Cadence Bank Q1 2025 Earnings Report

Cadence Bank EPS Results

• Actual EPS: $0.71
• Consensus EPS: $0.64
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: $0.62

Cadence Bank Revenue Results

• Actual Revenue: $448.55 million
• Expected Revenue: $451.61 million
• Beat/Miss: Missed by -$3.06 million
• YoY Revenue Growth: N/A

Cadence Bank Announcement Details

• Quarter: Q1 2025
• Date: 4/21/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, April 22, 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 Q1 2025 Earnings Call Transcript

Key Takeaways

• Acquisition of First Chatham Bank: Cadence received all regulatory approvals and plans to close in May, expanding its footprint significantly in Georgia.
• Q1 Financial Results: GAAP net income was $130.9 million ($0.71 per share), with a 1.15% ROA, an 8 bp increase in net interest margin, and a 100 bp+ improvement in the efficiency ratio.
• Loan Growth: First-quarter loans grew nearly 4% annualized, driven by mortgage, private banking, and community bank portfolios in Georgia, Florida, and Texas, with strong merchant CRE pipelines despite competitive yield compression.
• Deposit Stability: Average deposits rose by $610 million, quarter-end balances were flat with non-interest-bearing deposits steady at 21%, high CD retention, and a 9 bp decline in deposit costs.
• Credit Quality and Capital: Net charge-offs were 27 bps annualized, nonperforming loans fell 11%, allowance coverage stood at 1.34%, tangible book value reached $22.30 per share, and CET1 capital rose to 12.4%.

Presentation

[Operator]

Good day, and welcome to the Cadence Bank First Quarter twenty twenty five Webcast and Conference Call. All participants will be in a listen only mode. Please note that this event is being recorded. I would now like to turn the conference over to Will Frzackerele, Executive Vice President and Director of Corporate Finance. Please go ahead.

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

Good morning and thank you for joining the Cadence Bank first quarter twenty twenty five earnings conference call. We have members from our executive management team here with us 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 to the exhibit to the eight ks that we filed yesterday afternoon. These slides are also in the presentation section of our Investor Relations website.

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

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.

[James Rollins, Chairman & CEO at Cadence Bank]

Good morning.

[James Rollins, Chairman & CEO at Cadence Bank]

Thank you all for joining us to discuss our first quarter results. After I cover a few highlights and Valerie provides additional detail on our financials, our executive management team will be available for questions. First,

[James Rollins, Chairman & CEO at Cadence Bank]

during

[James Rollins, Chairman & CEO at Cadence Bank]

the quarter, we received all regulatory approvals to complete our acquisition of First Chatham Bank and we plan to close May. As a reminder, we announced this transaction the last time we had an earnings call. So be able to get approval and close in under one hundred days is fantastic. We're looking forward to working with Ken Ferrell and his team at First Chatham and expanding our presence in Georgia. Regarding the first quarter results, our financials continued to exhibit strength in a number of areas.

[James Rollins, Chairman & CEO at Cadence Bank]

GAAP net income increased to $130,900,000 or operations increased to $131,400,000 or $0.71 per share and ROA was higher at 1.15%. Our balance sheet management last fall drove an increase in net interest margin of eight basis points this quarter and our adjusted efficiency ratio improved by over 100 basis points as managed expenses offset the impact of fewer days in the quarter on revenue. Our teams remain focused on supporting our customers, which resulted in first quarter loan growth of nearly 4% on an annualized basis, with the strongest growth coming out of Georgia, Florida and Texas as those states continue to do well against the national backdrop. Loan pipelines remain solid across most of our regional markets. Merchant commercial real estate activity is as robust as it's been in years.

[James Rollins, Chairman & CEO at Cadence Bank]

Competition for the best transactions has driven yields down somewhat in recent months, but activity remains high. Deposit balances grew nicely on average, but given typical first quarter volatility, we ended the quarter flat with core customer deposits maintaining stability both in balances and in the mix of non interest bearing deposits. Importantly, credit results have been stable overall and were in line with our expectations for the quarter with net charge offs of 27 basis points annualized. There has certainly been some disruption added to the economy as of late. And while we are alert to the possibility of issues with borrowers, we have not seen any impact yet.

