Synovus Financial Corp (SNV) 2018 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Synovus First Quarter 2018 Earnings Conference Call.

(Operator Instructions) It is now my pleasure to turn the floor over to your host, Steve Adams, Senior Director of Investor Relations.

Sir, the floor is yours.

Thank you.

Good morning, everyone.

During the call today, we'll be referencing the slides and press release that are available within the Investor Relations section of our website, synovus.com.

Kessel Stelling, Chairman and Chief Executive Officer, will be our primary presenter today; with our executive management team available to answer your questions.

Before we get started, I'll remind you that our comments may include forward-looking statements.

These statements are subject to risks and uncertainties, and the actual results could vary materially.

We list the factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website.

We do not assume any obligation to update any forward-looking statements as a result of new information, early developments or otherwise, except as may be required by law.

During the call, we will reference non-GAAP financial measures related to the company's performance.

You may see the reconciliation of these measures in the appendix to our presentation.

(Operator Instructions) Thank you.

And I'll now turn it over to Kessel Stelling.

Thank you, Steve, and good morning to everyone, and welcome to our first quarter earnings call.

I'm going talk us through the earnings presentation as usual, and then we'll open the line to questions for myself or any members.

Our total revenues increased 12.2% for the first quarter versus the first quarter last year, while adjusted expenses increased 3.8% year-over-year.

This strong operating leverage demonstrates our continued discipline in managing expenses, which is also evident by the adjusted efficiency ratio of 57.42% for the quarter.

On the balance sheet side, average loans for the quarter increased $816.4 million or 3.4% versus a year ago and average deposits grew $869.2 million or 3.5% versus a year ago.

From a credit quality perspective, the nonperforming assets ratio was 0.53%, flat with the previous quarter and a 24 basis point improvement from a year ago.

And lastly in terms of capital management and returns, we continue to see improvement in overall capital efficiency with an adjusted ROE of 14.86%, up 480 basis points from a year ago.

Adjusted return on average tangible common equity improved to 15.23%, up 490 basis points from a year ago.

Moving to Slide 4. Total average loans grew 248 -- $240.8 million sequentially or 4% annualized compared to the same quarter a year ago.

Average loans grew $816.4 million or 3.4%.

The amounts on the graph represent period-end balances.

Period-end loan growth on a sequential quarter basis was $95.6 million or 1.6% annualized.

C&I loans increased $78.3 million or 2.6% annualized during the quarter.

The quarter reflects solid performance on our Global One specialty unit, up $35 million, as well on asset-based lending unit, up $34 million.

The remaining C&I portfolio increased slightly despite a seasonal decline in overall line utilization.

Consumer loans increased $115.5 million or 8% annualized, with lending partnership portfolios increasing by $132 million, consumable which is increasing $30 million, while HELOCs decreased $42 million.

The growth in portfolio mortgages was primarily in the private wealth and position portfolios, driven by strong originations in Jacksonville, Savannah, Birmingham, Columbus and Atlanta.

CRE loans declined $99.6 million or 5.8% annualized, driven by $51 million increase -- decrease, I'm sorry, in the investment properties portfolio and a $26 million decrease in the nonstrategic land and development portfolio.

The decline in CRE is largely a result of the continued higher velocity of payoff activity across the portfolio.

While we expect that asset sales and loan payoff will likely continue to remain elevated throughout -- through the end of the year, our expectation is that new construction draws and production will pick up during the second half of the year.

Moving to Slide 5, in deposits.

Total average deposits of $25.79 billion, decreased $498 million sequentially, but have increased $869 million or 3.5% versus a year ago.

Approximately 1/4 of the decrease in total average deposit balances was due to the runoff of excess brokered time deposits.

Additionally, seasonal increases in temporary deposits during the fourth quarter contributed to the first quarter decline.

Non-time core deposits decreased $120 million or 2.3% versus the previous quarter and increased $504 million or 2.5% versus the same period a year ago.

