Synovus Financial Corp.

views updated Jun 27 2018

Synovus Financial Corp.

One Arsenal Place
901 Front Avenue, Suite 301
Columbus, Georgia 31901
U.S.A.
Telephone: (706) 649-2311
Fax: (706) 649-2342
Web site: http://www.synovus.com

Public Company
Incorporated:
1972 as CB&T Bancshares, Inc.
Employees: 10,166
Total Assets: $18.51 billion (2002)
Stock Exchanges: New York
Ticker Symbol: SNV
NAIC: 551111 Offices of Bank Holding Companies; 522110 Commercial Banking; 522210 Credit Card Issuing; 522220 Sales Financing; 522291 Consumer Lending; 522292 Real Estate Credit; 522320 Financial Transactions Processing, Reserve, and Clearinghouse Activities; 523120 Securities Brokerage; 523920 Portfolio Management; 523991 Trust, Fiduciary, and Custody Activities; 524126 Direct Property and Casualty Insurance Carriers

Synovus Financial Corp. is a major bank holding company with banking operations in Georgia, Alabama, South Carolina, Florida, and Tennessee. Through its 39 community banks in those states (25 of which are in Georgia) and the more than 250 branches and offices of the banks and their subsidiaries, Synovus offers a range of financial services, including commercial and retail banking, trust services, mortgage banking, leasing services, financial management, securities brokering, and automobile and homeowners insurance. In addition to these financial services operations, the company also holds an 81.1 percent stake in Total System Services, Inc. (TSYS), the second largest processor of credit card transactions in the United States (trailing only First Data Corporation). Largely through an aggressive acquisition program, Synovus achieved stellar growth throughout the 1980s and early 1990s, increasing its assets more than sevenfold to $7.3 billion. Its assets were more than doubled again by the early 21st century thanks to a new wave of buyouts that began in 1998.

Developing from One Bank to a Regional Multibank Player

Synovuss earliest forerunner, Columbus Bank and Trust, was formed in 1930 from the merger of two Columbus, Georgia, banks, Third National Bank and The Columbus Savings Bank, both of which had been founded in 1888. The first turning point in the banks history came in 1958 when James W. Blanchard began an 11-year stint at the helm. Blanchard was highly regarded by his fellow managers and employees. Under his guidance, Columbuss assets nearly tripled, growing from $32 million to $93 million. Also, in a move that would eventually lead to the formation of TSYS, Columbus in 1959 became one of the first banks in the nation to offer its customers a charge card. To handle the increasing load of credit card transactions, Columbus computerized its card processing operations in 1966.

Blanchard, unfortunately, died of lung cancer in 1969, leaving the bank without a chief executive. Columbus had a seasoned banking staff from which it could have drawn Blanchards successor, but the banks board hired Blanchards son, James H. (Jimmy) Blanchard. The boards decision was startling because the younger Blanchard was only 28 years old and a practicing attorney with no banking experience. We already had executives who knew banking, but what we needed was dynamic leadership, said Columbus Chairman William B. Turner in Georgia Trend. We had watched Jimmy grow up; we had seen his success at school. He was a very, very capable, involved person who we felt would make a good choice.

Doubting his ability to lead Columbus, Blanchard rejected the banks offer. But three months later, realizing that it was a tremendous opportunity, he changed his mind. I wouldnt have been asked to do it if my last name had not been Blanchard, he told Georgia Trend. It was a radical decision. I wasnt really equipped to do it. But I decided to do it, and Im glad I did. Blanchard took Columbuss helm in 1970 and spent several years getting acclimated to the industry and environment at Columbus.

In an important move early in Blanchards tenure, Columbus Bank and Trust changed its structure to a bank holding company to take advantage of new state and federal laws related to the banking industry. CB&T Bancshares, Inc. was created in 1972 to be a one-bank holding company for Columbus Bank and Trust. Through CB&T, Columbus could expand its operations more easily within the state of Georgia. It could also begin participating in a number of non-banking-related financial markets.

Although Blanchard lacked banking experience, he later considered that deficiency an advantage because his mind was more open to emerging opportunities. I think not being a banker was a real plus, he said in Forbes. An example of Blanchards enlightened opportunism was his interest in fee-based financial services. Blanchards intrigue with fee-based financial services was piqued in 1974 when a Florida banker told him about the huge fees he was having to pay for credit card processing. Blanchard thought CB&T could combine its computerized operations with the advancements in telecommunications that were occurring at the time, to provide credit card processing services. Moreover, because CB&T had access to inexpensive labor, Blanchard thought that the bank could undercut the competition and still enjoy large profit margins. In 1974, therefore, CB&T began offering bankcard processing services to banks in Georgia, Alabama, Kentucky, and Washington. These services were based on the banks processing software, called the Total System, which had been completed the previous year.