[James Rollins, Chairman & CEO at Cadence Bank]

Our tangible book value continued to expand increasing to $22.3 per share and regulatory capital levels remained very strong with CET1 growing to 12.4% allowing us the capital flexibility to be opportunistic as we look ahead. I'll turn the call over to Valerie for her highlights on the financials and a few more details. Valerie?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Thank you, Dan. To add to Dan's comments, our pretax pre provision net revenue for the first quarter increased to $190,000,000 up over 3% from the prior quarter, driven by solid loan growth and lower expenses. Average loans were up just over $482,000,000 in the quarter, while period end loans grew by $310,000,000 or 3.7% annualized, as paydowns in the construction and energy portfolios impacted the period end balances. The growth primarily resulted from strong performance in our mortgage, private banking and community bank groups, and as Dan noted, more heavily weighted in our higher growth markets. The quarter's loan growth was right in line also with our expectations of low to mid single digit growth for the year.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Average deposits increased $610,000,000 in the quarter, while period end deposits were essentially flat with a slight decline in brokered deposits mostly offset by a tick up in public funds. Our deposit mix at quarter end was stable with our non interest bearing deposits as a percent of total deposits coming in just over 21%, the same level as they were at year end. We also had $1.8 in CDs mature in the quarter that our teams did a great job of retaining as CD balances also remained stable in the quarter. Referencing Slides nine through 11, our first quarter net interest margin of 3.46% continued to improve, up eight basis points in the quarter, largely due to the fourth quarter payoff of our BTFP borrowings. Loan yields were 6.33% in the quarter, down nine basis points as a result of the full quarter's impact of the December interest rate cut.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

New loans came on the books just shy of 7% in the quarter, which is well north of the total portfolio yield, and we continue to have variable rate loans repricing over time. These dynamics help minimize the impact of any interest rate cuts as we look forward through the year. Total cost of deposits kept pace, likewise declining by nine basis points to 2.35. New CDs in the quarter came in nearly 20 basis points lower than last quarter at an average rate of just over four ten. Our cumulative total deposit beta, excluding brokered funds, ticked up to 30% through the first quarter.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Our total adjusted revenue was down just slightly, less than 0.5% compared to the prior quarter, primarily due to fewer days in the first quarter. Net interest revenue was down $1,400,000 or 0.4% in the quarter due to day count. Adjusted non interest revenue on Slide 12 was down less than $1,000,000 or 1% in the quarter as strong mortgage origination income was offset by lower credit related fees and the impact of market volatility and number of days on wealth management revenue and deposit service charges respectively. Even so, our adjusted efficiency ratio improved notably to 57.6%, down 150 basis points from the fourth quarter, driven by lower expenses as we detail on Slide 13. While first quarter typically has higher expenses, our adjusted non interest expense actually decreased by just over $8,000,000 or 3 percent, driven largely by a $6,000,000 decrease in data processing and software expenses as those expenses normalize for what was an elevated fourth quarter.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Total comp expense increased just $600,000 as seasonal increases in employer FICA and four zero one contribution costs were partially offset by lower commissions and incentive costs. Turning to credit on Slide seven and eight. Net charge offs for the first quarter were $23,000,000 with about two thirds of that due to one previously impaired credit. Non performing loans declined 11% or $29,000,000 in the first quarter, while criticized loans were up 2% and classified loans were down 2%, so pretty stable overall. Our loan provision was $20,000,000 increased slightly from the prior quarter due primarily to a bit more conservative macroeconomic outlook.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

When you combine our allowance coverage of 1.34% with our strong and growing capital foundation laid out on Slide 14, we believe our balance sheet is well positioned should there be economic disruption in the near future. Our 2025 guidance is on Slide 15. We continue to feel comfortable with the ranges we shared last quarter in all categories. And to further clarify, believe that even with the May 1 close of First Chatham that we will still be within these ranges, potentially the higher side of the ranges on the balance sheet side with First Chatham Incorporated, but the revenue and expenses just won't have a material impact this year given the timing and size of the transaction. We are excited about expanding our presence in Georgia and continue to be optimistic on our footprint for both organic growth and M and A fill in opportunities.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Operator, we would like to open the call to questions, please.

