Synovus Financial Corp (SNV) 2013 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Synovus' third-quarter 2013 earnings conference call.

(Operator Instructions)

It is now my pleasure to turn the floor over to your host, Pat Reynolds.

Sir, the floor is yours.

Thank you, Tom, and thank all of you for joining us on the call today.

During the call, we will be referencing the slides and press release that are available within the Investor Relations section of our website at www.synovus.com.

Kessel Stelling, Chairman and Chief Executive Officer, will be our primary presenter today, with our executive management team available to answer all of your questions.

Before I begin, I need to remind you that our comments may include forward-looking statements.

These statements are subject to risks and uncertainties.

The actual results could vary materially.

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

We do not assume any obligation to update any forward-looking statements as a result of new information, early developments or otherwise, except as may be required by law.

During the call, we will discuss non-GAAP financial measures and reference to the Company's performance.

You may see the reconciliation of these measures and our GAAP financial measures in the Appendix to our presentation.

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

The only authorized webcast is located on our website.

We do respect the time available this morning and desire to answer everyone's questions.

We ask that initially you limit your time to two questions and if we have more time available after everyone's initial two questions, we will re-open the queue for follow-up questions.

I will now turn it over to Kessel Stelling.

Well, thank you, Pat.

And I'd, again, like to welcome all of you to the call as well, and I will walk us through our third-quarter highlights and then we will open it up for questions for the team.

For the quarter, net income available to common shareholders was $37.2 million, up $6.5 million, or 21.1%, in the second quarter of 2013 and up $21.1 million, or 132%, from $16 million a year ago.

Earnings were $0.04 per diluted common share, up from $0.03 per diluted common share for the second quarter of 2013 and $0.02 per diluted common share for the third quarter of 2012.

I'd like to, again, point out that [2013] earnings are now fully taxed at 37.4%, while the third-quarter 2012 earnings reflected a $211,000 tax benefit.

Pre-tax income, $73.5 million, compared to second quarter pre-tax income of $72.9 million and up $42.9 million, or 141%, versus the third-quarter 2012 pre-tax income of $30.5 million.

Total loans grew $103.3 million sequentially, or 2.1% on annualized basis.

Credit quality, again, continues to improve our NPL ratio decline to 2.29% from 2.74% in the second-quarter 2013 and 3.55% in the third-quarter 2012.

Our net charge-off ratio declined to 0.47% in the third quarter from 0.61% in the second quarter of 2013 and 1.97% in the third quarter of 2012.

We'll talk about capital ratios later, but I'll just highlight strong capital position post-TARP redemption with Tier 1 common equity now approaching 10%.

Take you to Page 5 in the deck.

Again, we talked about loans.

Third-quarter 2013 reported sequential core-loan growth $103.3 million, or 2.1% annualized.

Retail loans grew $83.3 million, or 9.5% annualized.

C&I loans grew $18.1 million, or 0.7% annualized, and CRE loans grew $3.2 million.

We currently expect fourth-quarter loan growth to be moderately stronger than the third quarter, probably in the neighborhood of 3% plus or minus.

Take you to Page 6. Again, please see core deposits grew $326 million, or 6.7% annualized from the second quarter of 2013.

Total core deposits increased $326 million, or 6.7%, again, annualized.

Core deposits, excluding time deposits, increased $133.5 million, or 3.3% annualized versus the second quarter.

Total deposits of about $21 billion grew $263.2 million, or 5% annualized in the second quarter of 2013.

I'll point out broker deposits declined about $63 million in the second quarter and now represent only 6.1% of our total deposits.

You probably saw recently released FDIC deposit share data.

We were pleased to see that we retained the top five market share in markets that represent about 80% of our core deposit franchise.

And, again, pleased to see the strong market share of our bank divisions throughout the Southeast.

On slide 7, we had a slight increase in net interest income and net interest margin.

Net interest income increased $1.9 million versus the second quarter of 2013.

Our net interest margin was 3.40%, up from 3.39% in the second quarter.

Yield on earning assets, 3.89%, up 1 basis point from the second quarter of 2013.

Our effective cost of funds was 49 basis points, unchanged from the second quarter.

We expect a slight downward pressure on the net interest margin during the fourth quarter of 2013.

On slide 8, total third-quarter 2013 non-interest income was $63.6 million, $1.5 million decrease from the second quarter and a $9.7 million decrease from the third quarter of 2012.

