Synovus Financial Corp.

Good morning and welcome to the Synovus second quarter 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I will now turn the call over to Kevin Brown, head of investor relations. Please go ahead.

Thank you and good morning. During today's call, we will reference the slides and press release that are available within the investor relations section of our website, synovus.com. Kevin Blair, President and Chief Executive Officer, will begin the call. He will be followed by Jamie Gregory, Chief Financial Officer. We will be available to answer your questions at the end of the call. We ask that you limit yourself to one question and one follow-up. Our comments include forward-looking statements. These statements are subject to risks and uncertainties, and the actual results could vary materially. We list 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.

Thank you, Kevin. Good morning, everyone, and thank you for joining our second quarter earnings call. Our team delivered another solid quarter with growth in revenue and earning assets, while maintaining an expense discipline that resulted in year-over-year quarterly expenses declining 5%. Additionally, we continue to see an improving credit outlook that produced a release in allowance. Finally, we continue to successfully deliver on our Synovus Forward initiatives and investments, with a $75 million in pre-tax run rate benefit achieved through the second quarter and an additional $100 million in pre-tax run rate benefits to come by year end 2022. Before I proceed, let me take a second to remind you of our performance to date as it compared to our expectations at the beginning of the year. We shared with you that we would deliver loan growth excluding PPP and ramp it up in the second half of the year. We also said we would improve the deposit mix and lower our cost of funds to stabilize the margin. Also, we would drive efficiency initiatives that will assist in returning to positive operating leverage while continuing to manage effectively through the uncertain credit environment and produce the planned benefits from Synovus Forward. I'm pleased to share with you today that we are delivering on those objectives and we concluded the first half of 2021 with considerable momentum and are optimistic about the prospects for growth and expansion moving forward. Our commercial loan pipelines are back to pre-pandemic levels with continued growth and CNI outstandings and commitments and line utilization actually increased slightly during the quarter. Client liquidity remains strong, which has allowed us to further optimize our deposit mix and reduce our cost of funds again this quarter. We expect this trend to continue in this low rate environment. Our wealth and treasury and payment solution businesses are performing at a high level. Continued growth and operating margin expansion in these fee income generating business units will help to offset the industry-wide reduction in mortgage activity. Criticized and classified loans declined for the quarter. Another proof point that the elevated credit concerns raised by the pandemic continue to abate and signal the opportunity to continue to move the allowance over time back down towards day one CECL levels. And during the first half of the year, we continue to invest in the future of Synovus. Key priorities to enhance the customer experience and deliver new sources of growth. A couple examples of this include Our treasury and payment solutions business launched a new suite of integrated receivable solutions called Synovus Accelerate AR. This solution has been well received and the sales pipeline has already begun to fill, which will create a new source of revenue while significantly benefiting our customers by saving them time and money. We also have migrated approximately 25,000 business clients to Synovus Gateway, our new digital platform for business and commercial banking. With expanded functionality and capabilities, we are making it easier for our customers to do business and promoting higher levels of business retention. Lastly, our smart analytics tool, which we've shared previously, has been further rolled out across our bankers and our markets and is beginning to have an impact on increasing pipelines and opportunities to expand the share of Wallet from our customers. We are also reminded during the second quarter that our focus on delivering a personalized and value-added customer experience matters and will continue to provide a foundation for future growth. Industry-wide consumer satisfaction surveys again show that our clients are more satisfied and loyal than those of our competitors, and we also received two awards of excellence for our family office during the quarter. These scores and accolades are not success in and of themselves, but rather affirmation that our efforts and our approaches are having meaningful impacts for our customers. For all of these reasons, as well as the vibrant economic expansion that we expect to continue in the Southeast, we remain confident in our path forward. Moving to slide three, which includes our financial highlights for the quarter. Total adjusted revenue of $489 million Adjusted expenses of $268 million and a $25 million reversal of provision for credit losses resulted in an adjusted net income of $179 million or $1.20 diluted earnings per share. Without adjustments, net income was $178 million or $1.19 diluted earnings per share. Pre-tax run rate benefits from Synovus Forward of $75 million have increased by $25 million from the first quarter results. Our work on completed and future initiatives continues to give us confidence in our ability to achieve an aggregate pre-tax run rate benefit of $100 million by year-end 2021 and $175 million by the end of 2022. Total loans excluding P3 loans were up $194 million in the second quarter. Growth in the quarter was delivered in our core CNI portfolio as well as third-party consumer lending, given the continued high liquidity environment. Despite solid production levels, elevated prepayment activity remains a headwind in our commercial and consumer real estate portfolios. Core transaction deposits increased $702 million, or 2%, led by core non-interest-bearing deposits growth of $601 million, or 4%. With the current loan-to-deposit ratio, we continued to remix the deposit base, strategically reducing higher-cost categories, including CDs and broker deposits. Key credit metrics were stable, with the NPA ratio declining by 4 basis points to 46 basis points, and the ACL coverage remained strong. A more favorable economic outlook and a 14% reduction in criticized and classified loans supported further allowance releases. The ACL ratio excluding P3 loans declined 15 basis points to 1.54%. We remain well capitalized with the CET1 ratio increasing to 9.8%, while completing nearly half of our $200 million share authorization in the quarter. We also executed on additional earning asset growth activities to monetize excess liquidity while keeping capital above our operating target. With that serving as an overview for the quarter, I will now turn it over to Jamie for a more detailed financial update, and I'll rejoin you later for an update on Synovus Forward and our guidance. Jamie?