As Synovus Financial (SNV) celebrated its 125th anniversary this year, its employees got a certain enjoyment from silencing critics who have questioned the company's staying power.
Synovus, which once relied heavily on lending to real estate developers, was clobbered during the financial crisis. It lost more than $3 billion from 2008 to 2011 and accepted nearly $1 billion from the Troubled Asset Relief Program. There were rumors that the Columbus, Ga., company was a potential takeover target.
Employees had "a sense of satisfaction" after hearing competitors cast doubt about Synovus' chances of survival, says Kessel Stelling, the company's chairman and chief executive. "The celebration lasted about a day. Our group went right back to the execution of our long-term plan."
(For full Countdown 2014 coverage, click here.)
Stelling's challenge in the year ahead will focus on finding ways to boost revenue and improve the bottom line. Questions about those issues occur more frequently, now that Synovus has put its darkest days behind it.
Uncertainty about growth is also a big reason American Banker selected Stelling as a community bank leader to watch next year. Stelling, in a wide-ranging interview, says investment in businesses such as equipment financing and a focus on high-growth markets should pay off.
The following is an edited transcript from a recent interview with Stelling.
What are your plans for 2014?
STELLING: We will continue to invest in our high opportunity markets and business lines where we see the ability to expand market share. Even though in the last couple of years most of the story was about our problems and Tarp, we were investing heavily in our large corporate banking group, senior housing group, asset-based lending and syndications and, most recently, the launch of the equipment finance group.
We recently added a team of seasoned bankers in Orlando, Fla., which we think is a great growth opportunity and good complement to what we are already doing there. We think Nashville, Tenn., has great opportunity for us. Atlanta is also coming back.
How important are areas such as equipment finance and senior housing to the overall strategy?
Banks that explore new sources will fare better than those that just stick to traditional sources of lending. We can grow the equipment finance group to over $1 billion in the next five years. We were seeing opportunities go to larger competitors so we think bringing that group in will be a strong complement.
With senior housing, we have as strong a group as you will find throughout the Southeast. The quality of our borrowers is very strong. It provided not just balance sheet diversification but growth opportunities at a time when our company and the industry was really challenged to find growth opportunities.
We have taken our reliance on commercial real estate down from 46% to about 32% [of total loans]. Our C&I and retail portfolio now represent 68% of our portfolio. We've really seen a reduction in large borrower concentrations.
During a recent conference call you discussed hiring mortgage lenders in targeted areas. What are your plans for that business?
We really were operating in some strong markets where we really did not have coverage from a mortgage standpoint. Florida is a good example. We did not have originators in place in Florida to take advantage of the new home markets. But we have taken very aggressive steps to take out fixed costs in the back room that aren't really necessary as refinancing volume has declined.
How have you prepared for the implementation of the qualified mortgage rule?
We've prepared with a lot of study, training of bankers and educating customers who had existing balloon mortgages that we did our best to get into amortizing mortgage instruments.
I think it will be an eye opener for a lot of consumers that regulations designed to protect them in some cases will certainly make getting a conventional mortgage more difficult. We will do our best to serve customers but there will be some unintended consequences.
Will Synovus offer non-QM loans?
We will do some non-QM. It will be based on evaluating the risk as best we can, but it will be more difficult. The key for all banks, but certainly our plan, is to make sure we are communicating with customers and prospective customers about changes and the impact of the new rule.
What are your company's challenges in 2014?
We are all challenged by the economy and the revenue growth associated with the slowly recovering economy. We are all looking at every source of revenue, making sure that we are maximizing those areas where customers see value. I think our industry has learned a lot about consumers and commercial borrowers and their willingness to pay fees.
All of us are looking hard at expenses. Companies that make expense control a way of life will fare well. We've got to make sure we are investing back in those areas that touch the customer, whether that's additional bankers or additional technology.
What kind of loan growth do you expect next year?
In 2014 we have guided in the 4%-5% range. We have been in some cases challenged on that, but we've got our bankers back playing offense. As a company we had been inwardly focused for the last few years, but Tarp is behind us. Our nonperforming loans are down substantially.
When you say you have been challenged with loan growth, does that mean some people are skeptical you can post those numbers?
A lot of industry analysts think the economy will grow at 3% and, if so, [they wonder] how we will grow 4% or 5%. We will need to take market share and enter business lines that maybe we haven't been in. But those lines will be ones that we have evaluated thoroughly from a risk standpoint. We will make sure we have experts in any line we enter. I think some people would like to see growth greater than that but we will want to be very measured.
Synovus recently agreed to sell its west Tennessee branches. Are you looking to exit any other markets?
We are not. Memphis is a good market and we hope it is good for the acquirer of our branches. It was a geographic outlier for us. We had very low market share there. We just felt like that was a transaction that would allow us to focus resources on markets where we could make a bigger impact. Recently released FDIC data shows we have top-five market share in markets that represent about 80% of our core deposit franchise.
Bankers often say that banks can't be a small player in a market anymore.
If you are No. 12 [in a market], you don't want to be No. 12 forever unless it is a really big market. We're in some markets that we're not top five but they are markets that we think have great growth potential like Tampa, Orlando or Jacksonville.
We are No. 1 in many markets throughout our franchise that maybe don't have the growth opportunities I just mentioned. We expect those bankers to continue to grow market share. You can provide low-cost deposits to those markets that have greater growth opportunities.
What are you considering in 2014 in terms of acquisitions?
Our focus is on core growth with our existing bankers. That said, I do believe there will be further consolidation in the industry. I think historically Synovus has been a good acquirer of banks.
M&A is not driving our plan but we certainly want to be ready. Whether that's 2014 or 2015, the key is making sure we are ready for it and we are in a position from our own earnings and balance sheet and from a regulatory standpoint.
Some people believe consolidation will accelerate around Atlanta. Do you think that will happen and, if so, would you like Synovus to participate?
I've been hearing about the pace of acquisitions picking up for the last two to three years and I haven't really seen it yet. That said, I love Atlanta. Our company has done well in Atlanta and I have a strong interest in Atlanta banking.
Do you have any 2014 predictions for the banking industry?
I think the focus will be on the banks that can execute. You aren't going to see big headlines, unless there is some M&A activity. In general, it will be blocking and tackling. It will be acquiring customers one at a time. It will be about growing market share and controlling expenses.