Synovus Financial Corp. today reported financial results for the quarter ended June 30, 2014.

Second Quarter Highlights

• Net income available to common shareholders for the second quarter of 2014 was $44.3 million or $0.32 per diluted share.
• Excluding restructuring charges of $7.7 million, net income available to common shareholders for the second quarter of 2014 was $49.0 million or $0.35 per diluted share, a 6.9% increase compared to $0.331 as reported for the first quarter of 2014.
• Net income available to common shareholders for the first quarter of 2014 was $45.9 million, or $0.331 per diluted share. For the second quarter of 2013, net income available to common shareholders was $30.7 million, or $0.241 per diluted share.
  • The first quarter of 2014 results included restructuring charges of $8.6 million, a$5.8 million net gain from the Memphis transaction, and a $3.1 million gain on a branch property sale.
  • The second quarter of 2013 results included restructuring charges of $1.8 million.
• Total revenues were $268.4 million for the second quarter of 2014. Excluding the impact of the first quarter of 2014 net gain from the Memphis transaction, the gain on the branch property sale, and investment securities gains, total revenues were up $8.0 million or 3.1% vs. the prior quarter.
• Total loans grew $296.8 million sequentially or 5.9% annualized, driven by growth in C&I and retail loans.
• Credit quality improved significantly with a 32.5% sequential quarter decline in non-performing loans. The NPL ratio declined to 1.27% at June 30, 2014 from 1.91% at March 31, 2014 and 2.47% a year ago.
• All Tier 1 capital ratios continued to expand with the Tier 1 common equity ratio ending the quarter at 10.41%, up 17 basis points from the prior quarter.

 
“We are pleased with our performance for the second quarter, which includes earnings per share of
$0.35 excluding restructuring charges,” said Kessel D. Stelling, Synovus Chairman and CEO. “We reported solid loan growth of 5.9% annualized, with C&I and retail reporting 7.2% and 14.3% growth, respectively. The quarter also included increases in mortgage, bankcard, and brokerage fees; a 32% reduction in non-performing loans; and a two basis point increase in the net interest margin.”

Balance Sheet Fundamentals

• Total loans ended the quarter at $20.46 billion, an $847.5 million or 4.3% increase from the second quarter of 2013.
• Total loans grew $296.8 million or 5.9% annualized compared to the first quarter of 2014.
  • C&I loans grew by $181.8 million from the first quarter of 2014, or 7.2% annualized.
  • Commercial real estate loans declined by $14.5 million from the first quarter of 2014.
  • Retail loans grew by $130.0 million from the first quarter of 2014, or 14.3%
    annualized.
• Total average deposits for the quarter were $20.86 billion, up $138.4 million from the previous quarter.
• Average core deposits ended the quarter at $19.46 billion, down $27.9 million compared to the first quarter of 2014.
• Average core deposits, excluding average time deposits, grew by $163.9 million compared to the previous quarter.

Core Performance

Adjusted pre-tax, pre-credit costs income was $98.9 million for the second quarter of 2014, an increase of $2.4 million from $96.5 million for the first quarter of 2014.

• Net interest income was $205.1 million for the second quarter of 2014, up $4.5 million from $200.5 million in the previous quarter.
• The net interest margin improved two basis points to 3.41% compared to 3.39% in the first quarter of 2014. The yield on earning assets was 3.86%, unchanged from the first quarter of 2014, and the effective cost of funds declined two basis points to 0.45%.
• Total non-interest income was $63.4 million compared to $70.2 million for the first quarter of 2014.
  • The first quarter of 2014 non-interest income included a $5.8 million net gain from the Memphis transaction, a $3.1 million gain on a branch property sale, and $1.3 million in investment securities gains.
  • Mortgage banking income increased $1.8 million or 50.5% from the previous quarter.
  • Core banking fees2 of $32.6 million were up $1.5 million or 4.7%, driven by higher bankcard fees.
  • Financial Management Services revenues, consisting primarily of fiduciary and asset management fees and brokerage revenue, increased $1.0 million or 5.3%.
• Total non-interest expense for the second quarter of 2014 was $182.2 million, down $2.0 million from the first quarter of 2014. Adjusted non-interest expense for the second quarter of 2014 was $169.5 million, up $2.4 million compared to $167.1 million for the first quarter of 2014 primarily due to planned increases in advertising expense.
  • Restructuring charges of $7.7 million relate to the planned closing of 13 branches across the five-state footprint during the fourth quarter of 2014.

Credit Quality

Broad-based improvement in credit quality continued.

• Total credit costs were $16.9 million in the second quarter of 2014, down 4.1% from
  $17.6 million in the first quarter of 2014 and down 29.4% from $24.0 million in the
  second quarter of 2013.
• Non-performing loan inflows were $34.3 million in the second quarter of 2014, down from $35.5 million in the first quarter of 2014 and $66.9 million in the second quarter of
  2013.
• Non-performing loans, excluding loans held for sale, were $259.5 million at June 30,
  2014, down $124.8 million or 32.5% from the previous quarter, and down $223.9 million
  or 46.3% from the second quarter of 2013. The non-performing loan ratio was 1.27% at
  June 30, 2014, down from 1.91% at the end of the previous quarter and 2.47% at June
  30, 2013.
• Net charge-offs were $35.4 million in the second quarter of 2014, up $20.2 million from
  $15.2 million in the first quarter of 2014 due to the significant reduction in NPLs which
  had existing reserves. The annualized net charge-off ratio was 0.69% in the second quarter, up from 0.30% in the previous quarter and up from 0.61% in the second quarter of 2013.

Capital Ratios

Capital ratios remained strong.

• Tier 1 Common Equity ratio was 10.41% at June 30, 2014, compared to 10.24% at March 31, 2014.
• Tier 1 Capital ratio was 11.01% at June 30, 2014, compared to 10.85% at March 31, 2014.
• Total Risk Based Capital ratio was 13.03% at June 30, 2014, compared to 13.31% at March 31, 2014.
• Tier 1 Leverage ratio was 9.69% at June 30, 2014, compared to 9.46% at March 31, 2014.
• Tangible Common Equity ratio was 10.91% at June 30, 2014, compared to 10.78% at March 31, 2014.

Stelling concluded, “We continue to successfully execute our plan for improving financial performance as evidenced by another quarter of solid operating results. Our activities are centered on enhancing the customer experience, emphasizing strong, local leadership as a key differentiator and a driver of our future success. We are better aligning our retail and commercial banking talent with customer needs and targeted market opportunities, and implementing new and enhanced technology that offers the added convenience customers now demand. Similar to our focus on growth in the large corporate, senior housing, and equipment financing space, we are positioning talent to serve the specific needs of middle market customers to increase our penetration in this high-opportunity segment. Additionally, we are expanding our team of retail brokerage financial consultants, mortgage originators, and trust professionals in markets with high-growth potential, and leveraging our existing Retail and Private Wealth Management teams to continue to increase market share and drive fee income growth throughout our banking franchise. We are energized about the opportunities ahead as we position Synovus as a banking leader for customers and communities across the Southeast.”

Second Quarter Earnings Conference Call

Synovus will host an earnings highlights conference call at 8:30 a.m. EDT on July 22, 2014. 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 www.synovus.com/webcasts. You may download RealPlayer or Windows Media Player (free download available) prior to accessing the actual call or the replay. The replay will be archived for 12 months and will be available 30-45 minutes after the call.