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Synovus Financial Corp (NYSE:SNV)
Q3 2019 Earnings Call
Oct 22, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the Synovus Third Quarter 2019 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Kevin Brown, Senior Director of Investor Relations. Please go ahead.

Kevin Brown -- Senior Director of Investor relations

Thank you and good morning. 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. Our executive management team is available to answer your questions.

Before we start, I'll remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties. 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 number of callers, we ask that you initially limit yourself to two questions. If we have more time available after everyone's initial questions, we will reopen the queue for follow-up. Thank you.

And I'll turn it over to Kessel Stelling.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Thank you, Kevin, and good morning, everyone, and welcome to the third quarter 2019 earnings call. Many of you have heard that Kevin will be replacing Steve Adams, as he transitions out of the Investor Relations role. I want to thank Steve for his efforts and know that Steve will be working with Kevin in the coming months to ensure a smooth transition. They'll both jointly be able to take any of your follow-up calls later today.

And as usual, I'm joined by our Synovus Senior leadership team and I'll walk us through the earnings presentation and then provide some brief comments about our 2020 CECL impact before opening the line for questions.

Our team, again, delivered good core performance this past quarter, while managing through another period of heightened economic uncertainty. But before I cover this quarter's financial results in detail, I'd like to summarize the progress we've made in 2019 toward achieving a number of our key strategic objectives. With almost a full year of the realignment of our major lines of business under our belt, we believe some of our core performance indicators this quarter directly reflect a more efficient and effective go-to-market approach, especially in key areas like middle market, commercial real estate lending and specialty lending areas, including premium finance, asset-based lending, senior housing, public finance and our new structured lending division.

We are building renewed momentum in our treasury and payment services business and we will further expand our appeal through an investment in a new treasury platform available to our commercial customers in 2020. We've also focused on the successful integration of FCB, not only executing on operating fundamentals, but even more importantly, adding to what was already a solid franchise in Florida. We've deepened our bench strength and reach by adding 35 product wealth, mortgage, brokerage, insurance and investment professionals in our expanded Central and South Florida region and we focused on building brand awareness through marketing efforts, as well as investing in the strategic placement of new branch locations in areas like Lake Mary outside Orlando and in Fort Lauderdale.

And in the digital space, we launched our new online and mobile banking platform earlier this year and launched a new online mortgage application tool that has significantly impacted new volume. Most importantly, we're seeing these investments pay off. The level and diversification of fee income sources across core banking, capital markets, wealth management and mortgage grows stronger each quarter. And our collective banking team generated $2.6 billion in total funded loan production this quarter.

On the other side of the balance sheet, our relationship-centric approach contributed to nearly $400 million in non-interest bearing deposit growth, which helped us manage our net interest margin and achieve positive revenue growth this quarter

Turning to Slide 3, diluted EPS was $0.83 for the quarter. On an adjusted basis, diluted EPS were $0.97, down $0.03, or 2.7% from the previous quarter, and up $0.03, or 2.9%, from the same period a year ago. There were a number of items impacting adjusted EPS this quarter, and I'll cover those on a subsequent slide.

Loan growth was steady this quarter, with average loan growth of $424 million, or 4.7% sequentially. Period-end deposits declined $534 million during the quarter as we continued to follow a disciplined approach in regard to higher cost CDs and public funds, which experienced additional one-off this quarter as expected.

Total revenue of $492 million increased $3.8 million, or 3.1% sequentially. Revenue growth was supported by strong non-interest income of $91 million on an adjusted basis, up $1.1 million, or 1.2% from last quarter, driven by many factors, including increased production with our mortgage team. Mortgage banking income this quarter was up nearly 31% sequentially and up 96% year-over-year.

Performance within our portfolio from a credit perspective also remains very favorable. Provision expense was $27.6 million in the quarter, increasing $15.4 million relative to a very low $12.1 million the prior quarter. Net charge-offs were 22 basis points for the quarter and 18 basis points year-to-date, and are expected to remain within our previously guided range of 15 basis points to 20 basis points for the full year.

Our profitability metrics have declined slightly. However, our efforts to grow sources of non-interest income and remix the deposit base will help to mitigate near term headwinds. The adjusted ROA was 1.33%, down 6 basis points from last quarter and down 14 basis points year-over-year, while our adjusted ROATCE was 15.46%, down 62 basis points from the same quarter a year ago. The adjusted tangible efficiency ratio improved this quarter to 51.71% compared to 52.08% in the second quarter, and 55.5% a year ago.

We continued our share repurchase program, buying back a total of 9.6 million shares this quarter. As of September 30, we had completed a total of $688.5 million in share repurchases under our $725 million authorization. And as of this week, we can now say that the authorization has been substantially fulfilled.

Turning to Slide 4, Slide 4 provides a summary of the adjustments made to this quarter's reported EPS results, which collectively impacted EPS by $0.14. I will reference a few of the more material items. The first item to point out relates to $10.5 million increase in the earnout liability associated with our Global One acquisition. As we referenced before, the 2016 acquisition of Global One included the opportunity for performance-based earnout payments. Due to the continued outstanding performance of that business, cumulative earnings reached thresholds that triggered two additional years of earnout payments and we've now recognized an increase in the earnout liability accordingly. Any additional earnout liability adjustments associated with Global One are not expected to be material to our financial results.

Also, during the quarter, we elected to reposition certain assets and liabilities. As a result, we incurred an early extinguishment loss of $3.4 million on acquired FHLB obligations and investment securities losses of $2.8 million net of tax. These actions will be accretive to net interest income on a go-forward basis and have a very short estimated earnback period.

Additionally, during the third quarter of 2019, the Company incurred a $4.4 million discrete tax item associated with state tax reform. This was driven by the writedown of a DTA benefit due to a reduction in the State of Florida income tax rate, but is expected to improve our effective tax rate on a go-forward basis.

Moving to Slide 5 and loans, total loans increased $279 million, or 3.1% sequentially. On an average basis, loan growth was $424 million, or 4.7%. We were very pleased with both the level and quality of loan production during the quarter, with total funded production of $2.6 billion, up nearly 30% over the prior quarter and weighted average loan spreads improving 17 basis points. Production growth was evident across all of our commercial business lines and was aided by the expanded specialty teams within our wholesale bank.

Payoff were significant this quarter, especially within our CRE portfolio, where we continue to see customers sell properties due to elevated valuations. In fact, the level of payoff activity within our CRE portfolio was about 50% higher than the prior quarter and was spread across various markets.

Commercial and industrial loans increased to $198 million sequentially. Several areas contributed to growth in C&I this quarter, including our middle market banking teams, senior housing, healthcare, premium finance and ABL. We continue to see positive trends in the consumer segment, which increased to $143 million in the quarter across multiple categories, including portfolio mortgage, HELOC, lending partnerships and credit card.

Although pressure in the market is evident, we continue to emphasize quality over growth in evaluating new lending opportunities. We consistently pass on opportunities that involve aggressive use of non-recourse financing, concessions on tenure and covenants, and fixed rate structures that do not meet our rate of return hurdles.

