Synovus Financial Corp (SNV) 2014 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Synovus' First Quarter 2014 Earnings Conference Call.

At this time, all lines have been placed on a listen-only mode, and we will open the floor for your questions and comments following the presentation.

It is now my pleasure to turn the floor over to your host, Mr. Pat Reynolds, Director of Investor Relations.

Sir, the floor is yours.

Thank you, Kate, and thank all of you for joining us today in the call.

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 your questions.

Before we begin, I'll 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 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 in 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 you initially limit your time to two questions.

If we have more time available after everyone's initial two questions, we will re-open the queue for follow-up questions.

I'll now turn it over to Kessel Stelling.

Thank you, Pat, and good morning to everyone, and thank you for joining our first-quarter earnings call.

I'll move right into the highlights for the quarter.

First-quarter 2014 net income available to common shareholders was $45.9 million, or $0.05 per diluted common share.

The quarter includes pre-tax restructuring charges of $8.6 million, a $5.8 million pre-tax net gain from the Memphis transaction completed earlier this quarter, as well as a $3.1 million pre-tax gain from a branch property sale.

Total reported loans grew $101.2 million sequentially, or 2% on an annualized basis.

Excluding the impact from the Memphis transaction, total loans grew $190.8 million, or 3.9% annualized versus fourth quarter 2013.

As you'll see we'll talk about later, we had continued broad-based improvement in credit quality.

Our NPL ratio declined to 1.91%, from 2.08% in the fourth quarter of 2013, and 2.65% in the first quarter of 2013.

We're now at the lowest level in six years since the first quarter of 2008.

Credit cost totaled $17.6 million, a 21% decline versus the fourth quarter of 2013, and down 64% from a year ago.

As you'll see later, all of our capital ratios increased during the quarter.

Our Tier 1 common equity ratio crossed the 10% threshold, ending the quarter at 10.24%, up 31 basis points from the prior quarter.

Going to Slide 4, as I said previously, first-quarter reported sequential quarter-line growth was $101.2 million, or 2% annualized.

That's the fourth consecutive quarter of reported loan growth.

Total loans excluding the impact of the Memphis transaction again were $190.8 million, or 3.9% annualized versus fourth quarter.

To give you a little color on that growth, C&I loans grew $131 million, or 5.3% annualized.

Retail loans increased $24 million, or 2.7% for the quarter -- again, excluding the impact of the Memphis transaction.

The primary support there was Atlanta and Tampa, with meaningful growth across retail products in Atlanta, and HELOC growth in Tampa.

CRE loans grew $36 million, or 2.2% annualized versus the fourth quarter, again excluding the impact of the Memphis transaction.

I think of additional interest, growth in investment properties was about $104 million, or 9.1% annualized.

We had planned declines in one to four family properties, and the land portfolio of about $68 million.

Again, we had strong loan growth in key markets across our footprint, including Atlanta, Tampa, Jacksonville, Orlando, and Charleston, and certainly others as well.

The story there is our teams on the ground are getting good traction, and our talent acquisitions in high-opportunity markets are beginning to show good results.

Based on the results we're currently achieving from our growth strategies, the strong pipeline and the current economic outlook in our footprint, we expect -- continue to expect loan growth of 4% to 5% for the year.

On Slide 5, talk a little bit about deposits.

The story there, improved core deposit mix.

On a reported basis, core deposits decreased about $198 million from year end to $19.58 billion.

The reported figures are impacted by the Memphis transaction, so excluding that, core deposits are flat versus the prior quarter, as growth in our low-cost core deposits was offset by declines in higher-cost time deposits.

Our core deposits reflect an improvement in mix, with non-interest bearing deposits up 14% versus a year ago, time deposits down 8% as planned.

We'll talk about the margin in a little bit.

The effective cost of our core deposits declined one basis point to 26 basis points versus the prior quarter, and declined four basis points from a year ago.

Core deposits, excluding the impact of the Memphis transaction and excluding time deposits, actually increased $232.5 million, or 5.8% annualized versus the fourth quarter.

Total deposits of $20.95 billion increased $74.1 million, or 1.4% versus the fourth quarter of 2013.

Total deposits excluding the impact for the Memphis transaction increased $265 million, or 5.2% from the fourth quarter of 2013.

On Slide 6, talk about the margin.

As you'll see, our net interest margin was 3.39%, up one basis point from the fourth quarter of 2013.

