Synovus Financial Corp (SNV) Q4 2019 Earnings Call Transcript - Motley Fool

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Synovus Financial Corp (NYSE:SNV)
Q4 2019 Earnings Call
Jan 24, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to Synovus Financial Corp. Fourth Quarter 2019 Results Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to your host today, Kevin Brown. Please go ahead.

Kevin Brown -- Senior Director, Investor Relations

Thank you and good morning. During the call today, we'll be referencing 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 begin the call; followed by Jamie Gregory, Chief Financial Officer who'll be providing more detailed comments on the fourth quarter; and then, President, Chief Operating Officer, Kevin Blair, who will talk about our 2020 outlook and long-term goals.

Our executive management team is available to answer your questions at the end of the call. Due to the number of callers, we ask that you limit yourself to two questions.

Before we get started, let me 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 these 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.

And now, here is Kessel Stelling.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thank you, Kevin, and good morning everyone and welcome to our fourth quarter and year-end 2019 earnings call. Before I'll offer a few additional comments on the year and the quarter, I want to take a moment to congratulate Kevin Blair, who was recently named President of Synovus, adding to his responsibilities as COO that he took on just a year ago.

I also want to thank our entire leadership team for the work they have done and will continue to do in the year ahead as we carve new paths for growth and efficiency, work that will be both rewarding and challenging for our team.

In that regard, we have recently partnered with a third-party to assist us in identifying new revenue and efficiency opportunities designed to improve ongoing performance as well as the customer experience. I've asked Kevin to serve as Executive Sponsor of this initiative and he'll provide more comments on this important work later in the presentation.

Before I turn the call over to Jamie, I'll briefly walk us through the highlights of the fourth quarter noted on Slide 3. Diluted earnings per share were $0.97, or $0.94 adjusted. Adjusted EPS was down 3% sequentially and up 3.1% year-over-year. Period-end loan growth was $745 million or 8.1% annualized resulting from total funded loan production of $3.6 billion.

Period-end deposit growth was $972 million or 10.3% annualized. Core transaction deposits increased $373 million and total deposit cost declined 13 basis points from the prior quarter. Net interest margin was 3.65%, a decline of 4 basis points from the prior quarter.

Excluding the impact of purchase accounting adjustments, the net interest margin was 3.40%, down 2 basis points from the prior quarter. Non-interest income was $98 million in the fourth quarter, an increase of $9.2 million from the prior quarter and $30 million from the prior year quarter, led by capital markets and fiduciary activities.

And credit quality metrics remain solid with the non-performing loan ratio and the non-performing asset ratio declining by 5 basis points from the prior quarter to 0.27% and 0.37% respectively. The net charge off ratio was 0.10%.

We repurchased $36.5 million in common stock or 1.1 million shares during the quarter which completed our 2019 share repurchase authorization of $725 million. Outstanding shares were reduced 11% from the beginning of the year. Our 2020 share repurchase authorization should allow us to continue operating with the CET1 ratio around 9%.

I'm also pleased to report that our Board approved a 10% increase in the quarterly dividend to $0.33 per share of common stock effective with the April 1 dividend.

I'll now turn the call over to Jamie for a more detailed look at 2019.

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Thank you, Kessel. Let's begin on Slide 4 with loans. We had another strong quarter of loan growth with a net increase of nearly $750 million on production of $3.6 billion. The growth was broad-based with CRE growing in seven of ten asset class. Direct C&I lending increasing across the footprint and the consumer book experiencing growth in all product types.

The credit profile of this growth was consistent with prior quarters and we remain confident in the quality of our loan book. We have a robust loan pipeline across industries and the footprint -- and we're starting to benefit more directly from changes in the competitive marketplace following recent M&A activity and industry consolidation.

On Slide 5, deposit highlights include a continued increase in core transaction deposits. This is a direct reflection of our team member's performance growing quality relationships across our footprint. In the fourth quarter, we continued our efforts to remix the deposit book by allowing higher cost deposits to run off.

We offset that run off with growth in non-interest bearing deposits, money markets and the seasonal inflows for more reasonable priced public fund deposits. This strategic focus support continued reductions in the total cost of deposits, which fell 18 basis points from the peak in July and 13 basis points from the previous quarter.

As you can see on Slide 6, the core net interest margin decreased 2 basis points to 3.4%. Excluding purchase accounting accretion, lower interest rates resulted in an 18 basis point reduction in loan yield and a 13 basis point reduction in the cost of deposits. As a reminder, GAAP margin at 3.65% benefited from purchase accounting accretion which was $26 million in the fourth quarter.

The benefit to NII from purchase accounting will decline substantially in 2020 to a full-year total of approximately $8 million. Strong balance sheet pipelines and the timing of loan growth, which was weighted toward the end of the quarter, provide tailwinds going into 2020.

On Slide 7, you will see we have had continued success in fee revenue growth, which increased to $98 million or $92 million adjusted. Included in our GAAP non-interest income is an $8 million increase in the fair value of certain equity investments.

In the fourth quarter, fee revenue growth was led by capital markets and fiduciary activities of $2 million and $1 million respectively, which more than offset reductions in areas such as mortgage banking income. Non-interest income as a percentage of average assets continues to improve as we successfully execute on this key strategic objective. An example of this success includes a 29% year-over-year increase and implementations by Treasury & Payment Solutions.

Slide 8 shows adjusted expenses of $265 million which is an increase of $6 million from the previous quarter. Significant increases noted on this slide reflect a $3 million increase in FDIC expense associated with the reclassification of certain loan categories over the past four years.

Expenses also increased with opportunistic revenue producing hires and additional non-interest income. There was also a $2 million increase in servicing expense that was more than offset with higher revenue resulted from a renegotiation of a third-party consumer lending partnerships.

As we execute strategies from our new operating model, we continue to recalibrate our expense base to emphasize the importance of customer-facing talent and technology. These investments have short-term paybacks that will serve the company well by improving efficiency and profitability long-term.

Key credit quality metrics on Slide 9 remains favorable, including NPL and NPA ratio that each declined by 5 basis points. These reductions were achieved with a net charge off ratio of 10 basis points for the quarter. The net charge off rate was 16 basis points for the year.

Provision expense of $24.5 million included the costs associated with a $466 million increase in net loan growth from the prior period. Provision expense remains elevated compared to net charge-offs due to the impact of purchase accounting. Under our acquired loan accounting selection, the credit mark flows through NII rather than provision as loans pay off or renew. As we think about the overall allowance, our coverage ratios remained favorable as credit quality continues to look healthy.

