Cadence Bank

The stable outlook reflects our expectation that over the next two years, Cadence will maintain financial metrics commensurate with similarly rated regional bank peers. We also expect loan losses will gradually rise to more normal levels amid a weaker economy and funding ratios will deteriorate somewhat given higher interest rates and expected loan growth. We expect capital ratios to remain relatively stable over the next two years. We could lower the rating within the next two years if asset quality deteriorates substantially more than similarly rated peers or worse than historical averages, or if the bank has unforeseen and significant operational, legal, or regulatory issues. We view an upgrade as unlikely over the next two years given already appropriate peer

...Cadence's funding and liquidity remain well positioned amid higher for longer interest rates. The bank's deposits declined 1.7% sequentially in the second quarter of 2023, mainly because of seasonal public fund outflows. Deposits were 88% of the funding base as of June 30, 2023, comparable to the median of rated U.S. banks. The loan-to-customer deposit ratio was 84% as of June 30, 2023, by our calculation, up from year-end 2022, but down substantially in recent years and roughly comparable to rated U.S. banks. On balance sheet liquidity is satisfactory, in our view, with cash and securities totaling 25% of assets as of June 30, 2023--although somewhat lower than the median of rated U.S. banks. Cadence Bank has substantially enhanced its scale, diversified its loan portfolio, and expanded its geographic reach following its transformational merger with BancorpSouth Bank. With nearly $49 billion in total assets, Cadence operates more than 350 branches across nine southeastern states. Cadence...

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