Cadence Bank(CADE) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net income available to common shareholders of $124.6 million or $0.68 per diluted share, with adjusted net income of $134.2 million or $0.73 per diluted share, both showing an increase of over 10% on a linked-quarter basis [6][9] - Adjusted PPNR was $176.7 million or 1.51% of average assets on an annualized basis, reflecting strong performance [6][9] - Net loan growth for the quarter was $1.2 billion or over 17% annualized, bringing the year-to-date total to $1.5 billion or 11% annualized [6][9] Business Line Data and Key Metrics Changes - Significant growth was reported in commercial and industrial, commercial real estate, and residential mortgage portfolios [7] - The loan growth was almost evenly split between the community bank and commercial bank, excluding residential mortgage growth [7] - Noninterest revenue was $125.2 million, a decline of $3.2 million due to lower MSR valuation adjustments, but insurance revenue grew over 10% [12] Market Data and Key Metrics Changes - The company experienced considerable loan growth in Texas, Florida, Missouri, and parts of Mississippi [7] - Total deposits saw a minor decline of $379 million, consistent with historical seasonal trends, but year-to-date deposits were still up by over $370 million or almost 2% annualized [7] Company Strategy and Development Direction - The company is focused on successfully integrating operations and technology systems post-merger, with a core system conversion scheduled for later this year [5][6] - There are plans to consolidate 17 additional branches, expected to yield annual cost savings of approximately $8 million [8] - The company aims to maintain a strong customer experience throughout the integration process, emphasizing operational efficiency and cost savings from the merger [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's credit quality metrics, noting net recoveries for five consecutive quarters and a decline in nonperforming assets [8] - The management team is cautiously optimistic about loan growth opportunities, contingent on economic conditions within their footprint [19][25] - There are concerns about potential economic headwinds, but the company remains well-positioned for increasing rates [14][19] Other Important Information - The adjusted efficiency ratio improved to 60.5%, with adjusted noninterest expenses declining by over $9 million or 3% compared to the previous quarter [8][13] - The company is asset sensitive, with approximately 68% of the loan portfolio floating within 30 days or variable rate [11] Q&A Session Summary Question: Impact of insurance acquisition on income - The acquisition contributed less than $0.5 million in gross fees [15] Question: Plans to alter asset sensitivity - Management is currently comfortable with their asset sensitivity position and continues to evaluate it [16] Question: Expectations for loan growth in the second half of the year - Management is pleased with current pipelines and expects continued growth, potentially reaching low double-digit growth by year-end [25][26] Question: Cost savings from expenses and branch closures - Management detailed expected cost savings from branch closures and amortization expense reductions, indicating a focus on maintaining efficiency [27][28] Question: Funding growth and margin outlook - Management plans to fund growth through deposits and securities runoff, with expectations for gradual increases in deposit costs [31][34] Question: Share repurchase outlook amid macro concerns - Management is cautious about future share repurchases due to potential economic uncertainties [55] Question: Credit quality and allowance for credit losses - Management indicated that credit quality remains strong, with the allowance for credit losses at 1.55% of loans [56] Question: Clarification on branch closures - The 17 additional branch closures are part of the previously communicated consolidation plans [58][61]