Synovus Financial Corp (SNV) 2002 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to the fourth quarter 2002 Synovus evening conference call.

At this time, all participants 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, Mr. Jim Blanchard, Chairman and Chief Executive Officer of Synovus.

Sir, the floor is yours.

Thank you very much.

Good afternoon and thank you, John.

We're thrilled to have as many people on this call, I think there are 56 people that have signed in on the call.

And most of you I know and have visited with.

And I've been reluctant a little bit, I don't want to appear frivolous about anything, but I just have to tell you we are all just sitting around here thrilled and excited with our year in 2002.

And I was afraid, I told the group we might run the risk that you folks felt like maybe we had gotten into the cocktail hour a little early and were not totally in touch with reality.

But the truth is none of us around here have ever experienced a 210 ROA for the year.

None of us have ever experienced a .33 net chargeoff during a recession year.

None of us have ever administered a company that had a 52% efficiency ratio.

And the list goes on and on and on of accomplishments that make this year the best one we've ever had.

And we're thrilled about it.

And I know that everywhere I go, frankly all I hear is moaning and groaning and wringing of hands.

And maybe we ought to feel a little more like that, but we just don't.

We're excited about these numbers.

We're excited about this report to you.

And we look forward to giving you some of the details and highlights and then having your questions.

As you know by now from the press release, our net income was $365 million.

And that's up 17.2% over last year.

Our diluted EPS was $1.21, a little bit higher than some had expected.

That's up 15.2% over the dollar and a nickel that we earned in 2001.

As I mentioned, return on assets was 210.

That's up from 203 last year.

And our return on equity was 19.69%.

And that's compared to 20% last year.

And as you know, we are really excited and pleased that our shareholders equity crested over the 2 billion mark and now represents 10.72% of our quarter end assets.

We have people ask us all the time about excess capital and what are you gonna do with your capital, but I have to tell you that in an economic period like we're in, having a 10.72% shareholders equity as a percentage of assets is is basically a -- it's maybe not a blank check with the regulators, but its's very close.

We are in a favored few of people who they smile at and they tip their hat and they say nice things.

And that's a very, very good feeling to have all the time, and in particular a year like we have just completed.

We had solid contributions from our banking, our financial services area, which includes, of course, banking financial management services, mortgage insurance, leasing services, as well as from pieces who reported yesterday another very solid year with their 20% increase in earnings per share.

I want to get into some of the details, but let me just tell you that for the financial services operation, we were up 16.8% over last year with an ROA excluding our Altesis operations of 157.

That was up from 152.

And our return on equity was 1885.

The major contributors to the growth of net income on the financial services side include a 13.9 percent growth in net interest income supported by another year of strong loan growth and continued strong credit quality and expense control also were great contributors to this year's results.

We continued during the year, and in particular in the fourth quarter, with our strategy of branch redeployment that we've described to you now.

We're going into our fourth year.

We added last year 11 new banking locations in high-growth markets and we exited four locations in low-growth markets.

During the year this resulted in an after tax gain of 9.4 million in the fourth quarter of 2002.

We continued obviously to make strategic investments in 2002.

In addition, the new branches in high-growth markets, we made significant investments in financial management services and in enhancing our technology.

As a matter of fact, we spent $45 million in capital expenditures last year, and we figured from a PML standpoint there were approximately $16 million in expenses relating to those strategic investments in 2002.

Also, I want to remind you that the 9.4 million branch gains in 2002 were offset during the year by non-recurring losses that you will recall of private equity investment writedown of 6 million, 4 million after tax cost for merchant fraud loss.

And also refresh your memory that in 2001, we had a positive contribution to net income of 8.4 million after tax, consisting of the Star gain and branch sales.

On the margin, our net interest margin for 2002 was virtually unchanged from the prior year at 4.65%.

That may not seem remarkable to you, but to us, we're just absolutely amazed.

We had strong core deposit growth.

And that, coupled with pricing discipline, helped us offset the negative impact of a 224 basis point decline in average prime rate from the year 2001 to last year, 2002.