Turning to Slide 6, it seems like an appropriate time to take a deeper dive into the composition and quality of our loan book by category. Pie chart shows the key components of each of our three portfolio categories, with the table in the bottom right showing the credit performance of each portfolio.

Our C&I book is $16.5 billion and is primarily comprised of general middle market and commercial banking clients across a diverse set of industries. Within C&I, specialty divisions such as senior housing and premium finance comprise about 16% of total loans and have been a significant contributor to our growth story the last several years. It's important to note that while syndicated credits are a part of the wholesale banking strategy, they only represent approximately 6% of total loans. We also highlight we have very low exposure related to either energy or leveraged loans, with combined exposure in those two areas at less than 3% of total loans.

The CRE portfolio is just over $10 billion and almost 90% of that book is comprised of income producing properties with multifamily, office, shopping center and hotel being the largest property types within the portfolio. We adhere to a disciplined constant price and management philosophy, thus, our largest CRE loan is less than $70 million, with average loan size of about $11 million. This portfolio is diverse from both a geographic and property type standpoint, with strong loan-to-value and debt service coverage levels. This is evidenced by the strong CRE credit quality metrics shown in the chart on the bottom right of the page.

The consumer book is $9.7 billion. Almost three-quarters of the consumer portfolio is in the mortgage and HELOC categories, with the remainder in lending partnerships, credit cards and other consumer. You can see by the credit score and loan-to-value statistics, as well as the credit quality metrics on the slide, that this portfolio remains very healthy. Our growth, both for the quarter and the year, has been broad-based across all categories.

We've included a few additional slides in the appendix, which provide more visibility into each of these portfolios, but in summary, we're pleased with the quality and the diversity of our portfolio and we're also pleased to be positioned in a part of the country that benefits from significant growth in population, jobs and wages, as well as strong overall economic performance.

Turning to Slide 7 and deposits, core transaction deposit growth was very strong this quarter, up $526 million sequentially. As we indicated last quarter, we continue to see the opportunity to remix the deposit base by allowing higher cost CDs and public funds to run off, while taking advantage of other short-term funding vehicles, including broker deposits and FHLB advances, which carry variable rates and reduce our overall asset sensitivity carried into a period of declining rates. As a result of this approach, public funds and CDs both declined by $556 million and $695 million, respectively, during the quarter.

The growth in core transaction deposits partially offset these declines, leading to an overall decline in total period-end deposits of $534 million, or 5.6% annualized, compared to the second quarter. On an average basis decline in total deposits was $185.5 million, or 1.9%, from the prior quarter. Within the core transaction deposit category, non-interest bearing deposits increased $392.6 million, or 18.2% sequentially, while money market accounts increased $259.3 million, or 11.5% sequentially.

While total deposit costs, excluding PAA did increase 1 basis point for the third quarter to 1.11% from 1.10%, you can see from our monthly trends that rates clearly peaked back in July at 1.14% and have steadily declined since that time. And given the positive trend we've experienced in non-interest bearing deposits, total core deposit costs, excluding brokered deposits, declined from 1% in Q2 to 0.99% in Q3.

Despite a market for CD pricing that remains competitive, we're now seeing originations at levels that are approximately 30 basis points below maturing CDs on average. Overall, we remain well positioned from a liquidity standpoint and our loan-to-deposit ratio of 97% remains within our targeted range.

Moving to Slide 8, net interest income was $402 million, up $4.8 million from the second quarter and up $110.5 million, or 38% year-over-year, due largely to the FCB merger. Net interest margin was flat compared to the second quarter at 3.69% and was favorably impacted by additional purchase accounting accretion this quarter. Net interest income and margin were favorably impacted by $16.1 million of loan accretion, $1.7 million of investment securities accretion and $11 million of deposit premium amortization. Excluding the impact of purchase accounting adjustments, the core net interest margin was 3.42%, down 6 basis points from the second quarter.

The net interest margin decline for the quarter, excluding the impact of PAA, was driven by an 8 basis point decrease in total earning asset yields and a 2 basis point decrease in the effective cost of funds. The decrease in funding costs was driven by a 1 basis point increase in the cost of interest bearing core deposits, offset by growth in non-interest bearing deposits. As we stated last quarter, we fully expect that additional rate cuts in the second half of the year will put pressure on our earning asset yields.

We're beginning to see downward movement in deposit cost and we're pleased with both the continued growth in non-interest bearing deposits, as well as moderation in our overall level of asset sensitivity. However, given the significant changes in the forward curve relative to last quarter, we do anticipate further compression in the margin between now and year-end. Jamie Gregory will provide additional color on the margin outlook during Q&A.

Turning to Slide 9 and fee income, total non-interest income was $88.8 million, down $1 million compared to the prior quarter, and up $17.1 million versus the same period a year ago. Non-interest income in the third quarter included both a gain and a favorable fair value mark to private equity investments of $1.2 million compared to $1.5 million last quarter, as well as a $3.7 million securities loss. Adjusted non-interest income of $91.3 million increased $1.1 million, or 1.2% sequentially and $20.1 million, or 28.2% year-over-year.

Core banking fees of $40.8 million increased $2.6 million, or 6.6% sequentially. The increase resulted from higher service charges, card fees and SBA gains during the quarter. Fiduciary, asset management, brokerage and insurance revenues of $26.6 million increased $743,000, 2.9% sequentially, and $2.9 million, or 12.3% over the same period last year. Total assets under management of $16.2 billion were up 8% year-over-year.

We continue to see strong momentum from capital markets activity with fee income this quarter of $7.4 million, up $6.2 million from the same quarter last year. This momentum stems from a very healthy partnership between our capital markets team and wholesale banking teams, including our newly added South Florida team members. The success has been evident as the second and third quarter combined were the two highest grossing capital markets fee income quarters for our Company to date. Moving forward, we look for sustained capital markets fee income success with income at current levels.

Disciplined talent acquisition and favorable interest rate environment created another solid quarter performance from our mortgage company, with revenues of $10.4 million, we are up $2.4 million, or 31% sequentially, and $5.1 million, or 96% year-over-year. Mortgage revenue during the quarter was driven by higher overall production, including an increase of refinance volume which accounted for approximately 35% of total production compared to 21% last quarter.

Turning to slide 10, total non-interest expense for the quarter was $276.3 million. These expenses included a number of extraordinary items we covered earlier on the call, including the $10.5 million earnout liability adjustment and a $4.6 million loss on early extinguishment of debt. Merger related expenses were relatively minor this quarter at $353,000.

On an adjusted basis, non-interest expense of ]$258.5 million increased $1.8 million, or 0.7%, versus the prior quarter. Excluding amortization of intangibles, adjusted tangible expenses were $255.6 million. Adjusted expenses in Q3 were higher than expected and were impacted by a number of factors, including production-based commissions that were higher by $2.4 million compared to last quarter and other expenses, which increased $1.1 million due mainly to professional fees.

