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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, ladies and gentlemen and welcome to the Synovus First Quarter 2018 Earnings Conference Call. At this time, all participants have been placed on a listen-only-mode. And we will open the floor for your questions and comments after the presentation.
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 will 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. Due to the number of callers we have, we do ask that you initially limit your time to two questions. If we have more time available after everyone’s initial questions, we will reopen the queue for follow-up.
Thank you. And I’ll now turn it over to Kessel Stelling.
Thank you, Steve and good morning to everyone. Welcome to our first quarter earnings call. I’m going to walk us through the earnings presentation as usual, and then we’ll open the line for 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. The strong operating leverage demonstrates our continued discipline 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 non-performing assets ratio was 0.53% flat with the previous quarter and a 24 basis points 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 loan grew $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 as our asset base lending unit up $34 million. Remaining C&I portfolio increased slightly despite a seasonal decline in overall line utilization.
Consumer loans increased a $115.5 million or 8% annualized with lending partnership portfolios increasing by $132 million. Consumer mortgages increasing $30 million, while HELOCs decreased $42 million. The growth in portfolio mortgages was primarily in the [indiscernible] 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 decrease in the investment properties portfolio and a $26 million decrease in the non-strategic land and development portfolio. The decline CRE is largely result of the continued higher velocity of payoff activity across the portfolio. While the expected asset sales in loan payoff will likely continue remaining elevated through the end of year. Our expectation is the 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 it increased $869 million or 3.5% versus a year ago. Core of the decrease in total average deposit balances was due to the loan of excess brokered time deposits.
Additionally seasonal increases and temporary deposits during the fourth quarter contributed to the first quarter decline. Non-time core deposits decreased a $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 will report it as a brokered deposit through February of 2018, the balances in these accounts totalled $307 million as of March 2018 and result of an increase of $112 million in average core deposits for the quarter due to the reclassification.
Given strong momentum of 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 deposit ratio remained 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 [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 security shield 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 points increase in the cost of interest bearing core deposits partially offset by refinancing our $300 million senior debt during the previous quarter which was open and annualized $14 million improvement in net interest income.
The increase of 4 basis points of the cost of interest bearing core deposits to 46 basis points represents roughly 16% data on the December 17 fed funds increased 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 deposit cycle to date is approximately 5%. Page 16 in the appendix includes additional information on the interest rate sensitivity as well as the investment securities and loan portfolios.
Turning to slide 7 and fee income, total non-interest income for the quarter $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 $7.7 million.
Adjusted non-interest 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 and 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 a 11% growth in trust revenues. Additionally our strategy to acquire key talent in select markets continue to bring new bring customer wins and accelerated growth in the business evidence by 19% growth in assets under management versus the same period last year.
Our family office business unit is off to a solid start 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 non-interest 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 billion benefit from the reduction and litigation contingency accruals. Additionally, fourth quarter of 2017 included a $23 million loss from the early extinguishment of debt. Adjusted non-interest expense of $198 million decreased $3.3 million or 1.6% sequentially an increase $7 million or 4% from a year ago.
The sequential quarter decrease was driven by $3 million decrease in advertising and $4.4 million decrease incentives partially offset by $4.4 million seasonal increase in employment taxes. Strong operating leverage for the quarter is resulted and adjusted efficiency ratio up 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 will see that our loan portfolio continuous to perform well. First graph shows NPA, NPL and delinquency trend. 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 are very pleased the past due remained 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 fourth quarter, the increase was in line with our expectations considering the fourth quarter provision expense was at lower levels due to the sales of previously mort 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 the 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 ratio remain strong an increase from a year ago as a reserve covers NPLs at 215% or 241% if you excluded impaired loans for which the expected loss has been charged-off. Again loan portfolio has been very healthy led by loan past dues NPLs and charge-offs, the loan was solid, loan loss reserve coverage ratios.
Moving to capital on slide 10, our capital ratios remain strong continue to be well above regulatory requirements, regulatory capital levels benefited from earnings growth, continue DTA accretion as well as the adoption of new accounting standard, which increased capital ratios by 2 to 3 basis points as described in footnote 4 of the slide. You will 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 and 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 and average price of $49.98 per share is part of our previously announced share repurchase program of up to $150 million, compared to a year ago we reduced our total share count by $3.6 million shares or 3% and only this month, our common stock dividend of $0.25 per share reflected the 67% increased announced earlier this year.
Slide 11 outlines our previously stated 2018 guidance which remains unchanged along with our first quarter results. From the balance sheet perspective, our first quarter results are 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 4% to 6% loan and deposit growth for the year.
