Synovus Beats Earnings Estimates, Slightly

Synovus reported a first quarter net loss of $229.9 million or 47 cents a share, slightly lower than the average estimate of analysts polled by Thomson Financial, which was a loss of 49 cents.
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COLUMBUS, Ga. (

TheStreet

) - Continuing the pattern for many of the large regional banks with weak asset quality,

Synovus Financial

(SNV) - Get Report

on Tuesday reported a net loss that was smaller than analysts expected.

Synovus reported a first quarter net loss of $229.9 million or 47 cents a share, slightly lower than the average estimate of analysts polled by Thomson Financial, which was a loss of 49 cents.

Earnings improved from a net loss of $282.8 million the previous quarter, although they exceeded the first quarter 2009 net loss, which was $150.9 million.

First quarter results included the payment of $14 million, in dividends on preferred shares issued to the U.S. Treasury in December 2008 when Synovus received $968 million in bailout money via the Troubled Assets Relief Program, or TARP.

Like other several other regional holding companies with high loan losses through the credit crisis, including

Marshall & Ilsley

(MI)

,

Regions (RF) - Get Report

and

Zions

(ZION) - Get Report

, the main factor in the linked-quarter earnings improvement was a reduction in Synovus's provision for loan losses.

The company set aside $341 million for reserves during the first quarter, down from $387 million in the fourth quarter and up from $290 million a year earlier.

An after-tax gain of $43 million on the sale of Synovus's merchant services business also boosted first-quarter results.

While nonperforming assets continued to increase, the inflow of nonperformers declined for the fourth-straight quarter, and net loan charge-offs declined to $316 million from $362 million the previous quarter.

Nonperforming assets -- including nonaccrual loans and repossessed real estate -- totaled $1.8 billion or 5.68% of total assets as of March 31, increasing from 5.58% the previous quarter and 4.99% a year earlier. Loan loss reserves covered 3.97% of total loans, and while this coverage ratio was lower than the annualized net charge-off ratio of 5.05%, the company's quarterly provision for loan loss reserves exceeded first quarter net charge-offs by $25 million.

Following the industry trend, Synovus's net interest margin - the difference between a bank's average yield on loans and investments and its average cost of funds - continued improving to 3.39% for the first quarter, from 3.25% in the fourth quarter and 3.05% during the first quarter of 2009.

While the lower-rate environment has helped most banks improve their margins over the past year, Synovus's remarkable 15% increase in non-interest bearing deposits from a year earlier is a remarkable achievement.

Before the earnings announcements, shares closed at $3.82, up 7% on the day, for a year-to-date total return of 87%.

CEO Richard Anthony said the company expected credit costs to continue to decline, and would "pursue all alternatives to bolster our capital position." He also said the company believed it had "an opportunity to return to profitability at some point during 2010."

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Written by Philip van Doorn in Jupiter Fla.

Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.