The decline versus second quarter was driven by a $2 million decrease in mortgage banking income, the decline versus the third quarter of 2012 was driven by a $5.5 million decrease in investment securities gains and a $3.9 million decrease in mortgage banking income.

Core banking fees, $32 million, an increase of $329,000 versus the second quarter of 2013.

Our FMS revenues of $17.9 million decreased $2 million versus the second quarter, $732,000 versus the third quarter of 2012.

That sequential core decline was driven primarily by decreases in trust services fees, brokerage revenue, and fees from customer interest rate swaps.

We currently expect fourth-quarter 2013 mortgage banking income to decline modestly from 3Q levels.

We expect core banking fees and FMS revenues to be moderately higher than 3Q levels.

On slide 9, as you'll see, year-to-date adjusted non-interest expense down $18.3 million, or 3.5%, while headcount decreased 6.2%.

Adjusted non-interest expense was $171 million in the third-quarter 2013, an increase of approximately $3.3 million, or 1.9%, versus the second quarter, again, primarily driven by a $3.3 million increase in employment expense and elevated levels of professional fees.

We currently expect a modest decline in the fourth quarter 2013 adjusted non-interest expense line from 3Q 2013 levels.

Our $30 million expense reduction initiative is on target to be fully implemented by year end.

Again, headcount declined 312 positions, or 6.2% from the third quarter of 2012, and it declined 238 since year-end 2012.

Additional expense reductions from this decline will be realized in 2014.

I've talked about it on many calls, but I will just say again -- expense management is a way of life for us.

You'll recall that we adjusted expenses by $95 million in 2011 and another $25 million in 2012.

Headcount has decreased by approximately 36% since year-end 2007 and our branch count has declined to 283 from 332 at year-end 2007.

Again, as a reminder, we've improved these -- we've achieved these improvements in cost structure while continuing to make substantial investments in talent and technology.

Our continued focus on efficiencies as well as expected declines in credit-related expenses will yield further expense reductions in 2014 and we will share those efforts with you as we feel appropriate.

On page 10, continued improvements in all credit metrics.

As you can see from the graphs here, the trend lines on this page, again, are a strong indicator of how our credit has continued to perform.

The four charts together provide just a really strong illustration of across-the-board improvement as we continue -- that we continue to experience in our loan portfolio.

I'll go into more detail on each of these in the following slides.

I'll point out, though, in addition to the metrics shown here, several other key credit metrics improved that I believe are worth mentioning.

Special-mention loans declined $476 million, or 32% from a year ago, and declined about $26 million on a linked-quarter basis.

Some substandard accruing loans decreased $380 million, or 39%, compared to a year ago and about $15 million sequentially.

Accruing TDRs declined $125 million, or 18% from a year ago, and $61 million, or 10% from the second quarter of 2013, and past dues continued at very low levels at just 0.40% of total loans.

On slide 11, again, credit costs and net charge-offs continued to trend lower.

Credit costs for the quarter were $22 million, down from $24 million in the second quarter of 2013 and $86 million a year ago.

Contributors to the improvement include lower NPL inflows and mark-to-mark changes, lower disposition costs, and an overall lower level of problem loans as our bankers and credit support here in Columbus continue to do an excellent job in resolving the lingering issues from the crisis.

We've previously stated that credit costs for the second half of the year were expected to be lower than the first half.

That's probably pretty obvious to you now.

Based on third-quarter trends, we now expect that fourth-quarter 2013 credit costs will be similar to the previous two quarters, which will result in a meaningful decline in credit costs versus the first half of the year.

Net charge-offs were 23% lower in the third quarter than in the second quarter, totaling $23 million, or 0.47%, compared to $30 million, or 0.61%, in the second quarter.

Again, you'll recall that we've guided that quarter-to-date charge-offs would fall below 1% by year-end 2013.

We've achieved that target in the second quarter and pleased to see that further improvement in the third quarter now with an annualized year-to-date net charge-off ratio of 0.75%.

Again, improvement charge-offs largely due to the same factors that drove credit cost improvement, which primarily relate to the overall level of problem loans.

On slide 12, we'll talk about inflows and total NPLs.

Total NPL inflows continued to decline.

Inflows of $47 million in the third quarter represent a 30% improvement over the second quarter and almost 60% improvement over the same quarter a year ago.

We believe that NPL inflows will remain at these lower levels, again, due to the improving trends that we've seen throughout the year in our substandard and special-mention credits.

