Cadence Bank Q4 2024 Earnings Report

Cadence Bank EPS Results

• Actual EPS: $0.70
• Consensus EPS: $0.68
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.40

Cadence Bank Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $457.78 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Cadence Bank Announcement Details

• Quarter: Q4 2024
• Date: 1/22/2025
• Time: After Market Closes
• Conference Call Date: Thursday, January 23, 2025
• Conference Call Time: 11:00AM ET

Cadence Bank (NYSE:CADE) provides commercial banking and financial services. Its products and services include consumer banking, consumer loans, mortgages, home equity lines and loans, credit cards, commercial and business banking, treasury management, specialized and asset-based lending, commercial real estate, equipment financing, and correspondent banking services. The company's products and services also comprise small business administration lending, foreign exchange, wealth management, investment and trust, financial planning, retirement plan management, and personal and business insurance services. Cadence Bank was founded in 1876 and is headquartered in Tupelo, Mississippi.

Cadence Bank Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to the Cadence Bank's 4th Quarter and Year End 2024 Webcast and Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Will Fazakerley, Executive Vice President and Director of Corporate Finance.

[Operator]

Please go ahead.

[Will Fisackerly, Executive VP & Director of Corporate Finance at Cadence Bank]

Good morning, and thank you for joining the Cadence Bank 4th quarter 2024 earnings conference call. We have members from our executive management team here with us this morning, Dan Rollins, Chris Bagley, Valerie Tolson and Billy Braddock. Our speakers will be referring to prepared slides during the discussion. You can find the slides by going to our Investor Relations page at ir. Cadencebank.com, where you'll find them on the link to our webcast or you can view them at the exhibit to the 8 ks that we filed yesterday afternoon.

[Will Fisackerly, Executive VP & Director of Corporate Finance at Cadence Bank]

These slides are also in the Presentations section of our Investor Relations website. I would remind you that the presentation, along with our earnings release, contain our customary disclosures around forward looking statements and any non GAAP metrics that may be discussed. The disclosures regarding forward looking statements contained in those documents apply to our presentation today. And now I'll turn it to Dan for his opening comments.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Good morning and Happy New Year. Thank you for joining us to discuss our Q4 and full year 2024 financial results. After I cover a few highlights and Valerie provides additional detail on our financials, our executive management team will be available for questions. Before we discuss the quarter, I'd like to make a few brief remarks regarding last night's announcement of our merger with FCB Financial Corp, the parent company of First Chatham Bank based in Savannah, Georgia. I would like to welcome Ken Farrell and the experienced team of bankers from First Chatham to Cadence.

[Dan Rollins, Chairman and CEO at Cadence Bank]

First Chatham was founded in 2,002 and is currently operating 8 locations across the Greater Savannah market with total assets of almost $600,000,000 Upon closing, Ken will serve as Cadence Bank Southeast Georgia Division President. We have expressed our desire to be an acquirer of choice and grow within our footprint for some time now. Savannah, the 2nd largest MSA in the state of Georgia and we currently have only one location there. It is a very diverse market with strong ties to manufacturing, port operations and logistics, tourism, healthcare, military and real estate development. First settlement is a great core funded franchise with approximately 30% of their deposits in non interest bearing products and an impressive overall cost of funding.

[Dan Rollins, Chairman and CEO at Cadence Bank]

The financial metrics of the transaction are attractive for both shareholder bases. The estimated pro form a impact to our tangible book value per share and regulatory capital metrics is minimal. We expect to achieve cost savings of approximately 25% of their non interest expense base, which will allow the transaction to be accretive to earnings in the 1st full year as well as provide a reasonable earn back on the tangible book dilution of 2 years or less. We are most excited about being able to offer our expanded set of products and services into this market in a more meaningful way to support our organic growth plans. We anticipate the transaction could close during the Q3 of 2025 subject to regulatory approval and other customary closing conditions.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Again, this is a big win for our company and our team is excited to be back in the game. As we move into the financial results, 2024 was a great year for our company. I'm extremely proud of the 5,000 plus teammates across our company and the contribution they've each made to the results that our management team will discuss this morning. The 2024 results speak for themselves. We reported meaningful improvement in virtually every aspect of our financial performance while maintaining strong credit quality and capital.

