Synovus Financial Corp. (SYU1.DU) Earnings Call Transcript & Summary

All right. Welcome, everyone. My name is Michael Rose. I'm a research analyst here at Raymond James, covering the banking sector. Next up, I am very pleased to have Synovus with us this afternoon. Based in Columbus, Georgia, the $54 billion asset company operates more than 280 offices in Georgia, Alabama, South Carolina, Florida and Tennessee. And from the company, I'm very pleased to have President and COO, Kevin Blair; CFO, Jamie Gregory; Chief Credit Officer, Bob Derrick; and Kevin Brown, who heads up Investor Relations for the company. Before I turn it to Kevin Blair to begin his presentation, I'd be remiss if I didn't offer up my congratulations to him, where he will be taking over as CEO starting next month for Kessel Stelling, who will remain on the Board of Directors as Executive Chairman until early 2025. Kevin is going to start out and give a presentation. We will have time at the end of his prepared remarks for questions. So if there's any you'd like me to ask, please use the Zoom Q&A function on the screen or e-mail me directly at [email protected]. And with that, I'll hand it over to Kevin.

Thank you, Michael. It's really great being with you today, and we appreciate your attendance on today's virtual session. Before I start, I will remind you that our comments may include forward-looking statements, and these statements are subject to risks and uncertainties. And the actual results could vary materially. We list these factors that may cause results to differ materially in our press release and SEC filings, which are available on our website, and we do not assume any obligation to update any of those forward-looking statements as a result of new information, early developments or otherwise, except as may be required by law. So thank you for being with us today. And we were just reminiscing earlier today about this conference a year ago, which was our last in-person conference, and it was the opportunity presented itself for us to unveil our Synovus Forward journey. And I'm happy to be with you again today, a year later, to share with you the next chapter of the Synovus story. As I go through several slides with you today, and Kevin, if you wouldn't mind just advancing to Slide 3. There's going to be a consistent theme, and that theme is going to be present throughout. We are fully committed to delivering sustainable improvements to our business that will lead to our continued progression in our ability to achieve top quartile profitability and efficiency objectives. Now the path is very clear on how we're going to get there. First, we believe that what we've done for the last 130 years has positioned us very well for the success that we will enjoy in the coming years, whether it's our footprint or our business model, and I'll cover that more in a second. Secondly, our dedication to delivering a superior customer experience. It's been something that we've been proud to do for many years. We've been recognized with our satisfaction scores, our Net Promoter Scores. But what's most important here is developing a level of loyalty with our customers that allows us to continue to deepen the share of their wallet while serving as a new source of referrals for new prospects that one a bank that can deliver those same principles for them. And then lastly, Synovus Board is going to continue to be our strategic road map as we deliver on our growth objectives and our profitability goals. As you may recall, our initial focus was more around a program, a program of initiatives and things that we could take to drive incremental growth. But that program has now changed into a mindset and a new way of doing business. And so for us, Synovus Board will continue to serve as our guidepost as we look for both short- and long-term prioritization as well as we think about performance and what we have to do in order to deliver on the financial and business imperatives. So let's go to Page 4. So as you see here, I probably didn't need to add the slide in, but quite frankly, I just want to make sure that everyone is fully informed on the Synovus story. Synovus has a long and storied history of growth and innovation, and it's always been a company that's been there for its customers, its team members and its communities. And since the global financial crisis, we've built upon that foundation. And we focus more intently on building an organization with greater diversification, expanded services and solutions and optionality as well as building out our risk management framework and practice. That would provide stability even in times of economic uncertainty, like we've seen over the last 12 months. This past year has been challenging for our country, our company and our team members. But through all that adversity, we believe that our purpose-driven approach remain the same. You support your team members, you support your customers and you support your communities and good things will happen, and we did. But in addition to those goals, we felt like it was important that as we weather the short-term headwinds that we were all facing that we needed to continue to invest in the things that are going to make us a stronger company on the other side of this pandemic. I also think we've done that at $54 billion in assets, and as Michael said, almost 290 branches, we cover a 5-state footprint, and we believe that we're perfectly sized not only to provide the service that we've been providing, but the capabilities and functionalities that the larger banks provide today, but we haven't lost sight of our local routes. We make sure through our customer-centric approach that we are local and that we continue to serve our customers and treat them in a personalized fashion so that it feels like a real relationship versus just a transaction. And we also believe that through our highly engaged workforce, we've built a strong and loyal customer base. And our businesses that we run and our team members here are being recognized for being some of the best in the industry. As you can see on this slide, one example of that is our Synovus family office, which was recently recognized as being best-in-class in its size category. And you'll also note that we won 16 awards and the 2020 Greenwich Excellence Awards for both Small Business and Middle Market Banking. Now look, this recognition is not what we strive for. But rather, it's adjudication that what we're doing is we're delivering on our value proposition, and our customers are seeing value in what we do. Let's move to Slide 5. Now the strength of our institution and its relative positioning are really based on several core attributes. And I'll try to list them on this slide. First, and we've said this for some time, we believe we're in the best footprint in bank. And this belief is not just our feelings. It's strongly supported with the demographic and economic data that we look at. As we evaluate the relative comparisons of things like employment rates or home prices or population growth, and there's many more. Our 5-state footprint is performing at levels or better than that