Synovus Financial Corp (SNV) 2004 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Synovus second-quarter earnings conference call. (OPERATOR INSTRUCTIONS).

It is now my pleasure to turn the floor over to your host, Jim Blanchard, CEO.

Sir, you may begin.

Thank you very much, and good afternoon, everybody.

I want to tell you that we are in a little bit of a celebratory mood around here, not just because of a good Board meeting and a good quarterly report but quite frankly, the celebration has been going on since June 30th and it accelerated somewhat on July 7th and it's really continuing right through the day.

On June 30th, of course we know that the Fed raised their discount rate by -- or the Fed funds rate by 25 basis points and then on July 7th, we got the good news from our friends at J.P.

Morgan Chase-Bank One that TSYS had been selected by them for their processing option.

These are big events in our history but probably the most important reason for celebration is that we believe these two events literally have eliminated from our landscape 2 of the biggest impediments or barriers or ceilings, if you will, that we have had to deal with.

As all of you know, the margin compression that we and others have experienced, certainly is not corrected with one move by the Fed.

But we do think the bell has rung and the movement of interest rates has turned back upward, and over time because of our positioning, we are I think in an excellent position to benefit from that significantly over time.

And then of course, the other barrier was the concern about TSYS' growth that was ameliorated significantly when Bank One selected us a little over a year ago, but then the concern I think came back in when the J.P.

Morgan Chase acquisition of Bank One was announced.

So in a lot of ways, the 2 clouds or barriers or impediments or ceilings or whatever you would call them, in fact, I would tell you the only 2 as far as we are concerned, are removed, they are not in the road ahead, and as far as we are concerned, it represents a great time for us to really move back toward maximizing our performance and I think the results that we achieve today and going forward.

I want to talk about the quarter briefly.

I have Phil Tomlinson here along with the other Synovus and TSYS executives and I've asked him to come and give us some particular color on the J.P.

Morgan Chase announcement, as well as what he has described as the momentum that has built behind TSYS going forward from here.

During the afternoon, I will be making forward-looking statements that are subject, obviously, to risks and uncertainties.

There are factors that could cause our results to differ materially from these forward-looking statements and they are all set forth in our public reports filed with the SEC.

I hope you have seen our announcement this morning.

We are excited about strong financial results for the quarter.

Key drivers being excellent credit quality, strong loan growth, along with stability in our net interest margin.

In addition, TSYS hit the numbers that were expected from them and in addition, again, to the tremendous news about their selection by J.P.

Morgan Chase to provide their credit card processing solutions.

For the quarter, our net income was 105 million, up 9.1 percent.

Diluted EPS was 34 cents, up 7.7 percent over the second quarter of 2003.

In the first half of 2004, our net income was 209 million, up 12.4 percent.

Diluted EPS, 68 cents, up 11.8 compared to the same period a year ago.

Return on assets was 186 for the quarter, 189 for the six months and that's compared to 188 and 189, respectively, for the same periods a year ago.

Return on equity was 17.6 percent for the quarter, 17.8 percent for the first 6 months as compared to 1781 and 1754 for the same periods of '03.

Shareholders' equity at quarter-end was 2.5 billion, representing 10.6 percent of assets.

As we anticipated and have predicted to you, the net interest margin was stable on a linked-quarter basis at 4.24 percent.

And the recent move by the Fee to increase short-term interest rates by 25 basis points is expected to have a modest positive impact on our net interest margin for the remainder of the year.

We estimate it at 4 to 5 basis points on an ongoing basis.

Frankly, we are very encouraged by the market's expectation for additional increases in short-term rates.

I know there's speculation about that, some are saying that the futures market is not necessarily calling for the next increase.

Frankly, we expect additional increases.

The gap between the market rates and the 125 Fed funds rate is dangerous from an accommodating standpoint.

We think the Fed is going to move to close that gap.

However, you will recall we are not dependent on that for our guidance.

We expect more increases but our guidance really does not call for increases for the remainder of the year.

Our net interest income for the quarter was 210 million, that's 7.7 million increase from the first quarter.

And the growth in net interest income was again positively impacted by our continued strong loan growth.

