•

Second quarter of 2018 net income was $48.0 million, representing an increase of $9.1 million, or 23.6%, compared to the first quarter of 2018 and an increase of $19.0 million, or 65.6%, compared to second quarter of 2017.  

o

On a per-share basis, net income was $0.57 per share for the second quarter of 2018, compared to $0.46 per share for the first quarter of 2018, and $0.35 per share for the

second quarter of 2017.  

o

Annualized returns on average assets, common equity and tangible common equity⁽¹⁾ for the second quarter of 2018 were 1.72%, 14.16% and 18.58%, respectively, compared to 1.44%, 11.73% and 15.52%, respectively, for the first quarter of 2018, and 1.19%, 9.29% and 12.63%, respectively, for the second quarter of 2017.    

o

A summary of non-routine items in the second quarter of 2018 are included in the table below.  See Table 8 – Non-Routine Income/Expense for more information related to non-routine items and comparative period information.  

After-tax Increase(Decrease) in

(In thousands, except per share data)

Income/

Expense

EPS

ROA

ROTCE

Noninterest income (non-routine)

$

3,058

$

0.03

0.08

%

0.91

%

Noninterest expense (non-routine)

(3,066

)

(0.03

)

(0.08

)

(0.91

)

Tax expense - Timing of legacy loan bad debt deduction for tax

5,991

0.07

0.21

2.32

Total

$

5,983

$

0.07

0.21

%

2.32

%

•

Loans were $9.0 billion as of June 30, 2018, an increase of $328.8 million, or 3.8%, as compared to $8.6 billion at March 31, 2018, and an increase of $1.3 billion, or 16.3%, as compared to $7.7 billion at June 30, 2017.

•

Core deposits (total deposits excluding brokered) were $8.7 billion as of June 30, 2018, up $451.1 million, or 5.5%, from March 31, 2018, and up $1.5 billion, or 20.8%, from June 30, 2017.  

•

Total revenue for the second quarter of 2018 was $120.1 million, up 3.4% from the linked quarter and up 13.9% from the same period in 2017 driven by strong loan, core deposit, and spread income growth due to a favorably positioned, asset-sensitive balance sheet benefiting from rising short-term rates.  

•

Our fully tax-equivalent net interest margin (“NIM”) for the second quarter of 2018 was 3.66%, an increase from 3.64% for the first quarter of 2018 and a decrease from 3.71% for the second quarter of 2017, reflecting our asset sensitivity.  Our NIM excluding recovery accretion for acquired-impaired loans was 3.64% for the second quarter of 2018, up 2 bp from 3.62% in the first quarter of 2018 and up 13 bp from 3.51% in the second quarter of 2017.  

•

The efficiency ratio⁽¹⁾ for the second quarter of 2018 was 52.0%, an improvement from both linked and prior quarter efficiency ratios of 53.4% and 53.3%, respectively.  The improvement in the efficiency ratio reflects ongoing focus on managing expenses and expanding revenue.  Second quarter 2018 revenues increased $4.0 million over first quarter 2018 and $14.7 million over second quarter 2017. The second quarter of 2018 included non-routine revenues and expenses, including a $4.9 million pre-tax gain on the sale of the assets of our insurance company, $1.8 million net loss on sales of securities, $1.2 million of secondary offering expenses, $0.8 million of acquisition related costs and $1.1 million of expenses related to the sale of the assets of our insurance company.  Excluding these non-routine revenues and expenses, the adjusted efficiency ratio⁽¹⁾ was 50.7% for the second quarter of 2018.  This compares to an adjusted efficiency ratio of 50.2% and 53.1% for the first quarter of 2018 and second quarter of 2017, respectively.  See Table 8 – Non-Routine Income/Expense for more information related to non-routine items.  

•

Total nonperforming assets declined 21.9% during the second quarter 2018, a decrease of $15.9 million to $56.8 million, or 0.6% of total loans, OREO and other NPAs.  Total nonperforming assets have dropped $84.6 million, or 59.8%, from $141.4 million, or 1.8% of total loans, OREO and other NPAs, as of June 30, 2017.

⁽¹⁾

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

-

Deposit increases reflect growth in core deposits, specifically with success in expanding commercial deposit relationships and treasury management services.  