The yield on earning assets increased one basis point to 3.86%, versus 3.85% in the fourth quarter 2013.

The effective cost of funds was unchanged from the fourth quarter at 47 basis points.

We continue to expect some slight downward pressure on the net interest margin during the remainder of 2014.

Slide 7, adjusted non-interest income increased $3.3 million versus the fourth quarter.

It was $63.1 million -- again, $3.3-million increase, driven primarily by $3.1 million gain on a branch property sale.

Both core banking fees and FMS revenues were impacted by seasonality and fewer number of days in the quarter.

Core banking fees were $31.2 million, down $880,000 from the fourth quarter, driven by lower transaction activity and NSF and bank card fees.

Our FMS revenues decreased versus prior quarter by $1.4 million to $18.1 million.

That comparison reflects some elevated customer swap fees in the prior quarter.

On another positive note, mortgage banking income actually increased $599,000 versus the fourth quarter.

We expect mortgage revenue during the remainder of this year to be relatively stable to increasing from first-quarter 2014 run rates, due to continued benefits from our strategic talent additions that we have described on previous calls.

On Slide 8, again, a continued focus on expense management.

Our adjusted first-quarter 2014 non-interest expense was $167.1 million, down $824,000 from the fourth quarter of 2013.

Head count down slightly versus the fourth quarter, down 3.1% versus a year ago.

Employment expenses increased $1.5 million versus the fourth quarter, due to seasonally higher payroll taxes.

Occupancy and equipment expenses were relatively flat versus the prior quarter, and we continue to evaluate our branch network as part of our focus on efficiency.

We closed three branches this month; now have 274 branches, compared to 283 branches a year ago.

A slight increase in FDIC expense $1 million versus the prior quarter.

Other expenses declined overall, professional fees declining by $2.2 million, due mostly to lower credit work-out costs.

The implementation of our previously announced new expense initiatives is certainly under way.

We announced $30 million on the last call.

As previously noted, these savings are expected to be offset by investments in talent, technology, and marketing.

We've just launched our new branding campaign.

Hopefully many of you have seen it, launching a couple weeks ago during the Masters.

It highlights the strength of our franchise and the local delivery model, while emphasizing the capital strength and expertise of the larger Synovus bank.

We're excited about that investment in branding.

We're excited about the investment in talent, as we continue to strategically add revenue-producing FTEs.

We're excited about our investments in technology -- our ATM fleet, our e-channel core origination system and commercial portal, which I'll talk about again a little later.

A comment on the $8.6 million in restructuring charge recorded this quarter.

It relates to targeted staff reductions, which we began to implement during the quarter, and are planned to be completed during the remainder of this year.

On Slide 9, we'll move to credit.

We talked about the broad improvement in credit quality.

We're pleased to see improvement, both in the quality of the credit portfolio, and the lower costs that result from a stronger, higher-quality balance sheet.

You can see this very well on the side that both credit costs and net charge-offs experienced meaningful reductions in the first quarter.

On the graph on the left, you'll see that credit costs were $18 million, a 21% improvement over the fourth quarter credit costs of $22 million.

The lower level of problem-loans-associated costs contributed to the reduction, obviously, in credit costs.

We expect credit costs to remain at levels similar to the current and previous quarter, as further credit volume improvements were partially offset by provision for loan growth.

The graph on the right shows net charge-offs for the first quarter of $15 million, or 0.3% annualized, down from $25 million, or 51 basis points annualized in the fourth quarter of 2013.

Lower marked to market charges and lower retail charge-offs contributed to the overall reduction in net charge-offs.

Slide 10, the graph on the left highlights the continued decline in NPL in-flows, down to $35 million for first quarter.

This represents a 14% improvement over the fourth quarter, and a 58% improvement over the same quarter a year ago.

It's important to also note that our sub-standard accruing and special mention loan balances declined by a combined 11% in the first quarter of 2014.

Continued reductions in these categories have resulted in lower NPL in-flows.

Non-performing loans ended the quarter at $384 million, now below 2%, at 1.91% of total loans, which is an 8% improvement from the fourth quarter of 2013, and a 26% improvement from a year ago.

We anticipate continued declines in the problem loan levels throughout 2014.

We expect that NPAs will move towards 1.5% by year-end 2014, and NPLs will end closer to 1% levels.

Slide 11, to highlight strong capital ratios.

All capital ratios increased versus the prior quarter, primarily due to earnings and DPA accretion, with some offset from loan growth.

