Synovus Financial Corp. (NYSE:SNV) Q1 2021 Earnings Conference Call April 20, 2021 8:30 AM ET

Company Participants

Kevin Brown - Senior Director, Investor Relations
Kessel Stelling - Chairman and Chief Executive Officer
Jamie Gregory - Chief Financial Officer
Kevin Blair - President and Chief Operating Officer

Conference Call Participants

Ebrahim Poonawala - Bank of America Merrill Lynch
Brad Milsaps - Piper Sandler
Brady Gailey - KBW
Timur Braziler - Wells Fargo Securities
Michael Rose - Raymond James Financial, Inc.
John Pancari - Evercore ISI
David Bishop - Seaport Global Securities LLC
Steven Duong - RBC Capital Markets
Christopher Marinac - Janney Montgomery Scott
Anthony Elian - J.P. Morgan
Brody Preston - Stephens Inc.
Jennifer Demba - Truist Securities
Kevin Fitzsimmons - D.A. Davidson Companies

Operator

Good morning and welcome to the Synovus First Quarter 2021 Earnings Call. [Operator instructions] Please note this event is being recorded. I would now like to turn the conference over to Kevin Brown, Senior Director of Investor Relations. Please go ahead.

Kevin Brown

Thank you and good morning. During today’s call, 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 begin the call. He will be followed by Jamie Gregory, Chief Financial Officer; and Kevin Blair, President and Chief Operating Officer. Our executive management team is available to answer your questions at the end of the call. We ask that you limit yourself to one question and one follow-up.

Let me remind you that our comments may include forward-looking statements. These statements are subject to risks and uncertainties and the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings, which are available on our website. We do not assume any obligation to update any forward-looking statements as a result of new information, early developments or otherwise, except as maybe required by law. During the call, we will reference non-GAAP financial measures related to the company’s performance. You may see the reconciliation of these measures in the appendix to our presentation.

And now, here is Kessel Stelling.

Kessel Stelling

Thank you, Kevin. Good morning, everyone and thanks for joining our first quarter 2021 earnings call and my last call as CEO. This is the 45th quarterly earnings call I’ve participated in with this great company, my 44th as CEO. And I can tell you with great certainty that despite lingering challenges for our company and the industry, these calls are ending for me on a much more positive note than when they started. My very first call was in April 2010, 11 years ago to the day as Chief Operating Officer. We were weeks away from completing the consolidation of 30 bank charters into one, and still very much in the early stages of recovering from the financial crisis.

I won't take you back through every high and low of the last 10 plus years, but before we move into today's update, I want to take a moment to thank our shareholders for their trust and support. I'm also grateful to those of you on this call, many of whom have followed our company as long as I've been around, some even longer. Our team looks forward to these calls every quarter in part because of the relationships we built with you. While we don't always agree, we appreciate your commitment to and usually your delivery of fair assessments of our opportunities and our strengths.

I also want to thank our executive team, with whom I've had the privilege of leading this company through the good times and the really tough ones as well. Above all, I want to thank our team members, many of whom are listening in today. This team has a passion, a drive, an incredible depth of talent. They simply won't take no for an answer. They're time tested and battle worn, they dig deep and always find new ways to win. I truly believe I work alongside the best team in the industry. And I'm regularly in all of their dedication to each other, our customers, communities and shareholders.

On Thursday, I'll confidently pass the CEO baton to Kevin Blair, who I strongly believe is more than capable and ready to take the helm. I am so proud of all we've done and beyond excited about what's still ahead. And that's where I'd like to focus the remainder of my comments.

In a presentation last month, Kevin identified three tenets that are core to our delivering sustainable top quartile performance. The first is being positioned for success, which includes capturing the growth in our southeastern footprint and capitalizing on our strong reputation with customers and communities.

Second, is providing an exceptional customer experience in which we continue to invest aggressively through efficiencies generated by Synovus Forward. And third is delivering core organic growth, which remains our top priority for capital deployment with expectations for core customer loan growth this year consistent with our guidance of 2% to 4%, excluding P3 loans. Our results in the first quarter demonstrated our ability to deliver in these areas.

Adjusted diluted earnings per share were $1.21, compared to $1.08 last quarter and $0.21 a year ago. Total adjusted revenue of $488 million, adjusted expenses of $267 million and a $19 million reversal of provision for credit losses led to strong earnings that further increased capital levels. Core transaction deposits grew $2 billion, helping reduce the total cost of deposits by 6 basis points to .22%.

Commercial loans, excluding those under the Paycheck Protection Program, increased $212 million or 1% from the end of the year. Through mid April, we processed 10,000 new Phase 2 applications for $1.1 billion and have funded approximately $950 million for our customers.

Net charge-offs remain low at 21 basis points. NPA, NPL and Past Due ratios all remain near historical lows, and we remain confident in the credit performance of our portfolio. We continue to be pleased with the progress in our Synovus Board initiatives.

By the end of the quarter, we've achieved a pre-tax run rate benefit of approximately $50 million of the $175 million expected by the end of 2022. Ken will provide more detail later on the call. Again, our team did an outstanding job delivering strong results for the quarter. And I look forward to continued progress throughout the year.

And with that overview, I'll now turn the call over to Jamie, for the more detailed financial update beginning with loans on Slide 4.

Jamie Gregory

Thank you, Kessel. Total loans increased $552 million in the first quarter, highlighted by $894 million and fundings from the second phase of P3 as well as the $476 million in direct auto portfolio purchase in March. With back end loaded growth, period end loan balances were $593 million higher than average balances. Loan growth of approximately $212 million in commercial loans, excluding P3 was led by our specialty verticals, while we saw declines in balances associated with our smaller commercial customers.

Total C&I loans, excluding P3 balances increased $4 million in the first quarter. Despite total commitment growth of $93 million, line utilization declined $43 million and the ratio remained stable at 40%. With the recent $2.9 trillion stimulus plan, we expect C&I line utilization to remain at or near these historically low levels for longer as customers prioritize use of their own excess liquidity before making meaningful draws. Returning to a more normalized average of 46% would add approximately $650 million in funded balances.

Total CRE loans increased $208 million as the recovery of commercial real estate markets continues. Total consumer loans excluding lending partnerships declined $333 million. The reductions are a continuation of the post-COVID trends witnessed across the industry as consumers use government stimulus to reduce revolving credit balances and deleverage. This trend was particularly apparent within our consumer mortgage and HELOC portfolios, which declined $214 million and $105 million, respectively.

We continue to deliver on the P3 program for our customers. We have processed $1.1 billion of P3 loans and funded approximately $950 million to date as part of the second phase of the program. We also continue to work through the forgiveness process on Phase 1 loans. In the first quarter, we have $711 million of loans complete the forgiveness process. Total P3 loans ended the quarter at $2.4 billion. More details related to these loans are available in the appendix.

Total lending partnership loans held for an investment increased $503 million led by the purchase of prime auto loans. We will continue to use lending partnerships as a strategy to manage the balance sheet, which I'll discuss further in the capital and liquidity sections.

As shown on Slide 5, we had total deposit growth of $677 million. The main drivers of the change include the deposits associated with Phase 2 of P3, declines in public funds and continued remixing of our deposit base. Deposit growth was led by an increase in core non-interest bearing deposits of $1.4 billion, allowing the continued strategic runoff of higher cost deposits. The more favorable mix supports further declines in the total cost of deposits, which declined another 6 basis points in the quarter to .22%.

At the end of the quarter, total non-interest bearing deposits accounted for 31% of total deposits, which improves our cost of deposits and NII sensitivity. The cost of money market deposits fell about 3 basis points and we will continue to manage these costs down in this low rate environment.

In the first quarter, we were able to reduce the cost of time deposits by 24 basis points to .89%. The reduction then included a 19% decline in brokered CDs, which included $309 million at an average rate of approximately 1.85%. Further reductions in deposit costs will come from time deposit maturities as well as further price reductions in non-maturity deposits.