[Dan Rollins, Chairman and CEO at Cadence Bank]

As we dive further into the numbers, GAAP net income was $130,300,000 or $0.70 per diluted common share for the 4th quarter and $514,100,000 or $2.77 per share for the full year. Adjusted net income from continuing operations for the Q4 was $130,000,000 or $0.70 per diluted common share and $507,900,000 or $2.74 per share for the full year. On a per share basis, this represents adjusted earnings growth of $0.54 up 25% compared to 2023. We had another very solid quarter from a balance sheet growth perspective. Our loan growth for the quarter was $438,000,000 or just over 5% annualized, resulting in total net loan growth of $1,200,000,000 for the year, which is approximately 4%.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Additionally, we have continued to retain and grow core customer deposits. Excluding the elevated temporary overnight sweep activity at September 30 that we discussed in our Q3 call, core customer deposits grew $260,000,000 or 3% annualized for the quarter and $2,200,000,000 or approximately 7% for the full year. Our ability to grow core deposits, while also prudently managing deposit costs has been instrumental in our net interest margin improvement. Net interest margin improved by 7 basis points linked quarter to 3.38 percent and by 22 basis points for the full year to 3.30%. Valerie will discuss the margin in a few minutes, including our expectations as we move into 2025.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Our credit quality continues to be very stable. We reported net charge offs of 17 basis points annualized for the quarter and 24 basis for the full year. Our non performing, criticized and classified totals are all very stable linked quarter and year over year, while our allowance for credit losses coverage remains strong at 1.37% of net loans and leases. We continue to improve operating leverage and efficiency. While we had a couple of items that drove a slight uptick in our quarterly efficiency ratio, for the full year, we improved by 5 percentage points from 63.3% in 2023 to 58.4% in 2020 4.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Finally, we reported meaningful tangible growth meaningful growth in tangible book value metrics during 2024. Tangible book value per share improved to $2.22 per share, which is over 11% to $21.54 at December 31, while tangible common shareholders' equity to tangible assets increased from 7.44% to 8.67% over the same time period. We achieved this growth while repurchasing just over 1,200,000 shares during the year at an average price of $26.74 I'll now turn the call over to Valerie for her comments. Valerie?

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Thank you, Dan. Dan referenced the key highlights for the year. Steady loan growth, meaningful core customer deposit growth, significant margin expansion, stable credit quality, improved operating efficiency and a strong capital position. Focusing specifically on the 4th quarter results, we reported the adjusted EPS from continuing operations of $0.70 up 75% from the same quarter last year driven by an 11% increase in adjusted revenue combined with lower expenses and loan provisions. The linked quarter $0.02 EPS decline was driven by some isolated expenses related to a system upgrade and a small increase in our provision for loan losses.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Total loans ended the year at $33,700,000,000 with growth in the 4th quarter $438,000,000 or just over 5 percent annualized with the quarter's growth primarily in residential mortgages, owner occupied C and I and income producing CRE. For the year, the net loan growth was $1,200,000,000 or approximately 4%. Loan pipelines remain solid and diversified and the macro environment in our footprint is favorable for continued loan growth. Total deposits, dollars 40,500,000,000 grew 1,700,000,000 in the 4th quarter, including the addition of $1,500,000,000 in broker deposits that we used along with excess cash to pay off the $3,500,000,000 in bank term funding program borrowings and to call $215,000,000 in sub debt during the quarter. We also saw a $360,000,000 seasonal increase in public funds balances during the quarter.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

And while core customer deposits declined slightly in quarter end balances, adjusting for the elevated temporary funds at September 30 that we discussed last quarter, core deposit growth for the Q4 was $260,000,000 or 3% annualized. Further, core customer deposit growth for the full year was $2,200,000,000 or almost 7%. As you know, our strong core customer deposit base is the foundation of our franchise and our team has done a tremendous job in 2024 from both the retention and a growth perspective. The ability to continue to grow core funding has also driven the favorable trends in our net interest income and net interest margin detailed on Slide 11. Our 4th quarter net interest margin of 3.38% represents 7 basis points of improvement compared to the Q3 of 2024 and since the Q4 of 2023 it has increased by a significant 34 basis points.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

The 4th quarter net interest margin improvement was driven by lower average earning assets as we reduced our borrowings and excess cash. Given the recent interest rate cuts, our loan portfolio yield dipped by 21 basis points to 6.4% in the 4th quarter, while total cost of deposits declined 11 basis points to 2.44%. Our non interest bearing deposits as a percent of total deposits did decline to 21.2% during the quarter, partially impacted by the addition of the broker deposits in the denominator. Net interest revenue was up $3,100,000 in the Q4 to $364,500,000 supported

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

by

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

the growth in new loans. For the full year of 2024, net interest revenue was $1,400,000,000 up $85,000,000 or 6% compared to 2023. Non interest revenue highlighted on Slide 14 was $86,200,000 on an adjusted basis declining $2,600,000 or 2.9 percent in the 4th quarter as an increase in mortgage banking revenue was offset by a decline in other non interest revenue. Wealth management revenue, deposit service charges and card fees were all very stable linked quarter. Our mortgage banking revenue was up $2,500,000 in the quarter due to improvements in the net mortgage servicing rights or evaluation adjustments, partially offset by a $1,800,000 decline in mortgage origination and servicing revenue as gain on sales margins compressed slightly.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Notably, quarterly production volume increased to over $800,000,000 the highest quarterly production in 3 years. Other miscellaneous income declined $2,600,000 largely due to a gain on debt extinguishment that was reported in the 3rd quarter results, as well as lower fair valuations of some of our equity investments and limited partnerships. For the full year, full year 2024 adjusted non interest revenue was $345,000,000 improving $19,000,000 or also 6% from the prior year, reflecting growth in wealth management fees, deposit service charges and other revenue. Moving to Slide 15, total adjusted non interest expense was $266,700,000 for the quarter, up $6,300,000 or approximately 2% compared to the Q3 of 2024. This increase was driven largely by a $4,000,000 increase in data processing and software expenses, which impacted by a 4th quarter upgrade of our treasury management platform.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