Blanchard also played a key role in lobbying for passage of the multibank holding company bill, which the General Assembly of Georgia approved in 1976. The bill enabled banks in the state to acquire banks in counties outside their own county. CB&T became the first bank to act on this law when it acquired Commercial Bank (of Thomas ville, Georgia) at the beginning of 1977. Several more Georgia community banks were acquired over the next few years: Security Bank and Trust (Albany), Commercial Bank and Trust of Troup County (LaGrange), Sumter Bank and Trust (Americus), People Bank (Boston), Coastal Bank (Brunswick), and First State Bank (Valdosta).

1980s: Banking Beyond Georgia and Forming TSYS

By the late 1970s CB&T had become a regional bank holding company with more than $500 million in assets and annual income of about $5 million. Although CB&T had established itself as a major player in its core regional markets, during the next decade the holding company would far exceed the pace of growth it had achieved in any previous period. The expansion would result largely from continued state and federal deregulation, most notably the legislation the U.S. Congress passed in the mid-1980s that allowed bank holding companies to begin expanding their operations across state lines. More importantly, though, CB&Ts keen and aggressive management would help it to overcome many of its peers, making it one of the fastest growing banks and financial service providers in the nation.

CB&T launched an ambitious growth program in 1983 when it acquired three banking systems in Georgia: Buena Vista Loan and Savings Bank, Bank of Hazlehurst, and Citizens Bank and Trust of West Georgia, a relatively large banking chain based in Carrollton. In 1984 CB&T added just one institution, Citizens Bank of Colquitt, Georgia. That acquisition boosted CB&Ts asset base to nearly $1 billion and its annual net income to nearly $12 million.

Augmenting the companys profits during this period was its subsidiary, Total System Services, Inc. CB&T had spun off its growing transaction processing operations in 1983, creating TSYS (pronounced tee-sis), which was publicly traded but majority owned by CB&T through Columbus Bank and Trust. As a division of Columbus, TSYS had generated fees of about $15 million in 1982, but by 1985 and as a subsidiary TSYS had sales of $28 million, of which $4.3 million was netted as profit.

Blanchard increased CB&Ts expansion effort in 1985, acquiring three Georgia-based banks. Also that year CB&T entered the securities sector by buying a full-service brokerage company (which would later be renamed Synovus Securities, Inc.). During 1986 and 1987 the company acquired six more institutions, bringing its total asset base going into 1988 to nearly $2 billion. Furthermore, following interstate banking deregulation, CB&T bought two Florida banks and one Alabama bank in 1988, and one bank each in Alabama, Georgia, and Florida in 1989. As a result of an aggressive acquisition strategy and keen management, CB&T saw its assets grow to $2.4 billion by the end of the 1980s as its net income rose to a record $31.4 million. CB&T had boosted both its holdings and profits more than fourfold since the start of the decade.

Though CB&T grew rapidly during the 1980s, its growth reflected a dominant banking industry trend toward consolidation that had been occurring since the late 1970s. Banks had increasingly been under pressure since the late 1970s from less-regulated financial sectors that were quickly stealing market share. In an effort to compete in the difficult environment, bank holding companies had been purchasing smaller rivals. The owners and managers of those holding companies typically benefitted from economies of scale. In addition, the better managed banks were able to improve the performance of the acquisitions by restructuring their operations and improving their margins. CB&T was one of more than 1,300 bank holding companies that emerged by the end of the 1980s. It was also among the most successful.

Company Perspectives:

Achieving our vision to be the finest financial services company in the world begins with an unwavering commitment to our corporate values. Integrity. Service. Putting people first. Treating folks right and doing the right things. This is not corporate rhetoric, this is our character. We wont compromise these values under any circumstances.

Although CB&Ts general growth strategy was reflective of overall trends, its specific tactics represented a departure from industry norms. Most bank holding companies completely integrated the banks that they acquired into the parent organization. Integrating acquisitions usually entailed changing the name of the bank and its branches to reflect the parents name, making the bank look and feel like the other banks throughout the holding companys chain, and sometimes installing an entirely new management team. The general idea was to reduce costs, such as those related to advertising and administration, by creating an integrated chain of similar banks.

