Synovus Financial Corp. today reported financial results for the quarter ended June 30, 2019.

Second Quarter 2019 Highlights

• Diluted EPS of $0.96; adjusted diluted EPS of $1.00, up 1.5% sequentially and 8.4% year over year.
• Period-end loan growth of $504.1 million, or 5.7% annualized, from prior quarter.
• Average non-interest-bearing deposits excluding public funds up $312.4 million or 15.1% sequentially.
• Non-interest income growth of 13.1% sequentially, or 15.0% on an adjusted basis.
• Key credit metrics continued to improve, with non-performing asset (NPA) and non-performing loan ratios declining 5 and 6 basis points, respectively.
• Completed integration of all Florida Community Bank (FCB) systems, customers, branches, and branding.
• Increased the 2019 share repurchase authorization from $400 million to $725 million.
• Announced and priced a public offering of $350 million of Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E.

“Our results in the second quarter reflect the strength of our core business and our geography, with broad-based loan growth and solid credit and profitability metrics,” said Kessel D. Stelling, Synovus chairman and CEO. “We are pleased with the early wins in our expanded Florida footprint as we introduce our broader capabilities to new customers and prospects. We not only expect continued successes in that region, but across our entire footprint, as our core and specialty bankers work together to serve customers. The real and sustaining competitive differentiator for our company remains our talented team that is passionate about the important work they do and proud to represent our brand of relationship-centered banking and financial services in our markets.”

Balance Sheet

• Total loans ended the quarter at $36.14 billion, up $504.1 million or 5.7% annualized from the previous quarter, with growth across all categories.
• Steady growth in commercial and industrial loans, with strong contributions from a number of markets and teams.
• Commercial real estate loan growth led by investment properties, including multi-family, hotel and shopping centers, which grew a combined $121.2 million, partially offset by declines in office and warehouse. Continued positive trends in the consumer category, driven by lending partnerships, up $211.9 million, and by mortgage and HELOC growth, up $42.1 million and $44.5 million, respectively.

• Total deposits ended the quarter at $37.97 billion, down $108.5 million or 1.1% annualized from first quarter 2019.
• Managed deposit cost and mix during the quarter, with growth in core transaction deposits of $100.8 million and a lower composition of public funds and CDs. Core transaction deposits consist of non-interest bearing, NOW/savings, and money market deposits excluding public funds.
• The decline in public funds and CDs was partially offset by growth in brokered deposits of $294.5 million, which replaced maturing CDs at shorter durations and lower rates.
• On an average basis, non-interest bearing demand deposit accounts grew $249.9 million, or 11.1% annualized over the first quarter. Excluding the impact of public funds deposit runoff, non-interest bearing demand deposits increased $312.4 million from the previous quarter.
• The loan to deposit ratio was 95.2%, up from 93.6% in the prior quarter.

Income Statement Summary^**

• Total revenues were $487.9 million in the second quarter, up $10.7 million or 2.2% from the previous quarter.
• Net interest income was flat compared to the prior quarter.
• Net interest margin was 3.69%, down 9 basis points from the previous quarter; includes $21.0 million or 21 basis points of purchase accounting adjustments (PAA) compared to $18.8 million or 19 basis points in first quarter.
  • The sequential decrease in net interest margin was driven by the declining rate environment and full quarter effect of subordinated debt that was issued in the first quarter.
  • Excluding the impact of PAA, earning asset yields declined 3 basis points and the effective cost of funds increased 8 basis points.
• Non-interest income increased $10.4 million or 13.1% from the prior quarter and $16.4 million or 22.4% compared to second quarter 2018.
  • The sequential increase was primarily attributable to a $3.5 million, or 70.9%, increase in capital markets income and a $2.8 million, or 56.4%, increase in mortgage banking income.
• Non-interest expense declined $28.3 million or 9.7% due to lower merger-related expenses, and adjusted non-interest expense increased $14.1 million or 5.8% from the prior quarter.
  • The increase in adjusted expenses resulted mainly from higher producer commissions, increased servicing fees related to growth in our lending partnership portfolio, and higher consulting fees tied to various business and technology initiatives.
  • Employment taxes were seasonally lower by $3.3 million.
• Provision expense was $12.1 million, an $11.5 million decrease from the previous quarter, primarily due to lower charge-off activity.
• The effective tax rate was 25.9% for the quarter.

Capital Ratios

• Capital ratios remained strong and all increased slightly during the quarter.
• During the second quarter 2019, Synovus announced an increase in the share repurchase authorization from $400 million to $725 million, and completed repurchases of $25.0 million.
  • Year-to-date share repurchases total $345.0 million and share count has declined by 8.0% since January 1, 2019.
• During the second quarter 2019, Synovus announced and priced a public offering of $350 million of Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E. This transaction closed on July 1 and is not included in second quarter results.