UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 1-15773

 

 

CADENCE FINANCIAL CORPORATION

(Exact Name of Registrant as Specified in Its Charter.)

 

 

 

Mississippi		64-0694775
(State or Other Jurisdiction of Incorporation or Organization)		(I. R. S. Employer Identification No.)

 

301 East Main Street, P. O. Box 1187, Starkville, Mississippi		39760
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (662) 323-1341

 

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $1 Par Value – 11,904,132 shares as of March 31, 2008.

 

 

 

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PART I - FINANCIAL INFORMATION

CADENCE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)

 

(Amounts in thousands, except per share data)		2008			2007
INTEREST INCOME
Interest and fees on loans		$	23,045		$	23,972
Interest and dividends on securities			5,440			5,178
Other interest income			124			315
Total interest income			28,609			29,465
INTEREST EXPENSE
Interest on deposits			10,665			12,735
Interest on borrowed funds			3,425			3,031
Total interest expense			14,090			15,766
Net interest income			14,519			13,699
Provision for loan losses			3,000			1,229
Net interest income after provision for loan losses			11,519			12,470
OTHER INCOME
Service charges on deposit accounts			2,137			2,153
Insurance commissions, fees and premiums			1,379			1,501
Trust Department income			564			612
Mortgage loan fees			360			343
Other income			1,360			925
Securities gains (losses), net			203			8
Impairment loss on securities			—			(5,097	)
Total other income			6,003			445
OTHER EXPENSE
Salaries and employee benefits			7,967			7,776
Premises and fixed asset expense			1,996			2,048
Other expense			3,868			3,634
Total other expense			13,831			13,458
Income (loss) before income taxes			3,691			(543	)
Income taxes			930			(646	)
Net income		$	2,761		$	103
Net income per share:
Basic		$	0.23		$	0.01
Diluted		$	0.23		$	0.01
Dividends per common share		$	0.25		$	0.25

 

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CADENCE FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

 

(In thousands)		March 31, 2008				Dec. 31, 2007
		(Unaudited)
ASSETS
Cash and due from banks		$	43,869			$	36,729
Interest-bearing deposits with banks			10,216				12,250
Federal funds sold and securities purchased under agreements to resell			2,356				3,418
Total cash and cash equivalents			56,441				52,397
Securities available-for-sale			401,659				403,796
Securities held-to-maturity (estimated fair value of $21,746 at March 31, 2008 and $23,957 at December 31, 2007)			20,557				22,846
Other securities			17,395				16,449
Total securities			439,611				443,091
Loans			1,363,800				1,337,847
Less: allowance for loan losses			(15,022	)			(14,926	)
Net loans			1,348,778				1,322,921
Interest receivable			11,323				13,200
Premises and equipment, net			35,301				35,908
Goodwill and other intangible assets			69,462				69,738
Other assets			48,934				46,900
Total Assets		$	2,009,850			$	1,984,155
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposits		$	181,776			$	171,403
Interest-bearing deposits			1,214,763				1,254,163
Total deposits			1,396,539				1,425,566
Interest payable			3,335				4,632
Federal funds purchased and securities sold under agreements to repurchase			109,037				107,060
Subordinated debentures			30,928				30,928
Other borrowed funds			261,982				210,771
Other liabilities			10,872				10,828
Total liabilities			1,812,693				1,789,785
Shareholders’ Equity:
Common stock - $1 par value, authorized 50,000,000 shares in 2008 and 2007; issued 11,904,132 shares in 2008 and 11,901,132 shares in 2007			11,904				11,901
Surplus			93,291				93,251
Retained earnings			90,261				90,843
Accumulated other comprehensive income (loss)			1,701				(1,625	)
Total shareholders’ equity			197,157				194,370
Total Liabilities and Shareholders’ Equity		$	2,009,850			$	1,984,155

 

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CADENCE FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

(Unaudited)

 

(Amounts in thousands)		2008				2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	2,761			$	103
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			1,009				1,120
Deferred income taxes			386				(787	)
Provision for loan losses			3,000				1,229
Net performance share activity			(100	)			28
Loss (gain) on sale of securities, net			(203	)			(8	)
Impairment loss on securities			—				5,097
(Increase) decrease in interest receivable			1,877				1,189
(Increase) decrease in loans held for sale			(872	)			(138	)
(Increase) decrease in other assets			(4,187	)			(1,426	)
Increase (decrease) in interest payable			(1,297	)			(1,007	)
Increase (decrease) in other liabilities			(136	)			(2,911	)
Net cash provided by operating activities			2,238				2,489
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and calls of securities			120,375				22,212
Proceeds from sale of securities			203				9
Purchase of securities			(111,712	)			(437	)
(Increase) decrease in loans			(27,986	)			(24,084	)
(Additions) disposal of premises and equipment			(72	)			(1,087	)
Net cash used in investing activities			(19,192	)			(3,387	)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in deposits			(29,027	)			(5,241	)
Dividend paid on common stock			(2,976	)			(2,974	)
Net change in federal funds purchased and securities sold under agreements to repurchase			1,977				5,640
Net change in short-term FHLB borrowings			(25,093	)			(7,000	)
Proceeds from long-term debt			80,000				—
Repayment of long-term debt			(3,883	)			(6,222	)
Net cash provided by (used in) financing activities			20,998				(15,797	)
Net increase (decrease) in cash and cash equivalents			4,044				(16,695	)
Cash and cash equivalents at beginning of year			52,397				83,504
Cash and cash equivalents at end of period		$	56,441			$	66,809
Cash paid during the period for:
Interest		$	15,387			$	16,773
Income tax		$	94			$	241

 

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CADENCE FINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements include the accounts of Cadence Financial Corporation (the “Corporation”) and Cadence Bank, N.A. (“Cadence” or the “Bank”), a wholly-owned subsidiary of the Corporation, Enterprise Bancshares, Inc. (“Enterprise”), a wholly-owned subsidiary of the Corporation, Galloway-Chandler-McKinney Insurance Agency, Inc. (“GCM”), a wholly-owned subsidiary of Cadence, NBC Insurance Services of Alabama, Inc., a wholly-owned subsidiary of Cadence, NBC Service Corporation (“Service”), a wholly-owned subsidiary of Cadence, and Commerce National Insurance Company (“CNIC”), a wholly-owned subsidiary of Service. All significant intercompany accounts and transactions have been eliminated.