of the national averages. And we believe this trend will continue and may even become more pronounced as we continue to see trends with tax rates and with migration of businesses and population shifts that we think the southeast is going to become even stronger. So the good news is we think our markets are great. And what makes it even better is we feel that we are relevant in all of those markets with our coverage and our density. We have over 50% of the markets in which we operate today, where we have a top 5 market share. Now as we move to the second attribute, it's capital. We have significantly improved our capital levels throughout 2020 as we demonstrated prudence, given the unprecedented economic changes that were occurring with the pandemic. And now we're in a position to fully utilize that capital to support our organic growth as our current levels are in excess of our stated target range. We've also seen a dramatic reduction in loan-to-deposit ratio. The amount of liquidity that's in the system today is unparalleled. That leaves our bank with elevated levels of liquidity to also be able to deploy those into those asset growth strategies that we have. Also, as we look at the near 0 interest rate environment that we're in today, we think we're extremely well positioned for higher rates. As you will see, our asset sensitivity has increased slightly, mainly due to our cash position, but we also believe that all of the positive shifts that we've made on the deposit side of the balance sheet have helped us in supporting our ability to increase NII when we get to that place where rates will start to rise. And then lastly, despite this difficult business environment that we've all been living in, we have maintained solid credit performance while continuing to increase our allowance for credit losses. As you'll see on this slide, from 278% to 433% over the last -- past -- over the past 4 quarters. And if I can draw your attention to Page 13 in the appendix, we've updated our monthly cash flow analyses to show the month of December and also January 2021. The bottom line here is that we did see some lost momentum in cash inflows in December as the virus spread picked up. But you can also see in January 2020 (sic) [ 2021 ], we reversed that trend, and now we're showing a 13% increase in cash inflows. So needless to say, we don't think we're completely through the tunnel at this point, but it does appear like the light is much bright. Let's, Kevin, go back to Slide 6. So obviously, in order for us to achieve our goals, we recognize that our success is really truly predicated on how we add value to our relationships. It's really that simple. Our approach to enhancing the customer experience is being built around what we call human digitization. So at Synovus, we're leveraging technology to empower relationships, with a model of high-tech meeting high touch. And as our highly engaged and experienced team members serve as a key point of differentiation, it's not about addition by subtraction, but rather building synergies from the combination of using both technology and talent to increase your value proposition to your customers and to attract those relationships that other banks currently have. And so we're building this customer-first principle around 3 areas: number one, we have to make it easier to do business with us. Our customers tell us that all the time. It's about convenience and service, it's about convenience and sales, and it's about allowing our customers to self-select the channel and the method for conducting the transaction or having the conversation that they want to have. Number two, it's really about providing advice and guidance. Now that's where I think we can truly differentiate ourselves versus our competitors. Our customers tell us that they want plans. And if we give them plans to help them achieve their financial goals and objectives, then they're more void. And if they're loyal, they're willing to give you more opportunities to expand your wallet share with your solution. And as I said earlier, they're outtelling their friends and colleagues what a wonderful bank they have, and it serves as a source of future growth for the bank. And the third thing is we have embraced innovation in a new way here as it notes. We look at innovation and how we build our systems, we look at it and how we run our businesses and what products and solutions we're adding. The world is evolving so rapidly, and we must keep pace. So let's go to Page 7 and dig in a little deeper into each of these 3 guiding principles. First, let me talk about easier to do business. We are clearly focused on what driving convenience at our bank means. And we've actually done some of that this past year despite all the challenges. We rolled out new customer facing technology. Like our commercial portal, Synovus Gateway, we believe this is going to be a best-in-class solution for our cash management services as well as our commercial customers to interact with the bank on a daily basis. We've also added new functionality like Zelle in 2020 that makes person-to-person payments much easier. And as a result, our increased volume of roughly 60% in activity as a result of the new solution. We also then during the pandemic to improve and augment our online account origination capabilities. And ultimately, we made some changes to things like remote deposit capture, which enhanced the functionality in a time where we were seeing volumes increased by 24% with our commercial base. Secondly, we've been making investments in data and analytics. And as we've shared in previous meetings, we know that this will have a meaningful impact to revenues as we proactively provide solutions that we know our customers need while already reducing extremely low levels of attrition that we're having and also providing some early warning mechanisms for our risk management indicators. But given our high levels of existing loyalty, as I've mentioned before, with our Net Promoter Scores, we expect our new tools will also allow us to provide even more customized consultation and advice and insights on a much more proactive basis, and that's going to lead to higher levels of success and even higher levels of loyalty. And then lastly, as we look at innovation, things like PICASSO, which originally started as our journey to modernize our core. The goal here is with this effort is to reduce our data processing costs, to empower our businesses with real-time banking, to adapt faster and have a more flexible core platform and to scale up and down instantaneously without having to have pricing challenges or contractual issues. Now we've expanded this PICASSO-type approach with our modern core into other areas of the bank. So innovation in our products and solutions are also very important, including how we service our customers. As you'll notice from the logos on this page, we believe that the fintechs that we partner with are truly just at partners, not competitors. And this partnership we're going to serve as the big equalizer as we compete with companies that obviously have much larger technology budgets and have