Synovus Announces Earnings for the Second Quarter 2023
Thursday, July 20th, 2023
Second Quarter 2023 Highlights
- Total revenue of $567.8 million increased $45.2 million, or 9%, compared to the second quarter 2022, driven by net interest income growth of 7%, in addition to growth in core client fee income, excluding mortgage, of 7% year-over-year.
- Pre-provision net revenue of $260.6 million increased $20.0 million, or 8%, compared to the second quarter 2022.
- Period-end loans increased $308.6 million sequentially, primarily driven by fundings of existing CRE commitments and growth in consumer loans, somewhat offset by lower utilization from C&I commitments.
- Total deposits increased $126.5 million sequentially and included remixing due to the rate environment.
- Credit quality metrics at solid levels with a net charge-off ratio of 0.24%, a modest increase in the ACL ratio to 1.19%, and broader stable performance across the loan portfolio, asset types, and industries.
- Preliminary CET1 ratio of 9.85% increased 8 bps sequentially as capital generation continued to support client loan growth while also buffering capital levels given economic uncertainty.
Second Quarter Summary
|
|
Reported |
|
Adjusted |
||||||||||||||||||||
|
(dollars in thousands) |
|
2Q23 |
|
|
|
1Q23 |
|
|
|
2Q22 |
|
|
|
2Q23 |
|
|
|
1Q23 |
|
|
|
2Q22 |
|
|
Net income available to common shareholders |
$ |
165,819 |
|
|
$ |
193,868 |
|
|
$ |
169,761 |
|
|
$ |
169,526 |
|
|
$ |
195,276 |
|
|
$ |
171,018 |
|
|
Diluted earnings per share |
|
1.13 |
|
|
|
1.32 |
|
|
|
1.16 |
|
|
|
1.16 |
|
|
|
1.33 |
|
|
|
1.17 |
|
|
Total revenue |
|
567,807 |
|
|
|
613,877 |
|
|
|
522,654 |
|
|
|
567,347 |
|
|
|
599,469 |
|
|
|
526,854 |
|
|
Total loans |
|
44,353,537 |
|
|
|
44,044,939 |
|
|
|
41,204,780 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
Total deposits |
|
50,080,392 |
|
|
|
49,953,936 |
|
|
|
49,034,700 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
Return on avg assets |
|
1.15 |
% |
|
|
1.36 |
% |
|
|
1.26 |
% |
|
|
1.18 |
% |
|
|
1.37 |
% |
|
|
1.27 |
% |
|
Return on avg common equity |
|
15.5 |
|
|
|
19.2 |
|
|
|
16.5 |
|
|
|
15.8 |
|
|
|
19.4 |
|
|
|
16.6 |
|
|
Return on avg tangible common equity |
|
17.7 |
|
|
|
21.9 |
|
|
|
18.8 |
|
|
|
18.1 |
|
|
|
22.1 |
|
|
|
19.0 |
|
|
Net interest margin |
|
3.20 |
|
|
|
3.43 |
|
|
|
3.22 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
Efficiency ratio-TE(1)(2) |
|
53.99 |
|
|
|
52.33 |
|
|
|
53.87 |
|
|
|
52.57 |
|
|
|
50.48 |
|
|
|
53.43 |
|
|
NCO ratio-QTD |
|
0.24 |
|
|
|
0.17 |
|
|
|
0.16 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
NPA ratio |
|
0.59 |
|
|
|
0.41 |
|
|
|
0.33 |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
(1) |
Taxable equivalent |
|
(2) |
Adjusted tangible efficiency ratio |
Balance Sheet
|
Loans* |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
(dollars in millions) |
|
2Q23 |
|
|
1Q23 |
|
Linked Quarter Change |
|
Linked Quarter % Change |
|
|
2Q22 |
|
Year/Year Change |
|
Year/Year % Change |
||||||
|
Commercial & industrial |
$ |
22,531.2 |
|
$ |
22,600.2 |
|
$ |
(68.9 |
) |
|
— |
% |
|
$ |
20,778.3 |
|
$ |
1,752.9 |
|
|
8 |
% |
|
Commercial real estate |
|
13,293.9 |
|
|
12,996.8 |
|
|
297.1 |
|
|
2 |
|
|
|
11,503.4 |
|
|
1,790.5 |
|
|
16 |
|
|
Consumer |
|
8,528.4 |
|
|
8,448.0 |
|
|
80.4 |
|
|
1 |
|
|
|
8,923.0 |
|
|
(394.6 |
) |
|
(4 |
) |
|
Total loans |
$ |
44,353.5 |
|
$ |
44,044.9 |
|
$ |
308.6 |
|
|
1 |
% |
|
$ |
41,204.8 |
|
$ |
3,148.8 |
|
|
8 |
% |
|
*Amounts may not total due to rounding |
||||||||||||||||||||||
- Total loans ended the quarter at $44.35 billion, up $308.6 million sequentially.
