Bad loan write downs increase, causing Synovus to post wider 1st-quarter loss

Synovus posts wider 1Q loss as bad loans mount

COLUMBUS, Ga. — Synovus Financial Corp. posted a wider first-quarter loss on Tuesday as the bank continued to write down bad loans and set aside funds to cover loans headed toward default.

After paying preferred dividends, the net loss available to common shareholders widened to $230 million, or 47 cents per share. That compares with a loss of $150.9 million, or 46 cents per share, in the 2009 first quarter.

The latest period’s results include a $43 million after-tax gain from the sale of the company’s merchant services business. The bank did not provide a per-share estimate for the impact of the one-time item.

There were 49 percent more shares outstanding in the recent quarter, which had the effect of reducing the per-share loss.

Analysts polled by Thomson Reuters, on average, expected a loss of 49 cents per share.

Net interest income, or earnings from deposits, edged up 2 percent to $250 million from $244.4 million.

Core deposits slipped marginally to $22.54 billion, from $22.69 billion a year ago.

Non-interest income, or earnings from fees and charges, fell 17 percent to $69.7 million, from $84.4 million last year. Mortgage banking income dropped 38 percent to $5.8 million.

Synovus increased its provision for loan losses, the money set aside to cover souring loans, by 17 percent to $340.9 million from $290.4 million.

Net charge-offs, or loans that were written off as uncollectable, rose 28 percent to $316 million in the quarter, from $246.3 million last year.

Nonperforming assets, those loans considered past due and in danger of being written off, rose 7 percent to $1.84 billion from $1.73 billion a year ago.

“As we look into the future, we expect our credit costs will continue to decline,” said Chairman and CEO Richard Anthony in a statement. That decrease will allow the bank to reduce its loan loss reserve, he said. “We continue to believe that we have an opportunity to return to profitability at some point during 2010.”

In aftermarket trading, Synovus Financial shares lost 31 cents, or 8.1 percent, to $3.51. They earlier rose 25 cents, or 7 percent, to close at $3.82. The stock has traded between $1.45 and $5 over the past year.