Synovus Financial Corp. reported Tuesday financial results for the quarter ended March 31, 2014.

First Quarter Results

• Net income available to common shareholders was $45.9 million for the first quarter of 2014, an increase of 27.9% compared to $35.9 million for the fourth quarter of 2013, and up from $14.8 million for the first quarter of 2013. Diluted net income per common share for the first quarter of 2014 was $0.05 compared to $0.04 for the fourth quarter of 2013 and $0.02 for the first quarter of 2013.
• Total loans grew $101.2 million sequentially or 2.0% annualized. Excluding the impact from the Memphis transaction, loans grew $190.8 million or 3.9% annualized.
• Credit costs totaled $17.6 million for the first quarter of 2014, compared to $22.3 million for the fourth quarter of 2013 and $49.3 million for the first quarter of 2013.

"We were pleased to report a 28% increase in net income available to common shareholders for the quarter,” said Kessel D. Stelling, Synovus Chairman and CEO. “We also continue to be encouraged by growth in C&I, CRE, and retail loans, and in key markets like Atlanta, Tampa, Orlando, Jacksonville, and Charleston. Our steady progress over the past several quarters is a direct result of investments in additional talent in high-opportunity markets, effective partnerships between our core and specialty line bankers, and our team’s unwavering commitment to delivering exceptional customer service. The quarter also included continued reductions in credit costs, a slight increase in the net interest margin, and the implementation of new expense reduction initiatives.” 

Core Performance 

Pre-tax, pre-credit costs income was $96.5 million for the first quarter of 2014, an increase of $261 thousand from $96.3 million for the fourth quarter of 2013. 

• Net interest income was $200.5 million for the first quarter of 2014, down $3.8 million from $204.3 million in the previous quarter, due to two fewer calendar days.
• The net interest margin was 3.39%, compared to 3.38% in the fourth quarter of 2013, with the yield on earning assets up one basis point and the effective cost of funds unchanged.
  • Mortgage banking income increased $599 thousand over the previous quarter.
  • Service charges on deposit accounts and bankcard fees declined $434 thousand and $461 thousand, respectively, due to seasonality.
  • The first quarter of 2014 non-interest expense includes $8.6 million in restructuring charges. The fourth quarter of 2013 non-interest expense includes $10.0 million in litigation loss contingency expense and $3.8 million in restructuring charges.
  • Adjusted non-interest expense (excludes Visa indemnification charges, restructuring charges, litigation loss contingency expense and other credit costs) was $167.1 million, down $824 thousand, compared to $167.9 million for the fourth quarter of 2013.

• Total non-interest income was $70.2 million for the first quarter of 2014, up $10.0 million, compared to $60.2 million for the fourth quarter of 2013. Total non-interest income for the first quarter of 2014 includes a $5.8 million net gain on the Memphis transaction and a $3.1 million gain on a branch property sale.

• Non-interest expense for the first quarter of 2014 was $184.2 million, down $6.6 million, compared to $190.7 million for the fourth quarter of 2013. 

Balance Sheet Fundamentals 

• Total reported loans ended the quarter at $20.16 billion, a $101.2 million increase from the fourth quarter of 2013.
• Total loans, excluding the impact from the Memphis transaction, grew $190.8 million or 3.9% annualized compared to the fourth quarter of 2013.
• Excluding the impact from the Memphis transaction:

• Commercial and industrial loans grew by $130.7 million from the fourth quarter of 2013, or 5.3% annualized.
• Commercial real estate loans grew by $35.6 million from the fourth quarter of 2013, or 2.2% annualized.
• Retail loans grew by $24.1 million from the fourth quarter of 2013, or 2.7% annualized.

• Total deposits ended the quarter at $20.95 billion, up $74.1 million from the previous quarter.
• Core deposits ended the quarter at $19.58 billion, down $197.8 million compared to the fourth quarter of 2013. Core deposits excluding the impact from the Memphis transaction were flat compared to the fourth quarter of 2013. Core deposits, excluding time deposits, increased $80.3 million compared to the previous quarter. 

Credit Quality 

Broad-based improvement in credit quality continued. 

• Total credit costs were $17.6 million in the first quarter of 2014, down $4.7 million from $22.3 million in the fourth quarter of 2013 and down from $49.3 million in the first quarter of 2013.
• Net charge-offs were $15.2 million in the first quarter of 2014, down $9.9 million from $25.1 million in the fourth quarter of 2013 and down from $42.1 million in the first quarter of 2013. The annualized net charge-off ratio was 0.30% in the first quarter, down from 0.51% in the previous quarter and down from 1.18% in the first quarter of 2013.
• Non-performing loan inflows were $35.0 million in the first quarter of 2014, down from $41.2 million in the fourth quarter of 2013 and $83.9 million in the first quarter of 2013.
• Non-performing loans, excluding loans held for sale, were $384.9 million at March 31, 2014, down $31.4 million from the previous quarter, and down $128.4 million or 25.0% from the first quarter of 2013. The non-performing loan ratio was 1.91% at March 31, 2014, down from 2.08% at the end of the previous quarter and 2.65% at March 31, 2013.
• Total non-performing assets were $498.2 million at March 31, 2014, down $41.4 million from the previous quarter, and down $179.4 million or 26.5% from the first quarter of 2013. The non-performing asset ratio was 2.46% at March 31, 2014, compared to 2.67% at the end of the previous quarter and 3.47% at March 31, 2013.

• Total delinquencies (consisting of loans 30 or more days past due and still accruing) were 0.37% of total loans at March 31, 2014, compared to 0.36% at December 31, 2013, and 0.46% at March 31, 2013. Total loans past due 90 days or more and still accruing remained low at 0.03% at March 31, 2014, compared to 0.02% at December 31, 2013, and 0.03% at March 31, 2013. 

Capital Ratios 

All capital ratios increased in the first quarter. 

• Tier 1 Common Equity ratio was 10.24% at March 31, 2014, compared to 9.93% at December 31, 2013.
• Tier 1 Capital ratio was 10.85% at March 31, 2014, compared to 10.54% at December 31, 2013.
• Total Risk Based Capital ratio was 13.31% at March 31, 2014, compared to 13.00% at December 31, 2013.
• Tier 1 Leverage ratio was 9.46% at March 31, 2014, compared to 9.13% at December 31, 2013.
• Tangible Common Equity ratio was 10.78% at March 31, 2014, compared to 10.68% at December 31, 2013. 

Stelling concluded, “During the remainder of 2014, we expect continued loan growth, further improvement in credit quality, and a continued push on expense reductions. We are making strategic investments to improve our customers’ experience and more effectively reach potential customers. We will conclude this summer the rollout of our 200 new full-service ATMs and, later this year, enhanced commercial and mobile banking channels. We also recently launched a brand campaign that includes television, print, and online advertising designed to build greater awareness of the full capabilities and resources of Synovus. All of these activities, along with our strong capital position, provide a solid foundation for long-term growth and success.”