Turning to Slide 11, you will see that our credit quality metrics remained solid. The NPL ratio improved this quarter from 34 basis points to 32 basis points. Net charge-offs of 22 basis points were higher this quarter, and down 2 basis points versus the same quarter a year ago, not isolated to any particular asset class, but spread across our consumer, small business and commercial portfolios. If you look at the chart in the upper right of slide 11, you'll see that the 22 basis points is largely consistent with the last five quarters, with the exception of the second quarter, which was impacted by timing and recoveries.

Year-to-date net charge-offs of 18 basis points remain in line with our stated guidance of 15 basis points to 20 basis points for the year. And again, we feel confident that we'll end the year within that range.

Provision expense for the quarter was $27.6 million compared to $12.1 million in the second quarter and $23.6 million in the first quarter, resulting in year-to-date provision expense of $63.2 million. The increase in provision expense from the previous quarter is primarily related to the timing of charge-offs and the impact of gross loan production. It's helpful to keep in mind that as we experienced payoffs on acquired loans, we don't benefit from any reserve releases that would typically offset growth-related provision.

The allowance for loan losses increased $7.6 million from the previous quarter, ending at $265 million, with the ratio increasing 2 basis points to 0.73%. The coverage ratios of reserve to NPLs remained strong at 244%, or 364% excluding FCB NPLs and impaired loans, for which the expected loss has been charged off.

We remain pleased with the quality of our credit book based on many factors, including the stability of forward-looking credit indicators such as past dues and non-accrual inflows. We feel confident that our strong credit profile positions us well for the future as we continue to grow our portfolio with the same commitment to quality as evidenced by the metrics on this page.

Moving to capital on Slide 12, we continue to have confidence in our overall capital position. As a reminder, on July 1, we closed a new $350 million Series E preferred equity offering, which raised new Tier 1 qualifying capital. We largely utilized this incremental capital to buy back common shares in the third quarter, which had the effect of increasing our total risk-based capital ratio and decreasing our CET1 ratio, consistent with the low end of our target range of 9% to 10%. CET1 at quarter end was 8.96%. The total risk-based capital ratio increased 19 basis points during the quarter to 12.30%.

Since January 1, 2019, and through the end of the third quarter, we've decreased our total share count by 10.7%, with repurchases totaling $688.5 million. We continually evaluate our capital position in the context of our overall capital priorities, which include funding organic growth, paying a competitive dividend, and capital deployment through either share repurchase or other investments. We also remain committed to sustaining a capital cushion that is sufficient to whether a possible future economic downturn and credit cycle. Under our current stress testing framework, we remain well capitalized under a scenario consistent with The Great Recession.

Turning to slide 13, before we address our updated 2019 outlook, I want to share a little more detail regarding the progress of our expanded franchise in the Central and South Florida marketplace. We continue to see the South Florida market stand out as being one of the most economically healthy and productive in our footprint. The acquired portfolio continues to perform as expected, and reflects credit metrics that compare favorably to those of legacy Synovus.

As we have reviewed the portfolio through routine testing and renewal events, we continue to be pleased with the fundamental health of the book and our own assessments have been validated through market transactions in which acquiring deals have been sold at prices that are consistent with or above the fair value mark.

From a talent standpoint, the team that joined us from FCB is integrating well within the Synovus team, and is complementing our existing culture with their own, which emphasizes delivery on customer expectations with a sense of urgency and commitment to excellence. Additionally, we've attracted over 35 new producers in wealth, trust, and brokerage across our Central and South Florida markets. These team members who have largely joined Synovus within the last six months have already generated new assets under management of over $150 million.

Our Central and South Florida branches are also quickly adapting to the broader array of Synovus retail banking products. Since conversion in May, the legacy FCB branches have seen an uptick in their production in key consumer banking products, including credit card and checking accounts, which were up 57% and 6%, respectively, against 2018 averages. These early wins support, I believe, the long-term opportunities afforded in such a healthy and vibrant market.

Slide 14 outlines our original 2019 guidance for key financial metrics. And I'll provide a little color this morning on where we expect to end the year. From a balance sheet perspective, we continue to expect solid loan growth in the fourth quarter. However, given a number of factors, including accelerated payoffs and our consistent credit discipline, we now expect loan growth for the full year to fall slightly below our previously guided range.

Deposit growth will be a function of the level of loan growth experienced as well as our continued discipline to focus on generating favorable relationship returns in the midst of the current interest rate environment. For that reason, deposit growth could likewise fall below the low end of the range.

Revenue growth of 5.5% to 7.5% remains on track, despite pressure on net interest income from declining earning asset yields. This is a result of both favorable purchase accounting accretion trends within the acquired portfolio, as well as strong fee income growth that has outpaced our initial estimates.

Given the sizable level of production activity driving higher fee income and corresponding commissions, expenses could be at the top or slightly outside of our 2% to 4% guidance for the year. Regarding taxes, as we stated last quarter, our ability to achieve a lower effective tax rate is largely tied to completion of a number of tax credit related initiatives, which we expected to complete before year end. While occurring after the close of the third quarter, we can now say that a number of these initiatives have been completed and will provide additional benefit in the fourth quarter and beyond, thus our current guidance of 24% to 25% for 2019 remains unchanged.

Turning to slide 15, before we wrap up and proceed to Q&A, we wanted to provide some brief comments on the impact we expect from the upcoming CECL adoption in 2020. From a day one perspective, we estimate CECL to increase the allowance by a range of 40% to 60%, with approximately two-thirds of that increase due to acquired loans. Said another way, excluding the impact of the acquired loans, the overall impact to Synovus is estimated to be 10% to 20% given our current loan mix and economic conditions.

At time of the FCB acquisition, accounting guidance did not allow for day one credit reserves, but instead required a fair-value discount. Upon CECL adoption, Synovus will record an allowance representing lifetime expected credit losses on all originated and acquired loans. However, because of an accounting election made at the time of the FCB acquisition, Synovus will be able to avoid the commonly referenced double accounting effect of CECL on a large majority of the acquired loans. Instead, we will record a balance sheet gross-up to loans and allowance on those loans avoiding a more significant hit to equity and capital ratios.

As reflected in the table on this slide, those PCI by Analogy loans drive 50% of the estimated increase for the day one allowance and are expected to have no adverse impact to capital. Our team has been working very hard to prepare for CECL adoption. And while we feel confident that we're on target and prepared to meet the January 1 adoption date, our range of estimates could change based on the composition of the loan portfolio and macroeconomic factors that exist at the date of adoption.

So as we prepare to close out this year, and looking into 2020, we remain diligently focused on the areas we can control, including efficiency, expense management and growth in our corporate business and specialty lines. While we're aggressively pursuing the many untapped opportunities in our expanded Florida region, we're also very confident that the combination of strong talent, capabilities in our relationship-centered delivery model, well positions us to win in our other vibrant markets across the Southeast.

