

$

52,077

 

 

$

111,017

 

 

$

13,588,080

 

 

$

13,699,097

 

 

$

3,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

24

 

 

 

Age Analysis of Past-Due Loans as of December 31, 2019

 

 

 

 

 

 

 

 

 

 

90+ Days

 

(In thousands)

 

30-59 Days Past Due

 

 

60-89 Days Past Due

 

 

90+ Days Past Due

 

 

Total

 

 

Current

 

 

Total(1)

 

 

Past Due and Accruing

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

23,143

 

 

$

1,117

 

 

$

15,183

 

 

$

39,443

 

 

$

4,477,573

 

 

$

4,517,016

 

 

$

85

 

Energy

 

 

—

 

 

 

—

 

 

 

8,166

 

 

 

8,166

 

 

 

1,411,791

 

 

 

1,419,957

 

 

 

—

 

Restaurant

 

 

1,219

 

 

 

1,284

 

 

 

8,021

 

 

 

10,524

 

 

 

1,016,897

 

 

 

1,027,421

 

 

 

108

 

Healthcare

 

 

497

 

 

 

41

 

 

 

4,143

 

 

 

4,681

 

 

 

469,583

 

 

 

474,264

 

 

 

—

 

Total commercial and industrial

 

 

24,859

 

 

 

2,442

 

 

 

35,513

 

 

 

62,814

 

 

 

7,375,844

 

 

 

7,438,658

 

 

 

193

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

3,354

 

 

 

133

 

 

 

2,255

 

 

 

5,742

 

 

 

1,685,952

 

 

 

1,691,694

 

 

 

—

 

Multifamily

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

659,902

 

 

 

659,902

 

 

 

—

 

Office

 

 

253

 

 

 

—

 

 

 

1,219

 

 

 

1,472

 

 

 

534,204

 

 

 

535,676

 

 

 

—

 

Total commercial real estate

 

 

3,607

 

 

 

133

 

 

 

3,474

 

 

 

7,214

 

 

 

2,880,058

 

 

 

2,887,272

 

 

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

8,967

 

 

 

6,101

 

 

 

7,292

 

 

 

22,360

 

 

 

2,545,935

 

 

 

2,568,295

 

 

 

887

 

Other

 

 

192

 

 

 

37

 

 

 

54

 

 

 

283

 

 

 

89,147

 

 

 

89,430

 

 

 

40

 

Total consumer

 

 

9,159

 

 

 

6,138

 

 

 

7,346

 

 

 

22,643

 

 

 

2,635,082

 

 

 

2,657,725

 

 

 

927

 

Total

 

$

37,625

 

 

$

8,713

 

 

$

46,333

 

 

$

92,671

 

 

$

12,890,984

 

 

$

12,983,655

 

 

$

1,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $44.5 million of net accrued interest receivable is excluded from the loan balances above as of December 31, 2019.

 

Nonaccrual Status

The following table provides information about nonaccruing loans by portfolio segment and class of financing receivable as of and for the three and six months ended June 30, 2020.

 

 

Nonaccrual Loans - Amortized Cost

 

 

90+ Days

 

 

Interest Income Recognized

 

(In thousands)

 

Beginning of the Period(1)

 

 

End of the Period

 

 

No Allowance Recorded

 

 

Past Due and Accruing

 

 

Three Months Ended June 30, 2020

 

 

Six Months Ended June 30, 2020

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

66,589

 

 

$

62,579

 

 

$

4,845

 

 

$

126

 

 

$

18

 

 

$

18

 

Energy

 

 

9,568

 

 

 

41,884

 

 

 

957

 

 

 

—

 

 

 

1

 

 

 

9

 

Restaurant

 

 

53,483

 

 

 

76,175

 

 

 

21,096

 

 

 

—

 

 

 

9

 

 

 

38

 

Healthcare

 

 

4,833

 

 

 

2,803

 

 

 

1,952

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial and industrial

 

 

134,473

 

 

 

183,441

 

 

 

28,850

 

 

 

126

 

 

 

28

 

 

 

65

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

5,935

 

 

 

23,853

 

 

 

3,046

 

 

 

71

 

 

 

16

 

 

 

59

 

Multifamily

 

 

—

 

 

 

714

 

 

 

714

 

 

 

—

 

 

 

—

 

 

 

—

 

Office

 

 

1,245

 

 

 

92

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial real estate

 

 

7,180

 

 

 

24,659

 

 

 

3,760

 

 

 

71

 

 

 

16

 

 

 

59

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

15,101

 

 

 

16,278

 

 

 

2,464

 

 

 

2,894

 

 

 

53

 

 

 

83

 

Other

 

 

24

 

 

 

6

 

 

 

—

 

 

 

32

 

 

 

2

 

 

 

4

 

Total consumer

 

 

15,125

 

 

 

16,284

 

 

 

2,464

 

 

 

2,926

 

 

 

55

 

 

 

87

 

Total

 

$

156,778

 

 

$

224,384

 

 

$

35,074

 

 

$

3,123

 

 

$

99

 

 

$

211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts are not comparable to prior period public filings due to our adoption of CECL on January 1, 2020. Prior to this date, pools of individual ACI loans were excluded because they continued to earn interest income from the accretable yield at the pool level. With the adoption of CECL, the pools were discontinued, and performance is based on contractual terms for individual loans. Additionally, prior to January 1, 2020, nonaccrual balances were presented using recorded investment. Upon adoption of CECL, approximately $43.0 million of ACI loans were reclassed to nonaccrual loans.

 

Loans Modified into TDRs

The Company attempts to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Bank considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. Qualifying criteria and payment terms are structured by the borrower’s current and prospective ability to comply with the modified terms of the loan.

25

A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that the Company has granted a concession to the borrower. The Company may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without the modification. Concessions could include reductions of interest rates at a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, principal forgiveness, forbearance, or other concessions. The assessments of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR.

All TDRs are individually evaluated to measure the amount of any ACL. The TDR classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring.

The following table provides information regarding loans that were modified into TDRs during the periods indicated.

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Number of TDRs

 

 

Amortized Cost(1)

 

 

Number of TDRs

 

 

Amortized Cost

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

$

—

 

 

 

2

 

 

$

7,647

 

Energy

 

 

—

 

 

 

—

 

 

 

1

 

 

 

11,717

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1,455

 

Total

 

 

—

 

 

$

—

 

 

 

4

 

 

$

20,819

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) There was no net accrued interest receivable recorded on the loan balances above as of June 30, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Number of TDRs

 

 

Amortized Cost(1)

 

 

Number of TDRs

 

 

Amortized Cost

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

3

 

 

$

19,366

 

 

 

3

 

 

$

28,913

 

Energy

 

 

1

 

 

 

8,140

 

 

 

1

 

 

 

11,717

 

Restaurant

 

 

2

 

 

 

24,246

 

 

 

—

 

 

 

—

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1,455

 

Total

 

 

6

 

 

$

51,752

 

 

 

5

 

 

$

42,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Less than $0.1 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

 

The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term. Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 days past due status with respect to principal and/or interest payments.

For the three- and six-month periods ended June 30, 2020 and June 30, 2019, the Company had no TDRs for which there was a payment default within the 12 months following the restructure date. During the three and six months ended June 30, 2020, approximately $12.5 million and $19.3 million in charge-offs were taken related to one general C&I loan that was modified into a TDR during the same period. During the three and six months ended June 30, 2019, approximately $17.8 million in charge-offs were taken related to commercial and industrial loans modified into TDRs during the same period.

26

On March 27, 2020, the CARES Act was signed into law. The CARES Act provides financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Additionally, in April 2020, regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) which permits certain loan modifications due to the effects of the COVID-19 (as defined) to not be identified as a TDR. For the three-month period ended June 30, 2020, the Company had approximately 2,500 cumulative loan modifications (both payment deferrals and non-payment deferral modifications) totaling $2.5 billion with the vast majority of these loans currently eligible for exemption from the accounting guidance for TDRs. As of June 30, 2020, active COVID loan modifications declined to $1.9 billion, of which $1.4 billion represented payment deferrals (primarily 90-day) and $0.5 billion represented non-payment deferral modifications. The Company believes additional loans may be restructured because of COVID-19 before the end of the year that will not be identified as TDRs in accordance with this law or interagency statement.

The following table provides information regarding the types of loan modifications that were modified into TDRs during the periods indicated.

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Loans Modified by:

 

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

Energy

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Total

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Loans Modified by:

 

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

 

3

 

 

 

—

 

 

 

3

 

Energy

 

 

1

 

 

 

—

 

 

 

—

 

 

 

1

 

Restaurant

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Total

 

 

1

 

 

 

5

 

 

 

—

 

 

 

5

 

Residential Mortgage Loans in Process of Foreclosure

Included in loans are $2.3 million and $4.4 million of consumer loans secured by single family residential real estate that are in process of foreclosure at June 30, 2020 and December 31, 2019, respectively. We have ceased foreclosure activities on residential real estate due to the COVID-19 pandemic. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $234 thousand and $151 thousand of foreclosed single-family residential properties in other real estate owned as of June 30, 2020 and December 31, 2019, respectively.

27

Note 5—Goodwill and Other Intangible Assets

The following table summarizes the Company’s goodwill and other intangible assets at June 30, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

(In thousands)

June 30, 2020

 

 

December 31, 2019

 

Goodwill

$

43,061

 

 

$

485,336

 

Core deposit intangible, net of accumulated amortization of $70,612 and $60,836, respectively

 

81,011

 

 

 

90,788

 

Customer lists, net of accumulated amortization of $23,065 and $21,908, respectively

 

10,800

 

 

 

11,993

 

Noncompete agreements, net of accumulated amortization of $229 and $137, respectively

 

1,127

 

 

 

1,473

 

Trademarks, net of accumulated amortization of $115 and $75, respectively

 

1,319

 

 

 

1,359

 

Total goodwill and intangible assets, net

$

137,318

 

 

$

590,949

 

 In accordance with US GAAP, the Company performs annual tests to identify potential impairment of goodwill. The tests are required to be performed annually and more frequently if events or circumstances indicate a potential impairment may exist. The Company compares the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Considering the economic conditions resulting from the COVID-19 pandemic, the Company conducted an interim goodwill impairment test in the first quarter of 2020. The interim test indicated a goodwill impairment of $443.7 million within the Bank reporting unit resulting in the Company recording an impairment charge of the same amount in the first quarter of 2020. The primary causes of the goodwill impairment in the Bank reporting unit were economic and industry conditions resulting from the COVID-19 pandemic that caused volatility and reductions in the market capitalization of the Company and its peer banks, increased loan provision estimates, increased discount rates, and other changes in variables driven by the uncertain macro-environment that resulted in the estimated fair value of the reporting unit being less than the reporting unit’s carrying value. The fair value of the reporting unit was determined using an income approach under the framework established for measuring fair value under ASC 820.

The Company has $43.1 million in goodwill remaining in its separate reporting units of Trust, Retail Brokerage and Investment Service businesses for which the Company's qualitative assessments based upon the asset and fee-based nature of the businesses did not indicate potential impairment. The fair values of the reporting units are based upon management’s estimates and assumptions. Although management has used the estimates and assumptions it believes to be most appropriate in the circumstances, it should be noted that even relatively minor changes in certain assumptions used in management’s calculations could result in significant differences in the results of the impairment tests.

The following table represents changes to the carrying amount of goodwill by segment for the period reported.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Balance as of December 31, 2019

 

$

442,579

 

 

$

42,757

 

 

$

—

 

 

$

485,336

 

Additions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth & Pension acquisition

 

 

—

 

 

 

304

 

 

 

—

 

 

 

304

 

Other

 

 

1,116

 

 

 

—

 

 

 

—

 

 

 

1,116

 

Losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment

 

 

(443,695

)

 

 

—

 

 

 

—

 

 

 

(443,695

)

Balance as of June 30, 2020

 

$

—

 

 

$

43,061

 

 

$

—

 

 

$

43,061

 

During the first quarter of 2020, goodwill assigned to Banking increased by $1.1 million related to the State Bank acquisition. There was an increase year-to-date of $0.3 million in the goodwill related to the acquisition from Wealth & Pension Services Group, Inc. on July 1, 2019 by the Bank’s subsidiary, Linscomb & Williams, Inc. (see Note 2).

Note 6—Derivatives

The Company primarily uses derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. Management will designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship. The Company’s remaining derivatives consist of economic hedges that do not qualify for hedge accounting and derivatives held for customer accommodation, or other purposes.

28

The fair value of derivative positions outstanding is included in “other assets” and “other liabilities” on the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows. For derivatives not designated as hedging instruments, gains and losses due to changes in fair value are included in noninterest income and the operating section of the consolidated statement of cash flows. For derivatives designated as hedging instruments, the entire change in the fair value related to the derivative instrument is recognized as a component of other comprehensive income and subsequently reclassified into interest income when the forecasted transaction affects income.

The notional amounts and estimated fair values as of June 30, 2020 and December 31, 2019 were as follows:

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

Fair Value

 

 

 

 

 

 

Fair Value

 

(In thousands)

 

Notional Amount

 

 

Other Assets

 

 

Other Liabilities

 

 

Notional Amount

 

 

Other Assets

 

 

Other Liabilities

 

Derivatives designated as hedging instruments (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

350,000

 

 

$

26,561

 

 

$

—

 

 

$

350,000

 

 

$

—

 

 

$

643

 

Commercial loan interest rate collars

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,000,000

 

 

 

239,213

 

 

 

—

 

Total derivatives designated as hedging instruments

 

 

350,000

 

 

 

26,561

 

 

 

—

 

 

 

4,350,000

 

 

 

239,213

 

 

 

643

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

 

1,228,008

 

 

 

26,329

 

 

 

2,116

 

 

 

1,008,805

 

 

 

8,386

 

 

 

899

 

Commercial loan interest rate caps

 

 

172,851

 

 

 

11

 

 

 

11

 

 

 

167,185

 

 

 

18

 

 

 

18

 

Commercial loan interest rate floors

 

 

583,262

 

 

 

15,221

 

 

 

15,221

 

 

 

654,298

 

 

 

8,836

 

 

 

8,836

 

Commercial loan interest rate collars

 

 

71,110

 

 

 

639

 

 

 

639

 

 

 

75,555

 

 

 

257

 

 

 

257

 

Mortgage loan held-for-sale interest rate lock commitments

 

 

38,236

 

 

 

548

 

 

 

—

 

 

 

4,138

 

 

 

22

 

 

 

—

 

Mortgage loan forward sale commitments

 

 

9,754

 

 

 

56

 

 

 

—

 

 

 

4,109

 

 

 

26

 

 

 

—

 

Mortgage loan held-for-sale floating commitments

 

 

7,367

 

 

 

—

 

 

 

—

 

 

 

1,523

 

 

 

—

 

 

 

—

 

Foreign exchange contracts

 

 

113,982

 

 

 

1,054

 

 

 

836

 

 

 

74,322

 

 

 

379

 

 

 

558

 

Total derivatives not designated as hedging instruments

 

 

2,224,570

 

 

 

43,858

 

 

 

18,823

 

 

 

1,989,935

 

 

 

17,924

 

 

 

10,568

 

Total derivatives

 

$

2,574,570

 

 

$

70,419

 

 

$

18,823

 

 

$

6,339,935

 

 

$

257,137

 

 

$

11,211

 

 

  

The Company is party to collateral support agreements with certain derivative counterparties. Such agreements require that the Company or the counterparty to maintain collateral based on the fair values of derivative transactions. In the event of default by a counterparty the non-defaulting counterparty would be entitled to the collateral. At June 30, 2020 and December 31, 2019, the Company was required to post $13.2 million and $10.6 million, respectively, in cash or securities as collateral for its derivative transactions, which are included in “interest-bearing deposits with banks” on the Company’s consolidated balance sheets. In addition, the Company had recorded the obligation to return cash collateral provided by a counterparty of $22.4 million and $240.9 million as of June 30, 2020 and December 31, 2019, respectively, within deposits on the Company’s consolidated balance sheet. The Company’s master agreements represent written, legally enforceable bilateral agreements that (1) create a single legal obligation for all individual transactions covered by the master agreement and (2) in the event of default, provide the non-defaulting counterparty the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to promptly liquidate or set-off collateral posted by the defaulting counterparty. As permitted by U.S. GAAP, the Company does not offset fair value amounts for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts of derivatives executed with the same counterparty under the master agreement.

29

Pre-tax gain (loss) included in the consolidated statements of operations related to derivative instruments for the three and six months ended June 30, 2020 and 2019 were as follows:

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

(In thousands)

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

Derivatives designated as hedging instruments

   (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

4,046

 

 

$

981

 

 

$

—

 

 

$

11,310

 

 

$

(1,509

)

 

$

—

 

Commercial loan interest rate collars

 

 

—

 

 

 

16,714

 

 

 

—

 

 

 

86,125

 

 

 

37

 

 

 

—

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans held for sale interest rate lock commitments

 

$

—

 

 

$

—

 

 

$

215

 

 

$

—

 

 

$

—

 

 

$

(42

)

Foreign exchange contracts

 

 

—

 

 

 

—

 

 

 

687

 

 

 

—

 

 

 

—

 

 

 

984

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

(In thousands)

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

Derivatives designated as hedging instruments

   (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

28,081

 

 

$

876

 

 

$

—

 

 

$

17,956

 

 

$

(3,017

)

 

$

—

 

Commercial loan interest rate collars

 

 

143,199

 

 

 

24,926

 

 

 

—

 

 

 

127,602

 

 

 

37

 

 

 

—

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans held for sale interest rate lock commitments

 

$

—

 

 

$

—

 

 

$

526

 

 

$

—

 

 

$

—

 

 

$

27

 

Foreign exchange contracts

 

 

—

 

 

 

—

 

 

 

1,551

 

 

 

—

 

 

 

—

 

 

 

2,124

 

 

Cash Flow Hedges

Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company uses interest rate swaps, caps, floors and collars to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans (1-Month LIBOR).

In February 2019, the Company entered into a $4.0 billion notional interest rate collar with a five-year term. In March 2020, the collar was terminated and resulted in a $261.2 million realized gain that was recorded in accumulated other comprehensive income. The value received in exchange for the termination assumed an average 1-month LIBOR rate of 0.5785% over the next four years. The gain, currently reflected in other comprehensive income net of deferred income taxes, will amortize over the next four years into interest income.

In March 2016, the Company entered into the following interest rate swap agreements to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans.

Effective Date

 

Maturity Date

 

Notional Amount

(In Thousands)

 

 

Fixed Rate

 

 

Variable Rate

March 8, 2016

 

February 27, 2026

 

$

175,000

 

 

 

1.5995

%

 

1 Month LIBOR

March 8, 2016

 

February 27, 2026

 

 

175,000

 

 

 

1.5890

 

 

1 Month LIBOR

 

30

Based on our current interest rate forecast, $77.2 million of deferred income on derivatives in OCI at June 30, 2020 is estimated to be reclassified into net interest income during the next twelve months. Future changes to interest rates or the amount of outstanding hedged loans may significantly change actual amounts reclassified to income. There were no reclassifications into income during the six months ended June 30, 2020 and 2019 as a result of any discontinuance of cash flow hedges because the forecasted transaction is no longer probable. The maximum length of time over which the Company is hedging a portion of its exposure to the variability in future cash flows for forecasted transactions is approximately 5.7 years as of June 30, 2020.

Interest Rate Swap, Floor, Cap and Collar Agreements not designated as hedging derivatives

 

The Company enters into certain interest rate swap, floor, cap and collar agreements on commercial loans that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company enters into an interest rate swap, floor, cap or collar with a loan customer while at the same time entering into an offsetting interest rate agreement with another financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The interest rate swap transaction allows the Company’s customer to effectively convert a variable rate loan to a fixed rate. The interest rate cap transaction allows the Company’s customer to minimize interest rate risk exposure to rising interest rates. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s consolidated statements of operations. The Company is exposed to credit loss in the event of nonperformance by the parties to the interest rate agreements. However, the Company does not anticipate nonperformance by the counterparties. The estimated fair value has been recorded as an asset and a corresponding liability in the accompanying consolidated balance sheets as of June 30, 2020 and December 31, 2019.

Note 7—Deposits

Domestic time deposits $250,000 and over were $503.6 million and $644.1 million at June 30, 2020 and December 31, 2019, respectively. There were no foreign time deposits at either June 30, 2020 or December 31, 2019.

Note 8—Borrowed Funds

Senior and Subordinated Debt

In June 2019, the Company completed a registered public offering of $85 million aggregate principal amount of 4.75% fixed to floating rate subordinated notes due 2029, the net proceeds of which were used to redeem our 4.875% senior notes due June 28, 2019. The fixed rate will remain at 4.75% until June 30, 2024, at which point the note will convert to a floating rate. In June 2014, the Company and the Bank completed an unregistered $245 million multi-tranche debt transaction and in March 2015, the Company completed an unregistered $50 million debt transaction. The subordinated note due June 28, 2029 will convert to a floating rate on June 28, 2024. The subordinated note due March 11, 2025 converted to a floating rate on March 11, 2020. The Bank’s subordinated note will convert from a fixed rate to a floating rate on June 28, 2024. These transactions enhanced our liquidity and regulatory capital levels to support balance sheet growth. Details of the debt transactions are as follows:

 

 

 

 

 

 

 

 

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Cadence Bancorporation:

 

 

 

 

 

 

 

 

5.375% senior notes, due June 28, 2021

 

$

50,000

 

 

$

50,000

 

7.250% subordinated notes, due June 28, 2029, callable in 2024

 

 

35,000

 

 

 

35,000

 

3-month LIBOR plus 4.663%, subordinated notes, due March 11, 2025, callable in 2020

 

 

40,000

 

 

 

40,000

 

4.750% subordinated notes, due June 30, 2029, callable in 2024

 

 

85,000

 

 

 

85,000

 

Total — Cadence Bancorporation

 

 

210,000

 

 

 

210,000

 

Cadence Bank:

 

 

 

 

 

 

 

 

6.250% subordinated notes, due June 28, 2029, callable in 2024

 

 

25,000

 

 

 

25,000

 

Debt issue costs and unamortized premium

 

 

(1,889

)

 

 

(2,350

)

Total senior and subordinated debt

 

$

233,111

 

 

$

232,650

 

 

The senior transactions were structured with four- and seven-year maturities to provide holding company liquidity and to stagger the Company’s debt maturity profile. The $35 million and $25 million subordinated debt transactions were structured with a fifteen-year maturity, ten-year call options, and fixed-to-floating interest rates. The $85 million subordinated debt transaction was structured with a ten-year maturity, a five-year call option, and a fixed-to-floating interest rate. The $40 million subordinated debt transaction has a five-year call option. These subordinated debt structures were designed to achieve full Tier 2 capital treatment for 10 years.

31

The Company’s outstanding senior note is unsecured, unsubordinated obligations and is equal in right of payment to all the Company’s other unsecured debt. The Company’s subordinated notes are unsecured obligations and will be subordinated in right of payment to all the Company’s senior indebtedness and general creditors and to depositors at the Bank. The Company’s senior notes and subordinated notes are not guaranteed by any subsidiary of the Company, including the Bank.

The Bank’s subordinated notes are unsecured obligations and are subordinated in right of payment to all the Bank’s senior indebtedness and general creditors and to depositors of the Bank. The Bank’s subordinated notes are not guaranteed by the Company or any subsidiary of the Bank.

Payment of principal on the Company’s and Bank’s subordinated notes may be accelerated by holders of such subordinated notes only in the case of certain insolvency events. There is no right of acceleration under the subordinated notes in the case of default. The Company and/or the Bank may be required to obtain the prior written approval of the Federal Reserve, and, in the case of the Bank, the OCC, before it may repay the subordinated notes issued thereby upon acceleration or otherwise.

Junior Subordinated Debentures

In conjunction with the Company’s acquisition of Cadence Financial Corporation and Encore Bank, N.A., the junior subordinated debentures were marked to fair value as of their respective acquisition dates. The related mark is being amortized over the remaining term of the junior subordinated debentures. The following is a list of junior subordinated debt:

 

 

 

 

 

 

 

 

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Junior subordinated debentures, 3 month LIBOR plus 2.85%, due 2033

 

$

30,000

 

 

$

30,000

 

Junior subordinated debentures, 3 month LIBOR plus 2.95%, due 2033

 

 

5,155

 

 

 

5,155

 

Junior subordinated debentures, 3 month LIBOR plus 1.75%, due 2037

 

 

15,464

 

 

 

15,464

 

Total par value

 

 

50,619

 

 

 

50,619

 

Purchase accounting adjustment, net of amortization

 

 

(13,171

)

 

 

(13,174

)

Total junior subordinated debentures

 

$

37,448

 

 

$

37,445

 

Advances from FHLB and Borrowings from FRB

Outstanding FHLB advances were $100 million as of June 30, 2020 and December 31, 2019. At June 30, 2020, the outstanding advance was a long-term convertible advance. Advances are collateralized by $4.0 billion of commercial and residential real estate loans pledged under a blanket lien arrangement as of June 30, 2020, which provides $2.6 billion of borrowing availability.

As of June 30, 2020 and December 31, 2019, the FHLB has issued for the benefit of the Bank irrevocable letters of credit totaling $731 million and $391 million, respectively. Included in the FHLB letters of credit are $725 million in variable letters of credit in favor of a municipal customer to secure certain deposits. These letters of credit expire on November 30, 2020 and December 22, 2020, respectively. Approximately $6 million in letters of credit are used to secure municipal deposits which expire on July 20, 2020.

There were no borrowings from the FRB discount window as of June 30, 2020 and December 31, 2019. Any borrowings from the FRB would be collateralized by $1.7 billion in commercial loans and small business loans under the Paycheck Protection Program pledged under a borrower-in-custody arrangement.

Notes Payable

On July 1, 2019, the Company’s wholly owned subsidiary, Linscomb & Williams, Inc., acquired certain assets and assumed certain liabilities of Wealth and Pension Services Group, Inc. (“W&P”). At June 30, 2020, a note payable of $1.7 million was outstanding in connection with this acquisition (see Note 2).

On March 29, 2019, the Company entered into a credit agreement for a revolving loan facility in the amount of $100 million with a maturity date of March 29, 2020. On March 29, 2020, the Company renewed the credit agreement with a maturity date of March 29, 2021. There were no amounts outstanding under this line of credit at June 30, 2020. Subsequent to June 30, 2020 the Company cancelled this facility.

32

Note 9—Other Noninterest Income and Other Noninterest Expense

The detail of other noninterest income and other noninterest expense captions presented in the consolidated statements of operations is as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Other noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance revenue

 

$

225

 

 

$

244

 

 

$

474

 

 

$

442

 

Mortgage banking income

 

 

2,020

 

 

 

674

 

 

 

3,131

 

 

 

1,253

 

Income from bank owned life insurance policies

 

 

1,220

 

 

 

1,264

 

 

 

2,549

 

 

 

2,416

 

Other

 

 

(1,373

)

 

 

1,394

 

 

 

(1,953

)

 

 

2,979

 

Total other noninterest income

 

$

2,092

 

 

$

3,576

 

 

$

4,201

 

 

$

7,090

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Other noninterest expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data processing expense

 

$

3,084

 

 

$

3,435

 

 

$

6,436

 

 

$

6,029

 

Software amortization

 

 

4,036

 

 

 

3,184

 

 

 

7,583

 

 

 

6,519

 

Consulting and professional fees

 

 

3,009

 

 

 

1,899

 

 

 

5,715

 

 

 

4,128

 

Loan related expenses

 

 

735

 

 

 

1,740

 

 

 

1,495

 

 

 

2,650

 

FDIC insurance

 

 

3,939

 

 

 

1,870

 

 

 

6,374

 

 

 

3,622

 

Communications

 

 

1,002

 

 

 

1,457

 

 

 

2,158

 

 

 

2,455

 

Advertising and public relations

 

 

920

 

 

 

1,104

 

 

 

2,384

 

 

 

1,885

 

Legal expenses

 

 

579

 

 

 

645

 

 

 

991

 

 

 

803

 

Other

 

 

8,052

 

 

 

9,937

 

 

 

19,688

 

 

 

18,118

 

Total other noninterest expenses

 

$

25,356

 

 

$

25,271

 

 

$

52,824

 

 

$

46,209

 

 

33

Note 10—Income Taxes

Income tax (benefit) expense for the three and six months ended June 30, 2020 was ($6.7) million and ($39.9) million, respectively, compared to $14.7 million and $31.8 million for the same periods in 2019. The effective tax rate was 10.6% and 8.1% for the three and six months ended June 30, 2020, respectively, compared to 23.3% and 23.0% for the same periods in 2019. The effective tax rate for the three and six months ended June 30, 2020 was driven by a decrease in income before income taxes.

The effective tax rate is primarily affected by the amount of pre-tax income (loss), and to a lesser extent, tax-exempt interest income, and the increase in cash surrender value of bank-owned life insurance. The effective tax rate is also affected by discrete items that may occur in any given period but are not consistent from period-to-period, which may impact the comparability of the effective tax rate between periods.

At June 30, 2020, we had a net deferred tax asset of $65.9 million, compared to a net deferred tax liability of
$25.0 million at December 31, 2019. The increase in the net deferred asset was primarily due to the tax effect of the CECL transition and provision for credit losses (Notes 1 and 4), reduction of deferred tax liabilities related to tax deductible goodwill, and the termination of the interest rate collar (Note 6).

Note 11—Earnings Per Common Share

The following table displays a reconciliation of the information used in calculating basic and diluted net (loss) income per common share for the three and six months ended June 30, 2020 and 2019.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands, except share and per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income per consolidated statements of operations

 

$

(56,114

)

 

$

48,346

 

 

$

(455,425

)

 

$

106,547

 

Net income allocated to participating securities

 

 

—

 

 

 

(170

)

 

 

—

 

 

 

(401

)

Net (loss) income allocated to common stock

 

$

(56,114

)

 

$

48,176

 

 

$

(455,425

)

 

$

106,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (Basic)

 

 

125,924,652

 

 

 

128,791,933

 

 

 

126,277,549

 

 

 

129,634,049

 

Weighted average dilutive restricted stock units and warrants

 

 

—

 

 

 

243,620

 

 

 

—

 

 

 

153,709

 

Weighted average common shares outstanding (Diluted)

 

 

125,924,652

 

 

 

129,035,553

 

 

 

126,277,549

 

 

 

129,787,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Earnings per common share (Basic)

 

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 

(Loss) Earnings per common share (Diluted)

 

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 

The effect from the assumed exercise of stock options and restricted stock units of 3,098,998 and 1,870,507 compared to 169,800 and 1,009,148 for the three and six months ended June 30, 2020 and 2019, respectively, were not included in the above computations of diluted earnings per share because such amounts would have had an antidilutive effect on earnings per common share.

Note 12—Regulatory Matters

Cadence and Cadence Bank are each required to comply with regulatory capital requirements established by federal and state banking agencies. Failure to meet minimum capital requirements can subject the Company and the Bank to certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. These regulatory capital requirements involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items, and qualitative judgments by the regulators.

Quantitative measures established by regulation to ensure capital adequacy require institutions to maintain minimum ratios of common equity Tier 1, Tier 1, and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average tangible assets (the “Leverage” ratio).

On March 27, 2020, the federal banking agencies issued an interim final rule to delay the estimated impact on regulatory capital stemming from the adoption of CECL. The agencies granted this relief to allow institutions to focus on lending to customers in light of recent strains on the U.S economy due to COVID-19, while also maintaining the quality of regulatory capital. Under the interim final rule, 100% of the CECL Day 1 impact and 25% of subsequent provisions for credit losses (“Day 2” impacts) will be deferred over a two-year year period ending January 1, 2022, at which time this deferred amount will be phased in on a pro rata basis over a three-year period ending January 2025.

The actual capital amounts and ratios for the Company and the Bank as of June 30, 2020 and December 31, 2019 are presented in the following tables and as shown, are above the thresholds necessary to be considered “well-capitalized.” Management believes that no events or changes have occurred after June 30, 2020 that would change this designation.

34

 

 

 

Consolidated Company

 

 

Bank

 

(In thousands)

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

$

1,751,651

 

 

 

9.5

%

 

$

1,837,580

 

 

 

10.0

%

Common equity tier 1 capital

 

 

1,751,651

 

 

 

11.7

 

 

 

1,787,580

 

 

 

11.9

 

Tier 1 risk-based capital

 

 

1,751,651

 

 

 

11.7

 

 

 

1,837,580

 

 

 

12.2

 

Total risk-based capital

 

 

2,147,055

 

 

 

14.3

 

 

 

2,050,896

 

 

 

13.7

 

Minimum requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

 

736,486

 

 

 

4.0

 

 

 

736,981

 

 

 

4.0

 

Common equity tier 1 capital

 

 

676,118

 

 

 

4.5

 

 

 

676,097

 

 

 

4.5

 

Tier 1 risk-based capital

 

 

901,490

 

 

 

6.0

 

 

 

901,463

 

 

 

6.0

 

Total risk-based capital

 

 

1,201,987

 

 

 

8.0

 

 

 

1,201,951

 

 

 

8.0

 

Well capitalized requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

N/A

 

 

N/A

 

 

 

921,227

 

 

 

5.0

 

Common equity tier 1 capital

 

N/A

 

 

N/A

 

 

 

976,585

 

 

 

6.5

 

Tier 1 risk-based capital

 

 

901,490

 

 

 

6.0

 

 

 

1,201,951

 

 

 

8.0

 

Total risk-based capital

 

 

1,502,484

 

 

 

10.0

 

 

 

1,502,438

 

 

 

10.0

 

 

 

 

 

Consolidated Company

 

 

Bank

 

(In thousands)

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

$

1,784,664

 

 

 

10.3

%

 

$

1,953,008

 

 

 

11.1

%

Common equity tier 1 capital

 

 

1,784,664

 

 

 

11.5

 

 

 

1,903,008

 

 

 

12.3

 

Tier 1 risk-based capital

 

 

1,784,664

 

 

 

11.5

 

 

 

1,953,008

 

 

 

12.6

 

Total risk-based capital

 

 

2,120,571

 

 

 

13.7

 

 

 

2,099,146

 

 

 

13.6

 

Minimum requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

 

690,213

 

 

 

4.0

 

 

 

689,881

 

 

 

4.0

 

Common equity tier 1 capital

 

 

697,089

 

 

 

4.5

 

 

 

696,755

 

 

 

4.5

 

Tier 1 risk-based capital

 

 

929,453

 

 

 

6.0

 

 

 

929,007

 

 

 

6.0

 

Total risk-based capital

 

 

1,239,270

 

 

 

8.0

 

 

 

1,238,676

 

 

 

8.0

 

Well capitalized requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

N/A

 

 

N/A

 

 

 

862,351

 

 

 

5.0

 

Common equity tier 1 capital

 

N/A

 

 

N/A

 

 

 

1,006,425

 

 

 

6.5

 

Tier 1 risk-based capital

 

 

929,453

 

 

 

6.0

 

 

 

1,238,676

 

 

 

8.0

 

Total risk-based capital

 

 

1,549,088

 

 

 

10.0

 

 

 

1,548,345

 

 

 

10.0

 

 

Under regulations controlling national banks, the payment of any dividends by a bank without prior approval of the OCC is limited to the current year’s net profits (as defined by the OCC) and retained net profits of the two preceding years. Due to the effect of the recognition of the non-cash goodwill impairment charge in the first quarter of 2020 to the Banks retained profits, the Bank is currently required to seek prior approval of the OCC to pay a dividend. The Federal Reserve, as primary regulator for bank holding companies, has also stated that all common stock dividends should be paid out of current income. Additionally, on July 24, 2020, the Federal Reserve amended its supervisory guidance and regulations addressing dividends from bank holding companies to require consultation with the Federal Reserve prior to paying a dividend that exceeds earnings for the period for which the dividend is being paid. While the holding company had $147.0 million in cash on hand as of June 30, 2020, the holding company does not generate income on a stand-alone basis, and, over time, may not have the capability to pay common stock dividends without first receiving dividends from the Bank.

The Bank is required to maintain average reserve balances in the form of cash or deposits with the Federal Reserve Bank. The reserve balance varies depending upon the types and amounts of deposits. Effective March 26, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent in response to the COVID-19 pandemic in order to help support lending. This action eliminated the reserve requirements for many depository institutions. At December 31, 2019, the required reserve balance with the Federal Reserve Bank was approximately $246.0 million.

35

Note 13—Commitments and Contingent Liabilities

The consolidated financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of banking business and which involve elements of credit risk, interest rate risk, and liquidity risk. The commitments and contingent liabilities are commitments to extend credit, home equity lines, overdraft protection lines, and standby and commercial letters of credit. Such financial instruments are recorded when they are funded. A summary of commitments and contingent liabilities is as follows:

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Commitments to extend credit

 

$

4,054,843

 

 

$

4,667,360

 

Commitments to grant loans

 

 

278,206

 

 

 

292,199

 

Standby letters of credit

 

 

202,400

 

 

 

213,548

 

Performance letters of credit

 

 

18,430

 

 

 

27,985

 

Commercial letters of credit

 

 

20,370

 

 

 

15,587

 

 

Commitments to extend credit and letters of credit include some exposure to credit loss in the event of nonperformance of the customer. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. In addition, the Company has entered certain contingent commitments to grant loans. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit policies and procedures for such commitments are the same as those used for lending activities. Because these instruments have fixed maturity dates and because a number expire without being drawn upon, they generally do not present any significant liquidity risk. No significant losses on commitments were incurred during the three and six months ended June 30, 2020 and 2019.

The Company makes investments in limited partnerships, including certain low-income housing partnerships for which tax credits are received. As of June 30, 2020 and December 31, 2019, unfunded capital commitments totaled $44.6 million and $44.9 million, respectively (see Note 15).

The Company and the Bank are defendants in various pending and threatened legal actions arising in the normal course of business. In the opinion of management, based upon the advice of legal counsel, the ultimate disposition of all pending and threatened legal action will not have a material effect on the Company’s consolidated financial statements. On September 16, 2019, a Company shareholder filed a putative class action complaint against Cadence Bancorporation and certain senior officers. Following consolidation of a related matter and appointment of lead plaintiffs, the lead plaintiffs filed an amended complaint on January 31, 2020, which asserted claims under Sections 10(b) and 20 of the Securities Exchange Act on behalf of a putative class of persons and entities that purchased or otherwise acquired the Company’s securities between July 23, 2018 and January 23, 2020, inclusive. The amended complaint alleges that the Company and the individual defendants made materially misleading statements about the credit quality of the Company’s loan portfolio, did not timely charge off bad debt or record sufficient loss provisions to reserve against the risk of loss, and maintained an inadequate allowance for credit losses. The consolidated case is captioned Frank Miller et al. v. Cadence Bancorporation et al., Case No. H-19-3492-LNH, in the United States District Court for the Southern District of Texas.

On August 7, 2020, the District Court granted the defendants’ motion to dismiss and entered a final judgment dismissing the case in its entirety, with prejudice. The court concluded that the complaint failed to show that Cadence Bancorporation and the individual defendants made any material misstatements and failed to allege specific facts supporting a strong inference of fraudulent intent or severe recklessness. Because the time for filing an appeal has not yet lapsed and discovery has not commenced, it is not possible at this time to estimate the likelihood or amount of any damage exposure.

36

Note 14—Disclosure About Fair Values of Financial Instruments

See Note 20 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2019 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset at June 30, 2020 and December 31, 2019:

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

$

2,661,433

 

 

$

—

 

 

$

2,661,433

 

 

$

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,764

 

 

 

1,764

 

 

 

—

 

 

 

—

 

Derivative assets

 

 

70,419

 

 

 

—

 

 

 

70,419

 

 

 

—

 

Other assets

 

 

32,101

 

 

 

—

 

 

 

—

 

 

 

32,101

 

Total recurring basis measured assets

 

$

2,765,717

 

 

$

1,764

 

 

$

2,731,852

 

 

$

32,101

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

18,823

 

 

$

—

 

 

$

18,823

 

 

$

—

 

Total recurring basis measured liabilities

 

$

18,823

 

 

$

—

 

 

$

18,823

 

 

$

—

 

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

$

2,368,592

 

 

$

—

 

 

$

2,368,592

 

 

$

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,862

 

 

 

1,862

 

 

 

—

 

 

 

—

 

Derivative assets

 

 

257,137

 

 

 

—

 

 

 

257,137

 

 

 

—

 

Other assets

 

 

26,882

 

 

 

—

 

 

 

—

 

 

 

26,882

 

Total recurring basis measured assets

 

$

2,654,473

 

 

$

1,862

 

 

$

2,625,729

 

 

$

26,882

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

11,211

 

 

$

—

 

 

$

11,211

 

 

$

—

 

Total recurring basis measured liabilities

 

$

11,211

 

 

$

—

 

 

$

11,211

 

 

$

—

 

 

Changes in Level 3 Fair Value Measurements

The tables below include a roll-forward of the consolidated balance sheet amounts for the three and six months ended June 30, 2020 and 2019 for changes in the fair value of financial instruments within Level 3 of the valuation hierarchy that are recorded on a recurring basis. Level 3 financial instruments typically include unobservable components but may also include some observable components that may be validated to external sources. The gains or (losses) in the following table (which are reported in other noninterest income in the consolidated income statements) may include changes to fair value due in part to observable factors that may be part of the valuation methodology.

37

Level 3 Assets Measured at Fair Value on a Recurring Basis

 

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(In thousands)

 

Net Profits Interests

 

 

Investments in Limited Partnerships

 

 

SBA Servicing Rights

 

Beginning Balance

 

$

4,071

 

 

$

5,317

 

 

$

24,042

 

 

$

11,601

 

 

$

3,942

 

 

$

3,803

 

Originations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

261

 

 

 

194

 

Net gains (losses) included in earnings

 

 

(338

)

 

 

59

 

 

 

(1,015

)

 

 

288

 

 

 

(466

)

 

 

(211

)

Reclassifications

 

 

—

 

 

 

—

 

 

 

1,203

 

 

 

675

 

 

 

—

 

 

 

—

 

Acquired in settlement of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Contributions paid

 

 

—

 

 

 

—

 

 

 

499

 

 

 

2,409

 

 

 

—

 

 

 

—

 

Distributions received

 

 

—

 

 

 

—

 

 

 

(98

)

 

 

(440

)

 

 

—

 

 

 

—

 

Ending Balance

 

$

3,733

 

 

$

5,376

 

 

$

24,631

 

 

$

14,533

 

 

$

3,737

 

 

$

3,786

 

Net unrealized (losses) gains included in earnings relating to assets held at the end of the period

 

$

(338

)

 

$

59

 

 

$

(1,015

)

 

$

288

 

 

$

(466

)

 

$

(211

)

Net unrealized gains (losses) recognized in other comprehensive income relating to assets held at the end of the period

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(In thousands)

 

Net Profits Interests

 

 

Investments in Limited Partnerships

 

 

SBA Servicing Assets

 

Beginning Balance

 

$

4,330

 

 

$

5,779

 

 

$

18,742

 

 

$

11,191

 

 

$

3,810

 

 

$

—

 

Acquired

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,213

 

Originations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

561

 

 

 

514

 

Net (losses) gains included in earnings

 

 

(597

)

 

 

(115

)

 

 

(1,331

)

 

 

1,034

 

 

 

(634

)

 

 

(2,941

)

Reclassifications

 

 

—

 

 

 

—

 

 

 

1,727

 

 

 

(125

)

 

 

—

 

 

 

—

 

Acquired in settlement of loans

 

 

—

 

 

 

—

 

 

 

4,257

 

 

 

—

 

 

 

—

 

 

 

—

 

Contributions paid

 

 

—

 

 

 

—

 

 

 

1,783

 

 

 

3,017

 

 

 

—

 

 

 

—

 

Distributions received

 

 

—

 

 

 

(288

)

 

 

(547

)

 

 

(584

)

 

 

—

 

 

 

—

 

Ending Balance

 

$

3,733

 

 

$

5,376

 

 

$

24,631

 

 

$

14,533

 

 

$

3,737

 

 

$

3,786

 

Net unrealized (losses) gains included in earnings relating to assets held at the end of the period

 

$

(597

)

 

$

(115

)

 

$

(1,331

)

 

$

1,034

 

 

$

(634

)

 

$

(2,941

)

Net unrealized gains (losses) recognized in other comprehensive income relating to assets held at the end of the period

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Assets Recorded at Fair Value on a Nonrecurring Basis

From time to time, the Company may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheets at June 30, 2020 and December 31, 2019, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value:

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

38,631

 

 

$

—

 

 

$

38,631

 

 

$

—

 

Individually evaluated loans, net of allocated allowance for credit losses (1)

 

 

181,648

 

 

 

—

 

 

 

—

 

 

 

181,648

 

Other real estate and repossessed assets

 

 

10,216

 

 

 

 

 

 

 

—

 

 

 

10,216

 

Total assets measured on a nonrecurring basis

 

$

230,495

 

 

$

—

 

 

$

38,631

 

 

$

191,864

 

38

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

87,649

 

 

$

—

 

 

$

87,649

 

 

$

—

 

Individually evaluated loans, net of allocated allowance for credit losses (1)

 

 

101,561

 

 

 

—

 

 

 

—

 

 

 

101,561

 

Other real estate

 

 

1,628

 

 

 

—

 

 

 

—

 

 

 

1,628

 

Total assets measured on a nonrecurring basis

 

$

190,838

 

 

$

—

 

 

$

87,649

 

 

$

103,189

 

(1) Prior to the adoption of CECL on January 1, 2020, these loans were known as Impaired loans, net of specific allowance.

 

Significant unobservable inputs used in Level 3 fair value measurements for financial assets measured at fair value on a nonrecurring basis are summarized below:

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

(In thousands)

 

Carrying

Value

 

 

Valuation

Methods

 

Unobservable Inputs

 

Range

 

Weighted Average (2)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans, net of allowance for credit losses (3)

 

$

181,648

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 85%

 

25%

 

 

 

 

 

 

 

Discounted cash flow

 

Discount rate

 

3.75% - 4.36%

 

4.2%

 

 

 

 

 

 

 

Enterprise value

 

Comparables and average multiplier

 

4.31x - 6.19x

 

5.09x

 

 

 

 

 

 

 

Enterprise value

 

Discount rates and comparables

 

13% - 15%

 

14%

 

 

 

 

 

 

 

Net recoverable oil and gas reserves and forward-looking commodity prices

 

Capitalization rate and discount rate

 

10% - 20%

 

12%

 

Other real estate

 

 

1,606

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 20%

 

10%

 

 

 

 

 

 

 

 

 

Estimated closing costs

 

10%

 

10%

 

 

 

39

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

(In thousands)

 

Carrying

Value

 

 

Valuation

Methods

 

Unobservable

Inputs

 

Range

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans, net of allowance for credit losses (3)

 

$

101,561

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 50%

 

 

 

 

 

 

 

Appraised value, as adjusted

 

Minimum guaranteed proceeds per Settlement Agreement

 

0%(1)

 

 

 

 

 

 

 

Discounted cash flow

 

Discount rate 5.8%

 

0%(1)

 

 

 

 

 

 

 

Enterprise value

 

Exit and earnings multiples,

discounted cash flows,

and market comparables

 

0% - 46%(1)

 

Other real estate

 

 

1,628

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 20%

 

 

 

 

 

 

 

 

 

Estimated closing costs

 

10%

 

(1) Represents difference of remaining balance to fair value.

 

(2) Weighted averages were calculated using the input attribute and the outstanding balance of the loan.

 

(3) Prior to the adoption of CECL on January 1, 2020, these loans were known as Impaired loans, net of specific allowance.

 

 

The estimated fair values of the Company’s financial instruments are as follows:

 

 

June 30, 2020

 

(In thousands)

 

Carrying Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

185,919

 

 

$

185,919

 

 

$

185,919

 

 

$

—

 

 

$

—

 

Interest-bearing deposits in other banks

 

 

1,696,051

 

 

 

1,696,051

 

 

 

1,696,051

 

 

 

—

 

 

 

—

 

Federal funds sold

 

 

17,399

 

 

 

17,399

 

 

 

17,399

 

 

 

—

 

 

 

—

 

Investment securities available-for-sale

 

 

2,661,433

 

 

 

2,661,433

 

 

 

—

 

 

 

2,661,433

 

 

 

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,764

 

 

 

1,764

 

 

 

1,764

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

38,631

 

 

 

38,631

 

 

 

—

 

 

 

38,631

 

 

 

—

 

Net loans

 

 

13,328,196

 

 

 

13,379,997

 

 

 

—

 

 

 

—

 

 

 

13,379,997

 

Derivative assets

 

 

70,419

 

 

 

70,419

 

 

 

—

 

 

 

70,419

 

 

 

—

 

Other assets

 

 

88,308

 

 

 

88,308

 

 

 

—

 

 

 

—

 

 

 

88,308

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

16,069,282

 

 

 

16,080,049

 

 

 

—

 

 

 

16,080,049

 

 

 

—

 

Advances from FHLB

 

 

100,000

 

 

 

100,000

 

 

 

—

 

 

 

100,000

 

 

 

—

 

Senior debt

 

 

49,969

 

 

 

50,644

 

 

 

—

 

 

 

50,644

 

 

 

—

 

Subordinated debt

 

 

183,142

 

 

 

174,457

 

 

 

—

 

 

 

174,457

 

 

 

—

 

Junior subordinated debentures

 

 

37,448

 

 

 

34,629

 

 

 

—

 

 

 

34,629

 

 

 

—

 

Notes payable

 

 

1,663

 

 

 

1,663

 

 

 

—

 

 

 

1,663

 

 

 

—

 

Derivative liabilities

 

 

18,823

 

 

 

18,823

 

 

 

—

 

 

 

18,823

 

 

 

—

 

 

40

 

 

December 31, 2019

 

(In thousands)

 

Carrying Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

252,447

 

 

$

252,447

 

 

$

252,447

 

 

$

—

 

 

$

—

 

Interest-bearing deposits in other banks

 

 

725,343

 

 

 

725,343

 

 

 

725,343

 

 

 

—

 

 

 

—

 

Federal funds sold

 

 

10,974

 

 

 

10,974

 

 

 

10,974

 

 

 

—

 

 

 

—

 

Investment securities available-for-sale

 

 

2,368,592

 

 

 

2,368,592

 

 

 

—

 

 

 

2,368,592

 

 

 

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,862

 

 

 

1,862

 

 

 

1,862

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

87,649

 

 

 

87,649

 

 

 

—

 

 

 

87,649

 

 

 

—

 

Net loans

 

 

12,864,012

 

 

 

12,755,360

 

 

 

—

 

 

 

—

 

 

 

12,755,360

 

Derivative assets

 

 

257,137

 

 

 

257,137

 

 

 

—

 

 

 

257,137

 

 

 

—

 

Other assets

 

 

72,719

 

 

 

72,719

 

 

 

—

 

 

 

—

 

 

 

72,719

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

14,742,794

 

 

 

14,753,192

 

 

 

—

 

 

 

14,753,192

 

 

 

—

 

Advances from FHLB

 

 

100,000

 

 

 

100,000

 

 

 

—

 

 

 

100,000

 

 

 

—

 

Senior debt

 

 

49,938

 

 

 

51,202

 

 

 

—

 

 

 

51,202

 

 

 

—

 

Subordinated debt

 

 

182,712

 

 

 

189,386

 

 

 

—

 

 

 

189,386

 

 

 

—

 

Junior subordinated debentures

 

 

37,445

 

 

 

48,012

 

 

 

—

 

 

 

48,012

 

 

 

—

 

Notes payable

 

 

2,078

 

 

 

2,078

 

 

 

—

 

 

 

2,078

 

 

 

—

 

Derivative liabilities

 

 

11,211

 

 

 

11,211

 

 

 

—

 

 

 

11,211

 

 

 

—

 

 

41

 

Note 15—Variable Interest Entities and Other Investments

Under ASC 810-10-65, the Company is deemed to be the primary beneficiary and required to consolidate a variable interest entity (“VIE”) if it has a variable interest in the VIE that provides it with a controlling financial interest. For such purposes, the determination of whether a controlling financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. ASC 810-10-65, as amended, requires continual reconsideration of conclusions reached regarding which interest holder is a VIE’s primary beneficiary.

 

The Bank has invested in several affordable housing projects as a limited partner. The partnerships have qualified to receive annual affordable housing federal tax credits that are recognized as a reduction of current tax expense. The Company has determined that these structures meet the definition of VIE’s under ASC 810 but that consolidation is not required, as the Bank is not the primary beneficiary. At June 30, 2020 and December 31, 2019, the Bank’s maximum exposure to loss associated with these limited partnerships was limited to the Bank’s investment. The Company accounts for these investments and the related tax credits using either the effective yield method or the proportional amortization method, depending upon the date of the investment. Under the effective yield method, the Bank recognizes the tax credits as they are allocated and amortizes the initial costs of the investments to provide a constant effective yield over the period that the tax credits are allocated. Under the proportional amortization method, the Bank amortizes the cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. At June 30, 2020 and December 31, 2019, the Company had recorded investments in other assets on its consolidated balance sheets of approximately $33.9 million and $28.2 million, respectively related to these investments.

Additionally, the Company invests in other certain limited partnerships accounted for under the fair value practical expedient of net asset value (“NAV”) totaling $24.6 million and $18.7 million as of June 30, 2020 and December 31, 2019, respectively. The company recognized $1.0 million and $1.3 million in losses for the three and six months ended June 30, 2020 compared to $0.1 million in losses and $0.7 million in gains for the same periods in 2019 related to these assets recorded at fair value through net income. Certain other limited partnerships without readily determinable fair values that do not qualify for the practical expedient are accounted for at their cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These investments totaled $7.1 million and $8.7 million as of June 30, 2020 and December 31, 2019, respectively. Other limited partnerships are accounted for under the equity method totaling $8.9 million and $9.0 million at June 30, 2020 and December 31, 2019, respectively.

The following table presents a summary of the Company’s investments in limited partnerships as of June 30, 2020 and December 31, 2019:

(In thousands)

June 30, 2020

 

 

December 31, 2019

 

Affordable housing projects (amortized cost)

$

33,856

 

 

$

28,205

 

Limited partnerships accounted for under the fair value practical expedient of NAV

 

24,631

 

 

 

18,742

 

Limited partnerships without readily determinable fair values that do not qualify for the practical expedient of NAV accounted for under the cost method

 

7,086

 

 

 

8,681

 

Limited partnerships required to be accounted for under the equity method

 

8,920

 

 

 

8,951

 

Total investments in limited partnerships

$

74,493

 

 

$

64,579

 

 

Equity investments with readily determinable fair values not held for trading are recorded at fair value with changes in fair value reported in net income. Cadence elected a measurement alternative to fair value for certain equity investments without a readily determinable fair value. As of June 30, 2020, and December 31, 2019, there were no downward and upward adjustments for impairments or price changes from observable transactions, however, due to the current economic environment one investment was determined to be fully impaired and a $1.9 million charge recognized in the second quarter. The carrying amount of equity investments measured under the measurement alternative are as follows:

 

For the Six Months Ended June 30,

 

(In thousands)

2020

 

 

2019

 

Carrying value, Beginning of Year

$

8,681

 

 

$

8,714

 

Reclassifications

 

(1,727

)

 

 

125

 

Net income change

 

49

 

 

 

—

 

Distributions

 

(440

)

 

 

(929

)

Contributions

 

523

 

 

 

1,378

 

Carrying value, End of Period

$

7,086

 

 

$

9,288

 

 

42

Cadence’s investments in certain markable equity securities are carried at fair value and are reported in other assets in the consolidated balance sheets. Total marketable equity securities were $1.8 million and $1.9 million at June 30, 2020 and December 31, 2019, respectively.

During 2016, the Bank received net profits interests in oil and gas reserves, in connection with the reorganization under bankruptcy of two loan customers (one of these was sold during 2018). The Company has determined that these contracts meet the definition of VIE’s under Topic ASC 810, but that consolidation is not required as the Bank is not the primary beneficiary. The net profits interest is a financial instrument and recorded at estimated fair value, which was $3.7 million and $4.3 million at June 30, 2020 and December 31, 2019, respectively, representing the maximum exposure to loss as of that date.

The Company has established a rabbi trust related to the deferred compensation plan offered to certain of its employees. The Company contributes employee cash compensation deferrals to the trust. The assets of the trust are available to creditors of the Company only in the event the Company becomes insolvent. This trust is considered a VIE because either there is no equity at risk in the trust or because the Company provided the equity interest to its employees in exchange for services rendered. The Company is considered the primary beneficiary of the rabbi trust as it has the ability to select the underlying investments made by the trust, the activities that most significantly impact the economic performance of the rabbi trust. The Company includes the assets of the rabbi trust as a component of other assets and a corresponding liability for the associated benefit obligation in other liabilities in its consolidated balance sheets. At June 30, 2020 and December 31, 2019, the amount of rabbi trust assets and benefit obligation was $3.5 million and $3.7 million, respectively.

Note 16—Segment Reporting

The Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to the Company’s financial condition and operating results and management’s regular review of the operating results of those services. The Company operates through three operating segments: Banking, Financial Services and Corporate. Additional information about the Company’s reportable segments is included in Cadence’s Annual Report on Form 10-K for the year ended December 31, 2019.

The Banking Segment includes the Commercial Banking, Retail Banking and Private Banking lines of business. The Financial Services Segment includes the Trust, Retail Brokerage, and Investment Services businesses.

Business segment results are determined based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions or in accordance with generally accepted accounting principles.

The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material inter-segment sales or transfers. In the first quarter of 2020, the Company recognized a $443.7 million non-cash goodwill impairment charge representing all the goodwill allocated to the Banking segment (Note 5). The accounting policies used by each reportable segment are the same as those discussed in Note 1 of the Annual Report on Form 10-K for the year ended December 31, 2019. All costs, except corporate administration and income taxes, have been allocated to the reportable segments. Therefore, combined amounts agree to the consolidated totals.

The following tables present the operating results of the segments as of and for the three and six months ended June 30, 2020 and 2019:

 

 

Three Months Ended June 30, 2020

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

158,440

 

 

$

(58

)

 

$

(3,668

)

 

$

154,714

 

Provision for credit losses

 

 

158,811

 

 

 

—

 

 

 

—

 

 

 

158,811

 

Noninterest income

 

 

18,875

 

 

 

10,966

 

 

 

109

 

 

 

29,950

 

Noninterest expense

 

 

78,982

 

 

 

8,262

 

 

 

1,376

 

 

 

88,620

 

Income tax (benefit) expense

 

 

(13,677

)

 

 

377

 

 

 

6,647

 

 

 

(6,653

)

Net (loss) income

 

$

(46,801

)

 

$

2,269

 

 

$

(11,582

)

 

$

(56,114

)

Total assets

 

$

18,760,701

 

 

$

92,638

 

 

$

4,414

 

 

$

18,857,753

 

43

 

 

 

Three Months Ended June 30, 2019

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

165,832

 

 

$

(592

)

 

$

(4,453

)

 

$

160,787

 

Provision for credit losses

 

 

28,927

 

 

 

—

 

 

 

—

 

 

 

28,927

 

Noninterest income

 

 

23,063

 

 

 

8,444

 

 

 

215

 

 

 

31,722

 

Noninterest expense

 

 

91,266

 

 

 

7,914

 

 

 

1,349

 

 

 

100,529

 

Income tax expense (benefit)

 

 

15,893

 

 

 

(62

)

 

 

(1,124

)

 

 

14,707

 

Net income (loss)

 

$

52,809

 

 

$

—

 

 

$

(4,463

)

 

$

48,346

 

Total assets

 

$

17,371,669

 

 

$

101,028

 

 

$

31,308

 

 

$

17,504,005

 

 

 

 

 

Six Months Ended June 30, 2020

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

315,998

 

 

$

(410

)

 

$

(7,406

)

 

$

308,182

 

Provision for credit losses

 

 

242,240

 

 

 

—

 

 

 

—

 

 

 

242,240

 

Noninterest income (expenses)

 

 

44,217

 

 

 

21,175

 

 

 

(373

)

 

 

65,019

 

Noninterest expense

 

 

607,046

 

 

 

16,974

 

 

 

2,253

 

 

 

626,273

 

Income tax (benefit) expense

 

 

(44,599

)

 

 

473

 

 

 

4,239

 

 

 

(39,887

)

Net (loss) income

 

$

(444,472

)

 

$

3,318

 

 

$

(14,271

)

 

$

(455,425

)

Total assets

 

$

18,760,701

 

 

$

92,638

 

 

$

4,414

 

 

$

18,857,753

 

 

 

 

Six Months Ended June 30, 2019

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

340,228

 

 

$

(1,222

)

 

$

(8,930

)

 

$

330,076

 

Provision for credit losses

 

 

40,137

 

 

 

—

 

 

 

—

 

 

 

40,137

 

Noninterest income

 

 

43,151

 

 

 

18,729

 

 

 

506

 

 

 

62,386

 

Noninterest expense

 

 

188,610

 

 

 

15,547

 

 

 

9,812

 

 

 

213,969

 

Income tax expense (benefit)

 

 

35,754

 

 

 

311

 

 

 

(4,256

)

 

 

31,809

 

Net income (loss)

 

$

118,878

 

 

$

1,649

 

 

$

(13,980

)

 

$

106,547

 

Total assets

 

$

17,371,669

 

 

$

101,028

 

 

$

31,308

 

 

$

17,504,005

 

 

Note 17—Equity-based Compensation

The Company administers a long-term incentive compensation plan that permits the granting of incentive awards in the form of stock options, restricted stock, restricted stock units, performance units, stock appreciation rights, or other stock-based awards. The terms of all awards issued under these plans are determined by the Compensation Committee of the Board of Directors.

The Amended and Restated 2015 Omnibus Incentive Plan (the “Plan”) permits the Company to grant to employees and directors various forms of incentive compensation. The principal purposes of this plan are to focus directors, officers, and other employees and consultants on business performance that creates shareholder value, to encourage innovative approaches to the business of the Company, and to encourage ownership of the Company’s stock. The Plan authorizes 7.5 million common share equivalents available for grant, where grants of full value awards (e.g., shares of restricted stock, restricted stock units and performance stock units) count as one share equivalent. The number of remaining share equivalents available for future issuance under the Plan was 3.4 million at June 30, 2020.

Restricted Stock Units

During the six months ended June 30, 2020 and 2019, the Company granted 772,881 and 1,149,963 shares, respectively, of stock-based awards in the form of restricted stock units pursuant to and subject to the provisions of the Plan. The following table summarizes the activity related to restricted stock unit awards:

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Shares

 

 

Weighted Average Fair Value per Unit at Award Date

 

 

Number of Shares

 

 

Weighted Average Fair Value per Unit at Award Date

 

Non-vested at beginning of period

 

 

1,229,863

 

 

$

19.97

 

 

 

273,354

 

 

$

26.49

 

Granted during the period

 

 

772,881

 

 

 

7.80

 

 

 

1,149,963

 

 

 

18.51

 

Vested during the period

 

 

(198,075

)

 

 

20.03

 

 

 

(81,377

)

 

 

22.53

 

Forfeited during the period

 

 

(60,788

)

 

 

19.40

 

 

 

(53,816

)

 

 

20.57

 

Non-vested at end of period

 

 

1,743,881

 

 

$

14.59

 

 

 

1,288,124

 

 

$

19.86

 

 

44

The restricted stock units granted include both time and performance-based components. Of the time-based restricted stock units granted and remaining at June 30, 2020:

 

•

41,843 units will vest in annual installments ending in the first quarter of 2021;

 

•

2,116 units will vest in annual installments ending in the third quarter of 2021;

 

•

242,641 units will vest in quarterly installments ending in the first quarter of 2022;

 

•

29,181 units will cliff-vest in the first quarter of 2022;

 

•

48,562 units will vest in annual installments ending in the first quarter of 2022;

 

•

177,041 units will vest in annual installments ending in the first quarter of 2023;

 

•

5,252 units will vest in annual installments ending in the second quarter of 2023;

 

•

9,901 units will vest in annual installments ending in the third quarter of 2023;

 

•

764,976 units will vest in annual installments ending in the first quarter of 2024; and

 

•

4,000 units will vest in quarterly installments ending in the second quarter of 2021.

While the grants specify a stated target number of units, the determination of the actual settlement in shares will be based in part on the achievement of certain financial performance measures of the Company. For the performance-based restricted stock units granted, these performance conditions will determine the actual units vesting and can be in the range of 25% to 200% of the units granted. These grants include rights as a shareholder in the form of dividend equivalents. Dividend equivalents for time vested restricted stock units will be paid on each dividend payment date for the Company; dividend equivalents for the performance vesting restricted stock will be accrued and paid on the vested number of shares once the performance is achieved and the shares are issued. The fair value of the restricted stock units was estimated based upon the fair value of the underlying shares on the date of the grant.

The Company recorded $1.2 million and $2.3 million of equity-based compensation expense for the outstanding restricted stock units for the three and six months ended June 30, 2020, respectively, compared to $2.7 million and $3.6 million for the three and six months ended June 30, 2019, respectively. The remaining expense related to unvested restricted stock units is $19.0 million as of June 30, 2020 and will be recognized over service periods ranging from 3 months to 45 months.

Stock Options

During the six months ended June 30, 2020 and 2019, the Company granted zero and 1,602,848 stock options, respectively, to certain executive officers. The options were granted at an exercise price equal to a 15% premium to the fair value of the common stock at the date of grant with a weighted-average exercise price of $20.43. The options vest over a three-year period and expire at the end of seven years. During the six months ended June 30, 2020, 534,283 stock options vested. The Company recorded $309 thousand and $618 thousand of equity-based compensation expense for the outstanding stock options for the three and six months ended June 30, 2020, respectively, compared to $309 thousand and $561 thousand for the three and six months ended June 30, 2019, respectively. The remaining expense related to non-vested stock option grants is $1.9 million at June 30, 2020 and will be recognized over the next 19 months.

The Company used the Black-Scholes option pricing model to estimate the fair value of the stock options. See Note 23 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2019 for a description of the assumptions used for stock option awards issued during 2019.

Employee Stock Purchase Plan

On June 1, 2018, the Company commenced the 2018 Employee Stock Purchase Plan (“ESPP”) whereby employees may purchase the Company’s Class A common stock at a discount of 15% of the fair market value of a share of Class A common stock, defined as the closing price of Class A common stock on the NYSE for the first and last days of the purchase period (as defined in the ESPP). The total amount of the Company’s Class A common stock on which options may be granted under the ESPP shall not exceed 500,000 shares. Shares of Class A common stock subject to any unexercised portion of a terminated, canceled or expired option granted under the ESPP may again be used for options under the ESPP. No participating employee shall have any rights as a shareholder until the issuance of a stock certificate to the employee. There were 117,481 shares and 51,089 shares of Class A common stock purchased in the open market by the ESPP during the six months ended June 30, 2020 and 2019, respectively, which resulted in compensation expense of $31 thousand and $45 thousand for the three and six months ended June 30, 2020, respectively, compared to $80 thousand and $172 thousand for the three and six months ended June 30, 2019, respectively.

45

Note 18—Accumulated Other Comprehensive Income (Loss)

Activity within the balances in accumulated other comprehensive income (loss) is shown in the following tables for the six months ended June 30, 2020 and 2019.

 

 

Six Months Ended June 30, 2020

 

(In thousands)

 

Unrealized gains on securities available for sale

 

 

Unrealized gains on derivative instruments designated as cash flow hedges

 

 

Unrealized gains on defined benefit pension plans

 

 

Accumulated other comprehensive income

 

Balance at December 31, 2019

 

$

19,605

 

 

$

95,097

 

 

$

—

 

 

$

114,702

 

Net change

 

 

48,929

 

 

 

109,829

 

 

 

—

 

 

 

158,758

 

Balance at June 30, 2020

 

$

68,534

 

 

$

204,926

 

 

$

—

 

 

$

273,460

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

Unrealized gains (losses) on securities available for sale

 

 

Unrealized gains (losses) on derivative instruments designated as cash flow hedges

 

 

Unrealized gains (losses) on defined benefit pension plans

 

 

Accumulated other comprehensive income (loss)

 

Balance at December 31, 2018

 

$

(24,279

)

 

$

(18,305

)

 

$

(328

)

 

$

(42,912

)

Net change

 

 

40,589

 

 

 

115,457

 

 

 

—

 

 

 

156,046

 

Balance at June 30, 2019

 

$

16,310

 

 

$

97,152

 

 

$

(328

)

 

$

113,134

 

 

Note 19—Subsequent Events

On July 21, 2020, the Board of Directors of Cadence Bancorporation approved a quarterly cash dividend in the amount of $0.05 per share of outstanding common stock, representing an annualized dividend of $0.20 per share. The dividend will be paid on August 7, 2020 to holders of record of Cadence’s Class A common stock on July 31, 2020.

On August 7, 2020, the District Court, in the consolidated case captioned Frank Miller et al. v. Cadence Bancorporation et al., Case No. H-19-3492-LNH, granted the defendants’ motion to dismiss and entered a final judgment dismissing the case in its entirety, with prejudice. See Note 13 for additional detail.

46

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

General

The following discussion and analysis presents our results of operations and financial condition on a consolidated basis for the three and six months ended June 30, 2020. This discussion should be read in conjunction with the unaudited consolidated financial statements, accompanying notes, and supplemental financial data included herein. The emphasis of this discussion will be amounts as of June 30, 2020 compared to December 31, 2019 for the balance sheets and the three and six months ended June 30, 2020 compared to June 30, 2019 for the statements of operations.

Because we conduct our material business operations through our bank subsidiary, Cadence Bank, N.A., the discussion and analysis relates to activities primarily conducted by the Bank. We generate most of our revenue from interest on loans and investments and fee-based revenues. Our primary source of funding for our loans is deposits. Our largest expenses are interest on these deposits and salaries and related employee benefits. We measure our performance primarily through our net income, pre-tax and pre-loan provision earnings, net interest margin, efficiency ratio, ratio of allowance for credit losses to total loans, return on average assets and return on average equity, among other metrics, while maintaining appropriate regulatory leverage and risk-based capital ratios.

This Quarterly Report on Form 10-Q contains forward-looking statements. 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.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

 

•

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;

 

•

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;

 

•

our ability to monitor our lending relationships;

 

•

the composition of our loan portfolio, including the identity of our borrowers and the concentration of loans in our energy-related industries and 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;

 

•

our ability to identify potential candidates for, consummate, and achieve synergies resulting from, potential future acquisitions;

 

•

any interruption or breach of security resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems;

 

•

environmental liability associated with our lending activities;

 

•

the geographic concentration of our markets in Texas and the southeast United States;

 

•

the commencement and outcome of litigation and other legal proceedings against us or to which we may become subject;

47

 

•

changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, including, but not limited to, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection, and the ability to comply with such changes in a timely manner;

 

•

changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Federal Reserve Board;

 

•

requirements to remediate adverse examination findings;

 

•

changes in the scope and cost of FDIC deposit insurance premiums;

 

•

implementation of regulatory initiatives regarding bank capital requirements that may require heightened capital;

 

•

the obligations associated with being a public company;

 

•

changes in accounting principles, policies, practices, or guidelines;

 

•

the discontinuation of the London Interbank Offered Rate (“LIBOR”) and other reference rates;

 

•

our success at managing the risks involved in the foregoing items;

 

•

our modeling estimates related to an increased interest rate environment;

 

•

natural disasters, war, or terrorist activities; a pandemic, or the outbreak of COVID-19 or similar outbreak;

 

•

adverse effects due to COVID-19 on us and our customers, counterparties, employees, and third-party service providers, and the adverse impacts to our business, financial position, results of operations, and prospects; or

 

•

other economic, competitive, governmental, regulatory, technological, and geopolitical factors affecting our operations, pricing, and services.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Overview

Cadence Bancorporation is a financial holding company and a Delaware corporation headquartered in Houston, Texas, and is the parent company of Cadence Bank, N.A. With $18.9 billion in assets, $13.7 billion in total loans (net of unearned discounts and fees), $16.1 billion in deposits and $2.0 billion in shareholders’ equity as of June 30, 2020, we currently operate a network of 98 locations across Texas, Georgia, Alabama, Florida, Mississippi, and Tennessee. We focus on middle-market commercial lending, complemented by retail banking and wealth management services, and provide a broad range of banking services to businesses, high net worth individuals and business owners.

During the first six months of 2020, the global economy experienced a downturn related to the impacts of the COVID-19 global pandemic (“COVID-19”). Such impacts included significant volatility in the global stock markets, a 150-basis-point reduction in the target federal funds rate, the enactment of the Coronavirus Aid, Relief, and Economic Security (“CARES Act”), including the Paycheck Protection Program (“PPP”) administered by the Small Business Administration, and a variety of rulings from our banking regulators.

We continue to actively monitor developments related to COVID-19 and its impact to our business, customers, employees, counterparties, vendors, and service providers. During the first half of 2020, the most notable financial impacts to the our results of operations included a non-cash goodwill impairment charge and higher provision for credit losses primarily as a result of deterioration in macroeconomic variables such as unemployment, GDP and real estate prices, which are incorporated into our economic forecasts utilized to calculate our allowance for credit losses.

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In response to the COVID-19 pandemic, we have taken several actions to offer various forms of support to our customers, employees, and communities that have experienced impacts from this development. We are actively working with customers impacted by the economic downturn, offering payment deferrals and other loan modifications. As of June 30, 2020, we have outstanding balances of $1.9 billion in total COVID-19 related modifications, including $1.4 billion or 10% of loans representing active payment deferrals and $0.5 billion representing non-payment deferral loan modifications. The $1.4 billion of active payment deferrals included $295 million in Residential Real Estate; $307 million in Restaurant Industry; $230 million in General C&I; $226 in CRE-Industrial, Retail, and Other; and $108 million in Hospitality, with the remainder spread throughout other portfolios. As of July 31, 2020, the amount of loans with active payment deferrals declined to $671 million, of which $187 million are second deferrals (generally 90-day) and $484 million are first deferrals. The $671 million of active payment deferrals at July 31, 2020 included $128 million in Residential Real Estate; $114 million in Hospitality; $105 million in General C&I; $108 million in CRE-Industrial, Retail and Other; and $65 million in Restaurant Industry, with the remainder spread throughout other portfolios. The remaining first payment deferrals expire primarily in the third quarter of 2020. The vast majority of these loans are currently eligible for exemption from the accounting guidance for TDRs (see Note 4 to the consolidated financial statements and “- Asset Quality – Loan Modifications Related to COVID-19”).

Additionally, through June 30, 2020, we have originated $1.0 billion to approximately 4,100 customers under the PPP of which the majority have been to customers in general C&I and Restaurant portfolios. (See Table 17 – Paycheck Protection Program).

Considering the volatility in the capital markets and economic disruptions, we continue to carefully monitor our capital and liquidity positions, both of which have continued to reflect excess balances and capital levels well over regulatory requirements. In March 2020, the U.S. banking agencies issued an interim final rule that provides banking organizations with an alternative option to delay for two years an estimate of CECL's effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period. We elected this alternative option instead of the one described in the December 2018 rule previously issued by banking agencies.

We operate Cadence Bancorporation through three operating segments: Banking, Financial Services and Corporate. Our Banking Segment, which represented approximately 96% of our total revenues for the six months ended June 30, 2020, consists of our Commercial Banking, Retail Banking and Private Banking lines of business. Considering the economic conditions resulting from the COVID-19 pandemic, we conducted an interim goodwill impairment test as of March 31, 2020. The 2020 interim test indicated a goodwill impairment of $443.7 million within the Bank reporting unit resulting in the Company recording an impairment charge of the same amount in the Banking segment for the first quarter of 2020. The primary causes of the goodwill impairment in the Bank reporting unit were economic and industry conditions resulting from COVID-19 that caused volatility and reductions in our market capitalization and our peer banks, increased loan provision estimates, increased discount rates and other changes in variables driven by the uncertain macro-environment that resulted in the estimated fair value of the reporting unit being less than the reporting unit’s carrying value.

Within our Commercial Banking line of business, we focus on select industries, which we refer to as our “specialized industries,” in which we believe we have specialized experience and service capabilities. These industries include franchise restaurant, healthcare, and technology. Energy lending is also an important part of our business as energy production and energy related industries are meaningful contributors to the economy in our Texas market. In our Retail Banking business line, we offer a broad range of banking services through our branch network to serve the needs of consumers and small businesses. In our Private Banking business line, we offer banking services, such as deposit services and residential mortgage lending. Our Financial Services Segment includes our Trust, Retail Brokerage, and Investment Services. These businesses offer products independently to their own customers as well as to Banking Segment clients. Investment Services operates through the “Linscomb & Williams” name. The products offered by the businesses in our Financial Services Segment primarily generate non-banking service fee income. Our Corporate Segment reflects parent-only activities, including debt and capital raising, and intercompany eliminations.

We believe that our franchise is positioned for success as a result of prudent lending in our markets through experienced relationship managers and a client-centered, relationship-driven banking model. We believe our success is supported by (i) our attractive geographic footprint, (ii) our stable and efficient deposit funding provided by our acquired franchises (each of which was a long-standing institution with an established customer network), (iii) our veteran board of directors and management team, (iv) our capital position and (v) our credit quality and risk management processes.

Selected Financial Data

The following table summarizes certain selected consolidated financial data for the periods presented. The historical consolidated financial information presented below contains financial measures that are not presented in accordance with U.S. GAAP and which have not been audited. See “Table 29 – Non-GAAP Financial Measures.”


49

Table 1 – Selected Financial Data

 

 

As of and for the Three Months Ended June 30,

 

 

As of and for the Six Months Ended June 30,

 

 

As of and for the Year Ended December 31,

 

 

(In thousands, except share and per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2019

 

 

Statement of Income Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(56,114

)

 

$

48,346

 

 

$

(455,425

)

 

$

106,547

 

 

$

201,958

 

 

Net interest income

 

 

154,714

 

 

 

160,787

 

 

 

308,182

 

 

 

330,076

 

 

 

651,173

 

 

Noninterest income

 

 

29,950

 

 

 

31,722

 

 

 

65,019

 

 

 

62,386

 

 

 

130,925

 

 

Noninterest expense (3)

 

 

88,620

 

 

 

100,529

 

 

 

626,273

 

 

 

213,969

 

 

 

408,770

 

 

Provision for credit losses

 

 

158,811

 

 

 

28,927

 

 

 

242,240

 

 

 

40,137

 

 

 

111,027

 

 

Efficiency ratio (1)

 

 

47.99

 

%

 

52.22

 

%

 

167.81

 

%

 

54.52

 

%

 

52.27

 

%

Adjusted efficiency ratio (1)

 

 

47.93

 

%

 

49.97

 

%

 

48.92

 

%

 

48.05

 

%

 

48.64

 

%

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) earnings - basic

 

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 

 

$

1.56

 

 

(Loss) earnings - diluted

 

 

(0.45

)

 

 

0.37

 

 

 

(3.61

)

 

 

0.82

 

 

 

1.56

 

 

Book value per common share

 

 

16.24

 

 

 

18.84

 

 

 

16.24

 

 

 

18.84

 

 

 

19.29

 

 

Tangible book value (1)

 

 

15.15

 

 

 

14.21

 

 

 

15.15

 

 

 

14.21

 

 

 

14.65

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

125,924,652

 

 

 

128,791,933

 

 

 

126,277,549

 

 

 

129,634,049

 

 

 

128,913,962

 

 

Diluted

 

 

125,924,652

 

 

 

129,035,553

 

 

 

126,277,549

 

 

 

129,787,758

 

 

 

129,017,599

 

 

Cash dividends declared

 

$

0.050

 

 

$

0.175

 

 

$

0.225

 

 

$

0.350

 

 

$

0.700

 

 

Dividend payout ratio

 

 

(11.11

)

%

 

47.30

 

%

 

(6.23

)

%

 

42.68

 

%

 

44.87

 

%

Performance Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average common equity (2)

 

 

(10.65

)

%

 

8.32

 

%

 

(40.12

)

%

 

9.39

 

%

 

8.51

 

%

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

 

 

(10.56

)

 

 

12.23

 

 

 

(3.57

)

 

 

13.83

 

 

 

12.40

 

 

Return on average assets (2)

 

 

(1.22

)

 

 

1.10

 

 

 

(5.06

)

 

 

1.22

 

 

 

1.14

 

 

Net interest margin (2)

 

 

3.51

 

 

 

3.97

 

 

 

3.67

 

 

 

4.09

 

 

 

4.00

 

 

Period-End Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities, available-for-sale

 

$

2,661,433

 

 

$

1,684,847

 

 

$

2,661,433

 

 

$

1,684,847

 

 

$

2,368,592

 

 

Total loans, net of unearned income

 

 

13,699,097

 

 

 

13,627,934

 

 

 

13,699,097

 

 

 

13,627,934

 

 

 

12,983,655

 

 

Allowance for credit losses ("ACL")

 

 

370,901

 

 

 

115,345

 

 

 

370,901

 

 

 

115,345

 

 

 

119,643

 

 

Total assets

 

 

18,857,753

 

 

 

17,504,005

 

 

 

18,857,753

 

 

 

17,504,005

 

 

 

17,800,229

 

 

Total deposits

 

 

16,069,282

 

 

 

14,487,821

 

 

 

16,069,282

 

 

 

14,487,821

 

 

 

14,742,794

 

 

Total shareholders’ equity

 

 

2,045,480

 

 

 

2,426,072

 

 

 

2,045,480

 

 

 

2,426,072

 

 

 

2,460,846

 

 

Asset Quality Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

1.74

 

%

 

0.85

 

%

 

1.74

 

%

 

0.85

 

%

 

0.97

 

%

Total ACL to total loans

 

 

2.71

 

 

 

0.85

 

 

 

2.71

 

 

 

0.85

 

 

 

0.92

 

 

ACL to total nonperforming loans ("NPLs")

 

 

165.30

 

 

 

106.08

 

 

 

165.30

 

 

 

106.08

 

 

 

100.07

 

 

Net charge-offs to average loans (2)

 

 

0.94

 

 

 

0.54

 

 

 

0.97

 

 

 

0.28

 

 

 

0.63

 

 

Capital Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders’ equity to assets

 

 

10.8

 

%

 

13.9

 

%

 

10.8

 

%

 

13.9

 

%

 

13.8

 

%

Tangible common equity to tangible assets (1)

 

 

10.2

 

 

 

10.8

 

 

 

10.2

 

 

 

10.8

 

 

 

10.9

 

 

Common equity tier 1 (CET1)

 

 

11.7

 

 

 

10.9

 

 

 

11.7

 

 

 

10.9

 

 

 

11.5

 

 

Tier 1 leverage capital

 

 

9.5

 

 

 

10.3

 

 

 

9.5

 

 

 

10.3

 

 

 

10.3

 

 

Tier 1 risk-based capital

 

 

11.7

 

 

 

10.9

 

 

 

11.7

 

 

 

10.9

 

 

 

11.5

 

 

Total risk-based capital

 

 

14.3

 

 

 

12.9

 

 

 

14.3

 

 

 

12.9

 

 

 

13.7

 

 

 

(1) Considered a non-GAAP financial measure. See “Table 29 – Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

(2) Annualized.