I think we're pinching ourselves trying to really realize the significance of being able to manage the margin that effectively.

The fourth quarter margin of 453% reflected an 11-point decrease from the third quarter of 464.

And that decline was primarily due to the 50 basis point decrease in the prime rate on November 7th.

And that decrease negatively impacted our earning asset yields.

In fact, earning asset yields decreased 29 basis points for the quarter, while our cost of funds decreased by 18 basis points.

The margin was also affected by continued strong growth of floating rate loans.

And as you have heard us say, I hope you won't grow tired of hearing this, but that has a slightly negative impact on us currently, but it should have a very positive impact going forward during the current year, if in fact, we see some interest rate increase as most economists expect and, frankly, as we expect.

On the deposit side, I won't go into the details because it varies somewhat to past reports.

But they grew 14.7%.

And that was with particular growth occurring in the NOW accounts, the DDA accounts and the money market accounts.

Our loans grew for the year 16.5% over the prior year.

And again, the larger markets that we serve contributed a majority of the dollar volume.

Fundamental loan growth excluding the acquisitions and the divestitures was 14.1%.

Commercial loans, primarily commercial real estate, represent most of the growth in volume again, as in the past.

And most of that growth is in the one to four family category.

We have a very strong residential market in most of our banking locations and in particular where this growth is occurring.

I guess maybe the credit quality is the most exciting part of this.

Our net chargeoff ratio for the fourth quarter was .27.

That's the lowest level in the past six quarters.

Chargeoff ratio actually peaked in the second quarter, as we predicted to you that it would.

And we've experienced steady decline since that point in time.

For the year, the chargeoff ratio was .33 compared to .30 a year ago.

At year-end our non-performing asset ratio was .64.

That was up slightly from .59, I believe it was.

And that is primarily because of one loan.

It's an 8.7 million CNI credit that was placed on non-accrual during the fourth quarter.

Without that credit, the non-performing asset ratio would literally have dropped a point to .58.

And I recall in the second quarter also saying that we thought our non-performers had peaked.

Now, actually in percentage terms they didn't.

But if you normalize our non-performers, take out our acquisitions, and also this one loan that we added, in fact we did peak in the second quarter.

And I feel even more confident that on an absolute dollar and percentage basis, that we have reached that peak at the end of the year.

The past due trends are probably the most positive indicator of all.

You'll recall in the second quarter we were exuberant over a 121 past due ratio.

And the past due ratio at the end of the year was .70, .70, less than 1%.

And our 90 days is only .21%.

So, you can see that our credit quality is stronger, better.

Our reserve is still at 138.

That represents right at 300% of covered non-performing loans.

Actually, our provision for the year was $65 million.

That's a 26.4% increase over the previous year.

And the net chargeoff coverage for the year was 1.48 times the chargeoffs, exactly what it was in the previous year.

That net chargeoff coverage for the fourth quarter was actually 1.61, a little bit higher than the average for the year, but appropriate for the quarter.

I might mention back on the one non-performing loan, the CNI loan that was put on non-accrual, that we do have adequate reserves against that loan and expect really the best as far as that loan is concerned within the limits of the reserve that has been set aside for it.

On fee income, we also had this, we think, marvelous result in what has not been a market conducive to really high rates of fee income growth.

Nevertheless, our financial services operation non-interest income was up 9% over last year.

And financial management services and insurance revenues actually increased 16% for the year.

Service charges increased 9%.

Mortgage revenues increased 8%.

And that was, of course, on top of what was the most unbelievable record year in 2001.

And credit card fees actually increased 6%.

Let's talk about our expenses.

While fundamental banking assets grew 13% and revenues grew 13.5%, fundamental expense growth on the banking side was only 5.5% for the year.

I was told that fundamental head count was only up 2.4%.

And I asked, what is fundamental head count?

I mean, I guess it's either head count or it isn't.

But that excludes acquisitions and other dispositions and unusual items.