Additionally, our continued investments in technology are building a better operating environment and improved delivery channels to enhance the customer experience and broaden our reach. Above all, our team continues to demonstrate our deep commitment to serving customers at the highest levels, giving back to our communities and ensuring that we create long-term value for our investors.

With that, operator, I'll now open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of John Pancari with Evercore. Please go ahead.

John Pancari -- Evercore ISI -- Analyst

Good morning.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Good morning.

John Pancari -- Evercore ISI -- Analyst

Wanted to see if you can talk a little bit about your expectation for the the GreenSky relationship. I know that was a contract that was coming to expiration in August or September and you were evaluating it. Can you just give us your update on if you're still participating in the program, and if there's been any changes in terms of the terms are your expected production that you see coming out of that? Thanks.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Yeah, John. Good morning. This is Kessel. Maybe, Kevin and I'll tag team that. Let me just, by the way from a housekeeping standpoint, acknowledge that we tried to cover a lot of ground in the opening their and a little longer than we would like to have gone. So we'll be very efficient with our answers, but we'll stay on the line as long as we need to this morning to get to all of you. So we apologize for that.

GreenSky, we are in the relationship. We're comfortable with the relationship, it's really the continuous give and take in terms of what we expect, what they expect. And so even though there are contract dates that we won't get into specific dates and actions associated with that, we are comfortable with the relationship. We are still in the relationship. And again, it's a conscious discussion on appropriate returns for us, appropriate structural credit, which pools we have more interest in than others, but again, as of today, we are comfortable of that relationship. Kevin, I don't know if you would have anything to add to that?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

No. I guess....

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Okay.

John Pancari -- Evercore ISI -- Analyst

Okay. Thanks. And then wanted to just get a little bit more color around loan growth, I know you had indicated that you expect now 2019 could come in below the 5% or it could come in slightly below the 5.5% to 7.5% range. Can you just talk about what you're seeing that's impacting that? And how does that impact your outlook for 2020? I mean, could we see loan growth moderate incrementally through 2020? And if you can perhaps give us an idea of what type of level we can expect, as we look out? Thanks.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Yeah. John, I don't know that we are ready to give 2020 guidance. Let me talk about what we see right now, and again, others might have color. We did see, and I know we've talked about it before, accelerated payoff, but actually in the CRE book this quarter payoffs were about 50% higher than in the past quarter. And we made and we looked hard at a lot of loans that we had the opportunity quite frankly to renew that we were taken out of because we just weren't willing to go to a fixed rate structure or we weren't willing to concede on term and tenure and rate. And again, it was a conscious decision. I've said often, as I've been on the road this year, that I would much rather have to revise guidance. By the way, I did want to, but I'd much rather revised guidance down than I would compromise on those things we said we're going to not compromise.

So, if the CRE levels stayed at elevated level in the fourth quarter, if they do, that probably could cause us to be at that slightly lower end. We haven't given up by the way on anything, but just based on current pipelines, current market conditions, where we see some construction loans go out at CO or go -- have opportunities to go non-recourse at CO, which we're just not going to do. So it's a little unsure. We like our pipeline. We are optimistic about production in the fourth quarter. We like the way our teams have come together. We really feel good about some of the hires we've made, the go-to-market strategy. So the production side has been good. I think total production of $2.6 billion in funded loan production, but the payoffs, they are hard to predict, but third quarter was certainly accelerated.

So haven't given up on the fourth quarter. And when we say outside the guidance, it would be -- we think it'll be very slight if outside, but wanted to make sure we were clear on that. And then, we'll continue to work toward our 2020 outlook and give that guide certainly on the January call.

John Pancari -- Evercore ISI -- Analyst

Okay. Got it. Thanks. Kessel.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Thanks, John.

Operator

Your next question is from the line of Ken Zerbe with Morgan Stanley. Please go ahead.

Ken Zerbe -- Morgan Stanley -- Analyst

All right. Thanks. Good morning.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Good morning, Ken.

Ken Zerbe -- Morgan Stanley -- Analyst

I was hoping you guys could provide just a little more detail on the higher provision/charge-offs in the quarter. Obviously, I know one of the concerns around your stock might be that potential credit risk and having a tick up this quarter is probably not the best thing in the world. Can you just like what's driving that, is it Synovus, is it FCB, is it something else? Thanks.

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

Yeah. Hi, Ken. This is Bob. I'll just provide a little bit more clarity on that I hope. On the charge-off ratio itself, again, we weren't -- I think the last quarter was really the anomaly, not this quarter. So we had from a timing standpoint of actual charge-offs, they just happened to kind of cluster in this quarter versus last quarter. So I would call your attention to that being really low. And as Kessel mentioned in his opening comments, if you kind of smooth that curve out, they are higher. There's no debating that, but if you break down the charge-offs, there is, we didn't have any charge off greater than $4 million, a handful of commercial credits in that $1 million to $4 million range, offset by very limited smaller recovery level this quarter.

So the net effect of all that is, you do get a charge offs a little bit higher than last quarter when it was sort of everything went your way, but again, nothing systemic. Your question about geography, it's spread out across the footprint, with no isolated geography. On provision, recall that, as Kessel mentioned, we take a little bit heavier -- we take full provision on gross loan production and we just don't get any offset in that acquired book that you would normally get on the payoffs. So you factor those two together, it gives you a little bit elevated provision cost, but overall, if you look at it over a few quarters, we don't feel that there's anything out of line or any trend line that we're concerned about.

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

And Ken, this is Jamie. One thing to add to that is, when you think about the provision expense, as Bob mentioned, as Kessel mentioned on the call, just remember that, when we get those paydowns in the acquired book, that's part of that PAA story. So we have enhanced or higher PAA this quarter and that's part of the same story that Bob's talking about. It actually resulted in more provision expense for the quarter for the growth.

Ken Zerbe -- Morgan Stanley -- Analyst

Got you. Understood. Okay. And then maybe my follow-up question, can you just turn just you capital levels. I'm looking at the CECL slide and you make a point that there is minimal impact in year one given the three-year phase-in. But does that imply that there is a more substantial impact in years two and three, and what should we infer from that in terms of your ability, your willingness to buy that conditional shares now that the $725 million is done? Thanks.

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

Yeah. Hi Ken. There is not a tremendous capital impact. You're right about the three-year phase-in, but the main thing I would point to, and we'll give more guidance on the capital impact as we move along into 2020, but I would point to the fact that the PCI by Analogy loans have no capital impact. Right. As Kessel mentioned on the call, that's, that's a gross-up. And that's a real benefit to us we think by heading into the CECL environment that we're not going to get the capital hit from those loans and that's half of the CECL impact.

Ken Zerbe -- Morgan Stanley -- Analyst

Okay. Sorry. And then just on your willingness to continue to do buybacks. Now that the $725 million is over with?

