Cadence Bank Q3 2025 Earnings Call - Strong Acquisition Integration and Solid Organic Growth Drive Earnings

Conference Operator: Good day, and welcome to the Cadence Bank Third Quarter twenty twenty five Earnings 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 that this event is being recorded. I would now like to turn the conference over to Will Frzackerly, Executive Vice President and Director of Finance.

Please go ahead. Good morning and thank you for joining the Cadence Bank third quarter twenty twenty five earnings conference call. We have members from our executive management team here with us

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank: this morning, Dan Rollins, Chris Bagley, Valerie Toulson 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 eight ks that we filed yesterday afternoon. These slides are also available 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 as well as 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 to Dan for his opening comments.

Dan Rollins, CEO, Cadence Bank: Good morning. Thank you for joining us this morning to discuss our third quarter results. It’s been another outstanding quarter for our company. I will cover a few highlights and Valerie will provide some additional detail on our financials. After our prepared comments, our executive management team will be available for questions.

We are very pleased to have completed the acquisition of Industry Bank shares on July 1, as well as the operational integration that just completed last week. 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. We look forward to the opportunity to grow in Central Texas and Georgia markets that were added through these transactions. Industry was certainly a unique transaction given the size and complexity of their securities portfolio, and it was just a home run on all fronts. Our team did a fantastic job in executing the disposition of 100% of their securities portfolio during the third quarter at a total mark that was less than our estimated mark when we announced the transaction.

In fact, virtually all of the purchase accounting marks for industry came in better than originally estimated. Valerie will cover the purchase accounting items in more detail in a moment, but these improvements are reflected in our quarter end tangible book value per share declining only $0.12 to $22.82 as the impact of industry was largely offset by strong operating earnings and improvement in our AOCI. As we look more specifically at our results for the quarter, we had another great quarter from an earnings standpoint. Adjusted net income from continuing operations increased to $152,800,000 or $0.81 per share and adjusted return on assets was 113 for the quarter. Our balance sheet growth combined with net interest margin improvement drove a meaningful increase in revenue and our adjusted efficiency ratio improved to 56.5%.

Deposits were up 3,400,000,000.0 with core deposits, core customer deposits up 3,100,000,000.0 due to the influx from industry. Our teams have done a tremendous job retaining core deposit relationships at all of the acquired banks throughout their transition to our systems, and we look forward to being able to leverage our deposit products and services more fully now that we’re past the integration. Loans were up 1,300,000,000.0 with 1,000,000,000 coming from the industry acquisition and over 300,000,000 in organic growth across mortgage and multiple verticals. We did see an uptick in CRE pay downs during the quarter, but our new origination activity continues to be very strong across our footprint. Finally, credit results continue to be in line with expectations with net charge offs for the ’26 basis points annualized and non performing asset levels and criticized and classified asset levels continuing to reflect stability.

And for clarity, loans to NDFIs represent only 2% of our loan portfolio and even less than that if you exclude REITs. We continue to feel confident in that portfolio as well as our overall credit performance. I’ll now turn to Valerie. She can provide some highlights.

Valerie Toulson, CFO, Cadence Bank: Thank you, Dan. To add to Dan’s comments, our adjusted pretax pre provision net revenue for the third quarter reached a record $224,000,000 up nearly 9% from the prior quarter, driven by strong organic performance and the closing of our second acquisition this year. As Dan referenced, the industry transaction added about $2,500,000,000 of securities on day one, all of which we sold during the quarter. We used those proceeds to invest back into securities, reduce wholesale borrowings, broker deposits and certain higher cost public funds as well as fund loan growth. As part of the sale of those securities, we also unwound related hedges.

In the financials, the net result is zero impact with a $4,300,000 securities gain offset by a $4,300,000 hedge loss included in other miscellaneous noninterest revenue. There were additional gains associated with these sold securities that we offset through a repositioning of $515,000,000 of our existing portfolio securities at improved yields. Net of all this activity, our securities portfolio grew $780,000,000 in the quarter and reflected an improved mix and interest rate profile compared to the prior quarter and day one acquired assets. Total adjusted revenue of $517,000,000 increased $41,000,000 or 9% in the quarter. Net interest revenue was up $46,000,000 or 12% as a result of the larger balance sheet and improved net interest margin.

Our net interest margin improved six basis points to 3.46%, driven by improved securities yields and a decline in overall funding costs. Looking forward, assuming the forward curve impact on our balance sheet repricing and growth expectations, we anticipate continued modest improvement in net interest margin through the end of the next year. Loan yields were 6.37% in the quarter, up three basis points due to added accretion, while yields excluding accretion remained steady quarter over quarter. Securities yields improved by 32 basis points to 3.65%, again as a result of the restructuring and purchase activity discussed earlier. Our total funding cost improved seven basis points to 2.35% as we brought down wholesale borrowings, brokered deposits and time deposits repriced.