In the normal decision making process, management makes certain estimates and assumptions that affect the reported amounts that appear in these statements. Although management believes that the estimates and assumptions are reasonable and are based on the best information available, actual results could differ.

In the opinion of management, all adjustments necessary for the fair presentation of the financial statements presented in this report have been made. Such adjustments were of a normal recurring nature.

Certain amounts reported in 2007 have been reclassified to conform with the 2008 presentation. These reclassifications did not impact the Corporation’s consolidated financial condition or results of operations.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Corporation’s latest annual report on Form 10-K.

Note 1. Recently Issued Accounting Pronouncements

In September 2006, the FASB ratified the consensus reached in Emerging Issues Task Force (“EITF”) Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” Under the terms of an endorsement arrangement, an employer owns and controls a policy that will provide future postretirement benefits to an employee. EITF Issue No. 06-4 requires that a liability be recognized for the postretirement benefit expense, based on the substantive agreement with the employee. This Issue is effective for the first interim reporting period beginning after December 15, 2007, with the guidance applied using either a retrospective approach or a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. As of January 1, 2008, the Corporation recorded a cumulative-effect debit adjustment to retained earnings of approximately $368,000 related to the adoption of EITF Issue No. 06-4. Related postretirement benefit expense will be recorded monthly thereafter.

Note 2. Goodwill and Other Intangible Assets

Goodwill represents the cost of acquired institutions in excess of the fair value of the net assets acquired. In accordance with FASB Statement No. 142, “Goodwill and Other Intangible Assets,” the Corporation does not amortize goodwill but performs periodic testing of goodwill for impairment. If impaired, the asset is written down to its estimated fair value. At March 31, 2008, the Corporation had approximately $66.8 million of goodwill on its consolidated balance sheet, which will remain at that level unless it becomes impaired under the definition of impairment in Statement No. 142.

Other identifiable intangible assets consist primarily of the core deposit premium arising from acquisitions. The core deposit premium was established using the discounted cash flow approach and is being amortized using an accelerated method over the estimated remaining life of the acquired core deposits.

Note 3. Performance Shares and Stock Options

 

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The Corporation accounts for stock options in accordance with FASB Statement No. 123(R), “Share-Based Payment.” This Statement requires that the fair value of equity instruments exchanged for employee service (as determined on the grant date of the award) be recognized as compensation cost over the period during which an employee is required to provide service in exchange for the award – the requisite service period (usually the vesting period). Changes in fair value during the requisite service period are recognized as compensation cost over that period.

In 2006, the Corporation’s shareholders adopted a new Long-Term Incentive Compensation Plan. This plan gave the Compensation Committee of the Board of Directors additional alternatives for using share-based compensation. In 2007 and 2008, under the provisions of the Long-Term Incentive Compensation Plan, the Compensation Committee awarded performance shares of stock to certain eligible employees. The shares vest in equal amounts over a four-year period after they are earned.

As of March 31, 2008, a total of 111,500 performance shares are outstanding. Of those shares, 33,950 have been earned. For the quarters ended March 31, 2008 and 2007, compensation expense relating to performance shares totaled $66,000 and $26,000, respectively.

Note 4. Variable Interest Entities

Through a business trust subsidiary, the Corporation has issued $30.9 million in subordinated debentures that were used to support trust preferred securities. These debentures are the sole assets of the trust subsidiary. In accordance with FASB Interpretation No. 46(R), “Consolidation of Variable Interest Entities,” the trust subsidiary is not consolidated into the financial statements of the Corporation.

Note 5. Comprehensive Income

The following table discloses comprehensive income for the periods indicated:

 

		Three Months Ended March 31,
(In thousands)		2008				2007
Net income		$	2,761			$	103
Net change in other comprehensive income (loss):
Realized (gains) losses included in net income			(125	)			(5	)
Impairment loss included in net income			—				3,147
Unrealized gains (losses) on securities			3,447				290
Unrealized gains (losses) on interest rate swaps			4				16
Net change in other comprehensive income (loss)			3,326				3,448
Comprehensive income		$	6,087			$	3,551
Accumulated other comprehensive income (loss) at beginning of period		$	(1,625	)		$	(6,693	)
Net change in other comprehensive income (loss)			3,326				3,448
Accumulated other comprehensive income (loss) at end of period		$	1,701			$	(3,245	)

Note 6. Defined Benefit Pension Plan

The following table contains the components of the net periodic benefit cost of the Corporation’s defined benefit pension plan for the periods indicated:

 

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		Three Months Ended March 31,
(In thousands)		2008				2007
Service cost		$	233			$	147
Interest cost			187				170
Expected return on assets			(205	)			(210	)
Net (gain)/loss recognition			83				77
Prior service cost amortization			(23	)			(32	)
Net periodic benefit cost/(income)		$	275			$	152

The expected rate of return for 2008 and 2007 was 7.5%.

Note 7. Investment Securities

In accordance with FASB Staff Position Nos. FAS 115-1 and FAS 124-1, “The Meaning of Other-than-Temporary Impairment and Its Application to Certain Investments,” for the quarter ended March 31, 2008, management reviewed the securities portfolio for securities that had unrealized losses for more than twelve months and that could be considered other-than-temporary. As of March 31, 2008, approximately 8% of the number of securities in the portfolio reflected an unrealized loss.