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

Yeah. We continue to manage to the range we described of 9% to 10%. We're very comfortable at 9%. As you can see we're just right below it. We look at that in many different ways. We look at the full capital stack, we run a bunch of different stress scenarios. And one thing I would just highlight is, when we look at a severe adverse scenario, just think like a Great Recession type scenario, we only see a couple of percent capital degradation over that horizon. And so, at 9% CET1. We feel very comfortable that that's a safe and sound place to operate.

Ken Zerbe -- Morgan Stanley -- Analyst

All right. Thank you.

Operator

Your next question is from the line of Brady Gailey with KBW. Please go ahead.

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

Hi. Good morning, guys.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Good morning, Brady.

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

So if I can just start with the net interest margin. I know last quarter we talked about that flipping I think about 5 basis points to 8 basis points in the back half of this year. Yield accretion was higher this quarter, which helped it, but Kessel, I heard you also say a couple of minutes ago that you are expecting a further NIM pressure. So maybe just an outlook on the NIM into fourth quarter.

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

Yeah. This is Jamie. I'll just jump in on that. You're right. In our prior guidance last quarter we said 5 basis points to 8 basis points predicated on a rate cut in July, and then, another one in the fourth quarter. For disclosure, we are modeling October for that second cut. When you back out PAA, we are down 6 basis points on the quarter after getting both those cuts in the same quarter. I would just say that the rate cuts happened faster than we were modeling. We were using just the market forwards for that and deposit rates lag a little bit at the beginning.

There is a lot of pressure on promotional rates and CDs and we chose not to participate. It's the same story we said in the second quarter. We kept going, said no on the higher cost promotional CDs, and you saw a run-off there. We also passed on public funds. Public funds are now $550 million on the quarter. CDs down $695 million. But there is a story when you peel that back a little bit, the CDs -- the average maturity was about 2.1%. The average going all-in yield recall for the CDs was 1.80% [Phonetic], but we've let 8,000 CD accounts go in the quarter and 84% of those were single service. So these are not core Synovus relationships. But then also, CD production and deposit production overall was up over 30% quarter-on-quarter. And so that led to more households, more accounts, that's how we achieved the $525 million of core transaction deposit increase. Non-interest bearing up significantly.

We just continue to remix in the third quarter same as second, and you'll probably see some of that in the fourth. I won't go onto liability side of the balance sheet. Kessel spoke to on the loan side, and I would just say that, that story is a real positive, up 17 basis points quarter-on-quarter on new and renewed loan spreads. That's a nice tailwind for deposit -- I mean for loans, as we head into the fourth quarter. So when you see our monthly deposit costs, you've seen a decline in August and September, we were down 8 basis points from the high. We feel good about how that positions us heading into the fourth quarter.

When we think about what will happen in the fourth quarter, our models right now -- I know this is a little more dovish than forward rates, but we have a cut in October and a cut in December, we would say that, should that happen, we would expect another 5 basis points to 8 basis points of NIM compression. And then, I would just say that, after that, as we head into 2020 and deposit betas increase, I think, that the marginal impact per rate cut would be less.

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

All right. That's helpful. And then one last one on credit. NPLs were down, but OREO was up about $20 million, which is a fairly big swing relative to you all, but was there any big asset that drove that OREO increase?

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

Hi Matt. This is Bob. It is OREO and other assets, so there is some other classifications in there that tick up that NPA number, albeit not very much. The loan account again continued to decline, but the NPA would include OREO plus some other assets.

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

So that was all small ticket stuff, there was no big asset coming in there?

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

Hi, Brady. This is Bob. I mean there was a receivable in there that's a relatively large dollar amount, but we reclassified it in the NPA. It was an existing accounting Class III -- I mean the existing asset that would not have classified as non-accrual or non-performing and we just moved it into that category.

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

Okay. Got it. Thanks guys.

Operator

Your next question is from the line of Jennifer Demba with SunTrust. Please go ahead.

Jennifer Demba -- SunTrust -- Analyst

Thank you. Good morning.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Good morning.

Jennifer Demba -- SunTrust -- Analyst

So you indicated that expenses might be at the high end to just above the range in the previous outlook. Just curious, would the propensity would be to adjust expenses to better reflect this new rate environment?

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

Jennifer, it's Jamie. As we look at our expense run rate, a couple of things really happened in the third quarter. And part of that was commission expenses being higher, exactly the direction you're going, lower rates, greater mortgage production, and so we've seen that in the third quarter. One thing I would highlight though is that, that was a shift from the second quarter, where we had capital markets and other fee revenue businesses that were really in their stride. And so, as we think about that guidance, our core expense run rate feels consistent and looks consistent with what we've said in the past. We are just having higher commissions. We did have another $1 million higher in professional fees that were non-recurring in the third quarter.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

And Jennifer, let me add on. This is Kessel. I think, I heard maybe a comment about propensity to adjust, so just a couple of points. We did and we have been aggressive in our hiring. We have been very pleased in our ability to attract talent in some cases sooner than we might have thought. So you get some expense gain from that, and you saw, obviously, the revenue associated with that. But the question is where are we willing to make adjustments? I would say that, Jamie, Kevin at the last meeting we had yesterday or last evening was about looking at opportunities, not just in the fourth quarter, but really in '20 and '21 and the out years of where are the opportunities to make significant adjustments in the expense run rate. And we will be much clearer on that '20 and '21 guidance in the January call. We certainly don't take growing expenses lightly and we want to make very sure that we continue to invest, both in the talent that we've acquired and the technology we need, the customer-facing technology, but at the same time, we've got to save to be able to invest. So we're looking at that. Again, last night and probably later today, we'll give more clarity on that in January.

Jennifer Demba -- SunTrust -- Analyst

Great. Thanks so much.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Thank you.

Operator

Your next question is from the line of Ebrahim Poonawala with Bank of America. Please go ahead.

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

Good morning, guys.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Good morning.

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

Good morning.

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

So, most of my questions have been asked and answered. Just a couple of quick follow-ups. In terms of the accretion, is it right in terms of, we should expect purchase accounting accretion essentially going to zero come 1Q '20? And to the extent you can, can you talk about how some of that may influence provisioning expenses next year, like, do we see some lower provisioning as a result of accretion flowing through that line item? If you can talk about that.

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

Yes, sure. This is Jamie. So as we look forward, we would expect PAA to be reduced dramatically in 2020. We would expect that full year PAA to be somewhere in the ballpark of maybe $8 million. And so that's how we think about that. That goes through CECL. And so when we think about -- that ties in with your provision question, as we look at provision, we would say charge-offs. If you look at our pipeline, what we have experienced, we are at 18 basis points year-to-date in charge-off, if you look at all forward-looking credit metrics, we feel good. But for next year, when you think about that, you would just say charge-offs plus growth. And that CECL -- that clearly CECL brings in a whole new variants about the economic outlook and all that, but just setting all that to the side, that's how we're thinking about it.

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

And Ebrahim, this is Bob. You're right, we wouldn't have the PAA credit accretion after January 1. So as we gross up the mark into the loan loss provision, you would have just the normal loan loss release associated with new loans in that category.

