Executive Summary / Key Takeaways

• Synovus Financial Corp. is undergoing a strategic transformation, leveraging robust organic growth initiatives and technological advancements, culminating in a definitive merger agreement with Pinnacle Financial Partners, Inc. (PNFP).
• The company delivered strong financial performance in the first nine months of 2025, with net income available to common shareholders rising significantly to $575.60 million, or $4.10 per diluted common share, driven by net interest margin expansion, lower funding costs, and improved credit quality.
• Strategic investments in high-growth commercial lending segments, talent acquisition, and advanced digital banking tools are fueling loan growth and diversifying fee income, positioning Synovus for sustained market share gains in the competitive Southeast.
• The pending merger with Pinnacle, expected to close in Q1 2026, will create a Category IV Large Financial Institution, subjecting the combined entity to enhanced regulatory scrutiny but also offering significant scale and market leadership in the region.
• Synovus maintains a strong capital position with a CET1 ratio of 11.22% as of September 30, 2025, and a disciplined approach to capital deployment prioritizing loan growth, while navigating interest rate sensitivities and managing credit risks effectively.

Synovus's Strategic Evolution: Building a Southeast Powerhouse

Synovus Financial Corp. (NYSE:SNV), founded in 1888 and headquartered in Columbus, Georgia, has a rich history in financial services, including early involvement in the payments business through its past ownership of TSYS. This deep-rooted experience has shaped its current strategy, which centers on a client-centric, relationship-based banking model. Over the past decade, Synovus has embarked on a significant diversification and growth journey, strategically building out industry verticals and expanding its middle market banking presence. This foundational work has positioned the company to capitalize on the dynamic economic landscape of the southeastern U.S.

The company's overarching strategy is to drive organic growth by outperforming the market, aiming for loan growth 100 to 200 basis points above underlying GDP expansion. This is achieved through active market share gains, leveraging a strong corporate culture, comprehensive product capabilities, and a client-centric approach to attract top talent and deepen existing relationships. Synovus has also proactively managed its balance sheet, optimizing its portfolio by reducing exposure to non-core and non-relationship assets to free up capital and resources for higher-returning core client growth. This disciplined approach is critical as the company prepares for a transformative merger.

Technological Edge: Fueling Efficiency and Client Solutions

Synovus's strategic investments in technology are a cornerstone of its competitive differentiation, enabling enhanced client service and operational efficiency. The company has implemented a new loan origination system with nCino (NCNO) and a new syndication platform, streamlining lending processes and improving transaction capabilities. In treasury management, Synovus has introduced improved client onboarding, foreign exchange hedging, an Accelerate AP solution for payables management, a robust receivables platform, and enhanced Lockbox services. These tools are designed to provide clients with comprehensive, 24/7 operational capabilities.

Future technological initiatives include ERP integration with its treasury platform and a fully integrated payment portal, which will allow clients to utilize a multitude of payment rails. The company is also refining its Maast embedded finance solution, initially launched as an MVP product, to enhance its value proposition, particularly for independent software vendors (ISVs) and merchant acquiring companies. While specific quantitative performance metrics for these technologies are not publicly detailed, the strategic intent is clear: to provide superior client solutions that deepen relationships, diversify fee income streams, and contribute to a stronger competitive moat. These technological advancements are integral to Synovus's ability to attract and retain clients, drive efficiency, and support its long-term growth strategy.

Competitive Landscape: Differentiating in a Crowded Market

The banking industry in the Southeast is highly competitive, with Synovus vying against both larger regional and national banks, as well as agile fintech companies. Key direct competitors include Regions Financial (RF), Truist Financial (TFC), Fifth Third Bancorp (FITB), and KeyCorp (KEY), all of whom operate in similar markets and offer comparable commercial and retail banking services. Synovus acknowledges this intense competition, particularly in pricing for both loans and deposits, but emphasizes its differentiated strategy centered on relationship value rather than price alone.