Non-performing loans ended the quarter at $451 million, or 2.29% of total loans, which is a 36% improvement from a year ago and a 7% improvement from the second quarter.

We expect NPLs to continue to trend downward to less than 2% total loans by year end, driven by reduced NPL inflow levels, continued execution, problem asset resolution strategies, and an increasing volume of upgrades.

On slide 13, again, we show a loan portfolio by risk rate.

Again, pleased that past rated loans increased $177 million from the second quarter of 2013, now 90% of total loans, up from 89% last quarter and 84% total loans a year ago.

Deeply pleased that special-mention, substandard accruing, and non-performing loans all declined during the quarter.

And slide 14, again, will reflect the strong capital ratios post-TARP redemption that I referred to earlier.

I'll remind you that they reflect the common preferred stock offerings, which generated about $300 million in net proceeds that were completed during the third quarter in conjunction with the July 2013 $968 billion TARP redemption.

I'll highlight the ratios for you that I've already mentioned earlier -- Tier 1 common equity now approximately 9.93%; Tier 1 capital, 10.55%; total risk-based capital, 13.04%; leverage ratio of 8.96%; and tangible common equity ratio of 10.61%.

I'll also point out that the 3Q 2013 Tier 1 common equity ratio under Basel III is estimated at 9.72%, about a 21-basis-point decline from current levels.

I'll also call your attention to the disallowed portion of the deferred tax asset at the end of the third quarter.

That asset is $647.8 million and as a percentage of risk weighted assets, 2.98%.

So that's a quick summary of the third-quarter highlights.

We'll have more to say during the Q&A and certainly more to say in our close, but at this time, Operator, I'd like to open it up for questions from the audience.

Thank you very much, ladies and gentlemen.

The floor is now open for questions.

(Operator Instructions)

Jennifer Demba with SunTrust.

Just curious about your loan growth comments, the outlook for fourth quarter -- just curious as to what's driving that expectation of stronger growth right now?

And what kind of loan growth expectations you might have for the next few quarters based on what you're seeing within your own pipeline and the competition out there?

Jennifer, let me take a high level, and then Kevin and D can fill in gaps as they see them.

Really, from a fourth-quarter standpoint, current pipeline, as well as just what we expect in terms of seasonal draws in the fourth quarter and maybe a little, again, moderating credit burn, but we see 3%, and possibly as high as 4% in the quarter.

I said 3% plus or minus.

I'd certainly like to see it on the high end of that, but it's, again, based on a very in-depth review of pipeline and reviews of all of our bank division CEOs and specialty line groups.

And again, I'll let Kevin or D add to that.

As far as for next year, we think we can push that number north in the 4% to 5% range.

And again, it's based on what has been a pretty long-term investment in talent over the cycle, and those -- a lot of them we've talked about.

Some are more recent in terms of equipment financing, expansion into Orlando, additions to large corporate banking teams in Nashville and around the footprint.

So again, based on pipeline activity and pretty thorough projections from those groups, we think that number moves into the 4% to 5% range in the not too distant future.

As far as the types of loans, Kevin, D?

You all want to add anything about that?

Yes, Kessel, this is D. I'll take that.

If you take and go in, and look at the pipeline, our pipeline is evenly broken out at about half and half on the -- from a commercial side on CRE and C&I, so we feel positive.

And to maybe give a little more depth on the other comments that you've made.

Our pipeline is as strong now as it's been in the cycle, so we do feel positive for additional growth there.

In addition, I would say for the fourth quarter and really, as we step into next year, we do see some reduction in some of the larger paydowns that we have had over the last year to 18 months.

But I think, and then as you get into 2014, I think the last factor that I would add would be -- as we have worked through these problem credits, we worked on both dispositions on a heavier level, as well as working problem credits out of the Bank.

And our expectation is that will reduce as well.

So that's -- would be the color I would add to it.

Okay, thank you very much.

John Pancari with Evercore.

Could you give us a little more color on expense trends in the quarter, specifically the OREO costs and where you think they could go to from here?

And then also on the comp side, and where that could go?

Yes, John, this is Tommy.

I'll take the general G&A, and then Kevin will talk about the ORE costs.

But in the second quarter, we thought that we'd see some additional expense reduction in the third quarter.

And basically, it was a component of two factors.

One was -- we had some one-offs in the second quarter that we thought would go away, and that is what happened.

