Cadence Financial Corporation Reports Second Quarter Results

STARKVILLE, Miss.--(Business Wire)--
Cadence Financial Corporation (NASDAQ: CADE), a $2 billion
financial holding company whose principal subsidiary is Cadence Bank,
N.A., today reported net income of $1.9 million, or $0.16 per diluted
share, for the second quarter ended June 30, 2008, compared with net
income of $3.6 million, or $0.30 per diluted share, for the second
quarter of 2007. The primary cause of the reduction in income was a
$2.4 million, or $0.12 per diluted share, increase in the Company's
loan loss provision compared with the second quarter of 2007.

"Cadence reported a 5.4% increase in loans to $1.4 billion since
the second quarter of last year due to growth in selected markets,"
stated Lewis F. Mallory, Jr., chairman and chief executive officer of
Cadence Financial Corporation. "Our loan growth slowed as we entered
2008 due to the softening economy and was up only 1.2% in the first
six months of this year. We experienced a slight decline in total
loans during the second quarter of 2008 and expect loan growth to be
slow in the second half of 2008, reflecting the slowing economy and
our increased focus on credit quality rather than growing our loan
volume.

"We are taking a very prudent and aggressive stance in addressing
credit quality issues in our loan portfolio to minimize future
losses," continued Mr. Mallory. "We increased our allowance for loan
losses in the second quarter of 2008 to $15.8 million as net
charge-offs remained below our provision expense for the second
consecutive quarter this year. Even though some of our loan quality
metrics have improved in the second quarter of 2008, our current
projections indicate that our loan loss provision will continue to
increase in the third quarter of 2008."

Second Quarter Results

Net interest income declined 2.1% to $14.0 million in the second
quarter of 2008 compared with $14.3 million in the second quarter of
2007. The decline in net interest income was due to a 22 basis point
decrease in net interest margin partially offset by a 5.1% increase in
average earning assets.

"Our net margin was down 22 basis points since the second quarter
of last year as a result of loan yields declining at a faster rate
than the cost of deposits," continued Mr. Mallory. "We also have
slowed the growth of higher yielding real estate development loans due
to the soft real estate market and our increased emphasis on credit
quality. This reduced overall yields in our loan portfolio. We expect
our margin to remain under pressure in the second half of 2008 based
on the current interest rate environment and a slowdown in new loan
demand."

Total interest income declined 15.5% to $25.7 million for the
second quarter of 2008 compared with $30.4 million in the second
quarter of 2007. Interest and fees on loans declined 17% due to a
178 basis point decrease in average yields partially offset by a $97.8
million increase in average loan balances from the second quarter of
2007. Interest and dividends on investment securities fell 6.6% to
$5.1 million compared with the second quarter of 2007 due to a 16
basis point decline in yield and a $14.1 million decrease in the
average investment securities portfolio.

Cadence's provision for loan losses was $3.3 million in the second
quarter of 2008 compared with $900,000 in the second quarter of 2007
and $3.0 million in the first quarter of 2008. At the end of the
second quarter of 2008, the allowance for loan losses was $15.8
million, or 1.2% of total loans, compared with $12.1 million, or 0.9%
of total loans, in the second quarter of 2007. The allowance increased
to 147.9% of non-performing loans at the end of the second quarter of
2008, up from 109.9% in the first quarter of 2008 and 145.2% in the
second quarter of 2007. Net interest income after provision for loan
losses was down 20.1% to $10.7 million in the second quarter of 2008
compared with $13.4 million in the second quarter of 2007. The Company
is maintaining its allowance for loan losses at the maximum level
permitted by its evaluation of allowance adequacy.

Total non-interest income was $5.1 million in the second quarter
of 2008 compared with $5.3 million in the second quarter of 2007. The
decline in non-interest income in the latest quarter was due to lower
service charges on deposits, insurance fees and commissions and lower
mortgage loan origination income resulting from lower transaction
volume related to reduced activity in the housing sector of the
economy. Trust department income was down due to lower fees related to
the decline in the market value of equity investments under
management.

"We continue to focus on cost controls throughout Cadence," noted
Mr. Mallory. "Since last year, we have been very successful in
leveraging our infrastructure to hold down expenses. As a result,
non-interest expenses decreased 0.5% to $13.6 million compared with
$13.7 million in the second quarter of 2007."

Income before taxes fell 55.7% to $2.3 million in the second
quarter of 2008 compared with $5.1 million in the second quarter of
2007. The tax rate for the second quarter of 2008 was 17.3% compared
with 29.5% in the same period last year. The lower tax rate is due to
tax-exempt income being a higher percentage of pretax income in the
second quarter of 2008 than in the second quarter of 2007.