[Operator]

Thank you. We will now begin the question and answer session. And your first question today will come from Menon Gasolia with Morgan Stanley. Please go ahead.

[Manan Gosalia, Analyst at Morgan Stanley]

Hi, good morning. Good morning. Just looking at the loan pipelines, feels like you're not really seeing the impact of the April 2 announcements just yet. You noted that loan pipelines remain solid. And I think you just pointed to the higher end of the loan growth guide.

[Manan Gosalia, Analyst at Morgan Stanley]

Can you maybe expand on what you're hearing from clients post April 2? And what gives you the confidence that, that level of loan growth will continue?

[James Rollins, Chairman & CEO at Cadence Bank]

Sure. I'll take a stab at that if I'm coming through on the line. Can you hear me, Manon?

[Manan Gosalia, Analyst at Morgan Stanley]

I can hear you fine.

[James Rollins, Chairman & CEO at Cadence Bank]

You can. Good. I can't tell if we technical issues this morning. Glad to hear that you're there.

[James Rollins, Chairman & CEO at Cadence Bank]

Good morning. So

[James Rollins, Chairman & CEO at Cadence Bank]

yes, we thought we were pleased with what happened with our loan pipeline in the first quarter. We have seen very little, if any, impact so far of the noise. So like you said, it was April, it was after first quarter end. So when you talk about the macro environment, we continue to watch, we continue to listen, we continue to pay attention to what our customers are telling us. There's a lot of noise out there.

[James Rollins, Chairman & CEO at Cadence Bank]

I think today customers are beginning to sit back a little bit and maybe slow. But in the first quarter, we didn't experience any of that, Billy.

[Edward Braddock, Chief Banking Officer at Cadence Bank]

Yes. So I mean our current pipelines, we've got a couple of select call out areas. I mean our equipment finance, our CRE, they're the best pipelines we've seen in years. Regionally, I'd say Texas is the highest, Georgia as well. We've got competitive factors

[Edward Braddock, Chief Banking Officer at Cadence Bank]

that

[Edward Braddock, Chief Banking Officer at Cadence Bank]

are still driving win rates. But as far as tariff control, I mean just anecdotal issues of hey, we're trying to evaluate how it's going to impact us. If it's going to some have taken advantage of it. They pulled some sales and deals forward. But as far as immediate impact on pipeline, we're just not seeing it.

[Edward Braddock, Chief Banking Officer at Cadence Bank]

It's still staying solid.

[Manan Gosalia, Analyst at Morgan Stanley]

Got it. And then maybe flipping over to the deposit side, broker deposits came down about $200,000,000 or so Q on Q and noted that there was about 1,800,000,000 in CDs that matured during the quarter. Can you remind us how much in higher cost deposits roll over through the next of the year and how much of a benefit you expect to get there?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Yes. Sure, Manon. So we've got about another $3,000,000,003,500,000,000 of time deposits that mature in the second quarter. Those are just north of $420,000,000 What we saw this quarter was really the new CDs, just new to the bank coming in just north of $410,000,000 When you look at the kind of the new and renewed rate though that was lower closer to about $3.60. So there's still some incremental benefit that we anticipate seeing as some of those time deposits continue to come on board and renew at a little bit lower rates.

[James Rollins, Chairman & CEO at Cadence Bank]

I think we're looking to fund we want to fund with the best or lowest possible funding source. And so what you saw in the quarter was brokered CDs were more expensive than wholesale funding for the home loan bank, correct?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Yes. I think he was asking about the time deposits, but

[James Rollins, Chairman & CEO at Cadence Bank]

We saw that brokered deposits went down.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Yes.

[Manan Gosalia, Analyst at Morgan Stanley]

And just to clarify Valerie, the numbers you just mentioned include both brokered CDs and non brokered time deposits?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

They do. Our brokered came down about, yes, to your point $200,000,000 So the bulk of it was really consumer core customer time deposits is what we're talking about.

[Manan Gosalia, Analyst at Morgan Stanley]

Great. Thank you.

[Operator]

And your next question today will come from Jared Shaw with Barclays. Please go ahead.

