SYNOVUS FINANCIAL CORP. In this Report, the words "Synovus," "the Company," "we," "us," and "our" refer
to
FORWARD-LOOKING STATEMENTS
Certain statements made or incorporated by reference in this Report which are not statements of historical fact, including those under "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Report, constitute forward-looking statements within the meaning of, and subject to the protections of, Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements include statements with respect to Synovus' beliefs, plans, objectives, goals, targets, expectations, anticipations, assumptions, estimates, intentions and future performance and involve known and unknown risks, many of which are beyond Synovus' control and which may cause Synovus' actual results, performance or achievements or the financial services industry or economy generally, to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. 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," "predicts," "could," "should," "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 financial services industry and economy in general. Forward-looking statements are based on the 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 document. Many of these factors are beyond Synovus' ability to control or predict. These factors include, but are not limited to: (1) the risk that competition in the financial services industry,
including competition
from nontraditional banking institutions such as Fintechs, may adversely affect our
future earnings and growth;
(2) the risk that we may not realize the expected benefits from our strategic
initiatives or that we may not be able to realize growth and efficiency gains in
the time period expected, which could regularly affect our future profitability;
(3) our ability to attract and retain employees and the impact of
senior leadership
transitions that are key to our strategic initiatives;
(4) the risk that an economic downturn and contraction, including a recession, could
have a material adverse effect on our capital, financial condition, credit quality,
results of operations and future growth, including the risk that the strength of
the current economic environment could be weakened by the continued impact of
COVID-19 and by current supply chain challenges andinflation;
(5) risks related to our strategic implementation of new lines of
business, new
products and services, and new technologies and an expansion of our existing
business opportunities with a renewed focus on innovation;
(6) the risk that we may be required to make substantial expenditures to keep pace with
regulatory initiatives and the rapid technological changes in the financial
services market;
(7) the risk that prolonged periods of inflation could have on our business,
profitability and our stock price;
(8) changes in the interest rate environment, including changes to the federal funds
rate, and competition in our primary market area may result in increased funding
costs or reduced earning assets yields, thus reducing margins and net interest
income;
(9) the impact of recent and proposed changes in governmental policy, laws and
regulations, proposed and recently enacted changes inmonetary policy and in the
regulation and taxation of banks and financial institutions, or the interpretation
or application thereof and the uncertainty of futureimplementation and enforcement
of these regulations, including the risk of inflationary pressure and interest rate
increases;
(10) the risk that our current and future information technology system enhancements and
operational initiatives may not be successfully implemented, which could negatively
impact our operations;
(11) risks related to our business relationships with, and reliance upon, third parties
that have strategic partnerships with us or that provide key components of our
business infrastructure, including the costs of services and products provided to
us by third parties, and risks related to disruptions in service or financial
difficulties with a third-party vendor or business relationship;
(12) the risk that our enterprise risk management framework, our compliance program, or
our corporate governance and supervisory oversight functions may not identify or
address risks adequately, which may result in unexpected losses;
(13) risks that our asset quality may deteriorate or that our allowance for credit
losses may prove to be inadequate or may be negatively affected by credit risk
exposures;
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(14) risks related to the ability of our operational framework to identify and manage
risks associated with our business such as credit risk, compliance risk,
reputational risk, and operational risk, including by virtue of our relationships
with third-party business partners, as well as our relationship with third-party
vendors and other service providers;
(15) the risk that we may be exposed to potential losses in the event of fraud and/or
theft, or in the event that a third-party vendor, obligor, or business partner fails
to pay amounts due to us under that relationship or under any arrangement that we
enter into with them;
(16) our ability to identify and address cyber-security risks such as data security
breaches, malware, "denial of service" attacks, "hacking" and identity theft, a
failure of which could disrupt our business and result in the disclosure of and/or
misuse or misappropriation of confidential or proprietary information, disruption or
damage of our systems, increased costs, significant losses, or adverse effects to
our reputation;
(17) the risks and uncertainties related to the impact of the continuing COVID-19
pandemic on our assets, business, capital and liquidity, financial condition,
prospects and results of operations;
(18) changes in the cost and availability of funding due to changes in the deposit market
and credit market;
(19) the impact on our financial results, reputation, and business if we are unable to
comply with all applicable federal and state regulations or other supervisory
actions or directives and any necessary capital initiatives;
(20) the risks that if economic conditions worsen further or regulatory capital rules are
modified, we may be required to undertake initiatives to improve or conserve our
capital position;
(21) restrictions or limitations on access to funds from historical and alternative
sources of liquidity could adversely affect our overall liquidity, which could
restrict our ability to make payments on our obligations and our ability to support
asset growth and sustain our operations and the operations of (22) our ability to receive dividends from our subsidiaries could affect our liquidity,
including our ability to pay dividends or take other capital actions;
(23) risks related to our ESG strategies and initiatives, the scope and pace of which
could alter our reputation and shareholder, employee, client and third-party
relationships;
(24) risks related to the continued use, availability and reliability of LIBOR and the
risks related to the transition from LIBOR to any alternate reference rate we may
use;
(25) the risk that we may not be able to identify suitable bank and non-bank acquisition
opportunities as part of our growth strategy and even if we are able to identify
attractive acquisition opportunities, we may not be able to complete such
transactions on favorable terms or realize the anticipated benefits from such
acquisitions;
(26) the risk that we could realize losses if we sell non-performing assets and the
proceeds we receive are lower than the carrying value of such assets;
(27) risks related to regulatory approval to take certain actions, including any
dividends on our common stock or preferred stock, anyrepurchases of common stock or
any other issuance or redemption of any other regulatory capital instruments;
(28) the risk that our concentrated operations in the
vulnerable to local economic conditions, local weather catastrophes, public health
issues and other external events;
(29) the costs and effects of litigation, investigations or similar matters, or adverse
facts and developments related thereto;
(30) risks related to the fluctuation in our stock price and general volatility in the
stock market;
(31) the effects of any damages to our reputation resulting from developments related to
any of the items identified above; and
(32) other factors and other information contained in this Report and in other reports
and filings that we make with the SEC under the Exchange Act, including, without
limitation, those found in "Part II - Item 1A. Risk Factors" of this Report.
For a discussion of these and other risks that may cause actual results to differ from expectations, refer to "Part I - Item 1A. Risk Factors" and other information contained in Synovus' 2021 Form 10-K and our other periodic filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, that we file from time to time with theSEC . All written or oral forward-looking statements that are made by or are attributable to Synovus are expressly qualified by this cautionary notice. You should not place undue reliance on any forward-looking statements since those statements speak only as of the date on which the statements are made. Synovus undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of new information or unanticipated events, except as may otherwise be required by law.
INTRODUCTION AND CORPORATE PROFILE
Synovus Financial Corp. is a financial services company and a registered bank holding company headquartered inColumbus, Georgia . Through its wholly-owned subsidiary,Synovus Bank , aGeorgia state-chartered bank that is a member of theFederal Reserve System , the Company provides commercial and consumer banking in addition to a full suite of specialized 38 -------------------------------------------------------------------------------- products and services including private banking, treasury management, wealth management, mortgage services, premium finance, asset-based lending, structured lending, and international banking. Synovus also provides financial planning and investment advisory services through its wholly-owned subsidiaries,Synovus Trust andSynovus Securities , as well as itsGLOBALT and Creative Financial Group divisions.
The following financial review summarizes the significant trends, changes in our business, transactions, and other matters affecting Synovus' results of operations for the three and six months endedJune 30, 2022 and financial condition as ofJune 30, 2022 andDecember 31, 2021 . This discussion supplements, and should be read in conjunction with, the unaudited interim consolidated financial statements and notes thereto contained elsewhere in this Report and the consolidated financial statements of Synovus, the notes thereto, and management's discussion and analysis contained in Synovus' 2021 Form 10-K.
Management's Discussion and Analysis of Financial Condition and Results of Operations consists of:
•Discussion of Results of Operations - Reviews Synovus' financial performance, as well as selected balance sheet items, items from the statements of income, significant transactions, and certain key ratios that illustrate Synovus' performance. •Credit Quality, Capital Resources and Liquidity - Discusses credit quality, market risk, capital resources, and liquidity, as well as performance trends. It also includes a discussion of liquidity policies, how Synovus obtains funding, and related performance.
•Additional Disclosures - Discusses additional important matters including critical accounting policies and non-GAAP financial measures.
A reading of each section is important to understand fully our financial performance.
