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

All right. Joining us once again, we're very pleased to have Synovus. Synovus has managed 2024 better than most, keeping a strong hold on costs, prioritizing strong capital and doing strategic hiring, which should position it well for growth in the years ahead. They appear poised to benefit from the strong demographics across their footprint with the goal of obviously reaching top quartile returns over time. So here to tell us more about the story is CEO, Kevin Blair; CFO, Jamie Gregory. With that, I'm going to pass it over to Kevin, who's going to actually walk us through the slide presentation that they had put out last night, and then we'll have a short chat once Kevin is done with the slides. Kevin?

Thank you, Ryan. It's great to be with everyone today. I think this is such a great conference. I look forward to it every year. And so feels like we're under some positive tailwinds this year, which makes it even more gratifying. I told Ryan, I'd spend about 20 minutes going through the deck that we released last evening, and then we'll go through some Q&A. So I'm going to go through these slides fairly quickly and try to hit the high points on each. Anyone that knows the Synovus story knows that we've gone through a transformational journey over the last 15 years. And I said to many of the investors in the room that I think we're the youngest 136-year-old bank in the United States because the amount of change that we've had over the last 15 years to move from 29 individually chartered community banks into having a fulsome regional bank approach that has enhanced the client experience, diversified the revenue stream of the bank and ultimately improve the overall risk resilience has been quite extraordinary. We built that transformation off of a foundation that was rooted in a team member culture that was second to none. Great place to work, high level of engagement, extremely high loyal client satisfaction and high loyalty. And that around this wheel is the adjudication of the things we do every day to bring that to the market. Winning awards like J.D. Power, being a Great Place To Work, having American Banker recognized us as one of the most reputable banks in the United States. All of those things, we don't do what we do to be able to win awards, but the awards serve as adjudication to say that what we're doing every day is being felt by our clients, our team members and ultimately, our shareholders. As such, when you look at this business mix, it would tell you that we've diversified our revenue streams that will allow us to deliver consistent and sustainable earnings over time. And more importantly, it allows us to be targeted at who we want to bank and where we have the right to win. If you look at this, I think the business mix that we've been able to build allows us to serve the needs of our commercial and consumer clients. And quite frankly, we've talked about the Goldilocks principle. We are large enough to provide all the capabilities and functionalities that the large banks provide, but we have not lost sight of the need for personal attention that the smaller banks provide. Hence, we're kind of in that sweet spot where we can be the best of both worlds. You couldn't have this conversation without talking about Synovus, the 5-state footprint, the 55 markets that we serve, the Southeast continues to be a positive. And I've talked to our team internally. We're not the only ones that know that. When you look at 83 banks in Atlanta or 89 banks in South Florida. Others are coming to South Florida. You've heard a lot of banks this week talk about their expansion. But we have brand awareness, we have density, and we're winning there today. And it has earned us the right to be able to take advantage of the net population inflow that continues to happen in the Southeast and should allow us to continue to have outsized growth into the future. When you look at the data from a population inflow standpoint, the population growth over the next 5 years will be about 2x the national average. And each year that attributes about $50 billion of income that's coming into our footprint. So that should allow us to have a nice sustainable level of growth into the future. But as I said, rising tide lifts all boats, but the way you really win is you take market share. Now we've been very clear as we built the bank and transformed it into something that we feel like as a competitive advantage against our competitors. We felt it was very important to make sure that we continue to build a more risk resilient balance sheet. As you can see from the slides here, we've been able to increase our Tier 1 capital to the highest level it's been in the last 9 years. We've been able to reduce our wholesale funding by almost 500 basis points since 2023. All that said, as we've entered a period of economic uncertainty as we've gotten through that, it puts us in a stronger position to be able to grow on the other side. And I said earlier, when you go through a transformation and when you're changing your business model, you often see companies that struggle with an ability to deliver earnings, deliver growth, deliver profitability. We've been able to do both. Over the last 8 years, you've seen that our EPS has grown on an adjusted basis almost 12%, 11%. If you look at core deposit growth per share to rightsize it for any acquisitions, we've been able to grow at 7% a year, and we've been able to increase our return to our shareholders by increasing the dividend by 18% a year. So we've been able to transform the institution, put us in a better position to win while continuing to perform. And this is shown at the bottom half of this, I talk about scoreboards all the time. And