Synovus Financial's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Synovus Financial Corp. (SNV)

Q1 2012 Earnings Call

April 24, 2012 8:30 am ET


Kessell Stelling – Chairman, Chief Executive Officer

Thomas Prescott – Executive Vice President, Chief Financial Officer

Kevin Howard – Chief Credit Officer

D. Copeland – Chief Banking Officer

Pat Reynolds – Director, Investor Relations


Todd Hagerman – Sterne Agee

Craig Siegenthaler – Credit Suisse

Jefferson Harralson – KBW

Emlen Harmon - Jefferies

Kevin Fitzsimmons – Sandler O’Neill

Nancy Bush – NAB Research

Stephen Alexopoulos – JP Morgan

Christopher Marinac – FIG Partners

Jennifer Demba – SunTrust Robinson Humphrey

Ken Zerbe – Morgan Stanley

Mike Turner – Compass Point

Erika Penala – Bank of America Merrill Lynch



Good morning ladies and gentlemen and welcome to the Synovus First Quarter Earnings conference call. At this time, all lines have been placed on a listen-only mode and we will open the floor for your questions and comments following the presentation.

It is now my pleasure to turn the floor over to your host, Pat Reynolds, Director of Investor Relations. Sir, the floor is yours.

Pat Reynolds

Thank you, Kate, and I thank all of you for joining us today on the 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 Our presenters today will be Kessell Stelling, Chairman and Chief Executive Officer; Tommy Prescott, Chief Financial Officer, and Kevin Howard, Chief Credit Officer.

Before we 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 results to differ materially in our press release and in our SEC filings, which are available on the website. Further, we do not intend to update any forward-looking statements to reflect circumstances or events that occur after the date these statements are made. We disclaim any responsibility to do so.

During the call, we will discuss non-GAAP financial measures in reference to the Company’s performance and you can find a reconciliation of these measures to GAAP financial measures in the appendix to 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 webcast is located on our website.

With respect to time available this morning and desire to answer everyone’s questions, we ask you to initially limit your time to two questions. If we have more time available after everyone’s initial two questions, we will reopen the queue for follow-up questions.

And now, I’ll turn the call over to Kessell.

Kessell Stelling

Thank you, Pat, and thanks to all of you for joining our first quarter earnings call this morning. As we said in the release this morning, we are very pleased to report a profit for the third consecutive quarter. The quarter was highlighted by a significant reduction in non-performing loan inflows, lower net charge-offs, and a reduction in all key problem loan categories. I’m going to walk you through the first part of the deck and then turn it over to Tommy Prescott. He’ll be followed by Kevin Howard, and then we’ll come back and certainly answer questions.

So if you’ll begin on Slide 4 of the deck, again you’ll see our earnings results. Net income available to common shareholders was 21.4 million compared to net income of 12.8 million in the fourth quarter of 2011 and a net loss of 93.7 million in the first quarter of 2011. Net income per diluted common share was $0.024 compared to net income of $0.014 in the first quarter and a net loss of $0.119 in the first quarter of 2011.

Turning to Page 5, again as was the case with last quarter, credit was certainly the story of the quarter. I’ll walk you through several of those categories. Non-performing loan inflows continued to improve, you’ll see, declining from 189 million in the fourth quarter to 140 million in the first quarter of 2012, down 49 million or 26% from the fourth quarter, and down 167 million or 54% from the first quarter of 2011. Our net charge-off ratio was 1.90% annualized compared to 2.26% in the fourth quarter of ’11 and 3.12% in the first quarter of ’11; in dollars, down 18 million or 16% from the fourth quarter, down 72 million or 43% from the first quarter of 2011 – again, a tremendous improvement in the charge-off results there.

Turning to Page 6, as I said earlier, every key problem loan category decreased during the quarter. Our non-performing loans declined 47 million or 5% from the fourth quarter of 2011. As illustrated on the graph on the top left, potential problem commercial loans decreased 95 million or 12% from the fourth quarter of 2011, and again at the bottom left you’ll see a graph reflecting our past dues. Past dues over 90 days ended the quarter hit 0.04%, down from 0.07% the previous quarter, and total past dues ended the quarter at 0.73%, certainly acceptable levels in these times.

Turning to Page 7, some commentary on the loan and deposit behavior. The first quarter of ’12 results reflected expected downward pressures on loan balances. As we guided on the call last time, we felt that the first half of this year we’d still experience some downward pressure, and the results do reflect that. The sequential quarter net loan decline was approximately 25 million in the first quarter compared to an increase of approximately 167 million in the fourth quarter of 2011, and a decline of approximately 238 million in the first quarter of 2011.

Total loans reported a sequential quarter decline of 236.1 million compared to $22.3 million decline the previous quarter and a $588.3 million decrease in the first quarter of 2011. We do expect our loan balances to stabilize and grow during the second half of 2012, and delighted to report that our specialty lending group, which we’ve talked a good deal about, grew net loan balances by more than 15% during the quarter, and we’re encouraged by significant growth in our loan pipeline across our footprint. The loan portfolio mix continued to improve during the quarter. Kevin will talk about that later, but C&I and retail combined now represent approximately 65% of our total loans.

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