-

Noninterest bearing deposits as a percent of total deposits were 22.9%, compared to 22.6% at March 31, 2018 and 23.4% at June 30, 2017.  

-

The year-over-year core deposit growth supported a $93.8 million reduction in brokered deposits since June 30, 2017.  As of June 30, 2018, brokered deposits totaled $649.3 million, or 7.0% of total deposits, down from 9.0% of total deposits at March 31, 2018 and down from 9.4% of total deposits at June 30, 2017, respectively.  

-

Tangible common shareholder’s equity⁽¹⁾ was $1.1 billion at June 30, 2018, an increase of $44.5 million from March 31, 2018, and an increase of $100.5 million from June 30, 2017.  Tangible book value per share⁽¹⁾ increased $0.53, or 4.3%, to $12.85 per share for the second quarter of 2018, compared to $12.32 per share as of March 31, 2018, driven by strong earnings growth and goodwill recovery due to the sale of the assets of our insurance company.

-

In June 2018, Cadence paid a $0.125 per common share dividend totaling $10.5 million.  

-

In November 2017, February 2018 and May 2018, Cadence completed secondary offerings whereby its controlling stockholder, Cadence Bancorp LLC, sold 10,925,000, 9,200,000 and 20,700,000 of Cadence Bancorporation shares, respectively, reducing its ownership in Cadence to 76.6%, 65.6% and 40.9%, respectively.  All proceeds from these transactions were received by Cadence Bancorp LLC and did not impact Cadence Bancorporation’s equity or outstanding shares.

⁽¹⁾

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

-

Net-charge offs for the quarter ended June 30, 2018 were $2.2 million, compared to $0.4 million for the three months ended March 31, 2018 and $1.8 million for the three months ended June 30, 2017. Annualized net-charge offs as a percent of average loans for the quarter ended June 30, 2018 were 0.10%, compared to 0.06%, for the full year of 2017. Total second quarter 2018 charge-offs of $3.7 million and recoveries of $1.5 million were primarily due to two seasoned energy credits that have been in active resolution.

-

NPAs totaled $56.8 million, or 0.6%, of total loans, OREO and other NPAs as of June 30, 2018, compared to $72.7 million, or 0.8%, as of March 31, 2018, and down from $141.4 million, or 1.8%, as of June 30, 2017.

-

The allowance for credit losses (“ACL”) was $90.6 million, or 1.01% of total loans, as of June 30, 2018, as compared to $91.5 million, or 1.06% of total loans, as of March 31, 2018 and $93.2 million, or 1.21% of total loans, as of June 30, 2017.  The year-over-year decline in the ACL as a percentage of total loans resulted primarily from the reduction in non-performing loans and related valuation reserves (largely from the energy portfolio) and improved environmental factors in the energy sector over the past year.  

-

Our fully tax-equivalent net interest margin (“NIM”) for the second quarter of 2018 was 3.66% as compared to 3.64% for the first quarter of 2018 and 3.71% for the second quarter of 2017.  The linked quarter increase in NIM is primarily a result of our asset sensitive balance sheet and earning asset yields increasing more significantly than our funding costs in the recent rising rate environment.  Our NIM excluding recovery accretion for acquired-impaired loans was 3.64%, 3.62% and 3.51% for the second quarter of 2018, first quarter of 2018 and second quarter of 2017 respectively.

-

Earning asset yields for the second quarter of 2018 were 4.75%, up 24 basis points from 4.51% in the first quarter of 2018, and up 30 basis points from 4.45% in the second quarter of 2017, driven by increases in loan yields.  

o

Over 71% of our loan portfolio is floating rate and has benefited from the short-term rate increases during the periods.  

o

Yield on loans, excluding acquired-impaired loans, increased meaningfully to 5.04% for the second quarter of 2018, as compared to 4.81% and 4.36% for the first quarter of 2018 and second quarter of 2017, respectively.

o

Total accretion for acquired-impaired loans was $5.6 million in the second quarter of 2018, essentially flat from the first quarter of 2018 and down $4.9 million from the

second quarter of 2017.  The year-over-year decline in accretion was due to recovery timing.  Recovery accretion was $0.6 million, $0.4 million and $4.5 million for the second quarter of 2018, first quarter of 2018 and second quarter of 2017, respectively.  

o

Total loan yields increased to 5.16% for the second quarter of 2018 versus 4.94% for the first quarter of 2018 and 4.74% for the second quarter of 2017.  