So, you grow in assets 13%, you grow in revenues 13%, and your head count grew by 2.4%.

And we also met our target of holding our parent company holding company expenses to 4%.

All of this resulted in an efficiency ratio that's the lowest that we've had since I've been here for sure, in the financial services side.

And that's 52.07%.

That's compared to 53.80 last year, or almost a 2% decrease in our efficiency ratio.

I think we're very optimistic that we can see that right at 50 in the current year.

Now, TSYS had another solid year, as well.

I think everybody's tempted to refer to this challenging environment, but TSYS grew net income 20.5%.

Their EPS was 64 cents, up from 53 cents.

Their revenues increased over 7% for the year.

If you exclude the reimbursables or the pass-throughs, as we feel like is most appropriate to do to get the true indicator, our total revenues were up 724 million, or an increase of 9.5%.

They had what they considered and we considered a very good Christmas season.

Transactions increased by 6.7% last year even though I think we had five or six fewer shopping days after Thanksgiving than we had had in the previous year.

In addition to what we consider to be great internal growth, TSYS had some significant new customer growth, as well, during the year.

And you're familiar with the new agreement with Sears-Canada to process more than 8 million retail accounts.

And another highlight of the year was a renewal of our seven-year agreement with Canadian Tire Financial Services in Canada.

I'm sure if you listen to the conference call yesterday from TSYS, you know that they continue to remain optimistic about additional signings in 2003 and optimistic about the size of signings that would give us the kind of growth rates that we're used to historically at TSYS.

We obviously are affirming or reaffirming our expectation that we announced at the end of the third quarter, that the TSYS outlook for this year is 12 to 15% net income growth and that the Synovus outlook is 10 to 14% EPS growth.

We expect to be within those ranges, and we think that on a comparable basis to 2002, and on a comparable basis to all the other players in the sector, that that will be exceptional performance.

I fully expect that we'll be in here next year at the same time feeling very, very good.

I want to remind you of the analogy that I gave you at the end of last quarter's conference call, and then pull back into your recollection a comment that we made a year or two or three ago.

And that is that if there's ever a company that ought to be doing good, it's Synovus.

We've worked, we've invested, we've re-engineered, we've repositioned, we've redeployed, we have outsourced our data processing, we've built a new business segment in financial management services, we have a decentralized system of banking that is winning in the marketplace in almost every bank we own.

We have a team that has just been recognized again by "Fortune" as the ninth best place to work in America.

That's six years in a row, where we're been near the top of that list.

We have a lot of momentum.

We're not oblivious to the environment.

We're not oblivious to the economy.

We're not oblivious to the events of last September, or two September ago.

We're not oblivious to the threats of war that are floating around.

But we're not staggering under the weight and the burden of those events.

We're doing our job.

We're coming to work.

We're pushing the plow.

We are, I think, effectively managing this company to the extent that we're excited about what we did, and we're optimistic about the future.

And so, I hope you don't think we got into the cocktail hour early, but that's our sense at this meeting.

I have this wonderful staff of great professionals sitting around this table, and we'd all just love to pause now and field your questions.

Thank you, Mr. Blanchard.

Ladies and gentlemen, the floor is now open for questions.

If you have any questions or comments, please press the numbers 1 followed by 4 on your touch tone telephone at this time.

Touching 1, 4 a second time will remove you from the queue should your question be answered.

And with ask that you pick up your hands set if listening on speaker phone for optimum sound quality.

Please pause for a moment while we poll for questions.

Your first question is coming from Nancy Bush.

State your affiliation and then pose your question.

NAB Research.

How are you, Jim?

Nancy, welcome back.

Thank you.

A couple of questions.

Number 1, for Tommy, if I add the four quarters, I get $1.23.

You reported $1.21.

Tell me where I'm going wrong.

If you do the four-digit rounded in the four quarters, you get $1.212.

But clearly, with the four decimal places in the four quarters, it adds to $1.21.

Okay, thanks.

