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

Good morning, and welcome back. I'm excited to introduce our next guests. We have Synovus Financial. From Synovus, we have Kevin Blair, President and CEO; and Jamie Gregory, CFO. So Thanks, Kevin. Thanks, Jamie, for joining us.

Thank you for having us.

And maybe, Kevin, just to kick things off. You had about 6 months since you took over as CEO. Give us a little bit of a perspective -- and I appreciate that you've been obviously involved integrally in terms of the strategic aspects of the bank even prior to that. But give us an update just in terms of the franchise as it stands today coming out of the pandemic. What are kind of the 2 or 3 key strategic priorities you're focused on?

Ebrahim, thank you. I think it's a great place to start because I think the key coming out of the crisis is if you have a strong foundation with great customers and great team members. It makes it easier when you come out of the crisis to be able to hit the ground running, and we actually think we're a stronger bank than we were entering the crisis. One thing that Synovus has proven in its 130-year history is that not only are we accomplished and generated growth throughout our time in existence, but we've also been tremendously resilient in getting through difficult times. And I think the pandemic proved that out. But if you think about the future, the saying that I have is the bank that we want to be is the bank we've always been, only better. And so when I look at the core tenets of what we're working on today, it really revolves around 3 core areas of transformation and it all centers on our customers' loyalty that is such a big part of what we focus on to generate growth. And so from my perspective, those 3 tenets start with, first, streamlined and simplified. Our customers tell us time in and time out. They want us to be easier to do business with. And with the digitalization of what's happening in a sector is that we have to continuously find ways to make it easier to do business with our customers and, ultimately, our team members, want to make it easy for them to get their job done. So we have some work streams in place that are looking at things like client journeys and automation and how we digitize the front end of many of our processes to ensure that we're even easier to do business with. And we generate that loyalty that we've had for so long to take it to another level. The second is repositioning for advantage. And for us, that means focusing on those businesses that relationship matters, where we can bring advice to the table and generate deeper shares of wallet and attract new customers where we're providing a value proposition that our competitors aren't providing. So you'll see us focus a lot more on some of our commercial lines of business. We'll get into some of our investments, but we're expanding our middle market presence. We're expanding many of our specialty businesses. We've announced that we're going to enter the corporate and investment banking space. And so we're really excited about some of those investments because we know that we have the right to win in those spaces. We also have invested heavily in wealth, whether it's in our geographic wealth franchise or whether it's in things like our family office. Again, where we have the ability to bring advice and personalized service to the table, we win, and we're going to continue to do that, whether it's in a generic form, in geographic banking, or whether it's in some of our specialties. And the third priority is really around high tech meets high touch. So look, I mentioned earlier, we've been going down this path of digitalization of taking all of our processes and allowing our customers to interact and interface with the bank differently. Now we're going to take it to the next level, which is making sure that we bring new solutions, new products, new capabilities to the table so that we create new sources of revenue. And that doesn't come with the exclusion of people. It actually comes as a complement. We bring technology to the table with our very experienced team members, and it creates a better opportunity to, again, expand the wallet share and grow new customers. I'll leave you with the importance of FinTech here because I think nothing that we're going to do in technology we're going to do by ourselves. We're going to partner with the right firms like we've been doing for the last several years. And I propose to you 3 taxonomies for how we look at FinTechs. One, we're looking at FinTechs that do things that we don't do, that bring a new solution or product to the table. Two, we're also looking at FinTechs to bring products and solutions to the table that they do it better than we do it at the bank and so that we could white label a solution to be able to offer. And third, we're looking at FinTechs to partner to make sure that our infrastructure and our core platforms are agile and are modern to allow us to continue to grow and add new capabilities.