Tier 1 common equity ended the quarter at 10.24%, up 31 basis points from the prior quarter.

Tier 1 capital, 10.85% versus 10.54% in the fourth quarter.

Total risk-based capital, 13.31%, versus 13% in the fourth quarter.

Leverage ratio, 9.46%, versus 9.13% in the fourth quarter.

Our tangible common equity ratio, 10.78%, versus 10.68% in the fourth quarter of 2013.

Again, first quarter 2014 Tier 1 common equity under Basel III is estimated at 10.03%, which is well in excess of the minimum requirements.

Remind you that we still have a very significant deferred tax asset that we continue to generate regulatory capital in future periods.

Before we go to Q&A, just a little commentary about what we expect to see in the year ahead.

First, a comment on the first quarter.

We're pleased with our performance in the first quarter.

I think it reflects continued steady progress for our Company.

We remain intensely focused on activities that enable us to deliver an exceptional customer experience as we move through the second quarter and the remainder of the year.

Certainly, credit quality and efficiency are always top of mind, and we expect continued momentum in both of those areas during 2014, and our team remains very focused in both areas.

As I stated previously, we expect credit costs will remain at or near the lower levels we've experienced in the past couple of quarters, and we expect additional expense savings of $30 million to offset the investments we're making in technology, talent, and marketing that drive growth.

Again, we don't stop there.

We'll continue to push for additional expense-save opportunities.

If you live in the Atlanta or Birmingham markets, or are supported by their television markets, or even here in Columbus, you may have seen evidence of our investment in marketing as part of our extensive internal and external branding effort currently under way.

We launched for the first time a Synovus-branded television print and digital advertising designed to help our customers better connect our local bank divisions, which have served us so well, to the added capital infrastructure and expertise that Synovus brings to the relationship.

We think that boosting awareness of the Synovus brand is really important in this competitive environment, especially to business customers who want relationship banking, but in many cases need more than a community bank alone can offer.

Our efforts to grow deposits, loans, and fee income include customizing our retail delivery model based on the different needs of our customers in our small, medium, and larger markets.

We continue to emphasize our core banking products and services while we're expanding our brokerage sales force, hiring additional mortgage originators, licensing even more of our front-line bankers to assist in the sale of insurance and trust services, and extending our private wealth services to even more markets.

We continue our work to refine the packaging and pricing of our deposit services, focusing on increasing revenues from a core line of business, expanding our treasury management product set, and developing additional revenue sources.

We've got an ongoing effort to assess market and business line growth opportunities.

We're continuing our efforts around senior housing, equipment leasing, and commercial real estate, as we gain even greater traction in the service of larger commercial customers.

We continue to invest in enhanced technology and e-channels necessary to be competitive, and offer added flexibility and convenience to our customers' banking experience.

We'll complete this summer the roll-out of our 200 new full-service branch ATMs, and launch our enhanced commercial banking portal and mobile banking upgrades later this year -- again, all designed to improve that customer experience.

Just like every other bank and continuing with our activities over the past several years, we're actively evaluating our branch network to ensure that our banking locations provide value and convenience to customers who want a physical place to transact.

We know there's a need to preserve branch banking for a certain customer segment, and we're working to do that just as efficiently as possible.

Finally, but I think most importantly, we continue our investment in talent.

We've talked a lot about the additional experience and highly skilled team members in banking, mortgage, investment, and support lines to our already strong team, but we're investing heavily in our existing team who have worked so hard to carry us through this crisis, with additional commitments to leadership, development, training, benefit, reward, and recognition, et cetera.

Again, a big investment in our teams.

I think we really do have the right focus and the right activities under way to generate the kind of growth we expect for the year and beyond, and we're especially excited about the branding effort and many additional activities underway that we believe will generate positive results for our shareholders, and a better experience for our customers.

Now operator, I'll be glad to open the floor for any of the questions.

We have our team standing by to take those questions.

Thank you.

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

(Operator Instructions)

Our first question today is coming from Emlen Harmon.

Please announce your affiliation and pose your question.

Hi good morning, calling from Jefferies.

Good morning.

I was hoping we could just talk through the expense progression in the quarter a little bit.

Obviously, expenses pretty flat quarter over quarter in what can sometimes be a seasonally tough quarter.

You talked a little bit about some of the expense-save initiatives you guys have going for the year.

Could we actually talk through the comp line, specifically, and give us a sense of just kind of what seasonal expenses you guys are seeing in comp this year in terms of payroll taxes, any other kind of accrual increases, and just kind of what you would expect from a run rate there as we head into the second quarter?

