Cadence Bank (CADE) Q4 2025 earnings review
Going Out on Top: Record Efficiency Ahead of Merger
In its final quarter before the expected February 1, 2026 merger with Huntington Bancshares, Cadence Bank delivered a clean sweep of improved metrics. Adjusted EPS of $0.85 beat the prior quarter's $0.81, driven by a 9 basis point expansion in Net Interest Margin (NIM) to 3.55% and an efficiency ratio improvement to 54.9%. While the company is about to be acquired, the underlying engine is accelerating, with net organic loan growth of 4.8% annualized and a 29% YoY surge in Pre-Tax Pre-Provision Net Revenue (PPNR).
🐂 Bull Case
NIM expanded to 3.55% (+9 bps QoQ) as funding costs fell faster than asset yields. Total funding costs dropped 11 bps to 2.24%, while loan yields only compressed 5 bps. This positive leverage indicates strong deposit pricing power.
The bank is generating significantly more revenue per dollar of expense. Adjusted PPNR rose 29.2% YoY to $237.8M, while the adjusted efficiency ratio improved by over 400 basis points YoY to 54.9%.
🐻 Bear Case
Net charge-offs (NCOs) ticked up to 0.28% of average loans (annualized), compared to 0.17% in 24Q4. While not at alarmist levels, the trend is deteriorating slightly as the cycle matures.
With the Huntington closing days away (Feb 1), the primary risk shifts to integration. Ensuring the 4.8% annualized loan growth and deposit relationships transfer smoothly to the new entity is the final hurdle.
⚖️ Verdict: 🟢🟢
Excellent. Cadence is handing over a high-performing balance sheet to Huntington. Expanding margins, growing loans, and record profitability in the final quarter validate the franchise value.
Key Themes
Net Interest Margin Acceleration
Accelerating. Contrary to industry fears of asset yield compression, CADE expanded NIM by 9 basis points QoQ to 3.55%. The driver was the liability side: cost of total deposits fell 10 bps to 2.15%, outpacing the 5 bps decline in loan yields. This confirms the bank is successfully managing the rate cycle pivot.
Organic Growth Despite M&A Distraction
Stable/Positive. Typically, banks lose momentum pending a merger. CADE bucked this trend, delivering $444.5M in net organic loan growth (4.8% annualized) and $529M in core customer deposit growth. This suggests the sales force remained engaged despite the looming Huntington transaction.
Credit Quality Drift
Deteriorating. Net charge-offs rose to $26.1M (0.28% annualized) from $14.1M (0.17%) a year ago. While the provision for credit losses decreased QoQ ($28M vs $32M), the underlying charge-off trend is moving upward, signaling normalization or pockets of stress in the portfolio.
Deposit Mix Optimization
Improving. CADE reduced expensive brokered deposits by $461M while growing core customer deposits by $529M. Noninterest-bearing deposits rose to 21.4% of total deposits (up from 20.6% in Q3), reversing a multi-quarter trend of mix degradation. This mix shift directly supported the NIM expansion.
The Huntington Merger
Imminent. Shareholders approved the deal, regulatory approvals are in hand, and closing is set for February 1, 2026. This effectively caps the CADE narrative, with shareholders transitioning to HBAN equity (2.475 HBAN shares per CADE share).
Other KPIs
Accelerating. Up 29.2% YoY and 6.1% QoQ. This is the cleanest measure of the bank's core operating power, removing the noise of merger expenses and provision changes. Reaching 1.78% of average assets is a standout performance.
Accelerating. Increased $0.87 (+3.8%) from the prior quarter ($22.82). Driven by strong retained earnings and improvement in the fair value of the securities portfolio as rates stabilized/fell.
Stable. Down 0.9% linked quarter. Despite inflationary pressures, the bank managed to reduce expenses sequentially (driven by data processing and occupancy), contributing to the positive operating leverage.
Guidance
The company did not provide standalone financial guidance for 2026 due to the pending acquisition by Huntington Bancshares. All forward-looking statements are now contingent on the combined entity's performance.
Key Questions
Credit Deterioration Specifics
Net charge-offs increased to 28 bps from 17 bps a year ago. Is this uptick driven by a specific sector (e.g., CRE, C&I) or a specific vintage of loans, and how does this impact the handover to Huntington?
Deposit Beta Velocity
Deposit costs fell 10 bps this quarter. Given the current rate environment, do you expect the pace of deposit cost reductions to accelerate, hold steady, or decelerate in Q1 2026?
Talent Retention
With the merger closing in days, have you observed any regrettable attrition among revenue-producing staff (lenders, wealth advisors) during this 'lame duck' quarter, or has the retention package secured the team?
Noninterest-Bearing Deposits
NIB deposits ticked up to 21.4% after sliding previously. Is this a seasonal anomaly, or have you seen a structural stabilization in client cash sorting behaviors?