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Synovus Reports Results for Third Quarter 2009
 
 

Columbus, Ga., October 22, 2009 - Synovus Financial Corp. (NYSE: SNV) announced today its results of operations for the third quarter of 2009.

 

Business Highlights

 

·        The net loss for the third quarter of 2009 was $423.7 million, or $1.27 per common share.

·        The third quarter results include a non-cash charge of approximately $149 million to record an increase in the valuation allowance for deferred tax assets. The deferred tax asset valuation allowance now totals $331 million.

·        Total credit costs for the third quarter were $606.3 million, including provision expense of $496.5 million and foreclosed real estate costs of $101.4 million.

-        Credit costs were largely driven by valuation charges on new non-performing loans and existing non-performing assets, as well as charges for estimated losses on future asset dispositions.

-        Allowance and cumulative write-downs on all remaining NPAs are approximately 46% of unpaid principal balance.

·         Problem asset disposition strategy remains on track with $339 million in sales for the third quarter.

·         The allowance for loan losses increased 16 basis points to 3.49% of total loans.

·         Total past due loans remained relatively low at 1.35% of total loans.

·         Pre-tax, pre-credit costs income was $147.7 million.

·         The net interest margin was 3.22%, down 1 basis point from the second quarter of 2009. Excluding the negative impact of non-performing assets, the net interest margin was 3.64%, up 2 basis points from the prior quarter.

·         Core deposits continued their positive trend with 3.4% year over year growth. Linked quarter core deposits were relatively flat, while we successfully improved the mix by replacing higher priced time deposits with lower cost funding.

·         Salaries and other personnel expenses were $105.8 million for the quarter, down $3.5 million from the second quarter of 2009.

·         On September 22, 2009, the company completed a $600 million underwritten public offering of 150 million shares of the company’s common stock at a public offering price of $4 per share.

·         As of September 30, 2009, the tangible common equity to tangible assets ratio was 6.28%, Tier 1 capital ratio was 10.54%, and total risk-based capital ratio was 13.90%.


“During the quarter, we continued our aggressive approach of charging down and disposing of non-performing assets,” said Richard Anthony, Chairman and CEO. “Additionally, our results for the quarter include pre-tax, pre-credit costs income of $148 million, which we believe demonstrates our core earnings potential in a more favorable credit environment. The capital plan we announced in September, including our $600 million capital raise, adds another layer of strength to our financial foundation. We are focused on emerging stronger from this economic cycle and it is our commitment to repay the U.S. Treasury’s TARP investment and restore dividends on our common stock as soon as possible.”

 

Synovus will host an earnings highlights conference call at 4:30 pm EDT, on October 22, 2009. The earnings call will be accompanied by a slide presentation. Shareholders and other interested persons may access the slide presentation and listen to this conference call via simultaneous Internet broadcast at www.synovus.com by clicking on the “Live Webcast” icon. You may download RealPlayer or Windows Media Player (free download available) prior to accessing the actual call or the replay. The replay will be archived for 12 months and will be available 30-45 minutes after the call.

 

Synovus is a financial services holding company with approximately $35 billion in assets based in Columbus, Georgia. Synovus provides commercial and retail banking, as well as investment services, to customers through 30 banks, 328 offices, and 463 ATMs in Georgia, Alabama, South Carolina, Florida and Tennessee. The company focuses on its unique decentralized customer delivery model, position in high-growth Southeast markets and commitment to being a great place to work to ensure unparalleled customer experiences. See Synovus on the Web at www.synovus.com.

 

Forward-Looking Statements

 

This press release and certain of our other filings with the Securities and Exchange Commission contain statements that constitute “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among others, our statements regarding our belief in our demonstrated core earnings potential in a more favorable credit environment; the capital plan and the strength of our financial foundation; our commitment to repay U.S. Treasury’ TARP investment and restore dividends on our common stock; and the assumptions underlying our expectations. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. A number of important factors could cause actual results to differ materially from those contemplated by the forward- looking statements in this press release and our filings with the Securities and Exchange Commission. Many of these factors are beyond Synovus’ ability to control or predict. Factors that could cause actual results to differ materially from those contemplated in this press release and our filings with the Securities and Exchange Commission include: (1) further deterioration in credit quality, particularly in residential construction and development loans, may continue to result in increased non-performing assets and credit losses, which will adversely impact our earnings and capital; (2) declining values of residential real estate may result in further write-downs of assets, which may increase our credit losses and negatively affect our financial results; (3) continuing weakness in the residential real estate environment may negatively impact our ability to liquidate non-performing assets; (4) the impact on our borrowing costs, capital cost and our liquidity due to adverse changes in our current credit ratings; (5) our ability to manage fluctuations in the value of our assets and liabilities to maintain sufficient capital and liquidity to support our operations; (6) restrictions or limitations on access to funds from subsidiaries, thereby restricting our ability to make payments on our obligations or dividend payments; (7) continuing deterioration in general economic conditions and conditions in the financial markets; (8) inadequacy of our allowance for loan losses, or the risk that the allowance may prove to be inadequate or may be negatively affected by credit risk exposures; (9) changes in the interest rate environment which may increase funding costs and reduce earning assets yields, thus reducing margins; (10) risks associated with the concentration of our non-performing assets in certain geographic regions and with affiliated borrowing groups; (11) the risk of additional future losses if the proceeds we receive upon the liquidation of non-performing assets are less than the fair value of such assets;  (12) risks associated with the execution of our capital plan; (13) the impact of the Emergency Economic Stabilization Act of 2008, the American Recovery and Reinvestment Act, The Financial stability Plan and other recent and proposed changes in governmental policy, laws and regulations, including proposed and recently enacted changes in the regulation of banks and financial institutions, or the interpretation or application thereof, including restrictions, increased capital requirements, limitations and/or penalties arising from banking, securities and insurance laws regulations and examinations; (14) the impact on Synovus’ financial results, reputation and business if Synovus is unable to comply with all applicable federal and state regulations and applicable memoranda of understanding, other supervisory actions and any necessary capital initiatives; (15) risks associated with litigation; (16) the volatility of our stock price; and (17) the other factors set forth in Synovus’ filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. We believe these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise.