much greater scale. Let's go to Page 8. And while we're on Page 8, I want to shift our story. If we have a strong foundation, if we continue to enhance the customer experience, then it's going to lead to growth. Now growth doesn't just happen by sitting back and waiting for that. We've taken some steps to make sure that we have the ability to amplify our commitment to growth. And that includes expanding our sources and in making investments in areas where we believe the return on investment is great. We've also realized that when we do this, you'll notice the words on this page, it's really about profitable growth. We have not lost sight of the need for positive operating leverage, and we'll continue to execute on new initiatives to ensure that the efficiency trends that we've been able to exhibit in recent years continue for the future. So let's dig in a little more to growth on Page 9. I first will reiterate the point I made earlier with a strong foundation. Our footprint presents us with a unique opportunity for growth. As I mentioned earlier, population growth exceeds that of the national average by 70%. And when you look at household income, it's growing at a rate 20% higher than the national average over the next 5 years. Secondly, we've taken many actions to increase the productivity of all of our asset generating bankers. Actions include improving our talent, increasing sales activities, improving our success rate with better tools and power. And simply just upskilling in many situations. As we closed out 2019 and entered 2020, we saw loan production increase to record levels. Then as the pandemic impact was felt, activity did diminish and you'll see as we close out 2020, fourth quarter production was actually down 12% versus the same period in 2019. Now we believe as the economy improves and our sales activities return to a more normalized level, we have the confidence that we will be able to return to pre-pandemic higher levels of production. And in a year, we're winning business was much more difficult. We on-boarded almost 70 new relationships in our wholesale commercial banking team and over 2,000 new customers from our round one of PPP. We've also had a concerted strategy to accelerate the growth in our fee income generation business, including wealth management, treasury and payment solutions, our capital markets team as well as our small business administration lending unit. These efforts are producing results, especially as interest rates have declined, placing headwinds on top line revenues. The investments in the wealth businesses are contributing to growth, and you can see on this slide that our assets under management have a 20% CAGR since 2018. So lastly, as you look at the slide, I mentioned about investing. And investing is not just in technology, it's in talent. We believe at Synovus, we're an attractive model that's attracting top talent from the larger institutions, from other mid-cap banks and quite frankly, from around the industry. And we've doubled down in areas where we believe we can grow at a much faster pace and in businesses that have higher returns. And we won in those places where we've attracted that talent. You see here a 16% increase in wholesale banking talent since 2018, an 18% increase in wealth talent and over 100% in our sales and our revenue producers on the treasury and payment solutions side. So it's not -- this is not realization in and of itself. What we have to do is attract the talent and make sure that we monitor these investments to ensure that they're providing the continued ongoing returns that we had expected, and then we adjust accordingly. Let's go to Slide 10. As we turn to Slide 10, as I mentioned on the previous page, it was intentional that we talk about profitable growth. Because as the focus on top line metrics become more timely, we cannot lose sight of our efforts and, quite frankly, our proven track record of having a disciplined management of expenses. You can see on the upper left-hand side of this slide that, that track record has been very strong. We've been able to continue to reduce our efficiency ratio through positive operating leverage. And we continue to move closer to the top quartile efficiency ratio. And as we presented on the previous page, we've been strategically adding revenue producers that have helped us to grow. But as you'll notice on this slide, in totality, we actually have been able to cut our headcount right around 2% since 2008. And so invest where we need to invest and get more efficient in other areas, which will allow us to return to areas of positive operating. Now then most importantly, as we think about expense and as we've been talking, Synovus Forward will serve as our gateway to be able to continue to offer additional ideas and additional efficiencies that will continue this pursuit of a lower efficiency ratio and again, returning to the positive operating leverage. Programs like our organizational optimization and our third-party expenditures and real estate consolidation, all of those are providing benefits today. But as we think about the environment we're in, and we shared in the fourth quarter, we're now upping our target for efficiencies by an additional $25 million to be generated by the end -- in a run rate capacity by the end of 2022. And how are we going to do that? We're going to do it by expanding these same initiatives that we've already taken on, but we'll add new initiatives in here like automation and using technology and robotics to reduce our back office expense. The whole leadership team is committed to being able to deliver not only on the top line numbers, but also to balance it out with a real expense discipline that follows suit. So as I close out my presentation today, let's go to Page 11. Yes, I want to put an exclamation point on the core messages. We are fully committed to you, and we're focused on delivering on both our short-term and our long-term business and financial imperatives. And we are prioritizing and doubling down in areas where we have the right to win. So first, our markets are superior. We believe our approach and our capabilities are highly competitive, and we continue to make investments that will accelerate our growth. Second, I truly believe our relationship-based approach centered around being easy to do business with, seamlessly delivering across our customer segments and fully leveraging this human digitization approach will improve loyalty, will deepen relationships and will serve as a way to get new customers through our doors. Next, by doing all of these things, we think we're going to be fully positioned to deliver on our top quartile growth and efficiency objectives. And lastly, I think it goes without saying, but we will do so, and we will not compromise or change our growth to risk management. This past 12 months provides another proof point of the improvements we've made since the previous financial crisis and the prudent risk management is an unwavering part of our future growth. So Michael, with that, let me turn it back over to Q&A and welcome Jamie and Bobby -- Bob back into the conversation.

