JPM JP Morgan Chase and Co

By Christina Rexrode and Corrie Driebusch 

Bank stocks have rallied since last November's presidential election. Now, a lender created from the rubble of the financial crisis will test investors' appetite for new bank shares.

Cadence Bancorporation, a Houston-based firm that counts former J.P. Morgan Chase & Co. Chief Executive William Harrison as lead director, Wednesday night became the first major U.S. bank since last September to list shares in an initial public offering.

The company, run by Chairman and CEO Paul Murphy, priced 7.5 million shares at $20 each, for a total offering size of $150 million. The $20 price was the midpoint of the expected offering range of $19 to $21, according to a regulatory filing. The deal was led by Goldman Sachs Group Inc. and J.P. Morgan. The shares are expected to begin trading on the New York Stock Exchange on Thursday under the symbol CADE.

Cadence could serve as a proxy for what investors think of several key topics in the banking industry, including how firms will deal with volatile energy loans and how small banks will handle higher regulatory burdens as they expand.

While the IPO market has picked up recently, the act of going public has been relatively unusual for banks. "There are just a finite number of management teams interested in being public versus many more who are actively looking to...sell their company," said Christopher Marinac, director of research at FIG Partners.

There are about 5,900 banks in the U.S., according to the Federal Deposit Insurance Corp., down from about 8,000 in 2009. About 260 U.S. banks with more than $1 billion in assets are privately held, according to S&P Global Market Intelligence. Most have less than $5 billion in assets.

Four U.S.-based banks went public in 2016, according to Dealogic. First Hawaiian Inc. led the biggest offering, raising $558 million in August. Its shares are up 25% from their IPO price.

Cadence was formed in 2009 by investors who wanted to snap up failed or struggling banks. After raising money from endowments and pension funds, including the California Public Employees' Retirement System, Cadence bought three small banks in 2011 and 2012. It closed on the first after wrestling it away from another bank that had already signed a deal to buy it.

Other banks with similar origins have already gone public. Florida-based BankUnited Inc., for example, went public in 2011, less than two years after a group of Wall Street financiers bought it following its collapse.

The bank, whose operations are centered in Texas, Alabama and Florida, had planned to go public a couple of years ago but shelved those plans when oil and gas prices went haywire, according to people familiar with the matter. Energy loans make up about 13% of its loan portfolio, according to the bank's regulatory filings. The bank's net income slipped 12% in 2015 before bouncing up 68% last year.

The bank says that the offering will be used for general corporate purposes such as debt repayment. Current investors won't get to cash out immediately.

Some investors believe that bank mergers will pick up speed now that the Fed has signaled it will make it easier for smaller banks to get merger approval. Cadence, in its regulatory filing, said it had no current plans for near-term acquisitions but would consider them.

Mr. Murphy, the Mississippi-born CEO, worked on multiple mergers to stitch together his previous company, Amegy Bank of Texas.

Cadence, which has about $9.5 billion in assets, will also need to convince investors that it can handle the increased regulation that comes with crossing the $10 billion threshold.

In its regulatory filing, Cadence said it was "reasonable to assume" it would pass $10 billion as early as the middle of this year and that it couldn't be certain of the full impact of such a change.

Write to Christina Rexrode at christina.rexrode@wsj.com and Corrie Driebusch at corrie.driebusch@wsj.com

(END) Dow Jones Newswires

April 12, 2017 23:14 ET (03:14 GMT)

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