-

Total cost of funds for the second quarter of 2018 was 118 basis points versus 94 basis points in the linked quarter and 81 basis points in the second quarter of 2017.  

o

Total cost of deposits for the second quarter of 2018 was 98 basis points versus 75 basis points in the linked quarter and 59 basis points in the second quarter of 2017, due primarily to rising interest rates as well as approximately $1.2 billion in our “Up CD” product that reset on April 1, 2018 based on the semi-annual reset schedule with the index rate increasing 50 basis points from the first quarter of 2018.  This increase in Up CD rates accounted for 8 basis points of the quarterly increase in cost of deposits.  Over $600 million of the Up CDs are scheduled to mature by year end 2018.

-

Total service fees and revenue for the second quarter of 2018 were $21.4 million, a decrease of $2.5 million, or 10.5%, from the first quarter of 2018, and a decrease of $0.7 million, or 3.4%, from the same period of 2017.  The second quarter of 2018 decrease compared to the linked quarter was driven by the decrease in insurance revenue due to the sale of the assets of our insurance company. Compared to the prior year’s quarter, decreases in trust services revenue, insurance revenue and mortgage banking revenue were partially offset by increases in credit-related fees and investment advisory revenue.    

-

Total other noninterest income for the second quarter of 2018 was $3.3 million, an increase of $2.2 million from the first quarter of 2018, and an increase of $2.4 million from the same period of 2017.  The increase from linked quarter was largely a result of the $4.9 million pre-tax gain on sale of the assets of our insurance company, offset by a $1.8 million loss from the sale of certain securities within tax-exempt investment securities portfolio. See Table 8 – Non-Routine Income/Expense for more information related to non-routine items.  

⁽¹⁾

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

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End Date:

August 6, 2018

As of and for the Three Months Ended

(In thousands, except share and per share data)

June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017

Statement of Income Data:

Interest income

$

123,963

$

113,093

$

108,370

$

99,503

$

99,375

Interest expense

28,579

21,982

20,459

18,340

16,991

Net interest income

95,384

91,111

87,911

81,163

82,384

Provision for credit losses

1,263

4,380

(4,475

)

1,723

6,701

Net interest income after provision

94,121

86,731

92,386

79,440

75,683

Noninterest income  - service fees and revenue

21,395

23,904

22,405

23,014

22,144

- other noninterest income

3,277

1,079

3,251

4,110

845

Noninterest expense

62,435

61,939

66,371

56,530

56,134

Income before income taxes

56,358

49,775

51,671

50,034

42,538

Income tax expense

8,384

10,950

36,980

17,457

13,570

Net income

$

47,974

$

38,825

$

14,691

$

32,577

$

28,968

Period-End Balance Sheet Data:

Investment securities

$

1,049,710

$

1,251,834

$

1,262,948

$

1,198,032

$

1,079,935

Total loans, net of unearned income

8,975,755

8,646,987

8,253,427

8,028,938

7,716,621

Allowance for credit losses

90,620

91,537

87,576

94,765

93,215

Total assets

11,305,528

10,999,382

10,948,926

10,502,261

9,811,557

Total deposits

9,331,055

9,048,971

9,011,515

8,501,102

7,930,383

Noninterest-bearing deposits

2,137,407

2,040,977

2,242,765

2,071,594

1,857,809

Interest-bearing deposits

7,193,648

7,007,994

6,768,750

6,429,508

6,072,574

Borrowings and subordinated debentures

471,453

471,335

470,814

572,683

499,266

Total shareholders’ equity

1,389,956

1,357,103

1,359,056

1,340,848

1,304,054

Average Balance Sheet Data:

