Synovus Financial Corp. reported financial results for the quarter ended March 31, 2018.

First Quarter Highlights

Net income available to common shareholders for the first quarter 2018 was $100.6 million or $0.84 per diluted share as compared to $27.0 million or $0.23 per diluted share for the fourth quarter 2017 and $69.3 million or $0.56 per diluted share for the first quarter 2017. The fourth quarter 2017 results included a $23.2 million loss on early extinguishment of debt and a $47.2 million charge related to Federal tax reform.

Adjusted earnings per diluted share for the first quarter 2018 were $0.86, a 19.8% increase from the fourth quarter 2017 and a 50.9% increase from the first quarter 2017.

As a result of Federal tax reform and other one-time and seasonal items, the effective tax rate for the first quarter was 22.6% compared to 32.0% in the first quarter 2017.

Return on average assets for the first quarter 2018 was 1.34%, compared to 0.37% the previous quarter and 0.96% in the first quarter 2017.

Adjusted return on average assets was 1.36%, up 24 basis points from the previous quarter and up 39 basis points from the first quarter 2017.

Return on average common equity was 14.62%, an increase of 465 basis points from the first quarter 2017.

Adjusted return on average common equity was 14.86%, an improvement of 480 basis points from the first quarter 2017.

Adjusted return on average tangible common equity was 15.23%, an increase of 490 basis points from the first quarter 2017.

Total average loans grew $240.8 million or 4.0% annualized from the previous quarter and $816.4 million or 3.4% as compared to the first quarter 2017.

Total average deposits decreased $497.9 million or 7.7% annualized from fourth quarter 2017 and increased $869.2 million or 3.5% as compared to the first quarter 2017.

Total ending deposits increased $105.6 million or 1.6% from fourth quarter 2017 and increased $1.15 billion or 4.6% as compared to the first quarter 2017.

Total revenues1 were $341.3 million, up $37.2 million or 12.2% from the first quarter 2017.

Net interest margin was 3.78%, up 13 basis points from the previous quarter and up 36 basis points from the first quarter 2017.

Efficiency ratio was 57.16%, compared to 66.77% the previous quarter and 64.84% in the first quarter 2017.

Adjusted efficiency ratio was 57.42%, an improvement of 483 basis points from the first quarter 2017.
Credit quality metrics remained favorable, with a net charge-off ratio of 7 basis points, down 8 basis points from the previous quarter and down 5 basis points from first quarter 2017. The non-performing asset ratio was 0.53%, unchanged from the previous quarter and down 24 basis points from first quarter 2017.

“2018 is off to a good start, with 12 percent growth in revenues and a 50 percent increase in earnings per share year-over-year,” said Kessel D. Stelling, Synovus chairman and CEO. “We delivered another quarter of strong operating leverage through disciplined execution of our growth strategies, including talent acquisition and expansion of our presence in high-potential markets. As we approach completion of the transition to a unified Synovus brand, we are already seeing the benefits of greater name recognition across our footprint. Our team is deeply committed to building on our reputation, improving the customer experience, and executing on core growth strategies to meet and exceed long-term targets."

Balance Sheet

Total average loans for the quarter were $24.85 billion, up $240.8 million or 4.0% annualized from the previous quarter and up $816.4 million or 3.4% as compared to the first quarter 2017.

Total loans ended the quarter at $24.88 billion, up $95.6 million or 1.6% annualized from the previous quarter and up $624.6 million or 2.6% as compared to the first quarter 2017.

Commercial and industrial loans grew by $78.3 million or 2.6% annualized from the previous quarter and $369.2 million or 3.1% as compared to the first quarter 2017.

Consumer loans grew by $115.5 million or 8.0% annualized from the previous quarter and $885.2 million or 17.4% as compared to the first quarter 2017.

Commercial real estate loans declined by $99.6 million or 5.8% annualized from the previous quarter and declined $631.6 million or 8.5% as compared to first quarter 2017.

Total average deposits for the quarter were $25.79 billion, down $497.9 million or 7.7% annualized from the previous quarter and up $869.2 million or 3.5% as compared to the first quarter 2017.

Average non-time core deposits decreased $120.4 million or 2.3% annualized from the previous quarter and increased $504.1 million or 2.5% as compared to the first quarter 2017.

Total deposits ended the quarter at $26.25 billion, up $105.6 million or 1.6% annualized from fourth quarter 2017 and up $1.15 billion or 4.6% as compared to the first quarter 2017.

The loan to deposit ratio remained stable at 95%.

