425: Synovus Reports Strong Q3, Merger on Track for Q1 2026

Synovus Financial Corp. announced robust third-quarter 2025 earnings, with adjusted EPS up 19% year-over-year, and confirmed its merger with Pinnacle Financial Partners is on schedule for Q1 2026.

Summary

• GAAP earnings per share for Q3 2025 was $1.33, and adjusted earnings per share was $1.46, representing a 19% increase year-over-year.
• Adjusted pre-provision net revenue (PPNR) grew 5% sequentially and 12% from Q3 2024.
• Net interest margin (NIM) expanded, wealth revenue and capital markets income both increased at a strong pace.
• Net charge-offs remained low, and capital ratios moved higher, with the preliminary common equity Tier 1 (CET1) ratio reaching 11.24%, the highest in Synovus's history.
• The company added 25 new revenue producers during Q3, bringing the year-to-date total to 74.
• The pending merger with Pinnacle Financial Partners is expected to close in Q1 2026, with significant tangible progress demonstrated in integration efforts, including leadership team finalization and retention packages for key employees.
• The pro forma CET1 ratio for the combined company is now expected to be approximately 10.1% at the closing of the merger, an improvement due to a more favorable rate environment and strong Q3 capital generation.
• Adjusted revenue increased 9% year-over-year and 4% sequentially, while adjusted noninterest expense rose 6% year-over-year and 3% sequentially.
• Net interest margin increased 4 basis points sequentially to 3.41%.
• Average loans increased 1% sequentially, and period-end loans rose 0.5%. Loan production jumped 43% year-over-year.
• Period-end core deposits declined $231 million (1%) from Q2, primarily due to a strategic $370 million decline in public funds.
• The average cost of deposits was relatively flat at 2.23% in Q3.
• Adjusted noninterest revenue was $136 million, increasing 4% sequentially and 12% year-over-year, driven by wealth revenue and capital markets income.
• Net charge-offs were $15 million or 14 basis points, and nonperforming assets improved to 0.53% of total loans and real estate owned, down from 0.59% in Q2.
• The allowance for credit losses ended Q3 at 1.19%, compared to 1.18% in June.
• Full-year 2025 guidance includes expected period-end loan growth of approximately 4.5%, core deposit growth of 0.5%, adjusted revenue growth of 6.5%, and adjusted noninterest expense growth of 2.5%.
• Anticipated adjusted noninterest revenue for 2025 is $515 million to $520 million, and net charge-offs for Q4 are estimated between 15 and 20 basis points.
• The effective tax rate was 20% in Q3 and is expected to be approximately 21% for the full year 2025.

Sentiment

Score: 8

Explanation: The filing reports strong financial performance, including record capital ratios and healthy earnings growth, exceeding expectations. The merger integration is progressing well, and management expresses high confidence in the future combined entity. While there are some headwinds like deposit declines and NIM pressure, the overall tone is very positive and forward-looking, with clear strategic execution.

Positives

• Reported strong Q3 2025 GAAP EPS of $1.33 and adjusted EPS of $1.46, up 19% year-over-year, exceeding market expectations.
• Achieved healthy adjusted PPNR growth, up 5% sequentially and 12% from Q3 2024.
• Experienced net interest margin expansion and strong noninterest revenue growth, contributing to year-over-year earnings growth.
• Demonstrated continued hiring momentum with 25 new revenue producers added in Q3, totaling 74 year-to-date.
• Merger integration efforts with Pinnacle Financial Partners are progressing significantly, with the entire leadership team finalized and headcount-related decisions nearing completion.
• The pro forma CET1 ratio for the combined company is now expected to be approximately 10.1% at merger close, an improvement from initial estimates.
• Generated positive operating leverage in Q3, with adjusted revenue increasing 9% year-over-year while adjusted noninterest expense rose 6%.
• Loan production jumped 43% year-over-year, with strong contributions from high-growth verticals and institutional commercial real estate lending.
• Adjusted noninterest revenue increased 4% sequentially and 12% year-over-year, driven by broad-based growth in core banking fees, wealth revenue, and capital markets income.
• Credit trends remained very healthy, with net charge-offs at $15 million (14 basis points) and nonperforming assets improving to 0.53%.
• Achieved the highest CET1 ratio in Synovus's history at 11.24%.
• Expects strong capital generation post-merger, projecting 35-40 basis points of common equity Tier 1 each quarter before risk-weighted asset growth.
• Produced $2.6 billion in new deposit production in Q3, an 18% increase versus Q2.
• Client surveys indicate general optimism, with 40% expecting better business activity and 40% expecting the same over the next 12 months.
• Capital markets income momentum is expected to continue, driven by derivatives, syndication, and lead arranger fees.
• The structured lending division, representing 60% of non-bank financial institution (NBFI) exposure, has a stellar credit track record with no charge-offs, nonperforming loans, or criticized/classified loans, and is 100% senior secured.