During the quarter, we obtained approval to report our sweep money market product offered by Synovus Securities as a component of core deposits.

This product was reported as a broker deposit through February of 2018.

The balances in these accounts totaled $307 million as of March 2018, and resulted in an increase of $112 million in average core deposits for the quarter due to the reclassification.

Given the strong momentum in the second half of the quarter, on a period-end basis, total deposits increased $106 million sequentially and increased $1.1 billion or 4.6% versus the same period a year ago.

Additionally, our loan-to-deposit ratio remain stable at 95%, which is within our targeted range.

Moving to Slide 6. Net interest income was $274.3 million, increasing $5 million or 1.7% versus the previous quarter on a lower day count.

Compared to the same period a year ago, net interest income increased $34 million or 14.3%.

The increase in net interest income is driven by loan growth as well as margin expansion.

The net interest margin for the quarter is 3.78%, up 13 basis points from the previous quarter and up 36 basis points from a year ago.

The improvement for the quarter was driven by 15 basis point increase in loan yields due largely to the December and March short-term rate increases, a 4 basis point increase in our investment securities yields as well as a benefit from the decreased cash position for the quarter.

Effective cost of funds increased 3 basis points sequentially to 53 basis points, reflecting a 4 basis point increase in the cost of interest-bearing core deposits, partially offset by the refinancing on our $300 million senior debt during the previous quarter, which will result in an annualized $14 million improvement in net interest income.

The increase of 4 basis points in the cost of interest-bearing core deposits to 46 basis points represents roughly a 16% beta on the December '17 Fed funds increase of 25 basis points.

We continue to strategically increase deposit rates in various products and segments.

However, given our overall pricing discipline, the beta on interest-bearing core deposits cycle to-date is approximately 5%.

Page 16 in the appendix includes additional information on the interest rates sensitivity as well as the investment securities and loan portfolios.

Turning to Slide 7, in fee income.

Total noninterest income for the quarter was $67 million, down $2.3 million versus the prior quarter and down $4.8 million versus the same period a year ago.

First quarters of 2018 and 2017 included the impact from net decreases in the fair value of private equity investments of $3.1 million and $1.8 million, respectively.

Additionally, the first quarter of 2017 includes net investment securities gains of $7.7 million.

Adjusted noninterest income of $70.1 million increased $849,000 versus the prior quarter and $4.1 million or 6.2% versus the same period a year ago.

Core banking fees of $36 million increased $303,000 sequentially and $900,000 or 2.6% versus a year ago, due primarily to significant growth in gains from sale of SBA loans.

Fiduciary asset management, brokerage and insurance revenues of $23 million increased $1.6 million or 7.2% sequentially and $2.7 million or 12.9% versus the same period a year ago, driven by year-over-year 20% growth in brokerage revenues and an 11% growth in trust revenues.

Additionally, our strategy to acquire key talent in select markets continue to bring new customer wins and accelerated growth in the business evidenced by a 19% growth in assets under management versus the same period last year.

Our Family Office business unit is off to a solid start in 2018, with revenues up 17% versus the same period a year ago, which includes revenue growth from our new offices in Atlanta and Nashville.

Turning to Slide 8. Total noninterest expense of $195 million decreased $31.4 million or 14% sequentially and decreased 1% versus the same period a year ago.

Current quarter includes a $2.6 million benefit from the reduction in litigation contingency accruals.

Additionally, fourth quarter of 2017 included a $23 million loss from the early extinguishment of debt.

Adjusted noninterest expense of $198 million decreased $3.3 million or 1.6% sequentially and increased $7 million or 4% from a year ago.

The sequential quarter decrease was driven by a $3 million decrease in advertising and a $4.4 million decrease in incentives, partially offset by $4.4 million seasonal increase in employment taxes.

Strong operating leverage for the quarter has resulted in an adjusted efficiency ratio of 57.42%, down 187 basis points from the previous quarter and down 483 basis points from the same period a year ago.

On Slide 9, you'll continue to -- you'll see that our loan portfolio continues to perform well.