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

Got it. And just a quick follow-up in terms of I guess tied to expenses, but just wanted to get a sense of where you think you will be in terms of the Florida investments by the end of the year. And just trying to get a better sense, Kessel, to your point around expense leverage. Do you think you'll have -- I'm sure there's always investments to be made, but do you think you'll be in a place where you would have the franchise where you don't need to make a ton of investments next year in Florida?

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Well, when you say -- and maybe Kevin can help me on Florida. We're pleased with what we've done in Florida, both from the realization of the expense saves, and quite frankly, from the ability to attract 35 -- I think there's a slide in the deck, I can't reference the page right now, but 35 producers spread throughout Florida. And by the way, our existing franchise is a part of that because I think the coverage we now provide for that state allows us just to attract a lot more talent. I think I heard of, in addition to slide, I think I heard of maybe a couple of more this week in the South Florida part, because I think our footprint lends itself well to people in that space. So as far as 2020, I don't think we'll ever stop investing in revenue producing talent.

We just got to make sure that we know exactly what they'll bring, how they'll bring it, how quickly they'll bring it, and that if we don't meet the expectation you have to deal with that. But we really do think right now, if you look at how we are positioned in the five-state footprint, and again, not speaking for against any other bank, I would speak to Synovus, we think we are an attractive employer. We have a lot to offer. Our way of business to customers remains attractive. And so again, we've had an inflow of talent based on our operating model, based on our size, based on our reputation, based on the markets we cover, that I don't see that slowing in 2020.

Now, again, maybe not quite at the pace, but it's a good problem to have when people that can produce good revenue, that have great reputations in market, reach out to you, and want to be part of your team. So we will look at it carefully and just have to make sure that we continue to look for ways to save expense, so that we can invest in those revenue generating people.

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

Got it. Thank you.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Thank you.

Operator

Your next question is from the line of Jared Shaw with Wells Fargo. Please go ahead.

Jared Shaw -- Wells Fargo -- Analyst

Hi. Good morning.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Good morning, Jared.

Jared Shaw -- Wells Fargo -- Analyst

Maybe just circling back on the funding side. As we look at the cost of funds going into the end of the year, should we expect to see an acceleration of the deposit cost decline, especially in the, as you continue to exit the higher cost of funds? Or do you think that is the -- maybe the transactional pricing comes down, you would step back in there? And then, also, as you replace that with FHLB, are you extending duration there or is it really more just a short-term replacement for that higher cost funds?

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

Yeah. You would definitely expect to see a greater decline in the fourth quarter than what we saw in the third. It's just -- I think that as we've laid it out truthfully in the prior earnings call and think about another couple of Fed moves, I think, those numbers still a hold, where if you had two more moves, you could see another 10ish basis points of decline in your cost of funds, your effective cost of funds. With regards to the home loan bank, that finding we keep fairly short. We're constantly evaluating what makes the most sense, but also we're not extending out where you end up paying more spreads for the advances

Jared Shaw -- Wells Fargo -- Analyst

Okay. Thanks. And then on the capital side, I appreciate the comments on the buyback, I guess what are you seeing in terms of opportunities for other types of investments, whether it's M&A or business line type acquisitions? Are there opportunities out in the market, is that something that you're interested in here? Or is it really more, we should be looking at the buyback as the primary -- buyback and the growth as the primary ways of controlling capital?

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

Yeah. I would jump in on this. I would just remind you on our capital priorities, right. Number one is organic growth. Like that's what we want to do, it's the most accretive to shareholders, that's our priority. And so we'll continue to look for ways to deploy and grow Synovus and our footprint. Second, we're committed to our dividend and we will continue with the strong dividend policy, and we're in the process of looking at that for 2020 currently.

And our third priority would be either share repurchases or other investments. And so when you think about other investments, it would need -- they would need to outperform, giving it back to the shareholders and make a lot sense given the risk that's involved. Clearly, we wanted the Florida Community Bank integration beyond building out those branches and turning them into Synovus branches, but our priority right now is executing that. Looking -- there could be -- there is nothing on the horizon, but there could be non-bank ways to basically add products to serve our customers better. But truthfully those are the last in the line of priorities. As Kessel mentioned, we talked about two hires in the last week. That's where we should be deploying our capital. We should be building out and growing these businesses that we already have

Jared Shaw -- Wells Fargo -- Analyst

Okay. Thanks.

Operator

Your next question is from the line of Brad Milsaps with Sandler O'Neill. Please go ahead.

Brad Milsaps -- Sandler O'Neill -- Analyst

Hey. Good morning, guys.

Hey, Jamie, I wanted to maybe follow up a little bit on the NIM. Just curious in terms of the bond book even ex-purchase accounting, we've got the yield their stay pretty stable. Just curious what you're doing there, if you plan to shrink it additionally to help offset some NIM compression?

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

Yeah. Including PAA, there is a little bit of noise in PAA in the book this quarter. But when you back that out, you're right, around a 3.04% book yield, going on yields in the securities portfolio is about 2.55% to 2.70%. So you would see that yield decline over time, but you're right, I would expect to see securities portfolio to decline a little bit in the fourth quarter. Probably similar to what it did in the third. And I would also just remind you that we did rebalance the portfolio this quarter, we took some losses, did a little bit of duration extension and picked a little bit of yield. And so that's also in the mix of that.

Brad Milsaps -- Sandler O'Neill -- Analyst

Great. And I appreciate all the color on the run-off and CDs and the public funds, but the category that grew at least on average were the non-maturity brokered deposits. It looks like the yield actually, or the cost on those actually went up 1 basis point. I would have thought those would have maybe been your most interest rate sensitive deposit bucket and it's your highest cost. Curious, will those reprice more significantly in the fourth quarter, or are you building those because they are indexed, and so you should get more of a pickup maybe that we haven't seen yet? Just any additional color there would be helpful.

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

Yeah. What you're seeing there is timing related. Those will definitely reset. So within brokered deposits, the non-maturity, they typically trade based on fed effective and so it's a spread to fed effective of little bit less than 20 basis points. And so, yeah, you will see that reset as the fed moves. On the CDs, we have some brokered CDs in there and the going on yield of those is about 1.80% today and typically five to six months CD, and so we would expect to see all of those declining also as we go along.

Brad Milsaps -- Sandler O'Neill -- Analyst

Got it. And then just final question for Kessel. It sounds like you're pushing maybe 40 new hires in Florida plus what you've hired across the rest of footprint this year. Would you expect in 2020 you would exceed the number of new producers that you hired in 2019?

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

I don't know that I could give you a number there. And it's not just Florida, we are constantly in market recruiting talent. We've got -- we're close to some more in Georgia right now. So, gosh, I really would hate to say more or less. I think certainly we have the opportunity to build out Florida and have some really underutilized markets, with no brokerage, no trust. So that probably slows there. And so I guess the overall number might come down a little bit, but I mean, quite frankly, that would be a good problem to have if we felt like we had more opportunity for top talent around the footprint. But I guess again without any real forecast, I would say that numbers certainly in Florida would tend to come down and we could be very selective around the footprint.