Secondly, Jim, on this 8.7 million credit that you added to non-accrual in the fourth quarter, can you give us any color on that, what was, quote, special about it, and why you feel there won't be other $8.7 million credits that pop up in coming quarters?

Yes.

I'm going to ask Mark Holladay, Nancy, if he would handle that question.

Thank you.

That particular credit was a CNI credit.

It is located in our Atlanta region.

It's a waste management company.

Basically, that company started having some deterioration in terms of losses in the late second and early third quarter.

We felt like the company was headed for potentially some very significant problems.

We had a consultant go into the company to do a viability study on the company.

They basically came back and said, yes, this company is viable.

Since then, the company has hired the consultant.

They've stopped the bleeding in this company.

And the company is growing positively at this time.

We do, however, think it may take us three or four quarters for this company to return to a level to where we feel like we could take it off a non-accrual status.

But the momentum is positive and we're optimistic about it.

The next question you had is why don't we think we're going to have more $8.7 million credits.

And you know, nobody can guarantee that with all certainty.

But really, Nancy, a couple reasons.

We talked to all of our bankers.

I spent a lot of time with them.

They're all very optimistic about their credit quality numbers.

The second reason is that we've had some of these non-performing assets on our books now for a year to up to two years, and I am extremely optimistic about the turnover of those assets.

And basically, even if we do have a few potential problems that could come on, I think that if you look at what our potential is to remove some of those non-performing loans off the books versus what we feel like may be coming on the books, we've got a very positive outlook.

Okay.

While I've got you on the subject of credit quality, could you just address the whole issue of the quality of the commercial real estate portfolios, the status -- if that has been an issue of some concern for some people related to your stock.

Yeah.

We talked before about our commercial portfolio.

And a big piece of our commercial portfolio is in owner occupied properties.

Those are the owners who run their own businesses.

They're professionals, lawyers, those kind of things.

It does look like it inflates our CRE somewhat.

That is one thing.

Again, another big component of our portfolio is in this one-to-four-family category.

That's basically in the home building area.

We've always been active in that area.

We've always been able to perform well in that area.

We are speculative.

Contract homes are in balance and we think we have the right mix there to be able to manage that.

We don't see a slowdown in that activity.

Early on in this year we could see some slowing later on in the year.

The factors we're looking at certainly are market absorption, which we do, I think, a very good job of in each one of our markets.

And then we're also looking at interest rates and what the potential is for those to increase.

If you look at our non-performing loans, only 24% of our total non-performing loans are in the CRE category, which we think is an outstanding number.

If you look at our history going back to 1988, our chargeoffs in that category have been less than 10 basis points every year with the exception of two.

And I think our highest chargeoff ratio in that category has been about 18 basis points.

We also have, I believe, extremely good underwriting discipline in our market.

We don't underwrite loans to the currents rate.

We underwrite them to rates that could escalate.

And that portfolio will hold up well.

And we're a relationship-oriented bank.

We're not out there doing project loans for people coming into the market who want to do things.

These are sound, well-developed customer relationships who have lots of multiple products with us.

And we know these people well and we know how they respond in crunches, and feel good about that, as well.

Same thing when you look at our past dues in the CRE category, our 30-day past dues.

Our CRE category is lower than the other categories, as well.

So, at this point we don't see a problem out there.

All right.

Thank you very much.

I thank you, Nancy.

Your next question is coming from Bob Patton.

Please state your affiliation and pose your question.

UBS Warburg.

Hey, Jim, how are you doing?

We're seeing a lot of banks apply a lot of different tax strategies.

You guys still run one the higher tax lines in the group.

That's one question.

And then, if you could give me, Jim, your forecast for the margin.

Thanks, Bob.

Tommy, do you want to take the tax, and then I'll try to tell you what we think about the margin?

Sure.

Good afternoon, Bob.

The -- I believe your question was -- had to do with our tax strategies and, I guess, tax rates on the year.

Exactly, Tommy.

Are you seeing a lot of banks with revenue growth slowing getting a lot more aggressive in terms of using state tax strategies and so forth to lower the tax rate.

