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

Get started for our first bank presentation for the day. I'm delighted to welcome Chairman and President and CEO, Kevin Blair from Synovus Financial. we also have Jamie Gregory who's there. I'm told for moral support. So Jamie, thank you for being there.

And maybe just -- Kevin, over the past day talking to management teams, clearly, a lot of uncertainty around the macro outlook. Would love to kick it off in terms of your markets have been beneficiary from some of the pandemic trends, move to the Southeast. Maybe as a reassuring manufacturing pickup, et cetera, give us a state of the union for when you look across your footprint, client base, what are they feeling and...

Yes. Let me start off, thank you for having me. It's great. I always see that we get through a fireside chat. I'm still waiting for the fire, but I guess maybe that's the outside temperature today. But first, it's been about a little less than 30 days since we presented our earnings for the fourth quarter and gave our guidance for the year. And so not a lot has changed in 30 days other than we continue to live in a highly volatile environment. And I don't think that's going to change over the next 11 months. We're going to continue to see things change. But for Synovus, part of what we shared in that presentation was our goal is to deliver double-digit PPNR this year despite all of that uncertainty. And to your question, Ebrahim, a big reason for that is we believe we're in one of the best footprints in banking. When you look at the Southeast, the population growth over the next 5 years is 2x what the national average is, and household income growth is 30% higher. And so we feel that we're in a great position. But unfortunately, rising tides raise all boats. And so we're not the only one competing in the Southeast and more banks continue to double down in that footprint. So for us, it's about beating our competition and getting better. Now when you look at the sentiment that we're seeing, we do a survey, our Market Intelligence group, Cal Evans leads that as well outside of IR. We do it every quarter to ask our commercial clients, what they're seeing in the marketplace from the prospective -- hiring that they'll be doing in the future, what their business pipelines look like, what the price is and their ability to pass on that increase cost to their clients look like. And really, you could argue that commercial clients are overly optimistic but the reality is we've seen improving trends over the last 3 quarters on those surveys. And as I said, the absolute number may matter less, but we look at the relative change. And so what we're seeing today in the fourth quarter survey is that those commercial clients actually feel a little more bullish as prospects of new business and prospects of future hiring in upcoming quarters as they plan out for the year. So that bodes well. We haven't seen a decline. We have seen inflationary pressures on the price side start to abate a little bit, and that will allow them, obviously, to manage margins because I think we all were worried about how long can they pass on these prices to the consumer. When you look at the consumer, obviously, you guys see the data, consumer spending is declining. And I think we all expected that. But when you look at consumer sentiment, it's actually started to increase a little bit. And we were at a presentation a couple of weeks ago in Atlanta with an economist and he provided an interesting perspective on consumer sentiment. He said it's more directly correlated to the price of the pump. Most consumers go and see how much does that gallon of gas cost, and that's what determines how optimistic they are about how far their paycheck is going to go. So I think as fuel prices have come down, sentiment has retraced a little bit and gotten better. But overall, I would tell you that we remain cautiously optimistic, not just because of the economic trends that we're seeing, not just because of the population inflow but as I've started, we believe that our model is differentiated. And so even during difficult times, to be able to produce growth, you've got to take share from competitors and ultimately, you've got to have some new irons in the fire that produce growth. And that's what we've been trying to do over the last 1.5 years is put some new businesses, new products in place that even if the underlying growth slows, we believe that we'll be able to grow at a faster pace than the underlying market.

Got it. And I want to talk about some of those irons in the fire. But just one follow-up around the survey. It's the fact that it's been incrementally improving over the last 3 quarters, does that mean that higher interest rates are not having a negative impact in terms of like you would imagine that cost of equity has gone up for these customers, like all of that's not playing out the way, I guess, you would have expected a year ago.

Yes. It's an interesting question. I think it shows you that interest cost is going up, but it's not the biggest expense they have. It's generally the raw materials. And so as inflationary pressures on their raw materials have come down, they're more optimistic on that side, and they probably ignore the interest rate a little bit on the other side. Now it's hard to argue that over time, that's that is going to create a headwind for their growth. But I think the benefits of seeing a reduction in kind of their core pricing on their raw materials have offset the increase in interest rates.