- Commercial and industrial (C&I) loans decreased $68.9 million sequentially, primarily driven by lower utilization from existing commitments and a strategic decline in syndicated loans.
- CRE loans increased $297.1 million sequentially, mostly due to draws on existing multi-family commitments and continued low levels of pay-offs.
- Consumer loans increased $80.4 million sequentially, largely a result of growth in portfolio mortgages somewhat offset by continued third-party decline from runoff.
|
|
||||||||||||||||||||||
|
Deposits* |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
(dollars in millions) |
|
2Q23 |
|
|
1Q23 |
|
Linked Quarter Change |
|
Linked Quarter % Change |
|
|
2Q22 |
|
Year/Year Change |
|
Year/Year % Change |
||||||
|
Non-interest-bearing DDA |
$ |
12,945.5 |
|
$ |
13,827.6 |
|
$ |
(882.0 |
) |
|
(6 |
)% |
|
$ |
15,781.1 |
|
$ |
(2,835.6 |
) |
|
(18 |
)% |
|
Interest-bearing DDA |
|
6,255.3 |
|
|
5,841.0 |
|
|
414.3 |
|
|
7 |
|
|
|
6,327.1 |
|
|
(71.7 |
) |
|
(1 |
) |
|
Money market |
|
10,803.7 |
|
|
11,776.0 |
|
|
(972.3 |
) |
|
(8 |
) |
|
|
13,793.0 |
|
|
(2,989.3 |
) |
|
(22 |
) |
|
Savings |
|
1,222.9 |
|
|
1,312.7 |
|
|
(89.8 |
) |
|
(7 |
) |
|
|
1,498.7 |
|
|
(275.9 |
) |
|
(18 |
) |
|
Public funds |
|
7,031.4 |
|
|
6,888.2 |
|
|
143.2 |
|
|
2 |
|
|
|
5,863.9 |
|
|
1,167.5 |
|
|
20 |
|
|
Time deposits |
|
5,291.8 |
|
|
4,060.3 |
|
|
1,231.5 |
|
|
30 |
|
|
|
2,147.8 |
|
|
3,144.1 |
|
|
146 |
|
|
Brokered deposits |
|
6,529.8 |
|
|
6,248.3 |
|
|
281.5 |
|
|
5 |
|
|
|
3,623.1 |
|
|
2,906.7 |
|
|
80 |
|
|
Total deposits |
$ |
50,080.4 |
|
$ |
49,953.9 |
|
$ |
126.5 |
|
|
— |
% |
|
$ |
49,034.7 |
|
$ |
1,045.7 |
|
|
2 |
% |
|
*Amounts may not total due to rounding |
||||||||||||||||||||||
- Total deposits ended the quarter at $50.08 billion, up $126.5 million sequentially
- Money market deposits were primarily impacted by the continued shifting to time deposits.
- Non-interest-bearing DDAs were impacted by pressures from seasonal cash deployment of excess funds and continued pressures from the higher rate environment.
