SYNOVUS FINANCIAL CORP - FORM 8-K - EX-99.1 - April 20, 2021

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Exhibit 99.1
synovusa041.jpg
Media Contact
Investor Contact
Lee Underwood
Kevin Brown
Media Relations
Investor Relations
(706) 644-0528(706) 644-0948
Synovus Announces Earnings for the First Quarter 2021
Diluted Earnings per Share of $1.19 vs. $0.20 in 1Q20
Adjusted Diluted Earnings per Share of $1.21 vs. $0.21 in 1Q20

COLUMBUS, Ga., April 20, 2021 - Synovus Financial Corp. (NYSE: SNV) today reported financial results for the quarter ended March 31, 2021.

First Quarter 2021 Highlights
•Net income available to common shareholders of $178.8 million or $1.19 per diluted share, up $0.23 sequentially and $0.99 compared to prior year.
◦Adjusted diluted EPS of $1.21, up $0.13 sequentially and $1.00 compared to prior year.
•Period-end loans increased $552.1 million or 1% sequentially.
◦Paycheck Protection Program (PPP) loans increased $170.1 million and third-party consumer loan balances, including a prime auto purchase of $476 million, increased $503.2 million sequentially.
•Core transaction deposits (non-interest bearing, NOW/savings, and money market deposits excluding public and brokered funds) increased $2.05 billion or 6% sequentially.
•Total deposit costs of 0.22% down 6 bps sequentially due to ongoing repricing and product remixing.
•Net interest income of $373.9 million declined $12.1 million sequentially as lower deposit costs and deployment of excess liquidity partially offset a lower day count, continued fixed-rate asset repricing, and accelerated prepayment activity.
◦Net interest margin of 3.04% vs 3.12% sequentially.
•Non-interest revenue declined $3.8 million sequentially and increased $7.1 million compared to prior year.
◦Adjusted non-interest revenue increased $0.6 million sequentially as broad-based growth helped offset normalization of net mortgage revenue.
•Non-interest expense declined $35.4 million sequentially and $9.1 million compared to prior year.
◦Adjusted non-interest expense declined $8.5 million sequentially led by reduction in professional fees, partially offset by seasonal increases in payroll taxes and benefits.
•Reversal of provision for credit losses of $18.6 million, primarily from a more favorable economic outlook.
◦Allowance for credit losses coverage ratio (to loans) of 1.58%, or 1.69% excluding PPP loans.
•Credit quality metrics remain relatively stable with a net charge-off ratio of 0.21%; non-performing assets, non-performing loans, and past dues remained near prior cycle lows.
•Preliminary CET1 ratio increased 8 bps sequentially to 9.74%, with strong core earnings helping offset a $1.20 billion increase in risk-weighted assets.
•In April, executed share repurchases of approximately $10 million as part of the $200 million authorization for 2021.







First Quarter Summary
ReportedAdjusted
(dollars in thousands)1Q214Q201Q201Q214Q201Q20
Net income available to common shareholders$178,802 $142,118 $30,230 $180,685 $160,618 $30,708 
Diluted earnings per share1.19 0.96 0.20 1.21 1.08 0.21 
Total loans38,805,101 38,252,984 38,258,024 N/AN/AN/A
Total deposits47,368,951 46,691,571 39,826,585 N/AN/AN/A
Total FTE revenue485,587 501,514 477,903 487,577 499,114 473,424 
Return on avg assets1.40 %1.11 %0.32 %1.41 %1.25 %0.32 %
Return on avg common equity15.77 12.31 2.75 15.93 13.91 2.79 
Return on avg tangible common equity17.85 14.00 3.34 18.04 15.79 3.39 
Net interest margin3.04 3.12 3.37 N/AN/AN/A
Efficiency ratio55.01 60.32 57.81 54.19 54.60 56.72 
NCO ratio0.21 0.23 0.21 N/AN/AN/A
NPA ratio0.50 0.50 0.50 N/AN/AN/A

“Our results in the first quarter of 2021 reflect strong financial performance as we continue to position the company for long-term growth,” said Kessel Stelling, Synovus Chairman and CEO. “Solid earnings drove capital growth, core transaction deposits grew $2 billion from the previous quarter, credit quality remained strong, and our efficiency initiatives enabled additional investments in improving the customer experience. We continued to support our customers and communities through the Paycheck Protection Program in the first quarter, including approximately $1 billion in phase two fundings. As the economic recovery accelerates and Kevin Blair steps in as CEO, the energy and optimism among our team are high, and I have never been more confident in our future.”
Kevin Blair, Synovus President and COO, said, “I’m honored for the opportunity to lead this exceptional team, and to build upon our strong foundation in driving growth as we deliver differentiated, value-adding solutions and advice to attract and build relationships with our clients.”


