Q2 2025 Synovus Financial Corp Earnings Call
Good morning and welcome to the sovas second quarter 2025 earnings call.
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On our turn, the call over to Jennifer Denver senior director investor relations. Please go ahead
Speaker Change: He will be followed by Jamie Gregory Executive Vice, President and Chief Financial Officer and they will be available to answer your questions at the end of the call.
Speaker Change: Our comments include forward-looking statements, these statements are subject to risk and uncertainties and the actual results could vary materially. We lift these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward looking statements because of new information, early developments or otherwise except as may be required by law. During the call, we will reference non-gaap Financial measures related to the company's performance. You may see the reconciliation of these measures in the appendix to our presentation. And now Kevin Blair will provide an overview of the quarter.
Kevin Blair: Thank you, Jennifer last night. We were pleased to release strong second quarter 2025 results. So novas reported Gap and adjusted earnings per share of a dollar and 48 cents, adjusted earnings per share increased 14% from the first quarter and jumped 28% year-over-year while adjusted pre-provision net revenue. Rose 5% sequentially and grew 7% from second quarter 2024
Kevin Blair: Our year-over-year earnings growth was primarily attributable to healthy net, interest margin expansion, lower provision for credit losses and continued, operating expense discipline.
Kevin Blair: On a link quarter basis. Loan growth was strong and broad-based, while Loan Production was the highest. It's been since the third quarter of 2022,
Kevin Blair: Also, net interest, margin expanded modestly and Capital Market fees, rebounded, while expense growth was well, controlled net charge offs declined and capital ratios moved higher.
Kevin Blair: Importantly, we continue to execute well on our 2025, strategic initiatives, which includes our accelerated hiring of relationship. Managers through the second quarter, we are on track with this program at adding 12 new commercial Bankers during June. We issued press releases which highlighted our new hires across the footprint and we continue to have a robust pipeline of talent slated for expansion in the third and fourth quarters.
Moreover sonova continues to provide exceptional Client Service as evidenced by our performance in the most recent JD Power. Survey, we had the 6th highest-grossing
Kevin Blair: Moreover, we have augmented our survey and client contact efforts over the second quarter to yield a more effective industry intelligence.
In summary, I'm incredibly pleased with our performance this quarter and the strong trajectory we're on. We saw a 60% year-over-year increase in total funded Loan Production in the second quarter, coupled with a continued decline in net charge offs and broad-based expansion across our fee, income categories, all of, which underscores the momentum we built in the strength of the diversity of our growth and we have achieved these results while setting new high water marks for our Capital, ratios demonstrating, both the bazillions and the discipline of our strategy. Now, Jamie will review our second quarter results in Greater detail. Jamie
Jamie Gregory: Thank you. Kevin.
To know this generated positive operating leverage in second quarter 2025 adjusted Revenue. Increased 3% from the first quarter while adjusted non-interest expense grew. Just 1% on a year-over-year basis, adjusted Revenue, increased 5% while adjusted, non-interest expense rows, 3%,
Jamie Gregory: Net, interest, margin expansion, drove 6% year-over-year, net interest income growth in the second quarter.
On a sequential basis and Nim expanded 2 basis points to 3.37% benefiting from a decline in our cost of deposits. Fixed rate, asset repricing Edmond Charities, lower cash, balances and a stable fed funds environment.
Jamie Gregory: Period and Loan balances were up 888% from the first quarter.
Jamie Gregory: Loan growth continues to be led by our high growth verticals, which increase 52 million in the second quarter.
Jamie Gregory: Specialty lending, Rose 353 million sequentially driven by growth and structured lending and restaurant Services Lending.
Jamie Gregory: further supported by corporate and Investment Banking loans, which were up 159 million
Jamie Gregory: Also of note, our Commercial Bank line of business within the community bank, grew loans by 111 million.
Jamie Gregory: year in fact, as Kevin mentioned, our Loan Production was the highest it's been since the third quarter of 2022
Jamie Gregory: Core deposits declined, 788 million or 2% from the first quarter, which included a 405 million, drop in public funds.
Time deposits and inspiring demand deposits declined. Partially offset by 115 million of growth in non-interest-bearing, deposits.
Jamie Gregory: Also brokered deposits for down 130 million.
Turning to funding calls, our average cost of deposits declined, 4 basis points to 2.22% in the second quarter.
Jamie Gregory: This deposit cost Improvement represents a total deposit beta of 50 through the recent easing cycle compared to our guidance of 40 to 45%.
Jamie Gregory: Adjusted. Non-interest Revenue was a 131 million which increased 12%, sequentially and grew 3%. Year-over-year
Jamie Gregory: Growth was primarily attributable to a sharp Rebound in capital markets fees. A 2% increase in wealth management income.
Jamie Gregory: Seasonally higher commercial sponsorship, revenue and a $0 bully gain.
Jamie Gregory: On a year-over-year basis. We generated 9% growth in core banking fees, partially offset by lower Capital markets Revenue.
We remain very disciplined with non-interest expense control.
Jamie Gregory: Adjusted, non-interest expense Rose. Just 1% on a link quarter basis and increased 3% year-over-year.
sales in the second quarter of 2024 and 2025 adjusted non-interest expense increased just 2% year-over-year,
Jamie Gregory: growth was driven by higher employment expenses, partially from a full quarter, impact of our 2025 mirrored increases, as well as the initiation of new projects and a $1 million contribution to the Donor, advised fund.