That's great. I'm going to go off. I just want to go back to one thing because I was talking to an investor last week and they were comparing Synovus coming out of the financial crisis to today. And like to someone who has followed Synovus for a long time, and you've been at Synovus for a while, it feels like it's a very different bank today and what we should expect coming out of this downturn versus how it did most coming out of the financial crisis. Again, Kessel did an awesome job like cleaning things up. But I just feel like how -- your ability to play offense today is very different than 2012, '13, '14. Maybe spend a minute or 2 kind of making that distinction and if you agree with that.

Yes, totally agree with it. And well, Kessel has done an amazing job from 2009 until 2021 to put us in a position. If you think about what was going on back, in those days, we had 29 independently chartered banks. And so they were coming out of the crisis, number one, was recovering from the credit losses that the company had observed but, more importantly, how do you create a centralized unified brand. And so the first 5 to 6 years coming out of the crisis was following this new form -- this new phase of the Synovus history, which is a consolidated prudent risk management organization that has centralized functionality and no longer had this disseminated model. And so I would tell you that we're really only 11 or 12 years in to this new phase because we've spent the last 10 years building that out. And so to your point, when we entered this crisis, quite frankly, we weren't worried about the credit quality impacts that we would have seen during the global financial crisis. And so throughout the last 18 months and as we look to the future, we continue to invest in new sources of revenue. So we weren't trying to repair things that were broken. We were continuing to focus on what we're doing today, the great customer base we have, how do we add new products, new capabilities, new team members to be able to generate growth coming out of the other side. So as we come out, and as we expected, the credit continued to hold up, and it did for the entire industry. But now we have more irons in the fire. We have a more broad-based revenue model. We have more opportunities, and we've really gone back, Ebrahim, to our focus on innovation. There's a lot of focus in our company on the art of possible, how do we generate a new product, whether it's in the banking-as-a-service platform or whether it's in new solutions from our commercial specialty team. And so it's been much more about being on the offense, to your point, versus having to fight the credit losses or issues, the changes that are required to be fixed to be able to even go on the offensive.

That's helpful, Kevin. And I guess talking about offense, loan growth in the third quarter was pretty strong, especially when you look at some of your commercial lending clearly, a big focus for investors, whether we do actually see some of these green shoots translating into stronger growth. Just talk to us in terms of what you were seeing. And are we in a steady path where we see some degree of acceleration in loan growth over the coming quarters?

Yes. So I think the loan growth story is a similar story as just revenue in general is that the way in which we're going to have balanced and consistent and sustainable loan growth is if we have lots of different areas contributing to the quarter. We had total loan growth ex PPP up 10%. If you exclude our third-party portfolio, then we were still up 8%. So it really came on the backs of C&I and CRE. We have been very selective on mortgage growth, and that's really a duration play. We want to make sure that we're putting portfolio mortgages on the books that we're getting the full relationship because that's going to be an asset that obviously continues to extend in duration at historically low rates. So we really doubled down on commercial. And I would tell you, this past quarter, we saw C&I return -- I'm sorry, CRE return to a more normalized level. We saw 7% annualized growth there, and it was really across several asset classes. We saw it in multifamily, we are able to see some growth in senior housing. We also saw it in our industrial and warehousing area. So the marketplace is getting better, and we are -- we've been adding bankers throughout the crisis to be able to continue to focus on new opportunities, but also we've had our legacy bankers focusing on productivity. We're getting greater productivity from those bankers. Now I will mention that on CRE, we would have had far greater growth because we talked about, in the third quarter, we had record levels of production in commercial -- in that CRE and C&I, $2.5 billion in production, which was a record level for us. The problem is we sold $2.1 billion in payoffs, which was much higher than our 9-quarter average about $700 million higher than our 9-quarter average. CRE was about $500 million of that $700 million. So we had $500 million of elevated payoffs. So the productivity is going up. Production levels are very high. Payoff levels have remained very elevated because of people's concerns around corporate tax rate changing and personal tax rate changing on the capital gain side. So people have been taking chips off the table. Cap rates are low. And so we expect that maybe to continue into the fourth quarter as uncertainty continues there. but we also expect productivity to stay high. On the C&I front, we know that the supply chain and liquidity issues are putting some headwinds on growth as we've seen a decline in line utilization this past quarter but that didn't stop us from growing. We actually grew C&I about $600 million this quarter, about 14% annualized. And again, it came from many different areas. And you look at it across some of our NAICS codes, we had, I think it was 6 NAICS codes that had over $50 million of growth. Finance and insurance health care accommodations and food services, construction, manufacturing, you go down the list. So the key is we had bankers from both our community bank, our wholesale bank, across our special key units across some of our new units like structured lending contributing growth. The headwinds here are going to continue to be supply chain, but we still see elevated pipeline. So I think part of this, I said, in the third quarter, was our customers are coming back to the marketplace. Our bankers are becoming more active. It's a constructive environment as the economy is expanding again post COVID. We think some of that got delayed because of Delta. But all that said, the things that drove growth in the third quarter, we think, are still evident in the fourth quarter, and they'll continue into 2022. So we're expecting to continue to see loan growth on the commercial side. The real wildcard there is just going to be the payoff activity. And if there's a bunch of pent-up payoff activity that's going to happen before year-end because of concerns around 2022 tax changes, then we could see some pressures. But the reality is what we are controlling, the production side, we still remain very confident and constructive on growth.