Understood. And I guess, maybe pivoting to the Synovus, you talked about great markets but extremely competitive markets. And Synovus, obviously, over the last decade has gone through a transformation in and of itself. Give us a sense of the competitive positioning, right? You're in a market where you were very, very large banks, a bunch of regional and a ton of like-sized competitors going for the same business. So would love to hear from you in terms of competitive positioning, how you are strategically looking to grow and where you're investing?

Yes. Well, look, it's no secret that there's $4 billion of disruption happening in our footprint with mergers happening and anytime there's a merger, there creates an opportunity because you're migrating clients from one platform to another. And I don't know of many migrations that doesn't have some issue or just require retraining of clients because they're on new platform. So that in and of itself has created opportunities, not only for clients but for talent because folks in many situations don't want to work for the acquiring bank. But more importantly for us, it's focused on the things we can control because those things are going to happen, and we want to be the bank of choice and to be the bank of choice, one of the things that we've tried to focus on the last 3 years is really being everything to only some. You can't be everything to all. You've got to be more surgical at where you spend your money. As a $60 billion bank, we can't go out and be everything to every segment and provide every product and try to be the best at everything. So one of the things we said is we have the right to win in the commercial banking space. And so we've doubled down in commercial. We've expanded our geographic banking practice across our 5-state footprint, we've added specialty units, we've double down in our middle market space and adding new talent from some of the institutions that are going through change. And the specialty businesses that we're adding, whether it's CIB or restaurant services or expanding things like senior housing, those are now becoming national businesses. And I believe in the commercial space, not only do you have to provide a great deal of service, you have to be proactive and provide advice, but they want expertise. And so that's where we've tried to bring in, whether it's from an industry perspective or an asset class perspective. And one of the things that we're not walking away from is our expertise in CRE. Now you go back to transformation 2008, we're almost 50% CRE. You look today, we're a little less than 30%. So we've rightsized the balance sheet. CRE was probably too much, but we've also changed the asset classes. But we believe that we're really good in that space, and we're not going to walk away from it and we're going to double down there. The other thing that was important is if you're going to be good in commercial banking is you've got to have a great treasury platform. Today, access to capital and when rates were at 0, it was pretty easy to get capital. But the one thing that we believe and maybe it's the Goldilocks principle is we're small enough to provide a level of service that maybe the larger institutions have forgotten about. We're large enough to provide the types of functionality, capabilities that the smaller banks can't provide, but it all starts with that portal that every commercial client uses. And so last year, we rolled out our new Synovus Gateway platform, which is the commercial portal that allows them to access all of the cash management services that we provide. And that's been, I think, a game changer because we've added functionality to a lot of our clients. It's API-enabled, so we can continue to add new solutions. We've added an FX platform, export trade product, accounts receivable product and in the coming year, we'll add an accounts payable product. And you can't do that if you're on an old legacy mainframe platform. So having an API-enabled platform is important. But then two, we've added a tremendous amount of talent on the treasury side. Sales folks, both on community bank, wholesale bank and now CIB and technical expertise because it used to be a function where you could go out and sell products. Today, everything has to connect into the company's ERP or connect into their system. And so you have to have technical expertise at the same time. And when you look at our trajectory of our sales and treasury since 2018, we've had a 70% CAGR in growth, 70%. And what we've monitored over time is what percentage of that sales, we call it PxV, price times volume, comes from existing clients. In the very beginning, about 90%, 95% of the sales came from cross-sell. So it says in the past, we weren't doing a great job of providing these services to our existing relationships. In 2022, that number was 60%, still shows that we had opportunity to cross-sell into the existing base, but 40% of that sales growth came from new relationships. And I think that's a little bit of the chicken and the egg. Before, we didn't have the products to entice people over from a treasury standpoint, now we have it. We're getting full service or the full wallet share of the clients when they come over. And in many situations, we're winning the business because of treasury, not leading with loans. So our transformation on the commercial side has been something that not only focusing on the talent piece of it, but getting the capabilities and the products. And then the last piece is analytics. And for anyone, if you look at a bank, we are given a treasure trove of data, transaction data, client data and the banks that can take all of that copious amount of information and call it down into something that's actionable, because what your clients want today is not a fulfillment channel, they don't want to have to come to the bank and ask for something. They want the bank to come to them and make a value-added recommendation to say, this is something you need. And if you're mining the data, you can do that on a more proactive basis. And so we've spent a lot of time and energy on that to make our bankers better. And then when things like our loan origination system, we've originated -- we've just rolled out nCino that's going to make a better client experience. It's also going to give our bankers more capacity to be able to go out and sell. So throughout our bank, the transformation has been built around kind of a diversification of revenue. And you'll see that when we talk about things like banking-as-a-service and CIB but it's also about those core businesses. And there's one thing I've probably not done a great job of doing is emphasizing that a big part of our growth are not these new shiny objects. They're important, and we like them. But a big part of our growth are these core businesses that we think we have the right to win in and we're actually growing at a good pace.