CB&T adopted a unique, decentralized approach. It allowed the banks that it purchased to retain their name and management. One result was that CB&T had higher operating costs. But Blanchard believed that the strategy resulted in overall greater returns because the banks retained their local image and appeal. To the surprise of some critics, CB&T significantly outperformed industry averages with the strategy throughout the 1980s.

As CB&T swelled its asset base through merger and acquisition during the 1980s, it also continued to post solid gains with its TSYS subsidiary. In fact, TSYS benefitted greatly from banking industry trends during the decade. Indeed, when bank holding companies acquired new banks they were often faced with the task of processing as many as twice the number of credit card accounts that they had previously managed. Rather than scramble to expand their own processing facilities, they turned to companies like TSYS, paying them a fee to service the accounts for them. At the same time, several non-banking entities sought TSYSs services.

TSYSs competitive advantage over similar service companies was a technical orientation. Indeed, CB&T had invested heavily in top-notch technology to make its subsidiary one of the most efficient, low-cost credit card account processors in the nation. As a result of its efforts, TSYS had quickly become one of the largest contenders in that industry, second only to American Express. By 1990, TSYS was processing 16 million accounts, generating fees of about $84 million annually, and capturing annual profits of nearly $12 million. It was the processor of choice for several major creditors, including General Electric Capital Corp. and Prudential. In 1990, moreover, the company scored a major victory when it landed a five-year contract to service the newly created AT&T Universal Card. Within three years that huge client added ten million new accounts and was contributing nearly 30 percent of TSYSs entire revenue base.

In the meantime, CB&T rounded out the decade of the 1980s by adopting a new name: Synovus Financial Corp. The name Synovus was a combination of the words synergy and novus. According to the company, the latter word means usually of superior quality and different from the others listed in the same category.

Steady Growth Throughout the 1990s

After achieving growth during the 1980s, Synovus aggressively increased its expansion efforts during the early 1990s. After a depression in real estate and construction markets in the late 1980s, a string of bank and savings and loans failed. As banks failed at a rate unparalleled since the Great Depression, still-healthy banks were selling at an apparent discount. Synovus took advantage of the bargains. During the first three years of the 1990s, it bought 20 new banks that were scattered throughout Georgia, Alabama, and north Florida. By 1992, Synovuss asset base had risen to $5.2 billion as its net income had increased to $61 million.

Synovus tempered its acquisition activity during 1993, choosing instead to focus on streamlining its existing operations. The company added one new bank to its foldBirmingham Federal Savings Bank of Birmingham, Alabama, its largest acquisition to that date. Synovuss 1993 gains, however, were largely attributable to Synovuss fast-growing TSYS subsidiary. In 1993, the transaction processor announced a string of successes, including a new seven-year contract with its biggest customer, AT&T, and negotiations to acquire the card-processing business of Bank of America, one of the largest credit card issuers in the nation. Most importantly, TSYS a year later implemented a new $33 million proprietary software system (dubbed TS2) designed to place it at the forefront of the industry in terms of service and cost. It is the single biggest event in the history of this company, Blanchard said about the new system in the Atlanta Constitution. This is like a rocket ship to the moon in terms of technology.

Key Dates:

1888:
Third National Bank and The Columbus Savings Bank are both founded in Columbus, Georgia.
1930:
The two Columbus banks merge to form Columbus Bank and Trust.
1958:
James W. Blanchard begins an 11-year stint as head of the bank.
1959:
Columbus Bank and Trust becomes one of the first U.S. banks to offer charge cards.
1970:
Blanchard s son, James H. Blanchard, takes the helm.
1972:
CB&T Bancshares, Inc. is created as a one-bank holding company for Columbus Bank and Trust.
1974:
CB&T begins offering third-party credit card transaction processing to banks in Georgia and other states using processing software called the Total System.
1977:
Following passage of the multibank holding company bill, CB&T makes its first acquisition, Commercial Bank of Thomasville, Georgia.
1983:
The banks third-party transaction processing business is spun off as Total System Services, Inc. (TSYS), which becomes a publicly traded firm majority owned by CB&T.
1988:
CB&Ts banking operations cross state lines for the first time through the acquisitions of banks in Florida and Alabama.
1989:
CB&T changes its name to Synovus Financial Corp.
1993:
Synovus acquires Birmingham Federal Savings Bank of Birmingham, Alabama.
1995:
Synovus acquires its first South Carolina bank, National Bank of South Carolina.
2002:
Community banking operations are expanded into Tennessee with the purchase of the Bank of Nashville.

