Cadence Financial Corporation Reports Third Quarter Results

STARKVILLE, Miss. - (BUSINESS WIRE) - Cadence Financial Corporation (NASDAQ: CADE), a $1.8 billion bank holding company whose principal subsidiary is Cadence Bank, N.A., today reported a net loss applicable to common shareholders of $13.1 million, or $1.10 per diluted share, for the third quarter ended September 30, 2009, compared with a net loss of $5.3 million, or $0.44 per diluted share, for the third quarter of 2008. The loss for the 2009 period was due primarily to a high provision for loan losses and higher non-interest expenses related to increased FDIC premiums, and nonrecurring expenses related to early extinguishment of debt and those associated with our efforts to raise capital.

"We are making real progress in reducing Cadence's exposure to higher risk real estate loans this year in order to improve our earnings prospects," stated Lewis F. Mallory, Jr., chairman and chief executive officer of Cadence Financial Corporation. "We took aggressive steps to clean up our nonperforming loans and charged off $22.5 million in loans in the third quarter of 2009. These actions had the effect of reducing our nonperforming loans and nonperforming assets compared with the second quarter of 2009. In addition, we reduced our other real estate owned (OREO) for the second consecutive quarter. In the fourth quarter of 2009, we expect to report continued improvement in asset quality and a reduced provision for loan losses assuming the current economic trends continue to stabilize and begin to improve."

Third Quarter Results

Net interest income was $11.6 million in the third quarter of 2009 compared with $13.5 million in the third quarter of 2008. Net interest margin improved to 2.56% in the third quarter of 2009 compared with 2.21% in the second quarter of 2009. Net interest margin was 3.00% in the third quarter of 2008. The reduction in net interest margin since last year was due in part to management's focus on reducing certain higher-risk real estate loans that typically have higher interest rates, and pay downs on loans that were not replaced due to weak loan demand. In addition, Cadence built its liquidity over the past three quarters in 2009 by accumulating deposits and investing in short-term assets. The shift in earning assets from loans to lower yielding short-term investments was estimated to cost about 26 basis points in net interest margin for the third quarter of 2009.

"Cadence's net interest margin improved to 2.56% in the third quarter of 2009, up 35 basis points from the second quarter of 2009," continued Mr. Mallory. "We benefited from an improved yield on earning assets and lower cost of funds compared with the second quarter. We expect to make further improvement in our loan yields and continue to focus on reducing the cost of non-accrual loans in future quarters. Our margin has averaged 3.35% over the past five years."

Total interest income was $20.2 million for the third quarter of 2009 compared with $24.9 million in the third quarter of 2008. Interest and fees on loans declined 21.1% due to a 74 basis point decrease in yields and a $131.6 million decrease in average loan balances from the third quarter of 2008. The majority of the decrease in loans is due to Cadence's program to reduce its exposure to real estate loans across its franchise; specifically loans for 1-4 speculative residential construction, land development, lots to builders, and commercial real estate loans. These higher risk real estate loan categories were down approximately $25 million in the last three months and down $169 million since the third quarter of 2008.

Interest and dividends on investment securities were down 10.4% to $4.6 million for the third quarter of 2009 compared with the third quarter of 2008 due to a 54 basis point decline in yield offset partially by a $16 million increase in the average investment securities portfolio.

Cadence's provision for loan losses was $20.7 million in the third quarter of 2009 compared with $11.7 million in the third quarter of 2008 and $23.0 million in the second quarter of 2009. At the end of the third quarter 2009, the allowance for loan losses was $44.9 million, or 3.81% of total loans, compared with $46.7 million in the second quarter of 2009, or 3.76% of loans, and $18.1 million, or 1.3% of total loans, in the third quarter of 2008. The third quarter 2009 allowance included net charge-offs of $22.5 million. Approximately $20 million of these charge-offs had been reserved for previously.

Total non-interest income increased to $6.7 million in the third quarter of 2009 compared with $6.2 million in the third quarter of 2008. The increase in non-interest income was due primarily to an increase in security gains, offset partially by lower services charges, trust department income, insurance commission and mortgage loan fees. Cadence sold its insurance business effective August 31, 2009, and booked a gain of approximately $500,000 in other non-interest income during the third quarter. The gain on sale is subject to adjustment in the fourth quarter of 2009 based on final settlement costs related to pension and tax costs at the year end of 2009.

