Apr 18, 2017
Executives
Bob May - Senior Director, IR, and Capital Management Kessel Stelling - Chairman and CEO Kevin Blair - CFO Kevin Howard - EVP and Chief Credit Officer
Analysts
Emlen Harmon - JMP Securities Jared Shaw - Wells Fargo Securities Ebrahim Poonawala - Bank of America Merrill Lynch Jennifer Demba - SunTrust Robinson Humphreys, Inc Ken Zerbe - Morgan Stanley Kevin Fitzsimmons - Hovde Group Casey Haire - Jefferies Steven Alexopoulos - JP Morgan Nancy Bush - NAB Research John Pancari - Evercore ISI Christopher Marinac - FIG Partners Brady Gailey - KBW
Operator
Good morning, ladies and gentlemen, and welcome to the Synovus First Quarter 2017 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host, Bob May. Sir, the floor is yours.
Bob May
Thank you, Samantha, and good morning everyone. During the 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 be our primary presenter today, with our executive management team available to answer your questions. Before we begin, I'll remind you that our comments may include forward-looking statements.
These statements are subject to risks and uncertainties, and the actual results could vary materially. We list these factors that might cause results to differ materially in our press release and in our SEC filings which are available on our website.
We do not assume any obligation to update any forward-looking statements as a result of new information, early developments or otherwise, except as may be required by law. During the call, we'll reference non-GAAP financial measures related to the Company’s performance.
You may see the reconciliation of these measures in the appendix of our presentation. Thank you, and now I’ll turn it over to Kessel Stelling.
Kessel Stelling
Thank you, Bob, and good morning to everyone. Welcome to our first quarter earnings call.
We've got a lot to cover this morning. So as usual, I’ll walk through the deck and the focus primarily will be on the main event, which is what we believe would be very strong first quarter and then we'll close the presentation with a recap of the transaction that we announced yesterday.
So, let’s start with Slide 3 of the earnings presentation, and you'll see profitability continued to improve during the quarter. We reported net income available to common shareholders of 69.3 million, which represents a 39% increase versus the first quarter of 2016.
Diluted EPS was $0.56, up 5.1% versus the fourth quarter, and up 44% versus the first quarter of ‘16. Adjusted diluted EPS was $0.57, which represents growth of 5.4% versus $0.54 in 4Q ’16 and growth of 30% versus the $0.44 reported in the first quarter of '16.
First quarter results include a $4.1 million tax benefit worth $0.03 per share from the adoption of a new accounting standards update, which requires the tax effects from share-based compensation be recorded through earnings instead of through equity. Kevin Blair will be happy to talk more about that later.
This was a primary driver for the decrease of the effect of tax rate to 32%. The impact from this change will be significantly lower for the remainder of the year.
We currently estimate the benefits for the rest of the year will be less than $1 million for the quarter. Total revenues were 304.1 million, up 2.4 million or 0.8% sequentially, and up 8.1% versus a year ago with net interest income increasing 10% and adjusted non-interest income increasing 4%.
Solid performance this quarter has resulted in continued progress towards all of our long-term goals, but I just want to highlight our return on assets this quarter was 0.96%, improving 6 basis points sequentially, and 23 basis points versus a year ago. Moving to balance sheet, total average loans increased 313 million or 5.4% annualized on a sequential quarter basis, and grew 1.45 billion or 6.4% versus a year ago.
Total average deposits grew approximately 258 million or 4.2% annualized versus the fourth quarter of '16, and 1.71 billion or 7.4% versus the first quarter of '16. A couple of highlights on credit quality capital, we continue to see favorable credit quality metrics.
The NPL ratio 0.65% continues to hold relatively a little well over an improved 13 basis points from the first quarter of 16. Our return on average common equity increased 289 basis points versus the first quarter of '16 to 9.97%.
We are also very pleased to see that our return on average tangible common equity increased 311 basis points versus 1Q '16 to 10.26%. Moving to Slide 4, I want to provide you a little more color on loan growth this quarter, and as usual Kevin Howard will provide even more color in the Q&A.
The amounts on the graph represent period-end balances. We reported quarter loan -- sequential quarter loan growth of 402 million or 6.8% annualized.
We saw balanced and diversified growth for the quarter. C&I loans increased 189 million or 6.6% annualized.
Consumer loans grew 120 million or 9.8% annualized, and CRE loans grew 93 million or 5.1% annualized. While year-over-year basis loans grew 1.5 billion or 6.6%.
C&I loans increased 931 million or 8.6%. Consumer loans grew 720 million or 16.5% and CRE loans actually declined by 154.4 million or 2% from the first quarter '16, reflecting growth in investment properties of 121 million while seeing declines in non-strategic 1-4 family and the land development.
Total average loans grew 313 million or 5.4% annualized versus the fourth quarter '16 and 1.45 billion or 6.4% versus the first quarter of '16. The quarter highlights our enhanced capabilities with broad-based growth in several strategic areas of focus on our senior housing specialty unit, consumer mortgage, our life insurance premium finance business as well as our small business lending efforts all posted significant growth this quarter.
Moving to Slide 5 in deposits, you'll see that first quarter '17 total average deposits 24.92 billion increased 257.6 million or 4.2% annualized versus the fourth quarter '16, led by sequential quarter growth of 371.7 million or 8.5% annualized and our average core transaction deposits partially offset by seasonal declines in state county and municipal balances. On year-over-year basis, first quarter total average deposits increased 1.71 billion or 7.4% versus the first quarter of '16.
Average core transaction accounts increased 1.61 billion or 9.7% versus first quarter '16, and overall increase in customer average balances and our focused efforts to attract grow positive relationships in smaller business and mass affluent segments have driven the year-over-year growth in core transaction balances. Given strong deposit growth, the loan deposit ratio decreased to 96.6% down 16 basis points versus the fourth quarter of '16 and down 43 basis points versus the first quarter '16.
Average broker deposits increased 286 million or 26.1% versus first quarter ’16, due to our Synovus securities deposit sweep product that we've rolled out May of 2016 and has accredited 300 million in deposits. This product we'll have 17.4 million or 22.5% annualized sequentially as we continue to expand our assets under management.
Moving to Slide 6, you'll see net interest income is 240 million, increasing 6.4 million or 2.7% versus fourth quarter '16 and 10% versus the first quarter of '16. The increase in net interest income is driven by strong loan growth as well as margin expansion.
Aided by the way higher in December and March, the net interest margin for quarter is 3.42%, up 13 basis points from the fourth quarter of 16. The yield on earned assets was 3.88% up 15 basis points versus fourth quarter ’16 with the yield on loans are 4.25%, up 11 basis points.
Sequentially, yield on investment securities was 2.07% up 14 basis points sequentially, and with the overall focus on pricing discipline, the effective cost of funds was 46 basis points for the quarter, up 2 basis points from the quarter '16. Looking little more closely to deposit rates, the cost of interest bearing core deposits increased one basis points sequentially to 0.36% largely due to strategic re-pricing and mix related changes.
