Synovus Financial Corp. today reported financial results for the quarter ended March 31, 2013.

First Quarter Results

• Pre-tax income increased to $46.6 million for the first quarter of 2013, up 29.6% from $35.9 million in the first quarter of 2012. Excluding the impact of restructuring charges, pre-tax income was $51.4 million. 
• Net income available to common shareholders was $14.8 million for the first quarter of 2013, compared to $709.3 million for the fourth quarter of 2012 and $21.4 million for the first quarter of 2012. Diluted net income per common share for the first quarter of 2013 was $0.02, compared to $0.78 for the fourth quarter of 2012 and $0.02 for the first quarter of 2012.

o The first quarter of 2013 results included restructuring charges of $4.9 million and income tax expense of $17.0 million. 
o The fourth quarter of 2012 results included investment securities gains of $8.2 million, approximately $157 million in pre-tax charges from distressed asset dispositions, and an income tax benefit of $796.3 million primarily from the deferred tax asset recapture.
o The first quarter of 2012 results included securities gains of $20.1 million and income tax benefit of $77 thousand.

• Credit costs fell to the lowest level in more than five years to $49.3 million for the first quarter of 2013, compared to $185.8 million for the fourth quarter of 2012 and $90.9 million for the first quarter of 2012.
• Total non-interest expense was $182.3 million for the first quarter of 2013, down 14.6% from the fourth quarter of 2012 and down 10.3% from the first quarter of 2012.

“Pre-tax income reached $47 million, the highest level in five years, led by significant reductions in credit costs and operating expenses,” said Kessel D. Stelling, Chairman and CEO of Synovus.  “We achieved broad-based credit quality improvement during the quarter, including a 40% reduction in non-performing loan inflows from the first quarter of last year. Our keen focus on expense management continues, and our initiatives to reduce core expenses by $30 million in 2013 are well on track.”

Core Performance

Pre-tax, pre-credit costs income was $100.7 million for the first quarter of 2013, down $7.3 million from $108.0 million for the fourth quarter of 2012.
• Net interest income was $199.8 million for the first quarter of 2013, down $7.6 million from $207.5 million in the previous quarter, primarily due to two fewer days in the quarter.
• The net interest margin was 3.43%, down two basis points from the fourth quarter of 2012, due to a decline in the yield on earning assets of four basis points partially offset by a decline in the effective cost of funds of two basis points.
• Total non-interest income was $64.7 million for the first quarter of 2013, down $15.4 million, compared to $80.1 million for the fourth quarter of 2012.
• Non-interest income, excluding net investment securities gains, was $64.7 million, down $7.2 million from the previous quarter.

o Bankcard fees declined $3.1 million due primarily to a one-time benefit of $2.2 million recorded the previous quarter from a change in the debit card rewards program as well as seasonality. 
o Mortgage banking income declined $2.1 million.
o Service charges on deposit accounts declined $1.4 million, impacted by two fewer business days in the quarter.
o Fiduciary and asset management fees increased $0.4 million.
o Brokerage revenue increased $0.5 million.

• Core expenses (excludes Visa indemnification charges, restructuring charges, and other credit costs) were $163.8 million, down $7.6 million from $171.4 million for the fourth quarter of 2012.

o Salaries and other personnel expenses were down $1.0 million from the previous quarter, due primarily to a decrease in salaries of $5.4 million, partially offset by a seasonal increase in payroll taxes of $3.0 million and a $1.2 million increase in employee insurance.
o Professional fees were $4.9 million lower than the previous quarter.

“While facing a challenging lending environment, we are optimistic about our pipeline and increasing levels of loan commitments, and expect modest loan growth for the remainder of 2013,” said Stelling. “Our bankers remain focused on building total relationships and providing needs-based financial solutions, as demonstrated by the first quarter increase in brokerage and fiduciary and asset management revenues.” 

