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) (NYSE: CADE) is a regional commercial bank that offers a full suite of financial services to individuals, businesses and government entities. Through its network of branches and digital platforms, the bank provides deposit accounts, treasury management solutions, commercial and industrial lending, equipment finance, residential and consumer mortgages, and wealth management services. Cadence Bank serves a mix of small and mid-size companies as well as retail customers in its core markets.

The institution traces its heritage to Cadence Bancorporation, which was established in 1987 in Tupelo, Mississippi. In September 2021, Cadence Bancorporation completed its merger with BancorpSouth Bank, adopting the Cadence brand and establishing dual headquarters in Houston, Texas and Tupelo, Mississippi. This combination expanded the bank’s footprint across the Southeast and enhanced its capacity in capital markets and advisory services.

Cadence Bank operates over 150 branches and a comprehensive digital banking platform, covering key states such as Texas, Louisiana, Mississippi, Alabama, Arkansas, Tennessee and Florida. Its product portfolio includes checking and savings accounts, money market and certificate of deposit offerings, commercial real estate lending, asset-based and specialty finance, supply-chain finance, trust and fiduciary services, and investment advisory solutions.

Under the leadership of President and Chief Executive Officer Tommy W. Cook Jr., Cadence Bank has focused on disciplined growth, customer service excellence and community engagement. The executive team strives to support local economies by providing tailored banking solutions, fostering long-term client relationships and participating in regional development initiatives.

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 2025 Webcast and Conference Call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question, you may press star then one on the touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Will Fisackerly, Executive Vice President and Director of Corporate Finance. Please go ahead.

[Will Fisackerly, EVP and Director of Corporate Finance at Cadence Bank]

Good morning and thank you for joining the Cadence Bank first quarter 2025 earnings conference call. We have members from our executive management team here with us this morning: Dan Rollins, Chris Bagley, Valerie Toalson, 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 through the exhibit to the 8-K that we filed yesterday afternoon. These slides are also in the presentation section of our Investor Relations website. I would remind you that the presentation along with our earnings release contain our customary disclosures around forward-looking statements and any non-GAAP or GAAP metrics that may be discussed. The disclosures regarding forward-looking statements contained in those documents apply to our presentation today.

[Will Fisackerly, EVP and Director of Corporate Finance at Cadence Bank]

Now I'll turn to Dan for his opening comments.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Good morning. 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. During the quarter we received all regulatory approvals to complete our acquisition of First Chatham Bank and we plan to close May 1st. As a reminder, we announced this transaction the last time we had an earnings call, so to be able to get approval and close in under 100 days is fantastic. We're looking forward to working with Ken Farrell 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. GAAP net income increased to $130.9 million or $0.70 per share.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Adjusted net income from continuing operations increased to $131.4 million 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 8 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. Competition for the best transactions has driven yields down somewhat in recent months, but activity remains high.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

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. Our tangible book value continued to expand, increasing to $22.30 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.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Valerie.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

Thank you Dan. To add to Dan's comments, our pre-tax pre-provision net revenue for the first quarter increased to $190 million, up over 3% from the prior quarter, driven by solid loan growth and lower expenses. Average loans were up just over $482 million in the quarter, while period-end loans grew by $310 million 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 is, 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 and President of Banking Services at Cadence Bank]

Average deposits increased $610 million in the quarter while period-end deposits were essentially flat with a slight decline in brokered deposits mostly offset by a tick 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 billion 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 8 basis points in the quarter largely due to the fourth quarter payoff of our BTFP borrowings.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

Loan yields were 6.33% in the quarter, down 9 basis points as a result of the full quarter's impact of the December interest rate cut. 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 9 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 4.10%. Our cumulative total deposit beta excluding brokered funds ticked up to 30% through the first quarter.