And I’ll call your attention to a new slide in the appendix Page 17 which contains additional information on product interest rates sensitivity profile as well as the investment securities and loan portfolios, and again Kevin Blair will be happy to speak to that later in the call. Turning to Slide 7 and fee income, non-interest income for the first quarter was 72 million, down 2.2 million or 2.9% versus the fourth quarter and up 13.8% versus the first quarter of ’16.
Other income this quarter includes net investment security gains of 7.7 million, partially offset by a net decrease in the fair value of private equity investments of 1.8 million. The gain for quarter includes a $3.4 million of gain with sale of equity position and $4.4 million gains from the repositioning of the investment securities portfolio.
Several gains of approximately 6 million were recognized in the fourth quarter of ’16. Adjusted non-interest income of 66 million decreased 2.6 million or 3.8% versus the fourth quarter, an increase of 4% versus the first quarter of ’16.
We’ve experienced strong sequential quarter and year-over-year growth in fiduciary/asset management, brokerage and interest revenues as well as mortgage banking income. Fiduciary/asset management, brokerage and interest revenues totaled 12.7 million which represent a 1.6% sequential quarter increase and a strong 10.3% increase versus the same period a year ago.
The year-over-year increase is driven by 7% growth in assets under management as well as increased banker productivity we continue to benefit from new talent additions. We’re also very pleased with the 4.3% sequential quarter increase and assets under management, which will provide momentum for the remainder of the year.
Mortgage banking income 5.8 million for the quarter, an increase of 4.8% sequentially, an increase of 5.1% from the year ago, year-over-year growth was driven by our previously announced investments in talent and technology with secondary production increasing 13% versus the same quarter last year. Total mortgage production of 279 million is up 20% versus a year ago.
Turning to Slide 8, let's just spend a few minutes on expenses. On first quarter ’17, total non-interest expense was a 197.4 million, an increase of 4.2 million or 2.2% versus the fourth quarter of ’16 and 0.9% versus the first quarter of ’16.
First quarter ’17 includes 6.5 million in restructuring charges consisting primarily of termination benefits incurred in conjunction with a voluntary early retirement program offered during quarter. This program is part of our ongoing efficiency initiative and expected to result in annual savings with approximately $2.5 million that was included in our original 2017 guidance.
First quarter ’17 adjusted non-interest expense was a 190.6 million, increased 3.6 million or 1.9% versus fourth quarter and 11.4 million or 6.4% versus the first quarter ’16. Year-over-year expense growth is driven by strategic investment in talent and technology, increased advertising expenses and the Global One acquisition.
Strategic investments in talent and technology accounted for approximately $5 million of the increase as we continue to add talent and investment in technology, aimed at enhancing the customer experience. The $3.5 million increase in advertising expense is a timing-related increase as we incurred expenses this quarter associated with our brand.
And targeted advertising efforts included our ad that ran across our footprint during the Super Bowl. Advertising expense is expected to be flat to slightly up in 2017.
In addition, $1.2 million of the year-over-year increase is due to the addition of the Global One operating expenses. I also want to make sure you’ve noted the revision in the adjusted efficiency ratio calculation this quarter.
ORE expense and other credit costs have been excluded in the past, but will be included going forward and we have restated previous quarters as well. The change in the calculation resulted in a higher adjusted efficiency ratio of 62.25% in the first quarter, an improvement of 129 basis points from a similarly restated number in the first quarter of ‘16.
Had we continued to report the ratio as was calculated in 2016, the adjusted efficiency ratio would have been 60.85%, an improvement of 94 basis points from the first quarter of ‘16. Turning to Slide 9, you’ll see credit quality metrics continue to be favorable.
The first graph shows NPA, NPL and delinquency trends. The NPA ratio moved up slightly three basis points to 0.77% compared to 0.74% the prior quarter, down significantly from 0.95% in the same quarter a year ago.
The slight increase in the quarter is due to a lower-than-usual volume of disposition activity. It should be noted that we moved $11.6 million in loans that held-for-sale during the quarter and marked in the liquidation value, we anticipate these loans being sold early in the second quarter.
NPLs were flat 0.65% compared to 0.64% the prior quarter and down from 0.78% in the first quarter of ‘16. Past dues remained low at 0.26% which is a one basis point improvement over the previous quarter and a two basis point improvement over the first quarter of ‘16.
Net charge-offs for the first quarter were 6.9 million or 12 basis points compared to 14 basis points in the fourth quarter and 0.13% in the first quarter of 2016. The low level of net charge-offs this quarter is attributable to a lower level of gross charge-offs rather than high recoveries as we have seen in the past.
And again, Kevin can give you more color on that. Provision expense $8.7 million, it reflects an expected increase from $6.3 million in the first quarter this compares to $9.4 million in the same quarter a year ago.
This increase relates to components of loan growth as well as the previously mentioned lower rate of recoveries. The allowance for loan losses increased by $1.7 million in the first quarter $253.5 million, while the ratio declined one basis point to 1.05%.
Compared to a year ago, the allowance is down $1 million and the ratio declined seven basis points. Coverage ratio remained strong with reserve covering NPLs of 160% or 205%, if you excluded the impaired loans for which the expected loss has been charged off.
On Slide 10, I won’t read all the capital ratios to you, but you’ll see they remained strong in the quarter. First quarter of ‘17 CET1 ratio is 9.86%, down 10 basis points versus the fourth quarter of ‘16 a little bit increased and phased in and this allowed DDA under Basel III to 80% from 60%.
The first quarter of ‘17 CET1 ratio on a fully phased-in basis is estimated at 9.63%. You’ll see total risk-based capital remained strong at 12.09% versus 12.01% in the fourth quarter ’16.
And lastly, I'll highlight that we repurchased $15.1 million in common shares for the quarter. As we stated in January, our repurchase volume will be optimistic based upon on our level of organic growth, liquidity levels and overarching capital levels.
Turning to Slide 11, just a couple of comments on our previously stated 2017 guidance, you'll see most of our guidance remains the same. A couple of changes resulted in balance sheet growth, the recent market rate hike which we did not include in our previous guidance, as well as overall margin assumptions.
We now expect net interest income growth between 10% to 12% for 2017 that we previously guided at 8% to 10%. We previously also disclosed the 2017 estimate of 36% and 37% for our effective tax rate.
As I mentioned, we're going over the quarterly highlights, our effective tax rate in the first quarter was 32% due to the effect of the adoption of share-based payments, accounting standard update. We currently expect our effective tax rate to be in the 34% to 35% for the full year of 2017 due to continued potential tax expense volatility for the ASU, but also the implementation of new tax credit strategies as our federal NOL diminishes.
And the lastly before I transition to the announcement of yesterday, I just want to provide an update on our transition to a single brand, Synovus. It's widely known that we're completing this year a transition of all 28 bank of ATMs to a single bank operating environment that improves efficiency and productivity both for our team and for our customers and ultimately an enhanced customer experience.
We’ve also announced to various channels since last fall our intention to fully transition to a single brand culminating in 2018 with consistent Synovus signage across our footprint. We’re continuously evolving to meet the changing need and expectations of our customers who live in a 24x7 digitally connected highly competitive world.
