Synovus Financial Corp. (SNV)

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Synovus Financial Corp. (SNV)

Q2 2008 Earnings Call

July 24 2008 4:30 pm ET

Executives

Richard Anthony - President and CEO

Tommy Prescott - CFO

Analysts

Steve Alexopoulos - JPMorgan

Tony Davis - Stifel Nicolaus & Company

Jennifer Demba - SunTrust Robinson Humphrey

Kevin Fitzsimmons - Sandler O'Neill & Partners

Christopher Marinac - Fig Partners

Scott Valentin - Friedman Billings Ramsey

Chris Foster

Adam Barkstrom - Sterne Agee & Leach

Ken Usdin

Wilson Yeaghley

Presentation

Operator

Good afternoon ladies and gentlemen, and welcome to the Synovus second quarter earnings 2008 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. It is now my pleasure to turn the floor over to your host, Mr. Richard Anthony. Sir, the floor is yours.

Richard Anthony

Thank you very much. I want to welcome each of you to our conference call this afternoon to discuss our second quarter performance. We released our earnings and related information just, literally a few minutes ago, so, many of you probably have not had your normal opportunity to study the results.

But, I'll point out that the net income for the second quarter was $12.1 million, $0.04 a share. That was impacted by a goodwill impairment charge, a non-cash charge of $27 million. And, Tommy can have more on that later, if you wish. Tommy Prescott, our CFO, will be adding some color to these high-level comments that I'm making right here in this introductory part of our call.

Credit, obviously was the story for the quarter, as it has been for the past few quarters. The pattern that we experienced was very similar to the pattern that you have seen earlier this year, and late last year. Our charge-off experience for the quarter was right in the range of 1%, 1.04%.

This compares to 95 basis points in the first quarter of 2008. Our nonperforming assets reached a level of 3% in this harsh credit environment. I would say that the primary story continues to be the Atlanta impact that we're feeling right now. 46% of our increase of $111 million in the quarter occurred in Atlanta.

That has to do with nonperforming loans. And the Atlanta market represents 58% of our total nonperforming loans in the residential, construction and development portfolios. So, we want to give you a little guidance on credit as we look out into the future. We would anticipate for the remainder of the year our charge-offs remaining in that 1% range. We see our nonperforming asset percentage going up some, but at a slowing pace for the remainder of this year. So we've got a few more quarters of this difficult credit environment to work through.

I do think that we are definitely doing the right things in credit. At the top of the list would be the importance of having a good disposition strategy. We have had an auction in the quarter that we felt pretty good about, so we will schedule other absolute auctions, primarily for Atlanta properties, over the remainder of 2008. Now, I don't know the number, but we could have any as three or four of those, as we continue to study the benefits and the experience that we're getting from that particular technique.

We've had some note sales. We'll continue to pursue that particular option to reduce NPAs. And certainly, our ongoing work with our builders to create incentives for them to move properties works, but it doesn't generate the volume and the numbers that we think are necessary to really work down our nonperforming asset totals. So, the disposition strategy would be at the top of our short-term list of priorities.

And secondly, I want to mention Project Optimus. You have heard us talk about this idea generating process that began about three months ago. We have completed the assessment phase of that. The ideas that have come from this ground-up process with our team members is complete, and has resulted, I think in some outstanding enhancements for this company in the areas of efficiency, as well as general productivity and revenue increases. We will have more to say about that by the end of August. We are finalizing the numbers, the impact on the company, which clearly will be positive. When we have completed that work, we will have something to say publicly about that. And as I say, we anticipate that date being right at the end of August.

So we thank you for your continued interest in Synovus, its performance. We are excited about the long-term potential while recognizing that this difficult residential housing environment is making an impact on our performance at this point in time. Tommy Prescott, as I said earlier, is here in the room with me, and I'll ask him now to give his color on the results for the quarter.

Tommy Prescott

Thank you, Richard. I want to offer a few high level comments before we go to Q&A. First of all, a few comments on the balance sheet. The loan growth did slowdown, $330 million, or 4.9% linked quarter growth on an annualized basis, about half of the pace of the last several quarters, really as we expected. And the loan growth occurred in the categories you would expect, with shrinkage of about 1% in the commercial real estate categories, with most of the dollar growth occurring in C&I, and also some growth in retail.

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