Cadence Bancorporation (Pending:CADE) expects to raise $150 million in its upcoming IPO ($172.5 million if the underwriters exercise their option to purchase additional shares).

Based in Houston, Texas, Cadence Bancorporation is a financial holding company that offers commercial and personal banking, mortgage financing, investment management, and insurance services through its subsidiaries.

We previewed this deal on our IPO Insights platform.

Cadence Bancorporation will offer 7.5 million shares at an expected price range of $19 to $21. If the underwriters price the IPO at the midpoint of that range, CADE will have a market capitalization of $1.7 billion.

CADE filed for the IPO on March 17, 2017.

Lead Underwriters: Goldman Sachs (GS) and J.P. Morgan Securities.

Underwriters: Keefe Bruyette & Woods, Raymond James & Associates, Robert W. Baird & Company, Sandler O’Neil & Partners, Stephens Inc., SunTrust Robinson Humphreys, and Tudor Pickering Holt & Company.

Business Summary & Use of Proceeds

According to company filings, Cadence Bancorp offers commercial and personal banking, mortgage financing, investment management, and insurance services through its subsidiaries. The firm has a network of 66 branches as of December 31, 2016, with 25 branches in Alabama, 14 branches in Florida, 12 branches in Texas, 11 branches in Mississippi, and 4 branches in Tennessee.

The company also has $9.5 billion in assets, $8.0 billion in deposits, $7.4 billion in gross loans, and $1.1 billion in shareholder’s equity.

The company considers its commercial banking segment to be its core driver, and it represents 77% of the total loan portfolio. Other segments include retail banking, financial services, investment management, and trust services. The company has over 1,100 employees, which includes 55 commercial relationship managers who oversee more than 6,100 commercial accounts.

The company aims to use proceeds from the IPO for organic growth and general corporate purposes, including the repayment of debt, maintaining required regulatory capital, and potential future acquisition opportunities.

Executive Management Highlights

Chairman and CEO Paul Murphy has served in his positions since 2010. His previous experience comes from working for Amegy Bank of Texas, Zions Bancorp, and Superior Bank FSB. In addition, he serves as a Director of Houston branch at the Federal Reserve Bank of Dallas. Mr. Murphy received his bachelor degree in finance from Mississippi State University and his M.B.A. from the University of Texas at Austin.

CFO and EVP Valerie Toalson has been with Cadence Bancorporation since 2012. Her previous experience includes senior financial positions at BankAtlantic, BOK Financial Corporation, Bank of Oklahoma, and Price Waterhouse. She is a Certified Public Accountant.

Risk Factors & Potential Competition

Liquidity risk, interest rate risk and insufficient allowance for credit losses are three noted risk factors from the company.

Cadence Bancorporation faces competition from the largest banks in the United States: JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs, Morgan Stanley (NYSE:MS), U.S. Bancorp (NYSE:USB), Bank of New York Mellon (NYSE:BNY), HSBC N.A. Holdings, and Capital One Financial (NYSE:COF). In addition, the company faces competition from regional banks such as First Citizens Bank, PNC Financial (NYSE:PNC), and Suncoast Credit Union.

If CADE prices its IPO at the midpoint of its proposed range, and underwriters exercise their option to purchase additional shares, CADE will have a P/S ratio of 4.54x. This is slightly above competitor PNC’s P/S, as well as the industry average.

Conclusion: Consider An Allocation

Although slightly low profile, CADE boasts solid fundamentals and a strong underwriting team.

We are optimistic on this Goldman-led deal and the company longer-term.

While it may be currently priced slightly above its peer group, we nevertheless are looking forward to the IPO and are currently hearing that it is oversubscribed.

Don Dion’s IPO Insights provides up-to-date information and analysis on the major IPOs each week, along with additional opportunities to invest and short these stocks at their quiet period and lockup period expirations, respectively. Consider following us at the link above. We will continue our PRO offerings on Seeking Alpha alongside our more exclusive research.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CADE over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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