Slide 6 shows net interest income of $374 million or $349 million, excluding P3 fee accretion. Those figures represent a $12 million decrease from the fourth quarter, largely due to lower day count and the continuation of low rate pressure. This includes a greater than expected increase in refinance activity and higher premium amortization within the securities portfolio. These headwinds were partially offset by lower deposit calls and the continued deployment of excess liquidity.

In addition to the increase in lending partnerships, a $503 million I referenced earlier, we increased the size of the securities book by $1 billion. In the first quarter, we realized $25 million in P3 fees. At quarter end, the net unrealized fees were $25 million for Phase 1 and $36 million for Phase 2. We expect most of the remaining Phase 1 fee accretion will occur in the second quarter, and Phase 2 fee accretion will pick up in the second half of the year. As a reminder, most Phase 1 loans have a 2-year term. It's a 5-year term for Phase 2 loans.

Securities accounted for approximately 16% of total assets at the end of the quarter. And we continue to expect further growth within that portfolio for the foreseeable future to deploy excess liquidity. Based on current market conditions and our loan growth expectations, we reiterate our expectation that our core NII should trough in the first quarter exclusive of accelerated P3 fee accretion.

As we progress through the year, we expect to see increases in NII driven by loan growth, deployment of liquidity, a deceleration of prepayment and further deposit cost reductions. The net interest margin was 3.04%, down 8 basis points from the previous quarter. We will continuously monitor our forecasts of liquidity position as we consider the appropriate size and composition of our securities and lending partnership portfolios.

Slide 7 shows non-interest revenue of $111 million. After adjusting for security losses, adjusted non-interest revenue was $113 million, up $1 million from the prior quarter and $14 million from the prior year. Core banking revenues increased $1 million as a $2 million increase in account analysis fees following the first wave of our pricing for value initiative, offset declines in NSF [ph] fees of $1 million.

Increased customer derivative activity and interest rate movements contributed to a capital markets improvement of $3 million. We saw continued growth in assets under management, which were up 2% quarter-over-quarter and 35% year-over-year. Net mortgage revenue of $22 million remained strong, although we're seeing some normalization in activity from the extended low rate environment. While first quarter mortgage production levels remained elevated, the recent increase in interest rates is likely to reduce production levels going forward.

Moving on to non-interest expense on Slide 8. Total and adjusted non-interest expenses were $267 million. Adjusted NIE was down $9 million from the prior quarter and $5 million from the prior year. The employment expense increase of $8 million from the prior quarter include seasonal first quarter increases in employment taxes and other related employment expenses that were partially offset by the benefit of Synovus Forward initiatives, including a full quarter benefit of the voluntary early retirement program last quarter.

Professional fees declined $8 million from the prior quarter, primarily from lower expenses associated with Synovus Forward, P3 and CARES Act related initiatives. Kevin will share an update on our Synovus Forward progress shortly. We remain committed to prudent expense management, enabling us to continue investing in areas that position us for greater success, deliver a superior customer experience and promote profitable growth.

We remain confident in the credit performance of our loan portfolio. As you can see on Slide 9, key credit metrics remain stable with NPA, NPL and Past Dues all remaining near historical lows. I As further note that our allowance estimates show reduced LIFO loan losses versus the prior quarter. Net charge-offs declined $2 million to $20 million or 21 basis points.

Given elevated levels of liquidity and continued economic recovery, particularly in the Southeast, we are not expecting a significant change in net charge-offs in the near-term. The $19 million reversal of provision for credit losses resulted from the improved economic outlook and stable loan portfolio metrics that were partially offset by the increased size of the loan portfolio.

As expected, we saw an increase in criticized and classified loans that reflects the timing from our grading process, which uses trailing quarterly financial statements and reflects the lower levels of revenue experienced during the pandemic. Approximately 60% of the $263 million increase is hospitality related, including hotels and full service restaurants.

The most recent cash inflow data, which is located in the appendix shows positive momentum in year-over-year activity. We expect to see a significant reduction in criticized and classified levels as the real time improvements we're seeing in cash inflows, which serve as a proxy for revenues translates into improved quarterly financial statements for borrowers.

This more positive outlook is reflected in the ending ACL ratio of 1.69%, excluding P3 loans. It is the first quarterly decline since implementing CCEL over a year ago. The decrease aligns with the more positive economic outlook and reduced uncertainty. The allowance at the end of the quarter incorporates an outlook with moderate economic expansion and benefits from the recently approved stimulus. There's more detail included in the appendix.

As noted on Slide 10, the CET1 ratio increased 8 basis points to 9.74% from strong core earnings, despite a risk weighted asset increase of $1.2 billion. The RWA increase is primarily from balance sheet management efforts I referenced earlier as well as a $234 million increase in loans held-for-sale. The CET1 ratio grew more than 100 basis points over the past year, and we remain above the top end of our 9% to 9.5% operating range for CET1.

We are well-positioned to complete our key strategic objectives including our commitment to profitable growth. Our top priority is to deploy our balance sheet to core multi solution relationships. We also believe it's important to return a portion of current earnings through dividends, targeting a long-term payout ratio of 30% to 40%. When we are comfortable that our capital is sufficient to cover our primary objectives, we consider secondary priorities like share repurchases and noncore growth.

Before handing over it over to Kevin, I'd like to highlight the active balance sheet management efforts we've taken shown on Slide 11 because that goes hand in hand with our ability to deploy excess liquidity as well as capital above the top end of our operating range. The first graph is a historical view of our cash position to give a sense for where normalized operating levels were pre-COVID.

We've talked about the impact on NIM, but there's also the opportunity cost of not deploying that liquidity. Current interest bearing funds with the federal reserve of $2.7 billion are about 3.5x higher than normalized levels, and we've actively managed our balance sheet in the past few quarters to monetize that excess liquidity.

One way we were able to accomplish this with our lending partnership portfolio, which a year-ago had approximately $2 billion in held for investment loans. With our actions and restructuring the green sky relationship and active management of the other lending partnership portfolios, our total lending partnership exposure at quarter end was $1.9 billion, with approximately $1.2 billion in held for investment loans and approximately $700 million in held-for-sale loans.

We will continue to manage this portfolio as we navigate the current capital and liquidity environment. In the first quarter, we purchased auto loans because we believe that the risk return profile, 2-year average life and the auto loan market liquidity was a good fit under current market conditions. As you can see in the third graph, we also increased our securities as a percentage of total assets. The yield on first quarter [ph] purchases was about 1.4%.

The last graph is a historical view of the loan to deposit ratio, which currently stands at 82%. This provides significant longer term opportunities highlighted by the ability to be more selective and efficient with our funding, which you've seen us actively manage over the past year. This includes deposits and other liabilities. With excess liquidity and capital above the high-end of our targeted operating range, we can increase assets including securities and loans, which results in much higher yields and lower [indiscernible] rates with the federal reserve. We can accomplish this without sacrificing core organic loan growth, our highest priority for capital and liquidity deployment.

I'll now turn it over to Kevin, who will provide some comments about our strategies and provide an update on Synovus Forward.

Kevin Blair

Thank you, Jamie. I'd like to begin by thanking Kessel for all of his contributions that have helped transform Synovus and position us very well for the future. The entire Synovus leadership team and I sincerely appreciate the unwavering support, and especially skillful and influential leadership Kessel has provided as CEO. And we're grateful he'll remain in the mix in his role as the Executive Chairman of the Board.

Kessel and I have worked very closely together since I joined the company in 2016. He's taught me and our entire team a lot. As we've watched and listened to him steer us through challenges no one ever dreamed we'd face. It's certainly an honor to take the helm of this incredible company as we continue to build on the strong foundation that is part of his legacy.

As Kessel stated during his introduction, we have been working intently not only to perform in the present, but also building upon our core foundations and further transforming the company to be in a position to deliver sustainable top quartile growth.

Slide 12 provides a basis for which we believe creates a compelling formula for our ability to achieve and sustain our top quartile objectives. It begins with being positioned for success, which is a combination of the longevity and resulting value of a strong core franchise as well as the more recent transformation of the company.

