Executive Summary / Key Takeaways

• Synovus delivered robust first-quarter 2025 results, significantly increasing net income and EPS year-over-year, driven by net interest margin expansion, improved credit performance, and disciplined expense management.
• The company's strategic focus on high-growth commercial segments (Middle Market, Specialty, CIB) is yielding results, with strong production trends and building pipelines expected to drive loan growth of 3-5% in 2025, supported by recent talent additions.
• Deposit costs are declining, and core deposit growth of 3-5% is targeted for 2025, fueled by strategic initiatives like the legal industry deposit vertical and continued positive mix shifts away from higher-cost funding.
• Credit quality metrics showed broad improvement in Q1 2025, with lower net charge-offs and non-performing assets/loans, contributing to a decrease in the allowance for credit losses despite a more cautious economic outlook reflected in forecast weighting.
• Synovus maintains a strong capital position with a CET1 ratio near the top end of its target range, providing flexibility for prioritized client growth and opportunistic share repurchases under the authorized $400 million program for 2025.

Synovus Financial Corp., a financial institution with roots stretching back over 136 years in the Southeast, has evolved from a community banking cornerstone into a diversified financial services provider. Headquartered in Columbus, Georgia, the company operates through its subsidiary, Synovus Bank, across Alabama, Florida, Georgia, South Carolina, and Tennessee. This regional focus positions Synovus in some of the nation's highest-growth markets, a strategic advantage it aims to leverage. Over the past decade, particularly since the Great Financial Crisis, Synovus has undertaken a deliberate transformation, prioritizing a derisked balance sheet, diversified revenue streams, enhanced risk management, and robust capital and liquidity levels. This strategic pivot is now bearing fruit, positioning the company for renewed growth and improved profitability in a dynamic economic environment.

The competitive landscape in the Southeast is robust, featuring a mix of large national banks, super-regional players like Regions Financial (RF), Truist Financial (TFC), Fifth Third Bancorp (FITB), and PNC Financial Services (PNC), and smaller community banks, alongside increasing competition from fintech firms. Synovus competes by emphasizing a relationship-based banking approach, aiming to out-capability smaller rivals and out-service larger ones. While larger peers like TFC and PNC benefit from greater scale and broader market reach, and some like RF and FITB may exhibit stronger cost efficiencies in certain areas, Synovus differentiates itself through deep regional expertise, a focus on specific high-growth commercial and wealth segments, and targeted investments in technology to enhance client experience and operational effectiveness. The company's ability to attract talent from larger institutions, citing its culture and product capabilities, underscores its competitive standing in the war for human capital.

Central to Synovus's strategy is the intelligent application of technology, not merely as a cost-saving measure but as a tool for competitive differentiation and revenue generation. While specific, quantifiable performance metrics for all its technological platforms compared to competitors are not detailed, management highlights several key areas. The company utilizes a retail analytics platform that has demonstrably translated into a better client experience and is credited with a 60% increase in new revenue resulting from the insights and leads generated. In its wealth management segment, a focus on the Business Owner Wealth Strategy, supported by integrated platforms, is delivering a 52% conversion rate on qualified referrals. Synovus also emphasizes its treasury and payment solutions, where growth pipelines remain robust, and its efforts to reduce fraud and operating losses through enhanced systems have resulted in an 11% year-to-date reduction in expenses. Furthermore, the company is enhancing its Maast embedded finance solution, aiming to create a stronger value proposition with enhanced functionality and capabilities, targeting both independent software vendors (ISVs) and independent sales organizations (ISOs). This initiative, while still under development after an initial beta phase, is intended to generate both fee income and core deposits. The strategic intent behind these technology investments is to deepen client relationships, improve operational efficiency, and create new revenue streams, thereby strengthening Synovus's competitive moat against both traditional banks and agile fintech players.

The company's strategic execution is reflected in its recent financial performance. The first quarter of 2025 saw net income available to common shareholders surge to $183.7 million, or $1.30 per diluted common share, a significant increase from $114.8 million, or $0.78 per diluted common share, in the prior year. This impressive 67% year-over-year EPS growth was primarily fueled by an 8% increase in net interest income, reaching $454.4 million. The net interest margin expanded notably, rising 31 basis points year-over-year to 3.35% and 7 basis points sequentially, driven by effective deposit repricing, the benefit of hedge maturities, lower cash balances, and the positive impact of the securities repositioning executed in the second quarter of 2024.

Non-interest revenue in Q1 2025 was $116.5 million, a slight decrease of 2% year-over-year, mainly due to lower commercial sponsorship income and brokerage revenue, partially offset by growth in card fees and service charges on deposit accounts. Despite this quarterly dip, management emphasizes the healthy non-interest revenue growth achieved over the past few years, citing an 11% compound annual growth rate in core client fees (excluding mortgage) from 2020 to 2024. Non-interest expense demonstrated strong control, falling 5% year-over-year to $308.0 million, largely benefiting from a $12.2 million decrease in the FDIC special assessment accrual. Excluding this assessment, adjusted non-interest expense was relatively stable year-over-year, reflecting disciplined cost management alongside strategic investments.