Balance Sheet
Loans*
(dollars in millions)1Q214Q20Linked Quarter ChangeLinked Quarter % Change1Q20Year/Year ChangeYear/Year % Change
Commercial & industrial$19,693.8 $19,520.2 $173.7 1 %$17,810.3 $1,883.5 11 %
Commercial real estate10,533.9 10,325.7 208.2 2 10,475.4 58.6 1 
Consumer8,577.3 8,407.1 170.2 2 9,972.3 (1,395.0)(14)
Total loans$38,805.1 $38,253.0 $552.1 1 %$38,258.0 $547.1 1 %

*Amounts may not total due to rounding

•Total loans ended the quarter at $38.81 billion, up $552.1 million or 1% sequentially.
•Commercial and industrial (C&I) loan growth of $173.7 million sequentially.
◦Total PPP loans increased by $170.1 million.
▪Phase 1 forgiveness of $711 million, or $687 million net of unearned, and Phase 2 fundings of $894 million, or $857 million net of unearned.
◦C&I line utilization remains near historic lows ~40%.
•CRE loans increased $208.2 million as the recovery in commercial real estate continues.


•Consumer loans increased $170.2 million sequentially, with a prime auto portfolio purchase of $476 million partially offset by declines in consumer mortgages and HELOCs of $214.3 million and $105.4 million, respectively.


Deposits*
(dollars in millions)1Q214Q20Linked Quarter ChangeLinked Quarter % Change1Q20Year/Year ChangeYear/Year % Change
Non-interest-bearing DDA$13,742.1 $12,382.7 $1,359.4 11 %$8,968.8 $4,773.3 53 %
Interest-bearing DDA5,841.7 5,674.4 167.3 3 4,617.4 1,224.4 27 
Money market13,943.7 13,541.2 402.5 3 10,255.0 3,688.7 36 
Savings1,277.0 1,156.2 120.8 10 949.5 327.6 35 
Public funds6,154.9 6,760.6 (605.7)(9)5,261.4 893.6 17 
Time deposits3,214.8 3,605.9 (391.2)(11)5,786.6 (2,571.9)(44)
Brokered deposits3,194.7 3,570.4 (375.7)(11)3,987.9 (793.3)(20)
Total deposits$47,369.0 $46,691.6 $677.4 1 %$39,826.6 $7,542.4 19 %

*Amounts may not total due to rounding

•Total deposits ended the quarter at $47.37 billion, up $677.4 million or 1% sequentially.
•Core transaction deposits increased $2.05 billion or 6% sequentially.
◦Broad-based growth in all categories including MMA, DDA, NOW, and savings supported declines in higher cost deposits.
•Total deposit costs declined 6 bps to 0.22% sequentially.


Income Statement Summary**
(in thousands, except per share data)1Q214Q20Linked Quarter ChangeLinked Quarter % Change1Q20Year/Year ChangeYear/Year % Change
Net interest income$373,857 $385,932 $(12,075)(3)%$373,260 $597 — %
Non-interest revenue110,956 114,761 (3,805)(3)103,857 7,099 7 
Non-interest expense267,134 302,498 (35,364)(12)276,279 (9,145)(3)
(Reversal of) provision for credit losses(18,575)11,066 (29,641)nm158,722 (177,297)nm
Income before taxes$236,254 $187,129 $49,125 26 %$42,116 $194,138 461 %
Income tax expense49,161 36,720 12,441 34 3,595 45,566 nm
Preferred stock dividends8,291 8,291 — — 8,291 — — 
Net income available to common shareholders$178,802 $142,118 $36,684 26 %$30,230 $148,572 491 %
Weighted average common shares outstanding, diluted149,780 148,725 1,055 1 %148,401 1,379 1 %
Diluted earnings per share$1.19 $0.96 $0.23 25 $0.20 $0.99 486 
Adjusted diluted earnings per share1.21 1.08 0.13 12 0.21 1.00 483 