This growth was partially offset by lower FDIC premiums Consulting fees and operational losses.
Jamie Gregory: Year-over-year. Non-interest expense growth was primarily attributable to higher employment expense partially offset by lower credit related, legal costs and operational losses.
Jamie Gregory: Our results, demonstrated continued strength and credit performance, with a net charge also of 18 million or 17 basis points.
Jamie Gregory: Better than our previously, communicated guidance of around 20 basis points.
Jamie Gregory: Non-performing loans, improved to 0.59% of total loans down from 67% in the first quarter.
Jamie Gregory: The allowance for credit losses into the quarter at 1.18% compared to 1.24% in March.
The allowance for credit losses to climb due to positive credit Trends, within our loan portfolio. Partially offset by a more adverse economic Outlook.
Jamie Gregory: We continue to be diligent and proactive with credit risk management and remaining engaged in multiple efforts to identify risks associated with recent policy changes.
Jamie Gregory: Finally, our Capital position remains strong in the second quarter with the preliminary. Common Equity Tier 1 ratio at 10.91% and preliminary total risc-based Capital. Now, at 13.74% you hear me, this is the highest cet1 ratio in our company's history.
Our healthy earnings profile continues to support our Capital position leading this slightly higher, Caper, ratios inclusive of about 21 million of Sherry purchases completed in the second quarter.
Jamie Gregory: I'll now turn it back to Kevin to discuss our 2025 guidance.
Kevin Blair: Thank you. Jamie, looking at 2025 guidance, our Outlook has been revised to reflect our expectations for increased Revenue. Growth supported by strong year-to-date performance that we expect to continue in the third and fourth quarters. Our guidance. Incorporates 2 fed fund Cuts in the second half of the year in September and December and a relatively stable 10-year treasury yield
Period, end loan growth, is expected to be 4 to 6% in 2025, compared to 8% annualized growth in the second quarter. The vast majority of the growth is expected to come from our high growth verticals, which include Middle Market specialty, and corporate and Investment Banking Lending.
Kevin Blair: our confidence in this Outlook is based upon current lending pipelines, our 2024, and early 2025 Talent additions, as well as business line, expansions
On the deposit front. We now, expect core deposit growth of 1 to 3%. Strong. Second half 2025 growth should be led by continued. Focus on core deposit production across our business lines. Normal seasonal benefits, and investments in deposit specialties
Kevin Blair: Own growth momentum net, interest margin strength, and our expectations for fewer 2025 rate Cuts, our interest rate sensitivity profile continues to be relatively neutral to the front end of the curve and we remain slightly asset sensitive to long-term rates.
Kevin Blair: However during an easing cycle, the margin should still exhibit. Short-term pressure due to the timing lag between loan and deposit repricing.
Kevin Blair: We now anticipate adjusted non-interest revenue of 495 million to 515 million. This year, we believe continued core execution in areas such as Treasury and Payment Solutions and capital markets as well as refinement of our delivery models. And consumer banking wealth services. And third-party payments will support the bank's fee income momentum
Kevin Blair: Adjust it. Not interest expense growth, should remain in the range of 2 to 4% in 2025.
Kevin Blair: We will continue to be balanced and very disciplined and expense management. While investing in areas that deliver long-term shareholder value. And the third quarter, we estimate that non-interest expense should be around 320 million. Primarily as a result of a higher Day Count ongoing expansion in addition of Technology projects and continued team member hiring
Kevin Blair: Moving to credit quality, we believe that the credit loss environment should be relatively stable over the near term as a result. We estimate that net charge all should be relatively stable in the second half of 2025 compared to the 19s experience in the first half of this year.
Kevin Blair: Moving to Capital. We will Target a relatively stable, cet1 ratio with the priority on Capital deployment, continuing to be loan growth, rather than share repurchases. We believe current capital levels are more than adequate in a range of more challenging economic outcomes.
Kevin Blair: Our tax rate was approximately 21% in the second quarter and compared to over 22% in the prior period. We now anticipate the tax rate should be between 21 and 22% for the full year 2025
In summary, our team, demonstrated solid performance in the first half of the year. And we feel confident that this momentum should continue in the third and fourth quarters. As a result, we have raised our 2025 net interest income and non-interest revenue Outlook while maintaining our non-interest expense guidance.
Kevin Blair: We also expect our net charge offs and capital ratios to remain relatively stable throughout the second half of the Year. Collectively these results. Set the stage for a strong 2025 building on the momentum and the achievements. We've delivered year to date with strong fundamentals and a clear strategic path. We are well, positioned to deliver sustained value and strong financial performance this year and Beyond, and now operator, let's open the call for questions.
Kevin Blair: Thank you. We now begin at the question and answer session.
Speaker Change: to ask a question, you may press start, then 1 on your touchtone phone,
if you're using a speaker-phone, please pick up your handset before pressing the keys.
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Speaker Change: In the interest of time, please limit yourselves to 1 question and 1 follow-up.
Speaker Change: Thank you.
Speaker Change: Our first question for today comes from John Armstrong of RBC.
Your line is now open this. Go ahead.
Thank you. Good morning everyone.
Speaker Change: Kevin.
Speaker Change: I'm here. Can you hear me?
Yeah, we can hear you.
