CADE-PA — Cadence Bank

Summary of Cadence Bank (CADE-PA) Q3 2025 Earnings Call

1. Key Financial Results and Metrics:

• Adjusted Net Income: Increased to $152.8 million, or $0.81 per share.
• Adjusted Return on Assets: 1.13%.
• Adjusted Efficiency Ratio: Improved to 56.5%.
• Deposits: Up $3.4 billion, with core customer deposits increasing by $3.1 billion, largely due to the acquisition of Industry Bank Shares.
• Loan Growth: Total loans rose by $1.3 billion, with $1 billion attributed to the Industry acquisition and over $300 million in organic growth.
• Net Charge-Offs: Annualized at 26 basis points, with stable non-performing asset levels.
• Tangible Book Value per Share: Decreased by $0.12 to $22.82, primarily due to acquisition impacts being offset by strong operating earnings.

2. Strategic Updates and Business Highlights:

• Acquisition of Industry Bank Shares: Completed on July 1, with successful operational integration finalized recently. This acquisition is expected to enhance growth in Central Texas and Georgia markets.
• Securities Portfolio Management: Successfully disposed of 100% of Industry's securities portfolio, with better-than-expected purchase accounting marks leading to an additional $143 million in intangible common equity.
• Record Pretax Pre-Provision Net Revenue: Reached $224 million, up nearly 9% from the prior quarter, driven by strong organic performance and the recent acquisition.

3. Forward Guidance and Outlook:

• Revenue and Loan Growth Expectations: Guidance for slightly lower revenue and loan growth in Q4 2025, primarily due to a shorter time frame for achieving targets. However, management remains optimistic about growth potential into 2026.
• Net Interest Margin: Expected to improve modestly through the end of the year and into next year, driven by loan repricing and reduced funding costs.
• Expense Management: Anticipated to align with revenue expectations, maintaining operating leverage as the company integrates acquisitions.

4. Bad News, Challenges, or Points of Concern:

• Declining Non-Interest-Bearing Deposits: Non-interest-bearing deposits decreased to 20.6%, attributed to the lower percentage from Industry Bank's deposits and temporary customer inflows.
• Commercial Real Estate (CRE) Paydowns: Noted uptick in CRE paydowns, which may impact loan growth, although management views this as a normal part of business cycles.
• Competitive Pressures: Increased competition in loan pricing, particularly in the community banking sector, though yields have remained stable.

5. Notable Q&A Insights:

• Deposit Mix and Retention: Management discussed the impact of temporary customer deposits and emphasized the stability of core deposits post-acquisition.
• Loan Pricing and Competition: While competition remains, the bank has managed to maintain loan yields, with new loans averaging 6.85%.
• Future M&A Activity: Management is open to further acquisitions but is focused on opportunities that enhance market density within their existing footprint rather than expanding geographically.

Overall, Cadence Bank reported a strong quarter with significant growth driven by strategic acquisitions and effective management of its balance sheet, while also acknowledging challenges related to deposit stability and competitive pressures in the lending market.