if you use my sports analogy, you can win on the field all day, but everybody looks at the scoreboard to say, "Are you really winning." If you look at the bottom of this chart shows that as of just a couple of weeks ago, I don't know if it's been updated, but we're #1 out of the 50 banks in the KBW Regional Bank Index and #13 over the last 3 years. So something is working. And I would point to the larger graph above it to say we've been able to deliver what we've committed to delivering. And as such, our estimates have actually gone up for [ '25 ] versus being revised downward. Now I would submit to you that this scoreboard that I'm talking about, this is not the end of the game. Maybe it's the first quarter because we don't rest on our laurels. We're not looking at 2024 stock performance in declaring victory. This just tells us that, again, on this journey of transformation, we're winning, and we have an opportunity to win each quarter after this. Maybe the bigger stories as we transition to 2025 is we are transitioning from maybe more of a defensive posture as we've talked about fortifying the balance sheet, optimizing risk-weighted assets into what I call Synovus Go. And Synovus Go is much more about leaning in and generating incremental growth. It starts with stronger loan growth. We've been adding talent over the last several years. That's going to allow us to continue to grow our production capabilities. Ultimately, some of the headwinds that we've seen in this last year, whether it's elevated payoff and paydown activities or just seeing some strategic declines in portfolios, that's behind us. So as we look forward, there's an opportunity to grow. On the deposit side, we've built an engine that can continue to produce good deposit growth. You saw the previous slide, 7% a year. We think through our business model and some of the decisions we've made to increase resources on our liquidity specialty team as well as the deposit vertical, we'll be able to generate core deposit growth that correlates very nicely with overall loan growth. And when you look at our fee income businesses, we've invested a lot in capital markets, wealth and treasury and payment solutions. And we think those investments will continue to provide dividends and sustainable growth into the foreseeable future. One of the things we've talked about is our intentions to increase our hiring of new relationship managers, primarily in 3 areas: core commercial banking, middle market banking and private wealth. About 20% to 30% increase over the next 3 years. Now that translates into roughly 30 to 35 FTE in '25, another 40 to 50 in '26 and then a commensurate amount in '27. This is not a big bet for us. This is an opportunity for us to lean in and be able to attract talent on a more concerted effort in several of the markets that we think we have the right to win. It is an incremental expense, but ultimately, we think this is a very quick payback within 2 years, this strategy will start paying for itself. And within 3 years, it could generate $1 billion in new loans, $500 million in new deposits and have a little over $30 million in PPNR. We also are expanding our specialty lending area with our structured lending division. Today, that's about $2.5 billion and $65 million of PPNR. We are going to add a new team there, that could generate over the next 3 years, an additional $1 billion and $30 million in PPNR. We're also expanding our FIG team under our CIB platform. That's already generated $0.5 billion of loans about 50% of the revenues in fee income. We're going to double down there, expand that FIG team to focus on some other financial services verticals. And we think that will generate an incremental $15 million in the years to come. I think this is important because it shows you some of the investments we've made in the last 3 years are working. Hence, we're having to go out and double down, add more staffing, double the teams to be able to generate incremental growth. So when you think about loans, and you'll see in a second, we're committed to 3% to 6% growth next year, which is higher than what we've experienced this year. It's not based on putting all of our eggs in 1 basket or hoping that the economy gets better. What you can see here is that we built a fairly diversified asset generation engine that will allow us to grow certain businesses at 10% to 15%, like CIB, like middle market, like specialty where we'll have some of our core businesses that are a little more mature like core banking -- core commercial banking, private wealth and senior housing, that will be low single digits. We're going to have 2 businesses that are impacted by lower interest rates. CRE, which you will continue to see higher paydown, payoff activity as well as the mortgage book, that will stay roughly flat. And then as you can see at the end, we only have about $2 billion in what we consider less strategic portfolios that are largely in runoff mode. We're not adding new assets there. So those could run off as much as 5%. Add that all up and what you have is a fairly diversified model that not only generates 3% to 6% loan growth, but will also contribute 3% to 6% deposit growth. For the fourth quarter, ultimately, the update here is just a couple of lines. Number one, revenues coming in a little better than we anticipated. And that's largely a function of better deposit betas on the easing cycle as well as better deposit mix. You see that our deposit growth is actually a little better than we anticipated for the quarter. Conversely, loan growth has been a little slower, and that is a function of lower line utilization, incremental payoff and paydown activities in both C&I and CRE, which we had anticipated, but it's a little higher than we had