Kevin Blair: Okay, good. Good. Um, Kevin. Can you just I want to talk about long growth, a little bit. Can you talk about the change in sentiment that you saw from Borrowers?
and how that really progressed during the quarter, we talked a little bit about it, last quarter was a lot of uncertainty but you know, now you're talking about
No, 60% year-over-year funded production.
Kevin Blair: Your high growth segment, annualized growth doubled, production, highest since 2022.
Speaker Change: So something clearly changed and I'm just curious if you feel like loan growth is accelerating from here and and kind of how it progressed during the quarter.
Speaker Change: Date which puts us right in the middle of that range, our moderate growth category that we thought would be 0 to 5 is now up to 6% year to date. And so, when you, when you think about, it's it's not 1 area, it's multiple areas that are producing. Um, it's a function of talent, it's a function of the, the activity picking up, and what's really great is as we look into the third quarter pipelines, are about 14% higher than where they were entering the second quarter. So yes, we think loan growth, could continue a couple things we're watching line utilization, we did see about 150 million, dollars of improvement on same line, utilization this quarter. So it's ticked up about 90 basis points. That's obviously a driver of growth. We also are monitoring the payoff activity, uh, we've talked about that for some time we've seen some elevated payoff activity, this quarter, it was up about 800 million dollars off of first quarter, so leveling off and most of that was in CRA. So if these production levels continue to increase, we don't see a significant change in payoff activity.
Speaker Change: Or we see some improvement there along with some line utilization, which is generally correlated to interest rates. We do believe that the second half could continue to pick up and that's why we've increased our loan guidance for the year.
Speaker Change: Okay, good. Very helpful and then, uh, just Jamie for you on the deposit Outlook. I I get it's being a little bit slower, but you're also flagging.
Faster, commercial deposit growth, can you talk a little bit about your expectations there, and then how you expected deposit mixed to change if, if this type of loan growth continues, thank you.
Speaker Change: Yeah, John, you know, first let me let me talk about the second quarter a little bit. When you look at uh, the decline and deposits, it was really led by public funds broker deposits as well as CDs. And as you're well aware, these are all products where growth is largely a function of price and so those were strategic decisions that we made uh in the second quarter. It led to the decline in total deposit cost um and positioned us for margin expansion but without those declines deposits. Uh, were roughly flat. And so now when we look forward to the second half of the year, you have the combination of a couple things 1, you have with Kevin is describing which is core client growth. Um, new accounts, new hires bringing in deposits, you have our specialty deposit verticals, but then you also have the seasonals and so if you look at history and look at core deposits, in the second half of the Year, well even if you exclude public funds that typically contributes 1 to 2% to total
Speaker Change: Deposit growth in the second half of the Year public funds themselves. Earn incremental 1 to 2%, uh, add in the second half of the year. And then, the last thing I would say is we made a strategic decision to be really aggressive and reducing our time deposit rates during the easing, uh, cycle. And as, you know, our our pricing bait on protho production, there was over a 100%. Well we you know, we've kind of pulled back more towards median in our CD pricing, uh, in the month of June and that led to stability. And so we had relative stability in CDs in the month of June and our average production rate was right around 3:52. And so we feel that with the stability in in time, uh, potentially infecting the growth as well as seasonals and then core client growth. And Specialty verticals, we're really well positioned for growth in the second half of the year.
Okay, thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Ibrahim at poonawalla of Frank of America. The line's not open. Please go ahead.
Good morning.
Speaker Change: Yes, maybe, um, just following up on the lending, momentum and growth. Uh, talk to us. May I maybe Jamie Kevin around
The competitive landscape that you're seeing and impact on pricing on. When you think about cni growth, uh, the sort of specially in some of your higher growth areas, both from competitive Banks out of State Banks and then even non-banks such as are you been seeing private credit at all? When you are out there in the market? Thanks?
Speaker Change: Capital for them to deploy back in or organic growth. So all of those things would point to the fact that we should expect to see ongoing competition for loans. Um, as it relates to pricing, we've talked about there being some competitive tension. When you look at it, on a sofa spread basis, we saw about 5 basis, points of decline quarter on quarter, so fairly modest. Uh and when you look at overall production loan yields, we came in about 6784 the quarter which was off about 12 basis points from the previous quarter, some of that relates to mix, but it is showing up uh with um, more pricing competition as our Bankers are out there, trying to win business. The great news is when we look at the other side of the equation and you look at the deposit of production pricing, that was at about 2:49. So we're we're still earning about a 430 spread on Loan Production, minus deposit production. That's something we look at internally because I think you don't want to look at just 1 side of the balance sheet, so it is going to be competitive both for loans for tax.
Speaker Change: Talent pricing is going to be a key component for how people compete. But I think we're able to manage through that and you do that by trying to provide more relationship value. It can't be just based on price alone so we've got to make sure that we continue to add value for our clients. We got to provide those cash Management Services. We've got to provide exceptional advice and service and then price becomes less of a factor.
That's good color. Thank you for that and I guess maybe just a stupid follow up. So I heard your comments on expenses and the Outlook, but if growth momentum does pick up over the coming months.
Speaker Change: Would that change in terms of like just tactically? Ratcheting up Investments. Try to grow beat Banker hiring or infrastructure around that just talk to us. In terms of how you're thinking about sort of dynamically changing things, depending on just how the um, uh, Revenue backlog evolves.