We also had an elevated level of litigation cost of attorney fees and other professional fees, and we thought that would go down, and actually it went up during the quarter.

So, our guidance for the fourth quarter would be that we'll continue to push hard on every expense lever.

And we do believe we'll see some improvement in some modest lowering of the expense base on an adjusted basis in the fourth quarter.

And maybe Kevin can take on the ORE outlook.

Yes, Tommy.

John, this is Kevin.

Our ORE did spike up slight -- our overall credit cost, as Kessel pointed out, did come down, and that was following a pretty significant decline from the first to the second quarter as well.

But our ORE position did go up from [$11 million to $15 million].

I'll tell you what that was -- we sold a higher mix of ORE probably than we expected in the dispositions.

And toward the end of the quarter, we got some of the older ORE under contract, and we wrote it down a little bit more.

There was an extra $2 million or $3 million there right at -- toward the end of the quarter that will sell into this quarter.

So, it did go up a little bit.

But as far as looking forward, I see the ORE -- and that includes the ORE expense and other credit cost expense not really related to provision -- to be more of about a $10-million run rate over the next few quarters.

We're pretty comfortable with that number going forward.

It could move around a little bit, but $10 million is a good number to model for both ORE expense and other non-provision credit costs for the next few quarters.

Okay, so based on that, and I guess maybe some implied downside room in the professional fees, assuming that you still see some of those costs come out, then I assume -- is it fair to assume that a $180 million level per quarter in total expenses is a good run rate to assume?

John, we hadn't guided that specifically.

We're at $181 million, and we talked about moving it down a little bit.

We think that's what will happen.

I think we described it as modestly, and so we believe we can drop a little bit from the Q3 level.

Okay, thank you.

Jefferson Harralson with KBW.

I'm going to ask my first question on the expense line -- follow-up with John.

Is the -- could you talk about the year-over-year increase in other expenses?

And what's driving that, and what's in there that might be semi credit related that could come down over time?

So, your question is on the --?

The other expenses?

The operating expenses.

It was $27 million in the third quarter [beat beat].

Yes.

Are you -- year over year, did you say?

Yes, year over year.

Well, year over year it's up, and if you take it all together, it seems like there's probably some credit-related things in there or some -- as credit improves possibly, there might be some -- a credit-related element in there that could come down.

Just be interested to know what's in that number, and think about that within the run rate as well.

The other operating expense in the third quarter were $27.4 million compared to $24.8 million, same quarter a year ago, and the third quarter of 2012 had a $2-million litigation contingency reversal which pulled it back in a little bit, and distorts the comparison a little bit.

And then, our advertising is up significantly, almost $2 million over the prior year.

And on a linked-quarter basis, we're at the $27.4 million compared to $27.6 million.

And really, the changes in the advertising being up is a key element to that difference.

Great, thank you.

And my follow-up -- I wanted to ask you about the regulatory DTA.

If I have my numbers right, it was $711 million last quarter; it went to $647.8 million you're mentioning this quarter.

How should we expect that to -- I guess, can you talk about that differential?

If I'm right about that number?

How can we think about that over time?

Is that a once-a-year type of thing, where we're look to move that into capital, or is it just as you make money, that's going to pretty much lower that DTA?

So, quarterly, look at the four quarters out in the future; you adjust it every quarter.

You take away the whole quarter, and put the new four quarters out one end -- end-of-the-year estimates of the ability to earn pre-tax income, and you calculate it that way.

So, it adjusts every quarter.

Okay, so how much of your regulatory DTA is in the capital ratios right now?

The disallowed piece is $647 million.

It's a little over a $100 million that we've taken in so far.

Great, thank you.

Erika Najarian with Bank of America.

This is Ebrahim.

I had a quick question on -- in terms of, when we look at future reserve release, we're about at 1.6% right now.

And when you look at reserves to loans and reserves to NPLs, are we at a point where we're close to the bottom?

Or do you think that the reserves, when you look at reserves to NPLs, the ratio essentially could trend lower as NPLs go down; any thoughts?

Yes, this is Kevin.

We have had, as a reserve, did go down from $171 million to $162 million, as you pointed out.

We did see our coverage ratios actually pick up a little bit, so that was encouraging.

And of course, that has a lot to do with our reduction in NPLs, and we expect that going forward.

Our risk models have been consistent all the way through the cycle, and they do model more reduction in overall reserves.

Of course, that assumes continued portfolio improvement, charge-offs stay at these lower levels.