expected. Credit, expenses, fee income, all within the original guidance. So slightly better quarter for us. And I think it sets the tone as we look into '25 as we build momentum off this year. We look at '25 as I mentioned, on the deposit side and loan side, both 3% to 6% loan growth. A lot of questions today on what drives that range. A little different for each on the loan side. It really comes down to line utilization, payoff activities. We're pretty solid on the production side. We feel really good about what we'll be able to do next year. It's more so some of the things we can control, whether there's elevated utilization declines or payoff activities. On the deposit side, it really gets down to diminishment, the average balance per account. That's largely continued to decline as we've exited this liquidity cycle, but we can't look into a crystal ball and know what happens next year, but we would expect the diminishment to largely stay at this lower level and maybe even turn back into an augmentation environment, but with potential inflation still on the horizon with some of the new policies, you just don't know. So a wider range there, we'll look to bring those in closer together as we are able to validate some of the assumptions. And then on the revenue side and expense, you'll see also correlated ranges there at 3% to 7%. Ultimately, on the revenue side, a little better growth there because we expect NIM expansion on the expense side, which I'll talk about in a second. We've taken this opportunity, as I mentioned earlier, to start leaning in with some incremental investments in both technology and on the talent front. And then from a charge-off standpoint, still a relatively stable environment, and we would maintain capital levels generally in this range, and we would have an effective tax rate that's largely what it's been the last couple of years. Talk about expenses. I think it's important to note what's different from this year where we're up roughly 1%. You'll see that in a normal course of business, just inflation, the merit increases we give our team members, contract and escalation clauses, that's about 3% on average, driving up the cost each year. We have about 0.5 point to 1 point of mandatory investment. That's end-of-life equipment, things we're doing from a regulatory standpoint. And this is not new. This is usually embedded within our expense base each year. So I don't want you to think that's incremental. It's incremental each year. It's just something that we're having to do. The difference is, this year, we're going to spend between $24 million and $36 million on new initiatives. And those new initiatives are going to be things like talent on the market expansion, new technology, better digital capabilities, new solutions on the treasury side. And that gives us the ability, we believe, to create outsized growth in the out years in '26 and '27 and '28. And these are all investments that have fairly short payback periods. To be able to afford that, each year, we go into our expense base and find new opportunities for efficiency. And this year, we'll identify between 1% and 2%, which puts you at kind of the end to 3% to 7%. So in the time, a couple of things I'd leave you with. Number one, as I mentioned, we're really moving from being on defense back to being on offense. Now that doesn't mean that we haven't been offense in the past, but we're really aligning our resources to promote a level of accelerated growth. And growth comes from many different areas. It's not just loans, it's deposits, it's fee income. We're aligning the resources to have a balanced approach there. We talked in the past, we focus where we have the right to win. At Synovus, at $60 billion, we don't have the right to be everything to everyone, but we do own the right to be everything to some. So we've focused the majority of our efforts on incremental investments, on the commercial segment and private wealth segment. And we think those are the areas where we'll continue to invest and gain market share as a result. We are refining our business model in certain areas like third-party payments where we're looking to increase the amount of fee income we get from commercial sponsorships, which is about $50 million today. Our consumer bank, we're continuing to live off a great client experience, but we're moving more into the opportunities that's approaching the small business segment. How do we take advantage of our bricks and mortar and capture a larger share within small business. And on our wealth side, we're moving to more of a single point of contact model, which we've been talking about for some time. Jamie will probably get a question on this from Ryan, but we're moving from a questionable NIM environment where people are trying to understand what the betas are to where we'll start to see margin expansion. And that comes from the fixed rate repricing that we've talked about. Even in the easing cycle, there's a short-term latency in repricing deposits, but we're neutral to the front end of the curve, and we're about 1% asset sensitive to the long end of the curve, a steepening of the yield curve will be very beneficial to our NIM. And lastly, I think the -- maybe the question mark is what's going to happen with credit. And we've heard those questions for really the last 2.5 years, we feel very good about our credit environment today. We're in a fairly range bound scenario today at 25 to 35 basis points. We don't see that changing. We think there could be some movement in some of the underlying credit metrics, but ultimately, the allowance and charge-offs are in a range that we feel very comfortable with and should be stable for the foreseeable future. So with that, I'll stop, and Ryan will take some Q&A.