Investment securities

$

1,183,055

$

1,234,226

$

1,228,330

$

1,169,182

$

1,099,307

Total loans, net of unearned income

8,848,820

8,443,951

8,226,294

7,867,794

7,650,048

Allowance for credit losses

93,365

89,097

94,968

94,706

90,366

Total assets

11,218,432

10,922,274

10,586,245

10,024,871

9,786,355

Total deposits

9,135,359

9,012,390

8,635,473

8,139,969

7,940,421

Noninterest-bearing deposits

2,058,255

2,128,595

2,170,758

1,982,784

1,845,447

Interest-bearing deposits

7,077,104

6,883,795

6,464,715

6,157,185

6,094,974

Borrowings and subordinated debentures

595,087

444,557

502,428

484,798

510,373

Total shareholders’ equity

1,358,770

1,342,445

1,348,867

1,320,884

1,251,217

As of and for the Three Months Ended

(In thousands, except share and per share data)

June 30,

2018

March 31,

2018

December 31,

2017

September 30,

2017

June 30,

2017

Per Share Data:⁽³⁾

Earnings

Basic

$

0.57

$

0.46

$

0.18

$

0.39

$

0.35

Diluted

0.57

0.46

0.17

0.39

0.35

Book value per common share

16.62

16.23

16.25

16.03

15.59

Tangible book value ⁽¹⁾

12.85

12.32

12.33

12.10

11.64

Weighted average common shares outstanding

Basic

83,625,000

83,625,000

83,625,000

83,625,000

81,918,956

Diluted

84,792,657

84,674,807

84,717,005

83,955,685

81,951,795

Cash dividends declared

$

0.125

$

0.125

$

—

$

—

$

—

Dividend payout ratio

21.93

%

27.17

%

—

%

—

%

—

%

Performance Ratios:

Return on average common equity ⁽²⁾

14.16

%

11.73

%

4.32

%

9.78

%

9.29

%

Return on average tangible common equity ^{(1) (2)}

18.58

15.52

5.71

13.04

12.63

Return on average assets ⁽²⁾

1.72

1.44

0.55

1.29

1.19

Net interest margin ⁽²⁾

3.66

3.64

3.59

3.52

3.71

Efficiency ratio ⁽¹⁾

52.00

53.35

58.44

52.20

53.27

Adjusted efficiency ratio ⁽¹⁾

50.74

50.22

55.57

52.74

53.15

Asset Quality Ratios:

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

0.63

%

0.84

%

0.85

%

1.51

%

1.82

%

Total nonperforming loans to total loans

0.44

0.60

0.58

0.96

1.36

Total ACL to total loans

1.01

1.06

1.06

1.18

1.21

ACL to total nonperforming loans ("NPLs")

230.60

175.30

183.62

122.66

88.81

Net charge-offs to average loans ⁽²⁾

0.10

0.02

0.13

0.01

0.09

Capital Ratios:

Total shareholders’ equity to assets

12.29

%

12.34

%

12.41

%

12.77

%

13.29

%

Tangible common equity to tangible assets ⁽¹⁾

9.78

9.65

9.71

9.95

10.27

Common equity tier 1 (CET1)

10.56

10.42

10.57

10.79

10.92

Tier 1 leverage capital

10.74

10.57

10.68

11.12

11.00

Tier 1 risk-based capital

10.93

10.79

10.94

11.17

11.31

Total risk-based capital

12.71

12.63

12.81

13.18

13.41

_____________________

(1)

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

(2)

Annualized.  

(3)

As of the completion of a secondary offering on May 22, 2018, 34,175,000 of our outstanding shares are owned by our parent-holding company Cadence Bancorp, LLC.

For the Three Months Ended June 30,

2018

2017

Average

Income/

Yield/

Average

Income/

Yield/

(In thousands)

Balance

Expense

Rate

Balance

Expense

Rate

ASSETS

Interest-earning assets:

Loans, net of unearned income⁽¹⁾

Originated and ANCI loans

$

8,606,253

$

108,130

5.04

%

$

7,348,932

$

79,904

4.36

%

ACI portfolio

242,567

5,610

9.28

301,116

10,525

14.02

Total loans

8,848,820

113,740

5.16

7,650,048

90,429

4.74

Investment securities

    Taxable

838,842

5,518

2.64

688,464

4,178

2.43

Tax-exempt⁽²⁾

344,213

3,547

4.13

410,843

5,208

5.08

Total investment securities

1,183,055

9,065

3.07

1,099,307

9,386

3.42

Federal funds sold and short-term investments

452,074

1,269

1.13

312,287

688

0.88

Other investments

55,909

634

4.55

50,064

695

5.57

Total interest-earning assets

10,539,858

124,708

4.75

9,111,706

101,198

4.45

Noninterest-earning assets:

