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

Third Quarter 2021 Highlights

• Net income available to common shareholders of $178.5 million or $1.21 per diluted share, up $0.02 sequentially and up $0.65 compared to prior year.

  • Adjusted diluted EPS of $1.20, unchanged sequentially and up $0.31 compared to prior year.

• Period-end loans increased $105.0 million sequentially, or $922.7 million excluding Paycheck Protection program (PPP) loans.

  • PPP loans declined $817.7 million sequentially.

• Core transaction deposits (non-interest bearing, NOW/savings, and money market deposits excluding public and brokered funds) increased $1.03 billion or 3% sequentially.

• Total deposit costs of 0.13% down 3 bps sequentially due to ongoing repricing and product remixing.

• Net interest income of $384.9 million increased $3.1 million sequentially as asset growth, reduced deposit costs, and a higher day count more than offset continued fixed-rate repricing and the slight reduction in LIBOR.

  • Net interest margin of 3.01%, down 1 bp sequentially.

• Non-interest revenue increased $7.9 million as broad-based growth helped to offset continued normalization of net mortgage revenue.

  • Adjusted non-interest revenue increased $8.1 million.

• Non-interest expense decreased $3.5 million sequentially as reductions in third-party processing and other services offset increases in other areas such as net occupancy, equipment, and software expense.

  • Adjusted non-interest expense decreased $1.2 million sequentially.

• Pre-provision net revenue of $232.8 million increased $14.4 million sequentially as total revenue increased $10.9 million and non-interest expense decreased $3.5 million.

• Reversal of provision for credit losses of $7.9 million, primarily from a more favorable economic outlook.

  • Allowance for credit losses coverage ratio (to loans) of 1.40%, or 1.42% excluding PPP loans.

• Credit quality metrics remain relatively stable, near historical lows. The net charge-off ratio declined 6 bps from prior quarter to 0.22%; the non-performing loan and asset ratios each fell 1 bp to 0.41% and 0.45%, respectively; and criticized and classified loans declined 22%.

• Preliminary CET1 ratio declined 12 bps sequentially to 9.63%, with strong core earnings helping offset the decline from deploying capital for balance sheet growth and returning capital to shareholders.

  • Includes $74.6 million in share repurchases at an average price of $42.00.

• Achieved pre-tax run rate benefit of approximately $100 million at the end of the quarter from a combination of revenue and expense initiatives under Synovus Forward, which is designed to make Synovus a more efficient, profitable, and nimble organization.

  • On track to achieve an aggregate $175 million pre-tax run rate benefit by the end of 2022.

Third Quarter Summary

“Our third quarter story was shaped by an intense focus on growth, and we are pleased with the results,” said Kevin Blair, Synovus president and CEO. “Loans, excluding PPP, grew $923 million, core transaction deposits were up $1.0 billion, and pre-provision net revenue increased 7 percent versus the second quarter. Our ongoing Synovus Forward initiatives reached a pre-tax run rate benefit of $100 million by quarter end and we are executing on an additional $75 million of benefits to be delivered by the end of 2022. Synovus Forward represents our ongoing innovation and profitable growth mindset, guiding our efforts to deliver sustainable, top quartile financial performance and enabling us to invest in areas with long-term benefit. With these strategic investments, combined with the momentum we are experiencing in our core businesses, our team is confident in our ability to continue to deliver as we build the bank of the future.”

Balance Sheet

• Total loans ended the quarter at $38.34 billion, up $105.0 million sequentially, or $922.7 million excluding PPP loans.

• Commercial and industrial (C&I) loans declined $215.3 million sequentially, led by a decline in PPP loan balances of $817.7 million.

  • C&I loan growth of $602.3 million excluding PPP balance changes despite line utilization remaining near historic lows at 39%.

• CRE loans increased $179.2 million, primarily in the income-producing real estate portfolio.

• Consumer loans increased $141.1 million sequentially, with growth of $266.5 million in third-party consumer lending offsetting declines in consumer mortgages and HELOCs of $92.3 million and $50.0 million, respectively.

• Total deposits ended the quarter at $47.69 billion, up $516.5 million sequentially.

• Core transaction deposits increased $1.03 billion or 3% sequentially.

  • Broad-based growth in DDA, NOW, MMA, and savings accounts supported strategic declines in higher cost deposits.

• Total deposit costs declined 3 bps sequentially to 0.13%.

Core Performance

• Net interest income of $384.9 million increased $3.1 million sequentially as asset growth and reduced deposit costs more than offset continued fixed-rate repricing and the slight reduction in LIBOR.

  • Net PPP fee accretion of $21.3 million, up $0.9 million sequentially.

  • Net interest margin was 3.01%, down 1 bp sequentially.

• Non-interest revenue increased $7.9 million, or 7% sequentially. Adjusted non-interest revenue increased $8.1 million, or 8% sequentially, and decreased $0.8 million, or 1% compared to prior year.

  • Broad-based growth including $4.8 million in capital markets income helped offset normalization of net mortgage revenue, which declined $2.7 million sequentially.

• Non-interest expense decreased $3.5 million, or 1% sequentially. Adjusted non-interest expense decreased $1.2 million sequentially.

  • Declines in third-party processing and other services of $5.0 million offset an increase in additional project spend that contributed to the $1.7 million increase in net occupancy, equipment, and software expense.

• Pre-provision net revenue of $232.8 million increased $14.4 million sequentially as total revenue increased $10.9 million and non-interest expense decreased $3.5 million.

• Reversal of provision for credit losses of $7.9 million from the provision expense associated with strong loan growth being more than offset by a reduction in life of loan loss estimates; allowance for credit losses coverage ratio (to loans) of 1.40%, or 1.42% excluding PPP loans.

• Tax expense was $53.9 million, a decrease of $2.9 million sequentially due to lower taxable income and favorable changes in discrete items.

  • Year-to-date effective tax rate of 22.21%.

Capital

• Preliminary CET1 ratio declined 12 bps during the quarter to 9.63% as strong core performance helped offset the impact of asset growth and $74.6 million in share repurchases at an average price of $42.00.

• Total risk-based capital ratio of 12.96% declined 29 bps from the prior quarter following a reduction in the Allowance for Credit Losses.