Synovus Financial Corp. (SNV)

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Synovus Financial Corporation (SNV)

Q4 2008 Earnings Call

January 22, 2008 4:30 pm ET


Richard Anthony – Chairman and Chief Executive Officer

Fred Green – President and Chief Operating Officer

Kevin Howard – Chief Credit Officer

Mark Holladay – Executive Vice President, Chief Risk Officer

Tommy Prescott – Executive Vice President, Chief Financial Officer


Nancy Bush

Tony Davis

Adam Barkstrom

Kevin Fitzsimmons

Christopher Marinac

Jennifer Demba



Good afternoon ladies and gentlemen and welcome to fourth quarter earnings 2008 conference call. (Operator Instructions) 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 fourth quarter conference call. We distributed our press release about 30 minutes ago so I am confident you have that in your hands and we will not cover everything you saw in there but I will make some remarks initially, followed by Tommy Prescott our CFO and then Fred Green our Chief Operating Officer.

First a reminder that we will be making some forward-looking statements 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.

What I would like to do in starting the meeting is first of all acknowledge and make reference to the reported net loss for the quarter which excluding the goodwill impairment charge was $195 million. It is pretty obvious we took a pretty conservative stance in the quarter in a couple of respects. The two big items that will get your attention would be first of all the goodwill impairment charge and secondly the large provision that we had pre-announced actually early in the month of January.

Just a couple of things to say about the goodwill impairment. We came in with a balance sheet, came into this period with a balance sheet that had about $483 million in goodwill. The general industry conditions, the decline in market caps for banking companies have resulted in impairments throughout a number of regional banks as we have noted in recent earnings releases. We are left with a very nominal amount of goodwill, some $40 million on our balance sheet and actually started with probably a lower percentage of goodwill in relation to the size of our company than many others who have been in the acquisition business.

At any rate, we will have a cleaner balance sheet without the goodwill attached to it and that charge was announced earlier today. Secondly, on the provision, we had stated around the 2nd of January that we expected a much larger than normal provision somewhere in the range of $350 million. The number as the results were finalized was $364 million.

I have in front of me some information that really breaks this $364 million down in a couple of different ways and I want to share this information with you. First of all, of the $364 million some $231 million would be related to charge offs that were taken in the quarter. Now of that $230 million $168 million relates to impairments on loans that have moved into the non-accrual category.

There were other charge offs that really were more of the normal write downs that you would see totaling some $62 million. Now, one side of the pie chart has to do with charge offs and the impact those charge offs have on the provision and that is what I just covered. The other part of the pie chart that I’m looking at has to do exclusively with reserve building. You noticed in the press release that our loan loss reserve has increased to 2.14% of loans compared to 1.68% at the end of the third quarter.

Now in this reserve building component we took a targeted look at the Atlanta construction and development portfolio. We reassessed it. We clearly had a conservative lean indicating aggressive action and $47 million of the $133 million in reserve build was related to Atlanta migration into higher risk rates. These loans in most cases are accruing loans but move into higher risk rates.

Now we had migration that took place, negative migration, in other parts of the portfolio. The non-Atlanta segment of this migration resulted in a $51 million portion of the provision. So here you see we have $98 million related to migration, about half in Atlanta and about half in other parts of the portfolio.

We took a conservative lean in our reserve factors, our unallocated reserve was increased in the quarter and we made an additional provision based upon qualitative factors that given the deterioration that continued in the economy and in the residential real estate market required reserve building. So these so called reserve factors ended up with about a $25 million additional provision.

Finally, there was about $11 million in reserve building tied to loans that went into non-accrual that we did not have time to do an impairment. We just couldn’t get the updated values. So when that happens we feel like the provision needs to be taking that into consideration so we put specific reserves on those properties until they can be impaired.

In summary, the total provision of $364 million was broken down in that manner.

The last thing I will say about this conservative lean and reassessment that was done in December is that we had some other real estate write downs of about $25 million that was in the P&L related to other properties that we are holding and other real estate. I hope that helps and I felt like that would give you more color on the provision that took place in that recent quarter.

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