Onto Slide 10, we remain confident in our overall capital position and are pleased to report that we completed the $725 million share repurchase authorization in 2019. This included fourth quarter repurchase activity of $37 million, which reflected a reduction of an additional 1.1 million shares. Total shares were reduced 11% from the beginning of the year.

Ongoing analysis continues to provide support for operating at our current capital and liquidity ratios.

And now, Kevin will discuss our outlook.

Kevin Blair -- President and Chief Operating Officer

Thanks, Jamie. Before I talk about what we expect in 2020, let me take a minute to reflect on 2019. I am very pleased with our progress and success achieved during the year. As we rolled out a new operating model in the beginning of the year our objectives were to better align our organization to further enhance the customer experience as well as expand and diversify our sources of growth.

In 2019, we added 58 net new revenue producing team members across our foot print, in many of the fastest growing markets in which we serve. Various business units contributed to our growth, including mortgage, brokerage, trust, private wealth management, wholesale banking and Treasury & Payment Solutions. The attraction of this talent helped move the needle in 2019 and will have an even bigger impact on 2020.

We also experienced strong growth in banker productivity during the year with funded loan production of $11.1 billion, up $3 billion or 37% from 2018. Moreover, the increase in production led to a 5.5% pro forma outstandings growth in total loans with C&I, CRE and consumer asset classes all increasing.

In 2019, we also delivered 10.6% fee income growth versus 2018 on a pro forma Synovus FCB basis. Strong growth was delivered across multiple businesses including mortgage, capital markets, card and our fiduciary and asset management businesses which saw assets under management grow 21%, as we continue to expand our capabilities and presence across the footprint. As a result of the growth in these categories, we saw the percentage of our revenue derived from fee income increase throughout the year, now totaling 19% in the fourth quarter.

As we previously discussed, we completed the integration of the Florida Community Bank during the year and we're pleased with the contributions of our newest team members. The legacy FCB wholesale team continued on a path of growth with loans increasing $350 million during the year. Deposit accounts growing by 8% and record levels of capital market income of $18 million, up 38% year-over-year.

Credit in the acquired FCB book also performed as we expected during the year with credit metrics and internal reviews supporting the overall quality of the portfolio. The legacy FCB branch network also saw performance gains in 2019 with branch unit sales per month of 51, slightly higher than the legacy Synovus branches. We also invested a new technology and new business units to generate growth. We released MySynovus, our consumer digital portal in 2019 and are preparing for the release of our commercial digital platform in 2020.

In the middle of 2019, the Synovus structured lending division was formed and in a very short period of time has already generated a $150 million in loan commitments. We also spent the year building out and piloting a much stronger value proposition for the mass affluent customer segment and we'll release this program and the associated solutions across our franchise this quarter.

So as we enter 2020, our roadmap will follow a similar course. It calls for opportunistic expansion and growth, simplification and process enhancements that will make us even easier to do business with and additional efficiency efforts that will fund new investments while helping to mitigate the headwinds from the margin.

In building the strategic roadmap, we engaged a third-party back in September of 2019. The work over the last four months has informed our 2020 guidance, but more importantly, our long-term goals. We have reviewed over 20 initiatives that provide opportunities for incremental growth from the revenue side as well as additional efficiencies. We are in the final stages of prioritizing the eight to ten initiatives that will be delivered during 2020. But generally the revenue opportunities have a longer-term horizon while efficiency opportunities will begin to be realized in 2020.

Our efficiency opportunities will center around the categories that have been constructive for us in the past; third-party spend, real estate and staffing rationalization. As we move forward with this engagement, we will continue to provide updates and greater transparency around the opportunities as well as the progress.

Now, moving to our 2020 guidance and long-term targets, these are based on a lower for longer rate environment and modest economic growth. We believe that the economic tailwinds that have resulted in above-average economic growth in the Southeast will continue. Our clients maintain a favorable outlook on the business environment and we are focused on supporting their growth.

We are pleased with the positive momentum in the balance sheet growth which has been driven by new talent, the enhancement of capabilities and sales tools, as well as stronger growth in our larger Tier 1 markets. Our approach and the momentum is expected to continue to support asset growth of 4% to 7% in 2020.

Funded loan production increased throughout 2019 and ended the year with a robust pipeline funded by a remix deposit base. For 2020, we expect loan growth to exceed market economic growth as we further deepen existing relationships, grow new relationships, and continue hiring of frontline bankers.

We expect this to result in broad-based loan growth across markets and industries. We will fund this growth with a continued focus on growing core transaction deposits. Our efforts to reduce high cost deposits will continue in 2020 as we selectively reduce higher cost, single service deposits.

One of the most significant headwinds to the 2020 income statement is purchase accounting adjustments, which are expected to reduce revenues by approximately $90 million from 2019. Excluding PAA, adjusted net interest income should increase 0% to 3% as we continue to actively manage our balance sheet to optimize the margin as well as returns.

We do expect the net interest margin to be down slightly, assuming flat interest rates and similar balance sheet mix. Adjusted non-interest income is expected to increase 3% to 6% with broad-based growth. The continued growth in fee income is a function of hiring efforts and higher opportunity markets, product areas such as Treasury & Payment Solutions, as well as an expansion of the share of wallet with existing relationships.

Adjusted non-interest expense is expected to increase 3% to 5%. The primary drivers include continued investments in people, processes and technology that will have relative short-term paybacks. These investments will be partially offset by savings realized during the execution of our strategic efficiency initiatives.

The 2019 tax rate of 26% was negatively impacted by significant non-deductible, merger-related expenses that are not expected in 2020 as well as certain discrete items that were also negative.

Elimination of these aforementioned expenses as well as additional strategic tax initiatives and the realignment of certain subsidiaries will reduce the future effective tax rate substantially. We expect the net charge off ratio of 15 basis points to 25 basis points as the credit cycle matures and recovery subside. There are no indications of any widespread credit deterioration; however, net charge-offs will be impacted by changes resulting from purchase accounting of the acquired portfolio as the credit mark is unwound at CECL adoption.

As we look forward to 2020, the largest change to financial statements involve CCEL implementation. Provision expense will be elevated going forward as we provide for life of loan losses and will be highly dependent on the projected economic environment, the credit profile and tenure of loans, the impact of unfunded reserves as well as expectations about net loan growth and a continuation of the current elevated levels of payoffs.