This transition to a common brand is a next important step in our long-term growth strategy to boost awareness among customers and prospects. I feel we are where we are and how we can meet their needs or any scale.
It is important to note that our local teams and local leadership will remain in place during and after the brand transition. Customers will continue to have same relationships with local bankers and our communities will continue to count on us to be deeply engage in their growth.
These are foundational components of delivery model we believe distinguish our brand of banking from our competitors. And now transition to the announcement of yesterday, which is the agreement with World’s Foremost Bank and Capital One.
Yesterday, we entered into a definitive agreement to acquire certain assets and assume certain liabilities of World’s Foremost Bank, a wholly-owned subsidiary of Cabela’s Incorporated. Immediately following the closing of this transaction, Synovus will sell the credit card assets and related liabilities to Capital One Bank, while retain the approximately $1.2 billion in brokered time deposit portfolio.
The transaction is expected to close in the third quarter of 2017 and is subject to customary regulatory approvals as well as completion of the Cabela’s and Bass Pro Shops merger announced in October 2016. The deposit portfolio consists of approximately $1.2 billion of brokered time deposits with the weighted average maturity of approximately 2.75 years, but weighted average book rate of the portfolios is approximately 1.85%.
However, the rate we marked to fair market value at the time of closings, we intend to use the additional liquidity to fund organic loan growth as well as replace other sources of wholesale funding such as our $800 million of brokered time deposit portfolio that is largely maturing in 2017. In terms of the financial impact of the transaction and we filed the 8-K and agreement last night, so I'll refer you that.
But pursuant to the terms of the agreement, you'll see that upon close, Synovus will receive $75 million in aggregate consideration from Cabela's and Capital One, which will be recorded in non-interest income with the deposit mark that equalizes a book value of deposit liabilities to the fair market value based on the average rate of brokered time deposits at the time of closing, minus 10 basis points. Given the aspect, this transaction is expected to be immediately accretive to earnings and the capital.
As we approach closing transaction, we'll evaluate all options or alternatives for usual utilizing the proceeds. Similar to our current efforts, we're evaluating and executing on restructuring opportunities, we're currently evaluating opportunities and alternatives to optimally deploy that proceeds in areas such as organic business growth, balance sheet restructuring, extinguishment of debt and capital distribution, all ongoing strategies.
Again, this transaction gives us additional flexibility. I'll just close by reiterating that this is an opportunistic transaction for Synovus.
It'll provide additional liquidity at favorable rates as well as proceeds through the $75 million fee that will give us additional flexibility on ongoing balance sheet restructuring efforts. The transaction presents a little operational risk and will be financial accretive immediately.
We hope have to the deal close by the early part of the third quarter, but just want to make sure all this transaction will not be a distraction from our efforts and initiatives associated with the growth of our business and the proceeding of our long-term financial goals. If anything, this transaction will simply accelerate our achievement for those goals.
With that in mind, let me turn it back over to Bob to start the Q&A portion of our call.
Bob May
Operator, we're ready for questions now.
Operator
Thank you, ladies and gentlemen. The floor is now open for questions.
[Operator Instructions] Your first question is coming from Emlen Harmon. Please announce your affiliation then pose your question.
Your line is now live.
Emlen Harmon
Hey, good morning guys, JMP Securities. Just on the transaction.
What discussions if any have you had with regulators, just about the structure of this transaction and just kind of what your degree of confidence is going to be approved and closed by the third quarter?
Kessel Stelling
Thank you, Emlen. As you know, I think regulators are not in the practice of pre-approving or pre-objecting the transactions like this, but we've been in very meaningful discussions with our partnering regulators during the course of these negotiations and although we can't predict when they might approve.
We have confidence that the transaction will be approved and closed, but again it's subject to the normal approval process, but I think suffice to say that we would not have entered into a transaction that we didn't have some degree of confidence that would get approved. But again there is a process, it involves multiple parties in this case, so we can only control our piece of it, but we have had regular discussions with our partnering regulators.
Emlen Harmon
And then just thinking about the financial impact of the transaction, I mean, how do you think about how this impacts your ROA coming out of the gate? And do you have this kind of a preliminary feel for what the IRR on this transaction is?
Kessel Stelling
Just let me take a high level and turn it over to Kevin Blair. So, this is a standalone transaction, you can do the math of the second time in our tax adjusted transaction base.
So that’s speaks to itself. I'll let Kevin speak to maybe the on-boarding of deposits which again will be adjusted to market at the time of closing, so it's a little tough for us to predict that now.
And then ongoing from a longer-term ROA, again keeping mind that we got to close the transaction that we just announced, but post-closing we do believe that the proceeds of the transaction would give us additional flexibility as we evaluate things such as debt restructuring, balance sheet restructuring including accelerated sale of NPAs, NPLs, other corporate real-estate. And so to quantify the longer term effect of that might be a little bit difficult, but now that I've shown you that how difficult it will be, I’ll turn over to Kevin Blair for additional comments.
Kevin Blair
I really appreciate that Kessel. Kessel is right.
This is not a normal transaction where you can look at traditional IRR characteristics because we're not outlaying cash for capital for the acquisition. It's much more of a balance sheet transaction where as Kessel mentioned $75 million, if you just drop that to the outline would be naturally accretive and would drive up EPS by $0.39.
But as Kessel mentioned, we want to look at the opportunities from that proceeds for most proceeds to be able to continue to deliver long-term accretive earnings growth. And so, we will look at some of those actions, balance sheet restructuring as Kessel mentioned.
In terms of the deposits, we’ll onboard the $1.2 billion of deposits that Kessel mentioned that will come on and what we have favorable rate. It will be a fair market value with the liquidity discount.
It may be slightly dilutive to margin initially, but as we deploy those funds into our loan portfolio, both organically as well as potentially synthetically through derivatives, we’ll be able to normalize the margin and be able to utilize those deposits to grow overall net interest income. So, we think that will be accretive as well once we’re able to onboard and bring in those deposits.
Emlen Harmon
Got it. Thanks.
So, it'd be a better way to ask that question initially would have been, I mean the 75 million that comes on basically going to -- in fact we're going to self-capitalize the assets that you'll put on the other side of those liabilities. Is that fair?
Kevin Blair
Yes, that’s fair. And look, we haven't committed anything with the 75 million, just we have optioned that it provides us with a one-time benefit.
But we’ll get some of those transactions, as Kessel mentioned, we look at every quarter. It’s a one-time fee income item that we could offset with potential restructuring items.
Operator
Okay. Your next question is coming from Jared Shaw.
Please announce your affiliation then pose your question. Your line is now live.
Jared Shaw
Hi, good morning. Wells Fargo Securities.
Just following up on that. Should we look at this as a self-contained individual transaction where you’re effectively just taking down 2.75 year duration in wholesale funds?
Or is this going to be a business sign that you stay active in and going forward and that this should be able to continue to provide some additional liquidity after these initial funds run through?
Kevin Blair
No, it's Kevin. It’s a one-time transaction.
So, there is no forward flow arrangement that we would continue to receive any liquidity from this arrangement.
Jared Shaw
Okay. And then when we look at Slide 17 at the interest rate, the interest sensitivity.