Negatives

• Period-end core deposits declined $231 million or 1% from Q2, largely due to a strategic $370 million decline in public funds.
• Lower corporate and investment banking (CIB) utilization and higher payoffs acted as headwinds to period-end loan growth in Q3.
• Reduced promotional CD pricing resulted in lower CD retention.
• Experienced lower augmentation in public funds balances year-to-date.
• Net interest margin is expected to be under some pressure in Q4, assuming 225 basis point Fed funds cuts in October and December and a relatively stable 10-year treasury yield, due to the timing lag between loan and deposit repricing.
• Client survey indicated 46% of clients saw input prices increasing, but only 22% could push those increased prices to end-users, suggesting potential margin compression for clients.

Risks

• Cost savings and synergies from the proposed transaction may not be fully realized or may take longer than anticipated.
• Disruption to Synovus's and Pinnacle's businesses as a result of the announcement and pendency of the proposed transaction.
• Integration of Pinnacle's and Synovus's respective businesses and operations may be materially delayed or will be more costly or difficult than expected.
• Failure to obtain the necessary approvals by the shareholders of Synovus or Pinnacle.
• The amount of the costs, fees, expenses, and charges related to the transaction.
• Inability to obtain required governmental approvals of the proposed transaction on the timeline expected, or at all, and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company.
• Reputational risk and the reaction of each company's customers, suppliers, employees, or other business partners to the proposed transaction.
• Failure of the closing conditions in the merger agreement to be satisfied, or any unexpected delay in closing the proposed transaction or the occurrence of any event, change, or other circumstances that could give rise to the termination of the merger agreement.
• Dilution caused by the issuance of shares of the combined company's common stock in the transaction.
• The possibility that the proposed transaction may be more expensive to complete than anticipated.
• Risks related to management and oversight of the expanded business and operations of the combined company following the closing.
• The possibility the combined company is subject to additional regulatory requirements as a result of the proposed transaction or expansion of business operations.
• The outcome of any legal or regulatory proceedings or governmental inquiries or investigations that may be currently pending or later instituted against Synovus, Pinnacle, or the combined company.
• General competitive, economic, political, and market conditions and other factors that may affect future results, including changes in asset quality and credit risk, inability to sustain revenue and earnings growth, changes in interest rates and capital markets, inflation, customer behavior, technological changes, and capital management activities.

Future Outlook

Synovus expects period-end loan growth of approximately 4.5% for the full year 2025, with broad-based growth anticipated in Q4. Core deposit growth is projected at 0.5% for the year, with Q4 expected to be strong due to core deposit production, seasonal benefits, and investments. The adjusted 2025 revenue growth outlook is 6.5%, and adjusted noninterest revenue is anticipated to be $515 million to $520 million. Adjusted noninterest expense growth should be 2.5%. Net interest margin is expected to be under some pressure in Q4 due to potential Fed funds cuts. Net charge-offs are estimated to be between 15 and 20 basis points in Q4. The CET1 ratio is expected to be approximately 11.35% at year-end 2025. The merger with Pinnacle Financial Partners is expected to close in Q1 2026, with pro forma company guidance to be issued thereafter. The combined entity aims for high single-digit growth in 2026 and 2027, with accelerated talent acquisition driving incremental growth.

Management Comments

• "Synovus reported strong third quarter 2025 GAAP earnings per share of $1.33 and adjusted earnings per share of $1.46, up 19% year-over-year." Kevin Blair, CEO, President & Chairman
• "We delivered continued strength in loan production, sustained momentum in fee income generation and grew our team member count by 43 this quarter, all clear indicators of our focus, discipline and resilience." Kevin Blair, CEO, President & Chairman
• "We continue to expect our pending merger with Pinnacle to close in first quarter 2026. This strategically and financially compelling partnership should create the fast growing most dynamic regional bank in the country." Kevin Blair, CEO, President & Chairman
• "The merger-related financial assumptions we communicated in July are unchanged, but we now expect the companys pro forma CET1 ratio to be approximately 10.1% at the closing of the merger as a result of a more favorable rate environment and the strong third quarter capital generation." Kevin Blair, CEO, President & Chairman
• "Excluding merger-related expenses, Synovus generated positive operating leverage in the third quarter." Jamie Gregory, Executive VP & CFO
• "Our high-growth verticals, particularly specialty lending, continue to drive loan growth, while institutional commercial real estate lending was also a strong contributor." Jamie Gregory, Executive VP & CFO
• "This is our lowest net charge-off quarter in almost 3 years. Our criticized and classified ratios are the lowest theyve been in 2 years. It was the third successive quarter of only having $25 million of inflows into NPL." Kevin Blair, CEO, President & Chairman
• "We believe we will generate 35 to 40 basis points of common equity Tier 1 each quarter. And that strength in capital generation gives us a lot of flexibility in how we deploy it." Jamie Gregory, Executive VP & CFO
• "I would submit to you, generally, people are more optimistic. And that coincides with some of the other data points that we look at." Kevin Blair, CEO, President & Chairman
• "Terry stated that in his career, he has never seen a more advantaged competitive position than the one we will enjoy post merger. I echo that sentiment, and Im incredibly confident in the path ahead and Im completely energized by the opportunity we have to shape the future of regional banking. The best is yet to come." Kevin Blair, CEO, President & Chairman

