Cadence Financial Corporation Reports Second Quarter Results

STARKVILLE, Miss.--(BUSINESS WIRE)--Cadence Financial Corporation (NASDAQ: CADE), a bank holding company whose principal subsidiary is Cadence Bank, N.A., today reported a net loss of $1.6 million, for the second quarter of 2010, compared with a net loss of $14.0 million for the second quarter of 2009. Reduced net interest income and sizeable expenses related to repossessed real estate were major contributors to the 2010 second quarter loss. Net loss applicable to common shareholders was $2.3 million, or $0.19 per diluted share, for the second quarter ended June 30, 2010, compared with a net loss applicable to common shareholders of $14.7 million, or $1.23 per diluted share, for the second quarter of 2009.

Cadence reported a significant decrease in its provision for loan losses from the second quarter of last year. The provision for loan losses dropped to $3.2 million in the second quarter of 2010 compared with $23.0 million in the second quarter of 2009 due to lower charge-offs and a lower level of non-performing and classified loans. This was the second consecutive quarterly reduction in classified loans.

Cadence also reported a decrease in operating expenses compared with the prior year as a result of cost cutting measures. Cadence’s salary and benefit expenses dropped to their lowest level since early 2004 due to staff consolidations made in the first quarter of 2010. Salary and benefit expenses declined 21.3% to $5.5 million in the second quarter of 2010 compared with $7.0 million in the second quarter of 2009. The staff reductions were part of Cadence’s strategy to improve its efficiency and profitability across its five-state franchise.

Cadence also reported that it continued to reduce its exposure to higher risk real estate loans over the past year, including loans for 1-4 family speculative residential construction, land development and lots to builders as part of its strategy to strengthen its balance sheet. These higher risk real estate loan categories were down approximately $5.4 million in the last three months and down $168.1 million since the second quarter of 2008. Total real estate loans were down $173.6 million since the second quarter of 2009.

Second Quarter Results

Net interest income was $10.0 million in the second quarter of 2010 compared with $10.7 million in the second quarter of 2009. The decline in net interest income was due to a 9.7% decrease in average earning assets and was offset partially by a 9 basis point increase in net interest margin compared with the second quarter of 2009. The increase in net interest margin was due primarily to the cost of interest bearing liabilities declining at a faster rate than the yield on earning assets. The average yield on loans rose 23 basis points to 5.15% while the average cost of deposits declined 52 basis points to 1.67% in the second quarter of 2010 compared with the second quarter of 2009.

Cadence has built its liquidity over the past year by accumulating deposits and investing in short-term assets. At June 30, 2010, Cadence had approximately $424 million invested in short-term assets. If the balances accumulated in lower-yielding short-term investments in excess of the normal liquidity needs of 12% of total liabilities had been invested in U.S. Government agency securities yielding an average of 2%, the net interest margin would have been approximately 29 basis points higher in the second quarter of 2010.

Cadence’s net interest margin was 2.30% in the second quarter of 2010, a 9 basis point increase from 2.21% in the second quarter of 2009. Net interest margin was 2.41% in the first quarter of 2010.

Total interest income declined to $17.0 million in the second quarter of 2010 compared with $20.4 million in the second quarter of 2009. Interest and fees on loans declined 15.7% due to a $248.2 million decrease in average loan balances from the second quarter of 2009, partially offset by a 23 basis point increase in average yields. In the second quarter of 2010, interest and dividends on investment securities declined to $3.7 million compared with the second quarter of 2009 due to a 21 basis point decline in yield and a $75.3 million decrease in the average investment securities portfolio.

Cadence’s provision for loan losses was $3.2 million in the second quarter of 2010 compared with $23.0 million in the second quarter of 2009. The decrease in the provision for loan losses since the second quarter of 2009 was due primarily to a significant reduction in new problem loans that required fewer additions to the allowance for loan losses, and a significant reduction in net charge-offs compared with the second quarter of 2009. The decrease in new problem loans was highlighted by a decline in classified assets for the second consecutive quarter. Net charge-offs declined to $10.0 million in the second quarter of 2010 compared with $15.3 million in the second quarter of 2009.

Non-accrual loans were $66.9 million in the second quarter of 2010 compared with $66.1 million in the first quarter of 2010 and $69.9 million in the second quarter of 2009. The slight increase from the linked first quarter was due to the addition of an $8.4 million credit in the Florida market that was largely offset by lower balances in the Memphis, Middle Tennessee and Alabama markets. The Florida credit was previously classified. In the second quarter of 2010, Cadence sold $5.0 million of OREO properties. The Company is maintaining its aggressive stance of moving non-performing loans through the foreclosure and sale process to minimize its risks and costs.

