UNITED STATES
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
________________________________________
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
FDIC Certificate No. 11813
CADENCE BANK
(Exact name of registrant as specified in its charter)
Mississippi
(State or other jurisdiction of incorporation or
organization)
One Mississippi Plaza, 201 South Spring Street
Tupelo, Mississippi
(Address of principal executive offices)
64-0117230
(I.R.S. Employer Identification No.)
38804
(Zip Code)
Registrant's telephone number, including area code: (662) 680-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common stock, $2.50 par value per share
5.50% Series A Non-Cumulative Perpetual Preferred Stock, par
value $0.01 per share
Securities registered pursuant to Section 12(g) of the Act: None.
Trading Symbol(s)
Name of Each Exchange on Which Registered
CADE
CADE Pr A
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 the 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 ☒
Non-accelerated filer ☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on June 30, 2023 was approximately $3.6 billion, based
on the last reported sale price per share of the registrant’s common stock as reported on the New York Stock Exchange on June 30, 2023.
As of February 19, 2024, the registrant had outstanding 182,220,834 shares of common stock, par value $2.50 per share, and 6,900,000 shares of its 5.50%
Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share.
To the extent stated herein, portions of the Definitive Proxy Statement on Schedule 14A to be used in connection with the registrant’s 2024 Annual Meeting
of Shareholders, scheduled to be held April 26, 2024, are incorporated by reference into Part III of this annual report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
1
CADENCE BANK
FORM 10-K
For the Fiscal Year Ended December 31, 2023
TABLE OF CONTENTS
PART I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
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Glossary of Defined Terms
ACH - Automated Clearing House
ACL - Allowance for credit losses
AFS - Available-for-sale
ALM - Asset/liability management
ALCO - Asset/Liability Management Committee
AML Act - Anti-Money Laundering Act of 2020
AOCI - Accumulated other comprehensive income (loss)
ASC - Accounting Standards Codification
ASU - Accounting Standards Update
ATM - Automated teller machine
Basel III - Basel Committee's 2010 Regulatory Capital Framework (Third Accord)
Basel III Rules - Final capital rules adopting the Basel III capital framework approved by U.S. federal regulators in 2013
Basel Committee - Basel Committee on Banking Supervision
BHC Act - Bank Holding Company Act of 1956, as amended
Board - the Company’s Board of Directors
BOLI - Bank-owned life insurance
BTFP - Bank Term Funding Program
C&I - Commercial and industrial
CAD - Construction, acquisition, and development
CAMT - Corporate alternative minimum tax rate
CARES Act - Coronavirus Aid, Relief, and Economic Security Act
CDE - Community development entity
CECL - ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("Current Expected Credit Losses")
CEO - Chief Executive Officer
CET1 - Common Equity Tier 1
CFPB - Consumer Financial Protection Bureau
CIO - Chief Information Officer
CISM - Certified Information Security Manager
CISO - Chief Information Security Officer
CISSP - Certified Information Systems Security Professional
Code - Code of Business Conduct and Ethics
Company - Cadence Bank and its subsidiaries
COO - Chief Operating Officer
COSO - Committee of Sponsoring Organizations of the Treadway Commission
COVID-19 - Coronavirus Disease 2019
CRA - Community Reinvestment Act of 1977
CRE - Commercial real estate
CSC - Contractual servicing cost
DEIB - Diversity, Equity, Inclusion & Belonging
DIF - Deposit Insurance Fund
DOJ - U.S. Department of Justice
EAP - Employee Assistance Program
ECL - Expected credit loss
EIR - Effective interest rate
EPS - Earnings per share
Exchange Act - Securities Exchange Act of 1934
ESG - Environmental, Social and Governance
EVE - Economic value of equity
FASB - Financial Accounting Standards Board
FDIC - Federal Deposit Insurance Corporation
FDICIA - Federal Deposit Insurance Corporation Improvement Act of 1991
FDM - Financial difficulty modification
FHA - Federal Housing Administration
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation (“Freddie Mac”)
FinCEN - Financial Crimes Enforcement Network
FNMA - Federal National Mortgage Association (“Fannie Mae”)
FRB - Federal Reserve Bank
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FTE - Fully taxable equivalent
FTP - Funds transfer pricing
GAAP - Generally Accepted Accounting Principles in the United States
GNMA - Government National Mortgage Association (“Ginnie Mae”)
IRA of 2022 - Inflation Reduction Act of 2022
IRR - Interest rate risk
ITM - Interactive teller machine
LIBOR - London Interbank Offered Rate
LTV - Loan to value
MBS - Mortgage-backed securities
MDBCF - Mississippi Department of Banking and Consumer Finance
MSR - Mortgage servicing rights
NAV - Net asset value
NII - Net interest income
NM - Not meaningful
NMTC - New market tax credit
NPA - Nonperforming asset(s)
NPL - Nonperforming loan(s)
NSF - Nonsufficient funds
NYSE - New York Stock Exchange
OCC - Office of the Comptroller of the Currency
OREO - Other real estate owned
PCAOB - Public Company Accounting Oversight Board
PCD - Purchased credit deteriorated
PCI - Purchase credit impaired
PSU - Performance stock unit
ROU - Right of use
RSA - Restricted stock award
RSU - Restricted stock unit
SBA - Small Business Administration
SBIC - Small Business Investment Company
SEC - U.S. Securities and Exchange Commission
SNC - Shared National Credit
SOFR - Secured Overnight Financing Rate
TBA - To be announced
TDR - Troubled debt restructuring
USDA - U.S. Department of Agriculture
VA - U.S. Department of Veterans Affairs
VIE - Variable interest entity
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements made in this annual report on Form 10-K (this “Report”) are not statements of historical fact and
constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and are subject to the safe harbor created thereby under the Private Securities Litigation
Reform Act of 1995 as well as the “bespeaks caution” doctrine. These statements are often, but not always, made through the
use of words or phrases such as “anticipate,” “aspire,” “assume,” “believe,” “budget,” “contemplate,” “continue,” “could,”
“estimate,” “expect,” “forecast,” “foresee,” “goal,” “hope,” “indicate,” “intend,” “may,” “might,” “outlook,” “plan,” “project,”
“projection,” “predict,” “prospect,” “potential,” “roadmap,” “seek,” “should,” “target,” “will,” and “would,” or the negative
versions of those words, or other comparable words of a future or forward-looking nature. These forward-looking statements
may include, without limitation, discussions regarding general economic, interest rate, real estate market, competitive,
employment, and credit market conditions; our assets; business; cash flows; financial condition; liquidity; prospects; results of
operations, the impact of the sale of Cadence Insurance (the “Transaction”) on the Company’s financial condition and future net
income and earnings per share, the amount of net after-tax proceeds expected to be received by the Company from the
Transaction, and the Company’s ability to deploy capital into strategic and growth initiatives; deposit growth interest and fee-
based revenue; capital resources; capital metrics; efficiency ratio; valuation of mortgage servicing rights; mortgage production
volume; net income; net interest revenue; non-interest revenue; net interest margin; interest expense; non-interest expense;
earnings per share; interest rate sensitivity; interest rate risk; balance sheet and liquidity management; off-balance sheet
arrangements; fair value determinations; asset quality; credit quality; credit losses; provision and allowance for credit losses,
impairments, charge-offs, recoveries and changes in volume; investment securities portfolio yields and values; ability to
manage the impact of pandemics and natural disasters; adoption and use of critical accounting policies; adoption and
implementation of new accounting standards and their effect on our financial results and our financial reporting; utilization of
non-GAAP financial metrics; declaration and payment of dividends; ability to pay dividends or coupons on our 5.5% Series A
Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, or our subordinated notes; mortgage and insurance
business and commission revenue growth; implementation and execution of cost savings initiatives; ability to successfully
litigate, resolve or otherwise dispense with threatened, ongoing and future litigation and administrative and investigatory
matters; ability to successfully complete pending or future acquisitions or divestitures; dispositions and other strategic growth
opportunities and initiatives; ability to successfully obtain regulatory approval for acquisitions and other growth initiatives;
ability to successfully integrate and manage acquisitions or divestitures; opportunities and efforts to grow market share;
reputation; ability to compete with other financial institutions; ability to recruit and retain key employees and personnel; access
to capital markets; investment in other financial institutions; and ability to operate our regulatory compliance programs in
accordance with applicable law.
Forward-looking statements are based upon management’s expectations as well as certain assumptions and estimates
made by, and information available to, management at the time such statements were made. Forward-looking statements are not
historical facts, are not guarantees of future results or performance and are subject to certain known and unknown risks,
uncertainties and other factors that are beyond our control and that may cause actual results to differ materially from those
expressed in, or implied by, such forward-looking statements. These risks, uncertainties and other factors include, without
limitation, general economic, unemployment, credit market and real estate market conditions, and the effect of such conditions
on the creditworthiness of borrowers, collateral values, the value of investment securities and asset recovery values; the risks of
changes in interest rates and their effects on the level and composition of deposits, loan demand, loan repayment velocity, and
the values of loan collateral, securities and interest sensitive assets and liabilities; risks arising from market reactions to the
banking environment in general, or to conditions or situations at specific banks; risks arising from perceived instability in the
banking sector; the impact of inflation, the failure of assumptions underlying the establishment of reserves for possible credit
losses, fair value for loans and other real estate owned; changes in the prices, values and sales volumes of residential and
commercial real estate, especially as they relate to the value of collateral supporting the Company’s loans; a deterioration of the
credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling,
or uncertainties surrounding the debt ceiling and the federal budget; the availability of and access to capital; possible
downgrades in our credit ratings or outlook which could increase the costs or availability of funding from capital markets; the
ability to attract new or retain existing deposits or to retain or grow loans; potential delays or other problems in implementing
and executing our growth, expansion and acquisition or divestment strategies (including the sale of Cadence Insurance, Inc.),
including delays in obtaining regulatory or other necessary approvals or the failure to realize any anticipated benefits or
synergies from any acquisitions or growth strategies; significant turbulence or a disruption in the capital or financial markets;
the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage and wealth
management businesses; the ability to grow additional interest and fee income or to control noninterest expense; competitive
factors and pricing pressures, including their effect on our net interest margin; changes in legal, financial and/or regulatory
requirements; recently enacted and potential legislation and regulatory actions and the costs and expenses to comply with new
and/or existing legislation and regulatory actions, and any related rules and regulations; changes in U.S. Government monetary
and fiscal policy, including any changes that may result from U.S. elections; FDIC special assessments or changes to regular
assessments; possible adverse rulings, judgments, settlements and other outcomes of pending or future litigation or government
actions; the ability to keep pace with technological changes, including changes regarding generative artificial intelligence,
maintaining cybersecurity and compliance with applicable cybersecurity regulatory requirements; increased competition in the
5
financial services industry, particularly from regional and national institutions, as well as from fintech companies, risks related
to our reliance on third parties to provide key components of our business infrastructure, including the risks related to
disruptions in services provided by disputes with, or financial difficulties of a third-party vendor, the impact of failure in, or
breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as
a result of cyber-attacks or an increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal
acts impacting us or our customers; natural disasters or acts of war or terrorism; international or political instability (including
the impacts related to or resulting from Russia’s military action in Ukraine, or the Israel-Hamas war, including the imposition
of additional sanctions and export controls, as well as the broader impacts to financial markets and the global macroeconomic
and geopolitical environments); risks related to, and the costs associated with, ESG matters, including the scope and pace of
related rulemaking activity; impairment of our goodwill or other intangible assets; adoption of new accounting standards or
changes in existing standards; and other factors described in “Part I, Item 1A. Risk Factors” in this Report or as detailed from
time to time in the Company’s press and news releases, reports and other filings we file with the FDIC.
The Company faces risks from potential adverse effects from the Transaction, including risks associated with
unexpected costs or liabilities relating to the Transaction. The Company also faces risks from: possible adverse rulings,
judgments, settlements or other outcomes of pending, ongoing and future litigation, as well as governmental, administrative and
investigatory matters; the impairment of the company’s goodwill or other intangible assets; losses of key employees and
personnel; the diversion of management’s attention from ongoing business operations and opportunities; and the company’s
success in executing its business plans and strategies, and managing the risks involved in all of the foregoing.
Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as
of the date of this Report, if one or more events related to these or other risks or uncertainties materialize, or if the Company’s
underlying assumptions prove to be incorrect, actual results may prove to be materially different from the results expressed or
implied by the forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking
statements. The forward-looking statements speak only as of the date of this Report, and the Company does not undertake any
obligation to publicly update or review any forward-looking statement, whether as a result of new information, future
developments or otherwise, except as required by applicable law. New risks and uncertainties may emerge from time to time,
and it is not possible for the Company to predict their occurrence or how they will affect the Company. All written or oral
forward-looking statements attributable to us are expressly qualified in their entirety by this section.
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PART I
ITEM 1. BUSINESS.
COMPANY OVERVIEW
Cadence Bank (“We,” “Our,” or the “Company”), originally chartered in 1876, is a state chartered commercial bank
with dual headquarters in Houston, Texas and Tupelo, Mississippi. The Company conducts commercial banking and financial
services directly and through its banking-related subsidiaries. The Company operates over 350 commercial banking and
mortgage locations in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri, Tennessee and Texas, including
a single loan production office in Oklahoma.
Our common stock and our preferred stock are listed on the New York Stock Exchange under the symbols “CADE”
and “CADE Pr A”, respectively. During the fourth quarter of 2021, we changed our corporate name from BancorpSouth Bank
to Cadence Bank in connection with our acquisition of Cadence Bancorporation. At December 31, 2023, the Company had total
assets of $48.9 billion; total loans, net of unearned income, of $32.5 billion; total deposits of $38.5 billion; and shareholders’
equity of $5.2 billion.
On November 30, 2023, the Company completed its previously announced sale of all of the issued and outstanding
shares of capital stock of Cadence Insurance, Inc., a former wholly owned subsidiary of the Company that conducted the
Company’s insurance agency business (“Cadence Insurance”), to Arthur J. Gallagher Risk Management Services, LLC
(“Gallagher”) (the “Sale Transaction”), pursuant to that certain stock purchase agreement, dated as of October 24, 2023, by and
among the Company, Cadence Insurance, Gallagher and Arthur J. Gallagher & Co. (the “Stock Purchase Agreement”). See
Note 3 for additional details.
The Company’s investor website address is https://ir.cadencebank.com. The Company makes available its annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports free
of charge on its investor website under the caption “Public Filings” as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the FDIC. The FDIC maintains a website that contains reports and other information
regarding issuers that file or furnish information electronically. The Company’s websites and the information contained therein
or linked thereto are not, and are not intended to be, incorporated into this Report.
PRODUCTS AND SERVICES
LENDING ACTIVITIES
The Company’s lending activities include both commercial and consumer loans. Loan originations are derived from a
number of sources including direct solicitation by the Company’s loan officers, existing depositors and borrowers, builders,
attorneys, walk-in customers and, in some instances, other lenders, real estate broker referrals and mortgage loan companies.
The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and
nature of the loan, and applies these procedures in a disciplined manner.
Our loan portfolio includes commercial and industrial loans, residential real estate loans, commercial real estate loans
and other consumer loans. The principal risk associated with each category of loans we make is the creditworthiness of the
borrower. Borrower creditworthiness is affected by general economic conditions, the attributes of the borrower and the
borrower’s market or industry. Attributes of the relevant business market or industry include the competitive environment,
customer and supplier availability, the threat of substitutes and barriers to entry and exit.
Commercial Lending
The Company offers a variety of commercial loan services including term loans, lines of credit, equipment and
receivable financing, energy, restaurant, healthcare, technology, SBA and agricultural loans. A broad range of short-to-medium
term commercial loans, both secured and unsecured, are made available to businesses for working capital (including inventory
and receivables), business expansion (including acquisition and development of real estate and improvements), and the
purchase of equipment and machinery. The Company also makes construction loans to real estate developers for the
acquisition, development and construction of residential and commercial properties.
Commercial loans are granted based on the borrower’s ability to generate cash flow to support its debt obligations and
other cash related expenses. A borrower’s ability to repay commercial loans is substantially dependent on the success of the
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business itself and on the quality of its management. As a general practice, the Company takes as collateral a security interest in
any available real estate, equipment, inventory, receivables or other personal property, although such loans may also be made
infrequently on an unsecured basis. In many instances, the Company requires personal guarantees of its commercial loans to
provide additional credit support.
The Company’s exposure to agricultural lending is minimal. Agricultural loans are generally supported by the
financial strength of the borrower and secured by the crops/livestock, crop insurance, equipment or real estate.
Residential Consumer Lending
A portion of the Company’s lending activity consists of the origination of fixed and adjustable rate residential
mortgage loans secured by owner-occupied property located in the Company’s primary market areas. Home mortgage banking
is unique in that a broad geographic territory may be served by originators working from strategically placed offices either
within the Company’s traditional banking facilities or from other locations. In addition, the Company offers construction loans,
second mortgage loans and home equity lines of credit.
The Company finances the construction of individual, owner-occupied houses on the basis of written underwriting and
construction loan management guidelines. First mortgage construction loans are made to qualified individual borrowers and are
generally supported by a take-out commitment from a permanent lender. The Company makes residential construction loans to
individuals who intend to erect owner-occupied housing on a purchased parcel of real estate. The construction phase of these
loans has certain risks, including the viability of the contractor, the contractor’s ability to complete the project and changes in
interest rates.
Mortgage lending serves to finance residential properties through long-term mortgages, both sold into the secondary
market and retained in the bank portfolio. Ongoing efforts to grow the bank portfolio through the company’s Right@Home
product for low- to moderate-income borrowers have contributed to the department’s production. Revenue is primarily derived
from loan originations and servicing fees paid to the company by government-sponsored enterprises and other investors who
purchase the mortgages after origination.
The sale of mortgage loans to the secondary market allows the Company to manage the interest rate risk related to
such lending operations. Generally, after the sale of a loan with servicing retained, the Company’s only involvement is to act as
a servicing agent. In certain cases, the Company may be required to repurchase mortgage loans upon which customers have
defaulted that were previously sold in the secondary market if these loans did not meet the underwriting standards of the entity
that purchased the loans.
Non-Residential Consumer Lending
Non-residential consumer loans made by the Company include loans for automobiles, recreation vehicles, boats,
personal (secured and unsecured) and deposit account secured loans. Non-residential consumer loans are attractive to the
Company because they typically have a shorter term and carry higher interest rates than those charged on other types of loans.
The Company also issues credit cards solicited on the basis of applications received through referrals from the
Company’s branches and other marketing efforts. The Company generally has a small portfolio of credit card receivables
outstanding. Credit card lines are underwritten using conservative credit criteria, including past credit history and debt-to-
income ratios, similar to the credit policies applicable to other personal consumer loans.
The Company grants consumer loans based on employment and financial information solicited from prospective
borrowers as well as credit records collected from various reporting agencies. Financial stability and credit history of the
borrower are the primary factors the Company considers in granting such loans. The availability of collateral is also a factor
considered in making such loans. The geographic area of the borrower is another consideration, with preference given to
borrowers in the Company’s primary market areas.
Shared National Credits
The federal banking agencies define a 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 part of our commercial focused relationship banking, we may act as an agent or participate in
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syndicated loan offerings because of the size of the customers and nature of industries we serve. At December 31, 2023, we
have $4.2 billion of outstanding SNC, representing 12.9% of total loans.
DEPOSITS
We offer our customers a variety of deposit products, including checking accounts, savings accounts, money market
accounts, time deposits, and other deposit accounts through multiple channels, including our extensive network of full-service
branches, drive-through branches, ATMs, ITMs, and our online, mobile, and telephone banking platforms. At December 31,
2023, our total deposits were $38.5 billion and were comprised of 24.0% noninterest-bearing deposits and 76.0% interest
bearing deposits. We intend to continue our efforts to provide funding for our business from customer relationship deposits.
The Company has been able to compete effectively for deposits in its primary market areas, while continuing to
manage the exposure to rising interest rates. The distribution and market share of deposits by type of deposit and by type of
depositor are important considerations in the Company’s assessment of the stability of its funding sources and its access to
additional funds. Furthermore, management shifts the mix and maturity of the deposits depending on economic conditions and
loan and investment policies in an attempt, within set policies, to minimize cost and maximize net interest margin.
For more information regarding the Company’s deposits, see “Management’s Discussion And Analysis of Financial
Condition And Results Of Operations – Deposits.”
OTHER SERVICES
Prior to its sale on November 30, 2023, Cadence Insurance was the Company’s insurance service brokerage and served
as an agent in the sale of commercial and personal lines of insurance with a full line of property, casualty, life, health and
employee benefits products and risk management services and operated offices across the Gulf- and Mid-South regions. Our
business model centered on developing a customized experience with a strategy centered on our clients’ goals related to risk
management, human capital, and/or their insurance program. Operating globally as a member of the Worldwide Broker
Network, the team consisted of nearly 800 insurance and risk management specialists. Cadence Insurance’s historical financial
results for periods prior to the sale are reflected in the Company’s consolidated financial statements as discontinued operations.
Through Linscomb Wealth Inc., formerly Linscomb & Williams Inc., a subsidiary of Cadence Bank, and Cadence
Trust, a division of the Bank, we offer wealth management and other fiduciary and private banking services targeted to affluent
clients, including individuals, business owners, families and professional service companies. In addition to generating fiduciary
and investment management fee income, we believe these services enable us to build new relationships and expand existing
relationships to grow our deposits and loans. Through our wealth management line of business and our relationships with LPL
Financial LLC, we offer financial planning, retirement services and trust and investment management by a team of seasoned
advisors, providing access for affluent clients as well as mass market clients, to a wide range of certificates of deposits, mutual
funds, estate planning products, insurance and annuities, individual retirement accounts, stocks, bonds, brokerage accounts,
money market accounts, investment advisory services, and other financial products and services. Although we do not limit our
customers to affluent clients and business owners, the focus of our wealth management line of business is on the “mass
affluent” ($500,000 to $2 million in investible assets) and “highly affluent” ($2 million to $5 million in investible assets)
markets.
In addition to traditional banking activities and the other products and services specified above, we provide a broad
array of financial services to our customers, including: debit and credit card products, treasury management services, merchant
services, automated clearing house services, lock-box services, remote deposit capture services, foreign exchange services, and
other treasury services.
COMPETITION
Vigorous competition exists in all major areas where the Company is engaged in business. The Company competes for
available loans and depository accounts with banks, thrifts, insurance companies, credit unions, mortgage bankers and finance
companies, money market mutual funds, other financial services companies and fintech companies, some of which are not
subject to the same degree of regulation and restrictions imposed upon us. None of these competitors are dominant in the entire
area served by the Company.
The principal areas of competition in the banking industry center on a financial institution’s ability and willingness to
provide credit on a timely and competitively priced basis, to offer a sufficient range of deposit and investment opportunities at
9
competitive prices and maturities, and to offer personal and business financial services of sufficient quality and at competitive
prices. Management believes that the Company can compete effectively in all of these areas.
CREDIT POLICIES AND PROCEDURES
In the normal course of business, the Company assumes risks in extending credit. The Company manages these risks
through underwriting in accordance with its lending policies, loan review procedures and the diversification of its loan and
lease portfolio. Although it is not possible to predict credit losses with certainty, management regularly reviews the
characteristics of the loan and lease portfolio to determine its overall risk profile and quality.
The provision for credit losses is the periodic cost (or credit) of providing an allowance or reserve for expected losses
on loans and leases. The Board of Directors has appointed a Credit Committee, composed of senior management and credit
administration staff which meets on a quarterly basis or more frequently if required to review the recommendations of several
internal working groups developed for specific purposes including the allowance for credit losses, specific provision amounts,
and charge-offs. The Allowance for Credit Losses (ACL) Group bases its estimates of credit losses on three primary
components: (1) estimates of expected losses that exist in various segments of performing loans and leases over the remaining
contractual life of the loan portfolio using a reasonable and supportable economic forecast; (2) specifically identified losses in
individually analyzed credits which are collateral-dependent, which generally include loans internally graded as impaired and
PCD Loss loans; and (3) qualitative factors related to economic conditions, portfolio concentrations, regulatory policy updates
and other relevant factors that address estimates of expected losses not fully addressed based upon management’s judgment of
portfolio conditions.
The Company utilizes credit risk models to estimate the probability of default and loss given default of loans over their
remaining life. Credit factors such as financial condition of the borrower and guarantor, recent credit performance, delinquency,
liquidity, cash flows, collateral type and value are used by the models to assess credit risk. In some cases, such as credit cards, a
loss rate model is used where lifetime loss rates are applied. Estimates of expected losses are influenced by the historical net
losses experienced by the Company for loans and leases of comparable creditworthiness and structure. Specific loss
assessments are performed for loans and leases based upon the collateral protection. The Company’s reasonable and
supportable eight quarter economic forecast is utilized to estimate credit losses before reverting to longer term historical loss
experience. The Company subscribes to various economic services and publications to assist with the development of inputs
used in the modeling and qualitative framework for the ACL calculation. The economic forecasts consider changes in real gross
domestic product, unemployment rate, interest rates, valuations for residential and commercial real estate, and other indicators
that may be correlated with the Company’s expected credit losses.
During 2023, the impact of inflation and rising interest rates resulted in concern that similar economic conditions may
continue into 2024 and the heightened risk of future customer loan defaults remains. The ACL estimate includes both portfolio
changes and changes in economic conditions experienced during the period. The unemployment rate has the highest weighting
within the Company’s credit modeling framework. The Company’s forecast for unemployment includes a range between 3.87%
and 5.55% through the fourth quarter of 2025. The Company considers several forecasts from external sources with
management weighting the forecast equally between the downside and baseline forecasts in the fourth quarter of 2023. In
addition, qualitative factors such as changes in economic conditions, concentrations of risk, and changes in portfolio risk
resulting from regulatory changes are considered in determining the adequacy of the level of the ACL. Attention is paid to the
quality of the loan and lease portfolio through a formal loan review process. An independent loan review department of the
Company is responsible for reviewing the credit rating and classification of individual credits and assessing trends in the
portfolio, adherence to internal credit policies and procedures and other factors that may affect the overall adequacy of the
ACL. The ACL Group is responsible for ensuring that the allowance for credit losses provides adequate coverage of expected
losses. The ACL Group meets at least quarterly to determine the amount of adjustments to the ACL, and it is comprised of
senior management from the Company’s Credit Administration, Risk, and Finance departments.
The Impairment Group is responsible for evaluating individual loans that have been specifically identified through
various channels, including examination of the Company’s watch list, past due listings, and loan officer assessments. An
analysis is prepared to assess the extent the loan is collateral-dependent and whether a loss exposure exists, which is reviewed
by the Impairment Group. The Impairment Group reviews all loans where a borrower is considered to be experiencing financial
difficulty if the loan is $1.0 million or greater to determine if it is probable that the Company will be unable to collect the
contractual principal and interest on the loan. The fair value of the underlying collateral is considered if the loan is collateral-
dependent. The Impairment Group meets at least quarterly, and it is made up of senior management from the Company’s Credit
Administration, Risk and Finance departments.
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In March 2022, the FASB issued ASU No. 2022-02, which eliminated the TDR accounting model for creditors that
have adopted ASC 326. The guidance became effective for the Company beginning January 1, 2023, and the Company elected
to adopt the guidance via the modified retrospective transition method. With the removal of the TDR model, all loan
modifications are now accounted for under the general loan modification guidance in Subtopic 310-20. The update also requires
enhanced disclosures regarding loan modifications for borrowers experiencing financial difficulty.
Loans of $1.0 million or more that are identified as collateral-dependent, which generally include loans internally
graded as impaired or PCD Loss loans, are reviewed by the Impairment Group which approves the amount of specific reserve,
if any, and/or charge-off amounts. The evaluation of real estate loans generally focuses on the fair value of underlying collateral
less estimated costs to sell obtained from appraisals, as the repayment of these loans may be dependent on the liquidation of the
collateral. In certain circumstances, other information such as comparable sales data is deemed to be a more reliable indicator of
fair value of the underlying collateral than the most recent appraisal. In these instances, such information is used in determining
the specific provision recorded for the loan. For commercial and industrial loans, the evaluation generally focuses on these
considerations, as well as the projected liquidation of any pledged collateral. Our larger corporate and specialized industry loans
are underwritten to the underlying enterprise value of the borrower. The value is in the equity of the business as a going
concern. Many valuation approaches are used in these situations including discounted cash flow, multiple of cash flow, or
comparable sales approaches. The Impairment Group reviews the results of each evaluation and approves the final specific
provision amounts, which are then included in the analysis of the adequacy of the ACL in accordance with FASB ASC 326.
A new appraisal is generally ordered for loans $1.0 million or greater that have characteristics of potential specific
provision, such as delinquency or other loan-specific factors identified by management, when a current appraisal (dated within
the prior 12 months) is not available or when a current appraisal uses assumptions that are not consistent with the expected
disposition of the loan collateral. In order to measure a specific provision properly at the time that a loan is reviewed, a bank
officer may estimate the collateral fair value based upon earlier appraisals received from outside appraisers, sales contracts,
approved foreclosure bids, comparable sales, officer estimates or current market conditions until a new appraisal is received.
This estimate can be used to determine the extent of the specific provision on the loan. After a loan is determined to be
collateral-dependent, it is management’s policy to obtain an updated appraisal on at least an annual basis for impaired loans
with a remaining recorded investment of $200 thousand and greater. Management performs a review of the pertinent facts and
circumstances of each collateral-dependent loan, such as changes in outstanding balances, information received from loan
officers and receipt of re-appraisals, at least quarterly. As of each review date, management considers whether additional
provision and/or charge-offs should be recorded based on recent activity related to the loan-specific collateral as well as other
relevant comparable assets. Any adjustment to reflect further exposure, either because management’s periodic review or as a
result of an updated appraisal, are made through recording additional ACL provisions and/or charge-offs.
When a guarantor is relied upon as a source of repayment, it is the Company’s policy to analyze the strength of the
guaranty. This analysis varies based on circumstances, but may include a review of the guarantor’s personal and business
financial statements and credit history, a review of the guarantor’s tax returns and the preparation of a cash flow analysis of the
guarantor.
Any loan or portion thereof which is classified as “loss” or which is determined by management to be uncollectible
because of factors such as the borrower’s failure to pay interest or principal, the borrower’s financial condition, economic
conditions in the borrower’s industry or the inadequacy of underlying collateral, is charged off.
The Company excludes accrued interest from interest income when it is determined that it is probable that all
contractual principal and interest will not be collected for loans.
REGULATION AND SUPERVISION
The following discussion sets forth certain material elements of the regulatory framework applicable to the Company. This
discussion is a brief summary of the regulatory environment in which the Company operates and is not designed to be a
complete discussion of all statutes and regulations affecting the Company’s operations. Regulation of financial institutions is
intended primarily for the protection of depositors, the deposit insurance fund and the safety and soundness of the U.S.
financial system and generally is not intended for the protection of shareholders. Changes in applicable laws, and their
implementation and application by regulatory agencies, cannot necessarily be predicted but could have a material and adverse
effect on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations.
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GENERAL
The Company is incorporated under the laws of the State of Mississippi and is subject to the applicable provisions of
Mississippi banking laws, the laws of the various states in which it operates, and federal law. The Company is subject to the
supervision and examination of the FDIC and the MDBCF. Violations of laws and regulations, or other unsafe and unsound
practices, may result in regulatory agencies imposing fines or penalties, cease and desist orders, or other enforcement actions.
Under certain circumstances, these agencies may enforce these remedies directly against officers, directors, employees, and
other parties participating in the affairs of a bank. Like all banks, we are regulated extensively under federal and state law.
Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions, the FDIC
and the MDBCF have the authority to compel or restrict certain actions on our part if they determine that we have insufficient
capital or other resources, or are otherwise operating in a manner that may be deemed to be inconsistent with safe and sound
banking practices. Under this authority, our regulators can require us or our subsidiaries to enter into informal or formal
supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease
and desist orders, pursuant to which we would be required to take identified corrective actions to address cited concerns and to
refrain from taking certain actions.
If we become subject to and are unable to comply with the terms of any regulatory actions or directives, supervisory
agreements, or orders, then we could become subject to additional, heightened supervisory actions and orders, possibly
including prompt corrective action restrictions and/or other regulatory actions, including prohibitions on the payment of
dividends on our common stock and preferred stock. If our regulators were to take such supervisory actions, then we could,
among other things, become subject to significant restrictions on our ability to develop any new business, as well as restrictions
on our existing business, and we could be required to raise additional capital, dispose of certain assets and liabilities within a
prescribed period of time, or both. The terms of any such action could have a material negative effect on our business,
reputation, operating flexibility, financial condition, and the value of our common stock and preferred stock.
CHANGE IN CONTROL
Federal law restricts the amount of voting stock of a bank that a person may acquire without the prior approval of
banking regulators. Under the Change in Bank Control Act and the regulations thereunder, a person or group must give advance
notice to the FDIC before acquiring control of the Company. Upon receipt of such notice, the FDIC may approve or disapprove
the acquisition. The Change in Bank Control Act creates a rebuttable presumption of control if a person or group acquires the
power to vote 10% or more of our outstanding common stock. The overall effect of such laws is to make it more difficult to
acquire a bank by tender offer or similar means than it might be to acquire control of another type of corporation. Consequently,
shareholders of the Company may be less likely to benefit from the rapid increases in stock prices that may result from tender
offers or similar efforts to acquire control of other companies. Investors should be aware of these requirements when acquiring
shares of our stock.
GOVERNANCE AND FINANCIAL REPORTING OBLIGATIONS
We are required to comply with various corporate governance and financial reporting requirements under the
Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the SEC, the PCAOB, and the NYSE. In particular, we
are required to include management and independent registered public accounting firm reports on internal controls as part of
our Annual Report on Form 10-K in order to comply with Section 404 of the Sarbanes-Oxley Act. We have evaluated our
controls, including compliance with the SEC rules on internal controls, and have and expect to continue to spend significant
amounts of time and resources on compliance with these rules. Our failure to comply with these internal control rules may
materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the values of
our securities.
CONSUMER FINANCIAL PROTECTION BUREAU (“CFPB”)
The CFPB is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial
protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair
Credit Reporting Act, Fair Debt Collection Practices Act, the Consumer Financial Privacy provisions of the Gramm-Leach-
Bliley Act, and certain other statutes. The CFPB has examination and primary enforcement authority under the consumer
financial protection laws with respect to depository institutions with $10.0 billion or more in assets, including the Company.
The CFPB regulates the origination of mortgages, mortgage disclosures, mortgage servicing, foreclosures, and
overdrafts, as well as many other consumer issues. The CFPB has authority to enforce a prohibition of unfair, deceptive, or
abusive practices in connection with the offering of consumer financial products. Additionally, the CFPB has proposed or will
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be proposing additional regulations, or modifying existing regulations, that directly relate to our business. Although it is
difficult to predict at this time the extent to which the CFPB’s rules impact the operations and financial condition of the
Company, such rules may have a material impact on the Company’s compliance costs, compliance risk, and fee income.
DIVIDENDS
Various federal and state laws limit the amount of dividends that the Company may pay to its shareholders without
regulatory approval. Under Mississippi law, the Company must obtain the non-objection of the Commissioner of the MDBCF
prior to paying any dividend on the Company’s capital stock. Further, the Company may not pay any dividends if, after paying
the dividend, it would be undercapitalized under applicable capital requirements. The FDIC also has the authority to prohibit
the Company from engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the
financial condition of the Company, could include the payment of dividends.
CAPITAL REQUIREMENTS
We are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets
and capital to risk-weighted assets. The required capital ratios are minimums, and the FDIC may determine that based on our
size, complexity or risk profile, we must maintain a higher level of capital in order to operate in a safe and sound manner. Risks
such as concentration of credit risks and risks arising from non-traditional activities, as well as the institution’s exposure to a
decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks, are
important factors that are to be taken into account in assessing an institution’s overall capital adequacy. The following is a brief
description of the relevant provisions of these capital rules and their potential impact on our capital levels.
We are subject to the following risk-based capital ratios: common equity Tier 1 (CET1) risk-based capital ratio, Tier 1
risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and total risk-based capital ratio, which includes
Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of
treasury stock plus retained earnings, less certain adjustments and deductions related to goodwill, intangible assets, mortgage
servicing assets and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised
of noncumulative perpetual preferred stock. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including
qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets,
subject to certain eligibility criteria. The minimum capital to risk-weighted assets ratios are as follows: (1) CET1 of 4.5%, (2)
Tier 1 capital of 6.0%, and (3) total capital of 8.0%. The capital rules also define the risk-weights assigned to assets and off-
balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example,
certain “high volatility” commercial real estate, past due assets, structured securities, and equity holdings.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly
average total consolidated assets net of goodwill, certain other intangible assets and certain required deduction items. The
required minimum leverage ratio for all banks is 4%.
In addition, the regulatory capital rules require a capital conservation buffer of 2.5%, comprised of CET1, above each
of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), which is designed to absorb losses
during periods of economic stress. This buffer requirement must be met for the Company to be able to pay dividends, engage in
share buybacks or make discretionary bonus payments to executive management without restriction.
For more information, see the “Regulatory Capital” section of Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
PROMPT CORRECTIVE ACTION
The FDICIA requires federal bank regulatory authorities to take “prompt corrective action” with respect to depository
institutions that do not meet minimum capital requirements. For these purposes, FDICIA establishes five capital tiers: “well
capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.”
An institution is deemed to be:
•
“well capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8.0% or
greater, a Tier 1 leverage ratio of 5.0% or greater, and a common equity Tier 1 risk-based capital ratio of 6.5% or
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greater, and is not subject to a regulatory order, agreement or directive to meet and maintain a specific capital level for
any capital measure;
“adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of
6.0% or greater, a Tier 1 leverage ratio of 4.0% or greater, and a common equity Tier 1 risk-based capital ratio of 4.5%
or greater, and the institution does not meet the definition of a “well capitalized” institution;
“undercapitalized” if it does not meet the definition of an “adequately capitalized” institution;
“significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital
ratio that is less than 4.0%, a Tier 1 leverage ratio that is less than 3.0%, and a common equity Tier 1 risk based capital
ratio that is less than 3.0%; and
“critically undercapitalized” if it has a ratio of tangible equity, as defined in the regulations, to total assets that is equal
to or less than 2%.
•
•
•
•
Throughout 2023, the Company’s regulatory capital ratios were in excess of the levels established for “well
capitalized” institutions.
FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a cash
dividend, if the depository institution would be “undercapitalized” after such payment. “Undercapitalized” institutions are
subject to growth limitations and are required by the appropriate, primary federal regulator to submit a capital restoration plan.
If an “undercapitalized” institution fails to submit an acceptable plan, it is treated as if it is “significantly
undercapitalized.” “Significantly undercapitalized” institutions may be subject to a number of requirements and restrictions,
including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and
cessation of receipt of deposits from correspondent banks.
“Critically undercapitalized” institutions may not, beginning 60 days after becoming “critically undercapitalized,”
make any payment of principal or interest on their subordinated debt. In addition, “critically undercapitalized” institutions are
subject to appointment of a receiver or conservator within 90 days of becoming so classified.
Under FDICIA, a depository institution that is not “well capitalized” is generally prohibited from accepting brokered
deposits and offering interest rates on deposits higher than the prevailing rate in its market. The Company is “well capitalized,”
and the FDICIA brokered deposit rule did not adversely affect its ability to accept brokered deposits. The Company had $764.4
million in brokered deposits at December 31, 2023.
FDIC INSURANCE
The deposits of the Company are insured by the DIF, which the FDIC administers, up to applicable limits, which
currently are set at $250,000 per depositor, per insured bank, for each account ownership category. To fund the DIF, FDIC-
insured banks are required to pay deposit insurance assessments to the FDIC. The deposit insurance assessment base is based on
an insured institution’s average consolidated total assets minus its average tangible equity. The FDIC uses a “scorecard” system
to determine deposit insurance premiums for institutions like the Company that have more than $10 billion in assets. Each
scorecard has a performance score and a loss-severity score that is combined to produce a total score. The FDIC is authorized to
make discretionary adjustments to the total score based upon significant risk factors that are not adequately captured in the
scorecard, which is translated into a premium rate.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe and
unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation,
rule, order or condition imposed by the FDIC. In addition, the Federal Deposit Insurance Act provides that, in the event of the
liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the
claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver,
will have priority over other general unsecured claims against the institution.
On October 18, 2022, the FDIC adopted a final rule, applicable to all insured depository institutions, to increase initial
base deposit insurance assessment rate schedules uniformly by two basis points. The final rule was effective for the first quarter
of 2023. The increase in the assessment rate schedules in intended to increase the likelihood that the reserve ratio of the DIF
reaches the statutory minimum if 1.35% by the statutory deadline of September 30, 2028. The new assessment rate schedules
will remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF in progressing
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toward the FDIC’s long-term goal of a 2% Designated Reserve Ratio. Progressively lower assessment rate schedules will take
effect when the reserve ratio reaches 2%, and again when it reaches 2.5%.
On November 16, 2023, the FDIC adopted a final rule to implement a special assessment to recover the loss of
approximately $16.3 billion to the DIF associated with protecting uninsured depositors following the closures of Silicon Valley
Bank and Signature Bank in early 2023. The FDI Act requires the FDIC to take this action in connection with the systemic risk
determination announced on March 12, 2023. Under the final rule, the banks that benefited most from the assistance provided
under the systemic risk determination will be charged a special assessment to recover losses to the DIF resulting from the
protection of uninsured depositors. In general, large banks and regional banks, and particularly those with large amounts of
uninsured deposits, were the banks most vulnerable to uninsured deposit runs and benefited most from the stability provided
under the systemic risk determination.
Approximately 114 banking organizations, including Cadence Bank, are subject to the special assessment. No banking
organizations with total assets under $5 billion will pay a special assessment, based on data for the December 31, 2022
reporting period. The special assessment will be collected at an annual rate of approximately 13.4 basis points for an anticipated
total of eight quarterly assessment periods, beginning with the quarter ending March 31, 2024. Because the estimated loss
pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early,
impose an extended special assessment collection period after the initial eight-quarter collection period to collect the difference
between losses and the amounts collected, and impose a one-time final shortfall special assessment after both receiverships
terminate. The special assessment will be collected beginning with the first quarterly assessment period of 2024 (i.e., January 1
through March 31, 2024) with an invoice payment date of June 28, 2024. The Company’s total special assessment to be paid
over the eight quarterly assessment periods is currently set at $36.2 million and was recorded as a liability and expensed in the
fourth quarter of 2023.
STANDARDS FOR SAFETY AND SOUNDNESS
The Federal Deposit Insurance Act requires the federal bank regulatory agencies to prescribe, by regulation or
guideline, operational and managerial standards for all insured depository institutions relating to: (1) internal controls; (2)
information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate risk exposure; and (6)
asset quality. The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for
Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards used
to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if a
regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to
submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and
soundness compliance plans.
INTERSTATE BANKING AND BRANCHING LEGISLATION
Federal law allows banks to establish and operate a de novo branch in a state other than the bank’s home state if the
law of the state where the branch is to be located would permit establishment of the branch if the bank were chartered by that
state, subject to standard regulatory review and approval requirements. Federal law also allows the Company to acquire an
existing branch in a state in which the Company is not headquartered and does not maintain a branch if the FDIC and MDBCF
approve the branch or acquisition, and if the law of the state in which the branch is located or to be located would permit the
establishment of the branch if the Company were chartered by that state.
Once a bank has established branches in a state through an interstate merger transaction or through de novo branching,
the bank may then establish and acquire additional branches within that state to the same extent that a state-chartered bank is
allowed to establish or acquire branches within the state. Current federal law authorizes interstate acquisitions of banks without
geographic limitation. Further, a bank headquartered in one state is authorized to merge with a bank headquartered in another
state, as long as neither of the states have opted out of such interstate merger authority prior to such date, and subject to any
state requirement that the target bank shall have been in existence and operating for a minimum period of time, not to exceed
five years, and subject to certain deposit market-share limitations.
AFFILIATE TRANSACTIONS AND INSIDER LOANS
The Company is subject to Regulation W, which comprehensively implements statutory restrictions on transactions
between a bank and its affiliates. Regulation W combines the Federal Reserve’s interpretations and exemptions relating to
Sections 23A and 23B of the Federal Reserve Act. Regulation W and Section 23A place limits on the amount of loans or
extensions of credit to, investments in, or certain other transactions with affiliates, and on the amount of advances to third
15
parties collateralized by the securities or obligations of affiliates. Regulation W and Section 23B prohibit a bank from, among
other things, engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at
least as favorable to the bank, as those prevailing at the time for comparable transactions with non-affiliated companies.
The Company is also subject to certain restrictions on extensions of credit to executive officers, directors, certain
principal shareholders and their related interests. Such extensions of credit must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not
involve more than the normal risk of repayment or present other unfavorable features.
COMMUNITY REINVESTMENT ACT
The CRA provides an incentive for regulated financial institutions to meet the credit needs of their local community or
communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of such
financial institutions. The regulations provide that the appropriate banking regulator will assess reports under CRA in
connection with applications for establishment of domestic branches, acquisitions of banks or mergers involving financial
holding companies. An unsatisfactory rating under CRA may serve as a basis to deny an application to acquire or establish a
new bank, to establish a new branch or to expand banking services. Cadence Bank received an ”Outstanding” CRA rating on
its most recent exam by the FDIC.
On October 24, 2023, the Office of the Comptroller of the Currency (“OCC”), Federal Reserve, and FDIC issued a
final rule to modernize their respective CRA regulations. The revised rules substantially alter the methodology for assessing
compliance with the CRA, with material aspects taking effect January 1, 2026 and revised data reporting requirements taking
effect January 1, 2027. Among other things, the revised rules evaluate lending outside traditional assessment areas generated by
the growth of non-branch delivery systems, such as online and mobile banking, apply a metrics-based benchmarking approach
to assessment, and clarify eligible CRA activities. The final rules may make it more challenging and/or costly for the Company
to receive a rating of at least “satisfactory” on its CRA exam.
ANTI-TERRORISM AND MONEY LAUNDERING
Pursuant to federal law, the Company is required to: (i) establish an anti-money laundering program; (ii) establish due
diligence policies, procedures and controls with respect to its private banking accounts and correspondent banking accounts
involving foreign individuals and certain foreign financial institutions; and (iii) avoid establishing, maintaining, administering
or managing correspondent accounts in the United States for, or on behalf of, foreign financial institutions that do not have a
physical presence in any country. The Company is also required to follow certain minimum standards to verify the identity of
customers, both foreign and domestic, when a customer opens an account. In addition, federal law encourages cooperation
among financial institutions, regulatory authorities and law enforcement authorities with respect to individuals, entities and
organizations engaged in, or reasonably suspected of engaging in, terrorist acts or money laundering activities. Federal banking
regulators are required, when reviewing bank acquisition and merger applications, to take into account the effectiveness of the
anti-money laundering activities of the applicants.
On January 1, 2021, the Anti-Money Laundering Act of 2020 (the “AML Act”) was passed. The AML Act includes
significant changes to anti-money laundering rules, including the creation of a national registry maintained by FinCEN that
banks may rely on to comply with customer due diligence requirements, enhancement of cooperation between banks and law
enforcement, and improvement of corporate transparency. Passage of the AML Act started a rulemaking and policy
development process that includes the Corporate Transparency Act and a rulemaking that requires companies to report
beneficial ownership to FinCEN for the first time in the history of federal law. The Company continues to monitor
developments related to these rules.
CONSUMER PRIVACY, DATA SECURITY, AND OTHER CONSUMER PROTECTION LAWS
Federal law generally prohibits disclosure of non-public consumer information to non-affiliated third parties unless the
consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further
required to disclose their privacy policies to customers annually. Financial institutions, however, will be required to comply
with state law if it is more protective of consumer privacy than federal law.
Federal law also directed federal regulators to prescribe standards for the security of consumer information. The
Company is subject to such standards, as well as standards for notifying customers in the event of a security breach. The
Company utilizes credit bureau data in underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act
and Regulation V on a uniform, nationwide basis, including credit reporting, prescreening, and sharing of information between
16
affiliates and the use of credit data. The Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting
Act, permits states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of that Act.
Customers must be notified when unauthorized disclosure involves sensitive customer information that may be misused.
The federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk
management standards among financial institutions. As a result, financial institutions are expected to establish multiple lines of
defense and to ensure their risk management processes address the risk posed by potential threats to the institution. A financial
institution’s management is expected to maintain sufficient processes to effectively respond and recover the institution’s
operations after a cyber-attack. A financial institution is also expected to develop appropriate processes to enable recovery of
data and business operations if a critical service provider of the institution falls victim to this type of cyber-attack. Our
information security protocols are designed in part to adhere to the requirements of this guidance.
On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify
their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.”
A notification incident includes, among other things, a computer-security incident that materially disrupts or degrades,
or is reasonable likely to materially disrupt or degrade, a banking organization’s operations or activities or its ability to deliver
products or services to a material portion of its customer base. The final rule also requires a bank service provider to notify a
banking organization of certain material disruptions in services provided to the banking organization.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and
regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity
programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many
states have also recently implemented or modified their data breach notification and data privacy requirements. We expect this
trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which our
customers are located.
The Company is also subject, in connection with its deposit, lending and leasing activities, to numerous federal and
state laws aimed at protecting consumers, including the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures
Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Truth in Savings Act, the Fair Housing Act, the Fair
Credit Reporting Act, the Electronic Funds Transfer Act, the Currency and Foreign Transactions Reporting Act, the National
Flood Insurance Act, the Flood Protection Act, laws and regulations governing unfair, deceptive, and/or abusive acts and
practices, the Service Members Civil Relief Act, the Housing and Economic Recovery Act, and the Credit Card Accountability
Act, among others, as well as various state laws.
During 2023, until its sale on November 30, 2023, the Company's insurance subsidiary was regulated by the insurance
regulatory authorities and applicable laws, and the regulations of the states in which it operated.
COMMERCIAL REAL ESTATE LENDING CONCENTRATION
The federal banking agencies have promulgated guidance governing concentrations in commercial real estate lending
for financial institutions. The guidance provides that a bank has a concentration in commercial real estate lending if (i) total
reported loans for construction, land development and other land represent 100% or more of total risk-based capital or (ii) total
reported loans secured by multifamily and non-farm residential properties and loans for construction, land development and
other land represent 300% or more of total risk-based capital and the bank’s commercial real estate loan portfolio has increased
50% or more during the prior 36 months. If a concentration is present, management must employ heightened risk management
practices including board and management oversight and strategic planning, development of underwriting standards, risk
assessment and monitoring through market analysis and stress testing and increasing capital requirements.
INCENTIVE COMPENSATION
The Dodd-Frank Act required the federal banking agencies and the SEC to establish joint rules or guidelines for
financial institutions with more than $1 billion in assets, such as us, which prohibit incentive compensation arrangements that
the agencies determine to encourage inappropriate risks by the institution. The federal banking agencies issued proposed rules
in 2011 and previously issued guidance on sound incentive compensation policies. In 2016, the federal banking agencies and
the SEC proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation
arrangements and would require enhanced oversight and recordkeeping. At December 31, 2023, these rules have not been
implemented.
17
The scope and content of banking regulators’ policies on executive compensation are continuing to develop and are
likely to continue evolving in the near future. It cannot be determined at this time whether compliance with such policies will
adversely affect the Company’s ability to hire, retain and motivate its key employees.
In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including the
NYSE, to implement listing standards that require listed companies to adopt policies mandating the recovery or “clawback” of
excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the
date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a
material misstatement if the error were corrected in the current period or left uncorrected in the current period. The NYSE's
listing standards pursuant to the SEC's rule became effective on October 2, 2023. We adopted a compensation recovery policy
pursuant to the NYSE listing standards effective October 2, 2023. The policy is included as Exhibit 97.1 to this Form 10-K.
THE VOLCKER RULE
Section 13 of the BHC Act, commonly referred to as the “Volcker Rule,” generally prohibits us and our subsidiaries
from (i) engaging in certain proprietary trading, and (ii) acquiring or retaining an ownership interest in or sponsoring a “covered
fund,” all subject to certain exceptions. The Volcker Rule also specifies certain limited activities in which we and our
subsidiaries may continue to engage and requires us to maintain a compliance program. In 2020, amendments to the proprietary
trading and covered funds regulations issued by the federal banking agencies, the SEC, and the Commodity Futures Trading
Commission took effect, simplifying compliance and providing additional exclusions and exemptions.
DEBIT INTERCHANGE FEES
Interchange fees, or "swipe" fees, are fees that merchants pay to credit card companies and card-issuing banks such as
the Company for processing electronic payment transactions on their behalf. The maximum permissible interchange fee that a
non-exempt issuer such as the Company may receive for an electronic debit transaction is the sum of 21 cents per transaction
and 5 basis points multiplied by the value of the transaction, subject to an upward adjustment of 1 cent if an issuer certifies that
it has implemented policies and procedures reasonably designed to achieve the fraud-prevention standards set forth by the
Federal Reserve. In addition, card issuers and networks are prohibited from entering into arrangements requiring that debit card
transactions be processed on a single network or only two affiliated networks and allows merchants to determine transaction
routing. On October 25, 2023, the FRB proposed to lower the maximum interchange fee that a large debit card issuer can
receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum amount
every other year going forward. We continue to monitor the development of these proposed rule revisions.
EFFECT OF GOVERNMENTAL POLICIES
The Company is affected by the policies of regulatory authorities, including the Federal Reserve, the FDIC, and the
MDBCF. An important function of the Federal Reserve is to regulate the national money supply. Among the instruments of
monetary policy used by the Federal Reserve are: (i) purchases and sales of United States government and other securities in the
marketplace; (ii) changes in the discount rate, which is the rate any depository institution must pay to borrow from the Federal
Reserve; (iii) changes in the reserve requirements of depository institutions; and (iv) indirectly, changes in the federal funds
rate, which is the rate at which depository institutions lend money to each other overnight. These instruments are intended to
influence economic and monetary growth, interest rate levels, and inflation.
The monetary policies of the Federal Reserve and other governmental policies have had a significant effect on the
operating results of commercial banks in the past and are expected to continue to do so in the future. Because of changing
conditions in the national and international economy and in the money markets, as well as the result of actions by monetary and
fiscal authorities, it is not possible to predict with certainty future changes in interest rates, deposit levels, loan demand, or the
business and results of operations of the Company, or whether changing economic conditions will have a positive or negative
effect on operations and earnings.
OTHER PROPOSALS
Bills occasionally are introduced in the United States Congress and the Mississippi State Legislature and other state
legislatures, and regulations are occasionally proposed by federal and state regulatory agencies, any of which could affect the
businesses, financial results and financial condition of the Company. Generally, it cannot be predicted whether or in what form
any particular proposals will be adopted or the extent to which the Company may be affected.
18
RECENT ACQUISITIONS AND TRANSACTION ACTIVITY
On October 24, 2023, the Company entered into the Stock Purchase Agreement regarding the sale of Cadence
Insurance to Gallagher and Arthur J. Gallagher & Co. The sale transaction closed on November 30, 2023. The transaction
resulted in a pre-tax gain of $706.6 million. The gain, along with Cadence Insurance’s historical financial results for periods
prior to the sale, is reflected in the Company’s consolidated financial statements as discontinued operations.
The following summarized financial information related to Cadence Insurance has been segregated from continuing
operations and reported as discontinued operations for the periods presented.
(In thousands)
Discontinued operations:
Net interest revenue
Total noninterest revenue
Total noninterest expense
Income from discontinued operations before income tax expense
Income tax expense
Income from discontinued operations, net of tax
Years Ended December 31,
2023
2022
2021
$
128 $
12 $
863,141
135,678
727,591
188,971
538,620 $
150,547
128,206
22,353
6,433
15,920 $
$
16
135,248
113,069
22,195
5,808
16,387
See Note 2 and Note 3 to the consolidated financial statements for information regarding recent acquisitions and
discontinued operations.
HUMAN CAPITAL
We recognize that our most valuable asset is our people. One of our top strategic priorities is the retention and
development of our talent. This includes providing career development opportunities for all associates; increasing our diversity,
equity, and inclusion; training our next generation of leaders; and succession planning. Our goal each day is to create an
environment that makes Cadence Bank a great place to work. We believe our relationship with our employees to be good. We
have not experienced any material employment-related issues or interruptions of services due to labor disagreements and are not
a party to any collective bargaining agreements.
Sourcing Talent
As of December 31, 2023, our full-time equivalent employees numbered 5,333. Our recruiting practices and hiring
decisions are among our most important activities. In order to build a more talented and diverse organization, we do not rely
only on our individual network for recruiting; instead, we utilize social media, local job fairs and educational organizations
across the United States to find diverse, motivated and qualified employees.
Our Board of Directors recognizes the importance of succession planning for our CEO and other key executives. The
Board annually reviews our succession plans for senior leadership roles, with the goal of ensuring we will continue to have the
right leadership talent in place to execute the organization's long-term strategic plans. We have engaged outside coaches to
work with certain high potential candidates in support of their continued development and readiness for broader roles.
Education and Training
We are dedicated to the continual training and development of our employees to ensure we can develop future
managers and leaders from within our organization. Our training starts immediately with on-boarding procedures that focus on
safety, responsibility, ethical conduct and inclusive teamwork.
In addition to on-boarding training, we provide extensive ongoing training and career development focused on:
•
•
•
•
compliance with our Code of Business Conduct and Ethics;
laws and regulations applicable to our business;
skills and competencies directly related to employees’ job duties;
commitment to creating a diverse, equitable and inclusive workplace;
19
• management skills necessary to develop our next generation of leaders; and
•
responsibility for personal safety and the safety of fellow employees.
Health and Welfare
We support our employees’ and their families’ health by offering full medical, dental and vision insurance for
employees and their families, life insurance and long-term disability plans, and health and dependent care flexible spending
accounts. We also provide our Employee Assistance Program (“EAP”), which includes confidential services that can help
employees and their families with personal or work life issues. The EAP is available 24 hours a day, online or over the phone.
During 2021, as a part of our merger integration, we evaluated the benefits at both legacy organizations and developed a health
and welfare benefit package that provides options for coverage that meet each teammate’s needs. In order to make our benefits
more affordable for lower compensated teammates, we have a varying contribution structure whereby lower compensated
teammates pay less for coverage. We also provide benefit options for our part time employees. During 2023, we announced a
new Parental Leave policy that further enhances our paid leave for the birth or adoption of a child, by providing up to 12 weeks
of leave. Additionally, we have added additional Bereavement Leave for employees losing a spouse or child.
During 2023, we sponsored our first wellness initiative which rewards employees for participation by providing a
credit toward their health insurance premium. In order to participate, employees received a health screening and counseling
with a health professional. This program allowed employees to receive the screening as part of their annual wellness exam, by a
visit to our private health clinic on our Tupelo Operations Campus or by receiving an in-home testing kit and virtual counseling
session.
To assist employees located in markets where physical therapy may be inconvenient due to location or schedules, we
introduced our new virtual physical therapy benefit. Employees who choose to participate do not need a physician’s order and
may do so in the comfort of their homes. Virtual kits provide electronic monitors to guide exercise and measure results. All
programs are conducted under the guidance of a Doctor of Physical Therapy.
Retirement
We provide a variety of resources and services to help our employees prepare for retirement. We provide an employer
funded pension plan that sets aside a cash contribution for all employees based on a percentage of their eligible pay and a
401(k) plan with a wide variety of investment options and a company match.
Diversity, Equity, Inclusion and Belonging
We have taken steps to expand our role as an employer that champions diversity, equity, inclusion and belonging.
Diversity encompasses the range of similarities and differences everyone brings to the workplace. Equity is the guarantee of
fair treatment, access, opportunity, and advancement. An inclusive workplace recognizes, appreciates, and effectively utilizes
the talents, skills and perspectives of everyone and ensures they are treated fairly and respectfully. Belonging creates a sense of
value that each person is needed and wanted.
Our DEIB efforts at Cadence are grounded solidly in our core values. Key focus areas include:
•
•
•
Talent Acquisition
Talent Management
People
◦
◦ Development and Retention
◦
Culture
◦
◦
◦
Education and Awareness
Communication and Advocacy
Employee Resource Groups
Community and Clients
◦
◦
◦
Strategic Partnerships and Community Engagement
Supplier Diversity
Clients and Products
20
INFORMATION TECHNOLOGY
The ability to access and use technology is an increasingly competitive factor in the financial services industry.
Technology is not only important with respect to delivery of financial services and protection of the security of customer
information but also in processing information. We must continually make technology investments to remain competitive in the
financial services industry. Accordingly, we continually adapt to the changing technological needs and wants of our clients by
investing in our electronic banking platform. We use a combination of online and mobile banking channels to attract and retain
clients and expand the convenience of banking with us. In most cases, our clients can initiate banking transactions from the
convenience of their personal computer or smart phone, reducing the number of in-branch visits necessary to conduct routine
banking transactions. The remote transactions available to our clients include remote image deposit, bill payment, external and
internal transfers, ACH origination, and wire transfer. We believe that our investments in technology and innovation are
consistent with our clients’ needs and will support future migration of our clients’ transactions to these and other developing
electronic banking channels. Further, we closely monitor information security for trends and new threats, including
cybersecurity risks, and invest significant resources to continuously improve the security and privacy of our systems and data.
See “Part 1, Item 1.A., Risk Factors” for additional information regarding technology and cybersecurity risks.
21
CORPORATE INFORMATION
Shares of Common Stock
Listed on the NYSE
NYSE Symbol: CADE
Shares of Series A Preferred Stock
Listed on NYSE
NYSE Symbol: CADE Pr A
Transfer Agent and Registrar
Computershare Investor Services
150 Royall Street
Canton, MA 02021
Tel: (800) 368-5948
Internet address: www.computershare.com
22
ITEM 1A. RISK FACTORS.
SUMMARY OF RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including, but not limited to, the
principal risks summarized below. Many of these risks are beyond our control although efforts are made to manage these risks
while simultaneously optimizing operational and financial results. The occurrence of any of the following risks, as well as risks
of which we are currently unaware or currently deem immaterial, could materially and adversely affect our assets, business,
cash flows, condition (financial or otherwise), liquidity, prospects, results of operations and the trading price of our capital
stock. A detailed discussion of our Risk Factors begins on page 26 following this Summary.
RISKS RELATED TO OUR BUSINESS
Market Risk
•
•
•
•
•
Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition
and results of operations;
Changes in interest rates could have an adverse impact on our results of operations and financial condition;
Inflationary pressures and rising prices may affect our results of operations and financial condition;
Our business is highly susceptible to local economic conditions as a result of the geographic concentration of our
operations; and
By engaging in derivative transactions, we are exposed to credit and market risk, which could adversely affect our
profitability and financial condition.
Credit Risk
•
•
If we do not properly manage our credit risk, our business could be seriously harmed;
Our ACL may not be adequate to absorb credit losses in our portfolio, which may adversely impact our business,
financial condition and results of operations;
• We make and hold in our portfolio real estate construction, acquisition and development loans, which are based upon
estimates of costs and values associated with the completed project and which pose more credit risk than other types of
loans typically made by financial institutions;
• Many of our loans are to commercial borrowers, which have unique risks compared to other types of loans;
•
•
•
•
•
Our loan portfolio includes lending in energy and other specialized industries;
Sustained low oil prices, volatility in oil prices and downturns in the energy industry, including in Texas, could
materially and adversely affect us;
A significant portion of our loan portfolio is comprised of loan participations and SNCs, which could have a material
adverse effect on our ability to monitor such lending relationships and lead to an increased risk of loss;
The amount of our nonperforming and criticized assets may adversely affect our results of operations and financial
condition; and
The fair value of our investment securities may decline. Factors beyond our control can significantly influence the fair
value of our securities and can cause adverse changes to the fair value of these securities.
23
Liquidity Risk
•
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition;
• Adverse developments or concerns affecting the financial services industry in general or financial institutions that are
similar to us or that may be viewed as being similar to us, such as bank failures and disruption in the United States
banking industry, could adversely affect our financial condition and results of operations;
• We rely on customer deposits as a significant source of funding, and our deposits may decrease in the future;
•
•
The borrowing needs of our clients may increase, especially during a challenging economic environment, which could
result in increased borrowing against our contractual obligations to extend credit;
An increased level of indebtedness could affect our ability to meet our obligations and may otherwise restrict our
activities; and
• We rely on the secondary mortgage market for some of our liquidity.
Strategic Risk
• We compete with financial holding companies, bank holding companies, banks, insurance, fintech companies, other
financial services companies and nonbank financial institutions, and consumers may decide not to use banks to
complete their financial transactions;
•
•
Our growth strategy includes risks that could have an adverse effect on our financial performance;
If we are unable to manage our growth effectively, our operations could be negatively affected;
• We face risks in connection with completed or potential acquisitions;
• We may not realize all of the anticipated benefits of the acquisition of Legacy Cadence;
• We may not be able to raise additional capital in the future; and
•
If the goodwill that we record in connection with a business acquisition becomes impaired, it could require a charge to
earnings.
Operational Risk
• We are subject to environmental liability risk associated with our lending activities;
•
Our business is, and will continue to be, dependent on technology and an inability to invest in technological
improvements or obtain reliable technological support may adversely affect our results of operation and financial
condition;
• We are subject to a variety of systems-failure and cybersecurity risks that could adversely affect our business and
financial performance;
• We may be adversely affected by the failure of certain third-party vendors to perform;
•
Our earnings could be adversely impacted by incidences of fraud and compliance failures that are not within our direct
control.
RISKS RELATED TO THE REGULATION OF OUR INDUSTRY
Regulatory Risk
•
•
•
•
•
The banking industry is highly regulated, and current and future legislative or regulatory changes could have a
significant adverse effect on our business, financial condition, or results of operations;
Regulatory initiatives regarding bank capital requirements may require increased capital;
Changes in accounting rules applicable to banks could adversely affect our financial condition and results of
operations;
Regulators periodically examine our business and we may be required to remediate adverse examination findings, and;
The Company is operating under a Consent Order, and failure to comply with the Consent Order could materially and
adversely affect our business.
24
Compliance Risk
• We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure
to comply with these laws could lead to a wide variety of sanctions;
•
•
Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase
our risk of liability with respect to such loans and could increase our cost of doing business;
The expanding body of federal, state and local regulations and/or the licensing of loan servicing, collections or other
aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of
noncompliance and subject us to litigation; and
• We are subject to laws regarding the privacy, information security, and protection of personal information and any
violation of these laws or another incident involving personal, confidential or proprietary information of individuals
could damage our reputation and otherwise adversely affect our operations and financial condition.
GENERAL RISK FACTORS
Economic Conditions
•
•
•
The fiscal and monetary policies of the U.S. government could have a material adverse effect on our results of
operations;
The Federal Reserve has implemented significant economic strategies that have impacted interest rates, inflation, asset
values, and the shape of the yield curve, over which the Company has no control and which the Company may not be
able to adequately anticipate; and,
The current economic environment poses significant challenges and could adversely affect our financial condition and
results of operations.
Investment in Our Common Stock and Preferred Stock
•
•
•
•
•
•
The price of our common stock and preferred stock may fluctuate significantly, which may make it difficult for
investors to resell shares of our common stock or preferred stock at a time or price they find attractive;
The rights of our common shareholders are generally subordinate to the rights of holders of our debt securities and
preferred stock and may be subordinate to the rights of holders of any class of preferred stock or any debt securities
that we may issue in the future;
Adverse changes in the ratings for our debt securities or preferred stock could have a material adverse effect on our
business, financial condition and liquidity and may increase our funding costs or impair our ability to effectively
compete for business and clients;
Our ability to declare and pay dividends is limited;
Our certificate of incorporation and bylaws include provisions that could impede a takeover of the Company; and
Shares of our common stock and preferred stock are not deposits insured by the FDIC and are subject to risk of loss
and uncertain return on investment.
25
Other Risks
•
As a public company, we incur significant legal, accounting, insurance, compliance and other expenses. Any
deficiencies in our financial reporting or internal controls could materially and adversely affect us, including resulting
in material misstatements in our financial statements, and the market price of our common stock;
• We may be adversely affected by changes in U.S. tax laws;
• We depend upon key personnel and we may not be able to retain them or attract, assimilate and retain highly qualified
employees in the future;
• We are required to make significant estimates and assumptions in the preparation of our financial statements. These
estimates and assumptions may not be accurate and are subject to change;
• We are involved in legal proceedings and may be the subject of additional litigation or government investigations in
the future; the actual cost of legal proceedings may exceed our accruals for them;
•
•
•
Reputational and environmental, social, and governance (ESG) risk may impact our results;
Our framework for managing risks may not be effective in mitigating risk and any resulting loss; and
Certain weather conditions have the potential to disrupt our business and adversely impact the operations and
creditworthiness of our clients.
RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including, but not limited to, the
material risks described below. It is impossible to predict or identify all such factors and, as a result, the following factors
should not be considered a complete discussion of the risks, uncertainties, or assumptions that could affect us.
In addition, certain statements in the following risk factors constitute forward-looking statements. Please refer to the
section entitled “Cautionary Note Regarding Forward-Looking Statements” beginning on page 5 of this Report.
RISKS RELATED TO OUR BUSINESS
Market Risk
Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition and
results of operations.