Great. Thanks, Kevin. So maybe a couple of bigger picture questions before we get into the specifics of the guidance that you provided. So Kevin, you're out in the market talking to clients a lot. I'm assuming you've been out a little post election. Can you maybe just talk about if you've changed any -- have you witnessed any change and client sentiment since the election. And obviously, you noted that loan growth was slower in the quarter, but are you seeing any improvement leading indicators for a borrowing coming back?

When you think about data, I look at a couple of things. Number one, pipeline, pipelines are up a little bit, but nothing substantially has changed since the election results. What we have seen this quarter, despite the outstanding decline, we've actually seen production continue to increase. So this will be the fourth quarter in a row that funded production is increasing. So I think those are factors that give us great confidence that we'll see further loan growth in '25. But as it relates to sentiment and client behaviors, I think the sentiment is people are generally positive. They think that there's going to be future opportunity -- or incremental opportunities to grow faster in '25. We've heard that from having discussions with clients, but it really comes down not to sentiment, but actions. And I'm waiting to see that translate into higher pipelines and ultimately, even higher production. When you look back to our slide that talks about loan growth, you'll see that we've actually been growing some of our businesses mid-single digits this year, middle market, CIBs double digits. So those business will continue. The places where you'll start to see a shift in sentiment like core commercial banking, private wealth, maybe middle market, those are -- we're all very bullish on what it's going to provide, but we haven't seen the data yet. So that's why when you look at our guidance, 3% to 6%, we're not assuming a different economic environment. We're not assuming that there's going to be increased production. The production levels that we've assumed for next year are largely in line with what we've been seeing this year, which, as I mentioned, are growing.

Maybe we can dig in a little bit further on the loan growth expectations that you laid out. So you highlighted, Kevin, utilization and CRE paydowns could be some factors. But maybe just talk about -- you laid out all the hiring that you've done. How dependent is the return of loan growth on all these relationship matter hiring that you've done versus a broader pickup in the market versus an increase in utilization. And so can you break that down for us and also help us think about what puts us on low versus high in the range?

So it's important to note, when I talk about the market expansion, those 30 to 35 FTEs that we'll add in 2025, we only have about $20 million in loan growth off those because if they come in, in March and April, by the time they get onboarded, they're not providing a tremendous amount of new loans. So our loan guidance for 3% to 6% is largely predicated on the resources that we have in the bank today. So we haven't placed any sort of risk associated with if we don't hire these folks, we're not going to make the growth. The difference in 3% to 6% is largely a factor of what you mentioned. Number one, what will happen with line utilization this quarter, it's off about $250 million. And that was something we had not anticipated. It was isolated to about 12 credits that had lower utilization. But if you look into the future, we're running in the mid-40s today. If you look back in 2023, that number was in the low 50% range. So if we get the utilization returning to normal, we'd be at the high end of the range. If it's going to kind of hang here, you could say we're in the midpoint, if you continue to see line utilization runoff, could push you lower the range. The other part is on CRE and mortgage payoff and paydown activities. This quarter, we've had about $400 million, $500 million of incremental payoff and paydown activity versus the third quarter. We felt like this quarter was going to be the high watermark and that you wouldn't see payoff activities pick up from here. So the relative change would be less. But if you saw an acceleration of payoff activities and what would do that would be just lower rates that could push that even higher, that could be a headwind, and that would drive us to the low end of the range. But the good news is on that 3% to 6%, it's not really predicated on adding new resources or adding a new vertical or having to go out and acquire growth. We're building that based on what's here today and what we think will happen from a production standpoint.

