Cadence Bank (CADE) Q4 2025: Net Interest Margin Rises 6bps as Deposit Mix Shifts Post-Integration
Cadence Bank’s Q4 was defined by the rapid integration of two acquisitions, a disciplined deposit remix, and a six basis point net interest margin expansion that signals improving balance sheet flexibility. Management’s tone emphasized operational leverage, with future cost saves and organic growth poised to drive incremental returns. Strategic capital deployment, ongoing deposit migration, and the evolving loan pipeline will be key determinants of 2026 outcomes.
Summary
- Acquisition Integration Drives Margin Expansion: Full operational integration of Industry Bank Shares and First Chatham improved NIM and deposit mix.
- Deposit Strategy Underpins Funding Cost Decline: Core deposit retention and brokered deposit runoff lowered total funding costs and positioned for further improvement.
- Efficiency Gains Set Up 2026 Leverage: Substantial cost saves from recent deals are yet to be realized, supporting future operating leverage.
Performance Analysis
Cadence Bank delivered a quarter marked by transformative M&A execution, with the full integration of Industry Bank Shares and First Chatham completed on schedule. The balance sheet swelled as a result, with deposits up $3.4 billion, largely from the Industry acquisition, and loans rising $1.3 billion, split between acquired and organic growth. Net interest margin (NIM) rose six basis points to 3.46%, reflecting a mix of improved securities yields and lower funding costs, as wholesale and brokered deposits were paid down and time deposit repricing moderated. Management’s disciplined approach to deposit management was evident in the runoff of higher-cost public funds and the retention of core customer balances, even as non-interest-bearing deposit ratios normalized post-acquisition.
On the revenue side, total adjusted revenue increased $41 million or 9% sequentially, with net interest income up 12%. Non-interest revenue dipped, driven by seasonal mortgage banking declines and MSR (mortgage servicing rights) adjustments, though underlying mortgage production rose 13% year over year. Expense growth was primarily acquisition-driven, with two-thirds of the increase tied to compensation from new bank additions and performance incentives. Adjusted efficiency ratio improved to 56.5%, and credit quality remained stable, with net charge-offs and non-performing assets well within historical norms.
- Securities Portfolio Restructuring: $2.5 billion in acquired securities were sold and reinvested, raising portfolio yield by 32bps to 3.65%.
- Deposit Mix Migration: Brokered deposits and high-cost public funds declined, while core deposits remained stable, supporting lower funding costs.
- Loan Yield Dynamics: New and renewed loans booked at 6.85%, sustaining portfolio yield and offsetting legacy fixed-rate runoff.
Capital levels rebounded faster than anticipated, enabling Cadence to re-enter the share buyback “game” sooner, while maintaining flexibility for future M&A or organic investment.
Executive Commentary
"Industry and First Chatham are now both fully integrated into our systems and processes, and we are operating as one bank under the Cadence brand. We look forward to the opportunity to grow in Central Texas and Georgia markets that were added through these transactions."
Dan Rollins, President and Chief Executive Officer
"Our adjusted pre-tax pre-provision net revenue for the third quarter reached a record $224 million, up nearly 9% from the prior quarter, driven by strong organic performance and the closing of our second acquisition this year."
Valerie Tolson, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Deposit Franchise Optimization
Cadence’s core funding strategy centers on replacing high-cost brokered and public funds with stable, relationship-based deposits, a move accelerated by the Industry acquisition. While the acquired bank’s deposit base skewed toward CDs (certificates of deposit, time-bound interest-bearing accounts), management expects to improve this mix over time, targeting a return to pre-acquisition ratios. This transition is critical for sustaining NIM as rates evolve and for maintaining a resilient funding base.
2. Balance Sheet and Securities Repositioning
The swift sale and reinvestment of $2.5 billion in acquired securities enabled Cadence to lock in higher yields and reduce interest rate risk. Additional repositioning of $515 million in legacy securities further improved the portfolio’s yield and duration profile. This proactive asset-liability management supports both near-term margin and long-term flexibility, especially as loan growth continues and organic funding sources are prioritized over incremental bond book expansion.
3. M&A Integration and Capital Deployment
Management executed on two sizable integrations in a single year, extracting better-than-expected purchase accounting marks and accelerating capital rebuild. With integration complete and cost saves yet to be fully realized, Cadence is positioned to deploy capital toward buybacks or additional acquisitions, with a stated preference for deepening density across its nine-state Southeast and Texas footprint. The focus remains on core organic growth, but strategic M&A remains on the table as the industry consolidates.