Got it. And just on the CRE payoffs, you mentioned the expectation of tax changes. Is that all there is to it? Because pre-pandemic, you would hear about CRE loans moving to the insurance balance sheets because of getting better pricing. Is that less of a dynamic today than 2 or 3 years ago?

Well, look, I think it's still there. But when we're looking at the relative difference between today and what would have happened, I mean, we've seen insurance companies playing in that space for some time. So I feel like that's a big reason for the difference in payoff activity. The other one is, look, I mean, it's not lost on any of us that there are many -- fixed income investors aren't getting the highest yield there. So people are chasing yield in every asset class you can. So I think there are new investors in real estate that are entering the marketplace outside of the traditional insurance balance sheet. So I think that does play a factor in what we've seen in payoffs because I think real estate is an attractive asset class, and many feel that it's going to be a better return over the long haul than other traditional asset classes. So I think there's -- the fact that people are worried about taxes, there are new investors in the marketplace, cap rates have been at extremely low levels, I think there's a lot of reasons for it. But it just feels elevated over these last several quarters and primarily due to this corporate tax rate change or personal tax rate change.

Got it. Got it. And I wanted to follow up on a question on supply chain, but I don't want to let Jamie get away without talking 15 minutes into this. So maybe if you could just pivot a little bit tied to loan growth but third-party loan purchases. I think Synovus is a little bit more unique in terms of going down that path. And this question is not meant as a critic to that strategy. But just talk to us when you're approaching third-party loan purchases, how are you thinking about giving up some potential future asset sensitivity, the level of credit risk that the bank is putting on the balance sheet.

I see what you mean. You're right. Those are definitely the considerations for that portfolio. When we think about the third-party assets, we're going to look at it multiple ways. The credit exposure, there's just a general kind of trend right now where there's less demand in credit on the consumer side, and we believe that this helps fill that gap as we think about our exposure, consumer commercial mix. We also look at the tenor of the loans that were put on balance sheet. And that's what you've seen over the past few quarters, the purchases in auto. The average life, the duration is generally shorter than the other assets that we have on the consumer mortgages and HELOCs. And we also look at consumer secured and consumer unsecured and kind of think about in the lens of the balance between those 2 kind of sectors of credit exposure. So all that fits together into a platform where we say, as a surrogate to the securities portfolio, what do we feel comfortable with. And we feel very comfortable with what we've added. Over the past year, we're still below where we were as a percent of loans pre-pandemic. But we feel good about the asset classes up in credit. Obviously, we've made a big bet on auto, but it's in the 750s FICO. Everybody is aware of what's going with used car prices. All of that plays into it, and then if we like the fact that it runs all, which flows into your comments around sensitivity. We look at our asset sensitivity in many different ways but one of the main ways is looking at it, what is our asset sensitivity today and then what is it in a year or in 2 years. And what we like about the assets that we're putting on the books in this third-party portfolio is that, yes, they reduce our asset sensitivity today. But when you look forward to next year or the year after, they amortize off and you have your native balance sheet asset sensitivity. And so we like that profile. But what goes into the strategy is, one, our expertise and our partners. We've had long-term relationships with all of them; liquidity; credit and capital; and then also your NII sensitivity.

