Second Quarter 2021 Highlights:
Adjusted pre-tax pre-provision net revenue(1) (“PPNR”) remained strong at $85.2 million or 1.83% of average assets, compared to first quarter 2021 PPNR of $86.4 million or 1.86% of average assets.
Net charge-offs were $8.7 million or 0.29% annualized of average loans, a level consistent with our longer-term expectations for our portfolio mix.
The allowance for credit losses (“ACL”) reflected continued reserve releases driven by improving credit metrics and economic forecasts, and incorporated a ($51.9) million provision release in the second quarter of 2021 compared to a ($48.3) million provision release in the linked quarter. The ACL remained robust at 2.13% of total loans. Excluding Paycheck Protection Program (“PPP”) loans, our ACL to loans ratio was 2.17% at June 30, 2021. Our ratio of ACL to total nonperforming loans was 202%.
Chairman and Chief Executive Officer of Cadence Bancorporation Paul B. Murphy, Jr. commented, “This quarter’s results demonstrate the strength of our profitable business model and continued improvement in the credit environment. With the economy expanding, our C&I focus and growth markets, combined with our strong capital levels, position Cadence well. We look forward to further augmenting our business model as we combine with BancorpSouth to become a stronger, more diversified and highly competitive regional bank.”
Second quarter 2021 highlights are as follows:
Our tax equivalent net interest margin (“NIM”) was 3.10%, down 12 basis points from prior quarter. The NIM decline was primarily driven by lower hedge income, lower accretion and earning asset mix shifts out of higher yielding loans and into lower yielding investment securities. The decline was partially mitigated by a continued decline in total deposit costs, which decreased five basis points in the quarter to 0.15%.
We continued to deleverage the balance sheet, paying off $50 million in senior debt in the quarter in addition to the $40 million sub-debt paid off in the first quarter of this year.
Our capital ratios remained robust, with the Common Equity Tier 1 ratio increasing to 14.7% and total risk weighted capital increasing to 17.0%. Our adjusted efficiency ratio(1) remained stable at 53.9%.
Annualized returns on average assets and tangible common equity were 2.17% and 21.12%, respectively. Adjusted annualized returns on average assets(1) and adjusted tangible common equity(1) were 2.28% and 22.08%, respectively.
Balance Sheet: Story continues
Loans at June 30, 2021 totaled $11.6 billion as compared to $12.4 billion at March 31, 2021, a decrease of $730.8 million or 5.9%. Loans decreased $2.1 billion or 15.1% from $13.7 billion at June 30, 2020. PPP loans declined by $588.8 million in the second quarter, with the remaining non-PPP loan decline of $142.0 million being driven by net paydowns and payoffs partially offset by approximately $1.1 billion in loan fundings in the quarter. Notable linked quarter changes, excluding PPP loans, included a net increase of General C&I of $42 million, and declines in Restaurant of $56 million, Healthcare of $29 million and CRE of $92 million. Investment Securities at June 30, 2021 totaled $4.3 billion as compared to $3.9 billion at March 31, 2021 and $2.7 billion at June 30, 2020. Securities as a percent of earning assets was 23.9%, 21.7% and 14.6% at June 30, 2021, March 31, 2021, and June 30, 2020, respectively. The increase in securities from both the linked quarter and prior year is a result of increased balance sheet liquidity. Securities acquired during the second quarter include primarily agency pass-through residential mortgage-backed securities.
Cash and Cash Equivalents at June 30, 2021, totaled $2.1 billion as compared to $1.9 billion at March 31, 2021 and June 30, 2020. The $211.6 million increase in the second quarter of 2021 was driven by $588.8 million in PPP loan repayments. Total assets were $18.7 billion as of June 30, 2021, a decrease of $107.7 million or 0.6% from March 31, 2021, and a decrease of $165.1 million or 0.9% from June 30, 2020. The linked quarter decrease was largely driven by PPP loan payoffs, partially offset by reinvestment of those proceeds in investment securities.