Synovus plan lands big deposits

Synovus, Georgia’s second-largest bank, has been bleeding red ink lately as the housing market imploded and the economy plunged into recession.

But there’s an eye-popping bright spot amid the gloom.

Synovus has seen a sizable growth in deposits, led by a six-fold increase in its “shared deposit service” program, which allows an individual to invest up to $7.75 million with Synovus and have the entire amount covered by the Federal Deposit Insurance Corp. —- far above the normal limits.

Over the past six months, Synovus has seen deposits in the program mushroom from $300 million to more than $1.7 billion. To put that number in context, the $1.4 billion gain is significantly larger than the $968 million the U.S. Treasury invested in Synovus in December as part of the federal bailout package.

The deposit growth is notable in that it came during a banking crisis that weakened some of the nation’s largest financial institutions. Many banks have been scrambling to keep fearful customers from pulling out their money.

Synovus officials say the influx of money has helped the bank to continue making new loans even as other banks largely froze their lending.

“We may have been only one of a few [banks] that grew during that period of time,” said Fred Green, Synovus’ chief operating officer. “It allowed us to have some loan growth when many in the industry were shrinking their portfolio.”

The returns offered to depositors are modest. A one-year CD, for example, currently pays about 1.7 percent. But the financial crisis has pushed many customers to look for safe havens to park their money, Green said.

The product offers a “fair return and the peace of mind that comes with the knowledge that not only is a strong company like Synovus backing it but also the U.S. government,” Green said.

The FDIC last October boosted the basic insurance limit for single accounts from $100,000 to $250,000, an increase that will expire at the end of the year.

So how can Synovus offer FDIC insurance on deposits up to $7.75 million? The Columbus-based bank holding company operates 31 separately chartered banks, and each bank is able to offer $250,000 in protection.

The trick, Green said, was figuring out a way to spread the money that wide but offer customers a single statement and tax record, making it appear as though the money was housed in a single spot.

About 1,800 customers are using the program, the vast majority of them individuals rather than businesses or institutions, Green said.

In a recent conference call with analysts, Richard Anderson, Synovus’ chairman and CEO, touted the success of the program, which he called “unique.”

“No other company has the capability we have with that particular product,” he said.

Analysts said the program has helped Synovus weather the economic storm, avoiding the liquidity issues that have plagued some banks.

Without the sharp increase in deposits, “they’d have less maneuvering room, that’s for sure,” said Jeff Davis, a banking analyst for Howe Barnes, a Chicago-based brokerage firm.

The good news on deposits, however, is overshadowed by the bank’s numerous problems, such as a rising tide of bad real estate loans that led the company to post a $637 million loss, or $1.93 per share, in the fourth quarter. Analysts are expecting further losses in the first quarter of the year of about 30 cents per share.

Synovus’ stock price has fallen by about half in the past three months to $4.62 per share Thursday.

Synovus, based in Columbus, is known for buying smaller community banks and allowing them to maintain their names and operate somewhat independently. In metro Atlanta, Synovus owns the Bank of Coweta and the Bank of North Georgia, the fifth-largest bank in metro Atlanta by market share.

Synovus is not the only bank to offer FDIC insurance far beyond the $250,000 limit. A Washington, D.C.-area company offers a different product that provides customers with up to $50 million in protected deposits.

The company, Promontory Interfinancial Network, has signed up about 2,800 banks nationwide, including 100 in Georgia, which cobble together their individual FDIC insurance coverage to create a blanket of coverage worth up to $50 million.

The program, known as CDARS —- certificate of deposit account registry service —- has also proved popular of late. Business is up four-fold, said Phil Battey, Promontory’s vice president for legislative and public affairs.

“We’re in the business of offering people security, and that’s what they’re interested in right now,” Battey said.

Synovus officials said there’s a key distinction between the two products. Synovus’ shared deposit service keeps a customer’s money under the same corporate roof; CDARS spreads the money to any number of banks across the country.

With CDARS, the money “is spread all over the country, to banks in markets that the depositor hasn’t even heard of,” said Synovus’ Green. “There’s a significant peace of mind in our market area, knowing Synovus banks.”