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DISCUSSION OF RESULTS OF OPERATIONS
Table 1 - Consolidated Financial Highlights
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands, except per
share data) 2022 2021 Change 2022 2021 Change
Net interest income $ 425,388 $ 381,860 11 % $ 817,635 $ 755,716 8 %
Provision for (reversal of) credit
losses 12,688 (24,598) nm 24,088 (43,173) nm
Non-interest revenue 97,266 107,087 (9) 202,600 218,043 (7)
Total TE revenue 523,614 489,738 7 1,022,059 975,324 5
Non-interest expense 282,051 270,531 4 554,501 537,665 3
Income before income taxes 227,915 243,014 (6) 441,646 479,267 (8)
Net income 178,052 186,200 (4) 349,088 373,292 (6)
Net income available to common
shareholders 169,761 177,909 (5) 332,507 356,711 (7)
Net income per common share, basic 1.17 1.20 (3) 2.29 2.41 (5)
Net income per common share, diluted 1.16 1.19 (3) 2.27 2.38 (5)
Net interest margin(1) 3.22 % 3.02 % 20 bps 3.11 % 3.03 % 8 bps
Net charge-off ratio(1) 0.16 0.28 (12) 0.18 0.24 (6)
Return on average assets(1) 1.26 1.36 (10) 1.24 1.38 (14)
Efficiency ratio-TE 53.87 55.24 (137) 54.25 55.13 (88)
(1) Annualized
Sequential Quarter
(dollars in thousands) June 30, 2022 March 31, 2022 Change June 30, 2021 Year-Over-Year Change
Loans, net of deferred fees and
costs $ 41,204,780 $ 40,169,150 $ 1,035,630 $ 38,236,018 $ 2,968,762
Total average loans 40,590,875 39,350,761 1,240,114 38,496,477 2,094,398
Total deposits 49,034,700 48,656,244 378,456 47,171,962 1,862,738
Core deposits (excludes brokered
deposits) 45,411,583 46,618,560 (1,206,977) 44,203,000 1,208,583
Core transaction deposits (excludes
brokered and public fund deposits) 37,399,915 38,285,649 (885,734) 35,506,980 1,892,935
Total average deposits 49,015,994 49,345,364 (329,370) 47,349,646 1,666,348
Non-performing assets ratio 0.33 % 0.40 % (7) bps 0.46 % (13) bps
Non-performing loans ratio 0.26 0.33 (7) 0.42 (16)
Past due loans over 90 days 0.01 0.01 - 0.01 -
CET1 capital $ 4,612,070 $ 4,485,661 $ 126,409 $ 4,214,720 $ 397,350
Tier 1 capital 5,149,215 5,022,806 126,409 4,751,865 397,350
Total risk-based capital 6,059,074 5,936,543 122,531 5,725,176 333,898
CET1 capital ratio 9.46 % 9.49 % (3) bps 9.75 % (29) bps
Tier 1 capital ratio 10.56 10.63 (7) 11.00 (44)
Total risk-based capital ratio 12.43 12.56 (13) 13.25 (82)
Total shareholders' equity to total
assets ratio 7.99 8.55 (56) 9.53 (154)
Return on average common equity(1) 16.48 14.20 228 15.40 108
(1) Quarter annualized
Executive Summary
Net income available to common shareholders for the second quarter of 2022 was
$169.8 million , or $1.16 per diluted common share, compared to $177.9 million ,
or $1.19 per diluted common share for the second quarter of 2021. Net income
available to common shareholders for the first six months of 2022 was $332.5
million , or $2.27 per diluted common share, compared to $356.7 million , or $2.38
per diluted common share for the first six months of 2021. The year-over-year
decreases for all time periods were impacted by a slowing of allowance releases
due primarily to the increased economic uncertainty present from inflation
concerns and geopolitical tensions, resulting in provision for credit losses of
$12.7 million and $24.1 million , respectively, for the three and six months
ended June 30, 2022 , and reversals of $24.6 million and $43.2 million for the
three and six months ended June 30, 2021 , respectively.
Net interest income for the six months ended June 30, 2022 was $817.6 million ,
up $61.9 million , or 8%, compared to the same period in 2021, including $10.5
million in PPP fees during 2022 and $45.2 million in 2021. Net interest margin
was up 8
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-------------------------------------------------------------------------------- bps over the comparable six-month period to 3.11% due primarily to positive re-mixing within earning assets and our asset-sensitive rate risk position, partially offset by a$34.7 million decline in PPP fees. Net interest margin for the second quarter was up 22 bps sequentially, aided by higher interest rates, lower cash balances, and managed deposit repricing. Non-interest revenue for the second quarter of 2022 was$97.3 million , down$9.8 million , or 9%, compared to the second quarter of 2021, and year-to-date was$202.6 million , down$15.4 million , or 7%, from the first half of 2021, primarily due to lower mortgage banking income and a$7.0 million write-down on a minority fintech investment partially offset by higher core banking fees(1) and higher wealth revenue(2). Non-interest expense for the second quarter of 2022 was$282.1 million , up$11.5 million , or 4%, while year-to-date non-interest expense of$554.5 million was up$16.8 million , or 3%, compared to the same periods in 2021. The increase in non-interest expense during 2022 was primarily due to an increase in expense associated with merit and elevated performance incentives, resumption of normal business activities post COVID-19, and investments in new growth initiatives. AtJune 30, 2022 , loans, net of deferred fees and costs, of$41.20 billion , increased$1.89 billion , or 5%, fromDecember 31, 2021 . Excluding a$312.9 million decline in PPP loans, primarily from forgiveness, loans increased$2.21 billion , or 6%, led by growth in C&I and CRE loans as commercial production and line utilization continue to drive growth. AtJune 30, 2022 , credit metrics remained stable and near historically low levels with NPAs at 33 bps, NPLs at 26 bps, and total past dues at 14 bps, as a percentage of total loans. Net charge-offs remained low at$16.6 million , or 16 bps annualized, and$35.2 million , or 18 bps annualized, for the three and six months endedJune 30, 2022 . The ACL atJune 30, 2022 totaled$458.4 million , a decrease of$11.1 million fromDecember 31, 2021 , and resulted primarily from continued positive trends in our credit performance, including reduction of NPLs, and quality and mix of new loan originations, mostly offset by an uncertain and generally negative economic outlook. The ACL to loans coverage ratio atJune 30, 2022 was 1.11%, 8 bps lower compared toDecember 31, 2021 . Total period-end deposits atJune 30, 2022 decreased$392.6 million compared toDecember 31, 2021 as lower money market, public funds, and time deposits impacted by rate-driven outflows and normal client liquidity deployment were mostly offset by increases in brokered deposits and higher non-interest-bearing demand deposits. Total deposit costs were 15 bps during the second quarter of 2022 and decreased 1 bp from the prior year comparable period, primarily due to an increase in non-interest-bearing deposits. Total deposit costs increased 4 bps compared to the sequential quarter due to deposit repricing associated with recent rate hikes. AtJune 30, 2022 , Synovus' CET1 ratio of 9.46%, well in excess of regulatory requirements, declined 4 bps compared toDecember 31, 2021 , driven by significant growth in risk-weighted assets, largely from loan growth, and return of capital primarily through common stock shareholder dividends, mostly offset by strong capital generation from earnings. Our commitment remains to allocate internally generated capital toward our strategic priorities of client loan growth and a stable dividend while also maintaining a strong and efficient capital position. More detail on Synovus' financial results for the three and six months endedJune 30, 2022 may be found in subsequent sections of "Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Report. See also "Part 1 - Item 1A. - Risk Factors" of Synovus' 2021 Form 10-K. (1) Core banking fees consist of service charges on deposit accounts, card fees, and several other non-interest revenue components including letter of credit fees, ATM fee income, line of credit non-usage fees, gains (losses) from sales of SBA loans, and miscellaneous other service charges. (2) Consists of fiduciary and asset management, brokerage, and insurance revenue. 41
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Changes in Financial Condition
During the six months endedJune 30, 2022 , total assets increased$65.5 million to$57.38 billion . We deployed liquidity as cash and cash equivalents decreased$1.34 billion , and total loans increased$1.89 billion , with commercial production and line utilization continuing to drive growth. Investment securities available for sale decreased$1.03 billion , driven by net unrealized losses from increases in market interest rates in the first half of 2022. The loan to deposit ratio was 84.0% atJune 30, 2022 , higher as compared to 79.5% atDecember 31, 2021 , and 81.1% atJune 30, 2021 . Total shareholders' equity atJune 30, 2022 decreased$712.4 million compared toDecember 31, 2021 and included net income of$349.1 million , offset by dividends declared on common and preferred stock of$98.9 million and$16.6 million , respectively, changes in after-tax net unrealized losses on investment securities available for sale and cash flow hedges of$801.5 million and$142.8 million , respectively, and share repurchases of$13.0 million .
Loans
The following table compares the composition of the loan portfolio at
Table 2 - Loans by Portfolio Class
June 31, 2022 vs.December 31 ,June 31, 2022 vs.June 31, 2021 (dollars in thousands)June 30, 2022 December 31, 2021 2021 ChangeJune 30, 2021 Change Commercial, financial and
agricultural$ 13,018,089 31.6 %$ 12,147,858 30.9 %$ 870,231 7 %$ 12,174,835 31.8 %$ 843,254 7 % Owner-occupied 7,760,236 18.8 7,475,066 19.0 285,170 4 7,064,599 18.5 695,637 10 Total commercial and industrial 20,778,325 50.4 19,622,924 49.9 1,155,401 6 19,239,434 50.3 1,538,891 8 Investment properties 10,408,048 25.3 9,902,776 25.2 505,272 5 9,218,013 24.1 1,190,035 13 1-4 family properties 641,855 1.6 645,469 1.6 (3,614) (1) 636,344 1.7 5,511 1 Land and development 453,514 1.0 466,866 1.2 (13,352) (3) 506,694 1.3 (53,180) (10) Total commercial real
estate 11,503,417 27.9 11,015,111 28.0 488,306 4 10,361,051 27.1 1,142,366 11 Consumer mortgages 5,124,523 12.4 5,068,998 12.9 55,525 1 5,200,718 13.6 (76,195) (1) Home equity 1,579,218 3.9 1,361,419 3.5 217,799 16 1,395,717 3.7 183,501 13 Credit cards 194,290 0.5 204,172 0.5 (9,882) (5) 196,207 0.5 (1,917) (1) Other consumer loans 2,025,007 4.9 2,039,334 5.2 (14,327) (1) 1,842,891 4.8 182,116 10 Total consumer 8,923,038 21.7 8,673,923 22.1 249,115 3 8,635,533 22.6 287,505 3 Loans, net of deferred fees and costs$ 41,204,780 100.0 %$ 39,311,958 100.0 %$ 1,892,822 5 %$ 38,236,018 100.0 %$ 2,968,762 8 % AtJune 30, 2022 , loans, net of deferred fees and costs, of$41.20 billion , increased$1.89 billion , or 5%, fromDecember 31, 2021 . This included a$312.9 million decline in PPP loans, primarily from forgiveness, and growth primarily in C&I and CRE loans, as commercial production and line utilization continue to drive growth. As a result of our strong year-to-date loan growth of 6% excluding PPP loans, we expect to be at or above the upper end of our previous guidance of 6% to 8% for 2022. C&I loans remain the largest component of our loan portfolio, representing 50.4% of total loans, while CRE and consumer loans represent 27.9% and 21.7%, respectively. Our portfolio composition is guided by our strategic growth plan, in conjunction with a comprehensive concentration management policy, which sets limits for C&I, CRE, and consumer loan levels as well as for sub-categories therein.