Net income for the second quarter of 2008 was $1.9 million, or
$0.16 per diluted share, compared with net income of $3.6 million, or
$0.30 per diluted share, in the second quarter of 2007. Diluted
average weighted shares outstanding increased 0.1% to 11.94 million in
the second quarter of 2008 compared with 11.92 million in the second
quarter of 2007.

Book value per share was $15.92 at June 30, 2008, and $15.97 at
June 30, 2007. Shareholders' equity was $189.6 million and $190.0
million at June 30, 2008 and 2007, respectively.

Cadence paid a cash dividend of $0.25 per share in the second
quarter. "Our dividend payout ratio is currently greater than our net
income and our Board of Directors will evaluate the dividend payout
ratio relative to earnings," noted Mr. Mallory. "We are committed to
remaining well-capitalized and will make adjustments as needed to
balance the dividend with earnings to ensure a strong capital base to
support future growth."

Six Month Results

Net interest income rose 1.9% to $28.6 million in the first six
months of 2008 compared with $28.0 million in the same period of 2007.
Net income for the first six months of 2008 was $4.6 million, or $0.39
per diluted share, compared with $3.7 million, or $0.31 per diluted
share, in the same period of 2007.

The 2008 six month results include a $4.2 million ($0.22 per
diluted share) increase in the loan loss provision to $6.3 million
compared with $2.1 million in the prior year's comparable period. The
2007 six month results include a $5.1 million ($0.26 per diluted
share) impairment loss on securities recorded in the first quarter of
2007. There was no comparable impairment loss in the 2008 period.

Third Quarter and 2008 Expectations

Expectations for the third quarter of 2008 are for net income to
be in the range of $.06 - $.10 per diluted share. Cadence reported net
income of $0.22 per diluted share in the third quarter of 2007.

Cadence expects earnings for 2008 to be in the range of $0.54 to
$0.60 per diluted share compared with $0.82 per diluted share reported
in 2007.

The 2008 earnings estimates are based on continued pressure on the
margin, slower loan growth and continued softness in selected markets
that is expected to result in an increase in the provision for loan
losses.

Conference Call

Cadence Financial Corporation will provide an on-line, real-time
webcast and rebroadcast of its second quarter results conference call
to be held tomorrow, July 23, 2008. 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 $2.0 billion financial holding
company providing full financial services, including banking, trust
services, mortgage services, insurance 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, 2007, 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.

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CADENCE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION

(In thousands, except share data)
JUNE 30, JUNE 30,
2008 2007
----------- -----------
ASSETS:

Cash and Due From Banks $ 40,273 $ 31,843
Interest Bearing Deposits Due From Banks 8,509 5,380
----------- -----------
Total Cash and Due From Banks 48,782 37,223

Securities:
Securities Available-for-Sale 405,691 409,342
Securities Held-to-Maturity 21,162 23,470
----------- -----------
Total Securities 426,853 432,812

Federal Funds Sold and Securities Purchased
Under Agreements To Resell 11,760 1,414

Other Earning Assets 18,628 17,821

Loans 1,354,372 1,283,906
Less: Allowance for Loan Losses (15,825) (12,125)
----------- -----------
Net Loans 1,338,547 1,271,781

Premises and Equipment, Net 34,321 33,760
Interest Receivable 10,628 13,817
Other Real Estate Owned 18,207 8,542
Goodwill and Other Intangibles 69,244 70,711
Other Assets 20,852 21,208
----------- -----------
Total Assets $1,997,822 $1,909,089
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY:

Noninterest-Bearing Deposits $ 179,744 $ 182,839
Interest-Bearing Deposits 1,227,369 1,245,764
----------- -----------
Total Deposits 1,407,113 1,428,603
Interest Payable 2,941 5,205
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase 99,540 89,120
Federal Home Loan Bank Borrowings 254,993 147,898
Subordinated Debentures 30,928 37,114
Other Liabilities 12,713 11,127
----------- -----------
Total Liabilities 1,808,228 1,719,067

SHAREHOLDERS' EQUITY:

