Cadence (CADE) Q1 profit and revenue overtake, loans increase

Cadence bank CADE reported adjusted earnings per share of 65 cents per share in the first quarter of 2022, beating Zacks’ consensus estimate of 60 cents. However, net income compares unfavorably to the 78 cents reported in the prior year quarter.

The increase in income was supported by an increase in net interest income. In addition, higher deposit and loan balances have strengthened its balance sheet. Nevertheless, shrinking net interest margins, low capital ratios and high spending were major headwinds.

Management noted, “We continue to be pleased with our business development efforts, especially so soon after the legal merger last fall. Our results for the quarter reflect successes on both sides of the balance sheet within our community and commercial banks as well as many of our other businesses, including mortgages, insurance and wealth management. Our results also reflect a stable net interest margin positioned for improvement and continued strong credit quality.”

The company’s net income available to common shareholders for the first quarter was $112.6 million, up 42.2% from the year-ago quarter.

Revenues climb on net interest income, expenses rise

Total revenue for the reported quarter increased 68.9% year over year to $440.3 million. Additionally, revenue topped Zacks’ consensus estimate of $423 million.

Net interest income for the quarter was $311.8 million, up 80.5% year-over-year. Fully taxable equivalent net interest margin (NIM) was 2.92%, compared to 3.15% in the prior year quarter.

Non-interest revenue increased 46.1% year over year to $128.4 million. The increase was driven by higher card and merchant fees, service fees and brokerage fees.

Non-interest expense was $291.7 million, up 87.2% year over year. The increase is mainly due to an increase in all components.

As of March 31, 2022, total deposits were $40.6 billion, up 1.9% sequentially, while loans and leases, net of unearned income, increased 1.1 % sequentially to reach $27.2 billion.

Decent credit quality

Non-performing loans and leases represented 0.44% of net loans and leases as of March 31, 2022, compared to 0.67% as of March 31, 2021. Additionally, in the first quarter, the company did not record any provision for losses on receivables.

However, non-performing assets were $147.7 million, compared to $110.7 million in the prior year quarter. Provision for credit losses on net loans and leases was 1.61% at March 31, 2022, up 1 basis point year-over-year.

Weak capital position

As of March 31, 2022, the Tier 1 capital and Tier 1 capital leverage ratios were 11.05% and 8.24%, respectively, compared to 11.95% and 8.59% recorded at the end of the quarter. of the previous year.

Additionally, the ratio of property, plant and equipment to property, plant and equipment decreased to 6.31% from 7.04% in the prior year quarter. Additionally, its total equity to total assets ratio was 9.48% at the end of the first quarter, compared to 10.30% as of March 31, 2021.

Capital Deployment Update

During the current quarter, the company repurchased 5.1 million shares and 4.9 million shares remained on its current stock repurchase authorization, which will expire on December 30, 2022.

Our point of view

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

However, high expenses could hamper earnings growth in the coming quarters.

Cadence Bank Price, Consensus, and EPS Surprise

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

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

Performance of other banks

First Horizon National SocietyFHN’s first-quarter 2022 adjusted earnings per share of 38 cents beat Zacks’ consensus estimate of 34 cents. However, the figure was down 25% year-on-year. Results exclude after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’s results reflect a higher loan balance, provisioning benefits and lower expenses. However, lower NII and commission income impacted revenue. In addition, pressure on margins due to low interest rates has been a spoilsport for FHN.

M&T Banking Corporation MTB reported net operating income per share of $2.73 in the first quarter of 2022, beating Zacks’ consensus estimate of $2.26. However, MTB’s net income compares unfavorably to the $3.41 per share reported a year ago.

Rising non-interest income and a strong capital position were tailwinds for M&T Bank. However, a decline in the NII, net interest margin and an increase in expenses were the main factors for the slowdown.

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