Synovus (NYS: SNV) has been showing steady improvement, most recently extending its run of profits to three quarters. Last month, it recorded a quarterly profit of $36 million, overturning a loss of $79.2 million a year ago. The regional lender had struggled to report profits because of a severe housing downturn in the Southeastern region, but better credit quality and a solid boost from its investments have helped it do so.  

Crediting profits
The bank recorded profits of $0.02 on a diluted per share basis that equaled the $0.02 figure that analysts had predicted. Net interest income for the quarter declined by 7% to $221 million as a result of a fall in average loan balances as well as lower reinvestment yields from earning assets. The net interest margin, however, rose a bit to 3.55% from 3.52% in the year-ago period.

Noninterest income, however, soared 31% to $84.0 million from a year ago, helped by a $20.1 million increase in net investment securities. What also added to the bank's profit was a 53% fall in its provision for credit losses, which pushed up total revenues by 50%.


Improving credit quality
Along with falling provisions for loan losses, Synovus saw its net charge-offs decline 43.2% from the prior-year period. Its nonperforming loans declined by 54.5% from a year ago and its nonperforming assets fell by 17.2% from the year ago period -- indicative of an improvement in the bank's overall loan quality. Synovus' Tier 1 capital ratio rose to 13.2% from 12.9% in the previous quarter -- pointing to the bank's improving capital position.        

Synovus left out
One surprising thing we've seen lately is that banks have managed to grow their loan books, which has somewhat helped counteract the pressures of the prevailing low interest rates and at the same time has put them in a better position for the future. US Bancorp (NYS: USB) , which recently saw its profits rise by 28%, saw its average total loans grow by 6.4%, which includes a 17% increase in commercial borrowing.

Synovus, on the other hand, fell into the same category as turnarounds such as Regions Financial (NYS: RF) , which saw its loan balance fall by around $236.1 million on a sequential basis. The company is, however, hopeful that its loans will grow going into the second half of the year, which will be important for Synovus' top-line growth. You can follow Synovus' progress in 2012 with the help of the Fool's free My Watchlist service.

If Synovus' turnaround attempt is too much of a nail-biter for you, The Motley Fool featured a simple bank with nearly spotless metrics in its brand new free report "The Stocks Only the Smartest Investors Are Buying." We invite you to download a free copy. To find out the name of the bank Warren Buffett would probably be interested in if he could still invest in small banks, just click here.

At the time this article was published

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