Net interest income after provision for loan losses rose to $6.8 million in the second quarter of 2010 compared with a net interest loss after provision for loan losses of $12.3 million in the second quarter of 2009.

At the end of the second quarter of 2010, the allowance for loan losses was $35.6 million, or 3.6% of total loans, compared with $46.7 million, or 3.8% of total loans, in the second quarter of 2009. The allowance totaled 51.4% of non-performing loans at the end of the second quarter of 2010. Gross loans totaled $998.4 million at June 30, 2010, compared with $1.2 billion at June 30, 2009, reflecting soft loan demand in all markets and Cadence’s commitment to protect capital. Cadence is maintaining its allowance for loan losses at the maximum level supported by its evaluation of allowance adequacy.

Total non-interest income rose to $4.8 million in the second quarter of 2010 compared with $4.1 million in the second quarter of 2009. The increase in non-interest income in the latest quarter was due to an increase in security gains and higher other non-interest income, offset partially by lower service charges and trust department income compared with the second quarter of 2009.

Non-interest expenses declined to $14.3 million in the second quarter of 2010 compared with $15.3 million in the second quarter of 2009. The decrease was due primarily to lower salary and employee benefit costs and were offset partially by higher OREO related costs that increased to $2.7 million in the second quarter of 2010 compared with $1.6 million in the same quarter of the prior year. The 2010 OREO expenses included increases in OREO holding expenses, losses on the disposition of OREO and OREO related legal fees.

Cadence’s pre-tax loss for the second quarter of 2010 was $2.8 million compared with a pre-tax loss of $23.5 million in the second quarter of 2009. Net loss from continuing operations was $1.6 million, or $0.14 per share, in the second quarter of 2010 compared with a net loss of $14.0 million, or $1.18 per share, in the second quarter of 2009. Net loss applicable to common shareholders was $2.3 million, or $0.19 per share, in the second quarter of 2010 compared with a net loss applicable to common shareholders of $14.7 million, or $1.23 per share, in the second quarter of 2009.

Six Month Results

Net interest income was $20.2 million in the first six months of 2010 compared with $23.0 million in the same period of 2009. The decrease in net interest income was due to a 7 basis point decrease in net interest margin and a 9.2% decrease in average earning assets for the first six months of 2010 compared with the same period in 2009. The provision for loan losses for the first six months of 2010 declined to $4.8 million compared with $55.8 million in the first six months of 2009.

Other expenses for the first six months of 2009 included a $66.5 million write-down in goodwill that was equal to $5.61 per diluted share. There was no comparable expense in the first six months of 2010.

For the first six months of 2010, Cadence reported a net loss of $2.8 million, compared with a net loss of $98.2 million for the first six months of 2009. Net loss applicable to common shareholders for the first six months of 2010 was $4.2 million, or $0.35 per diluted share, compared with a net loss applicable to common shareholders of $99.1 million, or $8.32 per diluted share, in the same period of 2009.

About Cadence Financial Corporation

Cadence Financial Corporation is a $1.9 billion bank holding company providing full financial services, including banking, trust services, mortgage services and investment products in Mississippi, Tennessee, Alabama, Florida and Georgia. Cadence’s stock is listed on the NASDAQ Global Select Market under the symbol CADE.

Forward-Looking Statements

This press release contains statements that are forward-looking as defined within the Private Securities Litigation Reform Act of 1995. These forward-looking statements are provided to assist in the understanding of anticipated future financial results. However, such forward-looking statements involve risks and uncertainties (including uncertainties relating to interest rates, management and operation of acquired operations and general market risks) that may cause actual results to differ materially from those in such statements. For a discussion of certain factors that may cause such forward-looking statements to differ materially from the Company’s actual results, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, and other reports filed with the Securities and Exchange Commission. Cadence Financial Corporation is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.

