10-K: Synovus Financial Corp. Reports Annual Results: Strategic Repositioning Impacts Earnings, Focus Shifts to Accelerated Growth in 2025

Sentiment:

Annual Results 21 February 2025 11:21 AM

Synovus Financial Corp.'s 2024 net income declined due to strategic investment securities portfolio repositioning, but the company is focusing on accelerated growth investments across the franchise in 2025.

Worse than expectedNet income available to common shareholders decreased to $439.6 million in 2024 from $507.8 million in 2023, primarily due to strategic repositioning of the investment securities portfolio.Strategic repositioning of the investment securities portfolio resulted in realized net losses of $256.7 million from sales of AFS investment securities.Net interest income decreased by 4% to $1.75 billion in 2024.Non-interest revenue decreased by 41% to $239.6 million in 2024.Total loans, net of deferred fees and costs, declined 2% to $42.61 billion at December 31, 2024.

Summary

Synovus Financial Corp.'s net income available to common shareholders for 2024 was $439.6 million, or $3.03 per diluted common share, compared to $507.8 million, or $3.46 per diluted common share, in 2023.
The year-over-year comparison was impacted the most by the strategic repositioning of the investment securities portfolio in 2024, which resulted in realized net losses of $256.7 million from sales of AFS investment securities.
Net interest income for 2024 was $1.75 billion, down 4% from $1.82 billion in 2023, with a net interest margin of 3.19%.
Non-interest revenue for 2024 was $239.6 million, down 41% compared to 2023, primarily due to the losses from sales of AFS investment securities.
Non-interest expense for 2024 decreased by 7% to $1.25 billion, impacted by lower restructuring charges and a lower FDIC special assessment accrual.
Total loans, net of deferred fees and costs, declined 2% to $42.61 billion at December 31, 2024.
The ACL to loans coverage ratio was 1.27% at December 31, 2024, up 3 bps from the prior year.
Total period-end deposits increased 1% to $51.10 billion at December 31, 2024, with core deposits up 3%.
The CET1 ratio was 10.84% at December 31, 2024, up 62 bps compared to the prior year.
The Board of Directors approved share repurchases of up to $400 million of common stock and $50 million of preferred stock in 2025.
Synovus' 2025 outlook includes end-of-period loan and core deposit growth of 3% to 6%, adjusted revenue growth of 3% to 7%, and adjusted non-interest expense growth of 3% to 7%.

Sentiment

Score: 6

Explanation: The document presents a mixed picture. While there are positives such as deposit growth and strong capital ratios, the decline in net income and revenue due to strategic repositioning creates uncertainty. The outlook for 2025 is positive, but dependent on stable economic conditions.

Positives

Core deposits increased by 3% in 2024.
The ACL to loans coverage ratio increased to 1.27% at December 31, 2024, up 3 bps from the prior year.
The CET1 ratio increased to 10.84% at December 31, 2024, up 62 bps compared to the prior year.
The Board of Directors approved share repurchases of up to $400 million of common stock and $50 million of preferred stock in 2025.
Non-interest expense decreased by 7% to $1.25 billion in 2024.

Negatives

Net income available to common shareholders decreased to $439.6 million in 2024 from $507.8 million in 2023.
Strategic repositioning of the investment securities portfolio resulted in realized net losses of $256.7 million from sales of AFS investment securities.
Net interest income decreased by 4% to $1.75 billion in 2024.
Non-interest revenue decreased by 41% to $239.6 million in 2024.
Total loans, net of deferred fees and costs, declined 2% to $42.61 billion at December 31, 2024.

Risks

Competition in the financial services industry, including from non-traditional banking institutions such as Fintechs and non-bank lenders, may adversely affect future earnings and growth.
Failure to attract and retain employees may adversely impact the ability to successfully execute growth and efficiency strategies.
The financial services market continues to undergo rapid technological changes, and if Synovus is unable to stay current with those changes, it will not be able to compete effectively.
Synovus faces significant cyber and data security risk that could result in the disclosure of confidential information, adversely affect its business or reputation, and expose it to significant liabilities.
Unstable economic conditions may have serious adverse consequences on Synovus' business, financial condition, and operations.
Climate change could adversely affect Synovus' business and client activity levels and could damage its reputation.
Synovus' concentrated operations in the Southeastern U.S. make it vulnerable to local economic conditions, local weather catastrophes, public health issues, and other external events.

Future Outlook

Synovus' 2025 outlook includes end-of-period loan and core deposit growth of 3% to 6%, adjusted revenue growth of 3% to 7%, and adjusted non-interest expense growth of 3% to 7%.

Management Comments

We believe our strategic actions over the past two years as well as the strength of our business model and presence in strong Southeastern U.S. growth markets positions Synovus to execute on our 2025 fundamental guidance outlined below.

Industry Context

The financial services industry is highly competitive and could become more competitive as a result of recent and ongoing legislative, regulatory, and technological changes, and continued consolidation within the financial services industry.