Time deposit costs improved six basis points as new and renewed time deposits in the quarter came in over 26 basis points lower than the total portfolio rate. Adjusted non interest revenue of $93,500,000 was down $4,700,000 due largely to mortgage banking revenue from seasonal declines in originations combined with the impact of MSR fair value adjustments. Mortgage banking revenue before MSR was up 13%, however, compared to the same quarter last year, reflecting our expanded production capabilities across our footprint. Our other fee businesses showed continued growth and solid performance in the quarter, with trust revenue declines due to the second quarter trust tax revenue. Adjusted noninterest expense increased $22,800,000 linked quarter.

Slide 15 breaks out the merger related expenses by category to reduce some of that noise. Of the quarterly increase in adjusted expense, over two thirds of it is comp related, basically reflecting the addition of the new banks, our merit impact beginning July 1 and higher incentive accruals related to performance. Increases in occupancy and equipment expense, deposit insurance, assessment expense and amortization of intangibles are all directly related to the acquired banks. This slide does a good job of highlighting the success we’ve had managing expenses, excluding the M and A related growth and improving operating efficiency. The loan provision was $32,000,000 including the day one provision of just over $5,000,000 associated with the acquired industry loans.

Our ACL coverage also remained stable linked quarter at 1.35%. I’d like to discuss just a few minutes looking at the updated purchase accounting for industry. As you may recall, industry had a unique balance sheet and organizational structure. As we refined our purchase accounting and tax evaluation work during the quarter, we were able to reflect improvement in several of the valuation marks relative to our initial estimates. As shown on Slide 17, these improved results resulted in an additional $143,000,000 in tangible common equity relative to initial estimates.

The largest benefit was an additional $80,000,000 in deferred tax assets that was quantified post close and that was realized during the quarter in conjunction with the security sales. In addition, refined marks on loans, securities and other assets also contributed to the improvement. All in, these adjustments result in the earn back on this transaction coming in closer to just two point five years. Finally, our guidance for the rest of the year is on Slide 18. We continue to be confident in our performance and in

Chris Bagley, Executive, Cadence Bank: the outlook for our markets, with projected growth and financial results through the

Valerie Toulson, CFO, Cadence Bank: end of the year all expected to continue to fall within the guidance ranges we shared last quarter. Operator, we would now like to open the call to questions, please.

Conference Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We ask that you please limit yourself to one question and one follow-up. We will now pause momentarily to assemble our roster. And your first question today will come from Manan Ghosalia with Morgan Stanley. Please go ahead.

Manan Ghosalia, Analyst, Morgan Stanley: Hi. Good morning,

Dan Rollins, CEO, Cadence Bank: Good morning, Manan. Good to hear from you.

Manan Ghosalia, Analyst, Morgan Stanley: My first question is on the guidance slide on Slide 18. Can you talk about the drivers of the slightly lower revenue and loan growth guide? I guess you’re pointing to the lower end of the prior range. I

Chris Bagley, Executive, Cadence Bank: know

Manan Ghosalia, Analyst, Morgan Stanley: you noted that there’s an uptick on CRE paydowns. It feels like organic loan growth might have also been a little bit weaker this quarter relative to last quarter. So I was wondering if that’s the reason or if there’s anything else that’s impacting these numbers.

: Okay. We can take that one.

Dan Rollins, CEO, Cadence Bank: Yes, I think that the answer is, is there’s only three months left in the year. And so the time line is much shorter, and so we have a better clarity into where we are. I think if you look at the top end of that range, that would show some pretty good growth in the fourth quarter. And we continue to believe that we’ve got a good growth machine going. Our plans look good.

We’ll talk about all of that. But I think the issue is, it’s just a shorter time period. Valerie, you’ve got some specifics, I think.

Valerie Toulson, CFO, Cadence Bank: I think you answered it spot on, Dan. The only other thing that I would add is what we’ve always talked about is that the expense expectations would fall in line with the revenue expectations. And so as we tighten the revenue, you’ll notice we tighten the expense as well. And so again, continuing to drive operating leverage as we go into the end of the year.

Manan Ghosalia, Analyst, Morgan Stanley: That’s very clear. And maybe on Slide 11 with the funding repricing and maturity schedule, I guess the question there is what sort of beta do you expect in the broker and time deposits as rates go down? And also, is there a mix shift you’d expect there as we go through next year? You know, maybe you’d pay down some of the higher cost deposits with core deposit growth, Or do you expect that, that funding mix would remain unchanged?

Dan Rollins, CEO, Cadence Bank: Yes. Think the industry bank shares plays a big piece of that. Remember, they were very heavily funded on the CD desk. I think our expectation is, is over time, we will be able to improve their deposit mix. I think your question was direct on beta on the brokerage side.

The brokerage side is going be market right there. It will move with the market pretty easily. We continue to want to move the broker deposits out. Our loan to deposit ratio went down quarter over quarter because of the deposits that came in with industry. I think we feel pretty good about our funding source.

Valerie?