On the deposit side, we reported deposits growing 11.9 percent over last year and if you exclude acquisitions and divestitures, those deposits grew by 9.1 percent over last year.

Our total core deposits, consisting of total deposits excluding CDs over 100,000 grew at 12.03 over the prior year.

If you exclude acquisitions and divestitures, core deposits grew by 8.9 percent over the prior year.

And the growth was led by strong increases in both demand deposits and money market accounts with increases of 11.8 percent and 21 percent, respectively.

On a sequential-quarter basis, our total deposits grew 31 percent annualized.

If you exclude the impact of the Memphis acquisition, the sequential quarter deposit growth was 23 percent annualized.

Average core deposits, excluding acquisitions and divestitures, increased 12.96 annualized for the second quarter as compared to the first.

And this growth was also led by demand deposits and money market accounts.

As far as loans are concerned, they increased 14.2 percent compared to the prior year.

If you exclude acquisitions and divestitures, the year-over-year loan growth was 11.6 percent.

Our year-to-date loan growth is in line with our expectations of 10 to 12 percent for the year.

And as we've mentioned numerous times, we believe our decentralized structure gives us a real edge on continuing to grow not only our loans but also our deposits and other fee income items robustly.

Credit quality continued to be excellent.

Our non-performing asset ratio declined for the third quarter in a row, ending the quarter at 0.52 percent, the lowest level in 12 quarters.

A year ago, the NPA ratio was 0.73 percent.

Past-due levels remain extremely favorable with past dues at only 0.61 percent and our greater than 90-day past dues at 0.15 percent of total loans.

Net charge-off ratio for the second quarter was 0.22 percent.

And for the first 6 months, net charge-offs are at 0.19 compared to 0.34 for the same period last year.

The provision for loan losses was 17.5 million compared to 16.6 million for the second quarter.

For the 6 months, the provision was 33 million compared to 36.9 million for the same period a year ago.

Lower net charge-offs this year have impacted the provision levels versus 2003 levels.

For the first 6 months, the provision covered net charge-offs by 2 times compared to 1.4 times for the same period a year ago.

The allowance for total -- for loan losses -- ended the quarter at 138 percent of total loans compared to 139 at March 31, 2004.

The allowance, by the way, covers non-performing loans at 368 percent and that's up from 337 percent at the end of the previous quarter.

For the Financial Services side of our business, reported non-interest income was flat for the quarter and up 10.3 percent for the first six months.

If you exclude the impact of acquisitions, divestitures, as well as mortgage revenues, then the non-interest income growth is a very robust 19.4 percent for the quarter and 16.4 percent for the first 6 months of 2004.

I mentioned mortgage revenues in that exclusion because they significantly impacted these comparisons.

Mortgage revenues were down 68 percent or $12 million for the quarter and 63 percent or $21 million year-to-date compared to the same period a year ago.

We are really making progress on our fee income aspirations to move from around 29 percent up to a target of 35 percent.

Service charges on deposits, which was the largest single component of our Financial Services fee income, are up 17.8 percent for the quarter and 16.5 percent for the year.

If you exclude the impact of acquisitions and divestitures, the service charges on deposits grew by 18 percent for the quarter and 14 percent for the first 6 months of 2004.

Frankly, this is a result of better products, better pricing and continued deposit growth.

Credit card fees are up 19.2 percent for the quarter and 12.8 percent for the year-to-date.

On the Financial Management Services side of the house, our revenues increased 8 percent for the quarter and 10 percent for the first 6 months of the year.

If you exclude the impact of divestitures, and we have had 2 in Quincy and the St. Pete Trust portfolios, the increase was even stronger at 14.1 for the quarter and 13.8 for the first 6 months.

We continue to be very optimistic about the momentum that we are experiencing in our Financial Management Services business.

We have added one billion -- 1.15 billion -- in new assets during the first half of the year.

And we now have right at 15 billion in assets under management.

On the G&A expense side, we continue to see our expenses tracking our plan, at 4.1 percent for the quarter.