**    Amounts may not total due to rounding




Core Performance

•Net interest income of $373.9 million in the first quarter, down $12.1 million sequentially as lower deposit costs and deployment of excess liquidity helped offset declines from continued fixed-rate repricing and accelerated prepayment activity.
◦Net PPP fee accretion of $24.9 million, up $0.1 million sequentially.
◦Net interest margin was 3.04%, down 8 bps sequentially.
•Non-interest revenue decreased $3.8 million, or 3% sequentially, and increased $7.1 million, or 7% compared to prior year. Adjusted non-interest revenue increased $0.6 million, or 1% sequentially, and $13.6 million, or 14% compared to prior year.
◦Broad-based growth including $3.2 million in capital markets income helped offset normalization of net mortgage revenue, which declined $2.1 million sequentially.
•Non-interest expense decreased $35.4 million, or 12% sequentially. Adjusted non-interest expense decreased $8.5 million, or 3% sequentially.
◦Seasonal increases in employment-related expenses such as payroll taxes and benefits more than offset by lower headcount and day count as well as lower professional fees associated with Synovus Forward and COVID/PPP.
•Reversal of provision for credit losses of $18.6 million; allowance for credit losses coverage ratio (to loans) of 1.58%, or 1.69% excluding PPP loans.
•Tax expense was $49.2 million, an increase of $12.4 million driven by higher taxable income.
◦Effective tax rate of 20.81%.


Capital Ratios
1Q214Q201Q20
Common equity Tier 1 capital (CET1) ratio9.74 %
*
9.66 %8.70 %
Tier 1 capital ratio10.99 
*
10.95 9.95 
Total risk-based capital ratio13.34 
*
13.42 12.29 
Tier 1 leverage ratio8.80 
*
8.50 8.92 
Tangible common equity ratio7.55 7.66 7.94 
* Ratios are preliminary.


Capital

•CET1 ratio improved 8 bps during the quarter to 9.74% as strong core performance helped offset a $1.20 billion increase in risk-weighted assets.
•Total risk-based capital ratio of 13.34% declined 8 bps from the prior quarter following a reduction in the ACL.

First Quarter Earnings Conference Call
Synovus will host an earnings highlights conference call at 8:30 a.m. EDT on April 20, 2021. 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.

Synovus Financial Corp. is a financial services company based in Columbus, Georgia, with approximately $55 billion in assets. Synovus provides commercial and retail banking, investment, and mortgage services through 288 branches in Alabama, Florida, Georgia, South Carolina, and Tennessee. Synovus Bank, a wholly owned subsidiary of Synovus, has been recognized as one of the country's “Most Reputable Banks” by American Banker and the Reputation Institute. Synovus is on the web at synovus.com, and on Twitter, Facebook, LinkedIn, and Instagram.


Forward-Looking Statements

This press release and certain of our other filings with the Securities and Exchange Commission contain statements that constitute “forward-looking statements” within the meaning of, and subject to the protections of, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. You can identify these forward-looking statements through Synovus’ use of words such as “believes,” “anticipates,” “expects,” “may,” “will,” “assumes,” “should,” “predicts,” “could,” “would,” “intends,” “targets,” “estimates,” “projects,” “plans,” “potential” and other similar words and expressions of the future or otherwise regarding the outlook for Synovus’ future business and financial performance and/or the performance of the banking industry and economy in general. These forward-looking statements include, among others, our expectations regarding our future operating and financial performance; our expectations regarding net interest income and net interest margin; expectations on our growth strategy, expense and revenue initiatives, capital management, balance sheet management, and future profitability; expectations on credit quality and performance; and the assumptions underlying our expectations. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties which may cause the actual results, performance or achievements of Synovus to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are based on the information known to, and current beliefs and expectations of, Synovus’ management and are subject to significant risks and uncertainties. Actual results may differ materially from those contemplated by such forward-looking statements. A number of factors could cause actual results to differ materially from those contemplated by the forward-looking statements in this press release. Many of these factors are beyond Synovus’ ability to control or predict.

These forward-looking statements are based upon information presently known to Synovus’ management and are inherently subjective, uncertain and subject to change due to any number of risks and uncertainties, including, without limitation, the risks and other factors set forth in Synovus’ filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2020, under the captions “Cautionary Notice Regarding Forward-Looking Statements” and “Risk Factors” and in Synovus’ quarterly reports on Form 10-Q and current reports on Form 8-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations and speak only as of the date that they are made. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as otherwise may be required by law.