Valerie Toulson, CFO, Cadence Bank: Yeah. Thanks, Dan. On the betas, we are expecting our interest bearing betas to get up to about the 50% level, and the total deposits probably between 30s and 40s. The mix shift that Dan talked to, we do have the expectation that over time, those industry deposits will begin to look a little bit more. So when you look at the balance sheet mix of deposits, looking back kind of prior to the acquisitions this year, it’s something that I would consider a little bit over the normal time period for our deposits to migrate back to.

Manan Ghosalia, Analyst, Morgan Stanley: Got it. So just to be clear, the 15% sorry, the 50 percentage beta was is on an organic basis. And in addition to that, there should be some mix shift coming in these higher cost deposits?

Valerie Toulson, CFO, Cadence Bank: Yes, that’s fair.

Manan Ghosalia, Analyst, Morgan Stanley: And

Conference Operator: your next question today will come from Jared Shaw with Barclays.

Dan Rollins, CEO, Cadence Bank: Hey, Jared. Good morning.

Jared Shaw, Analyst, Barclays: Hey. Good morning. Thanks. Hey, just following up on the deposit discussion. Is there anything as we look at the mix shift this quarter with the decline in DDA, What’s the expectations for DDA specifically as we go through the rest of the year apart from maybe the opportunity to pick up mix shift within industry?

Dan Rollins, CEO, Cadence Bank: Yes. I think that you have to look back at a little bit longer time period than just one quarter over one quarter. We had some anomalies in the last couple of quarters that are moving some numbers around. If you look back, we finished year end ’24 at 21.2 non interest bearing deposits. We were at 21.2% non interest bearing deposits in Q1.

Those deposits bounced up in Q2, some of that from First Chatham Bank that had a 30% non interest bearing deposit, and some of that from a customer of ours that seems to keep big balances with us at some points in the time period. And so we finished Q2 pretty high. We finished Q3 at 20.6%. So from Q1 or year end last year, 21.2% non interest bearing to 20.6 is the run rate we’ve been talking about all along. So 21% is kind of where we’ve been running on.

We’ve got that one big customer. What impacted it this quarter was, remember, industry’s deposits, noninterest bearing deposits were 15% of deposits. So we would have expected to see a run down from that 21% range a little bit because of their 15% free money on their balance sheets. And then that one customer, Valerie’s got some details, and she can talk about that one customer a little bit.

Valerie Toulson, CFO, Cadence Bank: Yeah. So let me just walk you through some details going back a quarter. If you go back to the ’25, excluding the $150,000,000 of NIB that we added from the first Chatham acquisition, our non interest bearing deposits increased about $450,000,000 period to period. About $550,000,000 of that was this customer that Dan referred to that periodically has influxes, had some dollars that came into our balance sheet in non interest bearing the last week of the quarter and stayed over period end. Otherwise, the noninterest bearing balances, excluding the acquisition deposits for that second quarter, would have been flattish.

So then you move forward to the third quarter. We added about $650,000,000 in noninterest bearing deposits from industry. And backing that out, you see our period end deposits declined about $750,000,000 What that represents is the outflow of that $550,000,000 that was in at the June as well as maybe a 2% to 3% reduction in noninterest bearing as we saw those dollars migrate into interest bearing products as an offset in our total core deposits. So I think the big difference is the average balances, obviously. And in the third quarter, that difference was driven by those temporary deposits that came into the balance sheet in the quarter and they were gone at the end of the quarter.

Specifically, there was about 2,000,000,000 that came in at the July. About half of that left mid August and the rest the August. So those added those alone added about $850,000,000 in average balances for the quarter, with the rest of that average balance increased due to the industry acquisition. So all in all, when you normalize out that temporary influx and the acquisitions, our noninterest bearing is very consistent, as Dan said, with our quarterly trends consistent as a percent of total deposits. Going forward, these period end non interest bearing balances and the ratio of total balances I’d say are good levels to consider as a base.

Periodically, we may have this customer bring some dollars in and out, but right now those dollars are out. And so it’s a foundational base. I would expect that on a go forward basis. Hopefully, that’s helpful to you. Yep.

The other thing that I would add is Manon’s question. I don’t think I answered it on the broker. We expect that broker to run off as you know, we can pay that down with investment cash flows. The bulk of those balances actually mature in the fourth quarter.

Dan Rollins, CEO, Cadence Bank: Yeah. We’re fortunate to have good customers to trust us with their balances. And this customer has been our customer for decades. And it seems like on an irregular basis, they have a lot of cash that flows in and it sits in our bank for a while while they decide what they want to do with it. So we like good customers like that.

Jared Shaw, Analyst, Barclays: Okay. Thanks. That’s really helpful. I guess as my follow-up, with these deals now closed and integrated and the benefit from the lower purchase accounting marks, the capital is really strong here. What should we think of sort of a good capital level or a base capital level that you’re trying to manage to?

And what are some of the thoughts, I guess, on buyback versus additional deals from here?

