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Synovus Announces Earnings for the Second Quarter 2021

Staff Report

Tuesday, July 20th, 2021

Synovus Financial Corp. today reported financial results for the quarter ended June 30, 2021.

Second Quarter 2021 Highlights

  • Net income available to common shareholders of $177.9 million or $1.19 per diluted share, unchanged sequentially and up $0.62 compared to prior year.

    • Adjusted diluted EPS of $1.20, down $0.01 sequentially and up $0.97 compared to prior year.

  • Period-end loans decreased $569.1 million or 1% sequentially.

    • Paycheck Protection Program (PPP) loans declined $763.4 million and third-party consumer loan balances increased $272.5 million sequentially.

  • Core transaction deposits (non-interest bearing, NOW/savings, and money market deposits excluding public and brokered funds) increased $702.4 million or 2% sequentially.

  • Total deposit costs of 0.16% down 6 bps sequentially due to ongoing repricing and product remixing.

  • Net interest income of $381.9 million increased $8.0 million sequentially as asset growth, reduced deposit costs, and a higher day count more than offset the reduction in PPP fee income.

    • Net interest margin of 3.02%, down 2 bps sequentially.

  • Non-interest revenue decreased $3.9 million sequentially as broad-based growth partially offset the normalization of net mortgage revenues.

    • Adjusted non-interest revenue decreased $6.2 million.

  • Non-interest expense increased $3.4 million sequentially and decreased $13.6 million compared to prior year.

    • Adjusted non-interest expense increased $2.4 million sequentially as the benefits from various efficiency initiatives were offset by higher commissions, incentives, and expenses primarily related to additional PPP forgiveness and expenses associated with higher third-party consumer loan balances.

  • Reversal of provision for credit losses of $24.6 million, primarily from a more favorable economic outlook.

    • Allowance for credit losses coverage ratio (to loans) of 1.47%, or 1.54% excluding PPP loans.

  • Credit quality metrics remain relatively stable, near historical lows. The non-performing asset ratio fell 4 bps to 0.46% sequentially; criticized and classified loans declined 14% compared to prior quarter.

  • Preliminary CET1 ratio increased 1 bp sequentially to 9.75%, with strong core earnings helping offset the decline from $92.5 million in share repurchases at an average price of $47.51, reducing average diluted outstanding shares from the prior quarter by 1.3%.

Second Quarter Summary

 
Reported

 
Adjusted
(dollars in thousands)
2Q21

 
1Q21

 
2Q20

 
2Q21

 
1Q21

 
2Q20
Net income available to common shareholders
$
177,909

 

 
$
178,802

 

 
$
84,901

 

 
$
178,969

 

 
$
180,685

 

 
$
34,015

 
Diluted earnings per share
1.19

 

 
1.19

 

 
0.57

 

 
1.20

 

 
1.21

 

 
0.23

 
Total loans
38,236,018

 

 
38,805,101

 

 
39,914,297

 

 
N/A

 

 
N/A

 

 
N/A

 
Total deposits
47,171,962

 

 
47,368,951

 

 
44,194,580

 

 
N/A

 

 
N/A

 

 
N/A

 
Total FTE revenue
489,738

 

 
485,587

 

 
550,911

 

 
488,612

 

 
486,785

 

 
470,659

 
Return on avg assets
1.36
%

 
1.40
%

 
0.71
%

 
1.37
%

 
1.41
%

 
0.32
%
Return on avg common equity
15.40

 

 
15.77

 

 
7.48

 

 
15.50

 

 
15.93

 

 
3.00

 
Return on avg tangible common equity
17.41

 

 
17.85

 

 
8.69

 

 
17.52

 

 
18.04

 

 
3.60

 
Net interest margin
3.02

 

 
3.04

 

 
3.13

 

 
N/A

 

 
N/A

 

 
N/A

 
Efficiency ratio
55.24

 

 
55.01

 

 
51.58

 

 
54.41

 

 
54.12

 

 
57.71

 
NCO ratio
0.28

 

 
0.21

 

 
0.24

 

 
N/A

 

 
N/A

 

 
N/A

 
NPA ratio
0.46

 

 
0.50

 

 
0.44

 

 
N/A

 

 
N/A

 

 
N/A

 

“Our Synovus team delivered solid financial performance in the second quarter while continuing to position the company for long-term success,” said Kevin Blair, Synovus President and CEO. “Revenue growth in the quarter was largely driven by an $8 million increase in net interest income resulting from earning asset growth. The credit outlook continued to improve, with a 14% reduction in criticized and classified loans and another quarter of reserve release. And we remained focused on growth drivers in the quarter while maintaining discipline around expenses, which declined 5% from the second quarter of 2020.