[Valerie Toalson, CFO and President of 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 $1.4 million or 0.4% in the quarter due to day count. Adjusted non-interest revenue on slide 12 was down less than $1 million 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.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

While first quarter typically has higher expenses, our adjusted non-interest expense actually decreased by just over $8 million or 3% driven largely by a $6 million decrease in data processing and software expenses as those expenses normalize from what was an elevated fourth quarter. Total comp expense increased just $600,000 as seasonal increases in employer FICA and 401(k) contribution costs were partially offset by lower commissions and incentives costs. Turning to credit on slides seven and eight, net charge-offs for the first quarter were $23 million with about 2/3 of that due to one previously impaired credit. Non-performing loans declined 11% or $29 million 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 million increased slightly from the prior quarter due primarily to a bit more conservative macroeconomic outlook.

[Valerie Toalson, CFO and President of 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 1st close of First Chatham that we will still be within these ranges. Potentially the higher side of the range is on the balance sheet side with First Chatham incorporated, but the revenue and expenses just will not 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&A fill in opportunities.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

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

[Operator]

Thank you.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We ask that you please limit yourself to one question and one follow up at this time. We will pause momentarily to assemble our roster. Your first question today will come from Manan Gosalia with Morgan Stanley. Please go ahead.

[Manan Gosalia, Head of U.S. Midcaps Banks Research at Morgan Stanley]

Hi, good morning. Just looking at loan pipelines, it feels like you're not really seeing the impact of the April 2nd 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. Can you maybe expand on what you're hearing from client's post April 2nd and what gives you the confidence that that level of loan growth will continue?

[Dan Rollins III, Chairman and CEO at Cadence Bank]

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

[Manan Gosalia, Head of U.S. Midcaps Banks Research at Morgan Stanley]

I can hear you fine.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

You can? Good. You can't tell if we have technical issues this morning. Glad to hear that you're there. Good morning. 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. Like you said, it was April, it was after first quarter end. You know, when you talk about the macro environment, we continue to watch, we continue, we continue to listen, we continue to pay attention to what our customers are telling us. There's a lot of noise out there. I think today customers are beginning to sit back a little bit and maybe slow. In the first quarter we didn't experience any of that. Billy.

[Billy Braddock, Chief Banking Officer at Cadence Bank]

Yeah, I mean our current pipelines, we've got a couple of select callout areas.

[Billy Braddock, Chief Banking Officer at Cadence Bank]

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. You know, we've got competitive factors that are still driving win rates. As far as tariff control, I mean just anecdotal issues of, hey, we're trying to evaluate how it's going to impact us, you know, if it's going to. Some have taken advantage of it, they pulled some sales and deals forward. As far as immediate impact on pipeline, we're just not seeing it. It's still staying solid.

[Manan Gosalia, Head of U.S. Midcaps Banks Research at Morgan Stanley]

Got it. Maybe flipping over to the deposit side, brokered deposits came down about $200 million or so QoQ. You noted that there was about $1.8 billion in CDs that matured during the quarter. Can you remind us how much in higher cost deposits roll over through the rest of the year and how much of a benefit you expect to get there?

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

Yep, sure. Manan. We've got about another $3.0 billion-$3.5 billion of time deposits that mature in the second quarter. Those are just north of $420. What we saw this quarter was really the new CDs just new to the bank, coming in just north of $410. When you look at the kind of the new and renewed rate though, that was lower, closer to about $360. There is 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.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

I think we're looking to fund. We want to fund with the best or lowest possible funding source. What you saw in the quarter was brokered CDs were more expensive than wholesale funding for the Federal Home Loan Bank, correct?

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

Yeah, yeah. I think he was asking about the time deposits.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

You saw that brokered deposits went down.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

Yes.

[Manan Gosalia, Head of U.S. Midcaps Banks Research at Morgan Stanley]

Just to clarify, Valerie, the numbers you just mentioned include both brokered CDs and non-brokered time deposits.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

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

[Manan Gosalia, Head of U.S. Midcaps Banks Research at Morgan Stanley]

Great, thank you.

[Operator]

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

[Jared Shaw, Managing Director at Barclays]

Maybe sticking with the margin theme. You had talked a little bit about yield compression from competition. How should we think about 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?

