Cadence Bank Q3 Earnings: Steady Growth and Future Momentum

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Cadence Bank Q3 Earnings: Steady Growth and Future Momentum

Cadence Bank (CADE) demonstrated strong performance in its third-quarter 2024 earnings call on October 30, 2024. GAAP net income was reported at $134.1 million, or $0.72 per diluted share. Adjusted net income from continuing operations increased by 6% from the previous quarter, reaching $135.6 million, or $0.73 per share.

The bank's core customer deposits grew by over 11% year-over-year despite a modest rise in deposit costs. Cadence Bank also showcased stable credit quality and a strong capital position with a CET1 ratio of 12.3%. Looking ahead, the management team expresses optimism about continuing loan growth and improving net interest margins.

Key Highlights

  • Q3 GAAP net income reached $134.1 million, with diluted earnings per share at $0.72.
  • Adjusted net income from continuing operations increased 6% quarterly.
  • Core customer deposits grew by over 11% year-over-year, reaching approximately $985 million.
  • Loan balances remained stable due to repayments, although new loan commitments were strong.
  • The net interest margin improved for the fourth consecutive quarter, rising to 3.31%.
  • The bank repurchased over 323,000 shares and maintained a robust capital position.
  • Management is optimistic about future loan growth and net interest margins.

Company Outlook

  • Revenue growth is expected to outpace cost growth through 2025.
  • The bank plans to continue its share repurchase strategy.
  • Post-election potential merger and acquisition opportunities are being explored, with a focus on expansion within existing markets.

Challenges

  • Loan growth is under pressure due to repayment activities.
  • Competitive pressures may affect deposit costs, but these are expected to peak this quarter.

Opportunities

  • The average rate on loans to be repriced in the next year is 6.34%.
  • Management anticipates a reduction in deposit costs going forward.
  • A healthy credit pipeline is present, and strategic hiring efforts are ongoing.

Underperformance Concerns

  • Some transactions expected to close by the quarter's end did not occur, but the credit pipeline remains strong.

Q&A Highlights

  • Management discussed the impact of non-accrual loans, mainly from SBA and FHA loans, but did not express significant concern over collection issues.
  • Cadence Bank plans to call back $215 million in subordinated debt in November, temporarily reducing Tier 2 capital.
  • The company is actively hiring with a focus on normalizing expenses.
  • Loan yields are expected to adjust in response to market changes, with new loans issued at approximately 7.70% to 7.75%.
  • Non-interest income is projected to rise if mortgage rates fall.

In summary, Cadence Bank delivered a strong performance in the third quarter of 2024, marked by growth in core customer deposits and stable credit quality. The bank's outlook remains positive, supported by a strong credit pipeline and strategic initiatives. Management continues to focus on operational efficiency and maintains cautious optimism about the bank's prospects in the face of competitive market conditions.