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Synovus Financial Corp  (NYSE:SNV)
Q4 2018 Earnings Conference Call
Jan. 15, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Synovus Financial Fourth Quarter 2018 Results Conference Call. All participants will been in listen-only mode. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Steve Adams, Senior Director of Investor Relations. Mr. Adams, please go ahead.

Steve Adams -- Senior Director of Investor Relations

Thank you Anita, and 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 any 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 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. Due to the number of callers this morning, we do ask that you initially limit your time to two questions. If we have more time available after everyone's initial questions, we'll reopen the queue for follow-up.

Thank you. And I'll now turn the call up over to our Chairman and CEO, Kessel Stelling.

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

Thank you, Steve, and good morning to everyone. Welcome to our third -- fourth quarter earnings call. I'm joined this morning by our Synovus leadership team. As usual, I'll walk through the earnings presentation and will open the line for questions. I'll start with the earnings deck on Slide 3, which provides a summary of our fourth quarter results.

Diluted EPS was $0.87 for the quarter. On an adjusted basis diluted EPS was $0.92, down 3.1% from the previous quarter and up 28.1% from the same period a year ago. The adjustments this quarter to reported EPS are largely due to merger-related expenses, the $3.4 million associated with the Florida Community Bank merger and a $1.6 million decrease in the fair value of private equity investments net of tax. Fourth quarter results were positively impacted by a broad-based loan growth, strong growth in deposits due in part to seasonal inflows of state, county, and municipal deposits and an additional 3 basis points of margin expansion.

However, these benefits were offset by higher effective tax rate during the quarter, due primarily to refinements of year-end provision estimates. For the full year, our effective tax rate was 21.7%, in line with the revised range we provided last quarter. Return on average assets during the quarter was 1.29% on a reported basis. On an adjusted basis, return on average assets was 1.36%, down 11 basis points sequentially and up 24 basis points from a year ago.

Total adjusted revenues increased 8.5% versus the same period last year, while adjusted expenses increased 2.5%. Though we experienced a slight increase in our expense run rate due to seasonality in the fourth quarter, we remain very focused on managing expenses in line with our objective to maintain strong positive operating leverage. On the balance sheet side, average loans for the quarter grew $303.7 million or 4.8% sequentially and just over $1 billion or 4.1% versus a year ago. On the other side of the balance sheet, average deposits grew $532.8 million or 8% sequentially and $634 million or 2.4% versus a year ago. Total deposits in the prior year -- prior quarter were elevated due to broker deposits received as part of the transaction with Cabela's and World's Foremost Bank. We continue to benefit from a relatively stable credit environment with a nonperforming assets ratio improving further to 0.44%, a 2 basis point improvement from the previous quarter and a 9 basis point improvement from a year ago.

Lastly, in terms of capital management and returns, we continue to see improvement in overall capital efficiency with an adjusted ROE of 14.99%, up 303 basis points from a year ago. Adjusted return on average tangible common equity improved to 15.36%, up 310 basis points from a year ago.

Moving to Slide 4. Total loans of $26 billion, grew $369.5 million sequentially or 5.7% annualized and 4.7% from a year ago. We were pleased to see steady loan growth again this quarter with C&I up $278 million and consumer loans up $240 million, somewhat offset by commercial real estate loans, which declined $148 million. Declines in the CRE were spread across multi-family, shopping center hotel and non-strategic land and development portfolios.

C&I loan growth was driven primarily by our general commercial banking teams across the footprint and was aided somewhat by seasonal growth and line utilization. Additionally, our interest premium finance business Global One grew $80 million during the fourth quarter and our asset-based lending vertical grew $41 million.

Similar to last quarter, our consumer portfolio experienced growth across all categories, including mortgage HELOC, lending partnerships and credit card. From a geographic standpoint, our metro markets continue to drive a large share of overall loan growth. Total average loans grew $304 million sequentially. Compared to the same quarter a year ago average loans grew $1.01 billion or 4.1%. We continue to be pleased with the balanced loan composition and diversification of our balance sheet. C&I loans now represent 49% of total loans with consumer loans increasing to 26% of the portfolio, while CRE loans have now declined to 25% of outstanding balances. We continue to be selective in our approach to CRE, monitoring our markets and asset classes very closely and maintaining very strong discipline around price and structure.

Moving to Slide 5 and deposits. Total average deposits of $26.92 billion, increased $533 million sequentially, and have increased $634 million or 2.4% versus a year ago. As I mentioned earlier, the year-over-year growth was muted due to the expected decline in broker deposits that were acquired in the fourth quarter 2017 in a transaction with World's Foremost Bank. Today just under $400 million or one-third of the original $1.1 billion broker deposits associated with World's Foremost Bank had matured. As a result, average broker deposits declined to just 6% of total deposits in the fourth quarter of 2018.

Excluding broker deposits, average deposits increased $681 million versus the third quarter of 2018 with strong growth in non-interest bearing deposits up $342.8 million from the prior quarter, as well as $114 billion growth in money market accounts and $205 million in time deposits. While a significant portion of the growth in non-interest bearing deposits were due to seasonal state, county municipal inflows, growth in other non-interest bearing continues to be strong resulting from account growth as well as balance augmentation. As expected, we experienced seasonal inflows of state and county municipal deposits during the quarter of approximately $313 million. We expect these deposits will return to more normalized levels during the first quarter of 2019.

Moving to Slide 6. Net interest income was $298 million, increasing $6.3 million or 2.2% versus the previous quarter. Compared to the same period a year ago, net interest income increased $28 million or 10.5%. The net interest margin for the quarter was 3.92% up an other 3 basis points from the previous quarter, and up 27 basis points from a year ago.

The net interest margin improvement for the quarter was driven by 12 basis point increase in loan yields, due to the September and December short term rate hikes and resulting higher average LIBOR rate. The increase in cost of funds during the fourth quarter was consistent with the third quarter, as the effective cost of funds increased 8 basis points sequentially to 81 basis points, and the cost of interest bearing deposits increased 14 basis points this quarter. Deposit betas actually declined this quarter with an incremental interest bearing deposit beta of 52% compared to 67% last quarter. Additionally, our cycle to-date beta of only 23% continues to demonstrate the value of our strong core deposit franchise.

Turning to Slide 7 and fee income. Total non-interest income for the quarter was $68 million, down $3.7 million versus the prior quarter and $1.4 million versus the same period a year ago. As I mentioned earlier, non-interest income in the quarter included a decrease in the fair value of private equity investments of $2.1 million. Adjusted non-interest income of $70.1 million, decreased $1.2 million versus prior quarter and increased $822,000 or 1.2% versus the same period a year ago.

Core banking fees of $36.8 million, increased $1.1 million sequentially and were up $1.2 million or 3.5 % compared to the prior year period. The improvement in core banking fees quarter-over-quarter was largely due to better card fee income as well as SBA gains on sale. Fiduciary, asset management, brokerage and interest revenues of $24.6 million, increased slightly on a sequential basis and increased $2.8 million or 13% from a year ago. Assets under management declined in the fourth quarter due to the decline in equity markets, but due to account growth is up slightly versus the same period last year. That said, for the full-year, revenues associated with these businesses increased 13.7% through our focused talent expansion efforts and we look forward to continued progress on these goals in 2019.