[Jared Shaw, Managing Director at Barclays]

Good morning, everybody. Maybe sticking with the margin theme, you had talked a little bit about yield compression from competition. How should we think about sort of the loan yields in the face of growth here and how that's sort of impacting your view of the margin as we go through the rest of the year?

[James Rollins, Chairman & CEO at Cadence Bank]

Loan yields came on good in the second in the first quarter '6 percent.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Yes, just right below 7% were where the new loans came on.

[James Rollins, Chairman & CEO at Cadence Bank]

Yes. So but we're certainly seeing the competition. Billy, you've been talking about that for weeks now. You want to talk about competition?

[Edward Braddock, Chief Banking Officer at Cadence Bank]

Yes.

[Edward Braddock, Chief Banking Officer at Cadence Bank]

I mean

[Edward Braddock, Chief Banking Officer at Cadence Bank]

for the larger high quality deals we're seeing 25 basis point yield compression on loans I would say across the board. What we're really noticing is in kind of our merchant CRE construction portfolio, but more broadly we're seeing it on competing deals as well. So I'll say 25%, in some cases even 50%, but up 50 basis points for the most part though around 25 basis point compression we're seeing over the last

[Edward Braddock, Chief Banking Officer at Cadence Bank]

three months

[Edward Braddock, Chief Banking Officer at Cadence Bank]

I would call it.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

But on your question on the margin, while we are seeing a little bit of that compression on the loan yields and we would expect as we go through the year, if we get the rate cuts that are anticipated, obviously that will impact the loan yield. But given the time deposit repricing as well as just our ability to kind of react quickly to rate changes, we anticipate being able to match that on the deposit costs as we go through the year. With the outlook today, a fairly stable net interest margin as we go through the rest of the year.

[Jared Shaw, Managing Director at Barclays]

Okay. All right. Thanks. And how should we think about capital priorities from here? Dan, it sounds like you're open to looking at deals with the success of the Georgia deal.

[Jared Shaw, Managing Director at Barclays]

But how should we think about sort of the dynamic of buybacks and M and A and sort of other uses of capital?

[James Rollins, Chairman & CEO at Cadence Bank]

I don't think anything has changed. The macro environment clearly causes us to want to step back a little bit and look and see what's there. But I think the same objectives we've had all along. Organic growth is number one goal for us. We want to continue to grow the company.

[James Rollins, Chairman & CEO at Cadence Bank]

We want to continue to grow within our footprint. All of the other tools are there and in the toolkit and I think we will use them when they're appropriate.

[Jared Shaw, Managing Director at Barclays]

Okay. Thank you.

[Jared Shaw, Managing Director at Barclays]

Appreciate it.

[Operator]

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

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

Thanks. Good morning. Just a follow-up on the and the NII So Zare, if the margin is fairly stable for the rest of the year, then to kind of get to the mid to high end of the revenue guide, probably means we need more balance sheet growth. And so just I know this quarter was more of a function of the full quarter's impact of the BPFP, but just kind of curious how you're thinking about, just the size of the balance sheet, in particular the bond book and kind of excess liquidity as we move to the back half of the year?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Sure. Yes. Specifically to the bond book, you may have noticed we did add a little bit of borrowings in the quarter, Federal Home Loan Bank borrowings. We added just shy of $800,000,000 of those. And we use that to buy some short term agency securities at basically about a 120 spread, 115 spread.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

And so that will add obviously to the balance sheet side, but also as we go through the rest of the year, add some really nice income. Almost as a hedge, if you will, to potentially while we're seeing good pipelines and good loan growth, there's just a lot of volatility in the economy right now. And so, I thought that was a prudent way to protect that net interest income stream. And so when I talk about a stable margin, I'm really talking about net interest margin as a percentage. But we do anticipate with the estimates that we've put out there on our guidance to continue to meet those and seeing a little bit of balance sheet growth as we go through the year.

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

Okay, great. And then that variable rate, if we look at my favorite slide, as you know, the one that breaks out the variable rate loans by type and maturity and then the rate. As we look at that variable rate loan, that was a lot more stable this quarter at 06/17. Do you still think that even as we get cuts, that piece can still move higher? Or are we around at equilibrium with that piece of your loan book today?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

In the near term, it's fairly stable. If you look out at the next one to three year bucket, that's when there's opportunity for that to improve. But you're right, for the rest of the year that number based on average will be fairly stable.

