Synovus Financial Corp (SNV) 2008 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to fourth quarter earnings 2008 conference call.

(Operator Instructions).

It is now my pleasure to turn the floor over to your host, Richard Anthony.

Sir, the floor is yours.

Thank you very much, and I want to welcome each of you to our fourth quarter conference call.

We distributed our press release about 30 minutes ago, so I'm confident that you have that in your hands.

We will not cover everything that you saw in there, but I will make some remarks initially, followed by Tommy Prescott, our CFO, and Fred Green, our Chief Operating Officer.

First, a reminder that we will be making forward-looking statements that are subject to risks and uncertainties, and there are factors that could cause our results to differ from those statements, and they are set forth in our public reports filed with the SEC.

What I would like to do in starting the meeting is to, first of all, acknowledge and make reference to the reported net loss for the quarter, which excluding the good will impairment charge was $195 million.

It is pretty obvious that we took a conservative stance in the quarter in a couple of respects.

The two big items that would get your attention would be, first of all, the good will impairment charge, and secondly, the large provision that we had pre-announced actually early in the month of January.

Just a couple of things to say about the good will impairment.

We came into this period with a balance sheet that had about $483 million in good will.

The general industry conditions, the decline in market caps for our banking companies have resulted in impairments throughout a number of regional banks as we noticed in recent earnings releases.

We are left with a very nominal amount of good will, some $40 million on our balance sheet, and actually started with probably a lower percentage of good will in relation to the size of our Company, than many others who have been in the acquisition business.

At any rate, we will have a cleaner balance sheet without the good will attached to it and that charge was announced earlier today.

Secondly, on the provision, we had stated around the second of January that we expected a much larger than normal provision, somewhere in the range of $350 million.

The number as the results were finalized was $364 million.

I have in front of me some information that really breaks this $364 million in a couple of different ways, and I want to share this information with you.

First of all, of the $364 million, some $231 million would be related to charge-offs that were taken in the quarter.

Now of that $230 million, $168 million relates to impairments on loans that have moved into the non-accrual category.

There were other charge-offs that really were more of the normal write downs that you would see, totaling some $62 million.

Now, one side of the pie chart has to do with charge-offs and the impact that those charge-offs have on the provision, and that's what I just covered.

The other part of the pie chart that I'm looking at has to do more exclusively with reserve building.

You noticed in the press release that our loan loss reserve has increased to 2.14% of loans, compared to 1.68% at the end of the third quarter.

Now in this reserve building component, we took a targeted look at the Atlanta construction and development portfolio.

We reassessed it.

We clearly had a conservative lean indicating aggressive action, and $47 million of the $133 million in reserve build was related to Atlanta migration into higher risk grades.

In most cases, these loans are accruing loans but moved into higher risk grades.

Now, we had migration that took place, negative migration, in other parts of the portfolio.

The non-Atlanta segment of this migration resulted in a $51 million portion of the provision.

So here you see we got $98 million related to migration, about half in Atlanta and about half in other parts of the portfolio.

We took a conservative lean in our reserve factors, our unallocated reserve was increased, in the quarter, and we made an additional provision based upon qualitative factors that given the deterioration that continued in the economy and in the residential real estate markets, required reserve building.

So these so called reserve factors ended up with about a $25 million additional provision.

Then finally, there was about $11 million in reserve building tied to loans that went into non-accrual that we did not have time to do an impairment.

We just couldn't get the updated values.

So when that happens, we feel like the provision needs to be taking that in consideration, so we put specific reserves on those properties until they can be impaired.

So in summary, the total provision of $364 million was broken down in that manner.

The last thing I will say about this conservative lean and reassessment that was done in December is that we had some other real estate write downs of about $25 million that was in the P&L, related to other properties that we're holding in other real estate.

I hope that helps, and I felt like that would give you more color on the provision that took place in that recent quarter.

I want to shift now to what I think is a real positive that continues in our Company, deposit gathering and liquidity.

Our year-over-year core deposit growth was 5.1%, at the end of December, and we had on a linked quarter basis, an 11.1% increase.

Tommy will add a little to this, but he will mention the success we continue to have in our shared CD and money market account program.