Perfect. Well, I just wanted to touch on the update that you provided on PPP in the slides, it's in the appendix. It looks like you guys are having pretty good success relative to round one. As you expect, the $40 million to $45 million in additional fees. If I'm doing my math right here, that's roughly 6% to 7% accretive to 2021 consensus earnings, if you did recognize all those fees this year. But can you discuss, a, what's going on there, but also the liquidity build that you might anticipate from the second round of PPP and how that may impact your name as we move forward?

So I'll start with that, and then I'll have Jamie talk more about the NIM and what was built into the forecast for our guidance. So as we look at the level of activity in the second round, originally, we had stated we expected around 5,000 to 7,500 applicants. And that was just based on the application volume we had seen since we opened up the portal. What we saw post earnings was there was an increase in application volume, and that should not be construed as us bringing on customers that are having additional credit headwinds. It was really -- we did more outreach to our customers that participated in the first round and made sure that they were aware that the second round was open. We want to make sure they fully understood eligibility. And what we've seen with this round of action around these 8,000 applications is the industry concentration is largely the same as what we saw the first time. Originally, out the gate, we saw businesses that were more impacted or COVID impacted industries, these are restaurants, retail, hotels, and real estate. And so that continued this path. We also acknowledge that most of the people that qualify, quite frankly, the 25% did not exist throughout the year, a lot of the times, it was just in that second quarter where they saw the 25% decline in their revenues. And so we are very happy to be able to drive the stimulus, and we think we're able to help customers with getting additional liquidity for their business, but we don't think it significantly changes how we're thinking about the credit profile of these customers and we think that it's -- obviously, it's helpful from a stimulus standpoint, but it's not something that gives us concern from a credit standpoint. Jamie, I don't know if you would add anything as you think about the liquidity that will come from this round.

