BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
Washington, D.C. 20551
________________________________________
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
FDIC Certificate No. 11813
CADENCE BANK
(Exact name of registrant as specified in its charter)
Mississippi
64-0117230
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification No.)
One Mississippi Plaza, 201 South Spring Street
Tupelo, Mississippi
38804
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (662) 680-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, $2.50 par value per share
CADE
New York Stock Exchange
5.50% Series A Non-Cumulative Perpetual Preferred Stock, par
value $0.01 per share
CADE Pr A
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received
by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on June 30, 2024 was $5.1 billion, based on the last
reported sale price per share of the registrant’s common stock as reported on the New York Stock Exchange on June 30, 2024.
As of February 18, 2025, the registrant had outstanding 183,525,441 shares of common stock, par value $2.50 per share, and 6,900,000 shares of its 5.50%
Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE
To the extent stated herein, portions of the Definitive Proxy Statement on Schedule 14A to be used in connection with the registrant’s 2025 Annual Meeting
of Shareholders, scheduled to be held April 23, 2025, are incorporated by reference into Part III of this annual report on Form 10-K.
1
CADENCE BANK
FORM 10-K
For the Fiscal Year Ended December 31, 2024
TABLE OF CONTENTS
PART I
Page
Item 1. Business
7
Item 1A. Risk Factors
23
Item 1B. Unresolved Staff Comments
46
Item 1C. Cybersecurity
46
Item 2. Properties
47
Item 3. Legal Proceedings
47
Item 4. Mine Safety Disclosures
48
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
49
Item 6. Reserved
50
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
51
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
91
Item 8. Financial Statements and Supplementary Data
94
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
175
Item 9A. Controls and Procedures
175
Item 9B. Other Information
175
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
175
PART III
Item 10. Directors, Executive Officers and Corporate Governance
176
Item 11. Executive Compensation
176
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
177
Item 13. Certain Relationships and Related Transactions, and Director Independence
177
Item 14. Principal Accountant Fees and Services
177
PART IV
Item 15. Exhibits and Financial Statement Schedules
177
Item 16. Form 10-K Summary
180
2
Glossary of Defined Terms
ACH - Automated Clearing House
ACL - Allowance for credit losses
AFS - Available for sale
AI - Artificial intelligence
ALM - Asset/liability management
ALCO - Asset/Liability Management Committee
AOCI - Accumulated other comprehensive income (loss)
ASC - Accounting Standards Codification
ASU - Accounting Standards Update
ATM - Automated teller machine
Basel III - Basel Committee's 2010 Regulatory Capital Framework (Third Accord)
Basel Committee - Basel Committee on Banking Supervision
BHC Act - Bank Holding Company Act of 1956, as amended
Board - the Company’s Board of Directors
BOLI - Bank-owned life insurance
BTFP - Bank Term Funding Program
C&I - Commercial and industrial
CAD - Construction, acquisition and development
CAMT - Corporate alternative minimum tax rate
CDE - Community development entity
CECL - ASU 2016-13, Measurement of Credit Losses on Financial Instruments ("Current Expected Credit Losses")
CEO - Chief Executive Officer
CET1 - Common Equity Tier 1
CFO - Chief Financial Officer
CFPB - Consumer Financial Protection Bureau
CIO - Chief Information Officer
CIS - Center for Internet Security
CISM - Certified Information Security Manager
CISO - Chief Information Security Officer
CISSP - Certified Information Systems Security Professional
Code - Code of Business Conduct and Ethics
CODM - Chief operating decision maker
Company - Cadence Bank and its subsidiaries
COO - Chief Operating Officer
COSO - Committee of Sponsoring Organizations of the Treadway Commission
COVID-19 - Coronavirus Disease 2019
CPR - Conditional Prepayment Rate
CRA - Community Reinvestment Act of 1977
CRE - Commercial real estate
CSC - Contractual servicing cost
DIF - Deposit Insurance Fund
DOJ - U.S. Department of Justice
EAP - Employee Assistance Program
EIR - Effective interest rate
EPS - Earnings per share
ESG - Environmental, Social and Governance
Exchange Act - Securities Exchange Act of 1934, as amended
EVE - Economic value of equity
FASB - Financial Accounting Standards Board
FDI Act - Federal Deposit Insurance Act
FDIC - Federal Deposit Insurance Corporation
FDICIA - Federal Deposit Insurance Corporation Improvement Act of 1991
FDM - Financial difficulty modification
Federal Reserve - Board of Governors of the Federal Reserve System
FHA - Federal Housing Administration
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FinCEN - Financial Crimes Enforcement Network
3
FNMA - Federal National Mortgage Association
FRB - Federal Reserve Bank
FTE - Fully taxable equivalent
GAAP - Generally Accepted Accounting Principles in the United States
GNMA - Government National Mortgage Association
HTC - Historic tax credits
IRA of 2022 - Inflation Reduction Act of 2022
IRR - Interest rate risk
ITM - Interactive teller machine
MBS - Mortgage-backed securities
MDBCF - Mississippi Department of Banking and Consumer Finance
MSR - Mortgage servicing rights
NAV - Net asset value
NII - Net interest income
NM - Not meaningful
NMTC - New market tax credit
NPA - Nonperforming asset(s)
NPL - Nonperforming loan(s)
NSF - Nonsufficient funds
NYSE - New York Stock Exchange
OCC - Office of the Comptroller of the Currency
OREO - Other real estate owned
PCAOB - Public Company Accounting Oversight Board
PCD - Purchased credit deteriorated
PSU - Performance stock unit
ROU - Right of use
RSA - Restricted stock award
RSU - Restricted stock unit
SBA - Small Business Administration
SBIC - Small Business Investment Company
SEC - U.S. Securities and Exchange Commission
SNC - Shared National Credit
SOFR - Secured Overnight Financing Rate
TBA - To be announced
TDR - Troubled debt restructuring
USDA - U.S. Department of Agriculture
VA - U.S. Department of Veterans Affairs
VIE - Variable interest entity
4
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements made in this annual report on Form 10-K (this “Report”) are not statements of historical fact and
constitute “forward-looking statements” within the meaning of Section 21E of the Exchange Act, and are subject to the safe
harbor created thereby under the Private Securities Litigation Reform Act of 1995 as well as the “bespeaks caution” doctrine.
These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “aspire,” “assume,”
“believe,” “budget,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “forecast,” “foresee,” “goal,” “hope,”
“indicate,” “intend,” “may,” “might,” “outlook,” “plan,” “project,” “projection,” “predict,” “prospect,” “potential,” “roadmap,”
“seek,” “should,” “target,” “will,” and “would,” or the negative versions of those words, or other comparable words of a future
or forward-looking nature. These forward-looking statements may include, without limitation, discussions regarding general
economic, interest rate, real estate market, competitive, employment, and credit market conditions; our assets; business; cash
flows; financial condition; liquidity; prospects; results of operations, and the Company’s ability to deploy capital into strategic
and growth initiatives; deposit growth interest and fee-based revenue; capital resources; capital metrics; efficiency ratio;
valuation of mortgage servicing rights; mortgage production volume; net income; net interest revenue; non-interest revenue; net
interest margin; interest expense; non-interest expense; earnings per share; interest rate sensitivity; interest rate risk; balance
sheet and liquidity management; off-balance sheet arrangements; fair value determinations; asset quality; credit quality; credit
losses; provision and allowance for credit losses, impairments, charge-offs, recoveries and changes in volume; investment
securities portfolio yields and values; ability to manage the impact of pandemics and natural disasters; adoption and use of
critical accounting policies; adoption and implementation of new accounting standards and their effect on our financial results
and our financial reporting; utilization of non-GAAP financial metrics; declaration and payment of dividends; ability to pay
dividends or coupons on our 5.5% Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share, or our
subordinated notes; mortgage and commission revenue growth; implementation and execution of cost savings initiatives; ability
to successfully litigate, resolve or otherwise dispense with threatened, ongoing and future litigation and administrative and
investigatory matters; ability to successfully complete pending or future acquisitions or divestitures; dispositions and other
strategic growth opportunities and initiatives; ability to successfully integrate and manage acquisitions or divestitures;
opportunities and efforts to grow market share; reputation; ability to compete with other financial institutions; ability to recruit
and retain key employees and personnel; access to capital markets; investment in other financial institutions; and ability to
operate our regulatory compliance programs in accordance with applicable law.
Forward-looking statements are based upon management’s expectations as well as certain assumptions and estimates
made by, and information available to, management at the time such statements were made. Forward-looking statements are not
historical facts, are not guarantees of future results or performance and are subject to certain known and unknown risks,
uncertainties and other factors that are beyond our control and that may cause actual results to differ materially from those
expressed in, or implied by, such forward-looking statements. These risks, uncertainties and other factors include, without
limitation, general economic, unemployment, credit market and real estate market conditions, and the effect of such conditions
on the creditworthiness of borrowers, collateral values, the value of investment securities and asset recovery values; the risks of
changes in interest rates and their effects on the level and composition of deposits, loan demand, loan repayment velocity, and
the values of loan collateral, securities and interest sensitive assets and liabilities; risks arising from market reactions to the
banking environment in general, or to conditions or situations at specific banks; risks arising from perceived instability in the
banking sector; the impact of inflation, the failure of assumptions underlying the establishment of reserves for possible credit
losses, fair value for loans and other real estate owned; changes in the prices, values and sales volumes of residential and
commercial real estate, especially as they relate to the value of collateral supporting the Company’s loans; a deterioration of the
credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling,
or uncertainties surrounding the debt ceiling and the federal budget; the availability of and access to capital; possible
downgrades in our credit ratings or outlook which could increase the costs or availability of funding from capital markets; the
ability to attract new or retain existing deposits or to retain or grow loans; potential delays or other problems in implementing
and executing our growth, expansion and acquisition or divestment strategies, including delays in obtaining regulatory or other
necessary approvals, including in obtaining the approval of any pending transaction, or the failure to realize any anticipated
benefits or synergies from any acquisitions or growth strategies; significant turbulence or a disruption in the capital or financial
markets; the effect of a fall in stock market prices on our investment banking business and our fee income from our brokerage
and wealth management businesses; the ability to grow additional interest and fee income or to control noninterest expense;
competitive factors and pricing pressures, including their effect on our net interest margin; changes in legal, financial and/or
regulatory requirements (including those related to share repurchases); recently enacted and potential legislation and regulatory
actions and the costs and expenses to comply with new and/or existing legislation and regulatory actions, and any related rules
and regulations; changes in U.S. Government monetary, fiscal and trade policy, including any changes that may result from
U.S. elections; special assessments or changes to regular assessments by banking regulators; possible adverse rulings,
judgments, settlements and other outcomes of pending or future litigation or government actions; the ability to keep pace with
technological changes, including changes regarding generative artificial intelligence, maintaining cybersecurity and compliance
with applicable cybersecurity regulatory requirements; increased competition in the financial services industry, particularly
from regional and national institutions, as well as from fintech companies, risks related to our reliance on third parties to
provide key components of our business infrastructure, including the risks related to disruptions in services provided by
disputes with, or financial difficulties of a third-party vendor, the impact of failure in, or breach of, our operational or security
5
systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber-attacks or an
increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting us or our
customers; natural disasters or acts of war or terrorism; international or political instability (including the impacts related to or
resulting from Russia’s military action in Ukraine, or the Israel-Hamas war, including the imposition of additional sanctions
and export controls, as well as the broader impacts to financial markets and the global macroeconomic and geopolitical
environments); risks related to, and the costs associated with, ESG matters, including the scope and pace of related rulemaking
activity; impairment of our goodwill or other intangible assets; adoption of new accounting standards or changes in existing
standards; and other factors described in “Part I, Item 1A. Risk Factors” in this Report or as detailed from time to time in the
Company’s press and news releases, reports and other filings we file with the federal banking regulators.
The Company faces risks from: possible adverse rulings, judgments, settlements or other outcomes of pending,
ongoing and future litigation, as well as governmental, administrative and investigatory matters; the impairment of the
company’s goodwill or other intangible assets; losses of key employees and personnel; the diversion of management’s attention
from ongoing business operations and opportunities; and the Company’s success in executing its business plans and strategies,
and managing the risks involved in all of the foregoing.
Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as
of the date of this Report, if one or more events related to these or other risks or uncertainties materialize, or if the Company’s
underlying assumptions prove to be incorrect, actual results may prove to be materially different from the results expressed or
implied by the forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking
statements. The forward-looking statements speak only as of the date of this Report, and the Company does not undertake any
obligation to publicly update or review any forward-looking statement, whether as a result of new information, future
developments or otherwise, except as required by applicable law. New risks and uncertainties may emerge from time to time,
and it is not possible for the Company to predict their occurrence or how they will affect the Company. All written or oral
forward-looking statements attributable to us are expressly qualified in their entirety by this section.
6
PART I
ITEM 1. BUSINESS.
COMPANY OVERVIEW
Cadence Bank (“We,” “Our,” or the “Company”), originally chartered in 1876, is a Mississippi state chartered
commercial bank with dual headquarters in Houston, Texas and Tupelo, Mississippi. The Company conducts commercial
banking and financial services directly and through its banking-related subsidiaries. The Company operates over 350
commercial banking and mortgage locations in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri,
Tennessee and Texas.
Our common stock and our preferred stock are listed on the New York Stock Exchange under the symbols “CADE”
and “CADE Pr A”, respectively. During the fourth quarter of 2021, we changed our corporate name from BancorpSouth Bank
to Cadence Bank in connection with our acquisition of Cadence Bancorporation. At December 31, 2024, the Company had total
assets of $47.0 billion; total loans, net of unearned income, of $33.7 billion; total deposits of $40.5 billion; and shareholders’
equity of $5.6 billion.
During the fourth quarter of 2024, the Company applied for and became a member of the Federal Reserve System.
The Federal Reserve Board of St. Louis is now the Company’s primary federal regulator in place of the FDIC.
The Company’s investor relations website address is https://ir.cadencebank.com. The Company makes available its
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those
reports free of charge on its investor website under the caption “Public Filings” as soon as reasonably practicable after such
material is electronically filed with, or furnished to, the Federal Reserve. The Company’s websites and the information
contained therein or linked thereto are not, and are not intended to be, incorporated into this Report.
PRODUCTS AND SERVICES
LENDING ACTIVITIES
The Company’s lending activities include both commercial and consumer loans. Loan originations are derived from a
number of sources including direct solicitation by the Company’s loan officers, existing depositors and borrowers, builders,
attorneys, walk-in customers and, in some instances, other lenders, real estate broker referrals and mortgage loan companies.
The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and
nature of the loan and applies these procedures in a disciplined manner.
Our loan and lease portfolio includes commercial and industrial loans, residential real estate loans, commercial real
estate loans and consumer loans. The principal risk associated with each category of loans we make is the creditworthiness of
the borrower. Borrower creditworthiness is affected by general economic conditions, the attributes of the borrower and the
borrower’s market or industry. Attributes of the relevant business market or industry include the competitive environment,
customer and supplier availability, the threat of substitutes and barriers to entry and exit.
Commercial Lending
The Company offers a variety of commercial loan services including term loans, lines of credit, equipment and
receivable financing, energy, restaurant, healthcare, technology, SBA, and agricultural loans. A broad range of short-to-medium
term commercial loans, both secured and unsecured, are made available to businesses for working capital (including inventory
and receivables), business expansion (including acquisition and development of real estate and improvements), and the
purchase of equipment and machinery. The Company also makes construction loans to real estate developers for the
acquisition, development and construction of residential and commercial properties.
Commercial loans are granted based on the borrower’s ability to generate cash flow to support its debt obligations and
other cash related expenses. A borrower’s ability to repay commercial loans is substantially dependent on the success of the
business itself and on the quality of its management. As a general practice, the Company takes as collateral a security interest in
any available real estate, equipment, inventory, receivables, or other personal property, although such loans may also be made
infrequently on an unsecured basis. In many instances, the Company requires personal guarantees of its commercial loans to
provide additional credit support.
7
The Company’s exposure to agricultural lending is minimal. Agricultural loans are generally supported by the
financial strength of the borrower and secured by the crops/livestock, crop insurance, equipment or real estate.
Residential Consumer Lending
A portion of the Company’s lending activity consists of the origination of fixed and adjustable-rate residential
mortgage loans secured by owner-occupied property located in the Company’s primary market areas. Home mortgage banking
is unique in that a broad geographic territory may be served by originators working from strategically placed offices either
within the Company’s traditional banking facilities or from other locations. In addition, the Company offers construction loans,
second mortgage loans and home equity lines of credit.
The Company finances the construction of individual, owner-occupied houses on the basis of written underwriting and
construction loan management guidelines. First mortgage construction loans are made to qualified individual borrowers and are
generally supported by a take-out commitment from a permanent lender. The Company makes residential construction loans to
individuals who intend to erect owner-occupied housing on a purchased parcel of real estate. The construction phase of these
loans has certain risks, including the viability of the contractor, the contractor’s ability to complete the project and changes in
interest rates.
Mortgage lending serves to finance residential properties through long-term mortgages, both sold into the secondary
market and retained in the bank portfolio. Ongoing efforts to grow the bank portfolio through the company’s Right@Home
product for low- to moderate-income borrowers have contributed to the department’s production. Revenue is primarily derived
from loan origination and servicing fees paid to the company by government-sponsored enterprises and other investors who
purchase the mortgages after origination.
The sale of mortgage loans to the secondary market allows the Company to manage the interest rate risk related to
such lending operations. Generally, after the sale of a loan with servicing retained, the Company’s only involvement is to act as
a servicing agent. In certain cases, the Company may be required to repurchase mortgage loans upon which customers have
defaulted that were previously sold in the secondary market if these loans did not meet the underwriting standards of the entity
that purchased the loans.
Non-Residential Consumer Lending
Non-residential consumer loans made by the Company include loans for automobiles, recreation vehicles, boats,
personal (secured and unsecured) and deposit account secured loans. Non-residential consumer loans are attractive to the
Company because they typically have a shorter term and carry higher interest rates than those charged on other types of loans.
The Company also issues credit cards solicited on the basis of applications received through referrals from the
Company’s branches and other marketing efforts. The Company generally has a small portfolio of credit card receivables
outstanding. Credit card lines are underwritten using conservative credit criteria, including past credit history and debt-to-
income ratios, similar to the credit policies applicable to other personal consumer loans.
The Company grants consumer loans based on employment and financial information solicited from prospective
borrowers as well as credit records collected from various reporting agencies. Financial stability and credit history of the
borrower are the primary factors the Company considers in granting such loans. The availability of collateral is also a factor
considered in making such loans. The geographic area of the borrower is another consideration, with preference given to
borrowers in the Company’s primary market areas.
Shared National Credits
The federal banking agencies define a SNC as any loan(s) extended to a borrower by a supervised institution or any of
its subsidiaries and affiliates which aggregates $100 million or more and is shared by three or more institutions under a formal
lending agreement or a portion of which is sold to two or more institutions, with the purchasing institutions assuming its pro
rata share of the credit risk. As part of our commercial focused relationship banking, we may act as an agent or participate in
syndicated loan offerings because of the size of the customers and nature of industries we serve. On December 31, 2024, we
have $4.1 billion of outstanding SNCs, representing 12.3% of total loans.
For more information regarding the Company’s loans and leases, see “Management’s Discussion And Analysis of
Financial Condition And Results Of Operations – Loans and Leases.”
8
DEPOSITS
We offer our customers a variety of deposit products, including checking accounts, savings accounts, money market
accounts, time deposits, and other deposit accounts through multiple channels, including our extensive network of full-service
branches, drive-through branches, ATMs, ITMs, and our online, mobile, and telephone banking platforms. At December 31,
2024, our total deposits were $40.5 billion and were comprised of 21.2% in noninterest-bearing deposits and 78.8% in interest
bearing deposits. We intend to continue our efforts to provide funding for our business from customer relationship deposits.
The Company has been able to compete effectively for deposits in its primary market areas, while continuing to
manage the exposure to higher interest rates. The distribution and market share of deposits by type of deposit and by type of
depositor are important considerations in the Company’s assessment of the stability of its funding sources and its access to
additional funds. Furthermore, management shifts the mix and maturity of the deposits depending on economic conditions and
loan and investment policies in an attempt, within set policies, to minimize cost and maximize net interest margin.
For more information regarding the Company’s deposits, see “Management’s Discussion And Analysis of Financial
Condition And Results Of Operations – Deposits.”
OTHER SERVICES
Through Linscomb Wealth Inc., formerly Linscomb & Williams Inc., a subsidiary of Cadence Bank, and Cadence
Trust, a division of Cadence Bank, we offer wealth management and other fiduciary and private banking services targeted to
affluent clients, including individuals, business owners, families, and professional service companies. In addition to generating
fiduciary and investment management fee income, we believe these services enable us to build new relationships and expand
existing relationships to grow our deposits and loans. Through our wealth management line of business and our relationship
with LPL Financial LLC, we offer financial planning, retirement services and trust and investment management by a team of
seasoned advisors, providing access for affluent clients as well as mass market clients, to a wide range of certificates of
deposits, mutual funds, estate planning products, insurance and annuities, individual retirement accounts, stocks, bonds,
brokerage accounts, money market accounts, investment advisory services, and other financial products and services. Although
we do not limit our customers to affluent clients and business owners, the focus of our wealth management line of business is
on the “mass affluent” ($500,000 to $2 million in investible assets) and “highly affluent” ($2 million to $5 million in investible
assets) markets.
In addition to traditional banking activities and the other products and services specified above, we provide a broad
array of financial services to our customers, including: debit and credit card products, treasury management services, merchant
services, automated clearing house services, lock-box services, remote deposit capture services, foreign exchange services, and
other treasury services.
COMPETITION
Vigorous competition exists in all major areas where the Company is engaged in business. The Company competes for
available loans and deposit accounts with banks, thrifts, insurance companies, credit unions, mortgage bankers and finance
companies, money market mutual funds, other financial services companies and fintech companies, some of which are not
subject to the same degree of regulation and restrictions imposed upon us. None of these competitors are dominant in the entire
area served by the Company.
The principal areas of competition in the banking industry center on a financial institution’s ability and willingness to
provide credit on a timely and competitively priced basis, to offer a sufficient range of deposit and investment opportunities at
competitive prices and maturities, and to offer personal and business financial services of sufficient quality and at competitive
prices. Management believes that the Company can compete effectively in all of these areas.
CREDIT POLICIES AND PROCEDURES
In the normal course of business, the Company assumes risks in extending credit. The Company manages these risks
through underwriting in accordance with its lending policies, loan review procedures and the diversification of its loan and
lease portfolio. Although it is not possible to predict credit losses with certainty, management regularly reviews the
characteristics of the loan and lease portfolio to determine its overall risk profile and quality.
The provision for credit losses is the periodic cost (or credit) of providing an allowance or reserve for expected losses
on loans and leases. The Board of Directors has appointed a Credit Committee, composed of senior management and credit
9
administration staff which meets on a quarterly basis or more frequently if required to review the recommendations of several
internal working groups developed for specific purposes including the allowance for credit losses, specific provision amounts,
and charge-offs. The Allowance for Credit Losses (ACL) Group bases its estimates of credit losses on three primary
components: (1) estimates of expected losses that exist in various segments of performing loans and leases over the remaining
contractual life of the loan portfolio using a reasonable and supportable economic forecast; (2) specifically identified losses in
individually analyzed credits which are collateral-dependent, which generally include loans internally graded as impaired and
PCD Loss loans; and (3) qualitative factors related to economic conditions, portfolio concentrations, regulatory policy updates
and other relevant factors that address estimates of expected losses not fully addressed based upon management’s judgment of
portfolio conditions.
The Company utilizes credit risk models to estimate the probability of default and loss given default of loans over their
remaining life. Credit factors such as financial condition of the borrower and guarantor, recent credit performance, delinquency,
liquidity, cash flows, collateral type and value are used by the models to assess credit risk. In some cases, such as credit cards, a
loss rate model is used where lifetime loss rates are applied. Estimates of expected losses are influenced by the historical net
losses experienced by the Company for loans and leases of comparable creditworthiness and structure. Specific loss
assessments are performed for loans and leases based upon the collateral protection. The Company’s reasonable and
supportable eight quarter economic forecast is utilized to estimate credit losses before reverting to longer term historical loss
experience. The Company subscribes to various economic services and publications to assist with the development of inputs
used in the modeling and qualitative framework for the ACL calculation. The economic forecasts consider changes in real gross
domestic product, unemployment rate, interest rates, valuations for residential and commercial real estate, and other indicators
that may be correlated with the Company’s expected credit losses.
During 2024, the impact of inflation and higher interest rates resulted in concern that similar economic conditions may
continue into 2025, and the heightened risk of future customer loan defaults remains. The ACL estimate includes both portfolio
changes and changes in economic conditions experienced during the period as well as forecasted to occur. The unemployment
rate has the highest weighting within the Company’s credit modeling framework. The Company’s forecast for unemployment
includes a range between 4.17% and 5.83% through the fourth quarter of 2026. The Company considers several forecasts from
external sources with management weighting the forecast mix 60% baseline and 40% downside in the fourth quarter of 2024. In
addition, qualitative factors such as changes in economic conditions, concentrations of risk, and changes in portfolio risk
resulting from regulatory changes are considered in determining the adequacy of the level of the ACL. Attention is paid to the
quality of the loan and lease portfolio through a formal loan review process. An independent loan review department of the
Company is responsible for reviewing the credit rating and classification of individual credits and assessing trends in the
portfolio, adherence to internal credit policies and procedures and other factors that may affect the overall adequacy of the
ACL. The ACL Group is responsible for ensuring that the allowance for credit losses provides adequate coverage of expected
losses. The ACL Group meets at least quarterly to determine the amount of adjustments to the ACL, and it is comprised of
senior management from the Company’s Credit Administration, Risk, and Finance departments.
The Impairment Group is responsible for evaluating individual loans that have been specifically identified through
various channels, including examination of the Company’s watch list, past due listings, and loan officer assessments. An
analysis is prepared to assess the extent the loan is collateral-dependent and whether a loss exposure exists, which is reviewed
by the Impairment Group. The Impairment Group reviews all loans where a borrower is considered to be experiencing financial
difficulty if the loan is $1.0 million or greater to determine if it is probable that the Company will be unable to collect the
contractual principal and interest on the loan. The fair value of the underlying collateral is considered if the loan is collateral-
dependent. The Impairment Group meets at least quarterly, and it is made up of senior management from the Company’s Credit
Administration, Risk and Finance departments.
In March 2022, the FASB issued ASU No. 2022-02, which eliminated the TDR accounting model for creditors that
have adopted ASC 326. The guidance became effective for the Company beginning January 1, 2023, and the Company elected
to adopt the guidance via the modified retrospective transition method. With the removal of the TDR model, all loan
modifications are now accounted for under the general loan modification guidance in Subtopic 310-20. The update also requires
enhanced disclosures regarding loan modifications for borrowers experiencing financial difficulty.
Loans of $1.0 million or more that are identified as collateral-dependent, which generally include loans internally
graded as impaired or PCD Loss loans, are reviewed by the Impairment Group which approves the amount of specific reserve,
if any, and/or charge-off amounts. The evaluation of real estate loans generally focuses on the fair value of underlying collateral
less estimated costs to sell obtained from appraisals, as the repayment of these loans may be dependent on the liquidation of the
collateral. In certain circumstances, other information such as comparable sales data is deemed to be a more reliable indicator of
fair value of the underlying collateral than the most recent appraisal. In these instances, such information is used in determining
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the specific provision recorded for the loan. For commercial and industrial loans, the evaluation generally focuses on these
considerations, as well as the projected liquidation of any pledged collateral. Our larger corporate and specialized industry loans
are underwritten to the underlying enterprise value of the borrower. The value is in the equity of the business as a going
concern. Many valuation approaches are used in these situations including discounted cash flow, multiple of cash flow, or
comparable sales approaches. The Impairment Group reviews the results of each evaluation and approves the final specific
provision amounts, which are then included in the analysis of the adequacy of the ACL in accordance with ASC 326.
A new appraisal is generally ordered for loans $1.0 million or greater that have characteristics of potential specific
provision, such as delinquency or other loan-specific factors identified by management, when a current appraisal (dated within
the prior 12 months) is not available or when a current appraisal uses assumptions that are not consistent with the expected
disposition of the loan collateral. To measure a specific provision properly at the time that a loan is reviewed, a bank officer
may estimate the collateral fair value based upon earlier appraisals received from outside appraisers, sales contracts, approved
foreclosure bids, comparable sales, officer estimates or current market conditions until a new appraisal is received. This
estimate can be used to determine the extent of the specific provision on the loan. After a loan is determined to be collateral-
dependent, it is management’s policy to obtain an updated appraisal on at least an annual basis for impaired loans with a
remaining recorded investment of $200 thousand and greater. Management performs a review of the pertinent facts and
circumstances of each collateral-dependent loan, such as changes in outstanding balances, information received from loan
officers and receipt of re-appraisals, at least quarterly. As of each review date, management considers whether additional
provision and/or charge-offs should be recorded based on recent activity related to the loan-specific collateral as well as other
relevant comparable assets. Any adjustment to reflect further exposure, either because management’s periodic review or as a
result of an updated appraisal, are made through recording additional ACL provisions and/or charge-offs.
When a guarantor is relied upon as a source of repayment, it is the Company’s policy to analyze the strength of the
guaranty. This analysis varies based on circumstances but may include a review of the guarantor’s personal and business
financial statements and credit history, a review of the guarantor’s tax returns and the preparation of a cash flow analysis of the
guarantor.
Any loan or portion thereof which is classified as “loss” or which is determined by management to be uncollectible
because of factors such as the borrower’s failure to pay interest or principal, the borrower’s financial condition, economic
conditions in the borrower’s industry or the inadequacy of underlying collateral, is charged off.
The Company excludes accrued interest from interest income when it is determined that it is probable that all
contractual principal and interest will not be collected for loans.
REGULATION AND SUPERVISION
The following discussion sets forth certain material elements of the regulatory framework applicable to the Company. This
discussion is a brief summary of the regulatory environment in which the Company operates and is not designed to be a
complete discussion of all statutes and regulations affecting the Company’s operations. Regulation of financial institutions is
intended primarily for the protection of depositors, the Deposit Insurance Fund and the safety and soundness of the U.S.
financial system and generally is not intended for the protection of shareholders. Changes in applicable laws, and their
implementation and application by regulatory agencies, cannot necessarily be predicted but could have a material and adverse
effect on the Company’s assets, business, cash flows, financial condition, liquidity, prospects and results of operations.
GENERAL
The Company is incorporated under the laws of the State of Mississippi and is subject to the applicable provisions of
Mississippi banking laws, the laws of the various states in which it operates, and federal law. The Company is subject to the
supervision and examination of the Federal Reserve, CFPB, and the MDBCF. The Company’s deposits are insured by the FDIC
to the fullest extent allowed by law, and the FDIC has back-up supervisory authority over the Company. Violations of laws and
regulations, or other unsafe and unsound practices, may result in regulatory agencies imposing fines or penalties, cease and
desist orders, or other enforcement actions. Under certain circumstances, these agencies may enforce these remedies directly
against officers, directors, employees, and other parties participating in the affairs of a bank. Like all banks, we are regulated
extensively under federal and state law. Under federal and state laws and regulations pertaining to the safety and soundness of
insured depository institutions, the Federal Reserve and the MDBCF have the authority to compel or restrict certain actions on
our part if they determine that we have insufficient capital or other resources, or are otherwise operating in a manner that may
be deemed to be inconsistent with safe and sound banking practices. Under this authority, our regulators can require us or our
subsidiaries to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding,
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written agreements and consent or cease and desist orders, pursuant to which we would be required to take identified corrective
actions to address cited concerns and to refrain from taking certain actions. Formal enforcement actions, such as formal
agreements, consent orders and cease and desist orders are public and can negatively affect our reputation.
If we become subject to and are unable to comply with the terms of any regulatory actions or directives, supervisory
agreements, or orders, then we could become subject to additional, heightened supervisory actions and orders, possibly
including prompt corrective action restrictions and/or other regulatory actions, including prohibitions on the payment of
dividends on our common stock and preferred stock. If our regulators were to take such supervisory actions, then we could,
among other things, become subject to significant restrictions on our ability to develop any new business, as well as restrictions
on our existing business, and we could be required to raise additional capital, dispose of certain assets and liabilities within a
prescribed period of time, or both. The terms of any such action could have a material negative effect on our business,
reputation, operating flexibility, financial condition, and the value of our common stock and preferred stock.
CHANGE IN CONTROL
Federal law restricts the amount of voting stock of a bank that a person may acquire without the prior approval of
banking regulators. Under the Change in Bank Control Act and the laws of the State of Mississippi, as well as the regulations
thereunder, a person or group must give advance notice to the Federal Reserve and MDBCF before acquiring control of the
Company. Upon receipt of such notice, the Federal Reserve and/or MDBCF may approve or disapprove the acquisition. The
Change in Bank Control Act creates a rebuttable presumption of control if a person or group acquires the power to vote 10% or
more of our outstanding common stock. The overall effect of such laws is to make it more difficult to acquire a bank by tender
offer or similar means than it might be to acquire control of another type of corporation. Consequently, shareholders of the
Company may be less likely to benefit from the rapid increases in stock prices that may result from tender offers or similar
efforts to acquire control of other companies. Investors should be aware of these requirements when acquiring shares of our
stock.
GOVERNANCE AND FINANCIAL REPORTING OBLIGATIONS
We are required to comply with various corporate governance and financial reporting requirements under the
Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the SEC, the PCAOB, and the NYSE. In particular, we
are required to include management and independent registered public accounting firm reports on internal controls as part of
our Annual Report on Form 10-K in order to comply with Section 404 of the Sarbanes-Oxley Act. We have evaluated our
controls, including compliance with the SEC rules on internal controls, and have and expect to continue to spend significant
amounts of time and resources on compliance with these rules. Our failure to comply with these internal control rules may
materially adversely affect our reputation, ability to obtain the necessary certifications to financial statements, and the values of
our securities.
CONSUMER FINANCIAL PROTECTION BUREAU
The CFPB is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial
protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair
Credit Reporting Act, Fair Debt Collection Practices Act, the Consumer Financial Privacy provisions of the Gramm-Leach-
Bliley Act, and certain other statutes. The CFPB has examination and primary enforcement authority under the consumer
financial protection laws with respect to depository institutions with $10.0 billion or more in assets, including the Company.
The CFPB regulates the origination of mortgages, mortgage disclosures, mortgage servicing, foreclosures, and
overdrafts, as well as many other consumer issues. The CFPB has authority to enforce a prohibition of unfair, deceptive, or
abusive practices in connection with the offering of consumer financial products. Additionally, the CFPB has proposed or will
be proposing additional regulations, or modifying existing regulations, that directly relate to our business. Although it is
difficult to predict at this time the extent to which the CFPB’s rules impact the operations and financial condition of the
Company, such rules may have a material impact on the Company’s compliance costs, compliance risk, and fee income.
In March 2023, the CFPB issued a final rule to implement Section 1071 of the Dodd-Frank Act, which requires lenders
to collect, and report information about lending to “women owned, minority-owned and small businesses.” This rule is due to
take effect in stages depending upon lending volume of the depository institution beginning in 2025. However, the final rule has
been subject to ongoing court challenges and may be revised by the CFPB. In December 2024, the CFPB finalized a rule that
would substantially limit overdraft fees that larger institutions such as the Bank may charge consumers, with an effective date
of October 1, 2025. If implemented, this rule would impact the Bank’s non-interest income. However, this rule has been
challenged in court and may be revised by the CFPB. The CFPB issued a final rule in March 2024 that capped credit card late
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fees charged by certain larger card issuers at $8.00. However, this final rule was subsequently enjoined by a court in Texas, and
the litigation has continued. The Company is monitoring these developments, as well as executive orders and other directives
from the executive branch regarding the CFPB, its supervisory and examination activities, and the regulatory oversight
applicable to the banking industry more broadly.
DIVIDENDS
Various federal and state laws limit the amount of dividends that the Company may pay to its shareholders without
regulatory approval. Under Mississippi law, the Company must obtain the non-objection of the Commissioner of the MDBCF
prior to paying any dividend on the Company’s capital stock. Further, the Company may not pay any dividends if, after paying
the dividend, it would be undercapitalized under applicable capital requirements. The Federal Reserve also has the authority to
prohibit the Company from engaging in business practices that the Federal Reserve considers to be unsafe or unsound, which,
depending on the financial condition of the Company, could include the payment of dividends.
CAPITAL REQUIREMENTS
We are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets
and capital to risk-weighted assets. The required capital ratios are minimums, and the Federal Reserve may determine that
based on our size, complexity or risk profile, we must maintain a higher level of capital in order to operate in a safe and sound
manner. Risks such as concentration of credit risks and risks arising from non-traditional activities, as well as the institution’s
exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage
those risks, are important factors that are to be taken into account in assessing an institution’s overall capital adequacy. The
following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels.
We are subject to the following risk-based capital ratios: common equity Tier 1 (CET1) risk-based capital ratio, Tier 1
risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and total risk-based capital ratio, which includes
Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus, net of
treasury stock plus retained earnings, less certain adjustments and deductions related to goodwill, intangible assets, mortgage
servicing assets and deferred tax assets subject to temporary timing differences. Additional Tier 1 capital is primarily comprised
of noncumulative perpetual preferred stock. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including
qualifying subordinated debt and a limited amount of loan loss reserves up to a maximum of 1.25% of risk-weighted assets,
subject to certain eligibility criteria. The minimum capital to risk-weighted assets ratios are as follows: (1) CET1 of 4.5%, (2)
Tier 1 capital of 6.0%, and (3) total capital of 8.0%. The capital rules also define the risk-weights assigned to assets and off-
balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example,
certain “high volatility” commercial real estate, past due assets, structured securities, and equity holdings.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly
average total consolidated assets net of goodwill, certain other intangible assets and certain required deduction items. The
required minimum leverage ratio for all banks is 4%.
In addition, the regulatory capital rules require a capital conservation buffer of 2.5%, comprised of CET1, above each
of the minimum risk-based capital ratio requirements (CET1, Tier 1, and total capital), which is designed to absorb losses
during periods of economic stress. This buffer requirement must be met for the Company to be able to pay dividends, engage in
share buybacks or make discretionary bonus payments to executive management without restriction.
For more information, see the “Regulatory Capital” section of Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of this Annual Report on Form 10-K.
PROMPT CORRECTIVE ACTION
The FDICIA requires federal bank regulatory authorities to take “prompt corrective action” with respect to depository
institutions that do not meet minimum capital requirements. For these purposes, FDICIA establishes five capital tiers: “well
capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.”
An institution is deemed to be:
•
“well capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 8.0% or
greater, a Tier 1 leverage ratio of 5.0% or greater, and a common equity Tier 1 risk-based capital ratio of 6.5% or
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greater, and is not subject to a regulatory order, agreement or directive to meet and maintain a specific capital level for
any capital measure;
•
“adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of
6.0% or greater, a Tier 1 leverage ratio of 4.0% or greater, and a common equity Tier 1 risk-based capital ratio of 4.5%
or greater, and the institution does not meet the definition of a “well capitalized” institution;
•
“undercapitalized” if it does not meet the definition of an “adequately capitalized” institution;
•
“significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital
ratio that is less than 4.0%, a Tier 1 leverage ratio that is less than 3.0%, and a common equity Tier 1 risk based capital
ratio that is less than 3.0%; and
•
“critically undercapitalized” if it has a ratio of tangible equity, as defined in the regulations, to total assets that is equal
to or less than 2%.
Throughout 2024, the Company’s regulatory capital ratios were in excess of the levels established for “well
capitalized” institutions.
FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a cash
dividend, if the depository institution would be “undercapitalized” after such payment. “Undercapitalized” institutions are
subject to growth limitations and are required by the appropriate, primary federal regulator to submit a capital restoration plan.
If an “undercapitalized” institution fails to submit an acceptable plan, it is treated as if it is “significantly
undercapitalized.” “Significantly undercapitalized” institutions may be subject to a number of requirements and restrictions,
including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and
cessation of receipt of deposits from correspondent banks.
“Critically undercapitalized” institutions may not, beginning 60 days after becoming “critically undercapitalized,”
make any payment of principal or interest on their subordinated debt. In addition, “critically undercapitalized” institutions are
subject to appointment of a receiver or conservator within 90 days of becoming so classified.
Under FDICIA, a depository institution that is not “well capitalized” is generally prohibited from accepting brokered
deposits and offering interest rates on deposits higher than the prevailing rate in its market. The Company is “well capitalized,”
and the FDICIA brokered deposit rule did not adversely affect its ability to accept brokered deposits. The Company had $2.1
billion in brokered deposits at December 31, 2024.
FDIC INSURANCE
The deposits of the Company are insured by the DIF, which the FDIC administers, up to applicable limits, which
currently are set at $250,000 per depositor, per insured bank, for each account ownership category. To fund the DIF, FDIC-
insured banks are required to pay deposit insurance assessments to the FDIC. The deposit insurance assessment base is based on
an insured institution’s average consolidated total assets minus its average tangible equity. The FDIC uses a “scorecard” system
to determine deposit insurance premiums for institutions like the Company that have more than $10 billion in assets. Each
scorecard has a performance score and a loss-severity score that is combined to produce a total score. The FDIC is authorized to
make discretionary adjustments to the total score based upon significant risk factors that are not adequately captured in the
scorecard, which is translated into a premium rate.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe and
unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation,
rule, order or condition imposed by the FDIC. In addition, the Federal Deposit Insurance Act provides that, in the event of the
liquidation or other resolution of an insured depository institution, the claims of depositors of the institution, including the
claims of the FDIC as subrogee of insured depositors, and certain claims for administrative expenses of the FDIC as a receiver,
will have priority over other general unsecured claims against the institution.
On October 18, 2022, the FDIC adopted a final rule, applicable to all insured depository institutions, to increase initial
base deposit insurance assessment rate schedules uniformly by two basis points. The final rule was effective for the first quarter
of 2023. The increase in the assessment rate schedules in intended to increase the likelihood that the reserve ratio of the DIF
reaches the statutory minimum of 1.35% by the statutory deadline of September 30, 2028. The new assessment rate schedules
will remain in effect unless and until the reserve ratio meets or exceeds 2% in order to support growth in the DIF in progressing
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toward the FDIC’s long-term goal of a 2% Designated Reserve Ratio. Progressively lower assessment rate schedules will take
effect when the reserve ratio reaches 2%, and again when it reaches 2.5%.
In November 2023, the FDIC issued a final rule to implement a special assessment to recover losses to the DIF
incurred as a result of bank failures earlier that year and the FDIC's use of the systemic risk exception to cover certain deposits
that were otherwise uninsured. The special assessment was based on estimated uninsured deposits as of December 31, 2022
(excluding the first $5.0 billion) and was assessed at a quarterly rate of 3.36 basis points, over eight quarterly assessment
periods, beginning in the first quarter of 2024. As a result of this final rule, the Company recorded a liability of $36.2 million
related to this assessment and expensed this amount in the fourth quarter of 2023. This amount was based on our estimate of the
full amount of the assessment at that time. In February 2024, the FDIC notified insured depository institutions that their loss
estimate related to the aforementioned bank failures had increased. In June 2024, due to the increased estimate of losses, the
FDIC announced that it projected that the special assessment will be collected for an additional two quarters beyond the initial
eight-quarter collection period, at a lower rate. This updated assessment was made under the FDIC's final rule whereby the
estimated loss pursuant to the systemic risk determination can be periodically adjusted. The FDIC has also retained the ability
to cease collection early, extend the special assessment collection period, and impose a final shortfall special assessment. The
extent to which any such additional future assessments will impact our future deposit insurance expense is currently uncertain.
During 2024, the Company recorded a liability of $4.6 million related to the additional special assessment and expensed during
the same period.
STANDARDS FOR SAFETY AND SOUNDNESS
The Federal Deposit Insurance Act requires the federal bank regulatory agencies to prescribe, by regulation or
guideline, operational and managerial standards for all insured depository institutions relating to: (1) internal controls; (2)
information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate risk exposure; and (6)
asset quality. The federal banking agencies have adopted regulations and Interagency Guidelines Establishing Standards for
Safety and Soundness to implement these required standards. These guidelines set forth the safety and soundness standards used
to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if a
regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to
submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and
soundness compliance plans.
INTERSTATE BANKING AND BRANCHING LEGISLATION
Federal law allows banks to establish and operate a de novo branch in a state other than the bank’s home state if the
law of the state where the branch is to be located would permit establishment of the branch if the bank were chartered by that
state, subject to standard regulatory review and approval requirements. Federal law also allows the Company to acquire an
existing branch in a state in which the Company is not headquartered and does not maintain a branch if the Federal Reserve and
MDBCF approve the branch or acquisition, and if the law of the state in which the branch is located or to be located would
permit the establishment of the branch if the Company were chartered by that state.
Once a bank has established branches in a state through an interstate merger transaction or through de novo branching,
the bank may then establish and acquire additional branches within that state to the same extent that a state-chartered bank is
allowed to establish or acquire branches within the state. Current federal law authorizes interstate acquisitions of banks without
geographic limitation. Further, a bank headquartered in one state is authorized to merge with a bank headquartered in another
state, as long as neither of the states have opted out of such interstate merger authority prior to such date, and subject to any
state requirement that the target bank shall have been in existence and operating for a minimum period of time, not to exceed
five years, and subject to certain deposit market-share limitations.
AFFILIATE TRANSACTIONS AND INSIDER LOANS
The Company is subject to Regulation W, which comprehensively implements statutory restrictions on transactions
between a bank and its affiliates. Regulation W combines the Federal Reserve’s interpretations and exemptions relating to
Sections 23A and 23B of the Federal Reserve Act. Regulation W and Section 23A place limits on the amount of loans or
extensions of credit to, investments in, or certain other transactions with affiliates, and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. Regulation W and Section 23B prohibit a bank from, among
other things, engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at
least as favorable to the bank, as those prevailing at the time for comparable transactions with non-affiliated companies.
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The Company is also subject to certain restrictions on extensions of credit to executive officers, directors, certain
principal shareholders and their related interests. Such extensions of credit must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties and must not
involve more than the normal risk of repayment or present other unfavorable features.
COMMUNITY REINVESTMENT ACT
The CRA provides an incentive for regulated financial institutions to meet the credit needs of their local community or
communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of such
financial institutions. The regulations provide that the appropriate banking regulator will assess reports under CRA in
connection with applications for establishment of domestic branches, acquisitions of banks or mergers involving financial
holding companies. An unsatisfactory rating under CRA may serve as a basis to deny an application to acquire or establish a
new bank, to establish a new branch or to expand banking services. Cadence Bank received an ”Outstanding” CRA rating on
its most recent exam by the FDIC.
On October 24, 2023, the OCC, Federal Reserve, and FDIC issued a final rule to modernize their respective CRA
regulations. The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects
taking effect January 1, 2026 and revised data reporting requirements taking effect January 1, 2027. Among other things, the
revised rules evaluate lending outside traditional assessment areas generated by the growth of non-branch delivery systems,
such as online and mobile banking, apply a metrics-based benchmarking approach to assessment, and clarify eligible CRA
activities. The final rules may make it more challenging and/or costly for the Company to receive a rating of at least
“satisfactory” on its CRA exam. The revised CRA regulations have been subject to an injunction since March 29, 2024. The
effective dates will be extended for each day the injunction remains in place, pending the resolution of the lawsuit.
ANTI-TERRORISM AND MONEY LAUNDERING
Pursuant to federal law, the Company is required to: (i) establish an anti-money laundering program; (ii) establish due
diligence policies, procedures and controls with respect to its private banking accounts and correspondent banking accounts
involving foreign individuals and certain foreign financial institutions; and (iii) avoid establishing, maintaining, administering
or managing correspondent accounts in the United States for, or on behalf of, foreign financial institutions that do not have a
physical presence in any country. The Company is also required to follow certain minimum standards to verify the identity of
customers, both foreign and domestic, when a customer opens an account. In addition, federal law encourages cooperation
among financial institutions, regulatory authorities and law enforcement authorities with respect to individuals, entities and
organizations engaged in, or reasonably suspected of engaging in, terrorist acts or money laundering activities. Federal banking
regulators are required, when reviewing bank acquisition and merger applications, to take into account the effectiveness of the
anti-money laundering activities of the applicants.
On January 1, 2021, the Anti-Money Laundering Act of 2020 (the “AML Act”) was passed. The AML Act includes
significant changes to anti-money laundering rules, including the creation of a national registry maintained by FinCEN that
banks may rely on to comply with customer due diligence requirements, enhancement of cooperation between banks and law
enforcement, and improvement of corporate transparency. Passage of the AML Act started a rulemaking and policy
development process that includes the Corporate Transparency Act and a rulemaking that requires companies to report
beneficial ownership to FinCEN for the first time in the history of federal law. The Company continues to monitor
developments related to these rules.
CONSUMER PRIVACY, DATA SECURITY, AND OTHER CONSUMER PROTECTION LAWS
Federal law generally prohibits disclosure of non-public consumer information to non-affiliated third parties unless the
consumer has been given the opportunity to object and has not objected to such disclosure. Financial institutions are further
required to disclose their privacy policies to customers annually. Financial institutions, however, will be required to comply
with state law if it is more protective of consumer privacy than federal law.
Federal law also directed federal regulators to prescribe standards for the security of consumer information. The
Company is subject to such standards, as well as standards for notifying customers in the event of a security breach. The
Company utilizes credit bureau data in underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act
and Regulation V on a uniform, nationwide basis, including credit reporting, prescreening, and sharing of information between
affiliates and the use of credit data. The Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting
Act, permits states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of that Act.
Customers must be notified when unauthorized disclosure involves sensitive customer information that may be misused.
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The federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk
management standards among financial institutions. As a result, financial institutions are expected to establish multiple lines of
defense and to ensure their risk management processes address the risk posed by potential threats to the institution. A financial
institution’s management is expected to maintain sufficient processes to effectively respond and recover the institution’s
operations after a cyber-attack. A financial institution is also expected to develop appropriate processes to enable recovery of
data and business operations if a critical service provider of the institution falls victim to this type of cyber-attack. Our
information security protocols are designed in part to adhere to the requirements of this guidance.
On November 18, 2021, the federal banking agencies issued a new rule effective in 2022 that requires banks to notify
their regulators within 36 hours of a “computer-security incident” that rises to the level of a “notification incident.”
A notification incident includes, among other things, a computer-security incident that materially disrupts or degrades,
or is reasonable likely to materially disrupt or degrade, a banking organization’s operations or activities or its ability to deliver
products or services to a material portion of its customer base. The final rule also requires a bank service provider to notify a
banking organization of certain material disruptions in services provided to the banking organization.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and
regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity
programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many
states have also recently implemented or modified their data breach notification and data privacy requirements. We expect this
trend of state-level activity in those areas to continue and are continually monitoring developments in the states in which our
customers are located.
The Company is also subject, in connection with its deposit, lending and leasing activities, to numerous federal and
state laws aimed at protecting consumers, including the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures
Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Truth in Savings Act, the Fair Housing Act, the Fair
Credit Reporting Act, the Electronic Funds Transfer Act, the Currency and Foreign Transactions Reporting Act, the National
Flood Insurance Act, the Flood Protection Act, laws and regulations governing unfair, deceptive, and/or abusive acts and
practices, the Service Members Civil Relief Act, the Housing and Economic Recovery Act, and the Credit Card Accountability
Act, among others, as well as various state laws.
COMMERCIAL REAL ESTATE LENDING CONCENTRATION
The federal banking agencies have promulgated guidance governing concentrations in commercial real estate lending
for financial institutions. The guidance provides that a bank has a concentration in commercial real estate lending if (i) total
reported loans for construction, land development and other land represent 100% or more of total risk-based capital or (ii) total
reported loans secured by multifamily and non-farm residential properties and loans for construction, land development and
other land represent 300% or more of total risk-based capital and the bank’s commercial real estate loan portfolio has increased
50% or more during the prior 36 months. If a concentration is present, management must employ heightened risk management
practices including board and management oversight and strategic planning, development of underwriting standards, risk
assessment and monitoring through market analysis and stress testing and increasing capital requirements.
INCENTIVE COMPENSATION
The Dodd-Frank Act required the federal banking agencies and the SEC to establish joint rules or guidelines for
financial institutions with more than $1 billion in assets, such as us, which prohibit incentive compensation arrangements that
the agencies determine to encourage inappropriate risks by the institution. The federal banking agencies issued proposed rules
in 2011 and previously issued guidance on sound incentive compensation policies. In 2016, the federal banking agencies and
the SEC proposed rules that would, depending upon the assets of the institution, directly regulate incentive compensation
arrangements and would require enhanced oversight and recordkeeping. At December 31, 2024, these rules have not been
implemented.
The scope and content of banking regulators’ policies on executive compensation are continuing to develop and are
likely to continue evolving in the near future. It cannot be determined at this time whether compliance with such policies will
adversely affect the Company’s ability to hire, retain and motivate its key employees.
In October 2022, the SEC adopted a final rule directing national securities exchanges and associations, including the
NYSE, to implement listing standards that require listed companies to adopt policies mandating the recovery or “clawback” of
excess incentive-based compensation earned by a current or former executive officer during the three fiscal years preceding the
17
date the listed company is required to prepare an accounting restatement, including to correct an error that would result in a
material misstatement if the error were corrected in the current period or left uncorrected in the current period. The NYSE's
listing standards pursuant to the SEC's rule became effective on October 2, 2023. We adopted a compensation recovery policy
pursuant to the NYSE listing standards effective October 2, 2023, and included the policy as Exhibit 97.1 to the Form 10-K for
the year ended December 31, 2023.
THE VOLCKER RULE
Section 13 of the BHC Act, commonly referred to as the “Volcker Rule,” generally prohibits us and our subsidiaries
from (i) engaging in certain proprietary trading, and (ii) acquiring or retaining an ownership interest in or sponsoring a “covered
fund,” all subject to certain exceptions. The Volcker Rule also specifies certain limited activities in which we and our
subsidiaries may continue to engage and requires us to maintain a compliance program. In 2020, amendments to the proprietary
trading and covered funds regulations issued by the federal banking agencies, the SEC, and the Commodity Futures Trading
Commission took effect, simplifying compliance and providing additional exclusions and exemptions.
DEBIT INTERCHANGE FEES
Interchange fees, or "swipe" fees, are fees that merchants pay to credit card companies and card-issuing banks such as
the Company for processing electronic payment transactions on their behalf. The maximum permissible interchange fee that a
non-exempt issuer such as the Company may receive for an electronic debit transaction is the sum of 21 cents per transaction
and 5 basis points multiplied by the value of the transaction, subject to an upward adjustment of 1 cent if an issuer certifies that
it has implemented policies and procedures reasonably designed to achieve the fraud-prevention standards set forth by the
Federal Reserve. In addition, card issuers and networks are prohibited from entering into arrangements requiring that debit card
transactions be processed on a single network or only two affiliated networks and allows merchants to determine transaction
routing. On October 25, 2023, the Federal Reserve proposed to lower the maximum interchange fee that a large debit card
issuer can receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum
amount every other year going forward. We continue to monitor the development of these proposed rule revisions.
EFFECT OF GOVERNMENTAL POLICIES
The Company is affected by the policies of regulatory authorities, including the Federal Reserve and the MDBCF. An
important function of the Federal Reserve is to regulate the national money supply. Among the instruments of monetary policy
used by the Federal Reserve are: (i) purchases and sales of United States government and other securities in the marketplace;
(ii) changes in the discount rate, which is the rate any depository institution must pay to borrow from the Federal Reserve; (iii)
changes in the reserve requirements of depository institutions; and (iv) indirectly, changes in the federal funds rate, which is the
rate at which depository institutions lend money to each other overnight. These instruments are intended to influence economic
and monetary growth, interest rate levels, and inflation.
The monetary policies of the Federal Reserve and other governmental policies have had a significant effect on the
operating results of commercial banks in the past and are expected to continue to do so in the future. Because of changing
conditions in the national and international economy and in the money markets, as well as the result of actions by monetary and
fiscal authorities, it is not possible to predict with certainty future changes in interest rates, deposit levels, loan demand, or the
business and results of operations of the Company, or whether changing economic conditions will have a positive or negative
effect on operations and earnings.
OTHER PROPOSALS
Bills occasionally are introduced in the United States Congress and the Mississippi State Legislature and other state
legislatures, and regulations are occasionally proposed by federal and state regulatory agencies, any of which could affect the
businesses, financial results and financial condition of the Company. Generally, it cannot be predicted whether or in what form
any particular proposals will be adopted or the extent to which the Company may be affected.
18
RECENT ACQUISITIONS AND TRANSACTION ACTIVITY
On January 22, 2025, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with
FCB Financial Corp. pursuant to which FCB Financial Corp., the parent company of First Chatham Bank, will merge with and
into the Company with the Company surviving, immediately followed by First Chatham Bank merging with and into the
Company with the Company surviving (collectively, the “Merger”). Under the terms of the Merger Agreement, the Company
will issue 2,300,000 shares of the Company’s common stock and $23.1 million in cash for all outstanding shares of FCB
Financial Corp.’s capital stock, subject to certain conditions and potential adjustments described in the Merger Agreement. The
closing of the Merger is conditioned upon customary closing conditions, including receipt of all required regulatory approvals
and approval by FCB Financial Corp.’s shareholders. Subject to satisfaction of all closing conditions, the Merger is expected to
close during the third quarter of 2025.
On November 30, 2023, the Company completed its previously announced sale of all of the issued and outstanding
shares of capital stock of Cadence Insurance, Inc., a former wholly owned subsidiary of the Company that conducted the
Company’s insurance agency business (“Cadence Insurance”), to Arthur J. Gallagher Risk Management Services, LLC
(“Gallagher”) (the “Sale Transaction”), pursuant to that certain stock purchase agreement, dated as of October 24, 2023, by and
among the Company, Cadence Insurance, Gallagher and Arthur J. Gallagher & Co. (the “Stock Purchase Agreement”). See
Note 2 for additional details. The transaction resulted in a pre-tax gain of $706.6 million. The gain, along with Cadence
Insurance’s historical financial results for periods prior to the sale, is reflected in the Company’s consolidated financial
statements as discontinued operations.
The following summarized financial information related to Cadence Insurance has been segregated from continuing
operations and reported as discontinued operations for the periods presented.
(In thousands)
Years Ended December 31,
Discontinued operations:
2023
2022
Net interest revenue
$
128 $
12
Total noninterest revenue
863,141
150,547
Total noninterest expense
135,678
128,206
Income from discontinued operations before income tax expense
727,591
22,353
Income tax expense
188,971
6,433
Income from discontinued operations, net of tax
$
538,620 $
15,920
See Note 2 to the consolidated financial statements for information regarding discontinued operations.
Effective May 17, 2024, the Company completed the sale of Cadence Business Solutions, LLC, its payroll processing
business unit, resulting in a net gain on sale of approximately $12.0 million. The gain on sale was included in Other noninterest
revenue within the accompanying consolidated statements of income.
HUMAN CAPITAL
We recognize that our most valuable asset is our people. One of our top strategic priorities is retaining and developing
our talent. This includes providing career development opportunities for all teammates, increasing their sense of belonging,
training our next generation of leaders, and succession planning. Our daily goal is to create an environment that makes Cadence
Bank a great place to work. Our relationship with our teammates is based on our core values. We have not experienced any
material employment-related issues or interruptions of services due to labor disagreements and are not a party to any collective
bargaining agreements.
Sourcing Talent
As of December 31, 2024, our full-time equivalent employees numbered 5,335. Our recruiting practices and hiring
decisions are among our most important activities. To build a more talented and productive organization, we do not rely only on
our individual network for recruiting; instead, we utilize social media, local job fairs, and educational organizations across the
United States to find motivated and qualified employees.
19
Our Board of Directors recognizes the importance of succession planning for our CEO and key executives. The Board
annually reviews our succession plans for senior leadership roles to ensure we will continue to have the right leadership talent
in place to execute the organization's long-term strategic plans. We have engaged outside coaches to work with certain high-
potential candidates to support their continued development and readiness for broader roles.
Education and Training
We are dedicated to the continual training and development of our employees to ensure we can develop future
managers and leaders within our organization. Our training starts immediately with onboarding procedures that focus on safety,
responsibility, ethical conduct, and inclusive teamwork.
In addition to onboarding training, we provide extensive ongoing training and career development focused on:
•
compliance with our Code of Business Conduct and Ethics;
•
laws and regulations applicable to our business;
•
skills and competencies directly related to employees’ job duties;
•
management skills necessary to develop our next generation of leaders; and
•
responsibility for personal safety and the safety of fellow employees.
Health and Welfare
We support our teammates and their families’ health by offering full medical, dental, vision, life insurance, and long-
term disability plans. We also provide reimbursement accounts such as health and dependent care flexible spending accounts.
We provide an Employee Assistance Program (EAP), which includes confidential services to help teammates and their families
with personal or work-life issues. EAP is available 24 hours, online or over the phone.
To make our benefits more affordable for lower-compensated teammates, we have a varying contribution structure
whereby lower-compensated teammates pay less for coverage. We also provide benefit options for our part-time teammates.
Beginning in 2023, we announced a new parental leave policy that further enhances our paid leave for the birth or adoption of a
child by providing up to 12 weeks of leave. Additionally, we have revised our bereavement leave to provide more time away
for our teammates following the loss of a spouse or child.
During 2024, we continued our wellness initiative, which rewards employees for participation by providing credit
toward their health insurance premiums. To participate, teammates partake in various health screenings and/or counseling from
a health professional. This initiative allows employees to obtain points by participating in activities such as health screenings as
part of their annual wellness exams.
We continued our virtual physical therapy benefits to assist teammates in markets where physical therapy may be
inconvenient due to location or schedules. Teammates who participate do not need a physician’s order and may do so in the
comfort of their homes. Virtual kits provide electronic monitors to guide exercise and measure results. All programs are
conducted under the guidance of a physician through virtual appointments or text within the program mobile app.
Retirement
We provide various resources and services to help our teammates prepare for retirement. We provide an employer-
funded pension plan that sets aside a cash contribution for all employees based on a percentage of their eligible pay and a
401(k) plan, with a company match, that includes various investment options.
Beginning in 2024, teammates could also make after-tax contributions, which can be converted to tax-advantaged Roth
contributions. Additionally, we introduced a Medicare assistance and education program for teammates considering or
preparing for retirement. This program provides teammates with guidance regarding Medicare Part A and Part B enrollment.
Also, in 2024, we introduced the Cadence 401(k) Student Debt Retirement Savings feature to assist our teammates
who have student loan debt and want to contribute to their 401(k) plans. This program responds to employees who are
balancing student loan payments with retirement savings. Under this program, when eligible teammates enroll, their student
loan payments will be used as retirement contributions and count toward their yearly 401(k) employer match.
20
Inclusion and Belonging
At Cadence, we embrace and celebrate the unique perspectives, backgrounds, and experiences of all our teammates,
customers, and communities. We expect our teammates to create a collaborative and inclusive environment that encourages
teammate engagement and establishes our company as one that reflects and includes the communities we serve. Through our
commitment to inclusion and belonging, we strive to create a welcoming and inclusive environment where everyone feels
valued and empowered to succeed. Our teammates are encouraged to bring their authentic selves to work, knowing that their
individuality is an asset that contributes to our collective success. We work as one team to leverage each other's strengths and
talents, fostering collaboration and innovation. By embracing inclusivity—one of the Company's core values—we can deliver
products and services to meet the needs of our customers and stakeholders, ensuring that everyone feels heard and represented.
In 2024, we offered live training titled Leading with Inclusion to all our people leaders. The training was so well-
received by Company leadership that we made it available to all teammates and offered multiple live sessions that any
teammate was welcome to attend. Over 80% of our Company attended leader or individual contributor training.
INFORMATION TECHNOLOGY
The ability to access and use technology is an increasingly competitive factor in the financial services industry.
Technology is not only important with respect to delivery of financial services and protection of the security of customer
information but also in processing information. We must continually make technology investments to remain competitive in the
financial services industry. Those investments have included significant updates to our technology infrastructure, core
processing, and deposit operations systems. Accordingly, we continually adapt to the changing technological needs and wants
of our clients by investing in our electronic banking platform. We use a combination of online and mobile banking channels to
attract and retain clients and expand the convenience of banking with us. In most cases, our clients can initiate banking
transactions from the convenience of their personal computer or smart phone, reducing the number of in-branch visits necessary
to conduct routine banking transactions. The remote transactions available to our clients include remote image deposit, bill
payment, external and internal transfers, ACH origination, and wire transfer. Enhancements to our online account originations
capabilities have been a strong focus, specifically around deposits, savings, and credit card products, utilizing secure and
convenient electronic signature capabilities where available. We believe that our investments in technology and innovation are
consistent with our clients’ needs and will support future migration of our clients’ transactions to these and other developing
electronic banking channels. Further, we closely monitor information security for trends and new threats, including
cybersecurity risks, and invest significant resources to continuously improve the security and privacy of our systems and data.
See “Part 1, Item 1.A., Risk Factors” for additional information regarding technology and cybersecurity risks.
21
CORPORATE INFORMATION
Shares of Common Stock
Listed on the NYSE
NYSE Symbol: CADE
Shares of Series A Preferred Stock
Listed on NYSE
NYSE Symbol: CADE Pr A
Transfer Agent and Registrar
Computershare Investor Services
150 Royall Street
Canton, MA 02021
Tel: (800) 368-5948
Internet address: www.computershare.com
22
ITEM 1A. RISK FACTORS.
SUMMARY OF RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including, but not limited to, the
principal risks summarized below. Many of these risks are beyond our control although efforts are made to manage these risks
while simultaneously optimizing operational and financial results. The occurrence of any of the following risks, as well as risks
of which we are currently unaware or currently deem immaterial, could materially and adversely affect our assets, business,
cash flows, condition (financial or otherwise), liquidity, prospects, results of operations and the trading price of our capital
stock. A detailed discussion of our Risk Factors begins on page 25 following this Summary.
RISKS RELATED TO OUR BUSINESS
Market Risk
•
Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition
and results of operations;
•
Changes in interest rates could have an adverse impact on our results of operations and financial condition;
•
Inflationary pressures and rising prices may affect our results of operations and financial condition;
•
Our business is highly susceptible to local economic conditions as a result of the geographic concentration of our
operations; and
•
By engaging in derivative transactions, we are exposed to credit and market risk, which could adversely affect our
profitability and financial condition.