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Loan yields came on good in the second in the first quarter. Six.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

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

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Yeah, so. We're certainly seeing the competition. Billy, you've been talking about that for weeks now. You want to talk about competition?

[Billy Braddock, Chief Banking Officer at Cadence Bank]

Yeah, I mean, for the larger high-quality deals, we're seeing, you know, 25 basis point yield compression on loans, I would say across the board, where we're really noticing it is in kind of our merchant CRE construction portfolio, but more broadly we're seeing it on. I would say 25, in some cases even 50%, but about 50 basis points for the most part though, around 25 basis point compression we're seeing over the last three months, I would call it.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

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. Given the time deposit repricing as well as just our ability to, 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. 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, but how should we think about the dynamic of buybacks and M&A and other uses of capital?

[Dan Rollins III, Chairman and 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. I think that the same objectives we've had all along, organic growth is number one goal for us. We want to continue to grow the company. 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.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Appreciate it.

[Operator]

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

[Catherine Mealor, Managing Director of Equity Research at KBW]

Thanks. Good morning. Just a follow up on the revenue and the NII outlook. 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. I know this quarter was more of a function of the full quarter's impact of the BTFP, 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 and President of Banking Services at Cadence Bank]

Sure, yeah. Specifically to the bond book. You know, 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 million of those. We used that to buy some short-term agency securities at basically about a 120 spread, 115 spread. 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 thought that was a prudent way to protect that net interest income stream. When I talk about a stable margin, I'm really talking about net interest margin, the percentage.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

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 of Equity Research at KBW]

Okay, great. That variable rate, 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 617. 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 and President of 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. Through the rest of the year that number based on average will be fairly stable.

[Catherine Mealor, Managing Director of Equity Research at KBW]

Great, thank you.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Thanks, Catherine.

[Operator]

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

[Brett Rabatin, Managing Director and Head of Equity 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.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Yeah, I don't know that any one bucket of loans is going to move the overall guidance that we've got out there. When you talk about guidance, I 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, Billy. We did see some energy changes.

[Billy Braddock, Chief Banking Officer at Cadence Bank]

Yeah, we did. I mean, mostly in midstream Term Loan B market. And some M&A activity created some pay downs, but we also added nine new transactions. I would suggest that that activity is creating opportunity for us as well. I anticipate that that'll continue to kind of stay level.

[Billy Braddock, Chief Banking Officer at Cadence Bank]

It's just when pay downs happen at once, it takes a minute to pull back. In that one segment, we've also got a renewable and power segment that's been on a. It's a newer business, probably only a couple years old. It continues to see some fantastic inroads. Those guys are making our name out there well known out there in that sector. Then our C&I teams across the various footprints have had a good quarter. We continue to see that just based off our footprint. I mean, Texas and Georgia specifically, they're really seeing some good momentum. We've seen good momentum in the community bank. What I like most about our company is the people we've got out front taking care of customers across the footprint. I think we've got real opportunity to continue to grow.

[Brett Rabatin, Managing Director and Head of Equity Research at Hovde Group]

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

[Dan Rollins III, Chairman and CEO at Cadence Bank]

The market causes people to sit back and think. You are 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 is out there, there is a lot of noise. People are trying to figure out what the noise is and how that impacts us.

[Brett Rabatin, Managing Director and Head of Equity Research at Hovde Group]

Okay, great. Appreciate the call there.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Brett.

[Operator]

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

[Jon Arfstrom, Managing Director and Associate Director of U.S. 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? Even though it's more competitive, is it acceptable to you guys to put on more CRE?

[Dan Rollins III, Chairman and CEO at Cadence Bank]

There's some great opportunities out there on the CRE side. Billy and Chris can certainly jump in here. When you look at what I specifically called out, the merchant CRE side, you're talking about the big gold-plated, large merchant developers that are out there developing projects that are really good. What we see 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. You know, 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 multi-family space, it's coming across our footprint because of the in migration of people. Billy? Chris?

