Synovus Financial Corp (SNV) 2009 Q4 法說會逐字稿

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

(Operator Instructions) It is now my pleasure to turn the floor over to your hoast, Pat Reynolds.

Sir, the floor is yours.

Thank you Dan.

Thank you all for joining in our call.

Today for the fourth quarter results.

You can view the slides and also access the press release on our website, www.Synovus.com.

Today, I will be followed by Richard Anthony, our CEO, who will give you an overview of the quarter and then Tommy Prescott, our CFO, will talk about the financials.

Kevin Howard will talk about the credit metrics for the quarter and then we'll have a summary comment by Richard as a follow on.

Before we get started, I need to remind you about our comments -- that our comments may include forward-looking statements, these statements are subject to risks and uncertainties, and actual results could vary materially.

We list these factors that might cause results to differ materially if our press release and in the SEC filings, which are available on our website.

Further, we do not intend to update any forward-looking statements to reflect circumstances or events that occur after the date that the statements are made.

We disclaim any responsibility to do so during the call, we will discuss non-GAAP financial measures in talking about the companys'' performance and you can find a reconciliation of these measures to GAAP financial measures in the appendix of the presentation.

Finally Synovus is not responsible for and does not edit or guarantee the accuracy of our earnings, teleconference transcript provided by third parties.

The only authorized webcasts -- live webcasts, are located on our website.

And now I'll turn it over to Richard?

Richard?

Pat, thank you very much.

I want to add my welcome to each of you.

And thanks for joining us this afternoon for our earnings conference call.

You received, just earlier, the press release.

I hope you've had a chance to review it.

We did achieve expected improvement in several areas, the net loss reported was certainly down considerably from the prior quarter.

And I believe was within anticipated ranges that the marketplace had placed on the Synovus expectations.

Our credit metrics were better, we will get to that in just a minute.

And I want to assure you that we have spent considerable time here around the end of 2009 and in the early stages of this year, assessing our loan portfolio, our balance sheet, our revenue streams, as we are developing expectations for the future, and we will share those in a general way with you this afternoon.

Specifically, the net loss reported was $249.9 million, included in that number, you notice that we had a non-cash $15 million goodwill impairment, which takes all of our bank goodwill off the books, in effect, leaving us with a cleaner balance sheet as a result.

As I mentioned, the credit metrics improved.

I won't get into the specifics.

Kevin Howard will cover that later, but our nonperforming asset run rate was improved.

Our charge offs were down, our past dues were at an extremely low level and our provision and other real estate expenses were lower.

Our asset disposition strategy has been a topic of conversation many times during the year, because we feel that our aggressive tactics will serve us well in the long run.

That strategy remained on track with $331 million in sales and improving realization rates.

Our deposit base remained firm.

In fact, year-over-year, average core deposits grew 5.8%.

The core deposit mix has continued to improve throughout the year, and our non-certificate of deposit growth was 9.9% year-over-year and 13.2% linked quarter.

Our non-interest bearing deposits on a linked quarter annualized basis, grew at 15% plus.

We track very carefully, as I'm sure you do, our pre-tax pre-credit costs income.

I won't get into the specifics, they will come later but the trend was positive and strong there.

Our margin was a little stronger than expected, we were up 3 basis points, despite the fact that we have continued to maintain a high level of liquidity, which we are working down somewhat.

But we have been able to achieve this improving margin with management of our cost of funds, as the downward repricing of time deposits has assisted us there.

If you exclude the negative impact of NPAs, our net interest margin was six point -- 3.63%, up 16 basis points, and is somewhat of an indicator of our longer term potential.

Core deposits continued to be a good story.

Our headcount is down 13% from its peak in the first quarter of '08.

The tax expense for the quarter, which was small, but probably unexpected, was a result of the increased DTA valuation allowance having to do with gains on investments.

If you need any particulars there, Tommy can help you with that.

The Visa shares that we owned were sold.

This is a part of our ongoing Capital Management programs.

We generated a $52 million gain there.

s a result, of all this, our capital ratios remained good, our tier 1 capital as you see in the deck is 10.11%.

Our tangible common equity to tangible asset ratio, 5.79%.

Our tier 1 common equity ended the year at 6.65%.

Those are my high level thoughts and observations.

I'll come back later with a few thoughts about the future.

But now, I'll turn the program over to Tommy.

Thank you, Richard.

And I'm going to start on slide nine and walk you through some of the financial details of the quarter.

Slide nine, you'll see a comparison back to the fourth quarter a year ago and then a comparison of this past quarter to the third quarter of 2009.

You can see towards the middle of the page, the $249.9 million loss that Richard described.

$190 million improvement over the third quarter, and really the key driver to that improvement were obviously credit.

With $179 million reduction in credit costs when you combine the reduction and the provision costs and then ORE costs that are embedded in the non-interest expense line.

Keep in mind in the quarter, we did have the previously announced $52 million Visa gain, which shows up in the non-interest income line.

And then we also had, and I don't think this was expected by most of the reports that I have seen, the $15 million goodwill charge.

The goodwill charge is really a byproduct of steep decline that had occurred in the stock price in the fourth quarter.

And as these goodwill valuation models work, it is based on market cap, and it really did not leave room in the model for goodwill in the banking organization.

As you know, it's a formula driven equation.

It is also a non-cash and non-regulatory capital affecting charge.

You'll notice also in spite of the fact we had a loss, we've had a income tax expense of about $7 million.

We would have expected a mid-20s sort of tax benefit in the quarter, and the main issue in the tax account as Richard described our set up tax issue awhile ago was a -- really a reduction of a deferred tax liability that was previously offsetting gross DTA.

And it effectively increased the DTA that required an additional reserve.

That was all connected for the fact that our bond portfolio, which drove that deferred tax liability, the gain in the bond portfolio shrunk as you would expect there in the quarter.

And the deferred tax liability associated with it, it shrunk likewise, and created that to happen during the quarter.

We would expect that as we enter into 2010, similar to the disclosure before, that we would be approaching a zero tax rate, and really would not see any significant valuation reserves that are incident to the deferred tax asset valuation.

If, in fact, the bond portfolio changed going forward, that actually -- it would, going forward, impact capital, but it would not flow through net income.

So, you wouldn't see the income volatility.

The other line I wanted to point you to on this page is the discontinued operations.

Basically, we are -- it's probable that we'll sell our merchant portfolio.

And once the threshold, from an accounting standpoint, of having to report discontinued operations, is fairly low, you don't have to have a contract.

You don't have to have a deal but you do have to have a process, and willing buyers who've expressed interest.

And you -- if you believe it is probable that you will sell the unit, then you have to disclose it as discontinued operations.

The disclosure actually happens a little ahead of where we'd really like it to from a communications standpoint.

But we believe it will happen.

We believe it will happen in the first quarter, and it will be a good transaction.

And it will allow us to really sell this business, create some capital and -- but in effect, stay in the business without owning it.