In the appendix, we've included a timeline with a series of highlights under Kessel's tenure as CEO. We certainly don't have time today to discuss all of the accomplishments and transformation over the last 11 years spanning the four phases of stabilize, rebuild, invest and accelerate. However, I want to highlight a couple of the imperatives that have been instrumental in better positioning Synovus for scalable growth and winning in the marketplace.

During this timeframe, we moved to a more centralized banking model without impacting our agility and customer connectivity that has long been a staple of Synovus. We built out robust and comprehensive risk management procedures and practices while strengthening and diversifying the balance sheet to better withstand periods of stress. And lastly, we have enhanced our products and solutions as well as expanded our coverage through the addition of talent and through the Global One in Florida Community Bank acquisitions.

As we evaluate our performance over the prior 12 months, these previous initiatives and efforts have been essential in helping to weather and overcome the challenges of the economic downturn while continuing to strengthen the bank for the future. Synovus is well-positioned competitively within our industry. We are large enough and aligned with the right fintechs and partners to deliver the capabilities and functionality of our largest bank competitors.

We have also doubled down on remaining local and focusing on delivering a personalized approach to banking, which competes well with the smaller institutions. Lastly, we have solid coverage across our markets, customer segments and industries. But we continue to have opportunities to expand our asset classes, products and solutions and talent base.

We also believe we're in the best footprint in banking. This belief is strongly supported by the demographic and economic data as we evaluate relative comparisons of metrics such as GDP, employment rates, home prices, and many others. Our 5-state footprint is performing at levels far better than the national averages. And we believe this trend will continue and will likely become more pronounced with population and business flows into our markets.

In addition, our capital levels have increased significantly throughout 2020 and into 2021. And we have demonstrated prudence given the unprecedented changes in the underlying economic environment. And we are now in a position to fully utilize our capital to support the organic growth as our current capital levels are in excess of our stated target levels.

In addition to being well-positioned, we fully understand the importance of and are committed to delivering a superior customer experience. The industry attempts to make this more complex than it really is. It is all about making it easier to do business with us and through our actions over time building a strong level of trust with our customers. We accomplish this by putting their interests first and partnering with them as advisors.

We have a long and successful track record with the high levels of customer loyalty, as evidenced by our net promoter scores, but we know there's an opportunity to continue to improve. We are redesigning customer processes, and leveraging technology to further strengthen relationships with a model of high tech meeting high touch with our highly engaged and experienced team members serving as a key point of differentiation.

It is not about addition by subtraction, but rather building synergies from the combination of both aspects. The line between service and sales is also becoming blurred. Customers want advice and guidance, and they expect their financial partners to provide it in a proactive manner in order to support their financial objectives. We are prioritizing investment in data and analytics as well as the channels that support customer interactions in order to be more proactive and timely in providing insights and advice.

Not only is it leading to creating longer term sticky relationships, but it is also generating new sources of revenue, which brings me to our third area focus profitable growth. Jamie summarized our capital priorities well, as we will continue to prioritize core organic growth as our primary objective. Given the strength of the economic activity in our footprint and our calling activities, we are starting to see pipelines and production levels return to pre-pandemic levels.

We continue to expect the second half of 2021 to be the strongest in terms of growth. We have also had a concerted strategy to accelerate the growth in our fee income generation businesses, including wealth management, treasury and payment solutions and capital markets. The first quarter results continue to show good momentum in these areas with increases in wealth management revenues, up $2 million or 5% from the fourth quarter as well as AUM continuing to grow as Jamie referenced earlier.

Treasury and payment solutions overall production and onboarding efforts continue to hit record levels, combined with the repricing efforts produced the $2 million or 23% increase in service charges versus the fourth quarter despite increases in customer liquidity. And lastly, the addition of key talent will serve as a catalyst for growth.

Synovus continues to be a model that is attracting top talent. We continue to double down on businesses where we have the right to win and present the opportunity for profitable growth. We have increased the producing team members in our wholesale and specialty banking units, treasury and payment solutions as well as wealth management.

Ongoing disruption in the industry as well as a targeted approach for expansion will allow us to opportunistically add top talent in areas where we continue to see relatively short payback periods and sources of long-term growth.

Moving to Slide 13. This outlines our Synovus Board initiatives which we've shared previously. We are confident these initiatives will help us achieve our stated objectives and align with the three tenets that Kessel outlined earlier. As a reminder, we expect to achieve a pre-tax run rate benefit of $175 million by the end of 2022. We prioritized efficiency initiatives as we kicked off the program in late 2019 in order to fund our journey forward, and these initiatives will result in approximately half of the $175 million anticipated pre-tax benefit.

At the end of the first quarter, we have achieved a pre-tax run rate benefit of approximately $50 million, with about $40 million in cost reductions and $10 million in incremental revenues. We are in the process of realizing the additional Phase 1 efficiency initiatives and announced in January that we expect to generate an additional $25 million in Phase 2.

We have initiated the Phase 2 program and over the next two quarters we will begin to make decisions that will lead to the incremental savings with the goal to have all of the efficiency programs executed by the fourth quarter of 2022. As we continue executing the Synovus Forward plan, the mix of benefits will shift towards revenues. As such, we are very pleased with the progress we've made in both our commercial analytics and pricing for value revenue initiatives.

We are currently in the pilot phase of our commercial analytics enhancements, which include the smart tool that I detailed on our previous earnings call. Our team is now receiving and closing actionable leads from this tool, and you'll begin to see the benefits in both net interest and non-interest revenue lines going forward. The Smart tool will be fully adopted and in production by the third quarter of this year.

We remain confident in our ability to generate a pre-tax run rate benefit of over $20 million by the end of the year. We are also in the initial phases of developing a similar tool to be leveraged by our retail and wealth management bankers and expect to have a program in place by year-end. Our pricing for value initiative in treasury and payment solutions began in the fourth quarter and will continue through the second quarter of 2021.

Results to date have exceeded our expectations with fees increasing $2 million quarter-over-quarter and we expect to maintain and even increase profitability in these products as we continue to increase our value proposition in treasury and payment solutions, including our new Synovus Gateway platform, Priority Service and Enhanced Solutions.

Delving deeper into our focus on expanding our products and solutions, sales and our new merchant solution continue to outpace our expectations, and we are turning our attention to rolling out additional functionality and capabilities in 2021, including international export financing, integrated payables and receivables and a one card digital wallet solution.

To achieve sustainable top quartile growth, we understand that continued investments in technology and talent are paramount. As we evaluate the need to balance short-term headwinds from interest rates or economic activity, we have emphasized not making short-term decisions that impact our long-term valuation or growth opportunities. As such, it requires more rigorous prioritization and focusing more intently on businesses where we have the right and proven track record of winning. Synovus Forward is predicated on supporting our aspirations as a growth bank and not simply cutting our way to prosperity.

Now before I turn it back over to Q&A, I want to make a couple final comments regarding the CEO transition. Since our announcement in December, we've been asked a lot about how the strategies will be changing under new leadership. While there will be some changes over time, like Kessel, I will continue to execute the Synovus Forward plan.

We have both been aligned with the company's direction and areas of emphasis outlined in Synovus Forward and our other strategic initiatives. We are both clear on our strengths as well as our opportunities for improvement. Also, we both have a lot of confidence in the Synovus team and our ability to win versus the largest and smallest competitors. And lastly, we are both committed to lead our company forward to deliver on both our short and long-term objectives, while not losing sight of what makes Synovus a great company. Its team members, its customers, and the communities we serve.

With that, I'll turn the call over to our operator for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Ebrahim Poonawala from Bank of America. Please go ahead.

Ebrahim Poonawala

Good morning, guys.

Kessel Stelling

Good morning, Ebrahim.

Kevin Blair

Good morning, Eb.