Speaker Change: No. Ibrahim you know as you look at the expense Outlook, there is some variable cost associated with incentives. You know if we outperform that you'll see that and collect a little bit higher but our strategic initiatives, we believe that they stand on their own uh on the IR profile of the initiative. And if you're focusing in on the hiring that's something that we you know, when we identify the right team members future team members, we're going to make that move and we're going to uh, make those hires. And that's that's less dependent on our Revenue Outlook. I mean, you can recall back in, uh, the fourth quarter when we first laid out our guidance for 2025, we had revenue and expenses in line with each other and I think that shows that you know we want to make the right long-term decisions for this company and we are okay you know if the expense growth and revenue growth are in line so long as that improves profitability for the future. Now look, that's clearly not what we're saying today.
Speaker Change: Because you can see the strong operating leverage in our revenue and expense guides today. But I would just say that our strategic growth initiatives, stand on their own, more than as a reaction to increased or decreased Revenue growth.
Speaker Change: All right, thank you both.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Anthony Ian from JP Morgan the lines now open, please go ahead.
Speaker Change: Hi everyone. Kevin just to follow up on the new hires and the prepared remarks you made. So, uh, you now a few weeks ago, plans to hire, uh, plans to make new hires in the Carolinas, Florida and other markets as part of the 203%, increase over the next 3 years.
It seems like you've had a lot of momentum in the past couple of quarters. So should we think of the many of these hires as being made this year or are still spread out over the next few years?
Yeah, Anthony. We, we talked about on the prepared remarks about 12 FTE. We had slated 25 commercial relationship, managers across Middle Market core commercial and business banking this year. So we're about 50% there. And you look at our pipeline. We think we'll add the other 12 to 13 in the second half of the year so that that will be on on Pace for what we had planned for 25. And 26, you'll see another 30 uh commercial hires.
Speaker Change: Wealth strategy, where we're targeting wealth opportunities, amongst those commercial, um, owners and CEOs. And so yes, you'll you'll see us play out this year, but really over the next 3 years, it's going to be fairly measured where each year will have a commiserate level of additions and part of that just because we want the 25 editions to really pay for the 26th editions and then we'll pay that forward into 27 where the 2 years will largely be paying for it. And so mentioned, most of these positions have less than a 2 year earned back as we evaluate them on a p&l basis. So it's going to be measured, we've been very excited about the talent we brought in today and yes I think we're going to be able to continue to do that for the foreseeable future.
Thank you. And then my follow-up. Jamie on seeing come, you had a good quarter and capital markets but the second half of income guide implies a bit of a step down. I'm just curious, what's driving that or is there a level of conservatism in baked into that? Thank you.
Speaker Change: Yeah. Tony you know as we look at the second half of the year and capital markets, we're actually uh expecting relative stability to the second quarter. I mean as you're aware we viewed the first quarter more as an anomaly and the second quarter as a return to normaly. And so, when you think about fee revenue for the second half of the year, we really expected to be, you know, relatively flat to the first half of 2025, similar level as the second quarter. Um, and and kind of, we were pretty much back to our original
guide that we had for full year in our
Speaker Change: thank you.
Speaker Change: Our next question comes from Bernard voni of Deutsche Bank. The Line is now open. Please go ahead.
Speaker Change: Yeah. Hi guys. Good morning. Um,
Just on the name. Uh,
Speaker Change: The increase sequentially. You know 1 of the factors you highlighted in addition to the lower funding costs or lower cash balances. Uh you know when you mentioned just normalized cash balances, can you remind us? What level should we be thinking of? And now that we have uh, 2 uh, assumed rate Cuts versus 4? Um, could you maybe share some some thoughts or color on the Glide path of men in the second half of the year, uh, and as we exit 2025,
Speaker Change: Yeah. You know, as we think about cash balances, we expect to be relatively stable uh, where we are. Uh, now uh, as we look into the second half of the year, um, we can balance around. I mean we could be at 2 billion dollars but we kind of hanging out in this General general area. When you look at um the margin for the second half of the Year first. I would I would anchor you to the flat rate scenario just because I think it's an easier way to think about it. We still expect in a in a flat rate, environment for the margin to appreciate to the low 340s uh the end of the year. And that's largely going to be uh fourth quarter. It'll be more of a fourth quarter event than a third quarter event.
Speaker Change: Um, due to fixed rate asset repricing. And so in that scenario we are expecting the uh funding cost and deposit cost to be relatively stable and to see a little bit of of increases in our asset yields as we go through the year. Um, with regards to Cuts again, it's it's the same thing. We've said before, we believe that each cut is about a, you know, 5 to 7 million dollar impact to nii. And so you can, you know, depending on when the cut is depending on how much 1 month. So for leads the actual cut itself, uh you kind of get somewhere in that range and um, so it's kind of hard to say the impact per quarter because it really depends on the month of the quarter of the East. But I would I would continue to use that 5 to 7 million dollars per per ease impact in AI. But we we remain neutral to the curve. And so once we get through that lead lag impact, we don't believe that the FED easing will have a long term impact to, to the margin.
Speaker Change: Just want to follow up on.
Speaker Change: Metrics obviously investments in Treasury and Payment Solutions. Uh and that's aided core banking fees in the first half of the Year thus far. I think 1 of the initiatives you point to is on pricing, I was just wondering if you could break down the drivers of growth here and then I know service charges came in a bit higher. In the quarter, just wondering if there's anything lumpy in that line item to call out. Thank you.