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

Great. Thank you.

[James Rollins, Chairman & CEO at Cadence Bank]

Thanks, Catherine.

[Operator]

And your next question today will come from Brett Rabatin with Hovde Group. Please go ahead.

[Brett Rabatin, Director of Research at Hovde Group]

Hey, good morning everyone. Wanted to ask about the loan growth guidance within the context of energy and just obviously you guys had some payoffs in the energy bucket. Wanted to see if the guidance contemplated that coming back or if that continues to maybe atrophy a little bit?

[James Rollins, Chairman & CEO at Cadence Bank]

Yes. I don't know that any one bucket of loans is going to move the overall guidance that we've got out there. So when you talk about guidance, think the footprint that we're serving today, we're really proud of what happened in Texas and Georgia and Florida. We think we continue to have opportunities within our footprint. We think we will continue to be able to grow the lines of business from quarter to quarter can bounce all over the page.

[James Rollins, Chairman & CEO at Cadence Bank]

Billy, we did see some energy change.

[Edward Braddock, Chief Banking Officer at Cadence Bank]

Yes, we did. I mean, so mostly in midstream, Term Loan B market and some M and A activity had created some pay downs, but we also added non new transactions. And I would suggest that that activity is creating opportunity for us as well. So I anticipate that that will continue to kind of stay level. It's just when pay downs happen at once it takes a minute to pull back in that one segment.

[Edward Braddock, Chief Banking Officer at Cadence Bank]

We've also got a renewable and power segment that's been on a it's a newer business probably only a couple of years old. It continues to see some fantastic inroads. Those guys are making our name out there well known out there in that sector. And then our C and I teams across the various footprints have had a good quarter and we've continued to see that just based off our footprint. I mean Texas and Georgia specifically they're really seeing some good momentum.

[James Rollins, Chairman & CEO at Cadence Bank]

We've seen good momentum in the community bank. Again, I like most about our company is the people we've got out front taking care of customers across the footprint. Think we've got real opportunity to continue to grow.

[Brett Rabatin, Director of Research at Hovde Group]

Okay, that's helpful. And then just back on the capital toolkit, Dan, I'm just curious to hear your perspective on the outlook for M and A, you're having any conversations or if it's pretty quiet with the uncertainty at this point?

[James Rollins, Chairman & CEO at Cadence Bank]

I think the volatility in the market causes people to sit back and think, but you're going to see transactions are going to continue to happen. Consolidation is going to continue to happen in the marketplace just like we were talking about the noise that's out there. There's a lot of noise. People are trying to figure out what the noise is and how that impacts us.

[Brett Rabatin, Director of Research at Hovde Group]

Okay, great. Appreciate the color.

[Operator]

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

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

Thanks. Good morning. The CRE comment, I think you said it's as robust as it's been in years. Can you talk a little bit more about what's driving that? And even though it's more competitive, is it acceptable to you guys to put on more CRE?

[James Rollins, Chairman & CEO at Cadence Bank]

There's some great opportunities out there on the CRE side. Billy and Chris can certainly jump in here. But when you look at what the and I specifically called out the merchant CRE side. So you're talking about the big gold plated large merchant developers that are out there developing projects that are really good. And so what we see is, is we continue to have some projects that will move off of our balance sheet at some point in the not too distant future we believe.

[James Rollins, Chairman & CEO at Cadence Bank]

And so when you look back at what's happening, there's still opportunities and it's coming in the industrial space, it's coming in the multifamily space and it's coming across our footprint because of the in migration of people. Will you Chris?

[Edward Braddock, Chief Banking Officer at Cadence Bank]

Yes, John, that's right. So we're seeing and keep in mind that we're still getting 55%, sixty % loan to cost on these. So we won't see the fundings out of these for twelve to eighteen months and it's backfilling that portfolio that as they start selling we're having to backfill for when that occurs. But yes, it's multifamily, it's industrial and it's in the markets that we're serving. So we're seeing it's just good road bus activity.

[Edward Braddock, Chief Banking Officer at Cadence Bank]

It's more than we've seen just in the last couple of years. I mean not since the beginning of time but just in the last couple of years we're seeing more activity than we had.