Yes. Thanks, Kevin. As we look at the liquidity environment in 2021, we think it's going to be a continuation of what 2020, how it ended. We think that this excess liquidity will stay on the balance sheet for an extended period of time, and we will react to that accordingly. We'll likely grow the securities portfolio. We're continuing to look at third-party loan partnership, seeing if there are ways to increase our exposure there, bringing it back up to where we were pre-crisis. With regards to the margin, it's going to be likely a volatile year because you'll have the impact of Paycheck Protection Program fee acceleration had forgiven us both the first wave here in the first half of the year and then the second wave in the second half of the year. The other thing that's really impactful to the margin for 2021 is excess liquidity and cash on balance sheet. We've spoken about that before. There's approximately a 6-basis point impact per $1 billion of cash that just sits on the balance sheet. And so there'll be a lot of moving pieces. We do expect the steeper yield curve is helpful. We expect that the margin, when you back out the extra cash, when you back out the Paycheck Protection Program, will remain fairly stable around the 3% area through 2021. And so we feel good about that assuming the kind of the current environment, where you're getting the benefit of steeper yield curve, there's a little bit of pressure from spread tightening on the securities portfolio. But that's how we view the different components with regards to just pure NII dollars, you'll see a decline in the first quarter. Due to day count and due to fixed rate asset repricing. And then we're expecting that core NII, again, excluding the impact of Paycheck Protection Program to increase as we go through the year. So that's how we're looking at the margin, NII and liquidity.

So one thing that I wanted to circle back on, Jamie, is you talked about the potential expansion of the securities portfolio. Clearly, the yield curve has steepened. What is your willingness to actually kind of net grow the securities book at this point under the premise that you laid out, the liquidity is going to be here with us for seemingly the foreseeable future?

Yes, Michael, it's a great question. And the backup in yields is helpful there. Right now, we're thinking that it's likely that we'll grow the securities portfolio, about 2% of earning assets in 2021, with the majority of that front-loaded early in the year. We will continually reassess that. As I mentioned, we use the third-party portfolio as a surrogate to the investment portfolio. And so we'd love to find opportunities to grow that as well. We have the capital and the liquidity to do so. And so those are strategies we're looking at. If we do use third-party lending as a partial solution, we will continue to have the discipline we had in the asset choices we've made in the past and would likely target something that had a duration that approximately aligns with how we see the liquidity, the excess liquidity environment.

That's very helpful. And I did want to circle back just on some of the loan growth commentary. You talked about moving the third-party up. I think you guys are around 2%. You had the willingness to maybe bring it up to 5% at one point. But excluding that and PPP, I think the one thing that really struck me in the slides was just the amount of production that you guys have had through even the depths of the crisis. I know it's only been 4 or 5 weeks since the earnings call. But are you sensing greater optimism from your customers at this point just given the vaccine is starting to get rolled out and the weather is starting to get better at least in a lot of the markets that you're in. Are we feeling confident about the growth outlook that you guys have provided?

