Synovus Financial Corp.

1888–1998

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 homeowner's 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

Synovus's 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 bank's 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, Columbus's 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 Blanchard's successor, but the bank's board hired Blanchard's son, James H. (Jimmy) Blanchard. The board's 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 bank's offer. But three months later, realizing that it was a tremendous opportunity, he changed his mind. "I wouldn't have been asked to do it if my last name had not been Blanchard," he told Georgia Trend. "It was a radical decision. I wasn't really equipped to do it. But I decided to do it, and I'm glad I did." Blanchard took Columbus's helm in 1970 and spent several years getting acclimated to the industry and environment at Columbus.

In an important move early in Blanchard's 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 Blanchard's enlightened opportunism was his interest in fee-based financial services. Blanchard's 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 bank's 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 Thomasville, 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).

Under his guidance, Columbus's assets nearly tripled, growing from $32 million to $93 million.

1982–1989

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&T's 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&T's asset base to nearly $1 billion and its annual net income to nearly $12 million.

Augmenting the company's 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&T's 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.

Although CB&T's 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 parent's name, making the bank look and feel like the other banks throughout the holding company's 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 TSYS's services.

1990–1998

TSYS's 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 TSYS's 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, Synovus's 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 of Birmingham, Alabama, its largest acquisition to that date. Synovus's 1993 gains, however, were largely attributable to Synovus's 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 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."

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 Synovus's 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 Synovus's 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 former--at least in the eyes of shareholders. To maintain his firm's stock price, Blanchard sought to return TSYS's 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.

1999–2002

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 price--fueled in part by TSYS's loss of the AT&T Universal Card account when AT&T sold that card portfolio to Citigroup--kept 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 plc, 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 Synovus's 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 GLOBALT, 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 Synovus's 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.