I was just curious what your thinking along those lines was.

We've been as aggressive as we can on the tax line.

It's the second largest expense in the company, second only to people expense.

And we are doing what we can on that front.

But it's things like historic tax credits, job credits, a credit related to our child care center and research, the R & E credit.

It's nothing exotic, nothing high risk, just ordinary business.

But we are trying to manage that just like any other expense.

So, it will be consistent with what we've seen in the past.

And then on the margin, I think the general consensus around the country is that we ought to see some short-term interest rates rising probably during the second half of 2003.

And assuming that that happens, and we believe that that is the most likely scenario, we expect our margin is going to be -- well, I'm going to say in the range of 450 to 460.

We're certainly optimistic it will be more towards the 460.

But that's our outlook.

If we don't get any rate increase, it will be somewhat lower.

But we're expecting it, Bob, and have it kind of built into our model at this point.

Okay.

One last question, Jim.

In terms of the reserve, with the loan growth you guys have been having, what kind of reserve -- are you anticipating letting that down, or are you going to keep it at the 138 level?

Well, 138 isn't a magic number.

I think the coverage of chargeoffs is a magic number.

Past due trends is a magic number.

Non-performers obviously is a factor.

But non-performers can go up on a single loan like it did this past quarter and won't cause us to maybe feel that we have to adjust it upward.

So, it's a combination of a lot of things.

And as you know, it's a judgment call.

And some of the new rules that are being kicked around are trying to eliminate some of the judgment that takes place.

We think that would be a terrible mistake.

In fact, we're just about in everything that comes along, Soar Baines, Axley kind of stuff, Basil kind of stuff, anything that wants to eliminate management's judgment and discretion, we think basically that's a mistake.

When you try to go to rules rather than judgment, you're going to, we think, weaken the credibility of earnings rather than strengthen it, as that seems to be the intention.

So, you know, to just answer you specifically, assuming we see very little change or some improvement, I'd say expect it to be around where it is.

Thanks, Jimmy.

And your next question is coming from Chris Maranak.

Please state your affiliation and then pose your question.

Yes, Sun Trust Robinson-Humphrey.

Hey, Jim.

A question for you just to follow up on Mark's explanation on the commercial real estate.

Can you give us a little more color just about the general granularity of the commercial portfolio, even if you looked beyond CRE?

What would be the average loan size?

How much would the portfolio be, sort of in larger chunks, however you would delineate it?

Yeah, I can try and do that.

The average loan size in a real estate portfolio is about $315,000, -- 350,000.

I think I told you 315.

We've gone back and assessed what the average size is, and that's what we've come up with.

If you break down our commercial real estate portfolio through more of a granularity process, you'll see that it's pretty well diversified as a percent of our loans, our development loans.

Our residential development loans make up 3.3% of our portfolio.

Our commercial development loans make up 2.5%.

One of the areas I talked to you about where we're a little heavier is in the one-to-four-family category.

We're 8.3% in that category.

And then multi-family is 2.1%.

Office buildings are 4.3%.

Our hotel sector is 4.5% P. Our shopping center sector is 3.5%.

Our owner occupied is 12%.

Then we have a land acquisition category that's 2.7%.

Those are acquisitions that are in excess of one year before any major activity would occur with that, and then we have an "other" property category that's 6.8%.

And it's made up of charitable organizations.

It's made up of recreational real estate.

It's made up of convenience stores and car dealerships and just a broader category of other items that we have not segmented out down to a smaller level at this point.

Okay.

Great.

That's helpful.

And I guess, Jim, perhaps for Tommy, on the securities portfolio, the [indiscernible] book tends to be lower and lower percentage of earning assets.

Will we see that reverse any time soon, or are you waiting for a different rate environments to consider that?

Chris, buying securities right now isn't really attractive.

We're waiting it out the best we can, and I really wouldn't expect to see that reverse until you see a little bit of play on the longer end of the curve.

Okay.

Fair enough.

Great.

Thank you.

