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VOL. 126 | NO. 212 | Monday, October 31, 2011

Trust One Parent Has Profitable Q3

By Andy Meek

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Columbus, Ga.-based Synovus Financial Corp. reported earnings of $15.7 million for the third quarter, the company’s first quarterly profit since Q2 2008.

Synovus, which is the parent of Memphis-based Trust One Bank, did that by pruning its employee headcount, raising capital and closing low-performing branches, including some in Memphis.

It’s paying off. Between July and September, Synovus said its net income was $15.7 million, compared to a loss of $53.5 million in Q2 and a loss of $195.8 million in Q3 2010.

The roughly $169 million of distressed asset sales during the quarter was down from about $195 million in Q2, and potential problem commercial loans declined for the fourth straight quarter.

Those dropped from $1.87 billion in Q3 2010 to $941.9 million in Q3 – a 50 percent drop.

“We are pleased to return to profitability, a key milestone for all of our stakeholders,” said Kessel Stelling, president and CEO of Synovus, in a statement about the quarter’s results. “We are gaining positive traction in almost every key area necessary for long-term, sustained profitability and growth.”

An analyst note published Thursday, Oct. 27, from Morgan Keegan & Co. Inc.’s equity research department, however, suggests Synovus would have posted a loss for the quarter after adjusting out a securities gain of $63 million.

“Management is doing all the right things, and we commend them for progress to date,” the note reads. “We also believe they are taking a hard look at all options on the table. We believe management is focused on doing what is right for shareholders and maximizing shareholder value.”

Nonetheless, Morgan Keegan’s analyst note encouraged Synovus to consider shrinking its balance sheet – and possibly put non-core parts of its franchise in Florida, Alabama and Tennessee up for sale.

In Tennessee, Synovus has Trust One in Memphis, The Bank of Nashville in Nashville, and Cohutta Banking Co. in Chattanooga.

“This would dramatically reduce expenses, excess liquidity and boost capital ratios. It would also free up management resources to focus on improving profitability.”

Also during Q3, Synovus cut its allowance for loan losses from $631.4 million at June 30 to $595.4 million at Sept. 30.

Total deposits also are up. They ended the quarter at $23.1 billion, up $234.4 million from the prior quarter.

Like some of its fellow regional banks in the Southeast, Synovus was hit especially hard by the collapse of the housing market. As such, its strategic repositioning has incorporated several elements.

The bank added about $644 million in Tier 1 capital in 2009 through a combination of measures that included a public equity offering, liability management and strategic dispositions.

The bank continued finding ways to boost capital in 2010, and in 2011 the company planned to find the lion’s share of a hoped-for $100 million in annual expense savings by the end of 2012.

Meanwhile, the bank joins several others in the Memphis area and elsewhere in the Southeast that have reported brighter earnings during Q3.

They include Trustmark Corp., the parent of Trustmark National Bank; Bank of Bartlett; BancorpSouth Inc.; and Renasant Corp.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 64 87 1,429
MORTGAGES 39 60 1,107
FORECLOSURE NOTICES 8 14 204
BUILDING PERMITS 92 209 3,265
BANKRUPTCIES 42 84 837
BUSINESS LICENSES 21 23 352
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0