Synovus Announces Earnings for the Third Quarter 2019
Tuesday, October 22nd, 2019
Synovus Financial Corp. (NYSE: SNV) today reported financial results for the quarter ended September 30, 2019.
Third Quarter 2019 Highlights
-
Diluted EPS of $0.83; adjusted diluted EPS of $0.97, down 2.7% sequentially and up 2.9% year-over-year.
-
Period-end loan growth of $279.3 million, or 3.1% annualized, from prior quarter.
-
Non-interest-bearing deposits excluding public funds increased $392.6 million sequentially or 18.2% annualized.
-
Net interest margin of 3.69%, unchanged from the previous quarter. Excluding the impact of purchase accounting adjustments (PAA), net interest margin was 3.42%, down 6 basis points from the prior quarter.
-
Non-interest income declined by $1.0 million from the second quarter but grew $1.1 million or 1.2% sequentially on an adjusted basis.
-
Credit quality metrics remained solid, with non-performing loan (NPL) ratio declining 2 basis points and the non-performing asset (NPA) ratio increasing 3 basis points.
-
Repurchased $343.5 million in common stock during the quarter; year-to-date repurchases total $688.5 million of the $725 million repurchase authorization.
-
Completed $350 million Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E offering on July 1.
Third Quarter Summary
|
|
Reported |
|
Adjusted |
||||||||||||||||||||
|
(dollars in thousands) |
3Q19 |
|
2Q19 |
|
3Q18 |
|
3Q19 |
|
2Q19 |
|
3Q18 |
||||||||||||
|
Net income available to common shareholders |
$ |
127,435 |
|
|
$ |
153,034 |
|
|
$ |
99,330 |
|
|
$ |
149,732 |
|
|
$ |
158,892 |
|
|
$ |
111,504 |
|
|
Diluted earnings per share |
0.83 |
|
|
0.96 |
|
|
0.84 |
|
|
0.97 |
|
|
1.00 |
|
|
0.94 |
|
||||||
|
Total loans |
36,417,826 |
|
|
36,138,561 |
|
|
25,577,116 |
|
|
N/A |
|
N/A |
|
N/A |
|||||||||
|
Total deposits |
37,433,070 |
|
|
37,966,722 |
|
|
26,433,658 |
|
|
N/A |
|
N/A |
|
N/A |
|||||||||
|
Total revenues |
491,676 |
|
|
487,880 |
|
|
363,423 |
|
|
494,213 |
|
|
488,270 |
|
|
362,989 |
|
||||||
|
Return on avg assets |
1.14 |
% |
|
1.34 |
% |
|
1.36 |
% |
|
1.33 |
% |
|
1.39 |
% |
|
1.47 |
% |
||||||
|
Return on avg common equity |
11.36 |
|
|
13.90 |
|
|
13.95 |
|
|
13.35 |
|
|
14.43 |
|
|
15.66 |
|
||||||
|
Return on avg tangible common equity |
13.19 |
|
|
16.09 |
|
|
14.33 |
|
|
15.46 |
|
|
16.70 |
|
|
16.08 |
|
||||||
|
Net interest margin |
3.69 |
|
|
3.69 |
|
|
3.89 |
|
|
3.42 |
|
|
3.48 |
|
|
N/A |
|||||||
|
Efficiency ratio |
56.20 |
|
|
54.14 |
|
|
60.62 |
|
|
51.71 |
|
|
52.08 |
|
|
55.55 |
|
||||||
|
Net charge-off ratio |
0.22 |
|
|
0.13 |
|
|
0.24 |
|
|
N/A |
|
N/A |
|
N/A |
|||||||||
|
NPA ratio |
0.42 |
|
|
0.39 |
|
|
0.46 |
|
|
N/A |
|
N/A |
|
N/A |
|||||||||
“Our team continues to execute on our strategic priorities, with core transaction deposit growth of $525.5 million, strong funded loan production of $2.6 billion, and solid fee income growth led by our mortgage, wealth, and capital markets teams,” said Kessel D. Stelling, Synovus chairman and CEO. “Credit quality remains strong, and we continue to focus on efficiency and expense management, the crisp execution of our FCB acquisition, talent and technology, and growth in our core business and specialty lines.”