Is that not including the impact of this?
Kevin Blair
In fact, this is just our interest rate sensitivity at the projecting our balance sheet at the end of the first quarter.
Jared Shaw
Great. Okay.
Just wanted to confirm that. Thanks.
And then looking at the security side what the gains you took this quarter. Was there another larger restructuring associated with that?
Or is that just opportunistic gains when you look at the change in yield with that gain? Was there a larger transaction we have there?
Kevin Blair
Two things. Yes, there was a transaction behind there, as Kessel mentioned of the talking points.
We did liquidate an equity position, which was $3.4 million with the 7.7. There were $4.4 million of gains we took out of securities book.
And I would say some of that was opportunistic gain and some of it was restructuring. So, the 14 basis points that we we’re able to pick up on the security yield was a function of that.
And we think, there are some potential opportunities to continue to expand that going forward, but we are not seeing any additional large security gains in the portfolio.
Jared Shaw
And then on the deposit side of the interest rate sensitivity. What -- have you updated your deposit betas or any changing thoughts on deposit performance as we look at potentially increasing or additional rate hikes?
Kevin Blair
Yes, the deposit betas have not been updated. We’ve always modeled conservatively at the -- let’s say 50% range.
So, when you look at Slide 17, you look at our asset sensitivity. Note that we have an escalating beta that starts off, say, the 40% range and at the up 25% and goes well above 50% as we do a shock over a 100.
As you know and you see in our results, we haven’t experienced those betas on the rate hikes that we have had to-date. But from a conservative aspect in terms of modeling to potential betas, we continue to keep it at that 50% range.
First quarter, the February rate hike looks to have created roughly a low single-digit deposit beta for us. But as there is talk in the industry and as we know that the competitive landscape continues fairly rapidly, we want to make sure that we continue to monitor that and assume that it could be much higher than what we’ve seen today.
Jared Shaw
And then just finally, when you look at the tailwind of recoveries. Does that really come to an end on the charge-off side?
Or should we start to see net charge-offs start to normalize here? Or is there anything you think in the pipeline that make recoveries maybe come back out in the next few quarters?
Kevin Howard
No, I think as we go -- this is Kevin Howard. As we get a little further again away from the recession, those recoveries have been going down a little bit.
They were down probably 3.5 million from last quarter. So that’s how we’ve guided up.
Quite frankly, we think our gross charge-offs will stay pretty level where they’ve been over the last few quarters, but our debt will climb up, probably in that 15 to 20 range is our expectations again, probably mainly due to slower recoveries. So we do expect that to wind down a little bit during the quarter.
Operator
Okay. And your next question is coming from Ebrahim Poonawala.
Please announce your affiliation then pose your question. Your line is now live.
Ebrahim Poonawala
Bank of America Merrill Lynch. Just one first question on capital and.
I guess, as we sort of go through this transaction. Does the approval process limit your ability, one, to do any other M&A, let’s call it a bank M&A?
And second, does it limit your ability to buy back stock in the interim period?
Kessel Stelling
Yes. We don’t believe it with anyway when our ability to just play in additional M&A transactions.
We’ve been very clear about the strategic nature of that lens and how they would have to make, again, strong financial and strategic sense and not be dilutive to our shareholders. So, no, we do not believe that this would limit our go forward opportunity in any way.
And there is a second part of your question.
Kevin Blair
Share repurchase, no, it won’t limit your share repurchase either. If anything, we may have a small impact in the first quarter given that we were in a blackout window as we are negotiating the transaction that would limit further repurchase in first quarter, but no headwinds moving forward.
Ebrahim Poonawala
And then as a follow-up to that. Can you remind us Kessel and Kevin in terms of your appetite to buy back stock at current valuations?
I mean you mentioned the blackout period had an impact in one, I’m just wondering, the appetite today in terms of where the stock is to buy back more stock and get to that close to $200 million for the year? Or how you’re thinking about that?
Kevin Blair
Yes. I remind you that, what we have shared last quarter that we have authorization of the $200 million and our stand on action has really not changed.
We’re looking at it a situational basis every quarter to evaluate the current stock price, our liquidity position to be overarching capital ratios, but also what our organic loan growth is. And with the combination of factor, we’re making decisions on how much shares we want to repurchase within an each quarter.
So, I don’t think that’s changed versus the original guidance. I wouldn’t read too much into the 50 million this quarter and make that a run rate or conversely I wouldn’t assume that we're going to continue to buy back share.
I think as we look at all of our options, we're going to take a very financially based IRR approach to doing so. And as you said, the current price what it is will have an impact on whether we buy back their shares or not.
Kessel Stelling
And Ebrahim, now I just follow up on your question about any effect on our longer term stability to participate in another transaction. Quite frankly, our focus on what we’re doing everyday to grow our core business.
I’m not trying to minimize the complexity of this transaction because as you know, the announcement involves Bass Pro, Cabela’s, Capital One, Synovus, and we each have our own work do to get finish line. But assuming closing of this transaction, the due diligence on our part has been intense and largely done.
And at the point of closing, we would then lead to onboard sometime of brokered time deposits. There is no systems conversion.
There is no people conversion. There is no distraction to our team either from an operational or really quite frankly from a regulatory standpoint on a go forward basis.
So, we believe again it is, as Kevin said, optimistic, a lot of work to do to get the finish line. But in terms of ultimate execution, it will not see a distraction to our team.
Ebrahim Poonawala
Understood. And just on a separate topic, your decent loan growth this quarter and there was enough sort of uncertainty around the industry data on loan growth.
I was wondering if you can comment, Kessel, just in terms of what you’re seeing on C&I, CRE across your footprint, any areas of particular strength or weakness? And are we seeing any signs at this optimism that we’ve seen sentiment surveys translating into real demand?
Kevin Howard
This is Kevin Howard again. We’re fairly optimistic about loan growth this year.
I mean there is a package that we were watching a little closer. Some of the multi-family we mentioned before, we pull back a little bit on commitments there.
We had growth there this quarter, but that was more funding of the existing construction loan, so we’re watching sort of the Class A in certain markets there. We’re certainly watching what's going on in the retail shopping center business.
So, we've done a lot of closing. I'll tell you from our perspective we're more -- we're not really into the big department stores.
We don't have a lot of those that's more -- for us, it's more strip center, smaller credit tenants, more of those type of tenants. But anyway -- there're some things we're watching on the real estate side, but we're pretty optimistic that we'll at least have positive loan growth.
I think year-over-year and real estate we were at negative 2%. We're thinking this year it's more probably zero to low single-digits, its maybe 3% or so.
On the C&I side, we're real optimistic of -- we've had a lot of success there, as Kessel mentioned, a lot of different business units growing. We had ADL, we had senior -- our senior housing, which has continued to show good growth there, premium insurance.
As Kessel mentioned, small business within the community bank had good positive growth there. And on top of that, we were a little off -- something that we've seen this quarter was -- our utilization was up close to 1%, on the C&I side, and that's some of our best borrowers who were drawing on their inventory receivable loans, maybe building inventory versus destocking as maybe what we've seen over the last year.
