Cadence Bank

The positive outlook on Cadence reflects our view that we could raise the ratings in the next two years. We think Cadence will maintain solid loan performance and generate stable earnings. We also think the company's capital ratios could modestly decline over time but remain well-capitalized and comparable to similarly rated peers. Although possible, we do not expect Cadence to face integration challenges resulting from the merger. Conversely, we could revise the outlook to stable if, in our view, the company has significant challenges related to the integration of both entities, if asset quality deteriorates disproportionally more than peers, or if capital ratios decline materially from current levels. We could raise the ratings if the merged company were to generate

...Once fully integrated, Cadence Bank (Cadence) stands to gain greater diversification in its loan portfolio, enhanced scale, and larger geographic footprint. However, short-term integration challenges could create delays or prevent full realization of these positive attributes. Cadence's strengthening of its credit culture helped maintain stable loan performance. As economic and industry risks recede, the company's asset quality trends are also improving. By our calculation, nonperforming assets to customer loans and other real estate owned was 0.66% as of Sept. 30, 2021, which is better than the median of U.S. rated banks of 1.1%. However, we maintain a cautious view of the company's exposure to what we see as higher-risk lending, such as construction and development loans. Cadence's good base of low-cost core deposits supports the company's funding and liquidity profile. By our calculation, Cadence's core deposits account for a significant portion of its funding base, leading to its strong...

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