- Total deposit costs increased 51 bps sequentially to 1.95% and were impacted by the anticipated pricing lags on core interest-bearing deposits (excludes brokered deposits) as well as the decline in non-interest-bearing DDAs.
|
Income Statement Summary** |
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
(in thousands, except per share data) |
|
2Q23 |
|
|
|
1Q23 |
|
|
Linked Quarter Change |
|
Linked Quarter % Change |
|
|
2Q22 |
|
|
Year/Year Change |
|
Year/Year % Change |
||||||
|
Net interest income |
$ |
455,531 |
|
|
$ |
480,751 |
|
|
$ |
(25,220 |
) |
|
(5 |
)% |
|
$ |
425,388 |
|
|
$ |
30,143 |
|
|
7 |
% |
|
Non-interest revenue |
|
112,276 |
|
|
|
133,126 |
|
|
|
(20,850 |
) |
|
(16 |
) |
|
|
97,266 |
|
|
|
15,010 |
|
|
15 |
|
|
Non-interest expense |
|
307,181 |
|
|
|
321,852 |
|
|
|
(14,671 |
) |
|
(5 |
) |
|
|
282,051 |
|
|
|
25,130 |
|
|
9 |
|
|
Provision for (reversal of) credit losses |
|
38,881 |
|
|
|
32,154 |
|
|
|
6,727 |
|
|
21 |
|
|
|
12,688 |
|
|
|
26,193 |
|
|
206 |
|
|
Income before taxes |
$ |
221,745 |
|
|
$ |
259,871 |
|
|
$ |
(38,126 |
) |
|
(15 |
)% |
|
$ |
227,915 |
|
|
$ |
(6,170 |
) |
|
(3 |
)% |
|
Income tax expense |
|
47,801 |
|
|
|
57,712 |
|
|
|
(9,911 |
) |
|
(17 |
) |
|
|
49,863 |
|
|
|
(2,062 |
) |
|
(4 |
) |
|
Net income |
|
173,944 |
|
|
|
202,159 |
|
|
|
(28,215 |
) |
|
(14 |
) |
|
|
178,052 |
|
|
|
(4,108 |
) |
|
(2 |
) |
|
Less: Net income (loss) attributable to noncontrolling interest |
|
(166 |
) |
|
|
— |
|
|
|
(166 |
) |
|
NM |
|
|
|
— |
|
|
|
(166 |
) |
|
NM |
|
|
Net income attributable to Synovus Financial Corp. |
|
174,110 |
|
|
|
202,159 |
|
|
|
(28,049 |
) |
|
(14 |
) |
|
|
178,052 |
|
|
|
(3,942 |
) |
|
(2 |
) |
|
Less: Preferred stock dividends |
|
8,291 |
|
|
|
8,291 |
|
|
|
— |
|
|
— |
|
|
|
8,291 |
|
|
|
— |
|
|
— |
|
|
Net income available to common shareholders |
$ |
165,819 |
|
|
$ |
193,868 |
|
|
$ |
(28,049 |
) |
|
(14 |
)% |
|
$ |
169,761 |
|
|
$ |
(3,942 |
) |
|
(2 |
)% |
|
Weighted average common shares outstanding, diluted |
|
146,550 |
|
|
|
146,727 |
|
|
|
(177 |
) |
|
— |
% |
|
|
146,315 |
|
|
|
235 |
|
|
— |
% |
|
Diluted earnings per share |
$ |
1.13 |
|
|
$ |
1.32 |
|
|
$ |
(0.19 |
) |
|
(14 |
) |
|
$ |
1.16 |
|
|
$ |
(0.03 |
) |
|
(3 |
) |
|
Adjusted diluted earnings per share |
|
1.16 |
|
|
|
1.33 |
|
|
|
(0.17 |
) |
|
(13 |
) |
|
|
1.17 |
|
|
|
(0.01 |
) |
|
(1 |
) |
|
Effective tax rate |
|
21.56 |
% |
|
|
22.21 |
% |
|
|
|
|
|
|
21.88 |
% |
|
|
|
|
||||||
|
** Amounts may not total due to rounding |
|||||||||||||||||||||||||
Core Performance
- Net interest income of $455.5 million was down $25.2 million sequentially, or 5%, and increased $30.1 million, or 7%, compared to the second quarter 2022.