Synovus participated in the PPP, which is a loan program that originated from the CARES Act. The total balance of all PPP loans was$86.7 million as ofJune 30, 2022 , down$312.9 million , or 78%, compared to$399.6 million as ofDecember 31, 2021 , primarily due to$316 million in forgiveness. The table below provides additional information on PPP loans. 42 --------------------------------------------------------------------------------
Table 3 - PPP loans
June 30, 2022
PPP Loan Balances
End of
Period, Net
of Unearned
(in millions, except count data Total Life-to-Date Fees and
) Fundings 2Q22 Forgiveness 2022 Forgiveness Forgiveness Costs(1)
Phase 1- 2020 Originations $ 2,886 $ 11 $ 26 $ 2,750 $ 14
Phase 2- 2021 Originations 1,047 108 290 971 73 Total$ 3,933 $ 119 $ 316 $ 3,721$ 87 (1) Equals fundings less forgiveness, pay-downs/pay-offs, and unearned net fees. Total Net Percent of 2Q22 Recognized 2022 Recognized Total Recognized Total Unrecognized or (dollars in millions) Fees FundingsNet Fees Net Fees Net Fees RemainingNet Fees Contractual Maturity Phase 1- 2020 Originations$ 94.9 3.3 % $ 0.1 $ 0.3$ 94.9 $ - 2 years Phase 2- 2021 Originations 43.6 4.2 3.6 10.3 40.9 2.8 5 years Total$ 138.5 3.5 % $ 3.7$ 10.5 $ 135.8 $ 2.8
Amounts may not total due to rounding.
Commercial Loans
Total commercial loans (which are comprised of C&I and CRE loans) atJune 30, 2022 were$32.28 billion , or 78.3%, of the total loan portfolio, compared to$30.64 billion , or 77.9%, atDecember 31, 2021 .
Commercial and Industrial Loans
The C&I loan portfolio represents the largest category of Synovus' loan portfolio and is primarily comprised of general middle market and commercial banking clients across a wide range of industries. The following table shows the composition of the C&I loan portfolio aggregated by NAICS code. In accordance with Synovus' lending policy, each loan undergoes a detailed underwriting process which incorporates uniform underwriting standards and oversight in proportion to the size and complexity of the lending relationship. As ofJune 30, 2022 , 93.4% (93.8% excluding PPP loans) of Synovus' C&I loans are secured by real estate, business equipment, inventory, and other types of collateral compared to 92.2% (94.1% excluding PPP loans) as ofDecember 31, 2021 . C&I loans atJune 30, 2022 grew$1.16 billion , or 6%, fromDecember 31, 2021 , as diverse growth from many of our Wholesale Banking sub-businesses was partially offset by a$312.9 million decline in PPP loan balances. The growth largely consisted of funded loan production and increased line utilization particularly in the finance and insurance, healthcare and social assistance, wholesale trade, and accommodation and food services industries. 43 --------------------------------------------------------------------------------
Table 4 - Commercial and Industrial Loans by Industry
June 30, 2022 December 31, 2021
(dollars in thousands) NAICS Code Amount %(1) Amount %(1)
Health care and social assistance 62 $ 4,489,914 21.6 % $ 4,220,579 21.5 %
Finance and insurance 52 3,112,695 15.0 2,520,480 12.8
Manufacturing 31-33 1,377,435 6.6 1,314,212 6.7
Accommodation and food services 72 1,338,556 6.4 1,231,801 6.3
Wholesale trade 42 1,268,075 6.1 1,146,505 5.8
Retail trade 44-45 1,184,962 5.7 1,195,456 6.1
Real estate and rental and leasing 5311 1,086,787 5.2 1,061,921 5.4
Construction 23 1,063,753 5.1 1,023,540 5.2
Professional, scientific, and
technical services 54 951,794 4.6 928,436 4.7
Other services 81 946,549 4.6 1,004,448 5.1
Transportation and warehousing 48-49 843,764 4.1 852,969 4.3
Real estate other 53 778,636 3.7 752,997 3.8
Arts, entertainment, and recreation 71 469,665 2.3 534,597 2.7
Educational services 61 422,306 2.0 427,456 2.2
Public administration 92 417,871 2.0 407,451 2.1
Administration, support, waste
management, and remediation 56 263,754 1.3 246,638 1.3
Agriculture, forestry, fishing, and hunting 11 261,234 1.3 285,372 1.5 Information 51 211,917 1.0 189,306 1.0 Other industries (2) 288,658 1.4 278,760 1.5 Total commercial and industrial loans$ 20,778,325 100.0 %$ 19,622,924 100.0 %
(1) Loan balance in each category expressed as a percentage of total C&I loans. (2) Comprised of NAICS industries that are less than 2% of total C&I loans.
AtJune 30, 2022 ,$13.02 billion of C&I loans, or 31.6% of the total loan portfolio (including PPP loans of$86.7 million net of unearned fees and costs), represented loans originated for the purpose of financing commercial, financial and agricultural business activities. The primary source of repayment on these loans is revenue generated from products or services offered by the business or organization. The secondary source of repayment is the collateral, which consists primarily of equipment, inventory, accounts receivable, time deposits, cash surrender value of life insurance, and other business assets. AtJune 30, 2022 ,$7.76 billion of C&I loans, or 18.8% of the total loan portfolio, represented loans originated for the purpose of financing owner-occupied properties. The financing of owner-occupied facilities is considered a C&I loan even though there is improved real estate as collateral. This treatment is a result of the credit decision process, which focuses on cash flow from operations of the business to repay the debt. The secondary source of repayment on these loans is the underlying real estate. These loans are predominately secured by owner-occupied and other real estate, and to a lesser extent, other types of collateral.
Commercial Real Estate Loans
CRE loans consist primarily of income-producing investment properties loans. Additionally, CRE loans include 1-4 family properties loans as well as land and development loans. Total CRE loans of$11.50 billion increased$488.3 million or 4%, fromDecember 31, 2021 as growth primarily in the multi-family and medical office sectors from funded loan production continued to outpace payoff activity. Investment properties loans consist of construction and mortgage loans for income-producing properties and are primarily made to finance multi-family properties, hotels, office buildings, shopping centers, warehouses and other commercial development properties. Total investment properties loans as ofJune 30, 2022 were$10.41 billion , or 90.5% of the CRE loan portfolio, and increased$505.3 million , or 5%, fromDecember 31, 2021 primarily due to growth in all sub-categories with the exception of shopping centers, which were down$196.6 million , or 12%, fromDecember 31, 2021 .
1-4 Family Properties Loans
1-4 family properties loans include construction loans to home builders and commercial mortgage loans related to 1-4 family rental properties and are almost always secured by the underlying property being financed by such loans. These
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properties are primarily located in the markets served by Synovus. At June 30,
2022 , 1-4 family properties loans totaled $641.9 million , or 5.6% of the CRE
loan portfolio, and decreased slightly from December 31, 2021 .
Land and Development Loans
Land and development loans include commercial and residential development as well as land acquisition loans and are secured by land held for future development, typically in excess of one year. Properties securing these loans are substantially within markets served by Synovus, and loan terms generally include personal guarantees from the principals. Loans in this portfolio are underwritten based on the LTV of the collateral and the capacity of the guarantor(s). Land and development loans of$453.5 million atJune 30, 2022 decreased slightly fromDecember 31, 2021 .
Consumer Loans
The consumer loan portfolio consists of a wide variety of loan products offered through Synovus' banking network including first and second residential mortgages, home equity and consumer credit card loans, as well as both secured and unsecured loans from third-party lending. As ofJune 30, 2022 , weighted-average FICO scores within the residential real estate portfolio based on committed balances were 777 for consumer mortgages and 788 for home equity, consistent with year-end 2021 scores. Consumer loans atJune 30, 2022 of$8.92 billion increased$249.1 million , or 3%, compared toDecember 31, 2021 . Home equity grew$217.8 million fromDecember 31, 2021 largely due to increased demand for home equity products as property values have increased, and interest rates for home equity products have remained relatively low. Other consumer loans decreased$14.3 million fromDecember 31, 2021 primarily resulting from$43.0 million lower third-party loan balances as payment activity more than offset purchases of$361.6 million .
Deposits
Deposits provide the most significant funding source for interest earning assets. The following table shows the composition of period-end deposits as of the dates indicated. See Table 12 - Quarter-to-Date Net Interest Income and Rate/Volume Analysis and Table 13 - Year-to-Date Net Interest Income and Rate/Volume Analysis in this Report for information on average deposits including average rates.
Table 5 - Composition of Period-end Deposits (dollars in thousands) June 30, 2022 %(1) December 31, 2021 %(1) June 30, 2021 %(1) Non-interest-bearing demand deposits(2)$ 15,781,109 32.2 %$ 15,242,839 30.9 %$ 14,342,601 30.4 % Interest-bearing demand deposits(2) 6,327,055 12.9 6,346,959 12.9 5,839,814 12.4 Money market accounts(2) 13,793,024 28.1 14,886,424 30.1 13,983,112 29.7 Savings deposits(2) 1,498,727 3.0 1,404,428 2.8 1,341,453 2.8 Public funds 5,863,899 12.0 6,284,553 12.7 5,804,905 12.3 Time deposits(2) 2,147,769 4.4 2,427,073 4.9 2,891,115 6.1 Brokered deposits 3,623,117 7.4 2,835,000 5.7 2,968,962 6.3 Total deposits$ 49,034,700 100.0 %$ 49,427,276 100.0 %$ 47,171,962 100.0 % Core deposits(3)$ 45,411,583 92.6 %$ 46,592,276 94.3 %$ 44,203,000 93.7 % Brokered time deposits$ 2,314,488 4.7 %$ 1,024,448 2.1 %$ 1,063,947 2.3 % Public funds time deposits$ 611,070 1.2 % $ 665,954 1.3 %$ 689,478 1.5 %
(1) Deposits balance in each category expressed as percentage of total deposits. (2) Excluding any public funds or brokered deposits. (3) Core deposits exclude brokered deposits.