Industry Context

The banking industry is experiencing a dynamic environment with ongoing consolidation, as evidenced by Synovus's merger with Pinnacle. There is a continued focus on net interest margin management amidst potential interest rate changes and a highly competitive landscape for talent acquisition, particularly in the Southeast. Synovus's strong Q3 performance, especially in loan production and fee income, suggests resilience despite broader economic uncertainties. The emphasis on high-growth verticals and specialty lending aligns with strategies to capture market share in a competitive regional banking sector. The general optimism among clients in the Southeast, despite rising input costs, indicates a potentially constructive regional economic backdrop for banking activities.

Comparison to Industry Standards

• The pro forma CET1 ratio of approximately 10.1% at merger close (9.9% including AOCI) is noted as the second highest among Category 4 banks, indicating a strong capital position relative to peers in that regulatory category.
• The ability to generate 35-40 basis points of common equity Tier 1 each quarter from earnings power, before considering risk-weighted asset growth, suggests a robust internal capital generation capacity that compares favorably to many regional banks.
• The historical track record of Pinnacle in hiring and retaining talent, and their model of attracting teams rather than individual hires, is presented as a differentiator in the highly competitive Southeast banking market for talent acquisition.
• The structured lending division's stellar credit performance (no charge-offs, NPLs, or criticized/classified loans, 100% senior secured) is highlighted as a best-in-class example, especially in contrast to recent commentary around non-bank financial institutions (NBFIs) in the broader industry.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for increased value through merger synergies, strong capital generation, and accelerated growth. Dilution risk from new share issuance.
• Employees: Leadership team finalized, headcount decisions and retention packages communicated, aiming to reduce uncertainty and increase excitement about the combined entity. Accelerated talent acquisition planned.
• Customers: Expectation of a stronger company with a larger balance sheet, better product capabilities, and continued focus on customer service with reduced bureaucracy.
• Regulatory Authorities: Ongoing constructive discussions regarding the regulatory application process and building a risk management organization for a Category 4 institution.

Next Steps

• Complete all headcount-related decisions and employee communications in Q4 2025.
• Close the merger with Pinnacle Financial Partners in Q1 2026.
• Issue 2026 pro forma company guidance after the merger closes.
• Accelerate talent acquisition to drive incremental growth in 2026 and beyond.
• Conduct systems conversion in Q1 2017 (as stated in the filing, likely a transcription error for a future year).
• Continue to invest in areas that support long-term growth.
• Focus on core deposit production across business lines in Q4.
• Build capital in the early quarters post-merger close.
• Deploy capital to clients for loan growth and market share in the Southeast.

Key Dates

Recommendation

The filing demonstrates robust financial performance in Q3 2025, exceeding market expectations with significant year-over-year EPS growth, expanding net interest margin, and strong noninterest revenue. Credit quality remains exceptionally healthy, with net charge-offs at a three-year low and nonperforming assets improving. The company has achieved its highest-ever CET1 ratio, indicating a very strong capital position. Crucially, the strategic merger with Pinnacle Financial Partners is progressing smoothly, with key integration milestones met and an improved pro forma capital outlook. Management's confidence in the combined entity's growth potential, talent acquisition strategy, and ability to generate substantial capital post-merger suggests a compelling long-term investment opportunity. While some NIM pressure is anticipated in Q4 and deposit growth has headwinds, the overall strategic execution and financial strength position the company for accelerated growth and market share gains in the Southeast, making it a strong buy.

Keywords

Synovus, Pinnacle Financial Partners, Merger, Earnings, Q3 2025, Financial Results, Banking, Regional Bank, Net Interest Margin, Loan Growth, Deposit Growth, Capital Ratios, Credit Quality, SEC Filing, Financial Services, Acquisition, Integration, CET1, Noninterest Revenue, Capital Markets, Specialty Lending, Corporate Governance, Risk Management