Understood. And just on NII sensitivity, just remind us, Jamie, how the balance sheet is positioned in terms of the upside from a maybe 100 basis point shock or ramp up in interest rates. And also remind us in terms of what's the payoff tied to the third-party book that you expect, which would reprice if rates are moving higher.

Yes, yes. Our asset sensitivity has remained fairly constant here the past couple of quarters. And that's split really between the short end and the long end of the curve. You do see a little bit of a migration in our floating rate loans has increased up to 55%. But the way we think about it is what is our risk appetite, where we want to be with our negative inherent asset sensitivity of the balance sheet, but then also where are we on rates. And so we balance kind of our exposure and our beliefs on rates with where we are in our hedging strategy. And so, naturally, we're asset sensitive. We do have hedges on the books. But if you look at the maturity schedule of the hedges, that will give you a lens into how we are thinking about when do we want to have flexibility to take advantage of rising rates. And so that's how we position it with kind of pivoting over to the margin. We feel that if you were to normalize for Paycheck Protection Program, if you were to normalize for cash on the balance sheet around this 3% area is the right area for us, I would say that the uncertain thing about the margin really is liquidity and how deposits come in and kind of impact the denominator. We feel there's a pretty clear lens on NII trajectory, we feel good about that. But I would say that as far as the margin goes, it's more about the denominator and how much liquidity do we have on balance sheet that impacts the margin.

Understood. And just talking about the liquidity, clearly, you've had record deposit growth, industry seeing a ton of deposit growth. As you look forward, I think the last some of the stimulus checks kind of rolled off in the third quarter. Are you seeing a slowdown now in deposit inflows? What's your outlook in the more steady state world for deposit balances?

It's been quite remarkable. And I would say this is one of the more uncertain areas of our outlook as we look forward into 2022. We're still seeing strong deposit growth. You saw in the third quarter core transaction deposit growth remains very elevated. And we do expect growth to continue, albeit not at the pace that we've seen historically. We think that the taper will impact that. And as we look forward, we do think that deposits will continue to grow, but it will not be quite at the rate that we've seen here for the past or just the beginning of the pandemic. And so with -- as we think about what that could look like on deposit costs and moving forward, we think that we still have opportunities on deposit costs. We think that we can drive those a little bit lower. We actually expect them to be fairly stable from the September levels for the next couple of quarters but then we expect to continue to have the ability to reprice lower, assuming rates stay at these areas. And so we would look forward to a rising rate environment and kind of get in to be able to get some actual insights in the betas and where your deposit mix skews when that happens. But I think right now, this would be one of the more uncertain areas of the outlook is that how this plays out.

That's interesting. I guess if you could spend some time on that just in terms of thinking about deposit betas or deposit pricing if the rates move higher, the Fed begins the rate hike in cycle. One, like do you think -- or are you assuming that the deposit betas behave better than what we saw in '15 to '18? Just talk to us about the puts and takes as you think about ALCO modeling around deposit pricing and forecasting.

As we think we, we're leveraging the prior 0 interest rate policy framework as a data point because there's really not a lot of them, but -- so our assumption is in the rising rate environment, we would assume a 35% beta. We use a static beta in the modeling. So when you look at our sensitivity in our Q, that's what you're seeing. In practice, we would expect to see a very low beta for the first few hikes, if any. And so we would expect to see that. And then once rates get a little higher, we would expect to see the beta increasing, some deposit mix shift probably at the time. And so -- but at the beginning, it's our assumption, due to this liquidity environment, the betas will be extremely low.