We basically are right on target on the expense side, continuing our decline as far as our efficiency ratio and basically a big item there is our strategy in '04 to hold our Financial Services segment without any expansion in total headcount.

In fact, it's decreased by 39 cents, year-end '03.

Let me give you some brief updates on new markets.

Our Savannah branch opened in March of 2004.

We estimate to have 40 million in loan production by year-end there, and we have an excellent team on the ground in what is one of Georgia's most attractive, high-growth markets.

Our Jacksonville operation opened on May 10, 2004.

They've already added 25 million in total assets.

We expect to be at 75 million by year-end.

It's our first de novo community bank that we've launched at Synovus, although our friends in Alabama have certainly had that experience and gave us a high level of confidence that this could be very successful.

We think Jacksonville is one of the best markets in the Southeast.

We have a great team on the ground there and we expect to have a very strong presence in that market.

And then we completed the acquisition in Memphis of Trust One Bank on June 1, 2004.

We added 490 million in assets.

As you know, this is our second venture into the Tennessee market and we believe it's going to prove to be another big success for Synovus.

On the TSYS side, let me just say before I turn it over to Phil that yesterday they announced their second-quarter results.

Net income was up 4.6 percent for the quarter.

Diluted EPS at 8 cents was up 4.6.

Revenues for the quarter, excluding reimbursables, were up 15.1 percent.

In the first half of '04, net income was 68 million, up 3.6 percent for the same period and diluted EPS was 35 percent, all in line with expectations.

And TSYS is truly building momentum for the rest of this year and next year.

And I want to ask Phil if he would just to make some comments to give you a little feel for their excitement about where they are and where they are going.

Thank you, Jimmy, and I appreciate the opportunity to be here.

If you look back through the first of the year and you may not have heard this story, but I had in an earlier conference call had said that TSYS was sort of in this -- we found ourselves -- in this perfect storm situation.

We had lost about 90 percent of our Mexican business, which was very profitable.

We lost it to acquisitions, Bank of America had bought Fleet.

We were not sure where that was heading.

Royal Bank of Scotland had bought Peoples and we were not sure where that was heading.

Vital, our merchant acquiring company that we are in a 50-50 joint venture with Visa, was struggling at that point.

Citi had bought Sears and we were not sure where that was going either.

And of course, the really big one that really shook us was of course J.P.

Morgan Chase buying Bank One.

We were working very diligently on that conversion.

Earlier in the year, we came out and we gave a guidance for the year of 5 to 7 percent for 2004, which is the lowest guidance we had ever given in the history of TSYS.

But in an effort to try and show the investment world that we were not setting a new norm for TSYS, we did come back and say that the guidance for 2005, which is not like us to go out that far, but we would be at least in the 10 to 15 percent range.

I think we have weathered that storm and we are feeing very good about where we are at today.

And Jimmy was talking about momentum, and if I can I would like to paint you a picture about the momentum that we think is going on in the card processing business today.

And I describe this sort of like a huge wave of momentum and so if you can, keep that in your mind.

But if you go back 10 years ago at TSYS to 1994, we were processing 39 million accounts.

If you look at us today, we're processing 287 million accounts.

And in the past several months, Royal Bank of Scotland has decided that we will process the Peoples' business and we will move that onto TSYS in September of this year.

We have also been given the green light on the Fleet business, which is 12 million accounts and we are planning on a March '05 conversion of that.

The Citi-Sears decision is still up in the air and we don't have a decision there.

And I would think probably a decision would be made on that this quarter.

But we feel -- we remain -- optimistic about that business, retaining that and possibly picking up some more of their private-label business.

Of course, we signed the Bank One contract last year and we are in the process of converting those accounts in the third and fourth quarter of this year.

And then of course, the J. P. Morgan Chase decision on top of that, which took a big if out of our business, there's not a lot of real color I can give you on that other than what we have already said.

We are working diligently on a definitive agreement as we speak and hopefully we're going have that completed and signed within the next 2, 3, 4 weeks, but certainly in the very near future.

Now when you keep thinking about what's going on at TSYS, we have an organic growth with our current customers of somewhere usually between the 5 and 10 percent per year, and that adds another 20 to 30 million accounts to our portfolio.