That's super helpful. Jamie, maybe to dig into some of the revenue line items that have been included in the guidance. And maybe we'll start with the easier one, the $500 million to $520 million of fee income. I know there's a lot of headwinds to fee income due to the business sales and the like in 2024. Maybe just talk a little bit about what's underlying the amount of fee income growth? And do you expect it to accelerate over the course of the year?

We were talking about this earlier, obviously, and we're really pleased with how we're positioned for 2025 in our fee businesses. I'd start with treasury and payment solutions. The team is really humming along. We have a nice tailwind there. They continue to deliver new products, new solutions, but also getting deeper relationships with our clients. The second area I'd highlight is wealth, and we have a lot of initiatives there. We are working to go to a single point of contact, drive wealth to our existing clients, existing commercial clients, and we think there's a big opportunity there. And then, I mean, you saw in 2024 for sure, but capital markets is a great opportunity for us. And we continue to like set the bar higher with the baseline for capital markets fees in any given quarter. I mean, obviously, those are volatile, but the trend there is positive. So kind of like how Kevin described, loan growth is across the bank. Fee revenue, which is bolstered across the bank with different businesses. And so we feel we're diversified, but also well positioned to deliver that growth in '25.

And when you think about the adjusted revenue were 3% to 7% you take out the fees, it implies at the midpoint a pretty nice NII growth. But obviously, there's a range of outcomes here and you've laid out some scenarios, at least some data points that you've included. Can you maybe just talk to us about what drives the variation in the NII? Is it you've made assumptions regarding -- obviously, loan growth would be one big factor. But what are some of the other factors that are driving the high versus low end in terms of NII growth?

There's still a little bit of uncertainty around interest rates, right? I think we'll learn more here in December, and we'll see what happens there. For us, it'd be NII accretive if the Fed were to stop after this next ease. So that's one thing that could influence how far they go, the pace they go. The second thing really is the loan growth that you mentioned. And that will dictate the NII growth. If you end up at the high end of the range on loan growth, if you -- to Kevin's point, if you see less payoffs, pay downs, if you see more the business coming along, Kevin mentioned, we haven't really modeled in a Trump bump or anything like that. But if you see any of that flow through that could push you to the high end. And then on the other side, if you see accelerated payoffs, paydowns, that would probably push you towards that lower end. The nice thing for us, and this is true with both fee revenue and loans, and you mentioned it, is we're not telling the kind of yes, but story. And in the past, what we've had to do is say, well, hold on, we're growing fee revenue so strong in all these businesses, but don't forget we sold global. Don't forget, we got rid of NSF fees. And that was kind of the story. But now those are in the rearview mirror, and they're behind. And so now you're just seeing a pure growth story. The same thing with loans. I mean we put them on the slide that you have a little bit of a headwind from national accounts and third-party consumer, but you're not seeing the rationalization of the loan portfolio anymore. It's more just a growth story and how can we improve the performance of each of our lines of business.

And Kevin, a lot of good details in terms of the expenses and maybe I'll have some specific questions. But when you take a step back and think about the guidance, revenues may grow 3% to 7%, expenses are going to grow 3% to 7%. Do you anticipate the bank generating positive operating leverage in 2025?

I think that there's a strong likelihood that we would. And it's no secret on why we have correlating ranges there, because we think about those 2 line items similarly is we have to generate revenue in order to earn the right to invest more. It's goes back to this market expansion strategy. We could have added all 90 FTE in year 1, but the impact of the financials would be fairly punitive. So we've kind of built it in over time. When you looked at the waterfall, the real maneuverability in managing expenses. And I should just start by saying I think our team does a tremendous job of managing expenses when you look at our efficiency ratio being in the top quartile. So we've done a great job. But cutting our way to prosperity is not a way to the future for me. So we look at those investments and we think about the variability that Jamie was just talking about on the revenue side. And if we saw softness somewhere, we have the ability to pull back a little bit on the expense side. Conversely, if we lean in and we see better loan growth, we'll lean into some of those investments. So I don't think we sit down every day trying to solve for positive operating leverage, but we think about that concept in general. And we make broader decisions based upon that. So each quarter, we're not at the end of the quarter saying, let's not hire person so we can generate positive operating leverage. But globally and kind of in aggregate, we do think about it that way.