A majority of the expenses associated with this upgrade are not expected to be ongoing as we move forward. Additionally, other non interest expense increased $2,100,000 due to smaller increases in several items including professional services, advertising and public relations and operational losses. For the full year 2024, adjusted non interest expense of $1,000,000,000 was down $23,000,000 or 2% compared to the 2023 year, driven by declines in compensation costs. Given the 6% growth in annual adjusted revenues combined with this 2% decline in annual adjusted non interest expense, our adjusted efficiency ratio improved by a meaningful 5 percentage points the year, moving from 63.3 percent for 2023 to 58.4 percent for 2024. Focusing on credit detailed on slides 9 and 10, net charge offs for the Q4 were $14,000,000 or 17 basis points annualized, down from the 26 basis points in the 3rd quarter.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Our provision for credit losses increased very slightly to $15,000,000 for the 4th quarter and our allowance coverage was relatively flat at 1 point 3 7% at the end of the 4th quarter. Non performing loans declined by $8,000,000 in the 4th quarter. And as a reminder, dollars 90,000,000 or 34% of those represent guaranteed portions of SBA and FHA credits. Additionally, our classified and criticized loans as a percent of total loans both improved linked quarter with classified loans as a percentage of total loans declining to 2.02% and criticized loans as a percentage of total loans declining to 2.35%. Our capital detailed on Slide 16 continues to grow and remain strong.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

While the $215,000,000 in subordinated debt that we called in November had a small impact on total capital, the other regulatory capital metrics increased nominally linked quarter and more meaningfully year over year. Additionally, our board's approval of a 10% increase in our quarterly common dividend to $0.275 per share is a clear indicator of the confidence in our capital strength and earnings power. Looking forward, as we laid out in our materials related to the First Chatham transaction, we expect the immediate impact of the merger to be immaterial to regulatory capital. Slide 17 sets forth our 2025 guidance, reflecting the anticipation of continued earning asset growth, incremental improvement to operating leverage and stable credit quality. Specifically, we are estimating low to mid single digit organic growth rates in each of loans and core customer deposits and growth in total adjusted revenue in a range of 5% to 8% over 2024 levels, with the opportunity to continue to see growth in net interest margin as we move through the year.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Additionally, as we continue to focus on investments in our people and technology, we expect expenses for the year to increase between 4% to 6% over 2024 levels and annual net charge offs to fall between 20 30 basis points. 2024 was an instrumental year for Cadence Performance, one where we deleveraged the balance sheet, enhanced earning asset mix, achieved nice core customer growth and significantly improved operating leverage and performance metrics. We believe this 2024 momentum will continue as we move into the New Year in support of our 2025 guidance and ongoing shareholder value. We are also excited about expanding our presence in Savanna and continue to be bullish on our footprint for both organic growth and M and A fill in opportunities. Operator, we would like to open the call to questions now, please.

[Operator]

We will now begin the question and answer session. The first question today comes from Manon Gossaillier with Morgan Stanley. Please go ahead.

[Manan Gosalia, Equity Analyst at Morgan Stanley]

Hi, good morning.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Good morning, Malin. Good to hear from you.

[Manan Gosalia, Equity Analyst at Morgan Stanley]

Can you unpack that loan growth guide a little bit for us? What are you assuming for the different loan segments and for the utilization rates especially because I know those came down at Dutch again this quarter?

[Dan Rollins, Chairman and CEO at Cadence Bank]

I don't know that we've made a big change in utilization rate. I think we're just looking at what's happening in the markets we're in. I think we feel like we've got wind in our sales. We saw production up 4th quarter over Q3. I think we feel like the markets that we're in are going to give us growth.

[Dan Rollins, Chairman and CEO at Cadence Bank]

I think the wild card is what's the economy going to do. I think if the economy picks up, if the economy acts the way some people think we're going to see in the back half of twenty twenty five, we could be on the high end or above the high end of the range. On the other end, if things don't move in the right direction, we think our guide is very conservative, Billy.