“We are delivering on Synovus Forward, with $75 million in pre-tax benefits to date, and we continue to strengthen our competitive position by investing in specialized talent, technology and solutions, and by taking advantage of our economically vibrant Southeast footprint,” Blair said. “We expect our efforts to produce sustained profitable growth, positive operating leverage, and higher returns as we progress toward becoming a top quartile performing bank.”

Balance Sheet

Loans*

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 
(dollars in millions)
  
2Q21

 
1Q21

 
Linked 
Quarter 
Change

 
Linked 
Quarter % 
Change

 
2Q20

 
Year/Year 
Change

 
Year/Year
% Change
Commercial & industrial
  
$
19,150.1

 

 
$
19,693.8

 

 
$
(543.7
)

 
(3
)%

 
$
20,031.6

 

 
$
(881.5
)

 

 
(4
)%
Commercial real estate
  
10,361.1

 

 
10,533.9

 

 
(172.9
)

 
(2
)

 
10,614.2

 

 
(253.1
)

 

 
(2
)
Consumer
  
8,724.8

 

 
8,577.3

 

 
147.5

 

 
2

 

 
9,268.5

 

 
(543.6
)

 

 
(6
)
Total loans
  
$
38,236.0

 

 
$
38,805.1

 

 
$
(569.1
)

 
(1
)%

 
$
39,914.3

 

 
$
(1,678.2
)

 

 
(4
)%
                                                       
*Amounts may not total due to rounding

  • Total loans ended the quarter at $38.24 billion, down $569.1 million or 1% sequentially.

  • Commercial and industrial (C&I) loans declined $543.7 million sequentially, led by a decline in PPP loan balances of $763.4 million.

    • PPP forgiveness of $927 million partially offset by additional fundings of $149 million.

    • C&I line utilization remains near historic lows at ~40%.

  • CRE loans declined $172.9 million as the recovery in commercial real estate continues.

  • Consumer loans increased $147.5 million sequentially, with growth of $273.5 million in third-party consumer lending offsetting declines in consumer mortgages and HELOCs of $98.4 million and $74.2 million, respectively.

Deposits*

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(dollars in millions)
2Q21

 
1Q21

 
Linked 
Quarter 
Change

 
Linked 
Quarter % 
Change

 
2Q20

 
Year/Year
Change

 
Year/Year
% Change
Non-interest-bearing DDA
$
14,342.6

 

 
$
13,742.1

 

 
$
600.5

 

 
4
%

 
$
11,830.7

 

 
$
2,511.9

 

 
21
%
Interest-bearing DDA
5,839.8

 

 
5,841.7

 

 
(1.9
)

 
—

 

 
5,057.2

 

 
782.6

 

 
15

 
Money market
13,983.1

 

 
13,943.7

 

 
39.4

 

 
—

 

 
11,457.2

 

 
2,525.9

 

 
22

 
Savings
1,341.5

 

 
1,277.0

 

 
64.4

 

 
5

 

 
1,080.1

 

 
261.3

 

 
24

 
Public funds
5,804.9

 

 
6,154.9

 

 
(350.0
)

 
(6
)

 
5,347.4

 

 
457.6

 

 
9

 
Time deposits
2,891.1

 

 
3,214.8

 

 
(323.6
)

 
(10
)

 
5,131.7

 

 
(2,240.6
)

 
(44
)
Brokered deposits
2,969.0

 

 
3,194.7

 

 
(225.7
)

 
(7
)

 
4,290.3

 

 
(1,321.3
)

 
(31
)
Total deposits
$
47,172.0

 

 
$
47,369.0

 

 
$
(197.0
)

 
—
%

 
$
44,194.6

 

 
$
2,977.4

 

 
7
%
                                                   
*Amounts may not total due to rounding

  • Total deposits ended the quarter at $47.17 billion, down $197.0 million sequentially.

  • Core transaction deposits increased $702.4 million or 2% sequentially.

  • Total deposit costs declined 6 bps sequentially to 0.16%.