Total period-end deposits atJune 30, 2022 decreased$392.6 million compared toDecember 31, 2021 as lower money market, public funds, and time deposits, impacted by rate-driven outflows and normal client liquidity deployment, were mostly offset by increases in brokered deposits and higher non-interest-bearing demand deposits. On a year-to-date average basis, the increase in total deposits was$1.57 billion , or 3%, driven by$1.33 billion in growth from non-interest-bearing demand deposits as this meaningful component of our overall funding strategy continues to help manage our total funding costs in the rising rate environment. Total deposit costs of 15 bps for the second quarter of 2022 decreased 1 bp from the prior year comparable period, primarily due to an increase in non-interest-bearing deposits. Total deposit costs increased 4 bps compared to the first quarter of 2022 as theFederal Open Market Committee's recent rate hikes have begun to modestly impact our deposit costs. Given the 75 bps rate hike inJune 2022 , as well as the recently announced 75 bps hike inJuly 2022 , we have begun to see and 45 --------------------------------------------------------------------------------
expect a continuation of upward pressure on deposits costs, as would be reasonably expected for this phase of the tightening cycle.
Non-interest Revenue
Non-interest revenue for the second quarter of 2022 was$97.3 million , down$9.8 million , or 9%, and year-to-date was$202.6 million , down$15.4 million , or 7%, compared to the same periods in 2021. The primary drivers were lower mortgage banking income and a$7.0 million write-down on a minority fintech investment partially offset by higher core banking fees(1) and higher wealth revenue(2).
The following table shows the principal components of non-interest revenue.
Table 6 - Non-interest
Revenue
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2022 2021 $ Change % Change 2022 2021 $ Change % Change
Service charges on deposit
accounts $ 23,491 $ 21,414 $ 2,077 10 % $ 46,030 $ 41,448 $ 4,582 11 %
Fiduciary and asset
management fees 20,100 18,805 1,295 7 40,377 36,759 3,618 10
Card fees 16,089 13,304 2,785 21 30,846 25,300 5,546 22
Brokerage revenue 15,243 13,926 1,317 9 29,898 26,899 2,999 11
Mortgage banking income 3,904 13,842 (9,938) (72) 9,857 36,157 (26,300) (73)
Capital markets income 7,393 3,335 4,058 122 12,864 10,840 2,024 19
Income from bank-owned life
insurance 9,165 7,188 1,977 28 15,722 16,031 (309) (2)
Insurance revenue 2,564 3,383 (819) (24) 3,983 5,079 (1,096) (22)
Investment securities gains
(losses), net - - - nm - (1,990) 1,990 nm
Other non-interest revenue (683) 11,890 (12,573) (106) 13,023 21,520 (8,497) (39)
Total non-interest revenue $ 97,266 $ 107,087 $ (9,821) (9) % $ 202,600 $ 218,043 $ (15,443) (7) %
Core banking fees (1) $ 45,483 $ 41,464 $ 4,019 10 % $ 90,887 $ 79,620 $ 11,267 14 %
Wealth revenue (2) $ 37,907 $ 36,114 $ 1,793 5 % $ 74,258 $ 68,737 $ 5,521 8 %
(1) Core banking fees consist of service charges on deposit accounts, card fees,
and several other non-interest revenue components including letter of credit
fees, ATM fee income, line of credit non-usage fees, gains (losses) from sales
of SBA loans, and miscellaneous other service charges.
(2) Consists of fiduciary and asset management, brokerage, and insurance
revenue.
Three and Six Months Ended
Service charges on deposit accounts, consisting of account analysis fees, NSF fees, and all other service charges, for the three and six months endedJune 30, 2022 were up compared to the same periods in 2021. The largest category of service charges, account analysis fees, were flat compared to the second quarter of 2021, and up 3% on a year-to-date comparable basis. NSF fees for the six months endedJune 30, 2022 and 2021 comprised 32% and 29%, respectively, of service charges on deposit accounts and 7% and 6%, respectively, of total non-interest revenue. NSF fees for the three and six months endedJune 30, 2021 were lower primarily due to fiscal stimulus funds. All other service charges on deposit accounts, which consist primarily of monthly fees on consumer demand deposits and small business accounts, for the three and six months endedJune 30, 2022 were up$740 thousand , or 14%, and$1.4 million , or 14%, respectively. Fiduciary and asset management fees are derived from providing estate administration, personal trust, corporate trust, corporate bond, investment management, financial planning, and family office services. The increase in fiduciary and asset management fees for the three and six months endedJune 30, 2022 was driven by strong client acquisition despite headwinds from a decline in the equity markets. Card fees consist primarily of credit card interchange fees, debit card interchange fees, and merchant discounts. Card fees are reported net of certain associated expense items including client loyalty program expenses and network expenses. Card fees for the three and six months endedJune 30, 2022 were up primarily due to higher transaction volumes from both consumer and commercial spend activity and account growth as we continue to invest in ourTreasury and Payment solutions business. Brokerage revenue consists primarily of brokerage commissions as well as advisory fees earned from the management of client assets. Brokerage revenue for the three and six months endedJune 30, 2022 increased over the prior year comparable periods, benefiting from client activity in the face of challenging equity markets. Mortgage banking income was significantly lower for the three and six months endedJune 30, 2022 , compared to the same periods in 2021, largely due to the economic environment with substantial increases in mortgage rates reducing refinancing and 46 -------------------------------------------------------------------------------- new-purchase volumes and compressing secondary margins. On a year-to-date basis, gains on sale declined$18.5 million as a result of a$550.9 million , or 55%, decrease in loan sales and a$574.1 million , or 58%, decline in secondary market mortgage production compared to the prior year. Capital markets income primarily includes fee income from client derivative transactions. Additionally, capital markets income includes fee income from debt capital market transactions and foreign exchange as well as other miscellaneous income from capital market transactions. The increase for the three months endedJune 30, 2022 compared to the same period in 2021 primarily resulted from a higher volume of client derivative transactions and a$1.3 million increase in loan syndication arranger fees. The increase for the six months endedJune 30, 2022 was primarily due to higher loan syndication arranger fees. Income from BOLI includes increases in the cash surrender value of policies and proceeds from insurance contracts. The increase for the three months endedJune 30, 2022 primarily related to$2.5 million in proceeds from insurance benefits. The main components of other non-interest revenue are fees for letters of credit and unused lines of credit, safe deposit box fees, access fees for ATM use, other service charges and loan servicing fees, gains from sales of GGL/SBA loans, and other miscellaneous items. The six months endedJune 30, 2022 primarily included a$7.0 million write-down on a minority fintech investment and a reduction in the fair value of non-qualified deferred compensation plan assets of$6.5 million (offset in non-interest expense), partially offset by a gain of$3.5 million related to the sale of a certain real estate partnership, as compared to 2021. Non-interest Expense Non-interest expense for the second quarter of 2022 was$282.1 million , up$11.5 million , or 4%, and year-to-date was$554.5 million , up$16.8 million , or 3%, compared to the same periods in 2021. The increase in non-interest expense during 2022 was primarily due to an increase in expense associated with merit and elevated performance incentives, resumption of normal business activities post COVID-19, and investments in new growth initiatives. We expect total investments in new growth initiatives to be in the$30 million to$35 million range in 2022.
The following table summarizes the components of non-interest expense.
