Three Southeastern banking companies reported earnings that met Wall Street’s expectations. Synovus, one of the three, also completed its senior management succession with James Blanchard stepping down as chairman after 36 years at the company.
Synovus Financial Corp. said that it earned 47 cents a share, and the $31.3 billion-asset Columbus, Ga., company finalized a senior management succession initiated 17 months ago.
Chief executive Richard Anthony was given the addition role of chairman, succeeding James Blanchard, who retired Wednesday. Frederick L. Green 3rd, who had been the vice chairman, succeeded Mr. Anthony as the president and was named the chief operating officer.
Earnings from two Alabama companies also met estimates.
The $33.8 billion-asset Compass Bancshares Inc. of Birmingham said it benefited from a lower loan-loss provision, reduced expenses, and a more favorable tax rate, which countered a decline in net interest income from the second quarter.
Colonial BancGroup Inc. of Montgomery reported earnings of 44 cents a share and a decline in net interest income from the second quarter. Like Compass, the $22.4 billion-asset Colonial reported lower credit costs and said it used higher service charges and a small securities gain to buffer its results.
Synovus, meanwhile, reported an increase in net interest income from a quarter earlier, to go along with a lower provision.
D. Paul Jones, the chairman, president, and CEO of Compass, warned that earnings across the industry are coming under increased pressure.
"We recognize the challenges facing the financial services industry," he said Wednesday during an earnings conference call. "As in the past when the financial services industry has faced similar challenges, it is those companies that focus on the basic fundamentals - the blocking and tackling - that weather the storm. That's where our focus is."
Analysts said that the third-quarter results largely affirm their beliefs that regional banking companies have reached the end of their higher-quality earnings streak, because of interest rates and slowing economic trends. According to analysts, companies might have to rely more on fees and other gains to maintain momentum heading into next year.
Kevin Reynolds of Stanford Equity Group said in an interview that loan growth and deposit growth are "decelerating a little bit," and that margins will remain under pressure. "Everybody wins when the economy is growing fairly rapidly. When it slows, only the best win."
Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co. Inc., said in an interview, "Banks have been doing as good a job as they can to manage the mix shift" in deposits.
"In the fourth quarter earnings will be of a lower quality," he said. "There will be no big misses, but we might see more asset sales, securities gains, and portfolio changes."
Compass said earnings increased 2.9% from the second quarter and 18% from a year earlier, to $118.8 million. Revenue fell 0.8% from a quarter earlier but rose 11% from the third quarter of last year, to $465.4 million.
Colonial said net income rose 2.3% from the second quarter and 20.5% from a year earlier, to $68 million. Revenue fell 0.2% from the second quarter but rose 5% from a year earlier, to $236.5 million.
Synovus said net income from its financial services operations rose 3.3% from the second quarter and 16% from a year earlier, to $110 million. The company also derives about 30% of its net income from its 81% stake in the card processor Total System Services Inc. (See story
Revenues from Synovus' financial services division rose 1.4% from the second quarter and 15% from a year earlier, to $380.1 million.
However, margins declined at all three companies as they battled the yield curve and intense pricing competition for deposits.
Colonial had the largest contraction from a quarter earlier, 17 basis points, to 3.64%. The margin contracted 14 basis points from a year earlier.
Deposits grew 3.2% from a year earlier, to $15.8 billion. Interest-bearing deposits increased by 7% over that period; no-interest deposits fell 10%.
Compass' margin shrank 12 basis points from the second quarter but grew 10 basis points from a year earlier, to 3.68%. Deposits grew 21% from a year earlier, to $22.8 billion. Interest-bearing deposits rose 19% over that period, to $9 billion.
"Its needless to say that deposit pricing is very competitive in all of our markets, and funding earning-asset growth will continue to be an industry challenge," Mr. Jones said.
Synovus' margin contracted 9 basis points from the second quarter but expanded 12 basis points from a year earlier, to 4.3%. Deposits grew 18% from a year earlier, to $24 billion. Interest-bearing deposits rose 20% over that period, to $17.1 billion, and no-interest deposits grew 2.5%. "Managing the margin and in part managing the deposit mix on our balance sheet and deposit pricing are going to be under close scrutiny," said Mr. Anthony, Synovus' chairman and CEO.
Robert E. Lowder, Colonial's chairman, president, and CEO, also cited pressure on the loan front, where he said he expects growth to slow.
"We're seeing less opportunity in the marketplace to make good, solid loans," he said Wednesday during a conference call. "I'd be very surprised if everybody's not seeing that. The economy has slowed, and that's in every category."
Colonial's loan portfolio rose nominally from the second quarter and 5.4% from a year earlier, to $15.5 billion. Compass' portfolio increased 2.9% from a quarter earlier and 18% from the third quarter of last year, to $24.5 billion. Synovus' portfolio rose 13% from the second quarter and 16% from a year earlier, to $24.2 billion.
Credit quality remained stable; none of the companies reported any major issues.
Colonial's third-quarter provision fell 71% from the second quarter and 76% from a year earlier, to $1.5 million. Net chargeoffs rose 70% from the second quarter but fell 34% from a year earlier, to $2.5 million.
Compass' provision fell 11% from the second quarter and 29% from a year earlier, to $24.2 million. Net chargeoffs rose 29% from the second quarter but fell 25% from a year earlier, to $21.4 million.
The provision at Synovus fell 0.7% from the second quarter and 6% from a year earlier, to $18.4 million. Net chargeoffs rose 27% from the second quarter but fell 11% from a year earlier, to $12.1 million.