Balance Sheet
Loans**
|
(dollars in millions) |
3Q19 |
|
2Q19 |
|
Linked Quarter Change |
|
Linked Quarter % Change* |
|
3Q18 |
|
Year/Year Change |
|
Year/Year % Change |
||||||||||||
|
Commercial & industrial |
$ |
16,445.3 |
|
|
$ |
16,247.5 |
|
|
$ |
197.7 |
|
|
4.8 |
% |
|
$ |
12,503.3 |
|
|
$ |
3,942.0 |
|
|
31.5 |
% |
|
Commercial real estate |
10,286.0 |
|
|
10,348.4 |
|
|
(62.4 |
) |
|
(2.4 |
) |
|
6,712.4 |
|
|
3,573.6 |
|
|
53.2 |
|
|||||
|
Consumer |
9,709.2 |
|
|
9,566.1 |
|
|
143.1 |
|
|
5.9 |
|
|
6,385.2 |
|
|
3,324.0 |
|
|
52.1 |
|
|||||
|
Unearned income |
(22.7 |
) |
|
(23.6 |
) |
|
0.9 |
|
|
(15.1 |
) |
|
(23.8 |
) |
|
1.1 |
|
|
(4.7 |
) |
|||||
|
Total loans |
$ |
36,417.8 |
|
|
$ |
36,138.6 |
|
|
$ |
279.3 |
|
|
3.1 |
% |
|
$ |
25,577.1 |
|
|
$ |
10,840.7 |
|
|
42.4 |
% |
* Annualized
** Amounts may not total due to rounding
-
Total loans ended the quarter at $36.42 billion, up $279.3 million or 3.1% annualized from the previous quarter.
-
Total funded loan production in the quarter was approximately $2.6 billion.
-
Commercial and industrial loans increased $197.7 million from the second quarter, with contributions from middle market, senior housing, health care, premium finance, and ABL teams.
-
Commercial real estate loans declined by $62.4 million from the prior quarter, as payoff activity accelerated.
-
Consumer loan growth was broad-based, with meaningful contributions from mortgage, lending partnerships, and HELOC growth.
Deposits**
|
(dollars in millions) |
3Q19 |
|
2Q19 |
|
Linked Quarter Change |
|
Linked Quarter % Change* |
|
3Q18 |
|
Year/Year Change |
|
Year/Year % Change |
||||||||||||
|
Non-interest-bearing DDA |
$ |
8,970.2 |
|
|
$ |
8,577.6 |
|
|
$ |
392.6 |
|
|
18.2 |
% |
|
$ |
6,936.7 |
|
|
$ |
2,033.5 |
|
|
29.3 |
% |
|
Interest-bearing DDA |
4,714.8 |
|
|
4,847.2 |
|
|
(132.4 |
) |
|
(10.8 |
) |
|
3,943.2 |
|
|
771.6 |
|
|
19.6 |
|
|||||
|
Money market |
9,212.1 |
|
|
8,952.9 |
|
|
259.3 |
|
|
11.5 |
|
|
7,536.2 |
|
|
1,675.9 |
|
|
22.2 |
|
|||||
|
Savings |
897.3 |
|
|
891.2 |
|
|
6.1 |
|
|
2.7 |
|
|
816.5 |
|
|
80.8 |
|
|
9.9 |
|
|||||
|
Public funds |
3,795.3 |
|
|
4,351.3 |
|
|
(556.0 |
) |
|
(50.7 |
) |
|
2,024.7 |
|
|
1,770.6 |
|
|
87.5 |
|
|||||
|
Time deposits |
6,647.8 |
|
|
7,343.0 |
|
|
(695.2 |
) |
|
(37.6 |
) |
|
3,492.5 |
|
|
3,155.3 |
|
|
90.3 |
|
|||||
|
Brokered deposits |
3,195.5 |
|
|
3,003.5 |
|
|
192.0 |
|
|
25.4 |
|
|
1,683.8 |
|
|
1,511.7 |
|
|
89.8 |
|
|||||
|
Total deposits |
$ |
37,433.1 |
|
|
$ |
37,966.7 |
|
|
$ |
(533.7 |
) |
|
(5.6 |
)% |
|
$ |
26,433.7 |
|
|
$ |
10,999.4 |
|
|
41.6 |
% |
* Annualized
** Amounts may not total due to rounding
-
Total deposits ended the quarter at $37.43 billion, down $533.7 million or 5.6% annualized from second quarter 2019.