Cash and due from banks

80,000

59,220

Premises and equipment

62,711

65,392

Accrued interest and other assets

629,228

640,403

   Allowance for credit losses

(93,365

)

(90,366

)

Total assets

$

11,218,432

$

9,786,355

LIABILITIES AND STOCKHOLDERS' EQUITY

Interest-bearing liabilities:

Demand deposits

$

4,712,302

$

11,700

1.00

%

$

4,232,497

$

6,354

0.60

%

Savings deposits

189,567

133

0.28

186,307

119

0.26

Time deposits

2,175,235

10,497

1.94

1,676,170

5,298

1.27

Total interest-bearing deposits

7,077,104

22,330

1.27

6,094,974

11,771

0.77

Other borrowings

459,678

3,785

3.30

375,681

2,896

3.09

Subordinated debentures

135,409

2,464

7.30

134,692

2,324

6.92

Total interest-bearing liabilities

7,672,191

28,579

1.49

6,605,347

16,991

1.03

Noninterest-bearing liabilities:

Demand deposits

2,058,255

1,845,447

Accrued interest and other liabilities

129,216

84,344

Total liabilities

9,859,662

8,535,138

Stockholders' equity

1,358,770

1,251,217

Total liabilities and stockholders' equity

$

11,218,432

$

9,786,355

Net interest income/net interest spread

96,129

3.26

%

84,207

3.42

%

Net yield on earning assets/net interest margin

3.66

%

3.71

%

Taxable equivalent adjustment:

Investment securities

(745

)

(1,823

)

Net interest income

$

95,384

$

82,384

_____________________

(1)

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

(2)

Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21% for the three months ended June 30, 2018, and a tax rate of 35% for the three months ended June 30, 2017.

For the Three Months Ended

June 30, 2018

For the Three Months Ended

March 31, 2018

Average

Income/

Yield/

Average

Income/

Yield/

(In thousands)

Balance

Expense

Rate

Balance

Expense

Rate

ASSETS

Interest-earning assets:

Loans, net of unearned income⁽¹⁾

Originated and ANCI loans

$

8,606,253

$

108,130

5.04

%

$

8,189,448

$

97,168

4.81

%

ACI portfolio

242,567

5,610

9.28

254,503

5,623

8.96

Total loans

8,848,820

113,740

5.16

8,443,951

102,791

4.94

Investment securities

    Taxable

838,842

5,518

2.64

827,227

5,118

2.51

Tax-exempt⁽²⁾

344,213

3,547

4.13

406,999

4,134

4.12

Total investment securities

1,183,055

9,065

3.07

1,234,226

9,252

3.04

Federal funds sold and short-term investments

452,074

1,269

1.13

515,017

1,529

1.20

Other investments

55,909

634

4.55

48,986

389

3.22

Total interest-earning assets

10,539,858

124,708

4.75

10,242,180

113,961

4.51

Noninterest-earning assets:

Cash and due from banks

80,000

92,878

Premises and equipment

62,711

62,973

Accrued interest and other assets

629,228

613,341

   Allowance for credit losses

(93,365

)

(89,097

)

Total assets

$

11,218,432

$

10,922,275

LIABILITIES AND STOCKHOLDERS' EQUITY

Interest-bearing liabilities:

Demand deposits

$

4,712,302

$

11,700

1.00

%

$

4,795,114

$

9,025

0.76

%

Savings deposits

189,567

133

0.28

179,662

114

0.26

Time deposits

2,175,235

10,497

1.94

1,909,019

7,491

1.59

Total interest-bearing deposits

7,077,104

22,330

1.27

6,883,795

16,630

0.98

Other borrowings

459,678

3,785

3.30

309,323

2,956

3.88

Subordinated debentures

135,409

2,464

7.30

135,233

2,396

7.19

Total interest-bearing liabilities

7,672,191

28,579

1.49

7,328,351

21,982

1.22

Noninterest-bearing liabilities:

Demand deposits

2,058,255

2,128,595

Accrued interest and other liabilities

129,216

122,884

Total liabilities

9,859,662