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

Good afternoon, everyone. Up next, we have Synovus. Synovus is a southeastern regional bank that is based in Columbus, Georgia. They offer commercial and retail products and services through 257 branches. At September 30, they had about $58 billion in assets. Presenting today for Synovus is Kevin Blair. Kevin is the President and CEO of Synovus. He joined in 2016 as CFO, and he was appointed COO in 2018 and he became President and CEO in April of 2021. And prior to coming to Synovus, he worked for 21 years at SunTrust. So with that, please join me in welcoming Kevin.

Thank you, [ Gerard ]. And it's great to be with you today. I don't know if anybody attended this last session, but Mike, I like Mike a lot. I know -- I now have my Christmas list, a pinball machine. I don't know if that was subliminal from his standpoint, but I'm going to tell my wife, I want one. Look, I only have about 25 minutes for presentation. And I know for many in the room, you probably know the Synovus story, but I want to highlight some of the things that we've been able to do in the last year or 2 and what we plan to do in the future and show you what that's resulting in, in terms of our performance and how we're better serving our clients. And this slide is a little busy, but I think the important takeaway from this is we're a bank that has a rich history over 134 years. But through that time frame, these strong routes that were built in the communities that we serve and the clients that we were helping and creating an experience that was, in many cases, second to none, we've continued to grow the bank to ensure that we're providing all of the solutions that meet our clients' needs. And so as you look at this, we've grown from a community bank into one that looks more like a super-regional bank, having all the functionality and capabilities of the largest institutions in the United States. But the important part is we haven't forgotten who we are. We remain very resilient in how we serve our clients, putting their interest first and making sure that the communities in which we operate that as we grow our bank, we help to grow those communities. And when you look at the accolades on the slide, we don't like to look at awards and say that, that makes us great. We look at it to suggest that the work we're doing is showing up in the views of our clients and the surveys of our clients telling us we're doing it well. And Greenwich is obviously, I think, the best way to evaluate how well you're serving your clients on the commercial side. We're in the top 5% of all banks in the awards that we received this last year. And then on the J.D. Power side, from a consumer standpoint, we're in the top quartile for overall satisfaction amongst our peer set, but also amongst the top 50 banks in the United States. Our investment thesis is, I think, pretty clear. And it starts with a positioning for long-term growth. And when I think about that, it's really about what you're doing from an operating perspective that's enabling our bankers to grow their clients and the wallet share of those clients at a faster pace. It starts with productivity, making sure you have the right talent and the right tools. But ultimately, it's about better addressing those needs of our clients and doing it in a more proactive fashion. I don't have to tell anyone here the demographics in the Southeast are pristine. And we don't think that's going to change. And I'll show you some statistics here in a second that shows you that I think the gap between some of the national averages and what's happening in the Southeast will actually expand. We also believe that a bank our size at close to $60 billion, you cannot be everything to all. You have to be strategic and choose the places that you feel that you can offer a sustainable competitive advantage and a value proposition that is differentiated. We believe that largely it is situated within the commercial segment, and we'll talk about how we're delivering on that. We also, as we've talked about having an elevated growth profile, we feel it's important from a risk return perspective that as you grow, it doesn't mean that you have to take on additional risk. We believe that we're growing, at the same time, we're actually improving the overall risk profile of our company. We'll talk about that later as well. And then it's also important. I think that's a little bit of this 3M mentality that if you're sitting here today and thinking that your traditional banking services are going to be the only sources of growth 3 and 5 years down the road, I think you're going to find that many of those revenue streams are slowly being disintermediated, and we don't even see it happening, whether it's things like blockchain or fintechs. And so we believe that our right to win has to also carry over into new initiatives, new sources of revenue that will produce growth that today isn't a source of growth, but will be 2 and 3 years down the road. And you can't make too many big bets at a bank our size. So you have to make sure that you're making those in areas that are highly probabilistic of success, and we'll talk about those investments we're making. And then lastly, we'll talk a lot today about what we're doing and where we're going. But I don't want you to leave here without the knowledge that we're performing today. We're top quartile in ROTCE. We're top quartile in ROA, and we're top quartile in our efficiency ratio when you compare Synovus to our peers. And so I think our core performance is shining, and that's what enables us to make those investments in those future sources of revenue. When we talk about the Southeastern marketplace, you can look at the population growth, which is 1.5x the national average or you can look at the unemployment rate, which is 20% lower than the national average. We know that we're well situated for growth and rising tides raises all boats. But ultimately, you've got to do more than