Yes, this is Tommy.

I'll take that question.

At the end of the fourth quarter last year, we guided that we were going to target a expense base that would be in the neighborhood of the 2013 expense base, which was $670 million.

We achieved in the first quarter, I guess, a proportional share of that, at $168 million, slightly under what it was in the fourth quarter last year.

We've got the initiatives that are out there to find our $30 million expense reduction and have it fully implemented by the end of the year.

That would include employee initiatives, work-force-reduction declines.

Branch closures are always on the front of that.

Then we feel like that we'll have a meaningful take-down, and are targeting a take-down of attorney fees.

We saw a little bit of that in a linked-quarter basis.

Then our discretionary spend focus, things where we can just tactically and strategically put pressure on the whole Company to continue to reduce things such as travel, training, supplies, and the like.

Kessel mentioned that we would have some offset to that, and that's the reason that these initiatives to take expenses down don't totally show up in the financial statement.

Those offsets, as he mentioned would include IT, marketing, and talent, as we look beyond just the immediate quarter or two; but as we look into the future we think those are wise investments for the good of the Company.

Got you, okay.

In terms of -- I know the comp expense can some types show some seasonality in the first quarter.

Could you just maybe detail what kind of increases you had, if anything, from say FICA taxes, or just comp accruals, bonus accruals?

Yes, you have some seasonality on both sides of the income.

You certainly have some on the expense side.

One of them would be the front-end-loaded FICA and that type of thing.

That actually more than offsets the shorter period of employment expense, so you have a net cost in the quarter, so you get some relief from that.

That's really, on the expense side, that's the primary one that's tied to the number of days and the seasonality.

Okay, got you.

Thanks, guys.

Thank you.

Our next question today is coming from John Pancari.

Please announce your affiliation and pose your question.

Evercore.

Good morning.

Good morning, John.

Tommy, back to the question there on comp.

Do you have the quantification of what the FICA was for the quarter?

Yes, about -- it represents about a $3-million increase in payroll taxes that you get mostly behind you in the first quarter.

All right, so that was a link quarter increase of $3 million; so we can expect that to decline $3 million next quarter?

You can expect it to subside almost in that amount.

You still have some that pulls along in the second quarter and beyond, but for the most part, it's very front-end loaded and largely done.

Okay.

Also on the expense front, the other expenses declined a good amount in the quarter.

I just want to see if there's something in that.

It looks like it's down about $5 million.

I'm not sure if there's an adjustment there that we need?

Yes, we had -- and that really triggers back into the GAAP disclosure, as opposed to the adjusted G&A expense -- but it's really, we had about a $3-million letter of credit reserve that was reserved for, that we were unable to -- that we were able to unwind during the quarter.

That actually is in the GAAP G&A expense line, but by the time you looked at the way that we've described the financials in the presentation deck, it's actually a component of credit cost.

Right, so is that other operating expense line item of $20.5 million sustainable at that level, or does it rebound back?

It's -- certainly the $3 million was a one-off, but I'd say without too much of a prescriptive answer there, it's in the same zone.

I won't tell you that it's sustainable, because it by definition has things that bump in and out of it, particularly on the credit side.

Okay.

All right, thanks.

If I could just ask one more thing, Kessel.

On the capital front, can you just give us a little more thoughts on the eventual capital deployment longer term?

I know you're sitting here at a 10% Basel III Tier 1 common.

You paid back (inaudible) in the third quarter of 2013, and you got the DTA recapture potential coming in.

Can you talk longer term about the potential deployment opportunity, particularly buy-backs?

Yes, John, and I'll make it longer term and not certainly quarter-specific, as you just mentioned.

We're three quarters out now from a capital raise, but as we projected and as part of our TARP exit, we believed that our capital ratios would grow substantially, and they will continue as we earn at the current rate or higher and as we bring back the disallowed portion of the DTA.

I think our regulators would agree that it's premature to talk timing, but that certainly it is in everyone's best interest for not just Synovus but for the industry to manage capital efficiently to keep access to capital markets.

I think as we move through this year, you'll hear us give more specificity to how that might happen, whether it comes in the form of share buy-backs -- which certainly could be attractive at the appropriate time at the appropriate date.

Also, with the potential of our reverse stock split, which is being voted on by our shareholders now, that also gives us additional flexibility on just the dividend front to potentially increase a dividend.