In conducting its review for other-than-temporary impairment, management evaluated a number of factors including, but not limited to the following: the amount of the unrealized loss; the length of time in which the unrealized loss has existed; the financial condition of the issuer; rating agency changes on the issuer; and management’s intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. Based on this review, management does not believe any individual security with an unrealized loss as of March 31, 2008 is other-than-temporarily impaired.

Note 8. Derivative Instruments

In 2006, the Corporation hedged a portion of its floating rate prime based lending portfolio by entering into floating to fixed interest rate swaps. The transactions are cash flow hedges as defined by FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and they are accounted for under the provisions of that Statement. As of March 31, 2008, one swap remained outstanding, with a total notional amount of $10 million, an original maturity of twenty-four months, and a rate of 8.01%. The effectiveness of the transaction was tested as of March 31, 2008, in accordance with FASB Statement No. 133, and management determined that as of that date, the transactions remained “highly effective,” as defined by FASB Statement No. 133. For the quarter ended March 31, 2008 and 2007, $4,000 and $16,000, respectively, in unrealized gains (net of tax) were recorded as adjustments to accumulated other comprehensive income for the increase in fair value of these transactions.

Note 9. Fair Value

The Corporation elected early adoption of FASB Statement No. 159 and adopted FASB Statement No. 157, effective January 1, 2007. As of that date, the Corporation elected the fair value option provisions of Statement No. 159 for certain investment securities. Subsequent to the original Form 10-Q filing for the quarter ended March 31, 2007, the Corporation rescinded its decision to apply Statement No. 159 to these securities. Consequently, the Corporation recognized an other-than-temporary impairment loss of $5.1 million for the first quarter of 2007 and reversed the cumulative effect adjustment to retained earnings as of January 1, 2007. The effect of the impairment charge and other related adjustments reduced net income by $3.6 million, or $0.30 per share, and increased retained earnings by $2.2 million, as of and for the quarter ended March 31, 2007. These adjustments were reflected in the Corporation’s Form 10-Q/A filed on July 25, 2007.

 

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As of March 31, 2008, the Corporation’s balance sheet does not include any financial assets or liabilities for which the fair value option of FASB Statement No. 159 was elected.

In accordance with the disclosure requirements of FASB Statement No. 157, the following table reflects assets measured at fair value on a recurring basis:

 

(In thousands)		Fair Value at March 31, 2008
Available-for-sale securities		$	401,659

Fair value for these assets was determined by reference to quoted market prices in active markets for identical assets.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information

The following provides a narrative discussion and analysis of significant changes in our results of operations and financial condition for the quarter ended March 31, 2008. Certain information included in this discussion contains forward-looking statements and information that are based on management’s beliefs, expectations and conclusions, drawn from certain assumptions and information currently available. The Private Securities Litigation Act of 1995 encourages the disclosure of forward-looking information by management by providing a safe harbor for such information. This discussion includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although we believe that the expectations and conclusions reflected in such forward-looking statements are reasonable, such forward-looking statements are based on numerous assumptions (some of which may prove to be incorrect) and are subject to risks and uncertainties, which could cause the actual results to differ materially from our expectations. When used in this discussion, the words “anticipate,” “believe,” “estimate,” “expect,” “objective,” “project,” “forecast,” “goal” and similar expressions are intended to identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with forward-looking statements, factors that could cause our actual results to differ materially from those contemplated in any forward-looking statements include, among others, increased competition, regulatory factors, economic conditions, changing interest rates, changing market conditions, availability or cost of capital, changes in accounting standards and practices, employee workforce factors, ability to achieve cost savings and enhance revenues, the assimilation of acquired operations and establishing credit practices and efficiencies therein, acts of war or acts of terrorism or geopolitical instability and other effects of legal and administrative proceedings, changes in federal, state or local laws and regulations and other factors identified in Item 1A, “Risk Factors,” and Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” of our Annual Report on Form 10-K for the year ended December 31, 2007 and that may be discussed from time to time in other reports filed with the Securities and Exchange Commission subsequent to this report. Readers are cautioned not to place undue reliance on any forward-looking statements made by or on behalf of the Corporation. Any such statement speaks only as of the date the statement was made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of changes in actual results, changes in assumptions or other factors affecting such statements.

For purposes of the following discussion and analysis of the Corporation’s financial condition and results of operations, the words the “Corporation,” “we,” “us” and “our” refer to the consolidated entities of Cadence Financial Corporation and Cadence, unless the context suggests otherwise.

 

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Introduction and Management Overview

The Corporation is a financial holding company that owns Cadence. Cadence operates in the states of Mississippi, Alabama, Tennessee, Florida and Georgia. Cadence’s primary business is providing traditional commercial and retail banking services to customers. Cadence also provides other financial services, including trust services, mortgage services, insurance and investment products. Our stock is traded on The NASDAQ Global Select Market (“NASDAQ”) under the ticker symbol of “CADE”.

For the first quarter of 2008, our net interest margin was 3.23%, compared to 3.26% for the same period of 2007. Our yield on earning assets declined during this period from 7.02% at March 31, 2007, to 6.36% at March 31, 2008. During this same period, our overall cost of funds declined from 4.26% to 3.53%. Our loan yields declined by 97 basis points as compared to the first quarter of 2007, due to the 300 basis point reduction in the Federal Funds rate over this period. Our loan portfolio is composed of approximately 62% variable rate loans and 38% fixed rate loans. Our average loan balances increased by approximately $108.8 million over this same period. During this period, management decided to depend more on wholesale funding sources to fund growth and not pay above market rates for retail deposits. This strategy resulted in our increasing average wholesale funding by approximately $133.6 million, while decreasing our average interest bearing deposits by $30.4 million. As a result, our cost of funds decreased by 73 basis points for the first quarter of 2008, as compared to the first quarter of 2007, and our margin only declined three basis points.

