Cadence Bank signals accelerated integration and targets continued margin improvement through 2025

Earnings Call Insights: Cadence Bank (CADE) Q3 2025

MANAGEMENT VIEW

* Chairman & CEO James Rollins highlighted the completion and full operational integration of Industry Bancshares and First Chatham into Cadence Bank, stating, "Industry and First Chatham are now both fully integrated into our systems and processes, and we are operating as one bank under the Cadence brand." Rollins stressed the strategic opportunity to expand in Central Texas and Georgia, and emphasized the successful disposition of 100% of Industry's securities portfolios during the quarter at a total mark that was "less than our estimated mark when we announced the transaction."
* Rollins reported tangible book value per share declined only $0.12 to $22.82, with the impact of the Industry acquisition "largely offset by strong operating earnings and implement in our AOCI." Adjusted net income from continuing operations increased to $152.8 million, or $0.81 per share, and adjusted return on assets was 1.13%. Deposits rose by $3.4 billion, with core customer deposits up $3.1 billion due to the Industry acquisition. Loans increased by $1.3 billion, including $1 billion from Industry and over $300 million in organic growth. Net charge-offs for the quarter were 26 basis points annualized, with nonperforming and criticized asset levels remaining stable.
* CFO Valerie Toalson stated, "Our adjusted pretax pre-provision net revenue for the third quarter reached a record $224 million, up nearly 9% from the prior quarter driven by strong organic performance and the closing of our second acquisition this year." Toalson detailed the sale and reinvestment of $2.5 billion in securities from Industry, resulting in a net portfolio growth of $780 million and an improved yield mix. "Net interest margin improved 6 basis points to 3.46% driven by improved securities yields and a decline in overall funding costs," with securities yields improving by 32 basis points to 3.65%. Total funding costs improved 7 basis points to 2.35%. Adjusted noninterest revenue was $93.5 million, down $4.7 million mainly due to seasonal mortgage banking declines. Adjusted noninterest expense increased $22.8 million, primarily compensation-related from the added banks and higher incentive accruals. Toalson also noted, "These adjustments result in the earn-back on this transaction coming in closer to just 2.5 years."

OUTLOOK

* Toalson reiterated guidance for the rest of the year, saying, "We continue to be confident in our performance and in the outlook for our markets, with projected growth and financial results through the end of the year all expected to continue to fall within the guidance ranges we shared last quarter."
* Management indicated that the slightly lower revenue and loan growth guidance for the remainder of the year is due to the shorter timeframe left in the year, not a change in underlying business trends.
* Expense expectations are tightened to align with revenue guidance as the company continues to drive operating leverage.

FINANCIAL RESULTS

* Adjusted net income from continuing operations was $152.8 million, or $0.81 per share, and adjusted return on assets was 1.13% for Q3 2025.
* Adjusted pretax pre-provision net revenue reached $224 million, up nearly 9% from the prior quarter.
* Total adjusted revenue was $517 million, an increase of $41 million or 9% quarter-over-quarter. Net interest revenue increased by $46 million or 12%. Net interest margin improved by 6 basis points to 3.46%.
* Deposits rose by $3.4 billion, with core customer deposits up $3.1 billion. Loans increased by $1.3 billion, including $1 billion from Industry and $300 million organically. Securities portfolio grew $780 million from prior quarter.
* Adjusted noninterest revenue was $93.5 million, down $4.7 million due to seasonal mortgage banking declines. Adjusted noninterest expense increased by $22.8 million, primarily related to compensation and integration costs.

Q&A

* Manan Gosalia, Morgan Stanley: Asked about guidance drivers and loan growth. Rollins responded, "There's only 3 months left in the year. And so the time line is much shorter, and so we have a better clarity into where we are."
* Gosalia also questioned funding repricing and deposit mix. Rollins said, "Industry Bancshares played a big piece of that. Remember, they were very heavily funded on the CD desk. I think our expectation is, over time, we will be able to improve their deposit mix."
* Jared Shaw, Barclays: Inquired about DDA decline and capital management post-acquisitions. Toalson explained fluctuations were driven by a large customer's temporary deposits and acquisition mix, calling period-end levels a "good base."
* Shaw followed up on capital strategy. Rollins noted, "We said last quarter that we needed to build capital after the Industry transaction. We did that already...that puts us back in the buyback game much faster than we thought before."
* Casey Haire, Autonomous: Asked about Industry deposit numbers and pricing. Toalson clarified, "Their cost of CDs was actually equal to or lower than ours...the core organic was actually flat."
* Multiple analysts probed on net interest margin, loan pricing, expenses, and M&A. Management repeatedly emphasized strong pipelines, disciplined cost management, and ongoing appetite for M&A within their existing footprint.

SENTIMENT ANALYSIS

* Analysts adopted a probing but mostly neutral tone, focusing on the sustainability of loan growth, deposit mix, and cost controls. Questions were fact-based, with little overt skepticism.
* Management maintained a confident and positive tone throughout both prepared remarks and Q&A, with Rollins stating, "We continue to believe that we've got a good growth machine going. Pipelines look good."
* Compared to the previous quarter, management’s confidence level remained high, with an increased emphasis on integration efficiency and capital flexibility.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted to a slightly lower range for revenue and loan growth for full-year 2025, attributed to the shorter remaining timeframe rather than business deterioration.
* Strategic focus remained on integration, organic growth, and disciplined expense management, echoing the prior quarter but with more emphasis on integration results and capital redeployment.
* Loan and deposit growth continued to be strong, but organic loan growth slowed compared to the prior quarter’s higher pace. Margin improvement became a more prominent theme.
* Analysts’ questions in both quarters concentrated on growth durability, margin, expenses, and acquisition impacts, with little change in sentiment or concern level.
* Management’s confidence remained high, with a continued focus on leveraging acquisitions and maintaining asset quality.

RISKS AND CONCERNS

* Management cited the uptick in CRE paydowns but emphasized strong new origination activity and stable asset quality.
* Temporary fluctuations in noninterest-bearing deposits were explained as driven by one large customer and acquisition mix, with expectations for stable core levels going forward.
* The impact of higher-cost public funds tied to Industry was managed through planned runoff.
* Analysts voiced concern about deposit mix and the sustainability of loan pipelines, but management pointed to strong pipelines and broad-based lending activity.

FINAL TAKEAWAY

Cadence Bank’s third quarter showcased successful integration of recent acquisitions, strong revenue and margin performance, and disciplined cost management, positioning the bank for continued growth through the end of 2025. Management’s confidence in the outlook is underpinned by robust loan pipelines, stable asset quality, and strategic capital deployment, while guidance adjustments reflect timing rather than operational weakness. Investors received clarity on the sustainability of deposit and loan trends, cost saves from acquisitions, and the path forward for capital actions and future M&A within Cadence’s growing regional footprint.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/cade/earnings/transcripts]

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