(3) The first six months of 2020 includes the non-cash goodwill impairment charge of $443.7 million in noninterest income, $412.9 million after-tax that was recognized in the first quarter of 2020.

50

Summary of Results of Operations – Three and Six months ended June 30, 2020

Net (loss) income for the three months ended June 30, 2020 totaled ($56.1) million compared to $48.3 million for the same period in 2019. The second quarter net decrease resulted from an increase in provision for credit losses as a result from degradation of economic forecasts, depressed energy markets and COVID-19 driven stress. The resulting (loss) earnings per diluted common share for the three months ended June 30, 2020 were ($0.45) compared to $0.37 for the same period in 2019.

Net (loss) income for the six months ended June 30, 2020 totaled ($455.4) million, a $562.0 million or 527.4% decrease compared to $106.5 million for the same period in 2019. The primary drivers of the decrease included a non-cash goodwill impairment charge of $412.9 million, net of tax, that was incurred in the first quarter of 2020. Diluted (loss) earnings per common share for the six months ended June 30, 2020 were ($3.61) compared to $0.82 for the same period in 2019.

The second quarter and year-to-date periods of 2020 and 2019 included non-routine revenues and expenses, primarily consisting of the non-cash goodwill impairment charge, merger related expenses, and expenses related to COVID-19. Excluding these non-routine expenses adjusted net (loss) income(1) was ($56.9) million, or ($0.45) per share, and ($44.5) million, or ($0.35) per share, for the three and six months ended June 30, 2020, and $51.3 million, or $0.40 per share, and $126.7 million, or $0.98 per share, for the comparable periods of 2019.

Annualized returns on average assets, common equity and tangible common equity(1) for the second quarter of 2020 were (1.22)%, (10.65)%, and (10.56)%(1) compared to 1.10%, 8.32%, and 12.23%(1) for the same period of 2019, respectively. Annualized returns on average assets, common equity and tangible common equity(1) for the six months ended June 30, 2020 were (5.06)%, (40.12)% and (3.57)% compared to 1.22%, 9.39% and 13.83% for the comparable period of 2019, respectively.

Adjusted returns(1) on average assets, common equity, and tangible common equity for the second quarter of 2020 were (1.24)%, (10.81)%, and (10.73)% compared to 1.17%, 8.86%, and 12.96% for the same period of 2019, respectively. Adjusted returns on average assets, common equity, and tangible common equity exclude the impact of the non-routine items noted above. Adjusted annualized returns on average assets, common equity, and tangible common equity(1) for the six months ended June 30, 2020 were (0.49)%, (3.92)%, and (3.77)% compared to 1.45%, 11.21%, and 16.29% for the comparable period of 2019, respectively.

Net interest income was $154.7 million for the three months ended June 30, 2020, a $6.1 million or 3.8% decrease compared to the same period of 2019. Our net interest spread decreased to 3.23% for the three months ended June 30, 2020 compared to 3.45% for the same period in 2019. Our fully tax-equivalent net interest margin (“NIM”) for the second quarter of 2020 was 3.51% as compared to 3.97% for the second quarter of 2019. The decrease in NIM reflects the impact of lower interest rates, lower yielding PPP loans and securities, and lower accretion income on acquired loans. The gain on our collar transaction and our deposit cost management continue to provide a strong foundation to our NIM.

Net interest income was $308.2 million for the six months ended June 30, 2020, a $21.9 million or 6.6% decrease compared to the same period of 2019. Our net interest spread decreased to 3.29% for the six months ended June 30, 2020 compared to 3.58% for the same period in 2019, and the net interest margin on an annualized basis decreased 42 basis points to 3.67% from 4.09%.

Provision for credit losses increased $129.9 million to $158.8 million in the three months ended June 30, 2020, compared to $28.9 million in the same period in 2019. Provision for credit losses increased $202.1 million for the six months ended June 30, 2020 compared to the same period of 2019 (see “—Provision for Credit Losses” and “—Asset Quality”). Both the three and six -month provision amounts reflect the forecasted effects of COVID-19 on the various loan segments due to higher unemployment, lower GDP, market value, energy prices, and real estate prices. The second quarter 2020 provision was affected by credit migration as well as a negative shift in the outlook for commercial real estate and a slower expected recovery. Our calculation for the ACL in the 2020 periods was impacted by the adoption of CECL, and used the baseline economic scenario provided by a nationally recognized service, as adjusted for qualitative and environmental factors. Annualized net charge-offs were 0.94% and 0.54% of average loans for the three months ended June 30, 2020 and 2019, respectively, and 0.97% and 0.28% for the six months ended June 30, 2020 and 2019, respectively.

Noninterest expense for the three months ended June 30, 2020 was $88.6 million, a decrease of $11.9 million or 11.8% from the same period in 2019 and a decrease of $5.3 million or 5.7% from the first quarter of 2020. Adjusted noninterest expense(1), which excludes the impact of non-routine items(1), was $87.4 million, a decrease of $8.6 million or 8.9% from the same period in 2019 and excluding goodwill impairment change, down $4.4 million or 13.8% from the first quarter of 2020. The year over year declines were driven by lower intangible amortization and lower incentive accruals.

Noninterest expense excluding goodwill impairment charge for the six months ended June 30, 2020 was $182.6 million, a decrease of $31.4 million or 14.7% from the same period in 2019. Adjusted noninterest expense(1), which excludes the impact of non-routine items(1), was $180.0 million, down $7.4 million or 4.0% from the same period in 2019.

Our efficiency ratio(1) was 47.99% for the three months ended June 30, 2020, compared to 52.22% efficiency ratio for that same period of 2019. For the six months ended June 30, 2020, our efficiency ratio, excluding the goodwill impairment charge, was 48.92% compared to 54.52% for the same period of 2019.

51

Our adjusted efficiency ratio(1) was 47.93% for the three months ended June 30, 2020, compared to 49.97% for the same period of 2019. Our adjusted efficiency ratio(1) was 48.92% for the six months ended June 30, 2020, compared to 48.05% for the same period of 2019. Adjusted efficiency ratios exclude the impact of the non-routine items.

 

(1) Considered a non-GAAP financial measure. See “Table 29 – Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

Summary of Financial Condition as of June 30, 2020

Our cash and cash equivalents at June 30, 2020 totaled $1.9 billion as compared to $0.8 billion at June 30, 2019 and compared to $0.6 billion at March 31, 2020. The $1.3 billion increase in the second quarter of 2020 resulted from the increase of $1.6 billion in deposits during this quarter.

Our total loans, net of unearned income, increased $715.4 million or 5.5%, from December 31, 2019 to $13.7 billion at June 30, 2020. The increases in loan balances during the first six months of 2020 was driven by $1.0 billion in Paycheck Protection Program (“PPP”) loan originations partially offset by payoffs and paydowns. The average amount of each originated PPP loan was approximately $251,000. The declines were driven by reductions in the C&I segment, including paydowns of defensive draws taken in March, and strategic declines in the restaurant, energy and leveraged loan sectors as we work to reduce select exposures. Shrinkage in the C&I loan segment may continue due to softer demand resulting from the economic conditions caused by the COVID-19 pandemic.

Total nonperforming assets (“NPA”) as a percent of total loans, OREO and other NPA increased to 1.74% compared to 0.97% as of December 31, 2019. NPA totaled $238.3 million as of June 30, 2020, compared to $125.5 million as of December 31, 2019. The adoption of CECL resulted in additional NPL in the purchased credit deteriorated (“PCD”) population that were previously considered performing when accounted for in a pool under prior accounting methodology versus individually under CECL. Had CECL been in place at December 31, 2019, the amount of these PCD loans would have been $43.0 million.

Our allowance for credit losses (“ACL”) increased $251.3 million, or 210.0%, to $370.9 million at June 30, 2020, and represented approximately 2.71% of total loans at June 30, 2020 and 0.92% at December 31, 2019. Excluding PPP loans, our ACL was 2.93% of total loans at June 30, 2020. Upon our adoption of CECL on January 1, 2020, we recorded an increase of $76.2 million or 63.4% to our ACL and reserve for unfunded commitments.

Total deposits increased $1.3 billion, or 9.0%, to $16.1 billion at June 30, 2020, from $14.7 billion at December 31, 2019. Over the same period, noninterest-bearing deposits increased $1.39 billion, or 36.2%, and comprised 32.5% and 26.0% of total deposits at June 30, 2020 and December 31, 2019, respectively. During the first six months of 2020, core deposit increases reflect customers maintaining additional liquidity in the current environment and broader impacts of fiscal stimulus. There was an increase in brokered deposits of $392.4 million from December 31, 2019 bringing the ratio of brokered deposits to total deposits to 3.7%.

Our Tier 1 leverage ratio decreased 83 basis points, Tier 1 risk-based capital increased 15 basis points, and total risk-based capital ratio increased 61 basis points from December 31, 2019. We met all capital adequacy requirements and the Bank continued to exceed the requirements to be considered well-capitalized under regulatory guidelines as of June 30, 2020.

Results of Operations

Earnings

For the three and six months ended June 30, 2020, the Company reported net losses of ($56.1) million and ($455.4) million compared to net income of $48.3 million and $106.5 million for the same periods of 2019, respectively. The following table presents key earnings data for the periods:


52

Table 2 – Key Earnings Data

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

 

June 30,

 

 

June 30,

 

 

 

(In thousands, except per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

Net (loss) income

 

$

(56,114

)

 

$

48,346

 

 

$

(455,425

)

 

$

106,547

 

 

 

Net (loss) income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Basic

 

 

(0.45

)

 

 

0.37

 

 

 

(3.61

)

 

 

0.82

 

 

 

- Diluted (1)

 

 

(0.45

)

 

 

0.37

 

 

 

(3.61

)

 

 

0.82

 

 

 

Dividends declared per share

 

 

0.050

 

 

 

0.175

 

 

 

0.225

 

 

 

0.350

 

 

 

Dividend payout ratio

 

 

(11.11

)

%

 

47.30

 

%

 

(6.23

)

%

 

42.68

 

%

 

Net interest margin (2)

 

 

3.51

 

 

 

3.97

 

 

 

3.67

 

 

 

4.09

 

 

 

Net interest spread (2)

 

 

3.23

 

 

 

3.45

 

 

 

3.29

 

 

 

3.58

 

 

 

Return on average assets (2)

 

 

(1.22

)

 

 

1.10

 

 

 

(5.06

)

 

 

1.22

 

 

 

Return on average common equity (2)

 

 

(10.65

)

 

 

8.32

 

 

 

(40.12

)

 

 

9.39

 

 

 

Return on average tangible common equity (2)(3)

 

 

(10.56

)

 

 

12.23

 

 

 

(3.57

)

 

 

13.83

 

 

 

(1) For three and six months ended June 30, 2020, there were no common stock equivalents as these were anti-dilutive. As of three and six months ended June 30, 2019, common stock equivalents of 243,620 and 153,709, respectively, were included.

(2) Annualized.

(3) Considered a non-GAAP financial measure. See “Table 29 – Non-GAAP Financial Measures” for a reconciliation of the non-GAAP measures to the most directly comparable GAAP financial measure.

 

Net Interest Income

 

The largest component of our net income is net interest income, which is the difference between the income earned on interest earning assets and interest paid on deposits and borrowings. We manage our interest-earning assets and funding sources to maximize our net interest margin. (See “—Quantitative and Qualitative Disclosures about Market Risk” for a discussion regarding our interest rate risk.) Net interest income is determined by the rates earned on our interest-earning assets, rates paid on our interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities, the degree of mismatch and the maturity and re-pricing characteristics of our interest-earning assets and interest-bearing liabilities. Net interest income divided by average interest-earning assets represents our net interest margin. The yield on our net earning assets less the yield on our interest-bearing liabilities represents our net interest spread.

Interest earned on our loan portfolio is the largest component of our interest income. Our originated and acquired non-credit impaired loans (“ANCI”) portfolios are presented at the principal amount outstanding net of deferred origination fees and unamortized discounts and premiums. Interest income is recognized based on the principal balance outstanding and the stated rate of the loan. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. ANCI loans acquired through our acquisitions are initially recorded at fair value. Discounts or premiums created when the loans were recorded at their estimated fair values at acquisition are being accreted or amortized over the remaining term of the loan as an adjustment to the related loan’s yield (see “Note 2—Business Combinations” to our consolidated financial statements for additional information related to the State Bank acquisition).

With the adoption of CECL, we measured the Day 1 amortized cost of our current Purchased Credit Deteriorated (“PCD”) assets by adding the Day 1 estimate of expected credit losses under the CECL impairment model to the loans’ Day 1 carrying value (or initial remaining purchase price). Because the initial estimate for expected credit losses for PCD loans is added to the carrying value to establish the Day 1 amortized cost, PCD accounting is commonly referred to as a “gross-up” approach. There was no capital impact recognized Day 1 on our PCD loans, rather the “gross-up” was offset by the establishment of the initial allowance. Under CECL, interest income for a PCD asset is recognized using the effective interest rate (“EIR”) calculated at initial measurement. This EIR is determined by equating the amortized cost basis of the instrument to its contractual cash flows, consistent with ANCI loans. Noncredit-related discount or premium on the PCD loans is accreted or amortized, using the EIR. Interest earned on PCD loans is reflected through interest income where it was previously considered in ACI loan accretion based on expected cash flows. The prior period numbers in Table 3 have been revised to be comparable to the 2020 presentation (the total interest income on PCD loans has not changed.). The yield on our PCD portfolio for the three months ended June 30, 2020, excluding accretion was 6.30% compared to 3.84% for the three months ended June 30, 2019. The yield on our PCD portfolio for the six months ended June 30, 2020, excluding accretion was 5.96% compared to 4.32% for the six months ended June 30, 2019. This increase is related to certain PCD loans that were previously accounted for within pools before the adoption of CECL returning to an individual accruing status.

53

The following table summarizes the amount of interest income related to our originated, ANCI, and PCD portfolios for the periods presented:

Table 3 – Interest Income on Loan Portfolios

 

For the Three Months Ended

For the Six Months Ended

 

 

(In thousands)

June 30,

2020

 

 

June 30,

2019

 

 

June 30, 2020

 

 

June 30, 2019

 

 

Interest Income Detail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

$

125,922

 

 

$

135,946

 

 

$

255,324

 

 

$

271,761

 

 

ANCI loans: interest income

 

26,264

 

 

 

49,095

 

 

 

59,205

 

 

 

100,204

 

 

ANCI loans: accretion

 

6,703

 

 

 

6,171

 

 

 

14,413

 

 

 

18,649

 

 

PCD loans: interest income (1)

 

3,111

 

 

 

2,781

 

 

 

6,150

 

 

 

6,343

 

 

PCD loans: accretion (1)

 

854

 

 

 

8,017

 

 

 

2,897

 

 

 

10,805

 

 

Total loan interest income

$

162,854

 

 

$

202,011

 

 

$

337,988

 

 

$

407,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yields

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

 

4.53

 

%

 

5.43

 

%

 

4.80

 

%

 

5.52

 

%

ANCI loans without discount accretion

 

4.20

 

 

 

5.49

 

 

 

4.54

 

 

 

5.55

 

 

ANCI loans discount accretion

 

1.08

 

 

 

0.69

 

 

 

1.11

 

 

 

1.04

 

 

PCD loans without discount accretion

 

6.30

 

 

 

3.84

 

 

 

5.96

 

 

 

4.32

 

 

PCD loans discount accretion

 

1.73

 

 

 

11.06

 

 

 

2.81

 

 

 

7.36

 

 

Total loan yield

 

4.72

 

%

 

5.82

 

%

 

5.03

 

%

 

5.93

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

For the individual components, prior quarter PCD amounts have been revised to be comparable to the current quarter presentation. The total amount for PCD loans has not changed. Interest income for PCD loans represents contractual interest.

 

 

Three Months Ended June 30, 2020 and 2019

Our net interest income, fully-tax equivalent (“FTE”), for the three months ended June 30, 2020 and 2019 was $155.1 million and $161.2 million, respectively, a decrease of $6.1 million. Our net interest margin for the three months ended June 30, 2020 and 2019 was 3.51% and 3.97%, respectively, a decrease of 46 basis points. The net interest margin for the three months ended June 30, 2020 was impacted by the addition of PPP loans averaging $663.6 million at an annualized yield of 2.37%. The following table sets forth the components of our FTE net interest income with the effect that the varying levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the three months ended June 30, 2020:

54

Table 4 - Rate/Volume Analysis

 

 

Three Months Ended June 30,

 

 

 

Net Interest Income

 

 

Increase

 

 

Changes Due To (1)

 

(In thousands)

 

2020

 

 

2019

 

 

(Decrease)

 

 

Rate

 

 

Volume

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

 

$

125,922

 

 

$

135,946

 

 

$

(10,024

)

 

$

(24,088

)

 

$

14,064

 

ANCI portfolio

 

 

32,967

 

 

 

55,266

 

 

 

(22,299

)

 

 

(7,310

)

 

 

(14,989

)

PCD portfolio (3)

 

 

3,965

 

 

 

10,799

 

 

 

(6,834

)

 

 

(4,052

)

 

 

(2,782

)

Interest on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

12,207

 

 

 

10,298

 

 

 

1,909

 

 

 

(2,534

)

 

 

4,443

 

Tax-exempt (2)

 

 

1,948

 

 

 

2,061

 

 

 

(113

)

 

 

(139

)

 

 

26

 

Interest on fed funds and short-term investments

 

 

328

 

 

 

2,667

 

 

 

(2,339

)

 

 

(3,867

)

 

 

1,528

 

Interest on other investments

 

 

247

 

 

 

520

 

 

 

(273

)

 

 

(342

)

 

 

69

 

Total interest income

 

 

177,584

 

 

 

217,557

 

 

 

(39,973

)

 

 

(42,332

)

 

 

2,359

 

Expense from interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on demand deposits

 

 

7,511

 

 

 

30,195

 

 

 

(22,684

)

 

 

(24,966

)

 

 

2,282

 

Interest on savings deposits

 

 

179

 

 

 

245

 

 

 

(66

)

 

 

(101

)

 

 

35

 

Interest on time deposits

 

 

10,451

 

 

 

20,298

 

 

 

(9,847

)

 

 

(5,425

)

 

 

(4,422

)

Interest on other borrowings

 

 

937

 

 

 

3,051

 

 

 

(2,114

)

 

 

(914

)

 

 

(1,200

)

Interest on subordinated debentures

 

 

3,383

 

 

 

2,548

 

 

 

835

 

 

 

(454

)

 

 

1,289

 

Total interest expense

 

 

22,461

 

 

 

56,337

 

 

 

(33,876

)

 

 

(31,860

)

 

 

(2,016

)

Net interest income

 

$

155,123

 

 

$

161,220

 

 

$

(6,097

)

 

$

(10,472

)

 

$

4,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The change in interest income due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.

(2) Interest income is presented on a tax equivalent basis using a Federal tax rate of 21% on our state, county and municipal investment portfolios.

(3) Prior to the adoption of CECL on January 1, 2020, these loans were referred to as ACI loans.

Our FTE total interest income for the three months ended June 30, 2020 totaled $177.6 million compared to $217.6 million for the three months ended June 30, 2019. This decrease is primarily the result of a decrease in interest income on loans slightly offset by an increase in interest income on securities. The decrease in interest income on loans resulted from the decline in LIBOR from second quarter of 2019 to the second quarter of 2020. We recognized $17.7 million in hedge income in the second quarter of 2020 which partially offset the decline in rates.

On March 6, 2020, we terminated our $4.0 billion notional interest rate collar, realizing a gain of $261.2 million (“transaction gain”). The value received in exchange for the termination assumed an average 1-month LIBOR rate of 0.5785% over the next four years. The locked-in transaction gain, currently reflected in other comprehensive income net of deferred income taxes, will amortize over an expected four years into interest income, regardless of the interest rate environment. Based on our current interest rate forecast, $77.2 million of deferred income on derivatives in other comprehensive income at June 30, 2020 is estimated to be reclassified into net interest income during the next twelve months. Future changes to interest rates or the amount of outstanding hedged loans may significantly change actual amounts reclassified to income.

Our interest expense for the three months ended June 30, 2020 and 2019 was $22.5 million and $56.3 million, respectively, a decrease of $33.9 million. This decrease is primarily related to strategic decisions to reduce higher cost deposit rates. Our cost of interest-bearing deposits decreased to 0.65% for the three months ended June 30, 2020 compared to 1.79% for the three months ended June 30, 2019. Our total cost of borrowings for the three months ended June 30, 2020 and 2019 was 4.66% and 5.09%, respectively.

The following table presents for the three months ended June 30, 2020 and 2019, on an FTE basis, our average balance sheet and our annualized average yields on assets and annualized average costs of liabilities. Average yields are calculated by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been calculated on a daily basis.

55

Table 5 – Average Balances, Net Interest Income and Interest Yields/Rates

 

 

For the Three Months Ended June 30,

 

 

 

 

2020

 

 

 

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

 

$

11,173,408

 

 

$

125,922

 

 

 

4.53

 

%

 

$

10,044,825

 

 

$

135,946

 

 

 

5.43

 

%

ANCI portfolio

 

 

2,512,163

 

 

 

32,967

 

 

 

5.28

 

 

 

 

3,586,344

 

 

 

55,266

 

 

 

6.18

 

 

PCD portfolio (3)

 

 

198,649

 

 

 

3,965

 

 

 

8.03

 

 

 

 

290,704

 

 

 

10,799

 

 

 

14.90

 

 

Total loans

 

 

13,884,220

 

 

 

162,854

 

 

 

4.72

 

 

 

 

13,921,873

 

 

 

202,011

 

 

 

5.82

 

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Taxable

 

 

2,269,017

 

 

 

12,207

 

 

 

2.16

 

 

 

 

1,500,971

 

 

 

10,298

 

 

 

2.75

 

 

Tax-exempt (2)

 

 

218,450

 

 

 

1,948

 

 

 

3.59

 

 

 

 

215,579

 

 

 

2,061

 

 

 

3.83

 

 

Total investment securities

 

 

2,487,467

 

 

 

14,155

 

 

 

2.29

 

 

 

 

1,716,550

 

 

 

12,359

 

 

 

2.89

 

 

Federal funds sold and short-term investments

 

 

1,342,779

 

 

 

328

 

 

 

0.10

 

 

 

 

597,988

 

 

 

2,667

 

 

 

1.79

 

 

Other investments

 

 

77,337

 

 

 

247

 

 

 

1.28

 

 

 

 

67,124

 

 

 

520

 

 

 

3.11

 

 

Total interest-earning assets

 

 

17,791,803

 

 

 

177,584

 

 

 

4.01

 

 

 

 

16,303,535

 

 

 

217,557

 

 

 

5.35

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

176,716

 

 

 

 

 

 

 

 

 

 

 

 

111,337

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

127,413

 

 

 

 

 

 

 

 

 

 

 

 

128,067

 

 

 

 

 

 

 

 

 

 

Accrued interest and other assets

 

 

672,132

 

 

 

 

 

 

 

 

 

 

 

 

1,217,228

 

 

 

 

 

 

 

 

 

 

   Allowance for credit losses

 

 

(267,464

)

 

 

 

 

 

 

 

 

 

 

 

(106,656

)

 

 

 

 

 

 

 

 

 

Total assets

 

$

18,500,600

 

 

 

 

 

 

 

 

 

 

 

$

17,653,511

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

$

8,368,151

 

 

$

7,511

 

 

 

0.36

 

%

 

$

7,732,568

 

 

$

30,195

 

 

 

1.57

 

%

Savings deposits

 

 

291,874

 

 

 

179

 

 

 

0.25

 

 

 

 

251,270

 

 

 

245

 

 

 

0.39

 

 

Time deposits

 

 

2,527,090

 

 

 

10,451

 

 

 

1.66

 

 

 

 

3,379,889

 

 

 

20,298

 

 

 

2.41

 

 

Total interest-bearing deposits

 

 

11,187,115

 

 

 

18,141

 

 

 

0.65

 

 

 

 

11,363,727

 

 

 

50,738

 

 

 

1.79

 

 

Other borrowings

 

 

149,973

 

 

 

937

 

 

 

2.51

 

 

 

 

300,897

 

 

 

3,051

 

 

 

4.07

 

 

Subordinated debentures

 

 

222,574

 

 

 

3,383

 

 

 

6.11

 

 

 

 

140,722

 

 

 

2,548

 

 

 

7.26

 

 

Total interest-bearing liabilities

 

 

11,559,662

 

 

 

22,461

 

 

 

0.78

 

 

 

 

11,805,346

 

 

 

56,337

 

 

 

1.91

 

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

4,587,673

 

 

 

 

 

 

 

 

 

 

 

 

3,281,383

 

 

 

 

 

 

 

 

 

 

Accrued interest and other liabilities

 

 

234,469

 

 

 

 

 

 

 

 

 

 

 

 

234,927

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

16,381,804

 

 

 

 

 

 

 

 

 

 

 

 

15,321,656

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

2,118,796

 

 

 

 

 

 

 

 

 

 

 

 

2,331,855

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

18,500,600

 

 

 

 

 

 

 

 

 

 

 

$

17,653,511

 

 

 

 

 

 

 

 

 

 

Net interest income/net interest spread

 

 

 

 

 

 

155,123

 

 

 

3.23

 

%

 

 

 

 

 

 

161,220

 

 

 

3.45

 

%

Net yield on earning assets/net interest margin

 

 

 

 

 

 

 

 

 

 

3.51

 

%

 

 

 

 

 

 

 

 

 

 

3.97

 

%

Taxable equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

 

 

 

 

 

(409

)

 

 

 

 

 

 

 

 

 

 

 

(433

)

 

 

 

 

 

Net interest income

 

 

 

 

 

$

154,714

 

 

 

 

 

 

 

 

 

 

 

$

160,787

 

 

 

 

 

 

_____________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 taxable equivalent basis using a tax rate of 21%.

(3) Prior to the adoption of CECL on January 1, 2020, these loans were referred to as ACI loans.

 

 


56

Six months ended June 30, 2020 and 2019

Our FTE net interest income for the six months ended June 30, 2020 and 2019 was $309.0 million and $331.0 million, respectively, a decrease of $22.0 million. Our net interest margin for the six months ended June 30, 2020 and 2019 was 3.67% and 4.09%, respectively, a decrease of 42 basis points.  The net interest margin for the six months ended June 30, 2020 was impacted by the addition of PPP loans averaging $333.3 million and an annualized yield of 2.37%. The following table sets forth, on an FTE basis, the components of our net interest income with the effect that the varying levels of interest earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the six months ended June 30, 2020 and 2019:

 

 

Net Interest Income

 

 

Increase

 

 

Changes Due To (1)

 

(In thousands)

 

2020

 

 

2019

 

 

(Decrease)

 

 

Rate

 

 

Volume

 

Increase (decrease) in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Originated loans

 

$

255,324

 

 

$

271,761

 

 

$

(16,437

)

 

$

(63,345

)

 

$

46,908

 

ANCI portfolio

 

 

73,617

 

 

 

118,853

 

 

 

(45,236

)

 

 

(15,370

)

 

 

(29,866

)

PCD portfolio (3)

 

 

9,047

 

 

 

17,148

 

 

 

(8,101

)

 

 

(3,678

)

 

 

(4,423

)

Interest on securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

 

26,222

 

 

 

21,094

 

 

 

5,128

 

 

 

(8,819

)

 

 

13,947

 

Tax-exempt (2)

 

 

3,757

 

 

 

4,261

 

 

 

(504

)

 

 

(358

)

 

 

(146

)

Interest on fed funds and short-term investments

 

 

2,112

 

 

 

5,949

 

 

 

(3,837

)

 

 

(9,165

)

 

 

5,328

 

Interest on other investments

 

 

641

 

 

 

1,138

 

 

 

(497

)

 

 

(1,145

)

 

 

648

 

Total interest income

 

 

370,720

 

 

 

440,204

 

 

 

(69,484

)

 

 

(101,880

)

 

 

32,396

 

Expense from interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on demand deposits

 

 

29,180

 

 

 

59,454

 

 

 

(30,274

)

 

 

(38,253

)

 

 

7,979

 

Interest on savings deposits

 

 

496

 

 

 

471

 

 

 

25

 

 

 

(77

)

 

 

102

 

Interest on time deposits

 

 

23,194

 

 

 

37,484

 

 

 

(14,290

)

 

 

(7,389

)

 

 

(6,901

)

Interest on other borrowings

 

 

2,044

 

 

 

6,746

 

 

 

(4,702

)

 

 

(2,142

)

 

 

(2,560

)

Interest on subordinated debentures

 

 

6,833

 

 

 

5,078

 

 

 

1,755

 

 

 

(2,289

)

 

 

4,044

 

Total interest expense

 

 

61,747

 

 

 

109,233

 

 

 

(47,486

)

 

 

(50,150

)

 

 

2,664

 

Net interest income

 

$

308,973

 

 

$

330,971

 

 

$

(21,998

)

 

$

(51,730

)

 

$

29,732

 

(1) The change in interest income due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.

(2) Interest income is presented on a tax equivalent basis using a Federal tax rate of 21% on our state, county and municipal investment portfolios.

(3) Prior to the adoption of CECL on January 1, 2020, these loans were referred to as ACI loans.

Our FTE total interest income for the six months ended June 30, 2020 totaled $370.7 million compared to $440.2 million for the six months ended June 30, 2019. This decrease is primarily the result of a decrease in interest income on loans slightly offset by an increase in interest income on securities. We recognized $25.6 million in hedge income year-to-date in 2020 which partially offset the decline in rates.

  Our interest expense for the six months ended June 30, 2020 and 2019 was $61.7 million and $109.2 million, respectively, a decrease of $47.5 million. This decrease is primarily related to strategic decisions to reduce higher cost deposit rates given the decline in Federal funds rates during the period. Our cost of interest-bearing deposits was 0.96% for the six months ended June 30, 2020 compared to 1.74% for the six months ended June 30, 2019. Our total cost of borrowings for the six months ended June 30, 2020 and 2019 was 2.19% and 4.79%, respectively.

The following table presents for the six months ended June 30, 2020 and 2019, our average balance sheet and our average yields on assets and annualized average costs of liabilities. Average yields are calculated by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been calculated on a daily basis.

57

 

 

For the Six Months Ended June 30,

 

 

 

 

2020

 

 

 

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

 

$

10,693,627

 

 

$

255,324

 

 

 

4.80

 

%

 

$

9,928,967

 

 

$

271,761

 

 

 

5.52

 

%

ANCI portfolio

 

 

2,621,701

 

 

 

73,617

 

 

 

5.65

 

 

 

 

3,635,352

 

 

 

118,853

 

 

 

6.59

 

 

PCD portfolio (3)

 

 

207,467

 

 

 

9,047

 

 

 

8.77

 

 

 

 

296,152

 

 

 

17,148

 

 

 

11.68

 

 

Total loans

 

 

13,522,795

 

 

 

337,988

 

 

 

5.03

 

 

 

 

13,860,471

 

 

 

407,762

 

 

 

5.93

 

 

Investment securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Taxable

 

 

2,233,773

 

 

 

26,222

 

 

 

2.36

 

 

 

 

1,516,158

 

 

 

21,094

 

 

 

2.81

 

 

Tax-exempt (2)

 

 

208,599

 

 

 

3,757

 

 

 

3.62

 

 

 

 

216,385

 

 

 

4,261

 

 

 

3.97

 

 

Total investment securities

 

 

2,442,372

 

 

 

29,979

 

 

 

2.47

 

 

 

 

1,732,543

 

 

 

25,355

 

 

 

2.95

 

 

Federal funds sold and short-term investments

 

 

985,832

 

 

 

2,112

 

 

 

0.43

 

 

 

 

680,337

 

 

 

5,949

 

 

 

1.76

 

 

Other investments

 

 

78,755

 

 

 

641

 

 

 

1.64

 

 

 

 

62,656

 

 

 

1,138

 

 

 

3.66

 

 

Total interest-earning assets

 

 

17,029,754

 

 

 

370,720

 

 

 

4.38

 

 

 

 

16,336,007

 

 

 

440,204

 

 

 

5.43

 

 

Noninterest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

 

213,760

 

 

 

 

 

 

 

 

 

 

 

 

115,064

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

127,613

 

 

 

 

 

 

 

 

 

 

 

 

128,526

 

 

 

 

 

 

 

 

 

 

Accrued interest and other assets

 

 

960,808

 

 

 

 

 

 

 

 

 

 

 

 

1,166,232

 

 

 

 

 

 

 

 

 

 

   Allowance for credit losses

 

 

(234,625

)

 

 

 

 

 

 

 

 

 

 

 

(101,886

)

 

 

 

 

 

 

 

 

 

Total assets

 

$

18,097,310

 

 

 

 

 

 

 

 

 

 

 

$

17,643,943

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

$

8,244,896

 

 

$

29,180

 

 

 

0.71

 

%

 

$

7,871,015

 

 

$

59,454

 

 

 

1.52

 

%

Savings deposits

 

 

282,159

 

 

 

496

 

 

 

0.35

 

 

 

 

249,968

 

 

 

471

 

 

 

0.38

 

 

Time deposits

 

 

2,524,504

 

 

 

23,194

 

 

 

1.85

 

 

 

 

3,183,894

 

 

 

37,484

 

 

 

2.37

 

 

Total interest-bearing deposits

 

 

11,051,559

 

 

 

52,870

 

 

 

0.96

 

 

 

 

11,304,877

 

 

 

97,409

 

 

 

1.74

 

 

Other borrowings

 

 

183,668

 

 

 

2,044

 

 

 

2.24

 

 

 

 

359,298

 

 

 

6,746

 

 

 

3.79

 

 

Subordinated debentures

 

 

222,454

 

 

 

6,833

 

 

 

6.18

 

 

 

 

138,341

 

 

 

5,078

 

 

 

7.40

 

 

Total interest-bearing liabilities

 

 

11,457,681

 

 

 

61,747

 

 

 

1.08

 

 

 

 

11,802,516

 

 

 

109,233

 

 

 

1.87

 

 

Noninterest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

 

4,123,143

 

 

 

 

 

 

 

 

 

 

 

 

3,307,745

 

 

 

 

 

 

 

 

 

 

Accrued interest and other liabilities

 

 

233,683

 

 

 

 

 

 

 

 

 

 

 

 

246,679

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

15,814,507

 

 

 

 

 

 

 

 

 

 

 

 

15,356,940

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

2,282,803

 

 

 

 

 

 

 

 

 

 

 

 

2,287,003

 

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

18,097,310

 

 

 

 

 

 

 

 

 

 

 

$

17,643,943

 

 

 

 

 

 

 

 

 

 

Net interest income/net interest spread

 

 

 

 

 

 

308,973

 

 

 

3.29

 

%

 

 

 

 

 

 

330,971

 

 

 

3.58

 

%

Net yield on earning assets/net interest margin

 

 

 

 

 

 

 

 

 

 

3.67

 

%

 

 

 

 

 

 

 

 

 

 

4.09

 

%

Taxable equivalent adjustment:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities

 

 

 

 

 

 

(791

)

 

 

 

 

 

 

 

 

 

 

 

(895

)

 

 

 

 

 

Net interest income

 

 

 

 

 

$

308,182

 

 

 

 

 

 

 

 

 

 

 

$

330,076

 

 

 

 

 

 

_____________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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 taxable equivalent basis using a tax rate of 21%.

(3) Prior to the adoption of CECL on January 1, 2020, these loans were referred to as ACI loans.

58

Provision for Credit Losses

On January 1, 2020, we adopted the current expected credit loss (“CECL”) accounting standard for estimating credit losses (see Note 1 to the consolidated financial statements). CECL replaces the current incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, the provision for credit losses includes the provision for loan losses and the provision for unfunded credit commitments. Prior to the adoption of CECL, the provision for unfunded credit commitments was included in other noninterest expenses. Prior periods are not required to be restated and, therefore, total provision for credit losses for the three and six months ended June 30, 2019 does not include the provision for unfunded commitments.

Under accounting standards for business combinations, acquired loans are recorded at fair value with no credit loss allowance on the date of acquisition. CECL eliminates existing guidance for acquired credit impaired (“ACI”) loans and requires recognition of the nonaccretable difference as an increase to the ACL on financial assets purchased with more than insignificant credit deterioration since origination, which will be offset by an increase in the amortized cost of the related loans. After initial recognition, the accounting for a PCD asset will generally follow the credit loss model that applies to that type of asset. For ACI loans accounted for under ASC 310-30 prior to adoption, the guidance in this amendment for PCD assets will be prospectively applied.

The provision for credit losses totaled $158.8 million and $242.2 million, respectively, for the three and six months ended June 30, 2020, compared to $28.9 million and $40.1 million, respectively, for the three and six months ended June 30, 2019.  The provision for the three and six months ended June 30, 2020 reflects the forecasted effects of COVID-19 on the various loan segments due to higher unemployment, lower GDP, market value, energy prices, and real estate prices. The second quarter 2020 provision was affected by credit migration as well as a negative shift in the outlook for commercial real estate and a slower expected recovery. Second quarter credit migration and portfolio balance changes contributed approximately 40% to our provision while approximately 60% was related primarily to changes in economic forecasts. Our ACL estimate used the baseline scenario provided by a nationally recognized service, as adjusted for certain qualitative and environmental factors (see “—Allowance for Credit Losses”). Net charge-offs were $32.6 million or 0.94% annualized of average loans for the three months ended June 30, 2020 compared to $18.6 million or 0.54% for the three months ended June 30, 2019. Net charge-offs were $65.0 million or 0.97% annualized of average loans for the six months ended June 30, 2020 compared to $19.1 million or 0.28% for the six months ended June 30, 2019. Loan charge-offs recognized during the three months ended June 30, 2020 and six months ended June 30, 2020 are higher compared the same periods of 2019 as a result of credit migration that has occurred primarily in the restaurant, energy, and general C&I classes and significantly impacted by the effects of COVID.

We recognized $28.9 million and $40.1 million in provision during the three and six months ended June 30, 2019, respectively, which included $27.0 million and $38.6 million provision related to the originated portfolio. The C&I originated portfolio provision of $24.0 million and $33.4 million for the three and six months ended June 30, 2019 included provisions related to overall growth and migration within the portfolios, including increases in NPL and classified loans.

The following is a summary of our provision for credit losses by portfolio segment for the periods indicated:

Table 6 – Provision for Credit Losses

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Funded Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

95,325

 

 

$

24,653

 

 

$

159,008

 

 

$

33,952

 

Commercial real estate

 

 

59,359

 

 

 

3,201

 

 

 

77,158

 

 

 

3,303

 

Consumer

 

 

3,522

 

 

 

240

 

 

 

4,278

 

 

 

1,446

 

Small business(1)

 

 

—

 

 

 

833

 

 

 

—

 

 

 

1,436

 

Total provision for funded loans

 

 

158,206

 

 

 

28,927

 

 

 

240,444

 

 

 

40,137

 

Unfunded commitments

 

 

605

 

 

 

—

 

 

 

1,796

 

 

 

—

 

Total provision for credit losses

 

$

158,811

 

 

$

28,927

 

 

$

242,240

 

 

$

40,137

 

(1) After the implementation of CECL, provision expense related to Small Business loans is included in Commercial and industrial and Commercial real estate. Prior period provision is presented as previously reported and may not be comparable by segment to the current period presentation.

59

Noninterest Income

Noninterest income is a component of our revenue and is comprised primarily of income generated from the services we provide our customers.

Noninterest income totaled $30.0 million and $65.0 million for the three and six months ended June 30, 2020, compared to $31.7 million and $62.4 million for the three and six months ended June 30, 2019, respectively. The decrease for the three months ended June 30, 2020 is primarily attributable to decreases in bankcard fees, other service fees, credit related fees, and other noninterest income affected by COVID-19 impacts on customer behavior. The increase for the six months ended June 30, 2020 is primarily due to service charges on deposits, SBA income and security gains.

The following table compares noninterest income for the three and six months ended June 30, 2020 and 2019:

Table 7 – Noninterest Income

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

2020

 

 

2019

 

 

% Change

 

 

2020

 

 

2019

 

 

% Change

 

Investment advisory revenue

 

$

6,505

 

 

$

5,797

 

 

 

12.2

 

%

$

12,111

 

 

$

11,439

 

 

 

5.9

%

Trust services revenue

 

 

4,092

 

 

 

4,578

 

 

 

(10.6

)

 

 

8,908

 

 

 

8,913

 

 

 

(0.1

)

Service charges on deposit accounts

 

 

4,852

 

 

 

4,730

 

 

 

2.6

 

 

 

11,268

 

 

 

9,860

 

 

 

14.3

 

Credit related fees

 

 

4,401

 

 

 

5,341

 

 

 

(17.6

)

 

 

10,384

 

 

 

10,211

 

 

 

1.7

 

Bankcard fees

 

 

1,716

 

 

 

2,279

 

 

 

(24.7

)

 

 

3,674

 

 

 

4,492

 

 

 

(18.2

)

Payroll processing revenue

 

 

1,143

 

 

 

1,161

 

 

 

(1.6

)

 

 

2,510

 

 

 

2,580

 

 

NM

 

SBA income

 

 

1,335

 

 

 

1,415

 

 

 

(5.7

)

 

 

3,243

 

 

 

2,864

 

 

NM

 

Other service fees

 

 

1,528

 

 

 

1,907

 

 

 

(19.9

)

 

 

3,440

 

 

 

4,011

 

 

 

(14.2

)

Securities gains, net

 

 

2,286

 

 

 

938

 

 

NM

 

 

 

5,280

 

 

 

926

 

 

NM

 

Other

 

 

2,092

 

 

 

3,576

 

 

 

(41.5

)

 

 

4,201

 

 

 

7,090

 

 

 

(40.7

)

  Total noninterest income

 

$

29,950

 

 

$

31,722

 

 

 

(5.6

)

%

$

65,019

 

 

$

62,386

 

 

 

4.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Advisory Revenue. Our investment advisory revenue is comprised largely of investment management and financial planning revenues generated through our subsidiary Linscomb & Williams, Inc. (“L&W”). For the three months ended June 30, 2020, investment advisory revenue had an increase of $0.7 million or 12.2% from the same period of 2019. For the six months ended June 30, 2020, investment advisory revenue increased to $12.1 million, or 5.9%, from the six months ended June 30, 2019. Assets under management increased by 17.9% as of June 30, 2020 compared to June 30, 2019.

Trust Services Revenue. We earn fees from our customers for trust services. For the three months ended June 30, 2020 and 2019, trust fees totaled $4.1 million and $4.6 million respectively, a decrease of $0.5 million, or 10.6%. For the six months ended June 30, 2020 and 2019, trust fees totaled $8.9 million. Assets under management increased by 8.6% as of June 30, 2020 compared to June 30, 2019.

Service Charges on Deposit Accounts. We earn fees from our customers for deposit-related services. For the three and six months ended June 30, 2020, service charges on deposits had an increase of $0.1 million and $1.4 million, respectively. For the six months ended June 30, 2020, the 14.3% increase was largely due to increased number of deposit accounts and customers from the State Bank acquisition were not subject to our deposit fees until the second quarter of 2019. Additionally, the earnings credit on certain commercial accounts decreased in the first quarter of 2020 resulting in increased fees on these accounts.

Credit-Related Fees. Our credit-related fees include fees related to credit advisory services, unfunded commitment fees and letter of credit fees. For the three and six months ended June 30, 2020, credit-related fees had a decrease of 17.6% and an increase of 1.7% to $4.4 million and $10.4 million compared to $5.3 million and $10.2 million for the three and six months ended June 30, 2019, respectively. The current quarter’s decrease was primarily related to decreased loan activity resulting from corporate reductions of debt and strategic declines in certain sectors as we work to reduce select exposures. This decrease was partially mitigated by an increase of $0.6 million in fees from derivatives and swaps.

Bankcard Fees. Our bankcard fees are comprised of automated teller machine (“ATM”) network fees and debit card revenue. Our bankcard fees were $1.7 million and $3.7 million for the three and six months ended June 30, 2020, respectively. The decreases of 24.7% and 18.2% for the three and six months ended June 30, 2020, respectively, were related to a decrease in card usage resulting from the economic slowdown associated with COVID-19.

60

SBA Income. Small Business Administration (“SBA”) income consists of gains on sales of SBA loans, servicing fees, and other miscellaneous fees. SBA income was $1.3 million and $3.2 million for the three and six months ended June 30, 2020 compared to $1.4 million and $2.9 million for the three and six months ended June 30, 2019, respectively. For the three months ended June 30, 2020, SBA income remained relatively flat due to SBA personnel being redirected and focused on PPP loan generation during the period. For the six months ended June 30,2020, the increase was largely driven by an increase of 12.8% in gain on sale of SBA loans and an increase of 18.5% in SBA serving fees related to the expanded focus on SBA lending after the unit was acquired with the State Bank acquisition.

Securities Gains. During the first quarter and second quarters of 2020, we sold and purchased investment securities through routine portfolio rebalancing for balance sheet management. For the three and six months ended June 30, 2020, the net gain was $2.3 million and $5.3 million, respectively.

Other Service Fees. Our other service fees include retail services fees. For the three months ended June 30, 2020 and 2019, other service fees totaled $1.5 million and $1.9 million, respectively. For the six months ended June 30, 2020 and 2019, other service fees totaled $3.4 million and $4.0 million, respectively. The second quarter and first half of 2020 decrease resulted primarily from a decrease in foreign exchange fees and wires transfer related fees.

Other Income. Other income for the three and six months ended June 30, 2020 compared to the same periods of 2019 decreased by $1.5 million, or 41.5%, and decreased $2.9 million, or 40.7%, respectively. For the three months ended June 30, 2020 the decrease resulted from a write down of $2.0 million on investments in limited partnerships and $0.7 million in foreign exchange settlement fees partially offset by an increase of $1.3 million in mortgage income banking. For the six months ended June 30, 2020 the decrease resulted from a $2.8 million decline in earnings on limited partnerships (including a write down of $2.0 million on one investment), losses of $0.5 million in equity securities, and a loss on sale of  fixed assets of $0.6 million, decrease of $0.5 million in foreign exchange transactions, and a loss of $0.5 million on net profits interests. These items were partially offset by an increase of $1.9 million in mortgage banking income and the 2019 revaluation charge of $2.0 million on a receivable related to the sale of our insurance company assets.

Noninterest Expenses

The following table compares noninterest expense for the three and six months ended June 30, 2020 and 2019:

Table 8 – Noninterest Expense

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

2020

 

 

2019

 

 

% Change

 

 

2020

 

 

2019

 

 

% Change

 

Salaries and employee benefits

 

$

47,158

 

 

$

53,660

 

 

 

(12.1

)

%

$

95,965

 

 

$

107,131

 

 

 

(10.4

)%

Premises and equipment

 

 

10,634

 

 

 

11,148

 

 

 

(4.6

)

 

 

21,443

 

 

 

22,106

 

 

 

(3.0

)

Merger related expenses

 

 

—

 

 

 

4,562

 

 

 

(100.0

)

 

 

1,281

 

 

 

26,562

 

 

 

(95.2

)

Goodwill impairment charge

 

 

—

 

 

 

—

 

 

NM

 

 

 

443,695

 

 

 

—

 

 

NM

 

Intangible asset amortization

 

 

5,472

 

 

 

5,888

 

 

 

(7.1

)

 

 

11,065

 

 

 

11,961

 

 

 

(7.5

)

Data processing expense

 

 

3,084

 

 

 

3,435

 

 

 

(10.2

)

 

 

6,436

 

 

 

6,029

 

 

 

6.8

 

Software amortization

 

 

4,036

 

 

 

3,184

 

 

 

26.8

 

 

 

7,583

 

 

 

6,519

 

 

 

16.3

 

Consulting and professional fees

 

 

3,009

 

 

 

1,899

 

 

 

58.5

 

 

 

5,715

 

 

 

4,128

 

 

 

38.4

 

Loan related expenses

 

 

735

 

 

 

1,740

 

 

 

(57.8

)

 

 

1,495

 

 

 

2,650

 

 

 

(43.6

)

FDIC insurance

 

 

3,939

 

 

 

1,870

 

 

 

110.6

 

 

 

6,374

 

 

 

3,622

 

 

 

76.0

 

Communications

 

 

1,002

 

 

 

1,457

 

 

 

(31.2

)

 

 

2,158

 

 

 

2,455

 

 

 

(12.1

)

Advertising and public relations

 

 

920

 

 

 

1,104

 

 

 

(16.7

)

 

 

2,384

 

 

 

1,885

 

 

 

26.5

 

Legal expenses

 

 

579

 

 

 

645

 

 

 

(10.2

)

 

 

991

 

 

 

803

 

 

 

23.4

 

Other

 

 

8,052

 

 

 

9,937

 

 

 

(19.0

)

 

 

19,688

 

 

 

18,118

 

 

 

8.7

 

  Total Noninterest Expense

 

$

88,620

 

 

$

100,529

 

 

 

(11.8

)

%

$

626,273

 

 

$

213,969

 

 

 

192.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense was $88.6 million and $626.3 million for the three and six months ended June 30, 2020 compared to $100.5 million and $214.0 million for the three and six months ended June 30, 2019, respectively. The decrease of $11.9 million for the three months ended June 30, 2020 was a result of decreases in merger expenses and salary and employee benefits related expenses. The increase of $412.3 million for the six months ended June 30, 2020, was driven by a non-cash goodwill impairment charge of $443.7 million incurred during the first quarter of 2020. Excluding the goodwill impairment charge, noninterest expense for the first six months of 2020 was $182.6 million, a decrease of $31.4 million or 14.7% from the same period in 2019 largely driven by a decrease in merger related expenses.


61

Salaries and Employee Benefits

Excluding goodwill impairment charge, salaries and employee benefit costs are the largest component of noninterest expense and include employee payroll expense, incentive compensation, health insurance, benefit plans and payroll taxes. The decrease of $6.5 million and $11.2 million, or 12.1% and 10.4% for the three and six months ended June 30, 2020 compared to the same periods of 2019, respectively, was primarily due to a reduction in incentive compensation due to lower earnings and other compensation accruals. The decrease in the second quarter of 2020 also included an additional $2.2 million in expense deferrals resulting from the origination of the PPP loans. Regular compensation makes up the majority of the total salaries and employee benefits category and remained flat for the three months ended June 30, 2020 compared to the 2019 period. For the six months ended June 30, 2020, regular compensation increased 5.4% compare to the same period of 2019. This increase is primarily related to build out and support of the State Bank acquisition, including C&I lending, technology, operations and risk areas, as well as the full period impact of the W&P acquisition.

The following table provides additional detail of our salaries and employee benefits expense for the periods presented:

Table 9 – Salaries and Employee Benefits Expense

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Salaries and employee benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Regular compensation

 

$

32,704

 

 

$

32,813

 

 

$

68,840

 

 

$

65,327

 

Incentive compensation

 

 

7,640

 

 

 

13,772

 

 

 

10,459

 

 

 

25,123

 

Taxes and employee benefits

 

 

6,814

 

 

 

7,075

 

 

 

16,666

 

 

 

16,681

 

Total salaries and employee benefits

 

$

47,158

 

 

$

53,660

 

 

$

95,965

 

 

$

107,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62

Premises and Equipment. Rent, depreciation and maintenance costs comprise most of premises and equipment expense. It decreased $0.5 million, or 4.6%, and decreased $0.7 million, or 3.0%, essentially unchanged for the three and six months ended June 30, 2020, respectively, compared to the same periods as of 2019.

Merger Related Expenses. For the three months ended June 30, 2020, merger related expenses decreased $4.6 million to zero. For the six months ended June 30, 2020, merger related expense decreased $25.3 million to $1.3 million. Merger related expenses in 2019 were primarily related to the acquisition of State Bank.

Goodwill Impairment Charge. Considering the recent economic conditions resulting from COVID-19, we conducted an interim goodwill impairment test as of March 31, 2020. The 2020 interim test indicated a goodwill impairment of $443.7 million within the Bank reporting unit resulting in the Company recording an impairment charge of the same amount in the first quarter of 2020. The primary causes of the goodwill impairment in the Bank reporting unit were economic and industry conditions resulting from COVID-19 that caused volatility and reductions in our market capitalization and our peer banks, increased loan provision estimates, increased discount rates and other changes in variables driven by the uncertain macro-environment that resulted in the estimated fair value of the reporting unit being less than the reporting unit’s carrying value.

We have $43.1 million in goodwill remaining in our separate reporting units of Trust and Registered Investment Advisor businesses for which the Company's assessments did not indicate potential impairment. The fair values of the reporting units are based upon management’s estimates and assumptions. Although management has used the estimates and assumptions it believes to be most appropriate in the circumstances, it should be noted that even relatively minor changes in certain assumptions used in management’s calculations could result in significant differences in the results of the impairment tests.

Intangible Asset Amortization. The company has recorded core deposit and other intangible assets related to acquisitions in prior years with the majority related to the State Bank acquisition. The core deposits intangibles are being amortized on an accelerated basis over a ten-year period and the other intangibles on a ten to twenty-year period, therefore the expense recorded will decline over the remaining lives of the assets.

Data Processing. Data processing expense for our operating systems totaled $3.1 million, a decrease of 10.2%, for the three months ended June 30, 2020 compared to the same period in 2019. For the six months ended June 30, 2020, data processing expense for our operating systems totaled $6.4 million, an increase of 6.8%, compared to the same period in 2019. These decreases occurred as a result of new contracts executed at lower costs for treasury management and Internet banking. Additionally, we have consolidated certain services in 2020 for which we were paying two vendors in the first half of 2019 after the State Bank merger

Consulting and Professional Services. For the three months ended June 30, 2020, our consulting and professional services increased $1.1 million or 58.5% compared to that same period in 2019. Consulting and professional services for the six months ended June 30, 2020 were $5.7 million, an increase of 38.4%, compared to the same period in 2019. A portion of our consulting and professional fees in 2019 were reported as merger related expenses as they were directly related to the State Bank acquisition.

FDIC Insurance. For the three and six months ended June 30, 2020, FDIC insurance expense had an increase of $2.1 million and $2.8 million, respectively. Our FDIC assessment will vary between reported periods as it is determined on various risk factors including earnings, credit, liquidity, composition of our balance sheet, loan concentration and regulatory ratings. The increase for the three months ended June 20, 2020 resulted, in part, from the net loss recorded in the first quarter of 2020 and the growth in deposits during the quarter.

Advertising and Public Relations. Advertising and public relations expenses, which include costs to create marketing campaigns, purchase the various media space or time, conduct market research, and various sponsorships in our expanded markets, had a decrease of $0.2 million or 16.7%, and an increase of $0.5 million or 26.5% for the three and six months ended June 30, 2020, respectively. The increase for the six-month period was primarily associated with expanded advertising and public relations in our Georgia markets.

Other. Other expenses include costs for insurance, supplies, education and training, and other operational expenses. For the three and six months ended June 30, 2020, other noninterest expenses decreased by 19.0% and increased 8.7% compared to the same periods in 2019, respectively. The change for the three months ended June 30, 2020, was primarily due to a decline in employee travel and business development expenses. The change for the six months as of June 30, 2020, was primarily due to increases in special asset expenses of $1.1 million.

Income Tax (Benefit) Expense

Income tax (benefit) expense for the three and six months ended June 30, 2020 was ($6.7) million and ($39.9) million compared to $14.7 million and $31.8 million for the same periods in 2019, respectively.

The effective tax rate on our pretax (loss) income of ($62.8) million and ($495.3) million was 10.6% and 8.1% for the three and six months ended June 30, 2020 compared to 23.3% and 23.0% on pre-tax income for the same periods in 2019, respectively. For the three and six months ended June 30, 2020, the change in the effective tax rate was driven by the decrease in income before income taxes.

63

The effective tax rate is primarily affected by the amount of pre-tax income, and to a lesser extent, tax-exempt interest income, and the increase in cash surrender value of bank-owned life insurance. The effective tax rate is also affected by discrete items that may occur in any given period but are not consistent from period-to-period, which may impact the comparability of the effective tax rate between periods.

At June 30, 2020, we had a net deferred tax asset of $65.9 million compared to a net deferred tax liability of $25.0 million at December 31, 2019. The increase in the net deferred asset was primarily due to the tax effect of the CECL transition (see Notes 1 and 4 to the consolidated financial statements), increased provision for credit losses, reduction of deferred tax liabilities related to tax deductible goodwill, and the termination of the interest rate collar (see Note 6 to the consolidated financial statements).

Financial Condition

The following table summarizes selected components of our balance sheet as of the periods indicated.

Table 10 – Selected Balance Sheet Data

 

 

 

As of

 

 

Average Balances

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

 

Three Months Ended June 30, 2020

 

 

Six Months Ended June 30, 2020

 

 

Year Ended December 31, 2019

 

Total assets

 

$

18,857,753

 

 

$

17,800,229

 

 

$

18,500,600

 

 

$

18,097,310

 

 

$

17,689,126

 

Total interest-earning assets

 

 

18,191,732

 

 

 

16,254,827

 

 

 

17,791,803

 

 

 

17,029,754

 

 

 

16,320,573

 

Total interest-bearing liabilities

 

 

11,221,395

 

 

 

11,281,263

 

 

 

11,559,662

 

 

 

11,457,681

 

 

 

11,634,514

 

Short-term and other investments

 

 

1,790,808

 

 

 

813,069

 

 

 

1,420,116

 

 

 

1,064,587

 

 

 

829,153

 

Securities available-for-sale

 

 

2,661,433

 

 

 

2,368,592

 

 

 

2,487,467

 

 

 

2,442,372

 

 

 

1,776,689

 

Loans, net of unearned income

 

 

13,699,097

 

 

 

12,983,655

 

 

 

13,884,220

 

 

 

13,522,795

 

 

 

13,714,731

 

Goodwill

 

 

43,061

 

 

 

485,336

 

 

 

43,061

 

 

 

262,004

 

 

 

484,003

 

Noninterest-bearing deposits

 

 

5,220,109

 

 

 

3,833,704

 

 

 

4,587,673

 

 

 

4,123,143

 

 

 

3,431,300

 

Interest-bearing deposits

 

 

10,849,173

 

 

 

10,909,090

 

 

 

11,187,115

 

 

 

11,051,559

 

 

 

11,197,328

 

Borrowings and subordinated debentures

 

 

372,222

 

 

 

372,173

 

 

 

372,547

 

 

 

406,122

 

 

 

437,186

 

Shareholders' equity

 

 

2,045,480

 

 

 

2,460,846

 

 

 

2,118,796

 

 

 

2,282,803

 

 

 

2,373,856

 

 

Investment Portfolio

Our available-for-sale securities portfolio increased $292.8 million or 12.4%, to $2.7 billion at June 30, 2020, from $2.4 billion at December 31, 2019. During the six months ended June 30, 2020, approximately $180.6 million of securities available-for-sale were sold and $638.0 million of securities available-for-sale were purchased. In addition, $227.9 million of securities matured or were paid down. The increase in securities is a result of substantial growth in deposits and lower loan originations outside of the PPP loans. Securities acquired include primarily investment grade municipal bonds and agency-backed mortgages. At June 30, 2020, our investment securities portfolio was 14.6% of our total interest-earning assets and produced an average taxable equivalent yield of 2.29% and 2.47% as of the three and six months ended June 30, 2020, respectively, compared to 2.89% and 2.95% for the three and six months ended June 30, 2019, respectively.

64

The following table sets forth the fair value of the available-for-sale securities at the dates indicated:

Table 11 – Investment Portfolio

 

 

 

As of

 

 

Percent Change

 

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

 

2020 vs 2019

 

 

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

105,504

 

 

$

69,106

 

 

 

52.7

 

%

Mortgage-backed securities ("MBS") issued or guaranteed by U.S. agencies:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential pass-through:

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by GNMA

 

 

115,312

 

 

 

99,082

 

 

 

16.4

 

 

Issued by FNMA and FHLMC

 

 

1,647,852

 

 

 

1,435,497

 

 

 

14.8

 

 

Collateralized mortgage obligations

 

 

237,535

 

 

 

295,832

 

 

 

(19.7

)

 

Commercial MBS

 

 

314,136

 

 

 

275,958

 

 

 

13.8

 

 

Total MBS

 

 

2,314,835

 

 

 

2,106,369

 

 

 

9.9

 

 

Obligations of states and municipal subdivisions

 

 

241,094

 

 

 

193,117

 

 

 

24.8

 

 

Total securities available-for-sale

 

$

2,661,433

 

 

$

2,368,592

 

 

 

12.4

 

%

The net unrealized gain on our available-for-sale securities portfolio was $87.2 million and $22.8 million at June 30, 2020 and December 31, 2019, respectively. The following tables summarize the investment securities with unrealized losses at June 30, 2020 and December 31, 2019 by aggregated major security type and length of time in a continuous unrealized loss position:

Table 12 – Unrealized Losses in the Investment Portfolio

 

 

 

Unrealized Loss Analysis

 

 

 

Losses < 12 Months

 

 

Losses > 12 Months

 

(In thousands)

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

48,760

 

 

$

401

 

 

$

12,074

 

 

$

211

 

Mortgage-backed securities

 

 

84,554

 

 

 

350

 

 

 

276

 

 

 

2

 

Obligations of states and municipal subdivisions

 

 

9,844

 

 

 

82

 

 

 

—

 

 

 

—

 

Total

 

$

143,158

 

 

$

833

 

 

$

12,350

 

 

$

213

 

 

 

 

 

Unrealized Loss Analysis

 

 

 

Losses < 12 Months

 

 

Losses > 12 Months

 

(In thousands)

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

33,053

 

 

$

209

 

 

$

13,703

 

 

$

206

 

Mortgage-backed securities

 

 

708,991

 

 

 

4,466

 

 

 

61,506

 

 

 

588

 

Obligations of states and municipal subdivisions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

742,044

 

 

$

4,675

 

 

$

75,209

 

 

$

794

 

 

As of June 30, 2020, the unrealized losses were not deemed to be caused by credit-related issues. We define credit loss as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. Non-credit related impairments are recognized in other comprehensive income, net of applicable taxes. Additionally, none of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. As of June 30, 2020, we did not recognize any allowance for credit losses related to available-for-sale securities since decline in fair value did not result from credit-related issues. We have adequate liquidity and, therefore, do not plan to sell and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

65

Loan Portfolio

We originate commercial and industrial loans, commercial real estate loans (including construction loans), residential mortgages and other consumer loans. A strong emphasis is placed on the commercial portfolio, consisting of commercial and industrial and commercial real estate loan types, with approximately 81% and 74% of the portfolio residing in these loan types as of June 30, 2020 and December 31, 2019, respectively. Our commercial portfolio is further diversified by industry concentration and includes loans to clients in specialized industries, including restaurant, healthcare and technology. Additional commercial lending activities include energy, construction, general corporate loans, business banking and community banking loans. Also, with the acquisition of State Bank, we added asset-based lending and Small Business Administration (“SBA”) lending. Mortgage, wealth management and retail make up most of the consumer portfolio.

Total loans increased by $715.4 million from December 31, 2019. The increases in loan balances included the origination of $1.0 billion in PPP loans (Table 17), partially offset by loan paydowns and payoffs. The declines were driven by corporate reductions of debt in the C&I segment, and strategic declines in the restaurant, energy and leveraged loan sectors as we work to reduce select exposures.

The following table presents total loans outstanding by portfolio segment and class of financing receivable as of June 30, 2020 and December 31, 2019. The June 30, 2020 presentation has been conformed to the December 31, 2019 portfolio segment and class of financing receivable to provide comparability to previous public filings with the exception of the Small Business Lending portfolio segment of which approximately $505 million was reclassified to C&I and $229 million was reclassified to CRE to reflect alignment with CECL categorizations.

Table 13 – Loan Portfolio

 

 

Total Loans as of

 

 

Change

 

(In thousands)

 

June 30, 2020(1)

 

 

December 31, 2019

 

 

Amount

 

 

Percent

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

4,860,127

 

 

$

3,979,193

 

 

$

880,934

 

 

 

22.1

%

Energy sector

 

 

1,449,274

 

 

 

1,427,832

 

 

 

21,442

 

 

 

1.5

 

Restaurant industry

 

 

1,146,785

 

 

 

993,397

 

 

 

153,388

 

 

 

15.4

 

Healthcare

 

 

561,743

 

 

 

472,307

 

 

 

89,436

 

 

 

18.9

 

Total commercial and industrial

 

 

8,017,929

 

 

 

6,872,729

 

 

 

1,145,200

 

 

 

16.7

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income producing

 

 

2,811,695

 

 

 

2,517,707

 

 

 

293,988

 

 

 

11.7

 

Land and development

 

 

251,528

 

 

 

254,965

 

 

 

(3,437

)

 

 

(1.3

)

Total commercial real estate

 

 

3,063,223

 

 

 

2,772,672

 

 

 

290,551

 

 

 

10.5

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

2,537,765

 

 

 

2,584,810

 

 

 

(47,045

)

 

 

(1.8

)

Other

 

 

80,180

 

 

 

93,175

 

 

 

(12,995

)

 

 

(13.9

)

Total consumer

 

 

2,617,945

 

 

 

2,677,985

 

 

 

(60,040

)

 

 

(2.2

)

Small business lending

 

 

—

 

 

 

734,237

 

 

 

(734,237

)

 

NM

 

Total (gross of unearned discount and fees)

 

 

13,699,097

 

 

 

13,057,623

 

 

 

641,474

 

 

 

4.9

 

Unearned discount and fees

 

 

—

 

 

 

(73,968

)

 

 

73,968

 

 

NM

 

Total (net of unearned discount and fees)

 

$

13,699,097

 

 

$

12,983,655

 

 

$

715,442

 

 

 

5.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts represent total net loans. Under CECL, loan balances are stated at amortized cost, which is net of unearned income and are not directly comparable to prior periods.

 

Commercial and Industrial. Total C&I loans increased by $1.1 billion or 16.7% since December 31, 2019 and represented 58.5% of the total loan portfolio at June 30, 2020, compared to 52.6% of total loans at December 31, 2019. As noted above, a significant portion of this change resulted from $1.0 billion in PPP loans as detailed in Table 17 below, offset by the reclassification of loans within the Small Business Lending segment to the C&I segment as noted above.

General C&I. As of June 30, 2020, our general C&I category included loans to the following industries: finance and insurance, professional services, durable manufacturing, commodities excluding energy, contractors, consumer services, and other. Generally, C&I loans typically provide working capital, equipment financing, and financing for expansion and are generally secured by assignments of corporate assets including accounts receivable, inventory, and/or equipment. There were $717.2 million in PPP loans outstanding in General C&I portfolio as of June 30, 2020.

66

Energy. Our energy team is comprised of experienced lenders with significant product expertise and long-standing relationships. Additionally, energy production and energy related industries are substantial contributors to the economies in the Houston metropolitan area and the state of Texas. We strive for a rigorous and thorough approach to energy underwriting and credit monitoring. The allowance for credit losses at June 30, 2020 was $37.4 million for our energy loans or 2.58% of the energy portfolio compared to $12.7 million or 0.89% as of December 31, 2019 (see “—Provision for Credit Losses” and “—Allowance for Credit Losses”). As of June 30, 2020, we had $41.9 million of nonperforming energy credits compared to $9.8 million of nonperforming energy credits as of December 31, 2019. In addition, 19.4% of the energy portfolio was criticized as of June 30, 2020 compared to 6.7% at December 31, 2019. As of June 30, 2020, there were approximately $79.0 million in PPP loans outstanding in the Energy portfolio as follows: $53 million in Energy Services, $16 million in Midstream, and $9 million in E&P. As presented in the following table our energy lending business is comprised of three areas: Exploration and Production (“E&P”), Midstream, and Energy Services.

Table 14 – Energy Loan Portfolio

 

 

As of

 

 

As of June 30, 2020

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

 

Unfunded Commitments

 

 

Criticized

 

Outstanding balance(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E&P

 

$

325,843

 

 

$

358,552

 

 

$

50,617

 

 

$

146,916

 

Midstream

 

 

902,434

 

 

 

886,748

 

 

 

531,034

 

 

 

91,201

 

Energy services

 

 

220,997

 

 

 

182,532

 

 

 

76,088

 

 

 

42,445

 

Total energy sector

 

$

1,449,274

 

 

$

1,427,832

 

 

$

657,739

 

 

$

280,562

 

As a % of total loans

 

 

10.58

%

 

 

10.93

%

 

 

 

 

 

 

 

 

Allocated ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E&P

 

$

11,201

 

 

$

3,728

 

 

 

 

 

 

 

 

 

Midstream

 

 

20,622

 

 

 

7,845

 

 

 

 

 

 

 

 

 

Energy services

 

 

5,585

 

 

 

1,168

 

 

 

 

 

 

 

 

 

Total allocated ACL

 

$

37,408

 

 

$

12,741

 

 

 

 

 

 

 

 

 

ACL as a % of outstanding balance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E&P

 

 

3.44

%

 

 

1.04

%

 

 

 

 

 

 

 

 

Midstream

 

 

2.29

 

 

 

0.88

 

 

 

 

 

 

 

 

 

Energy services

 

 

2.53

 

 

 

0.64

 

 

 

 

 

 

 

 

 

Total energy sector

 

 

2.58

%

 

 

0.89

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Loan balances as of June 30, 2020 are stated at amortized cost, which is net of unearned discount and fees and are not directly comparable to the prior period. Loan balances as of December 31, 2019 are presented as previously reported, gross of unearned discount and fees.

 

E&P loans outstanding comprised approximately 22.5% of outstanding energy loans as of June 30, 2020 compared to 25.1% of outstanding energy loans as of December 31, 2019. We have strategically reduced our exposure to this category of energy lending over time, down from 51.7% of our outstanding energy loans as of December 31, 2014. Our E&P customers are primarily businesses that derive a majority of their revenues from the sale of oil and gas and whose credit needs require technical evaluation of oil and gas reserves. Emphasis for E&P is on high quality, independent producers with proven track records. Our E&P credit underwriting includes a combination of well-by-well analyses, frequent updates to our pricing decks, and engaging energy engineers to actively monitor the portfolio and provide credit redeterminations, at a minimum, every six months. At least quarterly, and more frequently as needed during periods of higher commodity price volatility, we adjust the base and sensitivity price decks on which we value our clients’ oil and gas reserves. Generally, we seek to follow the shape of the NYMEX strips for oil and natural gas, but at a discount to the strip. In periods of higher commodity prices, our discount from the strip is higher whereas in lower price periods our discount is lower. The price decks utilized in our engineering analysis are ratified by our Senior Credit Risk Management Committee. Borrowing base redeterminations occur every spring and fall, with the spring redeterminations completed prior to the end of the second quarter and fall determinations completed prior to the end of the fourth quarter.

Approximately 77% of the committed E&P loans are secured by properties primarily producing oil and the remaining 23% are secured by natural gas. It is expected that our E&P portfolio will experience additional stress, although the level of stress will depend on the duration of the crisis and the level of commodity prices. We are working with our clients to manage through this difficult period, as most are focused on maximizing cash flow and downside protection by restructuring and optimizing their hedge strategies where appropriate. Our clients have a material amount of hedges in place which is an important mitigating factor, but not a static situation. We expect manageable near-term results and carefully monitor duration risk as the major factor.

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Midstream loans outstanding comprised 62.3% of outstanding energy loans as of June 30, 2020 compared to 62.1% of outstanding energy loans as of December 31, 2019. We have strategically increased Midstream lending as a percent of our total energy lending over time, up from 30.8% as of December 31, 2014. Midstream lending is generally to customers who handle the gathering, treating and processing, storage or transportation of oil and gas. These customers’ businesses are generally less commodity price sensitive than other energy segments given the nature of their fee-based revenue streams. The majority of the portfolio was impacted by some level of reduced volumes from shut-ins in April and May; however, almost all of these volumes have come back on-line in June and July and stress on borrower covenants has been minimal, thus far. The majority of the portfolio is backed by large energy focused PE funds and operated by highly experienced management teams with long term relationships and track records with Cadence Midstream bankers. Underwriting guidelines for the Midstream portfolio generally require a first lien on all assets as collateral. The average debt to capital of this portfolio is at approximately 37%. Of our borrowers, the average outstanding is approximately $11.0 million.

Energy Services loans outstanding comprised 15.2% of outstanding energy as of June 30, 2020 compared to 12.8% of outstanding energy loans as of December 31, 2019. This category of lending has remained a low percent of our total energy lending over time, down slightly from 17.5% as of December 31, 2014. Energy Services lending targets oilfield service companies that provide equipment and services used in the exploration for and extraction of oil and natural gas. Customers consist of a wide variety of businesses, including production equipment manufacturers, chemical sales, water transfer, rig equipment and other early and late stage services companies. However, the majority of this portfolio is more production-oriented, so management believes there will be some “shut-ins” or production halts, but, over time, production is expected to resume.

Specialized lending. The following table presents our specialized lending portfolio by category as of the dates presented.

Table 15 – Specialized Lending Portfolio

 

 

Amounts Outstanding as of(1)

 

 

Unfunded Commitments as of

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019(2)

 

 

June 30, 2020

 

Restaurant

 

$

1,146,785

 

 

$

963,399

 

 

$

156,997

 

Healthcare

 

 

561,743

 

 

 

451,055

 

 

 

90,181

 

Technology

 

 

481,167

 

 

 

369,160

 

 

 

82,923

 

Total specialized lending

 

$

2,189,695

 

 

$

1,783,614

 

 

$

330,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Loan balances as of June 30, 2020 are stated at amortized cost, which is net of unearned discount and fees and are not directly comparable to the prior period. Loan balances as of December 31, 2019 are presented as previously reported, gross of unearned discount and fees.

 

(2) Prior period balances are presented as previously reported (originated C&I loans only) and may not be comparable to the current period presentation which represents the entire C&I loan portfolio.

 

Restaurant, healthcare, and technology are the components of our specialized industries. For these industries we focus on larger corporate clients, who are typically well-known within the industry. The client coverage for these components is national in scope, given the size and capital needs of the majority of the clients. Given these customer profiles, we frequently participate in such credits with two or more banks through syndication.

Restaurant loans outstanding increased by 19.0% compared to December 31, 2019 due primarily to the second quarter origination of $141 million in PPP loans. In the restaurant sector, we focus on major franchisees and the operating companies of “branded” restaurant concepts. Our restaurant group focuses on top tier operators in restaurant operating companies and franchisee restaurants in nationwide markets. The portfolio includes 68% to Quick Service Restaurants (“QSRs”), 7% to Fast Casual, 20% to Full Service and 5% to Other. The Restaurant sector has experienced increases in nonperforming loans and charge-offs during 2020 and 2019 as certain customers have faced difficulties dealing with market pressures on employee compensation and increased competition, and more recently, the effects of COVID-19. Dining room closures have required restaurants to adjust their business and labor models accordingly, although many of our QSR customers (68% of our portfolio) are experiencing meaningful drive-through and pick-up business. Our Full Service portfolio is the most stressed segment of the portfolio with continued uncertainty and inconsistencies with dining-room closures and/or partial re-openings across the country.

Healthcare loans outstanding increased by 24.5% with the majority of this increase due to $94.6 million in PPP loans and comprised 25.7% of total specialized lending at June 30, 2020 compared to 25.3% at December 31, 2019. Our healthcare portfolio focuses on middle market healthcare providers generally with a diversified payer mix.

Technology loans outstanding increased by 30.3% due in part to $20.2 million in PPP loans and comprised 22.0% of total specialized lending at June 30, 2020 compared to 20.7% at December 31, 2019. Our technology portfolio focuses on the technology sub-segments of software and services, network and communications infrastructure, and internet and mobility applications.

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Commercial Real Estate. Commercial real estate (“CRE”) loans increased by $290.6 million  or 10.5% since December 31, 2019. CRE loans represented 22.4% of the total loan portfolio as of June 30, 2020, compared to 21.2% of total loans as of December 31, 2019. As noted above, a significant portion of this change resulted from the reclassification of loans within the Small Business Lending segment to the CRE segment in connection with CECL classifications. Income Producing CRE includes non-owner occupied loans secured by commercial real estate, regardless of the phase of the loan (construction versus completed). Commercial construction loans are primarily included in Income Producing CRE. Additionally, all real estate investment trust and income producing loans are included in the Income Producing CRE segment. Land, lots, and homebuilder loans are included in the land and development segment. All owner occupied CRE loans reside in the various C&I segments in which the underlying risk exists. Our CRE lending team is a group of experienced relationship managers focusing on construction and income producing property lending which generally have property or sponsors located in our geographic footprint. CRE loans are secured by a variety of property types, including multi-family dwellings, office buildings, industrial properties, and retail facilities.

Consumer. Consumer loans decreased by $60.0 million or 2.2% from December 31, 2019. Consumer loans represented 19.1% of total loans at June 30, 2020, compared to 20.5% of total loans at December 31, 2019. We originate residential real estate mortgages that are held for investment as well as held for sale in the secondary market. Approximately 16.9% of the consumer portfolio relates to acquired portfolios, compared to 19.1% as of December 31, 2019. Our originated consumer loan portfolio totaled $2.2 billion as of June 30, 2020, consistent with year-end 2019.

Concentrations of Credit. We closely and consistently monitor our concentrations of credit. Individual concentration limits are assessed and established, as needed, on a quarterly basis and measured as a percentage of risk-based capital. All concentrations greater than 25% of risk-based capital require a concentration limit, which are monitored and reported to the Board of Directors on at least a quarterly basis. In addition to the specialized industries, energy, and CRE segments in the loan portfolio, we manage concentration limits for other loans, such as, construction, multifamily, office building, leveraged loans, technology loans, specialty chemical, and non-specialized enterprise value loans. We evaluate the appropriateness of our underwriting standards in response to changes in national and regional economic conditions, including energy prices, interest rates, real estate values, and employment levels. Underwriting standards and credit monitoring activities are assessed and enhanced in response to changes in these conditions.

Shared National Credits. The federal banking agencies define a shared national credit (“SNC”) as any loan(s) extended to a borrower by a supervised institution or any of its subsidiaries and affiliates which aggregates $100 million or more and is shared by three or more institutions under a formal lending agreement or a portion of which is sold to two or more institutions, with the purchasing institutions assuming its pro rata share of the credit risk. As a commercial focused relationship bank, we often participate in syndicated loan offerings as a result of the size of the customers and nature of industries we serve.

Our SNC loans are spread across our commercial products with many falling within our specialized industries and are focused on customers where we have ancillary business or believe we can develop such business. Our management team, relationship managers, and credit risk management team have extensive experience in the underwriting, due diligence, and monitoring of SNC credits. We evaluate SNC loans using the same credit standards we apply in underwriting all our loans.

The following table presents our SNC portfolio by portfolio segment and class of financing receivable.

Table 16 – Shared National Credits

 

 

June 30, 2020

 

 

December 31, 2019

 

(In thousands)

 

Amount Outstanding(1)

 

 

% of SNC Portfolio

 

 

Amount Outstanding(1)

 

 

% of SNC Portfolio

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

993,329

 

 

 

38.3

%

 

$

997,021

 

 

 

38.2

%

Energy sector

 

 

885,991

 

 

 

34.2

 

 

 

903,501

 

 

 

34.7

 

Restaurant industry

 

 

466,477

 

 

 

18.0

 

 

 

468,298

 

 

 

18.0

 

Healthcare

 

 

30,004

 

 

 

1.2

 

 

 

31,436

 

 

 

1.2

 

Total commercial and industrial

 

 

2,375,801

 

 

 

91.7

 

 

 

2,400,256

 

 

 

92.1

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income producing

 

 

206,061

 

 

 

8.0

 

 

 

192,234

 

 

 

7.4

 

Land and development

 

 

9,081

 

 

 

0.3

 

 

 

14,294

 

 

 

0.5

 

Total commercial real estate

 

 

215,142

 

 

 

8.3

 

 

 

206,528

 

 

 

7.9

 

Total shared national credits

 

$

2,590,943

 

 

 

100.0

%

 

$

2,606,784

 

 

 

100.0

%

As a % of total loans

 

 

18.9

%

 

 

 

 

 

 

20.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Loan balances as of June 30, 2020 are stated at amortized cost, which is net of unearned discount and fees and are not directly comparable to the prior period. Loan balances as of December 31, 2019 are presented as previously reported, gross of unearned discount and fees.

 

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Paycheck Protection Program. The CARES Act created the PPP to provide certain small businesses with liquidity to support their operations during the COVID-19 pandemic. Entities must meet certain eligibility requirements to receive PPP loans, and they must maintain specified levels of payroll and employment to have the loans forgiven. The conditions are subject to audit by the U.S. government, but entities that borrow less than $2 million (together with any affiliates) will be deemed to have made the required certification concerning the necessity of the loan in good faith.

Under the PPP, eligible small businesses can apply to an SBA-approved lender for a loan that does not require collateral or personal guarantees. The loans have a 1% fixed interest rate. Loans issued prior to June 5 mature in two years unless otherwise modified and loans issued after June 5 mature in five years. However, they are eligible for forgiveness (in full or in part, including any accrued interest) under certain conditions. For loans (or parts of loans) that are forgiven, the lender will collect the forgiven amount from the U.S. government.

In response to the COVID-19 pandemic, we have taken several actions to offer various forms of support to our customers, employees, and communities that have experienced impacts from this development. We are actively working with customers impacted by the economic downturn, including securing loans for our customers under the PPP.

The following table presents our PPP loans by portfolio segment and class of financing receivable as of June 30, 2020. The June 30, 2020 presentation has been conformed to the December 31, 2019 portfolio segment and class of financing receivable to provide comparability to the other loan disclosures in MD&A.

