Synovus Financial Corp. today reported financial results for the quarter ended March 31, 2022. “Performance during the first quarter reflects strong execution against our profitable growth objectives, evidenced by 11 percent annualized loan growth and adjusted pre-provision net revenue of $213 million, up 9% year-over-year,” said Synovus President and CEO Kevin Blair. “In a rapidly changing landscape that presented new challenges, our team excelled, enabling an increase in our financial expectations for 2022. Leveraging the strength of our core franchise while leaning into our solid, transformational growth plan, we will enhance performance throughout the year while proactively pursuing new and expanded sources of revenue. I remain confident in the strength and capabilities of our team and our ability to achieve sustainable top quartile performance.”

First Quarter 2022 Highlights

• Net income available to common shareholders of $162.7 million, or $1.11 per diluted share, down $0.20 sequentially and down $0.08 compared to prior year.
  • Adjusted diluted EPS of $1.08, down $0.27 sequentially and down $0.13 compared to prior year. Year-over-year decline was primarily due to increased provision for credit losses.
• Period-end loans increased $857.2 million sequentially, and $1.05 billion, or 11.0% annualized, excluding Paycheck Protection program (PPP) loans.
• Core transaction deposits (non-interest bearing, NOW/savings, and money market deposits excluding public and brokered funds) increased $405.0 million sequentially, or 4% annualized, largely due to growth in non-interest bearing and savings deposits.
  • Total deposit costs of 0.11% down 1 bp sequentially primarily due to mix optimization.
• Pre-provision net revenue of $225.1 million increased $7.5 million, or 3%, compared to prior year.
  • Adjusted pre-provision net revenue of $213.4 million increased $17.3 million, or 9%, compared to prior year driven primarily by growth in net interest income excluding PPP fees of over $36 million, or 10%.

First Quarter Summary

Balance Sheet

• Total loans ended the quarter at $40.17 billion, up $857.2 million sequentially, and $1.05 billion, or 11.0% annualized, excluding PPP loans.
• Commercial and industrial (C&I) loans increased $729.4 million sequentially, led by broad based growth within our Wholesale Banking segment, partially offset by declines in PPP loan balances of $196.7 million.
• CRE loans increased $130.2 million, with payoff activity down from elevated levels seen in the second half of 2021.
• Consumer loans decreased $2.4 million sequentially.

• Total deposits ended the quarter at $48.66 billion, down $771.0 million sequentially.
• Core transaction deposits increased $405.0 million sequentially, or 4% annualized.
  • Growth of $283.8 million in non-interest bearing deposits and $72.3 million in savings deposits.
• Total deposit costs declined 1 bp sequentially to 0.11% due to mix optimization.

Core Performance

• Net interest income of $392.2 million was flat sequentially, despite lower day count and PPP fees, and increased $18.4 million, or 5%, compared to prior year.
  • Net PPP fee accretion of $6.9 million, down $5.8 million sequentially and down $18.0 million year-over-year.
  • Net interest margin was 3.00%, up 4 bps sequentially, aided by efficient balance sheet management.
• Non-interest revenue decreased $11.7 million, or 10%, sequentially and decreased $5.6 million, or 5%, compared to prior year. Adjusted non-interest revenue decreased $9.2 million, or 8%, sequentially and decreased $5.5 million, or 5%, compared to prior year.
  • Quarter-over-quarter decline was primarily related to an $8 million BOLI benefit in the previous quarter.
  • Year-over-year decline was primarily due to lower mortgage banking income resulting from increasing mortgage rates and lower refinancing volumes.
• Non-interest expense decreased $22.8 million, or 8%, sequentially and increased $5.3 million, or 2%, compared to prior year. Adjusted non-interest expense decreased $6.1 million, or 2%, sequentially and increased $13.7 million, or 5%, compared to prior year.
  • Quarter-over-quarter decline was a result of prudent expense management and the normalization of expense from an unusually high fourth quarter of 2021.
  • Year-over-year increase was primarily due to incentives and costs associated with elevated performance.
• Credit quality ratios remain strong and near historical lows. The net charge-off ratio for the quarter was 0.19%; both the non-performing loan and asset ratios remained flat at 0.33% and 0.40%, respectively; and total past dues were 0.11% of total loans outstanding.
• Provision for credit losses of $11.4 million compared to a reversal of provision for credit losses of $55.2 million for the fourth quarter of 2021; allowance for credit losses coverage ratio (to loans) of 1.15%, a decline of 4 bps sequentially. Drivers of the decline included positive trends in our credit performance and loan mix mostly offset by economic uncertainty which slowed the pace of the allowance decline this quarter.
• The effective tax rate was 19.98% for the quarter.

Capital

• Preliminary CET1 ratio declined 3 bps during the quarter to 9.47%, and the preliminary total risk-based capital ratio of 12.53% declined 8 bps from the previous quarter as capital generated through earnings helped offset the impact of loan growth and a $0.34 dividend for common shareholders.

First Quarter Earnings Conference Call

Synovus will host an earnings highlights conference call at 8:30 a.m. EDT on April 21, 2022. 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.