We are operating in an uncertain economic environment. The pandemic caused a global economic slowdown, and
while we have seen economic recovery in the markets we serve, labor shortages and inflation risk are impacting the continued
recovery. Continued economic uncertainty, or a recessionary or stagnant economy could result in financial stress on our
borrowers, which could adversely affect our business, financial condition, and results of operations. We increased the expense
for credit losses for 2023 from the amounts recorded in fiscal year 2022, however, deteriorating conditions in the regional
economies we serve, or in certain sectors of those economies, could still drive losses beyond that which is provided for in our
allowance for credit losses. We could also face the following risks in connection with the following events:
• market developments and economic stagnation or slowdown may affect consumer confidence levels and may cause
adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit
facilities;
•
•
•
•
the processes we use to estimate the allowance for credit losses and other reserves may prove to be unreliable. Such
estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may
be rendered inaccurate and/or no longer subject to accurate forecasting;
our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to
select, manage, and underwrite loans become less predictive of future charge-offs;
regulatory scrutiny of the banking industry has increased and could continue to increase, leading to increased
regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business
opportunities and increase our exposure to litigation or fines;
ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that
would have a materially adverse impact on our profitability and overall financial condition;
26
•
•
further erosion in the fiscal condition of the U.S. Treasury could lead to new taxes that would limit our ability to
pursue growth and return profits to shareholders; and
The U.S. government’s decisions regarding its debt ceiling and the possibility that the U.S. could default on its debt
obligations may cause further interest rate increases, disrupt access to capital markets and deepen recessionary
conditions.
If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse
effects on our financial condition.
Changes in interest rates could have an adverse impact on our results of operations and financial condition.
Significant increases in market interest rates on loans, or the perception that an increase may occur, could adversely
affect both our ability to originate new loans and our ability to grow. Beginning early in 2022, in response to growing signs of
inflation, the Federal Reserve increased interest rates rapidly, which continued throughout 2023. The Federal Reserve
announced its intention to take further actions, if necessary, to mitigate inflationary pressures. Rapid changes in interest rates
make it difficult for us to balance our loan and deposit portfolios, which may adversely affect our results of operations by, for
example, reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our
business. Decreases in interest rates could result in an acceleration of loan prepayments. Increased market interest rates could
also adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations; if this occurred, it could
cause an increase in nonperforming assets and charge offs, which could adversely affect our business.
Further, our earnings and financial condition are dependent to a large degree upon net interest income, which is the
difference or spread, between interest earned on interest-earning assets and interest paid on interest bearing liabilities. When
market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities may fluctuate.
This can cause decreases in our spread and can adversely affect our earnings and financial condition.
Interest rates are highly sensitive to many factors including:
•
•
•
•
The rate of inflation;
Economic conditions;
Federal monetary policies; and
Stability of domestic and foreign markets.
Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability.
Although the Federal Reserve will potentially decrease the target federal funds rate in 2024, it may maintain current rates, or
increase the target federal funds rate to continue combating inflationary trends. If the Federal Reserve were to lower the target
federal funds rate to below 0%, such rates could continue to constrain our interest rate spread and may adversely affect our
business forecasts. On the other hand, increases in interest rates, to combat inflation or otherwise, may result in a change in the
mix of noninterest and interest bearing accounts. All else being equal, if the interest rates on the Company's interest bearing
liabilities increase at a faster pace than the interest rates on our interest-earning assets, the result would be a reduction in net
interest income and with it, a reduction in net earnings. Moreover, although we have implemented practices we believe will
reduce the potential effects of changes in interest rates on our net interest income, these practices may not always be successful.
Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest income and our net
interest margin, asset quality, loan and lease origination volume, liquidity, and overall profitability. We cannot assure you that
we can minimize our interest rate risk.
In addition, the Company originates residential mortgage loans for sale and for our portfolio. The origination of
residential mortgage loans is highly dependent on the local real estate market and the level of interest rates. Increasing interest
rates tend to reduce the origination of loans for sale and fee income, which we report as gain on sale of loans. Decreasing
interest rates generally result in increased prepayments of loans and mortgage-backed securities, as borrowers refinance their
debt in order to reduce their borrowing cost. This typically leads to reinvestment at lower rates than the loans or securities were
paying. Changes in market interest rates could also reduce the value of our financial assets. Our financial condition and results
of operations could be adversely affected if we are unsuccessful in managing the effects of changes in interest rates.
27
Inflationary pressures and rising prices may affect our results of operations and financial condition.
Although the US economy experienced disinflation in 2023 compared to historic inflation in 2022, inflation continues
to be above the Federal Reserve’s target rate, and inflationary pressures are likely to continue into 2024. Inflation could lead to
increased costs to our customers, making it more difficult for them to repay their loans or other obligations, increasing our
credit risk. Sustained higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures,
which could push down asset prices and weaken economic activity. A deterioration in economic conditions in the United States
and our markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values
and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial
condition and results of operations.
Our business is highly susceptible to local economic conditions as a result of the geographic concentration of our
operations.
Our business is primarily concentrated in select markets in Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, Missouri, Oklahoma, Tennessee, and Texas. Our financial condition and results of operations depend largely upon
economic conditions in these market areas. Deterioration in economic conditions in the markets we serve could result in one or
more of the following: an increase in loan delinquencies; an increase in problem assets and foreclosures; a decrease in the
demand for our products and services; and a decrease in the value of collateral for loans, especially real estate collateral, in turn
reducing customers’ borrowing power, the value of assets associated with problem loans and collateral coverage. Our markets
are also susceptible to severe weather. The occurrence of adverse weather and natural disasters could destroy or cause a decline
in the value of assets that serve as collateral and increase the risk of delinquencies, defaults, foreclosures and losses on our
loans, damage our facilities and offices, negatively impact regional economic conditions, result in a decline in local loan
demand, loan originations and deposit availability and negatively impact our growth strategy. Any one or more of these
developments could have a material adverse effect on our business, financial condition or results of operations.
By engaging in derivative transactions, we are exposed to credit and market risk, which could adversely affect our
profitability and financial condition.
We manage interest rate risk by, among other things, utilizing derivative instruments to minimize significant
unplanned fluctuations in earnings that are caused by interest rate volatility. Hedging interest rate risk is a complex process,
requiring sophisticated models and constant monitoring, and is approximate. Due to interest rate fluctuations, hedged assets and
liabilities will appreciate or depreciate in market value. The effect of this unrealized appreciation or depreciation will generally
be offset by income or loss on the derivative instruments that are linked to the hedged assets and liabilities. By engaging in
derivative transactions, we are exposed to credit and market risk. If the counterparty fails to perform, credit risk exists to the
extent of the fair value gain in the derivative. Market risk exists to the extent that interest rates change in ways that are
significantly different from what we expected when we entered into the derivative transaction. The existence of credit and
market risk associated with our derivative instruments could adversely affect our net interest income and, therefore, could have
a material effect on our business, financial condition and results of operations. Failure to manage interest rate risk could have a
material adverse effect on our business. See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Quantitative and Qualitative Disclosures about Market Risk.”
Credit Risk
If we do not properly manage our credit risk, our business could be seriously harmed.
There are substantial risks inherent in making any loan or lease, including, but not limited to:
•
•
•
•
risks resulting from changes in economic and industry conditions;
risks inherent in dealing with borrowers;
risks inherent from uncertainties as to the future value of collateral; and
the risk of non-payment of loans and leases.
Although we attempt to minimize our credit risk through prudent loan and lease underwriting procedures and by
monitoring concentrations of our loans and leases, there can be no assurance that these underwriting and monitoring procedures
will reduce these risks as some of these risks are outside of our control. Moreover, as we continue to expand into new markets,
credit administration and loan and lease underwriting policies and procedures may need to be adapted to local conditions. The
inability to properly manage our credit risk or appropriately adapt our credit administration and loan and lease underwriting
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policies and procedures to local market conditions or changing economic circumstances could have an adverse effect on our
allowance and provision for credit losses and our financial condition, results of operations and liquidity.
Our ACL may not be adequate to absorb credit losses in our portfolio, which may adversely impact our business,
financial condition and results of operations.
Due to any declining economic conditions, our customers may not be able to repay their loans according to the original
terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. While we
maintain our ACL to provide for loan defaults and non-performance, losses may exceed the value of the collateral securing the
loans and the allowance may not fully cover any excess loss.
We make various assumptions and judgments about the collectability of our loan and lease portfolio and utilize these
assumptions and judgments when determining the ACL. The determination of the appropriate level of the ACL inherently
involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all
of which may undergo material changes. Deterioration in economic conditions affecting borrowers, new information regarding
existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require
an increase in the ACL. In addition, bank regulatory agencies periodically review our ACL and may require an increase in the
ACL or future provisions for credit losses, based on judgments different than those of management. Significant increases in the
ACL will result in a decrease in our net income and capital, and thus could have a material adverse effect on our financial
condition and results of operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Results of Operations – Provision for Credit Losses and Allowance for Credit Losses” included herein for more
information regarding our process for determining the appropriate level of the ACL.
We make and hold in our portfolio real estate construction, acquisition and development loans, which are based upon
estimates of costs and values associated with the completed project and which pose more credit risk than other types of
loans typically made by financial institutions.
At December 31, 2023, our real estate construction, acquisition and development loans represented 12.0% of our loan
portfolio. These loans have certain risks not present in other types of loans. The primary credit risks associated with real estate
construction, acquisition and development loans are underwriting, project and market risks. Project risks include cost overruns,
borrower credit risk, project completion risk, general contractor credit risk and environmental and other hazard risks. Market
risks are risks associated with the sale of the completed residential and commercial units. They include affordability risk, which
means the risk that borrowers cannot obtain affordable financing, product design risk, and risks posed by competing projects.
Real estate construction, acquisition and development loans also involve additional risks because funds are advanced upon the
security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining
real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the
completed project and the effects of governmental regulation of real property, it is difficult to evaluate accurately the total funds
required to complete a project and the related loan-to-value ratio. As a result, real estate construction, acquisition and
development loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the
ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor
to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated or market values or
rental rates decline, we may have inadequate security for the repayment of the loan upon completion of construction of the
project. If we are forced to foreclose on a project prior to or at completion due to a default, there can be no assurance that we
will be able to recover all of the unpaid balance and accrued interest on the loan as well as related foreclosure and holding costs.
In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an
unspecified period of time while we attempt to dispose of it. The adverse effects of the foregoing matters upon our real estate
construction, acquisition and development portfolio could result in an increase in non-performing loans related to this portfolio
and a resulting increase in charge-offs, which may have a material adverse effect on our financial condition and results of
operations.
Many of our loans are to commercial borrowers, which have unique risks compared to other types of loans.
At December 31, 2023, approximately 70.6% of our loan portfolio was comprised of commercial loans. Because
payments on these loans are often dependent on the successful operation or development of the property or business involved,
their repayment is sensitive to adverse conditions in the real estate market and the general economy. Accordingly, downturns in
the real estate market and economy increase the risk related to commercial loans, particularly commercial real estate loans.
Future declines in the real estate values in our markets could significantly impair the value of the particular collateral securing
our loans and our ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower’s obligations to
us. This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing
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our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth
prospects. Commercial loans are also subject to loan specific risks, including risks associated with construction, cost overruns,
project completion risk, general contractor credit risk and risks associated with the ultimate sale or use of the completed
construction. If a decline in economic conditions, natural disasters affecting commercial development or other issues cause
difficulties for our commercial loan borrowers, if we fail to evaluate the credit of these loans accurately when we underwrite
them or if we fail to adequately monitor the performance of these loans, our lending portfolio could experience delinquencies,
defaults and credit losses that could have a material adverse effect on our business, financial condition or results of operations.
Our loan portfolio includes lending in energy and other specialized industries.
Our loan portfolio includes lending in energy and other specialized industries. At December 31, 2023, 5.9% of our
total loans outstanding were to companies operating in the hospitality and healthcare industries, and 4.7% were to companies
operating in the energy sector. These industries and businesses are sensitive to economic conditions and complex factors (such
as supply chain factors), which may expose us to risks unique to these industries. Oil prices can fluctuate widely on a month-to-
month basis in response to a variety of factors that are beyond our control. Factors that contribute to price fluctuations include
war and instability in oil-producing regions, worldwide economic conditions, weather conditions, the supply and price of
domestic and foreign oil, natural gas and natural gas liquids, consumer demand, the price and availability of alternative fuels,
the proximity to, and capacity of, transportation facilities and the effect of worldwide energy conservation measures. Adverse
economic conditions or business conditions relating to these industries could negatively impact our operating results more than
if our loan portfolio was not concentrated in these industries.
Sustained low oil prices, volatility in oil prices and downturns in the energy industry, including in Texas and Louisiana,
could materially and adversely affect us.
The economy in Texas and Louisiana significantly depends on the energy industry. A downturn or lack of growth in
the energy industry and energy-related businesses, including sustained low oil prices or the failure of oil prices to rise in the
future, could adversely affect our results of operations and financial condition. The economic impacts of COVID-19 initially
resulted in pricing pressure on oil and gas and weaker demand for energy lending, however, energy prices have risen
significantly during 2023 contributing to the overall inflation rate. These factors and general uncertainty resulting from
continued volatility could have other future adverse impacts such as job losses in energy-related industries, lower borrowing
needs, higher transaction deposit balances and other effects that are difficult to isolate or quantify. Such impacts could
particularly impact states with significant dependence on the energy industry such as Texas and Louisiana, all of which could
have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our loan portfolio is comprised of loan participations and Shared National Credits (SNC), which
could have a material adverse effect on our ability to monitor such lending relationships and lead to an increased risk of
loss.
We participate in loans originated by other institutions and in SNC, broadly defined as loans to larger institutions by a
group of participating lenders where the client’s needs are larger than any individual lender can prudently provide, and in which
other lenders serve as the agent bank. Additionally, our specialized industries lending includes larger, national companies that
tend to be served through SNC. At December 31, 2023, approximately 12.9% of our total loans, consisted of SNC. For the vast
majority of SNC, we are not the lead bank. Our reduced control over the monitoring and management of these relationships
could lead to increased risk of loss, which could have a material adverse effect on our results of operations.
The amount of our nonperforming and criticized assets may adversely affect our results of operations and financial
condition.
As of December 31, 2023 and 2022, our nonperforming assets to total assets were 0.45% and 0.23%, respectively.
Total criticized loans as of December 31, 2023 and 2022, were $844.7 million and $622.8 million, respectively (see “Asset
Quality” section in Part II, Item 7, Management’s Discussion and Analysis). Increases in nonperforming assets and criticized
loans could result in increased provisions for credit losses, lost income, and additional expenses to maintain such assets which
could have a material adverse effect on our results of operations.
The fair value of our investment securities may decline.
At December 31, 2023, the fair value of our available for sale securities portfolio was approximately $8.1 billion.
Factors beyond our control can significantly influence the fair value of our securities and can cause adverse changes to the fair
value of these securities. These factors include rating agency actions, defaults by or other adverse events affecting the issuer,
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lack of liquidity, changes in market interest rates, and continued instability in the capital markets. A prolonged decline in the
fair value of our securities could result in an other-than-temporary impairment write-down, which would affect our results of
operations.
Liquidity Risk
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and
other sources could have a substantial negative effect on the Company’s liquidity. Our access to funding sources in amounts
adequate to finance our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically
or the financial services industry or economy in general. A decrease in the level of our business activity as a result of a
downturn in the markets in which our loans are concentrated as well as adverse regulatory actions against us could
detrimentally impact our access to liquidity sources. In addition, our access to deposits may be affected by the liquidity and/or
cash flow needs of depositors, which may be exacerbated in an inflationary, recessionary, or elevated rate environment. Our
ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or
negative views and expectations about the prospects for the financial services industry generally.
Adverse developments or concerns affecting the financial services industry in general or financial institutions that are
similar to us or that may be viewed as being similar to us, such as bank failures and disruption in the United States
banking industry, could adversely affect our financial condition and results of operations.
In 2023, several financial institutions failed or required outside liquidity support, often as a result of the inability of the
institutions to obtain needed liquidity. The impact of this situation led to heightened risk of additional stress to other financial
institutions, and the financial services industry generally as a result of increased lack of confidence in the financial sector.
Banking regulators are taking action in an effort to strengthen public confidence in the banking system, but there can be no
assurance that these actions will stabilize the financial services industry and financial markets. While we currently do not
anticipate liquidity constraints of the kind that caused certain other financial institutions to fail or require external support,
constraints on our liquidity could occur as a result of unanticipated deposit withdrawals, because of market distress or our
inability to access other sources of liquidity, including through the capital markets due to unforeseen market dislocations or
interruptions.
Moreover, some of our customers may become less willing to maintain deposits at the Bank because of broader market
concerns with the level of insurance available on those deposits. Our business and our financial condition and results of
operations could be adversely affected by continued soundness concerns regarding financial institutions generally, and our
counterparties specifically, and limitations resulting from further governmental action in an effort to stabilize or provide
additional regulation of the financial system, as well as the impact of excessive deposit withdrawals. Actual events involving
limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, or concerns or
rumors about any events of these kinds or other similar events, have in the past and may in the future lead to erosion of
customer confidence in the banking system or certain banks, deposit volatility, liquidity issues, stock price volatility and other
adverse developments. Any of these impacts, or any other impacts resulting from recent bank failures or other related or similar
events, could have a material adverse effect on our liquidity and our current and/or projected business operations and financial
condition and results of operations.
We rely on customer deposits as a primary source of funding, and our deposits may decrease in the future.
We rely on customer deposits as a significant source of funding. Competition among U.S. banks and non-banks for
customer deposits is intense and may increase the cost of deposits (particularly in an elevated rate environment) or prevent new
deposits and may otherwise negatively affect our ability to grow our deposit base. Our deposit accounts may decrease in the
future, and any such decrease could have a material adverse impact on our sources of funding. Any changes we make to the
rates offered on our deposit products to remain competitive with other financial institutions may adversely affect our
profitability. The demand for our deposit products may also be reduced due to a variety of factors such as demographic patterns,
changes in customer preferences, including customers moving funds out of bank deposits and into alternative investments, such
as the stock market, that may be perceived as providing superior expected returns, reductions in consumers’ disposable income,
regulatory actions that decrease customer access to particular products or the availability of competing products. In addition, a
portion of our deposits are brokered deposits. The levels of these types of deposits that we hold may be more volatile during
changing economic conditions.
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The borrowing needs of our clients may increase, especially during a challenging economic environment, which could
result in increased borrowing against our contractual obligations to extend credit.
A commitment to extend credit is a formal agreement to lend funds to a client as long as there is no violation of any
condition established under the agreement. The actual borrowing needs of our clients under these credit commitments have
historically been lower than the contractual amount of the commitments. At December 31, 2023, we had $9.7 billion in
unfunded credit commitments to our clients. Actual borrowing needs of our clients may exceed our expectations for any
numbers of reasons. This could adversely affect our liquidity, which could impair our ability to fund operations and meet
obligations as they become due and could have a material adverse effect on our business, financial condition and results of
operations.
Our indebtedness could affect our ability to meet our obligations and may otherwise restrict our activities.
Our indebtedness could limit our ability to borrow money for funding loans, capital expenditures, debt service
requirements or other corporate purposes; require us to dedicate a substantial portion of our cash flow to payments on our
indebtedness; increase our vulnerability to general adverse economic and industry conditions; and limit our ability to respond to
business opportunities, including growing our business through acquisitions. In addition, the instruments governing our
indebtedness contain certain restrictive covenants including with respect to consolidating or merging the Company or the Bank
into another entity or transferring substantially all of their respective assets or properties. Certain of the Company’s debt also
contains restrictions on the Company’s ability to assign or grant a security interest in or otherwise dispose of any shares of the
voting stock of the Bank. Failure to meet any of these covenants could result in an event of default under these agreements. If
an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these
agreements to be immediately due and payable.
At December 31, 2023, the Company had $438.5 million of subordinated and long-term debt outstanding. Total
interest expense on this debt was $19.1 million on a pre-tax basis for 2023. An increase in interest rates will increase our
interest expense on any new debt we issue. See “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.” In
addition, we may not be able to refinance our indebtedness on substantially similar terms, or at all, at or prior to the time that it
comes due.
We rely on the mortgage secondary market for some of our liquidity.
We originate and sell a portion of our residential mortgage loans. We rely on the FNMA and other purchasers to
purchase loans in order to reduce our credit risk and provide funding for additional loans we desire to originate. We cannot
provide assurance that these purchasers will not materially limit their purchases from us due to capital constraints or other
factors, including, with respect to FNMA, a change in the criteria for conforming loans. In addition, various proposals have
been made to reform the U.S. residential mortgage finance market, including the role of FNMA. The exact effects of any such
reforms are not yet known, but may limit our ability to sell conforming loans to FNMA. In addition, residential mortgage
lending is highly regulated, and our inability to comply with all federal and state regulations and investor guidelines regarding
the origination, underwriting documentation and servicing of residential mortgage loans may also impact our ability to continue
selling residential mortgage loans. If we are unable to continue to sell loans in the secondary market, our ability to fund, and
thus originate, additional residential mortgage loans may be adversely affected, which could have a material adverse effect on
our business, financial condition or results of operations.
Strategic Risk
We compete with financial holding companies, bank holding companies, banks, insurance, fintech, other financial
services companies and nonbank financial institutions, and consumers may decide not to use banks to complete their
financial transactions, which could adversely affect our net income.
The banking, insurance and financial services businesses are extremely competitive in our markets. Certain of our
competitors, many of which are well-established banks, credit unions, insurance agencies and other large financial institutions,
have an advantage over us through substantially greater financial resources, lending limits and larger distribution networks, and
are able to offer a broader range of products and services. Other competitors, including fintech companies, many of which are
smaller, are privately-held and thus benefit from greater flexibility in adopting or modifying growth or operational strategies
than we do. If we fail to compete effectively for deposits, loans, leases and other banking customers in our markets, we could
lose substantial market share, suffer a slower growth rate or no growth and our financial condition, results of operations and
liquidity could be adversely affected.
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Further, technology and other changes now allow parties to complete financial transactions without banks. For
example, consumers can pay bills, transfer funds directly and obtain loans without banks. This process could result in the loss
of interest and fee income, as well as the loss of customer deposits and the income generated from those deposits.
Non-bank financial technology providers invest substantial resources in developing and designing new technology,
particularly digital and mobile technology, and are beginning to offer more traditional banking products either directly or
through bank partnerships. Further, clients may choose to conduct business with other market participants who engage in
business or offer products in areas we deem speculative or risky, such as cryptocurrencies. Increased competition may
negatively affect our earnings by creating pressure to lower prices or credit standards on our products and services requiring
additional investment to improve the quality and delivery of our technology and/or reducing our market share, or affecting the
willingness of our clients to do business with us.
In addition, the widespread adoption of new technologies, including internet banking services, mobile banking
services, payment systems, those related to or involving artificial intelligence, machine learning, blockchain and other
distributed ledger technologies, could require substantial expenditures to modify or adapt our existing products and services as
we grow and develop our internet banking and mobile banking channel strategies in addition to remote connectivity solutions.
We might not be successful in developing or introducing new products and services, integrating new products or services into
our existing offerings, responding or adapting to changes in consumer behavior, preferences, spending, investing and/or saving
habits, achieving market acceptance of our products and services, reducing costs in response to pressures to deliver products
and services at lower prices or sufficiently developing and maintaining loyal customers.
Further, we may experience a decrease in customer deposits if customers perceive alternative investments, such as the
stock market, as providing superior expected returns. When customers move money out of bank deposits in favor of alternative
investments, we may lose a relatively inexpensive source of funds, and be forced to rely more heavily on borrowings and other
sources of funding to fund our business and meet withdrawal demands, thereby increasing our funding costs and adversely
affecting our net interest margin.
Our growth strategy includes risks that could have an adverse effect on our financial performance.
An element of our growth strategy is the acquisition of additional banks, bank holding companies, financial holding
companies, and/or other businesses related to the financial services industry that may complement our organizational structure
in order to achieve greater economies of scale. The market for acquisitions remains highly competitive. Accordingly, we cannot
assure you that appropriate growth opportunities will continue to exist, that we will be able to acquire banks, bank holding
companies and/or financial holding companies that satisfy our criteria or that any such acquisitions will be on terms favorable to
us. To the extent that we are unable to find suitable acquisition candidates, an important component of our growth strategy may
be lost.
In addition, acquisitions of financial institutions involve operational risks and uncertainties and acquired companies
may have unforeseen liabilities, exposure to asset quality problems, key employee and customer retention problems and other
problems that could negatively affect our organization. We may incur substantial costs to expand, and we cannot give assurance
such expansion will result in the levels of profits we seek. We may not be able to complete future acquisitions; and, if
completed, we may not be able to successfully integrate the operations, management, products and services of the entities that
we acquire and eliminate redundancies. The integration process could result in the loss of key employees or disruption of the
combined entity’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our
ability to maintain relationships with customers and employees or achieve the anticipated benefits of the transaction. The
integration process may also require significant time and attention from our management that they would otherwise direct at
servicing existing business and developing new business. Our inability to find suitable acquisition candidates and failure to
successfully integrate the entities we acquire into our existing operations may increase our operating costs significantly and
adversely affect our business and earnings.
Further, our growth strategy requires that we continue to hire qualified personnel, while concurrently expanding our
managerial and operational infrastructure. We cannot assure you that we will be able to hire and retain qualified personnel or
that we will be able to successfully expand our infrastructure to accommodate future acquisitions or growth. As a result of these
factors, we may not realize the expected economic benefits associated with our acquisitions. This could have a material adverse
effect on our financial performance.
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If we are unable to manage our growth effectively, our operations could be negatively affected.
If we experience growth in the future, we could face various risks and difficulties, including:
•
•
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finding suitable markets for expansion;
finding suitable candidates for acquisition;
attracting funding to support additional growth;
• maintaining asset quality;
•
attracting and retaining qualified management and personnel; and
• maintaining adequate regulatory capital.
In addition, in order to manage our growth and maintain adequate information and reporting systems within our
organization, we must identify, hire and retain additional qualified associates, particularly in the accounting and operational
areas of our business.
If we do not manage our growth effectively, our business, financial condition, results of operations and future
prospects could be negatively affected, and we may not be able to continue to implement our business strategy and successfully
conduct our operations.
We face risks in connection with completed or potential acquisitions.
Historically, we have grown through the acquisition of other financial institutions as well as the development of de
novo offices. During 2021, we completed three bank mergers, including our acquisition of Cadence Bancorporation and
Cadence Bank, N.A. (collectively, “Legacy Cadence”). As appropriate opportunities present themselves, we have pursued and
intend to continue to pursue additional acquisitions in the future that we believe are strategic and accretive to earnings. There
can be no assurance that we will be able to identify, negotiate, finance or consummate potential acquisitions successfully or, if
consummated, integrate such acquisitions with our current business.
We may not realize all of the anticipated benefits of the acquisition of Legacy Cadence.
Our ability to realize the anticipated benefits of the acquisition of Legacy Cadence continue to depend, to a large
extent, on our ability to successfully integrate the acquired business. The integration and combination of the acquired business
is a complex, costly and time-consuming process. As a result, we have, and continue to devote significant management
attention and resources to integrating their business practices and operations with ours. The integration process may disrupt our
business and the business of Legacy Cadence we may still face implementation challenges that limit the full realization of the
anticipated benefits of the acquisition. The failure to meet any such challenges involved in completing integration of the
acquired businesses and realization of those anticipated benefits could cause an interruption of, or a loss of momentum in, our
business activities or those of Legacy Cadence and could adversely impact our business, financial condition and results of
operations. In addition, completing integration of the businesses may still result in material unanticipated problems, expenses,
liabilities, loss of customers and diversion of our management’s and employees’ attention. The challenges of combining the
operations of the companies include, among others:
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•
•
•
•
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•
•
Difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects, including the
potential adverse impact of the Company’s assumption of Legacy Cadence’s outstanding debt obligations;
Difficulties in the integration of operations and teams;
Difficulties in the assimilation and retention of employees;
Difficulties in managing the expanded operations of a larger and more complex company;
Challenges in keeping existing customers and obtaining new customers;
Challenges in attracting and retaining key personnel, including personnel that are considered key to future success;
Challenges related to Legacy Cadence’s credit quality and credit risk; and
Challenges in keeping key business relationships in place.
Many of these factors are outside of our control and any one of them could result in increased costs and liabilities,
decreases in expected income and deposits, and diversion of management’s time and energy, which could have a material
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adverse effect on our business, financial condition and results of operations. Additionally, even if the integration of Legacy
Cadence is successful, the full benefits of the transaction may not be realized, including the synergies, cost savings, growth
opportunities or earnings accretion that are expected. These benefits may not be achieved within the anticipated time frame, or
at all, and additional unanticipated costs may be incurred in the integration of the businesses. These liabilities could include
exposure to unexpected asset quality problems, compliance and regulatory violations, key employee and client retention
problems and other problems that could result in significant costs to us.
All of these factors could cause dilution to our earnings per share, decrease or delay the expected accretive effect of the
transaction, negatively impact the price of our common stock, or have a material adverse effect on our business, financial
condition and results of operations.
We may not be able to raise additional capital in the future.
We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. In
addition, we may elect to raise additional capital to support our business or to finance any acquisitions or we may otherwise
elect or be required to raise additional capital. As a publicly-traded company, a likely source of additional funds is the capital
markets, accomplished generally through the issuance of equity, including common stock, preferred stock, warrants, depository
shares, rights, purchase contracts or units, and the issuance of senior or subordinated debt securities. Our ability to raise
additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other
factors, many of which are outside our control, and on our financial performance. Accordingly, we cannot provide assurance of
our ability to raise additional capital if needed or to be able to do so on terms acceptable to us. Any occurrence that may limit its
access to the capital markets, such as a decline in the confidence of investors, depositors of the Company or counterparties
participating in the capital markets, may adversely affect our capital costs and our ability to raise capital and, in turn, our
liquidity. Moreover, if we need to raise capital in the future, we may have to do so when many other financial institutions are
also seeking to raise capital and would have to compete with those institutions for investors. If we cannot raise additional
capital on favorable terms when needed, it may have a material adverse effect on our financial condition and results of
operations.
If the goodwill that we record in connection with a business acquisition becomes impaired, it could require a charge to
earnings.
Goodwill represents the amount by which the purchase price exceeds the fair value of net assets acquired in a business
combination. We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances
indicate the carrying value of the asset might be impaired.
We evaluate goodwill for impairment by comparing the estimated fair value of each reporting unit with its carrying
amount, including goodwill. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is
recognized in an amount equal to that excess. Factors that could cause an impairment charge include adverse changes to
macroeconomic conditions, declines in the profitability of the reporting unit, or declines in the tangible book value of the
reporting unit. Future evaluations of goodwill may result in impairment which could have a material adverse effect on our
business, financial condition and results of operations.
Operational Risk
We are subject to environmental liability risk associated with our lending activities.
A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may
foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances
could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well
as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may
materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or
more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental
liability. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material
adverse effect on our business, results of operations and financial condition.
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Our business is, and will continue to be, dependent on technology and an inability to invest in technological
improvements or obtain reliable technological support may adversely affect our results of operation and financial
condition.
The financial services industry is undergoing rapid technological changes with frequent introductions of new
technology-driven products and services. In addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. Our ability to grow and compete will depend in part upon our
ability to address the needs of customers by using technology to provide products and services that will satisfy their operational
needs, while managing the costs of expanding our technology infrastructure and our geographic footprint. Many competitors
have substantially greater resources to invest in technological improvements and third-party support. There can be no assurance
that we will be able to effectively implement new technology-driven products and services or be successful in marketing these
products and services to our customers. For the foreseeable future, we expect to rely on third-party service providers and on
other third parties for services and technical support. If those products and services become unreliable or fail, the adverse
impact on customer relationships and operations could be material.
We are subject to a variety of systems-failure and cybersecurity risks that could adversely affect our business and
financial performance.
Our internal operations are subject to certain risks, including, but not limited to, information systems failures and
errors, customer or employee fraud and catastrophic failures resulting from terrorist acts, data piracy or natural disasters. We
maintain a system of internal controls and security to mitigate the risks of many of these occurrences and maintain insurance
coverage for certain risks. However, should an event occur that is not prevented or detected by our internal controls, and is
uninsured against, or in excess of applicable insurance limits, such occurrence could have an adverse effect on our business,
financial condition, results of operations, and liquidity.
The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our operations
are dependent upon the ability to protect our computer equipment against damage from fire, severe storm, power loss,
telecommunications failure or a similar catastrophic event. Any damage or failure of our computer systems or network
infrastructure that causes an interruption in operations could have an adverse effect on our financial condition, results of
operations and liquidity.
In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure
against damage from physical break-ins, security breaches and other disruptive problems caused by internet users or other
users. Computer break-ins and other disruptions could jeopardize the security of information stored in and transmitted through
our computer systems and networks, which may result in significant liability and reputation risk to us, and may deter potential
customers. Although we, with the help of third-party service providers, intend to continue to actively monitor and, where
necessary, implement improved security technology and develop additional operational procedures to prevent damage or
unauthorized access to our computer systems and network, there can be no assurance that these security measures or operational
procedures will be successful. In addition, new developments or advances in computer capabilities or new discoveries in the
field of cryptography could enable hackers or data pirates to compromise or breach the security measures we use to protect
customer data. Any failure to maintain adequate security over our customers’ personal and transactional information could
expose us to reputational risk or consumer litigation and could have an adverse effect on our financial condition, results of
operations and liquidity.
Our risk and exposure to cyber-attacks and other information security breaches remain heightened because of, among
other things, the evolving nature of these threats and the prevalence of internet and mobile banking. As cyber threats continue to
evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures
or to investigate and remediate any information security vulnerabilities. Disruptions or failures in the physical infrastructure or
operating systems that support our businesses and customers, or cyber-attacks or security breaches of the networks, systems or
devices that customers use to access our products and services, could result in customer attrition, regulatory fines, penalties or
intervention, reputational damage, reimbursement or other compensation costs, including litigation expense and/or additional
compliance costs, any of which could materially and adversely affect our business, results of operations or financial condition.
We may be adversely affected by the failure of certain third-party vendors to perform.
We rely upon certain third-party vendors to provide products and services necessary to maintain our day-to-day
operations. These third parties provide key components of our business operations. Accordingly, our operations are exposed to
the risk that these vendors might not perform in accordance with applicable contractual arrangements or service level
agreements. Any complications caused by these third parties, including those resulting from disruptions in communication
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services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a
vendor, failure of a vendor to provide services for any reason, or poor performance of services, could adversely affect our
ability to deliver products and services to our customers and otherwise conduct our business. Financial or operational
difficulties of a third-party vendor could also hurt our operations if those difficulties interfere with the vendor’s ability to
provide services. Furthermore, our vendors could also be sources of operational and information security risk, including from
breakdowns or failures of their own systems or capacity constraints. Replacing these third-party vendors could also create
significant delay and expense. Problems caused by external vendors could be disruptive to our operations, which could have a
material adverse impact on our business and, in turn, our financial condition and results of operations. We maintain a system of
policies and procedures designed to monitor vendor risks, including, among other things: (i) changes in the vendor’s
organizational structure; (ii) changes in the vendor’s financial condition; (iii) changes in existing products and services or the
introduction of new products and services; and (iv) changes in the vendor’s support for existing products and services. While
we believe these policies and procedures help to mitigate risk, the failure of an external vendor to perform in accordance with
applicable contractual arrangements or service level agreements could be disruptive to our operations, which could have a
material adverse effect on our financial condition and results of operations.
Our earnings could be adversely impacted by incidences of fraud and compliance failures that are not within our direct
control.
Financial institutions are inherently exposed to fraud risk. A fraud can be perpetrated by a customer of the Company,
an employee, a vendor or members of the general public. We are most subject to fraud and compliance risk in connection with
the origination of loans, automated clearing house transactions, ATM transactions and checking transactions. Our largest fraud
risk, associated with the origination of loans, includes the intentional misstatement of information in property appraisals or
other underwriting documentation provided to us by third parties. If any of the information upon which we rely is
misrepresented, either fraudulently or inadvertently, and the misrepresentation is not detected prior to asset funding, the value
of the asset may be significantly lower than expected, or we may fund a loan we would not have funded or on terms we would
not have extended. Whether a misrepresentation is made by the applicant or another third party, we generally bear the risk of
loss associated with the misrepresentation. A loan subject to a material misrepresentation is typically unsellable or subject to
repurchase if it is sold prior to detection of the misrepresentation. The sources of the misrepresentations are often difficult to
locate, and it is often difficult to recover any of the monetary losses we may suffer. Accordingly, the compliance risk is that
loans are not originated in compliance with applicable laws and regulations and our standards. There can be no assurance that
we can prevent or detect acts of fraud or violation of law or our compliance standards by third parties. Repeated incidences of
fraud or compliance failures could adversely impact the performance of our loan portfolio.
RISKS RELATED TO THE REGULATION OF OUR INDUSTRY
Regulatory Risk
The banking industry is highly regulated, and current and future legislative or regulatory changes could have a
significant adverse effect on our business, financial condition, or results of operations.
As a state chartered bank, we are subject to extensive federal supervision and regulation. Federal regulation of the
banking industry, along with tax and accounting laws, regulations, rules and standards, limit our operations significantly and
control the methods by which we conduct business. In addition, compliance with laws and regulations can be difficult and
costly, and changes to laws and regulations can impose additional compliance costs. Many of these regulations are intended to
protect depositors, customers, the public, the banking system as a whole or the FDIC deposit insurance fund, not shareholders.
Regulatory requirements and discretion affect our lending practices, capital structure, investment practices, dividend policy and
many other aspects of our business. There are laws and regulations which restrict transactions between us and our subsidiaries.
These requirements may constrain our operations, and the adoption of new laws and changes to or repeal of existing laws may
have a further impact on our business, financial condition, results of operations and future prospects. The burdens imposed by
federal and state regulations place banks at a competitive disadvantage compared to non-bank competitors. We are also subject
to requirements with respect to the confidentiality of information obtained from clients concerning their identities, business and
personal financial information, employment, and other matters. We require our personnel to agree to keep all such information
confidential and we monitor compliance. Failure to comply with confidentiality requirements could result in material liability
and adversely affect our business, financial condition, results of operations and future prospects.
Federal and state regulatory agencies may adopt changes to their regulations or change the manner in which existing
regulations are applied. We cannot predict the substance or effect of pending or future legislation or regulation or the
application of laws and regulations to our Company. Compliance with current and potential regulation, as well as regulatory
scrutiny, may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase
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our regulatory capital, and limit our ability to pursue business opportunities in an efficient manner by requiring us to expend
significant time, effort and resources to ensure compliance and respond to any regulatory inquiries or investigations. In
addition, press coverage and other public statements that assert some form of wrongdoing by financial services companies
(including press coverage and public statements that do not involve us) may result in regulatory inquiries or investigations,
which, independent of the outcome, may be time-consuming and expensive and may divert time, effort and resources from our
business. Evolving regulations and guidance concerning executive compensation may also impose limitations on us that affect
our ability to compete successfully for executive and management talent.
See the discussion above at “Item 1. Business – Regulation and Supervision” for an additional discussion of the
extensive regulation and supervision we are subject to.
Regulatory initiatives regarding bank capital requirements may require increased capital.
Cadence is subject to risk-based and leverage capital requirements. We must maintain certain risk-based and leverage
capital ratios as required by our banking regulators, which can change depending on economic conditions and our particular
condition, risk profile, growth plans, and regulatory capital guidelines. Failure to meet minimum capital guidelines and/or other
regulatory requirements can subject the Company to certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material adverse effect on the Company’s consolidated financial statements.
Additional information, including the Company’s and Bank’s compliance with applicable capital adequacy standards is
provided in Note 19 to the consolidated financial statements and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Regulatory Capital.”
Changes in accounting rules applicable to banks could adversely affect our financial condition and results of operations.
From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the
preparation of our consolidated financial statements. These changes can be hard to predict and can materially impact how we
record and report our financial condition and results of operations. In some cases, we could be required to apply a new or
revised standard retroactively, resulting in a restatement of our prior period financial statements.
Regulators continually examine our business and we may be required to remediate adverse examination findings.
The FDIC, the MDBCF and the CFPB continually examine our business, including our compliance with laws and
regulations, and we may become subject to other regulatory agency examinations in the future. If, as a result of an examination,
a federal or state banking agency were to determine that our financial condition, capital resources, asset quality, earnings
prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or that we were in
violation of any law or regulation, it may require us to take a number of different remedial actions as it deems appropriate.
These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions
resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in
our capital, to restrict our growth by preventing us from acquiring other financial institutions or limiting our ability to expand
our business by engaging in new activities, to change the asset composition of our portfolio or balance sheet, to assess civil
monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions
cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into
receivership or conservatorship. Any regulatory action against us could have a material adverse effect on our business, financial
condition and results of operations.
The Company is operating under a Consent Order, and its failure to comply with the Consent Order could materially
and adversely affect our business.
On August 30, 2021, Legacy Cadence Bank and the DOJ agreed to a settlement set forth in the consent order related to
the investigation by the DOJ of Legacy Cadence Bank’s fair lending program in Harris, Fort Bend and Montgomery Counties
located in Houston, Texas during the period between 2014 and 2016 (the “Consent Order”). Under the Consent Order, Legacy
Cadence Bank will, among other things, implement a mutually agreed upon Fair Lending Plan, invest $4.17 million in a loan
subsidy fund to increase credit opportunities to residents of majority-Black and Hispanic neighborhoods and will devote $1.38
million toward advertising, community outreach, and credit repair and education. Legacy Cadence Bank will also open one full-
service branch to serve the banking and credit needs of residents in a majority-Black and Hispanic neighborhood in Houston. In
addition, Legacy Cadence Bank will employ a director of community lending and development who will oversee these efforts
and work in close consultation with Legacy Cadence Bank’s leadership. The Consent Order was signed by the United States
District Court for the Northern District of Georgia, Atlanta Division, on August 31, 2021. Pursuant to Section 5.2(g) of the
Agreement and Plan of Merger with Legacy Cadence, dated April 12, 2021, and Paragraph 50 of the Consent Order, Legacy
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BancorpSouth Bank approved the negotiated settlement, and subsequently, the Company agreed to accept the obligations of the
Consent Order. The Consent Order is in effect for five years. For additional information regarding the terms of this settlement
and the Consent Order, see Legacy Cadence’s Current Report on Form 8-K that was filed with the SEC on August 30, 2021.
The Company is operating under the Consent Order. Our Board of Directors and senior management team have been
working diligently to comply with the Consent Order and believe that they have allocated sufficient resources to address the
corrective actions required by the DOJ. Compliance with and resolution of the Consent Order will ultimately be determined by
the DOJ. The Company’s failure to comply with the Consent Order and to successfully implement its requirements may cause
us to incur additional significant compliance costs, subject us to larger fines, result in serious reputational consequences,
additional regulatory enforcement actions, including the imposition of material restrictions on the activities of the Company or
the assessment of fines or penalties against the Company and its officers and directors, which could prevent the Company from
executing its business strategy and negatively impact its business, or additional enforcement of the Consent Order through court
proceedings. Any of these results could have a material and adverse effect on our business, results of operations, financial
condition, cash flows and stock price.
Compliance Risk
We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to
comply with these laws could lead to a wide variety of sanctions.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose
nondiscriminatory lending requirements on financial institutions. The Department of Justice and other federal agencies,
including the CFPB, are responsible for enforcing these laws and regulations. A successful regulatory challenge to an
institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions,
including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on
expansion, and restrictions on entering new business lines. As discussed in more detail above, the Company is subject to the
Consent Order in connection with Legacy Cadence Bank’s compliance with fair lending laws. In the case of the CRA, the
performance of a financial institution in meeting the credit needs of its community and its overall CRA rating are factors that
will be taken into consideration when the federal banking agencies evaluate applications related to mergers and acquisitions, as
well as branch opening and relocations. Private parties may also have the ability to challenge an institution’s performance under
fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial
condition and results of operations.
Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase
our risk of liability with respect to such loans and could increase our cost of doing business.
Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered
“predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary
insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will
be able to repay the loans irrespective of the value of the underlying property. It is our policy not to make predatory loans, but
these laws create the potential for liability with respect to our lending and loan investment activities. They increase our cost of
doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or
the points and fees on loans that we do make.
The expanding body of federal, state and local regulations and/or the licensing of loan servicing, collections or other
aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of
noncompliance and subject us to litigation.
We service some of our own loans, and loan servicing is subject to extensive regulation by federal, state and local
governmental authorities as well as to various laws and judicial and administrative decisions imposing requirements and
restrictions on those activities. The volume of new or modified laws and regulations has increased in recent years and, in
addition, some individual municipalities have begun to enact laws that restrict loan servicing activities including delaying or
temporarily preventing foreclosures or forcing the modification of certain mortgages. If regulators impose new or more
restrictive requirements, we may incur additional significant costs to comply with such requirements which may further
adversely affect us. In addition, were we to be subject to regulatory investigation or regulatory action regarding our loan
modification and foreclosure practices, our financial condition and results of operation could be adversely affected.
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We are subject to laws regarding the privacy, information security and protection of personal information and any
violation of these laws or another incident involving personal, confidential or proprietary information of individuals
could damage our reputation and otherwise adversely affect our operations and financial condition.
Our business requires the collection and retention of large volumes of customer data, including personally identifiable
information in various information systems that we maintain and in those maintained by third parties with whom we contract to
provide data services. We also maintain important internal company data such as personally identifiable information about our
employees and information relating to our operations. We are subject to complex and evolving laws and regulations governing
the privacy and protection of personal information of individuals (including customers, employees, suppliers and other third
parties). For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain
limitations on our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii)
requires that we provide certain disclosures to customers about our information collection, sharing and security practices and
afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain
exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program
containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of
customer information we process, as well as plans for responding to data security breaches. Various state and federal banking
regulators and states have also enacted data security breach notification requirements with varying levels of individual,
consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Ensuring that
our collection, use, transfer and storage of personal information complies with all applicable laws and regulations can increase
our costs. Furthermore, we may not be able to ensure that all of our clients, suppliers, counterparties and other third parties have
appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such
information is transmitted by electronic means. If personal, confidential or proprietary information of customers or others were
to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are
not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties,
including cyber criminals), we could be exposed to litigation or regulatory sanctions under personal information laws and
regulations. Concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that
such measures are inadequate, could cause us to lose customers or potential customers for our products and services and thereby
reduce our revenues. Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws
and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease
certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise
adversely affect our operations and financial condition.
GENERAL RISK FACTORS
Economic Conditions
The fiscal and monetary policies of the U.S. government could have a material adverse effect on our results of
operations.
Our business is significantly affected by fiscal and monetary policies of the U.S. federal government and its agencies,
particularly the Federal Reserve Board. Federal Reserve policies determine in large part the cost of funds for lending and
investing and the returned earned on those loans and investments, both of which impact our net interest margin. Federal
Reserve policies may also adversely affect borrowers, potentially increasing the risk that they may fail to repay their loans or
could adversely create asset bubbles which result from prolonged periods of accommodative policy. This, in turn, may result in
volatile markets and rapidly declining collateral values. The monetary policies of the Federal Reserve and other governmental
policies have had a significant effect on the operating results of commercial banks in the past and are expected to continue to do
so in the future. Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond
our control. Adverse economic conditions and government policy responses to such conditions could have a material adverse
effect on our business, financial condition and results of operations.
The Federal Reserve implemented significant economic strategies that have impacted interest rates, inflation, asset
values, and the shape of the yield curve, over which the Company has no control and which the Company may not be
able to adequately anticipate.
In recent years, the Federal Reserve implemented a series of accommodative domestic monetary initiatives. Several of
these emphasized so-called quantitative easing strategies and decreases to the federal funds target rate. The Federal Reserve
reduced rates five times during 2019 through 2021. However, in response to the significant increase in the domestic inflation
rate in the U.S, the Federal Reserve increased the federal funds target rate seven times in 2022 for a total increase of 4.25%, and
four times in 2023, adding an additional 1.0%, bringing the federal funds target rate to 5.25%. The Federal Reserve continued
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its quantitative tightening through 2023. Further rate changes, increasing or decreasing the rate, are reportedly dependent on the
Federal Reserve’s assessment of economic data as it becomes available. The Company cannot predict the nature or timing of
future changes in monetary, economic, or other policies or the effect that they may have on the Company's business activities,
financial condition and results of operations. Changes in monetary policy, including changes in interest rates, could influence:
(i) the amount of interest we receive on loans and securities; (ii) the amount of interest we pay on deposits and borrowings; (iii)
our ability to originate loans and obtain deposits; (iv) the fair value of our assets and liabilities; and (v) the reinvestment risk
associated with changes in the duration of our mortgage-backed securities portfolio.
The current economic environment poses significant challenges and could adversely affect our financial condition and
results of operations.
We are operating in a challenging and uncertain economic environment. The global credit and financial markets have
from time to time experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability,
declines in consumer confidence, declines in economic growth, increases in unemployment rates, high rates of inflation, and
uncertainty about economic stability. As a result, financial institutions continue to be affected by uncertainty in the real estate
market, the credit markets, and the national financial market generally. We retain direct exposure to the commercial and
residential real estate markets, and we are affected by events in these markets. The financial markets and the global economy
may also be adversely affected by the current or anticipated impact of military conflict, including the current conflict between
Russia and Ukraine and the escalating conflicts in the Middle East, which is increasing volatility in commodity and energy
prices, creating supply chain issues and causing instability in financial markets. Sanctions imposed by the United States and
other countries in response to such conflicts could further adversely impact the financial markets and the global economy, and
any economic countermeasures by the affected countries or others could exacerbate market and economic instability.
The uncertainty in economic conditions has subjected us and other financial institutions to increased regulatory
scrutiny. In addition, deterioration in local economic conditions in our markets could result in losses beyond that provided for in
our ACL and result in increased loan delinquencies, problem assets, and foreclosures. This may also result in declining demand
for products and services, decreased deposits and increased borrowings under our current contractual obligations to extend
credit, all of which would adversely impact our liquidity positions, and declining values for loan collateral, which in turn would
reduce customers’ borrowing power and the value of assets and collateral associated with our existing loans.
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Investment in Our Common Stock and Preferred Stock
The price of our common stock and preferred stock may fluctuate significantly, which may make it difficult for
investors to resell shares of our common stock or preferred stock at a time or price they find attractive.
The price of our common stock and preferred stock may fluctuate significantly as a result of a variety of factors, many
of which are beyond our control. In addition to those described in “Cautionary Notice Regarding Forward Looking Statements,”
these factors include, among others:
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actual or anticipated quarterly fluctuations in our operating results, financial condition or asset quality;
changes in financial estimates or the publication of research reports and recommendations by financial
analysts or actions taken by rating agencies with respect to us or other financial institutions;
failure to declare dividends on our capital stock from time to time;
failure to meet analysts’ revenue or earnings estimates;
failure to integrate acquisitions or realize anticipated benefits from acquisitions;
strategic actions by us or our competitors, such as acquisitions, restructurings, dispositions or financings;
fluctuations in the stock price and operating results of our competitors or other companies that investors deem
comparable to us;
future sales of our capital stock or other securities;
proposed or final regulatory changes or developments;
anticipated or pending regulatory investigations, proceedings, or litigation that may involve or affect us;
reports in the press or investment community generally relating to our reputation or the financial services
industry;
domestic and international economic and political factors unrelated to our performance;
general market conditions and, in particular, developments related to market conditions for the financial
services industry;
adverse weather conditions, including floods, tornadoes and hurricanes; and
geopolitical conditions such as acts or threats of terrorism or military conflicts.
In addition, in recent years, the stock market in general has experienced extreme price and volume fluctuations. This
volatility has had a significant effect on the market price of securities issued by many companies, including for reasons
unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our capital
stock, notwithstanding our operating results. We expect that the market price of our capital stock will continue to fluctuate and
there can be no assurances about the levels of the market prices for our capital stock.
General market fluctuations, industry factors and general economic and political conditions and events, such as
economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause the stock price of our capital
stock to decrease regardless of operating results.
The rights of our common shareholders are generally subordinate to the rights of holders of our debt securities and
preferred stock and may be subordinate to the rights of holders of any class of preferred stock or any debt securities
that we may issue in the future.
Our Board of Directors has the authority to issue debt securities as well as an aggregate of up to 500,000,000 shares of
preferred stock without any further action on the part of our shareholders. Our Board of Directors also has the power, without
shareholder approval, to set the terms of any debt securities or series of preferred stock that may be issued, including voting
rights, dividend rights, and preferences over our common stock with respect to dividends or in the event of a dissolution,
liquidation or winding up and other terms. The shares and subordinated notes have certain rights that are senior to our common
stock. Any debt or shares of preferred stock that we may issue in the future may be senior to our common stock. Accordingly,
you should assume that any debt securities or preferred stock that we may issue in the future will also be senior to our common
stock. Because our decision to issue debt or equity securities or incur other borrowings in the future will depend on market
conditions and other factors beyond our control, the amount, timing, nature or success of our future capital raising efforts is
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uncertain. Holders of our common stock bear the risk that our future issuances of debt or equity securities or our occurrence of
other borrowings may negatively affect the market price of our common stock.
In the event that we issue preferred stock or debt securities in the future that has preference over our common stock
with respect to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with
voting rights that dilute the voting power of our common stock, the rights of the holders of our common stock or the market
price of our common stock could be adversely affected.
Adverse changes in the ratings for our debt securities or preferred stock could have a material adverse effect on our
business, financial condition and liquidity and may increase our funding costs or impair our ability to effectively
compete for business and clients.
The major rating agencies regularly evaluate us and their ratings of our long-term debt and preferred stock based on a
number of factors, including our financial strength and conditions affecting the financial services industry generally. In general,
rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset
quality, business mix and level and quality of earnings, and we may not be able to maintain our current credit ratings and
preferred stock ratings. Our ratings remain subject to change at any time, and it is possible that any rating agency will take
action to downgrade us in the future.
The ratings for our debt securities and preferred stock impact our ability to obtain funding. Reductions in any of the
ratings for our debt securities or preferred stock could adversely affect our ability to borrow funds and raise capital.
Downgrades in our ratings could trigger additional collateral or funding obligations, which may adversely impact our liquidity.
Therefore, any negative credit rating actions could have a material adverse effect on our business, results of operations,
financial condition or liquidity.
Furthermore, our clients and counterparties may be sensitive to the risks posed by a downgrade to our ratings and may
terminate their relationships with us, may be less likely to engage in transactions with us, or may only engage in transactions
with us at a substantially higher cost. We cannot predict the extent to which client relationships or opportunities for future
relationships could be adversely affected due to a downgrade in our ratings. The inability to retain clients or to effectively
compete for new business may have a material and adverse effect on our business, results of operations or financial condition.
Additionally, rating agencies themselves have been subject to scrutiny arising from the financial crisis. As a result or
for unrelated reasons, the rating agencies may make or may be required to make substantial changes to their ratings policies and
practices. Such changes may, among other things, adversely affect the ratings of our securities or other securities in which we
have an economic interest.
Our ability to declare and pay dividends is limited.
There can be no assurance of whether or when we may pay dividends on our capital stock in the future. Future
dividends, if any, will be declared and paid at the discretion of our Board of Directors and will depend on a number of factors.
Although the Company’s asset quality, earnings performance, liquidity and capital requirements will be taken into account
before we declare or pay any future dividends on our capital stock, our Board of Directors will also consider our liquidity and
capital requirements. In addition, federal and state banking laws and regulations and state corporate laws restrict the amount of
dividends we may declare and pay. See “Item 1. Business – Regulation and Supervision” included herein for more information.
Finally, so long as any shares of our 5.50% Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 (“Series A
Preferred Stock”) remain outstanding, unless we have paid in full (or declared and set aside funds sufficient for) applicable
dividends on the Series A Preferred Stock, we may not declare or pay any dividend on our common stock, other than a dividend
payable solely in shares of common stock or in connection with a shareholder rights plan.
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Our certificate of incorporation and bylaws include provisions that could impede a takeover of the Company.
Certain provisions of our certificate of incorporation and bylaws could delay, defer, or prevent a third party from
acquiring control of our organization or conduct a proxy contest, even if those events were perceived by many of our
shareholders as beneficial to their interests. These provisions:
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enable our Board of Directors to issue additional shares of authorized, but unissued capital stock;
enable our Board of Directors to issue “blank check” preferred stock with such designations, rights and
preferences as may be determined from time to time by the board;
enable our Board of Directors to increase the size of the board and fill the vacancies created by the increase;
• may prohibit large shareholders, in particular those owning 15% or more of our outstanding voting stock,
from merging or combining with us for a certain period of time;
provide for a plurality voting standard in the election of directors;
do not provide for cumulative voting in the election of directors;
enable our Board of Directors to amend our bylaws without shareholder approval;
do not allow for the removal of directors without cause;
limit the right of shareholders to call a special meeting;
require advance notice for director nominations and other shareholder proposals; and
require prior regulatory application and approval of any transaction involving control of our organization.
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These provisions, as well as our classified or “staggered” board of directors, change-in-control agreements with
members of management and supermajority voting requirements, may discourage potential acquisition proposals and could
delay or prevent a change in control, including when our shareholders might otherwise receive a premium over the market price
of our shares.
Shares of our common stock and preferred stock are not deposits insured by the FDIC and are subject to risk of loss
and uncertain return on investment.
Shares of our common stock and preferred stock are not deposit accounts and are not insured by the FDIC or any other
government agency and are subject to investment risk, including the possible loss of all of your investment.
Other Risks
As a public company, we incur significant legal, accounting, insurance, compliance and other expenses. Any deficiencies
in our financial reporting or internal controls could materially and adversely affect us, including resulting in material
misstatements in our financial statements, and the market price of our common stock.
As a public company, we incur significant legal, accounting, insurance and other expenses. These costs and
compliance with the rules of the SEC and the rules of the applicable stock exchange may further increase our legal and financial
compliance costs and make some activities more time consuming and costly. SEC rules require that our Chief Executive Officer
and Chief Financial Officer periodically certify the existence and effectiveness of our internal control over financial reporting
and our independent registered public accounting firm is required to audit the effectiveness of our internal control over financial
reporting. This process requires significant documentation of policies, procedures and systems, review of that documentation by
our internal auditing and accounting staff and our outside independent registered public accounting firm and testing of our
internal control over financial reporting by our internal auditing and accounting staff and our outside independent registered
public accounting firm. This process involves considerable time and attention from management, which could prevent us from
successfully implementing our business initiatives and improving our business, results of operations and financial condition,
may strain our internal resources, and increases our operating costs.
During our testing, we may identify deficiencies that would have to be remediated to satisfy the SEC rules for
certification of our internal control over financial reporting. A material weakness is defined by the standards issued by the
Public Company Accounting Oversight Board as a deficiency, or combination of deficiencies, in internal control over financial
reporting that results in a reasonable possibility that a material misstatement of our annual or interim financial statements will
not be prevented or detected on a timely basis. Therefore, we would have to disclose in periodic reports we file with the FDIC
any material weakness in our internal control over financial reporting. The existence of a material weakness would preclude
44
management from concluding that our internal control over financial reporting is effective and would preclude our independent
auditors from attesting to the effectiveness of our internal control over financial reporting. In addition, disclosures of
deficiencies of this type in our FDIC reports could cause investors to lose confidence in our financial reporting, may negatively
affect the market price of our common stock, and could result in the delisting of our securities from the securities exchanges on
which they trade. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud.
If we have deficiencies in our disclosure controls and procedures or internal control over financial reporting, it may materially
and adversely affect us.
We may be adversely affected by changes in U.S. tax laws.
We are subject to federal and applicable state tax regulations. Such tax regulations are often complex and require
interpretation and changes in these regulations could negatively impact our results of operations. In the normal course of
business, we are routinely subject to examinations and challenges from federal and applicable state tax authorities regarding the
amount of taxes due. Federal and state taxing authorities have become increasingly aggressive in challenging tax positions
taken by financial institutions. These tax positions may relate to tax compliance, sales and use, franchise, gross receipts, payroll,
property and income tax issues, including tax base, apportionment and tax credit planning. The challenges made by tax
authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income
among tax jurisdictions. If any such challenges are made and are not resolved in our favor, they could have a material adverse
effect on our results of operations.
We depend upon key personnel and we may not be able to retain them or attract, assimilate and retain highly qualified
employees in the future.
Our success depends in significant part upon the continued service of our senior management team and our continuing
ability to attract, assimilate and retain highly qualified and skilled managerial, product development, lending, marketing and
other personnel. We have an experienced senior management team and other key personnel that our board of directors believes
is capable of managing and growing our business. The loss of the services of any member of our senior management or other
key personnel or the inability to hire or retain qualified personnel in the future could adversely affect our business, results of
operations and financial condition.
We are required to make significant estimates and assumptions in the preparation of our financial statements. These
estimates and assumptions may not be accurate and are subject to change.
The preparation of our consolidated financial statements in conformity with GAAP requires our management to make
significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expense
during the reporting periods. Estimates are made by management in determining, among other things, the accounting for
business combinations, estimates of fair value, ACL and valuation of deferred tax assets. If our underlying estimates and
assumptions prove to be incorrect or if events occur that require us to revise our previous estimates or assumptions, our
financial condition and results of operations may be materially adversely affected.
We are involved in legal proceedings and may be the subject of additional litigation or government investigations in the
future; the actual cost of legal proceedings may exceed our accruals for them.
The nature of our business ordinarily results in a certain amount of litigation and investigations by government
agencies having oversight over our business. Although we have developed policies and procedures to minimize the impact of
legal noncompliance and other disputes and endeavored to provide reasonable insurance coverage, litigation, government
investigations and regulatory actions present an ongoing risk.
We cannot predict with certainty the cost of defense, the cost of prosecution or the ultimate outcome of litigation and
other proceedings filed by or against us, our directors, management or employees, including remedies or damage awards. On at
least a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings as well as
certain threatened claims (which are not considered incidental to the ordinary conduct of our business) utilizing the latest and
most reliable information available. For matters where a loss is not probable or the amount of the loss cannot be estimated, no
accrual is established. For matters where it is probable we will incur a loss and the amount can be reasonably estimated, we
establish an accrual for the loss. Once established, the accrual is adjusted periodically to reflect any relevant developments. The
actual cost of any outstanding legal proceedings and the potential loss, however, may turn out to be substantially higher than the
amount accrued. Further, our insurance may not cover all litigation, other proceedings or claims, or the costs of defense. While
the final outcome of any legal proceedings is inherently uncertain, based on the information available, advice of counsel and
45
available insurance coverage, if applicable, management believes that the litigation-related expense we have accrued is
adequate and that any incremental liability arising from pending legal proceedings, including class action litigation, and
threatened claims and those otherwise arising in the ordinary course of business, will not have a material adverse effect on our
business or consolidated financial condition. It is possible, however, that future developments could result in an unfavorable
outcome for any lawsuit or investigation in which we or our subsidiaries are involved, which may have a material adverse effect
on our business or our results of operations for one or more quarterly reporting periods. See “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations-Financial Condition - Certain Litigation and Other
Contingencies” for more information regarding material pending legal proceedings and ongoing government investigations.
Reputational and ESG risk may impact our results.
Our ability to originate and maintain deposit accounts is highly dependent upon customer and other external
perceptions of our business practices and/or our financial health. Adverse perceptions regarding our business practices and/or
our financial health could damage our reputation in both the customer and funding markets, leading to difficulties in generating
and maintaining accounts as well as in financing them. Adverse developments with respect to customer or other external
perceptions regarding the practices of our competitors, or our industry as a whole, may also adversely impact our reputation.
While we carefully monitor internal and external developments for areas of potential reputational risk and have established
governance structures to assist in evaluating such risks in our business practices and decisions, adverse reputational impacts on
third parties with whom we have important relationships may also adversely impact our reputation. Adverse impacts on our
reputation, or the reputation of our industry, may also result in greater regulatory and/or legislative scrutiny, which may lead to
laws, regulations or regulatory actions that may change or constrain the manner in which we engage with our customers and the
products and services we offer. Adverse reputational impacts or events may also increase our litigation risk.
Our business faces increasing public, investor, activist, legislative and regulatory scrutiny related to ESG and “anti-
ESG” developments. We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as
DEIB, environmental stewardship, human capital management, support for our local communities, corporate governance and
transparency, or fail to consider ESG factors in our business operations. Additionally, investors and shareholder advocates are
placing ever increasing emphasis on how corporations address ESG issues in their business strategy when making investment
decisions and when developing their investment theses and proxy recommendations. We may incur meaningful costs with
respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may suffer.
In response to ESG developments, there are increasing instances of “anti-ESG” legislation, regulation, and litigation
that could have unintended impacts on ordinary banking operations and increase litigation risk related to actions we choose to
take. If legislatures in the states in which we operate adopt legislation intended to protect certain industries by limiting or
prohibiting consideration of business and industry factors in lending activities, certain portions of our lending operations may
be impacted.
Our framework for managing risks may not be effective in mitigating risk and any resulting loss.
Our risk management framework seeks to mitigate risk and any resulting loss. We have established processes intended
to identify, measure, monitor, report and analyze the types of risk to which we are subject, including liquidity, credit, market,
interest rate, operational, legal and compliance, and reputational risk. However, as with any risk management framework, there
are inherent limitations to our risk management processes and strategies. There may exist, or develop in the future, risks that we
have not appropriately anticipated or identified. Also, breakdowns in our risk management framework could have a material
adverse effect on our financial condition and results of operations.
Certain weather conditions have the potential to disrupt our business and adversely impact the operations and
creditworthiness of our clients.
We have operations in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee
and Texas, which include areas susceptible to hurricanes, tornados and tropical storms. Such weather conditions can disrupt our
operations, result in damage to our branch office locations or negatively affect the local economies in which we operate. We
cannot predict whether or to what extent damage caused by future hurricanes, tornados, tropical storms or other adverse weather
events will affect our operations or the economies in our market areas, but such weather conditions could result in a decline in
loan originations and an increase in the risk of delinquencies, foreclosures or loan losses. Our business or results of operations
may be adversely affected by these and other negative effects of devastating hurricanes, tornados, tropical storms or other
adverse weather events.
46
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
Cadence Bank’s information security program is designed to protect the security, availability, integrity, and
confidentiality of our computer systems, networks, software and information assets, including client and other sensitive data.
The program is comprised of policies, guidelines, and procedures intended to align with regulatory guidance and the ISO Code
of Practice for Information Security Controls. Assessing, identifying and managing cybersecurity related risks are integrated
into our overall enterprise risk management process.
Cybersecurity Risk Management and Strategy
At Cadence Bank, we encourage all associates to be responsible for the security and confidentiality of client
information. We communicate this responsibility to associates upon hiring and regularly throughout their employment. We
regularly provide associates with information security awareness training, including concerning the recognition and appropriate
handling of potential phishing activity which could potentially place client or employee data, or other sensitive company data,
at risk. Our Enterprise Risk Management process integrates identification, assessment, and management of cybersecurity risks.
We additionally maintain procedures for the safe storage, handling, and secure disposal of sensitive information.
Cadence Bank protects its network and information assets with industry-tested security products and processes. Our
information security team actively monitors company networks and systems to detect suspicious or malicious activity. Internal
and external resources attend to monitoring, investigation, and defense of the Company’s network and computer systems. We
conduct vulnerability scans, and contract with third-party vendors to perform penetration tests against the Company’s network.
The Company also engages additional expert cyber consultants, as necessary and appropriate. Our Third-Party Risk
Management program also engages with different departments within the Company in order to identify and evaluate cyber risks
of our vendors and external service providers so that the relevant lines of business can also engage to manage potential cyber
risks of the vendor. Our information security program includes review of known cyber issues of our vendors and consideration
of any action by the Company in response. Additionally, the Company evaluates potential cyber risks, as appropriate, in its risk
assessments.
As part of our information security program, we have adopted a Cyber Crisis and Data Breach Response Plan (Incident
Response Plan), which is overseen primarily by our CISO in close collaboration with our CIO, Legal, and other relevant leaders
at the Company. The Incident Response Plan sets forth the Company’s processes and procedures for responding to significant
cybersecurity incidents and establishes procedures for escalation and reporting of potentially significant cybersecurity incidents
to senior management, Legal, and/or our Board Risk Committee, as appropriate.
Our Information Security Event Response Team, which includes senior members of the Legal, Information Security,
Enterprise Risk Management, Operations Management, Compliance, Audit, Security, Business Continuity, and Corporate
Communications departments, performs, at least annually, exercises to simulate responses to cybersecurity incidents. Each
exercise results in lessons learned and subsequent enhancements to the Incident Response Plan.
While we have experienced cybersecurity incidents in the past – including an incident arising out of the zero-day
vulnerability of Progress’ MOVEit software described in Item 3 “Legal Proceedings” – to date none have materially affected or
are reasonably likely to materially affect the Company or our business strategy, financial position, results of operations and/or
cash flows. Despite our efforts, there can be no assurance that our cybersecurity risk management processes and measures
described will be fully implemented, complied with, or effective in protecting our systems and information. We face risks from
certain cybersecurity threats that, if realized, are reasonably likely to materially affect our business strategy, result of operations
or financial condition. See Item 1A. “Risk Factors” for further discussion of the material risks associated with an interruption or
breach in our information systems or infrastructure.
Cybersecurity Governance
Our Board of Directors is responsible for overseeing the Company’s business, affairs, and material risks, including
risks associated with cybersecurity threats. The Board oversees the Company’s corporate risk governance processes primarily
through its committees, and oversight of cybersecurity risks is delegated primarily to our Risk Committee. The Risk Committee
receives cybersecurity and relevant updates from our CISO and CIO on a quarterly basis, as well as relevant risk assessments
47
and reporting on privacy or data breaches. At least annually, our CISO attends a meeting with the Risk Committee to update
members on material cybersecurity developments and risks. Additionally, the Board receives an information security program
summary report quarterly from the CISO, outlining the overall status of our information security program and the Company’s
compliance with regulatory guidelines.
