Synovus Announces 3Q Earnings, $250M Stock Repurchase Program, Dividend
Press release from the issuing company
Tuesday, October 21st, 2014
Synovus Financial Corp. today reported financial results for the quarter ended September 30, 2014.
Third Quarter Highlights
- Net income available to common shareholders for the third quarter of 2014 was $44.2 million or $0.32 per diluted share as compared to $44.3 million, or $0.32 per diluted share for the second quarter of 2014.
- Net income available to common shareholders for the third quarter of 2014 was $51.3 million or $0.37 per diluted common share, excluding net litigation related expenses, restructuring charges, and Visa indemnification charges totaling $7.0 million after-tax.
- Total loans grew $132.8 million sequentially.
- Credit quality continued to improve as the NPL ratio declined to 1.18% at September 30, 2014 from 1.27% at June 30, 2014 and 2.29% a year ago, and the annualized net charge-off ratio for the third quarter declined to 0.24% and 0.41% year-to-date compared to 0.47% for the third quarter of 2013 and 0.75% for year-to-date 2013.
- All Tier 1 capital ratios continued to expand with the Tier 1 common equity ratio ending the quarter at 10.60%, up 18 basis points from the prior quarter.
“The announced stock repurchase program and common dividend increase from $0.07 to $0.10 per share reflect our strong capital position, significantly improved risk profile, and earnings momentum,” said Kessel D. Stelling, Synovus Chairman and CEO. “These actions will provide increased returns to our broad shareholder base while still allowing us the flexibility needed to reinvest in the business and continue our pursuit of growth opportunities. These opportunities include the acquisition of specialized talent that enables us to reach untapped customer segments, expansion into new business lines, and significant investments in marketing and technology. Fundamentals such as expense management and credit quality remain high priorities as evidenced by our continued progress during the third quarter, but delivering exceptional customer service backed by comprehensive financial solutions is the primary focus of our team’s efforts and energy day-to-day.”
Balance Sheet Fundamentals
- Total loans ended the quarter at $20.59 billion, an $877.0 million or 4.4% increase from the third quarter of 2013.
- Total loans grew $132.8 million or 2.6% annualized compared to the second quarter of 2014.
- Retail loans grew by $86.0 million, or 9.1% annualized.
- Commercial real estate loans grew by $129.0 million or 7.7% annualized.
- C&I loans declined by $82.4 million, or 3.2% annualized.
- Total average deposits for the quarter were $20.94 billion, up $75.0 million or 1.4% annualized from the previous quarter.
- Average core deposits for the quarter were $19.44 billion, down $18.6 million compared to the second quarter of 2014.
- Average core deposits, excluding state, county, and municipal deposits, grew by $204.5 million or 4.7% annualized compared to the previous quarter.
Core Performance
Adjusted pre-tax, pre-credit costs income was $103.5 million for the third quarter of 2014, an increase of $4.6 million from $98.9 million for the second quarter of 2014.
- Net interest income was $206.3 million for the third quarter of 2014, up $1.2 million from $205.1 million in the previous quarter.
- The net interest margin declined four basis points to 3.37% compared to 3.41% in the second quarter of 2014. The yield on earning assets was 3.81%, five basis points lower than the second quarter of 2014, and the effective cost of funds declined one basis point to 0.44%.
- Total non-interest income was $64.0 million, up $598 thousand compared to $63.4 million for the second quarter of 2014.
- Core banking fees[1] of $32.8 million were up $125 thousand, driven by a $921 thousand or 4.8% increase in service charges on deposits and a $513 thousand or 5.9% decline in bankcard fees.
- Financial Management Services revenues, consisting primarily of fiduciary and asset management fees and brokerage revenue, increased $382 thousand, driven by brokerage revenue growth.
- Mortgage banking income decreased $618 thousand or 11.7%.
- Mortgage originations totaled $197 million, up from $188 million in the prior quarter.
- Decline in revenue was driven by lower gains on mortgage loan sales.
- Employment expense was $93.9 million, up $1.3 million, primarily due to one more pay day in the quarter and merit increases.
- Advertising expense was $7.2 million, an increase of $896 thousand.
- Professional fees were $2.5 million, down $5.7 million, reflecting the benefit from a $3.6 million net insurance recovery for incurred legal fees related to litigation.
- Total non-interest expense for the third quarter of 2014 was $193.7 million, up $11.6 million from the second quarter of 2014, primarily due to net litigation related expenses. Adjusted non-interest expense for the third quarter of 2014 was $166.8 million, down $2.7 million or 1.6% compared to $169.5 million for the second quarter of 2014.
Credit Quality
Broad-based improvement in credit quality continued.
- Total credit costs were $15.7 million in the third quarter of 2014, down 7.2% from $16.9 million in the second quarter of 2014 and down 29.8% from $22.4 million in the third quarter of 2013.
- Non-performing loans, excluding loans held for sale, were $242.4 million at September 30, 2014, down $17.2 million or 6.6% from the previous quarter, and down $208.5 million or 46.2% from the third quarter of 2013. The non-performing loan ratio was 1.18% at September 30, 2014, down from 1.27% at the end of the previous quarter and 2.29% at September 30, 2013.
- Total non-performing assets were $324.4 million at September 30, 2014, down $38.8 million or 10.7% from the previous quarter, and down $262.5 million or 44.7% from the third quarter of 2013. The non-performing asset ratio was 1.57% at September 30, 2014, compared to 1.77% at the end of the previous quarter and 2.96% at September 30, 2013.
- Net charge-offs were $12.3 million in the third quarter of 2014, down $23.1 million or 65.4% from $35.4 million in the second quarter of 2014. The annualized net charge-off ratio was 0.24% in the third quarter, down from 0.69% in the previous quarter and 0.47% in the third quarter of 2013.
Capital Ratios
Capital ratios remained strong.
- Tier 1 Common Equity ratio was 10.60% at September 30, 2014, up from 10.42% at June 30, 2014.
- Tier 1 Capital ratio was 11.19% at September 30, 2014, up from 11.01% at June 30, 2014.
- Total Risk Based Capital ratio was 13.17% at September 30, 2014, up from 13.03% at June 30, 2014.
- Tier 1 Leverage ratio was 9.85% at September 30, 2014, up from 9.69% at June 30, 2014.
- Tangible Common Equity ratio was 11.04% at September 30, 2014, up from 10.91% at June 30, 2014.
Capital Management
- The Board of Directors has authorized a share repurchase program of up to $250 million of the company’s common stock, to be executed over the next 12 months.
- Additionally, the Board of Directors has approved an increase in the company’s quarterly common stock dividend from $0.07 to $0.10 per share, effective with the quarterly dividend payable in January 2015.
Third Quarter Earnings Conference Call
Synovus will host an earnings highlights conference call at 8:30 a.m. EDT on October 21, 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.