First, ratios, NPA, NPL and delinquency trends.

The NPA ratio remained flat versus the prior quarter at 53 basis points and decreased by 24 basis points versus a year ago.

The NPL ratio increased by 1 basis point sequentially to 48 basis points and decreased by 17 basis points from a year ago.

We're very pleased the past due remained at low levels, ending the quarter at 22 basis points.

Net charge-offs for the first quarter were $4.3 million or 7 basis points annualized, down from $9 million or 15 basis points annualized in the fourth quarter and $7 million or 12 basis points annualized in the first quarter of 2017.

Provision expense for the quarter was $12.8 million compared to $8.6 million in the fourth quarter.

The increase was in line with our expectations considering that the fourth quarter provision expense was at lower levels due to the sales of previously marked assets associated with a large third quarter held-for-sale actions that we were able to take as a result of the Cabela's transaction in that quarter.

Provision expense was $8.7 million in the first quarter of '17.

Allowance for loan losses increased 3 basis points to 1.04% sequentially, which represents an $8.5 million increase.

Compared to a year ago, the allowance is up $4.3 million, while the ratio is down by 1 basis point.

Coverage ratios remained strong and have increased from a year ago as the reserve covers NPLs at 215% or 241% if you excluded impaired loans for which the expected loss has been charged off.

Again, our loan portfolio remains very healthy, led by low past dues, NPLs and charge-offs, along with solid loan loss reserve coverage ratios.

Moving to capital on Slide 10.

Our capital ratios remained strong, continue to be well above regulatory requirements.

Regulatory capital levels benefited from earnings growth, continued DTA accretion, as well as the adoption of a new accounting standard, which increased capital ratios by 2 to 3 basis points, as described in Footnote 4 of the slide.

You'll see that all the ratios increased during the quarter, with the exception of the tangible common equity ratio, which declined 9 basis points to 8.79% due to the increase in total loans in period-end cash balances.

Also as expected, the disallowed DTA continues to decline and is now $67 million.

Additionally, during the quarter, our capital actions included the repurchase of $27 million in common stock at an average price of $49.98 per share as part of our previously announced share repurchase program of up to $150 million.

Compared to a year ago, we've reduced our total share count by 3.6 million shares or 3%.

And earlier this month, our common stock dividend of $0.25 per share reflected the 67% increase announced earlier this year.

Slide 11 outlines our previously stated 2018 guidance, which remains unchanged along with our first quarter results.

From a balance sheet perspective, our first quarter results were slightly below our annual guidance but we expect to see stronger sales momentum in the upcoming quarters that will put us on track to deliver a 4% to 6% loan and deposit growth for the year.

We're currently exceeding our net interest income guidance for the year but given the uncertainties around the number of rate hikes and associated betas on deposits, we are maintaining our guidance at this point.

As a reminder, our guidance anticipated on March and September rate hike.

We're off to a great start in 2018 for fee income, with growth of 6.2%.

And despite increased volatility in the equity markets and a softer mortgage environment, our investments in fee producing businesses are expected to continue to provide positive momentum that will drive adjusted noninterest income growth in the 4% to 6% range.

We continue to expect that total noninterest expense will increase between 0 to 3% for the year as we continue to invest in revenue-producing opportunities while continuing to have a keen focus on efficiency and productivity.

We've previously disclosed the 2018 estimate of 23% to 24% for our effective tax rate.

Given the larger tax benefit that occurs in the first quarter associated with share-based compensation, our quarterly rate was slightly below the range.

As a result, future quarters will be slightly higher than the first quarter, and the 2018 effective tax rate is expected to be within the previously stated range.

We do not foresee significant changes in the credit environment or underlying quality with NPLs.

NPAs' expected to remain relatively flat for the year.

We maintain an expectation for net charge-off ratio in the range of 15 to 25 basis points as recoveries continue to moderate.

We also continue to expect the loan loss reserve ratio will remain above 1%.