The Board’s oversight of cybersecurity risk is supported by our CISO, who reports to the CIO. Our CISO is a veteran
information technology executive with decades of experience in the information technology field. The CISO has managed the
Company’s information security program for over two decades, and worked for the Company for a number of years before he
assumed that role. The CISO has a B.S. in Computer Science, and minored in Management Information Systems and Math. He
is a CISSP and a CISM. Our CIO has more than two decades experience working in the information technology space in the
private sector and before that spent a significant number of years working in related fields in the U.S. Air Force. He holds a
B.S. in Management Science, and an MBA in Information Technology.
Our CISO is responsible for the Company’s information security program. In this role, the CISO manages the
Company’s information security and day-to-day cybersecurity operations and supports the information security risk oversight
responsibilities of the Board and its committees. The CISO is a member of the Company’s Corporate Operations group and
reports to our CIO, who in turn reports to our COO. The CISO attends Risk Committee meetings at the invitation of the
Committee, provides cybersecurity and other relevant updates to the Risk Committee on a quarterly basis, and meets with the
Risk Committee in executive session at least annually to update committee members on material cybersecurity developments
and risks. The CISO also provides the quarterly information security program summary report to the Board.
ITEM 2. PROPERTIES.
At December 31, 2023, the physical properties of the Company are located in the states of Alabama, Arkansas, Florida,
Georgia, Louisiana, Mississippi, Missouri, Tennessee and Texas. The Company maintains dual headquarters in Houston, Texas
and Tupelo, Mississippi. The Company’s main office is located at One Mississippi Plaza, 201 South Spring Street in the central
business district of Tupelo, Mississippi in a seven-floor, modern, glass, concrete and steel office building owned by the
Company. The Company occupies approximately 98% of the space, with the remainder leased to an unaffiliated tenant. The
Company also owns an additional 290 buildings that provide space for branch banking, computer operations, lease servicing,
mortgage banking, warehouse needs and other general purposes. In addition to the facilities the Company owns, 93 branch-
banking, mortgage banking, and operational facilities that are occupied under leases with unexpired terms ranging from one to
twenty-seven years. Of the owned and leased properties described above, 372 properties are used by the Community and
Corporate Banking segments, 113 are used by the Mortgage segment, 39 properties are used by the Banking Services segment,
and 14 properties are used by the General Corporate and Other segment. Management considers all of the Company’s owned
buildings and leased premises to be in good condition. None of the Company’s properties are subject to material encumbrances.
ITEM 3. LEGAL PROCEEDINGS.
As reflected in publicly available information, the Company was impacted by the zero-day vulnerability of Progress’
MOVEit software. That has not resulted, and is not expected to result, in a material impact to our business strategy, results of
operations or financial condition. The Company has been named as a defendant in class action litigation arising from this
incident, which is pending in the District of Massachusetts. Addressing cybersecurity risks is a priority for the Company, and
the Company is committed to ongoing enhancement of its systems of internal controls and business continuity and disaster
recovery plans. See Item 1A. “Risk Factors” for further discussion of the risks associated with an interruption or breach in our
information systems or infrastructure.
Additional information in response to this item is incorporated herein by reference to “Note 22 - Commitments and
Contingent Liabilities - Litigation” in the notes to the consolidated financial statements included in Part II., Item 8. “Financial
Statements” of this Report.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
48
PART II—FINANCIAL INFORMATION
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET FOR CAPITAL STOCK
The common stock of the Company trades on the NYSE under the symbol “CADE,” and the 5.50% Series A Non-
Cumulative Perpetual Preferred Stock trades on the NYSE under the symbol “CADE Pr A.”
HOLDERS OF RECORD
As of February 20, 2024, there were 6,138 shareholders of record of the Company’s common stock.
DIVIDENDS
The Company declared cash dividends each quarter in an aggregate annual amount of $0.94 and $0.88 per share of
common stock during 2023 and 2022, respectively. Future dividends, if any, will vary depending on the Company’s
profitability, anticipated capital requirements and applicable federal and state regulations. Under Mississippi law, the Company
must obtain the non-objection of the Commissioner of the MDBCF prior to paying any dividend on the Company’s common
stock. In addition, the Company may not pay any dividends if, after paying the dividend, it would be undercapitalized under
applicable capital requirements. The Company is further restricted by the FDIC’s authority to prohibit the Company from
engaging in business practices that the FDIC considers to be unsafe or unsound, which, depending on the financial condition of
the Company, could include the payment of dividends. There can be no assurance that the FDIC or other regulatory bodies will
not limit or prohibit future dividends. Finally, so long as any shares of our Series A Preferred Stock remain outstanding, unless
we have paid in full (or declared and set aside funds sufficient for) applicable dividends on the Series A Preferred Stock, we
may not declare or pay any dividend on our common stock, other than a dividend payable solely in shares of common stock or
in connection with a shareholder rights plan. See “Item 1. Business – Regulation and Supervision” included herein for more
information on restrictions and limitations on the Company’s ability to pay dividends.
ISSUER PURCHASES OF EQUITY SECURITIES
The Company had repurchases of shares of common stock during the quarter ended December 31, 2023 as follows:
Period
October 31, 2023
November 30, 2023
December 31, 2023
Total
Total Number
of Shares
Purchased(1) (2)
Average Price
Paid per Share
614 $
3,704
2,619
6,937 $
20.66
22.26
30.17
25.10
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs(2)
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
or Programs(2)(3)
—
—
—
10,000,000
10,000,000
10,000,000
(1) This column includes 614 shares redeemed in October 2023, 3,704 shares redeemed in November 2023, and 2,619 shares redeemed in
December 2023 from employees for tax withholding purposes for stock compensation. There were no shares repurchased under the stock
repurchase program in the fourth quarter of 2023.
(2) On December 14, 2022, the Company announced a new share repurchase program whereby the Company could acquire up to an
aggregate of 10,000,000 shares of its common stock in the open market at prevailing market prices or in privately negotiated transactions
during the period between January 3, 2023 through December 29, 2023. The extent and timing of any repurchases depends on market
conditions and other corporate, legal and regulatory considerations. Repurchased shares are held as authorized but unissued shares.
These authorized but unissued shares will be available for use in connection with the Company’s equity incentive plans, other
compensation programs, other transactions or for other corporate purposes as determined by the Company’s Board of Directors. At the
time of expiration on December 29, 2023, no shares had been repurchased under this program.
49
(3) On December 13, 2023, the Company announced a new share repurchase program whereby the Company may acquire up to an
aggregate of 10,000,000 shares of its common stock in the open market at prevailing market prices or in privately negotiated transactions
during the period January 2, 2024 through December 31, 2024. The extent and timing of any repurchases depends on market conditions
and other corporate, legal and regulatory considerations. Repurchased shares are held as authorized but unissued shares. These
authorized but unissued shares will be available for use in connection with the Company’s equity incentive plans, other compensation
programs, other transactions or for other corporate purposes as determined by the Company’s Board of Directors.
RECENT SALES OF UNREGISTERED SECURITIES
From time to time, the Company issues securities in certain transactions that are described in its period and current
reports. The securities issued in these transactions are issued in reliance on the exemption provided by Section 3(a)(2) of the
Securities Act of 1933, as amended, because the sales involve securities issued by a bank.
STOCK PERFORMANCE GRAPH
The graph below compares the annual percentage change in the cumulative total shareholder return on the Company’s
common stock against the cumulative total return of the S&P 500 Index and the KBW Bank Index for a period of five years.
The graph assumes an investment of $100 in the Company’s common stock and in each respective index on December 31, 2018
and reinvestment of dividends without commissions. The KBW Bank Index is a modified cap-weighted index consisting of 24
exchange-listed National Market System stocks, representing national money center banks and leading regional institutions.
The performance graph represents past performance and should not be considered to be an indication of future performance.
Index
Cadence Bank
S&P 500 Index
KBW Bank Index
Period Ending
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
100.00
100.00
100.00
123.03
131.47
136.12
111.18
155.65
122.09
123.83
200.29
168.90
106.07
163.98
132.76
132.54
207.04
131.58
This stock performance graph and related information shall not be deemed to be “soliciting material” or to be “filed”
with the FDIC or subject to Regulation 14A or 14C of the Exchange Act or to the liabilities of Section 18 of the Exchange Act,
except to the extent that the Company specifically requests that such information be treated as soliciting material or specifically
incorporates it by reference into such filing.
50
Comparison of Five-Year Cumulative Total ReturnsCadence BankS&P 500 IndexKBW Bank Index12/31/1812/31/1912/31/2012/31/2112/31/2212/31/2350100150200250
ITEM 6. [RESERVED]
51
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
The Company is a regional bank with dual headquarters in Houston, Texas and Tupelo, Mississippi with
approximately $48.9 billion in total assets at December 31, 2023. The Company has commercial banking operations in
Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri, Tennessee, and Texas. The Company and its
subsidiaries provide commercial banking, leasing, mortgage origination and servicing, brokerage, trust, investment advisory,
and payroll services to corporate customers, local governments, individuals, and other financial institutions through an
extensive network of branches and offices.
Management’s discussion and analysis provides a narrative discussion of the Company’s financial condition and
results of operations. For a complete understanding of the following discussion, refer to the consolidated financial statements
and related notes presented elsewhere in this Report. Management’s discussion and analysis should also be read in conjunction
with the risk factors included in Item 1A of this Report. This discussion and analysis is based on reported financial information,
and certain amounts for prior years have been reclassified to conform with the current financial statement presentation.
The financial condition and operating results of the Company are heavily influenced by economic trends nationally
and in the specific markets in which the Company’s subsidiaries provide financial services. Generally, the pressures of the
national and regional economic cycle create a difficult operating environment for the financial services industry. During such
times, the Company is not immune to pressures and any economic downturn may have a negative impact on the Company and
its customers in all of the markets it serves. Management believes future weakness in the economic environment could
adversely affect the strength of the credit quality of the Company's assets overall. Therefore, management will continue to focus
on early identification and resolution of any credit issues.
The largest source of the Company’s revenue is derived from its corporate and community banking operations. The
financial condition and operating results of the Company are affected by the level and volatility of interest rates on loans,
investment securities, deposits, and other borrowed funds, and the impact of economic downturns on loan demand, collateral
values, and creditworthiness of existing borrowers. The financial services industry is highly competitive and heavily regulated.
The Company’s success depends on its ability to compete aggressively within its markets while maintaining sufficient asset
quality and cost controls to generate net income.
The information that follows is provided to enhance comparability of financial information between periods and to
provide a better understanding of the Company’s operations.
Significant 2023 Events
During 2023, the banking industry experienced significant stress with several widely reported bank failures and
industry wide concerns related to liquidity, deposit outflows, unrealized securities losses and eroding consumer confidence in
the banking system. Despite these negative industry events, our year-to-date results reflect continued strength in our balance
sheet, as we continued to add quality loan growth while maintaining strong liquidity and capital, even in the midst of a unique
period for the banking industry. Additionally, our strong capital and earnings allowed us the flexibility to capitalize on the rate
environment by executing balance sheet optimization transactions in 2023 whereby we sold approximately $4.6 billion in
available-for-sale securities in which the proceeds from the sale were redeployed in accretive activities including reinvestment
in higher-yielding securities, funding loans and reducing existing higher cost brokered deposits. Given the industry volatility
experienced in the first quarter of 2023, we proactively increased balance sheet liquidity in addition to our significant off-
balance sheet liquidity availability. During the second quarter of 2023, as the volatility and bank closures abated, we reduced
our excess liquidity, but continued to maintain higher than historic levels. Also, in the fourth quarter of 2023, we completed the
sale of Cadence Insurance for approximately $904 million. We believe this transaction will unlock significant value for our
shareholders and better position our Company for future success. We were able to both strengthen our capital position and
utilize a portion of this capital to reposition a meaningful portion of our securities portfolio as mentioned above. At
December 31, 2023, the total of our cash and cash equivalents and overnight borrowing availability exceeded the total of our
uninsured and uncollateralized deposits. Notably, our core deposit base showed little change during 2023, a testament to the
granularity of our deposits, the diversity of our customer base by both business mix and geography, and the strength of our
bankers and their continuous focus on our customers.
On July 31, 2023, the Company closed 35 branches as part of a branch optimization initiative in certain markets. We
believe branch optimization creates a stronger and more efficient branch network by aggregating customers to other nearby
branch locations and through continued migration to remote banking and digital channels. While branches remain an integral
52
part of our customer experience, constantly evolving innovations in banking have provided customers with new choices and
convenient ways to access our services: in person, ATM/ITM, online, mobile and by telephone. Our focus remains on elevating
the customer experience through relationship banking, expanded products, services and technology.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
In addition to financial ratios based on measures defined by U.S. GAAP, the Company has identified “total tangible
shareholders’ equity,” “tangible common shareholders’ equity,” “total tangible common shareholders’ equity (excluding
AOCI),” “total tangible assets,” “total tangible assets (excluding AOCI),” “tangible shareholders’ equity to tangible assets,”
“tangible common shareholders’ equity to tangible assets,” “tangible common shareholders’ equity to tangible assets (excluding
AOCI),” “tangible common book value per share,” and “tangible book value per common share (excluding AOCI)” as non-
GAAP financial measures used when evaluating the performance of the Company.
•
•
•
•
•
•
•
Total tangible shareholders’ equity is defined by the Company as total shareholders’ equity less goodwill and
identifiable intangible assets.
Total tangible common shareholders' equity is defined by the Company as total shareholders' equity less preferred
stock, goodwill, and other identifiable intangible assets.
Total tangible common shareholders' equity, excluding AOCI, is defined by the Company as total shareholders' equity
less preferred stock, goodwill, other identifiable intangible assets, and AOCI.
Total tangible assets are defined by the Company as total assets less goodwill and identifiable intangible assets.
Total tangible assets, excluding AOCI, are defined by the Company as total assets less goodwill, identifiable intangible
assets, and AOCI.
Tangible common book value per share is defined by the Company as tangible common shareholders’ equity divided
by total shares of common stock outstanding.
Tangible book value per common share, excluding AOCI, is defined by the Company as tangible common
shareholders' equity less AOCI divided by total shares of common stock outstanding.
Management believes the ratios of tangible shareholders’ equity to tangible assets, tangible common shareholders’
equity to tangible assets and tangible common shareholders’ equity to tangible assets (excluding AOCI) to be important to
investors who are interested in evaluating the adequacy of the Company’s capital levels. Management also believes that
tangible common book value per share and tangible common book value per share (excluding AOCI) are important to investors
who are interested in changes from period to period in book value per share exclusive of changes in intangible assets.
53
The following table reconciles these Non-GAAP financial measures as presented above to U.S. GAAP financial
measures as reflected in the Company’s consolidated financial statements for the periods indicated:
TABLE 1—NON-GAAP FINANCIAL MEASURES
(Dollars in thousands)
Total tangible assets, excluding AOCI
Total assets
Less: Goodwill
Other identifiable intangible assets
Total tangible assets
Less: AOCI
Total tangible assets, excluding AOCI
Total tangible common shareholders' equity, excluding AOCI
Total shareholders' equity
Less: Goodwill
Other identifiable intangible assets
Total tangible shareholders' equity
Less: Preferred stock
Total tangible common shareholders' equity
Less: AOCI
Total tangible common shareholders' equity, excluding AOCI
Year Ended December 31,
2022
2021
2023
$
$
$
$
$
$
$
48,934,510
1,367,785
100,191
47,466,534
(761,829)
48,228,363
5,167,843
1,367,785
100,191
3,699,867
166,993
3,532,874
(761,829)
4,294,703
$
$
$
$
$
$
$
48,653,414
1,367,785
119,579
47,166,050
(1,222,538)
48,388,588
4,311,374
1,367,785
119,579
2,824,010
166,993
2,657,017
(1,222,538)
3,879,555
$
$
$
$
$
$
$
47,669,751
1,321,483
190,455
46,157,813
(139,369)
46,297,182
5,247,987
1,321,483
190,455
3,736,049
166,993
3,569,056
(139,369)
3,708,425
Total common shares outstanding
182,871,775
182,437,265
188,337,658
Tangible shareholders' equity to tangible assets
Tangible common shareholders' equity to tangible assets
Tangible common shareholders' equity, excluding AOCI, to tangible assets,
excluding AOCI
Tangible common book value per share
Tangible book value per common share, excluding AOCI
$
$
7.79 %
7.44 %
8.90 %
19.32
23.48
$
$
5.99 %
5.63 %
8.02 %
14.56
21.27
$
$
8.09 %
7.73 %
8.01 %
18.95
19.69
54
FINANCIAL HIGHLIGHTS
The following table presents financial highlights for the periods indicated:
TABLE 2—FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
Common share data:
Basic (loss) earnings per share from continuing operations
Basic earnings per share
Diluted (loss) earnings per share from continuing operations
Diluted earnings per share
Cash dividends per share
Book value per share
Tangible common book value per share (1)
Tangible book value per common share, excluding AOCI (1)
Dividend payout ratio
Financial Ratios:
Return on average assets from continuing operations
Return on average assets
Return on average shareholders' equity from continuing operations
Return on average shareholders' equity
Return on average common shareholders' equity from continuing operations
Return on average common shareholders' equity
Total shareholders' equity to total assets
Total common shareholders' equity to total assets
Tangible common shareholders' equity to tangible assets (1)
Tangible common shareholders' equity, excluding AOCI, to tangible assets,
excluding AOCI (1)
Net interest margin-fully taxable equivalent
Credit Quality Ratios:
Net charge-offs (recoveries) to average loans and leases
Provision for credit losses to average loans and leases
ACL to net loans and leases
ACL to NPL
ACL to NPA
NPL to net loans and leases
NPA to total assets
Capital Adequacy Ratios:
Common Equity Tier 1 capital
Tier 1 capital
Total capital
Tier 1 leverage capital
As of and For the Year Ended December 31,
2022
2021
2023
$
$
(0.03)
2.92
(0.03)
2.92
0.94
27.35
19.32
23.48
32.22 %
0.01 %
1.11
0.08
12.08
(0.13)
12.33
10.56
10.22
7.44
8.90
3.08
0.23 %
0.25
1.44
216.54
210.46
0.67
0.45
11.62 %
12.06
14.32
9.30
$
2.39
2.47
2.37
2.46
0.88
22.72
14.56
21.27
35.77 %
0.94 %
0.97
9.78
10.13
9.93
10.30
8.86
8.52
5.63
8.02
3.15
— %
0.02
1.45
410.22
386.04
0.35
0.23
10.22 %
10.66
12.81
8.43
1.41
1.54
1.40
1.54
0.78
26.98
18.95
19.69
50.65 %
0.60 %
0.65
5.36
5.85
5.34
5.86
11.01
10.66
7.73
8.01
2.96
(0.03) %
0.81
1.66
346.04
275.52
0.48
0.34
11.11 %
11.61
13.86
9.90
(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures and Reconciliations.”
As of December 31, 2023, the target range for the federal funds rate was 5.25% to 5.50%. In December 2023, the
Federal Reserve released projections that showed the federal funds rate may decrease to 4.6% by the end of 2024. While there
55
can be no such assurance that any increases or decreases in the federal funds rate will occur, these projections imply up to a 75
basis point decrease during 2024. The increase in interest rates have had a pronounced effect on both our balance sheet as well
as our earnings. As seen in the following sections, the increase in net interest revenue for 2023 compared to 2022 and 2022
compared to 2021, resulted from a combination of higher yields on interest-earning assets and a shift in the mix of interest-
earning assets. The 2023 to 2022 increase in interest revenue was mostly offset by an increase in interest expense, primarily on
deposits due to both a mix shift of deposits out of noninterest bearing and into interest bearing, and an increase in deposit rates.
See “Net Interest Revenue” for further information.
The Company reported net income available to common shareholders of $532.8 million for 2023, compared to $453.7
million in 2022 and $185.7 million in 2021. The primary factor contributing to the $79.1 million increase in net income
available to common shareholders in 2023 was the $706.6 million gain on the sale of Cadence Insurance, included in
discontinued operations. The gain in discontinued operations was partially offset by the $458.8 million decrease in noninterest
revenue from $342.5 million in 2022, to negative $116.3 million for the 2023. This decrease was primarily due to the $435.6
million loss on sale of securities as a result of our securities portfolio restructuring during 2023. Also contributing to the decline
was an increase in noninterest expense from $1.1 billion in 2022 to $1.2 billion in 2023. Net interest revenue remained flat at
$1.4 billion for 2023 and 2022. A primary factor contributing to the $268.0 million increase in net income available to common
shareholders in 2022 compared to 2021, was the impact of the Cadence Bancorporation bank merger which occurred during
2021. The increase in net interest revenue from $805.7 million in 2021 to $1.4 billion in 2022 combined with the increase in
noninterest revenue from $242.9 million in 2021 to $342.5 million in 2022 were offset somewhat by the increase in noninterest
expense from $685.8 million in 2021 to $1.1 billion in 2022. Almost all categories of noninterest expense increased in 2022 as a
result of the Cadence Bancorporation merger in the fourth quarter of 2021. The Company recorded provision for credit losses
of $80.0 million, $7.0 million and $138.1 million for 2023, 2022 and 2021, respectively.
Net interest revenue for 2023 and 2022 remained relatively flat at $1.4 billion each compared to $805.7 million for
2021. In 2023, interest revenue increased due to increased interest rates which resulted in an increase on yields earned on
interest-earning assets coupled with growth in average balances in the loan and lease portfolio. The increase in interest revenue
was mostly offset by the increase in interest expense due to a mix shift from noninterest bearing deposits into interest bearing,
as well as increased market interest rates paid on average interest bearing liabilities for deposits and short-term borrowings.
Average interest-bearing liabilities increased to $32.7 billion in 2023 from $28.5 billion in 2022. As a result of the increase in
average interest-bearing liabilities coupled with the increase in rates paid on average interest bearing liabilities, interest expense
increased $749.5 million, or 358.1%, in 2023, compared to 2022.
The 67.7% increase in net interest revenue in 2022 compared to 2021 was primarily a result of the increase in interest
revenue related to the increasing average balances of the loan and lease portfolio and available-for-sale securities resulting from
the merger previously mentioned as well as the increase in short-term interest rates. The increase in interest revenue was offset
somewhat by the increase in average interest-bearing liabilities, as average interest-bearing liabilities increased to $28.5 billion
in 2022 from $17.9 billion in 2021, with this increase also a result of the previously mentioned merger coupled with the
increase in rates paid on average interest bearing liabilities. As a result of the increase in average interest-bearing liabilities
coupled with the increase in rates paid on average interest bearing liabilities, interest expense increased 174.2% in 2022
compared to 2021.
The Company attempts to diversify its revenue streams with noninterest revenue received from mortgage banking
operations, wealth management activities and other activities that generate fee income. Noninterest revenue for 2023 was
negative $116.3 million, compared to positive $342.5 million for 2022 and positive $242.9 million for 2021. The primary
contributors to the decrease in noninterest revenue from 2022 to 2023 were increased security losses of $435.3 million as a
result of our securities portfolio restructuring in 2023 and a decrease in mortgage banking revenue of $25.9 million. These
decreases were partially offset by a $16.0 million increase in other noninterest revenue across various smaller fee revenue
sources. Excluding security gains and losses, noninterest revenue for 2023, was $319.3 million, a decrease of $23.6 million or
6.9% from $342.9 million compared to 2022. The primary contributor to the increase in noninterest revenue from 2021 to 2022
was the Cadence Bancorporation merger that occurred during 2021.
56
Noninterest expense in 2023 was $1.2 billion, an increase of 4.2% from $1.1 billion for 2022, which was an increase
of 61.8% from $685.8 million for 2021. The increase in noninterest expense in 2023 compared to 2022 was primarily a result of
increases deposit insurance assessments related to the FDIC special assessment and other noninterest expense, partially offset
by decreases in merger expense. In 2023, salaries and employee benefits remained relatively flat compared to 2022. The
increase in noninterest expense in 2022 compared to 2021 was primarily a result of salary increases, increased commissions and
compensation costs associated with the bank mergers in 2021. In 2022, salaries and employee benefits increased $260.7
million, or 69.7% compared to 2021, including a charge of $9.0 million in 2022 in accordance with ASC 715, Compensation -
Retirement Benefits to reflect the settlement accounting impact of an elevated number of retirements and related lump sum
pension payouts during 2022 compared to a related charge of $3.1 million in 2021. Other increases in noninterest expense for
2022 compared to 2021 were also primarily the result of the bank mergers occurring in 2021 and included the increase in
occupancy and equipment, data processing and software and amortization of intangibles.
RESULTS OF OPERATIONS
The following is a summary of our results of operations for the periods indicated:
TABLE 3—SUMMARY OF RESULTS OF OPERATIONS
(Dollars in thousands)
Earnings Summary:
Interest revenue
Interest expense
Net interest revenue
Provision for credit losses
$
Net interest revenue, after provision for credit losses
Noninterest revenue
Noninterest expense
(Loss) Income from continuing operations, before income taxes
Income tax (benefit) expense
Income from continuing operations
Income from discontinued operations, before income taxes
Income tax expense from discontinued operations
Income from discontinued operations, net of income taxes
Net income
Less: preferred dividends
Net income available to common shareholders
$
Net Interest Revenue
Year Ended December 31,
2022
2021
2023
2,310,167 $
958,811
1,351,356
80,000
1,271,356
(116,343)
1,155,923
(910)
(4,594)
3,684
727,591
188,971
538,620
542,304
9,488
532,816 $
1,560,581 $
209,290
1,351,291
7,000
1,344,291
342,485
1,109,754
577,022
129,705
447,317
22,353
6,433
15,920
463,237
9,488
453,749 $
882,033
76,322
805,711
138,062
667,649
242,905
685,821
224,733
45,958
178,775
22,195
5,808
16,387
195,162
9,488
185,674
Net interest revenue is the difference between interest revenue earned on assets, such as loans, leases and securities,
and interest expense paid on liabilities, such as deposits and borrowings, and continues to provide the Company with its
principal source of revenue. Net interest revenue is affected by the general level of interest rates, changes in interest rates and
changes in the amount and composition of interest earning assets and interest bearing liabilities. One of the Company’s long-
term objectives is to manage interest earning assets and interest bearing liabilities to maximize net interest revenue, while
balancing interest rate, credit and liquidity risk. Net interest margin is determined by dividing fully taxable equivalent (FTE) net
interest revenue by average earning assets. For purposes of the following discussion, revenue from tax-exempt loans and
investment securities have been adjusted to an FTE basis, using an effective tax rate of 21% for the years ended December 31,
2023, 2022 and 2021.
57
The following table presents average interest earning assets, average interest bearing liabilities, net interest revenue-
FTE, net interest margin-FTE and net interest rate spread for each of the years presented:
TABLE 4—CONSOLIDATED AVERAGE BALANCES AND YIELD/RATE ANALYSIS
(Dollars in thousands)
ASSETS
Loans and leases (net of unearned income)
(1)(2)
2023
2022
2021
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
$ 31,913,925 $ 2,006,549
6.29 % $ 28,418,658 $ 1,344,195 4.73 % $ 17,055,429 $ 759,648
4.45 %
Loans held for sale, at fair value
85,961
4,450
5.18
122,079
7,554
6.19
278,447
8,035
2.89
Available-for-sale securities, at fair value:
Taxable
Tax-exempt (3)
Other investments
9,971,325
208,122
2.09
13,163,403
183,915
1.40
9,152,620
111,047
1.21
351,010
11,653
3.32
1,629,036
83,577
5.13
432,969
923,861
12,758
2.95
16,371
1.77
157,327
636,153
4,381
2.78
1,310
0.21
Total interest earning assets and revenue
43,951,257
2,314,351
5.27 % 43,060,970
1,564,793
3.63 % 27,279,976
884,421
3.24 %
Other assets
Allowance for credit losses
Total
5,204,505
451,809
$ 48,703,953
4,911,883
439,696
$ 47,533,157
3,004,215
289,543
$ 29,994,648
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
Interest bearing demand and money market
$ 18,314,649 $ 472,723
2.58 % $ 18,541,402
109,893
0.59 % $ 11,114,242
33,688
0.30 %
Savings
Time
3,028,875
14,955
0.49
3,657,718
5,519
0.15
2,946,629
2,764
0.09
6,674,231
246,476
3.69
3,545,402
24,253
0.68
2,784,733
24,394
0.88
Fed funds purchased, securities sold under
agreement to repurchase and other
800,170
32,590
4.07
923,973
13,432
1.45
713,785
838
0.12
Short-term FHLB borrowings
Short-term BTFP borrowings
1,389,759
68,235
4.91
1,325,381
36,863
2.78
2,052,055
104,696
5.10
—
—
—
3
—
—
—
—
—
Subordinated and long-term debt
452,645
19,136
4.23
465,004
19,330
4.16
341,170
14,638
4.29
Total interest bearing liabilities and
expense
32,712,384
958,811
2.93 % 28,458,880
209,290
0.74 % 17,900,562
76,322
0.43 %
Demand deposits - noninterest bearing
10,610,698
893,438
44,216,520
4,487,433
$ 48,703,953
Other liabilities
Total liabilities
Shareholders' equity
Total
Net interest revenue-FTE
Net interest margin-FTE
Net interest rate spread
Interest bearing liabilities to interest earning
assets
13,733,384
766,490
42,958,754
4,574,403
$ 47,533,157
8,382,997
373,514
26,657,073
3,337,575
$ 29,994,648
$ 1,355,540
$ 1,355,503
$ 808,099
3.08 %
2.33 %
74.43 %
3.15 %
2.90 %
66.09 %
2.96 %
2.82 %
65.61 %
(1)
Includes taxable equivalent adjustment to interest of approximately $1.7 million, $1.5 million, and $1.5 million in 2023, 2022, and 2021, respectively,
using an effective tax rate of 21% for all periods presented.
(2) Nonaccrual loans are included in loans and leases (net of unearned income). Nonaccrual loans were $216.1 million, $98.7 million, and $122.1 million in
2023, 2022, and 2021, respectively.
(3)
Includes taxable equivalent adjustment to interest of approximately $2.4 million, $2.7 million, and $0.9 million in 2023, 2022, and 2021, respectively,
using an effective tax rate of 21% for all periods presented.
Net interest revenue-FTE was flat at $1.4 billion in each of 2023 and 2022, and represented an increase of 67.7% from
$808.1 million in 2021. The increase in interest revenue-FTE during 2023 was due to the increased interest rates which resulted
in an increase on yields earned on interest-earning assets coupled with growth in average balances in the loan and lease
portfolio due to loan growth. This increase was offset by the increased rates paid on average interest bearing liabilities for
deposits and short-term borrowings, and a mix shift out of noninterest bearing deposits into time deposits. Average loans
increased from 66.0% of average interest-earning assets in 2022 to 72.6% in 2023. The increase in net interest revenue-FTE for
2022 compared to 2021 was primarily a result of the increase in interest revenue-FTE related to the increases in average
balances in available-for-sale securities and the loan and lease portfolio from the three bank mergers in 2021. The mix of
58
average interest-earning assets improved during 2022, and average loans and leases, net of unearned income increased from
62.5% of average interest-earning assets in 2021 to 66.0% in 2022. In 2022, market interest rates increased as a result of the
increases in the federal funds target rate effected by the Federal Reserve as part of its actions to reduce the inflation rate. This
increase in market interest rates resulted in an increase in yields earned on those interest-earning assets. Additionally, the
average interest bearing liabilities increased due primarily to the acquisitions mentioned above. The rates paid on average
interest bearing liabilities increased as rates paid for deposits and short-term debt increased due to the increase in market
interest rates.
Interest revenue-FTE increased 47.9% to $2.3 billion in 2023 from $1.6 billion in 2022, and an increase of 76.9% from
$884.4 million in 2021. The increase in interest revenue-FTE for 2023 compared to 2022 was primarily a result of the increase
in yields earned on interest-earning assets over the prior year due to the impact of rising interest rates on loan portfolio repricing
activity and new loan production, as well as a mix shift as the Company deployed cash flow from lower yielding securities into
higher yielding loans and available-for-sale securities. Additionally, interest revenue-FTE included $25.9 million (0.08%),
$46.8 million (0.16%) and $26.2 million (0.15%) in accretion related to the purchase discounts on acquired loans in 2023, 2022,
and 2021 respectively. The increase in interest revenue-FTE in 2022 compared to 2021 was primarily a result of increases in
average balances in the loan and lease portfolio and available-for-sale securities related to the aforementioned bank acquisitions
and the increase in yields earned on interest-earning assets over the prior year due to the increase in market interest rates that
occurred during 2022.
Interest expense increased 358.1% to $958.8 million in 2023 from $209.3 million in 2022, and, in 2022, represented an
increase of 174.2% from $76.3 million in 2021. The increase in interest expense for 2023 compared to 2022 was primarily a
result of the overall rates paid on average interest-bearing liabilities increasing 219 basis points for 2023, compared to 2022 in
response to rising interest rates and deposit competition combined with a mix shift out of noninterest bearing deposits into time
deposits. The increase in interest expense in 2022 compared to 2021 was primarily a result of average interest-bearing liabilities
increasing 59.0% to $28.5 billion in 2022 compared to $17.9 billion in 2021 due to the 2021 bank acquisitions. Also, the overall
rates paid on average interest-bearing liabilities increased 31 basis points for 2022 compared to 2021 in response to rising short-
term interest rates.
Net interest margin-FTE for 2023 was 3.08%, a decrease of 7 basis points, from 3.15% for 2022, and represented an
increase of 19 basis points from 2.96% for 2021. Net interest revenue-FTE may also be analyzed by segregating the yield/rate
and volume components of interest revenue and interest expense. The table below presents an analysis of rate and average
volume change in net interest revenue from 2022 to 2023 and from 2021 to 2022. The changes in net interest income due to
both rate and volume have been allocated to volume.
59
TABLE 5—RATE/VOLUME ANALYSIS
(In thousands)
INTEREST REVENUE
Loans and leases, net of unearned income
Loans held for sale
Available-for-sale securities:
Taxable
Non-taxable
Other
Total interest income
Net Interest Income
2023
2022
2023 versus 2022
Increase
(Decrease)
Volume
Rate
$
2,006,549 $
4,450
1,344,195 $
7,554
662,354 $
(3,104)
165,325 $
(2,235) $
497,029
(869)
208,122
11,653
83,577
2,314,351
183,915
12,758
16,371
1,564,793
24,207
(1,105)
67,206
749,558
(44,599)
(2,415)
12,496
128,572
68,806
1,310
54,710
620,986
INTEREST EXPENSE
Demand deposits - interest bearing
Savings deposits
Time deposits
Fed funds purchased, securities sold under agreement
to repurchase and other
Short-term FHLB borrowings
Short-term BTFP borrowings
Subordinated and long-term debt
Total interest expense
Net interest income
472,723
14,955
246,476
109,893
5,519
24,253
32,590
68,235
104,696
19,136
958,811
1,355,540 $
13,432
36,863
—
19,330
209,290
1,355,503 $
$
362,830
9,436
222,223
19,158
31,372
104,696
(194)
749,521
(1,344)
(949)
21,403
(1,800)
1,791
104,696
(514)
123,283
37 $
5,289 $
364,174
10,385
200,820
20,958
29,581
—
320
626,238
(5,252)
(In thousands)
INTEREST REVENUE
Loans and leases, net of unearned income
Loans held for sale
Available-for-sale securities:
Taxable
Non-taxable
Other
Total interest income
INTEREST EXPENSE
Demand deposits - interest bearing
Savings deposits
Time deposits
Fed funds purchased, securities sold under agreement
to repurchase and other
Short-term FHLB borrowings
Subordinated and long-term debt
Total interest expense
Net interest income
Net Interest Income
2022
2021
2022 versus 2021
Increase
(Decrease)
Volume
Yield / Rate
$
1,344,195 $
7,554
759,648 $
8,035
584,547 $
(481)
506,118 $
(4,512)
78,429
4,031
183,915
12,758
16,371
1,564,793
109,893
5,519
24,253
111,047
4,381
1,310
884,421
33,688
2,764
24,394
13,432
36,863
19,330
209,290
1,355,503 $
$
838
—
14,638
76,322
808,099 $
72,868
8,377
15,061
680,372
76,205
2,755
(141)
12,594
36,863
4,692
132,968
547,404 $
48,663
7,676
600
558,545
22,512
667
6,663
214
1,589
5,313
36,958
521,587 $
24,205
701
14,461
121,827
53,693
2,088
(6,804)
12,380
35,274
(621)
96,010
25,817
60
Provision for Credit Losses and Allowance for Credit Losses (“ACL”)
An analysis of the ACL for loans for the periods indicated is provided in the following table:
TABLE 6—ACL
(In thousands)
Balance, beginning of period
Charge-offs:
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total charge-offs
Recoveries:
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total recoveries
Net (charge-offs) recoveries
Initial allowance on PCD loans
Adoption of new ASU related to modified loans (1)
Provision:
Initial provision for acquired non-PCD loans
Provision for credit losses related to loans and leases
Balance, end of period
Year Ended December 31,
2023
2022
2021
$
440,347 $
446,415 $
244,422
(72,401)
(394)
(72,795)
(808)
(4,527)
(5,335)
(2,264)
(6,678)
(8,942)
(17,874)
(824)
(18,698)
(298)
(1,832)
(2,130)
(1,430)
(7,606)
(9,036)
(87,072)
(29,864)
7,541
1,582
9,123
622
1,071
1,693
2,000
1,688
3,688
14,504
(72,568)
—
255
—
14,165
2,292
16,457
4,352
3,521
7,873
3,017
2,566
5,583
29,913
49
(8,117)
—
—
100,000
2,000
$
468,034 $
440,347 $
(7,213)
(1,912)
(9,125)
(1,024)
(1,601)
(2,625)
(1,509)
(5,462)
(6,971)
(18,721)
11,754
4,140
15,894
1,831
1,262
3,093
2,424
2,624
5,048
24,035
5,314
75,124
—
130,555
(9,000)
446,415
Loans and leases, net of unearned income - average
Loans and leases, net of unearned income - period end
(1) Cadence adopted the new accounting guidance effective January 1, 2023, which eliminates the TDR recognition and measurement
guidance via the modified retrospective transition method (ASU 2022-02).
32,497,022 $
31,913,925 $
28,418,658 $
30,349,277 $
$
$
17,055,429
26,882,988
61
TABLE 7—ACL RELATED RATIOS
RATIOS
Provision for credit losses to average loans and leases, net of
unearned income
ACL to loans and leases, net of unearned income
Non-performing loans to loans and leases, net of unearned income
ACL to non-performing loans
Year Ended December 31,
2022
2021
2023
0.25 %
1.44
0.67
216.54
0.02 %
1.45
0.35
410.22
0.81 %
1.66
0.48
346.04
Net charge-offs (recoveries) to average loans and leases:
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total
0.20 %
—
0.20
—
0.01
0.01
—
0.02
0.02
0.23 %
0.01 %
—
0.01
(0.01)
(0.01)
(0.02)
(0.01)
0.02
0.01
— %
(0.03) %
(0.01)
(0.04)
—
—
—
(0.01)
0.02
0.01
(0.03) %
For the years ended December 31, 2023, 2022, and 2021, net charge-offs totaled $72.6 million compared to net
recoveries of $49 thousand and net recoveries of $5.3 million, respectively. As a percentage of average loans and leases, net
charge-offs totaled 0.23% for 2023. For 2022, net recoveries as a percentage of average loans and leases were insignificant
compared to net recoveries totaling 0.03% for 2021. Net charge-offs in 2023 were primarily in the commercial and industrial
segment and to a lesser extent in the other consumer class offset somewhat by net recoveries in the owner occupied class. Net
recoveries in 2022 were primarily in the commercial real estate segment and residential mortgages class offset somewhat by net
charge-offs in the non-real estate and other consumer classes. Net recoveries in 2021 were primarily in the commercial and
industrial segment and residential mortgages class and was offset by net charge-offs in the other consumer class.
The Company recorded $80.0 million in provision for credit losses during 2023 compared to $7.0 million for 2022 and
$138.1 million during 2021. The $80.0 million recorded in provision for credit losses during 2023 was related to the reversal for
unfunded commitments of $20.0 million and $100.0 million for provision related to loans and leases. The decrease in unfunded
commitments was due to the combination of the improvement in the rate applied to construction loans and less unfunded
amounts overall in the construction segment. The increase in provision for credit losses related to loans and leases is primarily
attributable to increases in the ACL allocated to the commercial and industrial segment due to higher specific reserves
combined with credit migration within the commercial and industrial segment and consumer segments (see Note 6 to the
consolidated financial statements).
The provision recorded for 2022 reflected stable credit quality and a modest provision for credit losses was necessary
to support continued growth in loans and unfunded commitments. The $138.1 million of provision recorded during 2021
included $130.6 million for initial provision for non-PCD acquired loans, a release of $9.0 million for provision related to loans
62
and leases, $13.0 million for provision for acquired unfunded commitments and $3.5 million for provision for unfunded
commitments.
The ACL increased $27.7 million to $468.0 million at December 31, 2023, from $440.3 million at December 31, 2022.
The ACL to non-performing loans decreased to 216.54% at December 31, 2023, from 410.22% at December 31, 2022. The
ACL at December 31, 2023, included $0.3 million due to the adoption of ASU 2022-02 related to modified loans (see Note 1).
For more information about the Company’s classified, non-performing, purchased credit deteriorated, and impaired loans, see
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition –
Loans and Leases” in Part II of the Report.
The breakdown of the ACL by loan and lease segment and class is based, in part, on evaluations of specific loan and
lease histories and the impact of forecasted economic conditions on the portfolio segments and geographical areas.
Accordingly, because these conditions are subject to change, the allocation is not necessarily indicative of the breakdown of any
future allowance for credit losses. Several economic forecasts from external sources are used in the estimation and allocation of
the ACL. The forecasts cover an eight-quarter forecast horizon to establish a forecast range and are based on upside, downside,
and base case scenarios. A blended scenario is selected by management to reflect the probable economic conditions within the
range. During the fourth quarter of 2023, the forecast was weighted equally between a base forecast and a downside forecast
scenario compared to more downside forecast weightings earlier in the year and in 2022, as inflation and recession chances
eased.
The Company recognizes that high interest rates, inflation, and slower economic growth may have short-term, long-
term, and regional impacts to the economy. In addition, qualitative factors such as changes in economic conditions,
concentrations of risk, and changes in portfolio risk resulting from regulatory changes are considered in determining the
adequacy of the level of the ACL (see Note 6 to the consolidated financial statements).
TABLE 8—ACL BY SEGMENT AND CLASS
(Dollars in thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total
December 31, 2023
December 31, 2022
% of Loans in
Each Category
to Total Loans
ACL
% of Loans in
Each Category
to Total Loans
ACL
$
$
194,577
31,445
226,022
42,118
69,209
111,327
124,851
5,834
130,685
468,034
27.5 % $
13.4
40.9
12.0
17.7
29.7
28.7
0.7
29.4
100.0 % $
147,669
35,548
183,217
68,902
74,727
143,629
106,142
7,359
113,501
440,347
29.6 %
13.4
43.0
11.7
17.0
28.7
27.4
0.9
28.3
100.0 %
63
Noninterest Revenue
The components of noninterest revenue from continuing operations for the periods indicated and the percentage
change between the periods are shown in the following table:
TABLE 9—NONINTEREST REVENUE
(Dollars in thousands)
Mortgage banking, excluding MSR and MSR hedge market
value adjustment
MSR and MSR hedge market value adjustment
Credit card, debit card and merchant fees
Deposit service charges
Securities gains (losses), net
Trust income (1)
Annuity fees (1)
Brokerage commissions and fees (1)
Gain on sale of PPP loans
Bank-owned life insurance
Credit related fees
SBA income
Other miscellaneous income
Total noninterest revenue
2023
Amount % Change
2022
Amount % Change
2021
Amount
$ 24,926
(5,948)
49,784
61,718
(435,652)
42,513
7,614
36,801
—
16,294
26,830
9,839
48,938
$ (116,343)
1.2 % $ 24,642
20,218
58,160
73,478
(384)
37,314
2,908
40,264
—
15,594
26,768
15,341
28,182
(134.0) % $ 342,485
(129.4)
(14.4)
(16.0)
NM
13.9
161.8
(8.6)
—
4.5
0.2
(35.9)
73.6
47,914
(48.6) % $
10,139
99.4
42,636
36.4
46,418
58.3
(395)
2.8
22,190
68.2
586
396.2
16,731
140.7
21,572
(100.0)
11,180
39.5
4,979
437.6
438
3402.5
52.2
18,517
41.0 % $ 242,905
(1)
Included in wealth management revenue on the Consolidated Statements of Income.
NM - not meaningful.
The Company’s revenue from mortgage banking typically fluctuates as mortgage interest rates change and is primarily
attributable to two activities - the origination and sale of new mortgage loans and the servicing of sold mortgage loans.
Origination revenue is comprised of gains or losses from the sale of mortgage loans held for sale, origination fees, underwriting
fees, and other fees associated with the origination of mortgage loans. For the years ended December 31, 2023, 2022, and 2021,
mortgage loan held for sale origination volumes totaled $837.1 million, $1.1 billion, and $2.2 billion respectively, which
produced origination revenue of $9.9 million, $12.9 million, and $39.9 million respectively. The timing of increases in market
interest rates caused decreases to the margins of loans sold and the volume of mortgage loans originated and sold for the year
ended December 31, 2023 compared to 2022. Interest rates during 2023 were higher than 2022 due to the increase in the federal
funds target rate set by the Federal Reserve during the last part of 2022 and throughout 2023, which largely contributed to the
lower volumes of mortgages originated and sold.
Revenue from the servicing process includes fees from the actual servicing of mortgage loans. For the years ended
December 31, 2023, 2022, and 2021, revenue from the servicing of mortgage loans was $23.9 million, $23.6 million, and $22.0
million respectively.
The Company services a class of residential mortgages that are first lien loans secured by a primary residence or
second home. The MSR, which are recognized as a separate asset on the date the corresponding mortgage loan is sold on a
servicing retained basis, is recorded at fair value as determined at each accounting period end. At December 31, 2023 and
December 31, 2022 the estimated fair value of the MSR was $106.8 million and $109.7 million, respectively.
Changes in the fair value of the Company’s MSR are generally a result of changes in mortgage interest rates from the
previous reporting period. An increase in mortgage interest rates typically results in an increase in the fair value of the MSR
while a decrease in mortgage interest rates typically results in a decrease in the fair value of the MSR. Mortgage interest rates
increased in 2023 compared to 2022. The fair value of the MSR is also impacted by principal payments on loans in the
servicing portfolio. For the years ended December 31, 2023, 2022, and 2021, decreases in the value of the MSR from these
payments were $8.8 million and $11.8 million, and $14.0 million, respectively.
64
The Company hedges the change in fair value of its MSR. At December 31, 2023, 2022, and 2021, there was a hedge
in place designed to cover approximately 73.1%, 47.9%, 33.1%, respectively, of the MSR value. The Company is susceptible to
significant fluctuations in MSR value during changing interest rate environments. Reflecting this sensitivity to interest rates, the
fair value of the MSR, including the hedge, experienced a decrease of $5.9 million during 2023, an increase of $20.2 million in
2022, and an increase of $10.1 million in 2021.
The following table presents the Company’s mortgage banking operations for the periods indicated:
TABLE 10— MORTGAGE BANKING OPERATIONS
(Dollars in thousands)
Production revenue:
Origination
Servicing
Payoffs/Paydowns
Total origination and servicing revenue
MSR and hedge market value adjustment
Total mortgage banking revenue
Origination of mortgage loans held for sale
Mortgage loans serviced at quarter-end
2023
2022
Amount
% Change
Amount
% Change
2021
Amount
$
$
$
$
9,910
23,854
(8,838)
24,926
(5,948)
18,978
(23.0) % $
1.2
25.1
1.2
(129.4)
(57.7) % $
12,869
23,565
(11,792)
24,642
20,218
44,860
(67.7) % $
7.0
15.5
(48.6)
99.4
(22.7) % $
39,855
22,020
(13,961)
47,914
10,139
58,053
837
7,703
(23.8) % $
0.1 % $
1,098
7,693
(49.8) % $
1.8 % $
2,189
7,554
Credit card, debit card and merchant fees decreased $8.4 million for 2023 compared to 2022 and increased $15.5
million in 2022 compared to 2021. The decrease in 2023 is primarily driven by a decrease in vendor incentive revenue and a
decrease in card interchange fees due to lower volume. The increase in 2022, which primarily related to credit card-related fees,
reflected an increase in number of transactions related to two smaller mergers which occurred during the second quarter of 2021
as well as the Legacy Cadence merger in the fourth quarter of 2021.
Deposit service charge revenue decreased $11.8 million for 2023 compared to 2022 and increased $27.1 million in
2022 compared to 2021. The decline in 2023 is primarily attributable to an $8 million adjustment to deposit service charges,
resulting from deposit service charge changes. These changes are expected to result in a reduction in revenue of approximately
$3 million per year going forward. The increase for 2022 primarily resulted from the three mergers previously mentioned
partially offset by an increase in the earnings credit rate on corporate analysis accounts and NSF representment refunds due to
policy changes.
Net securities losses increased $435.3 million for 2023 compared to 2022 and decreased $11 thousand in 2022
compared to 2021. The increase in 2023 was primarily driven by the securities portfolio restructurings that were executed as a
part of a balance sheet optimization initiative. During the first quarter of 2023, approximately $1.5 billion in U.S. Treasury
available-for-sale securities were sold generating a realized loss of approximately $51.3 million. Additionally, in the fourth
quarter of 2023, available-for-sale securities totaling approximately $3.1 billion in par value were sold for a realized loss of
approximately $384.5 million. Proceeds from the sales were redeployed in accretive activities including reinvestment in higher-
yielding securities, funding loans, and reducing higher cost brokered deposits. Refer to Note 4 in the consolidated financial
statements for additional details.
Credit-related fees includes those associated with unused line of credit fees, letter of credit fees, derivative fee income,
and arrangement fees, among other loan-related fees. This category increased $0.1 million for 2023 compared 2022 and
increased $21.8 million in 2022 compared to 2021. The increases for the periods presented were primarily driven by volume
increases in agency fees, unused line of credit fees and letter of credit fees.
SBA income decreased $5.5 million for 2023 compared to 2022 and increased $14.9 million in 2022 compared with
2021. The decrease in 2023 was primarily driven by a strategic decision in 2023 to decrease the sale of total SBA loans
originated which caused a decrease in the amount of gains recognized from the prior year. This decrease was offset by $1.7
million gains on SBA servicing rights and $3.2 million increases in SBA servicing and loan packaging fees. The increase in
2022 was largely attributable to gains on sales of SBA loans resulting from the timing of the merger with Legacy Cadence in
October 2021.
65
Other miscellaneous income includes payroll processing revenue, foreign exchange revenue, wire transfer fees, and
other miscellaneous items. Other miscellaneous income increased $20.8 million for 2023 compared to 2022 and increased $9.7
million in 2022 compared to 2021. The increase for the 2023 period was primarily driven by increases in dividend income from
FHLB stock, earnings from limited partnerships, and advisory fees. The increase for 2022 was primarily driven by an increase
in payroll processing revenue and foreign exchange revenue, both of which were revenue streams gained through the Legacy
Cadence merger in the fourth quarter of 2021.
Noninterest Expense
The components of noninterest expense from continuing operations for the years ended December 31, 2023, 2022, and
2021, and the percentage change between years is shown in the following table:
TABLE 11—NONINTEREST EXPENSE
2023
2022
% Change
Amount
% Change
2021
Amount
(Dollars in thousands)
Salaries and employee benefits
Occupancy and equipment
Data processing and software
Merger expense
Deposit insurance assessments
Pension settlement expense
Advertising and public relations
Foreclosed property expense
Telecommunications
Travel and entertainment
Amortization of intangibles
Professional, consulting and outsourcing
Legal expense
Postage and shipping
Other miscellaneous expense
Total noninterest expense
NM - not meaningful
Amount
$ 634,722
110,972
120,443
5,192
72,224
11,826
28,162
2,488
5,775
11,004
19,388
19,892
20,093
8,443
85,299
$ 1,155,923
— % $ 634,843
114,460
(3.0)
111,107
8.4
50,845
(89.8)
18,712
286.0
9,023
31.1
41,055
(31.4)
832
199.0
6,617
(12.7)
11,407
(3.5)
18,432
5.2
13,424
48.2
5,350
275.6
7,868
7.3
29.7
65,779
4.2 % $ 1,109,754
69.7 % $ 374,134
76,244
50.1
70,707
57.1
59,896
(15.1)
8,701
115.1
3,051
195.7
10,271
299.7
4,549
(81.7)
5,399
22.6
3,400
235.5
10,734
71.7
7,099
89.1
3,601
48.6
5,835
34.8
55.9
42,200
61.8 % $ 685,821
Salaries and employee benefits expense is the largest category of our noninterest expense. Salaries and employee
benefits decreased $0.1 million for 2023 compared to 2022. For 2022, salaries and employee benefits expense increased $260.7
million compared to 2021. The decrease in 2023 is primarily the result of the decrease in employee headcount which was
partially offset by increases in retail incentives due to the Customer Connect program. The increase in 2022 was primarily the
result of salary, compensation costs, and commissions increases related to the Legacy Cadence merger which occurred in the
fourth quarter in 2021 and two smaller mergers which occurred during the second quarter of 2021.
66
The components of salary and employee benefits expense for the periods indicated and the percentage change between
years are shown in the following table:
TABLE 12—SALARIES AND EMPLOYEE BENEFITS EXPENSE
(Dollars in thousands)
Regular salaries, net of deferred salaries
Commissions and incentive compensation
Taxes and employee benefits
Total salaries and employee benefits
Amount
$ 413,226
112,772
108,724
$ 634,722
2023
% Change
2022
Amount % Change
2021
Amount
(6.1) % $ 440,273
98,244
14.8
96,326
12.9
— % $ 634,843
68.4 % $ 261,440
47,582
106.5
47.9
65,112
69.7 % $ 374,134
Data processing and software expense increased $9.3 million for 2023 compared to 2022 and increased $40.4 million
for 2022 compared to 2021. The increases for 2023 compared to 2022 were largely driven by increases in vendor costs,
increased technology initiatives, software maintenance costs, and card processing expenses. The increases for 2022 compared to
2021 were primarily driven by costs incurred during the various system conversions completed after the merger with Legacy
Cadence, and to a lesser degree by increases in data processing volumes, software maintenance costs, and card processing
expenses as a result of the 3 acquisitions in 2021 discussed above.
Merger expense represents one-time expenses related to effecting the acquisition of another entity. Merger expenses
for 2023 totaled $5.2 million compared to $50.8 million in 2022. These expenses in 2023 primarily included compensation
related expenses. The expenses in 2022 primarily included costs related to the franchise-wide rebranding of the Company under
the Cadence Bank name, as well as employee retention, marketing, and technology related expenses.
Deposit insurance assessments expense increased $53.5 million for 2023 compared to 2022 and increased $10.0
million in 2022 compared to 2021. The 2023 increase was primarily due to a $36.2 million FDIC special assessment recorded in
the fourth quarter of 2023, and to a lesser extent, increased short-term borrowings and brokered deposits in 2023. The 2022
increase was the result of the movement in several variables utilized by the FDIC in calculating the deposit insurance
assessment coupled with the impacts from the three mergers in 2021.
Advertising and public relations expense decreased $12.9 million for 2023 compared to 2022 and increased
$30.8 million in 2022 compared to 2021. The decrease for 2023 and the increase in 2022 is largely driven by incremental
merger expenses related to the Company’s rebranding across our footprint.
Amortization of intangibles increased $1.0 million for 2023 compared to 2022 and increased $7.7 million in 2022
compared to 2021. The primary driver of the 2023 increase was an adjustment to a core deposit intangible in the second quarter
of 2023 resulting from a reassessment of the estimated remaining lives assigned to certain core deposit intangible assets. The
2022 increase was primarily the result of the three mergers in 2021.
Legal expense increased $14.7 million for 2023 compared to 2022 and increased $1.7 million in 2022 compared to
2021. The 2023 increase was largely driven by accruals for the settlement of certain legal matters. The 2022 increase was
mainly due to increased legal fees.
Other miscellaneous expense includes insurance expense, operational and fraud losses, supplies expense, franchise and
sales taxes, training and business development expenses, various regulatory fees, and various other expenses. This category
increased $19.5 million for 2023 compared to 2022 and increased $23.6 million in 2022 compared to 2021. The increase in
other miscellaneous expenses in 2023 was driven by increased operational losses ($6.7 million), pension costs ($6.4 million),
transit and delivery related fees ($3.3 million), and loan related expenses ($3.7 million). The 2022 increase in other
miscellaneous expense occurred as a result of the three mergers in 2021 previously mentioned.
Income Taxes
The Company recorded an income tax benefit from continuing operations of $4.6 million for the year ended December
31, 2023, and income tax expense from continuing operations of $129.7 million, and $46.0 million for the years ended
67
December 31, 2022 and 2021, respectively. The tax benefit in 2023 can be attributed to lower pre-tax income as a result of the
restructure of the securities portfolio. The increase in tax expense in 2022 can be attributed to higher pre-tax income.
The Company recorded income tax expense related to discontinued operations of $189.0 million, $6.4 million and $5.8
million for the years ended December 31, 2023, 2022 and 2021, respectively. The increase in tax expense in 2023 can be
attributed to higher pre-tax income mainly attributable to the $706.6 million gain on the sale of Cadence Insurance reported in
discontinued operations. The increase in tax expense in 2022 can be attributed to higher pre-tax income.
The effective tax rate on continuing operations was 504.8%, 22.5%, and 20.5% for the years ended December 31,
2023, 2022, 2021, respectively. The increase in the effective tax rate for 2023 was impacted by the securities restructuring, as
well as, the disposition of Cadence Insurance and the associated gain on the sale being reported in discontinued operations. For
2022, the increase in the effective tax rate resulted from the increase in pre-tax income. The effective tax rate for 2021 was
negatively impacted primarily by the non-deductible merger costs incurred in the fourth quarter of 2021.
In August 2022, the IRA of 2022 was signed into law to address inflation, healthcare costs, climate change and
renewal energy incentives, among other things. Included in the IRA of 2022 are provisions for the creation of a 15% CAMT
that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement
income in excess of $1 billion. For 2023, the Company is not subject to the 15% CAMT.
FINANCIAL CONDITION
The percentage of earning assets to total assets measures the effectiveness of management’s efforts to invest available
funds representing the most efficient and profitable uses. Earning assets at December 31, 2023 were $44.2 billion, or 90.3% of
total assets, compared with $43.7 billion, or 89.9% of total assets, at December 31, 2022.
TABLE 13—FINANCIAL CONDITION SUMMARY
(In thousands)
Period-End Balances:
Total assets
Available-for-sale securities
Loans and leases, net of unearned income
Total deposits
Securities sold under agreement to repurchase
Federal funds purchased and short-term BTFP and FHLB borrowings
Subordinated and long-term debt
Total shareholders' equity
Common shareholders' equity
Average Balances:
Total assets
Available-for-sale securities
Loans and leases, net of unearned income
Total deposits
Securities sold under agreement to repurchase
Federal funds purchased and short-term BTFP and FHLB borrowings
Subordinated and long-term borrowings
Total shareholders' equity
Common shareholders' equity
As of and For the
Year Ended
December 31,
2023
As of and For the
Year Ended
December 31,
2022
$
48,934,510 $
8,075,476
32,497,022
38,497,137
451,516
3,500,000
438,460
5,167,843
5,000,850
48,703,953
10,322,335
31,913,925
38,628,453
770,777
3,471,207
452,645
4,487,433
4,320,440
48,653,414
11,944,096
30,349,277
38,956,614
708,736
3,300,231
462,554
4,311,374
4,144,381
47,533,157
13,596,372
28,418,658
39,477,906
668,946
1,580,409
465,004
4,574,403
4,407,410
68
Securities
The Company uses its securities portfolio as a source of revenue and liquidity, and to serve as collateral to secure
certain types of deposits and borrowings. These securities, which are available for a possible sale, are recorded at fair value.
The following table shows the carrying value of the Company’s available-for-sale (AFS) securities by investment category for
the periods indicated:
TABLE 14—AVAILABLE-FOR-SALE SECURITIES SUMMARY
(In thousands)
Available-for-sale securities (AFS):
U.S. Treasury securities
U.S. government agency securities
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS):
2023
December 31,
2022
2021
$
465,018 $
332,011
1,458,513 $
1,477,127
1,496,465
2,638,442
Residential pass-through:
Guaranteed by GNMA
Issued by FNMA and FHLMC
Other residential MBS
Commercial MBS
Total MBS
Obligations of states and municipal subdivisions
Other domestic debt securities
Foreign debt securities
Total
$
75,662
4,387,101
727,434
1,742,837
6,933,034
137,624
67,197
140,592
113,427
8,129,191
243,357
2,061,133
10,547,108
565,520
63,645
295,290
8,075,476 $ 11,944,096 $ 15,606,470
84,368
6,274,970
168,452
1,881,853
8,409,643
466,002
82,718
50,093
At December 31, 2023, the Company’s AFS securities totaled $8.1 billion compared to $11.9 billion at December 31,
2022. The decrease of $3.9 billion, or 32.4%, was primarily driven by the strategic sale of $4.3 billion of available-for-sale
securities as described below, and by maturities and payments of $2.0 billion during the period. The decrease was partially
offset by purchases of $2.3 billion of securities during the period.
Net unrealized losses on AFS securities at December 31, 2023 and December 31, 2022 totaled $0.9 billion and
$1.5 billion, respectively. At December 31, 2023, management believes that the unrealized losses are due to noncredit-related
factors, such as changes in interest rates and other market conditions (see Note 4 to the consolidated financial statements).
In 2023, the Company executed a securities portfolio restructuring as a part of a balance sheet optimization initiative.
During the first quarter of 2023, approximately $1.5 billion in U.S. Treasury available-for-sale securities were sold generating
an after-tax realized loss of approximately $39.5 million. Additionally, in the fourth quarter of 2023, available-for-sale
securities totaling approximately $3.1 billion in par value were sold for an after-tax realized loss of approximately $294.1
million. Proceeds from the sales were redeployed in accretive activities including reinvestment in higher-yielding securities,
funding loans, and lowering higher-cost brokered deposits. Of the December 2023 sales proceeds, $1.4 billion has been
reinvested in securities as of December 31, 2023.
69
The following table shows the maturities and weighted average yields for the carrying value of the available-for-sale
securities for the periods indicated:
TABLE 15—MATURITY DISTRIBUTION OF AFS SECURITIES
(Dollars in thousands)
U.S. Treasury securities:
Due in less than one year
U.S. Treasury securities total
U.S. government agency securities:
Due in less than one year
Due in one to five years
Due in five to ten years
Due after ten years
U.S. government agency securities total
Obligations of states and municipal subdivisions:
Due in less than one year
Due in one to five years
Due in five to ten years
Due after ten years
Obligations of states and municipal subdivisions total
Other domestic debt securities:
Due in one to five years
Due in five to ten years
Due after ten years
Other domestic debt securities total
Foreign debt securities:
Due in one to five years
Due in five to ten years
Foreign debt securities total
Total securities due in less than one year
Total securities due in one to five years
Total securities due in five to ten years
Total securities due after ten years
MBS
Total estimated fair value
Contractual Maturity
December 31, 2023
December 31, 2022
Estimated
Fair Value
Weighted
Average
Yield
Estimated
Fair Value
Weighted
Average
Yield
$
465,018
465,018
5.46 % $ 1,458,513
1,458,513
5.46
0.70 %
0.70
—
12,853
249,502
69,656
332,011
1,835
9,153
15,655
110,981
137,624
5,181
60,632
1,384
67,197
51,507
89,085
140,592
—
4.37
4.66
2.22
4.14
2.84
2.95
2.22
2.70
2.66
5.90
4.59
4.50
4.69
2.25
5.86
4.54
796,830
437,156
156,506
86,635
1,477,127
5,819
16,704
24,292
419,187
466,002
12,906
68,153
1,659
82,718
50,093
—
50,093
466,853
78,694
414,874
182,021
6,933,034
$ 8,075,476
2,261,162
5.45
516,859
2.92
248,951
4.82
507,481
2.53
2.54
8,409,643
2.83 % $ 11,944,096
1.57
0.88
3.16
2.06
1.56
3.25
3.03
2.35
2.52
2.54
4.45
4.42
4.50
4.42
0.90
—
0.90
1.01
1.04
3.43
2.45
1.54
1.50 %
The yield on tax-exempt obligations of states and political subdivisions has been adjusted to a taxable equivalent basis
using a 21% tax rate.
70
Loans and Leases
The Company’s loans and leases held for investment portfolio represents the largest single component of the
Company’s earning asset base. Average loans and leases comprised 72.6% of average earning assets during the year ended
December 31, 2023. The Company’s lending activities include both commercial and consumer loans and leases. The Company
has established systematic procedures for approving and monitoring loans and leases that vary depending on the size and nature
of the loan or lease and applies these procedures in a disciplined manner. The Company’s loans and leases are widely
diversified by borrower and industry. Loans and leases, net of unearned income, totaled $32.5 billion at December 31, 2023,
representing a 7.1% increase from $30.3 billion at December 31, 2022. The bank also acts as agent or participant in
syndications and other financing arrangements with other financial institutions.
The following table shows the composition of the Company’s loan and lease portfolio by segment and class at the
dates indicated:
TABLE 16—LOAN PORTFOLIO
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total loans and leases, net of unearned income (1)
December 31, 2023
December 31, 2022
$
$
8,935,598 $
4,349,060
13,284,658
3,910,962
5,736,871
9,647,833
9,329,692
234,839
9,564,531
32,497,022 $
8,985,547
4,068,659
13,054,206
3,547,986
5,150,680
8,698,666
8,319,242
277,163
8,596,405
30,349,277
(1)
Total loans and leases are net of $75.4 million and $100.8 million of unearned income at December 31, 2023 and December 31, 2022, respectively.
The following table shows the Company’s loan and lease portfolio by segment and class at December 31, 2023 by
geographical location.
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and
development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
TABLE 17—LOANS BY GEOGRAPHICAL LOCATION
Alabama
Arkansas
Florida
Georgia
Louisiana
Mississippi
Missouri
Tennessee
Texas
Other
Total
$ 417,687
$ 158,759
$ 503,957
$ 528,205
$ 346,840
$ 532,593
$
62,507
$ 373,991
$ 3,718,233
$ 2,292,826
$ 8,935,598
345,679
763,366
247,584
406,343
281,750
785,707
313,532
841,737
292,347
591,611
90,227
167,464
1,676,272
342,594
4,349,060
639,187
1,124,204
152,734
541,455
5,394,505
2,635,420
13,284,658
202,977
446,290
649,267
1,216,942
31,155
1,248,097
79,365
273,000
352,365
388,396
18,488
406,884
363,597
369,897
472,953
605,160
733,494
1,078,113
54,985
212,148
267,133
194,535
435,089
629,624
46,014
182,393
1,799,697
514,446
3,910,962
208,216
254,230
296,918
2,080,393
809,760
5,736,871
479,311
3,880,090
1,324,206
9,647,833
647,117
408,459
462,264
1,147,388
179,119
716,384
3,898,525
265,098
9,329,692
5,563
6,431
11,587
87,229
1,780
17,892
49,397
5,317
234,839
652,680
414,890
473,851
1,234,617
180,899
734,276
3,947,922
270,415
9,564,531
Total
$ 2,660,730
$ 1,165,592
$ 2,171,881
$ 2,334,740
$ 1,380,171
$ 2,988,445
$ 587,863
$ 1,755,042
$ 13,222,517
$ 4,230,041
$ 32,497,022
71
Mergers and Acquisitions
In connection with past bank acquisitions, the Company acquired loans both with and without evidence of credit
quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no
carryover from the acquired institution’s previously recorded allowance for credit losses.
The fair value for acquired loans recorded at the time of acquisition is based upon several factors including the timing
and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash
flows using comparable market rates. The resulting fair value adjustment is recorded in the form of a premium or discount to
the unpaid principal balance of each acquired loan. As it relates to acquired loans that, as of the date of acquisition, have
experienced a more-than-insignificant deterioration in credit quality since origination (“PCD”), the net premium or net discount
is adjusted to reflect the Company’s ACL recorded for PCD loans at the time of acquisition, and the remaining fair value
adjustment not related to credit is accreted or amortized into interest income over the remaining life of the loan. As it relates to
acquired loans not classified as PCD (“non-PCD”) loans, the credit loss and yield components of the fair value adjustment are
aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the remaining life
of the loan. The Company records an ACL for non-PCD loans at the time of acquisition through provision expense, and
therefore, no further adjustments are made to the net premium or net discount for non-PCD loans.
In addition, a grade is assigned to each loan during the valuation process. For acquired loans that are not individually
reviewed during the valuation process, such loans are assumed to have characteristics similar to the assigned rating of the
acquired institution’s risk rating, adjusted for any estimated differences between the Company’s rating methodology and the
acquired institution’s risk rating methodology. Acquired loans that are individually evaluated at the acquisition date are
assigned a specific reserve in the same manner as other loans individually evaluated and are assigned an internal grade of
representing PCD with Loss Exposure.
The following is a discussion of the Company’s segments and classes of loans and leases:
Commercial and Industrial (“C&I”)
Non-Real Estate – The Company engages in lending to small and medium-sized business enterprises and government
entities through its community banking locations and to regional and national business enterprises through its corporate banking
division. C&I loans are loans and leases to finance business operations, equipment and owner-occupied facilities. These include
both lines of credit for terms of one year or less and term loans which are amortized over the useful life of the assets financed.