And then if you will think about the international side of this business with me and we have had great success with our business in the U.K. and in Ireland, we think we have wonderful prospects on the European continent and it's going to be really important for us to make some headway on the European continent with some large banks or large issuers over there.

But if you go back to 1998, '99, less than 5 percent of our business was international.

Today at year-end '03, it was 23 percent in the international side.

Then we look at these affiliates that we have, our Enhancement Service Company, which is a loyalty company, TDM, total debt management, which is a collection and bankruptcy management company, ProCard, which is a company that provides specialized reporting for our commercial card business, they are all doing very well.

We think that Vital has certainly come out of the woods and they have had over a 30 percent growth in this last quarter and we are very excited about where that's at.

Frankly, we were worried about NPC, National Processing Company, which was owned by National City.

That is a number one customer of Vital.

And of course they were bought by Bank of America, as you know; and Bank of America is our number 2 customer at Vital.

So we feel very good that those 2 have come together and we don't believe that either one of them will be going anywhere.

So we are working very hard to make sure that we can pull those contracts together.

Then on top of that, and I am just building more layers on this wave of momentum, if you will, but on top of that, we have introduced new products like profit, which is a work management system, an online work management system that we are selling to our current customers as fast as we can install it.

We can also sell it outside of the card processing business to most anyone.

If you add profit then the potential that we believe we have with some acquisitions possibly in the prepaid and stored value business, we have some initiatives going on in the health-care products business.

If you start adding all this up, and just the accounts that I have talked about add up to 436 million accounts.

So if you stop and think about what we have got in the queue or the pipeline, we believe that in the next 12 to 24 months, we will go from 287 million accounts to somewhere in the 425 to 450 range, I mean we think that is pretty much of a given.

We believe that in the card business, that is a market shift of 20 percent, which we are at today to about 37 percent, but certainly in the 35 to 40 percent range.

We have said that we are not ready to declare that we are the largest in the card processing business.

I think it's just not our style.

We are going to let the industry decide when that time is appropriate.

But we certainly think we are approaching that and getting closer.

And I think it is just a validation of what we have been saying for the past 10 years in the way that we have been doing business.

We are winning in the marketplace with service, technology and relationships and we are re- investing in people and technology and we think that we are on this huge wave of momentum and we think that there is a significant change in the card processing business, not only in the U.S. but on a global basis.

And we have made more progress in the last 2 years than we have made in many years before that combined.

So that's the point that I was trying to get across yesterday and I hope you can envision that today.

And Jimmy, with that, I'm going to turn it back over to you and you can go from there.

Thank you.

Phil, thank you, and I just want to conclude my remarks before we take questions by saying that in our press release this morning, we have confirmed our guidance of 8 to 10 percent for 2004.

Yesterday, TSYS confirmed theirs for '04 of 5 to 7 percent and 10 to 15 percent next year.

You'll recall that when they issued their guidance for '04, they came right back to '05 because they wanted to make sure that there was a recognition that their year in '04 represented, as Phil described, the perfect storm and not a new norm.

And so really, the 2 barriers that we talk about removing, the interest rate turn and the big success as represented by the J. P. Morgan Chase, I want everyone that's listening to know that this is not like a, just kicking an extra point.

I mean we've still got to drive the ball down the field and score touchdowns in these 2 areas as well as other areas.

We have got to execute.

We have got to lead effectively.

We have got to do 1,000 things right to make it all come out just right.

But I hope you sense the excitement that we feel that these 2 impediments or barriers or ceilings, if you will, are we think effectively removed.

And it looks like to us that the optimism we've had for 20 years about the growth potential of TSYS is well founded, has been throughout with the appropriate recognition of the concern that some of you and others have felt over the last year or so and that our optimism about our ability to run a bank that can perform No. 1, No. 2 or No. 3 in a pretty vibrant sector, which is what I think commercial banking is, based on our decentralized model, our strong leadership at the local level, our ability to create relationships because of a customer covenant that just is a higher standard of care and concern than most of our competitors, all of that's I think coming together for a pretty good cause for optimism from here going forward for the rest of this year and beyond.