 

Use of Non-GAAP Financial Measures

 

The measures entitled pre-tax, pre-credit costs income; net interest margin excluding the negative impact of non-performing assets; core deposits; and the tangible common equity to tangible assets ratio 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 income (loss) before income taxes, net interest margin, total deposits, and the ratio of total equity to total assets, respectively.

 

Management uses these non-GAAP financial measures to assess the performance of Synovus’ core business and the strength of its capital position. Synovus believes that these non-GAAP financial measures provide meaningful additional information about Synovus to assist investors in evaluating Synovus’ operating results, financial strength and capitalization. These non-GAAP financial measures should not be considered as a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures at other companies. 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, restructuring charges, and Visa litigation expense (recovery). Net interest margin excluding the impact of non-performing assets is a measure used by management to measure the net interest margin exclusive of the impact of non-performing assets and associated net interest charge-offs on the net interest margin. Core deposits is a measure used by management to evaluate organic growth of deposits and the quality of deposits as a funding source. The tangible common equity to tangible assets ratio is used by management and investment analysts to assess the strength of Synovus’ capital position.

 

The computations of pre-tax, pre-credit costs income; net interest margin excluding the impact of non-performing assets; core deposits; and the tangible common equity to tangible assets ratio, and the reconciliation of these measures to income loss before income taxes, net interest margin, total deposits, and the ratio of total equity to total assets are set forth in the tables below:

 

Reconciliation of Non-GAAP Financial Measures

(dollars in thousands)

3Q09

2Q09

1Q09

4Q08

3Q08

Loss before income taxes...............................

$ (454,047)

(663,396)

(221,806)

(740,480)

(59,682)

Add: Provision for losses on loans.............

496,522

631,526

290,437

363,867

151,351

Add: Other credit costs(1)............................

109,739

176,308

54,277

78,691

45,266

Add: Goodwill impairment..........................

-

-

-

442,730

9,887

Add: Restructuring charges.........................

(413)

397

6,358

2,826

9,048

Add (Subtract): Visa litigation settlement

expense (recovery)..................................

(4,067)

-

-

(6,390)

6,347

Pre-tax, pre-credit costs income.....................

$ 147,734

144,835

129,266

141,244

162,217

Total deposits.................................................

$ 28,054,191

27,423,814

27,947,986

28,617,179

27,848,863

Less: National market brokered deposits....

(5,639,336)

(4,994,641)

(5,258,841)

(6,338,078)

(6,174,573)

Core deposits.................................................

$ 22,414,855

22,429,173

22,689,145

22,279,101

21,674,290

Reconciliation of Non-GAAP Financial Measures (continued)

(dollars in thousands)

3Q09

2Q09

1Q09

4Q08

3Q08

Average earning assets(2)................................ expense (recovery).....................................

$ 31,556,037

32,124,145

32,425,793

32,308,295

31,296,510

Net interest income (taxable equivalent)

$ 255,850

257,827

244,420

259,437

268,975

Add: Negative impact of non-performing

assets on net interest income (3)...................

32,951

31,911

26,429

22,745

18,716

Net interest income (taxable equivalent)

excluding the negative impact of

 

 

 

 

 

non-performing assets................................

$ 288,801

289,738

270,849

282,182

287,691

Net interest margin.........................................

3.22%

3.23

3.05

3.20

3.42

Add: Negative impact of non-performing

 

 

 

 

 

assets on net interest margin.......................

0.42

0.39

0.33

0.27

0.24

Net interest margin excluding the negative

 

 

 

 

 

impact of non-performing assets.................

3.64%

3.62

3.38

3.47

3.66

Total assets....................................................

$ 34,614,117

34,349,670

34,547,432

35,786,269

34,339,141

Less: Goodwill............................................

(39,280)

(39,280)

(39,521)

(39,521)

(482,251)

Less: Other intangible assets.......................

(17,775)

(18,914)

(20,064)

(21,266)

(23,579)

Tangible assets...............................................

$ 34,557,062

34,291,476

34,487,847

35,725,482

33,833,311

Total shareholders’ equity..............................

$ 3,152,797

3,018,361

3,637,979

3,787,158

3,378,277

Less: Goodwill............................................

(39,280)

(39,280)

(39,521)

(39,521)

(482,251)

Less: Other intangible assets......................

(17,775)

(18,914)

(20,064)

(21,266)

(23,579)

Less: Cumulative perpetual preferred stock

(926,014)

(923,855)

(921,728)

(919,635)

-

Tangible common equity................................

$ 2,169,728

2,036,312

2,656,666

2,806,736

2,872,447

Tangible common equity to tangible assets.....

6.28%

5.94

7.70

7.86

8.49

(1)Other credit costs consist primarily of losses on ORE, reserve for unfunded commitments, and charges related to impaired loans held for sale.

(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.

 
SNV 3Q2009 Earnings Charts.pdf SNV 3Q2009 Earnings Charts
 
Contact
Patrick A. Reynolds
Title: Director of Investor Relations
Phone: (706) 649-4973