8-K: Cadence Bank Reports Q3 2025 Results, Announces Huntington Merger

Cadence Bank reported mixed third-quarter results with a dip in net income but strong year-to-date growth, while announcing a $7.4 billion all-stock merger with Huntington Bancshares Incorporated.

Summary

• Net income available to common shareholders for the three months ended September 30, 2025, was $127.477 million, a decrease of $6.6 million from $134.067 million in the same period of 2024.
• Year-to-date net income available to common shareholders for September 30, 2025, increased by $4.4 million to $388.228 million, compared to $383.773 million in the prior year.
• Net interest revenue for the third quarter of 2025 rose by $62.3 million (17.2%) to $423.727 million, and year-to-date increased by $93.3 million (8.7%) to $1,165.019 million.
• The net interest margin (FTE) improved to 3.46% for Q3 2025 (up from 3.31% in Q3 2024) and to 3.44% year-to-date (up from 3.27% in YTD 2024).
• Provision for credit losses significantly increased to $32.0 million in Q3 2025 (from $12.0 million in Q3 2024) and to $83.0 million year-to-date (from $56.0 million in YTD 2024).
• Noninterest revenue increased by $7.6 million (8.8%) to $93.478 million in Q3 2025, and by $6.7 million (2.5%) to $277.046 million year-to-date.
• Noninterest expense grew substantially by $60.8 million (23.4%) to $320.246 million in Q3 2025, and by $73.1 million (9.4%) to $852.458 million year-to-date, primarily due to merger expenses, salaries, data processing, and amortization of intangibles.
• Total assets reached $53.282 billion at September 30, 2025, up from $47.019 billion at December 31, 2024.
• Total loans and leases, net of unearned income, increased to $36.802 billion at September 30, 2025, from $33.742 billion at December 31, 2024.
• Total deposits grew to $43.921 billion at September 30, 2025, from $40.496 billion at December 31, 2024.
• The Allowance for Credit Losses (ACL) to Nonperforming Loans (NPL) ratio improved to 198.62% at September 30, 2025, from 168.84% at September 30, 2024.
• The NPL to net loans and leases ratio decreased to 0.68% at September 30, 2025, from 0.82% at September 30, 2024.
• Regulatory capital ratios, including Common Equity Tier 1 (11.51%), Tier 1 (11.91%), Total Capital (13.09%), and Tier 1 Leverage (9.24%), decreased from December 31, 2024, but remain above well-capitalized thresholds.
• Completed the acquisition of FCB Financial Corp. on May 1, 2025, issuing 2.3 million common shares and paying $23.1 million cash, adding $523.6 million in deposits and $382.6 million in loans.
• Completed the acquisition of Industry Bancshares, Inc. on July 1, 2025, paying $20 million cash, adding $4.3 billion in deposits, $1.0 billion in loans, and $2.5 billion in securities. Subsequently, $1.9 billion of acquired securities were sold, with proceeds redeployed to higher-yielding securities and wholesale funding paydown.
• Entered into an Agreement and Plan of Merger with Huntington Bancshares Incorporated on October 26, 2025, in an all-stock transaction valued at approximately $7.4 billion, with Huntington issuing 2.475 shares of its common stock for each Cadence common share.
• The Federal Reserve lowered interest rates by 25 basis points in September 2025 and an additional 25 basis points on October 29, 2025, bringing the target range to 3.75% to 4.00%.

Sentiment

Score: 6

Explanation: While Q3 net income declined and expenses rose, year-to-date performance shows growth in key revenue areas and improved net interest margin. The strategic acquisitions and the announced merger with Huntington Bancshares Incorporated present substantial future growth and synergy potential. Regulatory capital ratios, while slightly down, remain above well-capitalized thresholds. The overall outlook is cautiously optimistic due to the transformative merger.

Positives

• Year-to-date net income available to common shareholders increased by $4.4 million.
• Net interest revenue showed strong growth, increasing by 17.2% in Q3 2025 and 8.7% year-to-date.
• Net interest margin (FTE) improved to 3.46% in Q3 2025 and 3.44% year-to-date, indicating effective asset/liability management.
• Total assets grew to $53.282 billion, reflecting successful strategic acquisitions.
• Total loans and leases increased by $3.060 billion, and total deposits increased by $3.425 billion, partly driven by acquisitions.
• The ACL to NPL ratio improved to 198.62%, demonstrating strong coverage of nonperforming loans.
• The NPL to net loans and leases ratio decreased to 0.68%, indicating improved asset quality.
• Successful completion of FCB Financial Corp. and Industry Bancshares, Inc. acquisitions, expanding market presence and asset base.
• Strategic redeployment of $1.9 billion of acquired IBS securities into higher-yielding assets and wholesale funding paydown.
• Federal Reserve interest rate cuts in September and October 2025 are expected to benefit interest-bearing liabilities.
• The DOJ Consent Order related to the fair lending program was terminated on May 29, 2025, removing a significant regulatory overhang.