Our net interest margin for the first quarter of 2008 was flat when compared to the linked fourth quarter 2007 margin as Federal Funds rates declined 200 basis points during the quarter. As stated above, we followed the strategy of letting higher cost certificates of deposits (“CDs”) roll off as they matured and replaced them with less expensive short-term wholesale funds. As rates declined during the quarter, these funds repriced downward, and even though the yield on our average earning assets declined from 6.85% in the fourth quarter of 2007 to 6.36% for the first quarter of 2008, we were able to keep the margin unchanged for the quarter. During this period, we were able to decrease our cost of funds from 4.08% to 3.53%.

Our provision for loan losses was substantially higher in the first quarter of 2008 as compared to the first quarter of 2007, due primarily to downgrades on construction and development loans that added approximately $1.8 million to the provision for the first quarter of 2008. Our underwriting standards for certain segments have tightened based on recent changes in market conditions, and we believe that the current level of our allowance for loan losses is adequate as of March 31, 2008.

Noninterest income, exclusive of securities gains and losses, increased from $5.5 million for the first quarter of 2007 to $5.8 million for the first quarter of 2008, an increase of 4.7%. The growth of noninterest income continues to be an important part of our strategic goals.

Another goal of management in 2008 is to continue to control the level of noninterest expenses. During the first quarter of 2008, total noninterest expenses increased by $373,000, or 2.8%, from the same period of 2007, primarily resulting from slight increases in salaries and employee benefits.

For the first quarter of 2008, we reported net income of $2.8 million, or $.23 per share, compared to $103,000, or $.01 per share, for the first quarter of 2007. The net income for 2007 includes a $5.1 million ($3.1 million after tax) impairment loss recorded for certain investment securities.

We are continuing our efforts to grow loans and improve our margin. While loan growth is expected to slow in 2008 as compared to 2007, we believe that, based on the current state of the economy, we will still be able to achieve steady growth, primarily in our Tennessee, Alabama and Florida markets. The expansion or even maintenance of the margin, however, will be a more difficult objective to attain in the current interest rate environment. With the recent rate reductions by the Federal Reserve (200 basis points during the first quarter of 2008), our variable rate loans are repricing downward. However, the need for core deposits makes it very difficult to reduce the cost of these funds. There is strong competition for core deposits as all banks struggle to maintain this component of their funding. As we near the bottom of the rate cycle, we will be more aggressive in retaining and growing core deposits but at a

 

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lower rate than we would have had to pay over the past year. We will use these deposits to fund our growth and to reduce our dependence on wholesale funding.

Currently, we expect that interest rates will continue to decline at least through the second quarter of 2008. We expect growth to continue in our Tennessee, Alabama, and Florida markets; however, we expect this growth to occur more slowly in 2008. We based our 2008 projections, budgets and goals on these expectations. If these trends move differently than expected in either direction or speed, they could have a material impact on our financial condition and results of operations. The areas of our operations most directly impacted would be the net interest margin, loan and deposit growth and the provision for loan losses.

We continue to look for ways to grow noninterest income. The continued growth in the Memphis market, the expansion into the Birmingham and Nashville markets and our acquisitions of SunCoast in Florida and Seasons in Georgia have provided new customer bases for our other banking products and services.

We will also continue our efforts to control noninterest expenses by working to achieve maximum efficiencies within our new market areas. Reducing our efficiency ratio remains a key objective.

The previously mentioned growth in assets, expansion of noninterest income, and control of noninterest expenses will all contribute to net income growth. Other areas of focus to accomplish this goal will be controlling the cost of funding that will be needed to support our earning assets and maintaining our level of credit quality. Funding is a challenging issue in the current environment as many banks continue to pay above market rates for retail deposits. This situation makes it very difficult to obtain the desired spread between loan yields and cost of funds. If the economy continues to slow or the real estate market continues to soften, credit quality could become a more significant issue. In management’s opinion, the current level of the allowance for loan losses is sufficient for the level of anticipated losses in our current loan portfolio. However, we have tightened our underwriting standards for certain segments based on recent changes in market conditions, in an effort to better control credit quality.

In summary, our primary objective in 2008 is to increase net income by improving our net interest margin, maintaining our credit quality, and controlling noninterest expenses.

Critical Accounting Policies

Our accounting and financial reporting policies conform to United States generally accepted accounting principles and to general practices within the banking industry. Note A of the Notes to Consolidated Financial Statements in our annual report contains a summary of our accounting policies. Management is of the opinion that Note A, read in conjunction with all other information in our annual report on Form 10-K for the year ended December 31,2007 and this Management’s Discussion and Analysis, is sufficient to provide the reader with the information needed to understand our financial condition and results of operations.

It is management’s opinion that the areas of the financial statements that require the most difficult, subjective and complex judgments, and therefore contain the most critical accounting estimates, are the provision for loan losses and the resulting allowance for loan losses; the liability and expense relating to our pension and other postretirement benefit plans; issues relating to other-than-temporary impairment losses in the securities portfolio; and goodwill and other intangible assets.

