Cadence Bank’s Earnings Call Highlights Robust Growth

Cadence Bank ((CADE)) has held its Q2 earnings call. Read on for the main highlights of the call.

Cadence Bank’s recent earnings call painted a positive picture, highlighting robust growth in net income, loans, and deposits, largely driven by successful mergers and acquisitions. Despite facing challenges such as a decline in net interest margin and increased expenses, the overall sentiment was optimistic, with the positives significantly outweighing the negatives.

Strong Financial Performance

Cadence Bank reported an impressive increase in adjusted net income from continuing operations, reaching $137.5 million or $0.73 per share. The adjusted return on assets (ROA) stood at 1.14% for the quarter. Additionally, the bank achieved a record pretax pre-provision net revenue of $206 million, marking an over 8% increase from the previous quarter.

Loan and Deposit Growth

The bank experienced substantial organic loan growth of $1.1 billion for the quarter, translating to a 12.6% annualized rate, with Texas being a significant contributor. Moreover, organic core customer deposits rose at a 4.4% annualized rate, showcasing the bank’s ability to attract and retain customers.

M&A Activity

Cadence Bank successfully completed the acquisition of First Chatham Bank and announced plans to acquire Industry Bancshares. These strategic moves are set to expand the bank’s footprint in Georgia and Central Texas, further enhancing its market presence.

Efficiency and Revenue Growth

The bank’s adjusted efficiency ratio improved by 90 basis points to 56.7%, reflecting better operational efficiency. Total adjusted revenue saw a 6% increase, amounting to $476 million, underscoring the bank’s ability to generate higher income.

Improved Noninterest Revenue

Cadence Bank reported a $13 million or 15% increase in adjusted noninterest revenue compared to the first quarter. This growth was driven by strong performances in mortgage originations and wealth management, highlighting the bank’s diversified revenue streams.

Net Interest Margin Decline

The bank faced a slight decline in net interest margin, which fell by 6 basis points to 3.40%. This was attributed to investments in securities funded by Federal Home Loan Bank borrowings, although loan yields increased to 6.34%.

Increased Criticized and Classified Loans

There was a linked quarter increase in criticized and classified loans, attributed to a few specific credits. However, these levels remain within historical ranges, indicating manageable risk.

Increased Noninterest Expense

Adjusted noninterest expenses rose by $11.7 million on a linked quarter basis, driven by acquisition-related costs, business growth, and legal expenses. Despite this increase, the bank continues to focus on managing its cost structure effectively.

Forward-Looking Guidance

Cadence Bank’s guidance for the full year is optimistic, with expectations of loan growth between 11% and 15%, and core customer deposit growth of 12% to 15%. The bank anticipates total revenue growth between 10% and 12%, supported by stable credit conditions. These forecasts reflect the bank’s confidence in sustaining its growth trajectory.

In summary, Cadence Bank’s earnings call highlighted a strong quarter characterized by significant growth in key financial metrics and successful strategic initiatives. While challenges such as a decline in net interest margin and increased expenses were noted, the overall sentiment remains positive, with the bank well-positioned for continued growth.