Thank you, Chris.

Your next question is coming from David George.

Please state your affiliation and go ahead with your question.

A.G. Edwards.

Hi, Jim.

Hey, Dave.

A couple questions for you.

With respect to capital, and I apologize for asking this question.

I know you're asked it a lot and I know you referred to it at the outset.

You are sitting on as much capital, 10.8% equity to assets, the biggest number that I can remember for you guys.

Have there been any additional discussions about a potential buy back?

And I've got one other question with respect to the service charge on deposit line.

Your deposit growth year-over-year was in the mid-teens, 16, 17%, yet the fee number was about 1%, essentially flat both sequentially and year-over-year.

I was just wondering if you could comment on those two things.

Thank you.

Obviously, with the capital account at 2 billion-plus and 10.72, the possibility of a stock buyback, and particularly in the kind of environment we're in, is the subject of discussion constantly.

It's a tricky area for me to comment on.

And as you recall, in the last conference call I basically said that the board obviously considers these issues.

And if we ever concluded that we were gonna do such a thing, that the -- that we would obviously announce it promptly.

We haven't announced it, which means we haven't decided to do it.

But it's a good question and it's one that's always on the top of the table and particularly now in this environment.

Now, on the other question --

I'll be glad to answer that question.

The year-over-year service charge number certainly looks more in line.

Within the quarter we had some adjustments in the fourth quarter of last year, some catchup entries and service charges that helped it a little bit.

And I guess, as we've been more aggressive in acquiring these deposits, we've had some products out there that don't have quite as rich a margin from a service charge standpoint on them would be another part of the fourth quarter answer.

Okay.

That's helpful.

Thank you very much, guys.

Thank you.

Your next question is coming from Jacqueline Reeves.

Please state your affiliation, then pose your question.

Miss Reeves, your line is now live.

Do you have a question?

Most of my questions have been answered.

But with respect to the securities portfolio again, could you give some color with respect to what the reinvestment rate opportunities are out there that you have been able to take a look at or would be willing to take a look at, even though it might be limited?

Jackie, it's a bad time on the securities side of the house for everybody.

They're rolling off at 5 and 3/4, and we're putting them back on in loan 3s at the 3.75, 3.50.

Typically, agencies are steering away from the mortgage backs.

And we're just waiting for that to sweeten a little more later in the year before we make any sort of bold moves.

Thank you very much.

Thank you, Jackie.

Your next question is coming from Jason Momen.

Please state your affiliation and pose your question.

From Farrell Capital Management.

A question for you on the real estate portfolio.

Could you give some color on the loan-to-value ratios, both on new loans and on prior loans and when was the last time you re-evaluated the coverages you had on those?

And then could you talk about what you guys are doing or seeing in the form of mini-perms.

And then finally, a third question, if you could, talk about why the loan demand has been so strong and sort of where you see it maintaining strength that gives you confidence to grow it in 2003.

Yeah, I'm trying to remember those three questions.

LTV, mini-perms and loan demand.

Yeah, the loan-to-value scenarios, basically that's a constant ongoing process.

In any stack we have a group of [inaudible] teams that go in and do analysis on those larger loans in our portfolio.

We have not seen any real deterioration in the loan-to-value ratios in our real estate portfolio.

The only softness that we have seen, we have seen a little softness in the hotel sector.

But the cash flows and the cash flow coverage is still holding up.

And we don't have any -- we don't have any delinquencies at this time in that sector, either.

In terms of our underwriting, you know, we require significant cash down in that sector.

Normally 30% is our minimum target if we are going to do a hotel loan.

And significant net worth and other cash flow resources to repay debt.

Our typical underwriting on any real estate project is a minimum of 75% loan to value.

And again, we don't make project loans.

We require personal guarantees on all our debt.

And we feel, again, extremely good.

I do not have a consolidated view on all those loan-to-value ratios with me, but I can tell you things are holding up well.

The other thing is, as I think I mentioned, as well, when we underwrite a loan, we don't underwrite it at currents rates.

