Synovus Financial Corp. (SNV)

SNV 
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Synovus Financial (SNV)

Q2 2011 Earnings Call

July 28, 2011 8:00 am ET

Executives

Roy Copeland - Chief Banking Officer and Executive Vice President

Curtis Perry - Chief Commercial Officer and Executive Vice President

Thomas Prescott - Chief Financial Officer and Executive Vice President

Patrick Reynolds - Director of Investor Relations

Kevin Howard - Chief Credit Officer and Executive Vice President

Kessel Stelling - Chief Executive Officer, President, Director and Chairman of Executive Committee

Analysts

Emlen Harmon - Jefferies & Company, Inc.

Craig Siegenthaler - Crédit Suisse AG

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

Ken Zerbe - Morgan Stanley

Christopher Nolan - CRT Capital Group LLC

Jennifer Demba - SunTrust Robinson Humphrey, Inc.

John Pancari - Evercore Partners Inc.

Erika Penala - Merrill Lynch

Kevin St. Pierre - Sanford C. Bernstein & Co., Inc.

Robert Patten - Morgan Keegan & Company, Inc.

Christopher Marinac - FIG Partners, LLC

Nancy Bush - NAB Research

Steven Alexopoulos - JP Morgan Chase & Co

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to the Synovus Second Quarter Earnings 2011 Conference Call. [Operator Instructions] 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.

Patrick Reynolds

Thank you, Kate. And I thank you all for joining us today on the call about our second quarter results. You can review the slides and also access the press release on our website at www.synovus.com. Our presenters today will be Kessel Stelling, our President and Chief Executive Officer; Tommy Prescott, our Chief Financial Officer; and Kevin Howard, our Chief Credit Officer.

Before we begin, I need to remind you that our comments may include forward-looking statements. These statements are subject to risk 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. Further, we do not intend to update any forward-looking statements to reflect circumstances or events that occur after the date that the statements are made. We disclaim any responsibility to do so.

During the call, we will discuss non-GAAP financial measures in talking about the company's performance. You can find the reconciliation of these measures to GAAP financial measures in the appendix of the presentation. Finally, Synovus is not responsible for and does not edit or guarantee the accuracy of earnings teleconference transcripts provided by third parties. The only authorized webcasts are located on our website. And now we'll turn it over to Kessel.

Kessel Stelling

Thank you, Pat. And good morning to all of you, and thank you for joining us on this earnings call as we continue to share the story of our progress. You have seen the press release by now and the earnings deck. I'll do a brief summary and then turn it over to Tommy Prescott and Kevin Howard for more detail.

But I think, as you'll see, the story for the quarter for us, in addition to the improvement in our earnings, is the significant improvement in credit, which we'll talk about in great detail; the continued execution on key efficiency initiatives, including the customer experience; the building of significant pipelines and loan fundings through existing and new additions to talent, the majority of these fundings occurring in the C&I category; and then the continued improvement in our total deposit mix. And as you'll see growth in noninterest-bearing deposits of 14.7% year-over-year, 15.3% linked quarter.

But let me turn you to Page 4 of the deck, the financial results summary. And I will begin there. For the second quarter, the net loss attributable to common shareholders was $53.5 million, a 42.9% improvement from the first quarter and a 77.9% improvement from the second quarter of 2010. The net loss per common share was $0.07 compared to $0.12 the previous quarter. Net loss per common share excluding restructuring charges was $0.06 compared to $0.09 the previous quarter.

If you'll turn to Page 5, I think, again, the driver of the performance, as we said, primarily on the credit side. I'll walk you through the improvement in some of our key credit metrics. Mostly, if not all, showed significant improvement.

The credit costs -- total credit costs declined for the eighth consecutive quarter. You'll see total credit cost of $157.9 million, down 10.8% over the first quarter, down 55.2% over the second quarter of 2010. NPL inflows totaled approximately $231 million, the lowest level in 11 quarters. As you will remember, we had guided to levels at or slightly lower than our first quarter inflows, which were in excess of $300 million, and we were pleased with this component of our performance, certainly this quarter.

Distressed asset sales totaled $195 million in the second quarter. NPAs ended the quarter at $1.22 billion, a $56.8 million decrease from the first quarter of 2011 and a $354 million decrease year-over-year. In addition, potential problem commercial loans declined for the third consecutive quarter. Again, all great indicators of future performance.

If you turn to Page 6, I'll talk about some of the balance sheet trends. Net paydowns moderated during the second quarter, $167.6 million, down significantly from the previous quarter. And out of $167 million, over $100 million of debt paydown was related to our very focused strategy to reduce our large borrower concentration. We did not expect that type of decline in the quarters ahead as we had continued to execute on that concentration strategy.

We're very encouraged by our recent core lending activity. New originations steadily increased every month during the second quarter. Most of those originations, as stated previously, are occurring in the C&I space. We built meaningful pipelines, with momentum from the corporate banking initiatives that we have previously discussed, and we've seen great early success both in pipeline growth and fundings from our corporate banking team, including our recently announced Senior Housing Group.

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