Given our current profile of loan growth and expectations for the economy, we anticipate adding up to 10 basis point to the allowance for credit losses ratio throughout 2020 to account for the change in provisioning to the life of loans. Our estimated day one CECL impact, which remains unchanged from the previous quarter, can be found in the appendix. This incremental forecasted provision expense is not related to any changes in the underlying credit fundamentals of our loan book.

Moving on to capital; in 2019, we completed subordinated debt and preferred stock issuances and purchased 20 million shares, which effectively optimized the capital stack, given the current balance sheet size and risk profile. We reiterated our comfort with a CET1 ratio of 9% under the current conditions and are committed to first funding organic growth; second, maintaining a competitive dividend; and third, effective capital deployment.

As such, we will be increasing the common dividend by 10% in 2020 targeting a payout ratio of 35% to 40%. Moreover, we will monitor capital consumption through organic loan growth and tailor our share repurchases accordingly, as we continuously manage our capital and liquidity positions.

Our long-term goals reflect the successful execution of our strategic roadmap. We are committed to aggressively identify and implement new avenues for growth and efficiencies throughout our organization. I am confident in our path forward, in the passion and the commitment of our entire team and in the clarity of our vision to be the bank we've always been, but better.

We've moved -- we're moving forward fully aligned with a keen eye on delivering on our goals of positive operating leverage, diversified balance sheet growth and top quartile profitability metrics.

Kessel, I'll turn it back over to you for closing remarks.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thank you, Kevin. And before we move to Q&A. I, again, want to thank our Synovus team for their contributions to another successful year for our Company. Our results reflect continued momentum across our footprint with greater organic growth and an improving ability to execute well as a fully unified team. I'm always so proud of the way our team supports each other, serves our customers and gives back to our communities.

Operator, we are now available for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Ebrahim Poonawala with Bank of America Securities.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Good morning.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Good morning.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

I guess, just first question; wanted to -- looking at the expense guidance of 3% to 5%, how should we think about expense growth for the year? Is the lower-end kind of tied to -- if revenue asset growth is at the lower end we should expect expenses to be at the lower end and is that the right way to think about where expenses could shake out or is it more incumbent on just investment decisions that you're making?

Would love to get your thoughts in terms of just how we think about operating leverage for the year. And also in terms of, do we expect to get an update on the efficiency plan by the first quarter earnings or do you expect an update sooner than that?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

So, Ebrahim, hi, this is Jamie. Thanks for the question. We expect, as we say, 3% to 5% expense growth for 2020 and a lot of that has to do with things that happened in 2019. So we have about 1% expense growth associated with the third-party servicing and so that's just growth in the book. That's a renegotiation that also negatively impacted expenses this quarter.

Other thing, another impact are hires we made in the second half of '19 and so we've been really growing our first line out there in the field and that's going to be a negative impact to expenses as we head into 2020. You're right, the growth would definitely impact that. You saw that in the second half of '19 when -- with the commission expense being higher, just because of the strong performance in the fee revenue businesses.

And so you're right, it is somewhat dependent on that, but we are excited about the opportunity to improve this and we have many initiatives in play [Phonetic] as Kevin mentioned on the script, talking about our opportunities for 2020 with our transformation efforts.

Kevin Blair -- President and Chief Operating Officer

And Ebrahim, this is Kevin. I'll add through to the question as it relates to additional transparency around the initiatives. Yeah, I think in the first quarter earnings call, we'll provide a little more clarity as to the initiatives themselves. Obviously when we are giving guidance on the full year, we want to understand what the third-party spend will be in order to generate the savings.

But as Jamie mentioned, I think what you'll see with our quarterly expenses is that we'll hit a high watermark in first quarter and then expenses will trail-off as the year continues and so we'll be able to generate positive operating leverage as we get toward the second half of the year and most certainly as we look at 2021.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

That's helpful. And just moving quickly to capital CET1 at 8.95%, relative to the 9% target and you obviously raised the dividend this morning. Is it safe to assume that we should -- we may not see any buybacks at least early part of the year as you sort of gauge asset growth given you guidance and let capital build. Like, what's the right way to think about buybacks from here on?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Yeah. Ebrahim, we expect to maintain CET1 around the 9% level where we are currently and we feel confident in that level. And so you're right, we'll be looking at how we grow our balance sheet and how that plays into capital ratios. But I wouldn't assume that that means there will be holding off on share repurchases.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

So we could -- or we should expect a share repurchase in the first quarter?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

We are not giving guidance to the timing of share repurchases, but we're going to stay at the 9% level. As you look at that, I would say with our forecast of loan growth and the guidance we're giving, we may repurchase 2 million to 3 million shares in 2020 and that will probably be over the course of the year.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks for taking my questions.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thank you, Ebrahim.

Operator

Thank you. And the next question comes from Tyler Stafford with Stephens.

Tyler Stafford -- Stephens Inc. -- Analyst

Hey, good morning guys.

Kevin Blair -- President and Chief Operating Officer

Hey Tyler.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Good morning Tyler.

Tyler Stafford -- Stephens Inc. -- Analyst

Hey. I guess Jamie, I'm trying to just triangulate on expenses here, there is a comment from last quarter's call about looking at opportunities not just in the fourth quarter but in the 2021 -- 2020 and 2021 to take out significant adjustments to the expense run rate relative to the fourth quarter expenses that we saw that stepped up fairly meaningfully, and then I think the guide of 3% to 5% that was above expectations. Just I guess simply what happened to the outlook that -- I thought you guys were talking about, on the third quarter call, relative to what happened in the fourth quarter and the outlook here of 3% to 5% expense growth.

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Yes, Tyler. Well, I'd say a few things. First, we did have a lot of strong growth in the fourth quarter. You saw the balance sheet growth. Your saw the fee revenue growth and so that contributed to our target expenses. We also had the renegotiation of the third-party relationship that added $2 million to fourth quarter expenses. It will add, as I mentioned a minute ago to Ebrahim, it will add another $10 million or so to 2020 expenses as well.

But just as a reminder, that's offset by a bigger impact in NII. And so it's accretive to the shareholder. Also in the fourth quarter, we had FDIC expense and that was related to the reclassification of certain loan categories over the past four years and when we went in and looked at that, we also engaged a third party to identify opportunities to reduce the assessment rate going forward. And so that will actually be a net positive to 2020.

But then, we also had higher compensation expense. There were some ebbs and flows in compensation expense, but we did have $2 million higher due to certain legacy defined benefit plans that hit us in the fourth quarter. We do feel confident about the efforts we're making to reduce efficiency rate going forward.