4. Loan Growth and Credit Discipline
Loan pipelines remain robust across commercial, mortgage, and specialty verticals, with new originations outpacing paydowns in most categories. While CRE (commercial real estate) paydowns—especially bridge refinances—are expected to persist, management is confident that new production, particularly from recently acquired banks with access to expanded products and limits, will offset runoff. Credit quality is stable, and exposure to non-depository financial institutions (NDFIs) is modest at 2% of the portfolio, limiting sector-specific risk.
5. Efficiency and Operating Leverage
Substantial cost saves from the Industry deal are not yet visible in the run rate, with most expected to materialize in 2026. Management’s guidance implies continued operating leverage, supported by both expense discipline and revenue growth from expanded market presence and fee businesses, including mortgage and wealth management.
Key Considerations
Cadence Bank’s Q4 results reflect the culmination of a multi-year transformation through targeted M&A, deposit remixing, and balance sheet optimization. The strategic context for 2026 is shaped by:
Key Considerations:
- Deposit Beta Management: Executives anticipate interest-bearing deposit betas rising to 50%, with overall deposit betas in the 30-40% range, as rate cuts loom and deposit mix normalizes post-acquisition.
- Cost Save Realization: Most of the cost saves from the Industry integration are slated for 2026, providing a clear path to improved efficiency ratios and margin leverage.
- Capital Flexibility: Rapid capital rebuild post-acquisition enables both share buybacks and opportunistic M&A, with a disciplined approach to capital allocation.
- Loan Pipeline Diversity: Growth is broad-based across geographies and verticals, with CRE paydowns offset by strong C&I (commercial and industrial) and mortgage activity.
- Fee Revenue Upside: Mortgage production and wealth management hiring are driving underlying fee growth, with potential for further upside if rates decline and refi activity accelerates.
Risks
Cadence faces several risks as it transitions from integration to organic growth: Elevated deposit betas could pressure NIM if rate cuts occur faster than anticipated, while ongoing CRE paydowns may weigh on loan growth in the near term. Credit normalization, especially in income-producing CRE, and competition for core deposits remain key watchpoints. The full realization of cost saves and integration synergies is critical to achieving projected operating leverage.
Forward Outlook
For Q1 2026, Cadence guided to:
- Continued modest NIM improvement, driven by funding cost declines and loan repricing.
- Expense levels aligned with revenue expectations, preserving operating leverage.
For full-year 2026, management maintained guidance within prior ranges:
- Revenue and loan growth at the lower end of previous guidance, reflecting the shorter time frame and CRE paydown dynamics.
Management highlighted several factors that will shape the year:
- Execution of cost saves from the Industry integration, with most benefits realized from Q1 2026 onward.
- Deposit mix normalization and brokered deposit runoff, supporting further funding cost improvement.
Takeaways
Cadence Bank enters 2026 with a restructured balance sheet, a more efficient deposit base, and significant cost saves yet to be realized.
- Integration Execution Sets Up 2026 Leverage: The operational completion of two major deals, with cost saves and revenue synergies still ahead, positions Cadence for margin expansion and improved returns.
- Deposit and Funding Mix Will Be a Key Margin Driver: The pace of brokered deposit runoff and core deposit migration will dictate NIM trajectory as the rate environment evolves.
- Loan Growth and Credit Remain Balanced: Broad-based loan pipeline strength offsets CRE paydowns, while credit metrics remain stable, supporting forward growth and risk management.
Conclusion
Cadence Bank’s Q4 2025 results mark the end of a transformative integration phase and the beginning of a new operating chapter focused on efficiency, margin expansion, and capital deployment. The successful execution of deposit remixing and balance sheet repositioning, coupled with a robust loan pipeline and cost saves yet to materialize, set the stage for improved performance in 2026. Investors should monitor deposit beta trends, cost save realization, and organic loan growth as the primary levers for value creation in the coming year.
Industry Read-Through
Cadence’s experience underscores several broader industry themes: Regional banks with proactive deposit management and asset-liability flexibility are best positioned to defend margins as the rate cycle turns. The ability to extract value from M&A—through both improved purchase marks and rapid integration—will separate winners from laggards in a consolidating sector. The continued runoff of brokered deposits and focus on core funding is a playbook being adopted widely, and the pace of CRE paydowns versus new loan production will remain a key variable for peers. Finally, the lagged realization of cost saves post-M&A highlights the importance of patience and disciplined execution for investors across the regional banking landscape.