During 1994 Synovus acquired two more banks, including Peachtree National Bank of Peachtree City, Georgia, which had $78 million in assets. The following year Synovus acquired Riverdale, Georgia-based Peach State Bank, which had assets of $41 million. Peach State Bank was located in a county adjacent to that of Peachtree National, and so the former was merged into the latter. The firm also formed Synovus Mortgage Corp. in 1994 in order to provide mortgage services throughout the Southeast. Seeking to bolster the amount of non-interest income generated outside of TSYS, Synovus expanded the trust department of Columbus Bank and Trust into Synovus Trust Company in 1995. Through the new subsidiary, Synovus began expanding its trust, risk management, and related services into more of the community banks that were within its umbrella. Back on the acquisition front, Synovus increased its roster of community banks to 34 with the early 1995 purchases of NBSC Corporation and Citizens and Merchants Corporation. While the latter was a relatively small addition of a bank based in Douglasville, Georgia, with assets of $47 million, the former amounted to the largest purchase in Synovuss history and its first buyout of a South Carolina bank. NBSC was a holding company for the National Bank of South Carolina, which had 43 branches and $1 billion in assets. Synovus purchased NBSC for $153 million in stock. These latest additions increased Synovuss asset total to $7.9 billion by the end of 1995, while net income for the year increased 28.1 percent, to $114.6 million.

For the next two years, Synovus acquired no banks, adding only two NationsBank Corporation branches in Rome, Georgia, in late 1996. Because the NBSC acquisition was such a large one, the overall balance at Synovus between the banking side and TSYS had tilted too far in favor of the formerat least in the eyes of shareholders. To maintain his firms stock price, Blanchard sought to return TSYSs contribution to the overall net income back to the 30 percent figure that had prevailed in the late 1980s and early 1990s. As Blanchard told Georgia Trend in May 1997, Essentially, the investment community wants more Total System Services and less bank. One component of the effort to boost the TSYS contribution was the formation in 1996 of a joint venture with Visa U.S.A. Inc. called Vital Processing Services L.L.C. Vital was created to offer merchants electronic payment processing and related services.

During 1998 TSYS gained a major new client when it inked a deal with Sears, Roebuck and Co. to handle transactions related to more than 60 million Sears credit card accounts. That year also saw Synovus launch another string of acquisitions with the purchase of three banks in north Georgia. In August, Synovus purchased Community Bank Capital Corporation, the parent company of the Bank of North Georgia, which was based in Alpharetta and had assets of $348 million. Synovus bought Watkinsville-based Bank of Georgia in November. Then in December the $161 million-asset Georgia Bank and Trust Co., based in Calhoun, was acquired. Bank of Georgia, which had $55 million in assets, was subsequently merged into Athens First Bank & Trust Company, but the other two banks retained their names and management.

Several more deals were completed in 1999. The largest one, consummated in September, was a $115 million stock swap for Merit Holding Corporation, parent of two Georgia community banks, Mountain National Bank in Tucker and Charter Bank & Trust Co. of Marietta. The two banks had combined assets of $306 million. Two Florida banks were also acquired in 1999: $65 million-asset Ready Bank of West Florida, which was merged into Vanguard Bank & Trust Company, based in Valparaiso; and $60 million-asset Horizon Bank of Florida, which was merged into another Synovus affiliate, Bank of Pensacola. Synovus also acquired Wallace & de Mayo in 1999. The firm, based in Norcross, Georgia, specialized in debt collection and bankruptcy management services, and Synovus planned to offer these services to TSYS clients. Wallace & de Mayo was renamed TSYS Debt Management, Inc. following the purchase. Net income leaped another 14.7 percent for the year, reaching $225.3 million, and the latest acquisitions pushed the asset total to $12.5 billion. During the 1990s, Synovus saw its profits grow an average of 17 percent per year.

Increased Emphasis on Assets: Early 2000s and Beyond

A depressed stock pricefueled in part by TSYSs loss of the AT&T Universal Card account when AT&T sold that card portfolio to Citigroupkept Synovus on the acquisition sidelines during the final months of 1999 and most of 2000. The company did acquire ProCard, Inc. in May 2000. Based in Golden, Colorado, ProCard provided organizations with software and Internet applications to help them manage purchasing, travel, and fleet card programs. During that year TSYS bolstered its overseas operations through two major deals. The Royal Bank of Scotland Group pic, the second largest issuer of credit cards in the United Kingdom, selected TSYS to process its card transactions. In addition, TSYS purchased a 51.5 percent stake in GP Network Corporation, a provider of merchant processing services to financial institutions and retailers in Japan.