Ebrahim Poonawala

I guess, first and foremost, patience on pulling off what has been one of the most remarkable turnaround in banks post-financial crisis. So job well done. And I guess in terms of the question, I'm just trying to reconcile what Jamie talked about in terms of loan growth and the impact from stimulus and savings both on the commercial and consumer side. And I think Kevin, you mentioned about like pipeline and production levels back to pre-pandemic levels. Just talk to us, I mean, I think there's a fair amount of debate around whether or not the banks will see a pickup in loan growth. Give us a sense of given that -- a wide swath of the economy [indiscernible] footprint is already open. Are you seeing a pickup in loan demand? And I guess I understand the second half weighted loan growth, but should we start expecting better sort of color from you in terms of loan growth picking up over the next few months? Just give us puts and takes on that?

Kevin Blair

Ebrahim, it's interesting when you think about the puts and takes as you stay. When you look at the liquidity that exists in the marketplace today, we were talking about this yesterday, the average balance per checking account in commercial is up 40% year-over-year and on the consumer side, it's up 25% year-over-year. So when you think about the headwinds that exists that are leading to lower loan growth, it's really the amount of liquidity that's sitting on the customer's balance sheets.

Now we know that over time that will abate a bit, but the things that we're seeing that give us confidence first and foremost, as I mentioned, our pipelines are increasing. They were up 20% in the first quarter versus the fourth quarter of last year. We know that our bankers are becoming more active, they're going on prospect calls. They're having discussions with customers who are starting to plan capital expenditures for the second half of the year.

We also know that there's a tremendous amount of opportunity with some of the new tools that we're rolling out. Through our smart tool, it does give us insights into opportunities where we have lending opportunities where in the past, we may not have known that with existing customers.

And then when you think about our footprint, and you look at some of the data, unemployment in our 5-state footprint is all below 5.2%, every state is below 5.2% with the national average of 6.2%. You look at the net population inflows, all 5 states are in the top 15 in the country. So when you take into consideration that there's could be some demand coming from infrastructure, coming from second half of the year economic activity, combine that with where we see our footprint growing, and then you add in it -- add into that the increases in talent and the productivity gains we're making, we feel like the second half of the year is going to be constructive. But again, the biggest wildcard there will be the liquidity that sits on the balance sheet and how long that sticks around.

Jamie Gregory

Hey, Ebrahim, this is Jamie. Let me add one thing. We reiterated our guidance 2% to 4% loan growth in 2021. And as you're aware, we had an auto loan purchase in the first quarter. Our guidance remains the same on the 2% to 4% loan growth, excluding any sort of third-party lending portfolio purchases, like what we saw in the first quarter. So as Kevin mentioned, we feel good about our pipelines. We believe it's weighted to the back half of the year. And we're excluding in that guidance any sort of portfolio purchases that like you saw this -- at this quarter.

Ebrahim Poonawala

It's good to know. So thanks for clarifying that, Jamie. And I guess just as a follow-up to that, on Slide 11 where you have the liquidity and you talked about debt, is the message there that you would now pick up steam in terms of bringing down those cash balances, which historically used to be, I think $800 million to $1 billion to bring them down via loan purchases or investment securities deployment over the next few quarters. Just give us a little more color around the thought process of when liquidity levels could get back to normalized levels?

Kevin Blair

Ebrahim, that is our intent. Our priority is to deploy that liquidity and excess capital to customer loan growth. However, this is a unprecedented environment and government stimulus programs remain including quantitative easing. And so we expect core transaction deposit growth to continue and we believe that the liquidity situation may stay at a similarly elevated level through 2021. And so we are prepared for that.

We will consider using strategies like what you saw in the first quarter, be it with the securities portfolio growth or third-party assets, we're going to be very prudent in how we deploy that liquidity and that capital, but you may see continuations of those strategies. In January, we gave guidance of the securities portfolio growing to 16% to 17% of total assets. In the first quarter you saw that we increase it to 16%. And I would say that it's likely to -- that trends to the top end of that range as we proceed through 2021.

Ebrahim Poonawala

Got it. Thanks for taking my questions.

Operator

The next question is from Brad Milsaps from Piper Sandler. Please go ahead.

Kessel Stelling

Good morning, Brad.

Brad Milsaps

Hey, good morning.

Kevin Blair

Good morning.

Brad Milsaps

Hey, Kessel, congrats on a great tenure around as CEO. You'll certainly be missed on these calls, but Congratulations.

Kessel Stelling

Thanks, Brad.

Brad Milsaps

Jamie -- yes, Jamie wanted to start maybe with -- to follow-up maybe on the revenue guidance of down 1% to 4%. In 2021, it seems you're off to a little bit of a faster start in some of your fee revenue categories for this time of the year. And then also last quarter you talked about steepness of the curve, better performance with PPP. Obviously, you guys have talked a lot about your thoughts around loan growth in the back half of the year. [Indiscernible] possibly able to perform at the high-end of that range, it would seem kind of given your start to the year you could do that, but just kind of wanted to see if you could maybe frame that up a little bit more kind of why you stuck with that guidance? Is it just really kind of more the uncertainty that's out there, but it seems like there's several things going your way at this point.

Jamie Gregory

Brad, thanks for the question. You're right that the first quarter was strong, especially in our fee revenue businesses. Mortgages -- mortgage continues to perform well in this environment. And I believe that's just a testament to the mortgage team and us delivering for our customers in a environment -- low rate environment where there's so much mortgage activity that was strong in the first quarter, we expect it to continue to be strong as the normalization continues through 2021.

So we expect mortgage revenues to decline to pre-pandemic levels over the next few quarters. But we expected those revenue declines will be offset by broad based growth and our other fee revenue businesses and products, such as credit card, trust and fiduciary, deposit service charges and capital markets. And so we do expect to see those trends generally in fee revenue.

And then with regards to interest income, we expect the first quarter to be the low point for the full year and we expect to see growth as we proceed through 2021 in NII. And to your point and your question, that's due to two things. One is the balance sheet and we just discussed that with Ebrahim's question. We do expect growth, the 2% to 4% growth we are reiterating that, but we're also seeing growth in assets based on strategic decisions we're making in treasury and that's the third-party lending, that's the securities portfolio growth.

And we also expect to see a tailwind to your point on interest rates. The steepening of the curve and loan rates increasing are a positive to us, and if rates can stabilize or even increase from here, the pressure we've been experiencing on loan origination and mortgage pre-payments will abate and we -- they may become supportive of future interest income. It also reduced the premium amortization that we saw in the first quarter on the securities portfolio, which led to the lower book yield on the securities book.

Brad Milsaps

Okay, that's helpful. And then this is my follow-up. Adjusted expenses were down maybe a little less than $5 million year-over-year. I think you talked about $40 million being in the run rate at this point is sort of the delta there, mortgage commissions or other commissions that you might see reversed out, or do we need to think about maybe you spent some of those savings in other areas you're trying to kind of bridge the gap in expenses with the numbers you're talking about with Synovus Forward?

Jamie Gregory

Yes, you're exactly right. As mortgage revenues remain elevated, you will see elevated commission expense associated with that. But I'll also just point to the seasonal impact of normal personnel expenses in the first quarter that remain elevated. That was also a component of the first quarter.

Brad Milsaps

Great. Thank you, guys.

Kevin Blair

Thanks, Brad.

Operator

The next question is from Brad Gailey from KBW. Please go ahead.

Brady Gailey

Thanks. It's Brady. Good morning, guys.

Jamie Gregory

Hey, Brady.

Brady Gailey

So I wanted to start just with the third-party lending partnerships. You're at, I think about $2 billion as of the end of the quarter, that's about 5% of non PPP loans. But what's the appetite to continue to grow that?

Kevin Blair

Brady, that's a portfolio that we look at in multi facets. Specifically, when you look at the held-for-sale portfolio, that's a different risk profile than a typical held for investment loan portfolio and that's why we segregated it on our slide and the earnings presentation. So we view that risk differently. So it's lower risk because of the commitment to purchase component of it. But then when you look at the held for investment portfolio, we feel confident in our ability to manage that portfolio and to grow it from where we are today.