Negatives

• Net income available to common shareholders for Q3 2025 decreased by $6.6 million compared to Q3 2024.
• Provision for credit losses increased significantly to $32.0 million in Q3 2025 and $83.0 million year-to-date, indicating potential credit quality concerns or increased loan growth.
• Noninterest expense rose substantially by $60.8 million (23.4%) in Q3 2025 and $73.1 million (9.4%) year-to-date, driven by merger expenses, salaries, data processing, and amortization of intangibles.
• Regulatory capital ratios (CET1, Tier 1, Total Capital, Tier 1 Leverage) declined from December 31, 2024, although they remain above well-capitalized thresholds.
• Unrealized losses on available-for-sale securities remain substantial at $593.1 million, despite a decrease from December 31, 2024.
• Foreclosed Other Real Estate Owned (OREO) and other nonperforming assets increased by $2.7 million (46.9%) from December 31, 2024.
• Special mention loans increased by $191.0 million (167.8%) and substandard loans increased by $29.6 million (4.9%) compared to December 31, 2024, indicating some deterioration in credit quality indicators.
• Other miscellaneous income decreased for both Q3 and YTD 2025, partly due to a $4.3 million loss on fair value hedge termination related to the IBS securities portfolio and the absence of a $15.0 million gain from business sales in the prior year.

Risks

• General economic, unemployment, credit market, and real estate market conditions (including potential downturn, contraction, and/or recession) could adversely affect business, financial condition, and results of operations.
• Changes in interest rates could have an adverse impact on results of operations and financial condition, affecting deposit levels, loan demand, loan repayment velocity, and asset values.
• Market reactions to perceived instability in the banking sector could adversely affect financial condition and results of operations.
• The impact of inflation could lead to increased costs for customers, making loan repayment more difficult and increasing credit risk.
• Failure of assumptions underlying the establishment of reserves for possible credit losses could adversely impact business, financial condition, and results of operations.
• Changes in the prices, values, and sales volumes of residential and commercial real estate could impair collateral values.
• Uncertainties surrounding the impact of proposed tariffs could negatively affect the loan portfolio and profitability.
• A deterioration of the credit rating for U.S. long-term sovereign debt or uncertainties surrounding the debt ceiling and federal budget could impact capital availability and funding costs.
• Potential delays or problems in implementing and executing growth, expansion, and acquisition strategies, including delays in obtaining regulatory or other necessary approvals, or failure to realize anticipated benefits or synergies from acquisitions.
• Risks related to the acquisitions of FCB Financial Corp. and Industry Bancshares, Inc., including integration challenges, unexpected transaction costs, deposit and customer attrition, and increased competitive pressures.
• Risks related to the proposed merger with Huntington Bancshares Incorporated, including the occurrence of events that could terminate the merger agreement, legal proceedings, delays in completion, failure to obtain necessary regulatory or shareholder approvals, imposition of adverse conditions, failure to realize anticipated benefits, higher completion costs, diversion of management's attention, adverse reactions from customers or employees, and dilution from stock issuance.
• Significant turbulence or disruption in the capital or financial markets could adversely affect the investment banking business and fee income.
• Changes in legal, financial, and/or regulatory requirements (including those related to share repurchases) could increase compliance costs.
• Possible adverse rulings, judgments, settlements, and other outcomes of pending or future litigation or government actions.
• Inability to keep pace with technological changes, including 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 reliance on third parties to provide key components of business infrastructure, including disruptions in services or financial difficulties of vendors.
• Impact of failure in, or breach of, operational or security systems or infrastructure, including cyber-attacks or an increase in fraud.
• Natural disasters or acts of war or terrorism, and international or political instability (e.g., Russia's military action in Ukraine, Israel-Hamas war) could impact financial markets and the global macroeconomic environment.
• Risks and costs related to the scope and pace of Environmental, Social, and Governance (ESG) rulemaking activity.
• Impairment of goodwill or other intangible assets could require a charge to earnings.
• Adoption of new accounting standards or changes in existing standards could affect financial results and reporting.
• Losses of key employees and personnel could adversely affect business operations.
• Diversion of management's attention from ongoing business operations and opportunities due to acquisitions or other significant events.
• The ability to successfully execute business plans and strategies and manage associated risks.

Future Outlook

The Federal Reserve lowered interest rates by 25 basis points in September 2025 and an additional 25 basis points on October 29, 2025, bringing the target range for the federal funds rate to 3.75% to 4.00%, with a possibility of further reductions in Q4 2025. Management believes future weakness in the economic environment could adversely affect the strength of the credit quality of assets. The merger with Huntington Bancshares Incorporated is expected to close in the first quarter of 2026, subject to regulatory and shareholder approvals. The company is evaluating the impact of the recently signed OBBB Act on its consolidated financial statements and anticipates selling approximately $39.7 million of SBIC fund positions by December 31, 2025.

Management Comments

• Management believes future weakness in the economic environment could adversely affect the strength of the credit quality of assets. Therefore, management will continue to focus on early identification and resolution of credit issues.
• Management believes that no events or changes have occurred subsequent to the indicated dates that would change this designation [well-capitalized status].
• Management does not anticipate any shortor long-term changes to its liquidity strategies and believes that the Company has ample sources to meet any liquidity challenges that may arise.
• 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 ACL was recorded related to these securities at September 30, 2025 or December 31, 2024. Additionally, as of September 30, 2025 management had no intent to sell these securities, and it is more likely than not that the Company would not be required to sell the securities prior to recovery of costs.

Industry Context

The financial services industry is experiencing ongoing consolidation, as evidenced by the announced merger with Huntington Bancshares. Federal Reserve interest rate policies continue to be a dominant factor, with recent rate cuts signaling a response to economic conditions, which impacts banks' net interest margins. The industry also faces persistent challenges from inflation, intense competition from traditional and fintech players, and an evolving regulatory landscape, including new accounting standards and potential changes to consumer protection rules. The company's strategic acquisitions and merger activity reflect a broader trend of banks seeking scale and expanded capabilities to navigate these dynamics.

Comparison to Industry Standards

• Regulatory capital ratios (CET1, Tier 1, Total Capital, Tier 1 Leverage) exceed the levels established for well-capitalized institutions, indicating strong capital adequacy relative to regulatory benchmarks.
• The net interest margin (FTE) improved, suggesting effective management of interest-earning assets and interest-bearing liabilities in a dynamic rate environment, which is a key performance indicator in the banking sector.
• The ACL to NPL ratio of 198.62% indicates robust coverage of nonperforming loans, a positive sign for asset quality compared to industry peers.
• The company's internal loan classification system is compatible with classifications used by regulatory agencies, implying adherence to industry best practices for credit quality assessment.
• The economic forecast used for ACL estimation incorporates multiple scenarios (upside, downside, base case) over an eight-quarter horizon, reflecting a comprehensive and standard approach to risk management in financial institutions.

Management Changes

Corporate Governance

Legal Proceedings

• A litigation-related liability of $0.3 million was accrued at September 30, 2025. Management believes this accrual is adequate and any incremental change will not have a material adverse effect on the business or financial condition.
• The DOJ Consent Order related to Legacy Cadence Bank's fair lending program in Houston, Texas, was terminated on May 29, 2025, at the request of the DOJ.

Stakeholder Impact

• Shareholders: Will receive Huntington common stock in the merger, implying a transaction value of $39.77 per Cadence common share, offering potential for long-term value creation in the combined entity. The authorized share repurchase program also provides a mechanism for returning value.
• Employees: Huntington plans to retain the majority of customer-facing colleagues and maintain the branch network. While some job impacts are expected in overlapping areas, Huntington is committed to finding other opportunities. Benefits transition will occur post-merger.
• Customers: Will gain access to a broader portfolio of products, services, and digital tools from the combined Huntington entity, with an emphasis on maintaining local delivery and relationships.
• Communities: Huntington has committed to maintaining community partnerships and philanthropic commitments, and investing in Cadence's current communities.
• Creditors: Subordinated debt was paid off, reducing overall indebtedness. Increased FHLB advances indicate reliance on wholesale funding, but the overall liquidity position is deemed ample by management.

Next Steps

• Finalize purchase price allocation and fair value measurements for the FCB Financial Corp. and Industry Bancshares, Inc. acquisitions.
• Complete the sale of approximately $39.7 million of SBIC fund positions by December 31, 2025.
• Monitor for potential additional Federal Reserve interest rate reductions in the fourth quarter of 2025.
• Obtain necessary regulatory and shareholder approvals for the merger with Huntington Bancshares Incorporated.
• Work towards the expected closing of the Huntington merger in the first quarter of 2026.
• Evaluate the impact of the One Big Beautiful Bill (OBBB) Act on consolidated financial statements.

Key Dates

Recommendation

The announced merger with Huntington Bancshares Incorporated is a transformative event for Cadence Bank, offering significant long-term potential through expanded scale, capabilities, and market reach. While the most recent quarterly results show some mixed performance with increased provisions for credit losses and higher expenses, the year-to-date financial trends are positive, and strategic acquisitions have bolstered the asset base. The stock is likely to trade in line with the merger terms, with limited independent upside or downside until the transaction closes. Investors should hold their positions to realize the benefits of the merger, while monitoring the integration process and the combined entity's future performance.

Keywords

Banking, Financial Services, Merger, Acquisition, Huntington Bancshares, Cadence Bank, Quarterly Report, Financial Results, Net Interest Income, Credit Quality, Deposits, Loans, Regulatory Capital, Risk Management, Shareholder Approval, Stock Transaction, FCB Financial Corp, Industry Bancshares Inc, Interest Rates, Nonperforming Loans, Capital Ratios, SEC Filing