Balance Sheet Fundamentals

• Total reported loans ended the quarter at $19.4 billion, a $173.8 million decline from the fourth quarter of 2012.
• On a sequential quarter basis, the net loan decline was $51.6 million for the first quarter, compared to net loan growth of $345.4 million during the fourth quarter of 2012. Net loan growth (decline) excludes the impact of transfers to loans held-for-sale, charge-offs, and foreclosures. 
• Loans outstanding from the Corporate Banking Group were up approximately $158 million compared to the previous quarter and up approximately $664 million over the first quarter of the previous year.
• Total deposits ended the quarter at $20.6 billion, down $495.9 million from the previous quarter due primarily to decreases in non-interest bearing demand deposits and NOW account balances.
• Core deposits ended the quarter at $19.2 billion, down $735.7 million compared to the fourth quarter of 2012. Core deposits, excluding time deposits, decreased $634.6 million compared to the previous quarter. 
• The effective cost of core deposits (includes non-interest bearing deposits) was 30 basis points for the first quarter of 2013, unchanged from the fourth quarter of 2012, and down from 47 basis points for the first quarter of 2012.

Credit Trends

• Total credit costs were $49.3 million in the first quarter of 2013, down from $185.8 million in the fourth quarter of 2012 and $90.9 million in the first quarter of 2012. 
• Net charge-offs were $57.3 million in the first quarter of 2013, down from $193.5 million in the fourth quarter of 2013 and $94.7 million in the first quarter of 2012. The annualized net charge-off ratio was 1.18% in the first quarter, down from 3.94% in the previous quarter and 1.90% in the first quarter of 2012.
• Non-performing loan inflows were $83.9 million in the first quarter of 2013, down from $262.7 million in the fourth quarter of 2012 and $139.6 million in the first quarter of 2012. 
• Non-performing loans, excluding loans held for sale, were $513.2 million at March 31, 2013, down $30.1 million from the previous quarter, and down $322.8 million or 38.6% from the first quarter of 2012. The non-performing loan ratio was 2.65% at March 31, 2013, down from 2.78% at the end of the previous quarter and 4.21% at March 31, 2012.
• Total non-performing assets were $677.6 million at March 31, 2013, down $25.5 million from the previous quarter, and down $378.2 million or 35.8% from the first quarter of 2012. The non-performing asset ratio was 3.47% at March 31, 2013, compared to 3.57% at the end of the previous quarter and 5.26% at March 31, 2012.
• Synovus Bank’s classified assets ratio declined to 36.7% at March 31, 2013, down from 38.1% at December 31, 2012 and 57.7% at March 31, 2012. The consolidated classified assets ratio was 43.5% at March 31, 2013.
• Total delinquencies (consisting of loans 30 or more days past due and still accruing) were 0.46% of total loans at March 31, 2013, compared to 0.54% at December 31, 2012, and 0.73% at March 31, 2012. Total loans past due 90 days or more and still accruing were 0.03% at March 31, 2013, compared to 0.03% at December 31, 2012, and 0.04% at March 31, 2012.
• Distressed asset sales were approximately $61 million during the first quarter, compared to approximately $545 million in the fourth quarter of 2012, and approximately $135 million in the first quarter of 2012.

Capital Ratios
 

• Tangible Common Equity ratio was 9.89% at March 31, 2013 up from 9.66% at December 31, 2012.
• Tier 1 Common Equity ratio was 8.93% at March 31, 2013 up from 8.72% at December 31, 2012.
• Tier 1 Capital ratio was 13.50% at March 31, 2013 up from 13.24% at December 31, 2012.
• Tier 1 Leverage ratio was 11.27% at March 31, 2013 up from 11.00% at December 31, 2012.
• Total Risk Based Capital ratio was 16.45% at March 31, 2013 up from 16.18% at December 31, 2012.

Stelling concluded, "Our first quarter results reflect the continued progress of our company, and we are very pleased with the series of recent positive events.  In February, both Fitch Ratings and Standard & Poor’s Ratings Services (S&P) changed their outlooks on Synovus to Positive, and S&P upgraded our long-term counterparty credit rating by one level.  We also announced earlier today that the Federal Reserve Bank of Atlanta and the Georgia Department of Banking and Finance have lifted the Memorandum of Understanding entered into between the agencies and Synovus in 2009. 
 
“Our team remains intensely focused on strengthening core performance, winning new customers and expanding existing relationships, and crisply executing on our short- and long-term strategies for growth.  We also expect to exit the TARP program this year, most likely during the third quarter."

Synovus will host an earnings highlights conference call at 8:30 a.m. EST on April 23, 2013.  The earnings call will be accompanied by a slide presentation. Shareholders and other interested parties can access the slide presentation and listen to the conference call via simultaneous Internet broadcast at www.synovus.com/webcasts by clicking on the “Live Webcast” icon.  RealPlayer or Windows Media Player can be downloaded 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.