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Cadence (CADE) Tops on Q4 Earnings & Revenues, Hikes Dividend

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Cadence Bank (CADE - Free Report) delivered an earnings surprise of 5% in fourth-quarter 2021, with adjusted earnings per share of 63 cents per share beating the Zacks Consensus Estimate of 60 cents. However, the bottom line compares unfavorably with 69 cents reported in the year-ago quarter.

Higher net revenues were aided by an increase in net interest revenues. Moreover, higher deposit balances and loans aided the company. Nevertheless, shrinking net interest margins, capital position and elevated merger expenses were major drags.

On Oct 29, 2021, the company completed the merger with legacy Cadence Bancorporation, the parent company of Cadence Bank N.A., creating a $48-billion company, which is the 6th largest bank headquartered in the company's nine-state footprint. Following this, the company’s name was changed from BancorpSouth Bank to Cadence Bank and the stock ticker symbol from BXS to CADE.

While the fourth-quarter results do not represent a full-quarter of comparable combined earnings, the increases in the balance sheet and income statement metrics in the fourth quarter are largely due to the merger.

The company’s net loss to common shareholders for the fourth quarter amounted to $37 million against net income of $66.4 million reported in the year-ago quarter.

For the full year, adjusted earnings per share were $2.89 compared with $2.20 reported a year ago. Net income available to common shareholders was $185.7 million, down from $218.6 million in 2020.

Revenues & Deposits Climb, Expenses Rise

Total revenues for the reported quarter increased 46.7% year over year to $375.1 million. In addition, the top-line figure surpassed the Zacks Consensus Estimate of $374.9 million.

In 2021, total revenues were up 15.2% from the prior-year level to $1.18 billion. Also, the top line surpassed the Zacks Consensus Estimate of $1.17 billion.

Net interest revenues for the quarter were $271.2 million, up 53.3% year over year. The fully taxable equivalent net interest margin (NIM) was 2.90%, contracting from 3.29% in the prior-year quarter.

Non-interest revenues improved 31.8% year over year to $103.9 million. The figure included a positive mortgage servicing rights valuation adjustment of $2.6 million. The upside resulted from the increase in credit card, debit card and merchant fees, deposit service charges and wealth management fees.

Non-interest expenses were $289.2 million, increasing 73% year over year. The increase stemmed primarily from a rise in all the components, except for pension settlement expenses.

As of Dec 31, 2021, total deposits were $39.8 billion, up 69.2% sequentially, while loans and leases, net of unearned income, surged 79.3% sequentially to $26.9 billion.

Credit Quality Declines

Non-performing loans and leases were 0.57% of net loans and leases as of Dec 31, 2021, down from 0.81% as of Dec 31, 2020. However, non-performing assets were $186.8 million, up 40.9% from the prior-year quarter.

Additionally, in the fourth quarter, the company recorded a provision for credit losses of $133.6 million compared with the provision of $5.8 million seen in the fourth quarter of 2020. Allowance for credit losses to net loans and leases was 1.66% as of Dec 31, 2021, up 3 bps year over year.

Capital Position Weak

As of Dec 31, 2021, tier 1 capital and tier 1 leverage capital ratios were 11.29% and 9.90%, respectively, compared with 11.74% and 8.67% recorded at the end of the prior-year quarter.

Yet, the ratio of tangible shareholders' equity to tangible assets was flat at 7.54%. Additionally, the ratio of its total shareholders' equity to total assets was 10.66% at the end of the fourth quarter, down from 11.03% as of Dec 31, 2020.

Capital Deployment Update

In the reported quarter, the company repurchased 4,257,526 shares at a weighted average price of $30.66 per share.

Concurrent with fourth-quarter earnings, the company’s board of directors declared cash dividends of 22 cents per common share, indicating a sequential rise of 10%. The dividend will be paid out on Apr 1 to shareholders of record as of Mar 15, 2022.

Our Viewpoint

Cadence put up a decent performance in the fourth quarter. Inorganic growth moves have strengthened the company’s balance-sheet position. This supports its capital-deployment strategies.

However, the low interest rates amid the Federal Reserve's accommodative policy stance might hurt the company’s margins in the upcoming period, while elevated expenses might impede bottom-line growth.

Cadence Bank Price, Consensus and EPS Surprise


Cadence Bank Price, Consensus and EPS Surprise

Cadence Bank price-consensus-eps-surprise-chart | Cadence Bank Quote

Currently, Cadence carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Texas Capital Bancshares (TCBI - Free Report) reported adjusted earnings per share of $1.19 for fourth-quarter 2021, surpassing the Zacks Consensus Estimate of 91 cents. Moreover, results compare favorably with the prior-year quarter’s $1.14.

Robust capital position and lower expenses were the driving factors for TCBI. Moreover, the provision for credit losses recorded benefits. Yet, a fall in net interest income (NII) and fee income plus pressed margins were deterrents. Further, Texas Capital’sresults reflect a decline in both loans and deposit balances.

Webster Financial (WBS - Free Report) reported fourth-quarter 2021 adjusted earnings per share of $1.31, which surpassed the Zacks Consensus Estimate of $1.10. The reported figure excluded noteworthy items, such as charges related to mergers, strategic optimization and debt prepayment expenses.

Higher NII and fee income drove Webster Financial’s results. Moreover, declining costs, growth in loan balances and impressive capital ratios were positives. Also, the reserve release during the quarter was a tailwind. However, lower NIM and deposit balance were the key concerns for WBS.

Synovus Financial (SNV - Free Report) reported fourth-quarter 2021 adjusted earnings of $1.35 per share, which beat the Zacks Consensus Estimate of $1.1. Also, the bottom line compares favorably with earnings of $1.08 per share recorded in the year-ago quarter.

Synovus’results were driven by rising NII and fee income, lower expenses, and the reversal of provisions. SNV's solid loan and deposit balances stoked organic growth. However, shrinking NIM and deteriorating capital position were the undermining factors.

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