So, we do expect that has potential to get an upgrade of credit.

But there's a couple other things that could neutralize that a little bit -- that reduction, which is loan growth, where you heard D and Kessel talk about loan growth over the next few quarters.

So, that will add to the reserves.

And we're always watching the environment, the economic factors that are out there.

There are qualitative factors to that, so -- and new regulatory -- any new guidance that could come out, so we're conscious of that.

I don't want to -- we don't want to over-release or anything -- for any means, too quick out of the recovery.

But we do see the number, at this pace it's on, probably slows down a little bit, percentage of reserve.

But certainly there's a lot of factors that that involves, but we see just a slight reduction going forward.

All right, and if I can just sneak in one follow-up question on -- in terms of expenses, I appreciate the color that you provided.

The question is -- can we see the adjusted efficiency ratio move meaningfully from the 64% right now, given the rate backdrop?

Or do you expect that to remain close to the current levels, all else equal?

Let me take a stab at that.

This is Kessel.

We -- and I want to be real clear about that.

We will drive that number down.

And I know Tommy said we're not going to guide to a particular number or maybe level, but expenses were stubbornly high this quarter, and most of that was out of our control -- litigation-related expense.

Again, that is somewhat frustrating, but a part of this cycle.

And we'll get that behind us, and we will drive that number down.

We will drive additional cuts through a number of different opportunities with our branch system, with our overall real estate management, with credit-related expenses that are not, again, in credit costs but certainly tied to the cycle.

But overall, again, efficiency efforts that, although not necessarily publicized, are ongoing every day within our Company.

So, without guiding to an expense number or an efficiency ratio, the efforts here are very intense to make sure that we drive down from 3Q levels, and allow us, quite frankly, to continue to invest heavily in talent throughout our footprint, and technology, to better serve our customers.

And the cycle or the timing doesn't always line up so that the investment might occur before the subsequent cuts are reflected, but those efforts will continue, and we will drive that number down.

Got it, thank you very much.

Emlen Harmon with Jefferies.

I was hoping to talk a little bit more about the loan growth.

I guess just to be clear, when you're talking about 4% or 5% growth over the first few quarters of next year, I just want to make sure that's on a quarter-over-quarter basis.

And just also would like to understand what the run-off has been -- underlying production you feel like has been holding you back?

And whether you guys have identified those run-off portfolios, and how much is left to go there?

I'll let Kevin or D talk about the run-off, but the numbers we're referring to are annualized numbers, just like this quarter was 2% -- 2.1% on an annualized basis.

We believe the fourth quarter could be in, again, in that 3% to 4% on an annualized basis.

So, those are annualized numbers.

Got you.

This is Kevin.

I'll touch on the run-off, and let D take it from here.

But we had -- we think, by the end of the year, somewhere between $300 million and $400 million, whether it's disposition, being run out of the Bank, restructured, or just loans that we're pushing down is that much of that -- has been about that much of the run-off, mainly and obviously through the residential C&D and the land portfolio.

We just think, at the NPA levels we're expecting to be going into next year, that should be cut in half.

That could be a $150 million to $200 million number, which, two or three years ago, it was $700 million and $800 million, so that right there is a little bit of a lift swimming against the credit burn that we've had to over the several years.

So, that levels off somewhat during next year.

And, D, you may want to add on to --

Yes, I guess the only thing I would end up adding is, as Kevin made a comment there it would -- you'd look at your land acquisition and your development.

That is -- that will continue to go down, but it's -- but I think, as you can see this quarter, we actually grew in the retail loans, as well as commercial real estate, as well as C&I -- on all three of those categories.

From what we see from a pipeline standpoint, we see all three of those categories with positive momentum going into next year.

I would say the retail is a little higher than it probably will be on a go-forward basis, but I think we will more than overcome that in the CRE in the investment real estate, as well as the C&I side.

Got you.

Excuse me -- got you, thanks.

And then, I guess another one on loan growth as well.

So, you guys, following the redemption of TARP, has that generated new opportunities for you?

Are you seeing a chance to go in with new credits that were maybe passing before?

Yes, I think, in general, just removing the TARP stigma, as some like to refer to it, changes the perception of our Company with borrowers who might have been, maybe not reluctant, but at least in the back of their mind, had some doubts about the Company.

So, I do think it not only, as we've said often, put the offensive spring in the step in our bankers, but it certainly was a shot in the arm to our customer base.