Unique, no other Company has the capability we have with that particular product.

Moving to the subject of capital, I believe that we have a continued source of strength here, as I'm confident you all know we did receive our capital purchase program investment from the US Treasury on December 19th.

The amount was $968 million.

I believe that this program will continue to do its part to generate confidence in our banking system.

Certainly in our Company, it drives our capital ratios which already were good and strong, up to higher levels.

We believe that it will make possible for us good gains and liquidity and deposit gathering going forward, which in turn, will stimulate our ability to satisfy customer needs and demands for credit.

I do want to mention our capital ratios.

First, our Tier 1 ratio is at 11.2% at the end of the year.

The total risk base capital ratio is 14.5%.

And, the tangible common equity to asset ratio is 7.9%, and Tommy will add a little bit to what I have said there about those ratios.

Moving to the 5th topic that I wanted to cover here at the outset, our asset disposition strategy.

We continue to get even better organized around this approach.

We have centralized the team, an accountability to manage the disposition of problem assets in the Company.

We have created additional infrastructure.

The leadership group is identified.

They are working with our individual banks as we make decisions that will take into consideration the assets that are better able to be converted into cash than others, so that we have a priority system and are able to rank our assets in terms of disposition priority.

We have created, just in recent weeks, a new subsidiary within Synovus, to house some of the nonperforming assets.

We have named the entity, Broadway Asset Management.

We have essentially sold or transferred $500 million in nonperforming assets from seven banks, which will relieve some of the pressure on our banks with the highest levels of MPA's.

This will create a better, more productive focus for our bankers in those banks.

Even though they will continue to contribute to problem resolution, it's still within the charters themselves in those instances, creates a better set of credit metrics and will better allow our bankers to be bankers.

Finally, I want to mention Project Optimus.

We have continued to share with the public, the progress that is underway as we implement the ideas, the 700 ideas that were converted into good ideas under Project Optimus.

We are on schedule, on track, to meet the expectations that we set for run rates at the end of the fourth quarter.

We are moving now into 2009.

The executive team, we call it our Steering Committee, meets every month to go over, in detail, progress under Project Optimus.

Project Optimus has brought into our Company a more disciplined way of life.

As we make decisions, as we evolve as a Company, as we work toward continuous improvement, we clearly have centralized some of the areas we would have found difficult to convert in the past.

Our Company and the leadership realize that as a $35 billion organization we need to operate in a more sensible and basically efficient manner.

So, I continue to be very pleased with the shifts that are taking place in our Company as a result of these good ideas that came from Project Optimus.

So, that gets us started.

I hope that helps some, at a high level, understand where we are in our progress in Synovus.

We will now shift to Tommy, who will give some insight on the balance sheet, and he will hand off the program to Fred after that.

Thank you, Richard, and just a little more color on the balance sheet and margin, and maybe a capital comment also.

In this environment, loan growth is slow as you would expect.

In the environment, the deposit story is very good.

During the quarter, we continued the momentum we saw through the third quarter, and we increased our core deposits during the fourth quarter compared to third quarter, $605 million, or 11.1% linked quarter growth rate.

Some of the drivers there were government deposits, and also had good experience with our shared products for the year.

Of course, core deposits up 5.1% or $1.1 billion.

On the share product side, we ended the year in the quarter at $1.74 billion in shared products.

That represented $850 million growth in the fourth quarter.

The majority of that was actually earlier in the quarter, probably at the height of the customer concerns that were in the marketplace about the banking industry in general, that we were bringing in a lot of deposits from outside, in particular, at that time.

The deposit momentum is actually carried into the early part of 2009.

We seen a good January, so far, with some good growth in total core deposits.

That great deposit growth and the government preferred stock investment that closed on December 19th and was funded on December 19th, together have created a tremendous amount of liquidity in our Company.

I know you've seen that on the balance sheet.

Some of that will be there for a short-term basis as we bring down the brokerage CDs over the next 45 days or so, to absorb this new liquidity.

Make a couple of comments on the margin.

The margin for the quarter was 3.20.

Was 3.42, one quarter ago, so we are down 22 basis points.