Mortgage revenues of $3.8 million were somewhat soft in the fourth quarter, declining $1.5 million sequentially as result of lower secondary market production, which was due to seasonality and continued pressure on refinance activity.

Turning to Slide 8. Total non-interest expense of $209.9 million decreased $10.4 million or 4.7% sequentially and decreased $16.6 million or 7.3% versus the same period a year ago. The year-over-year decline as a result of a $23 million pre-tax loss from early redemption of senior notes that was incurred in the fourth quarter last year is part of our balance sheet restructuring actions undertaken related to the Cabela's transaction. Also as I noted earlier, the current quarter included FCB merger-related expenses of $3.4 million. Adjusted non-interest expense of $206.1 million, increased $4.5 million or 2.2% sequentially and increased $5 million or 2.5% from a year ago.

The sequential increase in expenses is a result of a $3.1 million increase in advertising expenses, which were seasonally lower in the previous quarter and a $3 million increase in consulting fees incurred as we prepared to launch our new consumer online and mobile platform known as My Synovus in the first quarter, we're very excited about that. These increases were partially offset by a $1.7 million reduction in FDIC expense, resulting from elimination of the DIF surcharge. We're pleased this year (technical difficulty) which was 55.98% in the fourth quarter and 56.33% for the full year improving 354 basis points from 2017 and exceeding our long-term target of 57%.

Turning to Slide 9. You'll see continued excellent performance on our credit quality measures. The NPA and NPL ratios both improved declining to 44 basis points and 41 basis points, respectively. Past due to greater than 30 days decline at 22 points, while past due is greater than 90 days were 1 basis point. Net charge-offs ended the quarter at 20 basis points, for the full year charge-offs also came in at 20 basis points which was right in the middle of our stated range of 15 to 25 basis points.

The allowance for loan losses decline to modest $900,000 from the previous quarter with the ratio ending at 97 basis points, down 1 basis point from the third quarter. However, the coverage ratios of reserve to NPL remained strong improving slightly from the previous quarter to 235% or 298% excluding impaired loans for which the expected reserve has been charged off.

Before I lead to credit slide, I want to take a couple of minutes to reflect on the significant progress our company has made over the past few years, as we have completely rebuilt our balance sheet structure and greatly strengthened our credit profile and reiterate our commitment to this conservative approach to credit as we move into a more uncertain 2019.

Post crisis, the CRE book has declined from 46% to 25% total loans with C&I increasing to 49% and consumer increasing to 26%. In addition to reducing our CRE exposure significantly, the mix within CRE has shifted with investment properties now comprising 85% of the CRE portfolio. These loans have been originated under a conservative underwriting policy with appropriate loan to value and debt service requirements in place for each property type.

Residential C&D and land which once comprise almost 25% of the entire loan book now comprises only 1.7% of total loans. This is now considered a non-strategic portfolio with only a small volume of non-speculative loans made to well established homebuilders under very strict underwriting guidelines. We adhere a very comprehensive concentration policy where we limit our exposure to any asset class or individual borrower. Our appetite for each property type and industry is determined by senior credit leadership based on real time market intelligence and approve by our Board level risk committee.

Additionally, we rigorously stress test our portfolio and results showing that even a severely adverse economic scenario would result in significantly lower credit losses than during the last recession with capital level remaining adequate throughout the period. This is a direct result of our efforts since the last recession to restructure and derisk the balance sheet.

As I said earlier, while the future economic outlook is less certain, we believe, we're well positioned from a credit quality standpoint, regardless of the timing or the severity of the next downturn.

Moving on to Slide 10. To talk about capital, where you'll see our ratios generally improved for the quarter, all ratios remain well in excess of regulatory minimums and are at the upper end of our internal operating ranges. Our CET1 ratio increased to 10.04% during the quarter. In December, we announced an additional common share repurchase authorization of $25 million, that was completed in the same month. Together with a $150 million our authorization announced in the first quarter of 2018 and completed in October, our total common share repurchases in 2018 were $175 million. This resulted in a reduction of 3.7 million shares, a 3.1% reduction in our share count. In the aggregate, we returned $281 million to common shareholders through a combination of share repurchases and common stock dividends in 2018.

Just to give you a quick summary of the year, Slide 11 highlights a number of key metrics. This show the broad-based financial improvement that our team achieved in 2018. So I'll hit those very quickly. Generally, our financial results were in line with our 2018 guidance. We're well ahead of the long-term targets for EPS growth, ROA, ROTCE and the adjusted efficiency ratio that we established just a year ago. For the full year adjusted EPS grew 43.8%, adjusted, ROA improved to 1.41%, return on average tangible common equity improved to 15.66%, and the adjusted efficiency ratio improved to 56.33%.

Additionally, we achieve further growth and diversification of our balance sheet, we maintain strong credit quality, we enhanced our capital position and executing on a truly strategic merger with FCB, that broadens our reach into one of the most compelling markets in the Southeast. In short, our team delivered on our objectives in 2018, and we have a high degree of confidence as we move into 2019.

Before I give a brief merger update, I'd like to take just a minute and give an overview of FCB's fourth quarter financial performance with a summary of those results provided on Slide 18 of the appendix. We saw continued strong fundamental performance for the quarter with net income of $41.8 million and EPS of $0.87 a share, down $0.02 versus the third quarter, primarily due to increased provision. Loan growth was sound during the quarter with average due loan growth of over $300 million during the quarter, compared to loan growth lower due to elevated CRE pay-offs late in the quarter.

Efficiency of operations continue to be a point of emphasis with non-interest expense of third (technical difficulty) declining $4.1 million in the third quarter, resulting in an efficiency ratio of 36.22%. Core down was 3.15% compared to 3.18% to prior quarter, as a yield on earning assets increased 11 basis points, while the effective cost of funds increased 14 basis points. We continue to be very pleased with the quality of the loan portfolio. The quarter did include $10.7 million in provision expense associated with the charge-off of a syndicated C&I loan, which FCB had previously identified. The loan was incorporated into our due diligence process as it was on non-accrual status during our review. The charge-off this quarter represents for the migration on the credit. We believe this fully covers the exposure. This one-off credit does not represent a systemic pattern as we've stated before syndications represent about 3 % of the FCB total loan portfolio.

The overall credit metrics continue to be strong with NPA is of 25 basis points, NPLs at 11 basis points and 60-day delinquency also at 11 basis points. And with the aforementioned charge-off, net charge-offs were only 14 basis points for the year. Kevin Howard will give a little more color on credit for the combined company later on, but again, we've been very pleased both with the performance of the existing book of FCB and certainly the loans we've seen originated since we've begun our association. And Kevin again will cover more on that later.

So we've mentioned the FCB integration a number of times, but before we talk about our 2019 outlook, I wanted to just offer a few comments about the success of our legal day 1. conversion. And why we're so confident as we prepare for the full conversion of our systems and branding by mid-2019. We were very pleased with the efficiency of the regulatory approval process and our own internal planning and organization, which allowed us to close on January 1, 2019, just 161 days after announcing the transaction.

Our top priority in preparing to legal day 1 was carrying for the FCB team members and their customers. We took important steps early in the process to assess talent and offer competitive packages for those we wanted to retain. We also began introducing our culture, we regularly share information and offer training that enable a smooth transition into our team on Day 1. We're very pleased with the employee retention rate to-date, while also remaining aligned with our efficiency targets including headcount related expect savings. We now expect merger related cost savings in 2019 to exceed $25 million well ahead of our original 2019 estimate of $20 million.