[Billy Braddock, Chief Credit Officer at Cadence Bank]

Yes. I mean, in the short run, what we've noticed is over the last 4 quarters, just our approval our large approval levels that we have in a loan committee that continue to increase every quarter over the last 4, peaking in the Q4 of the year. Keep in mind that to get those to close can take 2, 3, 4, 5, 6 months sometimes. So we're seeing good momentum of closings that occurred in the Q4 and already in the Q1. So we in the near term, we expect that to continue.

[Billy Braddock, Chief Credit Officer at Cadence Bank]

And then like Dan said, the macro markets are bode well for us, all we know right now.

[Dan Rollins, Chairman and CEO at Cadence Bank]

The line utilization includes unfunded construction loans. And we booked some big construction loans that are sitting on 0. So that can move the line utilization 1% or 2%.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Yes, it's maintained at that percent.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Very close.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

5.50 for a long time.

[Dan Rollins, Chairman and CEO at Cadence Bank]

It's kind

[Dan Rollins, Chairman and CEO at Cadence Bank]

of was went down a little bit. I just don't think that's the message. I don't think that means anything.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Yes.

[Manan Gosalia, Equity Analyst at Morgan Stanley]

Perfect. Thank you. And then maybe on the loan yield side, as I look at the 3 buckets of floating, variable and fixed rate loans on Slide 12, the floating rate loan yields are down as expected. The variable rate loan yields are down a touch versus last quarter and then the fixed rate loan yields are up.

[Manan Gosalia, Equity Analyst at Morgan Stanley]

So can you talk about how those loan yields should trend from here in each of those buckets given the forward curve?

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Yes. So I'll probably talk about it a little more generally. Our overall portfolio yield is at $640,000,000 and so that's taking the combination of all of that. If still on that Slide 12, you take a look at the 3 to 12 month bucket, if you will, that $2,200,000,000 that's priced right now at 620. In the Q4, our new loan production was north of 7%.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

And so if we're able to continue that in an environment where there's no cuts in rates, then that speaks very favorably for that overall portfolio yield. That combined with the new growth that Billy is talking about that we're hopeful we'll be able to pull through as well. So we're optimistic on our loan yields and believe that if the growth can come in and if we can sustain that north of 7% new production, then there's a possibility to actually see that overall portfolio yield increase.

[Dan Rollins, Chairman and CEO at Cadence Bank]

That help you?

[Manan Gosalia, Equity Analyst at Morgan Stanley]

Yes. Thank you.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Thank you. Appreciate it.

[Operator]

The next question comes from Michael Rose with Raymond James. Please go ahead.

[Michael Rose, Managing Director at Raymond James Financial]

Hey, good morning guys. Thanks for taking my questions. I'll take a shot at this, but you have a breakdown for what the expectation would be for fees versus NII as it relates to the guide? And then as we think about the expense aspect, how much flexibility is there if the revenue comes in towards the lower end to scale back? I know there's obviously incentive compensation components, but would you actually look to potentially reduce the tax spend?

[Michael Rose, Managing Director at Raymond James Financial]

Is there any flex there so that you could generate positive operating leverage? Thanks.

[Dan Rollins, Chairman and CEO at Cadence Bank]

I'll take a stab at the first one, the second part of your question on the expenses and let Valerie color in. But first, I want to really appreciate you sending that Chicago weather down to the Gulf Coast here. We appreciate the 11 inches of snow we had on Alabama coast and I know you sent that down to us. So thank you very much.

[Michael Rose, Managing Director at Raymond James Financial]

You're welcome.

[Dan Rollins, Chairman and CEO at Cadence Bank]

From Houston to the Mississippi, Alabama, Florida coast over to the East Coast of Georgia. But this weather is not unusual, not usual for us, record weather for us. And I know you're glad to get cold weather out of your town. Let's see, expense question. I think we continue to invest in our people and we continue to invest in our technology.

[Dan Rollins, Chairman and CEO at Cadence Bank]

So I think when you're talking about what levers do we have in there, we absolutely are looking to continue to grow and invest in our people. If we don't find the right people to grow, then that's not going to get spent. I think when you talk about the technology spend, we've got projects that are underway today that are in the hopper and are going to happen. So I don't know that there's a whole lot of room there, but we're continuing to find ways to be more efficient at what we're doing. We're continuing to find ways to knock cost out and we'll continue to stay focused on that.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Valerie, she was also talking about fees.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Yes. Yes. And I'll talk on the net interest income versus the non interest income side, I think that we're a little more bullish on the net interest income side. On non interest income, expecting steady growth in our business lines, but there are a few things. We've got the wealth management, obviously business lines that are impacted by whatever the market does.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

The markets had some pretty strong performance over the past couple of years and so particularly this past year. And so we are modeling a less robust market impact for that. So if things turn out a little better than expected, then there's some additional upside there. Same thing with mortgage, so much dependent upon obviously the rates that drive that business and level of business. We're still not predicting much on the refi businesses.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

So again, depending on where rates go, there's potential for more upside there as well. But right now, I'd say that we're looking to have the biggest portion of that overall revenue growth into next year really coming through net interest income.