Got it. And in terms of that liquidity that's come in, do you have a sense of or do you analyze your deposit inflows over the last 18 months to figure out what may actually outflow as supply chains normalize here? Like do you have a even a rough estimate around those numbers?

Nothing that would be accurate -- probably accurate enough to share. But we do believe, if you look at our growth, we think this is a wonderful time to gain clients. And so we're out there delivering. You've seen some of our treasury initiatives. We're out there actively working to grow our deposit base. And we believe that has positioned us well for the future. We do believe that when the supply chain frees up a little bit, then we'll see more CapEx spends, and that should be a draw on cash. Hopefully, it's a draw on utilization rates, and so we do expect that. But I would just say it's highly uncertain how that mix -- how that will interact with likely deposit growth kind of trends continuing for the next few quarters. And so those are the mix shifts that I would highlight there.

All right. I guess maybe shifting gears a little bit. I wanted to spend some time on the CRE market. Obviously beginning your focus for Synovus. I think there's some concern when the pandemic first hit around some of the CRE subsectors. Talk to us in one -- in terms of how that's shaken out. Are there 1 or 2 areas within CRE that you're still watching as you think about not just credit but even from limiting the growth exposure of the bank?

So Ebrahim, it's a great question because I think that you have to look at the different asset classes and understand some of the overarching pressures that you're seeing. Obviously, we've talked a lot about multifamily, and that's a very constructive asset class for us. I mean you look at the population growth in the Southeast. You look at the lack of supply for single-family housing. So that's been something that we have done a tremendous job on in the past, and we'll continue to grow that selectively. We're trying to do as much on the funded side as we are on construction because, obviously, construction adds a little more risk. So we like that asset class a lot, but we're just trying to manage how much of it is new construction versus how much of it is fully funded debt. But the asset classes that we put a ring fence around during COVID that had the biggest impact starts with hospitality. Obviously, as we've shared with you, we took a great number of steps to monitor our hospitality portfolio during the pandemic. We actually created a hospitality team. We pulled them off of their normal portfolios, and we have them just focus on our hospitality footprint. And the reality is those drivable destination hotels with a leisure element actually performed very, very well. And that was a bit of a surprise for us. So we're not out there targeting new hospitality deals today, but we are continuing to entertain new projects that have strong operators and strong sponsorship and the market fundamentals are constructive. If you look at the second area, it's office, and I think this is probably a little more opaque than some of the other asset classes. We don't believe that there's going to be a mass exodus from some of these central business districts as many have forecasted. And I think you're starting to see that today in cities like New York and Chicago, where people are coming back into the marketplace and offices are starting to fill up. But for us, we've had a good mix between those metro office complexes as well as some of the suburban submarkets, which we've continued to do well in. And in many situations, those have been the beneficiary of people moving out of some of the central business districts. But I would remind you, for office, for us, about 40% of our portfolio is in health care medical offices. And so for us, that's a very different animal than in dealing with the traditional office complex, and those have continued to hold up very well. And I think it just speaks to diversification. That's the key in any of these portfolios, diversification by industry diversification by geography, and we've maintained that. The third area that we focused on has been the retail sector. And obviously, big box has been a challenge. Fortunately, for us, we don't have a great deal of exposure there. We still are taking the chance to fund new opportunities and service providers, some that are single tenant credit projects. We also like the grocery-anchored centers. But the general reality is the MSAs in the Southeast, with retail rent have held up very, very well. And so we're going to continue to be a beneficiary of the population growth and the household income growth in the Southeast, and we're going to continue to do projects there. We also have a senior housing team that, as you know, has been in the marketplace for a very long period of time, and we'll continue to leverage their experience to make sure that we continue to do deals there, and we expect that to continue to grow. So for us, it's about making sure that we grow strategically, and we're leveraging our best operators. We're leveraging those businesses that have the right sponsorship and we're focused on the asset classes that mean that we feel have the greatest success as we look into the future, but CRE is going to be a growth engine for us.