-
Deposit costs and mix improved in the quarter, with core transaction deposits increasing $525.5 million, while public funds and CDs declined by $556.0 million and $695.2 million, respectively. Core transaction deposits consist of non-interest bearing, NOW/savings, and money market deposits excluding public and brokered funds.
-
Deposit costs peaked in July; core deposit costs, excluding brokered deposits and PAA, declined 1 basis point from the prior quarter to 0.99%.
-
On a period-end basis, non-interest bearing demand deposit accounts grew $392.6 million, or 18.2% annualized from the second quarter, while money market accounts increased $259.3 million, or 11.5% sequentially. Brokered deposits increased $192.0 million from the prior quarter.
-
The loan to deposit ratio for the quarter was 97.3%, up from 95.2% in the prior quarter, and within our targeted range.
Income Statement Summary**
|
(in thousands, except per share data) |
3Q19 |
|
2Q19 |
|
Linked Quarter Change |
|
Linked Quarter % Change |
|
3Q18 |
|
Year/Year Change |
|
Year/Year % Change |
||||||||||||
|
Net interest income |
$ |
402,097 |
|
|
$ |
397,262 |
|
|
$ |
4,835 |
|
|
1.2 |
% |
|
$ |
291,619 |
|
|
$ |
110,478 |
|
|
37.9 |
% |
|
Non-interest income |
88,760 |
|
|
89,807 |
|
|
(1,047 |
) |
|
(1.2 |
)% |
|
71,668 |
|
|
17,092 |
|
|
23.8 |
|
|||||
|
Non-interest expense |
276,310 |
|
|
264,126 |
|
|
12,184 |
|
|
4.6 |
|
|
220,297 |
|
|
56,013 |
|
|
25.4 |
|
|||||
|
Provision expense |
27,562 |
|
|
12,119 |
|
|
15,443 |
|
|
127.4 |
|
|
14,982 |
|
|
12,580 |
|
|
84.0 |
|
|||||
|
Income before taxes |
$ |
186,985 |
|
|
$ |
210,824 |
|
|
$ |
(23,839 |
) |
|
(11.3 |
)% |
|
$ |
128,008 |
|
|
$ |
58,977 |
|
|
46.1 |
% |
|
Income tax expense |
51,259 |
|
|
54,640 |
|
|
(3,381 |
) |
|
(6.2 |
) |
|
18,949 |
|
|
32,310 |
|
|
170.5 |
|
|||||
|
Preferred stock dividends |
8,291 |
|
|
3,150 |
|
|
5,141 |
|
|
163.2 |
|
|
9,729 |
|
|
(1,438 |
) |
|
(14.8 |
) |
|||||
|
Net income available to common shareholders |
$ |
127,435 |
|
|
$ |
153,034 |
|
|
$ |
(25,599 |
) |
|
(16.7 |
)% |
|
$ |
99,330 |
|
|
$ |
28,105 |
|
|
28.3 |
% |
|
Weighted average common shares outstanding, diluted |
154,043 |
|
|
159,077 |
|
|
(5,034 |
) |
|
(3.2 |
) |
|
118,095 |
|
|
35,948 |
|
|
30.4 |
% |
|||||
|
Diluted earnings per share |
$ |
0.83 |
|
|
$ |
0.96 |
|
|
$ |
(0.13 |
) |
|
(14.0 |
)% |
|
$ |
0.84 |
|
|
$ |
(0.01 |
) |
|
(1.6 |
) |
|
Adjusted diluted earnings per share |
$ |
0.97 |
|
|
$ |
1.00 |
|
|
$ |
(0.03 |
) |
|
(2.7 |
)% |
|
$ |
0.94 |
|
|
$ |
0.03 |
|
|
2.9 |
|
** Amounts may not total due to rounding
nm - not meaningful
Core Performance
-
Total revenues were $491.7 million in the third quarter, up $3.8 million from the previous quarter.