Got it. So all of that travel pretty bullish when you think about the markets, when you think about what you outlined. So when you think about one near-term, your loan growth guidance feels like -- what would be the risk of why you would not hit the higher end of your range? So you feel that you might do better than that?

Well, 5% to 9% is what we suggested for the year. And obviously, the exogenous factors of what happens in the economy is the biggest wild card there. And we shared on the fourth quarter call that our pipelines are lower. 30%, 40% lower than where they were going into the fourth quarter. A large reason for that has been CRE. We've pulled back in the construction side a little bit. We're still continuing to allocate capital towards our best clients who have full relationships with us to do construction projects where it makes sense. But you can see that our clients, their demand for capital has slowed because they're not out buying properties, and they're taking a wait-and-see approach on the CRE side, where we continue to expect to see great growth is on the C&I side. And it's going to come in our specialty areas like SLD, it will come in CIB, it will come in middle market, it will come in our senior housing area. So it's very diversified. So when we give you the wide range, the biggest variable will be kind of what the external environment is and demand from our clients. What gives us the ability to move towards the higher end of the range will be the productivity of some of these new businesses and being able to continue to grow there like a CIB. Consumer is really not a big emphasis for us. We still provide consumer mortgages, obviously, home equity. But as we've looked at residential home prices, we've been a little more selective with our credit policy there. We reduced the allowable LTV just to protect us in case we were to see housing prices decline. And we've deemphasized the third-party loan portfolio. So part of the reason that consumer loans, and you may end up a little lower on the spectrum as we continue to run down that third-party consumer portfolio, it could put a little bit of a headwind on loan growth.

Got it. And so one of the things you mentioned, I think you talked about this at the Investor Day around the CIB build-out. Just give us an update in terms of where we are hiring of talent, building out infrastructure, like is the business where you want it to be? And what's the -- any early signs of growth and what it looks like?

So we're very excited about where we are because I think we just made our final hire this past week in the 3 verticals. So just to remind everyone, we're doing TMC, so tech media, communications, financial institutions, and we're also doing health care. So we have the managing directors all in place. We want to make sure that we had the credit products team in place as well and to have some junior coverage bankers in each of the verticals. And now we've been able to fulfill all 3 of those verticals. Really the last piece of it is bringing in some of the junior analysts to help with the sales enablement process. So with the teams in place, we're now starting to have deal discussions. We've already surpassed $100 million in loans. We booked our first capital market fee. We booked our first deposit relationship. We've had a lead relationship. We helped to co-lead a syndicated transaction and so I'm very optimistic. The only concern I have is that as the capital markets have been a little less constructive over the last year and as we look out into the future, there still could be a down year in that space. And our team says, look, we've seen a little bit of a slowness in the pipeline, but given our newness, we're still going to have a lot of growth. And the team that we've been able to bring over, the real value there is if they can go back through their roll of decks and be able to bring over some of the clients that they were able to bank at their previous institutions. So we remain bullish on our ability to be able to grow there. And the big question will be, are you getting the right returns. And so what we want to make sure is if we're out committing capital, that we're getting in the depository relationship or we're getting fee income that comes with it. And ultimately, gives us the opportunity down the road to participate in DCM and some of the other capital markets categories.