So that explains the celebration taking place around Synovus.

Let me stop there and I will be happy to try to respond to any of your questions.

(OPERATOR INSTRUCTIONS).

Kevin Fitzsimmons, Sandler O'Neill.

Jim, I was wondering if you could talk a little bit about commercial real estate growth?

More than a few companies this quarter have really reported flattish or even sequentially down loan growth in that area, particularly due to paydowns that have happened this quarter.

And just looking at your balances at least at the year-end balances, I wasn't able to really, to see that.

And I was wondering if you did encounter that and if not, why do you think you guys really didn't?

Thanks.

Let me ask Mark Holladay if he would to respond to that particular question.

I will answer that specifically, but I might want to just talk about growth overall and that way, we can see if anybody else has any questions about it, we can get through it.

I just wanted you to be aware that our quarterly growth was consistent really throughout our Company, something we were really glad to see.

If you look at the actual percentage growth in Atlanta and look at it in our coastal areas and all of our other banks, the pace of growth was very close to the same rate.

The dollar growth in Atlanta, we grew about $129 million.

Our coastal banks grew -- that's 7 banks -- our coastal banks grew about 78 million.

And then our remaining banks grew about 540 million, and that made up that $745 million in growth.

The largest dollar growth above 50 million really occurred in (inaudible) by the banks, that's Alpharetta, they grew about 92 million, that's an Atlanta bank.

Our Birmingham bank grew at about 91 million.

Columbus grew about a $90 million pace.

And our South Carolina bank grew at about a $61 million pace.

That's 45 percent of the growth and that made up about, really, 41 percent of our loan balances; those banks make that up.

So the pace in growth was consistent with the size of the banks.

Our overall product type growth, our consumer growth, we grew at about an 11.8 percent pace.

Our C&I growth was about 7.2; and our commercial real estate really grew at about a 23 percent pace on an annualized basis.

And if you really look to where the growth occurred, part of the real estate is what we call commercial and industrial real estate.

We've got about $151 million.

We are very focused on customers who are wonderful family builders.

We are still seeing very good growth there.

Our 1 to 4 family-related growth was 203 million.

And then our investment properties, which are made up of hotels, multi-family, office and shopping centers grew at about 144 million.

And our CRE growth was very consistent across the Company as well, not just overall growth but consistent growth.

And that's a function, again, of our focus.

We have been in that business a whole long time.

We are very relationship-oriented, not project-oriented, and we think we are better at that than most banks.

I mean that's what we believe and that's what we have been able to show.

Okay.

So you really did not see that phenomenon, it sounds like (multiple speakers) --

No, we did not see it.

Nancy Bush, NAB Research.

Jim, could you just speak generally to the sort of competitive environment in pricing, both loans and profits right now?

We're hearing a lot about pricing being particularly aggressive in the Southeast.

Could you just speak to that?

Yes, I think that's accurate.

In an interest rate environment like this, competitive environment that has been building, everybody has been trying to figure out how to maintain their normal kind of operating results.

And so I think pricing has been tough.

I don't think we have seen the crazy stuff this time that you see, have seen, in some cycles.

But I think, Nancy, it's a fair statement to say that some of the banks that have been consolidating that maybe have had some disruptions over the last year or 2 or 3 are getting it together.

So I would say the competitive environment out there is probably as tough as it's been, but at a level that's not destructive.

And you know in that kind of environment, I think we can shine because we can grow and win customers and do good.

And you know, we believe strongly that it's because of the way we're organized, the kind of people we are able to put on the ground being with customers.

I would be one to vote that this is probably as tough as it's been.

And I don't see that easing up any time real soon.

My second question, Jim, would be on these new branches, particularly in Savannah and Jacksonville.

How are you staffing them?

Are you drawing people from the competition to staff these branches or how are you doing it?

Because you're getting some pretty good growth numbers pretty quickly, so I assume that it's somebody who is already familiar with the market.

Yes, I would say in every instance, it's people that have been there in that market, no customers, have a following, have a team that they can pull together quickly.