We we're also pleased with customer outrage and response so far on both account attrition and call volume into our customer care center have been low and we continue to equip our Florida team to confidently promote the long-term customer benefits of our combined bank to actively promote our brand in that region through multiple channels and to take steps to enhance the customer experience during the transition.

Finally, as we prepared for legal day 1, we were already planning for full brand and systems conversion, which we expect to complete by mid-year. The timeline on the slide provides a very high level view of key activities and when they occur over the coming months, our team is energized around the even more complex work ahead ready to move us to the next several months. So we're able to fully execute as one team serving customers in our newest high growth markets.

Movie to Slide 13 and beginning to look forward. You'll see that these five key opportunities we've outlined for 2019 are in some ways very similar to those that enable our company to generate significant financial improvement over the last few years. The mid-single-digit growth profile we've demonstrated historically will be enhanced by FCB, strong middle market banking award culture that has characterized both institutions.

In addition to growing our balance sheet interest income, our expanded talent base and wealth management, insurance and brokerage will further work to diversify our sources of revenue, which makes our business more resilient over the long term. The work we've done to rebuild our consumer product offering will be invaluable in deepening our share of wallet with existing customers and acquiring new ones. As we grow revenue, ongoing rationalization of our core expense base is just a way right. This will continue to be the case in 2019 and just as we have in the last few years, you should expect to see us maintain positive operating leverage of 1.5 to 2 times.

As these financial results are delivered, our expected earnings and capital optimization actions in 2019 will lead to an outsized opportunity to return excess capital to our shareholders.

And now that we've completed the first phase of the merger, we can begin to deliver on the cost savings associated with the acquisition, again, expected to exceed $25 million in the first year. More importantly though, we're eager to leverage the complementary strengths of our platforms and begin generating revenue synergies by deploying a best-in-class set of products, services and capabilities to our collective customers.

So with that backdrop, I'd like to take you to Slide 14, which will give you a view into our 2019 guidance. Then I'll talk more specifically about our capital plans and how we anticipate these results tying into these long range objectives. We expect 2019 to be another solid year from a balance sheet perspective. We expect loan and deposit growth of 5.5% to 7.5% on a period end basis with deposits beta supports our loan growth, while maintaining an appropriate loan to deposit ratio consistent with under its operating range of 95% to 97%.

This expected growth is measure off of a pro forma combined baseline of $35.37 billion in loans and $37.6 billion on deposits based on preliminary consolidation of both balance sheets.

We also expect revenue growth of 5.5% to 7.5% 2019 in line with our balance sheet growth expectation. This outlook assumes no short term rate hikes in 2019 and we expect the post merger adjusted NIM to compress slightly as a result of the flatness of the current yield curve in our plans to optimize the capital stack.

We also expect adjusted non-interest expense in the range of 2% to 4% net of synergies tied with the FCB acquisition. As I indicated earlier, we fully expect to manage ongoing expenses in a prudent way, while also realizing merger cost savings in an accelerated manner throughout the year. Our effective tax rate is expected to be 23% to 24% and we anticipate a net charge-off ratio of 15 to 20 basis points, which incorporates the impact of large acquired loan portfolio as well as an expectation of slight normalization of charge-offs in 2019 relative to the historically low levels in 2018.

And finally, our capital actions for 2019 will include a 20% increase in our common dividend to a $1.20 per share and expected share repurchase of $300 million to $350 million, which we largely supported by capital optimization strategies including expected capacity to issue Tier 2 instruments.

On Slide 15, you'll see some additional detail related to the 2019 capital actions, I just mentioned, which collectively are expected to return approximately $500 million to common shareholders over the next four quarters. I'll walk through the components of this plan, which include both the larger common dividend and an increase in common share repurchases. As we've shared many times before, our capital prioritization strategy always begins with funding organic growth and investing an appropriate level of capital back into the business followed by pursuit of competitive dividend, optimizing the capital stack and then finally evaluating the risk return trade-off between share repurchase and M&A.

We're pleased to announce that our Board of Directors has approved a 20% increase in the common stock dividend for 2019 to $0.30 per share with a quarterly dividend payable effective with the dividend payable in April of 2019.

As a result of our higher share count after the issuance of stock to acquire FCB, the dollar in fact on an annual basis associated with the dividend is $190 million to $200 million, including the current increase, the dividend growth for Synovus has been 30% on a compounded basis, since 2014. In 2019, we'll also have an opportunity to optimize combined capital base of Synovus after merging with FCB. The chart at bottom left of the slide reflects our pro forma capital ratios post merger and reveals that one of our total risk-based capital ratio will begin the year near the low end of our operating range we would have the capacity in our other capital ratios to issue $300 million to $350 million of Tier 2 qualifying instruments for the purpose of repurchasing common stock, while remaining well within our desired operating range.

On Slide 16, as we've said over the last few months that we provide updated long-term targets having exceeded or on track to exceed all of our previously stated goals included 20% compounded EPS growth to 1.35% ROA, 15% return on tangible to common equity and an adjusted efficiency ratio below 57%. Further by enhancing our growth and profitability profile for the merger with FCB, we believe, we're on track to deliver top quartile financial performance. So we're resetting our long-term targets accordingly. As you'll see on Slide 16, our team has defined key areas of focus around which we're building core strategies that will enhance the customer experience and solidify our value proposition, of course, by doing so, we'll continually elevate our financial performance in the key areas of growth, profitability and efficiency. Over the three-year time horizon, we've divined from meeting these targets, we believe will reach in our way at 1.45% and ROTCE of 17% and maintain a tangible efficiency ratio of around 50%.

So before we open the line for questions, I just want to reiterate, how proud I'm of our combined teams for their contributions to a landmark 2018. A year that included a historic transition to a single brand among other milestone accomplishments. As evidenced the priorities and opportunities we outlined during our call today, you can see 2019 is already fast and furiously under way for our team. We're very aware of the challenges ahead, but that's really when our team is at its best as we've demonstrated time and time again. In addition to our intense focus on successfully completing the FCB integration and launching our new My Synovus digital banking experience through the first half of the year, our team is also aggressively positioning talent, building synergies through our new go-to-market delivery model announced late last year.

As you've already heard, our new Chief Operating Officer is Kevin Blair and under his model, we'll combine our revenue generating businesses, our technology and operations team for what we will believe will be much better alignment and execution of our growth strategy. Kevin and his team which includes Kevin Howard, who as you know is transitioning out of his role as Chief Credit Officer to lead our newly combined Wholesale Bank Team, Wayne Akins who's expanding his role from Retail Executive to Chief Community Banking Officer leading a combined retail community bank team, Bart Singleton who continues serving as our Financial Management Services President and and EVP and Zack Bishop new to our team, our iT and Operations Executive, all of whom who have made significant changes and reporting and named key talent to new or expanded roles in organization, we're very excited about the way this team is going to market. You'll hear again from Kevin today in his last official day, as I spoke to before our credit team and we'll have a search as we have said before under way today for a new CFO. We really do believe this new models in a foster more full effective approach we're tracking way new business especially as we integrate the newest Florida team members into our relationship centered sales and service culture.