Got it. And the other thing you mentioned around lending was CRE. It seems it's been a concern obviously for investors when you think about higher interest rates, what that does, and we've talked about that just over the last time. One, give us a makeup of the CRE book, right? I think there's just so much of subsector differentiation between CRE1 and then is there any particular subset where you're worried about [ BNC ] class office, I think, has been talked about a lot.

Yes. So look, when you look at our book, income-producing properties, we're really -- we have a space. Office is the one that everyone wants to talk about. 50% of our office book today is in health care. So it's a different asset class than the traditional office space because people are still going into medical offices. And given the demographic play there, I don't see that changing. But where Cal and his team have been able to dig in and see where there's been some pressure on the office space has been on older properties prior to 2010 in Class B and C spaces and slow growth markets. We really don't have a lot of exposure there. Now, sure there's a onesie, twosies here and there, and our team has gone through the entire office book and been able to monitor any performance degradation, and we really just aren't seen anything. And -- but we read the same thing everybody else sees, and we see that vacancy rates have increased in certain markets. But I think what's important, as you think about CRE in general, is when you look at our footprint, our occupancy rates, our rent growth across all asset classes is exceeding that of the national average. So being in this footprint is going to be an insulating factor for whatever happens in the national environment to, you think about multifamily. Multifamily is still a constructive asset class, and we've grown that. Obviously, people need a place to live, and rent growth has continued. But we're seeing markets and that's where we look at pockets where there's -- where we believe it's overheated and there's not an opportunity. There's too much supply. And so we pulled back in certain markets. But generally, it's an asset class we continue to lend into. Hospitality has been something that -- from the pandemic, we really pulled back and we got into a mode of management versus growth. We will still work with some of our hospitality clients that there's an opportunity, but that's continued to perform very, very well through the pandemic and coming out of the other side, the space that we're looking in kind of the drivable resort destinations. Those have performed very, very, very well. And then retail, you think about retail, 75% of our portfolio is credit tenants. And if they're single occupants, they're very strong credit tenants. So that's performed. We're not in the mall space, and we're not -- we don't have a lot of strip center exposure in general. So I think the key with CRE is what we've been able to do over the last 10 years in changing our portfolio from being one that had a lot of raw land, construction, C&D lending, and to being income-producing properties with very good sponsors at very low LTVs. And so that's the real, I think, mitigant to what we're facing here. It's not to say that we won't have some losses, but I think they're going to be very, very contained. And it would be idiosyncratic versus something that's systemic across an asset class or portfolio.

And I know I asked about CRE, but anything on credit across the loan book, which is showing any early warning?

No, we -- in our decks, we try to put out those what we call recession-sensitive, and they used to be pandemic-sensitive. And there really hasn't been anything on the credit metric side. There's not a lot of risk rating downgrades. There's not a lot of delinquency or NPL inflows. So we're still not seeing that. And I think it just speaks to the strength of our borrowers. They have a lot of cash on their balance sheet. They -- I think people learned from the global financial crisis to keep a little dry powder, and I think that's helpful. But when you look at the underwriting standards and the amount of equity people are putting in deals, it's just we haven't seen -- someone's not willing to put the keys to us when they have that much equity in it. So we haven't seen anything at this point, but we're also not wearing such rose-colored glasses that we're not looking for that. Cal and his team has an analytical platform that looks at cash inflows, outflows. And so every month, we're analyzing our clients to see if there's been a change in their cash inflow situation and relative to their cash outflows. And although we do see variations by industry in certain quarters, we haven't seen anything that's give us great concern. So it's a cautiously optimistic story today. We'll continue to proactively monitor. We haven't had to change a lot of our underwriting guidelines. We felt like they were prudent to begin with. So we haven't had to adjust them and we'll continue to look for anything that gives us concern. The area outside of CRE that people ask and we've talked about is just small business. And that's just a factor of their balance sheets are smaller, they have less cushions of protection. And something were to happen from a client demand standpoint. They're more suspect in terms of their ability to weather that storm. But again, we haven't seen it in our underlying credit metrics to this point.