That utilization rate has actually been down slightly for several quarters in a row. It bumped up during the first quarter.
So, we've got optimism that we're going to be able to grow the book. We've got a lot of different again businesses growing -- but as I mentioned, also mentioned the premium insurance was close to a $40 million in net growth this quarter, that's a good number for us as we brought them onboard last year.
So, I'll tell you we've got a lot mixed signals out there. From an overall perspective, we believe we could maintain -- again, we've sort of guided consumer and C&I more into 5% to 10% range this year, and low single-digits on the real estate probably zero to about 3% as I mentioned in there.
Ebrahim Poonawala
And did SNC [ph] contribute meaningfully to this quarter's growth or not?
Kessel Stelling
Yes, we've had some growth there, so that was in the utilization number. That was about close to 40% of our C&I growth was in the SNC.
And I'll say this, that's first time we've seen positive growth in the SNC portfolio in several quarters. It's actually down the last couple of quarters, been pretty flat I'd say four to five quarters in the row.
So, we had a little utilization there and a couple of new requests in that arena this last quarter. So, that was part of the C&I growth for the first quarter.
Operator
Okay. You have another question coming from Jennifer Demba.
Please announce your affiliation then pose your question. Your line is now live.
Jennifer Demba
Question on your expenses, you said that the early -- the voluntary early retirement program, savings that you'll have is included in your expense guidance for this year. I am curious what other net savings you think will be occurring this year that will offset your investments?
Kevin Blair
I'll take that Jennifer. There's a lot of areas where we're driving efficiency and there's a lot of little ones and there is some big ones, I'll note.
One area that you've seen us talk about over the last several quarters is, on the facility side and how we continue to consolidate many of our abilities and operational centers. We've seen about 5% reductions in overall occupancy expense as a result of that.
We expect that to continue as we find other ways to to consolidate facilities. We’re opportunistically always working for headcount efficiencies and that from, I think like you’ve mentioned the early retirement program, but it's just from normal course of business where we’re looking to be more efficient with the ability to outsourcing, the ability to centralize different operations, so that will continue as well.
And I should mention that we’re always looking for brand consolidation and optimization to fill some of that -- we'll wait in terms of offsetting the growth in investments. We’ve been very aggressive as you know in cutting our locations since the crisis were down 23%, but we only have a list of potential opportunities for continued consolidations.
So, I would say those are the majority of the opportunities. I will note that in the first quarter, we saw a fairly significant reduction in professional fees, that was down double-digit and that’s an area across all discretionary expense lines whether its travel or professional fees.
We’re taking a much more rigorous discipline forward and we will continue to manage those numbers down as well.
Jennifer Demba
Okay. Can I ask a follow-up on the Cabela’s deal?
I just want to clarify something, so you're paying -- Synovus is paying for the deposit mark that’s correct, it is an offset of $75 million fee?
Kessel Stelling
You said Cabela’s is paying for the deposit mark?
Jennifer Demba
Sorry, Synovus is paying for it?
Kessel Stelling
No, no, no. That's we'll be compensated for the deposit mark.
Jennifer Demba
That was I want to…
Kessel Stelling
In addition to the 75.
Jennifer Demba
Okay, all right. Thank you very much and just one follow-up on the real estate consolidation.
What’s the status of your Atlanta region consolidation into that building in Cobb County?
Kevin Blair
Well, it's ongoing. The building is coming along nicely.
We were able to like the size of the building last week just before the opening of a new stadium. I won’t call the stadium by name, but it is a stadium in Atlanta, which really is a great facility and congrats to our competitors on that.
But we’re happy to see that building coming along way. We are looking at a late summer, early fall stage move in as we’ll begin moving teams from throughout the Atlanta footprint, which we again think gives us planning leverage through having that kind of mass in one spot.
It gives us longer-term efficiency as we exit some leases from office building ground at Atlanta or sell buildings where we've had excess capacity. And quite frankly, we think the intangible is bringing those scenes together as we actively work to deepen relationships, having so many of those complimentary businesses under one roof just has natural again benefits tied to working with your teammates to deepen the customer relationships.
But it will be a late summer, early fall stage move in.
Operator
Thank you. Your next question is coming from Ken Zerbe.
Please limit to two questions per participants. Ken, your line is now live.
Please announce your affiliation then pose your question.
Ken Zerbe
Great. Sure, Morgan Stanley.
I guess just on the deal, just wonder really in terms of you mentioned that’s going to be EPS accretive. But I guess there is kind of three ways that can be, right.
So, one is just the $75 million fee that you get, that’s certainly accretive or is it the 75 million, let’s just say you are buying back shares with it, right. So that’s another aspect of potential accretion?
And then there is the spread on the building to of brokerage CDs. When you guys refer to being accretive like are you -- how are you thinking about the split between those three areas?
Kessel Stelling
You've nailed all three. I mean we’re looking at it across the three sections or opportunities that you've brought up.
I mean, naturally, as we said, the $75 million is immediately accretive because it’s a one-time fee income item. What we want to do is to provide further guidance around how we could potentially utilize that $75 million to take on additional balance sheet restructuring or organizational realignment-type opportunities that could create additional EPS accretion over a longer period of time.
So -- but as I said at the beginning, it’s not a traditional transaction where we’re pro forma out the acquisition of a bank, it’s much more of just stating the fact that we’ll get the deposits. We’ll be able to redeploy those and get the spread off of it.
And then we’ll also have the $75 million fee, which is at our discretion.
Ken Zerbe
Got you. And what kind of spread would you anticipate that you get on the brokerage CDs in near term, not longer term, with the -- from loans?
Kessel Stelling
Just assume, if the book rate on the deposits as we said on the deck is 185. If you just go look at our loan rate today at 420, you could do the simple math there.
Now that doesn’t assume any mark on the deposits. We won’t know what the final mark is with the liquidity discount until the time of closing, but you can assume that we’re going to get 250 to 300 on spread on these deposits.
Ken Zerbe
Got it. Because I guess I’m just trying to figure out because you do talk about like over longer term you deployed into the loans.
But I guess, what I’m trying to figure out is, I wouldn't imagine you’re going to grow loans faster just because you have these deposits. So, is there a difference like should I give you extra credit for growing loans faster just because you have them?
Or is this normal loan growth that you’re going to do anyway, and then this, call 185 brokerage CDs is just the funding that I would have already assumed that you would have taken out in the market overtime anyway? You just now accelerate the borrowing, so to speak, of these liabilities?
Kevin Blair
Yes, Ken, as we get closer to closing the transaction, we’ll provide more guidance around that. But I mean your thought process is correct, I mentioned earlier that we have about $800 million of brokered CDs that are maturing.
So you could argue that a large portion of these deposits will just replace the existing wholesale funding. But with the surplus liquidity that we have, obviously, we’re not going to let it sit in cash.
We’re going to deploy it and get that operational spread off of the incremental liquidity.
Kessel Stelling
And Ken, just to highlight, and though we’ve stated this several times, but those deposits will be adjusted to market and we’ll be compensated for that that closing, minus an additional 10 basis points. So, again, transaction has got close and a lot needs to happen before then.