Non-interest expense increased 6% to $18.3 million in the third quarter of 2009 compared with $17.2 million in the third quarter of 2008. The increase was due to higher other non-interest expenses, offset partially by lower salaries and net premises costs. Third quarter 2009 non-interest expenses increased $1.3 million due to higher costs for FDIC insurance premiums, and one-time charges on the early extinguishment of debt and expenses associated with the Company's efforts to raise capital. These costs were offset partially by a $1.5 million reduction in expenses related to OREO. FDIC insurance premiums increased from $267,000 in the third quarter of 2008 to $1,215,000 in the third quarter of 2009. The loss on early extinguishment of debt totaled $934,000 in the third quarter of 2009 due to Cadence's repayment of higher costs Federal Home Loan Board advances. The Company expensed $967,000 associated with its efforts to raise capital.

Pre-tax loss was $20.7 million in the third quarter of 2009 compared with pre-tax loss of $9.2 million in the third quarter of 2008.

Net loss for the third quarter of 2009 was $12.4 million. Net loss applicable to common shareholders for the second quarter of 2009 was $13.1 million, or $1.10 per diluted share. This compares with a net loss of $5.3 million, or $0.44 per diluted share, in the third quarter of 2008. Diluted weighted average shares outstanding decreased 0.2% to 11.91 million in the third quarter of 2009 compared with 11.93 million in the third quarter of 2008.

Cadence sold $44 million in senior preferred shares to the U.S. Treasury in mid-January 2009. The preferred shares pay a cumulative annual dividend of 5% for the first five years. Cadence's third quarter 2009 loss applicable to common shareholders included $652,000 related to the preferred dividend and accretion of the discount recorded in relation to the preferred stock.

Nine-Month Results

Net interest income declined 17.8% to $34.6 million in the first nine months of 2009 compared with $42.1 million in the same period of 2008. The decrease in net interest income was due to a 63 basis point decrease in net interest margin, partially offset by a 3.3% increase in average earning assets for the first nine months of 2009 compared with the first nine months of 2008. The provision for loan losses was $76.5 million in the first nine months of 2009 compared with $18.0 million in the first nine months of 2008.

Net loss applicable to common stockholders for the first nine months of 2009 was $112.2 million, or $9.42 per diluted share, compared with a net loss of $640,000, or $0.05 per diluted share, for the first nine months of 2008. The 2009 results include a $66.8 million ($5.61 per diluted share) non-cash charge associated with the write-down of goodwill in the first quarter of 2009. The goodwill impairment charge was required by FASB Accounting Standards Codification Topic 350 (Intangibles - Goodwill and Other) and was an accounting adjustment that did not affect cash flows, liquidity, tangible book capital, regulatory capital, regulatory capital ratios and will not affect future operations. There was no comparable impairment loss in the 2008 period.

OCC Update

Cadence has previously disclosed that the Bank had entered into an agreement with the Office of Comptroller of Currency ("OCC" ) to improve the Bank's practices and raise its regulatory capital ratios for Total Risk Based Capital and Tier 1 Leverage Capital to 12% and 8%, respectively, as of September 30, 2009. While the Bank has implemented policies and procedures, and improved its practices to meet its obligations under such agreement, management reports that based on preliminary numbers they do not expect the Bank to be in compliance with the above referenced ratios as of September 30, 2009. These ratios are compiled as part of the Bank's next quarterly call report which is to be filed by October 31, 2009.

"We do not expect to meet the above-referenced regulatory ratio guidelines as of September 30, 2009; however, we are working on steps that will lead to our compliance in the future," concluded Mr. Mallory.

Conference Call

Cadence Financial Corporation will provide an on-line, real-time webcast and rebroadcast of its third quarter results conference call to be held tomorrow, October 27, 2009. The live broadcast will be available on-line at www.cadencebanking.com under investor information as well as www.investorcalendar.com beginning at 10:00 a.m. (Eastern Time). The on-line replay will follow immediately and continue for 30 days.