We underwrite it at much higher rates to insure that those cash flow coverages are going to be there.

And typically, today, we would be using a 7.5 or 8% rate.

When we underwrite a loan, our logic behind that typically has been if rates do go up and they start accelerating, we think at that point, inflation would catch up with us and we'd begin to see some revenue growth as well as support for that.

We are conservative underwriters.

We also underwrite to the securitization market.

We have that avenue.

We are seeing much more significant activity in that area.

Our customers are starting to look at the fact that rates probably are at their lowest levels, and they're taking advantage of our service to underwrite to permanent market.

And we've closed in the permanent market this last quarter probably close to $100 million worth of permanent mortgages that we were holding in our own portfolio.

And we expect to see more of that.

So, you know, I'm not expecting the same amount of real estate growth in 2003 that we've had in 2001, but I still would expect a good growth in 2003.

The mini-perms, we do hold credit for our relationships, and we will do it in a mini-perm fashion.

Typically we will make an offering for some of our customers.

Those mini-perms typically have balloons on them.

And normally there are three-year maturities on those mini-perms.

And we do that for a few reasons.

One is we like the income.

Number two, we do have the vehicle to sell those customers permanent mortgages, and we want our customers using us to finds their permanent mortgages and not somebody else.

And then, I think I answered the loan demands question.

We're still looking for, you know -- I'm estimating our growth next year will be in the 12% range.

I'd just add one comment on that, that we have said over and over again, and I think most of you have kind of sunk your teeth into this and really understand it as a fact, not just kind of the company line.

But you have to really start at the whole importance that we place here in Synovus on the people that make up our team: the kind of workplace environment that would cause "Fortune" to name us six years in a row as one of the best places to work; and then, as important, the decentralized chartered approach that we have to our banks, where we have CEOs that have really assembled exceptional, very professional teams.

And they are empowered to make deals to serve customers.

And the truth is in many cases they just out-gun and out-hustle and out-work, and probably as much as anything else, because of their capability and their empowerment, they come to the table with the answers so much quicker, that we win more than our share of the deals.

And again, I think that's a reality that is a great strength for Synovus.

Would that satisfy your questions on those?

Do you have another one?

No, no.

That's very good.

Thank you.

Your next question is a follow-up from Chris Maranak.

Sir, please go ahead.

I meant to ask earlier for a marker from Jim.

Did the $8.5 million MPA get charged down or is that something put on MPA status?

It's been put on non-accrual status.

And we have a reserve set aside at this point in time in the event that we would have to do that.

But as I mentioned, the momentum of this credit is termed, and we are optimistic at this point.

Thank you.

Very good.

Thank you.

If there will be any remaining questions or comments, please press the numbers 1 followed by 4 on your touch tone telephone at this time.

Thank you.

Your next question is coming from Gerard Cronin.

Please announce your affiliation and place your question.

Yes, Sander & Neil Good afternoon.

Just a quick question.

The 10 to 14% growth target that you have for 2003, does that include any branch sale gains?

If so, I know it's difficult to quantify, but if you could give us an idea about that?

And secondly, if this is a question you want to handle offline, that would be fine.

I'll just give you a call.

But I'm curious if you could give a breakdown of the total expenses between the bank and the processing company.

I'm not sure that we can do the second part without getting offline and digging a little.

Let me handle the first.

There is no expected branch sales or bank sales in the year 2003.

So, that number doesn't include any.

It's not anticipated.

It is, as you know, an ongoing redeployment.

But I really believe at this point, I feel pretty safe in telling you that there will be no sales that occur in the current period.

Very good.

Thank you.

Thank you, Gerry.

If there may be any final questions or comments, please press the numbers 1, then 4, on your touch tone phone.

Thank you.

And we do have a follow-up question coming from Jacqueline Reeves.

Jim, I just wanted to clarify that the -- in your opening comments the $15.3 million branch gain was technically offset by other items throughout the year.

But that was the only one in the fourth quarter, and there's no offsetting items to that?