So, we feel good about the transaction and look forward to pushing it through on into the first quarter.

Page ten begins balance sheet highlights, there's a picture of the trends in the loan book.

Loans were $26.4 billion, a quarter ago, shrunk almost $1 billion, to $25.4 billion.

And all the categories, as you see, shrunk, obviously with the greatest decline in the commercial real estate categories.

Slide 11 is a picture of a core deposits and as Richard pointed out earlier, the average year-over-year core deposits grew in the mid 5% range, from a year ago we're up about a 0.5%, linked quarter we are about flat.

But really, core deposits are kind of following the way we've been pushing them.

And that is, we've been purposely shrinking the -- or allowing, I guess, the, many of the single service CDs and the higher priced CDs.

Many of which came on a year ago when the rates were higher and there was a good (inaudible) in the marketplace.

We're allowing those, we're not trying to attract renewals on all of them.

As you can see the CD book has declined some.

But the categories that we've been going after ,and our strategy has been to grow transaction accounts, to grow all the non-core categories.

And good examples of that happened on a linked quarter basis would be the DTA growing 15.3%, 17.1% year-over-year, and all the non-CD categories, as Richard mentioned, have grown 9.9% for the year.

13.2% linked quarter.

We'll continue to push that strategy going forward.

We think we'll be successful at it.

We think during the first quarter, we'd expect to see some seasonal public money, seasonal movement.

But we think that would be the main noise and otherwise would continue the track we've been on.

Core deposits are shown on page 12.

And -- I'm sorry the core deposit trend relative to loans.

The top line on slide 12 indicates the direction of the loans and illustrates the decline that I described.

The decline in loans was less than the decline a quarter ago.

It was a billion dollars this time.

It was $1.3 billion a quarter ago.

But what this loan decline does, it takes some pressure off of funding.

Allows you to manage the core deposit strategy in a way that you think's appropriate from a relationship and a margin support standpoint.

And all at the same time, increasing the amount of loans funded by core deposits from 80% a year ago to 88% now.

So, we feel good about the strategy and the directional core deposits.

The margin is illustrated on the next page, slide 13.

And you can see, we had a 3 basis point improvement in the margin.

We actually had, on the margin, excluding the carry on nonperforming assets, had a 4 basis point improvement.

And as Richard said, if you look back a year ago, that line, which is maybe more of a fundamental lineup, 16 basis points, so good direction there.

But really, what's going on down inside the margin is we've had improved loan pricing, we've had downward repricing, of maturing time deposits.

We've had a -- there was a reduction in interest charge offs, and we -- go back to the third quarter, when we talked some about the elevated liquidity levels and all that.

We -- if you'll recall, just in round numbers, the liquidity -- the asset side liquidity, which I'll describe as the balance at the fed, grew from $1 billion to $2 billion in the -- I'm sorry, from $1 billion to $3 billion in the third quarter.

With much of that addition happening right at the end of the fourth quarter -- I'm sorry, the third quarter, that was related largely to the capital raise and the shrinkage in the loan book.

It was our intention to bring that $3 billion position down in the quarter, in the fourth quarter, and we did, we brought it down to about $2 billion.

And -- but from an average standpoint, because that balance built-up at the end of the third quarter, it took awhile to bring it down in the fourth quarter.

But we do expect, as we move into the first quarter, to be able to enjoy more of the margin that's been building kind of under the pressure that it -- or under the weight of that excess liquidity on it, as that's removed on an average basis.

We would expect to see the potential for a 15 basis point increase during the first quarter, and could see a margin that would move up to the 340 range.

Take you to slide 14, it's the trend on expenses and we continue to bump expenses down.

You can see that we had improvement in the third quarter that continued.

The biggest contributor of that was in the employment expense line, with a $5.5 million, or $4.5 million decline.

The headcount trends, as you look, you can see that over the period they have trended downward nicely, had a slight up-tick in the fourth quarter.

But if you look at the longer picture on it, we're actually down 13% in headcount from the peak back at the beginning of the first quarter of '08.

Or, about 950 positions.

So, we've continued to press on that.

Expect to continue to press on it, as we move into the future.

Slide 15 illustrates the pre-tax pre-credit cost income, again moving in a positive direction from $140 million a quarter ago, to $144 million this time.

And that's really driven by net interest income increase and the G&A expense reduction from a fundamental standpoint.

The capital trends are illustrated on slide 16.

And you can see some of the ratios that Richard cited awhile ago.

And you can see that they, I guess the tier 1 ratio, is still over 10.

And you can see the ratios and the -- all the trends on this page.

And I guess more importantly, on slide 17 as we view into the future on capital, we believe that we will remain in good stead on the capital standings as it relates to the current regulatory standards.

We will continue just like we've been doing to add to capital, we'll continue to look at all the non-dilutive opportunities.

Back from the third quarter, we did -- besides the capital rates, we did the amount of bond gains that created some additional non-diluted capital in the fourth quarter, we did the Visa transaction, we expect to do the merchant transaction in the first quarter.

And we just think it's smart during this period to continue to look at everything and continue to add capital in a shareholder friendly sort of way.

And we'll also continue to -- the balance sheet shrinkage will continue to be accretive to the capital ratio.

We'll look -- continue to look at the liability management strategy, we've got $656 million worth of sub debt, and various alternative things you can do with that to enhance or create capital.

And we'll continue to look at all of those and other types of transactions.

And then, we'll also continue to watch for the recovery of the -- the potential recovery of the deferred tax asset valuation, and that number, at the end of the year is $425 million.

And we look forward to the day, as we establish a trend of profitability and are able to recover that.

We also keep an eye on Capital Markets and just stay very fluid on the capital front.

And do like we've been doing, and you know, exercise the things we can do, to benefit capital along the way through the cycle.

The rest that we see in capital would primarily be just whatever happens to the economy.

I think its fair to say the economic recovery that we might have believed a year ago, may be six months out in the future and all the comments that I've made about capital, take that into consideration.

And the other thing that we'll keep a watch on is the -- the view the regulators have on capital, and also the timing of the deferred tax evaluation allowance.

So, we are -- just like we've been doing.

We continue to add to capital and to watch it carefully, but feel good about our direction where we are right now, and I'm going to stop there and turn it back to Kevin, I guess to talk about credit.

Thanks, Tommy.

If you'll go to slide 19, I'll cover the key credit quality trends for fourth quarter.

Our NPAs went up slightly to a little over 4% increase in the balance.

And I'll point out that it did go up 56 basis points and our NBA ratio was about half of that was -- kind of stems from the decline of the loan balance.

During the fourth quarter we increased our reserve up to three -- by $25 million up to 3.7%.

charge offs declined 27% from last quarter, as we expected, with every major category declining, except consumer, and it was flat.

I do expect for the year 2010, we averaged in 2009 about a 5.3% charge off ratio.

We certainly expect that to be lowered in 2010, driven by successful disposition strategy of continued successful disposition strategy and declining run rate and nonperforming loans.