Table 7 - Non-interest Expense
Three Months Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2022 2021 $ Change % Change 2022 2021 $ Change % Change
Salaries and other personnel
expense $ 161,063 $ 160,567 $ 496 - % $ 325,747 $ 322,044 $ 3,703 1 %
Net occupancy, equipment, and
software expense 43,199 41,825 1,374 3 86,076 82,959 3,117 4
Third-party processing and
other services 21,952 24,419 (2,467) (10) 42,947 44,451 (1,504) (3)
Professional fees 10,865 7,947 2,918 37 19,338 17,031 2,307 14
FDIC insurance and other
regulatory fees 6,894 5,547 1,347 24 13,144 11,127 2,017 18
Amortization of intangibles 2,118 2,379 (261) (11) 4,236 4,758 (522) (11)
Restructuring charges (1,850) 415 (2,265) nm (8,274) 946 (9,220) nm
Valuation adjustment to Visa
derivative 3,500 - 3,500 nm 3,500 - 3,500 nm
Loss on early extinguishment
of debt - - - nm 677 - 677 nm
Earnout liability adjustments - 750 (750) nm - 750 (750) nm
Other operating expense 34,310 26,682 7,628 29 67,110 53,599 13,511 25
Total non-interest expense
4 % $ 554,501 $ 537,665 $ 16,836 3 %
Three and Six Months Ended
Salaries and other personnel expense increased for the three and six months endedJune 30, 2022 primarily due to the impacts of elevated performance incentives and merit partially offset by a reduction in the fair value of the non-qualified deferred compensation liability (offset in non-interest revenue) and lower mortgage production-based commissions. Total headcount of 5,091 was flat compared toJune 30, 2021 as a result of Synovus Forward initiatives while adding headcount in areas associated with strategic revenue growth. Net occupancy, equipment, and software expense increased for the three and six months endedJune 30, 2022 due primarily to continued investments in technology and initiatives partially offset by savings from branch closures.Synovus Bank operated 261 branches atJune 30, 2022 compared to 285 branches atJune 30, 2021 with twenty branch closures during the first half of 2022. We expect to close a similar amount in the second half of 2022 to complete our large-scale branch optimization program. 47
-------------------------------------------------------------------------------- Third-party processing and other services include all third-party core operating system and processing charges as well as third-party loan servicing charges. Third-party processing expense decreased for the three and six months endedJune 30, 2022 , largely a result of higher 2021 expense associated with PPP loan forgiveness partially offset by enhancements associated with technology and initiatives. Professional fees increased for the three and six months endedJune 30, 2022 primarily from higher consulting fees largely related to new initiatives, technology, and sustainability strategies and increased legal fees from various matters, including new initiatives and credit-related items.FDIC insurance and other regulatory fees increased for the three and six months endedJune 30, 2022 largely due to a higher assessment rate primarily driven by partial normalization of liquidity levels and redemption ofSynovus Bank senior notes. During the three months endedJune 30, 2022 , Synovus recorded$3.0 million in gains on sales of five closed branches partially offset by restructuring charges associated with additional branch closures. During the six months endedJune 30, 2022 , Synovus recorded$12.1 million in gains largely relating to the sale of real estate facilities inColumbus, Georgia in addition to gains on sales of closed branches, partially offset by restructuring charges associated with additional branch closures. During the three and six months endedJune 30, 2021 , Synovus recorded restructuring charges primarily related to branch closures and restructuring of corporate real estate as part of the Synovus Forward initiative. During the second quarter of 2022, Synovus recorded a$3.5 million valuation adjustment to theVisa derivative followingVisa's announcement to fund$600 million to its litigation escrow account. OnFebruary 10, 2022 ,Synovus Bank redeemed its 2.289% Fixed-to-Floating Rate SeniorBank Notes of$400 million par value and incurred a$677 thousand loss on early extinguishment of debt. Earnout liability fair value adjustments associated with the Global One acquisition were the result of higher than projected earnings and higher earnings estimates over the remaining contractual earnout period, reflecting the continued success of the Global One enterprise. The earnout period ended onJune 30, 2021 , and the final earnout payment occurred during the third quarter of 2021. Other operating expense includes advertising, travel, insurance, network and communication, other taxes, subscriptions and dues, other loan and ORE expense, postage and freight, training, business development, supplies, donations, and other miscellaneous expense. Other operating expense was up for the three and six months endedJune 30, 2022 . The increases over prior year were primarily related to an increase in loan expense due to elevated production, managing fraud protection for clients, resumption of normal business activities post COVID-19, and increased 2022 advertising expense resulting from the launch of our newly developed brand positioning and campaign.
Income Tax Expense
Income tax expense was$49.9 million for the three months endedJune 30, 2022 , representing an effective tax rate of 21.9%, compared to income tax expense of$56.8 million for the three months endedJune 30, 2021 , representing an effective tax rate of 23.4%. Income tax expense was$92.6 million for the six months endedJune 30, 2022 , representing an effective tax rate of 21.0%, compared to income tax expense of$106.0 million for the six months endedJune 30, 2021 , representing an effective tax rate of 22.1%. The effective tax rate is lower for both the three and six month periods endedJune 30, 2022 , primarily due to an increase in net discrete tax benefits recognized during the current period, including share-based compensation, changes in amounts taxable by jurisdictions, and other accrual adjustments, compared to the respective prior periods.
CREDIT QUALITY, CAPITAL RESOURCES AND LIQUIDITY
Credit Quality
Synovus diligently monitors the quality of its loan portfolio by industry, property type, and geography through a thorough portfolio review process and our analytical risk management tools. AtJune 30, 2022 , credit metrics remained stable and near historical lows with NPAs at 33 bps, NPLs at 26 bps, and total past dues at 14 bps, as a percentage of total loans. Net charge-offs remained low at$16.6 million , or 16 bps annualized, and$35.2 million , or 18 bps annualized, respectively, for the three and six months endedJune 30, 2022 . We expect net charge-offs to remain relatively stable in the second half of 2022, assuming no material change in the economic environment. 48 --------------------------------------------------------------------------------
The table below includes selected credit quality metrics.
Table 8 - Credit Quality Metrics (dollars in thousands) June 30, 2022 December 31, 2021 June 30, 2021 Non-performing loans$ 109,024 $ 131,042$ 161,028 ORE and other assets 26,759 27,137 16,806 Non-performing assets$ 135,783 $ 158,179$ 177,834 Total loans$ 41,204,780 $ 39,311,958 $ 38,236,018 Non-performing loans as a % of total loans 0.26 % 0.33 % 0.42 %
Non-performing assets as a % of total loans, ORE, and specific other assets
0.33 0.40 0.46
Loans 90 days past due and still accruing $ 2,251 $ 6,770 $ 4,415
As a % of total loans 0.01 % 0.02 % 0.01 %
Total past due loans and still accruing $ 56,160 $ 57,565 $ 49,321
As a % of total loans 0.14 % 0.15 % 0.13 %
Net charge-offs, quarter $ 16,565 $ 10.522 $ 26,546
Net charge-offs/average loans, quarter 0.16 % 0.11 % 0.28 %
Net charge-offs, year-to-date $ 35,174 $ 77,788 $ 46,750
Net charge-offs/average loans, year-to-date 0.18 % 0.20 % 0.24 %
Provision for (reversal of) loan losses, quarter $ 9,446 $ (54,124) $ (19,960)
Provision for (reversal of) unfunded commitments,
quarter 3,242 (1,086) (4,638)
Provision for (reversal of) credit losses, quarter
Provision for (reversal of) loan losses, year-to-date$ 15,414 $ (100,351) $ (42,278) Provision for (reversal of) unfunded commitments, year-to-date$ 8,674 $ (5,900)$ (895) Provision for (reversal of) credit losses, year-to-date$ 24,088 $ (106,251) $ (43.173) Allowance for loan losses$ 407,837 $ 427,597$ 516,708 Reserve for unfunded commitments 50,559 41,885 46,890 Allowance for credit losses$ 458,396 $ 469,482$ 563,598 ACL to loans coverage ratio 1.11 % 1.19 % 1.47 % ALL to loans coverage ratio 0.99 1.09 1.35 ACL/NPLs 420.45 358.27 350.00 ALL/NPLs 374.08 326.31 320.88
Criticized and Classified Loans
Our loan ratings are aligned to federal banking regulators' definitions of pass and criticized categories, which include special mention, substandard, doubtful, and loss. Substandard accruing and non-accruing loans, doubtful, and loss loans are often collectively referred to as classified. Special mention, substandard, doubtful, and loss loans are often collectively referred to as criticized and classified loans. The following table presents a summary of criticized and classified loans. Criticized and classified loans atJune 30, 2022 were 2.2% of total loans, or$914.0 million , down$113.9 million as compared to 2.6% of total loans, or$1.03 billion , atDecember 31, 2021 . Table 9 - Criticized and Classified Loans (dollars in thousands) June 30, 2022 December 31, 2021 Special mention$ 391,596 $ 489,150 Substandard 516,412 526,117 Doubtful 3,520 10,630 Loss 2,500 2,058 Criticized and Classified loans$ 914,028 $ 1,027,955 As a % of total loans 2.2 % 2.6 % 49
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Provision for (Reversal of) Credit Losses and Allowance for Credit Losses
The provision for credit losses of$12.7 million and$24.1 million for the three and six months endedJune 30, 2022 included net charge-offs of$16.6 million and$35.2 million , respectively, and also represented a slower pace of allowance decline for the first half of the year.$3.7 million and$7.5 million in reserves were also added as a result of purchases of$180.2 million and$361.6 million of third-party lending loans for the three and six months endedJune 30, 2022 . The ALL of$407.8 million and the reserve for unfunded commitments of$50.6 million , which is recorded in other liabilities, comprise the total ACL of$458.4 million atJune 30, 2022 . The ACL decreased$11.1 million compared to theDecember 31, 2021 ACL of$469.5 million , which consisted of an ALL of$427.6 million and the reserve for unfunded commitments of$41.9 million . The ACL to loans coverage ratio of 1.11% atJune 30, 2022 was 8 bps lower compared toDecember 31, 2021 . The reduction in the ACL resulted primarily from continued positive trends in our credit performance, including reduction of NPLs, and quality and mix of new loan originations, mostly offset by an uncertain and generally negative economic outlook. Table 10 - Accruing TDRs by Risk Grade June 30, 2022 December 31, 2021 June 30, 2021 (dollars in thousands) Amount % Amount % Amount % Pass$ 59,865 36.5 %$ 56,479 47.1 %$ 62,686 50.3 % Special mention 31,492 19.2 11,387 9.5 8,600 6.9 Substandard accruing 72,744 44.3 51,938 43.4 53,242 42.8 Total accruing TDRs$ 164,101 100.0 %$ 119,804 100.0 %$ 124,528 100.0 % Troubled Debt Restructurings Accruing TDRs were$164.1 million atJune 30, 2022 , up$44.3 million compared toDecember 31, 2021 primarily due to interest rate modifications granted that were previously accounted for under the CARES Act. Non-accruing TDRs were$18.3 million atJune 30, 2022 , compared to$22.3 million atDecember 31, 2021 . Accruing TDRs are considered performing because they are performing in accordance with the restructured terms. At bothJune 30, 2022 andDecember 31, 2021 , approximately 98% of accruing TDRs were current. In addition, subsequent defaults on accruing TDRs (defaults defined as the earlier of the TDR being placed on non-accrual status or reaching 90 days past due with respect to principal and/or interest payments within twelve months of the TDR designation) have continued to remain at low levels.