Got it. And just one quick one on that. Any changes in the senior housing -- I mean I know it was sort of got very negative headlines early on. But as that market looks today, any big differences today versus pre-pandemic?

No. Actually, what's funny is it was -- it got a lot of negative headlines in the beginning because it was a very unsafe place to be. But if you think about it, those individuals that were in those nursing homes were the first to get vaccinated, so it quickly became some of the safest place to be. So we've seen demand pick back up. You've seen these companies, these operators have evolve to the situation of being able to use PPE and making sure that they create safe environments. And for a long period of time, there, people weren't allowed to move in, right? We weren't letting people come in. And so that's been removed. And so we're seeing traction with vacancy in some of the senior living facilities actually going way down. So it's back to more of a normalized environment there. But look, that industry has been changed forever as it relates to safety protocols and things like that from COVID. But it shows you -- how when you have the right operators, they can be very resilient in being able to get through it.

Got it. And you talked about your markets there, Kevin. Maybe if you could spend some time on just the Florida expansion. Remind us where we are in terms of the investment cycle both commercial bankers, wealth management and what we should expect in terms of just the ability of the franchise to outperform on growth as we think about the next few years.

It's something I like talking about because when we consummated the deal with Florida Community Bank back in January of 2019, I think there were lots of question marks around credit. There are lots of question marks about the volatility of that marketplace. And I don't think any of us was hoping that we would go through an economic downturn like we saw from the pandemic. But one thing I think that proved out was the strength of the portfolio that we acquired in the FCB transaction. It has held up very well. It was a group, as I've shared in the past, of very skilled corporate banking relationship managers that had very diversified portfolios, some around some specialty areas. But that South Florida franchise was -- we were able to attract the individuals and keep -- and retain those individuals that made them such a compelling financial services offering in the South Florida marketplace. And so first and foremost, we're glad we still have that team intact, and they continue to be a great growth vehicle for us. Two, we said in the very beginning, we wanted to build out our Synovus franchise. So we started by adding roughly 35 wealth professionals in the marketplace. And I'm happy to report that just a little over 2 years later, we have assets under management of around $1 billion. We have $0.5 billion of deposits. We have a consumer lending portfolio that accompanies that, which contributes a little over $20 million in annualized revenue in a little over 2 years. So we built it out. That trajectory of growth continues as each of those fiduciary officers or our advisers continue to build their books. And so it's done as we've expected. We've now gone to the next investment. We added a new CRE leader in the marketplace. He's been a wonderful addition to our team and is building out new opportunities for growth with new customers. We announced on the third quarter that we had added 2 new middle market bankers for Wells Fargo, 1 in Tampa and 1 in Jacksonville. We are super excited about these hires. We think that they are difference-makers in that marketplace, and they're going to bring a tremendous amount of growth orientation to those markets, and it's going to allow us to continue to expand our teams in each of those areas. And then lastly, we're in the process now of building out more of a community presence in South Florida. As I mentioned, when we bought FCB, they were focused a little more on market, larger corporate. And now we're going to be filling in with the kind of the core commercial and small business areas within South Florida. So for us, we still are super excited about what the Florida market brings to us, the level of business creation, the economic performance, the amount of business relocations, the migration and all of those point to continuing to invest there. But as you know, we've talked about doing this in a prudent way, where we try not to throw too many chips on the table. We put chips on the table. We benefit from those, and we continue to invest in a granular fashion in each of those areas as we go forward.

Got it. I guess talking about chips on the table, you talked about 2 initiatives during the third quarter call. One was the Corporate Investment Bank. The other, I think, was the restaurant finance -- franchise finance business. Give us some -- a bit more insight into both those around what the end game is and what's going to be the sort of time line for making the investments, getting that up to speed in terms of where you want -- what these should look like.