About Cadence Financial Corporation

Cadence Financial Corporation is a $1.8 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, 2008, 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
SEPTEMBER 30,
($ in thousands, except share data)
		2009				2008
ASSETS:
Cash and Due From Banks		$	17,483			$	36,101
Interest Bearing Deposits Due From Banks			37,442				7,869
Total Cash and Due From Banks			54,925				43,970
Securities:
Securities Available-for-Sale			417,645				412,680
Securities Held-to-Maturity			2,673				21,782
Total Securities			420,318				434,462
Federal Funds Sold and
Securities Purchased Under Agreements To Resell			30,312				3,269
Other Earning Assets			19,608				18,763
Loans			1,179,741				1,349,711
Less: Allowance for Loan Losses			(44,939	)			(18,146	)
Net Loans			1,134,802				1,331,565
Premises and Equipment, Net			31,866				34,044
Interest Receivable			8,111				9,976
Other Real Estate Owned			14,760				14,671
Goodwill and Other Intangibles			1,518				69,035
Other Assets			51,479				25,326
Total Assets		$	1,767,699			$	1,985,081
LIABILITIES AND SHAREHOLDERS' EQUITY:
Noninterest-Bearing Deposits		$	168,264			$	176,960
Interest-Bearing Deposits			1,243,180				1,267,918
Total Deposits			1,411,444				1,444,878
Interest Payable			1,869				2,867
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase			88,791				111,055
Federal Home Loan Bank Borrowings			100,000				194,993
Subordinated Debentures			30,928				30,928
Other Liabilities			13,857				14,474
Total Liabilities			1,646,889				1,799,195
SHAREHOLDERS' EQUITY:
Preferred Stock - $10 Par Value, Authorized 10,000,000 shares, Issued - 44,000 Shares at September 30, 2009			41,995				-
Common Stock - $1 Par Value, Authorized 50,000,000 shares, Issued - 11,912,564 Shares at September 30, 2009 and 11,908,914 Shares at September 30, 2008			11,913				11,909
Surplus and Undivided Profits			63,039				176,670
Accumulated Other Comprehensive Income (Loss)			3,863				(2,693	)
Total Shareholders' Equity			120,810				185,886
Total Liabilities and Shareholders' Equity		$	1,767,699			$	1,985,081

CADENCE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except share and per share data)
		FOR THE THREE MONTHS								FOR THE NINE MONTHS
		ENDED SEPTEMBER 30								ENDED SEPTEMBER 30
		2009				2008				2009				2008
INTEREST INCOME:
Interest and Fees on Loans		$	15,464			$	19,592			$	47,639			$	63,095
Interest and Dividends on Investment Securities			4,608				5,140				14,333				15,716
Other Interest Income			90				167				313				427
Total Interest Income			20,162				24,899				62,285				79,238
INTEREST EXPENSE:
Interest on Deposits			6,817				8,642				21,690				28,091
Interest on Borrowed Funds			1,760				2,718				5,993				9,047
Total Interest Expense			8,577				11,360				27,683				37,138
Net Interest Income			11,585				13,539				34,602				42,100
Provision for Loan Losses			20,704				11,703				76,460				18,003
Net Interest Income After Provision for Loan Losses			(9,119	)			1,836				(41,858	)			24,097
OTHER INCOME:
Service Charges on Deposit Accounts			2,219				2,453				6,349				6,791
Trust Department Income			527				542				1,500				1,684
Insurance Commission and Fee Income			1,055				1,428				3,411				3,844
Mortgage Loan Fee Income			242				275				879				983
Other Non-Interest Income			1,768				1,459				4,517				3,821
Gains (Losses) on Securities - Net			923				70				1,062				225
Total Other Income			6,734				6,227				17,718				17,348
OTHER EXPENSE:
Salaries and Employee Benefits			7,609				7,839				23,351				23,555
Net Premises and Fixed Asset Expense			1,976				1,990				5,932				5,994
Impairment Loss on Goodwill			-				-				66,846				-
Other Operating Expense			8,685				7,404				20,018				15,105
Total Other Expense			18,270				17,233				116,147				44,654
Income (Loss) Before Income Taxes			(20,655	)			(9,170	)			(140,287	)			(3,209	)
Applicable Income Tax Expense (Benefit)			(8,228	)			(3,891	)			(29,689	)			(2,569	)
Net Income (Loss)			(12,427	)			(5,279	)			(110,598	)			(640	)
Preferred Stock Dividend and Accretion of Discount			652				-				1,626				-
Net Income (Loss) Applicable to Common Shareholders		$	(13,079	)		$	(5,279	)		$	(112,224	)		$	(640	)
Net Income (Loss) Per Share - Basic and Diluted		$	(1.04	)		$	(0.44	)		$	(9.28	)		$	(0.05	)
Net Income (Loss) Applicable to Common Shareholders Per Share - Basic and Diluted		$	(1.10	)		$	(0.44	)		$	(9.42	)		$	(0.05	)
Average Weighted Common Shares:
Basic			11,912,564				11,908,914				11,913,306				11,906,488
Diluted			11,912,564				11,934,956				11,913,973				11,929,823