Provision/Allowance for Loan Losses

Our provision for loan losses is utilized to replenish the allowance for loan losses on the balance sheet. The allowance is maintained at a level deemed adequate by management after its evaluation of the risk exposure contained in our loan portfolio. Our senior credit officers and our loan review staff perform the methodology used to make this determination of risk exposure on a quarterly basis. As a part of this evaluation, certain loans are individually reviewed to determine if there is an impairment of our ability to collect the loans and the related interest. This determination is generally made based on collateral value securing such loans. If the senior credit officers and loan review staff determine that impairments exist, specific portions of the allowance are allocated to these individual loans. We group all other loans into homogeneous pools and determine risk exposure by considering the following non-exclusive list of factors: historical loss experiences; trends in delinquencies and non-accruals; and national, regional and local economic conditions. (These economic conditions would include, but not be limited to,

 

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general real estate conditions, the current interest rate environment and trends, unemployment levels and other information, as deemed appropriate.) Additionally, management looks at specific external credit risk factors that bring additional risk into the portfolio. For the period ended March 31, 2008, we identified the following three external risk factors: (1) declining general economic conditions; (2) increased risk associated with concentrations in commercial real estate; and (3) the overall portfolio impact of the slowdown trend in the real estate market. These external risk factors will be re-evaluated on a quarterly basis. Management makes its estimates of the credit risk in the portfolio and the amount of provision needed to keep the allowance for loan losses at an appropriate level using what management believes are the best and most current sources of information available at the time of the estimates; however, many of these factors can change quickly and with no advance warning. If management significantly misses its estimates in any period, it can have a material impact on the results of operations for that period and for subsequent periods.

Pension and Other Postretirement Benefit Plans

Another area that requires subjective and complex judgments is the liability and expense relating to our pension and other postretirement benefit plans. We maintain several benefit plans for our employees. They include a defined benefit pension plan, a defined contribution pension plan, a 401(k) plan and a deferred compensation plan. All contributions to these plans are made when due.

The defined benefit pension plan is the only plan that requires multiple assumptions to determine the liability under the plan. This plan has been frozen to new participants for several years. Management evaluates, reviews with the plan actuaries, and updates as appropriate the assumptions used in the determination of pension liability, including the discount rate, the expected rate of return on plan assets, and increases in future compensation. Actual experience that differs from the assumptions could have a significant impact on our financial position and results of operations. The discount rate and the expected rate of return on the plan assets have a significant impact on the actuarially computed present value of future benefits that is recorded on the financial statements as a liability and the corresponding pension expense.

In selecting the expected rate of return, management, in consultation with the plan trustees, selected a rate based on assumptions compared to recent returns and economic forecasts. They consider the current allocation of the portfolio and the probable rates of return of each investment type. In selecting the appropriate discount rate, management, with the assistance of actuarial consultants, performs an analysis of the plan’s projected benefit cash flows against discount rates from a national Pension Discount Curve (a yield curve used to measure pension liabilities).

FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” requires us to recognize the funded status of the plan (defined as the difference between the fair value of plan assets and the projected benefit obligation) on the balance sheet and to recognize in other comprehensive income any gains or losses and prior service costs or benefits not included as components of periodic benefit cost.

Other-Than-Temporary Impairment of Investment Securities

A third area that requires subjective and complex judgments on the part of management is the review of the investments in the securities portfolio for other-than-temporary impairments. EITF Issue 03-01 and FASB FSP FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” require us to review our investment portfolio and determine if it has impairment losses that are other-than-temporary. In making its determination, management considers the following items: (1) the length of time and extent to which the current market value is less than cost; (2) evidence of a forecasted recovery; (3) financial condition and the industry environment of the issuer; (4) downgrades of the securities by rating agencies; (5) whether there has been a reduction or elimination of dividends or interest payments; (6) whether we have the intent or ability to hold the securities for a period of time sufficient to allow for anticipated recovery of fair value; and (7) interest rate trends that may impact recovery and realization.

In the first quarter of 2007, we recognized a $5.1 million impairment loss relating to certain investment securities. As of March 31, 2008, our securities portfolio included certain securities that were impaired, by definition. We reviewed each of these securities to determine if any of the impairments were other-than-temporary. Using the criteria listed above, we determined that none of the impairments were other-than-temporary as of March 31, 2008.

 

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Goodwill and Other Intangible Assets

FASB Statement No. 142, “Goodwill and Other Intangible Assets,” eliminated the requirement to amortize goodwill; however, it does require periodic testing for impairment. We completed our impairment test in accordance with Statement No. 142 in October 2007 and concluded that no impairment writedown was warranted. At March 31, 2008, we had approximately $66.8 million of goodwill on our balance sheet.

Other Accounting/Regulatory Issues

In the normal course of business, Cadence makes loans to related parties, including our directors and executive officers and their relatives and affiliates. We make these loans on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties. Also, the loans are consistent with sound banking practices and within applicable regulatory and lending limitations. Please see Note O in the Notes to Consolidated Financial Statements included in our annual report for the year ended December 31, 2007 and our proxy statement for additional details concerning related party transactions.

Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits loans to executive officers. However, the rule does not apply to any loan made or maintained by an insured depository institution if the loan is subject to the insider lending restrictions of section 22(h) of the Federal Reserve Act. All loans that Cadence makes to executive officers are subject to the above referenced section of the Federal Reserve Act.

During 2007, we owned NBC Capital Corporation (MS) Statutory Trust I and Enterprise (TN) Statutory Trust I, both organized under the laws of the State of Connecticut for the purpose of issuing trust preferred securities. In accordance with FASB Interpretation No. 46 (revised December 2003), the trusts, which are considered variable interest entities, are not consolidated into our financial statements because the only activity of the variable interest entities is the issuance of the trust preferred securities. The trust preferred securities related to Enterprise (TN) Statutory Trust I were fully redeemed in December 2007, and the trust was dissolved in January 2008.

Results of Operations

Net income for the first quarter of 2008 was $2.8 million, or $.23 per share, compared to $103,000, or $.01 per share, for the first quarter of 2007.

Net interest income, the primary source of our earnings, represents income generated from earning assets, less the interest expense of funding those assets. Net interest income for the first quarter of 2008 was $14.5 million, compared to $13.7 million for the first quarter of 2007, an increase of 6.0%.