And then finally, as Kevin Kevin Howard transitions with his new role, we announced just yesterday, Bob Derrick is our new Chief Credit Officer. Bob with us today, we won't have him speaking on the call. We're really excited about Bob and his role. He is not new to credit. He's not new to our company. He's got more than 15 years in various credit supervision roles within Synovus most recently as Chief Credit Officer of the entire community bank. Bob's very natural choice to see Kevin Howard, we appreciate his willingness to relocate to our headquarters here in Columbus and to lead this critical function for our company again. As I mentioned earlier, we have an active search under way for our new CFO. We believe we'll have that talent in place soon.

With that, we look forward to reporting our progress to you throughout the year. Thank you for continued interest in our company. Operator, we'll now open the floor to questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) The first question today comes from Ken Zerbe with Morgan Stanley. Please go ahead.

Ken Zerbe -- Morgan Stanley. -- Analyst

Great. Good morning.

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

Good morning, Ken.

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Good morning, Ken.

Ken Zerbe -- Morgan Stanley. -- Analyst

So I'll just start off on the buyback. So obviously, it's good to see the higher buyback amount. Could you just talk a little bit about the timing of how those -- the $300 million to $350 million could progress in terms of the buybacks over the course of the year, but also throw in the Tier 2 debt. Do you need to -- is it going to be a 1:1 issuance? And what's the timing of when that might be issued? Thanks

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Okay. So Ken, obviously, the way in which we look at share repurchases, they're situational based on the stock price, our liquidity position, the level of organic growth. So you may want to model share repurchases happening across the entire 4 quarters. But as it relates to the Tier 2 issuance or the potential Tier 2 issuance, we're constantly looking at the markets to understand when they're constructive. I would suggest that we would look to do -- if we were to go to market, we would look at benchmark-type transactions. So you could look at a site that would be fairly correlated to the level of share repurchase. But again, it's hard to foreshadow when that opportunity would arise based on the markets and how constructive and what pricing we would receive on those instruments. So not a specific answer. We're in -- we're constantly looking at the markets, and we're evaluating what's opportunistic for Synovus and that's when we would go to market with any transaction.

Ken Zerbe -- Morgan Stanley. -- Analyst

Got it. Understood. Okay. And then just second question, in terms of the FCB cost savings and in terms of the $25 million, does most of that get realized after the full systems conversion in sort of second half of the year? Or could any of that be front-loaded?

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

Some of it will be frontloaded as we get some expense saves upfront with certain personnel that we're able to get some savings from the reduction in the workforce. There will be additional personnel savings as we go through the rest of the year, but there are other items like contracts and one-time expenses that would be reduced in the first half of the year. So it's largely spread across the year.

Ken Zerbe -- Morgan Stanley. -- Analyst

All right. Great, perfect. Thank you very much.

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

Thanks, Ken.

Operator

The next question comes from John Pancari with Evercore. Please go ahead.

John Pancari -- Evercore -- Analyst

Good morning, guys

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

Good morning, John.

John Pancari -- Evercore -- Analyst

If you could just give me -- give us a little bit more color on the FCB credit that you flagged, Kessel, mainly just around the -- why they have confidence that it's not a one-off -- or that it is a one-off and not indicative of a trend. What are they looking at that gives them that confidence? And also, could you just remind us of the size in the industry of the credit? Thanks.

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

Yes. I'll let Kevin delve into more detail there, John, but I'll just say, as I said, syndication's a very small part of their book. It's a nonorganic piece of their book, less 3% or less. Again, this particular credit was identified by them and moved to nonperforming. I don't know the exact timing. But certainly, when we did our due diligence, it was already classified. So this was not a surprise to them or to us. And it's just in those nationally syndicated credits, where we've got a lot of banks, there's just a process you go through. But Kevin, let me -- not to steal your thunder. I'll let you add anything else you want to...

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Yes. Kessel pretty much covered that. But I would just say this. There were -- the reason we feel it's not a systemic issue, again, 14 other banks involved. Their exposure was around $15 million, $16 million. It was, again, in the syndication book, I think there's just a handful of those credits that they're in. It was identified. As Kessel said, it's had some further migration during the year. And to their credit, they went ahead and dealt with it in the fourth quarter and charged it down to where, out of luck, there's any more exposure left. So it's very one-off-ish and -- John.

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

And John, I'll just add again that we look at that entire syndicated book as part of the due diligence. And again, this was one that was NPL at the time of due diligence. So there's no surprises here at all to us.

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Yes. And since John asked, I guess, the industry was healthcare related.

John Pancari -- Evercore -- Analyst

Got it. Okay. All right. That's helpful. And then related to that on the credit side, can you just talk about -- your charge-off guidance that you're providing for '19, given where you came out in '18, it doesn't really imply an increase to the overall charge-off level, and then particularly even when you factor in the mark that you took on the FCB book. So no real increase implied. How do you look at that? Because more broadly, the industry is going to see some incremental normalization of losses here. And you would think that charge-offs are going to be going higher. And then lastly, how do you still -- how do you feel about the mark, the low mark that you took at this point? Thanks

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

I'll maybe start it. I'll let Kevin Blair finish it. But I mean, we did. If you look at -- if you just have the legacy part of Synovus, I think we were right around 20 basis points. But if you look at the last two or three quarters, we were probably more in the 24, 25 range on average. And that's kind of where we think the year will play out this coming year. So if you just took our part, if we're going into the year, we would probably have guided somewhere in that 25 basis points range. We don't see anything out there that gives us pause to maybe want to increase. So we sort of stayed the same. And then I think, Kevin, maybe you can explain the purchase accounting better than me from there to kind of how we got the 15 to 20.

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

So John, just our range is 20 to 30. And with the purchase accounting that we'll have on their portfolio with the credit mark, as we've said in the past, based on the deal metrics, it was 111 basis points, would be right around the $105 million. We'll obviously update that for the fair value of those loans when we -- this quarter. And so when we appropriately mark those loans, the expectation is there will not be any charge-offs on those legacy FCB loans in 2019. So the only way that you could get a charge-off in FCB would be any newly originated loan that would be through a payment default, which would be highly unlikely. So when you look at the math behind our 20 to 30, and their number largely coming in at 0, it would give you a rate that would come in between that 15 to 20 basis points.

John Pancari -- Evercore -- Analyst

Okay, thanks. And then your thoughts on the mark?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

I think my thoughts on the mark are, as we said, we haven't seen any change or deterioration in the credit book itself. There's been no change in the composition of the loans. Kessel mentioned earlier in his prepared remarks, when you look at NPA levels at 24 basis points, delinquency levels at 11 basis points as well as the overall charge-off level, inclusive of this credit that we took this quarter at 14 basis points, we still think that the math that we shared with the deal announcement makes sense, but we'll be going through and updating that credit mark this quarter, but I don't expect there to be any shift in what we thought -- from what we thought last time.

John Pancari -- Evercore -- Analyst

Got it. Got it. All right. Thanks, Kevin. Thanks guys.

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

Thanks, John.

Operator

The next question comes from Ebrahim Poonawala with Bank of America. Please go ahead.

Ebrahim Poonawala -- Bank of America -- Analyst

Good morning, guys.

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

Good morning.

Ebrahim Poonawala -- Bank of America -- Analyst

I guess, I just wanted to hit up on the revenue growth guidance. And I guess, Kevin, give or take, my sense is pro forma margin for 1Q should be in the low 3.70s as we start off the year. Can you talk about, one, what happens with the margin where balance sheet growth turn outs to be lower than expected? And what gives you confidence just in terms of loan growth? Like, do you expect legacy Synovus loan growth to be better in '19 versus '18? And where at FCB do you expect loan growth to come from in '19 given just this overall caution? And I think Kessel mentioned the high uncertainty. Would love any clarity on where you expect loan growth, particularly FCB, to come from.