The balance sheet reflects ongoing strategic adjustments. Period-end loans stood at $42.65 billion at March 31, 2025, a modest increase of $39.7 million from year-end 2024. While overall growth was muted, lending momentum accelerated in high-growth areas like middle market, specialty, and corporate and investment banking, which saw an 8% annualized growth in Q1 2025. This growth was partially offset by payoffs, paydowns, and the continued strategic decline from non-relationship loans. Total period-end deposits decreased by $252.3 million sequentially to $50.84 billion, primarily due to a decline in time deposits and seasonal shifts in commercial deposits, partially offset by growth in public funds and non-interest-bearing demand deposits. Encouragingly, average deposit costs continued to decline, falling 20 basis points sequentially and 41 basis points year-over-year to 2.26% in Q1 2025, reflecting successful deposit remixing and pricing discipline. Uninsured deposits were estimated at $26.2 billion, but management notes that most deposits are either insured, collateralized, or could be insured through existing sweep programs.

Credit quality showed broad-based improvement in the first quarter. Net charge-offs were $21.4 million, or a low 20 basis points annualized, down significantly from $44.4 million in the prior year period. Non-performing assets and non-performing loans both stood at 67 basis points of total loans, down from 73 basis points at year-end 2024. Total past due loans also decreased to 22 basis points. The allowance for credit losses (ACL) decreased by $10.4 million to $528.9 million, resulting in an ACL to loans coverage ratio of 1.24%, down slightly from 1.27% at year-end. Management attributed the decrease in the ACL to improved credit performance, although this was partially offset by increased economic uncertainty reflected in a more heavily-weighted downside scenario in their economic forecasts, leading to a higher weighted average unemployment rate assumption (4.90% vs. 4.60%). Criticized and classified loans also decreased, primarily due to upward migration and paydowns. While the office CRE portfolio remains pressured, management sees "glimmers of hope" in valuations, and other portfolios like senior housing and multifamily are performing well. The ACL to NPL coverage ratio improved to 185% from 174%.

Synovus maintains a strong capital position, exceeding well-capitalized requirements. The preliminary Common Equity Tier 1 (CET1) ratio was 10.77% at March 31, 2025, a slight decrease from 10.84% at year-end 2024, as earnings accretion was offset by share repurchases. The company's capital management strategy targets a relatively stable CET1 ratio around 10.75%, prioritizing capital deployment for client loan growth while using share repurchases opportunistically. The Board authorized a $400 million common share repurchase program for 2025, and Synovus repurchased 2.40 million shares for $120.8 million in Q1 2025.

The company also declared a quarterly common stock dividend of $0.39 per share, reflecting confidence in its capital position and earnings power.

Looking ahead, Synovus provided updated fundamental guidance for 2025, assuming moderate growth conditions and four Fed rate cuts after Q1 2025, with the 10-year Treasury around current levels. The company expects period-end loan growth of 3-5%, driven by high-growth commercial segments and talent additions. Core deposit growth is also targeted at 3-5%, supported by core production focus and deposit specialties. Adjusted revenue growth is projected at 3-6%, with adjusted non-interest expense growth of 2-4%, reflecting continued investment alongside expense discipline. Net charge-offs are anticipated to be relatively stable sequentially in Q2 2025, remaining below the prior 25-35 basis point range. The CET1 ratio is expected to remain relatively stable around 10.75%, and the effective income tax rate is projected at approximately 22%. While the economic environment remains uncertain, particularly regarding the impact of potential tariffs and government policy changes, management believes its proactive balance sheet management, diversified business model, and strategic initiatives position Synovus well for long-term growth and top-quartile operating metrics. Key risks include the impact of economic downturns, interest rate volatility, regulatory changes, and the competitive intensity in its markets.

Conclusion

Synovus enters the current period from a position of strength, having successfully navigated recent challenges through strategic repositioning and disciplined execution. The first quarter of 2025 demonstrated robust financial performance, marked by significant earnings growth, expanding margins, and improving credit quality. The company's focus on high-growth commercial segments, coupled with investments in talent and technology, is building momentum for future loan and deposit growth. While macroeconomic uncertainties persist, particularly concerning potential policy impacts and interest rate paths, Synovus's strong capital levels, enhanced risk management framework, and diversified revenue streams provide resilience. The updated 2025 guidance reflects confidence in the company's ability to achieve profitable growth, supported by abating headwinds and continued strategic execution. For investors, Synovus presents a compelling narrative of a regional bank leveraging its core strengths and strategic investments to drive sustainable value creation, underpinned by a commitment to disciplined capital management and a favorable competitive position in its attractive Southeastern footprint.