As you well know, we can't put a person on the ground in charge of a bank that is in a learning mode.

We can't have on-the-job training.

When you have this decentralized approach where they are empowered to win in the marketplace, they've got to be professionals and they have got to be seasoned and they have got to have experience.

So in every instance of these expansions, we got well-qualified, highly trained, experienced people that have come out of those markets.

Do you think that -- what do you think your pace of these kinds of openings will be over the next couple of years, Jim?

Frankly, I think what we're seeing there is probably a little bit of a flurry.

I don't expect the pace to -- I don't expect us to do 2 and 3 and 4 of these a year like we seem to have done just recently.

We started the de novo.

We got a branch in Savannah and Chattanooga.

We got a new bank that's just come in in Memphis.

I would think, Nancy, that our pace will look more like it's looked over the last 5 years than the way it's looked in the last 6 to 8 months.

Sort of 2 a year maybe?

Yes, that would be a good target.

There's obviously no mathematical approach to it.

It's opportunistic, it's where opportunity presents itself with you know, the right folks, the right market, the right opportunity.

Great, thank you.

Chris Marinac, FIG Partners.

I wanted to ask you to elaborate a little bit on what Phil Tomlinson was telling us about, the shift of market share with TSYS.

And to what extent more longer-term do you think that that shift of market share gives you pricing power or will that ever happen?

I realize that's not going to happen upfront as you integrate, but can you address that at all?

You know, I dream of pricing power, Chris!

I wake up at night begging for it!

We have this wonderful technology advantage.

And as you know, in the last 100 head-to-head competitions, our record is incredible.

The success of this last 2 or 3 or 4 that Phil mentioned and the hoped-for success with the big one that remains, the Citi-Sears other private-label card business at Citi, all of that is indicative I think of the momentum that has been building.

It's certainly at of crescendo right now.

I agree with you, I don't believe we will see any immediate pricing power.

I don't think dealing with these big guys and that is basically who you deal with in the card business, we will ever have just totaling elasticity as far as being able to raise prices.

But I do think that we will have some flexibility and some strength and some ability beyond say what we have had over the last 10 years and I am optimistic that a market share shift like that, it will be a positive thing for us in that respect.

But all kidding aside, I don't look for the biggest banks and the biggest issuers in the world to be a lay-down ever for TSYS.

Second separate question is, can you address I guess how Sarbanes-Oxley is impacting you in terms of your plan for compliance by the end of the year?

And do you have your hands around how you handle that with a decentralized structure and affiliate structure you have?

Yes, we had a very robust conversation about that at our board meeting today.

I think the punch line is that we are very series of governance, about Sarbanes-Oxley, about SOX 404.

We have gone to considerable length to make sure that we are doing the things that we need to do.

We have tried to keep it within reason within common sense.

One of the criticism I think that is now coming forth out of the literature is that some organizations are spending more time on process than they are on running the business.

We don't want to make that mistake.

But for example, Section 404, you have got to get it right.

You can't miss that one.

And I think our attitude about Sarbanes-Oxley and governance is just like it's always been with the FDIC, with the Fed, with the OCC, with the state examiners, that we are bankers, we are used to being regulated.

Our rule is we live by the law, the regulation, the rule.

We don't get ahead in our organization by complaining about the regulators and the burden of regulation.

So we are doing what we need to do and trying to keep it within reason and not give it a life of its own that takes our eye off the ball.

Great Jim.

Thanks a lot.

John Pandtle, Raymond James.

My question relates to the better visibility that you are seeing now at TSYS on some of these accounts.

How if at all does it affect your acquisition appetite on the bank side going forward?

Well, John, as you know, we have tried to maintain about a 30 percent contribution from TSYS.

We think that is kind of optimum.

Frankly, it would not bother us if it jumped up to 35 because their growth rate accelerated back to say more historical norms.

But it does give us a little flexibility and a little dry powder.

And I don't mean that to say expect a wave of activity beyond our norm.

I tried to answer that in Nancy's question; but it certainly is a positive for us on the bank expansion side when we see accelerating growth rates on the TSYS side.

