Exhibit 99.3
Explanation of Non-GAAP Financial Measures
The measures entitled tangible common equity to tangible assets ratio, tangible common equity to risk-weighted assets ratio, core deposits, core deposits excluding time deposits, net interest margin excluding the negative impact of non-performing assets, pre-tax, pre-credit costs income, non-interest expense excluding credit costs and other non-recurring items, and fundamental non-interest expense are not measures recognized under U.S. generally accepted accounting principles (GAAP), and therefore are considered non-GAAP financial measures. The most comparable GAAP measures are the ratio of total shareholders’ equity to total assets, total deposits, net interest margin, loss before income taxes, and total non-interest expense, respectively.
Management uses these non-GAAP measures to assess the performance of Synovus’ core business and its capital position. Synovus believes that these non-GAAP financial measures provide meaningful additional information about Synovus to assist investors in evaluating Synovus’ capital strength and the performance of its core business. These non-GAAP financial measures should not be considered as substitutes for the ratio of total shareholders’ equity to total assets, total deposits, net interest margin, loss before income taxes, or total non-interest expense determined in accordance with GAAP and may not be comparable to other similarly titled measures at other companies. Total risk-weighted assets is a required measure used by banks and financial institutions in reporting regulatory capital and regulatory capital ratios to Federal and state regulatory agencies. The tangible common equity to tangible assets ratio and the tangible common equity to risk-weighted assets ratio are used by management and investment analysts to assess the strength of Synovus’ capital position. Core deposits and core deposits excluding time deposits are measures used by management to evaluate organic growth of deposits and the quality of deposits as a funding source. Net interest margin excluding the negative impact of non-performing assets is a measure used by management to measure net interest margin exclusive of the impact of non-performing assets and associated net interest charge-offs. Pre-tax, pre-credit costs income is a measure used by management to evaluate core operating results exclusive of credit costs as well as certain non-core expenses such as goodwill impairment charges, severance charges, net litigation contingency expense (recovery), and the gain on sale of Visa shares. Non-interest expense excluding credit costs and other non-recurring items is a measure used by management to evaluate core non-interest expense exclusive of other credit costs, severance charges, net litigation (expense) recovery, and goodwill impairment charges (i.e., excluding components of non-interest expense which are also excluded in the computation of pre-tax, pre-credit costs income). Fundamental non-interest expense is a measure used by management to evaluate core non-interest expense exclusive of other credit costs, severance charges, net litigation (expense) recovery, goodwill impairment charges, and FDIC insurance expense.
The computations of the tangible common equity to tangible assets ratio, the tangible common equity to risk-weighted assets ratio, core deposits, core deposits excluding time deposits, net interest margin excluding the negative impact of non-performing assets, pre-tax, pre-credit costs income, non-interest expense excluding credit costs and other non-recurring items, and fundamental non-interest expense, and the reconciliation of these measures to the ratio of total shareholders’ equity to total assets, total deposits, net interest margin, loss before income taxes, and total non-interest expense are set forth in the tables below:
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands)
3Q10 | 2Q10 | 1Q10 | 4Q09 | 3Q09 | ||||||||||||||||
Tangible Common Equity to Tangible Assets Ratio | ||||||||||||||||||||
Total risk-weighted assets | $ | 23,676,957 | 24,603,856 | 25,767,271 | 26,781,973 | 28,377,624 | ||||||||||||||
Total assets | $ | 30,954,761 | 32,382,340 | 32,439,438 | 32,831,418 | 34,610,480 | ||||||||||||||
Less: Goodwill | (24,431 | ) | (24,431 | ) | (24,431 | ) | (24,431 | ) | (39,280 | ) | ||||||||||
Less: Other intangible assets, net | (13,463 | ) | (14,505 | ) | (15,556 | ) | (16,649 | ) | (17,775 | ) | ||||||||||
Tangible assets | $ | 30,916,867 | 32,343,404 | 32,399,451 | 32,790,338 | 34,553,425 | ||||||||||||||
Total shareholders’ equity | $ | 3,216,066 | 3,423,932 | 2,616,743 | 2,851,041 | 3,136,660 | ||||||||||||||