Credit Risk
•
If we do not properly manage our credit risk, our business could be seriously harmed;
•
Our ACL may not be adequate to absorb credit losses in our portfolio, which may adversely impact our business,
financial condition and results of operations;
•
We make and hold in our portfolio real estate construction, acquisition and development loans, which are based upon
estimates of costs and values associated with the completed project and which pose more credit risk than other types of
loans typically made by financial institutions;
•
Many of our loans are to commercial borrowers, which have unique risks compared to other types of loans;
•
Our loan portfolio includes lending in energy and other specialized industries;
•
Sustained low oil prices, volatility in oil prices and downturns in the energy industry, including in Texas, could
materially and adversely affect us;
•
A significant portion of our loan portfolio is comprised of loan participations and SNCs, which could have a material
adverse effect on our ability to monitor such lending relationships and lead to an increased risk of loss;
•
The amount of our nonperforming and criticized assets may adversely affect our results of operations and financial
condition; and
•
The fair value of our investment securities may decline. Factors beyond our control can significantly influence the fair
value of our securities and can cause adverse changes to the fair value of these securities.
Liquidity Risk
•
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition;
•
Adverse developments or concerns affecting the financial services industry in general or financial institutions that are
similar to us or that may be viewed as being similar to us, such as bank failures and disruption in the United States
banking industry, could adversely affect our financial condition and results of operations;
•
We rely on customer deposits as a significant source of funding, and our deposits may decrease in the future;
•
The borrowing needs of our clients may increase, especially during a challenging economic environment, which could
result in increased borrowing against our contractual obligations to extend credit;
•
An increased level of indebtedness could affect our ability to meet our obligations and may otherwise restrict our
activities; and
•
We rely on the secondary mortgage market for some of our liquidity.
23
Strategic Risk
•
We compete with financial holding companies, bank holding companies, banks, insurance, fintech companies, other
financial services companies and non-bank financial institutions, and consumers may decide not to use banks to
complete their financial transactions;
•
Our growth strategy includes risks that could have an adverse effect on our financial performance;
•
If we are unable to manage our growth effectively, our operations could be negatively affected;
•
We face risks in connection with completed or potential acquisitions;
•
We may not realize all of the anticipated benefits of any acquisition;
•
We may not be able to raise additional capital in the future; and
•
If the goodwill that we record in connection with a business acquisition becomes impaired, it could require a charge to
earnings.
Operational Risk
•
Our business is, and will continue to be, dependent on technology and an inability to invest in technological
improvements or obtain reliable technological support may adversely affect our results of operation and financial
condition;
•
The development and use of generative AI presents risks and challenges that may adversely impact the Company’s
business;
•
We are subject to a variety of systems-failure and cybersecurity risks that could adversely affect our business and
financial performance;
•
We may be adversely affected by the failure of certain third-party vendors to perform;
•
Our earnings could be adversely impacted by incidences of fraud and compliance failures that are not within our direct
control; and
•
We are subject to environmental liability risk associated with our lending activities.
RISKS RELATED TO THE REGULATION OF OUR INDUSTRY
Regulatory Risk
•
The banking industry is highly regulated, and current and future legislative or regulatory changes could have a
significant adverse effect on our business, financial condition, or results of operations;
•
Regulatory initiatives regarding bank capital requirements may require increased capital;
•
Changes in accounting rules applicable to banks could adversely affect our financial condition and results of
operations;
•
Regulators periodically examine our business and we may be required to remediate adverse examination findings, and;
•
The Company is operating under a Consent Order, and failure to comply with the Consent Order could materially and
adversely affect our business.
Compliance Risk
•
We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure
to comply with these laws could lead to a wide variety of sanctions;
•
Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase
our risk of liability with respect to such loans and could increase our cost of doing business;
•
The expanding body of federal, state and local regulations and/or the licensing of loan servicing, collections or other
aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of
noncompliance and subject us to litigation; and
•
We are subject to laws regarding the privacy, information security, and protection of personal information and any
violation of these laws or another incident involving personal, confidential or proprietary information of individuals
could damage our reputation and otherwise adversely affect our operations and financial condition.
24
GENERAL RISK FACTORS
Economic Conditions
•
The fiscal and monetary policies of the U.S. government could have a material adverse effect on our results of
operations;
•
The Federal Reserve has implemented significant economic strategies that have impacted interest rates, inflation, asset
values, and the shape of the yield curve, over which the Company has no control and which the Company may not be
able to adequately anticipate; and,
•
The current economic environment poses significant challenges and could adversely affect our financial condition and
results of operations.
Investment in Our Common Stock and Preferred Stock
•
The price of our common stock and preferred stock may fluctuate significantly, which may make it difficult for
investors to resell shares of our common stock or preferred stock at a time or price they find attractive;
•
The rights of our common shareholders are generally subordinate to the rights of holders of our debt securities and
preferred stock and may be subordinate to the rights of holders of any class of preferred stock or any debt securities
that we may issue in the future;
•
Adverse changes in the ratings for our debt securities or preferred stock could have a material adverse effect on our
business, financial condition and liquidity and may increase our funding costs or impair our ability to effectively
compete for business and clients;
•
Our ability to declare and pay dividends is limited;
•
Our ability to repurchase shares of our common or preferred stock is limited;
•
Our certificate of incorporation and bylaws include provisions that could impede a takeover of the Company; and
•
Shares of our common stock and preferred stock are not deposits insured by the FDIC and are subject to risk of loss
and uncertain return on investment.
Other Risks
•
As a public company, we incur significant legal, accounting, insurance, compliance and other expenses. Any
deficiencies in our financial reporting or internal controls could materially and adversely affect us, including resulting
in material misstatements in our financial statements, and the market price of our common stock;
•
We may be adversely affected by changes in U.S. tax laws;
•
We depend upon key personnel and we may not be able to retain them or attract, assimilate and retain highly qualified
employees in the future;
•
We are required to make significant estimates and assumptions in the preparation of our financial statements. These
estimates and assumptions may not be accurate and are subject to change;
•
We are involved in legal proceedings and may be the subject of additional litigation or government investigations in
the future; the actual cost of legal proceedings may exceed our accruals for them;
•
Reputational and environmental, social, and governance risk may impact our results;
•
Our framework for managing risks may not be effective in mitigating risk and any resulting loss; and
•
Certain weather conditions have the potential to disrupt our business and adversely impact the operations and
creditworthiness of our clients.
RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including, but not limited to, the
material risks described below. It is impossible to predict or identify all such factors and, as a result, the following factors
should not be considered a complete discussion of the risks, uncertainties, or assumptions that could affect us.
In addition, certain statements in the following risk factors constitute forward-looking statements. Please refer to the
section entitled “Cautionary Note Regarding Forward-Looking Statements” beginning on page 5 of this Report.
25
RISKS RELATED TO OUR BUSINESS
Market Risk
Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition and
results of operations.
We are operating in an uncertain economic environment. The pandemic caused a global economic slowdown, and
while we have seen economic recovery in the markets we serve, labor shortages and inflation risk are impacting the continued
recovery. Continued economic uncertainty, or a recessionary or stagnant economy could result in financial stress on our
borrowers, which could adversely affect our business, financial condition, and results of operations. Deteriorating conditions in
the regional economies we serve, or in certain sectors of those economies, could still drive losses beyond that which is provided
for in our allowance for credit losses. We could also face the following risks in connection with the following events:
•
market developments and economic stagnation or slowdown may affect consumer confidence levels and may cause
adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit
facilities;
•
the processes we use to estimate the allowance for credit losses and other reserves may prove to be unreliable. Such
estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may
be rendered inaccurate and/or no longer subject to accurate forecasting;
•
our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to
select, manage, and underwrite loans become less predictive of future charge-offs;
•
regulatory scrutiny of the banking industry has increased and could continue to increase, leading to increased
regulation of the industry that could lead to a higher cost of compliance, limit our ability to pursue business
opportunities and increase our exposure to litigation or fines;
•
ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that
would have a materially adverse impact on our profitability and overall financial condition;
•
further erosion in the fiscal condition of the U.S. Treasury could lead to new taxes that would limit our ability to
pursue growth and return profits to shareholders; and
•
The U.S. government’s decisions regarding its debt ceiling and the possibility that the U.S. could default on its debt
obligations, or otherwise cease timely payment of obligations, may cause further interest rate increases, disrupt access
to capital markets and deepen recessionary conditions.
If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse
effects on our financial condition.
Changes in interest rates could have an adverse impact on our results of operations and financial condition.
Significant increases in market interest rates on loans, or the perception that an increase may occur, could adversely
affect both our ability to originate new loans and our ability to grow. Beginning early in 2022 and continuing throughout 2023,
in response to growing signs of inflation, the Federal Reserve increased interest rates rapidly. The Federal Reserve began
lowering interest rates in September 2024 in response to declining inflation and labor market concerns, followed by two
additional cuts in November and December, although rates nonetheless remain elevated. Rapid changes in interest rates make it
difficult for us to balance our loan and deposit portfolios, which may adversely affect our results of operations by, for example,
reducing asset yields or spreads, creating operating and system issues, or having other adverse impacts on our business.
Decreases in interest rates could result in an acceleration of loan prepayments. Increased market interest rates could also
adversely affect the ability of our floating-rate borrowers to meet their higher payment obligations; if this occurred, it could
cause an increase in nonperforming assets and charge offs, which could adversely affect our business.
Further, our earnings and financial condition are dependent to a large degree upon net interest income, which is the
difference or spread, between interest earned on interest-earning assets and interest paid on interest bearing liabilities. When
26
market rates of interest change, the interest we receive on our assets and the interest we pay on our liabilities may fluctuate.
This can cause decreases in our spread and can adversely affect our earnings and financial condition.
Interest rates are highly sensitive to many factors including:
•
The rate of inflation;
•
Economic conditions;
•
Federal monetary policies; and
•
Stability of domestic and foreign markets.
Accordingly, fluctuations in interest rates could adversely affect our interest rate spread, and, in turn, our profitability.
If the Federal Reserve were to lower the target federal funds rate to below 0%, such rates could continue to constrain our
interest rate spread and may adversely affect our business forecasts. On the other hand, increases in interest rates, to combat
inflation or otherwise, may result in a change in the mix of noninterest and interest bearing accounts. All else being equal, if the
interest rates on the Company's interest bearing liabilities increase at a faster pace than the interest rates on our interest-earning
assets, the result would be a reduction in net interest income and with it, a reduction in net earnings. Moreover, although we
have implemented practices we believe will reduce the potential effects of changes in interest rates on our net interest income,
these practices may not always be successful. Accordingly, changes in levels of market interest rates could materially and
adversely affect our net interest income and our net interest margin, asset quality, loan and lease origination volume, liquidity,
and overall profitability. We cannot assure you that we can minimize our interest rate risk.
In addition, the Company originates residential mortgage loans for sale and for our portfolio. The origination of
residential mortgage loans is highly dependent on the local real estate market and the level of interest rates. Increasing interest
rates tend to reduce the origination of loans for sale and fee income, which we report as gain on sale of loans. Decreasing
interest rates generally result in increased prepayments of loans and mortgage-backed securities, as borrowers refinance their
debt in order to reduce their borrowing cost. This typically leads to reinvestment at lower rates than the loans or securities were
paying. Changes in market interest rates could also reduce the value of our financial assets. Our financial condition and results
of operations could be adversely affected if we are unsuccessful in managing the effects of changes in interest rates.
Inflationary pressures and rising prices may affect our results of operations and financial condition.
Although the U.S. economy experienced declining inflation in 2024, inflation continues to be above the Federal
Reserve’s target rate, and inflationary pressures are likely to continue into 2025. Inflation could lead to increased costs to our
customers, making it more difficult for them to repay their loans or other obligations, increasing our credit risk. Sustained
higher interest rates by the Federal Reserve may be needed to tame persistent inflationary price pressures, which could push
down asset prices and weaken economic activity. A deterioration in economic conditions in the United States and our markets
could result in an increase in loan delinquencies and nonperforming assets, decreases in loan collateral values and a decrease in
demand for our products and services, all of which, in turn, would adversely affect our business, financial condition and results
of operations.
Our business is highly susceptible to local economic conditions as a result of the geographic concentration of our
operations.
Our business is primarily concentrated in select markets in Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, Missouri, Tennessee, and Texas. Our financial condition and results of operations depend largely upon economic
conditions in these market areas. Deterioration in economic conditions in the markets we serve could result in one or more of
the following: an increase in loan delinquencies; an increase in problem assets and foreclosures; a decrease in the demand for
our products and services; and a decrease in the value of collateral for loans, especially real estate collateral, in turn reducing
customers’ borrowing power, the value of assets associated with problem loans and collateral coverage. Our markets are also
susceptible to severe weather. The occurrence of adverse weather and natural disasters could destroy or cause a decline in the
value of assets that serve as collateral and increase the risk of delinquencies, defaults, foreclosures and losses on our loans,
damage our facilities and offices, negatively impact regional economic conditions, result in a decline in local loan demand, loan
originations and deposit availability and negatively impact our growth strategy. Any one or more of these developments could
have a material adverse effect on our business, financial condition or results of operations.
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By engaging in derivative transactions, we are exposed to credit and market risk, which could adversely affect our
profitability and financial condition.
We manage interest rate risk by, among other things, utilizing derivative instruments to minimize significant
unplanned fluctuations in earnings that are caused by interest rate volatility. Hedging interest rate risk is a complex process,
requiring sophisticated models and constant monitoring, and is approximate. Due to interest rate fluctuations, hedged assets and
liabilities will appreciate or depreciate in market value. The effect of this unrealized appreciation or depreciation will generally
be offset by income or loss on the derivative instruments that are linked to the hedged assets and liabilities. By engaging in
derivative transactions, we are exposed to credit and market risk. If the counterparty fails to perform, credit risk exists to the
extent of the fair value gain in the derivative. Market risk exists to the extent that interest rates change in ways that are
significantly different from what we expected when we entered into the derivative transaction. The existence of credit and
market risk associated with our derivative instruments could adversely affect our net interest income and, therefore, could have
a material effect on our business, financial condition and results of operations. Failure to manage interest rate risk could have a
material adverse effect on our business. See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Quantitative and Qualitative Disclosures about Market Risk.”
Credit Risk
If we do not properly manage our credit risk, our business could be seriously harmed.
There are substantial risks inherent in making any loan or lease, including, but not limited to:
•
risks resulting from changes in economic and industry conditions;
•
risks inherent in dealing with borrowers;
•
risks inherent from uncertainties as to the future value of collateral; and
•
the risk of non-payment of loans and leases.
Although we attempt to minimize our credit risk through prudent loan and lease underwriting procedures and by
monitoring concentrations of our loans and leases, there can be no assurance that these underwriting and monitoring procedures
will reduce these risks as some of these risks are outside of our control. Moreover, as we continue to expand into new markets,
credit administration and loan and lease underwriting policies and procedures may need to be adapted to local conditions. The
inability to properly manage our credit risk or appropriately adapt our credit administration and loan and lease underwriting
policies and procedures to local market conditions or changing economic circumstances could have an adverse effect on our
allowance and provision for credit losses and our financial condition, results of operations and liquidity.
Our ACL may not be adequate to absorb credit losses in our portfolio, which may adversely impact our business,
financial condition and results of operations.
Due to any declining economic conditions, our customers may not be able to repay their loans according to the original
terms, and the collateral securing the payment of those loans may be insufficient to pay any remaining loan balance. While we
maintain our ACL to provide for loan defaults and nonperformance, losses may exceed the value of the collateral securing the
loans and the allowance may not fully cover any excess loss.
We make various assumptions and judgments about the collectability of our loan and lease portfolio and utilize these
assumptions and judgments when determining the ACL. The determination of the appropriate level of the ACL inherently
involves a high degree of subjectivity and requires us to make significant estimates of current credit risks and future trends, all
of which may undergo material changes. Deterioration in economic conditions affecting borrowers, new information regarding
existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require
an increase in the ACL. In addition, bank regulatory agencies periodically review our ACL and may require an increase in the
ACL or future provisions for credit losses, based on judgments different than those of management. Significant increases in the
ACL will result in a decrease in our net income and capital, and thus could have a material adverse effect on our financial
condition and results of operations. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Results of Operations – Provision for Credit Losses and Allowance for Credit Losses” included herein for more
information regarding our process for determining the appropriate level of the ACL.
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We make and hold in our portfolio real estate construction, acquisition and development loans, which are based upon
estimates of costs and values associated with the completed project and which pose more credit risk than other types of
loans typically made by financial institutions.
At December 31, 2024, our real estate construction, acquisition and development loans represented 11.6% of our loan
portfolio. These loans have certain risks not present in other types of loans. The primary credit risks associated with real estate
construction, acquisition and development loans are underwriting, project and market risks. Project risks include cost overruns,
borrower credit risk, project completion risk, general contractor credit risk and environmental and other hazard risks. Market
risks are risks associated with the sale of the completed residential and commercial units. They include affordability risk, which
means the risk that borrowers cannot obtain affordable financing, product design risk, and risks posed by competing projects.
Real estate construction, acquisition and development loans also involve additional risks because funds are advanced upon the
security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining
real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the
completed project and the effects of governmental regulation of real property, it is difficult to evaluate accurately the total funds
required to complete a project and the related loan-to-value ratio. As a result, real estate construction, acquisition and
development loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the
ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor
to repay principal and interest. If our appraisal of the value of the completed project proves to be overstated or market values or
rental rates decline, we may have inadequate security for the repayment of the loan upon completion of construction of the
project. If we are forced to foreclose on a project prior to or at completion due to a default, there can be no assurance that we
will be able to recover all of the unpaid balance and accrued interest on the loan as well as related foreclosure and holding costs.
In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an
unspecified period of time while we attempt to dispose of it. The adverse effects of the foregoing matters upon our real estate
construction, acquisition and development portfolio could result in an increase in nonperforming loans related to this portfolio
and a resulting increase in charge-offs, which may have a material adverse effect on our financial condition and results of
operations.
Many of our loans are to commercial borrowers, which have unique risks compared to other types of loans.
At December 31, 2024, approximately 68.9% of our loan portfolio was comprised of commercial loans. Because
payments on these loans are often dependent on the successful operation or development of the property or business involved,
their repayment is sensitive to adverse conditions in the real estate market and the general economy. Accordingly, downturns in
the real estate market and economy increase the risk related to commercial loans, particularly commercial real estate loans.
Future declines in the real estate values in our markets could significantly impair the value of the particular collateral securing
our loans and our ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower’s obligations to
us. This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing
our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth
prospects. Commercial loans are also subject to loan specific risks, including risks associated with construction, cost overruns,
project completion risk, general contractor credit risk and risks associated with the ultimate sale or use of the completed
construction. If a decline in economic conditions, natural disasters affecting commercial development or other issues cause
difficulties for our commercial loan borrowers, if we fail to evaluate the credit of these loans accurately when we underwrite
them or if we fail to adequately monitor the performance of these loans, our lending portfolio could experience delinquencies,
defaults and credit losses that could have a material adverse effect on our business, financial condition or results of operations.
Our loan portfolio includes lending in energy and other specialized industries.
Our loan portfolio includes lending in energy and other specialized industries. At December 31, 2024, 6.1% of our
total loans outstanding were to companies operating in the hospitality and healthcare industries, and 4.3% were to companies
operating in the energy sector. These industries and businesses are sensitive to economic conditions and complex factors (such
as supply chain factors), which may expose us to risks unique to these industries. Oil prices can fluctuate widely on a month-to-
month basis in response to a variety of factors that are beyond our control. Factors that contribute to price fluctuations include
war and instability in oil-producing regions, worldwide economic conditions, weather conditions, the supply and price of
domestic and foreign oil, natural gas and natural gas liquids, consumer demand, the price and availability of alternative fuels,
the proximity to, and capacity of, transportation facilities and the effect of worldwide energy conservation measures. Adverse
economic conditions or business conditions relating to these industries could negatively impact our operating results more than
if our loan portfolio was not concentrated in these industries.
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Sustained low oil prices, volatility in oil prices and downturns in the energy industry, including in Texas and Louisiana,
could materially and adversely affect us.
The economy in Texas and Louisiana significantly depends on the energy industry. A downturn or lack of growth in
the energy industry and energy-related businesses, including sustained low oil prices or the failure of oil prices to rise in the
future, could adversely affect our results of operations and financial condition. The economic impacts of COVID-19 initially
resulted in pricing pressure on oil and gas and weaker demand for energy lending, however, energy prices have risen
significantly during 2024 contributing to the overall inflation rate. These factors and general uncertainty resulting from
continued volatility could have other future adverse impacts such as job losses in energy-related industries, lower borrowing
needs, higher transaction deposit balances and other effects that are difficult to isolate or quantify. Such impacts could
particularly impact states with significant dependence on the energy industry such as Texas and Louisiana, all of which could
have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our loan portfolio is comprised of loan participations and SNCs, which could have a material
adverse effect on our ability to monitor such lending relationships and lead to an increased risk of loss.
We participate in loans originated by other institutions and in SNCs, broadly defined as loans to larger institutions by a
group of participating lenders where the client’s needs are larger than any individual lender can prudently provide, and in which
other lenders serve as the agent bank. Additionally, our specialized industries lending includes larger, national companies that
tend to be served through SNCs. At December 31, 2024, approximately 12.3% of our total loans, consisted of SNCs. For the
vast majority of SNCs, we are not the lead bank. Our reduced control over the monitoring and management of these
relationships could lead to increased risk of loss, which could have a material adverse effect on our results of operations.
The amount of our nonperforming and criticized assets may adversely affect our results of operations and financial
condition.
As of December 31, 2024 and 2023, our nonperforming assets to total assets were 0.58% and 0.45%, respectively.
Total criticized loans as of December 31, 2024 and 2023, were $794.6 million and $844.7 million, respectively (see “Asset
Quality” section in Part II, Item 7, Management’s Discussion and Analysis). Increases in nonperforming assets and criticized
loans could result in increased provisions for credit losses, lost income, and additional expenses to maintain such assets which
could have a material adverse effect on our results of operations.
The fair value of our investment securities may decline.
At December 31, 2024, the fair value of our available for sale securities portfolio was $7.3 billion. Factors beyond our
control can significantly influence the fair value of our securities and can cause adverse changes to the fair value of these
securities. These factors include rating agency actions, defaults by or other adverse events affecting the issuer, lack of liquidity,
changes in market interest rates, and continued instability in the capital markets. A prolonged decline in the fair value of our
securities could result in an other-than-temporary impairment write-down, which would affect our results of operations.
Liquidity Risk
Liquidity risk could impair our ability to fund operations and jeopardize our financial condition.
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and
other sources could have a substantial negative effect on the Company’s liquidity. Our access to funding sources in amounts
adequate to finance our activities or on terms which are acceptable to us could be impaired by factors that affect us specifically
or the financial services industry or economy in general. A decrease in the level of our business activity as a result of a
downturn in the markets in which our loans are concentrated as well as adverse regulatory actions against us could
detrimentally impact our access to liquidity sources. In addition, our access to deposits may be affected by the liquidity and/or
cash flow needs of depositors, which may be exacerbated in an inflationary, recessionary, or elevated rate environment. Our
ability to borrow could also be impaired by factors that are not specific to us, such as a disruption in the financial markets or
negative views and expectations about the prospects for the financial services industry generally.
Adverse developments or concerns affecting the financial services industry in general or financial institutions that are
similar to us or that may be viewed as being similar to us, such as bank failures and disruption in the United States
banking industry, could adversely affect our financial condition and results of operations.
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In 2023, several financial institutions failed or required outside liquidity support, often as a result of the inability of the
institutions to obtain needed liquidity. The impact of this situation led to heightened risk of additional stress to other financial
institutions, and the financial services industry generally as a result of increased lack of confidence in the financial sector.
Banking regulators took action in an effort to strengthen public confidence in the banking system, but there can be no assurance
that these actions will stabilize the financial services industry and financial markets. While we currently do not anticipate
liquidity constraints of the kind that caused certain other financial institutions to fail or require external support, constraints on
our liquidity could occur as a result of unanticipated deposit withdrawals, because of market distress or our inability to access
other sources of liquidity, including through the capital markets due to unforeseen market dislocations or interruptions.
Moreover, some of our customers may become less willing to maintain deposits at the Bank because of broader market
concerns with the level of insurance available on those deposits. Our business and our financial condition and results of
operations could be adversely affected by soundness concerns regarding financial institutions generally, and our counterparties
specifically, and limitations resulting from further governmental action in an effort to stabilize or provide additional regulation
of the financial system, as well as the impact of excessive deposit withdrawals. Actual events involving limited liquidity,
defaults, nonperformance or other adverse developments that affect financial institutions, or concerns or rumors about any
events of these kinds or other similar events, have in the past and may in the future lead to erosion of customer confidence in
the banking system or certain banks, deposit volatility, liquidity issues, stock price volatility and other adverse developments.
Any of these impacts, or any other impacts resulting from past bank failures or other related or similar events, could have a
material adverse effect on our liquidity and our current and/or projected business operations and financial condition and results
of operations.
We rely on customer deposits as a primary source of funding, and our deposits may decrease in the future.
We rely on customer deposits as a significant source of funding. Competition among U.S. banks and non-banks for
customer deposits is intense and may increase the cost of deposits (particularly in an elevated rate environment) or prevent new
deposits and may otherwise negatively affect our ability to grow our deposit base. Our deposit accounts may decrease in the
future, and any such decrease could have a material adverse impact on our sources of funding. Any changes we make to the
rates offered on our deposit products to remain competitive with other financial institutions may adversely affect our
profitability. The demand for our deposit products may also be reduced due to a variety of factors such as demographic patterns,
changes in customer preferences, including customers moving funds out of bank deposits and into alternative investments, such
as the stock market, that may be perceived as providing superior expected returns, reductions in consumers’ disposable income,
regulatory actions that decrease customer access to particular products or the availability of competing products. In addition, a
portion of our deposits are brokered deposits. The levels of these types of deposits that we hold may be more volatile during
changing economic conditions.
The borrowing needs of our clients may increase, especially during a challenging economic environment, which could
result in increased borrowing against our contractual obligations to extend credit.
A commitment to extend credit is a formal agreement to lend funds to a client as long as there is no violation of any
condition established under the agreement. The actual borrowing needs of our clients under these credit commitments have
historically been lower than the contractual amount of the commitments. At December 31, 2024, we had $8.6 billion in
unfunded credit commitments to our clients. Actual borrowing needs of our clients may exceed our expectations for any
numbers of reasons. This could adversely affect our liquidity, which could impair our ability to fund operations and meet
obligations as they become due and could have a material adverse effect on our business, financial condition and results of
operations.
An increased level of indebtedness could affect our ability to meet our obligations and may otherwise restrict our
activities.
Our indebtedness could limit our ability to borrow money for funding loans, capital expenditures, debt service
requirements or other corporate purposes; require us to dedicate a substantial portion of our cash flow to payments on our
indebtedness; increase our vulnerability to general adverse economic and industry conditions; and limit our ability to respond to
business opportunities, including growing our business through acquisitions. In addition, the instruments governing our
indebtedness contain certain restrictive covenants including with respect to consolidating or merging the Company or the Bank
into another entity or transferring substantially all of their respective assets or properties. Certain of the Company’s debt also
contains restrictions on the Company’s ability to assign or grant a security interest in or otherwise dispose of any shares of the
voting stock of the Bank. Failure to meet any of these covenants could result in an event of default under these agreements. If
an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these
agreements to be immediately due and payable.
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Total interest expense on subordinated and long-term debt was $13.3 million on a pre-tax basis for 2024. Following
paydowns of that debt, at December 31, 2024, the Company had $10.7 million of subordinated and long-term debt outstanding.
An increase in interest rates will increase our interest expense on any new debt we issue. See “Item 7A. Quantitative and
Qualitative Disclosures about Market Risk.” In addition, we may not be able to refinance our indebtedness on substantially
similar terms, or at all, at or prior to the time that it comes due.
We rely on the mortgage secondary market for some of our liquidity.
We originate and sell a portion of our residential mortgage loans. We rely on FNMA and other purchasers to purchase
loans in order to reduce our credit risk and provide funding for additional loans we desire to originate. We cannot provide
assurance that these purchasers will not materially limit their purchases from us due to capital constraints or other factors,
including, with respect to FNMA, a change in the criteria for conforming loans. In addition, various proposals have been made
to reform the U.S. residential mortgage finance market, including the role of FNMA. The exact effects of any such reforms are
not yet known, but may limit our ability to sell conforming loans to FNMA. In addition, residential mortgage lending is highly
regulated, and our inability to comply with all federal and state regulations and investor guidelines regarding the origination,
underwriting documentation and servicing of residential mortgage loans may also impact our ability to continue selling
residential mortgage loans. If we are unable to continue to sell loans in the secondary market, our ability to fund, and thus
originate, additional residential mortgage loans may be adversely affected, which could have a material adverse effect on our
business, financial condition or results of operations.
Strategic Risk
We compete with financial holding companies, bank holding companies, banks, insurance, fintech, other financial
services companies and non-bank financial institutions, and consumers may decide not to use banks to complete their
financial transactions, which could adversely affect our net income.
The banking, insurance and financial services businesses are extremely competitive in our markets. Certain of our
competitors, many of which are well-established banks, credit unions, insurance agencies and other large financial institutions,
have an advantage over us through substantially greater financial resources, lending limits and larger distribution networks, and
are able to offer a broader range of products and services. Other competitors, including fintech companies, many of which are
smaller, are privately-held and thus benefit from greater flexibility in adopting or modifying growth or operational strategies
than we do. If we fail to compete effectively for deposits, loans, leases and other banking customers in our markets, we could
lose substantial market share, suffer a slower growth rate or no growth and our financial condition, results of operations and
liquidity could be adversely affected.
Further, technology and other changes now allow parties to complete financial transactions without banks. For
example, consumers can pay bills, transfer funds directly and obtain loans without banks. This process could result in the loss
of interest and fee income, as well as the loss of customer deposits and the income generated from those deposits.
Non-bank financial technology providers invest substantial resources in developing and designing new technology,
particularly digital and mobile technology, and are beginning to offer more traditional banking products either directly or
through bank partnerships. Further, clients may choose to conduct business with other market participants who engage in
business or offer products in areas we deem speculative or risky, such as cryptocurrencies. Increased competition may
negatively affect our earnings by creating pressure to lower prices or credit standards on our products and services requiring
additional investment to improve the quality and delivery of our technology and/or reducing our market share, or affecting the
willingness of our clients to do business with us.
In addition, the widespread adoption of new technologies, including internet banking services, mobile banking
services, payment systems, those related to or involving AI, machine learning, blockchain and other distributed ledger
technologies, could require substantial expenditures to modify or adapt our existing products and services as we grow and
develop our internet banking and mobile banking channel strategies in addition to remote connectivity solutions. We might not
be successful in developing or introducing new products and services, integrating new products or services into our existing
offerings, responding or adapting to changes in consumer behavior, preferences, spending, investing and/or saving habits,
achieving market acceptance of our products and services, reducing costs in response to pressures to deliver products and
services at lower prices or sufficiently developing and maintaining loyal customers.
Further, we may experience a decrease in customer deposits if customers perceive alternative investments, such as the
stock market, as providing superior expected returns. When customers move money out of bank deposits in favor of alternative
investments, we may lose a relatively inexpensive source of funds, and be forced to rely more heavily on borrowings and other
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sources of funding to fund our business and meet withdrawal demands, thereby increasing our funding costs and adversely
affecting our net interest margin.
Our growth strategy includes risks that could have an adverse effect on our financial performance.
An element of our growth strategy is the acquisition of additional banks, bank holding companies, financial holding
companies, and/or other businesses related to the financial services industry that may complement our organizational structure
in order to achieve greater economies of scale. The market for acquisitions remains highly competitive. Accordingly, we cannot
assure you that appropriate growth opportunities will continue to exist, that we will be able to acquire additional banks, bank
holding companies and/or financial holding companies that satisfy our criteria or that any such acquisitions will be on terms
favorable to us. To the extent that we are unable to find suitable acquisition candidates, an important component of our growth
strategy may be lost.
In addition, acquisitions of financial institutions involve operational risks and uncertainties and acquired companies
may have unforeseen liabilities, exposure to asset quality problems, key employee and customer retention problems and other
problems that could negatively affect our organization. We may incur substantial costs to expand, and we cannot give assurance
such expansion will result in the levels of profits we seek. We may not be able to complete future acquisitions; and, if
completed, we may not be able to successfully integrate the operations, management, products and services of the entities that
we acquire and eliminate redundancies. The integration process could result in the loss of key employees or disruption of the
combined entity’s ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our
ability to maintain relationships with customers and employees or achieve the anticipated benefits of the transaction. The
integration process may also require significant time and attention from our management that they would otherwise direct at
servicing existing business and developing new business. Our inability to find suitable acquisition candidates and failure to
successfully integrate the entities we acquire into our existing operations may increase our operating costs significantly and
adversely affect our business and earnings.
Further, our growth strategy requires that we continue to hire qualified personnel, while concurrently expanding our
managerial and operational infrastructure. We cannot assure you that we will be able to hire and retain qualified personnel or
that we will be able to successfully expand our infrastructure to accommodate future acquisitions or growth. As a result of these
factors, we may not realize the expected economic benefits associated with our acquisitions. This could have a material adverse
effect on our financial performance.
If we are unable to manage our growth effectively, our operations could be negatively affected.
If we experience growth in the future, we could face various risks and difficulties, including:
•
finding suitable markets for expansion;
•
finding suitable candidates for acquisition;
•
attracting funding to support additional growth;
•
maintaining asset quality;
•
attracting and retaining qualified management and personnel; and
•
maintaining adequate regulatory capital.
In addition, in order to manage our growth and maintain adequate information and reporting systems within our
organization, we must identify, hire and retain additional qualified associates, particularly in the accounting and operational
areas of our business.
If we do not manage our growth effectively, our business, financial condition, results of operations and future
prospects could be negatively affected, and we may not be able to continue to implement our business strategy and successfully
conduct our operations.
We face risks in connection with completed or potential acquisitions.
Historically, we have grown through the acquisition of other financial institutions as well as the development of de
novo offices. During 2021, we completed three bank mergers, including our acquisition of Cadence Bancorporation and
Cadence Bank, N.A. (collectively, “Legacy Cadence”). On January 22, 2025, we announced the pending acquisition of FCB
Financial Corp., the holding company for First Chatham Bank. As appropriate opportunities present themselves, we have
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pursued and intend to continue to pursue additional acquisitions in the future that we believe are strategic and accretive to
earnings. There can be no assurance that we will be able to identify, negotiate, finance or consummate potential acquisitions
successfully or, if consummated, integrate such acquisitions with our current business.
We may not realize all of the anticipated benefits of any acquisition.
Our ability to realize the anticipated benefits of any acquisition depend, to a large extent, on our ability to successfully
integrate the acquired business. The integration and combination of the acquired business is a complex, costly and time-
consuming process. As a result, we have, and continue to devote significant management attention and resources to integrating
acquired entities. The integration process may disrupt our business and the business of the acquired institution in ways that limit
the full realization of the anticipated benefits of the acquisition. The failure to meet any such challenges involved in completing
integration of the acquired businesses and realization of those anticipated benefits could cause an interruption of, or a loss of
momentum in, our business activities, and could adversely impact our business, financial condition and results of operations. In
addition, completing integration of acquired businesses may still result in material unanticipated problems, expenses, liabilities,
loss of customers and diversion of our management’s and employees’ attention. The challenges of combining the operations of
other companies include, among others:
•
Difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects, including the
potential adverse impact of any outstanding debt the Company assumes in connection with a merger;
•
Difficulties in the integration of operations and teams;
•
Difficulties in the assimilation and retention of employees;
•
Difficulties in managing the expanded operations of a larger and more complex company;
•
Challenges in keeping existing customers and obtaining new customers;
•
Challenges in attracting and retaining key personnel, including personnel that are considered key to future success;
•
Challenges related to an acquired entity’s credit quality and credit risk; and
•
Challenges in keeping key business relationships in place.
Many of these factors are outside of our control and any one of them could result in increased costs and liabilities,
decreases in expected income and deposits, and diversion of management’s time and energy, which could have a material
adverse effect on our business, financial condition and results of operations. Additionally, even if an integration is successful,
the full benefits of the transaction may not be realized, including the synergies, cost savings, growth opportunities or earnings
accretion that are expected. These benefits may not be achieved within the anticipated time frame, or at all, and additional
unanticipated costs may be incurred in the integration of the businesses. These liabilities could include exposure to unexpected
asset quality problems, compliance and regulatory violations, key employee and client retention problems and other problems
that could result in significant costs to us.
All of these factors could cause dilution to our earnings per share, decrease or delay the expected accretive effect of the
transaction, negatively impact the price of our common stock, or have a material adverse effect on our business, financial
condition and results of operations.
We may not be able to raise additional capital in the future.
We are required by federal regulatory authorities to maintain adequate levels of capital to support our operations. In
addition, we may elect to raise additional capital to support our business or to finance any acquisitions or we may otherwise
elect or be required to raise additional capital. As a publicly-traded company, a likely source of additional funds is the capital
markets, accomplished generally through the issuance of equity, including common stock, preferred stock, warrants, depository
shares, rights, purchase contracts or units, and the issuance of senior or subordinated debt securities. Our ability to raise
additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other
factors, many of which are outside our control, and on our financial performance. Accordingly, we cannot provide assurance of
our ability to raise additional capital if needed or to be able to do so on terms acceptable to us. Any occurrence that may limit its
access to the capital markets, such as a decline in the confidence of investors, depositors of the Company or counterparties
participating in the capital markets, may adversely affect our capital costs and our ability to raise capital and, in turn, our
liquidity. Moreover, if we need to raise capital in the future, we may have to do so when many other financial institutions are
also seeking to raise capital and would have to compete with those institutions for investors. If we cannot raise additional
capital on favorable terms when needed, it may have a material adverse effect on our financial condition and results of
operations.
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If the goodwill that we record in connection with a business acquisition becomes impaired, it could require a charge to
earnings.
Goodwill represents the amount by which the purchase price exceeds the fair value of net assets acquired in a business
combination. We review goodwill for impairment at least annually, or more frequently if events or changes in circumstances
indicate the carrying value of the asset might be impaired.
We evaluate goodwill for impairment by comparing the estimated fair value of each reporting unit with its carrying
amount, including goodwill. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is
recognized in an amount equal to that excess. Factors that could cause an impairment charge include adverse changes to
macroeconomic conditions, declines in the profitability of the reporting unit, or declines in the tangible book value of the
reporting unit. Future evaluations of goodwill may result in impairment which could have a material adverse effect on our
business, financial condition and results of operations.
Operational Risk
Our business is, and will continue to be, dependent on technology and an inability to invest in technological
improvements or obtain reliable technological support may adversely affect our results of operation and financial
condition.
The financial services industry is undergoing rapid technological changes with frequent introductions of new
technology-driven products and services. In addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. Our ability to grow and compete will depend in part upon our
ability to address the needs of customers by using technology to provide products and services that will satisfy their operational
needs, while managing the costs of expanding our technology infrastructure and our geographic footprint. Many competitors
have substantially greater resources to invest in technological improvements and third-party support. There can be no assurance
that we will be able to effectively implement new technology-driven products and services or be successful in marketing these
products and services to our customers. For the foreseeable future, we expect to rely on third-party service providers and on
other third parties for services and technical support. If those products and services become unreliable or fail, the adverse
impact on customer relationships and operations could be material.
The development and use of generative AI technology presents risks and challenges that may adversely impact the
Company’s business.
The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI
technology in certain business processes, services, or products. The legal and regulatory environment relating to AI is uncertain
and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as
provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI. These
evolving laws and regulations could require changes in the Company’s consideration or implementation of AI technology and
increase the Company’s compliance costs and the risk of non-compliance. AI models, particularly generative AI models, may
produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in
the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that
is otherwise harmful. In addition, the complexity of many AI models makes it difficult to understand why they are generating
particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI
models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and
complying with regulations that require documentation or explanation of the basis on which decisions are made. Further, the
Company may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in
which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material
in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated
with the output of their models, matters over which the Company may have limited visibility. Any of these risks could expose
the Company to liability or adverse legal or regulatory consequences and harm the Company’s reputation and the public
perception of its business or the effectiveness of its security measures.
We are subject to a variety of systems-failure and cybersecurity risks that could adversely affect our business and
financial performance.
Our internal operations are subject to certain risks, including, but not limited to, information systems failures and
errors, customer or employee fraud and catastrophic failures resulting from terrorist acts, data piracy or natural disasters. We
maintain a system of internal controls and security to mitigate the risks of many of these occurrences and maintain insurance
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coverage for certain risks. However, should an event occur that is not prevented or detected by our internal controls, and is
uninsured against, or in excess of applicable insurance limits, such occurrence could have an adverse effect on our business,
financial condition, results of operations, and liquidity.
The computer systems and network infrastructure we use could be vulnerable to unforeseen problems. Our operations
are dependent upon the ability to protect our computer equipment against damage from fire, severe storm, power loss,
telecommunications failure or a similar catastrophic event. Any damage or failure of our computer systems or network
infrastructure that causes an interruption in operations could have an adverse effect on our financial condition, results of
operations and liquidity.
In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure
against damage from physical break-ins, security breaches and other disruptive problems caused by internet users or other
users. Computer break-ins and other disruptions could jeopardize the security of information stored in and transmitted through
our computer systems and networks, which may result in significant liability and reputation risk to us, and may deter potential
customers. Although we, with the help of third-party service providers, intend to continue to actively monitor and, where
necessary, implement improved security technology and develop additional operational procedures to prevent damage or
unauthorized access to our computer systems and network, there can be no assurance that these security measures or operational
procedures will be successful. In addition, new developments or advances in computer capabilities and AI or new discoveries in
the field of cryptography could enable hackers or data pirates to compromise or breach the security measures we use to protect
customer data through more sophisticated cyber threats, including AI-generated phishing attacks and automated vulnerability
exploitation. Any failure to maintain adequate security over our customers’ personal and transactional information could expose
us to reputational risk or consumer litigation and could have an adverse effect on our financial condition, results of operations
and liquidity.
Our risk and exposure to cyber-attacks and other information security breaches remain heightened because of, among
other things, the evolving nature of these threats and the prevalence of internet and mobile banking. As cyber threats continue to
evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures
or to investigate and remediate any information security vulnerabilities. Disruptions or failures in the physical infrastructure or
operating systems that support our businesses and customers, or cyber-attacks or security breaches of the networks, systems or
devices that customers use to access our products and services, could result in customer attrition, regulatory fines, penalties or
intervention, reputational damage, reimbursement or other compensation costs, including litigation expense and/or additional
compliance costs, any of which could materially and adversely affect our business, results of operations or financial condition.
We may be adversely affected by the failure of certain third-party vendors to perform.
We rely upon certain third-party vendors to provide products and services necessary to maintain our day-to-day
operations. These third parties provide key components of our business operations. Accordingly, our operations are exposed to
the risk that these vendors might not perform in accordance with applicable contractual arrangements or service level
agreements. Any complications caused by these third parties, including those resulting from disruptions in communication
services provided by a vendor, failure of a vendor to handle current or higher volumes, cyber-attacks and security breaches at a
vendor, failure of a vendor to provide services for any reason, or poor performance of services, could adversely affect our
ability to deliver products and services to our customers and otherwise conduct our business. Financial or operational
difficulties of a third-party vendor could also hurt our operations if those difficulties interfere with the vendor’s ability to
provide services. Furthermore, our vendors could also be sources of operational and information security risk, including from
breakdowns or failures of their own systems or capacity constraints. Replacing these third-party vendors could also create
significant delay and expense. Problems caused by external vendors could be disruptive to our operations, which could have a
material adverse impact on our business and, in turn, our financial condition and results of operations. We maintain a system of
policies and procedures designed to monitor vendor risks, including, among other things: (i) changes in the vendor’s
organizational structure; (ii) changes in the vendor’s financial condition; (iii) changes in existing products and services or the
introduction of new products and services; and (iv) changes in the vendor’s support for existing products and services. While
we believe these policies and procedures help to mitigate risk, the failure of an external vendor to perform in accordance with
applicable contractual arrangements or service level agreements could be disruptive to our operations, which could have a
material adverse effect on our financial condition and results of operations.
Our earnings could be adversely impacted by incidences of fraud and compliance failures that are not within our direct
control.
Financial institutions are inherently exposed to fraud risk. A fraud can be perpetrated by a customer of the Company,
an employee, a vendor or members of the general public. We are most subject to fraud and compliance risk in connection with
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the origination of loans, automated clearing house transactions, ATM transactions and checking transactions. Our largest fraud
risk, associated with the origination of loans, includes the intentional misstatement of information in property appraisals or
other underwriting documentation provided to us by third parties. If any of the information upon which we rely is
misrepresented, either fraudulently or inadvertently, and the misrepresentation is not detected prior to asset funding, the value
of the asset may be significantly lower than expected, or we may fund a loan we would not have funded or on terms we would
not have extended. Whether a misrepresentation is made by the applicant or another third party, we generally bear the risk of
loss associated with the misrepresentation. A loan subject to a material misrepresentation is typically unsellable or subject to
repurchase if it is sold prior to detection of the misrepresentation. The sources of the misrepresentations are often difficult to
locate, and it is often difficult to recover any of the monetary losses we may suffer. Accordingly, the compliance risk is that
loans are not originated in compliance with applicable laws and regulations and our standards. There can be no assurance that
we can prevent or detect acts of fraud or violation of law or our compliance standards by third parties. Repeated incidences of
fraud or compliance failures could adversely impact the performance of our loan portfolio.
We are subject to environmental liability risk associated with our lending activities.
A significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may
foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances
could be found on these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well
as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may
materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or
more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental
liability. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material
adverse effect on our business, results of operations and financial condition.
RISKS RELATED TO THE REGULATION OF OUR INDUSTRY
Regulatory Risk
The banking industry is highly regulated, and current and future legislative or regulatory changes could have a
significant adverse effect on our business, financial condition, or results of operations.
As a state chartered bank, we are subject to extensive federal supervision and regulation. Federal regulation of the
banking industry, along with tax and accounting laws, regulations, rules and standards, limit our operations significantly and
control the methods by which we conduct business. In addition, compliance with laws and regulations can be difficult and
costly, and changes to laws and regulations can impose additional compliance costs. Many of these regulations are intended to
protect depositors, customers, the public, the banking system as a whole or the FDIC DIF, not shareholders. Regulatory
requirements and discretion affect our lending practices, capital structure, investment practices, dividend policy and many other
aspects of our business. There are laws and regulations which restrict transactions between us and our subsidiaries. These
requirements may constrain our operations, and the adoption of new laws and changes to or repeal of existing laws may have a
further impact on our business, financial condition, results of operations and future prospects. The burdens imposed by federal
and state regulations place banks at a competitive disadvantage compared to non-bank competitors. We are also subject to
requirements with respect to the confidentiality of information obtained from clients concerning their identities, business and
personal financial information, employment, and other matters. We require our personnel to agree to keep all such information
confidential and we monitor compliance. Failure to comply with confidentiality requirements could result in material liability
and adversely affect our business, financial condition, results of operations and future prospects.
Federal and state regulatory agencies may adopt changes to their regulations or change the manner in which existing
regulations are applied. We cannot predict the substance or effect of pending or future legislation or regulation or the
application of laws and regulations to our Company. Compliance with current and potential regulation, as well as regulatory
scrutiny, may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase
our regulatory capital, and limit our ability to pursue business opportunities in an efficient manner by requiring us to expend
significant time, effort and resources to ensure compliance and respond to any regulatory inquiries or investigations. In
addition, press coverage and other public statements that assert some form of wrongdoing by financial services companies
(including press coverage and public statements that do not involve us) may result in regulatory inquiries or investigations,
which, independent of the outcome, may be time-consuming and expensive and may divert time, effort and resources from our
business. Evolving regulations and guidance concerning executive compensation may also impose limitations on us that affect
our ability to compete successfully for executive and management talent.
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See the discussion above at “Item 1. Business – Regulation and Supervision” for an additional discussion of the
extensive regulation and supervision we are subject to.
Regulatory initiatives regarding bank capital requirements may require increased capital.
Cadence is subject to risk-based and leverage capital requirements. We must maintain certain risk-based and leverage
capital ratios as required by our banking regulators, which can change depending on economic conditions and our particular
condition, risk profile, growth plans, and regulatory capital guidelines. Failure to meet minimum capital guidelines and/or other
regulatory requirements can subject the Company to certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material adverse effect on the Company’s consolidated financial statements.
Additional information, including the Company’s and Bank’s compliance with applicable capital adequacy standards is
provided in Note 18 to the consolidated financial statements and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Regulatory Capital.”
Changes in accounting rules applicable to banks could adversely affect our financial condition and results of operations.
From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the
preparation of our consolidated financial statements. These changes can be hard to predict and can materially impact how we
record and report our financial condition and results of operations. In some cases, we could be required to apply a new or
revised standard retroactively, resulting in a restatement of our prior period financial statements.
Regulators continually examine our business and we may be required to remediate adverse examination findings.
The federal and state banking regulators continually examine our business, including our compliance with laws and
regulations, and we may become subject to other regulatory agency examinations in the future. If, as a result of an examination,
a federal or state banking agency were to determine that our financial condition, capital resources, asset quality, earnings
prospects, management, liquidity, or other aspects of any of our operations had become unsatisfactory, or that we were in
violation of any law or regulation, it may require us to take a number of different remedial actions as it deems appropriate.
These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions
resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in
our capital, to restrict our growth by preventing us from acquiring other financial institutions or limiting our ability to expand
our business by engaging in new activities, to change the asset composition of our portfolio or balance sheet, to assess civil
monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions
cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into
receivership or conservatorship. Any regulatory action against us could have a material adverse effect on our business, financial
condition and results of operations.
The Company is operating under a Consent Order, and its failure to comply with the Consent Order could materially
and adversely affect our business.
On August 30, 2021, Legacy Cadence Bank and the DOJ agreed to a settlement set forth in the consent order related to
the investigation by the DOJ of Legacy Cadence Bank’s fair lending program in Harris, Fort Bend and Montgomery Counties
located in Houston, Texas during the period between 2014 and 2016 (the “Consent Order”). Under the Consent Order, Legacy
Cadence Bank will, among other things, implement a mutually agreed upon Fair Lending Plan, invest $4.17 million in a loan
subsidy fund to increase credit opportunities to residents of majority-Black and Hispanic neighborhoods and will devote $1.38
million toward advertising, community outreach, and credit repair and education. Legacy Cadence Bank will also open one full-
service branch to serve the banking and credit needs of residents in a majority-Black and Hispanic neighborhood in Houston. In
addition, Legacy Cadence Bank will employ a director of community lending and development who will oversee these efforts
and work in close consultation with Legacy Cadence Bank’s leadership. The Consent Order was signed by the United States
District Court for the Northern District of Georgia, Atlanta Division, on August 31, 2021. Pursuant to Section 5.2(g) of the
Agreement and Plan of Merger with Legacy Cadence, dated April 12, 2021, and Paragraph 50 of the Consent Order, Legacy
BancorpSouth Bank approved the negotiated settlement, and subsequently, the Company agreed to accept the obligations of the
Consent Order. The Consent Order is in effect for five years. For additional information regarding the terms of this settlement
and the Consent Order, see Legacy Cadence’s Current Report on Form 8-K that was filed with the SEC on August 30, 2021.
The Company is operating under the Consent Order. Our Board of Directors and senior management team have been
working diligently to comply with the Consent Order and believe that they have allocated sufficient resources to address the
corrective actions required by the DOJ. Compliance with and resolution of the Consent Order will ultimately be determined by
the DOJ. The Company’s failure to comply with the Consent Order and to successfully implement its requirements may cause
38
us to incur additional significant compliance costs, subject us to larger fines, result in serious reputational consequences,
additional regulatory enforcement actions, including the imposition of material restrictions on the activities of the Company or
the assessment of fines or penalties against the Company and its officers and directors, which could prevent the Company from
executing its business strategy and negatively impact its business, or additional enforcement of the Consent Order through court
proceedings. Any of these results could have a material and adverse effect on our business, results of operations, financial
condition, cash flows and stock price.
Compliance Risk
We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to
comply with these laws could lead to a wide variety of sanctions.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose
nondiscriminatory lending requirements on financial institutions. The Department of Justice and other federal agencies,
including the CFPB, are responsible for enforcing these laws and regulations. A successful regulatory challenge to an
institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions,
including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on
expansion, and restrictions on entering new business lines. As discussed in more detail above, the Company is subject to the
Consent Order in connection with Legacy Cadence Bank’s compliance with fair lending laws. In the case of the CRA, the
performance of a financial institution in meeting the credit needs of its community and its overall CRA rating are factors that
will be taken into consideration when the federal banking agencies evaluate applications related to mergers and acquisitions, as
well as branch opening and relocations. Private parties may also have the ability to challenge an institution’s performance under
fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial
condition and results of operations.
Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase
our risk of liability with respect to such loans and could increase our cost of doing business.
Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered
“predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary
insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will
be able to repay the loans irrespective of the value of the underlying property. It is our policy not to make predatory loans, but
these laws create the potential for liability with respect to our lending and loan investment activities. They increase our cost of
doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or
the points and fees on loans that we do make.
The expanding body of federal, state and local regulations and/or the licensing of loan servicing, collections or other
aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of
noncompliance and subject us to litigation.
We service some of our own loans, and loan servicing is subject to extensive regulation by federal, state and local
governmental authorities as well as to various laws and judicial and administrative decisions imposing requirements and
restrictions on those activities. The volume of new or modified laws and regulations has increased in recent years and, in
addition, some individual municipalities have begun to enact laws that restrict loan servicing activities including delaying or
temporarily preventing foreclosures or forcing the modification of certain mortgages. If regulators impose new or more
restrictive requirements, we may incur additional significant costs to comply with such requirements which may further
adversely affect us. In addition, were we to be subject to regulatory investigation or regulatory action regarding our loan
modification and foreclosure practices, our financial condition and results of operation could be adversely affected.
We are subject to laws regarding the privacy, information security and protection of personal information and any
violation of these laws or another incident involving personal, confidential or proprietary information of individuals
could damage our reputation and otherwise adversely affect our operations and financial condition.
Our business requires the collection and retention of large volumes of customer data, including personally identifiable
information in various information systems that we maintain and in those maintained by third parties with whom we contract to
provide data services. We also maintain important internal company data such as personally identifiable information about our
employees and information relating to our operations. We are subject to complex and evolving laws and regulations governing
the privacy and protection of personal information of individuals (including customers, employees, suppliers and other third
parties). For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain
39
limitations on our ability to share nonpublic personal information about our customers with nonaffiliated third parties; (ii)
requires that we provide certain disclosures to customers about our information collection, sharing and security practices and
afford customers the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain
exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program
containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of
customer information we process, as well as plans for responding to data security breaches. Various state and federal banking
regulators and states have also enacted data security breach notification requirements with varying levels of individual,
consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Ensuring that
our collection, use, transfer and storage of personal information complies with all applicable laws and regulations can increase
our costs. Furthermore, we may not be able to ensure that all of our clients, suppliers, counterparties and other third parties have
appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such
information is transmitted by electronic means. If personal, confidential or proprietary information of customers or others were
to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are
not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties,
including cyber criminals), we could be exposed to litigation or regulatory sanctions under personal information laws and
regulations. Concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that
such measures are inadequate, could cause us to lose customers or potential customers for our products and services and thereby
reduce our revenues. Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws
and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease
certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise
adversely affect our operations and financial condition.
GENERAL RISK FACTORS
Economic Conditions
The fiscal and monetary policies and other actions of the U.S. government could have a material adverse effect on our
results of operations.
Our business is significantly affected by fiscal and monetary policies of the U.S. federal government and its agencies,
particularly the Federal Reserve. Federal Reserve policies determine in large part the cost of funds for lending and investing and
the returned earned on those loans and investments, both of which impact our net interest margin. Federal Reserve policies may
also adversely affect borrowers, potentially increasing the risk that they may fail to repay their loans or could adversely create
asset bubbles which result from prolonged periods of accommodative policy. This, in turn, may result in volatile markets and
rapidly declining collateral values. The monetary policies of the Federal Reserve and other governmental policies have had a
significant effect on the operating results of commercial banks in the past and are expected to continue to do so in the future.
Changes in any of these policies are influenced by macroeconomic conditions and other factors that are beyond our control. In
addition, changes in trade policies by the United States, such as tariffs or retaliatory tariffs, may cause inflation which could
impact the prices of products sold by our borrowers and have the potential to reduce demand for their products, impacting their
profitability and making it difficult for our borrowers to repay their loans. Adverse economic conditions and government policy
responses to such conditions could have a material adverse effect on our business, financial condition and results of operations.
The Federal Reserve implemented significant economic strategies that have impacted interest rates, inflation, asset
values, and the shape of the yield curve, over which the Company has no control and which the Company may not be
able to adequately anticipate.
In recent years, the Federal Reserve implemented a series of accommodative domestic monetary initiatives through
changes to the federal funds target rate. The Federal Reserve reduced rates from 2019 through 2021, then increased rates
throughout 2022 and 2023 in response to the significant increase in the domestic inflation rate in the U.S. In 2024, the Federal
Reserve began to cut rates, doing so three times, for a total of 1.0%, bringing the rate to 4.5% in December 2024. Further rate
changes, increasing or decreasing the rate, are reportedly dependent on the Federal Reserve’s assessment of economic data as it
becomes available. The Company cannot predict the nature or timing of future changes in monetary, economic, or other policies
or the effect that they may have on the Company's business activities, financial condition and results of operations. Changes in
monetary policy, including changes in interest rates, could influence: (i) the amount of interest we receive on loans and
securities; (ii) the amount of interest we pay on deposits and borrowings; (iii) our ability to originate loans and obtain deposits;
(iv) the fair value of our assets and liabilities; and (v) the reinvestment risk associated with changes in the duration of our
mortgage-backed securities portfolio.
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The current economic environment poses significant challenges and could adversely affect our financial condition and
results of operations.
We are operating in a challenging and uncertain economic environment. The global credit and financial markets have
from time to time experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability,
declines in consumer confidence, declines in economic growth, increases in unemployment rates, high rates of inflation, and
uncertainty about economic stability. As a result, financial institutions continue to be affected by uncertainty in the real estate
market, the credit markets, and the national financial market generally. We retain direct exposure to the commercial and
residential real estate markets, and we are affected by events in these markets. The financial markets and the global economy
may also be adversely affected by the current or anticipated impact of military conflict, including the current conflict between
Russia and Ukraine and the conflicts in the Middle East, which increase volatility in commodity and energy prices, creating
supply chain issues and causing instability in financial markets. Sanctions, tariffs, or other economic penalties imposed by the
United States and other countries in response to such conflicts could further adversely impact the financial markets and the
global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic
instability.
The uncertainty in economic conditions has subjected us and other financial institutions to increased regulatory
scrutiny. In addition, deterioration in local economic conditions in our markets could result in losses beyond that provided for in
our ACL and result in increased loan delinquencies, problem assets, and foreclosures. This may also result in declining demand
for products and services, decreased deposits and increased borrowings under our current contractual obligations to extend
credit, all of which would adversely impact our liquidity positions, and declining values for loan collateral, which in turn would
reduce customers’ borrowing power and the value of assets and collateral associated with our existing loans.
Investment in Our Common Stock and Preferred Stock
The price of our common stock and preferred stock may fluctuate significantly, which may make it difficult for
investors to resell shares of our common stock or preferred stock at a time or price they find attractive.
The price of our common stock and preferred stock may fluctuate significantly as a result of a variety of factors, many
of which are beyond our control. In addition to those described in “Cautionary Notice Regarding Forward Looking Statements,”
these factors include, among others:
•
actual or anticipated quarterly fluctuations in our operating results, financial condition or asset quality;
•
changes in financial estimates or the publication of research reports and recommendations by financial
analysts or actions taken by rating agencies with respect to us or other financial institutions;
•
failure to declare dividends on our capital stock from time to time;
•
failure to meet analysts’ revenue or earnings estimates;
•
failure to integrate acquisitions or realize anticipated benefits from acquisitions;
•
strategic actions by us or our competitors, such as acquisitions, restructurings, dispositions or financings;
•
fluctuations in the stock price and operating results of our competitors or other companies that investors deem
comparable to us;
•
future sales of our capital stock or other securities;
•
future repurchases of our common or preferred securities;
•
proposed or final regulatory changes or developments;
•
anticipated or pending regulatory investigations, proceedings, or litigation that may involve or affect us;
•
reports in the press or investment community generally relating to our reputation or the financial services
industry;
•
domestic and international economic and political factors unrelated to our performance;
•
general market conditions and, in particular, developments related to market conditions for the financial
services industry;
•
adverse weather conditions, including floods, tornadoes and hurricanes; and
•
geopolitical conditions such as acts or threats of terrorism or military conflicts.
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In addition, in recent years, the stock market in general has experienced extreme price and volume fluctuations. This
volatility has had a significant effect on the market price of securities issued by many companies, including for reasons
unrelated to their operating performance. These broad market fluctuations may adversely affect the market price of our capital
stock, notwithstanding our operating results. We expect that the market price of our capital stock will continue to fluctuate and
there can be no assurances about the levels of the market prices for our capital stock.
General market fluctuations, industry factors and general economic and political conditions and events, such as
economic slowdowns or recessions, interest rate changes or credit loss trends, could also cause the stock price of our capital
stock to decrease regardless of operating results.
The rights of our common shareholders are generally subordinate to the rights of holders of our debt securities and
preferred stock and may be subordinate to the rights of holders of any class of preferred stock or any debt securities
that we may issue in the future.
Our Board of Directors has the authority to issue debt securities as well as an aggregate of up to 500,000,000 shares of
preferred stock without any further action on the part of our shareholders. Our Board of Directors also has the power, without
shareholder approval, to set the terms of any debt securities or series of preferred stock that may be issued, including voting
rights, dividend rights, and preferences over our common stock with respect to dividends or in the event of a dissolution,
liquidation or winding up and other terms. The shares and subordinated notes have certain rights that are senior to our common
stock. Any debt or shares of preferred stock that we may issue in the future may be senior to our common stock. Accordingly,
you should assume that any debt securities or preferred stock that we may issue in the future will also be senior to our common
stock. Because our decision to issue debt or equity securities or incur other borrowings in the future will depend on market
conditions and other factors beyond our control, the amount, timing, nature or success of our future capital raising efforts is
uncertain. Holders of our common stock bear the risk that our future issuances of debt or equity securities or our occurrence of
other borrowings may negatively affect the market price of our common stock.
In the event that we issue preferred stock or debt securities in the future that has preference over our common stock
with respect to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred stock with
voting rights that dilute the voting power of our common stock, the rights of the holders of our common stock or the market
price of our common stock could be adversely affected.
Adverse changes in the ratings for our debt securities or preferred stock could have a material adverse effect on our
business, financial condition and liquidity and may increase our funding costs or impair our ability to effectively
compete for business and clients.
The major rating agencies regularly evaluate us and their ratings of our long-term debt and preferred stock based on a
number of factors, including our financial strength and conditions affecting the financial services industry generally. In general,
rating agencies base their ratings on many quantitative and qualitative factors, including capital adequacy, liquidity, asset
quality, business mix and level and quality of earnings, and we may not be able to maintain our current credit ratings and
preferred stock ratings. Our ratings remain subject to change at any time, and it is possible that any rating agency will take
action to downgrade us in the future.
The ratings for our debt securities and preferred stock impact our ability to obtain funding. Reductions in any of the
ratings for our debt securities or preferred stock could adversely affect our ability to borrow funds and raise capital.
Downgrades in our ratings could trigger additional collateral or funding obligations, which may adversely impact our liquidity.
Therefore, any negative credit rating actions could have a material adverse effect on our business, results of operations,
financial condition or liquidity.
Furthermore, our clients and counterparties may be sensitive to the risks posed by a downgrade to our ratings and may
terminate their relationships with us, may be less likely to engage in transactions with us, or may only engage in transactions
with us at a substantially higher cost. We cannot predict the extent to which client relationships or opportunities for future
relationships could be adversely affected due to a downgrade in our ratings. The inability to retain clients or to effectively
compete for new business may have a material and adverse effect on our business, results of operations or financial condition.
Additionally, rating agencies themselves have been subject to scrutiny arising from the financial crisis. As a result or
for unrelated reasons, the rating agencies may make or may be required to make substantial changes to their ratings policies and
practices. Such changes may, among other things, adversely affect the ratings of our securities or other securities in which we
have an economic interest.
42
Our ability to declare and pay dividends is limited.
There can be no assurance of whether or when we may pay dividends on our capital stock in the future. Future
dividends, if any, will be declared and paid at the discretion of our Board of Directors and will depend on a number of factors.
Although the Company’s asset quality, earnings performance, liquidity and capital requirements will be taken into account
before we declare or pay any future dividends on our capital stock, our Board of Directors will also consider our liquidity and
capital requirements. In addition, federal and state banking laws and regulations and state corporate laws restrict the amount of
dividends we may declare and pay. See “Item 1. Business – Regulation and Supervision” included herein for more information.
Finally, so long as any shares of our 5.50% Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 (“Series A
Preferred Stock”) remain outstanding, unless we have paid in full (or declared and set aside funds sufficient for) applicable
dividends on the Series A Preferred Stock, we may not declare or pay any dividend on our common stock, other than a dividend
payable solely in shares of common stock or in connection with a shareholder rights plan.
Our articles of incorporation and bylaws include provisions that could impede a takeover of the Company.
Certain provisions of our articles of incorporation and bylaws could delay, defer, or prevent a third party from
acquiring control of our organization or conduct a proxy contest, even if those events were perceived by many of our
shareholders as beneficial to their interests. These provisions:
•
enable our Board of Directors to issue additional shares of authorized, but unissued capital stock;
•
enable our Board of Directors to issue “blank check” preferred stock with such designations, rights and
preferences as may be determined from time to time by the board;
•
enable our Board of Directors to increase the size of the board and fill the vacancies created by the increase;
•
provide for a plurality voting standard in the election of directors;
•
do not provide for cumulative voting in the election of directors;
•
enable our Board of Directors to amend our bylaws without shareholder approval;
•
do not allow for the removal of directors without cause;
•
limit the right of shareholders to call a special meeting;
•
require advance notice for director nominations and other shareholder proposals; and
•
require prior regulatory application and approval of any transaction involving control of our organization.
These provisions, as well as our classified or “staggered” board of directors and change-in-control agreements with
members of management may discourage potential acquisition proposals and could delay or prevent a change in control,
including when our shareholders might otherwise receive a premium over the market price of our shares.
Shares of our common stock and preferred stock are not deposits insured by the FDIC and are subject to risk of loss
and uncertain return on investment.
