Synovus Financial Corp. (SNV)

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Synovus Financial (SNV)

Q1 2013 Earnings Call

April 23, 2013 8:30 am ET

Executives

Patrick A. Reynolds - Director of Investor Relations

Kessel D. Stelling - Chairman, Chief Executive Officer, President, Chairman of Executive Committee, Chairman of Synovus Bank and Chief Executive Officer of Synovus Bank

Thomas J. Prescott - Chief Financial Officer, Executive Vice President, Chief Financial Officer of Synovus Bank and Executive Vice President of Synovus Bank

Kevin J. Howard - Chief Credit Officer, Executive Vice President, Chairman of Credit Risk Committee, Chief Credit Officer of Synovus Bank and Regional Chief Executive Officer of Synovus Bank

Roy Dallis Copeland - Chief Banking Officer, Executive Vice President, Chief Banking Officer of Synovus Bank and Executive Vice President of Synovus Bank

Analysts

Kevin Fitzsimmons - Sandler O'Neill + Partners, L.P., Research Division

Stephen M. Moss - Evercore Partners Inc., Research Division

Nicholas Karzon - Crédit Suisse AG, Research Division

Ken A. Zerbe - Morgan Stanley, Research Division

Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division

Erika Penala - BofA Merrill Lynch, Research Division

Jennifer H. Demba - SunTrust Robinson Humphrey, Inc., Research Division

Rick Kraemer

Emlen B. Harmon - Jefferies & Company, Inc., Research Division

Michael Turner - Compass Point Research & Trading, LLC, Research Division

Christopher W. Marinac - FIG Partners, LLC, Research Division

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Synovus First Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Pat Reynolds, Investor Relations Director. Sir, the floor is yours.

Patrick A. Reynolds

Thank you, Kay, and I thank all of you for joining us today for 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 synovus.com.

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 the 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 may be required by the law.

During the call, we will discuss non-GAAP financial measures in reference to the company's performance, and you can see 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 2 questions. If we have more time available after everyone's initial 2 questions, we will reopen the queue for follow-up questions. Now I'll turn it over to Kessel Stelling.

Kessel D. Stelling

Thank you, Pat, and good morning to all of you. By now, hopefully, you've had a chance to review our press release, our earnings deck and 8-K filing earlier this morning. I'll talk about all of those, events in our time today. So again, thank you for joining us.

I guess the story of the quarter, pre-tax income increased to about $47 million for the first quarter of 2013. That was the highest level of pre-tax income for our company in about 5 years, up almost 30% from $35.9 million in the first quarter of 2012. Net income available to common shareholders was $14.8 million or $0.02 per diluted share. The first quarter results include $4.9 million in restructuring charges and income tax expense of approximately $17 million as our earnings are now fully taxed at 36.5%, after the fourth quarter DTA recapture.

A couple of clarifications about the comparative quarters, just as a reminder, fourth quarter of 2012 results included the investment securities gains of $8.2 million, approximately $157 million pre-tax charges from distressed asset dispositions and income tax benefit of approximately $796 million, primarily from deferred tax asset recapture. The first quarter of 2012 results included security gains of $20.1 million and income tax benefit of about $77,000. So just trying to give you a little comparative data there on those quarters we just referenced.

Again, the big story, our performance was driven by continued improvement in credit quality and further expense reductions. I'll take you to Page 5 and talk a little bit more about that, and you'll see graphically there indicated the tremendous improvement in credit costs over the 5-year horizon and also decline in core expenses. In fact, credit costs also fell to the lowest level in over 5 years to $49.3 million for the first quarter of 2013 compared to $185.8 million for the fourth quarter of 2012 and $90.9 million for the first quarter of 2012. That number is down $41.6 million compared to the first quarter a year ago, about 45.8%.

A little breakdown, in the first quarter, credit cost provision expense was about $36 million; ORE expense, about $11 million; other credit costs, $2.7 million. In addition to improvement in credit costs, we also saw continued improvement in core expenses as our efforts to drive those down continue to produce positive results. Core expenses, excluding restructuring charges, other credit costs and Visa indemnification charges were down -- were $163.8 million, down $7.6 million from $171.4 million in the fourth quarter of 2012, down $10.6 million from $170.4 million for the first quarter of 2012. We realized, across the boards, reductions and our initiatives to reduce our previously announced $30 million target in 2013 are well on track and we'll talk about that later in the slide deck.

Read the rest of this transcript for free on seekingalpha.com