Give us another quarter or two to be more specific about that, and certainly not predicting when that might happen, but we certainly are aligned with our major investors about managing the capital very efficiently.

Okay, thank you.

Our next question today is coming from Ken Zerbe.

Please announce your affiliation and pose your question.

Sure.

Hi, it's Ken Zerbe, Morgan Stanley.

Just had a question on credit cost.

The guidance -- I think you said it was going to be similar to the last couple quarters.

Obviously, we've seen a pretty good downward trend in credit recently.

I'm looking at Page 9 here.

But if I heard right on the letter of credit, the reserve -- I guess that does -- it sounds like that does reverse.

On Slide 9, you're -- I just want to make sure I'm thinking about this right, that instead of $18 million credit expense, it's probably more an adjusted $21-ish million.

That's the level that you're thinking about on a go-forward basis, is that correct?

Yes Ken, this is Kevin.

We do expect -- you could call that a recovery in a way.

It was a letter of credit against ORE property that got healed, and we had it 100% reserved.

When it got healed, our LC got released, so we released our reserve to get that, bringing that down $2.9 million.

But recoveries happen every quarter.

I can sort of put that in that bucket, and we'll have $4 million or $5 million over the last few quarters of recoveries, we expect that in the next couple of quarters.

I would say that was not that unusual.

There's a lot of noise, obviously, in credit costs.

But having said all that, I'll reiterate as Kessel mentioned, I do think somewhere between that goalpost $18 million to $22 million of the last couple of quarters is where I think our next credit cost will be, which will include the ORE expense and the provision expectations.

Got it, okay.

I guess when we think about a lot of the other banks as they've been healing over the last several years, they've ended up with negative provision expense.

Given your portfolio, given your credit, which is obviously improving, any -- is it just fair to assume you're not quite going to get that negative provision expense at any point soon, or -- I'm just trying to make sure that we're not -- go ahead.

Ken, it's a good point, but I don't know that we'll get there.

We do think -- again, we don't -- we think it will go in the right direction on overall credit cost, but we've still got some work to do.

We're happy that the NPLs are now below 2, NPAs are around 2.5, we expect as Kessel mentioned NPLs to go below 1 and 1.5 on NPAs by the end of the year.

We're not going to get there just on lower in-flows coming in, which is a great sign.

We're going to have to still have some disposition, restructure strategy to get there.

That will cause some provision to happen, as well as we expect loan growth.

You heard 4% to 5% is still a number we are targeted and believe we'll hit.

With that, we'll create some provision there.

I think during that time -- I'm not talking about every bank, but there was negative provision.

There was no loan growth, there was shrinkage going on at the same time they were getting recovery.

I don't think that perfect storm will happen for us.

I think because we're already getting loan growth and that's in place, so I think again we'll see improvement, but not to that point.

Got it.

Then just one follow-up question on the margin.

I think I heard that you said that you're going to have some slight margin pressure over the rest of the year.

What was it about this quarter that actually led to a fairly stable margin?

Was it just the day count, or premium amortization slowing?

Ken, we have a little better than expected securities revenue.

Also on the loan front, we did a little bit better pricing on new and renewed.

We don't know that it's sustainable at that level in order to achieve our 4% to 5% growth rate, but we were happy to see it go forward.

Got it.

Okay, thank you very much.

Our next question today is coming from Kevin Barker.

Please announce your affiliation and pose your question.

Kevin Barker with Compass Point.

Just wanted to follow up with the DFAST submission.

Do you expect the DFAST submission to push out the possibility of returning capital to shareholders, or is it primarily around the recent TARP repayment?

Well, of course we built a good capital planning and stress-testing methodology a couple of years ago.

I think the implementation of that really allowed us to get -- it was a key player in the TARP exit.

We at the end of March submitted the DFAST documents, mostly from our regulators, their view of that.

We think it was built on a good foundation, and look forward to having conversation with them about it.

What we filed, as we understand it, does not necessarily govern certainly what you do with your capital in the future.

In fact, the instructions of it were to not put any kind of mergers or any kind of stock plays in it that the bank might want to do at some point.

Because any kind of permission that might be required to do something in the future could be outside of that submission that occurred back in March.

It's -- I think the spirit of it was to have people just send in their organic view of their Company without any sort of transactions associated with it, including the buy-backs or whatever.

But that also, as we understand, by not putting that in there, doesn't keep us from doing something between now and next year, if we so choose to work with regulators on that.