Brad Milsaps -- Sandler O'Neill -- Analyst

Great. Thank you, guys.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Thank you.

Operator

Your next question is from the line of Tyler Stafford with Stephens. Please go ahead.

Tyler Stafford -- Stephens -- Analyst

Hey. Good morning, guys.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Hey. Good morning, Tyler.

Tyler Stafford -- Stephens -- Analyst

Hey. Going back to expenses, I'm a bit confused about just the earlier comment that the third quarter expenses feel consistent with what you guys had previously expected. I mean, even excluding the $1 million higher professional fees, the tangible NIE came in well ahead of the $250 million that you talked about last quarter for the third quarter and the fourth quarter. And last quarter you talked about how that even included 100 revenue producing hires as well as the July salary increases.

So, I guess how do you feel about the ability to get back toward that $250 million average tangible NIE going forward? And I get fee income was strong, but even quarter-over-quarter, it wasn't that big of an increased in my mind to, at least, warrant the sizable increase quarter-over-quarter. So just curious, where you expect the tangible NIE to go from here?

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

Yeah. Tyler, it's Jamie. Those are good questions. When you look at tangible NIE in the third quarter, we were really a few million higher than what we expected and really it is the tow components, it's the other professional fees of $1 million and it's the commissions of just under $2.5 million. And that really is the delta to what we had forecasted. Now, the reason that that's different than what you're saying is, because we had forecast a step down declines from Q3 to Q4. And so we do expect the fourth quarter adjusted tangible NIE to be lower than the third quarter. And so that's a piece of it.

But you're spot on, with the commission impact being maybe disproportion of what you'd expect given the growth in fee revenue, but what changed there is mix. And so, basically, some of the businesses that were growing faster in the third quarter are also higher commission businesses, when you think about mortgage versus derivative sales, things like that.

Tyler Stafford -- Stephens -- Analyst

Okay. All right. Thanks for that, Jamie. Maybe on the fee income side, and it was a good 2Q and 3Q core fee income results. I guess just how do you think about the sustainable pace of core fee growth over the near term just given all the hires that you've made and we've discussed so far on this call, what's the sustainable you think core fee income growth from here?

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

Yeah. Tyler, I'm not going to necessarily update guidance, but I tell you, that's one of our core priorities right now. It is sustainable growth and fee revenue, growing NIR as a percent of total revenue. What I liked that we're seeing in it now is the diversity of the growth. And so this quarter you had mortgage stepping up, last quarter it was capital markets and so we're seeing growth coming across the board. I mean, this quarter, we had over $1 million increase in fees associated with card. And so we're seeing strength across the board. We will update our longer-term guidance in January, but it is a good story. And within that story, we have businesses like treasury that are really starting to hit their stride and they're starting from a low base and that's going to be a nice tailwind to that fee revenue growth.

Tyler Stafford -- Stephens -- Analyst

Okay. All right. Thanks guys.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Thank you.

Operator

Your next question is from the line of Steven Alexopoulos with JPMorgan. Please go ahead.

Anthony Paolone -- JPMorgan -- Analyst

Hey. Good morning guys. This is Anthony Paolone [Phonetic] on for Steve. I wanted to follow up on the credit questions. Can you talk more about the increase in 90-day past due loans this quarter and was any of this tied to the FCB portfolio?

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

Hey, Anthony. This is Bob. You're on a very low base there. So there is some accounting to mortgages that we actually do, they are in the FCB portfolio, but it's a relatively small in number. But the increase in 90 days moving from 2 to 4, while that's double, is still very low base, but that is one thing I could call out is a small mortgage piece in Florida. But again, nothing that we didn't know about.

Anthony Paolone -- JPMorgan -- Analyst

Got it. Okay. And my last question, you noted on Slide 7 that deposit costs peaked in July and have since declined. Was this broadly across your whole footprint or are you still seeing deposit costs increases in certain markets? Thanks.

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

Yes. It across the footprint. Interestingly, I mean, deposit costs, when you think about CDs are different in different markets, but the decline is actually fairly consistent across the geographies.

Operator

Mr Anthony, are you done with your questions.

Anthony Paolone -- JPMorgan -- Analyst

Yes. Thank you.

Operator

Thank you. The next question is from the line of Garrett Holland with Baird. Please go ahead.

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

Good morning. Thanks for taking the questions. We've covered a lot of ground this morning. So just had a couple of follow-ups on NII related items. I appreciate the conservatism with the outlook, but if we only get one October rate cut in Q4, does the Q4 NIM outlook meaningfully change?

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

Not significantly. I guess I would look at the low end of the range. I mean we do have tailwinds heading into the quarter, but yeah, if it's just October move, I'd put it into the low end of the range.

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

Thanks. That's helpful. And does the amount of maturing CDs pick up in Q4? Just curious on that point and your outlook for the loan deposit ratio moving forward.

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

Yeah. We have a material amount of CDs that do mature in this fourth quarter, and not quite as many as the third quarter, but not far off.

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

That's helpful. Thanks for taking the questions.

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

Yeah.

Operator

Your next question is from the line of Steven Tu Duong with RBC. Please go ahead.

Steven Tu Duong -- RBC -- Analyst

Hey. Good morning, guys.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Good morning.

Steven Tu Duong -- RBC -- Analyst

You guys spoke, gave a lot of color on your CRE portfolio. Can you speak to your C&I portfolio and what the market is like there?

Anthony Paolone -- JPMorgan -- Analyst

Hi, Steven. This is Bob. I'll try to give you a little flavor for that. We feel good about our C&I book. As Kessel mentioned, it's fairly diverse from a concentration standpoint. Health care would probably be the industry category that would be the predominant number there, but again, that's probably 18% to 20% or so of that book. Our portfolio is all the way down to small business, all the way up to middle market and corporate syndications, very, very spread out very diversified. There is no industry concentration absent my mention of healthcare and that's a very broad space. So the credit metrics, as Kessel referenced in his earlier comments, were very good. We do get some small business charge-offs in that book, but that's mainly from our legacy accounts that we just run, but our yield offsets that. So we feel very good about the C&I book.

Steven Tu Duong -- RBC -- Analyst

Great. Thanks for the color there. And you guys also mentioned about some of the tax initiatives that you guys have been undertaking. Does this set you up in a better position as far as your effective tax rate goes for 2020?

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

Yes. It does. This is Jamie. We are working on multiple initiatives. We actually have had a deal close this quarter, which is a positive to us. We've discussed in the past that they've been slower to come along than we had hoped, but we've had one deal closed and we hope to have another one close this quarter. And so we're moving along well there and feel good about our 2020 ETR.

Steven Tu Duong -- RBC -- Analyst

Great. Appreciate the color, guys.

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

Thank you.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

You bet.