[Michael Rose, Managing Director at Raymond James Financial]

Helpful. And then just on credit, it was nice to see the step down in both criticized and classified loans. Just kind of the charge off guidance for the year is still around what you generated in 2024. Can you just give us some expectation of what that range could be if the economy continues to improve? Is there actually the ability that you could see charge offs kind of below the range and it's just the initial start to the year, so you've been conservative.

[Michael Rose, Managing Director at Raymond James Financial]

So it seems to me that just given that step down and the strong underwriting credit culture you guys have that range could be a little wide or high? Thanks.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Well, I like the way you think. We certainly want to see that number come down. I think that we are early in the year. I think that it's also lumpy. So we could have some big ticket hits that impact that.

[Dan Rollins, Chairman and CEO at Cadence Bank]

And so I think we want to make sure that we've got a range that works for us. Chris?

[Chris Bagley, President & Chief Credit Officer at Cadence Bank]

That's right. You're right on Mark, Dan. I mean the guidance is the guidance. We could do better or to the low end of the guidance. It's a lumpy part of that, but what I would want to emphasize, we could see like we saw this, we saw a good quarter this quarter, a downward trend, but that could bounce around a little bit given the size of the credits we're dealing with.

[Dan Rollins, Chairman and CEO at Cadence Bank]

We go back to the Q1 of last year, we had the one big item that came through that was out of left field and we're still dealing with some of that. We took it, but it is what it is.

[Michael Rose, Managing Director at Raymond James Financial]

Got it. I'll step back. Thanks.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Thank you. Appreciate it.

[Operator]

The next question comes from Jared Shaw with Barclays. Please go ahead.

[Jared Shaw, Managing Director at Barclays Capital]

Hey, good

[Jared Shaw, Managing Director at Barclays Capital]

morning. Hey, just remember a lift with your legs, not your back when you're shoveling up there.

[Dan Rollins, Chairman and CEO at Cadence Bank]

We don't even have any shovels for snow. What are you talking about? Thanks for reminding me.

[Jared Shaw, Managing Director at Barclays Capital]

It will be gone soon. Hey,

[Jared Shaw, Managing Director at Barclays Capital]

just maybe just

[Jared Shaw, Managing Director at Barclays Capital]

going back on the loan growth side, lowtomidsingledigit, I don't know, to me seems very conservative, I guess, in light of the deal and the tailwinds more broadly in the market. Are there any assumptions there for any type of loan runoff that we should expect? And then also does that include the benefits of the deal?

[Dan Rollins, Chairman and CEO at Cadence Bank]

It does not. So let's start with the deal. The deal is not in any of our forward numbers. So it's not in any of the guide at all. So start there.

[Dan Rollins, Chairman and CEO at Cadence Bank]

We're talking about organic growth and organic numbers and all of the guidance that we're talking about there. And I think we all agree that there's opportunity for us in 2025 to shine. I think as we sit here today, I don't know that we see where that actually comes from. There's just a lot of talk. We've been talking about that for a while.

[Dan Rollins, Chairman and CEO at Cadence Bank]

The new administration has been in place for 3 days today. We still don't have the banking leaders under their chairs yet. There's still some unknowns out there. But there's opportunity for us to do very well on loan growth this year. The team has capacity to grow.

[Dan Rollins, Chairman and CEO at Cadence Bank]

We've seen continued loan growth. Elyse said it just a minute ago. I think when you look back at Q4 over Q3, we had higher production by almost $300,000,000 in 4Q over 3Q. I think there's excitement amongst the team. The team's mixing it up out there.

[Dan Rollins, Chairman and CEO at Cadence Bank]

I saw a couple of emails yesterday flowing on some potential new credits that folks are excited to bring into us. We've got opportunity in front of us. I just don't know how to gauge that sitting here on January 23 for what we do for full year 2025.

[Jared Shaw, Managing Director at Barclays Capital]

Okay. All right. That's good.

[Billy Braddock, Chief Credit Officer at Cadence Bank]

Garrett, one thing I was going to add. I mean, part of the assumption and a wildcard out there is some of our merchant build construction lending activity That's the pay down exactly. Yes. And we've been active in that space. We were particularly active in 2021 2022.

[Billy Braddock, Chief Credit Officer at Cadence Bank]

A lot of that has funded up. And when capital markets open and those transactions trade, we'll see some level of pay down. We have assumed a tepid outstanding growth in that space for the year. So if that pay down activity is delayed, then we could outperform. If it's accelerated, we could underperform, but we've assumed that there's going to be a higher level of payoff and less growth in that space during the year.

[Billy Braddock, Chief Credit Officer at Cadence Bank]

Excellent. Good call.