Table 17 – Paycheck Protection Program

(In thousands)

 

Amortized Cost

 

 

% of PPP Portfolio

 

Commercial and industrial

 

 

 

 

 

 

 

 

General C&I

 

$

717,155

 

 

 

69.5

%

Energy sector

 

 

 

 

 

 

 

 

E&P

 

 

9,318

 

 

 

0.9

 

Midstream

 

 

16,307

 

 

 

1.5

 

Energy services

 

 

53,409

 

 

 

5.2

 

Restaurant industry

 

 

141,218

 

 

 

13.7

 

Healthcare

 

 

94,591

 

 

 

9.2

 

Total PPP loans

 

$

1,031,998

 

 

 

100.0

%

As a % of total loans

 

 

7.5

%

 

 

 

 

 

Asset Quality

We focus on asset quality strength through robust underwriting, proactive monitoring and reporting of the loan portfolio and collaboration between the lines of business, credit risk and enterprise risk management.

Credit risk is governed and reported up through the Board of Directors primarily through our Senior Credit Risk Management Committee (“SCRMC”). The SCRMC reviews credit portfolio management information such as problem loans, delinquencies, concentrations of credit, asset quality trends, portfolio analysis, exception management, policy updates and changes, and other relevant information. Further, both the Senior Loan Committee and Credit Transition Committee, the primary channels for credit approvals, report up through SCRMC. The approval of our Senior Loan Committee is generally required for relationships in an amount greater than $5.0 million. For loans in an amount greater than $5 million that are risk rated 10 or worse, approval of the Credit Transition Committee is generally required. There is a credit executive assigned to each line of business who holds the primary responsibility for the approval process outside of the loan approval committees. Our Board of Directors receives information concerning asset quality measurements and trends on a monthly basis. See Note 4 to the consolidated financial statements for additional disclosure regarding our credit risk management.

Our credit policy requires that key risks be identified and measured, documented and mitigated, to the extent possible, and requires various levels of internal approvals based on the characteristics of the loans, including the size of the exposure. We also have specialized underwriting guidelines for loans in our specialized industries that we believe reflects the unique characteristics of these industries.

70

Under our dual credit risk rating (“DCRR”) system, it is our policy to assign risk ratings to all commercial loan (C&I and CRE) exposures using our internal credit risk rating system. The assignment of loan risk ratings is the primary responsibility of the lending officer concurrent with approval from the credit officer reviewing and recommending approval of the credit. The assignment of commercial risk ratings is completed on a transactional basis using scorecards. The Company uses a total of nine different scorecards that accommodate various areas of lending. Each scorecard contains two main components: probability of default (“PD”) and loss given default (“LGD”). The PD rating is used as the Company’s risk grade of record. Loans with PD ratings of 1 through 8 are loans that the Company rates internally as “Pass.” Loans with PD ratings of 9 through 13 are rated internally as “Criticized” and represent loans for which one or more potential or defined weaknesses exists. Loans with PD ratings of 10 through 13 are also considered “Classified” and represent loans for which one or more defined weaknesses exist. These classifications are consistent with regulatory guidelines.

Consumer purpose loan risk classification is assigned in accordance with the Uniform Retail Credit Classification, based on delinquency and accrual status.

An important aspect of our assessment of risk is the ongoing completion of periodic risk rating reviews. As part of these reviews, we seek to review the risk ratings of each facility within a customer relationship and may recommend an upgrade or downgrade to the risk ratings. Our policy is to review two times per year all customer relationships with an aggregate exposure of $10.0 million or greater as well as all SNC. Additionally, all customer relationships with an aggregate exposure of $2.5 million to $10.0 million are reviewed annually. Further, customer relationships with an aggregate exposure of $2.5 million and greater with pass/watch (defined as a borderline risk credit representing the weakest pass risk rating) or criticized risk ratings are reviewed quarterly. Certain relationships are exempt from review, such as relationships where our exposure is cash-secured. An updated risk rating scorecard is required during each risk review as well as with any credit event that requires credit approval.

Nonperforming Assets

Nonperforming assets (“NPA”) primarily consist of nonperforming loans (“NPL”) and other assets acquired through any means in full or partial satisfaction of a debt previously contracted. The following table presents all nonperforming assets and additional asset quality data for the dates indicated.

Table 18 – Nonperforming Assets

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Nonperforming loans(1)

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

182,839

 

 

$

106,803

 

Commercial real estate

 

 

25,261

 

 

 

1,127

 

Consumer

 

 

16,284

 

 

 

7,289

 

Small business(2)

 

 

—

 

 

 

4,337

 

Total nonperforming loans

 

 

224,384

 

 

 

119,556

 

Foreclosed OREO and other NPA

 

 

13,949

 

 

 

5,958

 

Total nonperforming assets

 

$

238,333

 

 

$

125,514

 

NPL as a percentage of total loans

 

 

1.64

%

 

 

0.92

%

NPA as a percentage of loans plus OREO/other

 

 

1.74

%

 

 

0.97

%

NPA as a percentage of total assets

 

 

1.26

%

 

 

0.71

%

Total accruing loans 90 days or more past due

 

$

3,123

 

 

$

23,364

 

 

 

 

 

 

 

 

 

 

(1) Amounts are not comparable due to our adoption of CECL on January 1, 2020. Prior to this date, pools of individual ACI loans were excluded because they continued to earn interest income from the accretable yield at the pool level. With the adoption of CECL, the pools were discontinued, and performance is based on contractual terms for individual loans. Had CECL been in place at December 31, 2019, the amount of these PCD loans would have been approximately $43.0 million. Additionally, prior to January 1, 2020, we used recorded investment in this table. With the adoption of CECL we now use amortized cost.

 

(2) As of June 30, 2020, formerly Small Business balances are included in Commercial and Industrial and Commercial Real Estate. Prior period balances are presented as previously reported and may not be comparable by segment to the current period presentation.

 

Nonperforming Loans. Commercial loans, including small business loans, are generally placed on nonaccrual status when principal or interest is past due 90 days or more unless the loan is well secured and in the process of collection, or when the loan is specifically determined to be impaired. When a commercial loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income. Of the total nonperforming loans at June 30, 2020, approximately 64% are current on their contractual payments.

Consumer loans, including residential first and second lien loans secured by real estate, are generally placed on nonaccrual status when they are 120 or more days past due. When a consumer loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income.

71

Generally, cash receipts on nonperforming loans are used to reduce principal rather than recorded as interest income. Past due status is determined based upon contractual terms. A nonaccrual loan may be returned to accrual status when repayment is reasonably assured under the terms of the loan or, if applicable, under the terms of the restructured loan. For the three and six months ended June 30, 2020 and 2019, an immaterial amount of contractual interest paid was recognized on the cash basis.

Our nonperforming loans have increased to 1.64% of our loan portfolio as of June 30, 2020 compared to 0.92% of our loan portfolio as of December 31, 2019. As noted above, the adoption of CECL resulted in additional NPL in the PCD population that were previously considered performing when evaluated as a pool under prior accounting methodology versus individually under CECL. Had CECL been in place at December 31, 2019, the amount of these PCD loans would have been $43.0 million. Our NPL in the originated population were 1.32% as of June 30, 2020 compared to 0.82% as of December 31, 2019.

The following table includes our originated nonperforming assets for the periods presented.

Table 19 – Originated Nonperforming Assets

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Nonperforming loans(1)

 

 

 

 

 

 

 

 

Commercial and industrial

 

 

 

 

 

 

 

 

General C&I

 

$

44,442

 

 

$

43,630

 

Energy sector

 

 

 

 

 

 

 

 

E&P

 

 

3,820

 

 

 

5,206

 

Midstream

 

 

37,107

 

 

 

3,159

 

Energy services

 

 

957

 

 

 

1,417

 

Restaurant industry

 

 

67,674

 

 

 

45,032

 

Healthcare

 

 

2,183

 

 

 

3,770

 

Commercial real estate

 

 

19,324

 

 

 

—

 

Consumer

 

 

4,697

 

 

 

3,307

 

Small business(2)

 

 

—

 

 

 

1,395

 

Total nonperforming loans

 

 

180,204

 

 

 

106,916

 

E&P - net profits interests

 

 

3,733

 

 

 

4,330

 

Repossessed assets

 

 

8,610

 

 

 

—

 

Foreclosed OREO

 

 

—

 

 

 

—

 

Total nonperforming assets

 

$

192,547

 

 

$

111,246

 

Originated NPL as a percentage of total loans

 

 

1.32

%

 

 

0.82

%

 

 

 

 

 

 

 

 

 

(1) Amounts are not comparable due to our adoption of CECL on January 1, 2020. Prior to this date, we used recorded investment in this table. With the adoption of CECL we now use amortized cost.

 

(2) As of June 30, 2020, formerly Small Business balances are included in Commercial and Industrial and Commercial Real Estate. Prior period balances are presented as previously reported and may not be comparable by segment to the current period presentation.

 

Other Real Estate Owned and Other NPA. Other real estate owned consists of properties acquired through foreclosure and unutilized bank-owned properties. These properties, as held for sale properties, are initially recorded at fair value, less estimated costs to sell, on the date of foreclosure (establishing a new cost basis for the property). Subsequent to the foreclosure date, the OREO is maintained at the lower of cost or fair value. Any write-down to fair value required at the time of foreclosure is charged to the allowance for credit losses. Subsequent gains or losses on other real estate owned resulting from either the sale of the property or additional valuation allowances required due to further declines in fair value are reported in other noninterest expense.

The balance of foreclosed OREO was $1.6 million as of June 30, 2020 and consisted of nine properties compared to $1.6 million and eight properties as of December 31, 2019, with the majority related to foreclosures within our acquired loan portfolio. There were no additions to OREO resulting from foreclosure or repossession from a SNC during the three and six months ended June 30, 2020 and 2019.

In 2016, we received net profits interests (“NPI”) in certain oil and gas reserves related to two energy credit bankruptcies that were charged-off in 2016. We recorded the NPI at estimated fair value using a discounted cash flow analysis applied to the expected cash flows from the producing developed wells. We sold one NPI during 2018. The remaining NPI balance was $3.7 million as of June 30, 2020 compared to $4.3 million as of December 31, 2019. In addition, during the first quarter of 2020, we received assets of $4.3 million in the form of limited partnerships units related to two SNC energy credit bankruptcies and $6.3 million in inventory in a general C&I bankruptcy. During the three months ended June 30, 2020, we charged off $2.0 million of these limited partnership assets, leaving a balance of $8.6 million in repossessed assets.

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Past Due 90 Days and Accruing. We classify certain loans with principal or interest past due 90 days or more as accruing loans if those loans are well secured and in the process of collection or are specifically determined to be impaired as accruing loans. The bulk of the accruing 90 days or more past due loans at December 31, 2019 reside in the ACI portfolio prior to the adoption of CECL. As of June 30, 2020, the majority of these loans are within the acquired residential portfolio. These loans are monitored on a monthly basis by both the lines of business and credit administration.

Troubled Debt Restructuring. We attempt to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Bank considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. Qualifying criteria and payment terms are structured by the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as a troubled debt restructuring (“TDR”) if the borrower is experiencing financial difficulty and it is determined that we have granted a concession to the borrower. We may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without the modification. Concessions could include reductions of interest rates at a rate lower than the current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, principal forgiveness, forbearance, or other concessions. The assessments of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR.

All TDRs are reported as impaired. An impaired classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring. Nonperforming loans and impaired loans have unique definitions. Some loans may be included in both categories, whereas other loans may only be included in one category. As of June 30, 2020, there were SNCs totaling $2.2 million designated as TDRs compared to $7.7 million as of December 31, 2019.

The following table provides information regarding loans that were modified into TDRs for the periods indicated.

Table 20 – Loans Modified into TDRs

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Number of TDRs

 

 

Amortized Cost(1)

 

 

Number of TDRs

 

 

Amortized Cost

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

$

—

 

 

 

2

 

 

$

7,647

 

Energy

 

 

—

 

 

 

—

 

 

 

1

 

 

 

11,717

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1,455

 

Total

 

 

—

 

 

$

—

 

 

 

4

 

 

$

20,819

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) There was no net accrued interest receivable recorded on the loan balances above as of June 30, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Number of TDRs

 

 

Amortized Cost(1)

 

 

Number of TDRs

 

 

Amortized Cost

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

3

 

 

$

19,366

 

 

 

3

 

 

$

28,913

 

Energy

 

 

1

 

 

 

8,140

 

 

 

1

 

 

 

11,717

 

Restaurant

 

 

2

 

 

 

24,246

 

 

 

—

 

 

 

—

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1,455

 

Total

 

 

6

 

 

$

51,752

 

 

 

5

 

 

$

42,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Less than $0.1 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

73

We monitor loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term. Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 days past due status with respect to principal and/or interest payments.

For the three- and six-month periods ended June 30, 2020 and June 30, 2019, we had no TDRs for which there was a payment default within the 12 months following the restructure date. During the three and six months ended June 30, 2020, approximately $12.5 million and $19.3 million, respectively, in charge-offs were taken related to one general C&I loan that was modified into a TDR during the same period. During the three and six months ended June 30, 2019, approximately $17.8 million in charge-offs were taken related to commercial and industrial loans modified into TDRs during the same period.

Loan Modifications Related to COVID-19. Affected companies may experience cash flow challenges as a result of disruptions in their operations, higher operating costs or lost revenues. They may need to obtain additional financing, amend the terms of existing debt agreements or obtain waivers if they no longer satisfy debt covenants.

Financial institutions may elect to apply Section 4013 of the CARES Act and suspend TDR accounting and reporting requirements for certain loan modifications that are related to COVID-19 (i.e. forbearance, interest rate modifications, repayment plans or any other similar arrangements that defer or delay payment). The modifications must be made during the period beginning on March 1, 2020 and ending on the earlier of December 31, 2020 or 60 days after the national emergency is lifted, and the borrowers must have been less than 30 days past due on December 31, 2019.

Lenders that determine that a modification is not eligible for the relief from TDR accounting under Section 4013 of the CARES Act or elect not to apply it can consider the interagency statement issued by the federal and state banking regulators in March 2020 and revised in April 2020. The statement provides guidance on accounting for loan modifications related to COVID-19.

The guidance in the statement, which was developed in consultation with the FASB staff, indicates that short-term loan modifications (e.g., deferral of payments) made to help borrowers that are current on existing loans, either individually or as part of a program for creditworthy borrowers who are experiencing short-term financial or operational problems as a result of COVID-19, generally would not be considered TDRs.

For the three-month period ended June 30, 2020, the Company had approximately 2,500 cumulative loan modifications (including payment deferrals and non-payment deferrals) totaling $2.5 billion and the vast majority of these loans are currently eligible for exemption from the accounting guidance for TDRs. As of June 30, 2020, active COVID loan modifications declined to $1.9 billion, of which $1.4 billion represented payment deferrals (generally 90-day) and $0.5 billion represented non-payment deferral modifications. The Company believes additional loans may be restructured because of COVID-19 before the end of the year that will not be identified as TDRs in accordance with this law or interagency statement (see “- Overview” for additional information).

Potential Problem Loans. Potential problem loans represent loans that are currently performing, but for which available information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the repayment terms in the future and which may result in the classification of such loans as nonperforming at some time in the future. These loans are not included in the amounts of nonaccrual or restructured loans presented above but there is a reasonable possibility that they may become nonperforming before the end of the second quarter 2020. We cannot predict the extent to which economic conditions or other factors may impact borrowers and the potential problem loans. Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual status, become restructured, or require increased allowance coverage and provision for credit losses. We have identified approximately $53 million in credits as potential problem loans at June 30, 2020. Any potential problem loans would be assessed for loss exposure consistent with the methods described in Notes 1 and 4 to our Consolidated Financial Statements.

We expect the levels of nonperforming assets and potential problem loans to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with our degree of success in resolving problem assets. We seek to take a proactive approach with respect to the identification and resolution of problem loans.

74

Allowance for Credit Losses

The allowance for credit losses (“ACL”) is maintained at a level that management believes is adequate to absorb expected credit losses on loans in the loan portfolio as of the reporting date. On January 1, 2020 we adopted CECL which replaces the incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Events that are not within our control, such as changes in economic factors, could change after the reporting date and could cause increases or decreases to the ACL. The amount of the allowance is affected by loan charge-offs, which decrease the allowance; recoveries on loans previously charged off, which increase the allowance; and the provision for credit losses charged to earnings, which increases the allowance (see Notes 1 and 4 to the Consolidated Financial Statements). This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as events change.

Total ACL as of June 30, 2020 was $370.9 million or 2.71% of total loans (net of unearned discounts and fees) of $13.7 billion. Excluding PPP loans, the ACL was 2.93% of total loans at June 30, 2020. This compares with $119.6 million on loans of $13.0 billion or 0.92% of total loans at December 31, 2019. The adoption of the CECL accounting standard on January 1, 2020 increased the ACL by $75.9 million. The ACL was increased an additional $158.2 million and $242.2 million in provision for the second quarter and year-to-date 2020, respectively, which reflects the forecasted effects of COVID-19 on the various loan segments due to higher unemployment, lower GDP, market value, energy prices, and real estate prices. The second quarter 2020 provision was affected by credit migration as well as a negative shift in the outlook for commercial real estate and a slower expected recovery. Our estimate of the ACL used the baseline scenario provided by a nationally recognized service, as adjusted for consideration of certain qualitative and environmental factors. These adjustments consider, among other factors, risk attributes of each portfolio, relevant third-party research, and loss data collected from previous recessions. Loan charge-offs recognized during 2020 are higher than 2019 as a result of credit migration that has occurred primarily in the Restaurant, Energy and General C&I classes with the most significant impact being COVID related.

The following table presents the allocation of the ACL and the percentage of these loans to total loans. The allocation below is neither indicative of the specific amounts or the loan categories in which future charge-offs may occur, nor is it an indicator of any future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb any losses in any category.


75

Table 21 – Allocation of Allowance for Credit Losses

 

 

Allowance for Credit Losses(1)

 

 

Percent of ACL to Each

Category of Loans(1)

 

 

Percent of Loans in Each

Category to Total Loans(1)

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

Commercial and industrial

 

$

217,796

 

 

$

84,309

 

 

 

2.69

%

 

 

1.23

%

 

 

59.16

%

 

 

52.63

%

Commercial real estate

 

 

112,480

 

 

 

14,093

 

 

 

3.78

%

 

 

0.51

%

 

 

21.73

%

 

 

21.23

%

Consumer

 

 

40,625

 

 

 

15,392

 

 

 

1.55

%

 

 

0.57

%

 

 

19.11

%

 

 

20.51

%

Small business

 

 

—

 

 

 

5,849

 

 

 

0.00

%

 

 

0.80

%

 

 

0.00

%

 

 

5.62

%

Total allowance for credit losses

 

 

370,901

 

 

 

119,643

 

 

 

2.71

%

 

 

0.92

%

 

 

100.00

%

 

 

100.00

%

Reserve for unfunded commitments(2)

 

 

3,827

 

 

 

1,699

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

374,728

 

 

$

121,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) As of June 30, 2020, formerly Small Business balances are included in Commercial and Industrial and Commercial Real Estate. Prior period balances are presented as previously reported and may not be comparable by segment to the current period presentation.

 

(2) The reserve for unfunded commitments is recorded in other liabilities in the consolidated balance sheets.

 

As of June 30, 2020, $217.8 million or 58.7% of our ACL is attributable to our C&I loan segment compared to $84.3 million or 70.5% as of December 31, 2019. The ACL as a percentage of the C&I portfolio was 2.69% as of June 30, 2020 compared to 1.23% as of December 31, 2019. As of June 30, 2020, $112.5 million or 30.3% of our ACL is attributable to the CRE loan segment compared to $14.1 million or 11.8% as of December 31, 2019. The ACL as a percentage of the CRE portfolio has increased to 3.78% as of June 30, 2020 from 0.51% as of December 31, 2019. As of June 30, 2020, $40.6 million or 11.0% of our ACL is attributable to the Consumer loan segment compared to $15.4 million or 12.9% as of December 31, 2019. The ACL as a percentage of the Consumer portfolio has increased to 1.55% as of June 30, 2020 from 0.57% as of December 31, 2019. These increases reflect the adoption of CECL and the effects of COVID-19. As of June 30, 2020, $76.1 million or 20.5% of the total ACL was attributable to SNC loans compared to $32.0 million or 26.7% as of December 31, 2019. The ACL methodology is consistent whether or not a loan is a SNC.

During the three and six months ended as of June 30, 2020, we recorded net charge-offs of $32.6 million, or 0.94% annualized, and $65.0 million, or 0.97% annualized, of average loans compared to $18.6 million, or 0.54% annualized, and $19.2 million, or 0.28% annualized for the three and six months ended June 30, 2019, respectively. The current quarter charge-offs included $12.5 million in one general C&I credit, $4.0 million in one restaurant credit, and $14.2 million in one energy credit. The current year-to-date charge-offs included $33.1 million in three general C&I credits, $13.4 million in three restaurant credits, and $15.1 million in two energy credits. Of these charge-offs, $45.7 million were SNC credits within the Energy and general C&I portfolios.

The following tables summarize certain information with respect to our ACL on the total loan portfolio and the composition of charge-offs and recoveries for the periods indicated.

Table 22 – Allowance for Credit Losses Rollforward

 

 

For the Three Months Ended June 30, 2020

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Total Allowance for Credit Losses

 

As of March 31, 2020

 

$

154,585

 

 

$

53,418

 

 

$

37,243

 

 

$

245,246

 

Provision for loan losses

 

 

95,325

 

 

 

59,359

 

 

 

3,522

 

 

 

158,206

 

Charge-offs

 

 

(32,816

)

 

 

(327

)

 

 

(309

)

 

 

(33,452

)

Recoveries

 

 

702

 

 

 

30

 

 

 

169

 

 

 

901

 

As of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans at end of period, net of unearned income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,699,097

 

Average loans, net of unearned income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,884,220

 

Ratio of ending allowance to ending loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.71

%

Ratio of net charge-offs to average loans(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.94

 

Net charge-offs as a percentage of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20.58

 

Allowance for credit losses(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35.30

 

ACL as a percentage of NPL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

165.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized.

 

76

 

 

 

For the Six Months Ended June 30, 2020

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Total Allowance for Credit Losses

 

As of December 31, 2019

 

$

89,796

 

 

$

15,319

 

 

$

14,528

 

 

$

119,643

 

Cumulative effect of the adoption of CECL

 

 

32,951

 

 

 

20,599

 

 

 

22,300

 

 

 

75,850

 

As of January 1, 2020

 

 

122,747

 

 

 

35,918

 

 

 

36,828

 

 

 

195,493

 

Provision for loan losses

 

 

159,008

 

 

 

77,158

 

 

 

4,278

 

 

 

240,444

 

Charge-offs

 

 

(64,803

)

 

 

(806

)

 

 

(941

)

 

 

(66,550

)

Recoveries

 

 

844

 

 

 

210

 

 

 

460

 

 

 

1,514

 

As of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans at end of period, net of unearned income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,699,097

 

Average loans, net of unearned income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,522,795

 

Ratio of ending allowance to ending loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.71

%

Ratio of net charge-offs to average loans(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.97

 

Net charge-offs as a percentage of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27.05

 

Allowance for credit losses(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35.26

 

ACL as a percentage of NPL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

165.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized.

 

 

 

 

For the Three Months Ended June 30, 2019

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Small Business

 

 

Total Allowance for Credit Losses

 

As of March 31, 2019

 

$

75,526

 

 

$

10,469

 

 

$

14,690

 

 

$

4,353

 

 

$

105,038

 

Provision for credit losses

 

 

24,652

 

 

 

3,201

 

 

 

240

 

 

 

834

 

 

 

28,927

 

Charge-offs

 

 

(18,001

)

 

 

(253

)

 

 

(534

)

 

 

(193

)

 

 

(18,981

)

Recoveries

 

 

269

 

 

 

—

 

 

 

68

 

 

 

24

 

 

 

361

 

As of June 30, 2019

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans at end of period, net of unearned income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,627,934

 

Average loans, net of unearned income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,921,873

 

Ratio of ending allowance to ending loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.85

%

Ratio of net charge-offs to average loans(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.54

 

Net charge-offs as a percentage of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64.37

 

Allowance for credit losses(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

64.75

 

ACL as a percentage of NPL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

106.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized.

 

 

77

 

 

For the Six Months Ended June 30, 2019

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Small Business

 

 

Total Allowance for Credit Losses

 

As of December 31, 2018

 

$

66,316

 

 

$

10,452

 

 

$

13,703

 

 

$

3,907

 

 

$

94,378

 

Provision for credit losses

 

 

33,951

 

 

 

3,303

 

 

 

1,446

 

 

 

1,437

 

 

 

40,137

 

Charge-offs

 

 

(18,462

)

 

 

(338

)

 

 

(768

)

 

 

(351

)

 

 

(19,919

)

Recoveries

 

 

641

 

 

 

—

 

 

 

83

 

 

 

25

 

 

 

749

 

As of June 30, 2019

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans at end of period, net of unearned income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,627,934

 

Average loans, net of unearned income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,860,471

 

Ratio of ending allowance to ending loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.85

%

Ratio of net charge-offs to average loans(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.28

 

Net charge-offs as a percentage of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

47.76

 

Allowance for credit losses(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33.51

 

ACL as a percentage of NPL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

106.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized.

 

Total criticized loans at June 30, 2020 were $1.0 billion or 7.37% of total loans as compared to $605.1 million or 4.66% at December 31, 2019. The increase included net downgrades predominantly in Restaurant and Energy and to a lesser extent CRE credits, partially mitigated by net reductions in general C&I credits. This migration reflects those sectors of the economy that have been most acutely affected by COVID-19 and reflects the elevated risk in the current macroeconomic environment. The migration in the Restaurant segment is predominantly in the Non-QSR space as on-premise, family and casual sectors have been much more severely impacted by the economic shutdown. The majority of the migration in Energy is in the E&P sector due to lower commodity prices and CRE is almost exclusively hospitality. The level of criticized loans in the loan portfolio is presented in the following tables as of June 30, 2020 and December 31, 2019.

Table 23 – Criticized Loans

 

 

As of June 30, 2020(1)

 

(Amortized cost in thousands)

 

Special Mention

 

 

Substandard

 

 

Doubtful

 

 

Total Criticized

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

45,512

 

 

$

146,333

 

 

$

10,237

 

 

$

202,082

 

Energy

 

 

155,735

 

 

 

114,080

 

 

 

10,747

 

 

 

280,562

 

Restaurant

 

 

171,722

 

 

 

158,596

 

 

 

7,596

 

 

 

337,914

 

Healthcare

 

 

18,250

 

 

 

47,398

 

 

 

—

 

 

 

65,648

 

Total commercial and industrial

 

 

391,219

 

 

 

466,407

 

 

 

28,580

 

 

 

886,206

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

60,819

 

 

 

40,351

 

 

 

534

 

 

 

101,704

 

Multifamily

 

 

91

 

 

 

714

 

 

 

—

 

 

 

805

 

Office

 

 

346

 

 

 

1,005

 

 

 

—

 

 

 

1,351

 

Total commercial real estate

 

 

61,256

 

 

 

42,070

 

 

 

534

 

 

 

103,860

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

—

 

 

 

19,172

 

 

 

—

 

 

 

19,172

 

Other

 

 

—

 

 

 

39

 

 

 

—

 

 

 

39

 

Total consumer

 

 

—

 

 

 

19,211

 

 

 

—

 

 

 

19,211

 

Total

 

$

452,475

 

 

$

527,688

 

 

$

29,114

 

 

$

1,009,277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) As of June 30, 2020, formerly Small Business balances are included in Commercial and Industrial and Commercial Real Estate. Prior period balances are presented as previously reported and may not be comparable by segment to the current period presentation.

 

78

 

 

 

As of December 31, 2019(1)

 

(Recorded investment in thousands)

 

Special Mention

 

 

Substandard

 

 

Doubtful

 

 

Total Criticized

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

70,058

 

 

$

204,087

 

 

$

8,191

 

 

$

282,336

 

Energy sector

 

 

66,235

 

 

 

26,439

 

 

 

2,754

 

 

 

95,428

 

Restaurant industry

 

 

45,456

 

 

 

58,559

 

 

 

4,697

 

 

 

108,712

 

Healthcare

 

 

22,414

 

 

 

3,984

 

 

 

—

 

 

 

26,398

 

Total commercial and industrial

 

 

204,163

 

 

 

293,069

 

 

 

15,642

 

 

 

512,874

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income producing

 

 

36,205

 

 

 

7,125

 

 

 

—

 

 

 

43,330

 

Land and development

 

 

8,997

 

 

 

2,350

 

 

 

—

 

 

 

11,347

 

Total commercial real estate

 

 

45,202

 

 

 

9,475

 

 

 

—

 

 

 

54,677

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

152

 

 

 

11,603

 

 

 

—

 

 

 

11,755

 

Other

 

 

—

 

 

 

81

 

 

 

—

 

 

 

81

 

Total consumer

 

 

152

 

 

 

11,684

 

 

 

—

 

 

 

11,836

 

Small Business Lending

 

 

6,573

 

 

 

19,126

 

 

 

—

 

 

 

25,699

 

Total

 

$

256,090

 

 

$

333,354

 

 

$

15,642

 

 

$

605,086

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) As of June 30, 2020, formerly Small Business balances are included in Commercial and Industrial and Commercial Real Estate. Prior period balances are presented as previously reported and may not be comparable by segment to the current period presentation.

 

 

Deposits. Deposits at June 30, 2020 totaled $16.1 billion as compared to $14.7 billion at December 31, 2019. Our core deposits have increased due to corporate customer increases in liquidity in the current environment and broader impacts of fiscal stimulus in the second quarter. We aggressively lowered our interest rates on deposits resulting in costs of total deposits of 0.46% for the three months ended June 30, 2020 compared to 1.39% for the same period of 2019. For the six months ended June 30, 2020 the cost of total deposits lowered to 0.70% from 1.34% from the same period in 2019. Additionally, noninterest-bearing deposits as a percent of total deposits increased significantly to 32.5% from 26.0%. Our strategy is to fund asset growth primarily with customer deposits in order to maintain a stable liquidity profile and a more competitive cost of funds. We categorize deposits as brokered and non-brokered consistent with the banking industry.

The following table illustrates the growth in our deposits during the periods indicated:

Table 24 – Deposits

 

 

 

 

 

 

 

 

 

 

Percent to Total

 

 

Percentage

 

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

 

June 30, 2020

 

 

December 31, 2019

 

 

Change

 

 

Noninterest-bearing demand

 

$

5,220,109

 

 

$

3,833,704

 

 

 

32.5

 

%

 

26.0

 

%

 

36.2

 

%

Interest-bearing demand

 

 

8,095,519

 

 

 

8,076,735

 

 

 

50.4

 

 

 

54.8

 

 

 

0.2

 

 

Savings

 

 

302,344

 

 

 

268,848

 

 

 

1.9

 

 

 

1.8

 

 

 

12.5

 

 

Time deposits less than $100,000

 

 

1,098,150

 

 

 

973,329

 

 

 

6.8

 

 

 

6.6

 

 

 

12.8

 

 

Time deposits greater than $100,000

 

 

1,353,160

 

 

 

1,590,178

 

 

 

8.4

 

 

 

10.8

 

 

 

(14.9

)

 

Total deposits

 

$

16,069,282

 

 

$

14,742,794

 

 

 

100.0

 

%

 

100.0

 

%

 

9.0

 

%

Total brokered deposits

 

$

587,566

 

 

$

195,194

 

 

 

3.7

 

%

 

1.3

 

%

 

201.0

 

%

Domestic time deposits $250,000 and over were $503.6 million and $644.1 million at June 30, 2020 and December 31, 2019, respectively, which represented 3.1% and 4.4% of total deposits at June 30, 2020 and at December 31, 2019, respectively.

79

The following tables set forth our average deposits and the average rates expensed for the periods indicated:

Table 25 – Average Deposits/Rates

 

 

Three Months Ended June 30,

 

 

 

 

2020

 

 

2019

 

 

 

 

Average

 

 

Average

 

 

Average

 

 

Average

 

 

 

 

Amount

 

 

Rate

 

 

Amount

 

 

Rate

 

 

(In thousands)

 

Outstanding

 

 

Paid

 

 

Outstanding

 

 

Paid

 

 

Noninterest-bearing demand

 

$

4,587,673

 

 

 

—

 

%

$

3,281,383

 

 

 

—

 

%

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand

 

 

8,368,151

 

 

 

0.36

 

 

 

7,732,568

 

 

 

1.57

 

 

Savings

 

 

291,874

 

 

 

0.25

 

 

 

251,270

 

 

 

0.39

 

 

Time deposits

 

 

2,527,090

 

 

 

1.66

 

 

 

3,379,889

 

 

 

2.41

 

 

Total interest-bearing deposits

 

 

11,187,115

 

 

 

0.65

 

%

 

11,363,727

 

 

 

1.79

 

%

Total average deposits

 

$

15,774,788

 

 

 

0.46

 

%

$

14,645,110

 

 

 

1.39

 

%

 

 

 

Six Months Ended June 30,

 

 

 

 

2020

 

 

2019

 

 

 

 

Average

 

 

Average

 

 

Average

 

 

Average

 

 

 

 

Amount

 

 

Rate

 

 

Amount

 

 

Rate

 

 

(In thousands)

 

Outstanding

 

 

Paid

 

 

Outstanding

 

 

Paid

 

 

Noninterest-bearing demand

 

$

4,123,143

 

 

 

—

 

%

$

3,307,745

 

 

 

—

 

%

Interest-bearing deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand

 

 

8,244,896

 

 

 

0.71

 

 

 

7,871,015

 

 

 

1.52

 

 

Savings

 

 

282,159

 

 

 

0.35

 

 

 

249,968

 

 

 

0.38

 

 

Time deposits

 

 

2,524,504

 

 

 

1.85

 

 

 

3,183,894

 

 

 

2.37

 

 

Total interest-bearing deposits

 

 

11,051,559

 

 

 

0.96

 

%

 

11,304,877

 

 

 

1.74

 

%

Total average deposits

 

$

15,174,702

 

 

 

0.70

 

%

$

14,612,622

 

 

 

1.34

 

%

Borrowings

The following is a summary of our borrowings for the periods indicated:

Table 26 – Borrowings

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Advances from FHLB

 

$

100,000

 

 

$

100,000

 

Senior debt

 

 

49,969

 

 

 

49,938

 

Subordinated debt

 

 

183,142

 

 

 

182,712

 

Junior subordinated debentures

 

 

37,448

 

 

 

37,445

 

Notes payable

 

 

1,663

 

 

 

2,078

 

Total borrowings

 

$

372,222

 

 

$

372,173

 

Average total borrowings - YTD

 

$

406,122

 

 

$

437,185

 

At June 30, 2020, the outstanding advance from the FHLB was a long-term convertible advance. At June 30, 2020, we had borrowing availability of $2.6 billion from the FHLB.

In June 2014, we completed a $245 million unregistered multi-tranche debt transaction, and in March 2015, we completed an unregistered $50 million debt transaction ($10 million senior; $40 million subordinated). In June 2019, the Company completed a registered public offering of $85 million aggregate principal amount of 4.75% fixed to floating rate subordinated notes due 2029, the net proceeds of which, along with holding company cash, were used to redeem its 4.875% senior notes totaling $145 million due June 28, 2019.

The senior transactions were structured with four- and seven-year maturities to provide holding company liquidity and to stagger our debt maturity profile. The $35 million and $25 million subordinated debt transactions were structured with a fifteen-year maturity, ten-year call options, and fixed-to floating interest rates. The $85 million subordinated debt transaction was structured with a ten-year maturity, a five-year call option, and a fixed-to-floating interest rate. The $40 million subordinated debt transaction has a five-year call option. These subordinated debt structures were designed to achieve full Tier 2 capital treatment for 10 years.

80

On March 29, 2019, we entered into a credit agreement for a revolving loan facility in the amount of $100 million with a maturity date of March 29, 2020. On March 29, 2020, the Company renewed the credit agreement with a maturity date of March 29, 2021. There were no amounts outstanding under this line of credit at June 30, 2020. Subsequent to June 30, 2020 we cancelled this facility.

Shareholders’ Equity

As of June 30, 2020 and December 31, 2019, our ratio of shareholders’ equity to total assets was 10.85% and 13.82%, respectively, and we had tangible common equity ratios of 10.19% and 10.87%, respectively. Shareholders’ equity was $2.0 billion at June 30, 2020, a decrease of $415.4 million from December 31, 2019. The decrease resulted from the net loss for the six months of $455.4 million combined with the cumulative effect of adopting CECL of $62.8 million, dividends of $28.4 million, and the purchase of $30.0 million of common shares under our common stock repurchase program. These items were partially offset by an increase of $158.8 million of other comprehensive income which was due to increases in the fair value of our investment securities portfolio and interest rate collar. At June 30, 2020, approximately $100 million remains in our authorized share repurchase program, however we do not currently anticipate additional repurchases in the near future.

Regulatory Capital

We are required to comply with regulatory capital requirements established by federal banking agencies. These regulatory capital requirements involve quantitative measures of the Company's assets, liabilities and selected off-balance sheet items, and qualitative judgments by the regulators. Failure to meet minimum capital requirements can subject us to a series of increasingly restrictive regulatory actions. Failure to meet well capitalized capital levels (as defined) can result in restrictions on our operations.

Additionally, the regulatory capital requirements impose a capital conservation buffer designed to absorb losses during periods of economic stress. The capital conservation buffer is on top of minimum risk-weighted asset ratios and is equal to the lowest difference between the three risk-based capital ratios less the applicable minimum required ratio. The capital conservation buffer is 2.5% of common equity Tier 1 capital to risk-weighted assets. Banking institutions with ratios that are above the minimum but below the combined capital conservation buffer face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall and the institution’s eligible retained income (“ERI”). ERI is compiled using the past four quarter trailing net income, net of distributions and tax effects not reflected in net income.

On March 27, 2020, the federal banking agencies issued an interim final rule to delay the estimated impact on regulatory capital stemming from the adoption of CECL. The agencies granted this relief to allow institutions to focus on lending to customers in light of recent strains on the U.S economy due to COVID-19, while also maintaining the quality of regulatory capital. Under the interim rule, 100% of the Day-1 impact of the adoption of CECL and 25% of subsequent provisions for credit losses (“Day 2 impacts”) will be deferred over a two-year year period ending January 1, 2022. At that point, the amount will be phased into regulatory capital on a pro rata basis over a three-year period ending January 1, 2025.

At June 30, 2020, our capital ratios exceeded the requirements discussed above. Our actual regulatory capital amounts and ratios at June 30, 2020 are presented in the following table:

Table 27 – Regulatory Capital Amounts/Ratios

 

 

Consolidated Company

 

 

Bank

 

(In thousands)

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

$

1,751,651

 

 

 

9.5

%

 

$

1,837,580

 

 

 

10.0

%

Common equity tier 1 capital

 

 

1,751,651

 

 

 

11.7

 

 

 

1,787,580

 

 

 

11.9

 

Tier 1 risk-based capital

 

 

1,751,651

 

 

 

11.7

 

 

 

1,837,580

 

 

 

12.2

 

Total risk-based capital

 

 

2,147,055

 

 

 

14.3

 

 

 

2,050,896

 

 

 

13.7

 

Minimum requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

 

736,486

 

 

 

4.0

 

 

 

736,981

 

 

 

4.0

 

Common equity tier 1 capital

 

 

676,118

 

 

 

4.5

 

 

 

676,097

 

 

 

4.5

 

Tier 1 risk-based capital

 

 

901,490

 

 

 

6.0

 

 

 

901,463

 

 

 

6.0

 

Total risk-based capital

 

 

1,201,987

 

 

 

8.0

 

 

 

1,201,951

 

 

 

8.0

 

Well capitalized requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

N/A

 

 

N/A

 

 

 

921,227

 

 

 

5.0

 

Common equity tier 1 capital

 

N/A

 

 

N/A

 

 

 

976,585

 

 

 

6.5

 

Tier 1 risk-based capital

 

 

901,490

 

 

 

6.0

 

 

 

1,201,951

 

 

 

8.0

 

Total risk-based capital

 

 

1,502,484

 

 

 

10.0

 

 

 

1,502,438

 

 

 

10.0

 

81

Regulatory Requirements Affecting Dividends

Under regulations controlling national banks, the payment of any dividends by a bank without prior approval of the OCC is limited to the current year’s net profits (as defined by the OCC) and retained net profits of the two preceding years. Due to the effects to the Bank’s retained profits of the recognition of the non-cash goodwill impairment charge in the first quarter of 2020 and the net loss in the second quarter of 2020, the Bank is currently required to seek prior approval of the OCC to pay dividends to the holding company.

The holding company had $147.0 million in cash on hand as of June 30, 2020, representing approximately 6.3 times its annual routine operating costs and debt interest payments, excluding dividends and debt maturities. The holding company has $50 million in senior debt that matures in June 2021.  While the holding company cash level is currently significant, the holding company does not generate income on a stand-alone basis, and other than raising cash from capital or debt markets, the holding company’s future cash level is dependent upon receiving dividends from the bank. Additionally, on July 24, 2020, the Federal Reserve amended its supervisory guidance and regulations addressing dividends from bank holding companies to require consultation with the Federal Reserve prior to paying a dividend that exceeds earnings for the period for which the dividend is being paid.

 

Liquidity

Overview

We measure and seek to manage liquidity risk by a variety of processes, including monitoring the composition of our funding mix; monitoring financial ratios specifically designed to measure liquidity risk; maintaining a minimum liquidity cushion; and performing forward cash flow gap forecasts in various liquidity stress testing scenarios designed to simulate possible stressed liquidity environments. We attempt to limit our liquidity risk by setting board-approved concentration limits on sources of funds and limits on liquidity ratios used to measure liquidity risk and maintaining adequate levels of on-hand liquidity. We use the following ratios to monitor and analyze our liquidity:

 

•

Total Loans to Total Deposits—the ratio of our outstanding loans to total deposits.

 

•

Non-Brokered Deposits to Total Deposits—the ratio of our deposits that are organically originated through commercial and branch activity to total deposits.

 

•

Brokered Deposits to Total Deposits—the ratio of our deposits generated through wholesale sources to total deposits.

 

•

Highly Liquid Assets to Uninsured Large Depositors—the ratio of cash and highly liquid assets to uninsured deposits with a current depository relationship greater than $10 million.

 

•

Wholesale Funds Usage—the ratio of our current borrowings and brokered deposits to all available wholesale sources with potential maturities greater than one day.

 

•

Wholesale Funds to Total Assets—the ratio of current outstanding wholesale funding to assets.

As of June 30, 2020, all our liquidity measures were within our established guidelines.

The goal of liquidity management is to ensure that we maintain adequate funds to meet changes in loan demand or any deposit withdrawals. Additionally, we strive to maximize our earnings by investing our excess funds in securities and other assets. To meet our short-term liquidity needs, we seek to maintain a targeted cash position and have borrowing capacity through many wholesale sources including the FHLB, correspondent banks, and the Federal Reserve Bank. To meet long-term liquidity needs, we additionally depend on the repayment of loans, sales of loans, term wholesale borrowings, brokered deposits, and the maturity or sale of investment securities.

As a result of the current environment with the increase in deposits and the decline in our core loans we experienced elevated levels of liquidity. We anticipate these elevated levels to continue in the near future until we reach a more normalized environment.

Maturities of Time Deposits

The aggregate amount of time deposits in denominations of $100,000 or more as of June 30, 2020 and December 31, 2019, was $1.35 billion and $1.59 billion, respectively.

At June 30, 2020, the scheduled maturities of time deposits greater than $100,000 were as follows:

82

Table 28 – Time Deposit Maturity Schedule

 

 

June 30, 2020

 

(In thousands)

 

Amount

 

 

Average Interest Rate

 

Under 3 months

 

$

386,467

 

 

 

1.91

%

3 to 6 months

 

 

480,377

 

 

 

1.44

 

6 to 12 months

 

 

319,909

 

 

 

1.29

 

12 to 24 months

 

 

148,866

 

 

 

1.36

 

24 to 36 months

 

 

7,980

 

 

 

1.32

 

36 to 48 months

 

 

2,436

 

 

 

1.74

 

Over 48 months

 

 

7,125

 

 

 

0.79

 

Total

 

$

1,353,160

 

 

 

1.52

%

 

Cash Flow Analysis

Cash and cash equivalents

At June 30, 2020, we had $1.9 billion in cash and cash equivalents on hand, an increase of $910.6 million or 92.1% from our cash and cash equivalents of $988.8 million at December 31, 2019. At June 30, 2020, our cash and cash equivalents comprised 10.1% of total assets compared to 5.6% at December 31, 2019. We monitor our liquidity position and increase or decrease our short-term liquid assets as necessary. As a result of the current environment with the increase in deposits and the decline in our core loans we experienced elevated levels of liquidity. We anticipate these elevated levels to continue in the near future until we reach a more normalized environment.

2020 vs 2019

As shown in the Condensed Consolidated Statements of Cash Flows, operating activities provided $464.6 million in the six months ended June 30, 2020 compared to providing $132.1 million in the six months ended June 30, 2019. The increase in operating funds during the six months ended June 30, 2020 was due to $368.6 million from the termination of the interest rate collar and $307.9 million from proceeds from paydowns and sales of loans held for sale offset by $315.2 million from origination of loans held for sale.

Investing activities during the six months ended June 30, 2020 used net funds of $822.0 million, primarily due to $758.9 million in net loan funding and $505.7 million in purchases of available-for-sale securities. This was offset by $227.9 million from proceeds from maturities, calls, and paydowns of securities available-for-sale, $180.6 million from proceeds from sales of securities available-for-sale, and $47.0 million from proceeds from sale of loans held for sale. This compares to investing activities during the six months ended June 30, 2019 provided $398.0 million of net funds, primarily due to net cash received in business acquisitions of $414.3 million and net cash received from sales, maturities, and paydown of available-for-sale securities of $392.5 million. It was offset by net loan funding of $228.8 million and the purchase of available for sale securities of $169.3 million.

Financing activities during the six months ended June 30, 2020 provided $1.3 billion due to the net increase of $1.3 billion in deposits and slightly offset by the purchase of $30.0 million in our common stock and dividends of $28.4 million. This compares to financing activities during the six months ended June 30, 2019 that used $543.1 million in funds primarily due to a decrease in deposits of $319.2 million, purchase of $58.8 million in our common stock, dividends of $45.3 million, and repayment of senior debt of $134.9 million.

83

NON-GAAP FINANCIAL MEASURES

We identify “efficiency ratio,” “adjusted efficiency ratio,” “adjusted noninterest expense,” “adjusted noninterest income,” “adjusted operating revenue,” “tangible common equity,” “tangible common equity ratio,” “return on average tangible common equity,” “adjusted return on average tangible common equity,” “tangible book value per share,” “adjusted return on average assets,” “adjusted net income,” “adjusted net income allocated to common stock,” “tangible net income,” “adjusted tangible net income,” “adjusted diluted earnings per share” and “adjusted pre-tax pre-provision net earnings” as “non-GAAP financial measures.” In accordance with the SEC’s rules, we identify certain financial measures as non-GAAP financial measures if such financial measures exclude or include amounts in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles (“GAAP”) in effect in the United States in our statements of operations, balance sheet or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures, ratios or statistical measures calculated using exclusively financial measures calculated in accordance with GAAP.

The non-GAAP financial measures that we discuss herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP financial measures may differ from that of other companies reporting measures with similar names, and, therefore, may not be comparable to our non-GAAP financial measures.

Efficiency ratio is defined as noninterest expenses divided by operating revenue, which is equal to net interest income plus noninterest income. Adjusted efficiency ratio is defined as adjusted noninterest expenses divided by adjusted operating revenue, which is equal to net interest income plus noninterest income, excluding certain non-routine income and expenses. We believe that these measures are important to many investors in the marketplace who wish to assess our performance versus that of our peers.

Our adjusted noninterest expenses represent total noninterest expenses net of any merger, restructuring or other non-routine expense items. Our adjusted operating revenue is equal to net interest income plus noninterest income excluding gains and losses on sales of securities and other non-routine revenue items. In our judgment, the adjustments made to noninterest expense and operating revenue allow management and investors to better assess our performance by removing the volatility that is associated with certain other discrete items that are unrelated to our core business.

Tangible common equity is defined as total shareholders’ equity less goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in common shareholders’ equity exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing both common equity and assets while not increasing our tangible common equity or tangible assets.

The tangible common equity ratio is defined as the ratio of tangible common equity divided by total assets less goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. We believe that the most directly comparable GAAP financial measure is total shareholders’ equity to total assets.

Return on average tangible common equity is defined as tangible net income divided by average tangible common equity. Adjusted return on average tangible common equity is defined as adjusted tangible net income divided by average tangible common equity. We believe the most directly comparable GAAP financial measure is the return on average common equity.

Tangible net income is defined as net income plus goodwill impairment and intangible asset amortization, net of tax. Adjusted tangible net income is defined as net income plus goodwill impairment and intangible asset amortization, net of tax, plus non-routine item, net of tax. Non-routine items include merger related expenses, net securities gains, and other non-routine expenses.

Adjusted net income is defined as net income plus goodwill impairment, net of tax, and plus or minus total non-routine items, net of tax. Non-routine items include merger related expenses, gain on acquired loans, net securities gains, and other non-routine income and expenses. We believe the most directly comparable GAAP financial measure is net income.

Tangible book value per share is defined as book value, excluding the impact of goodwill and other intangible assets, if any, divided by shares of our common stock outstanding.

Adjusted return on average assets is defined as adjusted net income divided by average assets. We believe the most directly comparable GAAP financial measure is the return on average assets.

Adjusted net income allocated to common stock is defined as net income allocated to common stock plus goodwill impairment, net of tax, and plus total non-routine items. We believe the most directly comparable GAAP financial measure is net income allocated to common stock.

Adjusted diluted earnings per share is defined as adjusted net income allocated to common stock divided by diluted weighted average common shares outstanding. We believe the most directly comparable GAAP financial measure is diluted earnings per share.

84

Adjusted pre-tax, pre-provision net earnings is defined as income before taxes, provision for credit losses, goodwill impairment, and non-routine items. We believe the most directly comparable GAAP financial measure is income before taxes.

The following table is a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

Table 29 – Non-GAAP Financial Measures

 

 

As of and for the

Three Months Ended

 

 

As of and for the

Six Months Ended

 

 

As of and for the

Year Ended

 

(In thousands, except share and per share data)

 

June 30,

2020

 

 

June 30,

2019

 

 

June 30,

2020

 

 

June 30,

2019

 

 

December 31, 2019

 

Efficiency ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expenses (numerator)

 

$

88,620

 

 

$

100,529

 

 

$

626,273

 

 

$

213,969

 

 

$

408,770

 

Net interest income

 

$

154,714

 

 

$

160,787

 

 

$

308,182

 

 

$

330,076

 

 

$

651,173

 

Noninterest income

 

 

29,950

 

 

 

31,722

 

 

 

65,019

 

 

 

62,386

 

 

 

130,925

 

Operating revenue (denominator)

 

$

184,664

 

 

$

192,509

 

 

$

373,201

 

 

$

392,462

 

 

$

782,098

 

Efficiency ratio

 

 

47.99

%

 

 

52.22

%

 

 

167.81

%

 

 

54.52

%

 

 

52.27

%

Adjusted efficiency ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest expenses

 

$

88,620

 

 

$

100,529

 

 

$

626,273

 

 

$

213,969

 

 

$

408,770

 

Less: non-cash goodwill impairment charge

 

 

—

 

 

 

—

 

 

 

443,695

 

 

 

—

 

 

 

—

 

Less: merger related expenses

 

 

—

 

 

 

4,562

 

 

 

1,282

 

 

 

26,562

 

 

 

28,497

 

Less: pension plan termination expense

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,225

 

Less: expenses related to COVID-19 pandemic

 

 

1,205

 

 

 

—

 

 

 

1,327

 

 

 

—

 

 

 

—

 

Adjusted noninterest expenses (numerator)

 

$

87,415

 

 

$

95,967

 

 

$

179,969

 

 

$

187,407

 

 

$

379,048

 

Net interest income

 

$

154,714

 

 

$

160,787

 

 

$

308,182

 

 

$

330,076

 

 

$

651,173

 

Noninterest income

 

 

29,950

 

 

 

31,722

 

 

 

65,019

 

 

 

62,386

 

 

 

130,925

 

Plus: revaluation of receivable from sale of insurance assets

 

 

—

 

 

 

2,000

 

 

 

—

 

 

 

2,000

 

 

 

2,000

 

Less: gain on sale of acquired loans

 

 

—

 

 

 

1,514

 

 

 

—

 

 

 

1,514

 

 

 

2,777

 

Less: securities gains, net

 

 

2,286

 

 

 

938

 

 

 

5,280

 

 

 

926

 

 

 

2,018

 

Adjusted noninterest income

 

 

27,664

 

 

 

31,270

 

 

 

59,739

 

 

 

59,946

 

 

 

128,130

 

Adjusted operating revenue (denominator)

 

$

182,378

 

 

$

192,057

 

 

$

367,921

 

 

$

390,022

 

 

$

779,303

 

Adjusted efficiency ratio

 

 

47.93

%

 

 

49.97

%

 

 

48.92

%

 

 

48.05

%

 

 

48.64

%

Tangible common equity ratio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

$

2,045,480

 

 

$

2,426,072

 

 

$

2,045,480

 

 

$

2,426,072

 

 

$

2,460,846

 

Less: goodwill and other intangible assets, net

 

 

(137,318

)

 

 

(595,605

)

 

 

(137,318

)

 

 

(595,605

)

 

 

(590,949

)

Tangible common shareholders’ equity

 

 

1,908,162

 

 

 

1,830,467

 

 

 

1,908,162

 

 

 

1,830,467

 

 

 

1,869,897

 

Total assets

 

 

18,857,753

 

 

 

17,504,005

 

 

 

18,857,753

 

 

 

17,504,005

 

 

 

17,800,229

 

Less: goodwill and other intangible assets, net

 

 

(137,318

)

 

 

(595,605

)

 

 

(137,318

)

 

 

(595,605

)

 

 

(590,949

)

Tangible assets

 

$

18,720,435

 

 

$

16,908,400

 

 

$

18,720,435

 

 

$

16,908,400

 

 

$

17,209,280

 

Tangible common equity ratio

 

 

10.19

%

 

 

10.83

%

 

 

10.19

%

 

 

10.83

%

 

 

10.87

%

Tangible book value per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

$

2,045,480

 

 

$

2,426,072

 

 

$

2,045,480

 

 

$

2,426,072

 

 

$

2,460,846

 

Less: goodwill and other intangible assets, net

 

 

(137,318

)

 

 

(595,605

)

 

 

(137,318

)

 

 

(595,605

)

 

 

(590,949

)

Tangible common shareholders’ equity

 

$

1,908,162

 

 

$

1,830,467

 

 

$

1,908,162

 

 

$

1,830,467

 

 

$

1,869,897

 

Common shares outstanding

 

 

125,930,741

 

 

 

128,798,549

 

 

 

125,930,741

 

 

 

128,798,549

 

 

 

127,597,569

 

Tangible book value per share

 

$

15.15

 

 

$

14.21

 

 

$

15.15

 

 

$

14.21

 

 

$

14.65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

85

 

 

As of and for the

Three Months Ended

 

As of and for the

Six Months Ended

 

As of and for the

Year Ended

(In thousands, except share and per share data)

 

June 30,

2020

 

June 30,

2019

 

June 30,

2020

 

June 30,

2019

 

December 31, 2019

Return on average tangible common equity

 

 

 

 

 

 

 

 

 

 

Average common equity

 

$2,118,796

 

$2,331,855

 

$2,282,803

 

$2,287,003

 

$2,373,856

Less: average intangible assets

 

(140,847)

 

(597,772)

 

(362,680)

 

(600,096)

 

(598,546)

Average tangible common shareholders’ equity

 

$1,977,949

 

$1,734,083

 

$1,920,123

 

$1,686,907

 

$1,775,310

Net (loss) income

 

$(56,114)

 

$48,346

 

$(455,425)

 

$106,547

 

$201,958

Plus: non-cash goodwill impairment charge, net of tax

 

—

 

—

 

412,918

 

—

 

—

Plus: intangible asset amortization, net of tax

 

4,174

 

4,515

 

8,435

 

9,172

 

18,240

Tangible (loss) net income

 

$(51,940)

 

$52,861

 

$(34,072)

 

$115,719

 

$220,198

Return on average tangible common equity(1)

 

(10.56)%

 

12.23%

 

(3.57)%

 

13.83%

 

12.40%

Adjusted return on average tangible common equity

 

 

 

 

 

 

 

 

 

 

Average tangible common shareholders’ equity

 

$1,977,949

 

$1,734,083

 

$1,920,123

 

$1,686,907

 

$1,775,310

Tangible (loss) net income

 

$(51,940)

 

$52,861

 

$(34,072)

 

$115,719

 

$220,198

Non-routine items:

 

 

 

 

 

 

 

 

 

 

Plus: merger related expenses

 

—

 

4,562

 

1,282

 

26,562

 

28,497

Plus: pension plan termination expense

 

—

 

—

 

—

 

—

 

1,225

Plus: expenses related to COVID-19 pandemic

 

1,205

 

—

 

1,327

 

—

 

—

Plus: revaluation of receivable from sale of insurance assets

 

—

 

2,000

 

—

 

2,000

 

2,000

Less: gain on sale of acquired loans

 

—

 

1,514

 

—

 

1,514

 

2,777

Less: securities gains (losses), net

 

2,286

 

938

 

5,280

 

926

 

2,018

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

 

(256)

 

958

 

(720)

 

5,558

 

5,756

Total non-routine items, after tax

 

(825)

 

3,152

 

(1,951)

 

20,564

 

21,171

Adjusted tangible (loss) net income

 

$(52,765)

 

$56,012

 

$(36,023)

 

$136,283

 

$241,369

Adjusted return on average tangible common equity(1)

 

(10.73)%

 

12.96%

 

(3.77)%

 

16.29%

 

13.60%

Adjusted return on average assets

 

 

 

 

 

 

 

 

 

 

Average assets

 

$18,500,600

 

$17,653,511

 

$18,097,309

 

$17,643,943

 

$17,689,126

Net (loss) income

 

$(56,114)

 

$48,346

 

$(455,425)

 

$106,547

 

$201,958

Return on average assets

 

(1.22)%

 

1.10%

 

(5.06)%

 

1.22%

 

1.14%

Net (loss) income

 

$(56,114)

 

$48,346

 

$(455,425)

 

$106,547

 

$201,958

Plus: non-cash goodwill impairment charge, net of tax

 

—

 

—

 

412,918

 

—

 

—

Total non-routine items, after tax

 

(825)

 

3,152

 

(1,951)

 

20,564

 

21,171

Adjusted (loss) net income

 

$(56,939)

 

$51,497

 

$(44,458)

 

$127,111

 

$223,129

Adjusted return on average assets(1)

 

(1.24)%

 

1.17%

 

(0.49)%

 

1.45%

 

1.26%

Adjusted diluted earnings per share

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

125,924,652

 

129,035,553

 

126,277,549

 

129,787,758

 

129,017,599

Net (loss) income allocated to common stock

 

$(56,114)

 

$48,176

 

$(455,425)

 

$106,146

 

$201,275

Plus: non-cash goodwill impairment, net of tax

 

—

 

—

 

412,918

 

—

 

—

Total non-routine items, after tax

 

(825)

 

3,152

 

(1,951)

 

20,564

 

21,171

Adjusted (loss) net income allocated to common stock

 

$(56,939)

 

$51,328

 

$(44,458)

 

$126,710

 

$222,446

Adjusted diluted (loss) earnings per share

 

$(0.45)

 

$0.40

 

$(0.35)

 

$0.98

 

$1.72

Adjusted pre-tax, pre-provision net revenue

 

 

 

 

 

 

 

 

 

 

(Loss) income before taxes

 

$(62,767)

 

$63,053

 

$(495,312)

 

$138,356

 

$262,301

Plus: Provision for credit losses

 

158,811

 

28,927

 

242,240

 

40,137

 

111,027

Plus: non-cash goodwill impairment

 

—

 

—

 

443,695

 

—

 

—

Plus: Total non-routine items before taxes

 

(1,081)

 

4,110

 

(2,671)

 

26,122

 

26,927

Adjusted pre-tax, pre-provision net revenue

 

$94,963

 

$96,090

 

$187,952

 

$204,615

 

$400,255

 

 

 

 

 

 

 

 

 

 

 

(1) Annualized for the three and six months ended June 30, 2020 and 2019.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to unanticipated changes in net interest earnings or changes in the fair value of financial instruments due to fluctuations in interest rates, exchange rates and equity prices. Our primary market risk is interest rate risk (“IRR”).

86

IRR is the risk that changing market interest rates may lead to an unexpected decline in our earnings or capital. The main causes of IRR are the differing structural characteristics of our assets, liabilities and off-balance sheet obligations and their cumulative net reaction to changing interest rates. These structural characteristics include timing differences in maturity or repricing and the effect of embedded options such as loan prepayments, securities prepayments and calls, interest rate caps, floors, collars, and deposit withdrawal options. In addition to these sources of IRR, basis risk results from differences in the spreads between various market interest rates and changes in the slope of the yield curve which can contribute to additional IRR.

We evaluate IRR and develop guidelines regarding balance sheet composition and re-pricing, funding sources and pricing, and off-balance sheet commitments that aim to moderate IRR. We use financial simulation models that reflect various interest rate scenarios and the related impact on net interest income over specified periods of time. We refer to this process as asset/liability management (“ALM”).

The primary objective of ALM is to manage interest rate risk and desired risk tolerance for potential fluctuations in net interest income (“NII”) and economic value of equity (“EVE”) throughout interest rate cycles, which we aim to achieve by maintaining a balance of interest rate sensitive earning assets and liabilities. In general, we seek to maintain a desired risk tolerance with asset and liability balances within maturity and repricing characteristics to limit our exposure to earnings volatility and changes in the value of assets and liabilities as interest rates fluctuate over time. Adjustments to maturity categories can be accomplished either by lengthening or shortening the duration of either an individual asset or liability category, or externally with interest rate contracts, such as interest rate swaps, caps, collars, and floors. See “—Interest Rate Exposures” for a more detailed discussion of our various derivative positions.

Our ALM strategy is formulated and monitored by our Asset/Liability Management Committee (“ALCO”) in accordance with policies approved by the Board of Directors. The ALCO meets regularly to review, among other things, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, recent purchase and sale activity, maturities of securities and borrowings, and projected future transactions. The ALCO also establishes and approves pricing and funding strategies with respect to overall asset and liability composition. The ALCO reports regularly to our Board of Directors.

Financial simulation models are the primary tools we use to measure IRR exposures. By examining a range of hypothetical deterministic interest rate scenarios, these models provide management with information regarding the potential impact on NII and EVE caused by changes in interest rates.

The models simulate the cash flows and accounting accruals generated by the financial instruments on our balance sheet, as well as the cash flows generated by new business we anticipate over a 60-month forecast horizon. Numerous assumptions are made in the modeling process, including balance sheet composition, the pricing, re-pricing and maturity characteristics of existing business, and new business. Additionally, loan and investment prepayments, administered rate account elasticity, and other option risks are considered as well as the uncertainty surrounding future customer behavior. Because of the limitations inherent in any approach used to measure interest rate risk and because our loan portfolio will be actively managed in the event of a change in interest rates, simulation results, including those discussed in “—Interest Rate Exposures” immediately below, are not intended as a forecast of the actual effect of a change in market interest rates on our NII or EVE or indicative of management’s expectations of actual results in the event of a fluctuation in market interest rates, however, these results are used to help measure the potential risks related to IRR.

LIBOR Transition. An additional emerging risk related to IRR is the transition of the market from LIBOR to an alternative benchmark index anticipated through 2021. Management has formed a cross-functional project team to manage the assessment, identification, and resolution of risks and potential issues related to the transition from LIBOR to a replacement index. This team reports to the ALCO and Enterprise Risk Management, who will provide regular reports to the Board of Directors. See “Risk Factors—We May Be Adversely Impacted by The Transition from LIBOR as a Reference Rate” in our 2019 Annual Report on Form 10-K.

As part of our transition, we have identified approximately 39% of our assets and 2% of our liabilities and equity are tied to LIBOR, of which 27% of assets and 1% of liabilities and equity have maturity beyond 2021. We have begun remediation plans that include standardization of fallback language in all new contracts, solicitation from existing customers of rate index and spread amendments prior to LIBOR transition, providing customers with at least three options on alternative rate indexes of Prime, Ameribor, and SOFR, and preparing to adopt ISDA for derivative contracts.

At this time, we do not anticipate any changes with our outstanding cash flow hedges because ARRC has already approved SOFR as a replacement index and we anticipate sufficient SOFR loans available to hedge at transition. For the terminated collar, the timing of future forecasted income from OCI may be accelerated as our loans could migrate to index not qualified by FASB as a replacement for LIBOR.

We anticipate remediation of all contracts will be essentially complete by third quarter of 2021 in advance of LIBOR’s potential termination.

87

Table 30 – Interest Rate Sensitivity

Interest Rate Exposures

Based upon the current interest rate curves as of June 30, 2020, our NII simulation model projects our sensitivity over the next 12 months to an instantaneous increase or decrease in interest rates was as follows:

 

 

Increase (Decrease)

 

 

(Dollars in millions)

 

Net Interest

Income

 

 

Economic Value of

Equity

 

 

Change (in Basis Points) in Interest Rates (12-Month Projection)

 

Amount

 

 

Percent

 

 

Amount

 

 

Percent

 

 

+ 200 BP

 

$

72.0

 

 

 

11.49

 

%

$

1,214.6

 

 

 

36.35

 

%

+ 100 BP

 

 

32.3

 

 

 

5.16

 

 

 

704.8

 

 

 

21.09

 

 

- 25 BP

 

 

(5.1

)

 

 

(0.82

)

 

 

(208.2

)

 

 

(6.23

)

 

Based upon the current interest rate curves as of June 30, 2020, the following table reflects our NII sensitivity over the next 12 months to a gradual increase or decrease in interest rates over a twelve-month period:

 

 

Increase (Decrease)

 

 

(Dollars in millions)

 

Net Interest Income

 

 

Change (in Basis Points) in Interest Rates (12-Month Projection)

 

Amount

 

 

Percent

 

 

+ 200 BP

 

$

54.9

 

 

 

8.77

 

%

+ 100 BP

 

 

24.1

 

 

 

3.84

 

 

- 25 BP

 

 

(9.6

)

 

 

(1.53

)

 

 

Both the NII and EVE simulations include 12-month assumptions regarding balances, asset prepayment speeds, deposit repricing and runoff and interest rate relationships among balances that management believes to be reasonable for the various interest rate environments. With rates having fallen materially this quarter, the down 100 basis point scenario would result in market rates reaching floored and negative values which can produce a distorted view of interest rate risk metrics. Management believes using the down 25 basis point scenario is more meaningful in the current market rate environment than the down 100 basis point scenario. Management does consider additional scenarios with forecasted negative market rates which would result in margin deterioration. Differences in actual occurrences from these assumptions, as well as non-parallel changes in the yield curve, may change our market risk exposure.

Derivative Positions

Overview. Our Board of Directors has authorized the ALCO to utilize financial futures, forward sales, options, interest rate swaps, caps, collars, and floors, and other instruments to the extent appropriate, in accordance with regulations and our internal policy. We expect to use interest rate swaps, caps, collars, and floors as macro hedges against inherent rate sensitivity in our assets and our liabilities.

Positions for hedging purposes are undertaken primarily as a mitigation of three main areas of risk exposure: (1) mismatches between assets and liabilities; (2) prepayment and other option-type risks embedded in our assets, liabilities and off-balance sheet instruments; and (3) the mismatched commitments for mortgages and funding sources.

We currently intend to engage in only the following types of hedges: (1) those which synthetically alter the maturities or re-pricing characteristics of assets or liabilities to reduce imbalances; (2) those which enable us to transfer the interest rate risk exposure involved in our daily business activities; and (3) those which serve to alter the market risk inherent in our investment portfolio, mortgage pipeline, or liabilities and thus help us to match the effective maturities of the assets and liabilities.

Cash Flow Hedges. Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company uses interest rate swaps, caps, floors and collars to manage overall cash flow changes related to IRR exposure on benchmark interest rate loans (1-Month LIBOR).

In February 2019, the Company entered into a $4.0 billion notional interest rate collar with a five-year term. In March 2020, the collar was terminated and resulted in a $261.2 million realized gain. The value received in exchange for the termination assumed an average 1-month LIBOR rate of 0.5785% over the next four years. The gain, currently reflected in other comprehensive income net of deferred income taxes, will amortize over the next four years into interest income. (See Note 6 to the consolidated financial statements.)

88

In March 2016, the Company entered into interest rate swap agreements to manage overall cash flow changes related to IRR exposure on the 1-Month LIBOR rate indexed loans. At June 30, 2020, the Company has outstanding the following interest rate swap agreements:

Table 31 – Summary of Cash Flow Hedges

Effective Date

 

Maturity Date

 

Notional

Amount

(In Thousands)

 

 

Fixed Rate

 

 

Variable Rate

March 8, 2016

 

February 27, 2026

 

 

175,000

 

 

 

1.60

%

 

1 Month LIBOR

March 8, 2016

 

February 27, 2026

 

 

175,000

 

 

 

1.59

%

 

1 Month LIBOR

 

 

The following summarizes all derivative positions as of June 30, 2020 and December 31, 2019:

Table 32 – Derivative Positions

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

Fair Value

 

 

 

 

 

 

Fair Value

 

(In thousands)

 

Notional Amount

 

 

Other Assets

 

 

Other Liabilities

 

 

Notional Amount

 

 

Other Assets

 

 

Other Liabilities

 

Derivatives designated as hedging instruments (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

350,000

 

 

$

26,561

 

 

$

—

 

 

$

350,000

 

 

$

—

 

 

$

643

 

Commercial loan interest rate collars

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,000,000

 

 

 

239,213

 

 

 

—

 

Total derivatives designated as hedging instruments

 

 

350,000

 

 

 

26,561

 

 

 

—

 

 

 

4,350,000

 

 

 

239,213

 

 

 

643

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

 

1,228,008

 

 

 

26,329

 

 

 

2,116

 

 

 

1,008,805

 

 

 

8,386

 

 

 

899

 

Commercial loan interest rate caps

 

 

172,851

 

 

 

11

 

 

 

11

 

 

 

167,185

 

 

 

18

 

 

 

18

 

Commercial loan interest rate floors

 

 

583,262

 

 

 

15,221

 

 

 

15,221

 

 

 

654,298

 

 

 

8,836

 

 

 

8,836

 

Commercial loan interest rate collars

 

 

71,110

 

 

 

639

 

 

 

639

 

 

 

75,555

 

 

 

257

 

 

 

257

 

Mortgage loan held-for-sale interest rate lock commitments

 

 

38,236

 

 

 

548

 

 

 

—

 

 

 

4,138

 

 

 

22

 

 

 

—

 

Mortgage loan forward sale commitments

 

 

9,754

 

 

 

56

 

 

 

—

 

 

 

4,109

 

 

 

26

 

 

 

—

 

Mortgage loan held-for-sale floating commitments

 

 

7,367

 

 

 

—

 

 

 

—

 

 

 

1,523

 

 

 

—

 

 

 

—

 

Foreign exchange contracts

 

 

113,982

 

 

 

1,054

 

 

 

836

 

 

 

74,322

 

 

 

379

 

 

 

558

 

Total derivatives not designated as hedging instruments

 

 

2,224,570

 

 

 

43,858

 

 

 

18,823

 

 

 

1,989,935

 

 

 

17,924

 

 

 

10,568

 

Total derivatives

 

$

2,574,570

 

 

$

70,419

 

 

$

18,823

 

 

$

6,339,935

 

 

$

257,137

 

 

$

11,211

 

 

Counterparty Credit Risk

Derivative contracts involve the risk of dealing with both bank customers and institutional derivative counterparties and their ability to meet contractual terms. Our policies require that institutional counterparties must be approved by our ALCO and all positions over and above the minimum transfer amounts are secured by marketable securities or cash.

 

89

ITEM 4. CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures

The Company’s management, including the Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and are also designed to ensure that the information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

(b)

Internal Control Over Financial Reporting

Changes in internal control over financial reporting

There have been no changes in the Company’s internal control over financial reporting during the period ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Any control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are achieved. The design of a control system inherently has limitations, including the controls’ cost relative to their benefits. Additionally, controls can be circumvented. No cost-effective control system can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

90

PART II: OTHER INFORMATION

The Company and its subsidiaries are from time to time subject to claims and litigation arising in the ordinary course of business. At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial condition or cash flows. However, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.

Cadence Securities Class Action Litigation. On September 16, 2019, a Cadence Bancorporation shareholder filed a putative class action complaint against Cadence Bancorporation and certain senior officers. Following consolidation of a related matter and appointment of lead plaintiffs, the lead plaintiffs filed an amended complaint on January 31, 2020, which asserted claims under Sections 10(b) and 20 of the Securities Exchange Act on behalf of a putative class of persons and entities that purchased or otherwise acquired Cadence Bancorporation securities between July 23, 2018, and January 23, 2020, inclusive. The amended complaint alleges that Cadence Bancorporation and the individual defendants made materially misleading statements about the credit quality of Cadence Bancorporation’s loan portfolio, did not timely charge off bad debt or record sufficient loss provisions to reserve against the risk of loss, and maintained an inadequate allowance for credit losses. The consolidated case is captioned Frank Miller et al. v. Cadence Bancorporation et al., Case No. H-19-3492-LNH, in the United States District Court for the Southern District of Texas. On August 7, 2020, the District Court granted the defendants’ motion to dismiss and entered a final judgment dismissing the case in its entirety, with prejudice. The court concluded that the complaint failed to show that Cadence Bancorporation and the individual defendants made any material misstatements and failed to allege specific facts supporting a strong inference of fraudulent intent or severe recklessness. Because the time for filing an appeal has not yet lapsed and discovery has not commenced, it is not possible at this time to estimate the likelihood or amount of any damage exposure.

ITEM 1A. RISK FACTORS.

The following represents a material change in our risk factors from those disclosed in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2019.

 The COVID-19 pandemic is adversely affecting us and our customers, counterparties, employees, and third-party service providers, and the continued adverse impacts on its business, financial position, results of operations, and prospects could be significant.

The spread of COVID-19 has created a global public-health crisis that has resulted in widespread volatility and deteriorations in household, business, economic, and market conditions. The extent of the impact of the COVID-19 pandemic on the Company’s capital, liquidity, and other financial positions and on its business, results of operations, and prospects will depend on a number of evolving factors, including:

The duration, extent, and severity of the COVID-19 pandemic. COVID-19 does not yet appear to be contained and could affect significantly more households and businesses. The duration and severity of the COVID-19 pandemic continue to be impossible to accurately predict.

 

•

The response of governmental and nongovernmental authorities. The actions of many governmental and nongovernmental authorities have been directed toward curtailing household and business activity to contain COVID-19 while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate the adverse effects on individual households and businesses. These actions are not always coordinated or consistent across jurisdictions but, in general, have been rapidly expanding in scope and intensity.

 

•

The effect on the Company’s customers, counterparties, employees, and third-party service providers. COVID-19 and its associated consequences and uncertainties may affect individuals, households, and businesses differently and unevenly. In the near-term if not longer, however, the Company’s credit, operational, and other risks are generally expected to increase. In order to protect the health of our customers and employees, and to comply with applicable government directives, we have modified our business practices, including restricting employee travel, asking employees to work from home insofar as is possible, cancelling in-person meetings and implementing our business continuity plans and protocols to the extent necessary. We may take further such actions that we determine are in the best interest of our employees, customers and communities or as may be required by government order. These actions in response to the COVID-19 pandemic, and similar actions by our vendors and business partners, have not materially impaired our ability to support our employees, conduct our business and serve our customers, but there is no assurance that these actions will be sufficient to successfully mitigate the risks presented by COVID-19 or that our ability to operate will not be materially affected going forward.

 

•

CARES Act and PPP. In response to the pandemic, we have also enacted assistance for customers affected by COVID-19, including fee and penalty waivers, loan deferrals or other scenarios that may help our customers. Furthermore, in an effort to support our communities during the pandemic, we are participating in the Paycheck Protection Program (“PPP”) under

91

 

the CARES Act whereby loans to small businesses are made and those loans are subject to the regulatory requirements that would require forbearance of loan payments for a specified time or that would limit our ability to pursue all available remedies in the event of a loan default. If the borrower under the PPP loan fails to qualify for loan forgiveness, we are at the heightened risk of holding the loan at an unfavorable interest rate as compared to the loans to customers that we would have otherwise extended credit. Rules providing for forgiveness have been constantly evolving, including an automatic forgiveness if the amount of the PPP loan was not larger than a specified floor.

 

•

The effect on economies and markets. Whether the actions of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear. National, regional, and local economies and markets could suffer disruptions that are lasting. An economic slowdown could adversely affect the Company’s origination of new loans and the performance of its existing loans. In addition, governmental actions are meaningfully influencing the interest-rate environment, which could adversely affect the Company’s results of operations and financial condition.

 

We are unable to estimate the impact of COVID-19 on the Company’s business and operations at this time. The COVID-19 pandemic could cause the Company to experience higher credit losses in our lending portfolio, additional impairment of our goodwill and other financial assets, further reduced demand for its products and services, and other negative impacts on our financial position, results of operations, and prospects. Sustained adverse effects of the COVID-19 pandemic may also prevent the Company from satisfying our minimum regulatory capital ratios and other supervisory requirements, failing to be able to sustain the paying of dividends to shareholders, or result in downgrades in credit ratings.

 

Because of CECL, our financial results may be negatively affected as soon as weak or deteriorating economic conditions are forecasted and alter our expectations for credit losses. In addition, due to the expansion of the time horizon over which we are required to estimate future credit losses under CECL, we may experience increased volatility in our future provisions for credit losses. As a result, factoring in COVID-19, we incurred significant provision expense for credit losses in the first half of 2020 and may incur significant provision expense for credit losses in future periods as well.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITES AND USE OF PROCEEDS.

There were no issuer purchases of equity securities during the second quarter of 2020.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

92

ITEM 6. EXHIBITS.

Exhibit

Number

 

Description of Exhibit

 

 

 

10.1

 

Amended and Restated Employment Agreement, dated June 1, 2020, by and between Cadence Bancorporation and Samuel M. Tortorici.

 

 

 

10.2

 

Amended and Restated Employment Agreement, dated June 1, 2020, by and between Cadence Bancorporation and Valerie C. Toalson.

 

 

 

10.3

 

Amended and Restated Employment Agreement, dated June 1, 2020, by and between Cadence Bancorporation and R.H. “Hank” Holmes, IV.

 

 

 

31.1

 

Certification of the Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002

 

 

 

31.2

 

Certification of the Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002

 

 

 

32.1

 

Certification of the Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002

 

 

 

32.2

 

Certification of the Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002

 

 

 

101

 

Inline Interactive Financial Data

 

 

 

104

 

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, has been formatted in Inline XBRL.

 

93

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Cadence Bancorporation

(Registrant)

 

 

 

Date: August 10, 2020

 

/s/ Paul B. Murphy

 

 

Paul B. Murphy

 

 

Chairman and Chief Executive Officer

 

 

 

Date: August 10, 2020

 

/s/ Valerie C. Toalson

 

 

Valerie C. Toalson

 

 

Executive Vice President and Chief Financial Officer

 

94

 cade-ex101_102.htm

EXECUTION VERSION

EXHIBIT 10.1

 

Amended and Restated
Employment Agreement

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June _1_, 2020 (the “Restatement Date”), by and among Cadence Bancorporation, a Delaware corporation (the “Company”), Cadence Bank, N.A., a national banking association organized under the laws of the United States (the “Bank” and, together with the Company, “Cadence”), and Samuel M. Tortorici (the “Executive”).

WHEREAS, Cadence and the Executive are parties to an Amended and Restated Employment Agreement, dated as of March 14, 2017 (which agreement was originally dated as of February 1, 2015 and amended as of November 30, 2016) (the “Prior Agreement”);

WHEREAS, Cadence wishes to continue to employ the Executive in an executive capacity on the terms and conditions and for the consideration hereinafter set forth, and the Executive wishes to continue to be employed by Cadence on such terms and conditions and for such consideration; and

WHEREAS, Cadence and the Executive desire to amend and restate the Prior Agreement in its entirety as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and for other good and valuable consideration, it is hereby covenanted and agreed by the Executive and Cadence as follows:

1.Effective Date.  This Agreement shall be effective as of February 1, 2015 (the “Effective Date”).

2.Employment Period.  Unless terminated earlier pursuant to Section 5 of this Agreement, the term of this Agreement will commence on the Effective Date and end on the first anniversary of the Effective Date (the “Employment Period”); provided, however, that commencing on the first anniversary of the Effective Date, and on each subsequent anniversary of such date (such first anniversary and each annual anniversary thereafter, a “Renewal Date”), the Employment Period shall be automatically extended so as to terminate on the first anniversary of the applicable Renewal Date, unless at least 90 days prior to such Renewal Date, Cadence shall give notice to the Executive that the Employment Period shall not be so extended following such Renewal Date (a “Notice of Nonrenewal”), in which case the Employment Period shall terminate on the first anniversary of such Renewal Date.

3.Position and Duties.  During the Employment Period, the Executive shall (a) serve as President and Chief Operating Officer of the Company and Chief Executive Officer of the Bank, with such authority, power, duties, and responsibilities as are commensurate with such positions and as are customarily exercised by a person holding such position in a company of the size and nature of the Company, (b) report to the Chief Executive Officer of the Company, and (c) perform the Executive’s duties at Cadence’s primary office location in the Atlanta, Georgia metropolitan area, subject to the Executive’s performance of duties at and travel to such other

W/3732717

 

offices of the Company and its subsidiaries and controlled affiliates (the “Affiliated Entities”) and/or other locations as shall be necessary to fulfill the Executive’s duties.

4.Compensation.  Subject to the terms of this Agreement, while the Executive is employed by Cadence during the Employment Period, Cadence shall compensate the Executive for the Executive’s services as follows:

(a)Base Salary.  The Executive shall receive an annual base salary (“Annual Base Salary”) of no less than $425,000.  The Executive’s Annual Base Salary shall be reviewed annually by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Company Board”) pursuant to its normal performance review policies for senior executives and may be increased but not decreased in the sole and absolute discretion of the Compensation Committee or the Company Board.  The term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as in effect from time to time.  Such Annual Base Salary shall be payable in accordance with Cadence’s payroll policies.