In February 2001 Synovuss South Carolina affiliate, the National Bank of South Carolina, got a major boost through the acquisition of Spartanburg-based Carolina Southern Bank, which had assets of $200 million. Likewise, Bank of Pensacola was enlarged through the December 2001 purchase of $304 million-asset FABP Bancshares, Inc., parent of First American Bank of Pensacola. In August 2002 Synovus expanded its community banking operations into a fifth state through the purchase of $490 million-asset Community Financial Group, Inc., parent of the five-branch Bank of Nashville. Later in 2002, Synovus announced its intention to acquire two more banks. It would gain its first presence in the rapidly growing central west coast region of Florida by purchasing $408 million-asset United Financial Holdings, Inc., parent of United Bank of St. Petersburg and United Bank of the Gulf Coast, based in Sarasota. The other acquisition target was $340.7 million-asset FNB Newton Bankshares, Inc., parent of Covington, Georgia-based First Nation Bank. The latter deal further entrenched Synovus in the booming metropolitan Atlanta market. As Synovus increasingly targeted higher growth markets for expansion, it also began identifying lower growth areas for divestment. For example, the company was in the process in late 2002 of selling two banks in rural Georgia, Citizens Bank of Cochran and Bank of Hazlehurst.

Meantime, seeking to increase its asset management unit, Synovus acquired the Atlanta firm Creative Financial Group, Ltd. in February 2001. Creative Financial and its operating unit, Robert Andrew Securities, Inc., focused on financial planning for the wealthy and had $546 million in assets under management. In a further expansion in the asset management arena, the company launched Synovus Funds, a new family of mutual funds, in 2001. In May 2002 Synovus acquired GLOB ALT, Inc., an Atlanta-based provider of investment advisory services managing $1.21 billion in assets for its clients. These latest moves were intended to provide Synovus with a third major leg on which to prosper in the early 21st century, namely financial management services, which included brokerage, trust, and insurance services (the other two legs being community banking and TSYS). Blanchard, who continued his solid leadership of the company, was aiming to have Synovuss revenue split about equally between the three business areas within ten years. This appeared to be a daunting task given that financial services management generated only about 1 percent of revenues in 2002, but the dramatic growth potential of the newly targeted market made it much more realizable.

Principal Subsidiaries

GEORGIA CORPORATIONS: Columbus Bank and Trust Company; Total System Services, Inc. (81.1%); Synovus Trust Company; Commercial Bank; Commercial Bank & Trust Company of Troup County; Security Bank and Trust Company of Albany; Sumter Bank and Trust Company; The Coastal Bank of Georgia; First State Bank and Trust Company of Valdosta; Bank of Hazlehurst; The Cohutta Banking Company; Bank of Coweta; Citizens Bank and Trust of West Georgia; First Community Bank of Tifton; CB&T Bank of Middle Georgia; Sea Island Bank; Citizens First Bank; The Citizens Bank; The Citizens Bank of Cochran; Athens First Bank & Trust Company; Citizens & Merchants State Bank; Bank of North Georgia; Georgia Bank & Trust; Charter Bank & Trust Co.; Total Technology Ventures, LLC (60%); Creative Financial Group, LTD; Synovus Securities, Inc. ALABAMA CORPORATIONS: Synovus Financial Corp. of Alabama; Community Bank & Trust of Southeast Alabama; First Commercial Bank of Huntsville; The Bank of Tuscaloosa; Sterling Bank; First Commercial Bank; CB&T Bank of Russell County; Synovus Trust Corp. FLORIDA CORPORATIONS: Quincy State Bank; The Tallahassee State Bank; Bank of Pensacola; Vanguard Bank & Trust Company; First Coast Community Bank. TENNESSEE CORPORATIONS: The Bank of Nashville. NATIONAL BANKING ASSOCIATIONS: The National Bank of Walton County (GA); Peachtree National Bank (GA); The First National Bank of Jasper (AL); The National Bank of South Carolina (SC); Mountain National Bank (GA); pointpathbank, N.A. (GA). DELAWARE CORPORATIONS: ProCard, Inc.

Principal Competitors

SunTrust Banks, Inc.; Wachovia Corporation; BB&T Corporation; SouthTrust Corporation; Regions Financial Corporation; AmSouth Bancorporation; Union Planters Corporation; First Data Corporation.

Further Reading

Bach, Deborah, Newlyweds Bank Abandoned: Pure-Play Virtual Blues Give Synovus Cold Feet, American Banker, March 1, 2001, p. 1.

Billips, Mike, Dot-Corns Investing Lone Cloud in Synovus Financials Blue Sky, Georgia Trend, April 2000, p. 107.