You know, as Kevin mentioned, we expect the first quarter to actually be a little higher due to seasonal impact of personnel expense, that probably is $5 million to $6 million, but we're excited about the work streams we have in play to help us improve our run rate going forward and help get back to positive operating leverage and we're targeting returning to year-on-year positive operating leverage in late 2020.

Tyler Stafford -- Stephens Inc. -- Analyst

Okay. But to be clear, the efficiency opportunities that you're speaking to that is already reflected in the 3% to 5% expense growth outlook? Is that right?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

So the 3% to 5% outlook; there are a couple of things with that. One, that doesn't include any expenses associated with the transformation effort. So I'll be clear on that. But the benefit to calendar year 2020 is not nearly as much as the benefit to run rate at the end of the year. We expect to complete many of these initiatives that will improve both revenue and expense going forward, but the impact to 2020 is not significant.

Tyler Stafford -- Stephens Inc. -- Analyst

Okay. So the exit expense base being I think what you're implying at the low point for the year, that lower expense exit base should continue into 2021 providing greater efficiencies really in 2021 and a lower expense growth rate.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

That's right. And Tyler, this is Kessel. Let me just kind of maybe summarize what both Jamie and Kevin said to the question of what happened because one of you on the call have already seen that question and emailed this morning early. Nothing really happened, what in fact has happened is that the investments we made in 2019 throughout the year, but a lot in the middle and back half of the year have really paid off, but those salaries and those investments didn't go away as we entered 2020.

But in the midst of all that we've been very thoughtful and quite frankly aggressive in taking out cost in the back half, either in the fourth quarter with some reductions in staff throughout our Company. So I don't want to leave you with the impression that we've forgotten about our commitment to expense control.

It's just on this call today and I think you know this about us or me, I don't like to guide to things that I don't see. And so we are working very aggressively with a third party so that we can give you more color as to the amount of revenue opportunity and the amount of expense run rate short term and long term. And so I just want to make sure that you understand the commitment to executing on that is as strong as ever.

Tyler Stafford -- Stephens Inc. -- Analyst

Okay, thank you, Kessel.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thanks Tyler.

Operator

And the next question comes from Brady Gailey with KBW.

Brady Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Hey, thanks, good morning, guys.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Hey Brady.

Brady Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Well, I think I heard something earlier in the call about the loan loss reserve ratio being built 10 basis points. I wasn't sure, does that -- is that somehow related to CCEL or are you referring to after CCEL you expect to build the reserve by 10 basis points throughout the rest of 2020?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Hey Brady, this is Jamie. That we are referring to CCEL and we're referring to the day-two impact on the allowance for credit losses. As we look at 2020 and to give guidance there, CCEL was impacted by multiple factors, right, like there is the impact of loan growth, there is an impact of the credit components of loan mix, there is an impact of prepayments.

If you have accelerated prepayments, the average duration of your book extends and it negatively impacts your provision expense due to CCEL. There is the impact of unfunded commitments as well as the big impact of the general economic environment. Your assumptions that you put in there.

And so, when we look forward on the day-two impact of CCEL, we expect our allowance for credit losses to marginally increase as we go through the year. Clearly there's a lot of uncertainty. We're not forecasting any deterioration in the economy, we think that using a flat kind of economic assumptions that we still may see a slight increase in the allowance percentage or the percent of loans just due to the fact that the average duration of the book extends a little bit.

There is no change in the credit performance we -- the forward-looking credit indicators are all looking very good and strong right now. It's really just an impact of just forecasting slightly longer duration within the different portfolios.

Brady Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Alright, that's helpful. And then Kessel, it's been a year since you closed FCB. Your currency has come back a little bit, at least relative to where it was at some points back in 2019. Any update on how you're thinking about M&A in the next year or two?

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Well year or two might be two different things, Brady. I mean currency has come back some, but not enough to I think position us to participate in the transactions right now. As I think you probably know, there is a lot of chatter out there, there are a lot of smaller banks looking for exit partners.

I think we would all agree there are lot more sellers than there are buyers right now. But we're very, very, very focused on our internal operations on organic growth, on improving our returns, on controlling the expense growth that Tyler and Ebrahim both just spoke to.

So I think short-term, the answer is hedge down internal focus, keep building on the reputation that I think we've established, keep proving the investment thesis all in FCB as that team has really become fully integrated into our team and performing well throughout the entire State of Florida.

So late this year 2021, I would just say that regardless of currency, we will be very disciplined, and again, the thought being that if they were the right opportunity where we had the right currency, I think we would have to certainly look at something, but I wouldn't anticipate that being a 2020 event and would see 2021. I believe there will be plenty of sellers in 2021 as well.

Brady Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Got it. Thanks guys.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thanks.

Operator

Thank you. And the next question comes from Jennifer Demba with SunTrust.

Jennifer Demba -- SunTrust Robinson Humphreys, Inc. -- Analyst

Thank you. Good morning.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Good morning, Jennifer.

Jennifer Demba -- SunTrust Robinson Humphreys, Inc. -- Analyst

Back to the expenses topic. Jamie, I think you said that you expect the expense rationalization efforts to take -- to be more weighted toward the back end of the year. Does that bias your guidance for expenses -- core expenses of 3% to 5%, 3% to 5% growth, does that bias it toward the low end of that guidance?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Jennifer, I think that our guidance is -- I mean there are scenarios that can get within -- get you to the low end or the high-end. But you know, we think that that's the right range. We think our base cases is right in the middle of the range. But there are definitely opportunities to be at the low end.

And as Kessel mentioned earlier, we're going to be looking at a lot of things that can move the lever faster. We've -- as Kevin mentioned on the call, we've looked at over 20 initiatives. There are things that are teed up to go and in process right now. And so I guess that guidance is the best I can give you right now, but we feel good about it.

Jennifer Demba -- SunTrust Robinson Humphreys, Inc. -- Analyst

Okay. And question on hires or how offensive will you be in 2020 on hiring off this 58% base last year?

Kevin Blair -- President and Chief Operating Officer

Well, Jennifer, I think that really covers that expense number as well because we have not backed off on the hiring front. And again I believe selfishly, we've got a pretty attractive platform to hire too. I mean we continue to add depth throughout our footprint. And really all of our higher growth markets, it will continue to be. I actually spoke earlier this morning to Allen Barker, who is our Atlanta market President about the number of people that he and some of our other leaders here continue to talk to. And as he said to me, we have the opportunity to be very selective on who we hire because of the number of people who are interested in joining our team.