Past dues were the lowest in over two years at 1.03% with across-the-board decreases by loan type and short-term delinquencies, which were less than 1%.

Slide 20 shows our fourth quarter dispositions, we sold $331 million of problem assets, which, combined with $339 million from last quarter, easily surpassed our guidance that we would sell $600 million in the second half of 2009.

Our realization rate was up this quarter, as you can see in the graph from the previous two quarters, up [0.51].

A little better than we expected, considering the winter quarter.

The mix was 62% residential, within that, 52% houses, 48% lots.

So, we split that pretty well.

The investment real estate was 7%, land 9% of the assets sold.

And C&I, 21%.

Geographically, Atlanta was about 0% of the disposition activity in the fourth quarter.

We goo to slide 21.

Very important slide to understand.

And this demonstrates our continued efforts to clean up our balance sheet.

Our cumulative write downs on existing NPLs, now 28%, coupled with specific reserves on nonperforming loans, kept at that -- remained at 42.2%, combining those.

This along with our ORE mark by 60%, results in a total of 45% that is specifically reserved for or written down, in the total NPAs.

You saw on the last slide the 51% realization rate.

Circle that 45% number at the bottom of this page, which again reflects our aggressive approach in addressing our nonperforming assets.

Slide 22.

This slide reconciles our NPA activity for the fourth quarter.

Notice the addition $661 million of inflow nonperforming loans.

That was a 13% decrease from the previous quarter and that has trended down the past three quarters.

We are also pleased that we upgraded in that comp, $30 million to accrual status during the quarter.

Thats a significant number -- positive number to us.

Slide 23.

This slide represents our run rate by geography.

As we stated in the call last quarter, we were confident we would see improvement in Alabama, Florida and Tennessee and we did.

In Georgia, excluding in Atlanta, we expected the fourth quarter to be similar to the third quarter and it did trend a little bit higher.

South Georgia residential -- its a little bit more south Georgia, (inaudible) has come a little later.

Probably then Atlanta, Florida and South Carolina, most of those are on the back end, (inaudible) deterioration come a little later there.

So, we do expect to start seeing improvement in Georgia, outside of Atlanta.

Probably beginning in the second or third quarter in 2010.

Atlanta again, we did see improvement in our run-rate there and (inaudible) to (inaudible) that continue next quarter.

The housing markets, still difficult in Atlanta, but our exposure on performing residential C&D and (inaudible) are now less than $500 million, down from (inaudible) peak, of a couple years ago, close to $2 billion.

South Carolina did show a decline in (inaudible) or nonperforming loans for the fourth consecutive quarter.

Slide 24 is a look at our inflows by property type.

We did see an increase in investment properties.

I'm going to cover that (inaudible) the next slide.

But I did want to point out that we had significant decrease in the residential category this quarter.

Obviously that's (inaudible) working down those balances during 2009.

We would like to note that we do feel the increase in investment real estate, does not reflect.

Although, we see a little deterioration in the run-rate next year.

(Inaudible) this quarter was mainly the result of two projects in two unlikely categories, which are in good shape, warehouse and other investment properties.

Let me demonstrate that on the next slide.

And I do want to go ahead and cover investment properties in a little more detailed fashion (inaudible) slide.

To better demonstrate investment real estate trends during the quarter, this is a deeper dive.

First, I want to start with our larger portfolios, which is multi-family.

The run-rate there declined in the quarter, a little over $8 million, charge offs were down to 2% and virtually zero past dues.

One of the next, bigger portfolios, hotels.

Probably the most challenged industry in the investment real estate book, our underwriting is holding up well.

Our run rate -- we had one small loan, $500,000 that went nonperforming in the quarter.

charge offs were down to 2.2% and past dues were a very low [0.2%].

In the office portfolio, our NPA run rate did increase by $16 million.

We did have a couple of projects out of the Atlanta portfolio that made up that increase.

The Atlanta portfolio does represent about 25% of this category with the rest of the portfolios pretty evenly across the foot print.

Note that our charge offices in the office were significantly down to a 1% charge off rate in past dues there below 1%.

Shopping centers, despite very challenging economic in that industry as well, is holding up good.

Run rate of NPLs decreased once again this quarter.

Charge offices did pick up 3.5%.

And we had some dispositions in that area.

Our past due for 1.7% in our overall NPL ratio -- category still below 2% in our $1 billion shopping center portfolio.

I do want to point out in the warehouse -- under warehouses, our smallest category in the investment real estate portfolio and has been our best performing sector, going into the this past quarter.

Almost, all of that increase was the result of one loan that was approximately $24 million, of that $29 million total.

charge offs still -- very low, 1.6%, and we did not have a past due in that portfolio.

We feel good about the future of that portfolio -- holding up good.

Other investment property, also been a strong performing portfolio.

We had a significant credit similar of the warehouse story, go to nonperforming during the fourth quarter.

The loan was related to about a $24 million Marina, which represents most of that run rate.

I'll tell you we don't have many of those in our portfolio, we don't have another one a 0.3 of that size in the rest of the portfolio.

Its was -- I'm sorry that was a little bit of a one off in that portfolio, but it's held up well.

charge offs 1.2%, past dues again, less than 1%.

Finally, the commercial development portfolio, we did see some improvement from an NPL run rate and past due percentage standpoint this quarter, charge offs, though, were high.

Close to 11%.

The Atlanta portion of this portfolio about $130 million, with about half our NPLs -- represents about half our NPLs in the (inaudible) in that commercial development portfolio.

Overall, though, we do expect that this is going to be, and we have stated before, the weakest segment of the investment real estate portfolio.

And we do see some deterioration there in 2010.

Slide 26, this slide demonstrates just a quick, static look at (inaudible) quarter trends I showed you last -- on the last side.

Again, overall investment real estate portfolio is holding up well if you consider excluding one large credit, our NPL ratio would only be 3.2%.

We've mentioned this before in that portfolio, we don't have concentrations, tenants, geography, hotel flags, all within embedded in that portfolio.

Slide 27, you've seen this slide before.

Which demonstrates our declining exposure to residential C&D and land acquisition portfolio.

These three portfolios -- they've made up about half of our NPA problem in 2009.

We'd work this down 55% from a peak of close to $6 billion.

Atlanta alone has comprised about 36% of those NPLs within these portfolios.

Illustrated here you can see these three categories, once 22% of the book are now half that.

Atlanta's portion once 7% of those total loans -- these three categories is now, they all (inaudible) less than 2% of our total portfolio.

Total loan portfolio is what I was referring to there.

Just a quick snapshot of the C&I portfolio, it is -- (inaudible) doing well.

Past dues have declined again to [0.7%].

NPL, a modest 2.4%, charge offices declined this quarter as well.

As a graph demonstrates good diversity in this loan portfolio while we have worked through a lot of the challenges we have had, and again, we've got good credit metrics there have been in the real estate related and construction portfolio.