Boraks, David, Synovus Pins Its Profit Hopes on Growth-Market Strategy, American Banker, October 9, 2002, p. 1.

Brannigan, Martha, Synovus, Like a Southern Belle, Goes Courting Quietly: Georgia Concern Prospers by Buying Small Banks, and Leaving Them Alone, Wall Street Journal, February 6, 1995, p. B3.

Crockett, Barton, Synovus at Crossroads After Decade of Growth, American Banker, February 16, 1993, p. 1A.

Fleming, John, James Blanchard: Is It Time to Deregulate Banking?, Georgia Trend, February 1991, sec. 1, p. 72.

Gillam, Carey, More Than Plastic in the Cards for Synovus: Company Aims to Turn Its Sleepy Banks into Sleek Automated Sales Centers, American Banker, August 6, 1997, p. 4.

Grimes, Millard, and Tom Barry, The Georgia Trend Most Respected CEO of 1997: James H. Blanchard, Georgia Trend, May 1997, pp. 20 + .

Homa, Lynn, Georgia Bank Firm Seeks High-Tech Image via New NameSynovus, American Banker, August 22, 1989, p. 5.

King, Jim, Synovus CEO Putting Hope on Rocket Ship, Atlanta Constitution, October 3, 1993, sec. H, p. 1.

Lindsey, Kelly, Big Profits from Small Banks: Like Other Regional Banks, Synovus Has Been on a Buying Spree, Georgia Trend, October 1993, sec. 1, p. 28.

Novack, Janet, Backwater Bliss, Forbes, August 20, 1990.

Rhoads, Christopher, Ga. Bank Thrives Under Synovus Umbrella, American Banker, July 24, 1995, p. 8.

Salwen, Kevin G., CB&T Bancshares, in Growth Strategy, Faces Problem of Keeping Unusual Sidekick Robust, Wall Street Journal, January 18, 1989, p. C2.

Seward, Christopher, Synovus to Merge with Bank in S.C., Atlanta Constitution, October 6, 1994, sec. E, p. 1.

Sisk, Michael, Power to Its People, U.S. Banker, September 2002, pp. 32-34, 40.

Synovus Builds a New Bank Around Wealth Management, ABA Banking Journal, September 2001, p. 70.

Synovus Financial: Does Its Price Fully Reflect Its Performance?, Better Investing, May 1994, p. 58.

Synovus Financial Plans to Bank on Marriage, Community Banker, May 2000, pp. 46-47.

Watkins, Steve, Synovus Jim Blanchard: Chief Executives Winning Attitude Keeps His Company Expanding, Investors Business Daily, July 17, 2001.

Dave Mote

update: David E. Salamie

Synovus Financial Corp.

views updated May 23 2018

Synovus Financial Corp.

P.O. Box 120
Columbus, Georgia 319020129
U.S.A.
(706) 6495220
Fax: (706) 6492342

Public Company
Incorporated: 1972
Employees: 5,300
Total Assets: $7.3 billion
Stock Exchanges: New York
SICs: 6021 National Commercial Banks; 6022 State
Commercial Banks; 6211 Securities Brokers and Dealers;
6712 Bank Holding Companies

Synovus Financial Corp. is a major bank holding company with banking operations in Georgia, Florida, and Alabama. In addition to operating more than 30 community banks, Synovus is a leading provider of diversified financial services through its feebased subsidiary, Total System Services, Inc. Synovus achieved stellar growth throughout the 1980s and early 1990s, increasing its assets more than sevenfold to $7.3 billion.

Columbus Bank and Trust, a relatively small regional institution headquartered in Columbus, Georgia, changed its structure to a bank holding company to take advantage of new state and federal laws related to the banking industry in the early 1970s. Columbus Bank and Trust created CB&T Bancshares as a subsidiary in 1972. Through Synovus, Columbus could expand its operations more easily within the state of Georgia. It could also begin participating in a number of nonbankingrelated financial markets.

Prior to the formation of Synovus, James W. Blanchard led Columbus Bank and Trust. He was highly regarded by his fellow managers and employees. Under Blanchards guidance, Columbuss assets more than tripled between the late 1950s and late 1960s. Blanchard, unfortunately, died of lung cancer in 1969, leaving the bank without a chief executive. Columbus had a seasoned banking staff from which it could have drawn Blanchards successor, but the banks board hired Blanchards son, James H. (Jimmy) Blanchard. The boards decision was startling because the younger Blanchard was only 28 years old and a practicing attorney with no banking experience. We already had executives who knew banking, but what we needed was dynamic leadership, said Synovus chairman William B. Turner in Georgia Trend. We had watched Jimmy grow up; we had seen his success at school. He was a very, very capable, involved person who we felt would make a good choice.

