Synovus Financial Corp. (SNV)

SNV 
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Synovus Financial Corporation (SNV)

Q1 2009 Earnings Call

April 22, 2009 4:30 pm ET

Executives

Richard Anthony - Chairman and CEO

Fred Green - President and COO

Kevin Howard - Chief Credit Officer

D. Copeland - Chief Commercial Officer

Tommy Prescott - EVP and CFO

Analysts

Nancy Bush - NAB Research

Adam Barkstrom - Sterne Agee & Leach

Steven Alexopoulos - JPMorgan

Christopher Marinac - FIG Partners

Ken Zerbe - Morgan Stanley

Kevin Sampier

Jennifer Demba - Suntrust Robinson Humphrey

Bob Patten - Morgan, Keegan & Company, Inc.

Paul Miller

Steve Covington

Presentation

Operator

Good afternoon ladies and gentlemen and welcome to the Synovus sponsored First Quarter Earnings 2009 Conference Call.

At this time all participants have been placed on a listen-only mode and the floor will be open for your questions and comments, following the presentation.

Now, I would like to turn the floor over to your host, Mr. Richard Anthony. Sir, the floor is yours.

Richard Anthony

Thank you very much. And I want to welcome each of you to our first quarter conference call. We are in the middle of earnings season, and we here in the executive group, like you have been paying close attention to the announcements that have been coming from banks.

I guess we all would agree there have been mixed results. The main story; the core of the story for almost everyone is credit. We'll certainly spend appropriate time on credit in our call. But first, I want to recite to you several positives that we feel are noteworthy in the Synovus story.

On the deposit front, I have some details later, but we have had continued good momentum and success in that area in liquidity and deposit gathering. We have an improving story with our margin. We will share some information with you on that.

We continue to work hard on our expense base; we're seeing traction there, we're seeing good results. And throughout our footprint, even though a lot of attention is focused on Atlanta and perhaps parts of Florida; many of our markets remain solid. And as a result, many of our banks continue to be good contributors to Synovus’ performance.

Before I move into the quarterly performance, I want to mention a downgrade that has been announced actually just in the last 30 minutes from Moody's. I'm sure most of you have seen that on the screens.

Synovus was downgraded multiple notches, we were aware of this possibility. We have planned from a capital and liquidity standpoint for it. Moody's and their assumptions has taken a harsh view, particularly with real estate related loan portfolios.

But I wanted to share that with you, in case you had not seen the news, but more importantly I want you to know that this was not a huge shock and that we have prepared from a balance sheet standpoint.

As you saw in our earnings announcement, the net income or net loss for the quarter before the preferred dividend was a $137 million on a per share basis; this converts to $0.46. If you take that back to the fourth quarter of '08, excluding our goodwill write-down, the comparable number was $195 million.

Of course the key driver, as I said earlier, had to do with the credit cost. Our provision itself was $290 million in the quarter, compared to $364 million in the fourth quarter of '08.

Residential construction and development continues to be the largest component of credit cost, with the Atlanta market being the primary area of concern. 40% of the provision that we incurred in the first quarter relates to the Atlanta area markets.

We continue to build our reserve during the quarter. It increased from 2.14% to 2.32%. If you go back a year, it was 1.46% at the end of the first quarter of '08.

Non-performers increased significantly to $1.75 billion, which is 6.25% of the portfolio. The factors to consider here have to do with the contingent migration, related to the housing recession that we all are painfully familiar with.

We did add a large resort/hotel relationship, which is in the form of a restructured loan that is being finalized over the next several weeks. This added almost a 100 basis points to the non-performing asset ratio.

The exits in the first quarter from our NPA list were not at the level that we expect them to be over the next two to three quarters. Few things to consider there, the seasonality factor entered into some of our tactics and that the peak selling season was just around the corner, we were holding back a bit there.

We have been viewing, as you would expect with a lot of interest, the legacy loan program coming from the government public/private partnerships that are being put together. We believe that some new avenues for disposition will be opened up as a result of this program, and we want to see more from that. But the information that we want to see is not yet totally available. So, we will continue to follow progress there.

We had some bulk sales that we entertained. We held back on a few of those because the pricing did not suit us, but we will have a greater level of exits from this portfolio over the next two quarters as I said earlier.

We organized a little differently and I guess in a stronger fashion in the special assets area in recent weeks. D. Copeland, one of our executives has taken on some supervisory responsibilities there for special assets as we have centralized much of the activities in Synovus here at the corporate level.

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