[Jared Shaw, Managing Director at Barclays Capital]

Okay. All right. Thanks. And I

[Jared Shaw, Managing Director at Barclays Capital]

guess just for my follow-up, this deal, it looks attractive, but it's much smaller than sort of the MOE. Is this more of a one off than it was just too good to pass up? Or do you feel that going forward, there could be an opportunity to do sort of multiple overlapping smaller deals as a preference?

[Dan Rollins, Chairman and CEO at Cadence Bank]

I don't know that there's a preference. I think we could do what you just said. I think we would certainly like to see larger opportunities. You've heard me talk for the last year, we want to be the acquirer of choice. We want to be a good player.

[Dan Rollins, Chairman and CEO at Cadence Bank]

We want to be end market. We want the opportunity to expand and good markets that we need to expand in. This clicks all those boxes. When we talk about Savannah, that's the 2nd largest MSA in the state of Georgia. There's a lot of business activity in the Savannah market that our one branch, while we're doing well over there, we just we're not there, we're not visible.

[Dan Rollins, Chairman and CEO at Cadence Bank]

This puts us, I think, in 5 or 6 deposit market share in that market. And while the First Chatham team is fantastic, are a good community bank team. We get to overlay many products and services that are currently not on the menu of products and services that they're offering. And so I think we're excited about expanding further into that market. So opportunities like this have been what I've been talking about for a while.

[Dan Rollins, Chairman and CEO at Cadence Bank]

It would certainly be nice to find bigger opportunities. And I think we will see those opportunities as we look forward because I think we'll continue to be in a consolidating industry. We just want to be in the game.

[Jared Shaw, Managing Director at Barclays Capital]

Does this keep you out of the market until this closes? Or do you think that you could sort of stack deals?

[Dan Rollins, Chairman and CEO at Cadence Bank]

I don't believe a transaction that's 1.5% of our size slows us down.

[Jared Shaw, Managing Director at Barclays Capital]

Okay. Thank you.

[Operator]

The next question comes from Matt Olney with Stephens. Please go ahead.

[Matt Olney, Managing Director at Stephens Inc]

Hey, thanks. Good morning, everybody.

[Matt Olney, Managing Director at Stephens Inc]

Hi.

[Matt Olney, Managing Director at Stephens Inc]

I guess, Valerie, you addressed a question around loan pricing, loan yields. What about the other side on deposits? Any commentary on deposit pricing competition? And then kind of second part, just taking a step back, it feels like this margin has got some nice tailwinds for the year. Anything you would point us towards with respect to the margin in the Q1 or just the near term?

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Yes. I'll take the second half of that and then I'll let Chris talk a little bit about the competition out there. There are some things that we do have a sizable CD book, time deposit book in the Q4. Those were being put on an average of 3.9% and that was replacing some that were close to 4.5%. And so there's obviously opportunity there.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

As we look out at the first half of next year, there's ballpark about another $6,000,000,000 of those CDs that are going to be coming off north of 4%. And so we're opportunistic there that we can bring that pricing down. And so that will certainly help. We also put on in the Q4, dollars 1,500,000,000 of broker deposits that was the payoff, along with some excess cash, that bank term funding program debt at $3,500,000,000 And so those are actually on the books at $436,000,000 on average. Over the next 6 months about half of that will pay off, will mature.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

And so that is at about a $450,000,000 level. And so there's ability there as we go through the year as those kind of tail off kind of in a laddered over quarter over quarter to also see improvement as we offset that with organic growth in those deposits. So we do feel pretty good. And as you've known or as we've talked about, we have grown the core deposit base quarter over quarter. And so the teams are very focused on that and look to be able to do more of

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

that as we go forward.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

You want to talk about competition, Chris?

[Chris Bagley, President & Chief Credit Officer at Cadence Bank]

Yes. From the competition side, it's interesting.

[Chris Bagley, President & Chief Credit Officer at Cadence Bank]

I think it's still very competitive out there. The specials, if you will, primarily the CD specials slowed down for a while. They pick back up is what I would tell you anecdotally. We're seeing more CD specials, although at a lower rate right now than we saw 9 days ago because of the curve shift and all. But it does seem to things have gotten a bit more competitive over the last 30 days or so.

[Chris Bagley, President & Chief Credit Officer at Cadence Bank]

We're seeing it in pockets among community banks and there's different sources around the geography.

[Dan Rollins, Chairman and CEO at Cadence Bank]

The payoff of that bank term funding program, some of that came out of cash, which shrunk the balance sheet,

[Dan Rollins, Chairman and CEO at Cadence Bank]

which was all intentional.

[Matt Olney, Managing Director at Stephens Inc]

Yes.

[Matt Olney, Managing Director at Stephens Inc]

Okay. That's helpful. And then as far as the incremental pricing on the incremental deposit growth at the bank, I think I heard you mentioned newer time deposits in that mid to high 3% range. Is that a reasonable is that what I heard?