Got it. I guess maybe the other area of focus or concern for investors obviously are on deposits, not unique to Synovus. But just talk to us in terms of when you think about the deposit base today, the stickiness of that deposit base and this rate backdrop and how do you -- like what's embedded in your expectations on growth, the mix shift from DDA deposits.

Yes. You begin to the first thing, we talk a lot about the excess deposits that were raised in the pandemic. And look, we had that as well. There's some positive stories to that. When we provided PPP loans to non-customers, we required an operating account. And so those clients, we had over 2,000 that were new to the bank, the majority of those -- vast majority of those are still with us, and they're operating because they were thankful to be able to get that important loan back when they didn't know whether they would be able to make it through the pandemic. But if you think about what's happened at Synovus really over the last 4 years from 2018 to today, we basically doubled the amount of deposits that we have in account analysis, noninterest-bearing deposits. And when most people look at that, they think it was just the fact that interest rates were 0 and people put their money in noninterest bearing. It's actually the opposite. We were able to go out and sell these treasury solutions, as I mentioned earlier, 70% increase in sales and people have put their money in those NIB accounts to offset the fees that they would incur for using those treasury services. Now we're not immune. We saw in the fourth quarter, predominantly in December, we saw some of that NIB run out but we believe that we're in a good position going forward to be able to maintain a good percentage of NIB to total that's been increased over the last 4 years because of that treasury focus. And people will continue to leave it there. The wild card is, as you increase ECR, the earnings credit rate, it means you have less balances there, and that's why some of it has moved out. You saw over the last 2.5 years as we were flushed with liquidity, we did run off a large portion of high-cost CDs that really came from that FCB franchise. We're back in the time deposit market. Today, we have promotional rates just like everyone else. So I think you'll see the percentage of CDs increase, but not to the level they were prior to the pandemic. And for us, we said it in the fourth quarter. We can't control the dimension. QT is taking money out of the system, and we can't stop that. We obviously have retention efforts underway with all of our lines of business, and we're addressing the price. We've been able to keep the beta fairly low, below kind of where we are projecting last year, and we still think it's going to be in that mid-35 range going forward through the cycle. But when you think about our ability to generate deposit growth, it comes from production. Can't control diminishment, can't control augmentation. And so when we go back to the fourth quarter, our quarter-over-quarter increase in production was up $900 million. And that shows that our teams, when we focus them on deposits, which, again, you could argue maybe we should have been focused on it a little earlier, but again, we were pretty flushed with cash at an 89% loan-to-deposit ratio, we could tick up a little bit from there, but we're not going to go back to the 99%, 100% that we had 5 or 10 years ago. We've got to focus on production. And so we've changed incentive plans for our commercial bankers. And so there a little more focused on the value of those deposits. We've kicked off new promotions, adjusted the incentive plans in consumer and we focused on new industries that we think are deposit-rich like money service businesses, and we're evaluating some other opportunities there. So deposits are the wild card, and it's going to determine our cost of funds that we have to bring in to fund all of the loan growth we're talking about earlier. And so that help determine where we end up in that guidance for revenue range that we gave, 8% to 12% is that low-cost funding production. But at the end of the day, as the Fed gets to a point where we can pause for a second and maybe QT becomes less of an issue, if that diminishment stops and we keep the production at a higher level, that's what's going to translate into deposit growth for us.

Got it. And when I talk to a lot of banks, it feels like everyone was taking it back by -- during the summer, dates are going up 75 basis points per meeting. If you think about it today, have you seen at least leveling off in terms of the trends you're seeing in deposit pricing, deposit mix today versus, let's say, back in November, December, you talked about the runoff in NIB in December. I'm just wondering, is all that already beginning to stabilize or are you still kind of wait and watch?