Synovus distinguishes itself through a strong community brand, deep local market knowledge, and a commitment to personalized service. This approach fosters strong customer loyalty and allows for more tailored solutions, particularly for small and medium-sized commercial clients. For instance, Synovus's focus on community banking and local relationships can lead to greater efficiency in serving small businesses compared to the more standardized approaches of larger rivals like Truist Financial. While larger competitors may benefit from greater scale and extensive national footprints, Synovus aims to out-capability smaller banks and out-service larger institutions, creating a "Goldilocks-like principle" that attracts both clients and talent.

In terms of financial performance, Synovus's latest TTM Gross Profit Margin stands at 68.82%, Operating Profit Margin at 30.36%, and Net Profit Margin at 24.05%. Its Debt/Equity Ratio is 0.53, and its P/E Ratio is 7.93. When compared to competitors, Synovus's P/E ratio of 7.93 is lower than Regions Financial (10.87), Truist Financial (11.87), Fifth Third Bancorp (12.64), and KeyCorp (21.32), suggesting a potentially attractive valuation relative to its peers. Its P/B ratio of 1.09 is also competitive.

Synovus's talent acquisition strategy is a critical competitive advantage. The company actively recruits experienced relationship managers by offering a culture that fosters engagement (89% engagement levels in a recent survey), provides comprehensive technology and treasury solutions, and minimizes administrative burdens. This enables bankers to focus on client service, leading to a strong pipeline of talent, particularly in high-growth markets across the Southeast. While larger competitors like Truist Financial and Regions Financial may have more resources for broad technological investments, Synovus's targeted approach to technology and talent allows it to compete effectively in its chosen segments.

Financial Performance: A Trajectory of Strength

Synovus has demonstrated a strong financial trajectory, particularly in the first nine months of 2025. Net income available to common shareholders surged to $575.60 million, or $4.10 per diluted common share, compared to $260.70 million, or $1.79 per diluted common share, in the same period of 2024. This significant increase was driven by healthy net interest margin expansion, lower funding costs, and a notable decrease in the provision for credit losses.

Net interest income for the nine months ended September 30, 2025, increased by 7% to $1.39 billion. The net interest margin expanded by 22 basis points year-over-year to 3.38%, a result of effective deposit repricing, positive deposit remixing, and the repricing of fixed-rate assets. On a linked-quarter basis, the net interest margin saw a 4 basis point increase, supported by higher loan yields and hedge maturities. Non-interest revenue also contributed positively, growing 13% year-over-year in Q3 2025 to $140.70 million, primarily from higher core banking fees, capital markets income, and other non-interest revenue. Year-to-date, non-interest revenue was $391.30 million, significantly higher than the prior year, partly due to the impact of AFS investment securities sales losses in Q2 2024.
Expense management remains disciplined. Non-interest expense for the third quarter of 2025 increased by 11% to $348.70 million, and year-to-date by 4% to $972.50 million. These figures include $23.80 million in merger-related expenses associated with the pending Pinnacle merger. Despite these merger-related costs, Synovus has maintained a focus on containing overall expense growth through efficiency efforts, including an 11% decline in back-office headcount over the past five years, with resources reinvested into frontline talent and product enhancements.

Robust Loan and Deposit Dynamics

Loan growth has been a key highlight, with loans, net of deferred fees and costs, reaching $43.75 billion at September 30, 2025, an increase of $1.14 billion from December 31, 2024. This growth was primarily fueled by Commercial and Industrial (CI) loans, particularly in high-growth business lines like specialty lending and Corporate and Investment Banking (CIB), and increased commercial line utilization. Commercial Real Estate (CRE) loans also saw an increase, while consumer loan balances experienced a slight decline.

Deposit trends reflect strategic management. Total period-end deposits at September 30, 2025, decreased by $1.09 billion compared to December 31, 2024, mainly due to a $1.24 billion decline in core deposits, partially offset by a $151 million increase in brokered deposits. Average deposit costs in Q3 2025 were relatively flat sequentially at 2.23% but declined by 49 basis points year-over-year, benefiting from positive deposit remixing and disciplined repricing strategies. To support loan growth and offset deposit declines, Synovus increased long-term Federal Home Loan Bank (FHLB) advances by $1.60 billion.