And just to be clear, if -- let's say, we get into a scenario where revenue growth is coming in slower, is it pacing of the strategic investment and the desire to do more on the efficiencies that will drive the ability to at least keep revenues and expenses [ in more checks ]

Spot on. That's what I love about that waterfall chart. We are investing in our existing team. We've got to pay merit increases. We've got to make sure that the cost of living is being -- that our team members are feeling -- we're accounting for. Where we have variability is going out and pulling the other one, which is cost reductions and that comes from real estate, head count rationalization, third-party spend, things like that. But that 2% to 4% -- or the 2% to 3% growth in strategic investment, there's a lot of projects in there, Ryan, some of which capacity becomes an issue, how many technology projects can you do in a year? How many FTE are you really going to add? And what's the timing of it? So we've built in some buffers there to allow us to have some flexibility. But I want to be clear, we put it in there because we think all of those initiatives are great. And when you look at the 1-, 2-, 3-year payback periods, they're going to add value to the shareholder over time. So if we delay them, it's really delaying long-term shareholder value. So we want to do them, but we have the ability to make the increases a little more flexible based on revenue growth.

And Jamie, you talked about having success in the quarter in terms of deposit repricing. Maybe you could expand upon that a little bit. And when you think about the net interest margin that you've outlined for the -- for 2025, which starts setting and starts to improve, what sort of deposit repricing assumptions are embedded in that? And how do you think about the trajectory of the margin under different rate assumptions?

We're really pleased with how the fourth quarter is playing out for multiple reasons. First, I mean we would describe the competitive landscape in the Southeast is very rational. I mean obviously, deposit competition is high. But what we've seen from competitors makes sense and it's kind of what we would expect and this allowed us to price deposits as we expected and to be able to say we're actually having faster deposit growth than what we said in October. So we're winning on deposit price in the fourth quarter. We're winning on deposit growth. But part of that story on deposit price is that deposit growth. We're growing a little bit lower cost. And so we're ahead of the game and what we described in our earnings deck is high beta, but that's the recent production that's within that bucket of high beta. It's just lower cost. So everything is kind of playing out like we expected. Everything is playing out like we described. And as we look into 2025, we do still expect that 40% to 45% beta through the cycle in the easing environment. We're executing. We're kind of ahead of the curve right now, but our expectations have not changed.

And then when you think about charge-offs, obviously, you're providing for the first half, similar to what you did last year because who knows what's going to happen in the second half of the year. But I guess maybe just talk about when you think about the underlying assumptions of maybe what were the drivers of credit losses in 2024. How do you see that evolving into 2025 and '24 was the year where we actually credit gets better over the back half of the year. Do you think '25 with your crystal ball will be more a year of stability throughout?

Either way. As we look at credit, we -- if you kind of go back into 2023, we have just had a few individual credits that came through. There were higher LGD than what you would normally see. And those are kind of in the rearview mirror as well. And as we look forward, we do expect to see stability. And we are saying what we expect is 2025 be relatively stable. We're still expecting 25 to 35 basis points in the fourth quarter. As we look across our loan portfolios, we feel pretty good about what we're seeing in the performance, looking at the CRE portfolios, they continue to perform as expected. I mean no real guidance on the metrics, but we -- I guess our outlook is pretty consistent. I mean I wouldn't say anything's changed.

I think to Jamie's point, I think we're in a what we would consider the next normal credit where you're seeing kind of a normal flow of charge-offs. And as Jamie mentioned, the difference is if you take the same frequency of charge-off, but the loss given default is less, it's producing somewhat in this range. And Anne and her team are working through all the problem credits. We've talked about this, there's 8 to 10 credits that represent 80% of the NPLs. When you go through and you're analyzing what the loss content is, you're reserving for those. What gives us comfort is there's nothing systemic. We're not seeing anything broad-based across industries or geography. Two, the losses that we're incurring are coming in far less than what we've seen in the past. And we try to be data dependent when we think about this, and there's nothing that we're seeing today that would tell us we should be concerned about charge-offs escalating. Conversely, if we continue to see an improving economy and some of the things that Jamie talked about, that were still embedded in 24 numbers. If we're not seeing those sort of loss given defaults, you could actually see some improvement over time.

