Synovus Financial Corp. reported financial results for the quarter ended June 30, 2018.

Second Quarter Highlights

• Net income available to common shareholders was $108.6 million or $0.91 per diluted share as compared to $100.6 million or $0.84 per diluted share for the first quarter 2018 and $73.4 million or $0.60 per diluted share for the second quarter 2017.

  • Adjusted earnings per diluted share for the second quarter 2018 were $0.92, up 7.8% from the first quarter 2018 and a 52.6% increase from the second quarter 2017.

• Return on average assets was 1.42%, up 8 basis points from the previous quarter and up 42 basis points from the second quarter 2017.

• Return on average common equity was 15.39%, up 77 basis points from the previous quarter and up 505 basis points from the second quarter 2017.

  • Adjusted return on average common equity was 15.59%, an improvement of 510 basis points from the second quarter 2017.

  • Adjusted return on average tangible common equity was 15.97%, an increase of 522 basis points from the second quarter 2017.

• Total loans ended the quarter at $25.13 billion, up $251.0 million or 4.0% annualized from the previous quarter and up $703.5 million or 2.9% as compared to the second quarter 2017.

• Total average deposits grew $480.0 million or 7.5% annualized from the previous quarter and $1.28 billion or 5.1% versus the second quarter 2017.

• Total ending deposits increased $189.2 million or 2.9% from the previous quarter and increased $1.22 billion or 4.9% from the second quarter 2017.

• Total revenues¹ were $359.3 million, an increase of 12.3% from the prior-year quarter.

• Net interest margin was 3.86%, up 8 basis points from the previous quarter and up 35 basis points from the second quarter 2017.

• Efficiency ratio was 56.78%, down 38 basis points from the previous quarter and down 312 basis points from the prior-year quarter.

• Credit quality metrics remained favorable, with a non-performing asset ratio of 50 basis points, down 3 basis points from the previous quarter and down 23 basis points from the second quarter 2017.

• The effective tax rate in the second quarter of 2018 was 21.8% compared to 35.5% in the prior-year quarter.

• On June 21, Synovus completed a public offering of $200 million of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D.

“This was another solid quarter of performance for Synovus, with strong earnings and revenue growth,” said Kessel Stelling, Synovus chairman and CEO. “During the first half of the year, we successfully completed our transition to a unified brand, completed a public offering of $200 million of Series D Preferred Stock, and were ranked among American Banker’s most reputable banks for the fourth consecutive year. We are energized about the strong momentum going into the second half of the year as we focus on growing relationships and strengthening our communities.”

Balance Sheet

• Total average loans were $24.95 billion, up $93.9 million or 1.5% annualized from the previous quarter and $596.3 million or 2.4% as compared to the second quarter 2017.

• Total loans ended the quarter at $25.13 billion, up $251.0 million or 4.0% annualized from the previous quarter and up $703.5 million or 2.9% as compared to the second quarter 2017.

  • Commercial and industrial loans grew by $173.6 million or 5.8% annualized from the previous quarter and $532.5 million or 4.5% as compared to the second quarter 2017.

  • Consumer loans grew by $267.8 million or 18.0% annualized from the previous quarter and $945.8 million or 17.9% as compared to the second quarter 2017.

  • Commercial real estate loans declined by $191.6 million or 11.2% annualized from the previous quarter and declined $778.1 million or 10.5% as compared to the second quarter 2017.

• Total average deposits were $26.27 billion, up $480.0 million or 7.5% annualized from the previous quarter and $1.28 billion or 5.1% as compared to the second quarter 2017.

Core Performance

• Total revenues¹ were $359.3 million, up $17.9 million or 5.3% from the previous quarter and $39.5 million or 12.3% from the second quarter 2017.

• Net interest income was $284.6 million, up $10.3 million or 3.8% from the previous quarter and up 13.3% from the second quarter 2017.

• Net interest margin was 3.86%, up 8 basis points from the previous quarter. Yield on earning assets was 4.46%, up 16 basis points from the previous quarter, and the effective cost of funds was 0.61%, up 8 basis points from the previous quarter.