You got to remember that the prime rate started this quarter at 5% and ended at 3.25%, so that 175 basis points is a pretty big amount to swallow.

The earning asset yields during the quarter were down 37 basis points, while the cost of funds was down 15 basis points.

The actual negative carry on non-performing assets went up about 3 basis points during that period.

So, those are the drivers that brought the margin down to a lower level during the quarter.

Just kind of looking out a little bit on the margin, we would expect to see some additional pressure in the early part of the first quarter as we absorb the rate cuts that were made, particularly the ones late or in the middle part of December.

With the 75 basis point cut that occurred there, we will have to absorb that on the asset pricing side.

The things that will help the margin, going forward, are the great job that our folks are doing with loan pricing.

The message is crisp and clear out on the front line that in this rate environment and in this credit environment that loan pricing has to be one of great discipline.

And, the loans that we on-boarded or renewed in December, were at a lower 5% and with variable rate loans, at least half of them have floors in it, so our front line guys are doing a good job in pricing loans.

Additionally, we will have an opportunity to reprice deposits going forward.

Some of the CDs that were rolled off during the year were priced, or coming up on anniversaries of some really high pricing during 2008, and I think we will have some opportunity there to improve the cost of funding some.

Then we will be bringing the brokered CDs down, somewhere in the neighborhood with excess liquidity, and on any given day it varies, but let's call it a little over $1 billion, possibly up to a $1.5 billion.

That funding in that balance sheet being a little bit swollen up, because of the recent receipt of the US Treasury investment.

That excess liquidity being there at year end actually took our tangible capital ratio, which is very good at the 7.91 reported level, but when you take in the deleveraging that we will do with the reduction of the brokered CDs, it will bring that ratio up to north of 8% as we ease into the first quarter.

So that's just a couple of high level comments I wanted to make, and I want to turn it over to Fred now for the credit side.

Thank you, Tommy.

Richard mentioned a number of our credit metrics, and I just want to share a little more detail on several of them.

Our credit issues, for the most part, continue to be contained by product type, and that's a residential construction and development category, and pretty much by geography as well, primarily Atlanta as was referenced in the release and as Richard commented on.

What I want to do is spend a little bit of time talking about other components of our portfolio that are holding up real well, and share that with you.

Let me begin with our retail or our consumer loans.

As I think everyone knows, we've strategically not built an indirect auto book, so any deterioration nationally within those type portfolios we will not see as a result of really not having any.

The primary retail loans we have though are HELOC and credit cards, so I'll touch on those just a second.

Our HELOC portfolio is $1.7 billion, is very healthy and it continues to perform well.

The non-performing loans in that portfolio ended the year at .47%.

30 days in greater past dues at 1.04%, have been tracking it close to that level throughout the year.

Charge-offs for the quarter were at 1.09% and .68% percent for the year.

So again, that portfolio is holding up very well.

Credit cards, again another category that has shown deterioration throughout our industry, is holding up well here at Synovus.

First off, our balance is relatively small at 295 million, but the credit metrics are important.

Some we are proud of Our 30 day past dues and that category of our portfolio is 3.21%.

Our charge-offs for the quarter were at 4.4%, and again, on a annual basis, at 3.95%.

I think both of these particular retail or consumer portfolios are doing as well as they are compared to maybe the industry averages and it's really a result of our origination.

These products are sold as companion products to existing relationships.

They are customers that we know and have banked for a while.

None are sold out of market or through non-relationship sources like brokers.

So again, these are our customers that we've had for a while and they continue to perform very well.

Let me move up into the commercial real estate category.

I want to start with a comment that we made last quarter about our variable rate demand notes.

Those that were listening in will recall that we talked about the variable rate demand notes.

They are, basically, the term facilities that we underwrite and back with our letter of credits.

They have been sold, primarily, to the money market mutual funds group, and with the liquidity issues that came into play in the industry, in the early third quarter, a number of those purchasers chose not to continue the purchase, and we were seeing some of those variable rate demand notes put back to us since we issued the letter of credit.

The reason I mentioned that is they are existing credit exposure.

They are customers that are our best customers.

They're underwritten in conventional rates.