Got you. You said you're going to give the 2025 capital plan with 4Q earnings. Obviously, they won't stop me from asking. How to think about capital and share repurchases. And maybe just broadly, the plans to hold capital steady. Obviously, you have pretty robust plans -- hopeful plans for loan growth. Maybe just talk about the toggle how you're thinking about using it, we do see better loan growth versus if we don't?

Yes. Our priority is our client loan growth. And so that's where we want to be prepared for. I mean, Kevin walk through how we've reduced wholesale funding. We've increased capital ratios. We are very well positioned for growth. And to your point, it's -- the question is how do you toggle between share repurchases and loan growth. And we feel very comfortable with where we are right now. I mean capital ratios, Kevin mentioned highest levels in 9 years using CET1. That's much higher than any of our algorithms would tell us. It's much higher than severe adverse scenario. So we're very comfortable where we are and our plans for 2025 would just be to toggle between share repurchases and client growth. Just to kind of maintain in this area. But what we're really doing is we're watching what others are doing because the math doesn't imply you should be at 10.7%. The math would imply you can be lower. But we're watching where our peers are, and we don't want to be out of range of others. And so it's kind of more of a let's see what the environment holds, let's see what others are doing and then make sure that the balance sheet is just fully positioned for client loan growth.

Kevin, the bank has only done one deal in a while. It doesn't seem like it's a huge priority. Maybe just talk about an environment where we do start to see pickup in activity. What would you need to change to -- what would you need to see happen to change your priority? And second, when we've seen a lot of transactions in smaller banks, a lot of them have come with capital raises just to keep capital levels neutral. I don't know if that's going to be the same in the new regulatory regime. But broadly speaking, like how do you think about if M&A were an interest to you, the desire to have to shore up the capital ratio through issuance?

Yes. Look, number one, we take an inside-out approach on strategic planning, and we take an outside-in approach on benchmarking. And so what I mean by that is we build our plans saying, what can we do organically? And each year, we've done that. We've shown that over a 3-year period, that's the time line we can generate great growth and returns for our shareholders. But then we also take an outside end to say, look, are we going to generate returns that put us in the top 25% of our peers? If we're just comparing to ourselves, we're not doing our shareholder any value. So as long as we can continue to produce growth and returns that are in the top quartile, that our strategy is there. The thing that would change that, and then we've talked about that if everyone else is doing deals effectively and generating the synergies that will allow them to increase their relative profitability to 20% ROTCE, 150 ROA. It makes our strategy a little more challenging, right? Because when we're comparing ourselves to see whose top quartile, we're doing that today off of consensus numbers. So the thing that would change our strategy would be that if others are executing and it's raising the bar on what top quartile performance looks like, then maybe we'd look at that. But we are front feet on trying to drive organic growth. We think we're in a great footprint. Our business model, if you look at all the awards we're winning in the eyes of our clients, our team members, our communities, and that's a strategy that I think is a strategy with lower risk, long-term shareholder value to our clients and to our shareholders.

So I'm going to leave you with one question. So you showed on Slide 10 that you were the #1 at 50 the last 12 months in terms of total shareholder return. Convince us that we're going to be sitting up here 12 months from now that we're going to see the same results. What do you think is going to drive that?

Look, number one, a lot of that is just rerating. I think there was a lot of negative sentiment on Synovus that we're ending our credit cycle and things we're going to [ implode ] didn't happen. And when you start looking at our numbers and our ability to generate outsized growth and generate outsized returns, that's what our investment thesis is. We're not going to be at the far right hand of being the fastest growth bank in the United States. We're not going to be at the far right and being the highest returning bank. We're going to be top quartile in both. And I think that's what investors want. Prudent growth that generates outsized returns.

Fantastic. Well, we're out of time. So please join me in thanking Synovus.