Do you look at it as ensuring you have a certain buffer from the 5% Tier 1 common equity ratio that will be publicly disclosed next year?

Would you manage your business to ensure that you have a significant buffer over that 5% when it does get publicly disclosed?

That's -- we hadn't disclosed that amount.

Like you said, the submission next year will become public data, but the spirit of it is certainly to do your best with a stress assessment, and make sure you have the appropriate capital to create that buffer.

We're confident with what we sent in.

Okay.

In this stress test, would you expect the biggest volatility around the results of that to be primarily the losses from credit, or more the changes in core operating earnings from the business?

Well it's probably the actual losses.

We kept a careful eye on the large banks, and we feel like we're in a reasonable zone as we can tell.

But that's all to be determined when the smaller bank info comes in.

But I think that's a factor, maybe the size of the balance sheet, what happens under stress, and then just operating results would be the keys to it.

Okay.

Finally, do you expect your growth initiatives to entirely offset the $30 million in expense savings?

Growth initiatives to -- well, we expect the balance sheet to grow and to help improve our performance.

We think that the expense reduction which paves the way to invest in the Company without increasing G&A expense, all those are important ingredients of the future, we believe.

So net-net of those investments that you're making within the business, do you expect it to entirely offset the $30 million expense savings, or do you think the $30 million will entirely come out of your existing expense base?

Well the actual, we've guided to be at about the same place on a G&A annual basis as we were last year.

We're committed to the investments that we described earlier -- which quite frankly, if you add them all up, they're probably meaningfully a little bigger at least than the $30 million.

We've just got to keep pushing it.

We're -- we think the investments are incredibly important to the near term, mid-term, long term, and feel like that's worked the compromise of keeping expense stable rather than a reduction that would exactly equal the $30 million that we are trying to take out of the base.

Ken, I'll just reiterate the point that we announced $30 million in identified expense saves, and that would be offset by these investments in talent, technology, and marketing, but we haven't stopped at $30 million.

We disclosed what we had identified, continue to work around the clock to identify more than that.

As appropriate, we'll disclose that to the market, as well.

Okay, thank you for taking my questions.

Our next question today is coming from Christopher Marinac.

Please announce your affiliation and pose your question.

Thanks, good morning.

I just wanted to clarify, the small branch gain which was disclosed separate from the Memphis sale -- that should, should we be taking that out of the pre-calculation, as well?

That's what we've done, Chris, in the first slide of the deck.

We took it out of pre-tax, pre-credit cost, and have isolated it as kind of a one-off item.

Got it.

Okay, just wanted to clarify that, great.

Tommy, from the C&I growth you had this quarter, was most of that organic, or all of that organic, in terms of generated internally?

I guess as far as generated internal, can you expand on the question?

Sure, I was just trying to make the difference between sourced internally from Synovus versus going through the shared national credits.

What I would end up saying is if you're asking whether shared national credit or syndicated credits that we -- part of that or a significant part of that was in the C&I growth, but let me I guess answer it an additional way.

Of the syndicated credits that we have, 75% of them are actually inside a footprint, and half of them have -- about half of them have ancillary and additional services with us.

It becomes -- we've got relationships with them.

Our bankers are out calling on these companies as well, so some of them, you would have a significant chunk of those that were partnered with other banks.

Okay, great Kevin, that's helpful.

Last question for whomever, just your expectations on deposits as the rest of the year goes on.

Do you think you'll see any competition for deposits, any changing in pricing that may be necessary?

On the competition for deposits, I think the biggest thing is you've got everybody is continually focused on mix first, making sure we're looking at the right type of core deposits.

I will say it is an increased focus with us with our team on the deposit side, both on the every day account generation, but also on the balances, as well.

To me, we view it as something we'll need to continue to focus on to continue to drive the strength of the core franchise.

Great, thank you for the color.

Thanks, Chris.

Our next question today is coming from Nancy Bush.

Please announce your affiliation and pose your question.

Hi, NAB Research.

Good morning, guys.

Good morning, Nancy.

Tommy, a question for you.

Could you speak to the asset sensitivity of the Company right now, and whether it should be -- are there any swaps rolling off, or anything happening over the next few quarters that will increase the asset sensitivity, as it looks like we maybe are getting nearer to rates going up?

Nancy, I'll be glad to do that.

We do continue to believe that we have a reasonable amount of asset sensitivity.