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

I would just

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

add the we've got your question, do we have room? Yes, we've got room both on the CAD and the total CRE bucket. I don't think we put that in the slides, but we have room there. And it's coming from the community bank as well. So Billy mentioned the merchant type, that's a bread and butter product for us across the community bank.

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

So all that real estate activity is just good bread and butter for us. So we and it's hanging in there good. Why is it picking up a little bit?

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

I think the SBB, the liquidity crisis have put a lot of pause on a lot of deals and pipeline months ago. And so you're seeing some of the more strategic thinkers that are thinking three years out getting back into the market.

[James Rollins, Chairman & CEO at Cadence Bank]

That takes a while to bring some of these online.

[James Rollins, Chairman & CEO at Cadence Bank]

Does that help you, John?

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

Yes, that helps. Valerie, one for you on expenses. You obviously had a pretty strong performance on expenses, but anything to call out to maybe set us up for what the second quarter might look like on expenses given the performance in Q1?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Yes, sure. Yes, we were really pleased with our expenses. There were a few things tweaking some of the long term incentive plans that brought it down a little bit. But overall, kind of across the board, really nice expense management. As we look out for the rest of the year, we do expect quarterly expenses to increase.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

And still within our guidance of, I believe, within 4% to 6% for the year. So, I still think we're okay there. And that's going to factor in continuing to grow in our businesses. We're growing with good talented people. We're growing with good technologies that help our efficiency and effectiveness.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

So we're looking to continue that as we go through the year. And so that's at this point what I would expect.

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

Okay. All right. Thank you very much.

[James Rollins, Chairman & CEO at Cadence Bank]

Thank you, John.

[Operator]

And your next question today will come from Matt Olney with Stephens. Please go ahead.

[Matt Olney, Managing Director at Stephens Inc]

Hey,

[Matt Olney, Managing Director at Stephens Inc]

morning. Thanks for taking the question guys. Just want to follow-up on the bond purchases and the borrowings behind that that Valerie mentioned. It looks like this probably came later in the quarter. Any color on the timing of that trade and any color on just the duration of this trade?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Yes, sure. It was in the last month of the quarter. And like I said, was about $785,000,000 of securities. They're 0% to 20% risk weighted agencies, 2.5 duration, about north of 5.3 on yield and that's funded by borrowings that are about 4.2. So, getting some nice incremental spread there.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Depending on where spreads are and so forth, we may end up doing a little bit more of that in the second quarter. We'll kind of see where the rest of the balance sheet falls. But again, just really kind of a little bit of incremental earnings impact for us, while we had plenty of capacity on the borrowing side and took advantage of a little bit of spread differential there.

[Matt Olney, Managing Director at Stephens Inc]

And just to follow-up on that Valerie, it sounds like there is potential to do more of this in the future. Should we consider this with respect to loan growth? If the loan growth slows, if the macro deteriorates, this could become potentially more attractive to you guys in the future?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

It's really about the spread. And so depending on what that could look like that is an option.

[Matt Olney, Managing Director at Stephens Inc]

It's all around the spread.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

We had significantly reduced our securities book as you know over the past couple of years. We were down to about 15%. And so we're still well south of 20% and would anticipate that we kind of stay in that range in the foreseeable future. But there's certainly ability to do a little more there should we desire to with the rest of the balance sheet mix.

[Matt Olney, Managing Director at Stephens Inc]

Okay. Thank you guys.

[James Rollins, Chairman & CEO at Cadence Bank]

Thanks Matt.

[Operator]

Your next question today will come from Michael Rose with Raymond James. Please go ahead.

[Michael Rose, Managing Director - Equity Research at Raymond James Financial]

Hey, thanks for taking my questions. Just two quick ones. Good morning. Just on the pickup in line utilization, I think that's something we've seen from a bunch of banks across the reporting period so far. Anything to read into that?

[Michael Rose, Managing Director - Equity Research at Raymond James Financial]

Are you guys actually adding lines? Or just looking for some color there. Thanks.

[James Rollins, Chairman & CEO at Cadence Bank]

Yes, don't think there's anything to add into that. What you've seen on ours is up and down. You've got construction draws that fund into that too. I wouldn't read anything into that at all.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

And it's really within a first quarter or two. Mean, it's really small.