We feel like we've worked through a lot of that, and feel like we will perform better in 2010 there.

Last slide I have is slide 29, this slide covers our consumer portfolio.

And overall is treated well.

Past dues improved 1.5% and charge offs, pretty much where they were last quarter, pretty flat.

We rescore this portfolio on a quarterly basis.

And the -- on the -- average beacon scores did not decline over the past few quarters.

We feel like this portfolio will probably trend as the unemployment and foreclosure trends during 2010.

That's my last slide, Richard.

Kevin, thank you.

I'd like to move on to slide 30 and beyond.

We announced in our press release an organizational change, involving our structure, which has to do with consolidating the 30 bank charters that we have down into one.

This actually has been a consideration for several months.

We recently visited each of the regulatory agencies that we work with to run this proposal by them the reaction was positive, the visits went well.

That was our first step.

We have had an aspiration and really have had a strategy for several years to reduce the complexity of our company.

This certainly suits the regulators, and it suits us as well.

So, I think this move makes good sense coming at this point in time.

The bank names -- the community bank names that we use in each of our markets, will continue to be the brand that we operate with in our banking footprint.

So, we can do that, even though we will have one charter.

There are several expected benefits, as you can imagine.

The movement of capital loan participations, even cash between business units involves a layer of complexity that this will streamline and eliminate.

Capital is a part of that.

The way we must allocate it today, to satisfy requirements will be eased quite a bit.

There will be some governance and oversight advantages that will come from having truly a single enterprise.

And there probably will be -- there obviously will be some opportunities for efficiency.

If you think about work we have done in recent years, we started regionalizing functions within our company, five or six years ago and this work continued under the Project Optimus review that involved the idea generation process open to all team members.

So, the company continued to evolve as one that operated more as a single unit, as opposed to multiple business units.

We will have an extension of Project Optimus, that will be in the form of continuous improvement that will help us seek further ways to tighten up to company in this competitive environment, so that we can come out of this very challenging cycle stronger, leaner, and more capable of producing the kinds of levels of performance that we expect of ourselves and that investors expect as well.

So, without a doubt, I think we can position Synovus to emerge stronger than ever.

This move will be a part of that.

We'll be able to drive strategy, I think in a quicker and more uniform manner.

The secret for us is to retain the strengths that we have had in our culture, in our operating model, with the empowerment that we grant to our bankers, to own and manage the customer relationship, to be responsive to customer needs, whether they be in the area of credit or problem resolution or other service opportunities.

We think the model, while it has worked very well over a period of years, has reached a limit, in its effectiveness, and we can ease into this new form while retaining the same advantages that I just quoted, that have existed within Synovus over the years.

The timing, by the way, is expected to occur in two stages.

The legal consolidation will take place sometime, perhaps in the middle part of the year, but the operational conversion will occur later, because we want to be very careful about any potential disruptions or risks that might come operationally, by moving too quickly.

Now, I'd like to say something about 2010.

We want to guide everyone who is interested in our assessment of the future in several different ways.

The first statement that I would make is that, without a doubt, we think 2010 will reflect significant improvement over 2009 and all categories.

Certainly the credit metrics, as well as the bottom line performance.

The first quarter of the year is expected to be more elevated than the remainder of the year.

Based upon our projections, and these inflows and charge offs likely will come in at levels similar to what we have experienced in the fourth quarter.

This has been our thinking for several weeks now, but we do believe noticeable improvement beyond those levels will start to show, beginning in the second quarter and trending and moderating downward through the remainder of the year.

As I say, specifically, the run rate, which is probably the most significant driver of all credit metrics, is expected to be reduced consistently, resulting in lower provision levels in the second, third and fourth quarters.

The margin improvement that is possible and likely in our company should happen early in 2010.

I think Tommy made some references to the drivers there but we believe we'll see some good improvement in the first quarter of 2010 through the margin.

Expense management must remain a priority.

It doesn't really tie directly into this charter consolidation, because we feel compelled to take this very seriously, and with high sense of priority, regardless of our organizational structure.

But we will continue to search for ways to operate our company at a level of expense that are commensurate with our revenue generating potential and balance sheet size.

Having said all of that, we do believe that we can return to profitability, during 2010.

The likely opportunities are going to be certainly in the fourth quarter.

And with noticeable improvement, even showing up in the third quarter, as we are in the second half of the year.

That's our outlook.

We'll come back to any questions concerning that in the Q & A session.

And I want -- in just a minute to open up the call for those questions.

I do have a statement that I want to make reference to in anticipation of questions that might be on your mind regarding Sea Island Company.

We had gotten a handful of e-mails yesterday when the Sea Island Company issued a press release, wherein they announced entering into a forbearance agreement with their lenders, one of whom -- one of which is us.

And they announced their plans to hire an investment banker to pursue strategic alternatives.

We normally don't comment on specific credits, but given the level of inquiry that we have gotten, we wanted just to clarify a few points.

The forbearance agreement that was mentioned between the lenders and Sea Island is in place.

A lot of work has been put into that document.

Sea island, the lenders and the teams of financial and legal advisors participated in this work.

This situation has been addressed with customary procedures and regulations, assessments of reserves, and so forth.

So, each of the lenders independently is scrutinized and certainly each of the lenders has its own regulators and internal quality control teams that scrutinize any credit of this type.

So, a lot of different eyes have been on the situation.

Now, I would point out that we have extremely current appraisals.

And a specific reserve is in place, for our portion of the loan, as is required by our policies.

So, we have done all of the testing, and we are fully compliant with Synovus policies regarding loans of this type.

The Sea Island Company will be pursuing these alternatives, which could include a sale of the company, or a sale of assets or even recapitalizing the company.

And this is not a surprise in today's economy.

So, when any specific plans from the company are presented to the lenders, we will react to those proposals in accordance with the rights that are expressed under the formal loan documents.

I wanted to get that out, because we think that is all that is appropriate for us to say on this subject at this point and we will not take any questions on the call regarding Sea Island Company.

That is the status today.

So, let's open up the call.

We welcome your questions.

And we'll try to answer each of them.

Thank you.

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

(Operator instructions) Our first question is coming from Nancy Bush.

Please announce your affiliation and pose your question.

Hi, NAB research.

Good afternoon, guys.

Hello.

Couple of questions, two for Tommy and then one for Kevin.

Tommy, could you just talk about the excess liquidity?

Could you just repeat your remarks about that right now?

How that stands and how you expect that, that gets absorbed during 2010?

Nancy, I'll be glad to do that.

We -- actually, the decline that we planned to make in excess liquidity has occurred.

It occurred through pushing out some of the (inaudible) that I described.

It occurred by pushing out some of the federal home loan bank advances, and also some of the, the -- yes, the broker deposits.

And so we have the balance, as of period end, from about almost $3 billion -- I think $2.8 billion down to just under $2 billion.

The -- what I was describing awhile ago, Nancy, was the, was really the, the way the margin's influenced.