We've had some pretty aggressive stress testing there.

But as of this quarter end, we had about $400 million in net funding as a result of these variable rate demand notes, and they distort some of the growth rates that are in tables.

That's why I really wanted to bring that out.

I'm really just going to comment on two, and would be happy to field questions on any of the others, and maybe in more details on these, but the first one I will comment on is hotels.

In the tables, the annualized growth rate was 73.4%.

Within that category, there was $79.2 million in bond puts, and there was also some coding reclassification in that category of $29 million.

That leaves true growth in that area of $49.8 million, or 23.9%.

Almost all of that, in fact all of it, is related to construction draws on projects that are underway.

Again, that product type is holding up very well.

The nonperforming loan ratio at year end was .97.

The 30 day and over past dues were 0.

The quarter net charge-offs were 0, and on a year-to-date basis, we got a .01% recovery.

The next item I wanted to talk about is shopping centers.

We recognize that shopping centers are looked at, and we certainly look at them, as a possible next wave of deterioration.

Again, the growth rate that was expressed in the tables was impacted by the puts, again the credits that we've issued but issued letters of credits on.

Of the growth in that category, $38.9 million, were related to the bond puts, and that also adds some coating reclassifications of $23 million.

So in essence, there was no net growth in that one area.

By the way, the coding reclassifications came from the commercial development in other investment property categories that either show run off or single digit growth rates as a result.

Some credit metrics on shopping centers, our nonperforming loan ratio at quarter end was .36.

Our 30 day and over past due is .76.

Our quarter-to-date charge-off ratio .16, and year-to-date .10.

Again, I point those out to explain some of the growth, but also how well they are holding up.

Let me move now to the traditional CNI category.

Commercial strategy that we've talked about for the last couple of years is alive and well, and we are proud of the progress we are making there.

The portfolio is holding up well there.

The nonperforming ratio in this category is 1.58%.

30 day and over past dues at .73%.

Quarter-to-date charge-offs at 1.68%.

I point out that that charge-off rate is not a systemic issue.

We had, I guess, about $10 million associated with the charge-off on an earlier mentioned nonperforming loan to a customer in the automobile business, and about another $10 million was associated with three leases, one in the trucking business and the other two were related to private airplanes.

So again, those systemic issues there.

I will just move on to the the area we are having the greatest stress in and that's our residential portfolio, add a little bit to it, and then see what questions we might have.

Of our total $5.1 billion in that portfolio, our Atlanta market has $1.2 billion of that amount.

Of the $1.2 billion in Atlanta, we still have approximately $1 billion in performing loans, and the balance in nonperforming.

Richard mentioned a number of very aggressive steps we took in the fourth quarter, specifically building reserves in Atlanta.

We've had aggressive write downs there in the fourth quarter.

We've taken our impairment marks.

We are planning for even greater liquidation results in the early part of 2009, and as a result, have taken liquidation charges to accommodate those plans and what we would anticipate yielding during those type sales .

I will end it with that, and we will be happy to ask Mark Holladay or Kevin Howard and others, to join me if there are any specific questions you might have.

Richard, I'll turn it back over to

Thank you Fred and Tommy.

I would like to open the floor, now, up for questions from the audience.

Thank you ladies and gentlemen, the floor is now open for questions.

(Operator Instructions).

Our first question comes from Nancy Bush, your line is live.

Good afternoon, guys.

Hey, Nancy.

If I missed it, I'm sorry.

Did you address the Island at all, and the size of the exposures, et cetera, et cetera?

It's been much independent the news lately, I think down in Atlanta.

It has, and I'm going to ask Fred to make a comment there.

Nancy, what we say about Sea Island is they are our largest customer.

I wont get into the net amount of our loan there, but what I will say is that loan is a performing loan.

We have very frequent interaction with the Company and the principles, because of the size of the loan and that being our largest customer.

As I said, it is a performing loan.

Has that loan been restructured?

Is that part of its remaining performing?

Because my understanding is that Sea Island, the development, is in not great shape.

They are in, as you know, the resort business.

That's an area that's suffering throughout the country.

That loan has not been restructured.