[Michael Rose, Managing Director - Equity Research at Raymond James Financial]

Got

[Michael Rose, Managing Director - Equity Research at Raymond James Financial]

it. I think some of us are still reeling from the liquidity crisis during COVID and the lives of us on that.

[James Rollins, Chairman & CEO at Cadence Bank]

We understand

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

We all have PTFEs for

[Michael Rose, Managing Director - Equity Research at Raymond James Financial]

yes. That's a better way to put it. Just one follow-up for me, just kind of sticking with that theme. You guys obviously with the MOE worked out some of the legacy cadence restaurant exposure. You have some retail.

[Michael Rose, Managing Director - Equity Research at Raymond James Financial]

You laid out really nicely in Slides five and six. But any areas that you guys are particularly focused on or that you're seeing some concern expressed from customers? I know some of it's obvious, but just wanted to get a better feel for what you guys are doing internally, assuming this could potentially go on for an extended period. Thanks.

[James Rollins, Chairman & CEO at Cadence Bank]

Yes. I think the credit quality picture continues to look stable for us. I mean we saw a little bit of improvement in a couple of different categories. We saw a little deterioration in a couple of categories. Charge offs were higher off of really just one bigger credit.

[James Rollins, Chairman & CEO at Cadence Bank]

I think we feel good about where we sit today. The macro environment causes everybody to stand back and say, okay, let's see what we can figure out where it's going to come from. I don't know that we're seeing any of that today, Chris.

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

It's hard. I mean,

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

there's a ton of conversation going on. It's that uncertainty definitely creates some anxiousness across customer set. And that's all of them, right? I mean, it's farmers, builders, developers, manufacturers, retailers, importers. There's we're having a lot of conversations.

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

All of our frontline folks are talking with their clients. We're reporting back up through all of our credit processes and our loan approval processes what the current view of the tariff impact look like. But because of that uncertainty, it's just hard to handicap it. We haven't seen it impact our credit numbers today. And specifically to your question, we haven't identified any segment or particular line that's that we're overly concerned about.

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

It's really a credit by credit type process that we're going through. And all of that can temper a little maybe loan activity or exuberance I guess could be tempered a little bit until some certainty gets into the market.

[James Rollins, Chairman & CEO at Cadence Bank]

It's a mix. Just the handful of customers that I talked to in the manufacturing business, a couple of them were telling me they can see a benefit here that this is going to probably help them produce more. Other manufacturers are telling us, they're importing most of the inputs and this is going to they're going to have to pass along every bit of the cost increase and it could be detrimental to them. So it's a mixed bag. But when you push on what's happened today, still a lot of noise and not a lot of action.

[Michael Rose, Managing Director - Equity Research at Raymond James Financial]

Totally get it. I was hoping your crystal ball, Dan, would give us some more answers, but I guess we'll just have to wait.

[Michael Rose, Managing Director - Equity Research at Raymond James Financial]

For taking the question.

[James Rollins, Chairman & CEO at Cadence Bank]

I'm with you. Thanks.

[Operator]

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

[James Rollins, Chairman & CEO at Cadence Bank]

Casey,

[Operator]

your line may be muted. Moving along, we have Stephen Scouting with Piper Sandler. Please go ahead.

[James Rollins, Chairman & CEO at Cadence Bank]

We're not we're not getting you, Steven. I don't know if it's your end or our end, but we're not hearing your question.

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. Any chance you can hear me out there?

[James Rollins, Chairman & CEO at Cadence Bank]

Yes, we can. Much better.

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

Okay.

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

I don't know what changed, but so just kind of curious about how you think about the loan to deposit ratio potentially levering up the balance sheet from here?

[James Rollins, Chairman & CEO at Cadence Bank]

Yes. I think we continue to look to grow deposits. But I think when we look about where we sit today, I think we like the position we're in. We would like to continue to grow deposits. We would like to hang out in the neighborhood where we are up a little bit, down a little bit.

[James Rollins, Chairman & CEO at Cadence Bank]

But I think we feel comfortable about where we're sitting today. That's one of the things we like.