(b)Annual Incentive Payment.  With respect to each fiscal year or portion of a fiscal year of Cadence ending during the Employment Period, the Executive shall be eligible to receive an annual incentive payment (the “Incentive Payment”), with the actual amount of any such Incentive Payment to be determined by the Compensation Committee.  The Executive’s target Incentive Payment opportunity for each fiscal year ending during the Employment Period shall be 100% of the Annual Base Salary (the “Target Incentive Payment”), and the maximum Incentive Payment opportunity for each fiscal year ending during the Employment Period shall be 150% of the Annual Base Salary.  Any earned Incentive Payment in respect of a fiscal year shall be paid to the Executive no later than the 15th calendar day of the third month following the close of such fiscal year, unless Cadence or the Executive shall elect to defer the receipt of such Incentive Payment pursuant to an arrangement that meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

(c)Equity Compensation.  During the Employment Period, the Executive shall be eligible to participate in any equity and/or other long-term compensation programs established by Cadence from time to time for senior executive officers at the discretion of the Compensation Committee.

(d)Employee Benefits, Fringe Benefits, and Perquisites.  During the Employment Period, the Executive shall be provided with employee benefits (including vacation), fringe benefits, and perquisites in accordance with Cadence’s established policies.

(e)Expense Reimbursement.  Subject to the requirements of Section 8(a)(ii) of this Agreement (relating to in-kind benefits and reimbursements), during the Employment Period, Cadence shall reimburse the Executive for all reasonable and substantiated expenses incurred by the Executive in the performance of the Executive’s duties in accordance with Cadence’s policies applicable to senior executives.

(f)Indemnification/Insurance.  The Company and the Bank shall defend, indemnify, and hold the Executive harmless to the full extent permitted by the general laws of the State of Delaware and the Company’s and the Bank’s organizational documents, and shall

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promptly advance all expenses, including attorneys’ fees, under procedures provided by, and to the full extent permitted by, such laws and the Company’s and the Bank’s organizational documents.  The Company also shall procure and maintain directors and officers liability insurance, which shall apply during all periods of the Executive’s employment and thereafter during the period in which the Executive may be subject to liability for acts and omissions to act in connection with such employment.

5.Termination of Employment.  The Executive’s employment may be terminated under the following circumstances:

(a)Death or Disability.  The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period.  If Cadence determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may provide the Executive with written notice in accordance with Section 12(g) of this Agreement of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with Cadence shall terminate effective on the 30th calendar day after receipt of such notice by the Executive (the “Disability Effective Date”); provided that, within the 30 calendar days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, “Disability” shall mean the inability of the Executive to perform the Executive’s duties with Cadence on a full-time basis as a result of the Executive’s incapacity due to mental or physical illness, which incapacity prevents the Executive from substantially performing the Executive’s duties to Cadence for a period of 120 consecutive calendar days or 150 out of 180 consecutive calendar days, as determined by a physician selected by Cadence or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

(b)By Cadence with or without Cause.  Cadence may terminate the Executive’s employment during the Employment Period either with or without Cause.  For purposes of this Agreement, “Cause” shall mean the Executive’s:

(i)intentional misconduct;

(ii)fraud, embezzlement, or intentional theft from Cadence;

(iii)intentional , material, and wrongful damage to Cadence’s property;

(iv)intentional wrongful disclosure of material confidential information, trade secrets, or confidential business processes of Cadence;

(v)act leading to a conviction of (A) a felony or (B) a misdemeanor involving moral turpitude;

(vi)willful engagement in illegal conduct or gross misconduct, either of which is demonstrably and not insubstantially injurious to Cadence; or

(vii)continued refusal to follow lawful directions of the Executive’s supervisor (other than any such refusal resulting from incapacity due to physical or mental illness) after a written demand to follow such directions is delivered to the

-3-

 

Executive by Cadence that specifically identifies the manner in which Cadence believes the Executive has refused to follow such directions.

For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “intentional” or “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of Cadence.  Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Company Board or the Bank Board or upon the advice of counsel for Cadence shall be conclusively presumed to be done or omitted to be done by the Executive in good faith and in the best interests of Cadence.

(c)By the Executive with or without Good Reason.  The Executive’s employment may be terminated by the Executive during the Employment Period either with or without Good Reason.  For purposes of this Agreement, “Good Reason” shall mean, in the absence of the written consent of the Executive:

(i)a material and adverse change in the Executive’s position or a failure of Cadence to provide the Executive with the authorities, responsibilities, and reporting relationships consistent with the Executive’s position set forth in Section 3 of this Agreement;

(ii)a material failure of Cadence to provide any compensation and benefits when due pursuant to the terms of this Agreement;

(iii)a purported termination of the Executive by Cadence other than as provided under the terms and conditions of this Agreement;

(iv)a relocation of Cadence’s offices at which the Executive is principally employed to a location more than 50 miles from such location; provided, however, that any business travel required of the Executive in connection with the performance of the Executive’s duties to Cadence shall not constitute a relocation of Cadence’s offices at which the Executive is principally employed;

(v)a failure of Cadence to require a successor to assume this Agreement; or

(vi)Cadence providing a Notice of Nonrenewal to the Executive pursuant to Section 2.

In order to invoke a termination with Good Reason, the Executive shall provide written notice to Cadence of the existence of one or more of the events, conditions, or circumstances described in clauses (i) through (v) within 30 calendar days following the Executive’s knowledge of the initial existence of such events, conditions, or circumstances, specifying in reasonable detail the events, conditions, or circumstances constituting Good Reason, and Cadence shall have 30 calendar days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition if such condition is reasonably subject to cure.  In the event that Cadence fails to remedy the events, conditions, or circumstances constituting Good Reason during the applicable Cure Period, the Executive’s “separation from service” (within the meaning of Section 409A of

-4-

 

the Code) must occur, if at all, within 30 calendar days following the end of such Cure Period in order for such termination as a result of such events, conditions, or circumstances to constitute a termination with Good Reason within the meaning of this Agreement.

(d)Notice of Termination.  Any termination by Cadence with or without Cause or by the Executive with or without Good Reason shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 12(g) of this Agreement.  For purposes of this Agreement, a “Notice of Termination” means a written notice that: (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be 30 calendar days after the giving of such notice or 30 calendar days after the end of the Cure Period, if applicable, in the case of a termination by the Executive without or with Good Reason, respectively).  The failure by the Executive or Cadence to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or Cadence, respectively, hereunder or preclude the Executive or Cadence, respectively, from asserting such fact or circumstance in enforcing the Executive’s or Cadence’s rights hereunder.

(e)Date of Termination.  “Date of Termination” means: (i) if the Executive’s employment is terminated by Cadence other than for Cause or Disability, the date of receipt of the Notice of Termination or any later date specified therein within 30 calendar days of such notice, as the case may be; (ii) if the Executive’s employment is terminated by the Executive for Good Reason, a date that is no later than 30 calendar days after the Cure Period, if applicable; (iii) if the Executive’s employment is terminated by the Executive without Good Reason, the earlier of the date that is 30 calendar days following such notice or a date chosen by Cadence following its receipt of such notice to Cadence; (iv) if the Executive’s employment is terminated by Cadence for Cause, the date on which Cadence, after providing the Executive’s Cure Period, if applicable, notifies the Executive of such termination; or (v) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.

6.Obligations of Cadence upon Termination.

(a)Good Reason; Other Than for Cause, Death, or Disability.  If, during the Employment Period, Cadence terminates the Executive’s employment without Cause and other than by reason of the Executive’s death or Disability, or the Executive resigns the Executive’s employment with Good Reason, Cadence shall, except as otherwise required by law or provided below, pay or provide to the Executive the following:

(i)(A) as soon as reasonably practicable following the Date of Termination, a lump sum cash payment consisting of any accrued Annual Base Salary and unused vacation accrued through the Date of Termination, to the extent such Annual Base Salary and vacation has not already been paid to the Executive (the “Accrued Obligations”); (B) as soon as reasonably practicable following the Date of Termination, a lump sum cash payment consisting of any annual Incentive Payment earned by the

-5-

 

Executive and awarded by the Company Board or the Bank Board for a completed fiscal year but not then paid to the Executive, provided that (other than any portion of such annual Incentive Payment that was previously deferred, which portion shall instead be paid in accordance with the applicable deferral arrangement and any election thereunder) such payment shall be made no later than the 15th calendar day of the third month following the close of the fiscal year with respect to which such Incentive Payment is earned; (C) if such termination or resignation occurs other than as provided in clause (D) below, in the form of a cash payment payable in 24 equal monthly installments beginning on the date specified in Section 6(f) of this Agreement, the product of (I) two multiplied by (II) the sum of (x) the Annual Base Salary as in effect immediately prior to the Date of Termination (disregarding any reduction, if any, constituting Good Reason) plus (y) the Target Incentive Payment for the year in which the Date of Termination occurs; and (D) if such termination or resignation occurs on or within 24 months following a Change in Control (as defined in the Amended and Restated Cadence Bancorporation 2015 Omnibus Incentive Plan as in effect on the date hereof), a lump sum cash payment in an amount equal to the product of (I) three multiplied by (II) the sum of (x) the Executive’s Annual Base Salary plus (y) the Target Incentive Payment for the year in which the termination occurs;

(ii)to the extent not theretofore paid or provided, Cadence shall, as soon as reasonably practicable following the Date of Termination, pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy, practice, contract, or agreement of Cadence and the Affiliated Entities through the Date of Termination, and shall pay such unreimbursed expenses incurred through the Date of Termination as are subject to reimbursement pursuant to Section 4(e) of this Agreement (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits and Expenses”);

(iii)for a 24-month period following the Date of Termination, a payment each month equal to the monthly cost of continued coverage for the Executive and, where applicable, the Executive’s spouse and dependents, under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) paid by the Executive under the Company’s group health plan pursuant to Section 4980B of the Code, less the amount that the Executive would be required to contribute for such health coverage if the Executive were an active employee of the Company; provided that the Executive is eligible for and timely elects COBRA continuation coverage; and

(iv)for a 24-month period following the Date of Termination, Cadence shall purchase a term life insurance policy that provides the Executive with substantially the same life insurance benefit that the Executive would have received had the Executive remained employed by the Company during such 24-month period; provided that such policy can be purchased at standard rates.

(b)Death or Disability.  If the Executive’s employment is terminated by reason of the Executive’s death or Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than the obligation to pay or provide:

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(i)a lump sum cash payment in an amount equal to the sum of the Accrued Obligations and the Other Benefits and Expenses to the Executive or the Executive’s estate or beneficiary, as the case may be, as soon as reasonably practicable following the Date of Termination;

(ii)a prorated Target Incentive Payment for the fiscal year in which the Date of Termination occurs based upon the period of time during the fiscal year during which the Executive was employed by Cadence pursuant to this Agreement; provided that (other than any portion of such annual Incentive Payment that was previously deferred, which portion shall instead be paid in accordance with the applicable deferral arrangement and any election thereunder) such payment shall be made no later than the 15th calendar day of the third month following the close of the fiscal year with respect to which such Incentive Payment is earned;

(iii)in the case of the Executive’s Disability, for a 12-month period following the Date of Termination, a payment each month equal to the monthly cost of continued coverage for the Executive and, where applicable, the Executive’s spouse and dependents, under COBRA paid by the Executive under the Company’s group health plan pursuant to Section 4980B of the Code, less the amount that the Executive would be required to contribute for such health coverage if the Executive were an active employee of the Company; provided that the Executive is eligible for and timely elects COBRA continuation coverage; and

(iv)in the case of the Executive’s Disability, for a 12-month period following the Date of Termination, Cadence shall purchase a term life insurance policy that provides the Executive with substantially the same life insurance benefit that the Executive would have received had the Executive remained employed by the Company during such 12-month period; provided that such policy can be purchased at standard rates.

The term “Other Benefits and Expenses” as utilized in this Section 6(b) shall also include death or disability benefits under Company provided plans as in effect on the date of the Executive’s death with respect to senior executives of Cadence and their beneficiaries generally.

(c)Cause; Without Good Reason; Nonrenewal.  If the Executive’s employment shall be terminated by Cadence with Cause or by the Executive without Good Reason during the Employment Period, or if the Employment Period expires as a result of the delivery of a Notice of Nonrenewal by Cadence, this Agreement shall terminate without further obligations to the Executive, other than, if such termination occurs during the Employment Period, the obligation to pay or provide (i) the Accrued Obligations (paid as set forth in Section 6(a) of this Agreement) and (ii) the timely payment or provision of the Other Benefits and Expenses (paid as set forth in Section 6(a) of this Agreement).

(d)Effect of Termination on Equity Compensation.  Upon a termination of the Executive’s employment with the Company for any reason, any payments, benefits, or other rights of the Executive pursuant to applicable equity or other long-term incentive programs of Cadence shall be governed by the terms and conditions of the applicable program documents.

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(e)Effect of Termination on Other Positions.  If, on the Date of Termination, the Executive is a member of the Company Board, the Bank Board, or the board of directors of any of Cadence’s subsidiaries or holds any other position with Cadence or its subsidiaries, the Executive shall be deemed to have resigned from all such positions as of the date of the Executive’s termination of employment with Cadence.  The Executive agrees to execute such documents and take such other actions as Cadence may request to reflect such resignation.

(f)Amounts Subject to Release of Claims and Compliance with Restrictive Covenants.  The payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) are subject to the Executive’s: (i) execution, delivery to Cadence, and non-revocation within 60 calendar days of the Date of Termination of a release of claims in favor of Cadence, its Affiliated Entities, and any officers, directors, and members of Cadence and/or its Affiliated Entities substantially in the form used by Cadence in connection with executive employment terminations (and not imposing any post-employment restrictive covenant other than to reaffirm any such restrictive covenant applicable under this Agreement) (the “General Release”); and (ii) compliance with the provisions of Sections 10(b), 10(c), 10(d), and 10(e) of this Agreement during the Employment Period and after the Date of Termination.  In the event the Executive breaches the terms of Section 10(b), 10(c), 10(d), or 10(e) of this Agreement, all payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) shall, to the extent paid, be subject to a right of reclamation by Cadence or, to the extent unpaid, forfeiture by the Executive.  The Executive shall deliver a properly executed copy of the General Release within the particular time period specified therein, and the payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) shall begin on the 60th calendar day following the Date of Termination or such later date as is provided under this Agreement, provided that the Executive has executed and submitted such General Release and the statutory period during which the Executive is entitled to revoke such release of claims has expired on or before such 60th calendar day.

(g)Full Settlement.  The payments and benefits provided under this Section 6 of this Agreement (including, without limitation, the Other Benefits and Expenses) shall be in full satisfaction of Cadence’s obligations to the Executive upon the Executive’s termination of employment, notwithstanding the remaining length of the Employment Period, and in no event shall the Executive be entitled to severance benefits (or other damages in respect of a termination of employment or claim for breach of this Agreement) beyond those specified in this Section 6.

7.No Mitigation; No Offset.  Cadence’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right, or action that Cadence may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced regardless of whether the Executive obtains other employment.

8.Section 409A; FDIC; Forfeiture.

(a)Section 409A.

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(i)General.  It is intended that this Agreement shall comply with the provisions of Section 409A of the Code and the Treasury Regulations relating thereto, or an exemption to Section 409A of the Code.  Without limiting the generality of the foregoing, provisions herein with respect to the timing of payments shall be construed and interpreted in a manner consistent with such intent, and notwithstanding anything herein to the contrary, any amount due under Section 6(a)(i)(D) in respect of a Change in Control that is not an event described in Section 409A(a)(2)(A)(v) of the Code and the regulations thereunder (and that is not in excess of the amount of severance provided for in Section 6(a)(i)(C)) shall, to the extent necessary to comply with Section 409A of the Code, not be paid in a lump sum and shall instead be paid on the schedule contemplated by Section 6(a)(i)(C).  Any payments that qualify for the “short-term deferral” exception or another exception under Section 409A of the Code shall be paid under the applicable exception.  For purposes of the limitations on nonqualified deferred compensation under Section 409A of the Code, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Section 409A of the Code deferral election rules and the exclusion under Section 409A of the Code for certain short-term deferral amounts.  All payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under Section 409A of the Code.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment under this Agreement.  Within the time period permitted by the applicable Treasury Regulations (or such later time as may be permitted under Section 409A of the Code or any Internal Revenue Service or Department of Treasury rules or other guidance issued thereunder), Cadence may, in consultation with the Executive, modify the Agreement in order to cause the provisions of the Agreement to comply with the requirements of Section 409A of the Code, so as to avoid the imposition of  taxes and penalties on the Executive pursuant to Section 409A of the Code (to the extent economically more advantageous to the Executive than the imposition of any taxes and penalties).

(ii)In-Kind Benefits and Reimbursements.  Notwithstanding anything to the contrary in this Agreement, all (A) reimbursements and (B) in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (w) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement); (x) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year; (y) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred; and (z) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

(iii)Delay of Payments.  Notwithstanding any other provision of this Agreement to the contrary, if the Executive is considered a “specified employee” for purposes of Section 409A of the Code (as determined in accordance with the methodology established by Cadence as in effect on the date of termination), any payment that constitutes nonqualified deferred compensation within the meaning of

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Section 409A of the Code that is otherwise due to the Executive under this Agreement during the six-month period following the Executive’s separation from service (as determined in accordance with Section 409A of the Code) on account of the Executive’s separation from service shall be accumulated and paid to the Executive on the first business day of the seventh month following the Executive’s separation from service (the “Delayed Payment Date”).  The Executive shall be entitled to interest on any delayed cash payments from the date of termination to the Delayed Payment Date at a rate equal to the applicable federal short-term rate in effect under Section 1274(d) of the Code for the month in which the Executive’s separation from service occurs.  If the Executive dies during the postponement period, the amounts and entitlements delayed on account of Section 409A of the Code shall be paid to the personal representative of the Executive’s estate on the first to occur of the Delayed Payment Date or 30 calendar days after the date of the Executive’s death.

(b)FDIC.  Cadence and the Executive mutually acknowledge that the terms of this Agreement shall be subject to and limited by any requirements or limitations that may apply under any applicable law, including any rules or regulations promulgated by the FDIC (“FDIC Guidance”).  Accordingly, the Executive hereby (A) acknowledges and understands that any compensation payable to him under any benefit plan of Cadence or the Affiliated Entities, including without limitation under this Agreement, may be subject to and limited by such FDIC Guidance, (B) consents to any future modifications and limitations with respect to and under such benefit plans to the extent necessary to ensure compliance with FDIC Guidance, (C) agrees that any plan, program, policy, agreement, or arrangement of Cadence and the Affiliated Entities and this Agreement shall be treated as a benefit plan for purposes of such limitations, (D) voluntarily waives any claim against Cadence for any changes to the Executive’s compensation or benefits that are required to comply with the FDIC Guidance as in effect from time to time, (E) agrees that such waiver and consent shall constitute a part of and be integrated with this Agreement, (F) agrees to execute, acknowledge, and deliver such documents or instruments and take such other actions as may be reasonably necessary to effectuate the foregoing, and (G) agrees that in no event shall the Executive have the right to claim a breach of this Agreement or the terms of any benefit plan, if such claim is due to or arises from Cadence’s compliance or alleged failure to comply with applicable law, including without limitation FDIC Guidance.

(c)Forfeiture.  Notwithstanding any other provisions of this Agreement and in addition to and not in contravention of the clawback provision applicable to the Executive under applicable law:

(i)If, as a result of the Executive’s misconduct, Cadence is required to prepare an accounting restatement due to material noncompliance of Cadence  with any financial reporting requirement under the federal securities laws, the Executive shall reimburse Cadence for (A) all amounts received under any incentive compensation plans from Cadence that are in excess of the amounts the Executive would have been entitled to had the initial such financial document been issued or filed consistent with such accounting restatement, and (B) any gains realized from the sale of securities of Cadence during the 12-month period following the first public issuance or filing with the Securities and Exchange Commission (whichever first occurs) of the financial document

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embodying such financial reporting requirement, unless the application of this provision has been exempted by the Securities and Exchange Commission; and

(ii)If the Executive is found guilty of misconduct by any judicial or administrative authority in connection with any (A) formal investigation by the Securities and Exchange Commission or (B) other federal or state regulatory investigation, the Compensation Committee may require the repayment of any gain realized in respect of an award under any equity compensation plan without regard to the timing of the determination of misconduct in relation to the timing of the exercise of the award.

9.Limitation on Payments under Certain Circumstances.

(a)Limitation on Payments.  Anything in this Agreement to the contrary notwithstanding, in the event that the Accounting Firm (as defined below) shall determine that receipt of all Payments (as defined below) would subject Executive to tax under Section 4999 of the Code, the Accounting Firm shall determine whether some amount of Agreement Payments (as defined below) meets the definition of Reduced Amount (as defined below).  If the Accounting Firm determines that there is a Reduced Amount, then the aggregate Agreement Payments shall be reduced to such Reduced Amount.

(b)Determination of Reduced Amount.  If the Accounting Firm determines that the aggregate Agreement Payments should be reduced to the Reduced Amount, Cadence shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof, and the Executive may then elect, in the Executive’s sole discretion, which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the Parachute Value (as defined below) of the aggregate Agreement Payments equals the Reduced Amount); provided that Cadence shall reduce the Agreement Payments in the following order: (i) by reducing benefits payable pursuant to Section 6(a)(i)(C) or Section 6(a)(i)(D) of this Agreement, as applicable, then (ii) by reducing amounts payable pursuant to Section 6(a)(iii) of this Agreement, and then (iii) by reducing amounts payable pursuant to Section 6(a)(ii) of this Agreement.  All determinations made by the Accounting Firm under this Section 9 shall be binding upon Cadence and the Executive and shall be made no later than five days prior to the occurrence of the applicable change in control.  In connection with making determinations under this Section 9, the Accounting Firm shall take into account the value of any reasonable compensation for services to be rendered by the Executive before or after the applicable change in control, including any noncompetition provisions that may apply to the Executive, and Cadence shall cooperate in the valuation of any such services, including any noncompetition provisions.

(c)Overpayments; Underpayments.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by Cadence to or for the benefit of the Executive pursuant to this Agreement that should not have been so paid or distributed (each, an “Overpayment”) or that additional amounts that will have not been paid or distributed by Cadence to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed (each, an “Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder.  In the event that the Accounting Firm, based

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upon the assertion of a deficiency by the Internal Revenue Service against either Cadence or the Executive that the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by Cadence to or for the benefit of the Executive shall be repaid by the Executive to Cadence together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such repayment shall be required if and to the extent such deemed repayment would not either reduce the amount on which the Executive is subject to tax under Sections 1 and 4999 of the Code or generate a refund of such taxes.  In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by Cadence to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.  All fees and expenses of the Accounting Firm in implementing the provisions of this Section 9 shall be borne by Cadence.

(d)Certain Definitions.  The following terms shall have the following meanings for purposes of this Section 9:

(i)“Accounting Firm” shall mean Cadence’s independent auditor as of immediately prior to the applicable change in control;

(ii)“Agreement Payment” shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section 9);

(iii)“Net After-Tax Receipt” shall mean the Parachute Value of a Payment, net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws that applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Executive shall certify, in the Executive’s sole discretion, as likely to apply to the Executive in the relevant tax year(s);

(iv)“Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the excise tax under Section 4999 of the Code will apply to such Payment;

(v)A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise; and

(vi)“Reduced Amount” shall mean the amount of Agreement Payments that (A) has a Parachute Value that is less than the Parachute Value of all Agreement Payments and (B) results in aggregate Net After-Tax Receipts for all Payments that are greater than the Net After-Tax Receipts for all Payments that would

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result if the aggregate Parachute Value of Agreement Payments were any other amount that is less than the Parachute Value of all Agreement Payments.

10.Restrictive Covenants.

(a)Return of Company Property.  Upon the Executive’s termination of employment for any reason, the Executive shall promptly return to Cadence any keys, credit cards, passes, confidential documents or material, or other property belonging to Cadence, and the Executive shall also return all writings, files, records, correspondence, notebooks, notes, electronic contact lists, and other documents and things (including any copies thereof) containing confidential information or relating to the business or proposed business of Cadence or the Affiliated Entities or containing any trade secrets relating to Cadence or the Affiliated Entities, except any personal diaries, calendars, rolodexes, or personal notes or correspondence.  For purposes of the preceding sentence, the term “trade secrets” shall have the meaning ascribed to it under the Uniform Trade Secrets Act.  The Executive agrees to represent in writing to Cadence upon termination of employment that he has complied with the foregoing provisions of this Section 10(a).

(b)Mutual Nondisparagement.  The Executive, the Company, and the Bank each agree that, following the Executive’s termination of employment for any reason, none of the Executive, the Company, or the Bank shall, directly or indirectly, make any public statements that materially disparages (i) Cadence or the Affiliated Entities or any of their respective directors, officers, or employees, in the case of the Executive, or (ii) the Executive, in the case of the Company or the Bank.  Neither the Company nor the Bank shall be liable for any breach of its obligations under this Section 10(b) if it informs its directors and executive officers, as such term is defined in Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended, of the content of its covenant under this Section 10(b) and takes reasonable measures to ensure that such individuals honor the Company’s or the Bank’s, as applicable, agreement under this Section 10(b).  Notwithstanding the foregoing, nothing in this Section 10(b) shall prohibit the Executive from making truthful statements when required by order of a court or other governmental or regulatory body having jurisdiction or to enforce any legal right including, without limitation, the terms of this Agreement.

(c)Confidential Information.  The Executive agrees that, during the Executive’s employment with Cadence and at all times thereafter, the Executive shall hold for the benefit of Cadence all secret or confidential information, knowledge, or data relating to Cadence or any of the Affiliated Entities, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by Cadence or during the Executive’s consultation with Cadence after the Executive’s termination of employment, and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement).  Except in the good-faith performance of the Executive’s duties for Cadence, the Executive shall not, without the prior written consent of Cadence or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge, or data to anyone other than Cadence and those designated by it.  In addition, notwithstanding anything in this Agreement to the contrary, nothing in this Agreement shall impair the Executive’s rights under the whistleblower provisions of any applicable federal law or regulation or, for the avoidance of doubt, limit

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Executive’s right to receive an award for information provided to any government authority under such law or regulation.

(d)Nonsolicitation.  The Executive agrees that, while the Executive is employed by Cadence and during the 12-month period following the Executive’s termination of employment with Cadence for any reason, the Executive shall not directly or indirectly, (i) solicit any individual who is, on the Date of Termination (or was, during the six month period prior to the Date of Termination), employed by Cadence or the Affiliated Entities to terminate or refrain from renewing or extending such employment or to become employed by or become a consultant to any other individual or entity other than Cadence or the Affiliated Entities, (ii) initiate discussion with any such employee or former employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity on behalf of the Executive’s employer, or (iii) induce or attempt to induce any current customer, investor, supplier, licensee, or other business relation of Cadence or any of the Affiliated Entities to cease doing business with Cadence or such Affiliated Entity, or in any way interfere with the relationship between any such customer, investor, supplier, licensee, or business relation, on the one hand, and Cadence or any Affiliated Entity, on the other hand.

(e)Noncompetition.  The Executive acknowledges and recognizes that: (i) the nature of Cadence’s business is highly competitive and Cadence will be actively engaged in such business throughout the United States; (ii) the services to be performed for Cadence by the Executive are extraordinary and unique, and (iii) the Executive’s compensation and benefits hereunder reflect the extraordinary and unique value to Cadence of the Executive’s services.  Accordingly, as a material inducement to Cadence to enter into this Agreement and to pay the Executive the compensation and benefits hereunder, the Executive agrees that, while the Executive is employed by Cadence and during the 12-month period following the Executive’s termination of employment with Cadence for any reason (other than a termination by Cadence with Cause or a resignation by the Executive without Good Reason), the Executive shall not engage in Competition (as defined below).  The Executive shall be deemed to be engaging in “Competition” if the Executive, directly or indirectly, anywhere in the continental United States where Cadence or any of the Affiliated Entities engages in commercial banking business or any other financial services immediately prior to the Date of Termination, owns, manages, operates, controls, or participates in the ownership, management, operation, or control of or is connected as an officer, employee, partner, director, consultant, or otherwise with, or has any financial interest in, any business (whether through a corporation or other entity) engaged in the commercial banking business or in any other financial services business that is competitive with any portion of the business conducted by Cadence or any of the Affiliated Entities.  This Section 10(e) shall cease to apply upon an expiration of the Employment Period as a result of the delivery of a Notice of Nonrenewal by Cadence.

(f)Equitable Remedies.  The Executive acknowledges that Cadence would be irreparably injured by a violation of Section 10(b), 10(c), 10(d), or 10(e) of this Agreement, and the Executive agrees that Cadence, in addition to any other remedies available to it for such breach or threatened breach, on meeting the standards required by law, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of Section 10(b), 10(c), 10(d), or 10(e) of this

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Agreement.  If a bond is required to be posted in order for Cadence to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.

(g)Severability; Blue Pencil.  The Executive acknowledges and agrees that the Executive has had the opportunity to seek advice of counsel in connection with the Agreement and the restrictive covenants contained herein are reasonable in geographical scope, temporal duration, and in all other respects.  If it is determined that any provision of this Section 10 is invalid or unenforceable, the remainder of the provisions of this Section 10 shall not thereby be affected and shall be given full effect, without regard to the invalid portions.  If any court or other decision-maker of competent jurisdiction determines that any of the covenants in this Section 10 is unenforceable because of the duration or geographic scope of such provision, then after such determination becomes final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable, and in its reduced form, such provision shall be enforced.

11.Successors.

(a)This Agreement is personal to the Executive and without the prior written consent of Cadence shall not be assignable by the Executive.  This Agreement and any rights and benefits hereunder shall inure to the benefit of and be enforceable by the Executive’s legal representatives, heirs, or legatees.  This Agreement and any rights and benefits hereunder shall inure to the benefit of and be binding upon Cadence and its successors and assigns.

(b)Cadence will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of Cadence to assume expressly and agree to satisfy all of the obligations under this Agreement in the same manner and to the same extent that Cadence would be required to satisfy such obligations if no such succession had taken place.  As used in this Agreement, “Cadence” shall mean Cadence as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.

12.Miscellaneous.

(a)Amendment.  This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b)Withholding.  Cadence may withhold from any amounts payable under this Agreement such federal, state, local, or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(c)Applicable Law.  The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Texas, without regard to the conflict of law provisions of any state.

(d)Dispute Resolution.  Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement that is not resolved by the Executive and Cadence shall be submitted to arbitration in Texas in accordance with Texas law and the

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procedures of the American Arbitration Association.  The determination of the arbitrator shall be conclusive and binding on Cadence and the Executive and judgment may be entered on the arbitrator’s awards in any court having competent jurisdiction.  In the event any controversy or claim under this Agreement arises, to the full extent permitted by law, Cadence shall pay all reasonable and documented attorneys’ fees and other reasonable and documented litigation/arbitration costs and expenses incurred by the Executive in connection with such claim or controversy; provided that the Executive prevails on at least one material issue in such proceeding; and provided, further, that in no event shall Cadence be obligated to pay more than $100,000 in the aggregate for all such fees, costs, and expenses.

(e)Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

(f)Waiver of Breach.  No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, shall operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time.  The failure of any party hereto to take any action by reason of such breach shall not deprive such party of the right to take action at any time while such breach continues.

(g)Notices.  Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice):

to Cadence:

Cadence Bancorporation
2800 Post Oak Boulevard, Suite 3800
Houston, Texas 77056
Attention:Director of Human Resources

 

or to the Executive:

At the address last on the records of Cadence.

Such notices, demands, claims, and other communications shall be deemed given in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery or, in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received.

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(h)Survivorship.  Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.

(i)Entire Agreement.  From and after the date hereof, this Agreement shall supersede any other agreement or understanding between the parties with respect to the subject matter hereof (including, without limitation, the Prior Agreement).  The obligations under this Agreement are enforceable solely against Cadence and its Affiliated Entities, and in no event shall this Agreement be enforceable against any shareholder of, or investor in, Cadence.

(j)Counterparts.  This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original but all of which taken together constitute one and the same agreement.

(k)Representations by the Executive.  The Executive hereby warrants that the Executive has the full authority to execute and enter into this Agreement and that the Executive’s execution of this Agreement and commencement of employment with Cadence shall not contravene any obligations the Executive may have to any prior employer.  The Executive represents and warrants that the Executive has disclosed to Cadence all provisions in any agreements with the Executive’s current employer that purport to restrict the Executive’s activities following employment with such employer and that the Executive is subject to no agreement or restriction that would limit the Executive’s ability to execute and deliver this Agreement or serve in the capacities and fully perform the services contemplated herein.

[Signature Page Follows]

 

 

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IN WITNESS THEREOF, the Executive has hereunto set his hand, and each of the Company and the Bank has caused these presents to be executed in its name and on its behalf, all as of the day and year first above written.

CADENCE BANCORPORATION

By: /s/ Jerry W. Powell_________________________
                   Name: Jerry W. Powell
                   Title: EVP, General Counsel & Corporate Secretary

CADENCE BANK, N.A.

By: /s/ Jerry W. Powell_________________________
                   Name: Jerry W. Powell
                   Title: EVP, General Counsel & Corporate Secretary

EXECUTIVE

Samuel M. Tortorici___________________________
Samuel M. Tortorici

[Signature Page to Tortorici Amended and Restated Employment Agreement]

 

cade-ex102_100.htm

EXECUTION VERSION

EXHIBIT 10.2

Amended and Restated
Employment Agreement

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June _1_, 2020 (the “Restatement Date”), by and among Cadence Bancorporation, a Delaware corporation (the “Company”), Cadence Bank, N.A., a national banking association organized under the laws of the United States (the “Bank” and, together with the Company, “Cadence”), and Valerie C. Toalson (the “Executive”).

WHEREAS, Cadence and the Executive are parties to an Employment Agreement, dated as of February 1, 2015, amended as of November 30, 2016, and March 14, 2017 (the “Prior Agreement”);

WHEREAS, Cadence wishes to continue to employ the Executive in an executive capacity on the terms and conditions and for the consideration hereinafter set forth, and the Executive wishes to continue to be employed by Cadence on such terms and conditions and for such consideration; and

WHEREAS, Cadence and the Executive desire to amend and restate the Prior Agreement in its entirety as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and for other good and valuable consideration, it is hereby covenanted and agreed by the Executive and Cadence as follows:

1.Effective Date.  This Agreement shall be effective as of February 1, 2015 (the “Effective Date”).

2.Employment Period.  Unless terminated earlier pursuant to Section 5 of this Agreement, the term of this Agreement will commence on the Effective Date and end on the first anniversary of the Effective Date (the “Employment Period”); provided, however, that commencing on the first anniversary of the Effective Date, and on each subsequent anniversary of such date (such first anniversary and each annual anniversary thereafter, a “Renewal Date”), the Employment Period shall be automatically extended so as to terminate on the first anniversary of the applicable Renewal Date, unless at least 90 days prior to such Renewal Date, Cadence shall give notice to the Executive that the Employment Period shall not be so extended following such Renewal Date (a “Notice of Nonrenewal”), in which case the Employment Period shall terminate on the first anniversary of such Renewal Date.

3.Position and Duties.  During the Employment Period, the Executive shall (a) serve as Chief Financial Officer of the Company and Chief Financial Officer of the Bank, with such authority, power, duties, and responsibilities as are commensurate with such positions and as are customarily exercised by a person holding such position in a company of the size and nature of the Company, (b) report to the Chief Executive Officer of the Company, and (c) perform the Executive’s duties at Cadence’s primary office location in the Houston, Texas metropolitan area, subject to the Executive’s performance of duties at and travel to such other offices of the Company and its subsidiaries and controlled affiliates (the “Affiliated Entities”) and/or other locations as shall be necessary to fulfill the Executive’s duties.

W/2876141

 

 

4.Compensation.  Subject to the terms of this Agreement, while the Executive is employed by Cadence during the Employment Period, Cadence shall compensate the Executive for the Executive’s services as follows:

(a)Base Salary.  The Executive shall receive an annual base salary (“Annual Base Salary”) of no less than $450,000.  The Executive’s Annual Base Salary shall be reviewed annually by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Company Board”) pursuant to its normal performance review policies for senior executives and may be increased but not decreased in the sole and absolute discretion of the Compensation Committee or the Company Board.  The term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as in effect from time to time.  Such Annual Base Salary shall be payable in accordance with Cadence’s payroll policies.

(b)Annual Incentive Payment.  With respect to each fiscal year or portion of a fiscal year of Cadence ending during the Employment Period, the Executive shall be eligible to receive an annual incentive payment (the “Incentive Payment”), with the actual amount of any such Incentive Payment to be determined by the Compensation Committee.  The Executive’s target Incentive Payment opportunity for each fiscal year ending during the Employment Period shall be 100% of the Annual Base Salary (the “Target Incentive Payment”).  Any earned Incentive Payment in respect of a fiscal year shall be paid to the Executive no later than the 15th calendar day of the third month following the close of such fiscal year, unless Cadence or the Executive shall elect to defer the receipt of such Incentive Payment pursuant to an arrangement that meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

(c)Equity Compensation.  During the Employment Period, the Executive shall be eligible to participate in any equity and/or other long-term compensation programs established by Cadence from time to time for senior executive officers at the discretion of the Compensation Committee.

(d)Employee Benefits, Fringe Benefits, and Perquisites.  During the Employment Period, the Executive shall be provided with employee benefits (including vacation), fringe benefits, and perquisites in accordance with Cadence’s established policies.

(e)Expense Reimbursement.  Subject to the requirements of Section 8(a)(ii) of this Agreement (relating to in-kind benefits and reimbursements), during the Employment Period, Cadence shall reimburse the Executive for all reasonable and substantiated expenses incurred by the Executive in the performance of the Executive’s duties in accordance with Cadence’s policies applicable to senior executives.

(f)Indemnification/Insurance.  The Company and the Bank shall defend, indemnify, and hold the Executive harmless to the full extent permitted by the general laws of the State of Delaware and the Company’s and the Bank’s organizational documents, and shall promptly advance all expenses, including attorneys’ fees, under procedures provided by, and to the full extent permitted by, such laws and the Company’s and the Bank’s organizational documents.  The Company also shall procure and maintain directors and officers liability insurance, which shall apply during all periods of the Executive’s employment and thereafter

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during the period in which the Executive may be subject to liability for acts and omissions to act in connection with such employment.

5.Termination of Employment.  The Executive’s employment may be terminated under the following circumstances:

(a)Death or Disability.  The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period.  If Cadence determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may provide the Executive with written notice in accordance with Section 12(g) of this Agreement of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with Cadence shall terminate effective on the 30th calendar day after receipt of such notice by the Executive (the “Disability Effective Date”); provided that, within the 30 calendar days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, “Disability” shall mean the inability of the Executive to perform the Executive’s duties with Cadence on a full-time basis as a result of the Executive’s incapacity due to mental or physical illness, which incapacity prevents the Executive from substantially performing the Executive’s duties to Cadence for a period of 120 consecutive calendar days or 150 out of 180 consecutive calendar days, as determined by a physician selected by Cadence or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

(b)By Cadence with or without Cause.  Cadence may terminate the Executive’s employment during the Employment Period either with or without Cause.  For purposes of this Agreement, “Cause” shall mean the Executive’s:

(i)intentional misconduct;

(ii)fraud, embezzlement, or intentional theft from Cadence;

(iii)intentional, material, and wrongful damage to Cadence’s property;

(iv)intentional wrongful disclosure of material confidential information, trade secrets, or confidential business processes of Cadence;

(v)act leading to a conviction of (A) a felony or (B) a misdemeanor involving moral turpitude;

(vi)willful engagement in illegal conduct or gross misconduct, either of which is demonstrably and not insubstantially injurious to Cadence; or

(vii)continued refusal to follow lawful directions of the Executive’s supervisor (other than any such refusal resulting from incapacity due to physical or mental illness) after a written demand to follow such directions is delivered to the Executive by Cadence that specifically identifies the manner in which Cadence believes the Executive has refused to follow such directions.

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For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “intentional” or “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of Cadence.  Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Company Board or the Bank Board or upon the advice of counsel for Cadence shall be conclusively presumed to be done or omitted to be done by the Executive in good faith and in the best interests of Cadence.

(c)By the Executive with or without Good Reason.  The Executive’s employment may be terminated by the Executive during the Employment Period either with or without Good Reason.  For purposes of this Agreement, “Good Reason” shall mean, in the absence of the written consent of the Executive:

(i)a material and adverse change in the Executive’s position or a failure of Cadence to provide the Executive with the authorities, responsibilities, and reporting relationships consistent with the Executive’s position set forth in Section 3 of this Agreement;

(ii)a material failure of Cadence to provide any compensation and benefits when due pursuant to the terms of this Agreement;

(iii)a purported termination of the Executive by Cadence other than as provided under the terms and conditions of this Agreement;

(iv)a relocation of Cadence’s offices at which the Executive is principally employed to a location more than 50 miles from such location; provided, however, that any business travel required of the Executive in connection with the performance of the Executive’s duties to Cadence shall not constitute a relocation of Cadence’s offices at which the Executive is principally employed;

(v)a failure of Cadence to require a successor to assume this Agreement; or

(vi)Cadence providing a Notice of Nonrenewal to the Executive pursuant to Section 2.

In order to invoke a termination with Good Reason, the Executive shall provide written notice to Cadence of the existence of one or more of the events, conditions, or circumstances described in clauses (i) through (v) within 30 calendar days following the Executive’s knowledge of the initial existence of such events, conditions, or circumstances, specifying in reasonable detail the events, conditions, or circumstances constituting Good Reason, and Cadence shall have 30 calendar days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition if such condition is reasonably subject to cure.  In the event that Cadence fails to remedy the events, conditions, or circumstances constituting Good Reason during the applicable Cure Period, the Executive’s “separation from service” (within the meaning of Section 409A of the Code) must occur, if at all, within 30 calendar days following the end of such Cure Period in order for such termination as a result of such events, conditions, or circumstances to constitute a termination with Good Reason within the meaning of this Agreement.

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(d)Notice of Termination.  Any termination by Cadence with or without Cause or by the Executive with or without Good Reason shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 12(g) of this Agreement.  For purposes of this Agreement, a “Notice of Termination” means a written notice that: (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be 30 calendar days after the giving of such notice or 30 calendar days after the end of the Cure Period, if applicable, in the case of a termination by the Executive without or with Good Reason, respectively).  The failure by the Executive or Cadence to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or Cadence, respectively, hereunder or preclude the Executive or Cadence, respectively, from asserting such fact or circumstance in enforcing the Executive’s or Cadence’s rights hereunder.

(e)Date of Termination.  “Date of Termination” means: (i) if the Executive’s employment is terminated by Cadence other than for Cause or Disability, the date of receipt of the Notice of Termination or any later date specified therein within 30 calendar days of such notice, as the case may be; (ii) if the Executive’s employment is terminated by the Executive for Good Reason, a date that is no later than 30 calendar days after the Cure Period, if applicable; (iii) if the Executive’s employment is terminated by the Executive without Good Reason, the earlier of the date that is 30 calendar days following such notice or a date chosen by Cadence following its receipt of such notice to Cadence; (iv) if the Executive’s employment is terminated by Cadence for Cause, the date on which Cadence, after providing the Executive’s Cure Period, if applicable, notifies the Executive of such termination; or (v) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.

6.Obligations of Cadence upon Termination.

(a)Good Reason; Other Than for Cause, Death, or Disability.  If, during the Employment Period, Cadence terminates the Executive’s employment without Cause and other than by reason of the Executive’s death or Disability, or the Executive resigns the Executive’s employment with Good Reason, Cadence shall, except as otherwise required by law or provided below, pay or provide to the Executive the following:

(i)(A) as soon as reasonably practicable following the Date of Termination, a lump sum cash payment consisting of any accrued Annual Base Salary and unused vacation accrued through the Date of Termination, to the extent such Annual Base Salary and vacation has not already been paid to the Executive (the “Accrued Obligations”); (B) as soon as reasonably practicable following the Date of Termination, a lump sum cash payment consisting of any annual Incentive Payment earned by the Executive and awarded by the Company Board or the Bank Board for a completed fiscal year but not then paid to the Executive, provided that (other than any portion of such annual Incentive Payment that was previously deferred, which portion shall instead be paid in accordance with the applicable deferral arrangement and any election thereunder)

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such payment shall be made no later than the 15th calendar day of the third month following the close of the fiscal year with respect to which such Incentive Payment is earned; (C) if such termination or resignation occurs other than as provided in clause (D) below, in the form of a cash payment payable in 24 equal monthly installments beginning on the date specified in Section 6(f) of this Agreement, the product of (I) two multiplied by the sum of (x) the Annual Base Salary as in effect immediately prior to the Date of Termination (disregarding any reduction, if any, constituting Good Reason) plus (y) the Target Incentive Payment for the year in which the Date of Termination occurs; and (D) if such termination or resignation occurs on or within 24 months following a Change in Control (as defined in the Amended and Restated Cadence Bancorporation 2015 Omnibus Incentive Plan), a lump sum cash payment in an amount equal to (I) the product of (x) two multiplied by (y) the sum of (1) the Executive’s Annual Base Salary plus (2) the Target Incentive Payment for the year in which the termination occurs;

(ii)to the extent not theretofore paid or provided, Cadence shall, as soon as reasonably practicable following the Date of Termination, pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy, practice, contract, or agreement of Cadence and the Affiliated Entities through the Date of Termination, and shall pay such unreimbursed expenses incurred through the Date of Termination as are subject to reimbursement pursuant to Section 4(e) of this Agreement (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits and Expenses”);

(iii)for a 12-month period following the Date of Termination, a payment each month equal to the monthly cost of continued coverage for the Executive and, where applicable, the Executive’s spouse and dependents, under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) paid by the Executive under the Company’s group health plan pursuant to Section 4980B of the Code, less the amount that the Executive would be required to contribute for such health coverage if the Executive were an active employee of the Company; provided that the Executive is eligible for and timely elects COBRA continuation coverage; and

(iv)for a 12-month period following the Date of Termination, Cadence shall purchase a term life insurance policy that provides the Executive with substantially the same life insurance benefit that the Executive would have received had the Executive remained employed by the Company during such 12-month period; provided that such policy can be purchased at standard rates.

(b)Death or Disability.  If the Executive’s employment is terminated by reason of the Executive’s death or Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than the obligation to pay or provide:

(i)a lump sum cash payment in an amount equal to the sum of the Accrued Obligations and the Other Benefits and Expenses to the Executive or the Executive’s estate or beneficiary, as the case may be, as soon as reasonably practicable following the Date of Termination;

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(ii)a prorated Target Incentive Payment for the fiscal year in which the Date of Termination occurs based upon the period of time during the fiscal year during which the Executive was employed by Cadence pursuant to this Agreement; provided that (other than any portion of such annual Incentive Payment that was previously deferred, which portion shall instead be paid in accordance with the applicable deferral arrangement and any election thereunder) such payment shall be made no later than the 15th calendar day of the third month following the close of the fiscal year with respect to which such Incentive Payment is earned;

(iii)in the case of the Executive’s Disability, for a 12-month period following the Date of Termination, a payment each month equal to the monthly cost of continued coverage for the Executive and, where applicable, the Executive’s spouse and dependents, under COBRA paid by the Executive under the Company’s group health plan pursuant to Section 4980B of the Code, less the amount that the Executive would be required to contribute for such health coverage if the Executive were an active employee of the Company; provided that the Executive is eligible for and timely elects COBRA continuation coverage; and

(iv)in the case of the Executive’s Disability, for a 12-month period following the Date of Termination, Cadence shall purchase a term life insurance policy that provides the Executive with substantially the same life insurance benefit that the Executive would have received had the Executive remained employed by the Company during such 12-month period; provided that such policy can be purchased at standard rates.

The term “Other Benefits and Expenses” as utilized in this Section 6(b) shall also include death or disability benefits under Company provided plans as in effect on the date of the Executive’s death with respect to senior executives of Cadence and their beneficiaries generally.

(c)Cause; Without Good Reason; Nonrenewal.  If the Executive’s employment shall be terminated by Cadence with Cause or by the Executive without Good Reason during the Employment Period, or if the Employment Period expires as a result of the delivery of a Notice of Nonrenewal by Cadence, this Agreement shall terminate without further obligations to the Executive, other than, if such termination occurs during the Employment Period, the obligation to pay or provide (i) the Accrued Obligations (paid as set forth in Section 6(a) of this Agreement) and (ii) the timely payment or provision of the Other Benefits and Expenses (paid as set forth in Section 6(a) of this Agreement).

(d)Effect of Termination on Equity Compensation.  Upon a termination of the Executive’s employment with the Company for any reason, any payments, benefits, or other rights of the Executive pursuant to applicable equity or other long-term incentive programs of Cadence shall be governed by the terms and conditions of the applicable program documents.

(e)Effect of Termination on Other Positions.  If, on the Date of Termination, the Executive is a member of the Company Board, the Bank Board, or the board of directors of any of Cadence’s subsidiaries or holds any other position with Cadence or its subsidiaries, the

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Executive shall be deemed to have resigned from all such positions as of the date of the Executive’s termination of employment with Cadence.  The Executive agrees to execute such documents and take such other actions as Cadence may request to reflect such resignation.

(f)Amounts Subject to Release of Claims and Compliance with Restrictive Covenants.  The payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) are subject to the Executive’s: (i) execution, delivery to Cadence, and non-revocation within 60 calendar days of the Date of Termination of a release of claims in favor of Cadence, its Affiliated Entities, and any officers, directors, and members of Cadence and/or its Affiliated Entities substantially in the form used by Cadence in connection with executive employment terminations (and not imposing any post-employment restrictive covenant other than to reaffirm any such restrictive covenant applicable under this Agreement) (the “General Release”); and (ii) compliance with the provisions of Sections 10(b), 10(c), and 10(d) of this Agreement during the Employment Period and after the Date of Termination.  In the event the Executive breaches the terms of Section 10(b), 10(c), or 10(d) of this Agreement, all payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) shall, to the extent paid, be subject to a right of reclamation by Cadence or, to the extent unpaid, forfeiture by the Executive.  The Executive shall deliver a properly executed copy of the General Release within the particular time period specified therein, and the payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) shall begin on the 60th calendar day following the Date of Termination or such later date as is provided under this Agreement, provided that the Executive has executed and submitted such General Release and the statutory period during which the Executive is entitled to revoke such release of claims has expired on or before such 60th calendar day.

(g)Full Settlement.  The payments and benefits provided under this Section 6 of this Agreement (including, without limitation, the Other Benefits and Expenses) shall be in full satisfaction of Cadence’s obligations to the Executive upon the Executive’s termination of employment, notwithstanding the remaining length of the Employment Period, and in no event shall the Executive be entitled to severance benefits (or other damages in respect of a termination of employment or claim for breach of this Agreement) beyond those specified in this Section 6.

7.No Mitigation; No Offset.  Cadence’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right, or action that Cadence may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced regardless of whether the Executive obtains other employment.

8.Section 409A; FDIC; Forfeiture.

(a)Section 409A.

(i)General.  It is intended that this Agreement shall comply with the provisions of Section 409A of the Code and the Treasury Regulations relating thereto, or

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an exemption to Section 409A of the Code.  Without limiting the generality of the foregoing, provisions herein with respect to the timing of payments shall be construed and interpreted in a manner consistent with such intent, and notwithstanding anything herein to the contrary, any amount due under Section 6(a)(i)(D) in respect of a Change in Control that is not an event described in Section 409A(a)(2)(A)(v) of the Code and the regulations thereunder (and that is not in excess of the amount of severance provided for in Section 6(a)(i)(C)) shall, to the extent necessary to comply with Section 409A of the Code, not be paid in a lump sum and shall instead be paid on the schedule contemplated by Section 6(a)(i)(C).  Any payments that qualify for the “short-term deferral” exception or another exception under Section 409A of the Code shall be paid under the applicable exception.  For purposes of the limitations on nonqualified deferred compensation under Section 409A of the Code, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Section 409A of the Code deferral election rules and the exclusion under Section 409A of the Code for certain short-term deferral amounts.  All payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under Section 409A of the Code.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment under this Agreement.  Within the time period permitted by the applicable Treasury Regulations (or such later time as may be permitted under Section 409A of the Code or any Internal Revenue Service or Department of Treasury rules or other guidance issued thereunder), Cadence may, in consultation with the Executive, modify the Agreement in order to cause the provisions of the Agreement to comply with the requirements of Section 409A of the Code, so as to avoid the imposition of  taxes and penalties on the Executive pursuant to Section 409A of the Code (to the extent economically more advantageous to the Executive than the imposition of any taxes and penalties).

(ii)In-Kind Benefits and Reimbursements.  Notwithstanding anything to the contrary in this Agreement, all (A) reimbursements and (B) in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (w) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement); (x) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year; (y) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred; and (z) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

(iii)Delay of Payments.  Notwithstanding any other provision of this Agreement to the contrary, if the Executive is considered a “specified employee” for purposes of Section 409A of the Code (as determined in accordance with the methodology established by Cadence as in effect on the date of termination), any payment that constitutes nonqualified deferred compensation within the meaning of Section 409A of the Code that is otherwise due to the Executive under this Agreement during the six-month period following the Executive’s separation from service (as

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determined in accordance with Section 409A of the Code) on account of the Executive’s separation from service shall be accumulated and paid to the Executive on the first business day of the seventh month following the Executive’s separation from service (the “Delayed Payment Date”).  The Executive shall be entitled to interest on any delayed cash payments from the date of termination to the Delayed Payment Date at a rate equal to the applicable federal short-term rate in effect under Section 1274(d) of the Code for the month in which the Executive’s separation from service occurs.  If the Executive dies during the postponement period, the amounts and entitlements delayed on account of Section 409A of the Code shall be paid to the personal representative of the Executive’s estate on the first to occur of the Delayed Payment Date or 30 calendar days after the date of the Executive’s death.

(b)FDIC.  Cadence and the Executive mutually acknowledge that the terms of this Agreement shall be subject to and limited by any requirements or limitations that may apply under any applicable law, including any rules or regulations promulgated by the FDIC (“FDIC Guidance”).  Accordingly, the Executive hereby (A) acknowledges and understands that any compensation payable to him under any benefit plan of Cadence or the Affiliated Entities, including without limitation under this Agreement, may be subject to and limited by such FDIC Guidance, (B) consents to any future modifications and limitations with respect to and under such benefit plans to the extent necessary to ensure compliance with FDIC Guidance, (C) agrees that any plan, program, policy, agreement, or arrangement of Cadence and the Affiliated Entities and this Agreement shall be treated as a benefit plan for purposes of such limitations, (D) voluntarily waives any claim against Cadence for any changes to the Executive’s compensation or benefits that are required to comply with the FDIC Guidance as in effect from time to time, (E) agrees that such waiver and consent shall constitute a part of and be integrated with this Agreement, (F) agrees to execute, acknowledge, and deliver such documents or instruments and take such other actions as may be reasonably necessary to effectuate the foregoing, and (G) agrees that in no event shall the Executive have the right to claim a breach of this Agreement or the terms of any benefit plan, if such claim is due to or arises from Cadence’s compliance or alleged failure to comply with applicable law, including without limitation FDIC Guidance.

(c)Forfeiture.  Notwithstanding any other provisions of this Agreement and in addition to and not in contravention of the clawback provision applicable to the Executive under applicable law:

(i)If, as a result of the Executive’s misconduct, Cadence is required to prepare an accounting restatement due to material noncompliance of Cadence  with any financial reporting requirement under the federal securities laws, the Executive shall reimburse Cadence for (A) all amounts received under any incentive compensation plans from Cadence that are in excess of the amounts the Executive would have been entitled to had the initial such financial document been issued or filed consistent with such accounting restatement, and (B) any gains realized from the sale of securities of Cadence during the 12-month period following the first public issuance or filing with the Securities and Exchange Commission (whichever first occurs) of the financial document embodying such financial reporting requirement, unless the application of this provision has been exempted by the Securities and Exchange Commission; and

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(ii)If the Executive is found guilty of misconduct by any judicial or administrative authority in connection with any (A) formal investigation by the Securities and Exchange Commission or (B) other federal or state regulatory investigation, the Compensation Committee may require the repayment of any gain realized in respect of an award under any equity compensation plan without regard to the timing of the determination of misconduct in relation to the timing of the exercise of the award.

9.Limitation on Payments under Certain Circumstances.

(a)Limitation on Payments.  Anything in this Agreement to the contrary notwithstanding, in the event that the Accounting Firm (as defined below) shall determine that receipt of all Payments (as defined below) would subject Executive to tax under Section 4999 of the Code, the Accounting Firm shall determine whether some amount of Agreement Payments (as defined below) meets the definition of Reduced Amount (as defined below).  If the Accounting Firm determines that there is a Reduced Amount, then the aggregate Agreement Payments shall be reduced to such Reduced Amount.

(b)Determination of Reduced Amount.  If the Accounting Firm determines that the aggregate Agreement Payments should be reduced to the Reduced Amount, Cadence shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof, and the Executive may then elect, in the Executive’s sole discretion, which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the Parachute Value (as defined below) of the aggregate Agreement Payments equals the Reduced Amount); provided that Cadence shall reduce the Agreement Payments in the following order: (i) by reducing benefits payable pursuant to Section 6(a)(i)(C) or Section 6(a)(i)(D) of this Agreement, as applicable, then (ii) by reducing amounts payable pursuant to Section 6(a)(iii) of this Agreement, and then (iii) by reducing amounts payable pursuant to Section 6(a)(ii) of this Agreement.  All determinations made by the Accounting Firm under this Section 9 shall be binding upon Cadence and the Executive and shall be made no later than five days prior to the occurrence of the applicable change in control.  In connection with making determinations under this Section 9, the Accounting Firm shall take into account the value of any reasonable compensation for services to be rendered by the Executive before or after the applicable change in control, including any noncompetition provisions that may apply to the Executive, and Cadence shall cooperate in the valuation of any such services, including any noncompetition provisions.

(c)Overpayments; Underpayments.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by Cadence to or for the benefit of the Executive pursuant to this Agreement that should not have been so paid or distributed (each, an “Overpayment”) or that additional amounts that will have not been paid or distributed by Cadence to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed (each, an “Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder.  In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either Cadence or the Executive that the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by Cadence to or for the

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benefit of the Executive shall be repaid by the Executive to Cadence together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such repayment shall be required if and to the extent such deemed repayment would not either reduce the amount on which the Executive is subject to tax under Sections 1 and 4999 of the Code or generate a refund of such taxes.  In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by Cadence to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.  All fees and expenses of the Accounting Firm in implementing the provisions of this Section 9 shall be borne by Cadence.

(d)Certain Definitions.  The following terms shall have the following meanings for purposes of this Section 9:

(i)“Accounting Firm” shall mean Cadence’s independent auditor as of immediately prior to the applicable change in control;

(ii)“Agreement Payment” shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section 9);

(iii)“Net After-Tax Receipt” shall mean the Parachute Value of a Payment, net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws that applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Executive shall certify, in the Executive’s sole discretion, as likely to apply to the Executive in the relevant tax year(s);

(iv)“Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the excise tax under Section 4999 of the Code will apply to such Payment;

(v)A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise; and

(vi)“Reduced Amount” shall mean the amount of Agreement Payments that (A) has a Parachute Value that is less than the Parachute Value of all Agreement Payments and (B) results in aggregate Net After-Tax Receipts for all Payments that are greater than the Net After-Tax Receipts for all Payments that would result if the aggregate Parachute Value of Agreement Payments were any other amount that is less than the Parachute Value of all Agreement Payments.

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10.Restrictive Covenants.

(a)Return of Company Property.  Upon the Executive’s termination of employment for any reason, the Executive shall promptly return to Cadence any keys, credit cards, passes, confidential documents or material, or other property belonging to Cadence, and the Executive shall also return all writings, files, records, correspondence, notebooks, notes, electronic contact lists, and other documents and things (including any copies thereof) containing confidential information or relating to the business or proposed business of Cadence or the Affiliated Entities or containing any trade secrets relating to Cadence or the Affiliated Entities, except any personal diaries, calendars, rolodexes, or personal notes or correspondence.  For purposes of the preceding sentence, the term “trade secrets” shall have the meaning ascribed to it under the Uniform Trade Secrets Act.  The Executive agrees to represent in writing to Cadence upon termination of employment that he has complied with the foregoing provisions of this Section 10(a).

(b)Mutual Nondisparagement.  The Executive, the Company, and the Bank each agree that, following the Executive’s termination of employment for any reason, none of the Executive, the Company, or the Bank shall, directly or indirectly, make any public statements that materially disparages (i) Cadence or the Affiliated Entities or any of their respective directors, officers, or employees, in the case of the Executive, or (ii) the Executive, in the case of the Company or the Bank.  Neither the Company nor the Bank shall be liable for any breach of its obligations under this Section 10(b) if it informs its directors and executive officers, as such term is defined in Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended, of the content of its covenant under this Section 10(b) and takes reasonable measures to ensure that such individuals honor the Company’s or the Bank’s, as applicable, agreement under this Section 10(b).  Notwithstanding the foregoing, nothing in this Section 10(b) shall prohibit the Executive from making truthful statements when required by order of a court or other governmental or regulatory body having jurisdiction or to enforce any legal right including, without limitation, the terms of this Agreement.

(c)Confidential Information.  The Executive agrees that, during the Executive’s employment with Cadence and at all times thereafter, the Executive shall hold for the benefit of Cadence all secret or confidential information, knowledge, or data relating to Cadence or any of the Affiliated Entities, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by Cadence or during the Executive’s consultation with Cadence after the Executive’s termination of employment, and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement).  Except in the good-faith performance of the Executive’s duties for Cadence, the Executive shall not, without the prior written consent of Cadence or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge, or data to anyone other than Cadence and those designated by it.  In addition, notwithstanding anything in this Agreement to the contrary, nothing in this Agreement shall impair Executive’s rights under the whistleblower provisions of any applicable federal law or regulation or, for the avoidance of doubt, limit Executive’s right to receive an award for information provided to any government authority under such law or regulation.

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(d)Nonsolicitation.  The Executive agrees that, while the Executive is employed by Cadence and during the 12-month period following the Executive’s termination of employment with Cadence for any reason, the Executive shall not directly or indirectly, (i) solicit any individual who is, on the Date of Termination (or was, during the six month period prior to the Date of Termination), employed by Cadence or the Affiliated Entities to terminate or refrain from renewing or extending such employment or to become employed by or become a consultant to any other individual or entity other than Cadence or the Affiliated Entities, (ii) initiate discussion with any such employee or former employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity on behalf of the Executive’s employer, or (iii) induce or attempt to induce any current customer, investor, supplier, licensee, or other business relation of Cadence or any of the Affiliated Entities to cease doing business with Cadence or such Affiliated Entity, or in any way interfere with the relationship between any such customer, investor, supplier, licensee, or business relation, on the one hand, and Cadence or any Affiliated Entity, on the other hand.

(e)Equitable Remedies.  The Executive acknowledges that Cadence would be irreparably injured by a violation of Section 10(b), 10(c), or 10(d) of this Agreement, and the Executive agrees that Cadence, in addition to any other remedies available to it for such breach or threatened breach, on meeting the standards required by law, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of Section 10(b), 10(c), or 10(d) of this Agreement.  If a bond is required to be posted in order for Cadence to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.

(f)Severability; Blue Pencil.  The Executive acknowledges and agrees that the Executive has had the opportunity to seek advice of counsel in connection with the Agreement and the restrictive covenants contained herein are reasonable in geographical scope, temporal duration, and in all other respects.  If it is determined that any provision of this Section 10 is invalid or unenforceable, the remainder of the provisions of this Section 10 shall not thereby be affected and shall be given full effect, without regard to the invalid portions.  If any court or other decision-maker of competent jurisdiction determines that any of the covenants in this Section 10 is unenforceable because of the duration or geographic scope of such provision, then after such determination becomes final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable, and in its reduced form, such provision shall be enforced.

11.Successors.

(a)This Agreement is personal to the Executive and without the prior written consent of Cadence shall not be assignable by the Executive.  This Agreement and any rights and benefits hereunder shall inure to the benefit of and be enforceable by the Executive’s legal representatives, heirs, or legatees.  This Agreement and any rights and benefits hereunder shall inure to the benefit of and be binding upon Cadence and its successors and assigns.

(b)Cadence will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of Cadence to assume expressly and agree to satisfy all of the obligations under this

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Agreement in the same manner and to the same extent that Cadence would be required to satisfy such obligations if no such succession had taken place.  As used in this Agreement, “Cadence” shall mean Cadence as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.

12.Miscellaneous.

(a)Amendment.  This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b)Withholding.  Cadence may withhold from any amounts payable under this Agreement such federal, state, local, or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(c)Applicable Law.  The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Texas, without regard to the conflict of law provisions of any state.

(d)Dispute Resolution.  Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement that is not resolved by the Executive and Cadence shall be submitted to arbitration in Texas in accordance with Texas law and the procedures of the American Arbitration Association.  The determination of the arbitrator shall be conclusive and binding on Cadence and the Executive and judgment may be entered on the arbitrator’s awards in any court having competent jurisdiction.  In the event any controversy or claim under this Agreement arises, to the full extent permitted by law, Cadence shall pay all reasonable and documented attorneys’ fees and other reasonable and documented litigation/arbitration costs and expenses incurred by the Executive in connection with such claim or controversy; provided that the Executive prevails on at least one material issue in such proceeding; and provided, further, that in no event shall Cadence be obligated to pay more than $100,000 in the aggregate for all such fees, costs, and expenses.

(e)Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

(f)Waiver of Breach.  No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, shall operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time.  The failure of any party hereto to take any action by reason of such breach shall not deprive such party of the right to take action at any time while such breach continues.

(g)Notices.  Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified

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mail, return receipt requested, postage prepaid, or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice):

to Cadence:

Cadence Bancorporation
2800 Post Oak Boulevard, Suite 3800
Houston, Texas 77056
Attention:Director of Human Resources

 

or to the Executive:

At the address last on the records of Cadence.

Such notices, demands, claims, and other communications shall be deemed given in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery or, in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received.

(h)Survivorship.  Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.

(i)Entire Agreement.  From and after the date hereof, this Agreement shall supersede any other agreement or understanding between the parties with respect to the subject matter hereof (including, without limitation, the Prior Agreement).  The obligations under this Agreement are enforceable solely against Cadence and its Affiliated Entities, and in no event shall this Agreement be enforceable against any shareholder of, or investor in, Cadence.

(j)Counterparts.  This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original but all of which taken together constitute one and the same agreement.

(k)Representations by the Executive.  The Executive hereby warrants that the Executive has the full authority to execute and enter into this Agreement and that the Executive’s execution of this Agreement and commencement of employment with Cadence shall not contravene any obligations the Executive may have to any prior employer.  The Executive represents and warrants that the Executive has disclosed to Cadence all provisions in any agreements with the Executive’s current employer that purport to restrict the Executive’s activities following employment with such employer and that the Executive is subject to no agreement or restriction that would limit the Executive’s ability to execute and deliver this Agreement or serve in the capacities and fully perform the services contemplated herein.

[Signature Page Follows]

 

 

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IN WITNESS THEREOF, the Executive has hereunto set his hand, and each of the Company and the Bank has caused these presents to be executed in its name and on its behalf, all as of the day and year first above written.

CADENCE BANCORPORATION

By: Jerry W. Powell
      Name: Jerry W. Powell
      Title: EVP, Corporate Secretary

CADENCE BANK, N.A.

By: Jerry W. Powell
      Name: Jerry W. Powell
      Title: EVP, Corporate Secretary

EXECUTIVE

Valerie C. Toalson
Valerie C. Toalson

 

[Signature Page to Toalson Amended and Restated Employment Agreement]

cade-ex103_101.htm

EXECUTION VERSION

EXHIBIT 10.3

Amended and Restated
Employment Agreement

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of June _1_, 2020 (the “Restatement Date”), by and among Cadence Bancorporation, a Delaware corporation (the “Company”), Cadence Bank, N.A., a national banking association organized under the laws of the United States (the “Bank” and, together with the Company, “Cadence”), and Rudolph H. Holmes, IV (the “Executive”).

WHEREAS, Cadence and the Executive are parties to an Amended and Restated Employment Agreement, dated as of March 14, 2017 (which agreement was originally dated as of February 1, 2015 and amended as of November 30, 2016) (the “Prior Agreement”);

WHEREAS, Cadence wishes to continue to employ the Executive in an executive capacity on the terms and conditions and for the consideration hereinafter set forth, and the Executive wishes to continue to be employed by Cadence on such terms and conditions and for such consideration; and

WHEREAS, Cadence and the Executive desire to amend and restate the Prior Agreement in its entirety as set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and for other good and valuable consideration, it is hereby covenanted and agreed by the Executive and Cadence as follows:

1.Effective Date.  This Agreement shall be effective as of February 1, 2015 (the “Effective Date”).

2.Employment Period.  Unless terminated earlier pursuant to Section 5 of this Agreement, the term of this Agreement will commence on the Effective Date and end on the first anniversary of the Effective Date (the “Employment Period”); provided, however, that commencing on the first anniversary of the Effective Date, and on each subsequent anniversary of such date (such first anniversary and each annual anniversary thereafter, a “Renewal Date”), the Employment Period shall be automatically extended so as to terminate on the first anniversary of the applicable Renewal Date, unless at least 90 days prior to such Renewal Date, Cadence shall give notice to the Executive that the Employment Period shall not be so extended following such Renewal Date (a “Notice of Nonrenewal”), in which case the Employment Period shall terminate on the first anniversary of such Renewal Date.

3.Position and Duties.  During the Employment Period, the Executive shall (a) serve as Executive Vice President of the Company and President of the Bank, with such authority, power, duties, and responsibilities as are commensurate with such positions and as are customarily exercised by a person holding such position in a company of the size and nature of the Company, (b) report to the President and Chief Operating Officer of the Company, and (c) perform the Executive’s duties at Cadence’s primary office location in the Houston, Texas metropolitan area, subject to the Executive’s performance of duties at and travel to such other offices of the Company and its subsidiaries and controlled affiliates (the “Affiliated Entities”) and/or other locations as shall be necessary to fulfill the Executive’s duties.

W/3732715

 

4.Compensation.  Subject to the terms of this Agreement, while the Executive is employed by Cadence during the Employment Period, Cadence shall compensate the Executive for the Executive’s services as follows:

(a)Base Salary.  The Executive shall receive an annual base salary (“Annual Base Salary”) of no less than $350,000.  The Executive’s Annual Base Salary shall be reviewed annually by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Company Board”) pursuant to its normal performance review policies for senior executives and may be increased but not decreased in the sole and absolute discretion of the Compensation Committee or the Company Board.  The term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as in effect from time to time.  Such Annual Base Salary shall be payable in accordance with Cadence’s payroll policies.

(b)Annual Incentive Payment.  With respect to each fiscal year or portion of a fiscal year of Cadence ending during the Employment Period, the Executive shall be eligible to receive an annual incentive payment (the “Incentive Payment”), with the actual amount of any such Incentive Payment to be determined by the Compensation Committee.  The Executive’s target Incentive Payment opportunity for each fiscal year ending during the Employment Period shall be 100% of the Annual Base Salary (the “Target Incentive Payment”).  Any earned Incentive Payment in respect of a fiscal year shall be paid to the Executive no later than the 15th calendar day of the third month following the close of such fiscal year, unless Cadence or the Executive shall elect to defer the receipt of such Incentive Payment pursuant to an arrangement that meets the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

(c)Equity Compensation.  During the Employment Period, the Executive shall be eligible to participate in any equity and/or other long-term compensation programs established by Cadence from time to time for senior executive officers at the discretion of the Compensation Committee.

(d)Employee Benefits, Fringe Benefits, and Perquisites.  During the Employment Period, the Executive shall be provided with employee benefits (including vacation), fringe benefits, and perquisites in accordance with Cadence’s established policies.

(e)Expense Reimbursement.  Subject to the requirements of Section 8(a)(ii) of this Agreement (relating to in-kind benefits and reimbursements), during the Employment Period, Cadence shall reimburse the Executive for all reasonable and substantiated expenses incurred by the Executive in the performance of the Executive’s duties in accordance with Cadence’s policies applicable to senior executives.

(f)Indemnification/Insurance.  The Company and the Bank shall defend, indemnify, and hold the Executive harmless to the full extent permitted by the general laws of the State of Delaware and the Company’s and the Bank’s organizational documents, and shall promptly advance all expenses, including attorneys’ fees, under procedures provided by, and to the full extent permitted by, such laws and the Company’s and the Bank’s organizational documents.  The Company also shall procure and maintain directors and officers liability insurance, which shall apply during all periods of the Executive’s employment and thereafter

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during the period in which the Executive may be subject to liability for acts and omissions to act in connection with such employment.

5.Termination of Employment.  The Executive’s employment may be terminated under the following circumstances:

(a)Death or Disability.  The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period.  If Cadence determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may provide the Executive with written notice in accordance with Section 12(g) of this Agreement of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with Cadence shall terminate effective on the 30th calendar day after receipt of such notice by the Executive (the “Disability Effective Date”); provided that, within the 30 calendar days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.  For purposes of this Agreement, “Disability” shall mean the inability of the Executive to perform the Executive’s duties with Cadence on a full-time basis as a result of the Executive’s incapacity due to mental or physical illness, which incapacity prevents the Executive from substantially performing the Executive’s duties to Cadence for a period of 120 consecutive calendar days or 150 out of 180 consecutive calendar days, as determined by a physician selected by Cadence or its insurers and reasonably acceptable to the Executive or the Executive’s legal representative.

(b)By Cadence with or without Cause.  Cadence may terminate the Executive’s employment during the Employment Period either with or without Cause.  For purposes of this Agreement, “Cause” shall mean the Executive’s:

(i)intentional misconduct;

(ii)fraud, embezzlement, or intentional theft from Cadence;

(iii)intentional , material, and wrongful damage to Cadence’s property;

(iv)intentional wrongful disclosure of material confidential information, trade secrets, or confidential business processes of Cadence;

(v)act leading to a conviction of (A) a felony or (B) a misdemeanor involving moral turpitude;

(vi)willful engagement in illegal conduct or gross misconduct, either of which is demonstrably and not insubstantially injurious to Cadence; or

(vii)continued refusal to follow lawful directions of the Executive’s supervisor (other than any such refusal resulting from incapacity due to physical or mental illness) after a written demand to follow such directions is delivered to the Executive by Cadence that specifically identifies the manner in which Cadence believes the Executive has refused to follow such directions.

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For purposes of this provision, no act or failure to act on the part of the Executive shall be considered “intentional” or “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of Cadence.  Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Company Board or the Bank Board or upon the advice of counsel for Cadence shall be conclusively presumed to be done or omitted to be done by the Executive in good faith and in the best interests of Cadence.

(c)By the Executive with or without Good Reason.  The Executive’s employment may be terminated by the Executive during the Employment Period either with or without Good Reason.  For purposes of this Agreement, “Good Reason” shall mean, in the absence of the written consent of the Executive:

(i)a material and adverse change in the Executive’s position or a failure of Cadence to provide the Executive with the authorities, responsibilities, and reporting relationships consistent with the Executive’s position set forth in Section 3 of this Agreement;

(ii)a material failure of Cadence to provide any compensation and benefits when due pursuant to the terms of this Agreement;

(iii)a purported termination of the Executive by Cadence other than as provided under the terms and conditions of this Agreement;

(iv)a relocation of Cadence’s offices at which the Executive is principally employed to a location more than 50 miles from such location; provided, however, that any business travel required of the Executive in connection with the performance of the Executive’s duties to Cadence shall not constitute a relocation of Cadence’s offices at which the Executive is principally employed;

(v)a failure of Cadence to require a successor to assume this Agreement; or

(vi)Cadence providing a Notice of Nonrenewal to the Executive pursuant to Section 2.

In order to invoke a termination with Good Reason, the Executive shall provide written notice to Cadence of the existence of one or more of the events, conditions, or circumstances described in clauses (i) through (v) within 30 calendar days following the Executive’s knowledge of the initial existence of such events, conditions, or circumstances, specifying in reasonable detail the events, conditions, or circumstances constituting Good Reason, and Cadence shall have 30 calendar days following receipt of such written notice (the “Cure Period”) during which it may remedy the condition if such condition is reasonably subject to cure.  In the event that Cadence fails to remedy the events, conditions, or circumstances constituting Good Reason during the applicable Cure Period, the Executive’s “separation from service” (within the meaning of Section 409A of the Code) must occur, if at all, within 30 calendar days following the end of such Cure Period in order for such termination as a result of such events, conditions, or circumstances to constitute a termination with Good Reason within the meaning of this Agreement.

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(d)Notice of Termination.  Any termination by Cadence with or without Cause or by the Executive with or without Good Reason shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 12(g) of this Agreement.  For purposes of this Agreement, a “Notice of Termination” means a written notice that: (i) indicates the specific termination provision in this Agreement relied upon; (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated; and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be 30 calendar days after the giving of such notice or 30 calendar days after the end of the Cure Period, if applicable, in the case of a termination by the Executive without or with Good Reason, respectively).  The failure by the Executive or Cadence to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or Cadence, respectively, hereunder or preclude the Executive or Cadence, respectively, from asserting such fact or circumstance in enforcing the Executive’s or Cadence’s rights hereunder.

(e)Date of Termination.  “Date of Termination” means: (i) if the Executive’s employment is terminated by Cadence other than for Cause or Disability, the date of receipt of the Notice of Termination or any later date specified therein within 30 calendar days of such notice, as the case may be; (ii) if the Executive’s employment is terminated by the Executive for Good Reason, a date that is no later than 30 calendar days after the Cure Period, if applicable; (iii) if the Executive’s employment is terminated by the Executive without Good Reason, the earlier of the date that is 30 calendar days following such notice or a date chosen by Cadence following its receipt of such notice to Cadence; (iv) if the Executive’s employment is terminated by Cadence for Cause, the date on which Cadence, after providing the Executive’s Cure Period, if applicable, notifies the Executive of such termination; or (v) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.

6.Obligations of Cadence upon Termination.

(a)Good Reason; Other Than for Cause, Death, or Disability.  If, during the Employment Period, Cadence terminates the Executive’s employment without Cause and other than by reason of the Executive’s death or Disability, or the Executive resigns the Executive’s employment with Good Reason, Cadence shall, except as otherwise required by law or provided below, pay or provide to the Executive the following:

(i)(A) as soon as reasonably practicable following the Date of Termination, a lump sum cash payment consisting of any accrued Annual Base Salary and unused vacation accrued through the Date of Termination, to the extent such Annual Base Salary and vacation has not already been paid to the Executive (the “Accrued Obligations”); (B) as soon as reasonably practicable following the Date of Termination, a lump sum cash payment consisting of any annual Incentive Payment earned by the Executive and awarded by the Company Board or the Bank Board for a completed fiscal year but not then paid to the Executive, provided that (other than any portion of such annual Incentive Payment that was previously deferred, which portion shall instead be paid in accordance with the applicable deferral arrangement and any election thereunder)

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such payment shall be made no later than the 15th calendar day of the third month following the close of the fiscal year with respect to which such Incentive Payment is earned; (C) if such termination or resignation occurs other than as provided in clause (D) below, in the form of a cash payment payable in 24 equal monthly installments beginning on the date specified in Section 6(f) of this Agreement, the product of (I) two multiplied by (II) the sum of (x) the Annual Base Salary as in effect immediately prior to the Date of Termination (disregarding any reduction, if any, constituting Good Reason) plus (y) the Target Incentive Payment for the year in which the Date of Termination occurs; and (D) if such termination or resignation occurs on or within 24 months following a Change in Control (as defined in the Amended and Restated Cadence Bancorporation 2015 Omnibus Incentive Plan as in effect on the date hereof), a lump sum cash payment in an amount equal to the product of (I) 2.5 multiplied by (II) the sum of (x) the Executive’s Annual Base Salary plus (y) the Target Incentive Payment for the year in which the termination occurs;

(ii)to the extent not theretofore paid or provided, Cadence shall, as soon as reasonably practicable following the Date of Termination, pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy, practice, contract, or agreement of Cadence and the Affiliated Entities through the Date of Termination, and shall pay such unreimbursed expenses incurred through the Date of Termination as are subject to reimbursement pursuant to Section 4(e) of this Agreement (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits and Expenses”);

(iii)for a 24-month period following the Date of Termination, a payment each month equal to the monthly cost of continued coverage for the Executive and, where applicable, the Executive’s spouse and dependents, under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) paid by the Executive under the Company’s group health plan pursuant to Section 4980B of the Code, less the amount that the Executive would be required to contribute for such health coverage if the Executive were an active employee of the Company; provided that the Executive is eligible for and timely elects COBRA continuation coverage; and

(iv)for a 24-month period following the Date of Termination, Cadence shall purchase a term life insurance policy that provides the Executive with substantially the same life insurance benefit that the Executive would have received had the Executive remained employed by the Company during such 24-month period; provided that such policy can be purchased at standard rates.

(b)Death or Disability.  If the Executive’s employment is terminated by reason of the Executive’s death or Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than the obligation to pay or provide:

(i)a lump sum cash payment in an amount equal to the sum of the Accrued Obligations and the Other Benefits and Expenses to the Executive or the

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Executive’s estate or beneficiary, as the case may be, as soon as reasonably practicable following the Date of Termination;

(ii)a prorated Target Incentive Payment for the fiscal year in which the Date of Termination occurs based upon the period of time during the fiscal year during which the Executive was employed by Cadence pursuant to this Agreement; provided that (other than any portion of such annual Incentive Payment that was previously deferred, which portion shall instead be paid in accordance with the applicable deferral arrangement and any election thereunder) such payment shall be made no later than the 15th calendar day of the third month following the close of the fiscal year with respect to which such Incentive Payment is earned;

(iii)in the case of the Executive’s Disability, for a 12-month period following the Date of Termination, a payment each month equal to the monthly cost of continued coverage for the Executive and, where applicable, the Executive’s spouse and dependents, under COBRA paid by the Executive under the Company’s group health plan pursuant to Section 4980B of the Code, less the amount that the Executive would be required to contribute for such health coverage if the Executive were an active employee of the Company; provided that the Executive is eligible for and timely elects COBRA continuation coverage; and

(iv)in the case of the Executive’s Disability, for a 12-month period following the Date of Termination, Cadence shall purchase a term life insurance policy that provides the Executive with substantially the same life insurance benefit that the Executive would have received had the Executive remained employed by the Company during such 12-month period; provided that such policy can be purchased at standard rates.

