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Synovus Reports 16.1% Increase In Net Income For Second Quarter Of 2012

Synovus Financial Corp. (NYSE: SNV) today reported financial results for the quarter ended June 30, 2012.

Second Quarter Results

  • Net income available to common shareholders was $24.8 million for the second quarter of 2012, a 16.1% increase compared to net income available to common shareholders of $21.4 million for the first quarter of 2012 and a net loss attributable to common shareholders of $53.5 million in the second quarter of 2011. Net income available to common shareholders was $46.2 million for the first six months of 2012, compared to a net loss attributable to common shareholders of $147.2 million for the first six months of 2011.
  • Diluted net income per common share for the second quarter of 2012 was $0.03, compared to diluted net income per common share of $0.02 for the first quarter of 2012, and a net loss per common share of $0.07 for the second quarter of 2011. Diluted net income per common share for the first six months of 2012 was $0.05, compared to a net loss per common share of $0.19 for the first six months of 2011.

“Continued credit improvement drove our fourth consecutive quarter of profitability,” said Kessel D. Stelling, Chairman and CEO of Synovus. “Declines in total credit costs, non-performing loan inflows, non-performing assets, and total delinquencies contributed significantly to the overall credit improvement. We were pleased to again see increases in loans outstanding from our Large Corporate Banking, Senior Housing, and Asset-Based Lending groups and continued pipeline growth throughout our footprint, reflecting the ongoing success of our commercial banking strategy.”

Credit Trends

  • Total credit costs were $70.3 million in the second quarter of 2012, down 22.6% from $90.9 million in the first quarter of 2012 and down 55.5% from $157.9 million in the second quarter of 2011.
  • Non-performing loan inflows were $124.3 million in the second quarter of 2012, down 10.9% from $139.6 million in the first quarter of 2012 and down 46.2% from $231.1 million in the second quarter of 2011.
  • Distressed asset sales were approximately $128 million during the second quarter, compared to approximately $135 million in the first quarter of 2012, and approximately $195 million in the second quarter of 2011.
  • Non-performing loans, excluding loans held for sale, were $755.2 million at June 30, 2012, down $80.9 from the previous quarter, and down $130.1 million from the second quarter of 2011. The non-performing loan ratio was 3.84% at June 30, 2012, down from 4.21% at the end of the previous quarter and 4.32% at June 30, 2011.
  • Total non-performing assets were $961.4 million at June 30, 2012, down $94.4 million from the previous quarter, and down $257.3 million or 21.1% from the second quarter of 2011. The non-performing asset ratio was 4.83% at June 30, 2012, compared to 5.26% at the end of the previous quarter and 5.85% at June 30, 2011.
  • Total delinquencies (consisting of loans 30 or more days past due and still accruing) were 0.47% of total loans at June 30, 2012, down from 0.73% at March 31, 2012, and 0.97% at June 30, 2011. Total loans past due 90 days or more and still accruing were 0.03% at June 30, 2012, down from 0.04% at March 31, 2012, and 0.11% at June 30, 2011.
  • Net charge-offs were $98.7 million in the quarter, up slightly from $94.7 million in the first quarter of 2012, and down 41.0% from $167.2 million in the second quarter of 2011. The annualized net charge-off ratio was 1.99% in the second quarter, up from 1.90% in the previous quarter, and down from 3.22% in the second quarter of 2011.

Balance Sheet Fundamentals

  • Net sequential quarter loan growth was approximately $29 million for the second quarter, compared to a decrease of approximately $25 million during the first quarter of 2012 and a decline of approximately $168 million during the second quarter of 2011. Net loan growth excludes the impact of loan sales, transfers to loans held-for-sale, charge-offs, and foreclosures.
  • Reported loans declined $163.6 million, compared to a $236.1 million decrease in the previous quarter, and a $492.6 million decrease in the second quarter of 2011.
  • Loans outstanding from the Large Corporate Banking, Senior Housing, and Asset Based Lending groups were up approximately $486 million over the previous year and up approximately $141 million compared to the previous quarter.
  • Total deposits ended the quarter at $21.6 billion, down $572.6 million from the previous quarter due primarily to the planned reductions in higher-cost brokered deposits and time deposits of $462.3 million.
  • Core deposits ended the quarter at $20.4 billion, down $314.8 million compared to the first quarter of 2012. Core deposits, excluding time deposits, declined $110.4 million compared to the previous quarter due to an expected seasonal decrease in state, county and municipal deposits. Core deposits increased $231.8 million compared to a year ago. Core deposits, excluding time deposits, increased $1.18 billion compared to June 30, 2011.
  • The effective cost of core deposits (includes non-interest bearing deposits) continued to decline, with an effective cost of 41 basis points for the second quarter of 2012, down from 47 basis points for the previous quarter and 67 basis points in the second quarter of 2011.

Core Performance

Pre-tax, pre-credit costs income was $106.6 million for the second quarter of 2012, down $3.9 million from $110.6 million in the first quarter of 2012.

  • The net interest margin was 3.48%, down seven basis points from the first quarter of 2012, primarily due to the expected six basis point incremental impact from the debt issued in the first quarter of 2012.
  • Total non-interest income was $76.5 million for the second quarter of 2012, compared to $84.1 million in the first quarter of 2012.
  • Non-interest income, excluding net investment securities gains, was up $8.3 million from the previous quarter.
    • Mortgage revenue was up $2.0 million from the previous quarter
    • Bankcard fees were up $914 thousand compared to the previous quarter.
    • Service charges were up $454 thousand from the previous quarter.
    • Increase in fair value of private equity investments was $7.3 million for the quarter.
  • Total reported non-interest expense was $208.3 million for the second quarter of 2012 compared to $203.1 million for the previous quarter.
  • Core expenses (excludes Visa indemnification charges, restructuring charges and credit costs) were up $4.6 million from the first quarter of 2012.
    • Employment expenses increased $2.6 million from the previous quarter, primarily due to annual merit salary increases and employee incentives.
    • Other expenses were up $2.6 million compared to the previous quarter, largely due to higher attorney fees related to problem loans and litigation expenses.

Capital Ratios

  • Tier 1 Common Equity ratio was 8.81% at June 30, 2012 up from 8.67% at March 31, 2012.
  • Tier 1 Capital ratio was 13.36% at June 30, 2012 up from 13.19% at March 31, 2012.
  • Tier 1 Leverage ratio was 10.66% at June 30, 2012 up from 10.41% at March 31, 2012.
  • Total Risk Based Capital ratio was 16.32% at June 30, 2012 down from 16.57% at March 31, 2012.
  • Tangible Common Equity/Tangible Assets ratio was 7.12% at June 30, 2012 up from 6.81% at March 31, 2012.

Stelling concluded, “The second quarter was marked by the continued strengthening of our balance sheet as we disposed of non-performing loans and reduced levels of higher risk credits and asset classes, while generating high-quality commercial loans in all segments of our markets. These efforts, coupled with an intense focus on expense control and our customer-focused, relationship-based brand of banking, further position our company for sustained profitability and long-term success.”

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