Synovus Financial Corp. (SNV)

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Synovus Financial Corporation (SNV)

Q3 2008 Earnings Call Transcript

October 23, 2008, 4:30 pm ET


Richard Anthony – Chairman and CEO

Kevin Howard – Chief Credit Officer

Mark Holladay – EVP and Chief Risk Officer

Tommy Prescott – EVP and CFO

Leila Carr – EVP and Chief Retail Officer


Steven Alexopoulos

Nancy Bush

Tony Davis

Adam Barkstrom

Heather Wolf

Todd Hagerman

Christopher Marinac

Scott Valentin

Rob Rutschow

Michael Rogers

Kevin Fitzsimmons

Jennifer Demba



Good afternoon, ladies and gentlemen, and welcome to the Synovus third quarter 2008 earnings conference call. At this time, all participants are placed in a listen-only mode and we will open up the floor for your questions following the presentation.

It is now my pleasure to turn the floor over to your host Richard Anthony. Sir, floor is yours.

Richard Anthony

Thank you very much. I want to welcome each of you to our third quarter conference call. I'll read briefly our Safe Harbor statement. We will be making some forward-looking statements today that are subject to risks and uncertainties. There are factors that could cause our results to differ materially from these statements and they are set forth in public reports we file with the SEC.

Well, I guess, we're among, if not possibly the last regional bank to release earnings and our results, clearly we're impacted by the credit environment. We reported a loss as you saw just a few minutes ago of $27 million or $0.08 a share. And there are a couple of factors I want to point out that contributed to this loss and it could have a bearing on the way you view the results we could anticipate in the fourth quarter and really throughout 2009.

There was an intense review done of the top loans in our portfolio, comprising about 14% of the total outstanding. And there were some downgrades even though these are performing loans that resulted in $40 million increase in provision during the quarter. So I think that particular extra look and review needs to be noted.

Secondly, we put a lot of intensity into our impaired loans, both those coming in to the non-performing portfolio as well as those that are in NPLs. So we had about a $43 million write-down of collateral on these impaired loans, which is about double the amount of the quarterly write-down that we had been experiencing in the past. Those two particular items I wanted to point out.

Now let me just comment about our non-performing assets. They ended the quarter at 3.58%. There was an impact within the C&I portfolio as we added an auto dealer credit to non-performing status. We are not in the pool [ph] planning business. These were dealerships that we have financed. There was a lot of real estate taken as collateral. But 35% of the increase in NPAs was in still residential construction and development. So let me shift over to that now.

About 60% of NPAs remain in the Atlanta and west Florida markets. 56% of residential NPAs are in Atlanta, 12% are in west Florida. There are some other markets that are much less significant that comprise the remaining markets that would contribute to this residential emphasis that we have or concentration in NPLs. But I repeat that 60% of our NPAs remain in residential construction and development.

We had $345 million total inflows into NPAs. I won't get into any of the details of that, either Mark Holladay or Kevin Howard can address that during the Q&A should you wish more information on that particular subject.

A few comments about auction and loan sales activity. The disposition plan that we have for our non-performing assets is critical as we manage this aspect of our company. We have communicated regularly about the results of our absolute auctions, which have been conducted over the last several months. The impact from two of those was felt in the quarter. And those two particular auctions about $40 million of property was sold. We realized roughly 63% of the original loan amount in these auctions.

We're moving ahead with another absolute auction that has just begun and we are planning for a loan sale, a transaction that will occur in the fourth quarter. There was a $5 million charge taken for both of these two events, which have not yet occurred because we have identified the properties, we have some history and experience upon which to base the loss estimate, so $5 million in charges were taken related to this fourth absolute auction and the loan sale which is being worked today.

I will shift now to the balance sheet. We had slight loan growth about as we would have expected 2.93% annualized. We can talk more about this at a later date. But we did have some bond puts that hit the loan book during the quarter $50 million. We'll have more of that happening in the fourth quarter. These are good assets but as liquidity has become strained in these money market mutual funds, many regional banks are receiving puts of credit enhanced bond issues, primarily on commercial credits. So we had a modest impact in the quarter. We'll have more growth in the loan portfolio from that source in the fourth quarter. But the yields on these loans are good. And the quality is actually excellent.

Core deposits and the growth in that category of funding exceeded loan growth in the quarter. As I mentioned loan growth, 2.93%. Core deposit growth 4.3%. We're pleased with that. We're very conscious of the importance of liquidity. We have – we have no fed funds purchased position on the balance sheet. We have really begun to fund everything with deposits. There are some broker deposits. But our core activity is very good. And I think most of you know we have a unique advantage here on the deposit side with our multiple charter system, we have a shared CD and shared money market product that allows a customer to seamlessly have a single account with our company that allows insurance protection, deposit insurance protection today with the $250,000 higher limit, an aggregate of $8 million can be obtained in our company. Nobody else has this unique advantage. And the money is flowing in at a rapid pace.

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