The term “Other Benefits and Expenses” as utilized in this Section 6(b) shall also include death or disability benefits under Company provided plans as in effect on the date of the Executive’s death with respect to senior executives of Cadence and their beneficiaries generally.

(c)Cause; Without Good Reason; Nonrenewal.  If the Executive’s employment shall be terminated by Cadence with Cause or by the Executive without Good Reason during the Employment Period, or if the Employment Period expires as a result of the delivery of a Notice of Nonrenewal by Cadence, this Agreement shall terminate without further obligations to the Executive, other than, if such termination occurs during the Employment Period, the obligation to pay or provide (i) the Accrued Obligations (paid as set forth in Section 6(a) of this Agreement) and (ii) the timely payment or provision of the Other Benefits and Expenses (paid as set forth in Section 6(a) of this Agreement).

(d)Effect of Termination on Equity Compensation.  Upon a termination of the Executive’s employment with the Company for any reason, any payments, benefits, or other rights of the Executive pursuant to applicable equity or other long-term incentive programs of Cadence shall be governed by the terms and conditions of the applicable program documents.

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(e)Effect of Termination on Other Positions.  If, on the Date of Termination, the Executive is a member of the Company Board, the Bank Board, or the board of directors of any of Cadence’s subsidiaries or holds any other position with Cadence or its subsidiaries, the Executive shall be deemed to have resigned from all such positions as of the date of the Executive’s termination of employment with Cadence.  The Executive agrees to execute such documents and take such other actions as Cadence may request to reflect such resignation.

(f)Amounts Subject to Release of Claims and Compliance with Restrictive Covenants.  The payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) are subject to the Executive’s: (i) execution, delivery to Cadence, and non-revocation within 60 calendar days of the Date of Termination of a release of claims in favor of Cadence, its Affiliated Entities, and any officers, directors, and members of Cadence and/or its Affiliated Entities substantially in the form used by Cadence in connection with executive employment terminations (and not imposing any post-employment restrictive covenant other than to reaffirm any such restrictive covenant applicable under this Agreement) (the “General Release”); and (ii) compliance with the provisions of Sections 10(b), 10(c), 10(d), and 10(e) of this Agreement during the Employment Period and after the Date of Termination.  In the event the Executive breaches the terms of Section 10(b), 10(c), 10(d), or 10(e) of this Agreement, all payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) shall, to the extent paid, be subject to a right of reclamation by Cadence or, to the extent unpaid, forfeiture by the Executive.  The Executive shall deliver a properly executed copy of the General Release within the particular time period specified therein, and the payments and benefits provided under this Section 6 (other than the Accrued Obligations and the Other Benefits and Expenses) shall begin on the 60th calendar day following the Date of Termination or such later date as is provided under this Agreement, provided that the Executive has executed and submitted such General Release and the statutory period during which the Executive is entitled to revoke such release of claims has expired on or before such 60th calendar day.

(g)Full Settlement.  The payments and benefits provided under this Section 6 of this Agreement (including, without limitation, the Other Benefits and Expenses) shall be in full satisfaction of Cadence’s obligations to the Executive upon the Executive’s termination of employment, notwithstanding the remaining length of the Employment Period, and in no event shall the Executive be entitled to severance benefits (or other damages in respect of a termination of employment or claim for breach of this Agreement) beyond those specified in this Section 6.

7.No Mitigation; No Offset.  Cadence’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense, or other claim, right, or action that Cadence may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced regardless of whether the Executive obtains other employment.

8.Section 409A; FDIC; Forfeiture.

(a)Section 409A.

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(i)General.  It is intended that this Agreement shall comply with the provisions of Section 409A of the Code and the Treasury Regulations relating thereto, or an exemption to Section 409A of the Code.  Without limiting the generality of the foregoing, provisions herein with respect to the timing of payments shall be construed and interpreted in a manner consistent with such intent, and notwithstanding anything herein to the contrary, any amount due under Section 6(a)(i)(D) in respect of a Change in Control that is not an event described in Section 409A(a)(2)(A)(v) of the Code and the regulations thereunder (and that is not in excess of the amount of severance provided for in Section 6(a)(i)(C)) shall, to the extent necessary to comply with Section 409A of the Code, not be paid in a lump sum and shall instead be paid on the schedule contemplated by Section 6(a)(i)(C).  Any payments that qualify for the “short-term deferral” exception or another exception under Section 409A of the Code shall be paid under the applicable exception.  For purposes of the limitations on nonqualified deferred compensation under Section 409A of the Code, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Section 409A of the Code deferral election rules and the exclusion under Section 409A of the Code for certain short-term deferral amounts.  All payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under Section 409A of the Code.  In no event may the Executive, directly or indirectly, designate the calendar year of any payment under this Agreement.  Within the time period permitted by the applicable Treasury Regulations (or such later time as may be permitted under Section 409A of the Code or any Internal Revenue Service or Department of Treasury rules or other guidance issued thereunder), Cadence may, in consultation with the Executive, modify the Agreement in order to cause the provisions of the Agreement to comply with the requirements of Section 409A of the Code, so as to avoid the imposition of  taxes and penalties on the Executive pursuant to Section 409A of the Code (to the extent economically more advantageous to the Executive than the imposition of any taxes and penalties).

(ii)In-Kind Benefits and Reimbursements.  Notwithstanding anything to the contrary in this Agreement, all (A) reimbursements and (B) in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (w) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement); (x) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year; (y) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred; and (z) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.

(iii)Delay of Payments.  Notwithstanding any other provision of this Agreement to the contrary, if the Executive is considered a “specified employee” for purposes of Section 409A of the Code (as determined in accordance with the methodology established by Cadence as in effect on the date of termination), any payment that constitutes nonqualified deferred compensation within the meaning of

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Section 409A of the Code that is otherwise due to the Executive under this Agreement during the six-month period following the Executive’s separation from service (as determined in accordance with Section 409A of the Code) on account of the Executive’s separation from service shall be accumulated and paid to the Executive on the first business day of the seventh month following the Executive’s separation from service (the “Delayed Payment Date”).  The Executive shall be entitled to interest on any delayed cash payments from the date of termination to the Delayed Payment Date at a rate equal to the applicable federal short-term rate in effect under Section 1274(d) of the Code for the month in which the Executive’s separation from service occurs.  If the Executive dies during the postponement period, the amounts and entitlements delayed on account of Section 409A of the Code shall be paid to the personal representative of the Executive’s estate on the first to occur of the Delayed Payment Date or 30 calendar days after the date of the Executive’s death.

(b)FDIC.  Cadence and the Executive mutually acknowledge that the terms of this Agreement shall be subject to and limited by any requirements or limitations that may apply under any applicable law, including any rules or regulations promulgated by the FDIC (“FDIC Guidance”).  Accordingly, the Executive hereby (A) acknowledges and understands that any compensation payable to him under any benefit plan of Cadence or the Affiliated Entities, including without limitation under this Agreement, may be subject to and limited by such FDIC Guidance, (B) consents to any future modifications and limitations with respect to and under such benefit plans to the extent necessary to ensure compliance with FDIC Guidance, (C) agrees that any plan, program, policy, agreement, or arrangement of Cadence and the Affiliated Entities and this Agreement shall be treated as a benefit plan for purposes of such limitations, (D) voluntarily waives any claim against Cadence for any changes to the Executive’s compensation or benefits that are required to comply with the FDIC Guidance as in effect from time to time, (E) agrees that such waiver and consent shall constitute a part of and be integrated with this Agreement, (F) agrees to execute, acknowledge, and deliver such documents or instruments and take such other actions as may be reasonably necessary to effectuate the foregoing, and (G) agrees that in no event shall the Executive have the right to claim a breach of this Agreement or the terms of any benefit plan, if such claim is due to or arises from Cadence’s compliance or alleged failure to comply with applicable law, including without limitation FDIC Guidance.

(c)Forfeiture.  Notwithstanding any other provisions of this Agreement and in addition to and not in contravention of the clawback provision applicable to the Executive under applicable law:

(i)If, as a result of the Executive’s misconduct, Cadence is required to prepare an accounting restatement due to material noncompliance of Cadence  with any financial reporting requirement under the federal securities laws, the Executive shall reimburse Cadence for (A) all amounts received under any incentive compensation plans from Cadence that are in excess of the amounts the Executive would have been entitled to had the initial such financial document been issued or filed consistent with such accounting restatement, and (B) any gains realized from the sale of securities of Cadence during the 12-month period following the first public issuance or filing with the Securities and Exchange Commission (whichever first occurs) of the financial document

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embodying such financial reporting requirement, unless the application of this provision has been exempted by the Securities and Exchange Commission; and

(ii)If the Executive is found guilty of misconduct by any judicial or administrative authority in connection with any (A) formal investigation by the Securities and Exchange Commission or (B) other federal or state regulatory investigation, the Compensation Committee may require the repayment of any gain realized in respect of an award under any equity compensation plan without regard to the timing of the determination of misconduct in relation to the timing of the exercise of the award.

9.Limitation on Payments under Certain Circumstances.

(a)Limitation on Payments.  Anything in this Agreement to the contrary notwithstanding, in the event that the Accounting Firm (as defined below) shall determine that receipt of all Payments (as defined below) would subject Executive to tax under Section 4999 of the Code, the Accounting Firm shall determine whether some amount of Agreement Payments (as defined below) meets the definition of Reduced Amount (as defined below).  If the Accounting Firm determines that there is a Reduced Amount, then the aggregate Agreement Payments shall be reduced to such Reduced Amount.

(b)Determination of Reduced Amount.  If the Accounting Firm determines that the aggregate Agreement Payments should be reduced to the Reduced Amount, Cadence shall promptly give the Executive notice to that effect and a copy of the detailed calculation thereof, and the Executive may then elect, in the Executive’s sole discretion, which and how much of the Agreement Payments shall be eliminated or reduced (as long as after such election the Parachute Value (as defined below) of the aggregate Agreement Payments equals the Reduced Amount); provided that Cadence shall reduce the Agreement Payments in the following order: (i) by reducing benefits payable pursuant to Section 6(a)(i)(C) or Section 6(a)(i)(D) of this Agreement, as applicable, then (ii) by reducing amounts payable pursuant to Section 6(a)(iii) of this Agreement, and then (iii) by reducing amounts payable pursuant to Section 6(a)(ii) of this Agreement.  All determinations made by the Accounting Firm under this Section 9 shall be binding upon Cadence and the Executive and shall be made no later than five days prior to the occurrence of the applicable change in control.  In connection with making determinations under this Section 9, the Accounting Firm shall take into account the value of any reasonable compensation for services to be rendered by the Executive before or after the applicable change in control, including any noncompetition provisions that may apply to the Executive, and Cadence shall cooperate in the valuation of any such services, including any noncompetition provisions.

(c)Overpayments; Underpayments.  As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by Cadence to or for the benefit of the Executive pursuant to this Agreement that should not have been so paid or distributed (each, an “Overpayment”) or that additional amounts that will have not been paid or distributed by Cadence to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed (each, an “Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder.  In the event that the Accounting Firm, based

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upon the assertion of a deficiency by the Internal Revenue Service against either Cadence or the Executive that the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by Cadence to or for the benefit of the Executive shall be repaid by the Executive to Cadence together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such repayment shall be required if and to the extent such deemed repayment would not either reduce the amount on which the Executive is subject to tax under Sections 1 and 4999 of the Code or generate a refund of such taxes.  In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by Cadence to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.  All fees and expenses of the Accounting Firm in implementing the provisions of this Section 9 shall be borne by Cadence.

(d)Certain Definitions.  The following terms shall have the following meanings for purposes of this Section 9:

(i)“Accounting Firm” shall mean Cadence’s independent auditor as of immediately prior to the applicable change in control;

(ii)“Agreement Payment” shall mean a Payment paid or payable pursuant to this Agreement (disregarding this Section 9);

(iii)“Net After-Tax Receipt” shall mean the Parachute Value of a Payment, net of all taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws that applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Executive shall certify, in the Executive’s sole discretion, as likely to apply to the Executive in the relevant tax year(s);

(iv)“Parachute Value” of a Payment shall mean the present value as of the date of the change of control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm for purposes of determining whether and to what extent the excise tax under Section 4999 of the Code will apply to such Payment;

(v)A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise; and

(vi)“Reduced Amount” shall mean the amount of Agreement Payments that (A) has a Parachute Value that is less than the Parachute Value of all Agreement Payments and (B) results in aggregate Net After-Tax Receipts for all Payments that are greater than the Net After-Tax Receipts for all Payments that would

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result if the aggregate Parachute Value of Agreement Payments were any other amount that is less than the Parachute Value of all Agreement Payments.

10.Restrictive Covenants.

(a)Return of Company Property.  Upon the Executive’s termination of employment for any reason, the Executive shall promptly return to Cadence any keys, credit cards, passes, confidential documents or material, or other property belonging to Cadence, and the Executive shall also return all writings, files, records, correspondence, notebooks, notes, electronic contact lists, and other documents and things (including any copies thereof) containing confidential information or relating to the business or proposed business of Cadence or the Affiliated Entities or containing any trade secrets relating to Cadence or the Affiliated Entities, except any personal diaries, calendars, rolodexes, or personal notes or correspondence.  For purposes of the preceding sentence, the term “trade secrets” shall have the meaning ascribed to it under the Uniform Trade Secrets Act.  The Executive agrees to represent in writing to Cadence upon termination of employment that he has complied with the foregoing provisions of this Section 10(a).

(b)Mutual Nondisparagement.  The Executive, the Company, and the Bank each agree that, following the Executive’s termination of employment for any reason, none of the Executive, the Company, or the Bank shall, directly or indirectly, make any public statements that materially disparages (i) Cadence or the Affiliated Entities or any of their respective directors, officers, or employees, in the case of the Executive, or (ii) the Executive, in the case of the Company or the Bank.  Neither the Company nor the Bank shall be liable for any breach of its obligations under this Section 10(b) if it informs its directors and executive officers, as such term is defined in Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended, of the content of its covenant under this Section 10(b) and takes reasonable measures to ensure that such individuals honor the Company’s or the Bank’s, as applicable, agreement under this Section 10(b).  Notwithstanding the foregoing, nothing in this Section 10(b) shall prohibit the Executive from making truthful statements when required by order of a court or other governmental or regulatory body having jurisdiction or to enforce any legal right including, without limitation, the terms of this Agreement.

(c)Confidential Information.  The Executive agrees that, during the Executive’s employment with Cadence and at all times thereafter, the Executive shall hold for the benefit of Cadence all secret or confidential information, knowledge, or data relating to Cadence or any of the Affiliated Entities, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by Cadence or during the Executive’s consultation with Cadence after the Executive’s termination of employment, and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement).  Except in the good-faith performance of the Executive’s duties for Cadence, the Executive shall not, without the prior written consent of Cadence or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge, or data to anyone other than Cadence and those designated by it.  In addition, notwithstanding anything in this Agreement to the contrary, nothing in this Agreement shall impair the Executive’s rights under the whistleblower provisions of any applicable federal law or regulation or, for the avoidance of doubt, limit

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Executive’s right to receive an award for information provided to any government authority under such law or regulation.

(d)Nonsolicitation.  The Executive agrees that, while the Executive is employed by Cadence and during the 12-month period following the Executive’s termination of employment with Cadence for any reason, the Executive shall not directly or indirectly, (i) solicit any individual who is, on the Date of Termination (or was, during the six month period prior to the Date of Termination), employed by Cadence or the Affiliated Entities to terminate or refrain from renewing or extending such employment or to become employed by or become a consultant to any other individual or entity other than Cadence or the Affiliated Entities, (ii) initiate discussion with any such employee or former employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity on behalf of the Executive’s employer, or (iii) induce or attempt to induce any current customer, investor, supplier, licensee, or other business relation of Cadence or any of the Affiliated Entities to cease doing business with Cadence or such Affiliated Entity, or in any way interfere with the relationship between any such customer, investor, supplier, licensee, or business relation, on the one hand, and Cadence or any Affiliated Entity, on the other hand.

(e)Noncompetition.  The Executive acknowledges and recognizes that: (i) the nature of Cadence’s business is highly competitive and Cadence will be actively engaged in such business throughout the United States; (ii) the services to be performed for Cadence by the Executive are extraordinary and unique, and (iii) the Executive’s compensation and benefits hereunder reflect the extraordinary and unique value to Cadence of the Executive’s services.  Accordingly, as a material inducement to Cadence to enter into this Agreement and to pay the Executive the compensation and benefits hereunder, the Executive agrees that, while the Executive is employed by Cadence and during the 12-month period following the Executive’s termination of employment with Cadence for any reason (other than a termination by Cadence with Cause or a resignation by the Executive without Good Reason), the Executive shall not engage in Competition (as defined below).  The Executive shall be deemed to be engaging in “Competition” if the Executive, directly or indirectly, anywhere in the continental United States where Cadence or any of the Affiliated Entities engages in commercial banking business or any other financial services immediately prior to the Date of Termination, owns, manages, operates, controls, or participates in the ownership, management, operation, or control of or is connected as an officer, employee, partner, director, consultant, or otherwise with, or has any financial interest in, any business (whether through a corporation or other entity) engaged in the commercial banking business or in any other financial services business that is competitive with any portion of the business conducted by Cadence or any of the Affiliated Entities.  This Section 10(e) shall cease to apply upon an expiration of the Employment Period as a result of the delivery of a Notice of Nonrenewal by Cadence.

(f)Equitable Remedies.  The Executive acknowledges that Cadence would be irreparably injured by a violation of Section 10(b), 10(c), 10(d), or 10(e) of this Agreement, and the Executive agrees that Cadence, in addition to any other remedies available to it for such breach or threatened breach, on meeting the standards required by law, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of Section 10(b), 10(c), 10(d), or 10(e) of this

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Agreement.  If a bond is required to be posted in order for Cadence to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.

(g)Severability; Blue Pencil.  The Executive acknowledges and agrees that the Executive has had the opportunity to seek advice of counsel in connection with the Agreement and the restrictive covenants contained herein are reasonable in geographical scope, temporal duration, and in all other respects.  If it is determined that any provision of this Section 10 is invalid or unenforceable, the remainder of the provisions of this Section 10 shall not thereby be affected and shall be given full effect, without regard to the invalid portions.  If any court or other decision-maker of competent jurisdiction determines that any of the covenants in this Section 10 is unenforceable because of the duration or geographic scope of such provision, then after such determination becomes final and unappealable, the duration or scope of such provision, as the case may be, shall be reduced so that such provision becomes enforceable, and in its reduced form, such provision shall be enforced.

11.Successors.

(a)This Agreement is personal to the Executive and without the prior written consent of Cadence shall not be assignable by the Executive.  This Agreement and any rights and benefits hereunder shall inure to the benefit of and be enforceable by the Executive’s legal representatives, heirs, or legatees.  This Agreement and any rights and benefits hereunder shall inure to the benefit of and be binding upon Cadence and its successors and assigns.

(b)Cadence will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of Cadence to assume expressly and agree to satisfy all of the obligations under this Agreement in the same manner and to the same extent that Cadence would be required to satisfy such obligations if no such succession had taken place.  As used in this Agreement, “Cadence” shall mean Cadence as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.

12.Miscellaneous.

(a)Amendment.  This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b)Withholding.  Cadence may withhold from any amounts payable under this Agreement such federal, state, local, or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(c)Applicable Law.  The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Texas, without regard to the conflict of law provisions of any state.

(d)Dispute Resolution.  Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement that is not resolved by the Executive and Cadence shall be submitted to arbitration in Texas in accordance with Texas law and the

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procedures of the American Arbitration Association.  The determination of the arbitrator shall be conclusive and binding on Cadence and the Executive and judgment may be entered on the arbitrator’s awards in any court having competent jurisdiction.  In the event any controversy or claim under this Agreement arises, to the full extent permitted by law, Cadence shall pay all reasonable and documented attorneys’ fees and other reasonable and documented litigation/arbitration costs and expenses incurred by the Executive in connection with such claim or controversy; provided that the Executive prevails on at least one material issue in such proceeding; and provided, further, that in no event shall Cadence be obligated to pay more than $100,000 in the aggregate for all such fees, costs, and expenses.

(e)Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

(f)Waiver of Breach.  No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, shall operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time.  The failure of any party hereto to take any action by reason of such breach shall not deprive such party of the right to take action at any time while such breach continues.

(g)Notices.  Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice):

to Cadence:

Cadence Bancorporation
2800 Post Oak Boulevard, Suite 3800
Houston, Texas 77056
Attention:  Director of Human Resources

 

or to the Executive:

At the address last on the records of Cadence.

Such notices, demands, claims, and other communications shall be deemed given in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery or, in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received.

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(h)Survivorship.  Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.

(i)Entire Agreement.  From and after the date hereof, this Agreement shall supersede any other agreement or understanding between the parties with respect to the subject matter hereof (including, without limitation, the Prior Agreement).  The obligations under this Agreement are enforceable solely against Cadence and its Affiliated Entities, and in no event shall this Agreement be enforceable against any shareholder of, or investor in, Cadence.

(j)Counterparts.  This Agreement may be executed in separate counterparts, each of which shall be deemed to be an original but all of which taken together constitute one and the same agreement.

(k)Representations by the Executive.  The Executive hereby warrants that the Executive has the full authority to execute and enter into this Agreement and that the Executive’s execution of this Agreement and commencement of employment with Cadence shall not contravene any obligations the Executive may have to any prior employer.  The Executive represents and warrants that the Executive has disclosed to Cadence all provisions in any agreements with the Executive’s current employer that purport to restrict the Executive’s activities following employment with such employer and that the Executive is subject to no agreement or restriction that would limit the Executive’s ability to execute and deliver this Agreement or serve in the capacities and fully perform the services contemplated herein.

[Signature Page Follows]

 

 

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IN WITNESS THEREOF, the Executive has hereunto set his hand, and each of the Company and the Bank has caused these presents to be executed in its name and on its behalf, all as of the day and year first above written.

CADENCE BANCORPORATION

By: _/s/_Jerry W. Powell___________________________
             Name: Jerry W. Powell
             Title: EVP, General Counsel and Corporate Secretary                                                                            

CADENCE BANK, N.A.

By: /s/_Jerry W. Powell__________________________
             Name: Jerry W. Powell
                   Title: EVP, General Counsel and Corporate Secretary

EXECUTIVE

/s/ Rudolph H. Holmes, IV_______________________

Rudolph H. Holmes, IV

 

[Signature Page to Holmes Amended and Restated Employment Agreement]

cade-ex311_180.htm

Exhibit 31.1

CERTIFICATIONS

I, Paul B. Murphy, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Cadence Bancorporation;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:

 

August 10, 2020

 

/s/ Paul B. Murphy

 

 

 

 

Paul B. Murphy

Chairman and Chief Executive Officer

 

cade-ex312_181.htm

Exhibit 31.2

CERTIFICATIONS

I, Valerie C. Toalson, certify that:

 

1.

I have reviewed this annual report on Form 10-Q of Cadence Bancorporation;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date:

 

August 10, 2020

 

/s/ Valerie C. Toalson

 

 

 

 

Valerie C. Toalson

Chief Financial Officer

 

 

 

 

(Principal Accounting Officer)

 

cade-ex321_179.htm

Exhibit 32.1

Chief Executive Officer’s Certification required under Section 906 of Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Cadence Bancorporation (the “Company”) on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), I, Paul B. Murphy, Chief Executive Officer, certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) This Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 10, 2020

 

/s/ Paul B. Murphy

 

 

Paul B. Murphy

Chairman and Chief Executive Officer

 

A signed original of this written statement required by Section 906 has been provided to Cadence Bancorporation and will be retained by Cadence Bancorporation and furnished to the Securities and Exchange Commission or its staff upon request.

 

cade-ex322_178.htm

Exhibit 32.2

Chief Financial Officer’s Certification required under Section 906 of Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Cadence Bancorporation (the “Company”) on Form 10-Q for the period ended June 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), I, Valerie C. Toalson, Chief Financial Officer, certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) This Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 10, 2020

 

/s/ Valerie C. Toalson

 

 

Valerie C. Toalson

Chief Financial Officer

(Principal Accounting Officer)

 

A signed original of this written statement required by Section 906 has been provided to Cadence Bancorporation and will be retained by Cadence Bancorporation and furnished to the Securities and Exchange Commission or its staff upon request.

v3.20.2
Document and Entity Information - shares
 6 Months Ended
Jun. 30, 2020
Aug. 07, 2020
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Trading Symbol CADE  
Entity Registrant Name Cadence Bancorporation  
Entity Central Index Key 0001614184  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Entity Current Reporting Status Yes  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity File Number 001-38058  
Entity Tax Identification Number 47-1329858  
Entity Address, Address Line One 2800 Post Oak Boulevard  
Entity Address, Address Line Two Suite 3800  
Entity Address, City or Town Houston  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 77056  
City Area Code 713  
Local Phone Number 871-4000  
Entity Common Stock, Shares Outstanding   125,962,766
Entity Interactive Data Current Yes  
Title of 12(b) Security Class A Common Stock  
Security Exchange Name NYSE  
Entity Incorporation, State or Country Code DE  
Document Quarterly Report true  
Document Transition Report false  
v3.20.2
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
ASSETS    
Cash and due from banks $ 185,919 $ 252,447
Interest-bearing deposits with banks 1,696,051 725,343
Federal funds sold 17,399 10,974
Total cash and cash equivalents 1,899,369 988,764
Investment securities available-for-sale, amortized cost of $2,574,282 and allowance for credit losses of zero at June 30, 2020 2,661,433 2,368,592
FRB and FHLB stock 77,358 76,752
Loans held for sale 38,631 87,649
Loans, net of unearned income 13,699,097 12,983,655
Less: allowance for credit losses (370,901) (119,643)
Net loans 13,328,196 12,864,012
Premises and equipment, net 126,620 127,867
Cash surrender value of life insurance 185,218 183,400
Net deferred tax asset 65,915  
Goodwill 43,061 485,336
Other intangible assets, net 94,257 105,613
Other assets 337,695 512,244
Total assets 18,857,753 17,800,229
Liabilities:    
Noninterest-bearing deposits 5,220,109 3,833,704
Interest-bearing deposits 10,849,173 10,909,090
Total deposits 16,069,282 14,742,794
Federal Home Loan Bank advances 100,000 100,000
Senior debt 49,969 49,938
Subordinated debt 183,142 182,712
Junior subordinated debentures 37,448 37,445
Notes payable 1,663 2,078
Net deferred tax liability   24,982
Other liabilities 370,769 199,434
Total liabilities 16,812,273 15,339,383
Shareholders' equity:    
Common stock $0.01 par value, authorized 300,000,000 shares; 133,148,613 shares issued and 125,930,741 shares outstanding at June 30, 2020 and 132,984,756 shares issued and 127,597,569 shares outstanding at December 31, 2019 1,331 1,330
Additional paid-in capital 1,875,651 1,873,063
Treasury stock, at cost, 7,217,872 shares and 5,387,187 shares, respectively (130,725) (100,752)
Retained earnings 25,763 572,503
Accumulated other comprehensive income 273,460 114,702
Total shareholders' equity 2,045,480 2,460,846
Total liabilities and shareholders' equity $ 18,857,753 $ 17,800,229
v3.20.2
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Available-for-sale securities, Amortized cost $ 2,574,282 $ 2,345,791
Allowance for credit losses $ 0  
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 300,000,000 300,000,000
Common stock, shares issued 133,148,613 132,984,756
Common Stock, Shares, Outstanding 125,930,741 127,597,569
Treasury stock, shares outstanding 7,217,872 5,387,187
v3.20.2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
INTEREST INCOME        
Interest and fees on loans $ 162,854 $ 202,011 $ 337,988 $ 407,762
Interest and dividends on securities:        
Taxable 12,207 10,298 26,222 21,094
Tax-exempt 1,539 1,627 2,966 3,366
Other interest income 575 3,188 2,753 7,087
Total interest income 177,175 217,124 369,929 439,309
INTEREST EXPENSE        
Interest on time deposits 10,451 20,298 23,195 37,484
Interest on other deposits 7,690 30,440 29,674 59,925
Interest on borrowed funds 4,320 5,599 8,878 11,824
Total interest expense 22,461 56,337 61,747 109,233
Net interest income 154,714 160,787 308,182 330,076
Provision for credit losses 158,811 28,927 242,240 40,137
Net interest income after provision for credit losses (4,097) 131,860 65,942 289,939
NONINTEREST INCOME        
Investment advisory revenue 6,505 5,797 12,111 11,439
Trust services revenue 4,092 4,578 8,908 8,913
Credit related fees 4,401 5,341 10,384 10,211
Service charges on deposit accounts 4,852 4,730 11,268 9,860
Bankcard fees 1,716 2,279 3,674 4,492
Payroll processing revenue 1,143 1,161 2,510 2,580
SBA income 1,335 1,415 3,243 2,864
Other service fees 1,528 1,907 3,440 4,011
Securities gains, net 2,286 938 5,280 926
Other income 2,092 3,576 4,201 7,090
Total noninterest income 29,950 31,722 65,019 62,386
NONINTEREST EXPENSE        
Salaries and employee benefits 47,158 53,660 95,965 107,131
Premises and equipment 10,634 11,148 21,443 22,106
Merger related expenses   4,562 1,281 26,562
Goodwill impairment     443,695  
Intangible asset amortization 5,472 5,888 11,065 11,961
Other expense 25,356 25,271 52,824 46,209
Total noninterest expense 88,620 100,529 626,273 213,969
(Loss) income before income taxes (62,767) 63,053 (495,312) 138,356
Income tax (benefit) expense (6,653) 14,707 (39,887) 31,809
Net (loss) income $ (56,114) $ 48,346 $ (455,425) $ 106,547
Weighted average common shares outstanding (Basic) 125,924,652 128,791,933 126,277,549 129,634,049
Weighted average common shares outstanding (Diluted) 125,924,652 129,035,553 126,277,549 129,787,758
(Loss) earnings per common share (Basic) $ (0.45) $ 0.37 $ (3.61) $ 0.82
(Loss) earnings per common share (Diluted) $ (0.45) $ 0.37 $ (3.61) $ 0.82
v3.20.2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]        
Net (loss) income $ (56,114) $ 48,346 $ (455,425) $ 106,547
Unrealized gains on securities available-for-sale:        
Net unrealized gains, net of income taxes of $1,502, $5,617, $16,651, and $12,399 4,832 18,708 52,957 41,301
Less reclassification adjustments for gains realized in net income, net of income taxes of $542, $217, $1,252, and $214 1,744 721 4,028 712
Net change in unrealized gains on securities available-for-sale, net of tax 3,088 17,987 48,929 40,589
Unrealized gains (losses) on derivative instruments designated as cash flow hedges:        
Net unrealized gains, net of income taxes of $959, $21,282, $41,879, and $32,393 3,087 76,153 129,399 113,165
Less reclassification adjustments for gains (losses) realized in net income, net of income taxes of $4,307, $(339), $6,232, and $(688) 13,388 (1,133) 19,570 (2,292)
Net change in unrealized gains (losses) on derivative instruments, net of tax (10,301) 77,286 109,829 115,457
Other comprehensive (loss) income, net of tax (7,213) 95,273 158,758 156,046
Comprehensive (loss) income $ (63,327) $ 143,619 $ (296,667) $ 262,593
v3.20.2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Parenthetical) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Statement Of Income And Comprehensive Income [Abstract]        
Net unrealized gains on securities available-for-sale, taxes $ 1,502 $ 5,617 $ 16,651 $ 12,399
Reclassification adjustments for gains on securities available-for-sale realized in net income, taxes 542 217 1,252 214
Net unrealized gains on derivative instruments designated as cash flow hedges, taxes 959 21,282 41,879 32,393
Reclassification adjustments for gains (losses) on derivative instruments designated as cash flow hedges realized in net income, taxes $ 4,307 $ (339) $ 6,232 $ (688)
v3.20.2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Class A Common Shares Outstanding
Common Stock
Additional Paid-in Capital
Treasury Stock
Retained Earnings
Accumulated OCI
Balance at Dec. 31, 2018 $ 1,438,274   $ 836 $ 1,041,000 $ (22,010) $ 461,360 $ (42,912)
Balance, Shares at Dec. 31, 2018   82,497          
Net (loss) income 58,201         58,201  
Equity-based compensation cost 1,188     1,188      
Cash dividends declared (22,727)         (22,727)  
Dividend equivalents on restricted stock units (125)         (125)  
Purchase of treasury stock, at cost (58,830)       (58,830)    
Purchase of treasury stock, at cost, Shares   (3,002)          
Issuance of common shares for State Bank acquisition 826,113   492 825,621      
Issuance of common shares for State Bank acquisition, Shares   49,232          
Value of stock warrants assumed from State Bank 251     251      
Common stock issuance costs (295)     (295)      
Issuance of common shares for restricted stock unit vesting     1 (1)      
Issuance of common shares for restricted stock unit vesting, Shares   35          
Issuance of treasury stock shares for exercise of stock warrants       (7) 7    
Other comprehensive income 60,773           60,773
Balance at Mar. 31, 2019 2,302,823   1,329 1,867,757 (80,833) 496,709 17,861
Balance, Shares at Mar. 31, 2019   128,762          
Balance at Dec. 31, 2018 1,438,274   836 1,041,000 (22,010) 461,360 (42,912)
Balance, Shares at Dec. 31, 2018   82,497          
Net (loss) income 106,547            
Other comprehensive income 156,046           156,046
Balance at Jun. 30, 2019 2,426,072   1,329 1,870,097 (80,747) 522,259 113,134
Balance, Shares at Jun. 30, 2019   128,799          
Balance at Mar. 31, 2019 2,302,823   1,329 1,867,757 (80,833) 496,709 17,861
Balance, Shares at Mar. 31, 2019   128,762          
Net (loss) income 48,346         48,346  
Equity-based compensation cost 2,711     2,711      
Cash dividends declared (22,539)         (22,539)  
Dividend equivalents on restricted stock units (257)         (257)  
Common stock issuance costs (285)     (285)      
Issuance of common shares for restricted stock unit vesting, Shares   32          
Issuance of treasury stock shares for exercise of stock warrants       (86) 86    
Issuance of treasury stock shares for exercise of stock warrants, shares   5          
Other comprehensive income 95,273           95,273
Balance at Jun. 30, 2019 2,426,072   1,329 1,870,097 (80,747) 522,259 113,134
Balance, Shares at Jun. 30, 2019   128,799          
Balance at Dec. 31, 2019 2,460,846   1,330 1,873,063 (100,752) 572,503 114,702
Balance, Shares at Dec. 31, 2019   127,598          
Net (loss) income (399,311)         (399,311)  
Cumulative effect from adopting new accounting standard (Note 4) (62,779)         (62,779)  
Equity-based compensation cost 1,063     1,063      
Cash dividends declared (22,139)         (22,139)  
Dividend equivalents on restricted stock units (136)         (136)  
Purchase of treasury stock, at cost (29,973)       (29,973)    
Purchase of treasury stock, at cost, Shares   (1,831)          
Issuance of common shares for restricted stock unit vesting 1   1        
Issuance of common shares for restricted stock unit vesting, Shares   131          
Other comprehensive income 165,971           165,971
Balance at Mar. 31, 2020 2,113,543   1,331 1,874,126 (130,725) 88,138 280,673
Balance, Shares at Mar. 31, 2020   125,898          
Balance at Dec. 31, 2019 2,460,846   1,330 1,873,063 (100,752) 572,503 114,702
Balance, Shares at Dec. 31, 2019   127,598          
Net (loss) income (455,425)            
Other comprehensive income 158,758           158,758
Balance at Jun. 30, 2020 2,045,480   1,331 1,875,651 (130,725) 25,763 273,460
Balance, Shares at Jun. 30, 2020   125,931          
Balance at Mar. 31, 2020 2,113,543   1,331 1,874,126 (130,725) 88,138 280,673
Balance, Shares at Mar. 31, 2020   125,898          
Net (loss) income (56,114)         (56,114)  
Equity-based compensation cost 1,525     1,525      
Cash dividends declared (6,296)         (6,296)  
Dividend equivalents on restricted stock units 35         35  
Issuance of common shares for restricted stock unit vesting, Shares   33          
Other comprehensive income (7,213)           (7,213)
Balance at Jun. 30, 2020 $ 2,045,480   $ 1,331 $ 1,875,651 $ (130,725) $ 25,763 $ 273,460
Balance, Shares at Jun. 30, 2020   125,931          
v3.20.2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares
 3 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Statement Of Stockholders Equity [Abstract]        
Cash dividends declared per common share $ 0.05 $ 0.175 $ 0.175 $ 0.175
v3.20.2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Statement Of Cash Flows [Abstract]    
CASH FLOWS FROM OPERATING ACTIVITIES $ 464,554 $ 132,067
CASH FLOWS FROM INVESTING ACTIVITIES    
Cash received in acquisitions, net   414,342
Purchase of securities available-for-sale (505,656) (169,314)
Proceeds from sales of securities available-for-sale 180,605 254,109
Proceeds from maturities, calls and paydowns of securities available-for-sale 227,948 138,358
Purchases of other securities, net (606) (26,397)
Proceeds from sales of loans held for sale 47,018 16,984
Increase in loans, net (758,878) (228,789)
Purchase of premises and equipment (5,320) (4,772)
Proceeds from disposition of foreclosed property 2,087 4,787
Other, net (9,227) (1,317)
Net cash (used in) provided by investing activities (822,029) 397,991
CASH FLOWS FROM FINANCING ACTIVITIES    
Increase (decrease) in deposits, net 1,326,488 (319,177)
Net change in securities sold under agreements to repurchase   (23,357)
Advances on line of credit   5,000
Net change in short term FHLB advances   (150,000)
Issuance of subordinated debentures   83,474
Proceeds from long term FHLB advances   100,000
Repayment of senior debt   (134,922)
Repurchase of common stock (29,973) (58,830)
Cash dividends paid on common stock (28,435) (45,266)
Net cash provided by (used in) financing activities 1,268,080 (543,079)
Net increase (decrease) in cash and cash equivalents 910,605 (13,022)
Cash and cash equivalents at beginning of period 988,764 779,280
Cash and cash equivalents at end of period 1,899,369 766,258
Cash paid during the period for:    
Interest 66,069 101,974
Income taxes paid 984 30,692
Cash paid for amounts included in lease liabilities 5,562 5,683
Non-cash investing activities (at fair value):    
Acquisition of real estate and other assets in settlement of loans 12,665 1,886
Transfers of loans held for sale to loans 10,500 33,464
Transfers of loans to loans held for sale   17,444
Securities purchased, net, with settlement after quarter end 132,353  
Right-of-use assets (remeasured) obtained in exchange for operating lease liabilities $ 379 $ 82,220
v3.20.2
Summary of Accounting Policies
 6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Summary of Accounting Policies

Note 1—Summary of Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements for the Company have been prepared in accordance with instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this report have been included. These interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019. Operating results for the period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

The Company and its subsidiaries follow accounting principles generally accepted in the United States of America, including, where applicable, general practices within the banking industry. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. The assessment of whether or not the Company has a controlling interest (i.e., the primary beneficiary) in a variable-interest entity (“VIE”) is performed on an on-going basis. All equity investments in non-consolidated VIEs are included in “other assets” in the Company’s consolidated balance sheets (see Note 15).

Certain amounts reported in prior years have been reclassified to conform to the 2020 presentation. These reclassifications did not materially impact the Company’s consolidated balance sheets or consolidated statements of operations.

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, Subsequent Events, the Company’s management has evaluated subsequent events for potential recognition or disclosure in the consolidated financial statements through the date of the issuance of the consolidated financial statements. No subsequent events were identified that would have required a change to the consolidated financial statements, however, certain matters that occurred after the balance sheet date are included in Note 19 to the consolidated financial statements.

Nature of Operations

The Company’s primary subsidiary is the Bank.

The Bank operates under a national bank charter and is subject to regulation by the Office of the Comptroller of the Currency (“OCC”). The Bank provides full banking services in six southern states: Alabama, Florida, Georgia, Mississippi, Tennessee, and Texas.

The Bank’s operating subsidiaries include:

 

•

Linscomb & Williams, Inc. — financial advisory firm;

 

•

Cadence Investment Services, Inc. — provides investment and insurance products; and

 

•

Altera Payroll and Insurance, Inc. — provides payroll processing services and the sale of certain insurance products.

The Company and the Bank also have certain other non-operating and immaterial subsidiaries.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of goodwill, intangible assets, and deferred income taxes.

Accounting Policies

Related Party Transactions

In the normal course of business, loans are made to directors and executive officers and to companies in which they have a significant ownership interest. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties, are consistent with sound banking practices, and are within applicable regulatory and lending limitations. The aggregate balances of related party loans and deposits are insignificant as of June 30, 2020 and December 31, 2019.

Loans and Allowances for Credit Losses (“ACL”)

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. During 2018 and 2019, the FASB issued additional guidance providing clarifications and corrections, including: ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments–Credit Losses; ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments–Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; ASU 2019-05, Financial Instruments–Credit Losses (Topic 326): Targeted Transition Relief; ASU 2019-10, Financial Instruments–Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates; ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments–Credit Losses (collectively “ASC 326”). ASC 326, better known as Current Expected Credit Losses (“CECL”), among other things:

 

•

Replaces the current incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

 

•

Eliminates existing guidance for acquired credit impaired (“ACI”) loans and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, referred to as purchase credit deteriorated (“PCD”) assets, which will be offset by an increase in the amortized cost of the related loans. For ACI loans accounted for under ASC 310-30 prior to adoption, the guidance in this amendment for PCD assets will be prospectively applied.

 

•

Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in-scope financial assets (including collateral dependent assets).

 

•

Amends existing impairment guidance for available-for-sale securities to incorporate an allowance, which will allow for reversals of credit impairments if the credit of an issuer improves.

 

•

Requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio.

The Company adopted ASC 326 and additional related guidance effective January 1, 2020, using the cumulative effect method. As a result of this adoption, the Company recognized an adjustment to retained earnings of $62.8 million, recorded a deferred tax asset of $19.5 million, and reclassed ACL of $6.1 million with respect to PCD loans, formerly ACI loans, as of January 1, 2020. Because the Company adopted ASC 326 with a cumulative effect adjustment as of January 1, 2020, the comparative results as of December 31, 2019, and for the three and six months ended June 30, 2019, have not been restated and continue to be reported under the incurred loss accounting model.

The Company has elected the transition provisions provided by the banking agencies and will phase in the regulatory capital effects of the “Day One” and subsequent provisions for loan losses resulting from adoption of CECL. See Note 12 for additional disclosure.

Other changes to the Company’s significant accounting policies pertaining to Loans and the ACL as incorporated under ASC 326 are as follows:

 

•

In accordance with ASC 326, the Company uses amortized cost as a basis for determining the ACL; whereas, prior to adopting ASC 326, under the incurred loss accounting model the Company used recorded investment. The components of amortized cost include unpaid principal balance (“UPB”), unamortized discounts and premiums, and unamortized deferred fees and costs. As permitted by ASC 326, the Company has elected to not include accrued interest receivable in the determination of amortized cost and measurement of expected credit losses and, instead, has an accounting policy to write off accrued interest deemed uncollectible in a timely manner.

 

•

ASC 326 provides special initial recognition and measurement for the Day One accounting for PCD assets.

 

o

ASC 326 requires entities that purchase certain financial assets (or portfolios of financial assets) with the intention of holding them for investment to determine whether the assets have experienced more-than-insignificant deterioration in credit quality since origination.

 

o

More-than-insignificant deterioration will generally be determined by the asset’s delinquency status, risk rating changes, credit rating, accruing status or other indicators of credit deterioration since origination.

 

o

An entity initially measures the amortized cost of a PCD asset by adding the acquisition date estimate of expected credit losses to the asset’s purchase price. Because the initial estimate for expected credit losses is added to the purchase price to establish the Day One amortized cost, PCD accounting is commonly referred to as a “gross-up” approach. There is no credit loss expense recognized upon acquisition of a PCD asset; rather the “gross-up” is offset by establishment of the initial allowance.

 

o

After initial recognition, the accounting for a PCD asset will generally follow the credit loss model.

 

o

Interest income for a PCD asset is recognized using the effective interest rate (“EIR”) calculated at initial measurement. This EIR is determined by comparing the amortized cost basis of the instrument to its contractual cash flows, consistent with ASC 310-20. Accordingly, since the PCD gross-up is included in the amortized cost, the purchase discount related to estimated credit losses on acquisition is not accreted into interest income. Only the noncredit-related discount or premium is accreted or amortized, using the EIR that was calculated at the time the asset was acquired.

 

•

Commercial loans are generally placed on nonaccrual status when principal or interest is past due 90 days or more unless the loan is well secured and in the process of collection. Consumer loans, including residential first and second lien loans secured by real estate, are generally placed on nonaccrual status when they are 120 or more days past due. Prior to the adoption of ASC 326, the majority of our current PCD loans were treated as accruing loans as the Company was able to reasonably predict future cash flows at the unit of account or pool level. After adoption, the accruing status of each individual loan will be subject to the nonaccrual polices described above.

 

•

The accrual of interest, as well as the amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium, is generally discontinued at the time the loan is placed on nonaccrual status. All accrued but uncollected interest for loans that are placed on nonaccrual status is reversed through interest income. Cash receipts received on nonaccrual loans are generally applied against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income (i.e., cost recovery method). However, interest may be accounted for under the cash-basis method as long as the remaining amortized costs in the loan is deemed fully collectible.

The ACL is maintained through charges to income in the form of a provision for credit losses at a level management believes is adequate to absorb an estimate of expected credit losses over the contractual life of the loan portfolio as of the reporting date. Events that are not within the Company’s control, such as changes in economic factors, could change subsequent to the reporting date and could cause the ACL to be overstated or understated. The amount of the ACL is affected by loan charge-offs, which decrease the ACL; recoveries on loans previously charged off, which increase the ACL; and the provision for credit losses charged to income, which increases the ACL.

The following is a description of the Company’s process for estimating the ACL for all loans in its portfolio, including PCD loans:

 

•

The quantitative component of the Company’s ACL model includes three segments: commercial (“C&I”), commercial real estate (“CRE”), and consumer.

 

o

The C&I loan segment includes loans to clients in specialized industries, including restaurant, healthcare, and technology. Additional commercial lending activities include energy, general corporate loans, business banking and community banking loans. The C&I segment uses loan level through-the-cycle probability-of-default (“PD”) and loss-given-default (“LGD”) ratings generated by Cadence’s scorecards. These PD ratings are conditioned by industry to reflect the effect of certain forecasted macroeconomic variables, such as market value, interest rate spreads, and unemployment rate.

 

o

The CRE loan segment includes loans which are secured by a variety of property types, including multi-family dwellings, office buildings, industrial properties, and retail facilities. The Company offers construction financing, acquisition or refinancing of properties primarily located in our markets in Texas and the southeast United States. The CRE loan segment uses a loss-rate model, where lifetime loss rates are correlated closely with characteristics such as origination LTV, vintage/origination quality, and loan age, as well as with macroeconomic factors, including GDP growth rate, unemployment rate, and CRE market price change.

 

o

The consumer loan segment primarily consists of one-to-four family residential real estate loans with terms ranging from 10 to 30 years; however, the portfolio is heavily weighted to the 30-year term. The Company offers both fixed and adjustable interest rates and does not originate subprime loans. These loans are typically closed-end first lien loans for purposes of purchasing property, or for refinancing existing loans with or without cash out. Our loans are primarily owner occupied, full documentation loans. This segment also offers consumer loans to our customers for personal, family and household purposes, auto, boat and personal installment loans, however, these loans are a small percentage of the portfolio. The consumer loan segment uses a loss-rate model. Life-time loss rates capture the effect of credit score, loan age, size, and other loan characteristics and include Cadence’s own assumptions for LGD and the expected life of the loan. The loss rates are also affected by macroeconomic variables such as the unemployment rate, retails sales percent change year-over-year, household employment percent change year-over-year, Federal Housing Finance Agency (“FHFA”) home price index, housing affordability index at origination, and median house price.

 

o

When foreclosure of collateral securing a loan is probable, ASC 326 requires that the expected credit loss on a loan be measured based on the fair value of the collateral. When management’s measured value of the impaired loan is less than the amortized cost in the loan, the amount of the impairment is recorded as a specific reserve. These specific reserves are determined on an individual loan basis based on management’s current evaluation of the loss exposure for each credit, given the payment status, the financial condition of the borrower and any guarantors and the value of any underlying collateral. Loans that are individually evaluated are excluded from the collective evaluations described above. Changes in specific reserves from period to period are the result of changes in the circumstances of individual loans such as charge-offs, payments received, changes in collateral values or other factors.

 

o

For any collateral dependent loan where foreclosure is not probable, but repayment is expected to be provided primarily from the sale or operation of the collateral and the borrower is experiencing financial difficulty, a practical expedient for measuring the credit loss is allowed using the fair value of the collateral. The Company expects to elect this for qualifying credits particularly when there are unique risk characteristics which prohibit them from being collectively evaluated. When repayment will be from the operation of the collateral, generally fair value is estimated on the present value of expected cash flows from the operation of the collateral (an income approach). When repayment is expected from the sale of the collateral, the present value of the costs to sell will be deducted from the fair value of the collateral measured as of the measurement date.

 

•

As described above, loans included in each segment are collectively or individually evaluated to determine an expected credit loss which is allocated to the individual loans. Due to the growth of the credit portfolio into new geographic areas and into new commercial markets and the lack of seasoning of the portfolio, the Company recognizes there is limited historical loss information to adequately estimate loss rates based primarily on the Company’s historical loss data. Therefore, external loss data was acquired from the research arm of a nationally recognized risk rating agency to act as a proxy for loss rates within the ACL models until sufficient loss history can be accumulated from the Company’s loss experience in these segments. These loss rates were developed specifically for the Company’s customer risk profile and portfolio mix.

 

•

ASC 326 acknowledges that, because historical experience may not fully reflect an institution's expectations about the future, the institution should adjust historical loss information, as necessary, to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information. The quantitative models use baseline macroeconomic scenario forecast data provided by a nationally recognized rating agency for a reasonable and supportable period in estimating the current expected credit losses. The Company has elected an input reversion approach whereby the selected economic forecast for the identified macroeconomic variables revert to their historical trends. As a rule, the forecasts revert to their long-term equilibrium within two to five years or one “business cycle” depending on the segment. The Company monitors actual loss experience for each loan segment for adjustments required to the loss rates utilized.

 

•

Additionally, to adjust historical credit loss information for current conditions and reasonable and supportable forecasts, all significant factors relevant to determining the expected collectability of financial assets as of each reporting date should be considered. ASC 326 provides examples of factors an institution may consider. The banking regulatory agencies believe the qualitative or environmental factors identified in the December 2006 Interagency Policy Statement on the Allowance for Loan and Lease Losses should continue to be relevant under CECL and are covered by the examples of factors that may be considered under ASC 326. These factors require judgments that cannot be subjected to exact mathematical calculation. There are no formulas for translating them into a basis-point adjustment to be applied to historical losses. The adjustment must reflect management’s overall estimate of the extent to which expected losses on a segment of loans will differ from historical loss experience. It would include management’s opinion on the effects related to current conditions and reasonable and supportable forecasts, that are not already reflected in the quantitative loss estimate. These adjustments are highly subjective estimates that will be determined each quarter. To facilitate this process, management has developed certain analyses of selected internal and external data to assist management in determining the risk of imprecision. These primary adjustment factors include, but are not limited to the following:

 

o

Lending policies, procedures, practices or philosophy, including underwriting standards and collection, charge-off and recovery practices

 

o

Changes in national and service market economic and business conditions that could affect the level of default rates or the level of losses once a default has occurred within the Bank’s existing loan portfolio

 

o

Changes in the nature or size of the portfolio

 

o

Changes in portfolio collateral values

 

o

Changes in the experience, ability, and depth of lending management, and other relevant staff

 

o

Volume and/or severity of past due and classified credits or trends in the volume of losses, non-accrual credits, impaired credits, and other credit modifications

 

o

Quality of the institution’s credit review system and processes and the degree of oversight by bank management and the board of directors

 

o

Concentrations of credit such as industry and lines of business

 

o

Competition and legal and regulatory requirements or other external factors

 

•

The reserve for unfunded commitments is determined by assessing three distinct components: unfunded commitment volatility in the portfolio (excluding commitments related to letters of credit and commitment letters), adversely rated letters of credit, and adversely rated lines of credit. Unfunded commitment volatility is calculated on a trailing nine quarter basis; the resulting expected funding amount is then reserved for based on the current combined reserve rate of the funded portfolio. Adversely rated letters and lines of credit are assessed individually based on funding and loss expectations as of the period end. The reserve for unfunded commitments is recorded in other liabilities and the provision for losses on unfunded commitments is included in the provision for credit losses. Prior to adoption, the provision for losses on unfunded commitments was recorded in other noninterest expense. As of June 30, 2020 and December 31, 2019, the reserve for unfunded commitments totaled $3.8 million and $2.0 million, respectively.

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss. ASU 2017-04 became effective for the Company on January 1, 2020. See Note 5, Goodwill and Other Intangible Assets.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 amends the disclosure requirements of ASC 820 to remove disclosure of transfers between Level 1 and Level 2 of the fair value hierarchy and the valuation process for Level 3 fair value measurements, among other amendments, and to include disclosure of the range and weighted average used in Level 3 fair value measurements, among other amendments. Amendments should be applied retrospectively to all periods presented, except for certain amendments, which should be applied prospectively. ASU 2018-13 became effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a significant impact on the Company’s fair value disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). This standard aligns the requirements for capitalizing implementation costs in a hosting arrangement service contract with the existing guidance for capitalizing implementation costs incurred for an internal-use software license. This standard also requires capitalizing or expensing implementation costs based on the nature of the costs and the project stage during which they are incurred and establishes additional disclosure requirements. This standard became effective for Cadence on January 1, 2020. The adoption of this guidance had no material impact on the consolidated financial statements.

In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU amends ASC 810 guidance on how all reporting entities evaluate indirect interests held through related parties in common control arrangements when determining whether fees paid to decision makers and service providers are variable interests. ASU 2018-17 became effective for Cadence on January 1, 2020. The adoption of this guidance had no material impact on the consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments–Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging activities, and recognition and measurement. The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates, and prepayments, among other things. With respect to hedge accounting, the amendments address partial-term fair value hedges, fair value hedge basis adjustments, application by not-for-profit entities and private companies, and certain transition requirements, among other things. On recognizing and measuring financial instruments, they address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities must be remeasured at historical exchange rates.

The credit losses and hedging amendments have the same effective dates as the respective standards, unless an entity has already adopted the standards. The adoption of the credit loss standard, or CECL, is discussed above. Since the Company early adopted the guidance in ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, in 2018, the amended hedge accounting guidance in ASU 2019-04 became effective as of the beginning of the first annual reporting period beginning after April 25, 2019. The Company adopted this guidance on January 1, 2020, with no material impact.

In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update). The ASU adds and amends SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 119 related to the new credit losses standard and comments by the SEC staff related to the revised effective date of the new leases standard. The guidance became effective upon issuance and did not have a material impact.

In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. The ASU makes narrow-scope improvements to various financial instruments topics, including the new credit losses standard. Transition varies, with some of the amendments effective upon issuance for certain entities. The amendments related to ASU 2019-04 and ASU 2016-13 became effective for Cadence on January 1, 2020. Other amendments became effective upon issuance (March 9, 2020). The adoption of this guidance had no material impact on the consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients for hedging relationships affected by reference rate reform, if certain criteria are met. Entities can make a one-time election to sell and/or transfer to available-for-sale or trading any held-to-maturity debt securities that refer to an interest rate affected by reference rate reform and were classified as HTM before January 1, 2020. The guidance became effective upon issuance (March 12, 2020). As Cadence has no held-to-maturity debt securities, the adoption of the guidance had no impact.

Pending Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU eliminates certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted in interim or annual periods for which entities have not yet issued financial statements. Entities that elect to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, entities that elect early adoption must adopt all the amendments in the same period. Entities will apply the guidance prospectively, except for certain amendments. The Company is evaluating the impact this guidance may have on its consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force). The guidance clarifies that entities that apply the measurement alternative in ASC 321 should consider observable transactions that result in entities initially applying or discontinuing the use of the equity method of accounting under ASC 323. The guidance also says that certain forward contracts and purchased options on equity securities that are not deemed to be in-substance common stock under ASC 323 or accounted for as derivatives under ASC 815 are in the scope of ASC 321. The guidance is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The guidance should be applied prospectively. The Company is evaluating the impact this guidance may have on its consolidated financial statements.
v3.20.2
Business Combinations
 6 Months Ended
Jun. 30, 2020
Business Combinations [Abstract]  
Business Combinations

State Bank

On January 1, 2019, the Company acquired all the outstanding stock of State Bank Financial Corporation (“State Bank”) of Atlanta, Georgia in a stock transaction. The Company completed the accounting for the acquisition of State Bank and the measurement period was closed on December 31, 2019. The acquisition added $3.3 billion in loans and $4.1 billion in deposits. State Bank operated 32 branch locations across Georgia.

Under the terms of the transaction, State Bank shareholders received 1.271 shares of the Company’s Class A common stock in exchange for each share of State Bank common stock resulting in the Company issuing 49.2 million shares of its Class A common stock. In total, the purchase price for State Bank was $826.4 million, including $826.1 million in the Company’s common stock and $0.3 million representing the fair value of unexercised warrants.

The following table provides the purchase price allocation and the consideration paid for State Bank’s net assets.

(In thousands, except shares and per share data)

 

As Recorded by Cadence

 

Assets

 

 

 

 

Cash and cash equivalents

 

$

414,342

 

Investment securities available-for-sale

 

 

667,865

 

Loans held for sale

 

 

148,469

 

Loans

 

 

3,317,897

 

Premises and equipment

 

 

65,646

 

Cash surrender value of life insurance

 

 

69,252

 

Intangible assets

 

 

117,038

 

Other assets

 

 

47,146

 

Total assets acquired

 

$

4,847,655

 

Liabilities

 

 

 

 

Deposits

 

$

4,096,665

 

Short term borrowings

 

 

23,899

 

Other liabilities

 

 

76,368

 

Total liabilities assumed

 

 

4,196,932

 

Net identifiable assets acquired over liabilities assumed

 

 

650,723

 

Goodwill

 

 

175,657

 

Net assets acquired over liabilities assumed

 

$

826,380

 

Consideration:

 

 

 

 

Cadence Bancorporation common shares issued

 

 

49,232,008

 

Fair value per share of the Company's common stock

 

$

16.78

 

Company common stock issued

 

 

826,113

 

Fair value of unexercised warrants

 

 

267

 

Fair value of total consideration transferred

 

$

826,380

 

 

 

 

 

 

The Company estimated the fair value of loans by utilizing the discounted cash flow method applied to pools of loans aggregated by product categories and interest rate type. In addition, certain cash flows were estimated on an individual loan basis based on current performance and collateral value, if the loan was collateral dependent. Contractual principal and interest cash flows were projected based on the payment type (i.e., amortizing or interest only), interest rate type (i.e., fixed or adjustable), interest rate index, weighted average maturity, weighted average interest rate, weighted average spread, and weighted average interest rate floor of each loan pool. The expected cash flows for each category were determined by estimating future credit losses using probabilities of default (PD), loss given default (LGD) and the rate of prepayments. Projected monthly cash flows were then discounted to present value based on discount rates developed from various sources including an analysis of State Bank’s newly originated loans, a buildup approach and market data. There was no carryover of State Bank’s ACL associated with the loans acquired.

Intangible assets consisted of the core deposit intangible and the customer relationship intangible of a subsidiary. The core deposit intangible asset recognized of $111.9 million is being amortized over its estimated useful life of ten years utilizing an accelerated method. The benefit of the deposit base is equal to the difference in cash flows between maintaining the existing deposits and obtaining alternative funds over the life of the deposit base. The difference was tax effected and discounted to present value at a risk-adjusted discount rate. The valuation of the core deposit base includes estimates of the attrition rates for each deposit type based on historical attrition data and market participant information, in addition to estimates of total costs including interest cost, net maintenance cost, cost of reserves, and cost of float. The customer relationship and trademark intangible recognized of $3.7 million and $1.4 million are being amortized over estimated useful lives of ten and twenty years, respectively, using an accelerated method.

Goodwill of $175.7 million was recorded as a result of the transaction and is not amortized for financial statement purposes. All the goodwill was assigned to the Banking segment. The goodwill recorded is not deductible for income tax purposes. See also Note 5, Goodwill and Other Intangible Assets.

Certificates of deposit, including IRAs, were valued by projecting out the expected cash flows based on the contractual terms of the certificates of deposit. The fair values of savings and transaction deposit accounts were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. These cash flows were discounted using the interest rates on fixed maturity deposits offered by Cadence and State Bank as of January 1, 2019 resulting in a $3.4 million discount amortized over a twelve-month period.

Unfunded commitments are contractual obligations by a financial institution for future funding as it relates to closed end or revolving lines of credit. The Company valued these unfunded commitments at $26.8 million and recorded a liability using the “Netback” method. Because the borrower can draw upon their credit anytime until maturity, the lender must increase its capital on hand to meet funding requirements. Therefore, the undrawn portion is considered a liability (or asset if the loan is valued above par) and is netted back against the asset or the drawn portion. Generally, amortization for revolving lines occurs straight-line over the life of the loan and for closed end loans using the effective yield method over the remaining life of the loan when the loan funds.

Wealth & Pension

On July 1, 2019, the Company’s wholly owned subsidiary, Linscomb & Williams, Inc., acquired certain assets and assumed certain liabilities of Wealth and Pension Services Group, Inc. (“W&P”), a fee-based investment advisory firm with its principal office in Atlanta, Georgia. The Company completed the accounting for the acquisition and the measurement period was closed on June 30, 2020. The total purchase consideration paid of $8.0 million included an initial cash payment of $5.2 million and future cash payments totaling approximately $2.1 million to be paid in installments over a five-year period pursuant to the Asset Purchase Agreement. W&P is also eligible for future earn-out payments pursuant to the Asset Purchase Agreement based on achieving certain levels of earnings growth over a three- and five-year period. Intangible assets with an estimated fair value of $4.8 million were recorded and are comprised primarily of customer relationships and noncompete agreements. We also recognized goodwill of $2.9 million in connection with the acquisition.
v3.20.2
Investment Securities
 6 Months Ended
Jun. 30, 2020
Investments Debt And Equity Securities [Abstract]  
Investment Securities

Note 3—Investment Securities

 

A summary of amortized cost and estimated fair value of securities available-for-sale at June 30, 2020 and December 31, 2019 is as follows:

 

(In thousands)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

105,499

 

 

$

617

 

 

$

612

 

 

$

105,504

 

Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential pass-through:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by GNMA

 

 

112,167

 

 

 

3,145

 

 

 

—

 

 

 

115,312

 

Issued by FNMA and FHLMC

 

 

1,596,585

 

 

 

51,321

 

 

 

54

 

 

 

1,647,852

 

Other residential mortgage-backed securities

 

 

230,319

 

 

 

7,216

 

 

 

—

 

 

 

237,535

 

Commercial mortgage-backed securities

 

 

300,597

 

 

 

13,837

 

 

 

298

 

 

 

314,136

 

Total MBS

 

 

2,239,668

 

 

 

75,519

 

 

 

352

 

 

 

2,314,835

 

Obligations of states and municipal subdivisions

 

 

229,115

 

 

 

12,061

 

 

 

82

 

 

 

241,094

 

Total securities available-for-sale

 

$

2,574,282

 

 

$

88,197

 

 

$

1,046

 

 

$

2,661,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

69,464

 

 

$

57

 

 

$

415

 

 

$

69,106

 

Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential pass-through:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by GNMA

 

 

98,122

 

 

 

1,205

 

 

 

245

 

 

 

99,082

 

Issued by FNMA and FHLMC

 

 

1,423,771

 

 

 

13,128

 

 

 

1,402

 

 

 

1,435,497

 

Other residential mortgage-backed securities

 

 

292,019

 

 

 

4,197

 

 

 

384

 

 

 

295,832

 

Commercial mortgage-backed securities

 

 

276,533

 

 

 

2,448

 

 

 

3,023

 

 

 

275,958

 

Total MBS

 

 

2,090,445

 

 

 

20,978

 

 

 

5,054

 

 

 

2,106,369

 

Obligations of states and municipal subdivisions

 

 

185,882

 

 

 

7,235

 

 

 

—

 

 

 

193,117

 

Total securities available-for-sale

 

$

2,345,791

 

 

$

28,270

 

 

$

5,469

 

 

$

2,368,592

 

 

The scheduled contractual maturities of securities available-for-sale at June 30, 2020 were as follows:

 

 

 

Amortized

 

 

Estimated

 

(In thousands)

 

Cost

 

 

Fair Value

 

Due in one year or less

 

$

1,222

 

 

$

1,225

 

Due after one year through five years

 

 

1,096

 

 

 

1,087

 

Due after five years through ten years

 

 

86,559

 

 

 

86,711

 

Due after ten years

 

 

245,737

 

 

 

257,575

 

Mortgage-backed securities

 

 

2,239,668

 

 

 

2,314,835

 

Total

 

$

2,574,282

 

 

$

2,661,433

 

 

Gross gains and gross losses on sales of securities available-for-sale for the three and six months ended June 30, 2020 and 2019 are presented below. There were no other-than-temporary impairment charges included in gross realized losses for the three and six months ended June 30, 2020 and 2019. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale.

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Gross realized gains

 

$

2,286

 

 

$

1,810

 

 

$

5,280

 

 

$

1,813

 

Gross realized losses

 

 

—

 

 

 

872

 

 

 

—

 

 

 

887

 

Realized gains, net

 

$

2,286

 

 

$

938

 

 

$

5,280

 

 

$

926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities with a carrying value of $775.9 million and $629.4 million at June 30, 2020 and December 31, 2019, respectively, were pledged to secure public deposits, FHLB borrowings, repurchase agreements and for other purposes as required or permitted by law.

Information pertaining to securities available-for-sale with gross unrealized losses aggregated by category and length of time the securities have been in a continuous loss position was as follows:

 

 

Unrealized Loss Analysis

 

 

 

Losses < 12 Months

 

 

Losses > 12 Months

 

(In thousands)

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

48,760

 

 

$

401

 

 

$

12,074

 

 

$

211

 

Mortgage-backed securities

 

 

84,554

 

 

 

350

 

 

 

276

 

 

 

2

 

Obligations of states and municipal subdivisions

 

 

9,844

 

 

 

82

 

 

 

—

 

 

 

—

 

Total

 

$

143,158

 

 

$

833

 

 

$

12,350

 

 

$

213

 

 

 

 

Unrealized Loss Analysis

 

 

 

Losses < 12 Months

 

 

Losses > 12 Months

 

(In thousands)

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

33,053

 

 

$

209

 

 

$

13,703

 

 

$

206

 

Mortgage-backed securities

 

 

708,991

 

 

 

4,466

 

 

 

61,506

 

 

 

588

 

Obligations of states and municipal subdivisions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

742,044

 

 

$

4,675

 

 

$

75,209

 

 

$

794

 

 

 

As of June 30, 2020 and December 31, 2019, approximately 6% and 35%, respectively, of the fair value of securities in the investment portfolio reflected an unrealized loss. As of June 30, 2020, there were 9 securities that had been in a loss position for more than twelve months, and 21 securities that had been in a loss position for less than 12 months. As of June 30, 2020, the unrealized losses were not deemed to be caused by credit-related issues. Credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. Any impairment that is not credit-related is recognized in other comprehensive income, net of applicable taxes. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. As of June 30, 2020, allowance for credit losses related to available-for-sale securities is zero as the decline in fair value did not result from credit-related issues. The Company has adequate liquidity and, therefore, does not plan to sell and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Loans Held for Sale, Loans and Allowance for Credit Losses

Note 4—Loans Held for Sale, Loans and Allowance for Credit Losses

Loans Held for Sale

The following table presents a summary of the loans held for sale by portfolio segment at the lower of amortized cost or fair value as of June 30, 2020 and December 31, 2019.

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Commercial and industrial

 

$

30,865

 

 

$

34,767

 

Commercial real estate

 

 

1,098

 

 

 

49,894

 

Consumer

 

 

6,668

 

 

 

2,988

 

Total loans held for sale(1)

 

$

38,631

 

 

$

87,649

 

 

 

 

 

 

 

 

 

 

(1) $0.1 million and $0.4 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020 and December 31, 2019, respectively.

 

Loans

The following table presents total loans outstanding by portfolio segment and class of financing receivable as of June 30, 2020 and December 31, 2019. Outstanding balances include originated loans, Acquired Noncredit Impaired (“ANCI”) loans, and Purchase Credit Deteriorated (“PCD”) loans, formerly referred to as acquired credit impaired (“ACI”) loans. See Note 1 for additional information regarding the adoption of the new CECL accounting standard.

(In thousands)

 

June 30, 2020

 

 

December 31, 2019(2)

 

Commercial and industrial

 

 

 

 

 

 

 

 

General C&I

 

$

4,948,200

 

 

$

4,517,016

 

Energy

 

 

1,449,274

 

 

 

1,419,957

 

Restaurant

 

 

1,146,785

 

 

 

1,027,421

 

Healthcare

 

 

559,584

 

 

 

474,264

 

Total commercial and industrial

 

 

8,103,843

 

 

 

7,438,658

 

Commercial real estate

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

1,648,520

 

 

 

1,691,694

 

Multifamily

 

 

769,879

 

 

 

659,902

 

Office

 

 

558,525

 

 

 

535,676

 

Total commercial real estate

 

 

2,976,924

 

 

 

2,887,272

 

Consumer

 

 

 

 

 

 

 

 

Residential

 

 

2,537,695

 

 

 

2,568,295

 

Other

 

 

80,635

 

 

 

89,430

 

Total consumer

 

 

2,618,330

 

 

 

2,657,725

 

Total(1)

 

$

13,699,097

 

 

$

12,983,655

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million and $44.5 million of net accrued interest receivable is excluded from the total loan balances above as of June 30, 2020 and December 31, 2019, respectively.

 

(2) December 31, 2019 balances have been reclassified to conform to 2020 presentation for comparability purposes.

 

Paycheck Protection Program. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) created the Paycheck Protection Program (“PPP”) to provide certain small businesses with liquidity to support their operations during the COVID-19 pandemic. Entities must meet certain eligibility requirements to receive PPP loans, and they must maintain specified levels of payroll and employment to have the loans forgiven. The conditions are subject to audit by the U.S. government, but entities that borrow less than $2 million (together with any affiliates) will be deemed to have made the required certification concerning the necessity of the loan in good faith.

Under the PPP, eligible small businesses can apply to an SBA-approved lender for a loan that does not require collateral or personal guarantees. The loans have a 1% fixed interest rate. Loans issued prior to June 5 are due in two years unless otherwise modified and loans issued after June 5 are due in five years. However, they are eligible for forgiveness (in full or in part, including any accrued interest) under certain conditions. For loans (or parts of loans) that are forgiven, the lender will collect the forgiven amount from the U.S. government.

In response to the COVID-19 pandemic, the Company has taken several actions to offer various forms of support its customers, employees, and communities that have experienced impacts from this development. The Company is actively working with customers impacted by the economic downturn, including securing loans for our customers under the PPP.

The following table presents the Company’s PPP loans by portfolio segment and class of financing receivable as of June 30, 2020.

(In thousands)

 

Amortized Cost

 

 

% of PPP Portfolio

 

Commercial and industrial

 

 

 

 

 

 

 

 

General C&I

 

$

717,155

 

 

 

69.5

%

Energy sector

 

 

79,034

 

 

 

7.6

 

Restaurant industry

 

 

141,218

 

 

 

13.7

 

Healthcare

 

 

94,591

 

 

 

9.2

 

Total PPP loans

 

$

1,031,998

 

 

 

100.0

%

As a % of total loans

 

 

7.5

%

 

 

 

 

Allowance for Credit Losses (“ACL”)

Credit Risk Management. The Company’s credit risk management is overseen by the Company’s Board of Directors, including its Risk Management Committee, and the Company’s Senior Credit Risk Management Committee (“SCRMC”). The SCRMC is responsible for reviewing the Company’s credit portfolio management information, including asset quality trends, concentration reports, policy, financial and documentation exceptions, delinquencies, charge-offs, and nonperforming assets.

The Company’s credit policy requires that key risks be identified and measured, documented and mitigated, to the extent possible, and requires various levels of internal approvals based on the characteristics of the loans, including the size of the exposure. The Company also has customized underwriting guidelines for loans in the Company’s specialized industries that the Company believes reflects the unique characteristics of these industries.

Under the Company’s dual credit risk rating (“DCRR”) system, it is the Company’s policy to assign risk ratings to all commercial loan (C&I and CRE) exposures using the Company’s internal credit risk rating system. The assignment of loan risk ratings is the primary responsibility of the lending officer concurrent with approval from the credit officer reviewing and recommending approval of the credit. The assignment of commercial risk ratings is completed on a transactional basis using scorecards. The Company uses a total of nine different scorecards that accommodate various areas of lending. Each scorecard contains two main components: probability of default (“PD”) and loss given default (“LGD”). Each component is assessed using a multitude of both qualitative and quantitative scoring elements, which will generate a percentage for each component. The key elements assessed in the scorecard for PD are financial performance and trends as well as qualitative measures. The key elements for LGD are collateral quality and the structure of the loan. The PD percentage and LGD percentage are converted into PD and LGD risk ratings for each loan. The PD rating is used as the Company’s risk grade of record. Loans with PD ratings of 1 through 8 are loans that the Company rates internally as “Pass.” Loans with PD ratings of 9 through 13 are rated internally as “Criticized” and represent loans for which one or more potential or defined weaknesses exists. Loans with PD ratings of 10 through 13 are also considered “Classified” and represent loans for which one or more defined weaknesses exist. These classifications are consistent with regulatory guidelines. The following is a qualitative description of the Company’s loan classifications:

 

•

Pass—For loans within this risk rating, the condition of the borrower and the performance of the loan is satisfactory or better.

 

•

Pass/Watch—Borderline risk credits representing the weakest pass risk rating. Pass/Watch credits consist of credits where financial performance is weak, but stable. Weak performance is transitional. The borrower has a viable, defined plan for improvement. Generally, it is not expected for loans to be originated within this category.

 

•

Special Mention—A special mention loan has identified potential weaknesses that are of sufficient materiality to require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date. Special mention assets contain greater than acceptable risk to warrant increases in credit exposure and are thus considered non-pass rated credits.

 

•

Substandard—A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Loans classified as substandard possess well-defined weaknesses that are expected to jeopardize their liquidation. Loans in this category may be either on accrual status or nonaccrual status.

 

•

Doubtful—Loans classified as doubtful possess all of the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable or improbable based on currently existing facts, conditions, and values. Loans rated as doubtful are not rated as loss because certain events may occur that could salvage the debt. Loans in this category are required to be on nonaccrual.

 

•

Loss—Loans classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future. Loans may reside in this classification for administrative purposes for a period not to exceed the earlier of thirty (30) days or calendar quarter-end.

Consumer purpose loan risk classification is assigned in accordance with the Uniform Retail Credit Classification, based on delinquency and accrual status.

An important aspect of the Company’s assessment of risk is the ongoing completion of periodic risk rating reviews. As part of these reviews, the Company seeks to review the risk ratings of each facility within a customer relationship and may recommend an upgrade or downgrade to the risk ratings. The Company’s policy is to review two times per year all customer relationships with an aggregate exposure of $10 million or greater as well as all shared national credits (“SNC”). Additionally, all customer relationships with an aggregate exposure of $2.5 million to $10.0 million are reviewed annually. Further, customer relationships with an aggregate exposure of $2.5 million and greater with pass/watch or criticized risk ratings are reviewed quarterly. Certain relationships are exempt from review, such as relationships where the Company’s exposure is cash-secured. An updated risk rating scorecard is required during each risk review as well as with any credit event that requires credit approval.

The Company’s policies establish concentration limits for various industries within the commercial portfolio as well as commercial real estate, leveraged lending and other regulatory categories. Concentration limits are monitored and reassessed on a periodic basis and approved by the Board of Directors on an annual basis.

The approval of the Company’s Senior Loan Committee is generally required for relationships in an amount greater than $5.0 million. For loans in an amount greater than $5.0 million that are risk rated 10 or worse, approval of the Credit Transition Committee is generally required. There is a credit executive assigned to each line of business who holds the primary responsibility for the approval process outside of the loan approval committees.

ACL Rollforward and Analysis. The following tables provide a summary of the activity in the ACL and the reserve for unfunded commitments for the three and six months ended June 30, 2020 and 2019.

 

 

For the Three Months Ended June 30, 2020

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Total Allowance for Credit Losses

 

 

Reserve for Unfunded Commitments(1)

 

 

Total

 

As of March 31, 2020

 

$

154,585

 

 

$

53,418

 

 

$

37,243

 

 

$

245,246

 

 

$

3,222

 

 

$

248,468

 

Provision for credit losses

 

 

95,325

 

 

 

59,359

 

 

 

3,522

 

 

 

158,206

 

 

 

605

 

 

 

158,811

 

Charge-offs

 

 

(32,816

)

 

 

(327

)

 

 

(309

)

 

 

(33,452

)

 

 

—

 

 

 

(33,452

)

Recoveries

 

 

702

 

 

 

30

 

 

 

169

 

 

 

901

 

 

 

—

 

 

 

901

 

As of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

$

3,827

 

 

$

374,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The reserve for unfunded commitments is included in other liabilities on the consolidated balance sheets at June 30, 2020 and March 31, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2020

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Total Allowance for Credit Losses

 

 

Reserve for Unfunded Commitments(1)

 

 

Total

 

As of December 31, 2019

 

$

89,796

 

 

$

15,319

 

 

$

14,528

 

 

$

119,643

 

 

$

1,699

 

 

$

121,342

 

Cumulative effect of adoption of CECL

 

 

32,951

 

 

 

20,599

 

 

 

22,300

 

 

 

75,850

 

 

 

332

 

 

 

76,182

 

As of January 1, 2020

 

 

122,747

 

 

 

35,918

 

 

 

36,828

 

 

 

195,493

 

 

 

2,031

 

 

 

197,524

 

Provision for credit losses

 

 

159,008

 

 

 

77,158

 

 

 

4,278

 

 

 

240,444

 

 

 

1,796

 

 

 

242,240

 

Charge-offs

 

 

(64,803

)

 

 

(806

)

 

 

(941

)

 

 

(66,550

)

 

 

—

 

 

 

(66,550

)

Recoveries

 

 

844

 

 

 

210

 

 

 

460

 

 

 

1,514

 

 

 

—

 

 

 

1,514

 

As of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

$

3,827

 

 

$

374,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated

 

$

189,085

 

 

$

111,945

 

 

$

40,625

 

 

$

341,655

 

 

 

 

 

 

 

 

 

Loans individually evaluated

 

 

28,711

 

 

 

535

 

 

 

—

 

 

 

29,246

 

 

 

 

 

 

 

 

 

ACL as of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (amortized cost)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated

 

$

7,918,246

 

 

$

2,954,091

 

 

$

2,615,866

 

 

$

13,488,203

 

 

 

 

 

 

 

 

 

Loans individually evaluated

 

 

185,597

 

 

 

22,833

 

 

 

2,464

 

 

 

210,894

 

 

 

 

 

 

 

 

 

Loans as of June 30, 2020(2)

 

$

8,103,843

 

 

$

2,976,924

 

 

$

2,618,330

 

 

$

13,699,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The reserve for unfunded commitments is included in other liabilities on the consolidated balance sheets at June 30, 2020 and December 31, 2019.

 

(2) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

 

 

 

For the Three Months Ended June 30, 2019

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Small Business

 

 

Total Allowance for Credit Losses

 

As of March 31, 2019

 

$

75,526

 

 

$

10,469

 

 

$

14,690

 

 

$

4,353

 

 

$

105,038

 

Provision for credit losses

 

 

24,652

 

 

 

3,201

 

 

 

240

 

 

 

834

 

 

 

28,927

 

Charge-offs

 

 

(18,001

)

 

 

(253

)

 

 

(534

)

 

 

(193

)

 

 

(18,981

)

Recoveries

 

 

269

 

 

 

—

 

 

 

68

 

 

 

24

 

 

 

361

 

As of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2019

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Small Business

 

 

Total Allowance for Credit Losses

 

As of December 31, 2018

 

$

66,316

 

 

$

10,452

 

 

$

13,703

 

 

$

3,907

 

 

$

94,378

 

Provision for credit losses

 

 

33,951

 

 

 

3,303

 

 

 

1,446

 

 

 

1,437

 

 

 

40,137

 

Charge-offs

 

 

(18,462

)

 

 

(338

)

 

 

(768

)

 

 

(351

)

 

 

(19,919

)

Recoveries

 

 

641

 

 

 

—

 

 

 

83

 

 

 

25

 

 

 

749

 

As of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated for impairment

 

$

63,783

 

 

$

13,407

 

 

$

14,398

 

 

$

4,935

 

 

$

96,523

 

Loans individually evaluated for impairment

 

 

18,663

 

 

 

10

 

 

 

66

 

 

 

83

 

 

 

18,822

 

ACL as of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated for impairment

 

$

7,293,236

 

 

$

2,852,595

 

 

$

2,679,802

 

 

$

767,303

 

 

$

13,592,936

 

Loans individually evaluated for impairment

 

 

113,063

 

 

 

7,339

 

 

 

1,763

 

 

 

411

 

 

 

122,576

 

Loans as of June 30, 2019(1)

 

$

7,406,299

 

 

$

2,859,934

 

 

$

2,681,565

 

 

$

767,714

 

 

$

13,715,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Allowance for credit losses and loan balances as calculated and reported under the incurred loss accounting model and reported at June 30, 2019.

 

As described in Note 1, the Company adopted the new CECL accounting standard on January 1, 2020 which increased the ACL by $75.9 million. The ACL was increased an additional $158.2 million and $242.2 million in provision for the second quarter and year-to-date 2020, respectively which reflects the forecasted effects of COVID-19 on the various loan segments due to higher unemployment, lower GDP, market value, and real estate prices. The second quarter 2020 provision was affected by credit migration as well as a negative shift in the outlook for commercial real estate and a slower expected recovery. The Company’s estimate of the ACL used the baseline scenario provided by a nationally recognized service, as adjusted for consideration of certain qualitative and environmental factors. These adjustments consider, among other factors, risk attributes of each portfolio, relevant third-party research, energy prices, and loss data collected from previous recessions. Loan charge-offs recognized during 2020 are higher than 2019 as a result of credit migration that has occurred primarily in the Restaurant, Energy and General C&I classes with the most significant impact being COVID related.