But I don’t think you would -- I know you might see any changes in our credit appetite related to the on boarding of $1.2 billion deposits. We’ve been very disciplined with our approach to how we grow our loan book, and this transaction, as a stand-alone, would not any way, affect our appetite.
Just might change the funding mix of those loans.
Ken Zerbe
Got it. Understood.
And how meaningful is that -- could that deposit mark actually be because I know didn’t throw any numbers around it, but?
Kevin Blair
Hypothetically, you look at spot curves today. The numbers could be just to mark-to-market fair value, could be 10 to 15 basis points.
And then to Kessel’s point you add another 10 basis points added on top of that for liquidity discount, that you can get anywhere from 10.25 range mark-to-market in totality from the 1.2.
Operator
Your next question is coming from Kevin Fitzsimmons. Please announce your affiliation then pose your question.
Your line is now live.
Kevin Fitzsimmons
Hi, it’s Hovde Group. Good morning, guys.
I just want to follow up on loan growth. I know, you guys gave some color on some of the drivers of that loan growth and I appreciate that.
It seems like some of it is the specialized areas that you guys have been focused on for several quarters. But I just want to -- its I think the answer to this is no, but I just want to ask it because I've had some CEOs that will say, really, there is no translation from post-election optimism into actual meaningful growth activity.
And then there will be a few that will say, no, there is they're noticing this optimism actually translating into real activity. So, is the answer or more the former than the lateral on that, Kessel?
Or how would you characterize that? Thanks.
Kessel Stelling
Yes. So thanks, Kevin.
I'll let Kevin Howard speak to that as well. I mean again I think we saw optimism post-election and then I guess dampened by confusion and uncertainty, not just related to healthcare, but you saw commentary this morning on tax reform and does that now get pushed off out the push recess.
So, I’m not here we believe that the growth we’ve seen is related to that optimism. I think it’s just been normal business, so I’ll let Kevin maybe give a little color as to the nature of that growth.
But I think certainty in our economic and political environment will hopefully give us an additional boost, but I don’t see a lot of it to-date. It's anecdotal that I don’t see major initiatives fueled by that optimism.
Kevin, you might have a follow-up on that.
Kevin Howard
I think that’s -- I agree with that Kessel. It’s hard to translate that I mean I look at things kind of just to look within the numbers.
As I mentioned, it was encouraging for us to see better utilization don't exist some of our better borrowers building inventory maybe instead of reducing inventory. It feels like I don't think anything worse that we were in last year.
I think some things being just negative than some early disappointment, maybe some people, some of the businesses we talk to who are regulated. There is hope.
They will be some little relief there and I’m not talking about the bank, I’m talking about the customers. So, we will see how that plays now.
But I think in general that I am hearing more optimism than -- and again, we get mixed signals on that, that our customers, our consumers are borrowing at a pretty good pace. They're growing on their lines and making investments.
I would say, it’s a tough one. We are mixed in this room on that that we had that discussion yesterday, but I would say more optimistic than pessimistic about what’s going on in general in the economy.
Kevin Fitzsimmons
Okay. Thanks Kev.
Just one quick follow-up, Kessel, you made the point that you guys are not going to be hindered in terms of pursuing further M&A. Can you just remind us what in terms of traditional bank M&A so apart from this transaction?
What kind of fits in your sweet spot of what you'd be looking for and given what the sellers are looking for or asking for these days? Are you hopeful or would you not be expecting over the next year to have a traditional deal announced?
Thanks.
Kevin Howard
Yes. So, let me, yes -- because when you say pursuing, I maybe sure even we've had some color on that.
We’ve been very clear about our disciplined approach. And suffice to say with large majority, if not all of the deals have been announced over the last year and year and half have crossed somebody's desk in this company.
But for whatever reason strategic or pricing, a lot of time they go hand in hand, they haven't met our appetite, and we don't see that changing. We had obviously have a lot than our currency post-election, which allowed us and that back, but so did others, so nothing has changed from that standpoint.
We again think we're an attractive franchise, we think reputational we're in good standing, both within our industry and within our regulatory communities, as evidenced by this transaction. And so we'll get a look at transactions, but I think transactions like we did with level one which we didn't really comment a lot in call, that unit is performing very well.
And now hats off to that team for how they've integrated into our company and they have become a meaningful contributor, both for the revenue stream and the diversification of our loan book. So, that's what we've been looking for, we've been looking for something that fit, both financially and strategically.
And quite frankly, it fits cultures so that we thought they would integrate into our company and benefit long-term our shareholders. So, I think you would see deals, if you saw a deal on the smaller and that we're very disciplined, and by the way that means, we don't do any deals over the next year.
We're perfectly comfortable with that approach. We believe all along our focus on our internal performance has been the right focus, and we believe that as evidenced itself even this quarter with returns on average asset, the return on average changeable common equity go into plus 10% for the first time in a long time.
So, no in change approach, we're patient and we're disciplined. And again, we would look at what's in the market, there's never any shortage of product in the market.
Operator
And you're next question is coming from Casey Haire. Please announce your affiliation then pose your question.
Your line is now live.
Casey Haire
Jefferies, thanks guys. So, wanted to follow up on the guide, specifically the net interest income, if I understand you correctly, the Cabela deal closes about middle of the year.
I was wondering, if the NII guide for '17 of 10% to 12%, is that inclusive of what will be effectively a half year contribution from the Cabela deal or is it purely organic?
Kessel Stelling
I'm sorry. Kevin is going to answer that Casey.
I just wanted to make the housekeeping announcement for really everyone. We still have a lot of followers on the line.
We're going to stay on and take as many new as we can get to. I know some of you have other calls to get to.
If we don't get through in today then please follow up. Bob May will be happy to reach out to any of you and will do a follow-up.
So, Kevin you want to take this.
Kevin Howard
Yes, we've guided, Casey, for the guidance for the rest of 2017 that we would not include any of the pro forma aspects of the Cabela's, Capital One deal. So, the 10% to 12% is solely the organic growth that will deliver from just the Synovus Group and it does not include any forward rate curves.
It assumes rate that they ended the end of March.
Casey Haire
So, any sort of balance sheet restructuring benefits would be gravy to this year's numbers?
Kevin Howard
That's correct.
Kessel Stelling
Correct.
Casey Haire
And then just switching to the fee guide, you guys holding that at 2% to 4%, by my math that implies a pretty steep ramp from that 66 level here in the first quarter and it looks like you guys had a little bit of a down draft in that other line. I’m just curious what is the driver on the fee side to hit the low end of that 2% to 4% guidance?
A - Kevin Howard
So, look in the first quarter, we have some seasonal items. So you saw that we are at roughly 4% in the fourth quarter.
So, we feel like we’re on track a couple of areas that will increase as we move along the year will be our SBA gain on sale from the production that we're doing. That just to put it in perspective, the quarter-over-quarter decline there was a little over $1.4 million just given the seasonality of SBA production in the third and fourth quarter.
So, we’ll continue to ramp that up. Also, there is some seasonality around service charges in the first quarter that will continue to provide a little bit of a tailwind moving forward.