CADENCE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
JUNE 30,
($ in thousands, except share data)
	2010			2009
ASSETS:
Cash and Due From Banks	$	22,835		$	31,484
Interest Bearing Deposits Due From Banks		400,262			44,371
Total Cash and Due From Banks		423,097			75,855
Securities:
Securities Available-for-Sale		345,629			546,728
Securities Held-to-Maturity		2,668			14,196
Total Securities		348,297			560,924
Federal Funds Sold and
Securities Purchased Under Agreements To Resell		653			20,566
Other Earning Assets		20,356			19,424
Loans		998,432			1,244,227
Less: Allowance for Loan Losses		(35,585	)		(46,722	)
Net Loans		962,847			1,197,505
Premises and Equipment, Net		30,290			32,305
Interest Receivable		6,366			8,355
Other Real Estate Owned		35,413			16,686
Intangible Assets		1,140			1,667
Other Assets		57,986			46,885
Total Assets	$	1,886,445		$	1,980,172
LIABILITIES AND SHAREHOLDERS' EQUITY:
Noninterest-Bearing Deposits	$	175,149		$	167,971
Interest-Bearing Deposits		1,371,286			1,377,297
Total Deposits		1,546,435			1,545,268
Interest Payable		1,600			2,312
Federal Funds Purchased and
Securities Sold Under Agreements to Repurchase		82,778			88,374
Federal Home Loan Bank Borrowings		95,000			167,535
Subordinated Debentures		30,928			30,928
Other Liabilities		10,425			16,262
Total Liabilities		1,767,166			1,850,679
SHAREHOLDERS' EQUITY:
Preferred Stock - $10 Par Value, Authorized 10,000,000 shares, Issued - 44,000 Shares at June 30, 2010 and June 30, 2009		42,314			41,893
Common Stock - $1 Par Value, Authorized - 140,000,000 shares at June 30, 2010 and 50,000,000 shares at June 30, 2009; Issued - 11,909,127 Shares at June 30, 2010 and 11,912,564 Shares at June 30, 2009		11,909			11,913
Surplus and Undivided Profits		59,008			76,066
Accumulated Other Comprehensive Income (Loss)		6,048			(379	)
Total Shareholders' Equity		119,279			129,493
Total Liabilities and Shareholders' Equity	$	1,886,445		$	1,980,172

CADENCE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except share and per share data)
	FOR THE THREE MONTHS						FOR THE SIX MONTHS
	ENDED JUNE 30,						ENDED JUNE 30,
	2010			2009			2010			2009
INTEREST INCOME:
Interest and Fees on Loans	$	13,153		$	15,609		$	26,830		$	32,175
Interest and Dividends on Investment
Securities		3,683			4,667			7,396			9,725
Other Interest Income		192			127			343			176
Total Interest Income		17,028			20,403			34,569			42,076
INTEREST EXPENSE:
Interest on Deposits		5,686			7,714			11,629			14,873
Interest on Borrowed Funds		1,347			2,039			2,697			4,233
Total Interest Expense		7,033			9,753			14,326			19,106
Net Interest Income		9,995			10,650			20,243			22,970
Provision for Loan Losses		3,201			22,995			4,822			55,756
Net Interest Income (Loss) After Provision for
Loan Losses		6,794			(12,345	)		15,421			(32,786	)
OTHER INCOME:
Service Charges on Deposit Accounts		1,907			2,125			3,739			4,130
Trust Department Income		503			507			988			973
Other Non-Interest Income		1,527			1,418			2,700			3,385
Gains (Losses) on Securities - Net		846			76			833			139
Total Other Income		4,783			4,126			8,260			8,627
OTHER EXPENSE:
Salaries and Employee Benefits		5,521			7,012			12,127			14,082
Net Premises and Fixed Asset Expense		1,941			1,888			3,806			3,772
Impairment Loss on Goodwill		-			-			-			66,542
Other Operating Expense		6,868			6,401			12,611			11,079
Total Other Expense		14,330			15,301			28,544			95,475
Income (Loss) From Continuing Operations, Before Income Taxes		(2,753	)		(23,520	)		(4,863	)		(119,634	)
Applicable Income Tax Expense (Benefit)		(1,124	)		(9,490	)		(2,020	)		(21,578	)
Net Income (Loss) From Continuing Operations		(1,629	)		(14,030	)		(2,843	)		(98,056	)
Income (Loss) From Discontinued Operations, Before Income Taxes		-			32			-			2
Applicable Income Tax Expense (Benefit)		-			12			-			117
Net Income (Loss) From Discontinued Operations		-			20			-			(115	)
Net Income (Loss)		(1,629	)		(14,010	)		(2,843	)		(98,171	)
Preferred Stock Dividend and
Accretion of Discount		658			652			1,316			974
Net Income (Loss) Applicable to Common Shareholders	$	(2,287	)	$	(14,662	)	$	(4,159	)	$	(99,145	)
Net Income (Loss) Per Share From Continuing Operations - Basic and Diluted	$	(0.14	)	$	(1.18	)	$	(0.24	)	$	(8.23	)
Net Income (Loss) Per Share From Discontinued Operations - Basic and Diluted	$	-		$	-		$	-		$	(0.01	)
Net Income (Loss) Per Share - Basic and Diluted	$	(0.14	)	$	(1.18	)	$	(0.24	)	$	(8.24	)
Net Income (Loss) Applicable to Common Shareholders Per Share - Basic and Diluted	$	(0.19	)	$	(1.23	)	$	(0.35	)	$	(8.32	)
Average Weighted Common Shares:
Basic		11,910,761			11,912,564			11,911,585			11,913,683
Diluted		11,910,761			11,912,586			11,911,585			11,914,689