Personal and/or corporate guarantees are generally obtained where available and prudent. Also included in this category are
loans to finance agricultural production. The Company recognizes that risk from economic cycles, commodity prices,
pandemics, government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits,
natural disasters, fraud, losses due to theft or embezzlement, loss of sponsor support, health or loss of key personnel, or
competitive situations may adversely affect the scheduled repayment of business loans. In addition, risks in the agricultural
sector including crop failures due to weather, insects and other blights, commodity prices, governmental intervention, lawsuits,
labor or logistical disruptions. Non-real estate loans decreased 0.6% from December 31, 2022, to December 31, 2023.
Owner Occupied – Owner occupied loans include loans secured by business facilities to finance business operations,
equipment, agricultural land and owner-occupied facilities. These include both lines of credit for terms of one year or less and
term loans which are amortized over the useful life of the assets financed. Personal guarantees are generally obtained where
available and prudent. The Company recognizes that risk from economic cycles, pandemics, government regulation, supply-
chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or
embezzlement, health or loss of key personnel, or competitive situations may adversely affect the scheduled repayment of
business loans. Owner occupied loans increased 6.9% from December 31, 2022, to December 31, 2023.
Commercial Real Estate (“CRE”)
Construction, Acquisition and Development – CAD loans include both loans and credit lines for construction of
commercial, industrial, residential, and multi-family buildings and for purchasing, carrying, and developing land into residential
subdivisions or various types of commercial developments, such as industrial, warehouse, retail, office, and multi-family. The
Company generally engages in construction and development lending primarily in markets served by its branches. The
Company recognizes that risks are inherent in the financing of real estate development and construction. These risks include
location, market conditions and price volatility, changes in interest rates, demand for developed land, lots and buildings,
desirability of features and styling of completed developments and buildings, competition from other developments and
builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of utilities, roads, public
72
transportation and schools, availability of permanent financing for homebuyers, zoning, environmental restrictions, lawsuits,
economic and business cycle, or labor and reputation of the builder or developer. CAD loans increased 10.2% from
December 31, 2022, to December 31, 2023.
Each CAD loan is underwritten to address: (i) the desirability of the project, its market viability and projected
absorption period; (ii) the creditworthiness of the borrower and the guarantor, if applicable, as to liquidity, cash flow and assets
available to ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer’s experience and success
with similar projects; and (v) the value of the collateral.
Income Producing – Income producing loans include loans to finance income-producing commercial and multi-family
properties. Lending in this category is generally limited to properties located in the Company’s market area with only limited
exposure to properties located elsewhere. Loans in this category include loans for neighborhood retail centers, medical and
professional offices, single retail stores, warehouses and apartments leased generally to local businesses and residents. The
underwriting of these loans takes into consideration the occupancy and rental rates as well as the financial health of the
borrower. The Company’s exposure to national retail tenants is limited. The Company recognizes that risk from economic
cycles, pandemics, delayed or missed rent payments, supply-chain disruptions, operational errors, lawsuits, natural disasters,
losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect the
scheduled repayment of business loans. Income producing loans increased 11.4% from December 31, 2022, to December 31,
2023.
Consumer
Residential Mortgages – Consumer mortgages are first or second-lien loans to consumers secured by a primary
residence or second home. This category includes traditional mortgages and home equity loans and revolving lines of credit.
The loans are generally secured by properties located primarily in markets served by the Company’s branches. These loans are
underwritten in accordance with the Company’s general loan policy and procedures which require, among other things, proper
documentation of each borrower’s financial condition, satisfactory credit history, and property value. In addition to loans
originated for the Company’s portfolio, the Company originates and services consumer mortgages sold in the secondary market
which are underwritten and closed pursuant to investor and agency guidelines. Residential mortgages increased 12.1% from
December 31, 2022, to December 31, 2023.
Other Consumer – Other consumer lending includes consumer credit card accounts as well as personal revolving lines
of credit and installment loans. The Company offers credit cards primarily to its deposit and loan customers. Consumer
installment loans include term loans of up to five years secured by automobiles, boats and recreational vehicles. The Company
recognizes that there are risks in consumer lending which include interruptions in the borrower’s personal and investment
income due to loss of employment, market conditions, and general economic conditions, deterioration in the health and well-
being of the borrower and family members, natural disasters, pandemics, lawsuits, losses, or inability to generate income due to
injury, accidents, theft, vandalism, or incarceration. Other consumer loans decreased 15.3% from December 31, 2022, to
December 31, 2023.
Selected Loan Maturity and Interest Rate Sensitivity
The maturity distribution of the Company’s loan portfolio is one factor in management’s evaluation by collateral type
of the risk characteristics of the loan and lease portfolio. The interest rate sensitivity of the Company’s loan and lease portfolio
is important in the management of net interest margin. The Company attempts to manage the relationship between the interest
rate sensitivity of its assets and liabilities to produce an effective interest differential that is not significantly impacted by
changes in the level of interest rates (See Item 7A. Quantitative and Qualitative Disclosures About Market Risk). The following
73
table shows the maturity distribution based on remaining maturities of the Company’s loan and lease portfolio and the interest
rate sensitivity of the Company’s loans and leases maturing after one year at December 31, 2023:
TABLE 18—INTEREST RATE SENSITIVITY OF LOANS
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
One Year
or Less
Over One
Year through
Five Years
Over Five
Years through
Fifteen Years
Over Fifteen
Years
Fixed
Interest Rate
Variable
Interest Rate
Rate Structure for Loans
Maturing Over One Year
$ 1,531,171 $
6,254,659 $
1,058,391 $
91,377 $
978,834 $ 6,425,593
222,929
766,895
2,053,561
1,305,675
1,608,298
2,517,833
Total commercial and industrial
1,754,100
7,021,554
3,111,952
1,397,052
2,587,132
8,943,426
Commercial real estate
Construction, acquisition and development
1,210,000
Income producing
Total commercial real estate
910,414
2,120,414
Consumer
Residential mortgages
Other consumer
Total consumer
290,274
41,745
332,019
1,482,933
1,505,647
2,988,580
280,033
181,655
461,688
543,212
674,817
1,146,457
2,174,353
497,600
996,148
2,203,362
3,830,309
1,689,669
2,849,170
1,493,748
6,033,671
1,214,118
7,545,267
3,559,063
5,480,355
10,722
717
91,867
101,227
1,224,840
7,545,984
3,650,930
5,581,582
Total
$ 4,206,533 $ 10,471,822 $
6,026,461 $ 11,792,206 $ 7,731,810 $ 20,558,679
Loans Held-for-Sale
At December 31, 2023 and 2022, loans held for sale totaled $186.3 million and $187.9 million, respectively. Included
in loans held for sale are loans sold to GNMA with an option to repurchase totaling $56.5 million and $71.4 million at
December 31, 2023 and 2022, respectively. The Company records the GNMA loans at fair value on the consolidated balance
sheets with a corresponding liability. GNMA optional repurchase programs allow financial institutions to buy back individual
delinquent mortgage loans that meet certain criteria (90 days or more past due) from the securitized loan pool for which the
institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase
such a delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. Under FASB ASC 860, this
buyback option is considered a conditional option until the delinquency criteria are met, at which time the option becomes
unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional
buyback option, the loans can no longer be reported as sold and must be brought back onto the consolidated balance sheet as
loans held for sale, regardless of whether the Company intends to exercise the buy-back option. These GNMA loans are not
included in the nonperforming loans totals (See Table 19).
74
Asset Quality
Nonperforming Assets
NPA consists of NPL, OREO, and other repossessed assets. The increase from December 31, 2022 to December 31,
2023 in NPA was driven by the increase of $117.4 million, or 118.9%, in nonaccrual loans and leases (See Tables 20 and 21).
The increase was offset by the decrease of $8.6 million, or 100.0%, in accruing restructured loans and leases from
December 31, 2022 to December 31, 2023 due to the adoption of ASU 2022-02, as well as the decrease of $0.5 million, or
7.1%, in foreclosed OREO and other NPA. The majority of the increase in nonaccrual loans and leases is located in the C&I
non-real estate and CRE income producing segments. NPA were as follows as of each period presented:
TABLE 19—NONPERFORMING ASSETS
(In thousands)
Nonaccrual loans and leases
Restructured loans and leases, still accruing (1)
Total NPL
Foreclosed OREO and other NPA
Total NPA
NPL to total loans and leases
NPA to total assets
GNMA loans 90 or more days past due eligible for repurchase
Government guaranteed portion of nonaccrual loans and leases covered by the
SBA, FHA, VA or USDA
Loans and leases 90+ days past due, still accruing
December 31, 2023
216,141
$
—
216,141
6,246
222,387
$
December 31, 2022
98,745
$
8,598
107,343
6,725
114,068
$
0.67 %
0.45 %
0.35 %
0.23 %
$
$
$
56,524
$
71,367
49,551
22,466
$
$
20,830
2,068
(1)
The adoption of ASU 2022-02 (see Note 1) eliminated TDR accounting effective beginning January 1, 2023, thus eliminating restructured loans and leases, still accruing as
of the date of adoption.
Nonperforming Loans
NPL consist of nonaccrual loans and leases and, until the adoption of ASU 2022-02, effective January 1, 2023,
accruing loans and leases that have been restructured (primarily in the form of reduced interest rates and modified payment
terms) because of the borrower’s or guarantor’s financial difficulty. The Company’s policy provides that loans and leases are
generally placed in nonaccrual status if, in management’s opinion, payment in full of principal or interest is not expected or
payment of principal or interest is more than 90 days past due, unless the loan or lease is both well-secured and in the process of
collection. NPL increased 101.4% at December 31, 2023, compared to December 31, 2022. NPL as a percentage of net loans
and leases increased from 0.4% at December 31, 2022, to 0.7% at December 31, 2023.
Included in NPL at December 31, 2023, were $100.6 million of Impaired loans. Loans assigned an internal grade of
Impaired are individually analyzed collateral-dependent loans for which a specific provision has been considered to address the
unsupported exposure. Loans assigned an internal grade of PCD (loss) represent loans with evidence of deterioration of credit
quality since origination that are acquired, and for which it is probable, at acquisition, that the bank will be unable to collect all
contractually required payments. Impaired loans had a specific reserve of $41.6 million included in the total ACL of
$468.0 million at December 31, 2023, and were net of $4.8 million in partial charge-downs previously taken on these impaired
loans. Additionally, certain loans internally risk rated as PCD (loss) were included in NPL. At December 31, 2023, these loans
totaled $1.6 million and had a specific reserve of $62 thousand included in the ACL. Net partial charge-downs previously taken
on PCD (loss) loans were immaterial at December 31, 2023.
NPL at December 31, 2022, included $7.2 million of Impaired loans that had a specific reserve of $2.3 million
included in the ACL of $440.3 million at December 31, 2022. PCD (loss) loans included in NPL totaled $5.8 million and had a
specific reserve of $0.3 million included in the ACL. Net partial charge-downs previously taken on both Impaired and PCD
(loss) loans were immaterial at December 31, 2022.
75
The following table presents the Company’s NPL by geographical location at December 31, 2023:
TABLE 20—NONPERFORMING LOANS BY GEOGRAPHICAL LOCATION
(In thousands)
Alabama
Arkansas
Florida
Georgia
Louisiana
Mississippi
Missouri
Tennessee
Texas
Other
Total
Amortized Cost
$
2,660,730 $
1,165,592
2,171,881
2,334,740
1,380,171
2,988,445
587,863
1,755,042
13,222,517
4,230,041
32,497,022 $
$
Total NPL
15,985
2,136
10,204
68,894
3,975
12,589
2,091
3,161
59,437
37,669
216,141
NPL as a
% of
Amortized Cost
0.60 %
0.18
0.47
2.95
0.29
0.42
0.36
0.18
0.45
0.89
0.67 %
The following table provides additional details related to the Company’s loan and lease portfolio and the distribution
of NPL by segment and class at December 31, 2023:
TABLE 21—NONPERFORMING LOANS BY SEGMENT AND CLASS
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total
Amortized Cost
Total NPL
$
8,935,598 $
4,349,060
13,284,658
131,559
7,097
138,656
3,910,962
5,736,871
9,647,833
9,329,692
234,839
9,564,531
1,859
17,485
19,344
57,881
260
58,141
NPL as a
% of
Amortized Cost
1.47 %
0.16
1.04
0.05
0.30
0.20
0.62
0.11
0.61
$
32,497,022 $
216,141
0.67 %
NPL at December 31, 2023 increased by $117.4 million, or 118.9%, to $216.1 million from $98.7 million at
December 31, 2022. The increase in nonaccrual loans was primarily driven by the increases of $107.7 million, or 450.3%, for
the C&I non-real estate segment and $10.2 million, or 138.5%, for the CRE income producing segment.
76
The following table provides details regarding the aging of the Company’s NPL by segment and class at December 31,
2023:
TABLE 22—AGING OF NONACCRUAL LOANS
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total
OREO and Repossessed Assets
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days
Past Due
Total
Past Due
Current
Total
Nonaccrual
$
10,093 $
8,652 $
93,666 $ 112,411 $
19,148 $ 131,559
1,031
11,124
185
8,837
5,881
99,547
7,097
—
7,097
119,508
19,148
138,656
—
9,603
9,603
4,782
44
—
—
—
1,859
6,362
8,221
1,859
15,965
17,824
4,315
15
43,255
52,352
128
187
4,826
25,553 $
$
4,330
13,167 $ 151,151 $ 189,871 $
43,383
52,539
—
1,520
1,520
5,529
73
1,859
17,485
19,344
57,881
260
5,602
58,141
26,270 $ 216,141
OREO consists of properties acquired through foreclosure. Repossessed assets consist of non-real estate assets
acquired in partial or full settlement of loans. OREO and repossessed assets totaled $6.2 million and $6.7 million at
December 31, 2023, and December 31, 2022, respectively. The decrease of $0.5 million, or 7.1%, was primarily the result of
write-downs and sales of OREO during 2023.
Because a portion of the Company’s NPL have been determined to be collateral-dependent, management expects the
resolution of a significant number of these loans may necessitate foreclosure proceedings resulting in further additions to
OREO. At December 31, 2023, residential mortgages in process of foreclosure increased to $10.9 million compared to
$4.6 million at December 31, 2022.
At the time of foreclosure, the fair value of the collateral for loans backed by real estate is typically determined by an
appraisal performed by a third-party appraiser holding professional certifications. Such appraisals are then reviewed and
evaluated by the Company’s internal appraisal group. A market value appraisal using a 180-360-day marketing period is
typically ordered and the OREO is recorded at the time of foreclosure at its market value less estimated selling costs. For
residential subdivisions that are not completed, the appraisals reflect the uncompleted status of the subdivision.
Since OREO is carried at fair value less estimated selling costs on an ongoing basis, new appraisals are obtained on at
least an annual basis and the OREO carrying values are adjusted accordingly. The type of appraisals typically used for these
periodic reappraisals are “Restricted Use Appraisals,” meaning the appraisal is for client use only. Other indications of fair
value are also used to attempt to ensure that OREO is carried at fair value. These include listing the property with a broker and
acceptance of an offer to purchase from a third-party. If an OREO property is listed with a broker at an amount less than the
current carrying value, the carrying value is adjusted to reflect the list price less estimated selling costs and if an offer to
purchase is accepted at a price less than the current carrying value, the carrying value is adjusted to reflect that sales price, less
estimated selling costs. The majority of the properties in OREO are actively marketed using a combination of real estate
brokers, bank staff who are familiar with the particular properties and/or third parties.
Financial Difficulty Modifications
In March 2022, the FASB issued ASU No. 2022-02, eliminating the recognition and measurement guidance on TDRs
for creditors that have adopted ASC 326 and requiring them to make enhanced disclosures about loan modifications for
borrowers experiencing financial difficulty. The guidance became effective for Cadence beginning January 1, 2023, and was
adopted via the modified retrospective transition method.
77
With the removal of the TDR accounting model, the general loan modification guidance in Subtopic 310-20 is now
applied to all loan modifications, including modifications made for borrowers experiencing financial difficulty. Under this
guidance, a modification is treated as a new loan only if both 1) the terms of the new loan are at least as favorable to the lender
as the terms for comparable loans to other customers with similar collection risks, and 2) modifications to the terms of the
original loan are more than minor. If either condition is not met, the modification is accounted for as the continuation of the old
loan with any effect of the modification treated as a prospective adjustment to the loan’s effective interest rate. Modifications in
scope for borrowers experiencing financial difficulty may include principal forgiveness, other-than-insignificant payment delay,
interest rate reduction, or a combination of modifications. During the year ended December 31, 2023, the most common
concessions related to term extensions and payment deferrals. Other concessions included reduction of interest rates to below
market rates. See Note 5 to the consolidated financial statements.
At December 31, 2023, loans that were modified within the past twelve months for borrowers experiencing financial
difficulty totaled $139.9 million, or 0.4%, of total loans and leases, net of unearned income. Loans are considered to be in
payment default at 90 or more days past due. See Note 5 to the consolidated financial statements for additional information for
borrowers experiencing financial difficulty.
Loan Concentrations
At December 31, 2023, the Company did not have any concentration of loans or leases in excess of 10% of total loans
and leases outstanding which were not otherwise disclosed as a category of loans or leases. Loan concentrations are considered
to exist when there are amounts loaned to multiple borrowers engaged in similar activities which would cause them to be
similarly impacted by economic or other conditions. The Company conducts business in a geographically concentrated area and
has a significant amount of loans secured by real estate to borrowers in varying activities and businesses but does not consider
these factors alone in identifying loan concentrations. The ability of the Company’s borrowers to repay loans is somewhat
dependent upon the economic conditions prevailing in the Company’s market areas.
Internally Assigned Grades on Loans
The Company utilizes an internal loan classification system that is updated to perpetually grade loans according to
certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance,
delinquency, liquidity, cash flows, debt coverage ratios, collateral type and loan-to-value ratio. See Note 5 to the consolidated
financial statements.
The following table provides details of the Company’s loan and lease portfolio by segment, class, and internally
assigned grade at December 31, 2023:
TABLE 23—GRADES ON LOANS
(In thousands)
Commercial and industrial
Pass
Special
Mention
Substandard (1)
Loss
Impaired (1)
PCD (Loss)
Total
Non-real estate
Owner occupied
$ 8,450,809 $ 101,607 $
4,287,190
32,409
294,895 $
27,070
13 $
—
84,457 $
1,275
3,817 $ 8,935,598
4,349,060
1,116
Total commercial and
industrial
Commercial real estate
Construction, acquisition
and development
Income producing
Total commercial real
estate
Consumer (2)
Residential mortgages
Other consumer
Total consumer
12,737,999
134,016
321,965
3,894,551
5,527,388
3,364
23,727
13,047
170,217
9,421,939
27,091
183,264
9,258,002
234,367
9,492,369
4,066
—
4,066
66,050
472
66,522
13
—
—
—
—
—
—
85,732
4,933
13,284,658
—
15,539
15,539
—
—
—
—
—
—
1,574
—
1,574
3,910,962
5,736,871
9,647,833
9,329,692
234,839
9,564,531
Total
$ 31,652,307 $ 165,173 $
571,751 $
13 $
101,271 $
6,507 $ 32,497,022
78
(1)
In the loan classifications above, $61.1 million of the substandard balance and $8.4 million of the impaired balance is covered by government guarantees
from either the SBA, FHA, VA and USDA.
(2) During the second quarter of 2023, the Company began determining the risk rating classification of its Consumer portfolio based on nonaccrual and
delinquency status in accordance with the Uniform Retail Credit Classification guidance and industry norms, which contributed to a lower number of
criticized and classified loans compared to periods prior to the second quarter of 2023. As a result of this modification, current period results are not
directly comparable to periods prior to the second quarter of 2023.
The following table provides details regarding the aging of the Company’s loan and lease portfolio by internally assigned grade
at December 31, 2023:
TABLE 24—AGING BY GRADE ON LOANS
(In thousands)
Pass
Special Mention
Substandard
Loss
Impaired
PCD (Loss)
Total
Current
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days
Past Due
Total
$ 31,559,559 $
165,173
438,423
—
19,258
4,933
$ 32,187,346 $
51,766 $
—
18,518
—
19,670
—
89,954 $
20,441 $
—
17,893
13
7,758
—
46,105 $
20,541 $ 31,652,307
165,173
571,751
13
101,271
6,507
173,617 $ 32,497,022
—
96,917
—
54,585
1,574
At December 31, 2023, special mention, substandard, and impaired grade categories showed increases while PCD
(loss) decreased compared to December 31, 2022. Special mention loans increased $75.5 million, or 84.2%, compared to
December 31, 2022. The increase in special mention was driven primarily by an increase in the C&I segment and was partially
offset by a decrease in CRE CAD. Substandard loans increased $79.1 million, or 16.0%, at December 31, 2023 compared to
December 31, 2022. The increase was concentrated in C&I and CRE income producing and was partially offset by decreases in
CRE CAD and residential mortgages. For impaired loans, the increase of $94.1 million was primarily driven by an increase in
non-real estate and income producing, slightly offset by a decrease in owner occupied. Pass rated loans increased $1.9 billion,
or 6.5%, and this increase was seen across all loan categories except for slight decreases in non-real estate and other consumer.
The Company has maintained stable credit results while continuing to grow loans. Of total loans and leases, 99.0% were current
on their contractual payments at December 31, 2023.
Collateral for some of the Company’s loans and leases is subject to fair value estimates that can fluctuate with market
conditions and other external factors. In addition, while the Company has certain underwriting obligations related to such
estimates, the estimates of some real property and other collateral are dependent upon third-party independent appraisers
employed as independent contractors of the Company.
Deposits
Deposits originating within the communities served by the Company continue to be the Company’s primary source of
funding its earning assets. The Company has been able to compete effectively for deposits in its primary market areas, while
continuing to manage the exposure to rising interest rates. The distribution and market share of deposits by type of deposit and
by type of depositor are important considerations in the Company's assessment of the stability of its funding sources and its
access to additional funds. Furthermore, management shifts the mix and maturity of the deposits depending on economic
conditions and loan and investment policies in an attempt, within set policies, to minimize cost and maximize net interest
margin.
79
The following table presents the Company’s deposits and the percentage change between the periods indicated:
TABLE 25—SUMMARY OF DEPOSITS
2023
2022
2021
(Dollars in thousands)
Noninterest bearing demand deposits
Interest bearing demand and money market deposits
Savings
Time deposits
Total deposits
Amount
$ 9,232,068
19,276,596
2,720,913
7,267,560
$ 38,497,137
% Change
Amount
% Change
Amount
(27.5) % $ 12,731,065
19,040,131
1.2
3,473,746
(21.7)
3,711,672
95.8
(1.2) % $ 38,956,614
(6.6) % $ 13,634,505
18,727,588
1.7
3,556,079
(2.3)
3,899,501
(4.8)
(2.2) % $ 39,817,673
Deposits experienced a decrease of 1.2% at December 31, 2023, compared to December 31, 2022. Noninterest bearing
demand deposits decreased $3.5 billion, or 27.5%, at December 31, 2023, reflecting customer migration to interest bearing
products given the increase in market interest rates paid on deposits. Time deposits increased 95.8% at December 31, 2023
compared to December 31, 2022 due in part to the increase of $0.4 billion in brokered time deposits and in part to the increased
deposit rates referred to above.
The following table presents the classification of the Company’s deposits on an average basis for each of the periods
indicated:
TABLE 26—AVERAGE BALANCE AND YIELD ON DEPOSITS
(Dollars in thousands)
2023
2022
2021
Average
Amount
Average
Rate
Average
Amount
Average
Rate
Average
Amount
Average
Rate
Noninterest bearing demand deposits
$
10,610,698 —%
$
13,733,384 —%
$
8,382,997 —%
Interest bearing demand deposits
Savings
Time
18,314,649
3,028,875
6,674,231
2.58
0.49
3.69
18,541,402
3,657,718
3,545,402
0.59
0.15
0.68
11,114,242
2,946,629
2,784,733
0.30
0.09
0.88
Total deposits
$
38,628,453
$
39,477,906
$ 25,228,601
80
Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit
and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any
federal or state deposit insurance regimes. The uninsured portion of public funds owned by municipal and state government
entities are collateralized by the Company with investment securities and custodial letters of credit from the FHLB of Dallas.
The following table segregates our deposits by deposit insurance categories.
TABLE 27—ESTIMATED TOTAL INSURED AND UNINSURED DEPOSITS
(In thousands)
FDIC insured
Collateralized (uninsured)
Uninsured (excluding collateralized)
Total deposits
December 31, 2023 December 31, 2022
20,480,975
$
6,559,402
11,916,237
38,956,614
22,909,914 $
5,518,946
10,068,277
38,497,137 $
$
The Company’s estimated uninsured time deposits at December 31, 2023 had maturities as follows:
TABLE 28—MATURITY OF UNINSURED TIME DEPOSITS
(In thousands)
Three months or less
Over three months through six months
Over six months through twelve months
Over 12 months
Total
Borrowings
Short-term Borrowings
Amount
406,978
356,370
387,857
107,740
1,258,945
$
$
The Company has several types of available short-term borrowing arrangements including Federal funds purchased,
securities sold under agreements to repurchase, short-term BTFP, short-term FHLB borrowings and the Federal Reserve
discount window. Federal funds purchased are unsecured lines while the rest of these types of borrowings are collateralized by
investment securities and loans. At December 31, 2023 and December 31, 2022, the Company had total short-term borrowings
of $4.0 billion with a weighted average interest rate of 4.78% and $4.0 billion with a weighted average interest rate of 4.33%,
respectively. During 2023, short-term BTFP borrowings represented the largest component of short-term borrowings comprised
of one loan totaling $3.5 billion at a rate of 4.84% (as of December 31, 2023) and maturing on December 26, 2024. The
availability for new borrowings under the BTFP currently expires on March 11, 2024. See Note 10 to the Company’s
consolidated financial statements for additional details.
Long-term Borrowings
Under the terms of the blanket floating lien security agreement with FHLB Dallas, the Company is required to
maintain sufficient collateral to secure borrowings. At December 31, 2023, the remaining borrowing availability totaled $8.9
billion. At December 31, 2023, there were no call features on long-term FHLB borrowings. See Note 10 to the Company’s
consolidated financial statements for additional details.
Due to the merger with Legacy Cadence on October 29, 2021, the Company assumed subordinated notes with the par
value totaling $145.0 million and junior subordinated notes with the par value totaling $50.6 million. The Company redeemed,
at par, $35.0 million of the junior subordinated debentures in December 2021 and $15 million on January 3, 2022. On May 1,
2021, the Company assumed $10.0 million in subordinated notes from the merger with FNS Bancshares Inc. During 2023, the
Company repurchased $16.8 million of our $300 million Subordinated Notes due November 20, 2029 and $5.6 million of our
$85.0 million Subordinated Notes due June 30, 2029, resulting in a $1.8 million gain on the extinguishment of debt.
81
The following is a summary of our long-term borrowings at the dates indicated:
TABLE 29—LONG-TERM BORROWINGS
(In thousands)
December 31, 2023
December 31, 2022
4.850% advances from FHLB Dallas, due August 2, 2027
4.125% fixed to floating rate, subordinated notes, due November 20, 2029,
callable in 2024
$
7.250% subordinated notes, due June 28, 2029, callable in 2024
4.750% subordinated notes, due June 30, 2029, callable in 2024
6.250% subordinated notes, due June 28, 2029, callable in 2024
5.000% fixed to floating rate, subordinated notes, due June 30, 2030,
callable in 2025
Purchase accounting adjustment, net of amortization
771 $
283,159
35,000
79,352
25,000
10,000
5,786
Debt issue costs
Total long-term borrowings
Liquidity and Capital Resources
Liquidity
$
(608)
438,460 $
836
300,000
35,000
85,000
25,000
10,000
8,064
(1,346)
462,554
One of the Company's goals is to maintain adequate funds to meet increases in loan demand or any potential increase
in the normal level of deposit withdrawals. This goal is accomplished primarily by generating cash from the Company’s
operating activities and maintaining sufficient short-term liquid assets. These sources, coupled with a stable core deposit base
and a historically strong reputation in the capital markets, allow the Company to fund earning assets and maintain the
availability of funds. Management believes that the Company’s traditional sources of maturing loans and investment securities,
sales of loans held for sale, cash from operating activities and a strong base of core deposits are adequate to meet the
Company’s liquidity needs for normal operations over both the short-term and the long-term.
In response to the industry wide concerns regarding liquidity and deposit outflows that occurred late in the first quarter
of 2023, the Company proactively increased its on-balance sheet liquidity in the first quarter of 2023. These balances returned
to more normalized levels during the second and third quarters of 2023, although continued to be maintained at higher than
historic levels. The Company further increased its on-balance sheet liquidity in the fourth quarter of 2023 with the proceeds
from the security portfolio restructuring and proceeds from the sale of Cadence Insurance. The following table summarizes the
Company’s cash and cash equivalents as of the following dates:
TABLE 30—CASH AND CASH EQUIVALENTS
(In thousands)
Cash and cash equivalents
Cash and cash equivalents as a percentage of:
Loans and lease, net
Total earning assets
Total assets
Total deposits
Uninsured and uncollateralized deposits.
December 31, 2023
December 31, 2022
$
4,232,265
$
1,995,759
13.0 %
9.6
8.6
11.0
27.2
6.6 %
4.6
4.1
5.1
10.8
To provide additional liquidity as needed, the Company utilizes short-term financing through the purchase of federal
funds, securities sold under agreements to repurchase, and borrowings at the FHLB and through the BTFP. Additionally, the
Company can borrow funds through the Federal Reserve discount window.
82
The Company had the following sources of contingent liquidity available at December 31, 2023:
TABLE 31—CASH AND SOURCES OF CONTINGENT LIQUIDITY
(In thousands)
Cash and cash equivalents
Unpledged investment securities (at par)
Secured lines of credit availability at the FHLB and Federal Reserve
Unsecured Federal funds lines availability
Total
$
Amount
4,232,265
1,588,398
10,681,732
2,133,000
$ 18,635,395
At December 31, 2023, the Company had irrevocable letters of credit issued by the FHLB totaling $3.3 billion at
December 31, 2023, of which $3.0 billion is used to collateralize certain public funds and $0.3 billion is used on behalf of our
customers.
The ability of the Company to obtain funding from these or other sources could be negatively affected should the
Company experience a substantial deterioration in its financial condition or its debt rating or should the availability of short-
term funding become restricted as a result of the disruption in the financial markets. Management does not anticipate any short-
or long-term changes to its liquidity strategies and believes that the Company has ample sources to meet the liquidity challenges
caused by the current economic conditions. The Company has sound and robust risk management practices that include an
active ALCO to analyze and manage the Company’s liquidity and interest rate risk (See - Quantitative and Qualitative
Disclosures About Market Risk).
Other Liquidity Considerations
The Company’s operating lease obligations represent short and long-term operating lease and rental payments for
facilities, certain software and data processing and other equipment (see Note 8 to the consolidated financial statements for
more information). Purchase obligations represent obligations to purchase goods and services that are legally binding and
enforceable on the Company and that specify all significant terms, including: fixed or minimum quantities to be purchased;
fixed, minimum or variable price provisions; and the approximate timing of the transaction.
In the ordinary course of business, the Company enters into various off-balance sheet commitments and other
arrangements to extend credit that are not reflected on the consolidated balance sheets of the Company. The business purpose of
these off-balance sheet commitments is the routine extension of credit. The Company also faces the risk of deteriorating credit
quality of borrowers to whom a commitment to extend credit has been made; however, no significant credit losses are expected
from these commitments and arrangements. At December 31, 2023, letters of credit totaled $450.7 million and unfunded
extensions of credit totaled $9.7 billion (see Note 22 to the consolidated financial statement for more information). At
December 31, 2023, the Company maintained a reserve for unfunded commitments of $8.6 million included in other liabilities.
83
Cash Obligations
The following table summarizes the Company’s contractual obligations at December 31, 2023. See Notes 1, 8, and 10
to the consolidated financial statements for further disclosures regarding contractual obligations.
TABLE 32—CONTRACTUAL OBLIGATIONS
(In thousands)
Contractual Obligations:
Total
Payments Due by Periods
One to Three
Years
Less Than
One Year
Three to Five
Years
More than
Five Years
Deposits without a stated maturity
Deposits with a stated maturity
Subordinated and long-term borrowings
Operating lease obligations
Securities sold under agreement to repurchase
Short-term BTFP borrowings
Limited partnership investments
Total contractual obligations
$ 31,229,577 $ 31,229,577 $
— $
— $
7,267,560
438,460
191,543
451,516
3,500,000
275,218
6,651,318
—
11,178
451,516
3,500,000
199,859
$ 43,353,874 $ 42,043,448 $
542,249
—
24,143
—
—
69,596
635,988 $
73,638
771
23,271
—
—
885
98,565 $
—
355
437,689
132,951
—
—
4,878
575,873
Cash Flow Sources and Uses
Cash equivalents include cash and amounts due from banks, including interest bearing deposits with other banks. At
December 31, 2023, cash and cash equivalents totaled $4.2 billion compared to $2.0 billion and December 31, 2022. The ratio
of cash and cash equivalents to total assets was 8.6% at December 31, 2023 compared to 4.1% at December 31, 2022.
Cash flows from discontinued operations are not presented separately in the consolidated statements of cash flows.
Notwithstanding the sale transaction, the disposition of Cadence Insurance will not have a significant impact on either the future
cash flows or capital resources of the Company, due to the size of Cadence Insurance relative to the Company. The sale
transaction did provide net proceeds of $861.4 million which are reported in investing activities in the consolidated statements
of cash flows and a pre-tax gain of $706.6 million.
During 2023, operating activities provided $555.9 million in cash compared to $923.0 million during 2022. The
decrease was primarily driven by a decrease of $800.8 million in proceeds from payments and sales of loans held for sale. A
decrease of $632.4 million in originations of loans held for sale offset most of the decrease noted above.
During 2023, investing activities provided $2.4 billion in cash compared to $1.7 billion used by investing activities
during 2022. The increase of $4.1 billion in cash provided by investing activities resulted primarily from an increase of
$3.9 billion in proceeds from sales of available-for-sale securities which resulted from the Company’s balance sheet
optimization initiative, net proceeds of $0.9 billion from the sale of Cadence Insurance, a decrease of $1.3 billion in increased
loans and an increase of $252.3 million in cash activities from FHLB stock. These increases were partially offset by an increase
of $1.5 billion in purchases of available-for-sale securities and a decrease of $547.5 million in proceeds from maturities, calls,
and paydowns of available-for-sale securities.
During 2023, financing activities used cash of $715.4 million compared to cash provided of $1.5 billion during 2022.
The change in financing activities resulted from a decrease of $2.8 billion in cash provided by short-term borrowings. This
decrease in cash provided by financing activities was partially offset by a decrease of $404.3 million in decreased deposits and a
decrease of $181.2 million in cash used to repurchase common stock.
Regulatory Capital
Regulatory capital at December 31, 2023 and 2022 was calculated in accordance with standards established by the
federal banking agencies as well as the interagency final rule published on September 30, 2020 entitled “Revised Transition of
the Current Expected Credit Losses Methodology for Allowances” which delayed 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 the economic and other impacts from COVID-19, while also maintaining the quality of regulatory capital. Under the
final rule, the Day-1 impact of the adoption of CECL and 25% of subsequent provisions for credit losses (“Day-2 impacts”)
84
were deferred over a two-year period ending January 1, 2022. At that point, the amount is phased into regulatory capital on a
pro rata basis over a three-year period ending January 1, 2025.
Additionally, regulatory capital rules include a capital conservation buffer of 2.5% which the Company must maintain
on top of its minimum risk-based capital requirements. This buffer applies to all three risk-based capital measurements (CET1,
Tier 1 and total capital to risk-weighted assets). A financial institution with a conservation buffer of less than the required
amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain
discretionary bonus payments to executive officers.
Capital amounts and ratios for the Company at December 31, 2023 and 2022, are presented in the following table and
as shown, exceed the thresholds necessary to be considered “well capitalized.” Management believes that no events or changes
have occurred subsequent to the indicated dates that would change this designation.
TABLE 33—REGULATORY CAPITAL
(Dollars in thousands)
Common equity Tier 1 capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets)
Total capital (to risk-weighted assets)
Tier 1 leverage capital (to average assets)
Uses of Capital
December 31, 2023
Ratio
11.62% $ 3,880,508
4,047,501
12.06
4,861,521
14.32
4,047,501
9.30
December 31, 2022
Ratio
10.22%
10.66
12.81
8.43
Amount
$ 4,363,020
4,530,013
5,377,324
4,530,013
Amount
Subject to pre-approval from the FDIC and MDBCF, the Company may pursue acquisitions of depository institutions
and businesses closely related to banking that further the Company’s business strategies. Management anticipates that
consideration for any transactions would include shares of the Company’s common stock, cash or a combination thereof.
On December 13, 2023, the Company announced a new share repurchase program whereby the Company may acquire
up to an aggregate of 10,000,000 shares of its common stock. The share repurchase program became effective on January 2,
2024, and will expire on December 31, 2024. Under the share repurchase program, Cadence's shares may be purchased
periodically in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in
accordance with federal securities laws. Repurchased shares are held as authorized but unissued shares are available for use in
connection with the Company’s stock compensation programs, other transactions, or for other corporate purposes as determined
by the Company’s Board of Directors.
On December 14, 2022, the Company authorized a share repurchase program allowing the Company to purchase up to
an aggregate of 10,000,000 shares of the Company’s common stock. The share repurchase program became effective on
January 3, 2023, and expired on December 29, 2023. During the year ended December 31, 2023, the Company did not
repurchase any shares under this program.
During the first quarter of 2023, the Company increased the common stock dividend to $0.235 per share.
The IRA of 2022 includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased
by covered corporations during a taxable year, subject to certain limits and provisions. The excise tax was effective beginning
in fiscal year 2023. While we may complete transactions subject to the new excise tax, we do not expect a material impact to
our balance sheet or our results of operations.
Impact of Inflation
The consolidated financial statements and related consolidated financial data presented herein have been prepared in
accordance with U.S. GAAP and practices within the banking industry which require the measurement of financial position and
operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over
time due to inflation. The effect of inflation on a financial institution differs from the effect on other types of businesses. While
a financial institution’s operating expenses are affected by general inflation, the asset and liability structure of a financial
institution consists largely of monetary items. Monetary items, such as cash, investments, loans, deposits, and borrowings, are
those assets and liabilities which are or will be converted into a fixed number of dollars regardless of changes in prices. As a
result, changes in interest rates can be more impactful to a financial institution’s performance than general inflation. Inflation
85
may also have impacts on the Company’s customers, on businesses and consumers and their ability or willingness to invest,
save or spend, and perhaps on their ability to repay loans. As such, there would likely be impacts on the general appetite for
banking products and the credit health to the Company’s customers. See Part 1, Item 1.A., Risk Factors for additional
information regarding the risks of inflation.
Certain Litigation and Other Contingencies
The nature of the Company’s business ordinarily results in certain types of claims, litigation, investigations, and other
legal or administrative cases and proceedings. Although the Company and its subsidiaries have policies and procedures to
minimize legal noncompliance and the impact of claims and other proceedings and endeavored to procure reasonable amounts
of insurance coverage, litigation and regulatory actions present an ongoing risk.
The Company and its subsidiaries engage in lines of business that are heavily regulated and involve a large volume of
actual or potential financial transactions with customers or applicants, and the Company is a public company with a large
number of shareholders. From time to time, applicants, borrowers, customers, shareholders, former employees, service
providers, and other third parties have brought actions against the Company or its subsidiaries, in cases claiming substantial
damages. Financial services companies are subject to risks arising from changing regulatory frameworks or expectations,
regulatory investigations, class action litigation, and, from time to time, the Company and its subsidiaries have such actions
brought against them. The Company and its subsidiaries are also subject to enforcement actions by federal or state regulators,
including the FDIC, the CFPB, the DOJ, state attorneys general and the MDBCF, which may be adversely impacted by ongoing
litigation in which the Company is involved. Additionally, the Company is, and management expects it to be, engaged in a
number of foreclosure proceedings and other collection actions as part of its lending and leasing collections activities, which,
from time to time, have resulted in counterclaims against the Company and its subsidiaries. Various legal proceedings have and
may arise in the future out of claims against entities to which the Company is a successor as a result of business combinations.
When and as the Company determines it has meritorious defenses to the claims asserted, it vigorously defends against
such claims. The Company will consider settlement of claims when, in management’s judgment and in consultation with
counsel, it is in the best interests of the Company to do so.
The Company cannot predict with certainty the cost of defense, the cost of prosecution, or the ultimate outcome of
litigation or other proceedings filed by or against it, its subsidiaries and its directors, management or employees, including
remedies or damage awards. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection
with outstanding legal proceedings as well as certain threatened claims (which are not considered incidental to the ordinary
conduct of the Company’s business) utilizing the latest and most reliable information available. For matters where a loss is not
probable or the amount of the loss cannot be estimated, the Company will not accrue. For matters where it is probable the
Company will incur a loss and the amount can be reasonably estimated, the Company establishes an accrual for the loss. Once
established, the accrual is adjusted periodically to reflect any relevant developments. The actual cost of any such matters,
however, may turn out to be substantially higher than the amount accrued. Further, the Company’s insurance policies have
deductibles and coverage limits, and such policies are unlikely to cover all costs and expenses related to the defense or
prosecution of such legal proceedings or any losses arising therefrom.
Although the final outcome of any legal proceedings is inherently uncertain, based on the information available, advice
of counsel and available insurance coverage, if applicable, management believes that the litigation-related liability of $9.7
million accrued at December 31, 2023 is adequate and that any incremental change in potential liability arising from the
Company’s legal proceedings and threatened claims, including the matters described herein and those otherwise arising in the
ordinary course of business, will not have a material adverse effect on the Company’s business or consolidated results of
operations or financial condition. It is possible, however, that future developments could result in an unfavorable outcome for,
or resolution of any one or more of the legal proceedings in which the Company or its subsidiaries are defendants, which may
be material to the Company’s business or consolidated results of operations or financial condition for a particular fiscal period
or periods.
On August 30, 2021, Legacy Cadence and the DOJ agreed to a settlement set forth in the consent order related to the
investigation by the DOJ of Legacy Cadence Bank’s fair lending program in Harris, Fort Bend, and Montgomery Counties
located in Houston, Texas during the period between 2014 and 2016 (the “Consent Order”). The Consent Order was signed by
the United States District Court for the Northern District of Georgia, Atlanta Division, on August 31, 2021. Pursuant to Section
5.2(g) of the Agreement and Plan of Merger and Paragraph 50 of the Consent Order, Legacy BancorpSouth Bank approved the
negotiated settlement, and subsequently, the Company agreed to accept the obligations of the Consent Order. The Consent
Order is in effect for five years. For additional information regarding the terms of this settlement and the Consent Order, see
Legacy Cadence Bancorporation’s Current Report on Form 8-K that was filed with the SEC on August 30, 2021.
86
Recent Pronouncements
Refer to Note 1 “Summary of Significant Accounting Policies” in the consolidated financial statements for a
discussion of accounting standards currently effective for 2023 and accounting standards that have been issued but are not
currently effective.
CRITICAL ACCOUNTING ESTIMATES
The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP, which require the
Company to make estimates and assumptions (see Note 1 to the consolidated financial statements). Management bases our
estimates on historical experience and on various other assumptions that we believe to be reasonable under current
circumstances.
These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not
readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. The use of alternative
assumptions may result in significantly different estimates. Additionally, actual results may differ from these estimates.
Accounting policies are an integral part of our consolidated financial statements. A thorough understanding of these
accounting policies is essential when reviewing our reported results of operations and our financial position. The critical
accounting estimates discussed below involve additional management judgment due to the complexity and subjectivity of the
methods and assumptions used.
Allowance for Credit Losses
The Company bases its estimates of credit losses on three primary components: (1) estimates of expected losses that
exist in various segments of performing loans and leases over the remaining life of the loan portfolio using a reasonable and
supportable economic forecast; (2) specifically identified losses in individually analyzed credits which are collateral-dependent,
which generally include loans internally graded as impaired and PCD Loss loans; and (3) qualitative factors related to economic
conditions, portfolio concentrations, regulatory policy updates, and other relevant factors that address estimates of expected
losses not fully addressed based upon management’s judgment of portfolio conditions.
The Company utilizes credit risk models to estimate the probability of default and loss given default of loans over their
remaining lives. In some cases, including credit cards, a loss rate model is used where lifetime loss rates are estimated. The
probability of default settings in the models incorporate a risk grading process by utilizing pool-specific historical default rates.
In addition, the loss given default assumptions in the models utilize historical losses for different types of collateral on defaulted
loans while giving consideration for the loan-to-value ratio at the time of default. The product of the probability of default and
loss given default derives a base expected loss rate for each credit. The base expected loss rate is adjusted by way of
econometric models that measure the direction and magnitude of change in expected loss rates given a change in forecasted
economic variables.
The aforementioned credit risk models and econometric models were developed and are recalibrated using historical
experience. Credit factors such as financial condition of the borrower and guarantor, recent credit performance, delinquency,
liquidity, cash flows, collateral type and collateral value are used by the models to assess credit risk. Estimates of expected
losses are influenced by the historical net losses experienced by the Company for loans and leases of comparable
creditworthiness and structure. Specific loss assessments are performed for loans and leases based upon the collateral
protection. The Company’s reasonable and supportable eight quarter economic forecast is utilized to estimate credit losses
before reverting back to longer term historical loss experience.
The ACL represents management’s best estimate, but significant downturns in circumstances relating to loan quality
and economic conditions could necessitate additional provisions or a reduction in the ACL. Unanticipated changes and events
could have a significant impact on the financial performance of borrowers and their ability to perform as agreed. One of the
most significant judgments used in determining the ACL is the reasonable and supportable economic forecast. The economic
indices sourced from the economic forecast and used in developing the estimate include the national unemployment rate,
changes in the U.S. gross domestic product, changes in commercial real estate prices and changes in home prices. The
economic series for unemployment carries the highest weighting and is the most sensitive component of the estimate.
Given the dynamic relationship between macroeconomic variables within our modeling framework, it is difficult to
estimate the impact of a change in any one individual variable on the ACL. As a result, management uses a probability-
87
weighted approach that incorporates a baseline and a downside risk economic scenario when formulating the quantitative
estimate.
However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a
100% weighting applied to a downside risk scenario. Under this scenario, as an example, the unemployment rate increases, to
an estimated 5.7% and 6.3% at the end of 2024 and 2025, respectively. These numbers result in unemployment rates that are
approximately 1.5% and 2.2% higher than baseline scenario projections of 4.2% and 4.1%, respectively for the same time
periods.
To demonstrate the sensitivity to key economic parameters used in the calculation of our ACL at December 31, 2023,
management calculated the difference between a 100% base forecast and a 100% downside risk scenario. These calculations are
quantitative-only and exclude consideration of qualitative adjustments and produced a model result difference of $128.6
million.
The resulting difference is not intended to represent an expected increase in ACL for a number of reasons including the
following:
• Management uses a weighted approach applied to multiple economic scenarios for its ACL estimation process;
•
•
The highly uncertain economic environment;
The difficulty in predicting the inter-relationships between the economic parameters used in the various
economic scenarios; and
The sensitivity estimate does not account for our qualitative overlays and associated risk profile and size components
incorporated by management as part of its overall ACL framework.
•
Goodwill and Other Intangible Assets
The acquisition method of accounting requires that assets acquired and liabilities assumed in business combinations
are recorded at their fair values. This often involves estimates based on third-party or internal valuations based on discounted
cash flow analyses or other valuation techniques, which are inherently subjective. Business combinations also typically result in
goodwill, which is subject to ongoing periodic impairment tests based on the fair values of the reporting units to which the
goodwill relates. The amortization of definite-lived intangible assets is based upon the estimated economic benefits to be
received, which is also subjective. Provisional estimates of fair values may be adjusted for a period of up to one year from the
acquisition date if new information is obtained about facts and circumstances that existed as of the acquisition date that, if
known, would have affected the measurement of the amounts recognized as of that date. Adjustments recorded during this
period are recognized in the current reporting period. Management uses various valuation methodologies to estimate the fair
value of these assets and liabilities, and often involves a significant degree of judgment, particularly when liquid markets do not
exist for the particular item being valued. Examples of such items include loans, deposits, identifiable intangible assets and
certain other assets and liabilities.
Management uses significant estimates and assumptions to value such items, including projected cash flows,
repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The credit allowance
for PCD loans is recognized within business combination accounting. The ACL for non-PCD assets is recognized as provision
expense in the same reporting period as the business combination. The valuation of other identifiable intangible assets,
including core deposit intangibles, trademarks, and customer list intangibles, requires assumptions such as projected attrition
rates, expected revenue and costs, discount rates and other forward-looking factors. The purchase date valuations and any
subsequent adjustments also determine the amount of goodwill or bargain purchase gain recognized in connection with the
business combination. The use of different assumptions could produce significantly different valuation results, which could
have material positive or negative effects on our results of operations. The Company uses the best estimates and assumptions to
value assets acquired and liabilities assumed, at the acquisition date, and these estimates are subject to refinement.
Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired in a business
combination. The Company assesses goodwill for impairment at the reporting unit level on an annual basis, or more often if an
event occurs or circumstances change which indicate there may be impairment. The impairment test compares the estimated fair
value of each reporting unit with its net book value. The Company’s annual assessment date is during the Company’s fourth
quarter. The fair value of the reporting unit is estimated using valuation techniques that market participants would use in an
acquisition of the whole reporting unit, such as estimated discounted cash flows, the quoted market price of our common stock
adjusted for a control premium, and observable average price-to forward-earnings and price-to-tangible book multiples of
88
observed transactions. If the unit’s fair value is less than its carrying value, an estimate of the implied fair value of the goodwill
is compared to the goodwill’s carrying value and any impairment recognized.
The Company performed a quantitative assessment to determine if it was more likely than not that a reporting unit’s
fair value was less than its carrying value during the fourth quarter of 2023. Based on this assessment, it was determined the
reporting units’ fair value exceeded their carrying value. See Note 9 to the consolidated financial statements for additional
information on the Company’s goodwill and intangibles recorded in the periods presented.
89
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk Management
Market risk reflects the risk of economic loss resulting from changes in interest rates and other relevant market prices.
This risk of loss can be reflected in either reduced potential net interest revenue in future periods or diminished market values of
financial assets. The Company’s market risk arises primarily from IRR that is inherent in its lending, investment and deposit
taking activities.
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 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 NII and EVE over specified periods of time. We refer to this process as ALM.
The primary objective of ALM is to manage interest rate risk within a desired risk tolerance for potential fluctuations
in NII and EVE throughout different interest rate cycles, which we aim to achieve through management 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 acceptable 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 an individual asset or liability category, or externally with interest rate derivative
contracts, such as interest rate swaps, caps, collars, and floors. See “—Interest Rate Exposure” below for a more detailed
discussion of our various derivative positions.
Our ALM strategy is formulated and monitored by our ALCO in accordance with policies approved by the Board of
Directors. 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. ALCO also establishes and approves pricing and
funding strategies with respect to overall asset and liability composition. ALCO reports regularly to our Risk Committee of the
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 the new business that we anticipate over a 60-month forecast horizon, however,
past the 36-month mark, the growth of the balances is static in the forecast. Numerous assumptions are made in the modeling
process, including balance sheet composition, re-pricing, and maturity characteristics of existing 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 Exposure” 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.
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Interest Rate Exposure
Based upon the current interest rate environment at December 31, 2023, our simulation model projects our sensitivity
to an instantaneous increase or decrease in interest rates over a one-year period as follows:
TABLE 34—INTEREST RATE SENSITIVITY
(Dollars in millions)
Change (in Basis Points) in Interest Rates (12-Month Projection)
Net Interest Income
Economic Value of Equity
Amount
Percent
Amount
Percent
Increase (Decrease)
+ 200 BP
+ 100 BP
- 100 BP
- 200 BP
$
19.0
10.0
(12.0)
(23.0)
1.3 % $
(605.0)
0.7
(0.8)
(1.6)
(281.0)
274.0
546.0
(9.6) %
(4.5)
4.4
8.7
Both the NII and EVE simulations include assumptions regarding balances, asset prepayment speeds, deposit and
borrowings repricing and runoff and interest rate relationships among balances that management believes to be reasonable for
the various interest rate environments. Differences in actual occurrences from these assumptions may change our market risk
exposure.
See “Table 15 – Maturity Distribution of AFS Securities” that shows the maturities and weighted average yields for
the carrying value of the available-for-sale securities as of December 31, 2023, and “Table 18 – Interest Rate Sensitivity of
Loans” that shows the maturity distribution based on remaining maturities of the Company’s loan and lease portfolio and the
interest rate sensitivity of the Company’s loans and leases maturing after one year at December 31, 2023.
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. From time to time, we expect to use interest rate swaps, caps, collars, and floors as macro hedges against
inherent rate sensitivity in our assets and our liabilities to synthetically alter the maturities or re-pricing characteristics of assets
or liabilities to reduce imbalances.
We currently engage in only the following types of hedges: (1) those which enable us to transfer the interest rate risk
exposure involved in our daily business activities; and (2) those which serve to alter the market risk inherent in our investment
portfolio, mortgage pipeline, mortgage servicing rights, or liabilities and thus help us to manage earnings and market value
volatility within approved risk tolerances.
The following is a discussion of our current derivative positions related to IRR.
Interest Rate Lock Commitments. In the ordinary course of business, the Company enters into certain commitments
with customers in connection with residential mortgage loan applications for loans the Company intends to sell. Such
commitments are considered derivatives under current accounting guidance and are required to be recorded at fair value. The
change in fair value of these instruments is reflected currently in the mortgage banking revenue of the consolidated statements
of income. The fair value of these derivatives is recorded on the consolidated balance sheets in other assets and other liabilities.
Forward Sales Commitments. The Company enters into forward sales commitments of MBS with investors to mitigate
the effect of the interest rate risk inherent in providing interest rate lock commitments to customers. During the period from
commitment date to closing date, the Company is subject to the risk that market rates of interest may change. In an effort to
mitigate such risk, forward delivery sales commitments, under which the Company agrees to deliver certain MBS, are
established. These commitments are non-hedging derivatives in accordance with current accounting guidance and recorded at
fair value, with changes in fair value reflected currently in the mortgage banking revenue of the consolidated statements of
income. The fair value of these derivatives is recorded on the consolidated balance sheets in other assets and other liabilities.
Mortgage Servicing Right Hedges. The value of our MSR is dependent on changes in market interest rates. In order to
mitigate the effects of changes in rates on the value of our MSR, the Company has used various instruments (including but not
limited to Treasury options, Treasury and TBA futures and forwards, swap futures, etc.) as economic hedges.
91
Agreements Not Designated as Hedging Derivatives. The Company enters into interest rate swap, floor, cap and collar
agreements on commercial loans with customers to meet the financing needs and interest rate risk management needs of its
customers. At the same time, the Company enters into offsetting interest rate swap agreements with a financial institution in
order to minimize the Company’s interest rate risk. These interest rate agreements are non-hedging derivatives and are recorded
at fair value with changes in fair value reflected in noninterest income. The fair value of these derivatives is recorded on the
consolidated balance sheets in other assets and other liabilities.
See Note 21 to the consolidated financial statements for additional information regarding our derivative financial
instruments.
LIBOR Transition
The Company formed a working group to coordinate the orderly transition from LIBOR to one or more alternative
reference rates. The working group consisted of senior management of the Company, and the working group provided updates
to the Credit Committee of Management and the Credit Risk Committee of the Board on a recurring basis. The Company
discontinued the use of LIBOR for new production effective January 1, 2022, and LIBOR is no longer available for repricing
existing loans or derivatives with repricing or rate determination dates after June 30, 2023. At December 31, 2023, the
Company had no existing loans for which the repricing index was tied to LIBOR.
92
ITEM 8. FINANCIAL STATEMENTS.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Board of Directors of Cadence Bank
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. GAAP. The Company’s internal control over financial
reporting includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and directors of the Company; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including the Chief Executive Officer and the Chief
Financial Officer, the Company conducted an assessment of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on
management’s assessment and those criteria, management believes that the Company maintained effective internal control over
financial reporting as of December 31, 2023.
The Company’s independent registered public accounting firm has issued a report on the effectiveness of the
Company’s internal control over financial reporting. That report appears on page 94 of this Report.
Date:
February 23, 2024
Date:
February 23, 2024
/s/ James D. Rollins III
James D. Rollins III
Chief Executive Officer
/s/ Valerie C. Toalson
Valerie C. Toalson
Senior Executive Vice President and
Chief Financial Officer
(Principal
Accounting Officer)
93
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors and Audit Committee
Cadence Bank
Tupelo, Mississippi
Opinion on the Internal Control over Financial Reporting
We have audited Cadence Bank’s (the “Company”) internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated
Framework: (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of December 31, 2023 and 2022, and for each of the
years in the three-year period ended December 31, 2023, and our report dated February 23, 2024, expressed an unqualified
opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definitions and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
/s/ FORVIS, LLP
Jackson, Mississippi
February 23, 2024
94
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors and Audit Committee
Cadence Bank
Tupelo, Mississippi
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Cadence Bank (the “Company”) as of December 31, 2023
and 2022, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for
each of the years in the three-year period ended December 31, 2023, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2023, in conformity with accounting principles
generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 23, 2024, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below arises from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the
accounts or disclosures to which it relates.
Allowance for Credit Losses
As described in Notes 1, 5 and 6, the Company’s loan portfolio totaled $32.5 billion as of December 31, 2023, and the
allowance for credit losses on loans (“ACL”) was $468.0 million. This represents an estimate of expected losses inherent within
the Company’s loan portfolio.
The Company bases its estimates of credit losses on three primary components: (1) estimates of expected losses that exist in
various segments of performing loans and leases over the remaining life of the loan portfolio using a reasonable and
supportable economic forecast; (2) specifically identified losses in individually analyzed credits which are collateral dependent;
and (3) qualitative factors related to economic conditions, portfolio concentrations, regulatory policy updates, and other relevant
factors that address estimates of expected losses not fully addressed based upon management’s judgment of portfolio
95
conditions. The Company utilizes credit risk models to estimate the probability of default and loss given default of loans over
their remaining life. The product of the probability of default and loss given default derives a base expected loss rate for each
loan. The base expected loss rate is adjusted by way of econometric models that measure the direction and magnitude of change
in expected loss rates given a change in forecasted economic variables.
We identified the valuation of the ACL as a critical audit matter. The principal considerations for our determination of the ACL
as a critical audit matter includes the subjectivity and complexity involved in management’s determination of credit loss
estimates and assumptions, specifically the determination of weightings applied to the reasonable and supportable forecasts and
management’s adjustment in determining the economic conditions qualitative factor. This required an increased auditor effort,
including specialized skill and knowledge, and a high degree of auditor subjectivity in evaluating the estimated credit losses for
the loan portfolio.
The primary procedures we performed to address this critical audit matter included:
•
•
•
Evaluated and tested the design and operating effectiveness of controls, including those related to technology, over the
ACL, including:
◦
The completeness and accuracy of inputs into the model used to determine the allowance for credit losses,
◦ Management’s review of a reasonable and supportable forecast,
◦ Management’s review of the qualitative adjustments to the modeled output, including management’s review
of the determination of the economic conditions qualitative adjustment,
Evaluated management’s application of qualitative adjustments to the ACL, including testing the accuracy of the
supporting calculation and evaluating whether the qualitative factors, including the economic conditions qualitative
adjustment, appropriately addressed the risks that were not fully accounted for in the quantitative component of the
methodology;
Evaluated management’s determination of reasonable and supportable forecast, including testing the application of the
forecast and the related scenario weighting, in both the quantitative and qualitative calculation.
/s/ FORVIS, LLP
We have served as the Company’s auditor since 2019.
Jackson, Mississippi
February 23, 2024
96
Consolidated Balance Sheets
Cadence Bank and Subsidiaries
(In thousands, except share and per share amounts)
ASSETS
Cash and due from banks
Interest bearing deposits with other banks and Federal funds sold
Total cash and cash equivalents
Available-for-sale securities, at fair value
Loans and leases, net of unearned income
Allowance for credit losses
Net loans and leases
Loans held for sale, at fair value
Premises and equipment, net
Goodwill
Other intangible assets, net
Bank-owned life insurance
Other assets
Assets of discontinued operations
TOTAL ASSETS
LIABILITIES
Noninterest bearing demand deposits
Interest bearing demand and money market deposits
Savings
Time deposits
Total deposits
Securities sold under agreement to repurchase
Federal funds purchased
Short-term BTFP and FHLB borrowings
Subordinated and long-term borrowings
Other liabilities
Liabilities of discontinued operations
TOTAL LIABILITIES
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value per share; authorized and issued - 6,900,000
shares for both periods presented
Common stock, $2.50 par value per share; authorized - 500,000,000 shares;
issued and outstanding - 182,871,775 and 182,437,265 shares, respectively
Capital surplus
Accumulated other comprehensive loss
Retained earnings
TOTAL SHAREHOLDERS' EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
See accompanying notes to the consolidated financial statements.
$
$
December 31, 2023
December 31, 2022
$
798,177 $
3,434,088
4,232,265
8,075,476
32,497,022
468,034
32,028,988
186,301
802,133
1,367,785
100,191
642,840
1,498,531
—
48,934,510 $
9,232,068 $
19,276,596
2,720,913
7,267,560
38,497,137
451,516
—
3,500,000
438,460
879,554
—
43,766,667
756,906
1,238,853
1,995,759
11,944,096
30,349,277
440,347
29,908,930
187,925
792,232
1,367,785
119,579
630,046
1,540,239
166,823
48,653,414
12,731,065
19,040,131
3,473,746
3,711,672
38,956,614
708,736
200,000
3,100,231
462,554
815,703
98,202
44,342,040
166,993
166,993
457,179
2,743,066
(761,829)
2,562,434
5,167,843
48,934,510 $
456,093
2,709,391
(1,222,538)
2,201,435
4,311,374
48,653,414
97
Consolidated Statements of Income
Cadence Bank and Subsidiaries
(In thousands, except per share amounts)
INTEREST REVENUE:
Loans and leases
Available-for-sale securities:
Taxable
Tax-exempt
Loans held for sale
Short-term investments
Total interest revenue
INTEREST EXPENSE:
Interest bearing demand deposits and money market accounts
Savings
Time deposits
Federal funds purchased and securities sold under agreement to repurchase
Short-term debt
Subordinated and long-term debt
Total interest expense
Net interest revenue
Provision for credit losses
Net interest revenue, after provision for credit losses
NONINTEREST REVENUE:
Mortgage banking
Credit card, debit card and merchant fees
Deposit service charges
Security losses, net
Wealth management
Gain on sale of PPP loans
Other
Total noninterest revenue
NONINTEREST EXPENSE:
Salaries and employee benefits
Occupancy and equipment
Data processing and software
Merger expense
Amortization of intangibles
Deposit insurance assessments
Pension settlement expense
Other
Total noninterest expense
(Loss) income from continuing operations before income taxes
Income tax (benefit) expense
Income from continuing operations
Income from discontinued operations before income taxes
Income tax expense from discontinued operations
Income from discontinued operations, net of income taxes
Net income
Less: preferred dividends
Net income available to common shareholders
Basic (loss) earnings per common share from continuing operations
Basic earnings per common share
Diluted (loss) earnings per common share from continuing operations
Diluted earnings per common share
See accompanying notes to the consolidated financial statements.
Year Ended December 31,
2023
2022
2021
$
2,004,812 $
1,342,662 $
758,180
208,122
9,206
4,450
83,577
183,915
10,079
7,554
16,371
2,310,167
1,560,581
472,723
14,955
246,476
32,581
172,940
19,136
958,811
1,351,356
80,000
1,271,356
18,978
49,784
61,718
(435,652)
86,928
—
101,901
(116,343)
634,722
110,972
120,443
5,192
19,388
72,224
11,826
181,156
1,155,923
(910)
(4,594)
109,893
5,519
24,253
13,432
36,863
19,330
209,290
1,351,291
7,000
1,344,291
44,860
58,160
73,478
(384)
80,486
—
85,885
342,485
634,843
114,460
111,107
50,845
18,432
18,712
9,023
152,332
1,109,754
577,022
129,705
$
3,684 $
447,317 $
727,591
188,971
538,620
542,304
9,488
532,816 $
(0.03) $
2.92 $
(0.03) $
2.92 $
22,353
6,433
15,920
463,237
9,488
453,749 $
2.39 $
2.47 $
2.37 $
2.46 $
$
$
$
$
$
111,047
3,461
8,035
1,310
882,033
33,688
2,764
24,394
813
25
14,638
76,322
805,711
138,062
667,649
58,053
42,636
46,418
(395)
39,507
21,572
35,114
242,905
374,134
76,244
70,707
59,896
10,734
8,701
3,051
82,354
685,821
224,733
45,958
178,775
22,195
5,808
16,387
195,162
9,488
185,674
1.41
1.54
1.40
1.54
98
Consolidated Statements of Comprehensive Income (Loss)
Cadence Bank and Subsidiaries
(In thousands)
Net income
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on AFS securities:
Net unrealized gains (losses), net of income taxes of $(243,832), $339,070,
and $50,362
Reclassification adjustment for net (losses) gains realized in net income,
net of income taxes of $102,901, $141, and $(33)
Net change in unrealized gains (losses) on AFS securities, net of tax
Recognized employee benefit plan net periodic benefit cost, net of income
taxes of $(1,542), $(4,248), and $(30)
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
See accompanying notes to the consolidated financial statements.
Year Ended December 31,
2022
463,237 $
2023
542,304 $
$
2021
195,162
788,474
(1,096,453)
(151,481)
(332,751)
(454)
99
455,723
(1,096,907)
(151,382)
4,986
460,709
$ 1,003,013 $
13,738
(1,083,169)
(619,932) $
90
(151,292)
43,870
99
Consolidated Statements of Shareholders' Equity
Cadence Bank and Subsidiaries
Year Ended December 31, 2023, 2022, and 2021
(In thousands, except share and per share amounts)
Shares
Amount
Shares
Amount
Preferred Stock
Common Stock
Accumulated
Other
Comprehensive
(Loss) Income
Capital
Surplus
Retained
Earnings
Total
Shareholders
' Equity
Balance at December 31, 2020
6,900,000 $ 166,993
102,561,480 $ 256,404 $ 565,187 $
11,923 $ 1,821,970 $—$ 2,822,477
Net income
Other comprehensive loss, net of tax
Recognition of stock compensation
Repurchase of stock
Issuance of stock in conjunction with acquisitions
Preferred dividends declared, $1.375 per share
Cash dividends declared, $0.780 per share
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
164,939
—
—
412
—
—
31,925
(6,167,002)
(15,418)
(170,261)
91,778,241
229,446
2,415,147
—
—
—
—
—
—
—
195,162
(151,292)
—
—
—
—
—
195,162
(151,292)
32,337
(185,679)
2,644,593
—
—
—
—
(9,488)
(9,488)
(100,123)
(100,123)
Balance at December 31, 2021
6,900,000 $ 166,993
188,337,658 $ 470,844 $ 2,841,998 $
(139,369) $ 1,907,521 $ 5,247,987
Net income
Other comprehensive loss, net of tax
Recognition of stock compensation
Repurchase of stock
Preferred dividends declared, $1.375 per share
Cash dividends declared, $0.880 per share
—
—
—
—
—
—
—
—
—
—
—
—
—
—
242,313
—
—
606
—
—
35,620
(6,142,706)
(15,357)
(168,227)
—
—
—
—
—
—
—
463,237
463,237
(1,083,169)
—
—
—
—
—
—
—
(9,488)
(1,083,169)
36,226
(183,584)
(9,488)
(159,835)
(159,835)
Balance at December 31, 2022
6,900,000 $ 166,993
182,437,265 $ 456,093 $ 2,709,391 $
(1,222,538) $ 2,201,435 $ 4,311,374
Net income
Other comprehensive income, net of tax
Recognition of stock compensation
Exercise of stock options
Repurchase of stock, net of excise tax
Preferred dividends declared, $1.375 per share
Cash dividends declared, $0.940 per share
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Cumulative effect of change in accounting principle
— -
— -
—
—
334,910
226,705
—
—
837
567
—
—
30,188
5,579
(127,105)
(318)
(2,092)
—
—
—
—
—
—
—
—
—
—
542,304
460,709
—
—
—
—
—
—
—
—
—
—
(9,488)
542,304
460,709
31,025
6,146
(2,410)
(9,488)
(171,622)
(171,622)
(195) (195)
(195)
Balance at December 31, 2023
6,900,000 $ 166,993
182,871,775 $ 457,179 $ 2,743,066 $
(761,829) $ 2,562,434 $ 5,167,843
See accompanying notes to the consolidated financial statements.