Yes. So both of the investments we talked about are really based on that premise I started with, which is repositioning for advantage. We believe we have the right to win in the commercial space. And ultimately, the thing that we believe -- and it's played out, it's not just -- that expertise matters. Specialization matters. And so as we look at some of the industries within our footprint, we feel that it's important to make sure that we cover not just with general bankers that cover a geography but that we also have dedicated industry expertise. And the first was on the QSR and full-service restaurant segments. We brought over an individual from another super regional bank to lead out this practice. He was doing it at the other institution. He has a long history of banking both franchise and full service restaurants. And we, as a company, have had a lot of these businesses. But we think in order to get a deeper wallet share and to expand our presence outside of our existing customer base, we think it makes sense to bring over a team of professionals that just deal in that space. So we have hired the leader of that group. He is in the process of building out his team. And I think this quarter, you'll actually see us starting to book some of our first loans. In the fourth quarter, we'll actually start providing some traction around this restaurant services vertical that we have. The Corporate Investment Bank is probably a longer-term investment. And this is an area Ebrahim, that we were doing on market intelligence work, and we were looking at areas for new sources of revenue. And this was an area that we identified because we believe that many of the bulge bracket firms and super regional organizations continue to take their corporate and investment banks upmarket. So they're trying to get greater efficiency and productivity by focusing in larger revenue sizes and areas where they can get greater transaction revenue. And so we believe that there's a space above that $250 million area where our wholesale bank plays up to today, that we can interject corporate banking specialty so we'll have both coverage bankers and some investment banking capabilities to be able to provide that personalized attention with the expertise of having that corporate investment banker on our team. Now many of this will come from dealing with companies that grow out of our community and wholesale portfolios. But the big bet here is that we're going to bring in a team of bankers that have portfolios from where they're coming from that they'll be able to attract those clients over time. We have hired the leader of this group. He is coming to us also from a super regional bank. We, at this point, can't share his name because he's still under garden leave provisions, but we'll announce who that is by the end of November. And we're super excited. This, again, is going to be a little longer-term build-out, I shared on the call. We'll start with a couple of industry teams here. We'll focus on a couple of verticals to kick it off. And then as those start to generate revenue, we'll add additional teams. But this is all built around the provision that Jamie and his team have put out there, which is maintaining shorter payback periods for investments less than 2 years and making sure that we have a focus on net present value of all of these investments. And so for us, this will be a build-out. It's not going to be a big expense in 1 year and then you're going to have to wait and see all the revenue comes. We'll slowly build it out. We think over the next 3 to 5 years, this can be a material business unit for Synovus.

Excellent. I guess just moving very quickly, another big focus of yours has been Synovus Forward. Talk to us in terms of what's left tied to Synovus Forward in terms of the synergies. And also, my understanding is you spent a lot of time in terms of the wiring of the bank as you've gone through that process. What are the teachings from the Synovus Forward process that's kind of informing how you're thinking strategically about the bank and how you're doing things differently?