CADENCE FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS
($ in thousands, except per share data)
FOR THE THREE MONTHS ENDED JUNE 30:	2010			2009
Net Income (Loss) Applicable to Common Shareholders	$	(2,287	)	$	(14,662	)
Basic and Diluted Net Income (Loss) Per Common Share		(0.19	)		(1.23	)
Dividends Per Common Share		-			-
ANNUALIZED RETURNS
Return on Average Assets		-0.5	%		-2.9	%
Return on Average Equity		-7.7	%		-42.6	%
FOR THE SIX MONTHS ENDED JUNE 30:		2010			2009
Net Income (Loss) Applicable to Common Shareholders	$	(4,159	)	$	(99,145	)
Basic and Diluted Net Income (Loss) Per Common Share		(0.35	)		(8.32	)
Cash Dividends Per Common Share		-			0.05
ANNUALIZED RETURNS
Return on Average Assets		-0.4	%		-9.9	%
Return on Average Equity		-7.0	%		-129.0	%
SELECTED BALANCES AT JUNE 30:	2010			2009
Total Assets	$	1,886,445		$	1,980,172
Deposits and Securities Sold Under Agreements to Repurchase		1,579,213			1,583,642
Loans		998,432			1,244,227
Total Securities		348,297			560,924
Shareholders' Equity		119,279			129,493
Closing Market Price Per Common Share		1.15			2.23
Book Value Per Common Share		6.46			7.35
Tangible Equity		118,139			127,826
Tangible Book Value Per Common Share		6.37			7.21

CADENCE FINANCIAL CORPORATION
LOANS AND DEPOSITS BY STATE/REGION
AS OF JUNE 30, 2010:
	MISSISSIPPI		TUSCALOOSA			BIRMINGHAM		MEMPHIS		MIDDLE TN			FLORIDA		GEORGIA		TOTAL
LOANS	30	%		12	%	7	%	25	%		11	%	13	%	2	%	100	%
DEPOSITS	57	%		10	%	2	%	14	%		5	%	10	%	2	%	100	%
AS OF JUNE 30, 2009:
	MISSISSIPPI		TUSCALOOSA			BIRMINGHAM		MEMPHIS		MIDDLE TN			FLORIDA		GEORGIA		TOTAL
LOANS	29	%		10	%	7	%	24	%		16	%	11	%	3	%	100	%
DEPOSITS	58	%		10	%	2	%	13	%		5	%	10	%	2	%	100	%
REAL ESTATE LOAN BALANCES BY STATE/REGION - LINKED QUARTERS ($ in thousands)
			6/30/10							3/31/10
			Balance			% of Total				Balance			% of Total
Mississippi			$	192,312		26	%			$	197,227		26	%
Tuscaloosa				97,600		13	%				99,580		13	%
Birmingham				55,033		8	%				55,535		7	%
Memphis				161,734		22	%				166,006		22	%
Middle Tennessee				73,630		10	%				83,482		11	%
Florida				106,611		15	%				119,730		15	%
Georgia				19,867		3	%				23,070		3	%
Administration				23,404		3	%				24,304		3	%
Total			$	730,191		100	%			$	768,934		100	%