-
Net interest income increased $4.8 million or 1.2% compared to the prior quarter.
-
Net interest margin was 3.69%, unchanged from the previous quarter, and favorably impacted by $16.1 million of loan accretion, $1.7 million of investment securities accretion, and $11.0 million of deposit premium amortization. Excluding the impact of PAA, net interest margin was 3.42%, down 6 basis points from the prior quarter.
-
The sequential decrease in net interest margin was driven by an 8 basis points decline in total earning asset yields and a 2 basis points decrease in the effective cost of funds.
-
-
Non-interest income decreased $1.0 million or 1.2% from the prior quarter and increased $17.1 million or 23.8% compared to third quarter 2018. Adjusted non-interest income increased $1.1 million or 1.2% from the second quarter and $20.1 million or 28.2% year-over-year.
-
Capital markets fee income in the quarter was $7.4 million, up $6.2 million from the third quarter of 2018. Mortgage revenues in the quarter were $10.4 million, up $2.4 million or 30.9% from the previous quarter and up $5.1 million or 95.7% year-over-year.
-
-
Non-interest expense increased $12.2 million or 4.6% from the second quarter due primarily to a $10.5 million increase in the earnout liability associated with our 2016 Global One acquisition and a $4.6 million loss on early extinguishment of debt. Adjusted non-interest expense increased $1.8 million or 0.7% from the prior quarter.
-
The increase in adjusted expenses resulted mainly from merit raises and commission expenses, higher occupancy and equipment expenses, amortization of intangibles, and professional expenses.
-
-
Provision expense was $27.6 million, a $15.4 million increase from the previous quarter, primarily resulting from charge-offs and the impact of gross loan production.
-
The effective tax rate was 27.4% for the quarter and included a $4.4 million discrete tax item associated with state tax reform.
Capital Ratios
|
|
3Q19 |
|
2Q19 |
|
3Q18 |
|||
|
Common equity Tier 1 capital (CET1) ratio |
8.96 |
% |
(1) |
9.61 |
% |
|
9.90 |
% |
|
Tier 1 capital ratio |
10.27 |
|
(1) |
10.09 |
|
|
10.57 |
|
|
Total risk-based capital ratio |
12.30 |
|
(1) |
12.11 |
|
|
12.36 |
|
|
Tier 1 leverage ratio |
9.02 |
|
(1) |
8.89 |
|
|
9.58 |
|
|
Tangible common equity ratio(2) |
8.04 |
|
|
8.56 |
|
|
8.68 |
|
(1) Ratios are preliminary
(2) Non-GAAP measure; see applicable reconciliation
Capital
-
Capital ratios remained strong.
-
As a result of capital actions during the quarter, the Total Risk Based capital ratio increased to 12.30% and the CET1 ratio decreased to 8.96%, consistent with the low end of our operating range.
-
Repurchased $343.5 million in common stock, or 9.6 million shares, during the quarter; year-to-date repurchases total $688.5 million, or 18.8 million shares, of the $725 million repurchase authorization.
-
Share count has declined by 10.7% from January 1, 2019.
-
-
Completed $350 million Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E offering on July 1.