: Yes. I think we want

Dan Rollins, CEO, Cadence Bank: to continue to be good stewards of the capital that we have. And so I think we’ll continue to execute on our plans. We said last quarter that we needed to build capital after the industry transaction. We did that already. We made some great changes this quarter that helped us on that front.

So I think that puts us back in the buyback game much faster than we thought before. And I think we continue to look for opportunities to use capital and to grow. Number one is core organic growth and number two would be doing something inorganic.

: Thank you.

Dan Rollins, CEO, Cadence Bank: Good, Derek.

Conference Operator: And your next question today will come from Casey Haire with Autonomous. Please go ahead.

Ben Gerlinger, Analyst, Citi: Thanks. Good morning, everyone.

Casey Haire, Analyst, Autonomous: Wanted to touch on morning. Wanted to touch on deposits in the quarter. You guys so the deposits were up 3 and a half billion. Industry was 4 and a half billion dollar franchise. It sounded like, the core the the legacy deposit franchise was pretty stable.

Just wondering what was, what was driving, you know, what happened to a billion of of the industry deposits? And then any color on Dan, as you mentioned, it’s it’s heavily CDs. You know, any color on your ability to price them down and and retention rate?

Dan Rollins, CEO, Cadence Bank: Remember, their cost of CDs was actually equal to or lower than ours. So I don’t think their pricing structure was wrong. And I think your numbers are off a little bit. Valerie, you want to walk through that?

Valerie Toulson, CFO, Cadence Bank: Yeah. I think it might be helpful if you go on to page 20 of the slide deck, if you have that in front of you, Casey. We lay out the standalone, the addition of the bank shares, and the organic change. And you can see in the organic change column, we actually paid down broker deposits $05,000,000,000 in the quarter. Those public fund dollars that left, those were dollars that we actually that were higher cost public funds associated with the industry transaction that we intended on leaving.

We talked about that in the second quarter, and they did leave in the third quarter. And then you can see that the core organic was actually flat. When you looked at what industry brought on versus where we ended the quarter, it was very, very stable. And so both industry and First Chatham did a fantastic job of keeping all those deposits stable throughout the transition. And so there’s there wasn’t movement of that magnitude out of out of industry.

Does that help clarify? The other thing to keep in mind is also that

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank0: I missed that.

Valerie Toulson, CFO, Cadence Bank: I missed that slide.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank1: I’m sorry.

: I think you said you missed that Yeah.

Casey Haire, Analyst, Autonomous: I just sorry. I I missed that slide. I I see it. It’s all laid out there. My bad.

And just following up on the NIM, think, Valerie, you said that you expect it to be up going forward. Just wondering what does that presume in terms of purchase accounting adjustments going forward?

Valerie Toulson, CFO, Cadence Bank: Yeah. So the accretion this quarter was $5,500,000 It’s projected to steadily decline as we go forward. So for example, next quarter, it’s projected at about 4,000,000 And then for all of ’26, about 12,000,000. And so you can see that’s going to steadily decline. So that’s not what’s driving the NIM improvement.

What’s driving the NIM improvement is what what it has been. It’s the fact that we’re bringing on new loans at greater than the portfolio rate. It’s the, it’s the repricing of the variable and fixed rate loans, and it’s the bringing down of the deposit cost. All of that is is supporting that NIM improvement.

Casey Haire, Analyst, Autonomous: Got you. Thank you.

Dan Rollins, CEO, Cadence Bank: Thanks, Ben. Thanks, Casey.

Conference Operator: Your next question today will come from Ben Gerlinger with Citi. Please go ahead.

Ben Gerlinger, Analyst, Citi: Hi. Good morning.

Dan Rollins, CEO, Cadence Bank: Good.

Ben Gerlinger, Analyst, Citi: It seems like it’s a bit of a seller’s market right now. The bank m and a, we’re seeing some smaller transactions in or around your footprint that you’re from the last four, you’re seeing multiple bidders. So kind of I know that organic growth is top priority for capital. And since you’ve kind of rebuilt with the accounting to your benefit here, any conversations you might be having or is the bid ads too wide? Don’t get me wrong, like doing two deals already this year is quite a bit.

So I don’t mean to say you’re not doing a lot, but it seems like M and A is always on the front burner for you guys. Just any conversations you might be having or how sellers are viewing the bid ask spread?

Dan Rollins, CEO, Cadence Bank: Yeah, I appreciate that. I think we continue to have opportunities in front of us. So when you look at our footprint today, look at the what we’ve been able to do this year, announcing, closing, integrating the two transactions that we’ve been able to do this year. The team’s been very busy as you can imagine. But there will continue to be opportunities.

We’re in a consolidating industry. We like the position we sit in today. And I think we’ll be able to take advantage of the market.

Ben Gerlinger, Analyst, Citi: Gotcha. That’s helpful. Just kind of expanding on that a little further, you

Dan Rollins, CEO, Cadence Bank: have

Ben Gerlinger, Analyst, Citi: a pretty substantial geography in terms of opportunities within MSAs, but where you can of theoretically go back to the legacy BancorpSouth for really, really sticky deposit franchises. Is there is there one way you’d typically kind of lean if you have the opportunity? Is it more growth or is it more deposit focused?