If you look at the assets that we're purchasing, we believe that the liquidity and marketability and credit risk that we're taking by investing in those assets relative to the securities portfolio is where we are paid for that risk. We believe we can manage that risk and we have experience managing that portfolio in all environments, if you consider the actions we took in 2020 as well. And so we feel confident in that portfolio. We feel confident in leveraging it as a way to deploy capital and liquidity.

And I'll specifically point to the auto purchase in the first quarter. Because the way we look at that is we look at it as a prime auto portfolio with about a little more than a 2.2 year average life. And that profile fits really well with how we view capital and liquidity. And so that's the type asset we're looking for, something that fits well with our longer term view, but also an asset class that's very marketable and very liquid.

Brady Gailey

All right. That's helpful. Then my follow-up, I wanted to ask the stock has done well, all bank stocks have done more recently, but Synovus is now at 1.7x tangible. So maybe that makes the share buybacks a little less attractive. But on the flip side, you now have a currency that you haven't had in a while. So maybe bank M&A is a little more realistic for you guys. But how do you think about what the stock price has done and what impact that could have on buybacks versus bank M&A?

Kevin Blair

Look, Brady this is Kevin. In the capital priorities, we've said number one way to invest capital is back in organic growth. And with excess capital, we would look at share repurchase, we would look at non-bank M&A and we would look at alternative use of capital, as Jamie mentioned with third-party purchases. So we evaluate all of those on return basis. But as you think about M&A, we talked about having our right to win. I would just reiterate that we think our best investment today is an investment in Synovus.

And we believe that because as Jamie mentioned earlier, we love our footprint. We think it provides us with outsize opportunities for growth. We also feel that we've been very capable in attracting talent and adding new products and solutions to our -- another arrow in our quiver to be able to promote growth. We also feel like a lot of the reasons that people are doing M&A is to just generate efficiency and we've been doing that internally. Jamie touched on the efficiency initiatives. But I think it's important to note that we've reduced 180 FTE in the last two quarters or roughly 3% of our workforce. And that's we're doing that through Synovus Forward. And so we're generating efficiencies internally, and we like the size of our company.

I think there's a lot of conversations that go into scale and having to invest to be more relevant on the technology front. We feel that we're relevant today. We have the right partners and the right fintech solutions that we feel like we can compete with anyone. And then you have to integrate cultures and there's a mismatch there. And then you have to look at what potentially could be the lost revenues that are a function of team member attrition as well as customer attrition. So when you take all of that into consideration, we still feel -- but we still believe that the best investment is in Synovus. And that's what we're doing going forward.

Now from an M&A perspective, if we were to do anything, we've said very clearly it would be a functionality or capability or technology that would be additive to our portfolio of solutions and would be additive to our existing customer base. And any of those would be relatively small.

Brady Gailey

Okay, great. And Kessel, it's amazing what you've done with this company and the transition over the last decade. Congrats on a job well done, and good luck with the transition.

Kessel Stelling

Hey, thanks a lot Brady.

Operator

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

Timur Braziler

Good morning. This is actually Timur Braziler filling in for Jared. Maybe first just drilling into the expense picture again. In the fourth quarter call, I think the guidance for '21 was a reduction of 2% to 5%. That was pretty much covered here in the first quarter. I guess, as we look ahead, maybe help quantify what else is going to drop to the bottom line? And if that 2% to 5% reduction announced last quarter, if that's still a good rate that we should be expecting for the year?

Jamie Gregory

Yes, this is Jamie. Great question. And we do reiterate the guidance of down 2% to 5% and as we were discussing earlier, higher revenues and some of our fee businesses may impact commissions. But we still feel confident in our guidance of -- that decline of 2% to 5%. As we look forward in 2021, obviously, we have announced today that we as of 3/31, we have $40 million in run rate benefit in the Synovus Forward initiatives. And as we've mentioned, from the outset, we expect approximately two-thirds of the first $100 million to be expense initiatives.

So we still have ways to go in 2021 on the expense side through Synovus Forward initiatives, and that'll come through later in the year, you'll see that in the second half of the year. And so we believe that that's going to be a tailwind to the second half. We would reiterate that we expect second half expenses to be lower than first half. And we'll see those flow through in the second half of the year. We announced today that we're closing four branches in the second quarter, that'll be a piece of it. And then we continue to have benefits on some of our other work streams that have been in progress like third-party spin [ph], corporate real estate as well as personnel initiatives.

Timur Braziler

Okay, thank you. And then as a follow-up, just looking at the securities purchases made during the quarter, it looks like the duration in the securities book increased a couple of years. Maybe just talk about utilizing some of the excess liquidity, whether it's through securities or third-party purchases, your willingness to take on duration and how you balance that with balance sheet positioning for potentially a steeper yield curve and or higher rates down the road?

Jamie Gregory

Yes, that's a good question. You're right, the duration did extend in the first quarter. And that was largely due to the increase in interest rates, just the Convexity profile of that portfolio. If you were to see interest rates continue to increase on the long end, we would expect to see further extension, even though I would say that at some point, you get to a terminal duration on some of these that mortgage assets. We have remained diligent with the assets we're putting on the books. We have been buying mortgages at a premium. And it's fairly well split between 30-year mortgages, 15-year and 20-year mortgages and somewhat structured to protect against extension.

And so we haven't changed our investment profile. The duration extension really is due to interest rates alone. But you're right, we did have a significant amount of investments in the first quarter approximately a $1 billion. The going on yield of those investments was around 140 to 160 depending on the asset and we will look to grow that portfolio this year, approach the top end of our guidance of 16% to 17% of total assets as we go through the year.

Timur Braziler

Okay, great. Again, echo my congratulations for you Kessel, and thank you for the questions.

Kessel Stelling

Thanks so much.

Operator

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

Michael Rose

Hey, good morning. Thanks for taking my questions. Kessel, congrats again on a great job as the CEO, as everyone else has stated. My question is around credit. I did notice that criticized and classified were up a little bit. Obviously, the credit picture continues to improve, I guess what drove that. And then just from a provision standpoint, I think you've talked about getting the loan loss reserve back to kind of day one, post CECL day one levels at some point down the road. As the outlook improve where we could see very low levels of provision as we move forward for at least the next couple of quarters. Thanks.

Kevin Blair

Hey, Michael, this is Kevin. I'll take that. And this may be a bit of a lengthy answer just because I want to be comprehensive. But I think it's important when you look at the credit metrics this quarter to look at the entire body of work. As Jamie mentioned, we're relatively stable with NPAs, NPLs, charge-offs and our provision is showing an improving environment. But as you asked, looking specifically at criticized and classified, I think it's important to note that our grading process is largely a function of historical financial statements.

So the movement you saw this quarter was more of a result of the headwinds that we saw back in 2020. And those revenue headwinds being incorporated into the respective financial statements for this year as we've been doing our grading process. Most of the increase was related to our COVID impacted industries, hospitality and restaurants. It's related to some consumer mortgages that remained on deferment under the standard GSE standard guidance.

And I'll remind you that with most of those COVID related industries, despite the revenue challenges as we said back in 2020, we felt strong LTVs and sponsorships would mitigate much of the risks that we saw there. So I would tell you that the criticized and classified ratios are really a rearview mirror perspective on credit. And I think it's important to note even with the increases are absolute levels for criticized and classified are below that of our peers. Now, I think that truly reflect and assess what the credit environment and the expectations are going forward. I think you have to look at more of the real time data and forward looking measurement.

So in our appendix, we did provide the updated cash inflow data from January and February. And I think when you look at that, Michael, you'll see that in aggregate, our businesses have returned to pre-pandemic levels in terms of cash inflow. We also know through our second round of P3, that we had another billion one in application volumes. So we know many of those COVID impacted industries are being supported through economic stimulus.