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Sure, I'll start with NIM, and I'll try to walk, Ebrahim, through the adjustments. I mean, the first two quarters are going to be a little messy with the margin. And so let's just start with 3.92% where we ended this quarter. What you should expect to see is roughly a 25 basis point decline in our margin. That's a function of the math of the deal. And so when you break that down, it's 20 basis points, just the combination of both companies' margin, plus an additional 5 basis points by losing the loan fees that are currently in the FCB margin that would be accounted for as part of the rate mark -- or as part of the mark on the loans, so 25 basis points just due to the combination. If we were to execute on a Tier 2 issuance in the first or second quarter, that would also dilute the margin by another 4 basis points based on a potential offering. In addition to that, there could be as much as 1 basis point that we would see in terms of margin compression associated with some modest restructuring of the FCB investment portfolio. We're not going to make wholesale changes there, but we may restructure a portion of that. So that gives you roughly 30 basis points of decline to get you from the 3.92% to 3.62%. From that point, as Kessel mentioned, if you were to just look at today's forward curve and the interest rate environment, there would be a bit of a headwind on our margin just due to the flatness of the yield curve, the long end of the rates that have rallied. It would make it more difficult to get margin expansion. Now we do include 5 basis points in our revenue guidelines associated with the scheduled PAA with the rate mark on the loans as well as a small mark on our CD portfolio that will accrete in over the next 12 months. We do not include any unscheduled yield accretion that would occur in 2019. So as you know, the margin's going to be much more volatile with the purchase accounting side, but we expect to see a margin post merger somewhere around 3.65%. And so with all the puts and takes and our ability to restructure their liabilities, the determination on whether there will be a rate hike in 2019, which we have not included, that will be the deciding factors on where it moves from that level. So moving over to loan growth, in terms of the guidance, as you've mentioned, we did guide 5.5% to 7.5%. Kessel mentioned that the legacy Synovus portfolio would continue to grow in that mid-single-digit ranges of 4% to 6%. So you would see more of a sustained growth level from the legacy Synovus. That would put the FCB portfolio in the high single digits, into the 10% range, and that's obviously much lower than what they've done in the past. And we feel very comfortable with both organizations' ability to deliver the growth. And as Kessel mentioned the 2019 opportunities lie, it comes in all asset classes and categories. So we expect to see growth in C&I in both organizations. We have modest growth planned in CRE. And again, that can come from both organizations. And then we have consumer growth. As we've shared in the past, FCB has not been as focused on the consumer lending asset class. And although we will continue to get growth in legacy Synovus, we think there's opportunity to expand that into the FCB franchise. So quite frankly, we think there's going to be balanced growth, and there's not any one big bet on any one asset class or category. And then the last thing I'll mention to your question was what happens if we don't get loan growth. One of the things that we've tried to build as an organization is a much more dynamic revenue model. So that if we do not get the level of loan growth, the economy were to change, we have other levers that we can pull to generate bottom line improvement. That starts with the expense line item. And we talked about -- Kessel mentioned, we will continue to deliver positive operating leverage again this year. We had 2.6 times operating leverage in 2018. And so we think there's extra capacity there. If you wouldn't get the growth on the revenue side, we can manage the expense line item. And then lastly, from a share repurchase perspective, if we're not getting organic growth, as Kessel mentioned, that is the top priority, we have additional capacity to repurchase shares, which would also drive EPS without getting the benefit of additional loan growth.

Ebrahim Poonawala -- Bank of America -- Analyst

So very helpful. And I know there's a lot there in my question. Just one sort of follow-up on the margin. So the 3.65% starting point, very clear. Should we not have any benefit from the December rate hike going into 1Q to the -- particularly to the SNV margin as we think about where 1Q resets? And is it -- and what level of deposit migration do you continue to expect, either through time deposits or rising deposit betas, as you think about your revenue guidance for the year?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Yes. Well, I'll answer him quickly because he's cutting off. But we'll get some benefits in probably the legacy Synovus portfolio. FCB largely mitigates that. So it would be awash going from the December rate hike. And as you look forward, in terms of deposit migration, we're actually seeing -- as rates pause, we'll see less migration into higher cost deposits. But as you've noted, both organizations over the last two quarters have had outsized sales in CDs. So the percentage of CDs in terms of the total portfolio will increase in 2019.

Ebrahim Poonawala -- Bank of America -- Analyst

Got it. Thanks for taking my questions.

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

Thank you.

Operator

The next question comes from Brady Gailey with KBW. Please go ahead.

Brady Gailey -- KBW -- Analyst

Hi, good morning, guys.

Steve Adams -- Senior Director of Investor Relations

Good morning, Brady

Brady Gailey -- KBW -- Analyst

So when you look at FCB, I know you all talked about the cost savings in 2019 being $25 million or maybe even a little above that versus the initial expectation of $20 million. But when you look longer term, I mean, I think 2020 is the first full year where you'll see full cost saves. I know when you all announced the deal that number was around 26% of their expense base, but what's the update for kind of the longer-term kind of full cost save estimate for the deal?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Brady, we haven't provided a 2020 view on that, but I think you can read into our comments from the $25 million that we think there's additional opportunities in the long-term cost savings. Similar to the last question with Ebrahim, if we get the level of revenue growth, you may see the expenses staying more in line with the expectations. If you're not getting it, you may see additional expense savings. But we feel very good about what we've identified at this point. We know where there are expenses in both organizations that are scalable. And so we're going to be very mindful of the top line growth that we deliver, and then we'll use the expense number to help mitigate any pressures we see on the revenue side. So there's always opportunity there.

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

And Brady, just to put an exclamation point on that, I think the key takeaway today is that we found more sooner, and that's a good thing is the $25 million versus the $20 million. But before we update the longer term, we'd like to get a little further in, get the systems conversion, make sure that as we migrate customers, we've taken the appropriate care there. And as we can give more guidance or more specific guidance in the long term, we'll certainly do that.

Brady Gailey -- KBW -- Analyst

All right. That's helpful. And then my follow-up is just about, now that FCB is in the fold, just an update on how you guys are positioned to rates. I know, historically, Synovus has been asset-sensitive. You've all seen the net interest margin go up with these rate hikes. If you look at the curve now and if you look with the FCB in there, like I know you all used to provide the guidance of what plus 25 and plus 100 basis points would do. Maybe just an update on kind of where you consider Synovus' position related to rates with the FCB in there.

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Great question, Brady. We took that out this quarter just due to the fact that we didn't want to have a misleading slide in there that just included just the Synovus asset sensitivity. But what you should take away from that is that, with the combination of FCB, our asset sensitivity actually remains asset-sensitive. It actually mitigates or comes down just a little bit. And that's solely based on the mix of CDs that FCB has. So our overall asset sensitivity is slightly less, but we remain asset-sensitive. But what it does is -- and entering into a longer-term view of rates and if we were to go into a declining rate environment in the foreseeable future, it actually helps to mitigate some of the pressure that we would see on NII naturally without having to go out and do anything synthetically on terms of just a down 100 shock. So it doesn't materially change our profile in the short term in terms of the plus 25, but it does give us an additional insurance for a down 25 or down 100 shock as we look at the long term.