We expect -- the first quarter, we were saying in the fourth quarter call, we expect the fourth quarter -- the first quarter look a lot like the fourth quarter. And that's because there's seasonality. So a lot of the public funds deposits that you raised in the fourth quarter get paid out in the first quarter. So we had said we expected more deposit growth in the latter half of the year. So we expect the first quarter to look similar. And the environment we have today with the Fed continuing to increase rates will still put some pressure on with QT. put pressure on deposits leaving the system. The thing that we're optimistic, and we've seen this in January is that our production still is very, very strong and for all the factors we've talked about. But we don't expect it to just stop in the first quarter, second quarter. I think it's going to be a gradual improvement in things like diminishment. The question will be for things like augmentation is, the faster that inflation returns to a normalized level, the more likely you are to get augmentation to get people increasing their balances again. So it's not just about the lowering of average balances, when do we get back to increasing average balances.

I guess 2 things there in terms of pricing, production. When we think about like new deposit growth in this environment, is that coming at a substantially below market rate? Or how do you think about pricing of those new deposits? How should we think about it?

Yes. Well, look, it's higher, right? Because we're doing things like CD promotions and we're focused on generating deposits. You're going to see the cost of new deposits go up. And to your point earlier on, just the pricing pressures, there's going to be a lag impact to how deposits continue to reprice. So as the Fed goes from 75 to 25, you're going to get less increases on the floating rate loan book, and you're going to see this lag impact, which is why we expect -- even though the betas have been in the 20% range, they'll get to the mid-30s because that lag impact will pick up. So I think you're going to see deposit pricing on the book continue to increase despite the fact that the Fed is slowing the pace at which they're increasing Fed funds rate and production just because we're focused more on it and looking at it relative to what wholesale funding cost you, you'll see some of the production costs go up as well.

Got it. And tied to that in terms of competitive dynamics. You have a couple of like larger banks, super regionals, expanding and putting in a lot of branch locations in the Southeast. Like has that also worsened today versus 3, 6 months ago?

I don't know that the expansion of the branches are a real concern on our side. I mean -- and when you think about the real mechanisms that drive betas and pricing deposits, I mean we we're in an environment where there's pretty good market intelligence of what [ fees ] are paying. And these large banks have kept their standard rates fairly low. And so if you have a large portfolio that's in standard rates, and unfortunately, we do have that, you've been able to keep some of those rates lower. It's if you have everything in exception, price deposits that go up, New branches, look, it changes the economics of a new branch when you can look at a deposit worth 4% versus 1% and we'll selectively look at that. But we believe that through things like MAAST and other products, we can generate deposit growth without having to rely on going out and adding a bunch of bricks and mortar and I don't think that we're at a competitive disadvantage by some of these banks going out and adding more branches in our footprint. Obviously, consumer for us, as I mentioned earlier, doubling down on commercial consumer for us, that means we're not investing there. We're just not investing at the level we would on the commercial side. And so what we're trying to do in our branch networks, we've been able to close 13% of our branch network in the last year. We're stabilized now, and we want to make sure the productivity of the branches we have are maximized. And so I think we can continue to grow consumer deposits with the network we have without having to add a bunch of new ones.

And maybe you mentioned MAAST banking as a service play. You outlined a lot of detail at the Investor Day on this. Just give us an update there and where that stands in terms of pilot testing, what have been the results.