100
Consolidated Statements of Cash Flows
Cadence Bank and Subsidiaries
(In thousands)
Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operations:
Year Ended December 31,
2022
2021
2023
$
542,304 $
463,237 $
195,162
Depreciation, amortization, and accretion
Deferred income tax expense (benefit)
Provision for credit losses
Gain on sale of loans, net
Gain on disposition of business
Loss on sales of available-for-sale securities, net
Unrealized gain on limited partnerships, net
Share-based compensation expense
Proceeds from payments and sales of loans held for sale
Origination of loans held for sale
Increase in accrued interest receivable
Increase (decrease) in accrued interest payable
Net decrease (increase) in prepaid pension asset
(Increase) decrease in other assets
Increase (decrease) in other liabilities
Other, net
Net cash provided by operating activities
Investing Activities:
Proceeds from disposition of business, net of cash transferred
Purchases of available-for-sale securities
Proceeds from sales of available-for-sale securities
Proceeds from maturities, calls, and payments of available-for-sale
securities
Acquisition of businesses, net of cash (paid) received
Proceeds from sales (purchases) of FHLB stock, net
Increase in loans, net
Purchases of premises and equipment
Proceeds from sales of premises and equipment
Proceeds from disposition of foreclosed and repossessed property
Cash paid in branch divestiture
Proceeds from sales of loans transferred to held for sale
Net death benefits received (purchases of) on bank owned life insurance
Purchases of tax credit investments
Purchases of limited partnership interests
Other, net
Net cash provided (used) by investing activities
238,607
892
80,000
(17,033)
(706,588)
435,652
(8,024)
31,025
1,292,365
(1,333,522)
(15,247)
73,149
5,073
(56,172)
5,744
(12,327)
555,898
861,364
(2,333,245)
4,294,947
2,021,799
—
121,243
(2,333,391)
(98,283)
17,078
8,269
—
26,153
33
(83,813)
(26,980)
(79,126)
2,396,048
255,821
7,822
7,000
(46,083)
—
384
(8,169)
32,787
2,093,204
(1,965,956)
(41,193)
19,050
(5,037)
20,567
74,581
15,031
923,046
—
(787,318)
369,614
2,569,336
(11,511)
(131,055)
(3,630,970)
(94,499)
9,887
23,392
—
64,580
(17,564)
(66,637)
(30,298)
19,967
(1,713,076)
175,935
(22,063)
138,062
(104,996)
—
395
(1,587)
18,101
3,114,226
(2,218,300)
(35,922)
(2,402)
(5,676)
82,345
(161,998)
1,442
1,172,724
—
(7,909,743)
564,029
2,175,657
2,665,485
(311)
(202,667)
(72,267)
5,641
5,284
(358,916)
—
(648)
(34,701)
(3,480)
13,116
(3,153,521)
101
Consolidated Statements of Cash Flows (continued)
Financing Activities:
(Decrease) increase in deposits, net
Net change in securities sold under agreement to repurchase and federal
funds purchased
Net change in BTFP borrowings and short-term FHLB advances
Repayment of long-term FHLB advances and borrowings
Exercise of stock options
Repurchase of common stock
Cash dividends paid on common stock
Cash dividends paid on preferred stock
Other, net
Net cash (used in) provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental Cash Flow Disclosures
Cadence Bank and Subsidiaries
(In thousands)
Supplemental Disclosures
Cash paid during the period for:
Interest
Income taxes, net of refunds
Cash paid for amounts included in lease liabilities
Non-cash investing activities, at fair value:
Acquisition of real estate and other assets in settlement of loans
Transfers of loans held for sale to loans
Transfers of loans to loans held for sale
Right of use assets (reductions) obtained in exchange for new operating
lease liabilities
Increase in funding obligations for certain tax credit investments
See accompanying notes to consolidated financial statements.
$
$
Year Ended December 31,
2022
2021
2023
(459,654)
(863,976)
2,564,043
(457,220)
399,769
(22,536)
6,146
(2,410)
(171,791)
(9,488)
1,744
(715,440)
2,236,506
1,995,759
4,232,265 $
(373,452)
3,100,231
(17,844)
—
(183,584)
(160,777)
(9,488)
—
1,491,110
701,080
1,294,679
1,995,759 $
644,473
—
(55,977)
—
(185,679)
(99,264)
(9,488)
—
2,858,108
877,311
417,368
1,294,679
Year Ended December 31,
2022
2023
2021
885,661 $
163,452
20,262
7,531
45,307
26,083
(657)
152,222
190,241 $
72,445
22,221
4,337
1,624
23,533
28,663
83,765
78,724
76,802
17,332
12,047
9,115
9,346
47,395
—
102
Notes to Consolidated Financial Statements
Cadence Bank and Subsidiaries
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The Company and its subsidiaries follow GAAP, including, where applicable, general practices within the banking
industry. The 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 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 24 for more
information).
Certain amounts reported in prior years have been reclassified to conform to the 2023 presentation. These
reclassifications did not materially impact the Company’s consolidated financial statements.
In accordance with GAAP, 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.
Discontinued Operations
On October 24, 2023, the Company entered into the Stock Purchase Agreement regarding the sale of Cadence
Insurance to Gallagher and Arthur J. Gallagher & Co pursuant to which the Company agreed to sell all of the issued and
outstanding shares of capital stock of Cadence Insurance to Gallagher for a purchase price of $904.0 million in cash, subject to
customary purchase price adjustments. The transaction closed on November 30, 2023. The assets and liabilities of Cadence
Insurance have been presented as “assets of discontinued operations” and “liabilities of discontinued operations,” respectfully in
the Consolidated Balance Sheet at December 31,2022. Cadence Insurance’s operating results have been presented as
“discontinued operations” within the accompanying consolidated statements of income. Cash flows from both continuing and
discontinued operations are included in the Consolidated Statement of Cash Flows. See Note 3 and Note 20 for further
discussion.
Nature of Operations
The Company operates under a state bank charter and is subject to regulation by the FDIC. The Company is a regional
banking franchise with more than 350 branch locations across the South, Midwest and Texas. Services and products include
consumer banking, consumer loans, mortgages, home equity lines and loans, credit cards, commercial and business banking,
treasury management, specialized lending, asset-based lending, commercial real estate, equipment financing, correspondent
banking, SBA lending, foreign exchange, wealth management, investment and trust services, financial planning, and retirement
plan management.
Use of Estimates
The preparation of financial statements in conformity with U.S. 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.
Business Combinations
Assets and liabilities acquired in business combinations are accounted for under the acquisition method of accounting
and, accordingly, are recorded at their estimated fair values on the acquisition date. The Company generally records provisional
amounts at the time of an acquisition based on the information available. These provisional estimates of fair values may be
adjusted for a period of up to one year from the acquisition date if new information is obtained about facts and circumstances
that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that
date. Adjustments recorded during this period are recognized in the current reporting period. The excess cost over fair value of
103
net assets acquired is recorded as goodwill. In 2021, the Company completed the mergers with National United Bancshares
Inc., the parent company of National United, and FNS Bancshares Inc., the parent company of FNB Bank. Additionally, in
October 2021, we completed our merger with Cadence Bancorporation and its wholly owned subsidiary, Cadence Bank, N.A.,
(collectively referred to as “Legacy Cadence”) (see Note 2).
Securities
Available-for-Sale Securities
Securities classified as available-for-sale are those debt securities that are intended to be held for an indefinite period
of time, but not necessarily to maturity. Any decision to sell a security classified as available-for-sale would be based on
various factors, including movements in interest rates, liquidity needs, security risk assessments, changes in the mix of assets
and liabilities and other similar factors. These securities are carried at their estimated fair value, and the net unrealized gain or
loss is reported as accumulated other comprehensive income, net of tax, until realized upon sale. Premiums and discounts are
recognized in interest income using the effective interest method.
Realized gains and losses on the sale of securities available-for-sale are determined by specific identification using the
cost on a trade date basis and are included in securities (losses) gains, net in the Company’s consolidated statements of income.
The Company evaluates available-for-sale securities in an unrealized loss position to determine whether the decline in
the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any
impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related
impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the
fair value with a charge to earnings. In evaluating available-for-sale securities in unrealized loss positions for impairment,
management considers the magnitude and duration of the decline, as well as the reasons for the decline, whether the securities
are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, whether the
Company would be required to sell the securities before a full recovery of costs and the results of reviews of the issuers’
financial condition, among other facts.
Held-to-Maturity Securities
Securities classified as held-to-maturity are those debt securities for which there is a positive intent and ability to hold
to maturity. These securities are carried at cost, adjusted for amortization of premium and accretion of discount, computed by
the effective interest method. At December 31, 2023 and 2022, the Company did not have any held-to-maturity securities.
Trading Account Securities
Trading account securities are securities that are held for the purpose of selling them at a profit. The Company had no
trading account securities at December 31, 2023 and 2022.
Securities Purchased and Sold Under Agreements to Resell or Repurchase
Securities purchased under agreements to resell are accounted for as short-term investments and securities sold under
agreements to repurchase are accounted for as collateralized financing transactions and are recorded at the amounts at which the
securities were acquired or sold plus accrued interest. The securities pledged as collateral are generally U.S. government and
federal agency securities.
FHLB Stock
The Company has ownership in FHLB of Dallas stock which does not have readily determinable fair value and no
quoted market value, as ownership is restricted to member institutions, and all transactions take place at par value with the
FHLB as the only purchaser. Therefore, the Company accounts for this investment as a long-term asset and carries it at cost.
Management’s determination as to whether this investment is impaired is based on management’s assessment of the ultimate
recoverability of the par value (cost) rather than recognizing temporary declines in fair value. Investment in FHLB stock is
required for membership in the FHLB system and in relation to the level of FHLB advances.
Derivative Financial Instruments and Hedging Activities
Derivative instruments are accounted for under the requirements of ASC Topic 815, Derivatives and Hedging. ASC
815 requires companies to recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at
104
fair value. The fair value of derivative positions outstanding is included in other assets and other liabilities in 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. The Company does not speculate using derivative instruments.
Interest Rate Lock Commitments
In the ordinary course of business, the Company enters into certain commitments with customers in connection with
residential mortgage loan applications for loans the Company intends to sell. Such commitments are considered derivatives
under current accounting guidance and are required to be recorded at fair value. The change in fair value of these instruments is
reflected currently in the mortgage banking revenue of the consolidated statements of income. The fair value of these
derivatives is recorded on the consolidated balance sheets in other assets and other liabilities.
Forward Sales Commitments
The Company enters into forward sales commitments of MBS with investors to mitigate the effect of the interest rate
risk inherent in providing interest rate lock commitments to customers. During the period from commitment date to closing
date, the Company is subject to the risk that market rates of interest may change. In an effort to mitigate such risk, forward
delivery sales commitments, under which the Company agrees to deliver certain MBS, are established. These commitments are
non-hedging derivatives in accordance with current accounting guidance and recorded at fair value, with changes in fair value
reflected currently in the mortgage banking revenue of the consolidated statements of income. The fair value of these
derivatives is recorded on the consolidated balance sheets in other assets and other liabilities.
Agreements Not Designated as Hedging Derivatives
The Company enters into interest rate swap, floor, cap and collar agreements on commercial loans with customers to
meet the financing needs and interest rate risk management needs of its customers. At the same time, the Company enters into
offsetting interest rate swap agreements with a financial institution in order to minimize the Company’s interest rate risk. These
interest rate agreements are non-hedging derivatives and are recorded at fair value with changes in fair value reflected in
noninterest income. The fair value of these derivatives is recorded on the consolidated balance sheets in other assets and other
liabilities.
Foreign Currency Contracts
The Company enters into certain foreign currency exchange contracts on behalf of its clients to facilitate their risk
management strategies, while at the same time entering into offsetting foreign currency exchange contracts with another
counterparty in order to minimize the Company’s foreign currency exchange risk. The contracts are short term in nature, and
any gain or loss incurred at settlement is recorded as other noninterest income or other noninterest expense. The fair value of
these contracts is reported in other assets and other liabilities. The Company does not apply hedge accounting to these contracts.
Risk Participation Agreements
Cadence has both bought and sold credit protection in the form of participations on interest rate swaps (swap
participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary
course of business to serve the credit needs of customers. Swap participations, whereby Cadence has purchased credit
protection, entitle Cadence to receive a payment from the counterparty if the customer fails to make payment on any amounts
due to Cadence upon early termination of the swap transaction. For contracts where Cadence sold credit protection, Cadence
would be required to make payment to the counterparty if the customer fails to make payment on any amounts due to the
counterparty upon early termination of the swap transaction.
Mortgage Servicing Right Hedges
The value of our MSR is dependent on changes in market interest rates. In order to mitigate the effects of changes in
rate on the value of our MSR, the Company has used various instruments as an economic hedge. See Notes 18 and 21 for
further information.
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. Under Company policy, institutional counterparties must be approved by the
Company’s Asset/Liability Management Committee. The Company’s credit exposure on derivatives is limited to the net fair
105
value for each counterparty. Refer to Note 21 for further discussion and details of derivative financial instruments and hedging
activities.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the transferred assets is surrendered. Control
is generally considered to have been surrendered when 1) the transferred assets are legally isolated from the Company or its
consolidated affiliates, even in bankruptcy or other receivership, 2) the transferee has the right to pledge or exchange the assets
with no conditions that constrain the transferee and provide more than a trivial benefit to the Company, and 3) the Company
does not maintain the obligation or unilateral ability to reclaim or repurchase the assets. If these sale criteria are met, the
transferred assets are removed from the Company’s balance sheet and a gain or loss on sale is recognized. If not met, the
transfer is recorded as a secured borrowing, and the assets remain on the Company’s balance sheet, the proceeds from the
transaction are recognized as a liability, and gain or loss on sale is deferred until the sale criterion are achieved.
Loans Held-for-Sale
Mortgage Loans Held-for-Sale
The fair value of loans held-for-sale is based on commitments outstanding from investors as well as what secondary
markets are currently offering for portfolios with similar characteristics. The Company has elected to carry loans held-for-sale
at fair value. Loans held-for-sale are subjected to recurring fair value adjustments. Loan sales are recognized when the
transaction closes, the proceeds are collected, ownership is transferred and, through the sales agreement, continuing
involvement consists of the right to service the loan for a fee for the life of the loan, if applicable. Gains and losses on the sale
of loans held-for-sale are recorded as part of mortgage banking revenue on the consolidated statement of income. Fees on
mortgage loans sold individually in the secondary market, including origination fees, service release premiums, processing and
administrative fees, and application fees, are recognized as mortgage banking revenue in the period in which the loans are sold.
Buyers generally have recourse to return a purchased loan to the Company under limited circumstances. Recourse
conditions may include early payment default, breach of representations or warranties, and documentation deficiencies. During
2023, 2022, and 2021, an insignificant number of loans were returned to the Company. At December 31, 2023, the Company
had reserved $2.3 million for probable losses from representation and warranty obligations.
GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans
that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and
without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100% of the
remaining principal balance of the loan. Under FASB ASC 860, this buyback option is considered a conditional option until the
delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained
effective control over these loans under the unconditional buyback option, the loans can no longer be reported as sold and must
be brought back onto the consolidated balance sheet as loans held-for-sale, regardless of whether the Company intends to
exercise the buy-back option. These loans are reported as held-for-sale in accordance with U.S. GAAP with the offsetting
liability being reported as other liabilities. At December 31, 2023, the amount of loans subject to buy back was $56.5 million.
Commercial Loans Held-for-Sale
The Company originates certain commercial loans for which a portion is intended for sale. The Company also transfers
certain commercial loans to held-for-sale when management has the intent to sell the loan or a portion of the loan in the near
term. These held-for-sale loans are recorded at fair value. At the time of transfer, write-downs on the loans are recorded as
charge-offs and a new cost basis is established. Any subsequent fair value adjustment is determined on an individual loan basis
and is recognized as a valuation allowance with any charges included in other noninterest expense. Gains and losses on the sale
of these loans are included in other noninterest income when realized.
Loans and Leases and Related Provision and Allowance for Credit Losses
Loans and leases are presented in the consolidated financial statements at amortized cost. The components of
amortized cost include unpaid principal balance, unamortized discounts and premiums, and unamortized deferred fees and
costs. 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. Loans
acquired through acquisition are initially recorded at fair value. Discounts and premiums created when the loans were recorded
at their estimated fair values at acquisition are accreted over the remaining term of the loan as an adjustment to the related
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loan’s yield. In the event of a loan pay-off, the remaining net deferred origination fees, and unamortized discounts and
premiums are automatically recognized into income. Where doubt exists as to the collectability of the loans and leases, interest
income is recorded as payment is received.
The Company's policy provides that loans and leases are generally placed in nonaccrual status if, in management’s
opinion, payment in full of principal or interest is not expected or payment of principal or interest is more than 90 days past
due, unless the loan or lease is both well-secured and in the process of collection. Once placed in nonaccrual status, all accrued
but uncollected interest related to the current fiscal year is reversed against the appropriate interest and fee income on loans and
leases account with any accrued but uncollected interest related to prior fiscal years is charged off against the ACL.
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 conditions, 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.
ASC 326 eliminated existing guidance for PCI loans and provides special initial recognition and measurement for the
Day One accounting for PCD assets.
•
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.
• 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.
•
•
•
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.
After initial recognition, the accounting for a PCD asset will generally follow the credit loss model.
Interest income for a PCD asset is recognized using the 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.
Loans of $1.0 million or more that are identified as collateral-dependent, which generally include loans internally
graded as impaired or PCD Loss loans, are reviewed by the Impairment Group which approves the amount of specific reserve,
if any, and/or charge-off amounts. The evaluation of real estate loans generally focuses on the fair value of underlying collateral
less estimated costs to sell obtained from appraisals, as the repayment of these loans may be dependent on the liquidation of the
collateral. In certain circumstances, other information such as comparable sales data is deemed to be a more reliable indicator of
fair value of the underlying collateral than the most recent appraisal. In these instances, such information is used in determining
the specific provision recorded for the loan. For commercial and industrial loans, the evaluation generally focuses on these
considerations, as well as the projected liquidation of any pledged collateral. Some of our larger corporate and specialized
industry loans are underwritten to the underlying enterprise value of the borrower. The value is in the equity of the business as a
going concern. Many valuation approaches are used in these situations including discounted cash flow, multiple of cash flow, or
comparable sales approaches. The Impairment Group reviews the results of each evaluation and approves the final specific
provision amounts, which are then included in the analysis of the adequacy of the allowance for credit losses in accordance with
FASB ASC 326.
A new appraisal is generally ordered for loans $1.0 million or greater that have characteristics of potential specific
provision, such as delinquency or other loan-specific factors identified by management, when a current appraisal (dated within
the prior 12 months) is not available or when a current appraisal uses assumptions that are not consistent with the expected
disposition of the loan collateral. In order to measure a specific provision properly at the time that a loan is reviewed, a bank
officer may estimate the collateral fair value based upon earlier appraisals received from outside appraisers, sales contracts,
approved foreclosure bids, comparable sales, officer estimates or current market conditions until a new appraisal is received.
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This estimate can be used to determine the extent of the specific provision on the loan. After a loan is determined to be
collateral-dependent, it is management’s policy to obtain an updated appraisal on at least an annual basis for impaired loans
with a remaining recorded investment of $200,000 and greater. Management performs a review of the pertinent facts and
circumstances of each collateral-dependent loan, such as changes in outstanding balances, information received from loan
officers and receipt of re-appraisals, at least quarterly. As of each review date, management considers whether additional
provision and/or charge-offs should be recorded based on recent activity related to the loan-specific collateral as well as other
relevant comparable assets. Any adjustment to reflect further exposure, either because management’s periodic review or as a
result of an updated appraisal, are made through recording additional ACL provisions and/or charge-offs.
When a guarantor is relied upon as a source of repayment, the Company analyzes the strength of the guaranty. This
analysis varies based on circumstances, but may include a review of the guarantor’s personal and business financial statements
and credit history, a review of the guarantor’s tax returns and the preparation of a cash flow analysis of the guarantor.
Management will continue to update its analysis on individual guarantors as circumstances change.
In the normal course of business, management may grant modifications to borrowers that are experiencing financial
difficulty. Loans identified as meeting the criteria under ASC 310 are identified as financial difficulty modifications (FDM).
Any modification, renewal or forbearance on loans assigned a rating of “Special Mention” or worse, and loans of any rating
which show evidence of financial difficulty is reviewed to determine whether the borrower is experiencing financial difficulty
and if so, which terms of the loan were modified.
If the borrower is experiencing financial difficulty and the loan is modified via forgiveness of principal, reduction in
interest rate to a rate below current market rates for issuance, payment extension or deferral for greater than 6 months (including
extensions granted in the past 12 months), term or maturity date extension, or combination of these specific modification terms,
the modification requires disclosure.
During 2023, the most common modifications that were granted to borrowers experiencing financial difficulty
involved rescheduling payments of principal and interest over a longer amortization period, granting a period of reduced
principal payment or interest-only payment for a limited time period, or the rescheduling of payments in accordance with a
bankruptcy plan. Refer to Note 5 for the Company’s reportable modifications.
In the normal course of business, the Company assumes risks in extending credit. The Company manages these risks
through underwriting in accordance with its lending policies, loan review procedures and the diversification of its loan and
lease portfolio. Although it is not possible to predict credit losses with certainty, management regularly reviews the
characteristics of the loan and lease portfolio to determine its overall risk profile and quality.
The provision for credit losses is the periodic cost (or credit) of providing an allowance or reserve for expected losses
on loans and leases. The Board of Directors has appointed a Credit Committee, composed of senior management and lending
administration staff which meets on a quarterly basis, or more frequently if required, to review the recommendations of several
internal working groups developed for specific purposes including the allowance for credit losses, specific provision amounts,
and charge-offs. The ACL Group bases its estimates of credit losses on three primary components: (1) estimates of expected
losses that exist in various segments of performing loans and leases over the remaining life of the loan portfolio using a
reasonable and supportable economic forecast; (2) specifically identified losses in individually analyzed credits which are
collateral dependent; and (3) qualitative factors related to economic conditions, portfolio concentrations, regulatory policy
updates, and other relevant factors that address estimates of expected losses not fully addressed based upon management’s
judgment of portfolio conditions.
The Company utilizes credit risk models to estimate the probability of default and loss given default of loans over their
remaining life. The probability of default settings in the models incorporate a risk grading process by utilizing pool-specific
historical default rates. In addition, the loss given default settings in the models utilize historical losses for different types of
collateral on defaulted loans while giving consideration for the loan-to-value at the time of default. The product of the
probability of default and loss given default derives a base expected loss rate for each loan. The base expected loss rate is
adjusted by way of econometric models that measure the direction and magnitude of change in expected loss rates given a
change in forecasted economic variables.
The aforementioned credit risk models and econometric models were developed and are recalibrated upon the basis of
historical experience. Credit factors such as financial condition of the borrower and guarantor, recent credit performance,
delinquency, liquidity, cash flows, collateral type and value are used by the models to assess credit risk. Estimates of expected
losses are influenced by the historical net losses experienced by the Company for loans and leases of comparable
creditworthiness and structure. Specific loss assessments are performed for loans and leases based upon the collateral
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protection. The Company’s reasonable and supportable eight quarter economic forecast is utilized to estimate credit losses
before reverting back to longer term historical loss experience. The Company subscribes to various economic services and
publications to assist with the development of inputs used in the modeling and qualitative framework for the ACL calculation.
The economic forecast considers changes in real gross domestic product, nominal disposable income, unemployment rate,
equity valuations and related volatility, valuations for residential and commercial real estate, and other indicators that may be
correlated with the Company’s expected credit losses.
The Company excludes accrued interest from interest income when it is determined that it is probable that all
contractual principal and interest will not be collected for loans. For loans with available commitments that are not
unconditionally cancellable, expected losses were calculated by applying comparable loss rates on funded loans to the unfunded
commitment balances. In addition, the weighted average maturity and relatively stable line utilization were considered when
estimating losses on unfunded commitments.
Attention is paid to the quality of the loan and lease portfolio through a formal loan review process. An independent
loan review department of the Company is responsible for reviewing the credit rating and classification of individual credits and
assessing trends in the portfolio, adherence to internal credit policies and procedures and other factors that may affect the
overall adequacy of the allowance for credit losses. The ACL Group is responsible for ensuring that the ACL provides adequate
coverage of expected losses. The ACL Group meets at least quarterly to determine the amount of adjustments to the ACL. The
ACL Group is composed of senior management from the Company’s credit administration, risk and finance departments. The
Impairment Group is responsible for evaluating individual loans that have been specifically identified through various channels,
including examination of the Company’s watch list, past due listings, and loan officer assessments. For all loans identified, an
analysis is prepared to determine if the loan is collateral dependent and the extent of any loss exposure to be reviewed by the
Impairment Group. The Impairment Group reviews all loans restructured in an FDM if the loan is $1.0 million or greater to
determine if it is probable that the Company will be unable to collect the contractual principal and interest on the loan. An
evaluation of the circumstances surrounding the loan is performed in order to determine whether the loan was collateral-
dependent. The fair value of the underlying collateral is considered if the loan is collateral-dependent. The Impairment Group
meets at least quarterly. The Impairment Group is made up of senior management from the Company’s lending administration,
risk, and finance departments.
If a loan to a borrower experiencing financial difficulty is modified, regardless of the modification type, the loan is
reserved in accordance with FASB ASC 326. Should the borrower’s financial condition, collateral protection or performance
deteriorate, warranting reassessment of the loan rating or specific provision, additional reserves and/or charge-offs may be
required.
Any loan or portion thereof which is classified as “loss” or which is determined by management to be uncollectible,
because of factors such as the borrower’s failure to pay interest or principal, the borrower’s financial condition, economic
conditions in the borrower’s industry or the inadequacy of underlying collateral, is charged off.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and amortization. Provisions for depreciation
and amortization, computed using straight-line methods, are charged to expense over the estimated useful lives of the assets.
Costs of major additions and improvements are capitalized. Expenditures for routine maintenance and repairs are charged to
expense as incurred. Upon retirement, sale, or other disposition of property and equipment, the cost and accumulated
depreciation are eliminated from the accounts, and any gains or losses are included in income.
Leases
The Company leases various premises and equipment. At the inception of the contract, the Company determines if an
arrangement is or contains a lease and will recognize on the balance sheet a lease asset for its right to use the underlying asset
and a lease liability for the corresponding lease obligation for contracts longer than a year. Both the asset and liability are
initially measured at the present value of the future minimum lease payments over the lease term. In determining the present
value of lease payments, the Company uses our incremental borrowing rate as the discount rate for the leases.
The Company has elected the practical expedient to not separate non-lease components from lease components and
instead to account for both as a single lease component. The Company’s leases do not contain residual value guarantees or
material variable lease payments. The Company does not have any material restrictions or covenants imposed by leases that
would impact the Company’s ability to pay dividends or cause the Company to incur additional financial obligations.
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The Company elected to apply the short-term lease exception to existing leases that meet the definition of a short-term
lease (less than 12 months), considering the lease term from the commencement date, not the remaining term at the date of
adoption. Certain of the Company’s leases contain options to renew the lease therefore these renewal options are included in the
determination of the capitalization period and calculation of the lease liability and ROU asset as they are reasonably certain to
be exercised.
Leases for which the Company is the lessor are substantially all accounted for as operating leases and the lease
components and non-lease components are accounted for separately. The remaining lease periods vary from one month to five
years and the contractual maturities of gross lease receivables were not material to the financial position of our Company. See
Note 8 for additional required disclosures under ASC 842.
Other Real Estate Owned and Repossessed Assets
OREO consists of properties acquired through foreclosure. Repossessed assets consists of non-real estate assets
acquired in partial or full settlement of loans. OREO and repossessed assets totaled $6.2 million and $6.7 million at
December 31, 2023 and 2022, respectively. These assets are recorded at fair value, less estimated costs to sell, on the date of
foreclosure or repossession, establishing a new cost basis for the asset. Subsequent to the foreclosure or repossession date the
asset is maintained at the lower of cost or fair value. Any write-down to fair value required at the time of foreclosure or
repossession is charged to the ACL. Subsequent gains or losses resulting from the sale of the property or additional valuation
allowances required due to further declines in fair value are reported in other noninterest expense.
Goodwill and Other Intangible Assets
Goodwill is not amortized but is evaluated for impairment at least annually in the fourth quarter, or more frequently if
an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its
carrying amount. As part of its testing, the Company may elect to first assess qualitative factors to determine whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount. If the results of the qualitative assessment
indicate that more likely than not a reporting unit’s fair value is less than its carrying amount, the Company determines the fair
value of the respective reporting unit (through the application of various quantitative valuation methodologies) relative to its
carrying amount to determine whether quantitative indicators of potential impairment are present (i.e., Step 1). The Company
may also elect to bypass the qualitative assessment and begin with Step 1. If the results of Step 1 indicate that the fair value of
the reporting unit is below its carrying amount, the Company will recognize an impairment loss for the amount that the
reporting unit’s carrying amount exceeds its fair value (up to the amount of goodwill recorded). A reporting unit is defined as
an operating segment or a component of that operating segment. Reporting units may vary, depending on the level at which
performance of the segment is reviewed. If impaired, the asset is written down to its estimated fair value. No impairment
charges were recognized in any reporting unit through December 31, 2023. See Note 9 for additional information.
Other identifiable intangible assets consist primarily of core deposit premiums and customer relationships arising from
acquisitions. These intangibles were established using the discounted cash flow approach and are being amortized using an
accelerated method over the estimated remaining life of each intangible recorded at acquisition. Additionally, trademarks and
trade names, considered finite-lived intangible assets, are reviewed for impairment when events or changes in circumstances
indicate that the asset’s carrying amount may not be recoverable from undiscounted future cash flows or that it may exceed its
fair value. No impairment to these intangible assets has been identified in any period presented.
Servicing Rights Assets
The Company recognizes as assets the rights to service mortgage loans for others, known as MSR. The Company
records MSR at fair value for all loans sold on a servicing retained basis with subsequent adjustments to fair value of MSR in
accordance with FASB ASC 860. An estimate of the fair value of the Company’s MSR is determined utilizing assumptions
about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry
demand. Because the valuation is determined by using discounted cash flow models, the primary risk inherent in valuing the
MSR is the impact of fluctuating interest rates on the estimated life of the servicing revenue stream. The use of different
estimates or assumptions could also produce different fair values. The Company hedges the fair value of MSR. At
December 31, 2023, there was a hedge in place designed to cover approximately 73.1% of the MSR value. The Company is
susceptible to fluctuations in MSR value in changing interest rate environments. MSR are included in the other assets category
of the consolidated balance sheet. Changes in the fair value of MSR are recorded as part of mortgage banking revenue on the
consolidated statements of income.
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Cash Surrender Value of Life Insurance
The Company invests in BOLI, which involves the purchasing of life insurance on selected employees. The Company
is the owner of the policies and, accordingly, the cash surrender value of the policies is included in total assets and increases in
cash surrender values are reported as income in the consolidated statements of income. The cash value accumulation on BOLI
is permanently tax deferred if the policy is held to the insured person’s death and certain other conditions are met.
Variable Interest Entities and Other Investments
The Company is deemed to be the primary beneficiary and required to consolidate a 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. Conclusions reached regarding which interest holder is a
VIE’s primary beneficiary must be continuously evaluated. The Company has determined that certain of its investments meet
the definition of VIE.
The Company invests in certain affordable housing projects as a limited partner and 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 Company 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 Company 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.
Equity securities with readily determinable fair values not held for trading consist of marketable equity securities
which are carried at fair value with changes in fair value reported in net income.
For other investments in limited partnerships without readily determinable fair values, the Company has elected to
account for these investments using the practical expedient of the fair value of underlying net asset value. For investments in
other limited partnerships without readily determinable fair values that do not qualify for the practical expedient, these
investments 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. Any changes in fair value are reported in net
income. See Note 24 for more information about our variable interest entities and other investments.
Pension and Postretirement Benefits
The Company accounts for its defined benefit pension plans using an actuarial model that uses an approach which
allocates pension costs over the service period of employees in the plan. The Company also accounts for its other postretirement
benefits by recognizing net periodic postretirement benefit costs as employees render the services necessary to earn their
postretirement benefits. The principle underlying the accounting is that employees render service ratably over the service period
and, therefore, the income statement effects of the Company’s defined benefit pension and postretirement benefit plans should
follow the same pattern. The Company accounts for the over-funded or under-funded status of its defined benefit and other
postretirement plans as an asset or liability in its consolidated balance sheets.
The discount rate is the rate used to determine the present value of the Company’s future benefit obligations for its
pension and other postretirement benefit plans. The Company determines the discount rate to be used to discount plan liabilities
at the measurement date with the assistance of its actuary using the actuary’s proprietary model. The Company developed a
level equivalent yield using its actuary’s model at December 31, 2023 and the expected cash flows from the Cadence Bank
Retirement Plan (the “Basic Plan”), the Cadence Bank Restoration Plan (the “Restoration Plan”) and the Cadence Bank
Supplemental Executive Retirement Plan (the “Supplemental Plan”).
The Company offers a 401(k) defined contribution benefit plan to its employees. The plan provides for a 100% match
of employee contributions up to five percent of employee compensation. All contributions and related earnings are 100%
vested.
As a result of the prior acquisitions, the Company has various legacy unqualified supplemental retirement plans. The
plans allow for fixed payment amounts to begin on a monthly or annual basis at a specified age. The annual cost charged to
expense and the estimated present value of the projected payments was determined in accordance with the provisions of ASC
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715. The present value of projected payments is recorded as a liability in the Company’s consolidated balance sheets. The
Company provides a voluntary deferred compensation plan for certain of its executive and senior officers. Under this plan, the
participants may defer up to 25% of their base compensation and 100% of certain incentive compensation. The Company may,
but is not obligated to, contribute to the plan. Amounts contributed to this plan are credited to a separate account for each
participant and are subject to a risk of loss in the event of the Company’s insolvency. The Company made no contributions to
this plan in 2023, 2022, or 2021.
Share-Based Compensation
The Company administers several long-term incentive compensation plans that provide for the granting of various
forms of incentive share-based compensation. The Company values these units at the grant date fair value and recognizes
expense over the requisite service period. The Company’s share-based compensation costs are recorded as a component of
salaries and employee benefits in the consolidated statements of income. The Company has elected to account for forfeitures of
share-based compensation awards as they occur, and compensation cost is recorded assuming all recipients will complete the
requisite service period. If an employee forfeits an award because they do not complete the requisite service period, the
Company will reverse compensation cost previously recognized in the period the award is forfeited. See Note 15 for additional
information. Upon the exercise of stock options or the granting of restricted stock awards, the Company would fulfill these
events by new share issuances.
Income Taxes
The Company and its significant subsidiaries are subject to income taxes in federal, state and local jurisdictions, and
such corporations account for income taxes under the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The recognition of a deferred tax asset is dependent upon a “more likely than not” expectation of realization of the
deferred tax asset, based upon the analysis of available evidence. The deferred tax asset recoverability is calculated using a
consistent approach, which considers the relative impact of negative and positive evidence, including review of historical
financial performance, and all sources of future taxable income, such as projections of future taxable income exclusive of future
reversals of temporary differences and carryforwards, tax planning strategies, and any carryback availability. A valuation
allowance is required to sufficiently reduce the deferred tax asset to the amount that is expected to be realized on a “more likely
than not” basis. Changes in the valuation allowance are generally recorded through income. See Note 12 for more information
about the Company’s income taxes.
Common Stock Repurchases
The Company purchases shares of its common stock pursuant to share repurchase programs authorized by its Board of
Directors. Repurchased shares are available for use in the Company’s share-based compensation programs and other
transactions or for other corporate purposes as determined by the Company’s Board of Directors. At the date of repurchase,
shareholders’ equity is reduced by the repurchase price. See Note 19 for additional information.
Revenue Recognition
Service Charges on Deposit Accounts
Service charges on deposit accounts consist of non-sufficient funds fees, account analysis fees, and other service
charges on deposits which consist primarily of monthly account fees. Non-sufficient funds fees are recognized at the time the
account overdraft occurs in accordance with regulatory guidelines. Account analysis fees consist of fees charged to certain
commercial demand deposit accounts based upon account activity (and reduced by a credit which is based upon cash levels in
the account). The Company’s performance obligation for these fees is satisfied and related revenue recognized, when the
service is rendered.
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Fees and Other Service Charges
Fees and other service charges primarily consist of debit and credit card income, merchant services and other service
fees. These fees are earned at a point in time as the Company’s performance obligation for service charges are satisfied, and
related revenue recognized, when the services are rendered.
Assets Under Administration and Asset Management Fees
The Company does not include assets held in fiduciary or agency capacities in the consolidated balance sheets, as such
items are not assets of the Company. Fees from asset management activities are recorded on an accrual basis, over the period in
which the service is provided. Fees are a function of the market value of assets administered and managed, the volume of
transactions, and fees for other services rendered, as set forth in the underlying client agreement. This revenue recognition
involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations
and transaction volumes. The Company does not earn performance-based incentives. The Company’s performance obligation
for these fees is satisfied, and related revenue recognized, when services are rendered.
Advisory Fees for Brokerage Services
Advisory fees for brokerage services are collected monthly through a third-party vendor at a predetermined rate in the
contract. Revenue for such performance obligations are recognized at the time the performance obligations are satisfied and is
reflected in the Wealth Management line in the Consolidated Statements of Income.
Credit Related Fees
Credit related fees primarily include fees assessed on the unused portion of commercial lines of credit (“unused
commitment fees”) and syndication agent fees. Unused commitment fees are recognized over the period of the related
commitment. Syndication agent fees are earned to act as an agent for a period of time, usually one year. Arranger fees are
earned to arrange a syndicate of lenders and are generally recognized when the transaction is closed.
Bankcard Fees
Bankcard fees include primarily bankcard interchange revenue, which is recorded when services are provided.
Payroll Processing Revenue
Payroll processing revenue consists principally of payroll processing fees, property and casualty brokerage and
employee benefits brokerage. Payroll processing fees are charged as the services are provided and the Company satisfied its
performance obligation simultaneously. Property and casualty brokerage include the brokerage of both personal and
commercial coverages. The placement of the policy is completion of the Company's performance obligation and revenue is
recognized at that time. The Company's commission is a percentage of the premium. Employee benefits brokerage consists of
assisting companies in designing and managing comprehensive employee benefit programs. The services provided by the
Company are collectively benefit management services which are considered a bundle of services that are highly interrelated.
Each of the underlying services are activities to fulfill the benefit management service and are not distinct and separate
performance obligations. Revenue is recognized over the contract term as services are rendered on a monthly basis. Customer
payments are usually received on a monthly basis. This revenue is reflected in Other Income in the Consolidated Statements of
Income.
SBA Income
SBA income consists of gains on sales of SBA loans, servicing fees, changes in the fair value of servicing rights, and
other miscellaneous fees. Servicing fee income is recorded for fees earned for servicing SBA loans. The fees are based on a
contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. This
revenue is reflected in Other Income in the Consolidated Statements of Income.
Insurance Commissions
Insurance commissions, which is reported in income from discontinued operations, consists of several types of
insurance revenue related to insurance policy sales including direct bill commissions, agency commissions, installment and
agency fee income, and contingency income. The Company acts as an intermediary between the Company’s customer and the
insurance carrier. For agency commissions, the Company’s performance obligation is satisfied upon the issuance of the
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insurance policy, and therefore the Company recognizes the revenue at the time of policy issuance. For direct bill commissions,
the carrier remits the commission payment to the Company according to the policy statement and the Company recognizes
revenue monthly as the performance obligation is satisfied and no significant material reversal of revenue based on policy
cancellations are anticipated.
Installment and agency fee income is for revenue billed on a more frequent basis than annually. Contingency income is
additional revenue based on insurance carriers’ profitability, loss ratios and production growth as determined by the insurance
carriers. These fees are typically collected in the first quarter of the subsequent year following the calendar year of service.
Under Topic 606, these are recognized during the calendar year of service. Due to the volatility of the income, significant
judgment is required to estimate revenue. The Company considers several quantitative factors deemed by management to be
appropriate for the estimate and it is periodically reviewed for any changes throughout the year to adjust revenue recognized for
contingency income. Topic 606 requires that even with variable consideration, an estimate of revenue should be recorded at the
time that the performance obligation is completed.
Basic and Diluted Earnings Per Share
Basic and diluted EPS are calculated in accordance with ASC 260, Earnings Per Share. Basic EPS is computed by
dividing income available to common shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS is computed using the weighted-average number of shares determined for the basic EPS computation plus
the shares resulting from the assumed exercise of all outstanding share-based awards using the treasury stock method.
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net
income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities,
pension liability and cash flow hedges, are reported as a separate component of the shareholders’ equity section of the
consolidated balance sheets, such items, along with net income, are components of comprehensive income. See Note 17 for
additional information.
Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from banks,
interest bearing deposits with banks, and federal funds sold. Generally, federal funds are sold for one to seven day periods.
Cash flows from loans, either originated or acquired, are classified at the time according to management’s intent to
either sell or hold the loan for the foreseeable future. When management’s intent is to hold the loan for the foreseeable future,
the cash flows of that loan are presented as investing cash flows.
Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Company enters into off-balance sheet financial instruments consisting of
commitments to extend credit, credit card lines, standby letters of credit and commitments to purchase securities. Such financial
instruments are recorded in the consolidated financial statements when they are exercised.
Fair Value of Financial Instruments
Fair value estimates are made at a specific point in time, based on relevant market information and other information
about the Company’s financial instruments. These estimates do not reflect any premium or discount that could result from
offering for sale, at one time, the entire holdings of a particular financial instrument. Because no market exists for a portion of
the financial instruments, fair value estimates are also based on judgments regarding estimated cash flows, current economic
conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Management employs independent third-party pricing services to provide fair value estimates for the Company’s
financial instruments. Management uses various procedures to validate that the prices received from pricing services and
quotations received from dealers are reasonable for each relevant financial instrument, including reference to relevant broker/
dealer quotes or other market quotes and a review of valuations and trade activity of comparable securities. Consideration is
given to the nature of the quotes (e.g., indicative or firm) and the relationship of recently evidenced market activity to the prices
provided by the third-party pricing service.
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Understanding the third-party pricing service’s valuation methods, assumptions and inputs used by the firm is an
important part of the process of determining that reasonable and reliable fair values are being obtained. Management evaluates
quantitative and qualitative information provided by the third-party pricing services to assess whether they continue to exhibit
the high level of expertise that management relies upon.
Fair value estimates are based on existing financial instruments on the consolidated balance sheets, without attempting
to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial
instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes,
premises and equipment, goodwill and other intangible assets. In addition, the income tax ramifications related to the realization
of the unrealized gains and losses on financial instruments can have a significant effect on fair value estimates and have not
been considered in any of the estimates. For further information about fair value measurements, see Note 14.
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 at December 31, 2023 and 2022.
Recently Adopted Accounting Pronouncements
ASU No. 2021-08
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract
Assets and Contract Liabilities from Contracts with Customers. The guidance primarily addresses the accounting for contract
assets and contract liabilities from revenue contracts with customers in a business combination. The guidance became effective
for Cadence beginning January 1, 2023. As this guidance is to be applied prospectively to business combinations occurring on
or after the effective date, the adoption of this guidance had no immediate impact to the Company’s consolidated financial
statements.
ASU No. 2022-01
In March 2022, the FASB issued ASU No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—
Portfolio Layer Method. The amendments allow entities to employ a multiple-layer hedging strategy and further allows entities
to hedge nonprepayable financial assets under the portfolio layer method rather than just prepayable financial assets. The
amendments provide additional guidance on accounting for fair value hedge basis adjustments associated with portfolio layer
hedges, generally requiring these adjustments to be maintained at the closed portfolio level and clarifying how these amounts
should be disclosed.
The guidance became effective for Cadence beginning January 1, 2023. The guidance on hedging multiple layers in a
closed portfolio and required disclosures for fair value hedge basis adjustments will be applied prospectively. The guidance on
the accounting for fair value basis adjustments is applied on a modified retrospective basis. The adoption of this guidance had
no material impact to the Company’s consolidated financial statements.
ASU No. 2022-02
In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled
Debt Restructurings and Vintage Disclosures. The FASB issued this ASU to eliminate the recognition and measurement
guidance on troubled debt restructurings for creditors that have adopted ASC 326 and require them to make enhanced
disclosures about loan modifications for borrowers experiencing financial difficulty. The new guidance also requires public
business entities to present current-period gross write-offs (on a current year-to-date basis for interim-period disclosures) by
year of origination in their vintage disclosures
The guidance became effective for Cadence beginning January 1, 2023. Cadence elected to adopt the elimination of
the TDR recognition and measurement guidance via the modified retrospective transition method. As such, Cadence recorded a
cumulative-effect adjustment of $195 thousand, net of tax, to reduce opening retained earnings and $255 thousand to increase
the ACL as of the date of adoption for changes in the ACL that had been recorded for the existing population of loans modified
in a TDR as of January 1, 2023.
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The amendments related to disclosures were adopted prospectively. Refer to Note 5 for the Company’s presentation of
gross write-offs in the vintage disclosures, as well as the new required disclosures for loan modifications to borrowers
experiencing financial difficulty.
ASU No. 2022-03
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of
Equity Securities Subject to Contractual Sale Restrictions. The amendments in the ASU clarify that a contractual restriction on
the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered
in measuring fair value. The ASU introduces new disclosure requirements to provide investors with information about the
restriction including the nature and remaining duration of the restriction.
The guidance became effective for Cadence beginning January 1, 2024. Cadence does not include contractual sale
restrictions as adjustments to the measured fair value of our equity securities. The adoption of this guidance had no immediate
impact to our consolidated financial statements.
ASU No. 2023-01
In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements which
amends the accounting for common control leasing arrangements. The ASU requires all entities to amortize leasehold
improvements associated with common control leases over the useful life to the common control group.
The guidance became effective for Cadence beginning January 1, 2024. Cadence adopted this guidance on a
prospective basis. The adoption of this guidance had no immediate impact to our consolidated financial statements.
ASU No. 2023-02
In March 2023, the FASB issued ASU No. 2023-02, Investments—Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The ASU allows entities to
elect the proportional amortization method, on a tax-credit-program-by-tax-credit-program basis, for all equity investments in
tax credit programs meeting the eligibility criteria in ASC 323-740-25-1. The ASU further prescribes specific information
reporting entities must disclose about tax credit investments each period.
This guidance became effective for Cadence beginning January 1, 2024. Cadence adopted this guidance on a modified-
retrospective basis. Cadence evaluated all investments for which it still expects to receive income tax credits or other income
tax benefits as of January 1, 2024, to determine which investments qualified for the proportional amortization method as of the
date the investment was entered into. An immaterial, cumulative-effect adjustment reflecting the difference between the
previous method used to account for the tax equity investments and the application of the proportional amortization method
since the investments were entered was recognized in the opening balance of retained earnings as of January 1, 2024.
Pending Accounting Pronouncements
ASU No. 2023-05
In August 2023, the FASB issued ASU No. 2023-05, Business Combinations—Joint Venture Formations (Subtopic
805-60): Recognition and Initial Measurement. The ASU applies to the formation of entities that meet the definition of a joint
venture (or a corporate joint venture) as defined in the FASB ASC Master Glossary. The amendments in the ASU require that a
newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to
fair value measurement that are consistent with the business combinations guidance). The ASU allows a joint venture to apply
measurement period guidance in accordance with ASC 805-10, allowing the amounts recognized upon formation to be adjusted
for provisional items during the measurement period not to exceed one year from the formation date.
The ASU does not amend the definition of a joint venture, the existing guidance for the accounting by an equity
method investor for its investment in a joint venture, or the accounting by a joint venture for contributions received subsequent
to formation.
The amendments are effective prospectively for all joint ventures with a formation date on or after January 1, 2025,
and early adoption is permitted. A joint venture that was formed before the effective date of the ASU may elect to apply the
116
amendments retrospectively if it has sufficient information. The Company is currently evaluating the impact this guidance may
have on its consolidated financial statements.
ASU No. 2023-06
In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in
Response to the SEC’s Disclosure Update and Simplification Initiative, that incorporates certain U.S. Securities and Exchange
Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU
are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to
more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the
requirements, and align the requirements in the Codification with the SEC’s regulations.
The ASU modifies the disclosure or presentation requirements of a variety of Topics in the Codification. The
requirements are relatively narrow in nature. Some of the amendments represent clarifications to, or technical corrections of, the
current requirements.
The effective date for each amendment will be the date on which the SEC removes that related disclosure from its
rules. If by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be
removed from the Codification and not become effective for any entity. As this guidance is solely disclosure related, there will
be no quantitative impact to the Company’s consolidated financial statements.
ASU No. 2023-07
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures. The amendments in the ASU improve reportable segment disclosure requirements primarily through
enhanced disclosures about significant segment expenses.
The amendments in the ASU are effective for annual periods beginning after December 15, 2023. As this guidance is
solely disclosure related, there will be no quantitative impact to the Company’s consolidated financial statements.
ASU No. 2023-08
In December 2023, the FASB issued ASU No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic
350-60): Accounting for and Disclosure of Crypto Assets. The amendments are intended to improve the accounting for certain
crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value
recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset
holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting
period.
The amendments in the ASU are effective for fiscal years beginning after December 15, 2024, including interim
periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet
been issued (or made available for issuance). If amendments are adopted in an interim period, they must be adopted as of the
beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact this guidance may
have on its consolidated financial statements.
ASU No. 2023-09
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures. The ASU is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories
and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It
also includes certain other amendments intended to improve the effectiveness of income tax disclosures.
The amendments in the ASU are effective for annual periods beginning after December 15, 2024. For other entities,
the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual
financial statements that have not yet been issued or made available for issuance. As this guidance is solely disclosure related,
there will be no quantitative impact to the Company’s consolidated financial statements.
117
NOTE 2. BUSINESS COMBINATIONS
National United Merger
On May 1, 2021, the Company completed the merger with National United Bancshares Inc., the parent company of
National United (collectively referred to as “National United”), pursuant to which National United was merged with and into
the Company. National United operated six full-service banking offices in the Killeen-Temple, Texas; Waco, Texas; and
Austin-Round Rock-Georgetown, Texas metropolitan statistical areas. Under the terms of the definitive merger agreement, the
Company issued approximately 3.1 million shares of the Company’s common stock, plus $33.3 million in cash for all
outstanding shares of National United’s capital stock. At December 31, 2023 and 2022, total goodwill related to the National
United acquisition was $49.3 million. Goodwill is calculated as the excess of both the consideration exchanged and liabilities
assumed as compared to the fair value of identifiable assets acquired, none of which is expected to be deductible for tax
purposes. Additionally, the Company recognized $2.5 million of core deposit intangibles in conjunction with this acquisition.
The Company completed its valuation of the assets and liabilities acquired from National United prior to the one year
anniversary of the merger, thus ending the measurement period for this merger.
The following table presents the amounts recorded on the consolidated balance sheets on the acquisition date of May 1,
2021 for National United, showing the fair value as adjusted during the measurement period (in thousands):
Assets acquired:
Cash and cash equivalents
Available-for-sale securities and other equity investments
Loans and leases
Premises and equipment
Accrued interest receivable
Other identifiable intangibles
Other real estate owned
Bank-owned life insurance
Other assets
Total assets acquired
Liabilities assumed:
Deposits
Accrued interest payable
Other liabilities
Total liabilities assumed
Net assets acquired
Consideration paid:
Market value of common stock
Total cash paid
Total fair value of consideration paid
Goodwill
FNS Merger
$
$
$
$
$
$
$
232,578
132,046
431,910
9,802
1,932
2,541
663
6,651
4,320
822,443
744,602
138
1,730
746,470
75,973
92,018
33,256
125,274
49,301
On May 1, 2021, the Company completed the merger with FNS Bancshares Inc., the parent company of FNB Bank,
(collectively referred to as “FNS”), pursuant to which FNS was merged with and into the Company. FNS operated 17 full-
service banking offices in Alabama, Georgia, and Tennessee. Under the terms of the definitive merger agreement, the Company
issued approximately 3.0 million shares of the Company’s common stock, plus $18.0 million in cash for all outstanding shares
of FNS’s capital stock. At December 31, 2023 and 2022, total goodwill related to the FNS acquisition was $55.5 million.
Goodwill is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value
of identifiable assets acquired, none of which is expected to be deductible for tax purposes. Additionally, the Company
recognized approximately $0.9 million of core deposit intangibles in conjunction with this acquisition.
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The Company completed its valuation of the assets and liabilities acquired from FNS prior to the one year anniversary
of the merger, thus ending the measurement period for this merger.
The following table presents the amounts recorded on the consolidated balance sheet on the acquisition date of May 1,
2021 for FNS, showing the fair value as adjusted during the measurement period (in thousands):
Assets acquired:
Cash and cash equivalents
Available-for-sale securities and other equity investments
Loans and leases
Premises and equipment
Accrued interest receivable
Other identifiable intangibles
Other real estate owned
Bank-owned life insurance
Other assets
Total assets acquired
Liabilities assumed:
Deposits
Accrued interest payable
Junior subordinated debt
Long-term debt
Other liabilities
Total liabilities assumed
Net assets acquired
Consideration paid:
Market value of common stock issued
Total cash paid
Total fair value of consideration paid
Goodwill
Legacy Cadence Merger
$
$
$
$
$
$
$
143,179
170,158
453,035
14,671
2,531
938
1,023
12,064
11,981
809,580
721,462
174
10,000
20,206
7,161
759,003
50,577
88,028
18,003
106,031
55,454
On October 29, 2021, the Company completed its merger with Cadence Bancorporation, the parent company of
Cadence Bank, N.A., (collectively referred to as “Legacy Cadence”), pursuant to which Legacy Cadence merged with and into
the Company, with the Company continuing as the surviving entity. Legacy Cadence operated 99 full-service banking offices in
the southeast. Each Legacy Cadence shareholder, other than Legacy Cadence and the Company, received 0.70 shares of the
Company’s common stock for each share of Legacy Cadence Class A common stock. In addition, Legacy Cadence paid a one-
time, special cash dividend of $1.25 per share of Legacy Cadence Class A common stock on October 28, 2021. The merger is
anticipated to build a stronger banking franchise with relationship-focused financial services and better opportunities for
employees, customers, communities and shareholders. At December 31, 2023, total goodwill related to the Legacy Cadence
acquisition was $497.9 million. Goodwill is calculated as the excess of both the consideration exchanged and liabilities
assumed as compared to the fair value of identifiable assets acquired, none of which is expected to be deductible for tax
purposes. Additionally, the Company recognized $25.0 million of core deposit intangibles in conjunction with this merger. The
Company also recorded $49.3 million of customer relationship intangibles and $25.5 million for the Cadence trade name.
119
The following table presents the amounts recorded on the consolidated balance sheet on the acquisition date of October
29, 2021 for Legacy Cadence, showing the fair value as adjusted during the measurement period (in thousands):
Assets acquired:
Cash and cash equivalents
Available-for-sale securities
Loans held for sale
Loans and leases
Allowance for credit losses
Premises and equipment
Other identifiable intangible assets
Other assets
Total assets acquired
Liabilities assumed:
Deposits
Borrowings
Other liabilities
Total liabilities assumed
Net assets acquired
Consideration paid:
Market value of common stock
Fair value of equity awards
Cash paid in lieu of fractional shares
Total fair value of consideration paid
Goodwill
$
2,340,995
4,171,807
83,475
11,527,741
(56,459)
198,578
99,898
575,981
$ 18,942,016
$ 16,350,287
206,805
400,577
$ 16,957,669
1,984,347
$
2,464,546
17,675
8
2,482,229
497,882
$
$
In relation to the Legacy Cadence merger, the Company recorded $451.7 million provisional estimate of goodwill in
2021 and an additional $46.2 million during 2022, representing the excess of the purchase price over the acquisition accounting
value of net assets acquired, net of deferred taxes. The Company considers its valuations of Legacy Cadence’s assets acquired
and liabilities assumed to be final as management completed these valuations within the measurement period during the fourth
quarter of 2022.
During 2022, we continued to analyze the valuations assigned to the acquired assets and assumed liabilities and
received updated information resulting in the revised fair values displayed below. We updated our estimated fair values of these
items within our Consolidated Balance Sheet with a corresponding adjustment to goodwill. These changes are gross of taxes
and reflected in the following table:
(In thousands)
Acquired Asset or Liability
Balance Sheet Line Item
Available-for-sale securities
Loans and leases
Allowance for credit losses
Premises and equipment
Available-for-sale securities
Loans and leases
Allowance for credit losses
Premises and equipment
Other identifiable intangible assets Other intangible assets, net
Investments in limited partnerships Other assets
Goodwill
Deferred taxes
Unfunded commitments
Other liabilities
Goodwill
Other liabilities
Other liabilities
Other liabilities
Provisional
Estimate
Revised
Estimate
$
4,172,313 $
11,534,035
(64,576)
197,214
152,341
580,332
451,722
39,726
24,389
347,854
4,171,807 $
11,527,741
Increase (Decrease)
(506)
(6,294)
8,117
1,364
(52,443)
(4,351)
46,160
(2,756)
(6,507)
(2,129)
(56,459)
198,578
99,898
575,981
497,882
36,970
17,882
345,725
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All measurement period adjustments made during 2022 have been deemed insignificant individually and in the
aggregate. The Company finalized its valuation of the Legacy Cadence merger transaction within the measurement period (i.e.,
no later than October 28, 2022).
The following is a description of the methods used to estimate the fair values of significant assets acquired and
liabilities assumed above.
Cash and cash equivalents: The carrying amount of these assets is a reasonable estimate of fair value based on the
short-term nature of these assets.
Securities available-for-sale: Fair values for securities were based on quoted market prices where available. If quoted
market prices are not available, fair value estimates were based on observable inputs obtained from market transactions in
similar securities.
Loans: Fair values for loans were estimated based on a discounted cash flow methodology (income approach) that
considered factors including loan type and related collateral, classification status, remaining term of the loan (in months), fixed
or variable interest rate, past delinquencies, timing of principal and interest payments, current market rates, LTV, and current
discount rates. The discount rate did not include an explicit factor for credit losses, as that was included as a reduction to the
estimated cash flows. Large loans were specifically reviewed to evaluate credit risk. Additionally, purchased credit deteriorated
(PCD) loans that were determined to have more-than-insignificant deterioration were generally identified by the delinquency
status, risk rating changes, credit rating, accruing status or other indicators of credit deterioration since origination. Loans were
valued individually although multiple inputs were applied to loans with similar characteristics as appropriate.
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 $17.9 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.
Allowance for Credit Losses: The allowance for credit losses of $56.5 million was recorded on the identified PCD
loans. As discussed in Note 1, the adoption of ASC 326 impacted the way in which the allowance for credit losses is determined
for acquired loans. Prior to the Legacy Cadence merger, on January 1, 2020, Legacy Cadence also adopted ASC 326 through
the development of multiple current expected credit loss models (“ECL Model”) which segmented Legacy Cadence’s loan and
lease portfolio by borrower and loan type to estimate lifetime expected credit losses for loans and leases. Within each ECL
Model, loans and leases were further segregated based on additional risk characteristics specific to that loan or lease type and
the ECL Models used both internal and external historical loss data, as appropriate.
While there were significant similarities in the manner of adoption of ASC 326 by Legacy BXS and Legacy Cadence,
numerous steps were taken to align the Legacy Cadence process to ensure that the ACL reported at the time of the Legacy
Cadence merger in the table above and in all subsequent reporting periods is consistent with the ACL policies as outlined in
Note 1 – Summary of Significant Accounting Policies and Note 6 – Allowance for Credit Losses. This included conforming
certain Legacy Cadence assumptions (e.g., the reasonable and supportable forecast of future economic conditions and the
reasonable and supportable forecast period, among others) to that of Legacy BXS. This was accomplished primarily through
qualitative adjustments for alignment.
Intangible assets: Core deposit intangible asset represents the value of the relationships with deposit clients. The fair
value for the core deposit intangible asset was estimated based on a discounted cash flow methodology that gave appropriate
consideration to expected client attrition rates, net maintenance cost of the deposit base, alternative costs of funds, and the
interest costs associated with the client deposits. The core deposit intangible asset is being amortized over its estimated useful
life of approximately ten years utilizing an accelerated method. Client relationship intangibles are valued using a discounted
cash flow methodology that reflects the estimated value of the future net earnings from the relationships which includes
adjustments for estimated attrition. See Note 9 for additional information. Trade name assets are valued through the application
of a relief-from-royalty method, which presumes a trade name owner would license the rights to use the trade name and would
recognize revenues based on its use.
ROU Assets and Lease Liabilities: ROU assets and lease liabilities were measured using a methodology that involved
estimating the future rental payments over the remaining lease term with discounting using a fully-collateralized discount rate.
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The lease term was determined for individual leases based on management’s assessment of the probability of exercising
existing renewal options. The net effect of any off-market terms in a lease were also discounted and applied to the balance of
the lease asset.
Premises: Land and buildings held for use were valued at appraised values, which reflect considerations of recent
disposition values for similar property types with adjustments for characteristics of individual properties.
Deposits: The fair values used for the demand and savings deposits by definition equal the amount payable on demand
at the acquisition date. Fair values for time deposits were estimated using a discounted cash flow analysis applying the
prevailing market interest rates currently offered to the contractual interest rates on such time deposits resulting in a $3.4
million premium to be accreted over a two-year period.
Borrowings: The fair value of the subordinated debentures were estimated using a discounted cash flow calculation
that used recent issuance rates for similar notes offerings for similar sized issuers.
The impact on the income statement resulting from the changes to the estimated fair values was insignificant. The
finalization of these analyses through the measurement period did not significantly impact the income statement.
Cadence’s operating results for the year ended December 31, 2021 include the operating results of the acquired assets
and assumed liabilities of Legacy Cadence subsequent to the merger transaction on October 29, 2021. Due to various system
conversions of Legacy Cadence during the fourth quarter of 2021, as well as other streamlining and integration of the operating
activities into those of the Company, historical reporting for the Legacy Cadence operations is impracticable and thus
disclosures of the revenue from the assets acquired and income before income taxes is impracticable for the period subsequent
to acquisition.
Merger-related expenses of $5.2 million, $50.8 million and $59.9 million incurred during 2023, 2022 and 2021,
respectively, are recorded in the consolidated income statement and include incremental costs related to the closing of the
transactions, including legal, accounting and auditing, investment banker fees, certain employment related costs, travel,
printing, supplies, and other costs.
Branch Divestitures
In December 2021, Cadence Bank completed the divestiture of seven branches to satisfy regulatory requirements in
connection with the Legacy Cadence merger. The branches were located in Mississippi. There were $41.0 million in loans and
leases and $410.0 million in deposits divested in this transaction.
NOTE 3. DISCONTINUED OPERATIONS
On November 30, 2023, the Company completed the sale of its insurance subsidiary, Cadence Insurance, via a stock
purchase agreement with Gallagher and Arthur J. Gallagher & Co. for approximately $904 million, subject to customary
purchase price adjustments. The transaction resulted in a pre-tax gain of $706.6 million. The gain, along with Cadence
Insurance’s historical financial results for periods prior to the sale, is reflected in the Company’s consolidated financial
statements as discontinued operations. The assets and liabilities of Cadence Insurance have been presented as “Assets of
discontinued operations” and “Liabilities of discontinued operations” on the consolidated balance sheet at December 31, 2022.
Cadence Insurance’s operating results have been presented as “Discontinued operations” within the accompanying consolidated
financial statements and prior period amounts have been reclassified to conform with the current period presentation.
122
The following summarized financial information related to Cadence Insurance has been segregated from continuing
operations and reported as discontinued operations for the periods presented.
(In thousands)
Discontinued operations:
Net interest revenue
Noninterest revenue
Insurance commissions
Gain on sale of discontinued operations
Other
Total noninterest revenue
Noninterest expense
Salaries and employee benefits
Occupancy and equipment
Data processing and software
Amortization of intangibles
Other
Total noninterest expense
Income from discontinued operations before income tax expense
Income tax expense
Years Ended December 31,
2023
2022
2021
$
128 $
12 $
16
156,501
706,588
52
150,275
135,183
—
272
—
65
863,141
150,547
135,248
117,129
110,180
97,681
4,919
2,906
1,972
8,752
135,678
727,591
188,971
5,088
2,825
2,058
8,055
5,150
2,378
1,882
5,978
128,206
113,069
22,353
6,433
22,195
5,808
Income from discontinued operations, net of tax
$
538,620 $
15,920 $
16,387
The assets and liabilities of discontinued operations on the consolidated balance sheet as of December 31, 2022 were
as follows:
(In thousands)
Carrying amounts of assets included as part of discontinued operations:
December 31, 2022
Cash and cash equivalents
Premises and equipment, net
Goodwill and other intangibles
Other assets
Total assets of discontinued operations
Carrying amounts of liabilities included as part of discontinued operations:
Other liabilities
Total liabilities of discontinued operations
$
$
$
$
2,393
25,198
104,195
35,037
166,823
98,202
98,202
123
NOTE 4. AVAILABLE-FOR-SALE SECURITIES AND EQUITY SECURITIES
The amortized cost, unrealized gains and losses, and estimated fair value of available-for-sale securities are presented
in the following tables:
(In thousands)
December 31, 2023
U.S. Treasury securities
U.S. government agency securities
MBS issued or guaranteed by U.S. agencies
Residential pass-through:
Guaranteed by GNMA
Issued by FNMA and FHLMC
Other residential MBS
Commercial MBS
Total MBS
Obligations of states and political subdivisions
Other domestic debt securities
Foreign debt securities
Total available-for-sale securities
$
(In thousands)
December 31, 2022
U.S Treasury securities
U.S. government agency securities
MBS issued or guaranteed by U.S. agencies
Residential pass-through:
Guaranteed by GNMA
Issued by FNMA and FHLMC
Other residential MBS
Commercial MBS
Total MBS
Obligations of states and political subdivisions
Other domestic debt securities
Foreign debt securities
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
$
464,793 $
370,891
225 $
218
— $
39,098
465,018
332,011
85,806
5,097,172
756,244
1,850,447
7,789,669
172,252
73,941
144,080
9,015,626 $
1
95
2,440
1,413
3,949
13
—
6
4,411 $
10,145
710,166
31,250
109,023
860,584
34,641
6,744
3,494
944,561 $
75,662
4,387,101
727,434
1,742,837
6,933,034
137,624
67,197
140,592
8,075,476
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
$ 1,514,494 $
1,581,308
— $
1,111
55,981 $ 1,458,513
1,477,127
105,292
96,734
7,236,386
201,781
2,142,622
9,677,523
563,755
88,914
54,906
6
72
1
336
415
147
—
—
84,368
12,372
6,274,970
961,488
168,452
33,330
1,881,853
261,105
8,409,643
1,268,295
466,002
97,900
82,718
6,196
50,093
4,813
1,673 $ 1,538,477 $ 11,944,096
Total available-for-sale securities
$ 13,480,900 $
For available-for-sale securities, gross gains of $817 thousand and gross losses of $436.5 million were recognized in
2023, gross gains of $317 thousand and gross losses of $835 thousand were recognized in 2022, and gross gains of $383
thousand and gross losses of $514 thousand were recognized in 2021. There were no impairment charges related to credit losses
included in gross realized losses for the years ended December 31, 2023, 2022, or 2021.
Available-for-sale securities with a carrying value of $6.6 billion and $9.2 billion at December 31, 2023 and
December 31, 2022, respectively, were pledged to secure public and trust funds on deposit and for other purposes.
There were no securities held for trading or held-to-maturity at December 31, 2023 or December 31, 2022.
Proceeds from the sales of securities available-for-sale totaled $4.3 billion in 2023, $369.6 million in 2022, and $564.0
million in 2021.
124
The amortized cost and estimated fair value of available-for-sale securities at December 31, 2023 by contractual
maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
(In thousands)
Maturing in one year or less
Maturing after one year through five years
Maturing after five years through ten years
Maturing after ten years
Mortgage-backed securities
Total available-for-sale securities
Amortized
Cost
Estimated
Fair Value
$
$
466,630 $
83,161
441,126
235,040
7,789,669
9,015,626 $
466,853
78,694
414,874
182,021
6,933,034
8,075,476
At December 31, 2023 and December 31, 2022, approximately 82.5% and 98.6% of securities were in an unrealized
loss position, respectively. At December 31, 2023, there were 827 securities in a loss position for more than twelve months, and
91 securities in a loss position for less than twelve months. A summary of available-for-sale investments with continuous
unrealized loss positions for which an allowance for credit losses has not been recorded is as follows:
(In thousands)
December 31, 2023
U.S. government agency securities
MBS
Obligations of states and political subdivisions
Other domestic debt securities
Foreign debt securities
Total
(In thousands)
December 31, 2022
U.S Treasury securities
U.S. government agency securities
MBS
Obligations of states and political subdivisions
Other domestic debt securities
Foreign debt securities
$
$
$
Less Than 12 Months
Fair
Value
Unrealized
Losses
12 Months or Longer
Fair
Value
Unrealized
Losses
103,099 $
730,925
—
—
69,288
903,312 $
563 $
187,683 $
9,644
—
—
1
5,347,365
127,291
46,197
51,507
10,208 $ 5,760,043 $
38,535
850,940
34,641
6,744
3,493
934,353
Less Than 12 Months
Fair
Value
Unrealized
Losses
12 Months or Longer
Fair
Value
Unrealized
Losses
496,403 $
959,715
1,170,212
391,025
53,639
—
19,472 $
53,576
122,598
84,152
4,672
—
36,509
962,110 $
51,716
467,758
1,145,697
7,161,803
13,748
57,019
1,524
8,079
4,813
50,093
284,470 $ 8,706,862 $ 1,254,007
Total
$ 3,070,994 $
Management evaluates available-for-sale securities in unrealized loss positions to determine whether the impairment is
due to credit-related factors or noncredit-related factors. Credit loss is defined as the difference between the present value of the
cash flows expected to be collected and the amortized cost basis. Management believes that the unrealized losses detailed in the
previous tables are due to noncredit-related factors, such as changes in interest rates and other market conditions. Therefore, no
allowance for credit losses was recorded related to these securities at December 31, 2023 or December 31, 2022. No unrealized
losses were recorded into income during 2023, 2022, or 2021. Additionally, as of December 31, 2023 management had no
intent to sell these securities until the full recovery of unrealized losses, which may not be until maturity, and it is more likely
than not that the Company would not be required to sell the securities prior to recovery of costs. The fair value is expected to
recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.
In 2023, the Company executed a securities portfolio restructuring as a part of a balance sheet optimization initiative.