No, you really have to look at it for the year as a whole.

Okay.

And really, the -- Jackie, as you know, you can look at this three or four different ways.

You can look at it year to year and there's little or no increase because of the gains that we took last year.

You can look at it based on the investments that we continue to make in the new, faster growing markets, and there's no gains.

And you can look at it, really, in 2002 in a third way.

And that's kind of offsetting the extraordinary expenses that we had earlier in the year.

So, in all three categories it really didn't add anything.

You know, and I might mention this just for clarification.

We had a situation yesterday with TSYS where they had some currency valuations and some tax credits, and one of the analysts concluded that they really didn't make their number.

And it's just unfortunate that they made that conclusion because the truth is they paid employee incentives that would not have been paid but for those expenses.

And a fourth way of looking at this is we did the same thing.

We didn't add any dollars because of branch sales.

That would not be under any set of circumstances.

And I thought it might be important for y'all to know that we have a $13 million pool of money that we've put in our pension plan.

We have a $15 million pool of money that we want to put in our profit sharing plan.

We have a $7 million pool of money that we've put in our 401-K.

We have about $6 million worth of money that we can pay in bonuses.

That's $40 million that if we make our 15%-plus, can fund 40 million.

That's what our people get.

And they know that if we make it, they get it.

And if we don't make it, they don't get it.

And so, basically we expensed an equivalent amount of money for incentives that we probably would not have expensed without the branch sales.

So, you can look at it any way, but it would be impossible to come to the conclusion that without the branch sales we don't make the money, because if nothing else, we wouldn't have paid the incentives.

Is that clear, Jackie?

Yes, it is.

Yes, thank you.

Thank you.

Thank you.

And your next question is coming from Nancy Bush.

Please state your affiliation and pose your question.

I'm wondering, can you comment on how you're doing in the asset management and sort of asset gathering business around Atlanta, and what the plans are for '03 as far as expanding that business?

Well, just generally let me tell you that we're very happy with the growth rates.

The three worst years in the market since the Great Depression, I guess.

We had a goal of $1 billion in new assets under management, and we've gained over a billion and a half.

Our total revenues grew 15% in financial management services.

The Atlanta office of North Park is steadily growing and bringing in customers.

It's a three or four-year investment for us that won't turn profitable immediately, but I think Sonny and the financial management services team and all of us feel like we are really gaining momentum.

It's going to be our third pillar of strength, and it already strategically is strengthening dramatically the relationships that we enjoy with our core banking customers.

Any anecdotal evidence or other that you wish to share about how you're doing maybe against the Wachovia combination, the new Wachovia?

Not particularly them.

But I think everyone knows when you go through a merger, when you do something as monumental as they've done and others have done, there's fallout, there's turbulence.

I don't see any more opportunity in their case than as generally we've seen for 15 years, Nancy.

But it's definitely a positive for us.

In spite of a bad market, it's a good time for us to be building a business in Atlanta and other areas where we're succeeding, I think, on schedule with our financial management services activities.

Thank you.

Thank you.

Thank you.

And if there will be any final questions, please indicate so now by pressing 1, then 4, on your touch tone telephone.

Okay, Mr. Blanchard, I'm not showing any remaining questions.

Do you have any close comments that you'd like to finish up this call?

Just in closing, thank you for your questions.

Thank you for your continuing interest in Synovus and TSYS.

We got a lot of constituencies that we're working hard to make proud.

You people on this call are one of those constituencies.

And I know your arm's lengths, and I know you're looking over our shoulder on behalf of others.

But your friendship and your courtesies and your continuing interest and enthusiasm and, quite frankly, encouragement is most appreciated.

We're excited about 2003 and we're expecting good things to happen.

So, thank you for being on our call.

And we'll be seeing you, I'm sure, soon.

Thanks and good day.

Thank you, ladies and gentlemen.

That does conclude the 4th quarter 2002 Synovus earnings conference call.

You may disconnect your phone lines at this time and have a great day.

Thank you for your participation.