just get your fair share. We want more than our fair share of growth. And so we've gone after some of the metro markets, and we've listed those in the footnote here, 11 growth markets out of our 55 markets that we serve, and we've been investing more in talent in bricks and mortar in those locations. As you can see, over the years, those are now representing a larger share of our loans and deposits, almost 70% of our loans and almost 60% of our deposits. And why is that important? For many years, Synovus was viewed as this rural bank that had great core deposits and had great customers but didn't have a growth profile. So over the last 10 years, we repositioned that. We've continued to harvest the profitability in those quality low-cost deposits in rural markets, but we've been moving our resources into these faster growth markets. As you can see, 35% growth in our middle market bankers over the last several years. And as we look out the next 3 years, we're going to increase the number of bankers in our middle market space and our corporate and investment banking space by 75%. So we will get more than our fair share of this growth. Talked earlier about choosing the place you have the right to win. When we look at our investments every year in trying to discern where we get the highest return, we believe that we've exhibited that return has come out of the commercial client segment. And so as we evaluate our go-forward strategy, we want to make sure that we're doubling down in the things that we can do in order to deepen the wallet share of our existing clients that are in commercial but more importantly, attract new commercial clients to Synovus. You'll see that we have -- in order to do that, we value both geographic coverage as well as industry coverage. About 1/3 of our commercial bankers today are specialists, either by industry or by product. And then we still have about 200 geographically based bankers that sit across our 5-state footprint. And you'll see some of the industry verticals here. We've chosen those verticals based on the talent that we've been able to attract, but we've also correlated that to where we're seeing growth within our footprint. And now our CIB team will have a national coverage model based on delivering on health care, tech media and comms and our FIG vertical. If you look at the right, I think what's really important in commercial, and you'll hear it from every bank is that in order to meet the needs of your clients, you have to grow with them. And in today's world, it's not just about giving them capital to help them grow their business. You have to provide them with services that make it easier for them to do business. And that's treasury. It's the digital application that allows them to execute their transactions 24/7 on their time and at their leisure, whether it's capital markets, we've expanded our derivatives desk, and we also provide debt capital markets capabilities. And as we build out our CIB team, we'll have the opportunity to add more on the equity and M&A side of those capabilities. We've advanced our syndicated finance opportunities. I think in today's liquidity environment, originate and distribute has to be part of our vocabulary. It can't always be originate and hold. So we have a robust syndicated finance desk that we built over the last several years. And I think what's most important when people talk about commercials, they forget about the personal side of that. We have rolled out or in the process of rolling out a highly specialized private wealth management coverage model that focuses solely on business owners. We know that business owners actually have different needs and have different opportunities than does just the normal high net worth clientele. So we're having a very specialized approach to just targeting those business owners. At the same time that we've doubled down on investment in talent and on products and capabilities, we felt it was really important to make sure that we derisk and reposition our loan portfolio. So when you look at this slide, it's fairly complex when you look at all of the colors, but it's really simple. If you go back to the global financial crisis and you take the annual loss rates by asset class, and you apply those same loss rates to today's balance sheet, you'll see that our estimated losses would be lower by over 40%. Now I would submit to you, if I had my stress test up here, it would be far lower than that because we've also enhanced our credit policies. We've gotten more equity on CRE deals. We've improved our overall risk management practices. But this shows you what remixing a balance sheet can do. And as we've grown, we've selectively chosen certain asset classes that we want to grow and others that we passed on. When you look at credit metrics, I can tell you they're benign and they continue to get better. And as we're thinking about this next phase of what we'll see from an economic standpoint, we're not seeing any early signs of deterioration on the credit metric side. And we think part of that has been just due to the diversity of the balance sheet and the quality loan production that we put on really over the last several years. One area that we've invested in during the pandemic is just making sure that we have all the tools at our fingertips in order to better manage credit deterioration during downturns. We spent a lot of energy and money on developing an early warning mechanism that looks at our own clients' transactions, both on the lending side and the depository side that would allow us to see earlier than having a quarterly review or annual review that there's deterioration in the underlying credit. We also use that for our renewal process. So if we see someone is a low risk, it would allow us to have a streamlined renewal process. We've added more resources in the first line of defense, having credit officers work side by side with our bankers. And then lastly, we've developed more capabilities on the market intelligence