We are currently exceeding our net-interest income guidance for the year, but giving the uncertainties around the number of great hikes associated betas on deposits, we are maintaining our guidance at this point. As a reminder our guidance anticipated on March and September rate high. We are up to a great start 2018 for fee income with growth of 6.2% and despite increased volatility in the equity markets and a softer mortgage environment, our investments and deep producing businesses are expected to continue to provide positive momentum that will drive adjusted non-interest income growth in the 4% to 6% range.
We continue to expect the total non-interest 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 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, in 2018 effective tax rate is expected to be within the previously stated range.
We do not see 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 modulate. We also continue to expect the loan loss reserve ratio will may 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, we will continue to be situational and depend the primarily of the level of organic business growth and alternative uses of capital.
As I close out my comments - but I didn’t mention the progress towards our previously defined three year targets, due to the impact of tax reform, our strong revenue growth and our continued focus on more efficient and effective organization. We made significant progress towards achieving those goals in the first quarter of 2018. We all know that one 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 goal.
We are also making good progress, implementing key initiatives and enhance the customer experience, improve our competitive positioning and drive growth. Our ATM refresh will wrap up next month, we are expanding our presence through both strategic talent acquisitions and new branch [indiscernible] locations. And, by the end of June, our transition to unify servers brand will be completed in all five 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 and 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 then pose your question.
With KBW, good morning guys.
Brady.
So, your beat earnings as soon as this morning and at least versus me a lot of it came in the expense sign, 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, are there some expense signs that will actually continue to see on shrinkage? And then on the opposite, which expense signs do you think will start to see growth from here?
Brady, this is Kevin Blair. I will take that. So, you are right. For the quarter we have had $197 million in adjusted expenses, we did receive some benefit this quarter as it relates primarily to the credit expenses, we are down about $3 million on our year-to-year basis, part of that just benign credit environment that we have in our ORE portfolio, but as I’ll make sure that I make mention of the Cabela’s transaction last year as we sold many of those ORE properties and moved loans and the held for sale, it puts us in a environment where we expect to have continued low credit losses.
So, we’ll continue 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 personal expenses as we share in the earnings presentation last quarter, we are investing in revenue producing FTEs and we’ll continue to do that. So, I think you will see the personal line moving at 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 server team system, so the depreciation line will continue to grow, where we’ve gotten a little bit of abatement and we hope to continue to have that expense - going forward is in the other categories, whether that be professional fees, whether it be vendor related cost. And, so as we guided at the beginning of the year to have roughly 821 to 845 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 will 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 $8 million in expenses per quarter. So, all that said, I think we are pretty pleased with the first quarter as well, there will be a little bit about 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 loans we’ve had around efficiency are starting to payoff.
All right, that’s helpful. And, then my second question is just on the loan growth. I know you have the range of 4% to 6% on a period end basis loans grew 2%, it sounds like you 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?
Hey Brady, this is Kevin Howard I’ll take that. We did see some improvement, I guess, in the shrinkage in the CRE book, I think in the third and fourth quarter we were maybe $200 in one of the quarters and $300 in the fourth quarter and it was less little right at $100 million this quarter. So, we are starting while the payoff for the last year still pretty high, it less than it was the previous two quarters, but also we put on typically the construction loans probably from about May of 2017 to now and they are 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 non-strategic book that has run down to a very small base successfully 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 really three 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, it’s our thoughts, the construction going up and non-strategic 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, so yes, you’re right, if it’s negative of a 100 at this point, we hope to have a little bit positive growth between here and at the end of the year to get us at 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 will continue our consumer momentum somewhere probably around the 10% and then somewhere 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 will get to that 4% to 6% range and stay in that area due to kind of all those components.
Got it; thank you, guys.
Thanks Brady.
Thank you. Our next question today is coming from Taylor Stafford, please announce affiliation then pose your question.
From Stephens, good morning guys.
Hi Stafford.
Hey Kevin Blair, I wanted to maybe just start and follow up on expenses. So, I appreciate the commentary for I think Q2 getting back above $200 million and then you get the 1.8 step up from the merit increases, so it sounds like that will come in the low ends. Beyond ‘18, what do you think is an appropriate level of operating leverage for Synovus?
We said in the past, we liked it two times and especially during the raising rate environment, so we think for ‘19, we’ll continue to maintain the two times operating leverage. We’ve also said that we think our expenses in the upcoming years will normalize more than that 3% to 4% range just given the fact that we have a little bit of seasoning on our role forward on depreciation. So, all that said, even if we had revenue growths in the high single digits, we still believe that we could come back to roughly at 2 times operating leverage.