Yes, we are live. We have booked our first revenue in January. So we're on schedule. As we had said back in Investor Day, we wanted to have a product that was accessible by ISVs in the first quarter and we have our first client on the platform. They are processing payments, they have checking accounts, they've issued cards. And for us, the reason why you say, well, that's one client. Well, we did that intentionally. We'll onboard our second client in the next week or 2, and then we'll onboard our third client next month. And the reason for that is when you think about an ISV, it's one ISV, but they have hundreds, thousands of clients. And so what we want to make sure is that the solution as we roll it out with these ISVs, that is scalable. That both from a compliance standpoint and from a user experience that this solution is meeting their needs. And so even though we're live today, it's still somewhat in pilot mode because we want to evaluate how this client is using the platform and any enhancements we'll make. When we add in the second client, different industry, we'll evaluate again, third client, different industry, evaluate it with the goal of having a full rollout in July of this year, which will open it up to ISVs. Now, we've hired a Chief Revenue Officer, we've hired a sales team. So we're not waiting to July to do that. We're out-selling the platform today. We have a sandbox that they can go and look at the product and for us, we -- our initial thesis hypothesis has not changed. We think there's a unique marketplace for this. We don't believe that anyone is providing a full embedded finance solution that can be white labeled through ISVs. We believe that an ISV can improve their profitability 2 to 5x by using this solution by the revenue sharing that we'll do. And ultimately, we think the platform will be very successful. As you recall, at Investor Day, we said all it takes is 30 to 50 ISVs for us to achieve our kind of 3-year targets. And so we're not saying we're going to go capture 80% of the market, we're talking about a very small share of the market, 1%, 2% of the marketplace. So the good news is some of the people we're talking to have higher payment volumes than we would have estimated and they actually have more end-users. So if that plays out and you're able to get your representative share, then you don't even need 30, right? You may only need 20 because they're much bigger ISVs. So we're very pleased with where we are, but the final chapter of this book hasn't been written yet so we'll continue to monitor, but we're in a good place relative to where we want it to be.

And are there any industry -- remind me if any industry verticals where you are specifically focused on or...

Professional services is an area we like. Accounting services is an area we've looked at. We have an educational service platform that's on it today. And so it's -- it's things where you -- we believe that the end-user would be a good end-user for us, and that would be good deposits and ultimately provide us with the opportunity down the road to cross-sell things like payroll, eventually have working lines of credit, term facilities, but that's all kind of down the road. The premise in the beginning was a PayFac tool that brings in deposits and fee income. And that was what the product was predicated on.

And how quickly do we go from like 1, 2 clients to like could be by this time next year, could you have like 10, 20, 25 clients? Is that like a [indiscernible]?

Yes.

Got it. A few more minutes left, maybe just moving to expenses, right? Like I think you've done a lot in terms of Synovus Forward like in terms of both expense revenue synergies. Give us a sense of just the ability to drive positive operating leverage, your comfort level there, where the opportunities are, given all the work the bank has already done?

Yes. We -- Jamie, reminded me, as we closed out the year, I probably didn't do a good enough job on the earnings call. I mean it's pretty awesome. What we were able to do was Synovus Forward, $180 million of run rate benefit that we started prior to the pandemic. Back in September of 2019, we, as a leadership team sat down and said, we've got to come up with some initiatives that provide incremental lift to help us get to some of these financial targets. And over that 2-year time frame, it went from $100 million to $175 million, so be able to do $180 million, about 45% of Synovus Forward were efficiency initiatives. We did vendor management, where we went out and demand managed our third-party services, we re-negotiated rates. We closed branches, 13% of the network. We looked at other real estate opportunities where we took 400,000 square feet in Columbus, Georgia, and we're going to be down to 180,000 square feet. We rationalized the workforce -- the back office by automating and reducing in certain areas. And so those same things that allowed us to deliver on Synovus Forward have got to be the same things we look at going forward. There's -- at a 50% efficiency ratio where we are today, I know business mix matters, but I feel like we're in a pretty good place. So it doesn't come easy. But one of the things Jamie has impressed upon the leadership team is every year we have to find 1% to 2% of expense savings that allows us to have a growth rate that gives us positive operating leverage. And so I look at the guidance we gave this year. Our guidance suggests positive operating leverage. A big piece of that 2% to 3% of the growth in '23 is from these new initiatives. And you can imagine, as they come on board and start producing that is not going to be the same level of expense growth in '24 and '25 and you're going to get the hockey stick on the revenue side. So we felt that it was important to lean in. We didn't want to go into this uncertain period and contract in a way that encumbered our ability to have a long-term growth rate and to generate top quartile performance. But to be able to do that, you've got to be smart and disciplined to find that 1% to 2% every year that may be reinvested or maybe drop to the bottom line depending on what's happening on the top line.

Given the success with Synovus Forward, is the Synovus Forward 2.0 coming?