side that leverages external data sources that we can use both analytically and qualitatively to address certain asset classes or categories that we're seeing externally that it's having deterioration, we can then very quickly make changes to policies and monitoring. I know a lot of the conversation, maybe many of the questions will come around the deposit side. And I would tell you that part of the challenge that we have in this environment as there's been some diminishment of liquidity out of the banking system, one of the stats that sticks with me in the third quarter is that our average deposit and DDA, noninterest-bearing accounts actually was flat quarter-over-quarter. I think we're one of the few banks that was able to keep average balances on the noninterest-bearing product flat. And why is that? Why do people leave their money in a noninterest-bearing account? It's because they have treasury services that they're using those balances to offset the fees of the products that they have. And the way that you're going to be able to continue to grow DDA and maintain those balances is to ensure that you have those operating accounts and that you're cross selling all of these treasury solutions into that relationship. Because if it's just sitting there and the alternative is an interest rate, they're obviously going to move it. If it's there because it's their operating accounts and they're using it within their analysis product offset, then they're going to retain those balances. You'll see that we spend a lot of money on things like an accelerate accounts payable -- accounts receivable platform that has artificial intelligence. We have a virtual card. We recently rolled out our new commercial portal called Commercial Gateway that allows us to plug in new solutions on a much more agile basis. And then we also are rolling out later this year and next year, our additional solutions around international banking, which will include FX and trade solutions as well as a fully automated receivable -- payables platform that will also roll out called Accelerate Pay. So the key here is not only providing these solutions, but ultimately continuing to add new solutions as your clients' needs change. If you're not doing this, a lot of the fintechs or payment companies are coming in and grabbing parts of your business and slowly disintermediating your deposits. And so for us, not only are we helping our clients through saving them time and money and resources but we're also providing a defense against this third-party disintermediation. And ultimately, we're driving low-cost deposits to the bank. We've also unveiled more recently some deposit growth strategies that we think will allow us to grow our liquidity base at a pace at or faster than some of our asset growth. Our private wealth expansion, I mentioned that earlier around business owners, but there's some other initiatives in our consumer bank that's focusing on the MAAST-affluent segment. We're also adding liquidity specialists in our middle market, wholesale banking and corporate banking teams. These individuals will work with our relationship managers to identify opportunities to better manage the liquidity of our clients. We've embarked on several pilots around deposit-rich industries. The first one is around money service businesses. We've onboarded our first 2 clients there. We think that's a growth engine. And as most people that know MSBs, the real risk there is around the AML/BSA procedures. And I think we've done a great job of first building out a world-class AML/BSA process that will enable us to be highly effective at onboarding these MSBs. And I'll talk about our Banking as a Service platform in a second, but we believe that MAAST will also be a key contributor to low-cost deposits in the near future. Our 2 biggest investments that we talk about, and we've said on the third quarter earnings call, could represent as much as 3% to 4% of our expense growth year-over-year is corporate and investment banking and MAAST. As I mentioned earlier, corporate and investment banking is largely built around 3 industry verticals, tech, media and communications, financial institutions and health care. We have our 3 managing directors in place. Our entire leadership team, including the credit team, the debt capital markets team as well as some of our credit product specialists are now in place. We booked our first 3 deals. We have a little over $60 million on the books, and we have 2 more deals that will close in the next couple -- several weeks putting us over $100 million. So we're getting great traction. And as I've said in previous meetings, the key here was finding the right talent, putting them in a platform that was entrepreneurial that allows them to go out and bring their clients from those platforms that they're coming from. On the MAAST side, as you may know, we have been working through our pilot product. We have one integrated -- independent integrated software vendor that has been piloting this product. We have now onboarded 900, 850, I think, end users that are now processing payments through our MAAST platform. This initial pilot has been built to allow us to examine the user experience and the functionality and capabilities that's being provided by this. Not only processing payments, but we're now taking deposits and issuing debit cards, and we're working on the final phase of the product set, which would be a lending capability that would be provided through MAAST. So we're continuing to fine-tune the product, but there's nothing today that doesn't make us feel really excited about the rollout that we'll have in the first quarter of next year. We just went to the Money20/20 conference and again, are getting great feedback from several of the software vendors that are eager to play in our sandbox that we've set up to allow them to look at what the product can do for them. I mentioned earlier that we've doubled down in commercial. And so that doesn't mean that we're ignoring the