Dan Rollins, CEO, Cadence Bank: Yes. No, I don’t I think that we’ve always looked for opportunities. So when you look at the two transactions we closed this year, the industry transaction is smaller markets, as you call them, stickier deposits, a good core customer base that’s been with the bank for a long, long time. I think the team that’s been on the ground there, we had 300 and some odd people out for the last two weeks out of their home branches into the markets where industry’s 30 some odd branches are. Really good reception from customers there.

The team has done a fantastic job of talking to customers and making sure that everybody is taken care of. There’s really no difference in that to us versus the higher growth markets like Savannah from the first Chatham, tremendous opportunities to grow further into that market because of the growth opportunities there. They bring different things to us. And so it’s really the opportunity that brings themselves to opportunities that bring themselves to us.

Ben Gerlinger, Analyst, Citi: Got you. That’s helpful. Thank you.

Conference Operator: And your next question today will come from Catherine Mealor with KBW. Please go ahead.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank2: Thanks. One follow-up on hey, good morning. One follow-up on the margin. I know you did a lot in the bond book this quarter, and we saw a big jump into yield. But curious if there’s any insight you can give us into maybe the kind of where that yield was at towards the end of the quarter, just so we could kind of fully appreciate maybe what a full quarter’s impact would be from all the restructuring you did this quarter?

Dan Rollins, CEO, Cadence Bank: That’s a good question.

Valerie Toulson, CFO, Cadence Bank: Yeah. Well, I think

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank2: Valerie, am I still on?

Conference Operator: Pardon me, ladies and gentlemen. It appears we have lost connection to our speaker line. Please stand by while we reconnect. Thank you for your patience. Pardon me, ladies and gentlemen, I have reconnected this main speaker line.

Please continue.

Dan Rollins, CEO, Cadence Bank: Okay, Valerie. Answer that question again. Well, you can

Valerie Toulson, CFO, Cadence Bank: hear us now. We’ll go it again. Yes, Catherine, that’s a great question. We had about $1,000,000,000 that we reinvested after selling the securities from the industry acquisition. And then we had the additional $550,000,000 that we repositioned of our existing securities.

So all in, about $1,000,000,000 of, say, new securities, if you will, this quarter. Those came in at about a 5.2% yield. So that’ll be helping out that overall securities yield, which actually increased during this quarter as well. The securities that we bought after industry, those were bought probably by mid July. The restructuring didn’t occur until later in September.

So there’ll be a little bit additional bump as we go into the next quarter.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank2: Okay, great. And then would you expect to continue to grow the bond book as we move through next year? How do we think about I know we can look at what loan growth will do, but how do you think about the bond book with an average earning asset growth?

Valerie Toulson, CFO, Cadence Bank: Yeah. So we kind of like where it is as a percent of total assets. That being said, we’ve also got flexibility there where we could add a little bit depending on what the rest of the balance sheet does. But it could also, as we show in some of our slides, the cash flow that comes off that portfolio is pretty significant as well. And so it could also serve to be a funding mechanism should we need it.

So it’s we’ll probably stay between somewhere between 1520% of total assets, and really that’s going to depend on the loan growth outlook, etcetera.

Dan Rollins, CEO, Cadence Bank: Are we telling the team to fund loan growth with core deposit growth?

Valerie Toulson, CFO, Cadence Bank: Yeah. Exactly. That’s the preferred method. And if that was the case, then then we would certainly be reinvesting and adding a little bit more into the securities books.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank2: Okay. Very helpful. Thank you.

Dan Rollins, CEO, Cadence Bank: Thank you, Catherine.

Conference Operator: And your next question today will come from Michael Rose with Raymond James.

: Please go ahead.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank1: Hey. Good morning. Thanks for taking my questions. Maybe we can just start on expenses. So I think the guide would imply a little bit of build next year, but you still have as we think about 2026, you still have about 75% of the cost saves from industry still to kind of be realized.

Can you just I’m not asking for explicit guidance, but can you just give us kind of a starting point for expectations as we start to think about 2026 expenses? I mean, obviously, there’s going to be merit increases, there’s seasonal impacts, things like that. I know health care costs are going up for a lot of banks, but you do have these cost saves. At the same time, I assume you’re still reinvesting in the franchise, so we’d just love to frame out the puts and takes.

Dan Rollins, CEO, Cadence Bank: I appreciate the questions, Michael. I think from where we stand cost save wise, I don’t think you have any cost saves in the numbers that you see yet. I mean, we firstly, we ran the quarter. There’s a little bit, but we also had some old first chattel expenses still in there. So you’ve got some pretty good cost saves that we will continue to execute on in 4Q.

I think 1Q becomes a run rate quarter that you would want to see on a go forward basis with the cost saves in. Then off of that 1Q base quarter, then what’s the build, I think, is what you’re asking.