Capital Resources
Synovus andSynovus Bank are required to comply with capital adequacy standards established by our primary federal regulator, theFederal Reserve .Synovus andSynovus Bank measure capital adequacy using the standardized approach under Basel III. AtJune 30, 2022 ,Synovus andSynovus Bank's capital levels remained strong and exceeded well-capitalized requirements currently in effect. The following table presents certain ratios used to measureSynovus andSynovus Bank's capitalization. 50 --------------------------------------------------------------------------------
Table 11 - Capital Ratios (dollars in thousands) June 30, 2022 December 31, 2021 CET1 capital Synovus Financial Corp.$ 4,612,070 $ 4,388,618 Synovus Bank 5,158,225 4,998,698 Tier 1 risk-based capital Synovus Financial Corp. 5,149,215 4,925,763 Synovus Bank 5,158,225 4,998,698 Total risk-based capital Synovus Financial Corp. 6,059,074 5,827,196 Synovus Bank 5,754,389 5,587,757 CET1 capital ratio Synovus Financial Corp. 9.46 % 9.50 % Synovus Bank 10.59 10.83 Tier 1 risk-based capital ratio Synovus Financial Corp. 10.56 10.66 Synovus Bank 10.59 10.83 Total risk-based capital to risk-weighted assets ratio Synovus Financial Corp. 12.43 12.61 Synovus Bank 11.82 12.11 Leverage ratio Synovus Financial Corp. 9.03 8.72 Synovus Bank 9.06 8.86 AtJune 30, 2022 , Synovus' CET1 ratio was 9.46%, well in excess of regulatory requirements including the capital conservation buffer of 2.5%. TheJune 30, 2022 CET1 ratio declined 4 bps compared toDecember 31, 2021 , driven by significant growth in risk-weighted assets, largely from loan growth, and return of capital primarily through common stock shareholder dividends, mostly offset by strong capital generation from earnings. Our commitment remains to allocate internally generated capital toward our strategic priorities of client loan growth and a stable dividend while also maintaining a strong and efficient capital position. For additional information on regulatory capital requirements, see "Part II - Item 8. Financial Statements and Supplementary Data - Note 10 -Regulatory Capital " to the consolidated financial statements of Synovus' 2021 Form 10-K. Management reviews the Company's capital position on an on-going basis and believes, based on internal capital analyses and earnings projections, that Synovus is well positioned to meet relevant regulatory capital standards. OnJanuary 20, 2022 , Synovus announced that its Board of Directors authorized share repurchases of up to$300 million in 2022. During the six months endedJune 30, 2022 , Synovus repurchased a total of$13.0 million , or 281 thousand shares of its common stock, at an average price of$46.17 per share. Based on our current forecast for loan growth and given the uncertain economic environment, we expect to retain the majority of capital generated through earnings to support core balance sheet growth through the remainder of 2022. OnAugust 26, 2020 , the federal banking regulators issued a final rule (following an interim final rule issued onMarch 27, 2020 ) that allowed electing banking organizations that adopt CECL during 2020 to mitigate the estimated effects of CECL on regulatory capital for two years, followed by a three-year phase-in transition period. Synovus adopted CECL onJanuary 1, 2020 and theJune 30, 2022 regulatory capital ratios reflect Synovus' election of the five-year transition provision. AtJune 30, 2022 ,$43.7 million , or a cumulative 9 bps benefit to CET1, was deferred.
Dividends
Synovus has historically paid a quarterly cash dividend to the holders of its
common stock. Management and the Board of Directors closely monitor current and
projected capital levels, liquidity (including dividends from subsidiaries),
financial markets and other economic trends, as well as regulatory requirements
regarding the payment of dividends.
Synovus' ability to pay dividends on its common stock and preferred stock is
primarily dependent upon dividends and distributions that it receives from its
bank and non-banking subsidiaries, which are restricted by various regulations
administered by federal and state bank regulatory authorities.
51
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Synovus declared common stock dividends of $98.9 million , or $0.68 per common
share, for the six months ended June 30, 2022 , compared to $97.7 million , or
$0.66 per common share, for the six months ended June 30, 2021 . In addition,
Synovus declared dividends on its preferred stock of $16.6 million during both
the six months ended June 30, 2022 and 2021.
Liquidity
Liquidity represents the extent to which Synovus has readily available sources of funding to meet the needs of depositors, borrowers and creditors, to support asset growth, and to otherwise sustain operations of Synovus and its subsidiaries, at a reasonable cost, on a timely basis, and without adverse consequences. ALCO monitors Synovus' economic, competitive, and regulatory environment and is responsible for measuring, monitoring, and reporting on liquidity and funding risk as well as market risk. In accordance with Synovus policies and regulatory guidance, ALCO evaluates contractual and anticipated cash flows under normal and stressed conditions to properly manage the Company's liquidity profile. Synovus places an emphasis on maintaining numerous sources of current and contingent liquidity to meet its obligations to depositors, borrowers, and creditors on a timely basis. Liquidity is generated through various sources, including, but not limited to, maturities and repayments of loans by clients, maturities and sales of investment securities, and growth in core and wholesale deposits.Synovus Bank also generates liquidity through the issuance of brokered certificates of deposit and money market accounts.Synovus Bank accesses these funds from a broad geographic base to diversify its sources of funding and liquidity.Synovus Bank also has the capacity to access funding through its membership in the FHLB system and through theFederal Reserve discount window. AtJune 30, 2022 , based on currently pledged collateral,Synovus Bank had access to FHLB funding of$4.73 billion , subject to FHLB credit policies. Management continuously monitors and maintains appropriate levels of liquidity so as to provide adequate funding sources to manage client deposit withdrawals, loan requests, and other funding demands. In addition to bank level liquidity management, Synovus must manage liquidity at the parent company level for various operating needs including the servicing of debt, the payment of dividends on our common stock and preferred stock, share repurchases, payment of general corporate expense, and potential capital infusions into subsidiaries. The primary source of liquidity for Synovus consists of dividends fromSynovus Bank , which is governed by certain rules and regulations of the GA DBF and theFederal Reserve Bank . Synovus' ability to receive dividends fromSynovus Bank in future periods will depend on a number of factors, including, without limitation,Synovus Bank's future profits, asset quality, liquidity, and overall condition. In addition, both theGA DBF andFederal Reserve Bank may require approval to pay dividends, based on certain regulatory statutes and limitations. Synovus presently believes that the sources of liquidity discussed above, including existing liquid funds on hand, are sufficient to meet its anticipated funding needs. However, if economic conditions were to significantly deteriorate, regulatory capital requirements for Synovus orSynovus Bank were to increase as the result of regulatory directives or otherwise, or Synovus believes it is prudent to enhance current liquidity levels, then Synovus may seek additional liquidity from external sources. See "Part I - Item 1A. Risk Factors - Changes in the cost and availability of funding due to changes in the deposit market and credit market may adversely affect our capital resources, liquidity and financial results" of Synovus' 2021 Form 10-K. Furthermore, Synovus may, from time to time, take advantage of attractive market opportunities to refinance its existing debt, redeem its preferred stock, or strengthen its liquidity or capital position.
Earning Assets and Sources of Funds
Average total assets for the six months endedJune 30, 2022 increased$2.09 billion , or 4%, as compared to the first six months of 2021. Average earning assets increased$2.66 billion , or 5%, in the first six months of 2022 compared to the same period in 2021. The increase in average earning assets primarily resulted from a$2.39 billion , or 27%, increase in average investment securities available for sale and a$1.62 billion , or 4%, increase in average total loans, net of unearned income, which included a decrease of$1.98 billion in PPP loans. The increase in average loans was primarily attributable to growth in commercial production and line utilization. These increases were partially offset by a$1.36 billion , or 51%, decrease in average interest-bearing funds held at theFederal Reserve Bank . Average interest-bearing liabilities decreased$24.2 million for the first six months of 2022 compared to the same period in 2021. The decrease in average interest-bearing liabilities largely resulted from a$1.05 billion , or 27%, decrease in average time deposits, as a result of continued focus on remixing the deposit base, mostly offset by a$945.2 million , or 11%, increase in average interest-bearing demand deposits. Average non-interest-bearing deposits also increased$2.28 billion , or 16%, for the first six months of 2022 compared to the same period in 2021 as these deposits continue to be a meaningful component of our funding strategy and will help manage total funding costs in the rising rate environment. Net interest income for the six months endedJune 30, 2022 was$817.6 million , up$61.9 million , or 8% compared to the same period in 2021, including$10.5 million in PPP fees during 2022 and$45.2 million in 2021. Net interest margin was up 8 bps over the comparable six-month period to 3.11% due primarily to positive re-mixing within earning assets and our asset- 52 -------------------------------------------------------------------------------- sensitive rate risk position, partially offset by a$34.7 million decline in PPP fees. For the six months endedJune 30, 2022 , the yield on earning assets was 3.31%, an increase of 2 bps compared to the six months endedJune 30, 2021 , while the effective cost of funds decreased 6 bps to 0.20%. Compared to the same period in 2021, the yield on loans decreased 13 bps due primarily to the decline in PPP fees, while the yield on investment securities increased 32 bps primarily due to higher reinvestment yield and deceleration in prepayment activity compared to the prior year. On a sequential quarter basis, net interest income was up$33.1 million , or 8%, driven by loan growth and higher rates. Net interest margin for the second quarter was 3.22%, which was up 22 bps compared to the first quarter of 2022 aided by higher interest rates, lower cash balances, and managed deposit repricing. The second quarter of 2022 included$3.7 million recognized for associated PPP fees versus$6.9 million in the first quarter of 2022 and average PPP loan balances of$147.9 million versus$282.4 million in the first quarter of 2022. For the second quarter of 2022, the yield on earning assets increased 25 bps, while the effective cost of funds increased 3 bps compared to the first quarter of 2022. We continue to expect that net interest income and net interest margin will increase from second quarter 2022 levels as the benefits of higher short-term and long-term market interest rates are realized. 53 --------------------------------------------------------------------------------
