Regulatory Matters

3 Months Ended

Mar. 31, 2020

Banking And Thrift [Abstract]

Regulatory Matters

Note 12—Regulatory Matters

Cadence and Cadence Bank are each required to comply with regulatory capital requirements established by federal and state banking agencies. Failure to meet minimum capital requirements can subject the Company and the Bank to certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. These regulatory capital requirements involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items, and qualitative judgments by the regulators.

Quantitative measures established by regulation to ensure capital adequacy require institutions to maintain minimum ratios of common equity Tier 1, Tier 1, and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average tangible assets (the “Leverage” ratio).

On March 27, 2020, the federal banking agencies issued an interim final rule to delay 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 recent strains on the U.S economy due to COVID-19, while also maintaining the quality of regulatory capital. Under the interim final rule, 100% of the CECL Day 1 impact and 25% of subsequent provisions for credit losses (“Day 2” impacts) will be deferred over a two-year year period ending January 1, 2022, at which time it this deferred amount will be phased in on a pro rata basis over a three-year period ending January 2025.

The actual capital amounts and ratios for the Company and the Bank as of March 31, 2020 and December 31, 2019 are presented in the following tables and as shown, are above the thresholds necessary to be considered “well-capitalized.” Management believes that no events or changes have occurred after March 31, 2020 that would change this designation.

	Consolidated Company					Bank
(In thousands)	Amount		Ratio			Amount		Ratio
March 31, 2020
Tier 1 leverage	$	1,777,399		10.1	%	$	1,875,239		10.6	%
Common equity tier 1 capital		1,777,399		11.4			1,825,239		11.8
Tier 1 risk-based capital		1,777,399		11.4			1,875,239		12.1
Total risk-based capital		2,143,332		13.8			2,050,683		13.2
Minimum requirement:
Tier 1 leverage		704,395		4.0			704,633		4.0
Common equity tier 1 capital		698,790		4.5			698,584		4.5
Tier 1 risk-based capital		931,720		6.0			931,445		6.0
Total risk-based capital		1,242,293		8.0			1,241,927		8.0
Well capitalized requirement:
Tier 1 leverage	N/A		N/A				880,791		5.0
Common equity tier 1 capital	N/A		N/A				1,009,066		6.5
Tier 1 risk-based capital		931,720		6.0			1,241,927		8.0
Total risk-based capital		1,552,866		10.0			1,552,409		10.0

	Consolidated Company					Bank
(In thousands)	Amount		Ratio			Amount		Ratio
December 31, 2019
Tier 1 leverage	$	1,784,664		10.3	%	$	1,953,008		11.1	%
Common equity tier 1 capital		1,784,664		11.5			1,903,008		12.3
Tier 1 risk-based capital		1,784,664		11.5			1,953,008		12.6
Total risk-based capital		2,120,571		13.7			2,099,146		13.6
Minimum requirement:
Tier 1 leverage		690,213		4.0			689,881		4.0
Common equity tier 1 capital		697,089		4.5			696,755		4.5
Tier 1 risk-based capital		929,453		6.0			929,007		6.0
Total risk-based capital		1,239,270		8.0			1,238,676		8.0
Well capitalized requirement:
Tier 1 leverage	N/A		N/A				862,351		5.0
Common equity tier 1 capital	N/A		N/A				1,006,425		6.5
Tier 1 risk-based capital		929,453		6.0			1,238,676		8.0
Total risk-based capital		1,549,088		10.0			1,548,345		10.0

Under regulations controlling national banks, the payment of any dividends by a bank without prior approval of the OCC is limited to the current year’s net profits (as defined by the OCC) and retained net profits of the two preceding years. Due to the effect of the recognition of the non-cash goodwill impairment charge in the first quarter of 2020 to the Banks retained profits, the Bank is currently required to seek prior approval of the OCC to pay a dividend. The Federal Reserve, as primary regulator for bank holding companies, has also stated that all common stock dividends should be paid out of current income. While the holding company had $137.3 million in cash on hand as of March 31, 2020, the holding company does not generate income on a stand-alone basis, and, over time, may not have the capability to pay common stock dividends without first receiving dividends from the Bank.

The Bank is required to maintain average reserve balances in the form of cash or deposits with the Federal Reserve Bank. The reserve balance varies depending upon the types and amounts of deposits. At March 31, 2020 the required reserve balance with the Federal Reserve Bank was zero. The Federal Reserve Board has reduced reserve requirement ratios to zero percent that was effective March 26, 2020, the beginning of the next reserve maintenance period. This action eliminated the reserve requirements for many depository institutions and was designed to help support lending. At December 31, 2019, the required reserve balance with the Federal Reserve Bank was approximately $246.0 million.