consumer business. But we can't invest at the same pace, and in many places, we don't feel like we have the right to win. So what are we doing in consumer in order to continue to produce profitable growth trajectory. First, we've continued to optimize our branch network. We'll have closed about 17% of our branches since 2019. And going forward, we're going to continue to add new digital capabilities that allow our clients to not only conduct their service transactions, but to be able to originate 100% of what they could originate in the branch. We've also invested heavily in analytics in the fourth quarter. We'll have our rollout of our proactive insight program. I believe that the big change that's happening in consumer for many years, banks were fulfillment channels, clients came in or called the call center, came into a branch and said, "I need a product." They now expect us, and they tell us this in the J.D. Power survey. They want us to proactively reach out to them and give them advice and initiate a conversation that introduces a solution that could help them achieve their financial goals. The data that we have on our clients enables us to be able to lift up those insights to our bankers and whether we reach out to a client virtually or we put it on the digital platform or we have a banker call them, we need to be more proactive at introducing solutions that our clients will need. We also have already implemented last year a bank on standard product. We'll further evolve that product to remove NSF/OD from that, given where the marketplace is moving, that will have a minimal impact, $5 million to $10 million on fee income in the coming year. But ultimately, we want to make sure that all of our clients have optionality when they choose their checking solutions, and we'll have a product that doesn't provide those fees. And then lastly, I mentioned earlier, we're within the consumer segment, spending a little more time on the MAAST-affluent segment. We have a specific product and marketing capability that targets the MAAST affluent, and we'll continue to add more functionality to that product that I think will allow us to build stronger relationships with that segment. When you think about technology, you hear the story all the time about what percent of your revenue you're spending on technology. And although I think that's an interesting stat, I don't know that, that matters. I think what really matters is what your clients are telling you that, that technology is doing for them and what your team members are telling you. I think we're spending our money wisely and most of the money around tech and innovation is moving towards things that impact our team members and our clients. You can see by the end of this year, we'll have 40% of our branch network fully modernized. We're working on 82 client journeys. Client journeys are nothing more than ways in which clients interact with the bank. We're using technology to allow us to make that experience faster and easier. And a lot of times, we, as bankers, probably make our jobs sound more difficult than they really are. Clients just want to deal with the bank, and they want it to be an easy -- simplified and easy process. And that's where technology can make that so much easier for our clients. We have 61 major automation projects underway. And I would tell you that, in many cases, that will create efficiency, but I'm more excited about the capacity that it creates and the quality of the work where you remove manual effort and you replace it with an automation process that can make us more efficient, more effective and also serve our clients better. And then lastly, data is going to be so important for so many of the analytical projects we've had. We've taken about 30% of all of the data that exists at the company, and we have it in our data lake on a cloud-based platform, and we're continuing to expand that and building data marts that enables all of our businesses to better leverage that data to make better decisions. And then lastly, maybe it's a small piece, but I love when we do something, and it results in something where we get fairly immediate feedback. Earlier this year, we rolled out our new call center as a service platform with better IVR technology and just, quite frankly, better technology overall. At first, it was difficult. Anytime there's change for our clients when they would call in, we received questions about why do we move the system. During the month of October, we received the highest satisfaction score we've ever received in our contact center. And our contact center usually gets very high J.D. Power scores every year. So it shows you that when you use technology and you mix it with a good human touch, because many people are still coming through that IVR, our clients are telling us the experience is far better. I mentioned earlier that as we grow, we need to make sure that we not only produce profitable growth, but I think in an environment like today, where there's greater economic uncertainty, we have to show that we're also derisking the balance sheet and that we're improving our overall risk profile from a relative standpoint. And so you can see from this slide that we've actually increased our CET1 ratio almost 60 basis points since 2019. And from a liquidity standpoint, one of the things that we wanted to be cognizant of as we've gone through this excess liquidity period is that we increased our contingent funding sources and that we improved the overall mix of our deposits that over a longer period of time will serve as a more stable, low-cost funding base. And so you can see from the percentages here, we have a much more liquid securities portfolio, and we've increased our noninterest-bearing deposits as a percent of core deposits, almost to 38%. As I mentioned earlier, the key there is continuing to sell those treasury products to keep that percentage high. At the end of the third quarter, we talked about the fact that we're starting to see some headwinds