Common Stock - $1 Par Value, Authorized
50,000,000 shares, Issued - 11,907,414 Shares
at June 30, 2008 and 11,900,932 Shares at
June 30, 2007 11,907 11,901
Surplus and Undivided Profits 182,494 183,881
Accumulated Other Comprehensive Income (Loss) (4,807) (5,760)
----------- -----------
Total Shareholders' Equity 189,594 190,022
----------- -----------
Total Liabilities and Shareholders' Equity $1,997,822 $1,909,089
=========== ===========
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CADENCE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share data)
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
------------------------- ------------------------
2008 2007 2008 2007
------------ ------------ ----------- ------------
INTEREST INCOME:

Interest and Fees
on Loans $ 20,458 $ 24,652 $ 43,503 $ 48,624
Interest and
Dividends on
Investment
Securities 5,136 5,498 10,576 10,676
Other Interest
Income 136 283 260 598
------------ ------------ ----------- ------------
Total Interest
Income 25,730 30,433 54,339 59,898

INTEREST EXPENSE:

Interest on
Deposits 8,784 12,672 19,449 25,407
Interest on
Borrowed Funds 2,904 3,421 6,329 6,452
------------ ------------ ----------- ------------
Total Interest
Expense 11,688 16,093 25,778 31,859
------------ ------------ ----------- ------------
Net Interest
Income 14,042 14,340 28,561 28,039
Provision for Loan
Losses 3,300 900 6,300 2,129
------------ ------------ ----------- ------------
Net Interest
Income After
Provision for
Loan Losses 10,742 13,440 22,261 25,910
------------ ------------ ----------- ------------

OTHER INCOME:

Service Charges on
Deposit Accounts 2,201 2,343 4,338 4,496
Trust Department
Income 578 615 1,142 1,227
Insurance
Commission and Fee
Income 1,037 1,114 2,416 2,615
Mortgage Loan Fee
Income 348 469 708 812
Other Non-Interest
Income 1,002 936 2,362 1,861
Gains (Losses) on
Securities - Net (48) (140) 155 (132)
Impairment Loss on
Securities - - - (5,097)
------------ ------------ ----------- ------------
Total Other
Income 5,118 5,337 11,121 5,782
------------ ------------ ----------- ------------

OTHER EXPENSE:

Salaries and
Employee Benefits 7,749 7,725 15,716 15,501
Net Premises and
Fixed Asset
Expense 2,008 2,126 4,004 4,174
Other Operating
Expense 3,833 3,803 7,701 7,437
------------ ------------ ----------- ------------
Total Other
Expense 13,590 13,654 27,421 27,112
------------ ------------ ----------- ------------

Income Before
Income Taxes 2,270 5,123 5,961 4,580
Applicable Income
Tax Expense 392 1,513 1,322 867
------------ ------------ ----------- ------------
Net Income $ 1,878 $ 3,610 $ 4,639 $ 3,713
============ ============ =========== ============

Earnings Per Share:
Basic $ 0.16 $ 0.30 $ 0.39 $ 0.31
Diluted $ 0.16 $ 0.30 $ 0.39 $ 0.31
============ ============ =========== ============

Average Weighted
Shares:
Primary 11,907,414 11,898,954 11,905,262 11,894,866
Diluted 11,936,114 11,921,567 11,927,228 11,916,360
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CADENCE FINANCIAL CORPORATION
FINANCIAL HIGHLIGHTS

(in thousands, except per share data)

FOR THE THREE MONTHS ENDED JUNE 30: 2008 2007
--------- ---------

Net Earnings $ 1,878 $ 3,610
Basic and Diluted Earnings Per Share 0.16 0.30
Cash Dividends Per Share 0.25 0.25

ANNUALIZED RETURNS
Return on Average Assets 0.4% 0.8%
Return on Average Equity 3.9% 7.6%

FOR THE SIX MONTHS ENDED JUNE 30: 2008 2007
--------- ---------

Net Earnings $ 4,639 $ 3,713
Basic and Diluted Earnings Per Share 0.39 0.31
Cash Dividends Per Share 0.50 0.50

ANNUALIZED RETURNS
Return on Average Assets 0.5% 0.4%
Return on Average Equity 4.8% 3.9%

SELECTED BALANCES AT JUNE 30: 2008 2007
--------- ---------

Total Assets $1,997,822 $1,909,089
Deposits and Securities Sold Under Agreements to
Repurchase 1,455,303 1,463,923
Loans 1,354,372 1,283,906
Total Securities 426,853 432,812
Shareholders' Equity 189,594 190,022
Closing Market Price Per Share 10.83 20.00
Book Value Per Share 15.92 15.97
Tangible Equity 120,350 119,311
Tangible Book Value Per Share 10.11 10.03
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CADENCE FINANCIAL CORPORATION