And then when you look at some of the underlying data and things like hospitality, you'll see that ADRs in the hotel industry are returning to normalized levels. We've seen occupancy pick up significantly in Florida with all of the markets there with the exception of Orlando in recent months having over 70% occupancy. And we expect that to continue into the summer as you [indiscernible] and people starting to go out and travel into the footprint in these drivable destinations. And then the same -- on the same front, you look at restaurants, QSRs are performing at or above where they were pre-pandemic and you're starting to see full and limited service restaurants back to 90% of the levels that they had. So very, very strong improvement there.

And then lastly, I would tell you to look at as you go forward and have an outlook, the -- as Jamie mentioned on the call, the CECL life of loan estimates continue to decline with this reversal and provision this quarter. And based upon our economic forecast, we would expect this to continue. And we would also expect to see a significant level of upgrades in the coming quarters, while our charge-offs are going to remain fairly low in the near-term. So hopefully that addresses the credit question. Jamie, I'll let you cover the provision.

Jamie Gregory

Thanks, Kevin. As Kevin mentioned, the allowance for loan ratio declined quarter-on-quarter, we believe that's indicative of the environment. We would say that there's a significant amount of uncertainty in the outlook. We still have a large weighting to adverse scenarios in our CECL modeling. But we also would point to the fact that we've made adjustments to model inputs in our quantitative portion of our allowance calculation. At a high level, these adjustments are due to our expectation, the stimulus will serve to delay charge-offs rather than cure them. If our outlooks change -- if our outlook changes to the expectation that stimulus is the cure, then our life loss estimates would decrease fairly significantly. So I would point to that as one impact. And we will see how this plays out as we get further along. But that is a key assumption in our allowance calculation.

Michael Rose

It's very comprehensive answers. I appreciate it. Just one quick follow-up. So last quarter, you talked about mortgage revenues being down 40% to 50%. It seems like it's going to be better than that just based on your pipeline, the hirings that you've made and kind of the strength of your markets, any sort of gauge for what you'd expect that to be down now this year. Thanks.

Jamie Gregory

Yes. Michael, this is Jamie. I would adjust that range to down 10% to 30%. I would acknowledge that that’s a broad range and hopefully we end up at the high-end of that range. But I would definitely expect to see it higher than what we were expecting in January.

Michael Rose

Very helpful. Thanks for taking all my questions.

Jamie Gregory

Thanks, Michael.

Kevin Blair

Thanks, Michael.

Operator

The next question is from John Pancari from Evercore ISI. Please go ahead.

John Pancari

Good morning.

Kessel Stelling

Good morning, John.

Kevin Blair

Good morning, John.

John Pancari

Kessel, just want to say best of luck. I hope you make the most of retirement and certainly well deserved.

Kessel Stelling

Thanks.

John Pancari

So just want to start on the NII outlook. I know you had indicated that you see the first quarter as a trough, and you expect upside from here. What -- can you just maybe talk about what margin assumption is behind that? Just how you think about the progression of the margin from here, given the shape of the curve excluding the impact of PPP? Thanks.

Jamie Gregory

Yes, John, when you back out the impact of the Paycheck Protection Program, we actually would expect to see margin improvement as we head through the year, depending on how you would calculate the impact of PPP. It's -- we would say that the Paycheck Protection Program impact in the first quarter was more -- somewhere along the lines of 12 to 15 basis points, which is less than the straight fee income impact, but also including the 1% rate on those loans, which is non-dilutive.

And so we expect -- just like we expect NII, we would expect the margin to increase as we go through the year due to the benefit of interest rates, long-term interest rates and higher interest rates than where we are now and improved going on yields. And so we think that's a tailwind. But I would give it a big caveat that there were not -- it's uncertain how much liquidity will be on the balance sheet. And so the cash impact is significant. You're well aware that the impact is approximately 6 basis points per $1 billion. And so that is uncertain. And that could be very dilutive to the margin. But not impactful the NII as we go through the rest of this year.

John Pancari

Got it. Okay. Thanks, Jamie. That's helpful. And then in terms of the loan growth, it was more about timing is kind of what I'm interested. In terms of how are you thinking about it internally in terms of the timing of the return of your line utilization off that 40% level to that normalized 46% and I guess the same goes for the production levels reaching the pre-pandemic point. How do you think about the timing, given how things were trajecting? Are we looking at, if not, through the back half of this year, is it in the first half of next year? Just want to get an idea of how you expect that progression? Thanks.

Kevin Blair

Yes, John, it's a great question. And there's a lot of assumptions and uncertainties that go into that. To your point, we're pointing towards the second half of the year and that's just based upon our trended data that shows as I said earlier, pipelines are up 20% in the first quarter and production is only now about 11% down versus the first quarter of 2020. So we're continuing to see improvement. And as pipelines improve, as bankers become more active, we're optimistic that we'll start to see loan growth pick up. Now, as Jamie mentioned, this quarter, a big reason for our core growth being down was because of the consumer book.

So we saw more churn on the consumer mortgage portfolio and that led to about $100 million reduction in HELOC, but I think it's important to note that we did see a growth in both C&I, although its modest in CRE. So we expect that trend to continue. And as we said, at the beginning of the year, we expected mid single-digit growth in CRE and C&I and consumer was going to be a challenge. Now, Jamie also mentioned earlier how we are able to offset some of the runoff in mortgage in home equity with the purchase book, but we remain optimistic on the commercial side.

John Pancari

Got it. All right. Thanks so much, Kevin.

Operator

The next question is from David Bishop from Seaport Global Securities. Please go ahead.

David Bishop

Yes, thank you. Good morning, gentlemen. And I would like to reiterate my congratulations to Kessel on a stellar career there at Synovus.

Kessel Stelling

Thank you. Thanks, David.

David Bishop

A quick question sort of drilling down maybe on the margin and more on the -- maybe taking a look at the deposit sides here. Obviously, you guys are [indiscernible] near historic lows there. Just curious, where -- if you think you can take them even lower here and maybe where you see the bottom for deposit costs here over the near-term?

Jamie Gregory

Yes, David, this is Jamie. Thanks for the question. We do believe we have opportunities to further reduce deposit costs as we go through 2021 for multiple reasons. First is time deposits. We have $1.1 billion maturing here in the second quarter at approximately -- just a little bit more than a 1% rate. And we believe that we will likely continue to run those off as we go through the year, the higher cost time deposits. And we believe we also have opportunities to further reduce non-maturity deposits. We've had success working with our customers on non-maturity deposits over the past few quarters, and we expect that to continue. So if the rate and liquidity environment remains similar to the current expectations, we're targeting a total deposit cost in the mid teens. This will rely on future efforts to further reduce all of these deposit costs, but we feel confident in the team's ability to achieve those.

David Bishop

Got it. That’s good color. Then maybe sort of conversely on the low yield side, it looks like those are stabilizing. Just curious what you're seeing across the various markets and products there, just with the economy opening up across your footprint and across the country there. Are you seeing sort of risk premiums being washed away somewhat? Are you able to better price for riskier, just curious what you're seeing just in terms of loan yields present? And just loan yields in general across the market? Thanks.

Kevin Blair

Yes, David, it's a great question. I think if you look at our entire book ex fees, our portfolio is about 3.67 and productions coming in a little below that in the 3.40, 3.50 range on the yield side. And I think it goes back to Jamie's point with the excess liquidity that exists not only in banking, but across the entire spectrum, that we haven't seen people changing structures or changing their risk profile, but we have seen people competing on price. And obviously, that's easier to do when you're carrying the cash balances that most commercial banks are carrying. So it's becoming -- look, in my career it's never been a call where I've said that it's not competitive on price, but now it's just as competitive as ever but it's on the high credit quality type loans there. It's not on chasing risk and trying to price for it. It's everyone's trying to stay down the middle of the fairway, but price appropriately to win business, which means that we have some pressure on the margin there.

David Bishop

Got it. Thank you for the color.

Operator

The next question is from Steven Duong from RBC Capital Markets. Please go ahead.

Steven Duong

Hi, good morning, guys.

Kessel Stelling

Good morning, Steve.

Kevin Blair

Good morning, Steve.