And as announced at the beginning of the year, we have authorization for up to $150 million in share repurchases.

In 2018, the size and timing of future quarter repurchases will continue to be situational and depend on primarily of a level of organic business growth and alternative uses of capital.

As I close out my comments, I'd be remiss if I did mention the progress towards our previously defined 3-year targets.

Due to the impact of tax reform, our strong revenue growth and our continued focus on a more efficient and effective organization, we've made significant progress towards achieving those goals in the first quarter of 2018.

We all know that 1 quarter does not make a trend and we continue to have work to do in order to create sustainability on our growth, return and efficiency goals.

We're also making good progress implementing key initiatives that enhance the customer experience, improve our competitive position and drive growth.

Our ATM fleet refresh will wrap up next month.

We're expanding our presence through both strategic talent acquisitions and new branch and more relocations.

And by the end of June, our transition to a unified service brand will be completed in all 5 of our states.

The momentum and energy around this change continues to build among both team members and customers, and we are already seeing the benefits of greater brand recognition across our markets.

So with that, operator, we will open the line up for questions.

And again, we have our senior team here ready to take any questions that our callers might have.

(Operator Instructions) Our first question today is coming from Brady Gailey.

Please announce your affiliation and then post your question.

With KBW.

So you all beat earnings estimates this morning.

And at least versus me, a lot of it came in the expense line, I mean, not only did you not see any expense growth, but if you look at core expenses, it actually was down a little bit.

So maybe just some comments on how you think about expense growth going forward in your -- are there some expense lines that will actually continue to see shrinkage?

And then on the opposite, which expense lines do you think will start to see growth from here?

Brady, this is Kevin Blair.

I'll take that.

So you're right.

For the quarter, we had about $197 million in adjusted expenses.

We did receive some benefit this quarter as it relates primarily to the credit expenses.

We were down about $3 million on a year-over-year basis.

Part of that is just a benign credit environment that we have in our OREO portfolio, but it's -- make sure I make mention of the Cabela's transaction last year.

As we sold many of those OREO properties and moved loans into held-for-sale, it's put us in an environment where we expect to have continued low credit losses.

So we're continuing to have that benefit, probably won't be as strong as it was in the first quarter.

If you look at some of the other lines, we continue to increase our personnel expenses.

As we shared in the earnings presentation last quarter, we're investing in revenue-producing -- revenue-producing FTEs and we're continuing to do that.

So I think you'll see the personnel line move in that 5% to 5.5% range.

We are continuing to do some of our capital expenditure projects.

As Kessel mentioned, the ATM refresh, the digital refresh, some updates to our loan and servicing systems.

So the depreciation line, we're continuing to grow.

Where we've gotten a little bit of abatement and we hope to continuing to have that expenses going forward is in the other categories, whether that would be professional fees, whether it would be vendor-related cost.

And so as we guided at the beginning of the year to have roughly

$821 million to $845 million in total expenses.

As Kessel mentioned, we renewed our guidance on that range.

We just think we're going to come in much more towards the low end of the range.

So you'll see an increase in the next quarter over the $200 million mark just because of some seasonality.

But then after that, it may normalize.

We do have, in the middle of the year in July, we have our merit increase process, which adds about $1.8 million in expenses per quarter.

So all that said, I think we're pretty pleased with the first quarter as well.

There will be a little bit of a -- increase in the upcoming quarters which will push us back towards that 0% to 1% growth in total expenses.

But we think some of the disciplines we've around efficiency are starting to pay off.

All right.

That's helpful.

And then, my second question is just on loan growth.

I know you have the range of 4% to 6%.

On a period-end basis loans grew 2%.

It sounds like you all are more optimistic about the back half of the year when it comes to loan growth.

But it looks like CRE continues to shrink, and maybe, that's why loan growth is kept at bay a little bit.

When do you think CRE stops shrinking, and you could potentially see some CRE growth?

This is Kevin Howard.

I'll take that.

Well, we did see some improvement, I guess, in the shrinkage in the CRE book.