from an NII perspective. I think to put things in context, if you just look at our margin in the third quarter at 3.49%, it was up almost 50 basis points over the third quarter of last year. And we're seeing things today that would tell us that some of the asset sensitivity that we've enjoyed will start to subside and actually face some headwinds. And a large reason for that will be just as we continue to grow loans, and we've had an elevated growth profile on the loan side, 5 consecutive quarters of double-digit loan growth. We've had to fund some of that growth with wholesale funding. And as that percentage of wholesale funding has increased, it's putting more pressure on the margin. We've had a deposit beta through the cycle through the third quarter of only 15%, and we believe that the through-the-cycle number that we are continuing to estimate is somewhere around mid-30%, 35% range and we'll have to monitor that. So the headwinds we talked about were just the funding percentages, the composition of how we're having to fund some of that growth being wholesale funding. Now that, what we call as kind of a reset over the next quarter or maybe a quarter or 2. Thereafter, we believe that there's actually tailwinds to the margin. And a big reason for that is just this fixed loan repricing that will happen where you can see today that our loans are on the books at a little over 4.30% and what we're putting on and what we're renewing today is closer to 6%, and that number could go up, obviously, as the Fed continues to increase rates. Same thing on the securities side, where we're at -- in the high 1% range, the stuff we're putting on today is in the 4% range. And we have about $5 billion of swaps, some of which will start to mature in '23. For all of those reasons, we would actually expect margin to begin to expand again post this resetting. I should also mention here, one of the things that is giving us a little more confidence as we look into the future, is this quarter, we're actually seeing good solid core deposit growth. We're up a little over 1% quarter-to-date and it comes from many different areas, but we've actually doubled down on our bankers ensuring that we're getting full share of wallet from all of our clients and that if we're providing capital to you, we want to make sure that we're getting liquidity and return. And so it's resulting in some good deposit growth, and I think that's going to continue into 2023. Mentioned also that a lot of today's conversation is focused on the future. And I hope you can see in my eyes and hopefully from my voice how excited I am about what we're building. And it's not going to change just because of an economic downturn. I think it actually gives us an opportunity to continue to perform at a high level and really distance ourselves from some of our competitors. I think it was statement that was made about those -- when those around you are fearful, it's time to be greedy. And when those are around you're greedy, it's time to be fearful. And as I see a lot of people that are fearful, I think it's an opportunity for Synovus to continue to grab share but to do it in a smart way. As we look at our performance to date, you'll see that I mentioned earlier from a return standpoint, ROTCE, ROA and efficiency ratio, we're in the top quartile amongst all of our peers. And you'll see that as we shared back in February, we had some long-term targets that we shared at our Investor Day that we've largely achieved, obviously, given the higher rate environment than what was anticipated. But one of the key points we made back in February is that these are not absolute numbers. The reality is, our goal is to be top quartile. So being top quartile means that you have to be at 20% ROTCE. That's what we're going to strive for versus just looking at absolute targets. I should also mention here that I think for many years, we talked about growth and people look at the top line numbers and think just about loan growth. One of the things that we are very clear on is that we are making loans in a prudent fashion and profitability on loans is going to be something that's just as important as loan growth itself. And so we're willing to pass on loans if we don't feel like we can get the right returns there. During the third quarter, we did see our loan spreads increase about 20 basis points versus where they were in the first and second quarter. And we think that pricing power is going to continue to improve in the near future given some of the constraints on liquidity and capital and that will allow us also referencing the previous slide to help our margin going forward. So in conclusion, I think our story is pretty clear. We believe that today, we're performing at a very high level from a metric standpoint, when you look at the profitability, when you look at productivity, our bankers this past year in 2022, our commercial bankers are producing at a 25% higher productivity levels than they did the previous year. When you look at our assets under management on the wealth side, even though we've seen a fairly steep sell-off in the equity markets, we've been able to grow our wealth fees 5% year-over-year. And as I think about the risk profile, as I mentioned earlier, we've been able to improve our overall liquidity position with a loan-to-deposit ratio below 90%. We've been able to increase our capital. And so all of those things positions us for growth. As I look at some of those initiatives, I mentioned earlier that we could have 3% to 4% expense growth next year from our investments. But what gets me excited as I look out to 2025, those same initiatives could contribute as much as 10% of the company's revenue. And I think that's why it's so important today to make those investments that not only enable you to win business and continue to retain the business you have, but also to create new sources of revenue. So appreciate your attendance today and giving me a few minutes. And with that, I'll open it up for Q&A.