(amounts in thousands)

6/30/08 3/31/08 6/30/07
---------- ---------- ----------
LOAN BALANCES BY TYPE:
Commercial and Industrial $ 233,306 $ 232,951 $ 226,624
Personal 32,487 34,121 32,313
Real Estate:
Construction 274,925 275,049 263,756
Commercial Real Estate 589,859 597,140 530,832
Real Estate Secured by
Residential Properties 130,811 129,729 128,526
Mortgage 32,243 33,835 39,024
---------- ---------- ----------
Total Real Estate 1,027,838 1,035,753 962,138
Other 60,741 60,975 62,831
---------- ---------- ----------
Total $1,354,372 $1,363,800 $1,283,906
---------- ---------- ----------

ASSET QUALITY DATA:
Nonaccrual Loans $ 7,526 $ 10,554 $ 4,255
Loans 90+ Days Past Due 3,174 3,114 4,094
---------- ---------- ----------
Total Non-Performing Loans 10,700 13,668 8,349
Other Real Estate Owned 18,207 13,746 8,542
---------- ---------- ----------
Total Non-Performing Assets $ 28,907 $ 27,414 $ 16,891

Non-Performing Loans to Total
Loans 0.8% 1.0% 0.7%
Non-Performing Assets to Total
Loans and OREO 2.1% 2.0% 1.3%
Allowance for Loan Losses to Non-
Performing Loans 147.9% 109.9% 145.2%
Allowance for Loan Losses to Total
Loans 1.2% 1.1% 0.9%
Classified Assets to Capital 30.4% 29.3% 17.8%
Classified Loans to Capital 20.3% 21.8% 13.2%
Classified Loans to Total Loans 2.8% 3.2% 2.0%
Loans 30+ Days Past Due to Total
Loans 1.5% 1.7% 1.4%
(loans not included in non-
performing loans)
Net Chargeoffs to Average Loans
YTD 0.4% 0.2% 0.2%

NET CHARGEOFFS FOR QUARTER $ 2,496 $ 2,904 $ 1,684

INTANGIBLE ASSET AMORTIZATION FOR
QUARTER $ 218 $ 277 $ 335
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CADENCE FINANCIAL CORPORATION
LOANS AND DEPOSITS BY STATE/REGION

AS OF JUNE 30, 2008:

MISSISSIPPI TUSCALOOSA BIRMINGHAM MEMPHIS
------------------------------------------

LOANS 29% 9% 6% 27%

DEPOSITS 63% 11% 1% 11%

AS OF JUNE 30, 2008:

MIDDLE TN FLORIDA GEORGIA TOTAL
-------------------------------

LOANS 15% 11% 3% 100%

DEPOSITS 6% 6% 2% 100%

AS OF JUNE 30, 2007:

MISSISSIPPI TUSCALOOSA BIRMINGHAM MEMPHIS
------------------------------------------

LOANS 32% 9% 6% 29%

DEPOSITS 62% 11% 1% 14%

AS OF JUNE 30, 2007:

MIDDLE TN FLORIDA GEORGIA TOTAL
-------------------------------

LOANS 10% 10% 5% 100%

DEPOSITS 2% 6% 4% 100%

REAL ESTATE LOAN BALANCES BY STATE/REGION - LINKED QUARTERS ($ in
thousands)

6/30/08 3/31/08
--------------------- ---------------------
Balance % of Total Balance % of Total
---------- ---------- ---------- ----------
Mississippi $ 228,067 22% $ 237,775 23%
Tuscaloosa 89,784 9% 98,667 10%
Birmingham 69,008 7% 70,195 7%
Memphis 236,370 23% 244,967 24%
Middle Tennessee 187,100 18% 167,693 16%
Florida 136,733 13% 133,225 13%
Georgia 35,778 3% 36,648 3%
Administration 44,998 5% 46,583 4%
--------------------- ---------------------
Total $1,027,838 100% $1,035,753 100%
--------------------- ---------------------
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CADENCE FINANCIAL CORPORATION
ANALYSIS OF NET INTEREST EARNINGS

(amounts in thousands)

Average Balance
------------------------------------------------------
Quarter Quarter Quarter Six Months Six Months
Ended Ended Ended Ended Ended
6/30/08 6/30/07 3/31/08 6/30/08 6/30/07
---------- ---------- ---------- ---------- ----------
EARNING ASSETS:
Net loans $1,358,550 $1,260,775 $1,347,147 $1,352,849 $1,249,624
Federal funds
sold and
other
interest-
bearing
assets 21,970 17,275 18,316 20,225 21,489
Securities:
Taxable 322,980 344,799 333,090 328,221 338,598
Tax-exempt 111,719 104,056 110,766 111,242 104,763
---------- ---------- ---------- ---------- ----------
Totals 1,815,219 1,726,905 1,809,319 1,812,537 1,714,474
---------- ---------- ---------- ---------- ----------