And that's by the average balance in the fed account and the average excess asset side liquidity.

And that remained at elevated levels during the quarter because it took the quarter -- the whole quarter to really run off and change the levels of the account.

So, what we believe we'll see, in the first quarter, that will take this compression off the margin, is a $700 million to $800 million decline in the average balance, based on activities that have already occurred.

So, I hope that answers your question.

Okay.

But you said at year end you still had $2 billion or under -- slightly under $2 billion.

And, "excess liquidity."

That's correct.

That's the target that we were aiming for, even in the third quarter.

The one went to two intentionally, and then went to three, in a manner that wasn't totally planned.

And that was the -- the size of the capital raise and the -- really the marketplace lack of demand on loans created the excess liquidity that went beyond our $2 billion target all the way up to $3 billion almost at the end of the third quarter.

We have brought that down now and will enjoy the benefit of the average declining that has already begun declining in the early part of this year.

Now the 15 bips that you're talking about in margin in first quarter, how much of it comes from this decline in liquidity?

Is it mostly a function of that?

Is what's been going on is the margin's been trying to increase based on just the organic activity of lowering funding costs pretty dramatically and price in loans.

Well, it's been offset mostly by this additional liquidity.

And so I think it's safe, there is a little bit left as we enjoy the full benefit of the organic activity in the first quarter.

But most of the inquiries comes from removing this compression from the excess liquidity.

So, when do we get to a margin that increases or decreases just from the core -- the normal stuff?

Is that second quarter or third quarter?

Yes, the second quarter, I think if we leave our excess liquidity at a similar level to where it is today, then what you see in the second quarter will be more indicative of true fundamentals.

Okay.

And also if I could just ask, could you just give us a little bit more color?

You made some comments about actions that may take place with regard to sub debt?

And I think there's also been some talk of trust preferreds, et cetera.

What may be happening to increase capital through those avenues?

Nancy, I'll be glad to do that.

First of all the non-dilutive front, we've got a pattern of doing things and want to keep doing them, including the Visa gain this time and the merchant gain.

That will be likely in the first quarter.

We'll continue to look at opportunities to do things like that.

And including the continuing shrinkage of the balance sheet, which is you know, capital ratio additive.

On the liability management side, we've got $656 million worth of sub debt and a variety of potential strategies, none of which have been teed up or we are ready to launch.

But is some combination of a modification of the debt or some potential conversion of the debt into preferred or once common stock down the road becomes available to that type of, what's authorized shares might become available down the road, we would plan to, might plan to go down that strategy.

And then, we watched with interest a couple of banks doing the other transactions like the TARP for trust preferred and certainly hadn't gotten there yet.

But we're just looking at all the things that might be out there.

Okay.

I think it's smart to keep putting some capital in, as we get to the end of this credit cycle.

Okay and just quickly for Kevin, your disposals in Atlanta during the fourth quarter.

Could you just comment on sales prices, marks, et cetera, did these come in where you expected better than you expected, et cetera?

Nancy, this is the why don't I comment on that.

In Atlanta, we were volume exactly where we had expected to be.

I would say return on book was higher than we had expected and then I would say the result on unpaid balance was in line or a little higher than we had expected.

So they hit exactly the volume, they trended just like all the other areas.

That is great.

Thank you.

Thank you, Nancy.

Thank you, our next question is coming from Kevin Fitzsimmons, please announce your affiliation then pose your question.

Sander O'Neal.

Good afternoon.

Hey Kevin.

Richard, I understand all the advantages you laid out from the consolidation of the charters.

The one thing, though that you guys have been highlighting for the past several quarters is the advantage on the deposit front.

You know, because of the structure, being able to let people get more FDIC insurance on that front, can you just give us, in a sense of how to look at that, are you going to be losing a relative advantage?

Or is there a way to keep that somewhat in place?

Thanks.

That's a fair question, because it has been a unique product for us with the pooling of that insurance coverage.

We've had a lot of discussion about how to mitigate that.

And I really think Leila Carr can provide the best insight into the way we view that.

Thank you, Richard, as you all know we've got a $1.8 billion portfolio in the shared products.

And the way that's going to work is that we continue solid date charters, we actually have a six month grace period after the date of the charter consolidation.

That, that full portfolio is fully insured.

And during that six month grace period, your time deposit can be renewed for the same maturity date one time.

So, that represents a more plan to run off of the overall portfolio over a 12 month time Horizon and we expect about 800 million or $900 million of that portfolio to run off.

That gives us longer lead time to be proactive with the customer base, and certainly work with each customer to move those deposits on to bank balance sheets for traditional products as permitted.

So, that's a little bit less risk than you would normally expect in terms of consolidation date or even the first day after grace period.

So, if I understand that right, the timing of the run off would be more of like an early 2011 type of issue?

Yes, we'll experience some moderate run off in the second half of 2010.

But not material to the $300 million.

And then, more material run offices starting in 2011.

But it will be extended for the first six months and not the entire portfolio.

Because, we don't think that all of those deposits will flow out of the organization, although they'll flow out of that product type.

Okay great.

Thanks.

And just one quick follow-up for Kevin.

You guys mentioned that the -- you expect in first quarter the level of inflow and nonperforming loans and than that charge off to be about the same as this quarter.

What about the costs they significantly came down in the quarter this time just wondering thousand look at that going into first quarter?

Well, its probably looking at about the same as it was this past quarter.

I think it will trend similar.

Okay, thank you very much.

Thank you, Kevin.

Thank you, our next question is coming from Adam Backstrom.

Please announce your affiliation then pose your question.

Sorry, Stern Agee.

Good afternoon.

Hi, Adam.

How are you?

Lets see, Kevin and Nancy got to most of mine.

But I did want to circle back going back through the capital page and you guys were talking about maybe the potential for a deferred tax asset recapture in 2010.

I was wondering if you could put any more color around that?

Adam, it's Tommy.

I'll be glad to do that.

And I will tell you -- I know you hadn't had time to look at it.

But there is about a four slide primer on the deferred tax asset that you can refer to later.

But I guess you are asking about how you recover that and I'll do my best to answer it though.

You'll see in that presentation that's in the slides that we refer to the fact that first of all, there is a lot of subjectivity in it just like there was getting into it.

But that in general, we believe that a pattern of sustainable profitability, the way the literature reads and we believe that maybe several sustained quarters of profitability from a fundamental standpoint, that are followed by credible forecasts of future profitability, and in the business we're in, that simply means really clear evidence that the credit has turned and that the negative forces that have been affecting the income stadium will be reversed.

In other words credit costs trending down steeply.

So, we believe that in the meantime, as you become profitable, even without a release of the reserve, that as you have a zero tax rate against a profit, you're essentially bringing some of the deferred tax asset down.

And then at some, would have a release of the entire amount.

And it's also important for note that while day one, if you had a release of the whole amount, you get the full impact in tangible common equity but in the regulatory ratios you still have to live with the regulatory limitations.