Got it, okay. Thanks for clearing that up. And, then my second question is just around the margin, so last quarter you thought that the first quarter margin would be up 4 to 8 basis points excluding the drag from cash and I think you had 30% betas [indiscernible] into that . So, I guess given the December hike and March hike, is that still a reasonable expectation for Q2 post the March hike just that I guess 4 to 8 basis points?
Yes, we think got it last and we thought 8 to 12 with accumulative benefit of lower cash, the refinancing of the debt, plus the rate hike, but what we think going forward Taylor in that vein is that for this coming quarter and future quarters that 4 to 6 basis points increase is what we would expect in 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 yield of an amount, but we’ve said in the past each of our rate hike scenarios, we ramped up the beta, so for this March rate hike we are expecting 40% beta, as Kessel mentioned we only had 16 beta on the December rate hike, so it’s stepping up really materially and then for September rate hike, we had assumed that 50 beta and then thereafter we would assume 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.
Great, very clear, I’ll hop out. Thanks, guys.
Thanks, Taylor.
Thank you. Our next question today is coming from Jennifer Demba. Please announce your affiliation then pose your question.
Thank you, good morning.
Good morning.
Question on M&A, couple of larger Atlanta area community banks announced their sale this quarter. Just wondering what your interest is in acquiring or scale in the Atlanta market where you’re already very large given this now a lot of franchise scarcity in terms of larger community banks left in the bank? And, just a general M&A thoughts at this point now?
Yes, Jennifer I’ll note the general M&A thoughts have changed, we’re proud to remain very consistent both with our works and our actions about what we would like to do and where we might like to do it again on strategic transactions that were input that would have good integration, relatively short payback and increase again scale in markets in which we operate to get the kind of cost save you typically would need to get, I mean, we love Atlanta, we are 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 are pleased with how our stock has responded, we’ll continue to evaluate opportunities in all of the markets in which we operate.
Thanks so much.
Thank you.
Thank you. Our next question today is coming from Brad Milsaps. Please announce your affiliation then pose your question.
Hi, good morning, Sandler O’Neil.
Brad.
Hey Kevin, just want to ask about falling back up on the margin. The change in loan yield has been pretty consistent with each of that increase anywhere from 10 to 15 basis points, anything that you are 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 have been tracking our loan betas over the cycles where we had about 54% asset beta sent for 2015 rate hike and so it's been fairly uniform. What we are starting to see and we noted this back in our first quarter call around fourth quarter earnings is we are starting to see some competitive landscape changes as it relates to reprise loans and it largely a function of the tax reform. And for the quarter, our production of new loans came on roughly at 468 and if you look at that relative to our portfolio we are 470 so a little lower but it's stable.
But what we are starting to see across all the asset classes is a roughly 5 to 10 basis points 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 50-ish data on the asset side with each rate hike. We do think some of the benefit from tax reform is going to get competed away. So, that 54% will moderate a little bit, but it's still going to leave us an asset-sensitive position, so, we are - as I said to Taylor earlier, we’re still are 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 balance sheet? In other words, the average balance of interest bearing liabilities this quarter pretty much reflects how you want things, would you expect some more runoff into some of the various categories, you kind of repositioned continuing from Cabela’s etc, or is that that pretty much finished?
Yes Brad, I think there is still a little bit of tweaking that goes on there as Kessel mentioned earlier about a third of the deposit decline on a sequential quarter basis, was just a seasoning of some of our legacy broker time deposits that will mature and run off. We will 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 183 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. So, we will 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 setting there today on the balance sheet will stay relatively flat.
Great, thank you very much.
Thanks Brad.
Thank you. Our next question today is coming from Nancy Bush. Please announce your affiliation then pose your question.
NAB Research. Good morning, guys. If we can dwell into this loan demand issue 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 CRE demand, and as you said C&I pricing is getting competed away. So, why is everybody so optimistic that this suddenly going to change and loan demand is going to pick up in the coming quarters?
Nancy, I will start and then I’ll let Kevin Howard take the tougher part of your question. When you say we are so optimistic, I mean, we think based on pipelines and sales activities and our ability to take some share that will achieve our range of 4% to 6%, so I really can't speak to those that there are guiding more 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 non-strategic portfolios not just land, but CRI as a whole that the result for that for us has - have been loan growth and so far at certainly closer below 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.
Thank you.
