trending Market Intelligence /marketintelligence/en/news-insights/trending/WMq3g4lwrNmW7PoEK8KpgA2 content esgSubNav
In This List

Eyeing certain markets, Synovus slows CRE growth

Blog

Insight Weekly: Global stock performance; hydrogen pilot projects; Powell's Fed future unsure

Blog

How Financial Institutions are Managing Exposure to U.S. Municipals

Blog

Top 100 Banks: Capital Ratios Show Resilience to the Pandemic

Blog

Banking Essentials Newsletter: October Edition


Eyeing certain markets, Synovus slows CRE growth

executivessaid July 19 they were pulling back slightly from commercial real estate lending,noting that the move was prudent and consistent with regulatory guidance.

Synovusreported July 19 that it grew total loans in the second quarterby 5.3% annualized from the linked quarter, but actually reported a decrease inits CRE loan portfolio, which declined by 5.6% annualized.

Synovustold analysts and investors during its first-quarterearnings call that it was pulling back from construction lending andexpected 2016 originations in that lending segment to be roughly half what theyhad been in recent years.

SynovusChairman, President and CEO Kessel Stelling Jr. said on a conference call to discuss second-quarter results that constructionloans have a longer tail and the company decided to slow down the on-boarding ofthose loans after considering where continued growth might take its balance sheet.The chief executive noted that Synovus is not regulated by the OCC, which has ledthe way in subjecting banks with elevated CRE exposure to greater scrutiny, but said the company felt the decisionwas prudent and consistent with regulatory guidance over concentrations. Regulatorswarned late in 2015 thatthey would take a harder stance on CRE concentrations, which they define as CREloans composing at least 300% of total risk-based capital; construction, land developmentand other land loans composing 100% or more of total risk-based capital; and constructionand total CRE growth of 50% or more over the prior 36 months.

SynovusChief Credit Officer Kevin Howard said on the second-quarter call that the companypulled back from construction lending after growth in the second half of 2015 exceededits expectations. He said the company is also watching certain markets, such asAtlanta and Nashville, Tenn., where a number of multifamily units have come ontothe market recently. He said both areas have strong job and wage growth and believesthey can absorb the new construction, but the company wants to watch rather thanparticipate in those markets for a few quarters.

Howardfurther noted that Synovus still likes the multifamily space and works with manydevelopers that have banked with the company for some time. He said the company'smultifamily portfolio has grown as many of those legacy customers have come backand borrowed again after making it through the crisis. He said some of the underwritingin the last two or three years has been the best he has seen in 25 years, but notedthat rents have accelerated in some markets beyond the company's appetite, causingit to pull back from those areas.

In thesecond quarter, Synovus reportednet income available to common shareholders of $57.9 million, or 46 cents per share,compared to $53.2 million, or 40 cents per share, in the year-ago period.

The S&PCapital IQ consensus normalized EPS estimate for the recent quarter was 47 cents.