We are talking to them about opportunities to do that, but at this point it has not been restructured and is current as well.

And the reference Fred is making would have to do with a longer term.

The Company is performing within the maturities that have been established and with all the covenants and payment requirements, but if possible, we would like to work out a longer term maturity and those conversations are going on.

There are other bank partners in with us, and the activity levels have been pretty good down there.

I was down there last weekend and was impressed with what I saw.

It's good to hear that you are supporting your local credits, Richard.

Absolutely.

I asked Kelly King today, on the BB&T call, a question about doing auctions in Atlanta and I know that had been your plan before.

As I recall, it was about $125 million a quarter.

If you could update us on that?

Kelly said the conditions for auctions there were pretty tough.

That they had done some small things there and the discounts were just prohibitive.

So, if you could just speak to that?

Nancy, in the third quarter, we had mentioned to you that we took a charge-down to do an auction in the fourth quarter.

We carried out the auction, it came in where we anticipated it to come.

We got some really good partners that we do business with.

The end users that we are seeing are actually ends users buying these properties, the mortgage rates are dropping, the availability of financing and affordability is going up.

And right now, we have not seen that.

We had a successful fourth quarter auction so we still feel comfortable with where we are.

To restate our approach on this asset disposition strategy, unless something changes we will continue to have fairly frequent auctions.

I believe the next is scheduled for late February, and we will have one that follows it.

We have had four so far, primarily houses, most in Atlanta.

We have gotten, and this is based upon the original loan amount, we have gotten proceeds basically in to 63% to 70% of original loan amount on those auctions.

But our feeling is that with houses, we just can't justify not pushing them out as quickly as possible.

Anybody would know that you got maintenance, taxes and vandalism risks, and so we just feel that we have to keep moving those, and so far, the auctions have been the best vehicle, not the only vehicle, but one of the best certainly for bulk sales.

Is the $125 million per quarter still an operative number?

Yes.

I'm looking at Mark and Kevin, and the plan is still for that.

Yes.

That would be correct.

Thank you.

Our next question is from Tony Davis, your line is live.

Good afternoon, everyone.

Hey, Tony.

I guess you did sell $500 million to Broadway in the quarter.

Fred, I wondered what the mark on that was, and if you could maybe give us the percentage of accumulative mark from original book on the $920 million in MPLs you got now?

This is sort of another way of asking what Richard just said.

Tony, the sale or transfer to Broadway was obviously an internal transfer.

And I will ask Mark, again, to share the cumulative Mark question.

Okay.

Tony, in our nonperforming loan category, there is about $700 plus million in our total nonperforming assets.

That number is a little higher, but our cumulative mark on that is right at 25%.

In the BAM structure, we did as Richard mentioned, took an additional mark from ORE and nonperforming loans of about $50 million during the quarter.

Look for P&L provision to position us in the first quarter to move those assets that we were previously talking about.

Okay.

Tony, we have a few houses that went into the BAM subsidiary, but a lot of assets in there are lots and some land, and what that means is that some of these assets are going to be held a little longer than some of those that we feel must be moved out quickly.

As you can imagine, it's a real difficult time to be selling developed lots.

So we would be holding there in a position to perhaps look two, maybe three years, down the road.

Not for all of these assets, but for some at the bottom end of the scale.

Richard, of that 500, how much would be lots, do you think?

It's a high percentage, but what percentage of the 500 would be lots.

This is Kevin Howard, Tony.

It's going to be probably in the 60%, 65% of those assets.

Okay.

Residential.

Okay.

Tommy, to you.

I just wonder if you could you talk about the recent Shelf filing and you're thinking about the common equity levels that might prompt you to look at activating that?

Tony, the Shelf filing really surrounded the US government preferred investment and just getting that out there.

And actually, as previously stated, tangible common equity ratio is very sound and probably among one of the best in the business right now, and gives us a lot of avenues and opportunities down the road as things evolve and you one day get away from this US government investment, but right now, doesn't mean anymore than just that.

Okay.

One final thing to you,Tommy.

The most recent trends down there in deposit pricing, it has been hot and furious, hasn't it?