Net Interest Income and Rate/Volume Analysis
The following tables set forth the major components of net interest income and the related annualized yields and rates for the three and six months endedJune 30, 2022 and 2021, as well as the variances between the periods caused by changes in interest rates versus changes in volume. Table 12 - Quarter-to-Date Net Interest Income and Rate/Volume Analysis Three Months Ended June 30, 2022 Compared to 2021 Average Balances Interest Annualized Yield/Rate Change due to Increase (dollars in thousands) 2022 2021 2022 2021 2022 2021 Volume Rate (Decrease)
Assets
Interest earning assets: Investment securities available for sale$ 11,153,091 $ 9,184,691 $ 50,312 $ 33,298 1.81 % 1.45 %$ 7,116 $ 9,898 $ 17,014 Trading account assets 11,987 2,831 73 8 2.44 1.15 26 39 65 Commercial loans (1) (2) 31,870,387 29,936,751 308,442 287,677 3.88 3.85 18,560 2,205 20,765 Consumer loans (1) 8,720,488 8,559,726 83,826 84,402 3.86 3.94 1,579 (2,155) (576) Allowance for loan losses (415,372) (561,242) - - - - - - - Loans, net 40,175,503 37,935,235 392,268 372,079 3.92 3.93 20,139 50 20,189 Mortgage loans held for sale 85,299 242,940 921 1,859 4.32 3.06 (1,203) 265 (938) Other loans held for sale 725,762 615,301 7,678 4,750 4.19 3.05 840 2,088 2,928 Other earning assets(3) 813,028 2,705,819 1,660 740 0.81 0.11 (472) 1,392 920Federal Home Loan Bank andFederal Reserve Bank stock 179,837 159,340 1,820 800 4.05 2.01 103 917 1,020 Total interest earning assets 53,144,507 50,846,157$ 454,732 $ 413,534 3.43 % 3.26 % 26,549 14,649 41,198 Cash and due from banks 538,647 571,561 Premises, equipment, and software, net 385,457 452,652 Other real estate 11,439 1,406 Cash surrender value of bank-owned life insurance 1,077,231 1,055,663 Other assets(4) 1,379,659 2,090,332 Total assets$ 56,536,940 $ 55,017,771 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing demand deposits$ 9,513,334 $ 8,601,262 $ 3,598 $ 2,441 0.15 % 0.11 % 250 907 1,157 Money market accounts 15,328,395 15,476,262 6,850 7,181 0.18 0.19 (70) (261) (331) Savings deposits 1,506,195 1,333,297 72 55 0.02 0.02 9 8 17 Time deposits 2,829,684 3,792,382 1,688 4,894 0.24 0.52 (1,248) (1,958) (3,206) Brokered deposits 2,878,536 3,057,607 6,293 4,799 0.88 0.63 (281) 1,775 1,494 Federal funds purchased and securities sold under repurchase agreements 246,737 204,053 219 35 0.35 0.07 7 177 184 Other short-term borrowings 478,469 - 896 - 0.74 - 896 - 896 Long-term debt 878,413 1,203,038 8,768 11,478 3.99 3.82 (3,092) 382 (2,710) Total interest-bearing liabilities 33,659,763 33,667,901$ 28,384 $ 30,883 0.33 % 0.36 % (3,529) 1,030 (2,499) Non-interest-bearing deposits 16,959,850 15,088,836 Other liabilities 1,247,646 1,091,321 Shareholders' equity 4,669,681 5,169,713 Total liabilities and equity$ 56,536,940 $ 55,017,771 Interest rate spread: 3.10 2.90 Net interest income - TE/margin(5)$ 426,348 $ 382,651 3.22 % 3.02 %
960 791
Net interest income, actual (1) Average loans are shown net of unearned income. NPLs are included. Interest income includes fees as follows: 2022 -$13.0 million , 2021 -$28.5 million . (2) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans to a taxable-equivalent basis. (3) Includes interest-bearing funds withFederal Reserve Bank , interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements. (4) Includes average net unrealized gains (losses) on investment securities available for sale of$(923.1) million and$37.0 million for the three months endedJune 30, 2022 and 2021, respectively. (5) The net interest margin is calculated by dividing annualized net interest income - TE by average total interest earnings assets. 54 --------------------------------------------------------------------------------
Table 13 - Year-to-Date Net Interest Income and Rate/Volume Analysis
Six Months Ended June 30, 2022 Compared to 2021
Average Balances Interest Annualized Yield/Rate Change due to Increase
(dollars in thousands) 2022 2021 2022 2021 2022 2021 Volume Rate (Decrease)
Assets
Interest earning assets: Investment securities available for sale$ 11,206,150 $ 8,813,191 $ 97,562 $ 62,755 1.74 % 1.42 %$ 16,850 $ 17,957 $ 34,807 Trading account assets 10,540 2,947 112 30 2.13 2.01 76 6 82 Commercial loans (1) (2) 31,316,646 29,930,734 589,029 578,877 3.79 3.90 26,803 (16,651) 10,152 Consumer loans (1) 8,657,598 8,424,423 165,194 166,466 3.83 3.97 4,590 (5,862) (1,272) Allowance for loan losses (419,639) (580,450) Loans, net 39,554,605 37,774,707 754,223 745,343 3.84 3.97 31,393 (22,513) 8,880 Mortgage loans held for sale 94,542 244,940 1,803 3,516 3.81 2.87 (2,140) 427 (1,713) Other loans held for sale 661,768 637,901 12,978 9,555 3.90 2.98 353 3,070 3,423 Other earning assets(3) 1,363,223 2,771,576 2,475 1,458 0.36 0.10 (629) 1,646 1,017Federal Home Loan Bank andFederal Reserve Bank stock 170,006 158,503 2,505 1,468 2.95 1.85 106 931 1,037 Total interest earning assets 53,060,834 50,403,765 871,658 824,125 3.31 3.29 46,009 1,524 47,533 Cash and due from banks 543,638 545,295 Premises, equipment, and software, net 392,079 456,537 Other real estate 11,598 1,613 Cash surrender value of bank-owned life insurance 1,074,076 1,053,603 Other assets(4) 1,613,313 2,144,615 Total assets$ 56,695,538 $ 54,605,428 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing demand deposits$ 9,531,330 $ 8,586,092 5,970 5,414 0.13 0.13 609 (53) 556 Money market accounts 15,685,030 15,412,941 12,199 15,911 0.16 0.21 283 (3,995) (3,712) Savings deposits 1,483,547 1,276,608 139 105 0.02 0.02 20 14 34 Time deposits 2,919,242 3,972,840 3,826 11,936 0.26 0.61 (3,187) (4,923) (8,110) Brokered deposits 2,833,580 3,212,608 10,026 11,023 0.71 0.69 (1,297) 300 (997) Federal funds purchased and securities sold under repurchase agreements 220,689 206,735 230 69 0.21 0.07 5 156 161 Other short-term borrowings 242,870 - 896 - 0.73 - 896 - 896 Long-term debt 930,131 1,202,827 18,913 22,386 4.07 3.73 (5,044) 1,571 (3,473) Total interest-bearing liabilities 33,846,419 33,870,651 52,199 66,844 0.31 0.39 (7,715) (6,930) (14,645) Non-interest-bearing deposits 16,727,040 14,443,645 Other liabilities 1,196,375 1,138,073 Shareholders' equity 4,925,704 5,153,059 Total liabilities and equity$ 56,695,538 $ 54,605,428 Interest rate spread: 3.00 % 2.90 % Net interest income - TE/margin(5)$ 819,459 $ 757,281 3.11 % 3.03 %
1,824 1,565
Net interest income, actual (1) Average loans are shown net of unearned income. NPLs are included. Interest income includes fees as follows: 2022 -$33.7 million , 2021 -$60.4 million . (2) Reflects taxable-equivalent adjustments, using the statutory federal income tax rate of 21%, in adjusting interest on tax-exempt loans to a taxable-equivalent basis. (3) Includes interest-bearing funds withFederal Reserve Bank , interest earning deposits with banks, and federal funds sold and securities purchased under resale agreements. (4) Includes average net unrealized gains (losses) on investment securities available for sale of$(587.1) million and$76.3 million for the six months endedJune 30, 2022 and 2021, respectively. (5) The net interest margin is calculated by dividing annualized net interest income - TE by average total interest earnings assets. 55 --------------------------------------------------------------------------------
Market Risk Analysis
Interest rate risk is the primary market risk to which Synovus is potentially exposed. Synovus measures its sensitivity to changes in market interest rates through the use of a simulation model which incorporates all of Synovus' earning assets and liabilities. These simulations are used to determine a baseline net interest income projection and the sensitivity of the income profile based on changes in interest rates. These simulations incorporate assumptions and factors, including, but not limited to, changes in market rates, in the size or composition of the balance sheet, and in repricing characteristics as well as client behaviors. This process is reviewed and updated on an on-going basis in a manner consistent with Synovus' ALCO governance framework. Synovus has modeled its baseline net interest income forecast assuming a relatively flat interest rate environment with the federal funds rate at theFederal Reserve's targeted range of 1.50% to 1.75% as ofJune 30, 2022 and the prime rate of 4.75% as ofJune 30, 2022 . Synovus has modeled the impact of an immediate increase in market interest rates across the yield curve of 100 and 200 bps to determine the sensitivity of net interest income for the next twelve months. Synovus' current rate risk position is considered asset-sensitive and would be expected to benefit net interest income in a rising interest rate environment. The following table represents the estimated sensitivity of net interest income atJune 30, 2022 , with comparable information forDecember 31, 2021 .
Table 14 - Twelve Month Net Interest Income Sensitivity
Estimated % Change in Net Interest Income as Compared to
Unchanged Rates (for the next twelve months)
Change in Interest Rates (in bps) June 30, 2022 December 31, 2021
+200 11.0% 14.5%
+100 5.5% 6.5%
The net interest income simulation model is the primary tool utilized to
evaluate potential interest rate risks over a shorter-term time horizon. Synovus
also evaluates potential longer-term interest rate risk through modeling and
evaluation of the sensitivity of the Company's EVE. The EVE measurement process
estimates the net fair value of assets, liabilities, and off-balance sheet
financial instruments under various interest rate scenarios. Management uses EVE
sensitivity analyses as an additional means of measuring interest rate risk and
incorporates this form of analysis within its governance and limits framework.