I will just kind of break it up I mean on the C&I side for us, and again I don't think Nancy we are not just like we are forecasting double digit growth here. We think we can get in that 4% to 6% range if things fall right. We’ve got good momentum here and 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 $30-35 million this quarter. And other area is our premium insurance company we bought a couple of years ago. They have 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 couple of years. I don't think we fully utilize that yet with our company. We are growing small business pretty consistent. I think we grew actually we consider small business is $1 million under loans that are scored that grew like $20-25 million, I think we have grown 7 or 8 straight quarters there. It's a lot of singles, a lot of no big home runs in the year. But in the end, 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, year and half not that much CapEx spend. We think there is a little bit of pin up demand there. I’m not telling you it’s going to be robust, but I think there is some opportunity to see utilization in our C&I increase a little bit, very good economy, I can't tell you tax reform and the good economy has translated into the low growth yet, but it feels like there is some early signs of that.
So, for us just on the C&I again we are 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 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 have invested in the last four, five years and we have had, we think we can get some respectable numbers there and growth this year. We were 3% close to 3% 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 put on good construction loans over the last couple of years. We are not asking for - that's not going to be robust number. We are looking at just breakeven there this year versus the decline we have had over the last couple of years. And then for us on the consumer side of the equation, we have been able to have good double digit growth there. I don't think it will grow at the pace it did in the last couple of years, but our mortgage company is as strong mortgage company as you can get - are in good positions in the Southeast. We have solid double digit growth there. I don't see any reason why that won’t continue in this economy. So and that in our partnerships, we have had, as you know, our so far 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 this, not on loan demand but in a lot of competition, but I think it's reasonable that we can execute this year and get to where we have got it in the loan growth.
Okay. Thank you. 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 hiring of teams. Are you targeting particular markets or is this more opportunistic where you find the team maybe that's looking for home?
It's both because we certainly are targeting the high growth markets and we mentioned revenue growth in Atlanta and Nashville, but we’ve had good success optimistically in other markets that may not be identified as high growth, but there are certainly high opportunity for us as markets where we think our brand plays well, our culture plays well, and we are in 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 is another one where we have had good team additions, but I can name several more again where we saw great opportunity and very intentional from our standpoint and they are paying good dividends.
Alright, thank you.
Thank you.
Thank you. [Operator Instructions] Our next question is coming from Christopher Marinac. Please announce your affiliation then pose your question.
Hi, good morning. FIG Partners in Atlanta, Kessel, Kevin and team I wanted to ask about the expense success you’ve had. What are we not seeing on new investments behind the scenes that are going to [indiscernible]?
I’ll let Kevin Blair go a little further, but you are right. There has been extreme focus and intensity as you know Chris going back to 2010 we just don't take our eye off of that ball going into this year is budgeting season both from a headcount, strong desire to put dollars where we have customer facing ability to include the customer experience. The technology spend will continue to grow, we talk a lot about things like cybersecurity and new loan platforms and new board origination systems, but a lot of emphasis on our customer portal and other investments that will enhance the customer experience over time. Kevin I will let you give a little more color there.
So from a perspective of annual CapEx expenditure, because we are running $25 million to $30 million and Kessel mentioned it we are looking at all aspects of investment and we are focusing on the revenue benefit that we’re going to receive in out-year. So, whether it's the digital platforms or the ATM refresh that we talked about here today or if it's going out and looking at ways to find our processes and technology to allow for efficiency or better client experience. I don't think that we are not making any investments that we should be making. Obviously there is a list of a million things we would like to do and we prioritize and decide what we want to do each year, but we are making all the investments. We have talked about we are large enough from 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 budget each year to be able to keep up with some of our competitors. So, I think we are doing everything we need to do in order to be competitive.
That's great. Thank you for that background. And, Kessel just a follow-up, I know you gave good feedback on Jenny’s question about Atlanta. If I asked about Nashville, in this Nashville is a market that you cannot get an acquisition, but organically grow and still have the incremental success?
Yes, Chris Nashville is a great market for us. I along with several members of our senior team attended reception there two, three weeks ago. Rob McNeilly is our new market leader and 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 have 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, we have got good competitors there you know who they are. But we love the city. Our company is committed to the city and we try to show that support like I say, couple of weeks ago with a customer in prospect reception up there. So, just like Atlanta, Nashville has great opportunity for the company from organic growth standpoint.
Thanks guys. Appreciate it.
Thank you, Chris.
Thank you. We have no further questions in the queue at this time. Do you have any closing comments that you would like to finish with?
Yes. Thank you. And, I 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 will close the call by saying we’re off to a really good start in 2018 and that's really due to the efforts of 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. We are excited about this transition to the unified Synovus brand. As I said we’ll be complete by the end of June. It's going very well. Our team members are really energized by it. And, I have also gotten lots of feedback from our customers who are excited about seeing the growing presence of the Synovus name again and 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, 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 the conference call.