We run the models on a ramp basis, and believe that with a hundred basis points you could have a 3.2% increase in net interest income on an annualized rate over 12 months, and at that number at 200 basis points would be 5% increase over the same period.

We've been very conservative, I think, in our modeling.

We've actually taken that another step to say if you had a more aggressive re-pricing in the money market and NOW accounts, that those numbers would reduce to 2.6% and 3.9% based on the 100- and the 200-basis-point decline.

We've -- the floors have been moving out some.

That's certainly a useful fact for us as the rates began to move.

That's a key strategic piece of this, to have a lower level of the floor, as that number is down about $2.9 billion.

It's significantly lower than it was a couple of quarters ago.

We're keeping in mind as we look at our home loan bank advances and so forth to keep a balance on the interest rate risk, but we feel like we're well positioned for it, and quite frankly, would like to see that begin to happen, and think it would be very positive for our Company.

If I could just ask as an addendum to that, you were historically one of the most asset-sensitive banks in the industry, and this is sort of pre-2008.

Is it possible with your mix to get back to that position, and/or is this position that you would like to be in, very asset sensitive?

Well, we're certainly still asset sensitive.

Really to get back into that position right now would be pretty costly.

While it might have a future benefit for the -- none of us really know when rates are going up, so the bet would be a little bit against the short view.

We on a daily basis try to keep a balance between the asset side and the liability side and the duration amounts of windows and so forth.

Plus part of this is driven by the float from our customers and the approaches they have to lending and so forth.

We feel like we're in a good balance, and do not see us trying to move a lot of levers to increase the asset sensitivity in a large way right now.

We just want to keep it where it is and move forward that way.

Okay, understand that.

Quickly, Kessel, if you could mention -- you may have mentioned this in your remarks.

If so, I apologize.

Your large corporate group, what kind of progress they're making, how much they may have generated towards this quarter's loan growth, et cetera?

Nancy, I'll touch on it and Dee might want to add a little color.

They continue to make great progress.

Now, early on we had tremendous growth in areas like senior housing, because they were not having pay-offs.

It was a new group to us.

Now they're starting to see the normal churn that you actually want to see.

The lift in some of the individual components was certainly not as dramatic.

I think as Dee mentioned earlier, I think the better story now with that large corporate group is the partnerships they formed with the local bankers, where we're booking credits with ancillary services and so we may classify it in a large corporate group, but it really fits nicely into our footprint with our core banks and core bankers.

They're still -- we're very pleased with the progress of that group.

Again, from an individual component, maybe not as much lift in some of the sectors, but overall integrated very well with our team.

At the end of the day, the goal is to deliver that service and product to our customer without any doubt as to whether we're one team, one Synovus.

Again, good solid performance from that large corporate group.

All right.

Thank you.

Our next question today is coming from David Hilder.

Yes, thanks very much.

I'm with Drexel Hamilton.

Just a small question and a perhaps larger one.

On the 200 ATMs that you'll be rolling out later this year, will those replace existing ATMs, or will they be additive?

They'll replace existing.

We've been very strategic about where we put those -- obviously in our higher volume, because they're virtual branches.

We think they will also allow for potential efficiencies in branches that are either -- whether on premises or in close proximity to a branch.

But we're replacing our older fleet again with what we think is a state-of-the-art technology to really just give our customers additional options, full-service deposit capability and other capability.

Great, thank you.

On the Synovus advertising campaign, is that something that over time will be -- will the Synovus brand be more important, and perhaps some of the 28 regional or community bank names less important in your strategy?

We think it's very important to make sure that people understand the strength of Synovus.

The strength of that local brand served us very well during the crisis.

Quite frankly, it served us very well for 125 years in some markets, 113 in others.

But what was apparent as we came out of the crisis and did a lot of testing with focus groups about our footprint is that many of our customers didn't get the connection of who the local brand was relative to Synovus, or even who Synovus was.

Equally as important or more are the prospects and the business market that we think is so critical to our success did not understand that Synovus was a large regional bank holding Company with strong capital and technology to support that very local feel that we think we've executed so crisply across our footprint.

The idea here is to take that local brand equity and transfer it to Synovus -- not remove it from the local brand, but make sure that one plus one equals at least two, maybe three or four, as you look at again, a local brand like a Bank of Tuscaloosa and tie that into Synovus Bank.