Brady Gailey -- KBW -- Analyst

Got it. Thanks guys.

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

Thanks, Brady.

Operator

The next question comes from Jared Shaw with Wells Fargo. Please go ahead.

Jared Shaw -- Wells Fargo -- Analyst

HI, good morning.

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Good morning, Jared.

Jared Shaw -- Wells Fargo -- Analyst

Just on the FCB charge-off, you said that, that was included in the NPL due diligence. Was that part of the credit mark, the initial credit mark? Or was this in addition to the incremental credit mark?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

So great question, Jared. It was partially included, the credit mark. What we do obviously in the credit market, we would have taken that nonaccrual credit at the time and place some level of reserve. What Kevin Howard said in his comments was that there's been additional migration on the credit since we did that July credit mark. So we didn't have it fully marked in there, but a large portion of it would have been considered in our initial credit mark.

Jared Shaw -- Wells Fargo -- Analyst

Okay. So with that charge-off and then the incremental migration, we shouldn't expect to see the actual final credit mark probably being too much different? We shouldn't exclude that from the -- from the credit mark then at this point?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

I wouldn't because there could be other things that enter into the equation, just with the growth that they've had over the last several quarters. But I think, your math, you're thinking about it the right way. It was something that we had included there, but not the full amount, but it wouldn't have a material impact on the overall credit mark.

Jared Shaw -- Wells Fargo -- Analyst

Okay, thanks. And for my follow-up on the -- with the capital position now. What's the appetite, I guess, for looking at additional M&A as opposed to the buyback? Or should we expect that M&A is completely off the table at this point?

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

Jared, it's certainly off the table at this point. As I've said often, our focus is on getting this one integrated and get the cost save we've talked about, get the revenue synergies that we really believe will come and truly begin operating as one company. And you don't prove that out in 1 or 2 quarters, maybe even 1 year or so. Yes, it's completely off the table. We certainly always evaluate M&A. You could look at -- as I've told every investment banker out there, find me another Global One, which is a non-bank that's bolt on with an earnout. And could that be attractive? Sure. But for whole bank M&A, that's off the table. We've got both teams, and when I say both teams, really one team now, but everybody's excited about the opportunities. And it's going to take this year and I believe next year to prove that out, to prove what we strongly believe today. So our efforts are on execution. I think our teams have done a great job, by the way, getting this from deal announcement to deal close in 161 days. I think that speaks to our process, to our ability to plan, organize and execute. I think it speaks to regulatory credibility. I think it speaks to really good efficient operation. We want to take that same energy now and move it toward systems conversion. And then the real work begins. As I told at dinner last week, that's when the real work begins, which is running the company in a way that provides the value to the combined customer base that we believe it does. So that was a 5-minute answer to yes, you can take M&A off the table.

Jared Shaw -- Wells Fargo -- Analyst

Great, thank you.

Operator

The next question comes from Casey Haire with Jefferies. Please go ahead.

Casey Haire -- Jefferies. -- Analyst

Yes, thanks. Good morning. Kevin Blair, just a clarification question for you on the revenue outlook, does the 5.5% to 7.5% is that bake in the cost of Tier 2 instruments?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

It does include some level of Tier 2 instruments in there.

Casey Haire -- Jefferies. -- Analyst

Okay. Great. So all right. Okay. And then just following up on the CRE and the loan growth guide. It sounds like CRE, you guys -- that's been a soft category for you in '18, but you do expect growth. Just what's the underlying confidence with -- on the CRE front given what sounds like a pretty competitive environment?

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Yes. I think a couple of things. I think we had a good last couple of quarters of new construction loans that were originated. That will start to fund up, we think, a little bit higher than maybe the pace has been in the last few quarters. That's been primarily in the multifamily space, in some of the owner-occupied space as well. And also -- and I probably said this too many times, but we feel like the payoff velocity even really never seem to let up during the year. And I just look -- our outlook is that the payoff velocity will be less next year than this year, and then our construction fundings will be better next year going in. Plus, we have better territory to lend in. I mean, we're better in the Florida markets that we're now more deeply involved in should also give us a little bit there. So you put those kind of 3 things together. I'm not saying CRE's going to jump off the page. It was negative, I think, 5% or so for the year in growth. I think it gets at least probably low single digits, which is a good improvement. It is driven by those 3 components that we believe going into '19.

Operator

Next question comes from Steven Alexopoulos with JP Morgan. Please go ahead.

Steven Alexopoulos -- JP Morgan -- Analyst

Hey, good morning, everybody.

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

Good morning.

Steven Alexopoulos -- JP Morgan -- Analyst

I wanted to start on the deposit cost. So if we look, interest-bearing deposit costs were up 13 bps in the quarter, which is the same as 3Q, how do you guys see that progressing through 2019?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

It's a great question, Steven because -- this is Kevin Blair. What you're going to see -- obviously, the first quarter, you're going to get a similar level of repricing off of the December rate hike. The betas that we had in fourth quarter were much lower than what we saw in the third quarter for total interest-bearing deposits. We had a beta of 52% versus a 67% beta in the prior quarter. We expect to see a similar impact in the first quarter. It's going to be somewhere around the 60% beta based on that December rate hike. Now post first quarter and assuming no additional rate hikes, what you're going to see is there's going to be a natural increase in our cost of interest-bearing deposits just as we refund our maturing CDs. So to give you 2 data points there, our portfolio -- CD portfolio today has a rate of 1 50. Our new and renewing rate that we had in the same quarter was about 1 77. Now those numbers are becoming much more aligned. But if we look out into the first quarter of this year, we can see that what's maturing is at a much lower rate. As we look out into the second quarter and beyond, what's maturing is carrying a higher rate, but there's still a difference between what we're putting on new promotional CDs or the average and what's rolling off. So there will be a little bit of a headwind associated with time deposits. But we think that we can help to mitigate that from a total margin perspective as we continue to see repricing fixed rate loans that will mature as well as some of our shorter-duration loans that will renew and potentially at a higher rate. So it will increase in 2019 but not at the same pace.

Steven Alexopoulos -- JP Morgan -- Analyst

Okay. That's helpful. And then my follow-up for Kessel. What are your plans for the deposit franchise at FCB? I mean, do you just run off all their higher-cost funding? They have quite a bit of that. And do you need to actually invest in their deposit franchise to improve their mix? They were known previously having a great deposit mix. Thanks.

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

Now we do invest. There are plans right now with the existing physical locations that we think we can invest in and maybe some changes at our existing footprint. Our retail teams are very involved right now. They were a part from day 1 in planning in terms of additional product offerings. Maybe take some pressure off in terms of when they're having to fund outsized loan growth in their own footprint, there are only a couple of ways to do that quickly. We can take some pressure off and really introduce more product, a more disciplined sales approach. We think that over time certainly allows us to change the mix. But our retail teams are fast at work to do that right now. Our private wealth teams are energized there as well, our small business teams, again, all things that -- products and services that come with more core deposits. It's really certainly no criticism of their model. But when your customer base is -- that middle market banking, it's hard to fund dollar for dollar with your deposits. We think that -- we think a more balanced approach will serve them well and serve us well.

Steven Alexopoulos -- JP Morgan -- Analyst

Thanks for the color

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

Thanks, Steve.

