Synovus Financial Corp. (NYSE: SNV) today reported financial results for the quarter ended June 30, 2022. "We are pleased with our second quarter results and financial metrics, which reflect the efforts of our team to expand client relationships and attract new business," said Synovus President and CEO Kevin Blair. "Revenues of $523 million, up 7 percent year-over-year, were driven by our fourth consecutive quarter of annualized double-digit loan growth, excluding PPP, and 22 basis points of margin expansion during the quarter. Our ongoing focus on growing core operating deposit relationships led to another quarter of account growth, as well as non-interest bearing deposit growth of $254 million. We also acknowledge the strength of our client base, with credit metrics at historically low levels and average operating liquidity up more than 40 percent on average compared to pre-pandemic levels. Despite the increasing uncertainty presented by economic risks, we have continued to prudently invest in our core businesses as well as new business initiatives, which will serve as ongoing sources of growth. I am confident in our ability to guide both our company and clients through the present environment while building an even stronger bank for the future."

Second Quarter 2022 Highlights

• Net income available to common shareholders of $169.8 million, or $1.16 per diluted share, up $0.05 sequentially and down $0.03 compared to prior year.

  • Adjusted diluted EPS of $1.17, up $0.09 sequentially and down $0.03 compared to prior year. Year-over-year decline was primarily due to prior year benefit from reversal of provision for credit losses.

• Total revenue of $522.7 million increased $33.7 million, or 7%, compared to prior year.

  • Total revenue, excluding Paycheck Protection program (PPP) fees, of $519.0 million increased $50.4 million, or 11%, compared to prior year.

• Period-end loans increased $1.04 billion sequentially, and $1.15 billion, or 12% annualized, excluding PPP loans.

• Credit quality metrics remain at historically low levels with sequential improvement in the NPA, NPL, and criticized/classified loans ratios.

Second Quarter Summary

Balance Sheet

• Total loans ended the quarter at $41.20 billion, up $1.04 billion sequentially, and $1.15 billion, or 12% annualized, excluding PPP loans.

• Commercial and industrial (C&I) loans increased $426.0 million sequentially, led by broad based growth within our Wholesale Banking segment, partially offset by declines in PPP loan balances of $116.2 million.

• CRE loans increased $358.1 million sequentially, led by multi-family loans in addition to our Specialty Healthcare group.

• Consumer loans increased $251.5 million sequentially across multiple products including home equity and mortgage.

• Total deposits ended the quarter at $49.03 billion, up $378.5 million sequentially, impacted by seasonal effects and rate-driven outflows of $803.9 million and $358.3 million, respectively, in money-market and interest-bearing demand deposit accounts and offset by the use of brokered deposits as a cost-effective balance sheet and liquidity management tool.

  • Total non-interest-bearing deposits are now 35% of core deposits (total deposits excluding brokered deposits).

• Total deposit costs increased 4 bps sequentially to 0.15% and were impacted by the rising rate environment.

Core Performance

• Net interest income of $425.4 million was up $33.1 million sequentially and increased $43.5 million, or 11%, compared to prior year, driven by strong loan growth and higher rates.

  • PPP fees of $3.7 million, down $3.2 million sequentially and down $16.7 million year-over-year.

  • Net interest margin was 3.22%, up 22 bps sequentially, aided by higher interest rates, lower cash balances, and slower deposit repricing.

• Non-interest revenue decreased $8.1 million, or 8%, sequentially and decreased $9.8 million, or 9%, compared to prior year.

  • Quarter-over-quarter and year-over-year declines were primarily related to a $7 million write-down on a minority fintech investment and a challenging mortgage banking environment, partially offset by increases in wealth revenue, capital markets, and card fee income categories.

• Non-interest expense increased $9.6 million, or 4%, sequentially and increased $11.5 million, or 4%, compared to prior year. Adjusted non-interest expense increased $4.1 million, or 1%, sequentially and increased $15.4 million, or 6%, compared to prior year.

  • Year-over-year increase was primarily due to incentives and costs associated with elevated performance, merit increases, new business initiatives, and infrastructure investments.

• Credit quality ratios remain near historical lows. Both the non-performing loan and asset ratios improved to 0.26% and 0.33%, respectively; the net charge-off ratio for the quarter was 0.16%, and total past dues were 0.14% of total loans outstanding.

• Provision for credit losses of $12.7 million increased $1.3 million sequentially; allowance for credit losses coverage ratio (to loans) of 1.11% declined 4 bps sequentially. Drivers of the decline included our strong credit performance, including reduction of NPLs, and quality and mix of new originations, offset by an uncertain and generally negative economic outlook.

• The effective tax rate was 21.88% for the quarter.

Capital

• Preliminary CET1 ratio declined 3 bps during the quarter to 9.46%, and the preliminary total risk-based capital ratio of 12.43% declined 13 bps from the previous quarter as capital generated through earnings helped offset the impact of loan growth.