CADENCE FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS
($ in thousands, except per share data)
FOR THE THREE MONTHS ENDED SEPTEMBER 30:		2009				2008
Net Income (Loss) Applicable to Common Shareholders		$	(13,079	)		$	(5,279	)
Basic and Diluted Net Income (Loss) Per Common Share			(1.10	)			(0.44	)
Cash Dividends Per Common Share			-				0.05
ANNUALIZED RETURNS
Return on Average Assets			-2.8	%			-1.1	%
Return on Average Equity			-41.8	%			-11.2	%
FOR THE NINE MONTHS ENDED SEPTEMBER 30:		2009				2008
Net Income (Loss) Applicable to Common Shareholders		$	(112,224	)		$	(640	)
Basic and Diluted Net Income (Loss) Per Common Share			(9.42	)			(0.05	)
Cash Dividends Per Common Share			0.05				0.55
ANNUALIZED RETURNS
Return on Average Assets			-7.7	%			0.0	%
Return on Average Equity			-102.9	%			-0.4	%
SELECTED BALANCES AT SEPTEMBER 30:		2009				2008
Total Assets		$	1,767,699			$	1,985,081
Deposits and Securities Sold Under Agreements to Repurchase			1,450,235				1,499,933
Loans			1,179,741				1,349,711
Total Securities			420,318				434,462
Shareholders' Equity			120,810				185,886
Closing Market Price Per Common Share			1.80				9.25
Book Value Per Common Share			6.62				15.61
Tangible Equity			119,292				116,851
Tangible Book Value Per Common Share			6.49				9.81

CADENCE FINANCIAL CORPORATION
LOANS AND DEPOSITS BY STATE/REGION
AS OF SEPTEMBER 30, 2009:
		MISSISSIPPI			TUSCALOOSA				BIRMINGHAM			MEMPHIS			MIDDLE TN				FLORIDA			GEORGIA			TOTAL
LOANS		29	%			11	%		7	%		24	%			15	%		12	%		2	%		100	%
DEPOSITS		56	%			11	%		2	%		14	%			6	%		9	%		2	%		100	%
AS OF SEPTEMBER 30, 2008:
		MISSISSIPPI			TUSCALOOSA				BIRMINGHAM			MEMPHIS			MIDDLE TN				FLORIDA			GEORGIA			TOTAL
LOANS		29	%			9	%		6	%		25	%			17	%		11	%		3	%		100	%
DEPOSITS		64	%			10	%		1	%		11	%			6	%		6	%		2	%		100	%
REAL ESTATE LOAN BALANCES BY STATE/REGION - LINKED QUARTERS ($ in thousands)
					9/30/09										6/30/09
					Balance				% of Total						Balance				% of Total
Mississippi					$	216,166			25	%					$	218,223			24	%
Tuscaloosa						103,280			12	%						100,465			11	%
Birmingham						67,720			8	%						71,326			8	%
Memphis						185,280			21	%						188,391			21	%
Middle Tennessee						121,558			14	%						143,787			16	%
Florida						122,728			14	%						124,029			14	%
Georgia						25,544			3	%						26,964			3	%
Administration						29,496			3	%						30,651			3	%
Total					$	871,772			100	%					$	903,836			100	%

CADENCE FINANCIAL CORPORATION
($ in thousands)
			9/30/09				6/30/09					9/30/08
LOAN BALANCES BY TYPE:
Commercial and Industrial		$	194,662			$	198,836				$	222,620
Personal			21,223				30,844					33,349
Real Estate:
Construction			59,372				85,667					210,778
Commercial Real Estate			657,668				661,087					645,965
Real Estate Secured by Residential Properties			130,424				130,964					131,724
Mortgage			24,308				26,118					30,958
Total Real Estate			871,772				903,836					1,019,425
Other			92,084				110,711					74,317
Total		$	1,179,741			$	1,244,227				$	1,349,711
ASSET QUALITY DATA:
Nonaccrual Loans		$	55,899			$	69,852				$	24,618
Loans 90+ Days Past Due			4,085				2,906					4,532
Total Non-Performing Loans			59,984				72,758					29,150
Other Real Estate Owned			14,760				16,686					14,671
Total Non-Performing Assets		$	74,744			$	89,444				$	43,821
Non-Performing Loans to Total Loans			5.1	%			5.8	%				2.2	%
Non-Performing Assets to Total Loans and OREO			6.3	%			7.1	%				3.2	%
Allowance for Loan Losses to Non-Performing Loans			74.9	%			64.2	%				62.3	%
Allowance for Loan Losses to Total Loans			3.8	%			3.8	%				1.3	%
Classified Assets to Capital			131.0	%	*		120.7	%	**			43.1	%
Classified Loans to Capital			118.3	%	*		107.9	%	**			35.2	%
Classified Loans to Total Loans			12.1	%			11.2	%				4.9	%
Loans 30+ Days Past Due to Total Loans (loans not included in non-performing loans)			7.4	%			3.9	%				2.3	%
YTD Net Charge-offs to Average Loans YTD			4.1	%			2.3	%				1.1	%
NET CHARGE-OFFS FOR QUARTER		$	22,487			$	15,331				$	9,383
INTANGIBLE ASSET AMORTIZATION FOR QUARTER		$	149			$	155				$	208
* Includes the effect of write-off of goodwill in the first quarter of 2009. Without the goodwill impairment charge, the ratio of classified assets to capital was 84.3% and classified loans to capital was 76.2%.
** Includes the effect of write-off of goodwill in the first quarter of 2009. Without the goodwill impairment charge, the ratio of classified assets to capital was 79.6% and classified loans to capital was 71.1%.