So I think we'll continue to be aggressive. That puts pressure on that revenue number, but while there is some disruption, while there are good bankers in the market, we certainly want to make sure that we are front and center in that decision. I've visited with Kevin Howard in Atlanta just a couple of weeks ago and we spoke with a couple of people he's recruiting. And again, just seeing what attracts them to our company made me feel really good.

So we'll be aggressive, but again, disciplined. I mean hiring comes with a cost because especially in the middle market space it takes for -- take a while to generate revenue to cover that. So we'll make sure we balance the hiring in terms of what can give us shorter-term payback versus longer-term payback.

But I would say, again the -- if you'd look at the last quarter growth in loans and the push in fee revenue, it really does reflect a success of our hiring decisions throughout 2019.

Jennifer Demba -- SunTrust Robinson Humphreys, Inc. -- Analyst

Okay, thank you.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thanks, Jennifer.

Operator

Thank you. And the next question comes from Kevin Fitzsimmons with D.A. Davidson.

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Hey, good morning everyone.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Good morning, Kevin.

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Just taking a step back a bit on the -- you said you engaged a third-party back in September. I'm just curious what the thought process was. Was it that you knew you had all these investments being made and you needed a way or wanted a way, wanted to look at a way to offset that or was it more about looking versus peers where you stood on certain ratios. I'm just curious the thought process before stepping in with that.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Yeah, we'll all take some of that, Kevin. But I just think a fresh look is always good. You know us as well as anybody on this call. And in the past, we've engaged a third party for major initiatives. I remember like yesterday 2011 when it was a $100 million then we did a 35 or 25. And as we have grown, as we have integrated another organization as we have made major investments.

And I don't want to not give credit to our team who have been very diligent in looking at ways we can take cost out. We thought it was a good -- it's been a while since we had a really third-party fresh look at everything we doing. How we're pricing our products. What products we are offering, procurement -- I mean Jamie and Kevin have been to the work stream. So it was a combination of just time and a fresh look. It gives you ideas that maybe you didn't recognize or at least raises the opportunity of that and we've been very pleased so far. We just got a little more work to do.

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

And Kevin, let me add to that, to Kessel's point. We were not looking at our current efficiency ratio, which if you look at for 2019 at 52% and felt that we were an outlier. Quite frankly, I think we still show very well relative to our peers as it relates to efficiency ratio. But to Kessel's point, we're on offence and we're trying to grow the bank and we knew that if we needed to find capacity to continue to invest in new talent and technology that we had to be more efficient.

But in addition to the efficiency initiatives, we have a lot of revenue initiatives we're talking about and most importantly, we're also looking at process reengineering and automation, that's going to not only make our team member's lives better but also make us easier to do business with, with our customers.

So for us, it's not parochially focused on just efficiency. We're looking at growth, we're looking at generating revenue and we're looking at becoming a better institution as we serve our customers. And as Kessel mentioned earlier, we're a great platform for teammates or for team members to come to today and we want to continue to get better there as well.

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Okay, great. And one quick follow-up, just on the margin, on core excluding purchase accounting over the course of the year. I know you mentioned what it would be roughly but over -- when we're looking in a forward quarters, would you expect it to see some more compression, but then stabilization at some point mid-year. How should we expect it to flow?

Kevin Blair -- President and Chief Operating Officer

Yeah, Kevin, you nailed it. That's exactly what we would expect. I'd just say the fourth quarter, looking at the core margin at 3.40%, we feel really good about that and it benefited from a couple of things, one is the investment portfolio repositioning and so that will continue to benefit us. And second is our third-party relationships as well as the renegotiation of those that will also benefit us as we head into 2020.

So we have that tailwind that got us to the 3.40%. But as we look at 2020 I would say that I would expect we guide for the full year slightly down. I would just say, expect most of that in the first quarter. There are three things driving that. One is we had just such strong loan growth in the fourth quarter.

The second thing is that the first quarter has strong loan growth already quarter-to-date. And the third thing is just that the Fed move was at the end of October, and so we didn't get a full quarter of that rate reduction. And so I would say, slightly down for the year, biased toward the first quarter.

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

Great. Thanks guys.

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Thank you

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thanks Kevin.

Operator

Thank you. And next we have John Pancari with Evercore ISI.

John Pancari -- Evercore ISI -- Analyst

Good morning.

Kevin Blair -- President and Chief Operating Officer

Good morning, John.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Good morning, John.

John Pancari -- Evercore ISI -- Analyst

On the expense topic again, just given the initiatives and the longer-term expected benefits and everything, where do you see the impact being to your efficiency ratio longer term? What do you think is the appropriate long-term level for your efficiency ratio once you dial these efforts in? Thanks.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

John, that's a great question. We are striving for an efficiency ratio in the low '50s. I mean we've talked before about that at the 50 area, but we're really shooting for low-50s, given the change in the underlying interest rate environment. But look, we think we can improve. We think with our business mix, we have opportunities to be better and be more efficient on how we go to market. As Kevin mentioned, we think that's going to improve the experience for our associates and our customers. And so we're excited about that and we believe that these initiatives will help us get there.

John Pancari -- Evercore ISI -- Analyst

Okay. Got it. Thanks. And then separately, on your guidance on the 4% to 7% asset growth, how does that break down by the components in terms of loan growth securities. And then maybe give us some color on the other side on deposits?

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Yeah, we -- as we look at 2020, we're not really forecasting any material change in the investment portfolio. You mentioned security, so if you look at our loan-to-deposit ratio, we're comfortable where we are with our liquidity profile. And so I wouldn't expect that to change. And just, I mean, so I would expect to see balanced growth from us on both loans and deposits.

John Pancari -- Evercore ISI -- Analyst

Okay. Got it. Got it. Thanks. And then lastly, on the credit side, the -- your delinquencies, looked like they jumped about 40% linked quarter, can you give us some color on what drove that. And then separately, do you have criticized and classified assets for the quarter and how that changed?

Robert Warren Derrick -- Executive Vice President & Chief Credit Officer

Yeah, hey John, this is Bob. I'll try to provide you with a little color on that. We did have one large C&I credit that carried to quarter end. It's in our normal collection process. So given the fact that those past due levels are so low, when you have one, it can move the needle up from a percentage standpoint if you call it out.

From an ongoing basis, we still see risk grade inflow excuse me -- risk grade new and renewed origination to being at or better than our current levels. We still got inflows that are minimal, relatively speaking and our past-dues, while there will be some fluctuation obviously quarter-to-quarter when you get to these low levels, they're still showing no real signs of overall credit deterioration.

Your comment about the rated book John is, you're going to have some credits move within substandard or special mention here and there throughout the quarter. But again, there is no real new names coming onto that list. So it's just normal course of business there.