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

Got it. Great. And maybe how do you think about incremental M and A? Obviously, the valuations make everything a little more difficult, but given the quick approval timeline, does it change your outlook on how you think about M and A in the years to come or maybe the amount of deals you might be able to put together?

[James Rollins, Chairman & CEO at Cadence Bank]

Not really. Think from an M and A perspective, we're looking for culture. We're looking for the right fit. And I don't think that the speed or the valuations change that. You're still looking for the right folks for us.

[James Rollins, Chairman & CEO at Cadence Bank]

And if it's speed is a good thing. We like the speed. The FCB deal We're pleased to be able to get that completed and closed. We'll close that in a couple of weeks here.

[James Rollins, Chairman & CEO at Cadence Bank]

That's faster than we thought. We like all of that, but it's still around people bank with people and the culture is going to be a critical piece a critical component.

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

Yes, makes a

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

lot of sense. And then just lastly, quick on mortgage income, look like a pretty good quarter here. Do you think there's an inflection point anywhere, whether it's around the thirty year rate or just lower rates in general, where we could see a more material pickup in mortgage more broadly or kind of how you're thinking about expanding your teams there

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

theoretically?

[James Rollins, Chairman & CEO at Cadence Bank]

The fact that the thirty years jumped up in the last week or so certainly is not helping that team at all. That's a hard question. I don't know what the rate needs to get to see a big change. In some of our markets, it is a tight housing market.

[James Rollins, Chairman & CEO at Cadence Bank]

And so that's part of the picture too is the inventory is just not there. It's an interesting place we find ourselves today. The newer homes, big builders are buying down rates for first time homebuyers, which is a positive. But it's an interesting environment. Valerie, you want talk about mortgage?

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Yes. They had a great first quarter. Typically, first quarter is really good seasonally. But even when you look at us last year really up several hundred thousand dollars in originations. So really nice performance there as the teams continue to do well.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

To really gear up some of those refis, I mean, it's going to need to drop forty, fifty basis points from here probably.

[James Rollins, Chairman & CEO at Cadence Bank]

More. More.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Yes, at least to start getting that engine running.

[James Rollins, Chairman & CEO at Cadence Bank]

From a year ago, one of the things that the mortgage leadership team, Scott Dickey and his team did, we've retooled Upscaled our team. So the team that's out there in front of us today on the mortgage group, like I was talking about Billy's team a minute ago and the Community Bank team, we're really proud of the folks we've got out taking care of customers.

[Valerie Toalson, CFO & President - Banking Services at Cadence Bank]

Exactly. If they get that done for us.

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

Say another way, the refi boom hits, when it hits, if it hits, we're going to be positioned well to take advantage of it across a lot of different areas, including some expanded footprints that are new to us.

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

Fantastic. Lot of good color there. Thanks for

[Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies]

the time guys.

[James Rollins, Chairman & CEO at Cadence Bank]

Thanks, Bill.

[Operator]

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

[James Rollins, Chairman & CEO at Cadence Bank]

All right. Thanks, Nick. It's certainly an exciting and busy time for Cadence Bank and for our industry. We believe we're in an excellent position to be able to continue our path of operating performance improvement. I'm extremely proud of our team's efforts and our progress over the past few years and have high confidence that our unique operating model will support our vision of helping people, companies and communities prosper.

[James Rollins, Chairman & CEO at Cadence Bank]

Thank you for joining us today. We look forward to visiting with you all again soon.

[Operator]

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
• James Rollins, Chairman & CEO
• Valerie Toalson, CFO & President - Banking Services
• Edward Braddock, Chief Banking Officer
• Chris Bagley, President & Chief Credit Officer

Analysts

• Manan Gosalia, Analyst at Morgan Stanley
• Jared Shaw, Managing Director at Barclays
• Catherine Mealor, Managing Director - Equity Research at Keefe, Bruyette & Woods (KBW)
• Brett Rabatin, Director of Research at Hovde Group
• Jon Arfstrom, Managing Director - Associate Director of US Research at RBC Capital Markets
• Matt Olney, Managing Director at Stephens Inc
• Michael Rose, Managing Director - Equity Research at Raymond James Financial
• Stephen Scouten, MD & Senior Research Analyst at Piper Sandler Companies