During the first quarter of 2023 approximately $1.5 billion in U.S. Treasury available-for-sale securities were sold generating
125
an after-tax realized loss of approximately $39.5 million. Additionally, in the fourth quarter of 2023, available-for-sale
securities totaling approximately $3.1 billion in par value were sold for an after-tax realized loss of approximately $294.1
million. Proceeds from the sale were redeployed in accretive activities including reinvestment in higher-yielding securities,
funding loans, and reducing brokered deposits.
Held in other assets, 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. Additionally, the Company holds equity investments without readily
determinable fair values in other assets. These investments include an investment in the common stock of the FHLB of Dallas.
The Company is required to own stock in the FHLB of Dallas for membership in the FHLB system and in relation to the level
of FHLB advances. The Company accounts for this investment as a long-term asset and carries it at cost.
(In thousands)
December 31, 2023
Equity securities held at cost:
Equity securities
Federal Home Loan Bank stock
Total equity securities, held at cost
Equity securities held at fair value:
Farmer Mac stock
Affordable Housing MBS Exchange Traded Fund
Total equity securities, held at fair value
(In thousands)
December 31, 2022
Equity securities held at cost:
Equity securities
Federal Home Loan Bank stock
Total equity securities, held at cost
Equity securities held at fair value:
Farmer Mac stock
Affordable Housing MBS Exchange Traded Fund
Total equity securities, held at fair value
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Carrying
Value
Cost
20,582 $
13,113
33,695 $
49 $
24,994
25,043 $
— $
—
— $
536 $
—
536 $
— $
—
— $
— $
3,471
3,471 $
20,582
13,113
33,695
585
21,523
22,108
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Carrying
Value
Cost
18,102 $
134,356
152,458 $
49 $
24,994
25,043 $
— $
—
— $
295 $
—
295 $
— $
—
— $
18,102
134,356
152,458
— $
3,685
3,685 $
344
21,309
21,653
$
$
$
$
$
$
$
$
126
NOTE 5. LOANS AND LEASES
The following table is a summary of our loan and lease portfolio aggregated by segment and class at the periods
indicated:
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total loans and leases, net of unearned income (1)
December 31, 2023
December 31, 2022
$
$
8,935,598 $
4,349,060
13,284,658
3,910,962
5,736,871
9,647,833
9,329,692
234,839
9,564,531
32,497,022 $
8,985,547
4,068,659
13,054,206
3,547,986
5,150,680
8,698,666
8,319,242
277,163
8,596,405
30,349,277
(1) Total loans and leases are net of $75.4 million and $100.8 million of unearned income at December 31, 2023 and December 31, 2022,
respectively.
The Company engages in lending to consumers, small and medium-sized business enterprises, and government entities
through its community banking locations and to regional and national business enterprises through its corporate banking
division. The bank acts as agent or participant in SNC and other financing arrangements with other financial institutions. Loans
are issued generally to finance home purchases and improvements, personal expenditures, business investment and operations,
construction and development, and income producing properties. Loans are underwritten to be repaid primarily by available
cash flow from personal income, investment income, business operations, rental income, or the sale of developed or constructed
properties. Collateral and personal guaranties of business owners are generally required as a condition of the financing
arrangements and provide additional cash flow and proceeds from asset sales of guarantors in the event primary sources of
repayment are no longer sufficient.
While loans are structured to provide protection to the Company if borrowers are unable to repay as agreed, the
Company recognizes that there are numerous risks that may result in deterioration of the repayment ability of borrowers and
guarantors. These risks include failure of business operations due to economic, legal, market, logistical, weather, health,
governmental and force majeure events. Concentrations in the Company’s loan and lease portfolio also present credit risks. The
impact of a slowing economy, inflation, rising interest rates, and labor and supply chain shortages, poses additional risk to
borrowers and financial institutions. As a result of these factors, there is risk for businesses to experience difficulty in meeting
repayment obligations, and the Company may experience losses or deterioration in performance in its loan portfolio.
The Company has identified the following segments and classes of loans and leases with similar risk characteristics for
measuring expected credit losses:
Commercial and Industrial (“C&I”)
Non-Real Estate – Commercial and industrial loans are loans and leases to finance business operations, equipment and
owner-occupied facilities for small and medium-sized enterprises and also larger corporate borrowers. These include both lines
of credit for terms of one year or less and term loans which are amortized over the useful life of the assets financed. Personal
and/or corporate guarantees are generally obtained where available and prudent. This category also includes loans to finance
agricultural production. The Company recognizes that risk from economic cycles, commodity prices, pandemics, government
regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses
due to fraud, theft or embezzlement, loss of sponsor support, health or loss of key personnel or competitive situations may
adversely affect the scheduled repayment of business loans. In addition, risks in the agricultural sector including crop failures
due to weather, insects and other blights, commodity prices, governmental intervention, lawsuits, labor or logistical disruptions.
127
Owner Occupied – Owner occupied loans include loans secured by business facilities to finance business operations,
equipment and owner-occupied facilities primarily for small and medium-sized enterprises. These include both lines of credit
for terms of one year or less and term loans which are amortized over the useful life of the assets financed. Personal guarantees,
if applicable, are generally required for these loans. The Company recognizes that risk from economic cycles, pandemics,
government regulation, supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural
disasters, losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect
the scheduled repayment of business loans.
Commercial Real Estate (“CRE”)
Construction, Acquisition, and Development (“CAD”) – CAD loans include both loans and credit lines for the purpose
of purchasing, carrying, and developing land into residential subdivisions or various types of commercial developments, such as
industrial, warehouse, retail, office, and multi-family. This category also includes loans and credit lines for construction of
residential, multi-family and commercial buildings. The Company generally engages in CAD lending primarily in local markets
served by its branches. The Company recognizes that risks are inherent in the financing of real estate development and
construction. These risks include location, market conditions and price volatility, change in interest rates, demand for developed
land, lots and buildings, desirability of features and styling of completed developments and buildings, competition from other
developments and builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of
utilities, roads, public transportation and schools, availability of permanent financing for homebuyers, zoning, environmental
restrictions, lawsuits, economic and business cycle, labor, and reputation of the builder or developer.
Each CAD loan is underwritten to address: (i) the desirability of the project, its market viability and projected
absorption period; (ii) the creditworthiness of the borrower and the guarantor as to liquidity, cash flow and assets available to
ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer’s experience and success with similar
projects; and (v) the value of the collateral.
A substantial portion of CAD loans are secured by real estate in markets in which the Company is located. The
Company’s loan policy generally prohibits loans for the sole purpose of carrying interest reserves. Certain of the construction,
acquisition and development loans were structured with interest-only terms. A portion of the residential mortgage and CRE
portfolios were originated through the permanent financing of construction, acquisition and development loans. Rising interest
rates and the potential for slowing economic conditions could negatively impact borrowers’ and guarantors’ ability to repay
their debt which would make more of the Company’s loans collateral-dependent.
Income Producing – CRE loans include loans to finance income-producing commercial and multi-family properties.
Lending in this category is generally limited to properties located in the Company’s market area with only limited exposure to
properties located elsewhere but owned by in-market borrowers. Loans in this category include loans for neighborhood retail
centers, medical and professional offices, single retail stores, warehouses and apartments leased generally to local businesses
and residents. The underwriting of these loans takes into consideration the occupancy and rental rates as well as the financial
health of the borrower. The Company’s exposure to national retail tenants is limited. The Company recognizes that risk from
economic cycles, pandemics, government restrictions, delayed or missed rent payments, supply-chain disruptions, operational
errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel or competitive situations
may adversely affect the scheduled repayment of business loans.
Consumer
Residential Mortgages – Residential mortgages are first or second-lien loans to consumers secured by a primary
residence or second home. This category includes traditional mortgages, home equity loans and revolving lines of credit. The
loans are generally secured by properties located within the local market area of the community bank which originates and
services the loan. These loans are underwritten in accordance with the Company’s general loan policies and procedures which
require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and
property value. In addition to loans originated through the Company’s branches, the Company originates and services
residential mortgages sold in the secondary market which are underwritten and closed pursuant to investor and agency
guidelines. At December 31, 2023 and December 31, 2022, residential mortgage loans in process of foreclosure totaled
$10.9 million and $4.6 million, respectively. Additionally, the Company held $4.4 million and $2.1 million in foreclosed
residential properties at December 31, 2023 and December 31, 2022, respectively.
Other Consumer – Other consumer lending includes consumer credit cards as well as personal revolving lines of credit
and installment loans. The Company offers credit cards, primarily to its deposit and loan customers. Consumer installment
loans include term loans secured by automobiles, boats and recreational vehicles.
128
The Company recognizes there are risks in consumer lending which include interruptions in the borrower’s personal
and investment income due to loss of employment, market conditions, and general economic conditions, deterioration in the
health and well-being of the borrower and family members, natural disasters, pandemics, lawsuits, losses, or inability to
generate income due to injury, accidents, theft, vandalism, or incarceration.
The following tables provide details regarding the aging of the Company’s loan and lease portfolio, net of unearned
income, at the periods indicated:
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and
development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
December 31, 2023
30-59
Days
Past Due
60-89
Days
Past Due
90+ Days
Past Due
Total
Past Due
Current
Total
Amortized
Cost
90+ Days
Past Due
still
Accruing
$
22,750 $
14,574 $ 113,607 $ 150,931 $ 8,784,667 $ 8,935,598 $
19,941
4,818
27,568
1,193
15,767
5,882
119,489
11,893
162,824
4,337,167
13,121,834
4,349,060
13,284,658
—
19,941
1,394
11,179
12,573
48,244
1,569
49,813
1,191
4,702
5,893
1,878
6,390
8,268
4,463
3,906,499
3,910,962
22,271
5,714,600
5,736,871
26,734
9,621,099
9,647,833
23,934
45,520
117,698
9,211,994
9,329,692
511
340
2,420
232,419
234,839
24,445
45,860
120,118
9,444,413
9,564,531
18
29
47
2,265
213
2,478
Total
$
89,954 $
46,105 $ 173,617 $ 309,676 $ 32,187,346 $ 32,497,022 $
22,466
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and
development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
December 31, 2022
30-59
Days
Past Due
60-89
Days
Past Due
90+ Days
Past Due
Total
Past Due
Current
Total
Amortized
Cost
90+ Days
Past Due
still
Accruing
$
4,858 $
4,993 $
13,789 $
23,640 $ 8,961,907 $ 8,985,547 $
3,134
7,992
804
5,797
5,268
19,057
9,206
32,846
4,059,453
13,021,360
4,068,659
13,054,206
5,899
4,459
10,358
37,635
1,418
39,053
286
—
286
1,171
6,935
8,106
7,356
3,540,630
3,547,986
11,394
5,139,286
5,150,680
18,750
8,679,916
8,698,666
12,255
47,717
97,607
8,221,635
8,319,242
420
798
2,636
274,527
277,163
12,675
48,515
100,243
8,496,162
8,596,405
412
20
432
—
—
—
1,440
196
1,636
Total
$
57,403 $
18,758 $
75,678 $ 151,839 $ 30,197,438 $ 30,349,277 $
2,068
Excluded from the tables above are GNMA loans, which are subject to an unconditional buyback option, that are past
due 90 days or more totaling $56.5 million and $71.4 million at December 31, 2023 and December 31, 2022, respectively.
The Company utilizes an internal loan classification system that is perpetually updated to grade loans according to
certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance,
129
delinquency, liquidity, cash flows, debt coverage ratios, collateral type and loan-to-value ratio. The Company’s internal loan
classification system is compatible with classifications used by regulatory agencies. Loans may be classified as follows:
Pass: Loans which are performing as agreed with few or no signs of weakness. These loans show sufficient cash flow,
capital and collateral to repay the loan as agreed.
Special Mention: Loans where potential weaknesses have developed which could cause a more serious problem if not
corrected.
Substandard: Loans where well-defined weaknesses exist that require corrective action to prevent further deterioration.
Loans are further characterized by the possibility that the Company will sustain some loss if the deficiencies are not
corrected.
Doubtful: Loans having all the characteristics of Substandard and which have deteriorated to a point where collection
and liquidation in full is highly questionable.
Loss: Loans that are considered uncollectible or with limited possible recovery.
Impaired: An internal grade for individually analyzed collateral-dependent loans for which a specific provision has
been considered to address the unsupported exposure.
PCD (Loss): An internal grade for loans with evidence of deterioration of credit quality since origination that are
acquired, and for which it is probable, at acquisition, that the bank will be unable to collect all contractually required
payments.
The following tables provide details of the Company’s loan and lease portfolio, net of unearned income, by segment,
class and internally assigned grade at the periods indicated:
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Pass
Special
Mention
Substandard (1)
Loss
Impaired (1)
PCD (Loss)
Total
December 31, 2023
$ 8,450,809 $
101,607 $
294,895 $
13 $
84,457 $
3,817 $ 8,935,598
Total commercial and industrial
12,737,999
4,287,190
32,409
134,016
27,070
321,965
Commercial real estate
Construction, acquisition and
development
Income producing
Total commercial real estate
Consumer (2)
Residential mortgages
Other consumer
Total consumer
3,894,551
5,527,388
9,421,939
9,258,002
234,367
9,492,369
3,364
23,727
27,091
4,066
—
4,066
13,047
170,217
183,264
66,050
472
66,522
—
13
—
—
—
—
—
—
1,275
85,732
—
15,539
15,539
—
—
—
1,116
4,349,060
4,933
13,284,658
—
—
—
3,910,962
5,736,871
9,647,833
1,574
9,329,692
—
234,839
1,574
9,564,531
Total
$ 31,652,307 $
165,173 $
571,751 $
13 $
101,271 $
6,507 $ 32,497,022
(1)
In the loan classifications above, $61.1 million of the substandard balance and $8.4 million of the impaired balance is covered by government guarantees
from the SBA, FHA, VA and USDA.
(2) During the second quarter of 2023, the Company began determining the risk rating classification of its Consumer portfolio based on nonaccrual and
delinquency status in accordance with the Uniform Retail Credit Classification guidance and industry norms, which contributed to a lower number of
criticized and classified loans compared to periods prior to the second quarter of 2023. As a result of this modification, current period results are not
directly comparable to periods prior to the second quarter of 2023.
130
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total
Pass
Special
Mention (1)
Substandard (1)
Impaired (1)
PCD (Loss) (1)
Total
December 31, 2022
$
8,735,337 $
37,389 $
205,246 $
3,375 $
4,200 $
8,985,547
4,024,179
12,759,516
3,498,990
5,035,880
8,534,870
8,159,904
272,182
8,432,086
6,062
43,451
18,667
27,330
45,997
232
—
232
32,912
238,158
23,073
68,948
92,021
157,532
4,981
162,513
3,824
7,199
1,682
5,882
4,068,659
13,054,206
—
—
—
—
—
—
7,256
18,522
25,778
1,574
—
1,574
3,547,986
5,150,680
8,698,666
8,319,242
277,163
8,596,405
$ 29,726,472 $
89,680 $
492,692 $
7,199 $
33,234 $ 30,349,277
(1)
In the loan classifications above, $1.1 million of the special mention balance, $23.2 million of the substandard balance, $3.1 million of the PCD (Loss)
balance and $1.6 million of the impaired balance is covered by government guarantees from the SBA, FHA, VA and USDA.
The following tables provide credit quality indicators, including current period gross charge-offs, by class and period
of origination (vintage) at December 31, 2023:
Commercial and Industrial - Non-Real Estate
Period Originated:
(In thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Converted to
Term
Revolving
Loans
Total
Pass
$ 1,211,573
$ 1,425,415
$ 1,069,614
$ 279,689
$ 228,086
$ 610,891
$ 3,583,696
$
41,845
$ 8,450,809
Special Mention
Substandard
Loss
Impaired
PCD (Loss)
Total
% Criticized
—
22,458
—
635
—
10,155
88,307
—
14,187
—
30,042
69,226
—
22,057
—
11,599
7,381
—
—
—
2,220
27,439
—
—
—
16,096
40,071
13
20,475
3,817
31,495
39,995
—
5,904
—
—
18
—
21,199
—
101,607
294,895
13
84,457
3,817
$ 1,234,666
$ 1,538,064
$ 1,190,939
$ 298,669
$ 257,745
$ 691,363
$ 3,661,090
$
63,062
$ 8,935,598
1.9 %
7.3 %
10.2 %
6.4 %
11.5 %
11.6 %
2.1 %
33.6 %
5.4 %
Gross charge-offs
$
6,064
$
539
$ 21,038
$
6,103
$
980
$
9,746
$ 27,931
$
—
$
72,401
(In thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Converted to
Term
Revolving
Loans
Commercial and Industrial - Owner Occupied
Period Originated:
Pass
$ 535,962
$ 974,614
$ 844,507
$ 472,226
$ 309,595
$ 1,041,764
$ 108,522
$
Special Mention
Substandard
Impaired
PCD (Loss)
Total
% Criticized
6,066
747
—
—
5,637
1,893
—
—
—
3,584
—
—
—
2,647
—
—
845
5,431
—
1,116
17,036
12,686
1,275
—
2,825
82
—
—
$ 542,775
$ 982,144
$ 848,091
$ 474,873
$ 316,987
$ 1,072,761
$ 111,429
$
Gross charge-offs
$
—
$
169
$
109
$
1
$
5
$
110
$
—
$
—
$
1.3 %
0.8 %
0.4 %
0.6 %
2.3 %
2.9 %
2.6 %
— %
Total
$ 4,287,190
32,409
27,070
1,275
1,116
$ 4,349,060
—
—
—
—
—
—
1.4 %
394
131
(In thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Converted to
Term
Revolving
Loans
Construction, Acquisition, & Development
Period Originated:
Pass
$ 984,843
$ 1,644,676
$ 906,293
$ 147,645
$ 65,953
$ 47,211
$ 97,930
$
Special Mention
Substandard
Total
% Criticized
824
52
1,552
1,785
—
9,674
—
340
988
902
—
158
—
136
$ 985,719
$ 1,648,013
$ 915,967
$ 147,985
$ 67,843
$ 47,369
$ 98,066
$
0.1 %
0.2 %
1.1 %
0.2 %
2.8 %
0.3 %
0.1 %
— %
Gross charge-offs
$
—
$
28
$
600
$
2
$
—
$
178
$
—
$
—
$
—
—
—
—
Total
$ 3,894,551
3,364
13,047
$ 3,910,962
0.4 %
808
(In thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Converted to
Term
Revolving
Loans
Commercial Real Estate - Income Producing
Period Originated:
Pass
$ 490,336
$ 1,358,612
$ 1,235,035
$ 574,173
$ 518,213
$ 1,260,960
$ 90,059
$
Special Mention
Substandard
Impaired
Total
% Criticized
—
—
—
3,221
24,989
—
10,349
6,400
—
—
35,063
—
6,051
34,158
—
4,106
69,607
15,539
—
—
—
$ 490,336
$ 1,386,822
$ 1,251,784
$ 609,236
$ 558,422
$ 1,350,212
$ 90,059
$
— %
2.0 %
1.3 %
5.8 %
7.2 %
6.6 %
— %
— %
3.7 %
Gross charge-offs
$
—
$
—
$
1
$
—
$
—
$
4,526
$
—
$
—
$
4,527
Consumer - Residential Mortgages
Period Originated:
(In thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Converted to
Term
Revolving
Loans
Total
Pass
$ 1,486,784
$ 2,011,519
$ 1,686,270
$ 1,099,734
$ 544,597
$ 1,462,355
$ 965,626
$
1,117
$ 9,258,002
Special Mention
Substandard
PCD (Loss)
Total
% Criticized
—
1,423
—
—
6,525
—
4,066
10,951
—
—
9,437
—
—
8,313
—
—
25,864
1,574
—
3,537
—
—
—
—
4,066
66,050
1,574
$ 1,488,207
$ 2,018,044
$ 1,701,287
$ 1,109,171
$ 552,910
$ 1,489,793
$ 969,163
$
1,117
$ 9,329,692
0.1 %
0.3 %
0.9 %
0.9 %
1.5 %
1.8 %
0.4 %
— %
0.8 %
Gross charge-offs
$
8
$
380
$
483
$
168
$
83
$
591
$
551
$
—
$
2,264
Total
$ 5,527,388
23,727
170,217
15,539
$ 5,736,871
—
—
—
—
—
Consumer - Other Consumer
Period Originated:
(In thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
$ 57,877
$ 25,060
$ 14,080
$
8,026
$
3,667
$
2,050
$ 123,607
—
67
9
—
38
—
358
$ 57,877
$ 25,127
$ 14,089
$
8,026
$
3,705
$
2,050
$ 123,965
Pass
Substandard
Total
% Criticized
Revolving
Loans
Converted to
Term
$
$
—
—
—
Total
$ 234,367
472
$ 234,839
— %
0.3 %
0.1 %
— %
1.0 %
— %
0.3 %
— %
0.2 %
Gross charge-offs
$
2,780
$
584
$
277
$
210
$
89
$
58
$
2,680
$
—
$
6,678
The Company’s collateral-dependent loans totaling $107.8 million and $40.4 million at December 31, 2023 and
December 31, 2022, respectively, includes loans internally classified as impaired and PCD Loss. At December 31, 2023, most
of these loans are within the non-real estate, income producing, and owner occupied classes. Additionally, there were a small
amount of these loans in residential mortgages. C&I loans are typically supported by collateral such as real estate, receivables,
132
equipment, inventory, or by an enterprise valuation. Loans within the CRE and Consumer segments are generally secured by
commercial and residential real estate.
Loans of $1.0 million or greater are considered for specific provision when management has determined based on
current information and events, it is probable that the Company will be unable to collect all amounts due according to the
contractual terms of the note and that the loan is collateral-dependent. At December 31, 2023 and December 31, 2022,
$85.3 million and $31.3 million, respectively, of collateral-dependent loans had a valuation allowance of $41.7 million and
$4.5 million, respectively. The remaining balance of collateral-dependent loans of $22.5 million and $9.1 million at
December 31, 2023 and December 31, 2022, respectively, have sufficient collateral supporting the collection of all contractual
principal and interest or were charged down to the underlying collateral’s fair value, less estimated selling costs. Therefore,
such loans did not have an associated valuation allowance.
NPLs consist of nonaccrual loans and leases and loans and leases that have been restructured because of the borrower's
weakened financial condition.(1) The following table presents information concerning NPL at the periods indicated:
(In thousands)
Nonaccrual loans and leases (2)
Restructured loans and leases, still accruing (1)
Total NPL
December 31, 2023
$
216,141 $
—
216,141 $
December 31, 2022
98,745
8,598
107,343
$
(1) The adoption of ASU 2022-02 (see Note 1) eliminated TDR accounting effective beginning January 1, 2023, thus eliminating restructured loans and
leases, still accruing as of the date of adoption.
(2)
In the nonaccrual loans and leases above, $49.6 million of the December 31, 2023 balance and $20.8 million of the December 31, 2022 balance is covered
by government guarantees from the SBA, FHA, VA or USDA.
The Company’s policy for all loan classifications provides that loans and leases are generally placed in nonaccrual
status if, in management’s opinion, payment in full of principal or interest is not expected, unless such loan or lease is both
well-secured and in the process of collection.
The following table presents the amortized cost basis of loans on nonaccrual status by segment and class at the periods
indicated:
December 31, 2023
December 31, 2022
Nonaccrual Loans
Nonaccrual Loans
with No Related
Allowance
Nonaccrual Loans
Nonaccrual Loans
with No Related
Allowance
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
$
131,559 $
7,097
138,656
11,267 $
1,275
12,542
23,907 $
7,944
31,851
1,859
17,485
19,344
57,881
260
58,141
—
4,416
4,416
—
—
—
2,974
7,331
10,305
55,892
697
56,589
Total
$
216,141 $
16,958 $
98,745 $
58
1,819
1,877
—
—
—
1,574
—
1,574
3,451
133
The following table presents the interest income recognized on loans on nonaccrual status by segment and class for the
periods indicated:
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and industrial
Commercial real estate
Construction, acquisition and development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total
Year Ended December 31,
2023
2022
2021
$
$
863 $
178
1,041
710 $
683
1,393
53
748
801
1,880
5
1,885
3,727 $
133
90
223
1,925
90
2,015
3,631 $
349
1,207
1,556
196
920
1,116
1,020
97
1,117
3,789
In the normal course of business, management may grant concessions, which would not otherwise be considered, to
borrowers that are experiencing financial difficulty. Previously, loans identified as meeting the criteria set out in FASB ASC
310 were identified as TDRs. In March 2022, the FASB issued ASU No. 2022-02, which eliminates the TDR accounting model
for creditors that have adopted ASC 326. The guidance became effective for the Company beginning January 1, 2023, and the
Company elected to adopt the guidance via the modified retrospective transition method. With the removal of the TDR model,
all loan modifications are now accounted for under the general loan modification guidance in Subtopic 310-20. The update also
requires enhanced disclosures regarding loan modifications for borrowers experiencing financial difficulty. Further, the new
guidance requires public business entities to present current-period gross write-offs (on a current year-to-date basis for interim-
period disclosures) by year of origination in their vintage disclosures.
Under the general loan modification guidance, a modification is treated as a new loan only if both of the following
conditions are met: 1) the terms of the new loan are at least as favorable to the lender as the terms for comparable loans to other
customers with similar collection risks, and 2) modifications to the terms of the original loan are more than minor. If either
condition is not met, the modification is accounted for as the continuation of the old loan with any effect of the modification
treated as a prospective adjustment to the loan’s effective interest rate. Modifications in scope for borrowers experiencing
financial difficulty may include principal forgiveness, other-than-insignificant payment delay, interest rate reduction, or a
combination of modifications. During the year ended December 31, 2023, the most common concessions related to term
extensions and payment deferrals. Other concessions included a reduction of interest rates to below market rates.
Upon determination by the Company that a modified loan (or portion of a loan) has subsequently been deemed
uncollectible, the loan (or portion of the loan) is charged off. The amortized cost basis of the loan is reduced by the
uncollectible amount and the ACL is adjusted by this amount.
134
The following table presents loans that were modified within the past twelve months for borrowers experiencing
financial difficulty by segment and class, as well as the percentage of these modified loans compared to overall loans in each
segment and class, at December 31, 2023:
Payment
Deferral
Term
Extension
Interest Rate
Reduction
Combination
Interest Rate
Reduction and
Payment
Deferral
Combination
Term
Extension and
Interest Rate
Reduction
Combination
Term
Extension
and Payment
Deferral
Percent of
Total Loan
Class
$
32,121 $
70,009 $
— $
— $
6,583 $
—
40
32,121
70,049
—
1,520
1,520
42
—
42
—
27,774
27,774
139
11
150
—
—
—
—
—
299
—
299
—
—
—
—
—
37
—
37
—
6,583
—
769
769
331
—
331
262
—
262
—
—
—
—
—
—
1.22 %
—
0.82
—
0.52
0.31
0.01
—
0.01
(Dollars in thousands)
Commercial and
industrial
Non-real estate
Owner occupied
Total commercial and
industrial
Commercial real estate
Construction,
acquisition and
development
Income producing
Total commercial real
estate
Consumer
Residential mortgages
Other consumer
Total consumer
Total loans and leases, net
of unearned income
$
33,683 $
97,973 $
299 $
37 $
7,683 $
262
0.43 %
The following table presents the financial effect of the loan modifications presented above for borrowers experiencing
financial difficulty for the following period:
Year Ended December 31, 2023
Weighted-Average Interest
Rate Reduction
Weighted-Average Term
Extension (in years)
Commercial and industrial
Non-real estate
Owner occupied
Commercial real estate
Construction, acquisition and development
Income producing
Consumer
Residential mortgages
Other consumer
0.92 %
—
—
0.30
0.24
3.25
0.84
5.04
—
1.09
11.17
1.42
135
The following table provides the amortized cost basis of loans that experienced a payment default during the period
and were modified in the 12 months before default to borrowers experiencing financial difficulty:
Amortized Cost Basis of Modified Loans That Subsequently Defaulted at
December 31, 2023
Payment
Deferral
Term
Extension
Interest Rate
Reduction
Combination
Term
Extension and
Interest Rate
Reduction
Combination
Term
Extension and
Payment
Deferral
$
6,430 $
28,941 $
— $
1 $
262
—
17
$
6,430 $
28,958 $
50
50 $
—
1 $
—
262
(In thousands)
Commercial and industrial
Non-real estate
Consumer
Residential mortgages
Total modified
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial
difficulty to understand the effectiveness of its modification efforts. Loans are considered to be in payment default at 90 or
more days past due. The following table depicts the performance of loans that have been modified in the last 12 months:
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Commercial real estate
Construction, acquisition and development
Income producing
Consumer
Residential mortgages
Other consumer
Total
$
$
Payment Status (Amortized Cost Basis) at December 31, 2023
30-89 Days Past Due
90+ Days Past Due
Current
64,503 $
40
—
30,063
653
11
95,270 $
9,100 $
—
—
—
140
—
9,240 $
35,372
—
—
—
55
—
35,427
136
NOTE 6. ALLOWANCE FOR CREDIT LOSSES
The following table summarizes the changes in the ACL for the periods indicated:
(In thousands)
Balance at beginning of year
Charge-offs
Recoveries
Initial allowance on PCD loans
Adoption of new ASU related to modified loans (1)
Provision for loan losses
Balance at end of year
Year Ended December 31,
2023
2022
2021
$
$
440,347 $
(87,072)
14,504
—
255
100,000
468,034 $
446,415 $
(29,864)
29,913
(8,117)
—
2,000
440,347 $
244,422
(18,721)
24,035
75,124
—
121,555
446,415
(1) Cadence adopted the new accounting guidance effective January 1, 2023, which eliminates the TDR recognition and measurement guidance
via the modified retrospective transition method (ASU 2022-02). See Note 5.
The following tables summarize the changes in the ACL by segment and class for the periods indicated:
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and
industrial
Commercial real estate
Construction, acquisition and
development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Ending Balance
$
Year Ended December 31, 2023
Beginning
Balance
Charge-offs
Recoveries
Adoption of
new ASU for
modified
loans
Provision
(Release)
Ending
Balance
$
147,669 $
35,548
(72,401) $
(394)
7,541 $
1,582
256 $
2
111,512 $
(5,293)
194,577
31,445
183,217
(72,795)
9,123
258
106,219
226,022
68,902
74,727
143,629
(808)
(4,527)
(5,335)
622
1,071
1,693
—
(3)
(3)
(26,598)
(2,059)
(28,657)
106,142
7,359
113,501
440,347 $
(2,264)
(6,678)
(8,942)
(87,072) $
2,000
1,688
3,688
14,504 $
—
—
—
255 $
18,973
3,465
22,438
100,000 $
42,118
69,209
111,327
124,851
5,834
130,685
468,034
137
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and
industrial
Commercial real estate
Construction, acquisition and
development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Ending Balance
$
(In thousands)
Commercial and industrial
Non-real estate
Owner occupied
Total commercial and
industrial
Commercial real estate
Construction, acquisition and
development
Income producing
Total commercial real estate
Consumer
Residential mortgages
Other consumer
Total consumer
Ending Balance
$
Year Ended December 31, 2022
Beginning
Balance
Charge-offs
Recoveries
Initial ACL
on PCD
Loans
Provision
Ending
Balance
$
138,696 $
59,254
(17,874) $
(824)
14,165 $
2,292
— $
(551)
12,682 $
(24,623)
147,669
35,548
197,950
(18,698)
16,457
(551)
(11,941)
183,217
52,530
98,327
150,857
(298)
(1,832)
(2,130)
4,352
3,521
7,873
85,734
11,874
97,608
446,415 $
(1,430)
(7,606)
(9,036)
(29,864) $
3,017
2,566
5,583
29,913 $
—
(2,012)
(2,012)
(5,554)
(5,554)
(8,117) $
12,318
(23,277)
(10,959)
24,375
525
24,900
2,000 $
68,902
74,727
143,629
106,142
7,359
113,501
440,347
Year Ended December 31, 2021
Beginning
Balance
Charge-offs
Recoveries
Initial ACL
on PCD
Loans
Provision
Ending
Balance
$
31,906 $
35,488
(7,213) $
(1,912)
11,754 $
4,140
31,614 $
7,597
70,635 $
13,941
138,696
59,254
67,394
(9,125)
15,894
39,211
84,576
197,950
28,891
64,291
93,182
(1,024)
(1,601)
(2,625)
1,831
1,262
3,093
6,323
14,932
21,255
16,509
19,443
35,952
70,493
13,353
83,846
244,422 $
(1,509)
(5,462)
(6,971)
(18,721) $
2,424
2,624
5,048
24,035 $
14,009
649
14,658
75,124 $
317
710
1,027
121,555 $
52,530
98,327
150,857
85,734
11,874
97,608
446,415
138
The following table represents a roll forward of the reserve for unfunded commitments for the periods shown. The
reserve for unfunded commitments is classified in other liabilities in the consolidated balance sheets.
(In thousands)
Balance at beginning of period
$
Provision for unfunded commitments for loans acquired during the period
(Reversal) Provision for credit losses for unfunded commitments
Balance at end of period
$
Year Ended December 31,
2022
2023
2021
28,551 $
—
(20,000)
8,551 $
23,551 $
—
5,000
28,551 $
7,044
13,007
3,500
23,551
The economic impact of inflation, rising interest rates, volatility in the financial markets, and the potential for a
slowing economy poses additional risk to borrowers and financial institutions. These factors add to the risk borrowers may
experience difficulty in meeting repayment obligations, and the Company may experience losses or deterioration in
performance in its loan portfolio.
The ACL estimate is impacted by both portfolio changes and changes in economic conditions experienced during the
period. The unemployment rate has the highest weighting within the Company’s credit risk modeling framework. Economic
forecasts, which are obtained from different sources, provide upside, downside, and base case scenarios over an eight-quarter
forecast horizon to establish a forecast range. Management considers the scenarios and selects a blended scenario which, in
management’s opinion, reflects likely economic conditions within that range. The Company recognizes that inflation, rising
interest rates and a slowing economy may have short-term, long-term, and regional impacts to the economy. In addition,
qualitative factors such as changes in economic conditions, concentrations of risk, and changes in portfolio risk resulting from
regulatory changes are considered in determining the adequacy of the level of the ACL.
NOTE 7. PREMISES AND EQUIPMENT
A summary by asset classification at the periods indicated:
(In thousands)
Land
Buildings and improvements
Leasehold improvements
Equipment, furniture and fixtures
Computer software
Construction in progress
Right of use - lease
Subtotal
Accumulated depreciation and amortization
Premises and equipment, net
Estimated Useful
Life (Years)
N/A
5-40
5-39
3-20
3-5
N/A
N/A
December 31,
2023
December 31,
2022
$
$
140,771 $
541,966
39,875
342,362
100,040
47,015
199,973
1,412,002
609,869
802,133 $
138,653
528,680
33,144
301,358
94,417
70,885
211,573
1,378,710
586,478
792,232
Depreciation expense was $44.4 million, $42.8 million, and $30.3 million for the years ended December 31, 2023,
2022, and 2021, respectively.
Software amortization expense was $9.8 million, $9.5 million, and $6.5 million for the years ended December 31,
2023, 2022, and 2021, respectively.
The Company leases various premises and equipment. At the inception of the contract, the Company determines if an
arrangement is or contains a lease and will recognize on the balance sheet a lease asset for its right to use the underlying asset
and a lease liability for the corresponding lease obligation for contracts longer than a year. See Note 8 for additional disclosures
related to our lease obligations.
139
NOTE 8. LEASES
The Company leases various premises and equipment. At the inception of the contract, the Company determines if an
arrangement is or contains a lease and will recognize on the balance sheet a lease asset for its right to use the underlying asset
and a lease liability for the corresponding lease obligation for contracts longer than a year. The Company does not have any
commitments that would meet the definition of a finance lease. In the periods presented, the Company excludes leases of
Cadence Insurance, which are included in discontinued operations.
At December 31, 2023 and 2022, the weighted average remaining lease term for operating leases was 16.2 years and
15.8 years, respectively, and the weighted average discount rate used in the measurement of operating lease liabilities was 3.5%
and 3.2% at December 31, 2023 and 2022, respectively. Lease costs were as follows for the periods presented:
(In thousands)
Operating lease costs
Short-term lease costs
Variable lease costs
Sublease income
Total operating lease costs
Year Ended December 31,
2022
2021
2023
$
$
20,298 $
108
4
(1,011)
19,399 $
22,158 $
39
623
(1,123)
21,697 $
8,991
—
1,114
(187)
9,918
There were no leveraged leases or lease transactions with related parties during the years ended December 31, 2023
and 2022. At December 31, 2023 and 2022, the Company had no leases that had not yet commenced.
For leases that may contain renewal options or options to extend the lease term, the Company is reasonably certain to
do so, therefore, these extended terms are included in our lease liability calculation. A maturity analysis of operating lease
liabilities is included in the table below at December 31, 2023:
(In thousands)
2024
2025
2026
2027
2028
Thereafter
Total future minimum lease payments
Discount effect of cash flows
Present value of net future minimum lease payments
Amount
17,496
17,880
17,734
16,780
16,391
167,330
253,611
62,068
191,543
$
$
At December 31, 2023 and 2022, the Company’s operating lease ROU assets were $171.3 million and $183.8 million,
respectively, and ROU liabilities were $192.2 million and $206.8 million, respectively.
NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS
On November 30, 2023, Cadence Bank completed the previously announced sale of Cadence Insurance, Inc., a wholly
owned subsidiary of the Company that conducted the Company’s insurance agency business via a stock purchase agreement
with Arthur J. Gallagher Risk Management Services, LLC and Arthur J. Gallagher & Co. Cadence Insurance, Inc.’s historical
goodwill and intangibles have been reclassified to “Assets of discontinued operations” on the consolidated balance sheet at
December 31, 2022 to conform with the current period presentation. Refer to Note 3 for additional information.
The following tables present the carrying amounts of goodwill assigned to each of the Company’s reporting units at
December 31, 2023 and December 31, 2022. The Company finalized its valuation of the Legacy Cadence merger transaction
140
within the measurement period (i.e., no later than October 28, 2022). Refer to Note 2 for additional information on the mergers
and acquisitions, and Note 20 for additional information on segments.
(In thousands)
Corporate Banking
Community Banking
Mortgage
Banking Services
Total
December 31,
2023
December 31,
2022
$
$
401,742 $
918,354
19,652
28,037
1,367,785 $
401,742
918,354
19,652
28,037
1,367,785
The Company’s policy is to assess goodwill for impairment at the reporting unit level on an annual basis or sooner if
an event occurs or circumstances change which indicate that the fair value of a reporting unit is below its carrying amount.
Impairment is the condition that exists when the carrying amount of the reporting unit exceeds the fair value of that reporting
unit. The Company’s annual assessment date is during the Company’s fourth quarter. The Company’s annual goodwill
impairment evaluation for 2023 was based on a quantitative assessment and indicated no impairment of goodwill for its
reporting units.
In the current economic environment, forecasting cash flows, credit losses and growth in addition to valuing the
Company’s assets with any degree of assurance is very difficult and subject to significant changes over very short periods of
time. Management will continue to update its analysis as circumstances change. As market conditions continue to be volatile
and unpredictable, impairment of goodwill related to the Company’s reporting units may be necessary in future periods.
The carrying value of other intangible assets was $100.2 million and $119.6 million at December 31, 2023 and
December 31, 2022, respectively. In connection with the mergers and acquisitions detailed in Note 2, the Company recorded
core deposit intangible assets of $28.5 million. The core deposit intangible assets are being amortized over an estimated useful
life of ten years utilizing an accelerated method.
In connection with the Legacy Cadence merger, the Company also recorded $49.3 million of customer relationship
intangibles and $25.5 million for the Cadence trade name. The customer relationship intangibles are being amortized over an
estimated useful life of ten years utilizing an accelerated method. The trade name is considered indefinite-lived and is not
subject to amortization.
The following table, which excludes fully amortized intangibles, shows the gross carrying amount and accumulated
amortization of the Company’s other intangible assets at December 31, 2023 and December 31, 2022.
(In thousands)
Core deposit intangibles
$
Customer relationship intangibles
Non-solicitation intangibles
Trade names
Total other intangible assets
$
December 31, 2023
December 31, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
112,379 $
49,349
—
25,508
187,236 $
67,501 $
19,544
—
—
87,045 $
44,878 $
29,805
—
25,508
100,191 $
112,379 $
49,349
3,440
25,508
190,676 $
56,689 $
10,968
3,440
—
71,097 $
55,690
38,381
—
25,508
119,579
The following table presents intangible asset amortization expense for the periods indicated.
(In thousands)
Core deposit intangibles
Customer relationship intangibles
Non-solicitation intangibles
Total intangible asset amortization expense
Year Ended December 31,
2022
2023
2021
$
$
10,812 $
8,576
—
19,388 $
9,408 $
8,374
650
18,432 $
7,286
2,588
860
10,734
141
The following table presents the estimated intangible asset amortization expense for the next five years.
(In thousands)
2024
2025
2026
2027
2028
Core
Deposit
Intangibles
Customer
Relationship
Intangibles
$
8,927 $
8,582
8,005
7,574
5,231
7,288 $
6,309
5,331
4,352
3,373
Total
16,215
14,891
13,336
11,926
8,604
NOTE 10. TIME DEPOSITS AND BORROWINGS
Time deposits with a balance of $250,000 or more totaled $2.4 billion and $1.1 billion at December 31, 2023 and
December 31, 2022, respectively.
At December 31, 2023, time deposits that will mature in under one year totaled $6.7 billion. For time deposits with a
remaining maturity of more than one year at December 31, 2023, the aggregate amount maturing in each of the following five
years and thereafter is presented in the following table:
(In thousands)
2025
2026
2027
2028
2029
Thereafter
Total
Amount
474,819
67,430
38,831
34,807
55
300
616,242
$
$
Borrowings with original maturities of one year or less are classified as short-term. The following tables present
information relating to short-term debt for the periods presented:
December 31, 2023
End of Period
Year to Date Daily Average
(Dollars in thousands)
Federal funds purchased
Securities sold under agreement to repurchase
Bank Term Funding Program
Short-term FHLB advances
Total
Balance
$
—
451,516
3,500,000
—
$ 3,951,516
Interest
Rate
—%
4.29
4.84
—
Balance
$
29,361
770,777
2,052,088
1,389,759
$ 4,241,985
Interest
Rate
4.91%
4.04
5.10
4.91
Maximum
Outstanding
at any
Month End
$
375,000
862,589
3,500,000
5,700,228
$ 10,437,817
142
December 31, 2022
End of Period
Year to Date Daily Average
(Dollars in thousands)
Federal funds purchased
Securities sold under agreement to repurchase
Short-term FHLB advances
Total
Balance
$
200,000
708,736
3,100,231
$ 4,008,967
Interest
Rate
4.35%
3.44
4.53
Balance
$
255,027
668,946
1,325,381
$ 2,249,354
Interest
Rate
2.46%
1.07
2.78
Maximum
Outstanding
at any
Month End
$
725,000
708,736
3,800,232
$ 5,233,968
Federal funds purchased generally mature the day following the date of purchase. At December 31, 2023 and
December 31, 2022, the Company had established non-binding federal funds borrowing lines of credit with other banks
aggregating $2.1 billion and $1.8 billion, respectively. Additionally, the Company maintains access to the Federal Reserve
Bank (“FRB”) discount window borrowings which generally mature within 90 days and are collateralized by $2.1 billion in
commercial, agriculture, and consumer loans pledged under a borrower-in-custody agreement. At December 31, 2023 and
December 31, 2022, there were no borrowings from the FRB discount window.
The BTFP was created by the Federal Reserve to support businesses and households by making additional funding
available to eligible financial institutions to help assure they have the ability to meet the needs of their depositors. The BTFP
offers loans of up to one year in length to banks and other qualifying institutions pledging any collateral eligible for purchase by
the FRB. The collateral is valued at its par amount and consists mainly of MBS and U.S. government agency securities. The
BTFP expires on March 11, 2024, but the Federal Reserve may choose to renew the program. Cadence’s BTFP borrowing is
comprised of one loan totaling $3.5 billion at a rate of 4.84% at December 31, 2023 and matures on December 26, 2024. Short-
term FHLB borrowings mature within one year following the date of the advance.
All borrowings from the FHLB are collateralized by commercial, construction, and real estate loans pledged under a
blanket floating lien security agreement with the FHLB of Dallas at December 31, 2023 and December 31, 2022. Under the
terms of this agreement, the Company is required to maintain sufficient collateral to secure borrowings in an aggregate amount
of the lesser of the book value (i.e., unpaid principal balance), after applicable FHLB discounts, of the Company’s eligible
commercial and residential loans pledged as collateral, or 35% of the Company’s assets. Loans totaling $22.9 billion and
$19.8 billion at December 31, 2023 and December 31, 2022, respectively, were pledged to the FHLB of Dallas. At
December 31, 2023, the remaining borrowing availability totaled $8.9 billion. At December 31, 2023, there were no call
features on long-term FHLB borrowings.
The FHLB of Dallas has also issued irrevocable letters of credit totaling $3.3 billion at December 31, 2023 on behalf
of our customers. Of the total amount, $320 million expires on January 12, 2024, $3.0 billion expires on January 31, 2024, and
$26.7 million expires on December 17, 2025.
Securities sold under repurchase agreements generally mature within 1 day from the date of sale. The Company
monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of
the underlying securities. Collateral pledged pursuant to these repurchase agreements can include MBS issued or guaranteed by
U.S. agencies, U.S. Treasury securities and U.S. government agency securities.
143
The following table presents the details of the long-term and subordinated debt the Company has outstanding:
(In thousands)
December 31, 2023
December 31, 2022
4.850% advances from FHLB Dallas, due August 2, 2027
4.125% fixed to floating rate, subordinated notes, due November 20, 2029,
callable in 2024
$
7.250% subordinated notes, due June 28, 2029, callable in 2024
4.750% subordinated notes, due June 30, 2029, callable in 2024
6.250% subordinated notes, due June 28, 2029, callable in 2024
5.000% fixed to floating rate, subordinated notes, due June 30, 2030,
callable in 2025
Purchase accounting adjustment, net of amortization
771 $
283,159
35,000
79,352
25,000
10,000
5,786
Debt issue costs
Total long-term borrowings
$
(608)
438,460 $
836
300,000
35,000
85,000
25,000
10,000
8,064
(1,346)
462,554
On November 20, 2019, the Company completed its public offering of $300 million aggregate principal amount of its
4.125% Fixed-to-Floating Rate Subordinated Notes due November 20, 2029 (“the Notes”). The Company received net
proceeds, after deducting the underwriting discount and estimated expenses, of approximately $296.9 million. Beginning
November 20, 2019, the Notes began to bear interest at a fixed annual interest rate equal to 4.125%, payable semiannually in
arrears commencing May 20, 2020. Beginning November 20, 2024, the interest rate will reset quarterly to an annual interest
rate equal to the three-month LIBOR plus 2.47%, payable quarterly in arrears. With the cessation of the three-month LIBOR the
interest rate will reset at the call date to the Chicago Mercantile Exchange (CME) three-month SOFR + 0.26161%. The Notes
are unsecured obligations of the Company and will not be guaranteed by any of its subsidiaries. The Notes are subordinated and
rank junior in right of payment to all of the Company’s existing and future senior indebtedness. There is no sinking fund for the
Notes. The Company may on or after November 20, 2024, and on any interest payment date thereafter, redeem the Notes, in
whole or in part, subject to certain conditions. The Notes do not contain any covenants or restrictions on the incurrence of debt,
or the payment of dividends. During 2023, the Company repurchased $16.8 million of our $300 million Subordinated Notes due
November 20, 2029 and $5.6 million of our $85.0 million Subordinated Notes due June 30, 2029, resulting in a $1.8 million
gain on the extinguishment of debt.
Due to the merger with Legacy Cadence on October 29, 2021, the Company assumed subordinated notes with the par
value totaling $145.0 million and junior subordinated notes with the par value totaling $50.6 million. The Company redeemed,
at par, $35.0 million of the junior subordinated debentures in December 2021 and $15 million on January 3, 2022. On May 1,
2021, the Company assumed $10.0 million in subordinated notes from the merger with FNS Bancshares Inc. See Note 2 of the
consolidated financial statements for more details related to the mergers. Also, during the third quarter of 2022, the Company
redeemed the remaining long-term promissory notes.
NOTE 11. PREFERRED STOCK
In November 2019, the Company completed its public offering of 6,900,000 shares of 5.50% Series A Non-
Cumulative Perpetual Preferred Stock, par value $0.01 per share, with a liquidation preference of $25 per share of Series A
Preferred Stock (the “Series A Preferred Stock”), which represents $172.5 million in aggregate liquidation preference (the
“Series A Preferred Stock Offering”). The Company received net proceeds from the Series A Preferred Stock Offering, after
deducting the underwriting discount and estimated expenses, of approximately $167.5 million. Holders of the Series A
Preferred Stock are entitled to receive, only when, as, and if declared by the Company’s board of directors, non-cumulative
cash dividends based upon the liquidation preference of $25 per share of Series A Preferred Stock, and no more, at a rate equal
to 5.50% per annum, payable quarterly, in arrears, on February 20, May 20, August 20 and November 20 of each year. The
Series A Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provision. The Company
may redeem shares of Series A Preferred Stock at its option, subject to regulatory approval, at a redemption price equal to $25
per share, plus any declared and unpaid dividends. The Board of Directors declared total cash dividends of $1.375 per share of
Series A Preferred Stock for a total of $9.5 million in 2023, 2022, and 2021.
144
NOTE 12. INCOME TAXES
The components of income tax (benefit) expense attributable to continuing operations were as follows for the years
ended December 31, 2023, 2022 and 2021:
(In thousands)
Current:
Federal
State
Deferred:
Federal
State
Total
2023
2022
2021
$
(2,355) $
106,628 $
(3,131)
13,972
1,208
(316)
7,245
1,860
$
(4,594) $
129,705 $
60,883
6,646
(17,231)
(4,340)
45,958
The Company had income tax (payable) receivable of $(10.0) million, $(0.5) million and $53.2 million at
December 31, 2023, 2022 and 2021, respectively.
Income tax (benefit) expense on continuing operations differed from the amounts computed by applying the U.S.
federal income tax rate of 21% to (loss) income from continuing operations before income taxes resulting from the following:
(In thousands)
Tax (benefit) expense at statutory rates
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit
Tax-exempt interest revenue
Tax-exempt earnings on life insurance
Deductible dividends paid on 401(k) plan
Tax rate change revaluation of deferreds
Excess salary disallowance
Tax credits
FDIC disallowance
Nondeductible merger costs
Meals and entertainment
CARES Act benefit
Other, net
Total
2023
2022
2021
$
(191) $
121,175 $
47,194
(2,723)
(1,730)
(3,135)
(529)
—
4,855
(12,926)
7,332
—
628
—
3,825
12,508
(2,877)
(2,640)
(537)
2,470
3,672
(9,728)
3,797
129
441
—
1,295
$
(4,594) $
129,705 $
1,822
(1,783)
(2,304)
(492)
—
1,459
(3,406)
1,721
3,449
135
41
(1,878)
45,958
145
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 2023 and 2022 were as follows:
(In thousands)
Deferred tax assets:
2023
2022
Loans, principally due to allowance for credit losses
$
114,341 $
113,927
Other real estate owned
Loans, fair value adjustment
Securities, fair value adjustment
Accrued liabilities
Net operating loss carryforwards
Lease liability
Other
Unrealized net losses on available-for-sale-securities
Unrecognized pension expense
Total gross deferred tax assets
Less: valuation allowance
Deferred tax assets
Deferred tax liabilities:
Lease transactions
Employment benefits
Premises and equipment, principally due to differences in depreciation
Mortgage servicing rights
Intangible assets
Investments
Deferred net loan fees
Right of use asset
Other
Total gross deferred tax liabilities
Net deferred tax assets
2,217
5,953
5,137
34,724
6,593
44,916
3,007
222,063
14,291
453,242
615
452,627
$
1,511 $
12,690
24,588
25,134
29,936
7,093
24,106
40,200
3,669
168,927
$
283,700 $
2,291
9,870
4,511
33,800
8,350
48,332
4,691
362,993
15,833
604,598
615
603,983
904
23,238
21,630
25,901
31,207
3,360
21,799
43,142
5,799
176,980
427,003
At December 31, 2023, the Company had a net deferred tax asset of $283.7 million, compared to $427.0 million at
December 31, 2022. The changes to gross deferred tax assets and liabilities during 2023 was primarily due to deferred tax
adjustments related to the change in market value of available-for-sale securities.
Based upon the level of historical taxable income and projections for future taxable income over the periods in which
deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of
these deductible differences existing at December 31, 2023 with the exception of a state net operating loss carryforward that
will not be realized which resulted in a $0.6 million valuation allowance.
At December 31, 2023, the Company has federal net operating loss carryforwards of $27.8 million which will begin to
expire in 2030. The Company has state net operating loss carryforwards of $3.1 million which will begin to expire in 2030. The
Company believes it is more likely than not the benefit from certain state net operating loss carryforwards will not be realized,
and accordingly, has established a pre-tax valuation allowance of $13.5 million, $0.6 million after tax, associated with those net
operating losses at December 31, 2023.
The Company recognizes accrued interest related to unrecognized tax benefits and penalties as a component of other
noninterest expense. The Company accrued interest of approximately $143 thousand in 2023, $214 thousand in 2022 and $32
thousand in 2021. The Company's accrued interest and penalties on unrecognized tax benefits was $0.7 million and $1.2 million
at December 31, 2023 and 2022. Accrued interest and penalties are included in other liabilities.
146
At December 31, 2023 and 2022, the balance of unrecognized tax benefits, if recognized that would reduce the
effective tax rate is approximately $1.2 million and $3.1 million, respectively. The Company does not anticipate a significant
change to the total amount of unrecognized tax benefits within the next 12 months. The following table presents a summary of
the beginning and ending amounts of unrecognized income tax benefits:
(In thousands)
Balance at January 1
Additions based on income tax positions related to current year
Additions for income tax positions for prior years
Additions from acquisition
Reductions for income tax positions of prior years
Statute of limitation expirations
Settlements
Balance at December 31
Years ended December 31,
2023
2022
2021
$
3,077 $
1,441 $
—
—
—
—
—
(1,835)
1,242 $
$
154
—
1,482
—
—
—
3,077 $
491
—
—
1,351
—
—
(401)
1,441
Unrecognized state income tax benefits are not adjusted for the federal income tax impact.
The Company is subject to taxation in the United States and various states and local jurisdictions. The Company files a
consolidated United States federal return. Based on the laws of the applicable state where the Company conducts business
operations, the Company and its applicable subsidiaries either file a consolidated, combined or separate return. The tax years
that remain open for examination for the Company's major jurisdictions of the United States—Federal, Mississippi, Arkansas,
Tennessee, Alabama, Louisiana, Texas, Georgia and Missouri—are 2020, 2021 and 2022.
In August 2022, the IRA of 2022 was signed into law to address inflation, healthcare costs, climate change and
renewal energy incentives, among other things. Included in the IRA of 2022 are provisions for the creation of a 15% CAMT
that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement
income in excess of $1 billion. For 2023, the Company is not subject to the 15% CAMT.
NOTE 13. PENSION, OTHER POST RETIREMENT BENEFIT AND PROFIT SHARING PLANS
The Basic Plan is a non-contributory defined benefit pension plan managed by a trustee covering substantially all full-
time employees who have at least one year of service, worked at least 1,000 hours and have attained the age of 18. For such
employees hired prior to January 1, 2006, benefits were based on years of service and the employee’s compensation until
January 1, 2017, at which time benefits were based on a 2.5% cash balance formula. For such employees hired on or after
January 1, 2006, benefits accrue based on a cash balance formula, effective January 1, 2012. The Company's funding policy is
to contribute to the Basic Plan the amount that meets the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as the Company determines to be appropriate. The difference
between the plan assets and projected benefit obligation is included in other assets or other liabilities, as appropriate. Actuarial
assumptions are evaluated periodically.
The Restoration Plan provides for the payment of retirement benefits to certain participants in the Basic Plan. The
Restoration Plan is a non-qualified plan that covers any employee whose benefit under the Basic Plan is limited by the
provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and any employee who elects to participate in the
Cadence Frozen Deferred Compensation Plan, which reduces the employee’s benefit under the Basic Plan. For employees hired
prior to January 1, 2006, benefits were based on years of service and the employee’s compensation until January 1, 2017, at
which time benefits were based on a 2.5% cash balance formula. For such employees hired on or after January 1, 2006, benefits
accrue based on a cash balance formula, effective January 1, 2012. The Supplemental Plan is a non-qualified defined benefit
supplemental retirement plan for certain key employees. Benefits commence when the employee retires and are payable over a
period of ten years.
The Company measured benefit obligations using the most recent Pri-2012 mortality tables and MP-2021 mortality
improvement scale in selecting mortality assumptions at December 31, 2023. The Company uses a December 31 measurement
date for its pension and other benefit plans.
147
In 2023, an amendment was made to the Basic Plan in conjunction with a special voluntary retirement offer
specifically designed for long-term participants in the Basic Plan. This amendment to provide enhanced pension benefit
protection increased the Basic Plan’s liability by $5.1 million, which the Company recognized immediately as a one-time
charge to expense during 2023. As a result of the merger with Legacy Cadence in 2021, three new participants were invited to
participate in the Supplemental Plan. The merger also triggered certain change in control provision of the Supplemental Plan
where existing active participants became fully vested in their benefits under the plan. The Company elected to recognize the
fair value of the additional liabilities resulting from these plan amendments, totaling $5.7 million, immediately as a one-time
charge to merger expense during 2021.
A summary of the three defined benefit retirement plans at and for the years ended December 31, 2023, 2022 and 2021
follows:
(In thousands)
Change in benefit obligations:
Pension Benefits
2023
2022
2021
Projected benefit obligations at beginning of year
$
238,878 $
323,274 $
303,319
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Administrative expenses paid
Plan amendments
Settlements (1)
Projected benefit obligations at end of year
Change in plans' assets:
Fair value of plans' assets at beginning of year
Actual return on assets
Employer contributions
Benefits paid
Administrative expenses paid
Settlements (1)
Fair value of plans' assets at end of year
Funded status:
Projected benefit obligations
Fair value of plans' assets
Net amount recognized
9,840
12,191
15,387
(11,691)
(1,319)
5,088
10,439
7,278
(61,610)
(10,510)
(1,033)
—
(26,768)
(28,960)
241,606 $
238,878 $
7,363
4,397
29,009
(10,870)
(1,262)
3,570
(12,252)
323,274
341,629 $
414,067 $
393,224
33,397
2,555
(11,691)
(1,319)
(26,768)
(34,384)
2,449
(10,510)
(1,033)
(28,960)
42,546
2,681
(10,870)
(1,262)
(12,252)
337,803 $
341,629 $
414,067
(241,606) $
(238,878) $
(323,274)
337,803
341,629
96,197 $
102,751 $
414,067
90,793
$
$
$
$
$
(1) The total lump sums paid during 2023 and 2022 were $26.8 million and $29.0 million, respectively, compared to a settlement threshold
of $19.6 million and $14.8 million. As a result, a charge of $11.8 million and $9.0 million were recognized for 2023 and 2022,
respectively.
The overall funded status of the plans declined slightly during 2023. The slight decline was the result of a decrease in
the fair value of the plans' assets as payments and settlements exceeded the actual return on plan assets coupled with an increase
in the projected benefit obligation due to increased interest cost and plan amendments.
The weighted-average interest crediting rates for both the Basic Plan and the Restoration Plan were 3.98% in 2023.
The Supplemental Plan does not have a minimum interest crediting rate.
148
Amounts recognized in the consolidated balance sheets consisted of:
(In thousands)
Prepaid benefit cost
Accrued benefit liability
Accumulated other comprehensive loss adjustment
Net amount recognized
Pension Benefits
2023
2022
2021
$
$
188,325 $
201,581 $
207,855
(31,625)
(60,503)
(31,800)
(67,030)
96,197 $
102,751 $
(32,047)
(85,015)
90,793
Pre-tax amounts recognized in accumulated other comprehensive loss consisted of:
(In thousands)
Net prior service benefit
Net actuarial loss
Total accumulated other comprehensive loss
December 31,
2023
2022
$
$
191 $
60,312
60,503 $
205
66,825
67,030
The components of net periodic benefit cost for the periods indicated were as follows:
(In thousands)
Service cost
Interest cost
Expected return on plan assets
Recognized prior service cost
Recognized net loss
Settlement gain or loss and special termination benefit
Net periodic benefit (1)
Year Ended December 31,
2022
2021
2023
$
$
9,840 $
12,191
(21,969)
13
3,734
11,826
15,635 $
10,439 $
7,278
(23,003)
14
4,726
9,023
8,477 $
7,363
4,397
(22,901)
3,088
6,916
3,051
1,914
(1) While service cost is included in salaries and employee benefits, the other components of net periodic pension costs are included in other
noninterest expense in the consolidated statements of income for the years ended December 31, 2023, 2022, and 2021.
The weighted-average assumptions used to determine benefit obligations at December 31, 2023 and 2022 were as
follows:
Discount rate
Rate of compensation increase
Basic Plan
Restoration Plan
Supplemental Plan
2023
5.29%
4.00%
2022
5.50%
4.00%
2023
5.22%
4.00%
2022
5.46%
4.00%
2023
5.05%
3.00%
2022
5.41%
3.00%
The weighted-average assumptions used to determine net periodic benefit cost for 2023, 2022 and 2021 were as
follows:
Discount rate-service cost
Discount rate-interest cost
Rate of compensation increase
Expected rate of return on plan assets
2023
5.65%
5.13%
4.00%
6.50%
Basic Plan
2022
2.92%
1.95%
4.00%
6.00%
2021
2.45%
1.42%
3.00%
6.00%
149
Discount rate-service cost
Discount rate-interest cost
Rate of compensation increase
Expected rate of return on plan assets
Discount rate-service cost
Discount rate-interest cost
Rate of compensation increase
Expected rate of return on plan assets
2023
5.53%
5.30%
4.00%
N/A
2023
5.49%
5.28%
3.00%
N/A
Restoration Plan
2022
2.61%
2.26%
4.00%
N/A
Supplemental Plan
2022
2.24%
1.62%
3.00%
N/A
2021
1.64%
1.70%
3.00%
N/A
2021
1.81%
1.20%
3.00%
N/A
The following table presents information related to the defined benefit plans that had accumulated benefit obligations
in excess of plan assets at December 31, 2023 and 2022:
(In thousands)
Projected benefit obligation
Accumulated benefit obligation
Fair value of assets
2023
2022
$
37,431 $
34,861
—
35,951
31,361
—
In selecting the expected long-term rate of return on assets used for the Basic Plan, the Company considered the
average rate of earnings expected on the funds invested or to be invested to provide for the benefits of the plan. This included
considering the trust asset allocation and the expected returns likely to be earned over the life of the plan. This basis is
consistent with the prior year. The discount rate is the rate used to determine the present value of the Company’s future benefit
obligations for its pension and other postretirement benefit plans.
Plan assets are managed on a total return basis to meet future obligations. Risk is managed through asset allocation,
diversification, asset valuation analysis and maintaining a long-term focus. Assets are invested in multiple asset classes
including, but not limited to, domestic equities, international equities and fixed income securities. Factors considered for the
Plan’s asset allocation include, but are not limited to, the Plan’s funding status, long-term expected liabilities and expected
long-term investment performance. To meet the Plan’s obligation, long-term returns take priority over short term market
volatility and uncertainty. The Plan asset allocation, diversification and long-term performance are evaluated by the Retirement
Committee multiple times throughout each calendar year.
The Company’s pension plan weighted-average asset allocations at December 31, 2023 and 2022 and the Company’s
target allocations for 2024, by asset category, were as follows:
Asset category:
Equity securities
Debt securities
Cash and equivalents
Total
Plan assets at December 31,
Target for
2023
2022
49 %
47 %
4 %
100 %
46 %
50 %
4 %
100 %
2024
33-60%
40-67%
Equity securities held in the Basic Plan included shares of the Company’s common stock with a fair value of $2.4
million (0.72% of total plan assets) and $2.0 million (0.60% of total plan assets) at December 31, 2023 and 2022, respectively.
An analysis by management is performed annually to determine whether the Company will make a contribution to the Basic
Plan.
150
The following table presents information regarding expected future benefit payments, which reflect expected service,
as appropriate:
(In thousands)
Expected future benefit payments:
2024
2025
2026
2027
2028
2029-2033
$
Pension
Benefits
24,041
23,008
23,212
23,835
22,970
110,556
The following table presents the fair value of each major category of plan assets held in the Basic Plan at
December 31, 2023 and 2022:
(In thousands)
Investments, at fair value:
Cash and cash equivalents
U.S. agency debt obligations
Mutual funds
U. S. government debt obligations
Common stock of Cadence Bank
Brokered certificates of deposit
Total investments, at fair value
Accrued interest and dividends
Fair value of plan assets
Plan Assets
2023
2022
$
7,822 $
13,679
272,589
5,895
2,434
34,703
337,122
681
14,503
16,347
264,674
—
2,029
43,446
340,999
630
$
337,803 $
341,629
Fair values are determined based on valuation techniques categorized as follows: Level 1 means the use of quoted
prices for identical instruments in active markets; Level 2 means the use of quoted prices for identical or similar instruments in
markets that are not active or are directly or indirectly observable; Level 3 means the use of unobservable inputs. Quoted
market prices, when available, are used to value investments. Pension plan investments include funds which invest in various
types of investment securities and in various companies within various markets. Investment securities are exposed to several
risks, such as interest rate, market and credit risks. Because of the level of risk associated with certain investment securities, it is
at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes
could materially affect the amounts reported.
151
The following tables set forth the plan investments at fair value at December 31, 2023 and 2022:
(In thousands)
Cash and cash equivalents
U.S. agency debt obligations
U.S. government debt obligations
Mutual funds
Company common stock
Brokered certificates of deposit
Level 1
Level 2
Level 3
Total
2023
$
7,822 $
— $
— $
—
—
272,589
2,434
—
13,679
5,895
—
—
34,703
—
—
—
—
—
7,822
13,679
5,895
272,589
2,434
34,703
Total
$
282,845 $
54,277 $
— $
337,122
(In thousands)
Cash and cash equivalents
U.S. agency debt obligations
Mutual funds
Company common stock
Brokered certificates of deposit
Total
Level 1
Level 2
Level 3
Total
2022
$
14,503 $
— $
— $
—
264,674
2,029
—
16,347
—
—
43,446
—
—
—
—
14,503
16,347
264,674
2,029
43,446
$
281,206 $
59,793 $
— $
340,999
The following investments represented 5% or more of the total plan asset value at December 31, 2023:
(In thousands)
John Hancock Discip Value Fund
John Hancock Discip Value Mid Cap Fund
Curasset Capital Management Core Bond Fund
Curasset Capital Management Limited Term Inc Fund
Pioneer Multi-Asset Ultrashort Inc Fund
First Eagle Global Fund Class R6
JP Morgan Equity Income R6
JP Morgan Strategic Income Opp Fund
JPMorgan Undiscovered Managers Behavioral Value
$
2023
22,096
21,110
32,258
36,940
20,986
21,141
25,555
20,502
17,801
The Company has a defined contribution plan (commonly referred to as a “401(k) Plan”). Employees may contribute a
portion of their compensation, as set forth in the 401(k) Plan, subject to the limitations as established by the Code. Employee
contributions (up to 5% of defined compensation) are matched dollar-for-dollar by the Company. Employer contributions were
$22.6 million, $21.4 million, and $13.7 million for 2023, 2022, and 2021, respectively.
NOTE 14. FAIR VALUE DISCLOSURES
Fair value is defined by US GAAP as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires the Company to maximize the
use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:
•
Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.
152
•
•
Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or
similar instruments in markets that are not active, and model-based valuation techniques for which all significant
assumptions are observable in the market.
Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the
market. These unobservable assumptions reflect management’s estimates of assumptions that market participants
would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash
flow models, and similar techniques.
Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in
inputs occurs.
Determination of Fair Value
Fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The following describes the assumptions and methodologies
used to estimate the fair value of financial instruments recorded at fair value in the consolidated balance sheets and for
estimating the fair value of financial instruments for which fair value is disclosed.
Available-for-sale securities and equity investments. Available-for-sale securities and equity investments (with
readily determinable fair values) are recorded at fair value on a recurring basis. Available-for-sale securities and equity
investments that are traded on an active exchange are classified as Level 1. If quoted prices are not available, the Company
obtains fair value measurements from an independent pricing service. These fair value measurements consider observable
market data that may include benchmark yield curves, reported trades, broker/dealer quotes, issuer spreads and credit
information, among other inputs. These securities are classified as Level 2.
Mortgage servicing rights. The Company records MSR at fair value on a recurring basis with subsequent
remeasurement of MSR based on change in fair value. An estimate of the fair value of the Company’s MSR is determined by
utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market
trends and industry demand. All of the Company’s MSR are classified as Level 3.
Derivative instruments. The Company’s derivatives that are traded on an active exchange are classified as Level 1.
The majority of the Company’s derivative instruments are measured at fair value based on modeling that utilizes observable
market inputs for various interest rates published by leading third-party financial news and data providers. This is observable
data that represents the rates used by market participants for instruments entered into at that date; however, they are not based
on actual transactions, so they are classified as Level 2. Derivative instruments that are measured at fair value based on either an
observable market price or a discounted cash flow valuation using the terms of a derivative agreement are classified as Level 3.
Loans held for sale. Loans held for sale are carried at fair value which is based on commitments outstanding from
investors as well as what secondary markets are currently offering for portfolios with similar characteristics. Therefore, loans
held for sale are subjected to recurring fair value adjustments and are classified as Level 2. The Company obtains quotes, bids,
or pricing indications on all or part of these loans directly from the buyers. Premiums and discounts received or to be received
on the quotes, bids or pricing indications are indicative of the fact that the cost is lower or higher than fair value.