Doubting his ability to lead Columbus, Blanchard rejected the banks offer. But three months later, realizing that it was a tremendous opportunity, he changed his mind. I wouldnt have been asked to do it if my last name had not been Blanchard, he told Georgia Trend. It was a radical decision. I wasnt really equipped to do it. But I decided to do it, and Im glad I did. Blanchard took Columbuss helm in 1970 and spent several years getting acclimated to the industry and environment at Columbus.

Although Blanchard lacked banking experience, he later considered that deficiency an advantage because his mind was more open to emerging opportunities. I think not being a banker was a real plus, he said in Forbes. An example of Blanchards enlightened opportunism was his interest in feebased financial services. Blanchards intrigue with feebased financial services was piqued in 1974 when a Florida banker told him about the huge fees he was having to pay for credit card processing. Blanchard thought Columbus could combine its computerized operations (that it had installed in 1966) with the advancements in telecommunications that were occurring at the time, to provide credit card processing and other services. Moreover, because Columbus had access to inexpensive labor, Blanchard thought that Columbus could undercut the competition and still enjoy large profit margins. Under Blanchards direction, Synovus was among the first banks to enter the financial services boom that would proliferate throughout the 1980s and early 1990s.

By the late 1970s Synovus had become a regional bank holding company with more than $500 million in assets and annual income of about $5 million. Although Synovus had established itself as a major player in its core regional markets, during the next decade the holding company would far exceed the pace of growth it had achieved in any previous period. The expansion would result largely from continued state and federal deregulation. Notably, the legislation Congress passed in the mid 1980s that allowed holding companies like Synovus to begin expanding their operations across state lines. More importantly, though, Synovuss keen and aggressive management would help it to overcome many of its peers, making it one of the fastest growing banks and financial service providers in the nation.

Synovus launched an ambitious growth program in 1983 when it acquired one banking systems in Florida and two in Georgia: Buena Vista Loan & Savings (Florida); Bank of Hazlehurst; and Citizens Bank & Trust, a relatively large banking chain based in Carrollton. In 1984, Synovus added just one institution, Citizens Bank of Colquitt, Georgia. That acquisition boosted Synovuss asset base to nearly $1 billion and its annual net income to nearly $12 million.

Augmenting the companys profits during that period was its subsidiary, Total System Services, Inc. Synovus had spun off its growing financial services operations in 1983, creating Total System Services. As a part of Columbus, Total System had generated fees of about $15 million in 1982, but by 1985 and as a subsidiary Total System had sales of $28 million, of which $4.3 million was netted as profit.

Blanchard increased Synovuss expansion effort in 1985, and acquired a total of seven new Georgiabased banks. During 1986 and 1987 the company acquired six more institutions, bringing its total asset base going into 1988 to nearly $2 billion. Furthermore, following interstate banking deregulation, Synovus bought three Florida banks in 1988, and two Alabama banks and one more Georgia institution in 1989. As a result of its aggressive acquisition strategy and keen management of its existing assets, Synovuss assets grew to $2.4 billion by the end of the 1980s as its net income rose to a record $31.4 million. Synovus had boosted both its holdings and profits more than fourfold since the start of the decade.

Though Synovus grew rapidly during the 1980s (and during the early 1990s), its growth reflected a dominant banking industry trend toward consolidation that had been occurring since the late 1970s. Banks had increasingly been under pressure since the late 1970s from lessregulated financial sectors that were quickly stealing market share. In an effort to compete in the competitive environment, bank holding companies had been purchasing smaller competitors. The owners and managers of those holding companies typically benefitted from economies of scale. In addition, the better managed banks were able to improve the performance of the acquisitions by restructuring their operations and improving their margins. Synovus was one of more than 1,300 bank holding companies that emerged by the end of the 1980s. It was also among the most successful.

Although Synovuss general growth strategy was reflective of overall trends, its specific tactics represented a departure from industry norms. Most bank holding companies completely integrated the banks that they acquired into the parent organization. Integrating acquisitions usually entailed changing the name of the bank and its branches to reflect the parents name, making the bank look and feel like the other banks throughout the holding companys chain, and sometimes installing an entirely new management team. The general idea was to reduce costs, such as those related to advertising and administration, by creating an integrated chain of similar banks.

