Synovus Financial Corp., continuing to get a grip on its loan losses and expenses, today reported its second straight quarterly profit, even if by slightly more than a penny per share.
The regional bank, headquartered in Columbus, posted net income of $12.8 million in the fourth quarter of 2011, which translates to earnings per share of 1.4 cents. That compares to an October-December loss of nearly 23 cents per share a year ago.
“We’re very pleased to report our second consecutive quarter of profitability, and are really pleased to see positive traction in almost all key areas necessary to sustain long-term profitability and growth,” Kessel Stelling, Synovus chairman and chief executive officer, said during a conference call with Wall Street analysts after the earnings were released prior to the opening of the New York Stock Exchange.
The earnings performance beat the expectations of the analysts, who on average were projecting a flat fourth quarter, according to surveys by research firm Thompson Financial.
That included 2011 as a whole, with the analysts anticipating a loss of 17 cents per share. Instead, Synovus posted a loss of nearly $61 million, or 15 cents per share, as it turned the corner from a string of 12 straight quarterly losses through the first half of the year to profits in the third and fourth quarters. The firm racked up a loss of nearly $1.24 per share in 2010.
Stelling, in the conference call, touched on a couple of issues that will impact the company and its stock in a major way at some point. He said Synovus management, working with federal regulators, are still trying to decide when it will take advantage of a deferred tax asset accrued during its financial losses. The DTA will help offset income taxes at some point, with the current impact at around $1 per share.
The CEO also said repayment of the $968 million the bank owes through the federal Troubled Asset Relief Program (TARP) will likely follow recovery of the deferred tax asset. The timing of both are uncertain, he said, although sustained profits and a much-improved credit, or loan, environment will be required.
“Repayment of TARP is not a near-term event, but it’s certainly part of our everyday thinking and planning as we model our earnings and capital structure going forward,” Stelling said. “We will update you throughout the year as plans develop. Our goal is to exit TARP as prudently and efficiently as possible for all of our constituencies.”
For now, the company insists it is setting the stage for such a moment. That includes loan losses and subsequent chargeoffs that continued to drop in the final quarter of the year. The bank has been working relentlessly to get the problem commercial and residential development loans off its books.
Its loan-loss provision for 2011 came to $418.8 million, sharply down from the $1.13 billion it charged off in 2010. But its total non-performing assets still remain above $1 billion — $1.12 billion to be exact — although that’s down by nearly $163 million, or just under 13 percent, from the fourth quarter of 2010.
“We have three loans that are somewhere between $25 million and $30 million that are in non-performing,” said Kevin Howard, Synovus chief credit officer. “After that, they’re all below $20 million. We were looking at the mean of those, and they’re typically somewhere between $1 million and $4 million. That is where 80 percent or so of those loans are.”
Stelling also noted the “positive momentum” Synovus is seeing in its new loan pipeline, which had been sliding, but appears to be stabilizing. That is expected to help the company’s bottom line as it continues to sell distressed assets, write off bad loans and sustain its profits through 2012.
“You have to look back to the first quarter of 2009 to find reported loan growth at Synovus,” said Tommy Prescott, Synovus chief financial officer. “We’re encouraged to see the direction of loan balances. We know that sustaining that in the current competitive loan environment is tough, but we’re taking that head-on.”
The road to profitability has been a difficult one for Synovus. The company has endured two major restructurings, cutting more than 2,000 jobs from its ranks. There has been speculation it could be acquired by another bank because of the lingering weakness in its financial position, its stock price and the fact that the company still owes the TARP money.
Stelling said the past “efficiency” moves made by management are working and pledged to remain focused on doing business as lean as possible without compromising customer service at the Synovus banks scattered across Georgia, Alabama, Florida, South Carolina and Tennessee.
“I think the numbers speak for themselves,” the CEO said. “We had previously announced and identified $75 million in reductions for 2010. We realized $95.3 million, or an 11.7 percent reduction in core expenses for (2011). Our headcount decreased 885, or 14.5 percent, since December of last year.”
The bank employs just over 5,200 throughout the Southeast, with roughly 1,400 of those working in the Columbus area, either at the firm’s corporate headquarters or at its local banks, Columbus Bank and Trust and CB&T of East Alabama.
Breaking down its revenue stream, Synovus Financial Corp. reported net interest income of $505.4 million for 2011 after its loan-loss provisions. That compares to $144.9 million in the red in 2010. Non-interest income — things like service charges on deposits, bank-card fees and mortgage and brokerage sales — came in at $338.9 million, up 11 percent from $305.3 million in 2010.
For the fourth quarter, net interest income after loan provisions was $172.6 million compared to $10.4 million in the red in the October-December period in 2010. Non-interest income totaled $73.5 million, down 8 percent from $78.9 million a year ago.
Synovus shares (Ticker: SNV) closed up 10 cents, or 6.1 percent, at $1.73 in trading today on the New York Stock Exchange. The stock’s 52-week trading range is 94 cents to $2.93 per share.