The Company’s individually evaluated loans totaling $210.9 million at June 30, 2020 are considered collateral dependent loans and generally are considered impaired (Note 1). The majority of the these are within the C&I segment and include loans in the Energy, Restaurant, and General C&I classes. The majority of these loans are supported by an enterprise valuation or by collateral such as real estate, receivables or inventory, with the exception of loans within the Energy Exploration and Production (“E&P”) sector which are secured by oil and gas reserves. Loans within the CRE and consumer segments are secured by commercial and residential real estate.

Credit Quality

The following table provides information by each credit quality indicator and by origination year (vintage) as of June 30, 2020. The Company defines origination year (vintage) for the purposes of disclosure as the year of execution of the original loan agreement. Loans that are modified as a TDR are considered to be a continuation of the original loan, therefore the origination date of the original loan is reflected as the vintage date. This presentation is consistent with the vintage determination used in the ACL model. The criticized loans with a 2020 vintage relate to credits in resolution.

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

 

 

Revolving Credits

 

 

 

 

 

(In thousands)

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015 and Prior

 

 

Revolving Loans

 

 

Converted to

Term Loans

 

 

Total

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

1,298,422

 

 

$

760,994

 

 

$

1,065,899

 

 

$

639,740

 

 

$

379,240

 

 

$

661,520

 

 

$

2,395,110

 

 

$

16,712

 

 

$

7,217,637

 

Special mention

 

 

459

 

 

 

3,716

 

 

 

45,348

 

 

 

71,407

 

 

 

37,513

 

 

 

40,930

 

 

 

191,612

 

 

 

234

 

 

 

391,219

 

Substandard

 

 

3,676

 

 

 

8,616

 

 

 

112,904

 

 

 

33,882

 

 

 

41,116

 

 

 

97,183

 

 

 

169,030

 

 

 

—

 

 

 

466,407

 

Doubtful

 

 

—

 

 

 

1,784

 

 

 

6,675

 

 

 

6,957

 

 

 

4,521

 

 

 

1,577

 

 

 

7,066

 

 

 

—

 

 

 

28,580

 

Total commercial and industrial

 

 

1,302,557

 

 

 

775,110

 

 

 

1,230,826

 

 

 

751,986

 

 

 

462,390

 

 

 

801,210

 

 

 

2,762,818

 

 

 

16,946

 

 

 

8,103,843

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 

179,936

 

 

 

450,869

 

 

 

749,786

 

 

 

623,234

 

 

 

254,228

 

 

 

509,130

 

 

 

105,881

 

 

 

—

 

 

 

2,873,064

 

Special mention

 

 

275

 

 

 

45

 

 

 

16,090

 

 

 

21,825

 

 

 

11,613

 

 

 

11,215

 

 

 

193

 

 

 

—

 

 

 

61,256

 

Substandard

 

 

—

 

 

 

210

 

 

 

18,707

 

 

 

5,873

 

 

 

9,719

 

 

 

7,501

 

 

 

60

 

 

 

—

 

 

 

42,070

 

Doubtful

 

 

—

 

 

 

—

 

 

 

534

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

534

 

Total commercial real estate

 

 

180,211

 

 

 

451,124

 

 

 

785,117

 

 

 

650,932

 

 

 

275,560

 

 

 

527,846

 

 

 

106,134

 

 

 

—

 

 

 

2,976,924

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

199,779

 

 

 

466,604

 

 

 

587,756

 

 

 

330,294

 

 

 

297,718

 

 

 

464,492

 

 

 

237,681

 

 

 

968

 

 

 

2,585,292

 

30-59 days past due

 

 

—

 

 

 

1,537

 

 

 

4,193

 

 

 

549

 

 

 

1,487

 

 

 

4,099

 

 

 

350

 

 

 

—

 

 

 

12,215

 

60-89 days past due

 

 

—

 

 

 

490

 

 

 

4,232

 

 

 

392

 

 

 

1,952

 

 

 

2,743

 

 

 

88

 

 

 

—

 

 

 

9,897

 

90+ days past due

 

 

—

 

 

 

196

 

 

 

4,385

 

 

 

662

 

 

 

836

 

 

 

4,847

 

 

 

—

 

 

 

—

 

 

 

10,926

 

Total consumer

 

 

199,779

 

 

 

468,827

 

 

 

600,566

 

 

 

331,897

 

 

 

301,993

 

 

 

476,181

 

 

 

238,119

 

 

 

968

 

 

 

2,618,330

 

Total(1)

 

$

1,682,547

 

 

$

1,695,061

 

 

$

2,616,509

 

 

$

1,734,815

 

 

$

1,039,943

 

 

$

1,805,237

 

 

$

3,107,071

 

 

$

17,914

 

 

$

13,699,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

Past Due

The following tables provide an aging analysis of past due loans by portfolio segment and class of financing receivable.

 

 

Age Analysis of Past-Due Loans as of June 30, 2020

 

 

 

 

 

 

 

 

 

 

90+ Days

 

(In thousands)

 

30-59 Days Past Due

 

 

60-89 Days Past Due

 

 

90+ Days Past Due

 

 

Total

 

 

Current

 

 

Total(1)

 

 

Past Due and Accruing

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

3,257

 

 

$

1,060

 

 

$

18,155

 

 

$

22,472

 

 

$

4,925,728

 

 

$

4,948,200

 

 

$

126

 

Energy

 

 

964

 

 

 

25,947

 

 

 

3,820

 

 

 

30,731

 

 

 

1,418,543

 

 

 

1,449,274

 

 

 

—

 

Restaurant

 

 

352

 

 

 

31

 

 

 

14,898

 

 

 

15,281

 

 

 

1,131,504

 

 

 

1,146,785

 

 

 

—

 

Healthcare

 

 

412

 

 

 

1,416

 

 

 

2,504

 

 

 

4,332

 

 

 

555,252

 

 

 

559,584

 

 

 

—

 

Total commercial and industrial

 

 

4,985

 

 

 

28,454

 

 

 

39,377

 

 

 

72,816

 

 

 

8,031,027

 

 

 

8,103,843

 

 

 

126

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

1,027

 

 

 

1,631

 

 

 

1,682

 

 

 

4,340

 

 

 

1,644,180

 

 

 

1,648,520

 

 

 

71

 

Multifamily

 

 

218

 

 

 

—

 

 

 

—

 

 

 

218

 

 

 

769,661

 

 

 

769,879

 

 

 

—

 

Office

 

 

513

 

 

 

—

 

 

 

92

 

 

 

605

 

 

 

557,920

 

 

 

558,525

 

 

 

—

 

Total commercial real estate

 

 

1,758

 

 

 

1,631

 

 

 

1,774

 

 

 

5,163

 

 

 

2,971,761

 

 

 

2,976,924

 

 

 

71

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

12,080

 

 

 

9,502

 

 

 

10,888

 

 

 

32,470

 

 

 

2,505,225

 

 

 

2,537,695

 

 

 

2,894

 

Other

 

 

135

 

 

 

395

 

 

 

38

 

 

 

568

 

 

 

80,067

 

 

 

80,635

 

 

 

32

 

Total consumer

 

 

12,215

 

 

 

9,897

 

 

 

10,926

 

 

 

33,038

 

 

 

2,585,292

 

 

 

2,618,330

 

 

 

2,926

 

Total

 

$

18,958

 

 

$

39,982

 

 

$

52,077

 

 

$

111,017

 

 

$

13,588,080

 

 

$

13,699,097

 

 

$

3,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

 

 

 

Age Analysis of Past-Due Loans as of December 31, 2019

 

 

 

 

 

 

 

 

 

 

90+ Days

 

(In thousands)

 

30-59 Days Past Due

 

 

60-89 Days Past Due

 

 

90+ Days Past Due

 

 

Total

 

 

Current

 

 

Total(1)

 

 

Past Due and Accruing

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

23,143

 

 

$

1,117

 

 

$

15,183

 

 

$

39,443

 

 

$

4,477,573

 

 

$

4,517,016

 

 

$

85

 

Energy

 

 

—

 

 

 

—

 

 

 

8,166

 

 

 

8,166

 

 

 

1,411,791

 

 

 

1,419,957

 

 

 

—

 

Restaurant

 

 

1,219

 

 

 

1,284

 

 

 

8,021

 

 

 

10,524

 

 

 

1,016,897

 

 

 

1,027,421

 

 

 

108

 

Healthcare

 

 

497

 

 

 

41

 

 

 

4,143

 

 

 

4,681

 

 

 

469,583

 

 

 

474,264

 

 

 

—

 

Total commercial and industrial

 

 

24,859

 

 

 

2,442

 

 

 

35,513

 

 

 

62,814

 

 

 

7,375,844

 

 

 

7,438,658

 

 

 

193

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

3,354

 

 

 

133

 

 

 

2,255

 

 

 

5,742

 

 

 

1,685,952

 

 

 

1,691,694

 

 

 

—

 

Multifamily

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

659,902

 

 

 

659,902

 

 

 

—

 

Office

 

 

253

 

 

 

—

 

 

 

1,219

 

 

 

1,472

 

 

 

534,204

 

 

 

535,676

 

 

 

—

 

Total commercial real estate

 

 

3,607

 

 

 

133

 

 

 

3,474

 

 

 

7,214

 

 

 

2,880,058

 

 

 

2,887,272

 

 

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

8,967

 

 

 

6,101

 

 

 

7,292

 

 

 

22,360

 

 

 

2,545,935

 

 

 

2,568,295

 

 

 

887

 

Other

 

 

192

 

 

 

37

 

 

 

54

 

 

 

283

 

 

 

89,147

 

 

 

89,430

 

 

 

40

 

Total consumer

 

 

9,159

 

 

 

6,138

 

 

 

7,346

 

 

 

22,643

 

 

 

2,635,082

 

 

 

2,657,725

 

 

 

927

 

Total

 

$

37,625

 

 

$

8,713

 

 

$

46,333

 

 

$

92,671

 

 

$

12,890,984

 

 

$

12,983,655

 

 

$

1,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $44.5 million of net accrued interest receivable is excluded from the loan balances above as of December 31, 2019.

 

Nonaccrual Status

The following table provides information about nonaccruing loans by portfolio segment and class of financing receivable as of and for the three and six months ended June 30, 2020.

 

 

Nonaccrual Loans - Amortized Cost

 

 

90+ Days

 

 

Interest Income Recognized

 

(In thousands)

 

Beginning of the Period(1)

 

 

End of the Period

 

 

No Allowance Recorded

 

 

Past Due and Accruing

 

 

Three Months Ended June 30, 2020

 

 

Six Months Ended June 30, 2020

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

66,589

 

 

$

62,579

 

 

$

4,845

 

 

$

126

 

 

$

18

 

 

$

18

 

Energy

 

 

9,568

 

 

 

41,884

 

 

 

957

 

 

 

—

 

 

 

1

 

 

 

9

 

Restaurant

 

 

53,483

 

 

 

76,175

 

 

 

21,096

 

 

 

—

 

 

 

9

 

 

 

38

 

Healthcare

 

 

4,833

 

 

 

2,803

 

 

 

1,952

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial and industrial

 

 

134,473

 

 

 

183,441

 

 

 

28,850

 

 

 

126

 

 

 

28

 

 

 

65

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

5,935

 

 

 

23,853

 

 

 

3,046

 

 

 

71

 

 

 

16

 

 

 

59

 

Multifamily

 

 

—

 

 

 

714

 

 

 

714

 

 

 

—

 

 

 

—

 

 

 

—

 

Office

 

 

1,245

 

 

 

92

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial real estate

 

 

7,180

 

 

 

24,659

 

 

 

3,760

 

 

 

71

 

 

 

16

 

 

 

59

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

15,101

 

 

 

16,278

 

 

 

2,464

 

 

 

2,894

 

 

 

53

 

 

 

83

 

Other

 

 

24

 

 

 

6

 

 

 

—

 

 

 

32

 

 

 

2

 

 

 

4

 

Total consumer

 

 

15,125

 

 

 

16,284

 

 

 

2,464

 

 

 

2,926

 

 

 

55

 

 

 

87

 

Total

 

$

156,778

 

 

$

224,384

 

 

$

35,074

 

 

$

3,123

 

 

$

99

 

 

$

211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts are not comparable to prior period public filings due to our adoption of CECL on January 1, 2020. Prior to this date, pools of individual ACI loans were excluded because they continued to earn interest income from the accretable yield at the pool level. With the adoption of CECL, the pools were discontinued, and performance is based on contractual terms for individual loans. Additionally, prior to January 1, 2020, nonaccrual balances were presented using recorded investment. Upon adoption of CECL, approximately $43.0 million of ACI loans were reclassed to nonaccrual loans.

 

Loans Modified into TDRs

The Company attempts to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Bank considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. Qualifying criteria and payment terms are structured by the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that the Company has granted a concession to the borrower. The Company may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without the modification. Concessions could include reductions of interest rates at a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, principal forgiveness, forbearance, or other concessions. The assessments of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR.

All TDRs are individually evaluated to measure the amount of any ACL. The TDR classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring.

The following table provides information regarding loans that were modified into TDRs during the periods indicated.

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Number of TDRs

 

 

Amortized Cost(1)

 

 

Number of TDRs

 

 

Amortized Cost

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

$

—

 

 

 

2

 

 

$

7,647

 

Energy

 

 

—

 

 

 

—

 

 

 

1

 

 

 

11,717

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1,455

 

Total

 

 

—

 

 

$

—

 

 

 

4

 

 

$

20,819

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) There was no net accrued interest receivable recorded on the loan balances above as of June 30, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Number of TDRs

 

 

Amortized Cost(1)

 

 

Number of TDRs

 

 

Amortized Cost

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

3

 

 

$

19,366

 

 

 

3

 

 

$

28,913

 

Energy

 

 

1

 

 

 

8,140

 

 

 

1

 

 

 

11,717

 

Restaurant

 

 

2

 

 

 

24,246

 

 

 

—

 

 

 

—

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1,455

 

Total

 

 

6

 

 

$

51,752

 

 

 

5

 

 

$

42,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Less than $0.1 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

 

The Company monitors loan payments on an on-going basis to determine if a loan is considered to have a payment default. Determination of payment default involves analyzing the economic conditions that exist for each customer and their ability to generate positive cash flows during the loan term. Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 days past due status with respect to principal and/or interest payments.

For the three- and six-month periods ended June 30, 2020 and June 30, 2019, the Company had no TDRs for which there was a payment default within the 12 months following the restructure date. During the three and six months ended June 30, 2020, approximately $12.5 million and $19.3 million in charge-offs were taken related to one general C&I loan that was modified into a TDR during the same period. During the three and six months ended June 30, 2019, approximately $17.8 million in charge-offs were taken related to commercial and industrial loans modified into TDRs during the same period.

On March 27, 2020, the CARES Act was signed into law. The CARES Act provides financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Additionally, in April 2020, regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) which permits certain loan modifications due to the effects of the COVID-19 (as defined) to not be identified as a TDR. For the three-month period ended June 30, 2020, the Company had approximately 2,500 cumulative loan modifications (both payment deferrals and non-payment deferral modifications) totaling $2.5 billion with the vast majority of these loans currently eligible for exemption from the accounting guidance for TDRs. As of June 30, 2020, active COVID loan modifications declined to $1.9 billion, of which $1.4 billion represented payment deferrals (primarily 90-day) and $0.5 billion represented non-payment deferral modifications. The Company believes additional loans may be restructured because of COVID-19 before the end of the year that will not be identified as TDRs in accordance with this law or interagency statement.

The following table provides information regarding the types of loan modifications that were modified into TDRs during the periods indicated.

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Loans Modified by:

 

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

Energy

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Total

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Loans Modified by:

 

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

 

3

 

 

 

—

 

 

 

3

 

Energy

 

 

1

 

 

 

—

 

 

 

—

 

 

 

1

 

Restaurant

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Total

 

 

1

 

 

 

5

 

 

 

—

 

 

 

5

 

Residential Mortgage Loans in Process of Foreclosure

Included in loans are $2.3 million and $4.4 million of consumer loans secured by single family residential real estate that are in process of foreclosure at June 30, 2020 and December 31, 2019, respectively. We have ceased foreclosure activities on residential real estate due to the COVID-19 pandemic. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $234 thousand and $151 thousand of foreclosed single-family residential properties in other real estate owned as of June 30, 2020 and December 31, 2019, respectively.
v3.20.2
Goodwill and Other Intangible Assets
 6 Months Ended
Jun. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets

Note 5—Goodwill and Other Intangible Assets

The following table summarizes the Company’s goodwill and other intangible assets at June 30, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

(In thousands)

June 30, 2020

 

 

December 31, 2019

 

Goodwill

$

43,061

 

 

$

485,336

 

Core deposit intangible, net of accumulated amortization of $70,612 and $60,836, respectively

 

81,011

 

 

 

90,788

 

Customer lists, net of accumulated amortization of $23,065 and $21,908, respectively

 

10,800

 

 

 

11,993

 

Noncompete agreements, net of accumulated amortization of $229 and $137, respectively

 

1,127

 

 

 

1,473

 

Trademarks, net of accumulated amortization of $115 and $75, respectively

 

1,319

 

 

 

1,359

 

Total goodwill and intangible assets, net

$

137,318

 

 

$

590,949

 

 In accordance with US GAAP, the Company performs annual tests to identify potential impairment of goodwill. The tests are required to be performed annually and more frequently if events or circumstances indicate a potential impairment may exist. The Company compares the fair value of each reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Considering the economic conditions resulting from the COVID-19 pandemic, the Company conducted an interim goodwill impairment test in the first quarter of 2020. The interim test indicated a goodwill impairment of $443.7 million within the Bank reporting unit resulting in the Company recording an impairment charge of the same amount in the first quarter of 2020. The primary causes of the goodwill impairment in the Bank reporting unit were economic and industry conditions resulting from the COVID-19 pandemic that caused volatility and reductions in the market capitalization of the Company and its peer banks, increased loan provision estimates, increased discount rates, and other changes in variables driven by the uncertain macro-environment that resulted in the estimated fair value of the reporting unit being less than the reporting unit’s carrying value. The fair value of the reporting unit was determined using an income approach under the framework established for measuring fair value under ASC 820.

The Company has $43.1 million in goodwill remaining in its separate reporting units of Trust, Retail Brokerage and Investment Service businesses for which the Company's qualitative assessments based upon the asset and fee-based nature of the businesses did not indicate potential impairment. The fair values of the reporting units are based upon management’s estimates and assumptions. Although management has used the estimates and assumptions it believes to be most appropriate in the circumstances, it should be noted that even relatively minor changes in certain assumptions used in management’s calculations could result in significant differences in the results of the impairment tests.

The following table represents changes to the carrying amount of goodwill by segment for the period reported.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Balance as of December 31, 2019

 

$

442,579

 

 

$

42,757

 

 

$

—

 

 

$

485,336

 

Additions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth & Pension acquisition

 

 

—

 

 

 

304

 

 

 

—

 

 

 

304

 

Other

 

 

1,116

 

 

 

—

 

 

 

—

 

 

 

1,116

 

Losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment

 

 

(443,695

)

 

 

—

 

 

 

—

 

 

 

(443,695

)

Balance as of June 30, 2020

 

$

—

 

 

$

43,061

 

 

$

—

 

 

$

43,061

 

During the first quarter of 2020, goodwill assigned to Banking increased by $1.1 million related to the State Bank acquisition. There was an increase year-to-date of $0.3 million in the goodwill related to the acquisition from Wealth & Pension Services Group, Inc. on July 1, 2019 by the Bank’s subsidiary, Linscomb & Williams, Inc. (see Note 2).
v3.20.2
Derivatives
 6 Months Ended
Jun. 30, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Derivatives

Note 6—Derivatives

The Company primarily uses derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. Management will designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship. The Company’s remaining derivatives consist of economic hedges that do not qualify for hedge accounting and derivatives held for customer accommodation, or other purposes.

The fair value of derivative positions outstanding is included in “other assets” and “other liabilities” on the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows. For derivatives not designated as hedging instruments, gains and losses due to changes in fair value are included in noninterest income and the operating section of the consolidated statement of cash flows. For derivatives designated as hedging instruments, the entire change in the fair value related to the derivative instrument is recognized as a component of other comprehensive income and subsequently reclassified into interest income when the forecasted transaction affects income.

The notional amounts and estimated fair values as of June 30, 2020 and December 31, 2019 were as follows:

 

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

Fair Value

 

 

 

 

 

 

Fair Value

 

(In thousands)

 

Notional Amount

 

 

Other Assets

 

 

Other Liabilities

 

 

Notional Amount

 

 

Other Assets

 

 

Other Liabilities

 

Derivatives designated as hedging instruments (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

350,000

 

 

$

26,561

 

 

$

—

 

 

$

350,000

 

 

$

—

 

 

$

643

 

Commercial loan interest rate collars

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,000,000

 

 

 

239,213

 

 

 

—

 

Total derivatives designated as hedging instruments

 

 

350,000

 

 

 

26,561

 

 

 

—

 

 

 

4,350,000

 

 

 

239,213

 

 

 

643

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

 

1,228,008

 

 

 

26,329

 

 

 

2,116

 

 

 

1,008,805

 

 

 

8,386

 

 

 

899

 

Commercial loan interest rate caps

 

 

172,851

 

 

 

11

 

 

 

11

 

 

 

167,185

 

 

 

18

 

 

 

18

 

Commercial loan interest rate floors

 

 

583,262

 

 

 

15,221

 

 

 

15,221

 

 

 

654,298

 

 

 

8,836

 

 

 

8,836

 

Commercial loan interest rate collars

 

 

71,110

 

 

 

639

 

 

 

639

 

 

 

75,555

 

 

 

257

 

 

 

257

 

Mortgage loan held-for-sale interest rate lock commitments

 

 

38,236

 

 

 

548

 

 

 

—

 

 

 

4,138

 

 

 

22

 

 

 

—

 

Mortgage loan forward sale commitments

 

 

9,754

 

 

 

56

 

 

 

—

 

 

 

4,109

 

 

 

26

 

 

 

—

 

Mortgage loan held-for-sale floating commitments

 

 

7,367

 

 

 

—

 

 

 

—

 

 

 

1,523

 

 

 

—

 

 

 

—

 

Foreign exchange contracts

 

 

113,982

 

 

 

1,054

 

 

 

836

 

 

 

74,322

 

 

 

379

 

 

 

558

 

Total derivatives not designated as hedging instruments

 

 

2,224,570

 

 

 

43,858

 

 

 

18,823

 

 

 

1,989,935

 

 

 

17,924

 

 

 

10,568

 

Total derivatives

 

$

2,574,570

 

 

$

70,419

 

 

$

18,823

 

 

$

6,339,935

 

 

$

257,137

 

 

$

11,211

 

 

  

The Company is party to collateral support agreements with certain derivative counterparties. Such agreements require that the Company or the counterparty to maintain collateral based on the fair values of derivative transactions. In the event of default by a counterparty the non-defaulting counterparty would be entitled to the collateral. At June 30, 2020 and December 31, 2019, the Company was required to post $13.2 million and $10.6 million, respectively, in cash or securities as collateral for its derivative transactions, which are included in “interest-bearing deposits with banks” on the Company’s consolidated balance sheets. In addition, the Company had recorded the obligation to return cash collateral provided by a counterparty of $22.4 million and $240.9 million as of June 30, 2020 and December 31, 2019, respectively, within deposits on the Company’s consolidated balance sheet. The Company’s master agreements represent written, legally enforceable bilateral agreements that (1) create a single legal obligation for all individual transactions covered by the master agreement and (2) in the event of default, provide the non-defaulting counterparty the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to promptly liquidate or set-off collateral posted by the defaulting counterparty. As permitted by U.S. GAAP, the Company does not offset fair value amounts for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts of derivatives executed with the same counterparty under the master agreement.

Pre-tax gain (loss) included in the consolidated statements of operations related to derivative instruments for the three and six months ended June 30, 2020 and 2019 were as follows:

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

(In thousands)

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

Derivatives designated as hedging instruments

   (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

4,046

 

 

$

981

 

 

$

—

 

 

$

11,310

 

 

$

(1,509

)

 

$

—

 

Commercial loan interest rate collars

 

 

—

 

 

 

16,714

 

 

 

—

 

 

 

86,125

 

 

 

37

 

 

 

—

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans held for sale interest rate lock commitments

 

$

—

 

 

$

—

 

 

$

215

 

 

$

—

 

 

$

—

 

 

$

(42

)

Foreign exchange contracts

 

 

—

 

 

 

—

 

 

 

687

 

 

 

—

 

 

 

—

 

 

 

984

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

(In thousands)

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

Derivatives designated as hedging instruments

   (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

28,081

 

 

$

876

 

 

$

—

 

 

$

17,956

 

 

$

(3,017

)

 

$

—

 

Commercial loan interest rate collars

 

 

143,199

 

 

 

24,926

 

 

 

—

 

 

 

127,602

 

 

 

37

 

 

 

—

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans held for sale interest rate lock commitments

 

$

—

 

 

$

—

 

 

$

526

 

 

$

—

 

 

$

—

 

 

$

27

 

Foreign exchange contracts

 

 

—

 

 

 

—

 

 

 

1,551

 

 

 

—

 

 

 

—

 

 

 

2,124

 

 

Cash Flow Hedges

Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company uses interest rate swaps, caps, floors and collars to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans (1-Month LIBOR).

In February 2019, the Company entered into a $4.0 billion notional interest rate collar with a five-year term. In March 2020, the collar was terminated and resulted in a $261.2 million realized gain that was recorded in accumulated other comprehensive income. The value received in exchange for the termination assumed an average 1-month LIBOR rate of 0.5785% over the next four years. The gain, currently reflected in other comprehensive income net of deferred income taxes, will amortize over the next four years into interest income.

In March 2016, the Company entered into the following interest rate swap agreements to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans.

Effective Date

 

Maturity Date

 

Notional Amount

(In Thousands)

 

 

Fixed Rate

 

 

Variable Rate

March 8, 2016

 

February 27, 2026

 

$

175,000

 

 

 

1.5995

%

 

1 Month LIBOR

March 8, 2016

 

February 27, 2026

 

 

175,000

 

 

 

1.5890

 

 

1 Month LIBOR

 

Based on our current interest rate forecast, $77.2 million of deferred income on derivatives in OCI at June 30, 2020 is estimated to be reclassified into net interest income during the next twelve months. Future changes to interest rates or the amount of outstanding hedged loans may significantly change actual amounts reclassified to income. There were no reclassifications into income during the six months ended June 30, 2020 and 2019 as a result of any discontinuance of cash flow hedges because the forecasted transaction is no longer probable. The maximum length of time over which the Company is hedging a portion of its exposure to the variability in future cash flows for forecasted transactions is approximately 5.7 years as of June 30, 2020.

Interest Rate Swap, Floor, Cap and Collar Agreements not designated as hedging derivatives

 

The Company enters into certain interest rate swap, floor, cap and collar agreements on commercial loans that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company enters into an interest rate swap, floor, cap or collar with a loan customer while at the same time entering into an offsetting interest rate agreement with another financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The interest rate swap transaction allows the Company’s customer to effectively convert a variable rate loan to a fixed rate. The interest rate cap transaction allows the Company’s customer to minimize interest rate risk exposure to rising interest rates. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s consolidated statements of operations. The Company is exposed to credit loss in the event of nonperformance by the parties to the interest rate agreements. However, the Company does not anticipate nonperformance by the counterparties. The estimated fair value has been recorded as an asset and a corresponding liability in the accompanying consolidated balance sheets as of June 30, 2020 and December 31, 2019.
v3.20.2
Deposits
 6 Months Ended
Jun. 30, 2020
Banking And Thrift [Abstract]  
Deposits

Note 7—Deposits

Domestic time deposits $250,000 and over were $503.6 million and $644.1 million at June 30, 2020 and December 31, 2019, respectively. There were no foreign time deposits at either June 30, 2020 or December 31, 2019.
v3.20.2
Borrowed Funds
 6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Borrowed Funds

Note 8—Borrowed Funds

Senior and Subordinated Debt

In June 2019, the Company completed a registered public offering of $85 million aggregate principal amount of 4.75% fixed to floating rate subordinated notes due 2029, the net proceeds of which were used to redeem our 4.875% senior notes due June 28, 2019. The fixed rate will remain at 4.75% until June 30, 2024, at which point the note will convert to a floating rate. In June 2014, the Company and the Bank completed an unregistered $245 million multi-tranche debt transaction and in March 2015, the Company completed an unregistered $50 million debt transaction. The subordinated note due June 28, 2029 will convert to a floating rate on June 28, 2024. The subordinated note due March 11, 2025 converted to a floating rate on March 11, 2020. The Bank’s subordinated note will convert from a fixed rate to a floating rate on June 28, 2024. These transactions enhanced our liquidity and regulatory capital levels to support balance sheet growth. Details of the debt transactions are as follows:

 

 

 

 

 

 

 

 

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Cadence Bancorporation:

 

 

 

 

 

 

 

 

5.375% senior notes, due June 28, 2021

 

$

50,000

 

 

$

50,000

 

7.250% subordinated notes, due June 28, 2029, callable in 2024

 

 

35,000

 

 

 

35,000

 

3-month LIBOR plus 4.663%, subordinated notes, due March 11, 2025, callable in 2020

 

 

40,000

 

 

 

40,000

 

4.750% subordinated notes, due June 30, 2029, callable in 2024

 

 

85,000

 

 

 

85,000

 

Total — Cadence Bancorporation

 

 

210,000

 

 

 

210,000

 

Cadence Bank:

 

 

 

 

 

 

 

 

6.250% subordinated notes, due June 28, 2029, callable in 2024

 

 

25,000

 

 

 

25,000

 

Debt issue costs and unamortized premium

 

 

(1,889

)

 

 

(2,350

)

Total senior and subordinated debt

 

$

233,111

 

 

$

232,650

 

 

The senior transactions were structured with four- and seven-year maturities to provide holding company liquidity and to stagger the Company’s debt maturity profile. The $35 million and $25 million subordinated debt transactions were structured with a fifteen-year maturity, ten-year call options, and fixed-to-floating interest rates. The $85 million subordinated debt transaction was structured with a ten-year maturity, a five-year call option, and a fixed-to-floating interest rate. The $40 million subordinated debt transaction has a five-year call option. These subordinated debt structures were designed to achieve full Tier 2 capital treatment for 10 years.

The Company’s outstanding senior note is unsecured, unsubordinated obligations and is equal in right of payment to all the Company’s other unsecured debt. The Company’s subordinated notes are unsecured obligations and will be subordinated in right of payment to all the Company’s senior indebtedness and general creditors and to depositors at the Bank. The Company’s senior notes and subordinated notes are not guaranteed by any subsidiary of the Company, including the Bank.

The Bank’s subordinated notes are unsecured obligations and are subordinated in right of payment to all the Bank’s senior indebtedness and general creditors and to depositors of the Bank. The Bank’s subordinated notes are not guaranteed by the Company or any subsidiary of the Bank.

Payment of principal on the Company’s and Bank’s subordinated notes may be accelerated by holders of such subordinated notes only in the case of certain insolvency events. There is no right of acceleration under the subordinated notes in the case of default. The Company and/or the Bank may be required to obtain the prior written approval of the Federal Reserve, and, in the case of the Bank, the OCC, before it may repay the subordinated notes issued thereby upon acceleration or otherwise.

Junior Subordinated Debentures

In conjunction with the Company’s acquisition of Cadence Financial Corporation and Encore Bank, N.A., the junior subordinated debentures were marked to fair value as of their respective acquisition dates. The related mark is being amortized over the remaining term of the junior subordinated debentures. The following is a list of junior subordinated debt:

 

 

 

 

 

 

 

 

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Junior subordinated debentures, 3 month LIBOR plus 2.85%, due 2033

 

$

30,000

 

 

$

30,000

 

Junior subordinated debentures, 3 month LIBOR plus 2.95%, due 2033

 

 

5,155

 

 

 

5,155

 

Junior subordinated debentures, 3 month LIBOR plus 1.75%, due 2037

 

 

15,464

 

 

 

15,464

 

Total par value

 

 

50,619

 

 

 

50,619

 

Purchase accounting adjustment, net of amortization

 

 

(13,171

)

 

 

(13,174

)

Total junior subordinated debentures

 

$

37,448

 

 

$

37,445

 

Advances from FHLB and Borrowings from FRB

Outstanding FHLB advances were $100 million as of June 30, 2020 and December 31, 2019. At June 30, 2020, the outstanding advance was a long-term convertible advance. Advances are collateralized by $4.0 billion of commercial and residential real estate loans pledged under a blanket lien arrangement as of June 30, 2020, which provides $2.6 billion of borrowing availability.

As of June 30, 2020 and December 31, 2019, the FHLB has issued for the benefit of the Bank irrevocable letters of credit totaling $731 million and $391 million, respectively. Included in the FHLB letters of credit are $725 million in variable letters of credit in favor of a municipal customer to secure certain deposits. These letters of credit expire on November 30, 2020 and December 22, 2020, respectively. Approximately $6 million in letters of credit are used to secure municipal deposits which expire on July 20, 2020.

There were no borrowings from the FRB discount window as of June 30, 2020 and December 31, 2019. Any borrowings from the FRB would be collateralized by $1.7 billion in commercial loans and small business loans under the Paycheck Protection Program pledged under a borrower-in-custody arrangement.

Notes Payable

On July 1, 2019, the Company’s wholly owned subsidiary, Linscomb & Williams, Inc., acquired certain assets and assumed certain liabilities of Wealth and Pension Services Group, Inc. (“W&P”). At June 30, 2020, a note payable of $1.7 million was outstanding in connection with this acquisition (see Note 2).

On March 29, 2019, the Company entered into a credit agreement for a revolving loan facility in the amount of $100 million with a maturity date of March 29, 2020. On March 29, 2020, the Company renewed the credit agreement with a maturity date of March 29, 2021. There were no amounts outstanding under this line of credit at June 30, 2020. Subsequent to June 30, 2020 the Company cancelled this facility.
v3.20.2
Other Noninterest Income and Other Noninterest Expense
 6 Months Ended
Jun. 30, 2020
Other Nonoperating Income Expense [Abstract]  
Other Noninterest Income and Other Noninterest Expense

Note 9—Other Noninterest Income and Other Noninterest Expense

The detail of other noninterest income and other noninterest expense captions presented in the consolidated statements of operations is as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Other noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance revenue

 

$

225

 

 

$

244

 

 

$

474

 

 

$

442

 

Mortgage banking income

 

 

2,020

 

 

 

674

 

 

 

3,131

 

 

 

1,253

 

Income from bank owned life insurance policies

 

 

1,220

 

 

 

1,264

 

 

 

2,549

 

 

 

2,416

 

Other

 

 

(1,373

)

 

 

1,394

 

 

 

(1,953

)

 

 

2,979

 

Total other noninterest income

 

$

2,092

 

 

$

3,576

 

 

$

4,201

 

 

$

7,090

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Other noninterest expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data processing expense

 

$

3,084

 

 

$

3,435

 

 

$

6,436

 

 

$

6,029

 

Software amortization

 

 

4,036

 

 

 

3,184

 

 

 

7,583

 

 

 

6,519

 

Consulting and professional fees

 

 

3,009

 

 

 

1,899

 

 

 

5,715

 

 

 

4,128

 

Loan related expenses

 

 

735

 

 

 

1,740

 

 

 

1,495

 

 

 

2,650

 

FDIC insurance

 

 

3,939

 

 

 

1,870

 

 

 

6,374

 

 

 

3,622

 

Communications

 

 

1,002

 

 

 

1,457

 

 

 

2,158

 

 

 

2,455

 

Advertising and public relations

 

 

920

 

 

 

1,104

 

 

 

2,384

 

 

 

1,885

 

Legal expenses

 

 

579

 

 

 

645

 

 

 

991

 

 

 

803

 

Other

 

 

8,052

 

 

 

9,937

 

 

 

19,688

 

 

 

18,118

 

Total other noninterest expenses

 

$

25,356

 

 

$

25,271

 

 

$

52,824

 

 

$

46,209

 

 
v3.20.2
Income Taxes
 6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

Note 10—Income Taxes

Income tax (benefit) expense for the three and six months ended June 30, 2020 was ($6.7) million and ($39.9) million, respectively, compared to $14.7 million and $31.8 million for the same periods in 2019. The effective tax rate was 10.6% and 8.1% for the three and six months ended June 30, 2020, respectively, compared to 23.3% and 23.0% for the same periods in 2019. The effective tax rate for the three and six months ended June 30, 2020 was driven by a decrease in income before income taxes.

The effective tax rate is primarily affected by the amount of pre-tax income (loss), and to a lesser extent, tax-exempt interest income, and the increase in cash surrender value of bank-owned life insurance. The effective tax rate is also affected by discrete items that may occur in any given period but are not consistent from period-to-period, which may impact the comparability of the effective tax rate between periods.

At June 30, 2020, we had a net deferred tax asset of $65.9 million, compared to a net deferred tax liability of
$25.0 million at December 31, 2019. The increase in the net deferred asset was primarily due to the tax effect of the CECL transition and provision for credit losses (Notes 1 and 4), reduction of deferred tax liabilities related to tax deductible goodwill, and the termination of the interest rate collar (Note 6).
v3.20.2
Earnings Per Common Share
 6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Earnings Per Common Share

Note 11—Earnings Per Common Share

The following table displays a reconciliation of the information used in calculating basic and diluted net (loss) income per common share for the three and six months ended June 30, 2020 and 2019.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands, except share and per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income per consolidated statements of operations

 

$

(56,114

)

 

$

48,346

 

 

$

(455,425

)

 

$

106,547

 

Net income allocated to participating securities

 

 

—

 

 

 

(170

)

 

 

—

 

 

 

(401

)

Net (loss) income allocated to common stock

 

$

(56,114

)

 

$

48,176

 

 

$

(455,425

)

 

$

106,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (Basic)

 

 

125,924,652

 

 

 

128,791,933

 

 

 

126,277,549

 

 

 

129,634,049

 

Weighted average dilutive restricted stock units and warrants

 

 

—

 

 

 

243,620

 

 

 

—

 

 

 

153,709

 

Weighted average common shares outstanding (Diluted)

 

 

125,924,652

 

 

 

129,035,553

 

 

 

126,277,549

 

 

 

129,787,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Earnings per common share (Basic)

 

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 

(Loss) Earnings per common share (Diluted)

 

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 

The effect from the assumed exercise of stock options and restricted stock units of 3,098,998 and 1,870,507 compared to 169,800 and 1,009,148 for the three and six months ended June 30, 2020 and 2019, respectively, were not included in the above computations of diluted earnings per share because such amounts would have had an antidilutive effect on earnings per common share.
v3.20.2
Regulatory Matters
 6 Months Ended
Jun. 30, 2020
Banking And Thrift [Abstract]  
Regulatory Matters

Note 12—Regulatory Matters

Cadence and Cadence Bank are each required to comply with regulatory capital requirements established by federal and state banking agencies. Failure to meet minimum capital requirements can subject the Company and the Bank to certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. These regulatory capital requirements involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items, and qualitative judgments by the regulators.

Quantitative measures established by regulation to ensure capital adequacy require institutions to maintain minimum ratios of common equity Tier 1, Tier 1, and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average tangible assets (the “Leverage” ratio).

On March 27, 2020, the federal banking agencies issued an interim final rule to delay the estimated impact on regulatory capital stemming from the adoption of CECL. The agencies granted this relief to allow institutions to focus on lending to customers in light of recent strains on the U.S economy due to COVID-19, while also maintaining the quality of regulatory capital. Under the interim final rule, 100% of the CECL Day 1 impact and 25% of subsequent provisions for credit losses (“Day 2” impacts) will be deferred over a two-year year period ending January 1, 2022, at which time this deferred amount will be phased in on a pro rata basis over a three-year period ending January 2025.

The actual capital amounts and ratios for the Company and the Bank as of June 30, 2020 and December 31, 2019 are presented in the following tables and as shown, are above the thresholds necessary to be considered “well-capitalized.” Management believes that no events or changes have occurred after June 30, 2020 that would change this designation.

 

 

 

Consolidated Company

 

 

Bank

 

(In thousands)

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

$

1,751,651

 

 

 

9.5

%

 

$

1,837,580

 

 

 

10.0

%

Common equity tier 1 capital

 

 

1,751,651

 

 

 

11.7

 

 

 

1,787,580

 

 

 

11.9

 

Tier 1 risk-based capital

 

 

1,751,651

 

 

 

11.7

 

 

 

1,837,580

 

 

 

12.2

 

Total risk-based capital

 

 

2,147,055

 

 

 

14.3

 

 

 

2,050,896

 

 

 

13.7

 

Minimum requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

 

736,486

 

 

 

4.0

 

 

 

736,981

 

 

 

4.0

 

Common equity tier 1 capital

 

 

676,118

 

 

 

4.5

 

 

 

676,097

 

 

 

4.5

 

Tier 1 risk-based capital

 

 

901,490

 

 

 

6.0

 

 

 

901,463

 

 

 

6.0

 

Total risk-based capital

 

 

1,201,987

 

 

 

8.0

 

 

 

1,201,951

 

 

 

8.0

 

Well capitalized requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

N/A

 

 

N/A

 

 

 

921,227

 

 

 

5.0

 

Common equity tier 1 capital

 

N/A

 

 

N/A

 

 

 

976,585

 

 

 

6.5

 

Tier 1 risk-based capital

 

 

901,490

 

 

 

6.0

 

 

 

1,201,951

 

 

 

8.0

 

Total risk-based capital

 

 

1,502,484

 

 

 

10.0

 

 

 

1,502,438

 

 

 

10.0

 

 

 

 

 

Consolidated Company

 

 

Bank

 

(In thousands)

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

$

1,784,664

 

 

 

10.3

%

 

$

1,953,008

 

 

 

11.1

%

Common equity tier 1 capital

 

 

1,784,664

 

 

 

11.5

 

 

 

1,903,008

 

 

 

12.3

 

Tier 1 risk-based capital

 

 

1,784,664

 

 

 

11.5

 

 

 

1,953,008

 

 

 

12.6

 

Total risk-based capital

 

 

2,120,571

 

 

 

13.7

 

 

 

2,099,146

 

 

 

13.6

 

Minimum requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

 

690,213

 

 

 

4.0

 

 

 

689,881

 

 

 

4.0

 

Common equity tier 1 capital

 

 

697,089

 

 

 

4.5

 

 

 

696,755

 

 

 

4.5

 

Tier 1 risk-based capital

 

 

929,453

 

 

 

6.0

 

 

 

929,007

 

 

 

6.0

 

Total risk-based capital

 

 

1,239,270

 

 

 

8.0

 

 

 

1,238,676

 

 

 

8.0

 

Well capitalized requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

N/A

 

 

N/A

 

 

 

862,351

 

 

 

5.0

 

Common equity tier 1 capital

 

N/A

 

 

N/A

 

 

 

1,006,425

 

 

 

6.5

 

Tier 1 risk-based capital

 

 

929,453

 

 

 

6.0

 

 

 

1,238,676

 

 

 

8.0

 

Total risk-based capital

 

 

1,549,088

 

 

 

10.0

 

 

 

1,548,345

 

 

 

10.0

 

 

Under regulations controlling national banks, the payment of any dividends by a bank without prior approval of the OCC is limited to the current year’s net profits (as defined by the OCC) and retained net profits of the two preceding years. Due to the effect of the recognition of the non-cash goodwill impairment charge in the first quarter of 2020 to the Banks retained profits, the Bank is currently required to seek prior approval of the OCC to pay a dividend. The Federal Reserve, as primary regulator for bank holding companies, has also stated that all common stock dividends should be paid out of current income. Additionally, on July 24, 2020, the Federal Reserve amended its supervisory guidance and regulations addressing dividends from bank holding companies to require consultation with the Federal Reserve prior to paying a dividend that exceeds earnings for the period for which the dividend is being paid. While the holding company had $147.0 million in cash on hand as of June 30, 2020, the holding company does not generate income on a stand-alone basis, and, over time, may not have the capability to pay common stock dividends without first receiving dividends from the Bank.

The Bank is required to maintain average reserve balances in the form of cash or deposits with the Federal Reserve Bank. The reserve balance varies depending upon the types and amounts of deposits. Effective March 26, 2020, the Federal Reserve Board reduced reserve requirement ratios to zero percent in response to the COVID-19 pandemic in order to help support lending. This action eliminated the reserve requirements for many depository institutions. At December 31, 2019, the required reserve balance with the Federal Reserve Bank was approximately $246.0 million.
v3.20.2
Commitments and Contingent Liabilities
 6 Months Ended
Jun. 30, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingent Liabilities

Note 13—Commitments and Contingent Liabilities

The consolidated financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of banking business and which involve elements of credit risk, interest rate risk, and liquidity risk. The commitments and contingent liabilities are commitments to extend credit, home equity lines, overdraft protection lines, and standby and commercial letters of credit. Such financial instruments are recorded when they are funded. A summary of commitments and contingent liabilities is as follows:

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Commitments to extend credit

 

$

4,054,843

 

 

$

4,667,360

 

Commitments to grant loans

 

 

278,206

 

 

 

292,199

 

Standby letters of credit

 

 

202,400

 

 

 

213,548

 

Performance letters of credit

 

 

18,430

 

 

 

27,985

 

Commercial letters of credit

 

 

20,370

 

 

 

15,587

 

 

Commitments to extend credit and letters of credit include some exposure to credit loss in the event of nonperformance of the customer. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. In addition, the Company has entered certain contingent commitments to grant loans. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit policies and procedures for such commitments are the same as those used for lending activities. Because these instruments have fixed maturity dates and because a number expire without being drawn upon, they generally do not present any significant liquidity risk. No significant losses on commitments were incurred during the three and six months ended June 30, 2020 and 2019.

The Company makes investments in limited partnerships, including certain low-income housing partnerships for which tax credits are received. As of June 30, 2020 and December 31, 2019, unfunded capital commitments totaled $44.6 million and $44.9 million, respectively (see Note 15).

The Company and the Bank are defendants in various pending and threatened legal actions arising in the normal course of business. In the opinion of management, based upon the advice of legal counsel, the ultimate disposition of all pending and threatened legal action will not have a material effect on the Company’s consolidated financial statements. On September 16, 2019, a Company shareholder filed a putative class action complaint against Cadence Bancorporation and certain senior officers. Following consolidation of a related matter and appointment of lead plaintiffs, the lead plaintiffs filed an amended complaint on January 31, 2020, which asserted claims under Sections 10(b) and 20 of the Securities Exchange Act on behalf of a putative class of persons and entities that purchased or otherwise acquired the Company’s securities between July 23, 2018 and January 23, 2020, inclusive. The amended complaint alleges that the Company and the individual defendants made materially misleading statements about the credit quality of the Company’s loan portfolio, did not timely charge off bad debt or record sufficient loss provisions to reserve against the risk of loss, and maintained an inadequate allowance for credit losses. The consolidated case is captioned Frank Miller et al. v. Cadence Bancorporation et al., Case No. H-19-3492-LNH, in the United States District Court for the Southern District of Texas.

On August 7, 2020, the District Court granted the defendants’ motion to dismiss and entered a final judgment dismissing the case in its entirety, with prejudice. The court concluded that the complaint failed to show that Cadence Bancorporation and the individual defendants made any material misstatements and failed to allege specific facts supporting a strong inference of fraudulent intent or severe recklessness. Because the time for filing an appeal has not yet lapsed and discovery has not commenced, it is not possible at this time to estimate the likelihood or amount of any damage exposure.
v3.20.2
Disclosure About Fair Values of Financial Instruments
 6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Disclosure About Fair Values of Financial Instruments

Note 14—Disclosure About Fair Values of Financial Instruments

See Note 20 to the consolidated financial statements of the Annual Report on Form 10-K for the year ended December 31, 2019 for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset at June 30, 2020 and December 31, 2019:

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

$

2,661,433

 

 

$

—

 

 

$

2,661,433

 

 

$

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,764

 

 

 

1,764

 

 

 

—

 

 

 

—

 

Derivative assets

 

 

70,419

 

 

 

—

 

 

 

70,419

 

 

 

—

 

Other assets

 

 

32,101

 

 

 

—

 

 

 

—

 

 

 

32,101

 

Total recurring basis measured assets

 

$

2,765,717

 

 

$

1,764

 

 

$

2,731,852

 

 

$

32,101

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

18,823

 

 

$

—

 

 

$

18,823

 

 

$

—

 

Total recurring basis measured liabilities

 

$

18,823

 

 

$

—

 

 

$

18,823

 

 

$

—

 

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

$

2,368,592

 

 

$

—

 

 

$

2,368,592

 

 

$

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,862

 

 

 

1,862

 

 

 

—

 

 

 

—

 

Derivative assets

 

 

257,137

 

 

 

—

 

 

 

257,137

 

 

 

—

 

Other assets

 

 

26,882

 

 

 

—

 

 

 

—

 

 

 

26,882

 

Total recurring basis measured assets

 

$

2,654,473

 

 

$

1,862

 

 

$

2,625,729

 

 

$

26,882

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

11,211

 

 

$

—

 

 

$

11,211

 

 

$

—

 

Total recurring basis measured liabilities

 

$

11,211

 

 

$

—

 

 

$

11,211

 

 

$

—

 

 

Changes in Level 3 Fair Value Measurements

The tables below include a roll-forward of the consolidated balance sheet amounts for the three and six months ended June 30, 2020 and 2019 for changes in the fair value of financial instruments within Level 3 of the valuation hierarchy that are recorded on a recurring basis. Level 3 financial instruments typically include unobservable components but may also include some observable components that may be validated to external sources. The gains or (losses) in the following table (which are reported in other noninterest income in the consolidated income statements) may include changes to fair value due in part to observable factors that may be part of the valuation methodology.

Level 3 Assets Measured at Fair Value on a Recurring Basis

 

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(In thousands)

 

Net Profits Interests

 

 

Investments in Limited Partnerships

 

 

SBA Servicing Rights

 

Beginning Balance

 

$

4,071

 

 

$

5,317

 

 

$

24,042

 

 

$

11,601

 

 

$

3,942

 

 

$

3,803

 

Originations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

261

 

 

 

194

 

Net gains (losses) included in earnings

 

 

(338

)

 

 

59

 

 

 

(1,015

)

 

 

288

 

 

 

(466

)

 

 

(211

)

Reclassifications

 

 

—

 

 

 

—

 

 

 

1,203

 

 

 

675

 

 

 

—

 

 

 

—

 

Acquired in settlement of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Contributions paid

 

 

—

 

 

 

—

 

 

 

499

 

 

 

2,409

 

 

 

—

 

 

 

—

 

Distributions received

 

 

—

 

 

 

—

 

 

 

(98

)

 

 

(440

)

 

 

—

 

 

 

—

 

Ending Balance

 

$

3,733

 

 

$

5,376

 

 

$

24,631

 

 

$

14,533

 

 

$

3,737

 

 

$

3,786

 

Net unrealized (losses) gains included in earnings relating to assets held at the end of the period

 

$

(338

)

 

$

59

 

 

$

(1,015

)

 

$

288

 

 

$

(466

)

 

$

(211

)

Net unrealized gains (losses) recognized in other comprehensive income relating to assets held at the end of the period

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(In thousands)

 

Net Profits Interests

 

 

Investments in Limited Partnerships

 

 

SBA Servicing Assets

 

Beginning Balance

 

$

4,330

 

 

$

5,779

 

 

$

18,742

 

 

$

11,191

 

 

$

3,810

 

 

$

—

 

Acquired

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,213

 

Originations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

561

 

 

 

514

 

Net (losses) gains included in earnings

 

 

(597

)

 

 

(115

)

 

 

(1,331

)

 

 

1,034

 

 

 

(634

)

 

 

(2,941

)

Reclassifications

 

 

—

 

 

 

—

 

 

 

1,727

 

 

 

(125

)

 

 

—

 

 

 

—

 

Acquired in settlement of loans

 

 

—

 

 

 

—

 

 

 

4,257

 

 

 

—

 

 

 

—

 

 

 

—

 

Contributions paid

 

 

—

 

 

 

—

 

 

 

1,783

 

 

 

3,017

 

 

 

—

 

 

 

—

 

Distributions received

 

 

—

 

 

 

(288

)

 

 

(547

)

 

 

(584

)

 

 

—

 

 

 

—

 

Ending Balance

 

$

3,733

 

 

$

5,376

 

 

$

24,631

 

 

$

14,533

 

 

$

3,737

 

 

$

3,786

 

Net unrealized (losses) gains included in earnings relating to assets held at the end of the period

 

$

(597

)

 

$

(115

)

 

$

(1,331

)

 

$

1,034

 

 

$

(634

)

 

$

(2,941

)

Net unrealized gains (losses) recognized in other comprehensive income relating to assets held at the end of the period

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Assets Recorded at Fair Value on a Nonrecurring Basis

From time to time, the Company may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheets at June 30, 2020 and December 31, 2019, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value:

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

38,631

 

 

$

—

 

 

$

38,631

 

 

$

—

 

Individually evaluated loans, net of allocated allowance for credit losses (1)

 

 

181,648

 

 

 

—

 

 

 

—

 

 

 

181,648

 

Other real estate and repossessed assets

 

 

10,216

 

 

 

 

 

 

 

—

 

 

 

10,216

 

Total assets measured on a nonrecurring basis

 

$

230,495

 

 

$

—

 

 

$

38,631

 

 

$

191,864

 

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

87,649

 

 

$

—

 

 

$

87,649

 

 

$

—

 

Individually evaluated loans, net of allocated allowance for credit losses (1)

 

 

101,561

 

 

 

—

 

 

 

—

 

 

 

101,561

 

Other real estate

 

 

1,628

 

 

 

—

 

 

 

—

 

 

 

1,628

 

Total assets measured on a nonrecurring basis

 

$

190,838

 

 

$

—

 

 

$

87,649

 

 

$

103,189

 

(1) Prior to the adoption of CECL on January 1, 2020, these loans were known as Impaired loans, net of specific allowance.

 

Significant unobservable inputs used in Level 3 fair value measurements for financial assets measured at fair value on a nonrecurring basis are summarized below:

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

(In thousands)

 

Carrying

Value

 

 

Valuation

Methods

 

Unobservable Inputs

 

Range

 

Weighted Average (2)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans, net of allowance for credit losses (3)

 

$

181,648

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 85%

 

25%

 

 

 

 

 

 

 

Discounted cash flow

 

Discount rate

 

3.75% - 4.36%

 

4.2%

 

 

 

 

 

 

 

Enterprise value

 

Comparables and average multiplier

 

4.31x - 6.19x

 

5.09x

 

 

 

 

 

 

 

Enterprise value

 

Discount rates and comparables

 

13% - 15%

 

14%

 

 

 

 

 

 

 

Net recoverable oil and gas reserves and forward-looking commodity prices

 

Capitalization rate and discount rate

 

10% - 20%

 

12%

 

Other real estate

 

 

1,606

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 20%

 

10%

 

 

 

 

 

 

 

 

 

Estimated closing costs

 

10%

 

10%

 

 

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

(In thousands)

 

Carrying

Value

 

 

Valuation

Methods

 

Unobservable

Inputs

 

Range

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans, net of allowance for credit losses (3)

 

$

101,561

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 50%

 

 

 

 

 

 

 

Appraised value, as adjusted

 

Minimum guaranteed proceeds per Settlement Agreement

 

0%(1)

 

 

 

 

 

 

 

Discounted cash flow

 

Discount rate 5.8%

 

0%(1)

 

 

 

 

 

 

 

Enterprise value

 

Exit and earnings multiples,

discounted cash flows,

and market comparables

 

0% - 46%(1)

 

Other real estate

 

 

1,628

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 20%

 

 

 

 

 

 

 

 

 

Estimated closing costs

 

10%

 

(1) Represents difference of remaining balance to fair value.

 

(2) Weighted averages were calculated using the input attribute and the outstanding balance of the loan.

 

(3) Prior to the adoption of CECL on January 1, 2020, these loans were known as Impaired loans, net of specific allowance.

 

 

The estimated fair values of the Company’s financial instruments are as follows:

 

 

June 30, 2020

 

(In thousands)

 

Carrying Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

185,919

 

 

$

185,919

 

 

$

185,919

 

 

$

—

 

 

$

—

 

Interest-bearing deposits in other banks

 

 

1,696,051

 

 

 

1,696,051

 

 

 

1,696,051

 

 

 

—

 

 

 

—

 

Federal funds sold

 

 

17,399

 

 

 

17,399

 

 

 

17,399

 

 

 

—

 

 

 

—

 

Investment securities available-for-sale

 

 

2,661,433

 

 

 

2,661,433

 

 

 

—

 

 

 

2,661,433

 

 

 

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,764

 

 

 

1,764

 

 

 

1,764

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

38,631

 

 

 

38,631

 

 

 

—

 

 

 

38,631

 

 

 

—

 

Net loans

 

 

13,328,196

 

 

 

13,379,997

 

 

 

—

 

 

 

—

 

 

 

13,379,997

 

Derivative assets

 

 

70,419

 

 

 

70,419

 

 

 

—

 

 

 

70,419

 

 

 

—

 

Other assets

 

 

88,308

 

 

 

88,308

 

 

 

—

 

 

 

—

 

 

 

88,308

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

16,069,282

 

 

 

16,080,049

 

 

 

—

 

 

 

16,080,049

 

 

 

—

 

Advances from FHLB

 

 

100,000

 

 

 

100,000

 

 

 

—

 

 

 

100,000

 

 

 

—

 

Senior debt

 

 

49,969

 

 

 

50,644

 

 

 

—

 

 

 

50,644

 

 

 

—

 

Subordinated debt

 

 

183,142

 

 

 

174,457

 

 

 

—

 

 

 

174,457

 

 

 

—

 

Junior subordinated debentures

 

 

37,448

 

 

 

34,629

 

 

 

—

 

 

 

34,629

 

 

 

—

 

Notes payable

 

 

1,663

 

 

 

1,663

 

 

 

—

 

 

 

1,663

 

 

 

—

 

Derivative liabilities

 

 

18,823

 

 

 

18,823

 

 

 

—

 

 

 

18,823

 

 

 

—

 

 

 

 

December 31, 2019

 

(In thousands)

 

Carrying Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

252,447

 

 

$

252,447

 

 

$

252,447

 

 

$

—

 

 

$

—

 

Interest-bearing deposits in other banks

 

 

725,343

 

 

 

725,343

 

 

 

725,343

 

 

 

—

 

 

 

—

 

Federal funds sold

 

 

10,974

 

 

 

10,974

 

 

 

10,974

 

 

 

—

 

 

 

—

 

Investment securities available-for-sale

 

 

2,368,592

 

 

 

2,368,592

 

 

 

—

 

 

 

2,368,592

 

 

 

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,862

 

 

 

1,862

 

 

 

1,862

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

87,649

 

 

 

87,649

 

 

 

—

 

 

 

87,649

 

 

 

—

 

Net loans

 

 

12,864,012

 

 

 

12,755,360

 

 

 

—

 

 

 

—

 

 

 

12,755,360

 

Derivative assets

 

 

257,137

 

 

 

257,137

 

 

 

—

 

 

 

257,137

 

 

 

—

 

Other assets

 

 

72,719

 

 

 

72,719

 

 

 

—

 

 

 

—

 

 

 

72,719

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

14,742,794

 

 

 

14,753,192

 

 

 

—

 

 

 

14,753,192

 

 

 

—

 

Advances from FHLB

 

 

100,000

 

 

 

100,000

 

 

 

—

 

 

 

100,000

 

 

 

—

 

Senior debt

 

 

49,938

 

 

 

51,202

 

 

 

—

 

 

 

51,202

 

 

 

—

 

Subordinated debt

 

 

182,712

 

 

 

189,386

 

 

 

—

 

 

 

189,386

 

 

 

—

 

Junior subordinated debentures

 

 

37,445

 

 

 

48,012

 

 

 

—

 

 

 

48,012

 

 

 

—

 

Notes payable

 

 

2,078

 

 

 

2,078

 

 

 

—

 

 

 

2,078

 

 

 

—

 

Derivative liabilities

 

 

11,211

 

 

 

11,211

 

 

 

—

 

 

 

11,211

 

 

 

—

 

 
v3.20.2
Variable Interest Entities and Other Investments
 6 Months Ended
Jun. 30, 2020
Variable Interest Entities And Other Investments [Abstract]  
Variable Interest Entities and Other Investments

Note 15—Variable Interest Entities and Other Investments

Under ASC 810-10-65, the Company is deemed to be the primary beneficiary and required to consolidate a variable interest entity (“VIE”) if it has a variable interest in the VIE that provides it with a controlling financial interest. For such purposes, the determination of whether a controlling financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. ASC 810-10-65, as amended, requires continual reconsideration of conclusions reached regarding which interest holder is a VIE’s primary beneficiary.

 

The Bank has invested in several affordable housing projects as a limited partner. The partnerships have qualified to receive annual affordable housing federal tax credits that are recognized as a reduction of current tax expense. The Company has determined that these structures meet the definition of VIE’s under ASC 810 but that consolidation is not required, as the Bank is not the primary beneficiary. At June 30, 2020 and December 31, 2019, the Bank’s maximum exposure to loss associated with these limited partnerships was limited to the Bank’s investment. The Company accounts for these investments and the related tax credits using either the effective yield method or the proportional amortization method, depending upon the date of the investment. Under the effective yield method, the Bank recognizes the tax credits as they are allocated and amortizes the initial costs of the investments to provide a constant effective yield over the period that the tax credits are allocated. Under the proportional amortization method, the Bank amortizes the cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. At June 30, 2020 and December 31, 2019, the Company had recorded investments in other assets on its consolidated balance sheets of approximately $33.9 million and $28.2 million, respectively related to these investments.

Additionally, the Company invests in other certain limited partnerships accounted for under the fair value practical expedient of net asset value (“NAV”) totaling $24.6 million and $18.7 million as of June 30, 2020 and December 31, 2019, respectively. The company recognized $1.0 million and $1.3 million in losses for the three and six months ended June 30, 2020 compared to $0.1 million in losses and $0.7 million in gains for the same periods in 2019 related to these assets recorded at fair value through net income. Certain other limited partnerships without readily determinable fair values that do not qualify for the practical expedient are accounted for at their cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. These investments totaled $7.1 million and $8.7 million as of June 30, 2020 and December 31, 2019, respectively. Other limited partnerships are accounted for under the equity method totaling $8.9 million and $9.0 million at June 30, 2020 and December 31, 2019, respectively.

The following table presents a summary of the Company’s investments in limited partnerships as of June 30, 2020 and December 31, 2019:

(In thousands)

June 30, 2020

 

 

December 31, 2019

 

Affordable housing projects (amortized cost)

$

33,856

 

 

$

28,205

 

Limited partnerships accounted for under the fair value practical expedient of NAV

 

24,631

 

 

 

18,742

 

Limited partnerships without readily determinable fair values that do not qualify for the practical expedient of NAV accounted for under the cost method

 

7,086

 

 

 

8,681

 

Limited partnerships required to be accounted for under the equity method

 

8,920

 

 

 

8,951

 

Total investments in limited partnerships

$

74,493

 

 

$

64,579

 

 

Equity investments with readily determinable fair values not held for trading are recorded at fair value with changes in fair value reported in net income. Cadence elected a measurement alternative to fair value for certain equity investments without a readily determinable fair value. As of June 30, 2020, and December 31, 2019, there were no downward and upward adjustments for impairments or price changes from observable transactions, however, due to the current economic environment one investment was determined to be fully impaired and a $1.9 million charge recognized in the second quarter. The carrying amount of equity investments measured under the measurement alternative are as follows:

 

For the Six Months Ended June 30,

 

(In thousands)

2020

 

 

2019

 

Carrying value, Beginning of Year

$

8,681

 

 

$

8,714

 

Reclassifications

 

(1,727

)

 

 

125

 

Net income change

 

49

 

 

 

—

 

Distributions

 

(440

)

 

 

(929

)

Contributions

 

523

 

 

 

1,378

 

Carrying value, End of Period

$

7,086

 

 

$

9,288

 

 

Cadence’s investments in certain markable equity securities are carried at fair value and are reported in other assets in the consolidated balance sheets. Total marketable equity securities were $1.8 million and $1.9 million at June 30, 2020 and December 31, 2019, respectively.

During 2016, the Bank received net profits interests in oil and gas reserves, in connection with the reorganization under bankruptcy of two loan customers (one of these was sold during 2018). The Company has determined that these contracts meet the definition of VIE’s under Topic ASC 810, but that consolidation is not required as the Bank is not the primary beneficiary. The net profits interest is a financial instrument and recorded at estimated fair value, which was $3.7 million and $4.3 million at June 30, 2020 and December 31, 2019, respectively, representing the maximum exposure to loss as of that date.

The Company has established a rabbi trust related to the deferred compensation plan offered to certain of its employees. The Company contributes employee cash compensation deferrals to the trust. The assets of the trust are available to creditors of the Company only in the event the Company becomes insolvent. This trust is considered a VIE because either there is no equity at risk in the trust or because the Company provided the equity interest to its employees in exchange for services rendered. The Company is considered the primary beneficiary of the rabbi trust as it has the ability to select the underlying investments made by the trust, the activities that most significantly impact the economic performance of the rabbi trust. The Company includes the assets of the rabbi trust as a component of other assets and a corresponding liability for the associated benefit obligation in other liabilities in its consolidated balance sheets. At June 30, 2020 and December 31, 2019, the amount of rabbi trust assets and benefit obligation was $3.5 million and $3.7 million, respectively.
v3.20.2
Segment Reporting
 6 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
Segment Reporting

Note 16—Segment Reporting

The Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to the Company’s financial condition and operating results and management’s regular review of the operating results of those services. The Company operates through three operating segments: Banking, Financial Services and Corporate. Additional information about the Company’s reportable segments is included in Cadence’s Annual Report on Form 10-K for the year ended December 31, 2019.

The Banking Segment includes the Commercial Banking, Retail Banking and Private Banking lines of business. The Financial Services Segment includes the Trust, Retail Brokerage, and Investment Services businesses.

Business segment results are determined based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions or in accordance with generally accepted accounting principles.

The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material inter-segment sales or transfers. In the first quarter of 2020, the Company recognized a $443.7 million non-cash goodwill impairment charge representing all the goodwill allocated to the Banking segment (Note 5). The accounting policies used by each reportable segment are the same as those discussed in Note 1 of the Annual Report on Form 10-K for the year ended December 31, 2019. All costs, except corporate administration and income taxes, have been allocated to the reportable segments. Therefore, combined amounts agree to the consolidated totals.

The following tables present the operating results of the segments as of and for the three and six months ended June 30, 2020 and 2019:

 

 

Three Months Ended June 30, 2020

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

158,440

 

 

$

(58

)

 

$

(3,668

)

 

$

154,714

 

Provision for credit losses

 

 

158,811

 

 

 

—

 

 

 

—

 

 

 

158,811

 

Noninterest income

 

 

18,875

 

 

 

10,966

 

 

 

109

 

 

 

29,950

 

Noninterest expense

 

 

78,982

 

 

 

8,262

 

 

 

1,376

 

 

 

88,620

 

Income tax (benefit) expense

 

 

(13,677

)

 

 

377

 

 

 

6,647

 

 

 

(6,653

)

Net (loss) income

 

$

(46,801

)

 

$

2,269

 

 

$

(11,582

)

 

$

(56,114

)

Total assets

 

$

18,760,701

 

 

$

92,638

 

 

$

4,414

 

 

$

18,857,753

 

 

 

 

Three Months Ended June 30, 2019

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

165,832

 

 

$

(592

)

 

$

(4,453

)

 

$

160,787

 

Provision for credit losses

 

 

28,927

 

 

 

—

 

 

 

—

 

 

 

28,927

 

Noninterest income

 

 

23,063

 

 

 

8,444

 

 

 

215

 

 

 

31,722

 

Noninterest expense

 

 

91,266

 

 

 

7,914

 

 

 

1,349

 

 

 

100,529

 

Income tax expense (benefit)

 

 

15,893

 

 

 

(62

)

 

 

(1,124

)

 

 

14,707

 

Net income (loss)

 

$

52,809

 

 

$

—

 

 

$

(4,463

)

 

$

48,346

 

Total assets

 

$

17,371,669

 

 

$

101,028

 

 

$

31,308

 

 

$

17,504,005

 

 

 

 

 

Six Months Ended June 30, 2020

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

315,998

 

 

$

(410

)

 

$

(7,406

)

 

$

308,182

 

Provision for credit losses

 

 

242,240

 

 

 

—

 

 

 

—

 

 

 

242,240

 

Noninterest income (expenses)

 

 

44,217

 

 

 

21,175

 

 

 

(373

)

 

 

65,019

 

Noninterest expense

 

 

607,046

 

 

 

16,974

 

 

 

2,253

 

 

 

626,273

 

Income tax (benefit) expense

 

 

(44,599

)

 

 

473

 

 

 

4,239

 

 

 

(39,887

)

Net (loss) income

 

$

(444,472

)

 

$

3,318

 

 

$

(14,271

)

 

$

(455,425

)

Total assets

 

$

18,760,701

 

 

$

92,638

 

 

$

4,414

 

 

$

18,857,753

 

 

 

 

Six Months Ended June 30, 2019

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

340,228

 

 

$

(1,222

)

 

$

(8,930

)

 

$

330,076

 

Provision for credit losses

 

 

40,137

 

 

 

—

 

 

 

—

 

 

 

40,137

 

Noninterest income

 

 

43,151

 

 

 

18,729

 

 

 

506

 

 

 

62,386

 

Noninterest expense

 

 

188,610

 

 

 

15,547

 

 

 

9,812

 

 

 

213,969

 

Income tax expense (benefit)

 

 

35,754

 

 

 

311

 

 

 

(4,256

)

 

 

31,809

 

Net income (loss)

 

$

118,878

 

 

$

1,649

 

 

$

(13,980

)

 

$

106,547

 

Total assets

 

$

17,371,669

 

 

$

101,028

 

 

$

31,308

 

 

$

17,504,005

 

 
v3.20.2
Equity-based Compensation
 6 Months Ended
Jun. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Equity-based Compensation

Note 17—Equity-based Compensation

The Company administers a long-term incentive compensation plan that permits the granting of incentive awards in the form of stock options, restricted stock, restricted stock units, performance units, stock appreciation rights, or other stock-based awards. The terms of all awards issued under these plans are determined by the Compensation Committee of the Board of Directors.

The Amended and Restated 2015 Omnibus Incentive Plan (the “Plan”) permits the Company to grant to employees and directors various forms of incentive compensation. The principal purposes of this plan are to focus directors, officers, and other employees and consultants on business performance that creates shareholder value, to encourage innovative approaches to the business of the Company, and to encourage ownership of the Company’s stock. The Plan authorizes 7.5 million common share equivalents available for grant, where grants of full value awards (e.g., shares of restricted stock, restricted stock units and performance stock units) count as one share equivalent. The number of remaining share equivalents available for future issuance under the Plan was 3.4 million at June 30, 2020.

Restricted Stock Units

During the six months ended June 30, 2020 and 2019, the Company granted 772,881 and 1,149,963 shares, respectively, of stock-based awards in the form of restricted stock units pursuant to and subject to the provisions of the Plan. The following table summarizes the activity related to restricted stock unit awards:

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Shares

 

 

Weighted Average Fair Value per Unit at Award Date

 

 

Number of Shares

 

 

Weighted Average Fair Value per Unit at Award Date

 

Non-vested at beginning of period

 

 

1,229,863

 

 

$

19.97

 

 

 

273,354

 

 

$

26.49

 

Granted during the period

 

 

772,881

 

 

 

7.80

 

 

 

1,149,963

 

 

 

18.51

 

Vested during the period

 

 

(198,075

)

 

 

20.03

 

 

 

(81,377

)

 

 

22.53

 

Forfeited during the period

 

 

(60,788

)

 

 

19.40

 

 

 

(53,816

)

 

 

20.57

 

Non-vested at end of period

 

 

1,743,881

 

 

$

14.59

 

 

 

1,288,124

 

 

$

19.86

 

 

The restricted stock units granted include both time and performance-based components. Of the time-based restricted stock units granted and remaining at June 30, 2020:

 

•

41,843 units will vest in annual installments ending in the first quarter of 2021;

 

•

2,116 units will vest in annual installments ending in the third quarter of 2021;

 

•

242,641 units will vest in quarterly installments ending in the first quarter of 2022;

 

•

29,181 units will cliff-vest in the first quarter of 2022;

 

•

48,562 units will vest in annual installments ending in the first quarter of 2022;

 

•

177,041 units will vest in annual installments ending in the first quarter of 2023;

 

•

5,252 units will vest in annual installments ending in the second quarter of 2023;

 

•

9,901 units will vest in annual installments ending in the third quarter of 2023;

 

•

764,976 units will vest in annual installments ending in the first quarter of 2024; and

 

•

4,000 units will vest in quarterly installments ending in the second quarter of 2021.

While the grants specify a stated target number of units, the determination of the actual settlement in shares will be based in part on the achievement of certain financial performance measures of the Company. For the performance-based restricted stock units granted, these performance conditions will determine the actual units vesting and can be in the range of 25% to 200% of the units granted. These grants include rights as a shareholder in the form of dividend equivalents. Dividend equivalents for time vested restricted stock units will be paid on each dividend payment date for the Company; dividend equivalents for the performance vesting restricted stock will be accrued and paid on the vested number of shares once the performance is achieved and the shares are issued. The fair value of the restricted stock units was estimated based upon the fair value of the underlying shares on the date of the grant.

The Company recorded $1.2 million and $2.3 million of equity-based compensation expense for the outstanding restricted stock units for the three and six months ended June 30, 2020, respectively, compared to $2.7 million and $3.6 million for the three and six months ended June 30, 2019, respectively. The remaining expense related to unvested restricted stock units is $19.0 million as of June 30, 2020 and will be recognized over service periods ranging from 3 months to 45 months.

Stock Options

During the six months ended June 30, 2020 and 2019, the Company granted zero and 1,602,848 stock options, respectively, to certain executive officers. The options were granted at an exercise price equal to a 15% premium to the fair value of the common stock at the date of grant with a weighted-average exercise price of $20.43. The options vest over a three-year period and expire at the end of seven years. During the six months ended June 30, 2020, 534,283 stock options vested. The Company recorded $309 thousand and $618 thousand of equity-based compensation expense for the outstanding stock options for the three and six months ended June 30, 2020, respectively, compared to $309 thousand and $561 thousand for the three and six months ended June 30, 2019, respectively. The remaining expense related to non-vested stock option grants is $1.9 million at June 30, 2020 and will be recognized over the next 19 months.

The Company used the Black-Scholes option pricing model to estimate the fair value of the stock options. See Note 23 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2019 for a description of the assumptions used for stock option awards issued during 2019.

Employee Stock Purchase Plan

On June 1, 2018, the Company commenced the 2018 Employee Stock Purchase Plan (“ESPP”) whereby employees may purchase the Company’s Class A common stock at a discount of 15% of the fair market value of a share of Class A common stock, defined as the closing price of Class A common stock on the NYSE for the first and last days of the purchase period (as defined in the ESPP). The total amount of the Company’s Class A common stock on which options may be granted under the ESPP shall not exceed 500,000 shares. Shares of Class A common stock subject to any unexercised portion of a terminated, canceled or expired option granted under the ESPP may again be used for options under the ESPP. No participating employee shall have any rights as a shareholder until the issuance of a stock certificate to the employee. There were 117,481 shares and 51,089 shares of Class A common stock purchased in the open market by the ESPP during the six months ended June 30, 2020 and 2019, respectively, which resulted in compensation expense of $31 thousand and $45 thousand for the three and six months ended June 30, 2020, respectively, compared to $80 thousand and $172 thousand for the three and six months ended June 30, 2019, respectively.
v3.20.2
Accumulated Other Comprehensive Income (Loss)
 6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Accumulated Other Comprehensive Income (Loss)

Note 18—Accumulated Other Comprehensive Income (Loss)

Activity within the balances in accumulated other comprehensive income (loss) is shown in the following tables for the six months ended June 30, 2020 and 2019.

 

 

Six Months Ended June 30, 2020

 

(In thousands)

 

Unrealized gains on securities available for sale

 

 

Unrealized gains on derivative instruments designated as cash flow hedges

 

 

Unrealized gains on defined benefit pension plans

 

 

Accumulated other comprehensive income

 

Balance at December 31, 2019

 

$

19,605

 

 

$

95,097

 

 

$

—

 

 

$

114,702

 

Net change

 

 

48,929

 

 

 

109,829

 

 

 

—

 

 

 

158,758

 

Balance at June 30, 2020

 

$

68,534

 

 

$

204,926

 

 

$

—

 

 

$

273,460

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

Unrealized gains (losses) on securities available for sale

 

 

Unrealized gains (losses) on derivative instruments designated as cash flow hedges

 

 

Unrealized gains (losses) on defined benefit pension plans

 

 

Accumulated other comprehensive income (loss)

 

Balance at December 31, 2018

 

$

(24,279

)

 

$

(18,305

)

 

$

(328

)

 

$

(42,912

)

Net change

 

 

40,589

 

 

 

115,457

 

 

 

—

 

 

 

156,046

 

Balance at June 30, 2019

 

$

16,310

 

 

$

97,152

 

 

$

(328

)

 

$

113,134

 

 
v3.20.2
Subsequent Events
 6 Months Ended
Jun. 30, 2020
Subsequent Events [Abstract]  
Subsequent Events

Note 19—Subsequent Events

On July 21, 2020, the Board of Directors of Cadence Bancorporation approved a quarterly cash dividend in the amount of $0.05 per share of outstanding common stock, representing an annualized dividend of $0.20 per share. The dividend will be paid on August 7, 2020 to holders of record of Cadence’s Class A common stock on July 31, 2020.

On August 7, 2020, the District Court, in the consolidated case captioned Frank Miller et al. v. Cadence Bancorporation et al., Case No. H-19-3492-LNH, granted the defendants’ motion to dismiss and entered a final judgment dismissing the case in its entirety, with prejudice. See Note 13 for additional detail.
v3.20.2
Summary of Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying unaudited consolidated financial statements for the Company have been prepared in accordance with instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this report have been included. These interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019. Operating results for the period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

The Company and its subsidiaries follow accounting principles generally accepted in the United States of America, including, where applicable, general practices within the banking industry. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. The assessment of whether or not the Company has a controlling interest (i.e., the primary beneficiary) in a variable-interest entity (“VIE”) is performed on an on-going basis. All equity investments in non-consolidated VIEs are included in “other assets” in the Company’s consolidated balance sheets (see Note 15).

Certain amounts reported in prior years have been reclassified to conform to the 2020 presentation. These reclassifications did not materially impact the Company’s consolidated balance sheets or consolidated statements of operations.

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 855, Subsequent Events, the Company’s management has evaluated subsequent events for potential recognition or disclosure in the consolidated financial statements through the date of the issuance of the consolidated financial statements. No subsequent events were identified that would have required a change to the consolidated financial statements, however, certain matters that occurred after the balance sheet date are included in Note 19 to the consolidated financial statements.
Nature of Operations

Nature of Operations

The Company’s primary subsidiary is the Bank.

The Bank operates under a national bank charter and is subject to regulation by the Office of the Comptroller of the Currency (“OCC”). The Bank provides full banking services in six southern states: Alabama, Florida, Georgia, Mississippi, Tennessee, and Texas.

The Bank’s operating subsidiaries include:

 

•

Linscomb & Williams, Inc. — financial advisory firm;

 

•

Cadence Investment Services, Inc. — provides investment and insurance products; and

 

•

Altera Payroll and Insurance, Inc. — provides payroll processing services and the sale of certain insurance products.

The Company and the Bank also have certain other non-operating and immaterial subsidiaries.
Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of goodwill, intangible assets, and deferred income taxes.
Related Party Transactions

Related Party Transactions

In the normal course of business, loans are made to directors and executive officers and to companies in which they have a significant ownership interest. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties, are consistent with sound banking practices, and are within applicable regulatory and lending limitations. The aggregate balances of related party loans and deposits are insignificant as of June 30, 2020 and December 31, 2019.
Loans and Allowances for Credit Losses

Loans and Allowances for Credit Losses (“ACL”)

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. During 2018 and 2019, the FASB issued additional guidance providing clarifications and corrections, including: ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments–Credit Losses; ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments–Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; ASU 2019-05, Financial Instruments–Credit Losses (Topic 326): Targeted Transition Relief; ASU 2019-10, Financial Instruments–Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates; ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments–Credit Losses (collectively “ASC 326”). ASC 326, better known as Current Expected Credit Losses (“CECL”), among other things:

 

•

Replaces the current incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

 

•

Eliminates existing guidance for acquired credit impaired (“ACI”) loans and requires recognition of the nonaccretable difference as an increase to the allowance for expected credit losses on financial assets purchased with more than insignificant credit deterioration since origination, referred to as purchase credit deteriorated (“PCD”) assets, which will be offset by an increase in the amortized cost of the related loans. For ACI loans accounted for under ASC 310-30 prior to adoption, the guidance in this amendment for PCD assets will be prospectively applied.

 

•

Requires inclusion of expected recoveries, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in-scope financial assets (including collateral dependent assets).

 

•

Amends existing impairment guidance for available-for-sale securities to incorporate an allowance, which will allow for reversals of credit impairments if the credit of an issuer improves.

 

•

Requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio.

The Company adopted ASC 326 and additional related guidance effective January 1, 2020, using the cumulative effect method. As a result of this adoption, the Company recognized an adjustment to retained earnings of $62.8 million, recorded a deferred tax asset of $19.5 million, and reclassed ACL of $6.1 million with respect to PCD loans, formerly ACI loans, as of January 1, 2020. Because the Company adopted ASC 326 with a cumulative effect adjustment as of January 1, 2020, the comparative results as of December 31, 2019, and for the three and six months ended June 30, 2019, have not been restated and continue to be reported under the incurred loss accounting model.

The Company has elected the transition provisions provided by the banking agencies and will phase in the regulatory capital effects of the “Day One” and subsequent provisions for loan losses resulting from adoption of CECL. See Note 12 for additional disclosure.