Speaker Change: Seen, uh, and the other part of that is just as we continue to expand our Relationships by selling more cash management. Treasury Solutions into our clients wallet, it's driving growth there, as well as you think about the rest of the year, there's really nothing lumpy in the service charge line. We've actually held serve with NSF fees. Um, so that's, that's there. We've had, you know, some, some, um, um, on the Capital Market side. There's been some lumpiness there. Uh, we saw this quarter, we had a million dollar increase in capital markets largely a function of arranger fees, syndication fees and derivatives and so that will continue to kind of move around a little bit along with the Loan Production. But everything else is. Uh as we think about the rest of the year, it's it's running at a run rate that should continue at the levels. You've seen in the second quarter.
Speaker Change: Great. Thanks for taking my question.
Speaker Change: Thank you. Our next question. Comes from Menan. Gasalia from Morgan Stanley. Your line is now open. Please go ahead.
Hey, good morning. All
Speaker Change: Good morning. I wanted to ask on uh, good morning. Um, I wanted to ask on slide 22.
Speaker Change: Um, can you talk a little bit more about the decision to, um, add a little bit to reserves, um, from, uh, the economic uncertainty element of the, uh, macro component of the reserves. You know, it feels like things are going the right way. From a macro perspective, as well as from, um, your own portfolio perspective with ncos npls and criticize everything improving. So just wanted to get a little bit more color on um, on that increase. Was it just driven by Moody's or was there anything else in there?
Speaker Change: Yes, it, the short answer to whether driven by Moody's is, yes. I mean, we do use their scenarios and then we we apply our own internal weightings. We have a group of economists, that that are opinions on the probability and we adjust accordingly. And so, uh, and that that's the 4 scenarios. You see, on that slide on, slide, 22.
Um, the the change.
Speaker Change: From the prior quarter, really the, the indicator that we use, the most that drives the model, the most is unemployment, and the change in the unemployment rate. And when you look at the weighted scenarios that we use this quarter versus last quarter, the early changes in unemployment rates are are, what's driving that
Speaker Change: Uh, economic uncertainty increased. Um and then clearly the performance of the loan portfolio is that offset that more than offset it and led to the reduction in the allowance loan ratio
Got it. Um and then as a follow up just on Capital, um I think you noted a preference for allocating Capital towards loan growth rather than BuyBacks. And I think you slowed 5x a little bit this quarter but cd1 is still fairly strong at 10.9. So can you help us with how you're thinking about Buybacks in the back half of the year?
We continue to Target relative stability in our Capital ratios and so if you look at at year end, we are at 1084. And then we saw a decline in the first quarter and now we've built back up a little bit in the second quarter. Um, the the build in the second quarter oh largely had to do with how we saw loan growth coming in. When you look at, as Kevin mentioned earlier, when you look at the pipelines that we were seeing in March and April which were leading the loan growth in may, we just decided to hold off on incremental, share purchases and just wait till we see how it plays out. Because you're right, our priority is client loan growth. And that's what that capital is there for, uh, for and so we just wanted to hold off and watch what happened with loan growth. And so we're pleased to be at 109 uh, here at June 30. And, you know, we will try to maintain Rel
Speaker Change: Of stability as we go through the second half of the year.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Katherine Miller of KBW the lines. Now open, please go ahead.
Thanks, good morning.
Katherine Miller: Good morning.
Uh, not to say you
Yeah, those borrowings are all, you know, the home loan bank, borrowings and so, that's where I can see that increase, uh, in that piece of, of wholesale funding. You can think of those as being right near, you know, sofa rates and so those are collateralized very liquid, uh, borrowings when we look forward into the second half of the year. Uh, we do expect that core client, uh, deposit growth to, to, uh, offset the, the loan growth, we expect in the second half of the year. So, the growth I was describing earlier and, um, and not maturity, Experian deposits as well as public funds. Uh, we think that that will, that will be the offset to the, to the strong growth. We're expecting in the second half of the year,
Katherine Miller: Great, thank you. And then 1 more in. The margin is, can you give us?
Speaker Change: Insight into.
Speaker Change: Where your, um, where your fixed rate book kind of is on average day in terms of yield, and then where you're floating rate. Book is on average today, just trying to think about the, the balance between those 2 in a stable rate, environment, and and the upside from the fixed rate book. And then maybe, once we start to see Cuts also how the, you know, floating rate coming down maybe offset by that by that fixed rate, book repricing.
Yeah, I mean with the fluttery book typically our the spreads are around, 250 on on the floating rate book. And as of now, our floating rate, uh, loan portfolio is 64% of total loans.
Speaker Change: And the the index that's most uh, most common on our flood rate loan book is 1 month so far. And so I would expect to see that repriced uh, fairly swiftly, uh, and an easing environment. And then on the fixed rate side, on the commercial loans, I would assume kind of a 3 year uh, duration on those. And then, of course, the the mortgages are are fairly long of 5 or 6 year degrees.
Speaker Change: The fair to say that book is still kind of in the mid 5 today.
Speaker Change: Uh, the fixed rate book.
the, uh, when you, when you look at
Our total loan book um right now. Um, gosh, I don't I don't have that yield in front of me. Um, it is about, well, it's about 6 and a quarter. Uh, is the is the loan, uh, is the overall yield on on the loan book but
Speaker Change: Mortgage is the average kind of book yield on our mortgage portfolio is in the mid fours.