Yes, and we are hoping for relief on that one day, and obviously pricing is down but relative to all the indices, there is still some renegade pricing out there in the marketplace.

Local market CDs still tend to be over brokered CDs, so we are just having to fight it out best we can on the deposit side, and think that's a very big wild card in 2009 as to how that piece of the margin flows with regard to competitive pricing.

Thank you.

Thank you.

Our next question is from Adam Barkstrom, your line is live.

Good afternoon.

Adam.

Hope you're all well.

Tommy, I was just curious, kind of shift gears a little bit, talk about the TARP funding and give us a sense of how you guys are kind of thinking about, we saw some trusts results today, and we saw some fairly noticeable levering up on the investment securities side, whereas you guys have kept it somewhat flat.

Curious as to what your thoughts are on that side of the balance sheet, especially given that your commentary on letting some of the brokered CDs wind down.

What are we thinking on levering up the TARP funds?

Adam, the guys you just mentioned had a little longer to work with the US government capital.

We actually had, within the reporting period we are talking about, we've had it for seven days.

So, we really haven't had time to fully deploy it.

We have put some additional capital in the banks and expect that to strengthen the banks and allow them to, over time, leverage it.

We are using some of the excess liquidity short-term to bleed off some of the brokered CDs, and we will look for opportunities to deploy the capital in a profitable way very very soon, but these guys have been at it for a little bit longer than we have in terms of possession of the dollars.

That's a fair point.

I was asking more what your tendency might be going out two to one, or three to one.

You had any kind of thought along those lines?

Adam, we are first of all, using this to offset, actually getting rid of the broker CDs is more profitable than the investment you'd make now.

So, that's the short-term strategy, and we will be looking longer term as things unfold.

Okay.

Fair enough.

Tommy, could you help us out with the one piece of sort of the run rate for the preferred cost.

The dividend piece is pretty easy with the warrant dilution.

Any way you could help us out with sort of what the run rate is for the cost?

How you guys are looking at that on a quarterly basis?

Yes, I can give you a pretty good estimate of it after the discount has been applied against the preferred stock for the warrants and has to be amortized.

I would estimate that cost to be, I guess probably the easiest way to do it is to describe it as it pushes the yield on that.

While the cash cost is about 5%, the yield on the dividends is about 7% with that amortization of the discount.

Okay.

That's very helpful.

Last thing, Tommy.c Could you give us what your thoughts are, looking into 2009 on the tax rate?

It will be a little more normal in 2009.

It obviously, Adam, got out of whack with the good will write off.

Mid-30s, right now, is a good number.

Okay.

Thank you, gentlemen.

Thanks, Adam

Our next question is from Kevin Fitzsimmons, your line is live.

Good afternoon, everyone.

Just wanted to clarify a couple of things.

First, on the margin, your comments, I just want to make sure I heard you right, that you are going to see additional pressure in first quarter, and then hopefully, kind of stable to improving after that because of the repricing on CDs.

I want to make sure I heard that right.

And secondly, on credit costs.

Obviously, this was a quarter where as you said Richard, you took some very conservative steps and aggressive steps, and when we look at the run rate going forward, I know it's tough to talk about credit in terms of a run rate, but should we be looking at in first quarter, not using this quarter, maybe looking at something between this quarter and the third quarter as something more realistic, given the aggressive steps you took this quarter?

Kevin, on that last point, we would say yes, we would not encourage anybody to extend the run rate that you saw in the fourth quarter, out into the first quarter of 2009.

That would not be what we expect.

Kevin, this is Tommy.

On the margin question, you really got it right.

We would expect additional pressure on the top line of the net interest income with our variable rate loans absorbing the additional hits that will occur from the 75 basis point decline that happened mid month in December.

Those will have to play themselves out, but the offsets will be the brokered CDs coming off, the great job our folks are doing on front line loan pricing, and also the opportunities we will have fairly early and throughout the quarter on the CD repricing.

Based on what you're seeing now, I know we've only had days of January, but based on what you are seeing, would you expect the magnitude of compression to be less in first quarter versus fourth?

We're not prepared to take it quite that far, Kevin.

Okay.

Appreciate it.

Thanks.