For the first quarter of 2008, the net interest margin (net interest income divided by average earning assets) was 3.23%, compared to 3.26% for the first quarter of 2007. Our average earning assets increased by $107.4 million from the first quarter of 2007 to the first quarter of 2008. This increase is primarily due to the increase in our average loan balances, from $1.2 billion during the first quarter of 2007 to $1.3 billion during the first quarter of 2008. However, from the first quarter of 2007 to the first quarter of 2008, the yield on loans decreased from 7.85% to 6.88%. Our average interest-bearing liabilities increased by $103.2 million from the first quarter of 2007 to the first quarter of 2008. Average interest-bearing deposit balances decreased by $30.4 million during this period; however, the average balance of our other borrowings increased from $233.2 million during the first quarter of 2007 to $366.8 million during the first quarter of 2008. From the first quarter of 2007 to the first quarter of 2008, the cost of deposits decreased from 4.07% to 3.46%, and the cost of our other borrowings decreased from 5.27% to 3.76%. For additional information, please see the table entitled “Analysis of Net Interest Earnings” at the end of this section.

The provision for loan losses increased from $1.2 million for the first quarter of 2007 to $3.0 million for the first quarter of 2008. The majority of this increase was due to downgrades on construction and development loans that added approximately $1.8 million to the provision for loan losses for the first quarter of 2008.

Noninterest income includes various service charges, fees and commissions, including insurance commissions earned by GCM. It has been, and continues to be, one of our strategic objectives to diversify our other income sources so that we can be less dependent on net interest income. Noninterest income, exclusive of securities gains and losses,

 

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increased by $266,000, or 4.8%, from the first quarter of 2007 to the first quarter of 2008. The following table reflects the details of this change:

 

		Quarter Ended March 31,
(In thousands)		2008			2007			Change
Service charges on deposit accounts		$	2,137		$	2,153		$	(16	)
Insurance commissions, fees and premiums			1,379			1,501			(122	)
Trust Department income			564			612			(48	)
Mortgage loan fees			360			343			17
Other income			1,360			925			435
Total other income		$	5,800		$	5,534		$	266

The increase in noninterest income resulted primarily from a $232,000 gain on the sale of an asset held by the Corporation and $110,000 in proceeds from the redemption of stock in VISA, owned by Cadence. Our service charges on deposit accounts, insurance commissions, fees and premiums, and Trust Department income declined slightly from the first quarter of 2007 to the first quarter of 2008. Service charges were affected by lower fee income on certain account types; insurance commissions, fees, and premiums were affected by lower profit sharing from insurance carriers; and Trust Department income was impacted by lower investment balances reflecting the downturn of the equity markets during the quarter.

We recognized $203,000 in securities gains during the first quarter of 2008, compared to $8,000 in gains during the first quarter of 2007. We also recognized a $5.1 million impairment loss on certain collateralized mortgage obligations and mortgage-backed securities during the first quarter of 2007, in connection with the rescission of our application of FASB Statement No. 159 to those securities.

Noninterest expense represents ordinary overhead expenses. These expenses increased by $373,000, or 2.8%, during the first quarter of 2008, compared with the first quarter of 2007. The following table reflects the details of this change:

 

		Quarter Ended March 31,
(In thousands)		2008			2007			Change
Salaries and employee benefits		$	7,967		$	7,776		$	191
Premises and fixed asset expense			1,996			2,048			(52	)
Other expense			3,868			3,634			234
Total other expense		$	13,831		$	13,458		$	373

The $191,000, or 2.5%, increase in salaries and employee benefits was due primarily to a slight increase in salaries from normal annual raises and a 401(k) plan amendment that increased employer matching contributions to 100% of up to six percent of employee compensation, effective January 1, 2008. Other noninterest expenses increased by $234,000, or 6.4%, due primarily to increases in legal fees and advertising expense. The advertising expenses were incurred as the result of a general brand advertising campaign implemented in most of our markets during the first quarter of 2008.

Changes in our income tax expense have generally paralleled changes in income. Our effective tax rate was 25.2% for the first quarter of 2008. The credit shown for the first quarter of 2007 results from excluding approximately $1.0 million in tax-exempt earnings, thereby increasing our taxable loss included in the tax calculation.

Financial Condition

During the first quarter of 2008, our total assets increased by $25.7 million, or 1.3%, and our loan portfolio increased by $26.0 million, or 1.9%. This loan growth originated in our Florida and Tennessee markets.

 

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The allowance for loan losses as of March 31, 2008 was $15.0 million as compared to $14.9 million as of December 31, 2007 and $12.9 million as of March 31, 2007. We have tightened our underwriting standards for certain segments based on recent changes in market conditions.

The following table reflects some of the statistics we use to evaluate the quality and potential exposure within our loan portfolio. Classified assets included loans ninety days or more past due, but still accruing interest, non-accrual loans, and other real estate owned.

 

		Quarter Ended 3/31/08			Year Ended 12/31/07			Quarter Ended 3/31/07
Non-performing loans as a percentage of total loans		1.00	%		0.68	%		0.91	%
Non-performing assets as a percentage of total loans and other real estate owned		1.99	%		1.47	%		1.29	%
Allowance for loan losses as a percentage of non-performing loans		109.91	%		163.36	%		114.02	%
Allowance for loan losses as a percentage of total loans		1.10	%		1.12	%		1.04	%
Classified assets as a percentage of average capital		29.46	%		25.92	%		17.77	%
Classified loans as a percentage of total loans		3.16	%		2.91	%		2.34	%
Net charge-offs as a percentage of average net loans outstanding		0.21	%		0.42	%		0.04	%

Based on the evaluations described in the “Critical Accounting Policies” section on this document and the information above, the allowance for loan losses at March 31, 2008 was deemed adequate to cover exposure within our loan portfolio.