There are no plans short-term to replace the local brands, but it certainly gives us the opportunity to leverage our advertising and marketing, and make sure that our customers, as they move through South Carolina where we're branded as MBSC, into Atlanta where we're branded as Bank of North Georgia, or Nashville where we're Bank of Nashville, that those customers understand it's all one bank, it's one charter, and one method of service delivery.

Again, no plans to change things, but certainly we want to take that goodwill associated with those local brands and get that same goodwill and excitement around the Synovus brands.

Thank you very much.

That's very helpful.

Thank you.

Our final questions today are coming from Jefferson Harralson.

Please announce your affiliation and pose your question.

I have a very broad question, just on the business model.

You're making a lot of investments.

You've changed many years ago what the charter consolidation -- and I've got the ad campaigns and the ATMs, you're seeing definite change in the business model on th retail side and the commercial side.

Maybe just give you a chance to comment on the business model changes that you're putting into place now, if any.

Or just a bigger-picture question on the business model, how's it's changing, and how that should affect your long-term profitability.

Sure, Jefferson.

I'll take a stab at that one.

You know as well or better than most, we went from a 30-charter operating environment to one, and in some cases made immediate changes to operate as one bank.

We centralized some things, we regionalized others.

But our goal then and still is now is to keep those decisions that are most important to the customer as local as possible.

That doesn't mean you can't regionalize credit or centralize the finance function, but it means that our local bankers need to be able to quickly decision the majority of customer requests.

It's been a progression as we in some cases might have moved too far, in some cases maybe not far enough.

But in terms of overall business model change, we think the introduction of these specialists -- whether it's again asset base which we've had for a long time, senior housing, large corporate CRE bankers, that has now worked well as we collapsed these, in some cases psychological barriers, of local charters, and not wanting help from the mother ship -- which again, in our confederacy, was kind of how we operated in the past.

On the retail side, we do think we can be more efficient in a delivery model, and quite frankly make that experience better for the customer if we can get more consistent in how we deliver product and service.

But at the end of the day, what we want the customer to see from a business model change or tweak is just the experience gets better, and that it's as good in one market as it is the other, although we like the local flavor our leaders bring to their service.

We think that again, going to specialty lines in some of the larger corporate areas where we have people with real expertise in some of these business lines, it's better received, quite frankly, by our customer and by our local bankers.

Nothing radical from the customer side, other than we want them to be served by the right banker, and we want to do it in an efficient way.

We'll continue to explore opportunities -- but again, always keeping the customer in mind, but certainly looking at ways to deliver it more efficiently, as well.

Just one follow-up.

What should we expect next?

Is it something that with your success in the specialty business lines?

Is it a new product or new teams, new unnamed verticals should we expect next?

It's all of the above, and we're investing in talent every day.

We're recruiting teams and talent every day.

I really do made a point, it's quite frankly a lot easier to recruit today than it was two or three years ago, or even a year ago, pre-TARP exit.

Because I think we've got teams of bankers that see what this Company is doing, and see the value-add we bring to the market.

It's certainly recruiting individuals, it's recruiting teams.

Yes, it is looking at products.

We have a comprehensive review going on right now in our retail space to make sure we have the right product for the right market segments, and we'll continue to look at other opportunities there, as well.

Thanks, guys.

Thanks.

Thank you.

We have no further questions in the queue.

Okay, well thank you, operator, and thank you to all of you that joined in.

I'll close with just a brief comment.

I was going to say on one of you wrote, but it was actually Jefferson in their piece this morning, that we were grinding away towards higher profitability.

I think that's probably a fair statement that we're grinding away.

I just want to assure everyone we're grinding away with enthusiasm and with a sense of urgency as we move along, again, this Company's recovery into a period of growth and opportunity both for our Company and for our customers.

I think that's a fair assessment.

It might feel like a grind to some of our team, sometimes, so I want to thank them for what they continue to do day in and day out to move the needle for us.

Again, to all of you, both shareholders, investors, analysts that are on this call, we appreciate your continued support.

It's a big week for our Company.

We'll have our annual shareholders meeting on Thursday, where we will say farewell to two more Directors who have reached mandatory retirement age: Neil Purcell, who has chaired our Audit Committee through some tough times and has done a fantastic job of providing guidance to us; and then Jimmy Yancy, former Chairman and President of the Company, who will have celebrated 54.5 years with the Company upon his retirement.

Just a special thanks to those two.

Again, thanks to all of our team for all that you're doing every day to allow us to continue to make the progress we're making.

Thank you all, have a great day and a great rest of the week.

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.