Thank you, Kevin

(Operator Instructions).

Our next question comes from Christopher Marinac, your line is live.

Good afternoon.

I wanted to ask about seller financing and to the extent you are using that to move problem assets from the books, and is it something that you would prefer to do or not do in the coming year?

We will get you an answer.

It comes up frequently, and Chris, we think it ought to be a tool, and we've used it some.

I don't have the particulars, but we in recent conversations, I continue to bring it up because I think we need to give our bankers all the tools they think are necessary.

So Kevin, do you want to comment further on that?

Yes, we have just started picking up the pace there.

In Atlanta and south Florida, in particularly along the coast, when necessary, we've done some of it on houses where we are making sure that the customer is a qualifying customer.

We don't have a big program out there, but we have done some of that in those particular areas.

Great.

Just wanted to follow up about outside of Atlanta, perhaps in the Carolinas, have you seen any deterioration, whether it's on construction or in the CRE front, your bank in Columbia or other markets in north or South Carolina that you operate in?

Chris, this is Fred green.

Our bank in the Carolinas is one bank charter, it's headquartered in South Carolina, but it's throughout the state.

The softness we have seen in South Carolina has been on the coast, almost exclusively in the Myrtle Beach area, and it's in some of the multi-family there.

Again, just to share some high level information with you, the nonperforming asset ratio in South Carolina ended the year at 1.68 which was really our lowest by state, and the net charge-off ratio in South Carolina for the quarter was .96%, again performing nicely.

The issues there, as I said, are pretty much centered on the coast, and really, in the Myrtle Beach area.

Great, Fred, thanks so much.

Thank you, Chris.

Our final question comes from Jennifer Demba, your line is live.

Thank you, good afternoon.

Question on the Atlanta residential construction development portfolio.

Fred, thanks for all the detail on that.

You said about 16% is on nonperforming status.

Can you give us the net charge-off level in the fourth quarter for that, as well as the 30 days past due?

We can.

Is your question specific to Atlanta?

Hold on just one moment.

Sure.

Jennifer, this is Kevin.

Hi, Kevin.

I think your question wanted to stress the Atlanta portfolio, the past dues?

Yes.

Nonperforming and the charge-offs.

As Fred already mentioned, we have $240 million of nonperforming loans in the one to four family properties.

We had about $64 million in the residential, part of our past dues were in that one to four family in Atlanta.

Our total past dues, as you know, they were down for the quarter.

Atlanta represented also a slight decrease from a quarter-to-quarter, their total past dues, about $117 million in total past dues in the Atlanta area bank.

Okay.

The net charge-offs for the quarter?

The net charge-offs in the Atlanta area in the one to four in residential development was around $62 million.

When you have been selling lots, what kind of prices have you been getting as a percentage of loan value?

Jennifer, we haven't sold a lot of our lots.

We are holding the lots.

Of course, our strategy has been to move the houses first.

We have sold some of those, probably 40% to 50% range on some of the lots we have sold.

We put a few lots in one of the auctions we held, I think the one in October.

It may have been about a $1 million of lots, just kind of sampling the market.

I think we came out in the 40%, off the top of my head, somewhere in the 40% off of our book in that portfolio.

Okay.

Thank you.

Ladies and gentlemen, there are no further questions in queue.

Do you have any closing comments you'd like to finish with?

Thank you for joining us on this call.

I would like to leave you with this thought.

Think of our Company's approach as being conservative, pro active and aggressive.

We're, in my opinion, doing the right things, particularly as relates to credit and managing our way through this part of the cycle.

I feel like, as painful as it has been, 2008 was a year of change and progress.

We are building a foundation for the future of this Company that will serve us well.

We are not out of the cycle, so 2009 will be tough, but I am optimistic that we have gotten even better organized around this approach, and I leave you with the capital thought.

This tangible capital to asset ratio continues to stand out.

It will serve us well, and we will be playing offense before too long.

Not quite yet, but stay tuned, we will be.

Thanks a lot.

We will be in touch.

Thank you, ladies and gentlemen.

That does conclude today's teleconference call.

You may disconnect you line at this time, and have a wonderful day.

Thank you for your participation.