I think in our third and fourth quarter, we were maybe $200 million in one of the quarters and $300 million in the fourth quarter.

And it was less -- little -- right at $100 million this quarter.

So we are starting -- while the payoff for last year is still pretty high, it is less than it was the previous 2 quarters.

But also, we put on typically the construction loans probably from about May of 2017 till now.

And they're starting to fund up at a much higher velocity.

Our thoughts have been that it would come, maybe, pretty close to breakeven, maybe, not quite there in the second quarter and in the second half of the year that we would see some net growth there.

Plus the other part of the equation is the nonstrategic book that has run down to a very small base, especially after the Cabela's transaction.

So that will be less of a drag on our CRE book.

Hopefully, we'll be about breakeven there.

So between those, just really 3 components.

The payoff velocity, I'm not telling you it's not -- it's going to be high but not as much as it has been, is our thoughts, the construction going up and the nonstrategic sort of not being much of a factor.

So net-net-net, we think we'll be about even for the year.

That's our thoughts right now.

That -- so right -- so yes, you're right.

If it's negative $100 million at this, we hope to have a little bit of positive growth between here and end of the year to get us at that kind of net zero.

If you think about it, that's a big lift because last year, we were negative $600 million on the CRE book.

So if we can get somewhere around the breakeven mark, that's a big lift.

And we do believe we'll continue our consumer momentum at somewhere probably around the 10%.

And in some way, or maybe, 3%, 4%, 5% on the C&I side.

So that gets us to the kind of the end of period -- we still got some confidence there that we'll get to that 4% to 6% range and stay in that area due to kind of all those components.

Our next question today is coming from Tyler Stafford.

From Stephens.

Kevin, Blair, I wanted to maybe just start and follow up on the expenses.

So I appreciate the commentary for, I think, 2Q getting back above $200 million and you get the $1.8 million step-up from the merit increases.

So it sounds like that will come in at the low end.

Beyond '18, what do you think is an appropriate level of operating leverage for Synovus?

We've said in the past, Tyler, we like the 2x, and just specially during a rising rate environment.

So we think for '19, we'll continue to maintain the 2x operating leverage.

We've also said that we think our expenses in the upcoming year will normalize more than that 3% to 4% range, just given the fact that we have a little bit of seasoning on our roll forward on depreciation.

So all that said, even if we had revenue growth in the high single digits, we still believe that we could come back to roughly at 2x operating leverage.

Got it.

Okay.

And then my second question is just around the margin.

So last quarter, you thought the first quarter margin will be up 4 to 8 basis points, excluding the drag from cash.

And I think, you had 30% betas baked into that.

So I guess, given the December hike and the March hike, is that still a reasonable expectation for 2Q post the March hike, just that, I guess, 4 to 8 basis points?

Yes.

(inaudible) I think, we guided less, and got to be 8 to 12 with the cumulative benefit of lower cash, the refinancing of the debt plus the rate hike.

But what we think going forward, Tyler, in that vein is that for this coming quarter and future quarters, that 4 to 6 basis point increase is what we would expect.

And given our future expectations around rate hikes, that would put us somewhere around 12 to 18 basis points for the rest of the year as we close out 2018.

Now obviously, the betas that we observed during each of those rate hikes will determine the ultimate amount, but we've said in the past, each of our rate hike scenarios, we've ramped up the beta.

So for this March rate hike, we're expecting 40% beta.

As Kessel mentioned, we only had a 16% beta on the December rate hike.

So it's stepping up fairly materially.

And then for the September rate hike, we had assumed a 50% beta.

And then thereafter, we would assume a 60% beta for any future rate hike.

But the 4 to 6 basis point is a good rule of thumb for each quarter moving forward.

Our next question today is coming from Jennifer Demba.

Question on M&A.

Kessel, couple of larger Atlanta area community banks announced their sale this quarter.

Just wondering what your interest is in acquiring more scale in the Atlanta market, where you're already very large, given there is now a lot of franchise scarcity in terms of larger community banks left in the market.

