Following the first-quarter 2018 results, Synovus Financial’s (SNV - Free Report) shares climbed 2.09%, on earnings beat. Driven by top-line strength, the company reported a positive earnings surprise of 10.3%.
Adjusted earnings of 86 cents per share beat the Zacks Consensus Estimate of 78 cents. Also, the reported figure came in 50.9% higher than the prior-year quarter tally.
Higher revenues backed by strong loans & deposits balances drove organic growth. Notably, lower efficiency ratio and improved credit quality were tailwinds. Moreover, positive impact of rising rates was witnessed. However, escalating expenses remain a concern.
Including certain non-recurring items, net income available to common shareholders came in at $100.6 million or 84 cents per share compared with $69.3 million or 56 cents per share recorded in the prior-year quarter.
Top-Line Strength Reflected, Expenses Flare Up
Total adjusted revenues in the first quarter were $344.4 million, up 10.5% year over year. In addition, the top line surpassed the Zacks Consensus Estimate of $342.6 million.
Net interest income increased 14.3% year over year to $274.3 million. Further, net interest margin expanded 36 basis points (bps) year over year to 3.78%.
Non-interest income decreased 6.7% on a year-over-year basis to $67 million, including net decreased fair value of private equity investments. Lower mortgage banking income was on the downside. Adjusted non-interest income was $70.1 million, up 6.2% year over year.
Non-interest expenses were $195.2 million, down 1.1% year over year, including lower litigation contingency accruals. Adjusted non-interest expenses came in at $197.8 million, up 3.8% from the prior-year quarter. Notably, increase in almost all components of expenses led to the rise, partially offset by lower advertising expenses, foreclosed real estate expense and other operating expenses.
Adjusted efficiency ratio came in at 57.42%, as compared with 62.25% reported in the year-earlier quarter. A decline in ratio indicates improvement in profitability.
Total deposits came in at $26.3 billion, up 4.6% year over year. Total net loans climbed 2.6% year over year to $24.9 billion.
Credit Quality Marks Improvement
Credit quality metrics for Synovus improved in the quarter.
Net charge-offs plunged 37.7% year over year to $4.3 million. The annualized net charge-off ratio was 0.07%, down 5 bps from the year-earlier quarter. Provision for loan losses slipped 47.3% year over year to $12.8 million.
Non-performing loans were down 24.2% year over year to $120.1 million. The non-performing loan ratio came in at 0.48%, contracting 17 bps year over year.
Additionally, total non-performing assets amounted to $131.2 million, underlining a decline of 29.9% year over year. The non-performing asset ratio shrunk 24 bps year over year to 0.53%.
Strong Capital Position
Tier 1 capital ratio and total risk based capital ratio were 10.51% and 12.37%, respectively, compared with 10.18% and 12.08% as of Mar 31, 2017.
Also, as of Mar 31, 2018, Common Equity Tier 1 Ratio (fully phased-in) was 10.01% compared with 9.63% in the year-ago quarter. Tier 1 Leverage ratio was 9.37% compared with 9.13% in the comparable period last year.
Capital Deployment Update
During the quarter under review, the company repurchased common stock worth $26.7 million. Moreover, the quarterly common stock dividend has been increased 67% to 25 cents per share.
Synovus’ results have been quite decent in the quarter. We believe the company’s focus on both organic and inorganic growth, together with cost-containment efforts, will pay off and aid bottom-line expansion in subsequent years. Though escalating expenses raise concerns, lower efficiency ratio indicates optimism.
Currently, Synovus carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Huntington Bancshares (HBAN - Free Report) reported first-quarter 2018 earnings per share of 28 cents, in line with the Zacks Consensus Estimate. However, the figure came in higher than the prior-year quarter adjusted earnings of 21 cents. Results were driven by higher revenues and lower provisions. Continued growth in both loan and deposit balances was also recorded. Moreover, lower expenses were the primary tailwinds.
People's United (PBCT - Free Report) reported net earnings of 30 cents per share in the first quarter, in line with the Zacks Consensus Estimate. The reported figure improved 36.4% year over year. Rising rates and higher fee income supported results. Growth in loan and deposit balances reflected organic growth. However, elevated expenses and provisions remained major drags.
Driven by top-line strength, Texas Capital Bancshares Inc. (TCBI - Free Report) reported a positive earnings surprise of around 0.7% in first-quarter 2018. Earnings per share of $1.38 outpaced the Zacks Consensus Estimate by a penny. Additionally, results compared favorably with 80 cents recorded in the prior-year quarter. Results were driven by rise in revenues. Organic growth was reflected, with significant rise in loans and deposit balances. However, elevated expenses and provisions remained the undermining factors.
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