- The quarter-over-quarter decline was largely driven by increases in deposit costs and negative re- mixing in non-interest-bearing DDA deposits partially offset by higher asset yields and earning asset growth.
- Net interest margin was 3.20%, down 23 bps sequentially, impacted by the same factors mentioned above.
- The year-over-year increase resulted primarily from loan growth and interest rate increases somewhat offset by higher deposit costs and negative remixing from non-interest DDA deposits.
- The quarter-over-quarter decline was largely driven by increases in deposit costs and negative re- mixing in non-interest-bearing DDA deposits partially offset by higher asset yields and earning asset growth.
- Non-interest revenue decreased $20.9 million, or 16%, sequentially and increased $15.0 million, or 15%, compared to the second quarter 2022. Adjusted non-interest revenue decreased $6.9 million, or 6%, sequentially and increased $10.2 million, or 10%, compared to the second quarter 2022.
- The quarter-over-quarter decrease was impacted by the prior quarter's $13.1 million one-time benefit from the recovery of a non-performing asset related to the regulatory approval of our Qualpay investment and strong growth in capital markets income in the first quarter 2023, which normalized this quarter.
- The year-over-year increase primarily related to higher wealth revenue from diverse sources including fees from short-term liquidity management products and a $7 million write-down in the second quarter 2022 on a minority tech investment.
- Non-interest expense decreased $14.7 million, or 5%, sequentially and increased $25.1 million, or 9%, compared to the second quarter 2022. Adjusted non-interest expense decreased $3.8 million, or 1%, sequentially and increased $17.0 million, or 6%, compared to the second quarter 2022.
- The quarter-over-quarter decrease was largely due to the previous quarter's $16.8 million loss associated with the move of third-party consumer loans to held for sale in addition to seasonally elevated personnel expense in the first quarter 2023.
- The year-over-year increase primarily resulted from new business initiatives and infrastructure investments as well as investments in our workforce and higher FDIC insurance and healthcare costs.
- Overall credit performance and the credit quality of our recent originations was solid. The non-performing loan and asset ratios both moved to 0.59%; the net charge-off ratio for the quarter was 0.24%, and total past dues were 0.19% of total loans outstanding.
- Provision for credit losses of $38.9 million increased $6.7 million sequentially and increased $26.2 million compared to the second quarter 2022.
- Drivers of the quarter-over-quarter increase included higher net charge-offs and a modest increase of 2 bps in the allowance for credit losses coverage ratio (to loans).
- Drivers of the year-over-year increase largely included an 8 bps increase in the allowance for credit losses coverage ratio (to loans), which resulted from deterioration in forecasted economic scenarios mostly offset by continued solid loan portfolio performance, and higher net charge-offs.
|
Capital Ratios |
||||||||
|
|
|
|
|
|
|
|||
|
|
2Q23 |
|
1Q23 |
|
2Q22 |
|||
|
Common equity Tier 1 capital (CET1) ratio |
9.85 |
% |
* |
9.77 |
% |
|
9.46 |
% |
|
Tier 1 capital ratio |
10.88 |
|
* |
10.81 |
|
|
10.56 |
|
|
Total risk-based capital ratio |
12.79 |
|
* |
12.72 |
|
|
12.43 |
|
|
Tier 1 leverage ratio |
9.23 |
|
* |
9.14 |
|
|
9.03 |
|
|
Tangible common equity ratio |
6.17 |
|
|
6.12 |
|
|
6.26 |
|
|
* Ratios are preliminary. |
||||||||
Capital
- Preliminary CET1 ratio improved 8 bps during the quarter to 9.85%, and the preliminary total risk-based capital ratio of 12.79% increased 7 bps from the previous quarter as core earnings continued to support capital generation.
Second Quarter Earnings Conference Call
Synovus will host an earnings highlights conference call at 8:30 a.m. ET on July 20, 2023. 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.