Turner: Thank you. Our next question comes from our Turner of the a Davidson your lines are open. Please go ahead.
Turner: Oh thanks. Good morning. I wanted to ask a, uh, maybe bigger a, a bigger picture question in terms of the recruiting, uh, you know, it seems like every mid-size Bank in the Southeast that we talked to is is very focused on recruiting, you know, and talent acquisition. So can you talk about kind of the competitive Dynamics around? Uh, that strategy right now. Uh, and and maybe the value prop that you're kind of offering to folks that you think differentiates you
Speaker Change: Hey Gary. I look I I
You're right. That I think the way to to grow, is to continue to add quality talent. And we all say this is a talent industry because we're highly commoditized. So I don't think that our strategy is that differentiated, but um, the strategy is differentiated in your ability to hire better talent and I think it starts with being able to attract individuals based on the culture of your company. Uh, when I look at cenovus, we just finished our voice of team member uh, survey which looks at engagement and we finished at 89%, which puts us in the upper echelon of, uh, any company in the United States. And I think that's important people want to join a company.
Speaker Change: That is fun to work for uh, that celebrates 1. Another and is very family oriented and I think we provide that to these Bankers want to come to a place where they can fully serve their clients that starts with products and capabilities. And we've said this time in and time out, we're trying to be a bank that has all the capabilities and functionalities of the larger institutions, but we continue to deliver on a very personalized level, like the smaller Banks. And that puts us in that, uh, that Goldilocks like principle, where we think we can out competition or out capability of the smaller Banks and out service, the larger institutions. Well, that's how we attract Talent. We show them that we have the technology and the capabilities and the treasury solutions to be able to meet their clients needs. But we also show them that we really try to limit the administrative burdens that
Speaker Change: But I think it's a a model that works for us. And then when you get folks over from those institutions, that feel it and experience it, they become our biggest recruiters because then they're calling people from their previous institution and they're saying this company, really is what they say they are. So I should say because Ann's in the room credit is also very important to relationship managers. They need to make sure that our credit box and the way in which we adjudicate credit meets their needs. And we're very, uh, local, uh, and we're also very, um, attentive with our credit officers. Making sure that they're with the Frontline team members as a part of the solution, not as a back office function. So again, not not nothing really secret, but it's something that's a recipe for Success, that we've been able to enjoy. And we think it'll allow us to continue to recruit talent for the foreseeable future.
Thanks, appreciate the thoughts there, and then, uh, just uh, kind of quick quick keeping on the buyback. I know it was approximately 21 million dollars. Uh, could you give the kind of shares repurchased or average price?
Speaker Change: Yes, we uh we repurchase a weight, average price of 44.64.
So all right, dial 50000.
Speaker Change: Thank you. Our next question. Comes from Chris marinac. Janney. Montgomery. Scott, your line is now open. Please go ahead.
Speaker Change: Thanks, good morning. Uh, Jamie. Kevin I just want to follow back up on deposits. Um, a is the public funds, sort of focused going to change at all, or is this change just seasonal? And I'm also curious about incentives and how you think through those, um, as you continue to pursue growth.
The public Funds growth that we we are. Describing is purely seasonal. I mean I'm sure that there will be incremental clients that are that are gained in the second half of the year. But what I'm describing here is purely, purely seasonal.
Speaker Change: And uh, what was the question on incentives alignment with growth?
Speaker Change: Yeah, I'm just curious. If you're doing anything new on incentives or or is it still the same uh, plan that you've had in Prior quarters?
Yeah, same. Same plans, you know what? What's great about the front line is their incentive to grow Revenue. Um, all of our commercial Bankers, have a quarterly plan that talks about producing more revenue for the company and they get paid on that, in their annual plan is based on what their year-over-year portfolio, revenue does. So, the great thing about that is it, it's not the bucket mentality where you say, hey go focus more on deposits or go focus more on Fe income. They're in Senate, to serve the needs of our clients and provide the solutions without being a
Chris: Product pushing, uh, incentive plan, at the top of the house, you know, we have the same incentive plans that we have for our leadership team. It's about driving EPS growth and it's about maintaining an Roa that supports it, so it really reinforces prudent growth and nothing's changed on that front, Chris.
Chris: Great, Kevin, thank you for the caller. I appreciate it.
Chris: Yeah, thank you.
Thank you. Our next question comes from John McDonald of trust. Security is the Line open, please go ahead.
Hey, good morning, guys. Um, on terms of credit quality, could you talk about what's coming in better than expected for the net charge offs? And the other credit metrics you've beaten your your guidance from the beginning of the year and things seem to be, uh, improving and stable there. So, just looking for a little color on the credit
Speaker Change: Yeah, this is an thank you. Um,
Chris: so, as
Chris: For credit quality.
Chris: continued resolution of our, um,
Chris: larger office relationship. So that was part of the equation. Um, and we also had a, a cni, um, charge off. Um, that was, that was about 5 million. But then beyond that, um, it really dropped off as far as size all the way down to 1.5 million. So we're continuing to see, uh, just some more granularity in our
Chris: Charge off, um, haven't seen um, you know, continued growth and enlarged individual charged off, so that's been favorable to us. Um, and as far as our MPA, um, you know, some of that is attributable to uh, you know, continuing to resolve this 1 office credit. Um, but also, we just haven't had, um, you know, any increases in MPL in place.
