Synovus Financial Corp.

Good morning and welcome to the Synovus fourth quarter 2021 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I will now turn the call over to Carl Evans, 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, and we will be able to answer your questions at the end of the call. 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 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, Cal, and good morning, everyone. Thank you for joining our fourth quarter earnings call. I want to take a moment to officially recognize Cal Evans and his new role as Investor Relations and Market Intelligence Senior Director. Cal's expanded role in our company became official shortly after last quarter's call when Kevin Brown, who led IR for the past two years, shifted to our corporate treasury team. Kevin has done a great job interfacing with our analyst and investor community, but his latest move will help with his development and career aspirations. Cal has hit the ground running and brings a lot to the table, given his credit and market intelligence background. The transition is going well, and I know you'll enjoy working with and getting to know Cal. Now let's shift into the overview of 2021 with the fourth quarter placing an exclamation point on the year. 2021 was again wrought with challenges and uncertainties, but our teams were able to navigate the difficult environment to support our clients, contribute to our communities, and deliver for our shareholders. I want to thank our team for your hard work, dedication, and commitment. As you'll hear today, we accomplished a lot even as the pandemic continued to impact the operations of our clients and of our company. Our team is capable and understands the assignment when it comes to meeting the challenge from the unexpected and anticipating opportunities with and for our clients. Our strong fourth quarter and year-end report is an absolute testament to your talents and passions for the inspired and purpose-driven work we do that enables people to achieve their full potential. What you'll see today is a story of execution and follow through, of doing what we said we could and would do, and in many areas, doing even more. As we began 2021, we focused on five core business objectives. Number one, to regain growth momentum. Two, to enhance the client experience by making it even easier to do business with Synovus. Number three, to provide seamless delivery of our solutions across all of our lines of business, leading to a deeper wallet share and client relationships. Four, to better leverage analytics in order to provide more informed and proactive advice. And five, the development and attraction of talent to support our growth initiatives. We have made significant progress in all five core areas, and our success in 2021 was largely driven by our execution of these business objectives. Moving to slide three, let's review the year. Our lines of business succeeded in delivering core performance via solid loan, deposit, and fee income growth. While client loan demand was muted in the first half of 2021, in the second half, we saw double-digit, broad-based commercial loan growth, driven primarily by our wholesale bank, with all 10 wholesale sub-lines of business posting growth for the year. 2021 funded commercial loan production increased 50% versus 2020 and was up 40% versus 2019, with significant productivity gains across our community and wholesale teams. We expect this momentum to continue into 2022 given the pipelines and activities of our bankers, as well as the incremental growth that will be provided by our key 2021 investments in talent in the middle market, restaurant services, and corporate and investment banking teams. Deposit growth was driven by continued balance augmentation as well as an ongoing sales focus on core operating accounts. As a result, core transaction balances have increased 57% in the past two years. We have strategically allowed higher cost, lower value deposits to attrite with an overarching goal of remixing our funding profile to optimize lower cost deposit composition during this period of excess liquidity. At year end, 77% of total deposits were core transaction deposits versus 70% at year end 2020. Ex-security gains, non-interest revenues grew 5%, led by increases in core banking fees and income from various wealth businesses. This was the seventh consecutive quarter of increases in wealth fees. Drivers of this growth include a strong equity market as well as net new assets under management from client growth, including the onboarding of 12 new family office clients during the year. In 2021, we continued to make significant progress with our Synovus Forward initiatives. As of year end, we have achieved $110 million in pre-tax run rate benefit ahead of our original projections. Evidence of success includes reducing real estate expenses, lowering headcount, and a reduction of third-party spend, all of which resulted in adjusted 2021 expenses being flat versus 2020. The Synovus Forward savings allowed us to make strategic and impactful investments in every area while managing overall expenses. This year, we will transition our Synovus Forward efforts into our overall strategic plan, but remain committed and on pace to achieve the $175 million Synovus Forward target. As part of our focus on innovation, we launched several new digital solutions and services, including Enhanced Deposit Online Account Origination, Accelerate AR, our integrated receivable suite, and Gateway, our commercial banking digital platform. These investments have enhanced capabilities and functionality and is leading to a better overall client experience. We also implemented the smart commercial analytics tool that is giving our bankers better insights into solutions our clients need, early warning on client attrition, and proactive risk monitoring. In 2021, we also invested in people. In particular, those who have experience and expertise to expand our advisory services and to build strong relationship value. We grew our treasury and payments team, which had another record-breaking year, growing sales by almost 40%. and added to specialty banking and our middle market talent in our high growth central and west Florida regions. We also continue to emphasize the development of our existing team members through the launch of two new leadership development tracks for emerging and senior leaders. Despite the challenges associated with the pandemic, our recent voice of the team member survey indicated that 84% of our team members were actively engaged, which is top quartile relative to the financial services benchmark And we were designated a Great Place to Work by the Great Place to Work Institute. We also have made measured progress in our diversity, equity, and inclusion efforts by meeting our short-term ethnicity and gender-based goals in the leadership ranks in 2021. So overall, a productive and rewarding year, and one that carries a tremendous amount of momentum into 2022. Now let me shift the highlights from the fourth quarter. Let's start on slide four with loan growth, which increased $1.4 billion or an annualized 14% excluding P3. The growth this quarter resulted from our second consecutive quarter of record funded commercial loan production at $3.2 billion. This represented a 30% increase from the third quarter. The quality of growth as measured by risk ratings and underwriting metrics is consistent with the existing portfolio which continues to perform well and is supported by reversal of credit losses of $55 million this quarter. It's a similar story on the other side of the balance sheet with core transaction deposit growth of $1.3 billion or 4% versus the third quarter. Approximately 30% of this quarter's increase came from non-interest bearing deposits. The combination of balance augmentation and new account origination continues to be the drivers of growth. Net interest income growth was also strong this quarter, as we delivered $1.7 billion in earning asset growth. Net interest income increased $16 million from the third quarter, or 4%, excluding the reduction in P3 fees. The net interest margin declined five basis points in the quarter, largely due to lower P3 income. But the NIM before PPP fees actually increased one basis point as earning asset yields were fairly stable and we continued to lower deposit rates during the quarter. From a fee income perspective, we continue to be pleased with overall performance as the fourth quarter totaled $117 million. Core banking fees have returned and exceed pre-pandemic levels in the fourth quarter as card and cash management income have more than offset reductions in NSF income and our core strategic segments such as wealth management continue to generate growth through AUM expansion. Diluted earnings per share were $1.31 or $1.35 on an adjusted basis, an increase from $0.96 or $1.08 adjusted per share from the same period in 2020. During the fourth quarter, we successfully completed our capital plan with $33 million of share repurchases. For the full year, we balanced core client loan growth, a common dividend, and $200 million in share repurchases to achieve our target CET1 ratio of 9.5% at year end, which represents the middle of our operating range target for the upcoming year. Jamie will now share greater detail on the key initiatives and financial results for the quarter.