Valerie Toulson, CFO, Cadence Bank: Yeah. And I think what you walked them through, Dan, is exactly right. We really don’t have those cost saves for industry in the fourth quarter at all. We just completed the conversions, and so those will be flowing through most significantly through 2026. As typical with us, we will present our ’26 guidance when we do our end of year earnings.

So that’s when we’ll kind of lay it all out. But I think if you just think about it from a broader spectrum, we do anticipate continuing to build operating leverage as we go into next year. And that’s really driven by the strong revenue growth and the good loan opportunities that we see across our footprint as we continue into next year.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank1: Okay. That’s helpful. And then maybe if I can just go back to the slide deck from when the deal was announced. On Slide 12, you had the pro form a EPS reconciliation for ’26 and ’27. I know things have changed, and obviously, that was based on consensus at the time.

But maybe, Valerie, if you can just walk us through maybe some of the major changes just to summarize those and maybe how we should think about the build from the deal. Thanks.

Dan Rollins, CEO, Cadence Bank: Yeah. He’s on the deal slide deck, Valerie. So you’re talking about the changes that we saw. So the biggest one was the deferred tax asset piece, was the biggest piece. So we thought there was a little bit of a deferred tax asset.

We modeled that in as we worked with our tax folks and our internal team did an absolutely fantastic job. Want to brag on the folks that were involved in that. A lot of work went into understanding all of the pieces that were there. That was an $80,000,000 pickup that came through the deferred tax asset piece. And then the other components, whether it was the loan mark or the credit mark or all the different pieces that came through resulted in about $140,000,000 improvement on the capital side of that.

You can turn that into the income, think is what he’s trying to do is figure out what that does on an income statement side, Valerie.

Valerie Toulson, CFO, Cadence Bank: Yes. So and we laid all that out for you, Michael, on Slide 17. You can see the changes there.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank2: So you can see the piece that

Valerie Toulson, CFO, Cadence Bank: was the interest rate on loans. The actual interest rate mark on the loans was very pretty flat. The securities mark, we actually sold all those securities, and so there’s not anything forward looking on that piece. And so from an actual income standpoint, there’s not a lot of change, but it absolutely helped day one tangible book value.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank1: Okay. That’s exactly what I was looking for. Thanks for summarizing that. Appreciate all setbacks.

Dan Rollins, CEO, Cadence Bank: Yeah. The team did a fantastic job on this transaction.

Conference Operator: And your next question today will come from Stephen Scouting with Piper Sandler. So

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank3: you guys have had an extremely active busy couple of years with the insurance sale, restructuring,

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank4: couple of deals. How do you

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank3: think about kind of major strategic initiatives from here? Is it more just a blocking and tackling on what’s been built out? And if it was additional M and A, would you look for more market extension or more in market type of deals?

Dan Rollins, CEO, Cadence Bank: We’ve been very consistent on the answer on that question, Steven. I think we like the nine states we’re in. We don’t see a whole lot of need to stretch outside of that. We want to have more mass, more density within the states that we serve. We like the Southeast.

We like Texas. We continue to look for opportunities to expand in that footprint. And again, we’re really proud of the fact that we’ve been able to announce, close and integrate two transactions in this calendar year so far, and we continue to believe there’s opportunities in front of us.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank3: Okay, great. Appreciate that, Dan. And then you commented earlier on the 2025 guide that it implies a pretty strong growth rate here in the fourth quarter organically. Looks like kind of mid to mid high single digit growth implied in that guide. Is that kind of the right way to think about 26%?

I know you’re not giving ’26 guidance currently, but is that the kind of expectation that you guys would have as of today for what’s a palatable growth rate? And what kind of gives you confidence in that, whether it’s pipeline growth, customer demand? Any color you can give there around customer behavior?

Dan Rollins, CEO, Cadence Bank: Yes. Great questions. Thank you for asking that. We certainly want to talk about pipeline today. Chris and Billy can add in on where we stand on some of that.

The markets, the big server good. There is strong market activity. 4Q is typically a strong market. We see lots of activity coming in. The tax law changes are driving some business our way.

Which one of you guys wants to take the lead on this? Yeah. I’ll start. So

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank5: you’re right, Dan. Pipelines are solid. They’re diverse. It’s what I like about it. It’s across all of our C and I segments geographically.

It’s within all of our specialty groups, verticals, energy as well. The only place where we’ve seen a little headwind is from pay pay downs in CRE, which we’ve been expecting for a number of years. This is on the ’21, ’22 vintage merchant loans that were out there. So we’re seeing some of that activity. Most of that’s payoffs from product credit.

But for longer term pipeline, I mean, right now, the pipeline’s supporting, you know, in excess of what our budget was for the year. So that feels that feels nice. And, you know, even q three versus q four, I mean, we had lots in the q three pipeline. Some of it fell into q four as it always can happen from a

Dan Rollins, CEO, Cadence Bank: First few weeks look pretty good. Yeah. From a

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank5: I’m trying to trying to, you know, pinpoint an actual date. So I like the diversity that’s there, and it’s widespread. So I would say it continues to support,

Dan Rollins, CEO, Cadence Bank: you know, our thesis. Yeah. And and all lines are growing. So when you look at what’s happening out there, the the all business lines, the whole geography, everything’s running well. Chris?

Chris Bagley, Executive, Cadence Bank: Yeah. Just to add a little color. I mean, community bank’s the same way. You’re seeing, you know, one of the

: I think one of the

Chris Bagley, Executive, Cadence Bank: positives is we just have a lot of leverage to pull. So you’ve seen growth from market. You’ve seen growth from the community bank, and you’ve also proud about the acquisitions. I think there’s opportunity there. The transactions that have joined us, I think they’ve they’ve got a new set of products and higher lending limits, and I think you’re gonna see them hit the ground running next year as well.

Dan Rollins, CEO, Cadence Bank: Yeah. Our number one product in the community bank was not offered by either one of those banks on the loan desk or or the deposit desk.

Ben Gerlinger, Analyst, Citi: Your

Conference Operator: next question today will come from Matt Olney with Stephens.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank3: Hey. Thanks, guys. Good hey. Good morning. Thanks for taking the question.

Just just kinda on that last topic there around loan growth and pipelines. Just looking for any kinda color on loan pricing, loan competition in in recent weeks and months in the community bank and the commercial bank? Thanks.

Chris Bagley, Executive, Cadence Bank: I’ll start off. Think it’s competitive out there, but you see it in our yields that we’ve booked. So the yields have been holding in there. I think especially on the community bank side, spreads have tightened on some transactions, mostly on the software based things and in certain verticals. You see some tightening there, but I think all in, we’re able to keep our yields up right now.

Valerie Toulson, CFO, Cadence Bank: Yeah. The new and renewed loans for the third quarter actually came in about 6.85%. So we feel pretty good at that.

: Yeah. I’m not sure. Thanks.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank3: Okay. That’s all for me. Thanks, guys.

Dan Rollins, CEO, Cadence Bank: Thanks, Pat. Appreciate it.

Conference Operator: Your next question today will come from Brett Rabatin with Hovde Group. Please go ahead.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank4: Hey. Good morning, everybody. Wanted to ask about Slide 10. And when you look at the at the one to three years bucket, the the yield on that piece is a little lower even though a lot of that portfolio is variable. Can you guys just talk about, you know, that bucket?

And and I know it’s not a huge piece, but it it could be an incremental driver for yield, on the loan portfolio. And just is that weighted more towards the one or the three years in terms of

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank5: the duration?

Dan Rollins, CEO, Cadence Bank: Which which column are you in again just one more time? The one to

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank5: three year column? Yeah. One to three.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank4: Yes. Yep. Yep.

Valerie Toulson, CFO, Cadence Bank: And so, yeah, basically, what that includes when you refer to the floating and variable, that’ll include also loans that are fixed for a period of time that then switch to floating after a three, five, seven year period. And so this bucket for the originations includes more of that, and that’s, you know, for some that were produced at an at an earlier date. And that’s why it has a five forty six average rate. So, yes, you’re exactly right. As we look out into next year, there’s a decent, at least from where our new and renewed coming on at $6.85 versus that $5.46, that’s a pretty strong delta right now.

That may shrink a little bit depending on where rates go over the next few quarters, but it’s still a nice delta that we should continue to gain benefit from.

Dan Rollins, CEO, Cadence Bank: Allows us to reprice loans up even in a down rate environment. Exactly.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank4: And and so just following up on that, Valerie, is is that weighted more towards the one or the or closer to the three years in terms of the maturities there.

Valerie Toulson, CFO, Cadence Bank: Yeah. I don’t I don’t have that information in front of me right now.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank4: Okay. Okay. No worries. The other question I wanted to ask was around credit, and credit obviously continues to behave well for you guys. People have been talking about cockroaches, but you do you guys didn’t see any.

But there there was some movement in non accruals, down downdraft in c and I and an uptick in, income producing CRE, you know, might have been lumpy, any thoughts on the movement in the non performers?

Dan Rollins, CEO, Cadence Bank: I think what we’re seeing is just a normal migration that we’ve talked about for the last couple of quarters. I don’t see anything in there that’s too exciting. Chris, I know you wanna talk about some of that.

Chris Bagley, Executive, Cadence Bank: Yeah. I mean, Dan said it. It’s normal course of business as we work through different credits. You’re right. Some of it was in the CRE book this quarter, which we’ve, you know, identified credits there that have great loan to values.

We’re not anticipating losses there. You Remember that the non performing book, a large number of that’s SBA guaranteed loans, so you need to kind of adjust for that when you think about the non performing.

Dan Rollins, CEO, Cadence Bank: I think overall, if you want add, when we look at credit today, we’re we’re watching the same thing you’re saying. We’re seeing some of the talk in the market. We we don’t have a whole lot that we’re getting too excited about here.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank4: Okay. That’s helpful. Thanks for all the color, guys.

Conference Operator: And your next question today will come from Jon Arfstrom with RBC Capital Markets. Please go ahead.

Dan Rollins, CEO, Cadence Bank: Hey, thanks. Good morning. Hey, Jon.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank0: Hey. Billy, maybe one follow-up for you. You talked a little bit about the pay downs and the vintages. Are are you saying you expect the pay down activity to start to slow? Is is that the message you wanted to send on that?

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank5: No. You know, what I’m and this is CRE specific. Right? So there’s a there’s a volume across the industry. I mean, it was a heavy origination period in ’21 and ’22.

The payoffs have actually delayed longer than than we anticipated. They’re starting some, but they’re not because of sale activity for the most part. It’s because of bridge refinance activity. You know, 50% of the payoffs in CRE that merchant CRE was from bridge payoffs from private credit. We’ll continue to see some of that.

We’ll provide a little bit of that as well. So I don’t see it necessarily slowing. The the good news is is, you know, the ’24 and ’20 five vintage originations are gonna start funding to offset some of that. So that’s where you might see it mute is that is those construction loans start funding. If we could draw it perfectly, the lines would cross at the same time.

Unfortunately, we can’t draw perfectly.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank0: Okay. Okay. Good. And then just bigger picture on the fee income businesses. Is there anything you guys would call out this quarter one way or the other?

I I understand the wealth management piece and the MSR piece, but, you know, just help us with, you know, what’s the wealth strategy? What’s the mortgage banking strategy? And anything you would call out that was particularly favorable this quarter?

Valerie Toulson, CFO, Cadence Bank: I would just say on the mortgage, it’s typical seasonal dip that we see in the third quarter on a production standpoint. But if you look back year over year, it’s actually up 13%. And so that’s indicative of the commitment that we have to that business and the fact that they’ve been adding to talent in key markets across our footprint, and we expect that to continue. If rates in addition to that kind of organic flow, if you will if rates get something with a five handle on them, we would also expect to see a lot of refi activity. And so that would certainly drive up some changes there.

On the wealth side, we continue to do very well. I actually just talked to the leader of our Cadence Investment Services earlier today, and he said September was their highest revenue peak. And they look to be continuing that growth in the fourth quarter. We just continue to do well. That’s a strong business for us.

We think that for the industry, it’s actually a growing area of business, certainly, as there’s a lot of wealth transfer that’s going to happen in the next several years, and we want to be there to capture it. So yeah, we’re pretty bullish on those fee revenue categories. There was one item this quarter that I want to make sure is clearly understood. We had the securities gains of $4,300,000 and then also we had an offset of a negative $4,300,000 in other non interest revenue that we called out related to unwinding the associated hedges. And so the net impact on the P and L was zero.

But if you’re just looking at some of those pure numbers, you may may not see that. So just wanted to call that up.

Dan Rollins, CEO, Cadence Bank: I think on the on the wealth side, I’ll just add to that that that your team has hired two really good folks to join just this last quarter.

Valerie Toulson, CFO, Cadence Bank: In the Houston market, in the Atlantic market. There you go. And yeah.

Dan Rollins, CEO, Cadence Bank: We’re we’re we’re investing in in wealth, and and we’re excited about what the new folks will be able to help us do.

: Okay. Alright. Thank you. And

Conference Operator: your next question today is a follow-up from Ben Gurlinger with Citi. Please go ahead.

Ben Gerlinger, Analyst, Citi: Hello, Ben. Appreciate the follow-up. Just wanted to follow-up on on the the one client has a pretty substantial deposit relationship with you guys. Any any potential clarity on when they might refill? Then And what do you lend against them?

Or is it just a security position?

Dan Rollins, CEO, Cadence Bank: No. It’s just that this is a customer that we’ve had for for literally decades, and they have cash flows that come sporadically. We don’t always know when that money’s gonna flow in. Just a great customer that parks deposits with us for a while.

: Got you.

Ben Gerlinger, Analyst, Citi: Okay. I appreciate your time, and congrats, Dan, on the chair position of the ABA. Thank you.

Dan Rollins, CEO, Cadence Bank: Thanks. Appreciate it.

Conference 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, CEO, Cadence Bank: Thank you all for joining us this morning. I’m sure you can sense the excitement in our team shares around the financial results we’ve delivered combined with the opportunities that lie ahead. Looking back, our year to year to date performance has shown an ongoing cadence of progress, including the announcement, closing and integration of two strategic acquisitions, meaningful organic growth and continued improvement in performance. These accomplishments reflect the strength of our talent, both the front and the back office and our commitment to serving our customers and communities. Thank you all very much for joining us today.

This concludes our call. We look forward to visiting with you all again soon.

Conference Operator: Conference has now concluded. Thank you for attending today’s presentation.

Will Frzackerly, Executive Vice President and Director of Finance, Cadence Bank3: You may

Conference Operator: now disconnect.