Just like any bank today, that even those that hadn't created a deferred tax valuation allowance.

So, I hope that is what you are looking for.

Great.

Thank you.

Thank you, Adam.

Thank you, our next question is coming from Ken Usdin, please announce your affiliation then pose your question.

Thanks.

Bank of America, Merrill Lynch.

Hi, Ken.

Good afternoon.

I was just wondering if you can just take us a little bit through the C&I book just a little bit more.

That was the one area where the losses, the I'm sorry, the -- the direction was kind of the wrong way this quarter.

I was just wondering if you can just give us a little more color on what you're seeing with your business customers?

And on both the credit side of it also as far as the loan demand, any change in the underlying interest or signs of bottoming, as far as demands?

For both credit and demand on the C&I side?

Thanks.

Alright, Kevin, do you want to do the credit piece?

es, I'll start with, I mean, demand is I think our C&I book was down $200 million this quarter.

I think it was $500 million the quarter before.

So, it's starting to stabilize a little bit.

Still not getting a lot of demand.

I may -- D, if you want to comment on the lion's side.

Yes, I would say, the only couple of comments I would say on that, is across-the-board demand is still low.

The other thing that will be important to realize as you will see on our balance sheet, draws on lanes are down.

People are holding cash, which is probably the prudent thing to do in today's environment.

So, as you see the shrinkage of the balance sheet on both sides, it's just not, I guess it's just -- it's down some, but not tremendous.

Let me comment on the -- I guess we did have a slight increase.

Went from 130 to 160, I think in the quarter, September to December.

Still a pretty good number.

It is a $10.5 billion portfolio, but a little increase in the construction run rate, as well as the real estate related.

Still working through, you know, the real estate related C&I dand some of the hot spots, say real estate hot spots, some around Atlanta and South Carolina in particular.

But still, it is not spread out, you know, around the different categories, holding its own.

And (inaudible), but that would be the main increases in those particular areas we had in the fourth quarter.

And is it pretty granular at this point?

I mean is there anything really lumpy in there this was the NPLs or charge offices?

No -- yes, it's pretty granular, I mean, well, let me -- coming in from a -- around the footprint, but it's hitting certainly the worst I would say close to about 40%, 50% of that run rate, still is the construction again and the real estate related, working that book down a little bit, (inaudible).

I'd say it is more in those portfolios.

Outside of there pretty granular.

Sorry last piece in following to that on the -- how close do you think you are before you kind of just put the -- you put that construction piece to bed, as far as it hitting its own peak there?

Well it's still -- I mean, it was once over $1 billion and around $800 million now in that book.

So, we're going to -- we've got you know some deterioration still to go there.

We have less of it, we had a lot of it coming the last year from Florida and South Carolina and Atlanta.

We certainly have less of it there, so it's kind of worked its way down.

But, that and the -- again, the real estate related, so we've still got a ways to go there in 2010.

Okay great.

Thanks a lot.

Thank you, Ken.

Thank you.

Our next question is coming from Jennifer Demba.

Please announce your affiliation and pose your question.

Hi, this is actually Paxton Griffin filling in for Jenny.

How are you doing?

Good.

Going forward, what minimum capital ratios are you most comfortable with?

And which ratio are you managing your capital (inaudible)?

Tommy,do you want to -- ?

Paxton, I'd be glad just to tell you the things about it.

I mean, the fact is, we know where the legal minimums are.

We know you can't think of approaching them today, using tier 1 as an example with the legal minimum of 6%.

We know the regulators are -- in any environment, you certainly don't approach the minimums.

And we know that the direction is in an upward fashion with the regulators.

Going back to the [scap modeled, prescribed ratio], was the you know, 4%, tier 1 common.

And I mean, the reality of it is, we all know that there is -- you've got to have significant buffer above that and in terms of a point or two.

And, so we, we don't know where the standards are headed.

But we're trying to continue to add to our capital account and make sure we stay ahead of any curve that might happen with that.

I just want to add to what Tommy's saying or reiterate what he is saying.

First of all, we understand the importance of having ongoing measures that are being taken or can be taken virtually each quarter to supplement our capital position.

And the second point to make is that we believe, as I'm sure most others believe, that capital standards are more than just a result of where you are at a given point in time, say the end of the given quarter.

A lot of your capital strategy and confidence about capital can also have to do with your future view.

And we have some opportunities out in the future to really shore up capital, particularly this DTA recapture.

So, we think we've got a cushion out there that we don't ever need to lose sight of, nor does anybody who is evaluating our capital position, as a company.

So, it has to do with not just a current position, but the likelihood of events that might be a quarter or two down the road.

Okay great.

Thanks.

And could you also give us your margin outlook beyond the first quarter?

We believe that -- I gave you the first quarter view, where we think it could be at the 340 mark.

But there is some upside from there I described most of the upside we see in the margin for the year occurring in the first quarter.

But there is some modest amount on top of that.

And that's really about as far as we can go right now, with the margin guidance beyond the first quarter.

Okay great.

Thanks.

Thank you.

Our next question is coming from Erika Penala, please announce your affiliation and pose your question.

Hi, this is actually (inaudible) stepping in for Erika at UBS.

Good.

Hi, I actually think most of our questions have been answered but I just have a really quick question about DTA, again.

You had mentioned that the full impact that DTA would have a full impact on tangible comment and as far as regulatory capital ratios go, how much of that 425 is allowable into the tier 1 calculation?

Just on a current basis, I'm, I would estimate that -- well today, of the 425, if you reverse the whole thing today, you'd get the GAAP benefit, you get the TCE benefit.

But it would take awhile into the future to get the capital benefit for regulatory capital purposes.

If you view out further and assume a period of some modest losses front end and profitability as you work through the year, next year, then you can imagine, first of all, the DTA valuation grows some.

And you can imagine a release of a portion of that, beginning at that point in time.

So, you really don't get it until you begin to be profitable and have profitability in your future also under the regulatory rules.

So, you're saying it's a portion of timing in magnitude of profitability that allows a certain portion of the 425, that can be allowed at the tier 1?

I'm sorry.

Would you repeat the question?

Oh, I was just saying, are you saying that it's the function of timing and magnitude of profitability that can allow a certain portion of the 425 into tier 1?

Yes, that's correct.

And I mean, first of all, we believe we're going to get it.

And it is a matter of timing.

The regulatory requirements have two tests.

One is you can't, the DTA, can't exceed 10% of tier 1 capital.

Or you look at a 12 month rolling forecast of profitability, and you have to have a clear vision of that as another part of the test.

So, we're just a little ways from enjoying the regulatory benefit.

But we'll be glad to get it back into the GAAP numbers and we believe -- can begin to enjoy the regulatory piece of it in a good time frame.

Elaina, this is Pat.

Look at pages 37 through 40 in your presentation.

It goes, I'll -- into a lot of detail about the recovery of the DTA and I think that'll help you, we'll be glad to follow-up with any calls after that if you still need some help there.