Income Statement Summary**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(in thousands, except per share data)
2Q21

 
1Q21

 
Linked 
Quarter
Change

 
Linked 
Quarter % 
Change

 
2Q20

 
Year/Year
Change

 
Year/Year
% Change
Net interest income
$
381,860

 

 
$
373,857

 

 
$
8,003

 

 
2
%

 
$
376,566

 

 
$
5,294

 

 
1
%
Non-interest revenue
107,087

 

 
110,956

 

 
(3,869
)

 
(3
)

 
173,484

 

 
(66,397
)

 
(38
)
Non-interest expense
270,531

 

 
267,134

 

 
3,397

 

 
1

 

 
284,141

 

 
(13,610
)

 
(5
)
(Reversal of) provision for credit losses
(24,598
)

 
(18,575
)

 
(6,023
)

 
(32
)

 
141,851

 

 
(166,449
)

 
nm

 
Income before taxes
$
243,014

 

 
$
236,254

 

 
$
6,760

 

 
3
%

 
$
124,058

 

 
$
118,956

 

 
96
%
Income tax expense
56,814

 

 
49,161

 

 
7,653

 

 
16

 

 
30,866

 

 
25,948

 

 
84

 
Preferred stock dividends
8,291

 

 
8,291

 

 
—

 

 
—

 

 
8,291

 

 
—

 

 
—

 
Net income available to common shareholders
$
177,909

 

 
$
178,802

 

 
$
(893
)

 
—
%

 
$
84,901

 

 
$
93,008

 

 
110
%
Weighted average common shares outstanding, diluted
149,747

 

 
149,780

 

 
(33
)

 
—
%

 
147,733

 

 
2,014

 

 
1
%
Diluted earnings per share
$
1.19

 

 
$
1.19

 

 
$
—

 

 
—

 

 
$
0.57

 

 
$
0.62

 

 
109

 
Adjusted diluted earnings per share
1.20

 

 
1.21

 

 
(0.01
)

 
(1
)

 
0.23

 

 
0.97

 

 
421

 
                                         
** Amounts may not total due to rounding

Core Performance

  • Net interest income of $381.9 million increased $8.0 million sequentially as asset growth, reduced deposit costs, and a higher day count more than offset the reduction in PPP fee income.

    • Net PPP fee accretion of $20.4 million, down $4.5 million sequentially.

    • Net interest margin was 3.02%, down 2 bps sequentially.

  • Non-interest revenue decreased $3.9 million, or 3% sequentially. Adjusted non-interest revenue decreased $6.2 million, or 6% sequentially, and increased $12.7 million, or 14% compared to prior year.

    • Broad-based growth helped partially offset normalization of net mortgage revenue, which declined $8.5 million sequentially.

  • Non-interest expense increased $3.4 million, or 1% sequentially. Adjusted non-interest expense increased $2.4 million, or 1% sequentially.

    • The benefits from various efficiency initiatives were offset by higher commissions, incentives, and expenses primarily related to additional PPP forgiveness and expenses associated with higher third-party consumer loan balances.

  • Reversal of provision for credit losses of $24.6 million supported by a more positive economic outlook and 14% reduction in criticized and classified loans; allowance for credit losses coverage ratio (to loans) of 1.47%, or 1.54% excluding PPP loans.

  • Tax expense was $56.8 million, an increase of $7.7 million driven by higher taxable income and unfavorable change in discrete items.

    • Year-to-date effective tax rate of 22.56% before discrete items.

Capital Ratios

 

 

 

 

 

 

 

 
2Q21

 
1Q21

 
2Q20
Common equity Tier 1 capital (CET1) ratio
9.75
%
*
9.74
%

 
8.90
%
Tier 1 capital ratio
10.99

 
*
10.99

 

 
10.15

 
Total risk-based capital ratio
13.25

 
*
13.34

 

 
12.70

 
Tier 1 leverage ratio
8.72

 
*
8.80

 

 
8.38

 
Tangible common equity ratio
7.73

 

 
7.55

 

 
7.41

 
                 
* Ratios are preliminary.

Capital

  • Preliminary CET1 ratio improved 1 bp during the quarter to 9.75% as strong core performance helped offset the impact of $92.5 million in share repurchases at an average price of $47.51, reducing average diluted outstanding shares from the prior quarter by 1.3%.

  • Total risk-based capital ratio of 13.25% declined 9 bps from the prior quarter following a reduction in the ACL.