Other changes to the Company’s significant accounting policies pertaining to Loans and the ACL as incorporated under ASC 326 are as follows:

 

•

In accordance with ASC 326, the Company uses amortized cost as a basis for determining the ACL; whereas, prior to adopting ASC 326, under the incurred loss accounting model the Company used recorded investment. The components of amortized cost include unpaid principal balance (“UPB”), unamortized discounts and premiums, and unamortized deferred fees and costs. As permitted by ASC 326, the Company has elected to not include accrued interest receivable in the determination of amortized cost and measurement of expected credit losses and, instead, has an accounting policy to write off accrued interest deemed uncollectible in a timely manner.

 

•

ASC 326 provides special initial recognition and measurement for the Day One accounting for PCD assets.

 

o

ASC 326 requires entities that purchase certain financial assets (or portfolios of financial assets) with the intention of holding them for investment to determine whether the assets have experienced more-than-insignificant deterioration in credit quality since origination.

 

o

More-than-insignificant deterioration will generally be determined by the asset’s delinquency status, risk rating changes, credit rating, accruing status or other indicators of credit deterioration since origination.

 

o

An entity initially measures the amortized cost of a PCD asset by adding the acquisition date estimate of expected credit losses to the asset’s purchase price. Because the initial estimate for expected credit losses is added to the purchase price to establish the Day One amortized cost, PCD accounting is commonly referred to as a “gross-up” approach. There is no credit loss expense recognized upon acquisition of a PCD asset; rather the “gross-up” is offset by establishment of the initial allowance.

 

o

After initial recognition, the accounting for a PCD asset will generally follow the credit loss model.

 

o

Interest income for a PCD asset is recognized using the effective interest rate (“EIR”) calculated at initial measurement. This EIR is determined by comparing the amortized cost basis of the instrument to its contractual cash flows, consistent with ASC 310-20. Accordingly, since the PCD gross-up is included in the amortized cost, the purchase discount related to estimated credit losses on acquisition is not accreted into interest income. Only the noncredit-related discount or premium is accreted or amortized, using the EIR that was calculated at the time the asset was acquired.

 

•

Commercial loans are generally placed on nonaccrual status when principal or interest is past due 90 days or more unless the loan is well secured and in the process of collection. Consumer loans, including residential first and second lien loans secured by real estate, are generally placed on nonaccrual status when they are 120 or more days past due. Prior to the adoption of ASC 326, the majority of our current PCD loans were treated as accruing loans as the Company was able to reasonably predict future cash flows at the unit of account or pool level. After adoption, the accruing status of each individual loan will be subject to the nonaccrual polices described above.

 

•

The accrual of interest, as well as the amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium, is generally discontinued at the time the loan is placed on nonaccrual status. All accrued but uncollected interest for loans that are placed on nonaccrual status is reversed through interest income. Cash receipts received on nonaccrual loans are generally applied against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income (i.e., cost recovery method). However, interest may be accounted for under the cash-basis method as long as the remaining amortized costs in the loan is deemed fully collectible.

The ACL is maintained through charges to income in the form of a provision for credit losses at a level management believes is adequate to absorb an estimate of expected credit losses over the contractual life of the loan portfolio as of the reporting date. Events that are not within the Company’s control, such as changes in economic factors, could change subsequent to the reporting date and could cause the ACL to be overstated or understated. The amount of the ACL is affected by loan charge-offs, which decrease the ACL; recoveries on loans previously charged off, which increase the ACL; and the provision for credit losses charged to income, which increases the ACL.

The following is a description of the Company’s process for estimating the ACL for all loans in its portfolio, including PCD loans:

 

•

The quantitative component of the Company’s ACL model includes three segments: commercial (“C&I”), commercial real estate (“CRE”), and consumer.

 

o

The C&I loan segment includes loans to clients in specialized industries, including restaurant, healthcare, and technology. Additional commercial lending activities include energy, general corporate loans, business banking and community banking loans. The C&I segment uses loan level through-the-cycle probability-of-default (“PD”) and loss-given-default (“LGD”) ratings generated by Cadence’s scorecards. These PD ratings are conditioned by industry to reflect the effect of certain forecasted macroeconomic variables, such as market value, interest rate spreads, and unemployment rate.

 

o

The CRE loan segment includes loans which are secured by a variety of property types, including multi-family dwellings, office buildings, industrial properties, and retail facilities. The Company offers construction financing, acquisition or refinancing of properties primarily located in our markets in Texas and the southeast United States. The CRE loan segment uses a loss-rate model, where lifetime loss rates are correlated closely with characteristics such as origination LTV, vintage/origination quality, and loan age, as well as with macroeconomic factors, including GDP growth rate, unemployment rate, and CRE market price change.

 

o

The consumer loan segment primarily consists of one-to-four family residential real estate loans with terms ranging from 10 to 30 years; however, the portfolio is heavily weighted to the 30-year term. The Company offers both fixed and adjustable interest rates and does not originate subprime loans. These loans are typically closed-end first lien loans for purposes of purchasing property, or for refinancing existing loans with or without cash out. Our loans are primarily owner occupied, full documentation loans. This segment also offers consumer loans to our customers for personal, family and household purposes, auto, boat and personal installment loans, however, these loans are a small percentage of the portfolio. The consumer loan segment uses a loss-rate model. Life-time loss rates capture the effect of credit score, loan age, size, and other loan characteristics and include Cadence’s own assumptions for LGD and the expected life of the loan. The loss rates are also affected by macroeconomic variables such as the unemployment rate, retails sales percent change year-over-year, household employment percent change year-over-year, Federal Housing Finance Agency (“FHFA”) home price index, housing affordability index at origination, and median house price.

 

o

When foreclosure of collateral securing a loan is probable, ASC 326 requires that the expected credit loss on a loan be measured based on the fair value of the collateral. When management’s measured value of the impaired loan is less than the amortized cost in the loan, the amount of the impairment is recorded as a specific reserve. These specific reserves are determined on an individual loan basis based on management’s current evaluation of the loss exposure for each credit, given the payment status, the financial condition of the borrower and any guarantors and the value of any underlying collateral. Loans that are individually evaluated are excluded from the collective evaluations described above. Changes in specific reserves from period to period are the result of changes in the circumstances of individual loans such as charge-offs, payments received, changes in collateral values or other factors.

 

o

For any collateral dependent loan where foreclosure is not probable, but repayment is expected to be provided primarily from the sale or operation of the collateral and the borrower is experiencing financial difficulty, a practical expedient for measuring the credit loss is allowed using the fair value of the collateral. The Company expects to elect this for qualifying credits particularly when there are unique risk characteristics which prohibit them from being collectively evaluated. When repayment will be from the operation of the collateral, generally fair value is estimated on the present value of expected cash flows from the operation of the collateral (an income approach). When repayment is expected from the sale of the collateral, the present value of the costs to sell will be deducted from the fair value of the collateral measured as of the measurement date.

 

•

As described above, loans included in each segment are collectively or individually evaluated to determine an expected credit loss which is allocated to the individual loans. Due to the growth of the credit portfolio into new geographic areas and into new commercial markets and the lack of seasoning of the portfolio, the Company recognizes there is limited historical loss information to adequately estimate loss rates based primarily on the Company’s historical loss data. Therefore, external loss data was acquired from the research arm of a nationally recognized risk rating agency to act as a proxy for loss rates within the ACL models until sufficient loss history can be accumulated from the Company’s loss experience in these segments. These loss rates were developed specifically for the Company’s customer risk profile and portfolio mix.

 

•

ASC 326 acknowledges that, because historical experience may not fully reflect an institution's expectations about the future, the institution should adjust historical loss information, as necessary, to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information. The quantitative models use baseline macroeconomic scenario forecast data provided by a nationally recognized rating agency for a reasonable and supportable period in estimating the current expected credit losses. The Company has elected an input reversion approach whereby the selected economic forecast for the identified macroeconomic variables revert to their historical trends. As a rule, the forecasts revert to their long-term equilibrium within two to five years or one “business cycle” depending on the segment. The Company monitors actual loss experience for each loan segment for adjustments required to the loss rates utilized.

 

•

Additionally, to adjust historical credit loss information for current conditions and reasonable and supportable forecasts, all significant factors relevant to determining the expected collectability of financial assets as of each reporting date should be considered. ASC 326 provides examples of factors an institution may consider. The banking regulatory agencies believe the qualitative or environmental factors identified in the December 2006 Interagency Policy Statement on the Allowance for Loan and Lease Losses should continue to be relevant under CECL and are covered by the examples of factors that may be considered under ASC 326. These factors require judgments that cannot be subjected to exact mathematical calculation. There are no formulas for translating them into a basis-point adjustment to be applied to historical losses. The adjustment must reflect management’s overall estimate of the extent to which expected losses on a segment of loans will differ from historical loss experience. It would include management’s opinion on the effects related to current conditions and reasonable and supportable forecasts, that are not already reflected in the quantitative loss estimate. These adjustments are highly subjective estimates that will be determined each quarter. To facilitate this process, management has developed certain analyses of selected internal and external data to assist management in determining the risk of imprecision. These primary adjustment factors include, but are not limited to the following:

 

o

Lending policies, procedures, practices or philosophy, including underwriting standards and collection, charge-off and recovery practices

 

o

Changes in national and service market economic and business conditions that could affect the level of default rates or the level of losses once a default has occurred within the Bank’s existing loan portfolio

 

o

Changes in the nature or size of the portfolio

 

o

Changes in portfolio collateral values

 

o

Changes in the experience, ability, and depth of lending management, and other relevant staff

 

o

Volume and/or severity of past due and classified credits or trends in the volume of losses, non-accrual credits, impaired credits, and other credit modifications

 

o

Quality of the institution’s credit review system and processes and the degree of oversight by bank management and the board of directors

 

o

Concentrations of credit such as industry and lines of business

 

o

Competition and legal and regulatory requirements or other external factors

 

•

The reserve for unfunded commitments is determined by assessing three distinct components: unfunded commitment volatility in the portfolio (excluding commitments related to letters of credit and commitment letters), adversely rated letters of credit, and adversely rated lines of credit. Unfunded commitment volatility is calculated on a trailing nine quarter basis; the resulting expected funding amount is then reserved for based on the current combined reserve rate of the funded portfolio. Adversely rated letters and lines of credit are assessed individually based on funding and loss expectations as of the period end. The reserve for unfunded commitments is recorded in other liabilities and the provision for losses on unfunded commitments is included in the provision for credit losses. Prior to adoption, the provision for losses on unfunded commitments was recorded in other noninterest expense. As of June 30, 2020 and December 31, 2019, the reserve for unfunded commitments totaled $3.8 million and $2.0 million, respectively.
Recently Adopted and Pending Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss. ASU 2017-04 became effective for the Company on January 1, 2020. See Note 5, Goodwill and Other Intangible Assets.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 amends the disclosure requirements of ASC 820 to remove disclosure of transfers between Level 1 and Level 2 of the fair value hierarchy and the valuation process for Level 3 fair value measurements, among other amendments, and to include disclosure of the range and weighted average used in Level 3 fair value measurements, among other amendments. Amendments should be applied retrospectively to all periods presented, except for certain amendments, which should be applied prospectively. ASU 2018-13 became effective for the Company on January 1, 2020. The adoption of ASU 2018-13 did not have a significant impact on the Company’s fair value disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force). This standard aligns the requirements for capitalizing implementation costs in a hosting arrangement service contract with the existing guidance for capitalizing implementation costs incurred for an internal-use software license. This standard also requires capitalizing or expensing implementation costs based on the nature of the costs and the project stage during which they are incurred and establishes additional disclosure requirements. This standard became effective for Cadence on January 1, 2020. The adoption of this guidance had no material impact on the consolidated financial statements.

In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This ASU amends ASC 810 guidance on how all reporting entities evaluate indirect interests held through related parties in common control arrangements when determining whether fees paid to decision makers and service providers are variable interests. ASU 2018-17 became effective for Cadence on January 1, 2020. The adoption of this guidance had no material impact on the consolidated financial statements.

In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments–Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, that clarifies and improves areas of guidance related to the recently issued standards on credit losses, hedging activities, and recognition and measurement. The amendments clarify the scope of the credit losses standard and address issues related to accrued interest receivable balances, recoveries, variable interest rates, and prepayments, among other things. With respect to hedge accounting, the amendments address partial-term fair value hedges, fair value hedge basis adjustments, application by not-for-profit entities and private companies, and certain transition requirements, among other things. On recognizing and measuring financial instruments, they address the scope of the guidance, the requirement for remeasurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities must be remeasured at historical exchange rates.

The credit losses and hedging amendments have the same effective dates as the respective standards, unless an entity has already adopted the standards. The adoption of the credit loss standard, or CECL, is discussed above. Since the Company early adopted the guidance in ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, in 2018, the amended hedge accounting guidance in ASU 2019-04 became effective as of the beginning of the first annual reporting period beginning after April 25, 2019. The Company adopted this guidance on January 1, 2020, with no material impact.

In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments—Credit Losses (Topic 326) and Leases (Topic 842)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update). The ASU adds and amends SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 119 related to the new credit losses standard and comments by the SEC staff related to the revised effective date of the new leases standard. The guidance became effective upon issuance and did not have a material impact.

In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. The ASU makes narrow-scope improvements to various financial instruments topics, including the new credit losses standard. Transition varies, with some of the amendments effective upon issuance for certain entities. The amendments related to ASU 2019-04 and ASU 2016-13 became effective for Cadence on January 1, 2020. Other amendments became effective upon issuance (March 9, 2020). The adoption of this guidance had no material impact on the consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can elect various optional expedients for hedging relationships affected by reference rate reform, if certain criteria are met. Entities can make a one-time election to sell and/or transfer to available-for-sale or trading any held-to-maturity debt securities that refer to an interest rate affected by reference rate reform and were classified as HTM before January 1, 2020. The guidance became effective upon issuance (March 12, 2020). As Cadence has no held-to-maturity debt securities, the adoption of the guidance had no impact.

Pending Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU eliminates certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted in interim or annual periods for which entities have not yet issued financial statements. Entities that elect to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, entities that elect early adoption must adopt all the amendments in the same period. Entities will apply the guidance prospectively, except for certain amendments. The Company is evaluating the impact this guidance may have on its consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force). The guidance clarifies that entities that apply the measurement alternative in ASC 321 should consider observable transactions that result in entities initially applying or discontinuing the use of the equity method of accounting under ASC 323. The guidance also says that certain forward contracts and purchased options on equity securities that are not deemed to be in-substance common stock under ASC 323 or accounted for as derivatives under ASC 815 are in the scope of ASC 321. The guidance is effective for public business entities for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The guidance should be applied prospectively. The Company is evaluating the impact this guidance may have on its consolidated financial statements.
v3.20.2
Business Combinations (Tables)
 6 Months Ended
Jun. 30, 2020
Business Combinations [Abstract]  
Summary of Purchase Price Allocation and Consideration Paid

The following table provides the purchase price allocation and the consideration paid for State Bank’s net assets.

(In thousands, except shares and per share data)

 

As Recorded by Cadence

 

Assets

 

 

 

 

Cash and cash equivalents

 

$

414,342

 

Investment securities available-for-sale

 

 

667,865

 

Loans held for sale

 

 

148,469

 

Loans

 

 

3,317,897

 

Premises and equipment

 

 

65,646

 

Cash surrender value of life insurance

 

 

69,252

 

Intangible assets

 

 

117,038

 

Other assets

 

 

47,146

 

Total assets acquired

 

$

4,847,655

 

Liabilities

 

 

 

 

Deposits

 

$

4,096,665

 

Short term borrowings

 

 

23,899

 

Other liabilities

 

 

76,368

 

Total liabilities assumed

 

 

4,196,932

 

Net identifiable assets acquired over liabilities assumed

 

 

650,723

 

Goodwill

 

 

175,657

 

Net assets acquired over liabilities assumed

 

$

826,380

 

Consideration:

 

 

 

 

Cadence Bancorporation common shares issued

 

 

49,232,008

 

Fair value per share of the Company's common stock

 

$

16.78

 

Company common stock issued

 

 

826,113

 

Fair value of unexercised warrants

 

 

267

 

Fair value of total consideration transferred

 

$

826,380

 

 

 

 

 

 
v3.20.2
Investment Securities (Tables)
 6 Months Ended
Jun. 30, 2020
Investments Debt And Equity Securities [Abstract]  
Summary of Amortized Cost and Estimated Fair Value of Securities Available-for-Sale

A summary of amortized cost and estimated fair value of securities available-for-sale at June 30, 2020 and December 31, 2019 is as follows:

 

(In thousands)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

105,499

 

 

$

617

 

 

$

612

 

 

$

105,504

 

Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential pass-through:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by GNMA

 

 

112,167

 

 

 

3,145

 

 

 

—

 

 

 

115,312

 

Issued by FNMA and FHLMC

 

 

1,596,585

 

 

 

51,321

 

 

 

54

 

 

 

1,647,852

 

Other residential mortgage-backed securities

 

 

230,319

 

 

 

7,216

 

 

 

—

 

 

 

237,535

 

Commercial mortgage-backed securities

 

 

300,597

 

 

 

13,837

 

 

 

298

 

 

 

314,136

 

Total MBS

 

 

2,239,668

 

 

 

75,519

 

 

 

352

 

 

 

2,314,835

 

Obligations of states and municipal subdivisions

 

 

229,115

 

 

 

12,061

 

 

 

82

 

 

 

241,094

 

Total securities available-for-sale

 

$

2,574,282

 

 

$

88,197

 

 

$

1,046

 

 

$

2,661,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

69,464

 

 

$

57

 

 

$

415

 

 

$

69,106

 

Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential pass-through:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guaranteed by GNMA

 

 

98,122

 

 

 

1,205

 

 

 

245

 

 

 

99,082

 

Issued by FNMA and FHLMC

 

 

1,423,771

 

 

 

13,128

 

 

 

1,402

 

 

 

1,435,497

 

Other residential mortgage-backed securities

 

 

292,019

 

 

 

4,197

 

 

 

384

 

 

 

295,832

 

Commercial mortgage-backed securities

 

 

276,533

 

 

 

2,448

 

 

 

3,023

 

 

 

275,958

 

Total MBS

 

 

2,090,445

 

 

 

20,978

 

 

 

5,054

 

 

 

2,106,369

 

Obligations of states and municipal subdivisions

 

 

185,882

 

 

 

7,235

 

 

 

—

 

 

 

193,117

 

Total securities available-for-sale

 

$

2,345,791

 

 

$

28,270

 

 

$

5,469

 

 

$

2,368,592

 

 
Schedule of Contractual Maturities of Securities Available-for-Sale

The scheduled contractual maturities of securities available-for-sale at June 30, 2020 were as follows:

 

 

 

Amortized

 

 

Estimated

 

(In thousands)

 

Cost

 

 

Fair Value

 

Due in one year or less

 

$

1,222

 

 

$

1,225

 

Due after one year through five years

 

 

1,096

 

 

 

1,087

 

Due after five years through ten years

 

 

86,559

 

 

 

86,711

 

Due after ten years

 

 

245,737

 

 

 

257,575

 

Mortgage-backed securities

 

 

2,239,668

 

 

 

2,314,835

 

Total

 

$

2,574,282

 

 

$

2,661,433

 

 
Summary of Gross Gains, and Gross Losses on Sales of Securities Available for Sale Gross gains and gross losses on sales of securities available-for-sale for the three and six months ended June 30, 2020 and 2019 are presented below.

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Gross realized gains

 

$

2,286

 

 

$

1,810

 

 

$

5,280

 

 

$

1,813

 

Gross realized losses

 

 

—

 

 

 

872

 

 

 

—

 

 

 

887

 

Realized gains, net

 

$

2,286

 

 

$

938

 

 

$

5,280

 

 

$

926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Schedule of Securities Classified as Available-for-Sale with Gross Unrealized Losses Aggregated by Category and Length of Time

Information pertaining to securities available-for-sale with gross unrealized losses aggregated by category and length of time the securities have been in a continuous loss position was as follows:

 

 

Unrealized Loss Analysis

 

 

 

Losses < 12 Months

 

 

Losses > 12 Months

 

(In thousands)

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

48,760

 

 

$

401

 

 

$

12,074

 

 

$

211

 

Mortgage-backed securities

 

 

84,554

 

 

 

350

 

 

 

276

 

 

 

2

 

Obligations of states and municipal subdivisions

 

 

9,844

 

 

 

82

 

 

 

—

 

 

 

—

 

Total

 

$

143,158

 

 

$

833

 

 

$

12,350

 

 

$

213

 

 

 

 

Unrealized Loss Analysis

 

 

 

Losses < 12 Months

 

 

Losses > 12 Months

 

(In thousands)

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

 

Estimated

Fair Value

 

 

Gross

Unrealized

Losses

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations of U.S. government agencies

 

$

33,053

 

 

$

209

 

 

$

13,703

 

 

$

206

 

Mortgage-backed securities

 

 

708,991

 

 

 

4,466

 

 

 

61,506

 

 

 

588

 

Obligations of states and municipal subdivisions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

742,044

 

 

$

4,675

 

 

$

75,209

 

 

$

794

 

 
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses (Tables)
 6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Summary of Loans Held for Sale by Portfolio Segment

The following table presents a summary of the loans held for sale by portfolio segment at the lower of amortized cost or fair value as of June 30, 2020 and December 31, 2019.

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Commercial and industrial

 

$

30,865

 

 

$

34,767

 

Commercial real estate

 

 

1,098

 

 

 

49,894

 

Consumer

 

 

6,668

 

 

 

2,988

 

Total loans held for sale(1)

 

$

38,631

 

 

$

87,649

 

 

 

 

 

 

 

 

 

 

(1) $0.1 million and $0.4 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020 and December 31, 2019, respectively.

 
Summary of Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable

The following table presents total loans outstanding by portfolio segment and class of financing receivable as of June 30, 2020 and December 31, 2019. Outstanding balances include originated loans, Acquired Noncredit Impaired (“ANCI”) loans, and Purchase Credit Deteriorated (“PCD”) loans, formerly referred to as acquired credit impaired (“ACI”) loans. See Note 1 for additional information regarding the adoption of the new CECL accounting standard.

(In thousands)

 

June 30, 2020

 

 

December 31, 2019(2)

 

Commercial and industrial

 

 

 

 

 

 

 

 

General C&I

 

$

4,948,200

 

 

$

4,517,016

 

Energy

 

 

1,449,274

 

 

 

1,419,957

 

Restaurant

 

 

1,146,785

 

 

 

1,027,421

 

Healthcare

 

 

559,584

 

 

 

474,264

 

Total commercial and industrial

 

 

8,103,843

 

 

 

7,438,658

 

Commercial real estate

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

1,648,520

 

 

 

1,691,694

 

Multifamily

 

 

769,879

 

 

 

659,902

 

Office

 

 

558,525

 

 

 

535,676

 

Total commercial real estate

 

 

2,976,924

 

 

 

2,887,272

 

Consumer

 

 

 

 

 

 

 

 

Residential

 

 

2,537,695

 

 

 

2,568,295

 

Other

 

 

80,635

 

 

 

89,430

 

Total consumer

 

 

2,618,330

 

 

 

2,657,725

 

Total(1)

 

$

13,699,097

 

 

$

12,983,655

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million and $44.5 million of net accrued interest receivable is excluded from the total loan balances above as of June 30, 2020 and December 31, 2019, respectively.

 

(2) December 31, 2019 balances have been reclassified to conform to 2020 presentation for comparability purposes.

 
Summary of PPP Loans by Portfolio Segment and Class of Financing Receivable

The following table presents the Company’s PPP loans by portfolio segment and class of financing receivable as of June 30, 2020.

(In thousands)

 

Amortized Cost

 

 

% of PPP Portfolio

 

Commercial and industrial

 

 

 

 

 

 

 

 

General C&I

 

$

717,155

 

 

 

69.5

%

Energy sector

 

 

79,034

 

 

 

7.6

 

Restaurant industry

 

 

141,218

 

 

 

13.7

 

Healthcare

 

 

94,591

 

 

 

9.2

 

Total PPP loans

 

$

1,031,998

 

 

 

100.0

%

As a % of total loans

 

 

7.5

%

 

 

 

 
Summary of Allowance for Credit Losses The following tables provide a summary of the activity in the ACL and the reserve for unfunded commitments for the three and six months ended June 30, 2020 and 2019.

 

 

For the Three Months Ended June 30, 2020

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Total Allowance for Credit Losses

 

 

Reserve for Unfunded Commitments(1)

 

 

Total

 

As of March 31, 2020

 

$

154,585

 

 

$

53,418

 

 

$

37,243

 

 

$

245,246

 

 

$

3,222

 

 

$

248,468

 

Provision for credit losses

 

 

95,325

 

 

 

59,359

 

 

 

3,522

 

 

 

158,206

 

 

 

605

 

 

 

158,811

 

Charge-offs

 

 

(32,816

)

 

 

(327

)

 

 

(309

)

 

 

(33,452

)

 

 

—

 

 

 

(33,452

)

Recoveries

 

 

702

 

 

 

30

 

 

 

169

 

 

 

901

 

 

 

—

 

 

 

901

 

As of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

$

3,827

 

 

$

374,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The reserve for unfunded commitments is included in other liabilities on the consolidated balance sheets at June 30, 2020 and March 31, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2020

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Total Allowance for Credit Losses

 

 

Reserve for Unfunded Commitments(1)

 

 

Total

 

As of December 31, 2019

 

$

89,796

 

 

$

15,319

 

 

$

14,528

 

 

$

119,643

 

 

$

1,699

 

 

$

121,342

 

Cumulative effect of adoption of CECL

 

 

32,951

 

 

 

20,599

 

 

 

22,300

 

 

 

75,850

 

 

 

332

 

 

 

76,182

 

As of January 1, 2020

 

 

122,747

 

 

 

35,918

 

 

 

36,828

 

 

 

195,493

 

 

 

2,031

 

 

 

197,524

 

Provision for credit losses

 

 

159,008

 

 

 

77,158

 

 

 

4,278

 

 

 

240,444

 

 

 

1,796

 

 

 

242,240

 

Charge-offs

 

 

(64,803

)

 

 

(806

)

 

 

(941

)

 

 

(66,550

)

 

 

—

 

 

 

(66,550

)

Recoveries

 

 

844

 

 

 

210

 

 

 

460

 

 

 

1,514

 

 

 

—

 

 

 

1,514

 

As of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

$

3,827

 

 

$

374,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated

 

$

189,085

 

 

$

111,945

 

 

$

40,625

 

 

$

341,655

 

 

 

 

 

 

 

 

 

Loans individually evaluated

 

 

28,711

 

 

 

535

 

 

 

—

 

 

 

29,246

 

 

 

 

 

 

 

 

 

ACL as of June 30, 2020

 

$

217,796

 

 

$

112,480

 

 

$

40,625

 

 

$

370,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans (amortized cost)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated

 

$

7,918,246

 

 

$

2,954,091

 

 

$

2,615,866

 

 

$

13,488,203

 

 

 

 

 

 

 

 

 

Loans individually evaluated

 

 

185,597

 

 

 

22,833

 

 

 

2,464

 

 

 

210,894

 

 

 

 

 

 

 

 

 

Loans as of June 30, 2020(2)

 

$

8,103,843

 

 

$

2,976,924

 

 

$

2,618,330

 

 

$

13,699,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) The reserve for unfunded commitments is included in other liabilities on the consolidated balance sheets at June 30, 2020 and December 31, 2019.

 

(2) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

 

 

 

For the Three Months Ended June 30, 2019

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Small Business

 

 

Total Allowance for Credit Losses

 

As of March 31, 2019

 

$

75,526

 

 

$

10,469

 

 

$

14,690

 

 

$

4,353

 

 

$

105,038

 

Provision for credit losses

 

 

24,652

 

 

 

3,201

 

 

 

240

 

 

 

834

 

 

 

28,927

 

Charge-offs

 

 

(18,001

)

 

 

(253

)

 

 

(534

)

 

 

(193

)

 

 

(18,981

)

Recoveries

 

 

269

 

 

 

—

 

 

 

68

 

 

 

24

 

 

 

361

 

As of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30, 2019

 

(In thousands)

 

Commercial and Industrial

 

 

Commercial Real Estate

 

 

Consumer

 

 

Small Business

 

 

Total Allowance for Credit Losses

 

As of December 31, 2018

 

$

66,316

 

 

$

10,452

 

 

$

13,703

 

 

$

3,907

 

 

$

94,378

 

Provision for credit losses

 

 

33,951

 

 

 

3,303

 

 

 

1,446

 

 

 

1,437

 

 

 

40,137

 

Charge-offs

 

 

(18,462

)

 

 

(338

)

 

 

(768

)

 

 

(351

)

 

 

(19,919

)

Recoveries

 

 

641

 

 

 

—

 

 

 

83

 

 

 

25

 

 

 

749

 

As of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated for impairment

 

$

63,783

 

 

$

13,407

 

 

$

14,398

 

 

$

4,935

 

 

$

96,523

 

Loans individually evaluated for impairment

 

 

18,663

 

 

 

10

 

 

 

66

 

 

 

83

 

 

 

18,822

 

ACL as of June 30, 2019(1)

 

$

82,446

 

 

$

13,417

 

 

$

14,464

 

 

$

5,018

 

 

$

115,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans collectively evaluated for impairment

 

$

7,293,236

 

 

$

2,852,595

 

 

$

2,679,802

 

 

$

767,303

 

 

$

13,592,936

 

Loans individually evaluated for impairment

 

 

113,063

 

 

 

7,339

 

 

 

1,763

 

 

 

411

 

 

 

122,576

 

Loans as of June 30, 2019(1)

 

$

7,406,299

 

 

$

2,859,934

 

 

$

2,681,565

 

 

$

767,714

 

 

$

13,715,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Allowance for credit losses and loan balances as calculated and reported under the incurred loss accounting model and reported at June 30, 2019.

 
Summary of Credit Quality Indicator and by Origination Year

The following table provides information by each credit quality indicator and by origination year (vintage) as of June 30, 2020. The Company defines origination year (vintage) for the purposes of disclosure as the year of execution of the original loan agreement. Loans that are modified as a TDR are considered to be a continuation of the original loan, therefore the origination date of the original loan is reflected as the vintage date. This presentation is consistent with the vintage determination used in the ACL model. The criticized loans with a 2020 vintage relate to credits in resolution.

 

 

Amortized Cost Basis by Origination Year

 

 

 

 

 

 

Revolving Credits

 

 

 

 

 

(In thousands)

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015 and Prior

 

 

Revolving Loans

 

 

Converted to

Term Loans

 

 

Total

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

$

1,298,422

 

 

$

760,994

 

 

$

1,065,899

 

 

$

639,740

 

 

$

379,240

 

 

$

661,520

 

 

$

2,395,110

 

 

$

16,712

 

 

$

7,217,637

 

Special mention

 

 

459

 

 

 

3,716

 

 

 

45,348

 

 

 

71,407

 

 

 

37,513

 

 

 

40,930

 

 

 

191,612

 

 

 

234

 

 

 

391,219

 

Substandard

 

 

3,676

 

 

 

8,616

 

 

 

112,904

 

 

 

33,882

 

 

 

41,116

 

 

 

97,183

 

 

 

169,030

 

 

 

—

 

 

 

466,407

 

Doubtful

 

 

—

 

 

 

1,784

 

 

 

6,675

 

 

 

6,957

 

 

 

4,521

 

 

 

1,577

 

 

 

7,066

 

 

 

—

 

 

 

28,580

 

Total commercial and industrial

 

 

1,302,557

 

 

 

775,110

 

 

 

1,230,826

 

 

 

751,986

 

 

 

462,390

 

 

 

801,210

 

 

 

2,762,818

 

 

 

16,946

 

 

 

8,103,843

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pass

 

 

179,936

 

 

 

450,869

 

 

 

749,786

 

 

 

623,234

 

 

 

254,228

 

 

 

509,130

 

 

 

105,881

 

 

 

—

 

 

 

2,873,064

 

Special mention

 

 

275

 

 

 

45

 

 

 

16,090

 

 

 

21,825

 

 

 

11,613

 

 

 

11,215

 

 

 

193

 

 

 

—

 

 

 

61,256

 

Substandard

 

 

—

 

 

 

210

 

 

 

18,707

 

 

 

5,873

 

 

 

9,719

 

 

 

7,501

 

 

 

60

 

 

 

—

 

 

 

42,070

 

Doubtful

 

 

—

 

 

 

—

 

 

 

534

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

534

 

Total commercial real estate

 

 

180,211

 

 

 

451,124

 

 

 

785,117

 

 

 

650,932

 

 

 

275,560

 

 

 

527,846

 

 

 

106,134

 

 

 

—

 

 

 

2,976,924

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

199,779

 

 

 

466,604

 

 

 

587,756

 

 

 

330,294

 

 

 

297,718

 

 

 

464,492

 

 

 

237,681

 

 

 

968

 

 

 

2,585,292

 

30-59 days past due

 

 

—

 

 

 

1,537

 

 

 

4,193

 

 

 

549

 

 

 

1,487

 

 

 

4,099

 

 

 

350

 

 

 

—

 

 

 

12,215

 

60-89 days past due

 

 

—

 

 

 

490

 

 

 

4,232

 

 

 

392

 

 

 

1,952

 

 

 

2,743

 

 

 

88

 

 

 

—

 

 

 

9,897

 

90+ days past due

 

 

—

 

 

 

196

 

 

 

4,385

 

 

 

662

 

 

 

836

 

 

 

4,847

 

 

 

—

 

 

 

—

 

 

 

10,926

 

Total consumer

 

 

199,779

 

 

 

468,827

 

 

 

600,566

 

 

 

331,897

 

 

 

301,993

 

 

 

476,181

 

 

 

238,119

 

 

 

968

 

 

 

2,618,330

 

Total(1)

 

$

1,682,547

 

 

$

1,695,061

 

 

$

2,616,509

 

 

$

1,734,815

 

 

$

1,039,943

 

 

$

1,805,237

 

 

$

3,107,071

 

 

$

17,914

 

 

$

13,699,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 
Past Due Financing Receivables

The following tables provide an aging analysis of past due loans by portfolio segment and class of financing receivable.

 

 

Age Analysis of Past-Due Loans as of June 30, 2020

 

 

 

 

 

 

 

 

 

 

90+ Days

 

(In thousands)

 

30-59 Days Past Due

 

 

60-89 Days Past Due

 

 

90+ Days Past Due

 

 

Total

 

 

Current

 

 

Total(1)

 

 

Past Due and Accruing

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

3,257

 

 

$

1,060

 

 

$

18,155

 

 

$

22,472

 

 

$

4,925,728

 

 

$

4,948,200

 

 

$

126

 

Energy

 

 

964

 

 

 

25,947

 

 

 

3,820

 

 

 

30,731

 

 

 

1,418,543

 

 

 

1,449,274

 

 

 

—

 

Restaurant

 

 

352

 

 

 

31

 

 

 

14,898

 

 

 

15,281

 

 

 

1,131,504

 

 

 

1,146,785

 

 

 

—

 

Healthcare

 

 

412

 

 

 

1,416

 

 

 

2,504

 

 

 

4,332

 

 

 

555,252

 

 

 

559,584

 

 

 

—

 

Total commercial and industrial

 

 

4,985

 

 

 

28,454

 

 

 

39,377

 

 

 

72,816

 

 

 

8,031,027

 

 

 

8,103,843

 

 

 

126

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

1,027

 

 

 

1,631

 

 

 

1,682

 

 

 

4,340

 

 

 

1,644,180

 

 

 

1,648,520

 

 

 

71

 

Multifamily

 

 

218

 

 

 

—

 

 

 

—

 

 

 

218

 

 

 

769,661

 

 

 

769,879

 

 

 

—

 

Office

 

 

513

 

 

 

—

 

 

 

92

 

 

 

605

 

 

 

557,920

 

 

 

558,525

 

 

 

—

 

Total commercial real estate

 

 

1,758

 

 

 

1,631

 

 

 

1,774

 

 

 

5,163

 

 

 

2,971,761

 

 

 

2,976,924

 

 

 

71

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

12,080

 

 

 

9,502

 

 

 

10,888

 

 

 

32,470

 

 

 

2,505,225

 

 

 

2,537,695

 

 

 

2,894

 

Other

 

 

135

 

 

 

395

 

 

 

38

 

 

 

568

 

 

 

80,067

 

 

 

80,635

 

 

 

32

 

Total consumer

 

 

12,215

 

 

 

9,897

 

 

 

10,926

 

 

 

33,038

 

 

 

2,585,292

 

 

 

2,618,330

 

 

 

2,926

 

Total

 

$

18,958

 

 

$

39,982

 

 

$

52,077

 

 

$

111,017

 

 

$

13,588,080

 

 

$

13,699,097

 

 

$

3,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $48.2 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

 

 

 

Age Analysis of Past-Due Loans as of December 31, 2019

 

 

 

 

 

 

 

 

 

 

90+ Days

 

(In thousands)

 

30-59 Days Past Due

 

 

60-89 Days Past Due

 

 

90+ Days Past Due

 

 

Total

 

 

Current

 

 

Total(1)

 

 

Past Due and Accruing

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

23,143

 

 

$

1,117

 

 

$

15,183

 

 

$

39,443

 

 

$

4,477,573

 

 

$

4,517,016

 

 

$

85

 

Energy

 

 

—

 

 

 

—

 

 

 

8,166

 

 

 

8,166

 

 

 

1,411,791

 

 

 

1,419,957

 

 

 

—

 

Restaurant

 

 

1,219

 

 

 

1,284

 

 

 

8,021

 

 

 

10,524

 

 

 

1,016,897

 

 

 

1,027,421

 

 

 

108

 

Healthcare

 

 

497

 

 

 

41

 

 

 

4,143

 

 

 

4,681

 

 

 

469,583

 

 

 

474,264

 

 

 

—

 

Total commercial and industrial

 

 

24,859

 

 

 

2,442

 

 

 

35,513

 

 

 

62,814

 

 

 

7,375,844

 

 

 

7,438,658

 

 

 

193

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

3,354

 

 

 

133

 

 

 

2,255

 

 

 

5,742

 

 

 

1,685,952

 

 

 

1,691,694

 

 

 

—

 

Multifamily

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

659,902

 

 

 

659,902

 

 

 

—

 

Office

 

 

253

 

 

 

—

 

 

 

1,219

 

 

 

1,472

 

 

 

534,204

 

 

 

535,676

 

 

 

—

 

Total commercial real estate

 

 

3,607

 

 

 

133

 

 

 

3,474

 

 

 

7,214

 

 

 

2,880,058

 

 

 

2,887,272

 

 

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

8,967

 

 

 

6,101

 

 

 

7,292

 

 

 

22,360

 

 

 

2,545,935

 

 

 

2,568,295

 

 

 

887

 

Other

 

 

192

 

 

 

37

 

 

 

54

 

 

 

283

 

 

 

89,147

 

 

 

89,430

 

 

 

40

 

Total consumer

 

 

9,159

 

 

 

6,138

 

 

 

7,346

 

 

 

22,643

 

 

 

2,635,082

 

 

 

2,657,725

 

 

 

927

 

Total

 

$

37,625

 

 

$

8,713

 

 

$

46,333

 

 

$

92,671

 

 

$

12,890,984

 

 

$

12,983,655

 

 

$

1,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) $44.5 million of net accrued interest receivable is excluded from the loan balances above as of December 31, 2019.

 
Summary of Nonaccruing Loans by Portfolio Segment and Class of Financing Receivable

The following table provides information about nonaccruing loans by portfolio segment and class of financing receivable as of and for the three and six months ended June 30, 2020.

 

 

Nonaccrual Loans - Amortized Cost

 

 

90+ Days

 

 

Interest Income Recognized

 

(In thousands)

 

Beginning of the Period(1)

 

 

End of the Period

 

 

No Allowance Recorded

 

 

Past Due and Accruing

 

 

Three Months Ended June 30, 2020

 

 

Six Months Ended June 30, 2020

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

66,589

 

 

$

62,579

 

 

$

4,845

 

 

$

126

 

 

$

18

 

 

$

18

 

Energy

 

 

9,568

 

 

 

41,884

 

 

 

957

 

 

 

—

 

 

 

1

 

 

 

9

 

Restaurant

 

 

53,483

 

 

 

76,175

 

 

 

21,096

 

 

 

—

 

 

 

9

 

 

 

38

 

Healthcare

 

 

4,833

 

 

 

2,803

 

 

 

1,952

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial and industrial

 

 

134,473

 

 

 

183,441

 

 

 

28,850

 

 

 

126

 

 

 

28

 

 

 

65

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

5,935

 

 

 

23,853

 

 

 

3,046

 

 

 

71

 

 

 

16

 

 

 

59

 

Multifamily

 

 

—

 

 

 

714

 

 

 

714

 

 

 

—

 

 

 

—

 

 

 

—

 

Office

 

 

1,245

 

 

 

92

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial real estate

 

 

7,180

 

 

 

24,659

 

 

 

3,760

 

 

 

71

 

 

 

16

 

 

 

59

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential

 

 

15,101

 

 

 

16,278

 

 

 

2,464

 

 

 

2,894

 

 

 

53

 

 

 

83

 

Other

 

 

24

 

 

 

6

 

 

 

—

 

 

 

32

 

 

 

2

 

 

 

4

 

Total consumer

 

 

15,125

 

 

 

16,284

 

 

 

2,464

 

 

 

2,926

 

 

 

55

 

 

 

87

 

Total

 

$

156,778

 

 

$

224,384

 

 

$

35,074

 

 

$

3,123

 

 

$

99

 

 

$

211

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts are not comparable to prior period public filings due to our adoption of CECL on January 1, 2020. Prior to this date, pools of individual ACI loans were excluded because they continued to earn interest income from the accretable yield at the pool level. With the adoption of CECL, the pools were discontinued, and performance is based on contractual terms for individual loans. Additionally, prior to January 1, 2020, nonaccrual balances were presented using recorded investment. Upon adoption of CECL, approximately $43.0 million of ACI loans were reclassed to nonaccrual loans.

 
Summary of Information Regarding Loans and Types of Loan Modified into TDRs

The following table provides information regarding loans that were modified into TDRs during the periods indicated.

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Number of TDRs

 

 

Amortized Cost(1)

 

 

Number of TDRs

 

 

Amortized Cost

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

$

—

 

 

 

2

 

 

$

7,647

 

Energy

 

 

—

 

 

 

—

 

 

 

1

 

 

 

11,717

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1,455

 

Total

 

 

—

 

 

$

—

 

 

 

4

 

 

$

20,819

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) There was no net accrued interest receivable recorded on the loan balances above as of June 30, 2020.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Number of TDRs

 

 

Amortized Cost(1)

 

 

Number of TDRs

 

 

Amortized Cost

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

3

 

 

$

19,366

 

 

 

3

 

 

$

28,913

 

Energy

 

 

1

 

 

 

8,140

 

 

 

1

 

 

 

11,717

 

Restaurant

 

 

2

 

 

 

24,246

 

 

 

—

 

 

 

—

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

1

 

 

 

1,455

 

Total

 

 

6

 

 

$

51,752

 

 

 

5

 

 

$

42,085

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Less than $0.1 million of net accrued interest receivable is excluded from the loan balances above as of June 30, 2020.

 

 

The following table provides information regarding the types of loan modifications that were modified into TDRs during the periods indicated.

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Loans Modified by:

 

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

Energy

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Total

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Loans Modified by:

 

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

 

Rate Concession

 

 

Modified Terms and/or Other Concessions

 

Commercial and industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

 

—

 

 

 

3

 

 

 

—

 

 

 

3

 

Energy

 

 

1

 

 

 

—

 

 

 

—

 

 

 

1

 

Restaurant

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

Commercial real estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Industrial, retail, and other

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1

 

Total

 

 

1

 

 

 

5

 

 

 

—

 

 

 

5

 
v3.20.2
Goodwill and Other Intangible Assets (Tables)
 6 Months Ended
Jun. 30, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Summary of Goodwill and Other Intangible Assets

The following table summarizes the Company’s goodwill and other intangible assets at June 30, 2020 and December 31, 2019:

 

 

 

 

 

 

 

 

(In thousands)

June 30, 2020

 

 

December 31, 2019

 

Goodwill

$

43,061

 

 

$

485,336

 

Core deposit intangible, net of accumulated amortization of $70,612 and $60,836, respectively

 

81,011

 

 

 

90,788

 

Customer lists, net of accumulated amortization of $23,065 and $21,908, respectively

 

10,800

 

 

 

11,993

 

Noncompete agreements, net of accumulated amortization of $229 and $137, respectively

 

1,127

 

 

 

1,473

 

Trademarks, net of accumulated amortization of $115 and $75, respectively

 

1,319

 

 

 

1,359

 

Total goodwill and intangible assets, net

$

137,318

 

 

$

590,949

 
Summary of Changes to Carrying Amount of Goodwill by Segment

The following table represents changes to the carrying amount of goodwill by segment for the period reported.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Balance as of December 31, 2019

 

$

442,579

 

 

$

42,757

 

 

$

—

 

 

$

485,336

 

Additions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth & Pension acquisition

 

 

—

 

 

 

304

 

 

 

—

 

 

 

304

 

Other

 

 

1,116

 

 

 

—

 

 

 

—

 

 

 

1,116

 

Losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impairment

 

 

(443,695

)

 

 

—

 

 

 

—

 

 

 

(443,695

)

Balance as of June 30, 2020

 

$

—

 

 

$

43,061

 

 

$

—

 

 

$

43,061

 
v3.20.2
Derivatives (Tables)
 6 Months Ended
Jun. 30, 2020
Derivative Instruments And Hedging Activities Disclosure [Abstract]  
Schedule of Notional Amounts and Estimated Fair Values The notional amounts and estimated fair values as of June 30, 2020 and December 31, 2019 were as follows:

 

 

June 30, 2020

 

 

December 31, 2019

 

 

 

 

 

 

 

Fair Value

 

 

 

 

 

 

Fair Value

 

(In thousands)

 

Notional Amount

 

 

Other Assets

 

 

Other Liabilities

 

 

Notional Amount

 

 

Other Assets

 

 

Other Liabilities

 

Derivatives designated as hedging instruments (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

350,000

 

 

$

26,561

 

 

$

—

 

 

$

350,000

 

 

$

—

 

 

$

643

 

Commercial loan interest rate collars

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,000,000

 

 

 

239,213

 

 

 

—

 

Total derivatives designated as hedging instruments

 

 

350,000

 

 

 

26,561

 

 

 

—

 

 

 

4,350,000

 

 

 

239,213

 

 

 

643

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

 

1,228,008

 

 

 

26,329

 

 

 

2,116

 

 

 

1,008,805

 

 

 

8,386

 

 

 

899

 

Commercial loan interest rate caps

 

 

172,851

 

 

 

11

 

 

 

11

 

 

 

167,185

 

 

 

18

 

 

 

18

 

Commercial loan interest rate floors

 

 

583,262

 

 

 

15,221

 

 

 

15,221

 

 

 

654,298

 

 

 

8,836

 

 

 

8,836

 

Commercial loan interest rate collars

 

 

71,110

 

 

 

639

 

 

 

639

 

 

 

75,555

 

 

 

257

 

 

 

257

 

Mortgage loan held-for-sale interest rate lock commitments

 

 

38,236

 

 

 

548

 

 

 

—

 

 

 

4,138

 

 

 

22

 

 

 

—

 

Mortgage loan forward sale commitments

 

 

9,754

 

 

 

56

 

 

 

—

 

 

 

4,109

 

 

 

26

 

 

 

—

 

Mortgage loan held-for-sale floating commitments

 

 

7,367

 

 

 

—

 

 

 

—

 

 

 

1,523

 

 

 

—

 

 

 

—

 

Foreign exchange contracts

 

 

113,982

 

 

 

1,054

 

 

 

836

 

 

 

74,322

 

 

 

379

 

 

 

558

 

Total derivatives not designated as hedging instruments

 

 

2,224,570

 

 

 

43,858

 

 

 

18,823

 

 

 

1,989,935

 

 

 

17,924

 

 

 

10,568

 

Total derivatives

 

$

2,574,570

 

 

$

70,419

 

 

$

18,823

 

 

$

6,339,935

 

 

$

257,137

 

 

$

11,211

 

 
Schedule of Gain (Loss) in Consolidated Statements of Operations Related to Derivative Instruments

Pre-tax gain (loss) included in the consolidated statements of operations related to derivative instruments for the three and six months ended June 30, 2020 and 2019 were as follows:

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

(In thousands)

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

Derivatives designated as hedging instruments

   (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

4,046

 

 

$

981

 

 

$

—

 

 

$

11,310

 

 

$

(1,509

)

 

$

—

 

Commercial loan interest rate collars

 

 

—

 

 

 

16,714

 

 

 

—

 

 

 

86,125

 

 

 

37

 

 

 

—

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans held for sale interest rate lock commitments

 

$

—

 

 

$

—

 

 

$

215

 

 

$

—

 

 

$

—

 

 

$

(42

)

Foreign exchange contracts

 

 

—

 

 

 

—

 

 

 

687

 

 

 

—

 

 

 

—

 

 

 

984

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

(In thousands)

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

 

OCI

 

 

Reclassified

from AOCI to

interest income

 

 

Noninterest

income

 

Derivatives designated as hedging instruments

   (cash flow hedges):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial loan interest rate swaps

 

$

28,081

 

 

$

876

 

 

$

—

 

 

$

17,956

 

 

$

(3,017

)

 

$

—

 

Commercial loan interest rate collars

 

 

143,199

 

 

 

24,926

 

 

 

—

 

 

 

127,602

 

 

 

37

 

 

 

—

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage loans held for sale interest rate lock commitments

 

$

—

 

 

$

—

 

 

$

526

 

 

$

—

 

 

$

—

 

 

$

27

 

Foreign exchange contracts

 

 

—

 

 

 

—

 

 

 

1,551

 

 

 

—

 

 

 

—

 

 

 

2,124

 

 
Schedule of Interest Rate Swap Agreements

In March 2016, the Company entered into the following interest rate swap agreements to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans.

Effective Date

 

Maturity Date

 

Notional Amount

(In Thousands)

 

 

Fixed Rate

 

 

Variable Rate

March 8, 2016

 

February 27, 2026

 

$

175,000

 

 

 

1.5995

%

 

1 Month LIBOR

March 8, 2016

 

February 27, 2026

 

 

175,000

 

 

 

1.5890

 

 

1 Month LIBOR
v3.20.2
Borrowed Funds (Tables)
 6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Summary of Debt Details of the debt transactions are as follows:

 

 

 

 

 

 

 

 

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Cadence Bancorporation:

 

 

 

 

 

 

 

 

5.375% senior notes, due June 28, 2021

 

$

50,000

 

 

$

50,000

 

7.250% subordinated notes, due June 28, 2029, callable in 2024

 

 

35,000

 

 

 

35,000

 

3-month LIBOR plus 4.663%, subordinated notes, due March 11, 2025, callable in 2020

 

 

40,000

 

 

 

40,000

 

4.750% subordinated notes, due June 30, 2029, callable in 2024

 

 

85,000

 

 

 

85,000

 

Total — Cadence Bancorporation

 

 

210,000

 

 

 

210,000

 

Cadence Bank:

 

 

 

 

 

 

 

 

6.250% subordinated notes, due June 28, 2029, callable in 2024

 

 

25,000

 

 

 

25,000

 

Debt issue costs and unamortized premium

 

 

(1,889

)

 

 

(2,350

)

Total senior and subordinated debt

 

$

233,111

 

 

$

232,650

 

 
Summary of Junior Subordinated Debt The following is a list of junior subordinated debt:

 

 

 

 

 

 

 

 

 

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Junior subordinated debentures, 3 month LIBOR plus 2.85%, due 2033

 

$

30,000

 

 

$

30,000

 

Junior subordinated debentures, 3 month LIBOR plus 2.95%, due 2033

 

 

5,155

 

 

 

5,155

 

Junior subordinated debentures, 3 month LIBOR plus 1.75%, due 2037

 

 

15,464

 

 

 

15,464

 

Total par value

 

 

50,619

 

 

 

50,619

 

Purchase accounting adjustment, net of amortization

 

 

(13,171

)

 

 

(13,174

)

Total junior subordinated debentures

 

$

37,448

 

 

$

37,445

 
v3.20.2
Other Noninterest Income and Other Noninterest Expense (Tables)
 6 Months Ended
Jun. 30, 2020
Other Nonoperating Income Expense [Abstract]  
Summary of Other Noninterest Income and Other Noninterest Expense

The detail of other noninterest income and other noninterest expense captions presented in the consolidated statements of operations is as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Other noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance revenue

 

$

225

 

 

$

244

 

 

$

474

 

 

$

442

 

Mortgage banking income

 

 

2,020

 

 

 

674

 

 

 

3,131

 

 

 

1,253

 

Income from bank owned life insurance policies

 

 

1,220

 

 

 

1,264

 

 

 

2,549

 

 

 

2,416

 

Other

 

 

(1,373

)

 

 

1,394

 

 

 

(1,953

)

 

 

2,979

 

Total other noninterest income

 

$

2,092

 

 

$

3,576

 

 

$

4,201

 

 

$

7,090

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Other noninterest expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data processing expense

 

$

3,084

 

 

$

3,435

 

 

$

6,436

 

 

$

6,029

 

Software amortization

 

 

4,036

 

 

 

3,184

 

 

 

7,583

 

 

 

6,519

 

Consulting and professional fees

 

 

3,009

 

 

 

1,899

 

 

 

5,715

 

 

 

4,128

 

Loan related expenses

 

 

735

 

 

 

1,740

 

 

 

1,495

 

 

 

2,650

 

FDIC insurance

 

 

3,939

 

 

 

1,870

 

 

 

6,374

 

 

 

3,622

 

Communications

 

 

1,002

 

 

 

1,457

 

 

 

2,158

 

 

 

2,455

 

Advertising and public relations

 

 

920

 

 

 

1,104

 

 

 

2,384

 

 

 

1,885

 

Legal expenses

 

 

579

 

 

 

645

 

 

 

991

 

 

 

803

 

Other

 

 

8,052

 

 

 

9,937

 

 

 

19,688

 

 

 

18,118

 

Total other noninterest expenses

 

$

25,356

 

 

$

25,271

 

 

$

52,824

 

 

$

46,209

 
v3.20.2
Earnings Per Common Share (Tables)
 6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Reconciliation of Basic and Diluted Net (Loss) Income Per Common Share The following table displays a reconciliation of the information used in calculating basic and diluted net (loss) income per common share for the three and six months ended June 30, 2020 and 2019.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In thousands, except share and per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net (loss) income per consolidated statements of operations

 

$

(56,114

)

 

$

48,346

 

 

$

(455,425

)

 

$

106,547

 

Net income allocated to participating securities

 

 

—

 

 

 

(170

)

 

 

—

 

 

 

(401

)

Net (loss) income allocated to common stock

 

$

(56,114

)

 

$

48,176

 

 

$

(455,425

)

 

$

106,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (Basic)

 

 

125,924,652

 

 

 

128,791,933

 

 

 

126,277,549

 

 

 

129,634,049

 

Weighted average dilutive restricted stock units and warrants

 

 

—

 

 

 

243,620

 

 

 

—

 

 

 

153,709

 

Weighted average common shares outstanding (Diluted)

 

 

125,924,652

 

 

 

129,035,553

 

 

 

126,277,549

 

 

 

129,787,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Earnings per common share (Basic)

 

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 

(Loss) Earnings per common share (Diluted)

 

$

(0.45

)

 

$

0.37

 

 

$

(3.61

)

 

$

0.82

 
v3.20.2
Regulatory Matters (Tables)
 6 Months Ended
Jun. 30, 2020
Banking And Thrift [Abstract]  
Schedule of Actual Capital Amounts and Ratios

The actual capital amounts and ratios for the Company and the Bank as of June 30, 2020 and December 31, 2019 are presented in the following tables and as shown, are above the thresholds necessary to be considered “well-capitalized.” Management believes that no events or changes have occurred after June 30, 2020 that would change this designation.

 

 

 

Consolidated Company

 

 

Bank

 

(In thousands)

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

$

1,751,651

 

 

 

9.5

%

 

$

1,837,580

 

 

 

10.0

%

Common equity tier 1 capital

 

 

1,751,651

 

 

 

11.7

 

 

 

1,787,580

 

 

 

11.9

 

Tier 1 risk-based capital

 

 

1,751,651

 

 

 

11.7

 

 

 

1,837,580

 

 

 

12.2

 

Total risk-based capital

 

 

2,147,055

 

 

 

14.3

 

 

 

2,050,896

 

 

 

13.7

 

Minimum requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

 

736,486

 

 

 

4.0

 

 

 

736,981

 

 

 

4.0

 

Common equity tier 1 capital

 

 

676,118

 

 

 

4.5

 

 

 

676,097

 

 

 

4.5

 

Tier 1 risk-based capital

 

 

901,490

 

 

 

6.0

 

 

 

901,463

 

 

 

6.0

 

Total risk-based capital

 

 

1,201,987

 

 

 

8.0

 

 

 

1,201,951

 

 

 

8.0

 

Well capitalized requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

N/A

 

 

N/A

 

 

 

921,227

 

 

 

5.0

 

Common equity tier 1 capital

 

N/A

 

 

N/A

 

 

 

976,585

 

 

 

6.5

 

Tier 1 risk-based capital

 

 

901,490

 

 

 

6.0

 

 

 

1,201,951

 

 

 

8.0

 

Total risk-based capital

 

 

1,502,484

 

 

 

10.0

 

 

 

1,502,438

 

 

 

10.0

 

 

 

 

Consolidated Company

 

 

Bank

 

(In thousands)

 

Amount

 

 

Ratio

 

 

Amount

 

 

Ratio

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

$

1,784,664

 

 

 

10.3

%

 

$

1,953,008

 

 

 

11.1

%

Common equity tier 1 capital

 

 

1,784,664

 

 

 

11.5

 

 

 

1,903,008

 

 

 

12.3

 

Tier 1 risk-based capital

 

 

1,784,664

 

 

 

11.5

 

 

 

1,953,008

 

 

 

12.6

 

Total risk-based capital

 

 

2,120,571

 

 

 

13.7

 

 

 

2,099,146

 

 

 

13.6

 

Minimum requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

 

690,213

 

 

 

4.0

 

 

 

689,881

 

 

 

4.0

 

Common equity tier 1 capital

 

 

697,089

 

 

 

4.5

 

 

 

696,755

 

 

 

4.5

 

Tier 1 risk-based capital

 

 

929,453

 

 

 

6.0

 

 

 

929,007

 

 

 

6.0

 

Total risk-based capital

 

 

1,239,270

 

 

 

8.0

 

 

 

1,238,676

 

 

 

8.0

 

Well capitalized requirement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tier 1 leverage

 

N/A

 

 

N/A

 

 

 

862,351

 

 

 

5.0

 

Common equity tier 1 capital

 

N/A

 

 

N/A

 

 

 

1,006,425

 

 

 

6.5

 

Tier 1 risk-based capital

 

 

929,453

 

 

 

6.0

 

 

 

1,238,676

 

 

 

8.0

 

Total risk-based capital

 

 

1,549,088

 

 

 

10.0

 

 

 

1,548,345

 

 

 

10.0

 

 
v3.20.2
Commitments and Contingent Liabilities (Tables)
 6 Months Ended
Jun. 30, 2020
Commitments And Contingencies Disclosure [Abstract]  
Summary of Commitments and Contingent Liabilities

(In thousands)

 

June 30, 2020

 

 

December 31, 2019

 

Commitments to extend credit

 

$

4,054,843

 

 

$

4,667,360

 

Commitments to grant loans

 

 

278,206

 

 

 

292,199

 

Standby letters of credit

 

 

202,400

 

 

 

213,548

 

Performance letters of credit

 

 

18,430

 

 

 

27,985

 

Commercial letters of credit

 

 

20,370

 

 

 

15,587

 

 
v3.20.2
Disclosure About Fair Values of Financial Instruments (Tables)
 6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset at June 30, 2020 and December 31, 2019:

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

$

2,661,433

 

 

$

—

 

 

$

2,661,433

 

 

$

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,764

 

 

 

1,764

 

 

 

—

 

 

 

—

 

Derivative assets

 

 

70,419

 

 

 

—

 

 

 

70,419

 

 

 

—

 

Other assets

 

 

32,101

 

 

 

—

 

 

 

—

 

 

 

32,101

 

Total recurring basis measured assets

 

$

2,765,717

 

 

$

1,764

 

 

$

2,731,852

 

 

$

32,101

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

18,823

 

 

$

—

 

 

$

18,823

 

 

$

—

 

Total recurring basis measured liabilities

 

$

18,823

 

 

$

—

 

 

$

18,823

 

 

$

—

 

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale

 

$

2,368,592

 

 

$

—

 

 

$

2,368,592

 

 

$

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,862

 

 

 

1,862

 

 

 

—

 

 

 

—

 

Derivative assets

 

 

257,137

 

 

 

—

 

 

 

257,137

 

 

 

—

 

Other assets

 

 

26,882

 

 

 

—

 

 

 

—

 

 

 

26,882

 

Total recurring basis measured assets

 

$

2,654,473

 

 

$

1,862

 

 

$

2,625,729

 

 

$

26,882

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

11,211

 

 

$

—

 

 

$

11,211

 

 

$

—

 

Total recurring basis measured liabilities

 

$

11,211

 

 

$

—

 

 

$

11,211

 

 

$

—

 

 
Summary of Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis

Level 3 Assets Measured at Fair Value on a Recurring Basis

 

 

 

For the Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(In thousands)

 

Net Profits Interests

 

 

Investments in Limited Partnerships

 

 

SBA Servicing Rights

 

Beginning Balance

 

$

4,071

 

 

$

5,317

 

 

$

24,042

 

 

$

11,601

 

 

$

3,942

 

 

$

3,803

 

Originations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

261

 

 

 

194

 

Net gains (losses) included in earnings

 

 

(338

)

 

 

59

 

 

 

(1,015

)

 

 

288

 

 

 

(466

)

 

 

(211

)

Reclassifications

 

 

—

 

 

 

—

 

 

 

1,203

 

 

 

675

 

 

 

—

 

 

 

—

 

Acquired in settlement of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Contributions paid

 

 

—

 

 

 

—

 

 

 

499

 

 

 

2,409

 

 

 

—

 

 

 

—

 

Distributions received

 

 

—

 

 

 

—

 

 

 

(98

)

 

 

(440

)

 

 

—

 

 

 

—

 

Ending Balance

 

$

3,733

 

 

$

5,376

 

 

$

24,631

 

 

$

14,533

 

 

$

3,737

 

 

$

3,786

 

Net unrealized (losses) gains included in earnings relating to assets held at the end of the period

 

$

(338

)

 

$

59

 

 

$

(1,015

)

 

$

288

 

 

$

(466

)

 

$

(211

)

Net unrealized gains (losses) recognized in other comprehensive income relating to assets held at the end of the period

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

(In thousands)

 

Net Profits Interests

 

 

Investments in Limited Partnerships

 

 

SBA Servicing Assets

 

Beginning Balance

 

$

4,330

 

 

$

5,779

 

 

$

18,742

 

 

$

11,191

 

 

$

3,810

 

 

$

—

 

Acquired

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,213

 

Originations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

561

 

 

 

514

 

Net (losses) gains included in earnings

 

 

(597

)

 

 

(115

)

 

 

(1,331

)

 

 

1,034

 

 

 

(634

)

 

 

(2,941

)

Reclassifications

 

 

—

 

 

 

—

 

 

 

1,727

 

 

 

(125

)

 

 

—

 

 

 

—

 

Acquired in settlement of loans

 

 

—

 

 

 

—

 

 

 

4,257

 

 

 

—

 

 

 

—

 

 

 

—

 

Contributions paid

 

 

—

 

 

 

—

 

 

 

1,783

 

 

 

3,017

 

 

 

—

 

 

 

—

 

Distributions received

 

 

—

 

 

 

(288

)

 

 

(547

)

 

 

(584

)

 

 

—

 

 

 

—

 

Ending Balance

 

$

3,733

 

 

$

5,376

 

 

$

24,631

 

 

$

14,533

 

 

$

3,737

 

 

$

3,786

 

Net unrealized (losses) gains included in earnings relating to assets held at the end of the period

 

$

(597

)

 

$

(115

)

 

$

(1,331

)

 

$

1,034

 

 

$

(634

)

 

$

(2,941

)

Net unrealized gains (losses) recognized in other comprehensive income relating to assets held at the end of the period

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 
Summary of Assets Recorded at Fair Value on a Nonrecurring Basis

From time to time, the Company may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheets at June 30, 2020 and December 31, 2019, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value:

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

38,631

 

 

$

—

 

 

$

38,631

 

 

$

—

 

Individually evaluated loans, net of allocated allowance for credit losses (1)

 

 

181,648

 

 

 

—

 

 

 

—

 

 

 

181,648

 

Other real estate and repossessed assets

 

 

10,216

 

 

 

 

 

 

 

—

 

 

 

10,216

 

Total assets measured on a nonrecurring basis

 

$

230,495

 

 

$

—

 

 

$

38,631

 

 

$

191,864

 

 

(In thousands)

 

Carrying Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for sale

 

$

87,649

 

 

$

—

 

 

$

87,649

 

 

$

—

 

Individually evaluated loans, net of allocated allowance for credit losses (1)

 

 

101,561

 

 

 

—

 

 

 

—

 

 

 

101,561

 

Other real estate

 

 

1,628

 

 

 

—

 

 

 

—

 

 

 

1,628

 

Total assets measured on a nonrecurring basis

 

$

190,838

 

 

$

—

 

 

$

87,649

 

 

$

103,189

 

(1) Prior to the adoption of CECL on January 1, 2020, these loans were known as Impaired loans, net of specific allowance.

 
Summary of Significant Unobservable Inputs Used in Level 3 Fair Value Measurements for Financial Assets Measured at Fair Value on a Nonrecurring Basis

Significant unobservable inputs used in Level 3 fair value measurements for financial assets measured at fair value on a nonrecurring basis are summarized below:

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

(In thousands)

 

Carrying

Value

 

 

Valuation

Methods

 

Unobservable Inputs

 

Range

 

Weighted Average (2)

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans, net of allowance for credit losses (3)

 

$

181,648

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 85%

 

25%

 

 

 

 

 

 

 

Discounted cash flow

 

Discount rate

 

3.75% - 4.36%

 

4.2%

 

 

 

 

 

 

 

Enterprise value

 

Comparables and average multiplier

 

4.31x - 6.19x

 

5.09x

 

 

 

 

 

 

 

Enterprise value

 

Discount rates and comparables

 

13% - 15%

 

14%

 

 

 

 

 

 

 

Net recoverable oil and gas reserves and forward-looking commodity prices

 

Capitalization rate and discount rate

 

10% - 20%

 

12%

 

Other real estate

 

 

1,606

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 20%

 

10%

 

 

 

 

 

 

 

 

 

Estimated closing costs

 

10%

 

10%

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

(In thousands)

 

Carrying

Value

 

 

Valuation

Methods

 

Unobservable

Inputs

 

Range

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated loans, net of allowance for credit losses (3)

 

$

101,561

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 50%

 

 

 

 

 

 

 

Appraised value, as adjusted

 

Minimum guaranteed proceeds per Settlement Agreement

 

0%(1)

 

 

 

 

 

 

 

Discounted cash flow

 

Discount rate 5.8%

 

0%(1)

 

 

 

 

 

 

 

Enterprise value

 

Exit and earnings multiples,

discounted cash flows,

and market comparables

 

0% - 46%(1)

 

Other real estate

 

 

1,628

 

 

Appraised value, as adjusted

 

Discount to fair value

 

0% - 20%

 

 

 

 

 

 

 

 

 

Estimated closing costs

 

10%

 

(1) Represents difference of remaining balance to fair value.

 

(2) Weighted averages were calculated using the input attribute and the outstanding balance of the loan.

 

(3) Prior to the adoption of CECL on January 1, 2020, these loans were known as Impaired loans, net of specific allowance.

 

 
Summary of Estimated Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments are as follows:

 

 

June 30, 2020

 

(In thousands)

 

Carrying Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

185,919

 

 

$

185,919

 

 

$

185,919

 

 

$

—

 

 

$

—

 

Interest-bearing deposits in other banks

 

 

1,696,051

 

 

 

1,696,051

 

 

 

1,696,051

 

 

 

—

 

 

 

—

 

Federal funds sold

 

 

17,399

 

 

 

17,399

 

 

 

17,399

 

 

 

—

 

 

 

—

 

Investment securities available-for-sale

 

 

2,661,433

 

 

 

2,661,433

 

 

 

—

 

 

 

2,661,433

 

 

 

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,764

 

 

 

1,764

 

 

 

1,764

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

38,631

 

 

 

38,631

 

 

 

—

 

 

 

38,631

 

 

 

—

 

Net loans

 

 

13,328,196

 

 

 

13,379,997

 

 

 

—

 

 

 

—

 

 

 

13,379,997

 

Derivative assets

 

 

70,419

 

 

 

70,419

 

 

 

—

 

 

 

70,419

 

 

 

—

 

Other assets

 

 

88,308

 

 

 

88,308

 

 

 

—

 

 

 

—

 

 

 

88,308

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

16,069,282

 

 

 

16,080,049

 

 

 

—

 

 

 

16,080,049

 

 

 

—

 

Advances from FHLB

 

 

100,000

 

 

 

100,000

 

 

 

—

 

 

 

100,000

 

 

 

—

 

Senior debt

 

 

49,969

 

 

 

50,644

 

 

 

—

 

 

 

50,644

 

 

 

—

 

Subordinated debt

 

 

183,142

 

 

 

174,457

 

 

 

—

 

 

 

174,457

 

 

 

—

 

Junior subordinated debentures

 

 

37,448

 

 

 

34,629

 

 

 

—

 

 

 

34,629

 

 

 

—

 

Notes payable

 

 

1,663

 

 

 

1,663

 

 

 

—

 

 

 

1,663

 

 

 

—

 

Derivative liabilities

 

 

18,823

 

 

 

18,823

 

 

 

—

 

 

 

18,823

 

 

 

—

 

 

 

 

December 31, 2019

 

(In thousands)

 

Carrying Amount

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

252,447

 

 

$

252,447

 

 

$

252,447

 

 

$

—

 

 

$

—

 

Interest-bearing deposits in other banks

 

 

725,343

 

 

 

725,343

 

 

 

725,343

 

 

 

—

 

 

 

—

 

Federal funds sold

 

 

10,974

 

 

 

10,974

 

 

 

10,974

 

 

 

—

 

 

 

—

 

Investment securities available-for-sale

 

 

2,368,592

 

 

 

2,368,592

 

 

 

—

 

 

 

2,368,592

 

 

 

—

 

Equity securities with readily determinable fair values not held for trading

 

 

1,862

 

 

 

1,862

 

 

 

1,862

 

 

 

—

 

 

 

—

 

Loans held for sale

 

 

87,649

 

 

 

87,649

 

 

 

—

 

 

 

87,649

 

 

 

—

 

Net loans

 

 

12,864,012

 

 

 

12,755,360

 

 

 

—

 

 

 

—

 

 

 

12,755,360

 

Derivative assets

 

 

257,137

 

 

 

257,137

 

 

 

—

 

 

 

257,137

 

 

 

—

 

Other assets

 

 

72,719

 

 

 

72,719

 

 

 

—

 

 

 

—

 

 

 

72,719

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

14,742,794

 

 

 

14,753,192

 

 

 

—

 

 

 

14,753,192

 

 

 

—

 

Advances from FHLB

 

 

100,000

 

 

 

100,000

 

 

 

—

 

 

 

100,000

 

 

 

—

 

Senior debt

 

 

49,938

 

 

 

51,202

 

 

 

—

 

 

 

51,202

 

 

 

—

 

Subordinated debt

 

 

182,712

 

 

 

189,386

 

 

 

—

 

 

 

189,386

 

 

 

—

 

Junior subordinated debentures

 

 

37,445

 

 

 

48,012

 

 

 

—

 

 

 

48,012

 

 

 

—

 

Notes payable

 

 

2,078

 

 

 

2,078

 

 

 

—

 

 

 

2,078

 

 

 

—

 

Derivative liabilities

 

 

11,211

 

 

 

11,211

 

 

 

—

 

 

 

11,211

 

 

 

—

 

 
v3.20.2
Variable Interest Entities and Other Investments (Tables)
 6 Months Ended
Jun. 30, 2020
Variable Interest Entities And Other Investments [Abstract]  
Summary of Investment in Limited Partnerships

The following table presents a summary of the Company’s investments in limited partnerships as of June 30, 2020 and December 31, 2019:

(In thousands)

June 30, 2020

 

 

December 31, 2019

 

Affordable housing projects (amortized cost)

$

33,856

 

 

$

28,205

 

Limited partnerships accounted for under the fair value practical expedient of NAV

 

24,631

 

 

 

18,742

 

Limited partnerships without readily determinable fair values that do not qualify for the practical expedient of NAV accounted for under the cost method

 

7,086

 

 

 

8,681

 

Limited partnerships required to be accounted for under the equity method

 

8,920

 

 

 

8,951

 

Total investments in limited partnerships

$

74,493

 

 

$

64,579

 

 
Summary of Carrying Amount of Equity Investments Measured Under Measurement Alternative The carrying amount of equity investments measured under the measurement alternative are as follows:

 

For the Six Months Ended June 30,

 

(In thousands)

2020

 

 

2019

 

Carrying value, Beginning of Year

$

8,681

 

 

$

8,714

 

Reclassifications

 

(1,727

)

 

 

125

 

Net income change

 

49

 

 

 

—

 

Distributions

 

(440

)

 

 

(929

)

Contributions

 

523

 

 

 

1,378

 

Carrying value, End of Period

$

7,086

 

 

$

9,288

 

 
v3.20.2
Segment Reporting (Tables)
 6 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
Summary of Operating Results of Segments

The following tables present the operating results of the segments as of and for the three and six months ended June 30, 2020 and 2019:

 

 

Three Months Ended June 30, 2020

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

158,440

 

 

$

(58

)

 

$

(3,668

)

 

$

154,714

 

Provision for credit losses

 

 

158,811

 

 

 

—

 

 

 

—

 

 

 

158,811

 

Noninterest income

 

 

18,875

 

 

 

10,966

 

 

 

109

 

 

 

29,950

 

Noninterest expense

 

 

78,982

 

 

 

8,262

 

 

 

1,376

 

 

 

88,620

 

Income tax (benefit) expense

 

 

(13,677

)

 

 

377

 

 

 

6,647

 

 

 

(6,653

)

Net (loss) income

 

$

(46,801

)

 

$

2,269

 

 

$

(11,582

)

 

$

(56,114

)

Total assets

 

$

18,760,701

 

 

$

92,638

 

 

$

4,414

 

 

$

18,857,753

 

 

 

 

Three Months Ended June 30, 2019

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

165,832

 

 

$

(592

)

 

$

(4,453

)

 

$

160,787

 

Provision for credit losses

 

 

28,927

 

 

 

—

 

 

 

—

 

 

 

28,927

 

Noninterest income

 

 

23,063

 

 

 

8,444

 

 

 

215

 

 

 

31,722

 

Noninterest expense

 

 

91,266

 

 

 

7,914

 

 

 

1,349

 

 

 

100,529

 

Income tax expense (benefit)

 

 

15,893

 

 

 

(62

)

 

 

(1,124

)

 

 

14,707

 

Net income (loss)

 

$

52,809

 

 

$

—

 

 

$

(4,463

)

 

$

48,346

 

Total assets

 

$

17,371,669

 

 

$

101,028

 

 

$

31,308

 

 

$

17,504,005

 

 

 

 

 

Six Months Ended June 30, 2020

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

315,998

 

 

$

(410

)

 

$

(7,406

)

 

$

308,182

 

Provision for credit losses

 

 

242,240

 

 

 

—

 

 

 

—

 

 

 

242,240

 

Noninterest income (expenses)

 

 

44,217

 

 

 

21,175

 

 

 

(373

)

 

 

65,019

 

Noninterest expense

 

 

607,046

 

 

 

16,974

 

 

 

2,253

 

 

 

626,273

 

Income tax (benefit) expense

 

 

(44,599

)

 

 

473

 

 

 

4,239

 

 

 

(39,887

)

Net (loss) income

 

$

(444,472

)

 

$

3,318

 

 

$

(14,271

)

 

$

(455,425

)

Total assets

 

$

18,760,701

 

 

$

92,638

 

 

$

4,414

 

 

$

18,857,753

 

 

 

 

Six Months Ended June 30, 2019

 

(In thousands)

 

Banking

 

 

Financial Services

 

 

Corporate

 

 

Consolidated

 

Net interest income (expense)

 

$

340,228

 

 

$

(1,222

)

 

$

(8,930

)

 

$

330,076

 

Provision for credit losses

 

 

40,137

 

 

 

—

 

 

 

—

 

 

 

40,137

 

Noninterest income

 

 

43,151

 

 

 

18,729

 

 

 

506

 

 

 

62,386

 

Noninterest expense

 

 

188,610

 

 

 

15,547

 

 

 

9,812

 

 

 

213,969

 

Income tax expense (benefit)

 

 

35,754

 

 

 

311

 

 

 

(4,256

)

 

 

31,809

 

Net income (loss)

 

$

118,878

 

 

$

1,649

 

 

$

(13,980

)

 

$

106,547

 

Total assets

 

$

17,371,669

 

 

$

101,028

 

 

$

31,308

 

 

$

17,504,005

 

 
v3.20.2
Equity-based Compensation (Tables)
 6 Months Ended
Jun. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Summary of Activity Related to Restricted Stock Unit Awards The following table summarizes the activity related to restricted stock unit awards:

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

 

Number of Shares

 

 

Weighted Average Fair Value per Unit at Award Date

 

 

Number of Shares

 

 

Weighted Average Fair Value per Unit at Award Date

 

Non-vested at beginning of period

 

 

1,229,863

 

 

$

19.97

 

 

 

273,354

 

 

$

26.49

 

Granted during the period

 

 

772,881

 

 

 

7.80

 

 

 

1,149,963

 

 

 

18.51

 

Vested during the period

 

 

(198,075

)

 

 

20.03

 

 

 

(81,377

)

 

 

22.53

 

Forfeited during the period

 

 

(60,788

)

 

 

19.40

 

 

 

(53,816

)

 

 

20.57

 

Non-vested at end of period

 

 

1,743,881

 

 

$

14.59

 

 

 

1,288,124

 

 

$

19.86

 

 
v3.20.2
Accumulated Other Comprehensive Income (Loss) (Tables)
 6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Schedule of Accumulated Other Comprehensive Income (Loss)

Activity within the balances in accumulated other comprehensive income (loss) is shown in the following tables for the six months ended June 30, 2020 and 2019.