And just one really, really quick questions about the in (inaudible) in your investment property, as far as NPL balances go.

Were these mainly from debt service in or was it driven by value?

The value of the property versus debt service for the.

It's a little of both.

I mean, they are certainly related.

But it was, probably more debt service versus value certainly -- probably could say 50/50.

But theres a little bit more debt service on some of these.

Great, thank you.

Thank you.

And thank you, our next question is coming from Paul Miller.

Please announce you affiliation and pose your question.

Hi, this is actually Jessica Halenda, from FBR filling in for Paul.

I just had a question, I was wondering if you could talk a little bit about what types of loan modifications you guys are doing.

If you are doing any principle reduction at all.

And what you are seeing thats working the best?

Loan modification?

Who got that?

I didn't get everything clearly there?

Repeat the question please.

Does it have to do with mortgage loan modifications or commercial real estate?

I was just -- across-the-board, if you're doing any consumer or commercial loan modifications.

I was just wondering if you are doing interest rate reductions, extending out the amortization time, if you're doing any principle write down?

All right, lets start with the TDRs, wouldn't that cover it?

You might give the statistics there.

Yes, I don't mind -- I'll cover what we -- our troubled debt, restructured loans in the fourth quarter.

As a matter of fact, it reached $20 million, they were $192 million they're now $213 million.

We haven't made a lot of modification in those portfolio's you mentioned.

I do want to say something about our TDRs.

Within our TDRs, those are accruing loans.

And there are no -- there's one past due loan, less than $1 million, in that portfolio.

So I think our approach to handling these TDRs probably could be a little bit different than some of the other banks.

If they get past due, they're typically moved into the non-accrual bucket.

Not sure that completely answers your question, but does that get you close?

Yes, that helps.

So, do you -- so when you modify, when you do a TDR, you move it into your nonperforming bucket?

And then you're now seeing those perform for six months and that's why you're migrating them into accrual status?

(Inaudible)

Okay.

And is that what -- in, I think it was slide 22, in the presentation.

There was $30 million in upgrade to accruals, is that -- ?

Yes -- no, those aren't always TDRs.

Those are loans, that, over time, if they could have gone into non-accrual a year ago.

Typically you're right, more than six months or more, where the credit has gotten back on its feet.

And has to perform for six consecutive months before we can take it out of the non-accrual status.

So, and my point in that slide is we are beginning to see, especially it a quarter, you know the fourth quarter, sometimes be a difficult quarter, so it was good to see that upgrade -- those upgrades.

Okay.

Thank you very much.

On the consumer side, the consumer mortgages, we've been asking around the room.

We don't have big volumes of restructures.

I think some of our banks might do individual restructures in their portfolios, Mark, are you aware of any levels of activity there?

Well, we did put in place a modification program.

It was much more conservative than what the government mortgage products that came out with the large mortgage servicers.

And really, our customers, we need to know that they're going to be successful to do a modification program, so there's debt to income ratio qualifications, and other factors.

And we haven't done a lot, but we do have some customers that have taken advantage of it.

Okay.

Thank you, Mark.

Thank you, our next question is coming from Jefferson Harralson.

Please announce your affiliation, then pose your question.

Good afternoon, KBW.

Hello, Jefferson.

Tommy, I was going to ask you when you guys were talking about the sub data, you talked about a variety of things you can do.

And you mentioned exchanges, but you also mentioned modifications.

And I didn't know what a modification was, if I heard that right.

Yes, there's been a few of those transactions, and essentially, where you, you've put an auction on the sub debt, and you are aware it can be converted into some form of equity.

Preferred stock would be an example.

And you -- in doing so, in the restructure, create a gain that goes along with it and is added to capital.

And it's a transaction that's been -- we have seen and are watching, but don't have any immediate plan to do that, but we are just exploring.

Okay, I've seen that too.

How interested are you guys in the TARP to (inaudible)type of transaction?

Well, we've seen a few transactions.

And it's really something that's interesting to explore.

But we do don't have any -- any traction on moving that way right now.

But we are looking at all these alternatives.

Okay.

Another quick one on the -- do you guys expect a charge on the -- on consolidating the charters?

Right now, we believe that the cost -- the front end costs are -- we're kind of doing this in stages, with the legal consolidation happening ahead of the technology consolidation.

We're really working on the, the numbers.

But we don't see, certainly in 2010, a meaningful bump in expenses.

We'll have some professional fees and some advisory fees, but we don't see a large number there that we would put into our 2010 model.

So, no contract break up fees, that kind of stuff?

No, we're -- we haven't uncovered anything like that yet.

And I mean, we're one company today and we're going to be one company when it's done.

We're just changing some of the interior walls, if you will.

So, no triggers there.

All right.

And lastly, at the full risk of getting a no comment here, I think in the past you had mentioned Sea Island.

There was no mark against the Sea Island loan.

And today you mentioned that there is a specific reserve in place.

Is there -- is the pacific reserve new?

Or can you comment at all on the pacific reserve?

It's, just like I said, it is right in line with our policies.

That would require this match up to the evaluations.

Okay.

Thank you.

Thank you, our next question is coming from Gary tenor.

Please announce your affiliation and pose your question.

Thank you.

Soleil Securities.

I had a follow-up question on the ORE expense if it's going to be in line with the fourth quarter number.

How should we read into your asset disposition plans for 1Q?

Go ahead D.

I would say we would look on a total volume of asset disposition plans to be similar to where they were the previous couple of quarters.

ORE, costs I think where Kevin had said should be in line.

I think the biggest piece of that will be the mix of the assets that we sell.

So, it'll -- I would say it should be in line, assuming the mix remains the same that we sold for the fourth quarter.

Okay.

And then, I wonder, Richard, if you have any comments that you can make on the ongoing Chief Operating Officer search in terms of timing of when you'd expect somebody to be in?

Yes, we, it's an active and deliberate process that the board is involved with.

We have a committee, and I would think this quarter, there is a high probability that we could get it resolved.

Okay great.

And one last question.

On the TDR issue.

It went up modestly this quarter I think you mentioned about $20 million or so sequentially.

Is that an instrument or device you might use more going forward as we move into some more issues on income CRE, to keep more of those loans in performing status?

I definitely think it's a tool that we'll use to our advantage.

And I would think it would be more visible in the future.

We'll certainly work with our customers, especially in commercial real estate, going forward, if they need it.

All right.

Thank you.

Hey Dan, this is pat.

If we could, the hour is getting late.

Could we limit to one question per participant from this point on?

Sure.

The next question is coming from Kevin Reynolds, please announce your affiliation and pose your question.

Wunderlich Securities.

Good afternoon, gentlemen.

Hello, Kevin.

Hi, Richard, a quick question on the charter consolidation, I guess.

And Pat, I apologize I'm going to throw these both together as one.

What does it do to, just so I understand to the FDIC insurance in numbers.