Credit Quality and Capital Strength

Synovus's credit quality remains strong, reflecting robust underwriting policies and continuous monitoring. Non-Performing Assets (NPAs) stood at 53 basis points and Non-Performing Loans (NPLs) at 48 basis points as of September 30, 2025. Net charge-offs as a percentage of average loans were 14 basis points annualized for Q3 2025 and 17 basis points annualized year-to-date, a significant improvement from the prior year. The Allowance for Credit Losses (ACL) to loans coverage ratio was 1.19%, with the ACL to NPL coverage ratio increasing to 249%. This improvement in credit performance, coupled with strong loan growth, has allowed for a decrease in the ACL to loans coverage ratio.

The company's capital position is robust, with the Common Equity Tier 1 (CET1) ratio improving by 38 basis points to 11.22% at September 30, 2025, driven by organic earnings. Synovus repurchased 2.90 million shares of common stock during the first nine months of 2025, but share repurchases are currently paused due to the pending merger with Pinnacle. Management believes its capital levels are "well positioned to meet relevant regulatory capital standards" and are "more than adequate in a range of more challenging economic outcomes."

Outlook and Transformative Merger

Synovus's updated fundamental guidance for 2025 reflects continued optimism and strategic execution. The company anticipates end-of-period loan growth of approximately 4.50% and end-of-period core deposit growth of approximately 0.50%. Adjusted revenue growth is projected at approximately 6.50%, with adjusted non-interest expense growth around 2.50%. The net charge-off ratio is expected to remain relatively stable at 0.17% year-to-date annualized, and the CET1 ratio is targeted at approximately 11.35% by year-end, with an effective income tax rate of approximately 21%. This guidance incorporates an assumption of two 25 basis point interest rate cuts by the Federal Reserve in October and December 2025, and stable long-term rates.

A pivotal development for Synovus is its pending merger with Pinnacle Financial Partners, Inc., announced on July 24, 2025. This all-stock transaction, valued at $8.6 billion, aims to create a "Southeast growth champion." Shareholders of both companies approved the merger on November 6, 2025, and the transaction is expected to close in the first quarter of 2026. The combined entity, which will operate under the Pinnacle Financial Partners, Inc. brand, will be headquartered in Atlanta, Georgia, with the bank headquarters in Nashville, Tennessee. Synovus shareholders will own approximately 48.50% of the combined company.

This merger will transform the combined company into a Category IV Large Financial Institution, subjecting it to the Federal Reserve's enhanced prudential standards. This includes more rigorous capital planning, liquidity risk management, and resolution planning. While this presents a "significant regulatory hurdle," Synovus views it as an opportunity to scale with purpose and enhance its systemic footprint. Integration planning is actively underway, with executive leadership and local market banking leaders already named.

Conclusion

Synovus Financial Corp. stands at a pivotal juncture, having meticulously cultivated organic growth through strategic investments in talent, technology, and a client-centric approach, all while maintaining robust financial discipline. The company's strong performance in the first nine months of 2025, marked by expanding net interest margins, controlled expenses, and improving credit quality, underscores the effectiveness of its strategic initiatives. The impending merger with Pinnacle Financial Partners represents a transformative step, poised to create a formidable regional banking leader in the high-growth Southeast.

While the merger introduces complexities, particularly in navigating enhanced regulatory standards and integration challenges, it also promises significant scale and market opportunities. Synovus's commitment to technological innovation and its differentiated relationship-based banking model provide a solid foundation for competitive advantage. Investors should recognize Synovus's clear strategic path, its proven ability to execute, and the long-term value creation potential stemming from its organic growth engines and the strategic synergies of the merger, positioning it for sustained profitability and market leadership in the evolving financial landscape.