Thanks, Kevin. Actually, why don't I -- I'll start off with a quick question just going on your last statement. That's a great presentation. But the -- you talked about a number of initiatives underway and including the investment bank as well as banking as a service and a whole host of others. How do you think about -- and I believe you also made an acquisition, a fintech acquisition while you've been at the helm. So I guess, how do you think about your return on investment? Like how do you measure it? And then how do you decide whether to buy versus build?

Yes. It's a really good question. Internally, I don't know if there's a magic number to say that you want a 20% return on your investment because each one is very different. We start with putting the client in the center of the room. And we ask ourselves the question, what would the client need, what does the client need? And then we try to understand, are there solutions that we're providing today or are there solutions we need to buy or build in order to meet that need. And so we've been very selective and focused on where we want to make those investments. And in both situations for MAAST and CIB, there are different discussions. Number one, we looked at the small business segment and we see where that small business segment today, 50% of small businesses are using an ISV, ISP to run their business. So every day, they're logging into a Software-as-a-Service platform to run their business. And what we know from the consumer side, we've seen it with consumer lending, where point-of-sale is now the new way to get a loan. We've seen it in e-commerce where everybody wants a super app. And so our thought was we need to be able to take banking services where the commercial customer is currently working every day, and that's on that software platform. So as we evaluated it, we went through a lot of tests, both qualitative and quantitative, to see how large it could be. But ultimately, the returns that we were able to come up with was just by capturing 1% of those end users that are using that software, it paid for itself tenfold. On the CIB side, as we were sitting around having discussions and talking to prospective bankers, what we've uncovered, and it shouldn't shock anyone is that the larger banks continue to move upmarket. You'd rather do a $4 billion loan than you would rather do a $4 million loan. And so in that higher end of middle market, what we're seeing is that some of those clients are falling into the smaller side for those corporate investment banking teams, and they're largely being ignored. They're small fish in a big pond. So our value prop is can we go out and find some of those bankers who want a platform where they feel like they can serve those clients and at Synovus, they're going to be a big fish in a small pond. And I think when we looked at the business case for that, when we hired in Tom Dierdorff to run it, we saw that it could be a 2- to 3-year payback period and to be a very large contributor to the bank's growth and profitability going forward. I skipped over a little bit. But when you look at their metrics, one of the things we also look at, are they going to be accretive to our core metrics, profitability-wise, a 15-plus percent ROE. And when you look at the efficiency ratio, sub-40%. So we want to focus on business units that provide growth, but are also accretive. On the build versus buy, when we look at things like technology, we believe it's easier to partner and buy just because I'm not fooling anyone by saying that our bank is going to be the best developer of software. That's not what we do well. We believe others do it better. And so we're going to continue to partner with fintechs and other technology companies to be able to provide those solutions.