What I would tell you is that we talk about customer sentiment is that even going into the fourth quarter and as we entered first quarter, there was a growing optimism from our customer base. And we shared -- we saw that in our pipelines in fourth quarter, where our smaller commercial area, less than $35 million in revenue, those pipelines had gotten back to levels that we had seen in February of 2020. So smaller businesses and the commercial side, companies were entering a phase where they felt prudent to go out and invest in their business or to make an acquisition or, in many cases, just refinance their ability. So there was a level of optimism there. The thing that we've continued to talk about, we know that there, at some point, will be more animal spirits where people feel more comfortable to be able to go out and use capital expenditures. But in the short run, I think what's holding that up is just the level of liquidity. There's a tremendous amount of cash on the balance sheet of most of these companies. And as a result, when we set some of our larger companies, the pipelines there have not gotten back to pre-pandemic levels because there's just so much liquidity. But in general, Michael, as I said, the sentiment follows what you would see just watching your nightly news. I think as vaccines become more prevalent, as people change their behaviors, these commercial clients and the consumer is going to be out spending more, and it's going to drive up activity across the board and create demand for commercial borrowing.

And maybe just as a follow-up. One thing that I think, at least we've talked about over time is some of the dislocation from recent M&A in your market, there's also a bank out there that might be for sale. And then there's a bank out there that's in your markets that has an asset cap. How much of the growth that you guys are expecting are going to come from market share takeaway versus growth in the market? Maybe it's the majority of it, but would just have any color and updates there.

Well, what we say all the time is that we're in a competitive business every day and whether someone is doing an integration and it presents an opportunity or whether that competitor is not out being active calling on their customers. We have to continue to serve our customers, first and foremost, and that sets the tone for how other prospects look at us because, as I said, the #1 reason people are switching banks today are based on a recommendation from a friend or colleague. So we want to make sure that we continue to deliver with our existing customers, and that's going to create growth down the road. As it relates to disruption, we've seen that in the markets where there's been significant disruption, when you take the state of Georgia this past year, if you look at the market share gains that we made in the state of Georgia, I think it was 100 basis points. We think that we're the beneficiary of a lot of the activity that's going on in the M&A space. But we also know, and I've said this, is that any time there's a transaction like that, that creates opportunities, you've got to work at it. The first phase is when the deal is announced, and there are people that customers that want to move. The second phase is when they make reorganizations and it presents opportunity to go get talent because they have a different box. The third phase is when they actually do integration. And so I think like anything else, just like on our calling activities and how robust that has to be when there is a merger or when there's an integration going on, we just have to make sure that we're continuing to call on these prospects and offering a value proposition that wants them to move. As in relation to total growth, Jamie and I talked about it, as you look at the GDP of our marketplace, we believe that we should be growing faster than the growth of our states. And that means that we are getting some growth from taking business from our competitors, not just waiting for the tide to raise all shares.

Got it. And maybe just to ask the M&A question from a different angle. There's a lot of chatter out there. Our survey work indicates that M&A chatter is high and has improved even relative to a survey we did a couple of months ago. Just remind us, Kevin, what an ideal acquisition might look like for you? I know may not be exactly the right time. The stock price has started to improve here. But what in this new world post COVID, what is an ideal transaction look like for you guys?

Well, there probably isn't one, Michael. So what we would say is we think our best investment is in Synovus. And if we look at the opportunities that are present within our footprint that we have today, if you look at our different businesses, we think there's tremendous amount of growth through expanding existing relationships and continuing to prospect to win new relationships. So we also are very conscious of the fact that in order to be able to participate in the M&A activities that you're suggesting, you have to have a premium. You have to carry a currency that allows you to do it. And we feel that through the execution of Synovus Forward, as we improve our returns. And as we show that the growth engine that we have is alive and vibrant, we think it may position us to do that. But if we were to look at any sort of M&A in the short run, it would be a small bolt-on or capability that we feel that we could add to our company that would allow us to generate accretion from providing those solutions. And the best example of that, we use a lot is the purchase that we made in 2016 of Entaire Global One, which is a premium finance company. And that leadership team has done more than what we had forecasted in terms of their growth. But more importantly, we have a leadership team that has joined Synovus and now oversees our structured lending division as well as our asset-based lending area. So we have a set of leaders there that are entrepreneurs that are creating new areas of growth for us every day. So it's very small price upfront, a broader capability and leadership to them that will continue to pay dividends for years to come. That's to me, if you ask me what the best M&A opportunity is or it's something like that.

