Synovus Financial Corp. (SNV)

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Synovus Financial Corporation (SNV)

Q4 2012 Results Earnings Call

January 22, 2013 8:30 AM ET


Pat Reynolds - Director, Investor Relations

Kessel Stelling - Chairman and CEO

Kevin Howard - Executive Vice President and CCO

Tommy Prescott - Executive Vice President and CFO

D. Copeland - Executive Vice President and Chief Banking Officer


Todd Hagerman - Sterne, Agee & Leach, Inc.

Kevin St. Pierre - Sanford Bernstein

Craig Siegenthaler - Credit Suisse

Kevin Fitzsimmons - Sandler O’Neill

Nancy Bush - NAB Research

Jennifer Demba - SunTrust Robinson Humphrey

Mike Turner - Compass Point

Christopher Marinac - FIG Partners

Ken Zerbe - Morgan Stanley

Emlen Harmon - Jefferies

John Pancari - Evercore Partners

Erika Penala - Bank of America

Steven Alexopoulos - JP Morgan



Good morning, ladies and gentlemen. And welcome to Synovus’ First -- Fourth Quarter Earnings Conference Call. At this time, all lines have been placed on a listen-only mode, and we will open the floor for your questions and comments following the presentation.

It is now my pleasure to turn the floor over to your host, Mr. Pat Reynolds, Director of Investor Relations. Sir, the floor is yours.

Pat Reynolds

Thank you, Kate, and I thank all of you for joining us today on our call. During this call, we will be referencing the slides and press release that are available within the Investor Relations section of our website at

Kessel Stelling, Chairman and Chief Executive Officer will be our primary presenter today with our executive management team available to answer all of your questions.

Before I begin, I need to remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties and the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website.

We do not assume any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as maybe required by law.

During the call, we will discuss non-GAAP financial measures in reference to the company’s performance. And you can see these -- the reconciliation of these measures to our GAAP financial measures in the appendix to our presentation.

Finally, Synovus is not responsible for and does not edit or guarantee the accuracy of earnings teleconference transcript provided by third parties. The only authorized webcast is located on our website.

We do respect the time available this morning and desire to answer everyone’s questions. We ask that initially you limit your time to two questions. If we have more time available after everyone’s initial two questions, we will reopen the queue for follow-up questions.

Now, I’ll turn it over to Kessel Stelling.

Kessel Stelling

Thank you Pat, and good morning, everyone, and thank you for joining our earnings call. Slide four in the deck. Maybe says it all, it was certainly a milestone quarter for our company and a milestone year as well. I’m tempted to spend the entire call on this slide but there are a lot of other developments that I think are important to share with you.

But as you’ll see on this slide, net income for the quarter of $713 million, that relates to $0.78 on an EPS basis. The highlight of the quarter included $100 million income tax benefit from our deferred tax asset recapture. It also included as previously announced, the successful execution of distressed asset sales of approximately $400 -- $545 million, which drove dramatic acceleration in credit quality improvement, as you know we had announced the bulk sale earlier in December.

We also had net loan growth of approximately $345 million in the fourth quarter, up from approximately $240 million in the third quarter of 2012. We had reported loans declined by about $190 million, but keep in mind that’s after the impact of distressed loan sales of approximately $475 million.

We also have reported C&I and retail loan growth of $103 million sequentially, 3.1% annualized and that grew $291 million or 2.3% from a year ago, all a great reflection of the overall health of our franchising and a great job that our bankers are doing across our footprint.

I’ll take you to page five and talk a little bit about the DTA. As I just said previously, we did have an $800 million benefit from the deferred tax asset recapture, it was recorded in the fourth quarter and it was consistent with prior guidance on timing.

As it relates to timing, it was confidence in the sustainability of future profitability at sufficient levels, as well as continued improvement in credit quality were important considerations in the deferred tax asset valuation allowance reversal.

The recapture drove $0.89 per share increase in tangible book value per common share that now is at $2.96. Capital ratios also benefited from the deferred tax asset recapture, the biggest benefactor there was our tangible common equity ratio, which increased 232 basis points to 9.67%.

Approximately $714 million of the net deferred tax assets continue to be excluded from regulatory capital at December 31, 2012. The disallowed DTAs will decrease overtime, thus creating additional regulatory capital in future periods.

On slide six, I’ll take you to pre-tax, pre-credit cost income. We did see a slight decline in the quarter in credit cost. We’re certainly elevated impacted by the bulk sale as previously disclosed.

I’ll take you through a few of the components there. Our net interest income decreased about $5 million from the prior quarter, primarily due to higher interest reversals. Non-interest income excluding securities gains was up $5.3 million sequentially and a few contributors there were service charges on deposit accounts up about $500,000, our financial management services revenue was up a $1 million over the prior quarter, other service charges were up a $1 million driven by increases from some of our new initiatives and growth, and then we did have $1.8 million in private equity investment gains.

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