Synovus profit climbs nearly 27 percent to $73.4 million in quarter

It was a steady financial ascent in the second quarter of this year for Synovus Financial Corp., with the Southeast regional bank reporting Tuesday a profit of $73.4 million, up 21 percent from $57.9 million in the April-June period a year ago.

The company, headquartered in downtown Columbus, released its quarterly report before the opening of the New York Stock Exchange. In trading Monday, the stock jumped 42 cents per share to $44.88, not far off of its 52-week high of $45.38. But the stock closed down 31 cents Tuesday at $44.57 per share. The past year’s low for the bank is $29.74 per share.

For investors interested in Synovus, the $73.4 million profit, or net income, reported by the financial institution Tuesday translates to earnings per diluted share of 60 cents. That compares to 46 cents per share a year ago.

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Total revenues for the latest three-month reporting period came in at $319.8 million, which is up from $289.4 million the same quarter last year.

“We are pleased with our second-quarter performance, highlighted by a 30 percent year-over-year increase in earnings per share,” Synovus Chairman and Chief Executive Officer Kessel Stelling said in a statement.

“Profitability continued to improve as we delivered a 1 percent return on assets and an efficiency ratio below 60 percent for the quarter,” the CEO said. “We also celebrated being named ‘Most Reputable Bank’ by American Banker magazine and the Reputation Institute. Our team is honored by this recognition from both customers and non-customers, and further energized about our transition to a unified Synovus brand in 2018.”

The latter reference is to plans by the company to move away from the community-centric names that its banks in various Southeastern markets have used for years, if not decades. For instance, Columbus Bank and Trust, as well as CB&T Bank of East Alabama, will simply be called Synovus.

Lee Underwood, corporate spokesman for the bankholding company, said this week that the timing for CB&T’s transition to single-brand signage is on track for early 2018, with one caveat.

“The vertical ‘Columbus Bank and Trust’ lettering on the 12th (Street) and Broadway sides of the Uptown Center building will remain, even after the single-brand transition is complete next year, as a tribute to/acknowledgment of CB&T’s central role in Synovus’ history,” Underwood said via email.

In a conference call with banking industry analysts after the release of the earnings report, Stelling touched on the change to a single brand and how it is being received.

“We’re hearing great feedback from our team members, from our customers and our communities about the short- and long-term benefit of this unified Synovus brand,” he said. “The bottom line is our team really is thrilled and excited by the opportunities ahead.”

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Speaking about the outlook for the remainder of 2017, the CEO said Synovus is projecting average loan growth between 5 percent and 7 percent for the year as a while, with the same percentage range estimated for average deposit growth. For now, interest income should increase between 12 percent and 14 percent this year, that projection coming after rate hikes this year by the Federal Reserve. That guidance does not factor in any additional rate increases this year, which could push the growth numbers even higher, he said.

“I know we and y’all and most of us are concerned about the political and economic uncertainty for the remainder of 2017,” Stelling told the analysts. “But we remain confident in our ability to continue to grow and enhance profitability … and achieve the targets we’ve laid out.”

The executive also offered a quick update on the purchase of outdoors and recreation retailer Cabela’s by Bass Pro Shops. The Federal Trade Commission approved the pending merger on July 3, with Cabela’s shareholders voting July 11 for the deal to proceed.

Synovus has been asked to act as a middleman of sorts, purchasing the credit-card portfolio from a Cabela’s-owned bank, then reselling them to Capital One. The Columbus bank would retain $1.2 billion in brokered time deposits, plus a $75 million fee for its assistance. The financial review of that portion of the overall deal is now under review.

“So the application remains pending and we can’t predict or control the timeframe of the process, but we remain hopeful that this event will be a third-quarter closing. That’s all I can say on that transaction,” Stelling said.

Tuesday’s earnings report included a long list of data. Notable breakouts include:

Total average loans rose $314.0 million or 5.2 percent annualized from the first quarter of this year and $1.42 billion or 6.2 percent compared to the second quarter of 2016.

Total average deposits were up $72.9 million or 1.2 percent annualized from the first quarter of this year and $1.38 billion or 5.9 percent compared to the second quarter a year ago.

Total loans ended the quarter at $24.43 billion, up $172.0 million or 2.8 percent annualized from the first quarter of this year and up $1.37 billion or 5.9 percent compared to the second quarter 2016. Consumer and commercial and industrial loans both were higher, while commercial real estate loans were down.

Adjusted non-interest income was $70.1 million, up $4.1 million or 6.2 percent from the previous quarter and up 3.4 percent compared to the second quarter 2016. Income from banking fees and asset management/brokerage fees increased, while there was no movement up or down in mortgage income.

Adjusted non-interest expense totaled $191.4 million, up $837,000 or 0.4 percent from the first quarter of this year and 5 percent from the second quarter of 2016. The lion’s share of expense is for personnel, with that figure dipping slightly from the first quarter of this year, but up more than 8 percent from a year ago.

Total non-performing loans came in at $159.3 million at the end of June, up $5.2 million from the same time a year ago, while non-performing assets were $178.9 million on June 30, down $8.4 million from a year ago. Net charge-offs were $15.7 million in the second quarter, $9.5 million higher than in the April-June period of 2016.

This story was originally published July 18, 2017 at 8:50 AM with the headline "Synovus profit climbs nearly 27 percent to $73.4 million in quarter."