Kevin Blair -- President and Chief Operating Officer

And John, this is Kevin. I'll just add to Bob's comments. As Kessel mentioned, we had roughly $3.6 billion in production during the fourth quarter. That was up 20% over the third quarter. And you heard Bob mention the average risk-weighting. When we look at not only the book and you look at the low levels of NPAs and delinquencies that we have in our portfolio, we have a keen eye on making sure that the new production that's coming on is consistent with that prudent growth strategy and to see that each quarter we have an improving risk profile as it relates to that weighted average risk rating, gives us great confidence that we expect to see similar credit quality into the coming quarters.

And as Bob mentioned, you're going to have some episodic ebbs and flows in those numbers just because they're so small. But there is nothing that concerns us either from a portfolio or from what we're seeing on the production side.

John Pancari -- Evercore ISI -- Analyst

Okay. Got it. And then -- and sorry, did you imply that the -- would you state that the criticized or classified assets were stable in the quarter?

Kevin Blair -- President and Chief Operating Officer

Yes.

John Pancari -- Evercore ISI -- Analyst

Okay, got it. Alright, thank you.

Operator

Thank you. And the next question comes from Michael Rose with Raymond James.

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

Hey, guys. So it sounds like mid -- hey, how are you? Sounds like mid-single digit loan growth is kind of what you guys are targeting. You guys had really strong C&I loan growth this quarter, especially relative to the industry. Can you talk about just some of the growth drivers as we think about growth into 2020 is it -- are you guys moving upstream at all are the new hires that you've made, which I think are more weighted toward wealth management in 2019, but is it some of the new hires, is it market share takeaway. Just give us some color as to how we should think about growth next year? Thanks.

Kevin Blair -- President and Chief Operating Officer

No, Michael, it's great question. Yeah, fourth quarter was a strong C&I quarter but I look at the year and I look at almost $800 million worth of C&I growth. And ironically, it was not in the owner-occupied real estate category. We see a tremendous amount of competition from some of our competitors that are offering long-term fixed rate owner-occupied mortgages. And quite frankly, based on our profitability requirements, we've let some of that leave us.

So where we're seeing growth on the C&I front is really in our wholesale bank and we have added individuals there. We're up 10 revenue producers in the wholesale bank this year. The growth is coming from across our footprint in Florida and Alabama and Georgia and South Carolina. I think as you recall we moved Kevin Howard to lead that Group and it's been a change that has continued to build momentum as the year has progressed and they put on a really strong fourth quarter.

And it's not in any one industry, it's across many different industries. We're seeing it both on the line of credit side and unfunded commitments that was still growing at a commensurate rate. But also on the funded debt that's coming on. So we're optimistic that that will continue not just from taking share from competitors, but from the continued growth that we have from the bankers that Kessel mentioned we brought on in the second half of the year.

And we've also brought on the structured lending division, which is a new business for us that saw growth in the third and fourth quarter. And we're very optimistic that that will continue into 2020 and into 2021. The good news is when you look at what we're doing, we're getting a tremendous amount of growth, not only on the loan side, but the really nice data point is that we're getting treasury and operating accounts with a lot of those customers and we've talked a lot about our upgrade in Treasury & Payments Solutions.

But when you look at the number of implementations that we had in 2019 versus 2018, we're up 30%. So that means we're putting 30% more solutions in the hands of our customers. So we're very optimistic to see that growth continue but we're most excited about the new relationships that we're able to garner.

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

Okay. So that kind of dovetails with the comments around kind of balance deposit growth as well. It seems like you'll be getting some traction on the DDA side, which you got this quarter, but seems like that will continue into next year. Correct?

Kevin Blair -- President and Chief Operating Officer

Yeah. So average DDA was up for the quarter. When you look at the number of accounts, we grew on the consumer checking account front as well. So that was exciting to see and we're starting to get greater traction as it relates to operating accounts for some of these commercial relationships and that's going to be a big area of focus for us in 2020 to make sure that we get commercial deposit growth.

Obviously, that's a very sticky deposit and it's one that comes on the lower end of the call spectrum as well. So that will be something that we're very focused on and we're adding new treasury resources every day to make sure that we cover that market.

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

Alright, very helpful. Maybe just one follow-up question. I'm going to go back to expenses. Can you just give a little bit more color on the third-party that you've engaged, maybe who it is? And then you know that line item has been around $20 million. Should we expect that to kind of grow as we move into next year as you kind of work through some of these efforts? Thanks.

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Yeah, this is Jamie. We have been working with Boston Consulting Group and they have been diving into many of our businesses and our products. And you're right, we will see expenses associated with those as we go through 2020 and we will be clear about the impact of those to NIE as we go forward.

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

Alright, thanks for taking my questions.

Operator

Thank you. And the next question comes from Ken Zerbe with Morgan Stanley.

Ken Zerbe -- Morgan Stanley -- Analyst

Great, thanks. I'll try not ask another question about expenses, I figure you've given enough brief about that for the rest of the day.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thank you.

Ken Zerbe -- Morgan Stanley -- Analyst

But let's talk about the payback, I guess, from those expenses. So like -- when you think about -- like, I get that you hired a bunch of people and I see why you're growing assets this quarter or sorry in 2020, the 4% to 7% and you got 3% to 6% fee growth. My question is like once those people and all these initiatives are done and up and running, does that imply that asset growth should be higher than the 4% to 7% and fee growth should be higher than the 3% to 6% like not this year, but into 2021?

Kevin Blair -- President and Chief Operating Officer

I'll take that, Ken. So it's obviously each position that we hire, we have a calculated ROI, NPV and payback period. So as Kessel mentioned earlier, we know that our middle market bankers typically are less than eight months in terms of a payback. And when you go to some of the wealth positions, it takes a year or so for those earn-backs.

But yes, we look at those trailing revenue benefits and over time -- you'll pick up some of the operating leverage for these new positions because the expense will stay flat and the revenue continues to grow. So all else held constant on those positions, yes, the revenue increases while the expenses stay flat.

When you think about the 2020 guidance for next year and what we did this year, we were up 10.6% in fee income this year. That was aided by our new hires. If you look at some of those businesses that we added resources this year, you'll see another 10% growth next year in those same businesses.

We just have some anchors as it relates to fee income on a year-over-year basis. That's why you see a mid-single digit number for businesses like mortgage where seasonally it will be a little lower based on where we see interest rates. Capital markets where this year we had a record year. So it's hard to continue to grow that at 10%. But those businesses that we've invested in will continue to grow at a double-digit pace and over time will become more efficient.