Comparison to Industry Standards

As of December 31, 2024, Synovus was the largest bank holding company headquartered in Georgia based on assets.
Synovus competes with national and state banks, savings and loan associations, credit unions, and non-bank financial intermediaries, including securities brokers and dealers, investment advisory firms, mortgage companies, insurance companies, trust companies, finance companies, leasing companies, and certain governmental agencies.
Synovus also competes with much larger national and regional banks that have more resources than it does to deliver new products and services and introduce new technology to enhance the client experience.

Legal Proceedings

Synovus and its subsidiaries are subject to various legal proceedings, claims, and disputes that arise in the ordinary course of its business.
Synovus, like many other financial institutions, has been the target of legal actions and other proceedings asserting claims for damages and related relief for losses.

Stakeholder Impact

Shareholders may be concerned about the decline in net income and revenue, but may be encouraged by the company's focus on growth and capital management.
Employees may be affected by the company's efforts to streamline operations and reduce expenses.
Customers may benefit from the company's investments in technology and new products and services.

Next Steps

Synovus' strategic plan will continue to focus on a relationship-based approach to banking but centered on accelerated growth investments across the franchise, with a particular focus on middle market banking, specialty lending, CIB, and wealth services.
Initiatives will include a deliberate and thoughtful approach to relationship manager recruitment and hiring in these focus areas.
The 2025 strategic plan also focuses on continued product development and client penetration within treasury and payment solutions, continued expansion and development of certain specialty deposit verticals and capital markets capabilities, and an enhanced focus on third-party payments and sponsorship opportunities.
In addition, the Company will continue to focus on foundational infrastructure investments related to the client experience, process efficiencies, and controls and risk mitigation.

Key Dates

Date	Description
1972	Synovus Financial Corp. was incorporated under the laws of the State of Georgia.
June 21, 2018	Issuance date of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D.
January 1, 2019	Capital rules required a capital conservation buffer of 2.5% above each of the minimum risk-based capital ratio requirements.
July 1, 2019	Issuance date of Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series E.
January 1, 2020	Synovus adopted CECL.
June 30, 2020	The DIF reserve ratio fell to 1.30%, below the statutory minimum of 1.35%.
September 15, 2020	The FDIC established a plan to restore the DIF reserve ratio to meet or exceed the statutory minimum of 1.35% within eight years.
August 26, 2020	Federal banking regulators issued a final rule allowing electing banking organizations that adopted 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.
October 29, 2020	Synovus Bank issued 4.00% Fixed-to-Fixed Rate Subordinated Bank Notes.
January 1, 2021	Congress passed federal legislation that made sweeping changes to federal anti-money laundering laws.
November 18, 2021	Federal banking agencies issued a new rule effective in 2022 that requires banks to notify their primary federal regulator within 36 hours of a computer-security incident that rises to the level of a notification incident.
March 15, 2022	Congress enacted the Adjustable Interest Rate (LIBOR) Act.
August 11, 2022	Synovus issued 5.200% Senior Notes due 2025.
October 18, 2022	The FDIC adopted an amended restoration plan to increase the likelihood that the reserve ratio will be restored to at least 1.35% by September 30, 2028.
December 16, 2022	The FRB adopted a final rule to implement the LIBOR Act by identifying benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023.
February 15, 2023	Synovus Bank issued 5.625% Senior Bank Notes due 2028.
March 2023	The CFPB issued a final rule to implement Section 1071 of the Dodd-Frank Act, requiring lenders to collect and report information about lending to women-owned, minority-owned and small businesses.
June 1, 2023	Synovus acquired a 60% equity interest in Qualpay.
September 30, 2023	Synovus sold its asset management firm GLOBALT.
October 25, 2023	The Federal Reserve proposed to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction.
October 24, 2023	The OCC, Federal Reserve, and FDIC issued final rules to modernize their respective CRA regulations.
November 2023	The FDIC approved a final rule to implement a special assessment to recover the loss to the DIF associated with several bank failures that occurred during the first half of 2023.
December 14, 2023	The Board of Directors approved share repurchases of up to $300 million of common stock and $50 million of preferred stock in 2024.
December 2024	The CFPB finalized a rule that would substantially limit overdraft fees that larger institutions such as the Bank may charge consumers, with an effective date of October 1, 2025.
December 13, 2024	The Board of Directors approved share repurchases of up to $400 million of common stock and $50 million of preferred stock in 2025.
February 18, 2025	There were 140,893,828 shares of Synovus common stock outstanding.
April 24, 2025	Annual Meeting of Shareholders.

Keywords

Synovus, financial results, investment securities, capital ratios, loan growth, deposit growth, net interest income, non-interest revenue, non-interest expense, credit quality, regulatory capital, share repurchases, dividends, strategic plan, risk factors, financial services, banking

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