Steven Duong

So just first, I just noticed the AOCI had a good drop this quarter. Can you just speak to what were the drivers that bring down the AOCI account?

Jamie Gregory

Yes, Steve, that really has to do with the unrealized gain on the securities portfolio and interest rates increasing.

Steven Duong

Okay. So that was just simply -- okay. And, Kevin, you mentioned that the Synovus Forward will start shifting more towards the revenue side with some of that coming from net interest income. So is that essentially meaning that it's coming from increased loan growth looking forward?

Kevin Blair

It's really all the above, Steve. When we look at our revenue initiatives, we talked about the $10 million that we had accomplished in the quarter, about $6 million of that came from our treasury repricing and another $3 million from deposit repricing, and we had a $1 million in some of our ancillary fee income. As we look to the future revenue initiatives, there'll be an expansion through our analytics program, where if you just break it down analytics is providing insights to our frontline bankers, who then are able to go out and proactively sell new solutions.

Some of those solutions are going to be lending, some of are going to be money market and savings accounts, which obviously have an impact on the margin. Others are going to be related to treasury and payment solutions, and so that'll show up more on the fee income line. So we haven't given a specific mix and where those are coming in, because part of it is as we execute on those leads will have a better recognition of where the revenue is coming from. But what we have seen from the pilot phases of the smart tool, the majority of the leads in this first round are coming on the fee income side. So we're seeing it more on the treasury side.

Now as we go forward and some of the revenue initiatives that we have in play into 2022, it'll be bringing on new specialty lending teams, it'll be adding new products and solutions to the lending platform. So there will be additional NII that comes from that. So as we execute on those revenue initiatives will provide a better delineation of the geography of where it's hitting the P&L.

Steven Duong

Got it. I really appreciate the color in that. And Kessel just echoing everybody's sentiment, best wishes on the next stage.

Kessel Stelling

Thank you very much.

Operator

The next question is from Christopher Marinac from Janney Montgomery Scott. Please go ahead.

Christopher Marinac

Thanks. Good morning. I wanted to ask about the comments Kevin made earlier in the call about the ability to price for advice. And I was curious if any of the revenue gains thus far, I know it's early on Synovus Forward having reflected that, or is there some price increases that you're getting over? We think about this is just net new business.

Kevin Blair

Chris, it's a great question. I think it's both. So when we see today, we just mentioned the $6 million quarterly run rate impact that we've gotten from what we call pricing for value comes out of our treasury and payment solutions area. So we have increased pricing there. But those are increasing to market levels, and I think not only it's important to reference their market levels, I think it's important to be able to maintain that pricing you have to provide value. And so for us, it's about increasing the amount of advice and consultation we're providing to our commercial customers as it relates to cash management services, and what we can do for them to save them time and money.

As it relates to new products, I think a lot of the advice from a revenue standpoint will be about how do we execute. It's bringing over assets under management by being a financial adviser. It's doing financial plans in our branches to be able to unearth some of the opportunities that our branches are getting with our consumer customers. And on the commercial side, we're running things like it's called client planning, where we're sitting down and understanding all of the opportunities that we have with a client based on what they're using today. So then it results in having to go out and sell those products. So advice to me, it's something that you can get paid for, you just have to deliver it in a timely manner. And it has to be something where the customer finds benefit in the solution.

Christopher Marinac

Got it. That's helpful, Kevin. And real quick, you are getting new business out of the Florida FCB franchise. I know it's evolving, but just want to confirm that.

Kevin Blair

Yes, we're getting growth out of Florida. I mean, look, that’s one of the reasons that we like the Florida acquisition was that that marketplace is growing. Now, in general, I was going to mention earlier that when you look at just account growth this quarter, we had 8,000 consumer net new accounts this quarter, we had 2,000 net new commercial checking accounts this quarter, and that came from all over our 5-state footprint. But both of those numbers are high watermarks for new accounts. And that's net new. So we're seeing account growth across the franchise and I think South Florida and Central Florida have been big contributors to the growth.

Christopher Marinac

Great. Thanks again for all the information this morning and Kessel, best wishes in your next chapter.

Kessel Stelling

Thanks, Chris.

Operator

The next question is from Steven Alexopolous from J.P. Morgan. Please go ahead.

Anthony Elian

Hi, good morning. This is Anthony Elian on for Steve. A follow-up on the revenue outlook. Kevin, you identified on Slide 12, the three areas that should help the company deliver sustainable top quartile performance, but you maintain the guidance of adjusted revenue to decline 1% to 4% this year. I know you said you're starting to see strength in some fee income products. But when can we expect to start seeing a more material pickup in total revenue growth? Is this more of a second half of '21 event or more of '22?

Kevin Blair

Anthony, it's a great question because I think to your point when you're evaluating growth on top line revenue, one thing it's important to note as we enter 2021 and as we move throughout the years that we've been hindered a bit by our asset sensitivity, so the reduction in rates is putting some headwinds on top line. I don't think that takes away from the fact that we still feel very confident at some of the underlying levers of growth.

As I mentioned earlier, we're starting to see opportunities where the loan growth is starting to play out in the second half of the year. We had CRE growth in the first quarter and we're expecting C&I to pick up with or without utilization. We talked about our ability to generate growth in fee income. We're up 18% in fiduciary and asset management, up 10% year-over-year in card fees, 5% in brokerage. So the fee income businesses are continuing to contribute.

We've also talked previously about investing in specialization and specialty lending and within our wholesale bank. If you look at where we've grown there year-over-year, we're up $500 million in loan growth and our specialty finance area. Public finance is up 31%, senior housing 25% and specialty health care up 26%. I give you all those because we believe that there are core pockets of growth that are going to start to be seen once the overhang of the reduction in interest rates kind of falls out. So latter half of 2021 into 2022, we think the story is going to be more compelling.

Anthony Elian

Okay. And then my follow-up, how much of the $2 billion of core transaction deposit growth you saw this quarter, would you say is sticky versus temporary due to things like stimulus payments?

Kevin Blair

Well, I think you can look at the amount of funding that we said we had on P3 and that was about $900 million. So let's just say you subtract that out, it would still suggest that more than half of the balances came on as sticky deposits. Now, when we say sticky deposits, as Jamie mentioned earlier, is it sticky for the next 10 years or is it sticky for the next 2 years, but we do believe there was high quality growth outside of the P3 balances that we were able to fund this quarter.

Anthony Elian

Okay, great. Thank you. And echoing everyone, Kessel, congratulations on everything and best of luck going forward.

Kessel Stelling

Thank you.

Operator

The next question is from Brody Preston from Stephens Inc. Please go ahead.

Brody Preston

Good morning, everyone. Thanks for all the time this morning. I'll try to be brief here. Jamie, I was hoping maybe you could just help us ring fence $1 amount around in the salaries and personnel expense. How much was seasonal and sort of where you would expect that to go in the second quarter?

Jamie Gregory

Yes, Brody, in the first quarter, we had approximately $6 million to $7 million that was seasonal, just annual increases and expense and personnel expense. And so that that's what will go away as we go through this year.

Brody Preston

Okay. And the four branches that you outlined, I think the previous benefit from the last closures was about 925k per branch. Is that a similar kind of benefit go around?

Jamie Gregory

I assume 500k per branch.

Brody Preston

Okay. Okay, great. And then just one on the loan portfolio. I noticed that the senior housing ticked up quite a bit this quarter. Just wanted to ask, how much of that was PPP related and how much was non-PPP related? And then just more broadly on the entire loan portfolio, Jamie or Kevin, maybe you could just give us a sense for what percent of the portfolio is floating rate at this point?

Kevin Blair

Yes, I'll take the first one senior housing, Brody. None of the growth in senior housing was related to P3. It was all organic growth. We actually brought in seven new relationships to the bank this quarter in senior housing. They continue to do very well. We have none of those loans that are in deferment. We have none that are past due. So that portfolio is held up extremely well. And now there's opportunities for expansion. As you know, that team has been doing this for quite some time, they follow operators around the country. And so there's going to be continued new opportunities there. And we have taken the opportunity to grow that book, but none of it is related to P3.