Our liabilities increased slightly from $1.79 billion at December 31, 2007 to $1.81 billion at March 31, 2008, an increase of $22.9 million, or 1.3%. During the first quarter of 2008, deposits declined by $29.0 million, or 2.0%. The decrease resulted from a $39.4 million, or 3.1%, decrease in interest-bearing deposits, primarily CDs, partially offset by a $10.4 million, or 6.1%, increase in noninterest-bearing deposits. Also during the quarter, Federal Home Loan Bank advances increased by $51.2 million, or 24.3%. The changes in liability mix occurred because we allowed some of our higher cost CDs to leave the bank and replaced them with cheaper short-term wholesale funding that would reprice more quickly during the quarter, when rates were reduced by 200 basis points. Our objective is to fund loan growth with the proper mix of retail and wholesale funding that will maximize net interest income and yet maintain our core deposits at an acceptable level.

Shareholders’ equity increased from $194.4 million at December 31, 2007 to $197.2 million at March 31, 2008. We earned $2.8 million in net income during this period. Also, an increase in the market value of our available-for-sale investment securities caused our accumulated other comprehensive income balance to increase from an unrealized loss of $1.6 million at December 31, 2007 to an unrealized gain of $1.7 million at March 31, 2008. For the first quarter of 2008, we declared dividends of approximately $3.0 million.

Cadence is required to maintain a minimum amount of capital to total risk-weighted assets as defined by the banking regulators. At March 31, 2008, the Bank’s Tier 1, Tier 2 and total risk-based capital ratios exceeded the well-capitalized standards developed under applicable regulatory guidelines.

Dividends paid by the Corporation were provided from dividends received from the Bank. Under regulations controlling national banks, the payment of dividends by a bank without prior approval from the Comptroller of the Currency is limited in amount to the current year’s net profit and the retained net earnings of the two preceding years. At March 31, 2008, without approval from the Comptroller of the Currency, Cadence’s ability to pay dividends was limited to approximately $4.3 million.

Also, under regulations controlling national banks, the Bank is limited in the amount it can lend to the Corporation or any of its non-banking subsidiaries, and such loans are required to be on a fully secured basis. At March 31, 2008, there were no borrowings between the Corporation (or its non-banking subsidiaries) and the Bank.

 

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Off-Balance Sheet Arrangements

In the ordinary course of our business, we enter into agreements with customers to loan money. When a loan agreement is executed, the customer can either borrow the money immediately or draw against the loan over a predetermined time period. If an unfunded commitment is drawn against, the Bank charges the customer the interest rate established in the original agreement for the amount of the draw for the time period outstanding. As of March 31, 2008, the amount of unfunded commitments outstanding was $362.1 million.

We also provide letters of credit to our customers. A letter of credit is a contingent obligation to make a loan to the customer for up to the amount of the letter of credit and at a predetermined rate of interest. The Bank charges the customer approximately 1.5% of the face amount of a letter of credit as a fee for issuance. As of March 31, 2008, the amount of outstanding letters of credit was $15.3 million.

The issuance of a letter of credit or a loan commitment is subject to the same credit and underwriting standards as any other loan agreement.

At any point in time, we do not know when or if these commitments will be funded. Generally, if they are funded, they are funded at various times over the commitment period. As a result, we are able to fund them out of normal cash flow. If all outstanding commitments were funded at the same time, we have the ability to fund them through our short-term borrowing lines, the brokered certificate of deposit market and additional Federal Home Loan Bank borrowings.

Market Risk

During the first quarter of 2008, we maintained a consistent and disciplined asset/liability management policy focusing on interest rate risk and sensitivity.

In previous years, we hedged a portion of our floating rate prime based lending portfolio using floating to fixed interest rate swaps. These transactions were initiated to protect us from future unanticipated downward fluctuations in the prime rate and to help ensure a more constant cash flow from interest earned by our prime based lending portfolio. As of March 31, 2008, we had one outstanding swap with a notional amount of $10.0 million, an original maturity of twenty-four months, and a rate of 8.01%. This transaction is a cash flow hedge as defined by FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and was accounted for in accordance with the provisions of that Statement. As required by FASB Statement No. 133, we measured the effectiveness of the transaction as of March 31, 2008 and determined that it remained “highly effective,” as defined by FASB Statement No. 133. See Note 8 of the Notes to Consolidated Financial Statements for more information.

In September 2007, we entered into a $25.0 million structured repurchase transaction. This transaction was a standard repurchase transaction with a fixed rate of 4.255% and a forty-two month term. The transaction has a quarterly call option after one year.

In March 2008, we restructured a $25.0 million repurchase transaction initially entered into in December 2006. This transaction is a standard repurchase transaction with a fixed rate of 4.10% and a thirty-three month term. The transaction has a quarterly call option after nine months.

The primary objective of rate sensitivity management is to maintain net interest income growth while reducing exposure to adverse fluctuations in rates. We utilize an Asset/Liability Management Committee to evaluate and analyze our pricing, asset/liability maturities and growth, and balance sheet mix strategies in an effort to make informed decisions that will increase income and limit interest rate risk. The Committee uses simulation modeling as a guide for decision-making and to forecast changes in net income and the economic value of equity under assumed fluctuations in interest rate levels.

Due to the potential volatility of interest rates, our goal is to stabilize the net interest margin by maintaining a neutral rate sensitive position. At March 31, 2008, our balance sheet reflected approximately $22.2 million more in rate sensitive liabilities than assets that were scheduled to reprice within one year. This represents approximately 1.1% of

 

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total assets and indicates that we have achieved a basically neutral rate sensitive position. This computation results from a static gap analysis that weights assets and liabilities equally. Management believes this position to be acceptable in the current interest rate environment. Management does not believe that it is in our best interest to speculate on changes in interest rate levels. Although earnings could be enhanced if predictions were correct, they could also be put at significant risk if interest rates move against predictions.