And just your general M&A thoughts at this point now?

Yes, Jennifer.

I don't know if the general M&A thoughts have changed.

We try to remain very consistent both with our words and our actions about what we'd like to do and where we might like to do it.

Again, strategic transactions that were input that would have good [integration], relatively short payback and increased, again, scale in markets in which we operate to get the kind of cost save you typically would need to get.

I mean, you know we love Atlanta.

We're very aware of what is there in Atlanta and what's there quite frankly throughout other states that we have a lot of interest in: South Carolina, Florida, Tennessee and Alabama.

So again, the appetite hasn't changed.

We've focused intensely on increasing our internal returns to give us a currency that would allow us to compete where we wanted to compete.

So again, no change in how we view, again, different markets.

We're pleased with our performance.

We're pleased with our how our stock has responded.

And we'll continue to evaluate opportunities in all of the markets in which we operate.

Our next question today is coming from Brad Milsaps.

Sandler O'Neill.

Kevin, just wanted to ask about -- following the backup on the margin.

The change in loan yields has been pretty consistent, with each Fed increase anywhere from 10 to 15 basis points.

Anything that you're seeing in the market, or otherwise, that affected this quarter, that would change that sort of delta with each future Fed rate increase?

Brad, it's a really good question.

We've been tracking -- not only we track our deposit betas, but we've been tracking our loan betas over the cycle as well.

We've had about 54% asset beta spent for 2015 rate hike.

And so it's been fairly uniform.

What we're starting to see, and we noted this back in our first quarter call around fourth quarter earnings, is we're starting to see some competitive landscape changes as it relates to repricing of loans.

And it's largely a function of the tax reform.

And for the quarter, our production of new loans came on roughly at 4.68%.

And you look at that relative to our portfolio, we're at 4.70%.

So a little lower, but it's stable.

What we're starting to see across all of the asset classes is a roughly 5 to 10 basis point margin compression as it relates to just people giving back yield, primarily as I said, related to tax reform.

So going forward, we still expect to see a 50-ish beta on the asset side with each rate hike.

We do think some of the benefit from tax reform is going to get computed away.

So that 54% will moderate a little bit.

But it's still going to leave us in an asset-sensitive position.

So we're -- as I said to Tyler earlier, we're still going to be in the position to benefit 4 to 6 basis points per quarter.

That's helpful.

And just as a follow-up.

Are you pretty well finished with the remixing of the right side of the balance sheet?

In other words, does the average balance of interest-bearing liabilities this quarter pretty much reflects how you want things.

Would you expect some more runoff in some of the various categories you kind of repositioned continuing from Cabela's, et cetera?

Or is it -- or is that pretty much finished?

Yes, so Brad, I think, there's still a little bit of tweaking that goes on there, as Kessel mentioned earlier, about 1/3 of the deposit decline on a sequential quarter basis was just the seasoning of some of our legacy brokered time deposits that we let mature and run off.

We'll continue to do some of that.

Given the $1.1 billion that we acquired in the fourth quarter of last year, we like the rate that came on at 1.83%.

And if you think about where rates are today relative to where they were back then, we look at those deposits as a very effective funding source for us.

And we'll continue to evaluate the wholesale portfolio, trying to find some cheaper alternative sources of funding.

But I would generally say the categories, as they are sitting there today on the balance sheet, will stay relatively flat.

Our next question today is coming from Nancy Bush.

NAB Research.

If we could delve into this loan demand issue a little bit.

I was very happy that you brought up the issue that the tax reform savings are being competed away.

What I'm hearing from the community banks is this that loan demand is much softer than anybody had anticipated at this point, that what demand there is, is CRE demand.

And as you said, C&I pricing is getting competed away.

So why is everybody so optimistic that this is suddenly going to change, and loan demand is going to pick up in the coming quarters?

Nancy, I'll start, and then I'll let Kevin Howard take the tougher part of your question.