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

Yeah, Jon, that's right. We're seeing and keep in mind that we're still getting, you know, 55, 60% loan to cost on these.

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

We will not see the fundings out of these for, you know, 12 to 18 months. It is backfilling that portfolio that as they start selling, we are having to backfill for when that occurs. Yeah, it is multi-family, it is industrial, and it is in the markets that we are serving. We are seeing just good, robust activity. It is more than we have seen just in the last couple of years. I mean, not since the beginning of time, but just in the last couple years we are seeing more activity than we had. I would just add that we have got your question. Do we have room? Yes, we have got room both on the cap and the total CRE bucket. I do not think we put that in any of these slides, but we have room there. It is coming from the community bank as well.

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

Billy mentioned the merchant type, but that's a bread and butter product for us across the community bank. All that real estate activity is just good bread and butter for us and it's hanging in there good. Why is it picking up a little bit? I think the SVB, the liquidity crisis, have put a lot of pause on a lot of deals and pipeline months ago. You're seeing some of the more strategic thinkers that are thinking three years out getting back into the market. It takes a while to bring some of these online. Does that help you, Jon?

[Jon Arfstrom, Managing Director and Associate Director of U.S. Research at RBC Capital Markets]

Yep, 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 and President of Banking Services at Cadence Bank]

Yeah, sure. Yes, we were really pleased with our expenses. You know, there were a few things, you know, tweaking some of the long-term incentive plans that, you know, brought it down a little bit. But overall, you know, 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 and, you know, still within our guidance of, you know, I believe within 4%-6% for the year. So I still think we're okay there that, you know, and that's going to factor in, you know, continuing to grow in our businesses. You know, we're growing with good talented people, we're growing with good technologies that help our efficiency and effectiveness. So we're looking to continue that as we go through the year.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

That is, at this point, what I would expect.

[Jon Arfstrom, Managing Director and Associate Director of U.S. Research at RBC Capital Markets]

Okay. All right. Thank you very much.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Thank you, Jon.

[Operator]

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

[Matt Olney, Research Analyst at Stephens]

Hey. Hey, good 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 and President of Banking Services at Cadence Bank]

Sure. It was in the last month of the quarter and like I said, it was about $785 million of securities. They're 0%-20% risk weighted agencies, 2.5 duration, getting about north of 5.30% on yield. And that's funded by borrowings that are about, so getting some nice incremental spread there. You know, 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, you know, plenty of capacity on the borrowing side and took advantage of a little bit of spread differential there.

[Matt Olney, Research Analyst at Stephens]

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 and President of Banking Services at Cadence Bank]

It's really about the spread. Depending on what that could look like, that is an option.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

It's all around the spread.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

Yeah. 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, you know, well south of 20% and would anticipate that we kind of stay in that range in the foreseeable future. There is certainly ability to do a little more there should we desire to with the rest of the balance sheet mix.

[Matt Olney, Research Analyst at Stephens]

Okay. Okay. Thank you, guys.

[Dan Rollins III, Chairman and 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 of Equity Research at Raymond James]

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? Are you guys actually adding lines or, you know, just looking for some color there? Thanks.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

I 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 and President of Banking Services at Cadence Bank]

It's really within a percentage or two. I mean, it's really small.

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

Yeah, got it. I think some of us are still, you know, reeling from, you know, the liquidity crisis during COVID and the last drop.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

We understand.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

We all have PTSD for that.

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

Yes.

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

Yep.

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

Yep. 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, you know, worked down some of the legacy Cadence, you know, restaurant exposure, you have some retail. You lay it out really nicely in slides five and six. 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.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

I think the credit quality picture continues to look stable for us. I mean, we saw a little bit of improvement in a couple different categories. We saw a little deterioration in a couple of categories. Charge offs were higher off of really just one bigger credit. I think we feel good about where we sit today. The macro environment causes everybody to stand back and say, okay, let's see if 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 and Chief Credit Officer at Cadence Bank]

It's hard. I mean, there's a ton of conversation going on. That uncertainty definitely creates some anxiousness across customer set. That's all of them, right? I mean, it's farmers, builders, developers, manufacturers, retailers, importers. We are having a lot of conversations. All of our frontline folks are talking with their clients.