Great. Thanks. Let's open up the questions to the audience.

Kevin, I've got a couple for you. I think back at the Investor Day, you have this great slide that kind of broke down the wholesale bank into the 3 parts. I think it was middle market C&I, specialty, CRE. The middle market C&I and the specialty, if I remember correctly, had like 70% to 80% self-funding ratios. And I know you have commercial clients in the community bank as well. So I guess I wanted to ask of like the $1-or-so billion that you had in commercial deposit outflow this quarter, how much of that kind of came from commercial clients within the community bank versus clients in middle market C&I and the specialty areas? And was there any kind of dominating factor as to why they were kind of drawn down on those deposits?

Yes. It was really across the board, which told us it wasn't anything idiosyncratic. It was more systemic across most commercial clients. When we looked at the largest 20, 30 clients that had outflows, we found about 40% of those outflows were seasonally -- were affected by seasonality. About 20% of those were affected by the cash being deployed in the business, whether in operating accounts or weather investments. So the remaining 40% went for higher rates. And of that 40%, 20%, we moved to higher rates. We actually increased our off-balance sheet exposure about $700 million with a repo product during the quarter and the other 20% left the bank to find alternatives, whether that's making its way into the reverse repo facility or making its way into T-bills. So we looked across the board. There wasn't anything systemic. We don't think it was truly rate driven on our side, and it wasn't around a particular industry or segment inside the bank.

Got it. And then my second question, it's not Synovus specific. There was a kind of interesting transaction today that was announced with TIA Bank getting sold to a group of private equity investors. I mean it's the second time that these clients have gotten kind of room racked in the last 5, 6 years, whatever it was. Did you guys get a look at that? I know you've been pretty self-focused but just -- it's kind of interesting to CP investors buy whole banks typically so.

Yes. Look, we -- the highly effective investment banking community always make sure that every bank has an opportunity to see what's for sale. But we've been very clear. We're not in the business or in the market to go out and do a whole bank acquisition. I get so excited about the investment in Synovus. And where we trade today, quite frankly, from a currency standpoint, we're really not in a position to do it. And that's not the reason why we wouldn't talk about it, but we just think that we can invest in our company, continue to grow it, improve our profitability metrics. And then over time, maybe M&A becomes more of a discussion. But in the short run, we're just not that focused on it.

You spoke about how you're offering clients more services like treasury management and payments to bring in those NIB deposits. Can you talk about how you're optimizing for hard dollar fees versus the funding benefits that you get from NIB? And I guess the second part of that question is, in order to bring in those NIB deposits is the bigger growth opportunity from the clients that you have at your existing clients and tap into your current base? Or is it new clients from your growth MSAs?

