Capital mixed with skill and luck gives Cadence success
by Ted Carter
Published: July 12,2013
A five-star Bauer Financial rating and a percentage of growth in commercial & industrial loans that topped all U.S. banks have made for a lot of pats on the back throughout the multi-state market of the $5.7 billion-asset Cadence Bank.
From Cadence CEO Sam Tortorici’s perspective, “It’s amazing what a lot of capital and a very experienced institution can do.”
At the same time, it is important to factor in a sizable dose of luck, he adds.
On the luck side, the resuscitations Community Bancorp (which is now Cadence Bancorp) did on the three distressed banking companies it bought in the last two years turned out to be not as extensive as expected. “They actually performed better than we had marked their portfolio,” Tortorici said, referring to the Cadence acquisition in March 2011, Birmingham’s Superior Bank acquisition a few months later and the acquisition of Houston’s Encore Banshares in summer 2012.
The CEO has a simple explanation for the five-star “Superior” rating it received in the first quarter from Bauer, a Coral Gables, Fla., financial sector research company that awards banks across the county from zero stars to five, based on assessments of growth prospects, earnings trends and asset quality.
“The Bauer rating scale’s most important measure is capital,” he said. “Capital is an important strength of Cadence. When formed, we deployed about $950 million.”
Cadence ended the first quarter with $935 million in equity capital and $568 million in risk-based capital, according to its FDIC report.
The other highlight came at the end of last year, when Cadence ended the fourth quarter with an increase of 40.9 percent in commercial & industrial loan growth. The 10 percentage point increase surpassed all other banks, according to a report from SNL Financial of Charlottesville, Va..
C&I loans accounted for 44.7 percent of Cadence’s fourth quarter loans, SNL reported.
The bank had $1.79 billion in C&I loans in the final quarter of 2012, up from $1.27 billion in the third quarter.
Market geography has helped, according to Tortorici, who said Cadence focused on key industries in each state and region such as energy in Texas and heath care in Mississippi.
Cadence had a not-unexpected slow down in C&I lending in the first quarter but is projecting a strong second quarter in C&I activity. “At the same time we’re reducing our investments in real estate classifications,” Tortorici said.
Lending growth has been strong in other categories such as small business, he said. “A big portion of that is in the Golden Triangle.”
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