When you look at the growth this quarter in general, healthcare continues to be a good area of growth for us in general, not just senior housing. We've also seen growth in the construction industry as Bob has mentioned in the past. We also saw growth this quarter in professional services, financial and insurance as well, and a little bit of growth in manufacturing. So we're starting to see a broad base across several industries, which is good, but senior housing just one of those areas. Now, Jamie, I'll let you answer the variable rate.

Jamie Gregory

Yes, we're 52% variable rate.

Brody Preston

Okay. And I guess what percent of that would you consider floating?

Jamie Gregory

All of that is floating rate and of that about 8% of loans are prime based and you have around 44% that are based off of LIBOR.

Brody Preston

Okay, great. Thank you for taking my questions. I appreciate it, guys.

Jamie Gregory

Thanks, Brody.

Operator

The next question is from Jennifer Demba from Truist Securities. Please go ahead.

Jennifer Demba

Thank you. Good morning.

Kessel Stelling

Good morning, Jennifer.

Kevin Blair

Good morning, Jennifer.

Jennifer Demba

Kessel, congratulations on an amazing tenure. We're going to miss working with you.

Kessel Stelling

Thanks, Jennifer.

Jennifer Demba

Two questions, really quick. Kevin, you mentioned you'd likely be hiring some specialty teams over the next 1 or 2 years. Can you give us some more color on that? And my second question is, if you look at the sub markets across the Synovus footprint, which ones seem particularly ripe for more market share gains for you right now? Thanks.

Kevin Blair

Yes, thanks, Jennifer. Look, as you think about specialty, it really come out of two forms. One would be industry type specialties focusing on specific industries and I throw things out there like QSRs, transportation logistics, things that fit within our footprint, where today we're covering them and not always covering them with specialists, but with generals looking to build out our capability there. We proven that when you bring in specialty teams, it provides a value to our customers and it generates growth. So we're looking at industry. And then the second would be on products. As you think about the products that we offer today, we don't have a full set of asset classes. So we may look to expand into leasing or equipment finance, or accelerate some of our specialty lending areas into new forms of asset based lending. So those are the two areas we would look.

And then in terms of growth, look, I would start with the markets that were already strong. And you look at markets like Atlanta, where we have a strong market share, when you have that sort of density, it provides you with an opportunity to continue to grow. We think the underlying market is growing and as you know there's some disruption in that market. But I would also look at the Florida market I mentioned earlier, South Florida, Central Florida, tremendous opportunity. When you see the number of businesses and the amount of population growth that's happened in Florida, we need to make sure that we continue to exercise our right to win in that footprint.

And then I wouldn't leave out some of these secondary markets that we often talk about Greenville, Charleston, Augusta, Georgia, places where we feel like we have a opportunity to win and we're picking up market share. And it's probably not on the radar of some of the large bulge bracket firms.

Jennifer Demba

Thank you.

Operator

The next question is from Kevin Fitzsimmons from D.A. Davidson. Please go ahead.

Kevin Fitzsimmons

Hey, good morning, everyone.

Kessel Stelling

Good morning, Kevin.

Kevin Fitzsimmons

First, real quick, can I ask about the reserve ratio that I recognize the change in expectations and that led to the negative provision, assuming there is no material change and where expectations go from here would we expect a positive provision as you have better loan growth, but for that ratio to come down more gradually than what we saw this quarter? I know that's tough without you put the different inputs in the model, but assuming what you see, looking out from here. Thanks.

Jamie Gregory

Kevin, its Jamie. What I would say the way I would answer that is similar to what we said in January, there's uncertainty we believe that our allowance is adequate, given our outlook and the uncertainty in the outlook. But we do see scenarios where credit costs remain low and charge-offs remain low like what we're -- our guidance right now is where charge-offs remain low in the near-term. We feel like we have line of sight into that, and then we'll see where it goes from there.

And as I mentioned earlier, at some point, you will come to a resolution around the question of did stimulus delay charge-offs, or did it cure charge-offs. And for us that's the important question with regards to our allowance. And I believe that that's more of a function of time, because we need to get past the incremental stimulus efforts to really know the state of all of our creditors, all of our borrowers. And so that's what we're looking for. But we feel good about where we are right now, as you see our allowance to loan ratio declined 12 basis points on the quarter adjusted for P3.

If you look at our guidance on charge-offs that’s for stable at a very low level. We feel good with what we see in the loan book today. And that's something that we will constantly reassess as we go through 2021. We do remain of the belief that in a more normalized environment, assuming no material changes to loan mix that we will approach a day one allowance level. And for us, that was 1.06%, but we're uncertain of the timing of that.

Kevin Fitzsimmons

That's great. Thank you. And, last but certainly not least, I just want to say congrats to Kessel. It's been a privilege and honor for me for several years to cover Synovus and to get to know you, and to be a witness to your tenure as CEO. I think in several notes ago, Kessel I titled it, improvise, adapt and overcome related to Synovus. And I really, really feel that that's kind of a good generalization of how I viewed the journey here. And so maybe I might just throw this back to you Kessel, beyond quarterly earnings, if you can take a minute and talk about what aspects you're most proud of or you've improved in the operating model as you're handing over to Kevin here at this point. Thanks.

Kessel Stelling

Well, Kevin, that's a loaded question. Thanks for those comments, you might make it tough for me to close. I don't know that I have a proud moment. I'm proud of this team and I'm proud of the tenacity of the team. But look back to 30 charters consolidated when people thought that that could never change, I think of the gosh to recapture the DTA, the repayment of tarp in a way that was much more efficient, I think in the market. Expected, gosh, the creativity of the Cabela's transaction, which is kind of lost where we received a $75 million fee for facilitating a transaction that, quite frankly, is called when our regulatory standing and our knowledge of that industry. And then, I think great acquisitions Global One, FCB, but the glue that held that all together was, again tenacity of the team, the united nature of our Board, which never wavered throughout my tenure, when there were some tough days, Kevin, as you remember. And then again, our customers never left us. We had sticky customers through the crisis. We have sticky customers today.

And again, I'm proud of the relationships we formed with those of you on this call, I've received so many notes, not just nice things said today, but notes as we've been on this call for many of you, I've travelled with many of you, I probably argue with many of you. But I have deep respect for what you all do for our industry, and you really do help make our company better. I will just add one last thing many of you have congratulated me on retirement, I don't consider this retirement as a new phase, as I move into executive chair. I am all in and helping this team, this company succeed.

As a matter of fact, at 6:30 this morning, we gathered in Jamie's office and I in a very serious way asked Jamie and Kevin to think about and I was pretty serious, they weren't, to think about what role they wanted me to play in preparing them for the next core earnings call. And I got kind of a blank look. So I think more to come on that, but I'm all in for this company. So I guess, Kevin, I always said I wanted to leave this company better than when I found it. There were some great leaders before me, I hope I've done that. Again, I'm proud of the relationships, I'm proud of -- I hope the reputation we have or transparency with you guys, transparency with our regulators. And again, the support that I've enjoyed from Board's executive team to the teller line in the most remote branch has just been an honor to serve this company. I appreciate your comments. And thank you for that question.

Kevin Fitzsimmons

Congrats again. Thanks, Kessel.

Kessel Stelling

Thank you.

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 Stelling

Well, thank you. I think I just -- I think [indiscernible], but let me just thank everyone again for joining and for your continued interest in and support of our company. I think as you've heard throughout the update today, challenges persist, but our team remains determined. Our first quarter results certainly reflect our ability to deliver despite the environment. Our focus is right. Our priorities are right. Our investments are in the right places in customer experience and digital advisory capabilities. And this team fully understands that we must continue to execute and deliver on the expectations we've set.

So again, as I just said, as I move into my new role of Executive Chairman and Kevin Blair steps in as CEO, I just want to make sure everyone understands that the energy and the optimism among our team are high and I've just never been more confident in the future of this great company. So thank you all again on this call and hope you have a great rest of the day. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.