Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cadence Bank (CADE, Financial) reported a net income of $134.1 million, with adjusted net income from continuing operations increasing by 6% compared to the previous quarter.
- The bank achieved significant growth in core customer deposits, with an annualized increase of over 11%, while keeping deposit costs stable.
- Net interest margin improved for the fourth consecutive quarter, reaching 3.31%, driven by stabilized deposit costs and upward repricing of loans.
- Credit quality remained stable, with consistent net charge-offs and a solid allowance for credit losses at 1.38% of loans.
- Cadence Bank (CADE) repurchased over 323,000 shares of its stock, maintaining strong capital metrics, including a CET1 of 12.3% and total capital of 14.5%.
Negative Points
- Loan balances remained flat for the quarter due to payoff pressures, despite meaningful new loan commitments.
- There was an increase in non-accrual loans, primarily due to the migration of previously criticized credits.
- Mortgage banking revenue declined by $5 million in the third quarter, impacted by changes in the rate environment and paydowns.
- Total adjusted non-interest expense increased by 3.7% due to merit increases and other factors, impacting the efficiency ratio.
- The bank faces ongoing competition in deposit rates, which could affect future deposit cost management.
Q & A Highlights
Q: Can you discuss the impact of floating rate loans repricing in the near term and the fixed rate loans coming due over the next year?
A: Valerie Toalson, CFO, explained that the loan yields continued to increase despite having 27% floating rate securities. New loans are being issued at rates higher than the current portfolio average. The weighted average rate of loans repricing over the next 3 to 12 months is 6.34%, and new loans are being issued at higher rates, supporting continued loan yield increases.
Q: How are you managing deposit costs, and what are your expectations for deposit betas in the coming quarters?
A: Valerie Toalson noted that deposit costs increased by only 2 basis points this quarter. The bank is working aggressively to reduce deposit costs while maintaining growth. They have a significant amount of time deposits renewing in the fourth quarter, which are expected to reprice at lower rates, providing a tailwind for deposit cost reduction.
Q: Can you provide insights into the loan pipeline and the impact of payoffs on loan growth?
A: James Rollins, CEO, stated that new loans totaled approximately $1.07 billion for the quarter, similar to the previous quarter. The loan pipeline remains robust, but payoffs, particularly in the energy sector, have offset growth. The team is optimistic that origination activity will eventually outpace payoffs.
Q: What are your expectations for expense growth in 2025, and how does it relate to revenue growth?
A: James Rollins mentioned that while it's challenging to define "normalized" expense growth, they anticipate aligning with inflation rates and continuing investments in people and technology. The expectation is that revenue growth will outpace expense growth in 2025, driven by expanding margins and loan growth.
Q: How are you approaching share buybacks and M&A opportunities?
A: James Rollins stated that the bank has been consistent with share buybacks, taking advantage of market conditions. Regarding M&A, the focus is on expanding within existing markets rather than new footprints. The bank is well-positioned capital-wise to execute potential opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
