Synovus Financial Corp. today reported financial results for the quarter ended Sept. 30, 2022. “We demonstrated ongoing progress this quarter as we continue to execute our strategic growth plan,” said Synovus President and CEO Kevin Blair. “Our strong third quarter performance is a result of increased productivity, deepened, more profitable client relationships as well as prudent expense management. Pre-provision net revenue of $288 million, up 24% year over year, was driven by broad-based loan growth and robust margin expansion. Credit quality was solid in the third quarter, and capital remained at targeted levels as we continued to utilize our strong earnings to support client loan growth. We are confident in and committed to our path forward by investing in our core and new business initiatives while prioritizing credit, capital and liquidity management as we face economic uncertainty ahead.”

Third Quarter 2022 Highlights

• Net income available to common shareholders of $194.8 million, or $1.33 per diluted share, up $0.17 sequentially and up $0.12 compared to prior year.

• Total revenue of $582.2 million increased $59.6 million sequentially, or 11%, and increased $82.3 million, or 16%, compared to prior year, driven by strong loan growth and higher interest rates.

• Pre-provision net revenue of $288.2 million increased $47.6 million sequentially, or 20%, and increased $55.4 million, or 24%, compared to prior year.

• Period-end loans increased $1.37 billion sequentially, or 13% annualized, with growth diversified across asset classes and commercial business lines.

• Total deposits declined $1.34 billion sequentially, or 3%, primarily resulting from higher-rate, non-bank liquidity alternatives for clients, seasonality, and excess liquidity deployment.

• Credit quality metrics continue to remain at strong levels with sequential improvement in the NPA ratio, stable NPL and criticized/classified loan ratios, and a historically low net charge-off ratio.

• Maintained preliminary CET1 ratio of 9.51% as robust capital generation continued to support client loan growth.

Third Quarter Summary

Balance Sheet

• Total loans ended the quarter at $42.57 billion, up $1.37 billion sequentially, or 13% annualized.

• Commercial and industrial (C&I) loans increased $434.2 million sequentially, led by broad based growth within our Wholesale Banking segment and higher utilization from commitments.

• CRE loans increased $784.5 million sequentially, led by growth in multi-family loans and our Specialty Healthcare group in addition to the impact of a slowdown in payoffs.

• Consumer loans increased $147.9 million sequentially led by home equity and mortgage.

• Total deposits ended the quarter at $47.70 billion, down $1.34 billion sequentially, impacted by higher-rate, non-bank liquidity alternatives for clients, seasonality, and excess liquidity deployment.

• Total deposit costs increased 23 bps sequentially to 0.38% and were primarily impacted by the rising rate environment.

Core Performance

• Net interest income of $477.9 million was up $52.5 million sequentially, or 12%, and increased $93.0 million, or 24%, compared to prior year, driven by strong loan growth and higher rates.

  • Net interest margin was 3.49%, up 27 bps sequentially, aided by higher interest rates and deposit pricing discipline.

• Non-interest revenue increased $7.0 million, or 7%, sequentially and decreased $10.7 million, or 9%, compared to prior year.

  • The quarter-over-quarter increase was largely due to a prior quarter $7 million write-down on a minority fintech investment.

  • Year-over-year decline was primarily related to the continued challenging residential mortgage banking environment and prior year gains on equity investments, partially offset by increases in wealth revenue, brokerage revenue, and card fee income categories.

• Non-interest expense increased $12.0 million, or 4%, sequentially and increased $27.0 million, or 10%, compared to prior year. Adjusted non-interest expense increased $10.5 million, or 4%, sequentially and increased $27.1 million, or 10%, compared to prior year.

  • Increases were primarily due to higher performance-based incentives, merit-related salary increases, and operating costs related to realized revenue growth and investments in new growth initiatives.

• Credit quality ratios remain historically strong. The non-performing loan and asset ratios were 0.29% and 0.32%, respectively; the net charge-off ratio for the quarter was 0.04%, and total past dues were 0.15% of total loans outstanding.

• Provision for credit losses of $25.6 million increased $12.9 million sequentially and increased $33.4 million compared to prior year. Drivers of the increase included loan growth and a modest increase in the allowance for credit losses coverage ratio (to loans) of 2 bps sequentially, a result of deteriorating economic conditions mostly offset by continued strong credit quality.

Capital

• Preliminary CET1 ratio improved 5 bps during the quarter to 9.51%, and the preliminary total risk-based capital ratio of 12.44% improved 1 bps from the previous quarter as capital generated through earnings helped offset the impact of loan growth.