We were we before that with the number of charters.

I know you've gotten rid of a few of them.

Already, and second --

We were at $7.5 million, I believe.

Isn't that the the math on 30 times 250?

Okay, so $7.5 million, starting point?

Right.

And then, what does it do on the other side of the credit cycle when we get back to something of a more normal economic environment, whatever that may be.

What does it do to the way that you operate your model down at the street level, whether it's reality or perception on the part of your customers as you sort of centralize the commune banking experience?

We really have spent so much time talking about the need that we have to deliver the way that we have in the past.

Now, admittedly we have tightened up some of the oversight and the information that we get corporately on loan pricing and deposit pricing.

But, that doesn't mean we set the rates.

There is certainly flexibility at the market level there on credit, the limits are lower.

But a bank, whether it's a single charter or multiple charters through good credit performance can earn a higher level of authority in that respect.

But we are big believers in keeping the management approach that has worked, the parts that have really worked well, in this company, intact.

And that means some local decision making, particularly as it centers around the customer, the customer responsiveness, customer service, and customer relationships and we've made commitments to our bankers, to honor that.

And we let them become a part of the solution.

We all get in a room, and so this charter move doesn't change that.

tI really -- you can operate as much of a decentralized company as you want to, whether you have one charter or 30 or 50.

And we're going to find the right balance, the appropriate balance, and we think we've been moving to that place anyway over the past couple of years.

Thank you, our next question is coming from Bob Patten.

Please announce your affiliation and pose your question.

Hi, guys, Morgan Keegan.

Hi, Bob.

You've got to give Jefferson a gold star.

He tried.

Just a simple question.

With Visa gone, and the merchant sale being discontinued.

What other assets are there on the balance sheet in terms of venture capital?

Are here potential sources of gains that your guys could have going forward?

Bob, this is Tommy.

As you mentioned we have done the decent thing and we're in the throes of doing the merchant side there.

We're exploring the company.

When you're going through the cycle it makes you think differently and look at every corner and we're not prepared to identify other elements.

There are some that will be under consideration that could be meaningful to capital and we don't have actions to -- or plans to execute any of them immediately or even in the near future.

But we're -- we have them under consideration.

In the meantime we're continuing to press on the size of the balance sheet and create some capital ratio lift and from that side, and then explore these liability management and other strategies.

But hope that helps you.

Thank you.

Our next question is coming from Al Savastano, please announce your affiliation and pose your question.

McRory.

Good evening, guys, how are you?

Great, thank you.

Can you help me out on slide 27?

I'm just wondering about the performance of the -- the difference in the performance of the -- the difference in the performance between the one to four family constructions, the residential lien portfolio and the lien acquisition portfolio?

You want to know, tell me, you want to know the differences or how they're performing?

What was the -- ?

The performance, like so why is only the NPLs on the land portfolio lower than the other two?

Oh in the land?

Well it's, half the land if not a little bit, I think a little bit more than half is commercial land.

It's probably held up a little bit better than residential land.

But also there's raw land in that as well.

And some of that is not always for residential, it can be for a lot of different purposes, other than just exposed to residential real estate.

So, that's why it is trending a little bit better than the core residential land development and one to four.

I would have a view on that.

In that when we underwrite a land acquisition loan, we don't contemplate development for quite sometime.

We underwrite it to make more certain of recurring cash flows, or stronger liquidity guarantor support.

So, a land development loan, however, is underwritten, contemplating a pretty quick turn around into a project, which then needs to be successful to get the loan paid.

So, the underwriting standards are a bit different, I would say, on acquisition versus development.

Thank you.

Our next question is coming from Rob Rutschow, please announce your affiliation and pose your question.

Good evening.

CLSA.

Just a question on land prices.

I guess there is a concern that once the fed stops with quantitative easing that you'll see another decline in home prices.

And so, I'm wondering if that means that the charge offs might go up?

And what you think the -- whether you've considered that and that's in your outlook, and what you think the likelihood might be, of lower prices in your footprint?

Well, I think there is some possibility of some lower prices.

But goodness knows they've been beaten up pretty bad.

And really, you have to consider the fact that our portfolio is much, much smaller than it used to be.

So, any exposure we have is certainly more limited.

And any exposure to the downside, I think, is not great.

It's not get.

I think we would only have marginal reduction.

And to be honest, we are not expecting a big pickup, in the housing market.

But we certainly view it as a market with some stability in it, and there's going to be some pickup, we are just not betting all of our projections on that.

We are still being pretty conservative in our outlook.

Thank you.

Our next question is coming from Dave Bishop, please announce your affiliation, then pose your question.

Thank you.

Stifel Nicolaus.

Yes, Dave.

Good evening, gentlemen.

Don't know if I heard this but in terms of the sale the merchant group there, did you quantify potential gain on that transaction?

Is that something scale or to the Visa program or has that been enumerated yet?

No it's -- we're too early in the process.

And I mentioned awhile ago the accounting disclosures unfortunately, are ahead of the deal really and it would be inappropriate to talk about pricing you know, while we are in a negotiation period.

So, we'll get it out there, as soon as we get it done, though.

Thank you.

Our next question is coming from Nancy Bush.

Please announce your affiliation and then pose your question.

Yes, just a quick follow-up, Richard, on the whole consolidation issue.

I mean, one of the advantages of the company has always been that you've had these local boards that have been made up of business leaders, et cetera, et cetera.

What happens to these?

Are these going to become advisory boards?

Or do they go away?

Or, how do you move to not -- to keep that advantage?

Yes.

I didn't touch on that.

But it's very much on our mind, Nancy, because we have several hundred of these and many of them are good customers, good ambassadors -- great ambassadors in many cases.

So, we've had a lot of direct contact with them in the communication process.

My view is that we need and will do everything possible to preserve the value that they add to our banks and to our bankers.

As though nothing was different.

And now, if there are some nuances where you know, we, if we have to use the word advisory, we will.

I don't even want to put it in the vocabulary.

Because I consider them to be directors in these local markets going forward, just like they have been in the past.

I consider them to be advisors looking at the same information, and having the same opportunity to provide input that they had in the past.

So, we're taking the position that to the extent we can, we want to leave their role, as much as it was, as is possible.

The charters, of course, are symbolic.

And that's the part we've had to really work hard to explain, that we -- our intent is to operate with directors and in other aspects the same as was the case, even without this piece of paper.

Thank you.

There appear to be no further questions in queue.

Well, thanks so much for everybody participating, for your questions.

It helps us to hear what is on your mind.

We will use these themes that you have expressed as we get out and meet with the investment community.

But certainly leave you with the thought that Synovus has had some improving trends in the quarter.

We expect those to continue, and we especially believe that the second half of this year will be a much different year, with better results.

So, stay tuned and we'll be in touch.

Thank you ladies and gentlemen, this does conclude today's conference call, you may disconnect your phone lines at this time and have a wonderful day.

Thank you for your participation.