Doing what Synovus Chairman and Chief Executive Officer Kessel Stelling has often called basic blocking and tackling — a football term — the Southeast regional bank reported a profit Tuesday of $51.4 million in the first quarter of this year, or 38 cents per share.
That’s up 12 percent from common stock net income of $45.9 million, or 33 cents per share, recorded in the January-March period of 2014.
Synovus beat expectations on Wall Street, with analysts surveyed by Thomson Financial anticipating a consensus of 36 cents per share in the latest quarter.The bank, headquartered in downtown Columbus and parent company of Columbus Bank and Trust, saw loans, deposits and various specialty lines of business grow from the same quarter last year, while it also continued to buy back shares of its common stock.
Calling it a “very solid” quarter, Stelling in a conference call after the earnings release said Synovus is confident in its long-term growth strategy even with the banking sector as a whole continuing to feel financial pressure.
“Like others in the industry, we are still facing some headwinds with the interest rate environment and slower growth in certain commercial lending segments, and certainly stiff competition in certain segments,” the CEO said. “But we’re seeing measureable results from our investments in talent, from our investments in business lines, from our investments in technology.”
In the earnings report, Stelling pointed to growth in average loans, core deposits, improvement in credit quality and a “disciplined focus on expense management” as primary drivers behind the bank’s financial performance during the quarter. He also said revenue growth in mortgage banking, brokerage and U.S. Small Business Administration lending contributed to the profit.
Synovus is growing its specialty lending lines of business as well, he said, including senior housing, medical office banking and equipment financing. That comes with the bank making “strategic reductions” in the area of lending on residential and commercial real estate.
“That’s resulted in a stronger and more diversified loan portfolio,” he said. “Despite competitive pressures, we continue to exercise prudent underwriting and build long-term profitable relationships that lead to increased market share.”
Synovus reported total loans of $21.1 billion in the first quarter, up just over $947 million, or nearly 5 percent, from the same period a year ago. Management reiterated that it still expects loan growth to increase this year percentage-wise in the mid-single digits.
The bank’s first-quarter profit came on net interest income of $203.3 million, up from $200.5 million in the same three-month period a year ago. Non-interest income was $65.8 million, down from $70.2 million, with the major difference there from the nearly $5.8 million the company reported in the quarter a year ago from the sale of its bank branches in the Memphis, Tenn., market.
Non-interest income includes service charges on deposit accounts, with that category down less than 1 percent from a year ago. But mortgage income, brokerage revenue, asset-management fees, and bank-card income all were higher from the first quarter of 2014.
The current earnings report also shows a bank keeping a tight grip on overall expenses, with non-interest expense down nearly 3 percent from $184.2 million in the first quarter a year ago to $178.9 million in the current period. Employee salaries and expenses make up more than half of that number, with the category rising from $93.4 million to $96.5 million, or just over 3 percent.
During the conference call, the CEO said his company is “pursuing further expense savings.” But he also stressed, as he has before, that the regional bank will hire people for key positions. That will be in traditional areas that the firm wants to grow revenue, along with its effort to transform itself from a legacy brick-and-mortar operation to one that allows customers to bank online and using their smartphones.
Those investments, he said, are “designed to improve the customer experience and build a more profitable, efficient and competitive bank.”
Synovus has restructured itself in a major way during and after the Great Recession. At last count, the company with banks in five Southeast states has reduced its employee count from about 7,400 pre-recession to roughly 4,500 today. It also has closed branches companywide, lowering the total from more than 320 to just under 260, with a handful of those in the Columbus-Phenix City market that it dominates.
The bank also noted in its current report that it repurchased about $59 million of its common stock during the quarter, bringing it to $160 million bought back since its board of directors last October approved acquiring up to $250 million of its common shares. The company said it has reduced its share count by 6 million, or just over 4 percent. Fewer shares of stock on the market make those held by current investors more valuable.
Investors reacted favorably to Synovus’ financial report, with shares climbing 46 cents, or nearly 1.7 percent, to $28.15 in trading Tuesday on the New York Stock Exchange. That’s within striking distance of the stock’s 52-week high of $28.84 per share.
The closing price also marks a 43 percent surge in the bank’s stock since its 52-week low of $20.18 on May 19. That’s the day the company triggered a seven-for-one reverse stock split, which converted seven shares of the bank’s stock into one share. The stock had closed the previous trading day before the split at $3.12 per share.
Bernstein Research analyst Kevin St. Pierre, in a note following the quarterly release, said Synovus “looks relatively solid” with revenues “essentially in line with expectations.”
Stelling next will gather Synovus shareholders for the bank’s annual meeting Thursday at the Columbus Convention and Trade Center. The event kicks off at 10 a.m.
Synovus oversees $28 billion in assets through its 28 locally branded divisions in Georgia, Alabama, South Carolina, Florida and Tennessee.