Operator

Your next question is from the line of Christopher Marinac with Janney. Please go ahead.

Christopher Marinac -- Janney -- Analyst

Hey. Good morning. Just wanted to circle back on deposit mix. I know that we've seen this improvement from the low 60s now to the mid 60s and curious if that gap going back to pre-FCB should close in the next couple of quarters. And to what extent is it easier because the fed is lowering rates to get those core deposits higher?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Hi, Chris. This is Kevin Blair. You're right. It's been -- Jamie said in his remarks or in his Q&A that we taken two quarters to remix the book. I think you'll continue to see a remix in the fourth quarter back into more core transactional deposits. And it maybe lost in the overall arching message, but when you look at this quarter. Jamie mentioned it, growth in production of 30% resulted in a little over $500 million of core transactional growth. The run-off of $700 million in CDs and the $555 million in the public funds were all intentional around the strategic remixing. That will continue in the fourth quarter, which will have the effect of continuing to increase core transactional.

It won't get the legacy FCB portfolio exactly where Synovus was, but it puts us with a strong foundation, that as we start to bring on new core deposits in that South Florida/Central Florida marketplace, that we'll be able to grow core transactional deposits faster there than possibly what we have done in legacy Synovus. So really, it's going to continue through 2020, but it gives us a good baseline as we enter the year.

Christopher Marinac -- Janney -- Analyst

Great. That's helpful, Kevin. And just a quick follow-up. As you think about FCB, are there still expense savings opportunities and we simply just don't see those because you've got the commissions and the other expense that you outlined earlier?

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

There is not a tremendous level of additional expense reductions. You'll get the full-year benefit in 2020, but in terms of the run rate savings that we have posted by the end of the third quarter, we are largely completed with the cost synergies that we talked about. Now, as Kessel mentioned in the earlier question, we're constantly looking for ways to carve back our expenses and we look at that franchise as being part of Synovus today. So as we look at branch consolidation, vendor spend, personnel rationalization, there is always an opportunity to continue to refine the cost basis.

Christopher Marinac -- Janney -- Analyst

Great. Thanks very much guys.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Thanks, Chris.

Operator

Your next question is from the line of Nancy Bush with NAB Research. Please go ahead.

Nancy Bush -- NAB Research -- Analyst

Good morning, gentlemen. Kessel, you talked a lot about Florida, but you haven't talked a lot about Atlanta. And given everything that's going on there, could you just update us on the competitive situation and whether you're hiring there, et cetera?

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Yeah. We are. I love Atlanta. I actually said to our team yesterday and with all due respect to our team mates in Florida, we are talking too much around Florida, but that's just where a lot of you all's questions tend to go. We've done very well in Atlanta. We've got great talent in Atlanta. I've been personally involved in some of the recruiting effort there. We continue to see that again across -- not really related to any one particular bank, but just, again, you know the events that are going on there. We are bullish on the market, we're bullish on the economy and we're bullish on the nature of the talent that we see in market in Atlanta.

Nancy Bush -- NAB Research -- Analyst

Could you just speak to your loan and deposit growth there relative to the rest of the franchise/

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Yeah. Maybe Kevin can help there, because I don't have that market data. I can tell you what we see here is really good. So Kevin if you can speak to that.

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

Nancy, Atlanta continues to be one of our fastest growing markets. It's not only the marketplace itself, but as we built out our go-to-market strategy, both through the wholesale bank where we're adding middle market bankers, but quite frankly across all of our private wealth management and the community banking lines of business, it continuously shows the most growth, both from a lending standpoint, but also from a depository standpoint. So it is one of the markets that we will continue to invest in. We've added two branch locations there in the last year or last two years and that also has been a bit of a tailwind for us. And it's a place where we're continuing to look to expand our physical distribution network to continue to take advantage of opportunities in the inside the perimeter and outside the perimeter of Atlanta.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Yeah. Again, as Kevin said, I don't really get excited talking about building branches, but we are continuing to add branches in Atlanta because of opportunity and just because of the -- I think the increased distribution, we think, will benefit us greatly with our retail strategy. So we've not just opened two, we have other sites under development and under construction to add to our franchise there.

Nancy Bush -- NAB Research -- Analyst

Yes. If I could just add something to that -- to the question. Given the history of Atlanta, how is your deposit pricing in Atlanta now relative to the rest of the franchise as well?

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

It's like any other metro market that we see. It's no different than a Nashville or some of the other markets that we talked about. South Florida typically has a higher average rate on promotional deposits, but Atlanta fits right within the other metro markets. So it's not an outlier.

Nancy Bush -- NAB Research -- Analyst

Okay. All right. Thank you very much.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Thank you, Nancy.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Kessel Stelling for any closing remarks. Thank you.

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Well, thank you. Thanks to all of you for your patience today. Again, we apologize for the length of the call. We just had a lot of ground to cover and certainly it was a noisier quarter than sometimes these might reflect. So we did our best to try and walk you through those key items.

I just want to close by saying that we were pleased with the quality of our loan growth. As we said, we remain very disciplined. We are pleased with the quality of our core deposit growth. Again, as we remix the balance sheet, we are confident that our credit discipline is paying dividends and if that revises our loan growth a little bit downward, we will take that. But again, discipline is reflected in the reduction in NPLs, or low past dues. I mean the charge-offs that again remain in guidance with the guidance we put out this past January. So all credit metrics reflect that. And I think we're making the right decisions.

We are really pleased with the fee production, both from existing legacy Synovus teams and some of the new adds, I think, it validates our model, it validates our decision to invest. So we're very pleased there. We are pleased with the markets in which we operate. The economic conditions in the Southeast I think in general are better than the rest or better than most of the rest of the country, and so we like the markets we operate in.

And most of all, I am pleased with the performance of our team. And focusing on those things, they can control and putting some of the other noise out. So I'm confident that we'll finish the year strong. We look forward to the January call where we will update our guidance for the year and the out years in terms of our expectations and look forward to speaking with all of you then.

If there are questions in the meantime, please let us know that and we'll be happy to get right back to you. So thanks to everyone and have a good day.

Operator

[Operator Closing Remarks]

Duration: 79 minutes

Call participants:

Kevin Brown -- Senior Director of Investor relations

Kessel D. Stelling -- Chairman, Chief Executive Officer and President

Kevin Blair -- Senior Executive Vice President Chief Operating Officer

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

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

John Pancari -- Evercore ISI -- Analyst

Ken Zerbe -- Morgan Stanley -- Analyst

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

Jennifer Demba -- SunTrust -- Analyst

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

Jared Shaw -- Wells Fargo -- Analyst

Brad Milsaps -- Sandler O'Neill -- Analyst

Tyler Stafford -- Stephens -- Analyst

Anthony Paolone -- JPMorgan -- Analyst

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

Steven Tu Duong -- RBC -- Analyst

Christopher Marinac -- Janney -- Analyst

Nancy Bush -- NAB Research -- Analyst

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