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Cadence (CADE) Q2 Earnings Beat Estimates, Stock Rises 2.1%

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Cadence Bank (CADE - Free Report) reported second-quarter 2022 adjusted earnings per share of 73 cents, beating the Zacks Consensus Estimate of 66 cents. However, the bottom line compares unfavorably with 84 cents reported in the year-ago quarter.

The company's results were backed by significant growth in net interest revenues and fee income. The balance sheet position was strong with the increase in loan and lease balances. In addition, shares of Cadence Bank gained 2.12% following the release of the second-quarter earnings. However, a weak capital position was an offsetting factor.

The company’s net income available to common shareholders in the second quarter amounted to $124.6 million, up 70% from the year-ago quarter.

Revenues Climb, Expenses Rise

Total revenues in the reported quarter increased 60% year over year to $450 million. In addition, the top-line figure surpassed the Zacks Consensus Estimate of $440.1 million.

Net interest revenues in the quarter were $324.8 million, up 80% year over year. The fully taxable equivalent net interest margin (NIM) was 3.06%, up from 2.99% in the prior-year quarter.

Non-interest revenues improved 23% year over year to $125.2 million. The upside resulted from the increase in mortgage banking, card and merchant fees, deposit service charges, wealth management and others.

Non-interest expenses were $285.9 million, which increased 64% year over year. The increase stemmed primarily from a rise in all the components.

As of Jun 30, 2022, total deposits marginally decreased to $40.2 billion on a sequential basis, while loans and leases, net of unearned income, increased 4% sequentially to $28.36 billion.

Credit Quality - Mixed

Non-performing loans and leases were 0.41% of net loans and leases as of Jun 30, 2022, down from 0.56% as of Jun 30, 2021. Additionally, in the second quarter, the company recorded $1 million provision for credit losses, down from $11.5 million in the prior-year quarter.

However, non-performing assets were $130.4 million, up from $101.8 million in the prior-year quarter. Allowance for credit losses to net loans and leases was flat at 1.55% as of Jun 30, 2022.

Capital Position Weak

As of Jun 30, 2022, tier 1 capital and tier 1 leverage capital ratios were 10.86% and 8.35%, respectively, compared with 11.80% and 8.25% recorded at the end of the prior-year quarter.

Also, the ratio of tangible shareholders' equity to tangible assets was down to 5.82% from the prior-year quarter’s 7.11%. Additionally, the ratio of its total shareholders' equity to total assets was 9.29% at the end of the second quarter, down from 11.12% as of Jun 30, 2021.

Capital Deployment Update

In the reported quarter, the company repurchased 1 million shares and had 3.9 million shares remaining on its current share repurchase authorization, which will expire on Dec 30, 2022.

Our Viewpoint

Cadence put up a decent performance in the second quarter. The improvement in NIM and the decline in the provision of credit losses were the encouraging factors. However, the rise in expenses and the increase in non-performing assets hurt the results to some extent.

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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $3.10 for second-quarter 2022, meeting the Zacks Consensus Estimate. However, the bottom line compares unfavorably with the $3.45 per share reported in the year-ago period.

A rise in NII on net interest margin expansion and balance sheet strength drove MTB’s results. Yet a rise in expenses was a key undermining factor.

Truist Financial’s (TFC - Free Report) second-quarter 2022 adjusted earnings of $1.20 per share surpassed the Zacks Consensus Estimate of $1.17. However, TFC’s bottom line declined 22.6% from the prior-year quarter.

TFC’s results were aided by average loan growth and higher rates, which drove NII. However, lower non-interest income and a rise in provisions were the major headwinds.


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