INTEREST-
BEARING
LIABILITIES:
Interest-
bearing
deposits 1,213,598 1,257,852 1,237,965 1,225,781 1,263,076
Borrowed
funds,
federal
funds
purchased
and
securities
sold under
agreements
to
repurchase
and other
interest-
bearing
liabilities 397,903 258,124 366,808 382,464 245,724
---------- ---------- ---------- ---------- ----------
Totals 1,611,501 1,515,976 1,604,773 1,608,245 1,508,800
---------- ---------- ---------- ---------- ----------

Net amounts $ 203,718 $ 210,929 $ 204,546 $ 204,292 $ 205,674
---------- ---------- ---------- ---------- ----------

Interest For
------------------------------------------------------
Quarter Quarter Quarter Six Months Six Months
Ended Ended Ended Ended Ended
6/30/08 6/30/07 3/31/08 6/30/08 6/30/07
---------- ---------- ---------- ---------- ----------
EARNING ASSETS:
Net loans $ 20,458 $ 24,652 $ 23,045 $ 43,503 $ 48,624
Federal funds
sold and
other
interest-
bearing
assets 136 283 124 260 598
Securities:
Taxable 3,980 4,410 4,290 8,269 8,500
Tax-exempt 1,156 1,088 1,150 2,307 2,176
---------- ---------- ---------- ---------- ----------
Totals 25,730 30,433 28,609 54,339 59,898
---------- ---------- ---------- ---------- ----------

INTEREST-
BEARING
LIABILITIES:
Interest-
bearing
deposits 8,784 12,672 10,665 19,449 25,407
Borrowed
funds,
federal
funds
purchased
and
securities
sold under
agreements
to
repurchase
and other
interest-
bearing
liabilities 2,904 3,421 3,425 6,329 6,452
---------- ---------- ---------- ---------- ----------
Totals 11,688 16,093 14,090 25,778 31,859
---------- ---------- ---------- ---------- ----------

Net amounts $ 14,042 $ 14,340 $ 14,519 $ 28,561 $ 28,039
---------- ---------- ---------- ---------- ----------

Yields Earned
And Rates Paid (%)
------------------------------------------------------
Quarter Quarter Quarter Six Months Six Months
Ended Ended Ended Ended Ended
6/30/08 6/30/07 3/31/08 6/30/08 6/30/07
---------- ---------- ---------- ---------- ----------
EARNING ASSETS:
Net loans 6.06 7.84 6.88 6.47 7.85
Federal funds
sold and
other
interest-
bearing
assets 2.49 6.57 2.72 2.59 5.61
Securities:
Taxable 4.96 5.13 5.18 5.07 5.06
Tax-exempt 4.16 4.19 4.18 4.17 4.19
---------- ---------- ---------- ---------- ----------
Totals 5.70 7.07 6.36 6.03 7.05
---------- ---------- ---------- ---------- ----------

INTEREST-
BEARING
LIABILITIES:
Interest-
bearing
deposits 2.91 4.04 3.46 3.19 4.06
Borrowed
funds,
federal
funds
purchased
and
securities
sold under
agreements
to
repurchase
and other
interest-
bearing
liabilities 2.94 5.32 3.76 3.33 5.29
---------- ---------- ---------- ---------- ----------
Totals 2.92 4.26 3.53 3.22 4.26
---------- ---------- ---------- ---------- ----------

Net margin 3.11 3.33 3.23 3.17 3.30
---------- ---------- ---------- ---------- ----------

Note: Yields on
a tax
equivalent
basis would
be:
Tax-exempt
securities 6.40 6.45 6.43 6.41 6.44
---------- ---------- ---------- ---------- ----------
Total
earning
assets 5.84 7.28 6.50 6.17 7.18
---------- ---------- ---------- ---------- ----------
Net margin 3.25 3.47 3.37 3.31 3.44
---------- ---------- ---------- ---------- ----------

Tax equivalent
income (in
thousands) $ 623 $ 586 $ 619 $ 1,242 $ 1,172
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Cadence Financial Corporation
Richard T. Haston, 662-324-4258

Copyright Business Wire 2008