LIBOR Transition
On
The ARRC proposed SOFR as its preferred rate as an alternative to LIBOR and proposed a paced market transition plan to SOFR from LIBOR. Organizations are currently working on industry-wide and company-specific transition plans related to derivatives and cash markets exposed to LIBOR. As noted within "Part I - Item 1A. Risk Factors" of Synovus' 2021 Form 10-K, Synovus holds instruments that may be impacted by the discontinuance of LIBOR, which include floating rate obligations, loans, deposits, derivatives and hedges, and other financial instruments. Synovus has established a cross-functional LIBOR transition working group with representation from all business lines, support and control functions, and legal counsel that has 1) assessed the Company's current exposure to LIBOR indexed instruments and the data, systems and processes that were impacted and have been changed as a result; 2) established a detailed implementation plan; 3) formulated communications and learning activities to support clients and colleagues; and 4) developed a formal governance structure for the transition. For the last several years, loan agreement provisions for new and renewed loans included LIBOR fallback language to ensure transition from LIBOR when such transition occurs. All direct exposures resulting from existing financial contracts that mature after 2021 have been inventoried and are monitored on an ongoing basis. The Company discontinued the use of LIBOR as ofDecember 31, 2021 , with limited exceptions as permitted by regulatory guidance or internal policies. Synovus has expanded its product offerings and currently offers multiple alternative reference rates including SOFR, BSBY, and Prime indices. As ofJune 30, 2022 , the Company had approximately$13 billion in loans tied to LIBOR that mature afterJune 30, 2023 . Remediation activities are underway to modify or transition existing exposures to alternate index rates or to convert the rate under existing fallback language, including the use of the Adjustable Interest (LIBOR) Act, enacted inMarch 2022 , and other relevant legislation. 56 --------------------------------------------------------------------------------
Critical Accounting Policies
The accounting and financial reporting policies of Synovus are in accordance with GAAP and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. Synovus has identified certain of its accounting policies as "critical accounting policies," consisting of those related to the allowance for credit losses and income taxes. In determining which accounting policies are critical in nature, Synovus has identified the policies that require significant judgment or involve complex estimates. It is management's practice to discuss critical accounting policies with the Board of Directors' Audit Committee on a periodic basis, including the development, selection, implementation and disclosure of the critical accounting policies. The application of these policies has a significant impact on Synovus' unaudited interim consolidated financial statements. Synovus' financial results could differ significantly if different judgments or estimates are used in the application of these policies. All accounting policies described in "Part II - Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in Synovus' 2021 Form 10-K should be reviewed for a greater understanding of how we record and report our financial performance. There have been no significant changes to the accounting policies, estimates and assumptions, or the judgments affecting the application of these estimates and assumptions from those disclosed in Synovus' 2021 Form 10-K.
Non-GAAP Financial Measures
The measures entitled adjusted non-interest revenue; adjusted non-interest
expense; adjusted total revenue; adjusted tangible efficiency ratio; adjusted
net income available to common shareholders; adjusted net income per common
share, diluted; 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 TE revenue; efficiency
ratio-TE; net income available to common shareholders; net income per common
share, diluted; 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. Adjusted total revenue and adjusted non-interest
revenue are measures used by management to evaluate total TE revenue and
non-interest revenue exclusive of net investment securities gains (losses) and
fair value adjustments on non-qualified deferred compensation. 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 net income per common share, diluted,
adjusted return on average assets, and adjusted return on average common equity
are measurements used by management to evaluate operating results exclusive of
items that management believes 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 is a measure 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.
57
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Table 15 - Reconciliation of Non-GAAP Financial Measures
Three Months Ended Six Months Ended
(in thousands, except per share data) June 30, 2022 June
30, 2021
$ 97,266 $
107,087
- - - 1,990
Subtract/add: Fair value adjustment on
non-qualified deferred compensation 3,240 (1,126) 4,535 (1,918)
Adjusted non-interest revenue $ 100,506 $ 105,961 $ 207,135 $ 218,115
Adjusted non-interest expense
Total non-interest expense $ 282,051 $
270,531
- (750) - (750)
Subtract/add: Restructuring charges 1,850 (415) 8,274 (946)
Subtract: Valuation adjustment to Visa
derivative (3,500) - (3,500) -
Subtract: Loss on early extinguishment of debt - - (677) -
Subtract/add: Fair value adjustment on
non-qualified deferred compensation 3,240 (1,126) 4,535 (1,918)
Adjusted non-interest expense $ 283,641 $
268,240
Adjusted total revenue and adjusted tangible efficiency ratio Adjusted non-interest expense$ 283,641 $
268,240
(2,118) (2,379) (4,236) (4,758)
Adjusted tangible non-interest expense
Net interest income$ 425,388 $
381,860
960 791 1,824 1,565
Add: Total non-interest revenue 97,266 107,087 202,600 218,043
Total TE revenue $ 523,614 $
489,738
- - - 1,990
Subtract/add: Fair value adjustment on
non-qualified deferred compensation 3,240 (1,126) 4,535 (1,918)
Adjusted total revenue $ 526,854 $
488,612
53.87 % 55.24 % 54.25 % 55.13 %
Adjusted tangible efficiency ratio 53.43 54.41 54.44 54.26
Adjusted net income available to common
shareholders and adjusted diluted earnings per
share
Net income available to common shareholders $ 169,761 $ 177,909 $ 332,507 $ 356,711
Add: Earnout liability adjustments - 750 - 750
Add/subtract: Restructuring charges (1,850) 415 (8,274) 946
Add: Valuation adjustment to Visa derivative 3,500 - 3,500 -
Add: Loss on early extinguishment of debt - - 677 -
Subtract/add: Investment securities (gains)
losses, net - - - 1,990
Add/subtract: Tax effect of adjustments (1) (393) (105) 976 (743)
Adjusted net income available to common
shareholders $ 171,018 $
178,969
146,315 149,747 146,489 149,764
Net income per common share, diluted $ 1.16 $
1.19
1.17 1.20 2.25 2.40
58
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Table 15 - Reconciliation of Non-GAAP Financial Measures, continued
Three Months Ended Six Months Ended
(dollars in thousands) June 30, 2022 June
30, 2021
$ 178,052 $
186,200
- 750 - 750
Add/subtract: Restructuring charges (1,850) 415 (8,274) 946
Add: Valuation adjustment to Visa derivative 3,500 - 3,500 -
Add: Loss on early extinguishment of debt - - 677 -
Subtract/add: Investment securities (gains)
losses, net - - - 1,990
Add/subtract: Tax effect of adjustments (1) (393) (105) 976 (743)
Adjusted net income $ 179,309 $ 187,260 $ 345,967 $ 376,235
Net income annualized 714,165 746,846 703,962 752,771
Adjusted net income annualized 719,206 751,098 697,668 758,706
Total average assets 56,536,940 55,017,771 56,695,538 54,605,428
Return on average assets (annualized) 1.26 % 1.36 % 1.24 % 1.38 %
Adjusted return on average assets (annualized) 1.27 1.37 1.23 1.39
Three Months Ended
(dollars in thousands) June 30, 2022 March 31, 2022 June 30, 2021
Adjusted return on average common equity, return on
average tangible common equity, and adjusted return
on average tangible common equity (annualized)
Net income available to common shareholders $ 169,761 $ 162,746 $ 177,909
Add: Earnout liability adjustments - - 750
Add/subtract: Restructuring charges (1,850) (6,424) 415
Add: Valuation adjustment to Visa derivative 3,500 - -
Add: Loss on early extinguishment of debt - 677 -
Add/subtract: Tax effect of adjustments (1) (393) 1,369 (105)
Adjusted net income available to common shareholders
Adjusted net income available to common shareholders annualized
$ 685,951
6,471 6,543 7,128
Adjusted net income available to common shareholders
excluding amortization of intangibles annualized
Net income available to common shareholders annualized$ 680,910
6,471 6,543 7,128
Net income available to common shareholders excluding amortization of intangibles
$ 687,381
Total average shareholders' equity less preferred stock$ 4,132,536 $ 4,647,426 $ 4,632,568 Subtract: Goodwill (452,390) (452,390) (452,390) Subtract: Other intangible assets, net (32,387) (34,576) (41,399) Total average tangible shareholders' equity less preferred stock$ 3,647,759 $ 4,160,460 $ 4,138,779 Return on average common equity (annualized) 16.48 % 14.20 % 15.40 %
Adjusted return on average common equity (annualized) 16.60
13.82 15.50
Return on average tangible common equity (annualized) 18.84
16.02 17.41
Adjusted return on average tangible common equity
(annualized) 18.98 15.59 17.52
59
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Table 15 - Reconciliation of Non-GAAP Financial Measures, continued (dollars in thousands)
June 30, 2022 March 31, 2022 December 31, 2021 June 30, 2021
Tangible common equity ratio
Total assets $ 57,382,745 $ 56,419,549 $ 57,317,226 $ 54,938,659
Subtract: Goodwill (452,390) (452,390) (452,390) (452,390)
Subtract: Other intangible assets, net (31,360) (33,478) (35,596) (40,354)
Tangible assets $ 56,898,995 $ 55,933,681 $ 56,829,240 $ 54,445,915
Total shareholders' equity $ 4,584,438 $ 4,824,635 $ 5,296,800 $ 5,237,714
Subtract: Goodwill (452,390) (452,390) (452,390) (452,390)
Subtract: Other intangible assets, net (31,360) (33,478) (35,596) (40,354)
Subtract: Preferred stock, no par value (537,145) (537,145) (537,145) (537,145)
Tangible common equity $ 3,563,543 $ 3,801,622 $ 4,271,669 $ 4,207,825
Total shareholders' equity to total
assets ratio 7.99 % 8.55 % 9.24 % 9.53 %
Tangible common equity ratio 6.26 6.80 7.52 7.73
(1) An assumed marginal tax rate of 23.8% for 2022 and 25.3% for 2021 was applied.
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