Chris: And so at 25 million.
For this quarter, that's um, a a 3 Year love, um, for our, for our MPL inflow. So, um, that's really how it's kind of shaping up as far as our, you know, those couple of credit metrics, go
Speaker Change: Environment. What are some of the things being discussed or, or happening already on the regulatory front? That could be helpful to solve this.
So John, you know, that's that's a question that when you look into the crystal ball, I think that we all expect there to be a favorable regulatory environment. I always start this answer with saying we have a great partnership with our Regulators today, so we're not sitting here hoping that something changes because we think we have a really strong relationship, but as I noted earlier, we do expect the larger Banks to have more flexibility with capital as their Capital levels decline. Obviously, that will trickle down into Regional Banks. And I think it will give us more flexibility around relative and absolute Capital levels. And so we're excited about that because it gives us more uh growth uh potential number 2 uh in the overall regulatory environment. What we've noted is that there's um process and a lot of examinations that have been going on over the last several years. Whether you go back to the Silicon Valley failure through some of the questions around CRA. Those have intensified, I'd love to be able to
Have our team members spend more time, on generating Revenue versus having to do examinations. So I think the time allocation could shift a little bit and then, you know, the question that everybody asks is on m&a, and I think we all expect the regulatory environment there to be easier to be able to get uh approvals on m&a and so I think in
Speaker Change: Many ways that will drive activity. We all expect it to increase, not just because of the regulatory environment, but because of some of the succession succession management, uh, issues that exist across our industry. And in that environment, um, we have the opportunity to, to, um, be able to take advantage of any disruption, that would happen as a result of the m&a. So we're not counting on anything changing on the regulatory environment. We welcome a very friendly environment but we don't expect a lot of changes. The real question around tailoring at 100 billion dollars. Obviously, we're at 60 today. So it doesn't impact us. I think there have been a lot of folks that have speculated that. That could increase. We'll wait and see. We're going to continue to invest in our LSI capabilities, as we go from 60 billion to 70 billion to 80 billion just because we think it is prudent. Risk management to continue to invest in the areas that will over time uh improve your overall risk profile.
Speaker Change: Thank you, Kevin that's really helpful and just to clarify an m&a. You mentioned taking advantage potentially of other Banks uh m&a disruption. Your focus seems to be primarily on synovous and your internal opportunities and growth. Uh is that is that fair
Yeah, I I run the risk of sounding like a broken record John because I've said this really over the last 3 years and maybe even since our investor day. But yes our primary focus has been on driving organic growth and executing with consistency and discipline. And we've said that, because we believe that that will earn us the right to get a higher valuation, which has always been our Focus. We feel like our valuation does not truly reflect, uh, the value of our franchise. And if that valuation were to move up, it gives you better optionality to pursue m&a. And so our singular focused organic growth to improve valuation, which then adds optionality in the long run.
Got it. Thank you.
Speaker Change: Thank you. Next question comes from Jared. Shaw of Berkeley.
The lines are open. Please go ahead.
Speaker Change: Hi, this is John Rowan for Jared. Um,
Speaker Change: I guess. Um, on on credit uh could you just remind us what that that 1 larger office npl. Um is and kind of what the what the expectations are for that.
Yes.
Speaker Change: So the current npl, um, for that 1 office relationship, it comprises 2 different loans, but it's 1 relationship 2, different properties and 2 different locations.
And so the charge off that we took this quarter um is is on, just 1 of the property. We also took a charge off last order on the same property.
Speaker Change: So, with this, with this 1 property, um, we are just taking another step towards, you know, a resolution. Um, with that 1 particular location. The other property we have not taken any charges against
Speaker Change: Um, we have uh, raised the reserve. And we do feel like we're in a good place relative to our reserve on that property.
Speaker Change: Um and then I guess just uh modeling question. Um do you have what the cost of the hedges? Were this quarter? I think it was like 18 and a half million last quarter.
Speaker Change: Um, let me
see.
Um, Let me, let me get back to you on that 1.
Speaker Change: Okay. Okay. Thanks.
Speaker Change: and then, I guess this is back on the, uh,
Speaker Change: And then, back on the, uh, the higher ring, um, process about as being able to offer all of the tools that a large banquet offer, uh could you just talk about what some of the recent Investments and I guess Tech and tools for the bankers have been. Um,
Anything to note there? Yeah, I John I could probably take up the rest of the call to talk about all the Investments but I'll just I'll kind of rattle some of them off. We, we've just implemented a new loan origination system within Ceno. We've implemented a new syndication platform that allows us to lead transactions. We've invested a lot in our treasury area, whether that's simple things as an improved onboarding experience for our clients. But we also have added products like foreign exchange, a hedging, we've added products uh, that that we call accelerate uh, AP which provides uh new tools.
Speaker Change: Tools for managing people's payables. We haven't receivables platform. We've worked on the um, additional solutions that we provide through things like lockbox. I mean, the the list goes on and on its 1 of those things. As we talked about internally, you never get to the Finish Line. Uh, the world is becoming more and more digital and we are constantly investing in tools products capabilities that allow our clients to, to operate, really 247. And that's something that as we look into the future. We'll continue to spend our our next projects or on Erp integration into our clients. Erps with our treasury platform uh a fully integrated payment portal, that will allow our clients to use a multitude of of rails to make payments and so it it really involves both the treasury and deposit side as well as the um lending side. And then I would add we've also added capabilities in terms of just resources. We've added 2, liquidity product special,
Specialists that work side by side with our Bankers, to help the treasurers and controllers of these companies, better manage their capital and liquidity. And so its investments in technology. It's also investments in talent and capability.