Ebrahim, we're super excited about the third quarter of being able to announce that we had generated $100 million of incremental pretax run rate benefit. And to me, it was exciting because it was a lot of work since we announced this in the fourth quarter of 2019. Just reminding everyone that we came up with this program before the pandemic because one of our goals as a company is not just to perform well. We want to be a top quartile institution. And so when we were looking at our financial performance as it relates to growth and profitability and efficiency, we felt like there needed to be some incremental efforts to generate the financial benefits that we felt were needed to be a top quartile institution. The first year, we started with funding the journey with doing some head count reductions and third-party spend and real estate consolidations. And so the team worked very hard. And those things are hard. It's not easy to cut expense because we're cutting expense but, at the same time, we're growing. So we're not shrinking our way to prosperity. We're becoming more efficient while we grow. We started layering on some revenue initiatives during 2021, including our pricing for value for treasury. We have repriced deposits. We got an incremental 3 basis points there from some of our efforts. And we've taken an active approach in managing the yield of the loan book this past year to create some incremental yield on the loan portfolio. So to get to the $100 million, we cut expense, we managed the balance sheet, we repriced initiatives. And the exciting part is we made a lot of investments, a lot of investments in analytics that I have yet to pay off because part of the tool is we create these great analytical tools. We hand them over to bankers, which we did this past quarter. It takes time to work through those new insights for the bankers to be able to reach out to their customers to offer a new solution. We offer new products. We rolled out accelerate accounts receivable. That already has a $2 million of revenue built in from the pipeline that we've generated, but there's more to come there and there are new products that will come after that. So as you look at this next 75, it's a project, it's a program, but more so it's a mindset. And so the key takeaways for us is we've got to continue to leverage our innovation, and we've got to continue to challenge the status quo in order to come up with new ideas for efficiency, new ideas for revenue, but it's going to take both of those. You can't focus on one side of the equation or the other. You've got to focus on both. And so for me, we're optimistic is that this has not only helped us identify new initiatives, and we'll deliver on those. But the most important thing, and this is the thing that Jamie and I talk a lot about, it also enhances your prioritization, right? Banks try to be everything to all. And what it's done for us at Synovus Forward is it's pushed to the top of the initiatives those things that matter. It's where we invest our dollars. It's where we come up with our efficiency items, and it allows us to be a little more colloquial at how we look towards the future. And I think that's the key is if we have all of our executive team, all with the common vision with the same initiatives focused on those things that are going to generate growth and enhance profitability, we're going to be more successful in implementation.

Got it. And I know we are on top of our time. But one last question, I think, Jamie, for you just around capital management. Can you remind us around capital management priorities and how you look at approaching inorganic acquisitions? So obviously, you do loan purchases, which is a little more an asset acquisition. But when you think about M&A, bank, nonbank M&A, any interest there?

Let me jump in on the capital side, and I'll hand it to Blair for the ending on M&A. But look, the third quarter is exactly how we want to deploy capital. It is core client loan growth, and that's -- that's #1 for us. And so we're pretty excited about the longer-term outlook. We believe that we're well positioned. But obviously managing to the 9.5% CET1 target that's elevated than where we were pre-pandemic just as a qualitative buffer. And we feel good about that. We're also committed to a 30% to 40% dividend payout ratio. So you kind of combine those 2 things. And we just want to make sure that our balance sheet is positioned so that we can deliver that client growth. And so that's how we think about it. As we go forward and we look into 2022 when you think about share repurchases, they fit in with how first off, what is our RWA growth going to be with client relationships. And then beyond that, it's a relative value. And we look at all the metrics you would think about, price tangible book, we look at price to earnings, we look at the returns on the third party that we believe in, that we believe, have a strong risk-adjusted return. And so we put all of those into consideration as we think about share repurchases. And Kevin, let me hand it you on end of that.

Well, thank you, Jamie. And look, I see Jamie has our prioritizations down pat. And from an M&A standpoint, Ebrahim, we've said it very clearly is that the best investment we feel like we can make in Synovus. And so M&A for us, especially whole bank M&A, is really back burner. We believe that we have enough opportunities to invest in our company to generate incremental growth that we don't know that taking on a transaction and creating additional risk associated with that transaction is the best use of our capital today. Where we have been clear is that if there are companies, much smaller companies that provide functionality or capabilities or some level of technology, we would be inclined to look at some of those to generate growth and that we could deploy our capital that would not only enhance the future growth story but would allow us to offer solutions to our existing customers. We would look at that. But the reality is with the valuations in that space and the challenges that exist there that would be more difficult to pull off, but we are looking at those opportunities all the time.

Got it. With that, Kevin, Jamie, thank you so much for your time. Thanks for joining us.

Thanks for having us.