Completely understand. And speaking of investing in yourselves, I know you guys have the new buyback. You've commented that you're probably not going to use really any of it this quarter doesn't look like you have based on the 10-K. Any change in thought there given that the economic outlook may be getting a little bit better here in terms of usage of the buyback?

Michael, look, our priority for capital with our customers. I mean that's how we want to deploy it. We feel like there are opportunities for us to grow our balance sheet this year. But we do acknowledge that we're sitting at 9.7% CET1 at year-end, our target is 9.5%. And barring any change in the economic outlook, it looks like we'll be accreting capital here in the first quarter. And so as we think about that, we do think about what -- how much we expect to grow and what does that look like as far as capital accumulation and what are we -- how much we're going to use. And so we constantly reassess that and look at our capital deployment to our customers. And then think about the residual and think about share repurchases in light of that. And so nothing has changed from what we previously discussed, but that's how we look at it. As you're aware, we have the authorization for $200 million this year if we choose to use it.

Got it. And I want to bring Bob Derrick into the conversation just because we only got a few minutes left. But just wanted to get any sort of updated outlook as it relates to credit with, again, the backdrop seemingly getting better. You've had a few of your peers come out and actually give some charge-off ranges for the year, one of which was, I think, surprising the low side. How are you feeling about credit at this point, Bob?

Yes. Thanks, Michael. I appreciate that. But we feel pretty good, relatively speaking. I really want to highlight the performance of our customer base during this time. It's really we, like other banks, took a lot of action and mobilized a lot of forces around credit and around how we would handle migration and charge-offs, et cetera. But really, the enjoyment for me is just seeing our customers and how they reacted, the resiliency of that customer base, the willingness to repay versus the ability to repay is certainly there. We've been able to work through a fair number of those credits. We've seen negative migration, but we're starting to see some stability there. We expect perhaps as we get to the back half of this year to see some positive migration. So all in all, I think we're in a pretty good spot. Charge-offs, again, from a forecasted perspective, we're built into our CECL model. Through life of loan that we feel comfortable with now. As we kind of run scenarios, that number could easily be about where it is this last quarter. We see that as a possibility, but we also have some scenarios that would take that number up to 2x where it was last quarter. So you can do the math on that. But both of those charge-off scenarios, kind of book ends, would be well within where Jamie has got us on the reserve. So we feel good about that. And again, the ability of our customers, particularly in the hospitality space to make changes and stick with their properties and work with us to restructure has been really good.

Well, it's good to see the updated slide with the cash flows on some of the impact that industries moving higher in January. Before we close it off, Kevin, I just wanted to again, wish you congratulations on the CEO transition happening next month. Any sort of change in priorities or areas of focus that we can expect out of you? Is it more just continue along the path that you guys are already on?

I think it's trying to align along those 3 things we talked about today and maybe some acceleration in how we do that in terms of being easier to do business with, number one. Two, being able to leverage data and analytics that will allow us to be better partners with our customers, but also generate revenues. And then three, how do we truly embrace technology, process redesign and talent to continue to build this growth engine that we have today, but we also think there's a tremendous amount of opportunity to keep doing that. Now we have to do all of those things. And still deliver on these efficiency objectives. So I don't -- as I said, there's no -- there's not going to be any 180s that occur. It's continuing down that path, and we'll work more diligently on being able to achieve those goals, but also just really focusing our dollars and prioritizing where we think we have the right to win, which means you got to make big bets in certain businesses and certain products. And we'll continue to build out areas that had been levers of success for us to this point. So more of the same and just we want to run faster and perform better. And leverage what we'll get from the change in the economic activity to put a little bit of a tailwind behind us.

Great. Well, with that, we're out of time. I want to thank all of you for participating, and hopefully, next year, we'll be in-person and look forward to seeing you all soon.

Thanks, Michael.

Thank you, Michael.

Thank you.