Speaker Change: Okay, perfect, it's really helpful and I just, I guess. Um, um, the hiring is
If I guess.
Speaker Change: if it's a little bit more front loaded into 2025 or if you see applications, come up um
Would you be open to I guess Inc? Either increasing like the total amount of players or pushing some of the plant tires into 20205 versus 2026 or 2027. Now, 1 of the things we've been clear about John, is, you know, it, it somewhat, you say, it's front loaded, it. It's probably more front loaded because you, you, you get folks around, um, incentive time where they're getting paid their incentive and their equity. And that's a time to generally attract talent. But you know, with our pipelines we're we're not going to let that timing stand in the way. So uh, we'll we'll we'll we'll we'll continue to lean in the second half of the year. And we've told our leaders if we get the right team or the right Talent, your your number is just there for planning purposes, we want to lean in and add additional folks, obviously, when Jamie gives you updated guidance for expense, we've considered that. So we think in some areas they'll come in above where they originally planned and others, it may be a position or 2 light. And again, as I said earlier, we we were being we're being very picky about the talent we're bringing in.
Speaker Change: Okay, great, thank you so much for me. Thank you.
Nick Belloco: Thank you. Uh next question comes from Nick belloco of UBS.
Speaker Change: Your line is now open. Please go ahead.
Hi, good morning. I think it's been a while since you've spoken about it. Receiving the development of the past few months and your involvement in this space on the fringes on in the past. Do you have any thoughts or ambition in a stable coin business? And is that an area where you could see any opportunities over the next couple of years?
And I think as we've all seen to this point, it's generally been International payments and so we will look to that as adding that as an additional payment capability for our clients. But you know for for for us I think there are a lot of alternatives to that whether that's a real-time payment, same day AC fed now. So it'll just be 1 of many capabilities that we want to offer. So we're not doing anything outside their
Speaker Change: Thank you. And then maybe just 1 Credit, um, you know, good to see the good to hear all the color that you've given so far and the performance in the quarter, um, just as it relates to the reserving process if you do see charge up really stable as your as your sort of forecasting here. Um, would you expect that performance component of the allowance to drive the overall ratio done in the future, or or do you think that should stabilize? Um, outside of any changes in the macro environment? Thank you.
Speaker Change: Yeah, if we see, uh, Improvement in lump will probably for sure, that would drive a reduction, uh, in the, in the allowance to continue, you know, Trend there, that'd be, that'd be a positive. Um, when you think about the allowance, you know, you have the loan portfolio. Then you also have the economic scenarios if you, if you were to use a little bit more, uh, like if you just use the consensus Baseline scenario, you would also see a reduction uh, in
Speaker Change: The allowance.
Speaker Change: You know, by a handful of basis points. Uh, that's something that I think is, is important to consider as we look at this economic uncertainty and, you know,
Speaker Change: you know, as we look forward, we've seen a strong Trend in credit Improvement, as we've gone through the last few quarters, we feel confident, the second half of the year, um, but it's also something. Where if we saw increased certainty in the economic Outlook, that could be a positive as well.
Speaker Change: Thank you.
Thank you.
Speaker Change: Question and answer session. I'd like to turn the conference back over to Mr. Kevin Blair, for any closing remarks
Kevin Blair: Thank you, Alex.
Kevin Blair: As we close today's call, I want to emphasis re-emphasize, something fundamental to how we operate here at Synovus. We listen,
Kevin Blair: We're listening to our clients and refining, our service and advice and that's reflected in our performance in the latest JD Power survey where we posted the largest year-over-year increase and that promoter score amongst the 50 largest banks by asset size. We're listening to our investors. We've shortened our prepared remarks today. Uh we also beat expectations and we're raising our guidance as we execute. We're also listening to our team members. As I mentioned earlier, our most recent voice of team, member survey showed 89% engagement levels, placing Us in the upper echelon of the industry. But we know there's more to do and we will be relentless in delivering enhancements across all these fronts
Kevin Blair: This quarter's achievements are a direct reflection of the dedication, the resilience, and the innovation of our people.
Kevin Blair: From operations to strategy from client facing execution to corporate service support, every individual has played a role in driving our success. I want to extend my deepest, thanks to our entire team for your commitment and Your Excellence. Your efforts are not only seen they are deeply appreciated.
Kevin Blair: We've been making meaningful progress on our strategic priorities, strengthening our financial position and we've laid the groundwork for long-term growth. Whether it's through discipline execution, smart Investments, or Relentless, focus on customer value. We're building a stronger more agile organization. The me, the momentum we've created is real and it's energizing to me to see how far we've come as we look ahead. We're not just growing we're scaling with purpose by expanding our presence and key markets and investing in capabilities. That matter. Most to our clients, we're positioning sovas to compete and win at the highest level. The foundation we built a strong, the opportunities ahead or even stronger. Thank you for joining us today. And thank you for being part of this journey with that. Alex, we now conclude today's call
Kevin Blair: Thank you all for joining today's call. You may now disconnect your lines.