Shares of our common stock and preferred stock are not deposit accounts and are not insured by the FDIC or any other
government agency and are subject to investment risk, including the possible loss of all of your investment.
Other Risks
As a public company, we incur significant legal, accounting, insurance, compliance and other expenses. Any deficiencies
in our financial reporting or internal controls could materially and adversely affect us, including resulting in material
misstatements in our financial statements, and the market price of our common stock.
As a public company, we incur significant legal, accounting, insurance and other expenses. These costs and
compliance with the rules of the SEC and the rules of the applicable stock exchange may further increase our legal and financial
compliance costs and make some activities more time consuming and costly. SEC rules require that our CEO and CFO
periodically certify the existence and effectiveness of our internal control over financial reporting and our independent
registered public accounting firm is required to audit the effectiveness of our internal control over financial reporting. This
process requires significant documentation of policies, procedures and systems, review of that documentation by our internal
auditing and accounting staff and our outside independent registered public accounting firm and testing of our internal control
over financial reporting by our internal auditing and accounting staff and our outside independent registered public accounting
43
firm. This process involves considerable time and attention from management, which could prevent us from successfully
implementing our business initiatives and improving our business, results of operations and financial condition, may strain our
internal resources, and increases our operating costs.
During our testing, we may identify deficiencies that would have to be remediated to satisfy the SEC rules for
certification of our internal control over financial reporting. A material weakness is defined by the standards issued by the
PCAOB as a deficiency, or combination of deficiencies, in internal control over financial reporting that results in a reasonable
possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a
timely basis. Therefore, we would have to disclose in periodic reports we file with the Federal Reserve any material weakness
in our internal control over financial reporting. The existence of a material weakness would preclude management from
concluding that our internal control over financial reporting is effective and would preclude our independent auditors from
attesting to the effectiveness of our internal control over financial reporting. In addition, disclosures of deficiencies of this type
in our Federal Reserve reports could cause investors to lose confidence in our financial reporting, may negatively affect the
market price of our common stock, and could result in the delisting of our securities from the securities exchanges on which
they trade. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud. If we
have deficiencies in our disclosure controls and procedures or internal control over financial reporting, it may materially and
adversely affect us.
We may be adversely affected by changes in U.S. tax laws.
We are subject to federal and applicable state tax regulations. Such tax regulations are often complex and require
interpretation and changes in these regulations could negatively impact our results of operations. In the normal course of
business, we are routinely subject to examinations and challenges from federal and applicable state tax authorities regarding the
amount of taxes due. Federal and state taxing authorities have become increasingly aggressive in challenging tax positions
taken by financial institutions. These tax positions may relate to tax compliance, sales and use, franchise, gross receipts, payroll,
property and income tax issues, including tax base, apportionment and tax credit planning. The challenges made by tax
authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income
among tax jurisdictions. If any such challenges are made and are not resolved in our favor, they could have a material adverse
effect on our results of operations.
We depend upon key personnel and we may not be able to retain them or attract, assimilate and retain highly qualified
employees in the future.
Our success depends in significant part upon the continued service of our senior management team and our continuing
ability to attract, assimilate and retain highly qualified and skilled managerial, product development, lending, marketing and
other personnel. We have an experienced senior management team and other key personnel that our board of directors believes
is capable of managing and growing our business. The loss of the services of any member of our senior management or other
key personnel or the inability to hire or retain qualified personnel in the future could adversely affect our business, results of
operations and financial condition.
We are required to make significant estimates and assumptions in the preparation of our financial statements. These
estimates and assumptions may not be accurate and are subject to change.
The preparation of our consolidated financial statements in conformity with GAAP requires our management to make
significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the consolidated financial statements, and the reported amounts of income and expense
during the reporting periods. Estimates are made by management in determining, among other things, the accounting for
business combinations, estimates of fair value, ACL and valuation of deferred tax assets. If our underlying estimates and
assumptions prove to be incorrect or if events occur that require us to revise our previous estimates or assumptions, our
financial condition and results of operations may be materially adversely affected.
We are involved in legal proceedings and may be the subject of additional litigation or government investigations in the
future; the actual cost of legal proceedings may exceed our accruals for them.
The nature of our business ordinarily results in a certain amount of litigation and investigations by government
agencies having oversight over our business. Although we have developed policies and procedures to minimize the impact of
legal noncompliance and other disputes and endeavored to provide reasonable insurance coverage, litigation, government
investigations and regulatory actions present an ongoing risk.
44
We cannot predict with certainty the cost of defense, the cost of prosecution or the ultimate outcome of litigation and
other proceedings filed by or against us, our directors, management or employees, including remedies or damage awards. On at
least a quarterly basis, we assess our liabilities and contingencies in connection with outstanding legal proceedings as well as
certain threatened claims (which are not considered incidental to the ordinary conduct of our business) utilizing the latest and
most reliable information available. For matters where a loss is not probable or the amount of the loss cannot be estimated, no
accrual is established. For matters where it is probable we will incur a loss and the amount can be reasonably estimated, we
establish an accrual for the loss. Once established, the accrual is adjusted periodically to reflect any relevant developments. The
actual cost of any outstanding legal proceedings and the potential loss, however, may turn out to be substantially higher than the
amount accrued. Further, our insurance may not cover all litigation, other proceedings or claims, or the costs of defense. While
the final outcome of any legal proceedings is inherently uncertain, based on the information available, advice of counsel and
available insurance coverage, if applicable, management believes that the litigation-related expense we have accrued is
adequate and that any incremental liability arising from pending legal proceedings, including class action litigation, and
threatened claims and those otherwise arising in the ordinary course of business, will not have a material adverse effect on our
business or consolidated financial condition. It is possible, however, that future developments could result in an unfavorable
outcome for any lawsuit or investigation in which we or our subsidiaries are involved, which may have a material adverse effect
on our business or our results of operations for one or more quarterly reporting periods. See “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations-Financial Condition - Certain Litigation and Other
Contingencies” for more information regarding material pending legal proceedings and ongoing government investigations.
Reputational and ESG risk may impact our results.
Our ability to originate and maintain deposit accounts is highly dependent upon customer and other external
perceptions of our business practices and/or our financial health. Adverse perceptions regarding our business practices and/or
our financial health could damage our reputation in both the customer and funding markets, leading to difficulties in generating
and maintaining accounts as well as in financing them. Adverse developments with respect to customer or other external
perceptions regarding the practices of our competitors, or our industry as a whole, may also adversely impact our reputation.
While we carefully monitor internal and external developments for areas of potential reputational risk and have established
governance structures to assist in evaluating such risks in our business practices and decisions, adverse reputational impacts on
third parties with whom we have important relationships may also adversely impact our reputation. Adverse impacts on our
reputation, or the reputation of our industry, may also result in greater regulatory and/or legislative scrutiny, which may lead to
laws, regulations or regulatory actions that may change or constrain the manner in which we engage with our customers and the
products and services we offer. Adverse reputational impacts or events may also increase our litigation risk.
Our business faces public, investor, activist, legislative and regulatory scrutiny related to ESG. We face risking
damage to our brand and reputation if we fail to act responsibly in a number of areas, and investors and shareholder advocates
are placing ever increasing emphasis on how corporations address ESG issues in their business strategy when making
investment decisions and when developing their investment theses and proxy recommendations. We may incur meaningful
costs with respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may suffer.
There are increasing instances of “anti-ESG” legislation, regulation, and litigation related to ESG, which could impact
ordinary banking operations and increase litigation risk related to actions we choose to take. If legislatures in the states in which
we operate adopt legislation intended to protect certain industries by limiting or prohibiting consideration of business and
industry factors in lending activities, certain portions of our lending operations may be impacted.
Our framework for managing risks may not be effective in mitigating risk and any resulting loss.
Our risk management framework seeks to mitigate risk and any resulting loss. We have established processes intended
to identify, measure, monitor, report and analyze the types of risk to which we are subject, including liquidity, credit, market,
interest rate, operational, legal and compliance, and reputational risk. However, as with any risk management framework, there
are inherent limitations to our risk management processes and strategies. There may exist, or develop in the future, risks that we
have not appropriately anticipated or identified. Also, breakdowns in our risk management framework could have a material
adverse effect on our financial condition and results of operations.
Certain weather conditions have the potential to disrupt our business and adversely impact the operations and
creditworthiness of our clients.
We have operations in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Missouri, Tennessee and Texas,
which include areas susceptible to hurricanes, tornados and tropical storms. Such weather conditions can disrupt our operations,
result in damage to our branch office locations or negatively affect the local economies in which we operate. We cannot predict
45
whether or to what extent damage caused by future hurricanes, tornados, tropical storms or other adverse weather events will
affect our operations or the economies in our market areas, but such weather conditions could result in a decline in loan
originations and an increase in the risk of delinquencies, foreclosures or loan losses. Our business or results of operations may
be adversely affected by these and other negative effects of devastating hurricanes, tornados, tropical storms or other adverse
weather events.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
Cadence Bank’s information security program is designed to protect the security, availability, integrity, and
confidentiality of our computer systems, networks, software, and information assets, including client and other sensitive data.
The program is comprised of policies, guidelines, and procedures intended to align with regulatory guidance and the Center for
Internet Security Controls (“CIS Controls”). CIS Controls are a prescriptive, prioritized, and simplified set of best practices that
are used to strengthen cybersecurity. Assessing, identifying, and managing cybersecurity related risks are integrated into our
overall enterprise risk management process.
Cybersecurity Risk Management and Strategy
At Cadence Bank, we encourage all associates to be responsible for the security and confidentiality of client
information. We communicate this responsibility to associates upon hiring and regularly throughout their employment. We
regularly provide associates with information security awareness training, including concerning the recognition and appropriate
handling of potential phishing activity which could potentially place client or employee data, or other sensitive company data,
at risk. Our Enterprise Risk Management process integrates identification, assessment, and management of cybersecurity risks.
Additionally, we maintain procedures for the safe storage, handling, and secure disposal of sensitive information.
Cadence Bank protects its network and information assets with industry-tested security products and processes. Our
information security team actively monitors company networks and systems to detect suspicious or malicious activity. Internal
and external resources attend to monitoring, investigation, and defense of the Company’s network and computer systems. We
conduct vulnerability scans, and contract with third-party vendors to perform penetration tests against the Company’s network.
The Company also engages additional expert cyber consultants, as necessary and appropriate. Our Third-Party Risk
Management program also engages with different departments within the Company in order to identify and evaluate cyber risks
of our vendors and external service providers so that the relevant lines of business can also engage to manage potential cyber
risks of the vendor. Our information security program includes review of known cyber issues of our vendors and consideration
of any action by the Company in response. Additionally, the Company evaluates potential cyber risks, as appropriate, in its risk
assessments.
As part of our information security program, we have adopted a Cyber Crisis and Data Breach Response Plan (Incident
Response Plan), which is overseen primarily by our CISO in close collaboration with our CIO, Legal, and other relevant leaders
at the Company. The Incident Response Plan sets forth the Company’s processes and procedures for responding to significant
cybersecurity incidents and establishes procedures for escalation and reporting of potentially significant cybersecurity incidents
to senior management, Legal, and/or our Board Risk Committee, as appropriate.
Our Information Security Event Response Team, which includes senior members of the Legal, Information Security,
Enterprise Risk Management, Operations Management, Compliance, Audit, Security, Business Continuity, and Corporate
Communications departments, performs, at least annually, exercises to simulate responses to cybersecurity incidents. Each
exercise results in lessons learned and subsequent enhancements to the Incident Response Plan.
While we have experienced cybersecurity incidents in the past, to date none have materially affected or are reasonably
likely to materially affect the Company or our business strategy, financial position, results of operations and/or cash flows.
Despite our efforts, there can be no assurance that our cybersecurity risk management processes and measures described will be
fully implemented, complied with, or effective in protecting our systems and information. We face risks from certain
cybersecurity threats that, if realized, are reasonably likely to materially affect our business strategy, result of operations or
financial condition. See Item 1A. “Risk Factors” for further discussion of the material risks associated with an interruption or
breach in our information systems or infrastructure.
46
Cybersecurity Governance
Our Board of Directors is responsible for overseeing the Company’s business, affairs, and material risks, including
risks associated with cybersecurity threats. The Board oversees the Company’s corporate risk governance processes primarily
through its committees, and oversight of cybersecurity risks is delegated primarily to our Risk Management Committee. The
Risk Management Committee receives cybersecurity and relevant updates from our CISO and CIO on a quarterly basis, as well
as relevant risk assessments and reporting on privacy or data breaches. At least annually, our CISO attends a meeting with the
Risk Management Committee to update members on material cybersecurity developments and risks. Additionally, the Board
receives an information security program summary report quarterly from the CISO, outlining the overall status of our
information security program and the Company’s compliance with regulatory guidelines.
The Board’s oversight of cybersecurity risk is supported by our CISO, who reports to the CIO. Our CISO is a veteran
information technology executive with decades of experience in the information technology field. The CISO has managed the
Company’s information security program for over two decades and worked for the Company for a number of years before he
assumed that role. The CISO has a B.S. in Computer Science and minored in Management Information Systems and Math. He
is a CISSP and a CISM. Our CIO has more than two decades experience working in the information technology space in the
private sector and before that spent a significant number of years working in related fields in the U.S. Air Force. He holds a
B.S. in Management Science, and an MBA in Information Technology.
Our CISO is responsible for the Company’s information security program. In this role, the CISO manages the
Company’s information security and day-to-day cybersecurity operations and supports the information security risk oversight
responsibilities of the Board and its committees. The CISO is a member of the Company’s Operations department and reports to
our CIO, who in turn reports to our COO. The CISO attends Risk Management Committee meetings as a permanent invitee,
provides cybersecurity and other relevant updates to the Risk Management Committee on a quarterly basis, and meets with the
Risk Management Committee in executive session at least annually to update committee members on material cybersecurity
developments and risks. The CISO also provides the quarterly information security program summary report to the Board.
ITEM 2. PROPERTIES.
At December 31, 2024, the physical properties of the Company are located in the states of Alabama, Arkansas, Florida,
Georgia, Louisiana, Mississippi, Missouri, Tennessee and Texas. The Company maintains corporate offices in Houston, Texas
and Tupelo, Mississippi, as well as Birmingham, Alabama. The Company’s main office is located at One Mississippi Plaza, 201
South Spring Street in the central business district of Tupelo, Mississippi in a seven-floor, modern, glass, concrete and steel
office building owned by the Company. The Company occupies approximately 98% of the space, with the remainder leased to
an unaffiliated tenant. The Company also owns an additional 289 buildings that provide space for branch banking, computer
operations, lease servicing, mortgage banking, warehouse needs and other general purposes. In addition to the facilities the
Company owns, 93 branch-banking, mortgage banking, and operational facilities that are occupied under leases with unexpired
terms ranging from one to twenty-six years. Of the owned and leased properties described above, 371 properties are used by the
Community and Corporate Banking segments, 117 are used by the Mortgage segment, 41 properties are used by the Banking
Services segment, and 14 properties are used by the General Corporate and Other segment. Management considers all of the
Company’s owned buildings and leased premises to be in good condition. None of the Company’s properties are subject to
material encumbrances.
ITEM 3. LEGAL PROCEEDINGS.
As reflected in publicly available information, the Company was impacted by the zero-day vulnerability of Progress’
MOVEit software. That has not resulted, and is not expected to result, in a material impact to our business strategy, results of
operations or financial condition. The Company has been named as a defendant in class action litigation arising from this
incident, which is pending in the District of Massachusetts. Addressing cybersecurity risks is a priority for the Company, and
the Company is committed to ongoing enhancement of its systems of internal controls and business continuity and disaster
recovery plans. See Item 1A. “Risk Factors” for further discussion of the risks associated with an interruption or breach in our
information systems or infrastructure.
Additional information in response to this item is incorporated herein by reference to “Note 21 - Commitments and
Contingent Liabilities - Litigation” in the notes to the consolidated financial statements included in Part II., Item 8. “Financial
Statements” of this Report.
47
ITEM 4. MINE SAFETY DISCLOSURES.
None.
48
PART II—FINANCIAL INFORMATION
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET FOR CAPITAL STOCK
The common stock of the Company trades on the NYSE under the symbol “CADE,” and the 5.50% Series A Non-
Cumulative Perpetual Preferred Stock trades on the NYSE under the symbol “CADE Pr A.”
HOLDERS OF RECORD
As of February 18, 2025, there were 5,816 shareholders of record of the Company’s common stock.
DIVIDENDS
The Company declared cash dividends each quarter in an aggregate annual amount of $1.00 and $0.94 per share of
common stock during 2024 and 2023, respectively. Future dividends, if any, will vary depending on the Company’s
profitability, anticipated capital requirements and applicable federal and state regulations. Under Mississippi law, the Company
must obtain the non-objection of the Commissioner of the MDBCF prior to paying any dividend on the Company’s common
stock. In addition, the Company may not pay any dividends if, after paying the dividend, it would be undercapitalized under
applicable capital requirements. The Company is further restricted by the authority federal banking regulators have to prohibit
the Company from engaging in business practices that they consider unsafe or unsound, which, depending on the financial
condition of the Company, could include the payment of dividends. There can be no assurance that federal banking authorities
or other regulatory bodies will not limit or prohibit future dividends. Finally, so long as any shares of our Series A Preferred
Stock remain outstanding, unless we have paid in full (or declared and set aside funds sufficient for) applicable dividends on the
Series A Preferred Stock, we may not declare or pay any dividend on our common stock, other than a dividend payable solely
in shares of common stock or in connection with a shareholder rights plan. See “Item 1. Business – Regulation and
Supervision” included herein for more information on restrictions and limitations on the Company’s ability to pay dividends.
ISSUER PURCHASES OF EQUITY SECURITIES
The Company had repurchases of shares of common stock during the quarter ended December 31, 2024 as follows:
Period
Total Number
of Shares
Purchased(1) (2)
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs(2)
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans
or Programs(2)
October 31, 2024
— $
—
—
8,762,979
November 30, 2024
261
37.97
—
8,762,979
December 31, 2024
—
—
—
8,762,979
Total
261 $
37.97
(1)
This column includes no shares redeemed in October 2024, 261 shares redeemed in November 2024, and no shares redeemed in
December 2024 from employees for tax withholding purposes for stock compensation. There were no shares repurchased under the stock
repurchase program in the fourth quarter of 2024.
(2)
On December 13, 2023, the Company announced a share repurchase program whereby the Company may acquire up to an aggregate of
10,000,000 shares of its common stock in the open market at prevailing market prices or in privately negotiated transactions during the
period January 2, 2024 through December 31, 2024. The extent and timing of any repurchases depends on market conditions and other
corporate, legal and regulatory considerations. Repurchased shares are held as authorized but unissued shares. These authorized but
unissued shares will be available for use in connection with the Company’s equity incentive plans, other compensation programs, other
transactions or for other corporate purposes as determined by the Company’s Board of Directors. At the time of expiration on December
31, 2024, 1,237,021 had been repurchased under this program.
49
RECENT SALES OF UNREGISTERED SECURITIES
From time to time, the Company issues securities in certain transactions that are described in its period and current
reports. The securities issued in these transactions are issued in reliance on the exemption provided by Section 3(a)(2) of the
Securities Act of 1933, as amended, because the sales involve securities issued by a bank.
STOCK PERFORMANCE GRAPH
The graph below compares the annual percentage change in the cumulative total shareholder return on the Company’s
common stock against the cumulative total return of the S&P 500 Index and the KBW Nasdaq Bank Index for a period of five
years. The graph assumes an investment of $100 in the Company’s common stock and in each respective index on December
31, 2019 and reinvestment of dividends without commissions. The KBW Nasdaq Bank Index is a modified cap-weighted index
consisting of 24 exchange-listed National Market System stocks, representing national money center banks and leading regional
institutions. The performance graph represents past performance and should not be considered to be an indication of future
performance.
Comparison of Five-Year Cumulative Total Returns
Cadence Bank
S&P 500 Index
KBW Bank Index
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
50
100
150
200
250
Period Ending
Index
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
Cadence Bank
100.00
90.37
100.65
86.21
107.73
129.66
S&P 500 Index
100.00
118.39
152.34
124.73
157.48
196.85
KBW Nasdaq Bank Index
100.00
89.69
124.08
97.53
96.66
132.63
This stock performance graph and related information shall not be deemed to be “soliciting material” or to be “filed”
or subject to Regulation 14A or 14C of the Exchange Act or to the liabilities of Section 18 of the Exchange Act, except to the
extent that the Company specifically requests that such information be treated as soliciting material or specifically incorporates
it by reference into such filing.
ITEM 6. [RESERVED]
50
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
The Company is a regional bank with dual headquarters in Houston, Texas and Tupelo, Mississippi with $47.0 billion
in total assets at December 31, 2024. The Company has commercial banking operations in Alabama, Arkansas, Florida,
Georgia, Louisiana, Mississippi, Missouri, Tennessee, and Texas. The Company and its subsidiaries provide commercial
banking, leasing, mortgage origination and servicing, brokerage, trust, and investment advisory services to corporate customers,
local governments, individuals, and other financial institutions through an extensive network of branches and offices.
Management’s discussion and analysis provides a narrative discussion of the Company’s financial condition and
results of operations. For a complete understanding of the following discussion, refer to the consolidated financial statements
and related notes presented elsewhere in this Report. Management’s discussion and analysis should also be read in conjunction
with the risk factors included in Item 1A of this Report. This discussion and analysis is based on reported financial information,
and certain amounts for prior years have been reclassified to conform with the current financial statement presentation.
The financial condition and operating results of the Company are heavily influenced by economic trends nationally
and in the specific markets in which the Company’s subsidiaries provide financial services. Generally, the pressures of the
national and regional economic cycle create a difficult operating environment for the financial services industry. During such
times, the Company is not immune to pressures and any economic downturn may have a negative impact on the Company and
its customers in all of the markets it serves. Management believes future weakness in the economic environment could
adversely affect the strength of the credit quality of the Company's assets. Therefore, management will continue to focus on
early identification and resolution of credit issues.
The largest source of the Company’s revenue is derived from its corporate and community banking operations. The
financial condition and operating results of the Company are affected by the level and volatility of interest rates on loans,
investment securities, deposits, and other borrowed funds, and the impact of economic downturns on loan demand, collateral
values, and creditworthiness of existing borrowers. The financial services industry is highly competitive and heavily regulated.
The Company’s success depends on its ability to compete aggressively within its markets while maintaining sufficient asset
quality and cost controls to generate net income.
The information that follows is provided to enhance comparability of financial information between periods and to
provide a better understanding of the Company’s operations.
Significant 2024 Events and Recent Developments
During 2024, our results reflected improved financial performance resulting from various strategic accomplishments
and continued success in business development. We continued to generate quality loans, increase our core customer deposits,
reduce our debt and attract fee business, while maintaining strong liquidity and capital. We experienced strong revenue growth
coupled with lower operating expenses, resulting in enhanced operating efficiency, while continuing to improve our net interest
margin and reflect stable credit quality results. Also during 2024, the Company repurchased 1,237,021 shares of our common
stock. We believe these results positively position our Company for continued and future success.
Effective May 17, 2024, the Company completed the sale of Cadence Business Solutions, LLC, its payroll processing
business, resulting in a net gain on sale of approximately $12.0 million. The gain on sale was included in Other noninterest
revenue within the accompanying consolidated statements of income.
In November 2024, Cadence Bank became a member bank of the Federal Reserve Board. As a result of this, the
Company’s primary federal regulator is now the Federal Reserve Bank of St. Louis.
On January 22, 2025, the Company announced it entered into a definitive merger agreement with FCB Financial Corp.,
the bank holding company for First Chatham Bank, a Savannah, Georgia-based community bank. The merger has been
unanimously approved by the boards of directors of both companies. Pending regulatory approval, the approval of FCB
Financial Corp. shareholders, and the satisfaction of other customary closing conditions, it is anticipated to close during the
third quarter of 2025.
51
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
In addition to financial ratios based on measures defined by GAAP, the Company has identified “total tangible
shareholders’ equity,” “tangible common shareholders’ equity,” “total tangible common shareholders’ equity (excluding
AOCI),” “total tangible assets,” “total tangible assets (excluding AOCI),” “tangible shareholders’ equity to tangible assets,”
“tangible common shareholders’ equity to tangible assets,” “tangible common shareholders’ equity to tangible assets (excluding
AOCI),” “tangible common book value per share,” and “tangible book value per common share (excluding AOCI)” as non-
GAAP financial measures used when evaluating the performance of the Company.
•
Total tangible shareholders’ equity is defined by the Company as total shareholders’ equity less goodwill and other
intangible assets, net.
•
Total tangible common shareholders' equity is defined by the Company as total shareholders' equity less preferred
stock, goodwill, and other intangible assets, net.
•
Total tangible common shareholders' equity, excluding AOCI, is defined by the Company as total shareholders' equity
less preferred stock, goodwill, other intangible assets, net, and AOCI.
•
Total tangible assets are defined by the Company as total assets less goodwill and other intangible assets, net.
•
Total tangible assets, excluding AOCI, are defined by the Company as total assets less goodwill, other intangible
assets, net, and AOCI.
•
Tangible common book value per share is defined by the Company as tangible common shareholders’ equity divided
by total shares of common stock outstanding.
•
Tangible book value per common share, excluding AOCI, is defined by the Company as tangible common
shareholders' equity less AOCI divided by total shares of common stock outstanding.
Management believes the ratios of tangible shareholders’ equity to tangible assets, tangible common shareholders’
equity to tangible assets and tangible common shareholders’ equity to tangible assets (excluding AOCI) to be important to
investors who are interested in evaluating the adequacy of the Company’s capital levels. Management also believes that
tangible common book value per share and tangible common book value per share (excluding AOCI) are important to investors
who are interested in changes from period to period in book value per share exclusive of changes in intangible assets.
52
The following table reconciles these non-GAAP financial measures as presented above to GAAP financial measures as
reflected in the Company’s consolidated financial statements for the periods indicated:
TABLE 1—NON-GAAP FINANCIAL MEASURES
Year Ended December 31,
(Dollars in thousands, except per share amounts)
2024
2023
2022
Total tangible assets, excluding AOCI
Total assets
$
47,019,190
$
48,934,510
$
48,653,414
Less: Goodwill
1,366,923
1,367,785
1,367,785
Other intangible assets, net
83,190
100,191
119,579
Total tangible assets
$
45,569,077
$
47,466,534
$
47,166,050
Less: AOCI
(694,495)
(761,829)
(1,222,538)
Total tangible assets, excluding AOCI
$
46,263,572
$
48,228,363
$
48,388,588
Total tangible common shareholders' equity, excluding AOCI
Total shareholders' equity
$
5,569,683
$
5,167,843
$
4,311,374
Less: Goodwill
1,366,923
1,367,785
1,367,785
Other intangible assets, net
83,190
100,191
119,579
Total tangible shareholders' equity
$
4,119,570
$
3,699,867
$
2,824,010
Less: Preferred stock
166,993
166,993
166,993
Total tangible common shareholders' equity
$
3,952,577
$
3,532,874
$
2,657,017
Less: AOCI
(694,495)
(761,829)
(1,222,538)
Total tangible common shareholders' equity, excluding AOCI
$
4,647,072
$
4,294,703
$
3,879,555
Total common shares outstanding
183,527,575
182,871,775
182,437,265
Tangible shareholders' equity to tangible assets
9.04 %
7.79 %
5.99 %
Tangible common shareholders' equity to tangible assets
8.67 %
7.44 %
5.63 %
Tangible common shareholders' equity, excluding AOCI, to tangible
assets, excluding AOCI
10.04 %
8.90 %
8.02 %
Tangible common book value per share
$
21.54
$
19.32
$
14.56
Tangible book value per common share, excluding AOCI
$
25.32
$
23.48
$
21.27
53
FINANCIAL HIGHLIGHTS
The following table presents financial highlights for the periods indicated:
TABLE 2—FINANCIAL HIGHLIGHTS
As of and For the Year Ended December 31,
2024
2023
2022
Common share data:
Basic earnings (loss) per share from continuing operations
$
2.81
$
(0.03)
$
2.39
Basic earnings per share
2.81
2.92
2.47
Diluted earnings (loss) per share from continuing operations
2.77
(0.03)
2.37
Diluted earnings per share
2.77
2.92
2.46
Cash dividends per share
1.00
0.94
0.88
Book value per share
29.44
27.35
22.72
Tangible common book value per share (1)
21.54
19.32
14.56
Tangible book value per common share, excluding AOCI (1)
25.32
23.48
21.27
Dividend payout ratio from continuing operations
36.10 %
NM
37.13 %
Financial Ratios:
Return on average assets from continuing operations
1.09 %
0.01 %
0.94 %
Return on average assets
1.09
1.11
0.97
Return on average shareholders' equity from continuing operations
9.78
0.08
9.78
Return on average shareholders' equity
9.78
12.08
10.13
Return on average common shareholders' equity from continuing operations
9.91
(0.13)
9.93
Return on average common shareholders' equity
9.91
12.33
10.30
Total shareholders' equity to total assets
11.85
10.56
8.86
Total common shareholders' equity to total assets
11.49
10.22
8.52
Tangible common shareholders' equity to tangible assets (1)
8.67
7.44
5.63
Tangible common shareholders' equity, excluding AOCI, to tangible assets,
excluding AOCI (1)
10.04
8.90
8.02
Net interest margin-FTE
3.30
3.08
3.15
Credit Quality Ratios:
Net charge-offs to average loans and leases
0.24 %
0.23 %
— %
Provision for credit losses to average loans and leases
0.21
0.25
0.02
ACL to net loans and leases
1.37
1.44
1.45
ACL to NPL
174.09
216.54
410.22
ACL to NPA
170.38
210.46
386.04
NPL to net loans and leases
0.78
0.67
0.35
NPA to total assets
0.58
0.45
0.23
Capital Adequacy Ratios:
Common Equity Tier 1 capital
12.35 %
11.62 %
10.22 %
Tier 1 capital
12.79
12.06
10.66
Total capital
13.97
14.32
12.81
Tier 1 leverage capital
10.41
9.30
8.43
(1)
Non-GAAP financial measure. See “Non-GAAP Financial Measures and Reconciliations.”
As of December 31, 2024, the target range for the federal funds rate was 4.25% to 4.50%. In the fourth quarter of 2024,
the Federal Reserve lowered interest rates by 100 basis points, easing monetary policy for the first time in four years. There could
potentially be more rate cuts in 2025, however, the Federal Reserve continues to monitor relevant economic data and economic
54
policy changes. The prior years’ increases in interest rates has had a pronounced effect on both our balance sheet as well as our
earnings. As seen in the following sections, the increase in net interest revenue for 2024 compared to 2023 and 2023 compared to
2022 resulted from a combination of higher yields on interest-earning assets and a shift in the mix of interest-earning assets. The
increase was partially offset by an increase in interest expense, primarily on deposits due to both a mix shift out of noninterest
bearing and into interest bearing, and an increase in deposit rates. See “Net Interest Revenue” for further information.
The Company reported net income available to common shareholders of $514.1 million in 2024, compared to $532.8
million in 2023. Key factors contributing to the $18.7 million decrease in net income available to common shareholders included
(1) the $706.6 million gain, included in discontinued operations in 2023, on the sale of Cadence Insurance; mostly offset by (2) the
increase in noninterest revenue primarily due to the $435.6 million loss on sale of securities in 2023 as a result of our securities
portfolio restructuring during that period; and (3) the decrease in noninterest expense from $1.2 billion in 2023 to $1.0 billion in
2024 as a result of lower deposit insurance, personnel costs and merger costs. Net interest revenue increased slightly, remaining at
$1.4 billion in 2024 and 2023. The Company recorded a provision for credit losses of $71.0 million and $80.0 million for 2024 and
2023, respectively.
Net income available to common shareholders was $532.8 million in 2023, compared to $453.7 million in 2022. The
primary factor contributing to the $79.1 million increase in net income available to common shareholders in 2023 was the $706.6
million gain on the sale of Cadence Insurance, included in discontinued operations. The gain in discontinued operations was
partially offset by the $458.8 million decrease in noninterest revenue in 2023 primarily due to the $435.6 million loss on sale of
securities as a result of our securities portfolio restructuring during that period. Also contributing to the decline was an increase in
noninterest expense from $1.1 billion in 2022 to $1.2 billion in 2023 due to deposit insurance assessments related to the FDIC
special assessment. Net interest revenue remained flat at $1.4 billion for 2023 and 2022. The Company recorded a provision for
credit losses of $80.0 million and $7.0 million for 2023 and 2022, respectively.
Net interest revenue for 2024 increased $84.9 million, or 6.3% to $1.4 billion compared to 2023. The increase was
primarily related to increased interest rates which resulted in an increase on yields earned on interest-earning assets coupled with
growth in average balances in the loan and lease portfolio and other investments. This increase was partially offset by the increase
in interest expense due to increased market interest rates paid on average interest bearing liabilities for deposits, as well as a mix
shift from noninterest bearing deposits into interest bearing. With the increase in rates paid on average interest bearing liabilities,
interest expense increased $152.3 million, or 15.9%, in 2024 compared to 2023. See Table 4 below for more information on yield/
rate analysis.
Net interest revenue for 2023 and 2022 remained relatively flat at $1.4 billion. In 2023, interest revenue increased due to
increased interest rates which resulted in an increase on yields earned on interest-earning assets coupled with growth in average
balances in the loan and lease portfolio. The increase in interest revenue was mostly offset by the increase in interest expense due
to increased market interest rates paid on average interest bearing liabilities for deposits and short-term borrowings, as well as a
mix shift from noninterest bearing deposits into interest bearing. Average interest-bearing liabilities increased to $32.7 billion in
2023 from $28.5 billion in 2022. As a result of the increase in average interest-bearing liabilities coupled with the increase in rates
paid on average interest bearing liabilities, interest expense increased $749.5 million, or 358.1%, in 2023, compared to 2022. See
Table 4 below for more information on yield/rate analysis.
The Company attempts to diversify its revenue streams with noninterest revenue received from wealth management
activities, mortgage banking operations, and other activities that generate fee income. Noninterest revenue for 2024 was $356.5
million, compared to negative $116.3 million for 2023. The primary contributor to the increase in noninterest revenue was a
decrease in security net losses of $432.7 million as a result of securities portfolio restructuring in 2023. Other factors contributing
to the increase included increases in deposit service charges of $11.8 million, wealth management revenue of $8.0 million, and
other noninterest revenue of $21.6 million, primarily due to the gain on sale of Cadence Business Solutions, LLC. These increases
were partially offset by a $1.7 million decrease in mortgage banking revenue. Excluding security net losses, noninterest revenue for
2024, was $359.5 million, an increase of $40.2 million, or 12.6%, from $319.3 million in 2023. See “Noninterest Revenue” below
for more information.
Noninterest revenue for 2023 was negative $116.3 million, compared to $342.5 million for 2022. The primary
contributors to the decrease in noninterest revenue from 2022 to 2023 were increased security losses of $435.3 million as a result
of our securities portfolio restructuring in 2023 and a decrease in mortgage banking revenue of $25.9 million driven by the rate
environment. These decreases were partially offset by a $16.0 million increase in other noninterest revenue across various smaller
fee revenue sources. Excluding security gains and losses, noninterest revenue for 2023, was $319.3 million, a decrease of $23.6
million or 6.9% from $342.9 million compared to 2022. See “Noninterest Revenue” below for more information.
55
Noninterest expense in 2024 decreased 9.6% to $1.0 billion from $1.2 billion in 2023. The decrease in noninterest
expense in 2024 compared to 2023 was primarily a result of decreases in salaries and employee benefits, other noninterest expense,
deposit insurance assessments, pension settlement expense and merger expense, partially offset by increases in occupancy and
equipment and data processing and software. Deposit insurance assessments decreased $32.3 million, or 44.7%, in 2024 compared
to 2023, primarily due to the FDIC special assessment recorded in 2023. In 2024, salaries and employee benefits decreased $25.4
million, or 4.0%, compared to 2023 primarily due to an increase in deferred salaries from increased loan production in 2024 and
certain contractual one-time compensation payments made in 2023. Decreases in other noninterest expense for 2024 compared to
2023 included decreases in legal, operational losses and various other miscellaneous expenses. See “Noninterest Expense” below
for more information.
Noninterest expense in 2023 increased 4.2% to $1.2 billion from $1.1 billion for 2022. The increase in noninterest
expense in 2023 compared to 2022 was primarily a result of increases in deposit insurance assessments related to the FDIC special
assessment and other noninterest expense, partially offset by decreases in merger expense. In 2023, salaries and employee benefits
remained relatively flat compared to 2022. See “Noninterest Expense” below for more information.
56
RESULTS OF OPERATIONS
The following is a summary of our results of operations for the periods indicated:
TABLE 3—SUMMARY OF RESULTS OF OPERATIONS
Year Ended December 31,
(Dollars in thousands)
2024
2023
2022
Earnings Summary:
Interest revenue
$
2,547,357 $
2,310,167 $
1,560,581
Interest expense
1,111,142
958,811
209,290
Net interest revenue
1,436,215
1,351,356
1,351,291
Provision for credit losses
71,000
80,000
7,000
Net interest revenue, after provision for credit losses
1,365,215
1,271,356
1,344,291
Noninterest revenue
356,510
(116,343)
342,485
Noninterest expense
1,045,528
1,155,923
1,109,754
Income (Loss) from continuing operations, before income taxes
676,197
(910)
577,022
Income tax expense (benefit)
152,593
(4,594)
129,705
Income from continuing operations
523,604
3,684
447,317
Income from discontinued operations, before income taxes
—
727,591
22,353
Income tax expense from discontinued operations
—
188,971
6,433
Income from discontinued operations, net of income taxes
—
538,620
15,920
Net income
523,604
542,304
463,237
Less: preferred dividends
9,488
9,488
9,488
Net income available to common shareholders
$
514,116 $
532,816 $
453,749
Net Interest Revenue
Net interest revenue is the difference between interest revenue earned on assets, such as loans, leases and securities,
and interest expense paid on liabilities, such as deposits and borrowings, and continues to provide the Company with its
principal source of revenue. Net interest revenue is affected by the general level of interest rates, changes in interest rates and
changes in the amount and composition of interest earning assets and interest bearing liabilities. One of the Company’s long-
term objectives is to manage interest earning assets and interest bearing liabilities to maximize net interest revenue, while
balancing interest rate, credit and liquidity risk. Net interest margin is determined by dividing FTE net interest revenue by
average earning assets. For purposes of the following discussion, revenue from tax-exempt loans and investment securities have
been adjusted to an FTE basis, using an effective tax rate of 21% for the years ended December 31, 2024, 2023, and 2022.
57
The following table presents average interest earning assets, average interest bearing liabilities, net interest revenue-
FTE, net interest margin-FTE and net interest rate spread for each of the periods presented:
TABLE 4—CONSOLIDATED AVERAGE BALANCES AND YIELD/RATE ANALYSIS
2024
2023
2022
(Dollars in thousands)
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
Average
Balance
Interest
Yield/
Rate
ASSETS
Loans and leases (net of unearned
income) (1)(2)
$ 33,107,659
$ 2,166,565
6.54 % $ 31,913,925
$ 2,006,549
6.29 % $ 28,418,658
$ 1,344,195
4.73 %
Loans held for sale, at fair value
111,156
6,161
5.54
85,961
4,450
5.18
122,079
7,554
6.19
Available for sale securities, at fair
value:
Taxable
7,881,989
243,466
3.09
9,971,325
208,122
2.09
13,163,403
183,915
1.40
Tax-exempt (3)
80,880
3,289
4.07
351,010
11,653
3.32
432,969
12,758
2.95
Other investments
2,450,623
130,499
5.33
1,629,036
83,577
5.13
923,861
16,371
1.77
Total interest earning assets and
revenue
43,632,307
2,549,980
5.84 % 43,951,257
2,314,351
5.27 % 43,060,970
1,564,793
3.63 %
Other assets
4,812,184
5,204,505
4,911,883
Allowance for credit losses
471,212
451,809
439,696
Total
$ 47,973,279
$ 48,703,953
$ 47,533,157
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Interest bearing demand and money
market
$ 18,739,210
$ 573,826
3.06 % $ 18,314,649
$ 472,723
2.58 % $ 18,541,402
109,893
0.59 %
Savings
2,626,539
14,922
0.57
3,028,875
14,955
0.49
3,657,718
5,519
0.15
Time
8,330,176
368,572
4.42
6,674,231
246,476
3.69
3,545,402
24,253
0.68
Fed funds purchased, securities
sold
under
agreement
to
repurchase and other
86,171
4,131
4.79
800,170
32,590
4.07
923,973
13,432
1.45
Short-term FHLB borrowings
—
—
—
1,389,759
68,235
4.91
1,325,381
36,863
2.78
Short-term BTFP borrowings
2,845,902
136,404
4.79
2,052,055
104,696
5.10
—
—
—
Subordinated and long-term
borrowings
306,396
13,287
4.34
452,645
19,136
4.23
465,004
19,330
4.16
Total interest bearing liabilities
and expense
32,934,394
1,111,142
3.37 % 32,712,384
958,811
2.93 % 28,458,880
209,290
0.74 %
Demand deposits - noninterest
bearing
8,780,004
10,610,698
13,733,384
Other liabilities
905,176
893,438
766,490
Total liabilities
42,619,574
44,216,520
42,958,754
Shareholders' equity
5,353,705
4,487,433
4,574,403
Total
$ 47,973,279
$ 48,703,953
$ 47,533,157
Net interest revenue-FTE
$ 1,438,838
$ 1,355,540
$ 1,355,503
Net interest margin-FTE
3.30 %
3.08 %
3.15 %
Net interest rate spread
2.47 %
2.33 %
2.90 %
Interest bearing liabilities to
interest earning assets
75.48 %
74.43 %
66.09 %
(1)
Includes taxable equivalent adjustment to interest of $1.9 million, $1.7 million and $1.5 million in 2024, 2023 and 2022, respectively, using an effective
tax rate of 21% for all periods presented.
(2)
Nonaccrual loans are included in loans and leases (net of unearned income). Nonaccrual loans were $264.7 million, $216.1 million and $98.7 million in
2024, 2023 and 2022, respectively.
(3)
Includes taxable equivalent adjustment to interest of $0.7 million, $2.4 million and $2.7 million in 2024, 2023 and 2022, respectively, using an effective
tax rate of 21% for all periods presented.
Net interest revenue-FTE increased 6.1% to $1.4 billion in 2024 compared to 2023. The increase in net interest
revenue-FTE was primarily due to increased interest rates on loans, investment securities and other investments and the shift in
average balances of investment securities to loans, which resulted in an increase on yields earned on interest-earning assets.
58
This increase was offset by the increase in interest expense due to increased rates paid on average interest bearing deposits and
a shift out of noninterest bearing deposits into time deposits. Average loans increased from 72.6% of average interest earning
assets in 2023 to 75.9% in 2024.
Net interest revenue-FTE was flat at $1.4 billion in each of 2023 and 2022. The increase in interest revenue-FTE
during 2023 was due to the increased interest rates which resulted in an increase on yields earned on interest-earning assets
coupled with growth in average balances in the loan and lease portfolio. This increase was offset by the increased rates paid on
average interest bearing liabilities for deposits and short-term borrowings, which also increased due to the rise in market interest
rates. Average loans increased from 66.0% of average interest-earning assets in 2022 to 72.6% in 2023.
Interest revenue-FTE increased 10.2% to $2.5 billion in 2024, from $2.3 billion in 2023. The increase in interest
revenue-FTE for 2024 was primarily a result of the increase in yields earned on loans due to the increase in market rates over
the prior year, as well as the securities portfolio repositioning in late 2023 and improved earning asset mix from continued
deployment of cash. Additionally, interest revenue-FTE included $11.9 million and $25.9 million in accretion related to the
purchase discounts on acquired loans in 2024 and 2023, respectively.
Interest revenue-FTE increased 47.9% to $2.3 billion in 2023 from $1.6 billion in 2022. The increase in interest
revenue-FTE for 2023 compared to 2022 was primarily a result of the increase in yields earned on interest-earning assets over
the prior year due to the impact of rising interest rates on loan portfolio repricing activity and new loan production, as well as a
mix shift as the Company deployed cash flow from lower yielding securities into higher yielding loans and available for sale
securities. Additionally, interest revenue-FTE included $25.9 million and $46.8 million in accretion related to the purchase
discounts on acquired loans in 2023 and 2022, respectively.
Interest expense increased 15.9% to $1.1 billion in 2024, compared to $958.8 million in 2023. The increase in interest
expense for 2024 was primarily a result of the overall rates paid on average interest-bearing deposits increasing 60 basis points
for 2024, compared to 2023, which was in response to increased interest rates, combined with customer migration from
noninterest bearing deposits into time deposits.
Interest expense increased 358.1% to $958.8 million in 2023 from $209.3 million in 2022. The increase in interest
expense for 2023 compared to 2022 was primarily a result of the overall rates paid on average interest-bearing liabilities
increasing 219 basis points for 2023, compared to 2022 in response to rising interest rates and deposit competition combined
with a mix shift out of noninterest bearing deposits into time deposits.
Net interest margin-FTE for 2024 was 3.30%, an increase of 22 basis points, from 3.08% for 2023, which represented
a decrease of 7 basis points from 3.15% in 2022. Net interest revenue-FTE may also be analyzed by segregating the yield/rate
and volume components of interest revenue and interest expense. The table below presents the components of our net interest
revenue-FTE with the effect that the varying levels of interest-earning assets and interest-bearing liabilities and the applicable
rates have had on changes in net interest revenue from 2023 to 2024 and from 2022 to 2023. The changes in net interest
revenue-FTE due to both rate and volume have been allocated to volume and rate changes in proportion to the relationship of
the absolute dollar amounts of the changes in each.
59
TABLE 5—RATE/VOLUME ANALYSIS
2024 vs 2023
Net Interest Revenue
Increase
(In thousands)
2024
2023
(Decrease)
Volume
Rate
INTEREST REVENUE
Loans and leases, net of unearned income
$
2,166,565 $
2,006,549 $
160,016 $
76,519 $
83,497
Loans held for sale
6,161
4,450
1,711
1,379 $
332
Available for sale securities:
Taxable
243,466
208,122
35,344
(49,969)
85,313
Non-taxable
3,289
11,653
(8,364)
(10,529)
2,165
Other
130,499
83,577
46,922
43,639
3,283
Total interest revenue-FTE
2,549,980
2,314,351
235,629
61,039
174,590
INTEREST EXPENSE
Demand deposits - interest bearing
573,826
472,723
101,103
11,184
89,919
Savings deposits
14,922
14,955
(33)
(2,127)
2,094
Time deposits
368,572
246,476
122,096
67,889
54,207
Fed funds purchased, securities sold under agreement
to repurchase and other
4,131
32,590
(28,459)
(33,376)
4,917
Short-term FHLB borrowings
—
68,235
(68,235)
(34,117)
(34,118)
Short-term BTFP borrowings
136,404
104,696
31,708
38,381
(6,673)
Subordinated and long-term debt
13,287
19,136
(5,849)
(6,330)
481
Total interest expense
1,111,142
958,811
152,331
41,504
110,827
Net interest revenue-FTE
$
1,438,838 $
1,355,540 $
83,298 $
19,535 $
63,763
2023 vs 2022
Net Interest Revenue
Increase
(In thousands)
2023
2022
(Decrease)
Volume
Rate
INTEREST REVENUE
Loans and leases, net of unearned income
$
2,006,549 $
1,344,195 $
662,354 $
180,129 $
482,225
Loans held for sale
4,450
7,554
(3,104)
(2,000) $
(1,104)
Available for sale securities:
Taxable
208,122
183,915
24,207
(51,852)
76,059
Non-taxable
11,653
12,758
(1,105)
(2,598)
1,493
Other
83,577
16,371
67,206
19,295
47,911
Total interest revenue-FTE
2,314,351
1,564,793
749,558
142,974
606,584
INTEREST EXPENSE
Demand deposits - interest bearing
472,723
109,893
362,830
(1,360)
364,190
Savings deposits
14,955
5,519
9,436
(1,100)
10,536
Time deposits
246,476
24,253
222,223
37,135
185,088
Fed funds purchased, securities sold under agreement
to repurchase and other
32,590
13,432
19,158
(2,024)
21,182
Short-term FHLB borrowings
68,235
36,863
31,372
1,872
29,500
Short-term BTFP borrowings
104,696
—
104,696
104,696
—
Subordinated and long-term debt
19,136
19,330
(194)
(519)
325
Total interest expense
958,811
209,290
749,521
138,700
610,821
Net interest revenue-FTE
$
1,355,540 $
1,355,503 $
37 $
4,274 $
(4,237)
60
Provision for Credit Losses and Allowance for Credit Losses (“ACL”)
An analysis of the ACL for loans for the periods indicated is provided in the following table:
TABLE 6—ACL
Year Ended December 31,
(In thousands)
2024
2023
2022
Balance, beginning of period
$
468,034 $
440,347 $
446,415
Charge-offs:
Commercial and industrial
Non-real estate
(76,694)
(72,401)
(17,874)
Owner occupied
(379)
(394)
(824)
Total commercial and industrial
(77,073)
(72,795)
(18,698)
Commercial real estate
Construction, acquisition and development
(779)
(808)
(298)
Income producing
(2,503)
(4,527)
(1,832)
Total commercial real estate
(3,282)
(5,335)
(2,130)
Consumer
Residential mortgages
(3,161)
(2,264)
(1,430)
Other consumer
(6,888)
(6,678)
(7,606)
Total consumer
(10,049)
(8,942)
(9,036)
Total charge-offs
(90,404)
(87,072)
(29,864)
Recoveries:
Commercial and industrial
Non-real estate
8,004
7,541
14,165
Owner occupied
511
1,582
2,292
Total commercial and industrial
8,515
9,123
16,457
Commercial real estate
Construction, acquisition and development
418
622
4,352
Income producing
447
1,071
3,521
Total commercial real estate
865
1,693
7,873
Consumer
Residential mortgages
1,234
2,000
3,017
Other consumer
1,549
1,688
2,566
Total consumer
2,783
3,688
5,583
Total recoveries
12,163
14,504
29,913
Net (charge-offs) recoveries
(78,241)
(72,568)
49
Initial allowance on PCD loans
—
—
(8,117)
Adoption of new ASU related to modified loans (1)
—
255
—
Provision:
Provision for credit losses related to loans and leases (2)
71,000
100,000
2,000
Balance, end of period
$
460,793 $
468,034 $
440,347
Loans and leases, net of unearned income - average
$
33,107,659 $
31,913,925 $
28,418,658
Loans and leases, net of unearned income - period end
$
33,741,755 $
32,497,022 $
30,349,277
(1) Cadence adopted the new accounting guidance effective January 1, 2023, which eliminates the TDR recognition and measurement
guidance via the modified retrospective transition method (ASU 2022-02).
(2) Provision (reversal) for unfunded commitments was zero, $(20.0) million and $5.0 million in 2024, 2023 and 2022, respectively.
61
TABLE 7—ACL RELATED RATIOS
Year Ended December 31,
2024
2023
2022
RATIOS
Provision for credit losses to average loans and leases, net of
unearned income
0.21 %
0.25 %
0.02 %
ACL to loans and leases, net of unearned income
1.37
1.44
1.45
Nonperforming loans to loans and leases, net of unearned income
0.78
0.67
0.35
ACL to nonperforming loans
174.09
216.54
410.22
Net charge-offs (recoveries) to average loans and leases:
Commercial and industrial
Non-real estate
0.21 %
0.20 %
0.01 %
Total commercial and industrial
0.21
0.20
0.01
Commercial real estate
Construction, acquisition and development
—
—
(0.01)
Income producing
0.01
0.01
(0.01)
Total commercial real estate
0.01
0.01
(0.02)
Consumer
Residential mortgages
—
—
(0.01)
Other consumer
0.02
0.02
0.02
Total consumer
0.02
0.02
0.01
Total
0.24 %
0.23 %
— %
For the years ended December 31, 2024, 2023, and 2022, net charge-offs totaled $78.2 million, compared to net
charge-offs of $72.6 million and net recoveries of $49 thousand, respectively. As a percentage of average loans and leases, net
charge-offs totaled 0.24% in 2024 compared to 0.23% in 2023. For 2022, net recoveries as a percentage of average loans and
leases were insignificant. Net charge-offs in 2024 were primarily in the commercial and industrial non-real estate loan segment
and centered in Corporate Banking due to a few larger credits. Net charge-offs in 2023 were also primarily in the commercial
and industrial non-real estate loan segment. In 2022, net recoveries were primarily in the commercial real estate segment and
residential mortgages class offset somewhat by net charge-offs in the other consumer class.
The Company recorded $71.0 million in provision for credit losses ($71.0 million for loans and zero for unfunded
commitments) during 2024, compared to $80.0 million ($100.0 million for loans and $(20.0) million for unfunded
commitments) for 2023 and $7.0 million ($2.0 million for loans and $5.0 million for unfunded commitments) during 2022.
The 2024 provision for credit losses is primarily attributable to loan portfolio growth combined with the resolution of a
small number of larger problem credits heavily weighted to the Corporate Banking segment of the bank. The 2023 provision for
credit losses is primarily attributable to increases in the ACL allocated to the commercial and industrial segment due to higher
specific reserves combined with credit migration within the commercial and industrial and consumer segments. The $7.0
million of provision for credit losses recorded during 2022 was related to the provision for unfunded commitments of $5.0
million and $2.0 million for provision related to loans and leases.
The ACL decreased $7.2 million to $460.8 million at December 31, 2024, from $468.0 million at December 31, 2023.
This decrease was primarily seen in the commercial and industrial loan segment due to resolutions on some larger problem
credits occurring during the year. The ACL to nonperforming loans decreased to 174.09% at December 31, 2024, from
216.54% at December 31, 2023. For more information about the Company’s classified, nonperforming, purchased credit
deteriorated, and impaired loans, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Financial Condition – Loans and Leases” in Part II of this Report.
62
The breakdown of the ACL by loan and lease segment and class is based, in part, on evaluations of specific loan and
lease histories and the impact of forecasted economic conditions on the portfolio segments. Accordingly, because these
conditions are subject to change, the allocation is not necessarily indicative of the breakdown of any future allowance for credit
losses. Several economic forecasts from external sources are used in the estimation and allocation of the ACL. The forecasts
cover an eight-quarter forecast horizon to establish a forecast range and are based on upside, downside, and base case scenarios.
A blended scenario is selected by management to reflect the probable economic conditions within the range. As of
December 31, 2024, the forecast was weighted more heavily to a base forecast compared to a more balanced forecast weighting
between the base and downside scenarios as of December 31, 2023. This was a result of management’s view of the risk of
heightened inflation and a recession easing over time.
The Company recognizes that higher interest rates, inflation, and slower economic growth may have short-term, long-
term, and regional impacts to the economy. In addition, qualitative factors such as changes in economic conditions,
concentrations of risk, and changes in portfolio risk resulting from regulatory changes are considered in determining the
adequacy of the level of the ACL (see Notes 1 and 5 to the consolidated financial statements).
TABLE 8—ACL BY SEGMENT AND CLASS
December 31, 2024
December 31, 2023
(Dollars in thousands)
ACL
% of Loans in
Each Category
to Total Loans
ACL
% of Loans in
Each Category
to Total Loans
Commercial and industrial
Non-real estate
$
183,743
25.7 % $
194,577
27.5 %
Owner occupied
35,177
13.8
31,445
13.4
Total commercial and industrial
218,920
39.5
226,022
40.9
Commercial real estate
Construction, acquisition and development
44,703
11.6
42,118
12.0
Income producing
64,957
17.8
69,209
17.7
Total commercial real estate
109,660
29.4
111,327
29.7
Consumer
Residential mortgages
125,464
30.4
124,851
28.7
Other consumer
6,749
0.7
5,834
0.7
Total consumer
132,213
31.1
130,685
29.4
Total
$
460,793
100.0 % $
468,034
100.0 %
63
Noninterest Revenue
The components of noninterest revenue from continuing operations for the years ended December 31, 2024, 2023, and
2022, and the percentage change between the periods are shown in the following table:
TABLE 9—NONINTEREST REVENUE
2024
2023
2022
(Dollars in thousands)
Amount
% Change
Amount
% Change
Amount
Trust and asset management income (1)
$
48,507
14.1%
$
42,513
11.3%
$
38,198
Investment advisory fees (1)
33,660
7.2
31,403
9.9
28,580
Brokerage and annuity fees (1)
12,755
(2.0)
13,012
(5.1)
13,708
Deposit service charges
73,497
19.1
61,718
(16.0)
73,478
Credit card, debit card and merchant fees
50,245
0.9
49,784
(14.4)
58,160
Mortgage banking, excluding MSR and MSR hedge market
value adjustment
33,455
(0.9)
33,763
(7.3)
36,434
MSR and MSR hedge market value adjustment
(16,152)
(9.2)
(14,785)
(275.5)
8,426
Securities losses, net
(2,962)
99.3
(435,652)
NM
(384)
Bank-owned life insurance
17,716
8.7
16,294
4.5
15,594
Credit related fees
27,352
1.9
26,830
0.2
26,768
SBA income
12,083
22.8
9,839
(35.9)
15,341
Other miscellaneous income
66,354
35.6
48,938
73.6
28,182
Total noninterest revenue
$ 356,510
406.4%
$ (116,343)
(134.0)%
$
342,485
(1) Included in wealth management revenue on the consolidated statements of income.
NM - not meaningful.
Noninterest revenue for the year ended December 31, 2024 was $356.5 million, an increase of $472.9 million, or
406.4%, from 2023. Trust and asset management income increased $6.0 million for 2024 compared to 2023. The increase was
primarily associated with increased fees and new business. Deposit service charges increased $11.8 million for 2024 compared
to 2023. The increase was primarily attributable to increases in account analysis charges and in NSF and overdraft charges. Net
securities losses decreased $432.7 million for 2024 compared to 2023. The decrease was primarily driven by securities portfolio
restructurings that were executed as a part of a balance sheet optimization initiatives during the 2023, including the sale in early
2023 of $1.5 billion in U.S. Treasury available for sale securities generating a realized loss of $51.3 million, and the fourth
quarter of 2023 sale of available for sale securities totaling approximately $3.1 billion in par value for a realized loss of
approximately $384.5 million. There were $2.9 million in security losses recognized during 2024. Other miscellaneous income
includes payroll processing revenue, foreign exchange revenue, wire transfer fees, and other miscellaneous items. Other
miscellaneous income increased $17.4 million for 2024 compared to 2023. The increase includes the $12.0 million net gain
recognized from the sale of business, $4.7 million net gain on the extinguishment of debt, and a decrease in tax credit
investment amortization, offset by a decrease in dividend income during 2024.
Noninterest revenue for the year ended December 31, 2023 was, negative $116.3 million, a decrease of $458.8 million,
or 134.0%, from 2022. Credit card, debit card and merchant fees decreased $8.4 million for 2023 compared to 2022. The
decrease in 2023 is primarily driven by a decrease in vendor incentive revenue and a decrease in card interchange fees due to
lower volume. Deposit service charge revenue decreased $11.8 million for 2023 compared to 2022. The decline is primarily
attributable to an $8 million adjustment to deposit service charges, resulting from changes in deposit service charges. Net
securities losses increased $435.3 million for 2023 compared to 2022. The increase in 2023 was primarily driven by the
securities portfolio restructurings that were executed as a part of a balance sheet optimization initiative. During the first quarter
of 2023, approximately $1.5 billion in U.S. Treasury available for sale securities were sold generating a realized loss of
approximately $51.3 million. Additionally, in the fourth quarter of 2023, available for sale securities totaling approximately
$3.1 billion in par value were sold for a realized loss of approximately $384.5 million. Proceeds from the sales were redeployed
in accretive activities including reinvestment in higher-yielding securities, funding loans, and reducing higher cost brokered
deposits. Credit related fees increased $0.1 million for 2023 compared to 2022. The increase was primarily driven by volume
increases in agency fees, unused line of credit fees and letter of credit fees. Other miscellaneous income increased $20.8 million
for 2023 compared to 2022. The increase was primarily driven by increases in dividend income from FHLB stock, earnings
from limited partnerships, and advisory fees.
64
The Company’s revenue from mortgage banking typically fluctuates as mortgage interest rates change and is primarily
attributable to two activities - the origination and sale of new mortgage loans and the servicing of sold mortgage loans.
Origination revenue is comprised of gains or losses from the sale of mortgage loans held for sale, origination fees, underwriting
fees and other fees associated with the origination of mortgage loans. For the years ended December 31, 2024 and 2023,
mortgage loan held for sale origination volumes totaled $1.1 billion and $837.1 million, respectively, which produced
origination revenue of $9.6 million and $9.9 million, respectively. The decrease in mortgage origination revenue was the result
of lower margins on the mortgage loans held for sale that were sold during 2024 compared to 2023. During 2023, there was a
production shift resulting in more mortgage loans held for investment rather than those held for sale. During 2024, the focus
was shifted to a more even split between the two, which largely contributed to the higher volume of mortgage loans held for
sale originated and sold during 2024.
For the years ended December 31, 2023, and 2022, mortgage loan held for sale origination volumes totaled $837.1
million and $1.1 billion, respectively, which produced origination revenue of $9.9 million and $12.9 million, respectively. The
timing of increases in market interest rates caused decreases to the margins of loans sold and the volume of mortgage loans
originated and sold for the year ended December 31, 2023 compared to 2022. Interest rates during 2023 were higher than 2022
due to the increase in the federal funds target rate set by the Federal Reserve during the last part of 2022 and throughout 2023,
which largely contributed to the lower volumes of mortgages originated and sold.
Revenue from the mortgage servicing process includes fees from the actual servicing of mortgage loans. For the years
ended December 31, 2024, 2023, and 2022, revenue from the servicing of mortgage loans were $23.8 million, $23.9 million,
and $23.6 million respectively.
The Company services a class of residential mortgages that are first lien loans secured by a primary residence or
second home. The MSR, which are recognized as a separate asset on the date the corresponding mortgage loan is sold on a
servicing retained basis, is recorded at fair value as determined at each accounting period end. At December 31, 2024 and
December 31, 2023 the estimated fair value of the MSR was $114.6 million and $106.8 million, respectively.
The Company is susceptible to significant fluctuations in MSR fair value during changing interest rate environments.
The Company has an economic hedge in place on its MSR and uses various instruments (including but not limited to Treasury
options, SOFR and TBA futures and forwards) to mitigate the interest rate risk associated with the MSR. These hedging
instruments are reported at fair value, with adjustments included as part of mortgage banking revenue in the consolidated
statements of income. At December 31, 2024, 2023, and 2022, this economic hedge covered approximately 75.1%, 73.1%, and
47.9%, respectively, of the MSR value. Reflecting this sensitivity to interest rates, the fair value of the MSR, including the
hedge, experienced a decrease of $16.2 million during 2024, a decrease of $14.8 million during 2023, and an increase of $8.4
million during 2022.
The following table presents the Company’s mortgage banking operations for the periods indicated:
TABLE 10— MORTGAGE BANKING OPERATIONS
2024
2023
2022
(Dollars in thousands)
Amount
% Change
Amount
% Change
Amount
Production revenue:
Origination
$
9,617
(3.0) % $
9,910
(23.0) % $
12,869
Servicing
23,838
(0.1)
23,853
1.2
23,565
Total origination and servicing revenue
33,455
(0.9)
33,763
(7.3)
36,434
MSR and hedge market value adjustment
(16,152)
(9.2)
(14,785)
(275.5)
8,426
Total mortgage banking revenue
$
17,303
(8.8) % $
18,978
(57.7) % $
44,860
Origination of mortgage loans held for sale
$
1,140
36.2 % $
837
(23.8) % $
1,098
Mortgage loans serviced at quarter-end
$
8,043
4.4 % $
7,703
0.1 % $
7,693
65
Noninterest Expense
The components of noninterest expense from continuing operations for the years ended December 31, 2024, 2023, and
2022, and the percentage change between periods is shown in the following table:
TABLE 11—NONINTEREST EXPENSE
(Dollars in thousands)
Amount
% Change
Amount
% Change
Amount
Salaries and employee benefits
$ 609,307
(4.0) % $ 634,722
— % $
634,843
Occupancy and equipment
114,175
2.9
110,972
(3.0)
114,460
Data processing and software
121,884
1.2
120,443
8.4
111,107
Merger expense
—
(100.0)
5,192
(89.8)
50,845
Deposit insurance assessments
39,922
(44.7)
72,224
286.0
18,712
Pension settlement expense
—
(100.0)
11,826
31.1
9,023
Advertising and public relations
22,112
(21.5)
28,162
(31.4)
41,055
Foreclosed property expense
1,891
(24.0)
2,488
199.0
832
Telecommunications
5,857
1.4
5,775
(12.7)
6,617
Travel and entertainment
10,015
(9.0)
11,004
(3.5)
11,407
Amortization of intangibles
15,902
(18.0)
19,388
5.2
18,432
Professional, consulting and outsourcing
16,124
(18.9)
19,892
48.2
13,424
Legal
12,279
(38.9)
20,093
275.6
5,350
Postage and shipping
7,128
(15.6)
8,443
7.3
7,868
Other miscellaneous expense
68,932
(19.2)
85,299
29.7
65,779
Total noninterest expense
$ 1,045,528
(9.6) % $ 1,155,923
4.2 % $ 1,109,754
2024
2023
2022
Noninterest expense for the year ended December 31, 2024 was $1.0 billion, a decrease of $110.4 million, or (9.6)%,
from 2023. Occupancy and equipment increased $3.2 million for 2024 compared to 2023, primarily due to increases in building
maintenance and security related expenses. Data processing and software expense increased $1.4 million for 2024 compared to
2023, largely driven by increases in external data processing volume and mobile and online banking costs, offset by a decrease
in software maintenance costs. There were no merger expenses for 2024, compared to $5.2 million for 2023. Merger expenses
in 2023 primarily included compensation related expenses. Deposit insurance assessments decreased $32.3 million for 2024
compared to 2023, primarily due to the FDIC special assessment recorded in 2023. Professional, consulting and outsourcing
expenses decreased $3.8 million for 2024 compared to 2023, primarily due to decreases in outsourced services costs. Legal
expense decreased $7.8 million for 2024 compared to 2023, as a result of a decline in legal settlement costs. Other
miscellaneous expense decreased $16.4 million for 2024 compared to 2023, driven by decreases in operational losses ($6.1
million), pension costs ($3.6 million), loan related expenses ($3.2 million), and delivery related expenses ($2.1 million).
