Cadence Bank(US:CADE)2022-10-26 01:16Financial Data and Key Metrics Changes - The company reported adjusted net income of $143.7 million, or $0.78 per diluted share, representing a 7% increase compared to the previous quarter [11] - Adjusted PPNR (pre-provision net revenue) increased to $189.8 million, also up approximately 7% from the second quarter [11] - Net loan growth for the quarter was $936 million, or 13% annualized, bringing year-to-date total loan growth to $2.4 billion, or 12% annualized [12] - Total adjusted non-interest expense was $290.2 million, up from $271.8 million in the previous quarter, driven by compensation and nonrecurring benefits [25][28] Business Line Data and Key Metrics Changes - The corporate banking group had strong performance across various sectors, including C&I, energy, and real estate [12] - Non-interest revenue remained stable at $124.5 million, with a decline in mortgage banking revenue offset by improved revenue in limited partnership investments and other fees [24] - The insurance team reported a year-over-year revenue increase of over 11% [24] Market Data and Key Metrics Changes - The Texas region led loan growth, reflecting the economic environment and the company's geographic footprint [12] - The company experienced a decline in deposits of $1.2 billion, with nearly half attributed to public funds and correspondent bank balances [13] Company Strategy and Development Direction - The company successfully completed a core operating system conversion and rebranding of over 400 locations, enhancing its operational efficiency and customer service [7][10] - The management anticipates further benefits from merger efficiencies as they move into 2023, alongside the favorable interest rate environment [19][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of credit quality, despite a slight increase in net charge-offs due to one acquired energy credit [15][16] - The company is well-positioned for future growth, with a strong asset sensitivity and a unified brand to serve customers across its footprint [32] Other Important Information - The company incurred a $2.9 million pension settlement expense due to an elevated number of retirements [29] - Regulatory capital remains solid, with a common equity Tier 1 ratio of 10.3% and a total capital ratio of 12.8% [32] Q&A Session Summary Question: What is the expected run rate for expenses going into the fourth quarter? - Management indicated that the $290 million expense run rate is reasonable, with an estimated $46 million in cost savings remaining to be realized over the next couple of quarters [35][38] Question: What drove the increase in criticized or substandard loans? - Management noted that the increase was related to a few C&I credits, with no significant concerns about overall credit quality [40][41] Question: What is the outlook for net interest margin? - Management believes there is room for improvement in net interest margin due to the repricing of loans and the current interest rate environment [52][54] Question: How does the company view provisioning and the allowance ratio? - Management stated that while they are monitoring economic conditions, they feel confident about their current allowance ratio and credit quality [60][62] Question: What is the company's strategy regarding capital and buybacks? - Management has not engaged in stock buybacks recently due to low capital levels and intends to remain conservative given economic uncertainties [92]