I mean, I -- When you say so optimistic, I mean, we think, based on pipelines and sales activities and our ability to take some share, that we'll achieve our range of 4% to 6%.?

So I really can't speak to those that are guiding or are optimistic that they're going to get double-digit, because I'm with you.

And we see some of the same things.

There are pockets with good activity and steady activity but not robust in any particular category.

And again, as you know, we have been so disciplined about driving down our nonstrategic portfolios, not just land, but CRE as a whole, that the result for that for us is -- has been the loan growth at -- so far at the certainly close or below or end of our range.

I can't speak for others.

I'll let, maybe, Kevin give you color on where he sees some good activity and give you his own thoughts.

Just kind of break it up, I mean, on the C&I side.

For us, I'm not -- and again, I don't think, Nancy, we're -- well, it's not like we're forecasting double-digit growth here.

We think we can get in that 4% to 5%, 6% range if things fall right.

We've got good momentum here in -- the thing is we got a low base on something like ABL.

We only have about $140 million.

We think there is an opportunity to expand that.

We grew $30 million, $35 million this quarter.

Another area is our premium insurance company we bought a couple of years ago.

They've had tremendous momentum, growing $30 million to $50 million a quarter pretty consistently.

That was an add-on product we had.

It's still early with us for a couple of years.

I don't think we've fully utilized that yet with our company.

We're growing small business pretty consistent.

I think, we grew -- actually what we consider small business is $1 million and under loans that are scored.

That grew like $20 million, $25 million.

I think, we've grown 7 or 8 straight quarters there.

It's a lot of singles, a lot of no big homeruns in there, but -- and then the other part is, just kind of looking at our utilization, our utilization in our C&I line has been down over the last year or 1.5 years, not that much CapEx spend.

We think there is a little bit of pent-up demand there.

I'm not telling you it's going to be robust, but I think there is some opportunity to see utilization and our C&I increase a little bit.

Very good economy.

I can't tell you tax reform and the good economy have translated in the loan growth yet, but it feels like there is some early signs of that.

So for us, just on the C&I, again, we're not calling out double-digit growth.

But can we get -- and I'd like it to be better.

It's very competitive.

But we have invested at it heavily.

We grew our middle market.

We think there is a place there in that $35 million revenue to $200 million that we grew that last quarter $40 million or $50 million.

So there is some good pockets, things we've invested in the last 4, 5 years.

And we've had -- we think we can get some respectable numbers there in growth this year.

We were 3% -- close to 3% in C&I this quarter.

And this is our quarter that's usually kind of not as robust because of seasonality.

So again, we think we can get there.

And on the CRE side, we think we can get there.

As I mentioned earlier, payoffs have been very heavy.

But we've put on good construction loans over the last couple of years.

We're not asking for -- that's not going to be a robust number.

We're looking to just break even there this year versus the decline we've had over the last couple of years.

And then for us on the consumer side of the equation, we've been able to have good double-digit growth there.

I don't think it'll grow at the pace it did the last couple of years, but our mortgage company is as strong mortgage company as you can get and are in good positions in the Southeast.

We've had solid double-digit growth there.

I don't see any reason why that won't continue in this economy.

So -- and that and our partnerships.

We've had, as you know -- our so far GreenSky relationships have grown over the last couple of years.

I don't think that will grow as much as it grew this past year, but still it's an area that we think will be positive.

So there are some definite -- some things working against us.

Not a ton of loan demand, but a lot of competition.

But I think it's reasonable that we can execute this year, and get to where we've got it on the loan growth.

Okay.

And Kessel, if I could just ask one question.

It looks like you're finally beginning to get some traction in fiduciary and asset management.

And you mentioned the hiring of teams.

Are you targeting particular markets?

Or is this more opportunistic?

Why are you -- find a team, maybe, that's looking for a home?

It's both because we certainly are targeting the high-growth markets.

And we've mentioned revenue growth in Atlanta and in Nashville, but we've had good success opportunistically in other markets that may not be identified as high-growth.

