No regrets from now profitable Cadence Bank

August 28, 2011

Banking & Finance

Relief and optimism have replaced last summer’s struggle for survival for Starkville’s Cadence National Bank.

The new lease on life for the multi-state regional bank came courtesy of a nearly $150 million capital infusion from Community Bancorp LLC, a Houston, Texas, banking investment group that swooped in last October to take over Cadence after the bank had agreed to an acquisition by Jackson’s Trustmark.

It’s still a tough time to be a banker, said Cadence chairman Paul Murphy, the Community Bancorp chief who put the acquisition deal together last fall.

The sector has a lot of “revenue headwinds” and has entered a new and challenging regulatory era with the Dodd-Frank Wall Street Reform and Consumer Protection Act, he said.

But privately held Cadence, Murphy added, is recapitalized and “looking for new business.”

The $1.53-billion Cadence has added about 30 employees, including technology professionals for its back office and consumer products and services operations. And it has returned to the mortgage business after a moratorium on new home loans in the months leading to the acquisition by Community Bancorp.

“We are looking to hire mortgage loan officers from all over” the Cadence footprint, Murphy said.

Expansion is also under way. Murphy said loan officers and treasury management professionals have been hired for the opening of a Cadence branch in Houston in late fall.

And another Community Bancorp acquisition, Superior Bank in Birmingham, will take on the Cadence name with completion of the FDIC-assisted deal in November, he added.

Cadence, which has 38 locations in Mississippi, Tennessee, Alabama, Florida and Georgia will add 73 retail branches in Alabama and Florida with the Community Bancorp acquisition of Superior Bank. In addition, 24 consumer finance offices are part of the Superior acquisition.

The two acquisitions give Community Bancorp banking operations with $4.5 billion in assets. So far, the banking investment group has invested about 60 percent of the $1 billion it raised to buy banks in the Southeast, Murphy said.

Community Bancorp will resume its hunt for new acquisitions once it completes the Superior deal, Murphy added. “That should happen in November. We’ll go looking after the merger.”

As August came to a close last year, Cadence found itself just days away from expiration of a consent order from the Office of the Comptroller of the Currency for the bank to significantly increase its Tier One capital reserves. With little hope of a stock sale to raise the approximately $80 million needed to satisfy the reserve requirement, Cadence needed a buyer.

It first settled on a proposal from Trustmark but scrapped its definitive agreement with the regional bank in favor of a deal with Community Bancorp.

With the acquisition, Lewis Mallory Jr. retired as CEO and chairman. The Cadence board replaced him as CEO with Mark Abernathy and as chairman with Murphy.

With Community Bancorp’s cash, Cadence increased its Tier One risk-based capital from $98 million to $168 million, going from 5.25 percent to 10.5 percent — a level that exceeds regulatory requirements.

Also in recent months, Cadence used write-downs and sales from the Other Real Estate (ORE) portfolio of distressed real estate to take its non-current loans from $69 million to $18 million, Murphy said.

No regrets at this point, he said of the Cadence deal. “We’re making money on a monthly basis. I’m pleased with the profitability of Cadence.”

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