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

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. Specifically to your question, we haven't identified any segment or particular line that we're overly concerned about. It's really a credit-by-credit-type process that we're going through. All of that could temper a little, maybe loan activity or exuberance, I guess could be tempered a little bit until some certainty gets into the market.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

It's a mix. Just the handful of customers that I talk to in the manufacturing business, you know, a couple of them are telling me they can see a benefit here, that this is going to probably help them produce more.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Other manufacturers are telling us, you know, 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. It is a mixed bag. When you push on, you know what's happened today, still a lot of noise and not a lot of action.

[Matt Olney, Research Analyst at Stephens]

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.

[Matt Olney, Research Analyst at Stephens]

Thanks for taking questions.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

I'm with you. Thanks.

[Operator]

Your next question today will come from Casey Haire with Autonomous Research. Please go ahead, Casey. Your line may be muted. Moving along, we have Stephen Scouten with Piper Sandler. Please go ahead.

[Stephen Scouten, Managing Director at Piper Sandler]

[audio distortion]

[Dan Rollins III, Chairman and CEO at Cadence Bank]

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

[Stephen Scouten, Managing Director at Piper Sandler]

Okay. Any chance you can hear me now, Dan?

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Yes, we can. Much better.

[Stephen Scouten, Managing Director at Piper Sandler]

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

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Yes, I think we continue to look to grow deposits. 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. I think we feel comfortable where we're sitting today. That's one of the things we like.

[Stephen Scouten, Managing Director at Piper Sandler]

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

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Not really. I think from an M&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 benefits.

[Stephen Scouten, Managing Director at Piper Sandler]

Got it.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Speed's a good thing. We like the speed. The FCB deal was great. We're pleased to be able to get that completed and closed. We'll close that in a couple of weeks here. 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 component.

[Stephen Scouten, Managing Director at Piper Sandler]

Yep, makes a lot of sense. Just lastly, real quick on mortgage income, looked like a pretty good quarter here. Do you think there's an inflection point anywhere, whether it's around the 30-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?

[Dan Rollins III, Chairman and CEO at Cadence Bank]

The fact that the 30 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 to see a big change in some of our markets. It is a tight housing market. 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, the big builders are buying down rates for first-time home buyers, which is a positive. It's an interesting environment. Valerie, you want to talk about mortgage?

[Valerie Toalson, CFO and President of Banking Services at Cadence Bank]

Yeah. They had a great first quarter. Typically first quarter is really good seasonally, but even when you look at it last year, really up several hundred thousand dollars in origination. Really nice performance there as the teams continue to do well to really gear up some of those refis. I mean it's going to need to drop 40, 50 basis points from here probably or more. Yeah. At least to start getting that engine running.

[Dan Rollins III, Chairman and 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 and President of Banking Services at Cadence Bank]

Exactly. It's a good business for us.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

See another way, when 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, Managing Director at Piper Sandler]

Fantastic. A lot of good color there. Thanks for the time, guys.

[Dan Rollins III, Chairman and CEO at Cadence Bank]

Thank you, Stephen.

[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.

[Dan Rollins III, Chairman and 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. Thank you for joining us today. We look forward to visiting with you all again soon.

[Operator]

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

Participants

Executives

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

Analysts

• Manan Gosalia, Head of U.S. Midcaps Banks Research at Morgan Stanley
• Michael Rose, Managing Director of Equity Research at Raymond James
• Stephen Scouten, Managing Director at Piper Sandler
• Catherine Mealor, Managing Director of Equity Research at KBW
• Brett Rabatin, Managing Director and Head of Equity Research at Hovde Group
• Matt Olney, Research Analyst at Stephens
• Jon Arfstrom, Managing Director and Associate Director of U.S. Research at RBC Capital Markets
• Jared Shaw, Managing Director at Barclays