Analysis of Net Interest Earnings

The table below shows, for the periods indicated, an analysis of net interest earnings, including the average amount of interest-earning assets and interest-bearing liabilities outstanding during the period, the interest earned or paid on such amounts, the average yields/rates paid and the net yield on interest-earning assets:

 

		($ in Thousands) Average Balances
		Quarter Ended 3/31/08			Year Ended 12/31/07
EARNING ASSETS:
Net loans		$	1,347,147		$	1,284,762
Federal funds sold and other interest-bearing assets			18,316			19,384
Securities:
Taxable			333,090			335,564
Tax-exempt			110,766			104,995
Totals			1,809,319			1,744,705
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits			1,237,965			1,248,812
Borrowed funds, federal funds purchased and securities sold under agreements to repurchase and other interest-bearing liabilities			366,808			293,087
Totals			1,604,773			1,541,899
Net amounts		$	204,546		$	202,806

 

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		($ In Thousands) Interest For						Yields Earned And Rates Paid (%)
		Quarter Ended 3/31/08			Year Ended 12/31/07			Quarter Ended 3/31/08		Year Ended 12/31/07
EARNING ASSETS:
Net loans		$	23,045		$	99,591		6.88		7.75
Federal funds sold and other interest-bearing assets			124			970		2.72		5.00
Securities:
Taxable			4,290			17,173		5.18		5.12
Tax-exempt			1,150			4,379		4.18		4.17
Totals			28,609			122,113		6.36		7.00
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits			10,665			49,945		3.46		4.00
Borrowed funds, federal funds purchased and securities sold under agreements to repurchase and other interest-bearing liabilities			3,425			14,900		3.76		5.08
Totals			14,090			64,845		3.53		4.21
Net amounts		$	14,519		$	57,268		3.23		3.28
Note: Yields on a tax equivalent basis would be:
Tax-exempt securities								6.43		6.42
Total earning assets								6.50		7.13
Net yield on earning assets								3.37		3.42

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to Management’s Discussion and Analysis (Item 2 of this Part I), particularly to the section entitled “Market Risk.”

ITEM 4 – CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 of the Exchange Act, the Corporation has evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, as of the end of the period covered by this report, the effectiveness of the design and operation of its disclosure controls and procedures. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, such disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Corporation, including its consolidated subsidiaries, is recorded, processed, summarized and reported, including being made known to the certifying officers by others within the Corporation and its consolidated subsidiaries as appropriate to allow timely decisions regarding disclosure, within the time periods specified in the SEC’s rules and forms. From time to time, the Corporation reviews the disclosure controls and procedures, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Corporation’s system evolves with its business.

 

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Changes in Internal Controls over Financial Reporting

There was no change in the Corporation’s internal control over financial reporting during the quarter ended March 31, 2008 that has materially affected, or is likely to materially affect, the Corporation’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

In the normal course of business, the Corporation and its subsidiaries from time to time are involved in legal proceedings. There are no pending proceedings to which either the Corporation or any of its subsidiaries are a party that upon resolution are expected to have a material adverse effect upon the Corporation’s or its subsidiaries’ financial condition or results of operations.

ITEM 1A – RISK FACTORS

There have been no material changes to the risk factors previously disclosed in “Item 1A – Risk Factors,” in the Corporation’s annual report on Form 10-K.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

ITEM 5 – OTHER INFORMATION

Not applicable

ITEM 6 – EXHIBITS

 

11.1		Statement re computation of per-share earnings
31.1		Certificate pursuant to Rule 13a-14(a) or 15d-14(a) of Securities Exchange Act of 1934 as adopted pursuant to section 302 of Sarbanes-Oxley Act of 2002-Chief Executive Officer
31.2		Certificate pursuant to Rule 13a-14(a) or 15d-14(a) of Securities Exchange Act of 1934 as adopted pursuant to section 302 of Sarbanes-Oxley Act of 2002-Chief Financial Officer
32.1		Certificate pursuant to 18 U.S.C., Section 1350 as adopted pursuant to section 906 of Sarbanes-Oxley Act of 2002—Chief Executive Officer
32.2		Certificate pursuant to 18 U.S.C., Section 1350 as adopted pursuant to section 906 of Sarbanes-Oxley Act of 2002—Chief Financial Officer

All other exhibits required by Section 601 of Regulation S-K were included or included by reference in Form 10-K for the year ended December 31, 2007, filed with the Commission on March 13, 2008.

 

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The financial information furnished herein has not been audited by independent accountants; however, in the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the three-month period ended March 31, 2008 have been included.

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		CADENCE FINANCIAL CORPORATION
Date: May 8, 2008		/s/ Richard T. Haston
		Richard T. Haston
		Executive Vice President and Chief Financial Officer

 

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EXHIBIT INDEX:

 

Exhibit		Description		Page
11.1		Statement re computation of per-share earnings		21
31.1		Certificate pursuant to Rule 13a-14(a) or 15d-14(a) of Securities Exchange Act of 1934 as adopted pursuant to section 302 of Sarbanes-Oxley Act of 2002-Chief Executive Officer		22
31.2		Certificate pursuant to Rule 13a-14(a) or 15d-14(a) of Securities Exchange Act of 1934 as adopted pursuant to section 302 of Sarbanes-Oxley Act of 2002-Chief Financial Officer		23
32.1		Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of Sarbanes-Oxley Act of 2002—Chief Executive Officer		24
32.2		Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of Sarbanes-Oxley Act of 2002—Chief Financial Officer		25

 

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