And then we have significant investments as Kessel talked about on the slide. We’ve been able to produce mortgage production increases of roughly 20% on a year-over-year basis, and our brokerage and Synovus Security areas have seen revenues growing 20% and assets under management of 7% on a year-over-year basis.
So, we feel like there is a lot of the raw materials the inputs that go into that, that fee income that we're very confident around that will help to deliver the 2% to 4% this year. And as of note just on that other income item, there were some one-time benefits associated with [Indiscernible] in the fourth quarter as well as the SBA gains that I mentioned previously that drove the quarter-over-quarter decline.
Operator
And your next question is coming from Steven Alexopoulos. Please announce your affiliation then pose your question.
Steven Alexopoulos
Good morning everybody, JP Morgan. The follow-up on the deposit transaction, was this a competitive bid process that you guys participated in?
Kessel Stelling
I don't want maybe give too much color on the nature of that transaction because it was disclosed in our K and there were other Ks that have been filed, but we’ve been in discussions for some time with the parties and we believe it was again a fair transaction, and from our standpoint, I would let the other speak to it from theirs as well. But again, I think it speaks to our deep and long-term relationships in the industry including deep relationships in the card industry.
Steven Alexopoulos
Okay. And then of the 1.2 billion in deposits being acquired, what’s the mix of floating rate versus fixed rate?
Kessel Stelling
It’s all fixed rate, our CDs.
Steven Alexopoulos
All fixed rate, okay. And then if I could squeeze one more in the growth and other consumer loans, which was up a 100 million this quarter, up over $400 million over the past year?
What types of loans are those? Thanks.
Kessel Stelling
That’s been as we've disclosed before that’s the lending partnerships we have with SoFi and GreenSky. That’s primarily what that is, up 95% of it is in those two books.
And we’ve stated that we would grow probably up to about 3% of our balance sheet in these lending strategies as we have stated over the last few years. We’ve been willing to grow our consumer book.
We knew we would need to get into some partnerships so we get to that, and so that’s we've allocated the small part of the balance sheet today or so. It's the mix mainly of the relationships we have with those two partners.
Operator
Okay. Your next question is coming from Nancy Bush.
Please announce your affiliation then pose your question. Your line is now live.
Nancy Bush
Good morning Nancy Bush, NAB Research. Good morning, Kessel, how are you?
Kessel Stelling
Good morning, Nancy, great thank you.
Nancy Bush
Well, I have kind of a philosophical question about the transaction and given that I’m somebody who has watched Synovus for a long time. I never thought that I would be seeing a $1 billion of broker deposits put on the Synovus balance sheet and given the experience with funding back during the crisis, et cetera.
Was this just so attractive? Was it the $75 million kicker and does this sort of signal a new attitude about funding?
Kessel Stelling
I don’t think it signals an attitude, Nancy. Again, it’s on-boarding a $1.2 billion in broker deposits mark-to-market, a 10 basis point discount applied to that, little negligible operational risk, and a $75 million transaction fee, which again, gives us flexibility to explore or execute on a number of other strategies which have long-term benefit.
So, it’s opportunistic, I don’t think it's reflective of any change in attitude towards deposits. I think it was just a good transaction for our company that's a onetime transaction that has again low execution risk, pending regulatory approval.
We’ll close it. We’ll onboard CDs.
We’ll receive the fee, and we’ll continue on our core business. So, I don’t think it’s again reflective of any change of attitude.
Nancy Bush
What will this give you in terms of percentage of total deposits and broker deposits into that 10% sort of regulatory caution still in existence?
Kevin Blair
This is Kevin Blair. It’s going to be below 10% by fair margin.
So, as I mentioned, we have about $800 million of brokered CDs today that have an average life of roughly six months. So those mature, we'll just be replacing those, so it will not exceed the 10% broker threshold.
Nancy Bush
Okay. And then on the -- as the transaction plays into this the sort of better outlook for net interest income, et cetera, and whatever opportunities these deposits may give you in a $75 million?
Are there any thoughts about growing some of the fee businesses at a greater rate than might otherwise been anticipated and the one I’m thinking about obviously is asset management?
Kessel Stelling
Yes, I think all of those thoughts were already there, Nancy. So and again, I don’t want this transaction to overshadow what we believe was strong performance by some of those very fee businesses that you just referred to, good quarter.
So, we’ll continue to look at opportunities to expand there, including from an acquisition standpoint, even though that Global One wasn’t a fee business. It was certainly a diversification of balance sheet and revenue play for us.
So, if those opportunities were to present themselves on the fee side, we would certainly entertain them, but at the end of the day, this is a stand-alone transaction which we believe again gives us a boost in all the areas I mentioned. But that core focus on revenue, on loan, balance loan growth, on deposit mix is still very much ongoing.
And again, I think we had a quarter of strong results that reflect just that effort.
Operator
And your next question is coming from John Pancari. Please announce your affiliation and pose your question.
Your line is now live.
John Pancari
Evercore ISI. So, one more on the deal, just given the, again -- certainly, a creative deal and I get the optionality that it gives you, and you can make it as accretive as you want as you look at the reinvestment opportunities.
But now, this is one of several smaller transactions you’ve done in succession here. And I mean, do you have the management capacity in terms of distractions that the smaller deals can provide I mean that they can bring?
Can you still look at lots of smaller type of transactions like this and not be impacted by management distraction issues?
Kessel Stelling
Yes. So, John, great question.
So first of all, let me speak to this deal as you made several and I think this is our second. I don’t consider this a management distraction at all.
We've had a lot of lawyers involved and a lot of them are external, and on the call yesterday, I think the number was 3,000 employees. But it have not been a management distraction at all to maybe to Kevin Howard to D.
Copeland, to Wayne Akins, to Bart Singleton, those who are running our day-to-day businesses, not say haven't been involved at all. But basically they have been involved at all, it is their legal and financial transaction with a lot of external help and the execution operationally will be on-boarding.
I don't know we disclosed the number of CDs, but it's a one-time on-boarding of some CDS. There are no new relationships.
There are no new relationship managers to introduce to clients. There is no risk of losing business.
There is no efforts to try and get cost out that would require any kind of management attention. So, I mean look at this as a lot of people will be working behind the scene to get this to close, but it will not be the management or the business leaders of Synovus involved in that.
So, as it relates to that part of your question, it is a non-issue and I would say the Global One was similar. We kept the management of that company.
They’re performing at great levels and other than financial updates, which are meaningful has not been a distraction. So, I get the nature of your question.
These twos, in particularly, and this one for sure, it’s not a distraction at all to any of our management that will affect day-to-day execution.
John Pancari
Okay, great. Thank you, Kessel.
And then my follow-up is just around your retail, your exposure to retail both in the commercial real estate portfolio as well as to retailers to direct loan in your C&I book. Can you just help quantify your exposure there?
And sorry, if I missed that earlier in the call.
Kessel Stelling
So, John, you’re talking about the retail that's within C&I, right?
John Pancari
Yes. I guess both.