Operator

The next question comes from Tyler Stafford with Stephens Inc. Please go ahead.

Tyler Stafford -- Stephens Inc -- Analyst

Hi, good morning, guys.

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

Good morning, Tyler.

Tyler Stafford -- Stephens Inc -- Analyst

I just wanted to clarify a few things on the revenue guide. What's the total dollars of scheduled accretable yield that's in that revenue guide? And then can you just confirm that the 3.65% margin you pointed to, is that a GAAP or a core NIM?

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

Got it. So Tyler, let me go back. So the 3.65%, I said included 5 basis points of accretable yield that was scheduled. So that's about $27 million currently. And that's just based on our math that we came off the deal metrics. It's about $11 million on a 1-year CD accretion, and then we have about $16 million in the first year for the rate mark on the loan books. So about $27 million is included. That's about 5 basis points in margin. So if you were to back that out, core margin would be somewhere around 3.62%.

Tyler Stafford -- Stephens Inc -- Analyst

Okay. And then I know in the '19 guide this year, you folded in the fee growth into the revenue growth. But I guess, I'm just trying to triangulate to the total revenue growth that you're looking at, just given the loan growth and the margin commentary. To me, it implies a fairly sizable step-up in fees. So can you just talk about any color that the fee growth that's kind of embedded within the revenue growth for the year and how you're thinking about the fee growth?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Yes. It's still going to be mid-single digits. And if you look at where we've had the biggest headwind this year, Tyler, it's been on mortgage. And we think that we can change the trajectory of the year-over-year decline there. We've obviously been adding a lot of mortgage loan originators. Our production was down this year both on the secondary and portfolio mortgage side; but on the secondary, more so. And so as we add these mortgage loan originators, we think the market will continue to -- we'll be able to take share from the market and you will not see a year-over-year decline. So just not having that will be a benefit. But we also see continued growth in our fiduciary asset management brokers business. We're optimistic on our capital markets business. We have a strong fourth quarter in swaps. We know that FCB is also a heavy user of customer derivatives, so we're optimistic there. And then we also continue to see good growth in our card fee businesses. As you know, we rebranded and relaunched our consumer credit card. We also have a strong ISO business there. And the interchange on our debit card fees have generated somewhere around a 9% growth year-over-year. So when you add up all the minor components, we feel very optimistic that we'll get strong growth year-over-year. And mostly, it's different from this year in only that you won't have the abatement of the mortgage income.

Unidentified Participant -- -- Analyst

Got it. Okay. Thanks, Kevin, that's very helpful.

Operator

Next question comes from Brad Milsaps with Sandler O'Neill. Please go ahead.

Brad Milsaps -- Sandler O'Neill -- Analyst

Hey, good morning, guys.

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

Good morning, Brad.

Brad Milsaps -- Sandler O'Neill -- Analyst

Kevin, I just wanted to get some clarity on the -- additional clarity on the expense number. The 2% to 4% guidance, that doesn't include -- that includes the $25 million of cost saves but does not include the essentially offset number in goodwill amortization, is that correct?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Yes. So we did that and we footnoted. Hopefully, you saw that, Brad. And the only reason for that is, in the past, Synovus has excluded the amortization of intangibles from its adjusted expense base, and so -- mainly because it was not a large number. So for this exercise, we felt like we wanted to stay consistent with the categories and not confuse folks. So just know that there is roughly $20 million in there that would be in total expenses that's not included in that line item that would be associated with the amortization of the core deposit intangible.

Brad Milsaps -- Sandler O'Neill -- Analyst

And safe to assume the upper end of the expense guide would equate to the upper end of the revenue guide?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

That's right.

Brad Milsaps -- Sandler O'Neill -- Analyst

Okay. And then just final follow-up, back to the Tier 2 issuance. How much of the buyback would you guys be willing to fund or could fund without any Tier 2 issuance?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

I mean, it's really dependent. That number moves based on what the organic loan growth is. So it's hard to give you an answer with that. If you didn't -- if you hit your targets for loan growth, there's still a modest capability to buy back shares. If you exceed your loan growth, it starts to diminish the ability to buy back shares. So it's hard to answer that without going through each quarter and seeing what risk-weighted asset growth looks like.

Brad Milsaps -- Sandler O'Neill -- Analyst

Great. Thank you very much.

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

Thanks, Brad.

Operator

The next question is from Jennifer Demba with SunTrust. Please go ahead.

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

Thank you. Good morning. Could you talk about the enhancements you're making to your mobile and online platform that you discussed inflated the consulting fees in the fourth quarter? And then my second question is there's been a lot of rhetoric in the industry about enhanced competition for leveraged loans, just wondering if you have those outstanding.

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

Yes. I'll let Kevin take the leverage loans, Jennifer. I'll take the enhancement. We have spent a lot of time over the past 12 months investing in our new customer portal, My Synovus. I personally have done the pilot for maybe 3 or 4 months. We hit another great milestone this past Thursday night when we added more and launched the enhanced pilot, which we believe we will roll out to our customers in the first quarter. It is state-of-the-art. It's sleek. It is a great customer experience. I don't like inflating consulting fees. But when they deliver a product or service to the customers, which we think will be as good as any out there, they excite me. The entire executive team actually had a demo yesterday of the new (Technical Difficulty) and so we're very excited about it. We're excited about how our existing customer will view it, and we're excited about how a potential customer will view it as it relates to the technology capabilities that come with a bank our size. So first quarter launch, very successful launch of the new pilot, Thursday night. And there's still a couple of bugs because you always want to work out, but I couldn't be more pleased with our progress. And I think I speak for our entire team about their excitement about the mobile experience.

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Yes I'll follow up on the...

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

Leverage lending.

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Leverage lending. This is Kevin. Jennifer, it's not a big part of what we do. It's low single digits of our portfolio. Typically, if we're in a leverage loan, it's an existing relationship that may have made an acquisition, short-term related. So it's a small part of our book. A small part of our C&I lending is in the leverage side.

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

And that low single digit, is that off the C&I portfolio or off total loans?

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

It would be about 7-or-so percent of our C&I and about 3%, 3.5% of our total loans. So it's -- and that's about where we're comfortable at.

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

Okay. Thanks so much.

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

Thanks, Jennifer.

Operator

The next question comes from Michael Rose with Raymond James. Please go ahead.

Michael Rose -- Raymond James -- Analyst

Hi, thanks for taking my questions. Just on the FCB side. Just trying to figure out why their margin was actually down when LIBOR was up so much in the quarter. It may have had to do with that credit that was mentioned earlier. But I guess, can you give us a sense for kind of what their margin expectations would be on a stand-alone basis?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Michael, the non-accrual loan was 1 basis point of the decline. The other 2 basis points had more to do with just the mix shift. They continue to bring in CDs. And as you know, that artificially increases the beta because of the mix shift into the fixed rate deposit. So they got actually very similar to us, their increase on the asset side was on top of ours. So they've got the same benefit that we saw on LIBOR. It's just that their mix shift drove the other -- drove the decline on a quarterly basis. As you look out into the future, it's hard to say what theirs would have looked like under their existing strategies. But we think that we can -- as we combine them with our NIM, we'll be able to normalize their funding costs and get betas that are more in line with what we have. So you'd like to think that they would perform more similar to what we've had in the past, but it's hard to do that looking into the future knowing what that would look like.

