Struggling Cadence Financial, a 2009 TARP recipient, files for $80 million stock offering

Cadence Financial Corp. has filed with the Securities and Exchange Commission to raise $80 million through an offering of common stock.

The Starkville, Miss.-based company, which owns Cadence Bank, N.A., was the recipient of $44 million from the government's Troubled Asset Relief program in January 2009.

Unlike many such stock offerings by TARP recipients, Cadence's preliminary prospectus makes clear that repayment of the government aid is not an option for the proceeds.

Cadence has more pressing needs - namely, to strengthen its finances and satisfy regulators.  A consent order issued last month by the Office of the Comptroller of the Currency requires the company to boost its capital levels, invest in its subsidiaries, and decrease its exposure to troubled loans.

Cadence, which operates in five Southern states, ended 2009 with about $1.82 billion in assets.

The consent order gave the holding company about four months to raise what the OCC considers sufficient capital.  Should it fail to comply, it may be forced to seek a buyer or a merger partner.

Cadence is no stranger to the OCC.  According to the agency's website, Cadence Bank itself entered into a formal agreement with the OCC on April 17, 2009.  That agreement also was sweeping in its nature, and contained most of the criticisms leveled at the holding company itself a little more than a year later.

According to prospectus that Cadence filed last Friday, the company intends to use the net proceeds of this offering for "general corporate purposes, including funding our regulatory capital needs."  It goes on to say that a "substantial portion" of the offering's proceeds will be transmitted to the bnk and will qualify as Tier 1 capital, hopefully satisfying the requirements outlined in the OCC consent order.  

Cadence saw its profits plummet last year, from an already undesirable position that drew constantly closer scrutiny from regulators.  The company had a loss of $112.2 million applicable to common shareholders, compared with a loss of $3.36 million in 2008.  Non-accruing loans rose to $64.6 million, from $28.2 million a year earlier, and Cadence's loan-loss provisions escalated to $43.4 million, from $20.7 million.

Indeed, Cadence's heavy financial pressures and seemingly limited response caused at least one board member to walk away from the company earlier this year.  James Graham, a Mississippi businessman, said he believed the bank had already reached the point where it should have been sold.

That possibility remains an option if the stock offering and subsequent management decisions fails to satisfy the OCC.