If you could just help resize it up the amount of exposure you may have on the mall and strip mall side within your commercial real estate portfolio? And then separately I need exposure to the actual retailers in your C&I book?
Thanks.
Kessel Stelling
On the C&I book, first of all it's the segment we're exposed to probably more in the retail are motor vehicle, parts stores, gasoline stations, food and beverage. That’s probably 80% of is really not under -- what we kind of designate about 80% of those, but was not under what you call significant online competition.
We’re not -- we don’t have any exposed or any kind of mall locations or where we think, those issues could be -- the segments that are probably a little bit more vulnerable like what we've bought in some clothing line, accessories, electronics seems like that. It’s probably less than 10% of our books.
I’m talking about the C&I side. So, we don’t and nowhere exposure at all to department store where we made good inventory lines.
I think a very small part of -- again the heaviest being more parts, gasoline stations, food and beverage. That’s where sort of the retails are quoted up under in the C&I side of the retail.
On the real estate side, let me just say this, we're not doing a lot of lending there. I think we were down 60 million in retail portfolio this quarter.
If you can see declines there, we -- one thing about when we say about the books, it's not defaults in the last several quarters. There are no non-performers in the portfolio.
We're lending like everybody else there, strong equity requirements, it's very stabilized portfolio, probably 95% of it is not in construction phase, but as far as what you've asked about us the tenant mix. So I think what's where you may be headed, we're primarily grocery store anchored, kind of service providers and strip centers.
We have our largest tenant exposure is more in the drug stores and dollar stores, and where we think those are actually segments are performing pretty well. We kind of pegged about 10% of that book that might be more larger box of tight exposures, maybe part of the power centers.
So, we're kind of -- I think we've had a few closing announcements that have affected us a little bit. We know that's what you guys guarantors are for store and sponsorship there, that has helped kind of heal that.
Again, it's performing pretty good, we don't think we're exposed, again most of all those announcements I think we recorded 600 to 700 over the last six to nine months of the stores that closed in our footprint, I think probably effected five or six where we had closings. So, we're not -- we're watching that, we're cautious.
We're not growing that portfolio. It's definitely something that's got our attention, but we did feel pretty good that the mix of our portfolio is more toward kind of service and dollars and drugstores, and not as much now dependent on clothing and what we think or significant online competition.
So, that's kind of and again I mentioned before about 15% of business in grocery store anchored portfolio.
Operator
Your next question is coming from Christopher Marinac. Please announce your affiliation then pose your question.
Your line is now live.
Christopher Marinac
FIG Partners in Atlanta. Just want to follow up on the statement made earlier on the call about using some of the gain on the Cabela's transaction that to continue restructuring.
I was curious if that is related anything to the balance sheet, is there more that you want to do there? Or is that tied back towards some of the expense initiatives that are ongoing?
Kevin Blair
Yes, it's tied to both sides. I mean we're looking at potential balance sheet restructuring.
We mentioned, Kessel in his comment mentioned, potential bulk loan sales, both on the NPA side. We could look at other activities in the balance sheet that would restructure it to improve returns, but I think everything, the word that we used it gives us optionality to look at all efforts whether it'd be efficiency or balance sheet.
Christopher Marinac
And just a follow-up on the margin going forward. Do you see much benefit on the day counts getting one more day and then two more days for the next two quarters come out?
Kessel Stelling
Yes, do we get benefit from that?
Christopher Marinac
Right, I mean should the margin be that much better that we saw the step up this quarter?
Kessel Stelling
Yes, there's some benefits to the day count but most of our benefit and what we've projected is based on true yield changes, and that's driven by the rate hikes. But we've also -- as we talked about the investment securities, we've been able to expand the margin there.
Plus, we did mention as earlier, we did pick up two to three basis points just by managing down our cash that we're holding at the Federal Reserve. That mix has allowed us to increase the margin as well.
Operator
And your last question is coming from Brady Gailey. Please announce your affiliation then pose your question.
Your line is now live.
Brady Gailey
KBW, good morning guys. Maybe just one more on M&A, Kessel, as your currency gets more valuable and maybe the M&A gets a little more likely for you guys.
What size bank deal would you be most interested in? And do you have a geographic focus on where you would look to acquire other banks?
Kessel Stelling
Well, size we’ve said that we don’t anticipate our first true bank M&A deals would be a transformational deal. So, I think it'd be the -- certainly, at the smaller or end of the range, but to John's point about lots of those deals, we don’t anticipate doing lots of little deals.
We grew loans and deposits plus 300 million this quarter, just through our own internal efforts. So, again on the lower end of the maybe interesting range to the world, but for us, we would not do a whole bank M&A transaction that we didn’t believe was meaningful to us from a strategic and financial sense.
And we said though no -- none that we require a lot of explaining to our investors. That said, I think it'd be more likely to do something in market.
Yes, our currency is up, but so our most sellers and their expectations based on personal experience and conversations haven’t changed dramatically. So, I think more likely end market where we would be able to experience significant cost saves, but equally an important end market where the banks, the bankers and the customers are attractive to the way we do business is just a pure acquisition, take all the cost out, see what is left.
That is just not how we would anticipate doing things. So, it would be with -- again, somewhat, we believe we have some synergies with their team, with their management team and with ultimately their customer base in terms of what they expect from the bank and what we would anticipate in the customer relationships.
So, long answer in saying, certainly sub-10 billion probably did the small math and in our footprint where someone we believe we have the ability to make one plus one equal to three.
Brady Gailey
All right, that’s helpful. And then in the bond book, you’ve seen some decent growth in balances in the bond book over the last couple of quarters.
Will that continue or what’s the forecast in growth of the bond book?
Kessel Stelling
So on that front, as I mentioned on the previous question, we’ve been able to manage now in our cash balance. So, that we’ve been able to read, allocate that from those bonds into the bond book.
So, I think you’ll see the growth from this point forward to be fairly modest only therefore growth in liquidity purposes from a cover standpoint. But, yes, the growth that we saw quarter-over-quarter was largely a function of moving that cash into work from a bond perspective.
Operator
There are no further questions in queue.
Kessel Stelling
Okay, thank you. I’ll wrap up.
And Brady, I think it's fitting with the last question came from you, as you fill Jefferson's shoe. I guess, this is March 27th or 28th earnings call since becoming CEO and the first earnings call where I haven't had any spirited questions from Jefferson Hills.
And so we congratulate Jefferson as he transitions to the other side of phone line. I hope all of you that cover our friendly competitor asking equally spirited questions as he participates in his calls going forward.
So congratulations to Jefferson. I think, truly one of the good guys in the industry.
And I’ll just close by saying thanks to all in the call. But I really want to thank the Synovus team.
A lot of the news has been about a certainly unique transaction that we believe again has great benefit to our company. But the real story of the quarter is the strong operating results, which come from our team throughout our five states footprint, executive our strategic plan every day.
And every day they come to work, they try to do it better than they did a day before. And I think results speak to that.
So thanks to all of you participating especially those on the Synovus team who are on this call and we look forward to more successful calls throughout the year. So thank you all very much and have a great day.
Operator
Thank you, ladies and gentlemen. This does conclude today’s conference call.
You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.