Investments in limited partnerships. The fair value of certain investments in limited partnerships is estimated using
the practical expedient of net asset value. For other investments in limited partnerships that do not qualify for the practical
expedient, we use a measurement alternative which measures these investments at cost, less any impairment, plus or minus any
changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.
The Company classifies these investments in limited partnerships as Level 3.
SBA servicing assets. The fair value of the SBA servicing assets is estimated using the gross coupon less an assumed
CSC. The Company classifies SBA servicing assets as Level 3.
Other real estate owned and repossessed assets. OREO is carried at the lower of cost or estimated fair value, less
estimated selling costs and is subjected to nonrecurring fair value adjustments. Estimated fair value is determined on the basis
of independent appraisals and other relevant factors. Appraisals that are not based on observable inputs or that require
significant adjustments or fair value measurements that are not based on third-party appraisals are considered to be based on
153
significant unobservable inputs. The fair value of repossessed assets is determined using net orderly liquidation valuation on a
nonrecurring basis. The Company’s OREO and repossessed assets are classified as Level 3.
Collateral-dependent loans (impaired and purchase credit deteriorated (loss)). Collateral-dependent loans
considered for specific reserve are loans for which, based on current information and events, it is probable that the creditor will
be unable to collect all amounts due according to the contractual terms of the loan agreement. Collateral-dependent loans
include impaired loans and classified purchased credit deteriorated (loss) loans (as defined by management). When a loan is
collateral-dependent, the fair value of the loan is determined based on the fair value of the underlying collateral. All of the
Company’s collateral-dependent loans are classified as Level 3.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The following tables present the balances of the assets and liabilities measured at fair value on a recurring basis:
(In thousands)
Assets:
Available-for-sale securities
Equity investments
Mortgage servicing rights
Derivative instruments
Loans held for sale
Investments in limited partnerships
SBA servicing rights
Total
Liabilities:
Derivative instruments
(In thousands)
Assets:
Available-for-sale securities
Equity investments
Mortgage servicing rights
Derivative instruments
Loans held for sale
Investments in limited partnerships
SBA servicing rights
Total
Liabilities:
Derivative instruments
Level 1
Level 2
Level 3
Total
December 31, 2023
$
— $
8,075,476 $
22,108
—
1,809
—
—
—
23,917 $
—
—
25,836
186,301
—
—
8,287,613 $
— $
—
106,824
1,858
—
94,998
6,124
209,804 $
8,075,476
22,108
106,824
29,503
186,301
94,998
6,124
8,521,334
— $
44,294 $
10 $
44,304
Level 1
Level 2
Level 3
Total
December 31, 2022
$
— $
11,944,096 $
21,653
—
45
—
—
—
21,698 $
—
—
28,520
187,925
—
—
12,160,541 $
— $
—
109,744
856
—
67,533
5,585
183,718 $
11,944,096
21,653
109,744
29,421
187,925
67,533
5,585
12,365,957
$
$
$
$
253 $
55,486 $
431 $
56,170
154
Level 3 financial instruments typically include unobservable components but may also include some observable
components that may be validated to external sources. The table below includes a roll forward of the consolidated balance sheet
amounts for the years ended December 31, 2023, and 2022 for changes in the fair value of financial instruments within Level 3
of the valuation hierarchy that are recorded on a recurring basis. The gains or (losses) in the following table (which are reported
in Other noninterest income in the consolidated statements of income) may include changes to fair value due in part to
observable factors that may be part of the valuation methodology.
(In thousands)
Balance at December 31, 2022
Net (losses) gains
Additions
Reclassifications
Contributions paid
Distributions received
Other
Balance at December 31, 2023
Net unrealized (losses) gains included in net income for the period
related to assets and liabilities held at December 31, 2023
Year Ended December 31, 2023
Mortgage
Servicing
Rights
Investments
in Limited
Partnerships
SBA
Servicing
Rights
Mortgage Loan
Held-For-Sale
Interest Rate Lock
Commitments
(Assets and
Liabilities)
$ 109,744 $
(12,996)
10,076
—
—
—
—
67,533 $ 5,585 $
(1,227)
8,224
1,766
—
—
(1,120)
—
26,750
—
(6,411)
—
22
$ 106,824 $
94,998 $ 6,124 $
$
(4,158) $
8,224 $ (1,227) $
425
1,423
—
—
—
—
—
1,848
1,423
During the year ended December 31, 2022, the Company transferred $2.6 million in derivative instruments out of
Level 3. The transfer was primarily related to the integration of systems after the Legacy Cadence merger.
(In thousands)
Balance at December 31, 2021
Net gains (losses)
Transfers out of Level 3
Sales
Purchase accounting adjustment
Additions
Reclassifications
Contributions paid
Distributions received
Other
Year Ended December 31, 2022
Mortgage
Servicing
Rights
Net Profits
Interests
Investments
in Limited
Partnerships
SBA
Servicing
Rights
Derivative
Instruments
(Assets and
Liabilities)
$
69,552 $
23,903
—
—
—
16,289
—
—
—
—
109,744 $
2,000 $
—
—
(2,000)
—
—
—
—
—
— $
— $
46,750 $
7,771
—
—
(2,749)
—
6,665
18,930
(9,973)
139
67,533 $
5,358 $
(2,713)
—
—
—
2,940
—
—
—
—
5,585 $
4,654
(6,865)
2,636
—
—
—
—
—
—
—
425
Balance at December 31, 2022
$
Net unrealized gains (losses) included in net
income for the period related to assets and
liabilities held at December 31, 2022
Fair Value Option
$
35,695 $
— $
7,771 $
(2,713) $
(6,865)
The Company elected to measure commercial real estate loans held for sale and commercial and industrial loans held
for sale under the fair value option. Included in these loans are loans guaranteed by the SBA and loans related to syndications.
The Company assumed the cost of these loans approximates the fair value.
155
The Company also elected to measure residential mortgage loans held for sale at fair value. The election allows for
effective offset of the changes in fair values of the loans and the derivative instruments used to hedge them. Included in the
residential loans held for sale portfolio are certain previously sold GNMA loans. Under ASC 860-10-40, GNMA loans are no
longer considered sold due to the conditional buyback option becoming unconditional once the delinquency criteria is met when
they reach 90 or more days past due. The Company records these loans at fair value on the consolidated balance sheets with an
offsetting liability. The Company assumed the cost approximates the fair value. At December 31, 2023 and December 31, 2022,
the fair value of the GNMA loans totaled $56.5 million and $71.4 million, respectively.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal
balance of loans held for sale:
December 31, 2023
December 31, 2022
(In thousands)
Aggregate
Fair Value
Aggregate
Unpaid
Principal
Aggregate
Fair Value
Less
Aggregate
Unpaid
Principal
Aggregate
Fair Value
Aggregate
Unpaid
Principal
Aggregate
Fair Value
Less
Aggregate
Unpaid
Principal
Residential mortgage loans
Commercial and industrial loans
$
157,631 $
28,464
156,175 $
25,807
1,456 $
2,657
123,863 $
61,265
121,433 $
60,365
Commercial real estate loans
206
206
—
2,797
2,485
Total
$
186,301 $
182,188 $
4,113 $
187,925 $
184,283 $
2,430
900
312
3,642
Net gains and losses resulting from changes in fair value for residential mortgage loans held for sale are recorded in
mortgage banking income in the consolidated statements of income. For the years ended December 31, 2023 and 2022, the
Company had net gains totaling $2.1 million and $14.6 million, respectively.
Assets and Liabilities 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. The following tables present the balances of assets measured
at fair value on a nonrecurring basis:
(In thousands)
Assets:
Impaired loans, collateral-dependent
Purchased credit deteriorated (loss) loans
Other real estate and repossessed assets
(In thousands)
Assets:
Impaired loans, collateral-dependent
Purchased credit deteriorated (loss) loans
Other real estate and repossessed assets
$
$
Level 1
Level 2
Level 3
Total
December 31, 2023
— $
—
—
— $
—
—
101,271 $
6,507
6,247
101,271
6,507
6,247
Level 1
Level 2
Level 3
Total
December 31, 2022
— $
—
—
— $
—
—
7,199 $
33,234
5,118
7,199
33,234
5,118
156
Unobservable Inputs
The following table presents the significant unobservable inputs used in Level 3 fair value measurements for financial
assets measured at fair value on a recurring and nonrecurring basis:
Quantitative Information about Level 3 Fair Value Measurements
Carrying
Value
Valuation
Methods
Unobservable
Inputs
Range
Weighted
Average
(In thousands)
December 31, 2023
Measured at fair value on a recurring
basis:
Mortgage servicing rights(1)
$
106,824 Discounted cash
flow
Discount rate
9.8% - 16.0%
10.3%
Repayment speed
(CPR)
Coupon interest
rate
Remaining
maturity (months)
Servicing fee (bps)
6.4 - 100.0
8.1
2.8% - 6.8%
3.9%
119 - 480
338.8
19.0 bps-50.0
bps
28.6 bps
Net asset value
NM
NM
Contractual
servicing
cost (bps)
12.5 bps-40.0
bps
26.3 bps
Closing ratio
10.0% - 100%
55.9%
Investments in limited partnerships
94,998
SBA servicing rights(1)
Mortgage loan held-for-sale interest
rate lock commitments
Measured at fair value on a
nonrecurring basis:
6,124
1,848
Practical
expedient
Coupon less
contractual
servicing cost
Discounted cash
flow
Impaired loans, collateral-dependent $
101,271
Purchased credit deteriorated (loss)
loans
Other real estate and repossessed
assets
6,507
6,247
Appraised value,
as adjusted
Appraised value,
as adjusted
Appraised value,
as adjusted
Discount to fair
value
Discount to fair
value
Estimated closing
costs
0% - 90%
29.2%
10% - 30%
24.6%
7.0%
7.0%
157
(In thousands)
December 31, 2022
Measured at fair value on a
recurring basis:
Mortgage servicing rights(1)
Quantitative Information about Level 3 Fair Value Measurements
Carrying
Value
Valuation
Methods
Unobservable
Inputs
Range
Weighted
Average
$
109,744 Discounted cash flow
Discount rate
Repayment
speed (CPR)
Coupon interest
rate
Remaining
maturity
(months)
Servicing fee
(bps)
0.0%-41.3%
10.0%
0.0-100.0
7.2
2.3%-4.8%
3.6%
119.1-480.0
335.0
0.0 bps-50.0
bps
28.4 bps
Investments in limited
partnerships
SBA servicing rights(1)
Mortgage loan held-for-sale
interest rate lock commitments
Measured at fair value on a
nonrecurring basis:
Impaired loans, collateral-
dependent
Purchased credit deteriorated
(loss) loans
Other real estate and repossessed
assets
67,533
Practical expedient
Net asset value
NM
NM
5,585
Coupon less contractual
servicing cost
Contractual
servicing cost
(bps)
12.5 bps-40.0
bps
26.3 bps
425 Discounted cash flow
Closing ratio
70.0% - 100%
85.4%
$
7,199
33,234
5,118
Appraised value, as
adjusted
Appraised value, as
adjusted
Appraised value, as
adjusted
Discount to fair
value
Discount to fair
value
Estimated
closing costs
0%-75%
46.8%
10%-100%
36.1%
7.0%
7.0%
(1) Weighted averages were calculated using the input attributed and the outstanding balance of the loan.
Certain assets and liabilities subject to fair value disclosure requirements are not actively traded, requiring
management to estimate the fair value. These estimations necessarily require judgement to be applied to the reasonableness and
relevancy of comparable market prices, expected future cash flows, and appropriate discount rates.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. They
include cash and due from banks, interest bearing deposits with other banks and Federal funds sold, accrued interest receivable,
non-time deposits, federal funds purchased, securities sold under agreement to repurchase, short-term BTFP and FHLB
borrowings and accrued interest payable.
158
The following tables present carrying and fair value information of financial instruments for the periods presented:
(In thousands)
Assets:
Cash and due from banks
Interest bearing deposits with other banks and
Federal funds sold
Available for sale securities and equity securities
with readily determinable fair values
Net loans and leases
Loans held for sale
Accrued interest receivable
Mortgage servicing rights
Investments in limited partnerships
Other assets
Liabilities:
Deposits
Federal funds purchased and securities sold under
agreement to repurchase and other short-term
borrowings
Short-term BTFP and FHLB borrowings
Accrued interest payable
Subordinated and long-term borrowings
Derivative instruments:
Assets:
Commercial loan interest rate contracts
Mortgage loan held-for-sale interest rate lock
commitments
SOFR futures
U.S. Treasury options
Mortgage loan forward sale commitments
Foreign exchange contracts
Liabilities:
Commercial loan interest rate contracts
Mortgage loan held-for-sale interest rate lock
commitments
December 31, 2023
Carrying
Value
Fair Value
Level 1
Level 2
Level 3
$
798,177 $
798,177 $
798,177 $
— $
3,434,088
3,434,088
3,434,088
—
—
—
8,097,584
32,028,988
186,301
198,680
106,824
8,097,584
30,933,473
186,301
198,680
106,824
22,108
—
—
—
—
8,075,476
—
186,301
28,565
—
—
30,933,473
—
170,115
106,824
94,998
12,371
94,998
12,371
—
—
—
—
94,998
12,371
$ 38,497,137 $ 38,487,472 $
— $ 38,487,472 $
451,516
3,500,000
100,682
438,460
451,516
3,500,000
100,682
411,651
451,516
3,500,000
2,324
—
—
—
98,358
411,651
—
—
—
—
—
$
25,264 $
25,264 $
— $
25,264 $
—
1,858
1,549
260
246
326
1,858
1,549
260
246
326
—
1,549
260
—
—
—
—
—
246
326
$
41,459 $
41,459 $
— $
41,459 $
10
10
—
—
—
—
2,567
268
Mortgage loan forward sale commitments
Foreign exchange contracts
2,567
268
2,567
268
1,858
—
—
—
—
—
10
—
—
159
(In thousands)
Assets:
Cash and due from banks
Interest bearing deposits with other banks and
Federal funds sold
Available for sale securities and equity securities
with readily determinable fair values
Net loans and leases
Loans held for sale
Accrued interest receivable
Mortgage servicing rights
Investments in limited partnerships
Other assets
Liabilities:
Deposits
Federal funds purchased and securities sold under
agreement to repurchase and other short-term
borrowings
Short-term FHLB borrowings
Accrued interest payable
Subordinated and long-term borrowings
Derivative instruments:
Assets:
Commercial loan interest rate contracts
Mortgage loan held-for-sale interest rate lock
commitments
U.S. Treasury futures
Mortgage loan forward sale commitments
Foreign exchange contracts
Liabilities:
Commercial loan interest rate contracts
Mortgage loan held-for-sale interest rate lock
commitments
U.S. Treasury futures
U.S. Treasury options
Mortgage loan forward sale commitments
Foreign exchange contracts
Fair Value of Financial Instruments
December 31, 2022
Carrying
Value
Fair
Value
Level 1
Level 2
Level 3
$
756,906 $
756,906 $
756,906 $
— $
1,238,853
1,238,853
1,238,853
—
—
—
11,965,749
29,908,930
187,925
183,433
109,744
11,965,749
29,366,553
187,925
183,433
109,744
21,653
—
—
—
—
11,944,096
—
187,925
32,886
—
—
29,366,553
—
150,547
109,744
67,533
10,703
67,533
10,703
—
—
—
—
67,533
10,703
$ 38,956,614 $ 38,935,694 $
— $ 38,935,694 $
908,736
3,100,231
27,533
462,554
908,736
3,100,231
27,533
428,637
908,736
3,100,231
13,821
—
—
—
13,712
428,637
$
25,900 $
25,900 $
— $
25,900 $
856
45
175
2,445
856
45
175
2,445
—
45
—
—
—
—
175
2,445
$
52,616 $
52,616 $
— $
52,616 $
431
170
83
551
2,319
431
170
83
551
2,319
—
170
83
—
—
—
—
—
551
2,319
—
—
—
—
—
—
856
—
—
—
—
431
—
—
—
—
GAAP requires that the Company disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions that are used by the Company in estimating fair values of financial instruments that are not disclosed
above are set forth below.
Cash and Cash Equivalents. The carrying amounts for cash and cash equivalents approximate fair values due to their
immediate and shorter-term maturities. Cash and equivalents include cash and amounts due from banks, including interest-
bearing deposits with other banks.
160
Net Loans. Loans are valued on an individual basis, with consideration given to the loans’ underlying characteristics,
including account types, remaining terms, annual interest rates or coupons, interest types, accrual basis, timing of principal and
interest payments, current market rates, and remaining balances. A discounted cash flow model is used to estimate the fair value
of the loans using assumptions for prepayments speeds, projected default probabilities by risk grade, and estimates of prevailing
discount rates. The discounted cash flow approach models the projected cash flows, applying various assumptions regarding
interest and payment risks for the loans based on the loan types, payment types and fixed or variable interest rate classifications.
Estimated fair values are disclosed through the application of the exit price notion. The assumptions used to estimate fair value
are intended to approximate those that a market participant would use in an orderly transaction on the measurement date. All of
the Company’s loans and leases are classified as Level 3.
Deposits. The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at
the reporting date (that is, their carrying amounts). Fair values for time deposits are estimated using a discounted cash flow
calculation that uses recent issuance rates over the prior three months and a market rate analysis of recent offering rates for
retail products. For wholesale products, brokered pricing offering rates were used. The Company’s deposits are classified as
Level 2.
Borrowings. The carrying amounts for federal funds purchased and repurchase agreements approximate fair value
because of their short-term maturity and are classified as Level 1. Similarly, the carrying amounts for the Company's fixed-term
FHLB advances and BTFP also approximate fair value and are classified as Level 1. The fair value of the subordinated
debentures was estimated using a discounted cash flow calculation that uses recent issuance rates for similar notes offerings for
similar sized issuers. FHLB borrowings and the subordinate notes are classified as Level 2.
Lending Commitments. The Company’s lending commitments are negotiated at prevailing market rates and are
relatively short-term in nature. As a matter of policy, the Company generally makes commitments for fixed-rate loans for
relatively short periods of time. Therefore, the estimated value of the Company’s lending commitments approximates the
carrying amount and is immaterial to the financial statements. The Company’s lending commitments are classified as Level 2.
The Company’s off-balance sheet commitments, including letters of credit, which totaled $450.7 million at December 31, 2023,
are funded at current market rates at the date they are drawn upon. It is management’s opinion that the fair value of these
commitments would approximate their carrying value, if drawn upon. See Note 22 for additional information regarding lending
commitments.
Limitations. The fair value estimates are determined as of a specific point in time utilizing various assumptions and
estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain
financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. The fair
values for loans involve the use of various assumptions due to illiquidity in the market as of December 31, 2023 and 2022.
These assumptions are considered to reflect inputs that market participants would use in transactions involving these
instruments as of the measurement date. This table above only includes financial instruments of the Company, and, accordingly,
the total of the fair value amounts does not represent, and should not be construed to represent, the underlying value of the
Company.
NOTE 15. SHARE-BASED COMPENSATION
The Company’s Long-Term Equity Incentive Plan (“Incentive Plan”), Cadence Bank Equity Incentive Plan for Non-
Employee Directors, 2021 Long-Term Equity Incentive Plan and the Amended and Restated 2015 Omnibus Incentive Plan (the
“2015 Plan” assumed from Legacy Cadence) permits the Company to grant to employees and directors various forms of share-
based incentive compensation. Performance stock units (“PSU”) entitle the recipient to receive shares of the Company’s
common stock upon the achievement of performance goals that are specified in the award over a performance period. The
recipient of PSUs is not treated as a shareholder of the Company and is not entitled to vote or receive dividends until the
performance conditions stated in the award are satisfied and the shares of stock are issued to the recipient. All of the PSUs vest
over a three-year period and are valued at the fair value of the Company’s stock at the grant date based upon the estimated
number of shares expected to vest. In 2022, the Company incorporated a lattice model into the PSU valuation methodology to
estimate the fair value of the portion of the award related to market conditions. Restricted stock units (“RSU”) enable the
recipient to receive the shares once they are vested but with no voting rights until the shares are received. RSUs vest over three-
to five-year periods and are eligible to receive dividends that are accrued and paid upon vesting. Restricted stock awards
(“RSA”) entitle the recipient to vote the shares of stock but the recipient does not receive the shares until they are fully vested.
RSA grants vest over five- to seven-year periods and are entitled to receive dividends.
161
Performance Stock Units
The following table summarizes the Company’s PSU activity for the periods indicated:
Year Ended December 31,
2023
2022
Nonvested at beginning of period
Granted during the period
Vested during the period
Forfeited during the period
Nonvested at end of period
Weighted
Average Grant
Date Fair Value
28.54
20.39
30.55
24.51
26.17
Shares
1,485,603 $
597,979
(41,453)
(74,498)
1,967,631 $
Weighted
Average Grant
Date Fair Value
28.86
27.98
27.22
29.03
28.54
Shares
1,215,576 $
542,175
(26,252)
(245,896)
1,485,603 $
The Company recorded $13.6 million, $10.6 million, and $0.5 million of compensation expense from continuing
operations related to the PSUs in 2023, 2022, and 2021, respectively. At December 31, 2023, there was $16.2 million of
unrecognized compensation cost related to PSUs that is expected to be recognized over a weighted average period of 1.70
years.
Restricted Stock Units
The following table summarizes the Company’s RSU activity for the periods indicated:
Year Ended December 31,
2023
2022
Nonvested at beginning of period
Granted during the period
Vested during the period
Forfeited during the period
Nonvested at end of period
Weighted
Average Grant
Date Fair Value
28.53
20.46
28.06
25.38
25.20
Shares
2,435,802 $
1,386,005
(528,702)
(237,281)
3,055,824 $
Weighted
Average Grant
Date Fair Value
28.76
28.03
28.92
28.57
28.53
Shares
2,288,759 $
710,966
(422,175)
(141,748)
2,435,802 $
The Company recorded $23.4 million, $21.3 million, and $7.5 million of compensation expense from continuing
operations related to the RSUs in 2023, 2022, and 2021, respectively. These amounts included approximately $1.2 million, $1.5
million, and $0.7 million related to RSUs issued to the Company’s directors during 2023, 2022, and 2021, respectively. At
December 31, 2023, there was $37.5 million of unrecognized compensation cost related to RSUs that is expected to be
recognized over a weighted average period of 2.63 years.
Restricted Stock Awards
The following table summarizes the Company’s RSA activity for the periods indicated:
Year Ended December 31,
2023
2022
Nonvested at beginning of period
Vested during the period
Forfeited during the period
Nonvested at end of period
Weighted
Average Grant
Date Fair Value
29.47
31.24
28.49
28.14
Shares
1,055,307 $
(441,765)
(86,674)
526,868 $
Weighted
Average Grant
Date Fair Value
29.64
30.73
29.55
29.47
Shares
1,323,069 $
(176,925)
(90,837)
1,055,307 $
162
The Company recorded $2.4 million, $5.1 million, and $8.1 million of compensation expense from continuing
operations related to the RSAs in 2023, 2022, and 2021, respectively. At December 31, 2023, there was $2.6 million of
unrecognized compensation cost related to RSAs that is expected to be recognized over a weighted average period of 1.43
years.
The following table presents information regarding the vesting of the Company’s nonvested share-based compensation
grants outstanding at December 31, 2023:
Period Ending
December 31, 2024
December 31, 2025
December 31, 2026
December 31, 2027
December 31, 2028 and later
Total nonvested shares
Stock Options
PSU
Number of Shares
RSU
RSA
920,063
483,974
563,594
—
—
1,967,631
848,391
370,519
1,394,639
399,694
42,581
3,055,824
267,222
223,146
—
36,500
—
526,868
Key employees and directors of the Company may be granted stock options. Compensation expense is measured using
estimates of fair value of all share-based awards. No stock options were granted during 2023, 2022, and 2021. However, the
Company assumed outstanding stock options from its acquisition of Legacy Cadence in October 2021. The outstanding options
were converted according to the exchange rate used in the acquisition and became fully vested at that time. At the acquisition
date, options outstanding totaled 1,121,994 and had a weighted average exercise price of $27.40. The Company recorded $51
thousand of compensation expense from continuing operations related to the stock options for 2022. The Company recorded no
compensation expense related to the stock options for 2023 or 2021. During 2023, 226,705 options with a weighted average
exercise price of $27.11 were exercised. At December 31, 2023, there were 895,289 vested and unexpired options outstanding
with a weighted average exercise price of $27.47, which are set to expire in the first quarter of 2026.
NOTE 16. EARNINGS PER SHARE AND DIVIDEND DATA
Basic and diluted EPS are calculated in accordance with ASC 260, Earnings Per Share. Basic EPS is computed by
dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS is computed using the weighted-average number of shares determined for the basic EPS computation plus
the shares resulting from the assumed exercise of all outstanding share-based awards using the treasury stock method. There
were approximately 1.7 million equity awards that were antidilutive to loss per common share from continuing operations as of
December 31, 2023 and were therefore excluded from dilutive shares as of December 31, 2023. There were approximately 0.9
million, 0.1 million, and 0.3 million antidilutive equity awards excluded from dilutive shares for the years ended December 31,
2023, 2022, and 2021, respectively. The antidilutive equity awards are based on the impact to continuing operations available to
common shareholders and dictates whether the dilutive effect is considered for the remaining diluted calculations (diluted
earnings per common share from discontinued operations and diluted earnings per share).
163
The following table provides a reconciliation of the numerators and denominators of the basic and diluted EPS
computations for the periods indicated:
(In thousands, except per share amounts)
Net (loss) income from continuing operations (attributable to) available to
common shareholders
Net income from discontinued operations
Net income available to common shareholders
Weighted average common shares outstanding
Dilutive effect of stock compensation (1)
Weighted average diluted common shares
Basic (loss) earnings per common share from continuing operations
Basic earnings per common share from discontinued operations
Basic earnings per common share
Diluted (loss) earnings per common share from continuing operations (1)
Diluted earnings per common share from discontinued operations (1)
Diluted earnings per common share (1)
Year Ended December 31,
2022
2023
2021
(5,804) $
538,620
532,816 $
437,829 $
15,920
453,749 $
169,287
16,387
185,674
182,609
—
182,609
183,510
988
184,498
120,250
419
120,669
(0.03) $
2.95
2.92
(0.03) $
2.95
2.92
2.39 $
0.09
2.47
2.37 $
0.09
2.46
1.41
0.14
1.54
1.40
0.14
1.54
$
$
$
$
(1)
1.7 million outstanding equity awards are excluded from consideration for the year ended December 31,2023 due to a net loss from continuing operations attributable to common
shareholders because the inclusion of such awards would be antidilutive to net loss from continuing operations available to common shareholders.
Dividends to shareholders are subject to approval by the applicable state regulatory authority.
NOTE 17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (“AOCI”)
Activity within the balances in accumulated other comprehensive income (loss) is shown in the following tables for the
periods indicated:
(In thousands)
Balance at December 31, 2020
Net change
Balance at December 31, 2021
Net change
Balance at December 31, 2022
Net change
Balance at December 31, 2023
$
$
$
$
$
$
$
Unrealized loss on AFS
securities
Pension and other
postretirement benefits
Accumulated other
comprehensive loss
75,817 $
(151,382) $
(75,565) $
(1,096,907) $
(1,172,472) $
455,723 $
(716,749) $
(63,894) $
90 $
(63,804) $
13,738 $
(50,066) $
4,986 $
(45,080) $
11,923
(151,292)
(139,369)
(1,083,169)
(1,222,538)
460,709
(761,829)
164
NOTE 18. MORTGAGE SERVICING RIGHTS
The MSR, which are recognized as a separate asset on the date the corresponding mortgage loan is sold on a servicing
retained basis, is recorded at fair value as determined at each accounting period end. An estimate of the fair value of the
Company’s MSR is determined utilizing assumptions such as mortgage interest rates, discount rates, mortgage loan prepayment
speeds, market trends and industry demand. Data and assumptions used in the fair value calculation related to the MSR were as
follows:
(Dollars in thousands)
Unpaid principal balance
Weighted-average prepayment speed (CPR)
Average discount rate (annual percentage)
Weighted-average coupon interest rate (percentage)
Weighted-average remaining maturity (months)
Weighted-average servicing fee (basis points)
7,702,592 $
7,682,074 $
December 31, 2023 December 31, 2022 December 31, 2021
7,553,917
$
11.6
9.4
3.5
332.0
27.8
8.1
10.3
3.9
338.8
28.6
7.2
10.0
3.6
335.0
28.4
Because the valuation is determined by using discounted cash flow models, the primary risk inherent in valuing the
MSR is the impact of fluctuating interest rates on the estimated life of the servicing revenue stream. The use of different
estimates or assumptions could produce different fair values. At December 31, 2023, 2022, and 2021, the Company had an
economic hedge in place designed to cover approximately 73.1%, 47.9%, and 33.1% respectively, of the MSR (see Note 21 for
additional information). The Company is susceptible to fluctuations in the fair value of its MSR in changing interest rate
environments.
The Company services a class of residential mortgages that are first lien loans secured by a primary residence or
second home. The following table presents changes in the fair value of the MSR related to the activity in this class for the
periods indicated:
(In thousands)
Fair value, beginning of period
Originations of servicing assets
Changes in fair value:
Due to payoffs/paydowns
Due to change in valuation inputs or assumptions used in the
valuation model
Fair value, end of period
Year Ended December 31,
2022
2021
2023
109,744 $
10,076
69,552 $
16,289
47,571
23,927
(8,838)
(11,792)
(13,961)
(4,158)
106,824 $
35,695
109,744 $
12,015
69,552
$
$
All of the changes to the fair value of the MSR and the related economic hedge are recorded as part of mortgage
banking revenue in the consolidated statements of income. As part of mortgage banking noninterest revenue, the Company
recorded contractual servicing fees of $21.8 million, $21.7 million, and $20.8 million, and late and other ancillary fees of $2.8
million, $2.4 million, and $1.2 million for the years ended December 31, 2023, 2022, and 2021 respectively.
NOTE 19. CAPITAL AND REGULATORY MATTERS
The Company is subject to various regulatory capital requirements administered by the federal and state banking
agencies. Regulatory capital ratios at December 31, 2023 and 2022 were calculated in accordance with the Basel III capital
framework as well as the interagency final rule published on September 30, 2020 entitled “Revised Transition of the Current
Expected Credit Losses Methodology for Allowances.” Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse
effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the
Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The
Company’s capital amounts and classification are also subject to qualitative judgments by regulators about components, risk
weightings and other factors. Quantitative measures established by the FDIC to ensure capital adequacy require the Company to
maintain minimum capital amounts and ratios.
165
Additionally, regulatory capital rules include a capital conservation buffer which the Company must maintain on top of
its minimum risk-based capital requirements. This buffer applies to all three risk-based capital measurements (CET1, Tier 1 and
total capital to risk-weighted assets). A financial institution with a conservation buffer of less than the required amount is
subject to limitations on capital distributions, including dividend payments, stock repurchases, and certain discretionary bonus
payments to executive officers.
The actual capital amounts and ratios for the Company are presented in the following tables and as shown, exceed the
thresholds necessary to be considered “well capitalized.” Management believes that no events or changes have occurred
subsequent to the indicated dates that would change this designation.
(Dollars in thousands)
Actual:
December 31, 2023
Ratio
Amount
December 31, 2022
Ratio
Amount
Common equity Tier 1 capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets)
Total capital (to risk-weighted assets)
Tier 1 leverage capital (to average assets)
$ 4,363,020
4,530,013
5,377,324
4,530,013
11.62 % $ 3,880,508
4,047,501
12.06
4,861,521
14.32
4,047,501
9.30
10.22 %
10.66
12.81
8.43
Minimum requirement(1):
Common equity Tier 1 capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets)
Total capital (to risk-weighted assets)
Tier 1 leverage capital (to average assets)
Well capitalized requirement under prompt corrective action
provisions:
Common equity Tier 1 capital (to risk-weighted assets)
Tier 1 capital (to risk-weighted assets)
Total capital (to risk-weighted assets)
Tier 1 leverage capital (to average assets)
(1)
The additional capital conservation buffer in effect is 2.5%.
1,690,158
2,253,544
3,004,726
1,949,381
2,441,340
3,004,726
3,755,907
2,436,727
4.50
6.00
8.00
4.00
6.50
8.00
10.00
5.00
1,708,370
2,277,827
3,037,103
1,920,777
2,467,646
3,037,103
3,796,379
2,400,971
4.50
6.00
8.00
4.00
6.50
8.00
10.00
5.00
On December 14, 2022, the Company announced a new share repurchase program whereby the Company may acquire
up to an aggregate of 10,000,000 shares of its common stock in the open market at prevailing market prices or in privately
negotiated transactions during the period January 3, 2023 through December 29, 2023. At the time of expiration on December
29, 2023, no shares were repurchased under this program.
On December 13, 2023, the Company announced a new share repurchase program whereby the Company may acquire
up to an aggregate of 10,000,000 shares of its common stock in the open market at prevailing market prices or in privately
negotiated transactions during the period January 2, 2024 through December 31, 2024.
The extent and timing of any repurchases depends on market conditions and other corporate, legal and regulatory
considerations. Repurchased shares are held as authorized and unissued shares. These authorized but unissued shares are
available for use in the Company’s stock compensation programs, other transactions, or for other corporate purposes as
determined by the Company’s Board of Directors.
Federal and state banking laws and regulations and state corporate laws restrict the amount of dividends that the
Company may declare and pay. Under Mississippi law, the Company cannot pay any dividend on its common stock unless it
has received written approval of the Commissioner of the MDBCF. The federal banking agencies have indicated that paying
dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking
practice. Moreover, the federal agencies have issued policy statements providing that insured banks should generally only pay
dividends out of current operating earnings.
166
NOTE 20. SEGMENT REPORTING
The Company determines operating segments based upon 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 application and development of management reporting methodologies is a robust process and is subject to
periodic enhancements. As these enhancements are made, financial results presented by each reportable segment may be
periodically revised. In the third quarter of 2023, the Company modified certain allocated shared service costs from the General
Corporate and Other Segment to the other operating segments, with the FTP offset included in the General Corporate and Other
segment. Accordingly, prior periods were updated to reflect these enhancements. Cadence makes operating decisions based on
the following operating segments, as described below.
•
•
Corporate Banking segment focuses on C&I, business banking, and commercial real estate lending to clients in the
geographic footprint.
Community Banking segment provides a broad range of banking services through the branch network to serve the
needs of community businesses and individual consumers in the geographic footprint.
• Mortgage segment includes mortgage banking activities of originating mortgage loans, selling mortgage loans in the
secondary market and servicing the mortgage loans that are sold on a servicing retained basis.
•
•
Banking Services segment offers individuals, businesses, governmental institutions, and non-profit entities a wide
range of solutions to help protect, grow, and transfer wealth. Offerings include credit-related products, trust and
investment management, asset management, retirement and savings solutions, estate planning and annuity products.
General Corporate and Other segment includes other activities not allocated to other aforementioned operating
segments. Additionally, intercompany elimination are included as they do not reflect normal operations of the other
segments The disaggregation of General Corporate and Other better defines the results from the individual segments
due to the direct relationship of the internal support provided by the strategic business units within the Bank.
The Insurance Agencies segment is included in discontinued operations for all periods presented in the Consolidated
Statements of Income and Consolidated Balance Sheets. The Insurance Agencies segment provided service as agents in the sale
of commercial lines of insurance and full lines of property and casualty, life, health, and employee benefit products and
services. See Note 3 for additional information about discontinued operations.
Results of continuing operations and selected financial information by operating segment for periods indicated are
presented in the following tables:
(In thousands)
Results of Continuing Operations
Year Ended December 31, 2023
Net interest revenue
Provision (release) for credit losses
Net interest revenue after provision (release)
for credit losses
Noninterest revenue
Noninterest expense
Income (loss) from continuing operations before
income taxes
Income tax expense (benefit)
Income (loss) from continuing operations
Selected Financial Information
Total assets at end of period
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
$
493,094 $ 1,276,606 $
63,735
9,949
82,549 $
7,325
47,482 $
719
(548,375) $ 1,351,356
80,000
(1,728)
429,359
53,093
223,348
1,266,657
108,837
605,788
75,224
23,023
77,795
46,763
92,974
92,665
(546,647)
(394,270)
156,327
1,271,356
(116,343)
1,155,923
259,104
60,889
198,215 $
769,706
180,881
588,825 $
20,452
4,806
15,646 $
47,072
11,041
36,031 $
(1,097,244)
(262,211)
(835,033) $
(910)
(4,594)
3,684
$
$ 11,580,237 $ 17,106,224 $ 5,032,139 $ 1,116,347 $ 14,099,563 $ 48,934,510
167
(In thousands)
Results of Continuing Operations
Year Ended December 31, 2022
Net interest revenue
Provision (release) for credit losses
Net interest revenue after provision (release)
for credit losses
Noninterest revenue
Noninterest expense
Income (loss) from continuing operations
before income taxes
Income tax expense (benefit)
Income (loss) from continuing operations
Selected Financial Information
Total assets at end of period
(In thousands)
Results of Continuing Operations
Year Ended December 31, 2021
Net interest revenue
Provision for credit losses
Net interest revenue after provision for
credit losses
Noninterest revenue
Noninterest expense
(Loss) income from continuing operations
before income taxes
Income tax expense (benefit)
(Loss) income from continuing operations
Selected Financial Information
Total assets at end of period
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
$
411,695 $
47,981
755,056 $
(71,911)
61,036 $
26,582
31,074 $
(179)
92,430 $ 1,351,291
7,000
4,527
363,714
53,628
201,444
826,967
110,961
586,435
34,454
44,725
75,849
31,253
84,931
87,238
87,903
48,240
158,788
1,344,291
342,485
1,109,754
215,898
50,736
165,162 $
351,493
82,601
268,892 $
3,330
783
2,547 $
28,946
6,770
22,176 $
(22,645)
(11,185)
(11,460) $
577,022
129,705
447,317
$
$ 10,392,175 $ 16,972,114 $ 4,249,490 $ 1,001,097 $ 16,038,538 $ 48,653,414
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
$
69,509 $
123,801
562,302 $
9,832
57,349 $
4,429
5,969 $
—
110,582 $
—
805,711
138,062
(54,292)
6,768
19,818
552,470
84,864
287,697
52,920
57,912
34,338
5,969
42,846
29,403
110,582
50,515
314,565
667,649
242,905
685,821
(67,342)
12,402
(79,744) $
349,637
74,093
275,544 $
76,494
16,198
60,296 $
19,412
47
19,365 $
(153,468)
(56,782)
(96,686) $
224,733
45,958
178,775
$
$ 8,026,776 $ 15,593,803 $ 3,633,213 $ 1,114,550 $ 19,301,409 $ 47,669,751
The following table shows total noninterest income segregated between contracts with customers within the scope of
ASC 606, Revenue from Contracts with Customers, and those within the scope of other GAAP Topics.
(In thousands)
Year Ended December 31, 2023
Noninterest Income
In Scope of Topic 606
Credit card, debit card and merchant fees
Deposit service charges
Trust income
Brokerage commissions and fees
Total noninterest income (in-scope of Topic
606)
Total noninterest income (out-of-scope of
Topic 606)
Total noninterest income
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
$
626 $
13,004
—
—
37,314 $
55,199
—
—
— $
—
—
—
18 $
1,529
45,382
37,110
11,826 $
(8,014)
(2,869)
(309)
49,784
61,718
42,513
36,801
13,630
92,513
—
84,039
634
190,816
39,463
53,093 $
16,324
108,837 $
23,023
23,023 $
8,935
92,974 $
(394,904)
(394,270) $
(307,159)
(116,343)
$
168
(In thousands)
Year Ended December 31, 2022
Noninterest Income
In Scope of Topic 606
Credit card, debit card and merchant fees
Deposit service charges
Trust income
Brokerage commissions and fees
Total noninterest income (in-scope of Topic
606)
Total noninterest income (out-of-scope of
Topic 606)
Total noninterest income
(In thousands)
Year Ended December 31, 2021
Noninterest Income
In Scope of Topic 606
Credit card, debit card and merchant fees
Deposit service charges
Trust income
Brokerage commissions and fees
Total noninterest income (in-scope of Topic
606)
Total noninterest income (out-of-scope of
Topic 606)
Total noninterest income
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
$
522 $
15,015
—
—
40,855 $
58,232
—
—
— $
—
—
—
18 $
1,661
40,473
40,496
16,765 $
(1,430)
(3,159)
(232)
58,160
73,478
37,314
40,264
15,537
99,087
—
82,648
11,944
209,216
38,091
53,628 $
11,874
110,961 $
44,725
44,725 $
2,283
84,931 $
36,296
48,240 $
133,269
342,485
$
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
$
81 $
2,493
—
—
32,478 $
42,774
—
—
— $
—
—
—
1 $
359
24,914
16,800
10,076 $
792
(2,724)
(69)
42,636
46,418
22,190
16,731
2,574
75,252
—
42,074
8,075
127,975
4,194
6,768 $
9,612
84,864 $
57,912
57,912 $
772
42,846 $
42,440
114,930
50,515 $ 242,905
$
NOTE 21. DERIVATIVE INSTRUMENTS
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 may designate certain
derivatives as hedging instruments in a qualifying hedge accounting relationship. The Company’s derivative instruments 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 in the accompanying
consolidated balance sheets and in the net change in each of these financial statement line items in the operating section of the
accompanying consolidated statements of cash flows. For derivatives not designated as hedging instruments or determined to be
an ineffective hedge under applicable accounting guidance, gains and losses due to changes in fair value are included in
noninterest income and the operating section of the consolidated statements of cash flows. For derivatives designated as cash
flow 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
169
income. At December 31, 2023 and December 31, 2022, there were no derivatives designated under hedge accounting. The
notional amounts and estimated fair values for the periods indicated were as follows:
December 31, 2023
December 31, 2022
Fair Value
Fair Value
(In thousands)
Commercial loan interest rate contracts
Mortgage loan held-for-sale interest rate lock
commitments
SOFR futures (used to hedge MSR, see Note
18)
U.S. Treasury futures (used to hedge MSR, see
Note 18)
U.S. Treasury options (used to hedge MSR, see
Note 18)
Mortgage loan forward sale commitments
Foreign exchange contracts
Total derivatives
Notional
Amount
Other
Liabilities
$ 2,682,401 $ 25,264 $ 41,459 $ 2,547,319 $ 25,900 $ 52,616
Other
Liabilities
Notional
Amount
Other
Assets
Other
Assets
125,339
1,858
113,000
1,549
—
—
10
—
—
47,699
856
—
147,000
—
45
431
—
170
34,000
235,323
48,846
83
551
2,319
$ 3,238,909 $ 29,503 $ 44,304 $ 2,953,868 $ 29,421 $ 56,170
23,000
71,028
117,822
—
2,567
268
—
175
2,445
260
246
326
The Company is party to collateral support agreements with certain derivative counterparties. Such agreements require
that the Company maintain collateral based on the fair values of derivative transactions. In the event of default by the Company,
the counterparty would be entitled to the collateral. At December 31, 2023, and 2022, the Company was required to post
$50.0 million and $47.0 million, respectively, in cash or qualifying securities as collateral for its derivative transactions, which
are included in interest bearing deposits with other banks on the Company’s consolidated balance sheets. In addition, the
Company had recorded the obligation to return cash collateral provided by counterparties of $16.3 million and $25.0 million at
December 31, 2023, and 2022, respectively, within deposits on the Company’s consolidated balance sheet. Certain financial
instruments, such as derivatives, may be eligible for offset in the consolidated balance sheet and/or subject to master netting
arrangements or similar agreements. The Company’s derivative transactions with upstream financial institution counterparties
are generally executed under International Swaps and Derivative Association master agreements which include “right of set-
off” provisions. In such cases, there is generally a legally enforceable right to offset recognized amounts and there may be an
intention to settle such amounts on a net basis. Nonetheless, the Company does not generally offset such financial instruments
for financial reporting purposes.
The Company records gains and losses for derivatives not designated as hedging instruments in noninterest income on
the consolidated statements of income. For the year ended December 31, 2023, mortgage loans held for sale interest rate lock
commitments totaled $1.5 million in gains, compared to losses incurred of $8.0 million and $18.5 million during the years
ended December 31, 2022 and 2021, respectively. Foreign exchange contract gains totaled $5.2 million, $4.7 million and $0.7
million for the years ended December 31, 2023, 2022 and 2021, respectively.
The Company enters into certain interest rate contracts on commercial loans, which include swaps, floors and caps that
are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company enters into an
interest rate contract with a loan customer while at the same time entering into an offsetting interest rate contract 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, cap and floor transactions allow
the Company to manage its interest rate risk. Because the Company acts as an intermediary for its customer, changes in the fair
value of the underlying derivative contracts generally offset and do not significantly impact the Company’s consolidated
statements of income. The Company is exposed to credit loss in the event of nonperformance by the parties to the interest rate
contracts. 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 at December 31, 2023, and
2022.
The Company has both bought and sold credit protection in the form of participations on interest rate swaps (swap
participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary
course of business to serve the credit needs of customers. Swap participations, whereby the Company has purchased credit
170
protection, entitle the Company to receive a payment from the counterparty if the customer fails to make payment on any
amounts due to the Company upon early termination of the swap transaction. For contracts where the Company sold credit
protection, the Company would be required to make payment to the counterparty if the customer fails to make payment on any
amounts due to the counterparty upon early termination of the swap transaction. Swap participation agreements where the
Company is the beneficiary had notional values totaling $137.2 million and $153.7 million at December 31, 2023 and 2022,
respectively. Swap participation agreements where the Company is the guarantor had notional values totaling $425.8 million
and $215.9 million at December 31, 2023 and 2022, respectively.
Other derivative instruments held by the Company include commitments to fund fixed-rate mortgage loans held for
sale to customers and forward commitments to sell individual, fixed-rate mortgage loans. The Company’s objective in obtaining
the forward commitments is to mitigate the interest rate risk associated with the commitments to fund the fixed-rate mortgage
loans. Both the commitments to fund fixed-rate mortgage loans and the forward commitments to sell individual fixed-rate
mortgage loans are reported at fair value, with adjustments being recorded in current period earnings, and are not accounted for
as hedges.
The Company has an economic hedge in place on its MSR and uses various instruments (including but not limited to
Treasury options, Treasury, SOFR and TBA futures and forwards, etc.) to mitigate the interest rate risk associated with the
MSR. These hedging instruments are reported at fair value, with adjustments included as part of mortgage banking revenue in
the consolidated statements of income. See Note 18 for additional information.
NOTE 22. COMMITMENTS AND CONTINGENT LIABILITIES
Mortgage Loans Serviced for Others
The Company services mortgage loans for other financial institutions that are not included as assets in the Company’s
accompanying consolidated financial statements. Included in the $7.7 billion of loans serviced for investors at December 31,
2023 was $1.0 million of primary recourse servicing pursuant to which the Company is responsible for any losses incurred in
the event of nonperformance by the mortgagor. The Company's exposure to credit loss in the event of such nonperformance is
the unpaid principal balance at the time of default. This exposure is limited by the underlying collateral, which consists of
single family residences and either federal or private mortgage insurance.
Lending Commitments
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. Such financial
instruments are recorded when they are funded. At December 31, 2023, these included $450.7 million in letters of credit and
$9.7 billion in unfunded extensions of credit such as interim mortgage financing, construction credit, credit card, and revolving
line of credit arrangements.
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 into 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. The Company did not realize significant credit losses from these commitments and arrangements
during the years ended December 31, 2023, 2022, and 2021.
Other Commitments
The Company makes investments in limited partnerships, including certain affordable housing partnerships for which
tax credits are received. At December 31, 2023 and December 31, 2022, unfunded capital commitments totaled $275.2 million
and $186.7 million, respectively. See Note 24 for more information.
Litigation
The nature of the Company’s business ordinarily results in certain types of claims, litigation, investigations, and other
legal or administrative cases and proceedings. Although the Company and its subsidiaries have policies and procedures to
171
minimize legal noncompliance and the impact of claims and other proceedings, and endeavored to procure reasonable amounts
of insurance coverage, litigation and regulatory actions present an ongoing risk.
The Company and its subsidiaries engage in lines of business that are heavily regulated and involve a large volume of
actual or potential financial transactions with customers or applicants, and the Company is a public company with a large
number of shareholders. From time to time, applicants, borrowers, customers, shareholders, former employees, service
providers, and other third parties have brought actions against the Company or its subsidiaries, in some cases claiming
substantial damages. Financial services companies are subject to the risk of regulatory investigations, class action litigation,
and, from time to time, the Company and its subsidiaries have such actions brought against them. The Company and its
subsidiaries are also subject to enforcement actions by federal or state regulators, including the FDIC, the CFPB, the DOJ, state
attorneys general, and the MDBCF, which may be adversely impacted by ongoing litigation in which the Company is involved.
Additionally, the Company is, and management expects it to be, engaged in a number of foreclosure proceedings and other
collection actions as part of its lending and leasing collections activities, which, from time to time, have resulted in
counterclaims against the Company and its subsidiaries. Various legal proceedings have and may arise in the future out of
claims against entities to which the Company is a successor as a result of business combinations.
When and as the Company determines it has meritorious defenses to the claims asserted, it vigorously defends against
such claims. The Company will consider settlement of claims when, in management’s judgment and in consultation with
counsel, it is in the best interests of the Company to do so.
The Company cannot predict with certainty the cost of defense, the cost of prosecution, or the ultimate outcome of
litigation or other proceedings filed by or against it, its subsidiaries and its directors, management or employees, including
remedies or damage awards. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection
with outstanding legal proceedings as well as certain threatened claims (which are not considered incidental to the ordinary
conduct of the Company’s business) utilizing the latest and most reliable information available. For matters where a loss is not
probable or the amount of the loss cannot be estimated, the Company will not make an accrual. For matters where it is probable
the Company will incur a loss and the amount can be reasonably estimated, the Company will accrue for the loss. Once
established, the accrual is adjusted periodically to reflect any relevant developments. The actual cost of any such matters,
however, may turn out to be substantially higher than the amount accrued. Further, the Company’s insurance policies have
deductibles and coverage limits, and such policies are unlikely to cover all costs and expenses related to the defense or
prosecution of such legal proceedings or any losses arising therefrom.
Although the final outcome of any legal proceedings is inherently uncertain, based on the information available, advice
of counsel and available insurance coverage, if applicable, management believes that the litigation-related liability of $9.7
million accrued at December 31, 2023 is adequate and that any incremental change in potential liability arising from the
Company’s legal proceedings and threatened claims, including the matters described herein and those otherwise arising in the
ordinary course of business, will not have a material adverse effect on the Company’s business or consolidated results of
operations or financial condition. It is possible, however, that future developments could result in an unfavorable outcome for
or resolution of any one or more of the legal proceedings in which the Company or its subsidiaries are defendants, which may
be material to the Company’s business or consolidated results of operations or financial condition for a particular fiscal period
or periods.
On August 30, 2021, Legacy Cadence Bank and the DOJ agreed to a settlement set forth in the consent order related to
the investigation by the DOJ of Legacy Cadence Bank’s fair lending program in Harris, Fort Bend, and Montgomery Counties
located in Houston, Texas during the period between 2014 and 2016 (the “Consent Order”). The Consent Order was signed by
the United States District Court for the Northern District of Georgia, Atlanta Division, on August 31, 2021. Pursuant to Section
5.2(g) of the Agreement and Plan of Merger and Paragraph 50 of the Consent Order, Legacy BancorpSouth Bank approved the
negotiated settlement, and subsequently, the Company agreed to accept the obligations of the Consent Order. The Consent
Order is in effect for five years. For additional information regarding the terms of this settlement and the Consent Order, see
Legacy Cadence’s Current Report on Form 8-K that was filed with the SEC on August 30, 2021.
172
NOTE 23. OTHER NONINTEREST INCOME AND EXPENSE
The following table details other noninterest income for the periods indicated:
(In thousands)
Credit related fees
Bank-owned life insurance
SBA income
Other miscellaneous income
Total other noninterest income
Year Ended December 31,
2022
2023
2021
$
$
26,830 $
16,294
9,839
48,938
101,901 $
26,768 $
15,594
15,341
28,182
85,885 $
4,979
11,180
438
18,517
35,114
The following table details other noninterest expense for the periods indicated:
(In thousands)
Advertising and public relations
Foreclosed property expense
Telecommunications
Travel and entertainment
Professional, consulting, and outsourcing
Legal expense
Postage and shipping
Other miscellaneous expense
Total other noninterest expense
Year Ended December 31,
2022
2021
2023
$
$
28,162 $
2,488
5,775
11,004
19,892
20,093
8,443
85,299
181,156 $
41,055 $
832
6,617
11,407
13,424
5,350
7,868
65,779
152,332 $
10,271
4,549
5,399
3,400
7,099
3,601
5,835
42,200
82,354
NOTE 24. 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 VIE if it
has a variable interest in the VIE that provides a controlling financial interest. 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 requires continual reconsideration of
conclusions reached regarding which interest holder is a VIE’s primary beneficiary.
Certain NMTC meet the qualifications for consolidation under ASC 810. Consolidation is applicable to this type of
investment structure because the entities owned by the tax credit investment fund, managing member, and limited partner of the
sub-CDE, are under common control and the limited partner’s related party group has both the power and the obligation to
absorb the significant benefits and losses of the sub-CDE. Based on this, the limited partner, which is the Company, is the
primary beneficiary of the sub-CDE (VIE) and therefore subject to consolidation. NMTC investment structures which include a
managing member not affiliated with the Company are not subject to consolidation.
At December 31, 2023, the Company’s assets of the consolidated VIE that can be used only to settle obligations of the
consolidated VIE totaled $6.5 million. Our consolidated VIE were insignificant at December 31, 2022.
The Company is invested in several tax credit projects solely as a limited partner. At December 31, 2023 and
December 31, 2022, the Company’s maximum exposure to loss associated with these limited partnerships was limited to its
investment. Most of the investments are in affordable housing projects. The partnerships have qualified to receive annual
affordable housing federal tax credits that are recognized as a reduction of current tax expense. Under the effective yield
method, the Company 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 the tax credits are allocated. Under the proportional amortization method, the
Company 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. The Company also has, to a lesser
degree, investments in NMTC and historic tax credit projects. The Company has elected to account for the NMTC not subject
173
to consolidation and historic tax credits using the flow-through method, which reduces federal income taxes in the year in
which the credit arises. At December 31, 2023 and December 31, 2022, the Company recorded these tax credit investments in
other assets on its consolidated balance sheets of approximately $362.0 million and $234.5 million, respectively. The
amortization of the NMTC investments and historic tax credit investments is recorded in other noninterest income on the
Company’s consolidated statements of income. The Company recorded amortization of $7.0 million and $4.1 million for the
years ended December 31, 2023 and 2022, respectively.
Additionally, the Company has investments in other certain limited partnerships accounted for under the fair value
practical expedient of NAV totaling $95.0 million and $67.5 million at December 31, 2023 and December 31, 2022,
respectively. Related to these assets recorded at fair value through net income, the Company recognized net gains of $8.2
million and $7.8 million for the years ended December 31, 2023 and 2022, respectively. These investments are made primarily
through various SBIC funds as a strategy to provide expansion and growth opportunities to small businesses within our
footprint. Of the total fair value of these limited partnerships, $11.7 million and $9.9 million related to real-estate funds at
December 31, 2023 and December 31, 2022, respectively. The remaining $83.3 million and $57.6 million related to SBIC funds
that concentrate in a variety of industries at December 31, 2023 and December 31, 2022, respectively. At December 31, 2023,
unfunded commitments related to these investments were $8.1 million and $79.1 million related to the real-estate funds and
other SBIC funds, respectively. SBIC funds are generally structured to operate for approximately 10 years. During the life of
each SBIC fund, partners can request to withdraw from the fund, and subsequently receive the balance of their investment as
the underlying assets are liquidated over the remaining life of the fund. The Company has no current plans to withdraw from
any of its SBIC funds.
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 $2.4 million and $2.0 million
at December 31, 2023 and December 31, 2022, respectively. Other limited partnerships accounted for under the equity method
totaled $9.8 million and $13.1 million at December 31, 2023 and December 31, 2022, respectively.
A summary of the Company’s investments in limited partnerships is presented as of the following periods:
(In thousands)
Tax credit investments (amortized cost)
Limited partnerships accounted for under the fair value practical expedient of
NAV
Limited partnerships without readily determinable fair values that do not
qualify for the practical expedient of NAV accounted for under the cost
method
Limited partnerships required to be accounted for under the equity method
December 31, 2023
December 31, 2022
$
361,990 $
234,492
94,998
67,533
2,417
9,785
1,968
13,055
317,048
Total investments in limited partnerships
$
469,190 $
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 (see Note 4). Cadence elected a measurement alternative to fair value for certain equity
investments in limited partnerships described above without a readily determinable fair value. During the years ended and as of
December 31, 2023, and 2022, there were no downward or upward adjustments to these investments for impairments or price
changes from observable transactions. The carrying amount of these equity investments in limited partnerships measured under
this measurement alternative for the specified periods are as follows:
(In thousands)
Carrying value at the beginning of the year
Legacy Cadence merger
Reclassifications
Distributions
Contributions
Carrying value at the end of the year
Year Ended December 31,
2023
2022
$
$
1,968 $
—
1,800
(1,559)
208
2,417 $
4,563
27
(3,328)
(5,524)
6,230
1,968
174
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND
PROCEDURES
The Company, with the participation of its management, including the Company’s Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this
Report.
Based upon that evaluation, and as of the end of the period covered by this Report, the Company’s Chief Executive
Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective in
ensuring that information required to be disclosed in its reports that the Company files or submits to the FDIC under the
Exchange Act is recorded, processed, summarized and reported on a timely basis, and to ensure that such information is
accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosures.
Pursuant to Section 404 of the Sarbanes-Oxley Act, the Company has included a report of management’s assessment
of the design and operating effectiveness of its internal controls over financial reporting as part of this Report. The Company’s
independent registered public accounting firm reported on the effectiveness of the Company’s internal control over financial
reporting. Management’s report and the independent registered public accounting firm’s report are included in Item 8 of this
Report under the captions entitled “Management’s Report on Internal Control Over Financial Reporting” and “Report of
Independent Registered Public Accounting Firm.”
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in the Company’s internal control over financial reporting that occurred during the three
months ended December 31, 2023, covered by this Report that materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Pursuant to Item 408(a) of Regulation S-K, none of the Company's directors or executive officers adopted, terminated
or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended
December 31, 2023.
The Company has executed a Change in Control Agreement, effective January 1, 2024, with Edward H. Braddock, the
Company’s Chief Credit Officer. The agreement provides for a payment upon a good reason separation or involuntary
termination of service within 12 months following a change in control, each as defined in the agreement. Upon such an event,
Mr. Braddock would be entitled to receive: (a) a cash payment equal to two times the sum of his annual salary and target cash
incentive; (b) participation in or a cash payment equal to the value of fringe benefits for two years; (c) participation in or a cash
payment equal to the employer cost of health coverage for two years; and (d) vesting in his outstanding equity awards. The
agreement contains restrictive covenants, including a one-year non-solicitation of customers and employees, prohibition on
disclosure of confidential information, and prohibition on disparagement. The agreement does not provide for payment in the
event of a for-cause termination and provides for a cut-back of benefits in the event the amount of the benefit triggers Section
280G.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
None.
175
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The required information is incorporated herein by reference to the information under the captions “Directors and
Executive Officers” and “Board of Directors, Committees and Governance” in our Proxy Statement for the Annual Meeting of
Shareholders to be held on April 24, 2024 (the “2024 Proxy Statement”), to be filed with the FDIC pursuant to Regulation 14A
under the Exchange Act within 120 days of our fiscal year end.
MATERIAL CHANGES TO PROCEDURES BY WHICH SECURITY HOLDERS MAY RECOMMEND
NOMINEES
The Company has not made any material changes to the procedures by which its shareholders may recommend
nominees to the Company’s Board of Directors since the date of the Company’s Definitive Proxy Statement for its 2023 Annual
Meeting of Shareholders.
CERTAIN CORPORATE GOVERNANCE DOCUMENTS
The Company has adopted a Code of Business Conduct and Ethics that applies to its directors, officers, and
employees. The Company has also adopted Corporate Governance Principles for its Board of Directors. These documents, as
well as the links to charters of the Audit Committee, Executive Compensation and Stock Incentive Committee and Nominating
and Corporate Governance Committee of the Board of Directors, are available on the Investor Relations page of the Company’s
website at https://ir.cadencebank.com under the tabs “Corporate Governance - Governance Documents” and “- Board
Committees,” or shareholders may request a free copy of these documents from:
Cadence Bank
Attn: Corporate Secretary
One Mississippi Plaza
201 South Spring Street
Tupelo, Mississippi 38804
(662) 680-2000
The Company intends to disclose any amendments to its Code, or any waiver from a provision of the Code for the
Company’s principal executive officer and senior financial officers on the Company’s Investor Relations website in lieu of any
filing of such information on Form 8-K.
The other information required by this Item 10 will be presented in, and is incorporated herein by reference to,
Cadence’s Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders which will be filed with the FDIC within
120 days of our fiscal year end.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 will be presented in, and is incorporated herein by reference to, Cadence’s
Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders which will be filed with the FDIC within 120 days of
our fiscal year end.
176
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table provides information at December 31, 2023 with respect to compensation plans (including
individual compensation arrangements) under which shares of Company common stock are authorized for issuance:
Plan Category
Equity compensation plans approved
by shareholders (1)
Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
(a)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (excluding securities
related to column (a))
(c)
895,289
$27.47
3,267,172
(1) Excludes 526,868 restricted shares that were nonvested, 3,055,824 restricted stock units that were nonvested and 1,967,631 performance
shares that were unearned at December 31, 2023. Equity compensation plans approved by shareholders include the Cadence Bank Equity
Incentive Plan for Non-employee Directors, the Cadence Bank Long-Term Equity Incentive Plan, the 2021 Long-Term Equity Incentive
Plan and the Amended and Restated 2015 Omnibus Incentive Plan.
The other information required by this Item 12 will be presented in, and is incorporated herein by reference to,
Cadence’s Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders which will be filed with the FDIC within
120 days of December 31, 2023.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information required by this Item 13 will be presented in, and is incorporated herein by reference to Cadence’s
Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders which will be filed with the FDIC within 120 days of
December 31, 2023.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this Item 14 will be presented in, and is incorporated herein by reference to Cadence’s
Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders which will be filed with the FDIC within 120 days of
December 31, 2023.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1.Consolidated Financial Statements. Reference is made to Part II, Item 8, of this Annual Report on Form 10-K.
2.Consolidated Financial Statement Schedules. These schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or related notes.
3.Exhibits. The exhibits to this Annual Report on Form 10-K listed below have been included only with the copy of
this report filed with the FDIC.
(2)
a) Agreement and Plan of Reorganization, dated as of July 26, 2017, by and between BancorpSouth, Inc. and
BancorpSouth Bank. (Filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC
on July 27, 2017 (file number 1-12991) and incorporated herein by reference thereto).
b) Amended and Restated Agreement and Plan of Reorganization, dated as of August 15, 2017, by and between
BancorpSouth, Inc. and BancorpSouth Bank. (Filed as Exhibit 2.1 to the Company’s Current Report on Form
177
8-K filed with the SEC on August 15, 2017 (file number 1-12991) and incorporated herein by reference
thereto).
c) Agreement and Plan of Merger, dated as of April 12, 2021, and as amended on May 27, 2021, by and
between BancorpSouth Bank and Cadence Bancorporation. (Filed as Annex A to the Company’s Definitive
Proxy Statement/Prospectus on Schedule 14A filed with the FDIC on July 7, 2021 and incorporated herein by
reference thereto).
d) Stock Purchase Agreement, dated as of October 24, 2023, by and among Cadence Bank, Cadence Insurance,
Inc., Arthur J. Gallagher Risk Management Services, LLC and Arthur J. Gallagher & Co. (solely for purposes
of Section 12.16 thereof). (Filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the
FDIC on October 26, 2023 and incorporated herein by reference thereto).
(3)
(4)
(10)
a) Amended and Restated Articles of Incorporation of the Company. (Filed as Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed with the FDIC on November 1, 2017 and incorporated herein by reference
thereto).
b) Articles of Amendment to the Amended and Restated Articles of Incorporation of the Company. (Filed as
Exhibit 3.2 to the Company’s Form 8-A filed with the FDIC on November 20, 2019 and incorporated herein
by reference thereto).
c) Articles of Second Amendment to the Amended and Restated Articles of the Company. (Filed as Exhibit 3.1
to the Company’s Current Report on Form 8-K filed with the FDIC on October 29, 2021 and incorporated
herein by reference thereto).
d) Amended and Restated Bylaws of the Company. (Filed as Exhibit 3.2 to the Company’s Current Report on
Form 8-K filed with the FDIC on November 1, 2017 and incorporated herein by reference thereto).
e) First Amendment to the Amended and Restated Bylaws of the Company. (Filed as Exhibit 3(d) to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the FDIC on
February 25, 2021 and incorporated herein by reference thereto).
f)
Second Amendment to the Amended and Restated Bylaws of the Company. (Filed as Exhibit 3.2 to the
Company’s Current Report on Form 8-K filed with the FDIC on October 29, 2021 and incorporated herein by
reference thereto).
a) Specimen Common Stock Certificate. (Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K
filed with the FDIC on November 1, 2017 and incorporated herein by reference thereto).
b) Form of Certificate Representing the Series A Preferred Stock. (Filed as Exhibit 4.1 to the Company’s Form
8-A filed with the FDIC on November 20, 2019 and incorporated herein by reference thereto).
c) Fiscal and Paying Agency agreement, dated November 20, 2019, between BancorpSouth Bank and U.S. Bank
National Association. (Filed as Exhibit 4.2 to the Company’s Form 8-A filed with the FDIC on November 20,
2019 and incorporated herein by reference thereto).
d) Form of Global Subordinated Note, dated November 20, 2019, made by BancorpSouth Bank. (Filed as
Exhibit 4.3 to the Company’s Form 8-A filed with the FDIC on November 20, 2019 and incorporated herein
by reference thereto).
e) Description of the Company’s Capital Stock. (Filed as Exhibit 4(e) to the Company’s Form 10-K filed with
the FDIC on February 27, 2020 and incorporated herein by reference thereto).
a) BancorpSouth, Inc. Supplemental Executive Retirement Plan, as amended and restated. (Filed with the SEC
as Exhibit 10(A) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (file
number 1-12991) and incorporated herein by reference thereto). †
b) Amendment to the BancorpSouth, Inc. Supplemental Executive Retirement Plan. (Filed with the SEC as
Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30,
2012 (file number 1-12991) and incorporated herein by reference thereto). †
178
c) Amended and Restated BancorpSouth Bank Long-Term Equity Incentive Plan. (Filed as Exhibit 10(c) to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the FDIC on
February 25, 2021 and incorporated herein by reference thereto). †
d) BancorpSouth, Inc. Amended and Restated Executive Performance Incentive Plan., effective January 1, 2020
(Filed as Exhibit 10(e) to the Company’s Annual Report on Form 10-K filed with the FDIC on February 27,
2020 and incorporated herein by reference thereto). †
e) Form of Performance Share Award Agreement. (Filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed with the SEC on March 7, 2007 (file number 1-12991) and incorporated herein by reference
thereto). †
f)
Form of Long-Term Equity Incentive Plan Restricted Stock Agreement. (Filed with the SEC as Exhibit 10(E)
to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2013 (file number
1-12991) and incorporated herein by reference thereto). †
g) Amended and Restated BancorpSouth Equity Incentive Plan for Non-Employee Directors. (Filed as Exhibit
10(g) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the
FDIC on February 25, 2021 and incorporated herein by reference thereto). †
h) Amendment to BancorpSouth, Inc. Long-Term Equity Incentive Plan. (Filed with the SEC as Exhibit 10(D)
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (file number 1-12991)
and incorporated herein by reference thereto). †
i) BancorpSouth, Inc. Restoration Plan, as amended and restated. (Filed with the SEC as Exhibit 10(F) to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (file number 1-12991) and
incorporated herein by reference thereto). †
j) BancorpSouth, Inc. Amended and Restated Deferred Compensation Plan. (Filed with the SEC as Exhibit
10(G) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (file number
1-12991) and incorporated herein by reference thereto). †
k) Description of Dividend Reinvestment Plan. (Filed with the SEC as the Company’s prospectus pursuant to
Rule 424(b)(2) filed on January 5, 2004 (Registration No. 033-03009) and incorporated herein by reference
thereto). †
l)
Form of BancorpSouth Bank Change in Control Agreement. (Filed as Exhibit 10(t) to the Company’s Annual
Report on Form 10-K filed with the FDIC on February 27, 2020). †
m) BancorpSouth, Inc. Deferred Directors’ Fee Unfunded Plan, as amended and restated. (Filed with the SEC as
Exhibit 10(U) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (file
number 1-12991) and incorporated herein by reference thereto). †
n) Employment Details for Chris Bagley. (Filed with the SEC as Exhibit 10(PP) to the Company’s Annual
Report on Form 10-K for the year ended December 31, 2014 (file number 1-12991) and incorporated herein
by reference thereto).
o) Consent Order. (Filed as Exhibit 10.1 to the Company’s Current Report on form 8-K filed with the SEC on
June 29, 2016 (file number 1-12991) and incorporated herein by reference thereto).
p) Order Terminating Consent Order, dated January 27, 2020. (Filed with the SEC as Exhibit 10(aa) to the
Company’s Annual Report on Form 10-K filed with the FDIC on February 27, 2020 and incorporated herein
by reference thereto).
q) Retirement and Consulting Agreement, dated September 26, 2017, by and between BancorpSouth, Inc.,
BancorpSouth Bank and James R. Hodges. (Filed as Exhibit 10.1 to the Company’s Current Report on Form
8-K filed with the SEC on October 2, 2017 (file-number 1-12991) and incorporated herein by reference
thereto). †
r) BancorpSouth Split Dollar Life Insurance Plan, as amended and restated. (Filed as Exhibit 10(gg) to the
Company’s Annual Report on Form 10-K filed with the FDIC on February 26, 2018 and incorporated herein
by reference thereto). †
s) Cadence Bank, N.A. Consent Order, dated August 30, 2021. (Filed as Exhibit 10(s) to the Company’s Annual
Report on Form 10-K filed with the FDIC on February 25, 2022 and incorporated herein by reference
thereto).
t) Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and James D. Rollins, III.
(Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16, 2021
and incorporated herein by reference thereto). †
179
u) Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and Chris A. Bagley.
(Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16, 2021
and incorporated herein by reference thereto). †
v) Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and Paul B. Murphy, Jr.
(Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16, 2021
and incorporated herein by reference thereto). †
w) Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and Rudolph H. Holmes,
IV. (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16,
2021 and incorporated herein by reference thereto). †
x) Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and Valerie C. Toalson.
(Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16, 2021
and incorporated herein by reference thereto). †
y) Amendment to the BancorpSouth Amended and Restated Long-Term Equity Incentive Plan. (Filed as Exhibit
99.1 to the Company’s Current Report on Form 8-K filed with the FDIC on March 11, 2021). †
z) BancorpSouth 2021 Long-Term Equity Incentive Plan. (Filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the FDIC on April 30, 2021 and incorporated herein by reference thereto). †
aa) Form of Retention Award Agreement for Performance Units issued pursuant to the BancorpSouth Bank 2021
Long-Term Equity Incentive Plan. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
with the FDIC on October 29, 2021 and incorporated herein by reference thereto).
ab) Form of Retention Award Agreement for Performance Units issued pursuant to the BancorpSouth Bank 2021
Long-Term Equity Incentive Plan. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed
with the FDIC on October 29, 2021 and incorporated herein by reference thereto).
ac) Retirement and Consulting Agreement, dated December 15, 2023, by and between Cadence Bank and
Michael Meyer.* †
ad) Change in Control Agreement, effective January 1, 2024, by and between Cadence Bank and Edward H.
Braddock. * †
(21) Subsidiaries of the Registrant.*
(31.1) Certification of the Chief Executive Officer of Cadence Bank pursuant to Rule 13a-14 or 15d-14 of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
(31.2) Certification of the Chief Financial Officer of Cadence Bank pursuant to Rule 13a-14 or 15d-14 of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
(32.1) Certification of the Chief Executive Officer of Cadence Bank pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
(32.2) Certification of the Chief Financial Officer of Cadence Bank pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
(97.1) Cadence Bank Clawback Policy.*
†
Management contract or compensatory plan or arrangement.
*
**
Filed herewith.
Furnished herewith.
(b) Exhibits - See exhibit index included in Item 15(a)3 of this Annual Report on Form 10-K.
(c) Financial Statement Schedules - See Item 15(a)2 of this Annual Report on Form 10-K.
180
ITEM 16. FORM 10-K SUMMARY.
None.
181
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
DATE:
February 23, 2024
CADENCE BANK
By: /s/ James D. Rollins III
James D. Rollins III
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ James D. Rollins III
James D. Rollins III
/s/ Valerie C. Toalson
Valerie C. Toalson
/s/ Larry G. Kirk
Larry G. Kirk
/s/ Shannon A. Brown
Shannon A. Brown
/s/ Deborah M. Cannon
Deborah M. Cannon
/s/ Charlotte N. Corley
Charlotte N. Corley
/s/ Joseph W. Evans
Joseph W. Evans
/s/ Virginia A. Hepner
Virginia A. Hepner
/s/ William G. Holliman
William G. Holliman
/s/ Warren A. Hood Jr.
Warren A. Hood Jr.
/s/ Keith J. Jackson
Keith J. Jackson
/s/ Precious W. Owodunni
Precious W. Owodunni
/s/ Alan W. Perry
Alan W. Perry
/s/ Marc J. Shapiro
Marc J. Shapiro
/s/ Thomas R. Stanton
Thomas R. Stanton
/s/ Kathy N. Waller
Kathy N. Waller
Chief Executive Officer (Principal
February 23, 2024
Executive Officer) and Chairman
Senior Executive Vice President
February 23, 2024
and Chief Financial Officer (Principal
Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
February 23, 2024
182
RETIREMENT AND CONSULTING AGREEMENT
(Michael Meyer)
EXHIBIT 10(ac)
This Retirement and Consulting Agreement (the "Agreement") is entered into on December 15, 2023, by and between
Cadence Bank (the "Bank" or “Cadence”), and Michael Meyer, the Bank’s President – Banking Services (the “Executive”)
(collectively, the “Parties”). As used in this Agreement, the terms "Bank" and "Cadence" shall mean Cadence Bank as defined
herein and any successor to their respective business and/or assets which assumes and agrees to perform this Agreement by
operation of law, written agreement, or otherwise.
WHEREAS, Executive is employed by the Bank and intends to retire effective December 15, 2023;
WHEREAS, the Parties desire that the Executive continue to provide certain consulting services after retirement from
the Bank in order to assure an orderly transition of his duties and responsibilities to his successors;
WHEREAS, the Parties are entering into this Agreement to specify the following: (i) the date of Executive's
retirement; (ii) the amount and timing of payments that will be made to Executive in connection with his retirement; (iii) certain
additional consideration provided to the Executive; (iv) the terms of Executive's consulting services to Cadence after his
retirement; (v) Executive's agreement to be bound by certain restrictive covenants; and (vi) a release and waiver of all claims by
Executive in connection with his retirement from the Bank;
NOW, THEREFORE, based on the foregoing and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties hereby agree:
1.
Retirement from Employment.
i.
ii.
Retirement Date. Executive's retirement from Cadence is to be effective as of December 15, 2023 (the
"Retirement Date"). As of the Retirement Date, Executive hereby agrees that he shall relinquish all positions
which he holds with Cadence and any of its "Affiliates" (as defined below), including positions he holds as an
officer, director, or committee member. For purposes of this Agreement, an "Affiliate" is any business entity
that directly, or indirectly through one or more intermediaries, either controls, or is controlled by, the Bank.
Post-Retirement Consulting. Following the Retirement Date, Executive will be available to Cadence to
provide consulting services under the terms provided in Section 3. The parties contemplate and intend that the
amount of time expended by Executive under this consulting arrangement will be less than 20% of the time
expended as an officer and employee of the Bank prior to the Retirement Date and that any such time will be
provided on an as-needed, irregular basis.
2. Wages and Benefits.
ii.
i. Wages and Expense Reimbursement. Executive shall receive full payment of any remaining earned but
unpaid wages and his accrued but unused vacation time (subject to Cadence's vacation pay policy) through
the Retirement Date, such amounts to be paid as soon as administratively feasible following the Retirement
Date, consistent with the Bank’s payroll cycles. Executive has presented or will present evidence of all
expenditures that may be reimbursed under Cadence's business expense reimbursement policy. Cadence will
provide full reimbursement of any such expenses that are outstanding within ten days of receipt of such
evidence.
Cadence Benefits. The Parties acknowledge that Executive is participating in certain employee health,
welfare, retirement and fringe benefit plans maintained by the Bank or an Affiliate (collectively, the
"Employee Plans"). Executive's rights under the Employee Plans upon retirement shall be determined under
the terms of the Employee Plans, including Executive’s participation in the 2023 voluntary retirement offer
(the “2023 VRO”). Executive’s retirement on the Retirement Date is intended to be a “separation from
service” under the Employee Plans and within the meaning of the Internal Revenue Code. The waiver or
settlement of rights herein are not intended to include a waiver of amounts due, payable or owing under the
Employee Plans.
Restoration Plan. Payments will commence under the Cadence Restoration Plan six months following the
Retirement Date, in a form consistent with the terms of the Plan, the amount of which will be determined in
accordance with the terms of the plan.
Supplemental Executive Retirement Plan. Payments will commence at least six months following the
Retirement Date under the Cadence Supplemental Executive Retirement Plan, in the form of equal monthly
iii.
iv.
183
installments for a period of ten years, the amount of which will be determined in accordance with the terms of
the Plan.
Split Dollar. Executive’s rights under the Cadence Split Dollar Life Insurance Plan will continue in full force
and effect.
Severance. A lump sum payment of $750,143 (seven hundred fifty thousand one hundred forty-three dollars),
in satisfaction of amounts due to Executive as a result of his participation in the 2023 VRO. Executive shall
also receive a lump sum payment in cash, less applicable taxes, equal to the value of 2,292 shares of Common
stock multiplied by the closing price of a share of Cadence Bank Common Stock (CADE, NYSE) on
December 15, 2023.
Equity. The following payments of common stock in Cadence Bank (“Common Stock”) and cash, which
represent settlement of Executive’s various equity awards as set forth below:
v.
vi.
vii.
1. 5,413 shares of Common Stock, representing payment of Executive’s award under the Restricted
Stock Agreement dated January 23, 2019, payable as soon as administratively feasible after the
Retirement Date;
2. 4,547 shares of Common Stock, representing payment of Executive’s award under the Restricted
Stock Agreement dated January 22, 2020, payable as soon as administratively feasible after the
Retirement Date;
3. 7,265 shares of Common Stock and a cash payment equal to dividend equivalent units on such
shares, representing settlement and payment of Executive’s award under the Restricted Stock Unit
Agreement dated January 26, 2021, payable as soon as administratively feasible after May 15, 2026;
4. 7,503 shares of Common Stock and a cash payment equal to dividend equivalent units on such
shares, representing settlement and payment of Executive’s award under the Restricted Stock Unit
Agreement dated April 1, 2022, payable as soon as administratively feasible after March 31, 2026;
5. 8,361 shares of Common Stock and a cash payment equal to dividend equivalent units on such
shares, representing settlement and payment of Executive’s award under the Restricted Stock Unit
Agreements dated April 3, 2023, payable in substantially equal installments as soon as
administratively feasible after the following dates: March 31, 2025, March 31, 2026, and March 31,
2027;
6. Shares of common stock and a cash payment equal to dividend equivalent units on such shares, in an
amount to be determined based on achievement of specified performance goals, representing
settlement and payment of Executive’s award under the Performance Share Agreement dated
January 26, 2021, payable as soon as administratively feasible following January 1, 2024;
7. Shares of common stock and a cash payment equal to dividend equivalent units on such shares, in an
amount to be determined based on achievement of specified performance goals, representing
settlement and payment of Executive’s award under the Performance Unit Retention Award
Agreement dated October 28, 2021, payable as soon as administratively feasible following October
29, 2024;
8. Shares of common stock and a cash payment equal to dividend equivalent units on such shares, in an
amount to be determined based on achievement of specified performance goals, representing
settlement and payment of Executive’s award under the Performance Share Agreement dated April
1, 2022, payable as soon as administratively feasible following March 31, 2025;
9. Shares of common stock and a cash payment equal to dividend equivalent units on such shares, in an
amount to be determined based on achievement of specified performance goals, representing
settlement and payment of Executive’s award under the Performance Share Agreement (TSR) dated
April 3, 2023 payable as soon as administratively feasible following March 31, 2026;
10. Shares of common stock and a cash payment equal to dividend equivalent units on such shares, in an
amount to be determined based on achievement of specified performance goals, representing
settlement and payment of Executive’s award under the Performance Share Agreement dated April
3, 2023 payable as soon as administratively feasible following March 31, 2026.
viii.
Tax Withholdings. The payments payable to the Executive under this Agreement are subject to reduction to
satisfy any and all applicable standard federal, state and local withholding obligations and any other required
withholdings.
3. Consulting Services.
Executive is hereby retained by Cadence to provide consulting services for the period commencing immediately after the
Retirement Date and continuing until April 15, 2024 (the "Consulting Period"). The Consulting Period may be terminated by
either party by providing 30 day written notification to the other, and the Consulting Period may be extended beyond April 15,
2024 upon the mutual agreement of the Parties.
i.
Nature of Services. Executive will consult with Cadence in matters related to his former employment as the
President – Banking Services and the transition of his duties to the successor or successors identified by
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ii.
iii.
iv.
Cadence. Such duties will include transfer of knowledge to his successor(s) to provide information necessary
to effectively manage the Banking Service areas that previously reported to the Executive. Executive shall not
be required to perform services that are inconsistent with the services Executive provided during the term of
his employment with Cadence. Executive shall offer advice but shall not exercise direct supervision over his
successor(s) or any other employee of Cadence, nor shall Executive exercise discretionary decision-making
authority. Cadence shall not provide direction or supervision to the Executive as to the method of performing
his duties under this Agreement.
Location and Availability. Executive may reside wherever he chooses, without any restriction by Cadence;
however, Executive shall be available at reasonable times as reasonably needed for meetings and appearances
during normal business hours, primarily via video called meetings or at Cadence's offices in Austin, Texas,
after first being provided reasonable notice by Cadence. Executive shall be free to pursue business
opportunities and other activities that are consistent with his obligations to Cadence whether contained in this
Agreement or otherwise.
Remuneration. Executive will be paid $2,500 per month for services performed during the Consulting Period
in exchange for providing no more than ten (10) hours of consulting services per month. For services more
than the hourly maximum per month, the Parties may agree to an hourly rate for such additional services. If
requested by Cadence, Executive shall provide a periodic accounting of services performed under this
Agreement. For its own convenience, Cadence shall provide the Executive with appropriate meeting space
and secure equipment reasonably needed for the performance of his duties hereunder. Executive shall be
responsible for payment of all applicable taxes on the remuneration for consulting services, including
remission of any taxes to the Internal Revenue Service.
Relationship of Parties. Under no circumstances shall the Executive look to the Bank as his employer, or as a
partner, agent or principal. Executive shall not be entitled to any benefits accorded to the Bank’s employees,
including without limitation worker's compensation, disability insurance, or paid time off. Executive further
understands and agrees that if his status is later reclassified, whether by audit, administrative proceeding or
otherwise, he shall not be entitled to participate in any employee benefit plan, policy or arrangement
sponsored by the Company for any period preceding such reclassification, it being understood that the
Company possesses the sole and absolute authority to determine eligibility and coverage under any employee
benefit plan, policy or arrangement.
4. Confidential Information.
As used herein, "Confidential Information" means all technical and business information (including financial statements and
related books and records, personnel records, customer lists, arrangements with customers and suppliers, audit data or
information, manuals and reports) of the Bank and its Affiliates which is of a confidential and/or proprietary character and
which was either developed by Executive (alone or with others) or to which Executive has had access during Executive's
employment. Executive shall, both during and after Executive's employment with Cadence, protect and maintain the
confidential and/or proprietary character of all Confidential Information. Executive shall not, during or after termination of
Executive's employment or during or after termination of the Consulting Period, directly or indirectly, use or disclose any
Confidential Information (for Executive or another), for so long as it shall remain proprietary or protectable as confidential,
except as may be necessary for the performance of Executive's duties under this Agreement or permitted under Section 6(c).
5. Non-solicitation.
i.
ii.
iii.
Customers. During the Restricted Period (as defined below) and within the Territory (as defined below),
Executive will not, directly or indirectly, for himself or for another, in any manner whatsoever, procure,
solicit, accept or aid another in the procurement, solicitation or acceptance of financial services customers and
clients (including without limitation, solicitation of banking, insurance or securities products and services),
and other related products marketed by the Bank or its Affiliates, or make inquiries about any of those
products from or to any person, firm, corporation or association which was at any time during the Restricted
Period either doing business with the Bank or any of its Affiliates, or which was being actively solicited by
the Bank or any of its Affiliates during the 12 months prior to the termination of the Consulting Period.
Employees. During the Restricted Period, Executive will not induce, attempt to induce, solicit, encourage,
contact or discuss employment with any employee of the Bank or any of its Affiliates in an effort to induce
such employee to terminate his or her employment with Cadence. Executive also agrees not to disclose the
identity of any other employee of Cadence to any other Competing Business (as defined below) for purposes
of recruiting or hiring away such employee. Executive agrees not to hire any prospective employee for a
Competing Business if Executive knows or should have known that such individual worked for the Bank or
its Affiliates during the Restricted Period.
Customer Lists. Executive shall not during the Restricted Period disclose to any other person or entity the
names of the Bank's or any of its Affiliates' customers or clients and the nature of their business with the Bank
or its Affiliates.
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iv.
Definitions.
1.
2.
3.
“Competing Business” shall mean any business which has engaged or engages in activities within
the Territory constituting or relating to the establishment, ownership, management or operation of
a bank or financial services business or other related business (including without limitation,
banking, insurance or securities products and services).
“Restricted Period” shall mean two years following Executive’s Retirement Date.
“Territory” shall mean any county or parish in the States of Alabama, Arkansas, Florida, Georgia,
Louisiana, Missouri, Mississippi, Tennessee, and Texas, in which the Bank or an Affiliate maintains
a physical presence, including, but not limited to an office, and any county or parish in the foregoing
states in or for which the Executive performed services during the 12 months prior to his Retirement
Date.
(e) Consideration. In consideration for the promises set forth in this Section, the Bank grants to Executive
additional vesting service under Section 2(g) to provide Executive with vested stock awards as set forth in that subsection.
6. Enforcement.
i.
ii.
iii.
Reasonableness of Restrictions. Executive specifically acknowledges that the restrictions contained in
Sections 4 and 5 as to time and manner of nonsolicitation, noncompetition, and nondisclosure or use of
Confidential Information are reasonable and necessary to protect the legitimate business interests of the Bank
and its Affiliates and do not unduly limit his ability to work or carry on his profession within the Territory.
Remedies. Executive and Cadence agree that Executive's breach of any of the provisions of Sections 4 and 5
of this Agreement will result in irreparable harm to Cadence, that no adequate remedy at law is available, and
that Cadence shall be entitled to injunctive relief; provided, however, nothing herein shall prevent Cadence
from pursuing any other remedies at law or at equity available to it. Should a court of competent jurisdiction
declare any of the covenants set forth in Sections 4 or 5 unenforceable, the court shall be empowered to
modify or reform such covenants so as to provide relief reasonably necessary to protect the legitimate
business interests of Cadence and to award injunctive relief, or damages, or both, to which Cadence may be
entitled. If any provision of this Agreement is declared by a court of competent jurisdiction to be invalid,
Cadence and Executive agree that such declaration shall not affect the validity of the other provisions of this
Agreement. If any provision of this Agreement is capable of two constructions, one of which would render
the provision void and the other of which would render the provision valid, then the provision shall have the
construction which renders it valid.
Non-Enforcement for Permitted Activities. Nothing contained in this Agreement limits Executive's ability to
file a charge or complaint with any federal, state or local governmental agency or commission
("Governmental Agencies"), as permitted by applicable law). Executive acknowledges and understands that
this Agreement does not limit his ability to communicate with any Governmental Agency or otherwise
participate in any investigation or proceeding that may be conducted by any Government Agency, including
providing documents or other information. Cadence will take no enforcement action against Executive
described in this Agreement in the event that Executive validly engages in the conduct protected by
applicable law.
7. Non-Disparagement.
Executive agrees that Executive will not intentionally make any disparaging or detrimental public comments about the Bank,
any of its officers, directors, employees, Affiliates or agents, nor will Executive authorize, encourage or participate with anyone
on Executive's behalf to make such statements. In consideration of the foregoing, Cadence will not authorize or direct any
disparaging or detrimental public comments about Executive. Nothing in this Agreement shall preclude either party from
fulfilling any duty or obligation that they may have at law; from responding to any subpoena or official inquiry from any court
or government agency, including providing truthful testimony; providing documents subpoenaed or requested; or otherwise
cooperating in good faith with any court proceeding or investigation; in the case of either Cadence or the Executive, from taking
any reasonable actions to enforce their respective rights under this Agreement; or, in the case of the Executive, from exercising
rights as set forth in Section 6.
8. Cooperation.
The Parties recognize that Executive may be named as a defendant in legal actions with respect to his role as an officer of
Cadence. Cadence shall continue to cover Executive under any applicable directors and officers liability insurance policy that it
maintains with respect to such claims against Executive in such capacities for six years following the date hereof, which
coverage shall be at the same level as provided by Cadence to its senior executives and officers. Executive agrees that he will
participate in, and cooperate with, such defense without additional compensation from Cadence, provided that Cadence will
reimburse Executive with respect to any reasonable expense incurred by Executive as the result of participating in, and
186
cooperating with, such defense. Executive further agrees to provide his full cooperation in the defense or prosecution of one or
more existing or future court actions, governmental investigations, arbitrations, meditations or other legal, equitable or business
matters or proceedings which involves the Bank or its Affiliates. Executive acknowledges and understands that his obligations
of cooperation under this Section 8 are not limited in time and may include, but shall not be limited to, the need for or
availability for testimony in deposition, affidavit, trial, mediation or arbitration, as well as preparation for that testimony, and
consultation for other business matters unrelated to litigation. Executive will be available at Cadence's reasonable request for
any meetings or conferences deemed necessary in preparation for the defense or prosecution of any such matters or
proceedings.
9. Executive's Representations.
As a material inducement to Cadence to enter into this Agreement, the Executive hereby makes the following representations:
i.
ii.
Document Review. Executive has read all of the terms of this Agreement, including the fact that his
employment relationship with Cadence shall be permanently and irrevocably terminated as of the Retirement
Date, other than with respect to the consulting services contemplated during the Consulting Period, and that
this Agreement releases Cadence and all Bank Entities (defined below) forever from any legal action arising
from that employment relationship and the termination of that relationship. Executive acknowledges that he
has been advised to seek legal advice and that he has signed this Agreement of his own free will and in
exchange for the consideration to be given which is acknowledged to be adequate and satisfactory and in
excess of anything he might be entitled otherwise to receive. Executive represents and warrants that he is
competent to execute this Agreement.
Covenant Not to Sue. Except with respect to any activities that are protected under Section 6, Executive has
not filed any complaints or charges against any the Bank or any Bank Entity with any local, state or federal
agency or court related to his employment with or retirement from Cadence, and will not do so at any time
hereafter. In the event Executive participates in any complaint or charge against the Bank or any Bank Entity,
he waives the right to receive any compensation or monetary recovery in connection with such complaint or
charge.
10. Miscellaneous.
i.
Notices. Any notice under this Agreement must be in writing and given by certified or registered mail,
postage prepaid, addressed to the party or parties to be notified with return receipt requested, or by delivering
the notice in person, to the relevant address set forth below, or to such other address as the recipient of such
notice or communication has specified in writing to the other party hereto in accordance with this Section:
If to Cadence to:
Cadence Bank
Chief Talent Officer
999 Peachtree Street, 26th floor.
Atlanta, GA 30309
With a copy to:
Cadence Bank
Chief Legal Officer
1330 West Loop, Suite 1800
Houston, TX 77027
If to Executive, to:
Michael Meyer
Address on file
Notice to Executive may be to the then current address of Executive on the records of Cadence.
i.
ii.
No Offset. No payment under this Agreement will be subject to offset or reduction attributable to any amount
Executive may owe to Cadence or any other person, except as required by law.
Entire Agreement. The Parties have executed this Agreement based upon the express terms and provisions
set forth herein and have not relied on any communications or representations, oral or written, which are not
set forth in this Agreement. Except with respect to the Employee Plans, including the Cadence Bank Long-
Term Equity Incentive Plan and the Cadence 2021 Long-Term Equity Incentive Plan, and any predecessor or
successor, and any other agreement specifically referenced herein, this Agreement sets forth the entire
agreement between the Parties hereto, and fully supersedes any and all prior agreements or understandings
between the Parties hereto pertaining to the subject matter hereof.
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iii.
iv.
v.
Amendment. This Agreement may be amended in writing at any time by Cadence, provided that the
Executive's written consent is required for any amendment that would diminish the benefits provided
hereunder to Executive.
Choice of Law. This Agreement and the performance hereof will be construed and governed in accordance
with the internal laws of the State of Texas, without regard to its choice of law principles, except to the extent
that federal law controls or preempts state law. Any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing, statements (whether oral or
written) or actions of any party herein, shall be brought and maintained exclusively in the federal or state
courts of the state of Texas that are located in Harris County. Each party hereby irrevocably consents to the
service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of
copies thereof in accordance with Section 10 (a).
Successors and Assigns. The obligations, duties and responsibilities of Executive under this Agreement are
personal and shall not be assignable. In the event of Executive's death or disability, the release contained in
this Agreement shall be binding on, and the terms of this Agreement shall be enforceable by, the Executive's
estate, executors or legal representatives, provided that Cadence shall require any corporation, entity,
individual or other person who is the successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization, or otherwise) to all or substantially all of the business or assets of the Bank or
its Affiliates to expressly assume and agree to perform all of the obligations of Cadence under this
Agreement.
viii.
vii.
vi. Waiver of Provisions. Any waiver of any terms and conditions hereof must be in writing and signed by the
Parties hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a
waiver of any subsequent breach of the same or any other terms and conditions hereof.
Severability. The provisions of this Agreement and the benefits and amounts payable hereunder shall be
deemed severable, and if any portion shall be held invalid, illegal or enforceable for any reason, the remainder
of this Agreement and/or benefit or payment shall be effective and binding upon the Parties.
Attorneys' Fees. In the event Cadence or Executive breaches any term or provision of this Agreement and the
other party employs an attorney or attorneys to enforce the terms of this Agreement, then upon a finding by a
court of competent jurisdiction, the breaching or defaulting party agrees to pay the other party the reasonable
attorneys’ fees and costs incurred to enforce this Agreement.
Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed an
original, and all of which together will constitute one and the same instrument.
Incorporation of Additional Covenants. Executive agrees and acknowledges that those covenants,
restrictions, limitations, and clawback rights in favor of the Bank set forth in other agreements and plans to
which he is a signatory or in which he is a participant remain in full force and effect, including those set forth
in his various award agreements under the Cadence Bank Long-Term Equity Incentive Plan and the Cadence
2021 Long-Term Equity Incentive Plan; the Cadence Restoration Plan; the Cadence Split Dollar Life Plan;
and the Cadence Supplemental Executive Retirement Plan.
ix.
x.
11. Release and Waiver of Claims.
i.
Claims Released by Executive. As of the date of the execution of this Agreement, in consideration of his
continued association with Cadence as an independent contractor and of the payments, benefits, and other
consideration provided to Executive under this Agreement that are not otherwise owed, including the
Severance Payment, Executive hereby releases and forever discharges the Bank and all of its Affiliates, each
of their owners, officers, directors, employees, agents, stockholders, representatives, and their successors and
assigns (each a "Bank Entity" or, collectively, "Bank Entities"), from any and all charges, complaints,
obligations, liabilities, promises, agreements, rights, claims, debts, expenses or demands Executive now has
or may have, arising at any time on or before the Retirement Date, based on his employment with the Bank or
the termination of that employment or any positions, including directorships, with the Bank or any of its
Affiliates. This includes a release of any and all rights, claims or demands Executive has or may have,
whether known or unknown, under the Age Discrimination in Employment Act Title VII of the Civil Rights
Act of 1964; the Equal Pay Act the Americans with Disabilities Act, the Family and Medical Leave Act; the
Employee Retirement Income Security Act of 1974, the Health Insurance Portability and Accountability Act
of 1997, the Genetic Information Nondiscrimination Act, the Uniformed Services Employment and
Reemployment Rights Act, Section 1981 of the Civil Rights Act of 1866, the Civil Rights Act of 1991, the
Rehabilitation Act of 1973, the National Labor Relations Act, the Occupational Health and Safety Act, the
Worker Adjustment Retraining Act, Executive Order 11246, any and all claims of discrimination under local,
state or federal law, regulation or executive order; and actions at common law, in contract or tort, including,
but not limited to, claims for breach of contract (express or implied), hostile work environment, sexual
harassment, wrongful termination, defamation, fraud, misrepresentation, breach of the implied covenant of
good faith and fair dealing, bad faith, personal injury, invasion of privacy, emotional distress, interference
with economic relations, termination of employment in violation of public policy, tort claims, retaliation,
188
ii.
iii.
iv.
v.
vi.
worker's compensation, outrage, negligent and/or wanton hiring, training and/or supervision, mental anguish,
punitive damages, indemnity, common law claims, all claims for lost wages, overtime, benefits, back pay,
unused vacation, severance, reemployment, attorney's fees, costs and any and all claims for any other type of
legal or equitable relief under any federal or state statute or common law whatsoever violations of public
policy, and any whistleblower statutes, regulations, or policies, or under any other federal, state or local laws
or regulations regarding employment or termination of employment.
Review of Release. By signing below, Executive hereby acknowledges and represents that he has been given
45 days to review and consider whether to sign this Agreement and has been advised by Cadence to consult
with an attorney before doing so. Executive understands and agrees that by signing this Agreement, Executive
gives up any and all rights Executive may have to recover damages against Cadence or any other Bank Entity,
subject to the exception provided in Section 6(c). Executive hereby acknowledges that he is voluntarily
entering into this Agreement of his own free will, free of any coercion, pressure or duress, that he understands
the terms and conditions of this Agreement, and that he is knowingly releasing each of the Bank Entities in
accordance with the terms contained herein. Executive further acknowledges that he is receiving
consideration under this Agreement beyond anything of value to which he is already entitled, and the amount
of such consideration is adequate to support the release of claims provided herein.
Right of Revocation. Executive acknowledges that he has been advised by Cadence that he has seven days
after signing this Agreement (which shall not be signed prior to the Retirement Date) within which to revoke
his signature, that neither Cadence nor any other person is obligated to provide the payments and benefits
described above to him pursuant to the Agreement until eight days have passed, and then only if he has not
revoked his signature. Any such revocation must be received by Cadence within the seven-day revocation
period to be effective, and that such a revocation may only be sent by electronic delivery or facsimile to
Cadence, attention General Counsel. The Parties agree that in the event Executive revokes his signature
within such seven day period, Executive's retirement shall remain effective on the Retirement Date but that
this Agreement shall otherwise be void ab initio, and that any payments required to be made that are
otherwise contingent upon the execution of restrictive covenants and/or a release of claims shall not be made.
Rights Not Released or Waived. Notwithstanding the foregoing, by executing this Agreement, neither the
Executive nor Cadence will have relinquished his or its rights to enforce the provisions of this Agreement, the
Employee Plans, the Cadence Long-Term Equity Incentive Plan, or the Cadence 2021 Long-Term Equity
Incentive Plan.
Non-Admission. The Parties acknowledge that this Agreement does not constitute an admission by the
Executive or Cadence of any violation of any employment law, regulation, ordinance, or administrative
procedure, or any other federal, state, or local law, common law, regulation or ordinance, liability for which is
expressly denied.
Difference in Facts. Executive understands and agrees that certain facts in respect of which this Agreement is
made may be hereafter known to be other than or different from the facts now known or believed to be true.
Executive expressly accepts and assumes the risk that the facts may be different than they now understand or
believe them to be, and Executive hereby agrees that the terms of this Agreement, without limitation or
exception, shall in all respects be effective, binding, and not subject to termination or rescission because of
any such difference in facts, without regard to the nature of such facts or the reason or reasons why such facts
were not discovered until after the execution of this Agreement.
PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN
CLAIMS.
[signature page follows]
189
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.
EXECUTIVE
By: /s/ Michael Meyer-----
Name: Michael Meyer
Date: December 13, 2023
CADENCE BANK
/s/ Sheila Ray______________
Name: Sheila Ray
Title: EVP & Chief Talent Officer
December 13, 2023
190
EXHIBIT 10(ad)
CADENCE BANK
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement ("Agreement") is entered into by and among Cadence Bank, a Mississippi-
chartered bank (the “Bank” or “Cadence”), and Edward H. Braddock ("Executive"), (collectively, the “Parties”) to be effective
as of January 1, 2024 (the “Effective Date”).
Whereas, Executive is employed as the Chief Credit Officer of the Bank and is expected to make material
contributions to the continued growth and strength of the Bank;
Whereas, Cadence recognizes the need to attract and retain well-qualified executives and key personnel and has
identified Executive as such a person; and
Whereas, the Parties acknowledge that sufficient consideration in the form of continued employment and the
provision of confidential information provided in this Agreement is sufficient to support the duties and obligations contained
herein; and
Now, therefore, based upon the foregoing and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties agree as follows:
ARTICLE I.
CONSTRUCTION AND TERM
Section 1.1. Term and Renewal. The term of this Agreement shall commence on the Effective Date and shall expire December
31, 2026 (“Original Term”). If written notice of non-renewal is not provided by the Bank on or before December 31, 2024, the
term shall be extended one year beyond the Original Term (the “Renewal Term”). Thereafter, if the Bank does not provide
written notice of non-renewal on or before December 31 of any subsequent year, the Renewal Term shall be automatically
extended by one year beyond the then-current Renewal Term. Notwithstanding the foregoing, this Agreement shall terminate
upon Executive's termination of employment prior to the end of the Original Term or any Renewal Term.
Section 1.2 Employment Status. Executive acknowledges that his or her employment is at-will and that nothing contained in
this Agreement creates a right to continued employment.
ARTICLE II.
DEFINITIONS
Terms used in this Agreement that are defined are indicated by initial capitalization of the term. References to an “Article” or a
"Section" mean an article or a section of this Agreement. In addition to those terms that are specifically defined herein, the
following terms are defined for purposes hereof:
“Affiliate.” Affiliate means any entity that is a subsidiary organization of the Bank.
“Cause.” A termination of Executive’s employment for Cause means a termination of employment on account of any
of the incidents described below as determined in the sole discretion of the Board of Directors. To terminate Executive’s
employment for Cause, the Bank shall provide written notice to Executive setting forth the provision(s) under which it claims
Cause within 90 days of the date that the Board of Directors has actual knowledge of the facts underlying the Cause event.
Executive shall have the opportunity to cure such condition within 30 days after receiving notice, to the extent such condition or
conduct is capable of cure, as determined in the sole discretion of the Board of Directors.
(1) Executive has engaged in an act of misconduct or dishonesty that is materially injurious to the Bank or an
Affiliate;
(2) Executive has engaged in an act of fraud, embezzlement, theft, or any other crime of moral turpitude (without
necessity of formal criminal proceedings being initiated);
(3) Executive has willfully violated a material Bank policy or procedure;
191
(4) Executive has been suspended and/or temporarily prohibited from participating in the affairs of the Bank or
an Affiliate by any self-regulatory authority or pursuant to a notice served under section 8(e)(3) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. §§1818(e)(3) and (g)(1)) or other law or regulation;
(5) Executive has breached the restrictive covenants in Sections 4.1 or 4.2;
(6) Executive has willfully impeded, failed to materially comply with, or attempted to influence or obstruct an
investigation authorized by the Board of Directors; or
(7) Executive has willfully failed to substantially perform his/her reasonably-assigned duties with the Bank,
excluding any failure resulting from incapacity due to physical or mental illness.
For purposes of determining whether an act or omission constituting Cause has occurred, no such act or omission shall be
considered “willful” unless made by Executive in bad faith without a reasonable belief that the act or omission was legal,
appropriate, and in the Bank’s best interests. Any act or omission occurring in reliance upon a directive of the Board of
Directors made pursuant to a duly-adopted resolution or the advice of counsel to the Bank shall be deemed made in good faith.
The existence of Cause shall be determined in good faith by the Board of Directors of the Bank or the Compensation
Committee of the Bank’s Board of Directors. The Bank shall have sole discretion in making its determination that an event
constituting Cause has occurred; provided, however, that such determination must be made in a reasonable and good faith
manner after Executive has been granted an opportunity to present information to the Board of Directors or the Compensation
Committee, as applicable, regarding its determination. Such opportunity must be granted no fewer than five days following
receipt by the Executive of notice that the Board of Directors or Compensation Committee, as applicable, plans to make a
determination of the existence of Cause.
"Change in Control" means a transaction or circumstance in which any of the following have occurred:
(1) the merger, acquisition or consolidation of the Bank with any corporation or other legal entity pursuant to
which the other entity immediately after such merger, acquisition or consolidation owns more than 65% of the voting securities
(defined as any securities which vote generally in the election of its directors) of the Bank outstanding immediately prior thereto
or more than 65% of the Bank’s total fair market value immediately prior thereto;
(2) the date that any person, or persons acting as a group, as described in Treas. Reg. § 1.409A-3(i)(5) (a
“Person”), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Bank or a corporation
controlling the Bank or owned directly or indirectly by the shareholders of the Bank in substantially the same proportions as
their ownership of stock of the Bank, becomes the beneficial owner (as defined in Rule 13d-3 under the Securities and
Exchange Act of 1934, as amended), directly or indirectly, of securities of the Bank representing more than 30% of the total
voting power represented by the Bank's then outstanding voting securities (as defined above);
(3) the date that a majority of the members of the Board of Directors of the Bank is replaced during any 12-
month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of
Directors of the Bank before the date of the appointment or election; or
(4) the date that any Person acquires (or has acquired within the 12-month period ending on such date) assets
from the Bank that have a gross fair market value equal to 40% or more of the fair market value of the Bank’s total assets;
provided, however, that any of the following acquisitions will be excluded from such calculation:
with respect to its stock;
(i) an acquisition by a shareholder of the Bank (immediately before the acquisition) in exchange for or
or indirectly by the Bank;
(ii) an acquisition by an entity 50% or more of the total value or voting power of which is owned directly
power of the outstanding stock of the Bank; or
(iii) an acquisition by a Person that owns directly or indirectly 50% or more of the total value or voting
or indirectly by a Person described in paragraph (iii) above.
(iv) an acquisition by an entity 50% or more of the total value or voting power of which is owned directly
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985.
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“Code” means the Internal Revenue Code of 1986, as amended.
“Compensation Committee.” The Executive Compensation and Stock Incentive Committee of the Bank’s Board of
Directors or any duly-appointed successor committee.
“Good Reason.” A termination of employment for Good Reason means a resignation or other termination of
employment by Executive for any of the reasons described below, provided that the circumstances underlying such condition
are not initiated by Executive or with Executive’s consent. Good Reason is further conditioned on the Executive providing
written notice to the President of Cadence Bank of Executive’s intent to terminate within 90 days of the date that the facts
giving rise to the Good Reason condition occurs and the Bank’s failure to materially cure such condition within 30 days after
receiving such notice.
(1) A material diminution in Executive’s base salary or target annual bonus or incentive compensation oppor-
tunity.
(2) A material diminution in Executive's authority, duties, or obligations after taking into account any overall
increased authority, duties or obligations resulting from a Change in Control that creates a materially-larger entity.
(3) A requirement that Executive report and be subject to the authority of an officer or employee of the Bank or
an Affiliate who is neither the President of Cadence nor occupying a substantially-equivalent or superior role in the new
organization.
(4) A relocation of Executive's principal place of employment by 50 miles or more.
(5) Any material breach of this Agreement by the Bank or the failure of any successor to assume this Agreement
on and after a Change of Control.
ARTICLE III.
CHANGE IN CONTROL TERMINATION PAYMENT
Section 3.1 Benefits.
(a) Amount. Upon the occurrence of a Change in Control, and subject to the conditions, limitations and adjustments that
are provided for herein, the Bank will provide to Executive the sum of the amounts described below if, within the 12-month
period following such Change in Control, Executive's employment with the Bank and its Affiliates is terminated by the Bank
without Cause or by the Executive for Good Reason:
(1) An amount equal to 200% of Executive's annual base compensation determined by reference to Executive’s
base salary in effect at the time of Change in Control.
(2) An amount equal to 200% of the target annual bonus that Executive would be eligible to receive during the
fiscal year ending during which the Change in Control occurs.
(3) An amount equal to 24 multiplied by the monthly cost of COBRA coverage for the level of coverage elected
by the Executive for the year of termination of employment, less the employee-portion of such coverage paid by Executive as
an active employee.
(4) If any fringe benefit program, policy, arrangement or insurer permits post-employment participation
applicable to similarly-situated executives, Executive shall continue to participate for the lesser of the period permitted by such
program, policy, arrangement or insurer or a period of 24 months following termination of service at the cost of the Bank.
(5) Unless specified otherwise in a subsequent agreement, immediate vesting of all equity incentive awards,
provided that satisfaction of performance conditions of performance-based units shall be determined according to the
underlying award agreement.
(b) Adjustments. Notwithstanding anything herein to the contrary, the amounts and the timing of payments under Section
3.1(a) shall be adjusted in accordance with Section 3.2.
193
(c) Time for Payment; Interest. The cash amounts payable under this Section 3.1 shall be paid to Executive in a single
lump sum within ten business days following the date of termination of employment except as may be required by Section
3.2(b). The Bank's obligation to pay to Executive any amounts under this Section 3.1 will bear interest at the lesser of (i) 10%
or (ii) the maximum rate allowed by law until paid by the Bank, and all accrued and unpaid interest will bear interest at the
same rate, all of which interest will be compounded annually.
(d) Troubled Institution Limitations. All payments and benefits hereunder are subject to the limitations on golden parachute
and indemnification payments that may apply pursuant to 12 U.S.C. § 1828(k) and FDIC Regulation at 12 C.F.R. Part 359 or
any other applicable law, including any law or regulation adopted in the future, that may prohibit payments under this
Agreement. If certain circumstances occur that would limit payments hereunder, this limitation shall be applied by reducing the
payments and benefits that exceed legal limitation unless consent to such payments is obtained pursuant to such regulations.
3.2 Limitation of Payments.
(a) Golden Parachute. Notwithstanding anything in this Agreement to the contrary, if Executive is a “disqualified
individual” (as defined in section 280G(c) of the Code) and the benefits and payments provided for in this Agreement, together
with any other payments or vesting of equity awards which Executive has the right to receive on account of a “change in
control” (defined for this purpose in section 280G of the Code) would in the aggregate result in a “parachute payment” (as
defined in section 280G(b)(2) of the Code) to Executive, the amount of such change in control payments shall be reduced by the
Bank so that the aggregate of payments to Executive is the maximum change in control payment that does not constitute a
parachute payment (such amount referred to herein as the “Safe Harbor Payment”); provided, however, such reduction shall not
be applied if the net payment to Executive (after considering the effect of applicable excise taxes under section 4999 of the
Code) is greater than the Safe Harbor Payment. If, as a result of the above calculations, payments or benefits are to be reduced
to the Safe Harbor Payment, the reduction shall be applied in the following order: (i) cash severance pay that is exempt from
section 409A, (ii) any other cash severance pay, (iii) continued health care benefits, (iv) any restricted stock, (v) any equity
awards other than restricted stock and stock options, and (vi) stock options. Unless the Bank and Executive otherwise agree in
writing, any determination required under this Section shall be made by an independent advisor designated by the Bank and
reasonably acceptable to Executive (the “Independent Advisor”), whose determination shall be conclusive and binding upon
Executive and the Bank for all purposes. For purposes of making the calculations required under this Section, the Independent
Advisor may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of sections 280G and 4999 of the Code; provided that the Independent Advisor
shall assume that Executive pays all taxes at the highest marginal rate in the absence of clear evidence to the contrary. The Bank
and Executive shall furnish to the Independent Advisor such information and documents as the Independent Advisor may
reasonably request in order to make a determination under this Section. The Bank shall bear all costs that the Independent
Advisor may incur in connection with any calculations contemplated by this Section.
(b) Section 409A.
(1) To the extent payments or benefits under this Agreement are subject to Code Section 409A, this Agreement
shall be interpreted to comply with such provisions. A payment of any amount or benefit paid to Executive that is subject to
Section 409A of the Code and payable on account of termination of employment shall not be made unless such termination is
also a “separation from service” within the meaning of section 409A of the Code and the regulations promulgated thereunder.
For purposes of any such provision of this Agreement, references to a “termination,” “termination of employment,”
“resignation” or like terms shall mean “separation from service” within the meaning of section 409A of the Code.
Notwithstanding anything to the contrary in this Agreement or otherwise, if at the time of Executive’s “separation from service”
Executive is a “specified employee” (as defined under section 409A of the Code), payments of “deferred compensation” (as
defined under section 409A of the Code) that Executive would otherwise be entitled to receive during the six month period
following the separation from service, whether paid under this Agreement or otherwise, will instead be accumulated and paid in
a lump sum on the earlier of (i) the first day of the seventh month after the date of the separation from service, or (ii) the date of
Executive’s death. This paragraph shall apply only to the extent required to avoid Executive’s incurrence of any additional tax
or interest under section 409A of the Code.
(2) Nothing in this Agreement shall be construed to obligate the Bank to make an impermissible acceleration or
deferral of payments under section 409A of the Code or any regulations or Treasury guidance promulgated thereunder. To the
extent that payments hereunder would constitute an impermissible acceleration or deferral, payments shall be made in
accordance with the terms of the applicable plan, program, arrangement or policy or at the time permitted under section 409A
of the Code.
194
ARTICLE IV.
RESTRICTIVE COVENANTS
Section 4.1 Non-solicitation.
(a) Beginning on the Effective Date and for a period of one year after the date of termination of Executive’s employment
with the Bank or any of its Affiliates (the “Termination Date”), Executive will not, directly or indirectly, for himself/herself or
for another, in any manner whatsoever, procure, solicit, accept or aid another in the procurement, solicitation or acceptance of
financial services business (including without limitation, solicitation of banking or securities products and services), and other
related products marketed by the Bank or its Affiliates, or make inquiries about any of those products from or to any person,
firm, corporation or association which was at the Termination Date either doing business with the Bank or any of its Affiliates,
in the Territory (as hereinafter defined), or being actively solicited by the Bank or any of its Affiliates during the 12 months
prior to the Termination Date and Executive directly or indirectly interacted with, serviced, or solicited such account or
customer.
(b) Beginning on the Effective Date and for a period of one year after the Termination Date, Executive will not induce,
attempt to induce, solicit, encourage, or discuss employment with any other employee of the Bank or any of its Affiliates to
terminate his or her employment with the Bank or its Affiliate, provided that if Executive’s place of employment immediately
prior to the Termination Date is in Alabama, the restrictions contained in this paragraph shall be limited to an employee who
holds a position uniquely essential to the management, organization, or service of the Bank. Executive also agrees not to
disclose the identity of any other employee of the Bank or an Affiliate to any other Competing Business (as hereinafter defined)
for purposes of recruiting or hiring away such employee. Executive agrees not to hire any prospective employee for a
Competing Business if Executive knows or should have known that such person works for the Bank or its Affiliate as of the
Termination Date or during the six months prior to the Termination Date.
(c) Executive shall not, during the non-solicitation periods described in Sections 4.1(a) and 4.1(b) above, use or disclose
to any other person the names of the Bank’s or any of its Affiliates’ customers, clients and the nature of their business with the
Bank or its Affiliates.
(d) “Competing Business” shall mean any business which has engaged or engages in activities in any county or parish in
any state in which the Bank or any Affiliate has an office or in any county or parish in any state where Executive, at the
Termination Date or for 12 months prior to the Termination Date, performed services for the Bank or any Affiliate or drew
customers (hereinafter, the “Territory”) constituting or relating to the establishment, ownership, management or operation of a
bank or financial services business or other related business (including without limitation, solicitation of banking or securities
products and services) that competes with any business then being operated by the Bank, provided that the Bank was operating
or had taken material steps toward becoming actively engaged in such business during the Employment Period.
Section 4.2 Confidential Information.
(a) Executive hereby covenants and agrees with the Bank that, beginning with the Effective Date and lasting in
perpetuity, Executive will not disclose at any time or improperly use any Confidential Information (as defined below),
including, but not limited to, any confidential or secret information concerning (A) the business, affairs or operations of the
Bank or its Affiliates, or (B) any marketing, sales, operations, advertising or other concepts or plans of the Bank or its
Affiliates. Executive shall, both during and after Executive’s employment with the Bank, protect and maintain the confidential
and/or proprietary character of all Confidential Information. Executive shall not, during or after termination of Executive’s
employment, directly or indirectly, use (for Executive or another) or disclose any Confidential Information, for so long as it
shall remain proprietary or protectable as confidential, except as may be necessary for the performance of Executive’s duties
under this Agreement. In the event such Confidential Information becomes publicly-known as a result of Executive’s improper
use or disclosure, all prohibitions and restrictions on Executive’s conduct contained in this paragraph shall continue in force. In
the event Executive is required by law to disclose such Confidential Information, Executive shall, to the extent legally
permitted, provide written notice to the Bank within two business days of becoming aware of such requirement.
(b) As used herein, “Confidential Information” means all technical and business information (including agreements with
third parties, product design, financial statements and related books and records, marketing plans, operations plans and
structure, compensation arrangements, personnel records, customer lists and records, arrangements with customers and
suppliers, manuals and reports) of the Bank and its Affiliates which is of a confidential and/or proprietary character and which
is either developed by Executive (alone or with others) or to which Executive has had access during Executive’s employment.
(c) Executive specifically acknowledges that the restrictions of Sections 4.1 and 4.2 as to time and manner of non-
solicitation and non-disclosure or use of Confidential Information are reasonable and necessary to protect the legitimate
business interests of Cadence.
195
(d) In accordance with the Defend Trade Secrets Act, Executive will not be held liable under any federal or state trade
secret law for the disclosure of Confidential Information made in confidence to a federal, state, or local governmental official or
to an attorney, each solely for the purpose of reporting or investigating a suspected violation of law. Further, nothing contained
herein shall prohibit Executive from exercising any legally-protected whistleblower rights or participating in any government
investigation.
Section 4.3 Remedies, Modification and Severability. Executive and Cadence agree that Executive’s breach of Sections 4.1
and 4.2 of this Agreement will result in irreparable harm to the Bank, that no adequate remedy at law is available, and that the
Bank shall be entitled to injunctive relief; provided, however, nothing herein shall prevent the Bank from pursuing any other
remedies at law or at equity available to it. Should a court of competent jurisdiction declare any of the covenants set forth in
Sections 4.1 or 4.2 unenforceable, the court shall be empowered to modify or reform such covenants so as to provide relief
reasonably necessary to protect the interests of the Bank and to award injunctive relief, or damages, or both, to which the Bank
may be entitled. If any provision of this Agreement is declared by a court of last resort to be invalid, Bank and Executive agree
that such declaration shall not affect the validity of the other provisions of this Agreement. If any provision of this Agreement is
capable of two constructions, one of which would render the provision void and the other of which would render the provision
valid, then the provision shall have the construction which renders it valid.
Section 4.4 Mutual Non-Disparagement. Executive agrees that Executive will not intentionally make any disparaging or
detrimental public comments about Cadence, any of its officers, directors, employees, Affiliates or agents nor will Executive
authorize, encourage or participate with anyone on Executive’s behalf to make such statements. In consideration of the
foregoing, Cadence shall instruct its directors and senior officers to refrain from intentionally making any disparaging or
detrimental public comments about Executive. Nothing in this Section shall preclude either party from fulfilling any duty or
obligation that he, she or it may have at law, from responding to any subpoena or official inquiry from any court or government
agency, including providing truthful testimony, documents subpoenaed or requested or otherwise cooperating in good faith with
any proceeding or investigation, or, in the case of Executive, from taking any reasonable actions to enforce Executive’s rights
under this Agreement.
Section 4.5 Acknowledgement. For purposes of the restrictive covenants contained in this Agreement, Executive
acknowledges that he or she has been provided with significant benefit, including, but not limited to confidential information,
trade secrets, plans, and strategies of the Bank.
ARTICLE V.
GENERAL TERMS
Section 5.1 Notices. Any notice under this Agreement must be in writing and may be given by certified or registered mail,
postage prepaid, addressed to the party or parties to be notified with return receipt requested, or by delivering the notice in
person, to the relevant address set forth below, or to such other address as the recipient of such notice or communication has
specified in writing to the other party hereto in accordance with this Section:
If to Cadence:
Chief Legal Officer
1333 West Loop South, 18th Floor
Attn: Shanna Kuzdzal
Houston, TX 77027
Notice to Executive may be to the then-current address of Executive on the records of Cadence.
Section 5.2 Withholding; No Offset. All payments required to be made by the Bank under this Agreement to Executive will be
subject to the withholding of such amounts, if any, relating to federal, state and local taxes as may be required by law. No
payment under this Agreement will be subject to offset or reduction attributable to any amount Executive may owe to Cadence
or any other person, except as required by law.
Section 5.3 Entire Agreement. This Agreement constitutes the complete and entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements between the parties. The parties have executed this Agreement
based upon the express terms and provisions set forth herein and have not relied on any communications or representations, oral
or written, which are not set forth in this Agreement.
Section 5.4 Amendment. This Agreement may be amended in writing at any time by Cadence, provided that the Executive’s
written consent is required for any amendment that would diminish the benefits provided hereunder to Executive, except as may
be necessary to maintain compliance with applicable provisions of the Code.
196
Section 5.5 Choice of Law. This Agreement and the performance hereof will be construed and governed in accordance with the
internal laws of the State of Mississippi, without regard to its choice of law principles, except to the extent that federal law
controls or preempts state law.
Section 5.6 Successors and Assigns. The obligations, duties and responsibilities of Executive under this Agreement are
personal and shall not be assignable. In the event of Executive's death or disability, this Agreement shall be enforceable by
Executive's estate, executors or legal representatives. Cadence shall require any corporation, entity, individual or other person
who is the successor (whether direct or indirect, by purchase, merger, consolidation, reorganization, or otherwise) to all or
substantially all of the business or assets of the Bank to expressly assume and agree to perform, by a written agreement in form
and substance satisfactory to Executive, all of the obligations of Cadence under this Agreement. As used in this Agreement, the
terms “Bank” and “Cadence” shall mean the Bank and Cadence as defined herein and any successor to their respective business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, written agreement, or
otherwise.
Section 5.7 Waiver of Provisions. Any waiver of any terms and conditions hereof must be in writing and signed by the parties
hereto. The waiver of any of the terms and conditions of this Agreement shall not be construed as a waiver of any subsequent
breach of the same or any other terms and conditions hereof.
Section 5.8 Severability. The provisions of this Agreement and the benefits and amounts payable hereunder shall be deemed
severable, and if any portion shall be held invalid, illegal or enforceable for any reason, the remainder of this Agreement and/or
benefit or payment shall be effective and binding upon the parties.
Section 5.9 Attorneys’ Fees. In the event Cadence or Executive breaches any term or provision of this Agreement and the
other party employs an attorney or attorneys to enforce the terms of this Agreement, then the breaching or defaulting party
agrees to pay the other party the reasonable attorneys’ fees and costs incurred to enforce this Agreement.
Section 5.10 Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed an
original, and all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, Bank and Executive have caused this Agreement to be executed on the day and year
indicated below to be effective as described above.
EXECUTIVE
/s/ Edward H. Braddock
By:
Edward H. Braddock
Date: February 1, 2024
CADENCE BANK
/s/ James D. Collins, III
By:
James D. Rollins, III
Chief Executive Officer
Date: February 20, 2024
197
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21
Name
Jurisdiction of Incorporation/
Organization
Holder of Ownership Interests
Cadence Holdings, Inc.
Mississippi
Cadence Community Capital, LLC
Mississippi
Cadence Investor, LLC
Mississippi
Linscomb Wealth, Inc., formerly Linscomb
& Williams, Inc.
Texas
Cadence Business Solutions, LLC
Mississippi
Cadence Bank
Cadence Bank
Cadence Bank
Cadence Bank
Cadence Bank
CADENCE BANK
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 31.1
I, James D. Rollins III, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K (“this report”) of Cadence Bank;
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;
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;
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)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) 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:
February 23, 2024
/s/ James D. Rollins III
James D. Rollins III
Chief Executive Officer
EXHIBIT 31.2
CADENCE BANK
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Valerie C. Toalson, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K (“this report”) of Cadence Bank;
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;
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;
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)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) 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:
February 23, 2024
/s/ Valerie C. Toalson
Valerie C. Toalson
Senior Executive Vice President and
(Principal
Chief Financial Officer
Accounting Officer)
EXHIBIT 32.1
CADENCE BANK
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on Form 10-K of Cadence Bank (the “Company”), for the year ended
December 31, 2023, as filed with the Federal Deposit Insurance Corporation on the date hereof (the “Report”), I, James D.
Rollins III, Chief Executive Officer of the Company, certify in my capacity as an executive officer of the Company, pursuant to
18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
1934, as amended; and
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
February 23, 2024
/s/ James D. Rollins III
James D. Rollins III
Chief Executive Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by
the Company and furnished to the Federal Deposit Insurance Corporation or its staff upon request.
EXHIBIT 32.2
CADENCE BANK
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report on Form 10-K of Cadence Bank (the “Company”), for the year ended
December 31, 2023, as filed with the Federal Deposit Insurance Corporation on the date hereof (the “Report”), I, Valerie C.
Toalson, Chief Financial Officer of the Company, certify in my capacity as an executive officer of the Company, pursuant to 18
U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
1934, as amended; and
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
February 23, 2024
/s/ Valerie C. Toalson
Valerie C. Toalson
Senior Executive Vice President and
Chief Financial Officer (Principal
Accounting Officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by
the Company and furnished to the Federal Deposit Insurance Corporation or its staff upon request.
EXHIBIT 97.1
1.0 General
CADENCE BANK
CLAWBACK POLICY
1.1 Cadence Bank (the “Company”) has adopted this Clawback Policy (the “Policy”) in accordance with the
applicable listing standards of The New York Stock Exchange (the “NYSE”) and Rule 10D-1 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). To the extent this Policy is in any
manner deemed inconsistent with such listing standards, this Policy shall be treated as retroactively amended
to be compliant with such listing standards.
1.2 Each Executive Officer (as defined herein) shall be required to sign and return to the Company the
Acknowledgement Form attached hereto as Appendix A.
1.3 The effective date of this Policy is October 2, 2023 (the “Effective Date”).
1.4 This Policy supplements and expands upon the Executive Officer Incentive Based Compensation Recovery
section (the “Prior Policy”) of the Company’s Executive Compensation Policy. The Prior Policy shall
continue to apply to any incentive-based compensation received prior the Effective Date of this Policy or is
otherwise not covered by the terms of this Policy.
2.0 Definitions
The following words and phrases shall have the following meanings for purposes of this Policy:
2.1 Accounting Restatement. An “Accounting Restatement” means any accounting restatement due to the
material noncompliance of the Company with any financial reporting requirement under the securities laws,
including any required accounting restatement to correct an error in previously issued financial statements
that is material to the previously issued financial statements (a “Big R” restatement), or that would result in a
material misstatement if the error were corrected in the current period or left uncorrected in the current period
(a “little r” restatement).
2.2 Affected Compensation. “Affected Compensation” is the amount of Incentive-Based Compensation
Received that exceeds the amount of Incentive-Based Compensation that otherwise would have been
Received if the Executive Officer had not engaged in Misconduct, as determined by the Compensation
Committee.
2.3 Board. The “Board” means the Board of Directors of the Company.
2.4 Compensation Committee. The “Compensation Committee” means the Executive Compensation and Stock
Incentive Committee of the Board.
2.5 Erroneously Awarded Compensation. “Erroneously Awarded Compensation” is the amount of Incentive-
Based Compensation Received that exceeds the amount of Incentive-Based Compensation that otherwise
would have been Received had it been determined based on the restated amounts, computed without regard to
any taxes paid. For Incentive-Based Compensation based on stock price or total stockholder return (TSR),
where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation
directly from the information in an Accounting Restatement: (i) the amount shall be based on a reasonable
estimate of the effect of the Accounting Restatement on the stock price or TSR upon which the Incentive-
Based Compensation was Received; and (ii) the Company shall maintain documentation of the determination
of that reasonable estimate and provide such documentation to the NYSE.
2.6 Executive Officer. The term “Executive Officer” means the officers required to file reports under Section 16
of the Exchange Act.
2.7 FDIC. “FDIC” means the Federal Deposit Insurance Corporation.
2.8 Financial Reporting Measure. A “Financial Reporting Measure” is any measure that is determined and
presented in accordance with the accounting principles used in preparing the Company’s financial statements,
and any measure that is derived wholly or in part from such measure, including non-GAAP measures. Stock
price and TSR (and any measures that are derived wholly or in part from stock price or TSR) are also
Financial Reporting Measures. A Financial Reporting Measure need not be presented within the Company’s
financial statements or included in a filing with the FDIC.
2.9 Incentive-Based Compensation. The term “Incentive-Based Compensation” means any compensation that is
granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure.
2.10Misconduct. Misconduct means any activity engaged in or permitted by an Executive Officer that is harmful
to the interests of the Company, including without limitation, conduct during his or her employment that (a)
violates the Company’s Code of Business Conduct and Ethics, Insider Trading Policy Statement, Corporate
Governance Guidelines, or other similar policies, (b) constitutes egregious misconduct including, but not
limited to, fraud, criminal activities, falsification of Company records, theft, violent acts or threats of
violence, (c) constitutes “cause” under any employment or similar agreement, equity award, or nonqualified
plan, or (d) constitutes a violation of law, unethical conduct, or inappropriate behavior that causes substantial
reputational harm to the Company, creates a significant risk that the Company will be liable for damages,
subjected to equitable relief, or, if publicly-known, would create a significant likelihood of adverse publicity.
2.11Received. Incentive-Based Compensation is deemed “Received” in the Company’s fiscal period during which
the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the
payment or grant of the Incentive-Based Compensation occurs after the end of that period.
3.0 Statement of Policy
3.1 In the event that the Company is required to prepare an Accounting Restatement, the Company will recover
reasonably promptly the amount of all Erroneously Awarded Compensation Received by a person:
i. After beginning service as an Executive Officer;
ii. Who served as an Executive Officer at any time during the performance period for that Incentive-
Based Compensation;
iii. While the Company has a listed class of securities listed on the NYSE; and
iv. During the three completed fiscal years immediately preceding the date that the Company is required
to prepare the Accounting Restatement and any transition period (that results from a change in the
Company’s fiscal year) within or immediately following those three completed fiscal years. For
purposes of this Policy, a transition period between the last day of the Company’s previous fiscal
year and the first day of its new fiscal year that comprises a period of nine to twelve months would
be deemed a completed fiscal year.
3.2 In the event the Compensation Committee determines, in its discretion, that an Executive Officer has engaged
in Misconduct, the Compensation Committee may direct the Company to take action to recover reasonably
promptly the amount of such Affected Compensation Received by a person:
i. After beginning service as an Executive Officer;
ii. Who served as an Executive Officer at the time of the occurrence of such Misconduct creating
Affected Compensation; and
iii. During the three completed fiscal years immediately preceding the date that the Company discovered
the Misconduct and any transition period (that results from a change in the Company’s fiscal year)
within or immediately following those three completed fiscal years.
Nothing in this Section 3.2 is intended to limit or diminish the Company’s right of recovery contained in
Section 3.1 or elsewhere in this Policy and is intended solely to provide additional recovery rights in the
event of Misconduct not rising to the threshold under Section 3.1.
3.3 Notwithstanding the foregoing, this Policy shall only apply to Incentive-Based Compensation Received on or
after the Effective Date.
3.4 The Company’s obligation to recover Erroneously Awarded Compensation pursuant to this Policy is not
dependent on when the restated financial statements are filed.
3.5 For purposes of determining the relevant recovery period under this Policy, the date that the Company is
required to prepare an Accounting Restatement is the earliest to occur of: (i) the date the Board, a committee
of the Board, or the officer or officers of the Company authorized to take such action if Board action is not
required, concludes, or reasonably should have concluded, that the Company is required to prepare an
Accounting Restatement; or (ii) the date a court, regulator, or other legally authorized body directs the
Company to prepare an Accounting Restatement.
4.0 Certain Exceptions
4.1 The Company must recover Erroneously Awarded Compensation in compliance with this Policy except to the
extent that the conditions of paragraphs (i), (ii) or (iii) in this Section 4.1 are met, and the Compensation
Committee, or in the absence of such a committee, a majority of the independent directors serving on the
Board, has determined that recovery would be impracticable.
i.
The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to
be recovered. Before concluding that it would be impracticable to recover any amount of
Erroneously Awarded Compensation based on expense of enforcement, the Company shall make a
reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable
attempt(s) to recover, and provide that documentation to the NYSE.
ii. Recovery would violate home country law where that law was adopted prior to November 28, 2022.
Before concluding that it would be impractical to recover any amount of Erroneously Awarded
Compensation based on violation of home country law, the Company shall obtain an opinion of
home country counsel, acceptable to the NYSE, that recovery would result in such a violation, and
must provide such opinion to the NYSE.
iii. Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are
broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C.
401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
5.0 No Indemnification
5.1 The Company shall not indemnify any Executive Officer or former Executive Officer against the loss of
Erroneously Awarded Compensation pursuant to this Policy. The Company shall not reimburse any Executive
Officer or former Executive Officer for premiums on, or otherwise subsidize or pay for, an insurance policy
that would cover such person’s potential clawback obligations under this Policy.
6.0 Public Disclosures
6.1 The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the
U.S. Federal securities laws, including the disclosure required by the applicable FDIC filings.
7.0 Interpretation; Enforcement
7.1 The Compensation Committee shall have full authority to interpret and enforce this Policy to the fullest extent
permitted by law.
7.2 The Compensation Committee shall determine, in its sole discretion, the appropriate means to seek recovery
of any Erroneously Awarded Compensation, which may include, without limitation: (i) requiring cash
reimbursement; (ii) seeking recovery or forfeiture of any gain realized on the vesting, exercise, settlement,
sale, transfer or other disposition of any equity-based awards; (iii) offsetting the amount to be recouped from
any compensation otherwise owed by the Company to the Executive Officer; (iv) canceling outstanding
vested or unvested equity awards; or (v) taking any other remedial and recovery action permitted by law, as
determined by the Compensation Committee.
7.3 The Compensation Committee shall determine the repayment schedule for any Erroneously Awarded
Compensation or Affected Compensation in a manner that complies with the “reasonably promptly”
requirement set forth in Section 3.1 hereof. The determination with respect to “reasonably promptly” recovery
may vary from case to case and the Compensation Committee is authorized to adopt additional rules to further
describe what repayment schedules satisfies this requirement.
7.4 To the extent an Executive Officer or former Executive Officer refuses to pay to the Company any
Erroneously Awarded Compensation or Affected Compensation, the Company shall have the right to sue for
repayment or, to the extent legally permitted, to enforce such person’s obligation to make payment by
withholding unpaid or future compensation. The applicable Executive Officer or former Executive Officer
shall be required to reimburse the Company for any and all expenses reasonably incurred (including, but not
limited to legal fees) by the Company in recovering such Erroneously Awarded Compensation or Affected
Compensation in accordance with the immediately preceding sentence.
7.5 Any determination by the Compensation Committee or the Board with respect to this Policy shall be final,
conclusive, and binding on all interested parties.
7.6 Any members of the Compensation Committee, and any other members of the Board who assist in the
administration of this Policy, shall not be personally liable for any action, determination or interpretation
made with respect to this Policy and shall be fully indemnified by the Company to the fullest extent under
applicable law and Company policy with respect to any such action, determination or interpretation. The
foregoing sentence shall not limit any other rights to indemnification of the members of the Board under
applicable law or Company policy.
8.0 Non-Exclusivity
8.1 Nothing in this Policy shall be viewed as limiting the right of the Company or the Compensation Committee
to pursue recoupment under or as provided by the Company’s plans, awards, policies or agreements or the
applicable provisions of any law, rule or regulation (including, without limitation, Section 304 of the
Sarbanes-Oxley Act of 2002).
9.0 Policy Controls
9.1 If the requirement to recover Erroneously Awarded Compensation is triggered under this Policy, then, in the
event of any actual or alleged conflict between the provisions of this Policy and a similar clause or provision
in any of the Company’s plans, awards, policies or agreements, this Policy shall be controlling and
determinative; provided that, if such other plan, award, policy or agreement provides that a greater amount of
compensation shall be subject to clawback, the provisions of such other plan, award, policy or agreement
shall apply to the amount in excess of the amount subject to clawback under this Policy.
9.2 If the Compensation Committee determines that Affected Compensation shall be recovered under this Policy,
then in the event of any actual or alleged conflict between the provision of this Policy and a similar clause or
provision in any of the Company’s plans, awards, policies or agreements, this Policy shall be controlling and
determinative; provided that, if such other plan, award, policy or agreement provides that a greater amount of
compensation shall be subject to clawback, the provisions of such other plan, award, policy or agreement
shall apply to the amount in excess of the amount subject to clawback under this Policy.
10.0 Amendment
10.1The Compensation Committee may amend this Policy, provided that any such amendment does not cause this
Policy to violate applicable listing standards of the NYSE or Rule 10D-1 under the Exchange Act.
11.0 Exhibit Filing Requirement
11.1A copy of this Policy and any amendments thereto shall be posted on the Company’s website and filed as an
exhibit to the Company’s annual report on Form 10-K.
APPENDIX A
CADENCE BANK
ACKNOWLEDGEMENT OF CLAWBACK POLICY
By my signature below, which signature may be delivered electronically, I acknowledge that I have received and reviewed the
Cadence Bank Clawback Policy (the “Policy”) and that I am fully bound by, and subject to, all of the terms and conditions of
the Policy (as may be amended, restated, supplemented or otherwise modified from time to time). In the event of any
inconsistency between the Policy and the terms of any employment agreement to which I am a party, or the terms of any
compensation plan, program or agreement under which any compensation has been granted, awarded, earned or paid, the terms
of the Policy shall govern. In the event it is determined by the Compensation Committee that any amounts granted, awarded,
earned or paid to me must be forfeited or reimbursed to the Company, I will promptly take any action necessary to effectuate
such forfeiture and/or reimbursement. Any capitalized terms used in this Acknowledgment without definition shall have the
meaning set forth in the Policy.
Signature:
Name (printed):
Date: