Synovus Announces Earnings for the Second Quarter 2017

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Synovus Financial Corp. (NYSE:SNV) today reported financial results for
the quarter ended June 30, 2017.

Second Quarter Highlights

  • Net income available to common shareholders was $73.4 million or $0.60
    per diluted share as compared to $69.3 million or $0.56 per diluted
    share for the first quarter 2017 and $57.9 million or $0.46 per
    diluted share for the second quarter 2016.
  • Return on average assets was 1.00%, up 4 basis points from the
    previous quarter and up 17 basis points from the second quarter 2016.
  • Return on average common equity was 10.34%, up 37 basis points from
    the previous quarter and up 208 basis points from the second quarter
    2016.
  • Total average loans grew $314.0 million or 5.2% annualized from the
    previous quarter and $1.42 billion or 6.2% as compared to the second
    quarter 2016.
  • Total average deposits grew $72.9 million or 1.2% annualized from the
    previous quarter and $1.38 billion or 5.9% as compared to the second
    quarter 2016.
  • Credit quality metrics remained favorable with a non-performing asset
    ratio of 73 basis points, down 4 basis points from the previous
    quarter and down 8 basis points from the second quarter 2016.
  • Total revenues1 were $319.8 million, up $15.7 million or
    5.2% from the previous quarter and 10.5% from the second quarter 2016.
  • Net interest margin was 3.51%, up 9 basis points from the previous
    quarter and up 24 basis points from the second quarter 2016.
  • Efficiency ratio2 of 59.90% improved from 64.84% the
    previous quarter and 65.11% in the second quarter 2016.

“We are pleased with our second quarter performance, highlighted by a 30
percent year-over-year increase in earnings per share,” said Kessel
Stelling, Synovus chairman and CEO. “Profitability continued to improve
as we delivered a 1 percent return on assets and an efficiency ratio
below 60 percent for the quarter. We also celebrated being named ‘Most
Reputable Bank’ by American Banker magazine and the Reputation
Institute. Our team is honored by this recognition from both customers
and non-customers, and further energized about our transition to a
unified Synovus brand in 2018.”

Balance Sheet

  • Total loans ended the quarter at $24.43 billion, up $172.0 million or
    2.8% annualized from the previous quarter and up $1.37 billion or 5.9%
    as compared to the second quarter 2016.

    • Commercial and industrial loans grew by $10.1 million or 0.3%
      annualized from the previous quarter and $795.5 million or 7.3% as
      compared to the second quarter 2016.
    • Consumer loans grew by $207.2 million or 16.3% annualized from the
      previous quarter and $666.0 million or 14.4% as compared to the
      second quarter 2016.
    • Commercial real estate loans declined by $45.0 million or 2.4%
      annualized from the previous quarter and declined $93.4 million or
      1.2% as compared to the second quarter 2016.
  • Total average loans were $24.35 billion, up $314.0 million or 5.2%
    annualized from the previous quarter and $1.42 billion or 6.2% as
    compared to the second quarter 2016.
  • Total average deposits were $24.99 billion, up $72.9 million or 1.2%
    annualized from the previous quarter and $1.38 billion or 5.9% as
    compared to the second quarter 2016.

    • Average core transaction deposits3 grew $261.3 million
      or 5.8% annualized from the previous quarter and $1.56 billion or
      9.3% as compared to the second quarter 2016.

Core Performance

  • Total revenues1 were $319.8 million, up $15.7 million or
    5.2% from the previous quarter and 10.5% from the second quarter 2016.
  • Net interest income was $251.1 million, up $11.2 million or 4.7% from
    the previous quarter and 13.4% from the second quarter 2016.
  • Net interest margin was 3.51%, up 9 basis points from the previous
    quarter. Yield on earning assets was 3.99%, up 11 basis points from
    the previous quarter, and the effective cost of funds was 0.48%, up 2
    basis points from the previous quarter.
  • Total non-interest income was $68.7 million, down $3.2 million or 4.4%
    compared to the previous quarter and up 1.2% from second quarter 2016.
  • Adjusted non-interest income was $70.1 million, up $4.1 million or
    6.2% from the previous quarter and up 3.4% as compared to the second
    quarter 2016.

    • Core banking fees4 were $34.2 million, up $1.5 million
      or 4.6% from the previous quarter and 1.3% from the second quarter
      2016.
    • Fiduciary and asset management fees, brokerage revenue, and
      insurance revenues were $20.8 million, up $114 thousand or 0.5%
      from the previous quarter and 5.0% from the second quarter 2016.
    • Mortgage banking income was $5.8 million, unchanged from the
      previous quarter and down 2.6% from the second quarter 2016.
  • Total non-interest expense was $191.7 million, down $5.6 million or
    2.9% from the previous quarter and up 1.7% from the second quarter
    2016.

    • First quarter 2017 and second quarter 2016 included restructuring
      charges of $6.5 million and $5.8 million, respectively.
  • Adjusted non-interest expense was $191.4 million, up $837 thousand or
    0.4% from the previous quarter and 5.0% from the second quarter 2016.

    • Employment expense of $105.2 million decreased $2.0 million or
      1.8% from the previous quarter and increased 8.4% from the second
      quarter 2016.
    • Occupancy and equipment expense of $29.9 million increased $602
      thousand or 2.1% from the previous quarter and 11.8% from the
      second quarter 2016.
    • Other expenses of $56.6 million decreased $4.3 million or 7.0%
      from the previous quarter and decreased 12.6% from the second
      quarter 2016.
    • Efficiency ratio2 was 59.90% as compared to 64.84% in
      the previous quarter and 65.11% in the second quarter 2016.
    • Adjusted efficiency ratio was 59.56% as compared to 62.25% in the
      previous quarter and 63.00% in the second quarter 2016.

Credit Quality

  • Non-performing loans were $159.3 million at June 30, 2017, up $951
    thousand from March 31, 2017 and up $5.2 million from June 30, 2016.
    The non-performing loan ratio was 0.65% at June 30, 2017, unchanged
    compared to March 31, 2017 and down from 0.67% at June 30, 2016.
  • Total non-performing assets were $178.9 million at June 30, 2017, down
    $8.3 million from March 31, 2017 and down $8.4 million from June 30,
    2016. The non-performing asset ratio was 0.73% at June 30, 2017, as
    compared to 0.77% at March 31, 2017 and 0.81% at June 30, 2016.
  • Net charge-offs were $15.7 million in the second quarter 2017, up $8.8
    million from $6.9 million in the previous quarter and up $9.5 million
    from $6.1 million in the second quarter 2016. The annualized net
    charge-off ratio was 0.26% in the second quarter as compared to 0.12%
    in the previous quarter and 0.11% in the second quarter 2016.
  • Total delinquencies (consisting of loans 30 or more days past due and
    still accruing) remained low at 0.27% of total loans at June 30, 2017
    as compared to 0.26% at March 31, 2017 and 0.24% at June 30, 2016.

Capital Ratios

  • Ratios reflect repurchase of $30.2 million in common stock during the
    second quarter 2017.
  • Common Equity Tier 1 ratio was 10.02% at June 30, 2017 compared to
    9.86% at March 31, 2017.
  • Tier 1 Capital ratio was 10.36% at June 30, 2017 compared to 10.18% at
    March 31, 2017.
  • Total Risk Based Capital ratio was 12.24% at June 30, 2017 compared to
    12.09% at March 31, 2017.
  • Tier 1 Leverage ratio was 9.29% at June 30, 2017 compared to 9.13% at
    March 31, 2017.
  • Tangible Common Equity ratio was 9.15% at June 30, 2017 compared to
    9.04% at March 31, 2017.

Second Quarter Earnings Conference Call

Synovus will host an earnings highlights conference call at 8:30 a.m.
EDT on July 18, 2017. The earnings call will be accompanied by a slide
presentation. Shareholders and other interested parties may listen to
this conference call via simultaneous Internet broadcast. For a link to
the webcast, go to investor.synovus.com/event.
The replay will be archived for 12 months and will be available 30-45
minutes after the call.

Synovus Financial Corp.

Synovus Financial Corp. is a financial services company based in
Columbus, Georgia, with approximately $31 billion in assets. Synovus
provides commercial and retail banking, investment, and mortgage
services through 248 branches in Georgia, Alabama, South Carolina,
Florida, and Tennessee. Synovus Bank, a wholly owned subsidiary of
Synovus, was recognized as the “Most Reputable Bank” by American
Banker
and the Reputation Institute in 2017, and was named “Best
Regional Bank, Southeast
” by MONEY Magazine for 2016-17.
Synovus is on the web at synovus.com,
on Twitter @synovus,
and on LinkedIn at http://linkedin.com/company/synovus.

Forward-Looking Statements

This press release and certain of our other filings with the Securities
and Exchange Commission contain statements that constitute
“forward-looking statements” within the meaning of, and subject to the
protections of, Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical fact are forward-looking
statements. You can identify these forward-looking statements through
Synovus’ use of words such as “believes,” “anticipates,” “expects,”
“may,” “will,” “assumes,” “should,” “predicts,” “could,” “would,”
“intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and
other similar words and expressions of the future or otherwise regarding
the outlook for Synovus’ future business and financial performance
and/or the performance of the banking industry and economy in general.
These forward-looking statements include, among others, our expectations
regarding deposits, loan growth and the net interest margin;
expectations on our growth strategy, expense initiatives, strategic
transactions, our brand initiatives, capital management and future
profitability; expectations on credit trends and key credit metrics; and
the assumptions underlying our expectations. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of
future performance and involve known and unknown risks and uncertainties
which may cause the actual results, performance or achievements of
Synovus to be materially different from the future results, performance
or achievements expressed or implied by such forward-looking statements.
Forward-looking statements are based on the information known to, and
current beliefs and expectations of, Synovus’ management and are subject
to significant risks and uncertainties. Actual results may differ
materially from those contemplated by such forward-looking statements. A
number of factors could cause actual results to differ materially from
those contemplated by the forward-looking statements in this press
release. Many of these factors are beyond Synovus’ ability to control or
predict.

These forward-looking statements are based upon information presently
known to Synovus’ management and are inherently subjective, uncertain
and subject to change due to any number of risks and uncertainties,
including, without limitation, the risks and other factors set forth in
Synovus’ filings with the Securities and Exchange Commission, including
its Annual Report on Form 10-K for the year ended December 31, 2016
under the captions “Cautionary Notice Regarding Forward-Looking
Statements” and “Risk Factors” and in Synovus’ quarterly reports on Form
10-Q and current reports on Form 8-K. We believe these forward-looking
statements are reasonable; however, undue reliance should not be placed
on any forward-looking statements, which are based on current
expectations and speak only as of the date that they are made. We do not
assume any obligation to update any forward-looking statements as a
result of new information, future developments or otherwise, except as
otherwise may be required by law.

Use of Non-GAAP Financial Measures

The measures average core transaction deposits; adjusted non-interest
income; adjusted non-interest expense; adjusted efficiency ratio;
tangible common equity ratio; and common equity Tier 1 (CET1) ratio
(fully phased-in) are not measures recognized under U.S. generally
accepted accounting principles (GAAP) and therefore are considered
non-GAAP financial measures. The most comparable GAAP measures are total
average deposits; total non-interest income; total non-interest expense;
efficiency ratio; return on average common equity and total
shareholders’ equity to total assets ratio, respectively.

Synovus believes that these non-GAAP financial measures provide
meaningful additional information about Synovus to assist management,
investors, and bank regulators in evaluating Synovus’ operating results,
financial strength and capitalization, and the performance of its
business and the strength of its capital position, but they have
inherent limitations as analytical tools and should not be considered in
isolation or as a substitute for analyses of results as reported under
GAAP. Average core transaction deposits are a measure used by management
to evaluate organic growth of deposits and the quality of deposits as a
funding source. Adjusted non-interest income is a measure utilized by
management to measure non-interest income exclusive of net investment
securities gains and decrease in fair value of private equity
investments, net. Adjusted non-interest expense and the adjusted
efficiency ratio are measures utilized by management to measure the
success of expense management initiatives focused on reducing recurring
controllable operating costs. The tangible common equity ratio and
common equity Tier 1 (CET1) ratio (fully phased-in) are used by
management and bank regulators to assess the strength of our capital
position. These non-GAAP financial measures should be considered as
additional views of the way our financial measures are affected by
significant items and other factors, and since they are not required to
be uniformly applied, they may not be comparable to other similarly
titled measures at other companies and should not be considered as
substitutes for total average deposits; total non-interest income; total
non-interest expense; efficiency ratio; return on average common equity
and total shareholders’ equity to total assets ratio determined in
accordance with GAAP and may not be comparable to other similarly titled
measures at other companies.

The computations of average core transaction deposits; adjusted
non-interest income; adjusted non-interest expense; adjusted efficiency
ratio; tangible common equity ratio; and common equity Tier 1 (CET1)
ratio (fully phased-in) and the reconciliation of these measures total
average deposits; total non-interest income; total non-interest expense;
efficiency ratio; return on average common equity; and total
shareholders’ equity to total assets ratio are set forth in the tables
below.

1 Consist of net interest income and non-interest income
excluding net investment securities gains.
2
Non-interest expense as a percentage of the sum of net interest income
(fully taxable equivalent basis) and non-interest income excluding net
investment securities gains/losses.
3 Consist of
non-interest bearing, NOW/Savings, and money market deposits excluding
SCMs and brokered deposits.
4 Include service charges on
deposit accounts, bankcard fees, letter of credit fees, ATM fee income,
line of credit non-usage fees, gains from sales of government guaranteed
loans, and miscellaneous other service charges.

 
 
 
 
Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

     

2Q17

 

 

1Q17

 

 

2Q16

 
 
Average Core Transaction Deposits
Total average deposits $ 24,991,708   24,918,855 23,608,027
Subtract: Average brokered deposits (1,379,559 ) (1,380,786 ) (1,337,001 )
Subtract: Average time deposits excluding average SCM time deposits (3,151,333 ) (3,151,888 ) (3,141,621 )
Subtract: Average state, county, and municipal (SCM) deposits   (2,051,646 )   (2,238,324 ) (2,280,038 )
Average core transaction deposits $ 18,409,170     18,147,857   16,849,367  
 
Adjusted Non-interest Income
Total non-interest income $ 68,701 71,839 67,886
Subtract/add: Investment securities gains (losses), net 1 (7,668 )
Subtract/add: (Decrease) increase in fair value of private equity
investments, net
  1,352     1,814   (113 )
Adjusted non-interest income $ 70,054     65,985   67,773  
 
Adjusted Non-interest Expense
Total non-interest expense $ 191,747 197,388 188,611
Subtract: Restructuring charges (13 ) (6,511 ) (5,841 )
Subtract: Fair value adjustment to Visa derivative (360 )
Subtract: Merger-related expense (86 )
Subtract: Amortization of intangibles   (292 )   (183 )  
 
Adjusted non-interest expense $ 191,442  

 

190,608   182,410  

 

Adjusted Efficiency Ratio
Adjusted non-interest expense $ 191,442 190,608 182,410
Net interest income 251,097 239,927 221,449
Add: Tax equivalent adjustment 298 309 329
Add: Total non-interest income 68,701 71,839 67,886
Subtract/add: Decrease (increase) in fair value of private equity
investments, net
1,352 1,814

(113

)

Subtract/add: Investment securities gains (losses), net   1     (7,668 )  
Total revenues $ 321,449

 

306,221 289,551
Adjusted efficiency ratio   59.56 %   62.25   63.00  
 
 

 

Reconciliation of Non-GAAP Financial Measures, continued

(dollars in thousands)

2Q17

1Q17

2Q16

 
 
Tangible common equity ratio
Total assets $ 30,687,966 30,679,589 29,459,691
Subtract: Goodwill (57,092 ) (57,010 ) (24,431 )
Subtract: Other intangible assets, net   (11,843 )   (12,137 ) (228 )
Tangible assets $ 30,619,031     30,610,442   29,435,032  
 
Total shareholders’ equity $ 2,997,947 2,962,127 2,951,659
Subtract: Goodwill (57,092 ) (57,010 ) (24,431 )
Subtract: Other intangible assets, net (11,843 ) (12,137 ) (288 )
Subtract: Series C Preferred Stock, no par value   (125,980 )   (125,980 ) (125,980 )
Tangible common equity $ 2,803,032     2,767,000   2,800,960  
Tangible common equity ratio 9.15 % 9.04 9.52
 

Common Equity Tier 1 (CET1) ratio (fully phased-in)

Common Equity Tier 1 (CET1) $ 2,733,823 2,672,649 2,615,939
Adjustment related to capital components   (31,913 )   (39,834 ) (114,751 )
CET1 (fully phased-in) $ 2,701,910     2,632,815   2,501,188  
Total risk-weighted assets (fully phased-in) $ 27,528,806 27,332,093 26,363,698
Common Equity Tier 1 (CET1) ratio (fully phased-in) 9.81 % 9.63 9.49
 
 
 
 
 

Synovus

INCOME STATEMENT DATA

     

 

(Unaudited)

Six Months Ended

(Dollars in thousands, except per share data) June 30,
     
2017     2016     Change
 
Interest income $ 557,911 501,716 11.2 %
Interest expense 66,887 62,073 7.8
       
 
Net interest income 491,024 439,643 11.7
Provision for loan losses 18,934 16,070 17.8
       
 
Net interest income after provision for loan losses 472,090 423,573 11.5
       
 
Non-interest income:
Service charges on deposit accounts 39,593 39,950 (0.9 )
Fiduciary and asset management fees 24,676 22,854 8.0
Brokerage revenue 14,436 13,821 4.4
Mortgage banking income 11,548 11,425 1.1
Bankcard fees 16,438 16,718 (1.7 )
Investment securities gains, net 7,667 67 nm
(Decrease) increase in fair value of private equity investments, net (3,166 ) (278 ) nm
Other fee income 11,033 10,084 9.4
Other non-interest income 18,314 16,392 11.7
       
 
Total non-interest income 140,539 131,033 7.3
       
 
 
Non-interest expense:
Salaries and other personnel expense 212,404 198,419 7.0
Net occupancy and equipment expense 59,264 53,360 11.1
Third-party processing expense 26,223 22,814 14.9
FDIC insurance and other regulatory fees 13,645 13,344 2.3
Professional fees 12,907 13,307 (3.0 )
Advertising expense 11,258 9,761 15.3
Foreclosed real estate expense, net 3,582 7,272 (50.7 )
Earnout liability adjustments 1,707 nm
Merger-related expense 86 nm
Amortization of intangibles 475 121 292.6
Fair value adjustment to Visa derivative 720 nm
Loss on early extinguishment of debt 4,735 nm
Litigation settlement expense 2,700 nm
Restructuring charges, net 6,524 6,981 (6.5 )
Other operating expenses   41,058   43,310   (5.2 )
 
Total non-interest expense 389,133 376,844 3.3
       
 
 
Income before income taxes 223,496 177,762 25.7
Income tax expense 75,635 64,773 16.8
 
       
Net income 147,861 112,989 30.9
 
Dividends on preferred stock   5,119   5,119    
 
 
Net income available to common shareholders $ 142,742   107,870   32.3 %
 
 
Net income per common share, basic $ 1.17 0.85 37.4 %
 
Net income per common share, diluted 1.16 0.85 36.5
 
Cash dividends declared per common share 0.30 0.24 25.0
 
Return on average assets 0.98 % 0.78

20

 bps

Return on average common equity 10.16 7.66 250
 
 
Weighted average common shares outstanding, basic 122,251 126,164 (3.1 )%
Weighted average common shares outstanding, diluted 123,042 126,778 (2.9 )
 

nm – not meaningful

bps – basis points

 
 
 
 
 

Synovus

INCOME STATEMENT DATA
(Unaudited)
(In thousands, except per share data)       2017     2016     2nd Quarter
Second     First     Fourth     Third     Second     ’17 vs. ’16
Quarter     Quarter     Quarter     Quarter     Quarter     Change
 
Interest income $ 285,510 272,401 264,534 256,554 252,393 13.1 %
Interest expense   34,413   32,474   31,004   30,547   30,944 11.2  
 
 
Net interest income 251,097 239,927 233,530 226,007 221,449 13.4
Provision for loan losses   10,260   8,674   6,259   5,671   6,693 53.3  
 
 
Net interest income after provision for loan losses   240,837   231,253   227,271     220,336     214,756 12.1  
 
 
Non-interest income:
Service charges on deposit accounts 19,820 19,774 20,653 20,822 20,240 (2.1 )
Fiduciary and asset management fees 12,524 12,151 11,903 11,837 11,580 8.2
Brokerage revenue 7,210 7,226 7,009 6,199 7,338 (1.7 )
Mortgage banking income 5,784 5,766 5,504 7,329 5,941 (2.6 )
Bankcard fees 8,253 8,185 8,330 8,269 8,346 (1.1 )
Investment securities gains (losses), net (1 ) 7,668 5,885 59

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