And I think in our -- probably more so in our larger corporate efforts where, again, credit ratings and associated conversation around those are maybe more of an issue than in some of our local markets.

So, overall I don't know that we could quantify the number, but I think it does open doors, and it -- just from a mindset, both from the bankers and from the customers, I think it's certainly been a positive.

Great, thanks for taking my questions.

Steven Alexopoulos with JPMorgan.

Kessel, I appreciate not wanting to give specific expense guidance, but when you look at pre-credit-cost income, it's basically just trended down right over the past year.

From a high level, what are your thoughts on the ability to drive this?

And do you see enough revenue leverage to offset the higher environmental cost?

Yes, Steven, we do think -- we've said all along we need to stabilize the balance sheet, and now we've had reported loan growth two quarters in a row.

And we see that, again, trending up as not only production increases, but the credit burn decreases.

So, we think we have the opportunity for revenue lift from just an overall balance sheet standpoint.

We needed stability in the margin.

Even though we still expect some downward pressure, we were pleased to see the margin actually increase 1 basis point this quarter.

We'll still see continued pressure from a mortgage banking income, but as we've said, we made some investments.

We're taking cost out of the backroom, as are all of our competitors, but we're actually adding commissioned originators in higher growth markets where we just have not had a presence, primarily the state of Florida, where we've had strong banking operations in Tampa, the panhandle, Jacksonville, and not mortgage penetration.

So, we think we can partially offset the decline in refinancing activity with new purchase activity through the mortgage side.

And then we think, again, over the next quarter, we could see increases in core banking fees moderately higher, increases in overall FMS fees, excluding mortgage, moderately higher.

And we just got to drive down the other costs, whether it's associated with the credit cycle or anything else that was maybe tied to our former operating structure.

We get asked a lot about that model, where we went from 30 charters -- I guess at one time, 42 -- but 30 charters to 1. And we've taken a lot of cost out, but as that model matures, and we get a better handle for making sure we're staffing that model properly, and focusing on the customers and getting the backroom more efficient, we think there's more cost to come out there.

So, a long way of saying, yes, we do believe -- we can turn that tide.

And I think we'll do it through the efforts I just outlined.

Okay, and maybe just one other question.

Can you give color on loan purchases in the quarter?

Are you finding that a less attractive option here, given slowing growth?

Thanks.

On the loan purchases, are you talking about syndications, I guess?

Yes.

Our syndication balances, just as a hard core balances were actually slightly down quarter over quarter, so we did not -- we had some that paid off.

We did acquire some, but on a net basis, they were down quarter over quarter.

Okay, thanks for the color.

Ken Zerbe with Morgan Stanley.

Just a question on C&I growth.

Obviously, you mentioned you had a strong pipeline in C&I.

You do expect growth there, but can you comment on the competitive environment?

We've just heard so many negative statements during the quarter about how competitive it is, how much yield pressure there is.

Are you seeing the same levels of competition in your market?

And is the growth that you're expecting -- I mean, are you willing to take lower yield?

Are you willing to compete on price to show the growth?

Thanks.

On the C&I side, absolutely, we are seeing pressure.

I mean, that's what's going on in the market.

I would say especially on the short-term rates, I would say it's actually eased off or backed off a little bit on the long term in the last couple of months.

But from a C&I side, we do see that pressure.

We have passed on a lot of credits during the quarter for pricing.

We've actually let a couple go because of the competition that we were looking at from a pricing standpoint.

Hopefully, as you will see, we've tried to maintain margin as best that we can, and balance that with growth for the long term.

So, that's a conversation we have really every day.

To give you a little color on the C&I pipeline, it's up roughly about 20% quarter over quarter.

We just got to make sure we're doing it at the right pricing, and making sure we make those decisions individually based on the credit and the customer involved.

And, Ken, I'll just add that for the quarter, we reported loan growth of a little over $103 million; yield-earning assets went up 1 basis point for the quarter.

I think that probably illustrates we could have certainly grown a lot more if we were just trying to show a growth pattern that made a nice, steady chart.

But it's -- every day it's a battle out there.

And our bankers, I think, do a very good job of knowing when to walk away, and sometimes maybe we help that here in terms of walking away and not putting a credit on the books that, again, will make for a great growth story, but long term we can't live with.

I'll also point out that D mentioned syndications being slightly down, but we're getting growth from some newer business lines like senior housing where we think we actually have the best team on the ground in our markets, and we're getting opportunities that give us appropriate yield where we just have, again, why don't you bring expertise to the market that allows us to capitalize on the opportunity out there.