If I could as a follow-up, separately the TSYS guidance of 10 to 15 percent, what number of accounts is that predicated on at the end of '05?

Is that predicated on the 425 to 450 million, or is it a smaller number?

Yes, obviously, that was guidance given well before the very positive developments of the last month or 2.

The difficulty, frankly, about the guidance is that the contract with J.P.

Morgan Chase is still in negotiation.

And for example, the conversion date is not determined at this point.

If that's an early conversion date next year, that would mean one thing.

If it is a later conversion date, it would mean another.

If it's split part next year and part into '06, that's even a third.

So any speculation at this point about the guidance and any revision of it is just premature.

And so I can assure you that if and when those facts fall into place, we will make the appropriate disclosure based on what the facts are at the time.

Jason Goldberg, Lehman Brothers.

A couple questions, I think, Jim, you mentioned, you think the most recent Fed increase adds 4 to 5 basis points to net interest margin?

And if that is correct, is that kind of how we should think about it every time the Fed hikes 25 bips, you kind of pick up an incremental 5 basis points, or that's not the right way?

Well that's not necessarily the right way, but it would not be far from being off.

I think the truth is, Jason, we have to look at it at the time.

We have to look at it in the time frame in which it happens.

The balance sheet configuration could shift, the mix of the loans could shift.

There's a lot of moving parts.

So we are obviously positioned well with an asset sensitive balance sheet and I think each increase that occurs certainly, the next 1, were it to occur in August would be pretty close to this 1.

But it would be hard to extrapolate that out much past the next one.

Okay.

And then, secondly, I know you don't compete against any of these guys in all your markets but certainly (indiscernible) in some of your markets, but with union planners, national commerce and SouthTrust all going by the wayside, anything you guys are doing in particular to try to capitalize on any potential disruption?

Well, I think that's the way we've lived our life for 30 years, in particular since the mid-80s when the Southern compact was passed.

Our game is to capitalize on disruption.

We benefit from it.

It seems like every time, gosh, when all that started, we were a 2 to $3 billion bank.

Today we are in excess of 23 billion.

And that's taking small bites.

That's not any big mergers of equals or anything.

And even the small bites of the acquisitions add a point, point and a half of our growth rate, historically.

The rest of it is one customer at a time, picking them up from the competition, being first on the scene with a new arrival.

And so I would say that we will benefit from any disruption, any merger that takes place.

But again, it's hard to say that that's the bulk of what we do.

The bulk of what we do, as you know, is organize ourselves kind of to serve locally, develop relationships, be in the know, have influential people drawn to us and really grow internally.

Sounds good.

And then just lastly, you continue to build capital. (Indiscernible) were your thoughts are on share repurchase?

Well you know we have had a share repurchase.

It is on the shelf.

I don't know that we are anxious to get back into that.

We like having extra capital.

It is a very nice strength with our regulatory friends.

It gives you all kinds of options.

We have a pretty high payout on our dividend, which we built over the last 3 or 4 or 5 years.

It turned out to be pretty timely when the dividend taxation changed as favorably as it did.

And so I think sitting on a big old pocketbook feels pretty good to us.

Fair enough.

Thanks.

Good quarter.

Sir, there does appear to be no further questions in queue.

Do you have any closing comments you would like to finish with?

I would just like to thank all of you again for your interest.

I know that it is not like we have been struggling for the last couple or 3 years.

We have put up good numbers and been in the top 5 or 6 every year in all the indicators.

But we have not been at the top.

That's where we like to be.

That's where we think we can go at this point now that the interest rate environment looks like it will return to more normal and certainly the TSYS environment is exciting and the momentum is definitely there.

We are looking to continue to improve this company.

We are learning how to run a company at the highest levels of quality and excellence.

We really have an aspiration to be if not among the finest companies in the financial services industry.

And so this gives us a chance to be as good as we can possibly be and over the next couple, 3 years, that's certainly what we hope to attain.

So you all keep in touch.

Thank you for your interest and we will be seeing all of you individually between now and our next call.

Thanks, a lot, and have a good evening.

Thank you, ladies and gentlemen.

This does conclude today's teleconference.

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