Non-GAAP Financial Measures

The measures entitled adjusted non-interest revenue; adjusted non-interest expense; total adjusted revenue; adjusted tangible efficiency ratio; adjusted net income available to common shareholders; adjusted diluted earnings per share; adjusted return on average assets; adjusted return on average common equity; return on average tangible common equity; adjusted return on average tangible common equity; and tangible common equity ratio are not measures recognized under GAAP and therefore are considered non-GAAP financial measures. The most comparable GAAP measures to these measures are total non-interest revenue; total non-interest expense; total FTE revenue; efficiency ratio-FTE; net income available to common shareholders; diluted earnings per share; return on average assets; return on average common equity; and the ratio of total shareholders' equity to total assets, respectively.

Management believes that these non-GAAP financial measures provide meaningful additional information about Synovus to assist management and investors in evaluating Synovus’ operating results, financial strength, the performance of its business, and the strength of its capital position. However, these non-GAAP financial measures have inherent limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of operating results or capital position as reported under GAAP. The non-GAAP financial measures should be considered as additional views of the way our financial measures are affected by significant items and other factors, and since they are not required to be uniformly applied, they may not be comparable to other similarly titled measures at other companies. Total adjusted revenue and adjusted non-interest revenue are measures used by management to evaluate total FTE revenue and non-interest revenue exclusive of net investment securities gains (losses) and changes in the fair value of private equity investments, net. Adjusted non-interest expense and the adjusted tangible efficiency ratio are measures utilized by management to measure the success of expense management initiatives focused on reducing recurring controllable operating costs. Adjusted net income available to common shareholders, adjusted diluted earnings per share, adjusted return on average assets, and adjusted return on average common equity are measures used by management to evaluate operating results exclusive of items that are not indicative of ongoing operations and impact period-to-period comparisons. Return on average tangible common equity and adjusted return on average tangible common equity are measures used by management to compare Synovus’ performance with other financial institutions because it calculates the return available to common shareholders without the impact of intangible assets and their related amortization, thereby allowing management to evaluate the performance of the business consistently. The tangible common equity ratio is used by management to assess the strength of our capital position. The computations of these measures are set forth in the tables below.

Reconciliation of Non-GAAP Financial Measures
(dollars in thousands)1Q214Q201Q20
Adjusted non-interest revenue
Total non-interest revenue$110,956 $114,761 $103,857 
Add/subtract: Investment securities losses (gains), net1,990 (2,337)(8,734)
Subtract/add: Fair value (increase) decrease of private equity investments— (63)4,255 
Adjusted non-interest revenue$112,946 $112,361 $99,378 
Adjusted non-interest expense
Total non-interest expense$267,134 $302,498 $276,279 
Subtract: Restructuring charges(531)(18,068)(3,220)
Subtract: Valuation adjustment to Visa derivative— (890)— 
Subtract: Loss on early extinguishment of debt— (8,409)(1,904)
Adjusted non-interest expense
$266,603 $275,131 $271,155 


Reconciliation of Non-GAAP Financial Measures, continued
(dollars in thousands)1Q214Q201Q20
Total adjusted revenue and adjusted tangible efficiency ratio
Adjusted non-interest expense
$266,603 $275,131 $271,155 
Subtract: Amortization of intangibles(2,379)(2,640)(2,640)
Adjusted tangible non-interest expense
$264,224 $272,491 $268,515 
Net interest income
$373,857 $385,932 $373,260 
Add: Tax equivalent adjustment
774 821 786 
Add: Total non-interest revenue
110,956 114,761 103,857 
Total FTE revenue
485,587 501,514 477,903 
Add/subtract: Investment securities losses (gains), net1,990 (2,337)(8,734)
Subtract/add: Fair value (increase) decrease of private equity investments— (63)4,255 
Total adjusted revenue
$487,577 $499,114 $473,424 
Efficiency ratio-FTE
55.01 %60.32 %57.81 %
Adjusted tangible efficiency ratio
54.19 54.60 56.72 