Synovus adopted a unique, decentralized approach. It allowed the banks that it purchased to retain their name and management. One result was that Synovus had higher operating costs. However, Blanchard believed that the strategy resulted in overall greater returns because the banks retained their local image and appeal. To the surprise of some critics, Synovus significantly outperformed industry averages with the strategy throughout the 1980s and early 1990s.

As Synovus swelled its asset base through merger and acquisition during the 1980s, it also continued to post solid gains with its Total System subsidiary. In fact, Total System benefitted greatly from banking industry trends during the decade. Indeed, when bank holding companies acquired new banks they were often faced with the task of processing as many as twice the number of credit card accounts that they had previously managed. Rather than scramble to expand their own processing facilities, they turned to companies like Total System, paying them a fee to service the accounts for them. At the same time, several nonbanking entities sought Total Systems services.

Total Systems competitive advantage over similar service companies was a technical orientation. Indeed, Synovus had invested heavily in topnotch technology to make its subsidiary one of the most efficient, lowcost credit card account processors in the nation. As a result of its efforts, Total System had quickly become one of the largest contenders in that industry, second only to American Express. By 1990, Total System was processing 16 million accounts, generating fees of about $84 million annually, and capturing annual profits of nearly $12 million. It was the processor of choice for several major creditors, including General Electric Capital Corp. and Prudential. In 1990, moreover, the company scored a major victory when it landed a fiveyear contract to service the newly created AT&T Universal Card. Within three years that huge client added ten million new accounts and was contributing nearly 30 percent of Total Systems entire revenue base.

After achieving growth during the 1980s, Synovus aggressively increased its expansion efforts during the early 1990s. After a depression in real estate and construction markets in the late 1980s, a string of bank and savings and loans failed. As banks failed at a rate unparalleled since the Great Depression, stillhealthy banks were selling at an apparent discount. Synovus took advantage of the bargains. During the first three years of the 1990s, it bought 20 new banks that were scattered throughout Georgia, Alabama, and North Florida. By 1992, Synovuss asset base had risen to $5.2 billion as its net income had increased to $61 million.

Synovus tempered its acquisition activity during 1993, choosing instead to focus on streamlining its existing operations. The company added one new bank to its fold; Birmingham Federal Savings Bank, its largest acquisition ever. Synovuss 1993 gains, however, were largely attributable to Synovuss fastgrowing Total System subsidiary. In 1993, the feebased service provider announced a string of successes, including a new sevenyear contract with its biggest customer, AT&T, and negotiations to acquire the cardprocessing business of Bank of America, one of the largest credit card issuers in the nation. Most importantly, Total System designed and implemented a $33 million software system designed to place it at the forefront of the industry in terms of service and cost. It is the single biggest event in the history of this company, Blanchard said about the new system in the Atlanta Constitution. This is like a rocket ship to the moon in terms of technology.

The value of Synovuss strategy and longterm potential was evidenced in its stock price, which increased more than 20 percent in 1993. At the same time, Total System Servicess stock price rose nearly 50 percent. Any doubts about Blanchards ability to lead the company had long ago been put to rest. In my first ten years here, I probably had 1,000 people tell me Id never measure up to my daddy, Blanchard recalled in the Atlanta Constitution. He was always used as a club to bang me over the head... but he was a great banker. Still under the direction of the 52yearold Blanchard, Synovus managed to boost its assets to $5.6 billion in 1993 and to bolster its income about 18 percent to a record $74 million. Synovus continued to pursue its proven growth tactics going into 1994.

Principal Subsidiaries

Columbus Bank and Trust Company; Total System Services, Inc. (82%).

Further Reading

Crockett, Barton, Synovus at Crossroads after Decade of Growth, American Banker, February 16, 1993, p. 1A.

Fleming, John, James Blanchard: Is It Time to Deregulate Banking?, Georgia Trend, February 1991, sec. 1, p. 72.

King, Jim, Synovus CEO Putting Hope on ;Rocket Ship, Atlanta Constitution, October 3, 1993, sec. H, p. 1.

Lindsey, Kelly, Big Profits from Small Banks: Like Other Regional Banks, Synovus Has Been on a Buying Spree, Georgia Trend, October 1993, sec. 1, p. 28.

Novack, Janet, Backwater Bliss, Forbes, August 20, 1990.

Seward, Christopher, Synovus to Merge with Bank in S.C., Atlanta Constitution, October 6, 1994, sec. E, p. 1.

Synovus Financial: Does its Price Fully Reflect its Performance?, Better Investing, May 1994, p. 58.

Dave Mote