But it is a daily battle, and we're not going to, as Tommy says every other day -- don't do something stupid.

We're not going to do things stupid just to show loan growth.

Understood.

And then just one quick follow-up.

You mentioned, if I heard right, that you expect to see a reduction in paydowns.

How much visibility do you actually have in those, or were you talking more scheduled maturities?

Two things.

I'm talking more about not the scheduled maturities.

It would be actual maturities of loans.

It would be real estate projects that had hit a -- the finished construction and goes permanent.

The visibility we have -- as we know the draw schedules.

We are very involved in conversations with the bankers on tracking that.

And so, we've been able to see what we would do in those paydowns based on feedback and progress of each of those larger customers.

But we will continue to have it.

We always have had it, but it's -- but we expect it to be a little bit more reduced.

Great, thank you.

Kevin Fitzsimmons with Sandler O'Neill.

Can we just talk about capital for a second, Kessel?

Now, post-TARP repayment, you have this higher level of tangible common equity?

How do you view the dividend?

How do you view the prospect of buybacks?

I would suspect maybe with being so close to having repaid TARP, and perhaps going into more of a formalized stress-testing process, that that's something that we have to put on the back burner.

But I just wanted to get your thoughts on how to look at that.

Thanks.

Kevin, you said it well, and to my regulatory friends who are also on this call, I think you've answered the question for me.

But we said clearly during capital raise, and we were asked -- did you mind talking about it then?

We didn't think it appropriate to talk about giving back capital as we launched a capital raise.

So, it's a back-burner event, certainly in terms of the next several quarters.

But clearly you can see how capital will build with the disallowed portion of the DTA, and just normal earnings flowing back in.

So, you will see those ratios build.

And at the appropriate time, we'll have those discussions as we go through, again, stress testing and just ongoing discussions with our regulators about capital management.

We understand the need to manage it very efficiently.

As to the specifics, we were -- and this would be -- come as no big surprise.

We were at a conference -- I won't give out free advertising this morning -- at a conference in New York a couple months ago where that question was posed on an interactive basis to the audience full of analysts.

And the overwhelming response from that audience was they would like to see a share buyback, so -- and we didn't expect anything differently.

For our institutional shareholders, they would certainly like to see that.

To our retail shareholders, they would like to see a dividend increase, and right now we need to focus on core earnings, on pre-tax, pre-credit, on continuing to drive credit costs down.

And at the appropriate time, it will be a fun conversation to have.

And at the appropriate time in the future, we'll talk about ways to efficiently manage the capital and, where possible, return it to the shareholders.

Great, thank you.

And just a quick follow-up.

There's been a lot of questions on expenses during the call, but just looking ahead, you had alluded to that you're going to look at areas like your branch system.

Are the things that are on the table, would they include looking at specific markets such as your exit out of Memphis a few months ago?

Or are they going to be just more very bite-size type of approach to the expenses?

Thanks.

Well, I'm not sure I refer to them as bite size.

We've got a lot of effort looking at the overall footprint.

As it relates to specific markets, we did announce during the quarter the exit in Memphis and the sale of our branches there.

Quite frankly, we would like to focus our effort on making markets more efficient in growing markets.

We've had great activity in Nashville.

I had mentioned the large corporate banking additions and the growth we've had there.

Our Florida footprint, not as mature in maybe Jacksonville, but certainly doing well, and doing well in Tampa and along the panhandle.

And, again, the Alabama, Georgia, South Carolina markets are as core as you get.

So, no plans to exit markets.

We've just finished a comprehensive strategic review with every market leader, and we shared our expectations on what each leader needs to do to move the needle and be relevant in their markets.

And if they are irrelevant, become more relevant.

So, again, no plans to exit markets, but certainly plans to take meaningful bites out of the expense base.

Okay, thanks, guys.

Ladies and gentlemen, the floor remains open for questions.

(Operator Instructions)

Craig Siegenthaler with Credit Suisse.

Just had a follow-up here on C&I.

What is the new money yield at Synovus today relative to current portfolio yield of 4.37%?

You talking about the -- basically from a new and renewed -- the new rate; is that what you're talking about?

Exactly.

A lot of it depends, on a quarterly basis, on the mix that we had.

Kessel made a comment earlier on the senior housing and the strong yield that we're able to have on it.

