Synovus reports profit of $49.9 million in first quarter of 2016
Southeast regional bank Synovus Financial Corp. on Tuesday reported net income, or a profit, of $49.9 million in the first three months of 2016, which was down 2.8 percent from $51.4 million in the same quarter of 2015.
Synovus is headquartered in downtown Columbus and is the parent company of Columbus Bank and Trust, the city’s largest bank. It’s also the fourth-largest bank in Georgia in terms of deposits, behind SunTrust, Wells Fargo and Bank of America.
The first-quarter profit translated to diluted earnings per share of 39 cents, up from 38 cents per share in the first quarter of 2015. Adjusted diluted earnings per share — which subtracts one-time items such as early elimination of debt, litigation and settlement costs, and restructuring expenses — was 43 cents. Wall Street analysts surveyed by research firm Thomson Financial were anticipating, on average, adjusted earnings per share of 44 cents.
Even with the lower profit number, Synovus Chairman and Chief Executive Officer Kessel Stelling was upbeat about his bank’s overall performance and the progress it continues to make during its comeback from the Great Recession. The lingering hangover from the financial meltdown in the U.S. housing and banking sectors is still keeping a tight lid on interest rates, which are at extremely low levels nearly six years after the recession officially ended.
“Our strategic priorities are in order. Our team is solid and only gets stronger as we grow existing and add more specialized talent. We’re actively investing in strengthening our team in communities that we serve. We think it’s a great formula for a solid financial performance,” Stelling said in a conference call with analysts after the report’s release.
The CEO noted in the report that Synovus has reached the halfway point of its current $300 million common share repurchase program. The company, which announced the buyback effort last October, has reacquired $158.5 million of its stock shares, slicing total shares by 5.4 percent. In theory, fewer shares in the hands of investors makes those remaining on the market more valuable.
Stelling said Synovus continues to spend money on hiring new talent and other expenses related to growing its various business lines, particularly in key large-city markets. He said growing loans and core deposits remain top priorities for all of the firm’s bankers, who do business in Georgia, Alabama, Florida, South Carolina and Tennessee.
“We’re focused on activities in three key strategic areas for this year and beyond,” he said on the call. “Clearly, we want to broaden business lines and growth in market share in all of our markets. We want to gain greater efficiency, and continue our focus on investments in our people.”
The CEO specifically mentioned his bank is piloting several improvements in its digital offerings to improve ease of applying for loans and handling banking needs in general. That includes steering customers toward “lower cost delivery channels such as online, mobile and ATM banking.”
To that end, Synovus plans to close four more branches companywide in the current second quarter. The branches are located in West Point, Ga. (Commercial Bank and Trust branch in the Kia Motors plant), Dothan, Ala. (Dothan Pavilion branch of Community Bank and Trust of Southeast Alabama), Montgomery, Ala. (Baptist Medical branch of Sterling Bank), and Cordova, Ala. (Cordova branch of First Bank of Jasper). As of Tuesday, the company’s 28 locally branded divisions operated 257 branches and 335 ATMs.
“This is a reminder that since 2010 we’ve consolidated 20.4 percent of our branches. With the four scheduled to consolidate in May, that percentage increases to almost 22 percent,” said Stelling, referring to closures that have cut the company’s branch total from more than 320 to just under 260 now, which he believes makes Synovus a leader among its peers in terms of consolidation.
“We’ll continue to achieve additional efficiency through ongoing direct expense savings opportunities,” he told the analysts on the call. “But as you know, many of our larger opportunities have already been addressed by our team over the last few years.”
Even with the overall lower interest rate environment, Synovus saw its net interest income rise 5 percent from $198.8 million in the January-March quarter a year ago to $208.8 million in the same period this year. That was even while subtracting a loan provision loss of $9.3 million, which was up from nearly $4.4 million a year ago.
Overall interest income — before taking out interest expense and the loan loss provision — was $249.3 million in the first quarter, up 7.7 percent from $231.4 million a year ago.
Total non-interest income was pinched, however, with asset management fees, brokerage revenue, mortgage-related income and other fee income declining. Service charges on deposit accounts did increase 3 percent, while bank-card fees were up 3.7 percent.
After adding and subtracting it all up, total non-interest income came in at $63.1 million in the first quarter of this year, down 4.1 percent from $65.8 million in the same three-month period of 2015.
Breaking down the bank’s expenses for the quarter, Synovus reported that salaries and other personnel costs rose 5 percent from $96.4 million a year ago to $101.3 million in the current first quarter as it adds employees in major markets. The company has seen significant growth over the past year in Tampa, Fla., Nashville, Tenn., Charleston, S.C., Birmingham, Ala., Atlanta and Chattanooga, Tenn.
Salaries are by far the largest expense on the bank’s financial books, with a distant second the category of occupancy and equipment costs. That figure rose 1.5 percent from nearly $26.2 million a year ago to $26.5 million in the current quarter.
Third-party processing expense also jumped 7.5 percent, from $10.3 million in the first quarter of last year to $11.1 million in the most recent period. Processing includes authorizations and transactions for credit and debit cards used by Synovus customers, with Columbus-based TSYS, a former subsidiary of the bankholding firm, typically handling that for the bank.
Other expense categories from quarter to quarter saw FDIC and regulatory fees dipping 3.4 percent, professional fees rising 13.9 percent, advertising dropping 30 percent and foreclosed real-estate expense tumbling 71.7 percent.
Factoring in every penny spent by Synovus to run its business, total non-interest expense was up 5.2 percent from nearly $179 million in the first quarter of last year to just over $188 million in the same period of this year.
Additional key numbers reported Tuesday by Synovus included total loans ending the first quarter at $22.76 billion, up $1.65 billion from the same quarter a year ago. Loans connected to commercial real estate, commercial and industrial, and retail all experienced growth.
Total average deposits were $23.2 billion, up $1.6 billion from the first quarter of 2015.
Total non-performing assets came in at $216.6 million as of March 31, down by $53.5 million from a year ago. Net charge-offs were $7.4 million, up from $3.4 million in the previous quarter. Total delinquencies — loans of 30-plus days and still accruing interest — remain low, the company said.
STOCK WATCH
Synovus issued its first-quarter financial report before the markets opened Tuesday. When the New York Stock Exchange’s opening bell rang Tuesday morning, the bank’s shares fell quickly 3 percent to $29.98, but then recovered by the end of the day to $31.12 apiece, a gain of 17 cents or 0.5 percent. The stock’s 52-week trading range is $25.48 to $33.80 per share.
This story was originally published April 19, 2016 at 9:06 AM with the headline "Synovus reports profit of $49.9 million in first quarter of 2016."