• Total non-interest income was $73.4 million, up $6.3 million or 9.5% compared to the previous quarter and up $4.7 million or 6.8% from second quarter 2017.

  • Adjusted non-interest income was $74.7 million, up $4.6 million or 6.6% from the previous quarter and up $4.7 million or 6.7% as compared to the second quarter 2017.

• Core banking fees² were $37.4 million, up $1.6 million or 4.4% from the previous quarter and $757 thousand or 2.1% year-over-year.

• Fiduciary and asset management fees, brokerage revenue, and insurance revenues were $24.8 million, up $1.5 million or 6.1% from the previous quarter and 19.1% from the prior-year quarter.

• Mortgage banking income was $4.8 million, down 4.1% from the previous quarter and down 16.3% from the second quarter 2017.

• Total non-interest expense was $204.1 million, up $8.9 million or 4.5% from the previous quarter and up 6.4% from the second quarter 2017.

  • Second quarter 2018 includes a $2.3 million expense for a valuation adjustment to the Visa derivative, partially offset by a $1.4 million benefit from recovery of litigation settlement expenses.

• Adjusted non-interest expense was $202.7 million, up $4.9 million or 2.5% from the previous quarter and $11.3 million or 5.9% from the second quarter 2017.

  • Employment expense of $111.9 million declined 1.6% from the previous quarter and increased 6.3% from the second quarter 2017.

  • Occupancy and equipment expense of $32.7 million increased 3.7% from the previous quarter and increased 9.1% from the prior-year quarter.

  • Other expenses of $25.2 million increased $4.8 million or 23.3% from the previous quarter and increased 27.7% from the second quarter 2017.

  • Efficiency ratio was 56.78%, compared to 57.16% the previous quarter and 59.90% in the second quarter 2017.

    • Adjusted efficiency ratio was 56.41%, an improvement of 101 basis points from the first quarter 2018 and 315 basis points from the second quarter 2017.

Credit Quality

• Non-performing loans were $117.3 million at June 30, 2018, down $2.8 million from March 31, 2018, and down $42.0 million or 26.4% from June 30, 2017. The non-performing loan ratio was 0.47% at June 30, 2018, compared to 0.48% at March 31, 2018, and 0.65% at June 30, 2017.

• Total non-performing assets were $126.3 million at June 30, 2018, down $4.8 million from March 31, 2018 and down $52.6 million or 29.4% from June 30, 2017. The non-performing asset ratio was 0.50% at June 30, 2018, as compared to 0.53% at March 31, 2018, and 0.73% at June 30, 2017.

• Net charge-offs were $17.8 million in the second quarter 2018, up $13.6 million from $4.3 million in the previous quarter and up $2.2 million from $15.7 million in the second quarter 2017. The annualized net charge-off ratio was 0.29% in the second quarter as compared to 0.07% in the previous quarter and 0.26% in the second quarter 2017.

• Total delinquencies (consisting of loans 30 or more days past due and still accruing) remained low at 0.22% of total loans at June 30, 2018, unchanged from the previous quarter and down 5 basis points from June 30, 2017.

Capital

• During the second quarter 2018, Synovus repurchased $50.0 million in common stock, as part of the previously announced share repurchase program of up to $150 million.

• On June 21, Synovus completed a public offering of $200 million of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D.

• Common Equity Tier 1 ratio was 10.11% at June 30, 2018, compared to 10.09% at March 31, 2018.

• Tier 1 Capital ratio was 11.25% at June 30, 2018, compared to 10.53% at March 31, 2018.

• Total Risk Based Capital ratio was 13.07% at June 30, 2018, compared to 12.40% at March 31, 2018.

• Tier 1 Leverage ratio was 10.03% at June 30, 2018, compared to 9.37% at March 31, 2018.

• Tangible Common Equity ratio was 8.77% at June 30, 2018, compared to 8.79% at March 31, 2018.