Noninterest expense for the year ended December 31, 2023, was $1.2 billion, an increase of $46.2 million, or 4.2%,
from 2022. Occupancy and equipment decreased $3.5 million for 2023 compared to 2022, primarily due to a decrease of $4.2
million in building rent expense and a decrease of $1.3 million in equipment maintenance expense offset by an increase of $1.3
million in building maintenance expense. Data processing and software expense increased $9.3 million for 2023 compared to
2022, driven by increases in vendor costs, increased technology initiatives, software maintenance costs, and card processing
expenses. Merger expense represents one-time expenses related to effecting the acquisition of another entity. Merger expenses
for 2023 totaled $5.2 million compared to $50.8 million in 2022. These expenses in 2023 primarily included compensation
related expenses. The expenses in 2022 primarily included costs related to the franchise-wide rebranding of the Company under
the Cadence Bank name, as well as employee retention, marketing, and technology related expenses. Deposit insurance
assessments increased $53.5 million for 2023 compared to 2022, primarily due to a $36.2 million FDIC special assessment
recorded in 2023, and to a lesser extent, increased short-term borrowings and brokered deposits in 2023. Advertising and public
relations expense decreased $12.9 million for 2023 compared to 2022, largely driven by incremental merger expenses related to
the Company’s rebranding across our footprint. Amortization of intangibles increased $1.0 million for 2023 compared to 2022,
primarily due to an adjustment to a core deposit intangible in 2023 resulting from a reassessment of the estimated remaining
lives assigned to certain core deposit intangible assets. Professional, consulting and outsourcing increased $6.5 million for 2023
66
compared to 2022, primarily due to increases in consulting expenses and other professional fees. Legal expense increased $14.7
million for 2023 compared to 2022, largely driven by accruals for the settlement of certain legal matters. Other miscellaneous
expense increased $19.5 million for 2023 compared to 2022, primarily driven by increased operational losses ($6.7 million),
pension costs ($5.9 million), transit and delivery related fees ($3.3 million), and loan related expenses ($3.7 million).
Salaries and employee benefits expense was the largest category of our noninterest expense. Salaries and employee
benefits decreased $25.4 million for 2024 compared to 2023. For 2023, salaries and employee benefits expense decreased $0.1
million compared to 2022. The decrease in 2024 was attributable to an increase in deferred salaries from increased mortgage
loan production in 2024 and certain contractual one-time compensation payments made in 2023. The decrease in 2023 was
primarily the result of a decrease in employee headcount resulting from the branch optimization project, partially offset by
increases in retail incentives due to the Customer Connect program.
The components of salary and employee benefits expense for the periods indicated and the percentage change between
years are shown in the following table:
TABLE 12—SALARIES AND EMPLOYEE BENEFITS EXPENSE
2024
2023
2022
(Dollars in thousands)
Amount
% Change
Amount
% Change
Amount
Regular salaries, net of deferred salaries
$
373,366
(9.6) % $
413,226
(6.1) % $
440,273
Commissions and incentive compensation
129,816
15.1
112,772
14.8
98,244
Taxes and employee benefits
106,125
(2.4)
108,724
12.9
96,326
Total salaries and employee benefits
$
609,307
(4.0) % $
634,722
— % $
634,843
Income Taxes
The Company recorded an income tax expense from continuing operations of $152.6 million for the year ended
December 31, 2024, compared to an income tax benefit from continuing operations of $4.6 million and an income tax expense
of $129.7 million for the years ended December 31, 2023 and 2022, respectively. The increase in tax expense in 2024 can be
attributed to higher pre-tax income. The tax benefit in 2023 can be attributed to lower pre-tax income as a result of the loss
incurred due to the restructure of the securities portfolio.
The Company recorded zero income tax expense related to discontinued operations for the year ended December 31,
2024, compared to an income tax expense from discontinued operations of $189.0 million and $6.4 million for the years ended
December 31, 2023 and 2022, respectively. There was no tax expense on discontinued operations in 2024 as the sale of
Cadence Insurance closed in November 2023, and reported as a discontinued operation in 2023 and periods prior.
The effective tax rate on continuing operations was 22.6%, 504.8%, and 22.5% for the years ended December 31,
2024, 2023, and 2022, respectively. The decrease in the effective tax rate for 2024 and the increase in the effective tax rate for
2023 were both the result of the securities restructuring, as well as the disposition of Cadence Insurance and the associated gain
on the sale being reported in discontinued operations.
In August 2022, the IRA of 2022 was signed into law to address inflation, healthcare costs, climate change and
renewal energy incentives, among other things. Included in the IRA of 2022 are provisions for the creation of a 15% CAMT
that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement
income in excess of $1 billion. For 2024, the Company is not subject to the 15% CAMT.
67
FINANCIAL CONDITION
The percentage of earning assets to total assets measures the effectiveness of management’s efforts to invest available
funds representing the most efficient and profitable uses. Earning assets at December 31, 2024, were $42.4 billion, or 90.1% of
total assets, compared with $44.2 billion, or 90.3% of total assets, at December 31, 2023.
TABLE 13—FINANCIAL CONDITION SUMMARY
(In thousands)
As of and For the
Year Ended
December 31, 2024
As of and For the
Year Ended
December 31, 2023
Period-End Balances:
Total assets
$
47,019,190 $
48,934,510
Available for sale securities
7,293,988
8,075,476
Loans and leases, net of unearned income
33,741,755
32,497,022
Total deposits
40,496,201
38,497,137
Securities sold under agreement to repurchase
23,616
451,516
Short-term BTFP borrowings
—
3,500,000
Subordinated and long-term borrowings
10,706
438,460
Total shareholders' equity
5,569,683
5,167,843
Common shareholders' equity
5,402,690
5,000,850
Average Balances:
Total assets
47,973,279
48,703,953
Available for sale securities
7,962,869
10,322,335
Loans and leases, net of unearned income
33,107,659
31,913,925
Total deposits
38,475,929
38,628,453
Securities sold under agreement to repurchase
81,092
770,777
Federal funds purchased and short-term BTFP and FHLB borrowings
2,850,981
3,471,207
Subordinated and long-term borrowings
306,396
452,645
Total shareholders' equity
5,353,705
4,487,433
Common shareholders' equity
5,186,712
4,320,440
68
Securities
The Company uses its securities portfolio as a source of revenue and liquidity, and to serve as collateral to secure
certain types of deposits and borrowings. These securities, which are available for possible sale, are recorded at fair value. The
following table shows the carrying value of the Company’s AFS securities by investment category for the periods indicated:
TABLE 14—AVAILABLE FOR SALE SECURITIES SUMMARY
December 31,
(In thousands)
2024
2023
Available for sale securities:
U.S. Treasury securities
$
— $
465,018
U.S. government agency securities
281,231
332,011
MBS issued or guaranteed by U.S. agencies
Residential pass-through:
Guaranteed by GNMA
66,581
75,662
Issued by FNMA and FHLMC
3,965,556
4,387,101
Other residential MBS
934,721
727,434
Commercial MBS
1,549,641
1,742,837
Total MBS
6,516,499
6,933,034
Obligations of states and political subdivisions
132,069
137,624
Corporate debt securities
47,402
67,197
Foreign debt securities
316,787
140,592
Total
$
7,293,988 $
8,075,476
At December 31, 2024, the Company’s AFS securities totaled $7.3 billion compared to $8.1 billion at December 31,
2023. The decrease of $781.5 million, or 9.7%, was primarily driven by the maturities and paydowns of $1.6 billion and the
sale of $15.1 million of AFS securities during the period. The decrease was offset by purchases of $751.8 million of higher
yielding securities during the period.
Net unrealized losses on AFS securities at December 31, 2024 and December 31, 2023 totaled $853.7 million and
$940.2 million, respectively. At December 31, 2024, management believes that the unrealized losses are due to noncredit-
related factors, such as changes in interest rates and other market conditions (see Note 3 to the consolidated financial
statements).
In 2023, the Company executed securities portfolio restructurings as a part of a balance sheet optimization initiative.
During the first quarter of 2023, approximately $1.5 billion in U.S. Treasury AFS securities were sold generating an after-tax
realized loss of approximately $39.5 million. Additionally, in the fourth quarter of 2023, AFS securities totaling approximately
$3.1 billion in par value were sold for an after-tax realized loss of approximately $294.1 million. Proceeds from the sales were
redeployed in accretive activities including reinvestment in higher-yielding securities, funding loans, and lowering higher-cost
brokered deposits. Of the December 2023 sales proceeds, $2.1 billion was reinvested in securities.
69
The following table shows the maturities and weighted average yields for the carrying value of the AFS securities at
the dates indicated:
TABLE 15—MATURITY DISTRIBUTION OF AFS SECURITIES
December 31, 2024
December 31, 2023
(Dollars in thousands)
Estimated
Fair Value
Weighted
Average
Yield
Estimated
Fair Value
Weighted
Average
Yield
U.S. Treasury securities:
Due in less than one year
$
—
— % $
465,018
5.46 %
U.S. Treasury securities total
—
—
465,018
5.46
U.S. government agency securities:
Due in one to five years
8,364
3.76
12,853
4.37
Due in five to ten years
204,624
4.10
249,502
4.66
Due after ten years
68,243
2.14
69,656
2.22
U.S. government agency securities total
281,231
3.62
332,011
4.14
Obligations of states and political subdivisions:
Due in less than one year
—
—
1,835
2.84
Due in one to five years
9,295
2.92
9,153
2.95
Due in five to ten years
15,563
2.22
15,655
2.22
Due after ten years
107,211
2.69
110,981
2.70
Obligations of states and political subdivisions total
132,069
2.66
137,624
2.66
Corporate debt securities:
Due in one to five years
—
—
5,181
5.90
Due in five to ten years
45,702
4.77
60,632
4.59
Due after ten years
1,700
4.50
1,384
4.50
Corporate debt securities total
47,402
4.76
67,197
4.69
Foreign debt securities:
Due in one to five years
87,855
3.36
51,507
2.25
Due in five to ten years
228,932
5.16
89,085
5.86
Foreign debt securities total
316,787
4.66
140,592
4.54
Total securities due in less than one year
—
—
466,853
5.45
Total securities due in one to five years
105,514
3.35
78,694
2.92
Total securities due in five to ten years
494,821
4.59
414,874
4.82
Total securities due after ten years
177,154
2.50
182,021
2.53
MBS
6,516,499
2.87
6,933,034
2.54
Total estimated fair value
$
7,293,988
2.98 % $
8,075,476
2.83 %
The weighted average yields reported in Table 15 have been calculated using the average daily balance of the related
securities. The yields on tax-exempt obligations of states and political subdivisions have been adjusted to a taxable equivalent
basis using a 21% tax rate.
70
Loans and Leases
The Company’s loans and leases held for investment portfolio represents the largest single component of the
Company’s earning asset base. Average loans and leases comprised 75.9% and 72.6% of average earning assets during the
years ended December 31, 2024 and 2023, respectively. The Company’s lending activities include both commercial and
consumer loans and leases. The Company has established systematic procedures for approving and monitoring loans and leases
that vary depending on the size and nature of the loan or lease and applies these procedures in a disciplined manner. The
Company also acts as agent or participant in syndications and other financing arrangements with other financial institutions.
The Company’s loans and leases are widely diversified by borrower and industry. Loans and leases, net of unearned income,
totaled $33.7 billion at December 31, 2024, representing a 3.8% increase from $32.5 billion at December 31, 2023.
The following table shows the composition of the Company’s loan and lease portfolio by segment and class at the
dates indicated:
TABLE 16—LOANS AND LEASES PORTFOLIO
(In thousands)
December 31, 2024
December 31, 2023
Commercial and industrial
Non-real estate
$
8,670,529 $
8,935,598
Owner occupied
4,665,015
4,349,060
Total commercial and industrial
13,335,544
13,284,658
Commercial real estate
Construction, acquisition and development
3,909,184
3,910,962
Income producing
6,015,773
5,736,871
Total commercial real estate
9,924,957
9,647,833
Consumer
Residential mortgages
10,267,883
9,329,692
Other consumer
213,371
234,839
Total consumer
10,481,254
9,564,531
Total loans and leases, net of unearned income (1)
$
33,741,755 $
32,497,022
(1)
Total loans and leases are net of $21.4 million and $38.4 million of unearned income at December 31, 2024 and December 31, 2023, respectively.
The following table shows the Company’s loan and lease portfolio by segment and class at the dates indicated by
geographical location.
TABLE 17—LOANS AND LEASES BY GEOGRAPHICAL LOCATION
December 31, 2024
(In thousands)
Alabama
Arkansas
Florida
Georgia
Louisiana
Mississippi
Missouri
Tennessee
Texas
Other
Total
Commercial and industrial
Non-real estate
$
413,359
$
169,534
$
532,224
$
446,812
$
371,543
$
536,651
$
64,846
$ 399,346
$ 3,478,755
$ 2,257,459
$ 8,670,529
Owner occupied
337,580
253,538
308,545
400,342
298,787
624,950
107,443
159,058
1,708,113
466,659
4,665,015
Total commercial and industrial
750,939
423,072
840,769
847,154
670,330
1,161,601
172,289
558,404
5,186,868
2,724,118
13,335,544
Commercial real estate
Construction, acquisition and
development
230,810
65,358
438,173
543,249
36,194
169,336
45,690
180,566
1,656,715
543,093
3,909,184
Income producing
437,146
259,767
477,493
613,337
226,849
424,078
204,119
319,560
2,298,344
755,080
6,015,773
Total commercial real estate
667,956
325,125
915,666
1,156,586
263,043
593,414
249,809
500,126
3,955,059
1,298,173
9,924,957
Consumer
Residential mortgages
1,300,485
425,602
709,335
449,117
478,947
1,214,542
210,712
796,490
4,436,803
245,850
10,267,883
Other consumer
27,186
17,653
5,002
7,817
10,653
86,059
1,322
16,668
36,559
4,452
213,371
Total consumer
1,327,671
443,255
714,337
456,934
489,600
1,300,601
212,034
813,158
4,473,362
250,302
10,481,254
Total
$ 2,746,566
$ 1,191,452
$ 2,470,772
$ 2,460,674
$ 1,422,973
$ 3,055,616
$ 634,132
$ 1,871,688
$ 13,615,289
$ 4,272,593
$ 33,741,755
71
December 31, 2023
(In thousands)
Alabama
Arkansas
Florida
Georgia
Louisiana
Mississippi
Missouri
Tennessee
Texas
Other
Total
Commercial and industrial
Non-real estate
$
417,687
$
158,759
$
503,957
$
528,205
$
346,840
$
532,593
$
62,507
$ 373,991
$ 3,718,233
$ 2,292,826
$ 8,935,598
Owner occupied
345,679
247,584
281,750
313,532
292,347
591,611
90,227
167,464
1,676,272
342,594
4,349,060
Total commercial and industrial
763,366
406,343
785,707
841,737
639,187
1,124,204
152,734
541,455
5,394,505
2,635,420
13,284,658
Commercial real estate
Construction, acquisition and
development
202,977
79,365
363,597
472,953
54,985
194,535
46,014
182,393
1,799,697
514,446
3,910,962
Income producing
446,290
273,000
369,897
605,160
212,148
435,089
208,216
296,918
2,080,393
809,760
5,736,871
Total commercial real estate
649,267
352,365
733,494
1,078,113
267,133
629,624
254,230
479,311
3,880,090
1,324,206
9,647,833
Consumer
Residential mortgages
1,216,942
388,396
647,117
408,459
462,264
1,147,388
179,119
716,384
3,898,525
265,098
9,329,692
Other consumer
31,155
18,488
5,563
6,431
11,587
87,229
1,780
17,892
49,397
5,317
234,839
Total consumer
1,248,097
406,884
652,680
414,890
473,851
1,234,617
180,899
734,276
3,947,922
270,415
9,564,531
Total
$ 2,660,730
$ 1,165,592
$ 2,171,881
$ 2,334,740
$ 1,380,171
$ 2,988,445
$ 587,863
$ 1,755,042
$ 13,222,517
$ 4,230,041
$ 32,497,022
Loans Acquired in Mergers and Acquisitions
In connection with past bank acquisitions, the Company acquired loans both with and without evidence of credit
quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no
carryover from the acquired institution’s previously recorded allowance for credit losses.
The fair value for acquired loans recorded at the time of acquisition is based upon several factors including the timing
and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash
flows using comparable market rates. The resulting fair value adjustment is recorded in the form of a premium or discount to
the unpaid principal balance of each acquired loan. As it relates to acquired loans that, as of the date of acquisition, have
experienced a more-than-insignificant deterioration in credit quality since origination (“PCD”), the net premium or net discount
is adjusted to reflect the Company’s ACL recorded for PCD loans at the time of acquisition, and the remaining fair value
adjustment not related to credit is accreted or amortized into interest income over the remaining life of the loan. As it relates to
acquired loans not classified as PCD (“non-PCD”) loans, the credit loss and yield components of the fair value adjustment are
aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the remaining life
of the loan. The Company records an ACL for non-PCD loans at the time of acquisition through provision expense, and
therefore, no further adjustments are made to the net premium or net discount for non-PCD loans.
In addition, a grade is assigned to each loan during the valuation process. For acquired loans that are not individually
reviewed during the valuation process, such loans are assumed to have characteristics similar to the assigned rating of the
acquired institution’s risk rating, adjusted for any estimated differences between the Company’s rating methodology and the
acquired institution’s risk rating methodology. Acquired loans that are individually evaluated at the acquisition date are
assigned a specific reserve in the same manner as other loans individually evaluated and are assigned an internal grade
representing PCD with Loss Exposure.
The following is a discussion of the Company’s segments and classes of loans and leases:
Commercial and Industrial
Non-Real Estate – The Company engages in lending to small and medium-sized business enterprises and government
entities through its community banking locations and to regional and national business enterprises through its corporate banking
division. C&I loans are loans and leases to finance business operations, equipment and owner-occupied facilities. These include
both lines of credit and term loans which are amortized over the useful life of the assets financed. Personal and/or corporate
guarantees are generally obtained where available and prudent. Also included in this category are loans to finance agricultural
production. The Company recognizes that risk from economic cycles, commodity prices, pandemics, government regulation,
supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, fraud, losses due
to theft or embezzlement, loss of sponsor support, health or loss of key personnel, or competitive situations may adversely
affect the scheduled repayment of business loans. In addition, risks in the agricultural sector including crop failures due to
weather, insects and other blights, commodity prices, governmental intervention, lawsuits, labor or logistical disruptions. Non-
real estate loans decreased 3.0% from December 31, 2023, to December 31, 2024.
72
Owner Occupied – Owner occupied loans include loans secured by business facilities to finance business operations,
equipment, agricultural land and owner-occupied facilities. These include both lines of credit and term loans which are
amortized over the useful life of the assets financed. Personal guarantees are generally obtained where available and prudent.
The Company recognizes that risk from economic cycles, pandemics, government regulation, supply-chain disruptions, product
innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of
key personnel, or competitive situations may adversely affect the scheduled repayment of business loans. Owner occupied loans
increased 7.3% from December 31, 2023, to December 31, 2024.
Commercial Real Estate
Construction, Acquisition and Development – CAD loans include both term loans and credit lines for construction of
commercial, industrial, residential, and multi-family buildings and for purchasing, carrying, and developing land into residential
subdivisions or various types of commercial developments, such as industrial, warehouse, retail, office, and multi-family. The
Company generally engages in construction and development lending primarily in markets served by its branches. The
Company recognizes that risks are inherent in the financing of real estate development and construction. These risks include
location, market conditions and price volatility, changes in interest rates, demand for developed land, lots and buildings,
desirability of features and styling of completed developments and buildings, competition from other developments and
builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of utilities, roads, public
transportation and schools, availability of permanent financing for homebuyers, zoning, environmental restrictions, lawsuits,
economic and business cycle, or labor and reputation of the builder or developer. CAD loans had no significant change from
December 31, 2023, to December 31, 2024.
Each CAD loan is underwritten to address: (i) the desirability of the project, its market viability and projected
absorption period; (ii) the creditworthiness of the borrower and the guarantor, if applicable, as to liquidity, cash flow and assets
available to ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer’s experience and success
with similar projects; and (v) the value of the collateral.
Income Producing – Income producing loans include loans to finance income-producing commercial and multi-family
properties. Lending in this category is generally limited to properties located in the Company’s market area with only limited
exposure to properties located elsewhere. Loans in this category include loans for neighborhood retail centers, medical and
professional offices, single retail stores, warehouses and apartments leased generally to local businesses and residents. The
underwriting of these loans takes into consideration the occupancy and rental rates as well as the financial health of the
borrower. The Company’s exposure to national retail tenants is limited. The Company recognizes that risk from economic
cycles, pandemics, delayed or missed rent payments, supply-chain disruptions, operational errors, lawsuits, natural disasters,
losses due to theft or embezzlement, health or loss of key personnel, or competitive situations may adversely affect the
scheduled repayment of business loans. Income producing loans increased 4.9% from December 31, 2023, to December 31,
2024.
Consumer
Residential Mortgages – Consumer mortgages are first or second-lien loans to consumers secured by a primary
residence or second home. This category includes traditional mortgages and home equity loans and revolving lines of credit.
The loans are generally secured by properties located primarily in markets served by the Company’s branches. These loans are
underwritten in accordance with the Company’s general loan policy and procedures which require, among other things, proper
documentation of each borrower’s financial condition, satisfactory credit history, and property value. In addition to loans
originated for the Company’s portfolio, the Company originates and services consumer mortgages sold in the secondary market
which are underwritten and closed pursuant to investor and agency guidelines. Residential mortgages increased 10.1% from
December 31, 2023, to December 31, 2024.
Other Consumer – Other consumer lending includes consumer credit card accounts as well as personal revolving lines
of credit and installment loans. The Company offers credit cards primarily to its deposit and loan customers. Consumer
installment loans include term loans of up to five years secured by automobiles, boats and recreational vehicles. The Company
recognizes that there are risks in consumer lending which include interruptions in the borrower’s personal and investment
income due to loss of employment, market conditions, and general economic conditions, deterioration in the health and well-
being of the borrower and family members, natural disasters, pandemics, lawsuits, losses, or inability to generate income due to
injury, accidents, theft, vandalism, or incarceration. Other consumer loans decreased 9.1% from December 31, 2023, to
December 31, 2024.
73
Selected Loan Maturity and Interest Rate Sensitivity
The maturity distribution of the Company’s loan portfolio is one factor in management’s evaluation of the risk
characteristics of the loan and lease portfolio. The interest rate sensitivity of the Company’s loan and lease portfolio is
important in the management of net interest margin. The Company attempts to manage the relationship between the interest rate
sensitivity of its assets and liabilities to produce an effective interest differential that is not significantly impacted by changes in
the level of interest rates (See - Quantitative and Qualitative Disclosures About Market Risk). The following table shows the
maturity distribution based on remaining maturities of the Company’s loan and lease portfolio and the interest rate sensitivity of
the Company’s loans and leases maturing after one year at the dates indicated:
TABLE 18—INTEREST RATE SENSITIVITY OF LOANS AND LEASES
December 31, 2024
Rate Structure for Loans
Maturing Over One Year
(In thousands)
One Year
or Less
Over One
Year through
Five Years
Over Five
Years through
Fifteen Years
Over Fifteen
Years
Fixed
Interest Rate
Variable
Interest Rate
Commercial and industrial
Non-real estate
$ 1,614,062 $
5,789,715 $
1,167,901 $
98,851 $
882,160 $ 6,174,307
Owner occupied
236,466
1,057,772
1,926,975
1,443,802
1,582,554
2,845,995
Total commercial and industrial
1,850,528
6,847,487
3,094,876
1,542,653
2,464,714
9,020,302
Commercial real estate
Construction, acquisition and development 1,517,658
1,168,647
543,621
679,258
346,397
2,045,129
Income producing
898,518
1,600,538
1,075,478
2,441,239
846,873
4,270,382
Total commercial real estate
2,416,176
2,769,185
1,619,099
3,120,497
1,193,270
6,315,511
Consumer
Residential mortgages
214,528
214,603
1,098,220
8,740,532
3,895,731
6,157,624
Other consumer
35,751
167,391
9,468
761
80,291
97,329
Total consumer
250,279
381,994
1,107,688
8,741,293
3,976,022
6,254,953
Total
$ 4,516,983 $
9,998,666 $
5,821,663 $ 13,404,443 $ 7,634,006 $ 21,590,766
Loans Held-for-Sale
At December 31, 2024 and December 31, 2023, loans held for sale totaled $244.2 million and $186.3 million,
respectively. Included in loans held for sale are loans sold to GNMA with an option to repurchase totaling $69.0 million and
$56.5 million at December 31, 2024 and December 31, 2023, respectively. The Company records the GNMA loans at fair value
on the consolidated balance sheets with a corresponding liability. GNMA optional repurchase programs allow financial
institutions to buy back individual delinquent mortgage loans that meet certain criteria (90 days or more past due) from the
securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior
authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100% of the remaining principal
balance of the loan. Under ASC 860, this buyback option is considered a conditional option until the delinquency criteria are
met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over
these loans under the unconditional buyback option, the loans can no longer be reported as sold and must be brought back onto
the consolidated balance sheet as loans held for sale, regardless of whether the Company intends to exercise the buy-back
option. These GNMA loans are not included in the nonperforming loans totals (See Table 19).
74
Asset Quality
Nonperforming Assets
NPA consists of NPL, OREO, and other repossessed assets. The increase from December 31, 2023 to December 31,
2024 in NPA was driven by the increase of $48.6 million, or 22.5%, in nonaccrual loans and leases (See Tables 20 and 21).
The majority of the increase in nonaccrual loans and leases was located in the C&I non-real estate and residential mortgages
segments. The increase was offset by the decrease of $0.4 million, or 7.9%, in foreclosed OREO and other NPA. NPA were as
follows as of each period presented:
TABLE 19—NONPERFORMING ASSETS
(In thousands)
December 31, 2024
December 31, 2023
Total NPL(1)
$
264,692
$
216,141
Foreclosed OREO and other NPA
5,754
6,246
Total NPA
$
270,446
$
222,387
NPL to total loans and leases
0.78 %
0.67 %
NPA to total assets
0.58 %
0.45 %
GNMA loans 90 or more days past due eligible for repurchase
$
68,993
$
56,524
Government guaranteed portion of nonaccrual loans and leases covered by the
SBA, FHA, VA or USDA
$
89,906
$
49,551
Loans and leases 90+ days past due, still accruing
$
13,126
$
22,466
(1)
See Tables 20 and 21 for more information regarding NPL.
Nonperforming Loans
NPL consist of nonaccrual loans and leases. The Company’s policy provides that loans and leases are generally placed
in nonaccrual status if, in management’s opinion, payment in full of principal or interest is not expected or payment of principal
or interest is more than 90 days past due for commercial loans and 120 days past due for consumer loans, unless the loan or
lease is both well-secured and in the process of collection. NPL increased 22.5% at December 31, 2024, compared to
December 31, 2023. Excluding the government guaranteed portion of nonaccrual loans and leases, NPL increased 4.9% at
December 31, 2024, compared to December 31, 2023. NPL as a percentage of net loans and leases increased from 0.7% at
December 31, 2023, to 0.8% at December 31, 2024. NPL trends increased during the year, primarily due to a few larger credits
in the corporate bank's commercial and industrial loan segments. Additionally, residential loans have also seen an increase
during the year. With the current forecast, the Company expects a moderate correlation between NPL trends and provision
amounts.
Included in NPL at December 31, 2024, were loans of $75.8 million that are individually analyzed collateral-
dependent loans for which a specific provision has been considered to address the unsupported exposure. Collateral-dependent
loans are typically assigned an internal rating of impaired or PCD (loss). However, additional risk ratings can be used as needed
to align with regulatory definitions. PCD (loss) represent loans with evidence of deterioration of credit quality since origination
that are acquired, and for which it was probable, at acquisition, that the bank will be unable to collect all contractually required
payments. At December 31, 2024, $67.1 million of nonperforming collateral-dependent loans were rated as impaired and $8.7
million were rated as doubtful. Nonperforming collateral-dependent loans had a specific reserve of $16.9 million included in
the total ACL of $460.8 million at December 31, 2024, and were net of $1.9 million in partial charge-downs previously taken
on these impaired loans. At December 31, 2024, there were no net partial charge-downs previously taken on PCD (loss) loans.
NPL at December 31, 2023, included $100.6 million of impaired loans that had a specific reserve of $41.6 million
included in the ACL of $468.0 million at December 31, 2023, and were net of $4.8 million in partial charge-downs previously
taken on these impaired loans. PCD (loss) loans included in NPL totaled $1.6 million and had a specific reserve of
$62 thousand included in the ACL. Net partial charge-downs previously taken on PCD (loss) loans were immaterial at
December 31, 2023.
75
The following table presents the Company’s NPL by geographical location at the dates indicated:
TABLE 20—NONPERFORMING LOANS AND LEASES BY GEOGRAPHICAL LOCATION
December 31, 2024
December 31, 2023
(In thousands)
Amortized Cost
Total NPL
NPL as a
% of
Amortized Cost
Amortized Cost
Total NPL
NPL as a
% of
Amortized Cost
Alabama
$
2,746,566 $
22,394
0.82 % $
2,660,730 $
15,985
0.60 %
Arkansas
1,191,452
2,292
0.19
1,165,592
2,136
0.18
Florida
2,470,772
30,380
1.23
2,171,881
10,204
0.47
Georgia
2,460,674
17,245
0.70
2,334,740
68,894
2.95
Louisiana
1,422,973
5,669
0.40
1,380,171
3,975
0.29
Mississippi
3,055,616
13,702
0.45
2,988,445
12,589
0.42
Missouri
634,132
3,359
0.53
587,863
2,091
0.36
Tennessee
1,871,688
17,672
0.94
1,755,042
3,161
0.18
Texas
13,615,289
69,985
0.51
13,222,517
59,437
0.45
Other
4,272,593
81,994
1.92
4,230,041
37,669
0.89
Total
$
33,741,755 $
264,692
0.78 % $
32,497,022 $
216,141
0.67 %
The following table provides additional details related to the Company’s loan and lease portfolio and the distribution
of NPL by segment and class at the dates indicated:
TABLE 21—NONPERFORMING LOANS AND LEASES BY SEGMENT AND CLASS
December 31, 2024
December 31, 2023
(In thousands)
Amortized Cost
Total NPL
NPL as a
% of
Amortized Cost
Amortized Cost
Total NPL
NPL as a
% of
Amortized Cost
Commercial and industrial
Non-real estate
$
8,670,529 $
145,115
1.67 % $
8,935,598 $
131,559
1.47 %
Owner occupied
4,665,015
16,904
0.36
4,349,060
7,097
0.16
Total commercial and
industrial
13,335,544
162,019
1.21
13,284,658
138,656
1.04
Commercial real estate
Construction, acquisition and
development
3,909,184
8,600
0.22
3,910,962
1,859
0.05
Income producing
6,015,773
18,542
0.31
5,736,871
17,485
0.30
Total commercial real estate
9,924,957
27,142
0.27
9,647,833
19,344
0.20
Consumer
Residential mortgages
10,267,883
75,287
0.73
9,329,692
57,881
0.62
Other consumer
213,371
244
0.11
234,839
260
0.11
Total consumer
10,481,254
75,531
0.72
9,564,531
58,141
0.61
Total
$
33,741,755 $
264,692
0.78 % $
32,497,022 $
216,141
0.67 %
76
The following table provides details regarding the aging of the Company’s NPL by segment and class at the dates
indicated:
TABLE 22—AGING OF NONACCRUAL LOANS AND LEASES
December 31, 2024
(In thousands)
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days
Past Due
Total
Past Due
Current
Total
Nonaccrual
Commercial and industrial
Non-real estate
$
1,943 $
357 $
93,758 $
96,058 $
49,057 $
145,115
Owner occupied
574
50
16,280
16,904
—
16,904
Total commercial and industrial
2,517
407
110,038
112,962
49,057
162,019
Commercial real estate
Construction, acquisition and development
—
21
8,579
8,600
—
8,600
Income producing
—
246
12,193
12,439
6,103
18,542
Total commercial real estate
—
267
20,772
21,039
6,103
27,142
Consumer
Residential mortgages
5,379
7,656
56,829
69,864
5,423
75,287
Other consumer
13
28
153
194
50
244
Total consumer
5,392
7,684
56,982
70,058
5,473
75,531
Total
$
7,909 $
8,358 $
187,792 $
204,059 $
60,633 $
264,692
December 31, 2023
(In thousands)
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days
Past Due
Total
Past Due
Current
Total
Nonaccrual
Commercial and industrial
Non-real estate
$
10,093 $
8,652 $
93,666 $
112,411 $
19,148 $
131,559
Owner occupied
1,031
185
5,881
7,097
—
7,097
Total commercial and industrial
11,124
8,837
99,547
119,508
19,148
138,656
Commercial real estate
Construction, acquisition and development
—
—
1,859
1,859
—
1,859
Income producing
9,603
—
6,362
15,965
1,520
17,485
Total commercial real estate
9,603
—
8,221
17,824
1,520
19,344
Consumer
Residential mortgages
4,782
4,315
43,255
52,352
5,529
57,881
Other consumer
44
15
128
187
73
260
Total consumer
4,826
4,330
43,383
52,539
5,602
58,141
Total
$
25,553 $
13,167 $
151,151 $
189,871 $
26,270 $
216,141
OREO and Repossessed Assets
OREO consists of properties acquired through foreclosure. Repossessed assets consist of non-real estate assets
acquired in partial or full settlement of loans. OREO and repossessed assets totaled $5.8 million and $6.2 million at
December 31, 2024, and December 31, 2023, respectively. The decrease of $0.4 million, or 7.9%, was primarily the result of
write-downs and sales of OREO during 2024.
Because a portion of the Company’s NPL have been determined to be collateral-dependent, management expects the
resolution of a significant number of these loans may necessitate foreclosure proceedings resulting in further additions to
OREO. At December 31, 2024, residential mortgages in process of foreclosure increased to $19.7 million compared to
$10.9 million at December 31, 2023.
At the time of foreclosure, the fair value of the collateral for loans backed by real estate is typically determined by an
appraisal performed by a third-party appraiser holding professional certifications. Such appraisals are then reviewed and
evaluated by the Company’s internal appraisal group. A market value appraisal using a 180-360-day marketing period is
77
typically ordered and the OREO is recorded at the time of foreclosure at its market value less estimated selling costs. For
residential subdivisions that are not completed, the appraisals reflect the uncompleted status of the subdivision.
Since OREO is carried at the lower of cost or fair value less estimated selling costs on an ongoing basis, new
appraisals are generally obtained on at least an annual basis and the OREO carrying values are adjusted accordingly. The type
of appraisals typically used for these periodic reappraisals are “Restricted Use Appraisals,” meaning the appraisal is for client
use only. Other indications of fair value are also used to attempt to ensure that OREO is carried at fair value. These include
listing the property with a broker and acceptance of an offer to purchase from a third-party. If an OREO property is listed with a
broker at an amount less than the current carrying value, the carrying value is adjusted to reflect the list price less estimated
selling costs and if an offer to purchase is accepted at a price less than the current carrying value, the carrying value is adjusted
to reflect that sales price, less estimated selling costs. The majority of the properties in OREO are actively marketed using a
combination of real estate brokers, bank staff who are familiar with the particular properties and/or third parties.
Financial Difficulty Modifications
In March 2022, the FASB issued ASU No. 2022-02, eliminating the recognition and measurement guidance on TDRs
for creditors that have adopted ASC 326 and requiring them to make enhanced disclosures about loan modifications for
borrowers experiencing financial difficulty. The guidance became effective for Cadence beginning January 1, 2023, and was
adopted via the modified retrospective transition method.
With the removal of the TDR accounting model, the general loan modification guidance in Subtopic 310-20 is now
applied to all loan modifications, including modifications made for borrowers experiencing financial difficulty. Under this
guidance, a modification is treated as a new loan only if both 1) the terms of the new loan are at least as favorable to the lender
as the terms for comparable loans to other customers with similar collection risks, and 2) modifications to the terms of the
original loan are more than minor. If either condition is not met, the modification is accounted for as the continuation of the old
loan with any effect of the modification treated as a prospective adjustment to the loan’s effective interest rate. Modifications in
scope for borrowers experiencing financial difficulty may include principal forgiveness, other-than-insignificant payment delay,
interest rate reduction, or a combination of modifications. During the year ended December 31, 2024, the most common
concession related to term extensions. Other concessions included principal forgiveness, payment deferrals, and interest rate
reductions.
At December 31, 2024, loans that were modified within the past twelve months for borrowers experiencing financial
difficulty totaled $202.3 million, or 0.6%, of total loans and leases, net of unearned income. Loans are considered to be in
payment default at 90 or more days past due for purposes of assessing modified loans for default. See Note 4 to the
consolidated financial statements for additional information for these loans.
Loan Concentrations
At December 31, 2024, the Company did not have any concentration of loans or leases in excess of 10% of total loans
and leases outstanding which were not otherwise disclosed as a category of loans or leases. Loan concentrations are considered
to exist when there are amounts loaned to multiple borrowers engaged in similar activities which would cause them to be
similarly impacted by economic or other conditions. The Company conducts business in a geographically concentrated area and
has a significant amount of loans secured by real estate to borrowers in varying activities and businesses but does not consider
these factors alone in identifying loan concentrations. The ability of the Company’s borrowers to repay loans is somewhat
dependent upon the economic conditions prevailing in the Company’s market areas.
Internally Assigned Grades on Loans
The Company utilizes an internal loan classification system that is updated to perpetually grade loans according to
certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance,
delinquency, liquidity, cash flows, debt coverage ratios, collateral type and loan-to-value ratio. See Note 4 to the consolidated
financial statements.
78
The following table provides details of the Company’s loan and lease portfolio by segment, class, and internally
assigned grade at the dates indicated:
TABLE 23—GRADES ON LOANS AND LEASES
December 31, 2024
(In thousands)
Pass
Special
Mention
Substandard (1)
Doubtful
Impaired (1)
PCD (Loss)
Total
Commercial and industrial
Non-real estate
$ 8,208,176 $ 106,996 $
311,096 $
8,743 $
31,996 $
3,522 $ 8,670,529
Owner occupied
4,610,775
815
41,363
—
10,968
1,094
4,665,015
Total commercial and industrial 12,818,951
107,811
352,459
8,743
42,964
4,616 13,335,544
Commercial real estate
Construction, acquisition and
development
3,896,856
—
12,262
—
66
—
3,909,184
Income producing
5,850,702
5,094
144,084
—
15,893
—
6,015,773
Total commercial real estate
9,747,558
5,094
156,346
—
15,959
—
9,924,957
Consumer
Residential mortgages
10,167,830
891
89,597
—
8,154
1,411 10,267,883
Other consumer
212,865
—
506
—
—
—
213,371
Total consumer
10,380,695
891
90,103
—
8,154
1,411 10,481,254
Total
$ 32,947,204 $ 113,796 $
598,908 $
8,743 $
67,077 $
6,027 $ 33,741,755
(1)
In the loan classifications above, $99.0 million of the substandard balance and $11.1 million of the impaired balance are covered by government
guarantees from either the SBA, FHA, VA and USDA.
December 31, 2023
(In thousands)
Pass
Special
Mention
Substandard (1)
Loss
Impaired (1)
PCD (Loss)
Total
Commercial and industrial
Non-real estate
$ 8,450,809 $
101,607 $
294,895 $
13 $
84,457 $
3,817 $ 8,935,598
Owner occupied
4,287,190
32,409
27,070
—
1,275
1,116
4,349,060
Total commercial and industrial
12,737,999
134,016
321,965
13
85,732
4,933 13,284,658
Commercial real estate
Construction, acquisition and
development
3,894,551
3,364
13,047
—
—
—
3,910,962
Income producing
5,527,388
23,727
170,217
—
15,539
—
5,736,871
Total commercial real estate
9,421,939
27,091
183,264
—
15,539
—
9,647,833
Consumer
Residential mortgages
9,258,002
4,066
66,050
—
—
1,574
9,329,692
Other consumer
234,367
—
472
—
—
—
234,839
Total consumer
9,492,369
4,066
66,522
—
—
1,574
9,564,531
Total
$ 31,652,307 $
165,173 $
571,751 $
13 $
101,271 $
6,507 $ 32,497,022
(1)
In the loan classifications above, $61.1 million of the substandard balance and $8.4 million of the impaired balance is covered by government guarantees
from the SBA, FHA, VA and USDA.
79
The following tables provides details regarding the aging of the Company’s loan and lease portfolio by internally assigned
grade at the dates indicated:
TABLE 24—AGING BY GRADE ON LOANS AND LEASES
December 31, 2024
(In thousands)
Current
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days
Past Due
Total
Pass
$ 32,857,689 $
65,955 $
22,789 $
771 $ 32,947,204
Special Mention
113,796
—
—
—
113,796
Substandard (1)
368,636
24,685
40,707
164,880
598,908
Doubtful
8,743
—
—
—
8,743
Impaired (1)
29,908
1,904
—
35,265
67,077
PCD (Loss)
4,932
1,095
—
—
6,027
Total
$ 33,383,704 $
93,639 $
63,496 $
200,916 $ 33,741,755
(1)
In the loan classifications above, $99.0 million of the substandard balance and $11.1 million of the impaired balance are covered by government
guarantees from either the SBA, FHA, VA and USDA.
December 31, 2023
(In thousands)
Current
30-59 Days
Past Due
60-89 Days
Past Due
90+ Days
Past Due
Total
Pass
$ 31,559,559 $
51,766 $
20,441 $
20,541 $ 31,652,307
Special Mention
165,173
—
—
—
165,173
Substandard (1)
438,423
18,518
17,893
96,917
571,751
Loss
—
—
13
—
13
Impaired (1)
19,258
19,670
7,758
54,585
101,271
PCD (Loss)
4,933
—
—
1,574
6,507
Total
$ 32,187,346 $
89,954 $
46,105 $
173,617 $ 32,497,022
(1)
In the loan classifications above, $61.1 million of the substandard balance and $8.4 million of the impaired balance is covered by government guarantees
from the SBA, FHA, VA and USDA.
At December 31, 2024, pass, substandard, and doubtful grade categories increased while special mention, loss,
impaired, and PCD (loss) decreased compared to December 31, 2023. Pass loans increased $1.3 billion, or 4.1%, compared to
December 31, 2023. The increase in pass was seen across all loan categories except for slight decreases in C&I non-real estate
and other consumer. Substandard loans increased $27.2 million, or 4.7%, at December 31, 2024 compared to December 31,
2023. The increase in substandard was mainly driven by the increase in residential mortgages, C&I non-real estate, and C&I
owner occupied, somewhat offset by a decrease in CRE income producing. Special mention loans decreased $51.4 million, or
31.1%, compared to December 31, 2023. The decrease in special mention was driven primarily by a decrease in C&I owner
occupied and CRE income producing, somewhat offset by a increase in C&I non-real estate. Impaired loans decreased
$34.2 million, or 33.8%, at December 31, 2024 compared to December 31, 2023. The decrease in impaired was primarily
driven by a decrease in C&I non-real estate, slightly offset by an increase in C&I owner occupied and residential mortgages.
The Company has maintained stable credit results while continuing to grow loans. Of total loans and leases, 98.9% were current
on their contractual payments at December 31, 2024.
Collateral for some of the Company’s loans and leases is subject to fair value estimates that can fluctuate with market
conditions and other external factors. In addition, while the Company has certain underwriting obligations related to such
estimates, the estimates of some real property and other collateral are dependent upon third-party independent appraisers
employed as independent contractors of the Company.
80
Deposits
Deposits originating within the communities served by the Company continue to be the Company’s primary source of
funding its earning assets. The Company has been able to compete effectively for deposits in its primary market areas, while
continuing to manage the exposure to higher interest rates. The distribution and market share of deposits by type of deposit and
by type of depositor are important considerations in the Company's assessment of the stability of its funding sources and its
access to additional funds. Furthermore, management shifts the mix and maturity of the deposits depending on economic
conditions and loan and investment policies in an attempt, within set policies, to minimize cost and maximize net interest
margin.
The following table presents the Company’s deposits and the percentage change between the periods indicated:
TABLE 25—SUMMARY OF DEPOSITS
2024
2023
2022
(Dollars in thousands)
Amount
% Change
Amount
% Change
Amount
Noninterest bearing demand deposits
$ 8,591,805
(6.9) % $ 9,232,068
(27.5) % $ 12,731,065
Interest bearing demand and money market deposits
19,345,114
0.4
19,276,596
1.2
19,040,131
Savings
2,588,406
(4.9)
2,720,913
(21.7)
3,473,746
Time deposits
9,970,876
37.2
7,267,560
95.8
3,711,672
Total deposits
$ 40,496,201
5.2 % $ 38,497,137
(1.2) % $ 38,956,614
Total deposits experienced an increase of 5.2% at December 31, 2024, compared to December 31, 2023 due to
increases in core customer deposits (which excludes brokered deposits and public funds) and brokered deposits, partially offset
by a decrease in public funds. Brokered deposits were $2.1 billion at December 31, 2024, an increase of $1.3 billion, or
173.8%, compared to December 31, 2023. This increase reflects the Company's efforts to raise brokered deposits during 2024 to
facilitate the pay off of the $3.5 billion BTFP balance at rates the Company viewed as favorable compared to other alternative
funding sources. Total public funds balances were $4.1 billion at December 31, 2024, a decline of $1.5 billion, or 27.2%,
compared to December 31, 2023. This decrease primarily reflects a targeted effort to reduce certain less profitable public fund
relationships. Core customer deposit balances were $34.3 billion at December 31, 2024, an increase of $2.2 billion, or 6.9%,
compared to December 31, 2023. Growth in core customer deposits reflected both organic growth of $1.8 billion as well as
transfers from securities sold under agreement to repurchase of $360.0 million compared to December 31, 2023. Noninterest
bearing demand deposits decreased $640.3 million, or 6.9%, at December 31, 2024 compared to December 31, 2023. Time
deposits increased $2.7 billion, or 37.2%, at December 31, 2024 compared to December 31, 2023 due in part to an increase of
$1.5 billion in core customer and public funds deposits and an increase of $1.1 billion in brokered time deposits.
The following table presents the classification of the Company’s deposits on an average basis for each of the periods
indicated:
TABLE 26—AVERAGE BALANCE AND YIELD ON DEPOSITS
2024
2023
2022
(Dollars in thousands)
Average
Amount
Average
Rate
Average
Amount
Average
Rate
Average
Amount
Average
Rate
Noninterest bearing demand deposits
$
8,780,004
— % $
10,610,698
— % $
13,733,384
— %
Interest bearing demand deposits
18,739,210
3.06
18,314,649
2.58
18,541,402
0.59
Savings
2,626,539
0.57
3,028,875
0.49
3,657,718
0.15
Time
8,330,176
4.42
6,674,231
3.69
3,545,402
0.68
Total deposits
$
38,475,929
$
38,628,453
$
39,477,906
81
Uninsured deposits are defined as the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit
and amounts in any other uninsured investment or deposit account that are classified as deposits and are not subject to any
federal or state deposit insurance regimes. The uninsured portion of public funds owned by municipal and state government
entities are collateralized by the Company with investment securities and custodial letters of credit from the FHLB of Dallas.
The following table segregates our deposits by deposit insurance categories.
TABLE 27—ESTIMATED TOTAL INSURED AND UNINSURED DEPOSITS
(In thousands)
December 31, 2024
December 31, 2023
FDIC insured
$
25,840,309 $
22,909,914
Collateralized (uninsured)
3,901,677
5,518,946
Uninsured (excluding collateralized)
10,754,215
10,068,277
Total deposits
$
40,496,201 $
38,497,137
The Company’s estimated uninsured time deposits at December 31, 2024 had maturities as follows:
TABLE 28—MATURITY OF UNINSURED TIME DEPOSITS
(In thousands)
Amount
Three months or less
$
514,926
Over three months through six months
516,963
Over six months through twelve months
603,563
Over 12 months
86,263
Total
$
1,721,715
Borrowings
Short-term Borrowings
The Company has several types of available short-term borrowing arrangements including Federal funds purchased,
securities sold under agreements to repurchase, short-term FHLB borrowings and the Federal Reserve discount window.
Federal funds purchased are unsecured lines, while the rest of these types of borrowings are collateralized by investment
securities and loans. At December 31, 2024 and December 31, 2023, the Company had total short-term borrowings of $23.6
million with a weighted average interest rate of 4.10% and $4.0 billion with a weighted average interest rate of 4.78%,
respectively. Cadence’s BTFP borrowing was paid off during the fourth quarter of 2024. See Note 9 to the Company’s
consolidated financial statements for additional details.
Long-term Borrowings
Under the terms of the blanket floating lien security agreement with FHLB Dallas, the Company is required to
maintain sufficient collateral to secure borrowings. At December 31, 2024, the remaining borrowing availability totaled $13.0
billion. At December 31, 2024, there were no call features on long-term FHLB borrowings. See Note 9 to the Company’s
consolidated financial statements for additional details.
During 2024, the Company repurchased $68.0 million of the $300 million Subordinated Notes due November 20,
2029, resulting in a $1.8 million gain on the extinguishment of debt, and called the remaining $215.2 million in the fourth
quarter. In addition, the Company repurchased $0.5 million of our Subordinated Notes due June 2029 and called the remaining
$138.9 million of these Subordinated Notes due June 2029, resulting in a net gain on the extinguishment of debt of $4.7 million
which was reported in other noninterest revenue in the consolidated statements of income. The following is a summary of our
long-term borrowings at the dates indicated:
82
TABLE 29—LONG-TERM BORROWINGS
(Dollars in thousands)
December 31, 2024
December 31, 2023
4.850% advances from FHLB Dallas, due August 2, 2027
$
706 $
771
4.125% fixed to floating rate, subordinated notes, due November 20, 2029,
callable on November 20, 2024
—
283,159
7.250% subordinated notes, due June 28, 2029, callable on June 28, 2024
—
35,000
4.750% subordinated notes, due June 30, 2029, callable on June 30, 2024
—
79,352
6.250% subordinated notes, due June 28, 2029, callable on June 28, 2024
—
25,000
5.000% fixed to floating rate, subordinated notes, due June 30, 2030,
callable on June 30, 2025
10,000
10,000
Purchase accounting adjustment, net of amortization
—
5,786
Debt issue costs
—
(608)
Total long-term borrowings
$
10,706 $
438,460
Liquidity and Capital Resources
Liquidity
One of the Company's goals is to maintain adequate funds to meet increases in loan demand or any potential increase
in the normal level of deposit withdrawals. This goal is accomplished primarily by generating cash from the Company’s
operating activities and maintaining sufficient short-term liquid assets. These sources, coupled with a stable core deposit base
and a historical experience in the capital markets, allow the Company to fund earning assets and maintain the availability of
funds. Management believes that the Company’s traditional sources of maturing loans and investment securities, sales of loans
held for sale, cash from operating activities and a strong base of core deposits are adequate to meet the Company’s liquidity
needs for normal operations over both the short-term and the long-term.
The following table summarizes the Company’s cash and cash equivalents as of the following dates:
TABLE 30—CASH AND CASH EQUIVALENTS
(In thousands)
December 31, 2024
December 31, 2023
Cash and cash equivalents
$
1,731,576
$
4,232,265
Cash and cash equivalents as a percentage of:
Loans and lease, net
5.1 %
13.0 %
Total earning assets
4.1
9.6
Total assets
3.7
8.6
Total deposits
4.3
11.0
Total uninsured deposits
11.8
27.2
During 2024, the Company took advantage of available liquidity present at the beginning of the year, along with the
growth in deposits, to paydown borrowing from the BTFP and subordinated debt, enabling the Company to reduce reliance on
borrowings and mitigate the impact of increased interest rates on deposits.
83
The Company had the following sources of contingent liquidity available at December 31, 2024:
TABLE 31—CASH AND SOURCES OF CONTINGENT LIQUIDITY
(In thousands)
Amount
Cash and cash equivalents
$
1,731,576
Unpledged investment securities (at par) (1)
3,909,447
Secured lines of credit availability at the FHLB and Federal Reserve
14,607,478
Unsecured Federal funds lines availability
2,080,000
Total
$ 22,328,501
(1)
The fair value of unpledged investment securities was $3.5 billion at December 31, 2024.
At December 31, 2024, the Company had irrevocable letters of credit issued by the FHLB totaling $47.5 million,
which were used on behalf of our customers.
The ability of the Company to obtain funding from these or other sources could be negatively affected should the
Company experience a substantial deterioration in its financial condition or its debt rating or should the availability of short-
term funding become restricted as a result of the disruption in the financial markets. Management does not anticipate any short-
or long-term changes to its liquidity strategies and believes that the Company has ample sources to meet any liquidity
challenges that may arise. The Company has sound and robust risk management practices that include an active ALCO to
analyze and manage the Company’s liquidity and interest rate risk (See - Quantitative and Qualitative Disclosures About
Market Risk).
Other Liquidity Considerations
The Company’s operating lease obligations represent short and long-term operating lease and rental payments for
facilities, certain software and data processing and other equipment (see Note 7 to the consolidated financial statements for
more information). Purchase obligations represent obligations to purchase goods and services that are legally binding and
enforceable on the Company and that specify all significant terms, including: fixed or minimum quantities to be purchased;
fixed, minimum or variable price provisions; and the approximate timing of the transaction.
In the ordinary course of business, the Company enters into various off-balance sheet commitments and other
arrangements to extend credit that are not reflected on the consolidated balance sheets of the Company. The business purpose of
these off-balance sheet commitments is the routine extension of credit. The Company also faces the risk of deteriorating credit
quality of borrowers to whom a commitment to extend credit has been made; however, no significant credit losses are expected
from these commitments and arrangements. At December 31, 2024, letters of credit totaled $448.9 million and unfunded
extensions of credit totaled $8.6 billion (see Note 21 to the consolidated financial statement for more information). At
December 31, 2024, the Company maintained a reserve for unfunded commitments of $8.6 million included in other liabilities.
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Cash Obligations
The following table summarizes the Company’s contractual obligations at December 31, 2024. See Notes 1, 7, and 9 to
the consolidated financial statements for further disclosures regarding contractual obligations.
TABLE 32—CONTRACTUAL OBLIGATIONS
Payments Due by Periods
(In thousands)
Total
Less Than
One Year
One to Three
Years
Three to Five
Years
More than
Five Years
Contractual Obligations:
Deposits without a stated maturity
$ 30,525,325 $ 30,525,325 $
— $
— $
—
Deposits with a stated maturity
9,970,876
9,562,714
347,916
60,063
183
Subordinated and long-term borrowings
10,706
61
645
—
10,000
Operating lease obligations
187,798
11,241
23,119
22,902
130,536
Securities sold under agreement to repurchase
23,616
23,616
—
—
—
Limited partnership investments
277,421
233,178
40,758
836
2,649
Total contractual obligations
$ 40,995,742 $ 40,356,135 $
412,438 $
83,801 $
143,368
Cash Flow Sources and Uses
Cash equivalents include cash and amounts due from banks, including interest bearing deposits with other banks. At
December 31, 2024, cash and cash equivalents totaled $1.7 billion compared to $4.2 billion at December 31, 2023. The ratio of
cash and cash equivalents to total assets was 3.7% at December 31, 2024 compared to 8.6% at December 31, 2023.
Cash flows from discontinued operations are not presented separately in the consolidated statements of cash flows.
During 2024, operating activities provided $856.7 million in cash. During 2024, investing activities used
$782.2 million in cash. Primary uses of funds in investing activities during 2024 were net funding of loans $1.5 billion and
purchases of AFS securities $751.8 million. These items were partially offset by proceeds from maturities, calls and payments
of AFS securities of $1.6 billion. During 2024, financing activities used $2.6 billion, which primarily resulted from a decrease
of $3.5 billion in BTFP and short-term FHLB advance, a decrease of $427.9 million in securities sold under agreements to
repurchase and federal funds purchased and a decrease of $422.6 million in long-term borrowings. These items were partially
offset by an increase of $2.0 billion in deposits. During 2024, the Company took advantage of the extra liquidity present at the
beginning of the year, along with the growth in deposits to restructure the liability side of the balance sheet. This enabled the
Company to reduce reliance on borrowings which mitigated the impact of increased interest rates on deposits.
Regulatory Capital
Regulatory capital at December 31, 2024 and December 31, 2023 was calculated in accordance with standards
established by the federal banking agencies as well as the interagency final rule published on September 30, 2020 entitled
“Revised Transition of the Current Expected Credit Losses Methodology for Allowances” which delayed the estimated impact
on regulatory capital stemming from the adoption of CECL. The agencies granted this relief to allow institutions to focus on
lending to customers in light of the economic and other impacts from COVID-19, while also maintaining the quality of
regulatory capital. Under the final rule, the Day-1 impact of the adoption of CECL and 25% of subsequent provisions for credit
losses (“Day-2 impacts”) were deferred over a two-year period ending January 1, 2022. At that point, the amount is phased into
regulatory capital on a pro rata basis over a three-year period ending January 1, 2025.
Additionally, regulatory capital rules include a capital conservation buffer of 2.5% which the Company must maintain
on top of its minimum risk-based capital requirements. This buffer applies to all three risk-based capital measurements (CET1,
Tier 1 and total capital to risk-weighted assets). A financial institution with a conservation buffer of less than the required
amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain
discretionary bonus payments to executive officers.
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Capital amounts and ratios for the Company at December 31, 2024 and December 31, 2023, are presented in the
following table and as shown, exceed the thresholds necessary to be considered “well capitalized.” Management believes that
no events or changes have occurred subsequent to the indicated dates that would change this designation.
TABLE 33—REGULATORY CAPITAL
(Dollars in thousands)
Amount
Ratio
Amount
Ratio
Common equity Tier 1 capital (to risk-weighted assets)
$ 4,693,487
12.35%
$ 4,363,020
11.62%
Tier 1 capital (to risk-weighted assets)
4,860,480
12.79
4,530,013
12.06
Total capital (to risk-weighted assets)
5,306,647
13.97
5,377,324
14.32
Tier 1 leverage capital (to average assets)
4,860,480
10.41
4,530,013
9.30
December 31, 2024
December 31, 2023
Uses of Capital
Subject to pre-approval from the Federal Reserve and MDBCF, the Company may pursue acquisitions of depository
institutions and businesses closely related to banking that further the Company’s business strategies. Management anticipates
that consideration for any transactions would include shares of the Company’s common stock, cash or a combination thereof.
On December 13, 2023, the Company announced a share repurchase program whereby the Company may acquire up
to an aggregate of 10,000,000 shares of its common stock. The share repurchase program became effective on January 2, 2024,
and expired on December 31, 2024. Under this share repurchase program, Cadence's shares could have been purchased
periodically in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in
accordance with federal securities laws. Repurchased shares were held as authorized but unissued shares available for use in
connection with the Company’s stock compensation programs, other transactions, or for other corporate purposes as determined
by the Company’s Board of Directors. During the year ended December 31, 2024, the Company had repurchased 1,237,021
shares under this program.
During the first quarter of 2024, the Company increased the common stock dividend to $0.25 per share.
The IRA of 2022 includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased
by covered corporations during a taxable year, subject to certain limits and provisions. The excise tax was effective beginning
in fiscal year 2023. While we may complete transactions subject to the new excise tax, we do not expect a material impact to
our balance sheet or our results of operations.
Impact of Inflation
The consolidated financial statements and related consolidated financial data presented herein have been prepared in
accordance with GAAP and practices within the banking industry which require the measurement of financial position and
operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over
time due to inflation. The effect of inflation on a financial institution differs from the effect on other types of businesses. While
a financial institution’s operating expenses are affected by general inflation, the asset and liability structure of a financial
institution consists largely of monetary items. Monetary items, such as cash, investments, loans, deposits, and borrowings, are
those assets and liabilities which are or will be converted into a fixed number of dollars regardless of changes in prices. As a
result, changes in interest rates can be more impactful to a financial institution’s performance than general inflation. Inflation
may also have impacts on the Company’s customers, businesses and consumers and their ability or willingness to invest, save
or spend, and perhaps on their ability to repay loans. As such, there would likely be impacts on the general appetite for banking
products and the credit health to the Company’s customers. See Part 1, Item 1.A., Risk Factors, for additional information
regarding the risks of inflation.
Certain Litigation and Other Contingencies
The nature of the Company’s business ordinarily results in certain types of claims, litigation, investigations, and other
legal or administrative cases and proceedings. Although the Company and its subsidiaries have policies and procedures to
minimize legal noncompliance and the impact of claims and other proceedings and endeavored to procure reasonable amounts
of insurance coverage, litigation and regulatory actions present an ongoing risk.
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The Company and its subsidiaries engage in lines of business that are heavily regulated and involve a large volume of
actual or potential financial transactions with customers or applicants, and the Company is a public company with a large
number of shareholders. From time to time, applicants, borrowers, customers, shareholders, former employees, service
providers, and other third parties have brought actions against the Company or its subsidiaries, in cases claiming substantial
damages. Financial services companies are subject to risks arising from changing regulatory frameworks or expectations,
regulatory investigations, class action litigation, and, from time to time, the Company and its subsidiaries have such actions
brought against them. The Company and its subsidiaries are also subject to enforcement actions by federal or state regulators,
including the CFPB, the DOJ, state attorneys general, and the Federal Reserve or MDBCF, which may be adversely impacted
by ongoing litigation in which the Company is involved. Additionally, the Company is, and management expects it to be,
engaged in a number of foreclosure proceedings and other collection actions as part of its lending and leasing collections
activities, which, from time to time, have resulted in counterclaims against the Company and its subsidiaries. Various legal
proceedings have and may arise in the future out of claims against entities to which the Company is a successor as a result of
business combinations.
When and as the Company determines it has meritorious defenses to the claims asserted, it vigorously defends against
such claims. The Company will consider settlement of claims when, in management’s judgment and in consultation with
counsel, it is in the best interests of the Company to do so.
The Company cannot predict with certainty the cost of defense, the cost of prosecution, or the ultimate outcome of
litigation or other proceedings filed by or against it, its subsidiaries and its directors, management or employees, including
remedies or damage awards. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection
with outstanding legal proceedings as well as certain threatened claims (which are not considered incidental to the ordinary
conduct of the Company’s business) utilizing the latest and most reliable information available. For matters where a loss is not
probable or the amount of the loss cannot be estimated, the Company will not accrue. For matters where it is probable the
Company will incur a loss and the amount can be reasonably estimated, the Company establishes an accrual for the loss. Once
established, the accrual is adjusted periodically to reflect any relevant developments. The actual cost of any such matters,
however, may turn out to be substantially higher than the amount accrued. Further, the Company’s insurance policies have
deductibles and coverage limits, and such policies are unlikely to cover all costs and expenses related to the defense or
prosecution of such legal proceedings or any losses arising therefrom.
Although the final outcome of any legal proceedings is inherently uncertain, based on the information available, advice
of counsel and available insurance coverage, if applicable, management believes that the litigation-related liability of $12.0
million accrued at December 31, 2024 is adequate and that any incremental change in potential liability arising from the
Company’s legal proceedings and threatened claims, including the matters described herein and those otherwise arising in the
ordinary course of business, will not have a material adverse effect on the Company’s business or consolidated results of
operations or financial condition. It is possible, however, that future developments could result in an unfavorable outcome for,
or resolution of any one or more of the legal proceedings in which the Company or its subsidiaries are defendants, which may
be material to the Company’s business or consolidated results of operations or financial condition for a particular fiscal period
or periods.
On August 30, 2021, Legacy Cadence and the DOJ agreed to a settlement set forth in the consent order related to the
investigation by the DOJ of Legacy Cadence Bank’s fair lending program in Harris, Fort Bend, and Montgomery Counties
located in Houston, Texas during the period between 2014 and 2016 (the “Consent Order”). The Consent Order was signed by
the United States District Court for the Northern District of Georgia, Atlanta Division, on August 31, 2021. Pursuant to Section
5.2(g) of the Agreement and Plan of Merger and Paragraph 50 of the Consent Order, Legacy BancorpSouth Bank approved the
negotiated settlement, and subsequently, the Company agreed to accept the obligations of the Consent Order. The Consent
Order is in effect for five years. For additional information regarding the terms of this settlement and the Consent Order, see
Legacy Cadence Bancorporation’s Current Report on Form 8-K that was filed with the SEC on August 30, 2021.
Recent Pronouncements
Refer to Note 1 “Summary of Significant Accounting Policies” in the consolidated financial statements for a
discussion of accounting standards currently effective for 2024 and relevant accounting standards that have been issued but are
not currently effective.
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CRITICAL ACCOUNTING ESTIMATES
The Company’s consolidated financial statements are prepared in accordance with GAAP, which require the Company
to make estimates and assumptions (see Note 1 to the consolidated financial statements). Management bases our estimates on
historical experience and on various other assumptions that we believe to be reasonable under current circumstances.
These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not
readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. The use of alternative
assumptions may result in significantly different estimates. Additionally, actual results may differ from these estimates.
Accounting policies are an integral part of our consolidated financial statements. A thorough understanding of these
accounting policies is essential when reviewing our reported results of operations and our financial position. The critical
accounting estimates discussed below involve additional management judgment due to the complexity and subjectivity of the
methods and assumptions used.
Allowance for Credit Losses
The Company bases its estimates of credit losses on three primary components: (1) estimates of expected losses that
exist in various segments of performing loans and leases over the remaining life of the loan portfolio using a reasonable and
supportable economic forecast; (2) specifically identified losses in individually analyzed credits which are collateral-dependent,
which generally include loans internally graded as impaired and PCD Loss loans; and (3) qualitative factors related to economic
conditions, portfolio concentrations, regulatory policy updates, and other relevant factors that address estimates of expected
losses not fully addressed based upon management’s judgment of portfolio conditions.
The Company utilizes credit risk models to estimate the probability of default and loss given default of loans over their
remaining lives. The probability of default settings in the models incorporate a risk grading process by utilizing pool-specific
historical default rates. In addition, the loss given default assumptions in the models utilize historical losses for different types
of collateral on defaulted loans while giving consideration for the loan-to-value ratio at the time of default. The product of the
probability of default and loss given default derives a base expected loss rate for each credit. Additionally, in some cases,
including credit cards, a loss rate model is used where lifetime loss rates are estimated. The base expected loss rate is adjusted
by way of econometric models that measure the direction and magnitude of change in expected loss rates given a change in
forecasted economic variables.
The aforementioned credit risk models and econometric models were developed and are recalibrated using historical
experience. Credit factors such as financial condition of the borrower and guarantor, recent credit performance, delinquency,
liquidity, cash flows, collateral type and collateral value are used by the models to assess credit risk. Estimates of expected
losses are influenced by the historical net losses experienced by the Company for loans and leases of comparable
creditworthiness and structure. Specific loss assessments are performed for loans and leases based upon the collateral
protection. The Company’s reasonable and supportable eight quarter economic forecast is utilized to estimate credit losses
before reverting back to longer term historical loss experience.
The ACL represents management’s best estimate, but significant downturns in circumstances relating to loan quality
and economic conditions could necessitate additional provisions or a reduction in the ACL. Unanticipated changes and events
could have a significant impact on the financial performance of borrowers and their ability to perform as agreed. One of the
most significant judgments used in determining the ACL is the reasonable and supportable economic forecast. The economic
indices sourced from the economic forecast and used in developing the estimate include the national unemployment rate,
changes in the U.S. gross domestic product, changes in commercial real estate prices and changes in home prices. The
economic series for unemployment carries the highest weighting and is the most sensitive component of the estimate.
Given the dynamic relationship between macroeconomic variables within our modeling framework, it is difficult to
estimate the impact of a change in any one individual variable on the ACL. As a result, management uses a probability-
weighted approach that incorporates a baseline and a downside risk economic scenario when formulating the quantitative
estimate. The downside scenario is an estimate of various forecast variable estimates that result should certain material
downside risks be made manifest during the forecast period. Variables are negatively stressed further than what would be seen
in the baseline scenario. Typically, these adverse conditions will result in a negative impact on the allowance and would
require increased levels in the allowance if they were to materialize.
However, to illustrate a hypothetical sensitivity analysis, management calculated a quantitative allowance using a
100% weighting applied to a downside risk scenario. Under this scenario, as an example, the unemployment rate increases, to
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an estimated 5.9% and 5.8% at the end of 2025 and 2026, respectively. These numbers result in unemployment rates that are
approximately 1.5% and 1.6% higher than baseline scenario projections of 4.4% and 4.2%, respectively for the same time
periods.
To demonstrate the sensitivity to key economic parameters used in the calculation of our ACL at December 31, 2024,
management calculated the difference between a 100% base forecast and a 100% downside risk scenario. These calculations are
quantitative-only and exclude consideration of qualitative adjustments and produced a model result difference of $107.7
million.
The resulting difference is not intended to represent an expected increase in ACL for a number of reasons including the
following:
•
Management uses a weighted approach applied to multiple economic scenarios for its ACL estimation process;
•
The highly uncertain economic environment;
•
The difficulty in predicting the inter-relationships between the economic parameters used in the various
economic scenarios; and
•
The sensitivity estimate does not account for our qualitative overlays and associated risk profile and size components
incorporated by management as part of its overall ACL framework.
Goodwill and Other Intangible Assets
The acquisition method of accounting requires that assets acquired and liabilities assumed in business combinations
are recorded at their fair values. This often involves estimates based on third-party or internal valuations based on discounted
cash flow analyses or other valuation techniques, which are inherently subjective. Business combinations also typically result in
goodwill, which is subject to ongoing periodic impairment tests based on the fair values of the reporting units to which the
goodwill relates. The amortization of definite-lived intangible assets is based upon the estimated economic benefits to be
received, which is also subjective. Provisional estimates of fair values may be adjusted for a period of up to one year from the
acquisition date if new information is obtained about facts and circumstances that existed as of the acquisition date that, if
known, would have affected the measurement of the amounts recognized as of that date. Adjustments recorded during this
period are recognized in the current reporting period. Management uses various valuation methodologies to estimate the fair
value of these assets and liabilities, and often involves a significant degree of judgment, particularly when liquid markets do not
exist for the particular item being valued. Examples of such items include loans, deposits, identifiable intangible assets and
certain other assets and liabilities.
Management uses significant estimates and assumptions to value such items, including projected cash flows,
repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The credit allowance
for PCD loans is recognized within business combination accounting. The ACL for non-PCD assets is recognized as provision
expense in the same reporting period as the business combination. The valuation of other identifiable intangible assets,
including core deposit intangibles, trademarks, and customer list intangibles, requires assumptions such as projected attrition
rates, expected revenue and costs, discount rates and other forward-looking factors. The purchase date valuations and any
subsequent adjustments also determine the amount of goodwill or bargain purchase gain recognized in connection with the
business combination. The use of different assumptions could produce significantly different valuation results, which could
have material positive or negative effects on our results of operations. The Company uses the best estimates and assumptions to
value assets acquired and liabilities assumed, at the acquisition date, and these estimates are subject to refinement.
Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired in a business
combination. The Company assesses goodwill for impairment at the reporting unit level on an annual basis, or more often if an
event occurs or circumstances change which indicate there may be impairment. The impairment test compares the estimated fair
value of each reporting unit with its net book value. The Company’s annual assessment date is during the Company’s fourth
quarter. When a quantitative assessment is deemed necessary, the fair value of the reporting unit is estimated using valuation
techniques that market participants would use in an acquisition of the reporting unit, such as estimated discounted cash flows,
the quoted market price of our common stock adjusted for a control premium, and observable average price-to forward-earnings
and price-to-tangible book multiples of observed transactions. If the unit’s fair value is less than its carrying value, an estimate
of the implied fair value of the goodwill is compared to the goodwill’s carrying value and any impairment recognized.
The Company performed a qualitative assessment to determine if it was more likely than not that a reporting unit’s fair
value was less than its carrying value during the fourth quarter of 2024. Based on this qualitative assessment, it was determined
that no impairment of goodwill was indicated as of the assessment date and no triggering events were identified, therefore, a
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quantitative analysis was not deemed necessary. See Note 8 to the consolidated financial statements for additional information
on the Company’s goodwill and intangibles recorded in the periods presented.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Interest Rate Risk Management
Market risk reflects the risk of economic loss resulting from changes in interest rates and other relevant market prices.
This risk of loss can be reflected in either reduced potential net interest revenue in future periods or diminished market values of
financial assets. The Company’s market risk arises primarily from IRR that is inherent in its lending, investment and deposit
taking activities.
The main causes of IRR are the differing structural characteristics of our assets, liabilities and off-balance sheet
obligations and their cumulative net reaction to changing interest rates. These structural characteristics include timing
differences in maturity or repricing and the effect of embedded options such as loan prepayments, securities prepayments and
calls, interest rate caps, floors, collars, and deposit withdrawal options. In addition to these sources of IRR, basis risk results
from differences in the spreads between various market interest rates and changes in the slope of the yield curve can contribute
to additional IRR.
We evaluate IRR and develop guidelines regarding balance sheet composition and re-pricing, funding sources and
pricing, and off-balance sheet commitments that aim to moderate IRR. We use financial simulation models that reflect various
interest rate scenarios and the related impact on NII and EVE over specified periods of time. NII is a shorter-term indicator
while EVE is a longer-term indicator of IRR. We refer to this process as ALM.
The primary objective of ALM is to manage interest rate risk within a desired risk tolerance for potential fluctuations
in NII and EVE throughout different interest rate cycles, which we aim to achieve through management of interest rate sensitive
earning assets and liabilities. In general, we seek to maintain a desired risk tolerance with asset and liability balances within
maturity and repricing characteristics to limit our exposure to acceptable earnings volatility and changes in the value of assets
and liabilities as interest rates fluctuate over time. Adjustments to maturity categories can be accomplished either by
lengthening or shortening the duration of an individual asset or liability category, or externally with interest rate derivative
contracts, such as interest rate swaps, caps, collars, and floors. See “—Interest Rate Exposure” below for a more detailed
discussion of our various derivative positions.
Our ALM strategy is formulated and monitored by our ALCO in accordance with policies approved by the Board of
Directors. ALCO meets regularly to review, among other things, the sensitivity of our assets and liabilities to interest rate
changes, the book and market values of assets and liabilities, unrealized gains and losses, recent purchase and sale activity,
maturities of securities and borrowings, and projected future transactions. ALCO also establishes and approves pricing and
funding strategies with respect to overall asset and liability composition. ALCO reports regularly to our Risk Committee of the
Board of Directors.
Financial simulation models are the primary tools we use to measure IRR exposures. These simulation models
incorporate all of our earning assets and liabilities. By examining a range of hypothetical deterministic interest rate scenarios,
these models provide management with information regarding the potential impact on NII and EVE caused by changes in
interest rates.
The models simulate the cash flows and accounting accruals generated by the financial instruments on our balance
sheet, as well as the cash flows generated by the new business that we anticipate over a 60-month forecast horizon. However,
past the 36-month mark, the growth of the balances is static in the forecast. Numerous assumptions are made in the modeling
process, including balance sheet composition, re-pricing, a combination of market data and internal historical experiences, and
maturity characteristics of existing and new business. These assumptions are reviewed regularly. Additionally, loan and
investment prepayments, administered rate account elasticity, and other option risks are considered as well as the uncertainty
surrounding future customer behavior. Because our modeling is limited by the predictive power of historical data and current
assumptions, and because our balance sheet will be actively managed in the event of a change in interest rates, simulation
results, including those discussed in “—Interest Rate Exposure” immediately below, are not intended as a forecast of the actual
effect of a change in market interest rates on our NII or EVE, or indicative of management’s expectations of actual results in the
event of a fluctuation in market interest rates; however, these results are used to help measure the potential risks related to IRR.
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Interest Rate Exposure
Based upon the current interest rate environment at December 31, 2024, our simulation model projects our sensitivity
to an instantaneous increase or decrease in interest rates over a one-year period as follows:
TABLE 34—INTEREST RATE SENSITIVITY
(Dollars in millions)
Net Interest Income
Economic Value of Equity
Change (in Basis Points) in Interest Rates (12-Month Projection)
Amount
Percent
Amount
Percent
+ 200 BP
$
63.0
4.0 % $
(710.0)
(9.0) %
+ 100 BP
32.0
2.0
(351.0)
(4.5)
- 100 BP
(32.0)
(2.1)
293.0
3.7
- 200 BP
(70.0)
(4.5)
501.0
6.4
Increase (Decrease)
Both the NII and EVE simulations include assumptions regarding balances, asset prepayment speeds, deposit and
borrowings repricing and runoff and interest rate relationships among balances that management believes to be reasonable for
the various interest rate environments. Differences in actual occurrences from these assumptions may change our market risk
exposure.
See “Table 15 – Maturity Distribution of AFS Securities” that shows the maturities and weighted average yields for
the carrying value of the available for sale securities as of December 31, 2024, and “Table 18 – Interest Rate Sensitivity of
Loans” that shows the maturity distribution based on remaining maturities of the Company’s loan and lease portfolio and the
interest rate sensitivity of the Company’s loans and leases maturing after one year at December 31, 2024.
Derivative Positions
Overview. Our Board of Directors has authorized the ALCO to utilize financial futures, forward sales, options, interest
rate swaps, caps, collars, and floors, and other instruments to the extent appropriate, in accordance with regulations and our
internal policy. From time to time, we expect to use interest rate swaps, caps, collars, and floors as macro hedges against
inherent rate sensitivity in our assets and our liabilities to synthetically alter the maturities or re-pricing characteristics of assets
or liabilities to reduce imbalances.
We currently engage in only the following types of hedges: (1) those which enable us to transfer the interest rate risk
exposure involved in our daily business activities; and (2) those which serve to alter the market risk inherent in our investment
portfolio, mortgage pipeline, mortgage servicing rights, or liabilities and thus help us to manage earnings and market value
volatility within approved risk tolerances.
The following is a discussion of our current derivative positions related to IRR.
Interest Rate Lock Commitments. In the ordinary course of business, the Company enters into certain commitments
with customers in connection with residential mortgage loan applications for loans the Company intends to sell. Such
commitments are considered derivatives under current accounting guidance and are required to be recorded at fair value. The
change in fair value of these instruments is reflected currently in the mortgage banking revenue of the consolidated statements
of income. The fair value of these derivatives is recorded on the consolidated balance sheets in other assets and other liabilities.
Forward Sales Commitments. The Company enters into forward sales commitments of MBS with investors to mitigate
the effect of the interest rate risk inherent in providing interest rate lock commitments to customers. During the period from
commitment date to closing date, the Company is subject to the risk that market rates of interest may change. In an effort to
mitigate such risk, forward delivery sales commitments, under which the Company agrees to deliver certain MBS, are
established. These commitments are non-hedging derivatives in accordance with current accounting guidance and recorded at
fair value, with changes in fair value reflected currently in the mortgage banking revenue of the consolidated statements of
income. The fair value of these derivatives is recorded on the consolidated balance sheets in other assets and other liabilities.
Mortgage Servicing Right Hedges. The value of our MSR is dependent on changes in market interest rates. In order to
mitigate the effects of changes in rates on the value of our MSR, the Company has used various instruments (including but not
limited to Treasury options, Treasury, SOFR and TBA futures and forwards, swap futures, etc.) as economic hedges.
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Agreements Not Designated as Hedging Derivatives. The Company enters into interest rate swap, floor, cap and collar
agreements on commercial loans with customers to meet the financing needs and interest rate risk management needs of its
customers. At the same time, the Company enters into offsetting interest rate swap agreements with a financial institution in
order to minimize the Company’s interest rate risk. These interest rate agreements are non-hedging derivatives and are recorded
at fair value with changes in fair value reflected in noninterest income. The fair value of these derivatives is recorded on the
consolidated balance sheets in other assets and other liabilities.
See Note 20 to the consolidated financial statements for additional information regarding our derivative financial
instruments.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To the Board of Directors of Cadence Bank:
The Company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. GAAP. The Company’s internal control over financial
reporting includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and directors of the Company; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including the Chief Executive Officer and the Chief
Financial Officer, the Company conducted an assessment of the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on
management’s assessment and those criteria, management believes that the Company maintained effective internal control over
financial reporting as of December 31, 2024.
The Company’s independent registered public accounting firm has issued a report on the effectiveness of the
Company’s internal control over financial reporting. That report appears on page 95 of this Report.
Date:
February 21, 2025
/s/ James D. Rollins III
James D. Rollins III
Chief Executive Officer
Date:
February 21, 2025
/s/ Valerie C. Toalson
Valerie C. Toalson
Chief Financial Officer and
President - Banking Services
(Principal Accounting Officer)
94
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors and Audit Committee
Cadence Bank
Tupelo, Mississippi
Opinion on the Internal Control over Financial Reporting
We have audited Cadence Bank’s (the “Company”) internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated
Framework: (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of December 31, 2024 and 2023, and for each of the
years in the three-year period ended December 31, 2024, and our report dated February 21, 2025, expressed an unqualified
opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Definitions and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Forvis Mazars, LLP
Charlotte, North Carolina
February 21, 2025
95
Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors and Audit Committee
Cadence Bank
Tupelo, Mississippi
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Cadence Bank and Subsidiaries (the “Company”) as of
December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income (loss), shareholders’
equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results
of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with
accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 21, 2025, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due
to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below arises from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the
accounts or disclosures to which it relates.
Allowance for Credit Losses
As described in Notes 1, 5 and 6, the Company’s loan portfolio totaled $33.7 billion as of December 31, 2024, and the
allowance for credit losses on loans (“ACL”) was $460.8 million. This represents an estimate of expected losses inherent within
the Company’s loan portfolio.
The Company bases its estimates of credit losses on three primary components: (1) estimates of expected losses that exist in
various segments of performing loans and leases over the remaining life of the loan portfolio using a reasonable and
supportable economic forecast; (2) specifically identified losses in individually analyzed credits which are collateral dependent;
and (3) qualitative factors related to economic conditions, portfolio concentrations, regulatory policy updates, and other relevant
factors that address estimates of expected losses not fully addressed based upon management’s judgment of portfolio
96
conditions. The Company utilizes credit risk models to estimate the probability of default and loss given default of loans over
their remaining life. The product of the probability of default and loss given default derives a base expected loss rate for each
loan. The base expected loss rate is adjusted by way of econometric models that measure the direction and magnitude of change
in expected loss rates given a change in forecasted economic variables.
We identified the valuation of the ACL as a critical audit matter. The principal considerations for our determination of the ACL
as a critical audit matter includes the subjectivity and complexity involved in management’s determination of credit loss
estimates and assumptions, specifically the determination of weightings applied to the reasonable and supportable forecasts and
management’s adjustment in determining the economic conditions qualitative factor. This required an increased auditor effort,
including specialized skill and knowledge, and a high degree of auditor subjectivity in evaluating the estimated credit losses for
the loan portfolio.
The primary procedures we performed to address this critical audit matter included:
•
Evaluated and tested the design and operating effectiveness of controls, including those related to technology, over the
ACL, including:
◦
The completeness and accuracy of inputs into the model used to determine the allowance for credit losses,
◦
Management’s review of a reasonable and supportable forecast,
◦
Management’s review of the qualitative adjustments to the modeled output, including management’s review
of the determination of the economic conditions qualitative adjustment,
•
Evaluated management’s application of qualitative adjustments to the ACL, including testing the accuracy of the
supporting calculation and evaluating whether the qualitative factors, including the economic conditions qualitative
adjustment, appropriately addressed the risks that were not fully accounted for in the quantitative component of the
methodology;
•
Evaluated management’s determination of reasonable and supportable forecast, including testing the application of the
forecast and the related scenario weighting, in both the quantitative and qualitative calculation.
/s/ Forvis Mazars, LLP
We have served as the Company’s auditor since 2019.
Charlotte, North Carolina
February 21, 2025
97
Consolidated Balance Sheets
Cadence Bank and Subsidiaries
(In thousands, except share and per share amounts)
December 31, 2024
December 31, 2023
ASSETS
Cash and due from banks
$
624,884 $
798,177
Interest bearing deposits with other banks and Federal funds sold
1,106,692
3,434,088
Total cash and cash equivalents
1,731,576
4,232,265
Available for sale securities, at fair value
7,293,988
8,075,476
Loans and leases, net of unearned income
33,741,755
32,497,022
Allowance for credit losses
460,793
468,034
Net loans and leases
33,280,962
32,028,988
Loans held for sale, at fair value
244,192
186,301
Premises and equipment, net
783,456
802,133
Goodwill
1,366,923
1,367,785
Other intangible assets, net
83,190
100,191
Bank-owned life insurance
651,838
642,840
Other assets
1,583,065
1,498,531
TOTAL ASSETS
$
47,019,190 $
48,934,510
LIABILITIES
Noninterest bearing demand deposits
$
8,591,805 $
9,232,068
Interest bearing demand and money market deposits
19,345,114
19,276,596
Savings
2,588,406
2,720,913
Time deposits
9,970,876
7,267,560
Total deposits
40,496,201
38,497,137
Securities sold under agreement to repurchase
23,616
451,516
Short-term BTFP borrowings
—
3,500,000
Subordinated and long-term borrowings
10,706
438,460
Other liabilities
918,984
879,554
TOTAL LIABILITIES
41,449,507
43,766,667
SHAREHOLDERS' EQUITY
Series A Non-Cumulative Perpetual Preferred stock, $0.01 par value per
share; authorized - 500,000,000 shares; issued and outstanding - 6,900,000
shares for both periods presented
166,993
166,993
Common stock, $2.50 par value per share; authorized - 500,000,000 shares;
issued and outstanding - 183,527,575 and 182,871,775 shares, respectively
458,819
457,179
Capital surplus
2,742,913
2,743,066
Accumulated other comprehensive loss
(694,495)
(761,829)
Retained earnings
2,895,453
2,562,434
TOTAL SHAREHOLDERS' EQUITY
5,569,683
5,167,843
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
47,019,190 $
48,934,510
See accompanying notes to the consolidated financial statements.
98
Consolidated Statements of Income
Cadence Bank and Subsidiaries
Year Ended December 31,
(In thousands, except per share amounts)
2024
2023
2022
INTEREST REVENUE:
Loans and leases
$
2,164,633
$
2,004,812
$
1,342,662
Available for sale securities:
Taxable
243,466
208,122
183,915
Tax-exempt
2,598
9,206
10,079
Loans held for sale
6,161
4,450
7,554
Short-term investments
130,499
83,577
16,371
Total interest revenue
2,547,357
2,310,167
1,560,581
INTEREST EXPENSE:
Interest bearing demand deposits and money market accounts
573,826
472,723
109,893
Savings
14,922
14,955
5,519
Time deposits
368,572
246,476
24,253
Federal funds purchased and securities sold under agreement to repurchase
4,101
32,581
13,432
Short-term debt
136,434
172,940
36,863
Subordinated and long-term debt
13,287
19,136
19,330
Total interest expense
1,111,142
958,811
209,290
Net interest revenue
1,436,215
1,351,356
1,351,291
Provision for credit losses
71,000
80,000
7,000
Net interest revenue, after provision for credit losses
1,365,215
1,271,356
1,344,291
NONINTEREST REVENUE:
Wealth management
94,922
86,928
80,486
Deposit service charges
73,497
61,718
73,478
Credit card, debit card and merchant fees
50,245
49,784
58,160
Mortgage banking
17,303
18,978
44,860
Security losses, net
(2,962)
(435,652)
(384)
Other
123,505
101,901
85,885
Total noninterest revenue
356,510
(116,343)
342,485
NONINTEREST EXPENSE:
Salaries and employee benefits
609,307
634,722
634,843
Occupancy and equipment
114,175
110,972
114,460
Data processing and software
121,884
120,443
111,107
Deposit insurance assessments
39,922
72,224
18,712
Amortization of intangibles
15,902
19,388
18,432
Pension settlement expense
—
11,826
9,023
Merger expense
—
5,192
50,845
Other
144,338
181,156
152,332
Total noninterest expense
1,045,528
1,155,923
1,109,754
Income (loss) from continuing operations before income taxes
676,197
(910)
577,022
Income tax expense (benefit)
152,593
(4,594)
129,705
Income from continuing operations
$
523,604
$
3,684
$
447,317
Income from discontinued operations before income taxes
—
727,591
22,353
Income tax expense from discontinued operations
—
188,971
6,433
Income from discontinued operations, net of income taxes
—
538,620
15,920
Net income
523,604
542,304
463,237
Less: preferred dividends
9,488
9,488
9,488
Net income available to common shareholders
$
514,116
$
532,816
$
453,749
Basic earnings (loss) per common share from continuing operations
$
2.81
$
(0.03) $
2.39
Basic earnings per common share
$
2.81
$
2.92
$
2.47
Diluted earnings (loss) per common share from continuing operations
$
2.77
$
(0.03) $
2.37
Diluted earnings per common share
$
2.77
$
2.92
$
2.46
See accompanying notes to the consolidated financial statements.
99
Consolidated Statements of Comprehensive Income (Loss)
Cadence Bank and Subsidiaries
Year Ended December 31,
(In thousands)
2024
2023
2022
Net income
$
523,604 $ 542,304 $
463,237
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on AFS securities:
Net unrealized gains (losses), net of income taxes of $(21,118), $(243,832), and
$337,781
68,286
788,474 (1,096,614)
Reclassification adjustment for net losses realized in net income, net of
income taxes of $700, $102,901, and $91
(2,262)
(332,751)
(293)
Net change in unrealized gains (losses) on AFS securities, net of tax
66,024
455,723 (1,096,907)
Recognized employee benefit plan net periodic benefit cost, net of income taxes
of $(405), $(1,542), and $(4,248)
1,310
4,986
13,738
Other comprehensive income (loss), net of tax
67,334
460,709 (1,083,169)
Comprehensive income (loss)
$
590,938 $ 1,003,013 $ (619,932)
See accompanying notes to the consolidated financial statements.
100
Consolidated Statements of Shareholders' Equity
Cadence Bank and Subsidiaries
Preferred Stock
Common Stock
Capital
Surplus
Accumulated
Other
Comprehensive
(Loss) Income
Retained
Earnings
Total
Shareholders'
Equity
(In thousands, except share and per share amounts)
Shares
Amount
Shares
Amount
Balance at December 31, 2021
6,900,000
$ 166,993
188,337,658
$ 470,844
$ 2,841,998
$
(139,369) $ 1,907,521
$
5,247,987
Net income
—
—
—
—
—
—
463,237
463,237
Other comprehensive loss, net of tax
—
—
—
—
—
(1,083,169)
—
(1,083,169)
Equity based compensation, net of forfeitures and
shares withheld to cover taxes
—
—
242,313
606
35,620
—
—
36,226
Repurchase of stock
—
—
(6,142,706)
(15,357)
(168,227)
—
—
(183,584)
Preferred dividends declared, $1.38 per share
—
—
—
—
—
—
(9,488)
(9,488)
Cash dividends declared, $0.88 per share
—
—
—
—
—
—
(159,835)
(159,835)
Balance at December 31, 2022
6,900,000
$ 166,993
182,437,265
$ 456,093
$ 2,709,391
$
(1,222,538) $ 2,201,435
$
4,311,374
Net income
—
—
—
—
—
—
542,304
542,304
Other comprehensive income, net of tax
—
—
—
—
—
460,709
—
460,709
Equity based compensation, net of forfeitures and
shares withheld to cover taxes
—
—
334,910
837
30,188
—
—
31,025
Exercise of stock options
—
—
226,705
567
5,579
—
—
6,146
Repurchase of stock, net of excise tax
—
—
(127,105)
(318)
(2,092)
—
—
(2,410)
Preferred dividends declared, $1.38 per share
—
—
—
—
—
—
(9,488)
(9,488)
Cash dividends declared, $0.94 per share
—
—
—
—
—
—
(171,622)
(171,622)
Cumulative effect of change in accounting
principle, net of tax, for ASU 2022-02
—
—
—
—
—
—
(195)
(195)
Balance at December 31, 2023
6,900,000
$ 166,993
182,871,775
$ 457,179
$ 2,743,066
$
(761,829) $ 2,562,434
$
5,167,843
Net income
—
—
—
—
—
—
523,604
523,604
Other comprehensive income, net of tax
—
—
—
—
—
67,334
—
67,334
Equity based compensation, net of forfeitures and
shares withheld to cover taxes
—
—
1,076,811
2,693
9,646
—
—
12,339
Exercise of stock options
—
—
895,289
2,238
22,353
—
—
24,591
Repurchase of stock, net of excise tax
—
—
(1,316,300)
(3,291)
(32,152)
—
—
(35,443)
Preferred dividends declared, $1.38 per share
—
—
—
—
—
—
(9,488)
(9,488)
Cash dividends declared, $1.00 per share
—
—
—
—
—
—
(182,637)
(182,637)
Cumulative effect of change in accounting
principle, net of tax, for ASU 2023-02
— -
— -
—
—
—
—
1,540
1,540
Balance at December 31, 2024
6,900,000
$ 166,993
183,527,575
$ 458,819
$ 2,742,913
$
(694,495) $ 2,895,453
$
5,569,683
See accompanying notes to the consolidated financial statements.
101
Consolidated Statements of Cash Flows
Cadence Bank and Subsidiaries
Year Ended December 31,
(In thousands)
2024
2023
2022
Operating Activities:
Net income
$
523,604 $
542,304
$
463,237
Adjustments to reconcile net income to net cash provided by operations:
Depreciation, amortization, and accretion
202,566
238,607
255,821
Deferred income tax expense
8,219
892
7,822
Provision for credit losses
71,000
80,000
7,000
Gain on sale of loans, net
(21,351)
(17,033)
(46,083)
Gain on disposition of businesses
(14,980)
(706,588)
—
Loss on sales of available for sale securities, net
2,962
435,652
384
Unrealized gain on limited partnerships, net
(11,003)
(8,024)
(8,169)
Share-based compensation expense
32,710
39,983
36,877
Proceeds from payments and sales of loans held for sale
1,234,521
1,292,365
2,093,204
Origination of loans held for sale
(1,224,983)
(1,333,522)
(1,965,956)
Decrease (increase) in accrued interest receivable
2,010
(15,247)
(41,193)
Increase in accrued interest payable
10,171
73,149
19,050
Net (increase) decrease in prepaid pension asset
(4,619)
5,073
(5,037)
Decrease (increase) in other assets
39,145
(56,172)
20,567
Increase in other liabilities
22,016
4,394
75,360
Other, net
(15,326)
(12,327)
15,031
Net cash provided by operating activities
856,662
563,506
927,915
Investing Activities:
Proceeds from disposition of business, net of cash transferred
15,308
861,364
—
Purchases of available for sale securities
(751,846)
(2,333,245)
(787,318)
Proceeds from sales of available for sale securities
15,059
4,294,947
369,614
Proceeds from maturities, calls, and payments of available for sale
securities
1,576,542
2,021,799
2,569,336
(Purchases) sales of FRB and FHLB stock, net
(97,864)
121,243
(131,055)
Increase in loans, net
(1,486,004)
(2,333,391)
(3,630,970)
Purchases of premises and equipment
(80,074)
(98,283)
(94,499)
Proceeds from sales of premises and equipment
35,680
17,078
9,887
Proceeds from disposition of foreclosed and repossessed property
8,092
8,269
23,392
Acquisition of businesses, net of cash paid
—
—
(11,511)
Proceeds from sales of loans transferred to held for sale
60,578
26,153
64,580
Net death benefits received on (purchases of) bank owned life insurance
6,016
33
(17,564)
Purchases of tax credit investments
(71,703)
(83,813)
(66,637)
Purchases of limited partnership interests
(28,102)
(26,980)
(30,298)
Other, net
16,160
(79,126)
19,967
Net cash (used in) provided by investing activities
(782,158)
2,396,048
(1,713,076)
102
Consolidated Statements of Cash Flows (continued)
Cadence Bank and Subsidiaries
Year Ended December 31,
(In thousands)
2024
2023
2022
Financing Activities:
Increase (decrease) in deposits, net
1,999,373
(459,654)
(863,976)
Net change in securities sold under agreement to repurchase and federal
funds purchased
(427,900)
(457,220)
(373,452)
Net change in BTFP borrowings and short-term FHLB advances
(3,500,000)
399,769
3,100,231
Long-term borrowings called, repurchased, and repaid
(422,560)
(22,536)
(17,844)
Exercise of stock options
24,591
6,146
—
Repurchase of common stock
(35,443)
(2,410)
(183,584)
Cash dividends paid on common stock
(182,639)
(171,791)
(160,777)
Cash dividends paid on preferred stock
(9,488)
(9,488)
(9,488)
Cash paid for tax withholding on vested share-based compensation and
other
(21,127)
(7,608)
(4,869)
Other, net
—
1,744
—
Net cash (used in) provided by financing activities
(2,575,193)
(723,048)
1,486,241
Net (decrease) increase in cash and cash equivalents
(2,500,689)
2,236,506
701,080
Cash and cash equivalents at beginning of period
4,232,265
1,995,759
1,294,679
Cash and cash equivalents at end of period
$
1,731,576 $
4,232,265
$
1,995,759
Supplemental Cash Flow Disclosures
Cadence Bank and Subsidiaries
Year Ended December 31,
(In thousands)
2024
2023
2022
Supplemental Disclosures
Cash paid during the period for:
Interest
$
1,100,972 $
885,661 $
190,241
Income taxes, net of refunds
115,078
163,452
72,445
Cash paid for amounts included in lease liabilities
17,812
20,262
22,221
Non-cash investing activities, at fair value:
Acquisition of real estate and other assets in settlement of loans
7,917
7,531
4,337
Transfers of loans held for sale to loans
8,123
45,307
1,624
Transfers of loans to loans held for sale
102,202
26,083
23,533
Right of use assets obtained (reduced) in exchange for new operating lease
liabilities
7,433
(657)
28,663
Increase in funding obligations for certain tax credit investments
60,093
152,222
83,765
See accompanying notes to consolidated financial statements.
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Notes to Consolidated Financial Statements
Cadence Bank and Subsidiaries
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation
The Company is a regional bank with dual headquarters in Houston, Texas and Tupelo, Mississippi with $47.0 billion
in total assets at December 31, 2024. The Company has commercial banking operations in Alabama, Arkansas, Florida,
Georgia, Louisiana, Mississippi, Missouri, Tennessee, and Texas. The Company and its subsidiaries provide commercial
banking, leasing, mortgage origination and servicing, brokerage, trust, and investment advisory services to corporate customers,
local governments, individuals, and other financial institutions through an extensive network of branches and offices.
The Company and its subsidiaries follow GAAP, including, where applicable, general practices within the banking
industry. The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant
intercompany accounts and transactions have been eliminated in consolidation. The assessment of whether or not the Company
has a controlling interest (i.e., the primary beneficiary) in a VIE is performed on an on-going basis. All equity investments in
non-consolidated VIEs are included in “other assets” in the Company’s consolidated balance sheets (see Note 23 for more
information).
Effective May 17, 2024, the Company completed the sale of Cadence Business Solutions, LLC, its payroll processing
business unit, resulting in a net gain on sale of approximately $12.0 million. The gain on sale was included in Other noninterest
revenue within the accompanying consolidated statements of income.
Certain amounts reported in prior years have been reclassified to conform to the 2024 presentation. These
reclassifications did not materially impact the Company’s consolidated financial statements.
In accordance with GAAP, the Company’s management evaluated subsequent events for potential recognition or
disclosure in the consolidated financial statements through the date of the issuance of the consolidated financial statements.
Discontinued Operations
On October 24, 2023, the Company entered into the Stock Purchase Agreement regarding the sale of Cadence
Insurance to Arthur J. Gallagher Risk Management Services, LLC and Arthur J. Gallagher & Co pursuant to which the
Company agreed to sell all of the issued and outstanding shares of capital stock of Cadence Insurance to Gallagher for a
purchase price of $904.0 million in cash, subject to customary purchase price adjustments. The transaction closed on November
30, 2023. Cadence Insurance’s operating results have been presented as “discontinued operations” within the accompanying
consolidated statements of income. Cash flows from both continuing and discontinued operations are included in the
consolidated statements of cash flows. There was no activity from these discontinued operations in 2024. See Note 2 and Note
19 for further discussion.
Nature of Operations
The Company operates under a state bank charter and is subject to regulation by the Federal Reserve Bank of St.
Louis. The Company is a regional banking franchise with more than 350 branch locations across the South, Midwest and Texas.
Services and products include consumer banking, consumer loans, mortgages, home equity lines and loans, credit cards,
commercial and business banking, treasury management, specialized lending, asset-based lending, commercial real estate,
equipment financing, correspondent banking, SBA lending, foreign exchange, wealth management, investment and trust
services, financial planning, and retirement plan management.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the ACL,
valuation of goodwill, intangible assets, and deferred income taxes.
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Securities
AFS Securities
Securities classified as AFS are those debt securities that are intended to be held for an indefinite period of time, but
not necessarily to maturity. Any decision to sell a security classified as AFS would be based on various factors, including
movements in interest rates, liquidity needs, security risk assessments, changes in the mix of assets and liabilities and other
similar factors. These securities are carried at their estimated fair value, and the net unrealized gain or loss is reported as AOCI,
net of tax, until realized upon sale. Premiums and discounts are recognized in interest income using the effective interest
method.
Realized gains and losses on the sale of securities AFS are determined by specific identification using the cost on a
trade date basis and are included in securities (losses) gains, net in the Company’s consolidated statements of income.
The Company evaluates available for sale securities in an unrealized loss position to determine whether the decline in
the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors. Any
impairment that is not credit related is recognized in other comprehensive income, net of applicable taxes. Credit-related
impairment is recognized as an ACL on the balance sheet, limited to the amount by which the amortized cost basis exceeds the
fair value with a charge to earnings. In evaluating available for sale securities in unrealized loss positions for impairment,
management considers the magnitude and duration of the decline, as well as the reasons for the decline, whether the securities
are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, whether the
Company would be required to sell the securities before a full recovery of costs and the results of reviews of the issuers’
financial condition, among other facts. See Note 3 for additional information on AFS securities.
Held-to-Maturity Securities
Securities classified as held-to-maturity are those debt securities for which there is a positive intent and ability to hold
to maturity. These securities are carried at cost, adjusted for amortization of premium and accretion of discount, computed by
the effective interest method. At December 31, 2024 and 2023, the Company did not have any held-to-maturity securities.
Trading Account Securities
Trading account securities are securities that are held for the purpose of selling them at a profit. The Company had no
trading account securities at December 31, 2024 and 2023.
Securities Purchased and Sold Under Agreements to Resell or Repurchase
Securities purchased under agreements to resell are accounted for as short-term investments and securities sold under
agreements to repurchase are accounted for as collateralized financing transactions and are recorded at the amounts at which the
securities were acquired or sold plus accrued interest. The securities pledged as collateral are generally U.S. government and
federal agency securities.
FHLB Stock
The Company has ownership in FHLB of Dallas stock which does not have readily determinable fair value and no
quoted market value, as ownership is restricted to member institutions, and all transactions take place at par value with the
FHLB as the only purchaser. Therefore, the Company accounts for this investment as a long-term asset and carries it at cost.
Management’s determination as to whether this investment is impaired is based on management’s assessment of the ultimate
recoverability of the par value (cost) rather than recognizing temporary declines in fair value. Investment in FHLB stock is
required for membership in the FHLB system and in relation to the level of FHLB advances. FHLB stock is included in other
assets in the accompanying consolidated balance sheets.
FRB Stock
In November 2024, the Company became a member of the Federal Reserve System. As a member bank, Cadence is
required to purchase and hold shares of capital stock in the Federal Reserve Bank of St. Louis. The capital stock has no readily
determinable fair value and no quoted market value since ownership is restricted to member institutions. Therefore, the capital
stock is carried at cost. Impairment is based on management’s assessment on the recoverability of the cost rather than
recognizing temporary declines in fair value. FRB stock is included in other assets in the accompanying consolidated balance
sheets.
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Derivative Financial Instruments and Hedging Activities
Derivative instruments are accounted for under the requirements of ASC Topic 815, Derivatives and Hedging. ASC
815 requires companies to recognize derivative instruments as either assets or liabilities in the consolidated balance sheets at
fair value. The fair value of derivative positions outstanding is included in other assets and other liabilities in the accompanying
consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying
consolidated statements of cash flows. The Company does not speculate using derivative instruments. See Note 20 for further
discussion and details of derivative financial instruments and hedging activities.
Interest Rate Lock Commitments
In the ordinary course of business, the Company enters into certain commitments with customers in connection with
residential mortgage loan applications for loans the Company intends to sell. Such commitments are considered derivatives
under current accounting guidance and are required to be recorded at fair value. The change in fair value of these instruments is
reflected currently in the mortgage banking revenue of the consolidated statements of income. The fair value of these
derivatives is recorded on the consolidated balance sheets in other assets and other liabilities.
Forward Sales Commitments
The Company enters into forward sales commitments of MBS with investors to mitigate the effect of the interest rate
risk inherent in providing interest rate lock commitments to customers. During the period from commitment date to closing
date, the Company is subject to the risk that market rates of interest may change. In an effort to mitigate such risk, forward
delivery sales commitments, under which the Company agrees to deliver certain MBS, are established. These commitments are
non-hedging derivatives in accordance with current accounting guidance and recorded at fair value, with changes in fair value
reflected currently in the mortgage banking revenue of the consolidated statements of income. The fair value of these
derivatives is recorded on the consolidated balance sheets in other assets and other liabilities.
Agreements Not Designated as Hedging Derivatives
The Company enters into interest rate swap, floor, cap and collar agreements on commercial loans with customers to
meet the financing needs and interest rate risk management needs of its customers. At the same time, the Company enters into
offsetting interest rate swap agreements with a financial institution in order to minimize the Company’s interest rate risk. These
interest rate agreements are non-hedging derivatives and are recorded at fair value with changes in fair value reflected in
noninterest income. The fair value of these derivatives is recorded on the consolidated balance sheets in other assets and other
liabilities.
Foreign Currency Contracts
The Company enters into certain foreign currency exchange contracts on behalf of its clients to facilitate their risk
management strategies, while at the same time entering into offsetting foreign currency exchange contracts with another
counterparty in order to minimize the Company’s foreign currency exchange risk. The contracts are short term in nature, and
any gain or loss incurred at settlement is recorded as other noninterest income. The fair value of these contracts is reported in
other assets and other liabilities. The Company does not apply hedge accounting to these contracts.
Risk Participation Agreements
Cadence has both bought and sold credit protection in the form of participations on interest rate swaps (swap
participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary
course of business to serve the credit needs of customers. Swap participations, whereby Cadence has purchased credit
protection, entitle Cadence to receive a payment from the counterparty if the customer fails to make payment on any amounts
due to Cadence upon early termination of the swap transaction. For contracts where Cadence sold credit protection, Cadence
would be required to make payment to the counterparty if the customer fails to make payment on any amounts due to the
counterparty upon early termination of the swap transaction.
Mortgage Servicing Right Hedges
The value of our MSR is dependent on changes in market interest rates. In order to mitigate the effects of changes in
rate on the value of our MSR, the Company has used various instruments as an economic hedge. See Notes 17 and 20 for
further information.
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Counterparty Credit Risk
Derivative contracts involve the risk of dealing with both bank customers and institutional derivative counterparties
and their ability to meet contractual terms. Under Company policy, institutional counterparties must be approved by the
Company’s Asset/Liability Management Committee. The Company’s credit exposure on derivatives is limited to the net fair
value for each counterparty.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the transferred assets is surrendered. Control
is generally considered to have been surrendered when 1) the transferred assets are legally isolated from the Company or its
consolidated affiliates, even in bankruptcy or other receivership, 2) the transferee has the right to pledge or exchange the assets
with no conditions that constrain the transferee and provide more than a trivial benefit to the Company, and 3) the Company
does not maintain the obligation or unilateral ability to reclaim or repurchase the assets. If these sale criteria are met, the
transferred assets are removed from the Company’s balance sheet and a gain or loss on sale is recognized. If not met, the
transfer is recorded as a secured borrowing, and the assets remain on the Company’s balance sheet, the proceeds from the
transaction are recognized as a liability, and gain or loss on sale is deferred until the sale criterion are achieved.
Loans Held-for-Sale
Mortgage Loans Held-for-Sale
The Company has elected to carry loans held-for-sale at fair value. The fair value of loans held-for-sale is based on
commitments outstanding from investors as well as what secondary markets are currently offering for portfolios with similar
characteristics. Loans held-for-sale are subjected to recurring fair value adjustments. Loan sales are recognized when the
transaction closes, the proceeds are collected, ownership is transferred and, through the sales agreement, continuing
involvement consists of the right to service the loan for a fee for the life of the loan, if applicable. Gains and losses on the sale
of loans held-for-sale are recorded as part of mortgage banking revenue on the consolidated statements of income. Fees on
mortgage loans sold individually in the secondary market, including origination fees, service release premiums, processing and
administrative fees, and application fees, are recognized as mortgage banking revenue in the period in which the loans are sold.
Buyers generally have recourse to return a purchased loan to the Company under limited circumstances. Recourse
conditions may include early payment default, breach of representations or warranties, and documentation deficiencies. During
2024, 2023, and 2022, an insignificant number of loans were returned to the Company. At December 31, 2024 and 2023, the
Company had reserved $1.8 million and $2.3 million, respectively, for probable losses from representation and warranty
obligations.
GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans
that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and
without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100% of the
remaining principal balance of the loan. Under ASC 860, this buyback option is considered a conditional option until the
delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained
effective control over these loans under the unconditional buyback option, the loans can no longer be reported as sold and must
be brought back onto the consolidated balance sheet as loans held-for-sale, regardless of whether the Company intends to
exercise the buy-back option. These loans are reported as held-for-sale in accordance with GAAP with the offsetting liability
being reported as other liabilities. Refer to Note 13 for additional information.
Commercial Loans Held-for-Sale
The Company originates certain commercial loans for which a portion is intended for sale. The Company also transfers
certain commercial loans to held-for-sale when management has the intent to sell the loan or a portion of the loan in the near
term. These held-for-sale loans are recorded at fair value. At the time of transfer, write-downs on the loans are recorded as
charge-offs and a new cost basis is established. Any subsequent fair value adjustment is determined on an individual loan basis
and is recognized as a valuation allowance with any charges included in other noninterest expense. Gains and losses on the sale
of these loans are included in other noninterest income when realized.
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Loans and Leases and Related Provision and ACL
Loans and leases are presented in the consolidated financial statements at amortized cost. The components of
amortized cost include unpaid principal balance, unamortized discounts and premiums, and unamortized deferred fees and
costs. Interest income is recognized based on the principal balance outstanding and the stated rate of the loan. Loan origination
fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. Loans
acquired through acquisition are initially recorded at fair value. Discounts and premiums created when the loans were recorded
at their estimated fair values at acquisition are accreted over the remaining term of the loan as an adjustment to the related
loan’s yield. In the event of a loan pay-off, the remaining net deferred origination fees, and unamortized discounts and
premiums are automatically recognized into income. Where doubt exists as to the collectability of the loans and leases, interest
income is recorded as payment is received.
The Company's policy provides that loans and leases are generally placed in nonaccrual status if, in management’s
opinion, payment in full of principal or interest is not expected or payment of principal or interest is more than 90 days past due
for commercial loans and 120 days past due for consumer loans, unless the loan or lease is both well-secured and in the process
of collection. Once placed in nonaccrual status, all accrued but uncollected interest related to the current fiscal year is reversed
against the appropriate interest and fee income on loans and leases account with any accrued but uncollected interest related to
prior fiscal years is charged off against the ACL.
The ACL is maintained through charges to income in the form of a provision for credit losses at a level management
believes is adequate to absorb an estimate of expected credit losses over the contractual life of the loan portfolio as of the
reporting date. Events that are not within the Company’s control, such as changes in economic conditions, could change
subsequent to the reporting date and could cause the ACL to be overstated or understated. The amount of the ACL is affected
by loan charge-offs, which decreases the ACL; recoveries on loans previously charged off, which increases the ACL; the
provision for credit losses charged to income, which increases the ACL; and the release of provision for credit losses charged to
income, which decreases the ACL.
PCD (Loss) is an internal grade for loans with evidence of deterioration of credit quality since origination that are
acquired, and for which it is probable, at acquisition, that the bank will be unable to collect all contractually required payments.
Specific provisions related to PCD (Loss) loans found in ASC 326 include:
•
ASC 326 provides special initial recognition and measurement for the Day One accounting for PCD assets.
•
ASC 326 requires entities that purchase certain financial assets (or portfolios of financial assets) with the intention of
holding them for investment to determine whether the assets have experienced more-than-insignificant deterioration in
credit quality since origination.
•
More-than-insignificant deterioration will generally be determined by the asset’s delinquency status, credit risk rating,
accruing status or other indicators of credit deterioration since origination.
•
An entity initially measures the amortized cost of a PCD asset by adding the acquisition date estimate of expected
credit losses to the asset’s purchase price. Because the initial estimate for expected credit losses is added to the
purchase price to establish the Day One amortized cost, PCD accounting is commonly referred to as a “gross-up”
approach. There is no credit loss expense recognized upon acquisition of a PCD asset; rather the “gross-up” is offset
by establishment of the initial allowance.
•
After initial recognition, the accounting for a PCD asset will generally follow the credit loss model.
•
Interest income for a PCD asset is recognized using the EIR calculated at initial measurement. This EIR is determined
by comparing the amortized cost basis of the instrument to its contractual cash flows, consistent with ASC 310-20.
Accordingly, since the PCD gross-up is included in the amortized cost, the purchase discount related to estimated
credit losses on acquisition is not accreted into interest income. Only the noncredit-related discount or premium is
accreted or amortized, using the EIR that was calculated at the time the asset was acquired.
Loans of $1.0 million or more that are identified as collateral-dependent, which generally include loans internally
graded as impaired or PCD Loss loans, are reviewed by the Impairment Working Group which approves the amount of specific
reserve, if any, and/or charge-off amounts. For loans which are determined to be collateral dependent, the value assigned for
collateral support is influenced by current appraisals, foreclosure bid estimates, market conditions, aging of accounts receivable
or inventory, equipment documentation, observable market prices, estimates of enterprise or economic value, legal issues,
appraisal assumptions and property condition among other factors. For real estate secured loans, collateral support will be
determined by the current appraisals ordered and reviewed by the Appraisal Department, less discounts including foreclosure/
bank ownership, taxes and cost to sell. Generally, an individual reserve of the difference between the Bank’s amortized cost and
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the collateral support is recorded. A reserve of zero is appropriate when the collateral support equals or exceeds the amortized
cost of the loan. The Impairment Working Group reviews the results of each evaluation and approves the final specific
provision amounts, which are then included in the analysis of the adequacy of the ACL in accordance with ASC 326.
New collateral valuations are generally ordered for loans $1.0 million or greater that have characteristics of potential
specific provision, such as delinquency or other loan-specific factors identified by management, when current collateral support
(dated within the prior 12 months) is not available or when the current collateral support uses assumptions that are not
consistent with the expected disposition of the loan collateral. In order to measure a specific provision properly at the time that
a loan is reviewed, a bank officer may estimate the collateral support based upon earlier collateral valuations received from
outside appraisers, sales contracts, approved foreclosure bids, comparable sales, officer estimates or current market conditions
until a new collateral valuation is received. This estimate can be used to determine the extent of the specific provision on the
loan. Management performs a review of the pertinent facts and circumstances of each collateral-dependent loan, such as
changes in outstanding balances, information received from loan officers and receipt of re-appraisals, at least quarterly. As of
each review date, management considers whether additional provision and/or charge-offs should be recorded based on recent
activity related to the loan-specific collateral as well as other relevant comparable assets. Any adjustment to reflect further
exposure, either because management’s periodic review or as a result of updated collateral support, is made through recording
additional ACL provisions and/or charge-offs.
When a guarantor is relied upon as a source of repayment, the Company analyzes the strength of the guaranty. This
analysis varies based on circumstances but may include a review of the guarantor’s personal and business financial statements
and credit history, a review of the guarantor’s tax returns, and the preparation of a cash flow analysis of the guarantor.
Management will continue to update its analysis on individual guarantors as circumstances change.
In the normal course of business, management may grant modifications to borrowers that are experiencing financial
difficulty. Loans identified as meeting the criteria under ASC 310 are identified as an FDM. Any modification, renewal or
forbearance on loans assigned a rating of “Special Mention” or worse, and loans of any rating which show evidence of financial
difficulty is reviewed to determine whether the borrower is experiencing financial difficulty and if so, which terms of the loan
were modified.
If the borrower is experiencing financial difficulty and the loan is modified via forgiveness of principal, reduction in
interest rate to a rate below current market rates for issuance, payment extension or deferral for greater than 6 months (including
extensions granted in the past 12 months), term or maturity date extension, or combination of these specific modification terms,
the modification requires disclosure. See Note 4 for the Company’s reportable modifications.
In the normal course of business, the Company assumes risks in extending credit. The Company manages these risks
through underwriting in accordance with its lending policies, loan review procedures and the diversification of its loan and
lease portfolio. Although it is not possible to predict credit losses with certainty, management regularly reviews the
characteristics of the loan and lease portfolio to determine its overall risk profile and quality.
The provision for credit losses is the periodic cost (or credit) of providing an allowance or reserve for expected losses
on loans and leases. The Board of Directors has appointed a Credit Committee, composed of senior management and lending
administration staff which meets on a quarterly basis, or more frequently if required, to review the recommendations of several
internal working groups developed for specific purposes including the ACL, specific provision amounts, and charge-offs. The
ACL Working Group bases its estimates of credit losses on three primary components: (1) estimates of expected losses that
exist in various segments of performing loans and leases over the remaining life of the loan portfolio using a reasonable and
supportable economic forecast; (2) specifically identified losses in individually analyzed credits which are collateral dependent;
and (3) qualitative factors related to economic conditions, portfolio concentrations, regulatory policy updates, and other relevant
factors that address estimates of expected losses not fully addressed based upon management’s judgment of portfolio
conditions.
For modeling purposes, loans with similar loan characteristics (including but not limited to underwriting factors,
borrower financial conditions, credit history, collateral type, market conditions, etc.) are run individually through one of several
credit risk models to determine a one year probability of default and loss given default. These two figures are then multiplied to
create a one-year expected loss. All loans are then further segmented by portfolio for inclusion in one of several ACL models to
estimate the loan’s lifetime losses based on its one-year loss estimate. The lifetime loss estimate generated by the model
component includes a macroeconomic forecast that includes several factors over a reasonable and supportable period, which the
Company has determined is an eight quarter time period. After the reasonable and supportable period, all loans revert to their
historic one year expected loss estimates. The group may also consider the results of alternate models and calculations to ensure
that the reserve includes all appropriate risk components.
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The Company’s reasonable and supportable eight quarter economic forecast is utilized to estimate credit losses before
reverting to longer term historical loss experience. The Company subscribes to various economic services and publications to
assist with the development of inputs used in the modeling and qualitative framework for the ACL calculation. The economic
forecast considers changes in real gross domestic product, nominal disposable income, unemployment rate, equity valuations
and related volatility, valuations for residential and commercial real estate, and other indicators that may be correlated with the
Company’s expected credit losses.
The Company excludes accrued interest from interest income when it is determined that it is probable that all
contractual principal and interest will not be collected for loans. For loans with available commitments that are not
unconditionally cancellable, expected losses are calculated by applying comparable loss rates on funded loans to the unfunded
commitment balances. In addition, the loan type and expected line utilization are considered when estimating losses on
unfunded commitments.
Attention is paid to the quality of the loan and lease portfolio through a formal loan review process. An independent
loan review department of the Company is responsible for reviewing the credit rating and classification of individual credits and
assessing trends in the portfolio, adherence to internal credit policies and procedures and other factors that may affect the
overall adequacy of the ACL. The ACL Working Group is responsible for ensuring that the ACL provides adequate coverage of
expected losses. The ACL Working Group meets at least quarterly to determine the amount of adjustments to the ACL. The
ACL Working Group is composed of senior management from the Company’s credit administration, risk, and finance
departments. The Impairment Working Group is responsible for evaluating individual loans that have been specifically
identified through various channels, including examination of the Company’s watch list, past due listings, and loan officer
assessments. For all loans identified, an analysis is prepared to determine if the loan is collateral dependent and the extent of
any loss exposure to be reviewed by the Impairment Working Group. The Impairment Working Group reviews all loans
restructured in an FDM if the loan is $1.0 million or greater to determine if it is probable that the Company will be unable to
collect the contractual principal and interest on the loan. An evaluation of the circumstances surrounding the loan is performed
to determine whether the loan was collateral-dependent. The fair value of the underlying collateral is considered if the loan is
collateral-dependent. The Impairment Working Group meets at least quarterly. The Impairment Working Group is made up of
senior management from the Company’s lending administration, risk, and finance departments.
If a loan to a borrower experiencing financial difficulty is modified, regardless of the modification type, the loan is
individually evaluated and reserved for as needed. Should the borrower’s financial condition, collateral protection or
performance deteriorate, warranting reassessment of the loan rating or specific provision, additional reserves and/or charge-offs
may be required.
Any loan or portion thereof which is classified as “loss” or which is determined by management to be uncollectible,
because of factors such as the borrower’s failure to pay interest or principal, the borrower’s financial condition, economic
conditions in the borrower’s industry or the inadequacy of underlying collateral, is charged off. See Note 4 for additional
information on loans and leases and Note 5 for additional information on the ACL.
Premises and Equipment
Premises and equipment are stated at cost, less accumulated depreciation and amortization. Provisions for depreciation
and amortization, computed using straight-line methods, are charged to expense over the estimated useful lives of the assets.
Costs of major additions and improvements are capitalized. Expenditures for routine maintenance and repairs are charged to
expense as incurred. Upon retirement, sale, or other disposition of property and equipment, the cost and accumulated
depreciation are eliminated from the accounts, and any gains or losses are included in income. See Note 6 for additional
information.
Leases
The Company leases various premises and equipment. At the inception of the contract, the Company determines if an
arrangement is or contains a lease and will recognize on the balance sheet a lease asset for its right to use the underlying asset
and a lease liability for the corresponding lease obligation for contracts longer than a year. Both the asset and liability are
initially measured at the present value of the future minimum lease payments over the lease term. In determining the present
value of lease payments, the Company uses our incremental borrowing rate as the discount rate for the leases.
The Company has elected the practical expedient to not separate non-lease components from lease components and
instead to account for both as a single lease component. The Company’s leases do not contain residual value guarantees or
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material variable lease payments. The Company does not have any material restrictions or covenants imposed by leases that
would impact the Company’s ability to pay dividends or cause the Company to incur additional financial obligations.
The Company elected to apply the short-term lease exception to existing leases that meet the definition of a short-term
lease (less than 12 months), considering the lease term from the commencement date, not the remaining term at the date of
adoption. Certain of the Company’s leases contain options to renew the lease therefore these renewal options are included in the
determination of the capitalization period and calculation of the lease liability and ROU asset as they are reasonably certain to
be exercised.
Leases for which the Company is the lessor are substantially all accounted for as operating leases and the lease
components and non-lease components are accounted for separately. The remaining lease periods vary from one month to five
years and the contractual maturities of gross lease receivables were not material to the financial position of our Company. See
Note 7 for additional required disclosures under ASC 842.
OREO and Repossessed Assets
OREO consists of properties acquired through foreclosure. Repossessed assets consists of non-real estate assets
acquired in partial or full settlement of loans. OREO and repossessed assets totaled $5.8 million and $6.2 million at
December 31, 2024 and 2023, respectively, and included in other assets in the accompanying consolidated balance sheets.
These assets are recorded at fair value, less estimated costs to sell, on the date of foreclosure or repossession, establishing a new
cost basis for the asset. Subsequent to the foreclosure or repossession date the asset is maintained at the lower of cost or fair
value. Any write-down to fair value required at the time of foreclosure or repossession is charged to the ACL. Subsequent gains
or losses resulting from the sale of the property or additional valuation allowances required due to further declines in fair value
are reported in other noninterest expense.
Goodwill and Other Intangible Assets
Goodwill is not amortized but is evaluated for impairment at least annually in the fourth quarter, or more frequently if
an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its
carrying amount. As part of its testing, the Company may elect to first assess qualitative factors to determine whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount. If the results of the qualitative assessment
indicate that more likely than not a reporting unit’s fair value is less than its carrying amount, the Company determines the fair
value of the respective reporting unit (through the application of various quantitative valuation methodologies) relative to its
carrying amount to determine whether quantitative indicators of potential impairment are present (i.e., Step 1). The Company
may also elect to bypass the qualitative assessment and begin with Step 1. If the results of Step 1 indicate that the fair value of
the reporting unit is below its carrying amount, the Company will recognize an impairment loss for the amount that the
reporting unit’s carrying amount exceeds its fair value (up to the amount of goodwill recorded). A reporting unit is defined as
an operating segment or a component of that operating segment. Reporting units may vary, depending on the level at which
performance of the segment is reviewed. If impaired, the asset is written down to its estimated fair value. No impairment
charges were recognized in any reporting unit through December 31, 2024. See Note 8 for additional information.
Other identifiable intangible assets consist primarily of core deposit premiums and customer relationships arising from
acquisitions. These intangibles were established using the discounted cash flow approach and are being amortized using an
accelerated method over the estimated remaining life of each intangible recorded at acquisition. Additionally, trademarks and
trade names, considered finite-lived intangible assets, are reviewed for impairment when events or changes in circumstances
indicate that the asset’s carrying amount may not be recoverable from undiscounted future cash flows or that it may exceed its
fair value. No impairment to these intangible assets has been identified in any period presented.
Servicing Rights Assets
The Company recognizes as assets the rights to service mortgage loans for others, known as MSR. The Company
records MSR at fair value for all loans sold on a servicing retained basis with subsequent adjustments to fair value of MSR in
accordance with ASC 860. An estimate of the fair value of the Company’s MSR is determined utilizing assumptions about
factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market trends and industry demand.
Because the valuation is determined by using discounted cash flow models, the primary risk inherent in valuing the MSR is the
impact of fluctuating interest rates on the estimated life of the servicing revenue stream. The use of different estimates or
assumptions could also produce different fair values. The Company is susceptible to fluctuations in MSR value in changing
interest rate environments. MSR are included in the other assets category of the consolidated balance sheet. Changes in the fair
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value of MSR are recorded as part of mortgage banking revenue on the consolidated statements of income. See Note 17 for
additional information.
Cash Surrender Value of Life Insurance
The Company invests in BOLI, which involves the purchasing of life insurance on selected employees. The Company
is the owner of the policies and, accordingly, the cash surrender value of the policies is included in total assets and increases in
cash surrender values are reported as income in the consolidated statements of income. The cash value accumulation on BOLI
is permanently tax deferred if the policy is held to the insured person’s death and certain other conditions are met.
VIE and Other Investments
The Company is deemed to be the primary beneficiary and required to consolidate a VIE if it has a variable interest in
the VIE that provides it with a controlling financial interest. For such purposes, the determination of whether a controlling
financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most
significantly impact the VIE’s economic performance and the obligation to absorb the losses of the VIE or the right to receive
benefits from the VIE that could potentially be significant to the VIE. Conclusions reached regarding which interest holder is a
VIE’s primary beneficiary must be continuously evaluated. The Company has determined that certain of its investments meet
the definition of VIE.
The Company invests in certain affordable housing projects as a limited partner and accounts for these investments and
the related tax credits using either the effective yield method or the proportional amortization method, depending upon the date
of the investment. Under the effective yield method, the Company recognizes the tax credits as they are allocated and amortizes
the initial costs of the investments to provide a constant effective yield over the period that the tax credits are allocated. Under
the proportional amortization method, the Company amortizes the cost of the investment in proportion to the tax credits and
other tax benefits received and recognizes the net investment performance in the income statement as a component of income
tax expense.
Equity securities with readily determinable fair values not held for trading consist of marketable equity securities
which are carried at fair value with changes in fair value reported in net income.
For other investments in limited partnerships without readily determinable fair values, the Company has elected to
account for these investments using the practical expedient of the fair value of underlying net asset value. For investments in
other limited partnerships without readily determinable fair values that do not qualify for the practical expedient, these
investments are accounted for at their cost minus impairment, plus or minus changes resulting from observable price changes in
orderly transactions for the identical or a similar investment of the same issuer. Any changes in fair value are reported in net
income. See Note 23 for additional information about our variable interest entities and other investments.
Pension and Postretirement Benefits
The Company accounts for its defined benefit pension plans using an actuarial model that uses an approach which
allocates pension costs over the service period of employees in the plan. The Company also accounts for its other postretirement
benefits by recognizing net periodic postretirement benefit costs as employees render the services necessary to earn their
postretirement benefits. The principle underlying the accounting is that employees render service ratably over the service period
and, therefore, the income statement effects of the Company’s defined benefit pension and postretirement benefit plans should
follow the same pattern. The Company accounts for the over-funded or under-funded status of its defined benefit and other
postretirement plans as an asset or liability in its consolidated balance sheets.
The discount rate is the rate used to determine the present value of the Company’s future benefit obligations for its
pension and other postretirement benefit plans. The Company determines the discount rate with the assistance of its actuary
using the actuary’s proprietary model. The Company determined the discount rate by developing a level equivalent yield using
its actuary’s model at December 31, 2024 and incorporating the expected cash flows from the Cadence Bank Retirement Plan
(the “Basic Plan”), the Cadence Bank Restoration Plan (the “Restoration Plan”) and the Cadence Bank Supplemental Executive
Retirement Plan (the “Supplemental Plan”). See Note 12 for additional information.
The Company offers a 401(k) defined contribution benefit plan to its employees. The plan provides for a 100% match
of employee contributions up to five percent of employee compensation. All contributions and related earnings are 100%
vested.
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As a result of the prior acquisitions, the Company has various legacy unqualified supplemental retirement plans. The
plans allow for fixed payment amounts to begin on a monthly or annual basis at a specified age. The annual cost charged to
expense and the estimated present value of the projected payments was determined in accordance with the provisions of ASC
710 and ASC 715. The present value of projected payments is recorded as a liability in the Company’s consolidated balance
sheets. The Company provided a voluntary deferred compensation plan for certain of its executive and senior officers. Under
this plan, the participants were allowed to defer up to 25% of their base compensation and 100% of certain incentive
compensation. The Company could, but was not obligated to, contribute to the plan. Amounts contributed to this plan were
credited to a separate account for each participant and are subject to a risk of loss in the event of the Company’s insolvency.
The Company made no contributions to this plan in 2024, 2023, or 2022.
Share-Based Compensation
The Company administers several long-term incentive compensation plans that provide for the granting of various
forms of incentive share-based compensation. The Company values these units at the grant date fair value and recognizes
expense over the requisite service period. The Company’s share-based compensation costs are recorded as a component of
salaries and employee benefits in the consolidated statements of income. The Company has elected to account for forfeitures of
share-based compensation awards as they occur, and compensation cost is recorded assuming all recipients will complete the
requisite service period. If an employee forfeits an award because they do not complete the requisite service period, the
Company will reverse compensation cost previously recognized in the period the award is forfeited. Upon the exercise of stock
options, the granting of restricted stock awards, or the vesting of share-based awards, the Company would fulfill these events by
issuing new common shares. At December 31, 2024, the Company believes there are adequate authorized common shares to
satisfy anticipated share-based award vesting in 2025. See Note 14 for additional information.
Income Taxes
The Company and its significant subsidiaries are subject to income taxes in federal, state and local jurisdictions, and
such corporations account for income taxes under the asset and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and net operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The recognition of a deferred tax asset is dependent upon a “more likely than not” expectation of realization of the
deferred tax asset, based upon the analysis of available evidence. The deferred tax asset recoverability is calculated using a
consistent approach, which considers the relative impact of negative and positive evidence, including review of historical
financial performance, and all sources of future taxable income, such as projections of future taxable income exclusive of future
reversals of temporary differences and carryforwards, tax planning strategies, and any carryback availability. A valuation
allowance is required to sufficiently reduce the deferred tax asset to the amount that is expected to be realized on a “more likely
than not” basis. Changes in the valuation allowance are generally recorded through income. See Note 11 for more information
about the Company’s income taxes.
Common Stock Repurchases
The Company purchases shares of its common stock pursuant to share repurchase programs authorized by its Board of
Directors. Repurchased shares are available for use in the Company’s share-based compensation programs and other
transactions or for other corporate purposes as determined by the Company’s Board of Directors. At the date of repurchase,
shareholders’ equity is reduced by the repurchase price. See Note 18 for additional information.
Revenue Recognition
Service Charges on Deposit Accounts
Service charges on deposit accounts consist of non-sufficient funds fees, account analysis fees, and other service
charges on deposits which consist primarily of monthly account fees. Non-sufficient funds fees are recognized at the time the
account overdraft occurs in accordance with regulatory guidelines. Account analysis fees consist of fees charged to certain
commercial demand deposit accounts based upon account activity (and reduced by a credit which is based upon cash levels in
the account). The Company’s performance obligation for these fees is satisfied and related revenue recognized, when the
service is rendered.
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Fees and Other Service Charges
Fees and other service charges primarily consist of debit and credit card income, merchant services and other service
fees. These fees are earned at a point in time as the Company’s performance obligation for service charges are satisfied, and
related revenue recognized, when the services are rendered.
Assets Under Administration and Asset Management Fees
The Company does not include assets held in fiduciary or agency capacities in the consolidated balance sheets, as such
items are not assets of the Company. Fees from asset management activities are recorded on an accrual basis, over the period in
which the service is provided. Fees are a function of the market value of assets administered and managed, the volume of
transactions, and fees for other services rendered, as set forth in the underlying client agreement. This revenue recognition
involves the use of estimates and assumptions, including components that are calculated based on estimated asset valuations
and transaction volumes. The Company does not earn performance-based incentives. The Company’s performance obligation
for these fees is satisfied, and related revenue recognized, when services are rendered.
Advisory Fees for Brokerage Services
Advisory fees for brokerage services are collected monthly through a third-party vendor at a predetermined rate in the
contract. Revenue for such performance obligations are recognized at the time the performance obligations are satisfied and is
reflected in the Wealth Management line in the consolidated statements of income.
Credit Related Fees
Credit related fees primarily include fees assessed on the unused portion of commercial lines of credit (“unused
commitment fees”) and syndication agent fees. Unused commitment fees are recognized over the period of the related
commitment. Syndication agent fees are earned to act as an agent for a period of time, usually one year. Arranger fees are
earned to arrange a syndicate of lenders and are generally recognized when the transaction is closed.
Bankcard Fees
Bankcard fees include primarily bankcard interchange revenue, which is recorded when services are provided.
Payroll Processing Revenue
Payroll processing revenue consists principally of payroll processing fees, property and casualty brokerage and
employee benefits brokerage. Payroll processing fees are charged as the services are provided and the Company satisfied its
performance obligation simultaneously. Property and casualty brokerage include the brokerage of both personal and
commercial coverages. The placement of the policy is completion of the Company's performance obligation and revenue is
recognized at that time. The Company's commission is a percentage of the premium. Employee benefits brokerage consists of
assisting companies in designing and managing comprehensive employee benefit programs. The services provided by the
Company are collectively benefit management services which are considered a bundle of services that are highly interrelated.
Each of the underlying services are activities to fulfill the benefit management service and are not distinct and separate
performance obligations. Revenue is recognized over the contract term as services are rendered on a monthly basis. Customer
payments are usually received on a monthly basis. This revenue is reflected in Other Income in the consolidated statements of
income. During 2024, the Company completed the sale of Cadence Business Solutions, LLC, its payroll processing business
unit, which discontinued this revenue stream.
SBA Income
SBA income consists of gains on sales of SBA loans, servicing fees, changes in the fair value of servicing rights, and
other miscellaneous fees. Servicing fee income is recorded for fees earned for servicing SBA loans. The fees are based on a
contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. This
revenue is reflected in Other Income in the consolidated statements of income.
Advertising Costs
Advertising costs are expensed when the service is provided. See Note 22 for additional information.
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Basic and Diluted EPS
Basic and diluted EPS are calculated in accordance with ASC 260, Earnings Per Share. Basic EPS is computed by
dividing income available to common shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS is computed using the weighted-average number of shares determined for the basic EPS computation plus
the shares resulting from the assumed exercise of all outstanding share-based awards using the treasury stock method. See Note
15 for additional information.
Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net
income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities,
pension liability and cash flow hedges, are reported as a separate component of the shareholders’ equity section of the
consolidated balance sheets, such items, along with net income, are components of comprehensive income. See Note 16 for
additional information.
Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts due from banks,
interest bearing deposits with banks, and federal funds sold. Generally, federal funds are sold for one to seven day periods.
Cash flows from loans, either originated or acquired, are classified at the time according to management’s intent to
either sell or hold the loan for the foreseeable future. When management’s intent is to hold the loan for the foreseeable future,
the cash flows of that loan are presented as investing cash flows.
Off-Balance Sheet Financial Instruments
In the ordinary course of business, the Company enters into off-balance sheet financial instruments consisting of
commitments to extend credit, credit card lines, standby letters of credit and commitments to purchase securities. Such financial
instruments are recorded in the consolidated financial statements when they are exercised.
Fair Value of Financial Instruments
Fair value estimates are made at a specific point in time, based on relevant market information and other information
about the Company’s financial instruments. These estimates do not reflect any premium or discount that could result from
offering for sale, at one time, the entire holdings of a particular financial instrument. Because no market exists for a portion of
the financial instruments, fair value estimates are also based on judgments regarding estimated cash flows, current economic
conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Management employs independent third-party pricing services to provide fair value estimates for the Company’s
financial instruments. Management uses various procedures to validate that the prices received from pricing services and
quotations received from dealers are reasonable for each relevant financial instrument, including reference to relevant broker/
dealer quotes or other market quotes and a review of valuations and trade activity of comparable securities. Consideration is
given to the nature of the quotes (e.g., indicative or firm) and the relationship of recently evidenced market activity to the prices
provided by the third-party pricing service.
Understanding the third-party pricing service’s valuation methods, assumptions and inputs used by the firm is an
important part of the process of determining that reasonable and reliable fair values are being obtained. Management evaluates
quantitative and qualitative information provided by the third-party pricing services to assess whether they continue to exhibit
the high level of expertise that management relies upon.
Fair value estimates are based on existing financial instruments on the consolidated balance sheets, without attempting
to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial
instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes,
premises and equipment, goodwill and other intangible assets. In addition, the income tax ramifications related to the realization
of the unrealized gains and losses on financial instruments can have a significant effect on fair value estimates and have not
been considered in any of the estimates. For further information about fair value measurements, see Note 13.
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Related Party Transactions
In the normal course of business, loans are made to directors and executive officers and to companies in which they
have a significant ownership interest. In the opinion of management, these loans are made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties, are
consistent with sound banking practices, and are within applicable regulatory and lending limitations. The aggregate balances of
related party loans and deposits are insignificant at December 31, 2024 and 2023.
Recently Adopted Accounting Pronouncements
ASU No. 2022-03
In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of
Equity Securities Subject to Contractual Sale Restrictions. The amendments in the ASU clarify that a contractual restriction on
the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered
in measuring fair value. The ASU introduces new disclosure requirements to provide investors with information about the
restriction including the nature and remaining duration of the restriction.
The guidance became effective for Cadence beginning January 1, 2024. Cadence does not include contractual sale
restrictions as adjustments to the measured fair value of our equity securities. The adoption of this guidance had no immediate
impact to our consolidated financial statements.
ASU No. 2023-01
In March 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements which
amends the accounting for common control leasing arrangements. The ASU requires all entities to amortize leasehold
improvements associated with common control leases over the useful life to the common control group.
The guidance became effective for Cadence beginning January 1, 2024. Cadence adopted this guidance on a
prospective basis. The adoption of this guidance had no immediate impact to our consolidated financial statements.
ASU No. 2023-02
In March 2023, the FASB issued ASU No. 2023-02, Investments—Equity Method and Joint Ventures (Topic 323):
Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The ASU allows entities to
elect the proportional amortization method, on a tax-credit-program-by-tax-credit-program basis, for all equity investments in
tax credit programs meeting the eligibility criteria in ASC 323-740-25-1. The ASU further prescribes specific information
reporting entities must disclose about tax credit investments each period.
This guidance became effective for Cadence beginning January 1, 2024. Cadence adopted this guidance on a modified-
retrospective basis. Cadence evaluated all investments for which it still expects to receive income tax credits or other income
tax benefits as of January 1, 2024, to determine which investments qualified for the proportional amortization method as of the
date the investment was entered into. Based on Cadence’s assessment of investments’ eligibility for proportional amortization
as of January 1, 2024, Cadence had NMTC and HTC investments with investment balances of approximately $36 million that
were eligible for the proportional amortization method and for which Cadence still expects to receive income tax credits and
other income tax benefits of approximately $51 million in future periods.
The Company recorded a cumulative-effect adjustment to retained earnings for the difference between (1) the
cumulative amortization recognized for the eligible investments from investment inception through January 1, 2024, under the
equity method of accounting, and (2) the cumulative amortization that would be recognized for the same period under the
proportional amortization method. The Company’s cumulative adoption adjustment of $1.5 million was recorded to retained
earnings and represents the excess amortization expense under the equity method of accounting and removal of the remaining
deferred tax liabilities associated with the eligible investments as of January 1, 2024.
ASU No. 2023-07
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures. The amendments in the ASU improve reportable segment disclosure requirements primarily through
enhanced disclosures about significant segment expenses. The amendments in the ASU are effective for annual periods
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beginning after December 15, 2023. As this guidance is solely disclosure related, there was no quantitative impact to the
Company’s consolidated financial statements. See Note 19 for additional information.
Pending Accounting Pronouncements
ASU No. 2023-05
In August 2023, the FASB issued ASU No. 2023-05, Business Combinations—Joint Venture Formations (Subtopic
805-60): Recognition and Initial Measurement. The ASU applies to the formation of entities that meet the definition of a joint
venture (or a corporate joint venture) as defined in the FASB ASC Master Glossary. The amendments in the ASU require that a
newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to
fair value measurement that are consistent with the business combinations guidance). The ASU allows a joint venture to apply
measurement period guidance in accordance with ASC 805-10, allowing the amounts recognized upon formation to be adjusted
for provisional items during the measurement period not to exceed one year from the formation date.
The ASU does not amend the definition of a joint venture, the existing guidance for the accounting by an equity
method investor for its investment in a joint venture, or the accounting by a joint venture for contributions received subsequent
to formation.
The amendments are effective prospectively for all joint ventures with a formation date on or after January 1, 2025,
and early adoption is permitted. A joint venture that was formed before the effective date of the ASU may elect to apply the
amendments retrospectively if it has sufficient information. The Company does not anticipate any significant impact from this
guidance on its consolidated financial statements.
ASU No. 2023-06
In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in
Response to the SEC’s Disclosure Update and Simplification Initiative, that incorporates certain SEC disclosure requirements
into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure
and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the
SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements
in the Codification with the SEC’s regulations.
The ASU modifies the disclosure or presentation requirements of a variety of Topics in the Codification. The
requirements are relatively narrow in nature. Some of the amendments represent clarifications to, or technical corrections of, the
current requirements.
The effective date for each amendment will be the date on which the SEC removes that related disclosure from its
rules. If by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be
removed from the Codification and not become effective for any entity. As this guidance is solely disclosure related, there will
be no quantitative impact to the Company’s consolidated financial statements.
ASU No. 2023-08
In December 2023, the FASB issued ASU No. 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic
350-60): Accounting for and Disclosure of Crypto Assets. The amendments are intended to improve the accounting for certain
crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value
recognized in net income. The amendments also improve the information provided to investors about an entity’s crypto asset
holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting
period.
The amendments in the ASU are effective for fiscal years beginning after December 15, 2024, including interim
periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet
been issued (or made available for issuance). If amendments are adopted in an interim period, they must be adopted as of the
beginning of the fiscal year that includes that interim period. The Company currently does not have and does not anticipate to
have exposure to crypto assets and does not expect the adoption of this guidance to have any significant impact on its
consolidated financial statements.
117
ASU No. 2023-09
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures. The ASU is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories
and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It
also includes certain other amendments intended to improve the effectiveness of income tax disclosures.
The amendments in the ASU are effective for annual periods beginning after December 15, 2024. Early adoption is
permitted for annual financial statements that have not yet been issued or made available for issuance. As this guidance is solely
disclosure related, there will be no quantitative impact to the Company’s consolidated financial statements.
ASU No. 2024-01
In March 2024, the FASB issued ASU No. 2024-01, Compensation--Stock Compensation (Topic 718): Scope
Application of Profits Interest and Similar Awards, which provides four cases illustrating the scope application of Topic 718 for
profits interest awards. Determining whether a profits interest award should be accounted for as a share-based payment
arrangement or other compensation requires judgement based on the facts and circumstances of the specific transaction. The
illustrative example includes four fact patterns to demonstrate how an entity would apply the scope guidance in Topic 718 to
determine whether profits interest awards should be accounted for in accordance with Topic 718.
The amendments in the ASU are effective for annual periods beginning after December 15, 2024, and interim periods
within those annual periods. Early adoption is permitted for both interim and annual financial statements that have not yet been
issued or made available for issuance. The amendments should be applied either (1) retrospectively to all prior periods
presented in the financial statements or (2) prospectively to profits, interest, and similar awards grated or modified on or after
the date at which the entity first applies the amendments. The Company does not believe the adoption of this guidance will have
an immediate impact on its consolidated financial statements.
ASU No. 2024-02
In March 2024, the FASB issued ASU No. 2024-02, Codification Improvements--Amendments to Remove References
to the Concepts Statements, which contains amendments that remove references to various Concepts Statements. In most
instances, the references are extraneous and not required to understand or apply the guidance. In other instances, the references
were used in prior Statements to provide guidance in certain topical areas. Generally, the amendments are not intended to result
in significant accounting change for most entities. However, the FASB recognized that changes to that guidance may result in
accounting change for some entities. Therefore, the FASB provided transition guidance for all the amendments in this Update.
These amendments are effective for public business entities for fiscal years beginning after December 15, 2024. Early
application of the amendments is permitted for all entities, for any fiscal year or interim period for which financial statements
have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt
them as of the beginning of the fiscal year that includes that interim period. The Company does not anticipate any impact from
guidance on its consolidated financial statements.
ASU No. 2024-03
In November 2024, The FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—
Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires
disclosures in the note to the financial statements regarding specific expenses. The amendments do not change or remove
existing disclosure requirements. The amendments improve disclosure requirements through enhanced expense disaggregation.
The amendments require disclosures in each interim and annual reporting periods. The amendments are effective for
fiscal year beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Prospective
adoption is required, however an entity may choose to adopt retrospectively. Early adoption is permitted. As this guidance is
solely disclosure related, there will be no quantitative impact to the Company’s consolidated financial statements.
ASU No. 2024-04
In November 2024, The FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic
470-20): Induced Conversions of Convertible Debt Instruments, which clarifies requirements for determining whether certain
settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible
debt instruments that are not currently convertible, should be accounted for as an induced conversion.
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The amendments are effective for all entities for fiscal years beginning after December 15, 2025. Early adoption is
permitted as of the beginning of the annual reporting period for all entities that have adopted ASU 2020-06. If an entity adopts
ASU No. 2024-04 in an interim reporting period, it should adopt it as of the beginning of the annual reporting period that
includes that interim reporting period. The Company does not anticipate any impact from guidance on its consolidated financial
statements.
NOTE 2. DISCONTINUED OPERATIONS
On November 30, 2023, the Company completed the sale of its insurance subsidiary, Cadence Insurance, via a stock
purchase agreement with Arthur J. Gallagher Risk Management Services, LLC and Arthur J. Gallagher & Co. for $904 million,
subject to customary purchase price adjustments. The transaction resulted in a pre-tax gain of $706.6 million, reported in the
fourth quarter of 2023. The gain, along with Cadence Insurance’s historical financial results for periods prior to the sale, is
reflected in the Company’s consolidated financial statements as discontinued operations. Cadence Insurance’s operating results
have been presented as “Discontinued operations” within the accompanying consolidated financial statements and prior period
amounts have been reclassified to conform with the discontinued operations presentation. There was no activity from these
discontinued operations in 2024.
The following summarized financial information related to Cadence Insurance has been segregated from continuing
operations and reported as discontinued operations for the periods presented.
(In thousands)
Year Ended December 31,
Discontinued operations:
2023
2022
Net interest revenue
$
128 $
12
Noninterest revenue
Insurance commissions
156,501
150,275
Gain on sale of discontinued operations
706,588
—
Other
52
272
Total noninterest revenue
863,141
150,547
Noninterest expense
Salaries and employee benefits
117,129
110,180
Occupancy and equipment
4,919
5,088
Data processing and software
2,906
2,825
Amortization of intangibles
1,972
2,058
Other
8,752
8,055
Total noninterest expense
135,678
128,206
Income from discontinued operations before income tax expense
727,591
22,353
Income tax expense
188,971
6,433
Income from discontinued operations, net of tax
$
538,620 $
15,920
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NOTE 3. AVAILABLE FOR SALE SECURITIES AND EQUITY SECURITIES
The amortized cost, unrealized gains and losses, and estimated fair value of available for sale securities are presented
in the following tables:
(In thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
December 31, 2024
U.S. government agency securities
$
321,454 $
20 $
40,243 $
281,231
MBS issued or guaranteed by U.S. agencies
Residential pass-through:
Guaranteed by GNMA
78,279
—
11,698
66,581
Issued by FNMA and FHLMC
4,604,954
16
639,414
3,965,556
Other residential MBS
958,911
6,110
30,300
934,721
Commercial MBS
1,645,065
1,605
97,029
1,549,641
Total MBS
7,287,209
7,731
778,441
6,516,499
Obligations of states and political subdivisions
167,743
10
35,684
132,069
Corporate debt securities
52,751
—
5,349
47,402
Foreign debt securities
318,539
443
2,195
316,787
Total available for sale securities
$
8,147,696 $
8,204 $
861,912 $
7,293,988
(In thousands)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair
Value
December 31, 2023
U.S Treasury securities
$
464,793 $
225 $
— $
465,018
U.S. government agency securities
370,891
218
39,098
332,011
MBS issued or guaranteed by U.S. agencies
Residential pass-through:
Guaranteed by GNMA
85,806
1
10,145
75,662
Issued by FNMA and FHLMC
5,097,172
95
710,166
4,387,101
Other residential MBS
756,244
2,440
31,250
727,434
Commercial MBS
1,850,447
1,413
109,023
1,742,837
Total MBS
7,789,669
3,949
860,584
6,933,034
Obligations of states and political subdivisions
172,252
13
34,641
137,624
Corporate debt securities
73,941
—
6,744
67,197
Foreign debt securities
144,080
6
3,494
140,592
Total available for sale securities
$
9,015,626 $
4,411 $
944,561 $
8,075,476
For available for sale securities, gross gains of $7 thousand and gross losses of $3.0 million were recognized in 2024,
gross gains of $817 thousand and gross losses of $436.5 million in 2023, and gross gains of $317 thousand and gross losses of
$835 thousand were recognized in 2022. There were no impairment charges related to credit losses included in gross realized
losses for the years ended December 31, 2024 2023, or 2022.
Available for sale securities with a carrying value of $4.0 billion and $6.6 billion at December 31, 2024 and
December 31, 2023, respectively, were pledged to secure public and trust funds on deposit and for other purposes.
Proceeds from the sales of securities available for sale totaled $15.1 million in 2024, $4.3 billion in 2023, and $369.6
million in 2022.
120
The amortized cost and estimated fair value of available for sale securities at December 31, 2024 by contractual
maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
(In thousands)
Amortized
Cost
Estimated
Fair Value
Maturing in one year or less
$
— $
—
Maturing after one year through five years
108,300
105,514
Maturing after five years through ten years
520,442
494,821
Maturing after ten years
231,745
177,154
Mortgage-backed securities
7,287,209
6,516,499
Total available for sale securities
$
8,147,696 $
7,293,988
At December 31, 2024 and December 31, 2023, approximately 80.4% and 82.5% of securities were in an unrealized
loss position, respectively. At December 31, 2024, there were 871 securities in a loss position for more than twelve months, and
33 securities in a loss position for less than twelve months. At December 31, 2023, there were 827 securities in a loss position
for more than twelve months, and 91 securities in a loss position for less than twelve months. A summary of available for sale
investments with continuous unrealized loss positions for which an allowance for credit losses has not been recorded is as
follows:
Less Than 12 Months
12 Months or Longer
(In thousands)
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
December 31, 2024
U.S. government agency securities
$
74,795 $
221 $
200,798 $
40,022
MBS
249,197
2,314
5,123,218
776,127
Obligations of states and political subdivisions
303
7
121,117
35,677
Corporate debt securities
7,474
2,527
37,928
2,822
Foreign debt securities
—
—
52,806
2,195
Total
$
331,769 $
5,069 $ 5,535,867 $
856,843
Less Than 12 Months
12 Months or Longer
(In thousands)
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
December 31, 2023
U.S. government agency securities
$
103,099 $
563 $
187,683 $
38,535
MBS
730,925
9,644
5,347,365
850,940
Obligations of states and political subdivisions
—
—
127,291
34,641
Corporate debt securities
—
—
46,197
6,744
Foreign debt securities
69,288
1
51,507
3,493
Total
$
903,312 $
10,208 $ 5,760,043 $
934,353
Management evaluates available for sale securities in unrealized loss positions to determine whether the impairment is
due to credit-related factors or noncredit-related factors. Credit loss is defined as the difference between the present value of the
cash flows expected to be collected and the amortized cost basis. Management believes that the unrealized losses detailed in the
previous tables are due to noncredit-related factors, such as changes in interest rates and other market conditions. Therefore, no
allowance for credit losses was recorded related to these securities at December 31, 2024 or December 31, 2023. Additionally,
as of December 31, 2024 management had no intent to sell these securities until the full recovery of unrealized losses, which
may not be until maturity, and it is more likely than not that the Company would not be required to sell the securities prior to
recovery of costs. The fair value is expected to recover as the securities approach their maturity date or repricing date or if
market yields for such investments decline.
121
In 2023, the Company executed a securities portfolio restructuring as a part of a balance sheet optimization initiative.
During the first quarter of 2023 approximately $1.5 billion in U.S. Treasury available for sale securities were sold generating an
after-tax realized loss of approximately $39.5 million. Additionally, in the fourth quarter of 2023, available for sale securities
totaling approximately $3.1 billion in par value were sold for an after-tax realized loss of approximately $294.1 million.
Proceeds from the sale were redeployed in accretive activities including reinvestment in higher-yielding securities, funding
loans, and reducing brokered deposits.
Reported in other assets in the accompanying consolidated balance sheets, equity investments with readily
determinable fair values not held for trading are recorded at fair value, with changes in fair value reported in net income.
Additionally, the Company reports equity investments without readily determinable fair values in other assets in the
accompanying consolidated balance sheets. These investments include investments in the common stock of the FHLB of Dallas
and the Federal Reserve Bank of St. Louis. The Company is required to own stock in the FHLB of Dallas for membership in the
FHLB system and in relation to the level of FHLB advances. The company is also required to purchase and hold shares of
capital stock in the Federal Reserve Bank of St. Louis for membership in the Federal Reserve System. The Company accounts
for these investments as long-term assets and carries them at cost. During the years ended December 31, 2024 and 2023, there
were no downward or upward adjustments to these investments for impairments or price changes from observable transactions.
(In thousands)
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Carrying
Value
December 31, 2024
Equity securities held at cost:
Federal Reserve Bank stock
$
100,567 $
— $
— $
100,567
Federal Home Loan Bank stock
10,410
—
—
10,410
Other equity securities
20,582
—
—
20,582
Total equity securities, held at cost
$
131,559 $
— $
— $
131,559
Equity securities held at fair value:
Farmer Mac stock
$
49 $
543 $
— $
592
Affordable Housing MBS Exchange Traded Fund
24,994
—
3,908
21,086
Total equity securities, held at fair value
$
25,043 $
543 $
3,908 $
21,678
(In thousands)
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Carrying
Value
December 31, 2023
Equity securities held at cost:
Federal Home Loan Bank stock
$
13,113 $
— $
— $
13,113
Other equity securities
20,582
—
—
20,582
Total equity securities, held at cost
$
33,695 $
— $
— $
33,695
Equity securities held at fair value:
Farmer Mac stock
$
49 $
536 $
— $
585
Affordable Housing MBS Exchange Traded Fund
24,994
—
3,471
21,523
Total equity securities, held at fair value
$
25,043 $
536 $
3,471 $
22,108
122
NOTE 4. LOANS AND LEASES
The following table is a summary of our loan and lease portfolio aggregated by segment and class at the periods
indicated:
(In thousands)
December 31, 2024
December 31, 2023
Commercial and industrial
Non-real estate
$
8,670,529 $
8,935,598
Owner occupied
4,665,015
4,349,060
Total commercial and industrial
13,335,544
13,284,658
Commercial real estate
Construction, acquisition and development
3,909,184
3,910,962
Income producing
6,015,773
5,736,871
Total commercial real estate
9,924,957
9,647,833
Consumer
Residential mortgages
10,267,883
9,329,692
Other consumer
213,371
234,839
Total consumer
10,481,254
9,564,531
Total loans and leases, net of unearned income (1)
$
33,741,755 $
32,497,022
(1)
Total loans and leases are net of $21.4 million and $38.4 million of unearned income at December 31, 2024 and December 31, 2023,
respectively.
The Company engages in lending to consumers, small and medium-sized business enterprises, and government entities
through its community banking locations and to regional and national business enterprises through its corporate banking
division. The bank acts as agent or participant in SNC and other financing arrangements with other financial institutions. Loans
are issued generally to finance home purchases and improvements, personal expenditures, business investment and operations,
construction and development, and income producing properties. Loans are underwritten to be repaid primarily by available
cash flow from personal income, investment income, business operations, rental income, or the sale of developed or constructed
properties. Collateral and personal guaranties of business owners are generally required as a condition of the financing
arrangements and provide additional cash flow and proceeds from asset sales of guarantors in the event primary sources of
repayment are no longer sufficient.
While loans are structured to provide protection to the Company if borrowers are unable to repay as agreed, the
Company recognizes there are numerous risks that may result in deterioration of the repayment ability of borrowers and
guarantors. These risks include failure of business operations due to economic, legal, market, logistical, weather, health,
governmental and force majeure events. Concentrations in the Company’s loan and lease portfolio also present credit risks. The
impact of a slowing economy, inflation, higher interest rates, and labor and supply chain shortages, poses additional risk to
borrowers and financial institutions. As a result of these factors, there is risk for businesses to experience difficulty in meeting
repayment obligations, and the Company may experience losses or deterioration in performance in its loan portfolio. For
information regarding nonaccrual policies, past-dues or delinquency status, and recognizing write-offs within ACL, refer to
“Note 1 - Summary of Significant Accounting Policies” included in Part II., Item 8 for additional information.
The Company has identified the following segments and classes of loans and leases with similar risk characteristics for
measuring expected credit losses:
Commercial and Industrial
Non-Real Estate – Commercial and industrial loans are loans and leases to finance business operations, equipment and
owner-occupied facilities for small and medium-sized enterprises, as well as larger corporate borrowers. These include both
lines of credit and term loans which are amortized over the useful life of the assets financed. Personal and/or corporate
guarantees are generally obtained where available and prudent. This category also includes loans to finance agricultural
production. The Company recognizes risk from economic cycles, commodity prices, pandemics, government regulation,
supply-chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to
fraud, theft or embezzlement, loss of sponsor support, health or loss of key personnel or competitive situations may adversely
123
affect the scheduled repayment of business loans. In addition, risks in the agricultural sector including crop failures due to
weather, insects and other blights, commodity prices, governmental intervention, lawsuits, labor or logistical disruptions.
Owner Occupied – Owner occupied loans include loans secured by business facilities to finance business operations,
equipment and owner-occupied facilities primarily for small and medium-sized enterprises. These include both lines of credit
and term loans which are amortized over the useful life of the assets financed. Personal guarantees, if applicable, are generally
required for these loans. The Company recognizes that risk from economic cycles, pandemics, government regulation, supply-
chain disruptions, product innovations or obsolescence, operational errors, lawsuits, natural disasters, losses due to theft or
embezzlement, health or loss of key personnel, or competitive situations may adversely affect the scheduled repayment of
business loans.
Commercial Real Estate
Construction, Acquisition and Development – CAD loans include both loans and credit lines for the purpose of
purchasing, carrying, and developing land into residential subdivisions or various types of commercial developments, such as
industrial, warehouse, retail, office, and multi-family. This category also includes loans and credit lines for construction of
residential, multi-family and commercial buildings. The Company generally engages in CAD lending primarily in local markets
served by its branches. The Company recognizes that risks are inherent in the financing of real estate development and
construction. These risks include location, market conditions and price volatility, change in interest rates, demand for developed
land, lots and buildings, desirability of features and styling of completed developments and buildings, competition from other
developments and builders, traffic patterns, remote work patterns, governmental jurisdiction, tax structure, availability of
utilities, roads, public transportation and schools, availability of permanent financing for homebuyers, zoning, environmental
restrictions, lawsuits, economic and business cycle, labor, and reputation of the builder or developer.
Each CAD loan is underwritten to address: (i) the desirability of the project, its market viability and projected
absorption period; (ii) the creditworthiness of the borrower and the guarantor as to liquidity, cash flow and assets available to
ensure performance of the loan; (iii) equity contribution to the project; (iv) the developer’s experience and success with similar
projects; and (v) the value of the collateral.
A substantial portion of CAD loans are secured by real estate in markets in which the Company is located. The
Company’s loan policy generally prohibits loans for the sole purpose of carrying interest reserves. Certain of the construction,
acquisition and development loans were structured with interest-only terms. A portion of the residential mortgage and CRE
portfolios were originated through the permanent financing of construction, acquisition and development loans. Higher interest
rates and the potential for slowing economic conditions could negatively impact borrowers’ and guarantors’ ability to repay
their debt which would make more of the Company’s loans collateral-dependent.
Income Producing – CRE loans include loans to finance income-producing commercial and multi-family properties.
Lending in this category is generally limited to properties located in the Company’s market area with only limited exposure to
properties located elsewhere but owned by in-market borrowers. Loans in this category include loans for neighborhood retail
centers, medical and professional offices, single retail stores, industrials and apartments leased generally to local businesses and
residents. The underwriting of these loans takes into consideration the occupancy and rental rates as well as the financial health
of the borrower. The Company’s exposure to national retail tenants is limited. The Company recognizes that risk from
economic cycles, pandemics, government restrictions, delayed or missed rent payments, supply-chain disruptions, operational
errors, lawsuits, natural disasters, losses due to theft or embezzlement, health or loss of key personnel or competitive situations
may adversely affect the scheduled repayment of business loans.
Consumer
Residential Mortgages – Residential mortgages are first or second-lien loans to consumers secured by a primary
residence or second home. This category includes traditional mortgages, home equity loans and revolving lines of credit. The
loans are generally secured by properties located within the local market area of the community bank which originates and
services the loan. These loans are underwritten in accordance with the Company’s general loan policies and procedures which
require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and
property value. In addition to loans originated through the Company’s branches, the Company originates and services
residential mortgages sold in the secondary market which are underwritten and closed pursuant to investor and agency
guidelines. At December 31, 2024 and December 31, 2023, residential mortgage loans in process of foreclosure totaled
$19.7 million and $10.9 million, respectively. Additionally, the Company held $4.4 million in foreclosed residential properties
at both December 31, 2024 and December 31, 2023, respectively.
124
Other Consumer – Other consumer lending includes consumer credit cards as well as personal revolving lines of credit
and installment loans. The Company offers credit cards, primarily to its deposit and loan customers. Consumer installment
loans generally includes term loans secured by automobiles, boats and recreational vehicles.
The Company recognizes there are risks in consumer lending which include interruptions in the borrower’s personal
and investment income due to loss of employment, market conditions, and general economic conditions, deterioration in the
health and well-being of the borrower and family members, natural disasters, pandemics, lawsuits, losses, or inability to
generate income due to injury, accidents, theft, vandalism, or incarceration.
Credit Quality
The following tables provide details regarding the aging of the Company’s loan and lease portfolio, net of unearned
income, at the periods indicated:
December 31, 2024
(In thousands)
30-59
Days
Past Due
60-89
Days
Past Due
90+ Days
Past Due
Total
Past Due
Current
Total
Amortized
Cost
90+ Days
Past Due
still
Accruing
Commercial and industrial
Non-real estate
$
13,443 $
28,379 $
101,873 $
143,695 $ 8,526,834 $ 8,670,529 $
8,115
Owner occupied
10,375
3,836
16,280
30,491 4,634,524 4,665,015
—
Total commercial and industrial
23,818
32,215
118,153
174,186 13,161,358 13,335,544
8,115
Commercial real estate
Construction, acquisition and
development
4,254
663
8,579
13,496 3,895,688 3,909,184
—
Income producing
3,971
1,226
12,193
17,390 5,998,383 6,015,773
—
Total commercial real estate
8,225
1,889
20,772
30,886 9,894,071 9,924,957
—
Consumer
Residential mortgages
60,009
28,937
61,578
150,524 10,117,359 10,267,883
4,750
Other consumer
1,587
455
413
2,455
210,916
213,371
261
Total consumer
61,596
29,392
61,991
152,979 10,328,275 10,481,254
5,011
Total
$
93,639 $
63,496 $
200,916 $
358,051 $ 33,383,704 $ 33,741,755 $
13,126
December 31, 2023
(In thousands)
30-59
Days
Past Due
60-89
Days
Past Due
90+ Days
Past Due
Total
Past Due
Current
Total
Amortized
Cost
90+ Days
Past Due
still
Accruing
Commercial and industrial
Non-real estate
$
22,750 $
14,574 $
113,607 $
150,931 $ 8,784,667 $ 8,935,598 $
19,941
Owner occupied
4,818
1,193
5,882
11,893 4,337,167 4,349,060
—
Total commercial and industrial
27,568
15,767
119,489
162,824 13,121,834 13,284,658
19,941
Commercial real estate
Construction, acquisition and
development
1,394
1,191
1,878
4,463 3,906,499 3,910,962
18
Income producing
11,179
4,702
6,390
22,271 5,714,600 5,736,871
29
Total commercial real estate
12,573
5,893
8,268
26,734 9,621,099 9,647,833
47
Consumer
Residential mortgages
48,244
23,934
45,520
117,698 9,211,994 9,329,692
2,265
Other consumer
1,569
511
340
2,420
232,419
234,839
213
Total consumer
49,813
24,445
45,860
120,118 9,444,413 9,564,531
2,478
Total
$
89,954 $
46,105 $
173,617 $
309,676 $ 32,187,346 $ 32,497,022 $
22,466
125
The Company utilizes an internal loan classification system that is continually updated to grade loans according to
certain credit quality indicators. These credit quality indicators include, but are not limited to, recent credit performance,
delinquency, liquidity, cash flows, debt coverage ratios, collateral type and loan-to-value ratio. The Company’s internal loan
classification system is compatible with classifications used by regulatory agencies. Loans may be classified as follows:
Pass: Loans which are performing as agreed with few or no signs of weakness. These loans show sufficient cash flow,
capital and collateral to repay the loan as agreed.
Special Mention: Loans where potential weaknesses have developed which could cause a more serious problem if not
corrected.
Substandard: Loans where well-defined weaknesses exist that require corrective action to prevent further deterioration.
Loans are further characterized by the possibility that the Company will sustain some loss if the deficiencies are not
corrected.
Doubtful: Loans having all the characteristics of Substandard and which have deteriorated to a point where collection
and liquidation in full is highly questionable.
Loss: Loans that are considered uncollectible or with limited possible recovery.
Impaired: An internal grade for individually analyzed collateral-dependent loans for which a specific provision has
been considered to address the unsupported exposure.
PCD (Loss): An internal grade for loans with evidence of deterioration of credit quality since origination that are
acquired, and for which it is probable, at acquisition, that the bank will be unable to collect all contractually required
payments.
The following tables provide details of the Company’s loan and lease portfolio, net of unearned income, by segment,
class and internally assigned grade at the periods indicated:
December 31, 2024
(In thousands)
Pass
Special
Mention
Substandard (1)
Doubtful
Impaired (1)
PCD (Loss)
Total
Commercial and industrial
Non-real estate
$ 8,208,176
$
106,996
$
311,096
$
8,743
$
31,996
$
3,522
$ 8,670,529
Owner occupied
4,610,775
815
41,363
—
10,968
1,094
4,665,015
Total commercial and industrial
12,818,951
107,811
352,459
8,743
42,964
4,616
13,335,544
Commercial real estate
Construction, acquisition and development
3,896,856
—
12,262
—
66
—
3,909,184
Income producing
5,850,702
5,094
144,084
—
15,893
—
6,015,773
Total commercial real estate
9,747,558
5,094
156,346
—
15,959
—
9,924,957
Consumer
Residential mortgages
10,167,830
891
89,597
—
8,154
1,411
10,267,883
Other consumer
212,865
—
506
—
—
—
213,371
Total consumer
10,380,695
891
90,103
—
8,154
1,411
10,481,254
Total
$ 32,947,204
$
113,796
$
598,908
$
8,743
$
67,077
$
6,027
$ 33,741,755
(1)
In the loan classifications above, $99.0 million of the substandard balance and $11.1 million of the impaired balance is covered by government guarantees
from the SBA, FHA, VA and USDA.
126
December 31, 2023
(In thousands)
Pass
Special
Mention
Substandard (1)
Loss
Impaired (1)
PCD (Loss)
Total
Commercial and industrial
Non-real estate
$
8,450,809
$
101,607
$
294,895
$
13
$
84,457
$
3,817
$
8,935,598
Owner occupied
4,287,190
32,409
27,070
—
1,275
1,116
4,349,060
Total commercial and industrial
12,737,999
134,016
321,965
13
85,732
4,933
13,284,658
Commercial real estate
Construction, acquisition and
development
3,894,551
3,364
13,047
—
—
—
3,910,962
Income producing
5,527,388
23,727
170,217
—
15,539
—
5,736,871
Total commercial real estate
9,421,939
27,091
183,264
—
15,539
—
9,647,833
Consumer
Residential mortgages
9,258,002
4,066
66,050
—
—
1,574
9,329,692
Other consumer
234,367
—
472
—
—
—
234,839
Total consumer
9,492,369
4,066
66,522
—
—
1,574
9,564,531
Total
$
31,652,307
$
165,173
$
571,751
$
13
$
101,271
$
6,507
$ 32,497,022
(1)
In the loan classifications above, $61.1 million of the substandard balance and $8.4 million of the impaired balance is covered by government guarantees
from the SBA, FHA, VA and USDA.
The following tables provide credit quality indicators, including gross charge-offs, by class and period of origination
(vintage) at December 31, 2024:
Commercial and Industrial - Non-Real Estate
Period Originated:
(Dollars in thousands)
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 1,361,684
$ 926,422
$ 1,036,579
$ 695,625
$ 209,100
$ 563,337
$ 3,397,031
$
18,398
$ 8,208,176
Special Mention
13,242
10,942
—
23,158
18,337
—
41,317
—
106,996
Substandard
8,855
49,842
70,136
43,832
12,370
27,648
75,638
22,775
311,096
Doubtful
—
—
—
8,743
—
—
—
—
8,743
Impaired
—
1,485
2,773
9,013
—
—
18,725
—
31,996
PCD (Loss)
—
—
—
—
—
3,522
—
—
3,522
Total
$ 1,383,781
$ 988,691
$ 1,109,488
$ 780,371
$ 239,807
$ 594,507
$ 3,532,711
$
41,173
$ 8,670,529
% Criticized
1.6 %
6.3 %
6.6 %
10.9 %
12.8 %
5.2 %
3.8 %
55.3 %
5.3 %
Gross charge-offs
$
1,892
$
7,811
$
22,112
$
15,703
$
956
$
16,786
$
7,416
$
4,018
$
76,694
Commercial and Industrial - Owner Occupied
Period Originated:
(Dollars in thousands)
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 704,999
$ 607,548
$ 893,114
$ 756,156
$ 402,671
$ 1,122,908
$ 123,149
$
230
$ 4,610,775
Special Mention
—
—
—
—
815
—
—
—
815
Substandard
2,249
5,616
6,638
5,204
2,057
18,889
710
—
41,363
Impaired
394
2,335
5,911
1,053
—
1,275
—
—
10,968
PCD (Loss)
—
—
—
—
—
1,094
—
—
1,094
Total
$ 707,642
$ 615,499
$ 905,663
$ 762,413
$ 405,543
$ 1,144,166
$ 123,859
$
230
$ 4,665,015
% Criticized
0.4 %
1.3 %
1.4 %
0.8 %
0.7 %
1.9 %
0.6 %
— %
1.2 %
Gross charge-offs
$
—
$
1
$
263
$
6
$
41
$
67
$
1
$
—
$
379
127
Construction, Acquisition, & Development
Period Originated:
(Dollars in thousands)
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 1,058,203
$ 790,695
$ 1,261,256
$ 592,454
$
50,123
$
76,347
$
64,061
$
3,717
$ 3,896,856
Substandard
264
2,032
3,514
5,889
304
259
—
—
12,262
Impaired
—
—
—
—
66
—
—
—
66
Total
$ 1,058,467
$ 792,727
$ 1,264,770
$ 598,343
$
50,493
$
76,606
$
64,061
$
3,717
$ 3,909,184
% Criticized
— %
0.3 %
0.3 %
1.0 %
0.7 %
0.3 %
— %
— %
0.3 %
Gross charge-offs
$
—
$
19
$
101
$
537
$
35
$
2
$
85
$
—
$
779
Commercial Real Estate - Income Producing
Period Originated:
(Dollars in thousands)
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 497,633
$ 540,956
$ 1,595,416
$ 1,192,329
$ 511,254
$ 1,404,264
$ 108,850
$
—
$ 5,850,702
Special Mention
—
—
2,881
—
—
—
2,213
—
5,094
Substandard
—
459
468
7,690
70,889
64,084
494
—
144,084
Impaired
—
—
4,885
1,114
—
9,894
—
—
15,893
Total
$ 497,633
$ 541,415
$ 1,603,650
$ 1,201,133
$ 582,143
$ 1,478,242
$ 111,557
$
—
$ 6,015,773
% Criticized
— %
0.1 %
0.5 %
0.7 %
12.2 %
5.0 %
2.4 %
— %
2.7 %
Gross charge-offs
$
—
$
—
$
3
$
21
$
—
$
2,479
$
—
$
—
$
2,503
Consumer - Residential Mortgages
Period Originated:
(Dollars in thousands)
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 1,356,015
$ 1,477,090
$ 1,991,600
$ 1,545,259
$ 992,426
$ 1,734,512
$ 1,069,608
$
1,320
$ 10,167,830
Special Mention
101
790
—
—
—
—
—
—
891
Substandard
1,549
12,696
18,477
14,661
9,145
28,774
4,295
—
89,597
Impaired
—
—
—
3,979
1,675
—
2,500
—
8,154
PCD (Loss)
—
—
—
—
—
1,411
—
—
1,411
Total
$ 1,357,665
$ 1,490,576
$ 2,010,077
$ 1,563,899
$ 1,003,246
$ 1,764,697
$ 1,076,403
$
1,320
$ 10,267,883
% Criticized
0.1 %
0.9 %
0.9 %
1.2 %
1.1 %
1.7 %
0.6 %
— %
1.0 %
Gross charge-offs
$
10
$
325
$
559
$
430
$
81
$
749
$
1,007
$
—
$
3,161
Consumer - Other Consumer
Period Originated:
(Dollars in thousands)
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$
45,997
$ 29,538
$ 11,471
$
6,150
$
3,263
$
2,105
$ 114,341
$
—
$ 212,865
Substandard
—
97
48
6
—
17
338
—
506
Total
$
45,997
$ 29,635
$ 11,519
$
6,156
$
3,263
$
2,122
$ 114,679
$
—
$ 213,371
% Criticized
— %
0.3 %
0.4 %
0.1 %
— %
0.8 %
0.3 %
— %
0.2 %
Gross charge-offs
$
3,067
$
395
$
303
$
145
$
14
$
47
$
2,917
$
—
$
6,888
128
The following tables provide credit quality indicators, including gross charge-offs, by class and period of origination
(vintage) at December 31, 2023.
Commercial and Industrial - Non-Real Estate
Period Originated:
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 1,211,573
$ 1,425,415
$ 1,069,614
$ 279,689
$ 228,086
$ 610,891
$ 3,583,696
$
41,845
$ 8,450,809
Special Mention
—
10,155
30,042
11,599
2,220
16,096
31,495
—
101,607
Substandard
22,458
88,307
69,226
7,381
27,439
40,071
39,995
18
294,895
Loss
—
—
—
—
—
13
—
—
13
Impaired
635
14,187
22,057
—
—
20,475
5,904
21,199
84,457
PCD (Loss)
—
—
—
—
—
—
3,817
—
—
3,817
Total
$ 1,234,666
$ 1,538,064
$ 1,190,939
$ 298,669
$ 257,745
$ 691,363
$ 3,661,090
$
63,062
$ 8,935,598
% Criticized
1.9 %
7.3 %
10.2 %
6.4 %
11.5 %
11.6 %
2.1 %
33.6 %
5.4 %
Gross charge-offs
$
6,064
$
539
$
21,038
$
6,103
$
980
$
9,746
$
27,931
$
—
$
72,401
Commercial and Industrial - Owner Occupied
Period Originated:
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 535,962
$ 974,614
$ 844,507
$ 472,226
$ 309,595
$ 1,041,764
$ 108,522
$
—
$ 4,287,190
Special Mention
6,066
5,637
—
—
845
17,036
2,825
—
32,409
Substandard
747
1,893
3,584
2,647
5,431
12,686
82
—
27,070
Impaired
—
—
—
—
—
1,275
—
—
1,275
PCD (Loss)
—
—
—
—
1,116
—
—
—
1,116
Total
$ 542,775
$ 982,144
$ 848,091
$ 474,873
$ 316,987
$ 1,072,761
$ 111,429
$
—
$ 4,349,060
% Criticized
1.3 %
0.8 %
0.4 %
0.6 %
2.3 %
2.9 %
2.6 %
— %
1.4 %
Gross charge-offs
$
—
$
169
$
109
$
1
$
5
$
110
$
—
$
—
$
394
Construction, Acquisition & Development
Period Originated:
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$
984,843
$ 1,644,676
$
906,293
$
147,645
$
65,953
$
47,211
$
97,930
$
—
$ 3,894,551
Special Mention
824
1,552
—
—
988
—
—
—
3,364
Substandard
52
1,785
9,674
340
902
158
136
—
13,047
Total
$ 985,719
$ 1,648,013
$ 915,967
$ 147,985
$
67,843
$
47,369
$
98,066
$
—
$ 3,910,962
% Criticized
0.1 %
0.2 %
1.1 %
0.2 %
2.8 %
0.3 %
0.1 %
— %
0.4 %
Gross charge-offs
$
—
$
28
$
600
$
2
$
—
$
178
$
—
$
—
$
808
Commercial Real Estate - Income Producing
Period Originated:
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 490,336
$ 1,358,612
$ 1,235,035
$ 574,173
$ 518,213
$ 1,260,960
$
90,059
$
—
$ 5,527,388
Special Mention
—
3,221
10,349
—
6,051
4,106
—
—
23,727
Substandard
—
24,989
6,400
35,063
34,158
69,607
—
—
170,217
Impaired
—
—
—
—
—
15,539
—
—
15,539
Total
$ 490,336
$ 1,386,822
$ 1,251,784
$ 609,236
$ 558,422
$ 1,350,212
$
90,059
$
—
$ 5,736,871
% Criticized
— %
2.0 %
1.3 %
5.8 %
7.2 %
6.6 %
— %
— %
3.7 %
Gross charge-offs
$
—
$
—
$
1
$
—
$
—
$
4,526
$
—
$
—
$
4,527
129
Consumer - Residential Mortgages
Period Originated:
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$ 1,486,784
$ 2,011,519
$ 1,686,270
$ 1,099,734
$ 544,597
$ 1,462,355
$ 965,626
$
1,117
$ 9,258,002
Special Mention
—
—
4,066
—
—
—
—
—
4,066
Substandard
1,423
6,525
10,951
9,437
8,313
25,864
3,537
—
66,050
PCD (Loss)
—
—
—
—
—
1,574
—
—
1,574
Total
$ 1,488,207
$ 2,018,044
$ 1,701,287
$ 1,109,171
$ 552,910
$ 1,489,793
$ 969,163
$
1,117
$ 9,329,692
% Criticized
0.1 %
0.3 %
0.9 %
0.9 %
1.5 %
1.8 %
0.4 %
— %
0.8 %
Gross charge-offs
$
8
$
380
$
483
$
168
$
83
$
591
$
551
$
—
$
2,264
Consumer - Other Consumer
Period Originated:
(Dollars in thousands)
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving
Loans
Converted to
Term
Total
Pass
$
57,877
$
25,060
$
14,080
$
8,026
$
3,667
$
2,050
$ 123,607
$
—
$ 234,367
Substandard
—
67
9
—
38
—
358
—
472
Total
$
57,877
$
25,127
$
14,089
$
8,026
$
3,705
$
2,050
$ 123,965
$
—
$ 234,839
% Criticized
— %
0.3 %
0.1 %
— %
1.0 %
— %
0.3 %
— %
0.2 %
Gross charge-offs
$
2,780
$
584
$
277
$
210
$
89
$
58
$
2,680
$
—
$
6,678
The Company’s collateral-dependent loans totaled $81.8 million and $107.8 million at December 31, 2024 and
December 31, 2023, respectively. Typically these loans are internally classified as Impaired and PCD Loss. At December 31,
2024, $8.7 million of the total were rated as doubtful. At December 31, 2023, none of these loans were classified as doubtful.
At December 31, 2024, most of these loans are within the non-real estate and income producing classes. Additionally, there
were a smaller amount of these loans in the owner occupied, CAD, and residential mortgages classes. C&I loans are typically
supported by collateral such as real estate, receivables, equipment, inventory, or by an enterprise valuation. Loans within the
CRE and Consumer segments are generally secured by commercial and residential real estate.
Loans of $1.0 million or greater are considered for specific provision when management has determined based on
current information and events, it is probable that the Company will be unable to collect all amounts due according to the
contractual terms of the note and that the loan is collateral-dependent. At December 31, 2024 and December 31, 2023,
$59.1 million and $85.3 million, respectively, of collateral-dependent loans had a valuation allowance of $17.3 million and
$41.7 million, respectively. The remaining balance of collateral-dependent loans of $22.7 million and $22.5 million at
December 31, 2024 and December 31, 2023, respectively, have sufficient collateral supporting the collection of all contractual
principal and interest or were charged down to the underlying collateral’s fair value, less estimated selling costs. Therefore,
such loans did not have an associated valuation allowance.
NPLs consist of nonaccrual loans and leases. At December 31, 2024 and December 31, 2023, NPLs totaled $264.7
million and $216.1 million, respectively. Within the NPL balance, $89.9 million of the December 31, 2024 balance and $49.6
million of the December 31, 2023 balance is covered by government guarantees from the SBA, FHA, VA or USDA.
The Company’s policy for all loan classifications provides that loans and leases are generally placed in nonaccrual
status if, in management’s opinion, payment in full of principal or interest is not expected, unless such loan or lease is both
well-secured and in the process of collection.
130
The following table presents the amortized cost basis of loans on nonaccrual status by segment and class at the periods
indicated:
December 31, 2024
December 31, 2023
(In thousands)
Nonaccrual Loans
Nonaccrual Loans
with No Related
Allowance
Nonaccrual Loans
Nonaccrual Loans
with No Related
Allowance
Commercial and industrial
Non-real estate
$
145,115 $
2,944 $
131,559 $
11,267
Owner occupied
16,904
5,128
7,097
1,275
Total commercial and industrial
162,019
8,072
138,656
12,542
Commercial real estate
Construction, acquisition and development
8,600
66
1,859
—
Income producing
18,542
6,569
17,485
4,416
Total commercial real estate
27,142
6,635
19,344
4,416
Consumer
Residential mortgages
75,287
3,979
57,881
—
Other consumer
244
—
260
—
Total consumer
75,531
3,979
58,141
—
Total
$
264,692 $
18,686 $
216,141 $
16,958
The following table presents the interest income recognized on loans on nonaccrual status by segment and class for the
periods indicated:
Year Ended December 31,
(In thousands)
2024
2023
2022
Commercial and industrial
Non-real estate
$
2,828 $
863 $
710
Owner occupied
255
178
683
Total commercial and industrial
3,083
1,041
1,393
Commercial real estate
Construction, acquisition and development
100
53
133
Income producing
431
748
90
Total commercial real estate
531
801
223
Consumer
Residential mortgages
2,090
1,880
1,925
Other consumer
3
5
90
Total consumer
2,093
1,885
2,015
Total
$
5,707 $
3,727 $
3,631
In the normal course of business, management may grant concessions, which would not otherwise be considered, to
borrowers that are experiencing financial difficulty. Loans identified as meeting the criteria under ASC 310 are identified as
financial difficulty modifications (FDM). Any modification, renewal or forbearance on loans assigned a rating of “Special
Mention” or worse, and loans of any rating which show evidence of financial difficulty is reviewed to determine whether the
borrower is experiencing financial difficulty and if so, which terms of the loan were modified. If the borrower is experiencing
financial difficulty and the loan is modified via forgiveness of principal, reduction in interest rate to a rate below current market
rates for issuance, payment extension or deferral for greater than six months (including extensions granted in the past 12
months), term or maturity date extension, or combination of these specific modification terms, the modification requires
disclosure.
131
Under the general loan modification guidance, a modification is treated as a new loan only if both of the following
conditions are met: 1) the terms of the new loan are at least as favorable to the lender as the terms for comparable loans to other
customers with similar collection risks, and 2) modifications to the terms of the original loan are more than minor. If either
condition is not met, the modification is accounted for as the continuation of the old loan with any effect of the modification
treated as a prospective adjustment to the loan’s effective interest rate. Modifications in scope for borrowers experiencing
financial difficulty may include principal forgiveness, other-than-insignificant payment delay, interest rate reduction, or a
combination of modifications. During the year ended December 31, 2024, the most common concession related to term
extensions. Other concessions included principal forgiveness, payment deferrals, and interest rate reductions. At December 31,
2024, the Company has an outstanding unfunded commitment balance of $21.1 million to lend to five borrowers experiencing
financial difficulty.
Upon determination by the Company that a modified loan (or portion of a loan) has subsequently been deemed
uncollectible, the loan (or portion of the loan) is charged off. The amortized cost basis of the loan is reduced by the
uncollectible amount and the ACL is adjusted by this amount.
The following tables presents loans that were modified within the past twelve months for borrowers experiencing
financial difficulty by segment and class, as well as the percentage of these modified loans compared to overall loans in each
segment and class, for the years ended December 31, 2024 and December 31, 2023:
Year Ended December 31, 2024
(Dollars in thousands)
Principal
Forgiveness
Payment
Deferral
Combination
Payment
Deferral and
Term
Extension
Term
Extension
Interest
Rate
Reduction
Combination
Interest Rate
Reduction and
Payment
Deferral
Combination
Term
Extension and
Interest Rate
Reduction
Combination
Term
Extension,
Payment
Deferral and
Interest Rate
Reduction
Percent of
Total Loan
Class
Commercial and
industrial
Non-real estate
$
12,865
$ 13,100
$
6,463
$ 66,110
$
—
$
113
$
10,519
$
—
1.26 %
Owner occupied
—
—
—
1,591
—
—
1,370
—
0.06 %
Total commercial
and industrial
12,865
13,100
6,463
67,701
—
113
11,889
—
0.84 %
Commercial real estate
Construction,
acquisition and
development
—
—
—
—
7
—
—
—
— %
Income producing
—
—
30,670
45,206
—
—
—
13,373
1.48 %
Total commercial
real estate
—
—
30,670
45,206
7
—
—
13,373
0.90 %
Consumer
Residential
mortgages
—
22
—
202
178
100
400
—
0.01 %
Other consumer
—
—
19
—
—
—
—
—
0.01 %
Total consumer
—
22
19
202
178
100
400
—
0.01 %
Total loans and leases,
net of unearned
income
$
12,865
$ 13,122
$
37,152
$ 113,109
$
185
$
213
$
12,289
$
13,373
0.60 %
132
Year Ended December 31, 2023
(Dollars in thousands)
Payment
Deferral
Term
Extension
Interest Rate
Reduction
Combination
Interest Rate
Reduction and
Payment
Deferral
Combination
Term
Extension and
Interest Rate
Reduction
Combination
Term
Extension and
Payment
Deferral
Percent of
Total Loan
Class
Commercial and industrial
Non-real estate
$
32,121 $
70,009 $
— $
— $
6,583 $
262
1.22 %
Owner occupied
—
40
—
—
—
—
—
Total commercial and
industrial
32,121
70,049
—
—
6,583
262
0.82
Commercial real estate
Income producing
1,520
27,774
—
—
769
—
0.52
Total commercial real
estate
1,520
27,774
—
—
769
—
0.31
Consumer
Residential mortgages
42
139
299
37
331
—
0.01
Other consumer
—
11
—
—
—
—
—
Total consumer
42
150
299
37
331
—
0.01
Total loans and leases, net of
unearned income
$
33,683 $
97,973 $
299 $
37 $
7,683 $
262
0.43 %
The following table presents the financial effect of the loan modifications presented above for borrowers experiencing
financial difficulty for the following periods:
Year Ended December 31, 2024
Year Ended December 31, 2023
(Dollars in thousands)
Principal
Forgiveness
Weighted-
Average Interest
Rate Reduction
Weighted-
Average Term
Extension (in
years)
Weighted-Average
Interest Rate
Reduction
Weighted-Average
Term Extension (in
years)
Commercial and industrial
Non-real estate
$
5,835
1.42 %
1.23
0.92 %
0.84
Owner occupied
—
3.91
14.04
—
5.04
Commercial real estate
Construction, acquisition
and development
—
2.00
—
—
—
Income producing
—
0.54
1.72
0.30
1.09
Consumer
Residential mortgages
—
2.49
7.60
0.24
11.17
Other consumer
—
3.69
2.18
3.25
1.42
133
The following table provides the amortized cost basis of loans that experienced a payment default during the period
and were modified in the 12 months before default to borrowers experiencing financial difficulty:
Year Ended December 31, 2024
(In thousands)
Payment Deferral
Term Extension
Combination Term
Extension and Interest
Rate Reduction
Commercial and industrial
Non-real estate
$
164 $
— $
1,929
Commercial real estate
Income producing
—
9,113
—
Consumer
Residential mortgages
—
—
362
Total modified
$
164 $
9,113 $
2,291
The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial
difficulty to understand the effectiveness of its modification efforts. Loans are considered to be in payment default at 90 or
more days past due. The following table depicts the performance of loans that have been modified in the last 12 months:
Payment Status (Amortized Cost Basis) at December 31, 2024
(In thousands)
Current
30-89 Days Past Due
90+ Days Past Due
Commercial and industrial
Non-real estate
$
80,424 $
26,653 $
2,093
Owner occupied
2,961
—
—
Commercial real estate
Construction, acquisition and development
7
—
—
Income producing
89,249
—
—
Consumer
Residential mortgages
495
45
362
Other consumer
19
—
—
Total
$
173,155 $
26,698 $
2,455
134
NOTE 5. ALLOWANCE FOR CREDIT LOSSES
The following table summarizes the changes in the ACL for the periods indicated:
Year Ended December 31,
(In thousands)
2024
2023
2022
Balance at beginning of year
$
468,034 $
440,347 $
446,415
Charge-offs
(90,404)
(87,072)
(29,864)
Recoveries
12,163
14,504
29,913
Initial allowance on PCD loans
—
—
(8,117)
Adoption of new ASU related to modified loans (1)
—
255
—
Provision for loan losses
71,000
100,000
2,000
Balance at end of year
$
460,793 $
468,034 $
440,347
(1)
Cadence adopted the new accounting guidance effective January 1, 2023, which eliminates the TDR recognition and measurement
guidance via the modified retrospective transition method (ASU 2022-02). See Note 4 for additional information.
The following tables summarize the changes in the ACL by segment and class for the periods indicated:
Year Ended December 31, 2024
(In thousands)
Beginning
Balance
Charge-offs
Recoveries
Provision
(Release)
Ending Balance
Commercial and industrial
Non-real estate
$
194,577 $
(76,694) $
8,004 $
57,856 $
183,743
Owner occupied
31,445
(379)
511
3,600
35,177
Total commercial and industrial
226,022
(77,073)
8,515
61,456
218,920
Commercial real estate
Construction, acquisition and development
42,118
(779)
418
2,946
44,703
Income producing
69,209
(2,503)
447
(2,196)
64,957
Total commercial real estate
111,327
(3,282)
865
750
109,660
Consumer
Residential mortgages
124,851
(3,161)
1,234
2,540
125,464
Other consumer
5,834
(6,888)
1,549
6,254
6,749
Total consumer
130,685
(10,049)
2,783
8,794
132,213
Total
$
468,034 $
(90,404) $
12,163 $
71,000 $
460,793
135
Year Ended December 31, 2023
(In thousands)
Beginning
Balance
Charge-offs
Recoveries
Adoption of
new ASU for
modified
loans
Provision
(Release)
Ending
Balance
Commercial and industrial
Non-real estate
$
147,669 $
(72,401) $
7,541 $
256 $
111,512 $
194,577
Owner occupied
35,548
(394)
1,582
2 $
(5,293)
31,445
Total commercial and
industrial
183,217
(72,795)
9,123
258
106,219
226,022
Commercial real estate
Construction, acquisition and
development
68,902
(808)
622
— $
(26,598)
42,118
Income producing
74,727
(4,527)
1,071
(3) $
(2,059)
69,209
Total commercial real estate
143,629
(5,335)
1,693
(3)
(28,657)
111,327
Consumer
Residential mortgages
106,142
(2,264)
2,000
— $
18,973
124,851
Other consumer
7,359
(6,678)
1,688
— $
3,465
5,834
Total consumer
113,501
(8,942)
3,688
—
22,438
130,685
Total
$
440,347 $
(87,072) $
14,504 $
255 $
100,000 $
468,034
Year Ended December 31, 2022
(In thousands)
Beginning
Balance
Charge-offs
Recoveries
Initial ACL
on PCD
Loans
Provision
Ending
Balance
Commercial and industrial
Non-real estate
$
138,696 $
(17,874) $
14,165 $
— $
12,682 $
147,669
Owner occupied
59,254
(824)
2,292
(551)
(24,623)
35,548
Total commercial and
industrial
197,950
(18,698)
16,457
(551)
(11,941)
183,217
Commercial real estate
Construction, acquisition and
development
52,530
(298)
4,352
—
12,318
68,902
Income producing
98,327
(1,832)
3,521
(2,012)
(23,277)
74,727
Total commercial real estate
150,857
(2,130)
7,873
(2,012)
(10,959)
143,629
Consumer
Residential mortgages
85,734
(1,430)
3,017
(5,554)
24,375
106,142
Other consumer
11,874
(7,606)
2,566
—
525
7,359
Total consumer
97,608
(9,036)
5,583
(5,554)
24,900
113,501
Ending Balance
$
446,415 $
(29,864) $
29,913 $
(8,117) $
2,000 $
440,347
The following table represents a roll forward of the reserve for unfunded commitments for the periods shown. The
reserve for unfunded commitments is classified in other liabilities in the consolidated balance sheets.
Year Ended December 31,
(In thousands)
2024
2023
2022
Balance at beginning of period
$
8,551 $
28,551 $
23,551
(Reversal) provision for credit losses for unfunded commitments
—
(20,000)
5,000
Balance at end of period
$
8,551 $
8,551 $
28,551
The economic impact of inflation, higher interest rates, volatility in the financial markets, and the potential for a
slowing economy poses additional risk to borrowers and financial institutions. These factors add to the risk borrowers may
136
experience difficulty in meeting repayment obligations, and the Company may experience losses or deterioration in
performance in its loan portfolio.
The ACL estimate is impacted by both portfolio changes and changes in economic conditions experienced during the
period. The unemployment rate has the highest weighting within the Company’s credit risk modeling framework. Economic
forecasts, which are obtained from multiple sources, provide upside, downside, and base case scenarios over an eight-quarter
forecast horizon to establish a forecast range. Management considers the scenarios and selects a blended scenario which, in
management’s opinion, reflects likely economic conditions within that range. The Company recognizes that inflation, higher
interest rates and a slowing economy may have short-term, long-term, and regional impacts to the economy. In addition,
qualitative factors such as changes in economic conditions, concentrations of risk, and changes in portfolio risk resulting from
regulatory changes are considered in determining the adequacy of the level of the ACL.
NOTE 6. PREMISES AND EQUIPMENT
A summary by asset classification at the periods indicated:
(In thousands)
Estimated Useful
Life (Years)
December 31,
2024
December 31,
2023
Land
N/A
$
140,792 $
140,771
Buildings and improvements
5-40
557,916
541,966
Leasehold improvements
5-39
46,608
39,875
Equipment, furniture and fixtures
3-20
363,985
342,362
Computer software
3-5
111,973
100,040
Construction in progress
N/A
26,316
47,015
Right of use - lease
N/A
204,071
199,973
Subtotal
1,451,661
1,412,002
Accumulated depreciation and amortization
668,205
609,869
Premises and equipment, net
$
783,456 $
802,133
Depreciation expense was $45.1 million, $44.4 million, and $42.8 million for the years ended December 31, 2024,
2023, and 2022, respectively.
Software amortization expense was $9.5 million, $9.8 million, and $9.5 million for the years ended December 31,
2024, 2023, and 2022, respectively.
The Company leases various premises and equipment. At the inception of the contract, the Company determines if an
arrangement is or contains a lease and will recognize on the balance sheet a lease asset for its right to use the underlying asset
and a lease liability for the corresponding lease obligation for contracts longer than a year. See Note 7 for additional disclosures
related to our lease obligations.
NOTE 7. LEASES
The Company leases various premises and equipment. At the inception of the contract, the Company determines if an
arrangement is or contains a lease and will recognize on the balance sheet a lease asset for its right to use the underlying asset
and a lease liability for the corresponding lease obligation for contracts longer than a year. The Company does not have any
commitments that would meet the definition of a finance lease.
137
At December 31, 2024 and 2023, the weighted average remaining lease term for operating leases was 16.0 years and
16.2 years, respectively, and the weighted average discount rate used in the measurement of operating lease liabilities was 3.7%
and 3.5% at December 31, 2024 and 2023, respectively. Lease costs were as follows for the periods presented:
Year Ended December 31,
(In thousands)
2024
2023
2022
Operating lease costs
$
18,166 $
20,298 $
22,158
Short-term lease costs
139
108
39
Variable lease costs
—
4
623
Sublease income
(741)
(1,011)
(1,123)
Total operating lease costs
$
17,564 $
19,399 $
21,697
There were no leveraged leases or lease transactions with related parties during the years ended December 31, 2024
and 2023. At December 31, 2024 and 2023, the Company had no leases that had not yet commenced.
For leases that may contain renewal options or options to extend the lease term, the Company is reasonably certain to
do so, therefore, these extended terms are included in our lease liability calculation. A maturity analysis of operating lease
liabilities is included in the table below at December 31, 2024:
(In thousands)
Amount
2025
$
17,740
2026
17,867
2027
17,071
2028
16,703
2029
16,462
Thereafter
165,367
Total future minimum lease payments
251,210
Discount effect of cash flows
63,412
Present value of net future minimum lease payments
$
187,798
At December 31, 2024 and 2023, the Company’s operating lease ROU assets were $167.4 million and $171.3 million,
respectively, and ROU liabilities were $188.0 million and $192.2 million, respectively.
NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
The following tables present the carrying amounts of goodwill assigned to each of the Company’s reporting units at
December 31, 2024 and December 31, 2023. Refer to Note 19 for additional information on segments.
(In thousands)
December 31,
2024
December 31,
2023
Corporate Banking
$
401,742 $
401,742
Community Banking
918,354
918,354
Mortgage
19,652
19,652
Banking Services
27,175
28,037
Total
$
1,366,923 $
1,367,785
The Company’s policy is to assess goodwill for impairment at the reporting unit level on an annual basis or sooner if
an event occurs or circumstances change which indicate that the fair value of a reporting unit is below its carrying amount.
Impairment is the condition that exists when the carrying amount of the reporting unit exceeds the fair value of that reporting
unit. The Company’s annual assessment date is during the Company’s fourth quarter. The Company’s annual goodwill
impairment evaluation for 2024 was based on a qualitative assessment and indicated no events or circumstances that would
have resulted in an impairment of goodwill for its reporting units.
138
On May 17, 2024, the Company completed the sale of Cadence Business Solutions, its payroll processing business
unit. The payroll processing unit had previously been part of Cadence Insurance, Inc., prior to its sale in November 2023. The
sale of the payroll processing business resulted in a $0.9 million decrease in goodwill for the Banking Services unit and a $1.1
million decrease in customer relationship intangibles.
In the current economic environment, forecasting cash flows, credit losses and growth in addition to valuing the
Company’s assets with any degree of assurance is very difficult and subject to significant changes over very short periods of
time. The Company’s policy is to update its analysis as circumstances change. As market conditions continue to be volatile and
unpredictable, impairment of goodwill related to the Company’s reporting units may be necessary in future periods.
The carrying value of other intangible assets was $83.2 million and $100.2 million at December 31, 2024 and
December 31, 2023, respectively. The core deposit intangible assets and the customer relationship intangibles are both
amortized over an estimated useful life of ten years utilizing an accelerated method. The trade name is considered indefinite-
lived and is not subject to amortization.
The following table, which excludes fully amortized intangibles, shows the gross carrying amount and accumulated
amortization of the Company’s other intangible assets at December 31, 2024 and December 31, 2023.
December 31, 2024
December 31, 2023
(In thousands)
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Value
Core deposit intangibles
$
112,379 $
76,429 $
35,950 $
112,379 $
67,501 $
44,878
Customer relationship intangibles
48,250
26,518
21,732
49,349
19,544
29,805
Trade names
25,508
—
25,508
25,508
—
25,508
Total other intangible assets
$
186,137 $
102,947 $
83,190 $
187,236 $
87,045 $
100,191
The following table presents intangible asset amortization expense for the periods indicated.
Year Ended December 31,
(In thousands)
2024
2023
2022
Core deposit intangibles
$
8,928 $
10,812 $
9,408
Customer relationship intangibles
6,974
8,576
8,374
Non-solicitation intangibles
—
—
650
Total intangible asset amortization expense
$
15,902 $
19,388 $
18,432
The following table presents the estimated intangible asset amortization expense for the next five years.
(In thousands)
Core
Deposit
Intangibles
Customer
Relationship
Intangibles
Total
2025
$
8,582 $
5,921 $
14,503
2026
8,005
4,981
12,986
2027
7,574
4,042
11,616
2028
5,231
3,102
8,333
2029
3,249
2,162
5,411
NOTE 9. TIME DEPOSITS AND BORROWINGS
Time deposits with a balance of $250,000 or more totaled $3.2 billion and $2.4 billion at December 31, 2024 and
December 31, 2023, respectively.
139
At December 31, 2024, time deposits that will mature in under one year totaled $9.6 billion. For time deposits with a
remaining maturity of more than one year at December 31, 2024, the aggregate amount maturing in each of the following five
years and thereafter is presented in the following table:
(Dollars in thousands)
Amount
2026
$
308,487
2027
39,429
2028
32,507
2029
27,556
2030
69
Thereafter
114
Total
$
408,162
Borrowings with original maturities of one year or less are classified as short-term. The following tables present
information relating to short-term debt for the periods presented:
December 31, 2024
End of Period
Year to Date Daily Average
Maximum
Outstanding
at any
Month End
(Dollars in thousands)
Balance
Interest
Rate
Balance
Interest
Rate
Federal funds purchased
$
—
—%
$
5,077
5.28%
$
—
Securities sold under agreement to repurchase
and other
23,616
4.10
81,092
4.76
267,792
Bank Term Funding Program
—
—
2,845,902
4.79
3,500,000
Short-term FHLB advances
—
—
2
5.74
—
Total
$
23,616
$ 2,932,073
$ 3,767,792
December 31, 2023
End of Period
Year to Date Daily Average
Maximum
Outstanding
at any
Month End
(Dollars in thousands)
Balance
Interest
Rate
Balance
Interest
Rate
Federal funds purchased
$
—
—%
$
29,361
4.91%
$
375,000
Securities sold under agreement to repurchase
and other
451,516
4.29
770,777
4.04
862,589
Bank Term Funding Program
3,500,000
4.84
2,052,088
5.10
3,500,000
Short-term FHLB advances
—
—
1,389,759
4.91
5,700,228
Total
$ 3,951,516
$ 4,241,985
$ 10,437,817
Federal funds purchased generally mature the day following the date of purchase. At December 31, 2024 and
December 31, 2023, the Company had established non-binding federal funds borrowing lines of credit with other banks
aggregating $2.1 billion, for both periods. Additionally, the Company maintains access to the FRB discount window
borrowings which generally mature within 90 days and are collateralized by $2.1 billion in commercial, agriculture, and
consumer loans pledged under a borrower-in-custody agreement at December 31, 2024. At December 31, 2024 and
December 31, 2023, there were no borrowings from the FRB discount window.
Securities sold under repurchase agreements generally mature within one day from the date of sale. The Company
monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of
the underlying securities. Collateral pledged pursuant to these repurchase agreements can include MBS issued or guaranteed by
U.S. agencies, U.S. Treasury securities and U.S. government agency securities.
The BTFP was created by the Federal Reserve to support businesses and households by making additional funding
available to eligible financial institutions to help assure they have the ability to meet the needs of their depositors. The BTFP
140
offered loans of up to one year in length to banks and other qualifying institutions pledging any collateral eligible for purchase
by the FRB. The collateral was valued at its par amount and consisted primarily of MBS and U.S. government agency
securities. Cadence’s BTFP borrowing was paid off during the fourth quarter of 2024. The BTFP ceased making new loans in
March 2024.
All borrowings from the FHLB are collateralized by commercial, construction, and real estate loans pledged under a
blanket floating lien security agreement with the FHLB of Dallas at December 31, 2024 and December 31, 2023. Under the
terms of this agreement, the Company is required to maintain sufficient collateral to secure borrowings in an aggregate amount
of the lesser of the book value (i.e., unpaid principal balance), after applicable FHLB discounts, of the Company’s eligible
commercial and residential loans pledged as collateral, or 35% of the Company’s assets. Loans totaling $24.4 billion and
$22.9 billion at December 31, 2024 and December 31, 2023, respectively, were pledged to the FHLB of Dallas. At
December 31, 2024, the remaining borrowing availability totaled $13.0 billion. At December 31, 2024, there were no call
features on long-term FHLB borrowings. Short-term FHLB borrowings mature within one year following the date of the
advance.
The FHLB of Dallas has also issued irrevocable letters of credit totaling $47.5 million at December 31, 2024 on behalf
of our customers. Of the total amount, $26.7 million expires on December 17, 2025 and $20.8 million expires on January 30,
2025.
The following table presents the details of the long-term and subordinated debt the Company has outstanding:
(Dollars in thousands)
December 31, 2024
December 31, 2023
4.850% advances from FHLB Dallas, due August 2, 2027
$
706 $
771
4.125% fixed to floating rate, subordinated notes, due November 20, 2029,
callable on November 20, 2024
—
283,159
7.250% subordinated notes, due June 28, 2029, callable on June 28, 2024
—
35,000
4.750% subordinated notes, due June 30, 2029, callable on June 30, 2024
—
79,352
6.250% subordinated notes, due June 28, 2029, callable on June 28, 2024
—
25,000
5.000% fixed to floating rate, subordinated notes, due June 30, 2030,
callable on June 30, 2025
10,000
10,000
Purchase accounting adjustment, net of amortization
—
5,786
Debt issue costs
—
(608)
Total long-term borrowings
$
10,706 $
438,460
During 2024, the Company repurchased $68.0 million of the $300 million Subordinated Notes due November 20,
2029, resulting in a $1.8 million gain on the extinguishment of debt, and called the remaining $215.2 million of these
Subordinated Notes. Also during 2024, the Company repurchased $0.5 million of our Subordinated Notes due June 2029 and
called the remaining $138.9 million of each of the Subordinated Notes due June 2029, resulting in a net gain on the
extinguishment of debt of $4.7 million which was reported in other noninterest revenue in the consolidated statements of
income.
Contractual annual principal payments on long-term debt for the next five years and thereafter are shown in the
following table. These maturities are based upon the amounts owed at December 31, 2024.
(Dollars in thousands)
FHLB Advances
Subordinated Notes
Total
2025
$
61 $
— $
61
2026
40
—
40
2027
605
—
605
2028
—
—
—
2029
—
—
—
Thereafter
—
10,000
10,000
Total
$
706 $
10,000 $
10,706
141
NOTE 10. PREFERRED STOCK
In November 2019, the Company completed its public offering of 6,900,000 shares of 5.50% Series A Non-
Cumulative Perpetual Preferred Stock, par value $0.01 per share, with a liquidation preference of $25 per share of Series A
Preferred Stock (the “Series A Preferred Stock”), which represents $172.5 million in aggregate liquidation preference (the
“Series A Preferred Stock Offering”). The Company received net proceeds from the Series A Preferred Stock Offering, after
deducting the underwriting discount and estimated expenses, of $167.5 million. Holders of the Series A Preferred Stock are
entitled to receive, only when, as, and if declared by the Company’s board of directors, non-cumulative cash dividends based
upon the liquidation preference of $25 per share of Series A Preferred Stock, and no more, at a rate equal to 5.50% per annum,
payable quarterly, in arrears, on February 20, May 20, August 20 and November 20 of each year. The Board of Directors
declared total cash dividends of $1.375 per share of Series A Preferred Stock for a total of $9.5 million during years 2024,
2023, and 2022.
Series A Preferred Stock is not subject to any mandatory redemption, sinking fund or other similar provision. The
Company may redeem shares of Series A Preferred Stock at its option, subject to regulatory requirements, at a redemption price
equal to $25 per share, plus any declared and unpaid dividends. In the event Series A Preferred Stock is redeemed at the
liquidation amount, $5.5 million in excess of the liquidation amount over the carrying amount will be recorded as a reduction to
net income available to common shareholders.
NOTE 11. INCOME TAXES
The components of income tax expense (benefit) attributable to continuing operations were as follows for the years
ended December 31, 2024, 2023 and 2022:
Current:
Federal
$
126,226 $
(2,355) $
106,628
State
18,148
(3,131)
13,972
Deferred:
Federal
10,521
1,208
7,245
State
(2,302)
(316)
1,860
Total
$
152,593 $
(4,594) $
129,705
(In thousands)
2024
2023
2022
The Company had income tax receivable (payable) of $18.5 million, $(10.0) million and $(0.5) million at
December 31, 2024, 2023 and 2022, respectively.
142
Income tax expense (benefit) on continuing operations differed from the amounts computed by applying the U.S.
federal income tax rate of 21% to income (loss) from continuing operations before income taxes resulting from the following:
Tax expense (benefit) at statutory rates
$
142,001 $
(191) $
121,175
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit
12,519
(2,723)
12,508
Tax-exempt interest revenue
(1,542)
(1,730)
(2,877)
Tax-exempt earnings on life insurance
(3,422)
(3,135)
(2,640)
Deductible dividends paid on 401(k) plan
(16)
(529)
(537)
Goodwill writeoff
181
—
—
Tax rate change revaluation of deferreds
—
—
2,470
Excess salary disallowance
5,544
4,855
3,672
Tax credits
(4,225)
(12,926)
(9,728)
FDIC disallowance
6,876
7,332
3,797
Nondeductible merger costs
—
—
129
Meals and entertainment
565
628
441
Other, net
(5,888)
3,825
1,295
Total
$
152,593 $
(4,594) $
129,705
(In thousands)
2024
2023
2022
143
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 2024 and 2023 were as follows:
(In thousands)
2024
2023
Deferred tax assets:
Loans, principally due to allowance for credit losses
$
112,244 $
114,341
Other real estate owned
267
2,217
Loans, fair value adjustment
3,130
5,953
Securities, fair value adjustment
4,720
5,137
Accrued liabilities
34,708
34,724
Net operating loss carryforwards
5,598
6,593
Lease liability
43,939
44,916
Other
5,001
3,007
Unrealized net losses on available for sale-securities
201,646
222,063
Unrecognized pension expense
13,886
14,291
Total gross deferred tax assets
425,139
453,242
Less: valuation allowance
564
615
Deferred tax assets
424,575
452,627
Deferred tax liabilities:
Lease transactions
$
1,313 $
1,511
Employment benefits
17,231
12,690
Premises and equipment, principally due to differences in depreciation
18,748
24,588
Mortgage servicing rights
26,917
25,134
Intangible assets
29,221
29,936
Investments
6,216
7,093
Deferred net loan fees
25,360
24,106
Right of use asset
39,170
40,200
Other
4,099
3,669
Total gross deferred tax liabilities
168,275
168,927
Net deferred tax assets
$
256,300 $
283,700
At December 31, 2024, the Company had a net deferred tax asset of $256.3 million, compared to $283.7 million at
December 31, 2023. The changes to gross deferred tax assets and liabilities during 2024 was primarily due to deferred tax
adjustments related to the change in market value of available for sale securities.
Based upon the level of historical taxable income and projections for future taxable income over the periods in which
deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of
these deductible differences existing at December 31, 2024 with the exception of a state net operating loss carryforward that
will not be realized which resulted in a $0.6 million valuation allowance.
At December 31, 2024, the Company has federal net operating loss carryforwards of $23.7 million which will begin to
expire in 2030. The Company has state net operating loss carryforwards of $1.4 million which will begin to expire in 2030. The
Company believes it is more likely than not the benefit from certain state net operating loss carryforwards will not be realized,
and accordingly, has established a pre-tax valuation allowance of $13.2 million, $0.6 million after tax, associated with those net
operating losses at December 31, 2024.
The Company recognizes accrued interest related to unrecognized tax benefits and penalties as a component of other
noninterest expense. The Company accrued interest of $64 thousand in 2024, $143 thousand in 2023 and $214 thousand in
2022. The Company's accrued interest and penalties on unrecognized tax benefits was $0.8 million and $0.7 million at
December 31, 2024 and 2023, respectively. Accrued interest and penalties are included in other liabilities.
144
At December 31, 2024 and 2023, the balance of unrecognized tax benefits, if recognized that would reduce the
effective tax rate was $1.0 million and $1.2 million, respectively. The Company does not anticipate a significant change to the
total amount of unrecognized tax benefits within the next 12 months. The following table presents a summary of the beginning
and ending amounts of unrecognized income tax benefits:
Years ended December 31,
(In thousands)
2024
2023
2022
Balance at January 1
$
1,242 $
3,077 $
1,441
Additions based on income tax positions related to current year
—
—
154
Additions for income tax positions for prior years
—
—
—
Additions from acquisition
—
—
1,482
Reductions for income tax positions of prior years
(244)
—
—
Statute of limitation expirations
—
—
—
Settlements
—
(1,835)
—
Balance at December 31
$
998 $
1,242 $
3,077
Unrecognized state income tax benefits are not adjusted for the federal income tax impact.
The Company is subject to taxation in the United States and various states and local jurisdictions. The Company files a
consolidated United States federal return. Based on the laws of the applicable state where the Company conducts business
operations, the Company and its applicable subsidiaries either file a consolidated, combined or separate return. The tax years
that remain open for examination for the Company's major jurisdictions of the United States—Federal, Mississippi, Arkansas,
Tennessee, Alabama, Louisiana, Texas, Georgia and Missouri—are 2021, 2022 and 2023.
In August 2022, the IRA of 2022 was signed into law to address inflation, healthcare costs, climate change and
renewal energy incentives, among other things. Included in the IRA of 2022 are provisions for the creation of a 15% CAMT
that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement
income in excess of $1 billion. In 2024 and 2023, the Company was not subject to the 15% CAMT.
NOTE 12. PENSION AND OTHER POST RETIREMENT BENEFIT PLANS
The Basic Plan is a non-contributory defined benefit pension plan managed by a trustee covering substantially all full-
time employees who have at least one year of service, worked at least 1,000 hours and have attained the age of 18. For such
employees hired prior to January 1, 2006, benefits were based on years of service and the employee’s compensation until
January 1, 2017, at which time benefits were based on a 2.5% cash balance formula. For such employees hired on or after
January 1, 2006, benefits accrue based on a cash balance formula, effective January 1, 2012. The Company's funding policy is
to contribute to the Basic Plan the amount that meets the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974, plus such additional amounts as the Company determines to be appropriate. The difference
between the plan assets and projected benefit obligation is included in other assets or other liabilities, as appropriate. Actuarial
assumptions are evaluated periodically.
The Restoration Plan provides for the payment of retirement benefits to certain participants in the Basic Plan. The
Restoration Plan is a non-qualified plan that covers any employee whose benefit under the Basic Plan is limited by the
provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and any employee who elects to participate in the
Cadence Frozen Deferred Compensation Plan, which reduces the employee’s benefit under the Basic Plan. For employees hired
prior to January 1, 2006, benefits were based on years of service and the employee’s compensation until January 1, 2017, at
which time benefits were based on a 2.5% cash balance formula. For such employees hired on or after January 1, 2006, benefits
accrue based on a cash balance formula, effective January 1, 2012. The Supplemental Plan is a non-qualified defined benefit
supplemental retirement plan for certain key employees. Benefits commence when the employee retires and are payable over a
period of ten years.
The Company measured benefit obligations using the most recent Pri-2012 mortality tables and MP-2021 mortality
improvement scale in selecting mortality assumptions at December 31, 2024. The Company uses a December 31 measurement
date for its pension and other benefit plans.
145
In 2023, an amendment was made to the Basic Plan in conjunction with a special voluntary retirement offer
specifically designed for long-term participants in the Basic Plan. This amendment to provide enhanced pension benefit
protection increased the Basic Plan’s liability by $5.1 million, which the Company recognized immediately as a one-time
charge to expense during 2023.
A summary of the three defined benefit retirement plans at and for the years ended December 31, 2024, 2023 and 2022
follows:
Pension Benefits
(In thousands)
2024
2023
2022
Change in benefit obligations:
Projected benefit obligations at beginning of year
$
241,606 $
238,878 $
323,274
Service cost
7,627
9,840
10,439
Interest cost
11,765
12,191
7,278
Actuarial (gain) loss
6,026
15,387
(61,610)
Benefits paid
(10,612)
(11,691)
(10,510)
Administrative expenses paid
(2,058)
(1,319)
(1,033)
Plan amendments
—
5,088
—
Settlements (1)
(15,640)
(26,768)
(28,960)
Projected benefit obligations at end of year
$
238,714 $
241,606 $
238,878
Change in plans' assets:
Fair value of plans' assets at beginning of year
$
337,803 $
341,629 $
414,067
Actual return on assets
27,764
33,397
(34,384)
Employer contributions
4,170
2,555
2,449
Benefits paid
(10,612)
(11,691)
(10,510)
Administrative expenses paid
(2,058)
(1,319)
(1,033)
Settlements (1)
(15,640)
(26,768)
(28,960)
Fair value of plans' assets at end of year
$
341,427 $
337,803 $
341,629
Funded status:
Projected benefit obligations
$
(238,714) $
(241,606) $
(238,878)
Fair value of plans' assets
341,427
337,803
341,629
Net amount recognized
$
102,713 $
96,197 $
102,751
(1)
The total lump sums paid during 2024, 2023, and 2022 were $15.6 million, $26.8 million, and $29.0 million, respectively, compared to a
settlement threshold of $17.2 million, $19.6 million, and $14.8 million. As a result, there was no charge recognized for 2024 and a
charge of $11.8 million and $9.0 million were recognized for 2023 and 2022, respectively.
The overall funded status of the plans improved slightly during 2024. The slight increase was the result of an increase
in the fair value of the plans' assets as the actual returns on plan assets exceeded payments and settlements coupled with a
decrease in the projected benefit obligation due to decreased interest cost and plan amendments.
The weighted-average interest crediting rates for both the Basic Plan and the Restoration Plan were 3.79% in 2024.
The Supplemental Plan does not have a minimum interest crediting rate.
146
Amounts recognized in the consolidated balance sheets consisted of:
Pension Benefits
(In thousands)
2024
2023
2022
Prepaid benefit cost
$
191,464 $
188,325 $
201,581
Accrued benefit liability
(29,963)
(31,625)
(31,800)
Accumulated other comprehensive loss adjustment
(58,788)
(60,503)
(67,030)
Net amount recognized
$
102,713 $
96,197 $
102,751
Pre-tax amounts recognized in accumulated other comprehensive loss consisted of:
December 31,
(In thousands)
2024
2023
Net prior service benefit
$
178 $
191
Net actuarial loss
58,610
60,312
Total accumulated other comprehensive loss
$
58,788 $
60,503
The components of net periodic benefit cost for the periods indicated were as follows:
Year Ended December 31,
(In thousands)
2024
2023
2022
Service cost
$
7,627 $
9,840 $
10,439
Interest cost
11,765
12,191
7,278
Expected return on plan assets
(22,966)
(21,969)
(23,003)
Recognized prior service cost
13
13
14
Recognized net loss
2,931
3,734
4,726
Settlement loss
—
11,826
9,023
Net periodic benefit (credit) cost (1)
$
(630) $
15,635 $
8,477
(1)
While service cost is included in salaries and employee benefits, the other components of net periodic pension costs are included in other
noninterest expense in the consolidated statements of income for the years ended December 31, 2024, 2023, and 2022.
The weighted-average assumptions used to determine benefit obligations at December 31, 2024 and 2023 were as
follows:
Basic Plan
Restoration Plan
Supplemental Plan
2024
2023
2024
2023
2024
2023
Discount rate
5.60%
5.29%
5.50%
5.22%
5.31%
5.05%
Rate of compensation increase
4.00%
4.00%
4.00%
4.00%
3.50%
3.00%
The weighted-average assumptions used to determine net periodic benefit cost for 2024, 2023 and 2022 were as
follows:
Basic Plan
2024
2023
2022
Discount rate-service cost
5.35%
5.65%
2.92%
Discount rate-interest cost
5.13%
5.13%
1.95%
Rate of compensation increase
4.00%
4.00%
4.00%
Expected rate of return on plan assets
7.00%
6.50%
6.00%
147
Restoration Plan
2024
2023
2022
Discount rate-service cost
5.71%
5.53%
2.61%
Discount rate-interest cost
5.31%
5.30%
2.26%
Rate of compensation increase
4.00%
4.00%
4.00%
Expected rate of return on plan assets
N/A
N/A
N/A
Supplemental Plan
2024
2023
2022
Discount rate-service cost
5.75%
5.49%
2.24%
Discount rate-interest cost
5.02%
5.28%
1.62%
Rate of compensation increase
3.00%
3.00%
3.00%
Expected rate of return on plan assets
N/A
N/A
N/A
The following table presents information related to the Restoration and Supplemental Plans that had accumulated
benefit obligations in excess of plan assets at December 31, 2024 and 2023:
(In thousands)
2024
2023
Projected benefit obligation
$
35,534 $
37,431
Accumulated benefit obligation
34,376
34,861
Fair value of assets
—
—
In selecting the expected long-term rate of return on assets used for the Basic Plan, the Company considered the
average rate of earnings expected on the funds invested or to be invested to provide for the benefits of the plan. This included
considering the trust asset allocation and the expected returns likely to be earned over the life of the plan. This basis is
consistent with the prior year. The discount rate is the rate used to determine the present value of the Company’s future benefit
obligations for its pension and other postretirement benefit plans.
Plan assets are managed on a total return basis to meet future obligations. Risk is managed through asset allocation,
diversification, asset valuation analysis and maintaining a long-term focus. Assets are invested in multiple asset classes
including, but not limited to, domestic equities, international equities and fixed income securities. Factors considered for the
Plan’s asset allocation include, but are not limited to, the Plan’s funding status, long-term expected liabilities and expected
long-term investment performance. To meet the Plan’s obligation, long-term returns take priority over short term market
volatility and uncertainty. The Plan asset allocation, diversification and long-term performance are evaluated by the Retirement
Committee multiple times throughout each calendar year.
The Company’s pension plan weighted-average asset allocations at December 31, 2024 and 2023 and the Company’s
target allocations for 2025, by asset category, were as follows:
Plan assets at December 31,
Target for
Asset category:
2024
2023
2025
Equity securities
49 %
49 %
33-60%
Debt securities
47 %
47 %
40-67%
Cash and equivalents
5 %
4 %
Total
100 %
100 %
Equity securities held in the Basic Plan included shares of the Company’s common stock with a fair value of $2.8
million (0.83% of total plan assets) and $2.4 million (0.72% of total plan assets) at December 31, 2024 and 2023, respectively.
An analysis by management is performed annually to determine whether the Company will make a contribution to the Basic
Plan.
148
The following table presents information regarding expected future benefit payments, which reflect expected service,
as appropriate:
(In thousands)
Pension
Benefits
Expected future benefit payments:
2025
$
25,061
2026
25,577
2027
26,032
2028
25,515
2029
25,693
2030-2034
119,808
The following table presents the fair value of each major category of plan assets held in the Basic Plan at
December 31, 2024 and 2023:
Plan Assets
(In thousands)
2024
2023
Investments, at fair value:
Cash and cash equivalents
$
11,459 $
7,822
U.S. agency debt obligations
20,549
13,679
Mutual funds
272,349
272,589
U. S. government debt obligations
6,880
5,895
Common stock of Cadence Bank
2,834
2,434
Brokered certificates of deposit
26,711
34,703
Total investments, at fair value
340,782
337,122
Accrued interest and dividends
645
681
Fair value of plan assets
$
341,427 $
337,803
Fair values are determined based on valuation techniques categorized as follows: Level 1 means the use of quoted
prices for identical instruments in active markets; Level 2 means the use of quoted prices for identical or similar instruments in
markets that are not active or are directly or indirectly observable; Level 3 means the use of unobservable inputs. Quoted
market prices, when available, are used to value investments. Pension plan investments include funds which invest in various
types of investment securities and in various companies within various markets. Investment securities are exposed to several
risks, such as interest rate, market and credit risks. Because of the level of risk associated with certain investment securities, it is
at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes
could materially affect the amounts reported.
149
The following tables set forth the plan investments at fair value at December 31, 2024 and 2023:
2024
(In thousands)
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
$
11,459 $
— $
— $
11,459
U.S. agency debt obligations
—
20,549
—
20,549
U.S. government debt obligations
—
6,880
—
6,880
Mutual funds
272,349
—
—
272,349
Company common stock
2,834
—
—
2,834
Brokered certificates of deposit
—
26,711
—
26,711
Total
$
286,642 $
54,140 $
— $
340,782
2023
(In thousands)
Level 1
Level 2
Level 3
Total
Cash and cash equivalents
$
7,822 $
— $
— $
7,822
U.S. agency debt obligations
—
13,679
—
13,679
U.S. government debt obligations
—
5,895
—
5,895
Mutual funds
272,589
—
—
272,589
Company common stock
2,434
—
—
2,434
Brokered certificates of deposit
—
34,703
—
34,703
Total
$
282,845 $
54,277 $
— $
337,122
The following investments represented 5% or more of the total plan asset value at December 31, 2024:
(In thousands)
2024
John Hancock Discip Value Fund
$
20,713
John Hancock Discip Value Mid Cap Fund
19,756
Curasset Capital Management Core Bond Fund
30,536
Curasset Capital Management Limited Term Inc Fund
38,021
Pioneer Multi-Asset Ultrashort Inc Fund
20,572
First Eagle Global Fund Class R6
23,111
JP Morgan Equity Income R6
24,873
JP Morgan Strategic Income Opp Fund
20,057
The Company has a defined contribution plan (commonly referred to as a “401(k) Plan”). Employees may contribute a
portion of their compensation, as set forth in the 401(k) Plan, subject to the limitations as established by the Code. Employee
contributions (up to 5% of defined compensation) are matched dollar-for-dollar by the Company. Employer contributions were
$21.2 million, $22.6 million, and $21.4 million for 2024, 2023, and 2022, respectively.
150
NOTE 13. FAIR VALUE DISCLOSURES
Fair value is defined by U.S. GAAP as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy requires the Company to maximize the
use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:
•
Level 1: Valuation is based upon quoted prices for identical instruments traded in active markets.
•
Level 2: Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or
similar instruments in markets that are not active, and model-based valuation techniques for which all significant
assumptions are observable in the market.
•
Level 3: Valuation is generated from model-based techniques that use significant assumptions not observable in the
market. These unobservable assumptions reflect management’s estimates of assumptions that market participants
would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash
flow models, and similar techniques.
Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in
inputs occurs.
Determination of Fair Value
Fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The following describes the assumptions and methodologies
used to estimate the fair value of financial instruments recorded at fair value in the consolidated balance sheets and for
estimating the fair value of financial instruments for which fair value is disclosed.
Available for sale securities and equity investments. AFS securities and equity investments (with readily
determinable fair values) are recorded at fair value on a recurring basis. AFS securities and equity investments that are traded
on an active exchange are classified as Level 1. If quoted prices are not available, the Company obtains fair value
measurements from an independent pricing service. These fair value measurements consider observable market data that may
include benchmark yield curves, reported trades, broker/dealer quotes, issuer spreads and credit information, among other
inputs. These securities are classified as Level 2.
Mortgage servicing rights. The Company records MSR at fair value on a recurring basis with subsequent
remeasurement of MSR based on change in fair value. An estimate of the fair value of the Company’s MSR is determined by
utilizing assumptions about factors such as mortgage interest rates, discount rates, mortgage loan prepayment speeds, market
trends and industry demand. All of the Company’s MSR are classified as Level 3.
Derivative instruments. The Company’s derivatives that are traded on an active exchange are classified as Level 1.
The majority of the Company’s derivative instruments are measured at fair value based on modeling that utilizes observable
market inputs for various interest rates published by leading third-party financial news and data providers. This is observable
data that represents the rates used by market participants for instruments entered into at that date; however, they are not based
on actual transactions, so they are classified as Level 2. Derivative instruments that are measured at fair value based on either an
unobservable market price or a discounted cash flow valuation using the terms of a derivative agreement are classified as Level
3.
Loans held for sale. Loans held for sale are carried at fair value which is based on commitments outstanding from
investors as well as what secondary markets are currently offering for portfolios with similar characteristics. Therefore, loans
held for sale are subjected to recurring fair value adjustments and are classified as Level 2. The Company obtains quotes, bids,
or pricing indications on all or part of these loans directly from the buyers. Premiums and discounts received or to be received
on the quotes, bids or pricing indications are indicative of the fact that the cost is lower or higher than fair value.
Investments in limited partnerships. The fair value of certain investments in limited partnerships is estimated using
the practical expedient of net asset value. For other investments in limited partnerships that do not qualify for the practical
expedient, we use a measurement alternative which measures these investments at cost, less any impairment, plus or minus any
151
changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.
The Company classifies these investments in limited partnerships as Level 3.
SBA servicing assets. The fair value of the SBA servicing assets is estimated using the gross coupon less an assumed
CSC. The Company classifies SBA servicing assets as Level 3.
Other real estate owned and repossessed assets. OREO is carried at the lower of cost or fair value less estimated
selling costs on an ongoing basis and is subjected to nonrecurring fair value adjustments. Estimated fair value is determined on
the basis of independent appraisals and other relevant factors. Appraisals that are not based on observable inputs or that require
significant adjustments or fair value measurements that are not based on third-party appraisals are considered to be based on
significant unobservable inputs. The fair value of repossessed assets is determined using net orderly liquidation valuation on a
nonrecurring basis. The Company’s OREO and repossessed assets are classified as Level 3.
Collateral-dependent loans (impaired and purchase credit deteriorated (loss)). Collateral-dependent loans
considered for specific reserve are loans for which, based on current information and events, it is probable that the creditor will
be unable to collect all amounts due according to the contractual terms of the loan agreement. Collateral-dependent loans
include impaired loans and classified purchased credit deteriorated (loss) loans (as defined by management). When a loan is
collateral-dependent, the fair value of the loan is determined based on the fair value of the underlying collateral. All of the
Company’s collateral-dependent loans are classified as Level 3.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The following tables present the balances of the assets and liabilities measured at fair value on a recurring basis:
December 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Total
Assets:
Available for sale securities
$
— $
7,293,988 $
— $
7,293,988
Equity investments
21,678
—
—
21,678
Mortgage servicing rights
—
—
114,594
114,594
Derivative instruments
—
32,021
1,310
33,331
Loans held for sale
—
244,192
—
244,192
Investments in limited partnerships
—
—
118,710
118,710
SBA servicing rights
—
—
5,785
5,785
Total
$
21,678 $
7,570,201 $
240,399 $
7,832,278
Liabilities:
Derivative instruments
$
3,085 $
45,573 $
15 $
48,673
December 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Total
Assets:
Available for sale securities
$
— $
8,075,476 $
— $
8,075,476
Equity investments
22,108
—
—
22,108
Mortgage servicing rights
—
—
106,824
106,824
Derivative instruments
1,809
25,836
1,858
29,503
Loans held for sale
—
186,301
—
186,301
Investments in limited partnerships
—
—
94,998
94,998
SBA servicing rights
—
—
6,124
6,124
Total
$
23,917 $
8,287,613 $
209,804 $
8,521,334
Liabilities:
Derivative instruments
$
— $
44,294 $
10 $
44,304
152
Level 3 financial instruments typically include unobservable components but may also include some observable
components that may be validated to external sources. The table below includes a roll forward of the consolidated balance sheet
amounts for the years ended December 31, 2024 and 2023, for changes in the fair value of financial instruments within Level 3
of the valuation hierarchy that are recorded on a recurring basis. The gains or (losses) in the following table (which are reported
in Other noninterest income in the consolidated statements of income) may include changes to fair value due in part to
observable factors that may be part of the valuation methodology.
Year Ended December 31, 2024
(In thousands)
Mortgage
Servicing
Rights
Investments
in Limited
Partnerships
SBA
Servicing
Rights
Mortgage Loan
Held-For-Sale
Interest Rate Lock
Commitments
(Assets and
Liabilities)
Balance at December 31, 2023
$ 106,824 $
94,998 $
6,124 $
1,848
Net (losses) gains
(6,241)
11,822
(1,664)
(553)
Additions
14,011
—
1,325
—
Contributions paid
—
27,079
—
—
Distributions received
—
(15,189)
—
—
Balance at December 31, 2024
$ 114,594 $
118,710 $
5,785 $
1,295
Net unrealized gains (losses) included in net income for the period
related to assets and liabilities held at December 31, 2024
$
6,669 $
11,822 $ (1,664) $
(553)
Year Ended December 31, 2023
(In thousands)
Mortgage
Servicing
Rights
Investments
in Limited
Partnerships
SBA
Servicing
Rights
Mortgage Loan
Held-For-Sale
Interest Rate Lock
Commitments
(Assets and
Liabilities)
Balance at December 31, 2022
$ 109,744 $
67,533 $
5,585 $
425
Net (losses) gains
(12,996)
8,224
(1,227)
1,423
Additions
10,076
—
1,766
—
Reclassifications
—
(1,120)
—
—
Contributions paid
—
26,750
—
—
Distributions received
—
(6,411)
—
—
Other
—
22
—
—
Balance at December 31, 2023
$ 106,824 $
94,998 $
6,124 $
1,848
Net unrealized (losses) gains included in net income for the period
related to assets and liabilities held at December 31, 2023
$
(4,158) $
8,224 $ (1,227) $
1,423
Fair Value Option
The Company elected to measure commercial real estate loans held for sale and commercial and industrial loans held
for sale under the fair value option. Included in these loans are loans guaranteed by the SBA and loans related to syndications.
The Company assumed the cost of these loans approximates their fair value due to the short term these instruments remain on
the Company’s balance sheet.
The Company also elected to measure residential mortgage loans held for sale at fair value. The election allows for
effective offset of the changes in fair values of the loans and the derivative instruments used to hedge them. Included in the
residential mortgage loans held for sale portfolio are certain previously sold GNMA loans. Under ASC 860-10-40, certain
GNMA loans will not meet sale criteria due to the conditional buyback option becoming unconditional once the delinquency
criteria is met when they reach 90 or more days past due. The Company records these loans at fair value on the consolidated
153
balance sheets with an offsetting liability. The Company assumed the cost approximates the fair value. At December 31, 2024
and December 31, 2023, the fair value of the GNMA loans totaled $69.0 million and $56.5 million, respectively.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal
balance of loans held for sale:
December 31, 2024
December 31, 2023
(In thousands)
Aggregate
Fair Value
Aggregate
Unpaid
Principal
Aggregate
Fair Value
Less
Aggregate
Unpaid
Principal
Aggregate
Fair Value
Aggregate
Unpaid
Principal
Aggregate
Fair Value
Less
Aggregate
Unpaid
Principal
Residential mortgage loans
$
181,622 $
181,622 $
— $
157,631 $
156,175 $
1,456
Commercial and industrial loans
59,343
59,343
—
28,464
25,807
2,657
Commercial real estate loans
3,227
3,227
—
206
206
—
Total
$
244,192 $
244,192 $
— $
186,301 $
182,188 $
4,113
Net gains and losses resulting from changes in fair value for residential mortgage loans held for sale are recorded in
mortgage banking revenue in the consolidated statements of income. For the years ended December 31, 2024 and 2023, the
Company had net gains totaling $0.9 million and $2.1 million, respectively.
Net gains and losses resulting from changes in fair value for commercial and industrial loans and commercial real
estate loans held for sale are recorded in other noninterest revenue in the consolidated statements of income. For the years
ended December 31, 2024 and 2023, the Company had net gains from the sale of these loans totaling $6.4 million and $4.8
million, respectively.
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
From time to time, the Company may be required to measure certain other financial assets at fair value on a
nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of
cost or fair value accounting or write-downs of individual assets. The following tables present the balances of assets measured
at fair value on a nonrecurring basis:
December 31, 2024
(In thousands)
Level 1
Level 2
Level 3
Total
Assets:
Impaired loans, collateral-dependent(1)
$
— $
— $
75,820 $
75,820
Purchased credit deteriorated (loss) loans
—
—
6,027
6,027
Other real estate and repossessed assets
—
—
5,754
5,754
(1) At December 31, 2024, impaired loans, collateral-dependent includes $8.7 million which were classified as doubtful.
December 31, 2023
(In thousands)
Level 1
Level 2
Level 3
Total
Assets:
Impaired loans, collateral-dependent
$
— $
— $
101,271 $
101,271
Purchased credit deteriorated (loss) loans
—
—
6,507
6,507
Other real estate and repossessed assets
—
—
6,247
6,247
154
Unobservable Inputs
The following table presents the significant unobservable inputs used in Level 3 fair value measurements for financial
assets measured at fair value on a recurring and nonrecurring basis:
Quantitative Information about Level 3 Fair Value Measurements
(In thousands)
Carrying
Value
Valuation
Methods
Unobservable
Inputs
Range
Weighted
Average
December 31, 2024
Measured at fair value on a recurring
basis:
Mortgage servicing rights(1)
$
114,594
Discounted cash
flow
Discount rate
9.7% - 11.3%
10.1%
Repayment speed
(CPR)
6.8 - 12.6
8.3
Coupon interest
rate
3.2% - 7.9%
4.2%
Remaining
maturity (months)
119 - 480
342
Servicing fee (bps)
19.0 bps-50.0
bps
28.7 bps
Investments in limited partnerships
118,710
Practical
expedient
Net asset value
NM
NM
SBA servicing rights(1)
5,785
Coupon less
contractual
servicing cost
Contractual
servicing
cost (bps)
12.5 bps-40.0
bps
26.3 bps
Mortgage loan held-for-sale interest
rate lock commitments (assets and
liabilities)
1,295
Discounted cash
flow
Closing ratio
10.0% - 100%
46.8%
Measured at fair value on a
nonrecurring basis:
Impaired loans, collateral-
dependent(1)
$
75,820
Appraised value,
as adjusted
Discount to fair
value
10% - 41%
30.5%
Purchased credit deteriorated (loss)
loans(1)
6,027
Appraised value,
as adjusted
Discount to fair
value
10% - 30%
24.7%
Other real estate and repossessed
assets
5,754
Appraised value,
as adjusted
Estimated closing
costs
7.0%
7.0%
155
Quantitative Information about Level 3 Fair Value Measurements
(In thousands)
Carrying
Value
Valuation
Methods
Unobservable
Inputs
Range
Weighted
Average
December 31, 2023
Measured at fair value on a
recurring basis:
Mortgage servicing rights(1)
$
106,824
Discounted cash flow
Discount rate
9.8% - 16.0%
10.3%
Repayment
speed (CPR)
6.4 - 100.0
8.1
Coupon interest
rate
2.8% - 6.8%
3.9%
Remaining
maturity
(months)
119 - 480
338.8
Servicing fee
(bps)
19.0 bps-50.0
bps
28.6 bps
Investments in limited
partnerships
94,998
Practical expedient
Net asset value
NM
NM
SBA servicing rights(1)
6,124 Coupon less contractual
servicing cost
Contractual
servicing cost
(bps)
12.5 bps-40.0
bps
26.3 bps
Mortgage loan held-for-sale
interest rate lock commitments
(assets and liabilities)
1,848
Discounted cash flow
Closing ratio
10.0% - 100%
55.9%
Measured at fair value on a
nonrecurring basis:
Impaired loans, collateral-
dependent(1)
$
101,271
Appraised value, as
adjusted
Discount to fair
value
0% - 90%
29.2%
Purchased credit deteriorated
(loss) loans(1)
6,507
Appraised value, as
adjusted
Discount to fair
value
10% - 30%
24.6%
Other real estate and repossessed
assets
6,247
Appraised value, as
adjusted
Estimated
closing costs
7.0%
7.0%
(1)
Weighted averages were calculated using the input attributed and the outstanding balance of the loan.
Certain assets and liabilities subject to fair value disclosure requirements are not actively traded, requiring
management to estimate the fair value. These estimations necessarily require judgement to be applied to the reasonableness and
relevancy of comparable market prices, expected future cash flows, and appropriate discount rates.
The short-term nature of certain assets and liabilities result in their carrying value approximating fair value. They
include cash and due from banks, interest bearing deposits with other banks and Federal funds sold, accrued interest receivable,
non-time deposits, federal funds purchased, securities sold under agreement to repurchase, short-term BTFP borrowings and
accrued interest payable.
156
The following tables present carrying and fair value information of financial instruments for the periods presented:
December 31, 2024
(In thousands)
Carrying
Value
Fair Value
Level 1
Level 2
Level 3
Assets:
Cash and due from banks
$
624,884 $
624,884 $
624,884 $
— $
—
Interest bearing deposits with other banks and
Federal funds sold
1,106,692
1,106,692
1,106,692
—
—
Available for sale securities and equity securities
with readily determinable fair values
7,315,666
7,315,666
21,678
7,293,988
—
Net loans and leases
33,280,962 32,440,220
—
— 32,440,220
Loans held for sale
244,192
244,192
—
244,192
—
Accrued interest receivable
196,670
196,670
—
26,239
170,431
Mortgage servicing rights
114,594
114,594
—
—
114,594
Investments in limited partnerships
118,710
118,710
—
—
118,710
Other assets
11,539
11,539
—
—
11,539
Liabilities:
Deposits
$ 40,496,201 $ 40,495,193 $
— $ 40,495,193 $
—
Federal funds purchased and securities sold under
agreement to repurchase and other short-term
borrowings
23,616
23,616
23,616
—
—
Accrued interest payable
110,853
110,853
3
110,850
—
Subordinated and long-term borrowings
10,706
10,570
—
10,570
—
Derivative instruments:
Assets:
Commercial loan interest rate contracts
$
30,555 $
30,555 $
— $
30,555 $
—
Mortgage loan held-for-sale interest rate lock
commitments
1,310
1,310
—
—
1,310
Mortgage loan forward sale commitments
816
816
—
816
—
Foreign exchange contracts
650
650
—
650
—
Liabilities:
Commercial loan interest rate contracts
$
45,070 $
45,070 $
— $
45,070 $
—
Mortgage loan held-for-sale interest rate lock
commitments
15
15
—
—
15
Futures, forwards and options
3,085
3,085
3,085
—
—
Mortgage loan forward sale commitments
34
34
—
34
—
Foreign exchange contracts
469
469
—
469
—
157
December 31, 2023
(In thousands)
Carrying
Value
Fair
Value
Level 1
Level 2
Level 3
Assets:
Cash and due from banks
$
798,177 $
798,177 $
798,177 $
— $
—
Interest bearing deposits with other banks and
Federal funds sold
3,434,088
3,434,088
3,434,088
—
—
Available for sale securities and equity securities
with readily determinable fair values
8,097,584
8,097,584
22,108
8,075,476
—
Net loans and leases
32,028,988 30,933,473
—
— 30,933,473
Loans held for sale
186,301
186,301
—
186,301
—
Accrued interest receivable
198,680
198,680
—
28,565
170,115
Mortgage servicing rights
106,824
106,824
—
—
106,824
Investments in limited partnerships
94,998
94,998
—
—
94,998
Other assets
12,371
12,371
—
—
12,371
Liabilities:
Deposits
$ 38,497,137 $ 38,487,472 $
— $ 38,487,472 $
—
Federal funds purchased and securities sold under
agreement to repurchase and other short-term
borrowings
451,516
451,516
451,516
—
—
Short-term BTFP borrowings
3,500,000
3,500,000
3,500,000
—
—
Accrued interest payable
100,682
100,682
2,324
98,358
—
Subordinated and long-term borrowings
438,460
411,651
—
411,651
—
Derivative instruments:
Assets:
Commercial loan interest rate contracts
$
25,264 $
25,264 $
— $
25,264 $
—
Mortgage loan held-for-sale interest rate lock
commitments
1,858
1,858
—
—
1,858
Futures, forwards and options
1,809
1,809
1,809
—
—
Mortgage loan forward sale commitments
246
246
—
246
—
Foreign exchange contracts
326
326
—
326
—
Liabilities:
Commercial loan interest rate contracts
$
41,459 $
41,459 $
— $
41,459 $
—
Mortgage loan held-for-sale interest rate lock
commitments
10
10
—
—
10
Mortgage loan forward sale commitments
2,567
2,567
—
2,567
—
Foreign exchange contracts
268
268
—
268
—
Fair Value of Financial Instruments
GAAP requires that the Company disclose estimated fair values for its financial instruments. Fair value estimates,
methods, and assumptions that are used by the Company in estimating fair values of financial instruments that are not disclosed
above are set forth below.
Cash and Cash Equivalents. The carrying amounts for cash and cash equivalents approximate fair values due to their
immediate and shorter-term maturities. Cash and equivalents include cash and amounts due from banks, including interest-
bearing deposits with other banks.
158
Net Loans. Loans are valued on an individual basis, with consideration given to the loans’ underlying characteristics,
including account types, remaining terms, annual interest rates or coupons, interest types, accrual basis, timing of principal and
interest payments, current market rates, and remaining balances. A discounted cash flow model is used to estimate the fair value
of the loans using assumptions for prepayments speeds, projected default probabilities by risk grade, and estimates of prevailing
discount rates. The discounted cash flow approach models the projected cash flows, applying various assumptions regarding
interest and payment risks for the loans based on the loan types, payment types and fixed or variable interest rate classifications.
Estimated fair values are disclosed through the application of the exit price notion. The assumptions used to estimate fair value
are intended to approximate those that a market participant would use in an orderly transaction on the measurement date. All of
the Company’s loans and leases are classified as Level 3.
Accrued Interest Receivable and Payable. The carrying amounts for accrued interest receivable and accrued interest
payable approximate fair values due to their nature and are classified in the Level hierarchy according to their corresponding
asset or liability.
Deposits. The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at
the reporting date (that is, their carrying amounts). Fair values for time deposits are estimated using a discounted cash flow
calculation that uses recent issuance rates over the prior three months and a market rate analysis of recent offering rates for
retail products. For wholesale products, brokered pricing offering rates were used. The Company’s deposits are classified as
Level 2.
Borrowings. The carrying amounts for federal funds purchased and repurchase agreements approximate fair value
because of their short-term maturity and are classified as Level 1. Similarly, the carrying amounts for the Company's fixed-term
BTFP approximate fair value and were classified as Level 1. The fair value of the subordinated debentures was estimated using
a discounted cash flow calculation that uses recent issuance rates for similar notes offerings for similar sized issuers. FHLB
borrowings and the subordinate notes are classified as Level 2.
Lending Commitments. The Company’s lending commitments are negotiated at prevailing market rates and are
relatively short-term in nature. As a matter of policy, the Company generally makes commitments for fixed-rate loans for
relatively short periods of time. Therefore, the estimated value of the Company’s lending commitments approximates the
carrying amount and is immaterial to the financial statements. The Company’s lending commitments are classified as Level 2.
The Company’s off-balance sheet commitments, which include letters of credit totaling $448.9 million and $450.7 million at
December 31, 2024 and 2023, respectively, are funded at current market rates at the date they are drawn upon. It is
management’s opinion that the fair value of these commitments would approximate their carrying value, if drawn upon. See
Note 21 for additional information regarding lending commitments.
Limitations. The fair value estimates are determined as of a specific point in time utilizing various assumptions and
estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain
financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. The fair
values for loans involve the use of various assumptions due to illiquidity in the market as of December 31, 2024 and 2023.
These assumptions are considered to reflect inputs that market participants would use in transactions involving these
instruments as of the measurement date. The tables above only includes financial instruments of the Company, and,
accordingly, the total of the fair value amounts does not represent, and should not be construed to represent, the underlying
value of the Company.
NOTE 14. SHARE-BASED COMPENSATION
The Company’s Long-Term Equity Incentive Plan (“Incentive Plan”), Cadence Bank Equity Incentive Plan for Non-
Employee Directors, 2021 Long-Term Equity Incentive Plan and the Amended and Restated 2015 Omnibus Incentive Plan (the
“2015 Plan” assumed from Legacy Cadence) permit the Company to grant to employees and directors various forms of share-
based incentive compensation and were effective during the years ended December 31, 2024, 2023, and 2022. On December
30, 2024, the Cadence Bank 2025 Long-Term Incentive Plan (“the 2025 Plan”) was approved by the shareholders. The 2025
Plan supersedes all four of the incentive plans previously mentioned and is effective starting in fiscal year 2025. At December
31, 2024, 4.5 million shares were available for future grants of share-based compensation under the 2025 Plan.
The Company has primarily granted PSUs, RSUs and RSAs under the Incentive Plan. PSUs entitle the recipient to
receive shares of the Company’s common stock upon the achievement of performance goals that are specified in the award over
a performance period. The recipient of PSUs is not treated as a shareholder of the Company and is not entitled to vote or receive
dividends until the performance conditions stated in the award are satisfied and the shares of stock are issued to the recipient.
159
All PSUs vest over a three-year period and are valued at the fair value of the Company’s stock at the grant date based upon the
estimated number of shares expected to vest. In 2022, the Company incorporated a lattice model into the PSU valuation
methodology to estimate the fair value of the portion of the award related to market conditions. RSUs entitle the recipient to
receive the shares once they are vested but with no voting rights until the shares are received. RSUs generally vest over three- to
five-year periods and are eligible to receive dividend equivalents, which accrue and are paid upon vesting. RSAs entitle the
recipient to vote the shares of stock but the recipient does not receive the shares until they are fully vested. RSA grants vest
over five- to seven-year periods and are entitled to receive dividends.
The following table summarizes the Company’s total share-based compensation expense and related estimated tax
benefit for the periods indicated:
Year Ended December 31,
(In thousands)
2024
2023
2022
Share-based compensation expense
$
32,710 $
39,983 $
37,608
Tax benefit
8,651
9,198
7,755
Performance Stock Units
The following table summarizes the Company’s PSU activity for the periods indicated:
Year Ended December 31,
2024
2023
Shares
Weighted
Average Grant
Date Fair Value
Shares
Weighted
Average Grant
Date Fair Value
Nonvested at beginning of period
1,967,631 $
26.17
1,485,603 $
28.54
Granted during the period
323,293
30.26
597,979
20.39
Vested during the period
(807,684)
28.76
(41,453)
30.55
Forfeited during the period
(271,634)
27.04
(74,498)
24.51
Nonvested at end of period
1,211,606 $
25.34
1,967,631 $
26.17
The Company recorded $11.9 million, $13.6 million, and $10.6 million of compensation expense from continuing
operations related to the PSUs in 2024, 2023, and 2022, respectively. At December 31, 2024, there was $10.9 million of
unrecognized compensation cost related to PSUs that is expected to be recognized over a weighted average period of 1.70
years.
Restricted Stock Units
The following table summarizes the Company’s RSU activity for the periods indicated:
Year Ended December 31,
2024
2023
Shares
Weighted
Average Grant
Date Fair Value
Shares
Weighted
Average Grant
Date Fair Value
Nonvested at beginning of period
3,055,824 $
25.19
2,435,802 $
28.53
Granted during the period
1,064,936
28.76
1,386,005
20.46
Vested during the period
(810,160)
28.12
(528,702)
28.06
Forfeited during the period
(246,709)
25.83
(237,281)
25.38
Nonvested at end of period
3,063,891 $
25.61
3,055,824 $
25.20
The Company recorded $19.9 million, $23.4 million, and $21.3 million of compensation expense from continuing
operations related to the RSUs in 2024, 2023, and 2022, respectively. These amounts included $1.0 million, $1.2 million, and
$1.5 million related to RSUs issued to the Company’s directors during 2024, 2023, and 2022, respectively. At December 31,
160
2024, there was $42.3 million of unrecognized compensation cost related to RSUs that is expected to be recognized over a
weighted average period of 2.48 years.
Restricted Stock Awards
The following table summarizes the Company’s RSA activity for the periods indicated:
Year Ended December 31,
2024
2023
Shares
Weighted
Average Grant
Date Fair Value
Shares
Weighted
Average Grant
Date Fair Value
Nonvested at beginning of period
526,868 $
28.14
1,055,307 $
29.47
Vested during the period
(248,213)
27.51
(441,765)
31.24
Forfeited during the period
(31,118)
29.01
(86,674)
28.49
Nonvested at end of period
247,537 $
28.67
526,868 $
28.14
The Company recorded $945 thousand, $2.4 million, and $5.1 million of compensation expense from continuing
operations related to the RSAs in 2024, 2023, and 2022, respectively. At December 31, 2024, there was $682 thousand of
unrecognized compensation cost related to RSAs that is expected to be recognized over a weighted average period of 1.09
years.
The following table presents information regarding the vesting of the Company’s nonvested share-based compensation
grants outstanding at December 31, 2024:
Number of Shares
Period Ending
PSU
RSU
RSA
December 31, 2025
447,929
378,818
211,037
December 31, 2026
510,306
1,611,263
—
December 31, 2027
253,371
695,920
36,500
December 31, 2028
—
361,701
—
December 31, 2029 and later
—
16,189
—
Total nonvested shares
1,211,606
3,063,891
247,537
Stock Options
Key employees and directors of the Company may be granted stock options. Compensation expense is measured using
estimates of fair value of all share-based awards. No stock options were granted during 2024, 2023, and 2022. During 2024,
895,289 stock options were exercised with a weighted average exercise price of $27.47. The Company recorded no
compensation expense related to the stock options for 2024, 2023, and 2022. At December 31, 2024, there were no vested or
unexpired options outstanding.
NOTE 15. EARNINGS PER SHARE AND DIVIDEND DATA
Basic and diluted EPS are calculated in accordance with ASC 260, Earnings Per Share. Basic EPS is computed by
dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS is computed using the weighted-average number of shares determined for the basic EPS computation plus
the shares resulting from the assumed exercise of all outstanding share-based awards using the treasury stock method. There
were 62 thousand, 2.6 million, and 119 thousand antidilutive equity awards excluded from dilutive shares for the years ended
December 31, 2024, 2023, and 2022, respectively. The antidilutive equity awards are based on the impact to continuing
operations available to common shareholders and dictates whether the dilutive effect is considered for the remaining diluted
calculations (diluted earnings per common share from discontinued operations and diluted earnings per share).
161
The following table provides a reconciliation of the numerators and denominators of the basic and diluted EPS
computations for the periods indicated:
Year Ended December 31,
(In thousands, except per share amounts)
2024
2023
2022
Income from continuing operations
$
523,604 $
3,684 $
447,317
Income from discontinued operations, net of income taxes
—
538,620
15,920
Net income
523,604
542,304
463,237
Less: preferred dividends
9,488 2
9,488
9,488
Net income available to common shareholders
$
514,116 $
532,816 $
453,749
Net income (loss) from continuing operations available to common shareholders $
514,116 $
(5,804) $
437,829
Weighted average common shares outstanding
182,682
182,609
183,510
Dilutive effect of stock compensation (1)
2,910
—
988
Weighted average diluted common shares
185,592
182,609
184,498
Basic earnings (loss) per common share from continuing operations
$
2.81 $
(0.03) $
2.39
Basic earnings per common share from discontinued operations
—
2.95
0.09
Basic earnings per common share
2.81
2.92
2.47
Diluted earnings (loss) per common share from continuing operations (1)
$
2.77 $
(0.03) $
2.37
Diluted earnings per common share from discontinued operations (1)
—
2.95
0.09
Diluted earnings per common share (1)
2.77
2.92
2.46
(1)
1.7 million outstanding equity awards are excluded from consideration for the year ended December 31, 2023 due to a net loss from continuing operations attributable to common
shareholders because the inclusion of such awards would be antidilutive to net loss from continuing operations available to common shareholders.
Dividends to shareholders are subject to approval by the applicable regulatory authorities.
NOTE 16. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (“AOCI”)
Activity within the balances in accumulated other comprehensive income (loss) is shown in the following tables for the
periods indicated:
(In thousands)
Unrealized loss on AFS
securities
Pension and other
postretirement benefits
Accumulated other
comprehensive loss
Balance at December 31, 2021
$
(75,565) $
(63,804) $
(139,369)
Net change
$
(1,096,907) $
13,738 $
(1,083,169)
Balance at December 31, 2022
$
(1,172,472) $
(50,066) $
(1,222,538)
Net change
$
455,723 $
4,986 $
460,709
Balance at December 31, 2023
$
(716,749) $
(45,080) $
(761,829)
Net change
$
66,024 $
1,310 $
67,334
Balance at December 31, 2024
$
(650,725) $
(43,770) $
(694,495)
NOTE 17. MORTGAGE SERVICING RIGHTS
The MSR, which are recognized as a separate asset on the date the corresponding mortgage loan is sold on a servicing
retained basis, is recorded at fair value as determined at each accounting period end. An estimate of the fair value of the
Company’s MSR is determined utilizing assumptions such as mortgage interest rates, discount rates, mortgage loan prepayment
162
speeds, market trends and industry demand. Data and assumptions used in the fair value calculation related to the MSR were as
follows:
(Dollars in thousands)
December 31, 2024
December 31, 2023
December 31, 2022
Unpaid principal balance
$
8,043,306 $
7,702,592 $
7,682,074
Weighted-average prepayment speed (CPR)
8.3
8.1
7.2
Average discount rate (annual percentage)
10.1
10.3
10.0
Weighted-average coupon interest rate (percentage)
4.2
3.9
3.6
Weighted-average remaining maturity (months)
342.3
338.8
335.0
Weighted-average servicing fee (basis points)
28.7
28.6
28.4
Because the valuation is determined by using discounted cash flow models, the primary risk inherent in valuing the
MSR is the impact of fluctuating interest rates on the estimated life of the servicing revenue stream. The use of different
estimates or assumptions could produce different fair values. At December 31, 2024, 2023, and 2022, the Company had an
economic hedge in place designed to cover 75.1%, 73.1%, and 47.9% of the MSR interest rate risk, respectively (see Note 20
for additional information). The Company is susceptible to fluctuations in the fair value of its MSR in changing interest rate
environments.
The following table summarizes activity relating to residential mortgage loans sold with servicing retained for the
periods indicated:
Year Ended December 31,
(In thousands)
2024
2023
2022
Residential mortgage loans sold with servicing retained
$
1,093,169 $
746,144
1,141,053
Pretax gains resulting from above loan sales
14,991
12,184
30,845
The Company services a class of residential mortgages that are first lien loans secured by a primary residence or
second home. The following table presents changes in the fair value of the MSR related to the activity in this class for the
periods indicated:
Year Ended December 31,
(In thousands)
2024
2023
2022
Fair value, beginning of period
$
106,824 $
109,744 $
69,552
Originations of servicing assets
14,011
10,076
16,289
Changes in fair value:
Due to change in valuation inputs or assumptions(1)
6,669
(4,158)
35,695
Other changes in fair value(2)
(12,910)
(8,838)
(11,792)
Fair value, end of period
$
114,594
$
106,824
$
109,744
(1)
Primarily reflects changes in prepayment speeds and discount rate assumptions which are updated based on market interest rates.
(2)
Primarily reflects changes due to realized cash flows.
All of the changes to the fair value of the MSR and the related economic hedge are recorded as part of mortgage
banking revenue in the consolidated statements of income. As part of mortgage banking revenue, the Company recorded
contractual servicing fees of $21.3 million, $21.8 million, and $21.7 million, and late and other ancillary fees of $3.1 million,
$2.8 million, and $2.4 million for the years ended December 31, 2024, 2023, and 2022 respectively.
NOTE 18. CAPITAL AND REGULATORY MATTERS
The Company is subject to various regulatory capital requirements administered by the federal and state banking
agencies. Regulatory capital ratios at December 31, 2024 and 2023 were calculated in accordance with the Basel III capital
framework as well as the interagency final rule published on September 30, 2020 entitled “Revised Transition of the Current
Expected Credit Losses Methodology for Allowances.” Failure to meet minimum capital requirements can initiate certain
mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse
163
effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the
Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The
Company’s capital amounts and classification are also subject to qualitative judgments by regulators about components, risk
weightings and other factors. Quantitative measures are established by regulation to ensure capital adequacy and require the
Company to maintain minimum capital amounts and ratios.
Additionally, regulatory capital rules include a capital conservation buffer which the Company must maintain in
addition to its minimum risk-based capital requirements. This buffer applies to all three risk-based capital measurements
(CET1, Tier 1 and total capital to risk-weighted assets). A financial institution with a conservation buffer of less than the
required amount is subject to limitations on capital distributions, including dividend payments, stock repurchases, and certain
discretionary bonus payments to executive officers.
The actual capital amounts and ratios for the Company are presented in the following tables and as shown, exceed the
thresholds necessary to be considered “well capitalized.” Management believes that no events or changes have occurred
subsequent to the indicated dates that would change this designation.
December 31, 2024
December 31, 2023
(Dollars in thousands)
Amount
Ratio
Amount
Ratio
Actual:
Common equity Tier 1 capital (to risk-weighted assets)
$ 4,693,487
12.35 % $ 4,363,020
11.62 %
Tier 1 capital (to risk-weighted assets)
4,860,480
12.79
4,530,013
12.06
Total capital (to risk-weighted assets)
5,306,647
13.97
5,377,324
14.32
Tier 1 leverage capital (to average assets)
4,860,480
10.41
4,530,013
9.30
Minimum requirement(1):
Common equity Tier 1 capital (to risk-weighted assets)
1,709,652
4.50
1,690,158
4.50
Tier 1 capital (to risk-weighted assets)
2,279,536
6.00
2,253,544
6.00
Total capital (to risk-weighted assets)
3,039,382
8.00
3,004,726
8.00
Tier 1 leverage capital (to average assets)
1,867,273
4.00
1,949,381
4.00
Well capitalized requirement under prompt corrective action
provisions:
Common equity Tier 1 capital (to risk-weighted assets)
2,469,498
6.50
2,441,340
6.50
Tier 1 capital (to risk-weighted assets)
3,039,382
8.00
3,004,726
8.00
Total capital (to risk-weighted assets)
3,799,227
10.00
3,755,907
10.00
Tier 1 leverage capital (to average assets)
2,334,092
5.00
2,436,727
5.00
(1)
The additional capital conservation buffer in effect was 2.5%.
On December 13, 2023, the Company announced a share repurchase program whereby the Company may acquire up
to an aggregate of 10,000,000 shares of its common stock in the open market at prevailing market prices or in privately
negotiated transactions during the period January 2, 2024 through December 31, 2024. At the time of expiration on December
31, 2024, 1,237,021 shares had been repurchased under this program.
The extent and timing of any repurchases depends on market conditions and other corporate, legal and regulatory
considerations. Repurchased shares are held as authorized and unissued shares. These authorized but unissued shares are
available for use in the Company’s stock compensation programs, other transactions, or for other corporate purposes as
determined by the Company’s Board of Directors.
Federal and state banking laws and regulations and state corporate laws restrict the amount of dividends that the
Company may declare and pay. Under Mississippi law, the Company cannot pay any dividend on its common stock unless it
has received written approval of the Commissioner of the MDBCF. The federal banking agencies have indicated that paying
dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking
practice. The Federal Reserve must approve any dividend that exceeds the Company's current year’s net income plus its
retained net income from the prior two calendar years.
164
NOTE 19. SEGMENT REPORTING
The Company determines operating segments based upon the services offered, the significance of those services to the
Company's financial condition and operating results, and management's regular review of the operating results of those
services. The Company’s CODM is the Company’s CEO. The application and development of management reporting
methodologies is a robust process and is subject to periodic enhancements. As these enhancements are made, financial results
presented by each reportable segment may be periodically revised. Cadence makes operating decisions based on the following
operating segments, as described below.
•
Corporate Banking segment focuses on C&I, business banking, and commercial real estate lending to clients in the
geographic footprint.
•
Community Banking segment provides a broad range of banking services through the branch network to serve the
needs of community businesses and individual consumers in the geographic footprint.
•
Mortgage segment includes mortgage banking activities of originating mortgage loans, selling mortgage loans in the
secondary market and servicing the mortgage loans that are sold on a servicing retained basis.
•
Banking Services segment offers individuals, businesses, governmental institutions, and non-profit entities a wide
range of solutions to help protect, grow, and transfer wealth. Offerings include credit-related products, trust and
investment management, asset management, retirement and savings solutions, estate planning and annuity products.
•
General Corporate and Other segment includes other activities not allocated to other aforementioned operating
segments. Additionally, intercompany eliminations are included as they do not reflect normal operations of the other
segments The disaggregation of General Corporate and Other better defines the results from the individual segments
due to the direct relationship of the internal support provided by the strategic business units within the Bank.
The Insurance Agencies segment is included in discontinued operations for all periods presented in the consolidated
statements of income and consolidated balance sheets, where applicable. The Insurance Agencies segment provided service as
agents in the sale of commercial lines of insurance and full lines of property and casualty, life, health, and employee benefit
products and services. See Note 2 for additional information about discontinued operations.
Results of continuing operations and selected financial information by operating segment for periods indicated are
presented in the following tables. The tables show total noninterest income segregated between contracts with customers within
the scope of ASC 606, Revenue from Contracts with Customers, and those within the scope of other GAAP Topics.
Additionally, with the adoption of ASU 2023-07, the tables show significant segment expenses within total noninterest expense
used by the CODM to assess the performance of each segment.
165
(In thousands)
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
Results of Continuing Operations
Year Ended December 31, 2024
Net interest revenue
$
458,411 $ 1,101,546 $
96,039 $
41,157 $ (260,938) $ 1,436,215
Provision (release) for credit losses
35,928
10,580
12,058
(2,136)
14,570
71,000
Net interest revenue after provision (release)
for credit losses
422,483
1,090,966
83,981
43,293
(275,508)
1,365,215
Noninterest revenue
In Scope of Topic 606
Trust and asset management income
1,587
24
—
49,826
(2,930)
48,507
Investment advisory fees
—
—
—
33,852
(192)
33,660
Other brokerage fees
—
—
—
6,251
—
6,251
Deposit service charges
14,033
54,693
—
4,047
724
73,497
Credit card, debit card and merchant fees
259
37,268
—
7
12,711
50,245
Total noninterest revenue (in-scope of Topic 606)
15,879
91,985
—
93,983
10,313
212,160
Total noninterest revenue (out-of-scope of Topic
606)
41,078
39,349
22,037
9,777
32,109
144,350
Total noninterest revenue
56,957
131,334
22,037
103,760
42,422
356,510
Noninterest expense
Salaries and employee benefits
84,589
232,446
23,932
54,029
214,311
609,307
Occupancy and equipment
4,256
72,939
4,285
3,249
29,446
114,175
Data processing and software
4,306
2,811
4,176
5,399
105,192
121,884
Allocated overhead expenses
98,168
250,727
30,523
15,774
(395,192)
—
Other segment items(1)
32,489
47,126
13,399
19,201
87,947
200,162
Total noninterest expense
223,808
606,049
76,315
97,652
41,704
1,045,528
Income (loss) from continuing operations before
income taxes
255,632
616,251
29,703
49,401
(274,790)
676,197
Income tax expense (benefit)
60,073
144,819
6,980
11,525
(70,804)
152,593
Income (loss) from continuing operations
$
195,559 $
471,432 $
22,723 $
37,876 $ (203,986) $
523,604
Selected Financial Information
Total assets at end of period
$ 11,701,718 $ 17,422,937 $ 5,825,080 $ 1,104,128 $ 10,965,327 $ 47,019,190
(1) Other segment items for each reportable segment includes:
•
Corporate Banking —legal expenses, travel expenses and certain overhead expenses.
•
Community Banking—advertising, office supplies, ATM expenses, delivery expenses, professional and consulting fees, legal
expenses, telecommunication and postage expenses, travel expenses, and certain overhead expenses.
•
Mortgage—mortgage loan quality control and repurchase expenses, legal expenses, and certain overhead expenses.
•
Banking Services— amortization of intangibles, professional and consulting fees, legal expenses, and certain overhead expenses.
•
General, Corporate and Other— advertising, supplies, regulatory expenses, and certain other overhead expenses.
166
(In thousands)
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
Results of Continuing Operations
Year Ended December 31, 2023
Net interest revenue
$
493,091 $ 1,276,606 $
82,549 $
47,482 $ (548,372) $ 1,351,356
Provision (release) for credit losses
63,735
9,949
7,325
719
(1,728)
80,000
Net interest revenue after provision (release)
for credit losses
429,356
1,266,657
75,224
46,763
(546,644)
1,271,356
Noninterest revenue
In Scope of Topic 606
Trust and asset management income
282
21
—
45,077
(2,867)
42,513
Investment advisory fees
—
—
—
31,713
(310)
31,403
Other brokerage fees
—
—
—
5,397
—
5,397
Deposit service charges
12,993
55,199
—
1,529
(8,003)
61,718
Credit card, debit card and merchant fees
626
37,314
—
18
11,826
49,784
Total noninterest revenue (in-scope of Topic
606)
13,901
92,534
—
83,734
646
190,815
Total noninterest revenue (out-of-scope of
Topic 606)
39,179
16,303
23,023
9,240
(394,903)
(307,158)
Total noninterest revenue
53,080
108,837
23,023
92,974
(394,257)
(116,343)
Noninterest expense
Salaries and employee benefits
87,453
246,474
26,299
53,147
221,349
634,722
Occupancy and equipment
4,313
71,754
4,392
3,307
27,206
110,972
Data processing and software
7,806
8,184
4,339
6,292
93,822
120,443
Allocated overhead expenses
91,190
237,153
27,513
10,950
(366,806)
—
Other segment items(1)
32,586
42,223
15,252
18,969
180,756
289,786
Total noninterest expense
223,348
605,788
77,795
92,665
156,327
1,155,923
Income (loss) from continuing operations
before income taxes
259,088
769,706
20,452
47,072 (1,097,228)
(910)
Income tax expense (benefit)
60,886
180,881
4,806
11,041
(262,208)
(4,594)
Income (loss) from continuing operations
$
198,202 $
588,825 $
15,646 $
36,031 $ (835,020) $
3,684
Selected Financial Information
Total assets at end of period
$ 11,580,613 $ 17,106,224 $ 5,032,139 $ 1,116,347 $ 14,099,187 $ 48,934,510
(1) Other segment items for each reportable segment includes:
•
Corporate Banking —legal expenses, travel expenses and certain overhead expenses.
•
Community Banking—advertising, office supplies, ATM expenses, delivery expenses, professional and consulting fees, legal
expenses, telecommunication and postage expenses, travel expenses, and certain overhead expenses.
•
Mortgage—mortgage loan quality control and repurchase expenses, legal expenses, and certain overhead expenses.
•
Banking Services— amortization of intangibles, professional and consulting fees, legal expenses, and certain overhead expenses.
•
General, Corporate, and Other— pension settlement expense, advertising, supplies, regulatory expenses, and certain other
overhead expenses.
167
(In thousands)
Corporate
Banking
Community
Banking
Mortgage
Banking
Services
General
Corporate
and Other
Total
Continuing
Operations
Results of Continuing Operations
Year Ended December 31, 2022
Net interest revenue
$
411,695 $
755,056 $
61,036 $
31,074 $
92,430 $ 1,351,291
Provision (release) for credit losses
47,981
(71,911)
26,582
(179)
4,527
7,000
Net interest revenue after provision (release)
for credit losses
363,714
826,967
34,454
31,253
87,903
1,344,291
Noninterest revenue
In Scope of Topic 606
Trust and asset management income
720
1
—
40,619
(3,142)
38,198
Investment advisory fees
—
—
—
28,830
(250)
28,580
Other brokerage fees
—
—
—
10,800
—
10,800
Deposit service charges
15,008
58,232
—
1,661
(1,423)
73,478
Credit card, debit card and merchant fees
522
40,855
—
18
16,765
58,160
Total noninterest revenue (in-scope of Topic
606)
16,250
99,088
—
81,928
11,950
209,216
Total noninterest revenue (out-of-scope of
Topic 606)
37,370
11,873
44,725
3,003
36,298
133,269
Total noninterest revenue
53,620
110,961
44,725
84,931
48,248
342,485
Noninterest expense
Salaries and employee benefits
77,468
249,372
31,091
50,704
226,208
634,843
Occupancy and equipment
4,077
73,179
4,190
3,613
29,401
114,460
Data processing and software
2,613
12,175
4,647
5,357
86,315
111,107
Allocated overhead expenses
100,668
221,592
24,068
11,447
(357,775)
—
Other segment items(1)
16,618
30,117
11,853
16,117
174,639
249,344
Total noninterest expense
201,444
586,435
75,849
87,238
158,788
1,109,754
Income (loss) from continuing operations
before income taxes
215,890
351,493
3,330
28,946
(22,637)
577,022
Income tax expense (benefit)
50,736
82,601
783
6,770
(11,185)
129,705
Income (loss) from continuing operations
$
165,154 $
268,892 $
2,547 $
22,176 $
(11,452) $
447,317
Selected Financial Information
Total assets at end of period
$ 10,392,175 $ 16,972,114 $ 4,249,490 $ 1,001,097 $ 16,038,538 $ 48,653,414
(1) Other segment items for each reportable segment includes:
•
Corporate Banking —legal expenses, travel expenses and certain overhead expenses.
•
Community Banking—advertising, office supplies, ATM expenses, delivery expenses, professional and consulting fees, legal
expenses, telecommunication and postage expenses, travel expenses, and certain overhead expenses.
•
Mortgage—mortgage loan quality control and repurchase expenses, legal expenses, and certain overhead expenses.
•
Banking Services— amortization of intangibles, professional and consulting fees, legal expenses, and certain overhead expenses.
•
General, Corporate, and Other— pension settlement expense, advertising, supplies, regulatory expenses, and certain other
overhead expenses.
NOTE 20. DERIVATIVE INSTRUMENTS
The Company primarily uses derivatives to manage exposure to market risk, including interest rate risk, credit risk and
foreign currency risk, and to assist customers with their risk management objectives. Management may designate certain
derivatives as hedging instruments in a qualifying hedge accounting relationship. The Company’s derivative instruments consist
of economic hedges for which the Company has elected not to apply hedge accounting and derivatives held for customer
accommodation, or other purposes.
The fair value of derivative positions outstanding is included in other assets and other liabilities in the accompanying
consolidated balance sheets and in the net change in each of these financial statement line items in the operating section of the
accompanying consolidated statements of cash flows. For derivatives not designated as hedging instruments or determined to be
an ineffective hedge under applicable accounting guidance, gains and losses due to changes in fair value are included in
noninterest income and the operating section of the consolidated statements of cash flows. For derivatives designated as cash
168
flow hedging instruments, the entire change in the fair value related to the derivative instrument is recognized as a component
of other comprehensive income and subsequently reclassified into interest income when the forecasted transaction affects
income. At December 31, 2024 and December 31, 2023, there were no derivatives designated under hedge accounting. The
notional amounts and estimated fair values for the periods indicated were as follows:
December 31, 2024
December 31, 2023
Fair Value
Fair Value
(In thousands)
Notional
Amount
Other
Assets
Other
Liabilities
Weighted
Average
Maturity
(years)
Notional
Amount
Other
Assets
Other
Liabilities
Weighted
Average
Maturity
(years)
Commercial loan interest rate
contracts
$ 3,781,868 $ 30,555 $ 45,070
4.2
$ 2,682,401 $ 25,264 $ 41,459
4.5
Mortgage loan held-for-sale
interest rate lock commitments
151,231
1,310
15
0.1
125,339
1,858
10
0.1
Futures, forwards and options
(used to hedge MSR, see Note
17)
230,000
—
3,085
0.2
147,000
1,809
—
0.2
Mortgage loan forward sale
commitments
179,000
816
34
0.1
235,323
246
2,567
0.1
Foreign exchange contracts
55,542
650
469
0.5
48,846
326
268
0.3
Total derivatives
$ 4,397,641 $ 33,331 $ 48,673
$ 3,238,909 $ 29,503 $ 44,304
The Company is party to collateral support agreements with certain derivative counterparties. Such agreements require
that the Company maintain collateral based on the fair values of derivative transactions. In the event of default by the Company,
the counterparty would be entitled to the collateral. At December 31, 2024, and 2023, the Company was required to post $60.9
million and $56.8 million, respectively, in cash or qualifying securities as collateral for its derivative transactions. Of this,
$60.9 million was included in interest bearing deposits with other banks at December 31, 2024. At December 31, 2023,
$50.0 million was included in interest bearing deposits with other banks and $6.8 million was included in other assets. In
addition, the Company had recorded the obligation to return cash collateral provided by counterparties of $23.1 million and
$16.3 million at December 31, 2024, and 2023, respectively, within deposits on the Company’s consolidated balance sheet.
Certain financial instruments, such as derivatives, may be eligible for offset in the consolidated balance sheet and/or subject to
master netting arrangements or similar agreements. The Company’s derivative transactions with upstream financial institution
counterparties are generally executed under International Swaps and Derivative Association master agreements which include
“right of set-off” provisions. In such cases, there is generally a legally enforceable right to offset recognized amounts and there
may be an intention to settle such amounts on a net basis. Nonetheless, the Company does not generally offset such financial
instruments for financial reporting purposes.
The Company enters into certain interest rate contracts on commercial loans, which include swaps, floors, caps and
collars that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company
enters into an interest rate contract with a loan customer while at the same time entering into an offsetting interest rate contract
with another financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer
on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed
interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same
notional amount and receive the same variable interest rate on the same notional amount. The interest rate swap, floor, cap and
collar transactions allow the Company to manage its interest rate risk. Because the Company acts as an intermediary for its
customers, changes in the fair value of the underlying derivative contracts generally offset and do not significantly impact the
Company’s consolidated statements of income. The Company is exposed to credit loss in the event of nonperformance by the
parties to the interest rate contracts. However, the Company does not anticipate nonperformance by the counterparties. The
estimated fair value has been recorded as an asset and a corresponding liability in the accompanying consolidated balance
sheets at December 31, 2024 and 2023.
The Company has both bought and sold credit protection in the form of participations on interest rate swaps (swap
participations). These swap participations, which meet the definition of credit derivatives, were entered into in the ordinary
course of business to serve the credit needs of customers. Swap participations, whereby the Company has purchased credit
protection, entitle the Company to receive a payment from the counterparty if the customer fails to make payment on any
amounts due to the Company upon early termination of the swap transaction. For contracts where the Company sold credit
protection, the Company would be required to make payment to the counterparty if the customer fails to make payment on any
amounts due to the counterparty upon early termination of the swap transaction. Swap participation agreements where the
169
Company is the beneficiary had notional values totaling $205.1 million and $137.2 million at December 31, 2024 and 2023,
respectively. Swap participation agreements where the Company is the guarantor had notional values totaling $443.0 million
and $425.8 million at December 31, 2024 and 2023, respectively.
The Company enters into interest rate lock commitments with customers in connection with residential mortgage loan
applications for loans the Company intends to sell. Additionally, the Company enters into mortgage loan forward sales
commitments of MBS with investors to mitigate the effect of interest rate risk inherent in providing interest rate lock
commitments to customers. Both the interest rate lock commitments and mortgage loan forward sales commitments are
considered derivatives under current accounting guidance and are required to be recorded at fair value. The fair value of these
derivatives is recorded on the consolidated balance sheets in other assets and other liabilities. The change in fair value of these
instruments is recorded within mortgage banking revenue in the consolidated statements of income. For the years ended
December 31, 2024, and 2023, mortgage loans held for sale interest rate lock commitment and mortgage loan forward sales
commitment gains totaled $0.9 million, $1.5 million, respectively, compared to losses incurred of $8.0 million during the year
ended December 31, 2022.
The Company has an economic hedge in place on its MSR and uses various instruments (including but not limited to
Treasury options, SOFR and TBA futures and forwards) to mitigate the interest rate risk associated with the MSR. These
hedging instruments are reported at fair value, with adjustments included as part of mortgage banking revenue in the
consolidated statements of income. The market value adjustment on MSR hedge totaled net losses of $9.9 million, $1.8 million
and $15.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. See Note 17 for additional information.
The Company enters into certain foreign currency exchange contracts on behalf of its clients to facilitate their risk
management strategies, while at the same time entering into offsetting foreign currency exchange contracts with another
counterparty in order to minimize the Company’s foreign currency exchange risk. The contracts are short term in nature, and
any gain or loss incurred at settlement is recorded as other noninterest income. The fair value of these contracts is reported in
other assets and other liabilities. Foreign exchange contract net gains totaled $3.9 million, $5.2 million and $4.7 million for the
years ended December 31, 2024, 2023 and 2022, respectively.
NOTE 21. COMMITMENTS AND CONTINGENT LIABILITIES
Mortgage Loans Serviced for Others
The Company services mortgage loans for other financial institutions that are not included as assets in the Company’s
accompanying consolidated financial statements. Included in the $8.0 billion and $7.7 billion of mortgage loans serviced for
investors at December 31, 2024 and December 31, 2023, respectively, was $0.6 million and $1.0 million, respectively, of
primary recourse servicing pursuant to which the Company is responsible for any losses incurred in the event of
nonperformance by the mortgagor. The Company's exposure to credit loss in the event of such nonperformance is the unpaid
principal balance at the time of default. This exposure is limited by the underlying collateral, which consists of single family
residences and either federal or private mortgage insurance.
Lending Commitments
The consolidated financial statements do not reflect various commitments and contingent liabilities which arise in the
normal course of banking business and involve elements of credit risk, interest rate risk, and liquidity risk. Such financial
instruments are recorded when they are funded. At December 31, 2024 and December 31, 2023, these included $448.9 million
and $450.7 million, respectively, in letters of credit and $8.6 billion and $9.7 billion, respectively, in unfunded extensions of
credit such as interim mortgage financing, construction credit, credit card, and revolving line of credit arrangements.
Commitments to extend credit and letters of credit include some exposure to credit loss in the event of nonperformance
of the customer. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. In addition, the Company has entered into certain contingent commitments to grant loans.
Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The
credit policies and procedures for such commitments are the same as those used for lending activities. Because these
instruments have fixed maturity dates and because a number expire without being drawn upon, they generally do not present
any significant liquidity risk. The Company did not realize significant credit losses from these commitments and arrangements
during the years ended December 31, 2024, 2023, and 2022.
170
Other Commitments
The Company makes investments in limited partnerships, including certain affordable housing partnerships for which
it receives tax credits. At December 31, 2024 and December 31, 2023, unfunded capital commitments totaled $277.4 million
and $275.2 million, respectively. See Note 23 for more information.
Litigation
The nature of the Company’s business ordinarily results in certain types of claims, litigation, investigations, and other
legal or administrative cases and proceedings. Although the Company and its subsidiaries have policies and procedures to
minimize legal noncompliance and the impact of claims and other proceedings, and endeavored to procure reasonable amounts
of insurance coverage, litigation and regulatory actions present an ongoing risk.
The Company and its subsidiaries engage in lines of business that are heavily regulated and involve a large volume of
actual or potential financial transactions with customers or applicants, and the Company is a public company with a large
number of shareholders. From time to time, applicants, borrowers, customers, shareholders, former employees, service
providers, and other third parties have brought actions against the Company or its subsidiaries, in cases claiming substantial
damages. Financial services companies are subject to risks arising from changing regulatory frameworks or expectations,
regulatory investigations, class action litigation, and, from time to time, the Company and its subsidiaries have such actions
brought against them. The Company and its subsidiaries are also subject to enforcement actions by federal or state regulators,
including the CFPB, the DOJ, state attorneys general, and the Federal Reserve or MDBCF, which may be adversely impacted
by ongoing litigation in which the Company is involved. Additionally, the Company is, and management expects it to be,
engaged in a number of foreclosure proceedings and other collection actions as part of its lending and leasing collections
activities, which, from time to time, have resulted in counterclaims against the Company and its subsidiaries. Various legal
proceedings have and may arise in the future out of claims against entities to which the Company is a successor as a result of
business combinations.
When and as the Company determines it has meritorious defenses to the claims asserted, it vigorously defends against
such claims. The Company will consider settlement of claims when, in management’s judgment and in consultation with
counsel, it is in the best interests of the Company to do so.
The Company cannot predict with certainty the cost of defense, the cost of prosecution, or the ultimate outcome of
litigation or other proceedings filed by or against it, its subsidiaries and its directors, management or employees, including
remedies or damage awards. On at least a quarterly basis, the Company assesses its liabilities and contingencies in connection
with outstanding legal proceedings as well as certain threatened claims (which are not considered incidental to the ordinary
conduct of the Company’s business) utilizing the latest and most reliable information available. For matters where a loss is not
probable or the amount of the loss cannot be estimated, the Company will not make an accrual. For matters where it is probable
the Company will incur a loss and the amount can be reasonably estimated, the Company will accrue for the loss. Once
established, the accrual is adjusted periodically to reflect any relevant developments. The actual cost of any such matters,
however, may turn out to be substantially higher than the amount accrued. Further, the Company’s insurance policies have
deductibles and coverage limits, and such policies are unlikely to cover all costs and expenses related to the defense or
prosecution of such legal proceedings or any losses arising therefrom.
Although the final outcome of any legal proceedings is inherently uncertain, based on the information available, advice
of counsel and available insurance coverage, if applicable, management believes that the litigation-related liability of $12.0
million accrued at December 31, 2024 is adequate and that any incremental change in potential liability arising from the
Company’s legal proceedings and threatened claims, including the matters described herein and those otherwise arising in the
ordinary course of business, will not have a material adverse effect on the Company’s business or consolidated results of
operations or financial condition. It is possible, however, that future developments could result in an unfavorable outcome for
or resolution of any one or more of the legal proceedings in which the Company or its subsidiaries are defendants, which may
be material to the Company’s business or consolidated results of operations or financial condition for a particular fiscal period
or periods.
On August 30, 2021, Legacy Cadence Bank and the DOJ agreed to a settlement set forth in the consent order related to
the investigation by the DOJ of Legacy Cadence Bank’s fair lending program in Harris, Fort Bend, and Montgomery Counties
located in Houston, Texas during the period between 2014 and 2016 (the “Consent Order”). The Consent Order was signed by
the United States District Court for the Northern District of Georgia, Atlanta Division, on August 31, 2021. Pursuant to Section
5.2(g) of the Agreement and Plan of Merger and Paragraph 50 of the Consent Order, Legacy BancorpSouth Bank approved the
negotiated settlement, and subsequently, the Company agreed to accept the obligations of the Consent Order. The Consent
171
Order is in effect for five years. For additional information regarding the terms of this settlement and the Consent Order, see
Legacy Cadence’s Current Report on Form 8-K that was filed with the SEC on August 30, 2021.
NOTE 22. OTHER NONINTEREST INCOME AND EXPENSE
The following table details other noninterest income for the periods indicated:
Year Ended December 31,
(In thousands)
2024
2023
2022
Credit related fees
$
27,352 $
26,830 $
26,768
Bank-owned life insurance
17,716
16,294
15,594
SBA income
12,083
9,839
15,341
Other miscellaneous income
66,354
48,938
28,182
Total other noninterest income
$
123,505 $
101,901 $
85,885
The following table details other noninterest expense for the periods indicated:
Year Ended December 31,
(In thousands)
2024
2023
2022
Advertising and public relations
$
22,112 $
28,162 $
41,055
Foreclosed property expense
1,891
2,488
832
Telecommunications
5,857
5,775
6,617
Travel and entertainment
10,015
11,004
11,407
Professional, consulting, and outsourcing
16,124
19,892
13,424
Legal expense
12,279
20,093
5,350
Postage and shipping
7,128
8,443
7,868
Other miscellaneous expense
68,932
85,299
65,779
Total other noninterest expense
$
144,338 $
181,156 $
152,332
NOTE 23. VARIABLE INTEREST ENTITIES AND OTHER INVESTMENTS
Certain NMTC meet the qualifications for consolidation under ASC 810. Consolidation is applicable to this type of
investment structure when the entities owned by the tax credit investment fund, managing member, and limited partner of the
sub-CDE, are under common control and the limited partner’s related party group has both the power and the obligation to
absorb the significant benefits and losses of the sub-CDE. Based on this, the limited partner, which is the Company, is the
primary beneficiary of the sub-CDE (VIE) and therefore subject to consolidation. NMTC investment structures which include a
managing member not affiliated with the Company are not subject to consolidation.
At December 31, 2024 and December 31, 2023, the Company’s assets of the consolidated VIE that can be used only to
settle obligations of the consolidated VIE totaled $5.4 million and $6.5 million, respectively.
The Company is invested in several tax credit projects solely as a limited partner. At December 31, 2024 and
December 31, 2023, the Company’s maximum exposure to loss associated with these limited partnerships was limited to its
investment. Most of the investments are in affordable housing projects. The partnerships have qualified to receive annual
affordable housing federal tax credits that are recognized as a reduction of current tax expense. The Company accounts for
these investments and the related tax credits using either the effective yield method or the proportional amortization method,
depending upon the date of the investment. Under the effective yield method, the Company recognizes the tax credits as they
are allocated and amortizes the initial costs of the investments to provide a constant effective yield over the period the tax
credits are allocated. Under the proportional amortization method, the Company amortizes the cost of the investment in
proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income
statement as a component of income tax expense. The Company also has, to a lesser degree, investments in NMTC and historic
tax credit projects. The Company has elected to account for the NMTC not subject to consolidation and historic tax credits
using the flow-through method, which reduces federal income taxes in the year in which the credit arises. At December 31,
172
2024 and December 31, 2023, the Company recorded total tax credit investments in other assets on its consolidated balance
sheets of $387.3 million and $362.0 million, respectively.
Through December 31, 2023, the amortization of the NMTC investments and historic tax credit investments was
recorded in other noninterest income on the Company’s consolidated statements of income. The Company adopted the
provisions of ASU 2023-02 (see Note 1) as of January 1, 2024 and determined each investments’ eligibility for proportional
amortization. For certain NMTC and HTC investments that do not qualify for the proportional amortization method under ASU
2023-02, amortization related to these investments are recorded in other noninterest income in the Company’s consolidated
statements of income. The Company recorded amortization of $1.1 million for both the years ended December 31, 2024 and
2023, respectively. The cash flow activity related to these investments are presented in the net income (loss) line in the
operating activities section of the consolidated statements of cash flows.
For the investments that qualify for proportional amortization under ASU 2023-02, the Company recognized income
tax credits and other income tax benefits for the year ended December 31, 2024 of $37.7 million and $4.6 million, respectively.
The total income tax benefits of $42.3 million are partially offset by $33.4 million of investment amortization recognized for
the year ended December 31, 2024, for a net income tax benefit of $8.9 million. The Company recorded amortization for these
income tax credits of $23.6 million for year ended December 31, 2023, which $5.9 million was reported in noninterest income
in the consolidated statements of income and $17.7 million was reported in income tax expense.
The cash flows related to the total income tax benefits are presented in the consolidated statements of cash flows. The
net income tax benefit of $8.9 million for the year ended December 31, 2024, was included in the net income (loss) line within
operating activities. Investment amortization of $33.4 million for the year ended December 31, 2024, was included in the
depreciation and amortization line item, which was an adjustment to reconcile net income (loss) to cash provided by (used for)
operating activities. The income tax credits and other income tax benefits of $42.3 million for the year ended December 31,
2024, was included in the net change to other assets or liabilities line item, which was also an adjustment to reconcile net
income (loss) to cash provided by (used for) operating activities.
Additionally, the Company has investments in other certain limited partnerships accounted for under the fair value
practical expedient of NAV totaling $118.7 million and $95.0 million at December 31, 2024 and December 31, 2023,
respectively. Related to these assets recorded at fair value through net income, the Company recognized net gains of $11.9
million and $8.2 million for the years ended December 31, 2024 and 2023, respectively. These investments are made primarily
through various SBIC funds as a strategy to provide expansion and growth opportunities to small businesses and community
development funds to help serve the credit needs of the low- and moderate-income and underserved within our footprint. Of the
total fair value of these limited partnerships, $15.8 million and $11.7 million related to real-estate funds at December 31, 2024
and December 31, 2023, respectively. The remaining $102.9 million and $83.3 million are related to SBIC funds that
concentrate in a variety of industries at December 31, 2024 and December 31, 2023, respectively. At December 31, 2024,
unfunded commitments related to these investments were $4.6 million and $97.3 million related to the real-estate funds and
other SBIC funds, respectively. SBIC funds are generally structured to operate for approximately 10 years. During the life of
each SBIC fund, partners can request to withdraw from the fund, and subsequently receive the balance of their investment as
the underlying assets are liquidated over the remaining life of the fund. The Company has no current plans to withdraw from
any of its SBIC funds.
For other limited partnerships without readily determinable fair values that do not qualify for the practical expedient,
Cadence elected the measurement alternative to account for these investments at their cost minus impairment, plus or minus
changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same
issuer. These investments totaled $2.6 million and $2.4 million at December 31, 2024 and December 31, 2023, respectively.
Other limited partnerships accounted for under the equity method totaled $8.7 million and $9.8 million at December 31, 2024
and December 31, 2023, respectively.
173
A summary of the Company’s investments in limited partnerships is presented as of the following periods:
(In thousands)
December 31, 2024
December 31, 2023
Tax credit investments (amortized cost)
$
387,339 $
361,990
Limited partnerships accounted for under the fair value practical expedient of
NAV
118,710
94,998
Limited partnerships without readily determinable fair values that do not
qualify for the practical expedient of NAV accounted for under the cost
method
2,586
2,417
Limited partnerships required to be accounted for under the equity method
8,664
9,785
Total investments in limited partnerships
$
517,299 $
469,190
For equity investments carried at cost using the measurement alternative, during the year ended and as of
December 31, 2024, there were two write-downs for impairment totaling $119 thousand. During the year ended and as of
December 31, 2023, there were no downward or upward adjustments to these investments for impairments or price changes
from observable transactions. The carrying amount of these equity investments in limited partnerships measured under this
measurement alternative for the specified periods are as follows:
Year Ended December 31,
(In thousands)
2024
2023
Carrying value at the beginning of the year
$
2,417 $
1,968
Impairments
(119)
—
Reclassifications
272
1,800
Distributions
(1,007)
(1,559)
Contributions
1,023
208
Carrying value at the end of the year
$
2,586 $
2,417
174
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
CONCLUSION
REGARDING
THE
EFFECTIVENESS
OF
DISCLOSURE
CONTROLS
AND
PROCEDURES
The Company, with the participation of its management, including the Company’s Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this
Report.
Based upon that evaluation, and as of the end of the period covered by this Report, the Company’s Chief Executive
Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective in
ensuring that information required to be disclosed in its reports that the Company files or submits to the Federal Reserve under
the Exchange Act is recorded, processed, summarized and reported on a timely basis, and to ensure that such information is
accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosures.
Pursuant to Section 404 of the Sarbanes-Oxley Act, the Company has included a report of management’s assessment
of the design and operating effectiveness of its internal controls over financial reporting as part of this Report. The Company’s
independent registered public accounting firm reported on the effectiveness of the Company’s internal control over financial
reporting. Management’s report and the independent registered public accounting firm’s report are included in Item 8 of this
Report under the captions entitled “Management’s Report on Internal Control Over Financial Reporting” and “Report of
Independent Registered Public Accounting Firm.”
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in the Company’s internal control over financial reporting that occurred during the three
months ended December 31, 2024, covered by this Report that materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
Pursuant to Item 408(a) of Regulation S-K, none of the Company's directors or executive officers adopted, terminated
or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended
December 31, 2024.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
None.
175
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The required information is incorporated herein by reference to the information under the captions “Directors and
Executive Officers” and “Board of Directors, Committees and Governance” in our Proxy Statement for the Annual Meeting of
Shareholders to be held on April 23, 2025 (the “2025 Proxy Statement”), to be filed pursuant to Regulation 14A under the
Exchange Act within 120 days of our fiscal year end according to instructions from the Company’s primary federal banking
regulator.
MATERIAL CHANGES TO PROCEDURES BY WHICH SECURITY HOLDERS MAY RECOMMEND
NOMINEES
The Company has not made any material changes to the procedures by which its shareholders may recommend
nominees to the Company’s Board of Directors since the date of the Company’s Definitive Proxy Statement for its 2024 Annual
Meeting of Shareholders.
CERTAIN CORPORATE GOVERNANCE DOCUMENTS
The Company has adopted a Code of Business Conduct and Ethics that applies to its directors, officers, and
employees. The Company has also adopted Corporate Governance Principles for its Board of Directors. These documents, as
well as the links to charters of the Audit Committee, Executive Compensation and Stock Incentive Committee and Nominating
and Corporate Governance Committee of the Board of Directors, are available on the Investor Relations page of the Company’s
website at https://ir.cadencebank.com under the tabs “Corporate Governance - Governance Documents” and “- Board
Committees,” or shareholders may request a free copy of these documents from:
Cadence Bank
Attn: Corporate Secretary
One Mississippi Plaza
201 South Spring Street
Tupelo, Mississippi 38804
(662) 680-2000
The Company intends to disclose any amendments to its Code, or any waiver from a provision of the Code for the
Company’s principal executive officer and senior financial officers on the Company’s Investor Relations website in lieu of any
filing of such information on Form 8-K.
The other information required by this Item 10 will be presented in, and is incorporated herein by reference to,
Cadence’s Definitive Proxy Statement for the 2025 Annual Meeting of Shareholders which will be filed with the Company’s
primary federal banking regulator within 120 days of our fiscal year end.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 will be presented in, and is incorporated herein by reference to, Cadence’s
Definitive Proxy Statement for the 2025 Annual Meeting of Shareholders which will be filed with the Company’s primary
federal banking regulator within 120 days of our fiscal year end.
176
ITEM
12.
SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table provides information at December 31, 2024 with respect to compensation plans (including
individual compensation arrangements) under which shares of Company common stock are authorized for issuance:
Plan Category
Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (excluding securities
related to column (a))
(a)
(b)
(c)
Equity compensation plans approved
by shareholders (1)
—
—
4,500,000
(1)
Excludes 247,537 restricted shares that were nonvested, 3,063,891 restricted stock units that were nonvested and 1,211,606 performance
shares that were unearned at December 31, 2024. During the year ended December 31, 2024, equity compensation plans approved by
shareholders included the Cadence Bank Equity Incentive Plan for Non-employee Directors, the Cadence Bank Long-Term Equity
Incentive Plan, the 2021 Long-Term Equity Incentive Plan and the Amended and Restated 2015 Omnibus Incentive Plan. On December
30, 2024, the Cadence Bank 2025 Long-Term Incentive Plan (“the 2025 Plan”) was approved by the shareholders. The 2025 Plan
supersedes all four of the incentive plans previously mentioned and was effective on December 30, 2024.
The other information required by this Item 12 will be presented in, and is incorporated herein by reference to,
Cadence’s Definitive Proxy Statement for the 2025 Annual Meeting of Shareholders which will be filed with the Company’s
primary federal banking regulator within 120 days of December 31, 2024.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information required by this Item 13 will be presented in, and is incorporated herein by reference to Cadence’s
Definitive Proxy Statement for the 2025 Annual Meeting of Shareholders which will be filed with the Company’s primary
federal banking regulator within 120 days of December 31, 2024.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required by this Item 14 will be presented in, and is incorporated herein by reference to Cadence’s
Definitive Proxy Statement for the 2025 Annual Meeting of Shareholders which will be filed with the Company’s primary
federal banking regulator within 120 days of December 31, 2024.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1.Consolidated Financial Statements. Reference is made to Part II, Item 8, of this Annual Report on Form 10-K.
2.Consolidated Financial Statement Schedules. These schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or related notes.
3.Exhibits. The exhibits to this Annual Report on Form 10-K listed below have been included only with the copy of
this report filed with the federal banking regulators.
(2)
a)
Agreement and Plan of Merger, dated as of April 12, 2021, and as amended on May 27, 2021, by and
between BancorpSouth Bank and Cadence Bancorporation. (Filed as Annex A to the Company’s Definitive
177
Proxy Statement/Prospectus on Schedule 14A filed with the FDIC on July 7, 2021, and incorporated herein
by reference thereto).
b)
Stock Purchase Agreement, dated as of October 24, 2023, by and among Cadence Bank, Cadence Insurance,
Inc., Arthur J. Gallagher Risk Management Services, LLC and Arthur J. Gallagher & Co. (solely for purposes
of Section 12.16 thereof). (Filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the
FDIC on October 26, 2023, and incorporated herein by reference thereto).
(3)
a)
Second Amended and Restated Articles of Incorporation of the Company. (Filed as Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed with the Board of Governors of the Federal Reserve System on
January 3, 2025, and incorporated herein by reference thereto).
b)
Second Amended and Restated Bylaws of the Company. (Filed as Exhibit 3.2 to the Company’s Current
Report on Form 8-K filed with the Board of Governors of the Federal Reserve System on January 3, 2025,
and incorporated herein by reference thereto).
(4)
a)
Specimen Common Stock Certificate. (Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K
filed with the FDIC on November 1, 2017, and incorporated herein by reference thereto).
b)
Form of Certificate Representing the Series A Preferred Stock. (Filed as Exhibit 4.1 to the Company’s Form
8-A filed with the FDIC on November 20, 2019, and incorporated herein by reference thereto).
c)
Fiscal and Paying Agency Agreement, dated November 20, 2019, between BancorpSouth Bank and U.S.
Bank National Association. (Filed as Exhibit 4.2 to the Company’s Form 8-A filed with the FDIC on
November 20, 2019, and incorporated herein by reference thereto).
d)
Form of Global Subordinated Note, dated November 20, 2019, made by BancorpSouth Bank. (Filed as
Exhibit 4.3 to the Company’s Form 8-A filed with the FDIC on November 20, 2019, and incorporated herein
by reference thereto).
e)
Description of the Company’s Capital Stock. (Filed as Exhibit 4(e) to the Company’s Form 10-K filed with
the FDIC on February 27, 2020, and incorporated herein by reference thereto).
(10)
a)
BancorpSouth, Inc. Supplemental Executive Retirement Plan, as amended and restated. (Filed with the SEC
as Exhibit 10(A) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (file
number 1-12991) and incorporated herein by reference thereto). †
b)
Amendment to the BancorpSouth, Inc. Supplemental Executive Retirement Plan. (Filed with the SEC as
Exhibit 10(a) to the Company’s Quarterly Report on Form 10-Q for the three months ended September 30,
2012 (file number 1-12991) and incorporated herein by reference thereto). †
c)
Amended and Restated BancorpSouth Bank Long-Term Equity Incentive Plan. (Filed as Exhibit 10(c) to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the FDIC on
February 25, 2021 and incorporated herein by reference thereto). †
d)
BancorpSouth, Inc. Amended and Restated Executive Performance Incentive Plan., effective January 1, 2020
(Filed as Exhibit 10(e) to the Company’s Annual Report on Form 10-K filed with the FDIC on February 27,
2020 and incorporated herein by reference thereto). †
e)
Form of Performance Share Award Agreement. (Filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K filed with the SEC on March 7, 2007 (file number 1-12991) and incorporated herein by reference
thereto). †
f)
Form of Long-Term Equity Incentive Plan Restricted Stock Agreement. (Filed with the SEC as Exhibit 10(E)
to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2013 (file number
1-12991) and incorporated herein by reference thereto). †
g)
Amended and Restated BancorpSouth Equity Incentive Plan for Non-Employee Directors. (Filed as Exhibit
10(g) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the
FDIC on February 25, 2021 and incorporated herein by reference thereto). †
178
h)
Amendment to BancorpSouth, Inc. Long-Term Equity Incentive Plan. (Filed with the SEC as Exhibit 10(D)
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (file number 1-12991)
and incorporated herein by reference thereto). †
i)
BancorpSouth, Inc. Restoration Plan, as amended and restated. (Filed with the SEC as Exhibit 10(F) to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (file number 1-12991) and
incorporated herein by reference thereto). †
j)
BancorpSouth, Inc. Amended and Restated Deferred Compensation Plan. (Filed with the SEC as Exhibit
10(G) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (file number
1-12991) and incorporated herein by reference thereto). †
k)
Description of Dividend Reinvestment Plan. (Filed with the SEC as the Company’s prospectus pursuant to
Rule 424(b)(2) filed on January 5, 2004 (Registration No. 033-03009) and incorporated herein by reference
thereto). †
l)
Form of BancorpSouth Bank Change in Control Agreement. (Filed as Exhibit 10(t) to the Company’s Annual
Report on Form 10-K filed with the FDIC on February 27, 2020). †
m) BancorpSouth, Inc. Deferred Directors’ Fee Unfunded Plan, as amended and restated. (Filed with the SEC as
Exhibit 10(U) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 (file
number 1-12991) and incorporated herein by reference thereto). †
n)
BancorpSouth Split Dollar Life Insurance Plan, as amended and restated. (Filed as Exhibit 10(gg) to the
Company’s Annual Report on Form 10-K filed with the FDIC on February 26, 2018 and incorporated herein
by reference thereto). †
o)
Cadence Bank, N.A. Consent Order, dated August 30, 2021. (Filed as Exhibit 10(s) to the Company’s Annual
Report on Form 10-K filed with the FDIC on February 25, 2022 and incorporated herein by reference
thereto).
p)
Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and James D. Rollins, III.
(Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16, 2021
and incorporated herein by reference thereto). †
q)
Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and Chris A. Bagley.
(Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16, 2021
and incorporated herein by reference thereto). †
r)
Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and Rudolph H. Holmes,
IV. (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16,
2021 and incorporated herein by reference thereto). †
s)
Letter Agreement, dated as of April 12, 2021, by and between BancorpSouth Bank and Valerie C. Toalson.
(Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the FDIC on April 16, 2021
and incorporated herein by reference thereto). †
t)
Amendment to the BancorpSouth Amended and Restated Long-Term Equity Incentive Plan. (Filed as Exhibit
99.1 to the Company’s Current Report on Form 8-K filed with the FDIC on March 11, 2021). †
u)
BancorpSouth 2021 Long-Term Equity Incentive Plan. (Filed as Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed with the FDIC on April 30, 2021 and incorporated herein by reference thereto). †
v)
Form of Retention Award Agreement for Performance Units issued pursuant to the BancorpSouth Bank 2021
Long-Term Equity Incentive Plan. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed
with the FDIC on October 29, 2021 and incorporated herein by reference thereto).
w) Form of Retention Award Agreement for Performance Units issued pursuant to the BancorpSouth Bank 2021
Long-Term Equity Incentive Plan. (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed
with the FDIC on October 29, 2021 and incorporated herein by reference thereto).
x)
Retirement and Consulting Agreement, dated December 15, 2023, by and between Cadence Bank and
Michael Meyer.(Filed as Exhibit 10(ac) to the Company’s Annual Report on Form 10-K filed with the FDIC
on February 23, 2024, and incorporated herein by reference thereto). †
y)
Change in Control Agreement, effective January 1, 2024, by and between Cadence Bank and Edward H.
Braddock. (Filed as Exhibit 10(ad) to the Company’s Annual Report on Form 10-K filed with the FDIC on
February 23, 2024, and incorporated herein by reference thereto).†
179
z)
Cadence Bank 2025 Long-Term Incentive Plan. (Filed as Appendix B to the Company’s 2024 Notice of
Special Meeting and Proxy Statement on Form DEF 14A filed with the Board of Governors of the Federal
Reserve System on November 19, 2024 and incorporated herein by reference thereto).
(19)
Cadence Bank Insider Trading Policy.*
(21)
Subsidiaries of the Registrant.*
(31.1)
Certification of the Chief Executive Officer of Cadence Bank pursuant to Rule 13a-14 or 15d-14 of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
(31.2)
Certification of the Chief Financial Officer of Cadence Bank pursuant to Rule 13a-14 or 15d-14 of the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
(32.1)
Certification of the Chief Executive Officer of Cadence Bank pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
(32.2)
Certification of the Chief Financial Officer of Cadence Bank pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
(97.1)
Cadence Bank Clawback Policy. (Filed as Exhibit 97.1 to the Company’s Annual Report on Form 10-K filed
with the FDIC on February 23, 2024, and incorporated herein by reference thereto).
(b) Exhibits - See exhibit index included in Item 15(a)3 of this Annual Report on Form 10-K.
(c)
Financial Statement Schedules - See Item 15(a)2 of this Annual Report on Form 10-K.
†
Management contract or compensatory plan or arrangement.
*
Filed herewith.
**
Furnished herewith.
ITEM 16. FORM 10-K SUMMARY.
None.
180
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CADENCE BANK
DATE:
February 21, 2025
By: /s/ James D. Rollins III
James D. Rollins III
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ James D. Rollins III
Chief Executive Officer (Principal
February 21, 2025
James D. Rollins III
Executive Officer) and Chairman
/s/ Valerie C. Toalson
Chief Financial Officer and
February 21, 2025
Valerie C. Toalson
President - Banking Services
(Principal Accounting Officer)
/s/ Fernando G. Araujo
Director
February 21, 2025
Fernando G. Araujo
/s/ Shannon A. Brown
Director
February 21, 2025
Shannon A. Brown
/s/ Deborah M. Cannon
Director
February 21, 2025
Deborah M. Cannon
/s/ Charlotte N. Corley
Director
February 21, 2025
Charlotte N. Corley
/s/ Joseph W. Evans
Lead Independent Director
February 21, 2025
Joseph W. Evans
/s/ Virginia A. Hepner
Director
February 21, 2025
Virginia A. Hepner
/s/ William G. Holliman
Director
February 21, 2025
William G. Holliman
/s/ Warren A. Hood Jr.
Director
February 21, 2025
Warren A. Hood Jr.
/s/ Keith J. Jackson
Director
February 21, 2025
Keith J. Jackson
/s/ Precious W. Owodunni
Director
February 21, 2025
Precious W. Owodunni
/s/ Alan W. Perry
Director
February 21, 2025
Alan W. Perry
/s/ Alice L. Rodriguez
Director
February 21, 2025
Alice L. Rodriguez
/s/ Marc J. Shapiro
Director
February 21, 2025
Marc J. Shapiro
/s/ Thomas R. Stanton
Director
February 21, 2025
Thomas R. Stanton
181
EXHIBIT 19
CADENCE BANK
INSIDER TRADING POLICY
Cadence Bank (the Company[1]) encourages its directors, officers and employees to participate in the Company’s
future by investing in the Company’s securities. However, you should be aware that you may be subject to substantial liability
and penalties under federal securities laws for the illegal use of material, nonpublic information in connection with the purchase
or sale of the Company’s securities. You may also become subject to these penalties if you pass or “tip” material, nonpublic
information to others, even if you don’t trade in the Company’s securities or benefit from the trades of others.
These penalties could include criminal fines of, currently as much as $5,000,000, a civil penalty of up to three times
the profit gained or the loss avoided from the illegal trade and a prison term of up to 25 years. You could also be charged with
wire or mail fraud. The penalties for the Company and its supervisory personnel, if they fail to take appropriate steps to prevent
illegal insider trading, currently include a civil penalty of up to the greater of $1,000,000 or three times the profit gained or loss
avoided as a result of the violation and a criminal penalty of up to $25,000,000.
You should keep in mind that, in the event that your securities transactions become the subject of scrutiny, they will be
viewed after-the-fact with the benefit of hindsight. As a result, before engaging in any transaction, you should carefully
consider how the Securities and Exchange Commission (SEC) and others might view your transaction in hindsight.
The Company has adopted this Policy to help avoid even the appearance of the illegal use of material, nonpublic
information by anyone employed by or associated with the Company, including its directors, officers, employees, “principal
stockholders” or any other person who from time to time has access to material, nonpublic information regarding the Company
by virtue of their position (collectively, Insiders). The restrictions of this Policy on the use of material, nonpublic information
also apply to Insiders’ immediate family members[2] and other persons living in Insiders’ households, and Insiders are
responsible for compliance by these individuals with this Policy.
Please note that violations of the provisions of this Policy may be grounds for disciplinary action, including
dismissal.
1. No Trading While in Possession of Material, Nonpublic Information.
If you possess any material, nonpublic information relating to the Company, then you may not trade in the Company’s
securities (other than pursuant to a pre-approved trading plan that complies with Rule 10b5-1 under the Securities Exchange
Act of 1934, as amended (the Exchange Act), which is discussed below), or engage in any other action to take advantage of that
information. “Securities” include not only stocks, bonds, notes and debentures, but also options, warrants and similar
instruments.
In addition, neither you nor any related person may communicate or “tip” any material, nonpublic information to others.
For purposes of this Policy:
a.
“Material” information is any information that a reasonable investor would consider important in a decision to buy,
sell, or hold securities. Any information that could reasonably be expected to affect the price of the Company’s
securities should be considered material. Both positive and negative information may be material. Common examples
of information that will frequently be regarded as material, include, but are not limited to the following:
(i) significant acquisitions;
(ii) matters involving significant new products or services;
(iii) matters relating to new financing;
(iv) gain or loss of a substantial vendor or customer;
(v) entering into a significant contract;
(vi) projections by a corporation’s officers of future earnings or losses;
(vii) significant write-down in assets or increases in reserves;
(viii) a pending or proposed merger or acquisition, or a tender offer or exchange offer;
(ix) information about a major joint venture;
(x) a significant sale of assets;
(xi) changes in dividend policies, the declaration of a stock split or the offering of additional securities;
(xii) impending bankruptcy or financial liquidity problems;
(xiii) changes in management;
(xiv) significant litigation;
182
(xv) significant cybersecurity incidents; or
(xvi) matters required to be disclosed on a Form 8-K.
a.
“Nonpublic” information is information that is not generally available to the public. Whether information is generally
available to the public is a question of fact.
It is improper for you to trade the Company’s securities before the public has had a reasonable opportunity to receive
and consider a public announcement by the Company of material, nonpublic information, including earnings releases. The
Company believes that, as a rule of thumb, information about the Company will be generally known to the public once two full
business days have elapsed from the date of its release by public announcement or press release. Therefore, if you are aware of
material, nonpublic information, you may not trade in the Company’s securities until the information has been available to the
public for two full business days. For example, if a public announcement or press release of material, nonpublic information is
made or issued before the market opens on a Monday, you would not be permitted to trade until the following Wednesday.
Likewise, if an announcement is made after the market closes on a Friday, you would not be permitted to trade until the
following Wednesday.
This Policy also applies to material, nonpublic information relating to any other company obtained in the course of
employment or association with the Company.[3]
The restrictions in this Policy also apply to your transactions in the Company’s securities even after your employment
or position with the Company has ceased. If you are in possession of material, nonpublic information when your employment or
position terminates, you may not trade in the Company’s securities until that information has become public or is no longer
material.
Transactions that may be necessary or justifiable for independent reasons (such as the need to raise money for an
emergency expenditure) are no exception to full compliance with this Policy. Even the appearance of an improper transaction
must be avoided to preserve the Company’s reputation for adhering to the highest standards of conduct.
2. Restrictions on Distribution of Information about the Company.
The Company is required under federal securities laws to avoid the selective disclosure of material, nonpublic
information. You may not disclose information to anyone outside the Company, including immediate family members, friends
or acquaintances, other than in accordance with procedures established by the Company. You also may not discuss the
Company or its business in or on an Internet “chat room,” message board, social networking site or other similar forum under
any circumstances.
3. Pre-Clearance of Trades by Executive Officers, Directors, and Certain Other Designated Insiders.
“Insiders” are those individuals in the Company’s leadership who are subject to blackout periods prior to earnings
releases, or for other designated events. “Designated Insiders” are a sub-group that includes those individuals on the Executive
Management Committee, members of the Board of Directors, and the Company’s Chief Accounting Officer. An individual
seeking confirmation of their status as either a Designated Insider or an Insider should contact the Corporate Secretary.
To help avoid inadvertent violations and even the appearance of an improper transaction, Designated Insiders of the
Company are subject to the Company’s pre-clearance procedures. A Designated Insider(s) who desires to purchase, sell, gift or
transfer the Company’s securities must so inform the Company’s Trading Approval Team in advance, and the transaction must
be pre-cleared in advance by two members of the Trading Approval Team, using the pre-clearing form, attached as Exhibit B to
this Policy (the Pre-Clearing Form). The Trading Approval Team is comprised of the Chief Executive Officer, the Corporate
Secretary and the Chief Legal Officer. No member of the Trading Approval Team may pre-clear his or her own trade. For any
transaction in the Company’s securities proposed by a member of the Company’s Executive Management Committee or the
Board of Directors, one of the Trading Approval Team signatures must be from the Chief Executive Officer. The Corporate
Secretary shall be responsible for maintaining a record of all Pre-Clearing Forms submitted for approval. The Trading Approval
Team is under no obligation to approve any trade submitted for pre-clearance.
Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability if trades occur pursuant to a pre-
arranged “trading plan” that meets specified conditions. Any Designated Insider who wishes to implement a trading plan under
Rule 10b5-1 must first pre-clear the plan with the Trading Approval Team using the Pre-Clearing Form, and any member of
Executive Management Committee or the Board of Directors who wishes to implement a Rule 10b5-1 trading plan must have
their Pre-Clearing Form signed by the Chief Executive Officer as one of the members of the Trading Approval Team. The
Company reserves the right, in its sole discretion, to determine not to permit a Rule 10b5-1 trading plan for any or all of its
Designated Insiders. Rule 10b5-1 trading plans are items which must be disclosed to the market for the Company, directors, and
183
some officers. As required by Rule 10b5-1, you may enter into a trading plan only when you are not in possession of material,
nonpublic information, and there is a “cooling off” period between the date you adopt the plan and the date permitted for a “first
trade” pursuant to the plan. In addition, you may not enter into a trading plan during a blackout period. If you establish a trading
plan, you must not exercise any subsequent discretion affecting the transactions, and if your broker or any other person
exercises discretion in implementing the trades, you must not influence his or her actions and he or she must not possess any
material, nonpublic information at the time of the trades. Trading plans can be established for a single trade or a series of trades,
but there are restrictions regarding the existence of overlapping plans. Transactions effected pursuant to a pre-cleared trading
plan will not require further pre-clearance at the time of the transaction if the plan specifies the dates, prices and amounts of the
contemplated trades, or establishes a formula for determining the dates, prices and amounts, in each case in full compliance
with Rule 10b5-1.
Even if you are not an Insider, you are reminded that if you possess material, nonpublic information, you are still under
the restrictions described elsewhere in this Policy.
4. “Blackout” Periods During Which Trading Should Not Occur.
Because of the potential materiality of the Company’s earnings results for each quarter, Insiders may not trade in the
Company’s securities (other than pursuant to a pre-approved trading plan that complies with Rule 10b5-1 under the Exchange
Act) during the period that: (a) begins on the twenty-fifth day of the last month of a calendar quarter (March, June, September,
December); and (b) ends after two full business days have passed following the public release of the Company’s earnings
information for that calendar quarter. The Company does not intend to pre-clear trades or pre-clear the implementation of a
trading plan under Rule 10b5-1 by any Designated Insider occurring during such periods.
Additionally, Designated Insiders of the Company may not trade in the publicly traded securities of the Company for
any period of more than three consecutive business days during which 50% or more of the participants or beneficiaries under all
individual account plans (such as 401(k) plans) of the Company are restricted by the terms of such plans from purchasing,
selling or otherwise acquiring or transferring an interest in any equity security of the Company.
From time to time, an event may occur that is material to the Company and is known by only a few directors, officers
and other employees. So long as the event remains material and nonpublic, these Insiders may not trade in the Company’s
securities. The existence of such an event-specific blackout will not be announced, other than to those aware of the event giving
rise to the blackout. If, however, an Insider requests permission to trade in the Company’s securities during an event-specific
blackout, the Corporate Secretary will inform the requester of the existence of a restriction on trading without disclosing the
reason for the blackout. Any person made aware of the existence of an event-specific blackout should not disclose the existence
of the blackout to any other person. Please note that the failure of the Corporate Secretary to designate a person as being subject
to an event-specific blackout will not relieve that person of the obligation not to trade while aware of material, nonpublic
information.
5. Other Prohibited Transactions.
Because the Company believes that it is improper and inappropriate for any of its Insiders to engage in short-term or
speculative transactions involving the Company’s securities, except as provided below, Insiders are not permitted to engage in
any of the following transactions with respect to the Company’s securities:
Short Sales. Short sales of the Company’s securities evidence an expectation on the part of the seller that the securities
will decline in value, and therefore signal to the market that the seller has no confidence in the Company or its short-term
prospects. In addition, short sales may reduce the seller’s incentive to improve the Company’s performance. For these reasons,
short sales of the Company’s securities by Insiders are prohibited by this Policy. In addition, Section 16(c) of the Exchange Act
prohibits officers and directors from engaging in short sales.
Puts, Calls and Other Derivative Securities. A transaction in options is, in effect, a bet on the short-term movement of
the Company’s stock and therefore creates the appearance that the director, officer or employee is trading based on inside
information. Transactions in options also may focus the director’s, officer’s or employee’s attention on short-term performance
at the expense of the Company’s long-term objectives. Accordingly, this Policy prohibits transactions in puts, calls or other
derivative securities, on an exchange or in any other organized market, by Insiders. Option positions arising from certain types
of hedging transactions are governed by the following paragraph captioned “Hedging Transactions.”
Hedging Transactions. Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale
contracts, allow a person to lock in much of the value of his or her stock holdings, often in exchange for all or part of the
potential for upside appreciation in the stock. These transactions allow an individual to continue to own the covered securities,
but without the full risks and rewards of ownership. When that occurs, the individual utilizing such transactions may no longer
184
have the same objectives as the Company’s other shareholders. Therefore, Insiders are prohibited from engaging in any such
transactions.
Margin Transactions; Pledges. Securities held in a margin account may be sold by the broker without the customer’s
consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may
be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when
the pledgor is aware of material, nonpublic information, or otherwise is not permitted to trade in the Company’s securities, the
following individuals affiliated with the Company are prohibited from holding the Company’s securities in a margin account or
pledging securities of the Company as collateral for a loan: (a) directors; (b) the Chief Executive Officer; (c) the Chief Financial
Officer; (d) each other individual identified as a “Named Executive Officer” for at least one of the last three fiscal years
reported in the “Summary Compensation Table” in the most recent proxy statement filed by the Company; and (e) each other
executive officer of the Company who files reports of ownership under Section 16 of the Exchange Act.
6. Exceptions for Certain Transactions Under Company Plans.
Stock Option Exercises. This Policy does not prohibit the exercise of a stock option granted under one of the Company’s
stock option plans, or to the exercise of a tax withholding right pursuant to which you elect to have the Company withhold
shares subject to an option to satisfy tax withholding requirements. This Policy does apply, however, to any sale of the
Company’s securities as part of a broker-assisted cashless exercise of an option, or any other market sale for the purpose of
generating the cash needed to pay the exercise price of an option. This Policy also applies to any sale of the Company’s
common stock or other securities acquired upon exercise of an option.
401(k) Plan. This Policy does not prohibit purchases of shares of the Company’s common stock through a Company
stock fund offered through the Company’s 401(k) plan which result from your periodic contribution of money to the 401(k)
plan pursuant to your payroll deduction election. This Policy does apply, however, to certain elections you may make under the
401(k) plan, including: (a) an election to increase or decrease the percentage of your periodic contributions that will be
allocated to the Company stock fund; (b) an election to make an intra-plan transfer of an existing account balance into or out of
the Company stock fund; (c) an election to borrow money against your 401(k) plan account if the loan will result in a
liquidation of some or all of your Company stock fund balance; and (d) your election to pre-pay a plan loan if the pre-payment
will result in allocation of loan proceeds to the Company stock fund.
7. Section 16 Compliance.
Certain of the Company’s officers, directors and “principal stockholders” (as defined in the Exchange Act) have
additional compliance requirements pursuant to Section 16 of the Exchange Act, including the filing of Forms 3, 4 and 5 to
report holdings and trades of the Company’s equity securities. Generally, if one of these Designated Insiders buys, sells, or gifts
shares of the Company’s common stock, or is granted or exercises options to purchase shares of the Company’s common stock,
the Designated Insider must report the transaction to the Company’s federal regulators on a Form 4 within two business days of
the date of the transaction. The Company’s Corporate Secretary, in consultation with the Company’s legal counsel, would be
pleased to assist these Insiders in preparing and filing Section 16 reports at the Designated Insiders’ request. Designated
Insiders who are subject to the requirements of Section 16 should recognize, however, that they remain ultimately responsible
for the correct and timely filing of their Section 16 reports, as well as their compliance with the other requirements and
restrictions of Section 16. If a Designated Insider intends to sell Company common stock, he or she must arrange for their
broker to file a Form 144 if required.
To improve compliance with Section 16 reporting deadlines, the SEC requires public companies (including the
Company) to report in their annual proxy statements the names of those insiders subject to Section 16 reporting who failed to
timely file Section 16 reports. In addition, the SEC has brought enforcement actions against corporate insiders in connection
with the insiders’ failure to file Section 16 reports. Any person who willfully fails to file a report which he or she knew was
required under Section 16 or who willfully misrepresents information reported under Section 16 may be subject to criminal
penalties (including imprisonment and fines), in addition to SEC enforcement orders and possible civil liability.
To help ensure compliance with the requirements of Section 16, if any covered officer, director or principal stockholder
is aware of any trades in the securities of the Company which he or she has made but which have not been reported to the
Company and/or to the federal regulators on a Form 4 or, at the end of a calendar year, a Form 5, please contact the Corporate
Secretary of the Company so that the information may be reported to the federal regulators.
8. Annual Certifications.
To help ensure continued compliance with this Policy, each employee must make an Annual Certification through the
Company’s online training module that they have read and will comply with this Policy (sample attached as Exhibit A).
185
9. Questions.
If you have any questions regarding this Policy or any of the matters covered herein, please contact the Company’s
Corporate Secretary, who may be reached by email at corporate.secretary@cadencebank.com, or at Cadence Bank, 201 South
Spring Street, Tupelo, Mississippi 38804.
[1] The term Company or the Bank means Cadence Bank and its subsidiaries and their affiliates.
[2] The term “immediate family member” of you or an Insider includes your or the Insider’s spouse, parents, step-parents, children, step-
children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, or anyone (other than domestic
employees or tenants) who share your home or the Insider’s home. The term does not consider individuals who are no longer immediate
family members as a result of legal separation or divorce, or those who have died or become incapacitated.
[3] The SEC has also successfully prosecuted individuals for insider trading where the individual traded in the securities of a competitor based
on inside information about its own company. These insider-trading theories are akin to use of material non-public information for the
purpose of exploiting or manipulating the market.
186
Exhibit A
CADENCE BANK
INSIDER TRADING POLICY
ANNUAL CERTIFICATION SAMPLE
I certify that:
a.
I have been provided with a copy of the Insider Trading Policy (the Policy) of Cadence Bank (the Company). I have
read and understand the Policy. I understand that my failure to comply in all respects with the Company’s policies,
including the Policy, is the basis for disciplinary action, including termination of my employment or position with the
Company.
a.
Since the date of my last certification, or such shorter period of time that I have been an employee of or associated
with the Company, I have complied with the Policy.
a.
I will continue to comply with the Policy for as long as I am subject to the Policy.
187
Exhibit B
Pre-Clearance Approval Form
Pursuant to the Cadence Bank Insider Trading Policy, directors, executive officers and designated employees (“Designated
Insiders”) of Cadence Bank and its subsidiaries (collectively, the “Company”) who have access to material nonpublic
information about the Company must comply with pre-clearance procedures and are subject to blackout periods. Regardless of
whether pre-clearance is granted, you may not conduct a transaction if you are aware of any material nonpublic information
about the Company. If you have any questions, please contact Cathy Freeman, Corporate Secretary, to discuss. This policy and
pre-clearance process also applies to gift transactions. In addition, the shareholder must contact their broker to file a Form 144,
if required, for any transaction involving a sale.
To obtain pre-clearance, please complete the information below, sign, scan and email a copy to Cathy Freeman
(cathy.freeman@cadencebank.com), who will obtain signatures from two members of the Trading Approval Team members
within two business days and return a signed copy of this Pre-Clearance Approval Form to you.
Name: ____________________________________ Date: ______________________________
Registered Owner (if not held in your name): __________________________________________
Planned Transaction:
_____ Purchase _____ Exercise options and pay cash _____ Gift
_____ Sale _____ Exercise options and sell stock _____ Entry into 10b5-1 Plan
_____ Other: ______________________________________
Estimated Number of Shares or dollar amount of transaction: _________________________________
______ If checked, Designated Insider certifies that there are no opposite-way transactions that occurred within the last six
months; a Form 4 must be filed within 2 business days of the purchase, sale, or gift; and, if a sale, Rule 144 must be observed
(including filing a Form 144 if sale of more than 5,000 shares or $50,000 in three-month period).
____________________________________________________________________________________
Approval by Trading Approval Team Members:
X________________________________________ X ____________________________________
Date Granted: ________________________
Transaction must occur by close of business on ____________________ (the earlier of 10 business days after approval was
granted and the first day of the next quarterly blackout period), unless notified by a member of the Trading Approval Team that
the trading window has been closed early.
188
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name
Jurisdiction of Incorporation/
Organization
Holder of Ownership Interests
Cadence Holdings, Inc.
Mississippi
Cadence Bank
Cadence Community Capital, LLC
Mississippi
Cadence Bank
Cadence Investor, LLC
Mississippi
Cadence Bank
Linscomb Wealth, Inc.
Texas
Cadence Bank
EXHIBIT 31.1
CADENCE BANK
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James D. Rollins III, certify that:
1.
I have reviewed this annual report on Form 10-K (“this report”) of Cadence Bank;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant's Board of Directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date:
February 21, 2025
/s/ James D. Rollins III
James D. Rollins III
Chief Executive Officer
EXHIBIT 31.2
CADENCE BANK
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Valerie C. Toalson, certify that:
1.
I have reviewed this annual report on Form 10-K (“this report”) of Cadence Bank;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant’s Board of Directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date:
February 21, 2025
/s/ Valerie C. Toalson
Valerie C. Toalson
Chief Financial Officer and
President - Banking Services
(Principal Accounting Officer)
EXHIBIT 32.1
CADENCE BANK
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this annual report on Form 10-K of Cadence Bank (the “Company”), for the year ended
December 31, 2024, as filed with the Board of Governors of the Federal Reserve System on the date hereof (the “Report”), I,
James D. Rollins III, Chief Executive Officer of the Company, certify in my capacity as an executive officer of the Company,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
February 21, 2025
/s/ James D. Rollins III
James D. Rollins III
Chief Executive Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by
the Company and furnished to the Board of Governors of the Federal Reserve System or its staff upon request.
EXHIBIT 32.2
CADENCE BANK
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this annual report on Form 10-K of Cadence Bank (the “Company”), for the year ended
December 31, 2024, as filed with the Board of Governors of the Federal Reserve System on the date hereof (the “Report”), I,
Valerie C. Toalson, Chief Financial Officer of the Company, certify in my capacity as an executive officer of the Company,
pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
February 21, 2025
/s/ Valerie C. Toalson
Valerie C. Toalson
Chief Financial Officer and
President - Banking Services
(Principal Accounting Officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by
the Company and furnished to the Board of Governors of the Federal Reserve System or its staff upon request.