Cadence Bank(CADE) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted net income from continuing operations increased to $137.5 million or $0.73 per share, with adjusted ROA at 1.14% for the quarter [7] - Adjusted efficiency ratio improved by 90 basis points to 56.7% [8] - Organic loan growth reached $1.1 billion for the quarter, representing a 12.6% annualized growth rate [8] - Core customer deposits increased at a 4.4% annualized rate, with significant growth in non-interest bearing deposits [9] - Tangible book value rose to $22.94 per share, with CET1 regulatory capital at 12.2% [9] Business Line Data and Key Metrics Changes - Average loans increased by over $800 million, while period-end loans grew by $1.4 billion, including $400 million from the First Chatham acquisition [10] - Non-interest revenue increased by $13 million or 15% compared to the first quarter, driven by strong performance in mortgage originations and wealth management [13] - Adjusted non-interest expense rose by $11.7 million, primarily due to the First Chatham acquisition and business growth [14] Market Data and Key Metrics Changes - The company reported strong loan growth across various geographies and verticals, with Texas showing the highest growth [8] - Non-interest bearing deposits as a percentage of total deposits increased to 22.6% [11] - The net interest margin (NIM) declined by six basis points to 3.4%, but loan yields increased to 6.34% [12] Company Strategy and Development Direction - The company is focused on expanding its presence in Georgia and Central Texas through recent acquisitions [6] - Future loan growth is expected to be between 11-15% for the full year, supported by strong pipelines and acquisitions [18] - The company aims to continue investing in its future while maintaining stable credit and strong EPS performance [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving growth through both organic means and strategic partnerships [111] - The company anticipates continued strong loan demand and revenue growth in the latter half of the year [18] - Management noted that the current operating environment is favorable, with strong pipelines and borrower activity [50][86] Other Important Information - The company completed the acquisition of Industry Bank shares and First Chatham Bank, enhancing its market position [6] - The company liquidated a significant portion of the municipal portfolio acquired from Industry Bank, reinvesting the proceeds into higher-yielding securities [16] Q&A Session Summary Question: Can you provide insights on the NII and margin guidance? - Management indicated that they expect continued improvement in net interest margin as new loans are coming in at higher rates, despite some initial negative impacts from security purchases [21][24] Question: What are the expectations for M&A activity? - Management noted an increase in M&A activity and expressed confidence in executing future transactions within their existing footprint [28][30] Question: Can you elaborate on the revenue guidance increase? - The revenue guidance increase is based on strong loan growth and a healthy pipeline, with expectations for organic revenue growth [34] Question: How is the loan growth trend expected to continue? - Management believes the strong loan growth is sustainable and reflects a real change in demand rather than a temporary rebound [83][86] Question: What is the outlook for deposit growth? - Management is optimistic about continued growth in core deposits, particularly in DDA, and sees potential for further compression in CD costs [63][66] Question: Any changes in credit quality or classified loans? - Management reported that the increase in criticized loans is within normal ranges and attributed some of it to the recent acquisition [67]