Core Performance

Total revenues1 were $341.3 million in the first quarter, up from $339.1 million in the previous quarter, and up $37.2 million or 12.2% from $304.1 million in the first quarter 2017.

Net interest income was $274.3 million, up $4.6 million or 1.7% from the previous quarter and up $34.4 million or 14.3% from the first quarter 2017.

Net interest margin was 3.78%, up 13 basis points from the previous quarter. Yield on earning assets was 4.31%, up 16 basis points from the previous quarter, and the effective cost of funds was 0.53%, up 3 basis points from the previous quarter.

Total non-interest income was $67.0 million, down $2.3 million from the previous quarter and down $4.8 million or 6.7% from first quarter 2017.

The first quarters of 2018 and 2017 include net decreases in fair value of private equity investments of $3.1 million and $1.8 million, respectively. First quarter 2017 also included net investment securities gains of $7.7 million.

Adjusted non-interest income was $70.1 million, up $849 thousand from the previous quarter and up $4.1 million or 6.2% as compared to the first quarter 2017.

Core banking fees2 were $35.6 million, up $303 thousand or 0.9% from the previous quarter and up $900 thousand or 2.6% from first quarter 2017.

Fiduciary and asset management fees, brokerage revenue, and insurance revenues were $23.3 million, up $1.6 million or 7.2% from the previous quarter and up $2.7 million or 12.9% from first quarter 2017.
Total non-interest expense was $195.2 million, down $31.4 million or 13.8% from the previous quarter and down 1.1% from the first quarter 2017.

The first quarter 2018 includes a $2.6 million reduction in litigation contingency accruals. The fourth quarter 2017 included a $23.2 million loss on early extinguishment of debt, and the first quarter 2017 included $6.5 million in restructuring charges.

Adjusted non-interest expense was $197.8 million, down $3.3 million or 1.6% from the previous quarter and up $7.2 million or 3.8% from the first quarter 2017.

Employment expense of $113.7 million increased $2.5 million or 2.2% from the previous quarter and 6.1% from the first quarter 2017.

Occupancy and equipment expense of $31.5 million increased $1.4 million or 4.5% from the previous quarter and 7.3% from the first quarter 2018.

Other expenses were $52.6 million in the quarter, down $7.1 million or 11.9% from the previous quarter and down $1.5 million or 2.7% from the first quarter 2017.

Efficiency ratio for the first quarter was 57.16% as compared to 66.77% in the previous quarter and 64.84% in the first quarter 2017.

Adjusted efficiency ratio for the first quarter was 57.42% as compared to 59.29% in the previous quarter and 62.25% in the first quarter 2017.

Credit Quality

Non-performing loans were $120.1 million at March 31, 2018, up $4.5 million or 3.9% from the previous quarter and down $38.3 million or 24.2% from March 31, 2017. The non-performing loan ratio was 0.48% at March 31, 2018, compared to 0.47% at the end of the previous quarter and 0.65% at March 31, 2017.

Total non-performing assets were $131.2 million at March 31, 2018, compared to $130.6 million in the previous quarter and down $56.1 million or 29.9% from March 31, 2017. The non-performing asset ratio was 0.53% at March 31, 2018, unchanged from the previous quarter and down from 0.77% at March 31, 2017.

Net charge-offs were $4.3 million in the first quarter 2017, down $4.7 million or 52.3% from $9.0 million in the previous quarter and down 38.1% from the first quarter 2017. The annualized net charge-off ratio was 0.07% in the first quarter as compared to 0.15% in the previous quarter and 0.12% in the first quarter 2017.

Total delinquencies (consisting of loans 30 or more days past due and still accruing) remain low at 0.22% of total loans at March 31, 2018, as compared to 0.21% in the previous quarter and 0.26% at March 31, 2017.

Capital

During the first quarter 2018, Synovus repurchased $26.7 million in common stock, as part of the previously announced share repurchase program of up to $150 million. Additionally, Synovus declared common dividends of $0.25 per share, a 67% increase from the previous quarter.

Common Equity Tier 1 ratio was 10.11% at March 31, 2018, up from 9.99% at December 31, 2017.

Tier 1 Capital ratio was 10.51% at March 31, 2018, up from 10.38% at December 31, 2017.

Total Risk Based Capital ratio was 12.37% at March 31, 2018, up from 12.23% at December 31, 2017.

Tier 1 Leverage ratio was 9.37% at March 31, 2018, up from 9.19% at December 31, 2017.

Tangible Common Equity ratio was 8.79% at March 31, 2018, compared to 8.88% at December 31, 2017.