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Yes. That's about right.

[Matt Olney, Managing Director at Stephens Inc]

Okay, perfect.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

That's

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

what we thought.

[Matt Olney, Managing Director at Stephens Inc]

Thank you.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Thanks, Matt.

[Operator]

The next question comes from Catherine Mealor with KBW. Please go ahead.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Hey, Catherine.

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Thanks.

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Good morning. Going back to the revenue growth outlook, can you just give us a little bit of color around kind of what's driving the bottom end of the range versus the high end of the range? Is it all on rates? Or is there any other kind of pieces to think about with what the risk to the low end of the range is versus the upside to the high end?

[Dan Rollins, Chairman and CEO at Cadence Bank]

Risk to not hitting the low end, is that what the question? Right.

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Yes, just like that. Yes. Because the one way,

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

I guess, really the question is the low end feels very low to me and unlikely. I feel like we're generally biased towards the high end of the range and just kind of curious what would bring you to the low end of the revenue growth range?

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

I mean, I think it's

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

anything that would cause risk to the net interest income line is going to have the biggest impact. That's the ones that can be more volatile. If for some reason there are some sudden reductions in rates or some things that in our footprint that caused the loan origination to not come about as we anticipated to be. Those types of things, But I'd say that we feel pretty confident in that range as we look forward just given what we see today.

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Okay, great. That's helpful. I mean, so basically

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

if you believe the growth outlook and you believe we're somewhere between 2 cuts and 0 cuts, the high end of the range, is it a reasonable assumption? Is that fair?

[Dan Rollins, Chairman and CEO at Cadence Bank]

Yes, I think, yes. I mean, it's fair depending upon how many cuts come through.

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Got it. And then on buybacks, now that we're back into acquisition mode and the growth outlook looks really good. Do you think that there's less buyback activity this year?

[Dan Rollins, Chairman and CEO at Cadence Bank]

Yes. We've got we have not announced a buyback plan for 2025. We've got to work through with our new regulator to get all of that in place. And so we're in the process of doing some of that today. I don't know that I would say it's off the table, but with where we're sitting and the activity that we're seeing, we'd like to use our capital for other purposes.

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Got it. And really just more opportunistic, right. So just you kind of view that as more opportunistic if the stock pulls back then but generally capital will be used for acquisitions and growth from here?

[Dan Rollins, Chairman and CEO at Cadence Bank]

That's exactly what we've done for the last multiple years and I think we would be in the same boat.

[Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Great. Okay. Thank you.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Thank you, Catherine.

[Operator]

The next question comes from Gary Tenner with D. A. Davidson. Please go ahead.

[Gary Tenner, MD & Senior Research Analyst at D.A. Davidson Companies]

Thanks. Good morning. Just to ask Catherine's question in terms Good morning, Gary. Good morning. I'll just ask Catherine's question on the NII range maybe a little bit differently.

[Gary Tenner, MD & Senior Research Analyst at D.A. Davidson Companies]

Is it fair to say that the upside or downside, upper end or lower end of the range is more about volume than it is rate the way things sit today based on your rate assumptions?

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Well, based on our rate assumptions, I would say, yes. But if there are volatility in the rate assumptions, then that could prove otherwise. Or if we have a big bump in market performance, that could positively impact our fee income side as well. Longer term rates that could impact our refi rates

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

in mortgage Mortgage as well.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Mortgage as well.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

I mean, there's always there's just so many moving parts. But again, just based on the rate forecast, we use the forward curve at the end of the year, and what we see today in our marketplace that was the basis for the ranges that we provided.

[Gary Tenner, MD & Senior Research Analyst at D.A. Davidson Companies]

Sure. No, I appreciate that. I was more focused on the NII side, just given your comment about being more bullish on that side and conservative on the fee side, but I appreciate the comment. And then, I appreciate the commentary around competitiveness in the deposit side of the business. Can you talk about kind of pricing competition on the lending side?

[Gary Tenner, MD & Senior Research Analyst at D.A. Davidson Companies]

Have you seen other banks start kind of doors open for lending more and a little more competition on the pricing side?

[Chris Bagley, President & Chief Credit Officer at Cadence Bank]

I'll kick it off and let Billy jump in. We've got a lot of levers, great footprint, community bank model, corporate bank model, probably a little different depending on which view your lens you're looking from. It's we compete on the community bank side, a lot of community bank competition there as we're typically more fixed rate, 5 1 ARM type loans, owner occupied business and we're seeing competition in there. But the rates that we talked about earlier about the sign we'll get some 7s, that's 7 plus range. And then on the corporate side, Billy, I'll let you jump in on that.