Ken Zerbe -- Morgan Stanley -- Analyst

Got it. Okay. That helps. And then, I guess the other question, just in terms of provision expense, I completely understand that CECL is going to drive greater volatility in your provision expense. But you did mention it was going to be elevated. Is it right to think about if you are adding, say 10 basis points or about 15% to your reserve ratio, your allowance that your provision expense should also be, call it, roughly 15% higher, all things equal, of course. So instead of the 24% you did this quarter, it would be something like 28. I mean is that the right logic to think about going forward?

Kevin Blair -- President and Chief Operating Officer

I think the right way to think about it going forward would be, just to put an expansion of the allowance for credit losses to the year-ending loan balance and see what the provision build would be required to get there and the allowance build. Yeah, it's a little bit different answer than what you're saying.

Ken Zerbe -- Morgan Stanley -- Analyst

It is. Oh OK, I guess I'll have to think about that a little bit more. But OK, I'm good. Thank you very much.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thanks Ken.

Operator

Thank you. And now online we have Brad Milsaps with Piper Sandler.

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Hey, good morning.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Good morning, Brad.

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Just wanted to follow up on Ken's CECL questions. If my math is right, Looks like you might be targeting a reserve around 120 [Phonetic] by the end of the -- by the end of the year. If that's in fact correct, did that also account for any payoffs you get on the acquired book, you know some of that discount accreting back through the provision, does that also take into account for that or is that pretty much where you think you end up, no matter what?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

We still feel confident that day one impact of the 40% to 60% and then we expect some slight expansion in the allowance over the course of the year. As you're well aware, the purchase accounting impact gets wrapped up into CCEL in 2020.

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Okay. And then secondly, just sticking with accretion income. On the deposit side, I think you had the $11 million mark come through again this quarter. My understanding is that obviously goes away this year. How quickly do you think you can sort of earn that back, so to speak, through reductions in funding costs? You had a nice reduction this quarter in interest bearing deposit costs of around 15 basis points or so. Do you think it takes you a couple of quarters to sort of recapture that 11 million, so to speak, or is it longer than that?

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Yeah, Ken [Phonetic] you're right. The benefit of PAA on the policy goes away at year-end and we expect some opportunity in deposit repricing in the first quarter. And so we expect to see some decline there. But the benefit of remixing is largely complete for us.

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Okay, great. Thank you.

Operator

Thank you. And the next question comes from Steven Alexopoulos with JP Morgan.

Steven Alexopoulos -- JP Morgan -- Analyst

Hey, good morning everybody.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Good morning.

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Good morning, Steve.

Steven Alexopoulos -- JP Morgan -- Analyst

I want to first go back to your response to Ebrahim's question, do you plan to manage full year expenses to the revenue outcome and deliver positive operating leverage in 2020 on a full year basis?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

No, we have revenue -- so revenue headwinds include the PAA impact that Kevin mentioned, $90 million. So we expect NII just to be marginally up on the year, we had 0% to 3% and then we have strong growth in fee revenue and you see our guidance. And so that does not lead to positive operating leverage for the full year.

Steven Alexopoulos -- JP Morgan -- Analyst

Okay, that's clear. Thank you. And then on the loan growth, so when I look at Florida Community, they were routinely doing $400 million to $500 million per quarter of growth before the sale. And I think you said you did $350 million loan growth in total from them in 2019. Why did their loan growth fall by so much?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

It's a great question Steven. So it was less about production when you go back and look at what they would have produced in 2018 and you compare it to their funded production in 2019, it was only off by a couple of hundred million dollars. So what we were pleased to see is that the level of production continued. What changed was the level of pay-offs and pay-downs and it had very little to do with customer attrition. It had to do with the maturation of the portfolio and the fact that they actually are seeing the type of churn that you would see in a portfolio as it matures.

As you recall, they were producing somewhere around $400 million to $500 million worth of funded growth every quarter and they were growing $350 million to $400 million. So there wasn't a lot of pay-offs and pay-downs as the maturity of their book has continued to increase, they're starting to see some of that churn. So that's really the difference.

Steven Alexopoulos -- JP Morgan -- Analyst

Okay. So you're saying the originations have remained consistent?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Very consistent and very strong. And if you look at what they did in the fourth quarter, it was a very high watermark for them. It was a very, very strong quarter for the legacy FCB team.

Steven Alexopoulos -- JP Morgan -- Analyst

Got you. Okay, thanks for all the color.

Operator

Thank you. And next is Jared Shaw with Wells Fargo Securities.

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Hi Jared.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Hey Jared.

Jared Shaw -- Wells Fargo Securities -- Analyst

Hi, thank you. Just circling back on the provision, I guess, can you give a little color on what drove the -- I'm sorry, the allowance -- the allowance build this quarter given the sort of backdrop of stable credit quality.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Yeah. We have spoken about this a little bit before, but it's really -- it has to do with two things. First is just about loan growth in aggregate. And second is the high level of paydowns. Kevin mentioned the strong production in the fourth quarter, but we also still see elevated pay downs and when we have pay downs in the book -- in the FCB book, we don't get the benefit of a provision or a release.

And so even though we had loan growth of $800 million. If you were to say, what was the net loan growth of loans that we have provision against? It'd be much higher where we did not have provisioning and so that's what leads to that increase. So basically we have normal loan growth and then we have the growth or the pay-offs of ones where we did not have a provision against them and then they're offsetting our renewed and new loans.

Jared Shaw -- Wells Fargo Securities -- Analyst

Okay. That's helpful. Thanks. And then just looking at the NII, I heard -- obviously hear your comments on the margin. But when you look at NII and the strong momentum you said going into first quarter as well as the incremental benefit from that third party servicing renegotiation, should we expect actually quarterly to see NII may be stronger in the first quarter and then trickling down or I guess how should we be looking at NII through the year?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Yeah. You know let me just speak to it in rate terms. You know, we expect in the first quarter to see more of the impact of the negative -- more of a negative impact on loan yields. And so we'll see -- we're expecting a decline in 2020 of somewhere between 10 basis points and 15 basis points in loan yield for the year, but most of that will happen in the first quarter or a decent percentage will happen in the first quarter. And again, it's that same impact that I talked about, about both the recent loan growth as well as the October rate move and the full quarter impact of that.

Jared Shaw -- Wells Fargo Securities -- Analyst

Okay, thank you.