CADENCE FINANCIAL CORPORATION
ANALYSIS OF NET INTEREST EARNINGS
($ in thousands)
		Average Balance
		Quarter Ended			Quarter Ended			Quarter Ended			Nine Months Ended			Nine Months Ended
		9/30/09			9/30/08			6/30/09			9/30/09			9/30/08
EARNING ASSETS:
Net loans		$	1,220,948		$	1,352,760		$	1,273,120		$	1,268,930		$	1,352,819
Federal funds sold and other interest-bearing assets			138,279			32,143			221,341			157,216			24,289
Securities:
Taxable			398,883			318,814			358,386			373,503			324,951
Tax-exempt			37,147			113,560			83,389			74,919			112,021
Totals			1,795,257			1,817,277			1,936,236			1,874,568			1,814,080
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits			1,313,378			1,262,568			1,415,793			1,356,497			1,238,133
Borrowed funds, federal funds purchased and securities sold under agreements to repurchase and other interest-bearing liabilities			260,570			356,984			299,868			292,357			373,908
Totals			1,573,948			1,619,552			1,715,661			1,648,854			1,612,041
Net amounts		$	221,309		$	197,725		$	220,575		$	225,714		$	202,039
		Interest For
		Quarter Ended			Quarter Ended			Quarter Ended			Nine Months Ended			Nine Months Ended
		9/30/09			9/30/08			6/30/09			9/30/09			9/30/08
EARNING ASSETS:
Net loans		$	15,464		$	19,592		$	15,609		$	47,639		$	63,095
Federal funds sold and other interest-bearing assets			90			167			141			313			427
Securities:
Taxable			4,210			3,971			3,835			12,083			12,240
Tax-exempt			398			1,169			832			2,250			3,476
Totals			20,162			24,899			20,417			62,285			79,238
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits			6,817			8,642			7,714			21,690			28,091
Borrowed funds, federal funds purchased and securities sold under agreements to repurchase and other interest-bearing liabilities			1,760			2,718			2,039			5,993			9,047
Totals			8,577			11,360			9,753			27,683			37,138
Net amounts		$	11,585		$	13,539		$	10,664		$	34,602		$	42,100

CADENCE FINANCIAL CORPORATION
ANALYSIS OF NET INTEREST EARNINGS
($ in thousands)
		Yields Earned
		And Rates Paid (%)
		Quarter Ended			Quarter Ended			Quarter Ended			Nine Months Ended			Nine Months Ended
		9/30/09			9/30/08			6/30/09			9/30/09			9/30/08
EARNING ASSETS:
Net loans			5.02			5.76			4.92			5.02			6.23
Federal funds sold and other interest-bearing assets			0.26			2.07			0.26			0.27			2.35
Securities:
Taxable			4.19			4.95			4.29			4.33			5.03
Tax-exempt			4.25			4.10			4.00			4.01			4.14
Totals			4.46			5.45			4.23			4.44			5.83
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits			2.06			2.72			2.19			2.14			3.03
Borrowed funds, federal funds purchased and securities sold under agreements to repurchase and other interest-bearing liabilities			2.68			3.03			2.73			2.74			3.23
Totals			2.16			2.82			2.28			2.24			3.08
Net margin			2.56			3.00			2.21			2.47			3.10
Note: Yields on a tax equivalent basis would be:
Tax-exempt securities			6.55			6.30			6.16			6.18			6.38
Total earning assets			4.50			5.65			4.37			4.53			5.97
Net margin			2.61			3.10			2.30			2.55			3.24
Tax equivalent income (in thousands)		$	215		$	630		$	448		$	1,211		$	1,872

Cadence Financial Corporation
Richard T. Haston, 662-324-4258