 

 

Six Months Ended June 30, 2020

 

(In thousands)

 

Unrealized gains on securities available for sale

 

 

Unrealized gains on derivative instruments designated as cash flow hedges

 

 

Unrealized gains on defined benefit pension plans

 

 

Accumulated other comprehensive income

 

Balance at December 31, 2019

 

$

19,605

 

 

$

95,097

 

 

$

—

 

 

$

114,702

 

Net change

 

 

48,929

 

 

 

109,829

 

 

 

—

 

 

 

158,758

 

Balance at June 30, 2020

 

$

68,534

 

 

$

204,926

 

 

$

—

 

 

$

273,460

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

Unrealized gains (losses) on securities available for sale

 

 

Unrealized gains (losses) on derivative instruments designated as cash flow hedges

 

 

Unrealized gains (losses) on defined benefit pension plans

 

 

Accumulated other comprehensive income (loss)

 

Balance at December 31, 2018

 

$

(24,279

)

 

$

(18,305

)

 

$

(328

)

 

$

(42,912

)

Net change

 

 

40,589

 

 

 

115,457

 

 

 

—

 

 

 

156,046

 

Balance at June 30, 2019

 

$

16,310

 

 

$

97,152

 

 

$

(328

)

 

$

113,134

 
v3.20.2
Summary of Accounting Policies - Additional Information (Details) - USD ($)
Jan. 01, 2020
Jun. 30, 2020
Dec. 31, 2019
Significant Of Accounting Policies [Line Items]      
Reserve for unfunded commitments, amount   $ 3,800,000 $ 2,000,000.0
Held to maturity securities   $ 0  
Accounting Standards Update 2016-13      
Significant Of Accounting Policies [Line Items]      
Cumulative effect on retained earnings $ 62,800,000    
Deferred tax asset reclassed amount net 6,100,000    
Deferred tax assets $ 19,500,000    
v3.20.2
Business Combinations - Additional Information (Details)
$ in Thousands
Dec. 31, 2019
USD ($)
BranchLocation
shares
Jul. 01, 2019
USD ($)
Jun. 30, 2020
USD ($)
Business Acquisition [Line Items]      
Goodwill $ 485,336   $ 43,061
Unfunded commitments 44,900   $ 44,600
Banking Segment      
Business Acquisition [Line Items]      
Goodwill 442,579    
State Bank Financial Corporation      
Business Acquisition [Line Items]      
Loans added in acquisition 3,317,897    
Deposits added in acquisition $ 4,096,665    
Shares issued for business acquisition | shares 49,232,008    
Purchase price consideration $ 826,400    
Value of common stock in purchase price 826,113    
Fair value of unexercised warrants 267    
Goodwill 175,657    
Unfunded commitments 26,800    
Purchase consideration paid 826,380    
Intangible assets with an estimated fair value $ 117,038    
State Bank Financial Corporation | Certificates of Deposit      
Business Acquisition [Line Items]      
Estimated useful life 12 months    
Discount on transaction of certificates of deposit $ 3,400    
State Bank Financial Corporation | Banking Segment      
Business Acquisition [Line Items]      
Goodwill 175,700    
State Bank Financial Corporation | Core Deposit      
Business Acquisition [Line Items]      
Intangible assets recognized $ 111,900    
Estimated useful life 10 years    
State Bank Financial Corporation | Customer Relationship      
Business Acquisition [Line Items]      
Intangible assets recognized $ 3,700    
Estimated useful life 10 years    
State Bank Financial Corporation | Trademark      
Business Acquisition [Line Items]      
Intangible assets recognized $ 1,400    
Estimated useful life 20 years    
State Bank Financial Corporation | Common Class A      
Business Acquisition [Line Items]      
Common stock in exchange for outstanding common shares | shares 1.271    
Shares issued for business acquisition | shares 49,200,000    
State Bank Financial Corporation | Georgia      
Business Acquisition [Line Items]      
Number of branch locations | BranchLocation 32    
Wealth & Pension Services Group, Inc. | Linscomb & Williams, Inc.      
Business Acquisition [Line Items]      
Goodwill   $ 2,900  
Purchase consideration paid   8,000  
Cash payments   5,200  
Future cash payments to acquire certain assets and assume liabilities   $ 2,100  
Term of future cash payments   5 years  
Intangible assets with an estimated fair value   $ 4,800  
v3.20.2
Business Combinations - Summary of Purchase Price Allocation and Consideration Paid (Details) - USD ($)
$ / shares in Units, $ in Thousands
Dec. 31, 2019
Jun. 30, 2020
Liabilities    
Goodwill $ 485,336 $ 43,061
State Bank Financial Corporation    
Assets    
Cash and cash equivalents 414,342  
Investment securities available-for-sale 667,865  
Loans held for sale 148,469  
Loans 3,317,897  
Premises and equipment 65,646  
Cash surrender value of life insurance 69,252  
Intangible assets 117,038  
Other assets 47,146  
Total assets acquired 4,847,655  
Liabilities    
Deposits 4,096,665  
Short term borrowings 23,899  
Other liabilities 76,368  
Total liabilities assumed 4,196,932  
Net identifiable assets acquired over liabilities assumed 650,723  
Goodwill 175,657  
Net assets acquired over liabilities assumed $ 826,380  
Consideration:    
Cadence Bancorporation common shares issued 49,232,008  
Fair value per share of the Company's common stock $ 16.78  
Company common stock issued $ 826,113  
Fair value of unexercised warrants 267  
Fair value of total consideration transferred $ 826,380  
v3.20.2
Investment Securities - Summary of Amortized Cost and Estimated Fair Value of Securities Available-for-Sale (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Schedule Of Available For Sale Securities [Line Items]    
Securities available-for-sale, Amortized Cost $ 2,574,282 $ 2,345,791
Securities available-for-sale, Gross Unrealized Gains 88,197 28,270
Securities available-for-sale, Gross Unrealized Losses 1,046 5,469
Securities available-for-sale, Estimated Fair Value 2,661,433 2,368,592
Obligations of U.S. Government Agencies    
Schedule Of Available For Sale Securities [Line Items]    
Securities available-for-sale, Amortized Cost 105,499 69,464
Securities available-for-sale, Gross Unrealized Gains 617 57
Securities available-for-sale, Gross Unrealized Losses 612 415
Securities available-for-sale, Estimated Fair Value 105,504 69,106
Residential Pass-through | Guaranteed by GNMA    
Schedule Of Available For Sale Securities [Line Items]    
Securities available-for-sale, Amortized Cost 112,167 98,122
Securities available-for-sale, Gross Unrealized Gains 3,145 1,205
Securities available-for-sale, Gross Unrealized Losses   245
Securities available-for-sale, Estimated Fair Value 115,312 99,082
Residential Pass-through | Issued by FNMA and FHLMC    
Schedule Of Available For Sale Securities [Line Items]    
Securities available-for-sale, Amortized Cost 1,596,585 1,423,771
Securities available-for-sale, Gross Unrealized Gains 51,321 13,128
Securities available-for-sale, Gross Unrealized Losses 54 1,402
Securities available-for-sale, Estimated Fair Value 1,647,852 1,435,497
Other Residential Mortgage-Backed Securities    
Schedule Of Available For Sale Securities [Line Items]    
Securities available-for-sale, Amortized Cost 230,319 292,019
Securities available-for-sale, Gross Unrealized Gains 7,216 4,197
Securities available-for-sale, Gross Unrealized Losses   384
Securities available-for-sale, Estimated Fair Value 237,535 295,832
Commercial Mortgage-Backed Securities    
Schedule Of Available For Sale Securities [Line Items]    
Securities available-for-sale, Amortized Cost 300,597 276,533
Securities available-for-sale, Gross Unrealized Gains 13,837 2,448
Securities available-for-sale, Gross Unrealized Losses 298 3,023
Securities available-for-sale, Estimated Fair Value 314,136 275,958
Total MBS    
Schedule Of Available For Sale Securities [Line Items]    
Securities available-for-sale, Amortized Cost 2,239,668 2,090,445
Securities available-for-sale, Gross Unrealized Gains 75,519 20,978
Securities available-for-sale, Gross Unrealized Losses 352 5,054
Securities available-for-sale, Estimated Fair Value 2,314,835 2,106,369
Obligations of States and Municipal Subdivisions    
Schedule Of Available For Sale Securities [Line Items]    
Securities available-for-sale, Amortized Cost 229,115 185,882
Securities available-for-sale, Gross Unrealized Gains 12,061 7,235
Securities available-for-sale, Gross Unrealized Losses 82  
Securities available-for-sale, Estimated Fair Value $ 241,094 $ 193,117
v3.20.2
Investment Securities - Schedule of Contractual Maturities of Securities Available-for-Sale (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Investments Debt And Equity Securities [Abstract]  
Available-for-Sale, Due in one year or less, Amortized Cost $ 1,222
Available-for-Sale, Due after one year through five years, Amortized Cost 1,096
Available-for-Sale, Due after five years through ten years, Amortized Cost 86,559
Available-for-Sale, Due after ten years, Amortized Cost 245,737
Available-for-Sale, Mortgage-backed securities, Amortized Cost 2,239,668
Available-for-Sale, Total, Amortized Cost 2,574,282
Available-for-Sale, Due in one year or less, Estimated Fair Value 1,225
Available-for-Sale, Due after one year through five years, Estimated Fair Value 1,087
Available-for-Sale, Due after five years through ten years, Estimated Fair Value 86,711
Available-for-Sale, Due after ten years, Estimated Fair Value 257,575
Available-for-Sale, Mortgage-backed securities, Estimated Fair Value 2,314,835
Available-for-Sale, Total, Estimated Fair Value $ 2,661,433
v3.20.2
Investment Securities - Additional Information (Details)
 3 Months Ended 6 Months Ended
Jun. 30, 2020
USD ($)
Security
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Security
Jun. 30, 2019
USD ($)
Dec. 31, 2019
USD ($)
Schedule Of Available For Sale Securities [Line Items]          
Other-than-temporary impairment charges $ 0 $ 0 $ 0 $ 0  
Percentage of fair value of securities in investment portfolio reflect unrealized loss 6.00%   6.00%   35.00%
Number of securities in a loss position for more than twelve months | Security 9   9    
Number of securities in a loss position for less than twelve months | Security 21   21    
Allowance for credit losses related to available-for-sale securities $ 0   $ 0    
Collateral Pledged          
Schedule Of Available For Sale Securities [Line Items]          
Carrying value of securities pledged $ 775,900,000   $ 775,900,000   $ 629,400,000
v3.20.2
Investment Securities - Summary of Gross Gains, and Gross Losses on Sales of Securities Available for Sale (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Investments Debt And Equity Securities [Abstract]        
Gross realized gains $ 2,286 $ 1,810 $ 5,280 $ 1,813
Gross realized losses   872   887
Realized gains, net $ 2,286 $ 938 $ 5,280 $ 926
v3.20.2
Investment Securities - Schedule of Securities Classified as Available-for-Sale with Gross Unrealized Losses Aggregated by Category and Length of Time (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Schedule Of Available For Sale Securities [Line Items]    
Losses less than 12 Months, Estimated Fair Value $ 143,158 $ 742,044
Losses less than 12 Months, Gross Unrealized Losses 833 4,675
Losses more than 12 Months, Estimated Fair Value 12,350 75,209
Losses more than 12 Months, Gross Unrealized Losses 213 794
Obligations of U.S. Government Agencies    
Schedule Of Available For Sale Securities [Line Items]    
Losses less than 12 Months, Estimated Fair Value 48,760 33,053
Losses less than 12 Months, Gross Unrealized Losses 401 209
Losses more than 12 Months, Estimated Fair Value 12,074 13,703
Losses more than 12 Months, Gross Unrealized Losses 211 206
MBS    
Schedule Of Available For Sale Securities [Line Items]    
Losses less than 12 Months, Estimated Fair Value 84,554 708,991
Losses less than 12 Months, Gross Unrealized Losses 350 4,466
Losses more than 12 Months, Estimated Fair Value 276 61,506
Losses more than 12 Months, Gross Unrealized Losses 2 $ 588
Obligations of States and Municipal Subdivisions    
Schedule Of Available For Sale Securities [Line Items]    
Losses less than 12 Months, Estimated Fair Value 9,844  
Losses less than 12 Months, Gross Unrealized Losses $ 82  
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Loans Held for Sale by Portfolio Segment at Lower of Amortized Cost or Fair Value (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Accounts Notes And Loans Receivable [Line Items]    
Loans held for sale $ 38,631 $ 87,649
Commercial and Industrial    
Accounts Notes And Loans Receivable [Line Items]    
Loans held for sale 30,865 34,767
Commercial Real Estate    
Accounts Notes And Loans Receivable [Line Items]    
Loans held for sale 1,098 49,894
Consumer    
Accounts Notes And Loans Receivable [Line Items]    
Loans held for sale $ 6,668 $ 2,988
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Loans Held for Sale by Portfolio Segment at Lower of Amortized Cost or Fair Value (Parenthetical) (Details) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Accounts Notes And Loans Receivable [Line Items]    
Accrued interest receivable $ 48.2 $ 44.5
Loans Held for Sale    
Accounts Notes And Loans Receivable [Line Items]    
Accrued interest receivable $ 0.1 $ 0.4
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable $ 13,699,097 $ 12,983,655 $ 13,715,512
Commercial and Industrial      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 8,103,843 7,438,658 7,406,299
Commercial and Industrial | General C&I      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 4,948,200 4,517,016  
Commercial and Industrial | Energy Sector      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 1,449,274 1,419,957  
Commercial and Industrial | Restaurant Industry      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 1,146,785 1,027,421  
Commercial and Industrial | Healthcare      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 559,584 474,264  
Commercial Real Estate      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 2,976,924 2,887,272 2,859,934
Commercial Real Estate | Industrial, Retail, and Other      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 1,648,520 1,691,694  
Commercial Real Estate | Multifamily      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 769,879 659,902  
Commercial Real Estate | Office      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 558,525 535,676  
Consumer      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 2,618,330 2,657,725 $ 2,681,565
Consumer | Residential      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable 2,537,695 2,568,295  
Consumer | Other      
Accounts Notes And Loans Receivable [Line Items]      
Total loan outstanding and financing receivable $ 80,635 $ 89,430  
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Total Loans Outstanding by Portfolio Segment and Class of Financing Receivable (Parenthetical) (Details) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Accounts Notes And Loans Receivable [Line Items]    
Accrued interest receivable $ 48.2 $ 44.5
Loans And Leases Receivable Gross Carrying Amount    
Accounts Notes And Loans Receivable [Line Items]    
Accrued interest receivable $ 48.2 $ 44.5
v3.20.2
Loans Held-for-Sale, Loans and Allowance for Credit Losses - Summary of PPP Loans by Portfolio Segment and Class of Financing Receivable (Details)
$ in Thousands
 6 Months Ended
Jun. 30, 2020
USD ($)
Accounts Notes And Loans Receivable [Line Items]  
As a % of total loans 7.50%
Commercial and Industrial  
Accounts Notes And Loans Receivable [Line Items]  
Amortized Cost $ 1,031,998
% of PPP Portfolio 100.00%
Commercial and Industrial | General C&I  
Accounts Notes And Loans Receivable [Line Items]  
Amortized Cost $ 717,155
% of PPP Portfolio 69.50%
Commercial and Industrial | Energy Sector  
Accounts Notes And Loans Receivable [Line Items]  
Amortized Cost $ 79,034
% of PPP Portfolio 7.60%
Commercial and Industrial | Restaurant Industry  
Accounts Notes And Loans Receivable [Line Items]  
Amortized Cost $ 141,218
% of PPP Portfolio 13.70%
Commercial and Industrial | Healthcare  
Accounts Notes And Loans Receivable [Line Items]  
Amortized Cost $ 94,591
% of PPP Portfolio 9.20%
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Additional Information (Details)
 3 Months Ended 6 Months Ended
Jan. 01, 2020
USD ($)
Jun. 30, 2020
USD ($)
TDR
Jun. 30, 2019
USD ($)
TDR
Jun. 30, 2020
USD ($)
TDR
Jun. 30, 2019
USD ($)
TDR
Dec. 31, 2019
USD ($)
Accounts Notes And Loans Receivable [Line Items]            
Description policy review       two times per year    
Relationships amount     $ 5,000,000.0      
Loans amount     $ 5,000,000.0      
Allowance for Credit Losses $ 75,900,000 $ 158,200,000   $ 242,200,000    
Collateral loans impaired       $ 210,900,000    
Number of TDRs | TDR   0 0 0 0  
Residential Real Estate            
Accounts Notes And Loans Receivable [Line Items]            
Foreclosed residential properties   $ 234,000   $ 234,000   $ 151,000
Residential Real Estate | Consumer Loans            
Accounts Notes And Loans Receivable [Line Items]            
Residential mortgage loans in process of foreclosure   2,300,000   2,300,000   $ 4,400,000
COVID-19            
Accounts Notes And Loans Receivable [Line Items]            
Loan modifications total   2,500,000,000   2,500,000,000    
Loan modifications declined amount       1,900,000,000    
COVID-19 | Payment Deferrals            
Accounts Notes And Loans Receivable [Line Items]            
Loan modifications declined amount       1,400,000,000    
COVID-19 | Facility Restructures            
Accounts Notes And Loans Receivable [Line Items]            
Loan modifications declined amount       500,000,000    
Commercial and Industrial            
Accounts Notes And Loans Receivable [Line Items]            
Charge-offs related loans modified into TDRs   $ 12,500,000 $ 17,800,000 19,300,000 $ 17,800,000  
Customer Concentration | Accounts Receivable | Minimum            
Accounts Notes And Loans Receivable [Line Items]            
Consumer purpose loan risk       2,500,000    
Customer Concentration | Accounts Receivable | Minimum | Criticized            
Accounts Notes And Loans Receivable [Line Items]            
Consumer purpose loan risk       2,500,000    
Customer Concentration | Accounts Receivable | Minimum | NSC            
Accounts Notes And Loans Receivable [Line Items]            
Consumer purpose loan risk       10,000,000    
Customer Concentration | Accounts Receivable | Maximum            
Accounts Notes And Loans Receivable [Line Items]            
Consumer purpose loan risk       $ 10,000,000.0    
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Allowance for Credit Losses (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period $ 245,246 $ 105,038 $ 119,643 $ 94,378  
Provision for credit losses 158,206 28,927 240,444 40,137  
Charge-offs (33,452) (18,981) (66,550) (19,919)  
Recoveries 901 361 1,514 749  
Balance at end of period 370,901 115,345 370,901 115,345  
Allowance for credit losses, collectively evaluated for impairment 341,655 96,523 341,655 96,523  
Allowance for credit losses, individually evaluated for impairment 29,246 18,822 29,246 18,822  
Loans collectively evaluated 13,488,203 13,592,936 13,488,203 13,592,936  
Loans individually evaluated 210,894 122,576 210,894 122,576  
Loans ending balance 13,699,097 13,715,512 13,699,097 13,715,512 $ 12,983,655
Accounting Standards Update 2016-13          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period     195,493    
Cumulative effect of adoption of CECL 75,850   75,850    
Commercial and Industrial          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period 154,585 75,526 89,796 66,316  
Provision for credit losses 95,325 24,652 159,008 33,951  
Charge-offs (32,816) (18,001) (64,803) (18,462)  
Recoveries 702 269 844 641  
Balance at end of period 217,796 82,446 217,796 82,446  
Allowance for credit losses, collectively evaluated for impairment 189,085 63,783 189,085 63,783  
Allowance for credit losses, individually evaluated for impairment 28,711 18,663 28,711 18,663  
Loans collectively evaluated 7,918,246 7,293,236 7,918,246 7,293,236  
Loans individually evaluated 185,597 113,063 185,597 113,063  
Loans ending balance 8,103,843 7,406,299 8,103,843 7,406,299 7,438,658
Commercial and Industrial | Accounting Standards Update 2016-13          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period     122,747    
Cumulative effect of adoption of CECL 32,951   32,951    
Commercial Real Estate          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period 53,418 10,469 15,319 10,452  
Provision for credit losses 59,359 3,201 77,158 3,303  
Charge-offs (327) (253) (806) (338)  
Recoveries 30   210    
Balance at end of period 112,480 13,417 112,480 13,417  
Allowance for credit losses, collectively evaluated for impairment 111,945 13,407 111,945 13,407  
Allowance for credit losses, individually evaluated for impairment 535 10 535 10  
Loans collectively evaluated 2,954,091 2,852,595 2,954,091 2,852,595  
Loans individually evaluated 22,833 7,339 22,833 7,339  
Loans ending balance 2,976,924 2,859,934 2,976,924 2,859,934 2,887,272
Commercial Real Estate | Accounting Standards Update 2016-13          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period     35,918    
Cumulative effect of adoption of CECL 20,599   20,599    
Consumer          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period 37,243 14,690 14,528 13,703  
Provision for credit losses 3,522 240 4,278 1,446  
Charge-offs (309) (534) (941) (768)  
Recoveries 169 68 460 83  
Balance at end of period 40,625 14,464 40,625 14,464  
Allowance for credit losses, collectively evaluated for impairment 40,625 14,398 40,625 14,398  
Allowance for credit losses, individually evaluated for impairment   66   66  
Loans collectively evaluated 2,615,866 2,679,802 2,615,866 2,679,802  
Loans individually evaluated 2,464 1,763 2,464 1,763  
Loans ending balance 2,618,330 2,681,565 2,618,330 2,681,565 $ 2,657,725
Consumer | Accounting Standards Update 2016-13          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period     36,828    
Cumulative effect of adoption of CECL 22,300   22,300    
Small Business Portfolio Segment          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period   4,353   3,907  
Provision for credit losses   834   1,437  
Charge-offs   (193)   (351)  
Recoveries   24   25  
Balance at end of period   5,018   5,018  
Allowance for credit losses, collectively evaluated for impairment   4,935   4,935  
Allowance for credit losses, individually evaluated for impairment   83   83  
Loans collectively evaluated   767,303   767,303  
Loans individually evaluated   411   411  
Loans ending balance   $ 767,714   $ 767,714  
Reserve for Unfunded Commitments          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period 3,222   1,699    
Provision for credit losses 605   1,796    
Balance at end of period 3,827   3,827    
Reserve for Unfunded Commitments | Accounting Standards Update 2016-13          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period     2,031    
Cumulative effect of adoption of CECL 332   332    
After Reserve For Unfunded Commitments          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period 248,468   121,342    
Provision for credit losses 158,811   242,240    
Charge-offs (33,452)   (66,550)    
Recoveries 901   1,514    
Balance at end of period 374,728   374,728    
After Reserve For Unfunded Commitments | Accounting Standards Update 2016-13          
Accounts Notes And Loans Receivable [Line Items]          
Balance at beginning of period     197,524    
Cumulative effect of adoption of CECL $ 76,182   $ 76,182    
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Allowance for Credit Losses (Parenthetical) (Details) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Receivables [Abstract]    
Accrued interest receivable $ 48.2 $ 44.5
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Credit Quality Indicator And by Origination Year (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Financing Receivable Recorded Investment [Line Items]  
2020 $ 1,682,547
2019 1,695,061
2018 2,616,509
2017 1,734,815
2016 1,039,943
2015 and Prior 1,805,237
Revolving Loans 3,107,071
Revolving Credits Converted to Term Loans 17,914
Total 13,699,097
Commercial Portfolio Segment  
Financing Receivable Recorded Investment [Line Items]  
2020 1,302,557
2019 775,110
2018 1,230,826
2017 751,986
2016 462,390
2015 and Prior 801,210
Revolving Loans 2,762,818
Revolving Credits Converted to Term Loans 16,946
Total 8,103,843
Commercial Portfolio Segment | Pass  
Financing Receivable Recorded Investment [Line Items]  
2020 1,298,422
2019 760,994
2018 1,065,899
2017 639,740
2016 379,240
2015 and Prior 661,520
Revolving Loans 2,395,110
Revolving Credits Converted to Term Loans 16,712
Total 7,217,637
Commercial Portfolio Segment | Special mention  
Financing Receivable Recorded Investment [Line Items]  
2020 459
2019 3,716
2018 45,348
2017 71,407
2016 37,513
2015 and Prior 40,930
Revolving Loans 191,612
Revolving Credits Converted to Term Loans 234
Total 391,219
Commercial Portfolio Segment | Substandard  
Financing Receivable Recorded Investment [Line Items]  
2020 3,676
2019 8,616
2018 112,904
2017 33,882
2016 41,116
2015 and Prior 97,183
Revolving Loans 169,030
Total 466,407
Commercial Portfolio Segment | Doubtful  
Financing Receivable Recorded Investment [Line Items]  
2019 1,784
2018 6,675
2017 6,957
2016 4,521
2015 and Prior 1,577
Revolving Loans 7,066
Total 28,580
Commercial Real Estate  
Financing Receivable Recorded Investment [Line Items]  
2020 180,211
2019 451,124
2018 785,117
2017 650,932
2016 275,560
2015 and Prior 527,846
Revolving Loans 106,134
Total 2,976,924
Commercial Real Estate | Pass  
Financing Receivable Recorded Investment [Line Items]  
2020 179,936
2019 450,869
2018 749,786
2017 623,234
2016 254,228
2015 and Prior 509,130
Revolving Loans 105,881
Total 2,873,064
Commercial Real Estate | Special mention  
Financing Receivable Recorded Investment [Line Items]  
2020 275
2019 45
2018 16,090
2017 21,825
2016 11,613
2015 and Prior 11,215
Revolving Loans 193
Total 61,256
Commercial Real Estate | Substandard  
Financing Receivable Recorded Investment [Line Items]  
2019 210
2018 18,707
2017 5,873
2016 9,719
2015 and Prior 7,501
Revolving Loans 60
Total 42,070
Commercial Real Estate | Doubtful  
Financing Receivable Recorded Investment [Line Items]  
2018 534
Total 534
Consumer  
Financing Receivable Recorded Investment [Line Items]  
2020 199,779
2019 468,827
2018 600,566
2017 331,897
2016 301,993
2015 and Prior 476,181
Revolving Loans 238,119
Revolving Credits Converted to Term Loans 968
Total 2,618,330
Consumer | Current  
Financing Receivable Recorded Investment [Line Items]  
2020 199,779
2019 466,604
2018 587,756
2017 330,294
2016 297,718
2015 and Prior 464,492
Revolving Loans 237,681
Revolving Credits Converted to Term Loans 968
Total 2,585,292
Consumer | 30-59 days past due  
Financing Receivable Recorded Investment [Line Items]  
2019 1,537
2018 4,193
2017 549
2016 1,487
2015 and Prior 4,099
Revolving Loans 350
Total 12,215
Consumer | 60-89 days past due  
Financing Receivable Recorded Investment [Line Items]  
2019 490
2018 4,232
2017 392
2016 1,952
2015 and Prior 2,743
Revolving Loans 88
Total 9,897
Consumer | 90+ days past due  
Financing Receivable Recorded Investment [Line Items]  
2019 196
2018 4,385
2017 662
2016 836
2015 and Prior 4,847
Total $ 10,926
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Credit Quality Indicator And by Origination Year (Parenthetical) (Details) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Receivables [Abstract]    
Accrued interest receivable $ 48.2 $ 44.5
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Aging of Past Due Loans By Segment and Class of Financing Receivable (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans $ 111,017 $ 92,671
Current 13,588,080 12,890,984
Total 13,699,097 12,983,655
90+ Days Past Due and Accruing 3,123 1,120
30-59 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 18,958 37,625
60-89 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 39,982 8,713
90+ days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 52,077 46,333
Commercial and Industrial    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 72,816 62,814
Current 8,031,027 7,375,844
Total 8,103,843 7,438,658
90+ Days Past Due and Accruing 126 193
Commercial and Industrial | 30-59 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 4,985 24,859
Commercial and Industrial | 60-89 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 28,454 2,442
Commercial and Industrial | 90+ days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 39,377 35,513
Commercial and Industrial | General C&I    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 22,472 39,443
Current 4,925,728 4,477,573
Total 4,948,200 4,517,016
90+ Days Past Due and Accruing 126 85
Commercial and Industrial | General C&I | 30-59 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 3,257 23,143
Commercial and Industrial | General C&I | 60-89 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 1,060 1,117
Commercial and Industrial | General C&I | 90+ days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 18,155 15,183
Commercial and Industrial | Energy Sector    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 30,731 8,166
Current 1,418,543 1,411,791
Total 1,449,274 1,419,957
Commercial and Industrial | Energy Sector | 30-59 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 964  
Commercial and Industrial | Energy Sector | 60-89 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 25,947  
Commercial and Industrial | Energy Sector | 90+ days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 3,820 8,166
Commercial and Industrial | Restaurant Industry    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 15,281 10,524
Current 1,131,504 1,016,897
Total 1,146,785 1,027,421
90+ Days Past Due and Accruing   108
Commercial and Industrial | Restaurant Industry | 30-59 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 352 1,219
Commercial and Industrial | Restaurant Industry | 60-89 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 31 1,284
Commercial and Industrial | Restaurant Industry | 90+ days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 14,898 8,021
Commercial and Industrial | Healthcare    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 4,332 4,681
Current 555,252 469,583
Total 559,584 474,264
Commercial and Industrial | Healthcare | 30-59 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 412 497
Commercial and Industrial | Healthcare | 60-89 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 1,416 41
Commercial and Industrial | Healthcare | 90+ days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 2,504 4,143
Commercial Real Estate    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 5,163 7,214
Current 2,971,761 2,880,058
Total 2,976,924 2,887,272
90+ Days Past Due and Accruing 71  
Commercial Real Estate | Industrial, retail, and other    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 4,340 5,742
Current 1,644,180 1,685,952
Total 1,648,520 1,691,694
90+ Days Past Due and Accruing 71  
Commercial Real Estate | Multifamily    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 218  
Current 769,661 659,902
Total 769,879 659,902
Commercial Real Estate | Office    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 605 1,472
Current 557,920 534,204
Total 558,525 535,676
Commercial Real Estate | 30-59 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 1,758 3,607
Commercial Real Estate | 30-59 days past due | Industrial, retail, and other    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 1,027 3,354
Commercial Real Estate | 30-59 days past due | Multifamily    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 218  
Commercial Real Estate | 30-59 days past due | Office    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 513 253
Commercial Real Estate | 60-89 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 1,631 133
Commercial Real Estate | 60-89 days past due | Industrial, retail, and other    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 1,631 133
Commercial Real Estate | 90+ days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 1,774 3,474
Commercial Real Estate | 90+ days past due | Industrial, retail, and other    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 1,682 2,255
Commercial Real Estate | 90+ days past due | Office    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 92 1,219
Consumer    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 33,038 22,643
Current 2,585,292 2,635,082
Total 2,618,330 2,657,725
90+ Days Past Due and Accruing 2,926 927
Consumer | Residential Real Estate    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 32,470 22,360
Current 2,505,225 2,545,935
Total 2,537,695 2,568,295
90+ Days Past Due and Accruing 2,894 887
Consumer | Other    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 568 283
Current 80,067 89,147
Total 80,635 89,430
90+ Days Past Due and Accruing 32 40
Consumer | 30-59 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 12,215 9,159
Consumer | 30-59 days past due | Residential Real Estate    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 12,080 8,967
Consumer | 30-59 days past due | Other    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 135 192
Consumer | 60-89 days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 9,897 6,138
Consumer | 60-89 days past due | Residential Real Estate    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 9,502 6,101
Consumer | 60-89 days past due | Other    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 395 37
Consumer | 90+ days past due    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 10,926 7,346
Consumer | 90+ days past due | Residential Real Estate    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans 10,888 7,292
Consumer | 90+ days past due | Other    
Financing Receivable Recorded Investment Past Due [Line Items]    
Age Analysis of Past-Due Loans $ 38 $ 54
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Aging of Past Due Loans By Segment and Class of Financing Receivable (Parenthetical) (Details) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Receivables [Abstract]    
Accrued interest receivable $ 48.2 $ 44.5
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Nonaccruing Loans by Portfolio Segment and Class of Financing Receivable (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2020
Dec. 31, 2019
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   $ 156,778  
Nonaccrual Loans - Amortized Cost, End of the Period $ 224,384 224,384  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 35,074 35,074  
90+ Days Past Due and Accruing 3,123 3,123 $ 1,120
Interest Income Recognized 99 211  
Commercial and Industrial      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   134,473  
Nonaccrual Loans - Amortized Cost, End of the Period 183,441 183,441  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 28,850 28,850  
90+ Days Past Due and Accruing 126 126 193
Interest Income Recognized 28 65  
Commercial and Industrial | General C&I      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   66,589  
Nonaccrual Loans - Amortized Cost, End of the Period 62,579 62,579  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 4,845 4,845  
90+ Days Past Due and Accruing 126 126 85
Interest Income Recognized 18 18  
Commercial and Industrial | Energy Sector      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   9,568  
Nonaccrual Loans - Amortized Cost, End of the Period 41,884 41,884  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 957 957  
Interest Income Recognized 1 9  
Commercial and Industrial | Restaurant Industry      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   53,483  
Nonaccrual Loans - Amortized Cost, End of the Period 76,175 76,175  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 21,096 21,096  
90+ Days Past Due and Accruing     108
Interest Income Recognized 9 38  
Commercial and Industrial | Healthcare      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   4,833  
Nonaccrual Loans - Amortized Cost, End of the Period 2,803 2,803  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 1,952 1,952  
Commercial Real Estate      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   7,180  
Nonaccrual Loans - Amortized Cost, End of the Period 24,659 24,659  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 3,760 3,760  
90+ Days Past Due and Accruing 71 71  
Interest Income Recognized 16 59  
Commercial Real Estate | Industrial, Retail, and Other      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   5,935  
Nonaccrual Loans - Amortized Cost, End of the Period 23,853 23,853  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 3,046 3,046  
90+ Days Past Due and Accruing 71 71  
Interest Income Recognized 16 59  
Commercial Real Estate | Multifamily      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, End of the Period 714 714  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 714 714  
Commercial Real Estate | Office      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   1,245  
Nonaccrual Loans - Amortized Cost, End of the Period 92 92  
Consumer      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   15,125  
Nonaccrual Loans - Amortized Cost, End of the Period 16,284 16,284  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 2,464 2,464  
90+ Days Past Due and Accruing 2,926 2,926 927
Interest Income Recognized 55 87  
Consumer | Residential Real Estate      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   15,101  
Nonaccrual Loans - Amortized Cost, End of the Period 16,278 16,278  
Nonaccrual Loans - Amortized Cost, No Allowance Recorded 2,464 2,464  
90+ Days Past Due and Accruing 2,894 2,894 $ 887
Interest Income Recognized 53 83  
Consumer | Other      
Accounts Notes And Loans Receivable [Line Items]      
Nonaccrual Loans - Amortized Cost, Beginning of the Period   24  
Nonaccrual Loans - Amortized Cost, End of the Period 6 6  
90+ Days Past Due and Accruing 32 32  
Interest Income Recognized $ 2 $ 4  
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Nonaccruing Loans by Portfolio Segment and Class of Financing Receivable (Parenthetical) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Accounts Notes And Loans Receivable [Line Items]    
ACI loans reclassed to nonaccrual loans $ 224,384 $ 156,778
Accounting Standards Update 2016-13    
Accounts Notes And Loans Receivable [Line Items]    
ACI loans reclassed to nonaccrual loans   $ 43,000
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Loan that were Modified Into TDRs (Details)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2019
USD ($)
TDR
Jun. 30, 2020
USD ($)
TDR
Jun. 30, 2019
USD ($)
TDR
Financing Receivable Modifications [Line Items]      
Number of TDRs | TDR 4 6 5
Amortized Cost | $ $ 20,819 $ 51,752 $ 42,085
Commercial and Industrial | General C&I      
Financing Receivable Modifications [Line Items]      
Number of TDRs | TDR 2 3 3
Amortized Cost | $ $ 7,647 $ 19,366 $ 28,913
Commercial and Industrial | Energy Sector      
Financing Receivable Modifications [Line Items]      
Number of TDRs | TDR 1 1 1
Amortized Cost | $ $ 11,717 $ 8,140 $ 11,717
Commercial and Industrial | Restaurant Industry      
Financing Receivable Modifications [Line Items]      
Number of TDRs | TDR   2  
Amortized Cost | $   $ 24,246  
Industrial, Retail, and Other      
Financing Receivable Modifications [Line Items]      
Number of TDRs | TDR 1   1
Amortized Cost | $ $ 1,455   $ 1,455
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Loan that were Modified Into TDRs (Parenthetical) (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Financing Receivable Modifications [Line Items]    
Net accrued interest receivable $ 0  
Accrued interest receivable 48,200,000 $ 44,500,000
Maximum    
Financing Receivable Modifications [Line Items]    
Accrued interest receivable $ 100,000  
v3.20.2
Loans Held for Sale, Loans and Allowance for Credit Losses - Summary of Types of Loan Modifications that were Modified into TDRs (Details) - TDR
 3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Financing Receivable Modifications [Line Items]      
Number of Loans Modified 4 6 5
Rate Concession      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified   1  
Modified Terms and/or Other Concessions      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified 4 5 5
Commercial and Industrial | General C&I      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified 2 3 3
Commercial and Industrial | General C&I | Modified Terms and/or Other Concessions      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified 2 3 3
Commercial and Industrial | Energy Sector      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified 1 1 1
Commercial and Industrial | Energy Sector | Rate Concession      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified   1  
Commercial and Industrial | Energy Sector | Modified Terms and/or Other Concessions      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified 1   1
Commercial and Industrial | Restaurant Industry      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified   2  
Commercial and Industrial | Restaurant Industry | Modified Terms and/or Other Concessions      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified   2  
Industrial, Retail, and Other      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified 1   1
Industrial, Retail, and Other | Modified Terms and/or Other Concessions      
Financing Receivable Modifications [Line Items]      
Number of Loans Modified 1   1
v3.20.2
Goodwill and Other Intangible Assets - Summary of Goodwill and Other Intangible Assets (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Goodwill And Other Intangible Assets [Line Items]    
Goodwill $ 43,061 $ 485,336
Other intangible assets, net 94,257 105,613
Total goodwill and intangible assets, net 137,318 590,949
Core Deposit    
Goodwill And Other Intangible Assets [Line Items]    
Other intangible assets, net 81,011 90,788
Customer Lists    
Goodwill And Other Intangible Assets [Line Items]    
Other intangible assets, net 10,800 11,993
Noncompete Agreements    
Goodwill And Other Intangible Assets [Line Items]    
Other intangible assets, net 1,127 1,473
Trademarks    
Goodwill And Other Intangible Assets [Line Items]    
Other intangible assets, net $ 1,319 $ 1,359
v3.20.2
Goodwill and Other Intangible Assets - Summary of Goodwill and Other Intangible Assets (Parenthetical) (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Core Deposit    
Goodwill And Other Intangible Assets [Line Items]    
Accumulated amortization of intangible assets $ 70,612 $ 60,836
Customer Lists    
Goodwill And Other Intangible Assets [Line Items]    
Accumulated amortization of intangible assets 23,065 21,908
Noncompete Agreements    
Goodwill And Other Intangible Assets [Line Items]    
Accumulated amortization of intangible assets 229 137
Trademarks    
Goodwill And Other Intangible Assets [Line Items]    
Accumulated amortization of intangible assets $ 115 $ 75
v3.20.2
Goodwill and Other Intangible Assets - Additional Information (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Mar. 31, 2020
Jun. 30, 2020
Dec. 31, 2019
Goodwill And Other Intangible Assets [Line Items]      
Interim goodwill impairment $ 443,700 $ 443,695  
Goodwill   $ 43,061 $ 485,336
State Bank Acquisition      
Goodwill And Other Intangible Assets [Line Items]      
Increased in goodwill related to acquisition 1,100    
Wealth & Pension Services Group, Inc.      
Goodwill And Other Intangible Assets [Line Items]      
Increased in goodwill related to acquisition $ 300    
v3.20.2
Goodwill and Other Intangible Assets - Summary of Changes to Carrying Amount of Goodwill by Segment (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Mar. 31, 2020
Jun. 30, 2020
Goodwill And Other Intangible Assets [Line Items]    
Balance as of December 31, 2019 $ 485,336 $ 485,336
Impairment (443,700) (443,695)
Balance as of June 30, 2020   43,061
Wealth & Pension Acquisition    
Goodwill And Other Intangible Assets [Line Items]    
Acquisition and other goodwill   304
Other    
Goodwill And Other Intangible Assets [Line Items]    
Acquisition and other goodwill   1,116
Banking    
Goodwill And Other Intangible Assets [Line Items]    
Balance as of December 31, 2019 442,579 442,579
Impairment (443,700) (443,695)
Banking | Other    
Goodwill And Other Intangible Assets [Line Items]    
Acquisition and other goodwill   1,116
Financial Services    
Goodwill And Other Intangible Assets [Line Items]    
Balance as of December 31, 2019 $ 42,757 42,757
Balance as of June 30, 2020   43,061
Financial Services | Wealth & Pension Acquisition    
Goodwill And Other Intangible Assets [Line Items]    
Acquisition and other goodwill   $ 304
v3.20.2
Derivatives - Schedule of Notional Amounts and Estimated Fair Values (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Feb. 28, 2019
Derivatives Fair Value [Line Items]      
Notional Amount $ 2,574,570 $ 6,339,935  
Fair Value, Other Assets 70,419 257,137  
Fair Value, Other Liabilities 18,823 11,211  
Cash Flow Hedges      
Derivatives Fair Value [Line Items]      
Notional Amount     $ 4,000,000
Derivatives Designated as Hedging Instruments | Cash Flow Hedges      
Derivatives Fair Value [Line Items]      
Notional Amount 350,000 4,350,000  
Fair Value, Other Assets 26,561 239,213  
Fair Value, Other Liabilities   643  
Derivatives Designated as Hedging Instruments | Cash Flow Hedges | Commercial Loans | Interest Rate Swaps      
Derivatives Fair Value [Line Items]      
Notional Amount 350,000 350,000  
Fair Value, Other Assets 26,561    
Fair Value, Other Liabilities   643  
Derivatives Designated as Hedging Instruments | Cash Flow Hedges | Commercial Loans | Interest Rate Collars      
Derivatives Fair Value [Line Items]      
Notional Amount   4,000,000  
Fair Value, Other Assets   239,213  
Derivatives Not Designated as Hedging Instruments      
Derivatives Fair Value [Line Items]      
Notional Amount 2,224,570 1,989,935  
Fair Value, Other Assets 43,858 17,924  
Fair Value, Other Liabilities 18,823 10,568  
Derivatives Not Designated as Hedging Instruments | Mortgage Loan Held for Sale Interest Rate Lock Commitments      
Derivatives Fair Value [Line Items]      
Notional Amount 38,236 4,138  
Fair Value, Other Assets 548 22  
Derivatives Not Designated as Hedging Instruments | Mortgage Loan Held for Sale Floating Commitments      
Derivatives Fair Value [Line Items]      
Notional Amount 7,367 1,523  
Derivatives Not Designated as Hedging Instruments | Foreign Exchange Contracts      
Derivatives Fair Value [Line Items]      
Notional Amount 113,982 74,322  
Fair Value, Other Assets 1,054 379  
Fair Value, Other Liabilities 836 558  
Derivatives Not Designated as Hedging Instruments | Commercial Loans | Interest Rate Swaps      
Derivatives Fair Value [Line Items]      
Notional Amount 1,228,008 1,008,805  
Fair Value, Other Assets 26,329 8,386  
Fair Value, Other Liabilities 2,116 899  
Derivatives Not Designated as Hedging Instruments | Commercial Loans | Interest Rate Collars      
Derivatives Fair Value [Line Items]      
Notional Amount 71,110 75,555  
Fair Value, Other Assets 639 257  
Fair Value, Other Liabilities 639 257  
Derivatives Not Designated as Hedging Instruments | Commercial Loans | Interest Rate Caps      
Derivatives Fair Value [Line Items]      
Notional Amount 172,851 167,185  
Fair Value, Other Assets 11 18  
Fair Value, Other Liabilities 11 18  
Derivatives Not Designated as Hedging Instruments | Commercial Loans | Interest Rate Floors      
Derivatives Fair Value [Line Items]      
Notional Amount 583,262 654,298  
Fair Value, Other Assets 15,221 8,836  
Fair Value, Other Liabilities 15,221 8,836  
Derivatives Not Designated as Hedging Instruments | Forward Contracts | Mortgage Loan Forward Sale Commitments      
Derivatives Fair Value [Line Items]      
Notional Amount 9,754 4,109  
Fair Value, Other Assets $ 56 $ 26  
v3.20.2
Derivatives - Additional Information (Details) - USD ($)
$ in Thousands
 1 Months Ended 6 Months Ended
Mar. 31, 2020
Feb. 28, 2019
Jun. 30, 2020
Dec. 31, 2019
Derivative [Line Items]        
Obligation to return cash collateral provided by counterparty     $ 22,400 $ 240,900
Derivative, notional amount     2,574,570 6,339,935
Deferred net gains (loss) on derivatives     $ (77,200)  
Cash Flow Hedges        
Derivative [Line Items]        
Derivative, notional amount   $ 4,000,000    
Derivative contract term   5 years    
Derivative contract remaining maturity 4 years      
Amortization period of gain reflected in other comprehensive income net of deferred income taxes 4 years      
Realized gain on termination of cash flow hedges collar $ 261,200      
Maximum period for hedging transactions     5 years 8 months 12 days  
LIBOR | Cash Flow Hedges        
Derivative [Line Items]        
Derivative fixed rate 0.5785%      
Interest-bearing Deposits in Banks        
Derivative [Line Items]        
Cash or securities pledged as collateral     $ 13,200 $ 10,600
v3.20.2
Derivatives - Schedule of Gain (Loss) in Consolidated Statements of Operations Related to Derivative Instruments (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Derivative Instruments Gain Loss [Line Items]        
Noninterest income     $ (77,200)  
Derivatives Designated as Hedging Instruments | Cash Flow Hedges | Commercial Loans | Interest Rate Swaps        
Derivative Instruments Gain Loss [Line Items]        
OCI $ 4,046 $ 11,310 28,081 $ 17,956
Reclassified from AOCI to interest income 981 (1,509) 876 (3,017)
Derivatives Designated as Hedging Instruments | Cash Flow Hedges | Commercial Loans | Interest Rate Collars        
Derivative Instruments Gain Loss [Line Items]        
OCI   86,125 143,199 127,602
Reclassified from AOCI to interest income 16,714 37 24,926 37
Derivatives Not Designated as Hedging Instruments | Mortgage Loan Held for Sale Interest Rate Lock Commitments        
Derivative Instruments Gain Loss [Line Items]        
Noninterest income 215 (42) 526 27
Derivatives Not Designated as Hedging Instruments | Foreign Exchange Contracts        
Derivative Instruments Gain Loss [Line Items]        
Noninterest income $ 687 $ 984 $ 1,551 $ 2,124
v3.20.2
Derivative - Schedule of Interest Rate Swap Agreements (Details) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Derivative [Line Items]    
Notional Amount $ 2,574,570 $ 6,339,935
1.5995% Interest Rate Swap    
Derivative [Line Items]    
Effective Date Mar. 08, 2016  
Maturity Date Feb. 27, 2026  
Notional Amount $ 175,000  
Fixed Rate 1.5995%  
Variable Rate 1 Month LIBOR  
1.5890% Interest Rate Swap    
Derivative [Line Items]    
Effective Date Mar. 08, 2016  
Maturity Date Feb. 27, 2026  
Notional Amount $ 175,000  
Fixed Rate 1.589%  
Variable Rate 1 Month LIBOR  
v3.20.2
Deposits - Additional Information (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Domestic    
Time Deposits [Line Items]    
Time deposits $250,000 and over $ 503,600,000 $ 644,100,000
Foreign    
Time Deposits [Line Items]    
Time Deposits $ 0 $ 0
v3.20.2
Borrowed Funds - Additional Information (Details) - USD ($)
 1 Months Ended 6 Months Ended 12 Months Ended
Mar. 29, 2020
Jun. 30, 2019
Mar. 31, 2015
Jun. 30, 2014
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Mar. 31, 2020
Mar. 29, 2019
Borrowed Funds [Line Items]                  
Aggregate principle amount           $ 83,474,000      
Unregistered multi tranche debt Transactions       $ 245,000,000          
Unregistered debt transactions     $ 50,000,000            
Debt conversion, description         The subordinated note due June 28, 2029 will convert to a floating rate on June 28, 2024. The subordinated note due March 11, 2025 converted to a floating rate on March 11, 2020. The Bank’s subordinated note will convert from a fixed rate to a floating rate on June 28, 2024.        
Subordinated debt         $ 183,142,000   $ 182,712,000    
Subordinate debt capital treatment achievement period         10 years        
FHLB advances         $ 100,000,000   100,000,000    
FHLB borrowing availability         2,600,000,000        
Irrevocable letter of credit         731,000,000   391,000,000    
Notes payable         $ 1,663,000   2,078,000    
Holding Company Revolving Loan Facility | Revolving Credit Facility                  
Borrowed Funds [Line Items]                  
Debt instrument, maturity date Mar. 29, 2021       Mar. 29, 2020        
Borrowings               $ 0  
Line of credit facility, borrowing capacity                 $ 100,000,000
Linscomb & Williams, Inc. | Wealth & Pension Services Group, Inc.                  
Borrowed Funds [Line Items]                  
Notes payable         $ 1,700,000        
FRB                  
Borrowed Funds [Line Items]                  
Borrowings         $ 0   $ 0    
Municipal Deposits                  
Borrowed Funds [Line Items]                  
Letter of credit expiration date         Jul. 20, 2020        
Commercial Loans | FRB                  
Borrowed Funds [Line Items]                  
Collateralized borrowings from FRB         $ 1,700,000,000        
Commercial and Residential Real Estate Loan                  
Borrowed Funds [Line Items]                  
FHLB advances collateral amount         $ 4,000,000,000.0        
4.75% Fixed to Floating Rate Subordinated Notes Due 2029                  
Borrowed Funds [Line Items]                  
Aggregate principle amount   $ 85,000,000              
Debt instrument, interest rate   4.75%     4.75% 4.75%      
4.875% Senior Notes, Due June 28, 2019                  
Borrowed Funds [Line Items]                  
Debt instrument, interest rate   4.875%       4.875%      
Debt instrument, maturity date         Jun. 28, 2019        
Subordinated debt maturity period         4 years        
5.375% Senior Notes, Due June 28, 2021                  
Borrowed Funds [Line Items]                  
Debt instrument, interest rate         5.375%   5.375%    
Debt instrument, maturity date         Jun. 28, 2021   Jun. 28, 2021    
Subordinated debt maturity period         7 years        
7.250% Subordinated Notes, Due June 28, 2029, Callable in 2024                  
Borrowed Funds [Line Items]                  
Debt instrument, interest rate         7.25%   7.25%    
Debt instrument, maturity date         Jun. 28, 2029   Jun. 28, 2029    
Subordinated debt maturity period         15 years        
Subordinated debt         $ 35,000,000        
Call option period         10 years        
6.250% Subordinated Notes, Due June 28, 2029, Callable in 2024                  
Borrowed Funds [Line Items]                  
Debt instrument, interest rate         6.25%   6.25%    
Debt instrument, maturity date         Jun. 28, 2029   Jun. 28, 2029    
Subordinated debt maturity period         15 years        
Subordinated debt         $ 25,000,000        
Call option period         10 years        
4.750% Subordinated Notes, Due June 30, 2029, Callable in 2024                  
Borrowed Funds [Line Items]                  
Debt instrument, interest rate         4.75%   4.75%    
Debt instrument, maturity date         Jun. 30, 2029   Jun. 30, 2029    
Subordinated debt maturity period         10 years        
Subordinated debt         $ 85,000,000        
Call option period         5 years        
3-month LIBOR Plus 4.663%, Subordinated Notes, Due March 11, 2025, Callable in 2020                  
Borrowed Funds [Line Items]                  
Debt instrument, interest rate         4.663%   4.663%    
Debt instrument, maturity date         Mar. 11, 2025   Mar. 11, 2025    
Subordinated debt         $ 40,000,000        
Call option period         5 years        
Expiration on November 30, 2020 | Municipal Deposits                  
Borrowed Funds [Line Items]                  
Irrevocable letter of credit         $ 725,000,000        
Letter of credit expiration date         Nov. 30, 2020        
Expiration on December 22, 2020 | Municipal Deposits                  
Borrowed Funds [Line Items]                  
Irrevocable letter of credit         $ 725,000,000        
Letter of credit expiration date         Dec. 22, 2020        
Letter of Credit | Municipal Deposits                  
Borrowed Funds [Line Items]                  
Borrowings         $ 6,000,000        
v3.20.2
Borrowed Funds - Summary of Debt (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Debt issue costs and unamortized premium $ (1,889) $ (2,350)
Total senior and subordinated debt 233,111 232,650
Cadence Bancorporation    
Debt Instrument [Line Items]    
Long-term debt, gross 210,000 210,000
Cadence Bancorporation | 5.375% Senior Notes, Due June 28, 2021    
Debt Instrument [Line Items]    
Long-term debt, gross 50,000 50,000
Cadence Bancorporation | 7.250% Subordinated Notes, Due June 28, 2029, Callable in 2024    
Debt Instrument [Line Items]    
Long-term debt, gross 35,000 35,000
Cadence Bancorporation | 3-month LIBOR Plus 4.663%, Subordinated Notes, Due March 11, 2025, Callable in 2020    
Debt Instrument [Line Items]    
Long-term debt, gross 40,000 40,000
Cadence Bancorporation | 4.750% Subordinated Notes, Due June 30, 2029, Callable in 2024    
Debt Instrument [Line Items]    
Long-term debt, gross 85,000 85,000
Cadence Bank | 6.250% Subordinated Notes, Due June 28, 2029, Callable in 2024    
Debt Instrument [Line Items]    
Long-term debt, gross $ 25,000 $ 25,000
v3.20.2
Borrowed Funds - Summary of Debt (Parenthetical) (Details)
 6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
5.375% Senior Notes, Due June 28, 2021    
Debt Instrument [Line Items]    
Debt instrument, interest rate 5.375% 5.375%
Debt instrument, maturity date Jun. 28, 2021 Jun. 28, 2021
7.250% Subordinated Notes, Due June 28, 2029, Callable in 2024    
Debt Instrument [Line Items]    
Debt instrument, interest rate 7.25% 7.25%
Debt instrument, maturity date Jun. 28, 2029 Jun. 28, 2029
3-month LIBOR Plus 4.663%, Subordinated Notes, Due March 11, 2025, Callable in 2020    
Debt Instrument [Line Items]    
Debt instrument, interest rate 4.663% 4.663%
Debt instrument, maturity date Mar. 11, 2025 Mar. 11, 2025
4.750% Subordinated Notes, Due June 30, 2029, Callable in 2024    
Debt Instrument [Line Items]    
Debt instrument, interest rate 4.75% 4.75%
Debt instrument, maturity date Jun. 30, 2029 Jun. 30, 2029
6.250% Subordinated Notes, Due June 28, 2029, Callable in 2024    
Debt Instrument [Line Items]    
Debt instrument, interest rate 6.25% 6.25%
Debt instrument, maturity date Jun. 28, 2029 Jun. 28, 2029
v3.20.2
Borrowed Funds - Summary of Junior Subordinated Debt (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Junior subordinated debentures, gross $ 50,619 $ 50,619
Purchase accounting adjustment, net of amortization (13,171) (13,174)
Total junior subordinated debentures 37,448 37,445
3 month LIBOR plus 2.85%, due 2033    
Debt Instrument [Line Items]    
Junior subordinated debentures, gross 30,000 30,000
3 month LIBOR plus 2.95%, due 2033    
Debt Instrument [Line Items]    
Junior subordinated debentures, gross 5,155 5,155
3 month LIBOR plus 1.75%, due 2037    
Debt Instrument [Line Items]    
Junior subordinated debentures, gross $ 15,464 $ 15,464
v3.20.2
Borrowed Funds - Summary of Junior Subordinated Debt (Parenthetical) (Details) - Junior subordinated debt
 6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
3 month LIBOR plus 2.85%, due 2033    
Debt Instrument [Line Items]    
Debt instrument, interest rate 2.85% 2.85%
Debt instrument maturity year 2033 2033
3 month LIBOR plus 2.95%, due 2033    
Debt Instrument [Line Items]    
Debt instrument, interest rate 2.95% 2.95%
Debt instrument maturity year 2033 2033
3 month LIBOR plus 1.75%, due 2037    
Debt Instrument [Line Items]    
Debt instrument, interest rate 1.75% 1.75%
Debt instrument maturity year 2037 2037
v3.20.2
Other Noninterest Income and Other Noninterest Expense - Summary of Other Noninterest Income and Other Noninterest Expense (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Other noninterest income        
Insurance revenue $ 225 $ 244 $ 474 $ 442
Mortgage banking income 2,020 674 3,131 1,253
Income from bank owned life insurance policies 1,220 1,264 2,549 2,416
Other (1,373) 1,394 (1,953) 2,979
Total other noninterest income 2,092 3,576 4,201 7,090
Other noninterest expenses        
Data processing expense 3,084 3,435 6,436 6,029
Software amortization 4,036 3,184 7,583 6,519
Consulting and professional fees 3,009 1,899 5,715 4,128
Loan related expenses 735 1,740 1,495 2,650
FDIC insurance 3,939 1,870 6,374 3,622
Communications 1,002 1,457 2,158 2,455
Advertising and public relations 920 1,104 2,384 1,885
Legal expenses 579 645 991 803
Other 8,052 9,937 19,688 18,118
Total other noninterest expenses $ 25,356 $ 25,271 $ 52,824 $ 46,209
v3.20.2
Income Taxes - Additional Information (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Income Tax Disclosure [Abstract]          
Income tax (benefit) expense $ (6,653) $ 14,707 $ (39,887) $ 31,809  
Effective tax rate 10.60% 23.30% 8.10% 23.00%  
Net deferred tax liability         $ 25,000
Net deferred tax asset $ 65,900   $ 65,900    
v3.20.2
Earnings Per Common Share - Reconciliation of Basic and Diluted Net (Loss) Income Per Common Share (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Earnings Per Share [Abstract]            
Net (loss) income per consolidated statements of operations $ (56,114) $ (399,311) $ 48,346 $ 58,201 $ (455,425) $ 106,547
Net income allocated to participating securities     (170)     (401)
Net (loss) income allocated to common stock $ (56,114)   $ 48,176   $ (455,425) $ 106,146
Weighted average common shares outstanding (Basic) 125,924,652   128,791,933   126,277,549 129,634,049
Weighted average dilutive restricted stock units and warrants     243,620     153,709
Weighted average common shares outstanding (Diluted) 125,924,652   129,035,553   126,277,549 129,787,758
(Loss) Earnings per common share (Basic) $ (0.45)   $ 0.37   $ (3.61) $ 0.82
(Loss) Earnings per common share (Diluted) $ (0.45)   $ 0.37   $ (3.61) $ 0.82
v3.20.2
Earnings Per Common Share - Additional Information (Details) - USD ($)
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Stock Options and Restricted Stock Units        
Earnings Per Share [Line Items]        
Antidilutive stock options and restricted stock units $ 3,098,998 $ 169,800 $ 1,870,507 $ 1,009,148
v3.20.2
Regulatory Matters - Additional Information (Details) - USD ($)
$ in Millions
 6 Months Ended
Jun. 30, 2020
Mar. 26, 2020
Dec. 31, 2019
Banking And Thrift [Abstract]      
Describes the potential impact of COVID-19 On March 27, 2020, the federal banking agencies issued an interim final rule to delay the estimated impact on regulatory capital stemming from the adoption of CECL. The agencies granted this relief to allow institutions to focus on lending to customers in light of recent strains on the U.S economy due to COVID-19, while also maintaining the quality of regulatory capital. Under the interim final rule, 100% of the CECL Day 1 impact and 25% of subsequent provisions for credit losses (“Day 2” impacts) will be deferred over a two-year year period ending January 1, 2022, at which time this deferred amount will be phased in on a pro rata basis over a three-year period ending January 2025.    
Cash on hand $ 147.0    
Reserve requirement with FRB     $ 246.0
Reserve requirement ratio with FRB   0.00%  
v3.20.2
Regulatory Matters - Schedule of Actual Capital Amounts and Ratios (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]    
Tier 1 leverage $ 1,751,651 $ 1,784,664
Common equity tier 1 capital 1,751,651 1,784,664
Tier 1 risk-based capital 1,751,651 1,784,664
Total risk-based capital 2,147,055 2,120,571
Tier 1 leverage 736,486 690,213
Common equity tier 1 capital 676,118 697,089
Tier 1 risk-based capital 901,490 929,453
Total risk-based capital 1,201,987 1,239,270
Tier 1 risk-based capital 901,490 929,453
Total risk-based capital $ 1,502,484 $ 1,549,088
Tier 1 leverage 9.50% 10.30%
Common equity tier 1 capital 11.70% 11.50%
Tier 1 risk-based capital 11.70% 11.50%
Total risk-based capital 14.30% 13.70%
Tier 1 leverage 4.00% 4.00%
Common equity tier 1 capital 4.50% 4.50%
Tier 1 risk-based capital 6.00% 6.00%
Total risk-based capital 8.00% 8.00%
Tier 1 risk-based capital 6.00% 6.00%
Total risk-based capital 10.00% 10.00%
Cadence Bank    
Compliance With Regulatory Capital Requirements Under Banking Regulations [Line Items]    
Tier 1 leverage $ 1,837,580 $ 1,953,008
Common equity tier 1 capital 1,787,580 1,903,008
Tier 1 risk-based capital 1,837,580 1,953,008
Total risk-based capital 2,050,896 2,099,146
Tier 1 leverage 736,981 689,881
Common equity tier 1 capital 676,097 696,755
Tier 1 risk-based capital 901,463 929,007
Total risk-based capital 1,201,951 1,238,676
Tier 1 leverage 921,227 862,351
Common equity tier 1 capital 976,585 1,006,425
Tier 1 risk-based capital 1,201,951 1,238,676
Total risk-based capital $ 1,502,438 $ 1,548,345
Tier 1 leverage 10.00% 11.10%
Common equity tier 1 capital 11.90% 12.30%
Tier 1 risk-based capital 12.20% 12.60%
Total risk-based capital 13.70% 13.60%
Tier 1 leverage 4.00% 4.00%
Common equity tier 1 capital 4.50% 4.50%
Tier 1 risk-based capital 6.00% 6.00%
Total risk-based capital 8.00% 8.00%
Tier 1 leverage 5.00% 5.00%
Common equity tier 1 capital 6.50% 6.50%
Tier 1 risk-based capital 8.00% 8.00%
Total risk-based capital 10.00% 10.00%
v3.20.2
Commitments and Contingent Liabilities - Summary of Commitments and Contingent Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Commitments to Grant Loans    
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]    
Commitments to grant loans $ 278,206 $ 292,199
Standby Letters of Credit    
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]    
Letters of credit 202,400 213,548
Performance Letters of Credit    
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]    
Performance letters of credit 18,430 27,985
Commercial Letters of Credit    
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]    
Letters of credit 20,370 15,587
Commitments to Extend Credit    
Fair Value Off Balance Sheet Risks Disclosure Information [Line Items]    
Commitments to extend credit $ 4,054,843 $ 4,667,360
v3.20.2
Commitments and Contingent Liabilities - Additional Information (Details) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Commitments And Contingencies Disclosure [Abstract]    
Unfunded commitments - LLC Investments $ 44.6 $ 44.9
v3.20.2
Disclosure About Fair Values of Financial Instruments - Summary of Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Assets    
Investment securities available-for-sale $ 2,661,433 $ 2,368,592
Derivative assets 70,419 257,137
Liabilities    
Derivative liabilities 18,823 11,211
Carrying Value    
Assets    
Investment securities available-for-sale 2,661,433 2,368,592
Equity securities with readily determinable fair values not held for trading 1,764 1,862
Derivative assets 70,419 257,137
Liabilities    
Derivative liabilities 18,823 11,211
Level 1    
Assets    
Equity securities with readily determinable fair values not held for trading 1,764 1,862
Level 2    
Assets    
Investment securities available-for-sale 2,661,433 2,368,592
Derivative assets 70,419 257,137
Liabilities    
Derivative liabilities 18,823 11,211
Fair Value, Measurements, Recurring | Carrying Value    
Assets    
Investment securities available-for-sale 2,661,433 2,368,592
Equity securities with readily determinable fair values not held for trading 1,764 1,862
Derivative assets 70,419 257,137
Other assets 32,101 26,882
Total assets 2,765,717 2,654,473
Liabilities    
Derivative liabilities 18,823 11,211
Total recurring basis measured liabilities 18,823 11,211
Fair Value, Measurements, Recurring | Level 1    
Assets    
Equity securities with readily determinable fair values not held for trading 1,764 1,862
Total assets 1,764 1,862
Fair Value, Measurements, Recurring | Level 2    
Assets    
Investment securities available-for-sale 2,661,433 2,368,592
Derivative assets 70,419 257,137
Total assets 2,731,852 2,625,729
Liabilities    
Derivative liabilities 18,823 11,211
Total recurring basis measured liabilities 18,823 11,211
Fair Value, Measurements, Recurring | Level 3    
Assets    
Other assets 32,101 26,882
Total assets $ 32,101 $ 26,882
v3.20.2
Disclosure About Fair Values of Financial Instruments - Summary of Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Net Profits Interests        
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]        
Beginning Balance $ 4,071 $ 5,317 $ 4,330 $ 5,779
Net gains (losses) included in earnings (338) 59 (597) (115)
Distributions received       (288)
Ending Balance 3,733 5,376 3,733 5,376
Net unrealized (losses) gains included in earnings relating to assets held at the end of the period (338) 59 (597) (115)
Investments in Limited Partnerships        
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]        
Beginning Balance 24,042 11,601 18,742 11,191
Net gains (losses) included in earnings (1,015) 288 (1,331) 1,034
Reclassifications 1,203 675 1,727 (125)
Acquired in settlement of loans     4,257  
Contributions paid 499 2,409 1,783 3,017
Distributions received (98) (440) (547) (584)
Ending Balance 24,631 14,533 24,631 14,533
Net unrealized (losses) gains included in earnings relating to assets held at the end of the period (1,015) 288 (1,331) 1,034
SBA Servicing Assets        
Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation [Line Items]        
Beginning Balance 3,942 3,803 3,810  
Acquired       6,213
Originations 261 194 561 514
Net gains (losses) included in earnings (466) (211) (634) (2,941)
Ending Balance 3,737 3,786 3,737 3,786
Net unrealized (losses) gains included in earnings relating to assets held at the end of the period $ (466) $ (211) $ (634) $ (2,941)
v3.20.2
Disclosure About Fair Values of Financial Instruments - Summary of Assets Recorded at Fair Value on a Nonrecurring Basis (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]      
Individually evaluated loans, net of allocated allowance for credit losses $ 210,894   $ 122,576
Level 2      
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]      
Loans held for sale 38,631 $ 87,649  
Fair Value, Nonrecurring      
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]      
Loans held for sale 38,631 87,649  
Individually evaluated loans, net of allocated allowance for credit losses [1] 181,648 101,561  
Other real estate and repossessed assets 10,216    
Other real estate   1,628  
Total assets 230,495 190,838  
Fair Value, Nonrecurring | Level 2      
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]      
Loans held for sale 38,631 87,649  
Total assets 38,631 87,649  
Fair Value, Nonrecurring | Level 3      
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]      
Individually evaluated loans, net of allocated allowance for credit losses [1] 181,648 101,561  
Other real estate and repossessed assets 10,216    
Other real estate   1,628  
Total assets $ 191,864 $ 103,189  
[1] Prior to the adoption of CECL on January 1, 2020, these loans were known as Impaired loans, net of specific allowance.
v3.20.2
Disclosure About Fair Values of Financial Instruments - Summary of Significant Unobservable Inputs Used in Level 3 Fair Value Measurements for Financial Assets Measured at Fair Value On a Nonrecurring Basis (Details) - Level 3
$ in Thousands
 6 Months Ended 12 Months Ended
Jun. 30, 2020
USD ($)
Dec. 31, 2019
USD ($)
Minimum Guaranteed Proceeds Per Settlement Agreement    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs   Minimum guaranteed proceeds per Settlement Agreement
Range/Weighted Average [1]   0.00%
Discount of Fair Value | Individually Evaluated, Net of Allocated Allowance for Credit Losses    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs [2] Discount to fair value Discount to fair value
Discount of Fair Value | Individually Evaluated, Net of Allocated Allowance for Credit Losses | Minimum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average [2] 0.00% 0.00%
Discount of Fair Value | Individually Evaluated, Net of Allocated Allowance for Credit Losses | Maximum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average [2] 85.00% 50.00%
Discount of Fair Value | Individually Evaluated, Net of Allocated Allowance for Credit Losses | Weighted Average    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value inputs, discount rate [2],[3] 0.25  
Discount of Fair Value | Individually Evaluated, Net of Allocated Allowance for Credit Losses | Fair Value, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Carrying Value [2] $ 181,648 $ 101,561
Discount of Fair Value | Other    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs Discount to fair value Discount to fair value
Discount of Fair Value | Other | Minimum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average 0.00% 0.00%
Discount of Fair Value | Other | Maximum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average 20.00% 20.00%
Discount of Fair Value | Other | Weighted Average    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average [3] 10.00%  
Discount of Fair Value | Other | Fair Value, Nonrecurring    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Carrying Value $ 1,606 $ 1,628
Discounted Cash Flow    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs Discount rate Discount rate 5.8%
Range/Weighted Average [1]   0.00%
Discounted Cash Flow | Minimum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average 3.75%  
Discounted Cash Flow | Maximum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average 4.36%  
Discounted Cash Flow | Weighted Average    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value [3] 4.20%  
Discounted Cash Flow | Measurement Input, Discount Rate    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value inputs, discount rate   0.058
Enterprise Value    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs   Exit and earnings multiples, discounted cash flows, and market comparables
Enterprise Value | Minimum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value [1]   0.00%
Enterprise Value | Maximum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value [1]   46.00%
Enterprise Value | Comparables and Average Multiplier    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs Comparables and average multiplier  
Enterprise Value | Comparables and Average Multiplier | Weighted Average    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value [3] 5.09%  
Enterprise Value | Discount Rates and Comparables    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs Discount rates and comparables  
Enterprise Value | Discount Rates and Comparables | Minimum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value 13.00%  
Enterprise Value | Discount Rates and Comparables | Maximum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value 15.00%  
Enterprise Value | Discount Rates and Comparables | Weighted Average    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value [3] 14.00%  
Net Recoverable Oil And Gas Reserves And Forward Looking Commodity Prices    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs Capitalization rate and discount rate  
Net Recoverable Oil And Gas Reserves And Forward Looking Commodity Prices | Minimum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value 10.00%  
Net Recoverable Oil And Gas Reserves And Forward Looking Commodity Prices | Maximum    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value measurements, percentage of enterprise value 20.00%  
Net Recoverable Oil And Gas Reserves And Forward Looking Commodity Prices | Weighted Average    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average [3] 12.00%  
Estimated Closing Costs    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Unobservable Inputs Estimated closing costs Estimated closing costs
Range/Weighted Average 10.00% 10.00%
Estimated Closing Costs | Weighted Average    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Range/Weighted Average [3] 10.00%  
[1] Represents difference of remaining balance to fair value.
[2] Prior to the adoption of CECL on January 1, 2020, these loans were known as Impaired loans, net of specific allowance.
[3] Weighted averages were calculated using the input attribute and the outstanding balance of the loan
v3.20.2
Disclosure About Fair Values of Financial Instruments - Summary of Estimated Fair Values of Financial Instruments (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Financial Assets:    
Interest-bearing deposits with banks $ 1,696,051 $ 725,343
Federal funds sold 17,399 10,974
Investment securities available-for-sale 2,661,433 2,368,592
Derivative assets 70,419 257,137
Other assets 337,695 512,244
Financial Liabilities:    
Advances from FHLB 100,000 100,000
Senior debt 49,969 49,938
Subordinated debt 183,142 182,712
Junior subordinated debentures 37,448 37,445
Notes payable 1,663 2,078
Derivative liabilities 18,823 11,211
Level 1    
Financial Assets:    
Cash and due from banks 185,919 252,447
Interest-bearing deposits with banks 1,696,051 725,343
Federal funds sold 17,399 10,974
Equity securities with readily determinable fair values not held for trading 1,764 1,862
Level 2    
Financial Assets:    
Investment securities available-for-sale 2,661,433 2,368,592
Loans held for sale 38,631 87,649
Derivative assets 70,419 257,137
Financial Liabilities:    
Deposits 16,080,049 14,753,192
Advances from FHLB 100,000 100,000
Senior debt 50,644 51,202
Subordinated debt 174,457 189,386
Junior subordinated debentures 34,629 48,012
Notes payable 1,663 2,078
Derivative liabilities 18,823 11,211
Level 3    
Financial Assets:    
Net loans 13,379,997 12,755,360
Other assets 88,308 72,719
Carrying Value    
Financial Assets:    
Cash and due from banks 185,919 252,447
Interest-bearing deposits with banks 1,696,051 725,343
Federal funds sold 17,399 10,974
Investment securities available-for-sale 2,661,433 2,368,592
Equity securities with readily determinable fair values not held for trading 1,764 1,862
Loans held for sale 38,631 87,649
Net loans 13,328,196 12,864,012
Derivative assets 70,419 257,137
Other assets 88,308 72,719
Financial Liabilities:    
Deposits 16,069,282 14,742,794
Advances from FHLB 100,000 100,000
Senior debt 49,969 49,938
Subordinated debt 183,142 182,712
Junior subordinated debentures 37,448 37,445
Notes payable 1,663 2,078
Derivative liabilities 18,823 11,211
Fair Value    
Financial Assets:    
Cash and due from banks 185,919 252,447
Interest-bearing deposits with banks 1,696,051 725,343
Federal funds sold 17,399 10,974
Investment securities available-for-sale 2,661,433 2,368,592
Equity securities with readily determinable fair values not held for trading 1,764 1,862
Loans held for sale 38,631 87,649
Net loans 13,379,997 12,755,360
Derivative assets 70,419 257,137
Other assets 88,308 72,719
Financial Liabilities:    
Deposits 16,080,049 14,753,192
Advances from FHLB 100,000 100,000
Senior debt 50,644 51,202
Subordinated debt 174,457 189,386
Junior subordinated debentures 34,629 48,012
Notes payable 1,663 2,078
Derivative liabilities $ 18,823 $ 11,211
v3.20.2
Variable Interest Entities and Other Investments - Additional Information (Details)
 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
USD ($)
Investment
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Investment
Jun. 30, 2019
USD ($)
Dec. 31, 2018
USD ($)
Customer
Dec. 31, 2019
USD ($)
Dec. 31, 2016
Customer
Variable Interest Entities and Other Investments [Line Items]              
Equity method investments $ 7,086,000 $ 9,288,000 $ 7,086,000 $ 9,288,000 $ 8,714,000 $ 8,681,000  
Variable Interest Entity, Not Primary Beneficiary              
Variable Interest Entities and Other Investments [Line Items]              
Cost method investments 24,600,000   24,600,000     18,700,000  
Loss recognized from assets at fair value 1,000,000.0 $ 100,000 1,300,000        
Gain recognized from assets at fair value       $ 700,000      
Equity method investments $ 7,100,000   $ 7,100,000     8,700,000  
Number of investments fully impaired | Investment 1   1        
Impairment charge $ 1,900,000            
Total marketable equity securities 1,800,000   $ 1,800,000     1,900,000  
Number of loan customers | Customer             2
Number of loan customers sold | Customer         1    
Net profits interest 3,700,000   3,700,000     4,300,000  
Variable Interest Entity, Not Primary Beneficiary | Rabbi Trust              
Variable Interest Entities and Other Investments [Line Items]              
Defined rabbi trust assets and benefit obligation 3,500,000   3,500,000     3,700,000  
Variable Interest Entity, Not Primary Beneficiary | Limited Partner              
Variable Interest Entities and Other Investments [Line Items]              
Equity method investments 8,900,000   8,900,000     9,000,000.0  
Variable Interest Entity, Not Primary Beneficiary | Other Assets              
Variable Interest Entities and Other Investments [Line Items]              
Investments in affordable Housing Project $ 33,900,000   $ 33,900,000     $ 28,200,000  
v3.20.2
Variable Interest Entities and Other Investments - Summary of Investment in Limited Partnerships (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Dec. 31, 2018
Variable Interest Entities and Other Investments [Line Items]        
Limited partnerships required to be accounted for under the equity method $ 7,086 $ 8,681 $ 9,288 $ 8,714
Investments in Limited Partnerships        
Variable Interest Entities and Other Investments [Line Items]        
Affordable housing projects (amortized cost) 33,856 28,205    
Limited partnerships accounted for under the fair value practical expedient of NAV 24,631 18,742    
Limited partnerships without readily determinable fair values that do not qualify for the practical expedient of NAV accounted for under the cost method 7,086 8,681    
Limited partnerships required to be accounted for under the equity method 8,920 8,951    
Total investments in limited partnerships $ 74,493 $ 64,579    
v3.20.2
Variable Interest Entities and Other Investments - Summary of Carrying Amount of Equity Investments Measured Under Measurement Alternative (Details) - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Variable Interest Entities And Other Investments [Abstract]    
Carrying value, Beginning of Year $ 8,681 $ 8,714
Reclassifications (1,727) 125
Net income change 49  
Distributions (440) (929)
Contributions 523 1,378
Carrying value, End of Period $ 7,086 $ 9,288
v3.20.2
Segment Reporting - Additional Information (Details)
$ in Thousands
 3 Months Ended 6 Months Ended
Mar. 31, 2020
USD ($)
Jun. 30, 2020
USD ($)
Segment
Segment Reporting Information [Line Items]    
Number of operating segments | Segment   3
Non-cash goodwill impairment charge $ 443,700 $ 443,695
Banking    
Segment Reporting Information [Line Items]    
Non-cash goodwill impairment charge $ 443,700 $ 443,695
v3.20.2
Segment Reporting - Summary of Operating Results of Segments (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Segment Reporting Information [Line Items]              
Net interest income (expense) $ 154,714   $ 160,787   $ 308,182 $ 330,076  
Provision for credit losses 158,811   28,927   242,240 40,137  
Noninterest income 29,950   31,722   65,019 62,386  
Noninterest expense 88,620   100,529   626,273 213,969  
Income tax (benefit) expense (6,653)   14,707   (39,887) 31,809  
Net (loss) income (56,114) $ (399,311) 48,346 $ 58,201 (455,425) 106,547  
Total assets 18,857,753   17,504,005   18,857,753 17,504,005 $ 17,800,229
Banking              
Segment Reporting Information [Line Items]              
Net interest income (expense) 158,440   165,832   315,998 340,228  
Provision for credit losses 158,811   28,927   242,240 40,137  
Noninterest income 18,875   23,063   44,217 43,151  
Noninterest expense 78,982   91,266   607,046 188,610  
Income tax (benefit) expense (13,677)   15,893   (44,599) 35,754  
Net (loss) income (46,801)   52,809   (444,472) 118,878  
Total assets 18,760,701   17,371,669   18,760,701 17,371,669  
Financial Services              
Segment Reporting Information [Line Items]              
Net interest income (expense) (58)   (592)   (410) (1,222)  
Noninterest income 10,966   8,444   21,175 18,729  
Noninterest expense 8,262   7,914   16,974 15,547  
Income tax (benefit) expense 377   (62)   473 311  
Net (loss) income 2,269       3,318 1,649  
Total assets 92,638   101,028   92,638 101,028  
Corporate              
Segment Reporting Information [Line Items]              
Net interest income (expense) (3,668)   (4,453)   (7,406) (8,930)  
Noninterest income 109   215   (373) 506  
Noninterest expense 1,376   1,349   2,253 9,812  
Income tax (benefit) expense 6,647   (1,124)   4,239 (4,256)  
Net (loss) income (11,582)   (4,463)   (14,271) (13,980)  
Total assets $ 4,414   $ 31,308   $ 4,414 $ 31,308  
v3.20.2
Equity-based Compensation - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
 3 Months Ended 6 Months Ended
Jun. 01, 2018
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Dec. 31, 2018
Restricted Stock Units              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Restricted stock granted       772,881 1,149,963    
Number of unit expected to vest   1,743,881 1,288,124 1,743,881 1,288,124 1,229,863 273,354
Equity-based compensation expense   $ 1,200 $ 2,700 $ 2,300 $ 3,600    
Remaining expense related to unvested restricted stock units   19,000   $ 19,000      
Restricted Stock Units | Minimum              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Expense recognition period       3 months      
Restricted Stock Units | Maximum              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Expense recognition period       45 months      
Stock Options              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Expense recognition period       19 months      
Expense related to nonvested stock option grants   1,900   $ 1,900      
Stock Options | Executive Officer              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Equity-based compensation expense   $ 309 309 $ 618 $ 561    
Number of options granted       0 1,602,848    
Percentage of premium on common stock value, options granted       15.00%      
Weighted-average exercise price       $ 20.43      
Award vesting period       3 years      
Option expiration period       7 years      
Stock options vested       534,283      
Plan              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Common stock shares available for grant   7,500,000   7,500,000      
Shares of common stock remain available for future grants   3,400,000   3,400,000      
Plan | Restricted Stock Units              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Restricted stock granted       772,881 1,149,963    
Plan | Restricted Stock Units | Vest in First Quarter of 2021              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   41,843   41,843      
Plan | Restricted Stock Units | Vest in Third Quarter of 2021              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   2,116   2,116      
Plan | Restricted Stock Units | Vesting Quarterly              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   242,641   242,641      
Plan | Restricted Stock Units | Cliff-Vest              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   29,181   29,181      
Plan | Restricted Stock Units | Vest in First Quarter of 2022              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   48,562   48,562      
Plan | Restricted Stock Units | Vest in First Quarter of 2023              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   177,041   177,041      
Plan | Restricted Stock Units | Vest in Second Quarter of 2023              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   5,252   5,252      
Plan | Restricted Stock Units | Vest in Third Quarter of 2023              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   9,901   9,901      
Plan | Restricted Stock Units | Vest in First Quarter of 2024              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   764,976   764,976      
Plan | Restricted Stock Units | Vest in Second Quarter of 2021              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Number of unit expected to vest   4,000   4,000      
Plan | Restricted Stock Units | Half of Units Granted | Minimum              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Award vesting rights, percentage       25.00%      
Plan | Restricted Stock Units | Half of Units Granted | Maximum              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Award vesting rights, percentage       200.00%      
2018 Employee Stock Purchase Plan | Common Class A              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Equity-based compensation expense   $ 31 $ 80 $ 45 $ 172    
Percentage of discount on fair market value of common stock 15.00%            
Common stock purchased in the open market       117,481 51,089    
2018 Employee Stock Purchase Plan | Maximum | Common Class A              
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]              
Amount of common stock may be granted 500,000            
v3.20.2
Equity-based Compensation - Summary of Activity Related to Restricted Stock Unit Awards (Details) - Restricted Stock Units - $ / shares
 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]    
Number of shares, Non-vested at beginning of period 1,229,863 273,354
Number of shares, Granted during the period 772,881 1,149,963
Number of shares, Vested during the period (198,075) (81,377)
Number of shares, Forfeited during the period (60,788) (53,816)
Number of shares, Non-vested at end of period 1,743,881 1,288,124
Weighted average fair value per unit at award date, Non-vested at beginning of period $ 19.97 $ 26.49
Weighted average fair value per unit at award date, Granted during the period 7.80 18.51
Weighted average fair value per unit at award date, Vested during the period 20.03 22.53
Weighted average fair value per unit at award date, Forfeited during the period 19.40 20.57
Weighted average fair value per unit at award date, Non-vested at end of period $ 14.59 $ 19.86
v3.20.2
Accumulated Other Comprehensive Income (Loss) - Schedule of Accumulated Other Comprehensive Gain (Loss) (Details) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Jun. 30, 2020
Jun. 30, 2019
Accumulated Other Comprehensive Income Loss [Line Items]            
Balance $ 2,113,543 $ 2,460,846 $ 2,302,823 $ 1,438,274 $ 2,460,846 $ 1,438,274
Net change (7,213) 165,971 95,273 60,773 158,758 156,046
Balance 2,045,480 2,113,543 2,426,072 2,302,823 2,045,480 2,426,072
Unrealized Gains (Losses) on Securities Available for Sale            
Accumulated Other Comprehensive Income Loss [Line Items]            
Balance   19,605   (24,279) 19,605 (24,279)
Net change         48,929 40,589
Balance 68,534   16,310   68,534 16,310
Unrealized Gains (Losses) on Derivative Instruments Designated as Cash Flow Hedges            
Accumulated Other Comprehensive Income Loss [Line Items]            
Balance   95,097   (18,305) 95,097 (18,305)
Net change         109,829 115,457
Balance 204,926   97,152   204,926 97,152
Unrealized Gains (Losses) on Defined Benefit Pension Plans            
Accumulated Other Comprehensive Income Loss [Line Items]            
Balance       (328)   (328)
Balance     (328)     (328)
Accumulated OCI            
Accumulated Other Comprehensive Income Loss [Line Items]            
Balance 280,673 114,702 17,861 (42,912) 114,702 (42,912)
Net change (7,213) 165,971 95,273 60,773 158,758 156,046
Balance $ 273,460 $ 280,673 $ 113,134 $ 17,861 $ 273,460 $ 113,134
v3.20.2
Subsequent Events - Additional Information (Details) - $ / shares
 3 Months Ended
Jul. 21, 2020
Jun. 30, 2020
Mar. 31, 2020
Jun. 30, 2019
Mar. 31, 2019
Subsequent Event [Line Items]          
Cash dividends declared per common share   $ 0.05 $ 0.175 $ 0.175 $ 0.175
Subsequent Event | Quarterly Dividend          
Subsequent Event [Line Items]          
Cash dividends declared per common share $ 0.05        
Subsequent Event | Annualized Dividend          
Subsequent Event [Line Items]          
Cash dividends declared per common share $ 0.20