I would say we are seeing pressure on the larger C&I side as that comes in, as well as in-market -- as well as competition.

It is seeing a little pressure on that rate though overall.

Just in terms of magnitude, is it 40, 60 basis points below the current yield, or is it something much closer?

I'm sorry.

I didn't understand the question.

So, relative to the 4.37%, I'm just wondering in terms of magnitude, is it 40 to 60 basis points below the new money yield today, or is it something much closer to the current rate?

It would be less than your 40 to 60 basis points.

Okay, got it.

And then just a second question -- you're hearing a lot of your competitors complaining about investors going out in terms of term, in the CRE and C&I market.

Are you guys due any loans of 10-year maturity or greater today on the commercial side?

Craig, we lost you there.

Do we still have the call, operator?

I'm right here.

Can you guys hear me?

Yes --

Operator, are we still on the call?

You are still on the call, sir.

Operator, can you hear me?

I can hear you fine, Craig.

Can you hear me?

Yes, I can hear you, too.

Hold on just a moment.

Ladies and gentlemen, please be patient and please remain on the line.

Your conference call will resume momentarily.

Okay, your line is live.

Craig, your line is live also.

Sorry, Craig, (multiple speakers) we heard some of your question, but if you could repeat that one for us?

All right, perfect.

So, I just had a question on maturity.

Are you guys underwriting any commercial loans today with a maturity of 10 years or greater?

Because you're hearing a lot of banks complain about other institutions, investors, and insurance companies really extending out in terms of duration or maturity.

Yes, we would have very few credits that would be 10 year or more in maturities.

The ones that we would have would be very long-term customers with very long relationships.

We tend to be shorter than that, and really, over the last several quarters, our overall maturity in our book of loans really has not moved very far.

We're mainly a short-term 3- to 5-year lender on those type assets, and it's rare we even get past 5 -- 5 to 10, on those type of credits.

And, Craig, I think what you're also probably hearing, which I'm not sure we addressed, was that we are seeing some longer-term fixed rates.

Not just maturities, but longer-term fixed rates, which we have been very reluctant to compete against.

So, where we're seeing, again, a maturity with some variable rate protection, that might be one thing.

But when it's a flat-out long-term fixed rate, we're just not a long-term fixed-rate lender.

We have seen that in the market, and been willing to walk away from some of that.

All right, thanks, guys, for taking my questions.

Gentlemen, we have no further questions in queue at this time.

Okay, well, thank you, operator, and thanks to all of you who are on the call today, both analysts, investor community, and our team members and other friends of the Company throughout the footprint.

I want to just give you a quick summary of the quarter.

I think sometimes we all forget here that we're less than 90 days post-TARP redemption, which, again, represented a long, long journey.

We began this quarter with upgrades from Fitch, from Moody's, from S&P.

We completed successful common preferred stock offerings, and then we, again, our TARP redemption on July 26, which provided about a $0.04 per share annualized boost to EPS based on that current run rate.

It now puts our bankers back on offense, and allows us to really focus on customers and on growth.

I think, again, the highlights of the quarter were continued improvement in credit quality, loan growth, and really solid growth in core deposits.

We probably talked enough about expenses, but we did have elevated professional fees and other expenses related to loan workouts and foreclosed real estate.

And we expect those to decline going forward, and we will work diligently to make sure that occurs.

We expect the continued improvement in credit quality again, and think loans will grow, as I mentioned, 3% to 4%, and maybe 4% to 5% next year.

We were especially pleased to see the strong market share data across the Southeast where more than, again, 80% of our total deposits are in markets where we have top-five market share.

The key investments we made throughout the cycle, and the more recent ones including Nashville, Tampa, Orlando, [wealth] teams in Charleston and Naples, Fort Myers, are, again, beginning to produce results.

And, again, I think give us strong encouragement for the future.

So, again, in closing, it's a very big time for our Company.

We celebrate our 125th anniversary later this month.

We'll ring the bell on the New York Stock Exchange, but that will be a couple-hour diversion.

I will assure all of you we are as focused or more focused than ever on core operating results.

So, although we'll celebrate the past, we're even more excited about the future.

And I think all of you, again -- analysts, investors, shareholders in general, Board members, and team members on the call for your continued support of our Company.

Hope you all have a great day.

Thank you very much, ladies and gentlemen.

This does conclude today's conference call.

You may disconnect your phone lines at this time.

Have a wonderful day.

Thank you for your participation.