Synovus sees Q3 charge-offs at or near high end of previously guided range

In a regulatory filing yesterday, the company stated: “Synovus Financial expects an increase in third quarter charge-offs arising from a 10.75% participation in a $218.5 million nationally syndicated credit. The borrower filed for Chapter 11 bankruptcy on March 20, 2023, at which time Synovus placed the credit on nonaccrual status and reported it as a non-performing loan. As of June 30, 2023, there were reserves allocated to this particular credit of approximately 10% of the outstanding loan amount. The borrower’s bankruptcy proceeding converted to a Chapter 7 liquidation on August 24, 2023. At this time, Synovus expects minimal recovery on the exposure, resulting in an anticipated third quarter charge-off of approximately $23 million on the relationship. Inclusive of the above-mentioned charge-off and excluding the impact of the previously disclosed sale of Synovus’ medical office loan portfolio, Synovus expects net-charge-offs/average loans to be at or near the high end of its previously guided 0.30%-0.40% range for the second half of 2023. Exclusive of this charge-off and the medical office loan portfolio sale, Synovus expects net charge-offs/average loans to be at or below the lower end of the previously guided 0.30%-0.40% range for the second half of 2023. The sale of the medical office portfolio, which closed today and consisted of $1.2 billion of funded loans, is expected to result in an after-tax net loss in the third quarter of approximately $21 million. The net loss, which will be recorded in non-interest expense, represents the difference between the amortized cost (outstanding principal net of the allowance) and the value of the loan proceeds. Charge-offs of approximately $23 million associated with the sale will not have any income statement impact as they were fully reserved in the allowance for credit losses at the end of the second quarter.”