Yes. I'll start with the second. I think you always have to look at your existing client base first because it becomes more difficult, what maybe what bankers don't talk enough about is treasury and payment solutions are really great solutions that create stickiness when they're on our side. But when they're on the other side, they're sticky over there as well. So it's harder every day to get someone to move their treasury and their operating business because of that transition. So we first start with our existing clients. The fact that always comes up in my head, I ask our treasury -- our Head of Treasury every year, what percentage of your sales are coming from the existing book. So this year, we're up 24% in services that we've sold to our client base. 50% of those sales have come to existing clients. So in that situation, we're getting about 50% from cross-sell and 50% from new clients. And I think that feels good to me. But I think the balance is if you correlate that to NIB, you would still say that you're getting a higher NIB from existing clients than you would from new ones. Now it's a focus on ours. We look at the number of new accounts that we're bringing in on the checking side. We're up about 2% to 3% year-over-year, and that's important because if you're not, if you're just focusing on one side of the equation, your existing clients, you're not going to have an optimal growth story. To keep things in NIB, #1 you have to be competitive with your earnings credit rate. People talk a lot about deposit rates, but not a lot of folks talk about the ECR and what banks are willing to provide. And we treat it just like we would deposit rate, we look at our ECR relative to that of the industry, and we need to make sure that it remains competitive. The second, and I think the key is you've got to add new solutions so that you can sell those solutions to your clients. And that means that they have to carry extra NIB to offset those fees. So our model is continuing to grow the commercial space, bringing the new clients, cross-selling and adding new solutions that are of value to our clients that require them to keep extra balances.

John?

Yes, Kev. So you mentioned that you've tapped wholesale funding in the quarter to drive loan growth. Can you just give us an idea what the yield -- your new money yield that you're getting on this new loan production, what's the bulk of it that justified to happen wholesale to do so? And then related to that, this got a lot of focus on your earnings call. How does that influence your net interest income growth outlook for 2023? I believe you'd said it may approximate loan growth. How would you quantify at?

John, the hard part is, and we didn't give guidance on the last call just because there are so many moving pieces. But I'll go back to the loan question. During the quarter, when we talked about loan growth, we actually saw production drop about 20% versus the second quarter. One of the reasons that we saw elevated growth is that the payoff and pay down activity predominantly on the CRE side also slowed. And so we think going forward, as production moderates, given a slower economy, loan growth will slow down as well. And some of those payoffs and pay downs will pick back up. So some of the funding gap that existed may moderate a little bit. Going on yields that we had this last quarter were in the 5.75% to 6% range. And so when you think about the wholesale funding and Jamie and his team did a great job because our deposit diminishment largely occurred in the month of September. So we weren't seeing as much diminishment in July and August, most of it happened in September. And so we used FHLB to be able to fund that. And that's obviously floating rate near Fed funds rate. And so going forward, to your question, we're more cognizant of if things are being wholesale funded, you need to make sure that you're getting the returns on the lending side. And it won't mean that we're stopping to produce, but we're going to make sure that if we're going to do a loan and if it's at a 15% hurdle rate, you better get the deposits and you better get treasury to come with it. So I think it puts profitability back in the spotlight. And two, I mentioned earlier, our spreads on the loans in the third quarter were wider by 20 basis points over our FTP curve. And so we think that could continue to expand going forward, which would also give us a tailwind as we're thinking about '23. Again, what it all means to NIM, I wouldn't want to give a guess today. We want to get through this quarter. We want to see what betas are going to do. We want to see what our core deposit growth is, and that will give us a better perspective on what NIM looks like for '23.

Okay. Thanks, Kevin. That's actually all the time we have right now. That was an excellent presentation. Please join me in giving Kevin a round of applause.