Michael Rose -- Raymond James -- Analyst

Understood. And then maybe just one follow-up question on them specifically. You mentioned paydowns on their side. Is that more episodic? Or is that somewhat of a structural change just given the proliferation of non-bank lenders moving downstream? Thanks.

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

It was episodic. They noted three credits that paid out early. And I think that that's just -- to your point, it may be due to non-bank competition. People are out there moving their financing to permanent financing as soon as they can. So they were episodic. And for their portfolio, given the size, you can have one or two or three, and it makes a big difference in their outstandings. But it's not something that they've seen over the last several quarters, so these appear to be more episodic.

Michael Rose -- Raymond James -- Analyst

Okay. And then maybe just one follow-up. Just as you move forward, you've talked about lower hold limits for them. Can you give us any update there on kind of what that means?

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Talk about loan hold -- this is Kevin, I'll talk about loan hold limits. They're similar with ours. I don't think there'll be any change either way. We noted that early on in the due diligence process. They have a strong middle market lending team that lines up real similar to our corporate lending team. And so I just -- I don't see a whole lot of that changing at all. So if I stay -- we're real similar in those categories.

Michael Rose -- Raymond James -- Analyst

Okay. Thanks for taking my questions guys.

Operator

Next question comes from Christopher Marinac with FIG Partners. Please go ahead.

Christopher Marinac -- FIG Partners -- Analyst

Thanks. Just quickly, guys. The change in the wholesale -- or excuse me, the change in the total funding coming from FCB, to what extent are there new opportunities that you see now that you didn't see before? And then also, to what extent can you use the funding capacity of existing Synovus franchise perhaps that you haven't done in previous years?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Chris, we think there's tremendous opportunity there. Kessel highlighted some of that earlier. From my perspective, there's really three strategies. One, there are certain higher cost deposits that they have today that we'll be able to eliminate in the coming quarters. If you look at our loan-to-deposit ratio, this quarter we came in at 97.1%. On a pro forma basis, it takes us to 94%. And so if we were to just look at some of their lower value deposits, we feel very comfortable running some of those off and putting our loan-to-deposit ratio back to the level we're at today. So that's the first opportunity. The second opportunity is as Kessel mentioned earlier, some of the products and solutions that we currently offer through existing channels, so selling our products and solutions to their branches, making sure that we're using not only their capabilities, but ours to have outsized growth. I'd give an example. In the past, if you're going to do a CD promotion, if you're going to do it in South Florida, you're probably going to pay a 20 basis point premium to generate the volume. We can do those and spread it out throughout our footprint and mitigate some of the increased costs of that funding. And then the longer-term opportunity, as Kessel mentioned, was on the customer segment side. As FCB has been mostly focused on that middle market corporate banking customer segment, the cost of their deposits are generally higher because they're more sophisticated customer. As we roll-out our small business, our private wealth management play, there's going to be a lot of core deposit generation that comes with those. And they won't happen in the first quarter, but they'll start to occur over time. And that provides a new funding base at a much lower cost that will allow us to pick and choose the wholesale funding that comes in at a much higher cost.

Christopher Marinac -- FIG Partners -- Analyst

And Kevin, my follow-up is just related to kind of the funding differentials within the Synovus footprint. I mean, if you look at your major metro areas versus your non-metro areas, you still have an advantage today that you can do more of to your point, is that right?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

That's correct. We have models that we look at, that look at price elasticity by market, and that's how we choose where to do our promotions and that's how we determine the ultimate market level price that we provide. So yes, there is an advantage to be in these rural markets. We've talked about in the past, the legacy Synovus portfolio has 60% of its deposits in non-metro markets. So that's a very stable funding base that generally has a lower funding cost.

Christopher Marinac -- FIG Partners -- Analyst

Great. Thanks very much for this background guys.

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Thanks, Chris.

Operator

The last question today comes from Garrett Holland with Baird. Please go ahead.

Garrett Holland -- Baird -- Analyst

Good morning and thanks for taking the questions. Just following up on that last point. To what extent are the potential revenue synergies with FCB? Or really, the lower the marginal funding cost included in the '19 outlook?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

They're really not included at all, and it's something that -- we've said from day one, Garrett, that as we continue to focus on improving the collective franchise, that we're not going to come out and bid against ourselves and keep upping the ante to say how great this could be. We're going to deliver on those results. And so as we have the opportunity throughout 2019. And the reason that we haven't provided more detail around that is it largely depends on what the interest environment is to be able to tell you what sort of benefit we can achieve on the liability side. And on the revenue synergy piece, as Kessel mentioned earlier, our game plan there is we're going to start sharing with the investment community the benefits that we're able to achieve from the synergies as we start to achieve them. So it doesn't become a goal, but rather a scorecard on how well we're performing and generating those.

Garrett Holland -- Baird -- Analyst

No, that sounds good. And just one quick follow-up. So with more anxiety broadly on the outlook for credit costs, I'm just curious what the charge-off assumption is embedded in the updated financial targets and how that normalized loss rate may have changed with the addition of FCB? Thank you.

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Generally, we keep -- for the three year targets, we provide a similar economic forecast. We're not trying to predict where the next recession is coming. So you would expect to see charge-offs continue in a similar pace, but they would increase slightly each year as there's a larger portfolio that's not covered under purchase accounting. So going back to the Synovus guideline of 20 to 30, you probably could use that as a longer-term guidance for the company's long-term targets.

Garrett Holland -- Baird -- Analyst

Much appreciated.

Operator

This concludes our question-and-answer session. I'd like to turn the conference back over to Kessel Stelling for any closing remarks.

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

Thank you, Operator. And I'll be brief. Thanks for you all in staying with us through what's maybe one of the longer calls we've done. And we're happy to do that. We really do appreciate everyone who's been on the call today, including many of our retail shareholders, our team members. We know we get a lot of people on this call.

So I just want to really thank the team for the great job they've done and getting us to this point, for a great 2018, for just extraordinary effort both on the FCB and the Synovus side over the last couple or three months, during the holidays to, again, get to a legal day 1 closing, which just sets up the next events in a really great way. So stay tuned.

As Kevin said, as we get closer to conversion, as we get our team working more closely together, we certainly hope to capitalize on revenue synergies. And we'll share those as we get them. But in the meantime, our focus will be on again core blocking and tackling with our core banking, making sure that this extra merger of systems conversions and customers goes well. So thank you very much for your interest. Again, thanks to our team, and we look forward to sharing more about our results on the next earnings call. Thank you very much.

Operator

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 78 minutes

Call participants:

Steve Adams -- Senior Director of Investor Relations

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

Ken Zerbe -- Morgan Stanley. -- Analyst

Kevin J. Howard -- Executive Vice President and Chief Wholesale Banking Officer

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

John Pancari -- Evercore -- Analyst

Ebrahim Poonawala -- Bank of America -- Analyst

Brady Gailey -- KBW -- Analyst

Jared Shaw -- Wells Fargo -- Analyst

Casey Haire -- Jefferies. -- Analyst

Steven Alexopoulos -- JP Morgan -- Analyst

Tyler Stafford -- Stephens Inc -- Analyst

Unidentified Participant -- -- Analyst

Brad Milsaps -- Sandler O'Neill -- Analyst

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

Michael Rose -- Raymond James -- Analyst

Christopher Marinac -- FIG Partners -- Analyst

Garrett Holland -- Baird -- Analyst

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