Synovus Financial Corp. (SNV)

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Synovus Financial Group (SNV)

Q3 2012 Earnings Call

October 23, 2012 8:30 a.m. ET

Executives

Patrick A. Reynolds - Director, Investor Relations

Kessel D. Stelling, Jr - Chairman, CEO

Thomas J. Prescott - EVP, CFO

Kevin J. Howard - Chief Credit Officer

R. Dallis (D.) Copeland, Jr - Chief Banking Officer

Analysts

Steven Alexopoulos - JP Morgan Chase & Co.

Kenneth Zerbe - Morgan Stanley & Co.

Kevin Fitzsimmons – Sandler O'Neill & Partners

Christopher Marinac – FIG Partners LLC

Emlen Harmon - Jefferies & Company

John Pancari - Evercore Partners

Nancy Bush – NAB Research

Presentation

Operator

Good morning ladies and gentlemen, and welcome to the Synovus third-quarter earnings conference call. (Operator Instructions).

It is now my pleasure to turn the floor over to your host, Mr. Pat Reynolds, Director of Investor Relations. Sir, the floor is yours.

Patrick A. Reynolds - Director, Investor Relations

Thank you Kate. And I thank all of you for joining us today on our call. During this call, we will be referencing the slides and press release that are available within the Investor Relations section of our website at Synovus.com.

Kessel Stelling, Chairman and Chief Executive Officer will be our primary presenter today with our executive management group available to answer all of your questions.

Before I begin, I need to remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties and the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website. Further, we do not intend to update any forward-looking statements to reflect circumstances or events that occur after the date the statements are made. We disclaim any responsibility to do so.

During the call, we will discuss non-GAAP financial measures in reference to the company's performance. And you can see reconciliation of these measures to the GAAP financial measures in the appendix to our presentation.

Finally, Synovus is not responsible for and does not edit or guarantee the adversary of earnings teleconference transcripts provided by third parties. The only authorized webcast is located on our website.

We do respect the time available this morning and desire to answer everyone's questions. We ask that you initially, you will limit your time to two questions. If we have more time available after everyone's initial two questions, we will be open the queue for follow-up questions.

And now I'll turn it over to Kessel Stelling.

Kessel Stelling – Chairman, CEO

Thank you Pat, and good morning everyone, and I want to add my thanks to all of you for joining and participating in our third-quarter earnings call. And again Pat said, I will handle the prepared presentation and our team is ready and able to answer any questions any of you might have at the conclusion of the formal presentation.

Well, story of the quarter, again, is our fifth consecutive quarter of profitability. And we're pleased to report that. Our net income available to common shareholders was $16 million for the third quarter of 2012 compared to net income available to common shareholders of $24.8 million for the second quarter of this year. And $15.7 million in the third quarter of 2011.

Net income available to common shareholders was $62.2 million for the first nine months of 2012 compared to a net loss attributable to common shareholders of $131.5 million for the first nine months of 2011. As we said in our press release, earnings driven by growth in pre-tax credit cost income. As you see on page four of the deck, we are pleased to report an increase in pre-tax pre-credit cost income of $4.9 million sequentially. We are also pleased to report net interest margin expansion of three basis points to 3.51%. I'll talk a little bit more about that later in the deck. And again, a reported sequential quarter total un-growth of $51.7 million. Net loan growth of $239.6 million; a major milestone for our company as we have been talking about reaching stabilization for many, many quarters and certainly pleased to see both reported and net loan growth for the quarter. And we'll talk about the mix and where a lot of that came from later in the slides.

On page five, as I just mentioned, our fifth consecutive quarter profitability. It's our fourth quarter where pre-tax pre-credit cost income have exceeded credit cost. If you'll look to the right, you'll see pre-tax pre-credit cost income of $112 million for the quarter compared to just $107 million the quarter before. And again, we'll talk about some of the components as we go along.

An increase in credit cost, $86 million compared to $70 million a quarter ago. As Kevin Howard mentioned on the last call, we do a semi-annual adjustment of our reserve factors. Those factors were $18 million less than last quarter. Other factors go into certainly the provision line, market-to-market cost, retail charge-offs, loan growth, providing for loan growth, which is a good pressure to have certainly as well as OREO costs, in-flow costs, disposition, and other. And again, Kevin Howard will be happy to take your questions on that as we go through the deck.

On page six, again graphically illustrating the expansion and our net interest margin, 3.51% compared to 3.48% last quarter, and 3.47% a year ago. Our yield on earning assets was down five basis points. The effective cost of core deposits down approximately seven basis points to 0.34%. So again, pleased to see the expansion in our margin. A lot of pressure there. Our team has done a great job to hold the line and actually provide a little lift there.

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