Operator

Thank you. And the next question comes from Christopher Marinac with Janney Montgomery Scott.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Hey, thanks. Just a quick one on the fee income guidance for the year, what does it take to get to the upper end of the range and are there scenarios that that could actually be greater?

Kevin Blair -- President and Chief Operating Officer

So for us it's some of it will do -- will have to do with the external market in terms of interest rates and what happens with the equity markets. Those are the variables that we look at. We've obviously had a lot of resources on the fiduciary and brokerage side. So as the market flows, we'll be able to ebb and flow within that range.

Also with mortgage, if you look at most of our business as I'd mentioned, we expect to see strong growth in service charges year-over-year based on our investments in treasury. We expect to see double-digit growth in our fiduciary business again.

The two businesses that represent a bit of a headwind for us, as I mentioned were mortgage and capital markets, for different reasons. Mortgage because of interest rates and capital markets just because of the elevated levels that we had this year.

So, our success in moving to the high end of the range, we'll have some of those external factors. But quite frankly, it will deal with our productivity internally and how we can continue to generate higher levels of production within those businesses.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Got it. Thanks very much, Kevin, and thanks for all the discussion on the expenses this morning, I appreciate it.

Kevin Blair -- President and Chief Operating Officer

Thanks, Chris.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Thanks, Chris.

Operator

Thank you. And next on line is Garrett Holland with Baird.

Garrett Holland -- Robert W. Baird & Co. -- Analyst

Thanks and good morning. Just had a quick follow-up for you. I heard you on the efficiency ratio targeting low-50s, but could you provide some more detail on the updated top quartile profitability metrics you're targeting in this type of interest rate environment and what's a realistic timeframe for getting there?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Yeah, we are -- we look at ROA, ROATCE and efficiency ratio as we think about how do we perform versus peers and you know we believe in our strategies. We believe in the work we're doing this year on these transformation efforts to get to -- to get back to the top quartile. And so we think that we have a lot of momentum and a lot of opportunity here to improve that performance. We're not ready to give guidance on you really our forecast longer term where we shake out on that, but we will have more on that in the future.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

But Garrett, just -- in terms of timeframe, we look at long-term targets of two to three years. I think you go out past that it's harder to forecast and to Jaime's point, the variable there that has made the industry change their expectations is just what interest rates are going to do and it's hard to forecast that out two to three years. But our commitment is just to be in the high -- in the top quartile among our peer set.

Garrett Holland -- Robert W. Baird & Co. -- Analyst

That's helpful. I appreciate the detail.

Operator

Thank you. And next we have Steven Duong with RBC Capital.

Steven Duong -- RBC Capital -- Analyst

Hey, good morning guys.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Good morning.

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Good morning, Steven.

Steven Duong -- RBC Capital -- Analyst

Just on -- you mentioned the competition in the owner occupied portfolio. Was that the same tale on the multifamily side? And what other segments are you seeing a high level of competition?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Well, look, there is not a single asset class that we serve that doesn't have competition, Steven. So, it's across the board. Now the owner-occupied, there are a lot of smaller banks doing rate promotions where they are offering longer tenure, lower fixed rate loans. And again, within our business model, we're not going to chase business that doesn't make sense for us financially. So we're going to let some of that business leave us if it doesn't have the minimum profitability hurdle. So I think that's what you're seeing in some of the owner occupied side.

On the multifamily, I think that's much more of just the stabilization of properties that are moving off balance sheet. There is a higher level of construction there. And so as those reach maturity and move to the permanent market, they're leaving our balance sheet. But we're still producing on multifamily and like all the other asset classes, we're winning our fair share. It's just -- it's going to ebb and flow based on some of the maturation that are in our book.

Steven Duong -- RBC Capital -- Analyst

Got it. Appreciate the color on that. And then just last one, can you just remind us how much in your CD book you're expecting to have reprice for the quarter and what's the rate on that?

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

So right now, we would look at the maturities in the first quarter of the year, somewhere around $800 million in CDs. The current portfolio was a little over 2%. If you go back and look at this quarter all of the maturities were at 2.06% and we repriced at 1.98%. So I think based on a flat rate environment, you would see a similar movement in the first quarter with the maturities being a little over 2% and where we're renewing and where we're booking them in the high 1.90%s.

Steven Duong -- RBC Capital -- Analyst

Got it. Appreciate it. Thank you.

Operator

Thank you. And that does conclude the question and answer session. So I would like to return the floor to Kessel Stelling for any closing remarks.

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Alright. Well, thank you, operator, and first thank you to all of you who participated on the call today. We appreciate your interest in our Company, certainly some of the questions today might require follow up, and as usual, our team is available throughout the day and certainly next week to give you any follow-up data points if we weren't clear today.

For those of you who are shareholders on the call, thanks for your continued investment in our Company. But I really want to conclude by thanking our Synovus team for the great year in 2019, for the way they really did finish the year so strong and for the energy they're already pouring into 2020 to find ways to generate new revenue, additional efficiency and really deliver a differentiated customer experience, all with the eye on creating long-term shareholder value.

So a big thank you to the team. The executive team looks forward to giving you more color and more updates on our transformation efforts no later than the next earnings call, but if possible toward the end of the quarter, in the appropriate public forum, we would do that as well.

So, thank you so much for your attention today. Hope you all have a great weekend. And we look forward to talking with you soon.

Operator

[Operator Closing Remarks]

Duration: 69 minutes

Call participants:

Kevin Brown -- Senior Director, Investor Relations

Kessel D. Stelling Jr. -- Chairman & Chief Executive Officer

Andrew Jamie Gregory Jr. -- Executive Vice President & Chief Financial Officer

Kevin Blair -- President and Chief Operating Officer

Robert Warren Derrick -- Executive Vice President & Chief Credit Officer

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Tyler Stafford -- Stephens Inc. -- Analyst

Brady Gailey -- Keefe, Bruyette, & Woods, Inc. -- Analyst

Jennifer Demba -- SunTrust Robinson Humphreys, Inc. -- Analyst

Kevin Fitzsimmons -- D.A. Davidson -- Analyst

John Pancari -- Evercore ISI -- Analyst

Michael Rose -- Raymond James & Associates, Inc. -- Analyst

Ken Zerbe -- Morgan Stanley -- Analyst

Brad Milsaps -- Piper Sandler & Co. -- Analyst

Steven Alexopoulos -- JP Morgan -- Analyst

Jared Shaw -- Wells Fargo Securities -- Analyst

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Garrett Holland -- Robert W. Baird & Co. -- Analyst

Steven Duong -- RBC Capital -- Analyst

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