But this is a really high opportunity for us.

Markets where we think our brand plays well, our culture plays well and it -- we're an attractive platform for successful teams, and that's -- I won't get into too many of those markets, but again, strong talent additions.

Charleston comes to mind as another one where we've had good team additions, but I could name several more, again, where we saw great opportunity and very intentional on -- from our standpoint.

And they're paying good dividends.

(Operator Instructions) Our next question is coming from Christopher Marinac.

Fig Partners in Atlanta.

Kessel, Kevin and team, I want to ask about the expense success you've had.

What are we not seeing on new investments behind the scenes that are good?

Well, I'll let Kevin Blair go a little further.

But you're right, there has been extreme focus and intensity.

As you know Chris, going back to 2010, and we just don't take our eye off of that ball, going into this year's budgeting season, both from a headcount -- strong desire to put dollars where we have customer-facing ability to improve the customer experience.

That technology spend will continue to grow.

We talk a lot about things like cybersecurity and new loan platforms and new mortgage origination systems, but a lot of emphasis on our customer portal and other investments that will enhance the customer experience over time.

Kevin, I'll let you give a little more color there.

So -- yes, so from a perspective of annual CapEx expenditure because we're running $25 million to $30 million, and Kessel mentioned it, we're looking at all aspects of investment.

And we're focusing on the revenue benefit that we're going to receive an out year.

So whether it's the digital platforms or the ATM refresh that we've talked about here today, or if it's going out and looking at ways to define our processes and technology to allow for efficiency or better client experience, I don't think that we're not making any investments that we should be making.

Obviously, there is a list of a million things we'd like to do, and we prioritize and decide what we want to do each year.

But we're making all of the investments.

We've talked about -- we're large enough from a scale perspective that we feel like we have what our customers need, and we have the ability to continue to enhance those products and functionality with our budgets each year to be able to keep up with some of our competitors.

So I think we're doing everything we need to do in order to be competitive.

That's great, guys.

And Kessel, just a follow-up.

I know you gave good feedback on Jenny's question about Atlanta.

If I asked about (inaudible) Nashville?

I mean, is Nashville the market that you cannot do an acquisition but, I think -- but organically grow and it's (inaudible) amount of incremental success?

Yes, Chris, Nashville is a great market for us.

I, along with several members of our senior team, attended a reception there 2, 3 weeks ago.

Rob McNeilly is our new market leader in Nashville.

We have a family office in Nashville.

We -- one of our best-producing mortgage offices is in Nashville, both secondary and portfolio product.

We've had strong additions to the team.

So we do believe Nashville is a great market where we can grow organically.

It's a competitive banking market, and we've got good competitors there.

You know who they are.

But we love the city.

Our company is committed to the city, and we tried to show that support, like I say, a couple of weeks ago with a customer-in-prospect reception up there.

So just like Atlanta, Nashville has great opportunity for the company from an organic growth standpoint.

We have no further questions in the queue at this time.

Do you have any closing comments you'd like to finish with?

Yes.

Thank you.

And just want to thank everyone for dialing in this morning.

Thank you for your continued interest and support of our company.

As I started the call, I'll close the call by saying we're off to a really good start in 2018, and that's really due to the efforts of our outstanding group of team members across our 5-state footprint and great customers who, again, are attracted to our way of banking and our way of serving customers and communities.

And we're excited about this transition to the unified Synovus brand, as I said, will be complete by the end of June.

It's going very well.

Our team members are really energized by it.

And I've also gotten lots of feedback from our customers who are excited about seeing the growing presence of the Synovus name, again, in communities across our footprint.

So stay tuned for what we hope will be a very good rest of the year.

We really appreciate all of the efforts, again, of our team.

And we look forward to our next earnings call, we can report on our continued progress.

Thank you very much.

Hope everyone has a great day.

Thank you, ladies and gentlemen.

This does conclude today's call.

You may disconnect your phone lines at this time, and have a wonderful day.

Thank you for your participation.