Less: Goodwill | (24,431 | ) | (24,431 | ) | (24,431 | ) | (24,431 | ) | (39,280 | ) | ||||||||||
Less: Other intangible assets, net | (13,463 | ) | (14,505 | ) | (15,556 | ) | (16,649 | ) | (17,775 | ) | ||||||||||
Less: Cumulative perpetual preferred stock | (934,991 | ) | (932,695 | ) | (930,433 | ) | (928,207 | ) | (926,014 | ) | ||||||||||
Tangible common equity | $ | 2,243,181 | 2,452,301 | 1,646,323 | 1,881,754 | 2,153,591 | ||||||||||||||
Total shareholders’ equity to total assets ratio (1) | 10.39 | % | 10.57 | 8.07 | 8.68 | 9.06 | ||||||||||||||
Tangible common equity to tangible assets ratio | 7.26 | 7.58 | 5.08 | 5.74 | 6.23 | |||||||||||||||
Tangible common equity to risk-weighted assets ratio | 9.47 | 9.97 | 6.39 | 7.03 | 7.58 | |||||||||||||||
Core Deposits and Core Deposits Excluding Time Deposits | ||||||||||||||||||||
Total deposits | $ | 25,236,225 | 26,257,563 | 27,180,048 | 27,433,533 | 28,054,191 | ||||||||||||||
Less: National market brokered deposits | (3,549,175 | ) | (4,175,762 | ) | (4,642,345 | ) | (5,039,328 | ) | (5,639,336 | ) | ||||||||||
Core deposits | 21,687,050 | 22,081,801 | 22,537,703 | 22,394,205 | 22,414,855 | |||||||||||||||
Less: Time deposits | (6,482,521 | ) | (6,971,056 | ) | (7,384,005 | ) | (7,597,738 | ) | (8,091,021 | ) | ||||||||||
Core deposits excluding time deposits | $ | 15,204,529 | 15,110,745 | 15,153,698 | 14,796,467 | 14,323,834 | ||||||||||||||
(1) | Total shareholders’ equity less preferred stock divided by total assets |
Reconciliation of Non-GAAP Financial Measures
(dollars in thousands)
3Q10 | 2Q10 | 1Q10 | 4Q09 | 3Q09 | ||||||||||||||||
Net Interest Margin Excluding the Negative Impact of Non-performing Assets | ||||||||||||||||||||
Average earning assets (2) | $ | 29,397,980 | 30,133,553 | 29,816,791 | 31,402,913 | 31,556,544 | ||||||||||||||
Net interest income (taxable equivalent) | $ | 246,547 | 251,095 | 249,978 | 257,058 | 255,850 | ||||||||||||||
Add: Negative impact of non-performing assets on net interest income (3) | 22,336 | 24,383 | 27,863 | 30,102 | 32,951 | |||||||||||||||
Net interest income excluding the negative impact of non-performing assets | $ | 268,883 | 275,478 | 277,841 | 287,160 | 288,801 | ||||||||||||||
Net interest margin | 3.33 | % | 3.34 | 3.39 | 3.25 | 3.22 | ||||||||||||||
Add: Negative impact of non-performing assets on net interest margin | 0.30 | 0.33 | 0.38 | 0.38 | 0.42 | |||||||||||||||
Net interest margin excluding the negative impact of non-performing assets | 3.63 | % | 3.67 | 3.77 | 3.63 | 3.64 | ||||||||||||||
Pre-tax, Pre-credit Costs Income | ||||||||||||||||||||
Loss before income taxes | $ | (180,807 | ) | (233,632 | ) | (275,180 | ) | (243,929 | ) | (472,476 | ) | |||||||||
Add: Provision for losses on loans | 239,020 | 298,904 | 340,948 | 387,114 | 496,522 | |||||||||||||||
Add: Other credit costs | 61,870 | 53,689 | 53,562 | 40,659 | 109,739 | |||||||||||||||
Add: Goodwill impairment | — | — | — | 14,849 | — | |||||||||||||||
Add (subtract): Severance charges | 2,520 | — | — | (347 | ) | (413 | ) | |||||||||||||
(Subtract) add: Net litigation contingency expense (recovery) | — | — | — | (2,374 | ) | 6,433 | ||||||||||||||
Less: Gain on sale of Visa shares | — | — | — | (51,900 | ) | — | ||||||||||||||
Pre-tax, pre-credit costs income | $ | 122,603 | 118,961 | 119,330 | 144,072 | 139,805 | ||||||||||||||
Non-interest Expense Excluding Credit Costs and Other Non-recurring Items, and Fundamental Non-interest Expense | ||||||||||||||||||||
Total non-interest expense | $ | 269,011 | 258,762 | 252,797 | 249,493 | 316,820 | ||||||||||||||
Less: Other credit costs | (61,870 | ) | (53,389 | ) | (53,562 | ) | (40,659 | ) | (109,739 | ) | ||||||||||
(Subtract) add: Severance charges | (2,520 | ) | — | — | 347 | 413 | ||||||||||||||
Add (subtract): Net litigation contingency (expense) recovery | — | — | — | 2,374 | (6,433 | ) | ||||||||||||||
Less: Goodwill impairment | — | — | — | (14,849 | ) | — | ||||||||||||||
Non-interest expense excluding credit costs and other non-recurring items | 204,621 | 205,073 | 199,235 | 196,706 | 201,061 | |||||||||||||||
Less: FDIC insurance expense | (15,492 | ) | (18,064 | ) | (16,555 | ) | (16,675 | ) | (14,191 | ) | ||||||||||
Fundamental non-interest expense | $ | 189,129 | 187,009 | 182,680 | 180,031 | 186,870 | ||||||||||||||
(2) | Quarterly average balance |
(3) | Represents pro forma interest income on non-performing loans at current commercial loan portfolio yield, carrying cost of ORE, and net interest charge-offs on loans recognized during the quarter |
(4) | Other credit costs consist primarily of losses on ORE, reserve for unfunded commitments, and charges related to impaired loans held for sale |