[Billy Braddock, Chief Credit Officer at Cadence Bank]

Yes. The corporate side are almost exclusively floating rate loans And we are for the best credit quality loans, we are seeing a lot more spread compression on that end. On the ones that are more creative or M and A financings or that, We're not seeing as much, but on the highest quality, we've seen competition come in with new budgets saying we want to grow and so the spreads are compressed there.

[Dan Rollins, Chairman and CEO at Cadence Bank]

And we've got non bank competitors playing too.

[Billy Braddock, Chief Credit Officer at Cadence Bank]

We have non bank competitors. From a pricing standpoint, that doesn't affect us as much as it does from our volume and structure. But yes, that's a fair point.

[Gary Tenner, MD & Senior Research Analyst at D.A. Davidson Companies]

Thank you.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Thanks,

[Operator]

The next question comes from Jon Arfstrom with RBC. Please go ahead.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Good morning.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Hey, good morning. Good morning, John. Hey, good morning. Just Valerie, just a few cleanups here. But the non interest bearing balances, can you walk through that again?

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

I think you kind of touched on it in your prepared comments. But can you kind of walk through what drove that decline? And do you feel like that category is bottoming out at this point?

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Yes. So there were a couple of things related to that. One was the fact that we did add the $1,500,000,000 of broker deposits in the quarter and that adds to the denominator. So when you're looking at the percent of the non interest bearing to the total that impacts that as well. And then at the end of Q3, we had kind of overnight influx of non interest bearing deposits that we knew were coming out basically the next day That was $350,000,000 ish or so.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

And so that served to kind of augment that percentage at September 30. And so that also served to impact as well. But just to be clear, we are continuing to expect that to come down as a percent of total modestly, as we look through the year, just because we are continuing to see most of the new growth in our deposits coming in interest bearing products. That being said, we do have a lot of aggressive work going on, on the treasury management front. We have a new updated system.

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

The teams are all hands on there and that business can tend to bring more non interest bearing. So we are definitely working both sides of it, but we do anticipate it to probably just inch down maybe a couple of percentage points more over the next

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

year.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Yes. That's helpful. And then on credit, I think looks fine and then it looks like the reserve has floated down a little bit over the last 12 months. But curious how you want us to think about provision expectations and and the reserve outlook in general?

[Valerie Toalson, Senior EVP, CFO & President of Banking Services at Cadence Bank]

Yes, we feel I mean, we feel pretty good about where we're reserved. As you know, now with CECL, so much of that is based on the economic outlook. And so as long as there's stability there, I wouldn't anticipate dramatic movements given what we see as the outlook for credit right now. It could potentially drive us an inch lower just as we continue to grow the overall loan portfolio, but I think we're in a pretty good range.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

I think I'm last, Dan, so I'm going to ask one more. Do you have a regulatory changes wish list for Cadence? If there's anything you'd like to see changed that could

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

help you?

[Dan Rollins, Chairman and CEO at Cadence Bank]

No, I think what we've seen just in the last few days, the commentary that's come out of the acting Chair of the FDIC has been very positive for the banking industry. I think we like where we sit today as a Fed member bank and the relationship that we're building with the Federal Reserve has been very positive so far. I think, again, we feel really good about where we are. The wind in our sails for the last year coming into 2025, our footprint continues to shine.

[Dan Rollins, Chairman and CEO at Cadence Bank]

We've got great opportunities in front of us and the team is very focused on that.

[Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets]

Okay. Thank you.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Thank you. Appreciate it, John.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to the management team for any closing remarks.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Thank you all again for your time today and joining us. It's certainly an exciting time and a busy time for Cadence. We are confident that the tremendous progress we made in 2024 will continue to bear fruit in 2025, and we're very excited to be back in the M and A process. This is our first transaction since the Cadence BXS merger back in 2021. And while it's small relative to our current size, it does provide an opportunity for us to add scale in a very attractive market in Savannah, Georgia.

[Dan Rollins, Chairman and CEO at Cadence Bank]

And it gives our M and A team some time to exercise their muscle memory and be prepared for other opportunities that may come along the line. And it adds value to our shareholders and our customers that we serve in those markets. Thanks again everybody for joining us today. We look forward to seeing you as we're out on the road in 2025. We look forward to having a great 2025 for our company.

[Dan Rollins, Chairman and CEO at Cadence Bank]

Thank you all very much.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Will Fisackerly, Executive VP & Director of Corporate Finance
• Dan Rollins, Chairman and CEO
• Valerie Toalson, Senior EVP, CFO & President of Banking Services
• Billy Braddock, Chief Credit Officer
• Chris Bagley, President & Chief Credit Officer

Analysts

• Manan Gosalia, Equity Analyst at Morgan Stanley
• Michael Rose, Managing Director at Raymond James Financial
• Jared Shaw, Managing Director at Barclays Capital
• Matt Olney, Managing Director at Stephens Inc
• Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)
• Gary Tenner, MD & Senior Research Analyst at D.A. Davidson Companies
• Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets