Cadence Bank Announces Fourth Quarter 2024 and Annual Financial Results; Announces Increase in Quarterly Common Dividend

• Achieved net income available to common shareholders of $514.1 million, or $2.77 per diluted common share, and adjusted net income from continuing operations available to common shareholders,⁽¹⁾ which excludes non-routine income and expenses,⁽²⁾ of $507.9 million, or $2.74 per diluted common share, an increase of 24.5% on a per share basis compared to 2023.
• Reported annual adjusted pre-tax pre-provision net revenue (PPNR) from continuing operations⁽¹⁾ of $739.0 million, or 1.54% of average assets, an increase of $126.7 million, or 20.7%, compared to 2023.
• Generated net organic loan growth of $1.2 billion, or 3.8% for the year while core customer deposits, which exclude brokered deposits and public funds, increased $2.2 billion, or 6.9%.
• Increased net interest margin for the year by 22 basis points to 3.30%.
• Achieved continued improvement in operating leverage reflected in a decline in the adjusted efficiency ratio⁽¹⁾ from 63.3% in 2023 to 58.4% in 2024.
• Realized stable net charge-offs as a percent of average loans in 2024 of 0.24%, and criticized loans improved 5.9% to $794.5 million at December 31, 2024.
• Repurchased 1,237,021 shares of Company common stock at a weighted average price of $26.74; tangible book value per common share⁽¹⁾ increased to $21.54 per share at December 31, 2024, up $2.22 per share, or 11.5%, compared to December 31, 2023 while tangible common shareholders' equity to tangible assets⁽¹⁾ increased from 7.44% to 8.67% over the same time period.

Highlights for the fourth quarter of 2024 included:

• Reported quarterly net income available to common shareholders of $130.3 million, or $0.70 per diluted common share, and adjusted net income from continuing operations available to common shareholders⁽¹⁾ of $130.0 million, or $0.70 per diluted common share.
• Achieved quarterly adjusted PPNR from continuing operations⁽¹⁾ of $184.0 million, which is down $5.9 million compared to the third quarter of 2024 and up $46.1 million from the fourth quarter of 2023.
• Generated net organic loan growth of $437.8 million for the fourth quarter of 2024, or 5.2% on an annualized basis.
• Grew core customer deposits by $259.6 million in the fourth quarter, or 3.0% annualized, excluding the $435.0 million in temporary overnight sweep activity included in the September 30, 2024 deposit totals.
• Continued to improve net interest margin, increasing 7 basis points compared to the third quarter of 2024 to 3.38%.
• Realized 0.17% in annualized net charge-offs as a percent of average loans, improved 9 basis points from the linked quarter, and a $15.0 million provision for credit losses resulting in a 1.37% allowance for credit losses as a percent of loans. Additionally, criticized and classified loan levels as well as total nonperforming loans improved compared to the linked quarter.
• Maintained strong regulatory capital with Common Equity Tier 1 Capital of 12.4% and Total Capital of 14.0%.

Quarterly dividend increase and approval:

• At its regular quarterly meeting today, the Board of Directors of the Company declared quarterly cash dividends of $0.275 per common share of stock and $0.34375 per share of Series A Preferred Stock. The common stock dividend represents an increase of $0.025, or 10.0%, per share compared to the previous quarterly dividend of $0.25 per common share and is payable on April 1, 2025 to shareholders of record at the close of business on March 14, 2025. The preferred stock dividend is payable on February 20, 2025 to shareholders of record at the close of business on February 5, 2025.

"Our fourth quarter results reflect the culmination of a successful year of improved operating performance achieved through steady balance sheet growth, reduction of debt, stable credit quality, and improved net interest margin and operating efficiency," remarked Dan Rollins, Chairman and Chief Executive Officer of Cadence Bank. "This has been an exciting year for Cadence. We could feel the momentum in our business throughout the year, and the benefits of our footprint, business diversification and talented teammates shined through. This momentum was evidenced by strong capital generation, supporting both our future growth as well as a 10% increase in the quarterly dividend to common shareholders. Importantly, this momentum also fueled the 25% increase in our adjusted earnings from continuing operations per common share⁽¹⁾ for the year."

Earnings Summary

All adjusted financial results discussed herein are adjusted results from continuing operations.⁽³⁾

For the year ended December 31, 2024, the Company reported net income available to common shareholders of $514.1 million, or $2.77 per diluted common share, compared with $532.8 million, or $2.92 per diluted common share, for the year ended December 31, 2023. The Company reported adjusted net income from continuing operations available to common shareholders⁽¹⁾ of $507.9 million, or $2.74 per diluted common share, for the year ended December 31, 2024 compared with $401.2 million, or $2.20 per diluted common share, for the year ended December 31, 2023. Additionally, the Company reported adjusted PPNR from continuing operations⁽¹⁾ of $739.0 million, or 1.54% of average assets, for the year ended December 31, 2024 compared with $612.3 million, or 1.26% of average assets, for the year ended December 31, 2023.

For the fourth quarter of 2024, the Company reported net income available to common shareholders of $130.3 million, or $0.70 per diluted common share, compared to $256.7 million, or $1.41 per diluted common share, for the fourth quarter of 2023 and $134.1 million, or $0.72 per diluted common share, for the third quarter of 2024. Adjusted net income available to common shareholders from continuing operations⁽¹⁾ was $130.0 million, or $0.70 per diluted common share, for the fourth quarter of 2024, compared with $72.7 million, or $0.40 per diluted common share, for the fourth quarter of 2023 and $135.6 million, or $0.73 per diluted common share, for the third quarter of 2024. Additionally, the Company reported adjusted PPNR from continuing operations⁽¹⁾ of $184.0 million, or 1.55% of average assets on an annualized basis, for the fourth quarter of 2024, which represents a decline of $5.9 million or 3.1% compared to the third quarter of 2024, and an increase of $46.1 million or 33.4% compared to the same quarter of 2023.

Net Interest Revenue

Net interest revenue increased to $364.5 million for the fourth quarter of 2024, compared to $334.6 million for the fourth quarter of 2023 and $361.5 million for the third quarter of 2024. The net interest margin (fully taxable equivalent) improved to 3.38% for the fourth quarter of 2024, compared with 3.04% for the fourth quarter of 2023 and 3.31% for the third quarter of 2024.

Net interest revenue increased $3.1 million, or 0.9%, compared to the third quarter of 2024 as the Company continues to benefit from an improved average earning asset mix, continued upward repricing of fixed rate and certain variable rate loans that soften the impact of declining interest rates on the portfolio, declining deposit costs and paydowns of borrowings. Purchase accounting accretion revenue was $2.4 million for the fourth quarter of 2024 compared with $3.0 million for the third quarter of 2024. Average earning assets declined slightly to $42.9 billion, as growth in average loans of $182.1 million was offset by lower excess cash and securities as the Company paid off the Bank Term Funding Program balances and called a sub-debt issuance in the fourth quarter.

Yield on net loans, loans held for sale and leases, excluding accretion, was 6.40% for the fourth quarter of 2024, down 21 basis points from 6.61% for the third quarter of 2024. Investment securities yielded 3.04% in the fourth quarter of 2024, which is flat compared to the third quarter of 2024. The yield on total interest earning assets was 5.76% for the fourth quarter of 2024 compared with 5.92% for the third quarter of 2024.

The average cost of total deposits declined to 2.44% for the fourth quarter of 2024, compared to 2.55% for the third quarter of 2024. The 18 basis point linked quarter decline in the cost of interest-bearing deposits was partially offset by product mix shift with quarterly growth in interest-bearing demand and time deposits and declines in noninterest bearing deposits. Total interest-bearing liabilities cost declined 30 basis points to 3.17% for the fourth quarter of 2024 compared to 3.47% for the third quarter of 2024.

Balance Sheet Activity

Loans and leases, net of unearned income, increased to $33.7 billion at December 31, 2024 compared to $33.3 billion at September 30, 2024. Net loan growth of $437.8 million, or 5.2% annualized, for the fourth quarter was driven primarily by growth in residential mortgages, owner occupied C&I credits and  income producing CRE. 

Total deposits were $40.5 billion as of December 31, 2024, an increase of $1.7 billion from $38.8 billion at the end of the third quarter of 2024. The fourth quarter's increase included a seasonal increase of $360.0 million in public funds to $4.1 billion, and a $1.5 billion increase in brokered deposits to $2.1 billion at December 31, 2024. Brokered deposits were added during the fourth quarter primarily to facilitate the pay off of the $3.5 billion Bank Term Funding Program balance at rates the Company viewed as favorable compared to other alternative funding sources. Core customer deposits, which exclude brokered deposits and public funds, declined approximately $175.4 million compared to September 30, 2024. However, excluding approximately $435.0 million in temporary overnight customer sweep activity in core customer balances at the end of the third quarter, total core customer deposits increased $259.6 million during the fourth quarter, or 3.0% on an annualized basis. 

The December 31, 2024 loan to deposit ratio was 83.3%. Noninterest bearing deposits declined to 21.2% of total deposits at the end of the fourth quarter of 2024 from 23.8% at September 30, 2024. 

Total investment securities declined $0.5 billion during the fourth quarter of 2024 to $7.3 billion at December 31, 2024, representing 15.5% of total assets. Cash, due from balances and deposits at the Federal Reserve declined $2.3 billion to $1.7 billion at December 31, 2024 as the Company utilized excess liquidity to reduce reliance on higher cost funding, including the pay off of the Bank Term Funding Program borrowings and call of subordinated debt.

In November 2024, the Company called $215.2 million in fixed-to-floating subordinated debt at par. This debt was yielding 4.125% and was set to reprice at SOFR+2.73% after the November call date. This call was in addition to the June 2024 call of $138.9 million in fixed-to-floating subordinated debt at par, yielding 5.65% and set to reprice to a weighted-average rate of SOFR+3.76% after the June call date.

Credit Results, Provision for Credit Losses and Allowance for Credit Losses

Credit metrics for the fourth quarter of 2024 reflected overall stability in credit quality. Net charge-offs for the fourth quarter of 2024 were $14.1 million, or 0.17% of average net loans and leases on an annualized basis, compared with net charge-offs of $23.8 million, or 0.29% of average net loans and leases on an annualized basis, for the fourth quarter of 2023 and net charge-offs of $22.2 million, or 0.26% of average net loans and leases on an annualized basis, for the third quarter of 2024. The provision for credit losses for the fourth quarter of 2024 was $15.0 million, compared with $38.0 million for the fourth quarter of 2023 and $12.0 million for the third quarter of 2024. The allowance for credit losses of $460.8 million at December 31, 2024 was stable at 1.37% of total loans and leases compared to 1.38% of total loans and leases at September 30, 2024 and down slightly from 1.44% of total loans and leases at December 31, 2023.

Total nonperforming assets as a percent of total assets were 0.58% at December 31, 2024 compared to 0.45% at December 31, 2023 and 0.57% at September 30, 2024. Total nonperforming loans and leases as a percent of loans and leases, net were 0.78% at December 31, 2024, compared to 0.67% at December 31, 2023 and 0.82% at September 30, 2024. Other real estate owned and other repossessed assets was $5.8 million at December 31, 2024 compared to the December 31, 2023 balance of $6.2 million and the September 30, 2024 balance of $5.4 million. Criticized loans represented 2.35% of loans at December 31, 2024 compared to 2.60% at December 31, 2023 and 2.64% at September 30, 2024, while classified loans were 2.02% at December 31, 2024 compared to 2.09% at December 31, 2023 and 2.09% at September 30, 2024. 

Noninterest Revenue

Noninterest revenue was $86.2 million for the fourth quarter of 2024 compared with negative $311.5 million for the fourth quarter of 2023 and $85.9 million for the third quarter of 2024.  Noninterest revenue for the fourth quarter of 2023 included a securities portfolio restructuring loss of $384.5 million. Adjusted noninterest revenue⁽¹⁾ for the fourth quarter of 2024 was $86.2 million, compared with $73.1 million for the fourth quarter of 2023 and $88.8 million for the third quarter of 2024. Adjusted noninterest revenue⁽¹⁾ for the fourth quarter of 2024 has no significant adjustments while adjusted noninterest revenue⁽¹⁾ for the fourth quarter of 2023 excludes $384.5 million securities portfolio restructuring loss and adjusted noninterest revenue⁽¹⁾ for the third quarter of 2024 excludes $2.9 million in securities losses.

Adjusted noninterest revenue was relatively consistent with the third quarter of 2024, with improvements in mortgage banking revenue offset by a decline in other noninterest revenue. Wealth management revenue was $24.0 million for the fourth quarter of 2024, consistent with $24.1 million for the third quarter of 2024. Credit card, debit card and merchant fee revenue was $12.7 million for the fourth quarter of 2024, compared with $12.6 million for the third quarter of 2024. Deposit service charge revenue was $18.7 million for the fourth quarter of 2024, compared to $18.8 million for the third quarter of 2024.

Mortgage banking revenue totaled $3.6 million for the fourth quarter of 2024, compared to negative $1.1 million for the fourth quarter of 2023 and $1.1 million for the third quarter of 2024. The $2.5 million improvement during the linked quarter was due to improvement in the MSR net valuation adjustment of $4.3 million, partially offset by $1.8 million in seasonally lower mortgage production and servicing revenue.

Other noninterest revenue was $27.3 million for the fourth quarter of 2024, down from $32.1 million for the third quarter of 2024, with the $4.8 million decline impacted by lower quarterly fair valuations of limited partnerships and equity securities, as well as the impact of the prior quarter's gain on debt redemption. These declines were partially offset by increases in credit related fees, SBA income and BOLI proceeds.

Noninterest Expense

Noninterest expense for the fourth quarter of 2024 was $266.2 million, compared with $329.4 million for the fourth quarter of 2023 and $259.4 million for the third quarter of 2024. Adjusted noninterest expense⁽¹⁾ for the fourth quarter of 2024 was $266.7 million, compared with $269.8 million for the fourth quarter of 2023 and $260.4 million for the third quarter of 2024. Adjusted noninterest expense for the fourth quarter of 2024 excludes a benefit of $0.5 million associated with an adjustment to the estimated FDIC special assessment. The adjusted efficiency ratio⁽¹⁾ was 59.1% for the fourth quarter of 2024, compared to 57.7% for the third quarter of 2024 and 66.0% for the fourth quarter of 2023.

The $6.3 million, or 2.4%, linked quarter increase in adjusted noninterest expense⁽¹⁾ was driven primarily by increases in data processing and software expense as well as other noninterest expense. Data processing and software expense increased $4.1 million compared to the third quarter of 2024, primarily as a result of the fourth quarter system upgrade of the Company's treasury management platform, with a majority of those expenses not ongoing in nature. Other noninterest expense increased $3.4 million compared to the third quarter of 2024 driven by increases in various items including professional services, advertising and public relations, and operational losses.

Capital Management

Total shareholders' equity was $5.6 billion at December 31, 2024 compared with $5.2 billion at December 31, 2023 and $5.6 billion at September 30, 2024. Estimated regulatory capital ratios at December 31, 2024 included Common Equity Tier 1 capital of 12.4%, Tier 1 capital of 12.8%, Total risk-based capital of 14.0%, and Tier 1 leverage capital of 10.4%. During the fourth quarter of 2024, the Company did not repurchase any shares of Company common stock.  For the full year 2024, the Company repurchased 1,237,021 shares at a weighted average price of $26.74. Outstanding common shares were 183.5 million as of December 31, 2024.

Summary

Rollins concluded, "As we enter 2025, our team is excited about the opportunity to build on our accomplishments and momentum from 2024. Our focus on growth in loans, deposits and fee revenues, combined with net interest margin expansion, stable credit quality and improved operating efficiency, has contributed to continued improvement in our profitability and financial performance. We look forward to building on this success in 2025 and beyond as we focus on our company's vision of helping people, companies and communities prosper."

Key Transactions

Effective May 17, 2024, the Company completed the sale of Cadence Business Solutions, its payroll processing business unit, resulting in a net gain on sale of approximately $12 million. The impact on both revenues and expenses is not material. The payroll processing unit had previously been part of Cadence Insurance, Inc., prior to its sale in November 2023.

Effective November 30, 2023, the Company completed the sale of its insurance subsidiary, Cadence Insurance, to Arthur J. Gallagher & Co. for approximately $904 million. The Transaction resulted in net capital creation of approximately $625 million, including a net gain on sale of approximately $525 million. The gain along with Cadence Insurance's historical financial results for periods prior to the divestiture have been reflected in the consolidated financial statements as discontinued operations. Additionally, current and prior period adjusted earnings exclude the impact of discontinued operations. 

Conference Call and Webcast

The Company will conduct a conference call to discuss its fourth quarter and annual 2024 financial results on January 23, 2025, at 10:00 a.m. (Central Time). This conference call will be an interactive session between management and analysts. Interested parties may listen to this live conference call via Internet webcast by accessing http://ir.cadencebank.com/events. The webcast will also be available in archived format at the same address.

About Cadence Bank

Cadence Bank (NYSE: CADE) is a leading regional banking franchise with approximately $50 billion in assets and more than 350 branch locations across the South and Texas. Cadence provides consumers, businesses and corporations with a full range of innovative banking and financial solutions. Services and products include consumer banking, consumer loans, mortgages, home equity lines and loans, credit cards, commercial and business banking, treasury management, specialized lending, asset-based lending, commercial real estate, equipment financing, correspondent banking, SBA lending, foreign exchange, wealth management, investment and trust services, financial planning, and retirement plan management. Cadence is committed to a culture of respect, diversity and inclusion in both its workplace and communities. Cadence Bank, Member FDIC. Equal Housing Lender.

Forward-Looking Statements

Certain statements made in this news release constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor under the Private Securities Litigation Reform Act of 1995 as well as the "bespeaks caution" doctrine. These statements are often, but not exclusively, made through the use of words or phrases like "assume," "believe," "budget," "contemplate," "continue," "could," "foresee," "indicate," "may," "might," "outlook," "prospect," "potential," "roadmap," "should," "target," "will," "would," the negative versions of such words, or comparable words of a future or forward-looking nature. These forward-looking statements may include, without limitation, discussions regarding general economic, interest rate, real estate market, competitive, employment, and credit market conditions, or any of the Company's comments related to topics in its risk disclosures or results of operations as well as the impact of the Cadence Insurance sale on the Company's financial condition and future net income and earnings per share, and the Company's ability to deploy capital into strategic and growth initiatives. Forward-looking statements are based upon management's expectations as well as certain assumptions and estimates made by, and information available to, the Company's management at the time such statements were made. Forward-looking statements are not guarantees of future results or performance and are subject to certain known and unknown risks, uncertainties and other factors that are beyond the Company's control and that may cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements.

Risks, uncertainties and other factors the Company may face include, without limitation: general economic, unemployment, credit market and real estate market conditions, including inflation, and the effect of such conditions on customers, potential customers, assets, investments and liquidity; risks arising from market and consumer reactions to the general banking environment, or to conditions or situations at specific banks; risks arising from media coverage of the banking industry; risks arising from perceived instability in the banking sector; the risks of changes in interest rates and their effects on the level, cost, and composition of, and competition for, deposits, loan demand and timing of payments, the values of loan collateral, securities, and interest sensitive assets and liabilities; the ability to attract new or retain existing deposits, to retain or grow loans or additional interest and fee income, or to control noninterest expense; the effect of pricing pressures on the Company's net interest margin; the failure of assumptions underlying the establishment of reserves for possible credit losses, fair value for loans and other real estate owned; changes in real estate values; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, or uncertainties surrounding the debt ceiling and the federal budget; uncertainties surrounding the functionality of the federal government; potential delays or other problems in implementing and executing the Company's growth, expansion, acquisition, or divestment strategies, including delays in obtaining regulatory or other necessary approvals, or the failure to realize any anticipated benefits or synergies from any acquisitions, growth, or divestment strategies; the ability to pay dividends on the Company's 5.5% Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share; possible downgrades in the Company's credit ratings or outlook which could increase the costs or availability of funding from capital markets; changes in legal, financial, accounting, and/or regulatory requirements (including those related to stock repurchases); the costs and expenses to comply with such changes; the enforcement efforts of federal and state bank regulators; the ability to keep pace with technological changes, including changes regarding maintaining cybersecurity and the impact of generative artificial intelligence; increased competition in the financial services industry, particularly from regional and national institutions; the impact of a failure in, or breach of, the Company's operational or security systems or infrastructure, or those of third parties with whom the Company does business, including as a result of cyber-attacks or an increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting the Company or the Company's customers. The Company also faces risks from natural disasters or acts of war or terrorism; international or political instability, including the impacts related to or resulting from Russia's military action in Ukraine, the escalating conflicts in the Middle East, and additional sanctions and export controls, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical environments.

The Company also faces risks from: possible adverse rulings, judgments, settlements or other outcomes of pending, ongoing and future litigation, as well as governmental, administrative and investigatory matters; the impairment of the Company's goodwill or other intangible assets; losses of key employees and personnel; the diversion of management's attention from ongoing business operations and opportunities; and the Company's success in executing its business plans and strategies, and managing the risks involved in all of the foregoing.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with those factors that are set forth from time to time in the Company's periodic and current reports filed with its primary federal regulator, including those factors included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, particularly those under the heading "Item 1A. Risk Factors," in the Company's Quarterly Reports on Form 10-Q under the heading "Part II-Item 1A. Risk Factors," and in the Company's Current Reports on Form 8-K.

Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date of this news release, if one or more events related to these or other risks or uncertainties materialize, or if the Company's underlying assumptions prove to be incorrect, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statements. The forward-looking statements speak only as of the date of this news release, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, except as required by applicable law. All written or oral forward-looking statements attributable to the Company are expressly qualified in their entirety by this section.