Adjusted return on average assets
Net income$187,093 $150,409 $38,521 
Add: Restructuring charges531 18,068 3,220 
Add: Valuation adjustment to Visa derivative— 890 — 
Add: Loss on early extinguishment of debt
— 8,409 1,904 
Add/subtract: Investment securities losses (gains), net
1,990 (2,337)(8,734)
Subtract/add: Fair value (increase) decrease of private equity investments— (63)4,255 
Subtract: Tax effect of adjustments (1)
(638)(6,467)(167)
Adjusted net income$188,976 $168,909 $38,999 
Net income annualized$758,766 $598,366 $154,931 
Adjusted net income annualized$766,403 $671,964 $156,853 
Total average assets$54,188,504 $53,833,909 $48,696,595 
Return on average assets1.40 %1.11 %0.32 %
Adjusted return on average assets1.41 1.25 0.32 
Adjusted net income available to common shareholders and adjusted diluted earnings per share
Net income available to common shareholders$178,802 $142,118 $30,230 
Add: Restructuring charges531 18,068 3,220 
Add: Valuation adjustment to Visa derivative— 890 — 
Add: Loss on early extinguishment of debt— 8,409 1,904 
Add/subtract: Investment securities losses (gains), net1,990 (2,337)(8,734)
Subtract/add: Fair value (increase) decrease of private equity investments— (63)4,255 
Subtract: Tax effect of adjustments (1)
(638)(6,467)(167)
Adjusted net income available to common shareholders$180,685 $160,618 $30,708 
Weighted average common shares outstanding, diluted149,780 148,725 148,401 
Diluted earnings per share$1.19 $0.96 $0.20 
Adjusted diluted earnings per share1.21 1.08 0.21 



Reconciliation of Non-GAAP Financial Measures, continued
(dollars in thousands)
1Q214Q201Q20
Adjusted return on average common equity, return on average tangible common equity, and adjusted return on average tangible common equity
Net income available to common shareholders$178,802 $142,118 $30,230 
Add: Restructuring charges531 18,068 3,220 
Add: Valuation adjustment to Visa derivative— 890 — 
Add: Loss on early extinguishment of debt— 8,409 1,904 
Add/subtract: Investment securities losses (gains), net1,990 (2,337)(8,734)
Subtract/add: Fair value (increase) decrease of private equity investments— (63)4,255 
Subtract: Tax effect of adjustments (1)
(638)(6,467)(167)
Adjusted net income available to common shareholders
$180,685 $160,618 $30,708 
Adjusted net income available to common shareholders annualized
$732,778 $638,980 $123,507 
Add: Amortization of intangibles, annualized net of tax
7,207 7,782 7,868 
Adjusted net income available to common shareholders excluding amortization of intangibles annualized
$739,985 $646,762 $131,375 
Net income available to common shareholders annualized
$725,141 $565,382 $121,584 
Add: Amortization of intangibles, annualized net of tax7,207 7,782 7,868 
Net income available to common shareholders excluding amortization of intangibles annualized$732,348 $573,164 $129,452 
Total average shareholders' equity less preferred stock$4,599,076 $4,594,199 $4,424,278 
Subtract: Goodwill(452,390)(452,390)(497,267)
Subtract: Other intangible assets, net(44,005)(46,511)(54,514)
Total average tangible shareholders' equity less preferred stock$4,102,681 $4,095,298 $3,872,497 
Return on average common equity15.77 %12.31 %2.75 %
Adjusted return on average common equity15.93 13.91 2.79 
Return on average tangible common equity17.85 14.00 3.34 
Adjusted return on average tangible common equity18.04 15.79 3.39 

Reconciliation of Non-GAAP Financial Measures, continued
(dollars in thousands)March 31, 2021December 31,
2020		March 31, 2020
Tangible common equity ratio
Total assets
$55,159,011 $54,394,159 $50,619,585 
Subtract: Goodwill
(452,390)(452,390)(497,267)
Subtract: Other intangible assets, net
(42,733)(45,112)(53,032)
Tangible assets
$54,663,888 $53,896,657 $50,069,286 
Total shareholders’ equity
$5,161,717 $5,161,334 $5,065,205 
Subtract: Goodwill
(452,390)(452,390)(497,267)
Subtract: Other intangible assets, net
(42,733)(45,112)(53,032)
Subtract: Preferred Stock, no par value
(537,145)(537,145)(537,145)
Tangible common equity
$4,129,449 $4,126,687 $3,977,761 
Total shareholders’ equity to total assets ratio
9.36 %9.49 %10.01 %
Tangible common equity ratio
7.55 7.66 7.94 
(1) An assumed marginal tax rate of 25.3% for 2021 and 25.9% for 2020 was applied.


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