No, no. No. Jamie said no more 2.0s, 3.0s, it just has to be part of what we should because sometimes I don't want people to think it's not their job. And so what we're impressing upon people is every year, when you go through the budget process, we do a bottoms up, we've got to identify these savings. And it becomes a way of doing business, a discipline versus being an outsized project. Now I never say never because if you entered some sort of economic environment that require a more accelerated way to do that, we would obviously do something like that. We've proven we can but I really like that we've embedded it into the culture, into the discipline around annual planning that will allow us to get those benefits each year.

Makes sense. I just want to take a minute and see if there are any questions in the room, if anyone has a question raise your hand. If not, I can just continue with last couple of questions I had. One, just capital planning, I think the Board authorized a $300 million buyback. Give us a sense of just how you're thinking about building capital, maybe having some dry powder versus opportunistically buying back shares and at the pace of those buybacks that we should expect?

Ebrahim, it's funny. One of the things that we believe was a positive outcome of the global financial crisis was stress testing, right? And internally, we're not a CCAR bank, but we run a CCAR process every year, and that helps us analyze what levels of capital you need during an economic crisis, whether it's severe or severely adverse or whether it's just mild. And so we believe the targets that we provide, [ 925 ] to [ 975 ] are more than sufficient to weather another global financial crisis. Having said that, what Jamie said in the past, our #1 use of capital and our top priority is continuing to use it to help our clients grow their business. And so you'll see us -- loan growth is the #1 determinant of that going forward. We want to make sure we're providing a competitive dividend. And the third becomes share repurchase. So as we think about the environment we're in today, we've said that we would be inclined to manage our capital ratios towards the higher end of our range, just because I think the sentiment from investors would like to see a little more cushions of protection regardless of what our internal models say that more is better. So we're inclined to manage it towards the higher end of the range. But at the end of the day, that $300 million authorization for us gives us the ability to go out and buy shares, especially if the stock price remained at a depressed level. and we weren't getting the type of loan growth through the demand side that we are expecting, it gives us the flexibility. But that's -- we have it out there for that reason, not because it's a #1 priority to go back and buy back shares. #1 priority is to use that capital for our clients, and we'd love to use it all there and manage our CET1 ratios towards the high end of the range, just to give everybody a little more comfort that whatever this environment we're in, we have more than enough capital.

Anything inorganic in terms of nonbank M&A or fintech or anything? Does that make sense?

Bank M&A, we're not in the market. We're good. We're not left out with the party. And I'd say that, and not just because of why the regulatory environment and the like, I mean, we really are excited about the investment opportunities in Synovus. And so why go out and take on a risk today when you think you have a lot of opportunity to invest in yourself. The nonbank M&A is an interesting space because you hear a lot of banks that are doing fintech type investments. And we made a majority investment into fintech last year to help us build out MAAST. And those are the type of deals we like because it not only helps us roll out a new solution, but ultimately gives us the opportunity to take advantage of their merchant acquiring company of their growth. We'll continue to look at those, but I can be honest with you, there's not a lot of opportunities out there, despite what's happened with valuations of some of those firms, we want to find -- if we were to do a nonbank transaction, we want a functionality or capability that we could offer to our existing clients because that's what gives that exponential growth. What they're doing today, but then you could offer it to your existing clients. And so Jamie has a corporate development team that looks at those things. We've looked at a lot of products and capabilities. We've looked at depository opportunities. And we just haven't found anything that made sense from a price standpoint. But we're going to continue to look, and I think it's prudent to do that. But I don't think you should expect to read a headline every week that Synovus has done another deal.

30 seconds, but I wanted to get an update on the Florida franchise side. I think it's been a big push, the FCB transaction. Give us a sense of investment-wise, are you there where you want it to be? And what the growth outlook looks like?

I appreciate you give me 25 seconds to answer that. We're super excited that we did that deal. Number one, when you look at -- you go back and look at what we paid for it, we basically paid what our price to tangible book value is today. And if you can go out and buy a Florida franchise in South Florida, and pay 1.6x tangible value, I think it's phenomenal. It continues to be a great growth footprint for us. We continue to add talent in that market, and it's going to be, I think, a continued growth engine for us into the future.

All right. With that, thank you so much.

Thank you.