CADENCE FINANCIAL CORPORATION
($ in thousands)
	6/30/10			3/31/10			6/30/09
LOAN BALANCES BY TYPE:
Commercial and Industrial	$	163,717		$	169,230		$	198,836
Personal		18,427			18,807			30,844
Real Estate:
Construction		22,258			29,094			85,667
Commercial Real Estate		562,154			590,794			661,087
Real Estate Secured by Residential Properties		123,547			127,595			130,964
Mortgage		22,232			21,451			26,118
Total Real Estate		730,191			768,934			903,836
Other		86,097			89,640			110,711
Total	$	998,432		$	1,046,611		$	1,244,227
ASSET QUALITY DATA:
Nonaccrual Loans	$	66,947		$	66,077		$	69,852
Loans 90+ Days Past Due		2,309			3,734			2,906
Total Non-Performing Loans		69,256			69,811			72,758
Other Real Estate Owned		35,413			34,787			16,686
Total Non-Performing Assets	$	104,669		$	104,598		$	89,444
Non-Performing Loans to Total Loans		6.9	%		6.7	%		5.8	%
Non-Performing Assets to Total Loans and OREO		10.1	%		9.7	%		7.1	%
Allowance for Loan Losses to Non-Performing Loans		51.4	%		60.6	%		64.2	%
Allowance for Loan Losses to Total Loans		3.6	%		4.0	%		3.8	%
Classified Assets to Capital		146.6	%		152.8	%		120.7	%
Classified Loans to Capital		116.9	%		123.5	%		107.9	%
Classified Loans to Total Loans		14.0	%		14.0	%		11.2	%
Loans 30+ Days Past Due to Total Loans		4.4	%		4.4	%		3.9	%
YTD Net Charge-offs to Average Loans YTD		1.2	%		0.2	%		2.3	%
NET CHARGE-OFFS FOR QUARTER	$	9,954		$	2,705		$	15,331
INTANGIBLE ASSET AMORTIZATION FOR QUARTER	$	112		$	131		$	155

CADENCE FINANCIAL CORPORATION
ANALYSIS OF NET INTEREST EARNINGS
($ in thousands)
	Average Balance
	Quarter Ended		Quarter Ended		Quarter Ended		Six Months Ended		Six Months Ended
	6/30/10		6/30/09		3/31/10		6/30/10		6/30/09
EARNING ASSETS:
Net loans	$	1,024,962	$	1,273,120	$	1,073,061	$	1,048,878	$	1,293,319
Federal funds sold and other interest-bearing assets		352,285		216,766		309,757		331,387		162,525
Securities:
Taxable		362,752		358,386		339,922		351,407		360,572
Tax-exempt		3,693		83,389		3,694		3,694		94,118
Totals		1,743,692		1,931,661		1,726,434		1,735,366		1,910,534
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits		1,365,187		1,415,793		1,342,590		1,353,951		1,378,415
Borrowed funds, federal funds purchased and securities sold under agreements to repurchase and other interest-bearing liabilities		209,080		299,868		213,228		211,143		308,513
Totals		1,574,267		1,715,661		1,555,818		1,565,094		1,686,928
Net amounts	$	169,425	$	216,000	$	170,616	$	170,272	$	223,606
	Interest For
	Quarter Ended		Quarter Ended		Quarter Ended		Six Months Ended		Six Months Ended
	6/30/10		6/30/09		3/31/10		6/30/10		6/30/09
EARNING ASSETS:
Net loans	$	13,153	$	15,609	$	13,677	$	26,830	$	32,175
Federal funds sold and other interest-bearing assets		192		127		151		343		176
Securities:
Taxable		3,639		3,835		3,669		7,308		7,874
Tax-exempt		44		832		44		88		1,851
Totals		17,028		20,403		17,541		34,569		42,076
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits		5,686		7,714		5,943		11,629		14,873
Borrowed funds, federal funds purchased and securities sold under agreements to repurchase and other interest-bearing liabilities		1,347		2,039		1,350		2,697		4,233
Totals		7,033		9,753		7,293		14,326		19,106
Net amounts	$	9,995	$	10,650	$	10,248	$	20,243	$	22,970

CADENCE FINANCIAL CORPORATION
ANALYSIS OF NET INTEREST EARNINGS
($ in thousands)
	Yields Earned
	And Rates Paid (%)
	Quarter Ended		Quarter Ended		Quarter Ended		Six Months Ended		Six Months Ended
	6/30/10		6/30/09		3/31/10		6/30/10		6/30/09
EARNING ASSETS:
Net loans		5.15		4.92		5.17		5.16		5.02
Federal funds sold and other interest-bearing assets		0.22		0.23		0.20		0.21		0.22
Securities:
Taxable		4.02		4.29		4.38		4.19		4.40
Tax-exempt		4.77		4.00		4.82		4.79		3.97
Totals		3.92		4.24		4.12		4.02		4.44
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits		1.67		2.19		1.80		1.73		2.18
Borrowed funds, federal funds purchased and securities sold under agreements to repurchase and other interest-bearing liabilities		2.58		2.73		2.57		2.58		2.77
Totals		1.79		2.28		1.90		1.85		2.28
Net margin		2.30		2.21		2.41		2.35		2.42
Note: Yields on a tax equivalent basis would be:
Tax-exempt securities		7.33		6.16		7.42		7.38		6.10
Total earning assets		3.92		4.38		4.13		4.02		4.55
Net margin		2.30		2.30		2.41		2.35		2.53
Tax equivalent income (in thousands)	$	23	$	448	$	24	$	47	$	997